Exhibit 10.7


 


PRIVATE LABEL CREDIT CARD PROGRAM AGREEMENT


 


This Private Label Credit Card
Program Agreement (“Agreement”) is entered into as of the 1st day of March, 2007 (“Effective Date”),
by and among Citi Commerce Solutions of Canada Ltd., an Ontario corporation,
having its principal place of business at One Toronto Street, Suite 1200,
Toronto, Ontario M5C 2V6 (“Citi Commerce”), Zale Canada Co., a
corporation organized and existing under the laws of Nova Scotia, having its
principal place of business for North America at 901 W. Walnut Hill Lane,
Irving, Texas, U.S.A. 75038 (“Zale”) for the purposes set forth herein
and TXDC, L.P., a limited partnership organized and existing under the laws of
the State of Texas, in the United States of America (“TXDC”).


 


CONTEXT OF AGREEMENT


 


A.                                   Zale is engaged,
among other activities, in the retail sale of certain goods and services at its
retail Stores in Canada under the Brand names ‘Peoples’,
‘Peoples II’, ‘Mappins’, and ‘Youngs Jewellers’
(such Brand names, and any other Brand name or names adopted in the future by
Zale, hereinafter called the “Brand Names”, collectively, and the “Brand
Name”, individually) and wishes to offer to its customers the convenience
of using a Credit Card (as defined below) as the method of payment for those
goods and services.


 


B.                                     Zale wishes to
grant to Citi Commerce, and Citi Commerce wishes to have, the exclusive right
to own and operate the Private Label Program (as defined below), including the
right to issue new Credit Cards in substitution of and/or replacement for
existing private label credit cards bearing a Brand Name that were issued by
Citi Commerce under the Prior Agreement (as defined below), the right to all
future receivables originated pursuant to the Private Label Program, and the
right to use the Brand Names in connection with the Private Label Program, all
in accordance with the terms and conditions of this Agreement.


 


In consideration of the mutual
covenants and provisions contained herein and the sum of two dollars ($2.00),
now paid by each of the Parties to the other, the receipt and sufficiency of
which are acknowledged by each Party, and other valuable consideration
exchanged between them, Citi Commerce and Zale agree as follows:


 


1.                                      Definitions
and Interpretation:


 


(a)                                  For
all purposes of this Agreement, the following terms will have the following
meanings:


 


“Account” means a credit card account
(including any credit card account that has expired or been terminated or
canceled) opened by Citi Commerce in the name of an Applicant on which one or
more Credit Cards have been issued to Cardholders by Citi Commerce, such credit
card account containing a record of credit and charge activity with respect to
any Credit Card, including all Receivables thereon, on which a transaction may
be or has been made by a Cardholder (or by a Person authorized by a Cardholder)
or former Cardholder pursuant to a Credit Card.


 

















 


“Account Issuance Criteria” means the
Citi Commerce defined procedures on adjudicating new Account applications, making
fair and impartial decisions on applications, and the management of credit
lines based on defined lending criteria, as amended or replaced from time to
time.


 


“Affiliate” means, with respect to a
Party, any individual or entity, as applicable, directly or indirectly
controlling, controlled by, or under common control with, such Party.


 


“Agreement” means this Private Label
Credit Card Program Agreement, including any Attachments appended hereto, as it
may be amended from time to time in accordance herewith.


 


“Ancillary Products and Services” mean
any and all ancillary products and services that may be offered from time to
time to Cardholders, including but not limited to, Financial Services Products,
but excluding Credit Insurance.


 


“Annual Measurement Period” has the
meaning set out in Section 3. of Attachment D.


 


“Answer” has the meaning set out in Section 6.(b) of
Attachment I.


 


“Applicable Law” means all applicable
laws and regulations of any jurisdiction, including banking laws, Consumer
Protection Laws, Income Tax Act, Language Laws, Privacy Laws, securities laws,
tax laws, tariff and trade laws, ordinances, judgments, decrees, injunctions,
issuances, writs and orders or like actions of any Governmental Authority.


 


“Applicant” means an individual who has
applied to Citi Commerce for an Account, using the form of Application
prescribed by Citi Commerce for that purpose.


 


“Application” means Citi Commerce’s
prescribed form of application for an Account that must be completed and signed
by an Applicant and then submitted to Citi Commerce for its review and approval
or declination.


 


“Approved Sales Channel” means a
Store, or any other Zale sales channel (e.g. Zale catalogues, Zale internet
site(s) and Zale telephone/mail ordering systems) approved for use as a
sales channel by the Parties from time to time, through which Authorized Goods
and Services are offered for sale by Zale to Cardholders and the public in
Canada.


 


“Arbitration” means arbitration
pursuant to Section 12.(b).


 


“Arbitrator” has the meaning set out
in Section 1. of Attachment I.


 


“Assistance Period” has the meaning
set out in Section 15.(c).


 


2

















 


“Authorization” means an electronic or
voice credit authorization given by Citi Commerce to Zale for the dollar amount
of a Card Sale that exceeds the Floor Limit.


 


“Authorized Goods and Services” means
all merchandise and services, including Credit Insurance, offered from time to
time by Zale for sale to the public in the ordinary course of business at or
through Approved Sales Channels.


 


“Bankruptcy Act” means the Bankruptcy and Insolvency Act (Canada), the Winding-Up and Restructuring Act (Canada) or the Companies’ Creditors Arrangement Act (Canada), as amended or
replaced from time to time, and any other applicable insolvency or other
similar law of any jurisdiction.


 


“Brand Name” and “Brand Names”
have the meanings set out in Recital A. of this Agreement.


 


“Business Day” means any day other
than a Saturday, Sunday, or other day on which banks in Toronto, Ontario are
required or authorized to close.


 


“Card Sale” means a Transaction in
which an Account or a Card is used by a Cardholder and accepted by Zale as the
method of payment therefor.


 


“Cardholder” means an individual to
whom Citi Commerce has issued a Credit Card and who is obligated under a
Cardholder Agreement with respect to the Credit Card and the Account on which
that Credit Card has been issued.


 


“Cardholder Agreement” means an
agreement between Citi Commerce and a Cardholder establishing the terms and
conditions that govern an Account and under which a Credit Card is issued, as
such agreement may be amended from time to time.


 


“Cardholder Development” means any
activity that encourages Cardholders to use, build, or maintain balances on, or
retain Accounts, including Account activation, Account retention, and Account
stimulation.


 


“Cardholder Information” means the
following information about a Cardholder, if the Cardholder has provided it to
Citi Commerce in his or her capacity as a Cardholder or a prospective
Cardholder, as well as any other information that the Cardholder has provided
to Citi Commerce in such capacity from time to time:  name; postal address and electronic mail
address, as applicable; telephone number; date of birth; social insurance
number (optional); Account information; and any other personal information.


 


“Cardholder List” means a listing of
Cardholder names, telephone numbers, and postal addresses and electronic mail
addresses, as applicable.


 


3

















 


“Chargeback” means:


 


	
   

  	
  (i)

  	
  the refusal of Citi Commerce to pay Zale,
  in whole or in part, for a Card Sale, or

  
	
   

  	
   

  	
   

  
	
   

  	
  (ii)

  	
  the return to Zale of previously purchased
  Authorized Goods and Services by a Cardholder and the reimbursement by Zale
  to Citi Commerce of any amount previously paid by Citi Commerce to Zale in
  consideration of the related Card Sale,

  



 


all as provided for in Section 2.(b)(xii)
and Attachment A.


 


“Chargeback Report” has the meaning
set out in Section 2.(b)(xii)(3).


 


“Citi Commerce” means Citi Commerce
Solutions of Canada Ltd., a corporation organized under the laws of Ontario.


 


“Citi Property” has the meaning set
out in Section 6.(a)(i).


 


“Citigroup Information Security Standards”
means the document set out in Attachment J, as the same may be revised
from time to time in Citi Commerce’s sole discretion.


 


“Claim” means any claim, demand,
liability, allegation, assertion, offset, defence, counterclaim, proceeding,
action, suit or other right of action.


 


“Claim Statement” has the meaning set
out in Section 6.(a) of Attachment I.


 


“Client Relationship Team” has the
meaning set out in Section 4(a)(i).


 


“Complainant” has the meaning set out
in Section 4. of Attachment I.


 


“Complaint” has the meaning set out in
Section 4. of Attachment I.


 


“Confidential Information” has the
meaning set out in Section 7.(a).


 


“Consumer Protection Laws” means the Consumer Protection Act (Ontario) and any equivalent or
similar federal or provincial laws enacted for the protection of consumers, including
the Privacy Laws.


 


“Contractor” means any contractor or
subcontractor, as applicable, that performs services, directly or indirectly,
for a Party in accordance with this Agreement


 


“Counter-Complaint” has the meaning
set out in Section 6.(e). of Attachment I.


 


“Credit Card” means a credit card
displaying any one or more Brand Names (or such other design mutually
acceptable to the Parties) or Zale Marks that is issued by Citi Commerce on an
Account to a Cardholder and entitles the Cardholder to use that credit card in
a Card Sale.


 


4

















 


“Credit Insurance” means a credit
insurance product, the proceeds of which are paid to a creditor and which
offers specific disability, involuntary unemployment, death or other benefits
pursuant to which a Cardholder’s outstanding indebtedness owed to Citi Commerce
may be satisfied in whole or in part.


 


“Designated Third Party” has the
meaning set out in Section 15.(b).


 


“Disapproved Matter” has the meaning
set out in Section 4.(b)(ii).


 


“Disclosing Party” has the meaning set
out in Section 7.(a).


 


“Dispute” has the meaning set out in Section 4.(b)(i).


 


“Dissatisfied Party” has the meaning
set out in Section 12.(c)(i).


 


“EBITDAR” means,


 


	
   

  	
  (i)

  	
  For the immediately preceding four (4) fiscal
  quarters, Total Revenue minus Cost of Sales, minus Selling, General and
  Administrative Expenses (such expenses not to include depreciation and
  amortization expenses), minus Cost of Insurance Operations, plus

  
	
   

  	
   

  	
   

  
	
   

  	
  (ii)

  	
  Total Rent Expense Less Rentals Based on
  Sales.

  



 


For the purposes hereof, Total Revenue, Cost
of Sales, Selling, General and Administrative Expenses, and Cost of Insurance
Operations have the dollars and cents meaning designated under such titles or
other equivalent titles in the corresponding financial statements for those
four (4) fiscal quarters for the ultimate parent legal entity owning or
controlling Zale.  Total Rent Expense and
Rentals Based on Sales mean the relevant rent expenses for the prior fiscal
year and have the dollars and cents meaning designated under such titles or
other equivalent titles in the most recent annual financial statements for the
ultimate parent legal entity owning or controlling Zale.


 


“EFT” means electronic funds transfer.


 


“Effective Date” means the date first
set out in the preamble of this Agreement.


 


“Event of Default” has the meaning set
out in Section 13.(a).


 


“Executive Officer” means, with
respect to Citi Commerce, the President of Citi Commerce and, with respect to
Zale, means the Chairman, Chief Operating Officer or President of Zale, or if
these positions at a Party do not exist, the senior officer of the Party who
carries out the functions of the applicable officer of that Party as of the
Effective Date.


 


“Facilitator” has the meaning set out
in Section 12.(c)(iii).


 


5

















 


“Fair Market Value” has the meaning
set out in Section 15.(b).


 


“Financial Services Products” means
any financial services or products, including but not limited to loan and
credit products, deposit products, insurance products and services, credit
protection products, and investment and securities products and services.


 


“Fixed Charge Ratio” means, with
respect to the ultimate parent legal entity owning or controlling Zale, as of
the end of any fiscal quarter, a numerator of EBITDAR and a denominator of the
sum of:


 


(i)                                     the Net Interest
Expense for the immediately preceding four (4) fiscal quarters, and,


 


(ii)                                  the Total Rent
Expense less Rentals Based on Sales, as defined in EBITDAR.


 


For the purposes hereof, Net Interest Expense
has the dollars and cents meaning designated under ‘Interest Expense, Net’ or
other equivalent title in the corresponding financial statements for those four
(4) fiscal quarters for the ultimate parent legal entity owning or
controlling Zale.


 


Zale may, on occasion, submit a request to
Citi Commerce to adjust the calculation of the Fixed Charge Ratio for any
fiscal quarter due to the occurrence of one-time, extraordinary items that are
not representative of normal on-going Zale operations.  Upon receipt of such request, Citi Commerce
will, in its sole discretion (but acting reasonably), determine if a Fixed
Charge Ratio calculation adjustment will be made in the aforesaid
circumstances.


 


“Floor Limit” means:


 


	
   

  	
  (i)

  	
  for an Approved Sales Channel which is not
  equipped with the REPOS Service at the time a Card Sale is processed by the
  Approved Sales Channel in the manner prescribed by Section 2.(b)(iv) and
  Section 2.(b)(vii), the sum of One Hundred and Fifty Dollars
  ($150.00),

  
	
   

  	
   

  	
   

  
	
   

  	
  (ii)

  	
  for an Approved Sales Channel which is
  equipped with the REPOS Service at the time a Card Sale is processed by the
  Approved Sales Channel in the manner prescribed by Section 2.(b)(iv) and
  Section 2.(b)(vii), the sum of Zero Dollars ($0.00), and

  
	
   

  	
   

  	
   

  
	
   

  	
  (iii)

  	
  for an Approved Sales Channel which is
  equipped with the REPOS Service at the time a Card Sale is processed by the
  Approved Sales Channel in the manner prescribed by Section 2.(b)(iv) and
  Section 2.(b)(vii), the sum of One Hundred and Fifty Dollars
  ($150.00), if the Approved Sales Channel is unable for any reason whatsoever
  to access the REPOS Service,

  



 


6

















 


such sum (determined, as the case may be, in
accordance with (i), (ii) or (iii), above) being the maximum amount that a
Cardholder may charge for any single Card Sale without the Approved Sales
Channel being required to obtain Citi Commerce’s prior Authorization pursuant
to Section 2.(b)(vii).


 


“Force Majeure” means an occurrence
beyond the control and without the fault or negligence of the Party affected
and which said Party is unable to prevent or provide against by the exercise of
reasonable diligence including but not limited to:  acts of God or the public enemy; expropriation
or confiscation of facilities; changes in Applicable Law; war, terrorism,
rebellion, civil disturbances, sabotage, riots, floods, or unusually severe
weather that could not reasonably have been anticipated; fires, explosions or
other catastrophes; strikes or any other concerted acts of workers; other
similar occurrences; but lack of finances will in no event be deemed to be a
cause beyond a Party’s control.


 


“40 DP Losses” has the meaning set out
in Section 5.(d).


 


“40% Down Payment Program” has the meaning
set out in Section 5.(d).


 


“GAAP” means generally accepted
accounting principles in Canada, in effect from time to time, as set forth in
the opinions and pronouncements of the Canadian Institute of Chartered
Accountants.


 


“Governmental Authority” means any
government, any province or any other political subdivision thereof, and any
entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, in each case whether
federal, provincial or local.


 


“Hearing” has the meaning set out in Section 6.(h)(i) of
Attachment I.


 


“Incident” has the meaning set out in Section 7.(h).


 


“includes” or “including” means
includes or including without limitation.


 


“Income Tax Act” means the Income Tax Act (Canada).


 


“Indemnified Party” has the meaning
set out in Section 11.(c).


 


“Indemnifying Party” has the meaning
set out in Section 11.(c).


 


“Initial Term” means the period
commencing on the Effective Date and ending on March 8, 2011.


 


“In-Store Payment” has the meaning set
out in Section 2.(b)(xi).


 


“Language Laws” means the laws and
regulations of the Province of Québec relating to language.


 


7

















 


“Late Fee Revenue Rebate” means, in
respect of any one (1) calendar month, the product obtained by multiplying
the amount of the Net Late Fees earned by Citi Commerce in respect of Accounts
under the Private Label Program during that calendar month by twenty-five
percent (25%).


 


“Lien” means any mortgage or deed of
trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge,
claim, security interest (including, without limitation, any interest of a
buyer of accounts or chattel paper), easement, encumbrance, preference,
priority, or other security agreement, lease or preferential arrangement of any
kind or nature whatsoever.


 


“Liquidation Period” means the period
commencing on the date of termination of this Agreement and ending on the
expiration of twelve (12) months after the effective date of the termination of
this Agreement.


 


“Losses” means any and all demands,
claims (including Claims), actions or causes of action, assessments, damages,
liabilities, interest, penalties, costs and expenses (including reasonable
disbursements and legal fees (on a solicitor-client basis) incurred in
connection therewith and in seeking indemnification therefor, and any amounts
or expenses required to be paid or incurred in connection therewith and in
seeking indemnification therefor, and any amounts or expenses required to be
paid or incurred in connection with any action, suit, proceeding, claim,
appeal, demand, assessment or judgment) imposed upon or incurred by any Person
entitled to be indemnified under this Agreement; provided that in no
event will “Losses” include consequential damages or lost profits unless they
are awarded pursuant to a Party’s indemnification obligations hereunder.


 


“Magnetic Stripe Reading Terminal”
means a terminal that accepts a Credit Card as a payment method and has the
capability of reading magnetic stripe tracks 1 and 2 of the Credit Card.


 


“Material Change” means any change,
event, condition or occurrence, other than one required by Applicable Law or a
change in Citi Commerce credit policy, as described in Section 2.(b)(i),
which could reasonably be expected to (a) cause a material decrease in any
or all of the following:  (i) the
number of Applications, (ii) use of Credit Cards by Cardholders, or (iii) Card
Sales; (b) have a material adverse effect on the Private Label Program; or
(c) require material changes to or otherwise materially affect Zale’s
existing procedures, operations, hardware or software.


 


“Matter” has the meaning set out in Section 2.
of Attachment I.


 


“Merchant Fees” means the merchant
fees which Citi Commerce charges to Zale, and rebates to Zale, in respect to
the Settlement of Net Card Sales, such fees being set out in Attachment B.


 


“Net Card Sales” means, for any given
period, the total dollar amount of all Card Sales made during the period
(including, without limitation, Card Sales made 


 


8

















 


pursuant to any Second Look Program) properly
remitted by Zale to Citi Commerce, minus the total dollar amount of Returns
properly remitted by Zale to Citi Commerce.


 


“Net Credit Loss” has the meaning set
out in Section 3. of Attachment D.


 


“Net Late Fees” means, during any
calendar month, all late fees assessed during the month less any late fees
waived or reversed as a result of charging off a Cardholder Account or customer
service activity.


 


“New Account Acquisition” means all
activities connected with the development and implementation of marketing
programs for the opening of new Accounts, including creative development,
production, and distribution of advertising and marketing Solicitations offering
Accounts to prospective customers and fulfillment packages to new Cardholders.


 


“New Account Approval Rate Baseline”
has the meaning set out in Section 3. of Attachment D.


 


“New Account Approval Rate Standard”
has the meaning set out in Section 3. of Attachment D.


 


“New Respondents” has the meaning set
out in Section 6.(g) of Attachment I.


 


“Operating Regulations” mean the
standard operating regulations and procedures mutually developed and agreed to
by the Parties, as amended or replaced from time to time, that apply to the
Private Label Program, the initial operating regulations and procedures being
set out in Attachment A.


 


“Order” has the meaning set out in Section 6.(g) of
Attachment I.


 


“Other Party” has the meaning set out
in Section 12.(c)(i).


 


“Party” means Citi Commerce or Zale,
as applicable, and “Parties” means Citi Commerce and Zale.


 


“Person” means any individual,
corporation, partnership, joint venture, association, joint stock company,
trust, unincorporated organization or government or any group or political
subdivision thereof.


 


“Personal Information” has the meaning
set out in Section 2.(h)(i).


 


“POS Authorization Service” means the
electronic Card Sale authorization, data capture and routing system, including
host processors and communications ports and merchant link interfaces to the
POS Merchant Link used by Citi Commerce (or by its designated Contractor) for
the purposes of this Agreement, but does not include the POS Merchant Link, the
REPOS Service or any other computer systems of Zale (or its designated
Contractor).


 


9

















 


“POS Merchant Link” means the
communication link developed and used by Zale according to Citi Commerce’s
approved specifications, connecting the POS Authorization Service and the REPOS
Service.


 


“Pricing” means the annual service fee
(if any), interest rates, grace period for charges, minimum finance charge,
method of computing the minimum payment due on balances outstanding,
non-sufficient funds fee, cash advance transaction fee, over the credit limit
fee and any other pricing provision relating to an Account that is provided for
in a Cardholder Agreement.


 


“Prime Rate” means the annual rate of
interest announced by Royal Bank of Canada from time to time as a reference rate
then in effect for determining interest rates on Canadian dollar commercial
loans in Canada.


 


“Prior Agreement” the private label
credit card agreement made and entered into between the Parties dated May 5,
1999, as amended in accordance with the provisions thereof.


 


“Privacy Laws” means the Personal Information Protection and Electronic Documents Act
(Canada), the Act respecting the protection of personal
information in the private sector (Quebec) and the Personal Information Protection Acts (Alberta and British
Columbia) and any equivalent or similar provincial legislation.


 


“Privacy Officer” has the meaning set
out in Section 2.(h)(viii).


 


“Private Label Card Documentation”
means, with respect to an Account, all Applications, Cardholder Agreements, Credit
Cards, Sales Drafts, Credit Vouchers and Account billing statements relating to
such Account.


 


“Private Label Portfolio” means the
Accounts and all Receivables and Related Account Rights (excluding any Zale
Customer Information).


 


“Private Label Program” means the Zale
private label credit card program evidenced by and continued under this
Agreement whereby Citi Commerce will:


 


	
   

  	
  (i)

  	
  adjudicate Applications and open Accounts
  for Applicants,

  
	
   

  	
   

  	
   

  
	
   

  	
  (ii)

  	
  market, offer, issue and maintain and
  service Accounts and Credit Cards for Cardholders, and

  
	
   

  	
   

  	
   

  
	
   

  	
  (iii)

  	
  provide merchant acquiring and settlement
  services (including Settlement) and related merchant services to Zale,

  



 


all in accordance with the other terms and
conditions of this Agreement.


 


“Program Committee” has the meaning
set out in Section 4.(b)(i).


 


10
















 


“Purchase Assets” has the meaning set
out in Section 16(a).


 


“Purchase Date” has the meaning set
out in Section 15(c).


 


“Purchase Option” has the meaning set
out in Section 15(a).


 


“Purchase Price” has the meaning set
out in Section 15(a).


 


“Purchaser” has the meaning set out in
Section 18.(b).


 


“REAP” has the meaning set out in Attachment
A.


 


“Receivables” means any and all
amounts owing by a Cardholder on an Account to Citi Commerce.


 


“Receiving Party” has the meaning set
out in Section 7(a).


 


“Related Account Rights” means any and
all claims, contract rights, documentation, intangibles, remedies, indemnities,
guarantees, credits, deposits, intellectual property and other rights related
to an Account and any other rights and interest of Citi Commerce in the Credit
Cards and the Accounts.


 


“Renewal Term” means any term of two (2) years
following the completion of the Initial Term or another Renewal Term during
which this Agreement remains in effect.


 


“Reply” has the meaning set out in Section 6.(d) of
Attachment I.


 


“REPOS Service” means the retail
electronic point of sale data capture, routing and authorization system used by
Zale which is linked to and communicates with the POS Authorization Service
through the POS Merchant Link for the purpose of permitting an Approved Sales
Channel to request and receive Citi Commerce’s positive or negative electronic
credit authorization in respect of a Card Sale, to transmit Sales Data to (and,
if applicable, receive Sales Data from) Citi Commerce, and to capture Transaction
data in respect thereto for purposes of computing Settlement amounts due and
payable hereunder and for all other purposes permitted under this
Agreement.  For greater certainty, the
REPOS Service includes Zale’s (and its designated Contractor’s, if any) host
processors and communications ports and interfaces to, and including, the POS
Merchant Link, but does not include the POS Authorization Service or any other
computer systems of Citi Commerce or its designated Contractors.


 


“Representative” means, with respect
to any Party or Affiliate, as applicable, an officer, director, employee, or
agent of such Party or Affiliate.


 


“Respondent” has the meaning set out
in Section 4. of Attachment I.


 


11

















 


“Retail Master Record” means the
computer files containing the Cardholder List data and the most recently-posted
financial and Account status information with respect to all of the Accounts,
including, without limitation, active, inactive and recovery Accounts, which
computer files represent the aggregate amount of Receivables on the date the
computer files are created, together with a corresponding copy of that portion
of the trial balance that reflects the Receivables, record file description and
definitions and other files reflecting unbilled charges.


 


“Return” means a non-cash refund
issued by Zale to a Cardholder of all or a portion of the amount of a Card
Sale.


 


“Return Voucher” means evidence of a
Return in paper form.


 


“Revenue Sharing Payments” has the meaning
set out in Section 2. of Attachment B.


 


“Sales Data” means the electronic data
transmission of Card transactions from Zale to Citi Commerce, including Card
Sales and Returns.


 


“Sales Draft” means evidence of a Card
Sale in paper form.


 


“Second Look Notice” has the meaning
set out in Section 5.(c).


 


“Second Look Program” means any one or
more credit programs established by the Parties under this Agreement for
certain Applicants pursuant to Section 5.(c).


 


“Security Breach” has the meaning set
out in Section 10.(b).


 


“Service Level and Performance Standards”
mean the service level and performance standards mutually developed and agreed
to by the Parties, as amended or replaced from time to time, that apply to the
Private Label Program, the initial service level and performance standards
being set out in Attachment D.


 


“Settlement” means a payment in
respect to Net Card Sales made by Citi Commerce to Zale pursuant to Section 2.(b)(viii).


 


“Settlement Account” means the deposit
account maintained by Zale at a Canadian financial institution that Zale has
designated as the account to be debited and/or credited, as applicable, by Citi
Commerce for Settlement transactions and Merchant Fees, and for other amounts
due and payable by Zale to Citi Commerce from time to time under this
Agreement.


 


“Solicitation” means any application,
offer or invitation, made by any means, to any individual to establish an
Account


 


“Store” means a retail store owned and
operated by Zale in Canada bearing one or more Brands.


 


12

















 


“Tax” or “Taxes” means any
federal, provincial, local or foreign income, goods and services, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, custom duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, ad valorem, real property, personal property, sales, use, workers
compensation, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty or addition thereto, whether disputed or not, imposed by any
Canadian federal, provincial, territorial, local or foreign taxing authority.


 


“Tax Return” has the meaning set out
in Section 16.(d).


 


“Term” means the Initial Term together
with any Renewal Term.


 


“Transaction” means a purchase of
Authorized Goods and Services by a Cardholder from or through an Approved Sales
Channel.


 


“TXDC” means TXDC, L.P., a limited
partnership organized and existing under the laws of the State of Texas, in the
United States of America.


 


“Valid” has the meaning set out in Attachment
A.


 


“Zale” means Zale Canada Co., a
corporation organized under the laws of Nova Scotia.


 


“Zale Branded Materials” has the
meaning set out in Section 9.(b).


 


“Zale Credit Information” has the
meaning set out in Section 8(a).


 


“Zale Customer Information” means the
following information about a Cardholder, if a Cardholder has provided it to
Zale in his or her capacity as a Zale customer or prospective customer, as well
as any other information that the Cardholder has provided to Zale in such
capacity from time to time:  name; postal
address and electronic mail address, as applicable; telephone number; date of
birth; and any other personal information.


 


“Zale Marks” mean all of the trade
names, trade-marks, service marks and associated trade dress (including Brands)
set out in Attachment E, and any successor or replacement trade names,
trade-marks, service marks and associated trade dress (including Brands) for
the trade names, trade-marks, service marks and associated trade dress
(including Brands) set out in Attachment E.  In the event that Zale or TXDC (or both Zale
and TXDC) grant(s) to Citi Commerce a license to use any new or additional
trade names, trade-marks, service marks and associated trade dress (including
Brands) licensed to or owned by Zale or TXDC, as the case may be, pursuant to
the provisions of Section 9., such new or additional trade names,
trade-marks, service marks and associated trade dress (including Brands) will
be deemed to be “Zale Marks”.


 


13

















 


“Zale Privacy Promise” means the
document set out in Attachment F, as the same may be revised from time
to time in Zale’s sole discretion.


 


“Zale Property” has the meaning set
out in Section 6.(b)(i).


 


“Zale Representative” has the meaning
set out in Attachment A.


 


(b)                                 The
division of this Agreement into Articles and Sections, the insertion of headings,
and the provision of any table of contents are for convenience of reference
only and will not affect the construction or interpretation of this Agreement.


 


(c)                                  Unless
the context requires otherwise, words importing the singular include the plural
and vice versa and words importing gender include all genders.


 


(d)                                 Except
as otherwise expressly provided in this Agreement, all dollar amounts referred
to in this Agreement are stated in Canadian Dollars and any payment
contemplated by this Agreement will be made by EFT, cash, certified cheque or
any other method that provides immediately available funds.  If any payment is required to be made or
other action is required to be taken pursuant to this Agreement on a day which
is not a Business Day, then such payment or action will be made or taken on the
next Business Day.  In calculating
interest payable under this Agreement for any period of time, the first day of
such period will be included and the last day of such period will be excluded.


 


(e)                                  Any
reference in this Agreement to any statute or any section thereof will, unless
otherwise expressly stated, be deemed to be a reference to such statute or
section as amended, restated or re-enacted from time to time.


 


(f)                                    Unless
the context requires otherwise, references in this Agreement to Sections,
Attachments or Schedules are to Sections, Attachments or Schedules of this
Agreement.


 


(g)                                 This
Agreement is the product of negotiations between the Parties and their
respective attorneys, and no provision will be construed for or against any
Party by reason of ambiguity in language, rules of construction against
the draftsman, or similar doctrine.


 


(h)                                 The
following Attachments are attached hereto and incorporated by reference into
and made part of this Agreement:


 


	
   

  	
  Attachment A

  	
  -

  	
  Operating
  Regulations

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attachment B

  	
  -

  	
  Merchant
  Fees and Revenue Sharing

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attachment C

  	
  -

  	
  MIS Reports

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attachment D

  	
  -

  	
  Service
  Level and Performance Standards

  



 


14

















 


	
   

  	
  Attachment E

  	
  -

  	
  Zale Marks

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attachment F

  	
  -

  	
  Zale Privacy
  Promise

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attachment G

  	
  -

  	
  Account
  Pricing and Payment Terms

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attachment H

  	
  -

  	
  Program
  Committee

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attachment I

  	
  -

  	
  Arbitration
  Procedures

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attachment J

  	
  -

  	
  Citigroup
  Information Security Standards

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attachment K

  	
  -

  	
  Form of
  Cardholder Agreement

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attachment L

  	
  -

  	
  Third Party
  Retailer List

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attachment
  M

  	
  -

  	
  Insurance
  Administrative Services Agreement

  



 


2.                                      Private
Label Program Operations:


 


(a)                                  Existing
Accounts, Credit Cards and Settlement: 
The Parties acknowledge and agree that all private label credit card
accounts, credit cards and cardholders that existed prior to the Effective Date
and were governed by the Prior Agreement will be treated for all purposes as
Accounts, Credit Cards and Cardholders and will be governed under this
Agreement as of the Effective Date. 
Moreover, Citi Commerce agrees to make Settlements to Zale for all Card
Sales made by cardholders using such private label credit card accounts and
credit cards in accordance with the terms and conditions hereof.


 


(b)                                 Establishment
and Operation of Private Label Program:


 


(i)                                     General: 
During the Term of this Agreement, Citi Commerce agrees to
establish, operate and maintain the Private Label Program, adjudicate
Applications, issue Credit Cards, maintain the Accounts, provide merchant
acquiring and settlement services (including Settlement) and related merchant
services to Zale, and perform and comply with all of its other obligations and
covenants hereunder, all in accordance with the terms and conditions of this
Agreement, including (without limitation) the Operating Regulations and the
Service Level and Performance Standards.


 


Except as otherwise expressly provided in
this Agreement, Citi Commerce will at all times control, with appropriate input
from Zale, all aspects of the operation of the Private Label Program, including
Account Issuance Criteria standards and credit policy, (e.g., the decision
whether or not to extend credit for any Applicant for a Credit Card, and if so,
the amount of credit to be extended, and whether or not to continue or
terminate any individual Account), customer service operations, collections
policy and operations, marketing fulfillment operations, and accounting
operations.  


 


15

















 


Except as otherwise provided in this
Agreement, Citi Commerce will be the sole and exclusive owner of all materials
used in connection with the operation of the Private Label Program.


 


(ii)                                  Opening Accounts:


 


(1)           Applications By Mail:  Applications
that are received by Citi Commerce through the mail and not made
contemporaneously with a proposed Card Sale will be reviewed and adjudicated by
Citi Commerce in accordance with its Account Issuance Criteria in effect from
time to time (as solely determined by Citi Commerce, acting reasonably), and in
compliance with the Operating Regulations and the Service Level and Performance
Standards, and will be approved or declined in accordance therewith.  In this regard, and subject to the Privacy
Laws, Citi Commerce will advise Zale in accordance with this Agreement whether
such Applications have been approved or declined.


 


(2)           Applications with Accompanying Proposed Card Sale:  Applications telephoned to Citi
Commerce, or otherwise electronically transmitted to Citi Commerce, in
accordance with the Operating Regulations in conjunction with a proposed Card
Sale will be reviewed and adjudicated by Citi Commerce in accordance with its
Account Issuance Criteria in effect from time to time (as solely determined by
Citi Commerce, acting reasonably), and in compliance with the Operating
Regulations and the Service Level and Performance Standards, and will be
approved or declined in accordance therewith. 
In this regard, and subject to the Privacy Laws, Citi Commerce will
advise Zale in accordance with this Agreement whether such Applications have
been approved or declined.


 


(3)          Zale Obligations Regarding Applications:  Zale will perform the following
obligations in connection with a telephone, electronic or other transmission of
an Application to Citi Commerce for review and adjudication under Section 2.(b)(ii)(2):


 


	
   

  	
  (I)

  	
  ensure that all Cardholder Information has been
  provided on the Application by the Applicant,

  
	
   

  	
   

  	
   

  
	
   

  	
  (II)

  	
  provide to each Applicant a copy of any required
  disclosures that Citi Commerce provides to Zale for distribution to
  Applicants,

  
	
   

  	
   

  	
   

  
	
   

  	
  (III)

  	
  obtain identification and verification of the
  individual Applicant in accordance with the Operating Regulations,

  



 


16

















 


	
   

  	
  (IV)

  	
  provide a written acknowledgement, in the designated
  space on each Application, that Zale has reviewed the items of personal
  identification required to be produced by the Applicant pursuant to the
  Operating Regulations, such written acknowledgement to include the initials
  and employee ID number of the Zale employee who actually performed such
  review, provided, however, that failure to do so, in and of itself, will not
  be a basis for any Chargeback,

  
	
   

  	
   

  	
   

  
	
   

  	
  (V)

  	
  obtain the Applicant’s signature in the designated
  space on each Application,

  
	
   

  	
   

  	
   

  
	
   

  	
  (VI)

  	
  whether such Application is approved or declined by
  Citi Commerce, retain the original of each Application in the Stores in a
  secure manner for a designated period of time, as mutually agreed to by Zale
  and Citi Commerce, and ship the physical applications to Citi Commerce on a
  frequency that is mutually agreed to by Zale and Citi Commerce, all at Zale’s
  sole cost and expense, and

  
	
   

  	
   

  	
   

  
	
   

  	
  (VII)

  	
  in the event that such Application is approved,
  enter any ensuing Card Sale into the REPOS Service in accordance with Section 2.(b)(iv) (even
  though a Credit Card may not be presented) and, if requested to do so by Citi
  Commerce, enter the Application approval code provided by Citi Commerce to
  Zale into the REPOS Service.

  
	
   

  	
   

  	
   

  
	
   

  	
  Any failure by Zale to comply with this Section 2.(b)(ii)(3) may
  result in a Chargeback in accordance with Section 2(b)(xii).

  



 


(iii)          Issuance:  As of the Effective Date, and continuing
throughout the Term of this Agreement, Citi Commerce will offer and issue
Credit Cards, fund the Receivables and take or cause to be taken all actions
necessary to maintain and operate the Accounts and the Credit Cards in
accordance with this Agreement except for those actions required to be performed
by Zale pursuant to this Agreement.  Citi
Commerce will own all Receivables generated under the Accounts and all Related
Account Rights in respect of the Accounts. 
Beginning as of the Effective Date, Citi Commerce will have the
exclusive right during the Term of this Agreement to issue within Canada
private label credit cards hearing any of the Zale Marks or other trade name,
trade-mark, service mark and associated trade dress licensed to or owned by
Zale or TXDC, and used or proposed to be used in connection with the sale of
merchandise and/or services by Zale to the public in Canada.


 


17

















 


(iv)                              Credit Card Acceptance and Related Procedures:  As of the Effective Date, Zale will,
subject to the terms and conditions of this Agreement, accept each Credit Card
or Account number (in the event that a Credit Card has not yet been issued or
is not otherwise available for presentation) upon its presentation by a
Cardholder as the method of payment for a Transaction.  In doing so, Zale will comply with the
following procedures:


 


	
   

  	
  (1)

  	
  comply with the procedures applicable to the
  acceptance and processing of the Credit Card (or Account number, as the case
  may be) and the Transaction as a Card Sale, as set out in this Section 2.(b)(iv) and
  the Operating Regulations,

  
	
   

  	
   

  	
   

  
	
   

  	
  (2)

  	
  obtain identification and verification of the
  Cardholder in accordance with the Operating Regulations,

  
	
   

  	
   

  	
   

  
	
   

  	
  (3)

  	
  complete the Card Sale at a price or prices not in
  excess of the ticketed or posted price(s) for the Authorized Goods and
  Services being purchased by the Cardholder in the Transaction,

  
	
   

  	
   

  	
   

  
	
   

  	
  (4)

  	
  except as otherwise agreed by the Parties, not
  impose any fee or other charge (except for any retailer administration fee
  disclosed by Zale to the Cardholder at the time of any Card Sale and charged
  by it in connection with a deferred interest and/or payment program) to the
  Cardholder for using their Credit Card as the method of payment, for the Card
  Sale,

  
	
   

  	
   

  	
   

  
	
   

  	
  (5)

  	
  except as otherwise agreed by the Parties and when
  specifically disclosed to the Cardholder as a minimum purchase amount
  established for special credit plans or in connection with advertised
  merchandise offers, not require a minimum dollar amount for the Card Sale
  from the Cardholder as a condition precedent to the acceptance of the Credit
  Card as the method of payment for the Transaction by the Cardholder,

  
	
   

  	
   

  	
   

  
	
   

  	
  (6)

  	
  use the REPOS Service for the purpose of processing
  the Transaction being charged by the Cardholder with the Credit Card as a
  Card Sale, provided Zale is able to access the REPOS Service at the time of
  processing, and

  
	
   

  	
   

  	
   

  
	
   

  	
  (7)

  	
  obtain Citi Commerce’s credit authorization for the
  dollar amount of each Card Sale exceeding the Floor Limit which the
  Cardholder has charged with the Credit Card, such authorization to be
  obtained by Zale in the manner prescribed by Section 2.(b)(vii).

  
	
   

  	
   

  	
   

  
	
   

  	
  For greater certainty, Citi Commerce agrees that
  nothing set out in this Section 2.(b)(iv) will preclude Zale
  from granting a discount, award or bonus for payment in cash for any
  Authorized Goods and Services sold or performed in any Transaction processed
  as a Card Sale, as long as such 

  



 


18

















 


	
   

  	
  discount, award or bonus is clearly advertised
  in-Store or otherwise by or through an Approved Sales Channel through which
  the Card Sale is made.

  



 


(v)                                 Terminal System Warranty:  Zale warrants to Citi Commerce that the
Magnetic Stripe Reading Terminal system used by each Store has the capability
of:


 


	
   

  	
  (1)

  	
  reading the magnetic stripe track 2 of a retail
  private label Credit Card,

  
	
   

  	
   

  	
   

  
	
   

  	
  (2)

  	
  performing data capture of the Credit Card account
  number, the Transaction data and the Transaction amount in respect of any
  Card Sale,

  
	
   

  	
   

  	
   

  
	
   

  	
  (3)

  	
  validating the service code for three
  (3) numeric characteristics, and

  
	
   

  	
   

  	
   

  
	
   

  	
  (4)

  	
  validating the Credit Card account number and, if
  applicable, the expiry date of the Credit Card.

  



 


(vi)                              Completion and Retention of Sales Drafts and Return
Vouchers:  In respect of
any Transaction processed as a Card Sale or a Return, Zale will complete a
Sales Draft and/or a Return Voucher, as applicable, provide one (1) copy
thereof to the Cardholder, retain one (1) copy thereof, and comply with
the following requirements:


 


	
   

  	
  (1)

  	
  General
  Requirements: Each Sales Draft and/or Return Voucher must
  be legible and fully completed with the information required under this Section 2.(b)(vi),
  as applicable.

  
	
   

  	
   

  	
   

  
	
   

  	
  (2)

  	
  Mail/Telephone/Internet
  Transactions: For each Card Sale and/or Return effected by
  mail, telephone or internet, Zale will record the following information on
  the Sales Draft and/or Return Voucher:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (I)

  	
  the date on which the Card Sale and/or Return
  occurred,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (II)

  	
  the name and location (city and province) of the
  Cardholder to whom the bill for the Card Sale and/or Return will be sent,
  unless otherwise provided to Citi Commerce (e.g. batch reports, etc.),

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (III)

  	
  a brief and itemized description of the Authorized
  Goods and Services to which such Card Sale and/or Return relates,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (IV)

  	
  the total amount of the Card Sale and/or Return
  including a breakdown of the price for the related Authorized Goods and
  Services and all applicable Taxes,

  



 


19

















 


	
   

  	
   

  	
  (V)

  	
  the Cardholder’s Account number,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (VI)

  	
  the Authorization number (if any) provided by Citi
  Commerce,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (VII)

  	
  the shipping address (if applicable), and

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (VIII)

  	
  the shipping date (if applicable).

  



 


(3)                                  In-Store
Transactions:  For Card Sales
and/or Returns occurring in Stores, each Sales Draft and/or Return Voucher must
contain the same information required for Card Sales and Returns by mail,
telephone and internet (as specified in Section 2.(b)(vi)(2)),
except that the name and location of the Cardholder to whom the bill for the
Card Sale or Return will be sent and the shipping address and shipping date
will not be required.  A Sales Draft or
Return Voucher (as the case may be) must be signed by a Cardholder for each
Store Card Sale or Store Return at the time such Card Sale or Return (as the
case may be) is made and in the presence of a Representative of Zale.  For Card Sales and Returns to or by, as the
case may be, the individual representing himself to be the individual
Cardholder named on the Card, when the Card is physically presented to a Zale
Representative, such Representative must check to determine whether, in such
Representative’s judgment, the signature on the Sales Draft or Return Voucher
(as the case may be) is reasonably similar to the signature, if any, appearing
on the signature panel of the Credit Card. 
After completion of the Card Sale or Return Voucher, Zale will provide a
legible and completed copy of the Sales Draft or Return Voucher to the
Cardholder.


 


(4)                                  Signature:  Except as otherwise provided in the Operating
Regulations, the Sales Draft or Return Voucher for each in-Store transaction
referenced in Section 2.(b)(vi)(3) must include the signature
of the Cardholder, and the Sales Draft or Return Voucher for each mail,
telephone, and internet transaction referenced in Section 2.(b)(vi)(2),
must include the signature of the Cardholder or a member of the Cardholder’s
household (including without limitation any domestic employee) accepting
delivery.


 


(5)                                  Retention
of Sales Drafts and Return Vouchers: 
Zale will retain the original of each Sales Draft and Return Voucher for
not less than two (2) years from the Transaction date printed on such
Sales Draft or Return Voucher. 
Electronic signatures which comply with Applicable Law shall be deemed
to be signatures for all purposes of this sub-Section 2.(b)(vi).


 


20
















 


(vii)                           Floor Limit and Authorization Procedures:  If the dollar amount of a Card Sale which
a Cardholder wishes to charge with a Credit Card exceeds the Floor Limit, Zale
agrees that it will obtain Citi Commerce’s prior Authorization for the dollar
amount of the Card Sale, such Authorization to be obtained as follows:


 


(1)                                  in
the case of a Card Sale being processed through access to the REPOS Service,
Citi Commerce’s Authorization (whether granted or declined) will, subject to Section 2.(b)(vii)(2),
be provided electronically through the REPOS Service, and


 


(2)                                  in
the case of a Card Sale not being processed through the REPOS Service by reason
of the Approved Sales Channel not being equipped with the REPOS Service or such
Approved Sales Channel, being so equipped, being unable to access such REPOS
Service for such Card Sale processing purposes or to receive Citi Commerce’s
positive or negative Authorization, Citi Commerce’s Authorization (whether
granted or declined) will be provided by a Representative of Zale telephoning,
at no expense to Zale, Citi Commerce’s Authorization Department at the number
supplied by Citi Commerce to Zale for that purpose in accordance with the
Operating Regulations.


 


If Citi Commerce’s Authorization in respect
of such Card Sales dollar amount is granted pursuant to either of the foregoing
Card Sale Authorization processing methods, the Authorization number provided
by Citi Commerce relative thereto must appear on the Sales Draft for such Card
Sale in the space reserved therefor.  Zale
(including its Approved Sales Channels) will not to reveal the Floor Limit to
any Cardholder at any time.


 


(viii)                        Settlement for Net Card Sales:


 


(1)                                  Except
as otherwise expressly provided for herein, Zale will submit all Transactions
processed as Card Sales to Citi Commerce for Settlement purposes through the
REPOS Service.


 


(2)                                  Citi
Commerce will not be obligated to make a Settlement payment to Zale in respect
of any Card Sale which is not submitted to Citi Commerce through the REPOS
Service within thirty (30) Business Days of the date the Card Sale was
incurred; or the date the Authorized Goods and Services to which that Card Sale
relates were delivered by Zale to, or performed by Zale for, the Cardholder,
whichever is later.


 


(3)                                  With
respect to Card Sales processed by Zale through the REPOS Service and received
by Citi Commerce before 12:00hrs. Eastern 


 


21

















 


Time on any
Business Day, Citi Commerce will initiate a Settlement payment to Zale in the
form an EFT credit to the Settlement Account in the amount of the Settlement
owing by 14:00hrs Eastern Time on the Business Day immediately following the
Business Day on which Citi Commerce received the related Sales Data for those
Card Sales.  Citi Commerce will make such
payment by crediting the Settlement Account with the amount of the Settlement
owing (representing the subject Business Day’s Net Card Sales) via such EFT.


 


With respect to Card Sales processed through
the REPOS Service and received by Citi Commerce after 12:00hrs. Eastern Time on
any Business Day, Citi Commerce will initiate a Settlement payment to Zale in
the form of an EFT credit to the Settlement Account in the amount of the
Settlement owing by 14:00hrs. Eastern Time on the second Business Day
immediately following the Business Day on which Citi Commerce received the
related Sales Data for those Card Sales. 
Citi Commerce will make such payment by crediting the Settlement Account
with the amount of the Settlement owing (representing the subject Business Day’s
Net Card Sales) via such EFT.


 


Each EFT required to be made under this
Agreement will be at Citi Commerce’s sole cost and expense.


 


Neither Citi Commerce nor Zale will be liable
to the other Party for any delays in receipt of Settlement funds or errors in
Settlement Account entries caused by a third party not specifically engaged as
a Contractor by either of Citi Commerce or Zale to perform its obligations
hereunder.


 


Except for a Card Sale, the amount of which
Citi Commerce has properly made the subject of a Chargeback to Zale pursuant to
Section 2.(b)(xii), Zale will not have any right to receive a
Settlement payment in respect of any Card Sale from any party except Citi
Commerce unless and until the Card Sale has been assigned by Citi Commerce to
Zale pursuant to Section 2.(b)(xii).


 


(ix)           Payment
of Merchant Fees:  Except
as otherwise provided in this Agreement, Citi Commerce will deduct from any
Settlement payable to Zale under Section 2.(b)(viii) any
Merchant Fees that are payable in respect of the Net Card Sales remitted during
the period for which Settlement is being made. 
Citi Commerce will provide Zale with the details of each Merchant Fees
deduction in the form and within the time mutually agreed to by the Parties
from time to time.


 


22

















 


If any Settlement payment to be made to Zale
by Citi Commerce under Section 2.(b)(viii) is insufficient to
cover the Merchant Fees payable by Zale to Citi Commerce under this Section 2.(b)(ix),
the deficiency will constitute a debt of Zale to Citi Commerce that is due and
payable on demand.  Without restricting
such other of its legal rights or remedies as may exist, Citi Commerce may,
upon notice to Zale, offset such deficiency against future Settlement payments
to be made by Citi Commerce to Zale under Section 2.(b)(viii) or,
in its discretion (acting reasonably), demand payment of that debt.  For each demand made by Citi Commerce
hereunder, Zale will repay such debt to Citi Commerce within five (5) Business
Days of the date such demand is made; provided, however, that once such demand
is made Citi Commerce may not otherwise offset such debt against any future
payments to Zale unless, contemporaneously with such deduction and offset, it
immediately credits the invoice sent to Zale demanding such payment


 


Neither Citi Commerce nor Zale will be liable
to the other Party for any delays in receipt of funds or errors in account
entries caused by a third party not specifically engaged as a Contractor by
either of Citi Commerce or Zale to perform its obligations hereunder.


 


(x)                                   Revenue Sharing Payments:  Citi Commerce will make the Revenue
Sharing Payments due and owing to Zale via an EFT credit to the Settlement
Account at the rates and times prescribed by Attachment B.


 


(xi)           Cardholder
Payments:  Zale, directly
at its head office or at any Store location, may from time to time accept
payments (“In-Store Payments”) on an Account, provided such acceptance
is recorded and accounted for by Zale in accordance with the applicable
provisions of the Operating Regulations. 
Zale will notify Citi Commerce, in reasonable detail (including, without
limitation, the name and Account number of the Cardholder making an In-Store
Payment and the amount thereof) and by electronic transmission, of any In-Store
Payments so received within one (1) Business Day after receipt thereof,
and Citi Commerce may offset the amount of each such In-Store Payment from any
Settlement amount due to Zale on the Business Day immediately following Citi
Commerce’s receipt of such notice from Zale, and Zale will retain and become
the rightful owner of such In-Store Payment. 
In connection therewith, Citi Commerce hereby constitutes and appoints
Zale and its Representatives, or any of them, as Citi Commerce’s
attorneys-in-fact for the limited purpose of accepting cash and negotiating any
and all other instruments received in connection with such In-Store Payments,
and hereby authorizes Zale and its Representatives, or any of them, to take
such action or actions as they, or any of them, may deem necessary or
appropriate in connection therewith.  To
the extent any cheque or other negotiable instrument is tendered and accepted
as an In-Store Payment and is dishonoured for any reason whatsoever, and Citi
Commerce has offset the amount thereof as 


 


23

















 


provided herein,
Citi Commerce will promptly pay or credit Zale with the amount of such
dishonoured cheque or other negotiable instrument, plus a recovery fee of Twenty-Five
Dollars ($25.00) per incident, in accordance with the provisions of the
Operating Regulations.


 


(xii)                             Chargeback Rights and Procedures:


 


(1)                                  To
the extent (and only to the extent) that a Chargeback condition specified in Attachment
A has occurred, Citi Commerce may process a Chargeback to Zale, in the form
of an EFT debit to the Settlement Account, for the amount of a Card Sale or an
Account balance, or any disputed portion thereof, to which the Chargeback
relates, but only if and to the extent Citi Commerce has suffered financial
loss.  However, in no event will Citi
Commerce have the right to process any Chargeback more than twelve (12) months
after the Transaction date of the Card Sale giving rise to such Chargeback
(plus the period of any special credit plan applicable to such Card Sale that
provides for deferral of principal payments).


 


(2)                                  Except
to the extent required by Applicable Law, Citi Commerce will not process any
Chargeback to Zale under this Section 2.(b)(xii) based upon a Card
Sale merchandise or billing dispute by a Cardholder without first giving Zale
written notice of such dispute.


 


(3)                                  Citi
Commerce will, on a monthly basis, provide Zale electronically with a
chargeback report (the “Chargeback Report”), in such format as is mutually
agreed to by the Parties from time to time, of all Chargebacks processed in the
form of an EFT debit to the Settlement Account by Citi Commerce under this Section 2.(b)(xii)
during the immediately preceding month (such Chargeback Report to specify in reasonable
detail the name and Account number of each Cardholder with respect to which
such Chargeback is being processed, the amount of such Chargeback, the reasons
for such Chargeback, the applicable Chargeback code prescribed therefor by Attachment
A, and whether Citi Commerce has previously paid Zale for the related Card
Sale).


 


(4)                                  If
Citi Commerce processes a Chargeback to Zale under this Section 2.(b)(xii)
and the disputed amount is subsequently paid to Citi Commerce by the
Cardholder, Citi Commerce will promptly, and in any event within three (3) Business
Days of Citi Commerce’s receipt of such payment (in cleared funds), reimburse
Zale for the amount so paid by Cardholder.


 


(5)                                  Zale
will have the right to pursue and collect any amount from a Cardholder to the
extent Citi Commerce has processed a 


 


24

















 


Chargeback to Zale
under this Section 2.(b)(xii), and upon any such Chargeback being
so processed, Citi Commerce hereby automatically and without any further action
assigns to Zale all of Citi Commerce’s right, title and interest in, to and
under all such amounts which are the subject of a Chargeback hereunder and
constitutes and appoints Zale and its Representatives, or any one of them, as
its attorneys-in-fact for the limited purposes of collecting each and every
such amount, which payments and credits will be the sole property of and for
the benefit of Zale.


 


(6)                                  Chargeback
amounts charged back to Zale by Citi Commerce under this Section 2.(b)(xii)
will not include any Citi Commerce-imposed fees or finance charges, and will be
increased or reduced, as the case may be, by any amount previously charged or
credited to Zale, as Merchant Fees or other fees in respect of any amount
included in a Chargeback.  If Citi
Commerce has previously paid to Zale the amount which was the subject of the
Chargeback, Zale will repay such amount to Citi Commerce.  All credits and charges occurring since the
end of the period covered by the last Chargeback Report will be reflected in
each Chargeback Report (except that the first Chargeback Report will reflect
Chargebacks since the Effective Date).


 


(7)                                  Citi
Commerce is not required to pay Zale for any Card Sale which is the subject of
a Chargeback that Citi Commerce is permitted to process to the Settlement
Account under this Section 2.(b)(xii).  If Citi Commerce has already paid Zale for
such Card Sale, Zale will pay Citi Commerce, within thirty (30) days after
receipt of each Chargeback Report, the full amount of the Chargebacks due to
Citi Commerce as reflected in such Chargeback Report, unless Zale disputes Citi
Commerce’s right to make such Chargeback. 
If Zale disputes a Chargeback, it will so notify Citi Commerce of such
dispute and Citi Commerce and Zale will attempt to resolve such dispute in
accordance with the dispute resolution procedures set out in Section 12.  Notwithstanding anything contained herein to
the contrary, Chargebacks will not be subject to offset against any Settlement
amounts payable to Zale from time to time under Section 2.(b)(viii).


 


(xiii)                          Document Retrievals:


 


(1)                                  Zale
agrees to respond in a timely manner to the requests of Citi Commerce for
originals or copies of Applications, Sales Drafts and Return Vouchers.  When Zale receives an initial request from
Citi Commerce, Zale will only be obligated, regardless of whether such request
is for an original or a copy, to provide Citi Commerce with a copy of the
requested Application, Sales Draft or Return 


 


25

















 


Voucher, so long
as Citi Commerce’s request occurs within the agreed-upon document retention
period specified in Section 2.(b)(ii)(3)(VI) for Applications
or in Section 2.(b)(vi)(5) for Sales Drafts and Return
Vouchers.  If Citi Commerce is
subsequently required by the Cardholder to provide an original of such
Application, Sales Draft or Return Voucher, Citi Commerce will make a
subsequent request to Zale for the original and Zale will provide such original
to Citi Commerce, provided, once again, the subsequent request occurs within
the agreed-upon document retention period.


 


(2)           Citi Commerce will
present all requests for originals or copies of Applications, Sales Drafts or
Return Vouchers in the format outlined in, and in accordance with, the
Operating Regulations.


 


(3)           At the time Zale
provides Citi Commerce with an original or copy of a Sales Draft, Zale will
also provide Citi Commerce with the Authorization number of the Card Sale if
the Approved Sales Channel received verbal positive Authorization for such Card
Sale at the time it was incurred.


 


(4)           Citi Commerce will have
full Chargeback recourse to Zale under Section 2.(b)(xii) with
respect to any Card Sale for which Zale does not supply the original or copy of
a Sales Draft within thirty (30) days of the request therefor by Citi Commerce
in accordance with this Section 2.(b)(xiii), unless the Parties
agree to an extension.


 


(5)           Citi Commerce will have
full Chargeback recourse to Zale under Section 2.(b)(xii) with
respect to any Card Sale for which Zale does not supply the original or copy of
an Application to which the provisions of Section 2.(b)(ii)(2) apply
within thirty (30) days of the request therefor by Citi Commerce in accordance
with this Section 2.(b)(xiii), unless the Parties agree to an
extension.


 


(xiv)                         Cardholder Claims and Complaints:


 


(1)                                  Zale
will deal with any and all Cardholder Claims or complaints regarding Authorized
Goods and Services purchased from Zale pursuant to a Card Sale.  Citi Commerce is prohibited from dealing with
any such Cardholder Claim or complaint and will forthwith direct all such
Cardholder Claims and complaints to Zale.


 


(2)           Zale agrees that all
Cardholder refund Claims and billing disputes (including errors and/or
omissions) respecting the underlying Transaction for any Card Sale must be
settled directly between Zale and the Cardholder; provided, however, that if
any refund or 


 


26

















 


other monetary
adjustment is properly payable by Zale to the Cardholder, such refund or adjustment
will be made by means of Zale issuing a Return Voucher in respect thereto in
the prescribed manner.


 


(c)                                  Ownership
of Accounts, etc.:  Citi Commerce
will be the sole and exclusive owner of the Accounts and the Related Account
Rights, the Credit Cards, the Cardholder Agreements, the Receivables, the
Cardholder List and the Cardholder Information. 
Citi Commerce and its Affiliates will be entitled to utilize the
Cardholder List and Cardholder Information in connection with the operation of
the Private Label Program, the marketing of Ancillary Products and Services and
products and services offered by Citi Commerce’s Affiliates, and for such other
purposes as may be authorized pursuant to this Agreement.  Citi Commerce will include on the system record
for the Accounts a specific portfolio identifier, the purpose of which is to
identify the Accounts as being originated pursuant to the Private Label
Program.  The system record identifier
for the Accounts originated pursuant to the Private Label Program will be
different from the system record identifier used by Citi Commerce for any other
credit cards, plans or programs that it owns or operates during the term of
this Agreement.  During the Term of this
Agreement, Citi Commerce will not sell, lease, transfer or otherwise dispose of
all or any part of the Accounts or the Related Account Rights, the Cardholder
Agreements, the Receivables, the Cardholder List or the Cardholder Information
or any interest therein; provided, however, that Citi Commerce
may:


 


(i)            subject to Applicable
Law, securitize all or a portion of the Accounts (including all Cardholder
Information in respect thereto) and their Related Account Rights and
Receivables at any time, and


 


(ii)           sell charged-off
Accounts (including all Cardholder Information in respect thereto) and their
Related Account Rights and Receivables in the ordinary course of its collection
strategies and otherwise in accordance with its credit policies as in effect
from time to time.


 


During the Term of this Agreement, Zale will
not use or permit any of its Affiliates to use, or authorize any third party to
use, the Cardholder List or any Cardholder Information for any purpose without
the prior written consent of Citi Commerce (such consent not to be unreasonably
withheld or delayed), such use to be made (if at all) subject to and in
compliance with the Privacy Laws.


 


Zale will be the sole and exclusive owner of
all Zale Customer Information at all times and, subject to the Privacy Laws,
may use the same for Private Label Program marketing and promotion under Section 3.


 


(d)                                 Credit
Card Terms:  The Pricing and payment
terms to be offered by Citi Commerce on Accounts as of the Effective Date are
set out in Attachment G.  Citi
Commerce will have the sole authority, with reasonable input from Zale, to
determine and modify from time to time the Pricing and payment terms of the 


 


27

















 


Accounts and
Cardholder Agreements, including interest rates, service fees and other
charges, expiration date, revolving terms (if any), balance and finance charge
calculations, minimum payment requirements, payment dates, grace periods (if
any), and credit limits.  Zale will have
sole authority, within Applicable Law and with reasonable input from Citi Commerce,
to determine and modify, from time to time, any administration fee charged at
the point of sale and evidenced on a Sales Draft to a Cardholder related to a
credit plan.


 


Citi Commerce will provide not less than
sixty (60) days prior written notice to Zale of any proposed changes to the
Pricing and payment terms of the Cardholder Agreements.  The Parties agree that a shorter written
notice period may apply to a proposed change to the Pricing and payment terms
of the Cardholder Agreements if required by Applicable Law.  Moreover, notwithstanding any other provision
hereof to the contrary, the parties agree that during the Term of this
Agreement, the Pricing and payment terms hereunder will not competitively disadvantage
Zale as to the pricing and payment terms offered by a majority of specialty
jewellery retailers and department stores as outlined in Attachment L.  The identified retailers outlined in Attachment
L are subject to change, from time to time, as mutually agreed upon by the
parties and the agreed upon list in Attachment L is not to exceed seven (7) retailers.


 


The Parties agree that, subject to Zale’s
prior written approval (such approval not to be unreasonably withheld or
delayed), cash advance services on Accounts may be offered to Cardholders in
the future.  If the Parties agree to
offer cash advance services to Cardholders (and Zale has approved the same),
the credit line assignment on an Account will include a separate credit limit
for Card Sales and cash advances.


 


(e)                                  Credit
Card Plastics:  Citi Commerce will be
responsible for the printing and distribution of card plastics for Credit Cards
(including the issuance of replacement or renewal card plastics in the ordinary
course of the operation of the Private Label Program) and for all costs and
expenses related thereto.  Citi Commerce
will be responsible for determining any necessary legal disclosures that should
appear on the card plastic for Credit Cards and the technical specifications
for the card plastic (including size and magnetic stripe requirements), it
being understood that such technical specifications must be consistent with
Zale’s point-of-sale network requirements. 
The card plastic design will be subject to the prior review and approval
of Zale, which approval will not be unreasonably withheld or delayed.  In the event that Zale notifies Citi Commerce
in writing of its desire to (i) change the Brand identity or design of the
card plastic from the Brand identity or design approved by Zale and used by
Citi Commerce as of the Effective Date, or (ii) add a Brand to the Private
Label Program, Citi Commerce agrees to use commercially reasonable efforts to
begin to issue the re-Branded/redesigned/new cards with such new Brand identity
or redesign within three (3) months following receipt of such written
notice, which notice will be accompanied by camera-ready artwork and design
specifications.  In the event that the
new Brand or re-Branded/redesigned plastics are to be 


 


28

















 


utilized for a
re-issue to existing cardholders, Citi Commerce agrees to use its commercially
reasonable efforts to re-issue the re-Branded/redesigned cards with such new
Brand identity or redesign within six (6) months, following receipt of
such written notice, which notice will be accompanied by camera-ready artwork
and design specifications.  The design of
the re-Branded/redesigned card plastic will be subject to approval of Citi
Commerce, which approval will not be unreasonably withheld or delayed.  Zale will be responsible for all costs and
expenses associated with the design, printing and distribution of the
new/re-Branded/redesigned Credit Cards pursuant to this Section 2.(e) (other
than the issuance by Citi Commerce of replacement or renewal card plastics in
the ordinary course of the operation of the Private Label Program).


 


Notwithstanding the foregoing, all costs and
expenses to issue or re-issue card plastics for Credit Cards that would be
incurred as part of a marketing initiative under the Private Label Program will
be subject to separate financial analytics to support the financial
contribution each Party is willing to make to such re-issuance.  Each Party will share the key assumptions of
its analysis with the other Party.


 


(f)                                    Credit
Criteria and Review:  Subject to the
terms and conditions of this Agreement, Citi Commerce will receive Applications
for Card Accounts and approve or decline Accounts in accordance with its
prevailing Account Issuance Criteria.


 


Citi Commerce, in its sole discretion and
acting reasonably, will make fair and impartial decisions on the adjudication
of Applications and the management of credit lines based on defined lending
criteria, to minimize the risk to the Receivables and to acquire and maintain
customers for Zale and Citi Commerce. 
Credit policies and business practices of Citi Commerce must comply with
both Canadian federal and provincial/territorial legislation.  Citi Commerce may make changes to the lending
criteria from time to time as Citi Commerce reasonably deems necessary, and
such changes will not require the approval of Zale; provided however, that Citi
Commerce will give Zale at least thirty (30) days notice of any such change
that is a material change.  Citi Commerce
will decision each Application in accordance with the terms hereof (including
the Service Level and Performance Standards) as set out in Section 5.(b) of
this Agreement.


 


(g)                                 Customer
Satisfaction:  At all times during
the Term of this Agreement, Citi Commerce will maintain or provide for the
necessary telephone lines, computer and equipment capacity, application
software and adequately trained staff necessary to provide service to
Cardholders and new Account applicants, all in accordance with the Operating
Regulations and the Service Level and Performance Standards.


 


29

















 


(h)                                 Privacy:  During the Term of this Agreement:


 


(i)            Each of the Parties
agrees to comply with its own privacy policies and guidelines, the Privacy Laws
and this Section 2.(h).  Each
Party will use all personal information, within the meaning of the Privacy
Laws, about Applicants and Cardholders collected or received by it from the
other Party or handled or processed by it on behalf of the other Party under
this Agreement (hereinafter referred to as “Personal Information”) only
for the purposes authorized in this Agreement, and will not, for any reason,
use the Personal Information for other, or its own purposes.  Each Party will have the right, on reasonable
notice, to audit or review the other Party’s processes and procedures to ensure
that Personal Information is not being collected, used or disclosed in an
unauthorized manner, and that the provisions of this Agreement are being fully
complied with.


 


(ii)           Each Party will ensure
that all Personal Information collected, received, handled or processed by it
under this Agreement, irrespective of the format in which it is contained, is
protected by security safeguards appropriate to the sensitivity, amount,
distribution, format and method of storage of that Personal Information, in
accordance with all applicable federal and provincial legislation relating to
privacy of information, including but not limited to the Privacy Laws.


 


(iii)          Each Party acknowledges
that it will, or has implemented policies and procedures with respect to its
own collection, use, disclosure, retention and destruction of any Personal
Information, and agrees, for the purposes of this Agreement, to comply with
such policies and procedures, as they may be developed and revised from time to
time.  Further, each Party agrees to
protect, and not disclose, the other Party’s Personal Information with
procedures and security safeguards which provide at least the same level of
protection as afforded by that Party with respect to the same or similar use of
its most sensitive Personal Information. 
Each Party agrees that, from time to time, it will review its procedures
and security safeguards, through risk assessments, benchmarking or other means,
to determine whether they are still consistent with applicable privacy
legislation, appropriate to the risks, and consistent with best practices, and
if not, agrees to revise same as required. 
Each Party agrees to provide not less than thirty (30) days advance
written notice to the other Party of any change that may be required, and the
Parties must mutually agree to the change prior to its implementation.  However, in the case of a change that is a
regulatory mandated change, each Party must provide written notice of the
change to the other Party as promptly as possible before its implementation.


 


(iv)          Depending on the
determination of the sensitivity of Personal Information, each Party will
implement appropriate methods of protection for that Personal Information,
including, if applicable, physical measures (such as locked cabinets and
restricted office access), organizational measures (such as use of
non-disclosure agreements, security clearances, limiting 


 


30

















 


access on a “need to know” basis), and technological
measures (such as use of passwords and encryption).  In addition, each Party will ensure that
appropriate disaster recovery and back-up plans and procedures are in place
with respect to Personal Information in its possession.


 


(v)                                 Each
Party will ensure that the Personal Information collected, handled, or
processed by it under this Agreement is as accurate, complete and up-to-date as
is reasonably necessary for the purposes for which it is to be used, and can be
retrieved upon request within a reasonable period of time.


 


(vi)                              In
the event that either Party receives a request from an individual for access
to, or information about their Personal Information, or a complaint about how
their Personal Information has been handled, and such Personal Information is
in the possession of the other Party, such other Party will retrieve within a
reasonable period of time any and all of such Personal Information and provide
it, along with any further assistance required, to the other Party or the individual
requestor, at all times acting in accordance with the applicable Privacy Laws.


 


(vii)         The
Parties acknowledge and agree that injunctive relief will be available at any
time in the event of any misuse of Personal Information by a Party, or the
breach of confidentiality and privacy obligations set out in this
Agreement.  In no event will any dispute
between the Parties hereto, including with respect to fees and payment thereof,
allow either Party to deny access to, or retain custody of Personal Information.


 


(viii)        If
either Party becomes aware of any breach of confidentiality and privacy
relating to the Personal Information it has collected from, or on behalf of the
other Party, it will, within forty-eight (48) hours of discovering the breach,
notify the other Party’s designated Privacy Officer (the “Privacy Officer”)
of same.


 


(ix)           Upon
expiry or earlier termination of this Agreement, each Party will promptly
return to the other Party all Personal Information collected from, or on behalf
of, the other Party still in its possession, or destroy same, in accordance
with the other Party’s express instructions. 
Except as otherwise provided for in this Agreement and the Privacy Laws,
no Party will retain any Personal Information after the expiry or termination
of this Agreement.


 


(x)            Each
Party will indemnify and hold harmless the other Party against any and all
Claims, penalties, damages or costs of any kind (including, without limitation,
legal fees on a solicitor-client basis) incurred by or assessed against it as a
result of the other Party’s collecting, handling or processing of Personal
Information in contravention of the provisions of this Agreement.


 


31
















x


(i)            Zale Privacy
Promise:  Zale has made a formal
privacy promise to its customers regarding the use of personal information
about those customers.  A copy of that
formal privacy promise is attached as Attachment F.  Citi Commerce has reviewed the Zale Privacy
Promise and will not take any action that would result in Zale being in
violation of Section 2.(h).


 


(j)            MIS Reporting:  Citi Commerce will provide the management
information reports listed in Attachment C to Zale, all in the format
mutually agreed to by the Parties from time to time and with the frequency
prescribed by Attachment C.


 


3.                                      Private
Label Program Marketing:


 


(a)                                  New
Account Acquisition and Cardholder Development:


 


(i)                                     Marketing Plans:  Citi Commerce and Zale will meet on a
periodic basis to review the marketing plan for New Account Acquisition and
Cardholder Development.


 


(ii)                                  Implementation of Marketing Plans:  Citi Commerce and Zale will be
responsible for implementation of the marketing plans and may contract with one
or more third parties in connection with the implementation of such plans.  Citi Commerce will control, with reasonable
input from Zale, the design and production of all materials (including all
Solicitation, telemarketing scripts and fulfillment materials) for New Account
Acquisition marketing and Cardholder Development; provided that such
materials that include any of the Zale Marks will be presented to Zale for its
review and approval pursuant to Section 9.(b).  Zale agrees to cooperate with Citi Commerce
to provide reasonable access to relevant data and information, if any,
maintained by Zale that may be of assistance to Citi Commerce in connection
with the development and implementation of New Account Acquisition plans;
provided that any such access will be subject to such limitations, restrictions
and prohibitions as may be imposed by contracts by which Zale is bound and/or
by Applicable Law.


 


(b)                                 In-bound
Telephone Calls:  Citi Commerce will
maintain at its cost and expense a toll-free telephone number for purposes of accepting
in-bound telephone and Approved Sales Channels in-store Applications for Credit
Cards.


 


(c)                                  Account
Statements and Account Statement Messages: 
Citi Commerce will control (with reasonable input from Zale) the form,
format, design and content, including any legally required (as determined by
Citi Commerce) disclosures or descriptions, of the Cardholder Account
statements.  All Account statement
marketing or promotional messages that include any of the Zale Marks will be
provided to Zale for its review and approval pursuant to Section 9.(b).  Citi Commerce will be entitled to include any
of the Zale Marks on the Cardholder Account statement messages to individual
Cardholders for operational purposes, 


 


32

















 


Cardholder
Development purposes, Ancillary Products and Services purposes or any other
Private Label Program-related purpose.


 


(d)                                 Account
Statement Inserts:  Subject to the
requirements of this Section 3.(d), Zale will be periodically
entitled to include Account statement inserts in Cardholder Account statements
from time to time during the Term of this Agreement for purposes of promotions
associated with Authorized Goods and Services or its Brand image, the timing
and frequency of such Account statement insert inclusions to be mutually
determined and agreed to by the Parties from time to time.


 


Zale will be responsible for all costs and
expenses related to the development and printing of inserts, and delivery of
such Account statement inserts to the location designated by Citi Commerce at
least ten (10) Business Days prior to the scheduled insertion date.  All proposed inserts must comply with Citi
Commerce’s standard insert specifications (including but not limited to
specifications relating to size and weight) which may be modified from time to
time by Citi Commerce in its sole discretion; provided, however,
that Citi Commerce will provide Zale with not less than ninety (90) days
advance written notice of any change in the specifications.  Citi Commerce will control, with reasonable
input from Zale, the priority and timing of any proposed statement insert, it
being understood that any inserts of legal notices or information (as
reasonably determined by Citi Commerce) will have priority over any Zale
insert.  Zale will notify Citi Commerce
not less than thirty (30) days prior to the calendar month it desires to
include any statement inserts in the upcoming calendar quarter.  Except as expressly stated in this Agreement,
Citi Commerce will control, with reasonable input from Zale, all statement
inserts and ancillary materials included in Cardholder account statements.  Citi Commerce will provide to Zale on a
monthly basis a copy of all inserts included in Cardholders account statements
for the preceding month.


 


(e)                                  Take-One
Applications:  Citi Commerce will
control (with reasonable input from Zale) the form, format, design and content,
including any legally required (as determined by Citi Commerce) disclosures or
descriptions, of the take-one Applications; provided that take-one
Applications that include any of the Zale Marks will be provided to Zale for
its review and approval pursuant to Section 9.(b).  Citi Commerce will be responsible for all
costs and expenses of printing take-one Applications and delivering such
take-one Applications to Store locations; provided, however, that
in the event that Zale requests that Citi Commerce reprint take-one
Applications in connection with any new Brand image or redesign (other than in
connection with a normal reprinting and resupply by Citi Commerce), Zale will
be responsible for all such printing and delivery costs and expenses.  All costs and expenses of printing and
distributing such take-one Applications must be agreed to by the Parties before
such costs and expenses are incurred.


 


33

















 


(f)            In-Store Promotions:  Zale will use commercially reasonable efforts
to market and promote the Private Label Program and the use of Credit Cards
through point-of-sale promotions at or through Approved Sales Channels.  In this regard, Zale agrees to reasonably
cooperate with Citi Commerce in connection with the development of customary
in-store and point-of-sale promotional materials (including but not limited to
counter displays and tent cards, in-store banners, store signage, etc.).  Such promotional materials will be deemed to
be Zale Branded Materials and will be subject to review and approval by Zale
pursuant to Section 9.(b). 
All costs and expenses of printing and distributing such customary
in-store and point-of-sale promotional materials must be agreed to by the
Parties before such costs and expenses are incurred.


 


(g)                                 Zale
Marketing Initiatives:  In the event
that Zale desires to market Authorized Goods and Services to Cardholders using
the Cardholder List, Citi Commerce will not unreasonably withhold its consent
for such products and services and will cooperate with Zale to implement and
administer, either directly or indirectly through a third party selected by
Citi Commerce for this purpose, such marketing initiatives on behalf of Zale,
subject to the following:


 


(i)                                     Zale
will be responsible for all costs and expenses (including Citi Commerce’s
internal costs and expenses) relating to Citi Commerce’s cooperation,
implementation and administration of such Zale marketing initiatives,


 


(ii)           such marketing
initiatives will be limited to not more than one (1) per calendar quarter
except for the fourth calendar quarter in which Zale will have the right to
undertake up to two (2) such marketing initiatives.  All materials related to a Zale marketing
initiative pursuant to this Section 3.(g) will be subject to
the review and approval of Citi Commerce pursuant to Section 9.(c),
and


 


(iii)          Zale will use the
applicable forms of required disclosures provided by Citi Commerce to Zale if
Zale includes a reference to any special financing plans offered by Citi
Commerce in advertisements of Authorized Goods and Services by Zale to
Cardholders and the general public in Canada.


 


(h)                                 Ancillary
Products and Services:  Citi Commerce
and its Affiliates will have the exclusive right to market Ancillary Products
and Services to Cardholders using the Cardholder List.  Citi Commerce and its Affiliates will have
exclusive control over the development of marketing plans for Ancillary
Products and Services, the creation, development and production of all
promotional materials for Ancillary Products and Services, and the distribution
and frequency of such marketing efforts. 
Any solicitation of a Cardholder for an Ancillary Product or Service
that includes any of the Zale Marks, will be provided to Zale for its review
and approval pursuant to Section 9.(b).  Citi Commerce will obtain the approval of
Zale for any plan or marketing materials related to the offering of Ancillary
Products and Services, such approval not to be unreasonably withheld or
delayed.  


 


34

















 


All costs and
expenses related to the marketing of Ancillary Products and Services will be
borne by Citi Commerce and its Affiliates.


 


(i)                                     Marketing
of Credit Insurance:  During the term
of this Agreement and subject to the Privacy Laws, Zale will have the exclusive
right to market Credit Insurance to Applicants, using Citi Commerce’s standard
form of Application for that purpose. 
All text about Credit Insurance to be included on Citi Commerce’s
standard form of Application (or in any other Zale solicitations or other
marketing materials referenced in Section 9.(c)) must comply with
Applicable Law and is subject to the prior written approval of Citi Commerce,
such approval not to be unreasonably withheld or delayed.


 


Zale agrees that Citi Commerce will deduct
and retain a fee equal to the mutually agreed to percentage of the net billed
premium earned on the sale of Credit Insurance to Cardholders under this
Agreement, as set out in the Insurance Administrative Services Agreement in Attachment
M.  In doing so, it is understood and
agreed by the parties that no Merchant Fees will apply to insurance premiums on
Credit Insurance charged to Accounts under this Agreement.


 


(j)                                     Prohibition
on Marketing Other Cards:  During the
term of this Agreement, Zale will not, without the prior written approval of
Citi Commerce, issue, market, promote or offer within Canada any general
purpose or private label credit card (excepting Credit Cards) or any consumer
financing plan, and will not enter into any agreement or arrangement with any
Affiliate or third party that provides for the issuance, marketing, promotion
or offering within Canada of any general purpose or private label credit card
or any consumer financing plan; provided, however, that nothing
in this Section 3.(j) or any other provision of this Agreement
will prohibit Zale from:


 


·                                          accepting
any payment method (e.g. American Express, Diners
Club/enRoute, Interac Direct Payment, MasterCard,
NOVUS/Discover or VISA) in payment for Authorized Goods and
Services,


 


·              displaying
at any point of purchase signs or decals indicating the types of payment
accepted at that location, and


 


·                                          participating
in a Second Look Program with another Person, as permitted by Section 5.(c).


 


(k)                                  Ownership
and Marketing Materials:  Citi
Commerce will be the sole and exclusive owner of all designs, graphic layouts
and materials developed by Citi Commerce in connection with all of the
marketing and promotional activities contemplated pursuant to this Section 3.;
provided, however, that Zale will be the sole and exclusive owner of any card
plastic design, including all copyrights to the card plastic design, all
Account statement messages and Account statement inserts developed by it
pursuant to Section 3.(c) and Section 3.(d), all
materials 


 


35

















 


used in connection
with Zale marketing initiatives pursuant to Section 3.(g), and all
Zale Marks.  In the event that Zale
develops a unique or original marketing idea or process associated with the
marketing of Credit Cards, Zale, in its sole discretion, may offer Citi
Commerce a license to use such marketing idea or process.


 


(l)                                     Inactive
Accounts:  Citi Commerce will not
purge any Account from its operating system because of lack of debit or credit
activity, excepting any such Account which has not had any debit or credit
activity for a period of at least thirty-six (36) consecutive months, or such
other period as may be agreed to by the Parties.


 


4.                                      Client
Relationship Team and Program Committee:


 


(a)                                  Client
Relationship Team:


 


(i)                                     Structure:  The ongoing operations of the Private Label
Program will be subject to the continuing review of a client relationship team
(the “Client Relationship Team”). 
The Client Relationship Team will consist of Representatives of both
Zale and Citi Commerce.  Each of Citi
Commerce and Zale will be entitled to remove one or more of its Representatives
and appoint substitute Representatives at any time and from time to time during
the Term hereof upon written notice to the other Party.


 


(ii)                                  General Responsibility:  The Client Relationship Team will be the
principal management interface between the Parties with respect to the
day-to-day operations of the Private Label Program.  The Client Relationship Team will cooperate
and work together to expeditiously resolve problems which arise from time to
time in connection with the implementation and operation of the Private Label
Program and to facilitate the exchange of information between Citi Commerce and
Zale.  Responsibilities of the Client
Relationship Team will include, without limitation, approving annual business
plans and goals for operating performance, monitoring actual operating results
against milestones and expectations, dealing with day-to-day operational
matters that arise in connection with the Private Label Program, reviewing and
approving Material Changes to the Private Label Program proposed by Citi
Commerce, identifying market trends and analyzing the implications thereof for
the Private Label Program, and sponsoring Private Label Program improvement
opportunities.  Citi Commerce agrees
that, upon Zale’s reasonable request and subject to the Privacy Laws, it will
provide three (3) of Zale’s Client Relationship Team members with
read-only online access to Citi Commerce’s Cardholder records and that, to the
full extent permitted by Applicable Law, Citi Commerce will disclose any or all
of such Cardholder records to such designated members for reasons of Account
dispute resolution, issues regarding Returns and Chargebacks, Party disputes
and similar purposes.


 


36

















 


(iii)                               Specific Duties:  Citi Commerce agrees that it will not make
any Material Change without giving the Client Relationship Team prior notice of
such change at such time and in such manner as to allow the Client Relationship
Team an opportunity to discuss the proposed Material Change and its likely
implications, and to secure the approval or disapproval, as the case may be, of
the Client Relationship Team in connection therewith.  Without limiting the generality of any of the
foregoing, in addition to the responsibilities provided herein, the Client
Relationship Team will serve as the forum in which Zale and Citi Commerce will
at the appropriate time, or from time to time, as the case may be:


 


(1)           review and approve New
Account Acquisition and Cardholder Development plans proposed by Citi Commerce
and/or Zale and any marketing plans and related implementation schedules as
developed by Zale;


 


(2)                                  review
and approve any proposal concerning special inserts, messages or letters to be
included in Account statements to the extent such proposal is required to be
approved by the Client Relationship Team as provided herein;


 


(3)                                  discuss
and approve any proposals for new Card products;


 


(4)           discuss and approve or
disapprove, as the case may be, any Material Changes proposed by Citi Commerce
and/or Zale;


 


(5)           discuss issues related
to processing and servicing the Accounts, Cardholders and Approved Sales
Channels;


 


(6)           discuss and recommend
actions to achieve improvement in the effectiveness and efficiency of Private
Label Program operations;


 


(7)           discuss plans for major
systems changes which are not also Material Changes affecting the Private Label
Program and recommend action as needed;


 


(8)                                  manage
priorities and approve the implementation of any systems interface between Zale
and Citi Commerce or designees of either Party;


 


(9)                                  determine
Card specifications, including size, type of plastic, encoding and magnetic
stripe;


 


(10)         discuss and develop
proposals for new credit plans and other proposals and programs to maximize
Card Sales;


 


37

















 


(11)         discuss and approve
language and terms related to the Private Label Program, use of the Cards to
purchase Authorized Goods and Services, and any terms and conditions to be
included in Zale print, televised or other advertisements and catalogues
governing or inviting purchases of, as the case may be, Authorized Goods and
Services;


 


(12)         discuss such other
marketing and operational matters in respect of the Private Label Program as
are deemed appropriate by the Client Relationship Team or the Parties hereto;


 


(13)         discuss unsatisfactory
performance relative to the Private Label Program and develop plans and
proposals to address such unsatisfactory performance;


 


(14)                            discuss
and approve any changes to Settlement or reconciliation files; and


 


(15)                            conduct
periodic portfolio performance reviews.


 


(iv)                              Operational Oversight; Meetings; Voting and Records:


 


(1)           The Client Relationship
Team members will interface regularly as may be necessary or appropriate to achieve
the purposes set forth above, and will work closely on all operational matters
pertaining to the Private Label Program.


 


(2)                                  Each
of Zale and Citi Commerce will be entitled to one vote with respect to all
matters to be voted upon by the Client Relationship Team, regardless of the
number of members each Party has representing it on the Client Relationship
Team.  Any one of the representatives of
Zale and Citi Commerce may cast the vote allocated to Zale or Citi Commerce, as
the case may be, in the manner determined by such Representatives.  Any matter requiring approval of the Client
Relationship Team will require the affirmative vote of both Zale and Citi
Commerce, and failure to gain the affirmative vote of each Party will
constitute disapproval of such matter. 
Upon any such disapproval, either Party may reintroduce such matter,
with such modification or amendment deemed appropriate by such Party in its
reasonable discretion.  If such matter is
once again disapproved, at the option of the introducing Party, it will become
a Dispute to be resolved by the Program Committee in accordance with Section 4.(b)(ii).


 


(b)                                 Program
Committee:


 


(i)                                     Structure:  For the purpose of periodically reviewing
the Private Label Program and resolving any claim, controversy or dispute
between Citi 


 


38

















 


Commerce and Zale
arising out of relating to, or in connection with this Agreement or the
agreements and transactions contemplated hereby, including the interpretation,
validity, termination or breach of this Agreement and any deadlock of the
Client Relationship Team (any such claim, controversy or dispute hereinafter
called a “Dispute”), Citi Commerce and Zale will establish and maintain
a Program Committee (the “Program Committee”).  The Program Committee will consist of an
equal number of senior management Representatives of both Zale and Citi
Commerce.  The Program Committee will
establish the number of Representatives to be appointed to the Program
Committee from time to time; provided, however, that each of Citi Commerce and
Zale will always have an equal number of Representatives.  The initial number of such Representatives
for each of Zale and Citi Commerce will be three (3), and the initial members
of the Program Committee will be those individuals occupying the positions
listed in Attachment H.  Each of
Zale and Citi Commerce will be entitled to remove one or more of its
Representatives and appoint substitute Representatives at any time and from
time to time during the term hereof upon written notice to the other Party.


 


(ii)                                  Program Committee Meetings:  The Program Committee will meet (in
person or by telephone or video conference) at such times and places as may be
decided by the members of the Program Committee; provided, however, that the
Program Committee will meet (1) unless otherwise agreed by the Parties, at
least semi-annually to discuss the status of the Private Label Program; (2) within
five (5) days after either Party notifies the other Party of a Dispute;
and (3) as often as may be reasonably necessary to gather information with
respect to the matter which is the subject of any such Dispute and which is
appropriate and germane to its resolution. 
The Program Committee will discuss each such Dispute and negotiate in
good faith in an effort to resolve such Dispute as promptly and efficiently as
reasonably possible.  The members of the
Program Committee will appoint an acting chairman and adopt such other rules to
facilitate the conduct of meetings as are agreed to by the members from time to
time.  Each of Zale and Citi Commerce
will be entitled to one vote with respect to all matters to be voted upon by
the Program Committee.  Any one of the
Representatives of Zale and Citi Commerce may cast the vote allocated to Zale
or Citi Commerce, as the case may be, in the manner determined by such
Representatives.  The presence of a
Representative of both Zale and Citi Commerce who is authorized to vote will
constitute a quorum for meetings of the Program Committee.  Any matter requiring approval of the Program
Committee will require the affirmative vote of both Zale and Citi Commerce, and
failure to gain the affirmative vote of each Party will constitute disapproval
of such matter (a “Disapproved Matter”). 
The Program Committee will keep a written record of its proceedings,
which record will be reviewed and approved by one Representative of each of
Zale and Citi Commerce designated by the respective Parties for such purpose.


 


39
















 


(iii)          Unresolved
Disputes and Disapproved Matters: 
Any Dispute that cannot be resolved by the Program Committee, and
each Disapproved Matter, will be resolved in accordance with the dispute
resolution procedures prescribed by Section 12.


 


5.                                      Operating
Regulations; Service Level and Performance Standards; Second Look Program; 40%
Down Payment Program:


 


(a)                                  Operating
Regulations:  Citi Commerce and Zale
have established certain operating procedures setting out in greater detail the
technical standards, obligations and responsibilities of Citi Commerce and Zale
with respect to Card Sale Authorization, sales data capture, processing and
routing system requirements, Application, Sales Draft and Return Voucher
retrievals and Chargeback procedures, such operating procedures being set out
in Attachment A.  The Parties will
maintain and perform their obligations under this Agreement in compliance with
the Operating Regulations.


 


Citi Commerce reserves the right to amend the
Operating Regulations from time to time during the Term of this Agreement, but
no such amendment will be binding on Zale until the amendment (including its
effective date) has been approved by the Program Committee.  However, in the case of an amendment to the
Operating Regulations that is a regulatory mandated change, the Program
Committee will work to implement such change within the mandated
timeframe.  Zale will receive written
notice of the amendment as promptly as practicable before its implementation.


 


(b)                                 Service
Level and Performance Standards: 
Except as may otherwise be expressly provided in this Agreement, Citi
Commerce will maintain and perform its obligations in compliance with the
Service Level and Performance Standards in respect of the Private Label Program
in accordance with Attachment D throughout the Term of this
Agreement.  The performance of Citi
Commerce against the Service Level and Performance Standards will be reported
by Citi Commerce to Zale on a monthly basis (no later than 30 days after the
end of each month provided the data is available) during the Term of this
Agreement.  The Service Level Standards
may, from time to time, be revised upon the mutual agreement of the Parties.


 


(c)                                  Second
Look Program:  At any time during the
Term of this Agreement, Zale may request in writing that Citi Commerce work
with Zale to develop one or more `Second Look Programs’ (each a “Second Look
Program”) which are designed to offer credit services to certain Applicants
who do not otherwise qualify for the issuance of an Account under Citi Commerce’s
then current Account Issuance Criteria. 
In such event, Citi Commerce will use good faith efforts to develop and
present to Zale, no later than ninety (90) days after the date of any such
request, an initial draft of the Second Look Program; provided that this
provision will not be deemed to create any obligation on the part of Citi
Commerce or Zale to implement such a Second Look Program.  If, after the expiration of any such 90-day


 


40

















 


period Citi
Commerce notifies Zale that Citi Commerce cannot or will not develop a Second
Look Program, or Zale and Citi Commerce attempt to negotiate the terms and
conditions of such a Second Look Program but are unable to do so within a
reasonable period of time (not to exceed 45 days after presentation of a
proposed Second Look Program by Citi Commerce to Zale), then Zale will be free
to negotiate and enter into a Second Look Program with any other Person.


 


Notwithstanding the foregoing, if Zale
proposes to enter into a Second Look Program with a Person other than Citi
Commerce, Zale will notify Citi Commerce in writing of the material terms of
such proposal (“Second Look Notice”), and Citi Commerce will have a
right for a period of ten (10) Business Days from receipt of Zale’s
aforesaid notice to agree to enter into the Second Look Program with Zale upon
the same terms and conditions as those set forth in Zale’s aforesaid
notice.  Citi Commerce will notify Zale
within such ten (10) Business Day-period whether it desires to enter into
the Second Look Program with Zale upon the same terms and conditions as those
set forth in the Second Look Notice.  If
Citi Commerce notifies Zale that it elects not to enter into such Second Look
Program, or if Citi Commerce fails to so notify Zale within such ten (10) Business
Day-period (in which case, Citi Commerce will be deemed to have elected not to
enter into the Second Look Program with Zale), Zale will be free to enter into
the Second Look Program with another Person upon terms and conditions no less
favourable to Zale than those specified in the Second Look Notice.  If Citi Commerce notifies Zale that Citi
Commerce desires to enter into a Second Look Program upon terms and conditions
no less favourable to Zale than those specified in the Second Look Notice, Citi
Commerce and Zale will negotiate in good faith the terms of a definitive
agreement evidencing such Second Look Program. 
If Zale and Citi Commerce are unable to negotiate a definitive agreement
within thirty (30) days from Zale’s receipt of Citi Commerce’s notice that Citi
Commerce wishes to provide the Second Look Program, Zale will be free to enter
into an agreement evidencing a Second Look Program with another Person upon
terms and conditions no less favourable to Zale than those specified in the
Second Look Notice.


 


Citi Commerce’s obligation under this Section 5.(c) will
be satisfied, and as a result, the Parties expressly acknowledge that Zale will
not have any future right to negotiate a proposal for a Second Look Program
with any other Person during the term of the Agreement, if


 


(1)                                  Zale does not enter
into such an agreement within one hundred and twenty (120) days after the
expiration of such thirty (30) day period. 
Provided that the parties are negotiating in good faith, Zale may
request up to two (2) extensions of thirty (30) days under this Section 5.(c)(1),
or


 


(2)           the
Parties negotiate an agreement to provide a Second Look Program.  However, the Parties expressly acknowledge
that such Second Look Program agreement may contain provisions to allow Zale
future rights to 


 


41

















 


negotiate a proposal for a Second Look Program with another Person
under conditions which would be specified in such agreement.


 


(d)                                 40%
Down Payment Program:  The Parties
agree that Zale may offer a ‘40% Down Payment Program’, as described in the
Operating Regulations (“40% Down Payment Program”) to Cardholders during
the Term of this Agreement. In consideration of the foregoing, Zale will indemnify
Citi Commerce for all 40 DP Losses suffered or incurred by Citi Commerce
on an Account.


 


In this Section 5.(d), “40 DP
Losses” mean, in respect to an Account to which the 40% Down Payment
Program applies, all amounts (excluding interest and service charges) owing by
a Cardholder on the Account that exceed 110% of the Citi Commerce-assigned
credit limit on the Account where:  (i) the
Account is contractually delinquent for at least one hundred and eighty (180)
days, or (ii) the Cardholder has declared bankruptcy.


 


6.                                      Covenants,
Representations and Warranties:


 


(a)                                  Covenants
of Zale:  To induce Citi Commerce to
enter into, and consummate the transactions contemplated by this Agreement,
Zale makes the following covenants to Citi Commerce, each and all of which will
survive the execution and delivery of this Agreement:


 


(i)                                     Maintenance of Existence and Conduct of Business:
 Zale will preserve and keep in full
force and effect its corporate existence and will remain engaged in the
business of selling Authorized Goods and Services on Accounts either directly
or indirectly through its Affiliates. 
Zale will not transact business so as to represent itself as the owner
of the Accounts, the Credit Cards, the Cardholder List, the Receivables and
Related Account Rights or any other agreement, document, asset or property
owned by Citi Commerce or its Affiliates and used in connection with the
Private Label Program (collectively, “Citi Property”).


 


(ii)                                  Books and Records:  Zale will keep adequate records and books of
account with respect to the Accounts and the payments it receives from Citi
Commerce under this Agreement, and the In-Store Payments it receives from
Cardholders under Section 2.(b)(xi) and Zale will ensure that all
such books and records are made in accordance with GAAP and reflect all of Zale’s
financial transactions with respect to the Accounts and the Private Label
Program.


 


(iii)                               Litigation:  Zale will promptly notify Citi Commerce in
writing if it receives notice of any litigation that, if adversely determined,
would have a material and adverse effect on the Private Label Program, the
Accounts or Zale’s ability to perform any of its obligations under this
Agreement.


 


(iv)                              Enforcement of Rights:  Zale, acting reasonably, will enforce its
rights against third parties, including, without limitation, Approved Sales 


 


42

















 


Channels, to the
extent that a failure to enforce such rights could reasonably be expected to
materially and adversely affect the Private Label Program, the Accounts or Zale’s
ability to perform its obligations under this Agreement.  Zale, acting reasonably, will not take or
omit to take any action, which could reasonably be expected to have a material
and adverse effect on Citi Commerce, the Private Label Program, the Accounts,
the Receivables, the Related Account Rights or Citi Commerce’s ability to
perform its obligations under this Agreement.


 


(v)                                 No Liens:  Effective on the date hereof, Zale will not
create or (due to any action or inaction on the part of Zale or any of its
Affiliates) cause or permit any Lien in and to the Accounts, the Receivables,
the Related Account Rights or any other Citi Property.


 


(vi)                              Reports and Notices:  Zale will provide Citi Commerce with a
notice specifying the nature of any Zale Event of Default, any event which,
with the giving of notice would constitute a Zale Event of Default or any
development or other information which could have a material and adverse effect
on the Accounts or the value thereof, title of either Citi Commerce or its
Affiliates to any Citi Property or Zale’s ability to perform its obligations
under this Agreement.  Notices pursuant
to this Section 6.(a)(vi) relating to Zale Events of Default
will be provided as soon as reasonably practicable but in any event no later
than ten (10) Business Days after Zale becomes aware of the existence of
such default.  Notices relating to all
other events or developments described in this Section 6.(a)(vi) will
be provided (1) as soon as reasonably practicable but in any event no
later than five (5) Business Days after Zale becomes aware of the
existence of such event or development if such event or development has already
occurred, and (2) with respect to events or developments that have yet to
occur, as early as reasonably practicable under the circumstances.  Any notice provided under this Section 6.(a)(vi) will
be confirmed in writing to Citi Commerce as soon as reasonably practicable but
in any event no later than ten (10) Business Days after the delivery of
the initial notice.  If Zale becomes
aware of any failure by Citi Commerce to comply with any Service Level and
Performance Standards in any material respect, Zale will notify Citi Commerce
thereof within a reasonable time thereafter, but its failure to so notify Citi
Commerce will not limit any rights Zale may have with respect thereto under
this Agreement.


 


(vii)         Compliance with Laws:  Zale and its Representatives and Contractors
will comply in all material respects with all Applicable Laws governing the
performance of their obligations in respect to the Private Label Program under
this Agreement.


 


(viii)        Compliance with Citigroup Information Security
Standards:  Zale will not
take any action, and will ensure that its Representatives and Contractors authorized
to assist in the fulfillment of its obligations hereunder will not 


 


43

















 


take any action
that, if taken by a Citi Commerce Affiliate, would violate the Citigroup
Information Security Standards incorporated herein by reference, made a part of
this Agreement and as may be revised by Citi Commerce from time to time in its
sole discretion; provided, however, that (1) Citi Commerce will use
commercially reasonable efforts to provide Zale with as much prior notice of
any such changes as possible, (2) Zale will use commercially reasonable
efforts to comply with such changes as promptly
as possible, and (3) Zale’s inability to comply with any such change
without material burden or expense (as documented to Citi Commerce) will not be
deemed a breach of this Agreement.


 


(ix)           GST/QST Registration:  Zale is a registrant under Part IX of the
Excise Tax Act (Canada) and under
the Act Respecting the Quebec Sales
Tax.  Zale’s GST registration
number is 866038425RT0001 and its QST registration number is 1022399507.


 


(x)            Solicitation of Citi Commerce Employees:  While the Private Label Program is in effect
and for a period of twelve (12) months after the termination of this Agreement,
Zale will not hire or solicit the employment of any Person whom Citi Commerce
employed during the Term of this Agreement and who was involved in the
establishment, promotion, maintenance or operation of the Private Label Program
without the approval of Citi Commerce, which approval will not be unreasonably
withheld or delayed.


 


(xi)           Maintenance of Licenses, Etc.:  Zale will maintain in good standing all
licenses, consents, approvals, certificates of authority, orders and other
qualifications that are necessary for it to pay, perform and observe its
obligations under this Agreement.


 


(xii)          Citi Commerce Policies:  Zale, its Affiliates, Representatives,
Contractors and their respective employees will reasonably comply with Citi
Commerce’s on-site policies while on Citi Commerce’s premises, using facilities
or equipment of Citi Commerce or its Affiliates, or acting for, on behalf of,
or in conjunction with Citi Commerce. 
Citi Commerce may require Zale to remove from its premises any employee,
Representative, or Contractor of Zale or its Affiliates who fails to comply
with such policies or any portion thereof.


 


(xiii)         Zale Branded Materials:  All Zale Branded Materials and other marketing
materials prepared or provided by Zale in connection with this Agreement will
be accurate, complete and substantiated, and, upon Citi Commerce’s request,
Zale will deliver to Citi Commerce within three (3) Business Days accurate
and complete substantiation of each claim made in such Zale Branded Materials
and other marketing materials used or proposed for use in connection with the
Private Label Program, provided that the foregoing will not apply to any
information contained in such Zale Branded 


 


44

















 


Materials and
other marketing materials that is provided by Citi Commerce.


 


(xiv)        To the extent that such
financial statements are not publicly available, during the Initial Term and
any Renewal Term of this Agreement, Zale will provide to Citi Commerce,
promptly following the preparation thereof but in no event more than sixty (60)
days following the end of the period for which such financial statements are
prepared:


 


(1)                                  the
annual audited financial statements for the ultimate parent legal entity owning
or controlling Zale, prepared by its independent auditor or accountant, and


 


(2)                                  the
quarterly unaudited financial statements for the ultimate parent legal entity
or controlling Zale, as reviewed by its independent auditor or accountant.


 


(b)                                 Covenants
of Citi Commerce:  To induce Zale to
enter into, and consummate the transactions contemplated by this Agreement,
Citi Commerce makes the following covenants to Zale, each and all of which will
survive the execution and delivery of this Agreement:


 


(i)                                     Maintenance of Existence and Conduct of Business:
 Citi Commerce will preserve and keep
in full force and effect its corporate existence and will either directly or
indirectly through its Affiliates remain in the business of servicing the
Accounts.  Citi Commerce will not
transact business so as to represent itself as the owner of Zale Customer
Information or any other agreement, document, asset or property owned by Zale,
and used by Zale in connection with the Private Label Program (collectively “Zale
Property”).


 


(ii)                                  Books and Records:  Citi Commerce will keep adequate records and
books of account with respect to the Accounts, the Receivables and remittances
it receives from Zale, in which proper entries, reflecting all of Citi Commerce’s
financial transactions relating to the Private Label Program, are made in
accordance with GAAP.


 


(iii)                               Litigation:  Citi Commerce promptly will notify Zale in
writing if it receives notice of any litigation that, if adversely determined,
would have a material and adverse effect on the Private Label Program, the
Accounts, the Receivables or Citi Commerce’s ability to perform any of its
obligations under this Agreement.


 


(iv)          Enforcement of Rights:  Citi Commerce, acting reasonably, will enforce
its rights against third parties to the extent that a failure to enforce such
rights could reasonably be expected to materially and adversely affect the
Private Label Program or Citi Commerce’s ability to perform its obligations
under this Agreement.  Citi Commerce,
acting reasonably, will not take or omit 


 


45

















 


to take any action
which could reasonably be expected to have a material and adverse effect on
Zale, the Private Label Program, the Accounts, the Receivables, the Related
Account Rights or Zale’s ability to perform its obligations under this
Agreement.


 


(v)                                 Reports and Notices:  Citi Commerce will provide Zale with notice
specifying the nature of any Citi Commerce Event of Default, any event which,
with the giving of notice would constitute a Citi Commerce Event of Default, or
any development or other information which is likely to have a material and
adverse effect on the Private Label Program or Citi Commerce’s ability to
perform its obligations pursuant to this Agreement.  Notice pursuant to this Section 6.(b)(v) relating
to Citi Commerce Events of Default will be provided as soon as reasonably
practicable but in any event no later than ten (10) Business Days after
Citi Commerce becomes aware of the existence of such default.  Notices relating to all other events or
developments described in this Section 6.(b)(v) will be
provided (1) within five (5) Business Days after Citi Commerce
becomes aware of the existence of such event or development if such event or
development has already occurred, and (2) with respect to events or
developments that have yet to occur, as early as reasonably practicable under
the circumstances.  Any notice produced
under this Section 6.(b)(v) will be confirmed in writing to
Zale as soon as reasonably practicable but in  any event no later
than ten (10) Business Days after delivery of the initial notice.  If Citi Commerce becomes aware of any failure
by Zale to comply with any of the Operating Regulations in any material
respect, Citi Commerce will notify Zale thereof within a reasonable time thereafter,
but its failure to so notify Zale will not limit any rights Citi Commerce may
have with respect thereto under this Agreement.


 


(vi)                              Compliance with Laws:  Citi Commerce and its Representatives and
Contractors will comply in all material respects with all Applicable Laws, and
each of the Accounts and the terms, finance charges, fees and other charges in
connection therewith (including the Pricing and payment terms set out in Attachment
G) will comply in all material respects with all Applicable Laws.  Each new Cardholder will enter into a
Cardholder Agreement on terms and conditions substantially in the form attached
as Attachment K, or as the same may be modified by Citi Commerce from
time to time.


 


(vii)                           Zale Policies:  Citi  Commerce, its Affiliates,
Representatives, Contractors and their respective employees will reasonably
comply with Zale’s code of conduct (as communicated in writing by Zale to Citi
Commerce from time to time) while on Zale’s premises, using Zale’s facilities
or equipment, or acting for, on behalf of, or in conjunction with Zale.  Zale may require Citi Commerce to remove from
Zale’s premises any employee, Representative, or Contractor of Citi Commerce or
its Affiliates who fails to comply with such policies or any portion thereof.


 


46
















 


(viii)                      Privacy:  Citi Commerce will not take any
action that would result in Zale being in violation of Section 2.(h).


 


(ix)                              Solicitation of Zale Employees:  While the Private Label Program is in
effect and for a period of twelve (12) months after the termination of this
Agreement, Citi Commerce will not hire or solicit the employment of any Person
whom Zale has employed during the Term of this Agreement and who was involved
in the establishment, promotion, maintenance or operation of the Private Label
Program without the approval of Zale which approval will not be unreasonably
withheld or delayed.


 


(x)                               Maintenance of Licenses; Etc.:  Citi Commerce will maintain in good
standing all licences, consents, approvals, certificates of authority, orders
and other qualifications that are necessary for it to pay, perform and observe
its obligations under this Agreement.


 


(xi)                            Private Label Program:  Citi Commerce will implement the Private
Label Program with respect to Cardholders in accordance with the applicable Cardholder
Agreement.  It will promptly advise Zale
in the event of new or modified regulatory and statutory requirements that may
necessitate a Material Change in the Private Label Program or the manner in
which Citi Commerce implements the Private Label Program, and will comply with
such new and modified requirements in a timely manner.  It will take appropriate measures to ensure
that all aspects of Citi Commerce’s operation of the Private Label Program
(including all aspects implemented or maintained by Citi Commerce’s
Representatives and Contractors) comply fully with all requirements of
Applicable Law (as exists on the Effective Date and as may subsequently be
amended, modified or developed), including the Income Tax Act, the Privacy
Laws, the Consumer Protection Laws and the Language Laws.


 


(xii)        Marketing Materials:  All Private Label Program marketing
materials prepared or provided by Citi Commerce in connection with this
Agreement will be accurate, complete and substantiated, and, upon Zale’s
request, Citi Commerce will deliver to Zale within three (3) Business Days
accurate and complete substantiation of each claim made in such marketing
materials used or proposed for use in connection with the Private Label
Program, provided that the foregoing will not apply to any information
contained in such marketing materials that is provided by Zale.


 


(xiii)        GST Registration:  Citi Commerce is a registrant
under Part IX of the Excise Tax Act.  Citi
Commerce’s GST registration number is R102257854RT.


 


47

















 


(c)                                  Representations
and Warranties of Zale:  Zale hereby
represents and warrants to Citi Commerce as follows:


 


(i)                                   Organization:  It is duly organized, validly
existing and in good standing under the laws of the jurisdiction of
incorporation, and has full corporate power and authority to conduct its
business as it is presently being conducted;


 


(ii)                                Authorization:  It has all necessary corporate
authority and has taken all corporate action necessary to enter into this
Agreement, to consummate the transactions contemplated hereby and thereby and
to perform its obligations hereunder and thereunder.  This Agreement has been duly executed and
delivered by Zale and is a legal, valid and binding obligation of Zale, enforceable
against it in accordance with its terms, except as the enforcement thereof may
be limited by applicable bankruptcy, insolvency, rearrangement, reorganization
or similar debtor relief legislation affecting the rights of creditors
generally from time to time in effect and by general principles of equity
(regardless of whether such enforcement is sought in a proceeding at law or in
equity) and the discretion of the court before which any proceeding therefor
may be brought;


 


(iii)                             Absence of Conflicts:  The execution and delivery of this
Agreement by Zale and the performance by Zale of its obligations hereunder will
not result in:


 


(1)                                a
violation of Zale’s articles of incorporation or charter,


 


(2)                                a
breach of, or a default under, any term, provision of any contract, agreement,
indebtedness, lease, commitment, franchise, license, permit or authorization to
which Zale is a party or by which its assets are bound, which breach or default
would have a material adverse effect on its business or financial condition or
its ability to consummate the transactions contemplated hereby or thereby, or


 


(3)                                a
violation by Zale of any statute, rule, regulation, ordinance, code, order,
judgment, injunction, decree or award, which violation would have a material
adverse effect on its business or financial condition or its ability to
consummate the transactions contemplated hereby;


 


(iv)                            Consents and Approvals:  No consent, approval or authorization of,
or declaration, filing or registration with, any governmental or regulatory
authority, or any other Person, is required to be made or obtained by Zale in
connection with the execution, delivery and performance of this Agreement and
the performance of its obligations hereunder, except for such consents,
approvals, authorizations, filings and registrations as have been obtained or
made prior to the Effective Date;


 


(v)                               Litigation:  There is no action, order, writ,
injunction, judgment or decree outstanding or claim, suit, litigation,
proceeding, labor dispute, arbitral 


 


48

















 


action or
investigation pending, or to the knowledge of Zale threatened, against or
relating to:


 


(1)                                Zale
which has a reasonable possibility of an adverse determination and which, if
adversely determined, would be likely to have a material adverse effect on
Zale, or


 


(2)                                this
Agreement, or the transactions contemplated hereby;


 


(vi)                            Trade-marks:  Zale and TXDC are, collectively, the sole
and exclusive owners of the Zale Marks and, collectively, have the power and
authority to grant to Citi Commerce the license to use the Zale Marks as
provided in this Agreement.  The Zale
Marks are not subject to any liens, mortgages, pledges or restriction that
would adversely affect the license granted to Citi Commerce pursuant to Section 9.  Neither Zale nor TXDC has granted to any
other Person a license to use the Zale Marks or any other trade names,
trademarks, service marks and associated trade dress licensed to or owned by
Zale or TXDC in connection with the issuance, marketing, promotion or offering
of private label credit cards within Canada. 
With respect to the Zale Marks, neither Zale nor TXDC has been charged,
nor to its best knowledge is threatened to be charged, with infringement of any
unexpired trade-mark, trade-mark registration, trade name, service mark,
copyright, copyright registration or other proprietary right of any other
Person.  With respect to any new or
additional Zale Marks for which a license is granted pursuant to Section 9.,
the representations and warranties contained in this Section 6.(c)(vi) will
apply to the new or additional Zale Marks as of the date the license for such
new or additional Zale Marks is granted;


 


(vii)                         Brokers: 
Zale has not employed and is not subject to any valid claim of any
broker, finder, consultant or other intermediary in connection with the
transactions contemplated by this Agreement who will be entitled to a fee or
commission in connection with such transactions.


 


(d)                               Representations
and Warranties of Citi Commerce: 
Citi Commerce hereby represents and warrants to Zale as follows:


 


(i)                                   Organization:  It is duly organized, validly
existing and in good standing under the laws of the jurisdiction of
incorporation, and has full corporate power and authority to conduct its business
as it is presently being conducted;


 


(ii)                                Authorization:  It has all necessary corporate
authority and has taken all corporate action necessary to enter into this
Agreement, to consummate the transactions contemplated hereby and thereby and
to perform its obligations hereunder and thereunder.  This Agreement has been duly executed and
delivered by Citi Commerce and is a legal, valid and binding 


 


49

















 


obligation of Citi
Commerce, enforceable against it in accordance with its terms, except as the
enforcement thereof may be limited by applicable bankruptcy, insolvency,
rearrangement, reorganization or similar debtor relief legislation affecting
the rights of creditors generally from time to time in effect and by general
principles of equity (regardless of whether such enforcement is sought in a
proceeding at law or in equity) and the discretion of the court before which
any proceeding therefor may be brought;


 


(iii)          Absence of Conflicts:  The execution and delivery of this
Agreement by Citi Commerce and the performance by Citi Commerce of its
obligations hereunder will not result in:


 


(1)                                a
violation of Citi Commerce’s articles of incorporation or charter,


 


(2)                                a
breach of, or a default under, any term, provision of any contract, agreement,
indebtedness, lease, commitment, franchise, license, permit or authorization to
which Citi Commerce is a party or by which its assets are bound, which breach
or default would have a material adverse effect on its business or financial
condition or its ability to consummate the transactions contemplated hereby or
thereby, or


 


(3)                                a
violation by Citi Commerce of any statute, rule, regulation, ordinance, code,
order, judgment, injunction, decree or award, which violation would have a
material adverse effect on its business or financial condition or its ability
to consummate the transactions contemplated hereby;


 


(iv)                            Consents and Approvals:  No consent, approval or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority, or any other Person, is required to be made or
obtained by Citi Commerce in connection with the execution, delivery and
performance of this Agreement and the performance of its obligations hereunder,
except for such consents, approvals, authorizations, filings and registrations
as have been obtained or made prior to the Effective Date;


 


(v)                               Litigation:  There is no action, order, writ,
injunction, judgment or decree outstanding or claim, suit, litigation,
proceeding, labor dispute, arbitral action or investigation pending, or to the
knowledge of Citi Commerce threatened, against or relating to:


 


(1)                                Citi
Commerce which has a reasonable possibility of an adverse determination and
which, if adversely determined, would be likely to have a material adverse
effect on Citi Commerce, or


 


(2)                                this
Agreement, or the transactions contemplated hereby;


 


50

















 


(vi)                            Brokers: 
Citi Commerce has not employed and is not subject to any valid Claim
of any broker, finder, consultant or other intermediary in connection with the
transactions contemplated by this Agreement who will be entitled to a fee or
commission in connection with such transactions.


 


7.                                      Confidentiality
and Non-Disclosure:


 


(a)                              The
terms of this Agreement and all information provided pursuant to or in
connection with either Party’s performance under this Agreement, including
information concerning Accounts, Applicants and Cardholders (“Confidential
Information”) is confidential and proprietary to the Party providing the
Confidential Information (“Disclosing Party”) to the other Party (“Receiving
Party”).  Without limiting the
generality of the foregoing, the term Confidential Information includes
business strategies and plans, marketing plans, promotional materials,
promotional strategies, Cardholder Information and any other information or
materials relating to Cardholders (including behavioral, spending, statistical
and demographic information), Zale Customer Information and any other
information or materials relating to Zale customers (including behavioral,
spending, statistical and demographic information), and promotional
arrangements with third parties related to the Credit Cards.  The Cardholder Information, the Account
information of each Cardholder and any other information or materials relating
to Cardholders compiled by Citi Commerce (including behavioral, spending,
statistical and demographic information) is part of Citi Commerce’s file and
exclusive property.  The Zale Customer
Information, and information and materials relating to Zale customers compiled
by Zale (including behavioral, spending, statistical and demographic
information) are part of Zale’s file and exclusive property.  All Zale Customer Information is subject to
and shall be treated in accordance with the Privacy Laws.  Notwithstanding the foregoing, Confidential
Information will not include information which:


 


(i)                                   is
or hereafter becomes part of the public domain through no unauthorized act of
the Receiving Party;


 


(ii)                                is
rightfully received from a third party without any duty of confidentiality to
the Disclosing Party;


 


(iii)                           is
independently developed by the Receiving Party without use of or reference to
the Disclosing Party’s Confidential Information; or


 


(iv)                            is
disclosed pursuant to a requirement of Applicable Law.


 


If the Receiving Party asserts that any
exception set out in the preceding sentence allows the disclosure of any
Confidential Information, it will promptly submit to the Disclosing Party
written documentation demonstrating the applicability of the claimed exception.


 


(b)                               The
Receiving Party will not use any Confidential Information provided by the
Disclosing Party for any purposes other than as permitted or required under
this 


 


51

















 


Agreement and will
not accumulate in any way or make use of the Disclosing Party’s Confidential
Information for any other purpose, including the marketing or cross-selling of
any program, other than as authorized by the Disclosing Party.


 


(c)                                Without
the express written consent of the Disclosing Party, the Receiving Party will
not disclose or provide access to, directly or indirectly, and will not add to,
modify, append, or alter in any way any Confidential Information provided by
the Disclosing Party or any of the terms of this Agreement to any Person, with
the exception of disclosure to any Affiliate, Representative, or Contractor
that has a need to know, for the purposes of complying with its obligations
hereunder, the specific Confidential Information and that has agreed to keep
confidential such Confidential Information. 
In doing so, the Receiving Party will notify the Disclosing Party of the
name of the Person to whom any Confidential Information was provided, the date
of the disclosure, a description of the Confidential Information so provided,
and the purpose for the disclosure.


 


(d)                               The
Receiving Party will take reasonable measures, using the same care taken by
such Party to safeguard its own confidential and proprietary information (but
in no event less than reasonable care), to prevent unauthorized disclosure by
its Representatives and Contractors of any Confidential Information.


 


(e)                                Upon
the termination of this Agreement, the Receiving Party will, upon reasonable
request from the Disclosing Party, return or destroy all Confidential
Information provided by the Disclosing Party, including any summaries thereof,
and all copies and duplicates thereof (in whatever form maintained).  Each Party may retain a single copy of all
such Confidential Information for the term of any applicable statute of
limitations under Applicable Law, after which such Confidential Information
will be destroyed or returned to the Disclosing Party at such Disclosing Party’s
option.


 


(f)                                  Neither
Party will disclose, distribute or otherwise use any Confidential Information
that is personal information of a Person if the Party knows or has reason to
believe that such Person has not consented to any such disclosure, distribution
or use, or has withdrawn his or her consent to any such disclosure,
distribution or use.  The Receiving Party
may assume, unless it knows otherwise, that any personal information of a
Person provided to such Receiving Party by the Disclosing Party was provided
with the informed consent of such Person to the disclosure, distribution and
use by such Receiving Party.


 


(g)                               The
Parties acknowledge that the Confidential Information provided by the
Disclosing Party constitutes confidential and proprietary information of the
Disclosing Party and that use or disclosure thereof by the Receiving Party or
any Representative or Contractor of such Receiving Party, other than in
accordance with the express terms of this Agreement or as otherwise authorized
in writing by a senior officer of the Disclosing Party, constitutes a material
breach of the Agreement or, after the termination of this Agreement, of such
Disclosing Party’s continuing rights.  In
such event, the Parties acknowledge that such Disclosing 


 


52

















 


Party may be
immediately and irreparably harmed, that money damages may not provide full and
appropriate relief, and that such Disclosing Party may therefore obtain an
order for appropriate injunctive relief.


 


(h)                               Each
Party acknowledges and agrees that any unauthorized disclosure of the other’s
Confidential Information and/or any Security Breaches or other breach
whatsoever in the Receiving Party’s security system (an “Incident”) may
cause irreparable harm to the other Party and that time is of the essence in
mitigating the effects of such harm. 
Accordingly, the Receiving Party shall immediately advise the Client
Relationship Team members of the Disclosing Party of the occurrence of an
Incident.  The Parties agree that the
provisions of Section 11. of this Agreement will apply to any
Losses suffered or incurred by the Disclosing Party as a result of the
occurrence of an Incident caused by the Disclosing Party or any of its
Affiliates or Representatives.


 


(i)                                   Except
as required by law or as otherwise expressly permitted herein, neither Party
will use the other Party’s name or the name of an Affiliate of the Party in any
advertisement or make any public statement or respond to any third-party
inquiry relating to the other Party or its Affiliates without obtaining the
other Party’s prior written consent. 
Neither Party nor any of its Representatives or Contractors will discuss
or disclose publicly or discuss with any third party the compensation terms of
the Agreement as between Citi Commerce and Zale (including Merchant Fees),
facts relating to the other Party’s marketing activities (including
expenditures), and possible future commitments of the Parties in connection
with the Private Label Program.


 


(j)                                   In
the event that either Party receives a subpoena, court order or other similar
process purporting to require it to disclose Confidential Information, it will
provide the other Party with written notice and documentation thereof as soon
as practicable, and will cooperate with the other Party in the event that such
other Party determines to seek a protective order or other remedy with regard
to such disclosure.


 


8.                                      Collection
and Use of Zale Credit Information:  From
time to time,


 


(a)                                Citi
Commerce may collect credit and other financially-related information
(including information related to Zale’s transactions) about Zale (“Zale
Credit Information”) from Zale, from service arrangements Zale has made
with or through Citi Commerce, from credit bureaux and other financial
institutions, from credit grantors and from references Zale has provided to
Citi Commerce;


 


(b)                               Citi
Commerce may use Zale Credit Information as follows:


 


(i)                                   Upon
obtaining Zale’s prior written consent, which shall be given or withheld in
Zale’s sole discretion, make it available to credit bureaux, financial
institutions, or Persons with whom Zale has or may have financial or other
business dealings,


 


53

















 


(ii)                                to
assess Zale’s financial situation,


 


(iii)                             to
provide Zale with the services it receives from Citi Commerce, and


 


(iv)                            give
it to anyone who works with or for Citi Commerce, but only as needed for
providing the services Zale receives from Citi Commerce;


 


(c)                                Citi
Commerce may also use Zale Credit Information for the following purposes, (so
long as Zale has given its prior written approval to do so):


 


(i)                                   to
promote its services to Zale and add it to client lists Citi Commerce prepares
and uses for this purpose, and


 


(ii)                                to
share it with other Citigroup companies (where the law allows this) so that
they may promote their services
to Zale.


 


Zale may tell Citi Commerce to stop using
Zale Credit Information in the ways described in Section 8.(c) at
any time by giving notice in writing to Citi Commerce and Citi Commerce will
comply with the notice within ten (10) Business Days of receipt of that notice.  Citi Commerce acknowledges that the use of
Zale Credit Information in the ways described in Section 8.(c) is
at Zale’s option and that Zale will not be refused credit or other services just because it has told Citi Commerce
to stop using it in those ways.


 


For the purposes of Section 8.(c)(ii),
other Citigroup companies include Affiliates of Citi Commerce which are engaged
in the business of providing any one or more of the following services to the
public in Canada:  deposits, loans and
other commercial or personal financial services; credit, charge and payment
card services; insurance services.


 


If Zale is no longer a client of Citi
Commerce or this Agreement terminates, Citi Commerce may keep Zale Credit
Information in its records for so long and only for so long, as it is needed
for the purposes described in Section 8.(b) hereof so long as
such Zale Credit Information is not disclosed to any third party without Zale’s
prior written consent.


 


9.                                      Trademark Licensing and
Related Matters:  With
respect to the licensing, use and display of Zale Marks, and the review and
approval of Zale Branded Materials and Zale marketing initiatives, Citi
Commerce, Zale and TXDC agree together as follows:


 


(a)                                Grant
of License to Citi Commerce:  Subject
to the provisions of this Section 9., Zale and, to the extent
applicable, TXDC hereby grant to Citi Commerce a nonexclusive, limited and
terminable license to use the Zale Marks during the term of this Agreement in
connection with, and solely in connection with, the activities contemplated
herein with respect to the Private Label Program and the marketing of Ancillary
Products and Services (but not Credit Insurance) to Cardholders using the
Cardholder List.  In the event Zale or an
Affiliate uses or proposes to use any new or additional trade names,
trade-marks, service marks and associated trade dress licensed to or owned by
Zale or an Affiliate in connection with Zale’s specialty jewellery or other
businesses in Canada, Zale or, 


 


54

















 


to the extent
applicable, TXDC will grant to Citi Commerce pursuant to this Section 9.
a non-exclusive, limited and terminable license to use such new or additional
Zale Marks during the term of this Agreement for the purpose of the Private
Label Program (including the marketing of Ancillary Products and Services, but
not Credit Insurance), and such license will be governed by the terms and
conditions of this Agreement.  The license(s) granted
to Citi Commerce hereby will be exclusive for purposes of issuing, marketing,
promoting, offering or servicing of Credit Cards, Accounts and Cardholders
under the Private Label Program within Canada, and will be exclusive for the
marketing of Ancillary Products and Services (but not Credit Insurance) to
Cardholders using the Cardholder List. 
During the term of this Agreement, Zale or an Affiliate will not grant
to any other Person (except Authorized Sales Channels) any license to use the
Zale Marks for purposes of the issuance, marketing, promoting or offering of
credit cards within Canada.  The licenses
granted to Citi Commerce pursuant to this Section 9. are personal
and will not be assignable or transferable, by operation of law or otherwise,
without the prior written consent of Zale; provided, however,
that Citi Commerce may assign to an Affiliate any license granted hereunder
without the consent of Zale or TXDC in accordance with the assignment
provisions of Section 18.(f).


 


(b)                               Review
and Approval of Zale Branded Materials: 
Any goods, services, Solicitations, Cardholder communications,
presentations or other marketing materials bearing a Zale Mark (“Zale
Branded Materials”) will be submitted to Zale for its prior review and
approval pursuant to the provisions of this Section 9.(b).  Zale will be entitled to review Zale Branded
Materials for compliance with its corporate trade-mark standards and may
disapprove the use of the Zale Marks on such materials to the extent that use,
in the reasonable opinion of Zale, does not comply with its corporate
trade-mark standards or if Zale reasonably determines that such materials are
inconsistent with its corporate image or may otherwise cause harm to Zale.  Citi Commerce will not be required to submit to
Zale for its review and approval Zale Branded Materials to the extent that
substantially similar Zale Branded Materials have been previously approved by
Zale unless a specific request for such review and approval is made by Zale.


 


Zale must respond to any request for approval
of Zale Branded Materials within four (4) Business Days following receipt
of such request from Citi Commerce or Citi Commerce will be deemed to have
approved such materials.


 


(c)                                Review
and Approval of Zale Marketing Initiatives: 
Any solicitations or other marketing materials related to Zale marketing
initiatives contemplated pursuant to Section 3.(g), or any other
marketing initiatives proposed by Zale related to Credit Cards, will be
submitted to Citi Commerce for its prior review and approval, which approval
will not be unreasonably withheld or delayed. 
Citi Commerce must respond to any request for approval of such
solicitation or marketing materials within five (5) Business Days (within
ten (10) Business Days for French language materials) following receipt of
such request from Zale.


 


55
















 


10.                               Reviews
and Audits:


 


(a)                                Each
Party will maintain true and complete books of account at its premises
containing an accurate record of all data necessary to ascertain the proper
implementation of this Agreement including, without limitation, the computation
of payments due by Citi Commerce and all expenditures required of both Parties
hereunder.  To verify compliance with
this Agreement, either Party or its authorized Representatives and Contractors
will have the right, at such Party’s sole expense, to conduct performance
audits at the other Party’s premises. 
Each Party may conduct such audit (i) on an annual basis (except,
with respect to Zale, during the months of November and December and
the first month following Zale’s fiscal year end and, with respect to Citi
Commerce, during the first two (2) months after Citi Commerce’s fiscal
year end), and (ii) after each reasonably substantiated notice by Zale or
Citi Commerce that such Party reasonably believes the other Party has
materially failed to comply with its obligations hereunder.  The auditing Party will give the other Party
advance notice of any audit, and the Parties will schedule, within five (5) Business
Days from the date of the notice, a mutually convenient time at which such
audit may commence.  In addition, each
audit will be conducted during the audited Party’s normal business hours and in
a manner which will not materially interfere with its business.  The audit may include inspection and review
of such aspects of the audited Party’s business practices as are related to
such Party’s implementation of this Agreement. 
The audited Party will cooperate fully with the auditing Party and will
give such Party and its auditors reasonable access to its premises for
conducting an audit.  Such cooperation
will include the maintenance of true and complete books of account and other
appropriate records, containing an accurate record of all expenditures by the
audited Party required hereunder.


 


(b)                               Without
limiting the foregoing, in the event either Party believes in good faith there
may exist a security breach by the other Party with respect to any Cardholder
Information, Personal Information or Confidential Information (a “Security
Breach”), such Party or its designated Representatives and Contractors will
have the right to conduct a reasonable security investigation of the Private
Label Program-related operations, facilities, systems, and personnel directly
relating to the suspected Security Breach upon three (3) Business Days
prior written notice to the Party to be audited (which notice will describe in
reasonable detail the suspected Security Breach) for the purpose of protecting
against possible unauthorized or irregular activity with respect to wrongful
disclosure or use of Cardholder Information, Personal Information or
Confidential Information.  Any such
investigation will be coordinated with the audited Party’s Privacy Officer and
may include procedures to control, police, and monitor access to Cardholder
Information, Personal Information or Confidential Information and other matters
relating to the security, accessibility, vulnerability, or integrity of
Cardholder Information, Personal Information or Confidential Information or
databases from which such Cardholder Information, Personal Information or
Confidential Information can be derived or obtained.  The audited Party will provide the full
cooperation of its Representatives and Contractors in the conduct 


 


56

















 


of any such
investigation; provided, however, that each such investigation will be
conducted during such Party’s normal business hours and in a manner which will
not materially interfere with its business. 
The auditing Party will pay to the audited Party the reasonable costs
incurred by such Party in cooperating in the conduct of an investigation
pursuant to this Section 10.(b) to the extent the
investigation is not the first investigation conducted by such Party in the
then current calendar year, and the investigation does not reveal a material
Security Breach by the audited Party.


 


(c)                                If
any audit or security investigation under this Section 10. leads
the auditing Party to conclude that the audited Party has breached the
provisions of this Agreement, or that any of its business practices related to
its implementation of this Agreement or administration of the Private Label
Program presents a risk of unauthorized use or disclosure of Cardholder
Information, Personal Information or Confidential Information, the audited
Party will use commercially reasonable efforts to change such business
practices promptly to the reasonable satisfaction of the auditing Party, and
provide such Party with regular status reports until resolution of the problem.


 


(d)                               Citi
Commerce agrees, upon Zale’s request from time to time but no more frequently
than once during any consecutive twelve (12) month period, to deliver to Zale a
certification of an officer of Citi Commerce (i) as to the date on which
the last internal controls audit of Citi Commerce was conducted with respect to
the Private Label Program, and (ii) whether such audit revealed any
default by Citi Commerce hereunder (and, if so, a reasonable description of
such default) or contained any information which would suggest that Citi
Commerce is not capable of performing its obligations hereunder and, if so, the
reasonable details regarding such information.


 


(e)                                Zale
agrees, upon Citi Commerce’s request from time to time but no more frequently
than once during any consecutive twelve (12) month period, to deliver to Citi
Commerce a certification of an officer of Zale (i) as to the date on which
the last internal controls audit of Zale was conducted with respect to the
Private Label Program, and (ii) whether such audit revealed any default by
Zale hereunder (and, if so, a reasonable description of such default) or
contained any information which would suggest that Zale is not capable of
performing its obligations hereunder and, if so, the reasonable details
regarding such information.


 


(f)                                  Apart
from the audits provided for in Section 10.(a) and Section 10.(b),
Zale may undertake one (1) or more operational site visits of the
operations and facilities of Citi Commerce related to the operation of the
Private Label Program throughout each year, the timing of each such visit to be
mutually agreed to by the Parties.


 


(g)                               For
purposes of assisting Zale and its auditors, Citi Commerce will make available,
upon reasonable advance notice in writing, a designated Person from Citi
Commerce’s internal auditing department (or another appropriate employee 


 


57

















 


or outside
accountant) for the purpose of reviewing Citi Commerce’s internal controls in
connection with the subject matter of this Agreement.  For purposes of assisting Citi Commerce and
its auditors, Zale will make available, upon reasonable advance notice in
writing, a designated Person from Zale’s internal auditing department (or
another appropriate employee or outside accountant) for the purpose of
reviewing Zale’s internal controls in connection with the subject matter of
this Agreement.


 


11.                               Indemnification:


 


(a)                                Indemnification
by Zale:  Subject to any limitations
on Zale’s liability as provided for in this Agreement, Zale will indemnify and
hold harmless Citi Commerce and its Affiliates, and their respective
Representatives, from and against any Losses arising from or by reason of or
related to:


 


(i)                                   any
acts or omissions by Zale or any of its Affiliates or its Contractors or agents
(including any fraudulent, deliberate or criminal acts or omissions) in the
performance of this Agreement or the breach by Zale of any of its
representations, warranties, covenants or agreements herein contained; or


 


(ii)                                the
violation by Zale or any of its Contractors or agents of any Applicable Law;


 


provided that in no
event will Zale be obligated under this Section 11.(a) to
indemnify or hold harmless Citi Commerce or any of its Affiliates, or their
respective directors, officers, employees, insurers or agents, for any Losses
which result from the negligent or willful omissions or acts of Citi Commerce
or any of its Affiliates, or any of their respective Representatives or
Contractors.


 


(b)                               Indemnification
by Citi Commerce:  Subject to any
limitations on Citi Commerce’s liability as provided for in this Agreement,
Citi Commerce will indemnify and hold harmless Zale and its Affiliates, and
their respective Representatives, from and against any Losses arising from or
by reason of or related to:


 


(i)                                   any
acts or omissions by Citi Commerce or any of its Affiliates or its Contractors
or agents (including any fraudulent, deliberate or criminal acts or omissions)
in the performance of this Agreement or the breach by Citi Commerce of any of
its representations, warranties, covenants or agreements herein contained;


 


(ii)                                the
violation by Citi Commerce or any of its contractors, subcontractors or agents
of any Applicable Law; or


 


(iii)                             the
ownership or operation by Citi Commerce of the Accounts, Credit Cards,
Cardholder Lists, and the Cardholder Agreements;


 


58

















 


provided that in no
event will Citi Commerce be obligated under this Section 11.(b) to
indemnify or hold harmless Zale or any of its Affiliates, or their respective
directors, officers, employees, insurers or agents, for any Losses which result
from the negligent or willful omissions or acts of Zale or any of its
Affiliates, or any of their respective Representatives or Contractors, except
for Citi Commerce.


 


(c)                                Procedure
for Claims:  Whenever a claim arises
for indemnification under this Agreement, the Party claiming a right to
indemnification (the “Indemnified Party”) will promptly notify the Party
from whom the Indemnified Party is claiming indemnification (the “Indemnifying
Party”) of such claim and, when known, the facts constituting the basis for
such claim; provided that the failure to notify the Indemnifying Party
will not relieve the Indemnifying Party of any liability that it may have to
the Indemnified Party except to the extent the Indemnifying Party demonstrates
that it is prejudiced thereby.  In the
event of any such claim for indemnification resulting from or arising in
connection with a claim, suit or action by a third party, the Indemnifying Party
may (but need not) defend or participate in the defense of any such claim,
suit, or action.  The Indemnifying Party
will be entitled to select counsel and take all steps necessary in the defense
thereof; provided, however, that the Indemnified Party will have
the right, at its expense, to participate in any such defense with the counsel
of its choice but the fees and expenses of such counsel will be at the expense
of the Indemnified Party.  All fees and
expenses will be paid periodically as incurred. 
So long as the Indemnifying Party is in good faith defending such claim
or proceeding, the Indemnified Party will not compromise or settle such claim
without the prior written consent of the Indemnifying Party.  The Indemnifying Party will not without the
prior written consent of the Indemnified Party, effect any settlement of any
such claim unless such settlement includes an unconditional release of the
Indemnified Party from all Losses that are the subject of or constitute a
portion of such claim.  If the Indemnified
Party desires to compromise or settle any claim and gives written notice of
such settlement or compromise to the Indemnifying Party, but the Indemnifying
Party refuses to consent to such compromise or settlement, the Indemnifying
Party will indemnify the Indemnified Party for any Losses in excess of the
compromise or settlement proposed by the Indemnified Party without regard to
whether the Indemnified Party is otherwise entitled to such indemnification
under Section 11.(a) or Section 11.(b) of
this Agreement, as applicable.  If the
Indemnifying Party does not assume the defense of any such claim, suit or
action in accordance with this Section 11.(c), the Indemnified
Party may, at the Indemnifying Party’s expense, defend against such claim, suit
or action in such manner as it may deem appropriate, including, but not limited
to, settling such claim, suit or action (after giving prior written notice of
the same to the Indemnifying Party) on such terms as the Indemnified Party may
deem appropriate.  Any such settlement or
compromise of, or any final judgment or decree entered on or in, any claim,
suit or action which the Indemnified Party has defended in accordance herewith,
will be deemed to have been consented to by, and will be binding upon, the
Indemnifying Party as  fully as if the
Indemnifying Party had assumed the defense thereof and a final judgment or 


 


59

















 


decree had been
entered in such suit or action, or with regard to such claim, by a court of
competent jurisdiction for the amount of such settlement, compromise, judgment
or decree.  The Indemnified Party and the
Indemnifying Party will cooperate, without prejudice to any rights they may
have against each other, in the compromise or defense of any third party claim
that is not entirely subject to indemnification by a single Indemnifying
Party.  If, after the Indemnifying Party
elects to assume the defense of a claim, it is determined by dispute resolution
in accordance with Section 12. of this Agreement that the
Indemnified Party is not entitled to indemnification with respect thereto, the
Indemnifying Party will discontinue the defense thereof


 


(d)                               Subrogation:  In the event that Zale indemnifies Citi
Commerce (or any of its Affiliates or any of their respective directors,
officers, employees or agents) pursuant to Section 11.(a), or Citi
Commerce indemnifies Zale (or any of its Affiliates or any of their respective
directors, officers, employees or agents) pursuant to Section 11.(b),
the Indemnifying Party will be subrogated to any claims or rights of the
Indemnified Party as  against any
other Persons with respect to any amount paid by the Indemnifying Party under
this Section 11.  The
Indemnified Party will cooperate with the Indemnifying Party, at the expense of
the Indemnifying Party, in the assertion by the Indemnifying Party of any such
claims against such other Persons.


 


12.                               Dispute
Resolution:


 


(a)                                Resolution
of Disputes:  The Parties will make
all reasonable efforts to resolve any and all Disputes amicably through good
faith mutual consultation of the members of the Program Committee or other
appropriate officers of each Party.  The
consultations will include, at a minimum, two stages of negotiations, the first
of which will require the Program Committee members of both Parties and, if
necessary, the second of which will require the Executive Officer or other
designated senior officer of both Parties to engage in negotiations.


 


(b)                               Arbitration:  If a Dispute is not resolved by a unanimous
decision of the Program Committee members or, as applicable, the Executive
Officers or other designated senior officers of both Parties within thirty (30)
Business Days from the date the Dispute arose, then either Party may submit the
Dispute to Arbitration pursuant to Attachment I for the purposes of
determining whether a breach occurred and the Parties’ obligations in respect
of such breach, but not for the purpose of determining the specific course of
action required to be taken by a Party in order to remedy such breach.  The Dispute will not be made the subject
matter of any action in any court by any Party unless the Dispute has first
been submitted to Arbitration and finally determined by the arbitrator.  Any action commenced after the Arbitration
may only be for the purpose of enforcing the decision of the arbitrator and
recovery of the costs incidental to the action. 
In any action, the decision of the arbitrator will be conclusively
deemed to determine the interpretation of this Agreement and the rights and
liabilities as between the Parties in respect of the matter in Dispute.


 


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(c)                                Operating
Regulations/Service Level and Performance Standards Disputes:


 


(i)                                   Either
Party (in this Section 12.(c), the “Dissatisfied Party”)
may, at any time and from time to time, notify the other Party (in this Section 12.(c),
the “Other Party”) in writing that the Other Party is not performing one
or more of its obligations under this Agreement in accordance with the
Operating Regulations or the Service Level and Performance Standards.  In this notice, the Dissatisfied Party will
describe the nature of the breach and such details of the breach as it
reasonably has available.


 


(ii)                                Within
five (5) Business Days of delivery of a notice by the Dissatisfied Party
to the Other Party under Section 12.(c)(i), the Other Party will
notify the Dissatisfied Party that it either agrees that it was in breach, in
which case the provisions of Section 12.(a) will apply, or
that it disagrees that it was in breach.


 


(iii)                             If
the Other Party disagrees that it was in breach, then either Party may submit
its disagreement to such mutually acceptable Person as the Parties may mutually
agree from time to time, failing which such Person as is selected by
Arbitration (in this Section 12.(c), the “Facilitator”).  The Facilitator will hear the disagreement
within five (5) Business Days (or such longer period as both Parties may
agree) of either Party submitting the dispute to the Facilitator, during which
hearing each of Zale and Citi Commerce will be entitled to outline its
arguments and such facts as are related to the performance of its obligations
under this Agreement in accordance with the Operating Regulations or the
Service Level and Performance Standards. 
After hearing the arguments of both Parties, the Facilitator will
immediately determine whether the Other Party was in breach and, if so, will
suggest steps that the Parties may undertake to remedy the breach as the
Facilitator sees fit.


 


(iv)                            If
the Facilitator determines that the Other Party was in breach and recommends
corrective action by the Other Party, the Other Party will, within five (5) Business
Days after delivery of the Facilitator’s decision, either undertake this
corrective action or notify the Dissatisfied Party of the corrective action it
proposes to undertake to remedy the breach.


 


(v)                               Within
two (2) Business Days following receipt of the Other Party’s notice that
it plans to undertake a different remedy than that suggested by the
Facilitator, the Dissatisfied Party may notify the Other Party that it
disagrees with the Other Party’s remedy and may immediately submit the dispute
to resolution pursuant to Section 12.(a).  If the Dissatisfied Party either does not
respond within this two (2) Business Day period or notifies the Other
Party that it agrees with the Other Party’s suggested remedy, the Other Party
will immediately undertake the suggested remedy.


 


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(vi)                            Nothing
in this Section 12.(c) limits any other remedy that either
Party may have in law or in equity in respect of the other’s breach including,
but not limited to, any right to terminate this Agreement.


 


13.                               Events
of Default; Rights and Remedies:


 


(a)                                Events
of Default:  The occurrence of any
one or more of the following events (regardless of the reason therefor) will
constitute an “Event of Default” hereunder:


 


(i)                                   Non-Payment:  A Party fails to make payment when
due of any amounts (other than amounts subject to a bona fide dispute) in an outstanding
aggregate of at least One Million Dollars ($1,000,000.00) due and payable
pursuant to this Agreement and such failure remains unremedied for a period of
two (2) Business Days after the non-defaulting Party has given written
notice thereof by facsimile transmission to the address for defaulting Party
specified in Section 18.(o). 
If the failure to pay referred to in this Section 13(a)(i) is
a result of an event of Force Majeure or other event that cannot be remedied
within such two (2) Business Day period, an Event of Default will not be
deemed to have occurred if the defaulting Party used commercially reasonable
efforts to initiate a cure within such time and the failure is completely cured
within, in the case of an event of Force Majeure, two (2) Business Days
after the Force Majeure event ceases and, in all other cases, ten (10) Business
Days from the date of written notice regarding such failure.


 


(ii)                                Non-Performance:  A Party fails to perform, satisfy
or comply with any material obligation, condition, covenant or other provision
contained in this Agreement or is in default under this Agreement and, in each
case, (1) such failure remains unremedied (if capable of being remedied)
for a period of thirty (30) days after the other Party has given written notice
thereof or, if the same cannot be cured in a commercially reasonable manner
within such time, the same will not constitute an Event of Default if the Party
has initiated a cure within such time and the failure is completely cured
within sixty (60) days from the date of written notice regarding such failure,
except if there is a second or subsequent failure of a similar nature within a
six (6) month period after the first failure, and the second or subsequent
failure is not cured within thirty (30) days after the date of written notice,
and (2) such failure will either have a material and adverse effect on the
Private Label Program or materially diminishes the economic value of the
Private Label Program to the other Party.


 


(iii)                             Representations Not True:  Any
representation or warranty contained in this Agreement is not true and correct
in any material respect as of the date when made, and both (1) the Party
making such representation or warranty fails to cure (if capable of being
cured) the event giving rise to such breach within thirty (30) days after the
other Party has given written notice 


 


62

















 


thereof or, if the
same cannot be cured in a commercially reasonable manner within such time, the
same will not constitute an Event of Default if the Party has initiated a cure
within such time and the failure is completely cured within sixty (60) days
from the date of written notice regarding such breach and (2) such failure
will either have a material and adverse effect on the Private Label Program or
materially diminishes the economic value of the Private Label Program to
another Party.


 


(iv)                            Intervention by Governmental Authority:  Any Governmental Authority having
jurisdiction over a Party orders the appointment of a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) of the
Party or of any substantial part of its properties, or orders the winding-up or
liquidation of the affairs of the Party, and such order is not vacated,
discharged, stayed or bonded within sixty (60) days from the date of entry
thereof.


 


(v)                               Consent to Proceedings:  A Party (1) consents to the
institution of proceedings specified in Section 13(a)(iv) or
to the appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or similar official) of the Party or any
substantial part of its properties or (2) takes corporate action in
furtherance of any such action.


 


(vi)                            Bankruptcy Petition:  A petition under the Bankruptcy Act or
similar law is filed against a Party and is not dismissed within sixty (60)
days.


 


(vii)                         Appointment of Receiver, Trustee, etc.:  The appointment of a receiver, manager,
trustee or receiver-manager in respect of the Party or of any substantial part of its property.


 


(viii)                      Bankruptcy Proceeding Against a Party:  The commencement of a case or proceeding
against a Party seeking a decree or order by a court having jurisdiction (1) for
relief in respect of a Party pursuant to the Bankruptcy Act or any other applicable
bankruptcy or other similar law in any jurisdiction in respect of itself, (2) for
appointment of a custodian, receiver, liquidator, assignee, trustee, or
sequestrator (or similar official) of the Party or of any substantial part of
its properties, or (3) ordering the winding-up or liquidation of the
affairs of the Party will be entered, and will not be vacated, discharged,
stayed or bonded within ten (10) days from the date of entry thereof


 


(ix)                              Bankruptcy Proceeding by a Party:  A Party (1) commences a proceeding
(including, without limitation, the filing of a petition, an assignment, a
proposal or a notice of intention to make a proposal) under the Bankruptcy Act
or any other similar law in any jurisdiction in respect of itself, (2) consents
to the institution of proceedings pursuant thereto or to the filing of any such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar 


 


63

















 


official) of the
Party or any substantial part of its properties, or (3) takes corporate
action in furtherance of any such action.


 


(x)           Unenforceability of Provisions:  Any provision of this Agreement ceases to
be enforceable against any Party obligated thereunder and such cessation will
either have a material and adverse effect on the Private Label Program or will
materially diminish the economic value of the Private Label Program to the
other Party.


 


(xi)          Material Adverse Change:  There is a Material Change affecting a
Party that will have a material and adverse effect on the Private Label Program
or will materially diminish the economic value of the Private Label Program to
the other Party.


 


(xii)                           Failure to Maintain Fixed Charge Ratio:  The ultimate parent legal entity owning
or controlling Zale fails to maintain a Fixed Charge Ratio of at least 1.60 for
two (2) consecutive fiscal quarters.


 


(xiii)                        Exit from Canadian Retail Market:  Zale has sold to an unrelated third
party, de-Branded or discontinued the operation of Twenty Percent (20%) or more
of its Stores in Canada.


 


(xiv)                       Change of Control:


 


(1)                                In
the case of Zale, unless the prior written approval of Citi Commerce is
obtained, there is a sale by the shareholders of Zale of all or substantially
all of the outstanding shares of Zale, or by Zale of all or substantially all
of the assets of Zale, in either case, to a Person which is not an Affiliate of
Zale; and


 


(2)                                In
the case of Citi Commerce, unless the prior written approval of Zale is obtained
or as otherwise permitted in this Agreement, there is a sale:


 


(I)                                  by
the shareholder of Citi Commerce of all or substantially all of the outstanding
shares of Citi Commerce, or by Citi Commerce of all or substantially all of the
assets of Citi Commerce to a Person which is not an Affiliate of Citi Commerce;
or


 


(II)                              by
Citi Commerce of all or substantially all of its rights and interests in the
Private Label Portfolio to any Person which is not an Affiliate of Citi
Commerce.


 


(b)                               Remedies
for Events of Default:  In addition
to, and without prejudice to, any other rights or remedies available to the
Parties at law or in equity, including, without limitation, any rights to
damages, the following remedies will be available provided that the
non-defaulting Party provides notice to the defaulting 


 


64

















 


Party of the Event
of Default and of its exercise of that non-defaulting Party’s rights set out
below within thirty (30) days of the date on which the non-defaulting Party
first becomes aware of the occurrence of the Event of Default:


 


(i)                                   Interest: 
Upon the occurrence of an Event of Default, the non-defaulting Party
will be entitled, in addition to its remedies under Sections 13.(b)(ii) or
13.(b)(iii), to collect any amount indisputably in default plus
interest, equal to the Prime Rate plus two percent (2%) divided by
three-hundred-and-sixty-five (365) multiplied by the number of twenty-four hour
periods such amounts are in default multiplied by the value of any such
amounts, payable in arrears on demand and compounded monthly on the last day of
each calendar month.


 


(ii)                                Citi Commerce
Event  of Default:  Upon the occurrence of a Citi Commerce
Event of Default that continues beyond all applicable grace periods, Zale may,
at Zale’s option, terminate this Agreement and the rights of Citi Commerce
under this Agreement.


 


(iii)                             Zale Event of Default:  Upon the occurrence of a Zale Event of
Default that continues beyond all applicable grace periods, Citi Commerce may,
at its option, (1) cease establishing new Accounts and/or making advances
or generating new Receivables on existing Accounts, or (2) terminate this
Agreement and the rights of Zale under this Agreement.


 


(c)                                Force
Majeure:  No delay or failure in
performance by any Party of its obligations under this Agreement will
constitute an Event of Default of that Party or give rise to any Claim for
Loss, or Losses by any other Party if, and to the extent, such delay or failure
is caused by Force Majeure.  Unless such
Force Majeure substantially frustrates performance of either Party’s
obligations, Force Majeure will not operate to excuse, but only to delay,
performance.


 


If any Party is delayed in the performance of
its obligations under this Agreement by Force Majeure, such Party will promptly
notify the other Party with full particulars of such event or cause.  The Parties will make reasonable efforts to
minimize the effects of Force Majeure.


 


14.                               Term
and Termination:


 


(a)                                Term:  This Agreement will continue in full force
and effect during the Initial Term and will be renewed automatically for
successive Renewal Terms thereafter, unless this Agreement is terminated or not
renewed as a result of any of the following:


 


(i)                                   a
Party provides written notice to the other Party no less than two hundred and
seventy (270) days prior to the end of the then current Term that that Party
does not desire to renew this Agreement;


 


65
















 


(ii)                                a
Party provides written notice to the other Party that an Event of Default has
occurred and has continued beyond all applicable grace periods with respect to
a defaulting Party under Section 13. or


 


(iii)                             a
Party provides written notice to the other Party that that this Agreement is
otherwise terminated or not renewed in accordance with the terms of this
Agreement.


 


(b)                               Termination:


 


(i)                                   Event of Default:  Notwithstanding the provisions of Section 13.(b),
upon the occurrence of an Event of Default under Sections 13.(a)(iv) to
13.(a)(xiv) of this Agreement (during the Initial Term or any Renewal
Term), at the option of a non-defaulting Party, this Agreement may be
terminated upon thirty (30) days prior written notice to the defaulting Party.


 


(ii)                                Changes in Laws Affecting Citi Commerce:  If any Governmental Authority with
legislative, rulemaking, or judicial authority enacts a rule or law or
issues an order which in Citi Commerce’s good faith opinion acting reasonably
when compared to comparable providers of private label credit card programs in
Canada, will prevent Citi Commerce from engaging in any material activity
required under this Agreement, or which materially restricts Citi Commerce’s
ability to price, bill and collect on private label credit card accounts
(including Accounts), or otherwise operate its private credit card business
(including the Private Label Program), Citi Commerce may terminate this
Agreement effective immediately upon providing not less than sixty (60) days
prior written notice of termination to Zale.


 


(iii)                             Changes in Laws Affecting Zale:  If any Governmental Authority with
legislative, rulemaking, or judicial authority enacts a rule or law or
issues an order which in Zale’s good faith opinion will prevent Zale from
engaging in any material activity required under the Agreement, or which
materially restricts Zale’s ability to participate in the Private Label
Program, Zale may terminate this Agreement effective immediately upon providing
not less than sixty (60) days prior written notice of termination to Citi
Commerce.


 


(iv)                            Changes Affecting Citi Commerce:  In the event there is (1) any
Material Change to the operation or nature of Zale’s Brand Name businesses in
Canada (which includes the sale of Authorized Goods and Services) that
substantially and adversely affects the growth or maintenance of the number of
Accounts and is likely to cause Citi Commerce substantial harm or (2) any
Approved Sales Channel ceases to accept Credit Cards for purchases of
Authorized Goods and Services, Citi Commerce may 


 


66

















 


terminate this Agreement upon one hundred twenty (120)
days prior written notice to Zale.


 


(v)                               Changes Affecting Zale:  In the event there is any substantial
change to the Pricing and payment terms on Accounts (including the terms set
out in Attachment M) or other material terms of the Private Label
Program or the servicing of the Accounts (excepting in all cases any change
required by Applicable Law or a change in Citi Commerce credit policy, as
described in Section 2.(b)(i)), that substantially and adversely
affects the growth or maintenance of the number of Accounts in the Private
Label Program and is otherwise likely to cause Zale substantial harm, Zale may
terminate this Agreement upon one hundred twenty (120) days prior written
notice to Citi Commerce.


 


(c)                                Effects
of Termination:  Upon any termination
of this Agreement, the Parties will have all the rights and remedies described
herein.  No termination of this Agreement
will affect the rights or obligations of either Party which have or may have
arisen or occurred prior to the effective date of such termination.  For greater certainty, upon termination of
this Agreement, all amounts payable by Zale to Citi Commerce, or by Citi
Commerce to Zale, will continue to be due and payable in full accordance with
this Agreement without demand or notice of any kind.  Upon such termination of this Agreement, all
obligations of the Parties under this Agreement will cease, except that any
provision of this Agreement which must survive termination to be given effect
shall so survive such termination, including, without limitation, the
following:  Section 2.(h), Section 2.(i),
Section 2.(j), Section 6.(a)(ii), Section 6.(a)(ix),
Section 6.(b)(ii), Section 6.(b)(viii), Section 6.(c),
Section 6.(d), Section 7., Section 11., Section 13.(b),
Section 14.(c), Section 18.(h), Section 18.(n),
Section 18.(q), Section 18.(r), Section 18.(t),
Section 18.(u) and Section 18.(w).


 


15.                             Option
to Purchase:


 


(a)                                Purchase
Option:  In the event of the
termination, non-renewal or expiration of this Agreement pursuant to any of the
provisions of this Agreement other than pursuant to Section 14.(b)(i) of
this Agreement resulting from a Zale Event of Default, Zale has the option (the
“Purchase Option”) to purchase, or to arrange for an Affiliate of Zale
or for a third party to purchase, the Purchase Assets (as defined in Section 16.(a))
at an aggregate purchase price determined in accordance with Section 15.(b) (the
“Purchase Price”).


 


The Purchase Option granted by this Section 15.(a) will
terminate on the earlier of the date on which Zale delivers to Citi Commerce a
notice that Zale does not intend to exercise such Purchase Option and (i) in
the case of the termination, non-renewal or expiration of this Agreement
pursuant to Section 14.(a)(i) or Section 14.(a)(iii),
no less than one hundred and twenty (120) days prior to the end of the
then-current Term, and (ii) in the case of termination of this Agreement 


 


67

















 


pursuant Section 14.(a)(ii) (in
the case of a Citi Commerce Event of Default) and Section 14.(b),
one hundred and twenty (120) days after the date of such notice.


 


(b)                               Calculation
of Purchase Price:  Any purchase of
the Purchase Assets pursuant to this Section 15. will be at a
Purchase Price to be agreed upon by Citi Commerce and Zale; provided, however,
that if Citi Commerce and Zale cannot so agree upon a Purchase Price for such
Purchase Assets within ten (10) Business Days following notice of the
exercise of the Purchase Option by Zale to Citi Commerce pursuant to Section 15.(a),
the Purchase Price will be the value to Citi Commerce, as determined using a
discounted cash flow methodology, of the outstanding Receivables on a going
concern basis (the “Fair Market Value”) as of the date of scheduled
transfer arrived at by a neutral, independent public accounting firm which does
not represent either of the Parties or any of their Affiliates, and which is
qualified to provide valuation services similar to those to be provided
hereunder (the “Designated Third Party”), the identity of which
Designated Third Party will be agreed upon by Citi Commerce and Zale.  Citi Commerce and Zale agree to provide the
Designated Third Party with such information as is reasonably necessary to
assist in such valuation.  Such
information will be deemed to be Confidential Information of the disclosing
Party, provided that Zale may share the results of such valuation with a bona
fide prospective purchaser of all or any portion of the Purchase Assets, and,
provided further, that such prospective purchaser first executes a reasonable
confidentiality and non-disclosure agreement in favour of the owner of such
information.  The expense of such valuation
by the Designated Third Party will be shared equally by Citi Commerce and
Zale.  The “discounted cash flow
methodology” used to calculate the Fair Market Value assigned to the
outstanding Purchase Assets will employ a discount rate based on the then
current Prime Rate.  It is also
understood and agreed by the Parties that, in determining the Fair Market Value
for the Purchase Assets, any Accounts aged over one-hundred-and-eighty (180)
days past due or any ineligible Receivables which include any Receivable which
is not the legal, valid and binding obligation of a Cardholder by reason that,
as of the Purchase Date, such Cardholder, (i) is deceased, (ii) is a
minor under the laws of his/her province or territory of residence, (iii) is
not competent to enter into a contract or incur debt, (iv) is dissolved,
or (v) is the subject of any proceedings under the Bankruptcy Act, as
shown on the books and records of Citi Commerce, without bad debt reserves,
will be deemed to have a book balance and value of zero ($0.00).


 


(c)                                Assistance
Period:  If Zale exercises the option
granted in Section 15.(a), then the Term of this Agreement will be
automatically extended by a period (the “Assistance Period”) of not more
than six (6) months from the date of expiration, non-renewal or
termination.  Notwithstanding the
foregoing, each Party will be entitled to pursue any other remedy, in law or in
equity, available to it against the other including, without limitation,
seeking damages for breach of any provision of this Agreement.  Within thirty (30) days of the date upon
which Zale exercises the option granted in Section 15.(a), Citi
Commerce, Zale and the purchaser will agree on a closing date (the “Purchase
Date”) for the purchase transaction, which will occur within such six (6) month
Assistance Period.  During the period 


 


68

















 


commencing on the
original termination or expiry date and ending on the later of (i) the
Purchase Date, and (ii) the date (within the six (6) month Assistance
Period) upon which Zale and the purchaser notify Citi Commerce that its
assistance is no longer required, Citi Commerce will work with Zale and the
purchaser to enable the Accounts and the related Receivables to be converted to
the purchaser’s system.


 


The Parties further agree that, unless
otherwise agreed to in writing by both Parties, the closing of any of the
transactions contemplated by this Section 15. will not occur during
the period from November 1 of one year through March 1 of the following
year, but to the extent it would otherwise have occurred during such period,
they will occur instead on March 2.


 


16.                             Transfer
of Purchase Assets:


 


(a)                                Sale
of Purchase Assets:  On the Purchase
Date, Citi Commerce will sell, assign, and transfer to Zale, an Affiliate of
Zale, or any third party designated by Zale free and clear of all Liens, all of
the following assets of Citi Commerce and its Affiliates existing as of the
Purchase Date (collectively, the “Purchase Assets”):


 


(i)                                   all
Accounts (including related Account rights) as of the Purchase Date;


 


(ii)                                originals
or copies of all Private Label Card Documentation and the Retail Master Record
(other than legally privileged documents) relating to the Private Label Program
other than information, documents and materials:  (1) that are proprietary (which includes
credit ratings, credit reports, internal correspondence, marketing materials,
marketing plans, plans and budgets relating to the Private Label Program), (2) that
are  not required to run the Private
Label Program, (3) that are not required to be kept or are required to be
kept confidential by Citi Commerce, or (4) that are in the possession of a
Cardholder or a third party;


 


(iii)                             any
contracts with Contractors related to the Accounts or to the Credit Cards
requested to be assigned by Zale, provided that such contracts (1) are not
with Affiliates of Citi Commerce and do not also apply or relate to services
provided by a Contractor in relation to accounts other than the Accounts or
credit cards other than the Credit Cards, or (2) are not assignable or are
not assignable without the consent of the related third party which consent is
not provided; and


 


(iv)                            all
pending Applications.


 


(b)                               Contractors:  In connection with the sale of the Purchase
Assets, Citi Commerce will not be required to sell, assign or transfer any
contracts with Contractors related to the Accounts or to the Credit Cards
requested to be assigned by Zale that also apply or relate to services provided
by a Contractor in relation to accounts other than the Accounts or credit cards
other than the Credit Cards.  Citi
Commerce will, however, enter into a transitional services agreement with Zale,



 


69

















 


its Affiliate or
the purchaser, as the case may be, pursuant to which Citi Commerce will use
commercially reasonable efforts to provide, on a temporary basis only, such
Contractor services on terms and conditions agreed to by Zale and Citi
Commerce.


 


(c)                                Payment:  Zale will pay or will cause to be paid to
Citi Commerce the Purchase Price, in immediately available funds, on the
Purchase Date in consideration for the purchase of the Purchase Assets.


 


(d)                               Cooperation:  In the event of termination, expiration or
non-renewal of this Agreement, Zale and Citi Commerce will cooperate fully with
each other and make available to each other in a timely fashion such data and
other information as may be reasonably required, including providing access to
financial and other records of each of the Parties strictly relating to the
Private Label Program, for the preparation of any tax return, which will
include all returns, reports, declarations, designation, elections, notices,
filings, information returns, and statements filed in respect of Taxes (“Tax
Return”).  Any information obtained
pursuant to this Section 16.(d) will be treated as
Confidential Information, except as may be necessary in connection with the
filing of any Tax Returns or claims for refunds or in connection with any audit
or other proceeding.  Each Party will
provide cooperation and information required by this Section 16.(d) at
its own expense.


 


17.                             Liquidation
and Survival of Obligations:


 


(a)                                Liquidation
Right:  Upon any termination of this
Agreement and in the event that Zale does not, or is not entitled to, purchase
or arrange for the purchase of the Purchase Assets pursuant to Section 15.,
Citi Commerce will have the right during the Liquidation Period, in
addition to and retaining all other rights it may have under the terms of this
Agreement or Applicable Law:


 


(i)            to liquidate the
remaining Accounts in any lawful manner that may be expeditious, or
economically advantageous to Citi Commerce;


 


(ii)           to sell, transfer,
assign, or otherwise dispose of the remaining Accounts to a third party in any
lawful manner that may be expeditious, or economically advantageous to Citi
Commerce;


 


(iii)          to issue a replacement
or substitute card issued by Citi Commerce or an Affiliate of Citi Commerce,
provided that such card does not display any Zale Marks; and


 


(iv)          to use the right granted
to Citi Commerce pursuant to Section 18(c) of this Agreement.


 


Zale will accept and will cause all Approved
Sales Channels to accept the then-existing Credit Cards until the termination
or expiration of this Agreement.


 


70

















 


(b)                               Termination
of Agreement:  Except as otherwise
expressly provided herein, the expiration, non-renewal or termination of this
Agreement will in no way affect or impair the powers, obligations, duties,
rights and liabilities of Zale or Citi Commerce relating to any transaction or
event occurring prior to such expiration or termination.


 


18.                             Miscellaneous:


 


(a)                                Mutual
Covenants and Agreements:  Zale, TXDC
(to the extent applicable) and Citi Commerce herby agree that:


 


(i)            Co-operation:  Each of the Parties will co-operate fully
with the other of them in furnishing any information or performing any
reasonable action requested by such Party, which information or action is
necessary to the speedy and successful consummation of the transactions
specified in this Agreement.


 


(ii)           Other Required Information:  Each of the Parties will furnish to the
other all information concerning itself and its Affiliates as is required or
requested to be set forth by the other Party in any application or statement to
be filed with any Governmental Authority in connection with the regulatory
approval or review of the transactions contemplated in this Agreement.


 


(iii)          Applications:  Each of the Parties will cooperate in the
preparation of applications to any regulatory authorities that may have
jurisdiction for such approvals as may be required to be obtained to carry out
the transactions contemplated by this Agreement.  Such applications will be filed as soon as
practicable after the date of this Agreement, and each of the Parties will use
their reasonable commercial efforts to cause such applications to be approved;
provided, that the foregoing will not require a Party or any of its Affiliates
to commit to or effect the sale or other disposition of any of its or its
Affiliates’ assets or businesses or limit or restrict the operations of any
such businesses.


 


(iv)                              Further Assurances:  Each of the Parties will give such
further assurances to each other, produce, execute, acknowledge and deliver all
such acknowledgements and other instruments and take such further actions as
may be reasonably necessary and appropriate to carry out fully and effectively
the transactions contemplated in this Agreement.


 


(v)                                 Press Releases:  Zale and Citi Commerce each will obtain
the prior written approval of the other Party with regard to the substance and
timing of any press releases regarding the Private Label Program, which prior
approval will not unreasonably be withheld or delayed.  The foregoing notwithstanding, it is
understood that none of the Parties will be required to consult with the other
Party with regard to publications regarding the 


 


71

















 


Private Label
Program prepared solely by and for employees of Zale or Citi Commerce, or their
respective Affiliates, all of which may be issued without prior consultation
with, or the prior written consent of, the other Party.


 


(vi)                            Advice of Changes:  Each Party will promptly advise the other
in writing of any material fact which, if existing or known at the date hereof,
would have been required to be set forth or disclosed in or pursuant to this
Agreement or of any material fact which, if existing or known at the date
hereof, would have made any of the representations or warranties contained in
this Agreement untrue.


 


(vii)                         Contingency and Disaster Recovery Plans:  When requested by Citi Commerce, a
summary or portion of the Zale disaster recovery plan as it relates to the
Private Label Program, the REPOS Service and the Approved Sales Channels will
be provided by Zale to Citi Commerce at any time during the Term.  When requested by Zale, a summary or portion
of Citi Commerce’s disaster recovery plan as it relates to the Private Label
Program will be provided by Citi Commerce to Zale at any time during the Term:


 


To ensure that there is  no disruption of operations with
respect to each Party’s implementation of services to be provided under this
Agreement, each Party agrees to implement, when necessary, contingency and
disaster recovery plans.


 


Each Party will assign one or more technical
liaison(s) in its respective organization to respond to technical
inquiries and issues (including website and service related issues) of the
other Party relating to this Agreement.  Each Party’s technical liaison(s) will be
knowledgeable about the Private Label Program, will promptly respond to
inquiries from the other Party, and will use good faith efforts to resolve such
inquiries within two (2) Business Days.


 


(b)                               Sale
of Business by a Party:  In the event
that a Party transfers or disposes of any part of the business or businesses
carried on by it from time to time to any Person (the “Purchaser”), such
Party may, upon written notice to the other Parties, disclose any Confidential Information
that is the Confidential Information of the other Party and such Party to any
Purchaser or potential Purchaser who agrees in writing to keep such
Confidential Information confidential in accordance with the standards set out
in Section 7.; provided that, such Party may not disclose any such
Confidential Information to any Person who provides or any of whose Affiliates
provides services that are similar to the services performed by the other Party
under this Agreement without the prior consent of the other Party, such consent
not to be unreasonably withheld.


 


72

















 


(c)                                Use
of Zale’s Name:  From and after the
Effective Date, Citi Commerce may take any and all steps, in Zale’s name and on
its behalf, necessary or desirable in Citi Commerce’s opinion, reasonably
required to collect on or assist their designee to collect on any Account,
including, without limitation, endorsing Zale’s name on cheques and instruments
submitted by a Cardholder as payment on any such Account.


 


(d)                               Use
of Citi Commerce’s Name:  From and
after Zale’s exercise of the Purchase Option pursuant to Section 15.
of this Agreement, after a purchase by Zale (or its designee) of the Purchase
Assets, Zale may take any and all steps, in Citi Commerce’s name and on its
behalf, necessary or desirable in Zale’s opinion, reasonably required to
collect on or assist its designee to collect on any Account purchased by Zale
pursuant to Section 15. of this Agreement, including, without
limitation, endorsing Citi Commerce’s name on cheques and instruments submitted
by a Cardholder as payment on any such Account.


 


(e)                                Employees,
Representatives and Contractors:


 


(i)                                   Employees:  During the term of this Agreement,
no employee of Zale or a Contractor contracted by Zale other than those
expressly hired by Citi Commerce will be deemed to be an employee of Citi
Commerce.  No employee of Citi Commerce
or a Contractor contracted by Citi Commerce other than those expressly hired by
Zale will be deemed to be an employee of Zale.


 


(ii)                                Zale Representatives and Contractors:  Any Representative or Contractor that
Zale utilizes to implement this Agreement will: 
(1) comply with all applicable terms of this Agreement; and (2) except
with respect to employees, officers and directors of Zale, have entered into an
agreement with Zale establishing standards of care in the handling of
information that are consistent with the standards established by this
Agreement.  To the extent that any Zale
Representative or Contractor, excluding any Contractor or Representative
working onsite at Zale locations and employees, officers and directors of Zale,
will store or process any Cardholder Information, Zale will inform Citi
Commerce in advance of the identity of such Representative or Contractor and
such Representative or Contractor will execute a written agreement to comply
with the requirements of this Agreement and Applicable Laws, including the
Privacy Laws.  In addition, Citi Commerce
will have the right to consent to any Representative or Contractor, excluding
any Contractor or Representative working onsite at Zale locations or any
employees, officers or directors of Zale, who will store or process such
Cardholder Information; provided, however, that such consent (1) will not
be unreasonably withheld, and (2) will be deemed to be granted unless Citi
Commerce notifies Zale in writing of its disapproval of such Representative or
Contractor, as well as the grounds for its disapproval, within thirty (30) days
of the date Citi Commerce receives from Zale the 


 


73

















 


completed Security
Audit Questionnaire with respect to such Representative or Contractor.  Zale will remain primarily responsible to
Citi Commerce for the performance or non-performance of all of its
Representatives or Contractors who are utilized by Zale to implement this
Agreement and for their compliance with the applicable requirements of this
Agreement.  Citi Commerce will have the
right to require Zale to replace any such Representative or Contractor, except
with respect to employees, officers and directors of Zale, within thirty (30)
days of Citi Commerce’s notice for failure to perform in accordance with this
Agreement in the event that such Representative or Contractor fails to cure
such failure within ten (10) days of Citi Commerce’s notice.


 


(iii)                             Citi Commerce Representatives and Contractors:  Any Representative or Contractor that
Citi Commerce utilizes to implement this Agreement will:  (1) comply with all applicable terms of
this Agreement; (2) not take any action that would result in Zale being in
violation of the Zale Privacy Promise; and (3) have entered into an
agreement with Citi Commerce establishing standards of care in the handling of
information that are consistent with the standards established by this
Agreement.  To the extent that Citi
Commerce’s Representative or Contractor will store or process any Zale Customer
Information, Citi Commerce will inform Zale in advance of the identity of such
Representative or Contractor and such Representative or Contractor will execute
a written agreement to comply with the requirements of this Agreement and
Applicable Laws, including the Privacy Laws. 
In addition, Zale will have the right to consent to any Citi Commerce
Representative or Contractor, excluding any Contractor or Representative
working onsite at Zale locations or any employees, officers or directors of
Citi Commerce, who will store or process such Zale Customer Information;
provided, however, that such consent (1) will not be unreasonably
withheld, and (2) will be deemed to be granted unless Zale notifies Citi
Commerce in writing of its disapproval of such Representative or Contractor, as
well as the grounds for its disapproval, within thirty (30) days of the date Citi
Commerce receive from Zale the completed Security Audit Questionnaire with
respect to such Representative or Contractor. 
Citi Commerce will remain primarily responsible to Zale for the
performance or non-performance of all of its Representatives or Contractors who
are utilized by Citi Commerce to implement this Agreement and for their
compliance with the applicable requirements of this Agreement.  Zale will have the right to require Citi
Commerce to replace any such Representative or Contractor, except with respect
to employees, officers and directors of Citi Commerce, within thirty (30) days
of Zale’s notice for failure to perform in accordance with this Agreement;
provided, however, that such Representative or Contractor fails to cure such
failure within ten (10) days of Zale’s notice.


 


74
















 


(f)                                    Assignment:


 


(i)                                    No Assignment:  Except as permitted in this Section 18.(f),
no Party may assign its rights or benefits under this Agreement.  Each Party may assign all (but not less than
all) of its rights and benefits under this Agreement provided that:


 


(1)                                 the
assignment is made to an Affiliate of such Party;


 


(2)                                 such
Affiliate agrees to perform functions within guidelines established by such
Party; and


 


(3)                                such
Party will be responsible for functions performed by such Affiliate to the same
extent such Party would be responsible if it performed such functions itself.


 


(ii)                                 Assignment by Zale:  Subject to the provisions of this Section 18.(f)(ii) and
Section 13.(a)(xiv), Zale may assign all (but not less than all) of
its rights and obligations under this Agreement with the consent of Citi
Commerce which consent will not be unreasonably withheld or delayed if:


 


(1)                                the
assignment is to a purchaser of all or substantially all of the assets used by
Zale in its Brand Name business in Canada; and


 


(2)                              the
assignee undertakes to Citi Commerce to assume all of the obligations and
restrictions applicable to Zale under this Agreement.


 


Upon the
completion of such assignment, Zale will be relieved of its obligations arising
pursuant to this Agreement after the effective date of the assignment other
than the obligations contained in Section 2.(h) and Section 7.
of this Agreement.


 


(iii)                              Assignment by Citi Commerce:  Subject to the provisions of this Section 18.(1)(ii) and
Section 13.(a)(xiv), Citi Commerce may assign all (but not less
than all) of its rights, interests and obligations under this Agreement with
the consent of Zale which consent will not be unreasonably withheld or delayed
if:


 


(1)                                the
assignment is to a purchaser of all or substantially all of the private label
credit card business of Citi Commerce; and


 


(2)                                the
assignee undertakes to Zale to assume all of the obligations and restrictions
applicable to Zale under this Agreement.


 


Upon the
completion of such assignment, Citi Commerce will be relieved of its
obligations arising pursuant to this Agreement after the effective date of the 


 


75

















 


assignment
other than the obligations contained in Section 2.(h) and Section 7.
of this Agreement.


 


(g)                                Taxes:  All fees and other amounts payable pursuant
to this Agreement are exclusive of any applicable Taxes, which Taxes will be
paid by the Party required to pay such fees or other amounts at the same time
as the payment of such fees or other amounts, unless otherwise specified in
this Agreement.


 


(h)                                Non-Waiver:  No delay by a Party hereto in exercising any
of its rights under the Transaction Agreements, or partial or single exercise
of such right, will operate as a waiver of that or any other right.  The exercise of one or more of a Party’s
rights under this Agreement will not be a waiver of, or preclude the exercise
of any rights or remedies available to such Party under this Agreement or in
law or at equity.  Any waiver of a right
or remedy under this Agreement must be in writing and signed by the Party to be
bound by such waiver.


 


(i)                                    Amendment:  This Agreement may not be amended,
supplemented or otherwise modified except by a written instrument signed by
Citi Commerce and Zale.


 


(j)                                    Limitation
on Rights of the Parties:  Nothing
expressed or implied in this Agreement is intended or will be construed to
confer upon or give any Person, firm or corporation other than the Parties
hereto, their permitted successors or assigns, and their respective
shareholders any rights or remedies under or by reason of this Agreement or any
transaction specified in this Agreement.


 


(k)                                 Time
of the Essence:  Time is of the
essence in this Agreement.


 


(l)                                    Counterparts:  This Agreement may be executed in one or more
counterparts each of which will be an original, and all of which together will
constitute one and the same instrument.


 


(m)                              Severability:  Wherever possible, each provision of this
Agreement will be interpreted in such a manner as to be effective and valid
under Applicable Law, but if any provision of this Agreement is or becomes
prohibited by or invalid under Applicable Law, such provision will be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.


 


(n)                                Waiver
of Jury Trial:  The Parties hereto
waive all right to trial by jury in any action or proceeding to enforce or
defend any rights under this Agreement.


 


(o)                                Notices:


 


(i)                                    Addresses:  All notices, approvals, acceptances,
consents, directions and instruments required or permitted under this Agreement
will be in writing to the other Party and/or TXDC, as the case may be and will
be delivered in person or sent by telecopier or other similar form of
communications to the Parties and/or TXDC, as the case may be at the following
addresses:


 


76

















 


	
  If to Zale:

  	
  Zale Credit Services

  
	
   

  	
  901 West Walnut Hill Lane

  
	
   

  	
  Irving, Texas U.S.A. 75038

  
	
   

  	
  Attention:

  	
  Vice President, Credit Services

  
	
   

  	
  Facsimile:

  	
  (972) 580- 5123

  
	
   

  	
   

  	
   

  
	
  If to TXDC:

  	
  TXDC, L.P.

  
	
   

  	
  c/o Zale Credit Services

  
	
   

  	
  901 West Walnut Hill Lane

  
	
   

  	
  Irving, Texas U.S.A. 75038

  
	
   

  	
  Attention:

  	
  Vice President, Credit Services

  
	
   

  	
  Facsimile:

  	
  (972) 580- 5123

  
	
   

  	
   

  	
   

  
	
  If to Citi

  	
  Citi Commerce Solutions of Canada Ltd.

  
	
  Commerce:

  	
  One Toronto Street, Suite 1200

  
	
   

  	
  Toronto, Ontario Canada M5C 2V6

  
	
   

  	
  Attention:  Vice President,
  Client Development

  
	
   

  	
  Facsimile:  (416) 369-3652

  
	
   

  	
   

  
	
  With a

  	
  Citi Commerce Solutions of Canada Ltd.

  
	
  copy to:

  	
  One Toronto Street, Suite 1200

  
	
   

  	
  Toronto, Ontario Canada M5C 2V6

  
	
   

  	
  Attention:  General Counsel

  
	
   

  	
  Fax:  416-369-2362

  



 


(ii)                                Delivery:  Any notice, approval, acceptance,
consent, direction or instrument required or permitted under this Agreement
will:


 


(1)                                if
delivered, be deemed to have been given or made at the time of delivery; and


 


(2)                                if
sent by telecopier or other similar form of communication, be deemed to have
been given or made on the first Business Day following the day on which it was
sent.


 


(iii)                             Change of Address:  Any Party and/or TXDC, as the case
may be may give written notice of change of address in the same manner
described in this Section 18.(o), in which event all subsequent
written communications will be given to that Party and/or TXDC, as the case may
be at the changed address.


 


(p)                                Set-off:  Except as otherwise provided under this
Agreement, each of the Parties reserves the right to set-off any amounts that
remain owing, overdue and unpaid by one Party to the other Party against any
amounts that such Party owes to the other Party under this Agreement.


 


77

















 


(q)                                No
Joint Venture:  Nothing contained in
this Agreement will be deemed or construed by the Parties or any third  party
to create the relationship of principal and agent, partnership, joint venture
or of any association between Zale and Citi Commerce, and no act of either
Party will be deemed to create any such relationship.  Citi Commerce and Zale each agree to such
further actions as the other may request to evidence and affirm the
non-existence of any such relationship.


 


(r)                                   Obligations
Subject to Law:  Notwithstanding any
other provision of this Agreement, all of each Party’s obligations under this
Agreement will be subject to the Applicable Laws.


 


(s)                                 Continued
Liability for Goods and Services: 
Notwithstanding any other provision of this Agreement, (i) Zale
will remain liable under any agreement with any Cardholder that relates to the
Authorized Goods and Services purchased by such Cardholder and Zale will perform
all of its duties and obligations pursuant thereto to the same extent as if
this Agreement had not been executed; (ii) Citi Commerce will not have any
obligation or liability of any nature, secured or unsecured, whether fixed,
contingent or otherwise, with respect to any Authorized Goods and Services,
other than those arising in connection with the repossession of goods by Citi
Commerce or its Affiliates or designees and provided that Zale will retain all
rights it may have against any Person with respect to Authorized Goods and
Services manufactured or sold by such Person.


 


(t)                                   Entire
Agreement:  This Agreement supersedes
any other agreement, whether written or oral, that may have been made or
entered into by Zale and Citi Commerce (or by any officer or employee of either
of such Parties) relating to the matters contemplated hereby, and (together
with the other agreements, attachments, certificates and reports referred to in
this Agreement) constitute the entire agreement by the Parties related to the matters
contemplated hereby or therein.


 


(u)                                Binding
Effect; Effectiveness:  This
Agreement will be binding on and will inure to the benefit of the Parties
hereto and their respective successors and permitted assigns.


 


(v)                                Business
Ethics:


 


(i)                                  Each
Party hereto agrees to comply in all material respects with all Applicable Laws
applicable to any activities carried out by such Party under this Agreement.


 


(ii)                              Each
Party hereto agrees that all financial statements, billings and reports
rendered to the other Parties hereto under this Agreement will, to the best of
such Party’s knowledge, be true and correct.


 


(iii)                           Each Party hereto agrees to
notify the other Party hereto promptly upon the discovery of any instance where
the notifying Party fails to comply 


 


78

















 


with Section 18.(v)(i) or where the notifying Party
has reason to believe that data covered by Section 18.(v)(ii) is
no longer accurate and complete.


 


(w)                              Governing
Law:  This Agreement will be governed
by and construed and interpreted in accordance with the internal laws of the
Province of Ontario, without regard to principles of conflicts of laws.


 


(x)                                  Third
Party Beneficiaries:  Unless
specifically provided otherwise, nothing in this Agreement whether express or
implied, shall be deemed to confer on any Person, other than the Parties hereto
and their successors and permitted assigns, any right, obligation, remedy or
liability.  In addition to the foregoing
limitations on third party beneficiaries, TXDC will have no rights, remedies,
obligation or liabilities under this Agreement except those expressly granted
to TXDC in Section 9.


 


IN
WITNESS WHEREOF, the Parties have executed this
Private Label Credit Card Program Agreement as of the Effective Date.


 


	
  CITI COMMERCE SOLUTIONS OF CANADA LTD.

  	
   

  	
   

  	
  ZALE CANADA CO.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Bruce Clark

  	
   

  	
  By:

  	
  /s/ Rodney Carter

  
	
   

  	
  Name:

  	
  Bruce Clark

  	
   

  	
   

  	
  Name:

  	
  Rodney Carter

  
	
   

  	
  Title:

  	
  President

  	
   

  	
   

  	
  Title:

  	
  Group Senior Vice President

  
	
   

  	
   

  	
   

  	
   

  	
  & Chief Financial Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Diane Ferri

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Diane Ferri

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Vice President, Client
  Development

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TXDC, L.P.

  	
   

  	
   

  	
   

  
	
  By:  Zale
  Delaware, Inc., its general partner

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Rodney Carter

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Rodney Carter

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Group Senior Vice President &
  Chief Financial Officer

  	
   

  	
   

  	
   

  
								



 


(With respect to Section 9., and
as expressly granted in Section 18.)


 


79