Exhibit 10(r)
EXECUTION VERSION
CONSUMER CREDIT CARD PROGRAM AGREEMENT
By and Between
CIRCUIT CITY STORES, INC.
And
BANK ONE, DELAWARE, N.A.
Dated as of
January 16, 2004
TABLE OF CONTENTS
Page
ARTICLE I - DEFINITIONS................................................................................... 2
1.1 Certain Defined Terms....................................................................... 2
1.2 Usage....................................................................................... 2
1.3 Conventions................................................................................. 2
1.4 Interpretation.............................................................................. 2
ARTICLE II - ESTABLISHMENT AND PROMOTION OF THE PROGRAM................................................... 2
2.1 Commencement of Program and Establishment of Accounts....................................... 2
2.2 Certain Obligations of Company Under the Program............................................ 6
2.3 Promotion of Program........................................................................ 7
2.4 Marketing Plans............................................................................. 10
2.5 Program Marketing........................................................................... 11
2.6 Program Compensation........................................................................ 12
2.7 Transition.................................................................................. 14
ARTICLE III - ADMINISTRATION OF PROGRAM................................................................... 14
3.1 Preparation of Documents.................................................................... 14
3.2 Personnel, Features and Technology.......................................................... 15
3.3 Credit Terms and Credit Criteria; Association Affiliation................................... 15
3.4 Credit Losses............................................................................... 16
3.5 Accounts.................................................................................... 16
3.6 Ownership and Use of Company Customer Information
and Bank Portfolio Information; Privacy..................................................... 16
3.7 Incidental Marketing Programs; Cross Marketing to Other Cardmembers......................... 20
3.8 Rewards Program Administration.............................................................. 21
3.9 Other In-Store Credit Activities............................................................ 21
3.10 Training.................................................................................... 21
3.11 Systems Changes and Quality Control......................................................... 22
3.12 Inserts and Other Statement Communications.................................................. 22
3.13 Operating Procedures........................................................................ 23
3.14 Program Governance.......................................................................... 23
3.15 Balance-Building Programs................................................................... 23
3.16 Reports..................................................................................... 23
3.17 Postag...................................................................................... 24
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ARTICLE IV - SETTLEMENT................................................................................... 24
4.1 Transmission..................................................................................... 24
4.2 Calculating and Timing of Payment................................................................ 24
4.3 Direct Settlement................................................................................ 24
4.4 Company Payment Terms............................................................................ 24
4.5 Offset........................................................................................... 25
ARTICLE V - REPRESENTATIONS, WARRANTIES AND
COVENANTS OF COMPANY ..................................................................................... 25
5.1 General Representations, Warranties and Covenants................................................ 25
5.2 Presentment Warranties........................................................................... 27
ARTICLE VI - REPRESENTATIONS, WARRANTIES AND
COVENANTS OF BANK......................................................................................... 28
6.1 General Representations, Warranties and Covenants........................................... 28
ARTICLE VII - CHARGEBACKS................................................................................. 30
7.1 Chargebacks................................................................................. 30
ARTICLE VIII - EVENTS OF DEFAULT.......................................................................... 30
8.1 Events of Default........................................................................... 30
8.2 Remedies.................................................................................... 31
ARTICLE IX - TERM/TERMINATION............................................................................. 32
9.1 Initial and Renewal Term; Change in Control of Company...................................... 32
9.2 Purchase Right.............................................................................. 36
9.3 Liquidation................................................................................. 40
9.4 Securitization.............................................................................. 40
9.5 Force Majeure............................................................................... 41
9.6 Effect of Termination....................................................................... 42
ARTICLE X - INDEMNIFICATION............................................................................... 43
10.1 Indemnified Losses.......................................................................... 43
10.2 Indemnification by Company.................................................................. 43
10.3 Indemnification by Bank..................................................................... 44
10.4 Notice ..................................................................................... 45
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10.5 General Procedure........................................................................... 45
10.6 Role of Indemnified Party................................................................... 45
10.7 Limitations on Parties...................................................................... 45
ARTICLE XI - MISCELLANEOUS................................................................................ 46
11.1 Assignability............................................................................... 46
11.2 Entire Agreement; Amendment................................................................. 46
11.3 Waiver ..................................................................................... 47
11.4 Delays or Omissions......................................................................... 47
11.5 Insurance................................................................................... 47
11.6 Rights of Persons Not a Party............................................................... 47
11.7 Headings.................................................................................... 47
11.8 Governing Law/Severability.................................................................. 47
11.9 Good Faith.................................................................................. 47
11.10 Drafting.................................................................................... 48
11.11 Counterparts................................................................................ 48
11.12 Jurisdiction/Venue.......................................................................... 48
11.13 Waiver of Jury Trial........................................................................ 48
11.14 Notices..................................................................................... 48
11.15 Power of Attorney........................................................................... 48
11.16 Use of Names and Trademarks................................................................. 49
11.17 Confidential Information.................................................................... 49
11.18 Audit Rights................................................................................ 51
11.19 Press Releases or Publicity Statements...................................................... 51
11.20 Independent Contractor...................................................................... 52
11.21 No Joint Venture............................................................................ 52
11.22 Tax and Financial Cooperation............................................................... 52
11.23 [Reserved].................................................................................. 52
11.24 No Violation................................................................................ 52
11.25 Intellectual Property....................................................................... 53
11.26 Damages Limitation.......................................................................... 53
11.27 Specific Performance........................................................................ 54
11.28 Survival.................................................................................... 54
EXHIBIT 1.1 CERTAIN DEFINED TERMS
EXHIBIT 1.1(a) INITIAL AUTHORIZED ENTITIES
EXHBIT 2.1(b) PERFORMANCE STANDARDS
EXHIBIT 2.1(d) PROGRAM RESOURCE REQUIREMENTS
EXHIBIT 2.1(d)(iii) APPROVAL RATES AND CREDIT LIMITS
EXHIBIT 2.3(e) CERTAIN REMEDIES OF COMPANY
EXHIBIT 2.3(f) MANUFACTURER SPONSORED PROGRAMS
EXHIBIT 2.6(a) NEW ACCOUNT CONTINGENT PAYMENT
EXHIBIT 2.6(c) PROMOTIONAL FINANCING PROGRAMS
EXHIBIT 2.6(d) REWARDS PROGRAM FUNDING
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EXHIBIT 2.6(f) NET YIELD
EXHBIIT 2.6(g) RECOVERED SALES TAXES ON WRITTEN OFF ACCOUNTS
EXHIBIT 3.2(a) COMPETITION PROGRAMS
EXHIBIT 3.3(b) INITIAL CREDIT TERMS
EXHIBIT 3.6(f) PARTNER INFORMATION SECURITY STANDARDS
EXHIBIT 3.12 CONTENT AND SCHEDULE RESTRICTIONS
EXHIBIT 3.13 INITIAL OPERATING PROCEDURES
EXHIBIT 3.14(b) GOVERNANCE
EXHIBIT 3.16 REPORTS
EXHIBIT 4.2 SETTLEMENT FORM
EXHIBIT 5.2(h) PERMITTED SECURITY INTEREST
EXHIBIT 7.1 CHARGEBACKS
EXHIBIT 9.1(b) BANK COMPETITOR
EXHIBIT 9.2(b) DETERMINATION OF PURCHASE PRICE
EXHIBIT 11.16(a) FORM OF COMPANY TRADEMARK LICENSE AGREEMENT
EXHIBIT 11.16(b) FORM OF BANK TRADEMARK LICENSE AGREEMENT
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CONSUMER CREDIT CARD PROGRAM AGREEMENT
This Consumer Credit Card Program Agreement ("Agreement") is dated as
of January 16, 2004, effective as of the Effective Date, by and between Circuit
City Stores, Inc. ("Company"), a Virginia corporation, with its principal place
of business at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, and Bank One, Delaware,
N.A. ("Bank"), a national banking association with its principal place of
business at Three ▇▇▇▇▇▇▇▇▇ Centre, ▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇.
WITNESSETH
WHEREAS, Bank is in the business of establishing and managing
programs to offer payment products and extend revolving credit to qualified
consumers for the purchase of goods and/or services from merchants; and
WHEREAS, Bank and Company are among the parties to the
Purchase and Sale Agreement, pursuant to which Bank will purchase from Company
Bank the Accounts related to Company's U.S. consumer private label credit card
business and U.S. consumer co-branded general purpose bankcard business and
other related assets; and
WHEREAS, Company and the other Authorized Entities are in the
business of selling Company Goods and/or Services and serving customers; and
WHEREAS, Company and Bank have agreed to establish a consumer
private label credit card program pursuant to which Bank shall offer payment
products and extend credit to Cardholders for purchases of Company Goods and/or
Services from Company and other Authorized Entities, which program shall include
both new Accounts created on and after the Closing Date and existing Accounts
purchased by Bank pursuant to the Purchase and Sale Agreement, all as more fully
described herein; and
WHEREAS, Company and Bank have agreed to establish a
co-branded consumer general purpose bankcard program pursuant to which Bank
shall offer payment products and extend credit to Cardholders for purchases of
goods and/or services from various merchants, including the Company and other
Authorized Entities, and for cash advances, which program shall include both new
Accounts created on and after the Closing Date and existing Accounts purchased
by Bank pursuant to the Purchase and Sale Agreement, and a portion of which
program shall include co-branded credit card products with a consumer reward
program as part of the value proposition, all as more fully described herein;
and
WHEREAS, Company desires to establish a Program which will
support sales of Company Goods and/or Services by Company and other Authorized
Entities, increase sales revenues at Company and other Authorized Entities,
increase and enhance Company's and such other Authorized Entities' customer
bases, and enhance Company's and such other Authorized Entities' goodwill in
their respective customer bases, including the existing base of customers
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whose private label or co-branded Accounts are being purchased by Bank pursuant
to the Purchase and Sale Agreement; and
WHEREAS, Bank desires to offer payment products and extend
credit pursuant to Private Label Accounts and Co-Branded Bankcard Accounts and
expand the use of Private Label Accounts and Co-Branded Bankcard Accounts, and
to have the opportunity to propose other types of payment products which, if
agreed upon by Bank and Company, may be offered by Bank in connection with the
Program;
NOW, THEREFORE, in consideration of the terms and conditions
stated herein, and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
1.1. Certain Defined Terms. Unless otherwise specifically stated,
capitalized terms used in this Agreement and the attached Exhibits, shall have
the meanings ascribed to them in Exhibit 1.1.
1.2.Usage. Unless the context indicates otherwise, when used in the
singular, the term "party" shall mean Bank, on the one hand, and Company, on the
other hand.
1.3.Conventions. Unless the context indicates otherwise, the use of: (a)
the word "including", "includes" and other variation of such shall be deemed to
be equivalent to "including, but not limited to"; (b) the word "amended" shall
mean "amended, modified, restated or supplemented, from time to time;" and (c)
the words "approval" or "approve" or "consent" shall mean that a party shall not
unreasonably withhold the same, unless the provision in question makes reference
to the party in question having "sole discretion" in connection with its giving
of such approval or consent.
1.4.Interpretation. All references to the "Agreement" shall be deemed to be
a reference to this Agreement and each of the Exhibits hereto. In the event
there are inconsistencies between this Agreement and the Exhibits, this
Agreement governs.
ARTICLE II
ESTABLISHMENT AND PROMOTION OF THE PROGRAM
2.1.Commencement of Program and Establishment of Accounts.
(a) Commencing on the Closing Date, Company and Bank shall establish
the Program, including both the Private Label Program and Co-Branded Bankcard
Program, for the
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purpose of making open-end, revolving credit available, with the possible
addition, upon mutual agreement of the parties, of other payment products
including closed-end credit products to existing and new qualified customers and
prospective customers of Company and other Authorized Entities to finance
purchases of Company Goods and/or Services from the Company and other Authorized
Entities, Ancillary Products, purchases under Incidental Marketing Programs,
purchases from other merchants and Balance Build Programs (in the case of the
Co-Branded Bankcard Accounts or Rewards Accounts), pursuant to the terms and
conditions of this Agreement.
(b) Bank shall operate the Program in accordance with this Agreement,
including the Performance Standards set forth in Exhibit 2.1(b), and shall, to
the extent permissible under Applicable Law in a commercially reasonable manner,
emphasize the Company's (or Authorized Entity's, as the case may be) role, while
de-emphasizing Bank's role (and the role of Bank's Affiliates and
sub-contractors acting on Bank's behalf) as issuer.
(c) Subject to the terms and conditions of this Agreement, for each
consumer who has an address within the fifty (50) states of the United States
and the District of Columbia, (the "United States" or "U.S."), and who applies
for a Private Label Account, Co-Branded Bankcard Account or Rewards Account
after the Closing Date (i) in person at a retail Company Location within the
United States, (ii) by mailing to Bank a Credit Card Application, (iii) via the
Internet or Company website in the same manner as the program that was
previously tested by Company Bank, to be available at Closing so long as
required systems development by Company has been completed, (iv) by telephone in
the manner to be mutually agreed to by the parties, (v) by any direct mail
offerings, (vi) through an APO or FPO address for those members of the U.S. and
state military residing outside the U.S., or (vii) through any other application
method mutually agreed to by the parties, and in each case who qualifies for
credit as determined by Bank under the Private Label Program or the Co-Branded
Bankcard Program, as the case may be, Bank shall open a new Private Label
Account, Co-Branded Bankcard Account or Rewards Account, as the case may be,
assign to each an appropriate credit limit as determined by Bank, issue to such
applicant a Credit Card, activate such applicant's Credit Card, and grant credit
to such Cardholder for Purchases and, in the case of a Cardholder of a
Co-Branded Bankcard Account or Rewards Account, purchases from other merchants
who honor the Credit Card and cash advances.
(d) Services. Subject to the terms and conditions of this Agreement,
Bank shall perform all of the services necessary to establish, operate and
actively market the Program in accordance with the terms and conditions of this
Agreement at its own expense (except as otherwise expressly set forth herein),
in accordance with the Program resource requirements set forth in Exhibit 2.1(d)
("Services"), including:
i. Establish, operate and market (A) the Private Label
Program and (B) the Co-Branded Bankcard Program;
ii. Actively solicit, accept, and review Credit Card
Applications from, or on behalf of, prospective Cardholders;
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iii. Determine the creditworthiness of prospective Cardholders
in accordance with the Credit Criteria;
iv. Establish Accounts for all approved applicants with credit
limits to be set by Bank;
v. Provide all required disclosures, terms and conditions to
Cardholders, including Credit Card Agreements;
vi. Produce and issue Credit Cards to approved applicants;
vii. Provide authorizations to Company and other Authorized
Entities for Purchases under the Program, in accordance with the
Operating Procedures;
viii. Extend credit on Accounts to Cardholders for Purchases
and, in the case of Co-Branded Bankcard Accounts and Rewards Accounts,
for cash advances;
ix. Support the marketing efforts in this Agreement with
respect to Accounts;
x. Generate and deliver Billing Statements to Cardholders;
xi. Process and apply Cardholder payments in a timely manner
to the applicable Accounts;
xii. Manage all collection, charge-off, recovery and bankruptcy
processes arising from defaulted Accounts;
xiii. Respond to all Cardholder service and billing inquiries
and disputes;
xiv. Settle with Company for any amounts due hereunder in
accordance with Article IV;
xv. Operate the Program and service all Cardholders in
accordance with this Agreement ;
xvi. Offer Ancillary Products and Balance-Building Programs to
Cardholders, consistent with this Agreement or in the manner and timing
provided for in the Marketing Plan or otherwise agreed upon by the
Management Committee;
xvii. Assist Company and Authorized Entities in connection with
recovery of sales taxes on Written-Off Accounts as provided in Exhibit
2.6(g);
xviii. Provide live operator service to Cardholders and store
personnel through dedicated and distinct toll free numbers, with live
operator assistance to be available during all hours that Company or
Authorized Entity retail stores are open for business; and
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xix. Provide authorizations, VRU and Internet services on a
24x7, 365/366-day basis beginning on the Closing Date.
(e) Compliance with Applicable Law. Bank shall perform its Services
under this Agreement in compliance with Applicable Law. Bank shall inform
Company of any changes to Applicable Law to the extent such changes in
Applicable Law require a change by Company or any other Authorized Entity in its
activities in connection with the Program. Among other things, Bank will inform
Company of any requirements of Applicable Law which may be imposed on Company in
connection with the offer of Ancillary Products, or any Incidental Marketing
Program provided by Bank as mutually agreed upon by Company and Bank pursuant to
Section 3.7 in connection with Accounts.
(f) Performance Standards. Bank will perform the Services in
accordance with this Agreement, including the Performance Standards set forth in
Exhibit 2.1(b). Bank shall, among other things:
i. Operate on a 24x7, 365/366 day basis Company-branded
customer service centers with sufficient staff, specifically trained
and knowledgeable in the Program, whose primary responsibility it is to
answer calls from Company customers and stores; provided, however, Bank
may utilize such staff for backup and overflow support to other Bank
customer service staff in such a manner as to not adversely affect such
service to the Program. If performance standards are not met or
cardholder survey results are not satisfactory, Bank agrees to work
through the Management Committee to re-evaluate the staffing model and
address any training needs to improve performance;
ii. Utilize teams of shared and dedicated store support, risk
management, systems development, finance, analytical support, human
resources and marketing personnel for the management and operation of
the Program as listed in Exhibit 2.1(d);
iii. Obtain the approval of Company for standardized
communications and marketing related communications with Company
customers, including statement messages and statement inserts, customer
service scripts, automated voice response unit scripts and promotional
materials for use in the Program, excluding collections and delinquency
communications (which, shall be made available to Company prior to
first use but, subject to the proviso below, need not be approved by
Company); provided however, that Company shall immediately notify Bank
of any communications that Company determines in its commercially
reasonable discretion impugn the integrity or reputation of the
Company, or are deceptive or misleading in nature, and upon receipt of
such notice Bank shall immediately cease or refrain from such
communications; and,
iv. Conduct, no less often than quarterly, Cardholder
satisfaction surveys and provide the results to Company, consult with
Company regarding the surveys and make adjustments to the survey at
Company's reasonable request, permit Company reasonable access to audit
survey results and, at Company's request and expense, have an
independent third party conduct test surveys to validate the accuracy
of Bank's internal Cardholder satisfaction surveys, providing results
to Company and Bank.
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2.2.Certain Obligations of Company Under the Program.
(a) During the Term of this Agreement, Company shall, at its expense
(unless otherwise specified herein) and shall cause the other Authorized
Entities to, at their expense (unless otherwise specified herein), in accordance
with the terms and conditions of this Agreement perform in-store services in a
manner which is substantially equivalent to that provided immediately prior to
the Effective Date. Beginning on the Closing Date, Company shall perform such
services and shall cause the other Authorized Entities to perform such services,
including the following activities:
i. Accept Credit Cards in order that Cardholders may make
Purchases on their Accounts;
ii. Promote, accept and forward to Bank in accordance with the
Operating Procedures, Credit Card Applications;
iii. Obtain authorizations for Purchases;
iv. Accept In-Store Payments from Cardholders;
v. Comply with the Operating Procedures; and
vi. Honor all issued and unredeemed Rewards through their
expiration date.
(b) Company shall provide, at its expense, and cause the other
Authorized Entities, at their expense, to provide to Cardholders forms of Charge
Slips and/or copies thereof, and forms of Credit Slips with respect to sales of
Company Goods and/or Services and credits given with respect thereto. In
addition, Company shall keep (and shall cause each other Authorized Entity to
keep), at no expense to Bank, signatures on completed instant Credit Card
Applications and provide copies of applicable signatures to Bank at its request
in connection with customer service inquiries in accordance with the Operating
Procedures.
(c) For transactions in connection with the Program, Company shall
(and shall cause each other Authorized Entity to) communicate electronically
with Bank at the point of sale in the same manner Company communicated with the
Company Bank prior to the Effective Date, with such changes as may be mutually
agreed upon by the Company and the Bank.
(d) Company shall actively promote the Program by including the
following: (i) providing training to its employees regarding the Program; and
(ii) providing Program materials to customers that are the most recent Program
materials provided by Bank to Company Locations. Company shall include as part
of the overall performance evaluations of store directors, their promotion of
the Program and their Account production under the Program.
(e) Company agrees to maintain the functionality, as it existed prior
to the Effective Date, at the point-of-sale to enable promotional offers to be
provided to Cardholders, with such changes in functionality as may be mutually
agreed upon by the Company and the Bank.
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(f) Company agrees, to the extent necessary, to test any mutually
agreed upon functionality before implementation of such functionality.
(g) [Intentionally Omitted]
(h) Company agrees to assist Bank in the manner described in Exhibit
2.6(g) in connection with recovery of sales tax refunds for Written-Off
Accounts.
(i) Compliance with Applicable Law. Company shall perform its
obligations under this Agreement in compliance with Applicable Law affecting the
Company's business. Company shall inform Bank of any changes to such Applicable
Law of which Company has knowledge that, Company reasonably believes will
require a change by Bank in its activities in connection with the Program.
2.3.Promotion of Program.
(a) Bank and Company mutually agree to market actively the Program in
accordance with the mutually agreed marketing plan ("Marketing Plan").
(b) Company shall display conspicuously and make available at Company
Locations, in the manner mutually agreed upon, Credit Card Applications and
other promotional signage provided by Bank, to be used in connection with and
promotion of the Program. Any in-store signage and in-store promotional
materials, as well as any outbound telemarketing scripts, must be approved by
Company prior to usage. Company shall review such materials and any merchandise
used to encourage individuals to apply for or use Credit Cards and shall respond
to Bank's requests for approval on a timely basis. In the event Company does not
respond to Bank's written request for approval within five (5) business days
following Company's receipt of such request, Company's approval shall be deemed
granted and Bank may proceed to use such materials and merchandise. Any approval
by Company of any materials that contain billing or credit terms is not intended
to be and will not be construed to be an approval of such terms. Bank shall be
responsible for any Truth-in-Lending or similar state credit disclosure verbiage
provided by Bank to Company or any other Authorized Entity for use in
advertising copy, and such verbiage shall be used without modification and in
the manner specified by Bank. Bank shall provide such verbiage, and instructions
for use, in the form of a copy specification manual developed by the Bank and
administered by the Management Committee as it may be modified from time to
time. Bank further reserves the right to communicate strictly legal information
to Cardholders which it normally sends to its other cardholders and which does
not utilize Company's name or logo, or contain any marketing material or relate
to any change in terms of any Accounts (other than changes required by
Applicable Law), without the prior approval of Company (but Bank shall provide
samples of such communications for Company's review prior to first use thereof).
Company, shall have the right to directly solicit applications for
Credit Cards from Company customers without the direct participation of Bank.
Any marketing materials developed by Company for that purpose must be approved,
with respect to legal requirements, in writing by Bank prior to distribution by
Company; however, any Credit Card Applications used for the Program must be
supplied to Company by Bank. In the event Bank does not respond to
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Company's written request for approval within five (5) business days following
Bank's receipt of such request, Bank's approval shall be deemed granted and
Company may proceed to use such materials. Advertising copy need not be approved
by Bank so long as the Truth-in-Lending or similar state credit disclosure
verbiage provided by Bank as set forth above is used without modification and in
the manner specified by Bank in the specification manual referred to above and
the intended timing for the release of such advertising copy makes it
impracticable to obtain Bank's prior approval as set forth above (but Company
shall provide such advertising copy for Bank's review prior to the use of such
advertising copy). Company shall bear the expense of in-store signage; Bank
shall pay for the expense of Cardholder terms and conditions and related
disclosures; and Company and Bank shall split equally the cost of production of
printed "take one" applications used in Company and Authorized Entity stores.
(c) The design of any Credit Cards used will be mutually agreed upon
by Company and Bank and subject to Applicable Law. Company shall have the right
to approve the use of its Company Marks on Credit Card(s). In the event of any
change in Company Marks, Company shall bear and promptly reimburse Bank for any
additional expenses incurred by Bank in connection with the use of the altered
Company Marks in connection with a mass re-issuance of Credit Cards mutually
agreed upon by Bank and by Company.
(d) The Program is intended to serve as Company's primary source of
co-branded and private label revolving credit for non-commercial customers of
Company and of any Authorized Entities designated as such by Company. Subject to
Company's rights pursuant to Section 2.3(e) below, during the Term Company will
not promote any other Company co-branded or Company private label revolving
credit or charge card to its non-commercial customers resident in the U.S., and
will cause any Authorized Entities designated by Company to participate in the
Program as provided in Exhibit 1.1 to not promote any other Company co-branded
or Company private label revolving credit or charge card to their non-commercial
customers resident in the U.S. Notwithstanding the immediately preceding
sentence, Company, and any Authorized Entities, may themselves offer, and/or may
arrange for third parties to offer, secondary forms of credit, including credit
or charge card or cardless revolving credit or charge accounts, and/or closed
end form of credit, which may involve Company's name and/or brand for the
purpose of satisfying various legal requirements (but any plastics that may be
issued will not bear Company's name or the Company Marks on the face thereof),
to any customer or prospective customer who has been declined by Bank for credit
under the Program or whose request for credit under the Program cannot be
processed due to unavailability of Bank's authorization or application approval
process attributable to some failure by Bank or Bank's process, or who has been
approved by Bank for credit under the Program in an amount insufficient to
accommodate any purchase of Company Goods and/or Services such customer or
prospective customer desires to make, whether upon establishment of an Account
or thereafter. At Company's request Bank will permit appropriate modifications
to be made in Applications for Accounts received by Company or Authorized
Entities at store locations or via the Internet, to enable such Applications for
Accounts to be processed as requests for Bank's Accounts and as applications for
secondary forms of credit. At applicant's request (which will be preprinted in
the Bank's applications) Bank will forward to such third party sources of
secondary financing (and to Company or Authorized Entity if they are sources)
the applicant's application information and any credit scores and credit reports
used in connection with Bank's credit evaluation to be used by such third party
(or Company or Authorized Entity) solely for use and evaluation of such
8
secondary offer of credit. Bank will cooperate with Company or such Authorized
Entity and any such third party source of secondary financing to make any
necessary arrangements with the consumer reporting agencies to permit the
foregoing to occur in an automated manner without further action on the part of
applicant or Company or Authorized Entity or third party and without the
completion of an additional application or the securing of an additional credit
report, and with the transfers of data by Bank to occur within the timeframe set
forth as the performance standard for application processing set forth in
Exhibit 2.1(b). The details regarding the implementation of modifications
requested by Company as aforesaid will be determined by the Management
Committee, with such implementation to be complete by no later than the earlier
of (i) six (6) months following the Closing Date or (ii) the date on which Bank
materially and adversely changes its Credit Criteria with respect to the Program
from the credit criteria used by Company Bank prior to the Effective Date
hereof. (For purposes of the foregoing, "adversely" refers to changes which have
the effect of making credit less available, or available to fewer Persons, than
it otherwise would be.) Commencing immediately following the date of execution
of this Agreement, Bank may begin interacting and coordinating efforts and
working with Company's systems team to implement these arrangements, and Bank
and Company hereby agree to cooperate and act in good faith to implement such
arrangements within the aforementioned deadline. Incremental costs reasonably
incurred by Bank in connection with making such modifications in forms and/or
procedures to accommodate any such forms of secondary credit as may be requested
by Company as aforesaid, will be reimbursed by Company, provided Bank advises
Company of the approximate amount of such incremental costs before incurring
them. Nothing herein will be considered to limit Company's or Authorized
Entities' right to enter into a relationship for a corporate T&E or expense
related card product for employee business use. With regard to any Company
division or Affiliate or other Person which Company designates to participate in
the Program as provided in the definition of "Authorized Entity" in Exhibit 1.1,
but whose participation requires Bank's approval pursuant to such definition, or
whose participation on the basis requested by Company requires Bank's approval
of a differentiation proposed by Company pursuant to Section 3.1(b), if Bank
fails to send Company written notice approving such participation (and approving
such differentiation, as applicable) within 30 days following Bank's receipt of
Company's notification of such designation, the exclusivity provisions above in
this subsection (d), the provisions of subsection (g) below, and the provisions
of Section 9.2(a)(2) below, shall have no application whatsoever to such
division, Affiliate or other Person.
(e) Notwithstanding subsection (d) above, in addition to any other
rights and remedies of Company hereunder, Company at its option may provide, or
arrange for third parties to provide, any form of customer credit or payments
program, including co-branded and/or private label programs, as Company's and/or
Authorized Entities' primary source of customer credit without regard to the
exclusivity provisions of subsection (d) above ("Alternate Primary Program"),
under the circumstances and in the locations and for the periods described in
Exhibit 2.3(e), and the parties hereto shall have the obligations with respect
to such Alternate Primary Program as set forth in Exhibit 2.3(e).
(f) Manufacturer Sponsored Programs: Neither subsection (d) above nor
any other provision hereof will be construed to prohibit Company and any
Authorized Entities from making available, and promoting, special credit
programs offered by particular manufacturers for use in connection with purchase
of products of such manufacturer and/or related services,
9
whether such programs involve manufacturer-cobranded and/or private label credit
cards, cardless revolving or charge account credit, closed end credit, or
otherwise; provided, however, that Company agrees that manufacturer sponsored
programs shall comply with Exhibit 2.3(f).
(g) Additional Payment Products: Before entering into an agreement
during the Term hereof with any third party (other than a third party providing
secondary financing or providing an Alternate Primary Program or providing a
manufacturer sponsored program) to allow such third party to provide any payment
products, other than Company gift cards, intended to finance purchases only of
Company Goods and/or Services, such as debit cards, charge cards, or stored
value cards, and before commencing any formal request for proposal/information
procedure by which any third parties are invited to submit proposals or
information relating to their provision of such payment products, Company will
give Bank at least three (3) weeks prior notice to afford Bank the opportunity,
should Bank so desire, to provide any information which Bank may wish to provide
regarding any proposal by Bank to be selected by Company as the provider for
such payment products. Company agrees to consider any such proposal if furnished
by Bank, but will be under no obligation to choose Bank to provide such payment
products. To the extent Bank and Company do enter into a mutual written
agreement concerning the provision by Bank of any such payment products, Company
shall be entitled to receive such compensation relating thereto as may be
provided for in such written agreement.
▇.▇.▇▇▇▇▇▇▇▇▇ Plans.
(a) The initial Marketing Plan will be developed, and mutually agreed
upon, by the Company and the Bank, and will commence on the Closing Date and
conclude at the end of the Company's Fiscal Year ending February 28, 2005.
Preliminary Marketing Plans for subsequent Fiscal Years shall be consistent with
the terms of this Agreement and shall be agreed to by Company and Bank no later
than forty-five (45) days prior to the commencement of each such Fiscal Year
("Marketing Plan Date"). The Management Committee will review Marketing Plans at
least quarterly, and more often as may be deemed necessary by the parties. If
the Management Committee cannot agree upon a Marketing Plan by such Marketing
Plan Date, then, until the dispute or disagreement is resolved, the Management
Committee and the parties will implement those portions of the Marketing Plan on
which the Management Committee has agreed.
(b) The Marketing Plan for each Fiscal Year shall include an analysis
provided by Bank of the private label and co-branded bankcard programs of the
competitors of Company. Such analysis shall include a comparison of cardholder
pricing and terms, card features such as rebate/point programs or loyalty
programs, exclusive cardholder offerings, different product offerings such as
preferred shopper cards, and supporting creative materials, such as cardholder
applications and marketing materials. Such analysis also shall include a
comparison of Internet credit card functionality, including application,
approval and authorization and other factors that would support a comprehensive
comparison of the Company Program.
10
2.5.Program Marketing.
(a) Company shall provide, and cause any Authorized Entity who is
offering credit under the Program to provide, Bank with all customer lists,
maintained as such by Company (or such Authorized Entity) and current to within
90 days of the date provided by Company, of names, and, to the extent Company
(or such Authorized Entity) has them, U.S. residential addresses, and
residential telephone numbers of Company (or such Authorized Entity) in-store
customers, via magnetic tape, cartridge, or other media which is mutually agreed
upon (the "Lists"). If Company (or such Authorized Entity), in its sole
discretion, elects to commence selling Company Goods and/or Services via catalog
or elects to change its Internet privacy policy to permit their inclusion,
Company (or such Authorized Entity) will include in the Lists, as applicable,
and provided the Management Committee shall first agree upon the nature of the
use to be made thereof (i) the Company's (or such Authorized Entity's) customer
lists, maintained as such by Company (or such Authorized Entity), of e-mail
addresses of Company (or such Authorized Entity) Internet customers and, to the
extent Company (or such Authorized Entity) has them, names and U.S. shipping
addresses of such customers, and (ii) Company's (or such Authorized Entity's)
customer lists, maintained as such by Company (or such Authorized Entity) of
names, and, to the extent Company (or such Authorized Entity) has them, of U.S.
shipping addresses of Company (or such Authorized Entity) catalog customers.
Company shall use its best efforts to provide (and to cause such Authorized
Entity to provide) as complete and accurate a List as possible. The List shall
consist of Company (or such Authorized Entity) customers who are not shown in
Company's (or such Authorized Entity's) records as having notified Company (or
such Authorized Entity) of their election to exercise their rights under privacy
opt-out and "do-not-solicit" and "do-not-call" provisions (provided, however,
that Company does not undertake to determine (or to cause such Authorized Entity
to determine) whether a Company (or such Authorized Entity) customer has
notified any governmental authority or other third party, or has caused his or
her name, address or telephone number to be listed in a registry or listing
maintained by any governmental authority or other third party, as the means of
exercising any such rights, and, without limitation as to Bank's other
obligations hereunder to comply with Applicable Law, Bank shall be responsible
for making such determination and for making any necessary deletions from such
Lists). Company shall provide (and shall cause such Authorized Entity to
provide) Bank with updated Lists upon Bank's request up to four (4) times per
year. Company agrees that, except as required by Applicable Law, Company shall
not modify or otherwise amend its privacy policy (or permit such Authorized
Entity to modify or otherwise amend its privacy policy) to prohibit Company (or
such Authorized Entity) from providing the Lists to Bank or Bank's designated
agents as set forth in this Agreement or to otherwise restrict the sharing of
information pursuant to Section 3.6. Notwithstanding any other provision hereof,
Company (and such Authorized Entity) shall not be required to provide the
portion of any such List which Company (or such Authorized Entity) determines,
reasonably and in good faith, would violate Applicable Law.
(b) Pursuant to the Marketing Plan, Bank shall, at its own expense
(other than as set forth in Section 2.3(b) with respect to "take one"
applications and in-store signage), design, develop and produce such marketing,
promotion and solicitation materials as it deems appropriate, if approved by
Company (or to which the Company fails to object) using the same
11
five day review/approval procedure described in Section 2.3(b), to promote the
Program among Company customers, and Company shall endorse and reasonably assist
Bank with the administration of such promotional and solicitation activities.
Promotion of the Program shall include direct mail, telemarketing and such other
then current marketing channels as set forth in the Marketing Plan. The
Management Committee will schedule and direct the solicitation of Company
customers. Bank commits to direct mail to the Target Cardholders during each
Program Year and, if Bank meets or exceeds the Target Rate from such mailings,
to effect reasonable increases in the number of such direct mailings, so long as
Bank meets or exceeds the Target Rate.
(c) Pursuant to the Marketing Plan, Company may conduct and document
e-mail marketing campaigns ("E-mail Services") in accordance with all Applicable
Law, regulations, and specifications approved by the Management Committee.
2.6.Program Compensation.
(a) New Accounts. Company shall be entitled to the amounts provided
for in Exhibit 2.6(a), determined as set forth therein.
(b) Incidental Marketing Program. Company shall be entitled to the
amounts, if any, mutually agreed upon by Company and Bank, in connection with
any Incidental Marketing Program provided by Bank as mutually agreed upon by
Company and Bank pursuant to Section 3.7(a).
(c) Promotional Financing Program. Bank agrees to provide promotional
sales plans on the terms set forth in Exhibit 2.6(c), (the "Promotional Sales
Plans"). The frequency and volume of such Promotional Sales Plans shall be
determined by Company. Company shall pay Bank fees for Promotional Sales Plans
determined in accordance with Exhibit 2.6(c) ("Credit Promotion Fees"), and Bank
shall pay Company incentives for non-promotional sales plans and select
Promotional Sales Plans, determined in accordance with Exhibit 2.6(c) ("Sales
Participation Fees").
(d) Rewards Program. For Rewards Account product only, Bank will
offer Cardholder rewards points redeemable or rewardable at the rates set forth
in Exhibit 2.6(d). Bank will administer the Rewards program, fund the reward
redemption and keep any breakage from unredeemed points. Bank will have Rewards
Accounts available to prospective Cardholders at Company Locations by September
2004. Commencing immediately following the date of execution of this Agreement,
Bank may begin interacting and coordinating efforts and working with Company's
systems team to establish the Rewards program, and Bank and Company hereby
12
agree to cooperate and act in good faith to establish the Rewards program within
the aforementioned deadline.
(e) Interchange. The Bank shall not assess any interchange (as
defined by applicable credit card association) on any Company or Authorized
Entity sales, including the Company's or Authorized Entities' physical stores
and Internet sites, generated from Co-Branded Bankcard Accounts, Rewards
Accounts and Private Label Accounts, and Bank shall directly process Company or
Authorized Entity sales charged to Co-Branded Bankcard Accounts, Rewards
Accounts and Private Label Accounts, such that Company and Authorized Entities
incur no merchant acquirer/processor or similar fees. Bank shall be responsible
for paying any interchange purported to be assessed on any Company or Authorized
Entity sales by any card association, card association member, or other person
and, to the extent Company or any Authorized Entity are required to pay any such
assessments, Bank shall promptly reimburse Company and any such Authorized
Entity the amounts so paid. Company and Authorized Entity shall be responsible
for any costs, fees or assessments (other than interchange) imposed by any card
association, card association member, or other person for processing the
transaction, except for merchant acquirer/processor or similar fees incurred due
to Bank's failure to directly process Company or Authorized Entity sales charged
to Co-Branded Bankcard Accounts or Rewards Accounts or Private Label Accounts.
Bank's obligations under this Section 2.6(e) shall be subject to Company's
obligation to promptly provide and update on an ongoing basis a complete list of
valid Card Acceptor Ids, as defined in Section 3.8.
(f) Net Yield. Net Yield for the Bank will be calculated for all
Private Label and Co-Branded Bankcard Accounts and Rewards Accounts in the
manner described in Exhibit 2.6(f), and depending on the Net Yield so
calculated, the parties will make such payments and effect such other Program
adjustments as are provided for in Exhibit 2.6(f).
(g) Recovered Sales Taxes on Written-Off Accounts. Sales taxes
reflected in Written-Off Account balances that are recovered from taxing
authorities will be shared between Bank, on the one hand, and Company or
applicable Authorized Entity on the other hand, on the basis described in
Exhibit 2.6(g).
13
2.7.Transition. Consistent with the Transaction Agreements, commencing on
the Closing Date, Bank shall provide all staff and other resources necessary to
provide the Services. On and after the Closing Date, all Account Documentation,
as appropriate, and other such forms applicable to Accounts established on and
after the date hereof, shall clearly disclose that Bank is the creditor. On and
after the date of any notice of change in terms provided Cardholders of
purchased Accounts pursuant to the Purchase and Sale Agreement, all Account
Documentation used with respect to those Accounts shall clearly disclose that
Bank is the creditor of the Cardholders and that Bank is extending credit
directly to the Cardholders, and, except as otherwise agreed upon by the
Management Committee, shall conform in all respects to the requirements hereof
applicable to Accounts established on and after the Closing Date. The Parties
acknowledge that Company has removed, and has caused each other Authorized
Entity to remove, existing applications and other Account Documentation
indicating that Company Bank is establishing new Accounts opened on and after
the Closing Date, but that there may yet remain outstanding some solicitations
or applications previously distributed on which requests for Accounts may be
received on and after the Closing Date. If an application indicating that
Company or Company Bank is making the credit extension is received, then a
notice stating that Bank is establishing the Account and extending the credit
will be sent with the Credit Card to the applicant for whom the Account is
opened.
ARTICLE III
ADMINISTRATION OF PROGRAM
3.1. Preparation of Documents.
(a) In General. The form and content of all Account Documentation,
other than the legal portions (which Bank shall prepare and Company shall
review) of Credit Card Applications, Credit Card Agreements and other legal
documents related to Accounts, shall be mutually agreed upon by Bank and
Company; provided, however, that Bank shall be responsible for ensuring that
Account Documentation complies with Applicable Law. Consistent with the
Operating Procedures, Bank agrees to provide to Company and Authorized Entities
(at Company's expense to the extent specified in Section 2.3(b)) the then
current Account Documentation in sufficient quantities to enable Company and the
Authorized Entities to maintain their participation in the Program, and Bank
shall deliver such Account Documentation to such Company Locations as requested
by Company.
(b) Company's Option to Differentiate Account Documentation for
Certain Authorized Entities. If any additional Authorized Entities are
designated who trade under trade names or marks other than the Company Marks,
Bank may, in its discretion, permit Credit Card Applications and other Account
Documentation used to solicit Cardholders from among customers or prospective
customers of such Authorized Entities, and to establish and maintain such
Cardholders' Accounts, to utilize such other trade names or marks as may be
designated by Company, in lieu of the Company Marks utilized in the forms of
Account Documentation provided for in Section 3.1(a), in connection with such
solicitations and Accounts, whether Co-Branded Bankcard Accounts or Rewards
Accounts or Private Label Accounts, which Accounts may, in the case of Private
Label Accounts, permit purchases of goods and services not only
14
from the designated Authorized Entity, but also from Company and/or one or more
other Authorized Entities, to the extent specified by Company in its notice to
Bank designating such additional Authorized Entities. Any reasonable incremental
out-of-pocket costs incurred by the Bank in connection with such differentiation
in Account Documentation and, in the case of Private Label Accounts, permitted
purchases, will be reimbursed by Company.
3.2. Personnel, Features and Technology.
(a) In order to establish and operate a competitive Program, Bank
shall at its own expense use commercially reasonable efforts to: (i) provide a
team of key management personnel (including the personnel set forth on Exhibit
2.1(d)) to operate the Program in accordance with this Agreement with the levels
of competence, experience and expertise at least equal in the aggregate to those
provided by Bank to Bank's other major private label credit card and co-branded
bankcard programs; (ii) make available features and employ technology in support
of the Program at the same time that Bank makes such features available to and
employs such technology for Bank's other private label credit card and
co-branded bankcard programs, except where unable to do so because of the
proprietary rights of others, doing so is commercially unreasonable or Company
is unable to test such technology before, or to employ such technology upon, its
implementation; and (iii) make available features and employ technology in
support of the Program that in aggregate are on par with the Competition
Programs as provided in Exhibit 3.2(a). This shall not apply to any software
comparable to that described in the Gateway Software Licensing Agreement (as
such term is defined in the Purchase and Sale Agreement) that Bank develops for
or with a Competition Program.
(b) Company shall at its own expense use commercially reasonable
efforts to: (i) provide a team of key management personnel (including the
Program Coordinator provided pursuant to Section 3.14) to operate the Program in
accordance with this Agreement with sufficient levels of competence, experience
and expertise in Company's business; and (ii) make available system resources to
implement mutually agreed changes to the point of sale, gateway and other
systems maintained by Company and necessary to the Program.
3.3. Credit Terms and Credit Criteria; Association Affiliation. Bank shall
have the sole right to establish and change Credit Criteria, subject to the
provisions of Article VIII and Exhibit 2.3(e). Bank shall have the sole right to
establish and change Credit Terms, subject to the provisions of this Section
3.3, Article VIII and Exhibit 2.3(e). (This Section 3.3 does not apply to
Promotional Sales Plan terms referred to in Exhibit 2.6(c), which are governed
by Section 2.6(c) and said Exhibit.)
(a) Nothing contained in this Agreement shall limit Bank's ability to
alter or modify the Credit Terms in order to comply with Applicable Law. Nothing
in this Agreement shall limit Bank's ability to engage in Risk-Based Repricing.
(b) The initial Credit Terms are provided in Exhibit 3.3(b). Bank
shall provide written notice of any intended changes in Credit Terms to Company
as soon as practicable, but in no event less than thirty (30) days prior to the
earlier of (i) the date on which
15
Bank first mails or otherwise transmits notice notifying any existing
Cardholders of the changes in Credit Terms, or (ii) the date on which the Bank
first mails or otherwise transmits any solicitation or marketing material to any
prospective Cardholders whose new Accounts will be subject to the changed Credit
Terms, or (iii) the date on which Bank first uses the changed Credit Terms as
the initial terms applicable to new Accounts opened at Company or Authorized
Entity store locations or via the Internet.
(c) The initial card association to be affiliated with the Co-Branded
Bankcard Program shall be Visa. No change in such association affiliation shall
be made without the prior written approval of Company. Bank may negotiate with
credit card associations to obtain additional funds and incentive payments
directly related to and specified for the Program which funds and incentives do
not include any fees, discounts or other forms of compensation, incentives or
benefits Bank receives as a member or partner of the credit card association in
the ordinary course of business ("Association Incentives"). Any Association
Incentives received by Bank shall be made available to the Program through a
marketing fund disbursed as the Management Committee may determine.
▇.▇.▇▇▇▇▇▇ Losses. As between Bank and Company, all credit losses,
including fraud, credit, deceased, bankruptcy, or unauthorized transactions on
Accounts, shall be borne solely by Bank without recourse to Company; except for
(a) credit losses incurred in respect of transactions charged back pursuant to
Section 7.1 hereof, and (b) credit losses incurred after Accounts are purchased
by Company (or its designee) in accordance with Section 9.2.
3.5.Accounts.
(a) Ownership of Accounts. Bank shall be the sole and exclusive owner
of all Accounts and shall be entitled to receive all payments made by
Cardholders on Accounts. Purchases under the Program shall constitute extensions
of credit directly from Bank to Cardholders. Company will not, at any time, have
any rights in any of the Accounts established under the Program or in any
Indebtedness owing at any time thereunder unless Company subsequently purchases
such Accounts or Indebtedness from Bank.
(b) Record Retention. Upon commencement of the Initial Term, Bank,
consistent with its policies and practices, and policies and practices required
of federally chartered banks, shall retain proper records, files, and books of
account in which true and correct entries shall be made of all transactions
relating to the Accounts and the Program.
3.6.Ownership and Use of Company Customer Information and Bank Portfolio
Information; Privacy
(a) Ownership. Company (or the applicable Authorized Entity) shall
have ownership rights in all Company Customer Information, and shall have sole
ownership rights in the Lists, and in all other Company Customer Information
that does not also constitute Bank Portfolio Information. Bank shall have
ownership rights in all Bank Portfolio Information other than
16
the Lists, and shall have sole ownership rights in all other Bank Portfolio
Information that does not also constitute Company Customer Information.
(b) Use and Disclosure.
(i) Except as otherwise provided in this Section 3.6(b)(i),
Bank's right to use and disclose Bank Portfolio Information, Company Customer
Information or any other information it receives, creates or maintains in
connection with the Program, shall be limited to the creation, ownership, and
collection of the Accounts, the marketing, administration, and operation of the
Program and the provision of the Services in accordance with the terms and
conditions of this Agreement. Except for the marketing of the Program and
providing Ancillary Products, Bank shall not use any Bank Portfolio Information
to market any financial products or services (including any Incidental Marketing
Programs) or other products or services to Cardholders without the prior written
agreement of Company. The information use and transmission limitations set forth
in this Section 3.6(b)(i) and in Section 3.6(b)(iv) shall survive termination of
this Agreement, and, except to the extent otherwise specified in Section 9.3
with respect to the portion of Bank Portfolio Information that relates to any
Accounts which Bank shall have the right to liquidate pursuant to the provisions
in that Section, which Bank shall be free to use and disclose only as necessary
in order to exercise Bank's rights under Section 9.3 and 9.6 in accordance with
the provisions thereof, Bank will not use or disclose Bank Portfolio Information
or Company Customer Information following termination of this Agreement.
(ii) Except for Company's exclusivity obligations in Section
2.3(d) and its non-compete obligations in Section 9.3(b), and except as
otherwise provided in Section 3.6(b)(iii) with respect to information referred
to therein, nothing in this Agreement shall be construed to limit Company's
right to use and disclose Company Customer Information for any purpose, either
during or after the Term hereof.
(iii) Subject to Applicable Law, Company (or Authorized Entity)
shall have the right, both during and after the Term hereof, to use and disclose
personally identifiable Cardholder information which Company (or Authorized
Entity) obtains from Bank in connection with the Program or retains from Credit
Card Applications (A) for the purpose of promoting Company Goods and/or
Services, (B) in connection with a purchase by Company (or its designee) of the
Portfolio Assets or Private Label Portfolio Assets pursuant to Section 9.2, (C)
(subject to the non-compete obligations set forth in Section 9.3(b)) in
connection with establishing, promoting and maintaining a successor program, (D)
in connection with the conduct of any secondary financing program of the kind
referred to in Section 2.3(d), (E) in connection with the marketing,
administration, and operation of the Program and the performance of Company's
obligations in accordance with the terms and conditions of this Agreement, or
(F) as otherwise permitted under Applicable Law. However, in connection with
Company's (or the Applicable Authorized Entity's) use for the purpose referred
to in (A) above of such personally identifiable Cardholder information obtained
from Bank or retained from Credit Card Applications, Company (or the Applicable
Authorized Entity) shall not use any such information about Cardholder
transactions in a manner that indicates to the recipient of Company's (or
Authorized Entity's) marketing materials that his or her transactional activity
other than at Company Locations has been used to trigger the marketing
activities referred to in (A) above (for example, Company shall not use such
information to send a marketing solicitation
17
congratulating a Cardholder on his or her purchase of a television (purchased
other than at Company Locations) and inquiring whether he or she now wishes to
purchase a video cassette recorder from Company).
(iv) Any transmission or use of any Company Customer
Information or of Bank Portfolio Information by or on behalf of either party to
any third Person shall be subject to confidentiality commitments which shall be
similar in substance to the confidentiality provisions contained in this
Agreement. To the extent that Bank has caused any Bank Portfolio Information to
be enhanced by a third-party data provider, such as Axciom, the use thereof by
Company may subject Company to a license fee charged by such data provider, and
Company shall pay any such fee provided that Bank shall have notified Company of
the amount of such fee before providing Company with the applicable enhanced
information. Bank shall ensure that the use of Bank Portfolio Information and
Company Customer Information and other information relating to Cardholders and
Accounts by any affiliated or unaffiliated third-party to whom Bank provides
such information shall be limited to those purposes specified in Section
3.6(b)(i). Neither Bank nor any third-party engaged by Bank or otherwise working
on Bank's behalf shall sell, transfer or otherwise provide any Bank Portfolio
Information or Company Customer Information or other information relating to
Cardholders or Accounts to any other person, or permit any other person to use,
directly or indirectly, such information for any purpose other than those
purposes specified in Section 3.6(b)(i).
(c) Cardholder Consent. Subject to Applicable Law and Section 3.6(d),
Bank shall design the Credit Card Applications and privacy notices to be used in
connection with the Program in order to maximize the extent to which information
from Credit Card Applications, and other Bank Portfolio Information, may
lawfully be shared with Company (or the applicable Authorized Entity) and its
Affiliates (which measures shall include using consent verbiage in Credit Card
Applications and, to the extent necessary, in Credit Card Agreements). However,
Bank may revise such Credit Card Applications, Credit Card Agreements or privacy
notices to restrict the extent of such lawful sharing or use or disclosure of
the shared information (but Bank shall make no such revisions that would
restrict or encumber the sharing required to implement and maintain the
arrangements for secondary financing programs referred to in Section 2.3(d)
hereof). The privacy policy ("Bank Privacy Policy") may provide for an "opt-out"
from third party sharing (or an "opt-in" to third party sharing, if required by
Applicable Law for particular jurisdictions). In the event Bank does make any
such revisions, Bank will, to the extent commercially practicable, provide
advance notice to the Management Committee, and will discuss the rationale for
such revisions and any steps proposed by Bank to minimize any adverse impact of
such revisions on Company and Authorized Entities. In addition, at request of
Company Bank will provide necessary resources to conduct analyses and other data
related inquiries on Masterfile data not more than 4 times per Program Year and
subject to the reasonable and customary fees for such service.
(d) Information Access. Subject to Applicable Law, Bank shall provide
to Company monthly: (i) with respect to each Cardholder who has not "opted out,"
a copy of each item in the Bank's Masterfile; and (ii) with respect to each
Cardholder who has "opted out," a copy of each such item, except for any item
which individually identifies the Cardholder or permits the inference of the
Cardholder's identity; provided that, for purposes of this Section 3.6(d), if
Bank, in its commercially reasonable discretion, determines that compliance with
18
Applicable Law for particular jurisdictions makes it necessary to do so, Bank
may elect to treat Cardholders resident in such jurisdictions who have not
"opted in" as deemed to have "opted out."
(e) Bank will issue its Bank Privacy Policy to Cardholders of the
Accounts acquired by Bank pursuant to the Purchase and Sale Agreement, by the
time required under Applicable Law, but in any event within sixty days following
the Closing Date.
(f) Information Safeguards. Without limitation as to its other
obligations of confidentiality set forth elsewhere herein or in any other
confidentiality agreement to which it may be subject, each party will establish
and maintain appropriate administrative, technical and physical safeguards to
protect the security, confidentiality and integrity of the Company Customer
Information and the Bank Portfolio Information, and Company shall comply with
Bank's Partner Information Security Standards as described in attached Exhibit
3.6(f), to the extent not in conflict with the other provisions hereof. Each
party, upon reasonable notice from the other party, shall permit such other
party to audit its operations to verify compliance with this Section 3.6(f).
(g) Compliance with Law. The parties intend that the sharing of
personally identifiable information about their (and Authorized Entities')
customers shall comply with Applicable Law, including any applicable provisions
of the federal Fair Credit Reporting Act (15 USC 1681 et seq) and Title V,
Subtitle A of the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Financial Modernization Act of 1999 (15 USC
6801 et seq), and the regulations thereunder. The parties agree to cooperate in
determining the extent to which information relating to customers, Cardholders
and Accounts may be shared and shall cooperate and use commercially reasonable
efforts to address changes in Applicable Law, in order to retain and facilitate
each party's (and Authorized Entities') ownership rights in, continued access
to, and the economic value of such information.
(h) Relation to Other Bank Programs. Bank represents that, to the
best of its Knowledge (as defined in the Purchase and Sale Agreement) as of the
date hereof, in connection with Bank's other co-branded bankcard programs and
private label card programs, in the aggregate: Bank provides no more information
to the merchant or other co-brand party than it provides hereunder; and permits
no more extensive use of such information than is permitted to Company and
Authorized Entities hereunder.
(i) Nothing in this Section 3.6, or any other provision of this
Agreement (other than the exclusivity provisions of Section 2.3(d) and the
restriction set forth in Section 9.3(b)), shall be construed to limit in any way
Company's (or any Authorized Entity's) rights in, or use of, either before or
after termination of this Agreement, any information obtained by Company (or any
Authorized Entity) other than from Bank or from Credit Card Applications,
regardless of whether or not such information is identical to information
Company (or such Authorized Entity) obtained from Bank or from Credit Card
Applications in connection with the Program.
19
3.7.Incidental Marketing Programs; Cross Marketing to Other Cardmembers.
(a) Incidental Marketing Programs. Company shall retain all approval
rights, in its sole discretion, over any Incidental Marketing Programs Bank may
propose to offer to Cardholders or to Company Customers.
(b) Cross Marketing to Other Cardmembers. From time to time, at
Bank's discretion, Company may market its products and services to Other
Cardmembers in accordance with the following:
(i) Bank, in its sole discretion, shall select the Other
Cardmembers to receive Company's offers for Company's products and services.
(ii) All cross marketing campaigns by Company to Other
Cardmembers shall be at Company's sole expense. All offers to Other Cardmembers
made in such campaigns shall be unique and compelling and shall be no less
favorable than those offered by Company to non-Bank customers. Bank and Company
shall agree on the marketing fee Company pays to Bank for products and services
sold for each cross marketing campaign. Company shall track sales volume by
channel and campaign and provide Bank with such reporting as Bank requests. For
each promotion, Company shall provide Bank with reports detailing the number of
products or services sold within thirty (30) days after such promotion and Bank
shall evaluate such promotion and determine if Company may continue to offer
promotions to Other Cardmembers.
(iii) Subject to reasonable space, weight, size, content and
scheduling restrictions, and upon Bank's prior review and approval, up to two
(2) times each year during the Term of the Program, Company may include
promotional inserts for Company offers created and paid for by Company in
billing statements mailed to Other Cardmembers. Bank will pay the normal cost of
mailing statements with Company inserts, excluding the cost of preparing,
producing and shipping the actual insert which shall be the sole responsibility
of Company. In addition, if the Company inserts increase the postal expense
incurred by Bank to mail statements with such inserts, then Bank shall not
insert such materials without Company's consent, if Bank intends to charge
Company for such cost overage, and Company agrees, upon providing such consent,
to promptly reimburse Bank for such incremental postage expense.
(iv) Bank will evaluate proposals from Company for offers of
Company products and services to Other Cardmembers through Bank's online channel
including inclusion in: (1) welcome mail, (2) e-mail newsletter, and (3)
website. In the event that Bank offers Company products and services pursuant to
this section, Company shall provide Bank reporting based on click-throughs,
sales volume and revenue earned by Bank.
(v) In addition, no more than two times per year, Company may
request that Bank provide lists of a certain portion of Other Cardmembers for
the purpose of mailing promotional offers provided by the Company. The lists
shall be provided to a third party mail house on Bank's list of approved vendor
mail houses, who shall mail such offers on behalf of Company.
20
3.8.Rewards Program Administration. Company shall provide to Bank Card
Acceptor Ids of all sources of Company customer transactions. Company shall:
i. Provide such Card Acceptor Ids in accordance with Bank's
specifications;
ii. Notify Bank at least thirty (30) days in advance of new or
modified Card Acceptor Ids being utilized by Company; and
iii. Validate all Card Acceptor Ids no less than on a quarterly
basis and advise Bank of all changes, additions or
deletions to such Card Acceptor Ids;
Company is responsible for any costs associated with correcting Accounts where
errors have occurred as a result of incorrect and/or outdated Card Acceptor Ids.
3.9.Other In-Store Credit Activities.
(a) Credit Support. Company shall provide in-store credit activities,
which include acceptance of In-Store Payments and other credit support, as more
specifically set forth in the Operating Procedures.
(b) In-Store Payments. Company may accept In-Store Payments in US
dollars from Cardholders on their Accounts in accordance with the Operating
Procedures. All In-Store Payments shall be deemed to be held in trust by Company
for the benefit of Bank until such payments are actually received by Bank or
netted by Bank against Charge Transaction Data submitted to Bank in accordance
with the Settlement Procedures in Article IV.
▇.▇▇.▇▇▇▇▇▇▇▇.
(a) Company, at its expense, shall develop orientation materials to
introduce Bank employees to Company, to train Bank employees, and to keep them
current on the direction, products, merchandising and marketing programs of
Company's various businesses and Bank, at its expense, shall make its employees
and the materials available for training with respect to Company's and
Authorized Entities' businesses. Bank, at its expense, shall develop and
administer all other training to its employees to enhance their ability to
perform the services contemplated under this Agreement.
(b) Bank, at its expense, shall develop and produce materials for
training associates of Company and the Authorized Entities on the Program.
Company, at its expense, shall use such materials to train its associates and
the associates of Authorized Entities to promote the Program, accept Credit Card
Applications, and obtain authorizations for Purchases under the Program. Bank
also shall assist Company and other Authorized Entities with training of
employees of Company and other Authorized Entities in credit-related issues by
providing field marketing employees (as outlined in Exhibit 2.1(d)), among whose
principal duties as field marketing managers will be to assist with training to
the extent provided in this Agreement with respect to the Program, and in such
other fashion as may be mutually agreed to by the parties.
21
▇.▇▇.▇▇▇▇▇▇▇ Changes and Quality Control.
(a) The parties shall keep one another informed prior to and during
the process of making material changes to their respective systems or processes
relating to the Program. Prior to making any such material changes, each party
shall test such changes to ensure that such changes do not adversely impact the
Cardholders, the other party, or the Program. Upon the discovery of any such
adverse effect on the Cardholders, other party or the Program, the party
implementing such changes shall immediately take all commercially reasonable
steps to remedy the adverse effect as soon as practicable.
(b) Without the other party's prior written approval, a party shall
not make any changes to its systems or processes relating to the Program that
would require the other party to make changes to its systems or processes,
except if required by a change in Applicable Law. In the case of a change
required by a change in Applicable Law, the parties shall take commercially
reasonable steps to minimize the disruption of any such change to the parties.
Parties shall bear their own costs incurred in connection with any such changes.
(c) Delivery of Information. On and after the date hereof, each
party, at its expense, shall be responsible for all delivery of electronic
information to the other party. Each party shall bear the risk and cost of
delivery of materials it ships to the other party by other methods. Risk of
delivery lies with the sender until receipt by the other party. During the Term
of this Agreement, Company shall comply with Bank's data exchange technical
specifications and standards, including file transfer, protocols and standards,
file formats and layouts, and encryption/decryption software requirements, as in
effect at, and disclosed by Bank to Company prior to, the Closing Date under the
Purchase and Sale Agreement, with such further changes as shall be requested by
Bank and agreed upon by Company from time to time during the Term of this
Agreement.
3.12.Inserts and Other Statement Communications. Subject to the Marketing
Plan and to content and schedule restrictions set forth on Exhibit 3.12 and
Bank's prior review, Company shall have the right, except as provided below, to
include Company's or Authorized Entities' product and service advertisements in
Billing Statements sent, or provided electronically, to Cardholders, whether as
a statement insert, statement message, envelope message, internet link or other
form, provided that such advertisements conform to the requirements for such
Billing Statement inserts or other messages initially as set forth in Exhibit
3.12, including the timing for delivery to specified locations. Company's
inserts and other statement communications shall have priority over all others
except those involving only legal disclosure required to be made to Cardholders.
Company will prioritize inserts and Bank shall include all such inserts in order
of priority until excess postage is required. Bank shall not be required to
include inserts that cause excess postage. The parties acknowledge that a 1 page
statement would permit 4 inserts without causing excess postage and that 1 page
is approximately equal to 2 inserts. Company will be solely responsible for the
costs of producing and delivering to Bank or its designee such inserts. The
inclusion of statement messages will be at no cost to Company as long as Bank's
or its designee's requirements are met by Company. Bank may include billing
messages, inserts or other messages to promote the use of Accounts and
Balance-Building Programs and Ancillary Products as approved in the Marketing
Plan. Notwithstanding anything to the contrary in this
22
Agreement, any insert or message or return postage envelope required by
Applicable Law shall take precedence over other inserts and messages. Bank
agrees to cooperate with Company in scheduling, to the extent practicable, any
legally required notices to avoid adversely impacting Company's planned insert
and statement related marketing and customer communication efforts. Bank shall
immediately notify Company of any inserts and statement messages that Bank
determines in its commercially reasonable discretion impugn the integrity or
reputation of the Bank, or are deceptive or misleading in nature, or that market
a financial product or service (other than Company or Authorized Entity gift
cards) that competes with another Bank financial product or service which Bank
is already providing to Bank customers at the time Company first notifies Bank
regarding Company's decision to use statement inserts or statement messages to
market such product or service to Cardholders, and upon receipt of such notice
Company shall immediately cease or refrain from using such inserts and statement
messages.
3.13.Operating Procedures. The Operating Procedures are set forth in
Exhibit 3.13.
3.14.Program Governance.
(a) Bank and Company each shall assign, on a full time basis, an
employee knowledgeable about the Program and the Transaction Agreements to serve
as its liaison to the other party with regard to the day-to-day operation of the
Program. Bank's employee shall be referred to as the "Bank Program Coordinator"
and Company's employee shall be referred to as the "Company Program
Coordinator." Each party agrees that it will seek the input of the other party
before it makes its Program Coordinator appointment, including any future
appointments to replace a Program Coordinator.
(b) The parties agree to participate and cooperate fully in the
governance structure in accordance with Exhibit 3.14(b).
3.15.Balance-Building Programs. Bank may offer such Balance-Building
Programs as are approved in the Marketing Plan or otherwise approved by the
Management Committee. Notwithstanding the foregoing, Bank may, at its
discretion, offer over-limit capability on Co-Branded Rewards Accounts of up to
120% of any Cardholder's credit limit to permit access to credit for the
purchase of Company Goods and/or Services.
3.16.Reports.
(a) Bank shall make available to Company such standard and customized
reports relating to the Cardholders, the Accounts and the Program as Company may
reasonably request from time to time and as listed in Exhibit 3.16. Bank will
not charge for customized reports similar to the types of reports that Bank
provides to its management or other customers at no cost. If a customized report
requested by Company involves additional resources and costs, Bank will inform
Company, which shall have the option at its expense, to have Bank develop and
produce such report.
23
(b) Bank shall deliver to Company on a quarterly (Program Year
quarters) basis Net-Yield reports relating to the Program as a whole, and
separately as to the Private Label and the Co-branded Bankcard Accounts and
Rewards Accounts segments of the Program.
(c) Bank shall deliver to Company on a monthly basis reports on the
satisfaction of the Performance Standards as set forth in Exhibit 2.1(b).
(d) Bank shall deliver a daily report with each settlement showing
calculation of the settlement amount pursuant to Exhibit 4.2.
3.17 Postage. Except to the extent expressly set forth in Section 3.12 with
respect to certain increased postage, Bank One will bear all costs of all
postage incurred in connection with the Program, including postage associated
with returned "take one" applications.
ARTICLE IV
SETTLEMENT
4.1.Transmission. Company shall electronically transmit all Charge
Transaction Data from Company to Bank in the format detailed in the Operating
Procedures and pursuant to Section 3.11.
4.2.Calculation and Timing of Payment. Bank shall calculate a net
settlement amount in accordance with Exhibit 4.2 and will pay to Company such
amount on a daily basis. Bank will transfer funds via Automated Clearing House
("ACH") or wire transfer to an account designated in writing by Company to Bank.
If Charge Transaction Data is received by Bank's processing center before noon
Eastern time on a Business Day, Bank will initiate such ACH or wire transfer by
3pm Eastern time on the next Business Day. In the event that the Charge
Transaction Data is received after noon Eastern time on a Business Day, then
Bank will initiate such transfer no later than 3pm Eastern time on the second
Business Day thereafter. If Bank is unable to calculate the net settlement
amount in time to initiate such transfer by the required time, then Bank will
estimate the net settlement amount based on historical comparisons and will
initiate the transfer by the required time, notifying Company that it is based
on an estimate, and will calculate the correct net settlement amount, and will
transfer any difference due the Company, within five (5) days thereafter.
▇.▇.▇▇▇▇▇▇ Settlement. Bank will authorize and settle all amounts directly
with Company and bypass all bankcard associations. Each party shall bear its own
costs associated with such direct settlement.
▇.▇.▇▇▇▇▇▇▇ Payment Terms. Any amount(s) payable by Company to Bank under
this Agreement will be due, unless specifically provided for elsewhere in this
Agreement, when invoiced by the Bank, and shall be paid in immediately available
funds within twenty (20) days after the date of receipt of the invoice from
Bank.
24
4.5. Offset. In the event Company or any Authorized Entity, on the one
hand, or Bank, on the other hand (the "Payor"), is in default in paying such
other party (the "Recipient"), as applicable, any amount due under this
Agreement, the Recipient may effect such payment by means of set-off, unless
Recipient has been notified, or otherwise has knowledge, that the amount to be
paid to the Recipient is disputed in good faith by the Payor.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS OF COMPANY
5.1.General Representations, Warranties, and Covenants. To induce Bank to
enter into this Agreement and to establish and administer this Program, Company
makes to Bank the representations, warranties, and covenants set forth in this
Article V, which shall be deemed made effective as of the Closing Date and
(except for the representations and warranties in (c)(ii), (g) and (h)(ii)
below, and the representation and warranty in (b) below to the extent it would
prohibit Company from changing its state of incorporation) continuing and
ongoing thereafter during the Term:
(a) Compliance with Law. Company shall comply, and shall cause each
of the other Authorized Entities to comply, with Applicable Law referred to in
Section 2.2(i) in all material respects relating to its activities in connection
with the Program.
(b) Corporate Existence. Company is a corporation, duly organized,
validly existing and in good standing under the laws of the state of Virginia
and is authorized to conduct business under such laws as now conducted, and is
duly authorized, qualified or licensed to do business as a foreign corporation
and is in good standing in each jurisdiction where the ownership or operation of
its assets requires such authorization, qualification or licensing and shall
maintain such status and authority during the term of this Agreement.
(c) Corporate Power, Authorization and Performance. Company has full
corporate power and authority to execute and deliver this Agreement and each
other Transaction Agreement to which it is a party, and to perform its
obligations hereunder and thereunder. Company further represents and warrants
that (i) this Agreement has been duly authorized by all necessary corporate and
stockholder action and has been duly executed and delivered by Company and is
the valid and binding obligation of Company, enforceable against Company in
accordance with its terms and (ii) does not require any filing or registration
with or the consent or approval of any governmental body, agency, authority, or
any other person which has not been made or obtained.
(d) Accounts. Company shall not, and shall not permit any other
Authorized Entity to, represent itself as the owner of Accounts or Indebtedness
owned by Bank hereunder; provided that Company will not be considered to be in
breach of this covenant with regard to purchased Accounts until the receipt of
new Account Documentation from Bank.
(e) Disaster Recovery. Company and each of its Affiliates which is an
Authorized Entity has and shall maintain a contingency and disaster recovery
plan for the restoration of services affecting the Program and, to the extent
practicable, will provide Bank with prior written notification of any
modification of such plans. Company shall provide Bank
25
with the opportunity to review applicable portions of such plans, upon the
reasonable request of Bank.
(f) No Default. No default has occurred which, with the passage of
time or the giving of notice or both, and the failure to cure, would constitute
an Event of Default by Company as defined in Section 8.1.
(g) No Pending Litigation. There are no civil, criminal or
administrative actions, suits, claims, hearings, investigations or proceedings
pending (including any counterclaims) or, to Company's knowledge, threatened
against Company or any Authorized Entity that would materially and adversely
effect the ability of Company to perform its obligations under this Agreement or
any other Transaction Agreement.
(h) Noncontravention. The execution, delivery and performance of this
Agreement and any other Transaction Agreement and the consummation of the
transactions contemplated hereby and thereby do not and will not (i) violate the
charter or by-laws or any equivalent organizational document of Company, or (ii)
violate any applicable material law, rule, regulation, judgment, injunction,
order or decree to which Company is subject, or (iii) violate any material
contract, instrument or document to which Company is a party or (iv) constitute
a default under any existing material contract, instrument or document to which
Company is a party.
(i) Notice of Adverse Conditions. Company agrees to notify Bank,
subject to any confidentiality and other applicable legal requirements, promptly
after it is notified, and in any case no later than fifteen (15) days
thereafter, of any order by any court or regulatory body or any agreement with a
court or regulatory body materially and adversely affecting its ability to
perform its obligations hereunder, or in connection with the Program or engage
in any activities, contemplated in connection with the Program or under this
Agreement or is notified of any activity that would reasonably be expected to
have a material adverse effect on the Program or would reasonably be expected to
have a material adverse effect on Bank. Company also agrees, subject to any
confidentiality requirements, to provide advance warning of any discussions with
any court or regulatory body that would reasonably be expected to adversely and
materially affect any of the activities contemplated under this Agreement.
Company further represents that it has not suffered any event that has or could
reasonably be expected to have a material adverse change in, or material adverse
effect upon its business, operations, properties, assets, liabilities,
reputation or condition (financial or otherwise) or a material impairment of its
ability to perform its obligations under this Agreement.
(j) Records. Company shall keep, and shall cause each of the other
Authorized Entities to keep, adequate records and books of account with respect
to all of its business activities relating to the Program, in which proper
entries, reflecting all of Company's or the other Authorized Entities' (as
applicable) financial transactions, are made in accordance with applicable
accounting procedures.
(k) [Reserved]
(l) Account Covenants. Until the expiration or termination of the
Program, Company covenants to do the following with respect to the Accounts:
26
(i) Company shall respond to, and cooperate with, Bank
promptly in connection with the resolution of disputes with Cardholders;
(ii) Company shall maintain a policy for the exchange and
return of goods and adjustments for services rendered or not rendered that is in
accordance with all Applicable Law and shall promptly deliver a Credit Slip to
the Cardholder and include credit for such return or adjustment in the Charge
Transaction Data in accordance with the terms of this Agreement and the
Operating Procedures in the event the return/exchange has been authorized in
accordance with Company's policies; and
(iii) Company shall comply with all its warranties, if any, with
respect to goods and services sold under an Account.
(m) Taxes. Company shall, and shall cause each of the other
Authorized Entities to, pay, collect and remit, when due, any sales taxes
relating to the sale of Company Goods and/or Services.
(n) Divestiture. Provided Company is legally and contractually
permitted to do so, promptly following its execution Company shall advise Bank
of any signed commitment or letter of intent regarding the sale, exchange,
contribution or other transfer of any Company Locations which if consummated
would give rise to a Divestiture and, in any event, promptly advise Bank of the
consummation or occurrence of any Divestiture. In connection with any
Divestiture, at Bank's request, Company shall use reasonable efforts to initiate
communications between Bank and any acquirer of Company Locations in a
transaction constituting a Divestiture to afford Bank the opportunity to offer
to enter into a private label credit card agreement with such acquirer.
(o) Solvency. Company is Solvent.
5.2 Presentment Warranties. Company represents and warrants to Bank with
respect to each Account and the related Charge Slips and Charge Transaction Data
(and the following shall be deemed restated, renewed and reaffirmed each time
Bank receives Charge Transaction Data from Company or Authorized Entity relative
to an Account):
(a) That the Charge Slip represents a bona fide sale by Company or
Authorized Entity of the Company Goods and/or Services described in such Charge
Slip, that the Charge Slip has not been included in any Charge Transaction Data
previously transmitted to Bank, and that Company or Authorized Entity has
delivered all the goods and fully performed all the services listed on such
Charge Slip (except to the extent that any of following will be subsequently
delivered or performed, including : (i) goods purchased through a not in store
transaction, and (ii) goods retained by Company or Authorized Entity for repair
and warranty services), or (iii) goods or services to be delivered or performed
subsequent to time of sale, including services performed pursuant to an extended
warranty;
(b) That Company or Authorized Entity has shipped all the goods
listed on such Charge Slip which were purchased through a not in store
transaction;
27
(c) That (except in the case of not-in-store transactions) the Charge
Slip is signed and that the signature on the Charge Slip is similar to the
signature on the Credit Card or the signature on another item of valid
identification examined by Company or Authorized Entity;
(d) That the Charge Slip is not illegible, inaccurate or incomplete
and has not been materially altered after being signed by the Cardholder;
(e) That the transaction did not involve a cash advance or goods or
services not listed on the Charge Slip and only goods and services sold by
Company or Authorized Entity are the subject of the transaction;
(f) That the transaction was conducted by Company in accordance with
the Operating Procedures;
(g) That the Account number of the Cardholder has been accurately
printed or electronically captured on the corresponding Charge Slip retained by
the Company;
(h) That, except only as set forth in Exhibit 5.2(h), Company has not
nor will it directly or indirectly, take or grant or purport to take or grant
any right or security interest in such Charge Slip or any related Credit Slip to
or from any third party (other than to Bank);
(i) That the transactions giving rise to the Charge Transaction Data
were conducted by Company in accordance with all Applicable Law that pertains to
the sales of goods and/or services by Company as provided in Section 2.2(i).
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BANK
6.1. General Representations, Warranties, and Covenants. To induce Company
to enter into this Agreement and participate in the Program Bank makes to
Company the representations, warranties, and covenants set forth in this Article
VI, which shall be deemed made effective as of the Closing Date and (except for
the representations and warranties in (d)(ii), (g) and (h)(ii) below) continuing
and ongoing thereafter during the Term:
(a) Account Information. Upon Company's reasonable request, Bank
shall provide to Company, to the extent available to Bank and in accordance with
Applicable Law, information indicating, for each Account, the terms and
conditions applicable to such Account under the Credit Card Agreement governing
such Account, including the law applicable to such Account.
(b) Compliance with Law. Bank shall comply and shall cause each of
its Affiliates as subcontractors providing any Services, with Applicable Law in
all material respects relating to its activities in connection with the Program.
(c) Corporate Existence. Bank is a nationally chartered bank, duly
organized, validly existing and in good standing under the laws of the United
States and is authorized to
28
conduct business under such laws as now conducted. Bank shall maintain such
status and authority during the term of this Agreement.
(d) Corporate Power and Authorization. Bank represents and warrants
that it has full power and authority to execute and deliver this Agreement and
each other Transaction Agreement to which it is party, and to perform its
obligations hereunder. Bank further represents and warrants (i) that this
Agreement has been duly authorized by all necessary corporate and stockholder
action and has been duly executed and delivered by Bank and is the valid and
binding obligation of Bank, enforceable against Bank in accordance with its
terms and (ii) does not require any filing or registration with or the consent
or approval of any governmental body, agency, authority, or any other person
which has not been made or obtained.
(e) Disaster Recovery. Bank represents, warrants and covenants that
it and each of its Affiliates or subcontractor to the extent such Affiliate or
subcontractor is performing services in connection with the Program has and
shall maintain a contingency and disaster recovery plan to restore services
affecting the Program and, to the extent practicable, will provide Company with
prior written notification of any modification of such plans. Bank shall provide
Company with the opportunity to review applicable portions of such plan, upon
the reasonable request of Company.
(f) No Default. Bank represents and warrants that no default has
occurred which, with the passage of time or the giving of notice or both, and
the failure cure, would constitute an Event of Default as defined in Section
8.1.
(g) No Pending Litigation. Bank represents and warrants that there
are no, civil, criminal or administrative actions, suits, claims, hearings,
investigations or proceedings pending (including any counterclaims) or, to
Bank's knowledge, threatened against Bank that would materially and adversely
effect the ability of Bank to perform its obligations under this Agreement, or
any other Transaction Agreement.
(h) Noncontravention. Bank represents and warrants that the
execution, delivery and performance by Bank of this Agreement and any other
Transaction Agreement and the consummation of the transactions contemplated
hereby and thereby do not and will not (i) violate the charter or by-laws or any
equivalent organizational document of Bank, or (ii) violate any applicable
material law, rule, regulation, judgment, injunction, order or decree to which
Bank is subject, or (iii) violate any agreement with GE Capital or any of its
Affiliates, or violate any other material contract, instrument or document to
which Bank is a party, or (iv) constitute a default under any agreement with GE
Capital or any of its Affiliates, or constitute a default under any other
existing material contract, instrument or document to which Bank is a party.
(i) Notice of Adverse Conditions. Bank agrees to notify Company, and
subject to any confidentiality and other applicable legal requirements, promptly
after Bank is notified, and in any case no later than fifteen (15) days
thereafter, of any order by any court or regulatory body or any agreement with a
court or regulatory body materially and adversely affecting the ability of Bank
to furnish the Services, or engage in any activities, contemplated in connection
with the Program or under this Agreement or is notified of any activity that
would reasonably be expected to have a material adverse effect on the Program or
would reasonably be expected to have a material adverse effect on Company or any
other Authorized Entity. Bank also agrees, subject to confidentiality
requirements, to provide advance warning of any discussions with any court or
regulatory body that would reasonably be expected to adversely
29
and materially affect any of the activities contemplated under this Agreement.
Bank further represents that Bank has not suffered any event that has or could
reasonably be expected to have a material adverse change in, or material adverse
effect upon its business, operations, properties, assets, liabilities,
reputation or condition (financial or otherwise) or a material impairment of
Bank's ability to perform its obligations under this Agreement.
(j) Records. Bank shall keep adequate records and books of account
with respect to all of its business activities relating to the Program, in which
proper entries, reflecting all of Bank's financial transactions with respect to
the Program, are made in accordance with applicable accounting procedures.
(k) Trademarks. Bank represents and warrants to Company that it has
the right and power to cause Parent to license the Bank Marks to Company for use
as contemplated by this Agreement.
(l) Cardholder Relations. Bank shall respond to Company promptly, and
cooperate with Company, in connection with efforts to resolve disputes with
Cardholders.
(m) Financial Covenants. Bank shall at all times throughout the Term
of this Agreement, either (i) maintain an "adequately capitalized" status under
applicable federal banking regulations, and at least $7,000,000,000 in assets
determined on the same basis as in Schedule RC, line 12 ("Total assets") of
Bank's call report, or (ii) provide a guaranty, in form and substance
satisfactory to Company, of all of Bank' s obligations hereunder by one or more
Affiliates of Bank which each meet the "adequately capitalized" criterion, and
which together meet the Total assets criterion, set out in clause (i) above.
ARTICLE VII
CHARGEBACKS
7.1. Chargebacks. Bank's chargeback rights and procedures to be followed
shall be as set forth in Exhibit 7.1.
ARTICLE VIII
EVENTS OF DEFAULT
8.1. Events of Default. The occurrence of any one or more of the following
events shall constitute an "Event of Default" hereunder:
(a) If Bank fails to make any settlement payment (or estimated
settlement payment) when due and payable pursuant to this Agreement and the
Settlement Procedures with respect to the daily settlement payments set forth in
Exhibit 4.2 and, such settlement payment or estimated settlement payment is not
paid, within one (1) Business Day following notice of such failure to pay in the
case of an estimated settlement payment, and within five (5) Business Days
following notice of such failure to pay in the case of a settlement payment,
other than in each case as the result of a Force Majeure Event.
30
(b) Either party shall fail to make any payment (other than a daily
settlement payment pursuant to the Settlement Procedures) of any amount due
pursuant to this Agreement when due and payable and the same shall remain unpaid
for a period of thirty (30) days after the other party has given written notice
of such failure to pay.
(c) Either party shall breach in any material respect any covenant or
other provision contained herein (other than a covenant or other provision that
is subject to a specific Event of Default or termination provision), and the
same shall remain unremedied for a period of 30 days after written notice
thereof to the breaching party.
(d) Any representation or warranty of either party in this Agreement
shall not be true and correct in any material respect as of the date when made
or reaffirmed, and such untrue or incorrect representation or warranty shall
remain unremedied for a period of 30 days after written notice thereof to the
breaching party.
(e) Either party (i) shall not be Solvent; (ii) shall have any
proceeding instituted by or against it seeking to adjudicate it as bankrupt or
insolvent or seeking liquidation, reorganization or any similar alternative
under any law relating to bankruptcy or relief of debtors, or seeking the entry
of an order for relief or the appointment of a receiver or other similar
official for it or for any substantial part of its property, and, in the case of
any proceeding instituted against it (but not instituted by it), either such
proceeding shall remain undismissed or unstayed for a period of thirty (30)
days, or any of the actions sought in such proceeding (including the entry of an
order for relief against, or the appointment of a receiver or other similar
official for, it or any substantial part of its property) shall occur; or (iii)
shall take any corporate action to authorize any of the actions set forth in
clauses (i) or (ii) of this paragraph (e).
(f) [Reserved]
(g) If Company is no longer able to accept Visa (or, in the event of
a change in the Card Association, such other Card Association's) credit card
payments for Company Goods and/or Services, and such disability is not cured
within 5 days.
(h) If Bank changes Credit Terms (other than changes made on a case
by case basis for particular Accounts or Risk-Based Repricing) that Company
reasonably expects would have a material adverse effect on the Program, and Bank
fails to provide the notice required pursuant to Section 3.3.
(i) If Bank breaches or fails to meet any of the Performance
Standards described in Exhibit 2.1(b), any of the Targeted Approval Rates/Credit
Limits described in Exhibit 2.1(d)(iii), or any of the Cardholder Terms Trigger
Events described in Exhibit 2.3(e).
8.2. Remedies. Upon an Event of Default, the nondefaulting party may
terminate this Agreement by giving the other party notice of termination, which
right shall be in addition to any other rights or remedies available to the
non-defaulting party under this Agreement; provided however, termination of the
Agreement and exercise of Company's rights pursuant to Article IX, and/or
exercise by Company of its rights with respect to an Alternate Primary Program
pursuant to Exhibit 2.3(e), and/or the right to require performance by Bank of
any obligations under Article X with respect to third party claims, shall be
Company's sole and exclusive remedies for breaches by Bank consisting only of
Events of Default under Section 8.1 (i). In the event the nondefaulting party
gives notice of termination under this Section 8.2, this
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Agreement shall terminate (A) on the termination date specified in the
nondefaulting party's termination notice, which must be at least 30 days after
the date on which the nondefaulting party gave the termination notice, provided
that such termination shall not occur until the waiver in writing or expiration
of Company's right to provide notice of its election to purchase the Portfolio
Assets, or (B) if Company timely gives notice that it exercises its right under
Section 9.2 to purchase the Portfolio Assets, upon the date on which the closing
of the purchase by Company of the Portfolio Assets pursuant to Section 9.2 shall
take place. Upon the occurrence of an Event of Default by Company under Section
8.1, Bank, if it shall give notice of termination pursuant to this Section 8.2,
shall thereafter have the right to suspend its obligation hereunder to pay any
Account Contingent Payments pursuant to Section 2.6(a) and Exhibit 2.6(a) so
long as such Event of Default remains uncured. Upon the occurrence of an Event
of Default by Company under Section 8.1(g), Bank, if it shall give notice of
termination pursuant to this Section 8.2, shall thereafter have the right to
suspend its obligation hereunder to open new Co-Branded Bankcard Accounts and
new Rewards Accounts so long as such Event of Default remains uncured.
ARTICLE IX
TERM/TERMINATION
9.1. Initial and Renewal Term; Change in Control of Company.
(a) Initial and Renewal Term. Except as expressly set forth in
Section 2.3(d) with regard to preliminary work on the arrangements to allow
secondary offers of credit and as expressly set forth in Section 2.6(d) with
regard to preliminary work on establishing the Rewards program, which provisions
shall be effective as of the date of execution of this Agreement, and except for
the provisions of Article X and Sections 11.2, 11.3, 11.4, 11.6, 11.7, 11.8,
11.9, 11.10, 11.11, 11.12, 11.13, 11.14, 11.16, 11.17, 11.19, 11.20, 11.21,
11.24, 11.25, 11.26, 11.27, which, only to the extent they may apply to the
aforementioned provisions within Section 2.3(d) and 2.6(d), shall be effective
as of the date of execution of this Agreement, this Agreement shall be effective
as of the Effective Date and shall remain in effect until the seventh
anniversary of the Closing Date ("Initial Term"), and shall thereafter be
automatically renewed for successive three year terms (the "Renewal Term(s)")
unless either party notifies the other of its intent not to renew at least one
year prior to the end of the Initial Term or then current Renewal Term. If such
notice is given, termination of this Agreement shall occur (A) at the expiration
of the Initial Term or then current Renewal Term, provided that such termination
shall not occur until the waiver in writing or expiration of Company's right to
provide notice of its election to purchase the Portfolio Assets, or (B) if
Company timely gives notice that it exercises its right under Section 9.2 to
purchase the Portfolio Assets, upon the date on which the closing of the
purchase by Company of the Portfolio Assets pursuant to Section 9.2 shall take
place.
(b) Change in Control. In the event of a Change in Control of
Company, which results in Company being controlled by a Person who is either (i)
a major competitor of Bank or (ii) a domestic U.S. retailer with an existing
competing private label or co-brand (other than a Visa or MasterCard program
including a rewards component with a consumer earned
32
value equivalent to at least 1% of card purchases) credit card program with at
least $500 million in outstanding receivables provided by a competitor of Bank
identified in Exhibit 9.1(b) , or (iii) a domestic U.S. retailer with an
existing competing private label or co-brand (other than a Visa or MasterCard
program including a rewards component with a consumer earned value equivalent to
at least 1% of card purchases) credit card program provided by such company or
an Affiliate of such company, which retailer ceases utilizing the Company Marks
in a material number of Company Locations, then Company or Bank shall have the
right to terminate this Agreement. Company shall, as soon as legally permitted
to do so, advise Bank of any event that it reasonably believes to be a Change in
Control, which results in Company being controlled by such a Person.
Furthermore, Bank may give notice to Company if based on information known to
Bank, Bank reasonably believes that there has occurred such a Change in Control
of Company and if not refuted by Company within 15 days of such notice, such a
Change in Control of Company will be deemed to have occurred. In order to be
effective, the notice of termination must be delivered within 180 days of (A)
the date on which Company gives Bank notice that a Change in Control of Company
has occurred, or, if earlier, (B) the date on which such a Change in Control of
Company was deemed to have occurred due to Company's failure to refute Bank's
notice to Company as hereinabove set forth. If such notice is given, termination
of this Agreement shall occur (A) 180 days after delivery of the notice of
termination, provided that such termination shall not occur until the waiver in
writing or expiration of Company's right to provide notice of its election to
purchase the Portfolio Assets, or (B) if Company timely gives notice that it
exercises its right under Section 9.2 to purchase the Portfolio Assets, upon the
date on which the closing of the purchase by Company of the Portfolio Assets
pursuant to Section 9.2 shall take place. Notwithstanding the foregoing, Company
shall have the right to offer in writing to disclose to Bank, under a
nondisclosure agreement requiring Bank to hold such disclosure strictly
confidential, the identity of such a Person who is referred to in (i) or (ii) or
(iii) above and who may obtain control of the Company, and Bank shall have 14
days from execution of the nondisclosure agreement to respond by specifying in
writing whether Bank would or would not exercise its right hereunder to
terminate this Agreement. Bank shall be bound by its response in the event there
follows a Change in Control of Company in which such Person referred to in (i)
or (ii) or (iii) above shall obtain control of Company, and Bank shall be deemed
to have waived its right hereunder to proceed other than in accord with such
response. If Bank fails, within such 14 day period, to respond in writing as to
whether it would terminate, or if Bank fails, for more than 10 days after being
requested by Company to execute a commercially reasonable nondisclosure
agreement, to execute same, Bank shall be deemed to have waived its right
hereunder to terminate upon such a Change in Control.
(c) Termination Upon Divestiture. Bank shall have the right to
terminate the Agreement if a Divestiture shall occur, provided Bank gives notice
of termination within 60 days following the occurrence of the Divestiture. In
such event, termination of this Agreement shall occur (A) 180 days after
delivery of the notice of termination, provided that such termination shall not
occur until the waiver in writing or expiration of Company's right to provide
notice of its election to purchase the Portfolio Assets, or (B) if Company
timely gives notice that it exercises its right under Section 9.2 to purchase
the Portfolio Assets, upon the date on which the closing of the purchase by
Company of the Portfolio Assets pursuant to Section 9.2 shall take place.
33
(d) Company's Right to Terminate and/or Introduce Alternate Primary
Programs. In the event there shall occur any of the triggering events specified
in Exhibit 2.3(e), Company may terminate this Agreement, or may exercise its
rights with respect to Alternate Primary Programs, or may do both, at the times
and on the basis set forth in Exhibit 2.3(e). Whenever Company has the right to
terminate pursuant to Exhibit 2.3(e), Company may terminate this Agreement by
giving written notice of termination to Bank. In the event Company gives such
notice, termination of this Agreement shall occur (A) 180 days after delivery of
the notice of termination, provided that such termination shall not occur until
the waiver in writing or expiration of Company's right to provide notice of its
election to purchase the Portfolio Assets, or (B) if Company timely gives notice
that it exercises its right under Section 9.2 to purchase the Portfolio Assets,
upon the date on which the closing of the purchase by Company of the Portfolio
Assets pursuant to Section 9.2 shall take place.
34
(e) [Reserved]
(f) Company may elect to terminate this Agreement by giving written
notice of termination within 30 days after the later of (i) the end of any
Measurement Period for which Net Yield calculated pursuant to Section 2.6(f) was
below the Target Net Yield, and (ii) receipt by Company from Bank of
notification of such Net Yield for such Measurement Period; provided Company
repays any shortfall amounts owing for such Measurement Period as provided in
Exhibit 2.6(f). In the event such notice is given, this Agreement shall
terminate (A) on the termination date specified in Company's notice, which must
be at least 30 days after the date on which Company gave the termination notice,
provided that such termination shall not occur until the waiver in writing or
expiration of Company's right to provide notice of its election to purchase the
Portfolio Assets, or (B) if Company timely gives notice that it exercises its
right under Section 9.2 to purchase the Portfolio Assets, upon the date on which
the closing of the purchase by Company of the Portfolio Assets pursuant to
Section 9.2 shall take place.
(g) Material Change in Law, Etc. In the event that any material
change in any Applicable Law makes the continued performance of this Agreement
under the then current terms and conditions illegal, then Bank shall have the
right to terminate this Agreement by giving written notice of termination within
30 days of the date of the change in Applicable Law; provided that Bank may
terminate under this provision only if (i) Bank shall have first communicated in
writing to Company a remedial action proposal required to conform with
Applicable Law and which minimizes any adverse impact to Company, (ii) Company
shall have been given the opportunity to propose an alternative remedy to comply
with Applicable Law, and (iii) the parties have cooperated and operated in good
faith in an effort to reach a mutually satisfactory implementation plan to
conform to Applicable Law. Such written notice shall include a detailed
explanation and evidence of the illegality imposed as a result of such change.
If Bank gives such notice of termination and the parties are unable to reach a
mutually satisfactory implementation plan in the manner described above,
termination of this Agreement shall occur (A) 180 days after delivery of the
notice of termination, provided that such termination shall not occur until the
waiver in writing or expiration of Company's right to provide notice of its
election to purchase the Portfolio Assets, or (B) if Company timely gives notice
that it exercises its right under Section 9.2 to purchase the Portfolio Assets,
upon the date on which the closing of the purchase by Company of the Portfolio
Assets pursuant to Section 9.2 shall take place.
(h) In the event Bank revises, in a manner permitted under Section
3.6(c), the Bank Privacy Policy or Credit Applications or Credit Card
Agreements, other than pursuant to a change in Applicable Law, such that the
Bank Privacy Policy or Credit Applications or Credit Card Agreements provide
less sharing than the then current industry standard and results in a material
reduction in Company's then existing promotions of Company Goods and/or
Services, Company may elect to terminate this Agreement by giving written notice
of termination to Bank which notice shall include a detailed explanation of
Company's material reduction in its then existing promotions of Company Goods
and/or Services. In the event Company gives such notice, termination of this
Agreement shall occur (A) 180 days after delivery of the notice of termination,
provided that such termination shall not occur until the waiver in writing or
expiration of Company's right to provide notice of its election to purchase the
Portfolio Assets, or (B) if Company timely gives notice that it exercises its
right under Section 9.2 to purchase the
35
Portfolio Assets, upon the date on which the closing of the purchase by Company
of the Portfolio Assets pursuant to Section 9.2 shall take place.
9.2. Purchase Right.
(a) Upon any termination or expiration of this Agreement (other than
by Bank pursuant to Section 8.2 or 9.1(c) or by Company pursuant to Section
9.1(b) or as a result of non-renewal notice given by Company or Bank pursuant to
Section 9.1(a)), Company may, in its sole discretion, elect to purchase (or
cause its designee to purchase) all of the Accounts (including all Indebtedness,
Account Documentation, Bank Portfolio Information and other rights associated
with the Accounts, but excluding Written-Off Accounts and other carve-outs as
were applicable in connection with the Purchase and Sale Agreement) (the
"Portfolio Assets"). Upon any termination of this Agreement by Bank pursuant to
Section 8.2 or 9.1(c) or by Company pursuant to Section 9.1(b) or as a result of
non-renewal notice given by Company or Bank pursuant to Section 9.1(a), Company
may, in its sole discretion, elect to purchase (or cause its designee to
purchase) the Portfolio Assets, and Bank may, in its sole discretion, elect to
cause Company (or, at Company's option, Company's designee) to purchase the
Portfolio Assets relating to the Private Label Accounts ("Private Label
Portfolio Assets"), but Company shall have no obligation to effect a purchase of
the Private Label Portfolio Assets pursuant to such an election by Bank unless
and until Company shall have either
(1) elected (in Company's sole discretion) to
cease honoring the Private Label Account Credit
Cards in those Company Locations in which the
Private Label Account Credit Cards were honored
prior to the termination hereof and while they
remain Company Locations (other than Company's
election to cease honoring the Private Label
Account Credit Cards as a result of Bank's
failure to settle for transactions effected by
use of the Private Label Credit Cards in
accordance with the provisions of Article IV
hereof or Bank's failure to continue to maintain
the Performance Standards hereunder in connection
with Company's continuing to honor the Private
Label Credit Cards), or
(2) elected (in Company's sole discretion) to
commence offering another credit card program
(other than a Visa or MasterCard program with a
rewards component with a consumer earned value
equivalent to at least 1% of card purchases),
and provided Bank shall not have itself effected any sale of any of the Private
Label Portfolio Assets or exercised any rights under Section 9.6(iii) with
respect to any Private Label Portfolio Assets or otherwise managed the Private
Label Portfolio Assets in a manner inconsistent with the management of the
Private Label Portfolio Assets during the Term hereof (the occurrence of any of
which shall terminate any right of Bank to require Company (or its designee) to
purchase the Private Label Portfolio Assets). The purchase of the Portfolio
Assets or Private Label Portfolio Assets shall be for a purchase price
determined in accordance with Section 9.2(b), and on such representations,
warranties and other terms as shall be similar to those
36
provisions of the Purchase and Sale Agreement which were applicable to Purchased
Assets of the same kinds as the Portfolio Assets (or Private Label Portfolio
Assets, as applicable).
In the event of notice of non-renewal pursuant to Section
9.1(a) by either party, Company shall notify Bank within 180 days after delivery
of the notice of termination, if Company elects to exercise its purchase right,
and Bank shall notify Company within 180 days after delivery of the notice of
termination if Bank elects to cause Company (or Company's designee) to purchase
the Private Label Portfolio Assets (upon the satisfaction of the conditions set
out above in the second sentence of this Section 9.2(a)). In the event Bank
gives notice of early termination pursuant to Section 8.2 hereof, Company shall
notify Bank within 120 days after initial receipt of the Valuation Masterfile
from Bank as set forth below in this Section, if Company elects to exercise its
right to purchase (or have its designee purchase) the Portfolio Assets, and Bank
shall notify Company within said 120 days if Bank elects to exercise its right
to require Company (or Company's designee) to purchase the Private Label
Portfolio Assets. In the event of the early termination of this Agreement prior
to the end of the Initial Term or a Renewal Term by Company pursuant to Section
9.1(b), or by Bank pursuant to Section 9.1(c), Company shall notify Bank within
150 days after initial receipt of the Valuation Masterfile from Bank as set
forth below in this Section if Company elects to exercise its right to purchase
(or have its designee purchase) the Portfolio Assets, and Bank shall notify
Company within said 150 days if Bank elects to exercise its right to require
Company (or Company's designee) to purchase the Private Label Portfolio Assets.
In the event of the early termination of this Agreement prior to the end of the
Initial Term or a Renewal Term by Company pursuant to Section 8.2, 9.1(d),
9.1(f), 9.1(h) or 9.5(c), or by Bank pursuant to Section 9.1(b), 9.5(d) or
9.1(g), Company shall notify Bank within 150 days after initial receipt of the
Valuation Masterfile from Bank as set forth below in this Section if Company
elects to exercise its right to purchase (or have its designee purchase) the
Portfolio Assets. (If Company gives a notice exercising its right to purchase,
or to have its designee purchase, the Portfolio Assets and Bank gives a notice
exercising its right, if any, to require Company (or Company's designee) to
purchase the Private Label Portfolio Assets, then the parties shall proceed on
the basis of Company's notice.) Any purchase and sale of the Portfolio Assets
shall close no later than (A) the end of the Initial Term or Renewal Term, as
applicable (or, if later, upon receipt of any necessary regulatory approvals),
if termination of the Agreement is pursuant to Section 9.1(a), and (B) in all
other cases, within 90 days following the determination of the Purchase Price
pursuant to the provisions hereinafter set forth (or, if later, upon receipt of
any necessary regulatory approvals), except that if the date by which the
purchase and sale shall close, determined in accordance with the foregoing,
would be later than October 31 of any calendar year, Company may by written
notice to Bank elect to extend such period by an additional 90 days. Any
purchase and sale of the Private Label Portfolio Assets shall close no later
than the latest of (A) within 90 days following the determination of the
Purchase Price pursuant to the provisions hereinafter set forth, or (B) receipt
of any necessary regulatory approvals. Bank will manage the Portfolio Assets in
the ordinary course of business consistent with the prior practices of Bank with
respect to the management of the Portfolio Assets and, unless otherwise mutually
agreed by Bank and Company, and except as otherwise set forth in Section 8.2,
both parties shall continue to perform all of their obligations (including the
establishing of new Accounts and the payment of all fees and other compensation)
under this Agreement, until the Termination Date (and, in the case of
obligations which survive termination, continuing thereafter). Company and Bank
agree to use commercially reasonable efforts to obtain any necessary regulatory
approvals relating to the purchase and sale of the
37
Portfolio Assets or the Private Label Portfolio Assets pursuant to this Section
9.2. If the purchase of the Portfolio Assets or the Private Label Portfolio
Assets does not occur (due to failure to obtain regulatory approval) within 270
days of the execution of a purchase and sale agreement related to such purchase,
then Company's right to purchase (or have its designee purchase) the Portfolio
Assets and the Bank's right, if any, to cause Company (or Company's designee) to
purchase the Private Label Portfolio Assets, (and each party's right to give
notice of its election to exercise such right) shall immediately expire for all
purposes of this Agreement and be of no further effect.
The parties shall cooperate with each other in connection
with any sale or possible sale of the Portfolio Assets (or Private Label
Portfolio Assets), including providing the entire Valuation Masterfile (with
data for as long a period as is readily available on Bank's system, but in no
event less than 12 months; Bank's Valuation Masterfile data retention policies
for the Program must be no less than for its other programs and its credit card
business in general) of portfolio data and other customary information to
prospective purchasers, participating in due diligence by prospective purchasers
and otherwise facilitating the evaluation of the Portfolio Assets (or Private
Label Portfolio Assets) by prospective purchasers. Bank shall provide the
Valuation Masterfile within 30 days following delivery of any termination
notice, by either party, under any provisions of this Agreement, and shall
provide an updated Valuation Masterfile every 30 days thereafter. In addition,
in the event Bank gives notice of its exercise of its right to require Company
(or its designee) to purchase the Private Label Portfolio Assets, then, within
30 days of the date on which the conditions set forth in the second sentence of
Section 9.2(a) shall be satisfied, Bank shall provide another updated Valuation
Masterfile (the "Updated Valuation Masterfile"). Bank shall have the right to
require prospective purchasers to sign a customary form of confidentiality and
non-disclosure agreement prior to obtaining access to confidential information
relating to the Portfolio Assets (or Private Label Portfolio Assets). At the
closing, Bank shall also enter into an interim servicing agreement relating to
the Portfolio Assets (or Private Label Portfolio Assets) on customary terms and
conditions, including the payment to the Bank by the purchaser of the Bank's
reasonable costs for providing the interim services. If Company does not
exercise its purchase right in the time frame and manner required herein, such
right shall expire and this Section 9.2 (a) shall be of no further effect,
except to the extent Bank may have the right to require Company to purchase the
Private Label Portfolio Assets, in which case if Bank does not exercise such
right in the time frame and manner required herein, such right shall expire and
this Section 9.2(a) shall be of no further effect.
(b) If Company elects to purchase or direct the purchase of the
Portfolio Assets, or if Bank elects to require Company to purchase the Private
Label Portfolio Assets in those circumstances in which Bank has such right
pursuant to Section 9.2(a), Bank and Company, or the designee selected by
Company ("New Issuer"), as the case may be (the "Buyer") shall meet in good
faith for a period of thirty (30) calendar days following the date on which
Company provides notice of its intention to purchase the Portfolio Assets, or
beginning 30 days after receipt of the Updated Valuation Masterfile ("Exclusive
Negotiation Period"), to reach agreement on the purchase price of the Portfolio
Assets or of the Private Label Portfolio Assets, as the case may be ("Purchase
Price").
If Bank and the Buyer are unable to agree upon the Purchase
Price, the "Purchase Price" shall be determined in the manner set forth in
Exhibit 9.2(b).
38
Promptly following agreement upon the Purchase Price or
determination of the Purchase Price in the manner set forth in Exhibit 9.2(b),
Bank shall provide the Buyer a purchase and sale agreement containing provisions
similar to those provisions of the Purchase and Sale Agreement which were
applicable to Purchased Assets of the same kinds as the Portfolio Assets (or
Private Label Portfolio Assets, as applicable), for accomplishing the sale of
the Portfolio Assets (or Private Label Portfolio Assets, as applicable) to the
Buyer. If all or any portion of the Portfolio Assets (or Private Label Portfolio
Assets, as applicable) are held in a loan or asset securitization trust or other
securitization entity from which the Accounts and the related Indebtedness can
be removed, such purchase and sale agreement shall establish a closing date that
allows Bank sufficient time, consistent with industry practices, to remove such
Accounts and related Indebtedness. If all or any portion of the Portfolio Assets
(or Private Label Portfolio Assets, as applicable) are held in the Trust or
another securitization entity and Bank cannot effect such removal, then Bank
shall, in connection with the closing of the purchase of the Portfolio Assets
(or Private Label Portfolio Assets, as applicable) by the Buyer, cause
appropriate transfers to the Buyer (and, if applicable, any related special
purpose entity) of the Bank's interests in the Portfolio Assets (or Private
Label Portfolio Assets, as applicable) held in the Trust or such other
securitization entity, including the Bank's rights and obligations as servicer
and any interests retained by the Bank in such Portfolio Assets (or Private
Label Portfolio Assets, as applicable); provided that this sentence shall only
apply if, at the time of such transfers, the related securitization documents
allow the transfer of Bank's rights and obligations as servicer and the Trust or
such other securitization entity holds only Portfolio Assets (or Private Label
Portfolio Assets, as applicable). Company understands that any removal of
accounts or receivables from a securitization program or any transfer of
accounts or receivables subject to a securitization program is subject to (i) if
the related securitization transaction is rated, the approval of each rating
agency then rating such securitization transaction (including the receipt by
Bank of a confirmation from such rating agency that such removal or transfer
will not result in a reduction or withdrawal of such rating), (ii) the receipt
by Bank of the approval or consent of each other party to such securitization
transaction who has the right to approve or consent to such removal or transfer
and (iii) Bank's reasonable determination that such removal or transfer will not
have a material negative accounting, legal, regulatory or tax effect on Bank,
its affiliates or the related securitization trust or other securitization
entity. Bank shall use its best efforts to effect any such removal or transfer
on an expedited basis. In the event Bank becomes aware that Bank is unable to
effect such removal or transfer, then Bank shall provide written notice of same
to Company within 30 days and, notwithstanding Section 9.2(a) of this Agreement,
unless the parties in their sole discretion shall otherwise mutually agree in
writing, the Company's right to purchase (or have its designee purchase) the
Portfolio Assets, and the Bank's right, if any, to cause Company (or its
designee) to purchase the Private Label Portfolio Assets, as applicable, (and
each party's right to give notice of its election to exercise such right) shall
immediately expire for all purposes of this Agreement and be of no further
effect unless Bank, prior to the Termination Date, notifies Company that it can
effect such removal or transfer. Unless the inability to effect such removal or
transfer is the result of a change in Applicable Law, any obligation Company
would otherwise have under Section 9.6(vi) shall terminate.
39
9.3. Liquidation.
(a) Following termination of the Agreement, Bank shall have the right
to liquidate the Accounts that have not been purchased by Company (or its
designee), by any lawful manner including without limitation (i) collecting the
receivables or (ii) selling or issuing a replacement or substitute credit card;
provided, however, that (x) Bank shall not sell the Accounts to retailers
involved in a Competition Program or to institutions which provide such
retailers with any payment products nor shall Bank (or any purchaser of any
Accounts) issue a replacement or substitute card or account or payment card
product that is co-branded with, or in any way associated with a Competition
Program, and (y) Bank shall insure that any Person to which Bank may sell the
Accounts, and any successors and assigns, whether direct or indirect, of such
Person, are likewise subject to the same restrictions as set forth in (x) above
and in Section 9.6(ii) and (iii) below.
(b) Non-Compete. Following termination of the Agreement, with regard
to Cardholders whose Accounts shall not have been purchased by Company or its
designee, Company and any Authorized Entity shall have the right to solicit in
Company or Authorized Entity stores or at Company or Authorized Entity Internet
sites, such Cardholders for a successor program, which may include co-branded
bankcard and private label credit cards. Company's, Authorized Entity's or
designee's communications with such Cardholders may not make direct reference to
the Bank and the Program for any purpose. With respect to all such Cardholders'
Accounts established pursuant to this Agreement, Company agrees that neither
Company nor its Affiliates shall by itself or in conjunction with others,
directly or indirectly, for a period of two (2) years following the termination
of this Agreement for any reason whatsoever (other than due to an Event of
Default by Bank), specifically target any offer of a credit card, charge card
and/or payment card or related products to such Cardholders in their capacity as
Cardholders, but the foregoing shall not be construed as limiting in any way
Company's rights to solicit, or to authorize any Person to solicit, such
Cardholders for any product or service of any kind including any credit card,
charge card and/or payment card or related products, in their capacity as
customers or prospective customers of Company or Authorized Entities, or in any
capacity whatsoever other than that of Cardholders under the Program and,
accordingly, Company shall be under no obligation to cause any list of Persons
used in connection with any solicitation to have names of such Cardholders
deleted therefrom.
9.4. Securitization. Notwithstanding any other language contained in this
Agreement which might be construed to the contrary, Company agrees that Bank may
enter into one or more securitization transactions with respect to the Accounts
and, in connection with such transactions, sell the related Indebtedness;
provided that the documents governing any such transaction shall contain
provisions allowing Bank to reacquire such Indebtedness upon expiration of this
Agreement or upon termination of this Agreement by Company (subject to the
account removal conditions described in Section 9.2(b)) unless the omission of
such provisions would be consistent with industry standards or Bank's general
securitization practices (it being understood that such provisions need not
refer specifically to this Agreement or Company and that Bank may omit, delete
or modify any removal-of-account provision or other provision
40
allowing it to reclaim Indebtedness transferred in a securitization transaction
to the extent necessary to account for such transfer as a sale under applicable
accounting guidelines). Company shall sign any documents and consents reasonably
requested by Bank, underwriters, agents, rating agencies, investors or credit
enhancers in connection with any such securitization transaction; provided that
such documents and consents do not require Company to incur any additional
expense or to assume any additional liability. In connection with any such
securitization transaction, Bank shall obtain from any trustee or other third
party to whom the Indebtedness is transferred appropriate assurances that the
confidentiality of the Account information will be maintained and that the
Account information will be used only for the purpose of implementing the
related securitization program.
9.5. Force Majeure.
(a) Definition of Force Majeure. Neither party shall be considered to
be in default in the performance of any obligations under this Agreement when a
failure of performance shall be due to a Force Majeure Event. A "Force Majeure
Event" shall mean an unanticipated event which is not reasonably within the
control of the affected party or its affiliates or permitted subcontractor and
which by exercise of reasonable due diligence, such affected party or its
Affiliates or permitted subcontractors could not reasonably have been expected
to avoid, overcome or obtain or cause to be obtained a commercially reasonable
substitute therefore. Such causes may include, without limitation, the
following: flood, earthquake, tornado, storm, fire, explosion, public emergency,
civil disobedience, labor dispute, labor or material shortage, war, terrorism,
sabotage, restraint by court order or public authority (whether valid or
invalid), and action or non-action by or inability to obtain or keep the
necessary authorizations or approvals from any governmental agency or authority;
however, no party shall be relieved of its obligations hereunder, if its failure
of performance is due to removable or remediable causes which such party fails
to remove or remedy using commercially reasonable efforts within a reasonable
time period. Either party rendered unable to fulfill any of its obligations
under this Agreement by reason of a Force Majeure Event shall give twenty-four
(24) hours notice of such fact to the other and shall exercise due diligence to
remove such inability with all reasonable dispatch. The affected party shall
provide notice to the other party within twenty-four (24) hours of the cessation
of such Force Majeure Event.
(b) Exclusions from Force Majeure. The following events shall not be
deemed a Force Majeure Event: (i) Bank's failure to perform its obligations
because of Bank's failure to comply with, or the failure of Bank's Disaster
Recovery Plan; or (ii) Company's failure to perform its obligations because of
Company's failure to comply with, or the failure of Company's Disaster Recovery
Plan.
(c) This Agreement may be terminated by Company by giving written
notice to Bank in the event that a Force Majeure Event shall prevent Bank from
performing any Critical Functions for a period of at least 10 days, or by
Company by giving written notice to Bank in the event that a Force Majeure Event
shall prevent Bank from performing any material obligations (other than Critical
Functions) under this Agreement for a period of at least 60 days (each period as
applicable constitutes the Force Majeure Period).
41
(d) This Agreement may be terminated by Bank by giving written notice
to Company in the event that a Force Majeure Event shall prevent Company from
performing point-of-sale operations at Company Locations for a period of at
least 10 days, or by Bank by giving written notice to Company in the event that
a Force Majeure Event shall prevent Company from performing any material
obligations (other than point-of-sale operations at Company Locations) under
this Agreement for a period of at least 60 days (each period as applicable
constitutes the Force Majeure Period).
(e) If notice of termination is given by Bank or Company under (c) or
(d) above, termination of this Agreement shall occur (A) immediately upon
delivery of the notice of termination, provided that such termination shall not
occur until the waiver in writing or expiration of Company's right to provide
notice of its election to purchase the Portfolio Assets, or (B) if Company
timely gives notice that it exercises its right under Section 9.2 to purchase
the Portfolio Assets, upon the date on which the closing of the purchase by
Company of the Portfolio Assets pursuant to Section 9.2 shall take place.
9.6. Effect of Termination. Upon termination of this Agreement:
(i) Company shall promptly return to Bank all take-one and
other marketing materials that have been supplied to Company by Bank;
(ii) All Accounts which have been opened pursuant to the terms
hereof, together with all Accounts for which applications have been received but
not yet processed by Bank as of the effective date of such termination, to the
extent not purchased by Company (or its designee) pursuant to Section 9.2, shall
remain the sole and exclusive property of Bank, subject to Section 3.6(b)(i) and
(iv) and Section 9.3;
(iii) With regard to Accounts not purchased by Company (or its
designee) pursuant to Section 9.2 and the Cardholders thereof, to the extent
permissible under Applicable Law, Bank shall have the right to:
(1) reissue as a replacement or in substitution for Credit
Card(s) previously issued to such Cardholders pursuant to this Agreement, any
payment card product offered by Bank or its Affiliates (other than one which is
co-branded for or otherwise involves a Competition Program) which makes no
reference to Company or any Authorized Entity, and
(2) issue to applicants whose applications are received
after the effective date of such termination, any payment card product offered
by Bank or its Affiliates (other than one which is co-branded for or otherwise
involves a Competition Program) which makes no reference to Company or any
Authorized Entity on such card(s), and
(3) offer such Cardholders products and services of
Persons (other than the retailers involved in a Competition Program or the
institutions which provide such retailers with any payment products) provided
such offers make no reference to Company or any Authorized Entity;
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(iv) Bank shall suspend (1) soliciting or opening new Accounts
and (2) (except while Company is continuing to honor Private Label Account
Credit Cards as provided under (vi) below) granting additional credit under
Private Label Accounts, and (3) issuing any Credit Cards, whether by way of
replacement, substitution or otherwise;
(v) In the event of early termination, the Promotional Fee
Credit for the Program Year in which termination occurs will be prorated by
multiplying the Promotional Fee Credit by a fraction, the numerator of which is
the number of days elapsed in the Program Year prior to the Termination Date and
the denominator of which is 365; and
(vi) If the termination was not one in connection with which,
pursuant to Section 9.2(a), Bank is afforded the right to require Company to
purchase the Private Label Portfolio Assets, then, Company shall continue to
honor the Private Label Account Credit Cards until the earlier of (1) 12 months
following the Termination Date or (2) Company's election to cease honoring the
Private Label Account Credit Cards due to Bank's failure to settle for
transactions effected by use of the Private Label Credit Cards in accordance
with the provisions of Article IV hereof or Bank's failure to continue to
maintain the Performance Standards hereunder in connection with Company's
continuing to honor the Private Label Credit Cards, or (3) Bank's exercise of
any of its rights pursuant to (iii) above, or (4) Bank's exercise of its right
to sell the Private Label Credit Card Accounts pursuant to Section 9.3.
ARTICLE X
INDEMNIFICATION
10.1. Indemnified Losses. "Indemnified Losses" means any and all losses,
damages, liabilities, costs and expenses (including reasonable attorneys' fees
and expenses), settlement amounts as, judgments, damages, claims, demands,
offsets, defenses, counterclaims, actions or proceedings, subpoenas,
investigations, and related interest or penalties, including (subject to Section
11.26) any incidental, consequential, exemplary or indirect damages, lost
profits or other business interruption damages, in tort, contract or otherwise,
if any.
10.2. Indemnification by Company. Company agrees to indemnify, defend,
protect and hold harmless Bank and its Affiliates, and their respective agents,
employees, officers and directors, from and against any and all Indemnified
Losses arising out of, relating to, or resulting from:
(a) Company Goods and/or Services charged to a Private Label Account
or Co-Branded Bankcard Account or Rewards Account, including (i) the quality or
workmanship of such Company Goods and/or Services, (ii) the compliance of such
Company Goods and/or Services with Applicable Law, licensing or registration
requirements, (iii) product liability or warranty claims relating directly to
such Company Goods and/or Services;
(b) Any breach by Company or another Authorized Entity of any of the
terms, covenants, representations, warranties, or other provisions contained in
this Agreement;
43
(b1) Use by Company of advertising, marketing, promotion or
solicitation materials not approved by Bank or not consistent with the marketing
copy specifications manual referred to Section 2.3(b);
(c) The failure by Company or another Authorized Entity to comply
with Applicable Law as provided in Section 2.2(i);
(d) Any negligent act, willful misconduct, or negligent omission
where there was a duty to act by Company or another Authorized Entity directly
relating to an Account, a Cardholder, a prospective Cardholder, Account
Documentation, or any items of Indebtedness;
(e) Any unlawful use by Company or another Authorized Entity of
Company Customer Information or Bank Portfolio Information or any allegation
that the use by Company or another Authorized Entity of Company Customer
Information or Bank Portfolio Information was unlawful;
(f) Any claim that Bank's use of the Company Marks infringes any
third party's intellectual property rights, except to the extent caused by
Bank's failure to use the Company Marks in accordance with the terms of this
Agreement or the Company Trademark License Agreement; or
(g) Any third party claim arising out of or in connection with
personal injuries suffered at Company Locations.
10.3. Indemnification by Bank. Bank agrees to indemnify, defend, protect
and hold harmless Company, other Authorized Entities and their Affiliates,
agents, employees, officers and directors, from and against any and all
Indemnified Losses arising out of, relating to, or resulting from:
(a) Any acts or omissions of Bank with respect to the extension of
credit pursuant to the Program;
(b) Any breach by Bank of any of the terms, covenants,
representations, warranties, or other provisions contained in this Agreement;
(c) The failure of Bank or its Affiliates, or the failure of Account
Documentation, or procedures provided by Bank relating to the Program, to comply
with Applicable Law;
(d) Any negligent act, willful misconduct or negligent omission where
there was a duty to act by Bank or its Affiliates relating to an Account, a
Cardholder, a prospective Cardholder, Account Documentation or any items of
Indebtedness;
(e) Any unlawful use by Bank or its Affiliates of Bank Portfolio
Information or Company Customer Information or any allegation that the use by
Bank or its Affiliates of Company Customer Information or Bank Portfolio
Information was unlawful; or
44
(f) Any claim that Company's use of the Bank Marks infringes any
third party's intellectual property rights, except to the extent caused by
Company's failure to use the Bank Marks in accordance with the terms of this
Agreement or the Bank Trademark License Agreement.
10.4. Notice. Each party shall provide prompt notice to the other of any
third-party claims for which indemnity is sought, provided that any failure or
delay in providing such notice shall not affect the indemnification obligations
of the indemnifying party, except to the extent that the indemnifying party
shall have been materially prejudiced by such failure. In any event, the
indemnifying party and the indemnified party shall cooperate (at no cost to the
indemnified party) in the settlement or defense of any such claim, as set forth
below.
10.5. General Procedure. Provided that notice in accordance with Section
10.4 is given, the indemnifying party, at its own expense and using counsel of
its own choosing, will promptly defend, contest and otherwise protect against
any such claim, suit or proceeding. If the indemnifying party fails to timely
defend, contest or otherwise protect against any such claim, suit or proceeding,
the indemnified party may, but will not be obligated to, defend, contest or
otherwise protect against the same, and make any compromise or settlement
thereof and recover the entire cost of the defense, compromise or settlement
from the indemnifying party, including reasonable fees and disbursements of
counsel and amounts paid as a result of the resolution, settlement or compromise
of such claim, suit or proceeding.
10.6. Role of Indemnified Party. The indemnified party may, but will not be
obligated to, participate in the defense of any third-party claim, suit or
proceeding, at its own expense and using counsel of its own choosing, but the
indemnifying party shall be entitled to control the defense thereof unless the
indemnified party has relieved the indemnifying party from liability with
respect to the particular matter. The indemnified party shall cooperate and
provide such assistance as the indemnifying party reasonably may request in
connection with the indemnifying party's defense and shall be entitled to
recover from the indemnifying party the reasonable out-of-pocket costs of
providing such assistance (including reasonable fees of any counsel retained by
the indemnified party with the consent of the indemnifying party to facilitate
such assistance). The indemnifying party shall inform the indemnified party on a
regular basis of the status of any claim, suit or proceeding and the
indemnifying party's defense thereof. Any payments required to be made under
this Article X shall be made promptly by the party responsible therefor.
10.7. Limitations on Parties. In any third-party claim, suit or proceeding,
the defense of which is controlled by the indemnifying party: (i) the
indemnifying party shall not, without the indemnified party's prior written
consent, compromise or settle such claim, suit or proceeding, if (1) such
compromise or settlement would impose an injunction or other equitable relief
upon the indemnified party or (2) such compromise or settlement does not include
the third-party's release of the indemnified party from all liability relating
to such claim, suit or proceeding; and (ii) the indemnified party shall not
compromise or settle such claim, suit or proceeding without the prior written
consent of the indemnifying party, provided that, if the indemnified party
desires to compromise or settle such claim, suit or proceeding and the
indemnifying party refuses to
45
consent to such compromise or settlement, the indemnified party may enter into a
compromise or settlement but shall be solely responsible for the cost of any
compromise or settlement amount.
ARTICLE XI
MISCELLANEOUS
11.1. Assignability.
(a) This Agreement shall inure to the benefit of and shall be binding
upon the parties hereto and their respective legal representatives, successors
and permitted assigns.
(b) Except as provided in this Section 11.1, neither Company nor Bank
may assign its respective rights and obligations under this Agreement without
the prior written consent of the other party. Notwithstanding the foregoing,
Bank may assign all or a portion of its rights and obligations under this
Agreement to Parent or any of its other Affiliates, or otherwise use any of them
to perform functions of Bank hereunder, without the prior written consent of
Company, provided that no such assignment shall release Bank from any of its
obligations hereunder.
(c) During the Term of this Agreement, Bank shall not sell, transfer
or otherwise assign the Accounts or Indebtedness or other Portfolio Assets to a
third party not affiliated with Bank, whether accomplished via a sale of assets
or a sale or merger of Bank or otherwise, without the prior written approval of
Company except nothing in this Agreement shall be deemed to restrict Bank's
right, in its sole discretion, to: (i) securitize receivables generated on the
Accounts in accordance with Section 9.4; (ii) sell, transfer or otherwise assign
Accounts in accordance with Section 9.3; (iii) sell, transfer or otherwise
assign Written-Off-Accounts subject to the use restrictions in Section 3.6, and
(iv) to sell all or substantially all of the credit card assets of Parent.
(d) Company may assign its rights and obligations hereunder to any
entity which is a successor to all or substantially all of Company's assets and
business via merger or consolidation, purchase of assets, or otherwise.
(e) Bank may assign its rights and obligations hereunder to an
Affiliate provided that such Affiliate is an Affiliate of Parent and such
Affiliate satisfies the financial covenant under Section 6.1(m).
11.2. Entire Agreement; Amendment. This Agreement together with (a) the
Exhibits hereto which are expressly incorporated by reference herein and made a
part hereof and (b) the other Transaction Agreements, constitute the entire
agreement of the parties with respect to the subject matter hereof and
supersedes all other prior understandings and agreements between the parties
with respect to the subject matter hereof, whether written or oral. This
Agreement may not be amended or modified except by written instrument signed by
duly authorized representatives of both Bank and Company.
46
11.3. Waiver. The rights, obligations and duties of Bank and Company under
this Agreement may be waived only upon the written consent of duly authorized
representative of Bank and Company. In no event shall a term or provision of
this Agreement be deemed to have been waived or amended, unless a waiver or
amendment is in writing and signed by a person specified in the previous
sentence.
11.4. Delays or Omissions. Except as otherwise provided, Bank and Company
agree that no complete or partial delay or omission to exercise any right, power
or remedy accruing to any party, upon any breach, default or noncompliance by
another party under this Agreement, shall impair any such right, power or
remedy, nor shall it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of any similar breach, default or
noncompliance thereafter occurring. Except as otherwise provided herein, all
remedies under this Agreement shall be cumulative and nonexclusive of each
other.
11.5. Insurance. Each of Bank and Company represents, warrants, and
covenants for itself and any authorized subcontractor, that it shall maintain
from the Closing Date and until the Termination Date insurance (or self
insurance reserves) of the kinds and in amounts as are customarily maintained by
businesses similar in size and type, or as are required by Applicable Law,
whichever is greater.
11.6. Rights of Persons Not a Party. Except as otherwise expressly set
forth in this Agreement, this Agreement shall not create any rights on the part
of any person or entity not a party hereto, whether as a third-party beneficiary
or otherwise.
11.7. Headings. The headings, captions and arrangements of the provisions
and sections of this Agreement are for convenience and reference only, are not a
substantive part of this Agreement and are not to be used to affect the
validity, construction or interpretation of this Agreement or any of its
provisions.
11.8. Governing Law/Severability. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
such state's principles of conflict of laws (other than Section 5-1401 of the
General Obligations Law). Any term or provision of this Agreement that 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. If any provision of
this Agreement is deemed to be so broad as to be unenforceable, such provision
shall be interpreted to be only so broad as is enforceable. If any provision of
this Agreement is contrary to law, such provision shall, to the extent
necessary, be deemed ineffective without invalidating the remaining provisions
hereof.
11.9. Good Faith. The parties agree that, with regard to all of their
respective dealings under this Agreement, they will act fairly and in good
faith.
47
11.10. 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.
11.11. Counterparts. This Agreement may be executed by facsimile
transmission of original signatures 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.
11.12. Jurisdiction/Venue. Each party hereby submits to the nonexclusive
jurisdiction of competent State of New York state courts or federal courts in
the Southern District of New York for purposes of all legal proceedings arising
out of or relating to the transactions or relationships contemplated hereby.
Each party irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such proceedings brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
11.13. Waiver of Jury Trial. EACH PARTY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
11.14. Notices. All notices, demands and other communications hereunder
shall be in writing and shall be sent by nationally recognized overnight courier
service addressed to the party to whom such notice or other communication is to
be given or made at such party's address as set forth below, or to such other
address as such party may designate in writing to the other party from time to
time in accordance with the provisions hereof and shall be deemed given one (1)
Business Day after being sent, as follows: (i) if to Company (or to Circuit City
West Coast, Inc.): Circuit City Stores, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: General Counsel, Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇, with
a copy to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire, McGuireWoods LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇, and (ii) if to Bank (or to
Parent): Bank One, Delaware, N.A., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attn: Executive Vice President, Relationship Management, Telecopier No.:
(▇▇▇) ▇▇▇-▇▇▇▇, with a copy to General Counsel, at the same street address,
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇; provided, however, (i) if either of the above
parties shall have designated a different address by notice to the other, then
to the last address so designated.
11.15. Power of Attorney.
(a) Company authorizes and empowers Bank to sign and endorse
Company's name on all checks, drafts, money orders or other forms of payment in
respect of Accounts under this Agreement. This limited power of attorney
conferred hereby is deemed a power coupled with an interest and shall be
irrevocable for so long as Bank owns the Accounts.
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(b) Bank authorizes and empowers Company to sign and endorse Bank's
name on all checks, drafts, money orders or other forms of payment that are
submitted as In-Store Payments pursuant to this Agreement. This limited power of
attorney conferred hereby is deemed a power coupled with an interest and shall
be irrevocable prior to termination.
11.16. Use of Names and Trademarks.
(a) Bank may use the Marks identified in the Company Trademark
License Agreement, which is attached hereto as Exhibit 11.16(a) and incorporated
herein by reference (the "Company Marks"), solely in the creation, development,
marketing and administration of the Program, strictly in accordance with
Company's guidelines and pursuant to the terms and conditions of the Company
Trademark License Agreement. Bank will, and Company will cause Circuit City West
Coast, Inc. to, execute and deliver the Company Trademark License Agreement on
the Closing Date.
(b) Company and the Authorized Entities may use the Marks identified
in the Bank Trademark License Agreement, which is attached hereto as Exhibit
11.16(b) and incorporated herein by reference (the "Bank Marks"), solely in the
creation, development, marketing and administration of the Program, strictly in
accordance with Parent's guidelines and pursuant to the terms and conditions of
the Bank Trademark License Agreement. Company will, and Bank will cause Parent
to, execute and deliver the Bank Trademark License Agreement on the Closing
Date.
(c) Each party agrees to submit to the other party, for its prior
written approval, such approval not to be unreasonably withheld or delayed,
samples of all uses of each party's Marks, and each party agrees to use the
other party's Marks in a manner and only as approved by such party.
11.17. Confidential Information.
(a) General Confidentiality. The parties acknowledge and agree that
the terms of this Agreement and all information provided to or in connection
with either party's performance under this Agreement shall be considered
confidential and proprietary information ("Confidential Information") and shall
not be disclosed to any third party without the prior written consent of the
party providing the Confidential Information ("Disclosing Party"). Confidential
Information shall include, without limitation: (i) Nonpublic Personal
Information, including names and addresses; (ii) demographic, behavioral, and
credit information relating to Cardholders, prospective Cardholders or the Lists
provided to Bank pursuant to this Agreement; (iii) terms of this Agreement,
marketing materials, strategies and targeting methods; (iv) business objectives,
assets and properties; and (v) programming techniques and technical,
developmental, cost and processing information. Unless inconsistent with the
provisions of subsection (b) below, the obligations with respect to Confidential
Information shall not apply to Confidential Information that: (i) either party
or its personnel already know at the time it is disclosed as shown by their
written records; (ii) is publicly known without breach of this Agreement; (iii)
either party received from a third party authorized to disclose it without
49
restriction; (iv) either party, its agents or subcontractors, developed
independently without use of Confidential Information; or (v) either party is
required by law, regulation or valid court or governmental agency order to
disclose, in which case the party receiving such an order must give notice to
the other party, allowing them to seek a protective order.
(b) Use of Confidential Information. The Receiving Party shall use
Confidential Information only for the purpose of performing the terms of this
Agreement and shall not accumulate in any way or make use of Confidential
Information for any other purpose. The Receiving Party shall ensure that only
its employees, authorized agents, or subcontractors who need to know
Confidential Information to perform this Agreement will receive Confidential
Information and that such persons agree to be bound by the provisions of this
Section and maintain the existence of this Agreement and the nature of their
obligations hereunder strictly confidential.
(c) Loss of Confidential Information. In the event of any disclosure
or loss of, or inability to account for, any Confidential Information of the
Disclosing Party, the Receiving Party shall promptly, at its own expense: (i)
notify the Disclosing Party in writing; (ii) take such actions as may be
necessary or reasonably requested by the Disclosing Party to minimize the
violation; and (iii) cooperate in all reasonable respects with the Disclosing
Party to minimize the violation and any damage resulting therefrom.
(d) Unauthorized Use or Disclosure of Confidential Information. Each
party agrees that any unauthorized use or disclosure of Confidential Information
may cause immediate and irreparable harm to the Disclosing Party for which money
damages may not constitute an adequate remedy. In that event, each 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 in writing of any unauthorized misappropriation,
disclosure or use by any person of the Confidential Information 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
misappropriation, disclosure or use.
(e) Return or Destruction of Confidential Information. Upon either
party's demand, or upon the termination of this Agreement, the parties shall
comply with each other's reasonable instructions regarding the disposition of
Confidential Information which may include return of any and all Confidential
Information (including any copies or reproductions thereof). Such compliance
shall be certified in writing, including a statement that no copies of
confidential information have been kept.
(f) Except as otherwise provided in this Agreement, nothing in this
Agreement shall prohibit Company from owning, using, selling, renting,
transferring, providing, or otherwise utilizing the Company Customer Information
as Company, in its sole discretion, so chooses.
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(g) In the event of any inconsistency between the provisions of this
Section 11.17 and the provisions of Section 3.6, the provisions of Section 3.6
shall control to the extent of the inconsistency.
11.18. Audit Rights.
(a) Bank shall have the right, subject to existing confidentiality
obligations, with or by its duly appointed representative, to review, inspect
and audit, at Bank's sole expense, the books, records, data files and other
information and the facilities, systems and operations maintained by or on
behalf of Company and the other Authorized Entities (to the extent they are
Affiliates or are permitted by their contracts), related to the operation of the
Program and the performance of Company's obligations and its Authorized
Entities' obligations (to the extent permitted by their contracts) under this
Agreement or any other Transaction Agreement. Bank shall have the right to test
any audit requirement to ensure compliance with this Agreement.
(b) Company shall have the right, subject to existing confidentiality
obligations, with or by its duly appointed representative, to review, inspect
and audit, at Company's sole expense, the books, records, data files and other
information and the facilities and operations maintained by or on behalf of
Bank, including TSYS (to the extent contractually permissible, which permission
Bank will use its reasonable efforts to obtain and maintain), and any other Bank
affiliated or other approved outsourcers (to the extent permitted pursuant to
their contracts) related to the operation of the Program and the performance of
its obligations under this Agreement or any other Transaction Agreement,
including compliance with the Performance Standards, payments between the
parties, monitoring customer service and collection calls, telephone calls
involving alleged Cardholder fraud, and debt collection practices. Promptly
following their receipt by Bank, Bank shall provide Company, at no cost to
Company, copies of all SAS 70 or other third party audit reports received by
Bank with respect to TSYS or any of the other third parties mentioned above, and
of any subsequent reports addressing resolution of any issues presented by such
third party audit reports. Company shall have the right to test any audit
requirement and seed lists to ensure compliance with this Agreement.
(c) Such inspections shall occur at such reasonable times as shall be
agreed upon by the parties, and only during normal business hours, using
reasonable care not to cause damage and not to interrupt the normal business
operations of the audited party. Such audits (i) shall be subject to such
security procedures as the inspected party may reasonably impose, (ii) shall be
subject to such limitations as may be required by existing confidentiality
obligations, or under applicable rules, regulations or statutes governing the
conduct of the inspected party's business, and (iii) shall be performed
according to a mutually agreed upon audit plan, which shall include the scope of
the audit and a description of necessary documents. The parties agree to use
commercially reasonable efforts to obtain audit rights for the other party in
future contracts entered into with third parties regarding the Program.
11.19. Press Releases or Publicity Statements. Neither Bank nor Company
(nor any Affiliates of either Bank or Company) shall issue any press release or
otherwise make any publicity statement about the Program without the other
Party's prior written consent, except as
51
may be compelled by law, rule or regulation; provided, however, that nothing in
this Section 11.19 shall limit Bank's or Company's ability to make any
disclosures which in its judgment are desirable in filings with the Securities
and Exchange Commission and communications with shareholders and potential
investors.
11.20. Independent Contractor. In the performance of its duties or
obligations under this Agreement or any other contract, commitment, undertaking
or agreement made pursuant to this Agreement, Company shall not be deemed to be
the agent of Bank and Bank shall not be deemed to be the agent of Company but
rather the status of the parties shall be that of independent contractors
operating as separate entities. None of any party's employees, agents, or
servants is entitled to the benefits that are provided to the employees of the
other parties.
11.21. No Joint Venture. Nothing in this Agreement or any collateral
agreement shall be deemed to create a partnership or joint venture between
Company or another Authorized Entity and Bank. Except as expressly set forth
herein, no party shall have any authority to bind or commit the other party.
11.22. Tax and Financial Cooperation. During the Term hereof and for a
perpetual period following termination as provided in Article IX, the parties
agree to cooperate with each other in connection with any official tax inquiry,
tax audit, determination or related proceeding affecting tax liability of either
party or, in connection with a determination of any tax liability or treatment,
to make available to each other party within a reasonable amount of time, at no
cost to such party, documents, correspondence, reports, books and records of
either party and any other materials bearing on such tax inquiry, audit,
examination, proceeding or determination of tax liability or treatment, provided
that each party shall be reimbursed for any out-of-pocket expenses it incurs in
assisting another party hereunder.
11.23. [Reserved].
11.24. No Violation. Notwithstanding anything else contained in this
Agreement (including Section 3.6), neither Bank nor Company (nor any of their
respective Affiliates) shall, and none of them shall be obligated to, take any
action that such entity believes in good faith would violate, or would cause any
of them to violate, Applicable Law (including causing any of them to become a
"consumer reporting agency" for purposes of the federal Fair Credit Reporting
Act). Nothing contained in this Agreement (including Sections 5.1(b), (c) and
(h) hereof) shall be construed as an agreement, representation or warranty by
Company that it, or any Authorized Entity, will obtain or maintain any license
or other regulatory approval, other than as may be required for the purpose of
conducting its retail merchandising business. Without limiting the generality of
the foregoing, it is understood and agreed that Company does not represent or
warrant that it has, and does not undertake to seek or obtain, any insurance
agent or agency license or approval, any license or approval as may purport to
be required by any state for credit service organizations, credit repair
organizations, loan brokers or finance companies, or as may purport to apply to
persons involved in the offer or sale of various kinds of Ancillary Products or
52
Balance Builder Products or Incidental Marketing Program products or services.
To the extent any such requirement may be determined to exist, then, without
limitation as to any other rights or remedies it may have with respect to such
requirement, Company (unless in its sole discretion it desires to do so) shall
not be required to seek such license or approval, but rather the particular
aspect of the Program giving rise to the requirement in a particular
jurisdiction shall be eliminated from the Program as offered in that
jurisdiction.
11.25 Intellectual Property. All technology, software, trademarks, service
marks, logos, works of authorship, inventions, methods, know-how or other
material developed, invented, created or authored by either party in connection
with the Program shall belong solely and exclusively to the developing party,
and if jointly developed shall be jointly owned, including all intellectual
property rights relating thereto; provided, however, that each party hereby
grants the other party a non-exclusive, perpetual, paid-up royalty-free right
and license to use, any such exclusively owned items and all intellectual
property rights relating thereto solely for purposes of carrying out its
respective obligations relating to the Program and obtaining its respective
benefits under the terms of this Agreement and in connection with the conduct by
Company and Authorized Entities and their Affiliates, of any private label
credit card or co-branded bankcard program during the Term of this Agreement,
and thereafter until the first to occur of:
(i) the Company's right under Section 9.2 to purchase the Portfolio
Assets and Bank's right under Section 9.2 to require Company to
purchase the Private Label Portfolio Assets shall have been
waived in writing or shall have expired, and
(ii) the consummation of a purchase by Company or its designee of the
Portfolio Assets or Private Label Portfolio Assets pursuant to
Section 9.2,
provided, however, that following the occurrences referred to in clause (i)
above the Bank shall continue to have the rights to use the Company Marks to the
extent, and for the period, specified in the Company Trademark License
Agreement; and
provided further, that (A) Company and such designee shall continue to have the
rights to use the Bank Marks to the extent, and for the period, specified in
Bank Trademark License Agreement, and, (B) as to any other items of intellectual
property owned by Bank and used in connection with the Program, Company shall
receive a non-exclusive, perpetual, royalty-free right and license to use, and
to sublicense others to use any such items solely for the purposes of continuing
to provide private label credit card and/or co-branded bankcard programs for the
Company and Authorized Entities and their Affiliates only if Company has either
previously paid for substantially all of the development costs relating to such
items or pays Bank a fair market license fee, not to exceed 100% of the
development costs reasonably incurred and documented by Bank, for the use of
such items. Bank agrees to execute such further documents as may be necessary to
create such license.
11.26 Damages Limitation. Notwithstanding anything to the contrary in this
Agreement, in the absence of gross negligence, bad faith, willful misconduct, or
intentional breach or repudiation of a party's obligations, Bank and Company
shall not be liable to the other under or in connection with this Agreement or
the Program for any indirect, consequential or other damages relating to
prospective profits, income, anticipated sales or investments, or
53
goodwill, or for any punitive or exemplary damages (and, with respect to claims
for indemnification pursuant to Section 10.2(b) or 10.3(b), only actual damages
will be the subject of such indemnification); provided, however, that the
damages limitation set forth in this Section 11.26 shall not apply to any
damages which result from an obligation of Bank or Company to pay any third
party damages claims to the extent such third party claims otherwise fall under
Bank's or Company's respective indemnity obligations hereunder or any damages
which result from either party's failure to comply with its obligations under
Section 3.6 or 11.17.
11.27 Specific Performance. The parties acknowledges that each party will
be irreparably harmed and will have no adequate remedy at law if a party fails
to perform any of its material obligations under this Agreement other than
failures consisting solely of defaults under Sections 8.1(i). It is accordingly
agreed that, in addition to any other remedies which may be available at law or
in equity, each party shall have the right to obtain injunctive relief to
restrain a breach or threatened breach of, or otherwise obtain specific
performance of, such obligations of the other party.
11.28 Survival. The following provisions shall survive the termination of
this Agreement: Sections 2.1(e), 2.2(a)(vi)(as it relates to Rewards points
issued prior to the Termination Date), Exhibit 2.6(c) (as it relates to payments
on Flagged Accounts), 3.4, 3.5, 3.6, 3.17, 5.1(a), 5.1(j), 6.1(b), 6.1(j),
6.1(k), 6.1(l); Articles VIII, IX, X; Sections 11.1, 11.2, 11.3, 11.4, 11.6,
11.7, 11.8, 11.9, 11.10, 11.12, 11.13, 11.14, 11.16, 11.17, 11.19, 11.18 (so
long as either party claims there remains an unfulfilled financial obligation on
the part of the other party),11.20, 11.21, 11.22, 11.24, 11.25, 11.26, 11.27,
11.28; as they relate to Co-Branded Bankcard Accounts and Rewards Accounts,
while Bank still owns them and the Private Label Accounts and Company is
continuing to honor the Private Label Credit Cards, the following Sections:
2.1(d)(vii), 2.1(d)(xiv), 2.6(e) and 4.3; as they relate to Private Label
Accounts, while Bank still owns them and Company is continuing to honor the
Private Label Credit Cards related to those Accounts, the following: Sections
2.1(b), 2.1(d)(vii), 2.1(d)(viii), 2.1(d)(x), 2.1(d)(xi), 2.1(d)(xiii),
2.1(d)(xiv), 2.1(d)(xvii), 2.1(d)(xviii), 2.1(d)(xix), 2.1(e), 2.1(f)(i),
2.2(a)(i), 2.2(a)(iii), 2.2(a)(v), 2.2(b)(as to Charge Slips and Credit Slips),
2.2(c), 2.2(f), 2.2(h), 2.3(c), 2.6(e), 2.6(g), 3.1(a), 3.13, 4.1, 4.2, 4.3, 5.2
, 6.1(c), 6.1(d), 7.1.
SIGNATURE PAGE FOLLOWS
54
IN WITNESS WHEREOF, Bank and Company have caused this Agreement to be
executed by their respective officers or agents thereunto duly authorized as of
the date first above written.
CIRCUIT CITY STORES, INC.
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Senior Vice President and Chief Financial Officer
BANK ONE, DELAWARE, N.A.
By: /s/▇▇▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Executive Vice President