**Exhibit10.34**

 

Confidential TreatmentRequested.

 

Certain material (indicated byasterisks) has been omitted from this document and filed separately with theSecurities and Exchange Commission pursuant to a request for confidentialtreatment.

 

**AMENDED AND RESTATED CREDIT CARDPROGRAM AGREEMENT**

 

**by and among**

 

**THE NEIMAN MARCUS GROUP, INC.**

 

**BERGDORF GOODMAN, INC.**

 

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

 

**and**

 

**HSBC CARD SERVICES INC.**

 

**Dated as of September ****23****rd****, 2010**

 

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**Table of Contents**

 
| ** **                                              | ** ** | **Page**                                                                           |
|---------------------------------------------------------|------------|------------------------------------------------------------------------------------|
|                                                    |       |                                                                               |   |
| ARTICLE I  DEFINITIONS                             | 1          |
|                                                    | 1.1        | Generally                                                                          | 1 |
|                                                    | 1.2        | Miscellaneous                                                                      | 27 |
|                                                    |       |                                                                               |   |
| ARTICLE II  ESTABLISHMENT OF THE PROGRAM           | 28         |
|                                                    | 2.1        | Credit Program                                                                     | 28 |
|                                                    | 2.2        | Exclusivity                                                                        | 28 |
|                                                    |       |                                                                               |   |
| ARTICLE III  PROGRAM MANAGEMENT AND ADMINISTRATION | 32         |
|                                                    | 3.1        | Program  Objectives                                                                | 32 |
|                                                    | 3.2        | Management  Committee                                                              | 32 |
|                                                    | 3.3        | Program  Relationship Managers; Program Team                                       | 39 |
|                                                    |       |                                                                               |   |
| ARTICLE IV  PROGRAM OPERATIONS                     | 40         |
|                                                    | 4.1        | Operation of the  Program                                                          | 40 |
|                                                    | 4.2        | Certain  Responsibilities of the NMG Companies                                     | 40 |
|                                                    | 4.3        | Certain  Responsibilities of Bank                                                  | 41 |
|                                                    | 4.4        | Ownership of  Accounts; Account Documentation                                      | 42 |
|                                                    | 4.5        | Branding of  Accounts/Credit Cards/Cardholder Documentation/Solicitation Materials | 44 |
|                                                    | 4.6        | Underwriting and  Risk Management                                                  | 44 |
|                                                    | 4.7        | Cardholder Terms                                                                   | 52 |
|                                                    | 4.8        | Internet Services                                                                  | 54 |
|                                                    | 4.9        | Sales Taxes                                                                        | 55 |
|                                                    | 4.10       | Participation in  Reversals                                                        | 56 |
|                                                    | 4.11       | Interest Free  Receivables                                                         | 56 |
|                                                    |       |                                                                               |   |
| ARTICLE V  MARKETING                               | 56         |
|                                                    | 5.1        | Promotion of  Program                                                              | 56 |
|                                                    | 5.2        | Marketing  Commitment                                                              | 57 |
|                                                    | 5.3        | Communications  with Cardholders                                                   | 57 |
|                                                    | 5.4        | Additional  Marketing Support                                                      | 58 |
|                                                    | 5.5        | Approved  Ancillary Products                                                       | 59 |
|                                                    | 5.6        | Marketing Plan                                                                     | 59 |
|                                                    |       |                                                                               |   |
| ARTICLE VI  CARDHOLDER INFORMATION                 | 61         |
|                                                    | 6.1        | Customer  Information                                                              | 61 |
|                                                    | 6.2        | Cardholder Data                                                                    | 62 |
|                                                    | 6.3        | NMG Shopper Data;  NMG Prospect Data                                               | 66 |
|                                                    |       |                                                                               |   |
| ARTICLE VII  OPERATING STANDARDS                   | 68         |
|                                                    | 7.1        | Reports                                                                            | 68 |
|                                                    | 7.2        | Servicing                                                                          | 69 |
|                                                    | 7.3        | Service Level  Standards                                                           | 70 |

 

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|                                                       | 7.4    | Credit Systems                                                | 71     |
|------------------------------------------------------------|--------|---------------------------------------------------------------|--------|
|                                                       | 7.5    | Systems  Interface; Technical Support                         | 72     |
|                                                       |   |                                                          |   |
| ARTICLE VIII  MERCHANT SERVICES                       | 72     |
|                                                       | 8.1    | Transmittal and  Authorization of NMG Charge Transaction Data | 72     |
|                                                       | 8.2    | POS Terminals                                                 | 73     |
|                                                       | 8.3    | In-Store Payments                                             | 73     |
|                                                       | 8.4    | Settlement  Procedures                                        | 73     |
|                                                       | 8.5    | Bank’s Right to  Charge Back                             | 74     |
|                                                       | 8.6    | Exercise of  Chargeback                                       | 75     |
|                                                       | 8.7    | No Merchant  Acquirer/Processor Fees                          | 75     |
|                                                       |   |                                                          |   |
| ARTICLE IX  PROGRAM ECONOMICS                         | 76     |
|                                                       | 9.1    | NMG Compensation                                              | 76     |
|                                                       | 9.2    | Dispute  Resolution                                           | 77     |
|                                                       |   |                                                          |   |
| ARTICLE X  INTELLECTUAL PROPERTY                      | 77     |
|                                                       | 10.1   | The NMG Licensed  Marks                                       | 77     |
|                                                       | 10.2   | The Bank Licensed  Marks                                      | 79     |
|                                                       | 10.3   | Intellectual  Property                                        | 80     |
|                                                       |   |                                                          |   |
| ARTICLE XI  REPRESENTATIONS, WARRANTIES AND COVENANTS | 81     |
|                                                       | 11.1   | General  Representations and Warranties of NMG                | 81     |
|                                                       | 11.2   | General  Representations and Warranties of the Bank Companies | 83     |
|                                                       | 11.3   | No other  Representations or Warranties                       | 85     |
|                                                       | 11.4   | General Covenants  of the NMG Companies                       | 86     |
|                                                       | 11.5   | General Covenants  of the Bank Companies                      | 87     |
|                                                       |   |                                                          |   |
| ARTICLE XII  ACCESS, AUDIT AND DISPUTE RESOLUTION     | 88     |
|                                                       | 12.1   | Access Rights                                                 | 88     |
|                                                       | 12.2   | Audit Rights                                                  | 88     |
|                                                       | 12.3   | Accounting  Dispute Resolution                                | 89     |
|                                                       | 12.4   | Dispute  Resolution                                           | 90     |
|                                                       |   |                                                          |   |
| ARTICLE XIII  CONFIDENTIALITY                         | 92     |
|                                                       | 13.1   | General  Confidentiality                                      | 92     |
|                                                       | 13.2   | Use and Disclosure  of Confidential Information               | 93     |
|                                                       | 13.3   | Unauthorized Use  or Disclosure of Confidential Information   | 93     |
|                                                       | 13.4   | Return or  Destruction of Confidential Information            | 94     |
|                                                       |   |                                                          |   |
| ARTICLE XIV RETAIL PORTFOLIO ACQUISITIONS             | 94     |
|                                                       | 14.1   | Retailer that  Operates a Credit Card Business                | 94     |
|                                                       | 14.2   | Retailer that has  a Credit Card with another Issuer          | 95     |
|                                                       | 14.3   | Retailer that has  a Credit Card with Bank                    | 95     |
|                                                       | 14.4   | Co-Branded Credit  Card                                       | 95     |
|                                                       | 14.5   | Conversion of  Purchased Accounts                             | 96     |
|                                                       | 14.6   | No Other NMG  Obligations                                     | 96     |

 

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| ARTICLE XV  EVENTS OF DEFAULT; RIGHTS AND REMEDIES | 96     |
|---------------------------------------------------------|--------|
|                                                    | 15.1   | Events of Default | 96 |
|                                                    | 15.2   | Defaults by Bank | 97 |
|                                                    | 15.3   | Defaults by the  NMG Companies | 98 |
|                                                    | 15.4   | Remedies for  Events of Default | 99 |
|                                                    |   |   |   |
| ARTICLE XVI  TERM/TERMINATION                      | 99     |
|                                                    | 16.1   | Term | 99 |
|                                                    | 16.2   | Termination by  NMG Prior to the End of the Initial Term or a Renewal Term | 99 |
|                                                    | 16.3   | Termination by  Bank Prior to the End of the Initial Term or a Renewal Term | 101 |
|                                                    | 16.4   | Effective Date of  Termination | 102 |
|                                                    |   |   |   |
| ARTICLE XVII  EFFECTS OF TERMINATION               | 102    |
|                                                    | 17.1   | General Effects | 102 |
|                                                    | 17.2   | The NMG  Companies’ Option to Purchase the Program Assets | 103 |
|                                                    | 17.3   | Card Acceptance  and Loyalty Program During Wind-Down | 108 |
|                                                    | 17.4   | Dedicated Program  Personnel | 108 |
|                                                    | 17.5   | Rights of Bank if  Purchase Option Not Exercised | 108 |
|                                                    |   |   |   |
| ARTICLE XVIII  INDEMNIFICATION                     | 110    |
|                                                    | 18.1   | NMG  Indemnification of Bank | 110 |
|                                                    | 18.2   | Bank Companies’  Indemnification of the NMG Companies | 111 |
|                                                    | 18.3   | Procedures | 112 |
|                                                    | 18.4   | Notice and  Additional Rights and Limitations | 113 |
|                                                    |   |   |   |
| ARTICLE XIX  MISCELLANEOUS                         | 113    |
|                                                    | 19.1   | Precautionary  Security Interest | 113 |
|                                                    | 19.2   | Securitization,  Participation or Pledge of Cardholder Indebtedness | 114 |
|                                                    | 19.3   | Assignment | 114 |
|                                                    | 19.4   | Sale or Transfer  of Accounts | 114 |
|                                                    | 19.5   | Subcontracting | 115 |
|                                                    | 19.6   | Sales and Use Tax | 115 |
|                                                    | 19.7   | Amendment | 115 |
|                                                    | 19.8   | Non-Waiver | 115 |
|                                                    | 19.9   | Severability | 115 |
|                                                    | 19.10  | Waiver of Jury  Trial and Venue | 115 |
|                                                    | 19.11  | Governing Law;  Compliance with Law | 116 |
|                                                    | 19.12  | Specific  Performance | 116 |
|                                                    | 19.13  | Captions | 116 |
|                                                    | 19.14  | Notices | 116 |
|                                                    | 19.15  | Coordination of  Consents and Approvals | 117 |
|                                                    | 19.16  | Further  Assurances | 117 |
|                                                    | 19.17  | No Joint Venture | 117 |
|                                                    | 19.18  | Press Releases | 117 |
|                                                    | 19.19  | No Set-Off | 118 |

 

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|                                     | 19.20  | Conflict of  Interest                                                                     | 118    |
|------------------------------------------|--------|-------------------------------------------------------------------------------------------|--------|
|                                     | 19.21  | Third Parties                                                                             | 118    |
|                                     | 19.22  | Force Majeure                                                                             | 118    |
|                                     | 19.23  | Entire Agreement                                                                          | 119    |
|                                     | 19.24  | Binding Effect                                                                            | 119    |
|                                     | 19.25  | Counterparts/Facsimiles                                                                   | 119    |
|                                     | 19.26  | Survival                                                                                  | 119    |
|                                     |   |                                                                                      |   |
| ARTICLE XX  RECOURSE CREDIT PROGRAM | 120    |
|                                     | 20.1   | Recourse Credit  Program                                                                  | 120    |
|                                     | 20.2   | NMG Obligations                                                                           | 120    |
|                                     | 20.3   | Collection of  Charged-Off Partial Recourse Accounts and Purchased Full Recourse Accounts | 120    |
|                                     | 20.4   | Performance                                                                               | 121    |
|                                     | 20.5   | Reports                                                                                   | 121    |
|                                     | 20.6   | Termination                                                                               | 121    |
|                                     | 20.7   | Portfolio Cap                                                                             | 121    |
|                                     | 20.8   | Removals from  Recourse Portfolio                                                         | 121    |
|                                     | 20.9   | Annual Review                                                                             | 121    |

 

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**AMENDED AND RESTATED**

 

**CREDIT CARD PROGRAM AGREEMENT**

 

This Amended and RestatedCredit Card Program Agreement is made as of the 23rd day of September,2010, by and among The Neiman Marcus Group, Inc., a Delaware corporation (“NMG”),Bergdorf Goodman, Inc., a New York corporation (“BG, and togetherwith NMG, the “NMG Companies”), HSBC Bank Nevada, N.A., a nationalcredit card bank (“Bank”), and HSBC Card Services Inc. (formerly mergedwith HSBC Private Label Corporation, which was formerly known as HouseholdCorporation), a Delaware corporation (“Primary Servicer”).

 

WITNESSETH:

 

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

 

WHEREAS, the Parties are party to aCredit Card Program Agreement, dated as of June 8, 2005 (the “OriginalAgreement”), pursuant to which the Parties established a program pursuantto which Bank issues NMG Credit Cards (as hereinafter defined) and Non-CardPayment Plans (as hereinafter defined) to be serviced, marketed and promoted inaccordance with the terms thereof;

 

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

 

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

 

**ARTICLE I**

 

**DEFINITIONS**

 

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

 

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

 

“ABA Delinquency ForecastCondition” means:

 

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

 

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

 

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

 

“Account” means any PrivateLabel Account or Non-Card Payment Plan account under which a purchasetransaction may be or has been made by or to a Person (or any Person authorizedby such Person) pursuant to a Cardholder Agreement established pursuant to theterms of this Agreement.

 

“Account Documentation”means, with respect to an Account, any and all documentation relating to thatAccount, including Cardholder Documentation, checks or other forms of paymentwith respect to an Account, notices to Cardholders, adverse action notices,change of terms notices, other notices, correspondence, memoranda, documents,stubs, instruments, certificates, agreements, magnetic tapes, disks, hard copyformats or other computer-readable data transmissions, any microfilm,electronic or other copy of any of the foregoing, and any other written, electronicor other records or materials of whatever form or nature, including tangibleand intangible information, arising from or relating or pertaining to any ofthe 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.

 

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

 

“Accountants” has the meaningset forth in Section 12.3 hereof.

 

“Active Account” means forany period, an Account with a non-zero account balance or other financialactivity during such period.

 

“Affiliate” means, withrespect to any Person, each Person that controls, is controlled by, or is undercommon control with, such Person.  Forpurposes of this definition, “control” of a Person means the possession,directly or indirectly, of the power to direct or cause the direction of itsmanagement or policies, whether through the ownership of voting securities, bycontract or otherwise.

 

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“Agreement” means thisProgram Agreement, together with all of its schedules and exhibits, asmodified, altered, supplemented, amended and/or restated from time to time.

 

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

 

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

 

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

 

“Annualized” means, for anycalculation or measurement made over any period, multiplying the calculation ormeasurement by three-hundred-sixty-five (365) and dividing by the number ofdays in such period.  For example, (i) ifsuch period is the full months of March and April, then the calculation ormeasurement would be multiplied by three-hundred-sixty-five (365) and dividedby 61 (which is the equivalent of multiplying the measurement or calculation by5.984) and (ii) if such period is the full months of September 2010through December 2011, then the calculation or measurement would bemultiplied by 365 and divided by the sum of 365 and the number of days in September 2011through December 2011 (or 122) (which is the equivalent of multiplying themeasurement or calculation by 0.749).

 

“Applicable Law” means allapplicable federal, state and local laws (including common law), statutes,regulations, written regulatory guidance, orders or directives, as may beamended and in effect from time to time during the Term, including (i) theTruth in Lending Act and Regulation Z, including the Credit Card AccountabilityResponsibility and Disclosure Act of 2009 (ii) the Equal CreditOpportunity Act and Regulation B; (iii) the Fair Debt Collection PracticesAct; (iv) the Fair Credit Reporting Act; (v) the Gramm-Leach-BlileyAct; (vi) the USA PATRIOT Act; (vii) the Unfair and Deceptive TradePractices Act; and (viii) the Dodd-Frank Wall Street Reform and ConsumerProtection Act, and, in each case, any implementing regulations orinterpretations issued thereunder.

 

“Applicable Order” means, with respect to any Person, ajudgment, injunction, writ, decree or order of any Governmental Authority, ineach case legally binding on that Person or on any material amount of itsproperty.

 

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

 

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

 

“Application” means thecredit application that must be completed and submitted in order to establishan Account (including any such application submitted at the POS, by phone orvia the Internet).

 

“Approval Rate” with respectto any segment or group of Applications submitted during any particularmeasurement period pursuant to this Agreement, a percentage equivalent of afraction the numerator of which is the number of Applications in such segmentthat were approved during such measurement period and the denominator of whichare all Applications of such segment or group submitted by an Applicant duringsuch measurement period; provided, however, that (i) any Application thatwould have been declined solely due to a requirement imposed pursuant to aChange in Law enacted after the Effective Date (i.e., an Application that wouldhave been approved in absence of such Change in Law but was required to bedeclined pursuant to such Change in Law) shall be considered approved (andincluded in the numerator) for purposes of calculating the foregoing fractionand (ii) any Application that would have been approved solely due to arequirement imposed pursuant to a Change in Law enacted after the EffectiveDate (i.e., an Application that would have been declined in absence of suchChange in Law but was required to be approved pursuant to such Change in Law)shall be considered disapproved (and excluded from the numerator) for purposesof calculating the foregoing fraction.

 

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

 

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

 

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

 

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

 

“Average Interest FreeReceivables” means, for any Program Year, the average for each ProgramMonth occurring in such Program Year of the Program Month-end Billed CardholderDebt as to which no interest will accrue in accordance with the terms of creditplans in effect in connection with the Account under which such BilledCardholder Debt was incurred.

 

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“Bank” has the meaning setforth in the preamble hereof.

 

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

 

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

 

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

 

“Bank Licensed Marks” meansthe trademarks, tradenames, service marks, logos and other proprietarydesignations of Bank and/or Bank Parent listed on Schedule 1.1(b) andlicensed to the NMG Companies under Section 10.2 hereof.

 

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

 

“Bank Parent” means HSBCFinance Corporation, a Delaware corporation.

 

“Bank Systems” means Systemsowned, leased or licensed by and operated by or on behalf of Bank or any of itsAffiliates.

 

“Bankruptcy Code” means Title11 of the United States Code, as amended, or any other applicable state or federalbankruptcy, insolvency, moratorium or other similar law and all laws relatingthereto.

 

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

 

“Benchmark Population” meansall Persons who submitted an Application at a retail establishment, althoughexcluding Internet and catalog channels, owned or operated by the NMG Companiesor their Affiliates (including at a Licensee department therein) during theperiod from [***] through [***], provided, however, that for purposes ofreporting on and evaluating any proposed modification to the Risk ManagementPolicies for which the information required pursuant to Section 4.6(c) mustbe submitted prior to [***], the Benchmark Population means all such Personswho submitted such an Application through the end of the month ended prior tothe Risk Information Date.

 

“BG” has the meaning setforth in the preamble hereof.

 

“Billed Cardholder Debt”means (i) all amounts charged and owing to Bank by Cardholders that werebilled with respect to the Private Label Accounts and Non-Card Payment Plans(including principal balances from outstanding charges, charges for ApprovedAncillary Products, interest, NSF fees, late charges, pay-by-phone fees and anyother fees and charges), less (ii) the amount of any credit balances owingby Bank to such Cardholders, including in respect of any payments and anycredits associated with returns of NMG Goods and Services and other credits andadjustments, in each case, that were reflected in the Billing Statement withrespect to the Account.

 

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

 

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

 

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

 

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

 

“Cardholder” means any Personwho has been issued an NMG Credit Card or Non-Card Payment Plan (including anyguarantor of the Account related to such NMG Credit Card) and includesauthorized user(s).

 

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

 

“Cardholder Data” means allpersonally identifiable information about a Cardholder (A) received by oron 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 or Non-Card Payment Plan (includingNMG Charge Transaction Data with respect to charges on Private Label Accounts).

 

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

 

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

 

“Cardholder List” means anylist (whether in hardcopy, magnetic tape, electronic or other form) thatidentifies Cardholders, including any such listing that sets forth the names,addresses, 

 

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

 

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

 

(a)  the enactment orpromulgation of (i) a new federal, state or local statute, law orregulation, or a modification to any such statute, law or regulation, in eachcase binding on Bank or the NMG Companies, or (ii) any implementingregulations or interpretations issued under any such statute, law or regulationreferred to in clause (i) that are binding on Bank or the NMG Companies;

 

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

 

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

 

[***]

 

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“Change of Control” means,with respect to NMG or Bank, as the case may be, (the “subject Person”), (i) aPerson or group becomes the “beneficial owner” (as defined in Rules 13d-3and 13d-5 under the Securities Exchange Act of 1934 (except that a Person orgroup shall be deemed to own all securities it has the right to acquire)),directly or indirectly, of more than fifty percent (50%) of the total votingpower 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.

 

“CIL Decline” means theexistence of all of the following conditions: (i) a Change in Law (otherthan a Repeat Change in Law (as defined below)) (A) was enacted, promulgated or implemented within the most recent[***] and (B) remains in effect, (ii) the effect of applying suchChange in Law on a pro forma basis to the [***] completed months immediatelypreceding such implementation would have been to (A) decrease [***] forsuch period by more than [***] and (B) cause a [***] to have been ineffect during the duration of such period and (iii) Bank shall havedelivered a written certification with respect to the foregoing in accordancewith Section 4.6(j).  As usedherein, “Repeat Change in Law” means any Change in Law as to which thesubstantive requirements thereof applicable to Bank or the NMG Companies, asthe case may be, shall have been the subject of a prior certification pursuantto Section 4.6(j).  For example, inthe event that Bank shall have certified upon enactment of a particular statuteas to a CIL Decline, implementation of such statute or regulation implementingor interpreting the requirements of such statute would be a Repeat Change inLaw and would not be considered a Change in Law for purposes of clause (i) above.[***].

 

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

 

“Co-Branded Credit Card”means a Credit Card that bears a NMG Licensed Mark and the trademarks,tradenames, service marks, logos and other proprietary designations of AmericanExpress, Visa International Inc., Visa U.S.A., Inc. or MasterCardInternational Inc., or any other payment system that is generally acceptable tosellers of goods and services.

 

“ComparablePartner Programs” means fromtime to time other major Credit Cardprograms of Bank designated annually by the Management Committee that arecomparable to the Program in terms of program size, public profile and brandimage.  As of the date hereof, the “ComparablePartner Programs” include those listed on Schedule 1.1(c).

 

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

 

“Competitive”means (i) other than for purposes of Section 3.2(g)(iv), (ix) or4.7, with respect to any feature or aspect of the Program, that such feature oraspect is both (A) no less favorable to the NMG Companies than comparableaspects and features of the Comparable Partner Programs and (B) consistentand competitive with the comparable aspects and features of the CompetingRetail Programs (to the extent publicly known in the case of Competing RetailPrograms in which neither of the Parties or their respective Affiliates areparticipants) and (ii) for purposes of Sections 3.2(g)(iv), (ix) and4.7, (A) with respect to each Account term referenced in the definition of“Existing Terms Change” other than the Standard APR, that such term is no lessfavorable to the Cardholder (e.g. imposes no greater expense, obligation orburden on the Cardholder) than the least favorable corresponding termimplemented by any of the NMG Primary Competitors and [***].

 

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

 

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

 

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

 

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

 

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

 

“Credit Card Business” meansthe business relating to the ownership, administration and management of theAccounts and Receivables (including the extension of credit to Cardholders, theprocessing of transactions under the Accounts and the servicing of theAccounts) and includes all activities relating to the Program maintainedpursuant to this Agreement.

 

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

 

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

 

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

 

“Downgrade Event” means NMG’sCorporate Family Rating by two of the three of the Rating Agencies shall be ator below the rating designated as “Downgrade Trigger” below:

 
| Rating Agency                   |   | [***]  |
|---------------------------------|--------|--------|
|                            |   |   |
| Standard & Poor’s |   | [***]  |
|                            |   |   |
| Fitch                           |   | [***]  |
|                            |   |   |
| Moody’s                    |   | [***]  |

 

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

 

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

 

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

 

“Effective Date” means July 7,2010.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Fiscal Quarter” means eachthree (3) Fiscal Month period set forth in the calendar published by theNational Retail Federation for retailers on a Fiscal Year-reporting basis; providedthat the Fiscal Quarter in which the Effective Date occurs shall be deemed to beginon the Effective Date.

 

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

 

“Fiscal Year” means thefiscal year set forth in the calendar published by the National RetailFederation setting forth the fiscal year for retailers on a 52/53 week fiscalyear ending on the Saturday closest to July 31; provided that thefirst Fiscal Year under this Program shall be the period beginning on theEffective Date and ending on the Saturday closest to July 31, 2011.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Gross Receivables” meansamounts owing (net of credit balances) from cardholders with respect toaccounts in a Credit Card portfolio (including outstanding loans, cash advancesand other extensions of credit; billed or unbilled interest and late charges;and any other billed or unbilled fees, charges and interest assessed on suchaccounts).

 

“Gross Write Off” means, withrespect to Accounts that have been written off in a particular period inaccordance with the credit and collection policies contained in the RiskManagement Policies, the portion of the total Gross Receivables charged off asuncollectible in accordance with such credit and collection policies (and notas a result of fraud) during such period.

 

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

 

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

 

“Housing Price Forecast Condition”means:

 

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

 

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

 

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

 

“Imputed Income Model” meansa model designed to estimate income of a Person in accordance with ApplicableLaw based on certain attributes available to Bank or NMG without contactingsuch Person, such as demographic qualities and/or information in a consumer’s creditreport.

 

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

 

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

 

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

 

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

 

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

 

“Inserts” has the meaning setforth in Section 5.3(a) hereof.

 

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

 

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

 

“Interest Free Receivables”means Gross Receivables incurred pursuant to active credit plans that do notbear interest or pursuant to Accounts of Cardholders as to which Interest hasbeen permanently waived (other than Gross Receivables incurred pursuant to CCCSAccounts or 

 

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

 

“Interest Reversal Percentage”means, with respect to any Program Year, the percentage equal to (i) theaggregate amount of all finance charges that had been assessed on the Accountsand then reversed by NMG during such Program Year, divided by (ii) theaggregate amount of all finance charges assessed on the Accounts during suchProgram Year; provided, however, that, for purposes of arrivingat the foregoing percentage, the finance charges assessed and reversed on anyAccounts that have undergone any Existing Term Change or change in New AccountTerms in such Program Year shall be excluded from both the numerator anddenominator during the period of [***] after the effective date of such termschange.

 

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

 

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

 

“Internet” means the globalcommunication network that allows computers not connected by a network toconnect and exchange information and which includes but is not limited towebsites owned or operated by NMG, the NMG Companies, Bank or their respectiveAffiliates or their Licensees and websites of Persons linked or unlinked tosame.

 

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

 

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

 
| Rating Agency                   |   | [***]  |
|---------------------------------|--------|--------|
|                            |   |   |
| Standard & Poor’s |   | [***]; |
|                            |   |   |
| Fitch                           |   | [***]; |
|                            |   |   |
| Moody’s                    |   | [***]. |

 

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

 

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

 

“Knowledge” means, withrespect to any of the NMG Companies or Bank Companies, the actual knowledge ofthe executive officers of the organization who have managerial responsibilityfor the Program, after reasonable inquiry.

 

“Late Fee Reversal Percentage”means, with respect to any Program Year, the percentage equal to (i) theaggregate amount of all late fees that had been assessed on the Accounts andthen reversed by NMG or its Subsidiaries during such Program Year, divided by (ii) theaggregate

 

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amount of all late fees assessed onthe Accounts during such Program Year; provided, however, that,for purposes of arriving at the foregoing percentage, the late fees assessedand reversed on any Accounts that have undergone any Existing Term Change or changein New Account Terms in such Program Year shall be excluded from both thenumerator and denominator during the period of [***] after the effective dateof such terms change.

 

“Legal Opinion” means awritten opinion of counsel to a Party in form and substance reasonablyacceptable to the other Party and given by counsel (which, subject to theproviso below may be internal counsel) selected by the Party obtaining theopinion and reasonably acceptable to the other Party; provided that theParty receiving any such opinion may require (and it shall be deemed reasonableto so require) any opinion rendered pursuant to this Agreement to be renderedby outside counsel selected by the Party obtaining the opinion and reasonablyacceptable to the Party receiving the opinion.

 

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

 

“Liquidity Premium” means acomponent of Bank’s internal charge for cost of funds calculated in the normalcourse of business [***].

 

“Loyalty Card” means a cardissued for the Program pursuant to any Loyalty Program providing for access toan Account, including the Loyalty Cards listed in Section B of Schedule1.1(f) hereto.

 

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

 

“Management Committee” hasthe meaning set forth in Section 3.2(a) hereof.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Net Credit Sales” means, forany period, an amount equal to (A) gross credit sales on Accounts(including gift card sales, sales tax, delivery charges, Licensee sales and anyother amount included in the full amount charged by Cardholders) reflected inthe NMG Charge Transaction Data with respect to such period, minus (B) thesum of credits for returned goods and cancelled services and other credits(such as concessions, discounts and adjustments) on Accounts reflected in theNMG Charge Transaction Data with respect to such period.

 

“Net Interest Income” meansthe total dollar amount of revenue received as a result of interest assessedupon Cardholders, less any interest waivers granted.

 

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

 

“Net Yield” means the dollaramount equal to (a) the sum of assessed interest, late fees and other feesunder the Program during such Program Year, minus (b) the sum of allconcessions, reversals and write-offs of such interest, late fees and otherfees during such Program Year.

 

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

 

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

 

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

 

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

 

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

 

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

 

“New Portfolio” has themeaning set forth in Section 14.1 hereof.

 

“NMG” has the meaning setforth in the preamble hereof.

 

“NMG Channels” means (i) allretail establishments owned or operated by NMG or 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.

 

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

 

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

 

“NMG Credit Card” means aCredit Card offered or maintained pursuant to this Agreement that bears an NMGLicensed Mark and may be used solely to finance purchases of NMG Goods andServices through any NMG Channel, including the Credit Cards listed in Section Bof Schedule 1.1(g).

 

“NMG Credit Event” means theoccurrence and continuance of any of the following:  (i) the amount available for borrowingby the NMG Companies and their subsidiaries under their asset based lendingcredit facility is equal to or less than [***], (ii) a Downgrade Event or (iii) theNMG Companies shall have defaulted on the payment of principal or interest onindebtedness for borrowed money and as a result of such default indebtednessshall have become or been declared due and payable and such default remains ineffect and uncured.  Notwithstandinganything to the contrary in this definition, following the occurrence of acircumstance described in clause (i) above, the NMG Credit Event thatshall occur as a result of such event shall be deemed to continue until suchcircumstance shall have ceased to be in effect for [***] consecutive days.

 

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

 

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

 

“NMG Licensed Marks” meansthe trademarks, tradenames, service marks, logos and other proprietarydesignations of the NMG Companies listed on Schedule 1.1(h) and licensedto Bank by the NMG Companies under Section 10.1 hereof.

 

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

 

“NMG Marketing Fund” means anaccounting entry on the books of Bank representing the unused portion of theNMG Marketing Commitment, as set forth in Schedule 5.2.

 

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

 

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

 

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

 

“NMG Servicer” means NMG orsuch of its Affiliates responsible for performing the Services referred to inthe Servicing Agreement.

 

“NMG Shopper” means anyPerson who makes purchases of NMG Goods and Services or otherwise uses oraccesses NMG Channels.

 

“NMG Shopper Data” means allpersonally identifiable information regarding an NMG Shopper that is obtainedby (or on behalf of) NMG or any of its Affiliates at any time (including priorto the date hereof), including personally identifiable information obtained inconnection with such NMG Shopper making a purchase of NMG Goods and Services.

 

“NMG Systems” means Systemsowned, leased or licensed by and operated by, or on behalf of, NMG or itsAffiliates.

 

“NMG Transaction” means anypurchase, exchange or return of NMG Goods and Services by a Cardholder using anAccount.

 

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

 

*“*Non-Card Payment Plan*”* means the payment plans referred to in Section Aof Schedule 1.1(g) 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.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“POS” means point of sale.

 

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

 

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

 

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

 

“Pre-Tax Income ExcludingOperating Expense “ means with respect to any measurement period, the (A) GrossFinancing Income for such period, minus (B) Net Write-Offs for suchperiod, minus (C) Funding Costs for such period, minus (D) MarketingExpenses for 

 

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

 

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

 

“Privacy Policy” means theprivacy policy and associated disclosures to be provided by Bank to Cardholdersin connection with the Program.

 

“Private Label Accounts”means the Accounts linked to NMG Credit Cards.

 

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

 

“Profit Sharing Post MP RAM”means Risk Adjusted Margin for such measurement period, minus MerchantParticipation Yield for such measurement period minus IncrementalServicing Expenses for such measurement period.

 

“Program” means the programestablished pursuant to this Agreement.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“RAM Condition” means anytime commencing on the first date on which the Rolling 3 Month Post MP RAM forthe [***] most recently completed calendar months was less than [***] andending on the first date thereafter on which the Rolling 3 Month Post MP RAMfor the two most recently completed calendar months was [***] or greater.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Reserve Period” means theperiod commencing on the date on which NMG delivers a notice of termination toBank pursuant to Section 16.2(f)(ii)(B) and ending on the effectivedate of the termination of this Agreement; *provided, however,*thatthere shall be excluded from the Reserve Period (and the number of days in theReserve Period shall be correspondingly reduced) by the number of days duringthe period, if any, commencing on the date NMG elects to extend the periodduring which the purchase option referred to in Section 17.2 isexercisable and ending on the date on which NMG elects to purchase the ProgramAssets or such option to purchase the Program Assets expires without beingexercised.

 

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

 

“Risk Adjusted Margin” means,with respect to any segment of Accounts for any period, the Annualizedpercentage equivalent of a fraction equal to (A) (i) Gross FinancingIncome for such Accounts for such period, minus (ii) Net Write-Offs withrespect to such Accounts for such period (provided, however, that to the extentany Net Write-Offs with respect to the portion of any Recourse Account that isrecourse to NMG are subtracted pursuant to this clause (ii), then there shallbe added back and netted from such Net Write-Off amount the aggregate amount ofall payments of NMG pursuant to Article XX in respect of such Account),minus (iii) Funding Costs for such period times a fraction the numeratorof which is the Average Daily Gross Receivables in respect of such Accounts ofsuch segment during such period and the denominator of which is the AverageDaily Gross Receivables of all Accounts during such period, plus (iv) thetotal of all amounts paid by NMG pursuant to Section 9.1(c)(ii)(A),divided by (B) the Average Daily Gross Receivables in respect of suchAccounts in such segment for such period.

 

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

 

“Risk Change CompensationPercentage” means a percentage equal to the percentage of Net Credit Salesforecasted by Bank to be generated during the period commencing on theoccurrence of a Preliminary Non-Purchase Event and ending on the effective dateof termination of this Agreement pursuant to Section 16.4 hereof thatwould equal the Risk Change Compensation Amount.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Rolling 6 Month Risk AdjustedYield” means, with respect to any calendar month, the percentage equivalentof a fraction (A) the numerator of which is (i) Gross FinancingIncome for all Accounts minus Net Write-Offs for all Accounts for the period ofsix consecutive calendar months ending on and including the month immediatelypreceding such calendar month, times (ii) two, and (B) thedenominator of which is the Average Daily Gross Receivables in respect of allAccounts for the same six-month period referred to in clause (A).

 

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

 

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

 

“Sales Tax Refunds” meansrefunds, rebates, credits or deductions of sales and use tax by any taxingauthority in respect of an Account, and all allowable interest relatingthereto.

 

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

 

“Services” means the servicesrequired to be performed by NMG pursuant to the Servicing Agreement or thePrimary Servicer pursuant to Article VII hereof.

 

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

 

“SLA” means each individualperformance standard set forth on Schedule 7.3(a) and Schedule 2.04(a) ofthe Servicing Agreement.

 

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

 

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

 

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

 

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

 

“Term” means the Initial Termand each Renewal Term.

 

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

 

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

 

“Trademark Style Guide” meansany rules governing the manner of usage of trademarks, tradenames, servicemarks, logos and other proprietary designations.

 

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

 

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

 

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

 

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

 

“Unemployment Forecast Condition”means:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Write-Off Condition” meansany time commencing on the first date on which the Rolling 3 Month Write-OffRoll-Through Rate for the most recent calendar month was greater than [***] andending on the first date thereafter on which the Rolling 3 Month Write-OffRoll-Through Rate for the most recently completed calendar month was equal toor less than [***].

 

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

 

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

 

**ARTICLE II**

 

**ESTABLISHMENT OF THE PROGRAM**

 

2.1  Credit Program.  During the Term,Bank shall offer the NMG Credit Cards and the Non-Card Payment Plans.  Bank shall promptly open a new Account andissue a new NMG Credit Card and/or Non-Card Payment Plan with respect to eachApplication approved in accordance with the Risk Management Policies.  To the extent approved in accordance with theterms of this Agreement, the Program shall include and the Bank shall offersuch other Approved Ancillary Products and other payment products as shall beincorporated in the Program in the future.

 

2.2  Exclusivity.

 

(a)           General.  Except as otherwise provided in this Section 2.2(including Section 2.2(f)) and without limiting NMG’s right to arrange 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) an NMG Credit Cardor (ii) a Non-Card Payment Plan, in each case, other than through theProgram.

 

(b)           Second-LookCredit Card Program.  NotwithstandingSection 2.2(a), NMG and its Affiliates shall have the right at any timeduring the Term to establish a program (a “Second-Look Credit Card Program”)for (i) issuing Credit Cards using the NMG Licensed Marks, or (ii) openingNon-Card Payment Plans, in each case, to customers whose Applications have beendeclined by Bank; provided, however, that Bank shall have a rightof first offer to develop the Second-Look Credit Card Program as follows.  NMG shall provide notice to Bank indicatingthe intention of NMG or its applicable Affiliate(s) to establish theSecond-Look Credit Card Program.  Notlater than the [***] following receipt of the notice by Bank, Bank may make anoffer to NMG with respect to the establishment of the Second-Look Credit CardProgram, which offer shall remain open for a period of not less than[***].  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 mayelect to (A) accept the offer made by Bank, (B) establish theSecond-Look Credit Card Program directly or through any of its Affiliates, or (C) enterinto an arrangement with any third party Credit Card issuer providing for theestablishment of a Second-Look Credit Card Program to be issued by such issuer;provided that NMG may not enter into any such arrangement with any suchthird party Credit Card issuer unless the financial terms and conditionsoffered to NMG by such Credit Card issuer are substantially more favorable toNMG in the aggregate to the terms and conditions offered to NMG by Bank.  If NMG elects to establish a Second-Look CreditCard Program pursuant to clause (B) or (C) above, upon the request ofany NMG Company, Bank shall forward to the NMG Companies or a provider ofsecondary financing the Applications received by Bank with respect to suchcustomers and shall cooperate in good faith with the NMG Companies in order tofacilitate the 

 

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

 

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

 

(d)           Acceptanceof Non-NMG Credit Cards.

 

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

 

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

 

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

 

(C)                               NMG mayaccept additional Credit Cards not branded with any NMG Licensed Marks to theextent permitted pursuant to Section 2.2(d)(ii).

 

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

 

(A)                               No NMGCredit Event, Trigger Condition or CIL Decline shall have occurred and becontinuing at the time of any such expansion; and

 

(B)                               TheRolling 6 Month RAM in the month immediately preceding any such expansion is atleast [***].

 

(iii)          If(A) the NMG Companies expand acceptance of Credit Cards beyond what ispermitted in Section 2.2(d)(i) and (B) (1) the Rolling 6Month Risk Adjusted Yield for any month within the [***] month period followingsuch expansion is less than (2) [***] times the Rolling 6 Month RiskAdjusted Yield for the same calendar month during the [***] period precedingthe implementation of the expansion (the amount by which (1) is less than(2), the “Expanded Acceptance Revenue Shortfall”), then so long as noTrigger Condition, NMG Credit Event or CIL Decline shall have occurred and becontinuing, upon request of Bank delivered not more than [***] after the end ofthe month in respect of which an Expanded Acceptance Revenue Shortfall shallhave first occurred (“Bank’s Expanded Revenue Shortfall Notice”), theParties shall negotiate in good faith in an attempt to arrive at a mutuallyagreeable amendment to this Agreement designed to offset such ExpandedAcceptance Revenue Shortfall.  In theevent the Parties shall not agree upon any such amendment within [***] daysfollowing Bank’s Expanded Revenue Shortfall Notice, Bank shall be entitled toterminate this Agreement pursuant to Section 16.3(d).

 

(e)           RetailPortfolio Acquisition. Notwithstanding Section 2.2(a), Bank’s sole rights with respect toCredit Card portfolios acquired by NMG during the Term are set forth in ARTICLE XIVhereof.

 

(f)            InternetFinancing.

 

(i)            Duringthe [***] after the Effective Date, unless and until the restrictions set forthin this paragraph shall have lapsed, the NMG Companies shall not enter into anyarrangement with an unaffiliated third Person other than Bank or Bank’sAffiliates with respect to the provision of a product pursuant to which creditis extended to finance purchases of NMG Goods and Services solely over theInternet.

 

(ii)           If(A) prior to the date that is [***] after the Effective Date Bank has notdeveloped and implemented a product or other alternative solution 

 

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in compliance with the terms and provisions of thisAgreement which is designed to increase the Approval Rate for Applications madeover the Internet or (B) Bank has developed such a product or alternativeprior to such date, but the Approval Rate for Applications submitted over theInternet during the [***] ending with the [***] following implementation ofsuch product is less than [***], the restrictions set forth in clause (i) aboveshall lapse and the provisions of clause (iii) below shall apply.  If such product or alternative has beendeveloped and the Approval Rate for such Applications during theabove-referenced [***] is [***] or higher, then the restrictions set forth inclause (i) above shall continue.  Ifthe Approval Rate for such Applications for any subsequent rolling [***] isless than [***], then the restrictions set forth in clause (i) shall lapseand the provisions of clause (iii) shall apply.

 

(iii)          Inthe event that, following the date on which the restrictions set forth inclause (i) above shall have lapsed, any of the NMG Companies isconsidering entering into an arrangement with any unaffiliated Person toprovide a product pursuant to which credit is extended to finance purchases ofNMG Goods and Services solely over the Internet, NMG shall deliver writtennotice thereof not less than [***] Business Days prior to soliciting proposalsfor any such product from unaffiliated Person. Following such notice, Bank shall have the right to deliver a proposalto NMG with respect to the product NMG is soliciting proposals for or analternative to such a product that will provide similar benefits to NMG.  NMG shall consider any such proposal in goodfaith and shall not enter into any agreement with any third Person unless suchother agreement is on terms materially more favorable in the aggregate to NMGthan Bank’s proposal.  If NMG elects toreject any such proposal made by Bank it shall do so in writing stating thereasons for such rejection.  NMG shallprovide written notice to Bank not less than [***] Business Days prior toexecuting any such agreement with any such third Person and shall providewritten notice to Bank at least [***] prior to such product becomingcommercially available.  If the NMGCompanies do not enter into any such agreement with a third Person within oneyear of the initial notice to Bank pursuant to this Section 2.2(f), theNMG Companies shall once again comply with these procedures before enteringinto an agreement with respect to the provision of such a credit product.  Any Internet credit product offered by anunaffiliated Person pursuant to and as described in this Section 2.2(f) shallbe subject to the restrictions of Section 7.4(b), and shall not be (i) brandedwith any NMG Licensed Marks or (ii) used for catalog, telephone orin-store purchases.

 

(g)           OtherProducts.  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 paymentproducts.  For the avoidance of doubt,NMG and its Affiliates shall be free to do any of the following at any time:

 

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

 

(ii)           participatein rewards programs and promotions by card associations or for cards notbranded with any of the NMG Licensed Marks (e.g., American Express MembershipRewards); or

 

(iii)          offerits customers rewards or promotional programs or other value propositions,including Loyalty Programs, of any type; provided that, except to the extentapproved by a majority of the members constituting the full ManagementCommittee (including any vacancies), (A) the Program Loyalty Programsshall remain the primary Loyalty Programs for the NMG Channels and any changesto the Program Loyalty Programs shall be made in accordance with Article III,and (B) except to the extent set forth in Schedule 2.2(d), no LoyaltyProgram other than the Program Loyalty Programs shall (x) award pointsbased on the participant’s choice of tender or payment method or (y) provideawards on an annual basis upon reaching 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 NMG Shoppers;

 

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

 

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

 

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

 

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

 

3.2  Management Committee.

 

(a)           Establishmentof the Management Committee.  NMG, onbehalf of the NMG Companies, and Bank hereby establish a committee (the “ManagementCommittee”) to 

 

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oversee and review the conduct of the Program pursuant to this Agreementand to perform any other action that, pursuant to any express provision of thisAgreement, requires its action.

 

(b)           Subcommitteesof the Management Committee.  TheManagement 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)           Compositionof the Management Committee.  TheManagement 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 NMG Designees and Bank Designeeswill be designated prior to the Effective Date. Each Party shall designate its Managers to serve as one of its designeeson the Management Committee.  Each Partyshall at all times have as one of its designees the Person with overallresponsibility for the performance of the Program within his or her respectivecorporate organization, which in the case of Bank, shall be the Chief FinancialOfficer or Chief Operating Officer of the private label Credit Card business ofBank.  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 ofNMG.  Bank and NMG may each substituteits designees to the Management Committee from time to time so long as theirdesignees continue to satisfy the above requirements, provided that eachParty shall provide the other Party with as much prior notice of any suchsubstitution as is reasonably practicable under the circumstances.

 

(d)           Functionsof the Management Committee.  TheManagement Committee shall:

 

(i)                                     oversee Program marketingactivities, including review and approval of the Marketing Plan;

 

(ii)                                  review collection strategies andcollection metrics;

 

(iii)                               monitor activities of CompetingRetail 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 Affiliateof NMG or Bank, as the case may be, to perform any of the obligations to beperformed by Bank or the NMG Companies under the Program, in each case, exceptto the extent (x) subcontracted or outsourced as of the Effective Date or (y) suchsubcontracted or outsourced service would not involve direct contact betweensuch third party and any Cardholder (i.e., in person, via telephone or inwriting) it being agreed and understood that the subcontracting or outsourcingof such services (which may include print shops and mail 

 

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

 

(v)                                 evaluate and approve changes toany of the following:

 

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

 

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

 

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

 

(D)                                                                               changesto the Operating Procedures; and

 

(E)                                                                                changesto the SLAs applicable to the Program;

 

(vi)                              approve the design of CardholderDocumentation and any changes thereto;

 

(vii)                           review customer service,collections and other servicing performance and reporting aspects of theProgram against SLAs and other requirements of this Agreement;

 

(viii)                        oversee compliance with ApplicableLaw, the Risk Management Policies, Operating Procedures and other Programoperations and procedures;

 

(ix)                              carry out such other tasks as areassigned 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 fromtime to time.

 

(e)           Proceedingsof the Management Committee.

 

(i)            Meetingsand Procedural Matters.  TheManagement Committee shall meet (in person or telephonically) not lessfrequently than quarterly, provided that unless otherwise agreed by allManagement Committee members, not less than two (2) meetings per yearshall be in person.  In addition, anymember of the Management Committee may call a special meeting by delivery of atleast five (5) Business Days’ prior notice to all of the other members ofthe Management Committee, which notice shall specify the purpose for suchmeeting; provided, however, that, unless otherwise agreed inwriting by NMG (which agreement may be given or withheld in NMG’s solediscretion), (A) Bank shall not be entitled to 

 

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deliver such a notice with respect to a ManagementCommittee meeting at which a modification to the Risk Management Policies willbe considered and (B) the Management Committee shall not be required toconsider or vote upon a modification to the Risk Management Policies proposedby Bank, in either case unless the meeting at which such matter would beconsidered would be scheduled to occur on or after the Risk ImplementationDate.  Except to the extent expresslyprovided in this Agreement, the Management Committee (and any subcommitteeformed by it) shall determine the frequency, place (in the case of meetings inperson) and agenda for its meetings, the manner in which meetings shall becalled and all procedural matters relating to the conduct of meetings and theapproval of matters thereat.

 

(ii)           Actions.

 

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

 

(B)                               If amajority 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 do so), theninitially the Chief Executive Officer of HSBC Card & Retail Servicesand Senior Vice President, General Counsel and Secretary of NMG (or any othersimilarly ranking officer of Bank or NMG, as the case may be, who is not aManagement Committee member and shall have been designated in writing by NMG orBank, as applicable, to the other Party) shall in good faith attempt to resolvethe matter.  Any such resolution by suchsenior officers shall be deemed to be the action and approval of the ManagementCommittee for purposes of this Agreement. If after ten (10) Business Days, the Unapproved Matter remainsunresolved by such senior officers of NMG and Bank, the failure to agree shallconstitute a deadlock.  Notwithstandingthe foregoing provisions of this Section 3.2(e)(ii)(B), in the case theUnapproved Matter is a Bank Matter described in Section 3.2(g)(ii), (iii),(iv), (vi), (ix), (x) or (xi), the foregoing dispute resolution processshall not apply and, the initial failure of the Management Committee to agreeon such matter by majority vote shall constitute a deadlock.  In the

 

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event of a deadlock, thefinal 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.  In the event that NMG or Bank shall determineto implement a decision following a deadlock as an NMG Matter or a Bank Matter,as the case may be, such Party shall provide a written instrument on or afterthe Risk Implementation Date of such determination at least one Business Dayprior to implementing such decision.  Ifa deadlock 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)                                Exceptin the case of Bank Matters referenced in Section 3.2(g)(ii), (iii), (iv),(vi), (ix), (x) or (xi), notwithstanding anything to the contrary containedherein, Bank shall not override any vote of the NMG Designees in a way thatwould result in any aspect of the Program being more onerous or less beneficialto the Cardholders or the NMG Companies than Comparable Partner Programs unless(i) Bank’s position on the issue is required by Applicable Law and (ii) Bankadopts, and certifies to the NMG Companies that it has adopted, the same positionwith respect to each of its other Comparable Partner Programs that aresimilarly impacted by such Applicable Law or to which such Applicable Law couldsimilarly be applied.

 

(iii)          CustomerService Disputes. If at any time there shall be a material change incustomer dispute patterns or volume, (A) NMG shall call, and the Parties shallattend, one or more Management Committee meetings to consider and vote upon aplan to remediate such customer service or other disputes, (B) the Partiesshall negotiate in good faith for a period ending not less than ten (10) daysfollowing the date of such meeting, to arrive at a mutually agreeableremediation plan (or a shorter period if such a remediation plan is agreed toprior to the tenth (10th) day), and (C) in the event suchremediation plan is voted upon and approved, the Parties shall promptlyimplement such plan.  If such customerservice or other disputes remain uncured on the tenth (10th)day following the implementation of such Management Committee-approved remediationplan or such other date determined by the Management Committee as reasonablyrequired to implement such remediation plan, NMG shall call, and the Partiesshall attend, one or more Management Committee meetings to consider and voteupon an alternative plan to remediate such customer service or otherdisputes.  In the event that theManagement Committee is unable to agree to a plan to remediate such customerservice or other disputes within the 

 

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ten (10) days following any meeting called by NMGpursuant to this Section 3.2(e)(iii), it shall be considered an UnapprovedMatter.

 

(f)            NMGMatters.  In accordance with andsubject to this Section 3.2, NMG shall have the ultimate decision making authoritywith respect to any Unapproved Matters in respect of the following matters (the“NMG Matters”) and, except as required by Applicable Law or thisAgreement, any decision implemented as an NMG Matter can only be reversed ordiscontinued in NMG’s sole discretion:

 

(i)            designof the Cardholder Documentation and collateral aesthetics; provided thatchanges to the design or content of Cardholder Documentation (other thanBilling Statements) that require a material increase in production costs beyondthe per unit cost in effect as of the Effective Date (as adjusted by CPI) shallnot be adopted as an NMG Matter but shall require the approval of theManagement Committee pursuant to Section 3.2(e)(ii)(A) unless NMG agrees to paythe cost of such increase;

 

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

 

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

 

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

 

(v)           theapproval (in the sole discretion of NMG) of any new Credit Card products,including Approved Ancillary Products, Non-Card Payment Plans or other productsand services proposed to be offered to Cardholders and, in each case, theapproval of any compensation 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)          thedesign, implementation, modification or any changes to any terms of any ProgramLoyalty Program; provided that NMG shall continue to offer one or more ProgramLoyalty Programs to Cardholders throughout the Term and unless approved bymajority vote of the full Management Committee (including any vacancies), suchProgram Loyalty Programs shall be the primary Loyalty Programs for the NMGChannels;****and

 

(vii)         communicationsand/or contacts with Cardholders (other than as required to service theAccounts, comply with Applicable Law or as 

 

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otherwise provided in this Agreement), including useof telemarketing techniques by Bank.

 

(g)           BankMatters.  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”) and, except as required by Applicable Lawor this Agreement, any decision implemented as a Bank Matter can only bereversed or discontinued in Bank’s sole discretion:

 

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

 

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

 

(iii)          ifeither (A) an NMG Credit Event or a Trigger Condition has occurred and iscontinuing, then on or after the Risk Implementation Date, or (B) NMG hasdelivered a termination notice pursuant to Section 16.2(f)(ii)(B), then at anytime thereafter, any change to any Risk Management Policies relating to orgoverning existing Accounts; provided, however, that each such change in RiskManagement Policies shall be subject to the further restrictions uponimplementation of such change set forth in Sections 4.6(a), 4.6(f) and 4.6(o)(in the case of Bank Matters referred to in clause (A) above) or Sections4.6(a) and 4.6(g) (in the case of Bank Matters referred to in clause (B)above);

 

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

 

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

 

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

 

(vii)         capitalexpenditures for maintenance of, and improvements to, the Bank Systems used inconnection with the Program;

 

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

 

(ix)           ifa RAM Condition has occurred and is continuing, the implementation of ExistingTerm Changes, subject to compliance with Section 4.7(b) and provided that theAccount terms to be implemented are Competitive;

 

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

 

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

 

3.3   Program Relationship Managers; ProgramTeam.

 

(a)           TheNMG Companies and Bank shall each appoint one Program relationship manager(each, a “Manager”).  The Managersshall exercise 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 shall endeavor to provide stability andcontinuity in the Manager positions and each Party’s other Program personnel.

 

(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 shall report directly tothe Bank’s Senior Vice President-Client Development.  The Bank’s Manager’s performance-basedcompensation shall be based upon the Program Objectives and other specificannual targets and objectives set by the Management Committee, includingProgram profitability targets. The appointment of a new Manager by Bank issubject to the prior approval of NMG. With respect to future Bank Manager candidates, Bank shall seek topropose candidates with substantial Program relevant experience, includingexperience with the department store industry, comparable customer demographicsand loyalty programs.

 

(d)           Bankshall maintain a Program team having Competitive expertise and experience andmeeting the requirements and specifications set forth in Schedule 3.3.  No member of the Bank’s Program team shall bereassigned to any program operated by Bank or 

 

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any of its Affiliates pursuant to any agreement or arrangement with anyretail store competitor designated annually by the Management Committee,including those listed in Schedule 3.3(d), without the approval of NMG.

 

**ARTICLE IV**

 

**PROGRAM OPERATIONS**

 

4.1   Operation of the Program.

 

(a)           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 the ProgramObjectives.

 

(b)           Theinitial Operating Procedures applicable to various aspects of the operation ofthe Program shall be the operating procedures adopted by the Parties prior tothe Effective Date (which operating procedures are attached hereto as Schedule4.1(b)).  Changes to such OperatingProcedures shall only be made with the approval of the Management Committee; providedthat changes to the Risk Management Policies may be made in accordance withSection 4.6 and Article III.

 

(c)           Exceptas expressly provided otherwise in this Agreement, Bank shall use commerciallyreasonable efforts to ensure that the personnel and other resources (includingSystems and other technology resources) devoted by Bank to the Program shall beCompetitive.

 

4.2   Certain Responsibilities of the NMGCompanies.

 

(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)to which 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 the Effective Date;

 

(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 interest 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 the Effective Date;

 

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(iii)          asprovided in the Servicing Agreement, in its capacity as NMG Servicer, provideAccount monitoring services, including identifying delinquencies, identifying collectionefforts 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 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)         receiveand process In-Store Payments in accordance with procedures that comply withApplicable Law, subject to Section 8.3(b);

 

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

 

(ix)           continueto make available a Program Loyalty Program.

 

4.3   Certain Responsibilities 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)          provideall NMG Charge Transaction Data and Cardholder Data required for the NMGCompanies’ administration of any Loyalty Program;

 

(iv)          inaccordance with Section 7.2, prepare, process and mail Cardholder BillingStatements, Inserts, privacy policy notices, change in terms notices and othercommunications to Cardholders and perform any other Services required to beperformed pursuant to this Agreement from time to time;

 

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(v)           providetraining to NMG trainers with respect to Program operations, including trainingof POS personnel and NMG Servicer personnel in the Bank’s policies andprocedures with respect to the Program and in the use of the Bank Systemsutilized in the Program;

 

(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 the NMGCompanies, provide transaction and experience information about cardholders ofBank’s and its Affiliates’ other Credit Card programs and customers of Bank’sand its Affiliates’ other consumer loan programs and assist the NMG Companiesand their Affiliates in using such information to develop marketing plans fortheir businesses;

 

(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;

 

(viii)        processremittances from Cardholders;

 

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

 

(x)            handlerecovery****efforts in respect of Accounts.

 

4.4   Ownership of Accounts; AccountDocumentation.

 

(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 and Services inconnection with the Accounts and the Cardholder Indebtedness shall create therelationship of debtor and creditor between the relevant Cardholder and Bank,respectively.  The NMG Companiesacknowledge and agree that (i) they have no right, title or interest (exceptfor their right, title and interest in the NMG Licensed Marks and their optionto purchase the Program Assets under Section 17.2 or 17.5(a)) in or to, any ofthe Accounts or Account Documentation or any proceeds of the foregoing, and(ii) Bank extends credit directly to Cardholders.

 

(b)           Exceptas expressly provided herein, Bank shall be entitled to (i) receive allpayments made by Cardholders on Accounts and (ii) retain for its account allCardholder 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.

 

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

 

(f)            Withrespect to all Account Documentation, NMG Servicer, shall hold and retain theAccount Documentation following the Effective Date as bailee for the solebenefit of Bank.

 

(i)            Fromtime to time following the Effective Date, NMG Servicer shall deliver such AccountDocumentation as requested by Bank.  NMGServicer will use reasonable efforts to accommodate Bank’s shorter requestedtime frames, but in any event such deliveries will be made no later than thefollowing time frames: (i) for statements, fifteen (15) days; (ii) for non-cashpayment information, ten (10) days; (iii) for cash payment information, five(5) Business Days, (iv) for application information, twenty (20) days; (v) forsales slips, twenty (20) days; and (vi) for all other Account Documentation,thirty (30) days.  NMG Servicer shalleffect delivery of the requested Account Documentation at its sole cost andexpense, unless otherwise determined by the Management Committee; provided,that in connection with any litigation, all Account Documentation shall beprovided 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.  Without limiting any of their obligationsunder this Agreement, NMG agrees to maintain the Account Documentation for aperiod that complies with the document retention policy set forth in Schedule4.4(f).

 

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4.5   Branding of Accounts/CreditCards/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 the cost in effect as of theEffective Date (as adjusted by CPI), the Management Committee shall allocatethe increased costs resulting from such changes in Cardholder Documentationbetween the Parties.

 

(c)           NMGLicensed Marks shall appear prominently on the face of the NMG CreditCards.  The NMG Credit Cards shall notbear Bank’s Licensed Marks; provided, however, the Bank’s namewill appear on the back of the card in order to identify Bank as the creditprovider under the Program, together with any other disclosures required byApplicable Law.

 

4.6   Underwriting and Risk Management.

 

(a) (i) Bank shall accept or reject any Application based solely uponapplication of the then-current Risk Management Policies applicable to therelevant channel.  Upon satisfaction ofthe applicable credit criteria set forth in the Risk Management Policies, Bankshall promptly establish a Private Label Account and/or a Non-Card PaymentPlan, as applicable.

 

(ii)           Bankshall have the right, power and privilege to review periodically thecreditworthiness of Cardholders to determine the range of credit limits to bemade available to an individual Cardholder and whether or not to suspend orterminate credit privileges of such Cardholder; provided, however,[***].

 

(iii)          Forthe avoidance of doubt, Risk Management Policies with respect to periodicallyreviewing the creditworthiness of Cardholders to determine the range of creditlimits to be made available to an individual Cardholder and whether or not tosuspend or terminate credit privileges of such Cardholder may be developed at asegment and aggregate Account level using statistically valid segmentation andcredit risk management actions, and when ultimately applied shall be done so onan individual Account basis; provided, however, that, unless (A) either an NMGCredit Event or a [***] shall have occurred and shall be continuing and (B) inthe 

 

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case a [***] shall have occurred and be continuing,the [***] Negotiation Period shall have elapsed without the Parties havingexecuted and delivered amendments to this Agreement contemplated by Section4.6(o), such Risk Management Policies governing the range of credit limits tobe made available to an individual Cardholder and whether or not to suspend orterminate credit privileges of a Cardholder [***] be [***].

 

(b)           Theinitial Risk Management Policies shall be those in place immediately prior tothe Effective Date.  Each Party maypropose modifications of any aspect of the Risk Management Policies, whichmodifications shall be made only upon approval in accordance with Article III; * *provided, however,that, following delivery of all information required pursuant to Section4.6(c), any proposed modification to the Risk Management Policies that wouldnot be subject to approval as a Bank Matter may be approved by Bank’s ProgramManager and NMG’s senior credit officer provided approval of such change ismade pursuant to a written instrument signed by such senior credit officer andProgram Manager referring to the approval requirements of this Section 4.6(b)and delivered to the other Party.  Anymodification proposed by Bank must be made in accordance with the provisions ofthis Section 4.6 and accompanied by the information required pursuant toSection 4.6(c).

 

(c)           Inthe event Bank proposes to make any modifications to the Risk ManagementPolicies, then Bank shall deliver to NMG’s credit officer a report containingall of the information relating to such proposed modification referred to inclauses (i) through (vi) of this Section 4.6(c); provided, however,that, solely in the case of a proposal that cannot be implemented as a BankMatter, NMG’s senior credit officer may waive the obligation of Bank to deliverany or all of the information referred to in such clauses pursuant to a writteninstrument signed by such senior credit officer, referring to this Section 4.6(c)and delivered to Bank (it being understood that such senior credit officershall have no authority to waive any information referred to in this Section4.6(c) with respect to a proposal that can be implemented as a Bank Matter):

 

(i)            areasonable description of the proposed modification, specifying the particularchanges to be made to any provisions of the then-current Risk ManagementPolicies to be affected by such proposed modification;

 

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

 

(iii)          thecriteria for applying such modification, including the targeted populationsegment of Cardholders or Account applicants, as applicable to which suchmodification will apply;

 

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(iv)          aforecast reflecting the projected effects of the modification on each keyperformance indicator relevant to the Program and each Party including, withoutlimitation, the projected effect of such modification on open-to-buy amounts(in the case of credit line decrease strategies), authorization rates, NetCredit Sales, Post MP RAM, [***] and [***] for the aggregate period of [***] following such proposedimplementation, and in the case of a change that Bank proposes to implement asa Bank Matter (including a change that could be implemented in light of anevent that would become an NMG Credit Event if not cured by the RiskImplementation Date), and which individually or together with all previous changesto Risk Management Policies implemented as Bank Matters, is expected todecrease Net Credit Sales by more than [***] in any rolling [***] period, thechange in each of the foregoing metrics for each quarter during the [***]following the proposed implementation of such change;

 

(v)           inthe case of any proposed modification to any Risk Management Policy solelygoverning or affecting underwriting decisions with respect to Applications orthat will otherwise affect the policies or procedures for accepting,adjudicating or approving or disapproving Applications (a “New AccountPolicy”), an analysis showing (i) the impact such modification wouldhave had on the Approval Rate of the Benchmark Population assuming suchmodification had been implemented at the time of the adjudication of theApplications for such Benchmark Population (ii) to the extent reasonablypossible (and in any event if such effect was included in Bank’s analysis), theeffect on the Approval Rate of the Benchmark Population of any Change in Lawimplemented prior to or in connection with such change in New Account Policyand (iii) the difference in the calculation of the Approval Rate of theBenchmark Population between the previous and proposed New Account Policy;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(i)            Noproposed change to any Risk Management Policy with respect to or affecting anyexisting Account which is an Unapproved Matter [***] if NMG satisfies the requirements of Section 4.6(h) withrespect to the Existing Account Reserve Amount;*provided,however*, that each such proposed modification that would have been aBank Matter in absence of this Section 4.6(g)(i) shall become a BankMatter notwithstanding delivery of such termination notice and satisfaction ofsuch requirements upon the occurrence of a Preliminary Non-Purchase Event; and *provided, further,*that any such proposed change shall ceaseto be a Bank Matter in the event NMG makes a timely election to purchase theProgram Assets; and

 

(ii)           Priorto the [***] after the Risk Information Date, if NMG is in compliance with therequirements of Section 4.6(h) with respect to the New Account LossReserve Amount, [***] unless such modification satisfies theWind-Down Implementation Requirements. Following such [***], unless and until NMG shall have notified Bank thatit intends to exercise its purchase 

 

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option pursuant to Section 17.5 in respect ofthe Wind-Down Assets within the time frame required by Section 17.5(a),changes to New Account Policies shall become Bank Matters without limit; providedthat Bank may implement such Bank Matters following such [***] without anyconsideration or vote thereon by the Management Committee so long as Bank shallhave provided NMG with not less than five (5) Business Days’ prior writtennotice of such implementation (including the information with respect theretoset forth in Section 4.6(c)(i) through (v)).  In the event that NMG timely delivers noticethat it intends to exercise its purchase option pursuant to Section 17.5in respect of the Wind-Down Assets, thereafter, so long as NMG is in compliancewith the requirements of Section 4.6(h) in respect of the Wind-DownAsset Purchase Reserve Amount, Bank shall take such actions (includingmodifying New Account Policy changes made pursuant to the immediately precedingsentence (other than any such changes required to be maintained in effect byApplicable Law or safety and soundness considerations, as evidenced by a LegalOpinion)) to ensure that the New Account Policies in effect at all timessatisfy the Wind-Down Implementation Requirements.

 

(h)           Followingdelivery of a termination notice by NMG pursuant to Section 16.2(f)(ii)(B) butwithout in any way affecting Bank’s rights with respect to Bank Mattersreferred to in Section 3.2(g)(i):

 

(i)            Bankmay implement any change in Risk Management Policies with respect to oraffecting existing Accounts as a Bank Matter pursuant to Article IIIunless: (A) at the time NMG delivered such notice of termination [***], amountsotherwise due to NMG pursuant to Section 9.1(a)(i), up to a maximum amountequal to the Existing Account Reserve Amount or (B) within [***] aftersuch delivery of such notice of termination, NMG shall have delivered for thebenefit of Bank (and with Bank as payee) a letter of credit drawable by Bankupon a financial institution having an Investment Grade Credit Rating in anamount equal to the Existing Account Reserve Amount, which letter of credit maybe drawn solely upon and after a default by NMG in its payment obligation underSection 17.5(f) hereof;

 

(ii)           Notwithstandingthe provisions of Section 4.6(g), Bank may implement changes in NewAccount Policies as Bank Matters pursuant to Article III unless at thetime NMG delivers such notice of termination, NMG authorizes Bank to withholdfrom the amount otherwise due to NMG pursuant Section 9.1(a)(i), forapplication thereafter pursuant to Section 17.5(g) hereof, an amountequal to the New Account Loss Reserve Amount.

 

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(iii)          Inaddition, if NMG delivers a notice that it intends to exercise its option topurchase the Wind-Down Assets pursuant to Section 17.5(g), followingdelivery of such notice, Bank may implement changes in New Account Policies asBank Matters pursuant to Article III unless at the time NMG delivers suchoption exercise notice, NMG authorizes Bank to withhold from the amountotherwise due to NMG pursuant to Section 9.1(a)(i), for applicationpursuant to Section 17.5(g), an amount equal to the Wind-Down AssetPurchase Reserve Amount.

 

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

 

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

 

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

 

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

 

(k)           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.  The Parties each agree to use commerciallyreasonable efforts to cooperate with each other in such functions.

 

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

 

(m)          Duringany month in which (i) the Rolling 3 Month Post MP RAM for each of the twomost recently completed calendar months is greater than [***] and (ii) theRolling 6 Month Receivables Gross Write Off Ratio for the most recentlycompleted month is less than [***], then Bank shall be required to implementone of the Account management expansion initiatives described in Schedule4.6(m).  Such initiatives will bedesigned, in good faith, to target a minimum of [***] existing Accountsannually; provided that such Accounts are forecasted to generate a PostMP RAM of at least [***] on incremental Gross Receivables.  Accounts targeted for Account managementexpansion initiatives described in Schedule 4.6(m) implemented during anytwelve-month period immediately preceding the date on which Account managementexpansion obligations arise under this Section 4.6(m) shall counttoward the foregoing target.  Bank shallbe entitled to cease such Account management expansion initiatives at any timeduring which clause (i) or (ii) above is no longer satisfied; *provided, however,*that in the event clause (i) and (ii) abovehave been satisfied for [***], Bank shall be required to continue to pursuesuch initiatives to the extent necessary to ensure that a number of targetedAccounts are added, within the time frame specified below, that are at leastequal to the pro rata portion of the [***] minimum number of Accounts based onthe portion of the year during which such conditions were satisfied.  Any Accounts targeted by Bank above therequired number shall count toward the target for a maximum of [***] followingthe implementation of the action.  Bankshall target the required number of Accounts as set forth in this Section 4.6(m) nolater than the [***] after the date on which a condition referred to in clause (i) or(ii) ceases to exist or by the end of the [***] following the date theconditions set forth in clause (i) and (ii) were initially satisfied(whichever is earlier), provided that in the event the conditions referred toin clause (i) and (ii) above exist for more than [***], theadditional Accounts to be targeted in respect of each additional [***] (orportion thereof) shall be targeted no later than the ninetieth [***] after thedate on which a condition referred to in clause (i) or (ii) ceases toexist or by the end of such additional [***] (whichever is earlier).

 

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

 

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Model that may be used for the Program in order to permit manualdeterminations with respect to overlimit referrals to be made withoutadditional inquiries from the Cardholder. The Bank and/or Bank’s Affiliates shall own all right, title andinterest to any such Imputed Income Model that is designed and built by Bankand/or Bank’s Affiliates.

 

(o)           Atany time a [***] has occurred and is continuing, Bank may elect to deliver toNMG written certification executed by a financial officer of Bank identifyingthe occurrence and continuance of the [***] and attaching and certifying theaccuracy of the financial information demonstrating such occurrence. Followingdelivery of any such notice referred to above, the Parties shall negotiate ingood faith during the [***] to attempt to reach agreement on amendments to theeconomic provisions of this Agreement that the Parties agree are mutuallyacceptable and are designed to mitigate or eliminate any RAM Condition (itbeing agreed that the Parties shall cooperate in good faith to arrive atamendments that preserve to the maximum extent reasonably possible theprovisions of this Agreement in effect prior to the execution of suchamendments while achieving the above-stated objective).  If the Parties fail to reach agreement by theend of the [***], with respect to changes to Risk Management Policies governingor affecting existing Accounts, Bank shall no longer be subject to therestrictions set forth in Section 4.6(a)(ii)(B) and the proviso of Section 4.6(a)(iii).

 

4.7   Cardholder Terms.

 

(a)           Theterms and conditions of all Accounts as of the Effective Date shall be theterms and conditions specified in Schedule 4.7. Changes to the terms andconditions of the Accounts may be made only in accordance with this Section 4.7and Article III; *provided* thatno action shall be taken to implement any Existing Term Change or New AccountTerms approved as a Bank Matter pursuant to Section 3.2(g)(iv) or (vi) untilthe [***] following the date on which Bank breaks the deadlock with respect tosuch Bank Matter.

 

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

 

(c)           Uponthe occurrence and continuance of a RAM Condition or a CIL Decline, and withoutlimiting Bank’s rights with respect to Section 3.2(g)(v), Bank shall bepermitted to test the implementation of New Account Terms, *provided*such New Account Terms have been implemented by at least [***] and such testingand implementation is conducted at a level and in a manner consistent with thatof such NMG Competitors and according to the following procedures:

 

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

 

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

 

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

 

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

 

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

 

(vi)          Shouldthe Parties fail to reach agreement by the end of the Account Terms NegotiationPeriod, (A) if the [***] for the Accounts in the test populationexceeds the [***] for theControl Population by [***] but not more than [***], then implementation ofsuch New Account Terms shall be a Bank Matter, and (B) if the [***] 

 

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

 

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

 

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

 

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

 

4.8   Internet Services.

 

(a)           CardholderWebsite.  Bank shall maintain anNMG-branded website for Cardholders and potential Cardholders with the look andfeel consistent with the NMG Companies’ websites (“Program Website”).  The Program Website shall be accessed bylinks from the NMG Companies’ websites and shall contain or otherwise beassociated with only such material and links as shall be agreed by theManagement Committee from time to time. The NMG Companies will provide such links on (i) their home pages, (ii) theircheck-out pages, and (iii) such other pages as the ManagementCommittee shall determine from time to time. The Program Website shall also include links back to the NMG Companies’websites, on the 

 

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Program Website home page and such other pages as theManagement Committee shall determine from time to time.  The Program Website shall include thefollowing functions, and such other functions as may be approved by theManagement Committee from time to time (the Program Website and suchfunctionality, collectively, the “Internet Services”).

 

(b)           Applications.  The Program Website shall permit potentialCardholders to access an Application, to complete and submit the Applicationonline and receive real-time approvals or denials of such Application in accordancewith the Risk Management Policies and Operating Procedures.  Without limiting the foregoing, theApplication function on the Program Website shall have at a minimum allfeatures and functionality available prior to the Effective Date.

 

(c)           CardholderCustomer Service.  The ProgramWebsite shall permit Cardholders to (A) view the Cardholder’s Accountinformation and electronic forms of Billing Statements (including any LoyaltyProgram information, NMG Transaction information, and all other informationcontained in such Billing Statement); and (B) make payments on theCardholder’s Account via automated clearing house transfer or other paymentmechanism.

 

(d)           PerformanceStandards.  Bank shall provide theInternet Services consistent with the SLAs set forth on Schedule 4.8(d) andin accordance with industry standards.

 

(e)           CustomerPrivacy.  Bank shall ensure that thePrivacy Policy is clearly and prominently posted on the pages of theProgram Website.

 

(f)            InternetServices Representations and Warranties. Bank represents and warrants 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 part thereof,infringes upon or violates any patent, copyright, trade secret, trademark,invention, proprietary information, nondisclosure or other rights of any thirdparty.

 

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

 

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to pursueany such recoveries.  In the event NMG isaudited or assessed by a state, and as a result any amount of sales taxpreviously recovered is repaid to the state, Bank shall repay such amount toNMG. NMG shall use commercially reasonable efforts to negotiate such audit orassessment.  Bank also shall fullycooperate in any such audit or assessment and shall pay the costs and expensesof NMG incurred in connection with negotiating any tax audit or assessment or analyzingor pursuing any bad debt claims.

 

4.10         Participationin Reversals.

 

(a)           Reportingof Reversals.  Each Year-EndSettlement Statement shall set forth a calculation of the applicable InterestReversal Percentage and Late Fee Reversal Percentage for the preceding ProgramYear and such other calculations as are necessary to calculate any payment inrespect thereof to be made by NMG pursuant to this Section 4.10.

 

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

 

(c)           LateFee Reversals.  If the Late FeeReversal Percentage with respect to the Private Label Accounts reflected in theYear-End Settlement Sheet with respect to the preceding Program Year is greaterthan the applicable High Collar, the NMG Companies shall pay Bank an amountequal to [***].

 

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

 

**ARTICLE V**

 

**MARKETING**

 

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

 

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5.2   Marketing Commitment.

 

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

 

(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)           EachYearly Settlement Sheet shall set forth an accounting of the costs incurred, ifany, by NMG and its Affiliates in the prior Program Year which were paid out ofthe NMG Marketing Fund.  To the extentthat the expenditures of the NMG Marketing Commitment by NMG and its Affiliatesin any Program Year exceed the amount in the NMG Marketing Fund, the NMGCompanies shall be entitled to reimbursement from the NMG Marketing Fund forthe following Fiscal Year but not in excess of [***] of such Fiscal Year’s NMGMarketing Fund.  Any amount in the NMGMarketing Fund for a given Fiscal Year that is not spent in that Fiscal Yearshall 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 FiscalYear, with an amount equal to the Joint Marketing Commitment.  The Joint Marketing Commitment shall be usedas set forth in the Marketing Plan and as otherwise directed by the ManagementCommittee from time to time.  The NMGCompanies and Bank shall each provide to the other for inclusion in the MonthlySettlement Sheet, an accounting of such Party’s and its Affiliates’ use of theJoint Marketing Commitment in the prior Fiscal Month, and Bank shall reimbursethe NMG Companies for such amounts used by NMG and its Affiliates, and shallreduce the amount remaining in the Joint Marketing Fund by the amounts used byBank and its Affiliates.  Any amount inthe Joint Marketing Fund for a given Fiscal Year that is not spent in thatFiscal Year shall remain available for use at the direction of the ManagementCommittee during the Term.

 

(e)           Inthe event that the NMG Companies expand acceptance of Credit Cards not bearingNMG Licensed Marks as permitted by Section 2.2(d)(iii) and in anymonth during the [***] after such acceptance was first expanded, the GrossReceivables decline by more than [***] compared to the corresponding calendarmonth in the [***] preceding the expanded acceptance, the Parties shallconsider in good faith whether the amount of the NMG Marketing Commitmentand/or the Joint Marketing Commitment should be adjusted to take into accountsuch decline.

 

5.3   Communications with Cardholders.

 

(a)           NMGInserts.  NMG and its Affiliatesshall have the exclusive right to communicate with Cardholders, except for anymessage required by Applicable Law, through use of inserts, fillers andbangtails (which shall be included on all billing envelopes) (collectively, “Inserts”),including Inserts selectively targeted for particular segments of Cardholders,in any and all Billing Statements (including electronic Billing Statements) and

 

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envelopes, subject to Applicable Law.** **Except as otherwise provided in the Marketing Plan,and except for Inserts required by Applicable Law (which shall be paid for byBank), the NMG Companies shall be responsible for the content of, and the costof preparing and printing, any such Inserts. If the insertion of Inserts in particular Billing Statements wouldincrease the postage costs for such Billing Statements, the NMG Companies agreeto either pay for the incremental postage cost or prioritize the use of Insertsto avoid postage cost over-runs.  The NMGCompanies shall retain all revenues they receive from all Inserts (other thanany Inserts promoting the NMG Credit Cards or Approved Ancillary Products thatthe NMG Companies may permit to be produced and distributed in accordance withthe Marketing Plan).  Subject to NMG’s priorwritten approval, which shall not be unreasonably withheld, Bank maycommunicate with Cardholders in the Inserts about the Program as necessary forBank to comply with its obligations under this Agreement.

 

(b)           BillingStatement Messages.  NMG and itsAffiliates shall have the exclusive right to use Billing Statement (includingelectronic Billing Statement) messages and Billing Statement envelope (orelectronic mail) messages in each Billing Cycle to communicate withCardholders, subject to Applicable Law. Such messages shall be included at 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 writtenapproval, which shall not be unreasonably withheld, Bank may communicate withCardholders about the Program in the Billing Statements as necessary for Bankto comply with its obligations under this Agreement.

 

5.4   Additional Marketing 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 supportservices to assist NMG and its Affiliates in their promotion of the NMGChannels, or the marketing and promotion of NMG Goods and Services, the NMGCredit Cards or the Non-Card Payment Plans;

 

(B)                                conduct mailings and other relatedmarketing efforts on behalf of NMG and its Affiliates, which may includemarketing materials promoting the Program, the NMG Credit Cards and Non-CardPayment Plans, the NMG Channels and/or the NMG Goods and Services at NMG’soption, based upon the customer databases and customer database analysis toolsmaintained by Bank and its Affiliates, including nonpersonally identifiabletransaction and experience data from Bank’s and its Affiliates’ Credit

 

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Card, other consumer loan portfolio and othercustomer databases; provided that (unless such amounts are paid out ofthe NMG Marketing Fund or are paid out of the Joint Marketing Fund pursuant tothe Marketing Plan) the NMG Companies shall be responsible for allout-of-pocket expenses of all marketing materials and mailing services at cost;

 

(ii)           providesuch reasonable 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)          providemodels and modeling support, which may include Cardholder attrition models,prospect marketing models and other tools designed to improve Programperformance.

 

(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 and employ reasonable methodologiesdeveloped in consultation with the NMG Companies and shall provide for a levelof information reasonably acceptable to NMG. Bank shall make available to the NMG Companies the results of suchsurveys as well as all associated work papers promptly following completionthereof.

 

5.5   Approved Ancillary Products.  Except for theApproved Ancillary Products, the NMG Credit Cards and the Non-Card PaymentPlans, Bank and its Affiliates shall not offer (except as directed by NMG) anygoods or services to Cardholders or through the Program.  From time to time, Bank may propose tosolicit Cardholders for products or services other than the foregoing.  If the NMG Companies, in their sole and absolutediscretion, agree to permit such solicitation, such solicitation shall only bepermitted on the terms (including terms relating to the compensation of the NMGCompanies with respect thereto) agreed by the NMG Companies.

 

5.6   Marketing Plan.

 

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

 

(b)           Atleast once per calendar year, the Management Committee shall consider (to theextent such terms and conditions are publicly known or otherwise known and not

 

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subject 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 ManagementCommittee determines that a change to the Program may be required, the NMGCompanies and Bank shall jointly develop a plan with respect to implementationof such change in accordance with Applicable Law, including the impact theproposed change would have, if any, on the Program economics in Section 9.1(a),including the Risk Adjusted Margin, Post MP RAM and Profit Sharing Post MP RAM,and shall present such plan to the Management Committee for its review anddecision.  The Management Committee shalldecide whether to test or launch any such Program changes for Cardholders orpotential Cardholders.

 

(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;preparation of unique collateral materials for the NMG Companies’ employees;activation, retention and usage; statement design and messaging; advertising ofthe Program; and such other 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 Season.

 

(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.

 

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**ARTICLE VI**

 

**CARDHOLDER INFORMATION**

 

6.1   Customer Information.

 

(a)           Allsharing, use and disclosure of Cardholder Data and NMG Shopper Data under thisAgreement shall be subject to the provisions of this ARTICLE VI.  The Parties acknowledge that the same orsimilar information may be contained in the Cardholder Data, the NMG ShopperData, and other data and that each such pool of data shall therefore beconsidered separate information subject to the specific provisions applicableto 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, suchsecurity measures shall meet current industry standards and shall be at leastas protective as those used by each Party to protect its other confidentialcustomer 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, Bankshall treat NMG Shopper Data as if it were “customer information” for purposesof the regulations above.  In the event aParty 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 the ManagementCommittee.  In the event Bank becomesaware of any unauthorized use of or access to NMG Shopper Data, Bank shallimmediately notify the NMG Companies and shall cooperate with them, as theydeem necessary or as required by Applicable Law, (x) to assess the natureand scope of such incident, (y) to contain and control such incident toprevent further unauthorized access to or use of NMG Shopper Data, and (z) toprovide prompt notice to affected NMG Shoppers to the extent required byApplicable Law or otherwise with the approval of the Management Committee.  The cost and expenses of any such noticeshall be borne solely by the Party that experienced the unauthorized use of oraccess to Cardholder Data or 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 Cardholders

 

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who (i) after the Effective Date, have requested to be on Bank’s “donot call” 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   Cardholder Data.

 

(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 modificationsto the Program Privacy Policy shall be approved by the Management Committee, providedthat the Program Privacy Policy 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 theCardholder Data in compliance with Applicable Law and the Program PrivacyPolicy solely (i) for purposes of soliciting or marketing (in each case,solely as directed by the NMG Companies or the Management Committee) orservicing customers listed in the Cardholder Data for NMG Credit Cards,Approved Ancillary Products, and any other products and services approved bythe Management Committee, (ii) as otherwise necessary to carry out itsobligations or exercise its rights hereunder, or (iii) as required byApplicable Law.  Bank has no rights touse the Cardholder Data for marketing purposes except as expressly providedherein.

 

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

 

(i)            toits authorized subcontractors in connection with a permitted use of suchCardholder Data under this Section 6.2, provided that each such authorized subcontractor agrees in awritten agreement satisfactory to NMG and Bank to maintain all such CardholderData as strictly confidential and not to use or disclose such information toany Person other than Bank or an NMG Company, except as required by ApplicableLaw or any Governmental Authority (after giving Bank and the NMG Companiesprior 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

 

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proper disposal of Cardholder Data; 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, 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; provided that (A) any suchPerson is bound by terms substantially similar to this Section 6.2 as acondition 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; providedthat Bank seeks the full protection of confidential treatment for any disclosedCardholder Data to the extent available under Applicable Law governing suchdisclosure, and with respect to clause (B), to the extent permitted byApplicable Law, Bank (1) provides at least [***] prior notice of suchproposed disclosure to NMG if reasonably possible under the circumstances, and (2) seeksto redact the Cardholder Data to the fullest extent possible under ApplicableLaw governing 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;

 

(ii)           foreach Cardholder, joint-Cardholder and authorized buyer, (1)

 

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such person’s name, address, email address,telephone number, social security number and Account number; (2) anyreported change to any of the foregoing information; (3) transaction andexperience data; and (4) any such other Cardholder Data as the NMGCompanies 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.

 

Notwithstandingthe foregoing, no Party hereto shall be required to provide any information ona personally identifiable basis if the provision of such personallyidentifiable information would cause such Party to be considered a “consumerreporting agency” 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, NMG and each of its Affiliates mayreceive, use and disclose the Cardholder Data in compliance with Applicable Lawand the Program Privacy Policy (i) for purposes of promoting the Programor promoting NMG Goods and Services, (ii) as otherwise necessary to carryout its obligations under this Agreement, and (iii) as otherwise permittedby Applicable Law.

 

(g)           TheNMG Companies may use the Cardholder Data in compliance with Applicable Law andthe Program Privacy Policy.  Each of theNMG Companies may disclose the Cardholder Data in compliance with ApplicableLaw and the Program Privacy Policy 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 that each such existingsubcontractor and Future Subcontractor agrees in a written agreementsatisfactory to NMG and Bank to maintain all such Cardholder Data as strictlyconfidential in perpetuity and not to use or disclose such information to anyPerson other than an NMG Company or Bank, except as required by Applicable Lawor any Governmental Authority (after giving the NMG Companies prior notice andan opportunity to defend against such disclosure); provided, further,that each such existing subcontractor and Future Subcontractor maintains, andagrees in writing to maintain, an information security program that is

 

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designed to meet all requirements of Applicable Law,including, at a minimum, maintenance of an information security program that isdesigned to: (w) ensure the security and confidentiality of the CardholderData; (x) protect against any anticipated threats or hazards to thesecurity or integrity of the Cardholder Data; (y) protect againstunauthorized access to or use of the Cardholder Data; and (z) ensure theproper disposal of Cardholder Data; and provided, further, thateach 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; provided that (A) any suchPerson is bound by terms substantially similar to this Section 6.2 as acondition 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 such NMG Company seeks the full protection ofconfidential 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, such NMG Company (1) providesat least [***] prior notice of such proposed disclosure to Bank if reasonablypossible under the circumstances, and (2) seeks to redact the CardholderData to the fullest extent possible under Applicable Law governing suchdisclosure.

 

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

 

(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 date on which this

 

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

 

6.3   NMG Shopper 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 Data.  As betweenthe NMG Companies and Bank, all the NMG Shopper Data shall be owned exclusivelyby the NMG Companies.  Bank acknowledgesand agrees that it has no proprietary interest in the NMG Shopper Data.  To the extent Bank is the direct recipient ofsuch data, it shall provide such data to the NMG Companies in such format andat such times as shall be specified by NMG. Bank shall cooperate in the maintenance of the NMG Shopper Data andother data, including by incorporating in the Application and CardholderAgreement provisions mutually agreed to by the Parties pursuant to whichapplicants and Cardholders shall agree that they are providing theiridentifying information and all updates thereto and all transaction data fromNMG Channels to both Bank and NMG and its Affiliates.** **For the avoidance of doubt, thefollowing information 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 of whetheror not the customer has been approved for an NMG Credit Card; and

 

(ii)           forany Cardholder, (1) the Cardholder’s name, address, email address, telephonenumber, social security number and Account number; (2) any reported change toany of the foregoing information; and (3) Cardholder transaction and experiencedata in the NMG Channels at a detailed, line-item and SKU level that providesall detail provided to NMG and its Affiliates prior to 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 Companiesand Bank, the NMG Prospect List shall be owned exclusively by the NMG 

 

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Companies.  Bank acknowledges andagrees that it has 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 permitto be used, the NMG Prospect List except as provided in this Section6.3(c).  Bank may use the NMG Prospect Listin compliance 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, sellor otherwise transfer any right in or to the NMG Shopper Data or the NMGProspect List (all such rights belonging exclusively to the NMGCompanies).  Bank may disclose the NMGShopper Data and the NMG Prospect List in compliance with Applicable Lawsolely:

 

(i)            toits authorized subcontractors in connection with a permitted use of such NMGShopper Data or NMG Prospect List under this Section 6.3, provided that each suchauthorized subcontractor agrees in writing to maintain all such NMG ShopperData or NMG Prospect List as strictly confidential in a manner satisfactory toNMG and not to use or disclose such information to any Person other than Bankor an NMG Company, except as required by Applicable Law or any GovernmentalAuthority (after giving Bank and the NMG Companies prior notice and anopportunity to defend against such disclosure); provided, further,that each such authorized subcontractor maintains, and agrees in writing tomaintain, an information security program that is designed to meet allrequirements of Applicable Law, including, at a minimum, maintenance of aninformation security program that is designed to: (w) ensure the security andconfidentiality of the NMG Shopper Data and NMG Prospect List; (x) protectagainst any anticipated threats or hazards to the security or integrity of theNMG Shopper Data and NMG Prospect List; (y) protect against unauthorized accessto or use 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;

 

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

 

(iii)          toany Governmental Authority with authority over Bank (A) in connection with anexamination of Bank; or (B) pursuant to a specific requirement to provide theNMG Shopper Data or NMG Prospect List by such Governmental Authority or pursuantto compulsory legal process; providedthat Bank seeks the full protection of confidential treatment for any disclosedNMG Shopper Data or NMG Prospect List, as the case may be, to the extentavailable under Applicable Law governing such disclosure, and with respect toclause (B), to the extent permitted by Applicable Law, Bank (1) provides atleast [***] prior notice of such proposed disclosure to NMG if reasonablypossible under the circumstances, and (2) seeks to redact the NMG Shopper Dataor NMG Prospect List to the fullest extent possible under Applicable Lawgoverning such 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’srights to use and disclose the NMG Shopper Data and NMG Prospect List shallterminate.  Promptly following suchtermination, Bank shall return or destroy all the NMG Shopper Data and NMGProspect Lists and shall certify such return or destruction to the NMG Companiesupon request.

 

**ARTICLE VII**

 

**OPERATING STANDARDS**

 

7.1   Reports.

 

(a)           Within[***] after the end of each Fiscal Month or such other time as may be agreed bythe Parties with respect to particular reports, Bank shall provide to theManagement Committee and NMG the reports specified in Schedule 7.1(a)(i) (whichreports shall be reported on a Fiscal Month, calendar month or cycles-basis, asagreed upon by the parties), and such other reports as are mutually agreed toby the Parties from time to time.  Within[***] after the end of each Fiscal Month or such other time as may be agreed bythe Parties with respect to particular reports, NMG shall provide to theManagement Committee and Bank the reports specified in Schedule 7.1(a)(ii)(which reports shall be reported on a Fiscal Month, calendar month orcycles-basis, as agreed upon by the Parties), and such other reports as aremutually agreed to by the Parties from time to time.  The form of such reports and the calculationscontained therein shall be in such form and shall reflect such detail withrespect to all of the items reported, and each 

 

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component thereof, as shall be mutually agreed upon by the Parties. Thefinancial information set forth in reports from Bank reflecting informationwith respect to economic matters (including any information required todetermine amounts payable pursuant to Article IX, any information used indetermining Bank’s or the Program’s revenues or expenses for purposes of determiningProfit Sharing Post MP RAM, Post MP RAM (including for risk managementpurposes), any components thereof or any other relevant definitions) shall bederived from its General Ledger (GL) and/or its supporting financial accountingsubsystems.

 

(b)           Within****[***] after the end of each Program Month other thanthe last Program Month of each Program Year, NMG Servicer shall deliver to Banka statement, in the form set forth on Schedule 7.1(b), setting forth allinformation required to determine the payments to be made by the Partiespursuant to this Agreement in respect of such Program Month.  Each such statement shall be known as a “MonthlySettlement Sheet.”

 

(c)           Within****[***] after the end of each ProgramQuarter, NMG Servicer shall deliver to Bank a statement, in the form set forthon Schedule 7.1(c), setting forth all information required to determine thepayments to be made by the Parties pursuant to this Agreement in respect ofsuch Program Quarter.  Each such statementshall be known as a “Quarterly Settlement Sheet”.

 

(d)           Within[***] after the end of each Program Year, NMG Servicer shall deliver to Bank astatement, in the form set forth on Schedule 7.1(d), setting forth allinformation required to determine the payments to be made by the Parties pursuantto this Agreement in respect of the last Program Month of such Program Year andany annual payments to be made in respect of such Program Year.  Each such statement shall be known as a “Year-EndSettlement Sheet”.

 

7.2   Servicing.

 

(a)           AsServices are transferred by NMG to Primary Servicer pursuant to the ServicingAgreement, Primary Servicer shall perform such transferred Services inaccordance with the terms and conditions of this Agreement, the Risk ManagementPolicies 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.  Inaddition, without limiting the foregoing, with respect to the Services to beperformed by Primary Servicer, Primary Servicer agrees that it shall performsuch functions with no less care and diligence than that degree of care anddiligence employed by it in servicing the Comparable Partner Programs.

 

(b)           Upontransfer by NMG of any services pursuant to the Servicing Agreement, thePrimary Servicer shall accept appointment as servicer with respect to suchServices and shall be required to meet the SLAs applicable to Primary Servicerfor such Services set forth in Schedule 7.3(a) (as such SLAs may be amendedfrom time to time in accordance with this Agreement).  Upon the date of the foregoing transfer, NMGshall be released from any further obligation with respect to the performanceof such Services.  In the event thatcustomer 

 

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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 was monitored prior to such transfer.

 

(c)           Upontransfer of Services to Primary Servicer in accordance with Section 2.03(b) ofthe Servicing Agreement and Section 7.2(b), the amount payable to Servicershall be adjusted as set forth in Section 2.03(b) of the Servicing Agreement 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)           PrimaryServicer shall maintain records relating to its performance of the Services inaccordance with the record retention policies set forth on Schedule 4.4(f).Records may be kept in either paper or electronic form. Primary Servicer shallretrieve, reproduce and deliver to NMG any records reasonably requested fromtime to time by NMG for the purpose of providing customer assistance orresolving customer disputes, and NMG shall compensate Primary Servicer ondemand for the reasonable costs and expenses associated with such retrieval, reproductionand delivery.

 

(e)           PrimaryServicer shall have the right to perform any portion of the Services throughone or more subservicers; provided that (i) any subservicer that is notan Affiliate of Primary Servicer shall be subject to approval pursuant toArticle III and (ii) Primary Servicer shall remain fully responsible to NMG forthe portion of the Services performed by any subservicer(s) (including itsAffiliates).  Notwithstanding theforegoing, to the extent Primary Servicer subcontracts or outsources to anythird party any Services as of the date hereof, Primary Servicer may continueto subcontract or outsource such Services to such third party (and PrimaryServicer shall be fully responsible for the performance of such subcontractedor outsourced Services).

 

(f)            Notwithstandingany arrangement whereby Bank provides any Services through an Affiliate (orthird party as permitted under Section 7.2(e)), Bank shall remain obligated andliable to the NMG Companies for the provision of such Services withoutdiminution of such obligation or liability by virtue of such arrangement.

 

7.3   Service Level Standards.

 

(a)           PrimaryServicer shall perform the applicable Services in accordance with the SLAs setforth on Schedule 7.3(a).

 

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

 

(c)           Withrespect to any SLA set forth on Schedule 7.3(a), the provisions set forth inSchedule 7.3(c) shall apply.

 

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(d)           Throughoutthe Term, Primary Servicer shall maintain a disaster recovery and businesscontinuity plan with respect to its operations under the Program that complieswith Applicable 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.  PrimaryServicer shall provide NMG with access to review such plan, which shall beconsidered Confidential Information, upon request.  Primary Servicer shall test the plan annuallyand shall promptly implement such plan upon the occurrence of a disaster or businessinterruption.** **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)           Bankshall ensure that [***] identified features and functionalityavailable on the Bank Systems on the Effective Date (including data gathering,interface capabilities with the NMG Companies’ Systems, Loyalty Program supportand core systems/customer service functionality and [***] features and functionality set forth inSchedule 7.4(a)) shall remain available through the Term.

 

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

 

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

 

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

 

(e)           NeitherParty shall make any change to any of its Systems that would render themincompatible in any way with the other Party’s or its Affiliates’ Systems orrequire the other Party or its Affiliates (or the Retail Merchants) to make anychange to any of their Systems (including any POS terminals) or reduce orrestrict interfacing or System feeds, in any such case without the priorapproval of the Management Committee. Neither Party will make any materialchange to its Systems with respect to the Program without the prior approval ofthe Management Committee.

 

(f)            Bankshall maintain a disaster recovery and business continuity plan applicable tothe Bank Systems operated in connection with the Program that complies withApplicable Law and is consistent with plans maintained for its ComparablePartner Programs.  Bank shall be preparedto and have the ability to implement such plan if necessary.  Bank shall provide NMG with access to reviewsuch plan, which shall be considered Confidential Information, uponrequest.  Bank shall test the planannually and shall promptly implement such plan upon the occurrence of adisaster or business interruption.

 

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7.5   Systems Interface; Technical Support.

 

(a)           RequiredInterfaces.

 

(i)            TheNMG Companies and Bank shall maintain [***] System interfaces that exist between the NMGCompanies and Bank immediately prior to the Effective Date and shall cooperatein good faith with each other in connection with any modifications to suchinterfaces as may be requested by either Party from time to time.

 

(ii)           Eachof the NMG Companies and Bank agrees to maintain at its own expense itsrespective Systems interfaces so that the operation of the Systems as a wholeis [***] no less functional than prior to the Effective Date.  Bank agrees to provide sufficient personnelto support the Systems interfaces required to be sustained among the NMG Companiesand Bank.

 

(b)           AdditionalInterfaces; Interface Modifications. [***] requests for new interfaces, modifications to existing interfaces andterminations of existing interfaces shall be presented to the ManagementCommittee for approval.  Upon approval,the Parties shall work in good faith to establish the requested interfaces ormodify or terminate the existing interfaces, as applicable, on a timelybasis.  Except as otherwise providedherein (including in Section 7.4), all costs and expenses with respect to anynew interface or interface modification or termination shall be borne by therequesting Party unless otherwise determined by the Management Committee.  For the avoidance of doubt, Bank shall not beobligated to make any modifications to its Systems to facilitate an Internetfinancing product with a third Person as permitted pursuant to Section 2.2(f).

 

(c)           SecureProtocols.  The Parties shall usesecure protocols for the transmission of data from Bank and its Affiliates, onthe one hand, to NMG and its Affiliates, on the other hand, and vice versa.

 

**ARTICLE VIII**

 

**MERCHANT SERVICES**

 

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

 

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8.2   POS Terminals.  The RetailMerchants shall maintain POS terminals capable of processing NMG Credit Card,Non-Card Payment Plan and Account transactions as handled as of the EffectiveDate.  To the extent that the Retail Merchantsare required to make changes to any POS terminal (including hardware andsoftware) in order to process NMG Transactions and transmit NMG ChargeTransaction Data under this Agreement as a result of any System conversioncontemplated by Section 7.4 or any other change or modification to any BankSystem or a new Bank System approved by the Management Committee (other thanany such change necessitated solely as a result of an NMG System changeapproved as an NMG Matter), Bank shall pay the costs and expenses associatedwith such changes.

 

8.3   In-Store Payments. (a) The Retail Merchants may accept In-Store Payments fromCardholders on their Accounts in accordance with the Operating Procedures, theRisk Management Policies and any procedures required under Applicable Law.  The Retail Merchants shall, as necessary,provide proper endorsements on such items. If the Retail Merchants receive any In-Store Payments, NMG shall,directly or through its Affiliates, be deemed to hold such In-Store Payments intrust for Bank until such Payments are either delivered to Bank or applied toreduce amounts payable by Bank to NMG pursuant to Section 8.4(b).  Bank hereby grants to each of the NMGCompanies and the Retail Merchants a limited power of attorney (coupled with aninterest) to sign and endorse Bank’s name upon any form of payment that mayhave been issued in Bank’s name in respect of any Account.  The NMG Companies and Bank shall jointlydevelop procedures in the Operating Procedures with respect to the manner in whichsuch In-Store Payments shall be processed (it being understood that suchprocedures shall, subject to exceptions noted therein, provide for immediatecredit toward the applicable open-to-buy limits of the respective Account uponreceipt 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 Merchantsshall issue receipts for such payments in compliance with Applicable Law.

 

(b)           Inthe event that NMG determines in good faith that, as a result of the effects ofor requirements associated with any Change in Law (including additional expenseor procedures imposed on NMG as a result of any such change), it is no longeradvisable for the Retail Merchants to accept In-Store Payments, the RetailMerchants shall be entitled to cease accepting such In-Store Payments, providedthat NMG, on behalf of the Retail Merchants, shall use commercially reasonableefforts to notify Bank in writing not less than [***] before such acceptance isdiscontinued.  Any discontinuation ofsuch acceptance of In-Store Payments shall be applied to all Cardholders by allRetail Merchants.

 

8.4   Settlement Procedures.

 

(a)           NMGshall transmit NMG Charge Transaction Data to Bank in accordance with theOperating Procedures on each day on which such Retail Merchants are open forbusiness, other than Sunday.  If NMGCharge Transaction Data is received by Bank’s processing center on or before6:00 am (Central time) on any Business Day on which Bank is open forbusiness, Bank shall process the NMG Charge Transaction Data and initiate awire transfer of the payment in respect thereof before 1:00****pm (Central time) on the same BusinessDay.  If the 

 

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NMG Charge Transaction Data is received after 6:00 am (Central time)on any day a Retail Merchant is open, or at any time on a day other than aBusiness Day, Bank shall process the NMG Charge Transaction Data for payment by1:00****pm (Central time) on the following BusinessDay.

 

(b)           Bankshall remit to NMG, for itself and the Retail Merchants, an amount equal to (i)the total amount of charges identified in all NMG Charge Transaction Data notyet paid in accordance with Section 8.4(a) less (ii) the sum of (A) the totalamount of any credits included in such NMG Charge Transaction Data, plus(B) the total amount of In-Store Payments (if any), plus (C) any amountscharged back to such Retail Merchants pursuant to Section 8.5.  The total amount of charges reflected in theNMG Charge Transaction Data shall include the amount of all Special Discountssuch that upon daily settlement of such NMG Charge Transaction Data inaccordance with this Section 8.4(b), Bank shall pay NMG the price of the NMGGoods and Services without giving effect to such discount(s).  NMG shall reimburse Bank for the amount ofsuch discounts on a monthly basis as set forth in Section 8.4(c).

 

(c)           Notmore than [***] after the end of each Program Month, NMG Servicer shall deliveror cause to be delivered to Bank a report for such preceding Program Month ofall Special Discounts reflected in the NMG Charge Transaction Data and paid forby Bank in such preceding Program Month (and, in the case of NMG ChargeTransaction Data for a credit to an Account, all reversals of Special Discountsreflected in the credits included in such NMG Charge Transaction Data).  The sum of (i) the net amount of SpecialDiscounts paid by Bank with respect to such Special Discounts during suchProgram Month, as reflected on such report (after deducting any Special Discountsreversed in respect of NMG Goods and Services for which a credit was issued), plus(ii) an amount equal to the product of such net amount of Special Discounts and[***] shall be paid by NMG to Bank within [***] of such report.

 

(d)           NMGshall be responsible for allocating such remittances among the Retail Merchantsas appropriate and Bank shall have no responsibility or liability in connectiontherewith (it being agreed that Bank has no obligation to accept NMG ChargeTransaction Data directly from, or make remittances to, any person other thanNMG).

 

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

 

(a)           TheCardholder refuses to pay the charge based on a dispute regarding the qualityor delivery of NMG Goods and Services representing a valid defense to paymentconsistent with Applicable Law; provided that any such refusal constitutes abona fide claim presented by the Cardholder in good faith in the reasonableopinion of NMG, after consultation with Bank;

 

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

 

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

 

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

 

(e)           Theprice of NMG Goods and Services shown on the charge slip differs from theamount shown on the Cardholder’s copy of the sales slip;

 

(f)            Thecharge or Account arose from fraud of any employee or agent in a RetailMerchant;

 

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

 

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

 

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

 

(j)            NMGfails to obtain proper identification from the Cardholder at the time of theApplication;

 

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

 

(l)            Thecharge or Account arose from fraud of any employee or agent in a NMG callcenter;

 

(m)          Thecharge or Account arose from the unauthorized removal of information from anNMG store or owned facility;

 

(n)           Thecharge or Account arose from the unauthorized removal of information from anNMG computer systems; or

 

(o)           NMGships merchandise to a Cardholder after receiving the Cardholder’s request tocease such shipment.

 

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 chargeback pursuant to thisARTICLE VIII, upon payment in full of the related amount by NMG, Bank shallimmediately assign to NMG or the relevant Retail Merchant, without anyrepresentation, warranty or recourse, (i) all right to payments of amountscharged back in connection with such Cardholder charge, and (ii) any securityinterest granted by the NMG Companies under Section 19.1.  Bank shall cooperate fully in any effort bythe NMG Companies to collect the chargeback amount, including by executing anddelivering any document necessary or useful to such collection efforts.

 

8.7   No Merchant Acquirer/Processor Fees.  Bank shall directlyprocess the NMG Transactions such that the Retail Merchants do not incur anymerchant acquirer/processor or similar fees.

 

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**ARTICLE IX**

 

**PROGRAM ECONOMICS**

 

9.1  NMG Compensation.

 

(a)           Payments.

 

(i)            Notlater than 1:00 pm (Central time) on [***], Bank shall pay to NMG an amountequal to the amount set forth on Schedule 9.1(a)(i) with respect to theAccounts.

 

(ii)           Notlater than 1:00 pm (Central time) on the [***] after the date on which theMonthly Settlement Sheet is due, Bank shall pay NMG the amounts determined inaccordance with Schedule 9.1(a)(ii) with respect to the Accounts.

 

(iii)          Notlater than 1:00 pm (Central time) on the [***] after the date on which theQuarterly Settlement Sheet is due, each Party shall pay to the other theamounts determined in accordance with Schedule 9.1(a)(iii) with respect toAccounts, which amounts shall be required to be reflected on the QuarterlySettlement Sheet.

 

(iv)          Notlater than 1:00 pm (Central time) on the [***] following the date on which theYear-End Settlement Sheet is due, each Party shall pay to the other Party theamounts, if any, determined in accordance with Schedule 9.1(a)(iv), whichamounts shall be required to be reflected on such Year-End Settlement Sheet.

 

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

 

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

 

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

 

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

 

9.2  Dispute Resolution.  Any disputesregarding the amounts owed under this Agreement shall be resolved in accordancewith Section 12.3.

 

**ARTICLE X**

 

**INTELLECTUAL PROPERTY**

 

10.1        TheNMG Licensed Marks.

 

(a)           Grantof License to Use the NMG Licensed Marks. Subject to the terms and conditions of this Agreement, NMG hereby grantsto Bank a non-exclusive, royalty-free, non-transferable right and license touse the NMG Licensed Marks (i) with respect to the Program in the UnitedStates 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 uses of the NMG Licensed Marks shall bein accordance with this Agreement and any Trademark Style Guide delivered byNMG to Bank from time to time (which NMG shall so deliver), including that (A) Bankshall not modify, change, alter, delete from or add to the NMG Licensed Marks,including but not limited to any change in text, graphics or color, without thewritten consent of NMG, (B)  Bank shall not use the NMG Licensed Marks 

 

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together with any logos or trademarks of any other companies involved inthe retail industry; and (C) Bank shall not use the NMG Licensed Marks inassociation with any other marks to form a new mark.  All uses of the NMG Licensed Marks shallrequire the prior written approval of NMG. To the extent Bank delegates any of its rights or obligations hereunderto any authorized Affiliate and/or authorized third party in accordance withthe terms and conditions of this Agreement, Bank may sublicense its rights inthe 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, including but not limited tosecuring prior written approval of NMG for all uses of the NMG Licensed Marks,and Bank shall remain liable for such Person’s failure to so comply.  Except as expressly set forth in this Section 10.1,the rights granted pursuant to this Section 10.1 are solely for use ofBank and may not be sublicensed without the prior written approval of NMG.

 

(b)           NewNMG 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(h) hereto(a “New NMG Mark”), Bank may request that NMG add such New NMG Mark toSchedule 1.1(h) 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(h).

 

(c)           Terminationof License.  Except to the extentotherwise 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 licensegranted in this Section 10.1, all rights in the NMG Licensed Marks grantedhereunder shall revert to NMG and Bank shall: (i) discontinue 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)           Ownershipof the NMG Licensed Marks.  Bankacknowledges that (i) the NMG Licensed Marks, all rights therein, and thegoodwill associated therewith, are, and shall remain, the exclusive property ofNMG, (ii) it shall take no action which shall adversely affect NMG’sexclusive ownership of the NMG Licensed Marks, or the goodwill associated withthe NMG Licensed Marks (it being understood that the collection of Accounts,adverse action letters, and changes in terms of Accounts as required byApplicable Law do not adversely affect goodwill, if done in accordance with theterms of this Agreement), and (iii) any and all goodwill arising from useof the NMG Licensed Marks by Bank shall inure to the benefit of NMG.  Nothing herein shall give Bank anyproprietary interest in or to the NMG Licensed Marks, except the right to usethe NMG Licensed Marks in accordance with this Agreement, and Bank shall notcontest NMG’s title in and to the NMG Licensed Marks.

 

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(e)           Infringementby Third Parties.  Bank shall usereasonable efforts to notify NMG, in writing, promptly upon acquiring Knowledgeof any infringing use of any of the NMG Licensed Marks by any third party.  If any of the NMG Licensed Marks isinfringed, NMG alone has the right, in its sole discretion, to take whateveraction it deems necessary to prevent such infringing use; provided*,*however, that if NMG fails totake reasonable steps to prevent infringement of the NMG Licensed Marks andsuch infringement has an adverse effect upon the Program or the rights of Bankhereunder, Bank may request that NMG take action necessary to alleviate suchadverse impact.  Bank shall reasonablycooperate with and assist NMG, at NMG’s expense, in the prosecution of thoseactions that NMG determines, in its sole discretion, are necessary or desirableto prevent the infringing use of any of the NMG Licensed Marks.

 

10.2        TheBank Licensed Marks.

 

(a)           Grantof License to Use the Bank Licensed Marks. Subject to the terms and conditions of this Agreement, each of Bank andBank Parent hereby grants to the NMG Companies a non-exclusive, royalty-free,non-transferable right and license to use the Bank Licensed Marks in the UnitedStates in connection with the creation, establishment, marketing andadministration of, and the provision of services related to, the Program.  All uses of the Bank Licensed Marks shall bein accordance with this Agreement and any Trademark Style Guide delivered by Bankto NMG from time to time (which Bank shall so deliver), including that (i) NMGshall not modify, change, alter, delete from or add to the Bank Licensed Marks,including but not limited to any change in text, graphics or color, without thewritten consent of Bank, (B) NMG shall not use the Bank Licensed Markstogether with any logos or trademarks of any other companies involved in thefinancial services industry; and (C) NMG shall not use the Bank LicensedMarks in association with any other marks to form a new mark.  All uses of the Bank Licensed Marks shallrequire the prior written approval of Bank. To the extent the NMG Companies delegate any of their rights orobligations hereunder to any authorized Affiliate and/or authorized third partyin 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, including but not limited to securing prior written approval of Bankfor all uses of Bank Licensed Marks, and the NMG Companies shall remain liablefor such Person’s failure to so comply. Except as expressly set forth in this Section 10.2, the rightsgranted pursuant to this Section 10.2 are solely for use of the NMGCompanies and may not be sublicensed without the prior written approval ofBank.

 

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

 

(c)           Terminationof License.  The license granted inthis Section 10.2 shall terminate upon the termination or expiration ofthis Agreement or, if the purchase option under Section 17.2 is exercised,six (6) months after the Program Purchase Date.  Upon the termination of the license grantedin this Section 10.2, all rights in the Bank Licensed Marks granted 

 

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hereunder shall revert to Bank and the NMG Companies shall: (i) discontinueimmediately all use of the Bank Licensed Marks, or any of them, and anycolorable imitation thereof; and (ii) destroy all unused NMG Credit Cards,Applications, Account Documentation, Solicitation Materials, periodicstatements, materials, displays, advertising and sales literature and any otheritems, in each case, bearing any of the Bank Licensed Marks.

 

(d)           Ownershipof the Bank Licensed Marks.  Each ofthe NMG Companies acknowledges that (i) the Bank Licensed Marks, allrights therein, and the goodwill associated therewith, are, and shall remain,the exclusive property of Bank and/or Bank Parent, (ii) it shall take noaction which shall adversely affect Bank’s and/or Bank Parent’s exclusiveownership of the Bank Licensed Marks or the goodwill associated with the BankLicensed Marks, and (iii) any and all goodwill arising from use of theBank Licensed Marks by the NMG Companies shall inure to the benefit of Bankand/or Bank Parent.  Nothing herein shallgive the NMG Companies any proprietary interest in or to the Bank LicensedMarks, except the right to use the Bank Licensed Marks in accordance with thisAgreement, and the NMG Companies shall not contest Bank’s or Bank Parent’stitle in and to the Bank Licensed Marks.

 

(e)           Infringementby Third Parties.  Each of the NMGCompanies shall use reasonable efforts to notify Bank, in writing, promptlyupon acquiring Knowledge of any infringing use of any of the Bank LicensedMarks by any third party.  If any of theBank Licensed Marks is infringed, Bank and Bank Parent alone have the right, intheir sole discretion, to take whatever action deemed necessary to prevent suchinfringing use; provided, however, that if Bank and/or BankParent 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 and/or Bank Parent take action necessary to alleviate such adverseimpact.  The NMG Companies shallreasonably cooperate with and assist Bank and Bank Parent, at Bank’s expense,in the prosecution of those actions that Bank and/or Bank Parent determines, intheir sole discretion, are necessary or desirable to prevent the infringing useof any of the Bank Licensed Marks.

 

10.3        IntellectualProperty.

 

(a)           Independently-OwnedIntellectual Property.Each Party shall continue to own all of its Intellectual Property that existedas of the Effective Date.  Each Partyalso shall own all right, title and interest in the Intellectual Property itdevelops or creates independently of the other Party during the Term.

 

(b)           JointIntellectual Property.  Each Partyshall 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 ownedIntellectual Property shall be used by Bank in connection with any ComparablePartner Program or Competing Retail Program without the prior written consentof NMG.  Patents and patentableinventions shall be deemed to be owned jointly, as between the Parties, only ifthe respective personnel of each Party are deemed co-inventors under the patentlaw, and (ii) software and other works of authorship and associatedcopyrights shall be deemed to be jointly owned only if the Parties are deemedco-authors or co-owners of such software or other work of authorship under thecopyright law.  Any other IntellectualProperty developed by a substantially equal investment of 

 

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time, human, intellectual and financial resources by each Party duringthe Term of this Agreement shall be owned jointly by the Parties.  By way of example and not of limitation, aParty shall not be a joint owner of any such Intellectual Property if itscontribution thereto consists solely of data, unless that is the only contributionof the other Party.  Otherwise, allpatents, patentable inventions, software, other works of authorship and relatedcopyrights and all other Intellectual Property (and any improvements thereto)shall be deemed to be owned solely by one Party.  Thus, to the extent that a work created byone Party is based on or incorporates Intellectual Property of the other Party,but the Parties are not joint owners as set forth above, then one Party shallbe the sole owner of the Intellectual Property in the underlying work and theother Party shall be the sole owner of the Intellectual Property in the newwork.  Any information or data providedby or on behalf of one Party to the other Party remains, as between theParties, the sole property of the providing Party, and if applicable, shall beconsidered “Confidential Information” under Section 13.1.  Any Intellectual Property, systems ornetworks of a Party used to process, store or analyze information or data ofthe other Party remain, as between the Parties, the sole property of the firstParty.

 

(c)           Duringand after the Term of this Agreement, each Party may use, license or otherwiseexploit (or permit others to do so) any jointly owned Intellectual Propertyreferenced herein solely at its own risk.

 

**ARTICLE XI**

 

**REPRESENTATIONS, WARRANTIES AND COVENANTS**

 

11.1        GeneralRepresentations and Warranties of NMG.  Except as Previously Disclosed, NMG makes thefollowing representations and warranties to the Bank Companies as of theEffective Date:

 

(a)           CorporateExistence.  Each NMG Company: (i) isa corporation duly organized, validly existing and in good standing under thelaws of the jurisdiction of its incorporation; (ii) is duly licensed orqualified to do business and is in good standing as a foreign corporation inall jurisdictions in which the conduct of its business or the activities inwhich it is engaged makes such licensing or qualification necessary, except tothe extent that its non-compliance would not reasonably be expected to have,individually or in the aggregate, a material adverse effect on the 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 NMGCompany has all necessary corporate power and authority to (i) execute andenter into this Agreement, and (ii) perform the obligations required ofsuch NMG Company hereunder and the other documents, instruments 

 

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and agreements relating to the Program and this Agreement executed bysuch NMG Company pursuant hereto.  Theexecution and delivery by the NMG Companies of this Agreement and alldocuments, instruments and agreements executed and delivered by the NMGCompanies pursuant hereto, and the consummation by the NMG Companies of thetransactions specified herein, have been duly and validly authorized andapproved by all necessary corporate actions of the NMG Companies.  This Agreement (i) has been dulyexecuted and delivered by the NMG Companies, (ii) constitutes the validand legally binding obligation of the NMG 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.  Subject to receipt ofany licenses and qualifications required for NMG to perform its servicingobligations under the Servicing Agreement, the execution, delivery andperformance of this Agreement by each of the NMG Companies, their compliancewith the terms hereof, and consummation of the transactions specified hereinwill not (i) conflict with, violate, result in the breach of, constitutean event which would, or with the lapse of time or action by a third party orboth would, result in a default under, or accelerate the performance requiredby, the terms of any contract, instrument or agreement to which NMG or any ofits Subsidiaries is a party or by which they are bound, or to which any of theassets of NMG or any of its Subsidiaries are subject; (ii) conflict with orviolate the articles of incorporation or by-laws, or any other equivalentorganizational document(s), of the NMG Companies; (iii) breach or violateany Applicable Law or Applicable Order, in each case, applicable to the NMGCompanies; (iv) require the consent or approval of any other party to anycontract, instrument or commitment to which any NMG Company is a party or bywhich it is bound; or (v) require any filing with, notice to, consent orapproval 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)           NoLitigation.  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 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)           Compliancewith Laws.  Except to the extent thatany of the following would not reasonably be expected to have, individually orin the aggregate, a material adverse effect upon the Program or the ability ofthe NMG Companies to perform their obligations under this Agreement, the NMGCompanies are in compliance with all requirements of Applicable Law relating tothe Credit Card Business and neither of the NMG Companies nor any of theirAffiliates is subject to any order, directive or restriction of any kind issuedby any Governmental Authority that restricts in any respect its ability toperform its obligations under the Program.

 

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(f)            ServicingQualifications.  NMG is or will be atthe Effective Date licensed and qualified in all jurisdictions necessary toservice the Accounts in accordance with all Applicable Laws, except where thefailure to be so qualified would not reasonably be expected to have, individuallyor in the aggregate, a material adverse effect on the ability of NMG to performits obligations under this Agreement.

 

(g)           Booksand Records.  All books and recordsof the NMG Companies related to the Credit Card Business have been maintainedaccurately and in accordance with all requirements of Applicable Law applicableto the NMG Companies and the Credit Card Business, except for any instances ofinaccuracy or noncompliance that would not reasonably be expected to have amaterial adverse effect on the ability of the NMG Companies to perform theirobligations under this Agreement.

 

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

 

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

 

11.2        GeneralRepresentations and Warranties of the Bank Companies.  Except asPreviously Disclosed, the Bank Companies hereby make the followingrepresentations and warranties to the NMG Companies as of the Effective Date:

 

(a)           CorporateExistence.  Each Bank Company: (i) isduly organized, validly existing and in good standing under the laws of thejurisdiction of its incorporation; and (ii) is duly licensed or qualifiedto do business and is in good standing as a foreign entity in all jurisdictionsin which the conduct of the its business or the activities in which it isengaged, or proposes to engage pursuant to this Agreement, makes such licensingor qualification necessary, except to the extent that its non-compliance wouldnot reasonably be expected to have, individually or in the aggregate, a materialadverse effect upon the Bank Companies, the Program, the Accounts, CardholderIndebtedness or the Bank Companies’ ability to perform their obligations underthis Agreement.  The Bank Companies haveall necessary licenses, permits, consents or approvals from or by, and havemade all necessary filings and registrations with, all governmental authoritieshaving jurisdiction, to the extent required for the ownership, lease or conductand operation of their businesses and the Credit Card Business pursuant to thisAgreement, except to the extent that the failure to obtain such licenses,permits, consents or approvals or to make such filings or registrations wouldnot reasonably be expected to have, individually or in the aggregate, amaterial adverse effect upon the Bank Companies, the Program, the Accounts,Cardholder Indebtedness or the Bank Companies’ ability to perform theirobligations under this Agreement.

 

(b)           Capacity;Authorization; Validity.  Each BankCompany has all necessary corporate or similar power and authority to (i) executeand enter into this Agreement, and (ii) 

 

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perform the obligations required of such Bank Company hereunder and theother documents, instruments and agreements relating to the Program and thisAgreement executed by 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 duly executed and delivered by the BankCompanies, (ii) constitutes the valid and legally binding obligation ofthe Bank Companies, and (iii) is enforceable in accordance with its terms(subject to applicable bankruptcy, insolvency, reorganization, receivership orother laws affecting the rights of creditors generally and by general equityprinciples including those respecting the availability of specificperformance).

 

(c)           Conflicts;Defaults; Etc.  The execution,delivery and performance of this Agreement by each of the Bank Companies, theircompliance with the terms hereof, and the 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 theperformance required by, the terms of any contract, instrument or agreement towhich any of Bank Parent or any of its Subsidiaries is a Party or by which theyare 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 orApplicable Order, in each case, applicable to the Bank Companies; (iv) requirethe consent 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 orthe ability of the Bank Companies to perform their obligations under thisAgreement.

 

(d)           NoLitigation.  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)           Compliancewith Laws.

 

(i)            Exceptto the extent that any of the following would not reasonably be expected tohave, individually or in the aggregate, a material adverse effect upon theProgram or the ability of the Bank Companies to perform their obligations underthis Agreement,

 

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

 

(B)                               none ofthe Bank Companies or any of their Affiliates is subject to any capital plan orsupervisory 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)           Noneof the Bank Companies or any of their Affiliates is subject to any order,directive or restriction of any kind issued by any Governmental Authority thatrestricts in any respect its operation of their Credit Card business; and theBank Companies are not aware of any fact or circumstance that would in any waydelay or impede their ability to perform all of their obligations under theProgram.

 

(f)            ServicingQualifications.  The Bank Companiesare licensed and qualified in all jurisdictions necessary to service theAccounts in accordance with all Applicable Laws, except where the failure to beso qualified would not reasonably be expected to have, individually or in theaggregate, a material adverse effect on the ability of the Bank Companies toperform their obligations under this Agreement. Primary Servicer has all necessary facilities, equipment, supplies andsuch other resources as are reasonably necessary to provide any Servicesrequired to be provided by it pursuant to Section 7.2.

 

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

 

(h)           Booksand Records.  All books and recordsof 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.

 

(i)            Insurance.  The Bank Companies maintain insurancepolicies with respect to their properties under such terms and conditions asare (i) commercially reasonable and available from time to time and (ii) customaryfor similarly situated Persons engaged in similar business, except in each casefor insurance which a failure to maintain would not reasonable be expected tohave a material adverse effect on the ability of the Bank Companies to performtheir obligations under this Agreement.

 

11.3        Noother Representations or Warranties.  Except as expressly set forth in Sections11.1 and 11.2, neither Bank nor NMG has made or makes any other express orimplied representations, or any express or implied warranty, either written ororal, with respect to the

 

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Credit Card Business, theProgram, the Bank Companies or the NMG Companies, or as to any other matterwhatsoever.

 

11.4                        GeneralCovenants of the NMG Companies.

 

(a)                                 Litigation. Each of the NMG Companies promptly shall notify Bank in writing if itreceives written notice of any litigation that, if adversely determined, wouldreasonably be expected to have a material adverse effect on the Program, theAccounts in the aggregate or the NMG Companies’ ability to perform theirobligations hereunder.

 

(b)                                 Reports and Notices. Each of the NMG Companies shall provide Bank with a facsimile noticespecifying the nature of any NMG Event of Default, or any event which, with thegiving of notice or passage of time or both, would constitute an NMG Event ofDefault, or any development or other information which is likely to have amaterial adverse effect on the Program, the Accounts, Cardholder Indebtednessor the NMG Companies’ ability to perform their obligations pursuant to thisAgreement.  Notices pursuant to this Section 11.4(b) relatingto NMG Events of Default shall be provided within two (2) Business Daysafter any of the NMG Companies has Knowledge of the existence of suchdefault.  Notices relating to all otherevents or developments described in this Section 11.4(b) shall beprovided (i) promptly after any of the NMG Companies has 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 notice provided under this Section shallbe confirmed in writing to Bank within [***] after the transmission of theinitial notice.

 

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

 

(d)                                 Servicing Qualifications. NMG 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 NMG to perform its obligations under thisAgreement.

 

(e)                                  Disputes with Cardholders. The NMG Companies shall cooperate with Bank in a timely manner (but inno event less promptly than required by Applicable Law) to resolve all disputeswith Cardholders.

 

(f)                                   Financial Statements. If at any time during the Term, NMG does not publicly file periodicreports with the Securities and Exchange Commission, NMG shall provide to Bank (i) itsaudited consolidated annual financial statements within [***] of the end ofeach Fiscal Year, and (ii) its unaudited consolidated quarterly financialstatements within [***] of the end of each Fiscal Quarter.  Such statements shall include theconsolidated balance sheet, income statement and statement of cash flows andfinancial position, all prepared in accordance with GAAP applied on aconsistent basis (except for normal year end adjustments and the absence offootnotes on the quarterly statements).

 

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(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 records and books of account with respect to itsactivities in connection with the Program, in which proper entries reflectingall of NMG’s financial transactions are made in accordance with GAAP.

 

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

 

11.5                        GeneralCovenants of the Bank Companies.

 

(a)                                 Litigation. Bank shall notify NMG 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 anyBank Company’s ability to perform its obligations hereunder.

 

(b)                                 Reports and Notices. Bank shall provide NMG with a facsimile notice specifying the nature ofany Bank Event of Default, or any event which, with the giving of notice orpassage of time or both, would constitute a Bank Event of Default, or anydevelopment or other information which is likely to have a material adverseeffect on the Program, the Accounts or Bank’s ability to perform itsobligations pursuant to this Agreement. Notice pursuant to this Section 11.5(b) relating to BankEvents of Default shall be provided within two [***] after any Bank Company hasKnowledge of the existence of such default. Notices relating to 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 notice produced under this section shallbe confirmed in writing to NMG within [***] after transmission of the initialnotice.

 

(c)                                  Applicable Law/OperatingProcedures.  The Bank Companies shall at alltimes during the Term comply in all material respects with Applicable Lawaffecting their obligations under this Agreement and the OperatingProcedures.  Bank shall at all timesduring the Term maintain a federal bank charter and continue its existence as abank under the laws of the United States.

 

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

 

(e)                                  Servicing Qualifications. The Bank Companies shall at all times during the Term remain licensedand qualified in all jurisdictions necessary to service the Accounts in 

 

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accordancewith all Applicable 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 during the Term maintain thenecessary facilities, equipment, supplies and such other resources in goodworking order as are reasonably necessary to provide any Services required tobe provided by it pursuant to Section 7.2 in accordance with the SLAs setforth in Schedule 7.3(a).

 

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

 

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

 

**ARTICLE XII**

 

**ACCESS, AUDIT AND DISPUTE RESOLUTION**

 

12.1                        AccessRights.  Each Party shall permit the other Party andits representatives and regulators to visit its facilities related to theProgram during normal business hours with reasonable advance notice.  The reviewing Party shall employ suchreasonable procedures and methods as are necessary and appropriate in thecircumstances, minimizing interference to the extent practicable with thereviewed Party’s normal business operations. The reviewed Party shall use commercially reasonable efforts tofacilitate the reviewing Party’s review, including making reasonably availablesuch personnel of the reviewed Party and its service providers to assist thereviewing Party and its representatives as reasonably requested.  Each Party shall also permit the other Partyand its representatives and regulators to review (during normal business 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                        AuditRights.  Twice per year or at any time that a Partydisputes the amount of any monies owed by either Party to the other hereunder,such Party, at its sole cost and expense and upon five (5) days’ priornotice to the other Party, may conduct an audit of those of the other Party’sfinancial and operational records that are under the control and/or 

 

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direction of the auditedParty and relate to the Program or can be reasonably segregated.  Such audit shall be conducted during normalbusiness hours in accordance with generally accepted auditing standards and theauditing Party shall employ such reasonable procedures and methods as arenecessary and appropriate in the circumstances, minimizing interference to theextent practicable with the audited Party’s normal business operations.  The audited Party shall use commerciallyreasonable efforts to facilitate the auditing Party’s review, including makingreasonably available such personnel of the audited Party and its serviceproviders to assist the auditing Party and its representatives as reasonablyrequested.  The audited Party shalldeliver any document or instrument necessary for the auditing Party to obtainsuch records from any Person maintaining records for the audited Party andshall maintain records pursuant to its regular record retention policies.  For purposes of this provision, the auditedParty also shall be required to provide records relating to the Program held byPersons performing services in connection with the Program at the auditingParty’s request.  Notwithstanding thegenerality of the foregoing, the audited Party shall not be required to provideaccess to records to the extent that (a) such access is prohibited byApplicable Law, (b) such records are legally privileged, (c) suchrecords are company planning documents of such Party or any of its Affiliates,operating budgets, management reviews or employee records, (d) suchrecords relate to other customers of, or credit programs operated by, Bank orthe NMG Companies (except as may be necessary or appropriate in connection withany consideration of the terms and conditions of Comparable Partner Programsand Competing Retail Programs as contemplated by this Agreement to the extentsuch terms and conditions are publicly known or otherwise known and not subjectto any confidentiality obligations on the part of either Party) or (e) suchrecords relate to other customers or operations of such Party other than theProgram or to personnel records not normally disclosed in connection withaudits.

 

12.3                        AccountingDispute Resolution.  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.  The Parties agree to attempt in good faith toresolve any such disputes.  Except withrespect to any indemnification claim arising under Article XVII, whichshall not be subject to the procedures of this Section 12.3, in the eventthe Parties are unable to resolve any such dispute, after negotiating in goodfaith for a period of not less than ten (10) Business Days, either Partymay request a nationally recognized firm of independent accountants mutuallyagreeable to the Parties (the “Accountants”) to reconcile any amounts indispute; provided, however, that the Accountants’ determination shall belimited to the amount disputed by the Parties and in no event shall suchdetermination provide for a payment to any Party higher than the amount claimedby the Party to be owed to such Party. Any such request shall be in writing and shall specify with particularitythe disputed amounts being 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 shall cooperate fully in assistingthe Accountants in their review, including by providing the Accountants fullaccess to all files, books and records (including work papers of internal andindependent accountants of the Parties) relevant thereto and providing suchother information as the Accountants may reasonably request in connection withany 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) such

 

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records relate to othercustomers of, or credit programs operated by, the Party (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). In the event the determination made by the Accountants requires eitherParty to make payment to the other Party of any additional amount, such Partyshall make such payment no later than five (5) Business Days followingreceipt from the Accountants of written notice to the Parties of suchdetermination plus interest at the Federal Funds Rate on any such amount duecomputed from and including the date such amount should have been paid throughand excluding the date of payment. The fees and expenses of such Accountantsarising out of such reviews shall be borne by the Parties in proportion to therelative difference between their respective claims regarding the amount indispute and the amount determined by the Accountants.  The determination of the Accountants shall befinal and binding on the Parties subject to the correction of obvious errors.

 

12.4                        DisputeResolution.

 

(a)                                 Generally. Any dispute among the Parties arising out of or relating to thisAgreement, including with respect to the interpretation of any provision ofthis Agreement and with respect to the performance by NMG or Bank hereunderthat is not otherwise required to be submitted for resolution under Section 12.3shall be resolved as provided in this Section 12.4; provided, however,that this provision shall not limit either Party’s right to obtain anyprovisional or other remedy, including, without limitation, specificperformance or injunctive relief from any court of competent jurisdiction, asmay be necessary, in the aggrieved Party’s sole discretion, to protect itsrights 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 accordancewith Section 3.2.

 

(b)                                 Informal Dispute Resolution.

 

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

 

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

 

(B)                               Management Committee.  If, after a period of five (5) BusinessDays, the Managers are unable to resolve the dispute to the satisfaction of NMGand Bank, the dispute shall be brought before the Management Committee inaccordance with Section 3.2(e); provided, however, if theManagement Committee cannot resolve the dispute within 

 

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five (5) days, the dispute shall not beconsidered an Unapproved Matter.

 

(C)                               Appointment ofRepresentatives.  If,after a period of five (5) Business Days, the Management Committee isunable to resolve the dispute to the satisfaction of both the NMG Companies andBank, each Party shall appoint a designated knowledgeable, responsiblerepresentative who is one of the top five highest executives in the Credit Carddivision of Bank and one of the top five executives of NMG and who does notdevote substantially all of his or her time to performance under thisAgreement, whose task it will be to meet for the purpose of negotiating in goodfaith to seek resolution of the dispute.

 

With respect to clauses (A), (B) and (C) above, discussions,documents and correspondence exchanged among the Managers and representatives,or submitted to the Management Committee for purposes of these negotiations,shall be treated as Confidential Information developed for purposes ofsettlement, exempt from discovery and production, which shall not be admissiblein any lawsuit without the 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.

 

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

 

(A)                               either of 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 Daysafter the appointment of designated representatives pursuant to Section 12.4(b)(i)(C) above(it being understood that this period shall be deemed to run notwithstandingany claim that the process described in this Section 12.4 was not followedor completed).

 

(iii)                               This Section 12.4 shall notbe construed 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.

 

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**ARTICLE XIII**

 

**CONFIDENTIALITY**

 

13.1                        GeneralConfidentiality.

 

(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.  The provisions of this Article XIIIgoverning Confidential Information shall not govern Cardholder Data, NMGShopper Data or NMG Prospect Data, which shall be governed by the provisions ofArticle 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 through examination of, publicly available records orproducts; (iv) is required to be disclosed by Applicable Law; providedthat the Party subject to such Applicable Law shall use reasonable efforts toavoid such disclosure and notify the other Party of any such use or requirementprior to disclosure of any Confidential Information obtained from the otherParty in order to afford such other Party an opportunity to seek a protectiveorder to prevent or limit disclosure of the Confidential Information to thirdParties; provided, further, that such information shall bedisclosed only to the extent required by such Applicable Law and shallotherwise remain Confidential Information; or (v) is developed by NMG orBank, as the case may be, without the use or knowledge of any proprietary,non-public information provided by the other Party under, or otherwise madeavailable to such Party as a result of, this Agreement.  Nothing herein shall be construed to permitthe Receiving Party (as defined below) to disclose to any third party anyConfidential Information that the Receiving Party is required to keepconfidential under Applicable Law.

 

(c)                                  The terms and conditions of thisAgreement and the Marketing Plan and all of the items referred to in clauses (A) through(B) of Section 13.1(a) shall each be the 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 

 

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Agreementmay be filed by either Party with any Governmental Authority (including publicfilings with the Securities and Exchange Commission) to the extent required byApplicable Law.

 

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

 

13.2                        Use andDisclosure of Confidential Information.

 

(a)                                 Each Receiving Party shall use anddisclose the Confidential Information of the Disclosing Party only for thepurpose of performing its obligations or enforcing its rights with respect tothe Program or as otherwise expressly permitted by this Agreement, and shallnot accumulate in any way or make use of such Confidential Information for anyother 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, subcontractors, and subject to the below limitations, prospectiveNominated Purchasers and their employees and representatives who have areasonable need to access such Confidential Information in connection with theProgram, the sale of Program Assets or other assets of NMG and its Affiliatesor the establishment of a new Credit Card or other program or arrangement foran NMG Company, in each case in accordance with the terms of this Agreement,and (ii) ensure that any Person with access to the Disclosing Party’sConfidential Information agrees to be bound by a confidentiality agreementcontaining the restrictions set forth in this ARTICLE XIII.  Notwithstanding the foregoing, neither Partyshall, without the consent of the other Party (A) disclose the terms ofthis Agreement to a potential Nominated Purchaser, other than the disclosure oftermination-related rights and deadlines, the terms of the purchase optionsreferred to in Article XVII and the provisions of such Article relatingto the purchase and interim servicing arrangements referred to therein or (B) disclosethe terms of this Agreement to any third party with whom any of the NMGCompanies is considering entering into an arrangement permitted by Section 2.2(b),(c) or (f), other than the disclosure of the existence and terms of Bank’srights under such Sections to the extent reasonably necessary to inform suchthird party of the impact of such rights on such third party; provided, however,that neither Party shall disclose the specific criteria for risk underwritingdecisions or the economic terms of this Agreement to any third party (otherthan economic terms to which a Nominated Purchaser is to become party inconnection with its purchase of the Program Assets and/or the Wind-Down Assets,as the case may be).

 

13.3                        UnauthorizedUse or Disclosure of Confidential Information.  Each Receiving Party agrees that anyunauthorized use or disclosure of Confidential Information of the DisclosingParty might cause immediate and irreparable harm to the Disclosing Party forwhich money damages might not constitute an adequate remedy.  In that event, the Receiving 

 

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Party agrees that injunctiverelief may be warranted in addition to any other remedies the Disclosing Partymay have.  In addition, the ReceivingParty agrees promptly to advise the Disclosing Party by telephone and inwriting via facsimile of any security breach that may have compromised anyConfidential Information or of any unauthorized misappropriation, disclosure oruse by any Person of the Confidential Information of the Disclosing Party whichmay come to its attention, and to take all steps at its own expense reasonablyrequested by the Disclosing Party to limit, stop or otherwise remedy suchbreach, misappropriation, disclosure or use.

 

13.4                        Returnor Destruction of Confidential Information.  Upon the termination or expiration of thisAgreement, the Receiving Party shall comply with the Disclosing Party’sreasonable instructions regarding the disposition of the Disclosing Party’sConfidential Information, which may include return of any and all theDisclosing Party’s Confidential Information (including any electronic or papercopies, 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.  Such compliance shall be certified inwriting, including a statement that no copies of Confidential Information havebeen kept, except as necessary for regulatory purposes.

 

**ARTICLE XIV**

 

**RETAIL PORTFOLIO ACQUISITIONS**

 

14.1                        Retailerthat Operates a Credit Card Business.  If NMG or any of its Subsidiaries acquires orotherwise combines with (including by merger, consolidation or other businesscombination) a retail department store business that directly or through anAffiliate issues a Credit Card in the United States, unless such transaction isone giving right to a termination by NMG pursuant to Section 16.2(c) andas to which NMG has exercised such right, Bank shall have a right of firstoffer to acquire the related Credit Card business offered for sale by suchretailer in connection with NMG’s or its Subsidiary’s acquisition of the retaildepartment store business (such Credit Card business accounts, the “NewPortfolio”) as follows.  Prior to orpromptly following the consummation of the acquisition, NMG shall providenotice to Bank indicating its intention to engage in, or the consummation of,as the case may be, such acquisition and shall provide Bank with a reasonableopportunity to conduct due diligence, and for this purpose NMG shall provideBank and its representatives with reasonable access to the records and accounts(including the master file) relating to such New Portfolio, subject to theexecution of a confidentiality agreement reasonably satisfactory to NMG.  Not later than the [***] following receipt byBank of due diligence information reasonably requested by Bank and available toNMG, Bank may make an offer to NMG with respect to the purchase of such NewPortfolio, which offer shall be required to remain open for a period of notless than [***].  NMG shall be under noobligation to accept such offer or to provide Bank with any right to match anyoffer received by NMG from any third party. NMG may elect to (A) accept the offer made by Bank, (B) keepsuch New Portfolio or (C) offer such New Portfolio for sale to a thirdparty; provided that NMG shall not sell such New Portfolio to a thirdparty unless such third party makes an offer having financial terms andconditions (including terms relating to the manner in which the conversioncosts relating to the contemplated transaction are to be allocated among the 

 

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Parties) substantially morefavorable in the aggregate than the terms and conditions offered by Bank.  If NMG does not sell such New Portfolio toBank (whether because NMG elects to keep such New Portfolio or sell it to athird party), the restrictions of Section 2.2 shall not apply to theCredit Card business associated with such New Portfolio, including any growththereof.

 

14.2                        Retailerthat has a Credit Card with another Issuer.  If NMG or any of its Subsidiaries acquires orotherwise combines with (including by merger, consolidation or other businesscombination) a retail department store business that through an unaffiliatedPerson (other than Bank or any of its Affiliates) issues a Credit Card in theUnited States, unless such transaction is one giving right to a termination byNMG pursuant to Section 16.2(c) and as to which NMG has exercisedsuch right, Bank agrees that it shall negotiate in good faith for the purchaseof the retailer’s Credit Card portfolio from such unaffiliated issuerassociated with the retail assets being acquired.  Prior to or promptly following theconsummation of the acquisition, NMG shall provide notice to Bank indicatingits intention to engage in, or the consummation of, as the case may be, suchacquisition and shall cooperate to the extent practicable to provide Bank witha reasonable opportunity to conduct due diligence.  In the event that Bank is unsuccessful in itsbid 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.  IfNMG or any of its Subsidiaries, directly or with a third Person, acquires theCredit Card business of another retailer pursuant to this provision and thisAgreement remains in effect, Section 2.2 shall not apply to such acquiredCredit Card business or to the associated acquired retail operations, includingany growth thereof.

 

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

 

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

 

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14.5                           Conversionof Purchased Accounts.

 

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

 

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

 

(ii)                                  Purchased co-branded Credit Cardaccounts shall continue under the same terms and conditions being offered tothe purchased retailer’s customers, or such other terms and conditions uponwhich NMG and Bank shall mutually agree.

 

(b)                                 Bank shall cover all costs relatedto conversions pursuant to this Section 14.5, including replacement ofCredit Cards, notices to Cardholders and complying with other requirements ofApplicable Law.

 

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

 

**ARTICLE XV**

 

**EVENTS OF DEFAULT; RIGHTS AND REMEDIES**

 

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

 

(a)                                  Such Party shall fail to perform,satisfy or comply with any obligation, condition, covenant or other provisioncontained in this Agreement (other than failure to comply with any SLAs), and (i) suchfailure shall remain unremedied for a period of thirty (30) days 

 

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after the other Party shall have given written notice thereof specifyingthe nature of such failure in reasonable detail, provided that if suchfailure cannot be cured in a commercially reasonable manner within such time,such failure shall not constitute an Event of Default if the defaulting Partyshall have initiated and diligently pursued a cure within such time and suchcure is completed within ninety (90) days from the date of written noticeregarding such failure, and (ii) such failure shall either have a materialadverse effect 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 bysuch Party contained in this Agreement shall not be true and correct in anyrespect as of the date when made, and (i) the Party making such representationor warranty shall fail to cure the event giving rise to such breach withinthirty (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                           Defaultsby Bank.  The occurrence of any one or more of thefollowing events (regardless of the reason therefor) shall constitute an eventof default by Bank hereunder:

 

(a)                                  Bank shall fail to settle NMGCharge Transaction Data and make payment in full therefor within [***] aftersuch settlement payment is due pursuant to Section 8.4.

 

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

 

(c)                                  Bank shall fail to make payment infull of any amount due to NMG pursuant to Schedule 7.3(c) within [***]after such payment is due pursuant to Schedule 7.3(c).

 

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

 

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

 

(f)                                    Any regulatory authority havingjurisdiction over a Bank Company or Bank Parent shall order the appointment ofa custodian, receiver, liquidator, assignee, trustee or sequestrator (orsimilar official) of such Bank Company or Bank Parent, as the case may be, orof any substantial part of its properties, or order the winding-up orliquidation of the affairs of any Bank Company or Bank Parent, and such ordershall not be vacated, discharged, stayed or bonded within [***] from the dateof entry thereof.

 

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

 

(h)                                 Primary Servicer shall fail tomeet one or more SLAs expressly giving rise to the right to terminate hereunderin accordance with Section 7.3 and Schedule 7.3(c).

 

(i)                                     As a result of the regulatorystatus of a Bank Company or Bank Parent or any constraints imposed on a BankCompany or Bank Parent by any Governmental Authority, the benefits of theProgram to the NMG Companies are materially diminished or the NMG Companiesexperience a material decline in customer satisfaction, unless such constraint,diminishment or decline 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).

 

(j)                                     The Bank Guaranty shall expire orterminate or 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                           Defaultsby the NMG Companies.  The occurrence of any one or more of thefollowing events (regardless of the reason therefor) shall constitute an eventof default by the NMG Companies hereunder:

 

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

 

(b)                                 A petition under the U.S.Bankruptcy Code or similar law shall be filed against NMG and not be dismissedwithin [***].

 

(c)                                  A decree or order by a courthaving jurisdiction (i) for relief in respect of NMG pursuant to theBankruptcy Code 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 [***] from the date of entry thereof.

 

(d)                                 NMG shall (i) file a petitionseeking relief pursuant to the Bankruptcy Code or any other applicablebankruptcy or other similar law, (ii) consent to the institution ofproceedings pursuant thereto or to the filing of any such petition or to theappointment of or taking possession by a custodian, receiver, liquidator,assignee, trustee or sequestrator (or similar official) of NMG or anysubstantial part of its properties, or (iii) take corporate or similaraction in furtherance of any such action.

 

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

 

15.4                           Remediesfor Events of Default.  In addition to any other rights or remediesavailable to the Parties at law or in equity, upon the occurrence of an Eventof Default pursuant to Section 15.1, 15.2 or 15.3, the non-defaultingParty shall be entitled to collect from the defaulting Party any amountindisputably in default plus interest based on the Federal Funds Rate.

 

**ARTICLE XVI**

 

**TERM/TERMINATION**

 

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

 

16.2                           Terminationby NMG Prior to the End of the Initial Term or a Renewal Term.  NMG, on behalf ofthe NMG Companies, may terminate this Agreement upon written notice prior tothe end of the Initial Term or any Renewal Term and subject to the effectivedates of termination in Section 16.4:

 

(a)                                  after the occurrence of a BankEvent of Default;

 

(b)                                 if (i) there is a Change ofControl of Bank Parent or (ii) one or more Persons that is not anAffiliate of Bank on the date of this Agreement acquires a direct or indirectcontrolling interest in Bank or any other Person conducting a substantial partof the Credit Card business conducted within the corporate group of Bank Parentor such corporate group otherwise disposes of or terminates a substantial partof such Credit Card business;

 

(c)                                  following a Change of Control ofNMG if the other Party to the business combination transaction which resultedin or constituted such Change of Control issues, offers or otherwise provides(either itself or through Affiliates) or is Party to any contractualarrangement with any other Person to issue, offer or otherwise provide, anyCredit Card in the United States;

 

(d)                                 if there is a Change in Law whichreduces or could reasonably be expected to reduce in any material respect theability of NMG or any of its Subsidiaries to gain access to, or to use, anyCardholder Data, NMG Shopper Data or NMG Charge Transaction Data below thelevel of access and use permitted under Applicable Law immediately prior to theEffective Date, unless such reduction in access would be incapable of beingeliminated or mitigated if NMG were to terminate this Agreement and/orrepurchase the Program Assets (either for itself and its Affiliates or in orderto enter into alternative program arrangements with a third party other thanBank); provided, however, that prior to delivering a notice oftermination pursuant to this Section 

 

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16.2, NMG shall engage in good faith negotiations with Bank to modify theProgram in a way that would preserve at least the same level of access and useof such data for the benefit of NMG and its Affiliates following the relevantChange in Law as was permissible prior to the Effective Date, such negotiationsnot to terminate (in the absence of an agreement between the Parties on anymodification) earlier than [***] days after the earlier of (i) the date onwhich one of the Parties delivers a notice to the other that the relevantChange in Law is likely to occur or (ii) the date on which the relevantChange in Law takes effect; or

 

(e)                                  if there have been more than [***](excluding for purposes of this paragraph Unapproved Matters that are BankMatters as described in Sections 3.2(g)(ii), (iii), (iv), (vi), (ix), (x) and(xi)) within the last twelve (12) Fiscal Months; provided that if theManagement Committee votes on an identical matter more than one time and failsto reach agreement on such identical matter without any change in thecircumstances surrounding such matter, for purposes of this Section 16.2(e),such matter will only count as one (1) Unapproved Matter; or

 

(f)                                    not more than [***] after the RiskInformation Date in respect of a proposed modification to a Risk ManagementPolicy, other than a modification that would be Bank Matter as describedin Section 3.2(g)(i), if such modification is an Unapproved Matter andeither:

 

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

 

(ii)                                  in the case of a proposedmodification to a Risk Management Policy with respect to or affecting existingAccounts, either:

 

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

 

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

 

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

 

(g)                                 upon notice to Bank delivered notmore than [***] following (i) the implementation of any New Account Policyif the Approval Rate for the Benchmark Population assuming application of theNew Account Policy (including such modification) to the Applications submittedby such Benchmark Population, as modeled in accordance with Section 4.6(c)(v)(i),is less than [***] or (ii) the implementation of a Risk Management Policywith respect to or affecting existing Accounts if the cumulative effect of suchchange in Risk Management Policy and all other changes implemented pursuant toSections 3.2(g)(iii) and (iv) as Bank Matters is a decrease in suchNet Credit Sales by more than [***] in any rolling [***] period based on theinformation required to be delivered in accordance with Section 4.6(d) andthe methodology stated therein; or

 

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

 

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

 

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

 

16.3                           Terminationby Bank Prior to the End of the Initial Term or a Renewal Term.  Bank may terminatethis Agreement upon written notice prior to the end of the Initial Term or anyRenewal Term and subject to the effective dates of termination in Section 16.4:

 

(a)                                  after the occurrence of an NMGEvent of Default; or

 

(b)                                 following the end of a FiscalYear, if during such Fiscal Year, NMGhas not maintained the retail store square footage set forth on Schedule16.3(b); or

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

**ARTICLE XVII**

**EFFECTS OF TERMINATION**

 

17.1                           GeneralEffects.

 

(a)                                  All solicitations, marketing andadvertising of the Program, other than acceptance of applications through NMGChannels in the ordinary course of business consistent with past practice,shall cease upon the expiration or termination of this Agreement, except as theParties may otherwise mutually agree, provided that following suchexpiration or termination the Parties shall continue to operate the Program inaccordance with the terms of this Agreement and service the Accounts in goodfaith and in the ordinary course of their respective businesses, subject to theterms of this Agreement, until the provisions of Section 17.2 aresatisfied.  The Parties shall cooperateto ensure the orderly wind-down or transfer of the Program.

 

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(b)                                 Upon the satisfaction of theprovisions of Section 17.2 or, in the event NMG delivers notice that itdoes not wish to purchase the Program Assets (or fails to exercise such noticewithin the timeframe set forth in Section 17.2), upon the later of (i) theeffective date of termination and (ii) the date of such notice (or suchfailure to timely provide notice), all obligations of the Parties under thisAgreement shall cease, except that the provisions specified in Section 19.26shall survive.

 

17.2                           The NMGCompanies’ Option to Purchase the Program Assets.

 

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

 

(b)                                 The purchase option given by Section 17.2(a) isexercisable by NMG or the Nominated Purchaser serving notice on Bank no laterthan:

 

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

 

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

 

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

 

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

 

*provided,however,* that NMG shall have the option to extend the relevant deadline referredto in clause (i), (ii), or (iii), as the case may be, for a period of [***] additionaldays by providing written notice of such extension to Bank not later than the[***] prior to the applicable date referred to in clause (i), (ii), or(iii).  NMG may submit a written requestto Bank not later than the [***] prior to the date referred to in clause (iv) toextend the relevant deadline referred to in clause (iv) above for a periodof [***] additional days, but Bank shall have sole discretion as to whether itaccepts or rejects such request.  Duringthe period commencing on the relevant day set forth in clause (i), (ii), (iii) or(iv), as applicable, and ending on the date on which NMG delivers writtennotice as to whether the purchase option pursuant Section 17.2(a) willbe exercised (or in absence of such a notice, ending on the expiration date ofthe applicable period set forth in Section 17.2(b) as so extended), (A) noamounts shall be withheld in respect of the Existing Account Reserve Amount and(B) Bank shall withhold from the Merchant Participation an amount equal to[***] of Net Credit Sales and this amount shall be held by Bank or deposited inescrow in the same manner as amounts referred to in Section 4.6(h).  All amounts withheld pursuant to this Section 17.2(b) shallbe (x) paid to NMG upon completion of the purchase of the 

 

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

 

(c)                                  If such purchase option isexercised, NMG or the Nominated Purchaser must complete the purchase of theProgram Assets (i) in the case of the expiration of this Agreement at theend of a Term, on or prior to the expiration of the current Term; (ii) inthe case of a termination of this Agreement pursuant to Section 16.2(f),not later than [***] after the Risk Information Date; (iii) in the case ofa termination of this Agreement pursuant to Section 16.2(i), not laterthan [***] after delivery by NMG of the notice of termination; (iv) in thecase of a termination of this Agreement pursuant to Section 16.2(a) through(e), 16.2(g) or 16.2(h), not later than [***] after the Program AssetInformation Date; (v) in the case of a termination of this Agreement byBank prior to the expiration of the Term, not later than [***] after receipt byNMG of the notice of termination. Notwithstanding the foregoing (except in the case of a terminationpursuant to Section 16.2(g) or 16.2(h)) if, in connection with thepurchase of the Program Assets by a Nominated Purchaser, any requiredregulatory approvals or rating agency consents are not received on or prior tothe applicable foregoing date, such purchase shall be completed within [***]after such date; and provided, further, that in any case(including a termination pursuant to Section 16.2(g) or 16.2(h)), ifNMG is unable to complete the purchase by such date because of a materialbreach by Bank of its obligations pursuant to Section 17.2(e), suchpurchase shall be completed as soon as reasonably practicable following thedate on which such breach is cured.  Thedate of the completion of any purchase under this Section 17.2(c) pursuantto a purchase agreement referred to herein shall be the “Program PurchaseDate”.

 

(d)                                 The purchase price for the ProgramAssets purchased, payable on the Program Purchase Date, shall be equal to thePar Value thereof at the time of purchase, except that if the purchase rightarises as a result of (A) an early termination of this Agreement by Bankfor an NMG Event of Default or (B) an early termination by the NMGCompanies pursuant to Section 16.2(c), then such purchase price for theProgram Assets shall be an amount equal to the sum of (x) the ParValue thereof at the time of purchase, plus (y) de-conversion costsof the Bank in an amount not to exceed [***] million. The Parties shall usecommercially reasonable efforts to minimize transaction costs relating to thepurchase and deconversion of the Program Assets.

 

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

 

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

 

(f)                                    The Parties and/or the NominatedPurchaser shall promptly negotiate in good faith and execute a purchaseagreement for the Program Assets to be repurchased, which shall contain termsand conditions substantially similar to those in the Purchase Agreement (if applicable).  Bank shall provide reasonable assistance inconnection with the conversion of the Program Assets to the Systems of NMG orthe Nominated Purchaser, including provision of interim services.  The Parties (together with any potentialNominated Purchaser designated by NMG) shall negotiate in good faith the termsof, and the Parties and the Nominated Purchaser shall execute, an interimservicing agreement (the “Interim Servicing Agreement”) detailing theterms upon which the Parties will effectuate the conversion of the Accounts andother Program Assets and/or Wind-Down Assets to the Systems of NMG or theNominated Purchaser, including, if requested, the obligation of Bank to provideinterim services to NMG and /or the Nominated Purchaser for a period specifiedby NMG or the Nominated Purchaser of up to [***] following the Program PurchaseDate (as may be extended pursuant to this Section 17.2(f), the “InterimServicing Period”).  The InterimServicing Agreement shall be effective from the Program Purchase Date and shallprovide for a reasonable servicing fee to Bank. The Parties shall not unreasonably withhold or delay execution of theInterim Servicing Agreement.  The Partiesshall mutually agree upon a conversion plan which shall be set forth in the InterimServicing Agreement.  The Parties shalleffectuate the conversion of the Accounts and the Program Assets and/orWind-Down Assets to the Systems of NMG or the Nominated Purchaser by theconversion date specified in the conversion plan and in accordance with theInterim Servicing Agreement.  The InterimServicing Period shall terminate no later than [***] following the ProgramPurchase Date; *provided, however,* that (i) ifsuch termination date would otherwise fall on a date that is between November 1and January 31, NMG or the Nominated Purchaser, on the one hand, or Bank,on the other hand, may extend the Interim Servicing Period to a date that is[***] after January 31, and (ii) if the Interim Servicing Periodwould otherwise terminate on any of the last [***] of any calendar month, NMGor the Nominated Purchaser, on the one hand, or Bank, on the other hand, mayextend the Interim Servicing Period up to [***].  NMG or the Nominated Purchaser, on the onehand, or Bank, on the other hand, may extend the Interim Servicing Periodpursuant to clause (i) above by delivering written notice of suchextension to Bank or NMG and the Nominated Purchaser, as applicable, not lessthan [***] prior to the date on which the Interim Servicing Period would end inabsence of such extension or pursuant to clause (ii) above by deliveringwritten notice of such extension to Bank or NMG and the Nominated Purchaser, asapplicable, not less than [***] prior to the date on which the InterimServicing Period would end in absence of such extension.

 

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

 

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

 

(A)                              An analysis, prepared inaccordance with the methods and reflecting the information set forth inSchedule 17.2(g) reflecting a segmentation of all Accounts as to whichBank proposes to make any change to Risk Management Policies (other thanchanges as required by Applicable Law);

 

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

 

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

 

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

 

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

 

(v)                                 for each segment of RAM DeficientAccounts reflected in any of the foregoing analyses, (A) a description ofany proposed changes in Risk Management Policies and (B) informationregarding the forecasted effects of each such proposed change on key Programperformance metrics, including [***];

 

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

 

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

 

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

 

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

 

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

 

17.3                           CardAcceptance and Loyalty Program During Wind-Down.  Following the occurrence of a PreliminaryNon-Purchase Event occurring after a termination by NMG pursuant to Section 16.2(f),(g), (h) or (i) or by Bank pursuant to Section 16.3, all of therestrictions set forth in Section 2.2(d) on the ability of the NMGCompanies to accept Credit Cards other than NMG Credit Cards shall cease toapply and the NMG Companies shall thereafter be permitted to accept all CreditCards without limit through the expiration or termination of thisAgreement.  In addition, notwithstandingany provision of this Agreement to the contrary, following the occurrence of aPreliminary Non-Purchase Event occurring after any termination pursuant to theSections referred to above in this Section 17.3, any and all restrictions(including pursuant to Section 2.2(g), Schedule 2.2(d) or otherwise)on the NMG Companies’ ability to offer Loyalty Programs of any type or pursuantto any terms, to allow awards pursuant to the Program Loyalty Program to bemade available in connection with purchases using Credit Cards or other paymentproducts other than the NMG Credit Cards and/or any other restrictions on theability to amend or modify the Program Loyalty Program or any other LoyaltyProgram shall also cease to exist, provided**that points orawards granted pursuant to the Program Loyalty Program in exchange for paymentusing forms of tender other than the NMG Credit Cards shall not be awarded on amore favorable basis than points or awards granted pursuant to such program inexchange for payment using the NMG Credit Cards (e.g., comparable points andcomparable spend level).

 

17.4                           DedicatedProgram Personnel.  Upon termination or expiration of the Programfor any reason and until the date that is [***] 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)                                  In connection with any prospectiveexpiration of this Agreement, or following the delivery of a notice oftermination by NMG or Bank prior to the end of the Term, if NMG gives writtennotice that it shall not exercise the option referred to in Section 17.2or otherwise fails to exercise the purchase option within the time periodspecified in Section 17.2(b), following the effective date of theexpiration or termination of this Agreement, the NMG Companies shall have nofurther rights whatsoever in or to the Program Assets (other than in respect ofthe Wind-Down Assets to the extent NMG exercises its purchase option in respectthereof).  In the event a PreliminaryNon-Purchase Event occurs prior to the effective date of the expiration ortermination of this Agreement, Bank and NMG shall continue to comply with allof their respective obligations under this Agreement, provided that Bank shallnot be obligated to originate new Accounts (and in such event NMG shall not beobligated to perform activities referred to in Section 4.2(a)(v) or(viii)) unless at the time of a timely delivery of a Preliminary Non-PurchaseEvent NMG also exercises, by delivering written notice to Bank, an option topurchase, or cause a Nominated Purchaser to purchase, the assets associatedwith all Accounts originated after such date (such assets, the “Wind-DownAssets”).  The purchase price for theWind-Down Assets, which shall be payable upon the earlier to occur of (i) theProgram Purchase 

 

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

 

(b)                                 If NMG gives written notice thatit shall not exercise the option to purchase the Program Assets referred to in Section 17.2or otherwise fails to exercise the option within the time period specified in Section 17.2(b),Bank shall have the right in its sole discretion on or after the effective dateof the expiration or termination of this Agreement to:

 

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

 

(ii)                                  subject to Applicable Law, notifyCardholders that Bank shall cease providing credit under the Accounts andrequire repayment of all amounts outstanding on all Accounts until allassociated receivables have been repaid;

 

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

 

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

 

(c)                                  Notwithstanding the foregoing, inno event shall Bank use or disclose or permit any of its Affiliates to use ordisclose the Cardholder Data to market or promote a Credit Card or ancillaryproduct together with any retailer.

 

(d)                                 If NMG gives written notice thatit shall not exercise the option to purchase the Program Assets referred to in Section 17.2or otherwise fails to exercise the option within the time period specified in Section 17.2(b),following the effective date of the expiration or termination of thisAgreement, as applicable, the NMG Companies shall provide reasonable assistancein connection with the conversion of any Program Assets (other than Accountsthe NMG Companies may elect to purchase pursuant to Section 17.5(a))resident on or integrated within the NMG Systems to the Bank Systems, includingprovision of interim services in accordance with the provisions of thisAgreement until such conversion occurs, which shall not be later than [***]following the effective date of such expiration or termination.  Bank shall bear all costs and expenses of anysuch conversion and the transitioning of services performed by the NMGCompanies to the Bank.

 

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

 

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specified in Section 17.2(b), Bank shall no longer use any of theNMG Licensed Marks (or any other trademarks or source indicators confusinglysimilar thereto) and must rebrand the NMG Credit Cards; provided thatafter such [***], 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.

 

(f)                                    In the case of a termination byNMG pursuant to Section 16.2(f)(ii)(B), if NMG delivers written notice ofits intention to exercise the option to purchase the Program Assets referred toin Section 17.2 but fails to consummate such purchase at or before suchexpiration of the time to complete such purchase as set forth in thisAgreement, NMG shall pay to Bank, within [***] after such expiration, an amountequal to [***], Bank shall be entitled to draw upon and retain such amount fromthe segregated account, escrow account****orletter of credit established pursuant to Section 4.6(h)(i) and(iv).  The remainder of the amount heldin the segregated account or in escrow after such payment or drawing, if any,pursuant to Section 4.6(h)(i) shall be released to NMG and the letterof credit shall be terminated immediately upon such payment or drawing.  If NMG elects not to exercise the ProgramAssets purchase option referred to in Section 17.2, fails to timelyexercise the purchase option within the time period specified in Section 17.2(b) orthe Program Purchase Date occurs, all amounts held in the segregated account orin escrow established pursuant to Section 4.6(h)(i) and (iv) shallbe paid to NMG and the letter of credit, if any, shall be terminated withoutany drawing thereunder.

 

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

 

**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)                                  any Retail Merchant’s negligenceor recklessness or willful misconduct (including acts and omissions) relatingto the Program;

 

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

 

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

 

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

 

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

 

(f)                                    any Solicitation Materialsdistributed by an NMG Company and not (i) approved by the ManagementCommittee or (ii) provided by Bank;

 

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

 

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

 

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

 

18.2                           BankCompanies’ Indemnification of the NMG Companies.  From and after the Effective Date, the BankCompanies’ shall indemnify and hold harmless NMG, 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)                                  Bank’s or its Affiliate’snegligence or recklessness or willful misconduct (including acts and omissions)relating to the Program;

 

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

 

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

 

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(d)                                 dishonest or fraudulent acts byBank, or any of its Affiliates, agents or employees, in connection with theProgram;

 

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

 

(f)                                    any Account Documentation andSolicitation Materials approved by the Management Committee and used by any ofthe NMG Companies in that form and in accordance with Bank’s instructionsand/or the Operating Procedures that fails to comply with Applicable Law, otherthan any content in the Solicitation Materials that primarily relates toLoyalty Programs and was included in the Solicitation Materials in the formprovided by NMG without any input from Bank with respect to Applicable Law;

 

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

 

(h)                                 Bank’s Inserts or BillingStatement messages; and

 

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

 

18.3                           Procedures.

 

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

 

(b)                                 The Indemnified Party shall havethe right to employ its own counsel if the Indemnifying Party elects to assumesuch defense, but the fees and expenses of such counsel shall be at theIndemnified Party’s expense, unless (i) the employment of such counsel hasbeen authorized in writing by the Indemnifying Party, (ii) theIndemnifying Party has not employed counsel to take charge of the defensewithin twenty (20) days after delivery of the applicable notice or, havingelected to assume such defense, thereafter ceases its defense of such action,or (iii) the Indemnified Party has reasonably concluded that there may bedefenses available to it which are different from or additional to thoseavailable to the Indemnifying Party (in which case 

 

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the Indemnifying Party shall not have the right to direct the defense ofsuch action on behalf of the Indemnified Party), in any of which events theattorneys’ fees and expenses of counsel to the Indemnified Party shall be borneby the Indemnifying Party.

 

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

 

(d)                                 The Indemnified Party orIndemnifying Party may at any time notify the other of its intention to settleor compromise any claim, suit or action against the Indemnified Party inrespect of which payments may be sought by the Indemnified Party hereunder, and(i) the Indemnifying Party may settle or compromise any such claim, suitor action solely for the payment of money damages for which the IndemnifiedParty will be fully indemnified hereunder, but shall not agree to any othersettlement or compromise without the prior written consent of the IndemnifiedParty, which consent shall not be unreasonably withheld (it being agreed thatany failure of an Indemnified Party to consent to any settlement or compromiseinvolving relief other than monetary damages shall not be deemed to beunreasonably withheld), and (ii) the Indemnified Party may settle orcompromise any such claim, suit or action solely for an amount not exceedingOne Thousand Dollars ($1,000), but shall not settle or compromise any othermatter without the prior written consent of the Indemnifying Party, whichconsent shall not be unreasonably withheld.

 

18.4                           Noticeand Additional Rights and Limitations.

 

(a)                                  If an Indemnified Party fails togive prompt notice of any claim being made or any suit or action beingcommenced in respect of which indemnification under this ARTICLE XVIII maybe 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)                                 This ARTICLE XVIII shallgovern the obligations of the Parties with respect to the subject matter hereofbut shall not be deemed to limit the rights that either Party might otherwisehave at law or in equity.

 

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

 

**ARTICLE XIX**

 

**MISCELLANEOUS**

 

19.1   Precautionary Security Interest.  The NMG Companiesand Bank agree that this Agreement contemplates the extension of credit by Bankto Cardholders and that the NMG Companies’ submission of NMG Charge TransactionData to Bank shall constitute assignment by the NMG Companies of any and allright, title and interest in such NMG Charge 

 

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TransactionData and the Cardholder Indebtedness reflected therein.  However, as a precaution in the unlikelyevent that any person asserts that Article 9 of the UCC applies or mayapply to the transactions contemplated hereby, and to secure the NMG Companies’payment of and performance of all obligations of the NMG Companies to Bank, theNMG Companies hereby grant to Bank a first priority present and continuingsecurity interest in and to the following, whether now existing or hereaftercreated 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 any reasonable action requested by Bank, atBank’s expense, to establish the first lien and perfected status of suchsecurity interest.  Upon the terminationor expiration 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)                                  Bank shall have the right tosecuritize, participate or pledge the Cardholder Indebtedness or any partthereof by itself or as part of a larger offering at any time, in such a mannerthat allows Bank to obtain cash flows representing all or most of the economicbenefits of owning such Cardholder Indebtedness.  Such securitization, participation or pledgeshall not affect the NMG Companies’ rights or Bank’s obligationshereunder.  Bank shall not securitize,participate or pledge the Cardholder Indebtedness in any manner that mayencumber any of the NMG Companies’ rights hereunder to purchase ProgramAssets.  All uses of the NMG LicensedMarks in any securitization document shall be made in accordance with Section 10.1and with the prior written approval of NMG.

 

(b)                                 In the event the NMG Companieselect to purchase the Program Assets pursuant to Section 17.2 and Bank hassecuritized, participated or pledged any of the Cardholder Indebtednessincluded in the Program Assets, the Parties will cooperate to transfer suchassets, or Bank’s interest in and servicing rights with respect to such assets,to NMG or its Nominated Purchaser on reasonable terms pursuant to instrumentsin form and substance satisfactory to the Parties, and the purchase price setforth in Section 17.2(d) shall be reduced by the outstandingprincipal balance of such obligations on the Program Purchase Date.

 

19.3                           Assignment.  None of the NMGCompanies, on the one hand, and the Bank Companies, on the other hand, shallassign this Agreement or any of its rights hereunder without the prior writtenconsent of the other Party, except to the extent (i) the CardholderIndebtedness is securitized as permitted pursuant to Section 19.2 or (ii) otherwisepermitted under the Servicing Agreement.

 

19.4                           Sale orTransfer 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 to time propose to NMG theterms under which it desires to sell any NMG Accounts that have beenwritten-off in accordance with the Risk Management Policies, including thepayments proposed to be made to NMG and Bank in connection with any suchsale.  NMG 

 

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shallconsider any such proposal in good faith but shall be entitled to accept orreject any such proposal in its sole discretion.

 

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

 

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

 

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

 

19.8                           Non-Waiver.  No delay by a Partyhereto in exercising any of its rights hereunder, or partial or single exerciseof such rights, shall operate as a waiver of that or any other right.  The exercise of one or more of a Party’srights hereunder shall not be a waiver of, or preclude the exercise of, anyrights or remedies available to such Party under this Agreement or in law or atequity.

 

19.9                           Severability.  In case any one ormore of the provisions contained herein shall be invalid, illegal orunenforceable in any respect under any law, the validity, legality andenforceability of the remaining provisions contained herein shall not in anyway 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)                                  Each Party hereby waives all rightto trial by jury in any action or proceeding to enforce or defend any rightsunder this Agreement.

 

(b)                                 Each Party hereby irrevocablysubmits to the jurisdiction of the United States District Court for the Stateof Delaware or, if such federal jurisdiction is unavailable, in the statecourts of the State of Delaware over any action arising out of this Agreement,and each Party hereby irrevocably waives any objection which such Party may nowor hereafter have to the laying of improper venue or *forum non conveniens*. Each Party agrees that a judgment in any such action orproceeding may be enforced in other jurisdictions by suit on the judgment or in

 

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any mannerprovided by law.  Any and all service of process and any other notice in any such suit,action or proceeding with respect to this Agreement shall be effective againsta Party if given as provided herein.

 

19.11                     GoverningLaw; Compliance with Law.

 

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

 

(b)                                 Each Party shall comply in allmaterial respects with Applicable Law in connection with its activities and theexercise of its rights and performance of its obligations hereunder.

 

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

 

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

 

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

 

| If to the NMG Companies: |   | c/o The Neiman Marcus  Group, Inc. |
|--------------------------|--------|-----------------------------------------|
|                     |   | One Marcus Square                       |
|                     |   | 1618 Main Street                        |
|                     |   | Dallas, Texas 75201                     |
|                     |   | Attention: General Counsel              |
|                     |   |                                    |
|                     |   | c/o The Neiman Marcus Group, Inc.  |
|                     |   | One Marcus Square                       |
|                     |   | 1618 Main Street                        |
|                     |   | Dallas, Texas 75201                     |
|                     |   | Attention: Credit  Card Program Manager |

 

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| With a copy to:           |       | Simpson Thacher &  Bartlett LLP                                   |
|---------------------------|------------|----------------------------------------------------------------------------|
|                      |       | 425 Lexington Avenue                                                       |
|                      |       | New York, New York 10017                                                   |
|                      |       | Attention: Maripat  Alpuche, Esq.                                     |
|                      |       |                                                                       |
| If to the Bank Companies: |       | c/o HSBC Bank Nevada, N.A.                                                 |
|                      |       | 26525 N. Riverwoods Blvd.                                                  |
|                      |       | Mettawa, Illinois 60045                                               |
| ** **                | ** ** | Attention: SVP - Client  Development, HSBC Card & Retail Services |
|                      |       |                                                                       |
| With a copy to:           |       | HSBC Card Services, Inc.                                              |
|                      |       | 26525 N. Riverwoods Blvd.                                                  |
|                      |       | Mettawa, Illinois 60045                                               |
|                      |       | Attention: General Counsel, CRS  Division                                  |

 

19.15                     Coordination of Consentsand 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.

 

19.16                     Further Assurances.  The NMG Companiesand Bank agree to produce or execute such other documents or agreements as maybe necessary or desirable for the execution and implementation of thisAgreement and the consummation of the transactions specified herein and to takeall such further action as the other Party may reasonably request in order togive evidence to the consummation of the transactions specified herein.

 

19.17                     No Joint Venture.  Nothing containedin this Agreement shall be deemed or construed by the Parties or any thirdparty to create the relationship of principal and agent, partnership, jointventure or of any association between the NMG Companies and the Bank Companies,and no act of either Party shall be deemed to create any such relationship.  The NMG Companies and the Bank Companies eachagree to such further actions as the other may request to evidence and affirmthe non-existence of any such relationship.

 

19.18                     Press Releases.  The NMG Companies,on the one hand, and the Bank Companies, on the other hand, each shall obtainthe prior written approval of the other Party with regard to the substance andtiming of any press releases which announce the execution of this Agreement orthe transactions specified herein, which prior approval shall not unreasonablybe withheld.  At all times thereafter,the NMG 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 relatingthereto.  The foregoing notwithstanding,it is understood that neither Party shall be required to obtain any priorconsent, but shall consult with each other to the extent practicable, withregard to (a) filings, press 

 

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

 

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

 

19.21                     Third Parties.  There are nothird-party beneficiaries to this Agreement. Except for the Indemnified Parties with respect to indemnity claimspursuant to Article XVII, the Parties do not intend:  (i) the benefits of this Agreement toinure to any third party; or (ii) any rights, claims or causes of actionagainst a Party to be created in favor of any person or entity other than theother Party.

 

19.22                     Force Majeure.  If performance ofany service or obligation under this Agreement is prevented, restricted,delayed or interfered with by reason of labor disputes, strikes, acts of God,floods, lightning, severe weather, shortages of materials, rationing, utilityor communication failures, earthquakes, war, revolution, civil commotion, actsof public enemies, terrorist attacks, blockade, embargo or any law, order,proclamation, regulation, ordinance, demand or requirement having legal effectof any government or any judicial authority or representative of any suchgovernment, or any other act whatsoever, whether similar or dissimilar to thosereferred to in this clause, which are beyond the reasonable control of a Partyand could not have been prevented by reasonable precautions, (each, a “ForceMajeure Event”) then such Party shall be excused from such performance tothe extent of and during the period of such Force Majeure Event.  A Party excused from performance pursuant tothis Section 19.22 shall exercise all reasonable efforts to continue toperform its obligations hereunder, including by implementing its disasterrecovery and business continuity plan as provided in Section 7.3(d), andshall 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, ifa condition constituting a Force Majeure Event with respect to the Bank Companies,on the one hand, or the NMG Companies, on the other hand, exists for more thanthirty (30) consecutive days (or five (5) days in the case of any paymentobligation) and such Party is unable to perform a material obligation (whichshall be deemed to include any payment obligation pursuant to Article VIIIor 

 

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Article IX)under this Agreement due to such Force Majeure Event, then the other Partyshall have the right to terminate this Agreement upon written notice to theParty subject to such Force Majeure Event; provided, however,that (i) prior to delivering written notice of termination in respect ofsuch Force Majeure Event, the Party seeking to terminate this Agreement shallcall, and the Parties shall attend one or more Management Committee to considerand vote upon a plan to outsource the material obligation that such Party isunable to perform and (ii) in the event such outsourcing arrangement isagreed to, the Parties shall promptly implement such arrangement and thisAgreement may not be terminated unless such Force Majeure Event continues onthe fifteenth (15th)day following approval of such outsourcing arrangement.

 

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

 

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

 

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

 

19.26                     Survival.  Upon the expirationor termination of this Agreement, the Parties shall have the rights andremedies described herein.  Upon suchexpiration or termination, all obligations of the Parties under this Agreementshall cease, except that the obligations of the Parties pursuant to Schedule4.6(f) and the corresponding provisions of Section 4.6(f) (AlternativeRisk Change Payment Arrangements), ARTICLE VI (Cardholder Information), Section 8.5(Bank Right to Charge Back), Article X (Intellectual Property), ARTICLE XII(Access, Audit and Dispute Resolution), Article XIII (Confidentiality), ARTICLE XVII(Effects of Termination), ARTICLE XVIII (Indemnification), Section 19.1(Precautionary Security Interest), Section 19.6 (Sales and Use Tax), Section 19.10(Waiver of Jury Trial and Venue) and Section 19.11 (Governing Law;Compliance with Law) shall survive the expiration or termination of thisAgreement.

 

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**ARTICLE XX**

 

**RECOURSE CREDIT PROGRAM**

 

20.1                           Recourse Credit Program.

 

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

 

(b)                                 Recourse Accounts shall be subjectto the same Cardholder terms as the remainder of the Accounts under theProgram.  Recourse Accounts shall beconsidered Accounts for all purposes of this Agreement, including Sections 4.10and 4.11.

 

20.2                           NMG Obligations.

 

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

 

20.3                           Collection of Charged-OffPartial Recourse Accounts and Purchased Full Recourse Accounts.

 

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

 

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

 

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warranty by or recourse or liability to Bank, and NMG shall have the soleright to collect all amounts payable under the assigned Recourse Account.  NMG agrees that Bank may deduct undisputedpast due amounts that NMG owes to Bank for Recourse Accounts hereunder from anyamounts Bank owes to NMG under the Agreement. If Bank receives a payment on a Full Recourse Account after it has beenpurchased by NMG, Bank will forward to NMG, as promptly as reasonablypracticable, the equivalent sums for such payment received.

 

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

 

20.5                           Reports. Bankagrees to provide NMG with reporting on the status of all Recourse Accounts notless than monthly. Such report shall include the total number of RecourseAccounts in the Recourse Portfolio, the aggregate dollar amount of the RecourseAccounts in the Recourse Portfolio, the percentage of the total Programreceivables that are comprised of Recourse Accounts, and an itemized accountingof the delinquency level of each Recourse Account.

 

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

 

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

 

20.8                           Removals from RecoursePortfolio. In the event a Cardholder pays the entirebalance owed on a Recourse Account, Bank may in its sole discretion at anypoint thereafter remove such Recourse Account from the Recourse Portfolio andtreat it as a regular Account. Accordingly, if, and from the time, any suchRecourse Account is removed from the Recourse Portfolio, the Account shall nolonger be deemed a Recourse Account or subject to the terms of this Article XX.

 

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

 

121

----

 

[Remainderof Page Intentionally Left Blank]

 

122

----

 

IN WITNESS WHEREOF, each of theParties has caused this Agreement to be duly executed as of the date firstabove written.

 
|   | THE NEIMAN MARCUS GROUP, INC. |
|--------|------------------------------------|
|   |                               |
|   |                               |
|   | By:                                | /s/ James E. Skinner |
|   |                               | Name:  James E. Skinner |
|   |                               | Title:  EVP & CFO |
|   |                               |
|   |                               |
|   | BERGDORF GOODMAN, INC.        |
|   |                               |
|   |                               |
|   | By:                                | /s/  James E. Skinner |
|   |                               | Name:  James E. Skinner |
|   |                               | Title:  EVP & CFO |
|   |                               |
|   |                               |
|   | HSBC BANK NEVADA, N.A.             |
|   |                               |
|   |                               |
|   | By:                                | /s/  Brian Hughes |
|   |                               | Name:  Brian Hughes |
|   |                               | Title:  EVP |
|   |                               |
|   |                               |
|   | HSBC CARD  SERVICES INC.           |
|   |                               |
|   |                               |
|   | By:                                | /s/  Brian Hughes |
|   |                               | Name:  Brian Hughes |
|   |                               | Title: EVP |

 

----

 

**SCHEDULE 1.1(a)**

 

**ABA Delinquency Forecast**

 

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

** **
| **Month** | ** ** | **A=March 2010   Forecast** | ** ** | ** ** | ** ** |
|-----------|------------|---------------------------------------|------------|------------|------------|
| Jul-10    |       | 6.58                                  | %          | [***]      |       |
| Aug-10    |       | 6.50                                  | %          |       |
| Sep-10    |       | 6.42                                  | %          |       |
| Oct-10    |       | 6.34                                  | %          |       |
| Nov-10    |       | 6.26                                  | %          |       |
| Dec-10    |       | 6.16                                  | %          |       |
| Jan-11    |       | 6.04                                  | %          |       |
| Feb-11    |       | 5.93                                  | %          |       |
| Mar-11    |       | 5.80                                  | %          |       |
| Apr-11    |       | 5.68                                  | %          |       |
| May-11    |       | 5.57                                  | %          |       |
| Jun-11    |       | 5.45                                  | %          |       |
| Jul-11    |       | 5.32                                  | %          |       |
| Aug-11    |       | 5.18                                  | %          |       |
| Sep-11    |       | 5.05                                  | %          |       |
| Oct-11    |       | 4.93                                  | %          |       |
| Nov-11    |       | 4.81                                  | %          |       |
| Dec-11    |       | 4.69                                  | %          |       |
| Jan-12    |       | 4.57                                  | %          |       |
| Feb-12    |       | 4.46                                  | %          |       |
| Mar-12    |       | 4.35                                  | %          |       |
| Apr-12    |       | 4.25                                  | %          |       |
| May-12    |       | 4.15                                  | %          |       |
| Jun-12    |       | 4.04                                  | %          |       |
| Jul-12    |       | 3.91                                  | %          |       |
| Aug-12    |       | 3.78                                  | %          |       |
| Sep-12    |       | 3.66                                  | %          |       |
| Oct-12    |       | 3.56                                  | %          |       |
| Nov-12    |       | 3.49                                  | %          |       |
| Dec-12    |       | 3.42                                  | %          |       |
| Jan-13    |       | 3.35                                  | %          |       |
| Feb-13    |       | 3.29                                  | %          |       |
| Mar-13    |       | 3.23                                  | %          |       |
| Apr-13    |       | 3.16                                  | %          |       |
| May-13    |       | 3.10                                  | %          |       |
| Jun-13    |       | 3.05                                  | %          |       |
| Jul-13    |       | 3.00                                  | %          |       |
| Aug-13    |       | 2.96                                  | %          |       |
| Sep-13    |       | 2.92                                  | %          |       |
| Oct-13    |       | 2.88                                  | %          |       |

 

----

 
| Nov-13 |   | 2.85 | % |   |   |
|--------|--------|------|---|--------|--------|
| Dec-13 |   | 2.83 | % |   |
| Jan-14 |   | 2.83 | % |   |
| Feb-14 |   | 2.83 | % |   |

 

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

 

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

 

----

 

**SCHEDULE 1.1(b)**

 

**Bank Licensed Marks**

 
| **Mark**                             | ** ** | **Serial/Registration   Number** |
|--------------------------------------|------------|---------------------------------------|
| HSBC Card Services                   |       | 74586917/ 2000657                     |
| HSBC Bank Nevada                     |       | 74586917/ 2000657                     |
| HSBC Finance Corporation             |       | 74586917/ 2000657                     |
| HSBC Retail Services                 |       | 74586917/ 2000657                     |
| HSBC Card & Retail Services |       | 74586917/ 2000657                     |
| HSBC                                 |       | 74586917/ 2000657                     |

 
| **** |   |   |
|------|--------|--------|

 
| ** ** |   | 74052313/ 1699379 |
|------------|--------|-------------------|

 

----

 

**SCHEDULE 1.1(c)**

 

**Comparable Partner Programs**

 

SaksIncorporated

Helzberg Diamonds

Bon Ton

 

----

 

**SCHEDULE 1.1(d)**

 

**Collar Information**

 

“High Collar” means (i) with respect tothe Finance Charge Reversal Percentage applicable to the Private LabelAccounts, **[***]**, (ii) with respectto the Late Fee Reversal Percentage applicable to the Private Label Accounts, **[***]**; provided, however that the Parties will re-evaluate such rate  in **[***]**and may agree to a new rate which will apply for the remainder of theTerm based on changes to the weighted average Late Fee Reversal Percentage forthe period of **[***]**, (iii) withrespect to the dollar amount of Average Interest Free Receivables as a percentageof Average Private Label Receivables, **[***]**, or, in each case, such other level as may from time to time be set bythe Management Committee.

 

----

 

**SCHEDULE 1.1(e)**

 

**Housing Price Forecast**

 

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

 
| **Month** | ** ** | **A=March 2010   Forecast** | ** ** | ** ** | ** ** | **C=March 2012   Forecast (TBD)** | ** ** | **[***]** | ** ** |
|-----------|------------|---------------------------------------|------------|------------|------------|--------------------------------------------------|------------|-----------|------------|
| Jul-10    |       | 328.41                                |       | [***]      |       |                                             |       |      |       |
| Aug-10    |       | 326.18                                |       |       |       |                                             |       |      |
| Sep-10    |       | 324.55                                |       |       |       |                                             |       |      |
| Oct-10    |       | 323.51                                |       |       |       |                                             |       |      |
| Nov-10    |       | 322.96                                |       |       |       |                                             |       |      |
| Dec-10    |       | 322.82                                |       |       |       |                                             |       |      |
| Jan-11    |       | 322.92                                |       |       |       |                                             |       |      |
| Feb-11    |       | 323.06                                |       |       |       |                                             |       |      |
| Mar-11    |       | 323.08                                |       |       |       |                                             |       |      |
| Apr-11    |       | 322.87                                |       |       |       |                                             |       |      |
| May-11    |       | 322.29                                |       |       |       |                                             |       |      |
| Jun-11    |       | 321.32                                |       |       |       |                                             |       |      |
| Jul-11    |       | 320.24                                |       |       |       |                                             |       |      |
| Aug-11    |       | 319.38                                |       |       |       |                                             |       |      |
| Sep-11    |       | 319.04                                |       |       |       |                                             |       |      |
| Oct-11    |       | 319.13                                |       |       |       |                                             |       |      |
| Nov-11    |       | 319.46                                |       |       |       |                                             |       |      |
| Dec-11    |       | 319.91                                |       |       |       |                                             |       |      |
| Jan-12    |       | 320.44                                |       |       |       |                                             |       |      |
| Feb-12    |       | 321.02                                |       |       |       |                                             |       |      |
| Mar-12    |       | 321.69                                |       |       |       |                                             |       |      |
| Apr-12    |       | 322.47                                |       |       |       |                                             |       |      |
| May-12    |       | 323.39                                |       |       |       |                                             |       |      |
| Jun-12    |       | 324.47                                |       |       |       |                                             |       |      |
| Jul-12    |       | 325.68                                |       |       |       |                                             |       |      |
| Aug-12    |       | 327.02                                |       |       |       |                                             |       |      |
| Sep-12    |       | 328.41                                |       |       |       |                                             |       |      |
| Oct-12    |       | 329.83                                |       |       |       |                                             |       |      |
| Nov-12    |       | 331.27                                |       |       |       |                                             |       |      |
| Dec-12    |       | 332.70                                |       |       |       |                                             |       |      |
| Jan-13    |       | 334.15                                |       |       |       |                                             |       |      |
| Feb-13    |       | 335.54                                |       |       |       |                                             |       |      |
| Mar-13    |       | 336.95                                |       |       |       |                                             |       |      |
| Apr-13    |       | 338.44                                |       |       |       |                                             |       |      |
| May-13    |       | 339.97                                |       |       |       |                                             |       |      |
| Jun-13    |       | 341.53                                |       |       |       |                                             |       |      |
| Jul-13    |       | 343.13                                |       |       |       |                                             |       |      |
| Aug-13    |       | 344.77                                |       |       |       |                                             |       |      |
| Sep-13    |       | 346.40                                |       |       |       |                                             |       |      |

 

----

 
| Oct-13 |   | 348.02 |   |   |   |   |   |   |   |
|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Nov-13 |   | 349.62 |   |   |   |   |   |   |   |
| Dec-13 |   | 351.19 |   |   |   |   |   |   |   |
| Jan-14 |   | 352.75 |   |   |   |   |   |   |   |
| Feb-14 |   | 354.20 |   |   |   |   |   |   |   |
| Mar-14 |   |   |   |   |   |   |   |   |   |
| Apr-14 |   |   |   |   |   |   |   |   |   |
| May-14 |   |   |   |   |   |   |   |   |   |
| Jun-14 |   |   |   |   |   |   |   |   |   |
| Jul-14 |   |   |   |   |   |   |   |   |   |
| Aug-14 |   |   |   |   |   |   |   |   |   |
| Sep-14 |   |   |   |   |   |   |   |   |   |
| Oct-14 |   |   |   |   |   |   |   |   |   |
| Nov-14 |   |   |   |   |   |   |   |   |   |
| Dec-14 |   |   |   |   |   |   |   |   |   |
| Jan-15 |   |   |   |   |   |   |   |   |   |
| Feb-15 |   |   |   |   |   |   |   |   |   |
| Mar-15 |   |   |   |   |   |   |   |   |   |
| Apr-15 |   |   |   |   |   |   |   |   |   |
| May-15 |   |   |   |   |   |   |   |   |   |
| Jun-15 |   |   |   |   |   |   |   |   |   |
| Jul-15 |   |   |   |   |   |   |   |   |   |
| Aug-15 |   |   |   |   |   |   |   |   |   |
| Sep-15 |   |   |   |   |   |   |   |   |   |
| Oct-15 |   |   |   |   |   |   |   |   |   |
| Nov-15 |   |   |   |   |   |   |   |   |   |
| Dec-15 |   |   |   |   |   |   |   |   |   |
| Jan-16 |   |   |   |   |   |   |   |   |   |
| Feb-16 |   |   |   |   |   |   |   |   |   |
| Mar-16 |   |   |   |   |   |   |   |   |   |
| Apr-16 |   |   |   |   |   |   |   |   |   |
| May-16 |   |   |   |   |   |   |   |   |   |
| Jun-16 |   |   |   |   |   |   |   |   |   |
| Jul-16 |   |   |   |   |   |   |   |   |   |
| Aug-16 |   |   |   |   |   |   |   |   |   |
| Sep-16 |   |   |   |   |   |   |   |   |   |
| Oct-16 |   |   |   |   |   |   |   |   |   |
| Nov-16 |   |   |   |   |   |   |   |   |   |
| Dec-16 |   |   |   |   |   |   |   |   |   |
| Jan-17 |   |   |   |   |   |   |   |   |   |
| Feb-17 |   |   |   |   |   |   |   |   |   |
| Mar-17 |   |   |   |   |   |   |   |   |   |
| Apr-17 |   |   |   |   |   |   |   |   |   |
| May-17 |   |   |   |   |   |   |   |   |   |
| Jun-17 |   |   |   |   |   |   |   |   |   |

 

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

 

----

 

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

 

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

 

----

 

**SCHEDULE1.1(f)**

 

**Program Loyalty Program and Loyalty Cards**

 

Section A:Description of Current Program Loyalty Program

 

*The InCircle Program*

TheInCircle program has successfully driven the use of the NM and BG Card and hasstimulated ongoing retail sales for over 25 years. The InCircle Program appliesautomatically to any NM or BG Card (in limited cases, InCircle can beawarded to select AMEX cards enrolled in the program by a customer). Under thecurrent InCircle Program, a customer is an InCircle member as soon as they opena new credit card account. Each time a customer uses the NM or BG Card, thecustomer earns two points for each dollar spent. Once a customer accumulates10,000 points during an annual period, the customer becomes eligible to redeemfor an InCircle Gift card.

 

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

 

Amember’s account must be in good standing and at the current point level forthirty days to be eligible to redeem points. Merchandise returns and otherfinancial adjustments are deducted from the InCircle account points. Corporateand employee accounts are not eligible to participate in the InCircle program.

 

Allpoint redemptions for InCircle must be made during the annual program period(which lasts for thirteen months from January 1st, to the following January 31st). After January 31st,25% of unredeemed InCircle points (up to a maximum of 5,000 points) will becarried over into the next annual program period. Points are not earned onsales tax, beauty salons, delivery and processing, alterations or gift packagingcharges. Points are not convertible to cash or payment on Neiman Marcus orBergdorf Goodman credit accounts. Customers are responsible for all federal,state, and local taxes; for delivery, processing, and handling fees; and forinsurance.

 

NMGalso offers special privileges determined by NMG from time to time (such aspersonal shopper services, invitations to exclusive events, free consultationsand private shopping hours) as well as InCircle points to AMEX Centurion (“Black”)and Platinum cardholders.

 

TheInCircle program also permits point owners to convert points from InCirclepoints to points for other programs, including United Airlines, AmericanAirlines and Delta Airlines (point for point), and gifts/travel at Circle levelfour and above.

 

----

 

Section B:Loyalty Cards

 

InCircleGift Card®

 

----

 

**SCHEDULE 1.1(g)**

 

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

 

SectionA: Non-Card Payment Plans

 

SignatureAccounts

Commercialor Corporate Accounts (including Studio Accounts)

 

SectionB: Private Label Credit Cards

 

**NeimanMarcus**

NeimanMarcus Card

 

**Bergdorf Goodman**

Bergdorf Goodman Card

 

----

** **

**SCHEDULE 1.1(h)**

 

**NMG Licensed Marks**

** **
| **Mark**                     | ** ** | **Serial/Registration Number** |
|------------------------------|------------|-------------------------------------|
| BERGDORF  GOODMAN            |       | 1902799                             |
| BERGDORF  GOODMAN            |       | 0992733                             |
| INCIRCLE  REWARDS            |       | 2442806                             |
| NEIMAN  MARCUS               |       | 2209260                             |
| NEIMAN  MARCUS               |       | 0934177                             |
| NEIMAN  MARCUS               |       | SN  78/374184                       |
| NEIMAN  MARCUS (stylized)    |       | 1733202                             |
| NEIMAN-MARCUS                |       | 1154006                             |
| NM                           |       | 1558605                             |
| PLATINUM  PREFERENCE REWARDS |       | SN  78/420272                       |
| IN  (design)                 |       | 3370501                             |
| INCIRCLE                     |       | 3370473                             |
| INCIRCLE  (design)           |       | 77/588528                           |
| HORCHOW  GIFT CARD           |       | 3315415                             |

 

----

** **

**SCHEDULE 1.1 (i)**

 

**RAM Deficient Account Methodology**

 

[***]

 

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

 

“LateFee Yield” means, for any period, (i) the total dollar amount of revenuereceived as a result of late fees assessed upon Cardholders, less any late feewaivers granted, divided by (ii) the Average Daily Gross Receivables, whichshall be Annualized.

 

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

 

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

 

----

** **

**SCHEDULE 1.1(j)**

 

**Special Discounts**

 

[***]

 

----

** **

**SCHEDULE 1.1(k)**

 

**Unemployment Forecast**

 

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

 
| **Month** | ** ** | **A=March 2010   Forecast** | ** ** |   | ** ** |
|-----------|------------|---------------------------------------|------------|--------|------------|
| Jul-10    |       | 10.16                                 | %          | [***]  |       |
| Aug-10    |       | 10.24                                 | %          |   |
| Sep-10    |       | 10.28                                 | %          |   |
| Oct-10    |       | 10.30                                 | %          |   |
| Nov-10    |       | 10.31                                 | %          |   |
| Dec-10    |       | 10.32                                 | %          |   |
| Jan-11    |       | 10.31                                 | %          |   |
| Feb-11    |       | 10.28                                 | %          |   |
| Mar-11    |       | 10.23                                 | %          |   |
| Apr-11    |       | 10.14                                 | %          |   |
| May-11    |       | 10.02                                 | %          |   |
| Jun-11    |       | 9.85                                  | %          |   |
| Jul-11    |       | 9.65                                  | %          |   |
| Aug-11    |       | 9.45                                  | %          |   |
| Sep-11    |       | 9.26                                  | %          |   |
| Oct-11    |       | 9.08                                  | %          |   |
| Nov-11    |       | 8.90                                  | %          |   |
| Dec-11    |       | 8.72                                  | %          |   |
| Jan-12    |       | 8.53                                  | %          |   |
| Feb-12    |       | 8.34                                  | %          |   |
| Mar-12    |       | 8.15                                  | %          |   |
| Apr-12    |       | 7.95                                  | %          |   |
| May-12    |       | 7.76                                  | %          |   |
| Jun-12    |       | 7.59                                  | %          |   |
| Jul-12    |       | 7.43                                  | %          |   |
| Aug-12    |       | 7.27                                  | %          |   |
| Sep-12    |       | 7.11                                  | %          |   |
| Oct-12    |       | 6.95                                  | %          |   |
| Nov-12    |       | 6.80                                  | %          |   |
| Dec-12    |       | 6.65                                  | %          |   |
| Jan-13    |       | 6.52                                  | %          |   |
| Feb-13    |       | 6.43                                  | %          |   |
| Mar-13    |       | 6.36                                  | %          |   |
| Apr-13    |       | 6.32                                  | %          |   |
| May-13    |       | 6.27                                  | %          |   |
| Jun-13    |       | 6.22                                  | %          |   |
| Jul-13    |       | 6.17                                  | %          |   |
| Aug-13    |       | 6.11                                  | %          |   |
| Sep-13    |       | 6.06                                  | %          |   |

 

----

 
| Oct-13 |   | 6.03 | % |   |   |
|--------|--------|------|---|--------|--------|
| Nov-13 |   | 5.99 | % |   |   |
| Dec-13 |   | 5.95 | % |   |   |
| Jan-14 |   | 5.91 | % |   |   |
| Feb-14 |   | 5.88 | % |   |   |

 

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

 

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

 

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

 

----

** **

**SCHEDULE 2.2(d)**

 

**Loyalty Arrangements**

 

Permitted Loyalty Program Arrangements

 

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

 

----

** **

**SCHEDULE 3.3**

 

**Program Relationship Managers; Partner Program Team**

 

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

 

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

 

3.             Bank’sProgram Team Requirements and Specifications

 

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

 

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

 

(ii)  One (1)fully-trained data mining analyst.

 

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

 

(b) Other Program team requirements:

 

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

 

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

 

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

 

----

** **

**SCHEDULE 3.3(d)**

 

**List of Competing Retail Programs**

 

Saks

Nordstrom

Barney’s

Bloomingdale’s

Coach Jeffrey

Tiffany

Holt Renfrew

Fred Segal

Stanley Korshak

Scoop

LVMH

Prada Group

PPR Group

Macy’s

 

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** **

**SCHEDULE 4.1(b)**

 

**Risk Management Policies and Operating Procedures**

 

***Refer to attached document***

 

----

 

 

**HSBC CARD & RETAILSERVICES**

 

**NMG CREDIT RISK MANAGEMENTPOLICIES AND OPERATING PROCEDURES DOCUMENT**

 

**FINAL 1.19**

 

**SEPTEMBER 2010**

 

COPYRIGHT HSBC Card & Retail Services2010 ALL RIGHTS RESERVED.

 

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

 

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| 3SBC Card & Retail Services |   | Draft v 1.13 |
|--------------------------------------|--------|--------------|
| NMG Operating Procedure Document     |   | JUNE 2010    |

 

**Document Control**

 

[***]

 

 

ii

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[***]

 

iii

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** **

**Table of Contents**

 
| ** **                         | ** ** | **Page #** |
|------------------------------------|------------|-----------------|
| ** **                         |       | ** **      |
| **Section 1:  Introduction**  |       | **1**           |
|                               |       |            |
| 1.1  Purpose and Scope             |       | 1               |
| 1.2  Objectives                    |       | 1               |
| 1.3  Definitions and Abbreviations |       | 1               |
| [***]                              |       |            |

 

iv

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** **

[***]

 

v

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| HSBC Card & Retail Services |   | Version 1.13  |
|--------------------------------------|--------|---------------|
| NMG Operating Procedure Document     |   | MAY 2010 |

 

**Section 1:  Introduction**

 

***1.1 Purpose and Scope***

 

Thispolicy establishes the guidelines, consistent with sound underwriting practicesand regulatory guidance, affecting systemic and manual credit extensionactivities on the Neiman Marcus Group portfolio.

 

Thisis not an exhaustive list of  RiskManagement Policies and Operating Procedures but rather a representation forNMG and HSBC regarding the processes described herein.

 

***1.2 Objectives***

 

Theobjective of this policy is to establish formalized guidelines within whichoperational and systemic activities related to credit extension processing isset in place for the following covered activities:

 

New Accounts /Originations

 

Portfolio Management/ Authorizations

 

Guideline Increase /Decrease / Reinstatements

 

Reporting / AuthorityLimits

 

***1.3 Definitions and Abbreviations***

 
| CLD             |   | Credit Line Decrease                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|-----------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| CLI             |   | Credit Line Increase                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| D&B         |   | Dunn & Bradstreet Credit Bureau                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| DPD             |   | Days Past Due                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| FACT Act        |   | Fair and Accurate Credit Transactions Act of  2003 is a United States law. The act allows consumers to request and obtain a  free credit report once every twelve months from each of the three nationwide  consumer credit reporting companies The act also contains provisions to help  reduce identity theft, such as the ability for individuals to place alerts on  their credit histories if identity theft is suspected, or if deploying  overseas in the military, thereby making fraudulent applications for credit  more difficult. Further, it requires secure disposal of consumer information. |
|            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| FAS             |   | Financial Authorization System                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| NMGH            |   | Neiman Marcus Group, comprised of Neiman Marcus  and Bergdorf/Goodman                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| RAAC            |   | Risk Asset Acceptance Policy                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| REM             |   | Request Manager — form used to update system  access/entitlements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| RCM             |   | Retail Credit Management                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Ratification    |   | Ratification  is the act of confirmation by the RCC of management actions within assigned  levels of authority. Ratification applies to decisions by management prior to  implementation which is then ratified/confirmed at the next RCC meeting.                                                                                                                                                                                                                                                                                                                                                          |
|            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| OFAC            |   | Office of Foreign Asset Control                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| USA Patriot Act |   | Uniting and Strengthening America by  Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act  of 2001: Among other things, the act expands the Secretary of the Treasury’s  authority to regulate financial transactions, particularly those involving foreign  individuals and entities.                                                                                                                                                                                                                                                                                        |

 

1

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

 

2

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**SCHEDULE 4.4(f)**

 

**Document Retention Policy**

 

Beginningas of the Effective Date, NMG shall comply with the following documentretention policy:

 
| **Title**                                        | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                         | ** ** | **Retention** |
|--------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------|
| Regulatory Complaints                            |       | Complaint resolutions resulting  from complaints to any regulatory agency.                                                                                                                                                                                                                                                                                                                                                              |       | [***]         |
| Customer Application &  Agreement Forms |       | Samples of forms used for  customers applying for credit. Forms include two parts: 1) Application form  and 2) cardholder agreement and disclosures                                                                                                                                                                                                                                                                                     |       | [***]         |
| General Customer Correspondence                  |       | Retention of customer  correspondence that is currently required in writing, including name changes,  FTC dispute letters, bankruptcy filings and deceased notifications. Other  customer correspondence including address changes, credit limit change  requests and financial adjustment requests are not retained since these  requests can be accepted verbally today.                                                              |       | [***]         |
| Sales Slips (Signature Slips)                    |       | Signature slips that show the  transaction total, tender information and customer signature but not the  transaction detail.                                                                                                                                                                                                                                                                                                            |       | [***]         |
| GLB Privacy Opt Outs                             |       | Opt-out code will be retained  on-line permanently unless cardholder requests opt-in or opt-out change.  Opt-out reply notices will be retained on paper for 24 months                                                                                                                                                                                                                                                                  |       | [***]         |
| Completed Approved Applications                  |       | All new applications that are  signed by the applicant                                                                                                                                                                                                                                                                                                                                                                                  |       | [***]         |
| Customer Inquiry Decline Reason  Response        |       | After applicant receives initial  new account decline letter, decline reason response generally handled via  phone but follow-up letters mailed explaining specifics are not retained  although noted on the application on-line for 25 months. Existing cardholders  inquiry as to a declined authorization is also handled verbally in most cases  with follow-up letters, if necessary, not retained although noted on the  account. |       | [***]         |
| Adverse Action Letters                           |       | On-line letter code notations on  the declined application or existing account that had a declined sale,  declined application or their account closed, and the template of the adverse  action letter.                                                                                                                                                                                                                                 |       | [***]         |
| Approvals - Credit Line Increase  Request        |       | The date implemented and the  revised credit guideline is retained on-line                                                                                                                                                                                                                                                                                                                                                              |       | [***]         |
| Resolved Disputes                                |       | On-line history of each  Adjustment Jacket dispute including resolution stored in NMG Parley Forms  Database                                                                                                                                                                                                                                                                                                                            |       | [***]         |

 

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| **Title**                                            | ** ** | **Description**                                                                                                                                                                                                                                      | ** ** | **Retention** |
|------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------|
| Credit  Bureau Change Request/Correction             |       | Currently do not keep any  paperwork but the electronic consumer dispute verification (CDV) is stored  on-line for 120 days from date of submission                                                                                                  |       | [***]         |
| Currency Transaction Report                          |       | Currently stored within each  Store Cash Office but transitioning to centralized filing process                                                                                                                                                      |       | [***]         |
| Suspicious Activity Reports                          |       | Currently not done but will be  instituting process similar to Currency Transaction Report with a centralizing  filing and reporting control                                                                                                         |       | [***]         |
| OFAC Reporting                                       |       | Foreign OFAC reporting currently  in place but new reporting to be developed for all new applicants going  forward                                                                                                                                   |       | [***]         |
| USA Patriot Act Customer  Identification Information |       | Account opening information such  as: Name, Date of Birth, Social Security Number and Physical Address are  stored on-line but not all information is necessarily required to open new  account                                                      |       | [***]         |
| USA Patriot Act Customer  Identification Information |       | Pass/fail indicators of each new  account reason is stored on the on-line application record although no  specific beyond this indicator except any notes made by Universal Agent are  retained.                                                     |       | [***]         |
| Customer Identification Program  Reporting           |       | Exception reports to identify  customer program reporting is not existing at this time other than an  internal fraud file that can refer a new application for manual intervention.  NM Direct channel has additional fraud prevention capabilities. |       | [***]         |
| Cash Payment Reporting                               |       | See above Currency Transaction  Report                                                                                                                                                                                                               |       | [***]         |
| Performance Reports                                  |       | Various daily, weekly, monthly or  cycle reports used to measure performance in various credit department  functions that are retained on-line through SystemWare XNET or RDS platform                                                               |       | [***]         |

 

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**SCHEDULE 4.6(c)(vi)**

 

**Proposed Modification to Risk Management Policy**

**Projected Impact on**[***]

 

*Numbers are for Illustrative purposes only

 

[***]Impact Estimate — Methodology

 

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

 

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

 

[***]

 

Step II :  Ifnecessary (because Test/Control data for particular risk action is notavailable for the Neiman Marcus portfolio), derive ‘adjusted monthly [***]impact’ based on the proposed new test by incorporating judgmental assumptions.

 

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

 

[***]

 

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

 

[***]

 

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

 

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**SCHEDULE 4.6(d)**

 

**Implemented Modification to Risk Management Policy**

**Monthly Analysis of Cumulative Impact on**[***]

 

*Numbers below within the chart are for illustrativepurposes only

 

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

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

 

[***]

 

Example of Calculation of Sales Impact

 

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

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

·                  All numbers are for illustration purposes only

 

[***]

 

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**SCHEDULE 4.6(f)**

 

**Alternative Risk Change Payment Arrangement**

 

Withrespect to any segment of RAM Deficient Accounts identified pursuant to Section 17.2(g) comprisedof not less than **[***]**Accounts, NMG may elect, bywritten notice to Bank, to cause such segment of Accounts to become subject toan Alternative Risk Change Payment Arrangement, as described below, [***].   So long as NMG complies with the paymentarrangements pursuant to such Alternative Risk Change Payment Arrangement, asdescribed below, [***].

 

i.                  Bank willrandomly select the greater of **[***]**Accountsor **[***]** of Accounts capped at **[***]**Accounts from each segment of [***]; provided, however, thatBank shall only select the number of Accounts in excess of **[***]**Accounts(subject to the **[***]** Account cap) necessary toachieve a **[***]** confidence level that suchAccounts are representative of the segment of [***].

 

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

 

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

 

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

 

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Account” means, forany period, the sum of the Average Daily Gross Receivables for the ProtectedAccounts (excluding Test Actioned Accounts) for each month during such period dividedby the Average Protected Accounts for such period.  The excess of the Gross Receivables PerProtected Account over the Baseline Receivables are referred to herein as “IncrementalReceivables.”

 

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

 

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

 

Asused herein, “Alternative Payment Amount” with respect to any Program Quartermeans the sum of [***].

 

Asused herein, “Payment Period” means the period commencing with the occurrenceof a Preliminary Non-Purchase Event and ending on the date that is the earlierof (i) [***](iii) ofthe Program Agreement.

 

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**SCHEDULE 4.6(h)**

 

**Risk Change Shortfall**

 

[***]

 

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

 

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**SCHEDULE 4.6(i)**

 

**VIPAssignments**

 

New VIP assignments will be permittedonly in the following instances:

 

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

·                  RecourseAccounts

[***]

 

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

 

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**SCHEDULE 4.6(m)**

 

**Account Management Expansion**

 

1.Types of Action:

 

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

 

i.                  Proactive Batch Credit LineIncreases (CLI): Utilizing this strategy, guidelines would be systemicallyincreased through a batch process on Accounts meeting specific credit criteriawith no customer interaction required. Typically, the Accounts systemicallyincreased would be active Accounts nearing their existing guideline that meetminimum risk score and account qualifications.

 

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

 

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

 

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

 

v.              Relaxation of Existing RiskBased Inactive CLD Strategy: Similar to the risk-based active credit limitdecrease strategy, [***].  Relaxing this strategy may include, forexample, reducing the number of Accounts affected by raising risk scorethresholds in the existing strategy, decreasing guidelines less drastically(i.e., CLD to an amount higher than [***]), [***].

 

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**[***]

 

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

 

----

 

Example1.[***].

 

Example2:[***].

 

Example3: [***].

 

Example4:[***].

 

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**SCHEDULE 4.7**

 

**Account Terms**

 
| Annual  Fee                                    |   | None.                                                                                                                                                                                                                       |
|------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                           |   |                                                                                                                                                                                                                        |
| Late  Payment or Late Fee (at cycle)           |   | Lesser  of the Minimum Payment Amount and $25, in case no late fee has been assessed  in the past 6 cycles

 

Lesser  of the Minimum Payment Amount and $35, in case late fee has been assessed in  the past 6 cycles |
|                                           |   |                                                                                                                                                                                                                        |
| Returned  Check Fees                           |   | None                                                                                                                                                                                                                        |
|                                           |   |                                                                                                                                                                                                                        |
| Minimum  Payment Amount                        |   | 5%  of billed balance (but at least $25 rounded up to the nearest $5).                                                                                                                                                      |
|                                           |   |                                                                                                                                                                                                                        |
| Minimum Finance Charge                         |   | $.50                                                                                                                                                                                                                        |
|                                           |   |                                                                                                                                                                                                                        |
| Standard  APR                                  |   | APR  varies based on Prime + 20.74% (currently 23.99% APR as of June 1, 2010) for  cardholders.                                                                                                                             |
|                                           |   |                                                                                                                                                                                                                        |
| Grace  Period for the Imposition of Late Fees  |   | 6  days after the payment due date                                                                                                                                                                                          |
|                                           |   |                                                                                                                                                                                                                        |
| Grace  Period for the Repayment of Purchases   |   | 26  days                                                                                                                                                                                                                    |
|                                           |   |                                                                                                                                                                                                                        |
| Method  of Computing the Balance for Purchases |   | Average  Daily Balance (including new purchases)                                                                                                                                                                            |

 

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**SCHEDULE 4.8(d)**

 

**InternetServices**

 

AllInternet-based system functionality provided and maintained by the Bank must beavailable to cardholders 24 hours a day, 7 days a week with a minimum [***]system availability.  Scheduled systemmaintenance not exceeding [***] hours is allowed per month during the hoursof 12 am and 6 am CST, however, Bank will ensure in advance that systemmaintenance does not conflict with any NMG special sales event.  Internet functionality shall include:

 

·                  Real-Time Application Processing with FraudAuthentication— Bank application processing product must be completely processed back toInternet within a [***] window. Authentication product is a necessity to release new account numberimmediately back to Internet applicant if automatically approved or if referredto NMG Credit Services, a referral/reference number generated.  Authentication product must give NMG theability to influence question weighting structure and type of demographic orcredit bureau-related questions asked. Detailed fraud reporting and if available, the ability for UniversalAgents to either re-test applicant is required if applicant calls for manualverification.  In the event that fraudexpenses increase for [***] compared to fraud expenses from prior year as aresult of application fraud trends discussion with NMG and Bank must be held todiscuss alternatives and implement new fraud strategies to either enhance orreplace current authentication tools. Excluding auto-declined applications, this may include automaticallyreferring all internet applications to perform further manual verification byNMG Fraud before approving.

 

·                  Real-Time Authorization Processing (on NM/BGaccounts)- Direct communication to and from NM Direct/On-line CMOS system with a lessthan 2-second response time per authorization request is a requirement.  Current over-limit percentage parameters andTRIAD guideline increase processes must be in place to eliminate as much manualintervention as reasonably possible. Authorization processing through thischannel must be done from a ticket-level authorization prior to the item beingshipped.  At order time, an initialauthorization is performed to ensure the account is approvable and until allitems in the order are shipped, [***] until shipped to ensure the account isstill in good standing.  Allauthorizations not able to be approved systemically will require a batchedqueue-related decision process with NMG Credit Services to manually decisionpending transactions.  Some of thesemanual referrals include verifying the cardholder’s address discrepanciesbetween the CMOS and credit systems to further detect fraudulent addresssending.

 

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

 

·                  New Account Prescreening or Prospecting — In coordination with NM On-line personnel,new account and existing account prescreening options on the web can bediscussed by NMG and Bank.  The Partiesintend to encourage creditworthy third party customers, either during thecheck-out process or afterwards through an e-

 

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mail confirmation, to open an NM or BG chargeaccount with or without a promotion (i.e. bonus InCircle points or freeshipping). Other prospecting options to encourage existing NM or BG cardholdersto use their charge card to shop will also be discussed by NMG and Bank withinput from the NM On-line personnel with respect to specifications and designof such options.

 

·                  E-Pay Functionality — Electronic payment functionality must givethe cardholder the ability to pay their bill on-line, even on their closing ordue date, until [***] CST and be posted with this same date by thenext business day.  Should an on-linecustomer request to change or cancel his/her payment up until [***] CT same day, Universal Agents must have an abilityto correct these payments.  Returnedpayment transmission or reporting must be given to NMG daily to immediatelyreverse payment transaction or flag the account to require a replacementpayment prior to additional purchases.

 

·                  E-Bill Functionality - On-line bill presentment must be readilyavailable to cardholders within [***] of each cycle close and should contain at aminimum all data that is currently printed on the NM or BG monthly billingstatement.  Billing functionality shouldallow cardholders to view up to [***] of their billing statements andtransactional activity on-line.  TheParties will cooperate to implement selective marketing and InCircle loyaltymessages, if available, on the billing statement.  Universal Agents must have ability to viewand discuss on-line e-bill functionality with cardholders whenever necessary.

 

·                  E-Service Functionality — Additional services to providecycle-to-date balance information as well as customer address maintenance andcredit card re-ordering capabilities must also be maintained for self-servicingby the cardholder.  Additionally all “ContactUs” free-form e-mail requests from cardholders must continue to be circulatedthrough the [***] or applicable system, with template lettersexisting, for NMG Credit Services to provide prompt response back to therequestor.

 

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**Schedule 4.11**

**Promotional Credit Plans**

 

[***]

 

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**SCHEDULE 5.2**

 

**Marketing Commitments**

 

The “Program Growth Percentage” is, for eachFiscal Year after the first Fiscal Year of the Program, the percentage by whichNet Credit Sales for such Fiscal Year exceed Net Credit Sales for NMG’s FiscalYear ended July 31, 2010.

 

SectionA: NMG Marketing Commitment

 

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

 

Section B: Joint Marketing Commitment

 

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

 

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**SCHEDULE 6.2**

 

**Privacy Policy**

** **

**HSBCA Privacy Statement for Neiman Marcus and Bergdorf Goodman Cardholders**

 

**Introduction - Our Commitment to You**

 

HSBCis proud to be the issuer of the Neiman Marcus and the Bergdorf Goodman privatelabel credit card, each of which allows you to charge purchases from The NeimanMarcus Group, Inc. (“Neiman Marcus Group”), which includes Bergdorf Goodman,Inc., and their various affiliated companies. This Privacy Statement describesthe collection, use, and protection of information about you and your NeimanMarcus and/or Bergdorf Goodman credit card account. This policy has been ineffect as of July 2005.

 

HSBCis part of a financial services organization that has been providing superiorproducts and services to its customers for more than 150 years. We greatlyappreciate the trust that you and millions of customers have placed in us, andwe will protect that trust by continuing to respect the privacy of all ourapplicants and customers even if our formal customer relationship ends.

 

**What Information We Collect**

 

Itis important for you to know that in order to ensure that our customers get thevery best service and the highest quality products, HSBC collects demographicinformation (such as your name and address) and credit information (such asinformation related to your accounts with us and others). This information iscollected 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;

Information about yourInternet usage if you visit our web site.

** **

**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 and bergdorfgoodman.com. Your Neiman Marcus or Bergdorf Goodmancredit card can be used to make purchases at all of these locations.

 

Theinformation we share with Neiman Marcus Group may come from your application,such as your name, address, e-mail address, telephone number, and socialsecurity number. 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. This information comes from the sourcesdescribed above and may include your name, address, and account experience withus.

 

Youmay tell us not to share information with Neiman Marcus Group as set fort inthe immediately preceding paragraph by completing the form attached. ForVermont, state law requires us to obtain your permission in order to shareinformation about you in this way, and we will not share information about youin this way unless you authorize us to do so. We will automatically treataccounts with Vermont mailing addresses as if they have opted out of suchinformation 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 applicablelaw. These affiliated companies, doing business under the HSBC name, allprovide financial 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**

 

We may provide information to non-affiliatedcompanies that perform operational, collection, or fraud control servicesrelated to your

 

----

 

account.The sharing of information with these types of companies is permitted by law.Such a company might include a financial company (such as an insurance serviceprovider) or a non-financial company (such as a data processor or internetservice provider) with whom we have a service agreement. These companies arecontractually obligated to protect the information that they receive from usand may not use it for any other purpose other than for performance of serviceson behalf of HSBC. The information we may share also comes from the sourcesdescribed above and might include your name, address, phone number, and accountexperience 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.

 

**Your Choices to Limit Sharing**

 

**How to Opt-Out of Information Sharing with Our Affiliates**

 

Ifyou prefer that we do not disclose non-public personal information about you toour Affiliates, you may opt-out of those disclosures, that is, you may directus not to make those disclosures (other than those permitted by law) by calling1-800-685-6695 or 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. **Ifyou have previously informed us of your preference, you do not need to do soagain.**This request will not apply to information about yourtransactions or experience with HSBC (such as account information, accountusage, or payment history) and will only apply to the private label accountsyou have with HSBC. Private Label accounts are not general purpose accountssuch as MasterCard® or Visa®, but are accounts that may be used only atspecific merchant(s) named on the account. An opt-out request by any party on ajoint account will apply to all parties on the joint account.

 

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

 

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 calling 1-800-685-6695 or completing this detachable reply formand mailing it to the following address:

 

**The Neiman Marcus Group, Inc.P.O. Box 720937Dallas, Texas 75372-0937**

 

Wewill be happy to comply with your request. **Ifyou have previously informed us of your preference, you do not need to do soagain.**Please understand that your request may exclude you fromreceiving valuable offers in the future. Your request will only apply to theHSBC private label account(s) that you designate in your request. Your requestwill not apply to the sharing of information which we are permitted or requiredby law to share. If your account with HSBC is a joint account, an opt-out byany party on the joint account will apply to all parties on the account.Vermont residents are automatically opted-out of information sharing withNeiman Marcus Group that is not otherwise permitted or required by applicablelaw.

 

**Your Choice to Limit Marketing**

 

Federal law gives you theright to limit some but not all marketing from our Affiliates. Federal law alsorequires us to give you this notice to tell you about your choice to limitmarketing from our Affiliates.

You may limit our Affiliatesin the HSBC family of companies, such as our insurance and consumer financeaffiliates, from marketing their products or services to you based on yourpersonal information that we collect and share with them. This information mayinclude your income, your account history with us, and your credit history withus.

Your choice to limit marketing offers from ourAffiliates will apply for at least 5 year from when you tell us your choice. Ifyou have previously informed us of your preference, you do not need to do soagain within the 5 year period. Once that period expires, you will receive arenewal notice that will allow you to continue to limit marketing offers fromour Affiliates for at least another 5 years. If your account with HSBC is ajoint account, an opt-out by any party on the joint account will apply to allparties on the account.

 

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

 

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**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 Statementapplicable to Neiman Marcus and Bergdorf Goodman credit cards will always beavailable at the neimanmarcus.com and bergdorfgoodman.com websites.

 

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

 

**Special Notice for Vermont Residents**

 

HSBCdoes not share your information with Affiliates, other than informationrelating to your account transactions and our experiences with you, except aspermitted or required by applicable law.

 

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

 

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

 

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**Notifying Us of Your Opt-Out Preference**

 

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 or if youprefer that we not disclose non-public 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). 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**

 

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

 

Checkoption below with your preference:

 

 

o Opt-Out of InformationSharing with Our Affiliateso Opt-Out ofInformation Sharing with Neiman Marcus Group

 
|                                              |       |
|---------------------------------------------------|------------|
| Print  Name                                       |       |
|                                              |       |
|                                              |       |
|                                              |       |
| Neiman  Marcus or Bergdorf Goodman Account Number |       |
|                                              |       |
|                                              |       |
|                                              |       |
| Signature                                         |  Date |

 

----

 

**SCHEDULE 7.1(a)(i)**

 

**Bank Reports**

 
| **Department**      | ** ** | **Report Name** | ** ** | **Source** | ** ** | **Frequency**  |
|---------------------|------------|----------------------|------------|------------|------------|----------------|
| Accounts Receivable |       | [***]                |       | HSBC       |       | Monthly        |
|                |       | [***]                |       | HSBC       |       | Daily          |
|                |       | [***]                |       | HSBC       |       | Daily          |
|                |       | [***]                |       | HSBC       |       | Monthly        |
|                |       | [***]                |       | HSBC       |       | Monthly        |
|                |       | [***]                |       | HSBC       |       | Daily          |
|                |       | [***]                |       | HSBC       |       | Bi-weekly      |
|                |       | [***]                |       | NMG        |       | Daily          |
|                |       | [***]                |       | HSBC       |       | Cycle          |
|                |       | [***]                |       | HSBC       |       | Cycle          |
|                |       |                 |       |       |       |           |
| Audit               |       | [***]                |       | HSBC       |       | Daily          |
|                |       | [***]                |       | HSBC       |       | Daily          |
|                |       | [***]                |       | HSBC       |       | Daily          |
|                |       | [***]                |       | HSBC       |       | Daily          |
|                |       | [***]                |       | HSBC       |       | Weekly         |
|                |       | [***]                |       | HSBC       |       | Cycle, monthly |
|                |       | [***]                |       | HSBC       |       | Daily          |
|                |       | [***]                |       | HSBC       |       | Daily          |
|                |       | [***]                |       | HSBC       |       | Daily          |
|                |       | [***]                |       | HSBC       |       | Daily          |
|                |       | [***]                |       | HSBC       |       | Weekly         |
|                |       | [***]                |       | HSBC       |       | Cycle          |
|                |       | [***]                |       | HSBC       |       | Daily          |
|                |       | [***]                |       | HSBC       |       | Daily          |
|                |       | [***]                |       | HSBC       |       | Weekly         |
|                |       | [***]                |       | HSBC       |       | Daily          |
|                |       | [***]                |       | HSBC       |       | Daily          |
|                |       | [***]                |       | HSBC       |       | Weekly         |
|                |       |                 |       |       |       |           |
| Bill Adjustment     |       | [***]                |       | HSBC       |       | Daily, weekly  |
|                |       | [***]                |       | HSBC       |       | Daily, weekly  |
|                |       | [***]                |       | HSBC       |       | Daily          |
|                |       | [***]                |       | HSBC       |       | Cycle          |
|                |       | [***]                |       | HSBC       |       | Bi-weekly      |
|                |       |                 |       |       |       |           |
| Collections         |       | [***]                |       | HSBC       |       | Daily          |
|                |       | [***]                |       | HSBC       |       | Monthly        |
|                |       | [***]                |       | HSBC       |       | Monthly        |
|                |       | [***]                |       | HSBC       |       | Daily          |
|                |       | [***]                |       | HSBC       |       | Monthly        |
|                |       | [***]                |       | HSBC       |       | Daily          |
|                |       | [***]                |       | HSBC       |       | Monthly        |
|                |       | [***]                |       | HSBC       |       | Daily          |
|                |       | [***]                |       | HSBC       |       | Bi-weekly      |
|                |       | [***]                |       | HSBC       |       | Daily          |
|                |       | [***]                |       | HSBC       |       | Daily          |
|                |       | [***]                |       | HSBC       |       | Cycle          |
|                |       | [***]                |       | HSBC       |       | Cycle          |

 

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|   |   | [***]  |   | HSBC   |   | Cycle          |
|--------|--------|--------|--------|--------|--------|----------------|
|   |   | [***]  |   | HSBC   |   | Daily          |
|   |   | [***]  |   | HSBC   |   | Weekly         |
|   |   | [***]  |   | HSBC   |   | Daily          |
|   |   | [***]  |   | HSBC   |   | Daily          |
|   |   | [***]  |   | HSBC   |   | Monthly        |
|   |   | [***]  |   | HSBC   |   | Monthly        |
|   |   | [***]  |   | HSBC   |   | Monthly        |
|   |   | [***]  |   | HSBC   |   | Daily          |
|   |   | [***]  |   | HSBC   |   | Cycle          |
|   |   | [***]  |   | HSBC   |   | Monthly        |
|   |   | [***]  |   | HSBC   |   | Monthly        |
|   |   | [***]  |   | HSBC   |   | Weekly         |
|   |   | [***]  |   | HSBC   |   | Daily          |
|   |   | [***]  |   | HSBC   |   | Daily          |
|   |   | [***]  |   | HSBC   |   | Daily          |
|   |   | [***]  |   | HSBC   |   | Monthly        |
|   |   |   |   |   |   |           |
| Credit |   | [***]  |   | HSBC   |   | Monthly        |
|   |   | [***]  |   | HSBC   |   | Monthly        |
|   |   | [***]  |   | HSBC   |   | Daily          |
|   |   | [***]  |   | HSBC   |   | Daily          |
|   |   | [***]  |   | HSBC   |   | Monthly        |
|   |   | [***]  |   | HSBC   |   | Monthly        |
|   |   | [***]  |   | HSBC   |   | Monthly        |
|   |   | [***]  |   | HSBC   |   | Monthly        |
|   |   | [***]  |   | HSBC   |   | Weekly         |
|   |   | [***]  |   | HSBC   |   | Monthly        |
|   |   | [***]  |   | HSBC   |   | Monthly        |
|   |   | [***]  |   | HSBC   |   | Monthly        |
|   |   | [***]  |   | HSBC   |   | Monthly        |
|   |   | [***]  |   | HSBC   |   | Monthly        |
|   |   | [***]  |   | HSBC   |   | Monthly        |
|   |   | [***]  |   | HSBC   |   | Monthly        |
|   |   | [***]  |   | HSBC   |   | Monthly        |
|   |   | [***]  |   | HSBC   |   | Monthly        |
|   |   | [***]  |   | HSBC   |   | Monthly        |
|   |   | [***]  |   | HSBC   |   | Monthly        |
|   |   | [***]  |   | HSBC   |   | Monthly        |
|   |   | [***]  |   | HSBC   |   | Monthly        |
|   |   | [***]  |   | HSBC   |   | Weekly         |
|   |   | [***]  |   | HSBC   |   | Monthly        |
|   |   | [***]  |   | HSBC   |   | Monthly        |
|   |   | [***]  |   | HSBC   |   | Monthly        |
|   |   | [***]  |   | HSBC   |   | Monthly        |
|   |   | [***]  |   | HSBC   |   | Monthly        |
|   |   | [***]  |   | HSBC   |   | Semi-Annual    |
|   |   |   |   |   |   |           |
| Fraud  |   | [***]  |   | HSBC   |   | Bi-weekly      |
|   |   | [***]  |   | HSBC   |   | Daily,  weekly |
|   |   | [***]  |   | HSBC   |   | Daily          |
|   |   | [***]  |   | HSBC   |   | Daily          |
|   |   | [***]  |   | HSBC   |   | Weekly         |
|   |   | [***]  |   | HSBC   |   | Daily          |
|   |   | [***]  |   | HSBC   |   | Daily,  weekly |

 

----

 

**SCHEDULE 7.1(a)(ii)**

 

**NMG Reports**

 
| A/R  System |   | Manager  Overrides Report (daily)             |
|-------------|--------|-----------------------------------------------|
|        |   | Traveler’s  Check Payment Report (daily) |
|        |   | Gift  Card Payment Report (daily)             |
|        |   | Cash  Payment Report (daily)                  |

 

----

 

**SCHEDULE 7.1(b)**

** **

**Monthly Settlement Sheet**

 

The Monthly Settlement Sheet shall set forth:

 

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

 

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

 

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

 

(d)           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.

 

----

 

**SCHEDULE 7.1(c)**

 

**Quarterly Settlement Sheet**

 

The Quarterly Settlement Sheet shall set forth:

 

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

 

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

 

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

 

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

 

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

 

----

 

**SCHEDULE7.1(d)**

 

**Year-End Settlement Sheet**

 

TheYear-End Settlement Sheet shall set forth:

 

(a)         theaggregate of all Joint Marketing Commitment Amounts spent by the NMG Companiesin the last Program Month of such Program Year;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

----

 

**SCHEDULE7.3(a)**

 

**Primary Servicer Service Level Standards**

 

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

 

**A.****           ****DocumentationServices**Bank will meet the following service levels onaverage each month:

 

**1.****             **Percentage of all paper orelectronic billing statements that will be delivered within 4 days (excludingSundays) of cycle close date provided that this standard shall not apply ifeither: (i) a NMG systems problem prevents communication of the creditinput data to Bank’s credit operations (monthly reporting will be completed onan Excel spreadsheet); or, (ii) Inserts provided by the NMG Companies donot meet Bank’s specifications: **[***]**[Regulatory SLA]

 

**2.****             **Percentage of daily paymentsthat will be processed within [***] hours of receipt (functionality includesdesktop image archive capability up to [***] years for browse access): **[***]**

 

**B.****           ****CreditCard Production Services** Bank will meet the following service levelson average each month:

 

**1.****             **Percentage of all newaccount and replacement credit cards that will be mailed out within 4 businessdays after they are requested (monthly reporting will be completed on an Excelspreadsheet): **[***]**

 

**C.****           ****Lateand Early-Stage Collections**Bank will meet the following service levels on average each month (as measuredby Bank’s standard practices):

 

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

 

Mondaythrough Thursday [***] CST

Friday[***] CST

Saturday[***] CST

Sunday[***]

 

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

 

**[***]**

 

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

 

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

 

----

 

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

 

**[***]**

 

Exceptions to the ASA’s are asfollows:

 

·                  [***]

 

·                  [***]

 

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

 

4.  Upon the request of a Cardholder or upon theend of the fourth cycle for any Account with a Credit Balance up to **[***]**, the percentage of Credit Balancerefunds requested verbally or systemically that will be sent out within [***]days of such request or cycle end date provided that no Credit Balance refundwill be sent out for a Credit Balance under $1: **[***]** [Regulatory SLA]

 

5.Upon the request of a Cardholder or upon the end of the fourth cycle for anyAccount with a Credit Balance up to **[***]**,the percentage of Credit Balance refunds requested by mail correspondence thatwill be sent out within [***] days of such request or cycle end date providedthat no Credit Balance refund will be sent out for a Credit Balance under $1: **[***]** [Regulatory SLA]

 

6.  The percentage of Fair Credit billing and allother customer initiated disputes that are addressed within [***] days ofreceipt of notification: **[***]**[RegulatorySLA]

 

7.  The percentage of time that Bank shall makeits customer service operations available from Monday through Friday from 8:00 a.m.CST to 7:00 p.m. CST and Saturday from 9:00 a.m. CST to 1:00 p.m.:**[***]**

 

8.  The percentage of time that Bank shall makeits authorizations and new account operations available from Monday throughFriday from 9:00 a.m. CST to 11:00 p.m. CST, Saturday from 9:00 a.m.CST to 11:30 p.m. CST and Sunday from 9:00 a.m. CST to 10:30 p.m.CST (and will extend these hours to accommodate the store operations whenformal store hours are extended due to special sales events and seasonaldemands): **[***]**

 

**V.****           ****Systems**Bank will meet the 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 [***] hours a day, [***] days a week(other than scheduled system maintenance not exceeding [***] hours permonth during the hours of 2 am and 6 am CST: **[***]**

 

**** Denotes a Starred SLA***

 

----

** **

**SCHEDULE 7.3(c)**

 

**Primary Servicer 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)           SignificantFailure.  If  Primary Servicer (i) is more than **[***]** below the target for any Starred SLAin any Fiscal Month, (ii) fails to meet any individual Starred SLA in **[***]**or (iii) fails to meet anyStarred SLA **[***]**in any **[***]**(including multiple breaches of thesame and individual breaches of different Starred SLAs) (each, a “SignificantFailure”).

 

(b)           RegulatoryFailure.  If Primary Servicer fails tomeet an SLA 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)           Inthe event of a Significant Failure, Primary Servicer shall: (A) promptlyreport to NMG the reasons for the Starred SLA failure(s); (B) within [***]days of such Significant Failure, propose a remediation plan for taking suchaction as Primary Servicer deems necessary to correct and prevent recurrence ofsuch failure(s); and (C) subject to NMG’s agreement, implement theremediation plan as soon as practicable. However, under no circumstances shall the time period between NMG’sagreement to the remediation plan and completion of such plan exceed **[***]**.

 

(b)           IfPrimary Servicer has an additional failure of any of the same Starred SLA(s) (“SubsequentFailure”) during the **[***]**followingthe occurrence of any Significant Failure, Primary Servicer shall pay NMG **[***]**, within [***] days of the end of such Fiscal Month, for each suchSubsequent Failure.

 

(c)           Uponthe occurrence of the second Subsequent Failure and each additional SubsequentFailure of the same Starred SLA during the **[***]** following a Significant Failure or upon the occurrence of a RegulatoryFailure, Primary Servicer shall pay NMG **[***]**, within [***] days of the end of such Fiscal Month, per each additionalSubsequent Failure.

 

(d)           Uponthe occurrence of (i) the third and each additional Subsequent Failure ofthe same Starred SLA during the **[***]**following a Significant Failure or (ii) a second Regulatory Failureof the same Regulatory SLA, NMG shall, in addition to payment as provided inparagraph (c) above, have the right to terminate the Program Agreement byproviding [***] days prior written notice to Bank, in which event the partiesshall have the rights set forth in Article XVII; provided, however,that prior to NMG electing to terminate the Program Agreement, the ManagementCommittee shall meet to discuss the occurrence of the Subsequent Failure andshall determine whether such SLA should be modified.  If the 

 

----

 

Management Committeedetermines that such SLA shall be modified, then NMG shall not be entitled toterminate the Program Agreement as a result of the Subsequent Failure discussedat the meeting of the Management Committee unless and until an additionalSubsequent Failure 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 (e), 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 theServices or the appointment by NMG of a successor servicer reasonablysatisfactory to Bank pursuant to a servicing agreement reasonably satisfactoryto Bank.  Following the delivery by theapplicable Party of written notice of a servicing transfer or termination, NMGshall have reasonable access to Primary Servicer’s operations and systems toensure continuity of business and systems required to service the Accounts untilsuch time as NMG assumes the provision of the Services or appoints a successorservicer reasonably satisfactory to Bank.

 

III.          Non-StarredSLAs. For purposes of this Schedule 7.3(c), “Starred SLA” shall be deemed toinclude Non-Starred SLAs in the event that there have been more than **[***]**in any **[***]**with respect to any Non-Starred SLAs; provided,that in the event there are no Significant Failures in the immediatelyfollowing **[***]**with respect toany of the Non-Starred SLAs, then such Non-Starred SLAs shall no longer bedeemed to be Starred SLAs.

 

----

 

**SCHEDULE 7.4(a)**

 

**Bank Systems**

 

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

 

1.   ServicingSystems

 

A. Bank system platform must have a [***] or comparable servicing application to perform primarycredit authorization and customer service financial and non-financialmaintenance. The current servicing application provided by the bank is the [***] system. Back-up mainframesystems [***] provide secondaryfunctions supporting the NMG servicing teams. The current bank servicingapplication supports a key NMG process, [***]referral, through a custom [***]Referral screen. Future versions of [***]and/or its successors must provide similar servicing functionality, includingfunctionality to support the [***]referral process [***]. Futureversions of [***] and/or itssuccessors will be reviewed with NMG management to obtain recommendations andrequirements, with particular emphasis on closely matching the existing AUTHreferral screen. As the bank’s technology platforms evolve through upgrades,technical currency and / or application replacements, the bank will workclosely with NMG to define [***]technology solutions to support servicing within commercially reasonableparameters.

 

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

 

[***]

 

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

 

2.Critical NMG Customizations

 

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

 

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

 

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

 

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

 

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

 

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

 

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**Credit Batch Interfaces**

 
| **Internal NMG &   Vendor Interface   Systems** | ** ** | **Credit  Application** | ** ** | ** ** | ** ** | **Input/Output  Feed** | ** **         | **Frequency** | ** ** | **Processing Time-  frame** | ** ** |
|------------------------------------------------------------------------------|------------|-------------------------|------------|------------|------------|------------------------|--------------------|---------------|------------|-----------------------------|------------|
| NM Sales Audit                                                               |       | Settlement              |       | **[***]**  |       | Input                  |               | Daily         |       | Nightly                     |       |
| BG Sales Audit                                                               |       | Settlement              |       |       | Input      |                   | Daily              |          | Nightly    |                        |
| NMD/NMO Sales Audit                                                          |       | Settlement              |       |       | Input      |                   | Daily              |          | Nightly    |                        |
| HR NM Payroll deduction                                                      |       | Settlement              |       |       | Input      |                   | Weekly             |          | Nightly    |                        |
| HR BG Payroll deduction                                                      |       | Settlement              |       |       | Input      |                   | Weekly             |          | Nightly    |                        |
| Incircle                                                                     |       | InCircle                |       |       | Output     |                   | Daily              |          | Nightly    |                        |
| Incircle                                                                     |       | InCircle                |       |       | Input      |                   | Daily              |          | Nightly    |                        |
| EDW                                                                          |       | EDW                     |       |       | Output     |                   | Daily              |          | Nightly    |                        |
| Incircle                                                                     |       | Statements              |       |       | Input      |                   | Daily              |          | Nightly    |                        |
| Loss Prevention                                                              |       | Loss Prevention         |       |       | Output     |                   | Weekly             |          | Nightly    |                        |
| Credit Balance Refunds                                                       |       | Loss Prevention         |       |       |       |                   |               |          |       |                        |
| Donnelley, Abacus,  Commerce Register, Experian                              |       | A/R                     |       |       | Output     |                   | Monthly            |          | Nightly    |                        |
| Incircle                                                                     |       | InCircle                |       |       |       |                   | Yearly in February |          | Nightly    |                        |
| InCircle                                                                     |       | InCircle                |       |       | Output     |                   | Daily              |          | Nightly    |                        |

 

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**Credit Online Interfaces**

 
| **Internal NMG   Interface Systems**                     | ** ** | **Credit   Application** | ** ** | ** ** | ** **                                                                           | **External Interface  Systems**                                  | ** **                                                                             | **Output Response**                                               | ** **      | **Response   Time** | ** **  | **Frequency** | ** **                            | **Processing   Time-frame**** **** |
|-------------------------------------------------------------------------|------------|-------------------------------|------------|------------|--------------------------------------------------------------------------------------|-----------------------------------------------------------------------|----------------------------------------------------------------------------------------|------------------------------------------------------------------------|-----------------|--------------------------|-------------|---------------|---------------------------------------|----------------------------------------------|
| POS Store System - POS  Express (new apps)                              |       | New Application               |       | [***]      |                                                                                 | Formats the new app  request and sends to HSBC for credit processing. |                                                                                   | Reply back to the POS  register with an approval or referral response. |            | < 45 seconds          |        | Mon-Sat Sun   |                                  | 7 AM - 11 PM   10 AM - 11 PM                 |
| NMD - (new apps)                                                        |       | New Application               |       |       | Formats the new app  request and sends to HSBC for credit processing.                |                                                                  | Reply back to NMD with an  approval or referral response.                              |                                                                   | < 45 seconds |                     | Mon-Sat Sun |          | 7 AM - 11 PM   10 AM - 11 PM          |
| POS Store System - POS  Express (account look-up)                       |       | CMS                           |       |       | Format the account look-up  request and send to HSBC for a response.                 |                                                                  | Reply back to the POS  register with account number or not found.                      |                                                                   | < 2 seconds  |                     | Mon-Sat Sun |          | 7 AM - 11 PM   10 AM - 11 PM          |
| POS Store System - Sales  Authorization (NM & BG charge cards) |       | Authorization                 |       |       | Formats the authorization  request and send it to HSBC for authorization processing. |                                                                  | Reply back to the POS  register with an approval, referral or decline response.        |                                                                   | < 2 seconds  |                     | Mon-Sat Sun |          | 7 AM - 11 PM   10 AM - 11 PM          |
| NMD (CMOS) - Sales  Authorization (NM & BG charge cards)       |       | Authorization                 |       |       | Formats the authorization  request and send it to HSBC for authorization processing. |                                                                  | Reply back to NMD with an  approvals, referrals or decline response.                   |                                                                   | < 2 seconds  |                     | Mon-Sat Sun |          | 7 AM - 11 PM  10 AM - 11 PM           |
| System Authorization  Override                                          |       | In-house Credit System        |       |       | NMG mainframe application                                                            |                                                                  | Download the system  authorization override code to each POS store system RS/6000 box. |                                                                   |            |                     | Mon-Sat Sun |          | 7 AM - 11 PM   10 AM - 11 PM  Nightly |
| Intervoice (IVR) customer  inquiry                                      |       | Customer Service              |       |       |                                                                                 |                                                                  | Send response back to the  IVR based on the IVR option request.                        |                                                                   | < 2 seconds  |                     | Mon-Sat Sun |          | 7 AM - 11 PM  10 AM - 11 PM           |

 

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

 

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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 [***]and Net Credit Sales under such Account reflected in all NMG Charge TransactionData required to be paid for by Bank on such Business Day pursuant to Section 8.4.  The foregoing payment shall represent anestimate of the Merchant Participation, which shall be trued up each FiscalQuarter and each Fiscal Year as set forth in Schedules 9.1(a)(iii) and(iv).

 

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**SCHEDULE 9.1(a)(ii)**

 

**Monthly NMG Compensation**

 

Onthe dates set forth in Section 9.1(a)(ii), Bank shall pay the followingamounts to NMG:

 

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

 

(b)                      In-Store Payment Reimbursement.  An amount equal to [***] (which amount shallincrease by CPI on each anniversary of the Effective Date, with the increasedamount remaining in effect until the following anniversary) per In-StorePayment received by any of the NMG Companies in the prior Program Month.

 

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

 

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**SCHEDULE 9.1(a)(iii)**

 

**Quarterly NMG Compensation**

 

(a)           MerchantParticipation True-Up.

 

The“Quarterly Merchant Participation Amount “ shall be calculated as set forthbelow and (i) if the Quarterly Merchant Participation Amount exceeds theaggregate amount paid by Bank to NMG pursuant to Schedule 9.1(a)(i) inrespect of all preceding Program Quarters occurring in such Program Year, Bankshall pay the amount of such excess to NMG; and (ii) if the QuarterlyMerchant Participation Amount is less than the aggregate amount paid by Bank toNMG pursuant to Schedule 9.1(a)(i) in respect of all preceding ProgramQuarters in such Program Year, NMG shall pay the amount of such deficiency toBank.  For purposes of determining theQuarterly Merchant Participation Amount, the “amount paid by Bank to NMGpursuant to Schedule 9.1(a)(i)” with respect to any period as to which thequarterly true-up pursuant to this Schedule 9.1(a)(iii) has beenimplemented shall be the amount paid pursuant Schedule 9.1(a)(i) plus orminus the true-up amount paid pursuant to this Schedule 9.1(a)(iii).

 

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

 

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

 

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

 

(iii)          If the RiskAdjusted Margin for the preceding Program Quarters in such Program Year isgreater than [***], an amount equal to [***] times Net Credit Sales for suchProgram Quarters.

 

(b)           RAMSharing.

 

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

 

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

 

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

 

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

 

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

 

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**SCHEDULE 9.1(a)(iv)**

 

**Annual NMG Compensation**

 

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

 

(a)           MerchantParticipation True-Up.

 

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

 

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

 

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

 

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

 

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

 

(b)           RAMSharing.

 

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

 

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provisionsof Schedule 9.1(a)(iii) under the caption “RAM Sharing” in respect of theimmediately preceding Program Year, NMG shall pay the amount of such deficiencyto Bank.

 

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

 

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

 

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

 

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

 

(c)           ProfitabilityBonus.

 

Ifthe Risk Adjusted Margin for the immediately preceding Program Year is greaterthan [***], Bank shall pay to NMG an amount equal to [***] (the “ProfitabilityBonus”).

 

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**SCHEDULE 16.3(b)**

 

**Store Square-Footage Calculation**

 

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 4,775,000 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

Coral Gables, Florida

Orlando, Florida

San Antonio, Texas

Boca Raton, Florida

Austin,Texas

Charlotte,North Carolina

Natick,Massachusetts

Topanga,California

Bellevue,Washington

BergdorfGoodman, New York City (Women’s Store)

BergdorfGoodman, New York City (Men’s Store)

 

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**SCHEDULE 17.2(g)**

 

**Segmentation Methodology**

 

**Sample Segmentation — Illustrative purposes only**

 

**[***]**

 

**Sample Segmentation — Valid Protection Selection**

 

**[***]**

 

**Sample Segmentation — INVALID Protection Selection**

 

**[***]**

 

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