**EXHIBIT 10.31**

 

ConfidentialTreatment Requested.

 

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

 

SERVICING AGREEMENT

 

between

 

THE NEIMAN MARCUS GROUP, INC.

 

and

 

HSBC BANK NEVADA, N.A.

 

Dated as of July 7, 2005

 

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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                                 | 3 |
| Section 2.02.              | Servicer Compensation                       | 3 |
| 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 |
| Section 2.07.              | Inventory                                   | 6 |
| Section 2.08.              | Securitization                              | 6 |
|                            |                                        |   |
| ARTICLE III                     |                                        |
| REPRESENTATIONS  AND WARRANTIES |                                        |
|                            |                                        |   |
| Section 3.01.              | Representations and  Warranties of Servicer | 6 |
| Section 3.02.              | Representations and  Warranties of Bank     | 8 |
|                            |                                        |   |
| ARTICLE IV                      |                                        |
| ADDITIONAL  COVENANTS           |                                        |
|                            |                                        |   |
| Section 4.01.              | Further Assurances                          | 9 |
| Section 4.02.              | Modifications                               | 9 |
| Section 4.03.              | Correction of Errors                        | 9 |
| Section 4.04.              | Changes in Law                              | 9 |
| Section 4.05.              | Cooperation                                 | 9 |
| Section 4.06.              | Facilities and  Equipment                   | 9 |
| Section 4.07.              | Insurance                                   | 10 |
| Section 4.08.              | Customer Information                        | 10 |
|                            |                                        |   |
| ARTICLE V                       |                                        |
| DEFAULT;  REMEDIES              |                                        |
|                            |                                        |   |
| Section 5.01.              | Servicer Default                            | 10 |
| Section 5.02.              | Remedies                                    | 11 |

 

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| Section 5.03.    | Non-Starred SLAs                               | 12     |
|-----------------------|------------------------------------------------|--------|
|                  |                                           |
| ARTICLE VI            |                                           |
| TERM                  |                                           |
|                  |                                           |
| Section 6.01.    | Term of Agreement                              | 12     |
| Section 6.02.    | Servicer Termination  Events                   | 12     |
| Section 6.03.    | Termination by Bank                            | 13     |
| Section 6.04.    | Effect of Termination                          | 13     |
|                  |                                           |
| ARTICLE VII           |                                           |
| INDEMNIFICATION       |                                           |
|                  |                                           |
| Section 7.01.    | Indemnification                                | 13     |
| Section 7.02.    | Procedure for  Indemnification                 | 14     |
| Section 7.03.    | Notice and Additional  Rights and Limitations. | 15     |
| Section 7.04.    | Limits on  Indemnification                     | 15     |
|                  |                                           |
| ARTICLE VIII          |                                           |
| MISCELLANEOUS         |                                           |
|                  |                                           |
| Section 8.01.    | Confidentiality                                | 15     |
| Section 8.02.    | Access Rights                                  | 18     |
| Section 8.03.    | No Waiver; Remedies;  Amendment                | 18     |
| Section 8.04.    | Independent Contractor                         | 18     |
| Section 8.05.    | No Joint Venture                               | 18     |
| Section 8.06.    | Payment Terms                                  | 18     |
| Section 8.07.    | Entire Agreement                               | 19     |
| Section 8.08.    | No Set-Off                                     | 19     |
| Section 8.09.    | Notices                                        | 19     |
| Section 8.10.    | Severability                                   | 20     |
| Section 8.11.    | Headings                                       | 20     |
| Section 8.12.    | Survival                                       | 20     |
| Section 8.13.    | Costs and Expenses                             | 20     |
| Section 8.14.    | Drafting                                       | 20     |
| Section 8.15.    | Counterparts                                   | 20     |
| Section 8.16.    | Assignment; Successors                         | 20     |
| Section 8.17.    | **Governing  Law**                             | 21     |
| Section 8.18.    | Waiver of Jury Trial  and Venue                | 21     |
|                  |                                           |
| SCHEDULES             |                                           |
|                  |                                           |
| Schedule 1.01(a) | Services                                       |   |
| Schedule 2.03(e)      | Monthly Reports                                |   |
| Schedule 2.04(a)      | Service Level Standards                        |   |
| Schedule 5.02         | Remedies                                       |   |
| Schedule 7.04         | Indemnity Matters                              |   |
|                       |                                                |        |  |

 

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SERVICING AGREEMENT

 

ThisServicing Agreement (as amended from time to time, this “Agreement”),dated as of July 7, 2005, is between The Neiman Marcus Group, Inc., aDelaware corporation (“Servicer”), and HSBC Bank Nevada, N.A., anational credit card bank (“Bank”).

 

WHEREAS,Servicer and certain of its subsidiaries (together, “Sellers”) haveentered into a Purchase, Sale and Servicing Transfer Agreement with Bank andHSBC Finance Corporation, a Delaware corporation (“Bank Parent”), datedas of July 7, 2005 (as amended from time to time, the “Purchase Agreement”),pursuant to which Sellers will sell, and Bank will purchase, specified assetsrelated to Sellers’ consumer private label credit card business;

 

WHEREAS,Servicer and certain of its subsidiaries (together, the “NMG Companies”)are entering into a Program Agreement, dated as of June 8, 2005 (as amendedfrom time to time, the “Program Agreement”), with Bank and HouseholdCorporation, a Delaware corporation (“Primary Servicer”, and togetherwith Bank, the “Household Companies”) which shall govern the operationof such credit card business and the rendering of marketing and other servicesby the parties thereto; and

 

WHEREAS,Bank wishes to retain Servicer to provide, and Servicer wishes to provide,certain servicing and administration activities relating to the Accounts andthe Program, all pursuant to the terms and conditions set forth herein.

 

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 as follows:

 

ARTICLE I

 

DEFINITIONS AND INTERPRETATION

 

Section 1.01.Defined Terms. Wherever used in this Agreement, unless the contextotherwise requires, the following terms shall have the meanings set forthbelow. Capitalized terms used but not defined in this Agreement shall have themeanings given them in the Program Agreement.

 

“Agreement”: Asdefined in the preamble hereof.

 

“Bank”: As definedin the preamble hereof.

 

“Bank Parent”: Asdefined in the recitals hereof.

 

“Credit CardProduction Services”: The Services set forth in paragraph 2 of Section Iof Schedule 1.01(a).

 

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

 

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

 

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“DataProcessing Services”: The Services set forth in paragraph 4 of Section Iof Schedule 1.01(a).

 

“DeductibleAmount”: As defined in Schedule 7.04.

 

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

 

“DocumentationServices”: The Services set forth in paragraph 1 of Section I ofSchedule 1.01(a).

 

“HouseholdCompanies”: As defined in the recitals hereof.

 

“InitialPenalty Amount”: As defined in Schedule 5.02.

 

“LateStage Collection Services”: The Services set forth in paragraph 3 of Section Iof Schedule 1.01(a).

 

“NMGCompanies”: As defined in the recitals hereof.

 

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

 

“OtherServices”: The Services set forth in Section II of Schedule 1.01(a).

 

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

 

“PrimaryServicer”: As defined in the recitals hereof.

 

“ProgramAgreement”: As defined in the recitals hereof.

 

“PurchaseAgreement”: As defined in the recitals hereof.

 

“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.

 

“SecuritizationDocuments”: As defined in the Purchase Agreement.

 

“Sellers”:As defined in the recitals hereof.

 

“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.

 

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“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), SLA number 1 of Section A, SLA number 1 of Section B,SLA number 6 of Section C and SLA numbers 2 and 6 of Section D.

 

“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 Purchase Agreement, the Program Agreement and this Agreementand the agreements, instruments, schedules and other documents to be deliveredpursuant thereto and hereto.

 

Section 1.02.Certain Interpretive Matters. As used herein: (a) all references tothe plural 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 “withoutlimitation”; (d) all references to “$” or “dollars” shall be deemedreferences to United States dollars; and (e) all references to aparticular agreement, instrument or document shall include all renewals,extensions, modifications, amendments and restatements of such agreement,instrument, or document.

 

ARTICLE II

 

SERVICING

 

Section 2.01.Appointment. Subject to the terms and conditions of this Agreement, Bankhereby appoints Servicer as of the Effective Date as the servicer of theAccounts (excluding Non-Store Accounts associated with Dual-Line Credit Cards)and Cardholder Indebtedness and Servicer hereby accepts such appointment.

 

Section 2.02.Servicer Compensation. As compensation for provision of the Serviceshereunder, Servicer shall receive payment of the payment calculated byreference to the Servicing Fee Percentage as set forth in Schedule 9.1(a)(i) ofthe Program Agreement. Upon transfer of any of the Services to Primary Servicerin accordance with Section 2.03(b), the

 

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amount payable toServicer set forth in Schedule 9.1(a)(i) shall be adjusted as set forth inSchedule 9.1(a)(i) in order to reflect the reduction of Services beingperformed by Servicer and the assumption of the performance of such Services byPrimary Servicer.

 

Section 2.03.Services.

 

(a) Commencingon the Effective Date and continuing until the date, if any, upon which anylisted type of Service enumerated below is transferred to Primary Servicer asprovided in this Agreement, Servicer shall perform the following services(collectively, the “Services”): (i) the Documentation Services; (ii) theLate Stage Collection Services; (iii) the Credit Card Production Services;(iv) the Data Processing Services; and (v) the Other Services, ineach case in accordance with this Agreement and the Risk Management Policiesand Operating Procedures. Servicer shall service the Accounts in compliancewith Applicable Law, in such a way as to not disparage or embarrass theHousehold Companies or either of their names, with a level of service toCardholders and with no less care and diligence than the degree of service,care and diligence employed by Servicer prior to the Effective Date.Notwithstanding anything to the contrary contained herein, Bank shall be solelyresponsible for monitoring legal developments applicable to the operation ofthe Credit Card Business, although Servicer shall promptly apprise Bank of anysuch legal developments of which it becomes aware.

 

(b) Servicermay elect upon not less than thirty (30) days’ written notice to Bank totransfer (i) any one or more type of Services referenced in clauses (i) through(iv) of Section 2.03(a) or (ii) following conversion to theBank Systems, all of the Services being performed hereunder, to PrimaryServicer, in which event Primary Servicer shall accept appointment as servicerwith respect to such Services and shall be required to comply with theprovisions of the Program Agreement in connection with the performance of suchServices, including the requirement to meet the SLAs applicable to PrimaryServicer for such Service set forth in Schedule 7.3(a) of the ProgramAgreement. Upon the date of the foregoing transfer, Servicer shall be releasedfrom any further obligation with respect to the performance of such Services.

 

(c) NotwithstandingSection 2.03(b), Bank and Servicer agree that the Documentation Servicesshall be transferred to Primary Servicer as soon as practicable after the datehereof and, upon such transfer, Primary Servicer shall be required to complywith the provisions of the Program Agreement in connection with the performanceof such Services, including the requirement to meet the SLAs applicable to theDocumentation Services set forth in Schedule 7.3(a) of the ProgramAgreement.

 

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

 

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(e) Withinfifteen (15) days after the end of each Fiscal Month, Servicer shall provide toBank the reports specified in Schedule 2.03(e) and such other reports asare mutually agreed to by the Parties from time to time.

 

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

 

(g) Bankshall cooperate, and shall ensure that each of its Affiliates shall cooperate,with Servicer in all matters relating to Servicer’s performance of the Servicesat Servicer’s reasonable request. Such cooperation shall be provided at theexpense of Bank and shall include providing Servicer with reasonable access tothe personnel, records, systems, technology and information of the HouseholdCompanies and their Affiliates relating to the Accounts. Servicer shall obtainall licenses and authorizations necessary to perform the Services that itprovides hereunder.

 

Section 2.04.Service Level Standards.

 

(a) Servicershall perform the applicable Services in accordance with the SLAs set forth onSchedule 2.04(a).

 

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

 

Section 2.05.Use of 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 extent Servicer subcontracts oroutsources to any third party any Services as of the date hereof, Servicer maycontinue to subcontract or outsource such Services to such third party.

 

Section 2.06.Disaster Recovery. For as long as Servicer is providing serviceshereunder, Servicer shall continue to maintain the disaster recovery plan ineffect on the Effective Date. Servicer shall be prepared to and have theability to implement such plan if necessary. Servicer shall provide Bank withaccess to review such plan upon request. Servicer shall test the plan annuallyand shall promptly implement such plan upon the occurrence of a disaster orbusiness 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 adisaster or severe business interruption Servicer fails to take reasonablesteps to respond to such disaster or severe business interruption, Bank shallhave reasonable access to Servicer’s systems, technical personnel and disasterrecovery resources, so as to ensure continuity of business and systems requiredto service the Accounts.

 

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Section 2.07.Inventory. The Parties hereby agree that all paper, envelopes andplastic reasonably required for production and mailing of CardholderDocumentation and Loyalty Cards will be either (i) purchased by Servicerin consultation with Bank, in which case Servicer shall invoice Bank directlyfor such purchases and Bank shall pay Servicer for such invoices (includingshipping and taxes), or (ii) purchased by Bank in consultation withServicer at Bank’s sole cost and expense, provided that material qualities andquantities must be reasonably satisfactory to Servicer.

 

Section 2.08.Securitization.

 

(a) Aspart of the Services hereunder, Servicer hereby agrees to continue and to haveits Subsidiaries continue to perform for the benefit of Bank and Bank Parent ona subservicing basis, the servicing functions set forth under theSecuritization Documents with respect to the Accounts and receivables generatedthereunder that are subject to such Securitization Documents, from and afterthe Closing Date, including the execution and delivery of all certificates andreports as required by such Securitization Documents, which certificates andreports shall be addressed to HSBC Finance Corporation, a Delaware corporationas the Servicer.

 

(b) Servicerhereby acknowledges and agrees that HSBC Finance Corporation shall be entitledto rely on such reports and certificates as a basis for issuing any of its ownreports and certificates under the Securitization Documents. In addition,Servicer hereby agrees to use commercially reasonable efforts to causeServicer’s independent public accountants to issue the reports required by theSecuritization Documents and deliver such reports to HSBC Finance Corporationfor the period starting October 31, 2004 and ending on the Closing Date,such reports to be delivered by such independent public accounting firm on orbefore October 31, 2005.

 

(c) Servicershall cooperate with Bank and Bank Parent to correct any errors or deficienciesdiscovered in any of the reports referred to in this Section 2.08.

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES

 

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

 

(a) Organization.Servicer (i) is a corporation duly organized, validly existing and in goodstanding under the laws of the jurisdiction of its incorporation, (ii) isduly licensed or qualified to do business and is in good standing as a foreigncorporation in all jurisdictions in which the conduct of its business or theactivities in which it is engaged makes such licensing or qualificationnecessary, except to the extent that its non-compliance would not reasonably beexpected to have, individually or in the aggregate, a material adverse effecton its ability to

 

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perform its obligationshereunder, and (iii) has all necessary licenses, permits, consents orapprovals from or by, and has made all necessary filings and registrationswith, all governmental authorities having jurisdiction, to the extent requiredfor the ownership, lease or conduct and operation of its business, except tothe extent that the failure to obtain such licenses, permits, consents orapprovals or to make such filings or registrations would not reasonably beexpected to have, individually or in the aggregate, a material adverse effecton its ability to perform its obligations under this Agreement.

 

(b) Capacity;Authorization; Validity. Servicer has all necessary corporate power andauthority 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 anddelivery by Servicer of this Agreement and all documents, instruments andagreements executed and delivered by Servicer pursuant hereto, and theconsummation by Servicer of the transactions specified herein, have been dulyand validly authorized and approved by all necessary corporate actions ofServicer. This Agreement (i) has been duly executed and delivered byServicer, (ii) constitutes the valid and legally binding obligation ofServicer, and (iii) is enforceable in accordance with its terms (subjectto applicable bankruptcy, insolvency, reorganization, receivership or otherlaws 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 byServicer, its compliance with the terms hereof, and consummation of thetransactions specified herein will not (i) conflict with, violate, resultin the breach of, constitute an event which would, or with the lapse of time oraction by a third party or both would, result in a default under, or acceleratethe performance required by, the terms of any contract, instrument or agreementto which Servicer is a party or by which it is bound, or to which any of theassets of Servicer is subject; (ii) conflict with or violate the articlesof incorporation or by-laws of Servicer; (iii) breach or violate anyApplicable Law or Applicable Order, in each case, applicable to Servicer; (iv) requirethe consent or approval of any other party to any contract, instrument orcommitment to which Servicer 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 Servicer’s ability to perform its obligations under this Agreement.

 

(d) Litigation.No action, claim, litigation, proceeding, arbitration or investigation ispending or, to the Knowledge of Servicer, threatened against Servicer or any ofits Subsidiaries, at law, in equity or otherwise, by or before any GovernmentalAuthority, to which Servicer or any of its Subsidiaries is a party, which wouldreasonably be expected to have, individually or in the aggregate, a materialadverse effect on the ability of Servicer to perform its obligations under thisAgreement.

 

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(e) Facilitiesand Equipment. Servicer has all necessary facilities, equipment, suppliesand such other resources as are reasonably necessary to provide the Servicesunder this Agreement.

 

(f) Solvency.Servicer is Solvent.

 

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

 

(a) Organization.Bank (i) is a corporation duly organized, validly existing and in goodstanding under the laws of the jurisdiction of its incorporation, (ii) isduly licensed or qualified to do business and is in good standing as a foreigncorporation in all jurisdictions in which the conduct of its business or theactivities in which it is engaged makes such licensing or qualificationnecessary, except to the extent that its non-compliance would not reasonably beexpected to have, individually or in the aggregate, a material adverse effecton its ability to perform its obligations hereunder, and (iii) has allnecessary licenses, permits, consents or approvals from or by, and has made allnecessary filings and registrations with, all governmental authorities havingjurisdiction, to the extent required for the ownership, lease or conduct andoperation of its business, except to the extent that the failure to obtain suchlicenses, 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 on its ability to perform its obligationsunder this Agreement.

 

(b) Capacity;Authorization; Validity. Bank has all necessary corporate power andauthority 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 anddelivery by Bank of this Agreement and all documents, instruments andagreements executed and delivered by Bank pursuant hereto, and the consummationby Bank of the transactions specified herein, have been duly and validlyauthorized and approved by all necessary corporate 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).

 

(c) Conflicts;Defaults; Etc. The execution, delivery and performance of this Agreement byBank, its compliance with the terms hereof, and consummation of thetransactions specified herein will not (i) conflict with, violate, resultin the breach of, constitute an event which would, or with the lapse of time oraction by a third party or both would, result in a default under, or acceleratethe performance required by, the terms of any contract, instrument or agreementto which Bank is a party or by which it is bound, or to which any of the assetsof Bank is subject; (ii) conflict with or violate the articles ofincorporation or by-laws of Bank; (iii) breach or violate any ApplicableLaw 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,

 

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

 

(d) Litigation.No action, claim, litigation, proceeding, arbitration or investigation ispending or, to the Knowledge of Bank, threatened against Bank or any of itsAffiliates, at law, in equity or otherwise, by or before any GovernmentalAuthority, to which Bank or any of its Subsidiaries is a party, which wouldreasonably be expected to have, individually or in the aggregate, a materialadverse effect on the ability of Bank to perform its obligations under thisAgreement.

 

(e) Solvency.Bank is Solvent.

 

ARTICLE IV

 

ADDITIONAL COVENANTS

 

Section 4.01.Further Assurances. 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 as permitted by this Agreement, the ProgramAgreement, the Risk Management Policies or the Operating Procedures, Servicershall not enter into any agreement or arrangement reducing amounts payable byCardholders.

 

Section 4.03.Correction of 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.Changes in Law. Bank shall notify Servicer from time to time, in atimely manner, of the expiration, revocation or amendment of, or other materialdevelopments relating to, any requirements of Applicable Law affecting theprovision by Servicer of the Services. If such changes in law materiallyincrease Servicer’s cost of providing the Services, the Management Committeeshall meet to discuss the increased cost and shall determine the allocation ofsuch increased cost between the Parties.

 

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

 

Section 4.06.Facilities and Equipment.

 

(a) Foras long as Servicer is providing Services hereunder, Servicer shall maintain ingood working order all necessary facilities, equipment, supplies and such otherresources as are reasonably necessary to provide any Services in accordancewith the SLAs under this Agreement.

 

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(b) Servicershall provide Bank with written notice prior to opening a new servicingfacility for the purpose of providing the Services.

 

Section 4.07.Insurance. Servicer shall maintain insurance policies (in any eventincluding error and omissions liability insurance and fiduciary liabilityinsurance) with respect to its employees and properties under such terms andconditions as are (i) commercially reasonable and available from time totime and (ii) customary for similarly situated Persons engaged in similarbusiness, except in each case for insurance which a failure to maintain wouldnot reasonable be expected to have a material adverse effect on the ability ofServicer to perform its obligations under this Agreement.

 

Section 4.08.Customer Information. Servicer shall maintain an information securityprogram that is designed to meet all requirements of Applicable Law, including,at a minimum, maintenance of an information security program that is designedto: (i) ensure the security and confidentiality of customer information; (ii) protectagainst any anticipated 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 shall meet current industry standards andshall be at least as protective as those used by Servicer to protect its otherconfidential customer information. Servicer shall use the same degree of carein protecting 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 event Servicer becomes aware of anyunauthorized use of or access to customer information, Servicer shallimmediately notify Bank and shall cooperate with Bank, as it deems necessary oras required by Applicable Law, (x) to assess the nature and scope of suchincident, (y) to contain and control such incident to prevent furtherunauthorized access to or use of such information, and (z) to provideprompt notice to affected customers to the extent required by Applicable Law orotherwise with the approval of the Management Committee.

 

ARTICLE V

 

DEFAULT; REMEDIES

 

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

 

(a) SignificantFailure. If Servicer (i) is more than 20% below the target for anyStarred SLA in any Fiscal Month, (ii) fails to meet any individual StarredSLA in two (2) consecutive Fiscal Months or (iii) fails to meet anyStarred SLA four (4) times in any twelve (12) Fiscal Month period(including multiple breaches of the same and individual breaches of differentStarred SLAs) (each, a “Significant Failure”).

 

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

 

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Section 5.02.Remedies.

 

(a) Inthe event of a Significant Failure, Servicer shall: (A) promptly report tothe Management Committee the reasons for the Starred SLA failure(s); (B) withinthirty (30) days of such Significant Failure, propose a remediation plan fortaking such action as Servicer deems necessary to correct and preventrecurrence of such failure(s); and (C) subject to Bank’s agreement,implement the remediation plan as soon as practicable. However, under nocircumstances shall the time period between Bank’s agreement to the remediationplan and completion of such plan exceed two (2) months.

 

(b) IfServicer has an additional failure of any of the same Starred SLA(s) (“SubsequentFailure”) during the twelve (12) Fiscal Months following the occurrence ofany Significant Failure, Servicer shall pay Bank the Initial Penalty Amount,within fifteen (15) 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 twenty four (24) Fiscal Monthsfollowing a Significant Failure or upon the occurrence of a Regulatory Failure,Servicer shall pay Bank the Subsequent Penalty Amount, within fifteen (15) daysof the end of such Fiscal Month, per each additional Subsequent Failure.

 

(d) Uponthe occurrence of (i) the third and each additional Subsequent Failure ofthe same Starred SLA during the twenty four (24) 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 thirty (30) daysprior written notice to Servicer, in which event the parties shall have therights set forth in Article XVII of the Program Agreement; provided,however, that prior to either Party electing to transfer the provisionof such Services pursuant to Section 5.02(e) below or to terminatethe Program Agreement, the Management Committee shall meet to discuss theoccurrence of the Subsequent Failure and shall determine whether such SLAshould be modified (except in the case of a Regulatory Failure, in which eventno Management Committee meeting shall be required as a condition totransferring the affected Services pursuant to Section 5.02(e)). If theManagement Committee determines that such SLA shall be modified, then Bankshall not be entitled to terminate the Program Agreement as a result of theSubsequent Failure discussed at the meeting of the Management Committee unlessand until an additional Subsequent Failure of the same Starred SLA occurs; and provided,further, that for purposes of transferring Services pursuant to this Section 5.02(d) orSection 5.02(e), an SLA that is both a Starred SLA and a Regulatory SLAshall be deemed to be a Regulatory SLA.

 

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

 

(f) Noservicing 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

 

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Affiliate of theprovision of the Services or the appointment by Bank of a successor servicerreasonably satisfactory to Servicer pursuant to a servicing agreementreasonably 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 usecommercially reasonable efforts and cooperate with each other to ensurecontinuity of business during any transfer of Services.

 

Section 5.03.Non-Starred SLAs. For purposes of this Article V, “Starred SLA”shall be deemed to include Non-Starred SLAs in the event that there have beenmore than eight (8) Significant Failures in any twelve (12) month periodwith respect to any Non-Starred SLAs; provided, that in the event thereare no Significant Failures in the immediately following twelve (12) monthperiod with respect to any of the Non-Starred SLAs, then such Non-Starred SLAsshall no longer be deemed to be Starred SLAs.

 

ARTICLE VI

 

TERM

 

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

 

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

 

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

 

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

 

(c) Apetition under the U.S. Bankruptcy Code or similar law shall be filed againstServicer and not be dismissed within sixty (60) days.

 

(d) Adecree or order by a court having jurisdiction (i) for relief in respectof Servicer pursuant to the Bankruptcy Code or any other applicable bankruptcyor other similar law, (ii) for appointment of a custodian, receiver, liquidator,assignee, trustee or sequestrator (or similar official) of Servicer or of anysubstantial part of its properties, or (iii) ordering the winding-up orliquidation of the affairs of Servicer shall, in any such case be entered, andshall not be vacated, discharged, stayed or bonded within sixty (60) days fromthe date of entry thereof.

 

(e) Servicershall (i) file a petition seeking relief pursuant to the Bankruptcy Codeor any other applicable bankruptcy or other similar law, (ii) consent tothe institution of

 

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proceedings pursuantthereto or to the filing of any such petition or to the appointment of ortaking possession by a custodian, receiver, liquidator, assignee, trustee orsequestrator (or similar official) of Servicer or any substantial part of itsproperties, or (iii) take corporate or similar action in furtherance ofany such action.

 

Section 6.03.Termination by Bank. Bank may terminate this Agreement upon writtennotice prior to the end of the Term after the occurrence of a Servicer Event ofDefault. No such termination shall be effective until either assumption by Bankor its Affiliate of the provision of the Services pursuant to the ProgramAgreement or the appointment by Bank of a successor servicer reasonablysatisfactory to Servicer pursuant to a servicing agreement reasonablysatisfactory to Servicer. Following the delivery by Bank of written notice of aservicing transfer or termination, Bank shall have reasonable access to Servicer’soperations and systems to ensure continuity of business and systems required toservice the Accounts until such time as Bank or its Affiliate assumes theprovision of the Services or appoints a successor servicer reasonablysatisfactory to Servicer. Both Parties shall use commercially reasonableefforts and cooperate with each other to ensure continuity of business duringany transfer of Services.

 

Section 6.04.Effect of Termination.

 

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

 

(b) Ifthis 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. Servicer agrees to indemnify and holdharmless Bank, its Affiliates and their respective officers, directors andemployees from and against and in respect of any and all losses, liabilities,damages, costs and expenses of whatever nature, including reasonable attorneys’fees and expenses (collectively, “Damages”), which are caused or incurredby, result from, arise out of or relate to:

 

(a) thebreach of any of Servicer’s representations or warranties made in thisAgreement;

 

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

 

(c) anyfines or penalties imposed by a Governmental Authority on the basis of a RegulatoryFailure;

 

(d) anylawsuit, legal proceeding, arbitration proceeding, claim, dispute, complaint orsetoff by a Cardholder with respect to anything actually or allegedly done ornot done by Servicer in connection with the Services, excluding anythingactually or allegedly done or not done by Servicer that (A) is required orexpressly permitted under the Risk Management Policies, the OperatingProcedures or any Transaction Document or (B) is done at the expressdirection of Bank.

 

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

 

Section 7.02.Procedure for Indemnification.

 

(a) Incase any claim is made, or any suit or action is commenced against Bank inrespect 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 ofits election so to assume the defense thereof, Servicer shall not be liable toBank under this Section for any attorneys’ fees or other expensessubsequently incurred by Bank in connection with the defense thereof, except asset forth in Section 7.02(b), other than reasonable costs ofinvestigation.

 

(b) Bankshall have the right to employ its own counsel if Servicer elects to assumesuch 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.

 

(c) Bankor Servicer may at any time notify the other of its intention to settle orcompromise any claim, suit or action against Bank in respect of which paymentsmay be sought by Bank hereunder, and (i) Servicer may settle or compromiseany such claim, suit or action solely for the payment of money damages forwhich Bank will be fully indemnified

 

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hereunder and given afull and complete release of any and all liability by all relevant partiesrelating to such claim, suit or action, but shall not agree to any othersettlement or compromise unless Bank consents in writing, which consent shallnot be unreasonably withheld (it being agreed that any failure of an Bank toconsent to any settlement or compromise involving relief other than monetarydamages shall not be deemed to be unreasonably withheld), and (ii) Bankmay settle or compromise any such claim, suit or action solely for an amountnot exceeding One Thousand Dollars ($1,000), but shall not settle or compromiseany other matter without the prior written consent of Servicer, which consentshall not be unreasonably withheld.

 

Section 7.03.Notice and Additional Rights and Limitations.

 

(a) IfBank fails to give prompt notice of any claim being made or any suit or actionbeing 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) ThisSection 7.03 shall govern the obligations of the Parties with respect tothe subject matter hereof but shall not be deemed to limit the rights thateither Party might otherwise have at law or in equity.

 

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

 

Section 7.04.Limits on Indemnification. Notwithstanding anything to the contrary setforth in this article, Servicer shall not have any obligation to indemnify Bankin respect 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.

 

ARTICLE VIII

 

MISCELLANEOUS

 

Section 8.01.Confidentiality

 

(a) GeneralConfidentiality.

 

(i) For purposes ofthis Agreement, “Confidential Information” means any of the following: (i) informationthat is provided by or on behalf of either Servicer or the Household Companiesto the other Party or its agents in connection with providing Serviceshereunder (including information provided prior to the date hereof or theEffective Date); (ii) information about Servicer or the HouseholdCompanies or their

 

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Affiliates, or their respective businesses oremployees, that is otherwise obtained by the other Party in connection withproviding 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 Household Companies in connection with this Agreement, including byaccessing or being 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) Therestrictions on disclosure of Confidential Information under this Section 8.01shall not apply to information received or obtained by Servicer or theHousehold Companies, as the case may be, that: (i) is or becomes generallyavailable to the public other than as a result of disclosure in breach of thisAgreement or any other confidentiality obligations; (ii) is lawfullyreceived on a non-confidential basis from a third party authorized to disclosesuch information 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 Confidential Informationobtained from the other Party in order to afford such other Party anopportunity 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 Household Companies, as the case may be, withoutthe use or knowledge of any proprietary, non-public information provided by theother Party under, or otherwise made available to such Party as a result of,this Agreement. Nothing herein shall be construed to permit the Receiving Party(as defined below) to disclose to any third party any Confidential Information thatthe Receiving Party is required to keep confidential under Applicable Law.

 

(iii) The terms andconditions of this Agreement shall each be the Confidential Information ofServicer and the Household Companies and each of the Parties to this Agreementshall be deemed to be a Receiving Party of each of them; provided, however,that the terms of this Agreement may be filed by either Party with anyGovernmental Authority (including public filings with the Securities andExchange Commission) to the extent required by Applicable Law.

 

(iv) If Servicer, onthe one hand, or the Household Companies, on the other hand, receivesConfidential Information of the other Party (“Receiving Party”), theReceiving 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

 

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no event less than a reasonable degree of care; and (iii) implementand maintain commercially reasonable physical, electronic, administrative andprocedural security measures, including commercially reasonable authentication,access controls, virus protection and intrusion detection practices andprocedures.

 

(b) Useand Disclosure of Confidential Information.

 

(i) Each ReceivingParty shall use and disclose the Confidential Information of the DisclosingParty only for the purpose of performing its obligations or enforcing itsrights with respect to the Program or as otherwise expressly permitted by thisAgreement, and shall not accumulate in any way or make use of such ConfidentialInformation for any other purpose.

 

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

 

(c) UnauthorizedUse or Disclosure of Confidential Information. Each Receiving Party agreesthat any unauthorized use or disclosure of Confidential Information of theDisclosing Party might cause immediate and irreparable harm to the DisclosingParty for which money damages might not constitute an adequate remedy. In thatevent, the Receiving Party agrees that injunctive relief may be warranted inaddition to any other remedies the Disclosing Party may have. In addition, theReceiving Party agrees promptly to advise the Disclosing Party by telephone andin writing 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.

 

(d) Returnor Destruction of Confidential Information. Upon the termination orexpiration of this Agreement, the Receiving Party shall comply with theDisclosing Party’s reasonable instructions regarding the disposition of theDisclosing Party’s Confidential Information, which may include return of anyand all the Disclosing Party’s Confidential Information (including anyelectronic or paper copies, reproductions, extracts or summaries thereof); provided,however, that the Receiving Party in possession of tangible propertycontaining the Disclosing Party’s Confidential Information may retain onearchived copy of such material, subject to the terms of this Agreement, whichmay be used solely for regulatory purposes and may not be used for any otherpurpose. Such compliance shall be certified in writing, including a statementthat no copies of Confidential Information have been kept, except as necessaryfor regulatory purposes.

 

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Section 8.02.Access Rights. Each Party shall permit the other Party and itsrepresentatives and regulators to visit its facilities related to the Programduring normal business hours with reasonable advance notice. The reviewingParty shall employ such reasonable procedures and methods as necessary andappropriate in the circumstances, minimizing interference to the extentpracticable with the reviewed Party’s normal business operations. The reviewedParty shall use commercially reasonable efforts to facilitate the reviewingParty’s review, including making reasonably available such personnel of thereviewed Party and its service providers to assist the reviewing Party and itsrepresentatives as reasonably requested. Each Party shall also permit the otherParty and its representatives and regulators to review (during normal businesshours) and obtain copies of the books and records relating to the Program,including any audit results of subcontractors that provide Services; 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, the Household Companies or Servicer 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.

 

Section 8.03.No Waiver; Remedies; Amendment.

 

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

 

(b) Remediesprovided in this Agreement shall be the exclusive remedies of the Parties forbreaches of, or claims relating to, this Agreement.

 

(c) Inno event shall a term or provision of this Agreement be deemed to have beenwaived, modified or amended, unless a waiver, modification or amendment is inwriting and signed by the Parties hereto.

 

Section 8.04.Independent Contractor. 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 whatever measures as are necessary to ensure that its statusshall be that of an independent contractor.

 

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

 

Section 8.06.Payment Terms. All payments to be made by either Party pursuant to thisAgreement shall 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.

 

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Section 8.07.Entire Agreement. 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 and in a separate confidentialityletter signed by Bank dated March 9, 2005. This Agreement and the otherTransaction Documents and such confidentiality letter set forth the entireunderstanding between the Parties hereto with respect to the subject matterhereof and thereof.

 

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

 

Section 8.09.Notices. All notices, requests, demands and other communications whichare required or permitted to be given under this Agreement shall be in writingand shall be deemed to have been duly given upon the delivery or receiptthereof, as the case may be, sent by registered or certified mail, returnreceipt requested, via overnight delivery service, postage prepaid, or byfacsimile transmission (receipt confirmed) to:

 

(a)           In the case of Servicer:

 

c/o The Neiman MarcusGroup, Inc.

One Marcus Square

1618 Main Street

Dallas, Texas 75201

Attention: GeneralCounsel

Facsimile: (214) 573-5354

 

With a copy to:

 

c/o The Neiman MarcusGroup, Inc.

One Marcus Square

1618 Main Street

Dallas, Texas 75201

Attention: Credit CardProgram Manager

Facsimile: (214) 743-7646

 

With a copy to:

 

Simpson Thacher &Bartlett LLP

425 Lexington Avenue

New York, New York 10017

Attention: MaripatAlpuche, Esq.

Facsimile: (212) 455-2502

 

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(b)          In the case of Bank:

 

HSBC Bank Nevada, N.A.

2700 Sanders Road

Prospect Heights,Illinois 60070

Attention: ChiefOperating Officer, HSBC Retail Services

Facsimile: (847) 205-7441

 

With a copy to:

 

HSBC Retail Services

2700 Sanders Road

Prospect Heights,Illinois 60070

Attention: GeneralCounsel, Retail Services Division

Facsimile: (847) 205-7417

 

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

 

Section 8.11.Headings. The headings and recitals contained in this Agreement are forreference purposes only and shall not affect in any way the meaning orinterpretation of this Agreement.

 

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

 

Section 8.13.Costs and 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.

 

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

 

Section 8.15.Counterparts. This Agreement may be executed in one or morecounterparts, each of which counterparts shall be deemed to be original, andall such counterparts shall constitute 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

 

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have the right to assignits rights and obligations hereunder to an Affiliate. This Agreement isintended for the exclusive benefit of the Parties hereto and their respectivesuccessors and permitted assigns, and shall not create any rights in or beenforceable by any other Person whomsoever, other than any Person entitled toindemnification from Servicer pursuant to Article VII hereof, it being theintention of the Parties that no other Person shall be deemed to be a thirdparty beneficiary 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 Agreementshall be governed by and construed in accordance with the laws of the State ofNew York applicable to contracts made and to be performed within such State,and the obligations, rights and remedies of the parties hereunder shall bedetermined in accordance with such laws.**

 

Section 8.18.Waiver of Jury Trial and Venue.

 

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

 

(b) Eachparty hereto hereby irrevocably submits to the jurisdiction of the UnitedStates District Court for the State of Delaware or, if such federaljurisdiction is unavailable, in the state courts of the State of Delaware overany action arising out of this Agreement, and each party hereto herebyirrevocably waives any objection which such party may now or hereafter have tothe laying of improper venue or *forum nonconveniens*. Each party hereto agrees that a judgment in any suchaction or proceeding may be enforced in other jurisdictions by suit on thejudgment or in any manner provided by law. Any and all service of process andany other notice in any such suit, action or proceeding with respect to thisAgreement shall be effective against any party hereto if given as providedherein.

 

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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/  Steven P. Dennis |
|   | Name:                          | Steven  P. Dennis |
|   | Title:                         | Senior  Vice President, Strategy & Business Development |
|   |                           |
|   |                           |
|   | HSBC BANK NEVADA, N.A.         |
|   |                           |
|   | By:                            | /s/  Charles A. Colip |
|   | Name:                          | Charles  A. Colip |
|   | Title:                         | Executive  Vice President |

 

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**SCHEDULE1.01(a)**

 

**Services**

 

**I.   *The Services that may betransitioned to Bank are defined as follows:***

 

1.     **Documentation Services**— The StatementMailing responsibilities include preparing, processing and mailing customerbilling statements with related and appropriate inserts including but notlimited to privacy policies and term notifications. Additional creditcorrespondence may also be included. There are non-credit functions (i.e. storeand marketing mailings) not included in a transfer of DocumentationServices.  The ability for UniversalAgents to retrieve copies of customer billing statements through the SystemWareXNET or comparable system must also be done as part of this transition. Thecardholder remittance processing (Payment Processing) functionality related toreceiving and processing all incoming charge payments, except those paymentsreceived in the store, may also be transitioned.  The Payment Processing transition mustinclude a daily feed of NM and BG payments separately as a TRAMS input feedinto the NMG PaySys system until the Bank PaySys system is used.

 

2.     **Credit Card Production Services** — Theproduction and issuance of all new, replacement and reissued credit card platesrelated to the following credit card programs (Neiman Marcus, Bergdorf Goodman,NM Gold, NM InCircle, NM Platinum).  Inaddition to the embossed credit cards, the production services group generatesnon-embossed gift cards with the 16-digit gift card number coded in themagnetic stripe.  The timeline for thepotential transition of gift card issuance and additional costs incurred, ifany, will be mutually agreed upon by Bank and NMG prior to such conversion.

 

3.     **Late Stage Collections**— Collectionaccounts greater than or equal to 120 contractual days delinquent includingcharged-off (P&L) accounts.  Customercontact may include the use of power dialing equipment, generated collectionletters in addition to outbound phone contact with the customer. PostCharge-off (P&L) Collection Services include the administration, maintenanceand placement of accounts to outside attorneys and agencies on a contingencyfee basis.

 

4.     **Data Processing Services —**Credit carddata processing involves retail cardholder account data storage andmaintenance, transaction authorizing and posting, fraud and risk managementstrategies and settlement.

 

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**II.*  Services not considered fortransfer to the Bank includes****:*

 

Oncollection accounts less than 120 contractual days delinquent (**Early Stage Collections**), services include providing accountmonitoring, identifying over-extended accounts and initiating the appropriatecollection efforts.

 

**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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**SCHEDULE2.03(e)**

 

**MonthlyReports**

** **
| **Department**  | ** ** | **Hotel Report**                  | ** ** | **Brookline Equivalent**                                         |
|-----------------|------------|-----------------------------------|------------|------------------------------------------------------------------|
| **Collections** |       | Roll Rates                        |       | Trial Balance By Cycle                                           |
|            |       |                              |       | Trial Balance By  Balance Range                                  |
|            |       |                              |       | Roll Rate                                                        |
|            |       | Dialer Reports                    |       | Job Performance Summary                                          |
|            |       |                              |       | Monthly Job Performance  Summary                                 |
|            |       |                              |       | Monthly System  Performance Summary                              |
|            |       |                              |       | Monthly System  Completion Code Summary                          |
|            |       |                              |       | Monthly Job Completion  Code Summary                             |
|            |       | Collection QA Reports             |       | NM Monitoring Form                                               |
|            |       | Collection Agency Audit  Packages |       | Collection Agency  Account Audit                                 |
|            |       |                              |       | e.g. Attorney Placement  Summary (Strong Law Firm)               |
|            |       | Collection Bureau  Disputes       |       | Report Card Information;  Summary of Responses                   |
|            |       | Calling Strategies                |       | Billing Calendar -  Dialer Work Schedule                         |
|            |       | Block Code Report                 |       | Blocked Account Report                                           |
|            |       | Block Code/User Code  Report      |       | No applicable Report                                             |
|            |       | Debt Management  Inventory Report |       | Payment Plans                                                    |
|            |       |                              |       | CCCS Inventory                                                   |
|            |       | Outbound/Inbound Dialer  Volume   |       | Refer to Dialer Reports                                          |
|            |       | Collection Productivity  Reports  |       | Collector Synopsis  Summary Reports (By Team)                    |
|            |       |                              |       |                                                             |
| **Credit**      |       | Override Report                   |       | Credit Application  Processing System CAPS Listing               |
|            |       | Credit Line Increases             |       | New Accounts With  Guidelines Exceeding $                        |
|            |       |                              |       | Credit Limit Change  Report                                      |
|            |       | Forced Authorization  Report      |       | Daily Approval Override  Code Usage - Manager Overrides          |
|            |       |                              |       | Daily Approval Override  Code Usage - Credit Center Overrides    |
|            |       |                              |       | Authorization  Production By Operator ID                         |
|            |       |                              |       | Auto & Manual  Decline Transactions                     |
|            |       | Reinstatement Report              |       | No applicable Report                                             |
|            |       | Application Decision  Timing      |       | No applicable Report                                             |
|            |       | Adverse Action Timing             |       | Adverse Action Letter  Generation                                |
|            |       | Decline Reason Timing             |       | Adverse Action Letter Generation                                 |
|            |       |                              |       |                                                             |
| **Fraud**       |       | New Fraud Claims Report           |       | CAPS - Real-Time Fraud  Detection Payment Report Model           |
|            |       |                              |       | Pending Fraud Write-Off                                          |
|            |       | Fraud By Name Plate  Report       |       | Fraud Expense Forecast                                           |
|            |       |                              |       | Fraud Expense By  Location                                       |
|            |       | Fraud Block Code  Vintage Report  |       | No applicable Report                                             |
|            |       | Fraud By Type                     |       | Fraud Loss By Type                                               |
|            |       | Fraud Write-Off  Policies         |       | No applicable Report                                             |
|            |       | Fraud Investigation  Procedures   |       | Loss Prevention  Training Program - Module 5/Fraud Investigators |
|            |       | SAR Reporting Timelines           |       | No applicable Report                                             |

 

----

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

 

2

----

 
|   |   | Charge-Off &  Recovery Trends |   | Bad Debt Provision                                         |
|--------|--------|-----------------------------------|--------|------------------------------------------------------------|
|   |   |                              |   | Primary Collection  Agency Performance Report              |
|   |   |                              |   | Secondary  Agency & Bankruptcy Performance Report |
|   |   |                              |   | Bankruptcy Analysis                                        |
|   |   |                              |   | Bankruptcy Write-Off  Analysis                             |
|   |   | Behavior Score Control  Chart     |   | No applicable Report                                       |
|   |   |                              |   | Credit Reclassification  Summary Report                    |
|   |   | FICO Score Control  Chart         |   | No applicable Report                                       |
|   |   | Custom Score Control  Chart       |   | Population Stability  Report Final Scores                  |
|   |   | Account Review Analysis           |   | Quest Totals                                               |

** **

**3**

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**SCHEDULE2.04(a)**

 

**ServiceLevel Standards**

 

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

 

**A.****           ****DocumentationServices**Servicerwill meet the following service levels on average each month (as measured byServicer’s standard practices):

 

1.     Percentage of all billingstatements that will be mailed out within 5 days of cycle close date providedthat this standard shall not apply if a systems problem prevents communicationof the credit input data to Servicer’s credit operations (monthly reportingwill be completed on an Excel spreadsheet): [***] * [Regulatory SLA]

 

2.     Statement Mailing Servicesand Credit Card Production Services paper quality for statements, carriers andmatching window envelopes must meet the following minimum specifications:70-pound Cougar smooth natural/cream design

 

3.     Term notifications andprivacy and other inserts included in mailings must meet the following minimumpaper specifications: 60-pound offset

 

4.     Metavante CSF programming isused to produce the following billing statements: one-color billing statementswith 3 of 9 insertion barcode instructions

 

5.     The following are thestatement insert dimensions specifications: no larger than 5 1⁄2” long and 3 1⁄4”wide with a maximum insert weight of .150 ounces; total single-page statementmailing package per envelope must not exceed 1.000 ounce to qualify fordiscounted postal rate

 

6.     Percentage of daily paymentsthat will be processed within 48 hours of receipt (Functionality includesdesktop image archive capability up to 2 years for browse access): [***]

 

**B.****           ****CreditCard Production Services**Servicerwill meet the following service level on average each month (as measured byServicer’s standard practices):

 

1.     Percentage of all newaccount and replacement credit cards, including any Program Loyalty ProgramCards that will be mailed out within 5 business days after they are requested(monthly reporting will be completed on an Excel spreadsheet): [***] *

 

**C.****           ****Lateand Early-Stage Collections**Servicer will meet the following service levels on average each month (asmeasured by Servicer’s standard practices):

 

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

 

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

 

----

 

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

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

Sunday closed

 

3.     Percentage of time thatServicer shall complete the following minimum number of Account reviews per dayfor those accounts without a contact or tentative agreement still in the CTAsub-system: [***]

 
| Mid  balances ($[***] to $[***]) | every  3 days |
|----------------------------------|---------------|
| Balances  $[***] to $[***]       | every  3 days |
| Balances  greater than $[***]    | every  3 days |

 

4.     Percentage of time thatServicer shall maintain a [***] monthly promise to pay ratio of accounts workedfrom the autodialer: [***]

 

5.     Percentage of time that Servicershall maintain a [***] monthly contact ratio of accounts worked from theautodialer: [***]

 

6.     Percentage of time thatServicer shall maintain a [***] cure rate for Accounts worked excludingAccounts with balances greater than $[***]: [***] *

 

7.     Percentage of Accounts(greater than $[***] balance) which initially enter the collections queue willbe worked within 48 hours of such entry into the collections queue: [***]

 

**D.****           ****CreditProcessing Services & Customer Service Services** Servicer willmeet the following service levels on average each month (as measured byServicer’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 5 days ofreceipt: [***]

 

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:

 

·      [***](“[***] ASA”)during the months of April through October;

·      [***](“[***] ASA”)during the months of November through February; and

·      [***](“[***] ASA”)during March and during a month when there is a significant promotion ,sale event or another special event including the annual InCircle, Platinum andGold charge card re-issuance (and the Management Committee has been notified ofsuch promotion, sale event or special event).

 

If more than half of allAccounts receive a Change of Terms, then these standards will not be appliedfor the months during which the Change of Terms is becoming effective and onemonth after the Change of Terms has become effective. If the initial chargecard re-issuance (with Bank information on back of charge cards) is not sent toall cardholders with the Change of Terms notice, then these ASA standards willnot be applied for the 

 

2

----

 

months in which there-issued charge cards are sent and one month after all re-issued charge cardshave been mailed to all cardholders. *

 

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 or cycle end dateprovided that no Credit Balance refund will be sent out for a Credit Balanceunder [***] [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 bymail correspondence that will be sent out within 9 days of such request orcycle end date provided that no Credit Balance refund will be sent out for aCredit Balance under [***] [Regulatory SLA]

 

6.     Percentage of Fair Creditbilling and all other customer initiated disputes are handled [resolved] within60 days 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: [***]

 

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): [***]

 

----

****Denotes a Starred SLA***

 

3

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**SCHEDULE5.02**

 

**Remedies**

 

“InitialPenalty Amount”: [***].

 

“SubsequentPenalty Amount”: [***].

 

4

----

 

**SCHEDULE7.04**

 

**IndemnityMatters**

 

“Deductible Amount”: [***].

 

5

----