**Exhibit 10.35**

 

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

 

SERVICING AGREEMENT

 

between

 

THE NEIMAN MARCUS GROUP, INC.

 

and

 

HSBC BANK NEVADA, N.A.

 

 

 

Dated as of September 23rd, 2010

 

 

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**TABLE OF CONTENTS**

 
| ** **                     | ** **                                 | **Page** |
|--------------------------------|--------------------------------------------|----------|
|                           |                                       |     |
| ARTICLE I                 |
| DEFINITIONS AND INTERPRETATION |
|                           |                                       |     |
| Section 1.01.             | Defined Terms                              |     | 1 |
| Section 1.02.             | Certain Interpretive Matters               |     | 3 |
|                           |                                       |     |
| ARTICLE II                |
| SERVICING                      |
|                           |                                       |     |
| Section 2.01.             | Appointment                                |     | 4 |
| Section 2.02.             | Servicer Compensation                      |     | 4 |
| Section 2.03.             | Services                                   |     | 4 |
| Section 2.04.             | Service Level Standards                    |     | 5 |
| Section 2.05.             | Use of Subservicers                        |     | 5 |
| Section 2.06.             | Disaster Recovery                          |     | 5 |
|                           |                                       |     |
| ARTICLE III               |
| REPRESENTATIONS AND WARRANTIES |
|                           |                                       |     |
| Section 3.01.             | Representations and Warranties of Servicer |     | 6 |
| Section 3.02.             | Representations and Warranties of Bank     |     | 7 |
|                           |                                       |     |
| ARTICLE IV                |
| ADDITIONAL COVENANTS           |
|                           |                                       |     |
| Section 4.01.             | Further Assurances                         |     | 8 |
| Section 4.02.             | Modifications                              |     | 8 |
| Section 4.03.             | Correction of Errors                       |     | 8 |
| Section 4.04.             | Changes in Law                             |     | 8 |
| Section 4.05.             | Cooperation                                |     | 10 |
| Section 4.06.             | Facilities and Equipment                   |     | 11 |
| Section 4.07.             | Insurance                                  |     | 11 |
| Section 4.08.             | Customer Information                       |     | 11 |
|                           |                                       |     |
| ARTICLE V                 |
| DEFAULT; REMEDIES              |
|                           |                                       |     |
| Section 5.01.             | Servicer Default                           |     | 11 |
| Section 5.02.             | Remedies                                   |     | 12 |
| Section 5.03.             | Non-Starred SLAs                           |     | 13 |

 

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| ARTICLE VI    |
|--------------------|
| TERM               |
|               |   |   |
| Section 6.01. | Term of Agreement |   | 13 |
| Section 6.02. | Servicer Termination Events |   | 13 |
| Section 6.03. | Termination by Bank |   | 14 |
| Section 6.04. | Effect of Termination |   | 14 |
|               |   |   |
| ARTICLE VII   |
| INDEMNIFICATION    |
|               |   |   |
| Section 7.01. | Indemnification |   | 14 |
| Section 7.02. | Procedure for Indemnification |   | 15 |
| Section 7.03. | Notice and Additional Rights and Limitations |   | 16 |
| Section 7.04. | Limits on Indemnification |   | 16 |
|               |   |   |
| ARTICLE VIII  |
| MISCELLANEOUS      |
|               |   |   |
| Section 8.01. | Confidentiality |   | 17 |
| Section 8.02. | Access Rights |   | 19 |
| Section 8.03. | No Waiver; Remedies; Amendment |   | 19 |
| Section 8.04. | Independent Contractor |   | 19 |
| Section 8.05. | No Joint Venture |   | 20 |
| Section 8.06. | Payment Terms |   | 20 |
| Section 8.07. | Entire Agreement |   | 20 |
| Section 8.08. | No Set-Off |   | 20 |
| Section 8.09. | Notices |   | 20 |
| Section 8.10. | Severability |   | 21 |
| Section 8.11. | Headings |   | 21 |
| Section 8.12. | Survival |   | 21 |
| Section 8.13. | Costs and Expenses |   | 21 |
| Section 8.14. | Drafting |   | 22 |
| Section 8.15. | Counterparts |   | 22 |
| Section 8.16. | Assignment; Successors |   | 22 |
| Section 8.17. | Governing Law |   | 22 |
| Section 8.18. | Waiver of Jury Trial and Venue |   | 22 |

 

SCHEDULES

 

| Schedule  1.01(a)                          |   | Services                 |
|--------------------------------------------|--------|--------------------------|
| Schedule  2.04(a)                          |   | Service  Level Standards |
| Schedule 5.02  Remedies          |
| Schedule 7.04  Indemnity Matters |

 

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AMENDED AND RESTATED SERVICING AGREEMENT

 

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

 

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

 

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

 

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

 

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

 

NOW,THEREFORE, in consideration of the mutual agreements set forth herein and forother good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, the Parties hereby agree to amend and restate the OriginalServicing Agreement in its entirety as follows:

 

ARTICLE I

 

DEFINITIONSAND INTERPRETATION

 

Section 1.01.  DefinedTerms. Wherever used in this Agreement, unless the context otherwiserequires, the following terms shall have the meanings set forth below.Capitalized terms used but not defined in this Agreement shall have themeanings given them in the Program Agreement.

 

“Agreement”: As defined in the preamble hereof.

 

“Bank”:As defined in the preamble hereof.

 

“BankCost Increase Percentage”:  Asdefined in Section 4.04(b) hereof.

 

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

 

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

 

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

 

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

 

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

 

“DeductibleAmount”: As defined in Schedule 7.04.

 

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

 

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

 

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

 

“InitialPenalty Amount”: As defined in Schedule 5.02.

 

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

 

“NMGCompanies”:  As defined in therecitals hereof.

 

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

 

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

 

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

 

“ProgramAgreement”:  As defined in therecitals hereof.

 

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

 

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

 

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

 

“SeasonallyAdjusted Consumer Price Index for All Urban Consumers”:  means

 

“Servicer”:  As defined in the preamble hereof.

 

“ServicerDefault”: As defined in Section 5.01 hereof.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“SubsequentPenalty Amount”: As defined in Schedule 5.02.

 

“Term”:  As defined in Section 6.01 hereof.

 

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

 

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

 

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ARTICLE II

 

SERVICING

 

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

 

Section 2.02.  ServicerCompensation.  Ascompensation for provision of the Services hereunder, Servicer shall receivepayment as set forth in Schedule 9.1(a)(ii)(c) of the Program Agreement.

 

Section 2.03.  Services.

 

(a)           Commencing on the Effective Date and continuing until the date, if any,upon which any listed type of Service enumerated below is transferred toPrimary Servicer as provided in this Agreement, Servicer shall perform theservices described in Schedule 1.01(a) (collectively, the “Services”),in each case in accordance with this Agreement and the Risk Management Policiesand Operating Procedures.  Servicer shallservice the Accounts in compliance with Applicable Law, in such a way as to notdisparage or embarrass the Bank Parties or either of their names, with a levelof service to Cardholders and with no less care and diligence than the degreeof service, care and diligence employed by Servicer prior to the EffectiveDate.  Notwithstanding anything to thecontrary contained herein, Bank shall be solely responsible for monitoringlegal developments applicable to the operation of the Credit Card Business,although Servicer shall promptly apprise Bank of any such legal developments ofwhich it becomes aware.

 

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

 

(c)           Servicer shall maintain records relating to its performance of theServices in accordance with the record retention policies set forth on Schedule4.4(f) of the Program Agreement. Records may be kept in either paper orelectronic form. Servicer shall retrieve, reproduce and deliver to Bank anyrecords reasonably requested from time to time by Bank for the purpose ofproviding customer assistance or resolving customer disputes, and Bank shallcompensate Servicer on demand for the reasonable costs and expenses associatedwith such retrieval, reproduction and delivery.

 

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

 

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

 

Section 2.04.  ServiceLevel Standards.

 

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

 

(b)           Servicer shall report to Bank monthly, in a mutually agreed upon format,Servicer’s performance under each of the SLAs set forth on Schedule2.04(a).  If Servicer fails to meet any SLA,Servicer shall (i) immediately report to the Management Committee thereasons for the SLA failure(s); and (ii) promptly take commerciallyreasonable action to correct and prevent recurrence of such failure(s).

 

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

 

Section 2.06.  DisasterRecovery. For as long as Servicer is providing serviceshereunder, Servicer shall continue to maintain the disaster recovery plan ineffect on the Effective Date.  Servicershall be prepared to and have the ability to implement such plan ifnecessary.  Servicer shall provide Bankwith access to review such plan upon request. Servicer shall test the plan annually and shall promptly implement suchplan upon the occurrence of a disaster or business interruption.** **Servicershall be excused from its failure to meet any applicable SLAs that resultdirectly from the failure of any of the Bank Systems.  If in the event of a disaster or severebusiness interruption Servicer fails to take reasonable steps to respond tosuch disaster or severe business interruption, Bank shall have reasonableaccess to Servicer’s systems, technical personnel and disaster recoveryresources, so as to ensure continuity of business and systems required toservice the Accounts.

 

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ARTICLE III

 

REPRESENTATIONSAND WARRANTIES

 

Section 3.01.  Representationsand Warranties of Servicer. Servicer represents and warrantsto Bank as follows:

 

(a)           Organization. Servicer (i) is acorporation 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 its ability toperform its obligations hereunder, and (iii) has all necessary licenses,permits, consents or approvals from or by, and has made all necessary filingsand registrations with, all governmental authorities having jurisdiction, tothe extent required for the ownership, lease or conduct and operation of itsbusiness, 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 on its ability to perform its obligations under thisAgreement.

 

(b)           Capacity; Authorization; Validity.  Servicer has all necessary corporate powerand authority to (i) execute and enter into this Agreement, and (ii) performits obligations hereunder and the other documents, instruments and agreementsrelating to this Agreement executed by it pursuant hereto.  The execution and delivery by Servicer ofthis Agreement and all documents, instruments and agreements executed anddelivered by Servicer pursuant hereto, and the consummation by Servicer of thetransactions specified herein, have been duly and validly authorized andapproved by all necessary corporate actions of Servicer.  This Agreement (i) has been dulyexecuted and delivered by Servicer, (ii) constitutes the valid and legallybinding obligation of Servicer, and (iii) is enforceable in accordancewith its terms (subject to applicable bankruptcy, insolvency, reorganization,receivership or other laws affecting the rights of creditors generally and bygeneral equity principles including those respecting the availability ofspecific performance).

 

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

 

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such filings, notices, consentsand approvals as would not reasonably be expected to have, individually or inthe aggregate, a material adverse effect upon Servicer’s ability to perform itsobligations under this Agreement.

 

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

 

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

 

(f)            Solvency.  Servicer is Solvent.

 

Section 3.02.  Representationsand Warranties of Bank. Bank represents and warrants to Servicer asfollows:

 

(a)           Organization. Bank (i) is acorporation 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 its ability toperform its obligations hereunder, and (iii) has all necessary licenses,permits, consents or approvals from or by, and has made all necessary filingsand registrations with, all governmental authorities having jurisdiction, tothe extent required for the ownership, lease or conduct and operation of itsbusiness, 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 on its ability to perform its obligations under thisAgreement.

 

(b)           Capacity; Authorization; Validity.  Bank has all necessary corporate power and authorityto (i) execute and enter into this Agreement, and (ii) perform itsobligations hereunder and the other documents, instruments and agreementsrelating to this Agreement executed by it pursuant hereto.  The execution and delivery by Bank of this Agreementand all documents, instruments and agreements executed and delivered by Bankpursuant hereto, and the consummation by Bank of the transactions specifiedherein, have been duly and validly authorized and approved by all necessarycorporate actions of Bank.  ThisAgreement (i) has been duly executed and delivered by Bank, (ii) constitutesthe valid and legally binding obligation of Bank, and (iii) is enforceablein accordance with its terms (subject to applicable bankruptcy, insolvency,reorganization, receivership or other laws affecting the rights of creditorsgenerally and by general equity principles including those respecting theavailability of specific performance).

 

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(c)           Conflicts; Defaults; Etc.  The execution, delivery and performance ofthis Agreement by Bank, its compliance with the terms hereof, and consummationof the transactions specified herein will not (i) conflict with, violate,result in the breach of, constitute an event which would, or with the lapse oftime or action by a third party or both would, result in a default under, oraccelerate the performance required by, the terms of any contract, instrumentor agreement to which Bank is a party or by which it is bound, or to which any ofthe assets of Bank is subject; (ii) conflict with or violate the articlesof incorporation or by-laws of Bank; (iii) breach or violate anyApplicable Law or Applicable Order, in each case, applicable to Bank; (iv) requirethe consent or approval of any other party to any contract, instrument orcommitment to which Bank 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 Bank’s ability to perform its obligations under this Agreement.

 

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

 

(e)           Solvency.  Bank is Solvent.

 

ARTICLE IV

 

ADDITIONALCOVENANTS

 

Section 4.01.  FurtherAssurances. From time to time after the execution of thisAgreement, as and when requested by either Party, the other Party shall executeand deliver, or cause to be executed and delivered, all such documents andinstruments as may be reasonably necessary to consummate the transactionscontemplated by this Agreement.

 

Section 4.02.  Modifications. Except aspermitted by this Agreement, the Program Agreement, the Risk ManagementPolicies or the Operating Procedures, Servicer shall not enter into anyagreement or arrangement reducing amounts payable by Cardholders.

 

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

 

Section 4.04.  Changesin Law.

 

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

 

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

 

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

 

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

 

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

 

(d)           If the NMG Cost Increase Percentage exceeds [***], then Bank shall beobligated to implement a systematic method to comply with any such Changes inServicing Law that is equivalent to the systematic methods used or beingimplemented by Bank in connection with such Changes in Servicing Law inservicing other private label credit card portfolios as to which it isissuer.  Such systematic process shall beimplemented within a timeframe mutually agreed by the Servicer and Bank, whichtimeframe shall target [***] after changes in servicing procedures were firstimplemented in response to such Changes in Servicing Law that caused the NMGCost Increase Percentage to exceed [***] (or for any Change in Servicing Lawthereafter, shall target [***] after change in servicing procedures were firstimplemented in response to such Change in Servicing Law), but in any event suchprocess shall be implemented no later than [***] after the implementation ofsuch changes in servicing procedures as a result of such Change in ServicingLaw, unless (i) NMG’s failure to comply with the following obligations inthis Section 4.04(d) shall have prevented Bank from completing suchimplementation within such [***] or (ii) it is commercially impracticableto implement such systematic process within such [***] for a commerciallyreasonable cost, in which event (in the case of either clause (i) orclause (ii)) such implementation shall be completed as soon as reasonablypracticable.  NMG will reasonablycooperate with Bank in connection with the implementation of such systematicprocess, including by providing such product support, design review andapprovals, processing, data and technology changes and upgrades as arecommercially reasonable, in each case within timeframes reasonably required byBank in order to meet the agreed-upon timeframes for implementation of thesystematic process.  In determiningwhether implementation of a systematic process is commercially practicablewithin the [***] timeframe referred to above, the Parties agree that Bank shallhave the right to prioritize its systematic projects in accordance withApplicable Law and its commercially reasonable discretion, *provided,however,*that prioritizing other private label credit card systeminitiatives addressing the same Change in Servicing Law for credit cardPrograms other than the Program shall not be grounds for delayingimplementation of the systematic process required by this Section 4.04(d) beyondthe [***] after changes in servicing procedures were first implemented inresponse to the applicable Change in Servicing Law.

 

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

 

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

 

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Section 4.06.  Facilitiesand Equipment.

 

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

 

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

 

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

 

Section 4.08.  CustomerInformation.  Servicershall maintain 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: (i) ensure the securityand confidentiality of customer information; (ii) protect against anyanticipated threats or hazards to the security or integrity of suchinformation; (iii) protect against unauthorized access to or use of suchinformation; and (iv) ensure the proper disposal of such information.  Additionally, such security measures shallmeet current industry standards and shall be at least as protective as thoseused by Servicer to protect its other confidential customer information.  Servicer shall use the same degree of care inprotecting the customer information against unauthorized disclosure as itaccords to its own confidential customer information, but in no event less thana reasonable standard of care.  In the eventServicer becomes aware of any unauthorized use of or access to customerinformation, Servicer shall immediately notify Bank and shall cooperate withBank, 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 suchinformation, and (z) to provide prompt notice to affected customers to theextent required by Applicable Law or otherwise with the approval of theManagement Committee.

 

ARTICLE V

 

DEFAULT;REMEDIES

 

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

 

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

 

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

 

(b)           Regulatory Failure.  IfServicer fails to meet an SLA designated as a regulatory-based SLA on Schedule2.04(a) (each, a “RegulatorySLA”) and such failure results in a breach by Servicer of ApplicableLaw (such failure, a “Regulatory Failure”).

 

Section 5.02.  Remedies.

 

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

 

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

 

(c)           Upon the occurrence of the second Subsequent Failure and each additionalSubsequent Failure of the same Starred SLA during the [***] Fiscal Monthsfollowing a Significant Failure or upon the occurrence of a Regulatory Failure,Servicer shall pay Bank the Subsequent Penalty Amount, within [***] days of theend of such Fiscal Month, per each additional Subsequent Failure.

 

(d)           Upon the occurrence of (i) the third and each additional SubsequentFailure of the same Starred SLA during the [***] Fiscal Months following aSignificant Failure or (ii) a second Regulatory Failure of the sameRegulatory SLA , Bank shall, in addition to payment as provided in paragraph (c) above,have the right to terminate the Program Agreement by providing [***] days priorwritten notice to Servicer, in which event the parties shall have the rightsset forth in Article XVII of the Program Agreement; provided, however,that prior to either Party electing to transfer the provision of such Servicespursuant to Section 5.02(e) below or to terminate the ProgramAgreement, the Management Committee shall meet to discuss the occurrence of theSubsequent Failure and shall determine whether such SLA should be modified(except in the case of a Regulatory Failure, in which event no ManagementCommittee meeting shall be required as a condition to transferring the affectedServices pursuant to Section 5.02(e)). If the Management Committee determines that such SLA shall be modified,then Bank shall not be entitled to terminate the Program Agreement as a resultof the Subsequent Failure discussed at the meeting of the Management Committeeunless and until an additional Subsequent Failure of the same Starred SLAoccurs; and provided, further, that for purposes of transferringServices pursuant to this Section 5.02(d) or Section 5.02(e), anSLA that is both a Starred SLA and a Regulatory SLA shall be deemed to be aRegulatory SLA.

 

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(e)           Notwithstanding the foregoing, in the case of any Servicer Default withrespect to any type of Service, after the Management Committee meeting referredto above (except in the case of a Regulatory Failure) and assuming that no SLAis modified, in lieu of terminating the Program Agreement, either Party mayelect to cause the Services subject to such Servicer Default to be transferredto Primary Servicer pursuant to the Program Agreement.

 

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

 

Section 5.03.  Non-StarredSLAs. For purposes of this Article V, “Starred SLA” shall be deemed toinclude Non-Starred SLAs in the event that there have been more than [***] inany [***] with respect to any Non-Starred SLAs; provided, that in theevent there are no Significant Failures in the immediately following [***] withrespect to any of the Non-Starred SLAs, then such Non-Starred SLAs shall nolonger be deemed to be Starred SLAs.

 

ARTICLE VI

 

TERM

 

Section 6.01.  Termof Agreement. The term of this Agreement shall commence on thedate hereof and expire simultaneously with the termination of the ProgramAgreement or the termination pursuant to Section 2.03(b), 5.02(d) or5.02(e) (the “Term”).

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 6.03.  Terminationby Bank.  Bank may terminate thisAgreement upon written notice prior to the end of the Term after the occurrenceof a Servicer Event of Default.  No suchtermination shall be effective until either assumption by Bank or its Affiliateof the provision of the Services pursuant to the Program Agreement or theappointment by Bank of a successor servicer reasonably satisfactory to Servicerpursuant to a servicing agreement reasonably satisfactory to Servicer.  Following the delivery by Bank of writtennotice of a servicing transfer or termination, Bank shall have reasonableaccess to Servicer’s operations and systems to ensure continuity of businessand systems required to service the Accounts until such time as Bank or itsAffiliate assumes the provision of the Services or appoints a successorservicer reasonably satisfactory to Servicer. Both Parties shall use commercially reasonable efforts and cooperatewith each other to ensure continuity of business during any transfer ofServices.

 

Section 6.04.  Effectof Termination.

 

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

 

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

 

ARTICLE VII

 

INDEMNIFICATION

 

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

 

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

 

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

 

(b)           the failure by Servicer to perform any of its covenants or agreements containedin this Agreement, except to the extent such failure to perform is caused by (i) thefailure of any of the Bank Parties to perform its obligations under anyTransaction Document or (ii) any actions or omission by Servicer taken ornot taken at any Bank Parties’ written request or direction pursuant to anyTransaction Document;

 

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

 

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

 

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

 

Section 7.02.  Procedurefor Indemnification.

 

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

 

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

 

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(c)           Bank or Servicer may at any time notify the other of its intention tosettle or compromise any claim, suit or action against Bank in respect of whichpayments may be sought by Bank hereunder, and (i) Servicer may settle orcompromise any such claim, suit or action solely for the payment of moneydamages for which Bank will be fully indemnified hereunder and given a full andcomplete release of any and all liability by all relevant parties relating tosuch claim, suit or action, but shall not agree to any other settlement orcompromise unless Bank consents in writing, which consent shall not beunreasonably withheld (it being agreed that any failure of an Bank to consentto any settlement or compromise involving relief other than monetary damagesshall not be deemed to be unreasonably withheld), and (ii) Bank may settleor compromise 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 Servicer, which consent shall notbe unreasonably withheld.

 

Section 7.03.  Noticeand Additional Rights and Limitations.

 

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

 

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

 

(c)           Notwithstanding anything to the contrary in this Agreement, no Partyshall be liable to the other for punitive or exemplary damages relating to or arisingout of this Agreement, any breach hereof or any of the transactions providedfor therein, unless Bank shall have become liable to a third party for suchamounts.

 

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

 

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ARTICLE VIII

 

MISCELLANEOUS

 

Section 8.01.  Confidentiality

 

(a)           General Confidentiality.

 

(i)            For purposes of this Agreement, “Confidential Information” meansany of the following: (i) information that is provided by or on behalf ofeither Servicer or the Bank Parties to the other Party or its agents inconnection with providing Services hereunder (including information providedprior to the date hereof or the Effective Date); (ii) information aboutServicer or the Bank Parties or their Affiliates, or their respectivebusinesses or employees, that is otherwise obtained by the other Party inconnection with providing Services hereunder, in each case including: (A) informationconcerning marketing plans, objectives and financial results; (B) informationregarding business systems, methods, processes, financing data, programs andproducts; (C) information regarding any products offered or proposed to beoffered under the Program Agreement or the manner of offering of any suchproducts; (D) information unrelated to the Program obtained by Servicer orthe Bank Parties in connection with this Agreement, including by accessing orbeing present at the business location of the other Party; and (E) proprietarytechnical information, including source codes, or other proprietary informationdeveloped in connection with the Program; and (iii) the terms andconditions of this Agreement.

 

(ii)           The restrictions on disclosure of Confidential Information under this Section 8.01shall not apply to information received or obtained by Servicer or the BankParties, as the case may be, that: (i) is or becomes generally availableto the public other than as a result of disclosure in breach of this Agreementor any other confidentiality obligations; (ii) is lawfully received on anon-confidential basis from a third party authorized to disclose suchinformation without restriction and without breach of this Agreement; (iii) iscontained in, or is capable of being discovered through examination of,publicly available records or products; (iv) is required to be disclosedby Applicable Law; provided that the Party subject to such ApplicableLaw shall use reasonable efforts to avoid such disclosure and notify the otherParty of any such use or requirement prior to disclosure of any ConfidentialInformation obtained from the other Party in order to afford such other Partyan opportunity to seek a protective order to prevent or limit disclosure of theConfidential Information to third Parties; provided, further,that such information shall be disclosed only to the extent required by suchApplicable Law and shall otherwise remain Confidential Information; or (v) isdeveloped by Servicer or the Bank Parties, as the case may be, without the useor knowledge of any proprietary, non-public information provided by the otherParty under, or otherwise made available to such Party as a result of, thisAgreement.  Nothing herein shall beconstrued to permit the Receiving Party (as defined below) to disclose to anythird party any Confidential Information that the Receiving Party is requiredto keep confidential under Applicable Law.

 

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

 

(iv)          If Servicer, on the one hand, or the Bank Parties, on the other hand,receives Confidential Information of the other Party (“Receiving Party”),the Receiving Party shall do the following with respect to the ConfidentialInformation of the other Party (“Disclosing Party”): (i) keep theConfidential Information of the Disclosing Party secure and confidential; (ii) treatall Confidential Information of the Disclosing Party with the same degree ofcare as it accords its own Confidential Information, but in no event less thana reasonable degree of care; and (iii) implement and maintain commerciallyreasonable physical, electronic, administrative and procedural securitymeasures, including commercially reasonable authentication, access controls,virus protection and intrusion detection practices and procedures.

 

(b)           Use and Disclosure of Confidential Information.

 

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

 

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

 

(c)           Unauthorized Use 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 Party agreesthat injunctive relief may be warranted in addition to any other remedies theDisclosing Party may have.  In addition,the Receiving Party agrees promptly to advise the Disclosing Party by telephoneand in writing via facsimile of any security breach that may have compromisedany Confidential Information or of any unauthorized misappropriation,disclosure or use by any Person of the Confidential Information of theDisclosing Party which may come to its attention, and to take all steps at itsown expense reasonably requested by the Disclosing Party to limit, stop orotherwise remedy such breach, misappropriation, disclosure or use.

 

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(d)           Return or 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.

 

Section 8.02.  Access Rights.  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 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, includingany audit results of subcontractors that provide Services; provided thatneither Party shall be required to provide access to records to the extent that(a) such access is prohibited by Applicable Law, (b) such records arelegally privileged, (c) such records are company planning documents ofsuch Party or any of its Affiliates, operating budgets, management reviews oremployee records, (d) such records relate to other customers of, or creditprograms operated by, the Bank Parties or Servicer or (e) such recordsrelate to other customers or operations of such Party other than the Program orto personnel records not normally disclosed in connection with audits.

 

Section 8.03.  NoWaiver; Remedies; Amendment.

 

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

 

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

 

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

 

Section 8.04.  IndependentContractor. In the performance of its duties or obligationsunder this Agreement, Servicer shall not be deemed to be the agent of Bank andBank shall not be deemed to be the agent of Servicer and each Party shall atall times take

 

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whatevermeasures as are necessary to ensure that its status shall be that of anindependent contractor.

 

Section 8.05.  NoJoint Venture. Nothing in this Agreement or any TransactionDocument shall be deemed to create a partnership or joint venture betweenServicer and Bank. Except as expressly set forth herein, no Party shall haveany authority hereunder to bind or commit the other Party.

 

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

 

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

 

Section 8.08.  NoSet-Off.  The Parties agree that eachParty has waived any right to set-off, combine, consolidate or otherwiseappropriate and apply (i) any assets of the other Party held by the Partyor (ii) any indebtedness or other liabilities at any time owing by theParty to the other Party, as the case may be, against or on account of anyobligations owed by the other Party in connection with this Agreement, exceptas expressly set forth herein.

 

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

 

(a)           In the case of Servicer:

 

c/oThe Neiman Marcus Group, Inc.One Marcus Square1618 Main StreetDallas, Texas 75201Attention:  General CounselFacsimile:  (214) 573-5354

 

Witha copy to:

 

c/oThe Neiman Marcus Group, Inc.One Marcus Square1618 Main Street

 

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Dallas,Texas 75201Attention:  Credit Card Program ManagerFacsimile:  (214) 743-7646

 

Witha copy to:

 

SimpsonThacher & Bartlett LLP425 Lexington AvenueNew York, New York 10017Attention:  Maripat Alpuche, Esq.Facsimile: (212) 455-2502

 

(b)           In the case of Bank:

 

HSBCBank Nevada, N.A.26525 N. Riverwoods Blvd.

 

Mettawa, IL60045Attention: Chief Operating Officer, HSBC Card & Retail Services

 

Witha copy to:

 

HSBCCard & Retail Services26525 N. Riverwoods Blvd.Mettawa, IL 60045Attention: General Counsel, Card & Retail Services Division

 

Section 8.10.  Severability. To thefullest extent permitted by law, any term or provision of this Agreement whichis invalid or unenforceable in any jurisdiction shall, as to such jurisdiction,be ineffective to the extent of such invalidity or unenforceability withoutrendering invalid or unenforceable the remaining terms and provisions of thisAgreement in such jurisdiction or in any other jurisdiction.

 

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

 

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

 

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

 

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

 

Section 8.15.  Counterparts. ThisAgreement may be executed in one or more counterparts, each of whichcounterparts shall be deemed to be original, and all such counterparts shallconstitute one and the same instrument.

 

Section 8.16.  Assignment;Successors. This Agreement shall not be assigned by eitherParty without the prior written consent of the other, except that (a) Servicershall have the right to assign its rights and obligations hereunder to anyAffiliate of Servicer and (b) Bank shall have the right to assign itsrights and obligations hereunder to an Affiliate. This Agreement is intendedfor the exclusive benefit of the Parties hereto and their respective successorsand permitted assigns, and shall not create any rights in or be enforceable byany other Person whomsoever, other than any Person entitled to indemnificationfrom Servicer pursuant to Article VII hereof, it being the intention ofthe Parties that no other Person shall be deemed to be a third partybeneficiary of this Agreement. This Agreement shall be binding on, andenforceable against, the successors and permitted assigns of the Parties.

 

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

 

Section 8.18.  Waiverof Jury Trial and Venue.

 

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

 

(b)           Each party hereto 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 hereto hereby irrevocably waives any objection which such partymay now or hereafter have to the laying of improper venue or *forum non conveniens*.  Each party hereto agrees that ajudgment in any such action or proceeding may be enforced in otherjurisdictions by suit on the judgment or in any manner provided by law.  Any and all service of process and anyother notice in any such suit, action or proceeding with respect to thisAgreement shall be effective against any party hereto if given as providedherein.

 

INWITNESS WHEREOF, the Parties have caused their respective duly authorizedrepresentatives to execute this Agreement as of the date first written above.

 

 
|   |   | THE  NEIMAN MARCUS GROUP, INC. |
|--------|--------|-------------------------------------|
|   |   |                                |
|   |   |                                |
|   |   | By:                                 | /s/  James E. Skinner |

 

22

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|   |   |                    | Name:  James E. Skinner |
|--------|--------|-------------------------|-------------------------|
|   |   |                    | Title:  EVP & CFO   |
|   |   |                    |
|   |   |                    |
|   |   | HSBC  BANK NEVADA, N.A. |
|   |   |                    |
|   |   |                    |
|   |   | By:                     | /s/  Brian Hughes       |
|   |   |                    | Name:  Brian Hughes     |
|   |   |                    | Title:  EVP             |

 

23

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**SCHEDULE 1.01(a)**

 

**Services**

 

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

 

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

 

**DataProcessing Services —**Credit card data processing involves retailcardholder account data storage and maintenance, transaction authorizing andposting, fraud and risk management strategies and settlement.

 

**EarlyStage Collections** — Early stage collection accounts are defined asaccounts less [***] delinquent (less than [***]).  The servicing for early stage collectionsincludes providing account monitoring, identifying over-extended accounts and initiatingthe appropriate collection efforts which include the use of power dialingequipment and the generation of collection letters.

 

**CreditProcessing Services**include the processing, primarily through storereferral call interaction, and decisioning of new applications and pending saletransactions on existing accounts. Both of these underwriting processes aregoverned by the risk management policies and operating procedures.

 

**CustomerService Services**has multiple areas of functionality.  The call center responds and resolvescardholder and store inquiries and handles card program billing-related claimsfor Neiman Marcus, Bergdorf Goodman and the InCircle loyalty program.   Other support groups involved in thecustomer resolution process include Bill Adjustments, Media Retention andRetrieval, Accounts Receivable reconciliation, Third Party Charge-backs as wellas various clerical responsibilities.

 

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**SCHEDULE 2.04(a)**

 

**Service Level Standards**

 

Forthe Term, the following Servicing Levels will be maintained by Servicer asnoted:

 

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

 

1.              Percentage of time thatServicer shall make its collections operations available during the followingtimes: [***]

 

Monday through Thursday [***]CST

Friday [***] CST

Saturday [***] CST

Sunday [***]

 

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

 

[***]

 

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

 

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

 

2.              Authorization,customer service and InCircle calls will be answered on a monthly averagewithin the following timeframes after the call first becomes available for aUniversal Agent to answer:

 

[***]

 

Exceptions to the ASA’s are asfollows:

·                  [***].

·                  [***]

 

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within the reprieve) themonth following the month during which the Change of Terms has becomeeffective.

 

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

 

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

 

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

 

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

 

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

 

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

 

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****Denotes a Starred SLA***

 

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**SCHEDULE 5.02**

 

**Remedies**

 

“InitialPenalty Amount”: [***].

 

“SubsequentPenalty Amount”: [***].

 

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**SCHEDULE 7.04**

 

**Indemnity Matters**

 

“Deductible Amount”: [***].

 

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