**EXHIBIT 10.30**

 

ConfidentialTreatment Requested.

 

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

 

**CREDIT CARD PROGRAM AGREEMENT**

 

**by and among**

 

**THE NEIMAN MARCUS GROUP, INC.**

 

**BERGDORF GOODMAN, INC.**

 

**HSBC BANK NEVADA, N.A.**

 

**and**

 

**HOUSEHOLD CORPORATION**

 

**Dated as of June 8, 2005**

 

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**Table of Contents**

 
| ** **                                         | ** **                                                                         | ** ** | **Page** |
|----------------------------------------------------|------------------------------------------------------------------------------------|------------|----------|
|                                               |                                                                               |       |
| ARTICLE I DEFINITIONS                              |                                                                               | 1          |
| 1.1                                                | Generally                                                                          |       | 1        |
| 1.2                                                | Miscellaneous                                                                      |       | 13       |
|                                               |                                                                               |       |
| ARTICLE II  ESTABLISHMENT OF THE PROGRAM           |                                                                               | 14         |
| 2.1                                                | Credit Program                                                                     |       | 14       |
| 2.2                                                | Exclusivity.                                                                       |       | 14       |
|                                               |                                                                               |       |
| ARTICLE III PROGRAM  MANAGEMENT AND ADMINISTRATION |                                                                               | 16         |
| 3.1                                                | Program Objectives                                                                 |       | 16       |
| 3.2                                                | Management Committee                                                               |       | 17       |
| 3.3                                                | Program Relationship  Managers; Program Team                                       |       | 21       |
|                                               |                                                                               |       |
| ARTICLE IV PROGRAM  OPERATIONS                     |                                                                               | 22         |
| 4.1                                                | Operation of the  Program                                                          |       | 22       |
| 4.2                                                | Certain  Responsibilities of the NMG Companies                                     |       | 22       |
| 4.3                                                | Certain  Responsibilities of Bank                                                  |       | 24       |
| 4.4                                                | Ownership of Accounts;  Account Documentation                                      |       | 24       |
| 4.5                                                | Branding of  Accounts/Credit Cards/Cardholder Documentation/Solicitation Materials |       | 26       |
| 4.6                                                | Underwriting and Risk  Management                                                  |       | 26       |
| 4.7                                                | Cardholder Terms.                                                                  |       | 27       |
| 4.8                                                | Internet Services.                                                                 |       | 27       |
| 4.9                                                | Sales Taxes                                                                        |       | 28       |
| 4.10                                               | Participation in  Reversals                                                        |       | 29       |
| 4.11                                               | Interest Free Accounts                                                             |       | 29       |
|                                               |                                                                               |       |
| ARTICLE V MARKETING                                |                                                                               | 30         |
| 5.1                                                | Promotion of Program                                                               |       | 30       |
| 5.2                                                | Marketing Commitment                                                               |       | 30       |
| 5.3                                                | Communications with  Cardholders.                                                  |       | 31       |
| 5.4                                                | Additional Marketing  Support.                                                     |       | 31       |
| 5.5                                                | Approved Ancillary  Products                                                       |       | 33       |
| 5.6                                                | Marketing Plan.                                                                    |       | 33       |
|                                               |                                                                               |       |
| ARTICLE VI CARDHOLDER  INFORMATION                 |                                                                               | 34         |
| 6.1                                                | Customer Information                                                               |       | 34       |
| 6.2                                                | Cardholder Data                                                                    |       | 35       |
| 6.3                                                | NMG Shopper Data; NMG  Prospect Data                                               |       | 38       |

 

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|                                                  |                                                          |   |
|-------------------------------------------------------|---------------------------------------------------------------|--------|
| ARTICLE VII OPERATING  STANDARDS                      |                                                          | 41     |
| 7.1                                                   | Reports                                                       |   | 41 |
| 7.2                                                   | Servicing                                                     |   | 41 |
| 7.3                                                   | Service Level Standards                                       |   | 43 |
| 7.4                                                   | Credit Systems                                                |   | 43 |
| 7.5                                                   | Systems Interface;  Technical Support                         |   | 44 |
| 7.6                                                   | Customer Management  Systems                                  |   | 45 |
|                                                  |                                                          |   |
| ARTICLE VIII MERCHANT  SERVICES                       |                                                          | 45     |
| 8.1                                                   | Transmittal and  Authorization of NMG Charge Transaction Data |   | 45 |
| 8.2                                                   | POS Terminals                                                 |   | 46 |
| 8.3                                                   | In-Store Payments                                             |   | 46 |
| 8.4                                                   | Settlement Procedures                                         |   | 46 |
| 8.5                                                   | Bank’s Right to Charge  Back                             |   | 47 |
| 8.6                                                   | Exercise of Chargeback                                        |   | 48 |
| 8.7                                                   | No Merchant Discount                                          |   | 48 |
|                                                  |                                                          |   |
| ARTICLE IX PROGRAM  ECONOMICS                         |                                                          | 48     |
| 9.1                                                   | NMG Compensation                                              |   | 48 |
| 9.2                                                   | Dispute Resolution                                            |   | 49 |
|                                                  |                                                          |   |
| ARTICLE X INTELLECTUAL  PROPERTY                      |                                                          | 49     |
| 10.1                                                  | The NMG Licensed Marks                                        |   | 49 |
| 10.2                                                  | The Bank Licensed Marks                                       |   | 50 |
| 10.3                                                  | Intellectual Property                                         |   | 51 |
|                                                  |                                                          |   |
| ARTICLE XI  REPRESENTATIONS, WARRANTIES AND COVENANTS |                                                          | 52     |
| 11.1                                                  | General Representations  and Warranties of NMG                |   | 52 |
| 11.2                                                  | General Representations  and Warranties of the Bank Companies |   | 54 |
| 11.3                                                  | No other  Representations or Warranties                       |   | 57 |
| 11.4                                                  | General Covenants of  the NMG Companies.                      |   | 57 |
| 11.5                                                  | General Covenants of  the Bank Companies.                     |   | 58 |
|                                                  |                                                          |   |
| ARTICLE XII ACCESS,  AUDIT AND DISPUTE RESOLUTION     |                                                          | 59     |
| 12.1                                                  | Access Rights                                                 |   | 59 |
| 12.2                                                  | Audit Rights                                                  |   | 60 |
| 12.3                                                  | Accounting Dispute  Resolution.                               |   | 60 |
| 12.4                                                  | Dispute Resolution                                            |   | 62 |
|                                                  |                                                          |   |
| ARTICLE XIII  CONFIDENTIALITY                         |                                                          | 63     |
| 13.1                                                  | General  Confidentiality.                                     |   | 63 |
| 13.2                                                  | Use and Disclosure of  Confidential Information.              |   | 64 |
| 13.3                                                  | Unauthorized Use or  Disclosure of Confidential Information   |   | 65 |
| 13.4                                                  | Return or Destruction  of Confidential Information            |   | 65 |
|                                                  |                                                          |   |
| ARTICLE XIV RETAIL  PORTFOLIO ACQUISITIONS            |                                                          | 65     |
| 14.1                                                  | Retailer that Operates  a Credit Card Business                |   | 65 |
| 14.2                                                  | Retailer that has a  Credit Card with another Issuer          |   | 66 |

 

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| 14.3                                               | Retailer that has a  Credit Card with Bank                                  |   | 66 |
|----------------------------------------------------|-----------------------------------------------------------------------------|--------|----|
| 14.4                                               | Co-Branded Credit Card                                                      |   | 66 |
| 14.5                                               | Conversion of Purchased  Accounts                                           |   | 67 |
| 14.6                                               | No Other NMG  Obligations                                                   |   | 67 |
|                                               |                                                                        |   |
| ARTICLE XV EVENTS OF  DEFAULT; RIGHTS AND REMEDIES |                                                                        | 68     |
| 15.1                                               | Events of Default                                                           |   | 68 |
| 15.2                                               | Defaults by Bank                                                            |   | 68 |
| 15.3                                               | Defaults by the NMG  Companies                                              |   | 69 |
| 15.4                                               | Remedies for Events of  Default                                             |   | 70 |
|                                               |                                                                        |   |
| ARTICLE XVI  TERM/TERMINATION                      |                                                                        | 70     |
| 16.1                                               | Term                                                                        |   | 70 |
| 16.2                                               | Termination by NMG  Prior to the End of the Initial Term or a Renewal Term  |   | 70 |
| 16.3                                               | Termination by Bank  Prior to the End of the Initial Term or a Renewal Term |   | 71 |
| 16.4                                               | Automatic Termination                                                       |   | 71 |
|                                               |                                                                        |   |
| ARTICLE XVII EFFECTS OF  TERMINATION               |                                                                        | 72     |
| 17.1                                               | General Effects.                                                            |   | 72 |
| 17.2                                               | The NMG Companies’  Option to Purchase the Program Assets.             |   | 72 |
| 17.3                                               | Fair Market Value                                                           |   | 73 |
| 17.4                                               | Dedicated Program  Personnel                                                |   | 74 |
| 17.5                                               | Rights of Bank if  Purchase Option Not Exercised.                           |   | 74 |
|                                               |                                                                        |   |
| ARTICLE XVIII  INDEMNIFICATION                     |                                                                        | 75     |
| 18.1                                               | NMG Indemnification of  Bank                                                |   | 75 |
| 18.2                                               | Bank Companies’  Indemnification of the NMG Companies                  |   | 76 |
| 18.3                                               | Procedures.                                                                 |   | 77 |
| 18.4                                               | Notice and Additional  Rights and Limitations.                              |   | 78 |
|                                               |                                                                        |   |
| ARTICLE XIX  MISCELLANEOUS                         |                                                                        | 78     |
| 19.1                                               | Precautionary Security  Interest                                            |   | 78 |
| 19.2                                               | Securitization,  Participation or Pledge of Cardholder Indebtedness.        |   | 78 |
| 19.3                                               | Assignment                                                                  |   | 79 |
| 19.4                                               | Sale or Transfer of  Accounts                                               |   | 79 |
| 19.5                                               | Subcontracting                                                              |   | 79 |
| 19.6                                               | Sales and Use Tax                                                           |   | 79 |
| 19.7                                               | Amendment                                                                   |   | 79 |
| 19.8                                               | Non-Waiver                                                                  |   | 80 |
| 19.9                                               | Severability                                                                |   | 80 |
| 19.10                                              | Waiver of Jury Trial  and Venue                                             |   | 80 |
| 19.11                                              | Governing Law;  Compliance with Law.                                        |   | 80 |
| 19.12                                              | Specific Performance                                                        |   | 80 |
| 19.13                                              | Captions                                                                    |   | 81 |
| 19.14                                              | Notices                                                                     |   | 81 |

 

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| 19.15 | Coordination of  Consents and Approvals |   | 81 |
|-------|-----------------------------------------|--------|----|
| 19.16 | Further Assurances                      |   | 82 |
| 19.17 | No Joint Venture                        |   | 82 |
| 19.18 | Press Releases                          |   | 82 |
| 19.19 | No Set-Off                              |   | 82 |
| 19.20 | Conflict of Interest                    |   | 82 |
| 19.21 | Third Parties                           |   | 83 |
| 19.22 | Force Majeure                           |   | 83 |
| 19.23 | Entire Agreement                        |   | 83 |
| 19.24 | Binding Effect                          |   | 83 |
| 19.25 | Counterparts/Facsimiles                 |   | 84 |
| 19.26 | Survival                                |   | 84 |

 

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**CREDIT CARD PROGRAM AGREEMENT**

 

ThisCredit Card Program Agreement is made as of the 8th day of June, 2005, by and among The NeimanMarcus Group, Inc., a Delaware corporation (“NMG”), BergdorfGoodman, Inc., a New York corporation (“BG, and together with NMG,the “NMG Companies”), HSBC Bank Nevada, N.A., a national credit cardbank (“Bank”), and Household Corporation, a Delaware corporation (“PrimaryServicer”).

 

WITNESSETH:

 

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

 

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

 

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

 

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

 

NOW,THEREFORE, in consideration of the terms, conditions and mutual covenantscontained herein, and for good and valuable consideration, the receipt andsufficiency of which are hereby acknowledged, the parties hereto agree asfollows:

 

**ARTICLE I**

 

**DEFINITIONS**

 

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

 

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

 

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“AccountDocumentation” means, with respect to an Account, any and all documentationrelating to that Account, including Cardholder Documentation, checks or otherforms of payment with respect to an Account, notices to Cardholders, adverseaction 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, includingtangible and intangible information, arising from or relating or pertaining toany of the foregoing to the extent related to the Program; provided thatAccount Documentation shall not include NMG’s or any of its Affiliates’register tapes, invoices, sales or shipping slips, delivery or other receiptsor other indicia of the sale of NMG Goods and Services, any reports, analysesor other documentation prepared by any of the NMG Companies or their Affiliatesfor use in the retail business operated by the NMG Companies and theirAffiliates regardless of whether derived in whole or in part from the AccountDocumentation or any other document not directly related to the Credit CardBusiness.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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“AverageInterest Free Receivables” means, for any Fiscal Year, the average for eachFiscal Month occurring in such Fiscal Year of the Fiscal Month-end BilledCardholder Debt under Private Label Accounts that do not bear interest (otherthan CCCS Accounts and Accounts for which a payment plan was instituted inconnection with the servicing and collection thereof).

 

“AveragePrivate Label Receivables” means, for any Fiscal Year, the average for eachFiscal Month occurring in such Fiscal Year of the Fiscal Month-end BilledCardholder Debt under Private Label Accounts.

 

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

 

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

 

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

 

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

 

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

 

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

 

“BankParent” means HSBC Finance Corporation, a Delaware corporation.

 

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

 

“BankruptcyCode” means Title 11 of the United States Code, as amended, or any otherapplicable state or federal bankruptcy, insolvency, moratorium or other similarlaw and all laws relating thereto.

 

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

 

“BilledCardholder Debt” means (i) all amounts charged and owing to Bank byCardholders that were billed with respect to the Private Label Accounts(including principal balances from outstanding charges, charges for ApprovedAncillary Products, finance charges, NSF fees, late charges, pay-by-phone feesand any other fees and charges), less (ii) the amount of any creditbalances owing by Bank to such Cardholders, including in respect of anypayments and any credits associated with returns of NMG Goods and Services andother credits and adjustments, in each case, that were reflected in the BillingStatement with respect to the Account.

 

“BillingCycle” means the interval of time between regular periodic Billing Datesfor an Account.

 

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

 

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

 

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

 

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

 

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

 

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

 

“CardholderData” means all personally identifiable information about a Cardholder (A) receivedby or on behalf of Bank (including by NMG Servicer in its capacity as such) inconnection 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 behalfof Bank (including information obtained by NMG Servicer in its capacity assuch) for inclusion in its database of Cardholder information (includinginformation about a Cardholder purchased by Bank), including all transactionand experience information collected by or on behalf of Bank (including by NMGServicer in its capacity as such) with regard to each purchase charged by aCardholder using his or her NMG Credit Card, Non-Card Payment Plan or Account(including NMG Charge Transaction Data with respect to charges on Private LabelAccounts and transaction and experience information with respect to charges onNon-Store Accounts).

 

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

 

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

 

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“CardholderList” means any list (whether in hardcopy, magnetic tape, electronic orother form) that identifies Cardholders, including any such listing that setsforth the names, addresses, email addresses (as available), telephone numbersor social security numbers of any or all Cardholders.

 

“Changeof Control” means, with respect to NMG or Bank, as the case may be, (the “subjectPerson”), (i) a Person or group becomes the “beneficial owner” (as definedin Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934 (exceptthat a Person or group shall be deemed to own all securities it has the rightto acquire)), directly or indirectly, of more than fifty percent (50%) of thetotal voting power of the subject Person, (ii) such subject Person merges,consolidates, acquires, is acquired by, or otherwise combines with any otherPerson in a transaction in which the subject Person is not the surviving entityor which constitutes a “merger of equals”, it being understood that a subjectPerson shall not be considered the “surviving entity” of a transaction ifeither (A) the members of the Board of Directors of the subject Personimmediately prior to the transaction constitute less than a majority of themembers of the Board of Directors of the ultimate parent entity of the entitysurviving or resulting from the transaction or (B) the Persons who werebeneficial owners of the outstanding voting securities of the subject Personimmediately prior to the transaction beneficially own less than fifty percent(50%) of the total voting power of the ultimate parent entity of the entitysurviving or resulting from the transaction, or (iii) the subject Personsells all or substantially all of its assets to a Person that is not anAffiliate of the subject Person.

 

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

 

“Co-BrandedCredit Card” means a Credit Card that bears a NMG Licensed Mark and thetrademarks, tradenames, service marks, logos and other proprietary designationsof a Card Association, including any Dual-Line Credit Card.

 

“ComparablePartner Programs” means from time to time other major Credit Card programsof Bank designated annually by the Management Committee that are comparable tothe Program in terms of program size, public profile and brand image. As of thedate hereof, the “Comparable Partner Programs” include those listed on Schedule1.1(b).

 

“CompetingRetail Programs” means from time to time major retailer Credit Cardprograms other than the Program, whether or not Bank or any of its Affiliatesparticipate in such other programs.

 

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

 

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

 

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

 

“CreditCard” means a credit card pursuant to which the cardholder or authorizeduser may purchase goods and services, obtain cash advances or conveniencechecks, and transfer balances through open-end revolving credit, commonly knownas a credit or charge card; provided that the term does not include: (i) anygift card; (ii) any debit card, stored value card, electronic or digitalcash card or any other card that does not provide the holder thereof with theability to obtain credit other than through an overdraft line or similarfeature; or (iii) any card issued to the holder of a securities brokerageaccount that allows the holder to obtain credit through a margin account.

 

“CreditCard Business” means the business relating to the ownership, administrationand management of the Accounts and Receivables (including the extension ofcredit to Cardholders, the processing of transactions under the Accounts andthe servicing of the Accounts) and, following the Effective Date, includes allactivities relating to the Program established pursuant to this Agreement.

 

“CreditCard Production Services” has the meaning set forth in the ServicingAgreement.

 

“CustomerManagement System” means the Systems developed by the Bank with thefeatures set forth on Schedule 7.6.

 

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

 

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

 

“DocumentationServices” has the meaning set forth in the Servicing Agreement.

 

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

 

“Dual-LineCard Deadline” has the meaning set forth in Section C of Schedule2.2(c)(i)..

 

“Dual-LineCredit Card” means a Credit Card that (i) bears a NMG Licensed Mark andthe trademarks, tradenames, service marks, logos and other proprietarydesignations of a Card Association and (ii) is linked to a Non-StoreAccount and a Private Label Account.

 

“Dual-LineTesting Date” has the meaning set forth in Section C of Schedule2.2(c)(i).

 

“EffectiveDate” means the Closing Date as the term is defined in the PurchaseAgreement.

 

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

 

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

 

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“FederalFunds Rate” means the offered rate as reported in *The Wall Street Journal* in the “MoneyRates” section for reserves traded among commercial banks for overnight use inamounts of one million dollars or more or, if no such rate is published for aday, the rate published for the preceding Business Day, calculated on a dailybasis based on a 365 day year.

 

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

 

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

 

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

 

“FiscalYear” means the fiscal year set forth in the calendar published by theNational Retail Federation setting forth the fiscal year for retailers on a52/53 week fiscal year ending on the Saturday closest to July 31; providedthat the first Fiscal Year under this Program shall be the period beginning onthe Effective Date and ending on the Saturday closest to July 31, 2006.

 

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

 

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

 

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

 

“GovernmentalAuthority” means any federal, state or local domestic, foreign orsupranational governmental, regulatory or self-regulatory authority, agency,court, tribunal, commission or other governmental, regulatory orself-regulatory entity.

 

“GrossReceivables” means amounts owing (net of credit balances) from cardholderswith respect to accounts in a Credit Card portfolio (including outstandingloans, cash advances and other extensions of credit; billed or unbilled financecharges and late charges; and any other billed or unbilled fees, charges andinterest assessed on such accounts).

 

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

 

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

 

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

 

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

 

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

 

“In-StorePayment” means any payment on an Account made in a retail store owned oroperated by NMG or any of its Subsidiaries by a Cardholder or a person actingon behalf of a Cardholder.

 

“IntellectualProperty” 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 othersource indicators and the goodwill associated therewith; (iii) tradesecret rights; (iv) patents, designs, algorithms and other industrialproperty rights; (v) other intellectual and industrial property rights ofevery 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 orhereafter in force (including any rights in any of the foregoing).

 

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

 

“InternetServices” has the meaning set forth in Section 4.8.

 

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

 

“JointMarketing Commitment” means the obligation of the Bank to fund the amountper Fiscal Year set forth on Section B of Schedule 5.2 for the purposesset forth in Section 5.2(d).

 

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

 

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

 

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

 

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

 

“Licensee”means any Person authorized by NMG or any of its Subsidiaries to operate in andsell 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 inand sale of NMG Goods and Services from the NMG Channels or under the NMGLicensed Marks.

 

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

 

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

 

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

 

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

 

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

 

“MarketingPlan” means the document that outlines the objectives, strategies andtactics of new account solicitation, usage and awareness programs for theapplicable Fiscal Year.

 

“MerchantDiscount” means a discount rate generally applied against settlements dueto merchants for transactions with respect to the use of a Credit Card, whichincludes the Interchange Fees as well as any other transaction fees.

 

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

 

“NetCredit Sales” means, (i) for any Business Day, an amount equal to (A) grosscredit sales on Accounts (including gift card sales, sales tax, deliverycharges, Licensee sales and any other amount included in the full amountcharged by Cardholders) reflected in the NMG Charge Transaction Data since thepreceding Business Day, minus (B) the sum of credits for returnedgoods and cancelled services and other credits (such as concessions, discountsand adjustments) on Accounts reflected in the NMG Charge Transaction Data sincethe preceding Business Day and (ii) for any Fiscal Year, an amount equalto (A) gross credit sales on Accounts (including gift card sales, salestax, delivery charges, Licensee sales and any other amount included in the fullamount charged by Cardholders) reflected in the NMG Charge Transaction Datasince the preceding Fiscal Year, minus (B) the sum of credits forreturned goods and cancelled services and other credits (such as concessions,discounts and adjustments) on Accounts reflected in the NMG Charge TransactionData since the preceding Fiscal Year.

 

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

 

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

 

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

 

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

 

“NewPortfolio” has the meaning set forth in Section 14.1 hereof

 

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

 

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

 

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

 

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

 

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

 

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

 

“NMGGoods and Services” means the products and services sold, charged oroffered by or through NMG Channels, including for personal, household, orbusiness purposes, and including accessories, delivery services, protectionagreements, gift cards, shipping and handling, and work or labor to beperformed for the benefit of customers of the NMG Channels.

 

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

 

“NMGMarketing Commitment” means the obligation of the Bank to fund the amountper Fiscal Year set forth in Section B of Schedule 5.2 for the purposesset forth in Section 5.2(b).

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“NMGTransaction” means any purchase, exchange or return of NMG Goods andServices by a Cardholder using an Account.

 

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

 

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

 

“Non-StoreAccount” means an Account linked to any Dual-Line Credit Card and usablesolely for the purpose of financing purchases (and all fees and chargesrelating thereto) of goods and services through sellers or channels other thanthe NMG Channels.

 

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

 

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

 

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

 

“PrivacyPolicy” means the privacy policy and associated disclosures to be providedby Bank to Cardholders in connection with the Program.

 

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

 

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

 

“Program” means the program establishedpursuant to this Agreement.

 

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

 

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

 

“Program Loyalty Program” means the InCircleRewards Program and the Bergdorf Goodman Rewards Program described in Section Aof Schedule 1.1(c) or any other annual points-based loyalty programimplemented pursuant to Article III from time to time and tied to the NMGCredit Cards.

 

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

 

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

 

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

 

“Purchase Agreement” has the meaning set forthin the recitals hereof.

 

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

 

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

 

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

 

“Risk Management Policies” means theunderwriting and risk management policies, procedures and practices applicableto 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 anddecreases, over-limit decisions, Account closures, payment crediting andcharge-offs.

 

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

 

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

 

“Services” means the services required to beperformed by NMG pursuant to the Servicing Agreement or the Primary Servicerpursuant to Article VII hereof.

 

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

 

“SLA” means each individual performancestandard set forth on Schedule 7.3(a) and Schedule 2.04(a) of theServicing Agreement.

 

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

 

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

 

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

 

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

 

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

 

“Term” means the Initial Term and each RenewalTerm.

 

“Termination Period” means the period beginningon the earlier of the date of expiration of this Agreement or the date of anynotice of termination pursuant to Article XV and ending on either (i) thedate the Program Assets are repurchased pursuant to Section 17.2, if NMGor a Nominated Purchaser purchases the Program Assets, or (ii) the datethat either (A) the NMG Companies deliver written notice to Bank of theirelection not to purchase the Program Assets or (B) the right of the NMGCompanies to purchase the Program Assets expires in accordance with the termsof this Agreement.

 

“Trademark Style Guide” means any rules governingthe manner of usage of trademarks, tradenames, service marks, logos and otherproprietary designations.

 

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

 

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

 

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

 

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**ARTICLE II**

**ESTABLISHMENT OF THE PROGRAM**

 

2.1 Credit Program.

 

(a) General. Beginning as of the EffectiveDate, 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/orNon-Card Payment Plan with respect to each Application approved in accordancewith the Risk Management Policies. Following the issuance of Dual-Line CreditCards by Bank and NMG under the Program, Bank shall promptly open a new Accountand issue a new Dual-Line Credit Card with respect to each Application approvedin accordance with the Risk Management Policies. To the extent approved inaccordance with the terms of this Agreement, the Program shall include and theBank shall offer such other Approved Ancillary Products and other paymentproducts as shall be incorporated in the Program in the future.

 

(b) Notice to Cardholders. Substantiallyconcurrently with the Effective Date, Bank and NMG shall prepare jointly a formor forms of notices to each Cardholder to the effect that such Cardholder’sAccount has been acquired by Bank and, if applicable, also containing anychange of terms notices with respect to any change of terms that the Partiesmutually agree to implement. Such notice shall be in the form approved by bothParties, which approval will not be unreasonably withheld or delayed, and willcomply with all requirements of Applicable Law. Bank shall issue new PrivateLabel Credit Cards in accordance with Schedule 2.1(b) and shall maintainexisting Account numbers on the Accounts. The costs of preparation and mailingsof such notices and new Private Label Credit Cards shall be borne by Bank. Themailings shall be made in such manner and at such time as Bank and NMG maymutually agree.

 

2.2 Exclusivity.

 

(a) General. Except as otherwise providedin this Section 2.2 and without limiting NMG’s right to arrange thepurchase 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 itselfor in conjunction with or pursuant to agreements with any bank or other CreditCard issuer, offer or market in the United States (i) a Private LabelCredit Card, (ii) a Co-Branded Credit Card or (iii) a Non-CardPayment 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 theright at any time during the Term to establish a program (a “Second-LookCredit Card Program”) for (i) issuing Credit Cards, including PrivateLabel Credit Cards and Dual-Line Credit Cards, using the NMG Licensed Marks, or(ii) opening Non-Card Payment Plans, in each case, to customers whoseApplications have been declined by Bank; provided, however, thatBank shall have a right of first offer to develop the Second-Look Credit CardProgram as follows. NMG shall provide notice to Bank indicating the intentionof NMG or its applicable Affiliate(s) to establish the Second-Look CreditCard Program. Not later than the 20th day following receipt of the notice by Bank,Bank may make an offer to NMG with respect to the establishment of theSecond-Look Credit Card Program, which offer shall remain open for a

 

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periodof not less than forty-five (45) days. NMG shall be under no obligation toaccept such offer or to provide Bank with any right to match any offer receivedby NMG from any third party. NMG may elect to (A) accept the offer made byBank, (B) establish the Second-Look Credit Card Program directly orthrough any of its Affiliates, or (C) enter into an arrangement with anythird party Credit Card issuer providing for the establishment of a Second-LookCredit Card Program to be issued by such issuer; provided that NMG maynot enter into any such arrangement with any such third party Credit Cardissuer unless the financial terms and conditions offered to NMG by such CreditCard issuer are substantially more favorable to NMG in the aggregate to theterms and conditions offered to NMG by Bank. If NMG elects to establish aSecond-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 ora provider of secondary financing the Applications received by Bank withrespect to such customers and shall cooperate in good faith with the NMGCompanies in order to facilitate the issuance of Credit Cards or Non-CardPayment Plans, as applicable, to such customers pursuant to such program.

 

(c) Dual-Line/Co-Branded Program.

 

(i) Beginning as of the Effective Date, Bank, atits own expense, shall perform the product design and consumer research setforth in Section A of Schedule 2.2(c)(i) of Dual-Line Credit Cardproducts designated in such schedule or otherwise approved by the ManagementCommittee. Bank shall use its best efforts to ensure that the personnel used toconduct such product design and consumer research has relevant experience inthe department store industry, comparable customer demographics and loyaltyprograms and that the other resources (including Systems and other technologyresources) used to conduct such research are Competitive. Bank shall completethe product design and consumer research testing set forth in Section A ofSchedule 2.2(c)(i) by the Dual-Line Testing Date.

 

(ii) In the event that NMG decides to testDual-Line Credit Cards following such consumer research, NMG shall provide Banknotice of such desire. Within the Development Period, Bank shall commence thetesting set forth in Section B of Schedule 2.2(c)(i) of Dual-LineCredit Cards having the terms set forth in Schedule 2.2(c)(ii) and suchother and/or additional terms as may be approved by the Management Committee.In the event that Bank fails to commence offering Dual-Line Credit Cards on theterms set forth in Schedule 2.2(c)(ii) by the Dual-Line Card Deadline orotherwise breaches any of its obligations pursuant to this Section 2.2,NMG shall be free to issue Co-Branded Credit Cards itself or through anAffiliate or enter into an arrangement with any third party to issue Co-BrandedCredit Cards. Upon such an event, the restrictions of Section 2.2(a) shallnot apply to any such issuance of Co-Branded Credit Cards.

 

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

 

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

 

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(f) Other Products. Except to the extentexpressly set forth in this Section 2.2, NMG and its Affiliates shall notbe 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 ofthe following at any time:

 

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

 

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

 

(iii) offer its customers rewards or promotionalprograms or other value propositions, including Loyalty Programs, of any type;provided that, except to the extent approved by a majority of the membersconstituting the full Management Committee (including any vacancies), (A) theProgram Loyalty Programs shall remain the primary Loyalty Programs for the NMGChannels and any changes to the Program Loyalty Programs shall be made inaccordance with Article III, and (B) except to the extent set forthin Section B of Schedule 2.2(d), no Loyalty Program other than the ProgramLoyalty Programs shall (x) award points based on the participant’s choiceof tender or payment method or (y) provide awards on an annual basis uponreaching specific spending tiers.

 

**ARTICLE III**

**PROGRAM MANAGEMENT AND ADMINISTRATION**

 

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

 

(a)           to enhance the experience of NMGShoppers;

 

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

 

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

 

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

 

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

 

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3.2 Management Committee.

 

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

 

(b) Subcommittees of the Management Committee.The Management Committee may designate additional committees (which may includepersons who are not members of the Management Committee) with responsibilityfor 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 approvedby the Management Committee shall not be delegated to any subcommittee or otherbody.

 

(c) Composition of the Management Committee.The Management Committee shall consist of eight (8) members, of whom four (4) membersshall be nominated by NMG (the “NMG Designees”) and four (4) membersshall be nominated by Bank (the “Bank Designees”). The initial NMGDesignees 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 theManagement Committee. Each Party shall at all times have as one of itsdesignees the Person with overall responsibility for the performance of theProgram within his or her respective corporate organization, which in the caseof Bank, shall be the Chief Financial Officer or Chief Operating Officer of theprivate label Credit Card business of Bank. NMG shall designate among itsdesignees to the Management Committee the senior executive of NMG responsiblefor the Program Loyalty Programs and at least one executive officer of NMG.Bank and NMG may each substitute its designees to the Management Committee fromtime to time so long as their designees continue to satisfy the aboverequirements, provided that each Party shall provide the other Partywith as much prior notice of any such substitution as is reasonably practicableunder the circumstances.

 

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

 
| (i)    | oversee Program  marketing activities, including review and approval of the Marketing Plan;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (ii)   | review  collection strategies and collection metrics;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (iii)  | monitor  activities of competitive programs and identify implications of market  trends;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (iv)   | approve  the use of any third party (e.g., subcontractor or outsourced service  provider), other than any Affiliate of NMG or Bank, as the case may be, to  perform any of the obligations to be performed by Bank or the NMG Companies  under the Program, in each case, except to the extent (x) subcontracted  or outsourced as of the Effective Date or (y) such subcontracted or  outsourced service would not involve direct contact between such third party  and any Cardholder (i.e., in person, via telephone or in writing) it being  agreed and understood that the subcontracting or outsourcing of such services  (which may include print shops and mail vendors) would be within the sole  discretion of the respective Party who elects to subcontract or outsource  such service; |

 

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| (v)    | evaluate and  approve changes to any of the following:                                                                                                             |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                               |
|   | (A)                                                                                                                                                                | offering of new  Credit Cards or Approved Ancillary Products, including Co-Branded Credit  Cards, Non-Card Payment Plans or other payment products; |
|   |                                                                                                                                                               |   |
|   | (B)                                                                                                                                                                | changes in  Account terms, including any of the terms set forth on Schedule 4.7; |
|   |                                                                                                                                                               |   |
|   | (C)                                                                                                                                                                | changes to the  Risk Management Policies (which shall be submitted to the Management  Committee together with the expected pro forma effects of such changes on the  Program); |
|   |                                                                                                                                                               |   |
|   | (D)                                                                                                                                                                | changes to the  Operating Procedures; and |
|   |                                                                                                                                                               |   |
|   | (E)                                                                                                                                                                | changes to the  SLAs applicable to the Program; |
|   |                                                                                                                                                               |   |
| (vi)   | approve the  design of Cardholder Documentation and any changes thereto;                                                                                           |
|   |                                                                                                                                                               |
| (vii)  | review customer  service, collections and other servicing performance and reporting aspects of  the Program against SLAs and other requirements of this Agreement; |
|   |                                                                                                                                                               |
| (viii) | oversee  compliance with Applicable Law, the Risk Management Policies, Operating  Procedures and other Program operations and procedures;                          |
|   |                                                                                                                                                               |
| (ix)   | carry out such  other tasks as are assigned to it by this Agreement or jointly by the  Parties; and                                                                |
|   |                                                                                                                                                               |
| (x)    | pursuant  to Section 12.4(b)(i)(B), resolve disputes that arise among the Parties  with regard to the Program from time to time.                              |

 

(e)               Proceedings of the Management Committee.

 

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

 

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(ii) Actions.

 

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

 

(B) Ifa majority of the Management Committee members constituting the full ManagementCommittee (including any vacancies) fail to agree on any matter of significanceto the Program (an “Unapproved Matter”) within ten (10) BusinessDays 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) BusinessDays after the relevant subcommittee vote and has failed to so), then initiallythe Chief Executive Officer of HSBC Retail Services and Senior Vice President,General Counsel and Secretary of NMG (or any other similarly ranking officer ofBank or NMG, as the case may be, who is not a Management Committee member andshall have been designated in writing by NMG or Bank, as applicable, to the otherParty) shall in good faith attempt to resolve the matter. Any such resolutionby such senior officers shall be deemed to be the action and approval of theManagement Committee for purposes of this Agreement. If after ten (10) BusinessDays, the Unapproved Matter remains unresolved by such senior officers of NMGand Bank, the failure to agree shall constitute a deadlock. In the event of adeadlock, the final decision shall rest with NMG in the case of NMG Matters andwith Bank in the case of Bank Matters, each of which shall, except as otherwiseprovided herein, exercise its discretion reasonably and in good faith. If adeadlock should occur with respect to a matter that is neither an NMG Matternor a Bank Matter, the matter shall be deemed rejected by the ManagementCommittee.

 

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

 

(D) Notwithstandinganything to the contrary contained herein, Bank shall not override any vote ofthe NMG Designees in a way that would result in any aspect of the Program beingmore onerous or less beneficial to the Cardholders or the NMG Companies thanComparable Partner Programs unless (i) Bank’s position on the issue isrequired by Applicable Law and (ii) Bank adopts, and certifies to the NMGCompanies that it has adopted, the same position with respect to each of itsother Comparable Partner Programs that are similarly impacted by suchApplicable Law or to which such Applicable Law could similarly be applied.

 

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(iii) Customer Service Disputes. If at anytime there shall be a material change in customer dispute patterns or volume,as evidenced by the monitoring procedures set forth in the Dispute Resolutionand Service Profile Report Process section of the Operating Procedures, (A) NMGshall call, and the Parties shall attend, one or more Management Committeemeetings to consider and vote upon a plan to remediate such customer service orother disputes, (B) the Parties shall negotiate in good faith for a periodending not less than ten (10) days following the date of such meeting, toarrive at a mutually agreeable remediation plan (or a shorter period if such aremediation plan is agreed to prior to the 10th day), and (C) in the event suchremediation plan is voted upon and approved, the Parties shall promptlyimplement such plan; provided, that in the event that such customerservice or other disputes arise from a change in Account terms, NMG may requestthat any such Account terms be restored to the terms in effect prior to suchcustomer service or other disputes and Bank shall implement such change inAccount terms to the extent permitted by Applicable Law. If such changes inAccount terms are implemented, the amount payable by Bank to NMG under Section 9.1(a)(i) shallbe adjusted to reinstate the amounts previously payable pursuant to this Agreementin connection with such reinstated terms. If such customer service or otherdisputes remain uncured on the tenth (10th)day following the implementation of such Management Committee-approvedremediation plan or such other date determined by the Management Committee asreasonably required to implement such remediation plan, NMG shall call, and theParties shall attend, one or more Management Committee meetings to consider andvote 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 toremediate such customer service or other disputes within the ten (10) daysfollowing 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 andsubject to this Section 3.2, NMG shall have the ultimate decision makingauthority with respect to any Unapproved Matters in respect of the followingmatters (the “NMG Matters”):

 

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

 

(ii) look, feel and content of BillingStatements, except for content that is dictated by legal or regulatoryrequirements, as evidenced by a Legal Opinion;

 

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

 

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

 

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

 

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

 

(vii) communications and/or contacts withCardholders (other than as required to service the Accounts, comply withApplicable Law or as otherwise provided in this Agreement), including use oftelemarketing techniques by Bank.

 

(g) Bank Matters. In accordance with andsubject to this Section 3.2, Bank shall have the ultimate decision makingauthority with respect to any Unapproved Matters in respect of the followingmatters (the “Bank Matters”):

 

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

 

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

 

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

 

(iv) content of Cardholder Documentation andSolicitation Materials that is dictated by Applicable Law, as evidenced by aLegal Opinion.

 

3.3 Program Relationship Managers; Program Team.

 

(a) The NMG Companies and Bank shall each appointone Program relationship manager (each, a “Manager”). The Managers shallexercise day-to-day operational oversight of the Program, subject to theactions and decisions of the Management Committee, and coordinate thepartnership efforts between the NMG Companies and Bank, shall report to thedesignees on the Management Committee of the Party appointing such Manager andshall conduct their Program responsibilities in accordance with the actions anddecisions of the Management Committee. The NMG Companies and Bank shallendeavor to provide stability and continuity in the Manager positions and eachParty’s other Program personnel.

 

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

 

(c) Theinitial Manager of Bank is set forth in Schedule 3.3. The Bank’s Manager shallreport directly to the Bank’s Managing Director-Client Relations. The Bank’sManager’s performance-based compensation shall be based upon the ProgramObjectives and other specific annual targets and objectives set by theManagement Committee, including Program profitability targets. The appointmentof a new Manager by Bank is subject to the prior approval of NMG. With respectto future Bank Manager candidates, Bank shall seek to propose candidates withsubstantial Program relevant experience, including experience with thedepartment store industry, comparable customer demographics and loyalty programs.

 

(d) Bankshall maintain a Program team having Competitive expertise and experience andmeeting the requirements and specifications set forth in Schedule 3.3. Nomember of the Bank’s Program team shall be reassigned to any program operatedby Bank or any of its Affiliates pursuant to any agreement or arrangement withany 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 Operationof the Program.

 

(a) Eachof the Parties hereto shall perform its obligations under this Agreement (i) incompliance with the terms and conditions of this Agreement, the Risk ManagementPolicies, the Operating Procedures and any other policies, procedures andpractices adopted pursuant to this Agreement, (ii) in good faith, (iii) inaccordance with Applicable Law, and (iv) in a manner consistent with theProgram Objectives.

 

(b) Theinitial Operating Procedures applicable to various aspects of the operation ofthe Program shall be the operating procedures adopted by NMG, its Affiliatesand the Licensees prior to the Effective Date (which operating procedures areattached hereto as Schedule 4.1(b)). Changes to such Operating Procedures shallonly be made with the approval of the Management Committee; providedthat changes to the Risk Management Policies may be made in accordance with Section 4.6and Article III.

 

(c) Exceptas expressly provided otherwise in this Agreement, Bank shall use commercially reasonableefforts to ensure that the personnel and other resources (including Systems andother technology resources) devoted by Bank to the Program shall beCompetitive.

 

4.2 CertainResponsibilities of the NMG Companies.

 

(a) Inaddition to its other obligations set forth elsewhere in this Agreement, NMGagrees that during the Term it shall, either itself or through the Affiliate(s) towhich it subcontracts the relevant functions:

 

(i) asprovided in the Servicing Agreement, in its capacity as NMG Servicer, maintaina System to process Applications, using the underwriting and credit limitassignment policy set forth in the Risk Management Policies and the OperatingProcedures, as maintained by NMG in effect as of January 1, 2005;

 

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(ii) asprovided in the Servicing Agreement, in its capacity as NMG Servicer, maintaincall centers to respond to inquiries from Cardholders and to deal with billingrelated claims and adjustments (including by making finance charge and late feereversals), establish new Accounts or Account types, authorize transactions,and assign, increase and decrease credit lines, all in accordance with the RiskManagement Policies and the Operating Procedures, in each case, as performed byNMG prior to January 1, 2005;

 

(iii) asprovided in the Servicing Agreement, in its capacity as NMG Servicer, provideAccount monitoring services, including identifying delinquencies, identifyingcollection efforts required, implementing credit-line adjustments, over limitauthorizations and Account deactivation or cancellation;

 

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

 

(v) solicitnew Accounts through in-store instant credit procedures (in accordance withthis Agreement) and display of Solicitation Materials (or Applications) in theNMG Channels pursuant to the Marketing Plan;

 

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

 

(vii) receiveIn-Store Payments in accordance with procedures that comply with ApplicableLaw, subject to reimbursement from Bank for the processing of such payments asprovided in this Agreement;

 

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

 

(ix) continueto make available a Program Loyalty Program;

 

(x) asprovided in the Servicing Agreement, in its capacity as NMG Servicer, processremittances from Cardholders;

 

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

 

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

 

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4.3 CertainResponsibilities of Bank.

 

(a) Inaddition to its other obligations set forth elsewhere in this Agreement, Bankagrees that during the Term it shall:

 

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

 

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

 

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

 

(iv) inaccordance with Section 7.2, after the Documentation Services TransitionDate, prepare, process and mail Cardholder Billing Statements, Inserts, privacypolicy notices, change in terms notices and other communications to Cardholdersand perform any other Services required to be performed pursuant to thisAgreement from time to time;

 

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

 

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

 

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

 

4.4 Ownershipof Accounts; Account Documentation.

 

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

 

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(b) Exceptas expressly provided herein, Bank shall be entitled to (i) receive allpayments made by Cardholders on Accounts and (ii) retain for its accountall Cardholder Indebtedness and all other fees and income authorized by theCardholder Agreements and collected with respect to the Accounts and CardholderIndebtedness. Bank shall retain for its account any income from sellingApproved Ancillary Products as shall have been approved by the ManagementCommittee in connection with the approval of the offering of such ApprovedAncillary Products.

 

(c) Bankshall fund all Cardholder Indebtedness on the Accounts.

 

(d) Bankshall have the exclusive right to effect collection of Cardholder Indebtedness,except as set forth in the Servicing Agreement, and shall notify Cardholders tomake payment directly to it in accordance with its instructions; provided,however, that Bank at its option may make all collections for itsaccount using a Program name which includes the name of NMG and, if Bank soelects, 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 toBank a limited power of attorney (coupled with an interest) to sign and endorseNMG’s name upon any form of payment that may have been issued in NMG’s name inrespect of any Account.

 

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

 

(f) Withrespect to all Account Documentation, and notwithstanding the purchase of suchAccount Documentation by Bank as of the Effective Date, NMG Servicer, shallcontinue to hold and retain the Account Documentation following the EffectiveDate as bailee for the sole benefit of Bank.

 

(i) Fromtime to time following the Effective Date, NMG Servicer shall deliver suchAccount Documentation as requested by Bank. NMG Servicer will use reasonableefforts to accommodate Bank’s shorter requested time frames, but in any eventsuch deliveries will be made no later than the following time frames: (i) forstatements, 15 days; (ii) for non-cash payment information, 10 days; (iii) forcash payment information, 5 Business Days, (iv) for applicationinformation, 20 days; (v) for sales slips, 20 days; and (vi) for allother Account Documentation, 30 days. NMG Servicer shall effect delivery of therequested Account Documentation at its sole cost and expense, unless otherwisedetermined by the Management Committee; provided, that in connectionwith any litigation, all Account Documentation shall be provided within fifteen(15) days rather than the timeframes set forth above.

 

(ii) Indischarging its bailment duties hereunder, NMG Servicer agrees to utilize suchdocument storage, safekeeping and security methods in accordance withApplicable Law. All Account Documentation shall be housed at NMG Servicer’soperations centers or other facilities designated by NMG Servicer. Withoutlimiting any of their obligations under this Agreement, NMG agrees to maintainthe Account Documentation for a period that complies with the document retentionpolicy set forth in Schedule 4.4(f).

 

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4.5 Brandingof Accounts/Credit Cards/Cardholder Documentation/Solicitation Materials.

 

(a) TheCardholder Documentation and the Solicitation Materials shall be in the designand format proposed by the NMG Companies and approved by the ManagementCommittee; provided that Bank shall be responsible for ensuring that theCardholder Documentation and the Solicitation Materials comply with ApplicableLaw and for ensuring that the Solicitation Materials comply with the CardholderDocumentation.

 

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

 

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

 

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

 

4.6 Underwritingand Risk Management.

 

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

 

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(b) Theinitial Risk Management Policies to be in effect as of the Effective Date arecontained in the initial Operating Procedures. Each Party may proposemodifications of any aspect of the Risk Management Policies, whichmodifications shall be made only upon approval in accordance with Article III.

 

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

 

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

 

4.7 CardholderTerms.

 

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

 

(b) Theaccount numbers and BINs of all Purchased Accounts shall remain the same afterthe Effective Date.

 

4.8 InternetServices.

 

(a) CardholderWebsite. Bank shall develop and maintain an NMG-branded website forCardholders and potential Cardholders to be effective as of the SystemsTransition Date, with the look and feel consistent with the NMG Companies’websites (“Program Website”). The Program Website shall be accessedsolely by means of links from the NMG Companies’ websites and shall contain orotherwise be associated with only such material and links as shall be agreed bythe Management Committee from time to time. The NMG Companies will provide suchlinks on (i) their home pages, (ii) their check-out pages, and (iii) suchother pages as the Management Committee shall determine from time to time.The Program Website shall also include links back to the NMG Companies’websites, on the Program Website home page and such other pages asthe Management Committee shall determine from time to time. The Program Websiteshall include the following functions, and such other functions as may beapproved by the Management Committee from time to time (the Program Website andsuch functionality, collectively, the “Internet Services”).

 

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

 

(ii) CardholderCustomer Service. The Program Website shall permit Cardholders to (A) viewthe Cardholder’s Account information and Billing Statements (including anyLoyalty Program information, NMG Transaction information, and all otherinformation contained in such Billing Statement); (B) to the extentrequested by, and provided to the Bank by, NMG, view electronic copies of salesslips or other documents or data relating to the Cardholder’s NMG transactions,including the Cardholder’s signature; and (C) make payments on theCardholder’s Account via automated clearing house transfer or other paymentmechanism.

 

(b) PerformanceStandards. Bank shall provide the Internet Services consistent with theSLAs set forth on Schedule 4.8(b) and in accordance with industrystandards.

 

(c) CustomerPrivacy. Bank shall ensure that the Privacy Policy is clearly andprominently posted on the pages of the Program Website.

 

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

 

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

 

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

 

4.9 SalesTaxes. NMG and its Subsidiaries shall pay when due any sales taxes relatingto the sale of NMG Goods and Services. To the extent permitted by theApplicable Law of the relevant states, NMG shall use commercially reasonableefforts to recover sales taxes charged to any Account that has been written offby Bank. Bank shall notify the NMG Companies of any amounts written-off onAccounts by Bank, identified by Account, and shall sign such forms and provideany such other information as requested by NMG to enable the NMG Companies topursue any such recoveries. NMG shall pay to Bank an amount equal to recoveredsales taxes. To the extent Bank is permitted by Applicable Law to directlyrecover sales taxes charged to any Account written off by Bank, the NMGCompanies shall sign such forms and provide any such other information asreasonably requested by Bank to enable Bank

 

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to pursue any suchrecoveries. In the event NMG is audited or assessed by a state, and as a resultany amount of sales tax previously recovered is repaid to the state, Bank shallrepay such amount to NMG. NMG shall use commercially reasonable efforts tonegotiate such audit or assessment. Bank also shall fully cooperate in any suchaudit or assessment and shall pay the costs and expenses of NMG incurred inconnection with negotiating any tax audit or assessment or analyzing orpursuing any bad debt claims.

 

4.10 Participationin Reversals.

 

(a) Reportingof Reversals. Each Year-End Settlement Statement shall set forth acalculation of the applicable Finance Charge Reversal Percentage and Late FeeReversal Percentage for the preceding Fiscal Year and such other calculationsas are necessary to calculate the payment in respect thereof to be made by theParties pursuant to this Section 4.10. All amounts payable pursuant tothis Section shall be netted against each other so that only a singlepayment shall be made pursuant to this Section.

 

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

 

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

 

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

 

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

 

**ARTICLE V**

**MARKETING**

 

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

 

5.2 MarketingCommitment.

 

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

 

(b) TheNMG Marketing Fund shall be used by NMG and its Affiliates in the solediscretion of NMG for such incremental marketing of the Program and the CreditCard Business as NMG and its Affiliates shall undertake from time to time.

 

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

 

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

 

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

 

5.3 Communicationswith Cardholders.

 

(a) NMGInserts. NMG and its Affiliates shall have the exclusive right tocommunicate with Cardholders, except for any message required by ApplicableLaw, through use of inserts, fillers and bangtails (which shall be included onall billing envelopes) (collectively, “Inserts”), including Insertsselectively targeted for particular segments of Cardholders, in any and allBilling Statements (including electronic Billing Statements) and envelopes,subject to production requirements contained in the Operating Procedures andApplicable Law.****Except asotherwise provided in the Marketing Plan, and except for Inserts required byApplicable Law (which shall be paid for by Bank), the NMG Companies shall beresponsible for the content of, and the cost of preparing and printing, anysuch Inserts. If the insertion of Inserts in particular Billing Statementswould increase the postage costs for such Billing Statements, the NMG Companiesagree to either pay for the incremental postage cost or prioritize the use ofInserts to avoid postage cost over-runs. The NMG Companies shall retain allrevenues they receive from all Inserts (other than any Inserts promoting theNMG Credit Cards or Approved Ancillary Products that the NMG Companies maypermit to be produced and distributed in accordance with the Marketing Plan).Subject to NMG’s prior written approval, which shall not be unreasonablywithheld, Bank may communicate with Cardholders in the Inserts about theProgram as necessary for Bank to comply with its obligations under thisAgreement.

 

(b) BillingStatement Messages. NMG and its Affiliates shall have the exclusive rightto use Billing Statement (including electronic Billing Statement) messages andBilling Statement envelope (or electronic mail) messages in each Billing Cycleto communicate with Cardholders, subject to production requirements containedin the Operating Procedures and Applicable Law. Such messages shall be includedat no cost to the NMG Companies. Notwithstanding the foregoing, any messagerequired by Applicable Law shall take precedence over NMG’s and its Affiliates’messages. Subject to NMG’s prior written approval, which shall not beunreasonably withheld, Bank may communicate with Cardholders about the Programin the Billing Statements as necessary for Bank to comply with its obligationsunder this Agreement.

 

5.4 AdditionalMarketing Support.

 

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

 

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

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

 

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

 

(ii) provide suchreasonable assistance to NMG and its Affiliates as NMG may request inconnection with the training of personnel of NMG and its Affiliates regardingthe Program, including providing training materials developed by Bank andapproved by the Management Committee;

 

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

 

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

 

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

 

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5.5 ApprovedAncillary Products. Except for the Approved Ancillary Products, the NMGCredit Cards and the Non-Card Payment Plans, Bank and its Affiliates shall notoffer (except as directed by NMG) any goods or services to Cardholders orthrough the Program. From time to time, Bank may propose to solicit Cardholdersfor products or services other than the foregoing. If the NMG Companies, intheir sole and absolute discretion, agree to permit such solicitation, suchsolicitation shall only be permitted on the terms (including terms relating tothe compensation of the NMG Companies with respect thereto) agreed by the NMGCompanies.

 

5.6 MarketingPlan.

 

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

 

(b) Atleast once per calendar year, the Management Committee shall consider (to theextent such terms and conditions are publicly known or otherwise known and notsubject to any confidentiality obligations on the part of either Party)features, terms, conditions and other aspects of other Comparable PartnerPrograms and Competing Partner Programs in order to identify marketplacedevelopments for possible inclusion in the Program to ensure that the Programremains Competitive. If the Management Committee determines that a change tothe Program may be required, Bank shall develop a plan with respect toimplementation of such change, including the impact the proposed change wouldhave, if any, on the revenue share, and shall present such plan to the ManagementCommittee for its review and decision. The Management Committee shall decidewhether to test or launch any such Program changes for Cardholders or potentialCardholders.

 

(c) EachMarketing Plan shall outline, for each NMG Channel, all programs, to the extentestablished and mutually agreed upon by the NMG Companies and Bank, and shallinclude at least the following information for each program:

 

(i) descriptionof offer(s), cost per unit, expected response rate and other performanceprojections with respect thereto;

 

(ii) descriptionof target audience;

 

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

 

(iv) distributionamong the NMG Channels and types of Accounts; and

 

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

 

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

 

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preparation of uniquecollateral materials for the NMG Companies’ employees; activation, retentionand usage; statement design and messaging; advertising of the Program; and suchother marketing matters as the Parties shall agree to.

 

(e) EachMarketing Plan shall specify which Party is responsible for each Marketing Planitem and shall contain a budget specifying the Parties’ financialresponsibilities during the applicable Fiscal Year.

 

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

 

(g) Tothe extent practicable, all significant marketing initiatives developed underthis Agreement shall contain unique marketing source codes to facilitatepost-marketing research and analysis.

 

**ARTICLE VI**

**CARDHOLDER INFORMATION**

 

6.1 CustomerInformation.

 

(a) Allsharing, use and disclosure of Cardholder Data and NMG Shopper Data under thisAgreement shall be subject to the provisions of this Article VI. TheParties acknowledge that the same or similar information may be contained inthe Cardholder Data, the NMG Shopper Data, and other data and that each suchpool of data shall therefore be considered separate information subject to thespecific provisions applicable to that data hereunder.

 

(b) NMGand Bank shall each maintain an information security program that is designedto meet all requirements of Applicable Law, including, at a minimum,maintenance of an information security program that is designed to: (i) ensurethe security and confidentiality of the Cardholder Data and the NMG ShopperData; (ii) protect against any anticipated threats or hazards to thesecurity or integrity of the Cardholder Data and the NMG Shopper Data; (iii) protectagainst unauthorized access to or use of the Cardholder Data and the NMGShopper Data; and (iv) ensure the proper disposal of Cardholder Data andNMG Shopper Data. Additionally, such security measures shall meet currentindustry standards and shall be at least as protective as those used by eachParty to protect its other confidential customer information. Each Party shalluse the same degree of care in protecting the Cardholder Data and the NMGShopper Data against unauthorized disclosure as it accords to its ownconfidential customer information, but in no event less than a reasonablestandard of care. In particular, Bank shall treat NMG Shopper Data as if itwere “customer information” for purposes of the regulations above. In the eventa Party becomes aware of any unauthorized use of or access to Cardholder Data,such Party shall immediately notify the other Party and shall cooperate withsuch other Party, as it deems necessary or as required by Applicable Law, (x) toassess the nature and scope of such incident, (y) to contain and controlsuch incident to prevent further unauthorized access to or use of CardholderData, and (z) to provide prompt notice to affected Cardholders to theextent required by Applicable Law or otherwise with the approval of theManagement

 

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Committee. In the eventBank 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 thenature and scope of such incident, (y) to contain and control suchincident to prevent further unauthorized access to or use of NMG Shopper Data,and (z) to provide prompt notice to affected NMG Shoppers to the extentrequired by Applicable Law or otherwise with the approval of the ManagementCommittee. The cost and expenses of any such notice shall be borne solely bythe Party that experienced the unauthorized use of or access to Cardholder Dataor NMG Shopper Data.

 

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

 

6.2 CardholderData.

 

(a) Asamong the Parties hereto, the Cardholder Data shall be the property of andexclusively owned by Bank.

 

(b) TheProgram Privacy Policy applicable to the Cardholder Data is attached asSchedule 6.2 hereto. Any modifications to the Program Privacy Policy shall beapproved by the Management Committee, provided that the Program PrivacyPolicy shall comply with Applicable Law at all times.

 

(c) Bankshall not use, or permit to be used, the Cardholder Data, except as provided inthis Section 6.2. Bank may use the Cardholder Data in compliance withApplicable Law and the Program Privacy Policy solely (i) for purposes ofsoliciting or marketing (in each case, solely as directed by the NMG Companiesor the Management Committee) or servicing customers listed in the CardholderData for NMG Credit Cards, Approved Ancillary Products, and any other productsand services approved by the Management Committee, (ii) as otherwisenecessary to carry out its obligations or exercise its rights hereunder, or (iii) asrequired by Applicable Law. Bank has no rights to use the Cardholder Data formarketing purposes except as expressly provided herein.

 

(d) Bankshall not disclose, or permit to be disclosed, the Cardholder Data, except asprovided in this Section 6.2. Bank shall not, directly or indirectly, sellor otherwise transfer any right in or to the Cardholder Data other than to NMGor any of its Affiliates. Bank may disclose the Cardholder Data in compliancewith Applicable Law and the Program Privacy Policy solely:

 

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

 

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Cardholder Data underthis Section 6.2, provided that each such authorized subcontractoragrees in a written agreement satisfactory to NMG and Bank to maintain all suchCardholder Data as strictly confidential and not to use or disclose suchinformation to any Person other than Bank or an NMG Company, except as requiredby Applicable Law or any Governmental Authority (after giving Bank and the NMGCompanies prior notice and an opportunity to defend against such disclosure); provided,further, that each such authorized subcontractor maintains, and agreesin writing to maintain, an information security program that is designed tomeet all requirements of Applicable Law, including, at a minimum, maintenanceof an information security program that is designed to: (w) ensure thesecurity and confidentiality of the Cardholder Data; (x) protect againstany anticipated threats or hazards to the security or integrity of theCardholder Data; (y) protect against unauthorized access to or use of theCardholder Data; and (z) ensure the proper disposal of Cardholder Data;and provided, further, that each such authorized subcontractoragrees to notify promptly Bank and the NMG Companies of any unauthorizeddisclosure, use, or disposal of, or access to, Cardholder Data and to cooperatewith Bank and the NMG Companies in any investigation thereof and remedialaction with respect thereto;

 

(ii) toits Affiliates, and its and such Affiliates’ employees, attorneys andaccountants with a need to know such Cardholder Data in connection with apermitted use of such Cardholder Data under this Section 6.2; providedthat (A) any such Person is bound by terms substantially similar to this Section 6.2as a condition of employment or of access to Cardholder Data or by professionalobligations imposing comparable terms; and (B) Bank shall be responsiblefor the compliance by each such Person with the terms of this Section 6.2;

 

(iii) toany Governmental Authority with authority over Bank (A) in connection withan examination of Bank; or (B) pursuant to a specific requirement toprovide such Cardholder Data by such Governmental Authority or pursuant tocompulsory legal process; provided that Bank seeks the full protectionof confidential treatment for any disclosed Cardholder Data to the extentavailable under Applicable Law governing such disclosure, and with respect toclause (B), to the extent permitted by Applicable Law, Bank (1) providesat least ten (10) Business Days’ prior notice of such proposed disclosureto NMG if reasonably possible under the circumstances, and (2) seeks toredact the Cardholder Data to the fullest extent possible under Applicable Lawgoverning such disclosure; or

 

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

 

(e) Tothe extent Bank has access to the following information in accordance with theprovisions of this Agreement and subject to Applicable Law and the ProgramPrivacy Policy, Bank shall transmit to the NMG Companies at such times as maybe requested by NMG and in formats agreed to by the Parties in advance fromtime to time:

 

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

 

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(ii) foreach Cardholder, joint-Cardholder and authorized buyer, (1) such person’sname, address, email address, telephone number, social security number andAccount number; (2) any reported change to any of the foregoinginformation; (3) transaction and experience data; and (4) any suchother Cardholder Data as the NMG Companies may reasonably request;

 

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

 

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

 

(v) theCardholder Data for all categories of information available on the NMGCompanies’ credit Systems as of the date hereof.

 

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

 

(f) Bankshall cooperate with the NMG Companies to provide NMG and its Affiliates withthe maximum ability permissible under Applicable Law and the Program PrivacyPolicy to receive, use and disclose the Cardholder Data, including, asnecessary or appropriate, through use of consents or opt-out provisions, ineach case as directed by the NMG Companies. Without limiting the foregoing, NMGand each of its Affiliates may receive, use and disclose the Cardholder Data incompliance with Applicable Law and the Program Privacy Policy (i) forpurposes of promoting the Program or promoting NMG Goods and Services, (ii) asotherwise necessary to carry out its obligations under this Agreement, and (iii) asotherwise permitted by Applicable Law.

 

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

 

(i) toits existing subcontractors as of the Effective Date and to authorizedsubcontractors that enter into agreements with an NMG Company after theEffective Date (“Future Subcontractors”) in connection with a permitteduse of such Cardholder Data under this Section 6.2, provided thateach such existing subcontractor and Future Subcontractor agrees in a writtenagreement satisfactory to NMG and Bank to maintain all such Cardholder Data asstrictly confidential in perpetuity and not to use or disclose such informationto any Person other than an NMG Company or Bank, except as required byApplicable Law or any Governmental Authority (after giving the NMG Companiesprior notice and an opportunity to defend against such disclosure); provided,further, that each such existing subcontractor and Future Subcontractormaintains, and agrees in writing to maintain, an information security programthat is designed to meet all requirements of Applicable Law, including, at aminimum, maintenance of an

 

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information securityprogram that is designed to: (w) ensure the security and confidentialityof the Cardholder Data; (x) protect against any anticipated threats orhazards to the security or integrity of the Cardholder Data; (y) protectagainst unauthorized access to or use of the Cardholder Data; and (z) ensurethe proper disposal of Cardholder Data; and provided, further,that each such existing subcontractor and Future Subcontractor agrees to notifypromptly Bank and the NMG Companies of any unauthorized disclosure, use, ordisposal of, or access to, Cardholder Data and to cooperate with Bank and theNMG Companies in any investigation thereof and remedial action with respectthereto;

 

(ii) toits Affiliates, and its and such Affiliates’ employees, attorneys andaccountants with a need to know such Cardholder Data in connection with apermitted use of such Cardholder Data under this Section 6.2; providedthat (A) any such Person is bound by terms substantially similar to this Section 6.2as a condition of employment or of access to Cardholder Data or by professionalobligations imposing comparable terms; and (B) the NMG Companies shall beresponsible for the compliance by each such Person with the terms of this Section 6.2;or

 

(iii) toany Governmental Authority with authority over such NMG Company (A) inconnection with an examination of such NMG Company; or (B) pursuant to aspecific requirement to provide such Cardholder Data by such GovernmentalAuthority or pursuant to compulsory legal process; provided that suchNMG Company seeks the full protection of confidential treatment for anydisclosed Cardholder Data to the extent available under Applicable Lawgoverning such disclosure, and with respect to clause (B), to the extentpermitted by Applicable Law, such NMG Company (1) provides at least ten (10) BusinessDays’ prior notice of such proposed disclosure to Bank if reasonably possibleunder the circumstances, and (2) seeks to redact the Cardholder Data tothe fullest extent possible under Applicable Law governing such disclosure.

 

(h) Withrespect to the sharing, use and disclosure of the Cardholder Data following thetermination of this Agreement:

 

(i) therights and obligations of the Parties under this Section 6.2 shallcontinue through any Termination Period;

 

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

 

(iii) ifNMG 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 hereundershall terminate upon the termination of the Termination Period.

 

6.3 NMGShopper Data; NMG Prospect Data.

 

(a) Bankacknowledges that the NMG Companies gather information about purchasers of NMGGoods and Services and that NMG and its Affiliates have rights to use anddisclose such information independent of whether such information alsoconstitutes Cardholder

 

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Data. As between the NMGCompanies and Bank, all the NMG Shopper Data shall be owned exclusively by theNMG Companies. Bank acknowledges and agrees that it has no proprietary interestin the NMG Shopper Data. To the extent Bank is the direct recipient of suchdata, it shall provide such data to the NMG Companies in such format and atsuch times as shall be specified by NMG. Bank shall cooperate in themaintenance of the NMG Shopper Data and other data, including by incorporatingin the Application and Cardholder Agreement provisions mutually agreed to bythe Parties pursuant to which applicants and Cardholders shall agree that theyare providing their identifying information and all updates thereto and alltransaction data from NMG Channels to both Bank and NMG and its Affiliates.****For the avoidance of doubt, the followinginformation shall be deemed NMG Shopper Data:

 

(i) forany customer who has applied for an NMG Credit Card, regardless of the channelthrough which such application was completed or submitted (1) the customer’sname, address, email address, telephone number, social security number and allother commercially reasonable information supplied on the application orprescreened response submitted by the customer; and (2) an indication ofwhether or not the customer has been approved for an NMG Credit Card; and

 

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

 

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

 

(c) Bankshall not use, or permit to be used, directly or indirectly, the NMG ShopperData, except to transfer such data to the NMG Companies to the extent receivedby Bank. Bank shall not use, or permit to be used, the NMG Prospect List exceptas provided in this Section 6.3(c). Bank may use the NMG Prospect List incompliance with Applicable Law solely for purposes of soliciting customerslisted in the NMG Prospect List for Accounts or as required by Applicable Law.

 

(d) Bankshall not disclose, or permit to be disclosed, the NMG Shopper Data or the NMGProspect 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 NMGShopper Data or the NMG Prospect List (all such rights belonging exclusively tothe NMG Companies). Bank may disclose the NMG Shopper Data and the NMG ProspectList in compliance with Applicable Law solely:

 

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

 

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NMG Shopper Data or NMG ProspectList under this Section 6.3, provided that each such authorizedsubcontractor agrees in writing to maintain all such NMG Shopper Data or NMGProspect List as strictly confidential in a manner satisfactory to NMG and notto use or disclose such information to any Person other than Bank or an NMGCompany, except as required by Applicable Law or any Governmental Authority(after giving Bank and the NMG Companies prior notice and an opportunity todefend against such disclosure); provided, further, that eachsuch authorized subcontractor maintains, and agrees in writing to maintain, aninformation security program that is designed to meet all requirements ofApplicable Law, including, at a minimum, maintenance of an information securityprogram that is designed to: (w) ensure the security and confidentialityof the NMG Shopper Data and NMG Prospect List; (x) protect against anyanticipated threats or hazards to the security or integrity of the NMG ShopperData and NMG Prospect List; (y) protect against unauthorized access to oruse of the NMG Shopper Data and the NMG Prospect List; and (z) ensure theproper disposal of NMG Shopper Data and the NMG Prospect List; and provided,further, that each such authorized subcontractor agrees to notifypromptly Bank and the NMG Companies of any unauthorized disclosure, use, ordisposal of, or access to, NMG Shopper Data or the NMG Prospect List and tocooperate with the Bank and the NMG Companies in any investigation thereof andremedial action with respect thereto;

 

(ii) toits Affiliates, and its and such Affiliates’ employees, attorneys andaccountants, with a need to know the NMG Shopper Data or NMG Prospect List inconnection with a permitted use of the NMG Shopper Data or NMG Prospect Listunder this Section 6.3; provided that (A) any such Person isbound by terms substantially similar to this Section 6.3 as a condition ofemployment, of access to the NMG Shopper Data or NMG Prospect List or byprofessional obligations imposing comparable terms; and (B) Bank shall beresponsible for the compliance by each such Person with the terms of this Section 6.3;or

 

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

 

(e) Uponthe termination of this Agreement, without limiting Bank’s rights andobligations 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 Listshall terminate. Promptly following such termination, Bank shall return ordestroy all the NMG Shopper Data and NMG Prospect Lists and shall certify suchreturn or destruction to the NMG Companies upon request.

 

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**ARTICLE VII**

**OPERATING STANDARDS**

 

7.1 Reports.

 

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

 

(b) Within fifteen (15) days after the end ofeach Fiscal Month other than the last Fiscal Month of each Fiscal Year, NMGServicer shall deliver to Bank a statement, in the form set forth on Schedule7.1(b), setting forth all information required to determine the payments to bemade by the Parties pursuant to this Agreement in respect of such Fiscal Month.Each such statement shall be known as a “Monthly Settlement Sheet.”

 

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

 

7.2 Servicing.

 

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

 

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

 

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7.3(a) (assuch 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 furtherobligation with respect to the performance of such Services. In the event thatcustomer service is transferred to Primary Servicer as a transferred Service inaccordance with the Servicing Agreement and this Section 7.2(b), PrimaryServicer shall continue to monitor the customer disputes in substantially thesame manner as is described in the Dispute Resolution and Service ProfileReport Process section of the Operating Procedures.

 

(c) Upon transfer of any of the Services toPrimary Servicer in accordance with Section 2.03(b) of the ServicingAgreement and Section 7.2(b), the amount payable to Servicer set forth inSchedule 9.1(a)(i) shall be adjusted as set forth in Schedule 9.1(a)(i) inorder to reflect the reduction of Services being performed by Servicer and theassumption of the performance of such Services by Primary Servicer, whichtransferred Services shall be performed at the sole cost and expense of thePrimary Servicer.

 

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

 

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

 

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

 

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

 

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

 

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7.3 Service Level Standards.

 

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

 

(b) Primary Servicer shall report to the NMGCompanies monthly, in a mutually agreed upon format and on a calendar monthbasis, Primary Servicer’s performance under each of the SLAs set forth onSchedule 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 SLAfailure(s); and (ii) promptly take any action reasonably necessary tocorrect and prevent recurrence of such failure(s).

 

(c) With respect to any SLA set forth on Schedule7.3(a), the provisions set forth in Schedule 7.3(c) shall apply.

 

(d) Throughout the Term, Primary Servicer shallmaintain a disaster recovery and business continuity plan that complies withApplicable Law and is consistent with plans maintained for its ComparablePartner Programs. Primary Servicer shall be prepared to and have the ability toimplement such plan if necessary. Primary Servicer shall provide NMG withaccess to review such plan upon request. Primary Servicer shall test the planannually and shall promptly implement such plan upon the occurrence of adisaster or business interruption.****PrimaryServicer shall be excused from its failure to meet any applicable SLAs thatresult directly from the failure of any of the NMG Systems.

 

7.4 Credit Systems.

 

(a) The NMG Companies and Bank shall worktogether (including through a subcommittee of the Management Committee formedfor this purpose) to develop a mutually agreeable plan relating to the CreditSystems, which may include a conversion plan designed to convert such data tothe Bank Systems. Subject to the satisfaction of each of the requirements setforth in Section 7.4(b), at such time, if any, when both NMG and Bank aresatisfied with the terms of such conversion plan and have concluded that suchconversion will further the Program Objectives and provide cost efficienciesand features and functionality superior to those available on the NMG Systemswithout an unacceptable level of Program disruption, such conversion shall beimplemented (the date of any such conversion the “Systems Transition Date”).Bank shall bear all out-of-pocket costs and expenses associated with theSystems conversion (whether incurred by Bank or any of its Affiliates or NMG orany of its Affiliates).

 

(b) The Parties acknowledge and agree that noSystems conversion shall occur pursuant to Section 7.4(a) in absenceof satisfaction of each of the following requirements:

 

(i) Bank shall ensure that all identifiedfeatures and functionality available on the NMG Systems prior to the SystemsTransition Date (including data gathering, interface capabilities with the NMGCompanies’ other Systems, Loyalty Program support and core systems/customerservice functionality) are available on the Bank Systems as of the SystemsTransition Date to the extent the NMG Systems are to be converted to the BankSystems;

 

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

 

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

 

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

 

(v) Bank shall keep the same structure of Accountnumbers;

 

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

 

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

 

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

 

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

 

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

 

(d) Neither Party shall make any change to any ofits Systems that would render them incompatible in any way with the other Party’sor its Affiliates’ Systems or require the other Party or its Affiliates (or theRetail Merchants) to make any change to any of their Systems (including any POSterminals) or reduce or restrict interfacing or System feeds, in any such casewithout the prior approval of the Management Committee. Neither Party will makeany material change to its Systems with respect to the Program without theprior approval of the Management Committee.

 

7.5 Systems Interface; Technical Support.

 

(a) Required Interfaces.

 

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

 

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NMGCompanies and Bank shall maintain such interfaces and cooperate in good faithwith each other in connection with any modifications to such interfaces as maybe requested by either Party from time to time.

 

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

 

(b) Additional Interfaces; InterfaceModifications. All requests for new interfaces, modifications to existinginterfaces and terminations of existing interfaces shall be presented to theManagement Committee for approval. Upon approval, the Parties shall work ingood faith to establish the requested interfaces or modify or terminate theexisting interfaces, as applicable, on a timely basis. Except as otherwiseprovided herein (including in Section 7.4), all costs and expenses withrespect to any new interface or interface modification or termination shall beborne by the requesting Party unless otherwise determined by the ManagementCommittee.

 

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

 

7.6 Customer Management Systems. Bank herebyagrees to establish the Customer Management System with the features set forthin Schedule 7.6 by the dates specified in such schedule. The CustomerManagement System shall be established and maintained by Bank at its ownexpense in order to support NMG in the marketing of the Program and the CreditCard Business.

 

**ARTICLE VIII**

**MERCHANT SERVICES**

 

8.1 Transmittal and Authorization of NMG ChargeTransaction 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 andServices. The Retail Merchants shall transmit NMG Charge Transaction Data forauthorization of NMG Transactions to Bank as provided in the OperatingProcedures. NMG Servicer, on Bank’s behalf, shall authorize or decline NMGTransactions on a real time basis as provided in the Operating Procedures,including transactions involving split-tender (i.e., a portion of the totaltransaction amount is billed to an NMG Credit Card or Non-Card Payment Plan andthe remainder is paid through one or more other forms of payment), transactionsover the phone, on-line or hand keyed, as applicable, or down-payments on NMGGoods and Services for later delivery. If any Retail Merchant is unable toobtain authorizations for NMG Transactions for any reason, such Retail Merchantmay complete such NMG Transactions without receipt of further authorization asprovided in the Operating Procedures.

 

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

 

8.3 In-Store Payments. The Retail Merchants mayaccept In-Store Payments from Cardholders on their Accounts in accordance withthe Operating Procedures, the Risk Management Policies and any proceduresrequired under Applicable Law. The Retail Merchants shall, as necessary,provide proper endorsements on such items. If the Retail Merchants receive anyIn-Store Payments, NMG shall, directly or through its Affiliates, be deemed tohold such In-Store Payments in trust for Bank until such Payments are eitherdelivered to Bank or applied to reduce amounts payable by Bank to NMG pursuantto Section 8.4(b). Bank hereby grants to each of the NMG Companies and theRetail Merchants a limited power of attorney (coupled with an interest) to signand endorse Bank’s name upon any form of payment that may have been issued inBank’s name in respect of any Account. The NMG Companies and Bank shall jointlydevelop procedures in the Operating Procedures with respect to the manner inwhich such In-Store Payments shall be processed (it being understood that suchprocedures shall provide for immediate credit toward the applicable open-to-buylimits of the respective Account upon receipt of an In-Store Payment). The NMGCompanies, on behalf of the Retail Merchants, shall notify Bank upon receipt ofIn-Store Payments and Bank shall include the NMG Charge Transaction Datarelated to such In-Store Payments in the net settlement in respect of the dayimmediately following such receipt on the same basis as other NMG ChargeTransaction Data. The Retail Merchants shall issue receipts for such paymentsin compliance with Applicable Law.

 

8.4 Settlement Procedures.

 

(a) NMG shall transmit NMG Charge TransactionData to Bank in accordance with the Operating Procedures on each day on whichsuch Retail Merchants are open for business, other than Sunday. If NMG ChargeTransaction 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, Bankshall process the NMG Charge Transaction Data and initiate a wire transfer ofthe payment in respect thereof before 1:00 pm (Central time) on the sameBusiness Day. If the NMG Charge Transaction Data is received after 6:00 am(Central time) on any day a Retail Merchant is open, or at any time on a dayother than a Business Day, Bank shall process the NMG Charge Transaction Datafor payment by 1:00 pm (Central time) on the following Business Day.

 

(b) Bank shall remit to NMG, for itself and theRetail Merchants, an amount equal to (i) the total amount of chargesidentified 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 suchNMG Charge Transaction Data, plus (B) the total amount of In-StorePayments (if any), plus (C) any amounts charged back to such RetailMerchants pursuant to Section 8.5. The total amount of charges reflectedin the NMG Charge Transaction Data shall include the amount of all SpecialDiscounts such that upon daily settlement of such NMG Charge Transaction Datain

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

8.6 Exercise of Chargeback. If Bank exercisesits right of chargeback, Bank may set off all amounts charged back against anysums due to the NMG Companies under this Agreement, or Bank may demand paymentfrom NMG for the full amount of such chargeback. In the event of a chargebackpursuant to this Article VIII, upon payment in full of the related amountby NMG, Bank shall immediately assign to NMG or the relevant Retail Merchant,without any representation, warranty or recourse, (i) all right topayments 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 chargebackamount, including by executing and delivering any document necessary or usefulto such collection efforts.

 

8.7 No Merchant Discount. None of NMG, itsAffiliates or the Retail Merchants shall be required to pay any MerchantDiscount on any NMG Transaction. Bank shall directly process the NMGTransactions such that the Retail Merchants do not incur any merchantacquirer/processor or similar fees.

 

**ARTICLE IX**

**PROGRAM ECONOMICS**

 

9.1 NMG Compensation.

 

(a) Payments.

 

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

 

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

 

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

 

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

 

(v) Such amounts shall be paid to NMG or Bank, asthe 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 respectto such payment in accordance with the terms of this Agreement and each of Bankor NMG may invoke the dispute resolution procedures set forth herein followingpayment of such amounts.

 

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(b) Form of Payment. All paymentspursuant to this Section 9.1 shall be made by wire transfer of immediatelyavailable funds to an account designated in writing by NMG or Bank, as the casemay be, unless otherwise agreed upon by the Parties in writing.

 

9.2 Dispute Resolution. Any disputes regardingthe 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 LicensedMarks. Subject to the terms and conditions of this Agreement, NMG herebygrants to Bank a non-exclusive, royalty-free, non-transferable right andlicense to use the NMG Licensed Marks (i) with respect to the Program inthe United States in connection with the creation, establishment, marketing andadministration of, and the provision of services related to, the Program and (ii) inconnection with any sale permitted by this Agreement of the Accounts andCardholder Indebtedness to third parties for liquidation. All use of the NMGLicensed Marks shall be in accordance with this Agreement and any TrademarkStyle Guide delivered by NMG to Bank from time to time (which NMG shall sodeliver). All uses of the NMG Licensed Marks shall require the prior writtenapproval of NMG. To the extent Bank delegates any of its rights or obligationshereunder to any authorized Affiliate and/or authorized third party inaccordance with the terms and conditions of this Agreement, Bank may sublicenseits rights in the NMG Licensed Marks hereunder to such authorized Person; providedthat such Person shall agree to comply with all of the terms and conditions ofthe use of the NMG Licensed Marks hereunder and Bank shall remain liable forsuch 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 ofBank and may not be sublicensed without the prior written approval of NMG.

 

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

 

(c) Termination of License. Except to theextent otherwise provided in Section 17.5, the license granted in this Section 10.1shall terminate upon the termination or expiration of this Agreement or, if thepurchase option under Section 17.2 is exercised, the Program PurchaseDate. Upon termination of the license granted in this Section 10.1, allrights in the NMG Licensed Marks granted hereunder shall revert to NMG and Bankshall: (i) discontinue

 

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immediatelyall use of the NMG Licensed Marks, or any of them, and any colorable imitationthereof; 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 ofthe NMG Licensed Marks; provided that if the purchase option under Section 17.2is exercised, at NMG’s election, such items shall constitute Program Assets andwill be transferred and delivered to NMG or its Nominated Purchaser pursuant toSection 17.2.

 

(d) Ownership of the NMG Licensed Marks.Bank acknowledges that (i) the NMG Licensed Marks, all rights therein, andthe goodwill associated therewith, are, and shall remain, the exclusiveproperty of NMG, (ii) it shall take no action which shall adversely affectNMG’s exclusive ownership of the NMG Licensed Marks, or the goodwill associatedwith the NMG Licensed Marks (it being understood that the collection ofAccounts, adverse action letters, and changes in terms of Accounts as requiredby Applicable Law do not adversely affect goodwill, if done in accordance withthe terms of this Agreement), and (iii) any and all goodwill arising fromuse 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 NMGLicensed Marks, except the right to use the NMG Licensed Marks in accordancewith this Agreement, and Bank shall not contest NMG’s title in and to the NMGLicensed Marks.

 

(e) Infringement by Third Parties. Bankshall use reasonable efforts to notify NMG, in writing, promptly upon acquiringKnowledge of any infringing use of any of the NMG Licensed Marks by any thirdparty. 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 preventsuch infringing use; provided*,*however,that if NMG fails to take reasonable steps to prevent infringement of the NMGLicensed Marks and such infringement has an adverse effect upon the Program orthe rights of Bank hereunder, Bank may request that NMG take action necessaryto alleviate such adverse impact. Bank shall reasonably cooperate with andassist NMG, at NMG’s expense, in the prosecution of those actions that NMGdetermines, in its sole discretion, are necessary or desirable to prevent theinfringing use of any of the NMG Licensed Marks.

 

10.2 The Bank Licensed Marks.

 

(a) Grant of License to Use the Bank LicensedMarks. Subject to the terms and conditions of this Agreement, Bank herebygrants to the NMG Companies a non-exclusive, royalty-free, non-transferableright and license to use the Bank Licensed Marks in the United States inconnection with the creation, establishment, marketing and administration of,and the provision of services related to, the Program. All uses of the BankLicensed Marks shall be in accordance with this Agreement and any TrademarkStyle Guide delivered by Bank to NMG from time to time (which Bank shall sodeliver). All uses of the Bank Licensed Marks shall require the prior writtenapproval of Bank. To the extent the NMG Companies delegate any of their rightsor obligations hereunder to any authorized Affiliate and/or authorized thirdparty in accordance with the terms and conditions of this Agreement, the NMGCompanies may sublicense their rights in the Bank Licensed Marks hereunder tosuch authorized Person; provided that such Person shall agree to complywith all of the terms and conditions of the use of the Bank Licensed Markshereunder and the NMG Companies shall remain liable for such Person’s failureto so comply. Except as expressly set forth in this Section 10.2, therights granted pursuant to this Section 10.2 are solely for use of the NMGCompanies and may not be sublicensed without the prior written approval ofBank.

 

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(b) New Bank Marks. If Bank adopts atrademark, service mark or other source indicator that is not listed onSchedule 1.1(a) hereto (for purposes of this Section 10.2, a “NewBank Mark”), NMG may request that Bank add such New Bank Mark to Schedule1.1(a) hereto and license its use hereunder; Bank shall not unreasonablyfail to do so, and upon Bank’s written approval of the addition of such NewBank Mark, such New Bank Mark shall be deemed added to Schedule 1.1(a).

 

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

 

(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 shallremain, the exclusive property of Bank, (ii) it shall take no action whichshall adversely affect Bank’s exclusive ownership of the Bank Licensed Marks orthe goodwill associated with the Bank Licensed Marks, and (iii) any andall goodwill arising from use of the Bank Licensed Marks by the NMG Companiesshall inure to the benefit of Bank. Nothing herein shall give the NMG Companiesany proprietary interest in or to the Bank Licensed Marks, except the right touse the Bank Licensed Marks in accordance with this Agreement, and the NMGCompanies shall not contest Bank’s title in and to the Bank Licensed Marks.

 

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

 

10.3 Intellectual Property.

 

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

 

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(b) Joint Intellectual Property. EachParty shall have the right to use, license and otherwise exploit jointly ownedIntellectual Property without any restriction or obligation to account to theother Party; provided, however, that no such jointly owned IntellectualProperty shall be used by Bank in connection with any Comparable PartnerProgram or Competing Retail Program without the prior written consent of NMG.Patents and patentable inventions shall be deemed to be owned jointly, asbetween the Parties, only if the respective personnel of each Party are deemedco-inventors under the patent law, and (ii) software and other works ofauthorship and associated copyrights shall be deemed to be jointly owned onlyif the Parties are deemed co-authors or co-owners of such software or otherwork of authorship under the copyright law. Any other Intellectual Propertydeveloped by a substantially equal investment of time, human, intellectual andfinancial resources by each Party during the Term of this Agreement shall beowned jointly by the Parties. By way of example and not of limitation, a Partyshall not be a joint owner of any such Intellectual Property if itscontribution thereto consists solely of data, unless that is the onlycontribution of the other Party. Otherwise, all patents, patentable inventions,software, other works of authorship and related copyrights and all otherIntellectual Property (and any improvements thereto) shall be deemed to beowned solely by one Party. Thus, to the extent that a work created by one Partyis based on or incorporates Intellectual Property of the other Party, but theParties are not joint owners as set forth above, then one Party shall be thesole owner of the Intellectual Property in the underlying work and the otherParty shall be the sole owner of the Intellectual Property in the new work. Anyinformation or data provided by or on behalf of one Party to the other Partyremains, as between the Parties, the sole property of the providing Party, andif 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 theParties, 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 ownrisk.

 

**ARTICLE XI**

**REPRESENTATIONS, WARRANTIES AND COVENANTS**

 

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

 

(a) Corporate Existence. Each NMG Company:(i) is a corporation duly organized, validly existing and in good standingunder the laws of the jurisdiction of its incorporation; (ii) is dulylicensed or qualified to do business and is in good standing as a foreigncorporation in all jurisdictions in which the conduct of its business or theactivities in which it is engaged makes such licensing or qualificationnecessary, except to the extent that its non-compliance would not reasonably beexpected to have, individually or in the aggregate, a material adverse effecton the

 

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NMGCompanies’ ability to perform their obligations hereunder; and (iii) hasall necessary licenses, permits, consents or approvals from or by, and has madeall necessary filings and registrations with, all governmental authoritieshaving jurisdiction, to the extent required for the ownership, lease or conductand operation of its business, except to the extent that the failure to obtainsuch licenses, permits, consents or approvals or to make such filings orregistrations would not reasonably be expected to have, individually or in theaggregate, a material adverse effect upon the NMG Companies, the Program, theAccounts, Cardholder Indebtedness or the NMG Companies’ ability to performtheir obligations under this Agreement.

 

(b) Capacity; Authorization; Validity.Each NMG Company has all necessary corporate power and authority to (i) executeand enter into this Agreement, and (ii) perform the obligations requiredof such NMG Company hereunder and the other documents, instruments andagreements relating to the Program and this Agreement executed by such NMGCompany pursuant hereto. The execution and delivery by the NMG Companies ofthis Agreement and all documents, instruments and agreements executed anddelivered by the NMG Companies pursuant hereto, and the consummation by the NMGCompanies of the transactions specified herein, have been duly and validlyauthorized and approved by all necessary corporate actions of the NMGCompanies. This Agreement (i) has been duly executed and delivered by theNMG Companies, (ii) constitutes the valid and legally binding obligationof the NMG Companies, and (iii) is enforceable in accordance with itsterms (subject to applicable bankruptcy, insolvency, reorganization,receivership or other laws affecting the rights of creditors generally and bygeneral equity principles including those respecting the availability ofspecific performance).

 

(c) Conflicts; Defaults; Etc. Subject toreceipt of any licenses and qualifications required for NMG to perform itsservicing obligations under the Servicing Agreement, the execution, deliveryand performance of this Agreement by each of the NMG Companies, theircompliance with the terms hereof, and consummation of the transactionsspecified herein will not (i) conflict with, violate, result in the breachof, constitute an event which would, or with the lapse of time or action by athird party or both would, result in a default under, or accelerate the performancerequired by, the terms of any contract, instrument or agreement to which NMG orany of its Subsidiaries is a party or by which they are bound, or to which anyof the assets of NMG or any of its Subsidiaries are subject; (ii) conflictwith or violate the articles of incorporation or by-laws, or any otherequivalent organizational document(s), of the NMG Companies; (iii) breachor violate any Applicable Law or Applicable Order, in each case, applicable tothe NMG Companies; (iv) require the consent or approval of any other partyto any contract, instrument or commitment to which any NMG Company is a partyor 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 GovernmentalAuthority, except, in the cases of clauses (i) and (iii)-(v), for suchconflicts, breaches, defaults, violations or failures to obtain such consentsor approvals or make or obtain such filings, notices, consents and approvals aswould not reasonably be expected to have, individually or in the aggregate, amaterial adverse effect upon the NMG Companies, the Program, the Accounts,Cardholder Indebtedness or the NMG Companies’ ability to perform theirobligations under this Agreement.

 

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

 

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

 

(e) Compliance with Laws. Except to theextent that any of the following would not reasonably be expected to have,individually or in the aggregate, a material adverse effect upon the Program orthe ability of the NMG Companies to perform their obligations under thisAgreement, the NMG Companies are in compliance with all requirements ofApplicable Law relating to the Credit Card Business and neither of the NMG Companiesnor any of their Affiliates is subject to any order, directive or restrictionof any kind issued by any Governmental Authority that restricts in any respectits ability to perform its obligations under the Program.

 

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

 

(g) Books and Records. All books andrecords of the NMG Companies related to the Credit Card Business have beenmaintained accurately and in accordance with all requirements of Applicable Lawapplicable to the NMG Companies and the Credit Card Business, except for anyinstances of inaccuracy or noncompliance that would not reasonably be expectedto have a material adverse effect on the ability of the NMG Companies toperform their obligations under this Agreement.

 

(h) Insurance. The NMG Companies maintaininsurance policies with respect to their properties under such terms andconditions as are (i) commercially reasonable and available from time totime and (ii) customary for similarly situated Persons engaged in similarbusiness, except in each case for insurance which a failure to maintain wouldnot reasonable be expected to have a material adverse effect on the ability ofthe NMG Companies to perform their obligations under this Agreement.

 

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

 

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

 

(a) Corporate Existence. Each BankCompany: (i) is duly organized, validly existing and in good standingunder the laws of the jurisdiction of its incorporation; and (ii) is dulylicensed or qualified to do business and is in good standing as a foreignentity in all jurisdictions in which the conduct of the its business or theactivities in which it is engaged, or proposes to engage pursuant to thisAgreement, makes such licensing or qualification necessary, except to theextent that its non-compliance would not reasonably be expected to have,individually or in the aggregate, a material adverse effect upon the BankCompanies, the Program, the Accounts,

 

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

 

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

 

(c) Conflicts; Defaults; Etc. Theexecution, delivery and performance of this Agreement by each of the Bank Companies,their compliance with the terms hereof, and the consummation of thetransactions specified herein will not (i) conflict with, violate, resultin the breach of, constitute an event which would, or with the lapse of time oraction by a third party or both would, result in a default under, or acceleratethe performance required by, the terms of any contract, instrument or agreementto which any of Bank Parent or any of its Subsidiaries is a Party or by whichthey are bound, or to which any of the assets of Bank Parent or any of itsSubsidiaries are subject; (ii) conflict with or violate the articles ofincorporation or by-laws, or any other equivalent organizational document(s),of the Bank Companies; (iii) breach or violate any Applicable Law or ApplicableOrder, in each case, applicable to the Bank Companies; (iv) require theconsent or approval of any other Party to any contract, instrument orcommitment to which any Bank Company is a Party or by which it is bound; or (v) requireany filing with, notice to, consent or approval of, or any other action to betaken with respect to, any Governmental Authority, except, in the cases ofclauses (i) and (iii)-(v), for such conflicts, breaches, defaults,violations or failures to obtain such consents or approvals or make or obtainsuch filings, notices, consents and approvals as would not reasonably beexpected to have, individually or in the aggregate, a material adverse effectupon the Bank Companies, the Program, the Accounts, Cardholder Indebtedness or theability of the Bank Companies to perform their obligations under thisAgreement.

 

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(d) No Litigation. No action, claim,litigation, proceeding, arbitration or investigation is pending or, to theKnowledge of Bank, threatened against Bank Parent or any of its Subsidiaries,at law, in equity or otherwise, by or before any Governmental Authority, towhich Bank Parent or any of its Subsidiaries is a Party, which would reasonablybe expected to have, individually or in the aggregate, a material adverseeffect upon the Bank Companies, the Program, the Accounts, CardholderIndebtedness or the ability of the Bank Companies to perform their obligationsunder this Agreement.

 

(e) Compliance with Laws.

 

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

 

(A) theBank Companies are in compliance with all requirements of Applicable Lawrelating to their Credit Card business; and

 

(B) noneof the Bank Companies or any of their Affiliates is subject to any capital planor supervisory agreement, cease-and-desist or similar order or directive ormemorandum of understanding between it and any Governmental Authority or issuedby any Governmental Authority, nor has any of them adopted any boardresolutions at the request of any Governmental Authority.

 

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

 

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

 

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

 

(h) Books and Records. All books andrecords of the Bank Companies and their Affiliates related to their Credit Cardbusiness have been maintained accurately and in accordance with allrequirements of Applicable Law applicable to Bank and its Credit Card business,except for any instances of inaccuracy or noncompliance that would notreasonably be expected to have a material adverse effect on the ability of theBank Companies to perform their obligations under this Agreement.

 

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(i) Insurance. The Bank Companies maintaininsurance policies with respect to their properties under such terms andconditions as are (i) commercially reasonable and available from time totime and (ii) customary for similarly situated Persons engaged in similarbusiness, except in each case for insurance which a failure to maintain wouldnot reasonable be expected to have a material adverse effect on the ability ofthe 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 NMGhas made or makes any other express or implied representations, or any expressor implied warranty, either written or oral, with respect to the Credit CardBusiness, the Program, the Bank Companies or the NMG Companies, or as to anyother matter whatsoever.

 

11.4 General Covenants of the NMG Companies.

 

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

 

(b) Reports and Notices. Each of the NMGCompanies shall provide Bank with a facsimile notice specifying the nature ofany NMG Event of Default, or any event which, with the giving of notice orpassage of time or both, would constitute an NMG Event of Default, or anydevelopment or other information which is likely to have a material adverseeffect on the Program, the Accounts, Cardholder Indebtedness or the NMGCompanies’ ability to perform their obligations pursuant to this Agreement.Notices pursuant to this Section 11.4(b) relating to NMG Events ofDefault shall be provided within two (2) Business Days after any of theNMG Companies has Knowledge of the existence of such default. Notices relatingto all other events or developments described in this Section 11.4(b) shallbe provided (i) promptly after any of the NMG Companies has Knowledge ofthe existence of such event or development if such event or development hasalready occurred, and (ii) with respect to events or developments thathave yet to occur, as early as reasonably practicable under the circumstances.Any notice provided under this Section shall be confirmed in writing toBank within five (5) Business Days after the transmission of the initialnotice.

 

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

 

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

 

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(e) Disputes with Cardholders. The NMGCompanies shall cooperate with Bank in a timely manner (but in no event lesspromptly than required by Applicable Law) to resolve all disputes withCardholders.

 

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

 

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

 

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

 

11.5 General Covenants of the Bank Companies.

 

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

 

(b) Reports and Notices. Bank shallprovide NMG with a facsimile notice specifying the nature of any Bank Event ofDefault, or any event which, with the giving of notice or passage of time orboth, would constitute a Bank Event of Default, or any development or otherinformation which is likely to have a material adverse effect on the Program,the Accounts or Bank’s ability to perform its obligations pursuant to thisAgreement. Notice pursuant to this Section 11.5(b) relating to BankEvents of Default shall be provided within two (2) Business Days after anyBank Company has Knowledge of the existence of such default. Notices relatingto all other events or developments described in this Section 11.5(b) shallbe provided (i) promptly after any Bank Company obtains Knowledge of theexistence of such event or development if such event or development has alreadyoccurred, and (ii) with respect to events or developments that have yet tooccur, as early as reasonably practicable under the circumstances. Any noticeproduced under this section shall be confirmed in writing to NMG within five (5) BusinessDays after transmission of the initial notice.

 

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

 

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

 

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

 

(e) Servicing Qualifications. The BankCompanies shall at all times during the Term remain licensed and qualified inall jurisdictions necessary to service the Accounts in accordance with allApplicable Laws, except where the failure to be so qualified would notreasonably be expected to have, individually or in the aggregate, a materialadverse effect on the ability of the Bank Companies to perform theirobligations under this Agreement. Primary Servicer shall at all times duringthe Term maintain the necessary facilities, equipment, supplies and such otherresources in good working order as are reasonably necessary to provide anyServices required to be provided by it pursuant to Section 7.2 inaccordance with the SLAs set forth in Schedule 7.3(a).

 

(f) Program Support. The Bank Companiesshall not take any action that NMG reasonably concludes is materiallyinconsistent with the Program Objectives or otherwise materially adverselyaffects the Program or NMG’s retail business or relations with its customers inany material respect.

 

(g) Disputes with Cardholders. The BankCompanies shall cooperate with the NMG Companies in a timely manner (but in noevent less promptly than required by Applicable Law) to resolve all disputeswith Cardholders.

 

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

 

**ARTICLE XII**

**ACCESS, AUDIT AND DISPUTE RESOLUTION**

 

12.1 Access Rights. Each Party shall permit theother Party and its representatives and regulators to visit its facilitiesrelated to the Program during normal business hours with reasonable advancenotice. The reviewing Party shall employ such reasonable procedures and methodsas are necessary and appropriate in the circumstances, minimizing interferenceto the extent practicable with the reviewed Party’s normal business operations.The reviewed Party shall use commercially reasonable efforts to facilitate thereviewing Party’s review, including making reasonably available such personnelof the reviewed Party and its service providers to assist the reviewing Partyand its representatives as reasonably requested. Each Party shall also permitthe other Party and its representatives and regulators to review (during normalbusiness

 

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hours)and obtain copies of the books and records relating to the Program; providedthat neither Party shall be required to provide access to records to the extentthat (a) such access is prohibited by Applicable Law, (b) suchrecords are legally privileged, (c) such records are company planningdocuments of such Party or any of its Affiliates, operating budgets, managementreviews or employee records, (d) such records relate to other customersof, or credit programs operated by, Bank or the NMG Companies (except as may benecessary or appropriate in connection with any consideration of the terms andconditions of Comparable Partner Programs and Competing Retail Programs ascontemplated by this Agreement to the extent such terms and conditions arepublicly known or otherwise known and not subject to any confidentialityobligations on the part of either Party) or (e) such records relate toother customers or operations of such Party other than the Program or topersonnel records not normally disclosed in connection with audits.

 

12.2 Audit Rights. Twice per year or at anytime that a Party disputes the amount of any monies owed by either Party to theother 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 otherParty’s financial and operational records that are under the control and/ordirection of the audited Party and relate to the Program or can be reasonablysegregated. Such audit shall be conducted during normal business hours inaccordance with generally accepted auditing standards and the auditing Partyshall employ such reasonable procedures and methods as are necessary andappropriate in the circumstances, minimizing interference to the extentpracticable with the audited Party’s normal business operations. The auditedParty shall use commercially reasonable efforts to facilitate the auditingParty’s review, including making reasonably available such personnel of theaudited Party and its service providers to assist the auditing Party and itsrepresentatives as reasonably requested. The audited Party shall deliver anydocument or instrument necessary for the auditing Party to obtain such recordsfrom any Person maintaining records for the audited Party and shall maintainrecords pursuant to its regular record retention policies. For purposes of thisprovision, the audited Party also shall be required to provide records relatingto the Program held by Persons performing services in connection with theProgram at the auditing Party’s request. Notwithstanding the generality of theforegoing, the audited Party shall not be required to provide access to recordsto the extent that (a) such access is prohibited by Applicable Law, (b) suchrecords are legally privileged, (c) such records are company planningdocuments of such Party or any of its Affiliates, operating budgets, managementreviews or employee records, (d) such records relate to other customersof, or credit programs operated by, Bank or the NMG Companies (except as may benecessary or appropriate in connection with any consideration of the terms andconditions of Comparable Partner Programs and Competing Retail Programs ascontemplated by this Agreement to the extent such terms and conditions arepublicly known or otherwise known and not subject to any confidentialityobligations on the part of either Party) or (e) such records relate toother customers or operations of such Party other than the Program or topersonnel records not normally disclosed in connection with audits.

 

12.3 Accounting Dispute Resolution.

 

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

 

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TheParties agree to attempt in good faith to resolve any such disputes. Exceptwith respect to any indemnification claim arising under Article XVII,which shall not be subject to the procedures of this Section 12.3, in theevent the Parties are unable to resolve any such dispute, after negotiating ingood faith for a period of not less than ten (10) Business Days, eitherParty may request a nationally recognized firm of independent accountantsmutually agreeable to the Parties (the “Accountants”) to reconcile anyamounts in dispute; provided, however, that the Accountants’determination shall be limited to the amount disputed by the Parties and in noevent shall such determination provide for a payment to any Party higher thanthe amount claimed by the Party to be owed to such Party. Any such requestshall be in writing and shall specify with particularity the disputed amountsbeing submitted for determination. Each Party agrees to promptly and in goodfaith take all necessary action to designate the Accountants no later than ten (10) BusinessDays after a request that such a designation be made. The Parties shallcooperate fully in assisting the Accountants in their review, including byproviding 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 mayreasonably request in connection with any such review. Notwithstanding thegenerality of the foregoing, the Parties shall not be required to provide theAccountants with access to records to the extent that (i) such access isprohibited by Applicable Law, (ii) such records are legally privileged or (iii) suchrecords relate to other customers of, or credit programs operated by, the Party(except as may be necessary or appropriate in connection with any considerationof the terms and conditions of Comparable Partner Programs and Competing RetailPrograms as contemplated by this Agreement to the extent such terms andconditions are publicly known or otherwise known and not subject to anyconfidentiality obligations on the part of either Party). In the event thedetermination made by the Accountants requires either Party to make payment tothe other Party of any additional amount, such Party shall make such payment nolater than five (5) Business Days following receipt from the Accountantsof written notice to the Parties of such determination plus interest at theFederal Funds Rate on any such amount due computed from and including the datesuch 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 beborne by the Parties in proportion to the relative difference between theirrespective claims regarding the amount in dispute and the amount determined bythe Accountants. The determination of the Accountants shall be final andbinding on the Parties subject to the correction of obvious errors.

 

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12.4 Dispute Resolution.

 

(a) Generally. Any dispute among theParties arising out of or relating to this Agreement, including with respect tothe interpretation of any provision of this Agreement and with respect to theperformance by NMG or Bank hereunder that is not otherwise required to besubmitted for resolution under Section 12.3 shall be resolved as providedin this Section 12.4; provided, however, that this provisionshall not limit either Party’s right to obtain any provisional or other remedy,including, without limitation, specific performance or injunctive relief fromany court of competent jurisdiction, as may be necessary, in the aggrievedParty’s sole discretion, to protect its rights under this Agreement. This Section 12.4does not apply to disputes among the Management Committee members with respectto decisions expressly allocated to the Management Committee pursuant to thisAgreement (other than matters submitted to the Management Committee pursuant tothe 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 disputeresolution procedures, the Parties shall first attempt to resolve their disputeinformally, as follows:

 

(A) Managers.Upon the written request of either Party containing a short statement as to thenature 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 seekresolution of such dispute.

 

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

 

(C) Appointmentof Representatives. If, after a period of five (5) Business Days, theManagement Committee is unable to resolve the dispute to the satisfaction ofboth the NMG Companies and Bank, each Party shall appoint a designatedknowledgeable, responsible representative who is one of the top five highestexecutives in the Credit Card division of Bank and one of the top fiveexecutives of NMG and who does not devote substantially all of his or her timeto performance under this Agreement, whose task it will be to meet for thepurpose of negotiating in good faith to seek resolution of the dispute.

 

With respect to clauses(A), (B) and (C) above, discussions, documents and correspondenceexchanged among the Managers and representatives, or submitted to theManagement Committee for purposes of these negotiations, shall be treated asConfidential Information developed for purposes of settlement, exempt fromdiscovery and production, which shall not be admissible in any lawsuit withoutthe concurrence of the Parties. Documents identified in or provided with suchcommunications, which were not prepared for the purposes of the negotiations,are not so exempted and may, if otherwise admissible, be admitted in evidencein any lawsuit.

 

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

 

(A) eitherof the designated representatives concludes in good faith that amicableresolution through continued negotiation of the dispute does not appear likelyand so states in a notice to the other designated representative or in a jointdeclaration signed by each of them; or

 

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

 

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

 

**ARTICLE XIII**

**CONFIDENTIALITY**

 

13.1 General Confidentiality.

 

(a) For purposes of this Agreement, “ConfidentialInformation” means any of the following: (i) information that isprovided by or on behalf of either NMG or Bank to the other Party or its agentsin connection with the Program (including information provided prior to thedate hereof or the Effective Date); (ii) information about NMG or Bank ortheir Affiliates, or their respective businesses or employees, that isotherwise obtained by the other Party in connection with the Program, in eachcase including: (A) information concerning marketing plans, objectives andfinancial results; (B) information regarding business systems, methods,processes, financing data, programs and products; (C) informationregarding any products offered or proposed to be offered under the Program orthe manner of offering of any such products; (D) information unrelated tothe Program obtained by NMG or Bank in connection with this Agreement,including by accessing or being present at the business location of the otherParty; and (E) proprietary technical information, including source codes,or other proprietary information developed in connection with the Program; (iii) theterms and conditions of this Agreement; and (iv) the Marketing Plan. Theprovisions of this Article XIII governing Confidential Information shallnot govern Cardholder Data, NMG Shopper Data or NMG Prospect Data, which shallbe governed by the provisions of Article VI.

 

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

 

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throughexamination of, publicly available records or products; (iv) is requiredto be disclosed by Applicable Law; provided that the Party subject tosuch Applicable Law shall use reasonable efforts to avoid such disclosure andnotify the other Party of any such use or requirement prior to disclosure ofany Confidential Information obtained from the other Party in order to affordsuch other Party an opportunity to seek a protective order to prevent or limitdisclosure of the Confidential Information to third Parties; provided, further,that such information shall be disclosed only to the extent required by suchApplicable Law and shall otherwise remain Confidential Information; or (v) isdeveloped by NMG or Bank, as the case may be, without the use or knowledge ofany proprietary, non-public information provided by the other Party under, orotherwise made available to such Party as a result of, this Agreement. Nothingherein shall be construed to permit the Receiving Party (as defined below) todisclose to any third party any Confidential Information that the ReceivingParty is required to keep confidential under Applicable Law.

 

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

 

(d) If the NMG Companies, on the one hand, orBank, on the other hand, receives Confidential Information of the other Party (“ReceivingParty”), the Receiving Party shall do the following with respect to theConfidential Information of the other Party (“Disclosing Party”): (i) keepthe Confidential Information of the Disclosing Party secure and confidential; (ii) treatall Confidential Information of the Disclosing Party with the same degree ofcare as it accords its own Confidential Information, but in no event less thana reasonable degree of care; and (iii) implement and maintain commerciallyreasonable physical, electronic, administrative and procedural securitymeasures, 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 disclosethe Confidential Information of the Disclosing Party only for the purpose ofperforming its obligations or enforcing its rights with respect to the Programor as otherwise expressly permitted by this Agreement, and shall not accumulatein any way or make use of such Confidential Information for any other purpose.

 

(b) Each Receiving Party shall: (i) limitaccess 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 suchConfidential Information in connection with the Program, the sale of ProgramAssets or other assets of NMG and its Affiliates or the establishment of a newCredit Card or other program or arrangement for an NMG Company, in each case inaccordance with the terms of this Agreement, and (ii) ensure that anyPerson with access to the Disclosing Party’s Confidential Information agrees tobe bound by a confidentiality agreement containing the restrictions set forthin this Article XIII.

 

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

 

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

 

**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 retaildepartment store business that directly or through an Affiliate issues a CreditCard in the United States, unless such transaction is one giving right to atermination by NMG pursuant to Section 16.2(c) and as to which NMG hasexercised such right, Bank shall have a right of first offer to acquire therelated Credit Card business offered for sale by such retailer in connectionwith NMG’s or its Subsidiary’s acquisition of the retail department storebusiness (such Credit Card business accounts, the “New Portfolio”) asfollows. Prior to or promptly following the consummation of the acquisition,NMG shall provide notice to Bank indicating its intention to engage in, or theconsummation of, as the case may be, such acquisition and shall provide Bankwith a reasonable opportunity to conduct due diligence, and for this purposeNMG shall provide Bank and its representatives with reasonable access to therecords and accounts (including the master file) relating to such New Portfolio,subject to the execution of a confidentiality agreement reasonably satisfactoryto NMG. Not later than the 20th day following receipt by Bank of due diligenceinformation reasonably requested by Bank and available to NMG, Bank may make anoffer to NMG with respect to the purchase of such New Portfolio, which offershall be required to remain open for a period of not less than forty-five (45)days. NMG shall be under no obligation to accept such offer or to provide Bankwith any right to match any offer received by NMG from any third party. NMG mayelect to (A) accept

 

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theoffer made by Bank, (B) keep such New Portfolio or (C) offer such NewPortfolio for sale to a third party; provided that NMG shall not sellsuch New Portfolio to a third party unless such third party makes an offerhaving financial terms and conditions (including terms relating to the mannerin which the conversion costs relating to the contemplated transaction are tobe allocated among the Parties) substantially more favorable in the aggregatethan the terms and conditions offered by Bank. If NMG does not sell such NewPortfolio to Bank (whether because NMG elects to keep such New Portfolio orsell it to a third party), the restrictions of Section 2.2 shall not applyto the Credit Card business associated with such New Portfolio, including anygrowth thereof.

 

14.2 Retailer that has a Credit Card with anotherIssuer. If NMG or any of its Subsidiaries acquires or otherwise combineswith (including by merger, consolidation or other business combination) aretail department store business that through an unaffiliated Person (otherthan 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 toSection 16.2(c) and as to which NMG has exercised such right, Bankagrees that it shall negotiate in good faith for the purchase of the retailer’sCredit Card portfolio from such unaffiliated issuer associated with the retailassets being acquired. Prior to or promptly following the consummation of theacquisition, NMG shall provide notice to Bank indicating its intention toengage in, or the consummation of, as the case may be, such acquisition andshall cooperate to the extent practicable to provide Bank with a reasonableopportunity to conduct due diligence. In the event that Bank is unsuccessful inits bid for the Credit Card portfolio, NMG may offer the Credit Card program ofsuch unaffiliated issuer until the expiration of the agreement governing suchprogram, and Bank shall negotiate in good faith for the purchase of the CreditCard portfolio at that time; provided, however, that if Bank isunable to agree to the terms of the purchase of such Credit Card portfolioprior to the time that notice of termination or election to extend the term, asapplicable, is due under such program agreement, NMG shall have the right tocontinue to operate such Credit Card portfolio under the existing programagreement or to purchase and operate such retailer’s Credit Card businessitself or to engage a third party to do so; provided, however,that NMG shall not engage a third party other than Bank unless the financialterms and conditions (including terms relating to the manner in which theconversion costs relating to the contemplated transaction are to be allocatedamong the Parties) pursuant to which such third party is to operate such CreditCard business are substantially more favorable in the aggregate to NMG than theterms and conditions offered by Bank. If NMG or any of its Subsidiaries,directly or with a third Person, acquires the Credit Card business of anotherretailer pursuant to this provision and this Agreement remains in effect, Section 2.2shall not apply to such acquired Credit Card business or to the associatedacquired 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, consolidationor other business combination) a retail department store business that throughBank or any of its Affiliates issues a Credit Card in the United States, Bankand NMG shall assess and mutually agree whether to integrate such Credit Cardportfolio with the Program or operate such portfolio separately as provided in Section 14.5below.

 

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

 

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Cardunless (i) Bank is already providing a Dual-Line Credit Card program forthe NMG Companies at the time of the proposed acquisition or (ii) NMG hasalready given notice to Bank of its desire to issue a Dual-Line Credit Cardpursuant to Section 2.2(c)(ii) and Bank is fully committed toissuing, and able to issue, such Dual-Line Credit Card within the DevelopmentPeriod.

 

14.5 Conversion of Purchased Accounts.

 

(a) If Bank acquires any Credit Card portfoliopursuant to Section 14.1 or 14.2, or operates a Credit Card portfolio asset forth in Section 14.3, NMG and Bank shall negotiate in good faith inorder to arrive at mutually agreeable terms pursuant to which the acquiredCredit Card portfolio would be integrated into the Program, it being understoodthat, absent unique characteristics of the accounts acquired or impedimentsunder Applicable Law or the cardholder agreements applicable to the acquiredaccounts, it is the mutual intent of the Parties that the acquired accounts beintegrated as follows; provided, however, that if based on theforegoing principles and pursuant to such good faith negotiations the Partiesdetermine that the terms of this Agreement should not apply to such acquiredassets, the acquired accounts shall be governed by such other and/or additionalterms as the Parties shall agree; provided that accounts in anyportfolio operated by Bank and acquired pursuant to Section 14.3 shallcontinue 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 beconverted to Accounts established under the Program, which converted Accountsshall be subject to the same terms and conditions as the Accounts and to thisAgreement, and participate in the Program, as if they were originated underthis Agreement.

 

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

 

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

 

(b) Bank shall cover all costs related toconversions pursuant to this Section 14.5, including replacement of CreditCards, notices to Cardholders and complying with other requirements ofApplicable Law.

 

14.6 No Other NMG Obligations. Except as setforth in this Article XIV, the NMG Companies shall have no obligation toinclude in the Program any Credit Card portfolios acquired in connection withany merger, consolidation, acquisition or other transaction or otherwise causethem to be transferred to the NMG Companies or otherwise transfer any suchprogram to Bank. Except to the extent included in the Program, an acquiredportfolio may be operated free of the exclusivity restrictions set forth inthis Agreement.

 

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**ARTICLE XV**

**EVENTS OF DEFAULT; RIGHTS ANDREMEDIES**

 

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

 

(a) Such Party shall fail to perform, satisfy orcomply with any obligation, condition, covenant or other provision contained inthis Agreement (other than failure to comply with any SLAs), and (i) suchfailure shall remain unremedied for a period of thirty (30) days after theother Party shall have given written notice thereof specifying the nature ofsuch failure in reasonable detail, provided that if such failure cannotbe cured in a commercially reasonable manner within such time, such failureshall not constitute an Event of Default if the defaulting Party shall haveinitiated and diligently pursued a cure within such time and such cure iscompleted within ninety (90) days from the date of written notice regardingsuch failure, and (ii) such failure shall either have a material adverseeffect on the licensed marks of the non-defaulting Party, or materiallydiminish the economic value of the Program to the non-defaulting Party.

 

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

 

15.2 Defaults by Bank. The occurrence of anyone or more of the following events (regardless of the reason therefor) shallconstitute an event of default by Bank hereunder:

 

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

 

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

 

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

 

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

 

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(e) Any Bank Company or Bank Parent shall nolonger be solvent or shall fail generally to pay its debts as they become dueor there shall be a substantial cessation of such Bank Company’s or Bank Parent’sregular course of business.

 

(f) Any regulatory authority having jurisdictionover 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 substantialpart of its properties, or order the winding-up or liquidation of the affairsof any Bank Company or Bank Parent, and such order shall not be vacated,discharged, stayed or bonded within sixty (60) days from the date of entrythereof.

 

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

 

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

 

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

 

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

 

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

 

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

 

(a) NMG shall fail to make payment in full of anyamount set forth on a Monthly Settlement Sheet or Yearly Settlement Sheet whendue and payable.

 

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

 

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(c) A decree or order by a court havingjurisdiction (i) for relief in respect of NMG pursuant to the BankruptcyCode or any other applicable bankruptcy or other similar law, (ii) forappointment of a custodian, receiver, liquidator, assignee, trustee orsequestrator (or similar official) of NMG or of any substantial part of itsproperties, or (iii) ordering the winding-up or liquidation of the affairsof NMG shall, in any such case be entered, and shall not be vacated,discharged, stayed or bonded within sixty (60) days from the date of entrythereof.

 

(d) NMG shall (i) file a petition seekingrelief pursuant to the Bankruptcy Code or any other applicable bankruptcy orother similar law, (ii) consent to the institution of proceedings pursuantthereto or to the filing of any such petition or to the appointment of ortaking possession by a custodian, receiver, liquidator, assignee, trustee orsequestrator (or similar official) of NMG or any substantial part of itsproperties, or (iii) take corporate or similar action in furtherance ofany such action.

 

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

 

15.4 Remedies for Events of Default. Inaddition to any other rights or remedies available to the Parties at law or inequity, 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 thedefaulting Party any amount indisputably in default plus interest based on theFederal Funds Rate.

 

**ARTICLE XVI**

**TERM/TERMINATION**

 

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

 

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

 

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

 

(b) upon thirty (30) days’ prior written noticeif (i) there is a Change of Control of Bank Parent or (ii) one ormore Persons that is not an Affiliate of Bank on the date of this Agreementacquires a direct or indirect controlling interest in Bank or any other Personconducting a substantial part of the Credit Card business conducted within thecorporate group of Bank Parent or such corporate group otherwise disposes of orterminates a substantial part of such Credit Card business;

 

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

 

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

 

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

 

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

 

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

 

(b) upon six (6) months’ prior writtennotice following the end of a Fiscal Year, if during such Fiscal Year, NMG hasnot maintained the retail store square footage set forth on Schedule 16.3(b).

 

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

 

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**ARTICLE XVII**

**EFFECTS OF TERMINATION**

 

17.1 GeneralEffects.

 

(a) Allsolicitations, marketing and advertising of the Program, other than acceptanceof applications through NMG Channels in the ordinary course of businessconsistent with past practice, shall cease upon the expiration or terminationof this Agreement, except as the Parties may otherwise mutually agree, providedthat the Parties shall continue to operate the Program in accordance with theterms of this Agreement and service the Accounts in good faith and in theordinary course of their respective businesses, subject to the terms of thisAgreement, until the provisions of Section 17.2 are satisfied. The Partiesshall cooperate to ensure the orderly wind-down or transfer of the Program.

 

(b) Uponthe satisfaction of the provisions of Section 17.2, all obligations of theParties under this Agreement shall cease, except that the provisions specifiedin Section 19.26 shall survive.

 

17.2 TheNMG Companies’ Option to Purchase the Program Assets.

 

(a) Ifthis Agreement expires or is terminated by either Party for whatever reason,NMG has the option to purchase, or arrange the purchase by a third partynominated by NMG (a “Nominated Purchaser”), of the Program Assets fromBank.

 

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

 

(c) Ifsuch purchase option is exercised, NMG or the Nominated Purchaser must completethe purchase of the Program Assets within one hundred eighty (180) days afterthe notice has been given pursuant to Section 17.2(b); provided,that if, in connection with the purchase of the Program Assets by a NominatedPurchaser, any required regulatory approvals or rating agency consents are notreceived within one hundred eighty (180) days after notice has been givenpursuant to Section 17.2(b), NMG shall complete the purchase of theProgram Assets on behalf of the Nominated Purchaser within two hundred seventy(270) days after notice has been given pursuant to Section 17.2(b). Thedate of the completion of any purchase under this Section 17.2(c) shallbe the “Program Purchase Date.”

 

(d) Thepurchase price for the Program Assets purchased, payable on the Program PurchaseDate, shall be equal to the sum of (i) the par value of the CardholderIndebtedness related to the Private Label Accounts and Non-Card Payment Plansat the time of repurchase excluding written-off Cardholder Indebtedness (inaccordance with the write-off policy then

 

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applicable to theProgram) plus (ii) the Fair Market Value of the Non-Store Accounts, exceptthat if the repurchase right arises as a result of (A) an earlytermination of this Agreement by Bank for an NMG Event of Default pursuant to Section 16.3or (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 thesum of (x) the par value of the Cardholder Indebtedness related tothe Private Label Accounts and Non-Card Payment Plans at the time of repurchaseexcluding written-off Cardholder Indebtedness (in accordance with the write-offpolicy then applicable to the Program), plus (y) the Fair MarketValue of the Cardholder Indebtedness related to the Non-Store Accounts plus(z) de-conversion costs of the Bank in an amount not to exceed $1 million.

 

(e) TheParties shall use commercially reasonable efforts to minimize transaction costsand Bank shall provide NMG and the Nominated Purchaser and their respectiverepresentatives reasonable access to the records and accounts relating to theProgram Assets for the purpose of conducting due diligence investigations todetermine whether they wish to purchase the Program Assets and shall provide assoon as reasonably practicable (but in no event more than fifteen (15) days)following a request therefor from NMG or its Nominated Purchaser a master fileof the Accounts (which shall include data for at least the twelve (12) monthperiod preceding the month in which the master file is requested and shall beupdated upon request of NMG); provided, however, that Bank shallbe entitled to require any Nominated Purchaser to enter into customaryconfidentiality arrangements before providing it with such access. The Partiesshall promptly negotiate in good faith and execute a purchase agreement for theProgram Assets to be repurchased, which shall contain terms and conditionssubstantially similar to those in the Purchase Agreement (if applicable). Bankshall provide reasonable assistance in connection with the conversion of theProgram Assets to the Systems of NMG or the Nominated Purchaser, includingprovision of interim services in accordance with the provisions of thisAgreement until such conversion occurs; provided, however, thatBank shall not be obligated to provide such interim services for more than (i) twohundred seventy (270) days after notice has been given pursuant to Section 17.2(b) inconnection with a purchase of the Program Assets by a Nominated Purchaser or (ii) oneyear after the execution date of the purchase agreement with respect to therepurchase of the Program Assets by NMG subject to a reasonable servicing fee.The Parties shall not unreasonably withhold or delay execution of such purchaseagreement or any other documents necessary to effectuate such sale. The Partiesshall use reasonable efforts to ensure that the Program Purchase Date occurs aspromptly as reasonably practicable following the execution of such purchaseagreement.

 

17.3 FairMarket Value. In the event that this Agreement terminates and, if NMGnotifies Bank that it shall purchase the Program Assets, Bank and NMG (or itsNominated Purchaser) shall attempt to mutually determine the fair market valueof the Non-Store Accounts (“Fair Market Value”). If the Parties cannotreach such agreement, each Party shall nominate an investment banker whotogether shall select a third investment banker to value the Non-StoreAccounts. In determining the Fair Market Value of the Non-Store Accounts, theinvestment bankers shall assume that (a) the terms and conditions of thisAgreement, including all financial terms and conditions, Bank’s right to usethe NMG Licensed Marks in accordance with this Agreement and all other materialelements of the transactions contemplated by this Agreement, shall continue inrespect of the Non-Store Accounts being purchased during the period ofvaluation and (b) the Non-Store Accounts being purchased shall continue tooperate on an ongoing basis in accordance with past practice. In such case, theFair Market Value shall be the

 

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

 

17.4 DedicatedProgram Personnel. Upon termination or expiration of the Program for anyreason and until the date that is ninety (90) days after Bank ceases to provideany services hereunder, NMG shall have the right to offer employment toemployees and independent contractors of Bank and any of Bank’s Affiliates thatperform all or substantially all of their work for Bank or its Affiliates inconnection with the Program.

 

17.5 Rightsof Bank if Purchase Option Not Exercised.

 

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

 

(i) issueto Cardholders a replacement or substitute Credit Card (which card must notbear any NMG Licensed Marks or any other trademarks or source indicatorsconfusingly similar thereto) with such characteristics as Bank considersappropriate (the cost of card re-design and re-issue being borne by Bank); providedthat the replacement or substitute Credit Card shall not be issued incooperation with any retailer; provided, further, that the NMGCompanies shall be permitted to add an enclosure to the last two (2) BillingStatements to the effect that the Program has been terminated;

 

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

 

(iii) sellthe Accounts and associated receivables to a third party purchaser, other thana competitor of NMG and its Affiliates selected by Bank at a price agreedbetween Bank and the purchaser; or

 

(iv) anycombination of (i), (ii) and (iii).

 

(b) Notwithstandingthe foregoing, in no event shall Bank use or disclose or permit any of itsAffiliates to use or disclose the Cardholder Data to market or promote a CreditCard or ancillary product together with any retailer.

 

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

 

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

 

(d) Withinsixty (60) days (or one hundred twenty (120) days in the case of Dual-LineCards) after the NMG Companies give written notice that they shall not exercisetheir option referred to in Section 17.2 or after the time period for theNMG Companies to exercise such option shall have expired, Bank shall no longeruse any of the NMG Licensed Marks (or any other trademarks or source indicatorsconfusingly similar thereto) and must rebrand the NMG Credit Cards; providedthat thereafter Bank may continue to use the NMG Licensed Marks solely to theextent necessary to identify the Accounts in connection with the billing andcollection thereof and as otherwise required by Applicable Law.

 

**ARTICLE XVIII**

**INDEMNIFICATION**

 

18.1 NMGIndemnification of Bank. From and after the Effective Date, the NMGCompanies shall indemnify and hold harmless Bank, its Affiliates, and theirrespective officers, directors and employees from and against and in respect ofany and all losses, liabilities, damages, costs and expenses of whatevernature, including reasonable attorneys’ fees and expenses, which are caused orincurred by, result from, arise out of or relate to:

 

(a) anyRetail Merchant’s negligence or recklessness or willful misconduct (includingacts and omissions) relating to the Program;

 

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

 

(c) anyactions or omissions by Bank taken or not taken at an NMG Company’s writtenrequest or direction pursuant to this Agreement except where Bank would havebeen otherwise required to take such action (or refrain from acting) absent therequest or direction of the NMG Companies;

 

(d) dishonestor fraudulent acts by a Retail Merchant, or any of its agents or employees, inconnection with the Program (except to the extent of any amount charged backpursuant to Section 8.5);

 

(e) anyfailure by the Retail Merchants to satisfy any of their obligations to thirdparties with respect to the sale by them to such third parties of NMG Goods andServices;

 

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

 

(g) anyclaim, suit or proceeding by any third party arising out of the failure of a RetailMerchant to comply with Applicable Law in connection with the Program or theOperating Procedures, unless such failure was the result of any action taken ornot taken by such Retail Merchant at the written request or direction of Bank;

 

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

 

(i) allegationsby a third party that the use of the NMG Licensed Marks constitutesinfringement of any Intellectual Property right of such third party.

 

18.2 BankCompanies’ Indemnification of the NMG Companies. From and after theEffective Date, the Bank Companies’ shall indemnify and hold harmless NMG, itsAffiliates and their respective officers, directors and employees from andagainst and in respect of any and all losses, liabilities, damages, costs andexpenses 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’sor its Affiliate’s negligence or recklessness or willful misconduct (includingacts and omissions) relating to the Program;

 

(b) anybreach by Bank or any of its Affiliates, employees or agents of any of thematerial terms, covenants, representations, warranties or other provisionscontained in this Agreement or any Cardholder Agreement;

 

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

 

(d) dishonestor fraudulent acts by Bank, or any of its Affiliates, agents or employees, inconnection with the Program;

 

(e) anyfailure by the Bank Companies to satisfy any of their obligations to (i) Cardholderswith respect to the Program or the Accounts, whether pursuant to the CardholderAgreements or otherwise or (ii) any other third parties in connection withits provision of other products and services to such third parties;

 

(f) anyAccount Documentation and Solicitation Materials approved by the ManagementCommittee and used by any of the NMG Companies in that form and in accordancewith Bank’s instructions and/or the Operating Procedures that fails to complywith Applicable Law, other than any content in the Solicitation Materials thatprimarily relates to Loyalty Programs and was included in the SolicitationMaterials in the form provided by NMG without any input from Bank with respectto Applicable Law;

 

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

 

(h) Bank’sInserts or Billing Statement messages; and

 

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(i) allegationsby a third party that the use of the Bank Licensed Marks constitutesinfringement of any Intellectual Property right of such third party.

 

18.3 Procedures.

 

(a) Incase any claim is made, or any suit or action is commenced, against a Party(the “Indemnified Party”) in respect of which indemnification may besought by it under this Article XVIII, the Indemnified Party shallpromptly give the other Party (the “Indemnifying Party”) notice thereofand the Indemnifying Party shall be entitled to participate in the defense thereofand, with prior written notice to the Indemnified Party given not later thantwenty (20) days after the delivery of the applicable notice from theIndemnified Party, to assume, at the Indemnifying Party’s expense, the defensethereof, with counsel reasonably satisfactory to such Indemnified Party. Afternotice from the Indemnifying Party to such Indemnified Party of its election soto assume the defense thereof, except as set forth in Section 18.3(b), theIndemnifying Party shall not be liable to such Indemnified Party under this Section forany attorneys’ fees or other expenses subsequently incurred by such IndemnifiedParty in connection with the defense thereof, other than reasonable costs ofinvestigation.

 

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

 

(c) TheIndemnifying Party shall promptly notify the Indemnified Party if theIndemnifying Party desires not to assume, or participate in, the defense of anysuch claim, suit or action.

 

(d) TheIndemnified Party or Indemnifying Party may at any time notify the other of itsintention to settle or compromise any claim, suit or action against theIndemnified Party in respect of which payments may be sought by the IndemnifiedParty hereunder, and (i) the Indemnifying Party may settle or compromiseany such claim, suit or action solely for the payment of money damages forwhich the Indemnified Party will be fully indemnified hereunder, but shall notagree to any other settlement or compromise without the prior written consentof the Indemnified Party, which consent shall not be unreasonably withheld (itbeing agreed that any failure of an Indemnified Party to consent to anysettlement or compromise involving relief other than monetary damages shall notbe deemed to be unreasonably withheld), and (ii) the Indemnified Party maysettle or compromise any such claim, suit or action solely for an amount notexceeding One Thousand Dollars ($1,000), but shall not settle or compromise anyother matter without the prior written consent of the Indemnifying Party, whichconsent shall not be unreasonably withheld.

 

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18.4 Noticeand Additional Rights and Limitations.

 

(a) Ifan Indemnified Party fails to give prompt notice of any claim being made or anysuit or action being commenced in respect of which indemnification under this Article XVIIImay be sought, such failure shall not limit the liability of the IndemnifyingParty; provided, however, that this provision shall not be deemedto limit the Indemnifying Party’s rights to recover from the Indemnified Partyfor any loss, cost or expense which it can establish resulted from such failureto give prompt notice.

 

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

 

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

 

**ARTICLE XIX**

**MISCELLANEOUS**

 

19.1 PrecautionarySecurity Interest. The NMG Companies and Bank agree that this Agreementcontemplates the extension of credit by Bank to Cardholders and that the NMGCompanies’ submission of NMG Charge Transaction Data to Bank shall constituteassignment by the NMG Companies of any and all right, title and interest insuch NMG Charge Transaction Data and the Cardholder Indebtedness reflectedtherein. However, as a precaution in the unlikely event that any person assertsthat Article 9 of the UCC applies or may apply to the transactionscontemplated hereby, and to secure the NMG Companies’ payment of and performanceof all obligations of the NMG Companies to Bank, the NMG Companies hereby grantto Bank a first priority present and continuing security interest in and to thefollowing, whether now existing or hereafter created or acquired: (i) allAccounts, Cardholder Indebtedness, Account Documentation and NMG ChargeTransaction Data, (ii) all deposits, credit balances and reserves on theBank’s books relating to the Program, and (iii) all proceeds of theCardholder Indebtedness. In addition, the NMG Companies agree to take anyreasonable action requested by Bank, at Bank’s expense, to establish the firstlien and perfected status of such security interest. Upon the termination orexpiration of this Agreement, Bank shall execute such releases and file suchnotices as the NMG Companies may request to evidence the termination of thesecurity interest provided for in this Section 19.1.

 

19.2 Securitization,Participation or Pledge of Cardholder Indebtedness.

 

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

 

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

 

(b) Inthe event the NMG Companies elect to purchase the Program Assets pursuant to Section 17.2and Bank has securitized, participated or pledged any of the CardholderIndebtedness included in the Program Assets, the Parties will cooperate totransfer such assets, or Bank’s interest in and servicing rights with respectto such assets, to NMG or its Nominated Purchaser on reasonable terms pursuantto instruments in form and substance satisfactory to the Parties, and thepurchase price set forth in Section 17.2(d) shall be reduced by theoutstanding 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 theother hand, shall assign this Agreement or any of its rights hereunder withoutthe prior written consent of the other Party, except to the extent (i) theCardholder Indebtedness is securitized as permitted pursuant to Section 19.2or (ii) otherwise permitted under the Servicing Agreement.

 

19.4 Saleor Transfer of Accounts. Bank shall not sell or transfer in whole or inpart any Accounts; provided, however, that this Section 19.4shall not restrict the ability of Bank to securitize, participate or pledge theCardholder Indebtedness pursuant to Section 19.2. Bank may from time totime propose to NMG the terms under which it desires to sell any NMG Accountsthat have been written-off in accordance with the Risk Management Policies,including the payments proposed to be made to NMG and Bank in connection withany such sale. NMG shall consider any such proposal in good faith but shall beentitled 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 agreedthat, in fulfilling its obligations under this Agreement, no Person other thana Party hereto or its Affiliates may perform such Party’s functions; providedthat, to the extent a Party is not required to obtain Management Committeeapproval under Section 3.2(d)(iv) to outsource or subcontract aservice, the Parties and their Affiliates may subcontract or outsource suchservice to such third party. Each Party hereto shall be responsible forfunctions performed by such Affiliates or other Persons to the same extent the Partywould be responsible if it performed such functions itself.

 

19.6 Salesand Use Tax. This Agreement is intended to be a tax included contract forTexas sales and use taxes due on the taxable Texas portion of the Servicesperformed by NMG that benefit Bank in Texas. Bank shall provide to NMG amulti-state benefit exemption certificate and a letter instructing NMG to paydirectly to the State of Texas the Texas sales and use tax due under thisAgreement.

 

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

 

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19.8 Non-Waiver.No delay by a Party hereto in exercising any of its rights hereunder, orpartial or single exercise of such rights, shall operate as a waiver of that orany other right. The exercise of one or more of a Party’s rights hereundershall not be a waiver of, or preclude the exercise of, any rights or remediesavailable 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, legalityand enforceability of the remaining provisions contained herein shall not inany way be affected or impaired thereby, and this Agreement shall be reformed,construed and enforced as if such invalid, illegal or unenforceable provisionor portion of any provision had never been contained herein and there had beencontained herein instead such valid, legal and enforceable provisions as wouldmost nearly accomplish the intent and purpose of such invalid, illegal orunenforceable provision.

 

19.10 Waiverof Jury Trial and Venue.

 

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

 

(b) EachParty hereby irrevocably submits to the jurisdiction of the United StatesDistrict Court for the State of Delaware or, if such federal jurisdiction isunavailable, in the state courts of the State of Delaware over any actionarising out of this Agreement, and each Party hereby irrevocably waives anyobjection which such Party may now or hereafter have to the laying of impropervenue or *forum non conveniens*.Each Party agrees that a judgment in any such action or proceeding may beenforced in other jurisdictions by suit on the judgment or in any mannerprovided by law. Any and all service of process and any other notice in anysuch suit, action or proceeding with respect to this Agreement shall beeffective against a Party if given as provided herein.

 

19.11 GoverningLaw; Compliance with Law.

 

(a) ThisAgreement and all rights and obligations hereunder, including matters ofconstruction, validity and performance, shall be governed by and construed inaccordance with the laws of the State of New York applicable to contracts madeto be performed within such State and applicable federal law.

 

(b) EachParty shall comply in all material respects with Applicable Law in connectionwith its activities and the exercise of its rights and performance of itsobligations hereunder.

 

19.12 SpecificPerformance. The Parties agree that money damages would not be a sufficientremedy for any breach of Article VI, X or XIII or the failure of a Partyto perform any of its material obligations hereunder, and that, in addition toall other remedies, each Party will be entitled to seek specific performanceand to seek injunctive or other equitable relief as a remedy for any suchbreach or failure to perform its material obligations hereunder. Each Partywaives any requirements for the securing or posting of any bond in connectionwith such remedy.

 

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

 

19.14 Notices.Any notice, approval, acceptance or consent required or permitted under thisAgreement shall be in writing to the other Party and shall be deemed to havebeen duly given when delivered in person or, if sent by United Statesregistered or certified mail, with postage prepaid, or by a nationallyrecognized overnight delivery service, when received, addressed as follows:

 
| If to the NMG  Companies:  | c/o The Neiman Marcus  Group, Inc.One Marcus Square1618 Main StreetDallas, Texas 75201Attention: General  CounselFacsimile: (214)  573-5354                              |
|----------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                       |                                                                                                                                                                          |
|                       | c/o The Neiman Marcus  Group, Inc.One Marcus Square1618 Main StreetDallas, Texas 75201Attention: Credit  Card Program ManagerFacsimile: (214)  743-7646                  |
|                       |                                                                                                                                                                          |
| With a copy to:            | Simpson  Thacher & Bartlett LLP425 Lexington AvenueNew York, New York  10017Attention: Maripat  Alpuche, Esq.Facsimile: (212)  455-2502                         |
|                       |                                                                                                                                                                          |
| If to the Bank  Companies: | c/o HSBC Bank Nevada,  N.A.2700 Sanders RoadProspect Heights,  Illinois 60070Attention: Managing  Director -Client Relations,  HSBC Retail ServicesFacsimile: (908)  203-4217 |
|                       |                                                                                                                                                                          |
| With a copy to:            | HSBC Retail Services2700 Sanders RoadProspect Heights,  Illinois 60070Attention: General  Counsel, Retail Services DivisionFacsimile: (847)  205-7417                         |

 

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

 

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19.16 FurtherAssurances. The NMG Companies and Bank agree to produce or execute suchother documents or agreements as may be necessary or desirable for theexecution and implementation of this Agreement and the consummation of thetransactions specified herein and to take all such further action as the otherParty may reasonably request in order to give evidence to the consummation ofthe transactions specified herein.

 

19.17 NoJoint Venture. Nothing contained in this Agreement shall be deemed orconstrued by the Parties or any third party to create the relationship ofprincipal and agent, partnership, joint venture or of any association betweenthe NMG Companies and the Bank Companies, and no act of either Party shall bedeemed to create any such relationship. The NMG Companies and the BankCompanies each agree to such further actions as the other may request toevidence and affirm the non-existence of any such relationship.

 

19.18 PressReleases. The NMG Companies, on the one hand, and the Bank Companies, onthe other hand, each shall obtain the prior written approval of the other Partywith regard to the substance and timing of any press releases which announcethe execution of this Agreement or the transactions specified herein, whichprior approval shall not unreasonably be withheld. At all times thereafter, theNMG Companies and the Bank Companies, prior to issuing any press releasesconcerning this Agreement or the transactions specified herein, shall consultwith each other concerning the proposed substance and timing of such releasesand give due consideration to the comments of the other Party relating thereto.The foregoing notwithstanding, it is understood that neither Party shall berequired to obtain any prior consent, but shall consult with each other to theextent practicable, with regard to (a) filings, press releases and otherannouncements as may be required by Applicable Law or the applicable rules andregulations of any governmental agency or stock exchange and (b) publicationsprepared solely by and for employees of any of the NMG Companies or the BankCompanies, or their respective Affiliates.

 

19.19 NoSet-Off. The NMG Companies and the Bank Companies agree that each Party haswaived any right to set-off, combine, consolidate or otherwise appropriate andapply (i) any assets of the other Party held by the Party or (ii) anyindebtedness or other liabilities at any time owing by the Party to the otherParty, as the case may be, against or on account of any obligations owed by theother Party under this Agreement, except as expressly set forth herein.

 

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

 

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19.21 ThirdParties . There are no third-party beneficiaries to this Agreement. Exceptfor 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 toany third party; or (ii) any rights, claims or causes of action against aParty to be created in favor of any person or entity other than the otherParty.

 

19.22 ForceMajeure. If performance of any service or obligation under this Agreementis prevented, restricted, delayed or interfered with by reason of labordisputes, strikes, acts of God, floods, lightning, severe weather, shortages ofmaterials, 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 judicialauthority or representative of any such government, or any other actwhatsoever, whether similar or dissimilar to those referred to in this clause,which are beyond the reasonable control of a Party and could not have beenprevented by reasonable precautions, (each, a “Force Majeure Event”)then such Party shall be excused from such performance to the extent of andduring the period of such Force Majeure Event. A Party excused from performancepursuant to this Section 19.22 shall exercise all reasonable efforts tocontinue to perform its obligations hereunder, including by implementing itsdisaster recovery and business continuity plan as provided in Section 7.3(d),and shall thereafter continue with reasonable due diligence and good faith toremedy its inability to so perform except that nothing herein shall obligateeither Party to settle a strike or other labor dispute when it does not wish todo so. Notwithstanding the foregoing, if a condition constituting a ForceMajeure Event with respect to the Bank Companies, on the one hand, or the NMGCompanies, 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 isunable to perform a material obligation (which shall be deemed to include anypayment obligation pursuant to Article VIII or Article IX) under thisAgreement due to such Force Majeure Event, then the other Party shall have theright to terminate this Agreement upon written notice to the Party subject tosuch Force Majeure Event; provided, however, that (i) priorto delivering written notice of termination in respect of such Force MajeureEvent, the Party seeking to terminate this Agreement shall call, and theParties shall attend one or more Management Committee to consider and vote upona plan to outsource the material obligation that such Party is unable toperform and (ii) in the event such outsourcing arrangement is agreed to,the Parties shall promptly implement such arrangement and this Agreement maynot be terminated unless such Force Majeure Event continues on the fifteenth(15th) day following approval of suchoutsourcing arrangement.

 

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

 

19.24 BindingEffect. This Agreement shall be binding upon and shall inure to the benefitof the Parties hereto and their respective successors and permitted assigns.This Agreement is the product of negotiation by the Parties having theassistance of counsel and other advisers. It is the intention of the Partiesthat this Agreement not be construed more strictly with regard to one Party thanwith regard to the other.

 

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

 

19.26 Survival.Upon the expiration or termination of this Agreement, the Parties shall havethe rights and remedies described herein. Upon such expiration or termination,all obligations of the Parties under this Agreement shall cease, except thatthe obligations of the Parties pursuant to Article VI (CardholderInformation), Section 8.5 (Bank Right to Charge Back), Article X(Intellectual Property), Article XII (Access, Audit and DisputeResolution), Article XIII (Confidentiality), Article XVII (Effects ofTermination), 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 thisAgreement.

 

[Remainder of Page Intentionally Left Blank]

 

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INWITNESS WHEREOF, each of the Parties has caused this Agreement to be dulyexecuted as of the date first above written.

 
|   | THE NEIMAN MARCUS  GROUP, INC. |
|--------|--------------------------------|
|   |                           |   |
|   | By:                            | /s/ Steven P. Dennis |
|   | Name:                          | Steven P. Dennis |
|   | Title:                         | Senior Vice President,  Strategy,  Business Development and Multichannel Marketing |
|   |                           |   |
|   | BERGDORF GOODMAN, INC.         |
|   |                           |   |
|   | By:                            | /s/ Nelson A. Bangs |
|   | Name:                          | Nelson A. Bangs |
|   | Title:                         | Senior Vice President |
|   |                           |   |
|   | HSBC BANK NEVADA, N.A.         |
|   |                           |   |
|   | By:                            | /s/ Joseph W. Hoff |
|   | Name:                          | Joseph W. Hoff |
|   | Title:                         | Executive Vice  President |
|   |                           |   |
|   | HOUSEHOLD CORPORATION          |
|   |                           |   |
|   | By:                            | /s/ Joseph W. Hoff |
|   | Name:                          | Joseph W. Hoff |
|   | Title:                         | President |

 

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SCHEDULE 1.1(a)

 

**Bank Licensed Marks**

 

| **Mark**                      | ** ** | **Serial/Registration  Number** |
|-------------------------------|------------|---------------------------------|
|                          |       |                            |
| **HSBC Card  Services**       |       |                            | [***] |
| **HSBC Bank  Nevada**         |       |                            | [***] |
| **HSBC  Finance Corporation** |       |                            | [***] |
| **HSBC  Retail Services**     |       |                            | [***] |
|                          |       |                            |   |
| HSBC                          |       |                            |   |
|                          |       |                            | [***] |

 

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**SCHEDULE 1.1(b)**

 

**Comparable Partner Programs**

 

SaksIncorporated 

Domain

HelzbergDiamonds 

LizClaiborne

 

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**SCHEDULE 1.1(c)**

** **

**Program Loyalty Program and Loyalty Cards**

 

SectionA: Description of Current Program Loyalty Programs

 

*NeimanMarcus InCircle Rewards Program*

TheNeiman Marcus InCircle Rewards program has successfully driven the use of theNM Card and has stimulated ongoing retail sales for over 20 years. The NeimanMarcus InCircle Rewards Program applies automatically to any NM Card (inlimited cases, InCircle Rewards can be awarded to select AMEX cards enrolled inthe program by a customer). Under the current InCircle Rewards Program, eachtime a customer uses the NM Card, the customer earns one point for each dollarspent. Once a customer accumulates 5,000 points during an annual period, thecustomer automatically becomes a member of the InCircle Rewards program andreceives an InCircle Rewards card.

 

Withmembership come certain special privileges, as determined by NMG. In the pastthose privileges have included the following, subject to changes made by NMGfrom time to time: two publications and a newsletter, complimentary giftpackaging on purchases over $25, Hertz double upgrade/discount, double InCircleReward points on the customer’s birthday and $25 dinner certificate for Smith& Wollensky restaurant. Also cardholders receive advance notice of salesand special events at Neiman Marcus. NMG will periodically have double-pointdays at Neiman Marcus stores when cardholders can earn two points for everydollar spent on the card, driving more customer traffic into the stores.

 

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

 

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

 

Allpoint redemptions for InCircle Rewards must be made during the annual programperiod (which lasts for fourteen months from January to the following March 1st).After March 1st, 25% of unredeemed InCircle Rewards points (up to a maximum of5,000 points) will be carried over into the next annual program period. Pointsare not earned on sales tax, beauty salons, delivery and processing,alterations, gift packaging charges or NM Gift Cards®. Points are not

 

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

 

TheInCircle Rewards program also permits point owners to convert points fromInCircle Rewards points to points for other programs, including United andAmerican Airlines (point for point). The InCircle Program has relationshipswith third parties where InCircle points are rewarded to customers of thosethird parties in connection with the purchase of certain goods and servicesfrom such parties. In addition, the InCircle Program rewards points to coupleswho have registered at NMG for items purchased off their wedding registry regardlessof tender type.

 

*BergdorfGoodman Card Rewards Program*

TheBergdorf Goodman Rewards program currently operates differently than the NeimanMarcus InCircle Rewards program. Beginning in January 2005, the BergdorfGoodman Rewards program permits select AMEX cards (Centurion and Platinumcardholders only) to be enrolled in the Bergdorf Goodman Rewards program. EveryBergdorf Goodman card account is automatically enrolled in the program. ABergdorf Goodman card receives Bergdorf Goodman Rewards points if it is used ateither Bergdorf Goodman or a Neiman Marcus store (but not a Neiman MarcusClearance Center) on a one point per dollar basis. Beginning in January 2006,the Bergdorf Goodman Rewards program will be rolled into the InCircle Rewardsprogram.

 

 

SectionB: Loyalty Cards

 

InCircleRewards Card

InCirclePlatinum Rewards Card 

BergdorfGoodman Rewards Card

 

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**SCHEDULE1.1(d)**

** **

**NMG****Licensed Marks**

 
| ** **                                 | ** ** | **Serial/Registration** | ** ** | **Applicable  Retail**    | ** ** |
|--------------------------------------------|------------|-------------------------|------------|---------------------------|------------|
| **Mark**                                   | ** ** | **Number**              | ** ** | **Division/NMG  Channel** | ** ** |
| BERGDORF GOODMAN                           |       | 1902799                 |       |                      |       |
| BERGDORF GOODMAN                           |       | 0992733                 |       |                      |       |
| IN CIRCLE IN and Design (Circle around IN) |       | 1337166                 |       |                      |       |
| INCIRCLE REWARDS                           |       | 2442806                 |       |                      |       |
| NEIMAN MARCUS                              |       | 2209260                 |       |                      |       |
| NEIMAN MARCUS                              |       | 0934177                 |       |                      |       |
| NEIMAN MARCUS                              |       | SN 78/374184            |       |                      |       |
| NEIMAN MARCUS (stylized)                   |       | 1733202                 |       |                      |       |
| NEIMAN-MARCUS                              |       | 1154006                 |       |                      |       |
| NM                                         |       | 1558605                 |       |                      |       |
| PLATINUM PREFERENCE REWARDS                |       | SN 78/420272            |       |                      |       |

 

----

 

**SCHEDULE 1.1(e)**

** **

**Non-Card Payment Plans and Private Label Credit Cards**

 

SectionA: Non-Card Payment Plans

 

SignatureAccounts

Commercialor Corporate Accounts 

StudioAccounts 

ClubAccounts

 

SectionB: Private Label Credit Cards

 

**NeimanMarcus**

NeimanMarcus Card 

NeimanMarcus Gold Card

 

**BergdorfGoodman**

BergdorfGoodman Card

 

----

 

**SCHEDULE 1.1(f)**

 

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

 

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

 

----

 

**SCHEDULE 1.1(g)**

** **

**Special Discounts**

 

[***]

 

----

 

**SCHEDULE 2.1(b)**

** **

**Private-Label Credit Card Re-issuance**

** **

Forthe initial Private Label Credit Card re-issuance, preliminary and on-goingmeetings between Bank and NMG must take place to discuss the criteria forCardholders receiving the re-issued Private Label Credit Card mailing. Duringthe initial meetings, timeframes must be reviewed in order to avoid asignificant increase in customer service call volume. At a minimum, the PrivateLabel Credit Card re-issuance shall (i) take place in separate mailings acrossa 90-120 day minimum timeframe based on account status and (ii) be structuredsuch that active cardholders receive the re-issued Credit Cards first followedby in-active Cardholders in equally-staged mailings. In addition to defining thetesting and project plan to be implemented in connection with this re-issuance,other considerations to be addressed by the Management Committee include apotential account purge of some inactive Accounts, the development of fraud preventionsteps and the coding for Credit Card activation at the POS (or through theIVR/VRU). In accordance with the design of the Cardholder Documentation associatedwith the re-issuance pursuant to Section 4.5, Bank will be responsible for theproduction, mailing, audit reporting and communication of the appropriateloyalty-level Private Label charge cards and related materials to allcardholders. In addition to the staged mailing process, Bank must work with NMGto ensure that the Private Label Credit Cards and related materials meet NMG standardsin order to address the customer service impact of the re-issuance. Prior toany mailing of re-issued Private Label Credit Cards, Bank and NMG must discussand agree upon the maximum daily mailing volumes in this staged process. 

 

----

 

**SCHEDULE 2.2(c)(i)**

** **

**Dual-Line Credit Card Testing**

 

SectionA: Dual-Line Credit Card Development and Product Design

 

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

 

SectionB: Dual-Line Credit Card Testing

 

Bankand NMG will jointly develop and the Management Committee will approve a livetest plan, such plan to include channel, geographic and customer segmentationstrategies, (if applicable), and which may include, among other items, directmail to existing Private Label Cardholders and/or placing Dual-Line/Co-Brandapplications in select test stores. The Management Committee will approve thelive test plan, including identifying, setting and reporting of the metricsused to measure the success of the test, as well as the length of time of thetest period; provided, that such test period will commence no later thanthe Dual-Line Card Deadline and after conversion to the Bank Systems.

 

SectionC: Dual-Line Credit Card Definitions

 

“DevelopmentPeriod” means the period beginning on the day that NMG provides notice ofits desire to test Dual-Line Cards pursuant to Section 2.2(c)(ii) and ending onthe ninetieth (90th) day followingsuch notice.

 

“Dual-LineCard Deadline” means June 30, 2006, as may be extended in NMG’s solediscretion.

 

“Dual-LineTesting Date” means December 31, 2005.

 

----

 

**SCHEDULE 2.2(c)(ii)**

** **

**Dual-Line Credit Card Terms**

 

[***] branded

 

[***]general-purpose credit line 

 

NoMerchant Discount in the Retail Merchants 

 

Tiedto a Program Loyalty Program

 

Economicsto be agreed between NMG and Bank, including compensation for Program LoyaltyProgram points with respect to all spending and marketing outside of the NMGChannels

 

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

 

----

 

**SCHEDULE 2.2(d)**

 

SectionA: Non-NMG Credit Cards

 

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

 

SectionB: Permitted Loyalty Program Arrangements

 

[***]

 

----

 

**SCHEDULE3.2(e)**

 

**InitialProgram Changes**

 
| Annual Fee                                             |     | No annual fee,  except for $50 NM Gold Card program membership fee.                                                                                                                                                                              |
|--------------------------------------------------------|----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                   |     |                                                                                                                                                                                                                                             |
| Late Payment or Late Fee  (at cycle)                   |     | Based upon two prior month’s statement balance:                                                                                                                                                                                             |
|                                                   |     | ·                  $20-$49 Balance = $5                                                                                                                |
|                                                   |     | ·                  $50-$149 Balance = $15                                                                                                              |
|                                                   |     | ·                  $150-$299 Balance = $20                                                                                                             |
|                                                   |     | ·                  $300+ Balance = $29                                                                                                                 |
|                                                   | * * | * *                                                                                                                                                                                                                                         |
| Returned Check Fees *(BG  to be standardized**as NM)*  | * * | $25 per returned check                                                                                                                                                                                                                           |
|                                                   | * * | * *                                                                                                                                                                                                                                         |
| Minimum Payment Amount *(BG to be standardized as NM)* | * * | 10% of billed balance (but at least $25 and, for closing balances of  $250 or more, rounded up to the nearest $10).                                                                                                                              |
|                                                   | * * |                                                                                                                                                                                                                                             |
| Minimum Finance Charge                                 |     | $.50                                                                                                                                                                                                                                             |
|                                                   |     |                                                                                                                                                                                                                                             |
| Standard APR                                           |     | 21.0% APR for all residents (or at NMG’s election, all residents  other than 1,500 VIP Accounts plus up to 5,000 other Accounts) except in two  states to be agreed upon; [TBD%] plus Prime variable APR for two states to be  agreed upon. |
|                                                   |     |                                                                                                                                                                                                                                             |
| Grace Period for the  Repayment of Purchases           |     | 27 days                                                                                                                                                                                                                                          |
|                                                   |     |                                                                                                                                                                                                                                             |
| Method of Computing the  Balance for Purchases         |     | Average Daily Balance (including new purchases)                                                                                                                                                                                                  |

 

----

** **

**SCHEDULE 3.2(g)(i)**

** **

**Private Label Account Profiles**

** **

Bankmay make changes to the Risk Management Policies with respect to a channel inresponse to changes in the credit profiles for Account applicants in suchchannel if the Population Stability Index (PSI) based on the Fair, Isaac Scoreindicates a change in excess of [***] in such channel for twoconsecutive months

 

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

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

·                  The scores will be used to develop the PSI

 

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

 

[***]

 

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

 

ThePSI would be developed jointly over the first six months following theEffective Date with the Risk Management Policies remaining unchanged duringthis time.

 

Attachedis an example of a PSI.

 

----

 

**SCHEDULE 3.3**

** **

**Program Relationship Managers; Partner Program Team**

 

1.                                       Initial Managerof NMG: Steven Dennis

 

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

 

3.                                       Bank’s ProgramTeam Requirements and Specifications

 

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

 

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

 

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

 

Theforegoing dedicated employees shall devote substantially all of their effortsto performing Bank’s obligations pursuant to Section 5.4.

 

(b)Other Program team requirements:

 

EachProgram team member would have a minimum of five (5) years of relevantexperience working with similar programs.

 

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

 

Bankwill identify and assign a lead technology and a lead risk managementrepresentative to work with the Program team members. Each lead representativewill be the functional subject matter expert relative to the Program and willbe assigned for a period of time to provide consistency in knowledge andexperience to the Program team members.

 

----

 

**SCHEDULE 3.3(d)**

** **

**List of Retailers**

 

Saks

Nordstrom

Barney’s

Coach

Jeffrey

Tiffany

HoltRenfrew 

FredSegal

StanleyKorshak 

Scoop

LVMH

PradaGroup 

PPRGroup 

Federated

 

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** **

**SCHEDULE 4.1(b)**

** **

**Operating Procedures**

 

----

** **

**Schedule4.1(b)**

**RiskManagement Policies and**

**OperatingProcedures**

 

----

 

**NewAccount**

**RiskManagement Policies andOperating Procedures**

 

A-1

----

** **

**[***]**

 

----

 

**MultiplePaySys CDM Screen Prints showing fullapplication flow will be attached.**

 

B-1

----

** **

**[***]**

 

----

 

**Authorizations**

**RiskManagement Policies andOperating Procedures**

 

C-1

----

** **

**[***]**

 

----

 

**MultiplePaySys Custom Rescore Screen Printsshowing rescore matrixes and parameterswill be attached.**

 

D-1

----

** **

**[***]**

 

----

 

**Customer Service/InCircle****Risk Management Policies andOperating Procedures**

 

E-1

----

** **

**[***]**

 

----

 

**Collections****Risk Management Policies andOperating Procedures**

 

F-1

----

 

**POPULATION STABILITY COMPARISON**

**Benchmark vs Current MonthApplication Data**

 

**[***]**

 

----

 

**SCHEDULE 4.4(f)**

** **

**DocumentRetention Policy**

 

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

 
| **Title**                                        | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                            | ** ** | **Retention**                                                                                                                              |
|--------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------|
| Regulatory  Complaints                           |       | Complaint  resolutions resulting from complaints to any regulatory agency.                                                                                                                                                                                                                                                                                                                                                                 |       | [***]                                                                                                                                      |
| Customer  Application & Agreement Forms |       | Samples  of forms used for customers applying for credit. Forms include two parts: 1)  Application form and 2) cardholder agreement and disclosures                                                                                                                                                                                                                                                                                        |       | [***]                                                                                                                                      |
| General  Customer Correspondence                 |       | Retention  of customer correspondence that is currently required in writing, including  name changes, FTC dispute letters, bankruptcy filings and deceased  notifications. Other customer correspondence including address changes,  credit limit change requests and financial adjustment requests are not  retained since these requests can be accepted verbally today.                                                                 |       | [***]                                                                                                                                      |
| Sales  Slips (Signature Slips)                   |       | Signature  slips that show the transaction total, tender information and customer  signature but not the transaction detail.                                                                                                                                                                                                                                                                                                               |       | [***]                                                                                                                                      |
| GI.B  Privacy Opt Outs                           |       | Opt-out  code will be retained on-line for [***] months and opt-out reply  notices will be retained on paper for [***] months                                                                                                                                                                                                                                                                                                              |       | [***] Months (on-line  opt-out code) and [***] Months  (opt-out reply notices)                                                             |
| Completed  Approved Applications                 |       | All  new applications that are signed by the applicant                                                                                                                                                                                                                                                                                                                                                                                     |       | 60 Months                                                                                                                                  |
| Customer  Inquiry Decline Reason Response        |       | After  applicant receives initial new account decline letter, decline reason  response generally handled via phone but follow-up letters mailed explaining  specifics are not retained although noted on the application on-line for [***] months. Existing  cardholders inquiry as to a declined authorization is also handled verbally  in most cases with follow-up letters, if necessary, not retained although  noted on the account. |       | [***] Months for  new account declined application signed by applicants, [***] Months for other customer  inquiry decline reason responses |
| Adverse  Action Letters                          |       | On-line  letter code notations on the declined application or existing account that  had a declined sale, declined application or their account closed, and the  template of the adverse action letter.                                                                                                                                                                                                                                    |       | [***] Months                                                                                                                               |
| Approvals  - Credit Line Increase Request        |       | The  date implemented and the revised credit guideline is retained on-line                                                                                                                                                                                                                                                                                                                                                                 |       | [***] Months                                                                                                                               |
| Overlimit  Report                                |       | Retained  on-line through current SystemWare RDS platform but not stored on paper                                                                                                                                                                                                                                                                                                                                                          |       | [***] Months                                                                                                                               |

 

----

 
| Resolved  Disputes |   | On-line  history of each Adjustment Jacket dispute including resolution stored in  Forms Database |   | [***] Months |
|--------------------|--------|---------------------------------------------------------------------------------------------------|--------|--------------|

 
| **Title**                                            | ** ** | **Description**                                                                                                                                                                                                                                      | ** ** | **Retention**                                       |
|------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------|
| Credit  Bureau Change Request/Correction             |       | Currently  do not keep any paperwork but the electronic consumer dispute verification  (CDV) is stored on-line for [***] days from date of  submission                                                                                               |       | [***] Months                                        |
| Currency  Transaction Report                         |       | Currently  stored within each Store Cash Office but transitioning to centralized filing  process                                                                                                                                                     |       | [***] Months                                        |
| Suspicious  ActivityReports                          |       | Currently  not done but will be instituting process similar to

Currency  Transaction Report with a centralizing filing and reporting control                                                                                                        |       | [***] Months                                        |
| OFAC  Reporting                                      |       | Foreign  OFAC reporting currently in place but new reporting to be developed for all  new applicants going forward                                                                                                                                   |       | [***] Months                                        |
| USA  Patriot Act Customer Identification Information |       | Account  opening information such as: Name, Date of Birth, Social Security Number and  Physical Address are stored on-line but not all information is necessarily  required to open new account                                                      |       | [***] Months after  the account is closed (on-line) |
| USA  Patriot Act Customer Identification Information |       | Pass/fail  indicators of each new account reason is stored on the on-line application  record although no specific beyond this indicator except any notes made by  Universal Agent are retained.                                                     |       | [***] Months after  account opening (on-line)       |
| Customer  Identification Program Reporting           |       | Exception  reports to identify customer program reporting is not existing at this time  other than an internal fraud file that can refer a new application for manual  intervention. NM Direct channel has additional fraud prevention capabilities. |       | TBD                                                 |
| Cash  Payment Reporting                              |       | See  above Currency Transaction Report                                                                                                                                                                                                               |       | [***] Months                                        |
| Performance  Reports                                 |       | Various  daily, weekly, monthly or cycle reports used to measure performance in  various credit department functions that are retained on-line through  SystemWare XNET or RDS platform                                                              |       | [***] Months                                        |

 

----

 

**SCHEDULE 4.6(c)**

** **

**RiskManagement Policies Targets**

 

 

**[***]**

** **

----

 

**SCHEDULE4.7**

** **

**CardholderTerms**

 

 

**[***]**

 

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** **

**SCHEDULE 4.8(b)**

** **

**Internet Services**

 

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

 

·                  Real-Time ApplicationProcessing with Fraud Authentication – Provided Bank product offersextended application functionality beyond NM Online real-time applicationprocess (to be implemented in June 2005), Bank application processing productmust be submitted through CDM or comparable system and completely processedback to Internet within 45-second window. Authentication product is a necessityto release new account number immediately back to Internet applicant. Authenticationproduct must give NMG the ability to influence question weighting structure andtype of demographic or credit bureau-related questions asked. Detailed fraudreporting and if available, the ability for Universal Agents to quickly viewapplicant’s category questions whenever necessary are other requirements. Inthe event that fraud expenses increase for 2 consecutive months compared tofraud expenses from Fiscal Year 2004 as a result of authentication changes bymoving from the NMG to the Bank authentication and system platform, formaldiscussion with the Management Committee must be held to discuss alternativesand implement new fraud strategies to either enhance or replace currentauthentication tools. The authentication tools would also be beneficial inother application arenas if available.

 

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

 

·                  Signature Account (SIG600) Functionality – On furnitureand Home Décor items, upon NMG’s request, Bank shall offer NM On-line customersa 6-month, no finance charge Signature Account tender option for thosepurchases over $600 dollars. The real-time authorization processing for theseAccounts must allow for these requests to be sent to NMG Credit Services formanual intervention. SIG600 accounts are setup to bill 1/6th of the billed balance to ensure that 6 equalpayments exist for each item based on item ship date. The Signature AccountAgreement and terms letter following a Signature Account approval must beautomated within the respective credit systems. SIG600 denials willautomatically receive appropriate adverse action letter. If the Bank system cansupport a signature sale

 

----

 

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

 

·                  New Account Prescreening or Prospecting – In coordination with NM On-linepersonnel, new account and existing account prescreening options on the webwill be discussed by NMG and Bank The Parties intend to encourage creditworthythird party customers, either during the check-out process or afterwardsthrough an e-mail confirmation, to open an NM or BG charge account with orwithout a promotion (i.e. bonus InCircle points or free shipping). Otherprospecting options to encourage existing NM or BG cardholders to use theircharge card to shop will also be discussed by NMG and Bank with input from NMOn-line personnel with respect to specifications and design of such options.

 

·                  E-PayFunctionality – Electronic paymentfunctionality must give the cardholder the ability to pay their bill on-line, evenon their closing or due date, until 7 p.m. CST if not later and be posted withthis same date by the next business day. The MOD-10 check-digit routine andother NMG account number logic (i.e. account must begin with 04 or 05, be12-digits) must be part of initial process to eliminate “account not found”transactions. Should an on-line customer request to change or cancel their paymenton the same day, Universal Agents must have an ability to correct thesepayments. Daily transmissions of these electronic payments will be submittedthrough TRAMS or comparable receivable system to post payments regularly. Returnedpayment transmission or reporting must be given to NMG daily to immediatelyreverse payment transaction. Initial ACH Authorization Form requirements toinitiate an e-pay request must be explored further between Bank and NMG. Recurringpayment functionality with this e-pay product would also be included if Bankhas such capability. As a note, NMG currently utilizes several ACH vendorsthrough the IVR including Harbor Payments (Bank of New York) that can be usedfor this e-pay process fairly easily.

 

·                  E-BillFunctionality - On-line billpresentment must be readily available to cardholders within 24 hours of eachcycle close and should contain at a minimum all data that is currently printedon the NM or BG monthly billing statement. Billing functionality should allowcardholders to view up to 12 months of their billing statements on-line. TheParties will cooperate to implement the ability to display sub-total amountsper item in addition to selective marketing and InCircle loyalty messages anddisplays. Universal Agents must have ability to view and discuss on-line e-billfunctionality with cardholders whenever necessary.

 

·                  E-ServiceFunctionality – The Parties will alsocooperate to provide real-time memo and cycle-to-date balance information aswell as customer address maintenance and credit card re-ordering capabilitiesprovided these on-line requests do not immediately update cardholder creditsystem data. Instead, a security question (i.e. last four digits of SSN) willbe asked of cardholder at time of entry and updated data sent to a credit queuefor manual approval before actually updating the credit system. Upon such time,if any. review would be required until NMG Credit Services is comfortable withcustomer-initiated updates received from the on-line channel and manual controlcould be eliminated.

 

----

 

**SCHEDULE 5.2**

** **

**Marketing Commitments**

 

Section A:NMG Marketing Commitment

 

TheNMG Marketing Commitment for each Fiscal Year shall be equal to (i) [***], plus (ii) in the caseof any Fiscal Year following the first Fiscal Year, [***] multiplied by theapplicable Program Growth Percentage for such Fiscal Year.

 

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

 

Section B:Joint Marketing Commitment

 

TheJoint Marketing Commitment for each Fiscal Year shall be equal to (i) [***], plus (ii) in the caseof any Fiscal Year following the first Fiscal Year, [***] multiplied by theapplicable Program Growth Percentage for such Fiscal Year.

 

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

 

----

** **

**SCHEDULE6.2**

** **

**ProgramPrivacy Policy**

 

**HSBC BankNevada, N.A.**

A Privacy Statement for Neiman Marcus andBergdorf Goodman Cardholders

** **

**Introduction – Our Commitment to You**

 

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

 

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

 

**WhatInformation We Collect**

 

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

 

·                  Information we receive fromyou on your application or other form;

·                  Information you provide bytelephone or in person to a Neiman Marcus sales associate, Bergdorf Goodmansales associate or other representative;

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

·                  Information from an outsidesource such as your credit bureau report;

·                  [Informationfrom list vendors;]

·                  [Information from publicsources;] and

·                  Information about yourInternet usage if you visit our website.

 

**How We Share Information with Neiman Marcus Group**

 

Inorder to provide you with the benefits and services available to you as aNeiman Marcus or Bergdorf Goodman cardholder, it is necessary for HSBC to sharecertain information about you with Neiman Marcus Group. Neiman Marcus Groupincludes Neiman Marcus Stores, Neiman Marcus Direct (including Horchow), andneimanmarcus.com, in addition to Bergdorf Goodman, Inc. including BergdorfGoodman Stores, Bergdorf Goodman Direct and bergdorfgoodman.com.

 

----

 

YourNeiman Marcus or Bergdorf Goodman credit card can be used to make purchases atall of these locations.

 

Theinformation we share with Neiman Marcus Group may come from your application, suchas your name, address, e-mail address, telephone number, and social securitynumber. Neiman Marcus Group may have also received some or all of thisinformation from you. The information we share may also come from yourtransactions with us, such as your account number, information about yourcredit card purchases and your account performance. Neiman Marcus Group usesthe information we share solely in connection with providing the benefits andservices available to you as a Neiman Marcus or Bergdorf Goodman cardholder.

 

Exceptfor accounts with Vermont mailing addresses, we may also share non-publicpersonal information about you with Neiman Marcus Group which Neiman MarcusGroup may use to provide you with information about benefits and servicesavailable to you as a Neiman Marcus Group customer, but that are not necessarilyrelated to your account with us.  Thisinformation comes from the sources described above and may include your name,address, and account experience with us.

 

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

 

**How We Share Information with Companies Affiliated with HSBC**

 

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

 

**How We Share Information with Other Third Parties**

 

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

 

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sharealso 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 creditreporting agencies and companies which provide services related to youraccount. This information sharing is also permitted by law.

 

**Security of Your Information**

 

Safekeepingof your non-public personal information is a high priority. We maintainphysical safeguards, such as secure areas in buildings; electronic safeguards,such as passwords and encryption; and procedural safeguards, such as customerauthentication procedures to detect identity theft. We restrict access toinformation about you to only those who need to know that information toprovide products or services to you. We carefully select and monitor outsideservice providers, such as mail vendors, who have access to customerinformation, and we require them to keep it safe and secure. We do not allowthem to use or share the information for any purpose other than to perform theservice for which they are engaged. We train our employees with respect tosecurity procedures and monitor compliance therewith.

 

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

 

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

 

**The Neiman Marcus Group, Inc.**

**P.O. Box 720937**

**Dallas, Texas****75372-0937**

 

Wewill be happy to comply with your request. This request will not apply toinformation about your transactions or experience with HSBC (such as accountinformation, account usage, or payment history) and will only apply to theprivate label accounts you have with HSBC. Private Label accounts are notgeneral purpose accounts such as MasterCard® or Visa®, but are accounts thatmay be used only at the specific merchant(s) named on the credit card. Anopt-out request by any party on a joint account will apply to all parties onthe joint account. Vermont residents are automatically opted-out of creditinformation sharing with our Affiliates.

 

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

 

Ifyou do not want us to share your non-public personal information with NeimanMarcus Group for purposes that are unrelated to your account with us, pleaselet us know by completing this detachable reply form and mailing it to thefollowing address:

 

----

 

**The Neiman Marcus Group, Inc.**

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

 

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

 

**Changes to Privacy Statement**

 

Wereserve the right to modify or supplement our Privacy Statement at any time. Ifwe make material changes, we will provide our current customers with a revisednotice that describes our new practices. The current Privacy Statement applicableto Neiman Marcus and Bergdorf Goodman credit cards will always be available atthe neimanmarcus.com web site.

 

**The Neiman Marcus Group Privacy Policy**

 

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

 

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**SCHEDULE7.1(a)(i)**

 

**BankReports**

 
| **Department**                                                                                                                                 | ** ** | **Report**                                                                                                                                                                                                                                                                                                                               | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Late Stage Collections**                                                                                                                     |       | Roll  Rates                                                                                                                                                                                                                                                                                                                              |       | Trial  Balance By Cycle 

Trial  Balance By Balance Range 

Roll  Rate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                                                                                                                           |       | Dialer  Reports 

 

 

 

 

Collection  QA Reports 

Agency  Batch Track Analysis 

Write-Off  Performance 

Agency  Placement Strategies 

Calling  Strategies 

 

Debt  Management Inventory Report 

 

Outbound/Inbound  Dialer Volume 

Collection  Productivity Reports                           |       | Job  Performance Summary 

Monthly  Job Performance Summary 

Monthly  System Performance Summary 

Monthly  System Completion Code Summary 

Monthly  Job Completion Code Summary 

NM  Monitoring Form 

 

 

 

Billing  Calendar - Dialer Work Schedule 

 

Payment  Plans 

CCCS  Inventory 

Refer  to Dialer Reports 

Collector  Synopsis Summary Reports (By Team)                                                                                                                                                                                                                       |
|                                                                                                                                           |       |                                                                                                                                                                                                                                                                                                                                     |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| **Payment Processing** Image RPS Reports

 

 

 

 

 

 

 

 

 

 

Statistical  Reports |       | Cash  Letter 

Reject  Items Report 

Deposit  Report 

Client  Total Items 

Host  File Batch Summary Report 

 

Payment  Distribution Report 

NTN  100D 

15,000+  Report 

Consolidated  Cover Report 

Collection  Report 

Transmission  Report 

Image  RPS Operators Report 

Encoding  Errors Report 

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

Pass  I Pocket totals 

NM &  BG Batch listing for host file 

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

NCR  Payment Processing Control Listing 

Payments  in excess of 15,000 

Cash  Letter Listing Foreign Conversions 

Collection  Letter 

Printout  of transmission and acceptance of file (to host) 

Statistics  on each operator 

Monthly  Quantity of keying errors 

Monthly  Report on quantity and rate of envelopes opened |

 

----

 
| **Statement Mailing**    |   | Statement  Count Recap 

Detail  Statistics By Package 

Statement  of Mailing

Statistical  Totals

Cass  Report

Reprint  Statement

Tray  Labels

Misc.  Excel Schedules |   |  

 

 

 

 

 

 

Total  Number of Cycles Processed

Total  Number of Statements                                                                                                                                                                                                                                                                                                                                                                   |
|--------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                     |   |                                                                                                                                                                        |   | Total  Hours Processing Time

Average  Cycle Processing Time

Average  Statements Per Hour

Number  of Statements Mailed Same Day

Number  of Statements Mailed Within 24 Hours

Number  of Statements Mailed Within 48 Hours

Number  of Statements Mailed After 48 Hours

Total  Postage by Presort/USPS

Explanations  for Missed SLA’s                                                                                                                                          |
|                     |   |                                                                                                                                                                        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| **Credit Card Issuance** |   | Data  Card Audit File

Misc.  Excel Schedules                                                                                                                               |   |  

Total  Number of Jobs Processed

Total  Number of Cards & Customers

Total  Hours Processing Time

Average  Job Processing Time By Type

Average  Cards Per Hour By Type

Number  of Cards Mailed Same Day

Number  of Cards Mailed Within 24 Hours

Number  of Cards Mailed Within 48 Hours

Number  of Cards Mailed After 48 Hours

Postage  Reconciliation

Total  Postage By Card Type

Cards &  Forms Reconciliation

Explanations  for Missed SLA’s |

 

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

 

----

 

**SCHEDULE7.1(a)(ii)**

 

**NMGReports**

 
| **Department**  | ** ** | **Hotel  Report**                       | ** ** | **Brookline  Equivalent**                                        |
|-----------------|------------|-----------------------------------------|------------|------------------------------------------------------------------|
| **Collections** |       | Roll Rates                              |       | Trial Balance By Cycle                                           |
|            |       |                                    |       | Trial Balance By Balance  Range                                  |
|            |       |                                    |       | Roll Rate                                                        |
|            |       | Dialer Reports                          |       | Job Performance Summary                                          |
|            |       |                                    |       | Monthly Job Performance  Summary                                 |
|            |       |                                    |       | Monthly System Performance  Summary                              |
|            |       |                                    |       | Monthly System Completion  Code Summary                          |
|            |       |                                    |       | Monthly Job Completion  Code Summary                             |
|            |       | Collection QA Reports                   |       | NM Monitoring Form                                               |
|            |       | Collection Agency Audit  Packages       |       | Collection Agency Account  Audit                                 |
|            |       |                                    |       | e.g. Attorney Placement  Summary (Strong Law Firm)               |
|            |       | Collection Bureau Disputes              |       | Report Card Information;  Summary of Responses                   |
|            |       | Calling Strategies                      |       | Billing Calendar - Dialer  Work Schedule                         |
|            |       | Block Code Report                       |       | Blocked Account Report                                           |
|            |       | Block  Code/User Code Report            |       | No applicable Report                                             |
|            |       | Debt Management Inventory Report        |       | Payment Plans                                                    |
|            |       |                                    |       | CCCS Inventory                                                   |
|            |       | Outbound/Inbound Dialer  Volume         |       | Refer to Dialer Reports                                          |
|            |       | Collection Productivity  Reports        |       | Collector Synopsis Summary  Reports (By Team)                    |
|            |       |                                    |       |                                                             |
| **Credit**      |       | Override Report                         |       | Credit Application  Processing System CAPS Listing               |
|            |       | Credit Line Increases                   |       | New Accounts With  Guidelines Exceeding $                        |
|            |       |                                    |       | Credit Limit Change Report                                       |
|            |       | Forced Authorization  Report            |       | Daily Approval Override  Code Usage - Manager Overrides          |
|            |       |                                    |       | Daily Approval Override  Code Usage - Credit Center Overrides    |
|            |       |                                    |       | Authorization Production  By Operator ID                         |
|            |       |                                    |       | Auto & Manual Decline  Transactions                          |
|            |       | Reinstatement Report                    |       | No applicable Report                                             |
|            |       | Application Decision  Timing            |       | No applicable Report                                             |
|            |       | Adverse Action Timing                   |       | Adverse Action Letter  Generation                                |
|            |       | Decline Reason Timing                   |       | Adverse Action Letter  Generation                                |
|            |       |                                    |       |                                                             |
| **Fraud**       |       | New Fraud Claims Report                 |       | CAPS - Real-Time Fraud  Detection Payment Report Model           |
|            |       |                                    |       | Pending Fraud Write-Off                                          |
|            |       | Fraud By Name Plate Report              |       | Fraud Expense Forecast                                           |
|            |       |                                    |       | Fraud Expense By Location                                        |
|            |       | Fraud Block Code Vintage  Report        |       | No applicable Report                                             |
|            |       | Fraud By Type                           |       | Fraud Loss By Type                                               |
|            |       | Fraud Write-Off Policies                |       | No applicable Report                                             |
|            |       |  

Fraud Investigation  Procedures |       | Loss Prevention Training  Program - Module 5/Fraud Investigators |
|            |       | SAR Reporting Timelines                 |       | No applicable Report                                             |

 

----

 
| **Customer Service**          |   | Credit Balance Refund Aging Report   |   | Credit Balance Report                                 |
|-------------------------------|--------|--------------------------------------|--------|-------------------------------------------------------|
|                          |   |                                 |   | Check Register                                        |
|                          |   | Dispute Aging Report                 |   | Neiman Marcus FCBA Log                                |
|                          |   |                                 |   | Service Profile By  Division                          |
| ** **                    |   |                                 |   | Fiscal 2005 YTD Totals                                |
| ** **                    |   |                                 |   | Dispute Items Report                                  |
| ** **                    |   | Lost/Stolen Account  Maintenance     |   | Accounts Transferred Today                            |
| ** **                    |   |                                 |   | Transactions On Transfers                             |
| ** **                    |   | SSCRA Reporting                      |   | No applicable Report                                  |
| ** **                    |   | Repeat Credit Bureau  Disputes       |   | No applicable Report                                  |
| ** **                    |   | QA Monitoring                        |   | Credit Services Quality  Assurance Form               |
| ** **                    |   | Key Performance Measures             |   | Service Levels - Credit  Call Center                  |
| ** **                    |   | Telephone Statistics  Summary        |   | Split/Skill Summary  Monthly Authorizations           |
| ** **                    |   |                                 |   | Split/Skill Summary  Monthly Infobot                  |
| ** **                    |   |                                 |   | Split/Skill Summary  Monthly Incircle/Gold            |
| ** **                    |   |                                 |   | Split/Skill Summary  Monthly Incircle/Platinum        |
| ** **                    |   |                                 |   | Split/Skill Summary  Monthly - NMD/NMO Referrals      |
| ** **                    |   |                                 |   | Split/Skill Summary  Monthly Customer Service Help    |
| ** **                    |   | Dispute Processing &  Procedures |   | Dispute Resolution Process                            |
| ** **                    |   |                                 |   |                                                  |
| **Compliance**                |   | Right to Financial Privacy           |   | Subpoena Log                                          |
| ** **                    |   | Compliance Training                  |   | No applicable Report                                  |
| ** **                    |   | Escalated Complaint  Reporting       |   | No applicable Report                                  |
| ** **                    |   | Cash Payment Monitoring              |   | Reporting Monies Received  on In-Store Cash Payments  |
| ** **                    |   | OFAC Exception Reporting             |   | Report Distribution Change  Request                   |
| ** **                    |   | High Risk Country  Reporting         |   | No applicable Report                                  |
| ** **                    |   | CIP Exception Reporting              |   | No applicable Report                                  |
| ** **                    |   |                                 |   |                                                  |
| **A/R System**                |   | Activity Recap Report  (R16)         |   | Activity Recap Report (R16)                           |
| ** **                    |   | Reject Re-Entry Report  (R15)        |   | Reject Re-Entry Report (R15)                          |
| ** **                    |   | Warehoused Transactions (D10)        |   | Warehoused Transactions (D10)                         |
| ** **                    |   | Blocked Account Report (O07)         |   | Blocked Account Report (O07)                          |
| ** **                    |   | Trial Balance by Account (O08)       |   | Trial Balance by Account (O08)                        |
|                          |   | Charged Off Accounts  Report (D09)   |   | Charged Off Accounts  Report (D09)                    |
|                          |   | Audit Exception Report (D15)         |   | Audit Exception Report (D15)                          |
|                          |   | Generated Transaction  Journal (D11) |   | Generated Transaction  Journal (D11)                  |
|                          |   | Daily Balancing Report  (R32)        |   | Daily Balancing Report  (R32)                         |
|                          |   | Accounts Transferred Today  (O24)    |   | Accounts Transferred Today  (O24)                     |
|                          |   |                                 |   |                                                  |
| **Risk/Portfolio Management** |   | Application Result Summary           |   | CAPS Listing                                          |
|                          |   | Key Portfolio Statistics             |   | Customer Aging Report  (CAR)                          |
|                          |   | Authorization Summary                |   | Daily Authorization Totals                            |
|                          |   |                                 |   | Rescore Summary Report                                |
|                          |   |                                 |   | Rescore With Limit  Increase/Decrease - Tier I        |
|                          |   |                                 |   | Rescore Tier II With Limit  Increase                  |
|                          |   |                                 |   | Rescore Without Limit  Increase/Decrease              |
|                          |   |                                 |   | Rescore Tier II Without  Increase By Reason Code      |
|                          |   | Charge-Off & Recovery  Trends    |   | Bad Debt Provision                                    |
|                          |   |                                 |   | Primary Collection Agency  Performance Report         |
|                          |   |                                 |   | Secondary Agency &  Bankruptcy Performance Report |

 

----

 
|   |   |                          |   | Bankruptcy Analysis                       |
|--------|--------|-------------------------------|--------|-------------------------------------------|
|   |   |                          |   | Bankruptcy Write-Off  Analysis            |
|   |   | Behavior Score Control  Chart |   | No applicable Report                      |
|   |   |                          |   | Credit Reclassification  Summary Report   |
|   |   | FICO Score Control Chart      |   | No applicable Report                      |
|   |   | Custom Score Control Chart    |   | Population Stability  Report Final Scores |
|   |   | Account Review Analysis       |   | Quest Totals                              |

 

----

 

**SCHEDULE7.1(b)**

 

**MonthlySettlement Sheet**

 

The Monthly Settlement Sheet shall set forth:

 

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

 

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

 

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

 

----

 

**SCHEDULE7.1(c)**

** **

**Yearly SettlementSheet**

 

The Yearly Settlement Sheet shall set forth:

 

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

 

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

 

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

 

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

 

(e)           Average Private Label Receivables, (ii) AverageInterest Free Receivables and (iii) the Net Yield for such Fiscal Yearcalculated on all Billed Cardholder Debt and the calculation of any amounts duepursuant to Section 4.11; and

 

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

 

----

 

**SCHEDULE7.3(a)**

** **

**PrimaryServicer Service Level Standards**

 

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

 

**A. Documentation Services**Bank will meetthe following service levels on average each month:

 

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

 

**2.**              StatementMailing Services and Credit Card Production Services paper quality for multi-colorstatements, carriers and matching window envelopes must meet minimumspecifications: Ziegler 24-pound, 8 1/2” x 11” virginwhite stock, maximum blank white perforated paper

 

**3.**              Termnotifications and privacy and other inserts included in mailings use minimumpaper specifications: 60-pound offset

 

**4.**              Statementprogramming developed must produce the following billing statementcapabilities: multi-color and multiple, selective messaging billing statementcapabilities along with an upgraded (from 3 of 9) insertion barcode. Current orupgraded (as approved by NMG) loyalty point information must also be includedon the billing statement.

 

**5.**              Statementinsert dimension specifications: Correlate with billing statement size but mustcontinue to meet single-page 1.000 ounce discounted qualification postalrate

 

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

 

**B.****Credit CardProduction Services**Bank will meet the following service levels onaverage each month:

 

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

 

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

 

----

 

1.              The percentageof time that Bank shall make its collections operations available during thefollowing times: [***]

 

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

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

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

Sunday closed

 

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

 
| · |   | Mid balances [***]          |   | every 3 days |
|--------|--------|-----------------------------|--------|--------------|
| · |   | Balances [***]              |   | every 3 days |
| · |   | Balances greater than [***] |   | every 3 days |

 

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

 

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

 

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

 

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

 

**D. Credit ProcessingServices &**CustomerService Services** Bank will meet the following service levels onaverage each month:

 

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

 

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

 

·                  [***] during the months of April throughOctober;

 

·                  [***] during the months ofNovember through February; and

 

·                  [***] during March or during a monthwhen there is a significant promotion, sale event or another special eventincluding the annual InCircle, Platinum and Gold charge card re-issuance (andthe

 

----

 

ManagementCommittee has been notified of such promotion, sale or special event).

 

If more than half of allAccounts receive a Change of Terms, then these standards will not be appliedfor the months during which the Change of Terms is becoming effective and onemonth after the Change of Terms has become effective. *

 

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

 

4.              Upon therequest of a Cardholder or upon the end of the fourth cycle for any Accountwith a Credit Balance up to [***], the percentage of Credit Balance refundsrequested verbally or systemically that will be sent out within 3 days of suchrequest or cycle end date provided that no Credit Balance refund will be sent outfor a Credit Balance under [***] [Regulatory SLA]

 

5.              Upon therequest of a Cardholder or upon the end of the fourth cycle for any Accountwith a Credit Balance up to [***], the percentage of Credit Balance refundsrequested by mail correspondence that will be sent out within 7 days of suchrequest or cycle end date provided that no Credit Balance refund will be sentout for a Credit Balance under [***] [Regulatory SLA]

 

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

 

7.              The percentageof time that Bank shall make its customer service operations available fromMonday through Friday from 8:00 a.m. CST to 7:00 p.m. CST and Saturday from9:00 a.m. CST to 1:00 p.m.: [***]

 

8.              The percentageof time that Bank shall make its authorizations and new account operationsavailable 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 to10:30 p.m. CST (and will extend these hours to accommodate the store operationswhen formal store hours are extended due to special sales events and seasonaldemands): [***]

 

**V. Systems** Bank will meetthe following service levels on average each month:

 

1.              Percentage oftime that all Internet-based system functionality provided and maintained byBank will be available to cardholders 24 hours a day, 7 days a week (other thanscheduled system maintenance not exceeding four (4) hours per month duringthe hours of 12 am and 6 am CST: [***]

 

----

*** *Denotes a Starred SLA***

 

----

 

**SCHEDULE7.3(c)**

** **

**PrimaryServicer Defaults**

 

I.                                        PrimaryServicer Default. It shall be a “Primary Servicer Default” if either of theevents set forth below shall occur and be continuing and remain unremediedprior to the expiration of the specified period:

 

(a)           Significant Failure. If Primary Servicer (i) is morethan [***] below the target for any Starred SLA in any Fiscal Month,(ii) fails to meet any individual Starred SLA in two (2) consecutiveFiscal Months or (iii) fails to meet any Starred SLA four (4) timesin any twelve (12) Fiscal Month period (including multiple breaches of the sameand individual breaches of different Starred SLAs) (each, a “SignificantFailure”).

 

(b)           Regulatory Failure. If Primary Servicer fails to meet anSLA designated as a regulatory-based SLA on Schedule 7.3(a) (a “RegulatorySLA”) and such failure results in a breach by Primary Servicer ofApplicable Law (such failure, a “Regulatory Failure”).

 

II.                                    Remedies.

 

(a)           In the event of a Significant Failure, Primary Servicershall: (A) promptly report to NMG the reasons for the Starred SLAfailure(s); (B) within thirty (30) days of such Significant Failure,propose a remediation plan for taking such action as Primary Servicer deemsnecessary to correct and prevent recurrence of such failure(s); and(C) subject to NMG’s agreement, implement the remediation plan as soon aspracticable. However, under no circumstances shall the time period betweenNMG’s agreement to the remediation plan and completion of such plan exceed two(2) months.

 

(b)           If Primary Servicer has an additional failure of any ofthe same Starred SLA(s) (“Subsequent Failure”) during the twelve(12) Fiscal Months following the occurrence of any Significant Failure, PrimaryServicer shall pay NMG Two Hundred Thousand Dollars [***], within fifteen (15)days of the end of such Fiscal Month, for each such Subsequent Failure.

 

(c)           Upon the occurrence of the second Subsequent Failure andeach additional Subsequent Failure of the same Starred SLA during the twentyfour (24) Fiscal Months following a Significant Failure or upon the occurrenceof a Regulatory Failure, Primary Servicer shall pay NMG Five Hundred ThousandDollars [***], within fifteen (15) days of the end of such Fiscal Month, per eachadditional Subsequent Failure.

 

(d)           Upon the occurrence of (i) the third and eachadditional Subsequent Failure of the same Starred SLA during the twenty four(24) Fiscal Months following a Significant Failure or (ii) a secondRegulatory Failure of the same Regulatory SLA, NMG shall, in addition topayment as provided in paragraph (c) above, have the right to terminatethe Program Agreement by providing thirty (30) days prior written notice toBank, in which event the parties shall have the rights set forth inArticle XVII; provided, however, that prior to NMG electingto terminate the Program Agreement, the Management Committee shall meet todiscuss the occurrence of the Subsequent Failure and shall determine whethersuch SLA should be modified. If the Management Committee determines that suchSLA shall be modified, then NMG shall not be entitled to terminate the ProgramAgreement as a result of the Subsequent Failure discussed at the meeting of the

 

----

 

Management Committee unless and until an additional SubsequentFailure of the same Starred SLA occurs.

 

(e)               Notwithstandingthe foregoing, in the case of any Primary Servicer Default, after theManagement Committee meeting referred to above and assuming that no SLA ismodified, in lieu of terminating the Program Agreement, NMG may elect to causethe Services subject to such Servicer Default or all of the Services beingprovided by Primary Servicer to be transferred to NMG or another partydesignated by NMG; provided, that for purposes of transferring Servicespursuant to this paragraph (n), an SLA that is both a Starred SLA and aRegulatory SLA shall be deemed to be a Regulatory SLA.

 

(f)               Nosuch servicing transfer or termination of this Agreement pursuant to paragraph (e) aboveshall be effective until either assumption by NMG of the provision of the Servicesor the appointment by NMG of a successor servicer reasonably satisfactory toBank pursuant to a servicing agreement reasonably satisfactory to Bank.Following the delivery by the applicable Party of written notice of a servicingtransfer or termination, NMG shall have reasonable access to Primary Servicer’soperations and systems to ensure continuity of business and systems required toservice the Accounts until such time as NMG assumes the provision of theServices or appoints a successor servicer reasonably satisfactory to Bank.

 

III.                                Non-StarredSLAs. For purposes of this Schedule 7.3(c), “Starred SLA” shall be deemed to includeNon-Starred SLAs in the event that there have been more than eight(8) Significant Failures in any twelve (12) month period with respect toany Non-Starred SLAs; provided, that in the event there are noSignificant Failures in the immediately following twelve (12) month period withrespect to any of the Non-Starred SLAs, then such Non-Starred SLAs shall nolonger be deemed to be Starred SLAs.

 

----

 

**SCHEDULE 7.4(b)**

 

**Bank Systems**

 

The system conversion date to the Bank PaySysenvironment is dependent on the following requirements:

 

1.               NMG is currently using PaySys Release 2.59. Bank PaySys platform musthave exact or enhanced screen and programming functionality. If newer releaseis offered, PaySys functionality in this new release must be conducive to aretail environment in all aspects related to all sub-system functionality.

 

2.               Whether Universal Agents will be GUI-based screens or mainframe (green)screens, primary ‘work’ screen must have combined authorizations and customerservice functionality to be able to decision majority of pending authorizationsand perform generalized customer service non-financial maintenance andfinancial adjustments without further screen toggling.

 

3.               All PaySys customization (*see attached customized programming and reporting list bysub-system*)**currentlyused in the NMG PaySys environment must be converted to the Bank PaySysplatform unless an enhanced product offered by Bank and mutually agreed uponcan be substituted instead.

 

4.               All credit system interfaces (*see attached batch andon-line credit system interface lists*) including POS, Sales Audit,CMOS and InCircle must continue without interruption or delayed service duringand after PaySys system conversion.

 

5.               Upgraded real-time adherence and/or call management technology thatenhances NMG environment including Witness call monitoring software or a similarproduct with comparable technology must be converted at same time (if notsooner) as PaySys system conversion.

 

6.               Updated technology associated with re-developing score models throughStrategyWare initiatives or a comparable product with similar technologyrelated to new account scorecards, restore matrixes or internal behavioralscores will be explored. This could potentially eliminate the need to convertcurrent customization from NMG PaySys platform.

 

7.               Explore and determine if other technological enhancements including frauddetection and Internet-related products can be utilized and upgradedimmediately following PaySys system conversion.

 

8.               Independent of the conversion to the Bank PaySys environment, the Partiesshall have ongoing discussions regarding potential conversion of other creditsystems used by Universal Agents that can be converted separately from thePaySys conversion. Regardless of whether other systems are converted, theParties shall discuss the impact that the Bank PaySys conversion will have onthese other systems and appropriate action shall be taken to minimize anyeffect of such conversion on these other systems. These systems include thecheck authorization system, gift card maintenance system, InCircle loyaltypoint redemption system, XNET signature slip, statement viewer and numerousother miscellaneous systems.

 

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**PaySys Release 2.59**

**Custom Functionality & Reporting****(excluding any batch or on-line interfaces andany customization for other credit systems used)**

 

NMG will review Bank’s current solution for a fit tothe NMG business need. If NMG agrees that Bank functionality fulfills the NMGrequirement, the enhancement request will be marked as “not required”. If NMGdetermines that Bank functionality does not fulfill the NMG requirement, NMGwill then decide if the function is a “must have” for conversion, or is acandidate for a post-conversion implementation. Prior to any customfunctionality or enhancement being deemed for a post-conversion implementation,NMG must be satisfied with the Bank timeline for implementation and Bank mustuse commercially reasonable efforts to implement such functionality within theproposed timeline. If Bank does not implement such functionality within theagreed-upon timeline (and allowing for a thirty (30) day grace period), suchfailure will be escalated to the Management Committee for an appropriateresolution. NMG’s prior written consent must be obtainedin order to waive the implementation of any custom functionality detailedbelow. Prior to any conversion to the Bank Systems, NMG may specify additionalcustom functionalities that are required for a PaySys conversion as long assuch functionalities are part of the NMG Systems prior to such conversion.

 

**Credit****ManagementSystem (CMS)**

 

1.              A special function within the POS System accesses the PaySys System forPOS account look-up using various search criteria (i.e. name, address, phone,social security number) and responds back with up to 4 matching account numbersfor selection.

2.              Upgraded ARNL account look-up functionality to be able to search bysocial security number and through various phonetic methods. Retrieved accountdata on page 1 also displays account status code, block codes, currentbalance and the ability to view total balance owed on a customer with multipleaccounts (revolving, signature, etc).

3.              Old 9-digit account numbers are automatically run through the Mod-10check-digit routine to define the full 12-digit account number when assessedthrough ARIQ.

4.              Enhanced the customer statement formatting product (Metavante CSF) tore-design the statement for NMG (including InCircle point information andmessages).

5.              Custom late fee calculation method to assess the fee based on apercentage of the previous statement balance. Enhanced PaySys to accommodatelate payment fees in addition to late fees with logic to only assess one feeper billing. Additionally, customers paying in full, regardless of delinquencylevel, will not be assessed a late payment fee.

6.              Added a new screen to add a plan segment to an account without need for asale (logic module 01) first.

7.              New fields calculating last year’s total sales tax and this year’s totalsales tax is displayed on each account.

8.              High payment all-time date now displayed next to high payment all-timeamount.

9.              Added new screen ACH Pay by Phone functionality to authorizedocumentation of customer bank information and ACH history in order forcustomers to perform ACH payments.

10.        Permanentlydisplay new account scorecard, new account score, credit bureau risk score (attime of opening) as well as high activity and updated credit bureau risk scoreswith dates with semi-annual portfolio reviews are done.

 

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11.        Foreignaddress logic at statement, credit card and letter correspondence time tosuppress the ‘XX’ state and ‘99999’zip code fields based on the ‘1’in the language indicator field is done. The user demo 1 field housing thecountry is displayed instead.

12.        E-mailinformation currently stored in the employer field has been expanded to 40characters. A ‘Do Not E-Mail’field is also being stored and will be sent to marketing channels. New e-mailupdate date and an e-mail share field that is also sent to marketing channels.

13.        Storenumber data contained in the employee code field automatically stops a creditcard from being issued and sends a message to the InCircle system to stopemployee point redemption. When this store number is removed from this field asan employee leaves the Company, a credit card is automatically mailed to the customer.This field is also being expanded to 3-digits.

14.        UpgradedARML25 credit classification tables to measure ‘N’class based on credit bureau risk score and remaining classes on risk score inadditional to performance ratios.

15.        Onembossing screen, updated functionality for Universal Agents to defineembossing card type (i.e. Regular, Gold, Platinum) to be mailed to the customerby the Credit Card Processing Department. New credit cards mailed out containfull customer name in mag-stripe.

16.        Zerobalance statements are not printed and sent to the customer.

17.        CRMcomplimentary gifts scanned at the POS as a transaction code are deliveredthrough the PaySys System as a ‘memo’transaction for $0 that is eventually displayed on the billing statement assuch.

18.        UniversalAgent keying and storage of GLB privacy sharing, California SB1 sharingrestriction, Do Not Mail and affiliated credit bureau sharing codes and dates.In some instances, this information is passed to external systems forappropriate compliance.

19.        Multiplenew transaction codes in 100-300 series setup for both organizations (NM andBG) with GL level setup at a store level.

20.        Specializedmessaging for sales tax and InCircle customers done upon request to eitherreplace existing mass marketing message temporarily and as an additionalmessage on the billing statement.

21.        CustomReporting

[***]

 

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[***]

 

**Credit****DecisionManagement (CDM)**

 

1.              Usage of 4 distinct Fair Isaacs (FICO) new account scorecard modelsseparated based on the applicant’s time on file with the credit bureau and netfraction revolving burden. Each new account scorecard has differentcharacteristics, point measurements and cut-off scores associated with overallrisk.

2.              Customized PaySys System to interface with the FICO Search model toretrieve a credit bureau report and accommodate cradle to grave applicationprocessing was built to stream-line application process and communicate back tothe POS or NM Direct CMOS channels.

3.              New account credit bureau reports received from TransUnion contain bothan Empirica risk score and a TransRisk New Account (TRNA) Score for thin fileapplication decisioning. If no Empirica is available, TRNA score acts asprimary score.

4.              POS Express Application input data populates PaySys screens automaticallywith name, address, phone, date of birth, driver’s license information, e-mailaddress and social security number.

5.              POS Express Application process to link POS application input to CDMcradle to grave process. Delivery of either the account number or theapplication referral number is generated at POS within a 45-second window. Onthe NM Direct side, this same process is handled within a 45-second window butthrough the CMOS channel.

6.              As ARMO7 billing records are beingupdated with last cycle billed data, APTM17 new account cycle assignment forall CDM types is automatically updated with appropriate next billing cycle tobe used.

7.              Internal fraud file utilized within the cross-checks process to referthose applicants with matching name, address, phone or social security numbercriteria.

8.              Authentication pass/fail referral housedwithin the cross-checks section will indicate to Universal Agents to proceed toTransUnion website and obtain specific applicant questions and answers related toNM On-line application submission. [June 2005]

9.              Duplicate account referral in cross-checks validates whether subscribernumber used to pull bureau report (NM or BG) already has a trade-line on thebureau for that

 

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organization. If so, the referral is created toensure this account cannot be re-used before setting up a duplicate newaccount.

10.        Dateof birth provided on the bureau report is reformatted into the MMDDYYYY formatto coincide with PaySys date of birth fields.

11.        Multiplefraud custom referrals built to measure California 3-ID checks, addressmismatches as well as bureau delivered fraud and consumer messages.

12.        Customizedage variance and 3-day retail specific inquiry counter referrals developedthrough FICO and utilized as an effective retail fraud predictor today.

13.        Signatureadverse action CDM types setup by new and existing accounts to input proposedsale date and whether the sale is store or customer initiated. If the signaturerequest is declined or the customer walks away from a “customer-initiated” saleand the proposed sale data has elapsed, an adverse action letter is sent to thecustomer.

14.        Whenboth of the bureau agencies are down, “time out waiting on bureau” applicationsstored during this downtime are not automatically being processed through whenbureaus are back up.

15.        CustomReporting

[***]

 

**Financial Authorization System (FAS)**

 

1.              Authorization credit bureau reports received from TransUnion contain bothan Empirica risk score and a Horizon bankruptcy indicator score.

2.              In-house behavioral score model developed by Experian updated monthly atbilling to recalculate customer payment and purchase behavior.

3.              A customized initial 6-digit POS referral number that can eventually leadto an authorization approval code generated in Central Credit requires forcedcompliance input at the POS. Outside of system generated approval code, a ‘dailyoverride code’ allows for approval at POS beyond the compliance input approvalcode.

4.              Return and payment transactions go through same POS to FAS (OFAA)authorization process as a sale transaction does to ensure account number isvalidated before completing credit transaction.

 

----

 

5.              Customized ‘Pay Review’ authorization referral and on-line reportingprocess for check-paying customers over-paying their last statement balance orfor newer accounts paying before being billed.

6.              Warning codes (housed on ARMB1) for Mr. and/or Mrs. Only,Credit Card Only or Check ID restrictions are prompted at the POS for sellingassociates to confirm acceptance before proceeding with the sale.

7.              Separation of ‘open-to-buy’ versus an ‘open-to-buy, credit bureau exists’referral to advise Universal Agent of when an existing credit bureau report(currently retained for 90 days) is still on file.

8.              A specialized ‘excessive amount approved’ referral to automatically referall customers who have had memo or same day transactions approved totaling over[***] for manual review.

9.              An ‘irregular bureau’ referral was developed for those bureaus thateither have no risk score, limited trade-line data or special considerations(i.e. mixed file possibility).

10.        A‘zip code check’ referral to compare the address on file to the newly pulledbureau address particularly on inactive customers is done to ensure we have thecorrect billing address.

11.        A‘time out’ referral that coincides with FICO Search automatic move to oursecondary bureau (CBI Equifax) should TransUnion be down may occur if the delayis too significant. If so, this eliminates any transactions from being “hung”and allows Central Credit to call for immediate problem resolution support.

12.        FACTAct fraud detection custom authorization referrals to trigger those customerswho are changing their billing address, then ordering a credit card (and viceversa) in the designated period of time. In addition to referring the firstpurchase after receiving the credit card, the credit card mail-out date may bedelayed intentionally until such time that the customer receives and canappropriate respond to an address change and credit card ordering confirmationletter.

13.        FACTAct fraud detection custom authorization referrals to review addressdiscrepancies (ADI) between the address on file and the address on the bureauas well as HAWK or other fraud messages on the bureau.

14.        Abilityfor Universal Agents to see dual referral reasons on all authorizationreferrals. Additionally, some referrals are combined (i.e. HAWK, ADI orHAWK/ADI referrals) to display more than two reasons when pertinent.

15.        Real-timedaily sales tracking screen to view up-to-date sales and transaction countsacross all stores. This helps in forecasting scheduling needs, particularly onsale days, for the remainder of the day.

16.        On-linetotal account relationship screen for high-balance customers being built toquickly decipher customer status and indebtedness based on pertinent balanceand payment information displayed. [June 2005]

17.        CustomReporting

[***]

 

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[***]

 

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**Rescore Custom System (RCS)**

1.               Sub-system completely customized with POS to PaySys/RCS interface so whena customer hits their account open-to-buy, a bureau is automatically pulledthrough FICO Search and the account attempts to go through rescore.

2.               Various screen parameters to fully control which accounts can go throughrescore tier I and II by block code and other factors including high paymentall-time and bureau risk score are used.

3.               Using (ARML25) credit classification score, the Empirica or Beacon riskscore and net fraction revolving burden (revolving debt ratio), 243-dimensional rescore tier I matrixes (separated first by credit classificationscore) contain new guideline assignments. Provided the rescore guideline issufficient to approve the pending sale at POS, the approval back to POS is systemicallydone and the account guideline increased. If not, POS generates a 6-digit referral number for manual handling.

4.               In most cases where rescore tier I was not sufficient or a bureau is alreadyon file for a customer (in which case they will not go through rescore tier I),rescore tier II customized tables can be utilized. First, a customizedscorecard using a point accumulated system determines which of the 5 rescoretier II tables a customer goes through (1 being the best, 5 the worst). Therescore tier II tables are 2-dimensional based on a Horizon bankruptcy scoreand the customer’s last 6-months payments. These two variables result in amultiplier (i.e. 3.5%) amount that is then used to calculate against the last6-months payments. Provided this calculation is enough the automaticallyproceed at the POS with approving the pending transaction and increasing theaccount guideline, it is done. Otherwise, POS generates a 6-digit referral numberfor manual handling.

5.               If an existing credit bureau is still on file, before proceeding withordering a new bureau report, a message asks the Universal Agent if they aresure a new bureau needs to be ordered.

6.               The ability to release a California or Texas freeze file bureau reportprovided the customer gives us their PIN number is available.

7.               Custom Reporting

[***]

 

**Account Services Management (ASM)**

1.               Customized Universal Agent screen to perform authorization referrals andmost customer service inquiries from one screen with limited, if any togglingto other screens needed. PaySys screens ASMW, ARMN, ARIH, ASSD, OFCP and OFRSuseful information are contained on this customized screen. ASMN custom screenallows for account

 

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maintenance including name or address changes,guideline or block code updates, ASM action code utilization and statementre-print ordering. Most authorization referrals are made from this screen andinclude the ability, if so desired, to notate why the decision was made and whatmanager, if any, assisted in the approval or denial. However, all customerservice maintenance or authorization decisions made on this screen areautomatically notated within ASHI with a before and after recap (i.e. blockcode changed from ‘E’ to ‘F’ or AGM approved a $15,564.48 sale on 5/11/05 at 3pm for store 1, referred for HAWK/ADI and OTB, TU score of 712, manager DCVapproved).

2.               Pending FCRA screens by state that control address change, then creditcard reorder requests within a specified period of time. A special ASM queue tomanually release credit card requests once the customer has responded to theFCRA confirmation letter was built and is used today.

3.               Custom Reporting

a.               Custom Balancing Report — Summary [NCRM5932-1]

 

**Collections Tracking System (CTA)**

1.               Replaced a PC client server RecoverMaster System and migrated thefunctionalities into CTA.

2.               GUI-based front-end interface for Avaya auto-dialer.

3.               Custom Reporting

[***]

 

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**LetterTracking System (LTS)**

1.               Modifiedbracketed key words to correctly print foreign country letters similar tobilling statements and other correspondence.

 

**Transaction Management System (TRAMS)**

1.               Modified the NM Direct/On-line interface to accept full catalogdescriptions andpurchase ordernumbers which are passed to CMS, statement history screens anddisplayed on customer billing statements.

2.               Automated $50 annual Gold fee assessment to customers with a plan segmentautomatically added.

3.               Custom Reporting

[***]

 

**Security Supervisor (SSSR)**

1.               Automatic monthly purge of any users not accessing PaySys ID for one ofthe following reasons: (a) Have not used their ID ever and the first 30days has elapsed; (b) Have not used their ID at least once in the last 90days; (c) ID has been set to ‘9’ purge.

2.               Custom Reporting

[***]

 

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**Credit Batch Interfaces**

 
| **Internal  NMG &   Vendor  Interface   Systems** | ** ** | **Credit    Application**               | ** ** | **Data  Stream**                                                                             | ** ** | **Input/Output    Feed** | ** ** | **Frequency** | ** ** | **Processing  Time-frame** |
|------------------------------------------------------------|------------|-----------------------------------------|------------|----------------------------------------------------------------------------------------------|------------|--------------------------|------------|---------------|------------|----------------------------|
| [***]                                                      |       | TRAMS (front-end transaction processor) |       | Feeds NM full-line & clearance stores  sales/returns/payment financial transactions |       | Input                    |       | Daily         |       | Nightly                    |
| [***]                                                      |       | TRAMS (front-end transaction processor) |       | Feeds BG full-line stores sales/returns/payment  financial transactions                      |       | Input                    |       | Daily         |       | Nightly                    |
| [***]                                                      |       | TRAMS (front-end transaction processor) |       | Feeds NMO (web-site) and NMD (catalog) sales/returns  financial transactions                 |       | Input                    |       | Daily         |       | Nightly                    |
| [***]                                                      |       | TRAMS (front-end transaction processor) |       | Feeds NM & BG mailed-in payments                                                    |       | Input                    |       | Mon-Fri       |       | Afternoon                  |
| [***]                                                      |       | TRAMS (front-end transaction processor) |       | Feeds NM & BG ACH payments                                                          |       | Input                    |       | Mon-Fri       |       | Morning                    |
| [***]                                                      |       | TRAMS (front-end transaction processor) |       | Feeds NM & BG ACH payments                                                          |       | Input                    |       | Mon-Fri       |       | Morning                    |
| [***]                                                      |       | TRAMS (front-end transaction processor) |       | Feeds NM & BG ACH IVR payments                                                      |       | Input                    |       | Mon-Fri       |       | Nightly                    |
| [***]                                                      |       | TRAMS (front-end transaction processor) |       | Feeds NM employee credit card payments                                                       |       | Input                    |       | Weekly        |       | Nightly                    |
| [***]                                                      |       | TRAMS (front-end transaction processor) |       | Feeds BG employee credit card payments                                                       |       | Input                    |       | Every 2 wks.  |       | Nightly                    |
| [***]                                                      |       | TRAMS (front-end transaction processor) |       | Feeds NM retired employee credit card customers  medical insurance payments.                 |       | Input                    |       | Monthly       |       | Nightly                    |
| [***]                                                      |       | TRAMS (front-end transaction processor) |       | Feeds Payments for customers requesting Incircle  ‘Gold; card status.                   |       | Input                    |       | Daily         |       | Nightly                    |
| [***]                                                      |       | TRAMS (front-end transaction processor) |       | Feeds NM & BG P&L accounts recovered  payments and non-financial txns.          |       | Input                    |       | Weekly        |       | Nightly                    |

 

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| [***]  |   | Billing          |   | Feeds Harbor with updated ACH IVR accounts billing balance and minimum payment  information.                                                                                                                               |   | Output       |   | Each billing cycle |   | Morning         |
|--------|--------|------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|--------|--------------------|--------|-----------------|
| [***]  |   | Billing          |   | Provide outside P&L collection agencies with new assigned  NM & BG P&L accounts forcollection  recovery.                                                                                                  |   | Output       |   | Each billing cycle |   | Morning         |
| [***]  |   | Customer Service |   | Feeds  Harbor with new accounts that applied-for-ACH IVR payment  processing.                                                                                                                                              |   | Output       |   | Mon-Fri            |   | Nightly         |
|   |   |             |   |                                                                                                                                                                                                                       |   |         |   |               |   |            |
| [***]  |   | Posting          |   | Sends Chase an ACH payment file forNM/BG  payments that are being posted to the customer’saccount that  require ACH clearing.Receive Chase files that  identify NM/BF accounts that were processed or are NSF status. |   | Output/Input |   | Mon-Fri            |   | Nightly/Morning |
| [***]  |   | Posting          |   | Feeds Incircle system with posted NM sales/return txns.                                                                                                                                                                    |   | Output       |   | Daily              |   | Nightly         |
| [***]  |   | Posting          |   | Feeds NM customers that reached Incircle status for new credit card  generation.                                                                                                                                           |   | Input        |   | Daily              |   | Nightly         |
| [***]  |   | A/R              |   | Feeds the EDW system with new account information and existing account  demographicchanges.                                                                                                                                |   | Output       |   | Daily              |   | Nightly         |
| [***]  |   | Posting          |   | Updates the NMG Credit customer database for accounts that opted for  the ‘Do Not Call’.                                                                                                                         |   | Input        |   | Monthly            |   | Nightly         |
| [***]  |   | Statements       |   | Provides Credit with an Incircle points file that will display a  customer’s point information on a their billing statement.                                                                                          |   | Input        |   | Daily              |   | Nightly         |

 

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| [***] |   | Statements   |   | Provides Credit with a BG Rewards file that will  display a customer’s point information on a their billing statement.                                                     |   | Input        |   | Daily       |   | Nightly |
|-------|--------|--------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|--------|-------------|--------|---------|
| [***] |   | Statements   |   | Interface with Metavante CSF product to format the  billing statement.                                                                                                          |   | Input        |   | Daily       |   | Nightly |
| [***] |   | Statements   |   | Interface with Code 1 & Mailstream for billing  statement address correction and pre-sort mailing.                                                                     |   | Input        |   | Daily       |   | Nightly |
| [***] |   | Credit Cards |   | Transmits credit card file (new accounts,  replacements,Incircle,  etc.) to produce NM & BG charge cards and mailers.                                                  |   | Output       |   | Daily       |   | Morning |
| [***] |   | A/R          |   | Sends LP an extract file of the credit active  database to identify employee accounts.                                                                                          |   | Output       |   | Weekly      |   | Nightly |
| [***] |   | A/R          |   | Provide a monthly file of all NM & BG  demographic and financial account information to the credit bureaus for  credit reporting update.                               |   | Output       |   | Monthly     |   | Nightly |
| [***] |   | A/R          |   | Create a monthly file with NM & BG  customers that’opted-out’ frommailing promotion as part of the GLB bill.                                                 |   | Output       |   | Monthly     |   | Nightly |
| [***] |   | A/R          |   | Send a file to Trans Union with NM & BG  customers for credit limit/score review and receive back a filewith credit limit,bureau &  horizonscore adjustments. |   | Output/Input |   | Semi-annual |   | Nightly |

 

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| [***] |   | A/R                 |   | Send a file to Donnelley with NM & BG accounts that require  name, address & phone verification and apply the changes received  from Donnelley to our customer database. |   | Output/Input |   | Semi- annual    |   | Nightly |
|-------|--------|---------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|--------|-----------------|--------|---------|
| [***] |   | Check Authorization |   | Provides a national negative check account file that is used-to-update the  credit check authorization system.                                                                        |   | Input        |   | Tues-Sat        |   | Nightly |
| [***] |   | Check Authorization |   | Provide eFunds Scan with an daily bad check file (adds/deletes) of  NM/BG check customers.                                                                                                 |   | Output       |   | Mon-Fri         |   | Nightly |
| [***] |   | A/R                 |   | Provides a feed of NM survey response with e-mail addresses that update  the credit database.                                                                                              |   | Input        |   | Weekly          |   | Nightly |
| [***] |   | A/R                 |   | Provides a feed of Incircle customers that registered via Web-site with  e-mail addresses.                                                                                                 |   | Input        |   | Monthly         |   | Nightly |
| [***] |   | A/R                 |   | Provides a feed of all Incircle customers that will remain or lose  their Incircle status based on the points that have been accrued this year.                                            |   |         |   | Yearly in April |   | Nightly |
| [***] |   | A/R                 |   | FTP an extract file of BG Reward account information based upon  selected account numbers provided to us by BG.                                                                            |   | Output       |   | Daily           |   | Nightly |
| [***] |   | A/R                 |   | Provide BG Marketing system with new account information and existing  account demographic changes                                                                                         |   | Output       |   | Daily           |   | Nightly |

 

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| [***] | * *   | A/R        |       | Provide InCircle with new account information and  existing account demographic changes                                                                                                                                                                                                                                           |       | Output       |       | Daily                                                            |       | Nightly                                              |
|-------|------------|------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------|------------|------------------------------------------------------------------|------------|------------------------------------------------------|
| [***] |       | A/R        |       | Receives update from InCircle when a customer  achieves one of the elite status (InCircle or Platinum), to create a new  credit card.  The embossing file is sent to InCircle  for processing.                                                                                                                                    |       | Input/Output |       | Daily                                                            |       | Nightly                                              |
| [***] |       | Collection |       | Receive a file (upload to the mainframe) from the  autodialer identifying collection accounts that were not reached (i.e. left  message to call, no contact etc.). Send a new autodailer file (download to  RT) listing new accounts that need to be contacted and reschedule existing  collection accounts that were notreached. |       | Input/Output |       | Daily                                                            |       | Nightly/Morning                                      |
| [***] |       |       |       | Sends credit sale slips scanned to be uploaded to  the mainframe.                                                                                                                                                                                                                                                                 |       | Input        |       | Daily                                                            |       | Evening                                              |
| [***] | ** ** | **A/R**    | ** ** | **Access  (read only) the Credit customer database and extrapolate specific information  for reporting purposes.**                                                                                                                                                                                                                | ** ** | **Output**   | ** ** | **System  specific (i.e. daily, weekly, monthly or on request)** | ** ** | **Varies  (i.e. morning,********evening, weekends)** |

 

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**Credit Online Interfaces**

 
| **Internal NMG  Interface   Systems**                            | ** ** | **Credit   Application** | ** ** | **Data Stream**                                                                                                   | ** ** | **External Interface********Systems**                                                                                                                                   | ** ** | **Output   Response**                                                  | ** ** | **Response  Time** | ** ** | **Frequency** | ** ** | **Processing********Time-frame **** |
|------------------------------------------------------------------|------------|--------------------------|------------|-------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------|------------|--------------------|------------|---------------|------------|-------------------------------------|
| POS Store System - POS Express (new apps)                        |       | New Application          |       | Receives transaction from the POS store register  to process a new application credit card request.               |       | Fair Isaac - formats a credit bureau inquiry,  sends the data and formats the creditbureau reporting response for evaluation and new application decision  processing.  |       | Reply back to the POS register with an approval or  referral response. |       | [***]  seconds     |       | Mon-Sat Sun   |       | 7 AM - 11 PM 10 AM - 11 PM          |
|                                                             |       |                     |       |                                                                                                              |       |                                                                                                                                                                    |       |                                                                   |       |               |       |          |       |                                |
| NMD - (new apps)                                                 |       | New Application          |       | Receives transaction from the NMDcatalog division to process a new application creditcard request.                |       | Fair Isaac - formats a credit bureau inquiry,  sends the data and formats the creditbureau reporting response for evaluation and new application decision  processing.  |       | Reply back to NMD with an approval orreferral response.                |       | [***]  seconds     |       | Mon-Sat Sun   |       | 7 AM - 11 PM 10 AM - 11 PM          |
|                                                             |       |                     |       |                                                                                                              |       |                                                                                                                                                                    |       |                                                                   |       |               |       |          |       |                                |
| NMO Web Acct Applications - [***] (new apps) -  (In development) |       | New Application          |       | Receives transaction from Web server to process new acct applications                                             |       | Fair Isaac - formats a credit bureau inquiry, sends the data and  formats the creditbureau reporting response  for evaluation and new application decision  processing. |       | Reply back to the Web server with an approval or referral response.    |       | [***]  seconds     |       | Mon-Sat Sun   |       | 7 AM - 11 PM 10 AM - 11 PM          |
|                                                             |       |                     |       |                                                                                                              |       |                                                                                                                                                                    |       |                                                                   |       |               |       |          |       |                                |
| POS Store System - POS Express (account look- up)                |       | CMS                      |       | Receives transaction from the POS store register  to process either a name, address, phone or SSN# accountlookup. |       | None                                                                                                                                                                    |       | Reply back to the POS register with account number  or not found.      |       | [***]  seconds     |       | Mon-Sat Sun   |       | 7 AM - 11 PM 10 AM - 11 PM          |

 

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| POS StoreSystem - Sales Authorization (NM & BGcharge cards) |   | Authorization |   | Receives transaction from the POS store register  to process a NM or BG purchase/return transaction.                 |   | Access the Fair Isaac system for creditreporting information if the account exceeds their OTB or had no  activity over 12 months for evaluation andestablishing new credit limit. |   | Reply back to the POS register with an approval,referral or decline response. |   | [***]  |   | Mon-Sat Sun |   | 7 AM - 11 PM 10 AM - 11 PM |
|----------------------------------------------------------------------|--------|---------------|--------|----------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|--------|--------|--------|-------------|--------|----------------------------|
|                                                                 |   |          |   |                                                                                                                 |   |                                                                                                                                                                              |   |                                                                          |   |   |   |        |   |                       |
| POS StoreSystem - Sales Authorization(3rd party charge cards)        |   | Authorization |   | Receives transaction from the POS store register  to process 3rd party charge cards for purchase/return transaction. |   | Format the transaction and send the authorization  request to AMEX or FNBO (Visa, MC, etc.) for processing.                                                                       |   | Reply back to the POS register with an approval,referral or decline response. |   | [***]  |   | Mon-Sat Sun |   | 7 AM - 11 PM 10 AM - 11 PM |
|                                                                 |   |          |   |                                                                                                                 |   |                                                                                                                                                                              |   |                                                                          |   |   |   |        |   |                       |
| NMD - Sales Authorization (NM & BG charge  cards)           |   | Authorization |   | Receives batched transactions on anhourly basis from NMD to processpurchase/return transaction.                      |   | Access the Fair Isaac system for creditreporting information if the account exceeds their OTB or had no  activity over 12 months for evaluation andestablishing new credit limit. |   | Reply back toNMD with an approvals, referrals or declineresponse.             |   | [***]  |   | Mon-Sat Sun |   | 7 AM - 11 PM 10 AM - 11 PM |
|                                                                 |   |          |   |                                                                                                                 |   |                                                                                                                                                                              |   |                                                                          |   |   |   |        |   |                       |
| [***]                                                                |   | [***]         |   | [***]                                                                                                                |   | [***]                                                                                                                                                                             |   | [***]                                                                         |   | [***]  |   | [***]       |   | [***]                      |

 

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| NM Sales Check Recon               |   | Customer Service       |   | Access the NM Sales Check Recon system to look up a customer’s credit  sales slip.                                 |   |   |   |                                                                               |   | < [***] seconds |   | Mon-Sat Sun |   | 7 AM - 11 PM 10 AM - 11 PM         |
|------------------------------------|--------|------------------------|--------|-------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|------------------------------------------------------------------------------------|--------|--------------------|--------|-------------|--------|------------------------------------|
|                               |   |                   |   |                                                                                                                    |   |   |   |                                                                               |   |               |   |        |   |                               |
| System Authorization [***]         |   | In-house Credit System |   | Create a daily system authorization override code.                                                                      |   |   |   | Download the systemauthorization [***] code to each  POS store system RS/6000 box. |   |               |   | Mon-Sat Sun |   | 7 AM - 11 PM 10 AM - 11 PM Nightly |
|                               |   |                   |   |                                                                                                                    |   |   |   |                                                                               |   |               |   |        |   |                               |
| Systemware - Xnet Access           |   |                   |   | Access Systemware using Xnet to view NM & BG customer  statements on-line (9 months) and reprint if necessary. |   |   |   | Statement view.                                                                    |   | < [***] seconds |   | Mon-Sat Sun |   | 7 AM - 11 PM 10 AM - 11 PM Nightly |
|                               |   |                   |   |                                                                                                                    |   |   |   |                                                                               |   |               |   |        |   |                               |
| Systemware - Xnet Access           |   |                   |   | Access Systemware using Xnet to view NM & BG customer’s credit  signature sale slip.                      |   |   |   | Credit signature sales slip view.                                                  |   | < [***] seconds |   | Mon-Sat Sun |   | 7 AM - 11 PM 10 AM - 11 PM Nightly |
|                               |   |                   |   |                                                                                                                    |   |   |   |                                                                               |   |               |   |        |   |                               |
| Systemware - Xnet Access           |   |                   |   | Access Systemware using Xnet to view NM & BG customer POS  journal tape roll.                                  |   |   |   | POS journal tape roll view.                                                        |   | < [***] seconds |   | Mon-Sat Sun |   | 7 AM - 11 PM 10 AM - 11 PM Nightly |
|                               |   |                   |   |                                                                                                                    |   |   |   |                                                                               |   |               |   |        |   |                               |
| Foreign Account new app validation |   | In-house Credit System |   | Receive from the customer a 3rd party credit card and [***]                                                             |   | [***]  |   | [***]                                                                              |   | < [***] seconds |   | Mon-Sat Sun |   | 7 AM - 11 PM 10 AM - 11 PM Nightly |
|                               |   |                   |   |                                                                                                                    |   |   |   |                                                                               |   |               |   |        |   |                               |
| Gift Card                          |   |                   |   | Access the system to perform Gift Card maintenance.                                                                     |   |   |   |                                                                               |   | < [***] seconds |   | Mon-Sat Sun |   | 7 AM - 11 PM 10 AM - 11 PM Nightly |

 

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| Incircle                          |   |             |   | Access the Credit database to identify any  Incircle delinquent accounts and lookup name and address information.               |   |   |   |                                                            |   | < [***] seconds |   | Mon-Sat Sun |   | 7 AM - 11 PM 10 AM - 11 PM |
|-----------------------------------|--------|------------------|--------|---------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|-----------------------------------------------------------------|--------|--------------------|--------|-------------|--------|----------------------------|
|                              |   |             |   |                                                                                                                            |   |   |   |                                                            |   |               |   |        |   |                       |
| Intervoice (IVR) customer inquiry |   |             |   | Access the Credit database to inquiry on the  customer’s balance, purchase and payment activity and gift card information. |   |   |   | Send response back to the IVR based on the IVR  option request. |   | < [***] seconds |   | Mon-Sat Sun |   | 7 AM - 11 PM 10 AM - 11 PM |
|                              |   |             |   |                                                                                                                            |   |   |   |                                                            |   |               |   |        |   |                       |
| BGMS Sales Check Recon            |   | Customer Service |   | Access the BG Sales Check Recon system to look up  a customer’s credit sales slip.                                         |   |   |   |                                                            |   | < [***] seconds |   | Mon-Sat Sun |   | 7 AM - 11 PM 10 AM - 11 PM |

 

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

 

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**SCHEDULE 7.6**

 

**Customer Management Systems**

 
| · | Mass  Personalization              |
|--------|------------------------------------|
| · | Empowering  the Sales Associate    |
| · | Turbo  Charging the Segment of One |

 

PHASEI — As long as the NMG resources required for the change of terms areavailable, the Documentation Services and then the Credit Card ProductionServices operations, including statement mailing, payment processing and creditcard processing activities, may, at NMG’s option, be converted to Bank systems.The delivery date depends on the complexity of the interfaces and would beagreed upon by Bank and NMG. As a statement processing enhancement, HSBC wouldprovide “Mass Personalization” via color/graphical statement marketingcapabilities driven by NMG’s current segmentation.

 

PHASEII — Portfolio (PaySys) Conversion delivery date to be determined andagreed upon by HSBC and NMG. Delivery date is contingent upon completing allbatch and on-line interfaces, customization enhancements and satisfaction ofthe other requirements of Section 7.4.

 

PHASEIII — Subsequent to the systems and portfolio conversion, in the eventthat NMG determines that any functionality set forth below would be (i) beneficial,(ii) feasible based on system requirements and (iii) able tointerface to other affected systems as of the implementation date, Bank shallimplement such functionality. Either Bank or NMG may propose other enhancementsor modifications than those listed below (excluding any enhancement ormodification set forth on a different Schedule) and the Parties may mutuallyagree to replace any of the functionalities listed below with such othermodifications or enhancements. Bank and NMG shall agree on the delivery date ofany functionality item, including any agreed upon enhancement or modificationnot listed below, which delivery date will be dependent on, among otherconsiderations, the complexity of the interfaces and functionality.

 

·“Empowering theSales Associate”

·     Ability to select standardor personalized statement marketing/messages from the POS

·     Ability to select standardor personalized letters, postcards, and eMail from the POS.

·     Ability to select standardor personalized eCare marketing/messages from the POS

 

·“Multi-ChannelMass Personalization” using Brookline’s current segmentation characteristics.

·     Centralized ability todrive standard letters, postcards, and eMail. (may be additional cost)

·    Centralizedability to drive standard eCare marketing/messages.

 

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·    Centralized ability to drivestandard Customer Service marketing/messages.

 

·InternetCapabilities and Various Scoring, Fraud or Other Enhancements

·    Refer to Schedules 4.8(b) and7.4(b) for all functionalities

 

· “Turbo Chargingthe Segment of One”.

·    Ability tocreate individual customer profiles based upon number and value of purchases,product type, department, manufacturer, etc.

·    Ability to drive the “Empoweringof the Sales Associate” based on the above profiles.

·    Ability to drive the “Multi-ChannelMass Personalization based on the above profiles.

 

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**SCHEDULE 9.1(a)(i)**

 

**Daily NMG Compensation**

 

Bankshall pay to NMG an amount equal to the aggregate for all Private LabelAccounts and Non-Card Payment Plans of the following:

 

Foreach such Private Label Account or Non-Card Payment Plan, the product of (A) thesum of (x) the Program Fee Percentage applicable to such Account and (y) theServicing Fee Percentage and (B) Net Credit Sales under such Accountreflected in all NMG Charge Transaction Data required to be paid for by Bank onsuch Business Day pursuant to Section 8.4.

 

Determinationof Program Fee Percentage

 

The“Program Fee Percentage” with respect to each Account means [***]. The ProgramFee Percentage applicable to an Account shall be increased on the effectivedate of any of the following change in terms applicable to such Account to [***]plus the amount set forth in the column designated “Program Fee Increase Amount”below and shall remain at such increased percentage until further changed asset forth below:

 

[***]

 

----

 

TheProgram Fee Percentage shall be increased for changes in APR and fee termschanges on a cumulative basis. For example, if (i) an APR on an Account ischanged to a variable rate based on the Prime Rate plus a [***] margin and (ii) thelate fee on such Account is changed so that it is assessed within 5 days afterthe end of the applicable late period, then the Program Fee Percentage withrespect to such Account would be [***]. With respect to any Fixed Rate optionset forth above, if the one month LIBOR rate increases beyond [***], theParties will negotiate in good faith to adjust the Program Fee Percentage.

 

“PrimeRate” means the “Prime Rate” as such rate is reported in the Consumer Ratescolumn of The Wall Street Journal or as determined in such other mutuallyacceptable manner as the parties agree if The Wall Street Journal is no longerreporting such rate.

 

Inthe event that all of the Services set forth below are transferred to Bank andthe Servicing Agreement is terminated, the Program Fee Percentage applicable toall Accounts shall be increased by [***].

 

Determinationof Servicing Fee Percentage

 

The“Servicing Fee Percentage” means [***]. The Servicing Fee Percentage applicableto all Accounts shall be decreased on the date that Bank begins providing thefollowing Services to the Program:

 

[***]

 

During the Term, whileNMG is providing the Services set forth above, a portion of some of theServices may be subject to sales and use tax in Texas. Refer to Section 19.6for treatment of sales and use tax on these Services.

 

----

 

**SCHEDULE 9.1(a)(ii)**

 

**Monthly NMG Compensation**

 

(a)           Marketing Reimbursement. Theaggregate of all Joint Marketing Commitment amounts spent by the NMG Companiesin the prior Fiscal Month.

 

(b)           In-Store Payment Reimbursement.An amount equal to [***] (which amount shall increase by CPI on eachanniversary of the Effective Date, with the increased amount remaining ineffect until the following anniversary) per In-Store Payment received by any ofthe NMG Companies in the prior Fiscal Month.

 

----

 

**SCHEDULE 16.2(c)**

 

Ifthis Agreement is terminated pursuant to Section 16.2(c) prior to theend of the Initial Term, NMG shall pay Bank the sum of (i) the NMGMarketing Commitment for the Fiscal Year prior to such termination (or the NMGMarketing Commitment for the first Fiscal Year if this Agreement is terminatedprior to the end of the first full Fiscal Year of the term), (ii) theJoint Marketing Commitment for the Fiscal Year prior to such termination (orthe Joint Marketing Commitment for the first Fiscal Year if this Agreement isterminated prior to the end of the first full Fiscal Year of the term), and (iii) thefollowing amount:

 
| **Date of Termination**                                                                                             | ** ** | **Amount** | ** ** |
|---------------------------------------------------------------------------------------------------------------------|------------|------------|------------|
| Prior to the first anniversary of the Effective  Date:                                                              |       | $          | [***]      |   |
| On or after the first anniversary of the Effective  Date and prior to the second anniversary of the Effective Date: |       | $          | [***]      |   |
| On or after the second anniversary of the  Effective Date and prior to the third anniversary of the Effective Date: |       | $          | [***]      |   |
| On or after the third anniversary of the Effective  Date and prior to the fourth anniversary of the Effective Date: |       | $          | [***]      |   |
| On or after the fourth anniversary of the  Effective Date and prior to the fifth anniversary of the Effective Date: |       | $          | [***]      |   |

 

4

----

 

**SCHEDULE 16.3(b)**

 

Bankmay terminate this Agreement in accordance with Section 16.3(b), if NMGhas not maintained on average during such Fiscal Year full-line, retail storesquare footage of at least 4,250,00 square feet.

 

Thefollowing stores were included in the calculation of square footage:

 

Dallas,Texas (Downtown)

Dallas,Texas (North Park)

Houston,Texas (Galleria)

BalHarbour Florida

Atlanta,Georgia

St.Louis, Missouri

Northbrook,Illinois

FortWorth, Texas

Washington,D.C.

NewportBeach, California

BeverlyHills, California

Westchester,New York

LasVegas, Nevada

OakBrook, Illinois

SanDiego, California

FortLauderdale, Florida

SanFrancisco, California

Chicago,Illinois (Michigan Avenue)

Boston,Massachusetts

PaloAlto, California

McLean,Virginia

Denver,Colorado

Minneapolis,Minnesota

Scottsdale,Arizona

Troy,Michigan

ShortHills, New Jersey

Kingof Prussia, Pennsylvania

Paramus,New Jersey

Honolulu,Hawaii

PalmBeach, Florida

Plano,Texas (Willow Bend)

Tampa,Florida

CoralGables, Florida

Orlando,Florida

BergdorfGoodman, New York City (Women’s Store)

BergdorfGoodman, New York City (Men’s Store)

 

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