Document:

EXHIBIT 10.30

 

Confidential
Treatment Requested.

 

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

 

CREDIT CARD PROGRAM AGREEMENT

 

by and among

 

THE NEIMAN MARCUS GROUP, INC.

 

BERGDORF GOODMAN, INC.

 

HSBC BANK NEVADA, N.A.

 

and

 

HOUSEHOLD CORPORATION

 

Dated as of June 8, 2005

 

 

Table of Contents

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I DEFINITIONS

  	
   

  	
  1

  
	
  1.1

  	
  Generally

  	
   

  	
  1

  
	
  1.2

  	
  Miscellaneous

  	
   

  	
  13

  
	
   

  	
   

  	
   

  
	
  ARTICLE II
  ESTABLISHMENT OF THE PROGRAM

  	
   

  	
  14

  
	
  2.1

  	
  Credit Program

  	
   

  	
  14

  
	
  2.2

  	
  Exclusivity.

  	
   

  	
  14

  
	
   

  	
   

  	
   

  
	
  ARTICLE III PROGRAM
  MANAGEMENT AND ADMINISTRATION

  	
   

  	
  16

  
	
  3.1

  	
  Program Objectives

  	
   

  	
  16

  
	
  3.2

  	
  Management Committee

  	
   

  	
  17

  
	
  3.3

  	
  Program Relationship
  Managers; Program Team

  	
   

  	
  21

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV PROGRAM
  OPERATIONS

  	
   

  	
  22

  
	
  4.1

  	
  Operation of the
  Program

  	
   

  	
  22

  
	
  4.2

  	
  Certain
  Responsibilities of the NMG Companies

  	
   

  	
  22

  
	
  4.3

  	
  Certain
  Responsibilities of Bank

  	
   

  	
  24

  
	
  4.4

  	
  Ownership of Accounts;
  Account Documentation

  	
   

  	
  24

  
	
  4.5

  	
  Branding of
  Accounts/Credit Cards/Cardholder Documentation/Solicitation Materials

  	
   

  	
  26

  
	
  4.6

  	
  Underwriting and Risk
  Management

  	
   

  	
  26

  
	
  4.7

  	
  Cardholder Terms.

  	
   

  	
  27

  
	
  4.8

  	
  Internet Services.

  	
   

  	
  27

  
	
  4.9

  	
  Sales Taxes

  	
   

  	
  28

  
	
  4.10

  	
  Participation in
  Reversals

  	
   

  	
  29

  
	
  4.11

  	
  Interest Free Accounts

  	
   

  	
  29

  
	
   

  	
   

  	
   

  
	
  ARTICLE V MARKETING

  	
   

  	
  30

  
	
  5.1

  	
  Promotion of Program

  	
   

  	
  30

  
	
  5.2

  	
  Marketing Commitment

  	
   

  	
  30

  
	
  5.3

  	
  Communications with
  Cardholders.

  	
   

  	
  31

  
	
  5.4

  	
  Additional Marketing
  Support.

  	
   

  	
  31

  
	
  5.5

  	
  Approved Ancillary
  Products

  	
   

  	
  33

  
	
  5.6

  	
  Marketing Plan.

  	
   

  	
  33

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI CARDHOLDER
  INFORMATION

  	
   

  	
  34

  
	
  6.1

  	
  Customer Information

  	
   

  	
  34

  
	
  6.2

  	
  Cardholder Data

  	
   

  	
  35

  
	
  6.3

  	
  NMG Shopper Data; NMG
  Prospect Data

  	
   

  	
  38

  

 

 

	
   

  	
   

  	
   

  
	
  ARTICLE VII OPERATING
  STANDARDS

  	
   

  	
  41

  
	
  7.1

  	
  Reports

  	
   

  	
  41

  
	
  7.2

  	
  Servicing

  	
   

  	
  41

  
	
  7.3

  	
  Service Level Standards

  	
   

  	
  43

  
	
  7.4

  	
  Credit Systems

  	
   

  	
  43

  
	
  7.5

  	
  Systems Interface;
  Technical Support

  	
   

  	
  44

  
	
  7.6

  	
  Customer Management
  Systems

  	
   

  	
  45

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII MERCHANT
  SERVICES

  	
   

  	
  45

  
	
  8.1

  	
  Transmittal and
  Authorization of NMG Charge Transaction Data

  	
   

  	
  45

  
	
  8.2

  	
  POS Terminals

  	
   

  	
  46

  
	
  8.3

  	
  In-Store Payments

  	
   

  	
  46

  
	
  8.4

  	
  Settlement Procedures

  	
   

  	
  46

  
	
  8.5

  	
  Bank’s Right to Charge
  Back

  	
   

  	
  47

  
	
  8.6

  	
  Exercise of Chargeback

  	
   

  	
  48

  
	
  8.7

  	
  No Merchant Discount

  	
   

  	
  48

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX PROGRAM
  ECONOMICS

  	
   

  	
  48

  
	
  9.1

  	
  NMG Compensation

  	
   

  	
  48

  
	
  9.2

  	
  Dispute Resolution

  	
   

  	
  49

  
	
   

  	
   

  	
   

  
	
  ARTICLE X INTELLECTUAL
  PROPERTY

  	
   

  	
  49

  
	
  10.1

  	
  The NMG Licensed Marks

  	
   

  	
  49

  
	
  10.2

  	
  The Bank Licensed Marks

  	
   

  	
  50

  
	
  10.3

  	
  Intellectual Property

  	
   

  	
  51

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI
  REPRESENTATIONS, WARRANTIES AND COVENANTS

  	
   

  	
  52

  
	
  11.1

  	
  General Representations
  and Warranties of NMG

  	
   

  	
  52

  
	
  11.2

  	
  General Representations
  and Warranties of the Bank Companies

  	
   

  	
  54

  
	
  11.3

  	
  No other
  Representations or Warranties

  	
   

  	
  57

  
	
  11.4

  	
  General Covenants of
  the NMG Companies.

  	
   

  	
  57

  
	
  11.5

  	
  General Covenants of
  the Bank Companies.

  	
   

  	
  58

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII ACCESS,
  AUDIT AND DISPUTE RESOLUTION

  	
   

  	
  59

  
	
  12.1

  	
  Access Rights

  	
   

  	
  59

  
	
  12.2

  	
  Audit Rights

  	
   

  	
  60

  
	
  12.3

  	
  Accounting Dispute
  Resolution.

  	
   

  	
  60

  
	
  12.4

  	
  Dispute Resolution

  	
   

  	
  62

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII
  CONFIDENTIALITY

  	
   

  	
  63

  
	
  13.1

  	
  General
  Confidentiality.

  	
   

  	
  63

  
	
  13.2

  	
  Use and Disclosure of
  Confidential Information.

  	
   

  	
  64

  
	
  13.3

  	
  Unauthorized Use or
  Disclosure of Confidential Information

  	
   

  	
  65

  
	
  13.4

  	
  Return or Destruction
  of Confidential Information

  	
   

  	
  65

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIV RETAIL
  PORTFOLIO ACQUISITIONS

  	
   

  	
  65

  
	
  14.1

  	
  Retailer that Operates
  a Credit Card Business

  	
   

  	
  65

  
	
  14.2

  	
  Retailer that has a
  Credit Card with another Issuer

  	
   

  	
  66

  

 

ii

 

	
  14.3

  	
  Retailer that has a
  Credit Card with Bank

  	
   

  	
  66

  
	
  14.4

  	
  Co-Branded Credit Card

  	
   

  	
  66

  
	
  14.5

  	
  Conversion of Purchased
  Accounts

  	
   

  	
  67

  
	
  14.6

  	
  No Other NMG
  Obligations

  	
   

  	
  67

  
	
   

  	
   

  	
   

  
	
  ARTICLE XV EVENTS OF
  DEFAULT; RIGHTS AND REMEDIES

  	
   

  	
  68

  
	
  15.1

  	
  Events of Default

  	
   

  	
  68

  
	
  15.2

  	
  Defaults by Bank

  	
   

  	
  68

  
	
  15.3

  	
  Defaults by the NMG
  Companies

  	
   

  	
  69

  
	
  15.4

  	
  Remedies for Events of
  Default

  	
   

  	
  70

  
	
   

  	
   

  	
   

  
	
  ARTICLE XVI
  TERM/TERMINATION

  	
   

  	
  70

  
	
  16.1

  	
  Term

  	
   

  	
  70

  
	
  16.2

  	
  Termination by NMG
  Prior to the End of the Initial Term or a Renewal Term

  	
   

  	
  70

  
	
  16.3

  	
  Termination by Bank
  Prior to the End of the Initial Term or a Renewal Term

  	
   

  	
  71

  
	
  16.4

  	
  Automatic Termination

  	
   

  	
  71

  
	
   

  	
   

  	
   

  
	
  ARTICLE XVII EFFECTS OF
  TERMINATION

  	
   

  	
  72

  
	
  17.1

  	
  General Effects.

  	
   

  	
  72

  
	
  17.2

  	
  The NMG Companies’
  Option to Purchase the Program Assets.

  	
   

  	
  72

  
	
  17.3

  	
  Fair Market Value

  	
   

  	
  73

  
	
  17.4

  	
  Dedicated Program
  Personnel

  	
   

  	
  74

  
	
  17.5

  	
  Rights of Bank if
  Purchase Option Not Exercised.

  	
   

  	
  74

  
	
   

  	
   

  	
   

  
	
  ARTICLE XVIII
  INDEMNIFICATION

  	
   

  	
  75

  
	
  18.1

  	
  NMG Indemnification of
  Bank

  	
   

  	
  75

  
	
  18.2

  	
  Bank Companies’
  Indemnification of the NMG Companies

  	
   

  	
  76

  
	
  18.3

  	
  Procedures.

  	
   

  	
  77

  
	
  18.4

  	
  Notice and Additional
  Rights and Limitations.

  	
   

  	
  78

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIX
  MISCELLANEOUS

  	
   

  	
  78

  
	
  19.1

  	
  Precautionary Security
  Interest

  	
   

  	
  78

  
	
  19.2

  	
  Securitization,
  Participation or Pledge of Cardholder Indebtedness.

  	
   

  	
  78

  
	
  19.3

  	
  Assignment

  	
   

  	
  79

  
	
  19.4

  	
  Sale or Transfer of
  Accounts

  	
   

  	
  79

  
	
  19.5

  	
  Subcontracting

  	
   

  	
  79

  
	
  19.6

  	
  Sales and Use Tax

  	
   

  	
  79

  
	
  19.7

  	
  Amendment

  	
   

  	
  79

  
	
  19.8

  	
  Non-Waiver

  	
   

  	
  80

  
	
  19.9

  	
  Severability

  	
   

  	
  80

  
	
  19.10

  	
  Waiver of Jury Trial
  and Venue

  	
   

  	
  80

  
	
  19.11

  	
  Governing Law;
  Compliance with Law.

  	
   

  	
  80

  
	
  19.12

  	
  Specific Performance

  	
   

  	
  80

  
	
  19.13

  	
  Captions

  	
   

  	
  81

  
	
  19.14

  	
  Notices

  	
   

  	
  81

  

 

iii

 

	
  19.15

  	
  Coordination of
  Consents and Approvals

  	
   

  	
  81

  
	
  19.16

  	
  Further Assurances

  	
   

  	
  82

  
	
  19.17

  	
  No Joint Venture

  	
   

  	
  82

  
	
  19.18

  	
  Press Releases

  	
   

  	
  82

  
	
  19.19

  	
  No Set-Off

  	
   

  	
  82

  
	
  19.20

  	
  Conflict of Interest

  	
   

  	
  82

  
	
  19.21

  	
  Third Parties

  	
   

  	
  83

  
	
  19.22

  	
  Force Majeure

  	
   

  	
  83

  
	
  19.23

  	
  Entire Agreement

  	
   

  	
  83

  
	
  19.24

  	
  Binding Effect

  	
   

  	
  83

  
	
  19.25

  	
  Counterparts/Facsimiles

  	
   

  	
  84

  
	
  19.26

  	
  Survival

  	
   

  	
  84

  

 

iv

 

CREDIT CARD PROGRAM AGREEMENT

 

This
Credit Card Program Agreement is made as of the 8th day of June, 2005, by and among The Neiman
Marcus Group, Inc., a Delaware corporation (“NMG”), Bergdorf
Goodman, Inc., a New York corporation (“BG, and together with NMG,
the “NMG Companies”), HSBC Bank Nevada, N.A., a national credit card
bank (“Bank”), and Household Corporation, a Delaware corporation (“Primary
Servicer”).

 

WITNESSETH:

 

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

 

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

 

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

 

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

 

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

 

ARTICLE I

 

DEFINITIONS

 

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

 

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

 

 

“Account
Documentation” means, with respect to an Account, any and all documentation
relating to that Account, including Cardholder Documentation, checks or other
forms of payment with respect to an Account, notices to Cardholders, adverse
action notices, change of terms notices, other notices, correspondence, memoranda,
documents, stubs, instruments, certificates, agreements, magnetic tapes, disks,
hard copy formats or other computer-readable data transmissions, any microfilm,
electronic or other copy of any of the foregoing, and any other written,
electronic or other records or materials of whatever form or nature, including
tangible and intangible information, arising from or relating or pertaining to
any of the foregoing to the extent related to the Program; provided that
Account Documentation shall not include NMG’s or any of its Affiliates’
register tapes, invoices, sales or shipping slips, delivery or other receipts
or other indicia of the sale of NMG Goods and Services, any reports, analyses
or other documentation prepared by any of the NMG Companies or their Affiliates
for use in the retail business operated by the NMG Companies and their
Affiliates regardless of whether derived in whole or in part from the Account
Documentation or any other document not directly related to the Credit Card
Business.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2

 

“Average
Interest Free Receivables” means, for any Fiscal Year, the average for each
Fiscal Month occurring in such Fiscal Year of the Fiscal Month-end Billed
Cardholder Debt under Private Label Accounts that do not bear interest (other
than CCCS Accounts and Accounts for which a payment plan was instituted in
connection with the servicing and collection thereof).

 

“Average
Private Label Receivables” means, for any Fiscal Year, the average for each
Fiscal Month occurring in such Fiscal Year of the Fiscal Month-end Billed
Cardholder Debt under Private Label Accounts.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Bank
Parent” means HSBC Finance Corporation, a Delaware corporation.

 

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

 

“Bankruptcy
Code” means Title 11 of the United States Code, as amended, or any other
applicable state or federal bankruptcy, insolvency, moratorium or other similar
law and all laws relating thereto.

 

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

 

“Billed
Cardholder Debt” means (i) all amounts charged and owing to Bank by
Cardholders that were billed with respect to the Private Label Accounts
(including principal balances from outstanding charges, charges for Approved
Ancillary Products, finance charges, NSF fees, late charges, pay-by-phone fees
and any other fees and charges), less (ii) the amount of any credit
balances owing by Bank to such Cardholders, including in respect of any
payments and any credits associated with returns of NMG Goods and Services and
other credits and adjustments, in each case, that were reflected in the Billing
Statement with respect to the Account.

 

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

 

3

 

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

 

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

 

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

 

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

 

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

 

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

 

“Cardholder
Data” means all personally identifiable information about a Cardholder (A) received
by or on behalf of Bank (including by NMG Servicer in its capacity as such) in
connection with the Cardholder’s application for use of an NMG Credit Card,
Non-Card Payment Plan or Account or (B) otherwise obtained by or on behalf
of Bank (including information obtained by NMG Servicer in its capacity as
such) for inclusion in its database of Cardholder information (including
information about a Cardholder purchased by Bank), including all transaction
and experience information collected by or on behalf of Bank (including by NMG
Servicer in its capacity as such) with regard to each purchase charged by a
Cardholder using his or her NMG Credit Card, Non-Card Payment Plan or Account
(including NMG Charge Transaction Data with respect to charges on Private Label
Accounts and transaction and experience information with respect to charges on
Non-Store Accounts).

 

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

 

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

 

4

 

“Cardholder
List” means any list (whether in hardcopy, magnetic tape, electronic or
other form) that identifies Cardholders, including any such listing that sets
forth the names, addresses, email addresses (as available), telephone numbers
or social security numbers of any or all Cardholders.

 

“Change
of Control” means, with respect to NMG or Bank, as the case may be, (the “subject
Person”), (i) a Person or group becomes the “beneficial owner” (as defined
in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934 (except
that a Person or group shall be deemed to own all securities it has the right
to acquire)), directly or indirectly, of more than fifty percent (50%) of the
total voting power of the subject Person, (ii) such subject Person merges,
consolidates, acquires, is acquired by, or otherwise combines with any other
Person in a transaction in which the subject Person is not the surviving entity
or which constitutes a “merger of equals”, it being understood that a subject
Person shall not be considered the “surviving entity” of a transaction if
either (A) the members of the Board of Directors of the subject Person
immediately prior to the transaction constitute less than a majority of the
members of the Board of Directors of the ultimate parent entity of the entity
surviving or resulting from the transaction or (B) the Persons who were
beneficial owners of the outstanding voting securities of the subject Person
immediately prior to the transaction beneficially own less than fifty percent
(50%) of the total voting power of the ultimate parent entity of the entity
surviving or resulting from the transaction, or (iii) the subject Person
sells all or substantially all of its assets to a Person that is not an
Affiliate of the subject Person.

 

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

 

“Co-Branded
Credit Card” means a Credit Card that bears a NMG Licensed Mark and the
trademarks, tradenames, service marks, logos and other proprietary designations
of a Card Association, including any Dual-Line Credit Card.

 

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

 

“Competing
Retail Programs” means from time to time major retailer Credit Card
programs other than the Program, whether or not Bank or any of its Affiliates
participate in such other programs.

 

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

 

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

 

5

 

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

 

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

 

“Credit
Card Business” means the business relating to the ownership, administration
and management of the Accounts and Receivables (including the extension of
credit to Cardholders, the processing of transactions under the Accounts and
the servicing of the Accounts) and, following the Effective Date, includes all
activities relating to the Program established pursuant to this Agreement.

 

“Credit
Card Production Services” has the meaning set forth in the Servicing
Agreement.

 

“Customer
Management System” means the Systems developed by the Bank with the
features set forth on Schedule 7.6.

 

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

 

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

 

“Documentation
Services” has the meaning set forth in the Servicing Agreement.

 

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

 

“Dual-Line
Card Deadline” has the meaning set forth in Section C of Schedule
2.2(c)(i)..

 

“Dual-Line
Credit Card” means a Credit Card that (i) bears a NMG Licensed Mark and
the trademarks, tradenames, service marks, logos and other proprietary
designations of a Card Association and (ii) is linked to a Non-Store
Account and a Private Label Account.

 

“Dual-Line
Testing Date” has the meaning set forth in Section C of Schedule
2.2(c)(i).

 

“Effective
Date” means the Closing Date as the term is defined in the Purchase
Agreement.

 

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

 

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

 

6

 

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

 

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

 

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

 

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

 

“Fiscal
Year” means the fiscal year set forth in the calendar published by the
National Retail Federation setting forth the fiscal year for retailers on a
52/53 week fiscal year ending on the Saturday closest to July 31; provided
that the first Fiscal Year under this Program shall be the period beginning on
the Effective Date and ending on the Saturday closest to July 31, 2006.

 

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

 

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

 

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

 

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

 

“Gross
Receivables” means amounts owing (net of credit balances) from cardholders
with respect to accounts in a Credit Card portfolio (including outstanding
loans, cash advances and other extensions of credit; billed or unbilled finance
charges and late charges; and any other billed or unbilled fees, charges and
interest assessed on such accounts).

 

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

 

7

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Internet
Services” has the meaning set forth in Section 4.8.

 

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

 

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

 

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

 

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

 

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

 

8

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Marketing
Plan” means the document that outlines the objectives, strategies and
tactics of new account solicitation, usage and awareness programs for the
applicable Fiscal Year.

 

“Merchant
Discount” means a discount rate generally applied against settlements due
to merchants for transactions with respect to the use of a Credit Card, which
includes the Interchange Fees as well as any other transaction fees.

 

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

 

“Net
Credit Sales” means, (i) for any Business Day, an amount equal to (A) gross
credit sales on Accounts (including gift card sales, sales tax, delivery
charges, Licensee sales and any other amount included in the full amount
charged by Cardholders) reflected in the NMG Charge Transaction Data since the
preceding Business Day, minus (B) the sum of credits for returned
goods and cancelled services and other credits (such as concessions, discounts
and adjustments) on Accounts reflected in the NMG Charge Transaction Data since
the preceding Business Day and (ii) for any Fiscal Year, an amount equal
to (A) gross credit sales on Accounts (including gift card sales, sales
tax, delivery charges, Licensee sales and any other amount included in the full
amount charged by Cardholders) reflected in the NMG Charge Transaction Data
since the preceding Fiscal Year, minus (B) the sum of credits for
returned goods and cancelled services and other credits (such as concessions,
discounts and adjustments) on Accounts reflected in the NMG Charge Transaction
Data since the preceding Fiscal Year.

 

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

 

9

 

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

 

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

 

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

 

“New
Portfolio” has the meaning set forth in Section 14.1 hereof

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

10

 

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

 

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

 

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

 

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

 

“NMG
Transaction” means any purchase, exchange or return of NMG Goods and
Services by a Cardholder using an Account.

 

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

 

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

 

“Non-Store
Account” means an Account linked to any Dual-Line Credit Card and usable
solely for the purpose of financing purchases (and all fees and charges
relating thereto) of goods and services through sellers or channels other than
the NMG Channels.

 

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

 

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

 

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

 

“POS”
means point of sale.

 

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

 

“Privacy
Policy” means the privacy policy and associated disclosures to be provided
by Bank to Cardholders in connection with the Program.

 

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

 

11

 

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

 

“Program” means the program established
pursuant to this Agreement.

 

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

 

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

 

“Program Loyalty Program” means the InCircle
Rewards Program and the Bergdorf Goodman Rewards Program described in Section A
of Schedule 1.1(c) or any other annual points-based loyalty program
implemented pursuant to Article III from time to time and tied to the NMG
Credit Cards.

 

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

 

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

 

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

 

“Purchase Agreement” has the meaning set forth
in the recitals hereof.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Services” means the services required to be
performed by NMG pursuant to the Servicing Agreement or the Primary Servicer
pursuant to Article VII hereof.

 

12

 

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

 

“SLA” means each individual performance
standard set forth on Schedule 7.3(a) and Schedule 2.04(a) of the
Servicing Agreement.

 

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

 

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

 

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

 

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

 

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

 

“Term” means the Initial Term and each Renewal
Term.

 

“Termination Period” means the period beginning
on the earlier of the date of expiration of this Agreement or the date of any
notice of termination pursuant to Article XV and ending on either (i) the
date the Program Assets are repurchased pursuant to Section 17.2, if NMG
or a Nominated Purchaser purchases the Program Assets, or (ii) the date
that either (A) the NMG Companies deliver written notice to Bank of their
election not to purchase the Program Assets or (B) the right of the NMG
Companies to purchase the Program Assets expires in accordance with the terms
of this Agreement.

 

“Trademark Style Guide” means any rules governing
the manner of usage of trademarks, tradenames, service marks, logos and other
proprietary designations.

 

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

 

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

 

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

 

13

 

ARTICLE II

ESTABLISHMENT OF THE PROGRAM

 

2.1 Credit Program.

 

(a) General. Beginning as of the Effective
Date, Bank shall offer the NMG Credit Cards and the Non-Card Payment Plans.
Bank shall promptly open a new Account and issue a new NMG Credit Card and/or
Non-Card Payment Plan with respect to each Application approved in accordance
with the Risk Management Policies. Following the issuance of Dual-Line Credit
Cards by Bank and NMG under the Program, Bank shall promptly open a new Account
and issue a new Dual-Line Credit Card with respect to each Application approved
in accordance with the Risk Management Policies. To the extent approved in
accordance with the terms of this Agreement, the Program shall include and the
Bank shall offer such other Approved Ancillary Products and other payment
products as shall be incorporated in the Program in the future.

 

(b) Notice to Cardholders. Substantially
concurrently with the Effective Date, Bank and NMG shall prepare jointly a form
or forms of notices to each Cardholder to the effect that such Cardholder’s
Account has been acquired by Bank and, if applicable, also containing any
change of terms notices with respect to any change of terms that the Parties
mutually agree to implement. Such notice shall be in the form approved by both
Parties, which approval will not be unreasonably withheld or delayed, and will
comply with all requirements of Applicable Law. Bank shall issue new Private
Label Credit Cards in accordance with Schedule 2.1(b) and shall maintain
existing Account numbers on the Accounts. The costs of preparation and mailings
of such notices and new Private Label Credit Cards shall be borne by Bank. The
mailings shall be made in such manner and at such time as Bank and NMG may
mutually agree.

 

2.2 Exclusivity.

 

(a) General. Except as otherwise provided
in this Section 2.2 and without limiting NMG’s right to arrange the
purchase of the Program Assets by a Nominated Purchaser pursuant to Section 17.2,
during the Term, each of the NMG Companies agrees that it shall not, by itself
or in conjunction with or pursuant to agreements with any bank or other Credit
Card issuer, offer or market in the United States (i) a Private Label
Credit Card, (ii) a Co-Branded Credit Card or (iii) a Non-Card
Payment Plan, in each case, other than through the Program.

 

(b) Second-Look Credit Card Program.
Notwithstanding Section 2.2(a), NMG and its Affiliates shall have the
right at any time during the Term to establish a program (a “Second-Look
Credit Card Program”) for (i) issuing Credit Cards, including Private
Label Credit Cards and Dual-Line Credit Cards, using the NMG Licensed Marks, or
(ii) opening Non-Card Payment Plans, in each case, to customers whose
Applications have been declined by Bank; provided, however, that
Bank shall have a right of first offer to develop the Second-Look Credit Card
Program as follows. NMG shall provide notice to Bank indicating the intention
of NMG or its applicable Affiliate(s) to establish the Second-Look Credit
Card Program. Not later than the 20th day following receipt of the notice by Bank,
Bank may make an offer to NMG with respect to the establishment of the
Second-Look Credit Card Program, which offer shall remain open for a

 

14

 

period
of not less than forty-five (45) days. NMG shall be under no obligation to
accept such offer or to provide Bank with any right to match any offer received
by NMG from any third party. NMG may elect to (A) accept the offer made by
Bank, (B) establish the Second-Look Credit Card Program directly or
through any of its Affiliates, or (C) enter into an arrangement with any
third party Credit Card issuer providing for the establishment of a Second-Look
Credit Card Program to be issued by such issuer; provided that NMG may
not enter into any such arrangement with any such third party Credit Card
issuer unless the financial terms and conditions offered to NMG by such Credit
Card issuer are substantially more favorable to NMG in the aggregate to the
terms and conditions offered to NMG by Bank. If NMG elects to establish a
Second-Look Credit Card Program pursuant to clause (B) or (C) above,
upon the request of any NMG Company, Bank shall forward to the NMG Companies or
a provider of secondary financing the Applications received by Bank with
respect to such customers and shall cooperate in good faith with the NMG
Companies in order to facilitate the issuance of Credit Cards or Non-Card
Payment Plans, as applicable, to such customers pursuant to such program.

 

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

 

(i) Beginning as of the Effective Date, Bank, at
its own expense, shall perform the product design and consumer research set
forth in Section A of Schedule 2.2(c)(i) of Dual-Line Credit Card
products designated in such schedule or otherwise approved by the Management
Committee. Bank shall use its best efforts to ensure that the personnel used to
conduct such product design and consumer research has relevant experience in
the department store industry, comparable customer demographics and loyalty
programs and that the other resources (including Systems and other technology
resources) used to conduct such research are Competitive. Bank shall complete
the product design and consumer research testing set forth in Section A of
Schedule 2.2(c)(i) by the Dual-Line Testing Date.

 

(ii) In the event that NMG decides to test
Dual-Line Credit Cards following such consumer research, NMG shall provide Bank
notice of such desire. Within the Development Period, Bank shall commence the
testing set forth in Section B of Schedule 2.2(c)(i) of Dual-Line
Credit Cards having the terms set forth in Schedule 2.2(c)(ii) and such
other and/or additional terms as may be approved by the Management Committee.
In the event that Bank fails to commence offering Dual-Line Credit Cards on the
terms set forth in Schedule 2.2(c)(ii) by the Dual-Line Card Deadline or
otherwise breaches any of its obligations pursuant to this Section 2.2,
NMG shall be free to issue Co-Branded Credit Cards itself or through an
Affiliate or enter into an arrangement with any third party to issue Co-Branded
Credit Cards. Upon such an event, the restrictions of Section 2.2(a) shall
not apply to any such issuance of Co-Branded Credit Cards.

 

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

 

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

 

15

 

(f) Other Products. Except to the extent
expressly set forth in this Section 2.2, NMG and its Affiliates shall not
be restricted in any way with respect to any activities or payment products.
For the avoidance of doubt, NMG and its Affiliates shall be free to do any of
the following at any time:

 

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

 

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

 

(iii) offer its customers rewards or promotional
programs or other value propositions, including Loyalty Programs, of any type;
provided that, except to the extent approved by a majority of the members
constituting the full Management Committee (including any vacancies), (A) the
Program Loyalty Programs shall remain the primary Loyalty Programs for the NMG
Channels and any changes to the Program Loyalty Programs shall be made in
accordance with Article III, and (B) except to the extent set forth
in Section B of Schedule 2.2(d), no Loyalty Program other than the Program
Loyalty Programs shall (x) award points based on the participant’s choice
of tender or payment method or (y) provide awards on an annual basis upon
reaching specific spending tiers.

 

ARTICLE III

PROGRAM MANAGEMENT AND ADMINISTRATION

 

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

 

(a)           to enhance the experience of NMG
Shoppers;

 

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

 

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

 

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

 

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

 

16

 

3.2 Management Committee.

 

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

 

(b) Subcommittees of the Management Committee.
The Management Committee may designate additional committees (which may include
persons who are not members of the Management Committee) with responsibility
for overseeing and administering specified aspects of the Program (e.g.,
marketing, underwriting and risk management); provided, however,
that approval of any matter expressly required by this Agreement to be approved
by the Management Committee shall not be delegated to any subcommittee or other
body.

 

(c) Composition of the Management Committee.
The Management Committee shall consist of eight (8) members, of whom four (4) members
shall be nominated by NMG (the “NMG Designees”) and four (4) members
shall be nominated by Bank (the “Bank Designees”). The initial NMG
Designees and Bank Designees will be designated prior to the Effective Date.
Each Party shall designate its Managers to serve as one of its designees on the
Management Committee. Each Party shall at all times have as one of its
designees the Person with overall responsibility for the performance of the
Program within his or her respective corporate organization, which in the case
of Bank, shall be the Chief Financial Officer or Chief Operating Officer of the
private label Credit Card business of Bank. NMG shall designate among its
designees to the Management Committee the senior executive of NMG responsible
for the Program Loyalty Programs and at least one executive officer of NMG.
Bank and NMG may each substitute its designees to the Management Committee from
time to time so long as their designees continue to satisfy the above
requirements, provided that each Party shall provide the other Party
with as much prior notice of any such substitution as is reasonably practicable
under the circumstances.

 

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

 

	
  (i)

  	
  oversee Program
  marketing activities, including review and approval of the Marketing Plan;

  
	
   

  	
   

  
	
  (ii)

  	
  review
  collection strategies and collection metrics;

  
	
   

  	
   

  
	
  (iii)

  	
  monitor
  activities of competitive programs and identify implications of market
  trends;

  
	
   

  	
   

  
	
  (iv)

  	
  approve
  the use of any third party (e.g., subcontractor or outsourced service
  provider), other than any Affiliate of NMG or Bank, as the case may be, to
  perform any of the obligations to be performed by Bank or the NMG Companies
  under the Program, in each case, except to the extent (x) subcontracted
  or outsourced as of the Effective Date or (y) such subcontracted or
  outsourced service would not involve direct contact between such third party
  and any Cardholder (i.e., in person, via telephone or in writing) it being
  agreed and understood that the subcontracting or outsourcing of such services
  (which may include print shops and mail vendors) would be within the sole
  discretion of the respective Party who elects to subcontract or outsource
  such service;

  

 

17

 

	
  (v)

  	
  evaluate and
  approve changes to any of the following:

  
	
   

  	
   

  
	
   

  	
  (A)

  	
  offering of new
  Credit Cards or Approved Ancillary Products, including Co-Branded Credit
  Cards, Non-Card Payment Plans or other payment products;

  
	
   

  	
   

  	
   

  
	
   

  	
  (B)

  	
  changes in
  Account terms, including any of the terms set forth on Schedule 4.7;

  
	
   

  	
   

  	
   

  
	
   

  	
  (C)

  	
  changes to the
  Risk Management Policies (which shall be submitted to the Management
  Committee together with the expected pro forma effects of such changes on the
  Program);

  
	
   

  	
   

  	
   

  
	
   

  	
  (D)

  	
  changes to the
  Operating Procedures; and

  
	
   

  	
   

  	
   

  
	
   

  	
  (E)

  	
  changes to the
  SLAs applicable to the Program;

  
	
   

  	
   

  	
   

  
	
  (vi)

  	
  approve the
  design of Cardholder Documentation and any changes thereto;

  
	
   

  	
   

  
	
  (vii)

  	
  review customer
  service, collections and other servicing performance and reporting aspects of
  the Program against SLAs and other requirements of this Agreement;

  
	
   

  	
   

  
	
  (viii)

  	
  oversee
  compliance with Applicable Law, the Risk Management Policies, Operating
  Procedures and other Program operations and procedures;

  
	
   

  	
   

  
	
  (ix)

  	
  carry out such
  other tasks as are assigned to it by this Agreement or jointly by the
  Parties; and

  
	
   

  	
   

  
	
  (x)

  	
  pursuant
  to Section 12.4(b)(i)(B), resolve disputes that arise among the Parties
  with regard to the Program from time to time.

  

 

(e)               Proceedings of the Management Committee.

 

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

 

18

 

(ii) Actions.

 

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

 

(B) If
a majority of the Management Committee members constituting the full Management
Committee (including any vacancies) fail to agree on any matter of significance
to the Program (an “Unapproved Matter”) within ten (10) Business
Days after the relevant initial vote (and in the case of a subcommittee vote,
the Management Committee has attempted to resolve such matter for at least ten (10) Business
Days after the relevant subcommittee vote and has failed to so), then initially
the Chief Executive Officer of HSBC Retail Services and Senior Vice President,
General Counsel and Secretary of NMG (or any other similarly ranking officer of
Bank or NMG, as the case may be, who is not a Management Committee member and
shall have been designated in writing by NMG or Bank, as applicable, to the other
Party) shall in good faith attempt to resolve the matter. Any such resolution
by such senior officers shall be deemed to be the action and approval of the
Management Committee for purposes of this Agreement. If after ten (10) Business
Days, the Unapproved Matter remains unresolved by such senior officers of NMG
and Bank, the failure to agree shall constitute a deadlock. In the event of a
deadlock, the final decision shall rest with NMG in the case of NMG Matters and
with Bank in the case of Bank Matters, each of which shall, except as otherwise
provided herein, exercise its discretion reasonably and in good faith. If a
deadlock should occur with respect to a matter that is neither an NMG Matter
nor a Bank Matter, the matter shall be deemed rejected by the Management
Committee.

 

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

 

(D) Notwithstanding
anything to the contrary contained herein, Bank shall not override any vote of
the NMG Designees in a way that would result in any aspect of the Program being
more onerous or less beneficial to the Cardholders or the NMG Companies than
Comparable Partner Programs unless (i) Bank’s position on the issue is
required by Applicable Law and (ii) Bank adopts, and certifies to the NMG
Companies that it has adopted, the same position with respect to each of its
other Comparable Partner Programs that are similarly impacted by such
Applicable Law or to which such Applicable Law could similarly be applied.

 

19

 

(iii) Customer Service Disputes. If at any
time there shall be a material change in customer dispute patterns or volume,
as evidenced by the monitoring procedures set forth in the Dispute Resolution
and Service Profile Report Process section of the Operating Procedures, (A) NMG
shall call, and the Parties shall attend, one or more Management Committee
meetings to consider and vote upon a plan to remediate such customer service or
other disputes, (B) the Parties shall negotiate in good faith for a period
ending not less than ten (10) days following the date of such meeting, to
arrive at a mutually agreeable remediation plan (or a shorter period if such a
remediation plan is agreed to prior to the 10th day), and (C) in the event such
remediation plan is voted upon and approved, the Parties shall promptly
implement such plan; provided, that in the event that such customer
service or other disputes arise from a change in Account terms, NMG may request
that any such Account terms be restored to the terms in effect prior to such
customer service or other disputes and Bank shall implement such change in
Account terms to the extent permitted by Applicable Law. If such changes in
Account terms are implemented, the amount payable by Bank to NMG under Section 9.1(a)(i) shall
be adjusted to reinstate the amounts previously payable pursuant to this Agreement
in connection with such reinstated terms. If such customer service or other
disputes remain uncured on the tenth (10th)
day following the implementation of such Management Committee-approved
remediation plan or such other date determined by the Management Committee as
reasonably required to implement such remediation plan, NMG shall call, and the
Parties shall attend, one or more Management Committee meetings to consider and
vote upon an alternative plan to remediate such customer service or other disputes.
In the event that the Management Committee is unable to agree to a plan to
remediate such customer service or other disputes within the ten (10) days
following any meeting called by NMG pursuant to this Section 3.2(e)(iii),
it shall be considered an Unapproved Matter.

 

(f) NMG Matters. In accordance with and
subject to this Section 3.2, NMG shall have the ultimate decision making
authority with respect to any Unapproved Matters in respect of the following
matters (the “NMG Matters”):

 

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

 

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

 

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

 

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

 

20

 

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

 

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

 

(vii) communications and/or contacts with
Cardholders (other than as required to service the Accounts, comply with
Applicable Law or as otherwise provided in this Agreement), including use of
telemarketing techniques by Bank.

 

(g) Bank Matters. In accordance with and
subject to this Section 3.2, Bank shall have the ultimate decision making
authority with respect to any Unapproved Matters in respect of the following
matters (the “Bank Matters”):

 

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

 

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

 

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

 

(iv) content of Cardholder Documentation and
Solicitation Materials that is dictated by Applicable Law, as evidenced by a
Legal Opinion.

 

3.3 Program Relationship Managers; Program Team.

 

(a) The NMG Companies and Bank shall each appoint
one Program relationship manager (each, a “Manager”). The Managers shall
exercise day-to-day operational oversight of the Program, subject to the
actions and decisions of the Management Committee, and coordinate the
partnership efforts between the NMG Companies and Bank, shall report to the
designees on the Management Committee of the Party appointing such Manager and
shall conduct their Program responsibilities in accordance with the actions and
decisions of the Management Committee. The NMG Companies and Bank shall
endeavor to provide stability and continuity in the Manager positions and each
Party’s other Program personnel.

 

21

 

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

 

(c) The
initial Manager of Bank is set forth in Schedule 3.3. The Bank’s Manager shall
report directly to the Bank’s Managing Director-Client Relations. The Bank’s
Manager’s performance-based compensation shall be based upon the Program
Objectives and other specific annual targets and objectives set by the
Management Committee, including Program profitability targets. The appointment
of a new Manager by Bank is subject to the prior approval of NMG. With respect
to future Bank Manager candidates, Bank shall seek to propose candidates with
substantial Program relevant experience, including experience with the
department store industry, comparable customer demographics and loyalty programs.

 

(d) Bank
shall maintain a Program team having Competitive expertise and experience and
meeting the requirements and specifications set forth in Schedule 3.3. No
member of the Bank’s Program team shall be reassigned to any program operated
by Bank or any of its Affiliates pursuant to any agreement or arrangement with
any retail store competitor designated annually by the Management Committee,
including those listed in Schedule 3.3(d), without the approval of NMG.

 

ARTICLE IV

PROGRAM OPERATIONS

 

4.1 Operation
of the Program.

 

(a) Each
of the Parties hereto shall perform its obligations under this Agreement (i) in
compliance with the terms and conditions of this Agreement, the Risk Management
Policies, the Operating Procedures and any other policies, procedures and
practices adopted pursuant to this Agreement, (ii) in good faith, (iii) in
accordance with Applicable Law, and (iv) in a manner consistent with the
Program Objectives.

 

(b) The
initial Operating Procedures applicable to various aspects of the operation of
the Program shall be the operating procedures adopted by NMG, its Affiliates
and the Licensees prior to the Effective Date (which operating procedures are
attached hereto as Schedule 4.1(b)). Changes to such Operating Procedures shall
only be made with the approval of the Management Committee; provided
that changes to the Risk Management Policies may be made in accordance with Section 4.6
and Article III.

 

(c) Except
as expressly provided otherwise in this Agreement, Bank shall use commercially reasonable
efforts to ensure that the personnel and other resources (including Systems and
other technology resources) devoted by Bank to the Program shall be
Competitive.

 

4.2 Certain
Responsibilities of the NMG Companies.

 

(a) In
addition to its other obligations set forth elsewhere in this Agreement, NMG
agrees that during the Term it shall, either itself or through the Affiliate(s) to
which it subcontracts the relevant functions:

 

(i) as
provided in the Servicing Agreement, in its capacity as NMG Servicer, maintain
a System to process Applications, using the underwriting and credit limit
assignment policy set forth in the Risk Management Policies and the Operating
Procedures, as maintained by NMG in effect as of January 1, 2005;

 

22

 

(ii) as
provided in the Servicing Agreement, in its capacity as NMG Servicer, maintain
call centers to respond to inquiries from Cardholders and to deal with billing
related claims and adjustments (including by making finance charge and late fee
reversals), establish new Accounts or Account types, authorize transactions,
and assign, increase and decrease credit lines, all in accordance with the Risk
Management Policies and the Operating Procedures, in each case, as performed by
NMG prior to January 1, 2005;

 

(iii) as
provided in the Servicing Agreement, in its capacity as NMG Servicer, provide
Account monitoring services, including identifying delinquencies, identifying
collection efforts required, implementing credit-line adjustments, over limit
authorizations and Account deactivation or cancellation;

 

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

 

(v) solicit
new Accounts through in-store instant credit procedures (in accordance with
this Agreement) and display of Solicitation Materials (or Applications) in the
NMG Channels pursuant to the Marketing Plan;

 

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

 

(vii) receive
In-Store Payments in accordance with procedures that comply with Applicable
Law, subject to reimbursement from Bank for the processing of such payments as
provided in this Agreement;

 

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

 

(ix) continue
to make available a Program Loyalty Program;

 

(x) as
provided in the Servicing Agreement, in its capacity as NMG Servicer, process
remittances from Cardholders;

 

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

 

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

 

23

 

4.3 Certain
Responsibilities of Bank.

 

(a) In
addition to its other obligations set forth elsewhere in this Agreement, Bank
agrees that during the Term it shall:

 

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

 

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

 

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

 

(iv) in
accordance with Section 7.2, after the Documentation Services Transition
Date, prepare, process and mail Cardholder Billing Statements, Inserts, privacy
policy notices, change in terms notices and other communications to Cardholders
and perform any other Services required to be performed pursuant to this
Agreement from time to time;

 

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

 

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

 

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

 

4.4 Ownership
of Accounts; Account Documentation.

 

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

 

24

 

(b) Except
as expressly provided herein, Bank shall be entitled to (i) receive all
payments made by Cardholders on Accounts and (ii) retain for its account
all Cardholder Indebtedness and all other fees and income authorized by the
Cardholder Agreements and collected with respect to the Accounts and Cardholder
Indebtedness. Bank shall retain for its account any income from selling
Approved Ancillary Products as shall have been approved by the Management
Committee in connection with the approval of the offering of such Approved
Ancillary Products.

 

(c) Bank
shall fund all Cardholder Indebtedness on the Accounts.

 

(d) Bank
shall have the exclusive right to effect collection of Cardholder Indebtedness,
except as set forth in the Servicing Agreement, and shall notify Cardholders to
make payment directly to it in accordance with its instructions; provided,
however, that Bank at its option may make all collections for its
account using a Program name which includes the name of NMG and, if Bank so
elects, the name of Bank, and may direct all checks to be made payable to “NMG”
or, with NMG approval, another name combined with the name NMG. NMG grants to
Bank a limited power of attorney (coupled with an interest) to sign and endorse
NMG’s name upon any form of payment that may have been issued in NMG’s name in
respect of any Account.

 

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

 

(f) With
respect to all Account Documentation, and notwithstanding the purchase of such
Account Documentation by Bank as of the Effective Date, NMG Servicer, shall
continue to hold and retain the Account Documentation following the Effective
Date as bailee for the sole benefit of Bank.

 

(i) From
time to time following the Effective Date, NMG Servicer shall deliver such
Account Documentation as requested by Bank. NMG Servicer will use reasonable
efforts to accommodate Bank’s shorter requested time frames, but in any event
such deliveries will be made no later than the following time frames: (i) for
statements, 15 days; (ii) for non-cash payment information, 10 days; (iii) for
cash payment information, 5 Business Days, (iv) for application
information, 20 days; (v) for sales slips, 20 days; and (vi) for all
other Account Documentation, 30 days. NMG Servicer shall effect delivery of the
requested Account Documentation at its sole cost and expense, unless otherwise
determined by the Management Committee; provided, that in connection
with any litigation, all Account Documentation shall be provided within fifteen
(15) days rather than the timeframes set forth above.

 

(ii) In
discharging its bailment duties hereunder, NMG Servicer agrees to utilize such
document storage, safekeeping and security methods in accordance with
Applicable Law. All Account Documentation shall be housed at NMG Servicer’s
operations centers or other facilities designated by NMG Servicer. Without
limiting any of their obligations under this Agreement, NMG agrees to maintain
the Account Documentation for a period that complies with the document retention
policy set forth in Schedule 4.4(f).

 

25

 

4.5 Branding
of Accounts/Credit Cards/Cardholder Documentation/Solicitation Materials.

 

(a) The
Cardholder Documentation and the Solicitation Materials shall be in the design
and format proposed by the NMG Companies and approved by the Management
Committee; provided that Bank shall be responsible for ensuring that the
Cardholder Documentation and the Solicitation Materials comply with Applicable
Law and for ensuring that the Solicitation Materials comply with the Cardholder
Documentation.

 

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

 

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

 

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

 

4.6 Underwriting
and Risk Management.

 

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

 

26

 

(b) The
initial Risk Management Policies to be in effect as of the Effective Date are
contained in the initial Operating Procedures. Each Party may propose
modifications of any aspect of the Risk Management Policies, which
modifications shall be made only upon approval in accordance with Article III.

 

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

 

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

 

4.7 Cardholder
Terms.

 

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

 

(b) The
account numbers and BINs of all Purchased Accounts shall remain the same after
the Effective Date.

 

4.8 Internet
Services.

 

(a) Cardholder
Website. Bank shall develop and maintain an NMG-branded website for
Cardholders and potential Cardholders to be effective as of the Systems
Transition Date, with the look and feel consistent with the NMG Companies’
websites (“Program Website”). The Program Website shall be accessed
solely by means of links from the NMG Companies’ websites and shall contain or
otherwise be associated with only such material and links as shall be agreed by
the Management Committee from time to time. The NMG Companies will provide such
links on (i) their home pages, (ii) their check-out pages, and (iii) such
other pages as the Management Committee shall determine from time to time.
The Program Website shall also include links back to the NMG Companies’
websites, on the Program Website home page and such other pages as
the Management Committee shall determine from time to time. The Program Website
shall include the following functions, and such other functions as may be
approved by the Management Committee from time to time (the Program Website and
such functionality, collectively, the “Internet Services”).

 

27

 

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

 

(ii) Cardholder
Customer Service. The Program Website shall permit Cardholders to (A) view
the Cardholder’s Account information and Billing Statements (including any
Loyalty Program information, NMG Transaction information, and all other
information contained in such Billing Statement); (B) to the extent
requested by, and provided to the Bank by, NMG, view electronic copies of sales
slips or other documents or data relating to the Cardholder’s NMG transactions,
including the Cardholder’s signature; and (C) make payments on the
Cardholder’s Account via automated clearing house transfer or other payment
mechanism.

 

(b) Performance
Standards. Bank shall provide the Internet Services consistent with the
SLAs set forth on Schedule 4.8(b) and in accordance with industry
standards.

 

(c) Customer
Privacy. Bank shall ensure that the Privacy Policy is clearly and
prominently posted on the pages of the Program Website.

 

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

 

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

 

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

 

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

 

28

 

to pursue any such
recoveries. In the event NMG is audited or assessed by a state, and as a result
any amount of sales tax previously recovered is repaid to the state, Bank shall
repay such amount to NMG. NMG shall use commercially reasonable efforts to
negotiate such audit or assessment. Bank also shall fully cooperate in any such
audit or assessment and shall pay the costs and expenses of NMG incurred in
connection with negotiating any tax audit or assessment or analyzing or
pursuing any bad debt claims.

 

4.10 Participation
in Reversals.

 

(a) Reporting
of Reversals. Each Year-End Settlement Statement shall set forth a
calculation of the applicable Finance Charge Reversal Percentage and Late Fee
Reversal Percentage for the preceding Fiscal Year and such other calculations
as are necessary to calculate the payment in respect thereof to be made by the
Parties pursuant to this Section 4.10. All amounts payable pursuant to
this Section shall be netted against each other so that only a single
payment shall be made pursuant to this Section.

 

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

 

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

 

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

 

29

 

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

 

ARTICLE V

MARKETING

 

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

 

5.2 Marketing
Commitment.

 

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

 

(b) The
NMG Marketing Fund shall be used by NMG and its Affiliates in the sole
discretion of NMG for such incremental marketing of the Program and the Credit
Card Business as NMG and its Affiliates shall undertake from time to time.

 

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

 

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

 

30

 

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

 

5.3 Communications
with Cardholders.

 

(a) NMG
Inserts. NMG and its Affiliates shall have the exclusive right to
communicate with Cardholders, except for any message required by Applicable
Law, through use of inserts, fillers and bangtails (which shall be included on
all billing envelopes) (collectively, “Inserts”), including Inserts
selectively targeted for particular segments of Cardholders, in any and all
Billing Statements (including electronic Billing Statements) and envelopes,
subject to production requirements contained in the Operating Procedures and
Applicable Law.  Except as
otherwise provided in the Marketing Plan, and except for Inserts required by
Applicable Law (which shall be paid for by Bank), the NMG Companies shall be
responsible for the content of, and the cost of preparing and printing, any
such Inserts. If the insertion of Inserts in particular Billing Statements
would increase the postage costs for such Billing Statements, the NMG Companies
agree to either pay for the incremental postage cost or prioritize the use of
Inserts to avoid postage cost over-runs. The NMG Companies shall retain all
revenues they receive from all Inserts (other than any Inserts promoting the
NMG Credit Cards or Approved Ancillary Products that the NMG Companies may
permit to be produced and distributed in accordance with the Marketing Plan).
Subject to NMG’s prior written approval, which shall not be unreasonably
withheld, Bank may communicate with Cardholders in the Inserts about the
Program as necessary for Bank to comply with its obligations under this
Agreement.

 

(b) Billing
Statement Messages. NMG and its Affiliates shall have the exclusive right
to use Billing Statement (including electronic Billing Statement) messages and
Billing Statement envelope (or electronic mail) messages in each Billing Cycle
to communicate with Cardholders, subject to production requirements contained
in the Operating Procedures and Applicable Law. Such messages shall be included
at no cost to the NMG Companies. Notwithstanding the foregoing, any message
required by Applicable Law shall take precedence over NMG’s and its Affiliates’
messages. Subject to NMG’s prior written approval, which shall not be
unreasonably withheld, Bank may communicate with Cardholders about the Program
in the Billing Statements as necessary for Bank to comply with its obligations
under this Agreement.

 

5.4 Additional
Marketing Support.

 

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

 

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

 

	
  (A)

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

  

 

31

 

	
  (B)

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

  

 

(ii) provide such
reasonable assistance to NMG and its Affiliates as NMG may request in
connection with the training of personnel of NMG and its Affiliates regarding
the Program, including providing training materials developed by Bank and
approved by the Management Committee;

 

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

 

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

 

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

 

32

 

5.5 Approved
Ancillary Products. Except for the Approved Ancillary Products, the NMG
Credit Cards and the Non-Card Payment Plans, Bank and its Affiliates shall not
offer (except as directed by NMG) any goods or services to Cardholders or
through the Program. From time to time, Bank may propose to solicit Cardholders
for products or services other than the foregoing. If the NMG Companies, in
their sole and absolute discretion, agree to permit such solicitation, such
solicitation shall only be permitted on the terms (including terms relating to
the compensation of the NMG Companies with respect thereto) agreed by the NMG
Companies.

 

5.6 Marketing
Plan.

 

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

 

(b) At
least once per calendar year, the Management Committee shall consider (to the
extent such terms and conditions are publicly known or otherwise known and not
subject to any confidentiality obligations on the part of either Party)
features, terms, conditions and other aspects of other Comparable Partner
Programs and Competing Partner Programs in order to identify marketplace
developments for possible inclusion in the Program to ensure that the Program
remains Competitive. If the Management Committee determines that a change to
the Program may be required, Bank shall develop a plan with respect to
implementation of such change, including the impact the proposed change would
have, if any, on the revenue share, and shall present such plan to the Management
Committee for its review and decision. The Management Committee shall decide
whether to test or launch any such Program changes for Cardholders or potential
Cardholders.

 

(c) Each
Marketing Plan shall outline, for each NMG Channel, all programs, to the extent
established and mutually agreed upon by the NMG Companies and Bank, and shall
include at least the following information for each program:

 

(i) description
of offer(s), cost per unit, expected response rate and other performance
projections with respect thereto;

 

(ii) description
of target audience;

 

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

 

(iv) distribution
among the NMG Channels and types of Accounts; and

 

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

 

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

 

33

 

preparation of unique
collateral materials for the NMG Companies’ employees; activation, retention
and usage; statement design and messaging; advertising of the Program; and such
other marketing matters as the Parties shall agree to.

 

(e) Each
Marketing Plan shall specify which Party is responsible for each Marketing Plan
item and shall contain a budget specifying the Parties’ financial
responsibilities during the applicable Fiscal Year.

 

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

 

(g) To
the extent practicable, all significant marketing initiatives developed under
this Agreement shall contain unique marketing source codes to facilitate
post-marketing research and analysis.

 

ARTICLE VI

CARDHOLDER INFORMATION

 

6.1 Customer
Information.

 

(a) All
sharing, use and disclosure of Cardholder Data and NMG Shopper Data under this
Agreement shall be subject to the provisions of this Article VI. The
Parties acknowledge that the same or similar information may be contained in
the Cardholder Data, the NMG Shopper Data, and other data and that each such
pool of data shall therefore be considered separate information subject to the
specific provisions applicable to that data hereunder.

 

(b) NMG
and Bank shall each maintain an information security program that is designed
to meet all requirements of Applicable Law, including, at a minimum,
maintenance of an information security program that is designed to: (i) ensure
the security and confidentiality of the Cardholder Data and the NMG Shopper
Data; (ii) protect against any anticipated threats or hazards to the
security or integrity of the Cardholder Data and the NMG Shopper Data; (iii) protect
against unauthorized access to or use of the Cardholder Data and the NMG
Shopper Data; and (iv) ensure the proper disposal of Cardholder Data and
NMG Shopper Data. Additionally, such security measures shall meet current
industry standards and shall be at least as protective as those used by each
Party to protect its other confidential customer information. Each Party shall
use the same degree of care in protecting the Cardholder Data and the NMG
Shopper Data against unauthorized disclosure as it accords to its own
confidential customer information, but in no event less than a reasonable
standard of care. In particular, Bank shall treat NMG Shopper Data as if it
were “customer information” for purposes of the regulations above. In the event
a Party becomes aware of any unauthorized use of or access to Cardholder Data,
such Party shall immediately notify the other Party and shall cooperate with
such other Party, as it deems necessary or as required by Applicable Law, (x) to
assess the nature and scope of such incident, (y) to contain and control
such incident to prevent further unauthorized access to or use of Cardholder
Data, and (z) to provide prompt notice to affected Cardholders to the
extent required by Applicable Law or otherwise with the approval of the
Management

 

34

 

Committee. In the event
Bank becomes aware of any unauthorized use of or access to NMG Shopper Data,
Bank shall immediately notify the NMG Companies and shall cooperate with them,
as they deem necessary or as required by Applicable Law, (x) to assess the
nature and scope of such incident, (y) to contain and control such
incident to prevent further unauthorized access to or use of NMG Shopper Data,
and (z) to provide prompt notice to affected NMG Shoppers to the extent
required by Applicable Law or otherwise with the approval of the Management
Committee. The cost and expenses of any such notice shall be borne solely by
the Party that experienced the unauthorized use of or access to Cardholder Data
or NMG Shopper Data.

 

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

 

6.2 Cardholder
Data.

 

(a) As
among the Parties hereto, the Cardholder Data shall be the property of and
exclusively owned by Bank.

 

(b) The
Program Privacy Policy applicable to the Cardholder Data is attached as
Schedule 6.2 hereto. Any modifications to the Program Privacy Policy shall be
approved by the Management Committee, provided that the Program Privacy
Policy shall comply with Applicable Law at all times.

 

(c) Bank
shall not use, or permit to be used, the Cardholder Data, except as provided in
this Section 6.2. Bank may use the Cardholder Data in compliance with
Applicable Law and the Program Privacy Policy solely (i) for purposes of
soliciting or marketing (in each case, solely as directed by the NMG Companies
or the Management Committee) or servicing customers listed in the Cardholder
Data for NMG Credit Cards, Approved Ancillary Products, and any other products
and services approved by the Management Committee, (ii) as otherwise
necessary to carry out its obligations or exercise its rights hereunder, or (iii) as
required by Applicable Law. Bank has no rights to use the Cardholder Data for
marketing purposes except as expressly provided herein.

 

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

 

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

 

35

 

Cardholder Data under
this Section 6.2, provided that each such authorized subcontractor
agrees in a written agreement satisfactory to NMG and Bank to maintain all such
Cardholder Data as strictly confidential and not to use or disclose such
information to any Person other than Bank or an NMG Company, except as required
by Applicable Law or any Governmental Authority (after giving Bank and the NMG
Companies prior notice and an opportunity to defend against such disclosure); provided,
further, that each such authorized subcontractor maintains, and agrees
in writing to maintain, an information security program that is designed to
meet all requirements of Applicable Law, including, at a minimum, maintenance
of an information security program that is designed to: (w) ensure the
security and confidentiality of the Cardholder Data; (x) protect against
any anticipated threats or hazards to the security or integrity of the
Cardholder Data; (y) protect against unauthorized access to or use of the
Cardholder Data; and (z) ensure the proper disposal of Cardholder Data;
and provided, further, that each such authorized subcontractor
agrees to notify promptly Bank and the NMG Companies of any unauthorized
disclosure, use, or disposal of, or access to, Cardholder Data and to cooperate
with Bank and the NMG Companies in any investigation thereof and remedial
action with respect thereto;

 

(ii) to
its Affiliates, and its and such Affiliates’ employees, attorneys and
accountants with a need to know such Cardholder Data in connection with a
permitted use of such Cardholder Data under this Section 6.2; provided
that (A) any such Person is bound by terms substantially similar to this Section 6.2
as a condition of employment or of access to Cardholder Data or by professional
obligations imposing comparable terms; and (B) Bank shall be responsible
for the compliance by each such Person with the terms of this Section 6.2;

 

(iii) to
any Governmental Authority with authority over Bank (A) in connection with
an examination of Bank; or (B) pursuant to a specific requirement to
provide such Cardholder Data by such Governmental Authority or pursuant to
compulsory legal process; provided that Bank seeks the full protection
of confidential treatment for any disclosed Cardholder Data to the extent
available under Applicable Law governing such disclosure, and with respect to
clause (B), to the extent permitted by Applicable Law, Bank (1) provides
at least ten (10) Business Days’ prior notice of such proposed disclosure
to NMG if reasonably possible under the circumstances, and (2) seeks to
redact the Cardholder Data to the fullest extent possible under Applicable Law
governing such disclosure; or

 

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

 

(e) To
the extent Bank has access to the following information in accordance with the
provisions of this Agreement and subject to Applicable Law and the Program
Privacy Policy, Bank shall transmit to the NMG Companies at such times as may
be requested by NMG and in formats agreed to by the Parties in advance from
time to time:

 

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

 

36

 

(ii) for
each Cardholder, joint-Cardholder and authorized buyer, (1) such person’s
name, address, email address, telephone number, social security number and
Account number; (2) any reported change to any of the foregoing
information; (3) transaction and experience data; and (4) any such
other Cardholder Data as the NMG Companies may reasonably request;

 

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

 

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

 

(v) the
Cardholder Data for all categories of information available on the NMG
Companies’ credit Systems as of the date hereof.

 

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

 

(f) Bank
shall cooperate with the NMG Companies to provide NMG and its Affiliates with
the maximum ability permissible under Applicable Law and the Program Privacy
Policy to receive, use and disclose the Cardholder Data, including, as
necessary or appropriate, through use of consents or opt-out provisions, in
each case as directed by the NMG Companies. Without limiting the foregoing, NMG
and each of its Affiliates may receive, use and disclose the Cardholder Data in
compliance with Applicable Law and the Program Privacy Policy (i) for
purposes of promoting the Program or promoting NMG Goods and Services, (ii) as
otherwise necessary to carry out its obligations under this Agreement, and (iii) as
otherwise permitted by Applicable Law.

 

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

 

(i) to
its existing subcontractors as of the Effective Date and to authorized
subcontractors that enter into agreements with an NMG Company after the
Effective Date (“Future Subcontractors”) in connection with a permitted
use of such Cardholder Data under this Section 6.2, provided that
each such existing subcontractor and Future Subcontractor agrees in a written
agreement satisfactory to NMG and Bank to maintain all such Cardholder Data as
strictly confidential in perpetuity and not to use or disclose such information
to any Person other than an NMG Company or Bank, except as required by
Applicable Law or any Governmental Authority (after giving the NMG Companies
prior notice and an opportunity to defend against such disclosure); provided,
further, that each such existing subcontractor and Future Subcontractor
maintains, and agrees in writing to maintain, an information security program
that is designed to meet all requirements of Applicable Law, including, at a
minimum, maintenance of an

 

37

 

information security
program that is designed to: (w) ensure the security and confidentiality
of the Cardholder Data; (x) protect against any anticipated threats or
hazards to the security or integrity of the Cardholder Data; (y) protect
against unauthorized access to or use of the Cardholder Data; and (z) ensure
the proper disposal of Cardholder Data; and provided, further,
that each such existing subcontractor and Future Subcontractor agrees to notify
promptly Bank and the NMG Companies of any unauthorized disclosure, use, or
disposal of, or access to, Cardholder Data and to cooperate with Bank and the
NMG Companies in any investigation thereof and remedial action with respect
thereto;

 

(ii) to
its Affiliates, and its and such Affiliates’ employees, attorneys and
accountants with a need to know such Cardholder Data in connection with a
permitted use of such Cardholder Data under this Section 6.2; provided
that (A) any such Person is bound by terms substantially similar to this Section 6.2
as a condition of employment or of access to Cardholder Data or by professional
obligations imposing comparable terms; and (B) the NMG Companies shall be
responsible for the compliance by each such Person with the terms of this Section 6.2;
or

 

(iii) to
any Governmental Authority with authority over such NMG Company (A) in
connection with an examination of such NMG Company; or (B) pursuant to a
specific requirement to provide such Cardholder Data by such Governmental
Authority or pursuant to compulsory legal process; provided that such
NMG Company seeks the full protection of confidential treatment for any
disclosed Cardholder Data to the extent available under Applicable Law
governing such disclosure, and with respect to clause (B), to the extent
permitted by Applicable Law, such NMG Company (1) provides at least ten (10) Business
Days’ prior notice of such proposed disclosure to Bank if reasonably possible
under the circumstances, and (2) seeks to redact the Cardholder Data to
the fullest extent possible under Applicable Law governing such disclosure.

 

(h) With
respect to the sharing, use and disclosure of the Cardholder Data following the
termination of this Agreement:

 

(i) the
rights and obligations of the Parties under this Section 6.2 shall
continue through any Termination Period;

 

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

 

(iii) if
NMG provides notice that it shall not exercise its rights under Section 17.2,
NMG and its Affiliates’ right to use and disclose the Cardholder Data hereunder
shall terminate upon the termination of the Termination Period.

 

6.3 NMG
Shopper Data; NMG Prospect Data.

 

(a) Bank
acknowledges that the NMG Companies gather information about purchasers of NMG
Goods and Services and that NMG and its Affiliates have rights to use and
disclose such information independent of whether such information also
constitutes Cardholder

 

38

 

Data. As between the NMG
Companies and Bank, all the NMG Shopper Data shall be owned exclusively by the
NMG Companies. Bank acknowledges and agrees that it has no proprietary interest
in the NMG Shopper Data. To the extent Bank is the direct recipient of such
data, it shall provide such data to the NMG Companies in such format and at
such times as shall be specified by NMG. Bank shall cooperate in the
maintenance of the NMG Shopper Data and other data, including by incorporating
in the Application and Cardholder Agreement provisions mutually agreed to by
the Parties pursuant to which applicants and Cardholders shall agree that they
are providing their identifying information and all updates thereto and all
transaction data from NMG Channels to both Bank and NMG and its Affiliates.  For the avoidance of doubt, the following
information shall be deemed NMG Shopper Data:

 

(i) for
any customer who has applied for an NMG Credit Card, regardless of the channel
through which such application was completed or submitted (1) the customer’s
name, address, email address, telephone number, social security number and all
other commercially reasonable information supplied on the application or
prescreened response submitted by the customer; and (2) an indication of
whether or not the customer has been approved for an NMG Credit Card; and

 

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

 

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

 

(c) Bank
shall not use, or permit to be used, directly or indirectly, the NMG Shopper
Data, except to transfer such data to the NMG Companies to the extent received
by Bank. Bank shall not use, or permit to be used, the NMG Prospect List except
as provided in this Section 6.3(c). Bank may use the NMG Prospect List in
compliance with Applicable Law solely for purposes of soliciting customers
listed in the NMG Prospect List for Accounts or as required by Applicable Law.

 

(d) Bank
shall not disclose, or permit to be disclosed, the NMG Shopper Data or the NMG
Prospect List, except as provided in this Section 6.3. Bank shall not,
directly or indirectly, sell or otherwise transfer any right in or to the NMG
Shopper Data or the NMG Prospect List (all such rights belonging exclusively to
the NMG Companies). Bank may disclose the NMG Shopper Data and the NMG Prospect
List in compliance with Applicable Law solely:

 

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

 

39

 

NMG Shopper Data or NMG Prospect
List under this Section 6.3, provided that each such authorized
subcontractor agrees in writing to maintain all such NMG Shopper Data or NMG
Prospect List as strictly confidential in a manner satisfactory to NMG and not
to use or disclose such information to any Person other than Bank or an NMG
Company, except as required by Applicable Law or any Governmental Authority
(after giving Bank and the NMG Companies prior notice and an opportunity to
defend against such disclosure); provided, further, that each
such authorized subcontractor maintains, and agrees in writing to maintain, an
information security program that is designed to meet all requirements of
Applicable Law, including, at a minimum, maintenance of an information security
program that is designed to: (w) ensure the security and confidentiality
of the NMG Shopper Data and NMG Prospect List; (x) protect against any
anticipated threats or hazards to the security or integrity of the NMG Shopper
Data and NMG Prospect List; (y) protect against unauthorized access to or
use of the NMG Shopper Data and the NMG Prospect List; and (z) ensure the
proper disposal of NMG Shopper Data and the NMG Prospect List; and provided,
further, that each such authorized subcontractor agrees to notify
promptly Bank and the NMG Companies of any unauthorized disclosure, use, or
disposal of, or access to, NMG Shopper Data or the NMG Prospect List and to
cooperate with the Bank and the NMG Companies in any investigation thereof and
remedial action with respect thereto;

 

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

 

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

 

(e) Upon
the termination of this Agreement, without limiting Bank’s rights and
obligations with respect to the Cardholder Data pursuant to Section 17.5,
Bank’s rights to use and disclose the NMG Shopper Data and NMG Prospect List
shall terminate. Promptly following such termination, Bank shall return or
destroy all the NMG Shopper Data and NMG Prospect Lists and shall certify such
return or destruction to the NMG Companies upon request.

 

40

 

ARTICLE VII

OPERATING STANDARDS

 

7.1 Reports.

 

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

 

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

 

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

 

7.2 Servicing.

 

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

 

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

 

41

 

7.3(a) (as
such SLAs may be amended from time to time in accordance with this Agreement).
Upon the date of the foregoing transfer, NMG shall be released from any further
obligation with respect to the performance of such Services. In the event that
customer service is transferred to Primary Servicer as a transferred Service in
accordance with the Servicing Agreement and this Section 7.2(b), Primary
Servicer shall continue to monitor the customer disputes in substantially the
same manner as is described in the Dispute Resolution and Service Profile
Report Process section of the Operating Procedures.

 

(c) Upon transfer of any of the Services to
Primary Servicer in accordance with Section 2.03(b) of the Servicing
Agreement and Section 7.2(b), the amount payable to Servicer set forth in
Schedule 9.1(a)(i) shall be adjusted as set forth in Schedule 9.1(a)(i) in
order to reflect the reduction of Services being performed by Servicer and the
assumption of the performance of such Services by Primary Servicer, which
transferred Services shall be performed at the sole cost and expense of the
Primary Servicer.

 

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

 

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

 

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

 

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

 

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

 

42

 

7.3 Service Level Standards.

 

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

 

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

 

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

 

(d) Throughout the Term, Primary Servicer shall
maintain a disaster recovery and business continuity plan that complies with
Applicable Law and is consistent with plans maintained for its Comparable
Partner Programs. Primary Servicer shall be prepared to and have the ability to
implement such plan if necessary. Primary Servicer shall provide NMG with
access to review such plan upon request. Primary Servicer shall test the plan
annually and shall promptly implement such plan upon the occurrence of a
disaster or business interruption.  Primary
Servicer shall be excused from its failure to meet any applicable SLAs that
result directly from the failure of any of the NMG Systems.

 

7.4 Credit Systems.

 

(a) The NMG Companies and Bank shall work
together (including through a subcommittee of the Management Committee formed
for this purpose) to develop a mutually agreeable plan relating to the Credit
Systems, which may include a conversion plan designed to convert such data to
the Bank Systems. Subject to the satisfaction of each of the requirements set
forth in Section 7.4(b), at such time, if any, when both NMG and Bank are
satisfied with the terms of such conversion plan and have concluded that such
conversion will further the Program Objectives and provide cost efficiencies
and features and functionality superior to those available on the NMG Systems
without an unacceptable level of Program disruption, such conversion shall be
implemented (the date of any such conversion the “Systems Transition Date”).
Bank shall bear all out-of-pocket costs and expenses associated with the
Systems conversion (whether incurred by Bank or any of its Affiliates or NMG or
any of its Affiliates).

 

(b) The Parties acknowledge and agree that no
Systems conversion shall occur pursuant to Section 7.4(a) in absence
of satisfaction of each of the following requirements:

 

(i) Bank shall ensure that all identified
features and functionality available on the NMG Systems prior to the Systems
Transition Date (including data gathering, interface capabilities with the NMG
Companies’ other Systems, Loyalty Program support and core systems/customer
service functionality) are available on the Bank Systems as of the Systems
Transition Date to the extent the NMG Systems are to be converted to the Bank
Systems;

 

43

 

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

 

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

 

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

 

(v) Bank shall keep the same structure of Account
numbers;

 

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

 

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

 

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

 

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

 

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

 

(d) Neither Party shall make any change to any of
its Systems that would render them incompatible in any way with the other Party’s
or its Affiliates’ Systems or require the other Party or its Affiliates (or the
Retail Merchants) to make any change to any of their Systems (including any POS
terminals) or reduce or restrict interfacing or System feeds, in any such case
without the prior approval of the Management Committee. Neither Party will make
any material change to its Systems with respect to the Program without the
prior approval of the Management Committee.

 

7.5 Systems Interface; Technical Support.

 

(a) Required Interfaces.

 

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

 

44

 

NMG
Companies and Bank shall maintain such interfaces and cooperate in good faith
with each other in connection with any modifications to such interfaces as may
be requested by either Party from time to time.

 

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

 

(b) Additional Interfaces; Interface
Modifications. All requests for new interfaces, modifications to existing
interfaces and terminations of existing interfaces shall be presented to the
Management Committee for approval. Upon approval, the Parties shall work in
good faith to establish the requested interfaces or modify or terminate the
existing interfaces, as applicable, on a timely basis. Except as otherwise
provided herein (including in Section 7.4), all costs and expenses with
respect to any new interface or interface modification or termination shall be
borne by the requesting Party unless otherwise determined by the Management
Committee.

 

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

 

7.6 Customer Management Systems. Bank hereby
agrees to establish the Customer Management System with the features set forth
in Schedule 7.6 by the dates specified in such schedule. The Customer
Management System shall be established and maintained by Bank at its own
expense in order to support NMG in the marketing of the Program and the Credit
Card Business.

 

ARTICLE VIII

MERCHANT SERVICES

 

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

 

45

 

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

 

8.3 In-Store Payments. The Retail Merchants may
accept In-Store Payments from Cardholders on their Accounts in accordance with
the Operating Procedures, the Risk Management Policies and any procedures
required under Applicable Law. The Retail Merchants shall, as necessary,
provide proper endorsements on such items. If the Retail Merchants receive any
In-Store Payments, NMG shall, directly or through its Affiliates, be deemed to
hold such In-Store Payments in trust for Bank until such Payments are either
delivered to Bank or applied to reduce amounts payable by Bank to NMG pursuant
to Section 8.4(b). Bank hereby grants to each of the NMG Companies and the
Retail Merchants a limited power of attorney (coupled with an interest) to sign
and endorse Bank’s name upon any form of payment that may have been issued in
Bank’s name in respect of any Account. The NMG Companies and Bank shall jointly
develop procedures in the Operating Procedures with respect to the manner in
which such In-Store Payments shall be processed (it being understood that such
procedures shall provide for immediate credit toward the applicable open-to-buy
limits of the respective Account upon receipt of an In-Store Payment). The NMG
Companies, on behalf of the Retail Merchants, shall notify Bank upon receipt of
In-Store Payments and Bank shall include the NMG Charge Transaction Data
related to such In-Store Payments in the net settlement in respect of the day
immediately following such receipt on the same basis as other NMG Charge
Transaction Data. The Retail Merchants shall issue receipts for such payments
in compliance with Applicable Law.

 

8.4 Settlement Procedures.

 

(a) NMG shall transmit NMG Charge Transaction
Data to Bank in accordance with the Operating Procedures on each day on which
such Retail Merchants are open for business, other than Sunday. If NMG Charge
Transaction Data is received by Bank’s processing center on or before 6:00 am
(Central time) on any Business Day on which Bank is open for business, Bank
shall process the NMG Charge Transaction Data and initiate a wire transfer of
the payment in respect thereof before 1:00 pm (Central time) on the same
Business Day. If the NMG Charge Transaction Data is received after 6:00 am
(Central time) on any day a Retail Merchant is open, or at any time on a day
other than a Business Day, Bank shall process the NMG Charge Transaction Data
for payment by 1:00 pm (Central time) on the following Business Day.

 

(b) Bank shall remit to NMG, for itself and the
Retail Merchants, an amount equal to (i) the total amount of charges
identified in all NMG Charge Transaction Data not yet paid in accordance with Section 8.4(a) less
(ii) the sum of (A) the total amount of any credits included in such
NMG Charge Transaction Data, plus (B) the total amount of In-Store
Payments (if any), plus (C) any amounts charged back to such Retail
Merchants pursuant to Section 8.5. The total amount of charges reflected
in the NMG Charge Transaction Data shall include the amount of all Special
Discounts such that upon daily settlement of such NMG Charge Transaction Data
in

 

46

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

47

 

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

 

8.6 Exercise of Chargeback. If Bank exercises
its right of chargeback, Bank may set off all amounts charged back against any
sums due to the NMG Companies under this Agreement, or Bank may demand payment
from NMG for the full amount of such chargeback. In the event of a chargeback
pursuant to this Article VIII, upon payment in full of the related amount
by NMG, Bank shall immediately assign to NMG or the relevant Retail Merchant,
without any representation, warranty or recourse, (i) all right to
payments of amounts charged back in connection with such Cardholder charge, and
(ii) any security interest granted by the NMG Companies under Section 19.1.
Bank shall cooperate fully in any effort by the NMG Companies to collect the chargeback
amount, including by executing and delivering any document necessary or useful
to such collection efforts.

 

8.7 No Merchant Discount. None of NMG, its
Affiliates or the Retail Merchants shall be required to pay any Merchant
Discount on any NMG Transaction. Bank shall directly process the NMG
Transactions such that the Retail Merchants do not incur any merchant
acquirer/processor or similar fees.

 

ARTICLE IX

PROGRAM ECONOMICS

 

9.1 NMG Compensation.

 

(a) Payments.

 

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

 

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

 

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

 

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

 

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

 

48

 

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

 

9.2 Dispute Resolution. Any disputes regarding
the amounts owed under this Agreement shall be resolved in accordance with Section 12.3.

 

ARTICLE X

INTELLECTUAL PROPERTY

 

10.1 The NMG Licensed Marks.

 

(a) Grant of License to Use the NMG Licensed
Marks. Subject to the terms and conditions of this Agreement, NMG hereby
grants to Bank a non-exclusive, royalty-free, non-transferable right and
license to use the NMG Licensed Marks (i) with respect to the Program in
the United States in connection with the creation, establishment, marketing and
administration of, and the provision of services related to, the Program and (ii) in
connection with any sale permitted by this Agreement of the Accounts and
Cardholder Indebtedness to third parties for liquidation. All use of the NMG
Licensed Marks shall be in accordance with this Agreement and any Trademark
Style Guide delivered by NMG to Bank from time to time (which NMG shall so
deliver). All uses of the NMG Licensed Marks shall require the prior written
approval of NMG. To the extent Bank delegates any of its rights or obligations
hereunder to any authorized Affiliate and/or authorized third party in
accordance with the terms and conditions of this Agreement, Bank may sublicense
its rights in the NMG Licensed Marks hereunder to such authorized Person; provided
that such Person shall agree to comply with all of the terms and conditions of
the use of the NMG Licensed Marks hereunder and Bank shall remain liable for
such Person’s failure to so comply. Except as expressly set forth in this Section 10.1,
the rights granted pursuant to this Section 10.1 are solely for use of
Bank and may not be sublicensed without the prior written approval of NMG.

 

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

 

(c) Termination of License. Except to the
extent otherwise provided in Section 17.5, the license granted in this Section 10.1
shall terminate upon the termination or expiration of this Agreement or, if the
purchase option under Section 17.2 is exercised, the Program Purchase
Date. Upon termination of the license granted in this Section 10.1, all
rights in the NMG Licensed Marks granted hereunder shall revert to NMG and Bank
shall: (i) discontinue

 

49

 

immediately
all use of the NMG Licensed Marks, or any of them, and any colorable imitation
thereof; and (ii) destroy all unused NMG Credit Cards, Applications,
Account Documentation, Solicitation Materials, periodic statements, materials,
displays, advertising and sales literature and any other items bearing any of
the NMG Licensed Marks; provided that if the purchase option under Section 17.2
is exercised, at NMG’s election, such items shall constitute Program Assets and
will be transferred and delivered to NMG or its Nominated Purchaser pursuant to
Section 17.2.

 

(d) Ownership of the NMG Licensed Marks.
Bank acknowledges that (i) the NMG Licensed Marks, all rights therein, and
the goodwill associated therewith, are, and shall remain, the exclusive
property of NMG, (ii) it shall take no action which shall adversely affect
NMG’s exclusive ownership of the NMG Licensed Marks, or the goodwill associated
with the NMG Licensed Marks (it being understood that the collection of
Accounts, adverse action letters, and changes in terms of Accounts as required
by Applicable Law do not adversely affect goodwill, if done in accordance with
the terms of this Agreement), and (iii) any and all goodwill arising from
use of the NMG Licensed Marks by Bank shall inure to the benefit of NMG.
Nothing herein shall give Bank any proprietary interest in or to the NMG
Licensed Marks, except the right to use the NMG Licensed Marks in accordance
with this Agreement, and Bank shall not contest NMG’s title in and to the NMG
Licensed Marks.

 

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

 

10.2 The Bank Licensed Marks.

 

(a) Grant of License to Use the Bank Licensed
Marks. Subject to the terms and conditions of this Agreement, Bank hereby
grants to the NMG Companies a non-exclusive, royalty-free, non-transferable
right and license to use the Bank Licensed Marks in the United States in
connection with the creation, establishment, marketing and administration of,
and the provision of services related to, the Program. All uses of the Bank
Licensed Marks shall be in accordance with this Agreement and any Trademark
Style Guide delivered by Bank to NMG from time to time (which Bank shall so
deliver). All uses of the Bank Licensed Marks shall require the prior written
approval of Bank. To the extent the NMG Companies delegate any of their rights
or obligations hereunder to any authorized Affiliate and/or authorized third
party in accordance with the terms and conditions of this Agreement, the NMG
Companies may sublicense their rights in the Bank Licensed Marks hereunder to
such authorized Person; provided that such Person shall agree to comply
with all of the terms and conditions of the use of the Bank Licensed Marks
hereunder and the NMG Companies shall remain liable for such Person’s failure
to so comply. Except as expressly set forth in this Section 10.2, the
rights granted pursuant to this Section 10.2 are solely for use of the NMG
Companies and may not be sublicensed without the prior written approval of
Bank.

 

50

 

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

 

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

 

(d) Ownership of the Bank Licensed Marks.
Each of the NMG Companies acknowledges that (i) the Bank Licensed Marks,
all rights therein, and the goodwill associated therewith, are, and shall
remain, the exclusive property of Bank, (ii) it shall take no action which
shall adversely affect Bank’s exclusive ownership of the Bank Licensed Marks or
the goodwill associated with the Bank Licensed Marks, and (iii) any and
all goodwill arising from use of the Bank Licensed Marks by the NMG Companies
shall inure to the benefit of Bank. Nothing herein shall give the NMG Companies
any proprietary interest in or to the Bank Licensed Marks, except the right to
use the Bank Licensed Marks in accordance with this Agreement, and the NMG
Companies shall not contest Bank’s title in and to the Bank Licensed Marks.

 

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

 

10.3 Intellectual Property.

 

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

 

51

 

(b) Joint Intellectual Property. Each
Party shall have the right to use, license and otherwise exploit jointly owned
Intellectual Property without any restriction or obligation to account to the
other Party; provided, however, that no such jointly owned Intellectual
Property shall be used by Bank in connection with any Comparable Partner
Program or Competing Retail Program without the prior written consent of NMG.
Patents and patentable inventions shall be deemed to be owned jointly, as
between the Parties, only if the respective personnel of each Party are deemed
co-inventors under the patent law, and (ii) software and other works of
authorship and associated copyrights shall be deemed to be jointly owned only
if the Parties are deemed co-authors or co-owners of such software or other
work of authorship under the copyright law. Any other Intellectual Property
developed by a substantially equal investment of time, human, intellectual and
financial resources by each Party during the Term of this Agreement shall be
owned jointly by the Parties. By way of example and not of limitation, a Party
shall not be a joint owner of any such Intellectual Property if its
contribution thereto consists solely of data, unless that is the only
contribution of the other Party. Otherwise, all patents, patentable inventions,
software, other works of authorship and related copyrights and all other
Intellectual Property (and any improvements thereto) shall be deemed to be
owned solely by one Party. Thus, to the extent that a work created by one Party
is based on or incorporates Intellectual Property of the other Party, but the
Parties are not joint owners as set forth above, then one Party shall be the
sole owner of the Intellectual Property in the underlying work and the other
Party shall be the sole owner of the Intellectual Property in the new work. Any
information or data provided by or on behalf of one Party to the other Party
remains, as between the Parties, the sole property of the providing Party, and
if applicable, shall be considered “Confidential Information” under Section 13.1.
Any Intellectual Property, systems or networks of a Party used to process,
store or analyze information or data of the other Party remain, as between the
Parties, the sole property of the first Party.

 

(c) During and after the Term of this Agreement,
each Party may use, license or otherwise exploit (or permit others to do so)
any jointly owned Intellectual Property referenced herein solely at its own
risk.

 

ARTICLE XI

REPRESENTATIONS, WARRANTIES AND COVENANTS

 

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

 

(a) Corporate Existence. Each NMG Company:
(i) is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation; (ii) is duly
licensed or qualified to do business and is in good standing as a foreign
corporation in all jurisdictions in which the conduct of its business or the
activities in which it is engaged makes such licensing or qualification
necessary, except to the extent that its non-compliance would not reasonably be
expected to have, individually or in the aggregate, a material adverse effect
on the

 

52

 

NMG
Companies’ ability to perform their obligations hereunder; and (iii) has
all necessary licenses, permits, consents or approvals from or by, and has made
all necessary filings and registrations with, all governmental authorities
having jurisdiction, to the extent required for the ownership, lease or conduct
and operation of its business, except to the extent that the failure to obtain
such licenses, permits, consents or approvals or to make such filings or
registrations would not reasonably be expected to have, individually or in the
aggregate, a material adverse effect upon the NMG Companies, the Program, the
Accounts, Cardholder Indebtedness or the NMG Companies’ ability to perform
their obligations under this Agreement.

 

(b) Capacity; Authorization; Validity.
Each NMG Company has all necessary corporate power and authority to (i) execute
and enter into this Agreement, and (ii) perform the obligations required
of such NMG Company hereunder and the other documents, instruments and
agreements relating to the Program and this Agreement executed by such NMG
Company pursuant hereto. The execution and delivery by the NMG Companies of
this Agreement and all documents, instruments and agreements executed and
delivered by the NMG Companies pursuant hereto, and the consummation by the NMG
Companies of the transactions specified herein, have been duly and validly
authorized and approved by all necessary corporate actions of the NMG
Companies. This Agreement (i) has been duly executed and delivered by the
NMG Companies, (ii) constitutes the valid and legally binding obligation
of the NMG Companies, and (iii) is enforceable in accordance with its
terms (subject to applicable bankruptcy, insolvency, reorganization,
receivership or other laws affecting the rights of creditors generally and by
general equity principles including those respecting the availability of
specific performance).

 

(c) Conflicts; Defaults; Etc. Subject to
receipt of any licenses and qualifications required for NMG to perform its
servicing obligations under the Servicing Agreement, the execution, delivery
and performance of this Agreement by each of the NMG Companies, their
compliance with the terms hereof, and consummation of the transactions
specified herein will not (i) conflict with, violate, result in the breach
of, constitute an event which would, or with the lapse of time or action by a
third party or both would, result in a default under, or accelerate the performance
required by, the terms of any contract, instrument or agreement to which NMG or
any of its Subsidiaries is a party or by which they are bound, or to which any
of the assets of NMG or any of its Subsidiaries are subject; (ii) conflict
with or violate the articles of incorporation or by-laws, or any other
equivalent organizational document(s), of the NMG Companies; (iii) breach
or violate any Applicable Law or Applicable Order, in each case, applicable to
the NMG Companies; (iv) require the consent or approval of any other party
to any contract, instrument or commitment to which any NMG Company is a party
or by which it is bound; or (v) require any filing with, notice to,
consent or approval of, or any other action to be taken with respect to, any Governmental
Authority, except, in the cases of clauses (i) and (iii)-(v), for such
conflicts, breaches, defaults, violations or failures to obtain such consents
or approvals or make or obtain such filings, notices, consents and approvals as
would not reasonably be expected to have, individually or in the aggregate, a
material adverse effect upon the NMG Companies, the Program, the Accounts,
Cardholder Indebtedness or the NMG Companies’ ability to perform their
obligations under this Agreement.

 

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

 

53

 

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

 

(e) Compliance with Laws. Except to the
extent that any of the following would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect upon the Program or
the ability of the NMG Companies to perform their obligations under this
Agreement, the NMG Companies are in compliance with all requirements of
Applicable Law relating to the Credit Card Business and neither of the NMG Companies
nor any of their Affiliates is subject to any order, directive or restriction
of any kind issued by any Governmental Authority that restricts in any respect
its ability to perform its obligations under the Program.

 

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

 

(g) Books and Records. All books and
records of the NMG Companies related to the Credit Card Business have been
maintained accurately and in accordance with all requirements of Applicable Law
applicable to the NMG Companies and the Credit Card Business, except for any
instances of inaccuracy or noncompliance that would not reasonably be expected
to have a material adverse effect on the ability of the NMG Companies to
perform their obligations under this Agreement.

 

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

 

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

 

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

 

(a) Corporate Existence. Each Bank
Company: (i) is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation; and (ii) is duly
licensed or qualified to do business and is in good standing as a foreign
entity in all jurisdictions in which the conduct of the its business or the
activities in which it is engaged, or proposes to engage pursuant to this
Agreement, makes such licensing or qualification necessary, except to the
extent that its non-compliance would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect upon the Bank
Companies, the Program, the Accounts,

 

54

 

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

 

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

 

(c) Conflicts; Defaults; Etc. The
execution, delivery and performance of this Agreement by each of the Bank Companies,
their compliance with the terms hereof, and the consummation of the
transactions specified herein will not (i) conflict with, violate, result
in the breach of, constitute an event which would, or with the lapse of time or
action by a third party or both would, result in a default under, or accelerate
the performance required by, the terms of any contract, instrument or agreement
to which any of Bank Parent or any of its Subsidiaries is a Party or by which
they are bound, or to which any of the assets of Bank Parent or any of its
Subsidiaries are subject; (ii) conflict with or violate the articles of
incorporation or by-laws, or any other equivalent organizational document(s),
of the Bank Companies; (iii) breach or violate any Applicable Law or Applicable
Order, in each case, applicable to the Bank Companies; (iv) require the
consent or approval of any other Party to any contract, instrument or
commitment to which any Bank Company is a Party or by which it is bound; or (v) require
any filing with, notice to, consent or approval of, or any other action to be
taken with respect to, any Governmental Authority, except, in the cases of
clauses (i) and (iii)-(v), for such conflicts, breaches, defaults,
violations or failures to obtain such consents or approvals or make or obtain
such filings, notices, consents and approvals as would not reasonably be
expected to have, individually or in the aggregate, a material adverse effect
upon the Bank Companies, the Program, the Accounts, Cardholder Indebtedness or the
ability of the Bank Companies to perform their obligations under this
Agreement.

 

55

 

(d) No Litigation. No action, claim,
litigation, proceeding, arbitration or investigation is pending or, to the
Knowledge of Bank, threatened against Bank Parent or any of its Subsidiaries,
at law, in equity or otherwise, by or before any Governmental Authority, to
which Bank Parent or any of its Subsidiaries is a Party, which would reasonably
be expected to have, individually or in the aggregate, a material adverse
effect upon the Bank Companies, the Program, the Accounts, Cardholder
Indebtedness or the ability of the Bank Companies to perform their obligations
under this Agreement.

 

(e) Compliance with Laws.

 

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

 

(A) the
Bank Companies are in compliance with all requirements of Applicable Law
relating to their Credit Card business; and

 

(B) none
of the Bank Companies or any of their Affiliates is subject to any capital plan
or supervisory agreement, cease-and-desist or similar order or directive or
memorandum of understanding between it and any Governmental Authority or issued
by any Governmental Authority, nor has any of them adopted any board
resolutions at the request of any Governmental Authority.

 

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

 

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

 

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

 

(h) Books and Records. All books and
records of the Bank Companies and their Affiliates related to their Credit Card
business have been maintained accurately and in accordance with all
requirements of Applicable Law applicable to Bank and its Credit Card business,
except for any instances of inaccuracy or noncompliance that would not
reasonably be expected to have a material adverse effect on the ability of the
Bank Companies to perform their obligations under this Agreement.

 

56

 

(i) Insurance. The Bank Companies maintain
insurance policies with respect to their properties under such terms and
conditions as are (i) commercially reasonable and available from time to
time and (ii) customary for similarly situated Persons engaged in similar
business, except in each case for insurance which a failure to maintain would
not reasonable be expected to have a material adverse effect on the ability of
the Bank Companies to perform their obligations under this Agreement.

 

11.3 No other Representations or Warranties.
Except as expressly set forth in Sections 11.1 and 11.2, neither Bank nor NMG
has made or makes any other express or implied representations, or any express
or implied warranty, either written or oral, with respect to the Credit Card
Business, the Program, the Bank Companies or the NMG Companies, or as to any
other matter whatsoever.

 

11.4 General Covenants of the NMG Companies.

 

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

 

(b) Reports and Notices. Each of the NMG
Companies shall provide Bank with a facsimile notice specifying the nature of
any NMG Event of Default, or any event which, with the giving of notice or
passage of time or both, would constitute an NMG Event of Default, or any
development or other information which is likely to have a material adverse
effect on the Program, the Accounts, Cardholder Indebtedness or the NMG
Companies’ ability to perform their obligations pursuant to this Agreement.
Notices pursuant to this Section 11.4(b) relating to NMG Events of
Default shall be provided within two (2) Business Days after any of the
NMG Companies has Knowledge of the existence of such default. Notices relating
to all other events or developments described in this Section 11.4(b) shall
be provided (i) promptly after any of the NMG Companies has Knowledge of
the existence of such event or development if such event or development has
already occurred, and (ii) 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 shall be confirmed in writing to
Bank within five (5) Business Days after the transmission of the initial
notice.

 

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

 

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

 

57

 

(e) Disputes with Cardholders. The NMG
Companies shall cooperate with Bank in a timely manner (but in no event less
promptly than required by Applicable Law) to resolve all disputes with
Cardholders.

 

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

 

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

 

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

 

11.5 General Covenants of the Bank Companies.

 

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

 

(b) Reports and Notices. Bank shall
provide NMG with a facsimile notice specifying the nature of any Bank Event of
Default, or any event which, with the giving of notice or passage of time or
both, would constitute a Bank Event of Default, or any development or other
information which is likely to have a material adverse effect on the Program,
the Accounts or Bank’s ability to perform its obligations pursuant to this
Agreement. Notice pursuant to this Section 11.5(b) relating to Bank
Events of Default shall be provided within two (2) Business Days after any
Bank Company has Knowledge of the existence of such default. Notices relating
to all other events or developments described in this Section 11.5(b) shall
be provided (i) promptly after any Bank Company obtains Knowledge of the
existence of such event or development if such event or development has already
occurred, and (ii) 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 shall be confirmed in writing to NMG within five (5) Business
Days after transmission of the initial notice.

 

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

 

58

 

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

 

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

 

(e) Servicing Qualifications. The Bank
Companies shall at all times during the Term remain licensed and qualified in
all jurisdictions necessary to service the Accounts in accordance with all
Applicable Laws, except where the failure to be so qualified would not
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the ability of the Bank Companies to perform their
obligations under this Agreement. Primary Servicer shall at all times during
the Term maintain the necessary facilities, equipment, supplies and such other
resources in good working order as are reasonably necessary to provide any
Services required to be provided by it pursuant to Section 7.2 in
accordance with the SLAs set forth in Schedule 7.3(a).

 

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

 

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

 

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

 

ARTICLE XII

ACCESS, AUDIT AND DISPUTE RESOLUTION

 

12.1 Access Rights. Each Party shall permit the
other Party and its representatives and regulators to visit its facilities
related to the Program during normal business hours with reasonable advance
notice. The reviewing Party shall employ such reasonable procedures and methods
as are necessary and appropriate in the circumstances, minimizing interference
to the extent practicable with the reviewed Party’s normal business operations.
The reviewed Party shall use commercially reasonable efforts to facilitate the
reviewing Party’s review, including making reasonably available such personnel
of the reviewed Party and its service providers to assist the reviewing Party
and its representatives as reasonably requested. Each Party shall also permit
the other Party and its representatives and regulators to review (during normal
business

 

59

 

hours)
and obtain copies of the books and records relating to the Program; provided
that neither Party shall be required to provide access to records to the extent
that (a) such access is prohibited by Applicable Law, (b) such
records are legally privileged, (c) such records are company planning
documents of such Party or any of its Affiliates, operating budgets, management
reviews or employee records, (d) such records relate to other customers
of, or credit programs operated by, Bank or the NMG Companies (except as may be
necessary or appropriate in connection with any consideration of the terms and
conditions of Comparable Partner Programs and Competing Retail Programs as
contemplated by this Agreement to the extent such terms and conditions are
publicly known or otherwise known and not subject to any confidentiality
obligations on the part of either Party) or (e) such records relate to
other customers or operations of such Party other than the Program or to
personnel records not normally disclosed in connection with audits.

 

12.2 Audit Rights. Twice per year or at any
time that a Party disputes the amount of any monies owed by either Party to the
other hereunder, such Party, at its sole cost and expense and upon five (5) days’
prior notice to the other Party, may conduct an audit of those of the other
Party’s financial and operational records that are under the control and/or
direction of the audited Party and relate to the Program or can be reasonably
segregated. Such audit shall be conducted during normal business hours in
accordance with generally accepted auditing standards and the auditing Party
shall employ such reasonable procedures and methods as are necessary and
appropriate in the circumstances, minimizing interference to the extent
practicable with the audited Party’s normal business operations. The audited
Party shall use commercially reasonable efforts to facilitate the auditing
Party’s review, including making reasonably available such personnel of the
audited Party and its service providers to assist the auditing Party and its
representatives as reasonably requested. The audited Party shall deliver any
document or instrument necessary for the auditing Party to obtain such records
from any Person maintaining records for the audited Party and shall maintain
records pursuant to its regular record retention policies. For purposes of this
provision, the audited Party also shall be required to provide records relating
to the Program held by Persons performing services in connection with the
Program at the auditing Party’s request. Notwithstanding the generality of the
foregoing, the audited Party shall not be required to provide access to records
to the extent that (a) such access is prohibited by Applicable Law, (b) such
records are legally privileged, (c) such records are company planning
documents of such Party or any of its Affiliates, operating budgets, management
reviews or employee records, (d) such records relate to other customers
of, or credit programs operated by, Bank or the NMG Companies (except as may be
necessary or appropriate in connection with any consideration of the terms and
conditions of Comparable Partner Programs and Competing Retail Programs as
contemplated by this Agreement to the extent such terms and conditions are
publicly known or otherwise known and not subject to any confidentiality
obligations on the part of either Party) or (e) such records relate to
other customers or operations of such Party other than the Program or to
personnel records not normally disclosed in connection with audits.

 

12.3 Accounting Dispute Resolution.

 

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

 

60

 

The
Parties agree to attempt in good faith to resolve any such disputes. Except
with respect to any indemnification claim arising under Article XVII,
which shall not be subject to the procedures of this Section 12.3, in the
event the Parties are unable to resolve any such dispute, after negotiating in
good faith for a period of not less than ten (10) Business Days, either
Party may request a nationally recognized firm of independent accountants
mutually agreeable to the Parties (the “Accountants”) to reconcile any
amounts in dispute; provided, however, that the Accountants’
determination shall be limited to the amount disputed by the Parties and in no
event shall such determination provide for a payment to any Party higher than
the amount claimed by the Party to be owed to such Party. Any such request
shall be in writing and shall specify with particularity the disputed amounts
being submitted for determination. Each Party agrees to promptly and in good
faith take all necessary action to designate the Accountants no later than ten (10) Business
Days after a request that such a designation be made. The Parties shall
cooperate fully in assisting the Accountants in their review, including by
providing the Accountants full access to all files, books and records
(including work papers of internal and independent accountants of the Parties)
relevant thereto and providing such other information as the Accountants may
reasonably request in connection with any such review. Notwithstanding the
generality of the foregoing, the Parties shall not be required to provide the
Accountants with access to records to the extent that (i) such access is
prohibited by Applicable Law, (ii) such records are legally privileged or (iii) such
records relate to other customers of, or credit programs operated by, the Party
(except as may be necessary or appropriate in connection with any consideration
of the terms and conditions of Comparable Partner Programs and Competing Retail
Programs as contemplated by this Agreement to the extent such terms and
conditions are publicly known or otherwise known and not subject to any
confidentiality obligations on the part of either Party). In the event the
determination made by the Accountants requires either Party to make payment to
the other Party of any additional amount, such Party shall make such payment no
later than five (5) Business Days following receipt from the Accountants
of written notice to the Parties of such determination plus interest at the
Federal Funds Rate on any such amount due computed from and including the date
such amount should have been paid through and excluding the date of payment.
The fees and expenses of such Accountants arising out of such reviews shall be
borne by the Parties in proportion to the relative difference between their
respective claims regarding the amount in dispute and the amount determined by
the Accountants. The determination of the Accountants shall be final and
binding on the Parties subject to the correction of obvious errors.

 

61

 

12.4 Dispute Resolution.

 

(a) Generally. Any dispute among the
Parties arising out of or relating to this Agreement, including with respect to
the interpretation of any provision of this Agreement and with respect to the
performance by NMG or Bank hereunder that is not otherwise required to be
submitted for resolution under Section 12.3 shall be resolved as provided
in this Section 12.4; provided, however, that this provision
shall not limit either Party’s right to obtain any provisional or other remedy,
including, without limitation, specific performance or injunctive relief from
any court of competent jurisdiction, as may be necessary, in the aggrieved
Party’s sole discretion, to protect its rights under this Agreement. This Section 12.4
does not apply to disputes among the Management Committee members with respect
to decisions expressly allocated to the Management Committee pursuant to this
Agreement (other than matters submitted to the Management Committee pursuant to
the dispute resolution procedure referred to in Section 12.4(b)(i)(B)).
Such disputes shall be resolved in accordance with Section 3.2.

 

(b) Informal Dispute Resolution.

 

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

 

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

 

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

 

(C) Appointment
of Representatives. If, after a period of five (5) Business Days, the
Management Committee is unable to resolve the dispute to the satisfaction of
both the NMG Companies and Bank, each Party shall appoint a designated
knowledgeable, responsible representative who is one of the top five highest
executives in the Credit Card division of Bank and one of the top five
executives of NMG and who does not devote substantially all of his or her time
to performance under this Agreement, whose task it will be to meet for the
purpose of negotiating in good faith to seek resolution of the dispute.

 

With respect to clauses
(A), (B) and (C) above, discussions, documents and correspondence
exchanged among the Managers and representatives, or submitted to the
Management Committee for purposes of these negotiations, shall be treated as
Confidential Information developed for purposes of settlement, exempt from
discovery and production, which shall not be admissible in any lawsuit without
the concurrence of the Parties. Documents identified in or provided with such
communications, which were not prepared for the purposes of the negotiations,
are not so exempted and may, if otherwise admissible, be admitted in evidence
in any lawsuit.

 

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

 

(A) either
of the designated representatives concludes in good faith that amicable
resolution through continued negotiation of the dispute does not appear likely
and so states in a notice to the other designated representative or in a joint
declaration signed by each of them; or

 

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

 

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

 

ARTICLE XIII

CONFIDENTIALITY

 

13.1 General Confidentiality.

 

(a) For purposes of this Agreement, “Confidential
Information” means any of the following: (i) information that is
provided by or on behalf of either NMG or Bank to the other Party or its agents
in connection with the Program (including information provided prior to the
date hereof or the Effective Date); (ii) information about NMG or Bank or
their Affiliates, or their respective businesses or employees, that is
otherwise obtained by the other Party in connection with the Program, in each
case including: (A) information concerning marketing plans, objectives and
financial results; (B) information regarding business systems, methods,
processes, financing data, programs and products; (C) information
regarding any products offered or proposed to be offered under the Program or
the manner of offering of any such products; (D) information unrelated to
the Program obtained by NMG or Bank in connection with this Agreement,
including by accessing or being present at the business location of the other
Party; and (E) proprietary technical information, including source codes,
or other proprietary information developed in connection with the Program; (iii) the
terms and conditions of this Agreement; and (iv) the Marketing Plan. The
provisions of this Article XIII governing Confidential Information shall
not govern Cardholder Data, NMG Shopper Data or NMG Prospect Data, which shall
be governed by the provisions of Article VI.

 

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

 

63

 

through
examination of, publicly available records or products; (iv) is required
to be disclosed by Applicable Law; provided that the Party subject to
such Applicable Law shall use reasonable efforts to avoid such disclosure and
notify the other Party of any such use or requirement prior to disclosure of
any Confidential Information obtained from the other Party in order to afford
such other Party an opportunity to seek a protective order to prevent or limit
disclosure of the Confidential Information to third Parties; provided, further,
that such information shall be disclosed only to the extent required by such
Applicable Law and shall otherwise remain Confidential Information; or (v) is
developed by NMG or Bank, as the case may be, without the use or knowledge of
any proprietary, non-public information provided by the other Party under, or
otherwise made available to such Party as a result of, this Agreement. Nothing
herein shall be construed to permit the Receiving Party (as defined below) to
disclose to any third party any Confidential Information that the Receiving
Party is required to keep confidential under Applicable Law.

 

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

 

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

 

13.2 Use and Disclosure of Confidential Information.

 

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

 

(b) Each Receiving Party shall: (i) limit
access to the Disclosing Party’s Confidential Information to those employees,
authorized agents, vendors, consultants, service providers, accountants,
advisors and subcontractors who have a reasonable need to access such
Confidential Information in connection with the Program, the sale of Program
Assets or other assets of NMG and its Affiliates or the establishment of a new
Credit Card or other program or arrangement for an NMG Company, in each case in
accordance with the terms of this Agreement, and (ii) ensure that any
Person with access to the Disclosing Party’s Confidential Information agrees to
be bound by a confidentiality agreement containing the restrictions set forth
in this Article XIII.

 

64

 

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

 

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

 

ARTICLE XIV

RETAIL PORTFOLIO ACQUISITIONS

 

14.1 Retailer that Operates a Credit Card Business.
If NMG or any of its Subsidiaries acquires or otherwise combines with
(including by merger, consolidation or other business combination) a retail
department store business that directly or through an Affiliate issues a Credit
Card in the United States, unless such transaction is one giving right to a
termination by NMG pursuant to Section 16.2(c) and as to which NMG has
exercised such right, Bank shall have a right of first offer to acquire the
related Credit Card business offered for sale by such retailer in connection
with NMG’s or its Subsidiary’s acquisition of the retail department store
business (such Credit Card business accounts, the “New Portfolio”) as
follows. Prior to or promptly following the consummation of the acquisition,
NMG shall provide notice to Bank indicating its intention to engage in, or the
consummation of, as the case may be, such acquisition and shall provide Bank
with a reasonable opportunity to conduct due diligence, and for this purpose
NMG shall provide Bank and its representatives with reasonable access to the
records and accounts (including the master file) relating to such New Portfolio,
subject to the execution of a confidentiality agreement reasonably satisfactory
to NMG. Not later than the 20th day following receipt by Bank of due diligence
information reasonably requested by Bank and available to NMG, Bank may make an
offer to NMG with respect to the purchase of such New Portfolio, which offer
shall be required to remain open for a period of not less than forty-five (45)
days. NMG shall be under no obligation to accept such offer or to provide Bank
with any right to match any offer received by NMG from any third party. NMG may
elect to (A) accept

 

65

 

the
offer made by Bank, (B) keep such New Portfolio or (C) offer such New
Portfolio for sale to a third party; provided that NMG shall not sell
such New Portfolio to a third party unless such third party makes an offer
having financial terms and conditions (including terms relating to the manner
in which the conversion costs relating to the contemplated transaction are to
be allocated among the Parties) substantially more favorable in the aggregate
than the terms and conditions offered by Bank. If NMG does not sell such New
Portfolio to Bank (whether because NMG elects to keep such New Portfolio or
sell it to a third party), the restrictions of Section 2.2 shall not apply
to the Credit Card business associated with such New Portfolio, including any
growth thereof.

 

14.2 Retailer that has a Credit Card with another
Issuer. If NMG or any of its Subsidiaries acquires or otherwise combines
with (including by merger, consolidation or other business combination) a
retail department store business that through an unaffiliated Person (other
than Bank or any of its Affiliates) issues a Credit Card in the United States,
unless such transaction is one giving right to a termination by NMG pursuant to
Section 16.2(c) and as to which NMG has exercised such right, Bank
agrees that it shall negotiate in good faith for the purchase of the retailer’s
Credit Card portfolio from such unaffiliated issuer associated with the retail
assets being acquired. Prior to or promptly following the consummation of the
acquisition, NMG shall provide notice to Bank indicating its intention to
engage in, or the consummation of, as the case may be, such acquisition and
shall cooperate to the extent practicable to provide Bank with a reasonable
opportunity to conduct due diligence. In the event that Bank is unsuccessful in
its bid for the Credit Card portfolio, NMG may offer the Credit Card program of
such unaffiliated issuer until the expiration of the agreement governing such
program, and Bank shall negotiate in good faith for the purchase of the Credit
Card portfolio at that time; provided, however, that if Bank is
unable to agree to the terms of the purchase of such Credit Card portfolio
prior to the time that notice of termination or election to extend the term, as
applicable, is due under such program agreement, NMG shall have the right to
continue to operate such Credit Card portfolio under the existing program
agreement or to purchase and operate such retailer’s Credit Card business
itself or to engage a third party to do so; provided, however,
that NMG shall not engage a third party other than Bank unless the financial
terms and conditions (including terms relating to the manner in which the
conversion costs relating to the contemplated transaction are to be allocated
among the Parties) pursuant to which such third party is to operate such Credit
Card business are substantially more favorable in the aggregate to NMG than the
terms and conditions offered by Bank. If NMG or any of its Subsidiaries,
directly or with a third Person, acquires the Credit Card business of another
retailer pursuant to this provision and this Agreement remains in effect, Section 2.2
shall not apply to such acquired Credit Card business or to the associated
acquired retail operations, including any growth thereof.

 

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

 

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

 

66

 

Card
unless (i) Bank is already providing a Dual-Line Credit Card program for
the NMG Companies at the time of the proposed acquisition or (ii) NMG has
already given notice to Bank of its desire to issue a Dual-Line Credit Card
pursuant to Section 2.2(c)(ii) and Bank is fully committed to
issuing, and able to issue, such Dual-Line Credit Card within the Development
Period.

 

14.5 Conversion of Purchased Accounts.

 

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

 

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

 

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

 

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

 

(b) Bank shall cover all costs related to
conversions pursuant to this Section 14.5, including replacement of Credit
Cards, notices to Cardholders and complying with other requirements of
Applicable Law.

 

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

 

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ARTICLE XV

EVENTS OF DEFAULT; RIGHTS AND
REMEDIES

 

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

 

(a) Such Party shall fail to perform, satisfy or
comply with any obligation, condition, covenant or other provision contained in
this Agreement (other than failure to comply with any SLAs), and (i) such
failure shall remain unremedied for a period of thirty (30) days after the
other Party shall have given written notice thereof specifying the nature of
such failure in reasonable detail, provided that if such failure cannot
be cured in a commercially reasonable manner within such time, such failure
shall not constitute an Event of Default if the defaulting Party shall have
initiated and diligently pursued a cure within such time and such cure is
completed within ninety (90) days from the date of written notice regarding
such failure, and (ii) such failure shall either have a material adverse
effect on the licensed marks of the non-defaulting Party, or materially
diminish the economic value of the Program to the non-defaulting Party.

 

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

 

15.2 Defaults by Bank. The occurrence of any
one or more of the following events (regardless of the reason therefor) shall
constitute an event of default by Bank hereunder:

 

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

 

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

 

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

 

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

 

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

 

(f) Any regulatory authority having jurisdiction
over a Bank Company or Bank Parent shall order the appointment of a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official)
of such Bank Company or Bank Parent, as the case may be, or of any substantial
part of its properties, or order the winding-up or liquidation of the affairs
of any Bank Company or Bank Parent, and such order shall not be vacated,
discharged, stayed or bonded within sixty (60) days from the date of entry
thereof.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

69

 

(c) A decree or order by a court having
jurisdiction (i) for relief in respect of NMG pursuant to the Bankruptcy
Code or any other applicable bankruptcy or other similar law, (ii) for
appointment of a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) of NMG or of any substantial part of its
properties, or (iii) ordering the winding-up or liquidation of the affairs
of NMG shall, in any such case be entered, and shall not be vacated,
discharged, stayed or bonded within sixty (60) days from the date of entry
thereof.

 

(d) NMG shall (i) file a petition seeking
relief pursuant to the Bankruptcy Code or any other applicable bankruptcy or
other similar law, (ii) consent 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 official) of NMG or any substantial part of its
properties, or (iii) take corporate or similar action in furtherance of
any such action.

 

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

 

15.4 Remedies for Events of Default. In
addition to any other rights or remedies available to the Parties at law or in
equity, upon the occurrence of an Event of Default pursuant to Section 15.1,
15.2 or 15.3, the non-defaulting Party shall be entitled to collect from the
defaulting Party any amount indisputably in default plus interest based on the
Federal Funds Rate.

 

ARTICLE XVI

TERM/TERMINATION

 

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

 

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

 

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

 

(b) upon thirty (30) days’ prior written notice
if (i) there is a Change of Control of Bank Parent or (ii) one or
more Persons that is not an Affiliate of Bank on the date of this Agreement
acquires a direct or indirect controlling interest in Bank or any other Person
conducting a substantial part of the Credit Card business conducted within the
corporate group of Bank Parent or such corporate group otherwise disposes of or
terminates a substantial part of such Credit Card business;

 

70

 

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

 

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

 

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

 

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

 

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

 

(b) upon six (6) months’ prior written
notice following the end of a Fiscal Year, if during such Fiscal Year, NMG has
not maintained the retail store square footage set forth on Schedule 16.3(b).

 

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

 

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ARTICLE XVII

EFFECTS OF TERMINATION

 

17.1 General
Effects.

 

(a) All
solicitations, marketing and advertising of the Program, other than acceptance
of applications through NMG Channels in the ordinary course of business
consistent with past practice, shall cease upon the expiration or termination
of this Agreement, except as the Parties may otherwise mutually agree, provided
that the Parties shall continue to operate the Program in accordance with the
terms of this Agreement and service the Accounts in good faith and in the
ordinary course of their respective businesses, subject to the terms of this
Agreement, until the provisions of Section 17.2 are satisfied. The Parties
shall cooperate to ensure the orderly wind-down or transfer of the Program.

 

(b) Upon
the satisfaction of the provisions of Section 17.2, all obligations of the
Parties under this Agreement shall cease, except that the provisions specified
in Section 19.26 shall survive.

 

17.2 The
NMG Companies’ Option to Purchase the Program Assets.

 

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

 

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

 

(c) If
such purchase option is exercised, NMG or the Nominated Purchaser must complete
the purchase of the Program Assets within one hundred eighty (180) days after
the notice has been given pursuant to Section 17.2(b); provided,
that if, in connection with the purchase of the Program Assets by a Nominated
Purchaser, any required regulatory approvals or rating agency consents are not
received within one hundred eighty (180) days after notice has been given
pursuant to Section 17.2(b), NMG shall complete the purchase of the
Program Assets on behalf of the Nominated Purchaser within two hundred seventy
(270) days after notice has been given pursuant to Section 17.2(b). The
date of the completion of any purchase under this Section 17.2(c) shall
be the “Program Purchase Date.”

 

(d) The
purchase price for the Program Assets purchased, payable on the Program Purchase
Date, shall be equal to the sum of (i) the par value of the Cardholder
Indebtedness related to the Private Label Accounts and Non-Card Payment Plans
at the time of repurchase excluding written-off Cardholder Indebtedness (in
accordance with the write-off policy then

 

72

 

applicable to the
Program) plus (ii) the Fair Market Value of the Non-Store Accounts, except
that if the repurchase right arises as a result of (A) an early
termination of this Agreement by Bank for an NMG Event of Default pursuant to Section 16.3
or (B) an early termination by the NMG Companies pursuant to Section 16.2(c),
then such purchase price for the Program Assets shall be an amount equal to the
sum of (x) the par value of the Cardholder Indebtedness related to
the Private Label Accounts and Non-Card Payment Plans at the time of repurchase
excluding written-off Cardholder Indebtedness (in accordance with the write-off
policy then applicable to the Program), plus (y) the Fair Market
Value of the Cardholder Indebtedness related to the Non-Store Accounts plus
(z) de-conversion costs of the Bank in an amount not to exceed $1 million.

 

(e) The
Parties shall use commercially reasonable efforts to minimize transaction costs
and Bank shall provide NMG and the Nominated Purchaser and their respective
representatives reasonable access to the records and accounts relating to the
Program Assets for the purpose of conducting due diligence investigations to
determine whether they wish to purchase the Program Assets and shall provide as
soon as reasonably practicable (but in no event more than fifteen (15) days)
following a request therefor from NMG or its Nominated Purchaser a master file
of the Accounts (which shall include data for at least the twelve (12) month
period preceding the month in which the master file is requested and shall be
updated upon request of NMG); provided, however, that Bank shall
be entitled to require any Nominated Purchaser to enter into customary
confidentiality arrangements before providing it with such access. The Parties
shall promptly negotiate in good faith and execute a purchase agreement for the
Program Assets to be repurchased, which shall contain terms and conditions
substantially similar to those in the Purchase Agreement (if applicable). Bank
shall provide reasonable assistance in connection with the conversion of the
Program Assets to the Systems of NMG or the Nominated Purchaser, including
provision of interim services in accordance with the provisions of this
Agreement until such conversion occurs; provided, however, that
Bank shall not be obligated to provide such interim services for more than (i) two
hundred seventy (270) days after notice has been given pursuant to Section 17.2(b) in
connection with a purchase of the Program Assets by a Nominated Purchaser or (ii) one
year after the execution date of the purchase agreement with respect to the
repurchase of the Program Assets by NMG subject to a reasonable servicing fee.
The Parties shall not unreasonably withhold or delay execution of such purchase
agreement or any other documents necessary to effectuate such sale. The Parties
shall use reasonable efforts to ensure that the Program Purchase Date occurs as
promptly as reasonably practicable following the execution of such purchase
agreement.

 

17.3 Fair
Market Value. In the event that this Agreement terminates and, if NMG
notifies Bank that it shall purchase the Program Assets, Bank and NMG (or its
Nominated Purchaser) shall attempt to mutually determine the fair market value
of the Non-Store Accounts (“Fair Market Value”). If the Parties cannot
reach such agreement, each Party shall nominate an investment banker who
together shall select a third investment banker to value the Non-Store
Accounts. In determining the Fair Market Value of the Non-Store Accounts, the
investment bankers shall assume that (a) the terms and conditions of this
Agreement, including all financial terms and conditions, Bank’s right to use
the NMG Licensed Marks in accordance with this Agreement and all other material
elements of the transactions contemplated by this Agreement, shall continue in
respect of the Non-Store Accounts being purchased during the period of
valuation and (b) the Non-Store Accounts being purchased shall continue to
operate on an ongoing basis in accordance with past practice. In such case, the
Fair Market Value shall be the

 

73

 

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

 

17.4 Dedicated
Program Personnel. Upon termination or expiration of the Program for any
reason and until the date that is ninety (90) days after Bank ceases to provide
any services hereunder, NMG shall have the right to offer employment to
employees and independent contractors of Bank and any of Bank’s Affiliates that
perform all or substantially all of their work for Bank or its Affiliates in
connection with the Program.

 

17.5 Rights
of Bank if Purchase Option Not Exercised.

 

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

 

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

 

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

 

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

 

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

 

(b) Notwithstanding
the foregoing, in no event shall Bank use or disclose or permit any of its
Affiliates to use or disclose the Cardholder Data to market or promote a Credit
Card or ancillary product together with any retailer.

 

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

 

74

 

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

 

(d) Within
sixty (60) days (or one hundred twenty (120) days in the case of Dual-Line
Cards) after the NMG Companies give written notice that they shall not exercise
their option referred to in Section 17.2 or after the time period for the
NMG Companies to exercise such option shall have expired, Bank shall no longer
use any of the NMG Licensed Marks (or any other trademarks or source indicators
confusingly similar thereto) and must rebrand the NMG Credit Cards; provided
that thereafter Bank may continue to use the NMG Licensed Marks solely to the
extent necessary to identify the Accounts in connection with the billing and
collection thereof and as otherwise required by Applicable Law.

 

ARTICLE XVIII

INDEMNIFICATION

 

18.1 NMG
Indemnification of Bank. From and after the Effective Date, the NMG
Companies shall indemnify and hold harmless Bank, its Affiliates, and their
respective officers, directors and employees from and against and in respect of
any and all losses, liabilities, damages, costs and expenses of whatever
nature, including reasonable attorneys’ fees and expenses, which are caused or
incurred by, result from, arise out of or relate to:

 

(a) any
Retail Merchant’s negligence or recklessness or willful misconduct (including
acts and omissions) relating to the Program;

 

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

 

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

 

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

 

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

 

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

 

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

 

75

 

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

 

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

 

18.2 Bank
Companies’ Indemnification of the NMG Companies. From and after the
Effective Date, the Bank Companies’ shall indemnify and hold harmless NMG, its
Affiliates and their respective officers, directors and employees from and
against and in respect of any and all losses, liabilities, damages, costs and
expenses of whatever nature, including reasonable attorneys’ fees and expenses,
which are caused or incurred by, result from, arise out of or relate to:

 

(a) Bank’s
or its Affiliate’s negligence or recklessness or willful misconduct (including
acts and omissions) relating to the Program;

 

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

 

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

 

(d) dishonest
or fraudulent acts by Bank, or any of its Affiliates, agents or employees, in
connection with the Program;

 

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

 

(f) any
Account Documentation and Solicitation Materials approved by the Management
Committee and used by any of the NMG Companies in that form and in accordance
with Bank’s instructions and/or the Operating Procedures that fails to comply
with Applicable Law, other than any content in the Solicitation Materials that
primarily relates to Loyalty Programs and was included in the Solicitation
Materials in the form provided by NMG without any input from Bank with respect
to Applicable Law;

 

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

 

(h) Bank’s
Inserts or Billing Statement messages; and

 

76

 

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

 

18.3 Procedures.

 

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

 

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

 

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

 

(d) The
Indemnified Party or Indemnifying Party may at any time notify the other of its
intention to settle or compromise any claim, suit or action against the
Indemnified Party in respect of which payments may be sought by the Indemnified
Party hereunder, and (i) the Indemnifying Party may settle or compromise
any such claim, suit or action solely for the payment of money damages for
which the Indemnified Party will be fully indemnified hereunder, but shall not
agree to any other settlement or compromise without the prior written consent
of the Indemnified Party, which consent shall not be unreasonably withheld (it
being agreed that any failure of an Indemnified Party to consent to any
settlement or compromise involving relief other than monetary damages shall not
be deemed to be unreasonably withheld), and (ii) the Indemnified Party may
settle or compromise any such claim, suit or action solely for an amount not
exceeding One Thousand Dollars ($1,000), but shall not settle or compromise any
other matter without the prior written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld.

 

77

 

18.4 Notice
and Additional Rights and Limitations.

 

(a) If
an Indemnified Party fails to give prompt notice of any claim being made or any
suit or action being commenced in respect of which indemnification under this Article XVIII
may be sought, such failure shall not limit the liability of the Indemnifying
Party; provided, however, that this provision shall not be deemed
to limit the Indemnifying Party’s rights to recover from the Indemnified Party
for any loss, cost or expense which it can establish resulted from such failure
to give prompt notice.

 

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

 

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

 

ARTICLE XIX

MISCELLANEOUS

 

19.1 Precautionary
Security Interest. The NMG Companies and Bank agree that this Agreement
contemplates the extension of credit by Bank to Cardholders and that the NMG
Companies’ submission of NMG Charge Transaction Data to Bank shall constitute
assignment by the NMG Companies of any and all right, title and interest in
such NMG Charge Transaction Data and the Cardholder Indebtedness reflected
therein. However, as a precaution in the unlikely event that any person asserts
that Article 9 of the UCC applies or may apply to the transactions
contemplated hereby, and to secure the NMG Companies’ payment of and performance
of all obligations of the NMG Companies to Bank, the NMG Companies hereby grant
to Bank a first priority present and continuing security interest in and to the
following, whether now existing or hereafter created or acquired: (i) all
Accounts, Cardholder Indebtedness, Account Documentation and NMG Charge
Transaction Data, (ii) all deposits, credit balances and reserves on the
Bank’s books relating to the Program, and (iii) all proceeds of the
Cardholder Indebtedness. In addition, the NMG Companies agree to take any
reasonable action requested by Bank, at Bank’s expense, to establish the first
lien and perfected status of such security interest. Upon the termination or
expiration of this Agreement, Bank shall execute such releases and file such
notices as the NMG Companies may request to evidence the termination of the
security interest provided for in this Section 19.1.

 

19.2 Securitization,
Participation or Pledge of Cardholder Indebtedness.

 

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

 

78

 

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

 

(b) In
the event the NMG Companies elect to purchase the Program Assets pursuant to Section 17.2
and Bank has securitized, participated or pledged any of the Cardholder
Indebtedness included in the Program Assets, the Parties will cooperate to
transfer such assets, or Bank’s interest in and servicing rights with respect
to such assets, to NMG or its Nominated Purchaser on reasonable terms pursuant
to instruments in form and substance satisfactory to the Parties, and the
purchase price set forth in Section 17.2(d) shall be reduced by the
outstanding principal balance of such obligations on the Program Purchase Date.

 

19.3 Assignment.
None of the NMG Companies, on the one hand, and the Bank Companies, on the
other hand, shall assign this Agreement or any of its rights hereunder without
the prior written consent of the other Party, except to the extent (i) the
Cardholder Indebtedness is securitized as permitted pursuant to Section 19.2
or (ii) otherwise permitted under the Servicing Agreement.

 

19.4 Sale
or Transfer of Accounts. Bank shall not sell or transfer in whole or in
part any Accounts; provided, however, that this Section 19.4
shall not restrict the ability of Bank to securitize, participate or pledge the
Cardholder Indebtedness pursuant to Section 19.2. Bank may from time to
time propose to NMG the terms under which it desires to sell any NMG Accounts
that have been written-off in accordance with the Risk Management Policies,
including the payments proposed to be made to NMG and Bank in connection with
any such sale. NMG shall consider any such proposal in good faith but shall be
entitled to accept or reject any such proposal in its sole discretion.

 

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

 

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

 

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

 

79

 

19.8 Non-Waiver.
No delay by a Party hereto in exercising any of its rights hereunder, or
partial or single exercise of such rights, shall operate as a waiver of that or
any other right. The exercise of one or more of a Party’s rights hereunder
shall 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.

 

19.9 Severability.
In case any one or more of the provisions contained herein shall be invalid,
illegal or unenforceable in any respect under any law, the validity, legality
and enforceability of the remaining provisions contained herein shall not in
any way be affected or impaired thereby, and this Agreement shall be reformed,
construed and enforced as if such invalid, illegal or unenforceable provision
or portion of any provision had never been contained herein and there had been
contained herein instead such valid, legal and enforceable provisions as would
most nearly accomplish the intent and purpose of such invalid, illegal or
unenforceable provision.

 

19.10 Waiver
of Jury Trial and Venue.

 

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

 

(b) Each
Party hereby irrevocably submits to the jurisdiction of the United States
District Court for the State of Delaware or, if such federal jurisdiction is
unavailable, in the state courts of the State of Delaware over any action
arising out of this Agreement, and each Party hereby irrevocably waives any
objection which such Party may now or hereafter have to the laying of improper
venue or forum non conveniens.
Each Party agrees that a judgment in any such action or proceeding may be
enforced in other jurisdictions by suit on the judgment or in any manner
provided by law. Any and all service of process and any other notice in any
such suit, action or proceeding with respect to this Agreement shall be
effective against a Party if given as provided herein.

 

19.11 Governing
Law; Compliance with Law.

 

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

 

(b) Each
Party shall comply in all material respects with Applicable Law in connection
with its activities and the exercise of its rights and performance of its
obligations hereunder.

 

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

 

80

 

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

 

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

 

	
  If to the NMG
  Companies:

  	
  c/o The Neiman Marcus
  Group, Inc.

  One Marcus Square

  1618 Main Street

  Dallas, Texas 75201

  Attention: General
  Counsel

  Facsimile: (214)
  573-5354

  
	
   

  	
   

  
	
   

  	
  c/o The Neiman Marcus
  Group, Inc.

  One Marcus Square

  1618 Main Street

  Dallas, Texas 75201

  Attention: Credit
  Card Program Manager

  Facsimile: (214)
  743-7646

  
	
   

  	
   

  
	
  With a copy to:

  	
  Simpson
  Thacher & Bartlett LLP

  425 Lexington Avenue

  New York, New York
  10017

  Attention: Maripat
  Alpuche, Esq.

  Facsimile: (212)
  455-2502

  
	
   

  	
   

  
	
  If to the Bank
  Companies:

  	
  c/o HSBC Bank Nevada,
  N.A.

  2700 Sanders Road

  Prospect Heights,
  Illinois 60070

  Attention: Managing
  Director -

  Client Relations,
  HSBC Retail Services

  Facsimile: (908)
  203-4217

  
	
   

  	
   

  
	
  With a copy to:

  	
  HSBC Retail Services

  2700 Sanders Road

  Prospect Heights,
  Illinois 60070

  Attention: General
  Counsel, Retail Services Division

  Facsimile: (847)
  205-7417

  

 

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

 

81

 

19.16 Further
Assurances. The NMG Companies and Bank agree to produce or execute such
other documents or agreements as may be necessary or desirable for the
execution and implementation of this Agreement and the consummation of the
transactions specified herein and to take all such further action as the other
Party may reasonably request in order to give evidence to the consummation of
the transactions specified herein.

 

19.17 No
Joint Venture. Nothing contained in this Agreement shall 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
the NMG Companies and the Bank Companies, and no act of either Party shall be
deemed to create any such relationship. The NMG Companies and the Bank
Companies each agree to such further actions as the other may request to
evidence and affirm the non-existence of any such relationship.

 

19.18 Press
Releases. The NMG Companies, on the one hand, and the Bank Companies, on
the other hand, each shall obtain the prior written approval of the other Party
with regard to the substance and timing of any press releases which announce
the execution of this Agreement or the transactions specified herein, which
prior approval shall not unreasonably be withheld. At all times thereafter, the
NMG Companies and the Bank Companies, prior to issuing any press releases
concerning this Agreement or the transactions specified herein, shall consult
with each other concerning the proposed substance and timing of such releases
and give due consideration to the comments of the other Party relating thereto.
The foregoing notwithstanding, it is understood that neither Party shall be
required to obtain any prior consent, but shall consult with each other to the
extent practicable, with regard to (a) filings, press releases and other
announcements as may be required by Applicable Law or the applicable rules and
regulations of any governmental agency or stock exchange and (b) publications
prepared solely by and for employees of any of the NMG Companies or the Bank
Companies, or their respective Affiliates.

 

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

 

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

 

82

 

19.21 Third
Parties . There are no third-party beneficiaries to this Agreement. Except
for the Indemnified Parties with respect to indemnity claims pursuant to Article XVII,
the Parties do not intend: (i) the benefits of this Agreement to inure to
any third party; or (ii) any rights, claims or causes of action against a
Party to be created in favor of any person or entity other than the other
Party.

 

19.22 Force
Majeure. If performance of any service or obligation under this Agreement
is prevented, restricted, delayed or interfered with by reason of labor
disputes, strikes, acts of God, floods, lightning, severe weather, shortages of
materials, rationing, utility or communication failures, earthquakes, war,
revolution, civil commotion, acts of public enemies, terrorist attacks,
blockade, embargo or any law, order, proclamation, regulation, ordinance,
demand or requirement having legal effect of any government or any judicial
authority or representative of any such government, or any other act
whatsoever, whether similar or dissimilar to those referred to in this clause,
which are beyond the reasonable control of a Party and could not have been
prevented by reasonable precautions, (each, a “Force Majeure Event”)
then such Party shall be excused from such performance to the extent of and
during the period of such Force Majeure Event. A Party excused from performance
pursuant to this Section 19.22 shall exercise all reasonable efforts to
continue to perform its obligations hereunder, including by implementing its
disaster recovery and business continuity plan as provided in Section 7.3(d),
and shall thereafter continue with reasonable due diligence and good faith to
remedy its inability to so perform except that nothing herein shall obligate
either Party to settle a strike or other labor dispute when it does not wish to
do so. Notwithstanding the foregoing, if a condition constituting a Force
Majeure Event with respect to the Bank Companies, on the one hand, or the NMG
Companies, on the other hand, exists for more than thirty (30) consecutive days
(or five (5) days in the case of any payment obligation) and such Party is
unable to perform a material obligation (which shall be deemed to include any
payment obligation pursuant to Article VIII or Article IX) under this
Agreement due to such Force Majeure Event, then the other Party shall have the
right to terminate this Agreement upon written notice to the Party subject to
such Force Majeure Event; provided, however, that (i) prior
to delivering written notice of termination in respect of such Force Majeure
Event, the Party seeking to terminate this Agreement shall call, and the
Parties shall attend one or more Management Committee to consider and vote upon
a plan to outsource the material obligation that such Party is unable to
perform and (ii) in the event such outsourcing arrangement is agreed to,
the Parties shall promptly implement such arrangement and this Agreement may
not be terminated unless such Force Majeure Event continues on the fifteenth
(15th) day following approval of such
outsourcing arrangement.

 

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

 

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

 

83

 

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

 

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

 

[Remainder of Page Intentionally Left Blank]

 

84

 

IN
WITNESS WHEREOF, each of the Parties has caused this Agreement to be duly
executed as of the date first above written.

 

	
   

  	
  THE NEIMAN MARCUS
  GROUP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven P. Dennis  

  
	
   

  	
  Name:

  	
  Steven P. Dennis

  
	
   

  	
  Title:

  	
  Senior Vice President,
  Strategy,

  Business Development and Multichannel Marketing

  
	
   

  	
   

  	
   

  
	
   

  	
  BERGDORF GOODMAN, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nelson A. Bangs  

  
	
   

  	
  Name:

  	
  Nelson A. Bangs

  
	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  HSBC BANK NEVADA, N.A.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph W. Hoff  

  
	
   

  	
  Name:

  	
  Joseph W. Hoff

  
	
   

  	
  Title:

  	
  Executive Vice
  President

  
	
   

  	
   

  	
   

  
	
   

  	
  HOUSEHOLD CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph W. Hoff  

  
	
   

  	
  Name:

  	
  Joseph W. Hoff

  
	
   

  	
  Title:

  	
  President

  

 

 

SCHEDULE 1.1(a)

 

Bank Licensed Marks

 

	
  Mark

  	
   

  	
  Serial/Registration

  Number

  
	
   

  	
   

  	
   

  
	
  HSBC Card
  Services

  	
   

  	
   

  	
  [***]

  
	
  HSBC Bank
  Nevada

  	
   

  	
   

  	
  [***]

  
	
  HSBC
  Finance Corporation

  	
   

  	
   

  	
  [***]

  
	
  HSBC
  Retail Services

  	
   

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  
	
  HSBC
  

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  [***]

  

 

 

SCHEDULE 1.1(b)

 

Comparable Partner Programs

 

Saks
Incorporated 

Domain

Helzberg
Diamonds 

Liz
Claiborne

 

 

SCHEDULE 1.1(c)

 

Program Loyalty Program and Loyalty Cards

 

Section
A: Description of Current Program Loyalty Programs

 

Neiman
Marcus InCircle Rewards Program

The
Neiman Marcus InCircle Rewards program has successfully driven the use of the
NM Card and has stimulated ongoing retail sales for over 20 years. The Neiman
Marcus InCircle Rewards Program applies automatically to any NM Card (in
limited cases, InCircle Rewards can be awarded to select AMEX cards enrolled in
the program by a customer). Under the current InCircle Rewards Program, each
time a customer uses the NM Card, the customer earns one point for each dollar
spent. Once a customer accumulates 5,000 points during an annual period, the
customer automatically becomes a member of the InCircle Rewards program and
receives an InCircle Rewards card.

 

With
membership come certain special privileges, as determined by NMG. In the past
those privileges have included the following, subject to changes made by NMG
from time to time: two publications and a newsletter, complimentary gift
packaging on purchases over $25, Hertz double upgrade/discount, double InCircle
Reward points on the customer’s birthday and $25 dinner certificate for Smith
& Wollensky restaurant. Also cardholders receive advance notice of sales
and special events at Neiman Marcus. NMG will periodically have double-point
days at Neiman Marcus stores when cardholders can earn two points for every
dollar spent on the card, driving more customer traffic into the stores.

 

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

 

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

 

All
point redemptions for InCircle Rewards must be made during the annual program
period (which lasts for fourteen months from January to the following March 1st).
After March 1st, 25% of unredeemed InCircle Rewards points (up to a maximum of
5,000 points) will be carried over into the next annual program period. Points
are not earned on sales tax, beauty salons, delivery and processing,
alterations, gift packaging charges or NM Gift Cards®. Points are not

 

 

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

 

The
InCircle Rewards program also permits point owners to convert points from
InCircle Rewards points to points for other programs, including United and
American Airlines (point for point). The InCircle Program has relationships
with third parties where InCircle points are rewarded to customers of those
third parties in connection with the purchase of certain goods and services
from such parties. In addition, the InCircle Program rewards points to couples
who have registered at NMG for items purchased off their wedding registry regardless
of tender type.

 

Bergdorf
Goodman Card Rewards Program

The
Bergdorf Goodman Rewards program currently operates differently than the Neiman
Marcus InCircle Rewards program. Beginning in January 2005, the Bergdorf
Goodman Rewards program permits select AMEX cards (Centurion and Platinum
cardholders only) to be enrolled in the Bergdorf Goodman Rewards program. Every
Bergdorf Goodman card account is automatically enrolled in the program. A
Bergdorf Goodman card receives Bergdorf Goodman Rewards points if it is used at
either Bergdorf Goodman or a Neiman Marcus store (but not a Neiman Marcus
Clearance Center) on a one point per dollar basis. Beginning in January 2006,
the Bergdorf Goodman Rewards program will be rolled into the InCircle Rewards
program.

 

 

Section
B: Loyalty Cards

 

InCircle
Rewards Card

InCircle
Platinum Rewards Card 

Bergdorf
Goodman Rewards Card

 

 

SCHEDULE
1.1(d)

 

NMG Licensed Marks

 

	
   

  	
   

  	
  Serial/Registration

  	
   

  	
  Applicable
  Retail

  	
   

  
	
  Mark

  	
   

  	
  Number

  	
   

  	
  Division/NMG
  Channel

  	
   

  
	
  BERGDORF GOODMAN

  	
   

  	
  1902799

  	
   

  	
   

  	
   

  
	
  BERGDORF GOODMAN

  	
   

  	
  0992733

  	
   

  	
   

  	
   

  
	
  IN CIRCLE IN and Design (Circle around IN)

  	
   

  	
  1337166

  	
   

  	
   

  	
   

  
	
  INCIRCLE REWARDS

  	
   

  	
  2442806

  	
   

  	
   

  	
   

  
	
  NEIMAN MARCUS

  	
   

  	
  2209260

  	
   

  	
   

  	
   

  
	
  NEIMAN MARCUS

  	
   

  	
  0934177

  	
   

  	
   

  	
   

  
	
  NEIMAN MARCUS

  	
   

  	
  SN 78/374184

  	
   

  	
   

  	
   

  
	
  NEIMAN MARCUS (stylized)

  	
   

  	
  1733202

  	
   

  	
   

  	
   

  
	
  NEIMAN-MARCUS

  	
   

  	
  1154006

  	
   

  	
   

  	
   

  
	
  NM

  	
   

  	
  1558605

  	
   

  	
   

  	
   

  
	
  PLATINUM PREFERENCE REWARDS

  	
   

  	
  SN 78/420272

  	
   

  	
   

  	
   

  

 

 

SCHEDULE 1.1(e)

 

Non-Card Payment Plans and Private Label Credit Cards

 

Section
A: Non-Card Payment Plans

 

Signature
Accounts

Commercial
or Corporate Accounts 

Studio
Accounts 

Club
Accounts

 

Section
B: Private Label Credit Cards

 

Neiman
Marcus

Neiman
Marcus Card 

Neiman
Marcus Gold Card

 

Bergdorf
Goodman

Bergdorf
Goodman Card

 

 

SCHEDULE 1.1(f)

 

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

 

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

 

 

SCHEDULE 1.1(g)

 

Special Discounts

 

[***]

 

 

SCHEDULE 2.1(b)

 

Private-Label Credit Card Re-issuance

 

For
the initial Private Label Credit Card re-issuance, preliminary and on-going
meetings between Bank and NMG must take place to discuss the criteria for
Cardholders receiving the re-issued Private Label Credit Card mailing. During
the initial meetings, timeframes must be reviewed in order to avoid a
significant increase in customer service call volume. At a minimum, the Private
Label Credit Card re-issuance shall (i) take place in separate mailings across
a 90-120 day minimum timeframe based on account status and (ii) be structured
such that active cardholders receive the re-issued Credit Cards first followed
by in-active Cardholders in equally-staged mailings. In addition to defining the
testing and project plan to be implemented in connection with this re-issuance,
other considerations to be addressed by the Management Committee include a
potential account purge of some inactive Accounts, the development of fraud prevention
steps and the coding for Credit Card activation at the POS (or through the
IVR/VRU). In accordance with the design of the Cardholder Documentation associated
with the re-issuance pursuant to Section 4.5, Bank will be responsible for the
production, mailing, audit reporting and communication of the appropriate
loyalty-level Private Label charge cards and related materials to all
cardholders. In addition to the staged mailing process, Bank must work with NMG
to ensure that the Private Label Credit Cards and related materials meet NMG standards
in order to address the customer service impact of the re-issuance. Prior to
any mailing of re-issued Private Label Credit Cards, Bank and NMG must discuss
and agree upon the maximum daily mailing volumes in this staged process. 

 

 

SCHEDULE 2.2(c)(i)

 

Dual-Line Credit Card Testing

 

Section
A: Dual-Line Credit Card Development and Product Design

 

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

 

Section
B: Dual-Line Credit Card Testing

 

Bank
and NMG will jointly develop and the Management Committee will approve a live
test plan, such plan to include channel, geographic and customer segmentation
strategies, (if applicable), and which may include, among other items, direct
mail to existing Private Label Cardholders and/or placing Dual-Line/Co-Brand
applications in select test stores. The Management Committee will approve the
live test plan, including identifying, setting and reporting of the metrics
used to measure the success of the test, as well as the length of time of the
test period; provided, that such test period will commence no later than
the Dual-Line Card Deadline and after conversion to the Bank Systems.

 

Section
C: Dual-Line Credit Card Definitions

 

“Development
Period” means the period beginning on the day that NMG provides notice of
its desire to test Dual-Line Cards pursuant to Section 2.2(c)(ii) and ending on
the ninetieth (90th) day following
such notice.

 

“Dual-Line
Card Deadline” means June 30, 2006, as may be extended in NMG’s sole
discretion.

 

“Dual-Line
Testing Date” means December 31, 2005.

 

 

SCHEDULE 2.2(c)(ii)

 

Dual-Line Credit Card Terms

 

[***] branded

 

[***]
general-purpose credit line 

 

No
Merchant Discount in the Retail Merchants 

 

Tied
to a Program Loyalty Program

 

Economics
to be agreed between NMG and Bank, including compensation for Program Loyalty
Program points with respect to all spending and marketing outside of the NMG
Channels

 

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

 

 

SCHEDULE 2.2(d)

 

Section
A: Non-NMG Credit Cards

 

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

 

Section
B: Permitted Loyalty Program Arrangements

 

[***]

 

 

SCHEDULE
3.2(e)

 

Initial
Program Changes

 

	
  Annual Fee

  	
   

  	
  No annual fee,
  except for $50 NM Gold Card program membership fee.

  
	
   

  	
   

  	
   

  
	
  Late Payment or Late Fee
  (at cycle)

  	
   

  	
  Based upon two prior month’s statement balance:

  
	
   

  	
   

  	
  ·                  $20-$49 Balance = $5

  
	
   

  	
   

  	
  ·                  $50-$149 Balance = $15

  
	
   

  	
   

  	
  ·                  $150-$299 Balance = $20

  
	
   

  	
   

  	
  ·                  $300+ Balance = $29

  
	
   

  	
   

  	
   

  
	
  Returned Check Fees (BG
  to be standardized as NM)

  	
   

  	
  $25 per returned check

  
	
   

  	
   

  	
   

  
	
  Minimum Payment Amount (BG to be standardized as NM)

  	
   

  	
  10% of billed balance (but at least $25 and, for closing balances of
  $250 or more, rounded up to the nearest $10).

  
	
   

  	
   

  	
   

  
	
  Minimum Finance Charge

  	
   

  	
  $.50

  
	
   

  	
   

  	
   

  
	
  Standard APR

  	
   

  	
  21.0% APR for all residents (or at NMG’s election, all residents
  other than 1,500 VIP Accounts plus up to 5,000 other Accounts) except in two
  states to be agreed upon; [TBD%] plus Prime variable APR for two states to be
  agreed upon.

  
	
   

  	
   

  	
   

  
	
  Grace Period for the
  Repayment of Purchases

  	
   

  	
  27 days

  
	
   

  	
   

  	
   

  
	
  Method of Computing the
  Balance for Purchases

  	
   

  	
  Average Daily Balance (including new purchases)

  

 

 

SCHEDULE 3.2(g)(i)

 

Private Label Account Profiles

 

Bank
may make changes to the Risk Management Policies with respect to a channel in
response to changes in the credit profiles for Account applicants in such
channel if the Population Stability Index (PSI) based on the Fair, Isaac Score
indicates a change in excess of [***] in such channel for two
consecutive months

 

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

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

·                  The scores will be used to develop the PSI

 

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

 

[***]

 

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

 

The
PSI would be developed jointly over the first six months following the
Effective Date with the Risk Management Policies remaining unchanged during
this time.

 

Attached
is an example of a PSI.

 

 

SCHEDULE 3.3

 

Program Relationship Managers; Partner Program Team

 

1.                                       Initial Manager
of NMG: Steven Dennis

 

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

 

3.                                       Bank’s Program
Team Requirements and Specifications

 

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

 

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

 

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

 

The
foregoing dedicated employees shall devote substantially all of their efforts
to performing Bank’s obligations pursuant to Section 5.4.

 

(b)
Other Program team requirements:

 

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

 

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

 

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

 

 

SCHEDULE 3.3(d)

 

List of Retailers

 

Saks

Nordstrom

Barney’s

Coach

Jeffrey

Tiffany

Holt
Renfrew 

Fred
Segal

Stanley
Korshak 

Scoop

LVMH

Prada
Group 

PPR
Group 

Federated

 

 

SCHEDULE 4.1(b)

 

Operating Procedures

 

 

Schedule
4.1(b) 

Risk
Management Policies and 

Operating
Procedures

 

 

New
Account

Risk
Management Policies and

Operating Procedures

 

A-1

 

[***]

 

 

Multiple
PaySys CDM Screen Prints showing full

application flow will be attached.

 

B-1

 

[***]

 

 

Authorizations

Risk
Management Policies and

Operating Procedures

 

C-1

 

[***]

 

 

Multiple
PaySys Custom Rescore Screen Prints

showing rescore matrixes and parameters

will be attached.

 

D-1

 

[***]

 

 

Customer Service/InCircle

Risk Management Policies and

Operating Procedures

 

E-1

 

[***]

 

 

Collections

Risk Management Policies and

Operating Procedures

 

F-1

 

POPULATION STABILITY COMPARISON

Benchmark vs Current Month
Application Data

 

[***]

 

 

SCHEDULE 4.4(f)

 

Document
Retention Policy

 

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

 

	
   Title

   	
    

   	
   Description

   	
    

   	
   Retention

   
	
  Regulatory
  Complaints

  	
   

  	
  Complaint
  resolutions resulting from complaints to any regulatory agency.

  	
   

  	
  [***]

  
	
  Customer
  Application & Agreement Forms

  	
   

  	
  Samples
  of forms used for customers applying for credit. Forms include two parts: 1)
  Application form and 2) cardholder agreement and disclosures

  	
   

  	
  [***]

  
	
  General
  Customer Correspondence

  	
   

  	
  Retention
  of customer correspondence that is currently required in writing, including
  name changes, FTC dispute letters, bankruptcy filings and deceased
  notifications. Other customer correspondence including address changes,
  credit limit change requests and financial adjustment requests are not
  retained since these requests can be accepted verbally today.

  	
   

  	
  [***]

  
	
  Sales
  Slips (Signature Slips)

  	
   

  	
  Signature
  slips that show the transaction total, tender information and customer
  signature but not the transaction detail.

  	
   

  	
  [***]

  
	
  GI.B
  Privacy Opt Outs

  	
   

  	
  Opt-out
  code will be retained on-line for [***] months and opt-out reply
  notices will be retained on paper for [***] months

  	
   

  	
  [***] Months (on-line
  opt-out code) and [***] Months
  (opt-out reply notices)

  
	
  Completed
  Approved Applications

  	
   

  	
  All
  new applications that are signed by the applicant

  	
   

  	
  60 Months

  
	
  Customer
  Inquiry Decline Reason Response

  	
   

  	
  After
  applicant receives initial new account decline letter, decline reason
  response generally handled via phone but follow-up letters mailed explaining
  specifics are not retained although noted on the application on-line for [***] months. Existing
  cardholders inquiry as to a declined authorization is also handled verbally
  in most cases with follow-up letters, if necessary, not retained although
  noted on the account.

  	
   

  	
  [***] Months for
  new account declined application signed by applicants, [***] Months for other customer
  inquiry decline reason responses

  
	
  Adverse
  Action Letters

  	
   

  	
  On-line
  letter code notations on the declined application or existing account that
  had a declined sale, declined application or their account closed, and the
  template of the adverse action letter.

  	
   

  	
  [***] Months

  
	
  Approvals
  - Credit Line Increase Request

  	
   

  	
  The
  date implemented and the revised credit guideline is retained on-line

  	
   

  	
  [***] Months

  
	
  Overlimit
  Report

  	
   

  	
  Retained
  on-line through current SystemWare RDS platform but not stored on paper

  	
   

  	
  [***] Months

  

 

 

	
  Resolved
  Disputes

  	
   

  	
  On-line
  history of each Adjustment Jacket dispute including resolution stored in
  Forms Database

  	
   

  	
  [***] Months

  

 

	
   Title

   	
    

   	
   Description

   	
    

   	
   Retention

   
	
  Credit
  Bureau Change Request/Correction

  	
   

  	
  Currently
  do not keep any paperwork but the electronic consumer dispute verification
  (CDV) is stored on-line for [***] days from date of
  submission

  	
   

  	
  [***] Months

  
	
  Currency
  Transaction Report

  	
   

  	
  Currently
  stored within each Store Cash Office but transitioning to centralized filing
  process

  	
   

  	
  [***] Months

  
	
  Suspicious
  Activity  Reports

  	
   

  	
  Currently
  not done but will be instituting process similar to

  Currency
  Transaction Report with a centralizing filing and reporting control

  	
   

  	
  [***] Months

  
	
  OFAC
  Reporting

  	
   

  	
  Foreign
  OFAC reporting currently in place but new reporting to be developed for all
  new applicants going forward

  	
   

  	
  [***] Months

  
	
  USA
  Patriot Act Customer Identification Information

  	
   

  	
  Account
  opening information such as: Name, Date of Birth, Social Security Number and
  Physical Address are stored on-line but not all information is necessarily
  required to open new account

  	
   

  	
  [***] Months after
  the account is closed (on-line)

  
	
  USA
  Patriot Act Customer Identification Information

  	
   

  	
  Pass/fail
  indicators of each new account reason is stored on the on-line application
  record although no specific beyond this indicator except any notes made by
  Universal Agent are retained.

  	
   

  	
  [***] Months after
  account opening (on-line)

  
	
  Customer
  Identification Program Reporting

  	
   

  	
  Exception
  reports to identify customer program reporting is not existing at this time
  other than an internal fraud file that can refer a new application for manual
  intervention. NM Direct channel has additional fraud prevention capabilities.

  	
   

  	
  TBD

  
	
  Cash
  Payment Reporting

  	
   

  	
  See
  above Currency Transaction Report

  	
   

  	
  [***] Months

  
	
  Performance
  Reports

  	
   

  	
  Various
  daily, weekly, monthly or cycle reports used to measure performance in
  various credit department functions that are retained on-line through
  SystemWare XNET or RDS platform

  	
   

  	
  [***] Months

  

 

 

SCHEDULE 4.6(c)

 

Risk
Management Policies Targets

 

 

[***]

 

 

SCHEDULE
4.7

 

Cardholder
Terms

 

 

[***]

 

 

SCHEDULE 4.8(b)

 

Internet Services

 

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

 

·                  Real-Time Application
Processing with Fraud Authentication – Provided Bank product offers
extended application functionality beyond NM Online real-time application
process (to be implemented in June 2005), Bank application processing product
must be submitted through CDM or comparable system and completely processed
back to Internet within 45-second window. Authentication product is a necessity
to release new account number immediately back to Internet applicant. Authentication
product must give NMG the ability to influence question weighting structure and
type of demographic or credit bureau-related questions asked. Detailed fraud
reporting and if available, the ability for Universal Agents to quickly view
applicant’s category questions whenever necessary are other requirements. In
the event that fraud expenses increase for 2 consecutive months compared to
fraud expenses from Fiscal Year 2004 as a result of authentication changes by
moving from the NMG to the Bank authentication and system platform, formal
discussion with the Management Committee must be held to discuss alternatives
and implement new fraud strategies to either enhance or replace current
authentication tools. The authentication tools would also be beneficial in
other application arenas if available.

 

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

 

·                  Signature Account (SIG600) Functionality – On furniture
and Home Décor items, upon NMG’s request, Bank shall offer NM On-line customers
a 6-month, no finance charge Signature Account tender option for those
purchases over $600 dollars. The real-time authorization processing for these
Accounts must allow for these requests to be sent to NMG Credit Services for
manual intervention. SIG600 accounts are setup to bill 1/6th of the billed balance to ensure that 6 equal
payments exist for each item based on item ship date. The Signature Account
Agreement and terms letter following a Signature Account approval must be
automated within the respective credit systems. SIG600 denials will
automatically receive appropriate adverse action letter. If the Bank system can
support a signature sale

 

 

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

 

·                  New Account Prescreening or Prospecting – In coordination with NM On-line
personnel, new account and existing account prescreening options on the web
will be discussed by NMG and Bank The Parties intend to encourage creditworthy
third party customers, either during the check-out process or afterwards
through an e-mail confirmation, to open an NM or BG charge account with or
without a promotion (i.e. bonus InCircle points or free shipping). Other
prospecting options to encourage existing NM or BG cardholders to use their
charge card to shop will also be discussed by NMG and Bank with input from NM
On-line personnel with respect to specifications and design of such options.

 

·                  E-Pay
Functionality – Electronic payment
functionality must give the cardholder the ability to pay their bill on-line, even
on their closing or due date, until 7 p.m. CST if not later and be posted with
this same date by the next business day. The MOD-10 check-digit routine and
other NMG account number logic (i.e. account must begin with 04 or 05, be
12-digits) must be part of initial process to eliminate “account not found”
transactions. Should an on-line customer request to change or cancel their payment
on the same day, Universal Agents must have an ability to correct these
payments. Daily transmissions of these electronic payments will be submitted
through TRAMS or comparable receivable system to post payments regularly. Returned
payment transmission or reporting must be given to NMG daily to immediately
reverse payment transaction. Initial ACH Authorization Form requirements to
initiate an e-pay request must be explored further between Bank and NMG. Recurring
payment functionality with this e-pay product would also be included if Bank
has such capability. As a note, NMG currently utilizes several ACH vendors
through the IVR including Harbor Payments (Bank of New York) that can be used
for this e-pay process fairly easily.

 

·                  E-Bill
Functionality - On-line bill
presentment must be readily available to cardholders within 24 hours of each
cycle close and should contain at a minimum all data that is currently printed
on the NM or BG monthly billing statement. Billing functionality should allow
cardholders to view up to 12 months of their billing statements on-line. The
Parties will cooperate to implement the ability to display sub-total amounts
per item in addition to selective marketing and InCircle loyalty messages and
displays. Universal Agents must have ability to view and discuss on-line e-bill
functionality with cardholders whenever necessary.

 

·                  E-Service
Functionality – The Parties will also
cooperate to provide real-time memo and cycle-to-date balance information as
well as customer address maintenance and credit card re-ordering capabilities
provided these on-line requests do not immediately update cardholder credit
system data. Instead, a security question (i.e. last four digits of SSN) will
be asked of cardholder at time of entry and updated data sent to a credit queue
for manual approval before actually updating the credit system. Upon such time,
if any. review would be required until NMG Credit Services is comfortable with
customer-initiated updates received from the on-line channel and manual control
could be eliminated.

 

 

SCHEDULE 5.2

 

Marketing Commitments

 

Section A:
NMG Marketing Commitment

 

The
NMG Marketing Commitment for each Fiscal Year shall be equal to (i) [***], plus (ii) in the case
of any Fiscal Year following the first Fiscal Year, [***] multiplied by the
applicable Program Growth Percentage for such Fiscal Year.

 

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

 

Section B:
Joint Marketing Commitment

 

The
Joint Marketing Commitment for each Fiscal Year shall be equal to (i) [***], plus (ii) in the case
of any Fiscal Year following the first Fiscal Year, [***] multiplied by the
applicable Program Growth Percentage for such Fiscal Year.

 

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

 

 

SCHEDULE
6.2

 

Program
Privacy Policy

 

HSBC Bank
Nevada, N.A.

A Privacy Statement for Neiman Marcus and
Bergdorf Goodman Cardholders

 

Introduction – Our Commitment to You

 

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

 

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

 

What
Information We Collect

 

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

 

·                  Information we receive from
you on your application or other form;

·                  Information you provide by
telephone or in person to a Neiman Marcus sales associate, Bergdorf Goodman
sales associate or other representative;

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

·                  Information from an outside
source such as your credit bureau report;

·                  [Information
from list vendors;]

·                  [Information from public
sources;] and

·                  Information about your
Internet usage if you visit our website.

 

How We Share Information with Neiman Marcus Group

 

In
order to provide you with the benefits and services available to you as a
Neiman Marcus or Bergdorf Goodman cardholder, it is necessary for HSBC to share
certain information about you with Neiman Marcus Group. Neiman Marcus Group
includes Neiman Marcus Stores, Neiman Marcus Direct (including Horchow), and
neimanmarcus.com, in addition to Bergdorf Goodman, Inc. including Bergdorf
Goodman Stores, Bergdorf Goodman Direct and bergdorfgoodman.com.

 

 

Your
Neiman Marcus or Bergdorf Goodman credit card can be used to make purchases at
all of these locations.

 

The
information we share with Neiman Marcus Group may come from your application, such
as your name, address, e-mail address, telephone number, and social security
number. Neiman Marcus Group may have also received some or all of this
information from you. The information we share may also come from your
transactions with us, such as your account number, information about your
credit card purchases and your account performance. Neiman Marcus Group uses
the information we share solely in connection with providing the benefits and
services available to you as a Neiman Marcus or Bergdorf Goodman cardholder.

 

Except
for accounts with Vermont mailing addresses, we may also share non-public
personal information about you with Neiman Marcus Group which Neiman Marcus
Group may use to provide you with information about benefits and services
available to you as a Neiman Marcus Group customer, but that are not necessarily
related to your account with us.  This
information comes from the sources described above and may include your name,
address, and account experience with us.

 

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

 

How We Share Information with Companies Affiliated with HSBC

 

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

 

How We Share Information with Other Third Parties

 

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

 

 

share
also comes from the sources described above and might include your name,
address, phone number, and account experience with us.

 

Finally,
we may provide information about you to non-affiliated companies such as credit
reporting agencies and companies which provide services related to your
account. This information sharing is also permitted by law.

 

Security of Your Information

 

Safekeeping
of your non-public personal information is a high priority. We maintain
physical safeguards, such as secure areas in buildings; electronic safeguards,
such as passwords and encryption; and procedural safeguards, such as customer
authentication procedures to detect identity theft. We restrict access to
information about you to only those who need to know that information to
provide products or services to you. We carefully select and monitor outside
service providers, such as mail vendors, who have access to customer
information, and we require them to keep it safe and secure. We do not allow
them to use or share the information for any purpose other than to perform the
service for which they are engaged. We train our employees with respect to
security procedures and monitor compliance therewith.

 

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

 

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

 

The Neiman Marcus Group, Inc.

P.O. Box 720937

Dallas, Texas 75372-0937

 

We
will be happy to comply with your request. This request will not apply to
information about your transactions or experience with HSBC (such as account
information, account usage, or payment history) and will only apply to the
private label accounts you have with HSBC. Private Label accounts are not
general purpose accounts such as MasterCard® or Visa®, but are accounts that
may be used only at the specific merchant(s) named on the credit card. An
opt-out request by any party on a joint account will apply to all parties on
the joint account. Vermont residents are automatically opted-out of credit
information sharing with our Affiliates.

 

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

 

If
you do not want us to share your non-public personal information with Neiman
Marcus Group for purposes that are unrelated to your account with us, please
let us know by completing this detachable reply form and mailing it to the
following address:

 

 

The Neiman Marcus Group, Inc.

P.O. Box 720937

Dallas, Texas 75372-0937

 

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

 

Changes to Privacy Statement

 

We
reserve the right to modify or supplement our Privacy Statement at any time. If
we make material changes, we will provide our current customers with a revised
notice that describes our new practices. The current Privacy Statement applicable
to Neiman Marcus and Bergdorf Goodman credit cards will always be available at
the neimanmarcus.com web site.

 

The Neiman Marcus Group Privacy Policy

 

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

 

 

SCHEDULE
7.1(a)(i)

 

Bank
Reports

 

	
  Department

  	
   

  	
  Report

  	
   

  	
  Description

  
	
  Late Stage Collections

  	
   

  	
  Roll
  Rates

  	
   

  	
  Trial
  Balance By Cycle 

  Trial
  Balance By Balance Range 

  Roll
  Rate

  
	
   

  	
   

  	
  Dialer
  Reports 

   

   

   

   

  Collection
  QA Reports 

  Agency
  Batch Track Analysis 

  Write-Off
  Performance 

  Agency
  Placement Strategies 

  Calling
  Strategies 

   

  Debt
  Management Inventory Report 

   

  Outbound/Inbound
  Dialer Volume 

  Collection
  Productivity Reports

  	
   

  	
  Job
  Performance Summary 

  Monthly
  Job Performance Summary 

  Monthly
  System Performance Summary 

  Monthly
  System Completion Code Summary 

  Monthly
  Job Completion Code Summary 

  NM
  Monitoring Form 

   

   

   

  Billing
  Calendar - Dialer Work Schedule 

   

  Payment
  Plans 

  CCCS
  Inventory 

  Refer
  to Dialer Reports 

  Collector
  Synopsis Summary Reports (By Team)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Payment Processing Image RPS Reports

   

   

   

   

   

   

   

   

   

   

  Statistical
  Reports

  	
   

  	
  Cash
  Letter 

  Reject
  Items Report 

  Deposit
  Report 

  Client
  Total Items 

  Host
  File Batch Summary Report 

   

  Payment
  Distribution Report 

  NTN
  100D 

  15,000+
  Report 

  Consolidated
  Cover Report 

  Collection
  Report 

  Transmission
  Report 

  Image
  RPS Operators Report 

  Encoding
  Errors Report 

  Opener
  Statistics

  	
   

  	
  Listing
  of checks to be deposited in pocket cut

  Displays item rejected by machine or operator

  Pocket cut totals 

  Pass
  I Pocket totals 

  NM &
  BG Batch listing for host file 

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

  NCR
  Payment Processing Control Listing 

  Payments
  in excess of 15,000 

  Cash
  Letter Listing Foreign Conversions 

  Collection
  Letter 

  Printout
  of transmission and acceptance of file (to host) 

  Statistics
  on each operator 

  Monthly
  Quantity of keying errors 

  Monthly
  Report on quantity and rate of envelopes opened

  

 

 

	
  Statement Mailing

  	
   

  	
  Statement
  Count Recap 

  Detail
  Statistics By Package 

  Statement
  of Mailing

  Statistical
  Totals

  Cass
  Report

  Reprint
  Statement

  Tray
  Labels

  Misc.
  Excel Schedules

  	
   

  	
   

   

   

   

   

   

   

  Total
  Number of Cycles Processed

  Total
  Number of Statements

  
	
   

  	
   

  	
   

  	
   

  	
  Total
  Hours Processing Time

  Average
  Cycle Processing Time

  Average
  Statements Per Hour

  Number
  of Statements Mailed Same Day

  Number
  of Statements Mailed Within 24 Hours

  Number
  of Statements Mailed Within 48 Hours

  Number
  of Statements Mailed After 48 Hours

  Total
  Postage by Presort/USPS

  Explanations
  for Missed SLA’s

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Credit Card Issuance

  	
   

  	
  Data
  Card Audit File

  Misc.
  Excel Schedules

  	
   

  	
   

  Total
  Number of Jobs Processed

  Total
  Number of Cards & Customers

  Total
  Hours Processing Time

  Average
  Job Processing Time By Type

  Average
  Cards Per Hour By Type

  Number
  of Cards Mailed Same Day

  Number
  of Cards Mailed Within 24 Hours

  Number
  of Cards Mailed Within 48 Hours

  Number
  of Cards Mailed After 48 Hours

  Postage
  Reconciliation

  Total
  Postage By Card Type

  Cards &
  Forms Reconciliation

  Explanations
  for Missed SLA’s

  

 

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

 

 

SCHEDULE
7.1(a)(ii)

 

NMG
Reports

 

	
  Department

  	
   

  	
  Hotel
  Report

  	
   

  	
  Brookline
  Equivalent

  
	
  Collections

  	
   

  	
  Roll Rates

  	
   

  	
  Trial Balance By Cycle

  
	
   

  	
   

  	
   

  	
   

  	
  Trial Balance By Balance
  Range

  
	
   

  	
   

  	
   

  	
   

  	
  Roll Rate

  
	
   

  	
   

  	
  Dialer Reports

  	
   

  	
  Job Performance Summary

  
	
   

  	
   

  	
   

  	
   

  	
  Monthly Job Performance
  Summary

  
	
   

  	
   

  	
   

  	
   

  	
  Monthly System Performance
  Summary

  
	
   

  	
   

  	
   

  	
   

  	
  Monthly System Completion
  Code Summary

  
	
   

  	
   

  	
   

  	
   

  	
  Monthly Job Completion
  Code Summary

  
	
   

  	
   

  	
  Collection QA Reports

  	
   

  	
  NM Monitoring Form

  
	
   

  	
   

  	
  Collection Agency Audit
  Packages

  	
   

  	
  Collection Agency Account
  Audit

  
	
   

  	
   

  	
   

  	
   

  	
  e.g. Attorney Placement
  Summary (Strong Law Firm)

  
	
   

  	
   

  	
  Collection Bureau Disputes

  	
   

  	
  Report Card Information;
  Summary of Responses

  
	
   

  	
   

  	
  Calling Strategies

  	
   

  	
  Billing Calendar - Dialer
  Work Schedule

  
	
   

  	
   

  	
  Block Code Report

  	
   

  	
  Blocked Account Report

  
	
   

  	
   

  	
  Block
  Code/User Code Report

  	
   

  	
  No applicable Report

  
	
   

  	
   

  	
  Debt Management Inventory Report

  	
   

  	
  Payment Plans

  
	
   

  	
   

  	
   

  	
   

  	
  CCCS Inventory

  
	
   

  	
   

  	
  Outbound/Inbound Dialer
  Volume

  	
   

  	
  Refer to Dialer Reports

  
	
   

  	
   

  	
  Collection Productivity
  Reports

  	
   

  	
  Collector Synopsis Summary
  Reports (By Team)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Credit

  	
   

  	
  Override Report

  	
   

  	
  Credit Application
  Processing System CAPS Listing

  
	
   

  	
   

  	
  Credit Line Increases

  	
   

  	
  New Accounts With
  Guidelines Exceeding $

  
	
   

  	
   

  	
   

  	
   

  	
  Credit Limit Change Report

  
	
   

  	
   

  	
  Forced Authorization
  Report

  	
   

  	
  Daily Approval Override
  Code Usage - Manager Overrides

  
	
   

  	
   

  	
   

  	
   

  	
  Daily Approval Override
  Code Usage - Credit Center Overrides

  
	
   

  	
   

  	
   

  	
   

  	
  Authorization Production
  By Operator ID

  
	
   

  	
   

  	
   

  	
   

  	
  Auto & Manual Decline
  Transactions

  
	
   

  	
   

  	
  Reinstatement Report

  	
   

  	
  No applicable Report

  
	
   

  	
   

  	
  Application Decision
  Timing

  	
   

  	
  No applicable Report

  
	
   

  	
   

  	
  Adverse Action Timing

  	
   

  	
  Adverse Action Letter
  Generation

  
	
   

  	
   

  	
  Decline Reason Timing

  	
   

  	
  Adverse Action Letter
  Generation

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fraud

  	
   

  	
  New Fraud Claims Report

  	
   

  	
  CAPS - Real-Time Fraud
  Detection Payment Report Model

  
	
   

  	
   

  	
   

  	
   

  	
  Pending Fraud Write-Off

  
	
   

  	
   

  	
  Fraud By Name Plate Report

  	
   

  	
  Fraud Expense Forecast

  
	
   

  	
   

  	
   

  	
   

  	
  Fraud Expense By Location

  
	
   

  	
   

  	
  Fraud Block Code Vintage
  Report

  	
   

  	
  No applicable Report

  
	
   

  	
   

  	
  Fraud By Type

  	
   

  	
  Fraud Loss By Type

  
	
   

  	
   

  	
  Fraud Write-Off Policies

  	
   

  	
  No applicable Report

  
	
   

  	
   

  	
   

  Fraud Investigation
  Procedures

  	
   

  	
  Loss Prevention Training
  Program - Module 5/Fraud Investigators

  
	
   

  	
   

  	
  SAR Reporting Timelines

  	
   

  	
  No applicable Report

  

 

 

	
  Customer Service

  	
   

  	
  Credit Balance Refund Aging Report

  	
   

  	
  Credit Balance Report

  
	
   

  	
   

  	
   

  	
   

  	
  Check Register

  
	
   

  	
   

  	
  Dispute Aging Report

  	
   

  	
  Neiman Marcus FCBA Log

  
	
   

  	
   

  	
   

  	
   

  	
  Service Profile By
  Division

  
	
   

  	
   

  	
   

  	
   

  	
  Fiscal 2005 YTD Totals

  
	
   

  	
   

  	
   

  	
   

  	
  Dispute Items Report

  
	
   

  	
   

  	
  Lost/Stolen Account
  Maintenance

  	
   

  	
  Accounts Transferred Today

  
	
   

  	
   

  	
   

  	
   

  	
  Transactions On Transfers

  
	
   

  	
   

  	
  SSCRA Reporting

  	
   

  	
  No applicable Report

  
	
   

  	
   

  	
  Repeat Credit Bureau
  Disputes

  	
   

  	
  No applicable Report

  
	
   

  	
   

  	
  QA Monitoring

  	
   

  	
  Credit Services Quality
  Assurance Form

  
	
   

  	
   

  	
  Key Performance Measures

  	
   

  	
  Service Levels - Credit
  Call Center

  
	
   

  	
   

  	
  Telephone Statistics
  Summary

  	
   

  	
  Split/Skill Summary
  Monthly Authorizations

  
	
   

  	
   

  	
   

  	
   

  	
  Split/Skill Summary
  Monthly Infobot

  
	
   

  	
   

  	
   

  	
   

  	
  Split/Skill Summary
  Monthly Incircle/Gold

  
	
   

  	
   

  	
   

  	
   

  	
  Split/Skill Summary
  Monthly Incircle/Platinum

  
	
   

  	
   

  	
   

  	
   

  	
  Split/Skill Summary
  Monthly - NMD/NMO Referrals

  
	
   

  	
   

  	
   

  	
   

  	
  Split/Skill Summary
  Monthly Customer Service Help

  
	
   

  	
   

  	
  Dispute Processing &
  Procedures

  	
   

  	
  Dispute Resolution Process

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Compliance

  	
   

  	
  Right to Financial Privacy

  	
   

  	
  Subpoena Log

  
	
   

  	
   

  	
  Compliance Training

  	
   

  	
  No applicable Report

  
	
   

  	
   

  	
  Escalated Complaint
  Reporting

  	
   

  	
  No applicable Report

  
	
   

  	
   

  	
  Cash Payment Monitoring

  	
   

  	
  Reporting Monies Received
  on In-Store Cash Payments

  
	
   

  	
   

  	
  OFAC Exception Reporting

  	
   

  	
  Report Distribution Change
  Request

  
	
   

  	
   

  	
  High Risk Country
  Reporting

  	
   

  	
  No applicable Report

  
	
   

  	
   

  	
  CIP Exception Reporting

  	
   

  	
  No applicable Report

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  A/R System

  	
   

  	
  Activity Recap Report
  (R16)

  	
   

  	
  Activity Recap Report (R16)

  
	
   

  	
   

  	
  Reject Re-Entry Report
  (R15)

  	
   

  	
  Reject Re-Entry Report (R15)

  
	
   

  	
   

  	
  Warehoused Transactions (D10)

  	
   

  	
  Warehoused Transactions (D10)

  
	
   

  	
   

  	
  Blocked Account Report (O07)

  	
   

  	
  Blocked Account Report (O07)

  
	
   

  	
   

  	
  Trial Balance by Account (O08)

  	
   

  	
  Trial Balance by Account (O08)

  
	
   

  	
   

  	
  Charged Off Accounts
  Report (D09)

  	
   

  	
  Charged Off Accounts
  Report (D09)

  
	
   

  	
   

  	
  Audit Exception Report (D15)

  	
   

  	
  Audit Exception Report (D15)

  
	
   

  	
   

  	
  Generated Transaction
  Journal (D11)

  	
   

  	
  Generated Transaction
  Journal (D11)

  
	
   

  	
   

  	
  Daily Balancing Report
  (R32)

  	
   

  	
  Daily Balancing Report
  (R32)

  
	
   

  	
   

  	
  Accounts Transferred Today
  (O24)

  	
   

  	
  Accounts Transferred Today
  (O24)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Risk/Portfolio Management

  	
   

  	
  Application Result Summary

  	
   

  	
  CAPS Listing

  
	
   

  	
   

  	
  Key Portfolio Statistics

  	
   

  	
  Customer Aging Report
  (CAR)

  
	
   

  	
   

  	
  Authorization Summary

  	
   

  	
  Daily Authorization Totals

  
	
   

  	
   

  	
   

  	
   

  	
  Rescore Summary Report

  
	
   

  	
   

  	
   

  	
   

  	
  Rescore With Limit
  Increase/Decrease - Tier I

  
	
   

  	
   

  	
   

  	
   

  	
  Rescore Tier II With Limit
  Increase

  
	
   

  	
   

  	
   

  	
   

  	
  Rescore Without Limit
  Increase/Decrease

  
	
   

  	
   

  	
   

  	
   

  	
  Rescore Tier II Without
  Increase By Reason Code

  
	
   

  	
   

  	
  Charge-Off & Recovery
  Trends

  	
   

  	
  Bad Debt Provision

  
	
   

  	
   

  	
   

  	
   

  	
  Primary Collection Agency
  Performance Report

  
	
   

  	
   

  	
   

  	
   

  	
  Secondary Agency &
  Bankruptcy Performance Report

  

 

 

	
   

  	
   

  	
   

  	
   

  	
  Bankruptcy Analysis

  
	
   

  	
   

  	
   

  	
   

  	
  Bankruptcy Write-Off
  Analysis

  
	
   

  	
   

  	
  Behavior Score Control
  Chart

  	
   

  	
  No applicable Report

  
	
   

  	
   

  	
   

  	
   

  	
  Credit Reclassification
  Summary Report

  
	
   

  	
   

  	
  FICO Score Control Chart

  	
   

  	
  No applicable Report

  
	
   

  	
   

  	
  Custom Score Control Chart

  	
   

  	
  Population Stability
  Report Final Scores

  
	
   

  	
   

  	
  Account Review Analysis

  	
   

  	
  Quest Totals

  

 

 

SCHEDULE
7.1(b)

 

Monthly
Settlement Sheet

 

The Monthly Settlement Sheet shall set forth:

 

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

 

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

 

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

 

 

SCHEDULE
7.1(c)

 

Yearly Settlement
Sheet

 

The Yearly Settlement Sheet shall set forth:

 

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

 

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

 

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

 

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

 

(e)           Average Private Label Receivables, (ii) Average
Interest Free Receivables and (iii) the Net Yield for such Fiscal Year
calculated on all Billed Cardholder Debt and the calculation of any amounts due
pursuant to Section 4.11; and

 

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

 

 

SCHEDULE
7.3(a)

 

Primary
Servicer Service Level Standards

 

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

 

A. Documentation Services Bank will meet
the following service levels on average each month:

 

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

 

2.              Statement
Mailing Services and Credit Card Production Services paper quality for multi-color
statements, carriers and matching window envelopes must meet minimum
specifications: Ziegler 24-pound, 8 1/2” x 11” virgin
white stock, maximum blank white perforated paper

 

3.              Term
notifications and privacy and other inserts included in mailings use minimum
paper specifications: 60-pound offset

 

4.              Statement
programming developed must produce the following billing statement
capabilities: multi-color and multiple, selective messaging billing statement
capabilities along with an upgraded (from 3 of 9) insertion barcode. Current or
upgraded (as approved by NMG) loyalty point information must also be included
on the billing statement.

 

5.              Statement
insert dimension specifications: Correlate with billing statement size but must
continue to meet single-page 1.000 ounce discounted qualification postal
rate

 

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

 

B.  Credit Card
Production Services Bank will meet the following service levels on
average each month:

 

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

 

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

 

 

1.              The percentage
of time that Bank shall make its collections operations available during the
following times: [***]

 

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

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

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

Sunday closed

 

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

 

	
  ·

  	
   

  	
  Mid balances [***]

  	
   

  	
  every 3 days

  
	
  ·

  	
   

  	
  Balances [***]

  	
   

  	
  every 3 days

  
	
  ·

  	
   

  	
  Balances greater than [***]

  	
   

  	
  every 3 days

  

 

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

 

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

 

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

 

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

 

D. Credit Processing
Services &  Customer
Service Services Bank will meet the following service levels on
average each month:

 

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

 

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

 

·                  [***] during the months of April through
October;

 

·                  [***] during the months of
November through February; and

 

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

 

 

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

 

If more than half of all
Accounts receive a Change of Terms, then these standards will not be applied
for the months during which the Change of Terms is becoming effective and one
month after the Change of Terms has become effective. *

 

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

 

4.              Upon the
request of a Cardholder or upon the end of the fourth cycle for any Account
with a Credit Balance up to [***], the percentage of Credit Balance refunds
requested verbally or systemically that will be sent out within 3 days of such
request or cycle end date provided that no Credit Balance refund will be sent out
for a Credit Balance under [***] [Regulatory SLA]

 

5.              Upon the
request of a Cardholder or upon the end of the fourth cycle for any Account
with a Credit Balance up to [***], the percentage of Credit Balance refunds
requested by mail correspondence that will be sent out within 7 days of such
request or cycle end date provided that no Credit Balance refund will be sent
out for a Credit Balance under [***] [Regulatory SLA]

 

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

 

7.              The percentage
of time that Bank shall make its customer service operations available from
Monday through Friday from 8:00 a.m. CST to 7:00 p.m. CST and Saturday from
9:00 a.m. CST to 1:00 p.m.: [***]

 

8.              The percentage
of time that Bank shall make its authorizations and new account operations
available from Monday through Friday from 9:00 a.m. CST to 11:00 p.m. CST,
Saturday from 9:00 a.m. CST to 11:30 p.m. CST and Sunday from 9:00 a.m. CST to
10:30 p.m. CST (and will extend these hours to accommodate the store operations
when formal store hours are extended due to special sales events and seasonal
demands): [***]

 

V. Systems Bank will meet
the following service levels on average each month:

 

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

 

* Denotes a Starred SLA

 

 

SCHEDULE
7.3(c)

 

Primary
Servicer Defaults

 

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

 

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

 

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

 

II.                                    Remedies.

 

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

 

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

 

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

 

(d)           Upon the occurrence of (i) the third and each
additional Subsequent Failure of the same Starred SLA during the twenty four
(24) Fiscal Months following a Significant Failure or (ii) a second
Regulatory Failure of the same Regulatory SLA, NMG shall, in addition to
payment as provided in paragraph (c) above, have the right to terminate
the Program Agreement by providing thirty (30) days prior written notice to
Bank, in which event the parties shall have the rights set forth in
Article XVII; provided, however, that prior to NMG electing
to terminate the Program Agreement, the Management Committee shall meet to
discuss the occurrence of the Subsequent Failure and shall determine whether
such SLA should be modified. If the Management Committee determines that such
SLA shall be modified, then NMG shall not be entitled to terminate the Program
Agreement as a result of the Subsequent Failure discussed at the meeting of the

 

 

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

 

(e)               Notwithstanding
the foregoing, in the case of any Primary Servicer Default, after the
Management Committee meeting referred to above and assuming that no SLA is
modified, in lieu of terminating the Program Agreement, NMG may elect to cause
the Services subject to such Servicer Default or all of the Services being
provided by Primary Servicer to be transferred to NMG or another party
designated by NMG; provided, that for purposes of transferring Services
pursuant to this paragraph (n), an SLA that is both a Starred SLA and a
Regulatory SLA shall be deemed to be a Regulatory SLA.

 

(f)               No
such servicing transfer or termination of this Agreement pursuant to paragraph (e) above
shall be effective until either assumption by NMG of the provision of the Services
or the appointment by NMG of a successor servicer reasonably satisfactory to
Bank pursuant to a servicing agreement reasonably satisfactory to Bank.
Following the delivery by the applicable Party of written notice of a servicing
transfer or termination, NMG shall have reasonable access to Primary Servicer’s
operations and systems to ensure continuity of business and systems required to
service the Accounts until such time as NMG assumes the provision of the
Services or appoints a successor servicer reasonably satisfactory to Bank.

 

III.                                Non-Starred
SLAs. For purposes of this Schedule 7.3(c), “Starred SLA” shall be deemed to include
Non-Starred SLAs in the event that there have been more than eight
(8) Significant Failures in any twelve (12) month period with respect to
any Non-Starred SLAs; provided, that in the event there are no
Significant Failures in the immediately following twelve (12) month period with
respect to any of the Non-Starred SLAs, then such Non-Starred SLAs shall no
longer be deemed to be Starred SLAs.

 

 

SCHEDULE 7.4(b)

 

Bank Systems

 

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

 

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

 

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

 

3.               All PaySys customization (see attached customized programming and reporting list by
sub-system)  currently
used in the NMG PaySys environment must be converted to the Bank PaySys
platform unless an enhanced product offered by Bank and mutually agreed upon
can be substituted instead.

 

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

 

5.               Upgraded real-time adherence and/or call management technology that
enhances NMG environment including Witness call monitoring software or a similar
product with comparable technology must be converted at same time (if not
sooner) as PaySys system conversion.

 

6.               Updated technology associated with re-developing score models through
StrategyWare initiatives or a comparable product with similar technology
related to new account scorecards, restore matrixes or internal behavioral
scores will be explored. This could potentially eliminate the need to convert
current customization from NMG PaySys platform.

 

7.               Explore and determine if other technological enhancements including fraud
detection and Internet-related products can be utilized and upgraded
immediately following PaySys system conversion.

 

8.               Independent of the conversion to the Bank PaySys environment, the Parties
shall have ongoing discussions regarding potential conversion of other credit
systems used by Universal Agents that can be converted separately from the
PaySys conversion. Regardless of whether other systems are converted, the
Parties shall discuss the impact that the Bank PaySys conversion will have on
these other systems and appropriate action shall be taken to minimize any
effect of such conversion on these other systems. These systems include the
check authorization system, gift card maintenance system, InCircle loyalty
point redemption system, XNET signature slip, statement viewer and numerous
other miscellaneous systems.

 

 

PaySys Release 2.59

Custom Functionality & Reporting

(excluding any batch or on-line interfaces and

any customization for other credit systems used)

 

NMG will review Bank’s current solution for a fit to
the NMG business need. If NMG agrees that Bank functionality fulfills the NMG
requirement, the enhancement request will be marked as “not required”. If NMG
determines that Bank functionality does not fulfill the NMG requirement, NMG
will then decide if the function is a “must have” for conversion, or is a
candidate for a post-conversion implementation. Prior to any custom
functionality or enhancement being deemed for a post-conversion implementation,
NMG must be satisfied with the Bank timeline for implementation and Bank must
use commercially reasonable efforts to implement such functionality within the
proposed timeline. If Bank does not implement such functionality within the
agreed-upon timeline (and allowing for a thirty (30) day grace period), such
failure will be escalated to the Management Committee for an appropriate
resolution. NMG’s prior written consent must be obtained
in order to waive the implementation of any custom functionality detailed
below. Prior to any conversion to the Bank Systems, NMG may specify additional
custom functionalities that are required for a PaySys conversion as long as
such functionalities are part of the NMG Systems prior to such conversion.

 

Credit Management
System (CMS)

 

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

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

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

4.              Enhanced the customer statement formatting product (Metavante CSF) to
re-design the statement for NMG (including InCircle point information and
messages).

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

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

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

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

9.              Added new screen ACH Pay by Phone functionality to authorize
documentation of customer bank information and ACH history in order for
customers to perform ACH payments.

10.        Permanently
display new account scorecard, new account score, credit bureau risk score (at
time of opening) as well as high activity and updated credit bureau risk scores
with dates with semi-annual portfolio reviews are done.

 

 

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

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

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

14.        Upgraded
ARML25 credit classification tables to measure ‘N’
class based on credit bureau risk score and remaining classes on risk score in
additional to performance ratios.

15.        On
embossing screen, updated functionality for Universal Agents to define
embossing card type (i.e. Regular, Gold, Platinum) to be mailed to the customer
by the Credit Card Processing Department. New credit cards mailed out contain
full customer name in mag-stripe.

16.        Zero
balance statements are not printed and sent to the customer.

17.        CRM
complimentary gifts scanned at the POS as a transaction code are delivered
through the PaySys System as a ‘memo’
transaction for $0 that is eventually displayed on the billing statement as
such.

18.        Universal
Agent keying and storage of GLB privacy sharing, California SB1 sharing
restriction, Do Not Mail and affiliated credit bureau sharing codes and dates.
In some instances, this information is passed to external systems for
appropriate compliance.

19.        Multiple
new transaction codes in 100-300 series setup for both organizations (NM and
BG) with GL level setup at a store level.

20.        Specialized
messaging for sales tax and InCircle customers done upon request to either
replace existing mass marketing message temporarily and as an additional
message on the billing statement.

21.        Custom
Reporting

[***]

 

 

[***]

 

Credit Decision
Management (CDM)

 

1.              Usage of 4 distinct Fair Isaacs (FICO) new account scorecard models
separated based on the applicant’s time on file with the credit bureau and net
fraction revolving burden. Each new account scorecard has different
characteristics, point measurements and cut-off scores associated with overall
risk.

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

3.              New account credit bureau reports received from TransUnion contain both
an Empirica risk score and a TransRisk New Account (TRNA) Score for thin file
application decisioning. If no Empirica is available, TRNA score acts as
primary score.

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

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

6.              As ARMO7 billing records are being
updated with last cycle billed data, APTM17 new account cycle assignment for
all CDM types is automatically updated with appropriate next billing cycle to
be used.

7.              Internal fraud file utilized within the cross-checks process to refer
those applicants with matching name, address, phone or social security number
criteria.

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

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

 

 

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

10.        Date
of birth provided on the bureau report is reformatted into the MMDDYYYY format
to coincide with PaySys date of birth fields.

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

12.        Customized
age variance and 3-day retail specific inquiry counter referrals developed
through FICO and utilized as an effective retail fraud predictor today.

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

14.        When
both of the bureau agencies are down, “time out waiting on bureau” applications
stored during this downtime are not automatically being processed through when
bureaus are back up.

15.        Custom
Reporting

[***]

 

Financial Authorization System (FAS)

 

1.              Authorization credit bureau reports received from TransUnion contain both
an Empirica risk score and a Horizon bankruptcy indicator score.

2.              In-house behavioral score model developed by Experian updated monthly at
billing to recalculate customer payment and purchase behavior.

3.              A customized initial 6-digit POS referral number that can eventually lead
to an authorization approval code generated in Central Credit requires forced
compliance input at the POS. Outside of system generated approval code, a ‘daily
override code’ allows for approval at POS beyond the compliance input approval
code.

4.              Return and payment transactions go through same POS to FAS (OFAA)
authorization process as a sale transaction does to ensure account number is
validated before completing credit transaction.

 

 

5.              Customized ‘Pay Review’ authorization referral and on-line reporting
process for check-paying customers over-paying their last statement balance or
for newer accounts paying before being billed.

6.              Warning codes (housed on ARMB1) for Mr. and/or Mrs. Only,
Credit Card Only or Check ID restrictions are prompted at the POS for selling
associates to confirm acceptance before proceeding with the sale.

7.              Separation of ‘open-to-buy’ versus an ‘open-to-buy, credit bureau exists’
referral to advise Universal Agent of when an existing credit bureau report
(currently retained for 90 days) is still on file.

8.              A specialized ‘excessive amount approved’ referral to automatically refer
all customers who have had memo or same day transactions approved totaling over
[***] for manual review.

9.              An ‘irregular bureau’ referral was developed for those bureaus that
either have no risk score, limited trade-line data or special considerations
(i.e. mixed file possibility).

10.        A
‘zip code check’ referral to compare the address on file to the newly pulled
bureau address particularly on inactive customers is done to ensure we have the
correct billing address.

11.        A
‘time out’ referral that coincides with FICO Search automatic move to our
secondary bureau (CBI Equifax) should TransUnion be down may occur if the delay
is too significant. If so, this eliminates any transactions from being “hung”
and allows Central Credit to call for immediate problem resolution support.

12.        FACT
Act fraud detection custom authorization referrals to trigger those customers
who are changing their billing address, then ordering a credit card (and vice
versa) in the designated period of time. In addition to referring the first
purchase after receiving the credit card, the credit card mail-out date may be
delayed intentionally until such time that the customer receives and can
appropriate respond to an address change and credit card ordering confirmation
letter.

13.        FACT
Act fraud detection custom authorization referrals to review address
discrepancies (ADI) between the address on file and the address on the bureau
as well as HAWK or other fraud messages on the bureau.

14.        Ability
for Universal Agents to see dual referral reasons on all authorization
referrals. Additionally, some referrals are combined (i.e. HAWK, ADI or
HAWK/ADI referrals) to display more than two reasons when pertinent.

15.        Real-time
daily sales tracking screen to view up-to-date sales and transaction counts
across all stores. This helps in forecasting scheduling needs, particularly on
sale days, for the remainder of the day.

16.        On-line
total account relationship screen for high-balance customers being built to
quickly decipher customer status and indebtedness based on pertinent balance
and payment information displayed. [June 2005]

17.        Custom
Reporting

[***]

 

 

[***]

 

 

Rescore Custom System (RCS)

1.               Sub-system completely customized with POS to PaySys/RCS interface so when
a customer hits their account open-to-buy, a bureau is automatically pulled
through FICO Search and the account attempts to go through rescore.

2.               Various screen parameters to fully control which accounts can go through
rescore tier I and II by block code and other factors including high payment
all-time and bureau risk score are used.

3.               Using (ARML25) credit classification score, the Empirica or Beacon risk
score and net fraction revolving burden (revolving debt ratio), 24
3-dimensional rescore tier I matrixes (separated first by credit classification
score) contain new guideline assignments. Provided the rescore guideline is
sufficient to approve the pending sale at POS, the approval back to POS is systemically
done and the account guideline increased. 
If not, POS generates a 6-digit referral number for manual handling.

4.               In most cases where rescore tier I was not sufficient or a bureau is already
on file for a customer (in which case they will not go through rescore tier I),
rescore tier II customized tables can be utilized. First, a customized
scorecard using a point accumulated system determines which of the 5 rescore
tier II tables a customer goes through (1 being the best, 5 the worst). The
rescore tier II tables are 2-dimensional based on a Horizon bankruptcy score
and the customer’s last 6-months payments. These two variables result in a
multiplier (i.e. 3.5%) amount that is then used to calculate against the last
6-months payments. Provided this calculation is enough the automatically
proceed at the POS with approving the pending transaction and increasing the
account guideline, it is done. Otherwise, POS generates a 6-digit referral number
for manual handling.

5.               If an existing credit bureau is still on file, before proceeding with
ordering a new bureau report, a message asks the Universal Agent if they are
sure a new bureau needs to be ordered.

6.               The ability to release a California or Texas freeze file bureau report
provided the customer gives us their PIN number is available.

7.               Custom Reporting

[***]

 

Account Services Management (ASM)

1.               Customized Universal Agent screen to perform authorization referrals and
most customer service inquiries from one screen with limited, if any toggling
to other screens needed. PaySys screens ASMW, ARMN, ARIH, ASSD, OFCP and OFRS
useful information are contained on this customized screen. ASMN custom screen
allows for account

 

 

maintenance including name or address changes,
guideline or block code updates, ASM action code utilization and statement
re-print ordering. Most authorization referrals are made from this screen and
include the ability, if so desired, to notate why the decision was made and what
manager, if any, assisted in the approval or denial. However, all customer
service maintenance or authorization decisions made on this screen are
automatically notated within ASHI with a before and after recap (i.e. block
code changed from ‘E’ to ‘F’ or AGM approved a $15,564.48 sale on 5/11/05 at 3
pm for store 1, referred for HAWK/ADI and OTB, TU score of 712, manager DCV
approved).

2.               Pending FCRA screens by state that control address change, then credit
card reorder requests within a specified period of time. A special ASM queue to
manually release credit card requests once the customer has responded to the
FCRA confirmation letter was built and is used today.

3.               Custom Reporting

a.               Custom Balancing Report — Summary [NCRM5932-1]

 

Collections Tracking System (CTA)

1.               Replaced a PC client server RecoverMaster System and migrated the
functionalities into CTA.

2.               GUI-based front-end interface for Avaya auto-dialer.

3.               Custom Reporting

[***]

 

 

Letter
Tracking System (LTS)

1.               Modified
bracketed key words to correctly print foreign country letters similar to
billing statements and other correspondence.

 

Transaction Management System (TRAMS)

1.               Modified the NM Direct/On-line interface to accept full catalog
descriptions and  purchase order
numbers which are passed to CMS, statement history screens and  displayed on customer billing statements.

2.               Automated $50 annual Gold fee assessment to customers with a plan segment  automatically added.

3.               Custom Reporting

[***]

 

Security Supervisor (SSSR)

1.               Automatic monthly purge of any users not accessing PaySys ID for one of
the following reasons: (a) Have not used their ID ever and the first 30
days has elapsed; (b) Have not used their ID at least once in the last 90
days; (c) ID has been set to ‘9’ purge.

2.               Custom Reporting

[***]

 

 

Credit Batch Interfaces

 

	
  Internal
  NMG & 

  Vendor

  Interface 

  Systems 

  	
   

  	
  Credit
  

  Application

  	
   

  	
  Data
  Stream

  	
   

  	
  Input/Output
  

  Feed

  	
   

  	
  Frequency

  	
   

  	
  Processing

  Time-frame

  
	
  [***]

  	
   

  	
  TRAMS (front-end transaction processor)

  	
   

  	
  Feeds NM full-line & clearance stores
  sales/returns/payment financial transactions

  	
   

  	
  Input

  	
   

  	
  Daily

  	
   

  	
  Nightly

  
	
  [***]

  	
   

  	
  TRAMS (front-end transaction processor)

  	
   

  	
  Feeds BG full-line stores sales/returns/payment
  financial transactions

  	
   

  	
  Input

  	
   

  	
  Daily

  	
   

  	
  Nightly

  
	
  [***]

  	
   

  	
  TRAMS (front-end transaction processor)

  	
   

  	
  Feeds NMO (web-site) and NMD (catalog) sales/returns
  financial transactions

  	
   

  	
  Input

  	
   

  	
  Daily

  	
   

  	
  Nightly

  
	
  [***]

  	
   

  	
  TRAMS (front-end transaction processor)

  	
   

  	
  Feeds NM & BG mailed-in payments

  	
   

  	
  Input

  	
   

  	
  Mon-Fri

  	
   

  	
  Afternoon

  
	
  [***]

  	
   

  	
  TRAMS (front-end transaction processor)

  	
   

  	
  Feeds NM & BG ACH payments

  	
   

  	
  Input

  	
   

  	
  Mon-Fri

  	
   

  	
  Morning

  
	
  [***]

  	
   

  	
  TRAMS (front-end transaction processor)

  	
   

  	
  Feeds NM & BG ACH payments

  	
   

  	
  Input

  	
   

  	
  Mon-Fri

  	
   

  	
  Morning

  
	
  [***]

  	
   

  	
  TRAMS (front-end transaction processor)

  	
   

  	
  Feeds NM & BG ACH IVR payments

  	
   

  	
  Input

  	
   

  	
  Mon-Fri

  	
   

  	
  Nightly

  
	
  [***]

  	
   

  	
  TRAMS (front-end transaction processor)

  	
   

  	
  Feeds NM employee credit card payments

  	
   

  	
  Input

  	
   

  	
  Weekly

  	
   

  	
  Nightly

  
	
  [***]

  	
   

  	
  TRAMS (front-end transaction processor)

  	
   

  	
  Feeds BG employee credit card payments

  	
   

  	
  Input

  	
   

  	
  Every 2 wks.

  	
   

  	
  Nightly

  
	
  [***]

  	
   

  	
  TRAMS (front-end transaction processor)

  	
   

  	
  Feeds NM retired employee credit card customers
  medical insurance payments.

  	
   

  	
  Input

  	
   

  	
  Monthly

  	
   

  	
  Nightly

  
	
  [***]

  	
   

  	
  TRAMS (front-end transaction processor)

  	
   

  	
  Feeds Payments for customers requesting Incircle
  ‘Gold; card status.

  	
   

  	
  Input

  	
   

  	
  Daily

  	
   

  	
  Nightly

  
	
  [***]

  	
   

  	
  TRAMS (front-end transaction processor)

  	
   

  	
  Feeds NM & BG P&L accounts recovered
  payments and non-financial txns.

  	
   

  	
  Input

  	
   

  	
  Weekly

  	
   

  	
  Nightly

  

 

 

	
  [***]

  	
   

  	
  Billing

  	
   

  	
  Feeds Harbor with updated ACH IVR accounts billing balance and minimum payment
  information.

  	
   

  	
  Output

  	
   

  	
  Each billing cycle

  	
   

  	
  Morning

  
	
  [***]

  	
   

  	
  Billing

  	
   

  	
  Provide outside P&L collection agencies with new assigned
  NM & BG P&L accounts for  collection
  recovery.

  	
   

  	
  Output

  	
   

  	
  Each billing cycle

  	
   

  	
  Morning

  
	
  [***]

  	
   

  	
  Customer Service

  	
   

  	
  Feeds
  Harbor with new accounts that applied-for-ACH IVR payment
  processing. 

  	
   

  	
  Output

  	
   

  	
  Mon-Fri

  	
   

  	
  Nightly

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  Posting

  	
   

  	
  Sends Chase an ACH payment file for  NM/BG
  payments that are being posted to the customer’s  account that
  require ACH clearing.  Receive Chase files that
  identify NM/BF accounts that were processed or are NSF status.

  	
   

  	
  Output/Input

  	
   

  	
  Mon-Fri

  	
   

  	
  Nightly/Morning

  
	
  [***]

  	
   

  	
  Posting

  	
   

  	
  Feeds Incircle system with posted NM sales/return txns.

  	
   

  	
  Output

  	
   

  	
  Daily

  	
   

  	
  Nightly

  
	
  [***]

  	
   

  	
  Posting

  	
   

  	
  Feeds NM customers that reached Incircle status for new credit card
  generation.

  	
   

  	
  Input

  	
   

  	
  Daily

  	
   

  	
  Nightly

  
	
  [***]

  	
   

  	
  A/R

  	
   

  	
  Feeds the EDW system with new account information and existing account
  demographic  changes.

  	
   

  	
  Output

  	
   

  	
  Daily

  	
   

  	
  Nightly

  
	
  [***]

  	
   

  	
  Posting

  	
   

  	
  Updates the NMG Credit customer database for accounts that opted for
  the ‘Do Not Call’.

  	
   

  	
  Input

  	
   

  	
  Monthly

  	
   

  	
  Nightly

  
	
  [***]

  	
   

  	
  Statements

  	
   

  	
  Provides Credit with an Incircle points file that will display a
  customer’s point information on a their billing statement.

  	
   

  	
  Input

  	
   

  	
  Daily

  	
   

  	
  Nightly

  

 

 

	
  [***]

  	
   

  	
  Statements

  	
   

  	
  Provides Credit with a BG Rewards file that will
  display a customer’s point information on a their billing statement.

  	
   

  	
  Input

  	
   

  	
  Daily

  	
   

  	
  Nightly

  
	
  [***]

  	
   

  	
  Statements

  	
   

  	
  Interface with Metavante CSF product to format the
  billing statement.

  	
   

  	
  Input

  	
   

  	
  Daily

  	
   

  	
  Nightly

  
	
  [***]

  	
   

  	
  Statements

  	
   

  	
  Interface with Code 1 & Mailstream for billing
  statement address correction and pre-sort mailing.

  	
   

  	
  Input

  	
   

  	
  Daily

  	
   

  	
  Nightly

  
	
  [***]

  	
   

  	
  Credit Cards

  	
   

  	
  Transmits credit card file (new accounts,
  replacements,  Incircle,
  etc.) to produce NM & BG charge cards and mailers.

  	
   

  	
  Output

  	
   

  	
  Daily

  	
   

  	
  Morning

  
	
  [***]

  	
   

  	
  A/R

  	
   

  	
  Sends LP an extract file of the credit active
  database to identify employee accounts.

  	
   

  	
  Output

  	
   

  	
  Weekly

  	
   

  	
  Nightly

  
	
  [***]

  	
   

  	
  A/R

  	
   

  	
  Provide a monthly file of all NM & BG
  demographic and financial account information to the credit bureaus for
  credit reporting update.

  	
   

  	
  Output

  	
   

  	
  Monthly

  	
   

  	
  Nightly

  
	
  [***]

  	
   

  	
  A/R

  	
   

  	
  Create a monthly file with NM & BG
  customers that’opted-out’ from  mailing promotion as part of the GLB bill.

  	
   

  	
  Output

  	
   

  	
  Monthly

  	
   

  	
  Nightly

  
	
  [***]

  	
   

  	
  A/R

  	
   

  	
  Send a file to Trans Union with NM & BG
  customers for credit limit/score review and receive back a file  with credit limit,  bureau &
  horizon  score adjustments.

  	
   

  	
  Output/Input

  	
   

  	
  Semi-annual

  	
   

  	
  Nightly

  

 

 

	
  [***]

  	
   

  	
  A/R

  	
   

  	
  Send a file to Donnelley with NM & BG accounts that require
  name, address & phone verification and apply the changes received
  from Donnelley to our customer database.

  	
   

  	
  Output/Input

  	
   

  	
  Semi- annual

  	
   

  	
  Nightly

  
	
  [***]

  	
   

  	
  Check Authorization

  	
   

  	
  Provides a national negative check account file that is used-to-update the
  credit check authorization system.

  	
   

  	
  Input

  	
   

  	
  Tues-Sat

  	
   

  	
  Nightly

  
	
  [***]

  	
   

  	
  Check Authorization

  	
   

  	
  Provide eFunds Scan with an daily bad check file (adds/deletes) of
  NM/BG check customers.

  	
   

  	
  Output

  	
   

  	
  Mon-Fri

  	
   

  	
  Nightly

  
	
  [***]

  	
   

  	
  A/R

  	
   

  	
  Provides a feed of NM survey response with e-mail addresses that update
  the credit database.

  	
   

  	
  Input

  	
   

  	
  Weekly

  	
   

  	
  Nightly

  
	
  [***]

  	
   

  	
  A/R

  	
   

  	
  Provides a feed of Incircle customers that registered via Web-site with
  e-mail addresses.

  	
   

  	
  Input

  	
   

  	
  Monthly

  	
   

  	
  Nightly

  
	
  [***]

  	
   

  	
  A/R

  	
   

  	
  Provides a feed of all Incircle customers that will remain or lose
  their Incircle status based on the points that have been accrued this year.

  	
   

  	
   

  	
   

  	
  Yearly in April

  	
   

  	
  Nightly

  
	
  [***]

  	
   

  	
  A/R

  	
   

  	
  FTP an extract file of BG Reward account information based upon
  selected account numbers provided to us by BG.

  	
   

  	
  Output

  	
   

  	
  Daily

  	
   

  	
  Nightly

  
	
  [***]

  	
   

  	
  A/R

  	
   

  	
  Provide BG Marketing system with new account information and existing
  account demographic changes

  	
   

  	
  Output

  	
   

  	
  Daily

  	
   

  	
  Nightly

  

 

 

	
  [***]

  	
   

  	
  A/R

  	
   

  	
  Provide InCircle with new account information and
  existing account demographic changes

  	
   

  	
  Output

  	
   

  	
  Daily

  	
   

  	
  Nightly

  
	
  [***]

  	
   

  	
  A/R

  	
   

  	
  Receives update from InCircle when a customer
  achieves one of the elite status (InCircle or Platinum), to create a new
  credit card.
  The embossing file is sent to InCircle
  for processing.

  	
   

  	
  Input/Output

  	
   

  	
  Daily

  	
   

  	
  Nightly

  
	
  [***]

  	
   

  	
  Collection

  	
   

  	
  Receive a file (upload to the mainframe) from the
  autodialer identifying collection accounts that were not reached (i.e. left
  message to call, no contact etc.). Send a new autodailer file (download to
  RT) listing new accounts that need to be contacted and reschedule existing
  collection accounts that were not  reached.

  	
   

  	
  Input/Output

  	
   

  	
  Daily

  	
   

  	
  Nightly/Morning

  
	
  [***]

  	
   

  	
   

  	
   

  	
  Sends credit sale slips scanned to be uploaded to
  the mainframe.

  	
   

  	
  Input

  	
   

  	
  Daily

  	
   

  	
  Evening

  
	
  [***]

  	
   

  	
  A/R

  	
   

  	
  Access
  (read only) the Credit customer database and extrapolate specific information
  for reporting purposes.

  	
   

  	
  Output

  	
   

  	
  System
  specific (i.e. daily, weekly, monthly or on request)

  	
   

  	
  Varies
  (i.e. morning,  evening, weekends)

  

 

 

Credit Online Interfaces

 

	
  Internal NMG

  Interface 

  Systems

  	
   

  	
  Credit 

  Application

  	
   

  	
  Data Stream

  	
   

  	
  External Interface

  Systems

  	
   

  	
  Output 

  Response

  	
   

  	
  Response

  Time

  	
   

  	
  Frequency

  	
   

  	
  Processing

  Time-frame **

  
	
  POS Store System - POS Express (new apps)

  	
   

  	
  New Application

  	
   

  	
  Receives transaction from the POS store register
  to process a new application credit card request.

  	
   

  	
  Fair Isaac - formats a credit bureau inquiry,
  sends the data and formats the credit  bureau reporting response for evaluation and new application decision
  processing.

  	
   

  	
  Reply back to the POS register with an approval or
  referral response.

  	
   

  	
  [***]
  seconds

  	
   

  	
  Mon-Sat Sun

  	
   

  	
  7 AM - 11 PM 10 AM - 11 PM

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NMD - (new apps)

  	
   

  	
  New Application

  	
   

  	
  Receives transaction from the NMD  catalog division to process a new application credit  card request.

  	
   

  	
  Fair Isaac - formats a credit bureau inquiry,
  sends the data and formats the credit  bureau reporting response for evaluation and new application decision
  processing.

  	
   

  	
  Reply back to NMD with an approval or  referral response.

  	
   

  	
  [***]
  seconds

  	
   

  	
  Mon-Sat Sun

  	
   

  	
  7 AM - 11 PM 10 AM - 11 PM

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NMO Web Acct Applications - [***] (new apps) -
  (In development)

  	
   

  	
  New Application

  	
   

  	
  Receives transaction from Web server to process new acct applications

  	
   

  	
  Fair Isaac - formats a credit bureau inquiry, sends the data and
  formats the credit  bureau reporting response
  for evaluation and new application decision
  processing.

  	
   

  	
  Reply back to the Web server with an approval or referral response.

  	
   

  	
  [***]
  seconds

  	
   

  	
  Mon-Sat Sun

  	
   

  	
  7 AM - 11 PM 10 AM - 11 PM

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  POS Store System - POS Express (account look- up)

  	
   

  	
  CMS

  	
   

  	
  Receives transaction from the POS store register
  to process either a name, address, phone or SSN# account  lookup.

  	
   

  	
  None

  	
   

  	
  Reply back to the POS register with account number
  or not found.

  	
   

  	
  [***]
  seconds

  	
   

  	
  Mon-Sat Sun

  	
   

  	
  7 AM - 11 PM 10 AM - 11 PM

  

 

 

	
  POS Store  System - Sales Authorization (NM & BG  charge cards)

  	
   

  	
  Authorization

  	
   

  	
  Receives transaction from the POS store register
  to process a NM or BG purchase/return transaction.

  	
   

  	
  Access the Fair Isaac system for credit  reporting information if the account exceeds their OTB or had no
  activity over 12 months for evaluation and  establishing new credit limit.

  	
   

  	
  Reply back to the POS register with an approval,  referral or decline response.

  	
   

  	
  [***]

  	
   

  	
  Mon-Sat Sun

  	
   

  	
  7 AM - 11 PM 10 AM - 11 PM

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  POS Store  System - Sales Authorization  (3rd party charge cards)

  	
   

  	
  Authorization

  	
   

  	
  Receives transaction from the POS store register
  to process 3rd party charge cards for purchase/return transaction.

  	
   

  	
  Format the transaction and send the authorization
  request to AMEX or FNBO (Visa, MC, etc.) for processing.

  	
   

  	
  Reply back to the POS register with an approval,  referral or decline response.

  	
   

  	
  [***]

  	
   

  	
  Mon-Sat Sun

  	
   

  	
  7 AM - 11 PM 10 AM - 11 PM

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NMD - Sales Authorization (NM & BG charge
  cards)

  	
   

  	
  Authorization

  	
   

  	
  Receives batched transactions on an  hourly basis from NMD to process  purchase/return transaction.

  	
   

  	
  Access the Fair Isaac system for credit  reporting information if the account exceeds their OTB or had no
  activity over 12 months for evaluation and  establishing new credit limit.

  	
   

  	
  Reply back to  NMD with an approvals, referrals or decline  response.

  	
   

  	
  [***]

  	
   

  	
  Mon-Sat Sun

  	
   

  	
  7 AM - 11 PM 10 AM - 11 PM

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  

 

 

	
  NM Sales Check Recon

  	
   

  	
  Customer Service

  	
   

  	
  Access the NM Sales Check Recon system to look up a customer’s credit
  sales slip.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  < [***] seconds

  	
   

  	
  Mon-Sat Sun

  	
   

  	
  7 AM - 11 PM 10 AM - 11 PM

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  System Authorization [***]

  	
   

  	
  In-house Credit System

  	
   

  	
  Create a daily system authorization override code.

  	
   

  	
   

  	
   

  	
  Download the system  authorization [***] code to each
  POS store system RS/6000 box.

  	
   

  	
   

  	
   

  	
  Mon-Sat Sun

  	
   

  	
  7 AM - 11 PM 10 AM - 11 PM Nightly

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Systemware - Xnet Access

  	
   

  	
   

  	
   

  	
  Access Systemware using Xnet to view NM & BG customer
  statements on-line (9 months) and reprint if necessary.

  	
   

  	
   

  	
   

  	
  Statement view.

  	
   

  	
  < [***] seconds

  	
   

  	
  Mon-Sat Sun

  	
   

  	
  7 AM - 11 PM 10 AM - 11 PM Nightly

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Systemware - Xnet Access

  	
   

  	
   

  	
   

  	
  Access Systemware using Xnet to view NM & BG customer’s credit
  signature sale slip.

  	
   

  	
   

  	
   

  	
  Credit signature sales slip view.

  	
   

  	
  < [***] seconds

  	
   

  	
  Mon-Sat Sun

  	
   

  	
  7 AM - 11 PM 10 AM - 11 PM Nightly

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Systemware - Xnet Access

  	
   

  	
   

  	
   

  	
  Access Systemware using Xnet to view NM & BG customer POS
  journal tape roll.

  	
   

  	
   

  	
   

  	
  POS journal tape roll view.

  	
   

  	
  < [***] seconds

  	
   

  	
  Mon-Sat Sun

  	
   

  	
  7 AM - 11 PM 10 AM - 11 PM Nightly

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Foreign Account new app validation

  	
   

  	
  In-house Credit System

  	
   

  	
  Receive from the customer a 3rd party credit card and [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  < [***] seconds

  	
   

  	
  Mon-Sat Sun

  	
   

  	
  7 AM - 11 PM 10 AM - 11 PM Nightly

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Gift Card

  	
   

  	
   

  	
   

  	
  Access the system to perform Gift Card maintenance.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  < [***] seconds

  	
   

  	
  Mon-Sat Sun

  	
   

  	
  7 AM - 11 PM 10 AM - 11 PM Nightly

  

 

 

	
  Incircle

  	
   

  	
   

  	
   

  	
  Access the Credit database to identify any
  Incircle delinquent accounts and lookup name and address information.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  < [***] seconds

  	
   

  	
  Mon-Sat Sun

  	
   

  	
  7 AM - 11 PM 10 AM - 11 PM

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Intervoice (IVR) customer inquiry

  	
   

  	
   

  	
   

  	
  Access the Credit database to inquiry on the
  customer’s balance, purchase and payment activity and gift card information.

  	
   

  	
   

  	
   

  	
  Send response back to the IVR based on the IVR
  option request.

  	
   

  	
  < [***] seconds

  	
   

  	
  Mon-Sat Sun

  	
   

  	
  7 AM - 11 PM 10 AM - 11 PM

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BGMS Sales Check Recon

  	
   

  	
  Customer Service

  	
   

  	
  Access the BG Sales Check Recon system to look up
  a customer’s credit sales slip.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  < [***] seconds

  	
   

  	
  Mon-Sat Sun

  	
   

  	
  7 AM - 11 PM 10 AM - 11 PM

  

 

	
  **
  Credit online system availability is extended to 2 AM on special Incircle
  events.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

SCHEDULE 7.6

 

Customer Management Systems

 

	
  ·

  	
  Mass
  Personalization

  
	
  ·

  	
  Empowering
  the Sales Associate

  
	
  ·

  	
  Turbo
  Charging the Segment of One

  

 

PHASE
I — As long as the NMG resources required for the change of terms are
available, the Documentation Services and then the Credit Card Production
Services operations, including statement mailing, payment processing and credit
card processing activities, may, at NMG’s option, be converted to Bank systems.
The delivery date depends on the complexity of the interfaces and would be
agreed upon by Bank and NMG. As a statement processing enhancement, HSBC would
provide “Mass Personalization” via color/graphical statement marketing
capabilities driven by NMG’s current segmentation.

 

PHASE
II — Portfolio (PaySys) Conversion delivery date to be determined and
agreed upon by HSBC and NMG. Delivery date is contingent upon completing all
batch and on-line interfaces, customization enhancements and satisfaction of
the other requirements of Section 7.4.

 

PHASE
III — Subsequent to the systems and portfolio conversion, in the event
that NMG determines that any functionality set forth below would be (i) beneficial,
(ii) feasible based on system requirements and (iii) able to
interface to other affected systems as of the implementation date, Bank shall
implement such functionality. Either Bank or NMG may propose other enhancements
or modifications than those listed below (excluding any enhancement or
modification set forth on a different Schedule) and the Parties may mutually
agree to replace any of the functionalities listed below with such other
modifications or enhancements. Bank and NMG shall agree on the delivery date of
any functionality item, including any agreed upon enhancement or modification
not listed below, which delivery date will be dependent on, among other
considerations, the complexity of the interfaces and functionality.

 

·“Empowering the
Sales Associate”

·     Ability to select standard
or personalized statement marketing/messages from the POS

·     Ability to select standard
or personalized letters, postcards, and eMail from the POS.

·     Ability to select standard
or personalized eCare marketing/messages from the POS

 

·“Multi-Channel
Mass Personalization” using Brookline’s current segmentation characteristics.

·     Centralized ability to
drive standard letters, postcards, and eMail. (may be additional cost)

·    Centralized
ability to drive standard eCare marketing/messages.

 

 

·    Centralized ability to drive
standard Customer Service marketing/messages.

 

·  Internet
Capabilities and Various Scoring, Fraud or Other Enhancements

·    Refer to Schedules 4.8(b) and
7.4(b) for all functionalities

 

· “Turbo Charging
the Segment of One”.

·    Ability to
create individual customer profiles based upon number and value of purchases,
product type, department, manufacturer, etc.

·    Ability to drive the “Empowering
of the Sales Associate” based on the above profiles.

·    Ability to drive the “Multi-Channel
Mass Personalization based on the above profiles.

 

 

SCHEDULE 9.1(a)(i)

 

Daily NMG Compensation

 

Bank
shall pay to NMG an amount equal to the aggregate for all Private Label
Accounts and Non-Card Payment Plans of the following:

 

For
each such Private Label Account or Non-Card Payment Plan, the product of (A) the
sum of (x) the Program Fee Percentage applicable to such Account and (y) the
Servicing Fee Percentage and (B) Net Credit Sales under such Account
reflected in all NMG Charge Transaction Data required to be paid for by Bank on
such Business Day pursuant to Section 8.4.

 

Determination
of Program Fee Percentage

 

The
“Program Fee Percentage” with respect to each Account means [***]. The Program
Fee Percentage applicable to an Account shall be increased on the effective
date of any of the following change in terms applicable to such Account to [***]
plus the amount set forth in the column designated “Program Fee Increase Amount”
below and shall remain at such increased percentage until further changed as
set forth below:

 

[***]

 

 

The
Program Fee Percentage shall be increased for changes in APR and fee terms
changes on a cumulative basis. For example, if (i) an APR on an Account is
changed to a variable rate based on the Prime Rate plus a [***] margin and (ii) the
late fee on such Account is changed so that it is assessed within 5 days after
the end of the applicable late period, then the Program Fee Percentage with
respect to such Account would be [***]. With respect to any Fixed Rate option
set forth above, if the one month LIBOR rate increases beyond [***], the
Parties will negotiate in good faith to adjust the Program Fee Percentage.

 

“Prime
Rate” means the “Prime Rate” as such rate is reported in the Consumer Rates
column of The Wall Street Journal or as determined in such other mutually
acceptable manner as the parties agree if The Wall Street Journal is no longer
reporting such rate.

 

In
the event that all of the Services set forth below are transferred to Bank and
the Servicing Agreement is terminated, the Program Fee Percentage applicable to
all Accounts shall be increased by [***].

 

Determination
of Servicing Fee Percentage

 

The
“Servicing Fee Percentage” means [***]. The Servicing Fee Percentage applicable
to all Accounts shall be decreased on the date that Bank begins providing the
following Services to the Program:

 

[***]

 

During the Term, while
NMG is providing the Services set forth above, a portion of some of the
Services may be subject to sales and use tax in Texas. Refer to Section 19.6
for treatment of sales and use tax on these Services.

 

 

SCHEDULE 9.1(a)(ii)

 

Monthly NMG Compensation

 

(a)           Marketing Reimbursement. The
aggregate of all Joint Marketing Commitment amounts spent by the NMG Companies
in the prior Fiscal Month.

 

(b)           In-Store Payment Reimbursement.
An amount equal to [***] (which amount shall increase by CPI on each
anniversary of the Effective Date, with the increased amount remaining in
effect until the following anniversary) per In-Store Payment received by any of
the NMG Companies in the prior Fiscal Month.

 

 

SCHEDULE 16.2(c)

 

If
this Agreement is terminated pursuant to Section 16.2(c) prior to the
end of the Initial Term, NMG shall pay Bank the sum of (i) the NMG
Marketing Commitment for the Fiscal Year prior to such termination (or the NMG
Marketing Commitment for the first Fiscal Year if this Agreement is terminated
prior to the end of the first full Fiscal Year of the term), (ii) the
Joint Marketing Commitment for the Fiscal Year prior to such termination (or
the Joint Marketing Commitment for the first Fiscal Year if this Agreement is
terminated prior to the end of the first full Fiscal Year of the term), and (iii) the
following amount:

 

	
  Date of Termination

  	
   

  	
  Amount

  	
   

  
	
  Prior to the first anniversary of the Effective
  Date:

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  On or after the first anniversary of the Effective
  Date and prior to the second anniversary of the Effective Date:

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  On or after the second anniversary of the
  Effective Date and prior to the third anniversary of the Effective Date:

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  On or after the third anniversary of the Effective
  Date and prior to the fourth anniversary of the Effective Date:

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  On or after the fourth anniversary of the
  Effective Date and prior to the fifth anniversary of the Effective Date:

  	
   

  	
  $

  	
  [***]

  	
   

  

 

4

 

SCHEDULE 16.3(b)

 

Bank
may terminate this Agreement in accordance with Section 16.3(b), if NMG
has not maintained on average during such Fiscal Year full-line, retail store
square footage of at least 4,250,00 square feet.

 

The
following stores were included in the calculation of square footage:

 

Dallas,
Texas (Downtown)

Dallas,
Texas (North Park)

Houston,
Texas (Galleria)

Bal
Harbour Florida

Atlanta,
Georgia

St.
Louis, Missouri

Northbrook,
Illinois

Fort
Worth, Texas

Washington,
D.C.

Newport
Beach, California

Beverly
Hills, California

Westchester,
New York

Las
Vegas, Nevada

Oak
Brook, Illinois

San
Diego, California

Fort
Lauderdale, Florida

San
Francisco, California

Chicago,
Illinois (Michigan Avenue)

Boston,
Massachusetts

Palo
Alto, California

McLean,
Virginia

Denver,
Colorado

Minneapolis,
Minnesota

Scottsdale,
Arizona

Troy,
Michigan

Short
Hills, New Jersey

King
of Prussia, Pennsylvania

Paramus,
New Jersey

Honolulu,
Hawaii

Palm
Beach, Florida

Plano,
Texas (Willow Bend)

Tampa,
Florida

Coral
Gables, Florida

Orlando,
Florida

Bergdorf
Goodman, New York City (Women’s Store)

Bergdorf
Goodman, New York City (Men’s Store)EXHIBIT 10.31

 

Confidential
Treatment Requested.

 

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

 

SERVICING AGREEMENT

 

between

 

THE NEIMAN MARCUS GROUP, INC.

 

and

 

HSBC BANK NEVADA, N.A.

 

Dated as of July 7, 2005

 

 

TABLE OF CONTENTS

 

	
   

  	
  Page

  
	
  ARTICLE I

  	
   

  
	
  DEFINITIONS AND
  INTERPRETATION

  	
   

  
	
   

  	
   

  
	
  Section 1.01.

  	
  Defined Terms

  	
  1

  
	
  Section 1.02.

  	
  Certain Interpretive
  Matters

  	
  3

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  
	
  SERVICING

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.01.

  	
  Appointment

  	
  3

  
	
  Section 2.02.

  	
  Servicer Compensation

  	
  3

  
	
  Section 2.03.

  	
  Services

  	
  4

  
	
  Section 2.04.

  	
  Service Level Standards

  	
  5

  
	
  Section 2.05.

  	
  Use of Subservicers

  	
  5

  
	
  Section 2.06.

  	
  Disaster Recovery

  	
  5

  
	
  Section 2.07.

  	
  Inventory

  	
  6

  
	
  Section 2.08.

  	
  Securitization

  	
  6

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  
	
  REPRESENTATIONS
  AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.01.

  	
  Representations and
  Warranties of Servicer

  	
  6

  
	
  Section 3.02.

  	
  Representations and
  Warranties of Bank

  	
  8

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  
	
  ADDITIONAL
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.01.

  	
  Further Assurances

  	
  9

  
	
  Section 4.02.

  	
  Modifications

  	
  9

  
	
  Section 4.03.

  	
  Correction of Errors

  	
  9

  
	
  Section 4.04.

  	
  Changes in Law

  	
  9

  
	
  Section 4.05.

  	
  Cooperation

  	
  9

  
	
  Section 4.06.

  	
  Facilities and
  Equipment

  	
  9

  
	
  Section 4.07.

  	
  Insurance

  	
  10

  
	
  Section 4.08.

  	
  Customer Information

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  
	
  DEFAULT;
  REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 5.01.

  	
  Servicer Default

  	
  10

  
	
  Section 5.02.

  	
  Remedies

  	
  11

  

 

i

 

	
  Section 5.03.

  	
  Non-Starred SLAs

  	
  12

  
	
   

  	
   

  
	
  ARTICLE VI

  	
   

  
	
  TERM

  	
   

  
	
   

  	
   

  
	
  Section 6.01.

  	
  Term of Agreement

  	
  12

  
	
  Section 6.02.

  	
  Servicer Termination
  Events

  	
  12

  
	
  Section 6.03.

  	
  Termination by Bank

  	
  13

  
	
  Section 6.04.

  	
  Effect of Termination

  	
  13

  
	
   

  	
   

  
	
  ARTICLE VII

  	
   

  
	
  INDEMNIFICATION

  	
   

  
	
   

  	
   

  
	
  Section 7.01.

  	
  Indemnification

  	
  13

  
	
  Section 7.02.

  	
  Procedure for
  Indemnification

  	
  14

  
	
  Section 7.03.

  	
  Notice and Additional
  Rights and Limitations.

  	
  15

  
	
  Section 7.04.

  	
  Limits on
  Indemnification

  	
  15

  
	
   

  	
   

  
	
  ARTICLE VIII

  	
   

  
	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  
	
  Section 8.01.

  	
  Confidentiality

  	
  15

  
	
  Section 8.02.

  	
  Access Rights

  	
  18

  
	
  Section 8.03.

  	
  No Waiver; Remedies;
  Amendment

  	
  18

  
	
  Section 8.04.

  	
  Independent Contractor

  	
  18

  
	
  Section 8.05.

  	
  No Joint Venture

  	
  18

  
	
  Section 8.06.

  	
  Payment Terms

  	
  18

  
	
  Section 8.07.

  	
  Entire Agreement

  	
  19

  
	
  Section 8.08.

  	
  No Set-Off

  	
  19

  
	
  Section 8.09.

  	
  Notices

  	
  19

  
	
  Section 8.10.

  	
  Severability

  	
  20

  
	
  Section 8.11.

  	
  Headings

  	
  20

  
	
  Section 8.12.

  	
  Survival

  	
  20

  
	
  Section 8.13.

  	
  Costs and Expenses

  	
  20

  
	
  Section 8.14.

  	
  Drafting

  	
  20

  
	
  Section 8.15.

  	
  Counterparts

  	
  20

  
	
  Section 8.16.

  	
  Assignment; Successors

  	
  20

  
	
  Section 8.17.

  	
  Governing
  Law

  	
  21

  
	
  Section 8.18.

  	
  Waiver of Jury Trial
  and Venue

  	
  21

  
	
   

  	
   

  
	
  SCHEDULES

  	
   

  
	
   

  	
   

  
	
  Schedule 1.01(a)

  	
  Services

  	
   

  
	
  Schedule 2.03(e)

  	
  Monthly Reports

  	
   

  
	
  Schedule 2.04(a)

  	
  Service Level Standards

  	
   

  
	
  Schedule 5.02

  	
  Remedies

  	
   

  
	
  Schedule 7.04

  	
  Indemnity Matters

  	
   

  
				

 

ii

 

SERVICING AGREEMENT

 

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

 

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

 

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

 

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

 

NOW,
THEREFORE, in consideration of the mutual agreements set forth herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS AND INTERPRETATION

 

Section 1.01.
Defined Terms. Wherever used in this Agreement, unless the context
otherwise requires, the following terms shall have the meanings set forth
below. Capitalized terms used but not defined in this Agreement shall have the
meanings given them in the Program Agreement.

 

“Agreement”: As
defined in the preamble hereof.

 

“Bank”: As defined
in the preamble hereof.

 

“Bank Parent”: As
defined in the recitals hereof.

 

“Credit Card
Production Services”: The Services set forth in paragraph 2 of Section I
of Schedule 1.01(a).

 

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

 

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

 

 

“Data
Processing Services”: The Services set forth in paragraph 4 of Section I
of Schedule 1.01(a).

 

“Deductible
Amount”: As defined in Schedule 7.04.

 

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

 

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

 

“Household
Companies”: As defined in the recitals hereof.

 

“Initial
Penalty Amount”: As defined in Schedule 5.02.

 

“Late
Stage Collection Services”: The Services set forth in paragraph 3 of Section I
of Schedule 1.01(a).

 

“NMG
Companies”: As defined in the recitals hereof.

 

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

 

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

 

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

 

“Primary
Servicer”: As defined in the recitals hereof.

 

“Program
Agreement”: As defined in the recitals hereof.

 

“Purchase
Agreement”: As defined in the recitals hereof.

 

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

 

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

 

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

 

“Securitization
Documents”: As defined in the Purchase Agreement.

 

“Sellers”:
As defined in the recitals hereof.

 

“Servicer”:
As defined in the preamble hereof.

 

“Servicer
Default”: As defined in Section 5.01 hereof.

 

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

 

2

 

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

 

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

 

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

 

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

 

“Starred
SLA”: On Schedule 2.04(a), SLA number 1 of Section A, SLA number 1 of Section B,
SLA number 6 of Section C and SLA numbers 2 and 6 of Section D.

 

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

 

“Subsequent
Penalty Amount”: As defined in Schedule 5.02.

 

“Term”:
As defined in Section 6.01 hereof.

 

“Transaction
Document”: The Purchase Agreement, the Program Agreement and this Agreement
and the agreements, instruments, schedules and other documents to be delivered
pursuant thereto and hereto.

 

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

 

ARTICLE II

 

SERVICING

 

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

 

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

 

3

 

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

 

Section 2.03.
Services.

 

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

 

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

 

(c) Notwithstanding
Section 2.03(b), Bank and Servicer agree that the Documentation Services
shall be transferred to Primary Servicer as soon as practicable after the date
hereof and, upon such transfer, Primary Servicer shall be required to comply
with the provisions of the Program Agreement in connection with the performance
of such Services, including the requirement to meet the SLAs applicable to the
Documentation Services set forth in Schedule 7.3(a) of the Program
Agreement.

 

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

 

4

 

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

 

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

 

(g) Bank
shall cooperate, and shall ensure that each of its Affiliates shall cooperate,
with Servicer in all matters relating to Servicer’s performance of the Services
at Servicer’s reasonable request. Such cooperation shall be provided at the
expense of Bank and shall include providing Servicer with reasonable access to
the personnel, records, systems, technology and information of the Household
Companies and their Affiliates relating to the Accounts. Servicer shall obtain
all licenses and authorizations necessary to perform the Services that it
provides hereunder.

 

Section 2.04.
Service Level Standards.

 

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

 

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

 

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

 

Section 2.06.
Disaster Recovery. For as long as Servicer is providing services
hereunder, Servicer shall continue to maintain the disaster recovery plan in
effect on the Effective Date. Servicer shall be prepared to and have the
ability to implement such plan if necessary. Servicer shall provide Bank with
access to review such plan upon request. Servicer shall test the plan annually
and shall promptly implement such plan upon the occurrence of a disaster or
business interruption.  Servicer
shall be excused from its failure to meet any applicable SLAs that result
directly from the failure of any of the Bank Systems. If in the event of a
disaster or severe business interruption Servicer fails to take reasonable
steps to respond to such disaster or severe business interruption, Bank shall
have reasonable access to Servicer’s systems, technical personnel and disaster
recovery resources, so as to ensure continuity of business and systems required
to service the Accounts.

 

5

 

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

 

Section 2.08.
Securitization.

 

(a) As
part of the Services hereunder, Servicer hereby agrees to continue and to have
its Subsidiaries continue to perform for the benefit of Bank and Bank Parent on
a subservicing basis, the servicing functions set forth under the
Securitization Documents with respect to the Accounts and receivables generated
thereunder that are subject to such Securitization Documents, from and after
the Closing Date, including the execution and delivery of all certificates and
reports as required by such Securitization Documents, which certificates and
reports shall be addressed to HSBC Finance Corporation, a Delaware corporation
as the Servicer.

 

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

 

(c) Servicer
shall cooperate with Bank and Bank Parent to correct any errors or deficiencies
discovered in any of the reports referred to in this Section 2.08.

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES

 

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

 

(a) Organization.
Servicer (i) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, (ii) is
duly licensed or qualified to do business and is in good standing as a foreign
corporation in all jurisdictions in which the conduct of its business or the
activities in which it is engaged makes such licensing or qualification
necessary, except to the extent that its non-compliance would not reasonably be
expected to have, individually or in the aggregate, a material adverse effect
on its ability to

 

6

 

perform its obligations
hereunder, and (iii) has all necessary licenses, permits, consents or
approvals from or by, and has made all necessary filings and registrations
with, all governmental authorities having jurisdiction, to the extent required
for the ownership, lease or conduct and operation of its business, except to
the extent that the failure to obtain such licenses, permits, consents or
approvals or to make such filings or registrations would not reasonably be
expected to have, individually or in the aggregate, a material adverse effect
on its ability to perform its obligations under this Agreement.

 

(b) Capacity;
Authorization; Validity. Servicer has all necessary corporate power and
authority to (i) execute and enter into this Agreement, and (ii) perform
its obligations hereunder and the other documents, instruments and agreements
relating to this Agreement executed by it pursuant hereto. The execution and
delivery by Servicer of this Agreement and all documents, instruments and
agreements executed and delivered by Servicer pursuant hereto, and the
consummation by Servicer of the transactions specified herein, have been duly
and validly authorized and approved by all necessary corporate actions of
Servicer. This Agreement (i) has been duly executed and delivered by
Servicer, (ii) constitutes the valid and legally binding obligation of
Servicer, and (iii) is enforceable in accordance with its terms (subject
to applicable bankruptcy, insolvency, reorganization, receivership or other
laws affecting the rights of creditors generally and by general equity
principles including those respecting the availability of specific
performance).

 

(c) Conflicts;
Defaults; Etc. The execution, delivery and performance of this Agreement by
Servicer, its compliance with the terms hereof, and consummation of the
transactions specified herein will not (i) conflict with, violate, result
in the breach of, constitute an event which would, or with the lapse of time or
action by a third party or both would, result in a default under, or accelerate
the performance required by, the terms of any contract, instrument or agreement
to which Servicer is a party or by which it is bound, or to which any of the
assets of Servicer is subject; (ii) conflict with or violate the articles
of incorporation or by-laws of Servicer; (iii) breach or violate any
Applicable Law or Applicable Order, in each case, applicable to Servicer; (iv) require
the consent or approval of any other party to any contract, instrument or
commitment to which Servicer is a party or by which it is bound; or (v) require
any filing with, notice to, consent or approval of, or any other action to be
taken with respect to, any Governmental Authority, except, in the cases of
clauses (i) and (iii)-(v), for such conflicts, breaches, defaults,
violations or failures to obtain such consents or approvals or make or obtain
such filings, notices, consents and approvals as would not reasonably be
expected to have, individually or in the aggregate, a material adverse effect
upon Servicer’s ability to perform its obligations under this Agreement.

 

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

 

7

 

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

 

(f) Solvency.
Servicer is Solvent.

 

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

 

(a) Organization.
Bank (i) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, (ii) is
duly licensed or qualified to do business and is in good standing as a foreign
corporation in all jurisdictions in which the conduct of its business or the
activities in which it is engaged makes such licensing or qualification
necessary, except to the extent that its non-compliance would not reasonably be
expected to have, individually or in the aggregate, a material adverse effect
on its ability to perform its obligations hereunder, and (iii) has all
necessary licenses, permits, consents or approvals from or by, and has made all
necessary filings and registrations with, all governmental authorities having
jurisdiction, to the extent required for the ownership, lease or conduct and
operation of its business, except to the extent that the failure to obtain such
licenses, permits, consents or approvals or to make such filings or
registrations would not reasonably be expected to have, individually or in the
aggregate, a material adverse effect on its ability to perform its obligations
under this Agreement.

 

(b) Capacity;
Authorization; Validity. Bank has all necessary corporate power and
authority to (i) execute and enter into this Agreement, and (ii) perform
its obligations hereunder and the other documents, instruments and agreements
relating to this Agreement executed by it pursuant hereto. The execution and
delivery by Bank of this Agreement and all documents, instruments and
agreements executed and delivered by Bank pursuant hereto, and the consummation
by Bank of the transactions specified herein, have been duly and validly
authorized and approved by all necessary corporate actions of Bank. This
Agreement (i) has been duly executed and delivered by Bank, (ii) constitutes
the valid and legally binding obligation of Bank, and (iii) is enforceable
in accordance with its terms (subject to applicable bankruptcy, insolvency,
reorganization, receivership or other laws affecting the rights of creditors
generally and by general equity principles including those respecting the
availability of specific performance).

 

(c) Conflicts;
Defaults; Etc. The execution, delivery and performance of this Agreement by
Bank, its compliance with the terms hereof, and consummation of the
transactions specified herein will not (i) conflict with, violate, result
in the breach of, constitute an event which would, or with the lapse of time or
action by a third party or both would, result in a default under, or accelerate
the performance required by, the terms of any contract, instrument or agreement
to which Bank is a party or by which it is bound, or to which any of the assets
of Bank is subject; (ii) conflict with or violate the articles of
incorporation or by-laws of Bank; (iii) breach or violate any Applicable
Law or Applicable Order, in each case, applicable to Bank; (iv) require
the consent or approval of any other party to any contract, instrument or
commitment to which Bank is a party or by which it is bound; or (v) require
any filing with, notice to, consent or approval of, or any other action to be
taken with respect to, any Governmental Authority, except,

 

8

 

in the cases of clauses (i) and
(iii)-(v), for such conflicts, breaches, defaults, violations or failures to
obtain such consents or approvals or make or obtain such filings, notices,
consents and approvals as would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect upon Bank’s ability
to perform its obligations under this Agreement.

 

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

 

(e) Solvency.
Bank is Solvent.

 

ARTICLE IV

 

ADDITIONAL COVENANTS

 

Section 4.01.
Further Assurances. From time to time after the execution of this
Agreement, as and when requested by either Party, the other Party shall execute
and deliver, or cause to be executed and delivered, all such documents and
instruments as may be reasonably necessary to consummate the transactions
contemplated by this Agreement.

 

Section 4.02.
Modifications. Except as permitted by this Agreement, the Program
Agreement, the Risk Management Policies or the Operating Procedures, Servicer
shall not enter into any agreement or arrangement reducing amounts payable by
Cardholders.

 

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

 

Section 4.04.
Changes in Law. Bank shall notify Servicer from time to time, in a
timely manner, of the expiration, revocation or amendment of, or other material
developments relating to, any requirements of Applicable Law affecting the
provision by Servicer of the Services. If such changes in law materially
increase Servicer’s cost of providing the Services, the Management Committee
shall meet to discuss the increased cost and shall determine the allocation of
such increased cost between the Parties.

 

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

 

Section 4.06.
Facilities and Equipment.

 

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

 

9

 

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

 

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

 

Section 4.08.
Customer Information. Servicer shall maintain an information security
program that is designed to meet all requirements of Applicable Law, including,
at a minimum, maintenance of an information security program that is designed
to: (i) ensure the security and confidentiality of customer information; (ii) protect
against any anticipated threats or hazards to the security or integrity of such
information; (iii) protect against unauthorized access to or use of such
information; and (iv) ensure the proper disposal of such information.
Additionally, such security measures shall meet current industry standards and
shall be at least as protective as those used by Servicer to protect its other
confidential customer information. Servicer shall use the same degree of care
in protecting the customer information against unauthorized disclosure as it
accords to its own confidential customer information, but in no event less than
a reasonable standard of care. In the event Servicer becomes aware of any
unauthorized use of or access to customer information, Servicer shall
immediately notify Bank and shall cooperate with Bank, as it deems necessary or
as required by Applicable Law, (x) to assess the nature and scope of such
incident, (y) to contain and control such incident to prevent further
unauthorized access to or use of such information, and (z) to provide
prompt notice to affected customers to the extent required by Applicable Law or
otherwise with the approval of the Management Committee.

 

ARTICLE V

 

DEFAULT; REMEDIES

 

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

 

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

 

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

 

10

 

Section 5.02.
Remedies.

 

(a) In
the event of a Significant Failure, Servicer shall: (A) promptly report to
the Management Committee the reasons for the Starred SLA failure(s); (B) within
thirty (30) days of such Significant Failure, propose a remediation plan for
taking such action as Servicer deems necessary to correct and prevent
recurrence of such failure(s); and (C) subject to Bank’s agreement,
implement the remediation plan as soon as practicable. However, under no
circumstances shall the time period between Bank’s agreement to the remediation
plan and completion of such plan exceed two (2) months.

 

(b) If
Servicer has an additional failure of any of the same Starred SLA(s) (“Subsequent
Failure”) during the twelve (12) Fiscal Months following the occurrence of
any Significant Failure, Servicer shall pay Bank the Initial Penalty Amount,
within fifteen (15) days of the end of such Fiscal Month, for each such
Subsequent Failure.

 

(c) Upon
the occurrence of the second Subsequent Failure and each additional Subsequent
Failure of the same Starred SLA during the twenty four (24) Fiscal Months
following a Significant Failure or upon the occurrence of a Regulatory Failure,
Servicer shall pay Bank the Subsequent Penalty Amount, within fifteen (15) days
of the end of such Fiscal Month, per each additional Subsequent Failure.

 

(d) Upon
the occurrence of (i) the third and each additional Subsequent Failure of
the same Starred SLA during the twenty four (24) Fiscal Months following a
Significant Failure or (ii) a second Regulatory Failure of the same
Regulatory SLA, Bank shall, in addition to payment as provided in paragraph (c) above,
have the right to terminate the Program Agreement by providing thirty (30) days
prior written notice to Servicer, in which event the parties shall have the
rights set forth in Article XVII of the Program Agreement; provided,
however, that prior to either Party electing to transfer the provision
of such Services pursuant to Section 5.02(e) below or to terminate
the Program Agreement, the Management Committee shall meet to discuss the
occurrence of the Subsequent Failure and shall determine whether such SLA
should be modified (except in the case of a Regulatory Failure, in which event
no Management Committee meeting shall be required as a condition to
transferring the affected Services pursuant to Section 5.02(e)). If the
Management Committee determines that such SLA shall be modified, then Bank
shall not be entitled to terminate the Program Agreement as a result of the
Subsequent Failure discussed at the meeting of the Management Committee unless
and until an additional Subsequent Failure of the same Starred SLA occurs; and provided,
further, that for purposes of transferring Services pursuant to this Section 5.02(d) or
Section 5.02(e), an SLA that is both a Starred SLA and a Regulatory SLA
shall be deemed to be a Regulatory SLA.

 

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

 

(f) No
servicing transfer or termination of this Agreement pursuant to Section 5.02(d) or
Section 5.02(e) above shall be effective until either assumption by
the Bank or its

 

11

 

Affiliate of the
provision of the Services or the appointment by Bank of a successor servicer
reasonably satisfactory to Servicer pursuant to a servicing agreement
reasonably satisfactory to Servicer. Following the delivery by the applicable
Party of written notice of a servicing transfer or termination, Bank shall have
reasonable access to Servicer’s operations and systems to ensure continuity of
business and systems required to service the Accounts until such time as Bank
or its Affiliate assumes the provision of the Services or appoints a successor
servicer reasonably satisfactory to Servicer. Both Parties shall use
commercially reasonable efforts and cooperate with each other to ensure
continuity of business during any transfer of Services.

 

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

 

ARTICLE VI

 

TERM

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

12

 

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 official) of Servicer or any substantial part of its
properties, or (iii) take corporate or similar action in furtherance of
any such action.

 

Section 6.03.
Termination by Bank. Bank may terminate this Agreement upon written
notice prior to the end of the Term after the occurrence of a Servicer Event of
Default. No such termination shall be effective until either assumption by Bank
or its Affiliate of the provision of the Services pursuant to the Program
Agreement or the appointment by Bank of a successor servicer reasonably
satisfactory to Servicer pursuant to a servicing agreement reasonably
satisfactory to Servicer. Following the delivery by Bank of written notice of a
servicing transfer or termination, Bank shall have reasonable access to Servicer’s
operations and systems to ensure continuity of business and systems required to
service the Accounts until such time as Bank or its Affiliate assumes the
provision of the Services or appoints a successor servicer reasonably
satisfactory to Servicer. Both Parties shall use commercially reasonable
efforts and cooperate with each other to ensure continuity of business during
any transfer of Services.

 

Section 6.04.
Effect of Termination.

 

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

 

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

 

ARTICLE VII

 

INDEMNIFICATION

 

Section 7.01.
Indemnification By Servicer. Servicer agrees to indemnify and hold
harmless Bank, its Affiliates and their respective officers, directors and
employees from and against and in respect of any and all losses, liabilities,
damages, costs and expenses of whatever nature, including reasonable attorneys’
fees and expenses (collectively, “Damages”), which are caused or incurred
by, result from, arise out of or relate to:

 

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

 

13

 

(b) the
failure by Servicer to perform any of its covenants or agreements contained in
this Agreement, except to the extent such failure to perform is caused by (i) the
failure of any of the Household Companies to perform its obligations under any
Transaction Document or (ii) any actions or omission by Servicer taken or
not taken at any Household Companies’ written request or direction pursuant to
any Transaction Document;

 

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

 

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

 

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

 

Section 7.02.
Procedure for Indemnification.

 

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

 

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

 

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

 

14

 

hereunder and given a
full and complete release of any and all liability by all relevant parties
relating to such claim, suit or action, but shall not agree to any other
settlement or compromise unless Bank consents in writing, which consent shall
not be unreasonably withheld (it being agreed that any failure of an Bank to
consent to any settlement or compromise involving relief other than monetary
damages shall not be deemed to be unreasonably withheld), and (ii) Bank
may settle or compromise any such claim, suit or action solely for an amount
not exceeding One Thousand Dollars ($1,000), but shall not settle or compromise
any other matter without the prior written consent of Servicer, which consent
shall not be unreasonably withheld.

 

Section 7.03.
Notice and Additional Rights and Limitations.

 

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

 

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

 

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

 

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

 

ARTICLE VIII

 

MISCELLANEOUS

 

Section 8.01.
Confidentiality

 

(a) General
Confidentiality.

 

(i) For purposes of
this Agreement, “Confidential Information” means any of the following: (i) information
that is provided by or on behalf of either Servicer or the Household Companies
to the other Party or its agents in connection with providing Services
hereunder (including information provided prior to the date hereof or the
Effective Date); (ii) information about Servicer or the Household
Companies or their

 

15

 

Affiliates, or their respective businesses or
employees, that is otherwise obtained by the other Party in connection with
providing Services hereunder, in each case including: (A) information
concerning marketing plans, objectives and financial results; (B) information
regarding business systems, methods, processes, financing data, programs and
products; (C) information regarding any products offered or proposed to be
offered under the Program Agreement or the manner of offering of any such
products; (D) information unrelated to the Program obtained by Servicer or
the Household Companies in connection with this Agreement, including by
accessing or being present at the business location of the other Party; and (E) proprietary
technical information, including source codes, or other proprietary information
developed in connection with the Program; and (iii) the terms and
conditions of this Agreement.

 

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

 

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

 

(iv) If Servicer, on
the one hand, or the Household Companies, on the other hand, receives
Confidential Information of the other Party (“Receiving Party”), the
Receiving Party shall do the following with respect to the Confidential
Information of the other Party (“Disclosing Party”): (i) keep the
Confidential Information of the Disclosing Party secure and confidential; (ii) treat
all Confidential Information of the Disclosing Party with the same degree of
care as it accords its own Confidential Information, but in

 

16

 

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

 

(b) Use
and Disclosure of Confidential Information.

 

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

 

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

 

(c) Unauthorized
Use or Disclosure of Confidential Information. Each Receiving Party agrees
that any unauthorized use or disclosure of Confidential Information of the
Disclosing Party might cause immediate and irreparable harm to the Disclosing
Party for which money damages might not constitute an adequate remedy. In that
event, the Receiving Party agrees that injunctive relief may be warranted in
addition to any other remedies the Disclosing Party may have. In addition, the
Receiving Party agrees promptly to advise the Disclosing Party by telephone and
in writing via facsimile of any security breach that may have compromised any
Confidential Information or of any unauthorized misappropriation, disclosure or
use by any Person of the Confidential Information of the Disclosing Party which
may come to its attention, and to take all steps at its own expense reasonably
requested by the Disclosing Party to limit, stop or otherwise remedy such
breach, misappropriation, disclosure or use.

 

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

 

17

 

Section 8.02.
Access Rights. Each Party shall permit the other Party and its
representatives and regulators to visit its facilities related to the Program
during normal business hours with reasonable advance notice. The reviewing
Party shall employ such reasonable procedures and methods as necessary and
appropriate in the circumstances, minimizing interference to the extent
practicable with the reviewed Party’s normal business operations. The reviewed
Party shall use commercially reasonable efforts to facilitate the reviewing
Party’s review, including making reasonably available such personnel of the
reviewed Party and its service providers to assist the reviewing Party and its
representatives as reasonably requested. Each Party shall also permit the other
Party and its representatives and regulators to review (during normal business
hours) and obtain copies of the books and records relating to the Program,
including any audit results of subcontractors that provide Services; provided
that neither Party shall be required to provide access to records to the extent
that (a) such access is prohibited by Applicable Law, (b) such
records are legally privileged, (c) such records are company planning
documents of such Party or any of its Affiliates, operating budgets, management
reviews or employee records, (d) such records relate to other customers
of, or credit programs operated by, the Household Companies or Servicer or (e) such
records relate to other customers or operations of such Party other than the
Program or to personnel records not normally disclosed in connection with
audits.

 

Section 8.03.
No Waiver; Remedies; Amendment.

 

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

 

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

 

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

 

Section 8.04.
Independent Contractor. In the performance of its duties or obligations
under this Agreement, Servicer shall not be deemed to be the agent of Bank and
Bank shall not be deemed to be the agent of Servicer and each Party shall at
all times take whatever measures as are necessary to ensure that its status
shall be that of an independent contractor.

 

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

 

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

 

18

 

Section 8.07.
Entire Agreement. Each Party acknowledges that no representations, agreements,
or promises were made to it by the other Party other than those
representations, agreements or promises specifically contained in this
Agreement and in the Transaction Documents and in a separate confidentiality
letter signed by Bank dated March 9, 2005. This Agreement and the other
Transaction Documents and such confidentiality letter set forth the entire
understanding between the Parties hereto with respect to the subject matter
hereof and thereof.

 

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

 

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

 

(a)           In the case of Servicer:

 

c/o The Neiman Marcus
Group, Inc.

One Marcus Square

1618 Main Street

Dallas, Texas 75201

Attention: General
Counsel

Facsimile: (214) 573-5354

 

With a copy to:

 

c/o The Neiman Marcus
Group, Inc.

One Marcus Square

1618 Main Street

Dallas, Texas 75201

Attention: Credit Card
Program Manager

Facsimile: (214) 743-7646

 

With a copy to:

 

Simpson Thacher &
Bartlett LLP

425 Lexington Avenue

New York, New York 10017

Attention: Maripat
Alpuche, Esq.

Facsimile: (212) 455-2502

 

19

 

(b)          In the case of Bank:

 

HSBC Bank Nevada, N.A.

2700 Sanders Road

Prospect Heights,
Illinois 60070

Attention: Chief
Operating Officer, HSBC Retail Services

Facsimile: (847) 205-7441

 

With a copy to:

 

HSBC Retail Services

2700 Sanders Road

Prospect Heights,
Illinois 60070

Attention: General
Counsel, Retail Services Division

Facsimile: (847) 205-7417

 

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

 

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

 

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

 

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

 

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

 

Section 8.15.
Counterparts. This Agreement may be executed in one or more
counterparts, each of which counterparts shall be deemed to be original, and
all such counterparts shall constitute one and the same instrument.

 

Section 8.16.
Assignment; Successors. This Agreement shall not be assigned by either
Party without the prior written consent of the other, except that (a) Servicer
shall have the right to assign its rights and obligations hereunder to any
Affiliate of Servicer and (b) Bank shall

 

20

 

have the right to assign
its rights and obligations hereunder to an Affiliate. This Agreement is
intended for the exclusive benefit of the Parties hereto and their respective
successors and permitted assigns, and shall not create any rights in or be
enforceable by any other Person whomsoever, other than any Person entitled to
indemnification from Servicer pursuant to Article VII hereof, it being the
intention of the Parties that no other Person shall be deemed to be a third
party beneficiary of this Agreement. This Agreement shall be binding on, and
enforceable against, the successors and permitted assigns of the Parties.

 

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

 

Section 8.18.
Waiver of Jury Trial and Venue.

 

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

 

(b) Each
party hereto hereby irrevocably submits to the jurisdiction of the United
States District Court for the State of Delaware or, if such federal
jurisdiction is unavailable, in the state courts of the State of Delaware over
any action arising out of this Agreement, and each party hereto hereby
irrevocably waives any objection which such party may now or hereafter have to
the laying of improper venue or forum non
conveniens. Each party hereto agrees that a judgment in any such
action or proceeding may be enforced in other jurisdictions by suit on the
judgment or in any manner provided by law. Any and all service of process and
any other notice in any such suit, action or proceeding with respect to this
Agreement shall be effective against any party hereto if given as provided
herein.

 

21

 

IN
WITNESS WHEREOF, the Parties have caused their respective duly authorized
representatives to execute this Agreement as of the date first written above.

 

	
   

  	
  THE NEIMAN MARCUS
  GROUP, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Steven P. Dennis

  
	
   

  	
  Name:

  	
  Steven
  P. Dennis

  
	
   

  	
  Title:

  	
  Senior
  Vice President, Strategy & Business Development

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HSBC BANK NEVADA, N.A.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Charles A. Colip

  
	
   

  	
  Name:

  	
  Charles
  A. Colip

  
	
   

  	
  Title:

  	
  Executive
  Vice President 

  

 

22

 

SCHEDULE
1.01(a)

 

Services

 

I.   The Services that may be
transitioned to Bank are defined as follows:

 

1.     Documentation Services — The Statement
Mailing responsibilities include preparing, processing and mailing customer
billing statements with related and appropriate inserts including but not
limited to privacy policies and term notifications. Additional credit
correspondence may also be included. There are non-credit functions (i.e. store
and marketing mailings) not included in a transfer of Documentation
Services.  The ability for Universal
Agents to retrieve copies of customer billing statements through the SystemWare
XNET or comparable system must also be done as part of this transition. The
cardholder remittance processing (Payment Processing) functionality related to
receiving and processing all incoming charge payments, except those payments
received in the store, may also be transitioned.  The Payment Processing transition must
include a daily feed of NM and BG payments separately as a TRAMS input feed
into the NMG PaySys system until the Bank PaySys system is used.

 

2.     Credit Card Production Services — The
production and issuance of all new, replacement and reissued credit card plates
related to the following credit card programs (Neiman Marcus, Bergdorf Goodman,
NM Gold, NM InCircle, NM Platinum).  In
addition to the embossed credit cards, the production services group generates
non-embossed gift cards with the 16-digit gift card number coded in the
magnetic stripe.  The timeline for the
potential transition of gift card issuance and additional costs incurred, if
any, will be mutually agreed upon by Bank and NMG prior to such conversion.

 

3.     Late Stage Collections — Collection
accounts greater than or equal to 120 contractual days delinquent including
charged-off (P&L) accounts.  Customer
contact may include the use of power dialing equipment, generated collection
letters in addition to outbound phone contact with the customer. Post
Charge-off (P&L) Collection Services include the administration, maintenance
and placement of accounts to outside attorneys and agencies on a contingency
fee basis.

 

4.     Data Processing Services — Credit card
data processing involves retail cardholder account data storage and
maintenance, transaction authorizing and posting, fraud and risk management
strategies and settlement.

 

 

II.  Services not considered for
transfer to the Bank includes:

 

On
collection accounts less than 120 contractual days delinquent (Early Stage Collections), services include providing account
monitoring, identifying over-extended accounts and initiating the appropriate
collection efforts.

 

Credit
Processing Services include the processing, primarily through store
referral call interaction, and decisioning of new applications and pending sale
transactions on existing accounts. Both of these underwriting processes are
governed by the risk management policies and operating procedures.

 

Customer
Service Services has multiple areas of functionality.  The call center responds and resolves
cardholder and store inquiries and handles card program billing-related claims
for Neiman Marcus, Bergdorf Goodman and the InCircle loyalty program.   Other support groups involved in the
customer resolution process include Bill Adjustments, Media Retention and
Retrieval, Accounts Receivable reconciliation, Third Party Charge-backs as well
as various clerical responsibilities.

 

2

 

SCHEDULE
2.03(e)

 

Monthly
Reports

 

	
  Department

  	
   

  	
  Hotel Report

  	
   

  	
  Brookline Equivalent

  
	
  Collections

  	
   

  	
  Roll Rates

  	
   

  	
  Trial Balance By Cycle

  
	
   

  	
   

  	
   

  	
   

  	
  Trial Balance By
  Balance Range

  
	
   

  	
   

  	
   

  	
   

  	
  Roll Rate

  
	
   

  	
   

  	
  Dialer Reports

  	
   

  	
  Job Performance Summary

  
	
   

  	
   

  	
   

  	
   

  	
  Monthly Job Performance
  Summary

  
	
   

  	
   

  	
   

  	
   

  	
  Monthly System
  Performance Summary

  
	
   

  	
   

  	
   

  	
   

  	
  Monthly System
  Completion Code Summary

  
	
   

  	
   

  	
   

  	
   

  	
  Monthly Job Completion
  Code Summary

  
	
   

  	
   

  	
  Collection QA Reports

  	
   

  	
  NM Monitoring Form

  
	
   

  	
   

  	
  Collection Agency Audit
  Packages

  	
   

  	
  Collection Agency
  Account Audit

  
	
   

  	
   

  	
   

  	
   

  	
  e.g. Attorney Placement
  Summary (Strong Law Firm)

  
	
   

  	
   

  	
  Collection Bureau
  Disputes

  	
   

  	
  Report Card Information;
  Summary of Responses

  
	
   

  	
   

  	
  Calling Strategies

  	
   

  	
  Billing Calendar -
  Dialer Work Schedule

  
	
   

  	
   

  	
  Block Code Report

  	
   

  	
  Blocked Account Report

  
	
   

  	
   

  	
  Block Code/User Code
  Report

  	
   

  	
  No applicable Report

  
	
   

  	
   

  	
  Debt Management
  Inventory Report

  	
   

  	
  Payment Plans

  
	
   

  	
   

  	
   

  	
   

  	
  CCCS Inventory

  
	
   

  	
   

  	
  Outbound/Inbound Dialer
  Volume

  	
   

  	
  Refer to Dialer Reports

  
	
   

  	
   

  	
  Collection Productivity
  Reports

  	
   

  	
  Collector Synopsis
  Summary Reports (By Team)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Credit

  	
   

  	
  Override Report

  	
   

  	
  Credit Application
  Processing System CAPS Listing

  
	
   

  	
   

  	
  Credit Line Increases

  	
   

  	
  New Accounts With
  Guidelines Exceeding $

  
	
   

  	
   

  	
   

  	
   

  	
  Credit Limit Change
  Report

  
	
   

  	
   

  	
  Forced Authorization
  Report

  	
   

  	
  Daily Approval Override
  Code Usage - Manager Overrides

  
	
   

  	
   

  	
   

  	
   

  	
  Daily Approval Override
  Code Usage - Credit Center Overrides

  
	
   

  	
   

  	
   

  	
   

  	
  Authorization
  Production By Operator ID

  
	
   

  	
   

  	
   

  	
   

  	
  Auto & Manual
  Decline Transactions

  
	
   

  	
   

  	
  Reinstatement Report

  	
   

  	
  No applicable Report

  
	
   

  	
   

  	
  Application Decision
  Timing

  	
   

  	
  No applicable Report

  
	
   

  	
   

  	
  Adverse Action Timing

  	
   

  	
  Adverse Action Letter
  Generation

  
	
   

  	
   

  	
  Decline Reason Timing

  	
   

  	
  Adverse Action Letter Generation

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fraud

  	
   

  	
  New Fraud Claims Report

  	
   

  	
  CAPS - Real-Time Fraud
  Detection Payment Report Model

  
	
   

  	
   

  	
   

  	
   

  	
  Pending Fraud Write-Off

  
	
   

  	
   

  	
  Fraud By Name Plate
  Report

  	
   

  	
  Fraud Expense Forecast

  
	
   

  	
   

  	
   

  	
   

  	
  Fraud Expense By
  Location

  
	
   

  	
   

  	
  Fraud Block Code
  Vintage Report

  	
   

  	
  No applicable Report

  
	
   

  	
   

  	
  Fraud By Type

  	
   

  	
  Fraud Loss By Type

  
	
   

  	
   

  	
  Fraud Write-Off
  Policies

  	
   

  	
  No applicable Report

  
	
   

  	
   

  	
  Fraud Investigation
  Procedures

  	
   

  	
  Loss Prevention
  Training Program - Module 5/Fraud Investigators

  
	
   

  	
   

  	
  SAR Reporting Timelines

  	
   

  	
  No applicable Report

  

 

 

	
  Customer
  Service

  	
   

  	
  Credit Balance Refund
  Aging Report

  	
   

  	
  Credit Balance Report

  
	
   

  	
   

  	
   

  	
   

  	
  Check Register

  
	
   

  	
   

  	
  Dispute Aging Report

  	
   

  	
  Neiman Marcus FCBA Log

  
	
   

  	
   

  	
   

  	
   

  	
  Service Profile By
  Division

  
	
   

  	
   

  	
   

  	
   

  	
  Fiscal 2005 YTD Totals

  
	
   

  	
   

  	
   

  	
   

  	
  Dispute Items Report

  
	
   

  	
   

  	
  Lost/Stolen Account
  Maintenance

  	
   

  	
  Accounts Transferred
  Today

  
	
   

  	
   

  	
   

  	
   

  	
  Transactions On
  Transfers

  
	
   

  	
   

  	
  SSCRA Reporting

  	
   

  	
  No applicable Report

  
	
   

  	
   

  	
  Repeat Credit Bureau
  Disputes

  	
   

  	
  No applicable Report

  
	
   

  	
   

  	
  QA Monitoring

  	
   

  	
  Credit Services Quality
  Assurance Form

  
	
   

  	
   

  	
  Key Performance
  Measures

  	
   

  	
  Service Levels - Credit
  Call Center

  
	
   

  	
   

  	
  Telephone Statistics
  Summary

  	
   

  	
  Split/Skill Summary
  Monthly Authorizations

  
	
   

  	
   

  	
   

  	
   

  	
  Split/Skill Summary
  Monthly Infobot

  
	
   

  	
   

  	
   

  	
   

  	
  Split/Skill Summary
  Monthly Incircle/Gold

  
	
   

  	
   

  	
   

  	
   

  	
  Split/Skill Summary
  Monthly Incircle/Platinum

  
	
   

  	
   

  	
   

  	
   

  	
  Split/Skill Summary
  Monthly - NMD/NMO Referrals

  
	
   

  	
   

  	
   

  	
   

  	
  Split/Skill Summary
  Monthly Customer Service Help

  
	
   

  	
   

  	
  Dispute Processing &
  Procedures

  	
   

  	
  Dispute Resolution
  Process

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Compliance

  	
   

  	
  Right to Financial
  Privacy

  	
   

  	
  Subpoena Log

  
	
   

  	
   

  	
  Compliance Training

  	
   

  	
  No applicable Report

  
	
   

  	
   

  	
  Escalated Complaint
  Reporting

  	
   

  	
  No applicable Report

  
	
   

  	
   

  	
  Cash Payment Monitoring

  	
   

  	
  Reporting Monies
  Received on In-Store Cash Payments

  
	
   

  	
   

  	
  OFAC Exception
  Reporting

  	
   

  	
  Report Distribution
  Change Request

  
	
   

  	
   

  	
  High Risk Country
  Reporting

  	
   

  	
  No applicable Report

  
	
   

  	
   

  	
  CIP Exception Reporting

  	
   

  	
  No applicable Report

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  A/R
  System

  	
   

  	
  Activity Recap Report
  (R16)

  	
   

  	
  Activity Recap Report
  (R16)

  
	
   

  	
   

  	
  Reject Re-Entry Report
  (R15)

  	
   

  	
  Reject Re-Entry Report
  (R15)

  
	
   

  	
   

  	
  Warehoused Transactions
  (D10)

  	
   

  	
  Warehoused Transactions
  (D10)

  
	
   

  	
   

  	
  Blocked Account Report
  (O07)

  	
   

  	
  Blocked Account Report
  (O07)

  
	
   

  	
   

  	
  Trial Balance by
  Account (O08)

  	
   

  	
  Trial Balance by
  Account (O08)

  
	
   

  	
   

  	
  Charged Off Accounts
  Report (D09)

  	
   

  	
  Charged Off Accounts
  Report (D09)

  
	
   

  	
   

  	
  Audit Exception Report
  (D15)

  	
   

  	
  Audit Exception Report
  (D15)

  
	
   

  	
   

  	
  Generated Transaction
  Journal (D11)

  	
   

  	
  Generated Transaction
  Journal (D11)

  
	
   

  	
   

  	
  Daily Balancing Report
  (R32)

  	
   

  	
  Daily Balancing Report
  (R32)

  
	
   

  	
   

  	
  Accounts Transferred
  Today (O24)

  	
   

  	
  Accounts Transferred
  Today (O24)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Risk/Portfolio
  

  	
   

  	
  Application Result
  Summary

  	
   

  	
  CAPS Listing

  
	
  Management

  	
   

  	
  Key Portfolio
  Statistics

  	
   

  	
  Customer Aging Report
  (CAR)

  
	
   

  	
   

  	
  Authorization Summary

  	
   

  	
  Daily Authorization
  Totals

  
	
   

  	
   

  	
   

  	
   

  	
  Rescore Summary Report

  
	
   

  	
   

  	
   

  	
   

  	
  Rescore With Limit
  Increase/Decrease - Tier I

  
	
   

  	
   

  	
   

  	
   

  	
  Rescore Tier II With
  Limit Increase

  
	
   

  	
   

  	
   

  	
   

  	
  Rescore Without Limit
  Increase/Decrease

  
	
   

  	
   

  	
   

  	
   

  	
  Rescore Tier II Without
  Increase By Reason Code

  

 

2

 

	
   

  	
   

  	
  Charge-Off &
  Recovery Trends

  	
   

  	
  Bad Debt Provision

  
	
   

  	
   

  	
   

  	
   

  	
  Primary Collection
  Agency Performance Report

  
	
   

  	
   

  	
   

  	
   

  	
  Secondary
  Agency & Bankruptcy Performance Report

  
	
   

  	
   

  	
   

  	
   

  	
  Bankruptcy Analysis

  
	
   

  	
   

  	
   

  	
   

  	
  Bankruptcy Write-Off
  Analysis

  
	
   

  	
   

  	
  Behavior Score Control
  Chart

  	
   

  	
  No applicable Report

  
	
   

  	
   

  	
   

  	
   

  	
  Credit Reclassification
  Summary Report

  
	
   

  	
   

  	
  FICO Score Control
  Chart

  	
   

  	
  No applicable Report

  
	
   

  	
   

  	
  Custom Score Control
  Chart

  	
   

  	
  Population Stability
  Report Final Scores

  
	
   

  	
   

  	
  Account Review Analysis

  	
   

  	
  Quest Totals

  

 

3

 

SCHEDULE
2.04(a)

 

Service
Level Standards

 

For
the Term, the following Servicing Levels will be maintained by Servicer as
noted:

 

A.            Documentation
Services Servicer
will meet the following service levels on average each month (as measured by
Servicer’s standard practices):

 

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

 

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

 

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

 

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

 

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

 

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

 

B.            Credit
Card Production Services  Servicer
will meet the following service level on average each month (as measured by
Servicer’s standard practices):

 

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

 

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

 

2.     Percentage of time that
Servicer shall make its collections operations available during the following
times: [***]

 

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

 

 

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

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

Sunday closed

 

3.     Percentage of time that
Servicer shall complete the following minimum number of Account reviews per day
for those accounts without a contact or tentative agreement still in the CTA
sub-system: [***]

 

	
  Mid
  balances ($[***] to $[***])

  	
  every
  3 days

  
	
  Balances
  $[***] to $[***]

  	
  every
  3 days

  
	
  Balances
  greater than $[***]

  	
  every
  3 days

  

 

4.     Percentage of time that
Servicer shall maintain a [***] monthly promise to pay ratio of accounts worked
from the autodialer: [***]

 

5.     Percentage of time that Servicer
shall maintain a [***] monthly contact ratio of accounts worked from the
autodialer: [***]

 

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

 

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

 

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

 

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

 

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

 

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

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

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

 

If more than half of all
Accounts receive a Change of Terms, then these standards will not be applied
for the months during which the Change of Terms is becoming effective and one
month after the Change of Terms has become effective. If the initial charge
card re-issuance (with Bank information on back of charge cards) is not sent to
all cardholders with the Change of Terms notice, then these ASA standards will
not be applied for the 

 

2

 

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

 

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

 

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

 

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

 

6.     Percentage of Fair Credit
billing and all other customer initiated disputes are handled [resolved] within
60 days of receipt of notification: [***] * [Regulatory SLA]

 

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

 

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

 

*
Denotes a Starred SLA

 

3

 

SCHEDULE
5.02

 

Remedies

 

“Initial
Penalty Amount”: [***].

 

“Subsequent
Penalty Amount”: [***].

 

4

 

SCHEDULE
7.04

 

Indemnity
Matters

 

“Deductible Amount”: [***].

 

5

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