AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 16, 2001
REGISTRATION NO. 333-94623
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 5
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
ALLIANCE DATA SYSTEMS CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 7374 31-1429215
(State or Other Jurisdiction of (Primary standard (I.R.S. Employer
Incorporation or Organization) industrial classification Identification Number)
code number)
--------------------------
17655 WATERVIEW PARKWAY
DALLAS, TEXAS 75252
TELEPHONE: (972) 348-5100
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
J. MICHAEL PARKS
CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND PRESIDENT
17655 WATERVIEW PARKWAY
DALLAS, TEXAS 75252
TELEPHONE: (972) 348-5100
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
--------------------------
WITH A COPY TO:
TERRY M. SCHPOK, P.C. KENNETH M. DORAN, ESQ.
Akin, Gump, Strauss, Hauer & Feld, L.L.P. Gibson, Dunn & Crutcher LLP
1700 Pacific Avenue, Suite 4100 333 South Grand Avenue
Dallas, Texas 75201 Los Angeles, California 90071
Telephone: (214) 969-2800 Telephone: (213) 229-7000
Facsimile: (214) 969-4343 Facsimile: (213) 229-7520
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE ON OR AFTER THE EFFECTIVE DATE OF THIS REGISTRATION
STATEMENT.
--------------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / _________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / _________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / _________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13--OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses in connection with the issuance and distribution of
the securities being registered, other than underwriting discounts and
commissions are set forth in the following table. The Company will pay all
expenses of issuance and distribution. Each amount, except for the SEC, NASD and
New York Stock Exchange fees, is estimated.
SEC registration fees..................................... $ 79,200
NASD filing fees.......................................... 30,500
New York Stock Exchange application listing fee........... 335,000
Transfer agent's and registrar's fees and expenses........ 20,000
Printing and engraving expenses........................... 900,000
Legal fees and expenses................................... 900,000
Accounting fees and expenses.............................. 800,000
Blue sky fees and expenses................................ 5,000
Miscellaneous............................................. 10,300
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Total................................................... $3,080,000
==========
ITEM 14--INDEMNIFICATION OF DIRECTORS AND OFFICERS
Alliance Data Systems Corporation's Certificate of Incorporation provides
that it shall, to the fullest extent permitted by Section 145 of the Delaware
General Corporation Law, indemnify all persons whom it may indemnify under
Delaware law.
Section 145 of the Delaware General Corporation Law permits a corporation,
under specified circumstances, to indemnify its directors, officers, employees
or agents against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlements actually and reasonably incurred by them in
connection with any action, suit or proceeding brought by third parties by
reason of the fact that they were or are directors, officers, employees or
agents of the corporation, if such directors, officers, employees or agents
acted in good faith and in a manner they reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reason to believe their conduct was
unlawful. In a derivative action, i.e., one by or in the right of the
corporation, indemnification may be made only for expenses actually and
reasonably incurred by directors, officers, employees or agents in connection
with the defense or settlement of an action or suit, and only with respect to a
matter as to which they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made if such person shall
have been adjudged liable to the corporation, unless and only to the extent that
the court in which the action or suit was brought shall determine upon
application that the defendant directors, officers, employees or agents are
fairly and reasonably entitled to indemnity for such expenses despite such
adjudication of liability.
Alliance Data Systems Corporation's Bylaws provide for indemnification by it
of its directors, officers and certain non-officer employees under certain
circumstances against expenses (including attorneys' fees, judgments, fines and
amounts paid in settlement) reasonably incurred in connection with the defense
or settlement of any threatened, pending or completed legal proceeding in which
any such person is involved by reason of the fact that such person is or was an
officer or employee of Alliance Data Systems Corporation if such person acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of Alliance Data Systems Corporation, and, with respect to
criminal actions or proceedings, if such person had no reasonable cause to
believe his or her conduct was unlawful.
II-1
Alliance Data Systems Corporation's Certificate of Incorporation also provides
that, to the fullest extent permitted by the Delaware General Corporation Law,
no director shall be personally liable to Alliance Data Systems Corporation or
its stockholders for monetary damages resulting from breaches of their fiduciary
duty as directors.
Expenses for the defense of any action for which indemnification may be
available may be advanced by Alliance Data Systems Corporation under certain
circumstances. The general effect of the foregoing provisions may be to reduce
the circumstances which an officer or director may be required to bear the
economic burden of the foregoing liabilities and expenses. Directors and
officers will be covered by liability insurance indemnifying them against
damages arising out of certain kinds of claims which might be made against them
based on their negligent acts or omissions while acting in their capacity as
such.
ITEM 15--RECENT SALES OF UNREGISTERED SECURITIES
Since January 1998, Alliance Data Systems Corporation has issued and sold
the following unregistered securities:
(1) In July 1998, 9,634,265 shares of common stock were sold to various
Welsh, Carson, Anderson & Stowe limited partnerships and a total of
466,744 shares of common stock were sold to a total of 16 individuals
who are partners of some or all of the Welsh Carson limited
partnerships for $100.0 million to finance, in part, the acquisition of
all of the outstanding capital stock of the Loyalty Management Group
Canada Inc.
(2) In August 1998, 30,303 shares of common stock were sold to WCAS Capital
Partners II, L.P. at a value of $9.90 per share as consideration for
extending the maturity on a 10% subordinated note, issued to WCAS
Capital Partners II, originally due January 24, 2002 to October 25,
2005 and 20,202 shares were sold to Limited Commerce Corp. at a value
of $9.90 per share as consideration for extending the maturity on a 10%
subordinated note, issued to Limited Commerce Corp., originally due
January 24, 2002 to October 25, 2005.
(3) In September 1998, 655,555 shares of common stock were sold to WCAS
Capital Partners III, LP to finance, in part, the acquisition of
Harmonic Systems Incorporated.
(4) In July 1999, a total of 120,000 shares of Series A preferred stock
were sold to Welsh, Carson, Anderson & Stowe VIII, L.P., WCAS
Information Partners, L.P. and 20 individuals who are also partners of
some or all of the Welsh Carson limited partnerships for $120 million.
The shares of Series A preferred stock were issued to finance, in part,
the acquisition of the network transaction processing business of
SPS Payment Systems, Inc.
Since October 1996, Alliance Data Systems Corporation has granted stock
options to purchase shares of its common stock under its stock option plan
covering an aggregate of 5,441,910 shares, at exercise prices ranging from $9.00
to $15.00 per share. Since January 1998 Alliance Data Systems Corporation has
issued 130,375 shares of Alliance Data Systems Corporation's common stock
pursuant to the exercise of stock options. Since October 1996, 428,909 stock
options have lapsed without being exercised.
II-2
The sales and issuances of securities in the transactions described above
were deemed to be exempt from registration under the Securities Act in reliance
upon Section 4(2) of the Securities Act, Regulation D promulgated thereunder or
Rule 701 promulgated under Section 3(b) of the Securities Act, as transactions
by an issuer not involving any public offering or transactions pursuant to
compensatory benefit plans and contracts relating to compensation as provided
under Rule 701. The recipients of securities in each transaction represented
their intentions to acquire the securities for investment only and not with a
view to or for sale in connection with any distribution thereof and appropriate
legends were affixed to the securities issued in such transactions. All
recipients had adequate access, through their relationship with Alliance Data
Systems, to information about the Company.
ITEM 16--EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
EXHIBIT
NO. EXHIBITS
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*1 Form of Underwriting Agreement.
*2.1 Agreement and Plan of Merger, dated as of August 30, 1996,
by and between Business Services Holdings, Inc. and World
Financial Network Holding Corporation.
*2.2 Agreement and Plan of Merger, dated as of August 14, 1998,
by and among Alliance Data Systems Corporation, HSI
Acquisition Corp., and Harmonic Systems Incorporated.
*2.3 Stock Purchase Agreement, dated June 8, 1998, by and between
SPS Payment Systems, Inc., Alliance Data Systems
Corporation, SPS Commercial Services, Inc., and ADS
Network Services, Inc., amended July 12, 1999.
2.4 Agreement for the Purchase of all the Shares of Loyalty
Management Group Canada Inc., June 26, 1998, by and
between Air Miles International Group B.V., certain other
shareholders and option holders and Alliance Data Systems
Corporation as amended July 14, 1998.
*3.1 Second Amended and Restated Certificate of Incorporation of
the Registrant.
*3.2 Second Amended and Restated Bylaws of the Registrant.
*4 Specimen Certificate for shares of Common Stock of the
Registrant.
*5 Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
10.1 Credit Card Processing Agreement between World Financial
Network National Bank, Bath and Body Works, Inc. and
Tri-State Factoring, Inc., dated January 31, 1996.
10.2 Credit Card Processing Agreement between World Financial
Network National Bank, Victoria's Secret Catalogue, Inc.,
and Far West Factoring Inc., dated January 31, 1996
(assigned by Victoria's Secret Catalogue, Inc. to
Victoria's Secret Catalogue, LLC, May 2, 1998).
10.3 Credit Card Processing Agreement between World Financial
Network National Bank, Victoria's Secret Stores, Inc., and
Lone Mountain Factoring, Inc., dated January 31, 1996.
10.4 Credit Card Processing Agreement between World Financial
Network National Bank, Lerner New York, Inc., and Nevada
Receivable Factoring, Inc., dated January 31, 1996.
II-3
EXHIBIT
NO. EXHIBITS
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10.5 Credit Card Processing Agreement between World Financial
Network National Bank, Express, Inc., and Retail
Factoring, Inc., dated January 31, 1996.
10.6 Credit Card Processing Agreement between World Financial
Network National Bank, The Limited Stores, Inc., and
American Receivable Factoring, Inc., dated January 31,
1996.
10.7 Credit Card Processing Agreement between World Financial
Network National Bank, Structure, Inc., and Mountain
Factoring, Inc., dated January 31, 1996.
10.8 Credit Card Processing Agreement between World Financial
Network National Bank, Lane Bryant, Inc., and Sierra
Nevada Factoring, dated January 31, 1996, and amended
August 4, 1998 and September 12, 1999.
10.9 Credit Card Processing Agreement between World Financial
Network National Bank, Henri Bendel, Inc., and Western
Factoring, Inc., dated January 31, 1996 and amended
May 13, 1998.
*10.10 Alliance Data Systems Corporation and its Subsidiaries
Employee Stock Purchase Plan.
*10.11 Lease between Deerfield and Weiland Office Building, L.L.C.
and ADS Alliance Data Systems, Inc., dated July 30, 1999.
*10.12 Indenture of Sublease between J.C. Penney Company, Inc. and
BSI Business Services, Inc., dated January 11, 1996.
*10.13 Build-to-Suit Net Lease between Opus South Corporation and
ADS Alliance Data Systems, Inc., dated January 29, 1998,
as amended.
*10.14 Industrial Lease Agreement between CIBC Development
Corporation and Loyalty Management Group Canada Inc.,
dated October 19, 1998, amended January 26, 1999.
*10.15 Lease between YCC Limited and London Life Insurance Company
and Loyalty Management Group Canada Inc. dated May 28,
1997 and amended June 19, 1997 and January 15, 1998.
*10.16 Deed of Lease between Boswell International Marine (PTE)
Limited and Financial Automation Limited, dated August 3,
1999.
*10.17 Office Lease between Office City, Inc. and World Financial
Network National Bank, dated December 24, 1986, and
amended January 19, 1987, May 11, 1988, August 4, 1989 and
August 18, 1999.
*10.18 Lease Agreement by and between Continental Acquisitions,
Inc. and World Financial Network National Bank, dated July
2, 1990, and amended September 11, 1990, November 16, 1990
and February 18, 1991.
*10.19 Lease Agreement by and between Americana Parkway Warehouse
Limited and World Financial Network National Bank, dated
June 28, 1994.
*10.20 Lease Agreement by and between Morrison Taylor II, Ltd. and
ADS Alliance Data Systems, Inc., dated June 18, 1998, and
amended June 18, 1998.
*10.21 Lease Agreement between Morrison Taylor, Ltd. and ADS
Alliance Data Systems, Inc. dated July 1, 1997, and
amended June 18, 1998.
*10.22 Commercial Lease Agreement between Waterview Parkway, L.P.
and ADS Alliance Data Systems, Inc., dated July 16, 1997.
*10.23 Preferred Stock Purchase Agreement by and between Alliance
Data Systems Corporation and several persons named in
Schedule I thereto, dated July 12, 1999.
II-4
EXHIBIT
NO. EXHIBITS
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*10.24 Amended and Restated Stockholder Agreement, by and between
World Financial Network Holding Corporation, Limited
Commerce Corp., Welsh, Carson, Anderson, and Stowe VII,
L.P., and the several other investors named in Annex 1
thereto dated August 30, 1996, and amended July 24, 1998,
August 31, 1998 and July 12, 1999.
*10.25 Securities Purchase Agreement, by and between Business
Services Holdings, Inc., and the several purchasers named
in Schedule 1 and Schedule II thereto, dated January 24,
1996, and amended August 31, 1998.
*10.26 Common Stock Purchase Agreement between Alliance Data
Systems Corporation and Welsh, Carson, Anderson, and Stowe
VII, L.P., Welsh, Carson, Anderson, and Stowe VIII, L.P.,
and the persons named in Schedule I thereto, dated July
24, 1998.
*10.27 Securities Purchase Agreement between Alliance Data Systems
Corporation and WCAS Capital Partners III, L.P., dated
September 15, 1998.
*10.28 10% Subordinated Note due September 15, 2008 issued by
Alliance Data Systems Corporation to WCAS Capital Partners
III, L.P. dated September 15, 1998.
*10.29 10% Subordinated Note due October 25, 2005 issued by
Alliance Data Systems Corporation to the Limited Commerce
Corp., dated January 24, 1996.
*10.30 10% Subordinated Note due October 25, 2005 issued by
Alliance Data Systems Corporation to WCAS Capital Partners
II, L.P. dated January 24, 1996.
*10.31 Amended and Restated Credit Agreement between Alliance Data
Systems Corporation, and Loyalty Management Group Canada
Inc., the Guarantors party thereto, the Banks party
thereto, and Morgan Guaranty Trust Company of New York,
dated July 24, 1998.
*10.32 Pooling and Servicing Agreement, dated as of January 30,
1998, by and between World Financial Network National
Bank, as Transferor and as Servicer, and The Bank of New
York, as Trustee.
*10.33 ADS Alliance Data Systems, Inc. Supplemental Executive
Retirement Plan, effective May 1, 1999.
*10.34 Amended and Restated Alliance Data Systems Corporation and
its Subsidiaries Stock Option and Restricted Stock Plan.
*10.35 Form of Alliance Data Systems Corporation Incentive Stock
Option Agreement.
*10.36 Form of Alliance Data Systems Corporation Non-Qualified
Stock Option Agreement.
*10.37 Form of Alliance Data Systems Corporation Confidentiality
and Non-Solicitation Agreement.
*10.38 Alliance Data Systems Corporation 1999 Incentive
Compensation Plan.
*10.39 Letter employment agreement with J. Michael Parks, dated
February 19, 1997.
*10.40 Letter employment agreement with Ivan Szeftel, dated May 4,
1998.
II-5
EXHIBIT
NO. EXHIBITS
- ------- --------
*10.41 Registration Rights Agreement dated as of January 24, 1996
between Business Services Holdings, Inc. and Welsh Carson,
Andersen, and Stowe VII, L.P., WCAS Information Partners,
L.P., WCA Management Corporation, Patrick J. Welsh,
Russell L. Carson, Bruce K. Anderson, Richard H. Stowe,
Andrew M. Paul, Thomas E. McInerney, Laura VanBuren, James
B. Hoover, Robert A. Minicucci, Anthony J. deNicola, and
David Bellet.
*10.42 Securities Purchase Agreement, dated as of August 30, 1996,
by and among World Financial Network Holding Corporation,
Limited Commerce Corp., and several persons named in
Schedules I and II thereto, and WCAS Capital Partners II,
L.P., as amended August 31, 1998.
*10.43 Amended and Restated License to Use the Air Miles Trade
Marks in Canada, dated as of July 24, 1998, by and between
Air Miles International Holdings N.V. and Loyalty
Management Group Canada Inc.
*10.44 Amended and Restated License to Use and Exploit the Air
Miles Scheme in Canada, dated July 24, 1998, by and
between Air Miles International Trading B.V. and Loyalty
Management Group Canada Inc.
*10.45 License to Use the Air Miles Trademarks in the United
States, dated as of July 24, 1998, by and between Air
Miles International Holdings N.V. and Loyalty Management
Group Canada Inc.
*10.46 License to Use and Exploit the Air Miles Scheme in the
United States, dated as of July 1998, by and between Air
Miles International Trading B.V. and Alliance Data Systems
Corporation.
*10.47 Form of Retainer Agreement entered into between ADS Alliance
Data Systems, Inc. and certain affiliates of The Limited,
Inc.
*10.48 Form of Business Solutions Master Agreement between ADS
Alliance Data Systems, Inc. and certain affiliates of The
Limited, Inc.
*10.49 Second Amendment to Amended and Restated Credit Agreement,
dated as of September 29, 2000, by and among Alliance Data
Systems Corporation, Loyalty Management Group Canada Inc.,
Morgan Guaranty Trust Company of New York and Harris Trust
and Savings Bank.
*10.50 Commercial Real Estate Lease, between Route 7 Realty, LLC
and ADS Alliance Data Systems, Inc., dated October 24,
2000.
*10.51 Third Amendment to Amended and Restated Credit Agreement,
dated as of January 10, 2001 between Alliance Data Systems
Corporation, Loyalty Management Group Canada Inc. and
Harris Trust and Savings Bank.
*10.52 General Release and Severance Agreement by and between
Edward K. Mims, ADS Alliance Data Systems, Inc., and
Alliance Data Systems Corporation.
*10.53 General Release and Severance Agreement by and between James
Anderson, ADS Alliance Data Sytems, Inc. and Alliance Data
Systems Corporation.
10.54 Consumer Marketing Database Services Agreement among ADS
Alliance Data Systems, Inc., Intimate Brands, Inc. and The
Limited, Inc., dated as of September 1, 2000.
*10.55 Fourth Amendment to Lease, made effective as of June 1,
2000, by and between Partners at Brooksedge and ADS
Alliance Data Systems, Inc.
II-6
EXHIBIT
NO. EXHIBITS
- ------- --------
**10.56 Supplier Agreement between Loyalty Management Group Canada
and Air Canada dated as of April 24, 2000.
*21 Subsidiaries of the Registrant.
*23.1 Consent of Deloitte & Touche LLP with regard to Alliance
Data Systems Corporation and SPS Network Services.
*23.2 Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
(included in its opinion filed as Exhibit 5 hereto).
*24 Power of Attorney (included on the signature page hereto).
- ------------------------
* Previously filed.
** Portions of Exhibit have been omitted and filed separately with the
commission pursuant to a request for confidential treatment.
(b) Financial Statement Schedules
Schedule II--Valuation and qualifying accounts
ITEM 17--UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of
this registration statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial BONA FIDE offering thereof.
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement on Form S-1 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Dallas, State of Texas, on February 16, 2001.
ALLIANCE DATA SYSTEMS CORPORATION
By: /s/ J. MICHAEL PARKS
--------------------------------------------
J. Michael Parks
CHIEF EXECUTIVE OFFICER AND PRESIDENT
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed by the following persons in the
capacities and on February 16, 2001:
NAME TITLE
---- -----
/s/ J. MICHAEL PARKS Chairman of the Board, Chief Executive Officer
------------------------------------------- and President
J. Michael Parks (principal executive officer)
/s/ EDWARD J. HEFFERNAN Executive Vice President and Chief Financial
------------------------------------------- Officer
Edward J. Heffernan (principal financial officer)
* Vice President, Corporate Controller and
------------------------------------------- Chief Accounting Officer
Michael D. Kubic (principal accounting officer)
*
------------------------------------------- Director
Bruce K. Anderson
*
------------------------------------------- Director
Anthony J. deNicola
*
------------------------------------------- Director
Daniel P. Finkelman
*
------------------------------------------- Director
Kenneth R. Jensen
*
------------------------------------------- Director
Robert A. Minicucci
*
------------------------------------------- Director
Bruce A. Soll
*By: /s/ J. MICHAEL PARKS
--------------------------------------
J. Michael Parks
ATTORNEY-IN-FACT
II-8
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- ------- -----------
*1 Form of Underwriting Agreement.
*2.1 Agreement and Plan of Merger, dated as of August 30, 1996,
by and between Business Services Holdings, Inc. and World
Financial Network Holding Corporation.
*2.2 Agreement and Plan of Merger, dated as of August 14, 1998,
by and among Alliance Data Systems Corporation, HSI
Acquisition Corp., and Harmonic Systems Incorporated.
*2.3 Stock Purchase Agreement, dated June 8, 1998, by and between
SPS Payment Systems, Inc., Alliance Data Systems
Corporation, SPS Commercial Services, Inc., and ADS
Network Services, Inc., amended July 12, 1999.
2.4 Agreement for the Purchase of all the Shares of Loyalty
Management Group Canada Inc., June 26, 1998, by and
between Air Miles International Group B.V., certain other
shareholders and option holders and Alliance Data Systems
Corporation as amended July 14, 1998.
*3.1 Second Amended and Restated Certificate of Incorporation of
the Registrant.
*3.2 Second Amended and Restated Bylaws of the Registrant.
*4 Specimen Certificate for shares of Common Stock of the
Registrant.
*5 Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
10.1 Credit Card Processing Agreement between World Financial
Network National Bank, Bath and Body Works, Inc. and
Tri-State Factoring, Inc., dated January 31, 1996.
10.2 Credit Card Processing Agreement between World Financial
Network National Bank, Victoria's Secret Catalogue, Inc.,
and Far West Factoring Inc., dated January 31, 1996
(assigned by Victoria's Secret Catalogue, Inc. to
Victoria's Secret Catalogue, LLC, May 2, 1998).
10.3 Credit Card Processing Agreement between World Financial
Network National Bank, Victoria's Secret Stores, Inc., and
Lone Mountain Factoring, Inc., dated January 31, 1996.
10.4 Credit Card Processing Agreement between World Financial
Network National Bank, Lerner New York, Inc., and Nevada
Receivable Factoring, Inc., dated January 31, 1996.
10.5 Credit Card Processing Agreement between World Financial
Network National Bank, Express, Inc., and Retail
Factoring, Inc., dated January 31, 1996.
10.6 Credit Card Processing Agreement between World Financial
Network National Bank, The Limited Stores, Inc., and
American Receivable Factoring, Inc., dated January 31,
1996.
10.7 Credit Card Processing Agreement between World Financial
Network National Bank, Structure, Inc., and Mountain
Factoring, Inc., dated January 31, 1996.
10.8 Credit Card Processing Agreement between World Financial
Network National Bank, Lane Bryant, Inc., and Sierra
Nevada Factoring, dated January 31, 1996, and amended
August 4, 1998 and September 12, 1999.
10.9 Credit Card Processing Agreement between World Financial
Network National Bank, Henri Bendel, Inc., and Western
Factoring, Inc., dated January 31, 1996 and amended
May 13, 1998.
*10.10 Alliance Data Systems Corporation and its Subsidiaries
Employee Stock Purchase Plan.
EXHIBIT
NO. DESCRIPTION
- ------- -----------
*10.11 Lease between Deerfield and Weiland Office Building, L.L.C.
and ADS Alliance Data Systems, Inc., dated July 30, 1999.
*10.12 Indenture of Sublease between J.C. Penney Company, Inc. and
BSI Business Services, Inc., dated January 11, 1996.
*10.13 Build-to-Suit Net Lease between Opus South Corporation and
ADS Alliance Data Systems, Inc., dated January 29, 1998,
as amended.
*10.14 Industrial Lease Agreement between CIBC Development
Corporation and Loyalty Management Group Canada Inc.,
dated October 19, 1998, amended January 26, 1999.
*10.15 Lease between YCC Limited and London Life Insurance Company
and Loyalty Management Group Canada Inc. dated May 28,
1997 and amended June 19, 1997 and January 15, 1998.
*10.16 Deed of Lease between Boswell International Marine (PTE)
Limited and Financial Automation Limited, dated August 3,
1999.
*10.17 Office Lease between Office City, Inc. and World Financial
Network National Bank, dated December 24, 1986, and
amended January 19, 1987, May 11, 1988, August 4, 1989 and
August 18, 1999.
*10.18 Lease Agreement by and between Continental Acquisitions,
Inc. and World Financial Network National Bank, dated July
2, 1990, and amended September 11, 1990, November 16, 1990
and February 18, 1991.
*10.19 Lease Agreement by and between Americana Parkway Warehouse
Limited and World Financial Network National Bank, dated
June 28, 1994.
*10.20 Lease Agreement by and between Morrison Taylor II, Ltd. and
ADS Alliance Data Systems, Inc., dated June 18, 1998, and
amended June 18, 1998.
*10.21 Lease Agreement between Morrison Taylor, Ltd. and ADS
Alliance Data Systems, Inc. dated July 1, 1997, and
amended June 18, 1998.
*10.22 Commercial Lease Agreement between Waterview Parkway, L.P.
and ADS Alliance Data Systems, Inc., dated July 16, 1997.
*10.23 Preferred Stock Purchase Agreement by and between Alliance
Data Systems Corporation and several persons named in
Schedule I thereto, dated July 12, 1999.
*10.24 Amended and Restated Stockholder Agreement, by and between
World Financial Network Holding Corporation, Limited
Commerce Corp., Welsh, Carson, Anderson, and Stowe VII,
L.P., and the several other investors named in Annex 1
thereto dated August 30, 1996, and amended July 24, 1998,
August 31, 1998 and July 12, 1999.
*10.25 Securities Purchase Agreement, by and between Business
Services Holdings, Inc., and the several purchasers named
in Schedule 1 and Schedule II thereto, dated January 24,
1996, and amended August 31, 1998.
*10.26 Common Stock Purchase Agreement between Alliance Data
Systems Corporation and Welsh, Carson, Anderson, and Stowe
VII, L.P., Welsh, Carson, Anderson, and Stowe VIII, L.P.,
and the persons named in Schedule I thereto, dated July
24, 1998.
*10.27 Securities Purchase Agreement between Alliance Data Systems
Corporation and WCAS Capital Partners III, L.P., dated
September 15, 1998.
*10.28 10% Subordinated Note due September 15, 2008 issued by
Alliance Data Systems Corporation to WCAS Capital Partners
III, L.P. dated September 15, 1998.
EXHIBIT
NO. DESCRIPTION
- ------- -----------
*10.29 10% Subordinated Note due October 25, 2005 issued by
Alliance Data Systems Corporation to the Limited Commerce
Corp., dated January 24, 1996.
*10.30 10% Subordinated Note due October 25, 2005 issued by
Alliance Data Systems Corporation to WCAS Capital Partners
II, L.P. dated January 24, 1996.
*10.31 Amended and Restated Credit Agreement between Alliance Data
Systems Corporation, and Loyalty Management Group Canada
Inc., the Guarantors party thereto, the Banks party
thereto, and Morgan Guaranty Trust Company of New York,
dated July 24, 1998.
*10.32 Pooling and Servicing Agreement, dated as of January 30,
1998, by and between World Financial Network National
Bank, as Transferor and as Servicer, and The Bank of New
York, as Trustee.
*10.33 ADS Alliance Data Systems, Inc. Supplemental Executive
Retirement Plan, effective May 1, 1999.
*10.34 Amended and Restated Alliance Data Systems Corporation and
its Subsidiaries Stock Option and Restricted Stock Plan.
*10.35 Form of Alliance Data Systems Corporation Incentive Stock
Option Agreement.
*10.36 Form of Alliance Data Systems Corporation Non-Qualified
Stock Option Agreement.
*10.37 Form of Alliance Data Systems Corporation Confidentiality
and Non-Solicitation Agreement.
*10.38 Alliance Data Systems Corporation 1999 Incentive
Compensation Plan.
*10.39 Letter employment agreement with J. Michael Parks, dated
February 19, 1997.
*10.40 Letter employment agreement with Ivan Szeftel, dated May 4,
1998.
*10.41 Registration Rights Agreement dated as of January 24, 1996
between Business Services Holdings, Inc. and Welsh Carson,
Andersen, and Stowe VII, L.P., WCAS Information Partners,
L.P., WCA Management Corporation, Patrick J. Welsh,
Russell L. Carson, Bruce K. Anderson, Richard H. Stowe,
Andrew M. Paul, Thomas E. McInerney, Laura VanBuren, James
B. Hoover, Robert A. Minicucci, Anthony J. deNicola, and
David Bellet.
*10.42 Securities Purchase Agreement, dated as of August 30, 1996,
by and among World Financial Network Holding Corporation,
Limited Commerce Corp., and several persons named in
Schedules I and II thereto, and WCAS Capital Partners II,
L.P., as amended August 31, 1998.
*10.43 Amended and Restated License to Use the Air Miles Trade
Marks in Canada, dated as of July 24, 1998, by and between
Air Miles International Holdings N.V. and Loyalty
Management Group Canada Inc.
*10.44 Amended and Restated License to Use and Exploit the Air
Miles Scheme in Canada, dated July 24, 1998, by and
between Air Miles International Trading B.V. and Loyalty
Management Group Canada Inc.
*10.45 License to Use the Air Miles Trademarks in the United
States, dated as of July 24, 1998, by and between Air
Miles International Holdings N.V. and Loyalty Management
Group Canada Inc.
*10.46 License to Use and Exploit the Air Miles Scheme in the
United States, dated as of July 1998, by and between Air
Miles International Trading B.V. and Alliance Data Systems
Corporation.
EXHIBIT
NO. DESCRIPTION
- ------- -----------
*10.47 Form of Retainer Agreement entered into between ADS Alliance
Data Systems, Inc. and certain affiliates of The Limited,
Inc.
*10.48 Form of Business Solutions Master Agreement between ADS
Alliance Data Systems, Inc. and certain affiliates of The
Limited, Inc.
*10.49 Second Amendment to Amended and Restated Credit Agreement,
dated as of September 29, 2000, by and among Alliance Data
Systems Corporation, Loyalty Management Group Canada Inc.,
Morgan Guaranty Trust Company of New York and Harris Trust
and Savings Bank.
*10.50 Commercial Real Estate Lease, between Route 7 Realty, LLC
and ADS Alliance Data Systems, Inc., dated October 24,
2000.
*10.51 Third Amendment to Amended and Restated Credit Agreement,
dated as of January 10, 2001 between Alliance Data Systems
Corporation, Loyalty Management Group Canada Inc. and
Harris Trust and Savings Bank.
*10.52 General Release and Severance Agreement by and between
Edward K. Mims, ADS Alliance Data Systems, Inc. and
Alliance Data Systems Corporation.
*10.53 General Release and Severance Agreement by and between James
Anderson, ADS Alliance Data Sytems, Inc., and Alliance
Data Systems Corporation.
10.54 Consumer Marketing Database Services Agreement among ADS
Alliance Data Systems, Inc., Intimate Brands, Inc. and The
Limited, Inc., dated as of September 1, 2000.
*10.55 Fourth Amendment to Lease, made effective as of June 1,
2000, by and between Partners at Brooksedge and ADS
Alliance Data Systems, Inc.
**10.56 Supplier Agreement between Loyalty Management Group Canada
and Air Canada dated as of April 24, 2000.
*21 Subsidiaries of the Registrant.
*23.1 Consent of Deloitte & Touche LLP with regard to Alliance
Data Systems Corporation and SPS Network Services.
*23.2 Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
(included in its opinion filed as Exhibit 5 hereto).
*24 Power of Attorney (included on the signature page hereto)
- ------------------------
* Previously filed.
** Portions of Exhibit have been omitted and filed separately with the
commission pursuant to a request for confidential treatment.
EXHIBIT 2.4
AIR MILES INTERNATIONAL GROUP B.V.
- AND -
EACH OF THE OTHER SHAREHOLDERS AND OPTIONHOLDERS
LISTED ON EXHIBIT A-1
- AND -
ALLIANCE DATA SYSTEMS CORPORATION
AGREEMENT FOR THE PURCHASE OF ALL THE SHARES
OF
LOYALTY MANAGEMENT GROUP CANADA INC.
JUNE 26, 1998
EX2_5LOYALTY.DOC
iv
TABLE OF CONTENTS
ARTICLE 1INTERPRETATION
1.1 Definitions.......................................................2
1.2 Headings and Table of Contents....................................8
1.3 Number and Gender.................................................9
1.4 Business Days.....................................................9
1.5 Currency and Payment Obligations..................................9
1.6 Knowledge of the Vendors..........................................9
1.7 Statute References................................................9
1.8 Section and Schedule References...................................9
ARTICLE 2PURCHASE OF SHARES
2.1 Agreement to Purchase and Sell...................................10
2.2 Purchase Price...................................................10
2.3 Sale and Transfer of Shares......................................10
2.4 Payment of Purchase Price........................................10
2.5 Section 116 of the Tax Act.......................................11
2.6 Escrow...........................................................12
ARTICLE 3REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties Relating to the Vendors...........12
(1) Incorporation and Power........................12
(2) Ownership of Loyalty Shares....................12
(3) Enforceability of Obligations..................13
(4) Other Agreements...............................13
(5) Regulatory Approvals...........................13
(6) Residency......................................14
(7) Independent Legal Advice.......................14
(8) No Claims Against Company......................14
3.2 Representations and Warranties Relating to the Company...........14
(1) Status of the Company and LMGTS................14
(2) Qualification..................................14
(3) Authorized and Issued Capital..................15
(4) Ownership of LMGTS.............................15
(5) No Other Subsidiaries..........................15
(6) No Agreement to Sell Shares and No Options.....15
(7) Constating Documents and By-Laws...............16
(8) Bankruptcy.....................................16
(9) No Breach of Instruments or Laws...............16
(10) General Compliance with Laws...................16
(11) Financial Statements...........................16
(12) No Guarantee, Etc..............................19
(13) Title to Assets................................19
(14) Sufficiency of Assets..........................19
(15) Leases.........................................20
(16) Environmental Compliance.......................20
(17) Material Contracts.............................20
(18) Intellectual Property..........................21
(19) Litigation.....................................23
(20) Insurance......................................23
(21) Employees and Employment Contracts.............23
(22) Employee Plans.................................24
(23) Sponsors.......................................26
(24) Taxes Paid.....................................26
(25) Tax Filings....................................26
(26) Withholdings and Remittances...................28
(27) Regulatory Approvals...........................28
(28) Licences and Permits...........................28
(29) Safety Deposit Box/Powers of Attorney..........28
(30) Consents and Approvals.........................28
(31) Non-Arm's Length Contracts.....................29
(32) Minute Books and Stock Record Books............29
(33) Broker's or Finders' Fees......................29
3.3 Representations and Warranties of the Purchaser..................29
(1) Incorporation and Power........................29
(2) Due Authorization..............................29
(3) No Breach of Instruments or Laws...............30
(4) Regulatory Approvals...........................30
(5) Financing......................................30
(6) Enforceability of Obligations..................30
(7) Litigation.....................................30
3.4 Survival of Representations and Warranties.......................31
(1) Vendors' Representations and Warranties........31
(2) Purchaser's Representations and Warranties.....31
(3) Interpretation.................................31
ARTICLE 4INDEMNIFICATION
4.1 Indemnification by the Vendors...................................32
4.2 Limitations on Indemnification by Vendors........................33
4.3 Indemnification by the Purchaser.................................34
4.4 Limitations on Indemnification by the Purchaser..................35
4.5 Exclusive Remedy.................................................35
4.6 Adjustment for Tax Effect........................................35
4.7 Indemnification Procedure........................................35
(1) Third Party Claims.............................35
(2) Control of Claim...............................36
(3) Negotiations...................................36
(4) Consent........................................36
(5) Procedure......................................37
4.8 Adjustment.......................................................37
ARTICLE 5COVENANTS
5.1 Investigation....................................................37
5.2 Authorizations...................................................38
5.3 Confidentiality..................................................38
5.4 Risk of Loss.....................................................38
5.5 Action During Interim Period.....................................38
5.6 Investment Canada Notifications..................................39
5.7 Consents to Assignment of Contracts and Permits..................39
5.8 Cooperation......................................................39
5.9 Actions to Satisfy Closing Conditions............................40
5.10 Vendor's Several Liability.......................................40
5.11 ECB and VCB Arrangements.........................................40
5.12 Drag Along.......................................................40
5.13 Tax Returns......................................................40
ARTICLE 6CONDITIONS OF CLOSING
6.1 Purchaser's Conditions...........................................41
(1) Representations and Warranties.................41
(2) Vendors'Compliance.............................41
(3) No Litigation..................................41
(4) Consents and Authorizations....................41
(5) Approvals of the Vendors and the Company.......41
(6) Resignations...................................42
(7) Discharge of Lien..............................42
(8) License Agreements.............................42
(9) Non-Competition Agreement......................43
(10) Optionholders Share Sale Agreement.............43
(11) Termination of Shareholders Agreement..........43
(12) Legal Opinions.................................43
6.2 Condition Not Fulfilled..........................................43
6.3 Vendors'Conditions...............................................43
(1) Representations and Warranties.................44
(2) Purchaser's Compliance.........................44
(3) Consents and Authorizations....................44
(4) Approvals of the Purchaser.....................44
(5) License Agreements.............................44
6.4 Condition Not Fulfilled..........................................44
ARTICLE 7CLOSING ARRANGEMENTS
7.1 Closing..........................................................45
7.2 Vendor's Closing Deliveries......................................45
7.3 Purchaser's Closing Deliveries...................................45
ARTICLE 8GENERAL
8.1 Expenses.........................................................46
8.2 Payment of Taxes.................................................46
8.3 Public Announcements.............................................47
8.4 Notices..........................................................47
8.5 Time of Essence..................................................48
8.6 Entire Agreement.................................................49
8.7 Waiver...........................................................49
8.8 Severability.....................................................49
8.9 Further Assurances...............................................49
8.10 Attornment.......................................................49
8.11 Governing Law....................................................49
8.12 Successors and Assigns...........................................50
8.13 Counterparts.....................................................50
EXHIBITS
A-1 Vendors
A-2 Current Shareholder Structure of the Company
A-3 Expected Shareholder Structure at Closing
A-4 Optionholders
B Non-Competition Agreement
C Optionholder Share Sale Agreement
D Opinion of Company's Counsel
E Opinion of Purchaser's Counsel
F Escrow Agreement
G Amended and Restated License Agreements
SCHEDULES
3.1(4) Options to Purchase Shares from Vendors
3.1(6) Residency of Vendors and Optionholders
3.2(5) Equity or Participating Interests
3.2(6) Options from the Company
3.2(11) Financial Statements
3.2(13) Liens on Assets
3.2(15)(a) Real Property Leases
3.2(15)(b) Personal Property Leases
3.2(17) Material Contracts
3.2(18) Intellectual Property
3.2(19) Litigation
3.2(20) Insurance
3.2(21) Employees and Employment Contracts
3.2(22) Employee Plans
3.2(23) Major Sponsors
3.2(28) Licences and Permits
3.2(29) Bank Accounts, Etc.
3.2(30) Change of Control Provisions
3.2(31) Intercompany Agreements
3.3(4) Governmental Authorizations - Purchaser
SHARE PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 26th day of June, 1998,
among AIR MILES INTERNATIONAL GROUP B.V., a company incorporated under the
laws of The Netherlands ("AMIG"), each of the other shareholders and
optionholders listed on Exhibit A-1 (collectively with AMIG, the "VENDORS")
and ALLIANCE DATA SYSTEMS CORPORATION, a corporation organized and existing
under the laws of the State of Delaware (the "PURCHASER").
RECITALS
1. Loyalty Management Group Canada Inc., a corporation organized under the
laws of Ontario (the "COMPANY"), has authorized capital consisting of
1,434,464 common shares, of which 1,189,542 common shares are currently
issued and outstanding as fully paid and non-assessable shares of the Company.
2. As of the date hereof the issued and outstanding Loyalty Shares are owned as
described on Exhibit A-2 hereto.
3. The Optionholders and certain of the Vendors have options to acquire Loyalty
Shares, and accordingly, as of Closing the ownership of the Loyalty Shares is
expected to be as described in Exhibit A-3 hereto.
4. As of the Closing, the Vendors and the Optionholders (collectively, the
"Selling Shareholders") will own 100% of the issued and outstanding capital
stock of the Company.
5. Each of the Selling Shareholders is willing or required to sell to the
Purchaser the Loyalty Shares owned by such Selling Shareholder as of the Closing
Date, which Loyalty Shares in the aggregate will constitute 100% of the issued
and outstanding capital stock of the Company, and the Purchaser is willing to
purchase from the Selling Shareholders all of the Loyalty Shares, upon and
subject to the terms and conditions contained in this Agreement.
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Parties agree as
follows:
- 2 -
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS. In this Agreement, the following terms shall have the meanings
set out below unless the context requires otherwise:
"AFFILIATE" means, with respect to any Person, any other Person who
directly or indirectly controls, is controlled by, or is under direct
or indirect common control with, such Person, and includes any Person
in like relation to an Affiliate. A Person shall be deemed to "control"
another person if such Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies
of such Person, whether through the ownership of voting securities, by
contract or otherwise; and the term "CONTROLLED" shall have a similar
meaning.
"AGREEMENT" means this Agreement, including the Exhibits and the
Schedules to this Agreement, as it or they may be amended or
supplemented from time to time, and the expressions "HEREOF", "HEREIN",
"HERETO", "HEREUNDER", "HEREBY" and similar expressions refer to this
Agreement and not to any particular Section or other portion of this
Agreement.
"AMTM" means AIR MILES(R) travel miles.
"AIR MILES(R) PROGRAm" means the AIR MILES(R) Reward Program, a rewards
program managed and operated by the Company within Canada under which
Persons enrolled therein are eligible to earn AMTM which may be
redeemed for airline tickets and other goods and services.
"APPLICABLE LAW" means, with respect to any Person, property,
transaction, event or other matter, any law, rule, statute, regulation,
order, judgment, decree, treaty or other requirement having the force
of law relating or applicable to such Person, property, transaction,
event or other matter.
"ASSETS" means all the properties, assets, interests and rights of the
Company or LMGTS Relating to the Business, including the following:
(a) all rights and interests of the Company to and in the Leased
Premises and under the Real Property Leases, including prepaid
rents, security deposits and options to renew or purchase,
rights of first refusal under the Real Property Leases and all
leasehold improvements owned by the Company and forming part
of the Leased Premises;
(b) all receivables;
(c) all rights and interests under or pursuant to all warranties,
representations and guarantees, express, implied or otherwise,
of or made by suppliers or others in connection with the
Assets;
(d) the Intellectual Property;
(e) the Contracts;
(f) the Licences and Permits;
(g) the Books and Records;
(h) all prepaid charges, deposits, sums and fees paid by the
Company or LMGTS before the Closing Time; and
(i) all goodwill of the Company and LMGTS including the present
telephone numbers, internet domain addresses and other
communications numbers and addresses of the Company and LMGTS.
"BMO" means Bank of Montreal.
"BOOKS AND RECORDS" means all books, records, files and papers of the
Company including computer programs (including source code), software
programs, manuals and data, sales and advertising materials, sales and
purchases correspondence, research and development records, lists of
present and former Sponsors, Collectors and Suppliers, personnel,
employment and other records, and the minute and share certificate
books of the Company and LMGTS, and all copies and recordings of the
foregoing in the possession or under the control of the Company.
"BUSINESS" means the business carried on by the Company, which
primarily involves the operation of the AIR MILES-Registered Trademark-
Program and the business carried on by LMGTS.
"BUSINESS DAY" means any day except Saturday, Sunday or any day on
which banks are generally not open for business in the City of Toronto.
"CANADIAN DOLLARS" means the lawful currency of Canada.
"CLAIMS" has the meaning given in Section 4.1.
"CLOSING" means the completion of the purchase and sale of the Loyalty
Shares in accordance with the provisions of this Agreement.
"CLOSING DATE" means July 17, 1998 or such earlier or later date as may
be agreed upon in writing by the Parties provided however that any one
of AMIG, BMO, EUK Limited and the Purchaser shall have the right to
extend the Closing to July 24, 1998 upon notice to the other Parties
given on or prior to July 15, 1998, whereupon the "CLOSING DATE" shall
be July 24, 1998.
"CLOSING TIME" means the time of Closing on the Closing Date provided
for in Section 7.1.
"COLLECTOR" means a Person registered with the Company as a collector
of AMTM.
"COMPANY" means Loyalty Management Group Canada Inc., a corporation
organized under the laws of Ontario, doing business as "The Loyalty
Group".
"COMPANY'S COUNSEL" means the firm of Blake, Cassels & Graydon.
"CONTRACTS" means all pending and/or executory contracts, agreements,
leases and arrangements to which the Company or LMGTS is a party or by
which the Company or LMGTS or any of the Assets or the Business is
bound, including the Material Contracts, the Real Property Leases and
the Personal Property Leases.
"DIRECTOR" means a director of the Company.
"ECB" means the Company's Executive Committee Bonus Plan.
"ELECTRA" means Electra Investment Trust plc or an affiliate thereof.
"ELECTRA PLEDGE" means the pledge by AMIG of its Loyalty Shares to
Electra Fleming plc.
"EMPLOYEE" means an individual who is employed by the Company or LMGTS.
"EMPLOYEE PLANS" has the meaning given in Section 3.2(22).
"FINANCIAL STATEMENTS" means the audited comparative consolidated
financial statements of the Company for the fiscal years ended April
30, 1998 and April 30, 1997.
"GAAP" means those accounting principles that are recognized as being
generally accepted in Canada from time to time including those set out
in the handbook published by the Canadian Institute of Chartered
Accountants, consistently applied and without material revision from
prior periods in management estimates and assumptions affecting the
Financial Statements.
"GOVERNMENTAL AUTHORIZATION" means any approval, authorization,
certificate, consent, grant, licence, permit, quota or registration
which may be issued or granted by any Governmental Body.
"GOVERNMENTAL BODY" means any government, parliament, legislature,
regulatory authority, governmental department, agency, commission,
board, tribunal, or court or other law, rule or regulation-making
entity of any nation, state or province or other subdivision thereof or
any municipality, district or other subdivision thereof.
"INCLUDING" means "including without limitation", and "INCLUDES" means
"includes without limitation."
"INTELLECTUAL PROPERTY" means all of the rights and interests of the
Company and LMGTS in and to:
(a) all Trade-Marks;
(b) all inventions, patents, patent rights, patent applications
(including all reissues, divisions, continuations,
continuations-in-part and extensions of any patent or patent
application), industrial designs and applications for
registration of industrial designs Related to the Business;
(c) all copyrights, registrations and applications for
registration of copyrights Related to the Business;
(d) processes, data, data bases, trade secrets, designs, know-how,
product information, manuals, technology, research and
development reports, technical information, technical
assistance, design specifications, and similar materials
recording or evidencing expertise or information Related to
the Business;
(e) all computer software programs and applications (in both
source code and object code form as the Company may possess)
used in connection with the Business, whether owned by the
Company or LMGTS (the "Owned Software") or licensed by the
Company or LMGTS from third parties (the "Licensed Software");
(f) all other intellectual and industrial property rights of the
Company, whether in Canada or elsewhere, Related to the
Business; and
(g) all licences from third parties of intellectual property
listed in items (a) to (f) above.
"INTERIM PERIOD" means the period from the date of this Agreement to
the Closing.
"LMGTS" means LMG Travel Services Limited, a corporation organized
under the laws of Ontario.
"LEASED PREMISES" means all real property that is leased or occupied by
the Company or LMGTS under the Real Property Leases.
"LICENCES AND PERMITS" means all licences, permits, filings,
authorizations or approvals issued to the Company or LMGTS by any
Governmental Body.
"LICENSE AGREEMENTS" means the License to Use and Exploit the Air Miles
Scheme in Canada dated December 17, 1992 between Air Miles
International Trading B.V. and the Company, as amended, (the "Scheme
License") and the License to Use the Air Miles Trade-Marks in Canada
dated December 17, 1992 between Air Miles International Holdings N.V.
and the Company, as amended (the "Trade-Mark License").
"LIEN" means any lien, mortgage, charge, hypothec, pledge, security
interest, option, warrant, lease, sublease or other encumbrance of any
nature whatsoever.
"LOYALTY SHARES" means shares in the capital of the Company, including
shares received upon exercise of outstanding options.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
business or financial position of the Company and LMGTS taken as a
whole.
"MATERIAL CONTRACT" means any of the agreements listed on Schedule
3.2(17).
"NON-RESIDENT VENDORS" means those Selling Shareholders listed on
Schedule 3.1(6) as being non-residents of Canada for the purposes of
the Tax Act.
"OFFICER" means an officer of the Company.
"OPTIONHOLDERS" means the Persons listed on Exhibit A-4.
"PARTY" means a Party to this Agreement and any reference to a Party
includes its successors and permitted assigns.
"PERSON" is to be broadly interpreted and includes an individual, a
corporation, a partnership, a trust, an unincorporated organization,
the government of a country or any political subdivision thereof or any
agency or department of any such government, and the executors,
administrators or other legal representatives of an individual in such
capacity.
"PERSONAL PROPERTY LEASES" means all chattel leases, equipment leases,
rental agreements, conditional sales contracts and other similar
agreements to which the Company or LMGTS is a party or by which it is
bound.
"PURCHASE PRICE" has the meaning given in Section 2.2.
"PURCHASER'S COUNSEL" means Reboul, MacMurray, Hewitt, Maynard &
Kristol as to United States law and Fasken Campbell Godfrey as to
Canadian law.
"REAL PROPERTY LEASES" means all the leases, agreements to lease,
subleases, licences, concessions or occupancy agreements and use or
occupancy rights with respect to real property to which the Company or
LMGTS is a party or by which it is bound.
"RELATED TO THE BUSINESS" means used in or reasonably necessary to the
conduct of the Business prior to the Closing Time and the phrases
"RELATING TO THE BUSINESS" or "RELATE TO THE BUSINESS" shall be
similarly interpreted.
"RESERVE AGREEMENT" means the agreement dated as of December 1, 1992,
between the Company and Sun Life Trust Company, as amended.
"RESERVE FUND" has the meaning set out in the Reserve Agreement.
"SECTION 116 CERTIFICATE" has the meaning attributed thereto in
Section 2.5.
"SELLING SHAREHOLDERS" has the meaning set out in the Recitals hereto
provided that in the event an Optionholder does not exercise any of its
options to acquire Loyalty Shares, that Optionholder shall be deemed
not to be a Selling Shareholder.
"SHAREHOLDERS AGREEMENT" means the Shareholders Agreement dated
December 16, 1996 between the Company, BMO, Electra, AMIG and EUK
Limited.
"SPONSOR" means a Person granted a license or otherwise permitted by
the Company to issue AMTM.
"SUPPLIER" means a Person who provides goods or services to the Company
which are available to Collectors on redemption of their AMTM.
"TAX ACT" means the INCOME TAX ACT (Canada), as amended.
"TAXES" means all taxes, duties, excise, fees, imposts, assessments,
deductions, charges or withholding taxes including federal and
provincial sales, use, ad valorem and franchise taxes, payroll,
employment, goods and services taxes, harmonized sales taxes, transfer
taxes, property purchase taxes, income taxes, business taxes, capital
taxes, and other provincial and federal taxes, municipal taxes, local
taxes, environmental or windfall profits taxes, custom duties and
Canada Pension Plan contributions and employment insurance premiums or
other like assessments or charges and all liabilities with respect
thereto, including any penalty and interest payable with respect
thereto and the term "Tax Returns" means all reports, returns and other
documents filed or required to be filed by the Company and/or LMGTS in
respect of Taxes.
"TRADE-MARKS" means all registered or unregistered trade-marks, trade
names, business names, brand names, brands, designs, logos, identifying
indicia and service marks of the Company Relating to the Business
including any goodwill attaching to any such trade-marks and all
registrations and applications relating thereto.
"VCB" means the Company's Value Creation Bonus Plan.
"VENDOR'S LOYALTY SHARES" means, as to each Vendor at any time, the
Loyalty Shares owned by the Vendor at such time.
"VENDOR'S PROPORTIONATE SHARE" means, as to each Vendor, the percentage
obtained by dividing the number of Loyalty Shares sold by such Vendor
to the Purchaser by the aggregate number of Loyalty Shares sold by all
the Vendors to the Purchaser.
1.2 HEADINGS AND TABLE OF CONTENTS. The division of this Agreement into Articles
and Sections, the insertion of headings and the provision of any table of
contents are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement.
1.3 NUMBER AND GENDER. Unless the context requires otherwise, words importing
the singular include the plural and vice versa and words importing gender
include all genders.
1.4 BUSINESS DAYS. If any payment or other action is required to be made or
taken pursuant to this Agreement on a day which is not a Business Day, then such
payment shall be made or such other action shall be taken on the next Business
Day.
1.5 CURRENCY AND PAYMENT OBLIGATIONS. Except as otherwise expressly provided in
this Agreement:
(1) all dollar amounts referred to in this Agreement are stated in
Canadian Dollars;
(2) any payment contemplated by this Agreement shall be made by
cash, certified cheque or any other method that provides
immediately available funds; and
(3) except in the case of any payment due on the Closing Date, any
payment due on a particular day must be received and available
not later than 2:00 p.m. (Eastern Standard Time) on the due
date and any payment made after that time shall be deemed to
have been made and received on the next Business Day.
1.6 KNOWLEDGE OF THE VENDORS. Reference herein to "KNOWLEDGE OF THE VENDORS"
shall mean the actual knowledge of any of the Vendors after consultation with
the current Officers.
1.7 STATUTE REFERENCES. Any reference in this Agreement to any statute or any
section thereof shall, unless otherwise expressly stated, be deemed to be a
reference to such statute or section as amended, restated or re-enacted from
time to time.
1.8 SECTION AND SCHEDULE REFERENCES. Unless the context requires otherwise,
references in this Agreement to Sections, Exhibits or Schedules are to Sections,
Exhibits or Schedules of this Agreement.
ARTICLE 2
PURCHASE OF SHARES
2.1 AGREEMENT TO PURCHASE AND SELL. At the Closing Time, subject to the terms
and conditions of this Agreement (1) the Purchaser shall purchase from each
Vendor and each Vendor shall sell, transfer and assign to the Purchaser the
Loyalty Shares owned by such Vendor as of Closing; and (2) the Purchaser agrees
to purchase from each Optionholder the Loyalty Shares owned by such Optionholder
as of Closing.
2.2 PURCHASE PRICE. The purchase price payable by the Purchaser for all Loyalty
Shares (the "PURCHASE Price") shall be Two Hundred and Eighty Three Million
Canadian Dollars ($283,000,000).
2.3 SALE AND TRANSFER OF SHARES. At the Closing Time, each Vendor shall transfer
and deliver to the Purchaser certificates representing the Loyalty Shares being
sold by such Vendor under this Agreement, in each case duly endorsed for
transfer or accompanied by stock transfer powers duly endorsed in blank. Subject
to the fulfilment of the conditions set forth in Section 6.3, each Vendor who
holds options to acquire Loyalty Shares, shall exercise each of such options at
or prior to the Closing Time and shall sell the Loyalty Shares received upon
such exercise to the Purchaser as provided herein.
2.4 PAYMENT OF PURCHASE PRICE. As payment in full of the Purchase Price for the
Loyalty Shares, and against delivery of certificates for the Loyalty Shares as
aforesaid, at the Closing Time (a) the Purchaser shall pay to each Selling
Shareholder, by certified cheque or bankers draft payable to or at the direction
of such Selling Shareholder, an amount equal to the portion of Two Hundred and
Sixty Eight Million Canadian Dollars ($268,000,000) (the "Base Amount") payable
to such Selling Shareholder as described in Exhibit A-3, subject to the
provisions of Section 2.5, and (b) the Purchaser shall deposit in escrow an
amount equal to $15,000,000 (the "Escrow Amount") as contemplated by Section
2.6. For greater certainty but without limiting Section 2.3, (i) in the event
that a Vendor or an Optionholder does not exercise all of its options to acquire
Loyalty Shares, then the portion of the Base Amount and any Escrow Amount
payable to each Selling Shareholder as described in Exhibit A-3 shall be
adjusted accordingly, and (ii) the Purchaser shall have no obligation to
purchase any Loyalty Shares hereunder if, upon closing of such purchase and
sale, the Purchaser will not own 100% of the issued and outstanding capital
stock of the Company, or any Person will retain a right to acquire any capital
stock of the Company, in each case other than by reason of any action taken by
or on behalf of the Purchaser.
2.5 SECTION 116 OF THE TAX ACT.
(1) Each Non-Resident Vendor shall, on or before the Closing Time, make
best efforts to deliver to the Purchaser a certificate issued by the Minister of
National Revenue of Canada pursuant to subsection 116(2) of the Tax Act (a
"SECTION 116 CERTIFICATE") in respect of the proposed disposition by the
Non-Resident Vendor of the Vendor's Loyalty Shares. Each Section 116 Certificate
shall specify a "certificate limit" in an amount no less than the proportion of
the Purchase Price payable to such Vendor in accordance with Section 2.4.
(2) In the event that a Section 116 Certificate required under
subsection 2.5(1) has not been delivered by a Non-Resident Vendor to the
Purchaser on or before the Closing Time, or in the event that a Section 116
Certificate that is delivered by a Non-Resident Vendor to the Purchaser on or
before the Closing Time specifies a "certificate limit" that is less than the
proportion of the Purchase Price payable to such Vendor, the Purchaser shall be
entitled to withhold from such amount an amount equal to (i) 33 1/3% of such
amount if no Section 116 Certificate is delivered, or (ii) 33 1/3% of the
difference between such amount and the "certificate limit" if a Section 116
Certificate is delivered (in either case, the "WITHHELD AMOUNT"). Subject to
Section 2.5(5), the Withheld Amount shall be deposited by the Purchaser in an
interest bearing account at a bank located in Ontario and the Purchaser shall
provide notice to the Vendors of such account particulars. The Withheld Amount
shall be remitted to the Receiver General of Canada on the day that the Withheld
Amount is required to be so remitted pursuant to subsection 116(5) of the Tax
Act (the "REMITTANCE DATE"). All interest received by the Purchaser on the
Withheld Amount shall be for the account of the Non-Resident Vendor, and the
full amount of such interest less any taxes required to be deducted or withheld
from such interest shall be paid to the Non-Resident Vendor on the Remittance
Date.
(3) Notwithstanding the foregoing, if a Non-Resident Vendor delivers a
Section 116 Certificate or a replacement Section 116 Certificate to the
Purchaser at any time after the Closing Time and prior to the Remittance Date,
the Purchaser shall pay to the Non-Resident Vendor on account of the Withheld
Amount an amount equal to the Withheld Amount less 33 1/3% of the amount, if
any, by which the proportion of the Purchase Price payable to such Vendor
exceeds the "certificate limit" specified in such Section 116 Certificate. This
amount, together with all interest received by the Purchaser on this amount less
any taxes required to be deducted or withheld from such interest, shall be paid
by the Purchaser to the Non-Resident Vendor by the day after the day the Section
116 Certificate or replacement Section 116 Certificate is delivered to the
Purchaser.
(4) In any case where the Purchaser withholds and remits to the
appropriate taxing authority any amount pursuant to this section, the Purchaser
shall be deemed to have paid such amount to the Non-Resident Vendor on account
of the proportion of the Purchase Price payable to such Vendor.
(5) In any case where the Purchaser withholds any amount pursuant to
this section, such amount shall be invested by the Purchaser as directed by the
Non-Resident Vendor (for the account of and at the risk of such Non-Resident
Vendor) in respect of whom such amount is withheld.
2.6 ESCROW. At the Closing Time, (i) the Vendors and the Purchaser shall enter
into an escrow agreement substantially in the form of Exhibit F hereto (the
"Escrow Agreement", and (ii) the Purchaser shall deposit in escrow the Escrow
Amount (as defined in Section 2.4) pursuant to the Escrow Agreement. The Escrow
Amount shall be held in escrow and otherwise dealt with in accordance with the
Escrow Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES RELATING TO THE VENDORS. Each Vendor hereby
represents and warrants to the Purchaser as follows in respect of itself or
himself and acknowledges that the Purchaser is relying upon these
representations and warranties in connection with its execution and delivery of
this Agreement and the purchase of the Loyalty Shares:
(1) Incorporation and Power. In the event the Vendor is a corporation,
such Vendor is a corporation duly organized and validly subsisting under the
laws of its governing jurisdiction and has all requisite right, power and
authority to enter into, execute and deliver this Agreement and all other
agreements required to be delivered by it hereunder and to perform its
obligations hereunder and thereunder. The entering into, execution and delivery
of this Agreement and all other agreements to be delivered by it hereunder, and
the performance of its obligations hereunder and thereunder have been duly and
validly authorized and approved by all necessary corporate action on its part.
(2) Ownership of Loyalty Shares. Such Vendor is or will be at Closing
the sole and beneficial owner, and the holder of record, of the number of
Loyalty Shares shown opposite such Vendor's name in Exhibit A-3 hereto and has,
or will have at Closing, good and marketable title thereto, free and clear of
any and all Liens except for the Electra Pledge with respect to AMIG, and has or
will have at Closing the exclusive right to sell, transfer and assign such
shares. Such shares constitute all of the Loyalty Shares owned by such Vendor.
(3) Enforceability of Obligations. This Agreement has been validly
executed and delivered by such Vendor and is a valid and legally binding
obligation enforceable against such Vendor in accordance with its terms and all
other agreements required to be delivered under this Agreement when executed and
delivered will have been validly authorized, executed and delivered by such
Vendor and will thereupon be legal, valid and binding obligations enforceable
against such Vendor in accordance with their respective terms, subject however,
to the limitations with respect to enforcement imposed by law in connection with
bankruptcy, insolvency, re-organization or other laws affecting creditors'
rights generally, including the availability of equitable remedies such as
specific performance and injunction which are only available in the discretion
of the court from which they are sought and general equitable principles.
(4) Other Agreements. Except as set forth in Schedule 3.1(4), no
Person, other than the Purchaser pursuant to this Agreement has any contract, or
any right or privilege capable of becoming a contract, for the purchase,
transfer or sale of any of the shares in the capital of the Company owned by
such Vendor; at Closing, no Person, other than the Purchaser pursuant to this
Agreement, will have any contract, or any right or privilege capable of becoming
a contract, for the purchase, transfer or sale of any of the shares in the
capital of the Company owned by such Vendor. Except as set out in the
Shareholders Agreement and Schedule 3.1(4), such Vendor is not a party to or
bound by any contract, or any other obligation whatsoever which limits or
impairs such Vendor's ability to sell, transfer, assign or convey, or otherwise
similarly affects the shares in the capital of the Company owned by such Vendor;
at Closing, such Vendor will not be a party to or bound by any such contract or
obligation. The execution and delivery of this Agreement or such other documents
and agreements delivered or to be delivered by such Vendor under this Agreement
and the transactions contemplated hereby and thereby will not result in the
creation of any Liens on any Loyalty Shares owned by such Vendor, except as set
forth in the Shareholders Agreement and in Schedule 3.1(4). Except as set out in
the Shareholders Agreement and Schedule 3.1(4), none of such Vendor's Loyalty
Shares are or will be, as of the Closing Time, subject to, nor were any of such
Loyalty Shares issued (nor will any of such Loyalty Shares, as of the Closing
Time, be issued) in violation of, any preemptive rights of stockholders of the
Company or any right of first refusal or other similar right in favour of any
Person. The delivery by such Vendor of the certificates representing its Loyalty
Shares to the Purchaser at the Closing Time pursuant to Section 2.3 above,
against payment therefor at the Closing Time pursuant to Section 2.4 above, will
transfer valid title to such Loyalty Shares to the Purchaser, free and clear of
any and all Liens. At the Closing Time such Vendor shall not be a party to any
voting trust, voting agreement, proxy or similar agreement relating to any of
such Vendor's Loyalty Shares.
(5) Regulatory Approvals. No Governmental Authorization, approval,
order, consent or, except as contemplated by Section 2.5, filing is required on
the part of such Vendor in connection with the execution, delivery and
performance of this Agreement or such other documents and agreements to be
delivered hereunder or the performance of such Vendor's obligations hereunder or
thereunder.
(6) Residency. Such Vendor (other than any Non-Resident Vendor) is not
a non-resident of Canada for purposes of Section 116 of the TAX ACT.
(7) Independent Legal Advice. Such Vendor, if an individual, has (i)
been given the opportunity to conduct such investigation of the Company, its
Assets, Business and books and records, and to consult with senior management of
the Company, as such Vendor may have considered necessary in connection with the
transactions contemplated herein and such Vendor's obligations hereunder, (ii)
been given the opportunity to obtain independent legal advice with respect to
this Agreement, the transactions contemplated hereby and the implications
thereof, and (iii) has taken such action, if any, in this regard as such Vendor
has considered appropriate.
(8) No Claims Against Company. At the Closing Time, such Vendor shall
not, in its capacity as a shareholder of the Company, have any claims against
the Company.
3.2 REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY. Each of the Vendors
represents and warrants to the Purchaser as follows and acknowledges that the
Purchaser is relying upon these representations and warranties in connection
with the entering into of this Agreement and the purchase of the Loyalty Shares:
(1) Status of the Company and LMGTS. Each of the Company and LMGTS is a
corporation duly incorporated and validly existing under the laws of Ontario and
is a private company for the purposes of the SECURITIES ACT (Ontario).
(2) Qualification. Each of the Company and LMGTS is licensed or
qualified to do business in each jurisdiction in which the location of its
property and assets or the nature of the Business requires such licence or
qualification, except to the extent that a failure to do so would not have a
Material Adverse Effect, and no revocation of any such licence or qualification
has been undertaken or, to the knowledge of the Vendors, been threatened. LMGTS
is not as of the date of this Agreement registered under British Columbia travel
industry legislation but is in the process of applying to become registered
thereunder and such failure to be so registered will not result in a material
fine or penalty being imposed upon the Company or LMGTS or any material
limitation or disruption in the conduct of the Business. Each of the Company and
LMGTS has full corporate power to carry on the Business and to own and operate
its Assets as now carried on and owned and operated by it. The head office of
the Company is not in the Province of Quebec.
(3) Authorized and Issued Capital. The authorized capital of the
Company consists of 1,434,464 common shares, without nominal or par value of
which 1,189,542 common shares are currently issued and outstanding as validly
issued, fully paid and non-assessable common shares of the Company. At the
Closing Time, assuming that all options set forth or reflected on Exhibit A-3
are exercised, there will be 1,434,464 validly issued and outstanding fully paid
and non-assessable common shares of the Company.
(4) Ownership of LMGTS. The Company is, and at the Closing Time will
be, the sole registered and beneficial owner of all of the issued and
outstanding shares of LMGTS, with good and valid title thereto, free and clear
of all Liens. No subscription, warrant, option, convertible security or other
right (contingent or otherwise) to purchase or acquire any shares of any class
of capital stock of LMGTS (whether from the Company or LMGTS or otherwise) is
authorized or outstanding, there is not any commitment of LMGTS to issue any
shares, warrants, options or other such rights or to distribute to holders of
any class of its capital stock any evidences of indebtedness or assets and LMGTS
has no obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any shares of its capital stock or any interest therein or to pay any
dividend or to make any other distribution in respect thereof. Neither LMGTS nor
the Company is a party to any voting trust, voting agreement, proxy or similar
agreement relating to the shares of LMGTS except for the unanimous shareholder
agreement regarding LMGTS dated March 31, 1992.
(5) No Other Subsidiaries. Except as referred to in Schedule 3.2(5) and
except for portfolio investments of amounts in the Reserve Fund, neither the
Company nor LMGTS has (i) any interest in the shares, equity securities or other
securities convertible into equity securities of any Person or (ii) any
participating interest in any partnership, joint venture or other non-corporate
business enterprise.
(6) No Agreement to Sell Shares and No Options. Except as disclosed or
reflected in Schedule 3.2(6) and the Shareholders Agreement (i) no subscription,
warrant, option, convertible security or other right (contingent or otherwise)
to purchase or acquire from the Company any shares of any class of capital stock
of the Company is authorized or outstanding, (ii) there is not any commitment of
the Company to issue any shares, warrants, options or other such rights or to
distribute to holders of any class of its capital stock any evidences of
indebtedness or assets and (iii) the Company has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any shares of its capital
stock or any interest therein or to pay any dividend or to make any other
distribution in respect thereof. Except as set forth in the Shareholders
Agreement or as otherwise provided in this Agreement, the Company is not a party
to any voting trust, voting agreement, proxy or similar agreement relating to
any of the Loyalty Shares.
(7) Constating Documents and By-Laws. The Purchaser has been provided
with access to true and complete copies of all the constating documents and
by-laws and any and all amendments relating thereto of the Company and LMGTS,
and such constating documents and by-laws as so amended are in full force and
effect and no amendments are being made to same.
(8) Bankruptcy. Neither the Company nor LMGTS (i) is an insolvent
person within the meaning of the BANKRUPTCY AND INSOLVENCY ACT (Canada), (ii)
has made an assignment in favour of its creditors or a proposal in bankruptcy to
its creditors or any class thereof, (iii) had any petition for a receiving order
presented in respect of it, or (iv) has initiated proceedings with respect to a
compromise or arrangement with its creditors or for its winding up, liquidation
or dissolution. No receiver has been appointed in respect of the Company or
LMGTS or any of the Assets and no execution or distress has been levied upon any
of the Assets.
(9) No Breach of Instruments or Laws. Neither the entering into nor the
delivery of this Agreement nor the completion of the transactions contemplated
hereby by the Vendors will result in a violation of:
(a) any of the provisions of the constating documents or by-laws
of the Company or LMGTS;
(b) any contract or other agreement or instrument to which the
Company is a party or by which it is bound except to the
extent that any such contract or other agreement or instrument
requires consent or other action in connection with the change
of control of the Company as herein contemplated, and the only
such contracts or other agreements or instruments which
require such consent or other action are either (i) listed in
Schedule 3.2(30), or (ii) of a nature that the failure to
obtain any such consent will not result in a Material Adverse
Effect; or
(c) any Applicable Laws of any jurisdiction to which the Company
or LMGTS is subject.
(10) General Compliance with Laws. Each of the Company and LMGTS is
conducting the Business in compliance with all Applicable Laws, the breach of
which individually or in the aggregate would have a Material Adverse Effect.
(11) Financial Statements. The Financial Statements, true and complete
copies of which are annexed as Schedule 3.2(11), have been prepared in
accordance with GAAP, and fairly present the results of operations and financial
position of the Company as at the date thereof and for the fiscal year then
ended. Except as and to the extent (i) reflected on the audited consolidated
balance sheet of the Company and its consolidated subsidiaries as of April 30,
1998, (ii) incurred since April 30, 1998 in the ordinary course of business
consistent with past practice, (iii) set forth on Schedule 3.2(11) or (iv) that
any such liabilities or obligations are not material to the operations of the
Business, neither the Company nor LMGTS has any liabilities or obligations of
any kind or nature, whether known or unknown, secured or unsecured, absolute,
accrued, contingent or otherwise, and whether due or to become due, of a nature
customarily accrued, reserved against or disclosed (including in the notes
thereto) in a corporate balance sheet prepared in conformity with GAAP. Except
as set forth in Schedule 3.2(11) or as otherwise specifically contemplated by
this Agreement, since April 30, 1998, neither the Company nor LMGTS has:
(a) changed or amended its Articles of Incorporation or By-laws
(or similar governing documents);
(b) incurred any obligation or liability (fixed or contingent),
except normal trade or business obligations incurred in the
ordinary course of business and consistent with past practice,
none of which individually or in the aggregate is materially
adverse;
(c) discharged or satisfied any material Lien or paid any material
obligation or liability (fixed or contingent), other than in
the ordinary course of business and consistent with past
practice and other than the cancellation by the Company of its
loan facility with BMO and the resulting release by BMO of the
security it held for such loan facility;
(d) mortgaged, pledged or subjected to any Lien any of its assets
or properties (other than as referred to in Section 3.2(13)
below and other than in the ordinary course of business and
consistent with past practice);
(e) transferred, leased or otherwise disposed of any of its
material assets or properties except for a fair consideration
in the ordinary course of business and consistent with past
practice or, except in the ordinary course of business and
consistent with past practice, acquired any material assets or
properties;
(f) declared, set aside or paid any dividend or other
distribution (whether in cash, stock or property or any
combination thereof but not including any deemed dividend
arising by virtue of the Company paying expenses in
connection with the transactions contemplated hereby in an
aggregate amount not exceeding $160,000, which expenses
shall be reimbursed by the Selling Shareholders to the
Company at Closing) in respect of its capital stock or
redeemed or otherwise acquired any of its capital stock or
split, combined or otherwise similarly changed its capital
stock or, except as contemplated in Exhibit A-3, authorized
the creation or issuance of or issued or sold any shares of
its capital stock or any securities or obligations
convertible into or exchangeable for, or giving any Person
any right to acquire from the Company or LMGTS, any shares
of its capital stock, or agreed to take any such action;
(g) except for investments of the Reserve Fund in the ordinary
course of business, made any investment of a capital nature
either by purchase of stock or securities, contributions to
capital, property transfers or otherwise, or by the purchase
of any material property or assets of any other individual,
firm or corporation (except for purchases made in the ordinary
course of business);
(h) cancelled or compromised any debt or claim other than in the
ordinary course of business consistent with past practice;
(i) waived or released any rights of material value;
(j) other than under Sponsor agreements entered into in the
ordinary course of business and consistent with past practice,
transferred or granted any rights under or with respect to any
Intellectual Property or permitted any license, permit or
other form of authorization relating to any Intellectual
Property to lapse;
(k) other than in the ordinary course of business and consistent
with past practice, made or granted any wage or salary
increase applicable to any group or classification of
employees generally, entered into any employment contract
with, or made any loan to, or entered into any material
transaction of any other nature with, any officer or other
employee of the Company or LMGTS it being acknowledged that
the Company may during the Interim Period enter into any such
employment contract subject to and in accordance with the
provisions of Section 5.5 hereof;
(l) except for the execution of agreements with Sponsors in the
ordinary course of business and the execution of a Supplier
agreement with Northwest Airlines, entered into any
transaction, contract or commitment that, individually or in
the aggregate, are material, except (i) contracts listed, or
which pursuant to the terms hereof are not required to be
listed, on Schedule 3.2(15)(a) or (b), 3.2(17) or 3.2(18) and
(ii) this Agreement and the transactions contemplated hereby;
(m) suffered any casualty loss or damage (whether or not such loss
or damage shall have been covered by insurance) which affects
in any material respect its ability to conduct its business;
or
(n) suffered any material adverse change in its business,
operations or condition (financial or otherwise).
(12) No Guarantee, Etc. Neither the Company nor LMGTS is a party to or
bound by any contract of guarantee, indemnification, assumption or endorsement
of the obligations (contingent or otherwise) or indebtedness of any other Person
other than any such contract entered into in the ordinary course of business not
exceeding $100,000 in the aggregate and except for any guarantees or other like
obligations given by the Company in respect of the obligations of LMGTS none of
which exceed $100,000 in the aggregate.
(13) Title to Assets. The Company or LMGTS is the owner of or entitled
to use its Assets (other than the Intellectual Property which is addressed in
Section 3.2 (18)), with good and valid title thereto, free and clear of any and
all Liens, other than: (a) Liens arising by operation of law in the ordinary
course of business; (b) the contractual rights of the lessor under any Real
Property Lease or Personal Property Lease; (c) Liens on Assets securing (i)
indebtedness assumed or incurred to lease such Assets or to provide or satisfy
all or part of the purchase price of such Assets, or (ii) any extension, renewal
or refinancing of the balance of such indebtedness from time to time; (d) Liens
disclosed on Schedule 3.2(13). There is no agreement, option or other right or
privilege outstanding in favour of any Person for the purchase from the Company
or LMGTS of the Business, or of any of the Assets out of the ordinary course of
business.
(14) Sufficiency of Assets. To the knowledge of the Vendors, no asset
material to the Business has been disposed of since April 30, 1998 except in the
ordinary course of business and the Assets constitute all of the assets and
property used by the Company and LMGTS to operate the Business. The tangible
personal property, fixtures and equipment included in the Assets are (i) in all
material respects in a good state of repair (ordinary wear and tear excepted)
and operating condition, and (ii) sufficient and adequate in all material
respects to conduct the Business as conducted on the date of this Agreement.
(15) Leases.
(a) Schedule 3.2(15)(a) contains a complete and accurate list of
all Real Property Leases. The current use of the Leased
Premises is in compliance with, and is not in violation of,
any material covenants, conditions, restrictions or easements
affecting the Leased Premises or with respect to the use or
occupancy of the Leased Premises.
(b) Schedule 3.2(15)(b) attached hereto contains a complete and
accurate list of all material Personal Property Leases and
certain other non-material Personal Property Leases.
(c) Neither the Company nor LMGTS is in default or breach of, nor
has it received any notice of default or termination under,
any Real Property Lease or Personal Property Lease and there
exists no state of facts which after notice of lapse of time
or both would constitute such a default or breach except in
each case where any such default or breach would not result in
a Material Adverse Effect.
(16) Environmental Compliance. Each of the Company and LMGTS is in
material compliance with all environmental laws which are applicable in relation
to the operation of the Business (collectively, the "ENVIRONMENTAL LAWS")
including any such environmental laws relating to a discharge, spill or other
release, whether actual or potential, of any contaminant (as defined in the
ENVIRONMENTAL PROTECTION ACT (Ontario) and any other applicable legislation
existing as of the date hereof). The Business and the Assets are not the subject
of any governmental or regulatory remedial or control action or order or, to the
knowledge of the Vendors, any investigation or evaluation concerning an
environmental matter. Since the date of lease by the Company or LMGTS, the
Leased Premises have not been and are not now used as a landfill or waste
disposal site, nor to the knowledge of the Vendors, has any hazardous substance
or contaminant ever been deposited in or disposed of on, the Leased Premises,
nor, to the knowledge of the Vendors, has there ever been any release, spill or
discharge of any contaminant which would give rise to any action or claim
relating to violation of any such Environmental Laws or other requirements.
(17) Material Contracts. Neither the Company nor LMGTS is in default or
breach of any material provision of any Material Contract nor has it received
any notice of any such breach or default or termination under, any Material
Contract and, to the knowledge of the Vendors, there exists no state of facts
which after notice or lapse of time or both would constitute such a default or
breach. Except for the Material Contracts, neither the Company nor LMGTS is a
party to any (i) Contract which involves the payment to or by the Company or
LMGTS of more than $10,000,000 over the term of the Contract or more than
$3,000,000 during any year of the Contract, (ii) any loan agreement, trust
indenture or guarantee relating to the Company or LMGTS, (iii) warranties by the
Company of LMGTS in excess of those customary in the Business or (iv) except for
restrictions entered into with Sponsors in the normal course of business and
except for the License Agreements which only extend rights to the Company with
respect to Canada, material restrictions on the ability of the Company and/or
LMGTS to conduct the Business in any geographic location. All material
provisions of each Material Contract are valid and enforceable obligations of
the Company and/or LMGTS, as the case may be, and, to the knowledge of the
Vendors, of the other parties thereto, subject however to the limitations with
respect to enforcement imposed by law in connection with bankruptcy, insolvency,
reorganization or other laws affecting creditors' rights generally, including
the availability of equitable remedies such as specific performance and
injunction which are only available in the discretion of the court from which
they are sought and general equitable principles. The statements set out in
Schedule 3.2(17) respecting certain undisclosed Material Contracts are true and
correct in all material respects.
(18) Intellectual Property.
(a) Schedule 3.2(18) contains a complete and accurate listing of
all (i) registrations, applications and licenses (other than
licenses to or from Sponsors) forming part of the
Intellectual Property and that are material to the carrying
on of the Business and the registered owner thereof (in the
case of Trade-Marks) or the parties thereto in the case of
licenses, and (ii) Owned Software and Licensed Software that
is material to the carrying on of the Business. All of the
registered Trade-Marks Relating to the Business are duly and
validly registered in Canada. The Intellectual Property is
not subject to lien, mortgage, charge, hypothec, pledge or
security interest and all royalties due and payable by the
Company with respect to any Intellectual Property licensed
by it have been paid in full or accrued in the Financial
Statements.
(b) Except as disclosed on Schedule 3.2(18):
(i) the Company and LMGTS own, or are licensed to use, or
to the Vendors knowledge otherwise possess legally
enforceable rights to use or, in the case of
Intellectual Property under development, obtain the
right to use, all Intellectual Property that is (A)
material to the conduct of the Business currently
conducted by the Company and LMGTS or (B) to the
knowledge of the Vendors, under development for and
material to the Business;
(ii) to the knowledge of the Vendors, the Intellectual
Property and the conduct of the Company or LMGTS in
connection with the Intellectual Property do not
infringe upon or breach the intellectual property
rights of any other Person;
(iii) to the knowledge of the Vendors, there has been no
unauthorized or improper use by the Company of the
Trade-Marks which has affected or will affect the
distinctiveness thereof or rights therein;
(iv) to the knowledge of the Vendors, no Person is
infringing or breaching any of the Trade-Marks; and
(v) neither the Company nor LMGTS has received any
written notice challenging the Company or LMGTS
respecting the validity of, use of or ownership of
the Intellectual Property, and to the knowledge of
the Vendors, there are no facts upon which such a
challenge could be made.
(c) Except as set forth in Schedule 3.2(18), the Company and
LMGTS possess or have access to the source and object code
for all Owned Software which is material to the conduct of
the Business. Upon consummation of the transactions
contemplated by this Agreement, the Company and LMGTS will
continue to own all of such Owned Software, free and clear
of all Liens. None of the agreements for the license to the
Company of Licensed Software which is material to the
conduct of the Business require consents or other actions as
a result of the consummation of the transactions
contemplated by this Agreement in order for the Company and
LMGTS to continue to be entitled to use and operate such
Licensed Software after the Closing Date.
(d) Any programs, modifications, enhancements or other inventions,
improvements, discoveries, methods or works of authorship
included in the Owned Software that were created by employees
of the Company or LMGTS were made in the regular course of
such employees' employment with the Company and LMGTS using
the Company's and LMGTS' facilities and resources.
(e) The Company and/or LMGTS has conducted an inventory of the
Owned and Licensed Software, as well as the hardware and
embedded microcontrollers in non-computer equipment used by
the Company and LMGTS in connection with and material to the
operation of the Business (collectively, the "Computer
Systems") in order to determine which parts of the Computer
Systems are not Year 2000 Compatible (as defined below) and
to estimate the cost of rendering such Computer Systems Year
2000 Compatible prior to January 1, 2000. Based on the
above-referenced inventory, the Vendors represent and
warrant that the Computer Systems are either Year 2000
Compatible or that it is the reasonable expectation of the
Vendors that they will be Year 2000 Compatible prior to July
1, 1999; the estimated cost of rendering the Computer
Systems Year 2000 Compatible is $520,000, of which
approximately $400,000 has been or will be incurred by the
Company through allocation of resources otherwise available
from Rapp Collins Worldwide Limited Partnership and
approximately $120,000 has been or will be incurred directly
by the Company and/or LMGTS. "Year 2000 Compatible" means
that the Computer Systems to the extent required for their
particular use (i) correctly perform date data century
recognition, and calculations that accommodate same century
and multi-century formulas and date values; (ii) operate or
are expected to operate on a basis comparable to their
current operation during and after the calendar year 2000
A.D., including, but not limited to, leap years; and (iii)
shall not end abnormally or provide invalid or incorrect
results as a result of date data which represents or
references different centuries or more than one century.
(19) Litigation. Except as set out on Schedule 3.2(19), there are no
material outstanding claims, actions, suits, litigation, arbitrations,
investigations or proceedings at law or equity or before any Governmental Body
existing or, to the knowledge of the Vendors, threatened:
(i) against or relating to the Company, LMGTS, the Business or
any of the Assets or the right to use and enjoy the same; or
(ii) which would enjoin, restrict or prohibit the consummation of
the transactions contemplated by this Agreement.
(20) Insurance. Particulars of the policies of insurance maintained by
the Company and LMGTS at the date of this Agreement are set out in Schedule
3.2(20). All such policies are in full force and effect and neither the Company
nor LMGTS is in default, whether as to the payment of premiums or otherwise,
under the terms of such policies so as to entitle the relevant insurer to
terminate any such policy of insurance or deny coverage thereunder. Except as
set forth in Schedule 3.2(20) all such policies will remain in full force and
effect and will not in any way be affected by, or terminate or lapse by reason
of, any of the transactions contemplated by this Agreement.
(21) Employees and Employment Contracts. Schedule 3.2(21) lists: (i)
the senior management Employees as of the date of this Agreement and the birth
date, position, date of hire and compensation of each of them, respectively, and
(ii) a category description of all other Employees together with the approximate
number of Employees, the salary range and the average salary within each such
category. Except as set out in Schedule 3.2(21), and other than oral contracts
for indefinite hire terminable on notice or by pay in lieu thereof in accordance
with the requirements of Applicable Laws, neither the Company nor LMGTS is a
party to or bound by:
(a) any contracts for the employment or statutorily required
re-employment of any Employee; or
(b) any collective bargaining agreement, contract or legally
binding commitment to any trade union or employee organization
or group in respect of or affecting the Employees.
(22) Employee Plans.
(a) Schedule 3.2(22) lists all the employee benefit, health,
welfare, supplemental unemployment benefit, bonus, pension,
profit sharing, deferred compensation, stock compensation,
stock purchase, retirement, hospitalization insurance,
medical, dental, legal, disability and similar plans or
arrangements or practices applicable to the Employees or
former Employees which are currently maintained or
participated in by the Company or LMGTS (the "EMPLOYEE
PLANS"). None of the Employee Plans is a "registered pension
plan" within the meaning of subsection 248(1) of the TAX ACT.
(b) Except as disclosed on Schedule 3.2(22) and except that the
Company is planning to introduce a new drug card, neither the
Company nor LMGTS has any formal plan or commitment whether
legally binding or not, to create any additional Employee Plan
or to modify or change in any material respect any existing
Employee Plan that would affect any Employee or former
Employee except such modification or amendment as may be
required to be made to secure the continued registration of
any existing Employee Plan with each applicable Governmental
Body.
(c) All of the Employee Plans are registered where required by,
and are in good standing under, all Applicable Laws or other
legislative, administrative or judicial promulgations
applicable to the Employee Plans.
(d) No amendments to any Employee Plan have been promised and no
amendments to any Employee Plan will be made or promised prior
to Closing which affect or pertain to the Employees, except as
contemplated in the ECB and VCB.
(e) Copies of all the Employee Plans as amended as of the date
hereof and, if available, current plan summaries and employee
booklets in respect thereof as are applicable to the Employees
have been made available to the Purchaser.
(f) Except as disclosed on Schedule 3.2(22), no Employee Plan
provides benefits, including death or medical benefits
(whether or not insured), with respect to Employees or former
Employees beyond retirement or other termination of service,
other than:
(i) coverage required by Applicable Law, or
(ii) benefits the full cost of which is borne by the
Employee or Former Employee (or his beneficiary).
(g) Except as disclosed on Schedule 3.2(22), to the knowledge of
the Company and LMGTS, there are no material pending,
threatened or anticipated claims, proceedings, reviews or
investigations relating to any of the Employee Plans (other
than routine claims for benefits).
(h) With respect to each Employee Plan that is funded wholly or
partially through an insurance policy, there will be no
liability of the Company or LMGTS as of the Closing Date,
under any such insurance policy or ancillary agreement with
respect to such insurance policy in the nature of a
retroactive rate adjustment, loss sharing arrangement or
other actual or contingent liability arising wholly or
partially out of events occurring prior to the Closing Date
other than the obligation to pay premiums thereunder. With
respect to each Employee Plan not funded through an
insurance policy other than with respect to the ECB and the
VBC, the Company or LMGTS has either fully funded such
Employee Plan through a trust or, where required by
generally accepted accounting principles, has made
appropriate provision for all liability thereunder as at
April 30, 1998 in the Financial Statements. All employee
contributions to the Employee Plans to the date hereof in
all material respects have been properly withheld by the
Company or LMGTS, as appropriate, and have been fully paid
into the funding arrangements for the respective Employee
Plan.
(i) Each Employee Plan and fund established thereunder has been
administered and invested in accordance with the terms of the
Employee Plan and funding agreement. Each Employee Plan
(including all amendments thereto) is duly registered where
required by, and is in good standing under, and has been
administered and invested in compliance in all material
respects with all Applicable Laws.
(j) Except in connection with the ECB and the VBC and except for
the acceleration of outstanding options to acquire Loyalty
Shares, the consummation of the transactions contemplated by
this Agreement will not accelerate the time of payment or
vesting under any Employee Plan, require the funding or
securing of any benefits under any Employee Plan, or increase
the amount of compensation due any Employee.
(k) No participant in the ECB or the VCB will be entitled to any
future entitlements under either the ECB or the VCB by virtue
of a change of a control of the Company other than the change
of control of the Company to be effected pursuant hereto.
(23) Sponsors. Schedule 3.2(23) lists the 12 largest Sponsors of the
Company, based on projected annual revenue for the fiscal year of the Company
ending April 30, 1999. The Company has not received written notice of any
intention on the part of any such Sponsor to cease doing business with the
Company or to terminate its Sponsor agreement with the Company.
(24) Taxes Paid. Each of the Company and LMGTS has paid in full all
Taxes required to be paid on or prior to the date hereof and has made adequate
provision in the Financial Statements in accordance with GAAP for the payment of
all Taxes in respect of all fiscal periods ending on or before the date thereof.
Each of the Company and LMGTS will, after the date hereof to and including the
Closing Date, pay all Taxes becoming due and payable during such period. For the
purposes of this Section 3.2(24), Taxes includes all such Taxes as may arise by
reason of an assessment or reassessment received after the date hereof. Each of
the Company and LMGTS is a private corporation and a taxable Canadian
corporation for the purposes of the TAX ACT. Each of the Company and LMGTS is a
registrant for the purposes of the goods and services tax provided for under the
EXCISE TAX ACT.
(25) Tax Filings.
(a) Each of the Company and LMGTS has prepared and filed on time with
all appropriate Governmental Bodies all Tax Returns, declarations, remittances,
information returns and reports required to be filed by or on behalf of the
Company and LMGTS in respect of any Taxes for all fiscal periods ending prior to
the date hereof and will continue do so in respect of any fiscal period ending
on or before the Closing Date. All such returns, declarations, remittances,
information returns and reports are correct and complete in all material
respects, and no material fact has been omitted therefrom. No extension of time
in which to file any such returns, declarations, remittances, information
returns or reports is in effect. There are no reassessments of the Company's
Taxes or LMGTS' Taxes that have been issued and are outstanding and which have
not been paid.
(b) (i) No federal, provincial, state, local or foreign Tax Return of
the Company or LMGTS is currently the subject of an audit or examination by any
taxing authority, (ii) no administrative or court proceedings are currently in
progress or, to the knowledge of the Vendors, pending against the Company or
LMGTS with respect to any Taxes and (iii) no deficiency or adjustment for any
Taxes has been proposed, asserted or assessed against the Company or LMGTS which
has not been paid or satisfied; provided however that with respect to the
foregoing clauses (b)(i) and (b)(ii), the Company was advised by a phone call
received from Revenue Canada on June 23, 1998 that Revenue Canada proposes to
conduct an audit in respect of the Company's 1996 and 1997 tax years which audit
is expected to commence in the fall of 1998. The statute of limitations or
reassessment period for the assessment of income Taxes with respect to the
Company has expired in accordance with applicable law.
(c) Neither the Company nor LMGTS has ever requested or received a Tax
ruling (other than a determination with respect to a qualified employee benefit
plan) or entered into a legally binding agreement (such as a closing agreement)
with a taxing authority, which ruling or agreement could have an effect on the
Taxes of the Company or LMGTS after the Closing.
(d) No extensions of time have been granted to the Company to file any
Tax Return which has not yet been filed and no waiver or consent extending any
statute of limitations for the assessment or collection of any Taxes, which
waiver or consent remains in effect, has been executed by or on behalf of the
Company, nor are any requests for such waivers or consents pending.
(e) Neither the Company nor LMGTS has incurred any Tax liabilities
other than Tax liabilities arising in the ordinary course of carrying on its
Business since the date of the Financial Statements and from that date to and
including the Closing Date will not incur any Tax liabilities other than in the
ordinary course of carrying on its Business.
(f) All Taxes owed by each Selling Shareholder if such Selling
Shareholder's failure to pay any such Taxes could result in liability to the
Company have been paid to the appropriate taxing authorities.
(g) The Company has never (i) been a member of any consolidated,
combined or unitary group for United States federal, state, local or foreign Tax
law purposes or (ii) been a party to any Tax-sharing or allocation agreement.
(26) Withholdings and Remittances. Each of the Company and LMGTS has
withheld from each payment made to any of its present or former Employees,
Officers and Directors, all amounts, including applicable Taxes, required to be
withheld by Applicable Law or any interpretation or administration thereof, and
furthermore, has remitted such withheld amounts within the prescribed periods to
the appropriate Governmental Body. Each of the Company and LMGTS has charged,
collected and remitted on a timely basis all Taxes as required under Applicable
Law on any sale, supply or delivery whatsoever, made by the Company and LMGTS.
(27) Regulatory Approvals. Except as set forth in Schedule 3.2(30), no
Governmental Authorization is required to be obtained on the part of the Company
or LMGTS in connection with the execution, delivery and performance of this
Agreement or any other documents and agreements to be delivered hereunder, or is
necessary in order that the Business can be conducted immediately following the
Closing Date substantially in the same manner as heretofore conducted.
(28) Licences and Permits. Schedule 3.2(28) lists the material Licences
and Permits. All material Licences and Permits are in full force and effect,
neither the Company nor LMGTS is in violation of any material term or provision
or requirement of any such Licences and Permits, and to the knowledge of the
Vendors, no Person has threatened to revoke, amend or impose any condition in
respect of, or commence proceedings to revoke, amend or impose conditions in
respect of, any such Licence or Permit. Except as set forth in Schedule 3.2(28),
all such Licences and Permits will remain in full force and effect and will not
in any way be affected by, or terminate or lapse by reason of, any of the
transactions contemplated by this Agreement.
(29) Safety Deposit Box/Powers of Attorney. Schedule 3.2(29) lists:
(a) the name of each bank, trust company and other financial
institution in which the Company or LMGTS holds accounts or a
safety deposit box and the names of every Person authorized to
draw thereon or to have access thereto; and
(b) the name of each Person holding a general or special power of
attorney from the Company or LMGTS and a summary of the terms
thereof.
(30) Consents and Approvals. Except as disclosed on Schedule 3.2(30),
no consent or approval is required to be obtained by the Company (i) from any
Governmental Body in connection with the execution and delivery of this
Agreement and the completion of the transactions contemplated by this Agreement,
or (ii) under the terms of any Material Contract as a result of a change of
control of the Company.
(31) Non-Arm's Length Contracts. Neither the Company nor LMGTS is a
party to any Contract with any Person with whom it does not deal at arm's length
nor is it indebted to any such Person, except for Contracts (i) entered into in
the ordinary course of business on normal commercial terms, or (ii) Contracts
disclosed on Schedule 3.2(31).
(32) Minute Books and Stock Record Books. The corporate minute books
and stock record books of the Company and LMGTS (i) are in all material respects
complete and correct and accurately reflect in all material respects action
taken at all meetings of the stockholders and Board of Directors of the Company
and LMGTS and each committee (if any) of such Boards of Directors, and (ii)
properly and accurately record the issuance and transfer of all shares of
capital stock of the Company and LMGTS.
(33) Broker's or Finders' Fees. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried out by the
Vendors with the Purchaser without the intervention of any Person on behalf of
the Vendors or the Company in such manner as to give rise to any claim by any
Person against the Company or the Purchaser for a finder's fee, brokerage
commission or similar payment, other than Salomon Smith Barney Inc. and Nesbitt
Burns Inc., whose fees, compensation and expenses shall be solely for the
account of, and paid directly by, Selling Shareholders.
3.3 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser represents
and warrants to the Vendors as follows and acknowledges that the Vendors are
relying upon these representations and warranties in connection with the
entering into of this Agreement and the sale of the Loyalty Shares:
(1) Incorporation and Power. The Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware.
(2) Due Authorization. The Purchaser has all necessary corporate power,
authority and capacity to enter into this Agreement and all other agreements and
instruments to be executed by it as contemplated by this Agreement and to
perform its obligations under this Agreement and such other agreements and
instruments. The execution and delivery of this Agreement and such other
agreements and instruments and the completion of the transactions contemplated
by this Agreement and such other agreements and instruments have been duly
authorized by all necessary corporate action on the part of the Purchaser.
(3) No Breach of Instruments or Laws. Neither the entering into nor the
delivery of this Agreement nor the completion of the transactions contemplated
hereby by the Purchaser will result in a material violation of:
(a) any of the provisions of the constating documents or by-laws
of the Purchaser;
(b) any contract or other agreement or instrument to which the
Purchaser is a party or by which the Purchaser is bound; or
(c) any Applicable Laws of any jurisdiction to which the Purchaser
is subject.
(4) Regulatory Approvals. Except as disclosed on Schedule 3.3(4), no
Governmental Authorization is required to be obtained on the part of the
Purchaser in connection with the execution, delivery and performance of this
Agreement or any other documents and agreements to be delivered hereunder or the
performance of the obligations of the Purchaser hereunder or thereunder.
(5 Financing. The Purchaser has access to all funds necessary for the
consummation of the purchase contemplated by this Agreement and will upon
request provide evidence thereof satisfactory to the Vendors, acting reasonably.
(6 Enforceability of Obligations. This Agreement has been validly
executed and delivered by the Purchaser and is a valid and legally binding
obligation enforceable against the Purchaser in accordance with its terms and
all other agreements required to be delivered under this Agreement when executed
and delivered will have been validly authorized, executed and delivered by the
Purchaser and will thereupon be legal, valid and binding obligations enforceable
against the Purchaser in accordance with their respective terms, subject
however, to the limitations with respect to enforcement imposed by law in
connection with bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally, including the availability of equitable remedies
such as specific performance and injunctions which are only available in the
discretion of the court from which they are sought and general equitable
principles.
(7 Litigation. There are no outstanding claims, actions, suits,
litigation, arbitrations, investigations or proceedings at law or equity or
before any Governmental Body existing or, to the knowledge of the Purchaser,
pending which would enjoin, restrict or prohibit the purchase of the Loyalty
Shares or any portion thereof by the Purchaser as contemplated hereunder.
3.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(1 Vendors' Representations and Warranties. The representations and
warranties of the Vendors contained in Sections 3.1 and 3.2, or any other
agreement, certificate or instrument delivered pursuant to this Agreement shall
survive the Closing and, notwithstanding the Closing and any inspection or
inquiries made by or on behalf of the Purchaser, shall continue in full force
and effect for the benefit of the Purchaser, for a period of 15 months from the
Closing Date after which time the Vendors shall be released from all obligations
in respect of such representations and warranties provided, however, that
notwithstanding the foregoing provisions of this Section 3.4(1), (i) the
representations and warranties made by the Vendors in Section 3.1 and clauses
(3), (4) and (6) of Section 3.2 shall survive indefinitely, (ii) the
representations and warranties made by the Vendors in clauses (24), (25) and
(26) of Section 3.2 shall survive until the date 6 months following the
expiration of the applicable statute of limitations or reassessment period
relating thereto after which time the Vendors shall be released from all
obligations in respect of such representations and warranties, (iii) the
representations and warranties made by the Vendors in clause (18) of Section 3.2
shall survive for a period of 24 months from the Closing Date after which time
the Vendors shall be released from all obligations in respect of such
representations and warranties; and (iv) any claim for indemnification based on
any breach of a representation and/or warranty made in writing (setting out in
reasonable detail the nature of the claim and the appropriate amount of such
claim) prior to the expiration of such representation and warranty shall be
permitted to continue until finally resolved (by means of a final non-appealable
judgment of a court of competent jurisdiction or a settlement approved by the
parties involved) even if such resolution occurs after the expiration of such
representation and warranty.
(2 Purchaser's Representations and Warranties. The representations and
warranties of the Purchaser contained in Section 3.3 or any other agreement,
certificate or instrument delivered pursuant to this Agreement shall survive the
Closing and, notwithstanding the Closing, shall continue in full force and
effect for the benefit of the Vendors, indefinitely.
(3 Interpretation. Any disclosure made in this Agreement or any
Schedule or Exhibit hereto shall be deemed to have been made to apply to all
representations and warranties set forth in this Agreement and any document
delivered at or subsequent to the Closing Time as provided in or pursuant to
this Agreement as long as all required information is so disclosed.
ARTICLE 4
INDEMNIFICATION
4.1 INDEMNIFICATION BY THE VENDORS.
(1) Each Vendor shall indemnify and save harmless the Purchaser from and against
all claims, actions, suits, losses, costs, damages, expenses and liabilities,
including reasonable legal fees (collectively "CLAIMS"), suffered by the
Purchaser as a result of or in connection with:
(a) any breach of or non-fulfilment of any covenant or agreement
of such Vendor contained in this Agreement or under any other
agreement or instrument executed or delivered by such Vendor
pursuant to this Agreement; and
(b) any breach of or inaccuracy or misrepresentation in any
representation or warranty of such Vendor set forth in Section
3.1 of this Agreement.
(2) Each Vendor shall severally and separately indemnify and save harmless the
Purchaser from and against all Claims suffered by the Purchaser as a result of
or in connection with any breach of or inaccuracy or misrepresentation in any
representation or warranty of the Vendors set forth in Section 3.2 of this
Agreement; provided that each Vendor shall only be responsible for that portion
of any Claim equal to the amount of such Claim multiplied by such Vendor's
Proportionate Share, and without limiting the generality of the foregoing, if
either the Company or LMGTS suffers an assessment or a reassessment of Taxes for
and in respect of a taxation year ended prior to the date hereof, which
assessment or reassessment ultimately results in an increase in Taxes for and in
respect of such taxation year in excess of any provision relating thereto
contained in the Financial Statements, such increase in Taxes (to the extent in
excess of any such provision) shall be deemed to be a Claim for the purposes of
this Section 4.1(2) and the amount of such Claim shall be equal to such increase
in Taxes (to such extent) subject to reduction by the value of any directly
related deduction, tax credit, refund or similar directly related benefit
enjoyed or to be enjoyed by the Company or LMGTS or their respective successors;
provided, however, if the Claim derives from the disallowance by Revenue Canada
of all or any portion of a reserve taken as a deduction in computing income for
tax purposes, the amount of the Claim is hereby agreed to be the total of any
interest or penalties assessed by the applicable tax authorities in respect
thereof, plus an amount equal to:
disallowed reserve deduction x .446 x (1.065(4) -1)
as at April 30, 1998
In addition, if either the Company or LMGTS suffers an assessment or
reassessment of Taxes for and in respect of its taxation year ending by reason
of the acquisition of the shares of the Company by the Purchaser as herein
contemplated, which assessment or reassessment ultimately results in Taxes for
such taxation year in excess of the Taxes payable for such year computed on a
basis consistent with previous taxation years of the Company or LMGTS, as the
case may be, such increase in Taxes, to the extent in excess of any provision
relating thereto in the Financial Statements, shall be deemed to be a Claim for
the purposes of this Section 4.1(2) and the amount of such Claim shall be equal
to such excess (to such extent) subject to reduction by the value of any
directly related deduction, tax credit, refund or similar directly related
benefit enjoyed or to be enjoyed by the Company or LMGTS or their respective
successors); provided, however, if the Claim derives from the disallowance by
Revenue Canada of all or any portion of a reserve taken as a deduction in
computing income for tax purposes, the amount of the Claim is hereby agreed to
be the total of any interest or penalties assessed by the applicable tax
authorities in respect thereof, plus an amount equal to:
disallowed reserve deduction x .446 x (1.065(4) - 1)
in respect of such year
Notwithstanding anything else contained herein, none of the Vendors shall have
any liability with respect to any increase in Taxes which arises as a result of
any change in the accounting policies of the Company or basis for computation of
Taxes, (other than any such change which is required by Revenue Canada and other
than any such change which is required by the auditors of the Company acting
reasonably and in accordance with GAAP), including any decision by the Company
to lower the rate at which it reserves for its redemption liability, and any
resulting reassessment by Revenue Canada of Taxes payable for previous years.
Notwithstanding any other provision of this Agreement, the Vendors shall have no
obligation or liability under the indemnities in this Agreement for any
assessment or reassessment resulting from the amendment of any Tax Returns filed
by the Company or any successor thereto for any taxation year or other taxable
period (or portion thereof) ending on or before the Closing Date, unless such
amendment is consented to in writing by the Vendors.
4.2 LIMITATIONS ON INDEMNIFICATION BY VENDORS. Notwithstanding the foregoing or
any other provision in this Agreement, the obligation of the Vendors to
indemnify the Purchaser pursuant to Sections 4.1(1)(b) and 4.1(2) above shall be
subject to and limited by each of the following qualifications:
(1 except with respect to any claim(s) for indemnification for
breach of any representation or warranty made by any Vendor
pursuant to clauses (24), (25) and (26) of Section 3.2 no
claim(s) for indemnification shall be made until the aggregate
of all such claim(s) exceeds an amount equal to $1,000,000, at
which time the Purchaser shall be entitled to claim the full
amount of the claim or claims;
(2 the maximum aggregate liability of each Vendor (i) with
respect to any claim(s) for indemnification for breach of any
representation or warranty made by such Vendor pursuant to
Section 3.1(2) or made by the Vendors pursuant to clauses (3),
(4), (6), (18), (24), (25) and (26) of Section 3.2 shall be
limited to an amount equal to 100% of the portion of the
Purchase Price payable to such Vendor, and (ii) otherwise
shall be limited to an amount equal to 15% of the amount
obtained by multiplying such Vendor's Proportionate Share by
the Purchase Price; provided that in any event, the maximum
aggregate liability of each Vendor for all indemnity
obligations at any time or times under either or both of
Sections 4.1(1)(b) and 4.1(2), shall not exceed an amount
equal to the portion of the Purchase Price payable to such
Vendor and for the purpose of this Section 4.2(2), a Vendor's
Proportionate Share of any part of the Escrow Amount paid to
the Purchaser pursuant to the Escrow Agreement shall be
considered a liability incurred by such Vendor and shall be
allocated to either clauses (i) or (ii) of this Section
4.2(2), as applicable depending upon the nature of the Claim
which gave rise to such liability;
(3 the Vendors shall be given a reasonable opportunity to remedy
any breach of representation, warranty or covenant capable of
being remedied before any indemnity obligation will arise;
(4 the Vendors' obligations to compensate the Purchaser for any
claim for indemnification shall be reduced to the extent of
the amount of any reserve accrued in the Financial Statements,
provided and to the extent that such reserve relates
specifically to the subject matter of such claim.
4.3 INDEMNIFICATION BY THE PURCHASER. The Purchaser shall indemnify and save
harmless each Vendor from and against all Claims suffered by such Vendor as a
result of or in connection with:
(1 any breach of or non-fulfilment of any covenant or agreement
of the Purchaser contained in this Agreement or under any
other agreement or instrument executed or delivered by the
Purchaser pursuant to this Agreement; and
(2 any breach of or inaccuracy or misrepresentation in any
representation or warranty set forth in Section 3.3 of this
Agreement.
4.4 LIMITATIONS ON INDEMNIFICATION BY THE PURCHASER. Notwithstanding the
foregoing or any other provision in this Agreement, the obligation of the
Purchaser to indemnify the Vendors pursuant to Section 4.3(2) above shall be
subject to and limited by each of the following qualifications:
(1 no claim(s) for indemnification shall be made until the
aggregate of all such claim(s) exceeds an amount equal to
$1,000,000 at which time the Vendors shall be entitled to
claim the full amount of the claim or claims;
(2 the maximum aggregate liability of the Purchaser to a Vendor
shall be limited to an amount equal to 100% of the amount
obtained by multiplying such Vendor's Proportionate Share by
the Purchase Price; and
(3 the Purchaser shall be given a reasonable opportunity to
remedy any breach of representation, warranty or covenant
capable of being remedied before any indemnity obligation will
arise.
4.5 EXCLUSIVE REMEDY. Each Party hereby acknowledges and agrees that its sole
remedy with respect to any and all claims under or in connection with this
Agreement or the transactions contemplated hereby, including any claims relating
to the Company, LMGTS, the Business, the Assets, the Loyalty Shares or the
subject matter of this Agreement, shall be pursuant to the indemnification
provisions set forth in this Agreement, except in the case of fraud. In
furtherance of the foregoing, each Party hereby waives, to the fullest extent
permitted by law, any and all other rights and causes of action it may have
against the other Parties or its officers, directors, employees, agents,
representatives and Affiliates under or in connection with this Agreement or
relating to the transactions contemplated hereby (whether in contract, tort or
otherwise), including any claims relating to the Company, LMGTS, the Business,
the Assets, the Loyalty Shares or the subject matter of this Agreement.
4.6 ADJUSTMENT FOR TAX EFFECT. To the extent that a Party (in this Section 4.6,
the "INDEMNIFYING PARTY") becomes liable to pay any amount for which any other
Person (in this Section 4.6, the "INDEMNIFIED PARTY") can claim indemnification
hereunder, and such amount is deductible by the Indemnified Party for income tax
purposes, the Indemnifying Party shall, notwithstanding any other provision
hereof, be obligated to pay the Indemnified Party only the loss which the
Indemnified Party actually suffered after having regard to the effect of such
deductions.
4.7 INDEMNIFICATION PROCEDURE.
(1 Third Party Claims. In the case of claims or demands made by a third
party with respect to which indemnification is sought hereunder, the Party
seeking indemnification shall give prompt written notice to the Party from whom
indemnification is sought of any such claims or demands made upon it (and in any
event shall notify such Party within 10 days of first learning of such claims or
demands), provided that in the event of a failure to give such notice, such
failure shall not preclude the Party seeking indemnification to obtain such
indemnification but its right to indemnification shall be reduced to the extent
that such delay prejudiced the defence of the claim or demand or increased the
amount of liability or cost of defence and provided that, notwithstanding
anything else herein contained, no claim for indemnity in respect of the breach
of any representation or warranty contained herein may be made unless such claim
has been made prior to the expiry of the survival period applicable to such
representation and warranty pursuant to Sections 3.4(1) or (2), as the case may
be.
(2 Control of Claim. A Party (in this Article 4, the "INDEMNIFYING
PARTY") who is given notice from another Party (in this Article 4, the
"INDEMNIFIED PARTY") of a claim or demand in respect of which indemnification is
sought, shall have the right, by notice to the Indemnified Party given not later
than 30 days after receipt of the notice, to assume the control of the
negotiation, settlement, defence or compromise of the claim or demand.
(3 Negotiations. Upon the assumption of control of any claim or demand
by the Indemnifying Party, the Indemnifying Party shall diligently proceed with
the negotiation, settlement, defence or compromise of the claim or demand at its
sole expense and, in connection therewith, the Indemnified Party shall cooperate
fully, but at the expense of the Indemnifying Party with respect to any
out-of-pocket expenses incurred, to make available to the Indemnifying Party all
pertinent information and witnesses under the Indemnified Party's control, make
such assignments and take such other steps as in the opinion of counsel for the
Indemnifying Party are reasonably necessary to enable the Indemnifying Party to
conduct such defence. Except as provided in Section 4.7(4), the Indemnified
Party shall also have the right to participate in the negotiation, settlement,
defence or compromise of any claim or demand at its own expense. For greater
certainty, in the event that with respect to any claim or demand, the Purchaser
is the Indemnified Party, then the Purchaser shall cause the Company and LMGTS
to make available to the Indemnifying Party all pertinent information and
witnesses under the Company's or LMGTS' control.
(4 Consent. The Indemnifying Party shall not be liable hereunder for
any settlement or compromise of any claim or demand effected without the prior
written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld. If any Claim based upon a breach of any of the
representations and warranties made herein by the Vendors can, in the judgment
of the Vendors, acting reasonably, be settled and the Vendors wish to settle
such Claim, the Vendors shall provide written notice to the Purchaser of the
proposed settlement. Within five Business Days from the receipt of such notice
(or such shorter period as the Vendors may specify in any such notice, in the
event that such settlement opportunity must be accepted within a shorter time
period), the Purchaser shall provide written notice to the Vendors advising the
Vendors as to whether or not the Purchaser agrees with the proposed settlement.
If the Purchaser agrees with the proposed settlement, then the Claim may be
settled on such basis. If the Purchaser does not wish the Claim to be settled on
such basis, the Purchaser may, within such time period, give notice to the
Vendors that the Purchaser will assume, at its cost and expense, control of the
negotiation, settlement, defence or compromise of the Claim and, notwithstanding
any other provision of this Agreement, the Vendors' maximum aggregate liability
in respect of such Claim shall be limited to the amount set out in the notice
from the Vendors to the Purchaser setting out the proposed settlement. If the
Purchaser does not give notice to the Vendors within such time period, it shall
be deemed to have agreed with the proposed settlement.
(5 Procedure. For the purposes of Sections 4.7(2), (3) and (4), the
Vendors may by unanimous agreement appoint any one or more of the Vendors to
represent the Vendors collectively and absent such agreement each of the
Vendors, other than BMO and EUK Limited (and Electra in the event that it
becomes a vendor of Loyalty Shares to the Purchaser as contemplated by Section
8.12), hereby authorize AMIG and Craig Underwood acting jointly to represent the
Vendors for the purposes of Sections 4.7(2), (3) and (4); in either case, the
Purchaser shall be entitled to rely upon determinations relating to matters
contemplated by Sections 4.7(2), (3) and (4) made by such representatives of the
Vendors.
4.8 ADJUSTMENT. Any payment made under the indemnities herein provided for shall
be treated by the Purchaser and the Vendors for all purposes as an adjustment to
the Purchase Price.
ARTICLE 5
COVENANTS
5.1 INVESTIGATION. Until the Closing, but subject to any confidentiality
restrictions to which the Company may be subject: (a) the Purchaser and its
representatives and advisers shall, at their own expense, be permitted to make
such investigations, inspections, surveys or tests of the properties and assets
of the Company, LMGTS and their respective financial and legal condition as the
Purchaser, acting reasonably, deems necessary to familiarize itself with such
properties and assets, and (b) the Purchaser shall, during normal business
hours, be permitted complete access to all documents relating to information
scheduled or required to be disclosed under this Agreement. Notwithstanding the
foregoing provisions, to the extent that any of the Sponsors or Affiliates
thereof are, in the reasonable opinion of the Vendors, competitors of the
Purchaser, whether within Canada or elsewhere, the Vendors may withhold from any
such review by the Purchaser information regarding such Sponsors or Affiliates
which, in the Vendors' judgment, is of a competitive nature.
5.2 AUTHORIZATIONS. Each Vendor shall take all reasonable actions as are within
such Vendor's control to cause the Company to execute and deliver any
authorizations required to permit the investigations, inspections, surveys or
tests described in Section 5.1.
5.3 CONFIDENTIALITY. The Purchaser acknowledges that it remains bound by the
Confidentiality Agreement dated June 4, 1998.
5.4 RISK OF LOSS. Until the Closing, the Vendors shall cause the Company to
maintain in force all the policies of property damage insurance under which any
of the Assets is insured. Notwithstanding anything in this Section 5.4 to the
contrary, if at any time during the Interim Period there is any loss, damage or
destruction of a tangible Asset (whether or not covered by insurance) which has
or is likely to have a Material Adverse Effect, the Vendors shall promptly
notify the Purchaser thereof. The Purchaser may, at any time prior to 5:00 P.M.
on the tenth Business Day following its receipt of any such notice from any one
or more Vendors, elect by notice in writing to each of the Vendors, to either
complete the purchase of the Loyalty Shares hereunder notwithstanding such event
or terminate its obligation to complete such purchase. If the Purchaser does not
respond in writing within such period, it shall be conclusively deemed to have
elected to complete such purchase notwithstanding such event. If the Purchaser
elects within such time period to terminate its obligation to compete such
purchase, each Party shall thereafter be released from any obligations or
liability hereunder, except for the obligations of the Purchaser under Section
5.3 which shall survive any termination hereof.
5.5 ACTION DURING INTERIM PERIOD. During the Interim Period, AMIG shall cause
the Company and LMGTS:
(1 except as herein contemplated, not to make or agree to make
any material change in the compensation of any Director,
Officer or Employee or of any director, officer or employee of
LMGTS and not to pay or agree to pay or set aside any bonus,
profit sharing, retirement, insurance, death, severance or
fringe benefit or other extra-ordinary or indirect
compensation to, for or on behalf of any Director, Officer or
Employee or of any director, officer or employee of LMGTS,
other than in the normal course of business;
(2 not to sell, assign, transfer, mortgage, pledge or otherwise
encumber any of the Assets, except for sales in the normal
course of business;
(3 not to enter into any contract, agreement, commitment or
transaction outside the normal course of business;
(4 not to issue any shares or other securities of the Company
or LMGTS, except as contemplated by Exhibit A-3;
(5 not to declare or cause to be paid any dividend or make any
other form of distribution or payment on the Loyalty Shares
or any other securities of the Company;
(6 not to cancel or amend any policy of insurance which relates
to the Company, LMGTS or any of the Assets, except in the
ordinary course consistent with past practice or with the
prior written consent of the Purchaser; and
(7 generally, to carry on the Business in the normal course.
Notwithstanding the foregoing, the Purchaser acknowledges that during the
Interim Period the Company shall be permitted to hire, and determine the
compensation payable to, such new employees which, in the Company's judgment,
are necessary or desirable; provided that the Company shall not, except for the
hiring of a Vice-President, Legal Affairs, hire any Person for a senior
management position (vice-president or higher) without the prior consent of the
Purchaser, which consent shall not be unreasonably withheld.
5.6 INVESTMENT CANADA NOTIFICATIONS. Prior to the Closing Time, the Purchaser
shall have made all filings and notifications, including notification under the
INVESTMENT CANADA ACT, if applicable, to all appropriate Governmental Bodies as
are required by the Purchaser to permit the transactions contemplated herein.
5.7 CONSENTS TO ASSIGNMENT OF CONTRACTS AND PERMITS. Where consents are required
under any Material Contracts as a result of the change of control of the Company
or any of the transactions contemplated by this Agreement, the Vendors shall use
their reasonable best efforts to obtain all such required consents provided that
nothing herein shall require the Vendors to make any payments to any other party
to any of the Material Contracts.
5.8 COOPERATION. Each Vendor shall, and shall use reasonable efforts to ensure
that the Company, and the Company's employees, agents and representatives are
available to, take all action and do all things necessary, and assist the
Purchaser in taking all action and doing all things necessary, to obtain all
consents, approvals and authorizations of third parties, including the making
and prosecution of all notifications and filings with all Governmental Bodies,
required by the Purchaser as a condition to the completion of the transactions
contemplated hereunder. Such assistance by the Vendors, the Company and the
Company's employees, agents and representatives shall include assisting the
Purchaser in developing all necessary submissions for any applicable
Governmental Body and promptly providing all information necessary or desirable
for any submissions, notifications or filings in connection with the
transactions contemplated pursuant to this Agreement.
5.9 ACTIONS TO SATISFY CLOSING CONDITIONS. Each of the Parties shall take all
such reasonable actions as are within its power to control, and use its
reasonable efforts to cause other actions to be taken which are not within its
power to control, so as to ensure compliance with any conditions set forth in
Article 6 hereof which are for the benefit of any other Party hereto.
5.10 VENDOR'S SEVERAL LIABILITY. No Vendor shall be responsible or liable for
any failure on the part of any other Vendor to perform, discharge or satisfy any
obligation, covenant or agreement of such other Vendor contained in this
Agreement.
5.11 ECB AND VCB ARRANGEMENTS. Subject to satisfaction of the conditions set out
in Section 6.1, the Purchaser shall concurrently with or promptly following
Closing ensure that not less than $7 million (the "Bonus Funds") is directly or
indirectly paid to, invested in or contributed to the Company. The Purchaser
acknowledges the obligations of the Company under the ECB and VCB and agrees to
cause the Company to comply with such obligations following the Closing.
5.12 DRAG ALONG. If required to ensure that the Purchaser acquires pursuant
hereto 100% of the issued and outstanding Loyalty Shares, AMIG shall exercise
any drag along rights it may have with respect to any Optionholder and such
Optionholder's Loyalty Shares.
5.13 TAX RETURNS. The Purchaser shall cause the Company to prepare its Tax
Returns for its taxation year ended April 30, 1998 and for its taxation year
ending as a result of the change of control of the Company herein contemplated.
The Purchaser shall ensure that all Tax computations reflected in such returns
are made on the same basis that Tax has been computed in prior years and that a
copy of such returns is provided to AMIG for its review at least five Business
Days prior to their filing.
ARTICLE 6
CONDITIONS OF CLOSING
6.1 PURCHASER'S CONDITIONS. The Purchaser shall not be obliged to complete the
transactions contemplated by this Agreement unless, at or before the Closing
Time, each of the following conditions has been satisfied, it being understood
that the following conditions are included for the exclusive benefit of the
Purchaser and may be waived, in whole or in part, in writing by the Purchaser at
any time; and each of the Vendors shall take all such actions, steps and
proceedings as are reasonably within its control and as may be necessary to
ensure that the following conditions are fulfilled at or before the Closing
Time:
(1 Representations and Warranties. The representations and warranties
of the Vendors in Sections 3.1 and 3.2 shall be true and correct in all material
respects as at the Closing as if made at such time.
(2 Vendors' Compliance. Each of the Vendors shall have performed and
complied with all of the terms and conditions in this Agreement on the part of
such Vendor to be performed or complied with at or before Closing and shall have
executed and delivered or caused to have been executed and delivered to the
Purchaser at the Closing all the documents contemplated in Section 7.2 or
elsewhere in this Agreement to be executed and delivered by such Vendor.
(3 No Litigation. There shall be no litigation or proceedings pending
against any Party or any of its Affiliates, directors or officers, (i) for the
purpose of enjoining, preventing or restraining the completion of the
transactions contemplated by this Agreement or (ii) which in the result, could
adversely affect the right of the Purchaser to acquire or retain the Loyalty
Shares.
(4 Consents and Authorizations. There shall have been obtained all
Government Authorizations (exclusive of the Governmental Authorizations noted in
Schedule 3.2(30)), exemptions and certificates from all appropriate Governmental
Bodies as are required to be obtained by the Vendors or the Company to permit
the transactions contemplated herein.
(5 Approvals of the Vendors and the Company. At or before Closing, the
Vendors and the Company shall have taken or caused to be taken all necessary or
desirable actions, steps and proceedings, as appropriate, to (i) approve or
authorize the sale and transfer of the Loyalty Shares to the Purchaser and the
execution, delivery and performance of this Agreement and all other agreements
and instruments contemplated herein and therein, and (ii) permit the Loyalty
Shares to be validly transferred to and registered in the name of the Purchaser.
(6 Resignations. There shall have been delivered to the Purchaser
resignations and releases of: (i) each of the Officers who are not paid
employees of the Company, and (ii) each Director required by the Purchaser to
resign at or prior to Closing.
(7 Discharge of Lien. At Closing, AMIG shall deliver to the Purchaser
a full release or discharge of the Electra Pledge.
(8 License Agreements. The Trade-Mark License shall have been amended
and restated as provided in Exhibit G and shall have been executed and delivered
by each of the parties thereto. In addition, there shall have been delivered to
the Company by Air Miles International Trading B.V. ("AMIT") an amended and
restated Scheme License substantially in the form of Exhibit G, except that (i)
it shall deal with the license of the scheme as referred to in the Scheme
License, and not trade-marks; (ii) Articles 3, 4, 5, 6, 9, 11 and 13 of Exhibit
G shall not apply; (iii) the corresponding version in such amended and restated
Scheme License of Section 7.1 of Exhibit G shall deal with any assignment or
transfer by AMIT of such scheme; (iv) the applicable percentage for purposes of
the royalty (in the corresponding version of Section 8.1(ii)) shall be 0.90%,
rather than 0.10%; (v) AMIT shall provide representations and warranties to the
effect of those contained in clauses (i), (ii), (iii), (iv), (v), (vii) and
(viii) of Section 10.1 of Exhibit G , but not the other clauses thereof; (vi)
Section 14.3 of Exhibit G shall not apply; and (vii) the provisions of Section
14.4(2) of Exhibit G shall not apply and a provision shall be added to the
Scheme License stating that if either party terminates the Trade-Mark License,
it may, at its option, terminate the Scheme License. In addition, there shall
have been delivered by AMIG to the Purchaser or any Affiliate thereof that may
be designated by the Purchaser prior to the Closing Time scheme and trade-mark
license agreements executed by AMIT and Air Miles International Holdings N.V.
("AMIH"), as applicable, for the use of the Air Miles(R) scheme and trade-marks
by the Company or such Affiliate in the United States on terms and conditions
consistent with the corresponding such amended and restated License Agreements,
except that such licences shall be royalty free and shall not include any
warranties other than a warranty that the trade marks listed below have been
registered in the U.S. Patent and Trade Mark Office under the registration
numbers shown below, that the registered owner of such trade marks is AMIH and
that, to the knowledge of AMIH, (i) there are no opposition proceedings
currently pending in the U.S. Patent and Trade Mark Office in respect of such
trade marks, (ii) there have been no court proceedings successfully challenging
the validity of such trade marks and (iii) no court proceedings challenging the
validity of such trade marks are currently outstanding:
AIR MILES - (1150603)
AIR MILES TRAVEL THE WORLD (1819474)
AIR MILES TRAVEL THE WORLD (1771774)
(9 Non-Competition Agreement. There shall have been delivered to the
Purchaser non-competition agreements in substantially the form attached as
Exhibit B executed by each of LM Loyalty Management Holdings N.V. (the parent
company of AMIG), Craig Underwood, John Scullion, Bryan Pearson, John Wright,
Lori Russell, Bruce Kerr, Keith Mills and Liam Cowdrey.
(10 Optionholders Share Sale Agreement. The Purchaser shall have
received a Share Sale Agreement from each of the Optionholders who on or before
the Closing Time exercise all or any part of their options to acquire Loyalty
Shares in substantially the form set out in Exhibit C and each such Share Sale
Agreement shall be in full force and effect. Each Optionholder shall have,
concurrently with the closing of the sale of the Loyalty Shares by the Vendors
hereunder, completed the sale to the Purchaser under the Share Sale Agreements
of the Loyalty Shares he or she receives upon exercise of his or her options to
acquire Loyalty Shares.
(11 Termination of Shareholders Agreement. The Shareholders Agreement
shall, effective at the Closing Time, have been terminated.
(12 Legal Opinions. The Purchaser shall have received legal opinions
(which may be from Company's Counsel or in-house counsel to a Vendor) respecting
the existence and due authorization of this Agreement by each Vendor who is a
Person other than an individual, and respecting the due execution, delivery and,
considering strictly the provisions of this Agreement, the enforceability of
this Agreement with respect to each Vendor; such opinions may be based upon
reasonable assumptions and may be subject to customary qualifications.
6.2 CONDITION NOT FULFILLED. If any condition in Section 6.1 has not been
fulfilled by the Closing Time, the Purchaser, in its sole discretion may,
without limiting any rights or remedies available to the Purchaser at law or in
equity, either:
(a terminate this Agreement by notice to the Vendors, in which event
the Purchaser shall be released from its obligations under this
Agreement to complete the purchase of the Loyalty Shares; or
(b waive compliance with any such condition without prejudice to its
right of termination in the event of non-fulfilment of any other
condition.
6.3 VENDORS' CONDITIONS. The Vendors shall not be obliged to complete the
transactions contemplated by this Agreement unless, at or before the Closing
Time, each of the following conditions has been satisfied, it being understood
that the following conditions are included for the exclusive benefit of the
Vendors, and may be waived, in whole or in part, in writing by the Vendors at
any time; and the Purchaser agrees with the Vendors to take all such actions,
steps and proceedings as are reasonably within the Purchaser's control and as
may be necessary to ensure that the following conditions are fulfilled at or
before the Closing Time:
(1 Representations and Warranties. The representations and warranties
of the Purchaser in Section 3.3 shall be true and correct in all material
respects as at the Closing as if made at such time.
(2 Purchaser's Compliance. The Purchaser shall have performed and
complied with all of the terms and conditions in this Agreement on its part to
be performed or complied with at or before the Closing Time and shall have
executed and delivered or caused to have been executed and delivered to the
Vendors at the Closing Time all the documents contemplated in Section 7.3 or
elsewhere in this Agreement.
(3 Consents and Authorizations. There shall have been obtained all
Governmental Authorizations, exemptions and certificates from all appropriate
Governmental Bodies as are required to be obtained by the Purchaser to permit
the transactions contemplated herein.
(4 Approvals of the Purchaser. At or before Closing, the Purchaser
shall take or cause to be taken all necessary desirable actions, steps and
corporate proceedings, as appropriate, to approve or authorize the purchase of
the Loyalty Shares from the Vendors and the execution, delivery and performance
of this Agreement and all other agreements contemplated hereby and the
transactions contemplated herein and therein.
(5 License Agreements. The Company or the Purchaser's designated
Affiliate shall have executed in favour of Air Miles International Trading B.V.
and AMIH, as applicable, the scheme and trade-mark license agreements referred
to in Section 6.1(8).
6.4 CONDITION NOT FULFILLED. If any condition in Section 6.3 shall not have been
fulfilled by the Closing Time, the Vendors in their sole discretion may, without
limiting any rights or remedies available to them at law or in equity, either:
(a terminate this Agreement by notice to the Purchaser in which event
each of the Vendors shall be released from all obligations under this Agreement;
or
(b waive compliance with any such condition without prejudice to its
right of termination in the event of non-fulfilment of any other condition.
ARTICLE 7
CLOSING ARRANGEMENTS
7.1 CLOSING. The Closing shall take place at 10:00 a.m. on the Closing Date at
the offices of Blake, Cassels & Graydon, 23rd Floor, Commerce Court West, 199
Bay Street, Toronto, Ontario, or at such other time on the Closing Date or such
other place as may be agreed orally or in writing by the Vendors and the
Purchaser.
7.2 VENDOR'S CLOSING DELIVERIES. At the Closing, each Vendor shall deliver or
cause to be delivered to the Purchaser the following documents:
(1 the certificate or certificates representing the Loyalty
Shares owned by such Vendor duly endorsed in blank for
transfer;
(2 a certificate of such Vendor to the effect that its
representations and warranties contained in this Agreement are
true and correct at and as of the Closing in all material
respects with the same force and effect as if such
representations and warranties were made at and as of such
time;
(3 in the case of AMIG, certified copies of the resolutions of
the board of directors of AMIG authorizing or approving the
transactions contemplated by this Agreement;
(4 evidence that the consents and authorizations to be obtained
in accordance with Section 6.1(4) and by such Vendor in
accordance with Section 6.1(5) have been obtained;
(5 an opinion or opinions of legal counsel addressed to the
Purchaser and the Purchaser's Counsel substantially in the
form of Exhibit D;
(6 all such other agreements, documents, instruments and
certificates or evidence required or contemplated by this
Agreement to be delivered by such Vendor or as the Purchaser's
Counsel, acting reasonably, considers necessary to validly and
effectively complete the transfer of the Loyalty Shares to the
Purchaser in accordance with this Agreement.
7.3 PURCHASER'S CLOSING DELIVERIES. At the Closing, the Purchaser shall deliver
or cause to be delivered to the Vendors the following documents and payments:
(1 payment of the Base Amount required pursuant to Section 2.4;
(2 a certificate of the Purchaser to the effect that each of its
representations and warranties contained in this Agreement are
true and correct at and as of the Closing in all material
respects with the same force and effect as if such
representations and warranties were made at and as of such
time;
(3 a certified copy of the resolution of the board of directors
of the Purchaser authorizing and approving the transactions
contemplated by this Agreement;
(4 evidence that the consents and authorizations referred to in
Section 6.3(3) have been obtained;
(5 an opinion of Purchaser's Counsel addressed to the Vendors
and their counsel substantially in the form of Exhibit E; and
(6 all such other agreements, documents, instruments and
certificates or evidence required or contemplated by this
Agreement or as counsel to the Vendors, acting reasonably,
considers necessary to complete the transfer of the Loyalty
Shares to the Purchaser in accordance with this Agreement.
ARTICLE 8
GENERAL
8.1 EXPENSES. Each Party shall be responsible for its own legal and other
expenses (including any Taxes imposed on such expenses) incurred in connection
with the negotiation, preparation, execution, delivery and performance of this
Agreement and the transactions contemplated by this Agreement and for the
payment of any broker's commission, finder's fee or like payment payable by it
in respect of the purchase and sale of the Assets pursuant to this Agreement.
For greater certainty, the Selling Shareholders shall be responsible for the
payment of any fees payable by the Company to Nesbitt Burns Inc. and Salomon
Smith Barney Inc. in connection with the completion of the transaction
contemplated by this Agreement.
8.2 PAYMENT OF TAXES. Subject to the following proviso, all transfer Taxes, if
any, incurred in connection with this Agreement and the transactions
contemplated hereby shall be borne by Selling Shareholders, and Selling
Shareholders shall, at their own expense, file all necessary returns and other
documentation with respect to all such transfer Taxes; provided that the
Purchaser shall be responsible for, and shall prepare and file all returns with
respect to, any transfer Taxes imposed under the laws of the United States or
any political subdivision thereof.
8.3 PUBLIC ANNOUNCEMENTS. Except as required by Applicable Laws, including in
the by-laws and rules of any applicable stock exchange (in which case each Party
hereto shall use its reasonable efforts to deliver to the other Parties a copy
of same before such announcement is made), no disclosure, including disclosure
to Employees generally, or public announcement with respect to this Agreement or
any of the transactions contemplated hereby shall be made by any Party without
the prior written consent of the other Parties hereto provided that the Company
may disclose the general subject matter of this Agreement to any of its
Employees, Sponsors or Suppliers and for greater certainty, any Party may
disclose this Agreement to any of its direct or indirect shareholders, to the
extent required to obtain any necessary approvals in connection herewith.
8.4 NOTICES.
(1 Any notice, certificate, consent, determination or other
communication required or permitted to be given or made under this Agreement
shall be in writing and shall be effectively given and made if (a) delivered
personally, (b) sent by prepaid courier service or mail, or (c) sent prepaid by
fax or other similar means of electronic communication, in each case to the
applicable address set out below:
(i if to AMIG, to:
Air Miles International Group B.V.
Koningslaan 34
1075 AD Amsterdam
The Netherlands
Attention: Managing Director
Fax: 011 31 20 664 7747
with a copy to:
Blake, Cassels & Graydon
Commerce Court West
28th Floor
Toronto, Ontario
M5L 1A9
Attention: Mark J. Selick
Facsimile No.: (416) 863-2653
(ii if to the other Vendors, to the addresses set out on
Exhibit A-1,
(iii if to the Purchaser, to:
Alliance Data Systems Corporation
5001 Valley Road
Suite 650, West Tower
Dallas, Texas
75244-3910 U.S.A.
Attention: General Counsel
Facsimile No.: (972) 960-5330
with a copy to:
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York
10111 U.S.A.
Attention: Robert A. Schwed, Esq.
Facsimile No. (212) 841-5725
(2 Any such communication so given or made shall be deemed to have been
given or made and to have been received on the day of delivery if delivered, or
on the day of faxing or sending by other means of recorded electronic
communication, provided that such day in either event is a Business Day and the
communication is so delivered, faxed or sent before 4:30 p.m. local time at the
place of receipt on such day. Otherwise, such communication shall be deemed to
have been given and made and to have been received on the next following
Business Day. Any such communication sent by mail shall be deemed to have been
given and made and to have been received on the fifth Business Day following the
mailing thereof; provided however that no such communication shall be mailed
during any actual or apprehended disruption of postal services. Any such
communication given or made in any other manner shall be deemed to have been
given or made and to have been received only upon actual receipt.
(3 Any Party may from time to time change its address under this
Section by notice to the other Parties given in the manner provided by this
Section.
8.5 TIME OF ESSENCE. Time shall be of the essence of this Agreement in all
respects.
8.6 ENTIRE AGREEMENT. This Agreement, the Exhibits and the Schedules hereto
(together with the Confidentiality Agreement dated June 4, 1998 and the
documents and instruments executed at the Closing Time in connection herewith),
constitute the entire agreement between the Parties pertaining to the subject
matter of this Agreement and supersede all prior agreements, understandings,
negotiations and discussions, whether oral or written. There are no conditions,
warranties, representations or other agreements between the Parties in
connection with the subject matter of this Agreement (whether oral or written,
express or implied, statutory or otherwise) except as specifically set out in
this Agreement, the Exhibits and Schedules hereto, the Confidentiality Agreement
or such other documents and instruments executed at the Closing Time in
connection herewith.
8.7 WAIVER. A waiver of any default, breach or non-compliance under this
Agreement is not effective unless in writing and signed by the Party to be bound
by the waiver. No waiver shall be inferred from or implied by any failure to act
or delay in acting by a Party in respect of any default, breach or
non-observance or by anything done or omitted to be done by the other Party or
Parties. The waiver by a Party of any default, breach or non-compliance under
this Agreement shall not operate as a waiver of that Party's rights under this
Agreement in respect of any continuing or subsequent default, breach or
non-observance (whether of the same or any other nature).
8.8 SEVERABILITY. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such prohibition or unenforceability and shall be severed from
the balance of this Agreement, all without affecting the remaining provisions of
this Agreement or affecting the validity or enforceability of such provision in
any other jurisdiction.
8.9 FURTHER ASSURANCES. Each Party shall promptly do, execute, deliver or cause
to be done, executed and delivered all further acts, documents and things in
connection with this Agreement that any other Party may reasonably require for
the purposes of giving effect to this Agreement.
8.10 ATTORNMENT. For the purpose of all legal proceedings this Agreement shall
be deemed to have been performed in the Province of Ontario and the courts of
the Province of Ontario shall have jurisdiction to entertain any action arising
under the Agreement. Each of the Vendors and the Purchaser hereby attorn and
submit to the jurisdiction of the courts of the Province of Ontario.
8.11 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable in that Province and shall be treated, in all respects, as an Ontario
contract.
8.12 SUCCESSORS AND ASSIGNS. This Agreement shall enure to the benefit of, and
be binding on, the Parties and their respective successors and permitted
assigns. No Party may assign or transfer, whether absolutely, by way of security
or otherwise, all or any part of its respective rights or obligations under this
Agreement without the prior written consent of the other Parties; provided,
however, that (A) Purchaser may assign without the consent (written or
otherwise) of any of the other Parties, this Agreement (i) by way of security
and/or grant a collateral security interest in the Purchaser's rights under this
Agreement to one or more banks or financial institutions or other lenders to
secure repayment to such lenders of amounts loaned by such lenders to Purchaser,
and/or (ii) to any direct or indirect wholly-owned subsidiary of the Purchaser,
provided however that such subsidiary executes an assumption agreement in favour
of each of the other Parties agreeing to be bound by the obligations of the
Purchaser hereunder and provided further that any such assignment shall not
relieve the Purchaser of its obligations hereunder, and (B) each of the Parties
consents to Electra becoming the registered and beneficial holder of the Loyalty
Shares held by EUK Limited subject to Electra executing an assumption agreement
in favour of each of the other Parties agreeing to be bound by all of the
obligations of EUK Limited hereunder.
8.13 COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which taken together
shall be deemed to constitute one and the same instrument. Counterparts may be
executed either in original or faxed form and the Parties adopt any signatures
received by a receiving fax machine as original signatures of the Parties;
provided, however, that any
- -
Party providing its signature in such manner shall promptly forward to the other
Parties an original of the signed copy of this Agreement which was so faxed.
IN WITNESS WHEREOF the Parties have executed this Agreement.
ALLIANCE DATA SYSTEMS CORPORATION
Per:
Name:
Title:
AIR MILES INTERNATIONAL GROUP B.V.
Per:
Name:
Title:
EUK LIMITED
Per:
Name:
Title:
BANK OF MONTREAL
Per:
Name:
Title:
------------------------------------------
CRAIG UNDERWOOD
- -
------------------------------------------
JOHN SCULLION
------------------------------------------
BRYAN PEARSON
------------------------------------------
JOHN WRIGHT
------------------------------------------
LORI RUSSELL
------------------------------------------
BRUCE KERR
Exhibit 10.1
CREDIT CARD PROCESSING AGREEMENT
This Credit Card Processing Agreement is made as of this
31st day of January, 1996 between WORLD FINANCIAL NETWORK NATIONAL BANK, a
national banking association (the "BANK"), and Bath & Body Works, Inc., a
Delaware corporation (the "CORPORATION"), and Tri-State Factoring, Inc., a
Nevada corporation ("FACTORING") (the Corporation and Factoring being
collectively referred to herein as the "COMPANY").
WHEREAS the Company and the Bank believe that it is
desirable and in their respective best interests for the Bank to continue, in
a manner generally consistent with past practices, to issue credit cards
bearing the trade names, trademarks, logos and service marks used in the
Company's Bath & Body Works retail or catalogue business (the "BUSINESS")
which will allow the customers of the Company to purchase goods from the
Company using funds advanced by the Bank; and
WHEREAS in order to implement such arrangements, the
parties hereto desire to enter into this Agreement;
NOW, THEREFORE, the parties hereby agree as follows:
Section 1. TRADEMARKS. The Company hereby authorizes the Bank to use
the trademark "Bath & Body Works" on credit cards owned or issued by the Bank,
monthly billing statements, collection correspondence, credit card agreements,
credit applications, customer service Correspondence and in such other written
and oral communications with cardholders as are necessary or convenient in
connection with this Agreement, in each case consistent with past practices. The
Bath & Body Works" trademark is referred to herein as the "MARK". The Company
shall have the right to approve in its sole discretion the "art" (including
colors and font styles) for all proposed uses of the Mark by the Bank. The Bank
shall not use the Mark for any purpose other than as set forth in the first
sentence of this Section 1.
Section 2. CREDIT CARD SYSTEM.
2.1. NEW CREDIT CARDS.
2.1.1. ISSUANCE OF CREDIT CARDS. To the extent requested by the
Company, the Bank will issue credit cards bearing the Mark ("CREDIT CARDS") to
customers of the Business who apply for such Credit Cards and related extensions
of credit. Such customers (i) must qualify for
the extension of credit under credit standards related to new account approvals,
credit limits and authorization management ("CREDIT STANDARDS") which will be
determined by the Bank from time to time and (ii) must accept the Bank's
standard form of credit card agreement containing the terms and conditions
governing extensions of credit to Persons who hold Credit Cards and their
authorized users (attached hereto as Exhibit 2.1.1(a)). Notwithstanding the
foregoing, (i) the Credit Standards established by the Bank from time to time in
connection with the issuance of Credit Cards for use in connection with the
Business shall be consistent with past practices (as described in Exhibit
2.1.1(b)), with such changes as shall be (A) approved by the Company in its
reasonable discretion or (B) determined by the Bank in good faith to be
necessary from the standpoint of safe and sound banking practices and (ii) the
Bank may make any change in the terms of its agreement with any person who holds
a Credit Card (including repayment terms, fees and finance charge rates) after
prior notice to and consultation with the Company. The Bank hereby confirms its
understanding that the Company intends to offer and promote credit as outlined
in Section 2.2. The Bank will bear the costs of the issuance of Credit Cards
under this Section 2.1.
2.1.2. CREDIT MAXIMIZATION. The Company will be entitled to
use credit related promotional strategies consistent with past practices. The
Bank will work in good faith with the Company to develop business strategies
with respect to the issuance of Credit Cards intended to maximize the
potential of the Business and, in that regard, will consider in good faith
proposals involving variances from the Bank's general Credit Standards or
changes in the terms of the Bank's agreement with any person who holds a
Credit Card; PROVIDED that subject to compliance with the provisions of
Section 2.1.1, Credit Standards and the terms of such agreement shall in all
circumstances be determined by the Bank. The terms of any program involving
variances from the Bank's general Credit Standards or changes in the terms of
the Bank's agreement with any person who holds a Credit Card, including
(without limitation) fees or other charges to be paid by either party, shall
be agreed on a program-by-program basis.
2.2. PROMOTION. The Company will use its reasonable efforts to promote
the use of Credit Cards in the Business and to acquire new Cardholders (as
defined below), for the Bank through the use of, for example, "instant credit,"
"quick credit," preapproved solicitations, applications and promotional material
displayed in stores and inserted in catalogues and special offers to
Cardholders, in each case consistent with past practices. The costs incurred by
the Company and the Bank (including, among other things, the cost of printing
application forms,
2
promotional material, pre-approved solicitations and instant and quick credit
contracts and the cost of special offers) will be borne by the Company and the
Bank on terms to be negotiated from time to time in a manner consistent with
past practices. The Bank shall have two Business Days to review for legal
compliance all credit application forms and marketing materials (including,
without limitation, those referred to above) prior to their being printed.
Section 3. ACCEPTANCE OF CREDIT CARDS. The Company will permit Persons
who hold Credit Cards (subject to the restrictions of this Agreement) or other
credit cards owned by the Bank that the Bank has designated and their authorized
users ("CARDHOLDERS") to purchase goods sold by the Business without any cash
payment by use of a Credit Card, subject to the following conditions:
3.1. CHARGE SLIP (CREDIT CARD PRESENTED). If the customer presents a
Credit Card at the time of sale, the Company will maintain a record of the sale
in a form acceptable to the Bank which reflects the following:
3.1.1 A brief identification of the property or service purchased
(the "TRANSACTION");
3.1.2 The date of the Transaction;
3.1.3. The dollar amount of the purchase price of the merchandise or
service which was the subject of the Transaction, including applicable
shipping, handling and taxes;
3.1.4. An imprint or electronic capture of the Credit Card account
number or, in the event of equipment malfunction, a written notation of such
account number; and
3.1.5 The Cardholder's signature.
3.2. CHARGE SLIP (CREDIT CARD NOT PRESENTED). The Bank acknowledges
and agrees that a Cardholder need not present a Credit Card at the time of sale
and that, subject to Section 3.5, the Company may accept charges to a Credit
Card verbally from the customer or via a written order form from the customer.
If the customer does not present a Credit Card at the time of sale, the Company
will maintain a record of the sale in a form acceptable to the Bank which
reflects, in lieu of the information set forth in Section 3.1.1 through 3.1.5,
the following:
3.2.1. A brief identification of the Transaction;
3.2.2. The date of the Transaction;
3
3.2.3. The dollar amount of the purchase price of the merchandise or
service which was the subject of the Transaction, including applicable shipping,
handling and taxes;
3.2.4. A written notation of the Credit Card account number, which
shall have been obtained from the customer and recorded in the Company's
customer file;
3.2.5. The customer's name and address and, except in the case of
catalogue purchases, personal identification type and number; and
3.2.6. If applicable, the name and address to where the merchandise
which was the subject of the Transaction was shipped and the date and method of
shipment.
3.3. RETENTION OF CHARGE SLIP. The Company will retain a legible
copy of each charge slip for six months following the date of the Transaction
and will provide such copy to the Bank within 30 days of the Bank's request
therefor; PROVIDED that the Bank will request delivery of such information
only in the case of a bona fide dispute (the existence of such dispute to be
determined by the Bank in its reasonable discretion) relating to the
underlying Transaction, upon the inquiry of the applicable Cardholder or as
requested by auditors of the Bank in connection with their audit of the
Bank's financial statements or by any governmental authority.
3.4. AUTHORIZATION. The Transaction is authorized by the Bank in
accordance with the floor limits and other procedures in effect at the time or
such authorization is dispensed with under rules established by the Bank from
time to time in accordance with Section 8.3 to deal with situations in which
authorization is not available because of disruption of the Bank's computer
system or other causes provided for in such rules, consistent with past
practice.
3.5. CHARGEBACKS. 9The Company agrees to accept as a chargeback any
charge on a Credit Card where:
3.5.1. The Cardholder disputes the charge and the Company fails to
provide a legible copy of the charge slip within 30 days of the Bank's request
therefor in accordance with Section 3.3;
3.5.2. The Company failed to obtain authorization from the Bank in
accordance with Section 3.4;
3.5.3. The Company failed to complete the charge slip in accordance
with Section 3.1 or 3.2, as applicable;
4
3.5.4. A Company employee fraudulently misused the Credit Card or
account number;
3.5.5. A dispute arises from the Cardholder being charged or
credited more than once for the same sale, payment or return;
3.5.6. A dispute with the Cardholder arises from a voided
Transaction or an invalid Credit Card account number;
3.5.7. A dispute with the Cardholder arises from an improperly opened
Credit Card account, or the account is otherwise uncollectible, where a Company
employee failed to comply with new account procedures in effect at the time the
account was opened;
3.5.8. The Bank, consistent with past practices, gives the Cardholder
credit for (or accepts as payment) a non-expired discount coupon or gift
certificate in respect of a prior purchase; or
3.5.9. A dispute arises from the Company's failure properly to identify
a catalogue purchaser as the Cardholder where such failure results in
merchandise being shipped without the actual Cardholder's authorization.
The amount charged back with supporting detail will be invoiced to the
Company weekly, and all required payments by the Company shall be made within 30
days after receipt of an invoice. If the Company pays the Bank any chargeback
amount pursuant to this Section 3.5 or if such payment is netted against amounts
payable by the Bank pursuant to Section 4.1.1, any remittances relating to such
chargeback from the Cardholder subsequently collected by the Bank shall, to the
extent not refunded to the Cardholder, be credited by the Bank to the Company.
Section 4.Payment.
4.1 PAYMENT BY BANK
4.1.1. The Bank will pay to the Company, as full consideration for any
Transaction between the Company and any Cardholder using a Credit Card, as to
which the Company has complied with the provisions of Section 3 above, the
amount shown on the records of the Company for each Transaction, including all
applicable shipping, handling and taxes, less a discount, which discount shall
be equal to the discount rate determined in accordance with Section 4.1.5
(expressed as a fraction) multiplied by the amount shown on the records of the
Company for each Transaction (exclusive of all applicable shipping, handling and
taxes).
5
4.1.2. The Bank will pay such amount by transferring immediately
available funds to an account designated by the Company at any bank to which the
Bank may make electronic fund transfers before the end of the second Business
Day following the receipt by the Bank of the information required by Section 3.1
or 3.2, such information to be properly formatted and edited and transferred via
a telecommunications connection between the Company and the Bank pursuant to
such computer programs and telecommunications protocols as the Bank may, in its
reasonable discretion, designate from time to time, subject to reasonable prior
notice. The Company will transmit (in the manner referred to above) to the Bank
an audited and balanced file in the format specified by the Bank containing all
such information within two Business Days after the occurrence of the underlying
Transaction; PROVIDED that if, as a result of technical disruptions, any store
locations are not polled within a normal period after the occurrence of the
underlying Transactions, the Company will transmit such information relating to
such store locations as soon as reasonably practicable after polling is
completed.
4.1.3 The Company may not attempt to collect any amount from a
Cardholder with respect to a Transaction which has been paid for by the Bank
under this Section 4.1 and not charged back to the Company pursuant to Section
3.5.
4.1.4. The Company will, consistent with past practices, accept
payments from Cardholders for amounts due on Credit Cards ("IN-STORE PAYMENTS").
Any In-Store Payments received by the Company will be held in trust for the Bank
and its assigns and netted against amounts payable by the Bank pursuant to
Section 4.1.1. (PROVIDED that the Company shall not be required to keep In-Store
Payments separate from other payments received by the Company) and evidence of
such payments will be transmitted to the Bank on a daily basis in accordance
with the procedures set forth in Section 4.1.2. Notwithstanding the foregoing:
(a) if any bankruptcy or other insolvency proceeding has been commenced
against the Company (and so long as the same has not been dismissed), the
Company shall promptly comply with any written instruction (a "STORE PAYMENT
NOTICE") received by the Company from the Bank or any successor to the Bank as
"Servicer" under the Pooling and Servicing Agreement referred to below (the Bank
or any such successor being the "SERVICER") to take either of the following
actions (as specified in such instruction):
(i) cease accepting In-Store Payments and thereafter inform Cardholders
who wish to make In-Store Payments that payment should instead be sent to
Servicer (but only if the Servicer is required by the
Pooling and Servicing Agreement to give such notice); or
(ii) (A) deposit an amount equal to all In-Store Payments
received by each retail location operated by the Company, not later
than the Business Day following receipt, into a segregated trust
account (the "STORE ACCOUNT") established by the Company for this
purpose and, pending such deposit, to hold all In-Store Payments in
trust for the Bank and its assigns, (B) use commercially reasonable
efforts not to permit any amounts or items not constituting In-Store
Payments to be deposited in the Store Account and (C) cause all
available funds in each Store Account to be transferred on a daily
basis to an account designated in the Store Payment Notice;
PROVIDED that the Company need not take the actions specified in clause (i) or
clause (ii) if the Company or any of its affiliates provides the Servicer or the
Trustee under (and as defined in) the Pooling and Servicing Agreement with a
letter of credit, surety bond or other similar instrument covering collection
risk with respect to In-Store Payments and all conditions specified in the
Pooling and Servicing Agreement with respect to such letter of credit, surety
bond or other similar instrument are satisfied;
(b) if and to the extent that the Bank so requests in writing at a time
when the Bank is required by the Pooling and Servicing Agreement to make such
request, In-Store Payments shall no longer be netted against amounts payable by
the Bank pursuant to Section 4.1.1, but instead the Company shall transfer to
the Bank by wire transfer of immediately available funds (or, if the aggregate
amount to be transferred pursuant to this clause (b) and Section 4.2 is less
than $10,000, by check), not later than the third Business Day following receipt
of any In-Store Payments, an amount equal to the sum of such in-Store Payments.
So long as the Company complies with instructions delivered in accordance with
paragraph (a) or (b), any amounts payable by the Bank pursuant to Section 4.1.1
shall be made without deduction for In-Store Payments.
For purposes of the foregoing, the "POOLING AND SERVICING AGREEMENT"
means the Pooling and Servicing Agreement dated as of January 17, 1996 among the
Bank and The Bank of New York, as trustee, including each Supplement thereunder,
as the same may be amended, supplemented or otherwise modified from time to
time, except that no amendment, supplement or other modification to such
Agreement that affects the circumstances in which the Company may be required to
take the actions referred to in
7
paragraph (a) or (b) above or in section 4.2.3 shall be given effect for
purposes of this Agreement unless consented to by the Company.
4.1.5. DISCOUNT RATE. The applicable discount rate referred to in
Section 4.1.1 shall be the then applicable discount rate determined in
accordance with the matrix set forth in Exhibit 4.1.5; PROVIDED that in the
event of a legislated or judicial reduction in the annual percentage rate or
fees that may be charged by the Bank to Cardholders, the Company and the Bank
agree to negotiate in good faith an increase in the discount rate.
4.2. PAYMENT BY COMPANY. If the Bank has paid the Company for any
Transaction and
4.2.1. If :
(a) the representations and warranties of the Company with respect to
such Transaction, as set forth in Sections 5.1 through 5.3 below, are not true
in all material respects; or
(b) any merchandise which was the subject of such Transaction is
returned to the Company and the Company, pursuant to its policies concerning
returned merchandise, accepts such merchandise for credit; or
(c) in order to settle a dispute concerning the nature, quality or
quantity of goods purchased from the Company with the Credit Card, the Company
agrees to refund all or part of the purchase price thereof; then
4.2.2 The Company:
(a) shall pay the Bank an amount equal to the face amount of such
Transaction or portion thereof refunded to the customer, less any discount
actually taken by the Bank when it made payment to the Company in consideration
for such Transaction pursuant to Section 4.1.1;
(b) shall create a written memorandum of such Transaction setting forth
the information required by Section 3 above (a "CREDIT MEMORANDUM");
(c) shall transmit the information contained in such Credit Memorandum
to the Bank by the method of electronic transmission referred to in Section
4.1.2 above; and
(d) subject to Section 4.2.3, shall permit the payment required by this
Section 4.2 to be netted against amounts payable by the Bank pursuant to Section
4.1.1. The
8
Company shall retain any such Credit Memorandum in the same manner and for the
same time as the charge slip referred to in Section 3.3 and shall promptly
deliver any such Credit Memorandum to the Bank upon its request. If the Company
pays the Bank any amount for a Transaction pursuant to this Section 4.2 or if
such payment is netted against amounts payable by the Bank pursuant to Section
4.1.1, any remittances relating to such Transaction from the customer
subsequently collected by the Bank shall, to the extent not refunded to the
Cardholder, be credited by the Bank to the Company.
4.2.3. Notwithstanding clause (d) of Section 4.2.2, if and to the
extent that the Bank so requests in writing at a time when the Bank is required
by the Pooling and Servicing Agreement to make such request, amounts payable by
the Company pursuant to Section 4.2 ("ADJUSTMENT PAYMENTS") shall no longer be
netted against amounts payable by the Bank pursuant to Section 4.1.1, but
instead the Company shall transfer the amount of each Adjustment Payment to the
Bank by wire transfer of immediately available funds (or, if the aggregate
amount to be transferred pursuant to this Section 4.2 and clause (b) of Section
4.1.4 is less than $10,000, by check), not later than the second Business Day
following the date on which the events giving risk to such Adjustment Payment
occur (and amounts payable by the Bank pursuant to Section 4.1.1 shall be made
without deduction for Adjustment Payments).
4.3. OTHER FEES.
4.3.1. DEFERRED PAYMENT. If any Transaction between the Company and any
Cardholder using a Credit Card is consummated on a deferred payment basis (for
which the period of deferral may not exceed 90 days), then for each month during
the period of deferral, the Company will pay the Bank an amount equal to the
Deferred Payment Rate for such month multiplied by the average daily balance of
purchase price so deferred during such month. For purposes of this Section 4.3,
"DEFERRED PAYMENT RATE" means, for any month, (i) if the debt of the Bank has an
implied investment grade rating at all times during such month, the average
interest rate paid by the Bank to obtain funds during such month, and (ii) if
the debt of the Bank does not have an implied investment grade rating at all
times during such month, the then-current reference rate or index maintained or
provided by a nationally recognized investment banking firm (which firm shall be
reasonably acceptable to the Company and the Bank) in respect of issuers whose
debt has the lowest investment grade rating.
4.3.2. POSTAL RATE ADJUSTMENT. The Company agrees to reimburse the Bank
for any costs incurred by the
9
Bank as a result of changes in postal rates or rules applicable to mailings to
Cardholders after the date hereof; PROVIDED that the postal costs and postal
discounts applicable to mailings to Cardholders shall be no less favorable than
the postal costs and postal discounts applicable to comparable mailings to
holders of any other credit cards issued by the Bank. The Bank and the Company
agree to use their reasonable efforts to minimize postal costs and maximize
postal discounts.
4.3.3. SPECIAL PROJECTS. With respect to special services provided by
the Bank from time to time with respect to the Business (including, without
limitation, consulting, surveys, gift certificate calls and fulfillment, rebate
fulfillment, telemarketing and special processing or accounting reports required
in connection with promotional activities), the Company will pay to the Bank
amounts to be agreed on a program-by-program-basis. To the extent not otherwise
provided for in this Agreement, (i) the Bank shall not incur expenses required
to be paid or reimbursed by the Company for any project in amounts in excess of
$1,000 without having first obtained prior written or oral authorization from
the Company for such expenses; and (ii) the Bank shall not incur expenses
required to be paid or reimbursed by the Company for any project in amounts in
excess of $50,000 without having first obtained prior written authorization from
the Company for such expenses; PROVIDED that, in the event any terms of any such
written authorization are in conflict with the terms of this Agreement, the
terms of this Agreement shall be controlling.
4.3.4. PAYMENTS. All amounts payable by the Company under this Section
4.3 shall be paid by wire transfer of immediately available funds within 30 days
after receipt of an invoice for such amounts.
4.4. SETOFFS. The Bank may at any time, in addition to all other rights
and remedies available to it, setoff against any amount owing to the Company by
the Bank under this Agreement, any amounts owing by the Company to the Bank
under this Agreement.
4.5. INVOICE. The amount of any invoice prepared and delivered by the
Bank under this Agreement shall be deemed to be correct, accurate and binding
upon the Company if the Company makes no objection within 30 days after the date
of such invoice; PROVIDED that the making of any objection shall not relieve the
Company of its obligation to make full payment of the amount set forth on the
related invoice when such amount is otherwise payable pursuant to this Section
4, it being understood that the Company does not waive its rights thereby and
may, subject to Section
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10.4, assert a claim with respect to such invoice in an appropriate
proceeding.
Section 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Bank that:
5.1. VALID TRANSACTIONS. Each Transaction will be completed in
compliance with the provisions of Section 3 and will create a valid, binding and
legally enforceable obligation of the Cardholder whose name is shown on the
Credit Card to pay to the Company the amount shown on the charge slip, which
obligation to the Company will be discharged in full by the payment made to the
Company by the Bank in respect of such Transaction under Section 4.1 above.
5.2. ACCURATE INFORMATION. Each charge slip will accurately reflect the
Transaction described therein. Each charge slip and Credit Memorandum and any
charge slip or Credit Memorandum information transmitted to the Bank by the
Company will be complete and accurate and in a form deemed necessary by the Bank
to allow Cardholder billing in accordance with applicable law. The Company will
accurately report all returns and other credits to the Bank within the time
period specified in Section 4.
5.3. NO LIENS. No amount due to the Company with respect to any
Transaction will be subject to any lien or encumbrance in favor of any third
party or to any offset, counterclaim or defense of any Person other than the
Bank or its Affiliates.
5.4. MARK. The use of the Mark by the Bank under this Agreement does
not infringe the rights of any other Person.
Section 6. REPRESENTATIONS AND WARRANTIES OF THE BANK. The Bank hereby
represents and warrants to the Company that:
6.1. COMPLIANCE WITH LAWS. Each Credit Card and the related credit card
agreement, all monthly billing statements and any collection efforts of the Bank
conform and will conform in all material respects with all federal or state laws
or regulations applicable to the extension of credit to or the collection of
amounts from consumers including, without limitation, the Truth-in-Lending Act,
the Equal Credit Opportunity Act, the Fair Credit Reporting Act and federal and
state bankruptcy and debtor relief laws ("CONSUMER LAWS").
6.2 NON-CONTRAVENTION. The performance by the Bank of its obligations
under this Agreement will not
11
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, any agreement or instrument to which the Bank is
party or by which the Bank is bound, nor will such performance result in any
violation of the provisions of the articles of association or the by-laws of the
Bank or any applicable law or statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the Bank.
Section 7. COVENANTS OF THE COMPANY. The Company hereby covenants
and agrees with the Bank as FOLLOWS:
7.1. CREDIT-CARD NOTICES AND COMMUNICATIONS. The Company will,
consistent with past practices, accept and turn over to the Bank promptly upon
receipt thereof by the Company (i) subject to Section 4.1.4, any payments made
by any Cardholder with respect to any Transaction or any Credit Card and (ii)
any notices or other communications received by the Company with respect to any
Credit Card including, without limitation, customer changes of address and other
information on approved forms.
7.2. COMPLIANCE WITH APPLICABLE LAW. The Company will, at all times,
comply in all material respects with all Consumer Laws.
7.3. RULES. The Company shall comply with such written rules and
operating instructions relating to the use of the Credit Cards, the distribution
of applications, Credit Card security, authorization procedures, "downtime"
procedures and other matters related to this Agreement as the Bank may, from
time to time, promulgate with prior notice to the Company; PROVIDED that such
rules and operating instructions shall be consistent with past practices, with
such changes as shall be approved by the Company in its reasonable discretion.
7.4. CARDHOLDER INQUIRIES AND COMPLAINTS. If a Cardholder makes an
inquiry or complaint to the Company about the nature, quality or quantity of
goods purchased from the Company with a Credit Card, or a Cardholder has made
an inquiry or complaint to the Bank concerning the nature, quality or
quantity of goods purchased from the Company with a Credit Card, the Company
shall deal directly with the Cardholder to resolve any such complaint or
inquiry. The Company shall answer all inquiries from the Bank about
complaints made to the Bank by Cardholders within 10 days after the Company
receives an inquiry from the Bank.
7.5. EQUIPMENT. The Company shall obtain and maintain at its own
expense such point of sale and authorization terminals, credit card imprinters
and other
12
items of equipment as are necessary for it to receive authorizations, transmit
charge slip and Credit Memorandum information, process credit applications
and perform its obligations under this Agreement. Such point of sale and
authorization terminals shall be capable of communicating with the computer
equipment maintained by the Bank according to such computer programs and
telecommunications protocols as may be specified by the Bank in its
reasonable discretion from time to time subject to reasonable prior notice of
any change in such equipment or protocols.
7.6. EXCLUSIVITY. The Company may not accept promote any credit card
as and Credit Memorandum information, processpayment for its goods or services
unless such credit applications and card is Credit Card, perform its a
proprietary credit obligations under this Agreement. Such point of sale and
authorization terminals shall be card of another division of the Company or any
Affiliate of the Company (whether or capable of communicating with the computer
equipment maintained by the not issued by the Bank) or a credit card issued by a
bank or other Person engaged in the Bank business according to such computer
programs and of issuing credit cards to Persons for telecommunications protocols
the purpose of making payments to third parties generally as may be specified by
under such the Bank in names as Master its reasonable discretion from time to
time Card, Visa, Discover, American Express subject to or Optima. reasonable
prior notice The Company may of any change in not issue its own credit such
equipment or protocols. cards or enter into an agreement with any third party
under which credit cards bearing the Mark are issued; PROVIDED that after the
second anniversary of the date hereof, the Company shall be entitled to
negotiate with any third party with respect to the issuance of co-branded or
affinity bank credit cards bearing the mark and to accept any Bona Fide Offer by
such third party if, at least 30 days prior to accepting such Bona Fide Offer,
the Company provides the Bank with an opportunity to submit a competing offer
with respect to the issuance of co-branded or affinity bank credit cards bearing
the Mark, which competing offer, if it has terms at least as favorable to the
Company as such Bona Fide Offer, shall be accepted by the Company in lieu of
such Bona Fide offer. For purposes of this Section 7.6, "BONA FIDE OFFER" means
an offer to the Company with respect to a program of at least two years'
duration for the issuance of co-branded or affinity bank credit cards that is,
in the Company's reasonable judgment, generally competitive in light of
marketplace conditions existing at the time (such marketplace conditions to
include, without limitation, other offers with respect to co-branded or affinity
bank credit cards being made to the Company, its Affiliates and other retail or
catalogue merchants).
7.7. OBSOLETE MATERIALS. The Company shall reimburse the Bank for the
cost of replacing reasonable amounts of obsolete forms and other materials if
such replacement is requested by the Company due to changes in the Mark or in
the logo, colors or styles used to identify or promote the Business.
13
Section 8. COVENANTS OF THE BANK. The Bank hereby covenants and agrees
with the Company as follows:
8.1. COMPLIANCE WITH APPLICABLE LAW. The Bank will, in issuing,
billing, administering, and collecting with respect to the Credit Cards and at
all other times, comply in all material respects with all Consumer Laws.
8.2. COLLECTION. The Bank will use efforts to collect from each
Cardholder the purchase price and additional taxes and other charges of
Transactions consistent with past practices and with its efforts to collect
accounts receivable under other credit cards issued by it; PROVIDED that the
Bank will initiate collection of any account receivable under a Credit Card at
or before the time such account receivable is 60 days past due. The Bank will,
consistent with past practices, determine the use and timing of dunning letters,
statement messages and collection agents and will manage all written-off
accounts (including, without limitation, the management of outside collection
agencies). The Bank may implement reasonable variances from past collection
practices after prior notice to and consultation with the Company.
8.3. PERFORMANCE STANDARDS. In performing its obligations under this
Agreement, subject to Section 12.11, the Bank shall comply with the performance
standards set forth in Exhibit 8.3, as such performance standards may be
modified from time to time at the reasonable request of the Bank or the Company.
Within 10 days after the end of each fiscal month, the Bank will deliver to the
Company a compliance certificate of the chief executive officer or chief
financial officer of the Bank setting forth in reasonable detail data
demonstrating compliance during such calendar month with such performance
standards. Enhancements to, and modifications or upgrades of, the computer
processing, payment, billing and information services provided by the Bank will
be made from time to time at the reasonable request of the Company. Any such
enhancements, modifications or upgrades shall, to the extent requested by the
Company, be made on terms to be agreed upon.
8.4. FORCE MAJOR EVENT. After the occurrence of a Force Majeure Event
(as defined in Section 12.11) which disrupts the availability of the services
provided hereunder, the Bank may elect to reestablish the availability of such
services. If any such Force Majeure Event comparably disrupts the performance of
services similar to the services provided hereunder with respect to one or more
other credit cards issued by the Bank, then the Bank shall reestablish the
availability of such services to the same extent and within the same timetable
under
14
comparable circumstances as the comparable services are reestablished with
respect to such other credit cards. The Bank shall promptly notify the Company
of any Force Majeure Event and shall inform the Company whether it will
reestablish services and the timetable therefor. If the Bank chooses not to
reestablish or take measures to reestablish such services within a reasonable
period of time as would be indicated by sound business practice, the Company
shall be free to obtain such services from any supplier thereof.
Section 9. PROPERTY RIGHTS.
9.1. RIGHTS OF THE COMPANY. The Company is the owner of the names and
addresses of customers of the Business; provided that (i) as set forth in
Section 9.2, the Bank is also the owner of such information with respect to
customers of the Business who are also Cardholders and (ii) The Limited, Inc.
("THE LIMITED") is also the owner of such information with respect to customers
of the Business until the second anniversary of the date, if any, on which the
Company ceases to be an Affiliate of The Limited.
9.2. RIGHTS OF BANK. Except as set forth in Section 9.1, the Bank is
the owner of all information relating to the Cardholders (including names and
addresses) and the Credit Cards, the copyright to all written material contained
in any credit card agreements, applications, billing statements and other forms
used by the Bank in the administration of its agreements with the Cardholders,
all credit scoring systems and all policies of credit insurance issued to the
Bank with respect to any Cardholder; PROVIDED that the Bank shall not be
entitled to sell, rent or otherwise disclose any information relating to the
Cardholders to any third party other than (i) Affiliates of the Company, (ii)
Persons who, in the sole judgment of The Limited, do not compete, directly or
indirectly, with any retail or catalogue business conducted by The Limited or
any of its Affiliates and (iii) in the case of disclosure, credit agencies.
Subject to Section 9.3, the Company will not have any rights in any information
or property of the Bank; PROVIDED that the Bank will provide the Company with
such information the Bank owns with respect to Cardholders as the Company may
reasonably request in order to develop potential marketing or credit strategies.
9.3. DATABASE. (a) it is the intention of the parties that the Bank
will manage, maintain and develop an information marketing database (the
"DATABASE") at its own expense, subject to a mutually satisfactory agreement
with the Company pursuant to which (i) the Company will agree to utilize the
Database, (ii) the Database will be accessible from the Company's offices and
(iii) the Bank will provide
15
the Company with information maintained as part of the Database on terms that
are no less favorable than those offered by the Bank to any other recipient of
comparable information.
(b) Notwithstanding the foregoing, the Bank will, from time to time at
the request of the Company, and without charge, promptly provide the Company
with a list of the names and addresses of all Cardholders, all holders of other
proprietary credit cards of the Company or any Affiliate of the Company (if
issued by the Bank) and all other customers of the Business, any other business
of the Company and the business of any other Affiliate of the Company. The
Company shall reimburse the Bank for its costs of producing and shipping such
list in the format required by the Company within 30 days after receipt of a
request for such reimbursement from the Bank.
(c) Subject to Section 9.2, the Bank may make the Database available,
and provide information marketing services to, third parties on terms reasonably
determined by the Bank; PROVIDED that (i) the allocation among the Bank, the
Company and The Limited of fees charged by the Bank to such third parties shall
be agreed on a program-by-program basis or, in the case of programs existing on
the date hereof, continued consistent with past practices and (ii) the Bank may
not make the Database available, or provide information marketing services to,
any Person who, in the sole judgment of The Limited, competes, directly or
indirectly, with any retail or catalogue business conducted by The Limited or
any of its Affiliates.
9.4 ENVELOPE STUFFING
9.4.1. Subject to the right of the Bank to include in mailings to
Cardholders periodic billing statements and any legal notices which the Bank
believes are necessary or appropriate to send to Cardholders, the Company shall
have the right to have materials advertising its products and services included
in the envelopes containing the periodic statements. Such materials shall
advertise only products and services related to the Business, shall (unless the
Company provides the Bank with notice as provided below) be limited to seven
panels per envelope and shall conform to size requirements established from time
to time by the Bank with reasonable prior notice of any changes. The Company
shall use reasonable efforts (i) to notify the Bank at least 15 days before the
proposed date of any such inclusion and shall provide the Bank with a draft copy
of any such advertising material at the time it notifies the Bank of such
mailing and (ii) to provide the Bank with a seasonal marketing plan at least 30
days before the beginning date of each Season. The Company shall
16
provide the Bank with the materials to be included in the mailing not less than
two Business Days prior to the initial insertion date. If the Company does not
notify the Bank of any such inclusion at least seven days before the proposed
date of such inclusion or if the material included does not take up the
available space, the Bank may utilize the space remaining inside the envelopes
for its own purposes; PROVIDED that (i) unless the Company provides the Bank
with notice at least 45 days before the proposed inclusion date of the Company's
intent to utilize more than seven panels per envelope, the Bank shall be
entitled to utilize at least three panels (or two panels and one "bangtail",
remittance envelope) per envelope for its own purposes and (ii) all materials
included by the Bank shall be subject to the approval of the Company, which
approval shall not be unreasonably withheld.
9.4.2. The Bank shall have the exclusive right to include in any
mailing to Cardholders materials advertising products and services not related
to the Business and the allocation between the Bank and the Company of the
revenues generated thereby shall be agreed on a program-by-program basis or, in
the case of programs existing on the date hereof, continued consistent with past
practices; PROVIDED that such products and services and the related advertising
materials shall be subject to the approval of the Company, which approval shall
not be unreasonably withheld or delayed (it being understood that the Company
may withhold such approval if it determines in its sole discretion that the
advertising of such products or services is inconsistent with the image of the
Business).
9.4.3. Notwithstanding the foregoing, (i) the Bank shall have the right
to use its own "bangtail" remittance envelopes to promote credit life insurance
to existing Cardholders no more than four times per year or two times per Season
and (ii) all materials used, or sent to Cardholders, by the Bank under existing
programs of the Bank (including, but not limited to, credit life insurance)
shall not be subject to the approval of the Company.
9.4.4. The Bank shall provide timely specifications (including size and
weight requirements) for all statement inserts, credit card carriers and
"bangtail" remittance envelopes.
Section 10 INDEMNIFICATION; CLAIMS AND ACTIONS
10.1. INDEMNIFICATION BY THE COMPANY. The Company hereby indemnities
the Bank, its Affiliates and the directors, officers, employees and agents of
the Bank or any Affiliate of the Bank (each, a "RELATED PARTY") against, and
agrees to hold them harmless from, any and all losses,
17
claims, damages and liabilities (including, without limitation, the legal fees
and other expenses reasonably incurred in connection with any suit, action or
proceeding or any claim asserted) ("DAMAGES") incurred or suffered by any of
them arising out of or in any way related to any misrepresentation, breach of
any warranty or nonperformance of any covenant made by the Company under this
Agreement or relating to any personal or bodily injury or property damage
alleged to be caused by the sale of goods or rendering of services by the
Company.
10.2. INDEMNIFICATION BY THE BANK. The Bank hereby indemnifies the
Company and its Related Parties against, and agrees to hold them harmless from,
any and all Damages incurred or suffered by any of them arising out of or in any
way related to any misrepresentation, breach of any warranty, or nonperformance
of any covenant made by the Bank under this Agreement.
10.3. THIRD PARTY CLAIMS.
10.3.1. The Bank shall not be liable to the Company for or in
connection with any claim made against the Company by any other Person relating
in any manner to this Agreement or to any services or any other transactions
contemplated hereby (other than (i) claims based upon the Bank's failure to
perform its obligations under this Agreement, its or any of its Related Parties'
negligence or willful misconduct or its failure to comply with any law or
regulation (including, without limitation, any Consumer Law), (ii) claims by
employees or subcontractors of the Bank arising from the performance of services
under this Agreement (other than claims based upon the Company's or any if its
Related Parties, negligence or willful misconduct), (iii) claims relating to
acts or omissions of the Bank and its agents in connection with the collection
of amounts owing from Cardholders and (iv) claims relating to the submission by
the Bank or its agents of data concerning Cardholders to credit agencies), even
if the Bank has been advised of the possibility of such claims.
10.3.2. The Company shall not be liable to the Bank for or in
connection with any claim made against the Bank by any other Person relating in
any manner to this Agreement or to any services or other transactions
contemplated hereby (other than (i) claims based upon the Company's failure to
perform its obligations under this Agreement, its or any of its Related Parties'
negligence or willful misconduct or its failure to comply with any law or
regulation (including, without limitation, any Consumer Law), (ii) claims by
employees or subcontractors of the Company arising from this Agreement and (iii)
claims
18
relating to goods purchased from the Company), even if the Company has been
advised of the possibility of such claims.
10.4. DISPUTE RESOLUTION AND ACTIONS. The Bank and the Company shall
use their reasonable best efforts to resolve informally any claim of either
party under this Agreement. No action at law or in equity may be instituted
by any party with respect to any such claim unless such party has satisfied
its obligation under the first sentence of this Section 10.4.
10.5. LIMITATION ON ACTIONS. No action against either party, regardless
of form, arising out of or incidental to the matters contemplated by this
Agreement, may be brought by the other party more than one year after the event
giving rise to such cause of action occurred and is known or upon the exercise
of reasonable diligence should have been known to the injured party.
10.6. REIMBURSEMENT FOR LOSSES. If, as a result of any claim made by
the Bank against any third party (including, but not limited to, an insurer),
the Bank actually receives from such third party cash proceeds (or non-cash
proceeds, whether in the form of goods or services) which represent, in whole or
in part, compensation for or reimbursement of losses or costs actually incurred
by the Company, then the Bank will hold that portion of such proceeds fairly
allocable to the Company (taking into consideration all losses or costs actually
incurred by all parties for whose benefit such payments have been received) in
trust on behalf of the Company and will promptly pay over to the Company such
allocable amount of any such cash proceeds (or, as to non-cash proceeds, the
allocable portion or, at the discretion of the Bank, the cash equivalent
thereof).
10.7. SURVIVAL. The provisions of this Section 10 shall survive the
termination of this Agreement.
Section 11. TERMINATION.
11.1 TERM. This Agreement shall remain in effect until the tenth
anniversary of the date hereof, shall be automatically extended until the
twelfth anniversary of the date hereof if the Company does not give at least 12
months prior written notice of its objection to such extension and shall be
further automatically extended in successive two-year increments if the Bank or
the Company does not give at least 12 months prior written notice of its
objection to such extension, unless earlier terminated (a) by the Bank or the
Company in the event of a material breach by the other party of any of such
other party's obligations under this Agreement if any such breach remains
uncured 30 days after
19
written notice thereof to such party, (b) automatically in the event that the
Bank or the Company commences a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereinafter in
effect, seeks the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its assets, consents to
any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it, makes
a general assignment for the benefit of creditors, or fails generally to pay its
debts as they become due, or (c) by the Company upon not less than 60 days,
prior written notice to the Bank at any time after the sixth anniversary of the
date hereof if, based on the application of the attached matrix, the applicable
discount rate exceeds the highest discount rate in such matrix and the costs to
the Company under this Agreement are substantially higher than the costs that
would be incurred by the Company for comparable credit card services over the
remaining term of this Agreement from an independent third-party financial
institution; PROVIDED that the Company shall not be entitled to terminate this
Agreement pursuant to clause (c) unless the Company provides the Bank with a
written description of the material terms on which such third party financial
institution proposes to provide such services and is entitled to submit a
counter-proposal within 30 days of receipt of such description. If the Bank
submits a counter-proposal with terms substantially similar to those set forth
in such third party's proposal or agrees to maintain the discount rate at the
highest discount rate in the attached matrix, this Agreement shall remain in
full force and effect, modified as may be necessary to reflect the terms
included in the Bank's counter-proposal. Subject to Section 11.2, the
termination of this Agreement shall not affect the obligations of the
Cardholders to the Bank, the obligation of the Company and the Bank to make the
payments required under Section 4 with respect to Transactions that occurred
before the date of termination, the rights of the Bank under Sections 4.4, 7.4
and 9.1 and the rights of the Company under Section 9.1. Sections 10, 11 and 12
of this Agreement shall survive any such termination.
11.2. EFFECT OF TERMINATION. Upon termination of this Agreement, the
Company will have the option to purchase the then-outstanding Credit Card
account balances not previously written-off by the Bank (subject to the terms of
any securitization of such account balances) at the face amount thereof, without
recourse to the Bank, and will be provided with all related account information
and other account data; PROVIDED that the Company will be required to purchase
such then-outstanding Credit Card account balances on such terms if the Company
objects to any automatic
20
extension of this Agreement pursuant to Section 11.1. All payments by the
Company pursuant to this Section 11.2 shall be made not later than one Business
Day after termination of this Agreement by wire transfer of immediately
available funds to an account notified by the Bank to the Company not less than
two Business Days prior to the payment date. Upon any termination of this
Agreement, (i) the Company (at its sole expense) shall notify all Cardholders
that the Bank is no longer the processor of their Credit Card accounts and (ii)
the Company and the Bank shall cooperate in facilitating the transition to a new
processor.
11.3. EXTENSION. Any services which the parties hereto mutually agree
to be rendered after the termination of this Agreement shall be rendered
pursuant to all of the terms and provisions of this Agreement.
Section 12. MISCELLANEOUS.
12.1. NOTICES. All notices, requests and other communications to any
party hereunder shall be in writing (including telecopy or similar writing) and
shall be given, if to the Company, to:
Bath & Body Works, Inc.
Three Limited Parkway
Columbus, Ohio 43230
Attn. General Counsel
Telecopy: 614-479-7188
with a copy to:
The Limited, Inc.
Three Limited Parkway
Columbus, Ohio 43230
Attn.: General Counsel
Telescopy: 614-479-7188
and a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attn: Dennis S. Hersch
Telecopy: 212-450-4800
and if to the Bank, to:
World Financial Network National
Bank 4590 East Broad Street
Columbus, Ohio 43213
Attn: Daniel T. Groomes
Telecopy: 614-755-3418
21
or to such other address or telecopy number and with such other copies, as such
party may hereafter specify for the purpose by notice to the other parties. Each
such notice, request or other communication shall be effective (i) if given by
telecopy, when such telecopy is transmitted to the telecopy number specified in
this Section and evidence of receipt is received or (ii) if given by any other
means, upon delivery or refusal of delivery at the address specified in this
Section 12.1.
12. 2. AMENDMENTS; NO WAIVERS.
12.2.1. Any provision of this Agreement may be amended only if such
amendment is in writing and signed by all parties thereto.
12.2.2 No failure or delay by any party in exercising any right, power
or privilege under this Agreement shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
12.3. EXPENSES. All costs and expenses incurred in connection with the
this Agreement or the transactions contemplated hereby shall be paid by the
party incurring such cost or expense.
12.4. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns; PROVIDED that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of the other party. Notwithstanding the foregoing, (i) the Bank may from
time to time assign any or all of its rights and obligations hereunder to any
Affiliate of the Bank, provided that any such assignee of the Bank's obligations
hereunder shall have the capability to perform such obligations without
impairing the quality of the services provided to the Company, (ii) the Company
shall assign or otherwise transfer all of its rights and obligations under this
Agreement (A) to the purchaser of all or substantially all of the assets of the
Business or (B) to any corporation which is a successor (whether by merger,
consolidation or otherwise) to the Company or any successor (whether by merger,
consolidation or otherwise) thereto, in each case subject to the execution by
such assignee or transferee of an agreement to be bound by the provisions of
this Agreement and (iii) the Bank may from time to time sell accounts receivable
for securitization, retaining its processing and servicing
22
obligations with respect thereto (it being understood that (A) the purchaser of
such accounts receivable shall have no recourse against the Company for any
reason whatsoever and (E) the Bank hereby indemnities the Company and its
Related Parties against, and agrees to hold them harmless from, any and all
Damages incurred or suffered by any of them in connection with any claims made
by such purchaser).
12.5. GOVERNING LAWS. This Agreement shall be construed in accordance
with and governed by the law of the State of New York (without regard to the
choice of law provisions thereof).
12.6. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto or thereto shall have
received a counterpart hereof signed by the other parties hereto.
12.7. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties with respect to the subject matter hereof and supersedes all
prior agreements, understandings and negotiations, both written and oral,
between the parties with respect to such subject matter. No representation,
inducement, promise, understanding, condition or warranty not set forth herein
has been made or relied upon by any party hereto. Neither this Agreement nor any
provision thereof is intended to confer upon any Person other than the parties
any rights or remedies hereunder.
12.8. JURISDICTION. Any suit, action or proceeding seeking to enforce
any provision of, or based on any matter arising out of or in connection with,
this Agreement or the transactions contemplated thereby may be brought against
any of the parties in the United States District Court for the Southern District
of New York or any state court sitting in the City of New York, Borough of
Manhattan, and each of the parties hereby consents to the exclusive jurisdiction
of such court (and of the appropriate appellate courts) in any such suit, action
or proceeding and waives any objection to venue laid therein. Process in any
such suit, action or proceeding may be served on any party anywhere in the
world, whether within or without the State of New York. Without limiting the
foregoing, the parties agree that service of process upon such party at the
address referred to in Section 12.1, together with written notice of such
service to such party, shall be deemed effective service of process upon such
party.
23
12.9. CAPTIONS. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
12.10. DEFINED TERMS. The following terms, as used herein, shall have
the following meanings:
12.10.1. "AFFILIATE" means, with respect to any Person, any Person
directly or indirectly controlling, controlled by, or under common control with
such other Person. For purposes of this definition, "CONTROL" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the term "CONTROLLING" and
"CONTROLLED" have meanings correlative to the foregoing.
12.10.2. "BUSINESS DAY" means a day other than a Saturday, Sunday or
other day on which commercial banks in New York, New York or Columbus, Ohio are
authorized or required by law to close.
12.10.3. "PERSON" means an individual, a corporation, a partnership, an
association, a trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
12.10.4. "SEASON" means (i) the period from the first day of the fiscal
month of February to the last day of the fiscal month of July and (ii) the
period from the first day of the fiscal month of August to the last day of the
fiscal month of January.
12.11. FORCE MAJEURE. Notwithstanding the provisions of Section 8.3,
neither the Bank nor its affiliates shall be liable in any manner to the Company
for any failure to perform their obligations under this Agreement resulting in
any manner from delay, failure in performance, loss or damage due to fire,
strike, embargo, explosion, power blackout, earthquake, flood, war, the
elements, labor disputes, civil or military authority, acts of God, public
enemy, inability to secure fuel, acts or omissions of carriers or other causes
beyond their reasonable control, whether or not similar to any of the foregoing
(a "FORCE MAJEURE EVENT").
24
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers effective on the day and year first
above written.
WORLD FINANCIAL
NETWORK NATIONAL BANK
By: /s/ Timothy Lyons
-----------------------------------
Name: Timothy Lyons
---------------------------------
Title:
BATH & BODY WORKS, INC.
By: /s/ Timothy Lyons
-----------------------------------
Name: Timothy Lyons
---------------------------------
Title:
TRI-STATE FACTORING, INC.
By: /s/ Timothy Lyons
-----------------------------------
Name: Timothy Lyons
---------------------------------
Title:
25
Exhibit 10.2
CREDIT CARD PROCESSING AGREEMENT
This Credit Card Processing Agreement is made as of this 31st day of
January, 1996 between WORLD FINANCIAL NETWORK NATIONAL BANK, a national banking
association (the "BANK"), and Victoria's Secret Catalogue, Inc., a Delaware
corporation (the "CORPORATION") and Far West Factoring, Inc., a Nevada
corporation ("FACTORING") (the Corporation and Factoring being collectively
referred to here in as the "COMPANY")
WHEREAS the Company and the Bank believe that it is desirable and in
their respective best interests for the Bank to continue, in a manner generally
consistent with past practices, to issue credit cards bearing the trade names,
trademarks, logos and service marks used in the Company's Victoria's Secret
retail or catalogue business (the "BUSINESS") which will allow the customers of
the Company to purchase goods from the Company using funds advanced by the Bank;
and
WHEREAS in order to implement such arrangements, the parties hereto
desire to enter into this Agreement;
NOW, THEREFORE, the parties hereby agree as follows:
Section 1. TRADEMARKS. The Company hereby authorizes the Bank to use
the trademark "Victoria's Secret" on credit cards owned or issued by the Bank,
monthly billing statements, collection correspondence, credit card agreements,
credit applications, customer service correspondence and in such other written
and oral communications with cardholders as are necessary or convenient in
connection with this Agreement, in each case consistent with past practices. The
"Victoria's Secret" trademark is referred to herein as the "MARK". The Company
shall have the right to approve in its sole discretion the "art" (including
colors and font styles) for all proposed uses of the Mark by the Bank. The Bank
shall not use the Mark for any purpose other than as set forth in the first
sentence of this Section 1.
Section 2. CREDIT CARD SYSTEM.
2.1. NEW CREDIT CARDS.
2.1.1. ISSUANCE OF CREDIT CARDS. To the extent requested by the
Company, the Bank will issue credit cards bearing the Mark ("CREDIT CARDS") to
customers of the Business who apply for such Credit Cards and related
extensions of credit. Such customers (i) must qualify for the extension of
credit under credit standards related to new account approvals, credit limits
and authorization management ("CREDIT STANDARDS") which will be determined by
the Bank from time to time and (ii) must accept the Bank's standard form of
credit card agreement containing the terms and conditions governing extensions
of credit to Persons who hold Credit Cards and their authorized users (attached
hereto as Exhibit 2.1.1(a)). Notwithstanding the foregoing, (i) the Credit
Standards established by the Bank from time to time in connection with the
issuance of Credit Cards for use in connection with the Business shall be
consistent with past practices (as described in Exhibit 2.1.1(b)), with such
changes as shall be (A) approved by the Company in its reasonable discretion or
(B) determined by the Bank in good faith to be necessary from the standpoint of
safe and sound banking practices and (ii) the Bank may make any change in the
terms of its agreement with any person who holds a Credit Card (including
repayment terms, fees and finance charge rates) after prior notice to and
consultation with the Company. The Bank hereby confirms its understanding that
the Company intends to offer and promote credit as outlined in Section 2.2. The
Bank will bear the costs of the issuance of Credit Cards under this Section 2.1.
2.1.2. CREDIT MAXIMIZATION. The Company will be entitled to use credit
related promotional strategies consistent with past practices. The Bank will
work in good faith with the Company to develop business strategies with respect
to the issuance of Credit Cards intended to maximize the potential of the
Business and, in that regard, will consider in good faith proposals involving
variances from the Bank's general Credit 'Standards or changes in the terms of
the Bank's agreement with any person who holds a Credit Card; PROVIDED that
subject to compliance with the provisions of Section 2.1.1, Credit Standards and
the terms of such agreement shall in all circumstances be determined by the
Bank. The terms of any program involving variances from the Bank's general
Credit Standards or changes in the terms of the Bank's agreement with any person
who holds a Credit Card, including (without limitation) fees or other charges to
be paid by either party, shall be agreed on a program-by-program basis.
2.2. PROMOTION. The Company will use 'its reasonable efforts to promote
the use of Credit Cards in the Business and to acquire new Cardholders (as
defined below) for the Bank through the use of, for example, "instant credit,"
"quick credit," pre-approved solicitations, applications and promotional
material displayed in stores and inserted in catalogues and special offers to
CARDHOLDERS, in each case consistent with past practices. The costs incurred by
the Company and the Bank (including,
2
among other things, the cost of printing application forms, promotional
material, pre-approved solicitations and instant and quick credit contracts and
the cost of special offers) will be borne by the Company and the Bank on terms
to be negotiated from time to time in a manner consistent with past practices.
The Bank shall have two Business Days to review for legal compliance all credit
application forms and marketing materials (including, without limitation, those
referred to above) prior to their being printed.
Section 3. ACCEPTANCE OF CREDIT CARDS. The Company will permit Persons
who hold Credit Cards (subject to the restrictions of this Agreement) or other
credit cards owned by the Bank that the Bank has designated and their authorized
users ("CARDHOLDERS") to purchase goods sold by the Business without any cash
payment by use of a Credit Card, subject to the following conditions:
3.1. CHARGE SLIP (CREDIT CARD PRESENTED). If the customer presents a
Credit Card at the time of sale, the Company will maintain a record of the sale
in a form acceptable to the Bank which reflects the following:
3.1.1. A brief identification of the property or service purchased (the
"TRANSACTION");
3.1.2. The date of the Transaction;
3.1.3. The dollar amount of the purchase price of the merchandise or
service which was the subject of the Transaction, including applicable shipping,
handling and taxes;
3.1.4. An imprint or electronic capture of the Credit Card account
number or, in the event of equipment malfunction, a written notation of such
account number; and
3.1.5. The Cardholder's signature.
3.2. CHARGE SLIP (CREDIT CARD NOT PRESENTED). The Bank acknowledges and
agrees that a Cardholder need not present a Credit Card at the time of sale-and
that, subject to Section 3.5, the Company may accept charges to a Credit Card
verbally from the customer or via a written order form from the customer. If the
customer does not present a Credit Card at the time of sale, the Company will
maintain a record of the sale in a form acceptable to the Bank which reflects,
in lieu of the information set forth in Section 3.1.1 through 3.1.5, the
following:
3.2.1. A brief identification of the Transaction;
3.2.2. The date of the Transaction;
3
3.2.3. The dollar amount of the purchase price of the merchandise or
service which was the subject of the Transaction, including applicable shipping,
handling and taxes;
3.2.4. A written notation of the Credit Card account number, which
shall have been obtained from the customer and recorded in the Company's
customer file;
3.2.5. The customer's name and address and, except in the case of
catalogue purchases, personal identification type and number; and
3.2.6. If applicable, the name and address to where the merchandise
which was the subject of the Transaction was shipped and the date and method of
shipment.
3.3. RETENTION OF CHARGE SLIP. The Company will retain a legible copy
of each charge slip for six months following the date of the Transaction and
will provide such copy to the Bank within 30 days of the Bank's request
therefor; PROVIDED that the Bank will request delivery of such information only
in the case of a bona fide dispute (the existence of such dispute to be
determined by the Bank in its reasonable discretion) relating to the underlying
Transaction, upon the inquiry of the applicable Cardholder or as requested by
auditors of the Bank in connection with their audit of the Bank's financial
statements or by any governmental authority.
3.4. AUTHORIZATION. The Transaction is authorized by the Bank in
accordance with the floor limits and other procedures in effect at the time or
such authorization is dispensed with under rules established by the Bank from
time to time in accordance with Section 8.3 to deal with situations in which
authorization is not available because of disruption of the Bank's computer
system or other causes provided for in such rules, consistent with past
practice.
3.5. CHARGEBACKS. The Company agrees to accept as a chargeback any
charge on a Credit Card where:
3.5.1. The Cardholder disputes the charge and the Company fails to
provide a legible copy of the charge slip within 30 days of the Bank's request
therefor in accordance with Section 3.3;
3.5.2. The Company failed to obtain authorization from the Bank in
accordance with Section 3.4;
3.5.3. The Company failed to complete the-charge slip in accordance
with Section 3.1 or 3.2, as applicable;
4
3.5.4. A Company employee fraudulently misused the Credit Card or
account number;
3.5.5. A dispute arises from the Cardholder being charged or credited
more than once for the same sale, payment or return;
3.5.6. A dispute with the Cardholder arises from a voided Transaction
or an invalid Credit Card account number;
3.5.7. A dispute with the Cardholder arises from an improperly opened
Credit Card account, or the account is otherwise uncollectible, where a Company
employee failed to comply with new account procedures in effect at the time the
account was opened;
3.5.8. The Bank, consistent with past practices, gives the Cardholder
credit for (or accepts as payment) a non-expired discount coupon or gift
certificate in respect of a prior purchase; or
3.5.9. A dispute arises from the Company's failure properly to identify
a catalogue purchaser as the Cardholder where such failure results in
merchandise being shipped without the actual Cardholder's authorization.
The amount charged back with supporting detail will be invoiced to the
Company weekly, and all required payments by the Company shall be made within 30
'days after receipt of an invoice. If the Company pays the Bank any chargeback
amount pursuant to this Section 3.5 or if such payment is netted against amounts
payable by the Bank pursuant to Section 4.1.1, any remittances relating to such
chargeback from the Cardholder subsequently collected by the Bank shall, to the
extent not refunded to the Cardholder, be credited by the Bank to the Company.
Section 4. PAYMENT.
4.1. PAYMENT BY BANK.
4.1.1. The Bank will pay to the Company, as full consideration for any
Transaction between the Company and any Cardholder using a Credit Card, as to
which the Company has complied with the provisions of Section 3 above, the
amount shown on the records of the Company for each Transaction, including all
applicable shipping, handling and taxes, less a discount, which discount shall
be equal to the discount rate determined in accordance with Section 4.1.5
(expressed as a fraction) multiplied by the amount shown on the records of the
Company for each Transaction (exclusive of all applicable shipping, handling and
taxes).
5
4.1.2. The Bank will pay such amount by transferring immediately
available funds to an account designated by the Company at any bank to which the
Bank may make electronic fund transfers before the end of the second Business
Day following the receipt by the Bank of the information required by Section 3.1
or 3.2, such information to be properly formatted and edited and transferred via
a telecommunications connection between the Company and the Bank pursuant to
such computer programs and telecommunications protocols as the Bank may, in its
reasonable discretion, designate from time to time, subject to reasonable prior
notice. The Company will transmit (in the manner referred to above) to the Bank
an audited and balanced file in the format specified by the Bank containing all
such information within two Business Days after the occurrence of the underlying
Transaction; PROVIDED that if, as a result of technical disruptions, any store
locations are not polled within a normal period after the occurrence of the
underlying Transactions, the Company will transmit such information relating to
such store locations as soon as reasonably practicable after polling is
completed.
4.1.3. The Company may not attempt to collect any amount from any
Cardholder with respect to a Transaction which has been paid for by the Bank
under this Section 4.1 and not charged back to the Company pursuant to Section
3.5.
4.1.4. The Company will, consistent with past practices, accept
payments from Cardholders for amounts due on Credit Cards ("IN-STORE PAYMENTS").
Any In-Store Payments received by the Company will be held in trust for the Bank
and its assigns and netted against amounts payable by the Bank-pursuant to
Section 4.1.1 (PROVIDED that the Company shall not be required to keep In-Store
Payments separate from other payments received by the Company) and evidence of
such payments will be transmitted to the Bank on a daily basis in accordance
with the procedures set forth in Section 4.1.2. Notwithstanding the foregoing:
(a) if any bankruptcy or other insolvency proceeding has been commenced
against the Company (and so long as the same has not been dismissed), the
Company shall promptly comply with any written instruction (a "STORE PAYMENT
NOTICE") received by the Company from the Bank or any successor to the Bank as
"Servicer" under the Pooling and Servicing Agreement referred to below (the Bank
or any such successor being the "SERVICER") to take either of the following
actions (as specified in such instruction)
(i) cease accepting In-Store Payments and thereafter inform Cardholders
who wish to make In-Store Payments that payment should instead be sent to
Servicer (but only if the Servicer is required,by the
6
Pooling and Servicing Agreement to give such notice); or
(ii) (A) deposit an amount equal to all In-Store Payments received by
each retail location operated by the Company, not later than the Business
Day following receipt, into a segregated trust account (the "STORE
ACCOUNT") established by the Company for this purpose and, pending such
deposit, to hold all In-Store Payments in trust for the Bank and its
assigns, (B) use commercially reasonable efforts not to permit any amounts
or items not constituting In-Store Payments to be deposited in the Store
Account and (C) cause all available funds in each STORE ACCOUNT to be
transferred on a daily basis to an account designated in the Store Payment
Notice;
PROVIDED that the Company need not take the actions specified in clause (i) or
clause (ii) if the Company or any of its affiliates provides the Servicer or the
Trustee under (and as defined in) the Pooling and Servicing Agreement with a
letter of credit, surety bond or other similar instrument covering collection
risk with respect to In-Store Payments and all conditions specified in the
Pooling and Servicing Agreement with respect to such letter of credit, surety
bond or other similar instrument are satisfied;
(b) if and to the extent that the Bank so requests in writing at a time
when the Bank is required by the Pooling and Servicing Agreement to make such
request, In-Store Payments shall no longer be netted against amounts payable by
the Bank pursuant to Section 4.1.1, but instead the Company shall transfer to
the Bank by wire transfer of immediately available funds (or, if the aggregate
amount to be transferred pursuant to this clause (b) and Section 4.2 is less
than $10,000, by check), not later than the third Business Day following receipt
of any In-Store Payments, an amount equal to the sum of such In-Store Payments.
So long as the Company complies with instructions delivered in accordance with
paragraph (a) or (b), any amounts payable by the Bank pursuant to Section 4.1.1
shall be made without deduction for In-Store Payments.
For purposes of the foregoing, the "POOLING AND SERVICING AGREEMENT"
means the Pooling and Servicing Agreement dated as of January 17, 1996 among the
Bank and The Bank of New York, as trustee, including each Supplement thereunder,
as the same may be amended, supplemented or otherwise modified from time to
time, except that no amendment, supplement or other modification to such
Agreement that affects the circumstances in which the Company may be required to
take the actions referred to in
7
paragraph (a) or (b) above or in Section 4.2.3 shall be given effect for
purposes of this Agreement unless consented to by the Company.
4.1.5. DISCOUNT RATE. The applicable discount rate referred to in
Section 4.1.1 shall be the then applicable discount rate determined in
accordance with the matrix set forth in Exhibit 4.1.5; PROVIDED that in the
event of a legislated or judicial reduction in the annual percentage rate or
fees that may be charged by the Bank to Cardholders, the Company and the Bank
agree to negotiate in good faith an increase in the discount rate.
4.2. PAYMENT BY COMPANY. If the Bank has paid the Company for any
Transaction and
4.2.1. If:
(a) the representations and warranties of the Company with respect to
such Transaction, as set forth in Sections 5.1 through 5.3 below, are not true
in all material respects; or
(b) any merchandise which was the subject of such Transaction is
returned to the Company and the Company, pursuant to its policies concerning
returned merchandise, accepts such merchandise for credit; or
(c) in order to settle a dispute concerning the nature, quality or
quantity of goods purchased from the Company with the Credit Card, the Company
agrees to refund all or part of the purchase price thereof; then
4.2.2. The Company:
(a) shall pay the Bank an amount equal to the face amount of such
Transaction or portion thereof refunded to the customer, less any discount
actually taken by the Bank when it made payment to the Company in consideration
for such Transaction pursuant to Section 4.1.1;
(b) shall create a written memorandum of such Transaction setting forth
the information required by Section 3 above (a "CREDIT MEMORANDUM");
(c) shall transmit the information contained in such Credit Memorandum
to the Bank by the method of electronic transmission referred to in Section
4.1.2 above; and
(d) subject to Section 4.2.3, shall permit the payment required by this
Section 4.2 to be netted against amounts payable by the Bank pursuant to Section
4.1:1. The
8
Company shall retain any such Credit Memorandum in the same manner and for the
same time as the charge slip referred to in Section 3.3 and shall promptly
deliver any such Credit Memorandum to the Bank upon its request. If the Company
pays the Bank any amount for a Transaction pursuant to this Section 4.2 or if
such payment is netted against amounts payable by the Bank pursuant to Section
4.1.1, any remittances relating to such Transaction from the customer
subsequently collected by the Bank shall, to the extent not refunded to the
Cardholder, be credited by the Bank to the Company.
4.2.3. Notwithstanding clause (d) of Section 4.2.2, if and to the
extent that the Bank so requests in writing at a time when the Bank is required
by the Pooling and Servicing Agreement to make such request, amounts payable by
the Company pursuant to Section 4.2 ("ADJUSTMENT PAYMENTS") shall no longer be
netted against amounts payable by the Bank pursuant to Section 4.1.1, but
instead the Company shall transfer the amount of each Adjustment Payment to the
Bank by wire transfer of immediately available funds (or, if the aggregate
amount to be transferred pursuant to this Section 4.2 and clause (b) of Section
4.1.4 is less than $10,000, by check), not later than the second Business Day
following the date on which the events giving risk to such Adjustment Payment
occur (and amounts payable by the Bank pursuant to Section 4.1.1 shall be made
without deduction for Adjustment Payments).
4.3. OTHER FEES.
4.3.1. DEFERRED PAYMENT. If any Transaction between the Company and any
Cardholder using a Credit Card is consummated on a deferred payment basis (for
which the period of deferral may not exceed 90 days), then for each month during
the period of deferral, the Company will pay the Bank an amount equal to the
Deferred Payment Rate for such month multiplied by the average daily balance of
purchase price so deferred during such month. For purposes of this Section 4.3,
"DEFERRED PAYMENT RATE" means, for any month, (i) if the debt of the Bank has an
implied investment grade rating at all times during such month, the average
interest rate paid by the Bank to obtain funds during such month, and (ii) if
the debt of the Bank does not have an implied investment grade rating at all
times during such month, the then-current reference rate or index maintained or
provided by a nationally recognized investment banking firm (which firm shall be
reasonably acceptable to the Company and the Bank) in respect of issuers whose
debt has the lowest investment grade rating.
4.3.2. POSTAL RATE ADJUSTMENT. The Company agrees to reimburse the Bank
for any costs incurred by the
9
Bank as a result of changes in postal rates or rules applicable to mailings to
Cardholders after the date hereof; PROVIDED that the postal costs and postal
discounts applicable to mailings to Cardholders shall be no less favorable than
the postal costs and postal discounts applicable to comparable mailings to
holders of any other credit cards issued by the Bank. The Bank and the Company
agree to use their reasonable efforts to minimize postal costs and maximize
postal discounts.
4.3.3. SPECIAL PROJECTS. With respect to special services provided by
the Bank from time to time with respect to the Business (including, without
limitation, consulting, surveys, gift certificate calls and fulfillment, rebate
fulfillment, telemarketing and special processing or accounting reports required
in connection with promotional activities), the Company will pay to the Bank
amounts to be agreed on a program-by-program basis. To the extent not otherwise
provided for in this Agreement, (i) the Bank shall not incur expenses required
to be paid or reimbursed by the Company for any project in amounts in excess of
$1,000 without having first obtained prior written or oral authorization from
the Company for such expenses; and (ii) the Bank shall not incur expenses
required to be paid or reimbursed by the Company for any project in amounts in
excess of $50,000 without having first obtained prior written authorization from
the Company for such expenses; PROVIDED that, in the event any terms of any such
written authorization are in conflict with the terms of this Agreement, the
terms of this Agreement shall be controlling.
4.3.4. PAYMENTS. All amounts payable by the Company under this Section
4.3 shall be paid by wire transfer of immediately available funds within 30 days
after receipt of an invoice for such amounts.
4.4. SETOFFS. The Bank may at any time, in addition to all other rights
and remedies available to it, setoff against any amount owing to the Company by
the Bank under this Agreement, any amounts owing by the Company to the Bank
under this Agreement.
4.5. INVOICE. The amount of any invoice prepared and delivered by the
Bank under this Agreement shall be deemed to be correct, accurate and binding
upon the Company if the Company makes no objection within 30 days After the date
of such invoice; PROVIDED that the making of any objection shall not relieve the
Company of its obligation to make full payment of the amount set forth on the
related invoice when such amount is otherwise payable pursuant to this Section
4, it being understood that the Company does not waive its rights thereby and
may, subject to Section
10
10.4, assert a claim with respect to such invoice in an appropriate proceeding.
Section 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Bank that:
5.1. VALID TRANSACTIONS. Each Transaction will be completed in
compliance with the provisions of Section 3 and will create a valid, binding and
legally enforceable obligation of the Cardholder whose name is shown on the
Credit Card to pay to the Company the amount shown on the charge slip, which
obligation to the Company will be discharged in full by the payment made to the
Company by the Bank in respect of such Transaction under Section 4.1 above.
5.2. ACCURATE INFORMATION. Each charge slip will accurately reflect the
Transaction described therein. Each charge slip and Credit Memorandum and any
charge slip or Credit Memorandum information transmitted to the Bank by the
Company will be complete and accurate and in a form deemed necessary by the Bank
to allow Cardholder billing in accordance with applicable law. The Company will
accurately report all returns and other credits to the Bank within the time
period specified in Section 4.
5.3. NO LIENS. No amount due to the Company with respect to any
Transaction will be subject to any lien or encumbrance in favor of any third
party or to any offset, counterclaim or defense of any Person other than the
Bank or its Affiliates.
5.4. MARK. The use of the Mark by the Bank under this
Agreement does not infringe the rights of any other Person.
Section 6. REPRESENTATIONS AND WARRANTIES OF THE BANK. The Bank hereby
represents and warrants to the Company that:
6.1. COMPLIANCE WITH LAWS. Each Credit Card and the related credit card
agreement, all monthly billing statements and any collection efforts of the Bank
conform and will conform in all material respects with all federal or state laws
or regulations applicable to the extension of credit to or the collection of
amounts from consumers including, without limitation, the Truth-in-Lending Act,
the Equal Credit Opportunity Act, the Fair Credit Reporting Act and federal and
state bankruptcy and debtor relief laws ("CONSUMER LAWS")
6.2 NON-CONTRAVENTION. The performance by the Bank of its obligations
under this Agreement will not
11
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, any agreement or instrument to which the Bank is
party or by which the Bank is bound, nor will such performance result in any
violation of the provisions of the articles of association or the by-laws of the
Bank or any applicable law or statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the Bank.
Section 7. COVENANTS OF THE COMPANY. The Company hereby covenants and
agrees with the Bank as follows:
7.1. CREDIT CARD NOTICES AND COMMUNICATIONS. The Company will,
consistent with past practices, accept and turn over to the Bank promptly upon
receipt thereof by the Company (i) subject to Section 4.1.4, any payments made
by any Cardholder with respect to any Transaction or any Credit Card and (ii)
any notices or other communications received by the Company with respect to any
Credit Card including, without limitation, customer changes of address and other
information on approved forms.
7.2. COMPLIANCE WITH APPLICABLE LAW. The Company will, at
all times, comply in all material respects with all Consumer
Laws.
7.3. RULES. The Company shall comply with such written rules and
operating instructions relating to the use of the Credit Cards, the distribution
of applications, Credit Card security, authorization procedures, "downtime"
procedures and other matters related to this Agreement as the Bank may, from
time to time, promulgate with prior notice to the Company; PROVIDED that such
rules and operating instructions shall be consistent with past practices, with
such changes as shall be approved by the Company in its reasonable discretion.
7.4. CARDHOLDER INQUIRIES AND COMPLAINTS. If a Cardholder makes an
inquiry or complaint to the Company about the nature, quality or quantity of
goods purchased from the Company with a Credit Card, or a Cardholder has made an
inquiry or complaint to the Bank concerning the nature, quality or quantity of
goods purchased from the Company with a Credit Card, the Company shall deal
directly with the Cardholder to resolve any such complaint or inquiry. The
Company shall answer all inquiries from the Bank about complaints made to the
Bank by Cardholders within 10 days after the Company receives an inquiry from
the Bank.
7.5. EQUIPMENT. The Company shall obtain and maintain at its own
expense such point of sale and & authorization terminals, credit card imprinters
and other
12
items of equipment as are necessary for it to receive authorizations, transmit
charge slip and Credit Memorandum information, process credit applications and
perform its obligations under this Agreement. Such point of sale and
authorization terminals shall be capable of communicating with the computer
equipment maintained by the Bank according to such computer programs and
telecommunications protocols as may be specified by the Bank in its reasonable
discretion from time to time subject to reasonable prior notice of any change in
such equipment or protocols.
7.6. EXCLUSIVITY. The Company may not accept or promote any credit card
as payment for its goods or services unless such credit card is a Credit Card, a
proprietary credit card of another division of the Company or any Affiliate of
the Company (whether or not issued by the Bank) or a credit card issued by a
bank or other Person engaged in the business of issuing credit cards to Persons
for the purpose of making payments to third parties generally under such names
as Master Card, Visa, Discover, American Express or Optima. The Company may not
issue its own credit cards or enter into an agreement with any third party under
which credit cards bearing the Mark are issued; PROVIDED that after the second
anniversary of the date hereof, the Company shall be entitled to negotiate with
any third party with respect to the issuance of co-branded or affinity bank
credit cards bearing the Mark and to accept any Bona Fide Offer by such third
party if, at least 30 days prior to accepting such Bona Fide Offer, the Company
provides the Bank with an opportunity to submit a competing offer with respect
to the issuance of co-branded or affinity bank credit cards bearing the Mark,
which competing~offer, if it has terms at least as favorable to the Company as
such Bona Fide Offer, shall be accepted by the Company in lieu of such Bona Fide
Offer. For purposes of this Section 7.6, "BONA FIDE OFFER" means an offer to the
Company with respect to a program of at least two years' duration for the
issuance of co-branded or affinity bank credit cards that is, in the Company's
reasonable judgment, generally competitive in light of marketplace conditions
existing at the time (such marketplace conditions to include, without
limitation, other offers with respect to co-branded or affinity bank credit
cards being made to the Company, its Affiliates and other retail or catalogue
merchants)
7.7. OBSOLETE MATERIALS. The Company shall reimburse the Bank for the
cost of replacing reasonable amounts of obsolete forms and other materials if
such replacement is requested by the Company due to changes in the Mark or in
the logo, colors or styles used to identify or promote the Business.
13
Section 8. COVENANTS OF THE BANK. The Bank hereby covenants and agrees
with the Company as follows:
8.1. COMPLIANCE WITH APPLICABLE LAW. The Bank will, in issuing,
billing, administering, and collecting with respect to the Credit Cards and at
all other times, comply in all material respects with all Consumer Laws.
8.2. COLLECTION. The Bank will use efforts to collect from
each Cardholder the purchase price and additional taxes and other charges of
Transactions consistent with past practices and with its efforts to collect
accounts receivable under other credit cards issued by it; PROVIDED that the
Bank will initiate collection of any account receivable under a Credit Card at
or before the time such account receivable is 60 days past due. The Bank will,
consistent with past practices, determine the use and timing of dunning letters,
statement messages and collection agents and will manage all written-off
accounts (including, without limitation, the management of outside collection
agencies) . The Bank may implement reasonable variances from past collection
practices after prior notice to and consultation with the Company.
8.3. PERFORMANCE STANDARDS. In performing its obligations under this
Agreement, subject to Section 12.11, the Bank shall comply with the performance
standards set forth in Exhibit 8.3, as such performance standards may be
modified from time to time at the reasonable request of the Bank or the Company.
Within 10 days after the end of each fiscal month, the Bank will deliver to the
Company a compliance certificate of the chief executive officer or chief
financial officer of the Bank setting forth in reasonable detail data
demonstrating compliance during such calendar month with such performance
standards. Enhancements to, and modifications or upgrades of, the computer
processing, payment, billing and information services provided by the Bank will
be made from time to time at the reasonable request of the Company. Any such
enhancements, modifications or upgrades shall, to the extent requested by the
Company, be made on terms to be agreed upon.
8.4. FORCE MAJEURE EVENT. After the occurrence of a Force Majeure Event
(as defined in Section 12.11) which disrupts the availability of the services
provided hereunder, the Bank may elect to reestablish the availability of such
services. If any such Force Majeure Event comparably disrupts the performance of
services similar to the services provided hereunder with respect to one or more
other credit cards issued by the Bank, then the Bank shall reestablish the
availability of such services to the same extent and within the same timetable
under
14
comparable circumstances as the comparable services are reestablished with
respect to such other credit cards. The Bank shall promptly notify the Company
of any Force Majeure Event and shall inform the Company whether it will
reestablish services and the timetable therefor. If the Bank chooses not to
reestablish or take measures to reestablish such services within a reasonable
period of time as would be indicated by sound business practice, the Company
shall be free to obtain such services from any supplier thereof.
Section 9. PROPERTY RIGHTS.
9.1. RIGHTS OF THE COMPANY. The Company is the owner of the names and
addresses of customers of the Business; PROVIDED that (i) as set forth in
Section 9.2, the Bank is also the owner of such information with respect to
customers of the Business who are also Cardholders and (ii) The Limited, Inc.
("THE LIMITED") is also the owner of such information with respect to customers
of the Business until the second anniversary of the date, if any, on which the
Company ceases to be an Affiliate of The Limited.
9.2. RIGHTS OF BANK. Except as set forth in Section 9.1, the Bank is
the owner of all information relating to the Cardholders (including names and
addresses) and the Credit Cards, the copyright to all written material contained
in any credit card agreements, applications, billing statements and other forms
used by the Bank in the administration of its agreements with the Cardholders,
all credit scoring systems and all policies of credit insurance issued to the
Bank with respect to any Cardholder; PROVIDED that the Bank shall not be
entitled to sell, rent or otherwise disclose any information relating to the
Cardholders to any third party other than (i) Affiliates of the Company, (ii)
Persons who, in the sole judgment of The Limited, do not compete, directly or
indirectly, with any retail or catalogue business conducted by The Limited or
any of its Affiliates and (iii) in the case of disclosure, credit agencies.
Subject to Section 9.3, the Company will not have any rights in any information
or property of the Bank; PROVIDED that the Bank will provide the Company with
such information the Bank owns with respect to Cardholders as the Company may
reasonably request in order to develop potential marketing or credit strategies.
9.3. DATABASE. (a) It is the intention of the parties that the Bank
will manage, maintain and develop an information marketing database (the
"DATABASE") at its own expense, subject to a mutually satisfactory agreement
with the Company pursuant to which (i) the Company will agree to utilize the
Database, (ii) the Database will be accessible from the Company's offices and
(iii) the Bank will provide
15
the Company with information maintained as part of the Database on terms that
are no less favorable than those offered by the Bank to any other recipient of
comparable information.
(b) Notwithstanding the foregoing, the Bank will, from time to time at
the request of the Company, and without charge, promptly provide the Company
with a list of the names and addresses of all Cardholders, all holders of other
proprietary credit cards of the Company or any Affiliate of the Company (if
issued by the Bank) and all other customers of the Business, any other business
of the Company and the business of any other Affiliate of the Company. The
Company shall reimburse the Bank for its costs of producing and shipping such
list in the format required by the Company within 30 days after receipt of a
request for such reimbursement from the Bank.
(c) Subject to Section 9.2, the Bank may make the Database available,
and provide information marketing services to, third parties on terms reasonably
determined by the Bank; PROVIDED that (i) the allocation among the Bank, the
Company and The Limited of fees charged by the Bank to such third parties shall
be agreed on a program-by-program basis or, in the case of programs existing on
the date hereof, continued consistent with past practices and (ii) the Bank may
not make the Database available, or provide information marketing services to,
any Person who, in the sole judgment of The Limited, competes, directly or
indirectly, with any retail or catalogue business conducted by The Limited or
any of its Affiliates.
9.4. ENVELOPE STUFFING.
9.4.1. Subject to the right of the Bank to include in mailings to
Cardholders periodic billing statements and any legal notices which the Bank
believes are necessary or appropriate to send to Cardholders, the Company shall
have the right to have materials advertising its products and services included
in the envelopes containing the periodic statements. Such materials shall
advertise only products and services related to the Business, shall (unless the
Company provides the Bank with notice as provided below) be limited to seven
panels per envelope and shall conform to size requirements established from time
to time by the Bank with reasonable prior notice of any changes. The Company
shall use reasonable efforts (i) to notify the Bank at least 15 days before the
proposed date of any such inclusion and shall provide the Bank with a draft copy
of any such advertising material at the time it notifies the Bank of such
mailing and (ii) to provide the Bank with a seasonal marketing plan at least 30
day&, before the beginning date of each Season. The Company shall
16
provide the Bank with the materials to be included in the mailing not less than
two Business Days prior to the initial insertion date. If the Company does not
notify the Bank of any such inclusion at least seven days before the proposed
date of such inclusion or if the material included does not take up the
available space, the Bank may utilize the space remaining inside the envelopes
for its own purposes; PROVIDED that (i) unless the Company provides the Bank
with notice at least 45 days before the proposed inclusion date of the Company's
intent to utilize more than seven panels per envelope, the Bank shall be
entitled to utilize at least three panels (or two panels and one "bangtail"
remittance envelope) per envelope for its own purposes and (ii) all materials
included by the Bank shall be subject to the approval of the Company, which
approval shall not be unreasonably withheld.
9.4.2. The Bank shall have the exclusive right to include in any
mailing to Cardholders materials advertising products and services not related
to the Business and the allocation between the Bank and the Company of the
revenues generated thereby shall be agreed on a program-by-program basis or, in
the case of programs existing on the date hereof, continued consistent with past
practices; PROVIDED that such products and services and the related advertising
materials shall be subject to the approval of the Company, which approval shall
not be unreasonably withheld or delayed (it being understood that the Company
may withhold such approval if it determines in its sole discretion that the
advertising of such products or services is inconsistent with the image of the
Business)
9.4.3. Notwithstanding the foregoing, (i) the Bank shall have the right
to use its own "bangtail" remittance envelopes to promote credit life insurance
to existing Cardholders no more than four times per year or two times per Season
and (ii) all materials used, or sent to Cardholders, by the Bank under existing
programs of the Bank (including, but not limited to, credit life insurance)
shall not be subject to the approval of the Company.
9.4.4. The Bank shall provide timely specifications (including size and
weight requirements) for all statement inserts, credit card carriers and
"bangtail" remittance envelopes.
Section 10. INDEMNIFICATION; CLAIMS AND ACTIONS.
10.1. INDEMNIFICATION BY THE COMPANY. The Company hereby indemnifies
the Bank, its Affiliates and the directors, officers, employees and agents of
the Bank or any Affiliate of the Bank (each, a "Related Party") against, and
agrees to hold them harmless from, any and all losses,
17
claims, damages and liabilities (including, without limitation, the legal fees
and other expenses reasonably incurred in connection with any suit, action or
proceeding or any claim asserted) ("DAMAGES") incurred or suffered by any of
them arising out of or in any way related to any misrepresentation, breach of
any warranty or nonperformance of any covenant made by the Company under this
Agreement or relating to any personal or bodily injury or property damage
alleged to be caused by the sale of goods or rendering of services by the
Company.
10.2. INDEMNIFICATION BY THE BANK. The Bank hereby indemnifies the
Company and its Related Parties against- and agrees to hold them harmless from,
any and all Damages incurred or suffered by any of them arising out of or in any
way related to any misrepresentation, breach of any warranty, or nonperformance
of any covenant made by the Bank under this Agreement.
10.3. THIRD PARTY CLAIMS.
10.3.1. The Bank shall not be liable to the Company for or in
connection with any claim made against the Company by any other Person relating
in any manner to this Agreement or to any services or any other transactions
contemplated hereby (other than (i) claims based upon the Bank's failure to
perform its obligations under this Agreement, its or any of its Related Parties'
negligence or willful misconduct or its failure to comply with any law or
regulation (including, without limitation, any Consumer Law), (ii) claims by
employees or subcontractors of the Bank arising from the performance of services
under this Agreement (other than claims based upon the Company's or any if its
Related Parties' negligence or willful misconduct), (iii) claims relating to
acts or omissions of the Bank and its agents in connection with the collection
of amounts owing from Cardholders and (iv) claims relating to the submission by
the Bank or its agents of data concerning Cardholders to credit agencies), even
if the Bank has been advised of the possibility of such claims.
10.3.2. The Company shall not be liable to the Bank for or in
connection with any claim made against the Bank by any other Person relating in
any manner to this Agreement or to any services or other transactions
contemplated hereby (other than (i) claims based upon the Company's failure to
perform its obligations under this Agreement, its or any of its Related Parties'
negligence or willful misconduct or its failure to comply with any law or
regulation (including, without limitation, any Consumer Law), (ii) claims by
employees or subcontractors of the Company arising from this Agreement and (iii)
claims
18
relating to goods purchased from the Company), even if the Company has been
advised of the possibility of such claims.
10.4. DISPUTE RESOLUTION AND ACTIONS. The Bank and the Company shall
use their reasonable best efforts to resolve informally any claim of either
party under this Agreement. No action at law or in equity may be instituted by
any party with respect to any such claim unless such party has satisfied its
obligation under the first sentence of this Section 10.4.
10.5. LIMITATION ON ACTIONS. No action against either party, regardless
of form, arising out of or incidental to the matters contemplated by this
Agreement, may be brought by the other party more than one year after the event
giving rise to such cause of action occurred and is known or upon the exercise
of reasonable diligence should have been known to the injured party.
10.6. REIMBURSEMENT FOR LOSSES. If, as a result of any claim made by
the Bank against any third party (including, but not limited to, an insurer),
the Bank actually receives from such third party cash proceeds (or non-cash
proceeds, whether in the form of goods or services) which represent, in whole or
in part, compensation for or reimbursement of losses or costs actually incurred
by the Company, then the Bank will hold that portion of such proceeds fairly
allocable to the Company (taking into consideration all losses or costs actually
incurred by all parties for whose benefit such payments have been received) in
trust on behalf of the Company and will promptly pay over to the Company such
allocable amount of any such cash proceeds (or, as to non-cash proceeds, the
allocable portion or, at the discretion of the Bank, the cash equivalent
thereof)
10.7. SURVIVAL. The provisions of this Section 10 shall survive the
termination of this Agreement.
Section 11. TERMINATION.
11.1 TERM. This Agreement shall remain in effect until the tenth
anniversary of the date hereof, shall be automatically extended until the
twelfth anniversary of the date hereof if the Company does not give at least 12
months' prior written notice of its objection to such extension and shall be
further automatically extended in successive two-year increments if the Bank or
the Company does not give at least 12 months' prior written notice of its
objection to such extension, unless earlier terminated (a) by the Bank or the
Company in the event of a material breach by the other party of any of such
other party's obligations under&this Agreement if any such breach remains
uncured 30 days after
19
written notice thereof to such party, (b) automatically in the event, that the
Bank or the Company commences a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereinafter in
effect, seeks the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its assets, consents to
any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it, makes
a general assignment for the benefit of creditors, or fails generally to pay its
debts as they become due, or (c) by the Company upon not less than 60 days'
prior written notice to the Bank at any time after the sixth anniversary of the
date hereof if, based on the application of the attached matrix, the applicable
discount rate exceeds the highest discount rate in such matrix and the costs to
the Company under this Agreement are substantially higher than the costs that
would be incurred by the Company for comparable credit card services over the
remaining term of this Agreement from an independent third-party financial
institution; PROVIDED that the Company shall not be entitled to terminate this
Agreement pursuant to clause (c) unless the Company provides the Bank with a
written description of the material terms on which such third party financial
institution proposes to provide such services and is entitled to submit a
counter-proposal within 30 days of receipt of such description. If the Bank
submits a counter- proposal with terms substantially similar to those set forth
in such third party's proposal or agrees to maintain the discount rate at the
highest discount rate in the attached matrix, this Agreement shall remain in
full force and effect, modified as may be necessary to reflect the terms
included in the Bank's counter- proposal. Subject to Section 11.2, the
termination of this Agreement shall not affect the obligations of the
Cardholders to the Bank, the obligation of the Company and the Bank to make the
payments required under Section 4 with respect to Transactions that occurred
before the date of termination, the rights of the Bank under Sections 4.4, 7.4
and 9.1 and the rights of the Company under Section 9.1. Sections 10, 11 and 12
of this Agreement shall survive any such termination.
11.2. EFFECT OF TERMINATION. Upon termination of this Agreement, the
Company will have the option 'to purchase the then-outstanding Credit Card
account balances not previously written-off by the Bank (subject to the terms of
any securitization of such account balances) at the face amount thereof, without
recourse to the Bank, and will be provided with all related account information
and other account data; PROVIDED that the Company will be required to purchase
such then-outstanding Credit Card account balances on such terms if the Company
objects to any automatic
20
extension of this Agreement pursuant to Section 11.1. All payments by the
Company pursuant to this Section 11.2 shall be made not later than one Business
Day after termination of this Agreement by wire transfer of immediately
available funds to an account notified by the Bank to the Company not less than
two Business Days prior to the payment date. Upon any termination of this
Agreement, (i) the Company (at its sole expense) shall notify all Cardholders
that the Bank is no longer the processor of their Credit Card accounts and (ii)
the Company and the Bank shall cooperate in facilitating the transition to a new
processor.
11.3. EXTENSION. Any services which the parties hereto mutually agree
to be rendered after the termination of this Agreement shall be rendered
pursuant to all of the terms and provisions of this Agreement.
Section 12. MISCELLANEOUS.
12.1. NOTICES. All notices, requests and other communications to any
party hereunder shall be in writing (including telecopy or similar writing) and
shall be given, if to the Company, to:
Victoria's Secret Catalogue, Inc.
Three Limited Parkway
Columbus, Ohio 43230
Attn: General Counsel
Telecopy: 614-479-7188
with a copy to:
The Limited, Inc.
Three Limited Parkway
Columbus, Ohio 43230
Attn: General Counsel
Telecopy: 614-479-7188
and a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attn: Dennis S. Hersch
Telecopy: 212-450-4800
and if to the Bank, to:
World Financial Network National Bank
4590 East Broad Street
Columbus, Ohio 43213
Attn: Daniel T. Groomes
Telecopy: 614-755-3418
21
or to such other address or telecopy number and with such other copies, as such
party may hereafter specify for the purpose by notice to the other parties. Each
such notice, request or other communication shall be effective (i) if given by
telecopy, when such telecopy is transmitted to the telecopy number specified in
this Section and evidence of receipt is received or (ii) if given by any other
means, upon delivery or refusal of delivery at the address specified in this
Section 12.1.
12.2. AMENDMENTS; NO WAIVERS.
12.2.1. Any provision of this Agreement may be amended only if such
amendment is in writing and signed by all parties thereto.
12.2.2. No failure or delay by any party in exercising any right, power
or privilege under this Agreement shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusiVe of any rights or
remedies provided by law.
12.3. EXPENSES. All costs and expenses incurred in connection with the
this Agreement or the transactions contemplated hereby shall be paid by the
party incurring such cost or expense.
12.4. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties and their respective
successors and assigns; PROVIDED that no party may assign, delegate or
otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other party. Notwithstanding the foregoing, (i)
the Bank may from time to time assign any or all of its rights and
obligations hereunder to any Affiliate of the Bank, provided that any such
assignee of the Bank's obligations hereunder shall have the capability to
perform such obligations without impairing the quality of the services
provided to the Company, (ii) the Company shall assign or otherwise transfer
all of its rights and obligations under this Agreement (A) to the purchaser
of all or substantially all of the assets of the Business or (B) to any
corporation which is a successor (whether by merger, consolidation or
otherwise) to the Company or any successor (whether by merger, consolidation
or otherwise) thereto, in each case subject to the execution by such assignee
or transferee of an agreement to be bound by the provisions of this Agreement
and (iii) the Bank may from time to time sell accounts receivable for
securitization, retaining its processing and servicing
22
obligations with respect thereto (it being understood that (A) the purchaser of
such accounts receivable shall have no recourse against the Company for any
reason whatsoever and (B) the Bank hereby indemnifies the Company and its
Related Parties against, and agrees to hold them harmless from, any and all
Damages incurred or suffered by any of them in connection with any claims made
by such purchaser)
12.5. GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the law of the State of New York
(without regard to the choice of law provisions thereof)
12.6. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto or thereto shall have
received a counterpart hereof signed by the other parties hereto.
12.7. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties with respect to the subject matter hereof and supersedes all
prior agreements, understandings and negotiations, both written and oral,
between the parties with respect to such subject matter. No representation,
inducement, promise, understanding, condition or warranty not set forth herein
has been made or relied upon by any party hereto. Neither this Agreement nor any
provision thereof is intended to confer upon any Person other than the parties
any rights or remedies hereunder.
12.8. JURISDICTION. Any suit, action or proceeding seeking to enforce
any provision of, or based on any matter arising out of or in connection with,
this Agreement or the transactions contemplated thereby may be brought against
any of the parties in the United States District Court for the Southern District
of New York or any state court sitting in the City of New York, Borough of
Manhattan, and each of the parties hereby consents to the exclusive jurisdiction
of such court (and of the appropriate appellate courts) in any such suit, action
or proceeding and waives any objection to venue laid therein. Process in any
such suit, action or proceeding may be served on any party anywhere in the
world, whether within or without the State of New York. Without limiting the
foregoing, the parties agree that service of process upon such party at the
address referred to in Section 12.1, together with written notice of such
service to such party, shall be deemed effective service of process upon such
party.
23
12.9. CAPTIONS. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
12.10. DEFINED TERMS. The following terms, as used herein, shall have
the following meanings:
12.10.1. "AFFILIATE" means, with respect to any Person, any Person
directly or indirectly controlling, controlled by, or under common control with
such other Person. For purposes of this definition, "CONTROL" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "CONTROLLING" and
"CONTROLLED" have meanings correlative to the foregoing.
12.10.2. "BUSINESS DAY" means a day other than a Saturday, Sunday or
other day on which commercial banks in New York, New York or Columbus, Ohio are
authorized or required by law to close.
12.10.3. "PERSON" means an individual, a corporation, a partnership, an
association, a trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
12.10.4. "SEASON" means (i) the period from the first day of the fiscal
month of February to the last day of the fiscal month of July and (ii) the
period from the first day of the fiscal month of August to the last day of the
fiscal month, of January.
12.11. FORCE MAJEURE. Notwithstanding the provisions of Section 8.3,
neither the Bank nor its affiliates shall be liable in any manner to the Company
for any failure to perform their obligations under this Agreement resulting in
any manner from delay, failure in performance, loss or damage due to fire,
strike, embargo, explosion, power blackout, earthquake, flood, war, the
elements, labor disputes, civil or military authority, acts of God, public
enemy, inability to secure fuel, acts or omissions of carriers or other causes
beyond their reasonable control, whether or not similar to any, of the foregoing
(a "FORCE MAJEURE EVENT").
24
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers effective on the day and year first
above written.
WORLD FINANCIAL NETWORK
NATIONAL BANK
By: /s/ Timothy B. Lyons
------------------------------------
Name: Timothy B. Lyons
Title:
VICTORIA'S SECRET CATALOGUE, INC.
By: /s/ Timothy B. Lyons
------------------------------------
Name: Timothy B. Lyons
Title:
FAR WEST FACTORING, INC.
By: /s/ Timothy B. Lyons
------------------------------------
Name: Timothy B. Lyons
Title:
25
AGREEMENT AND CONSENT IN WRITING TO ASSIGNMENT
THIS AGREEMENT AND CONSENT IN WRITING TO ASSIGNMENT is made as of May
2, 1998 among WORLD FINANCIAL NETWORK NATIONAL BANK ("Bank"), a Delaware
corporation, VICTORIA'S SECRET CATALOGUE, INC. ("Company"), a Delaware
corporation, and VICTORIA'S SECRET CATALOGUE, LLC ("VSCLLC"), a Delaware limited
liability company.
WITNESSETH:
WHEREAS, Bank and Company are parties to a certain Credit Card
Processing Agreement dated as of January 31, 1996 (the "Agreement"); and
WHEREAS, Section 12.4 of the Agreement provides that neither the
Agreement nor any rights or obligations therein granted to or binding upon
Company may be assigned, delegated or transferred by Company without the prior
written consent of Bank; and
WHEREAS, Section 12.4 of the Agreement also provides that any
assignment by Company to any corporation which is a successor by merger,
consolidation or otherwise is subject to the execution by such assignee of an
agreement to be bound by the provisions of the Agreement; and
WHEREAS, Company desires to merge into VSCLLC, and Company further
desires to assign and transfer its interest in the Agreement and all of its
rights and obligations thereunder to VSCLLC; and
WHEREAS, Bank desires to consent to such assignment and transfer and
VSCLLC desires to accept such assignment and transfer and agree to be bound by
the provisions of the Agreement.
NOW, THEREFORE, pursuant to Section 12.4 of the Agreement, Bank hereby
consents in writing to the assignment and transfer by Company to VSCLLC of all
of Company's interest in the Agreement and all of Company's rights and
obligations thereunder. In addition, Company hereby assigns and transfers all of
its interest in the Agreement and all of its rights and obligations thereunder
to VSCLLC, and VSCLLC hereby accepts such assignment and transfer and agrees to
be bound by the provisions of the Agreement.
WORLD FINANCIAL NETWORK NATIONAL BANK
By: /s/ Carolyn S. Melvin
-----------------------------------
Carolyn S. Melvin, Vice President,
Secretary, and General Counsel
VICTORIA'S SECRET CATALOGUE, INC.
By: /s/ Timothy B. Lyons
-----------------------------------
Timothy B. Lyons, Secretary
VICTORIA'S SECRET CATALOGUE, LLC
By: /s/ Timothy B. Lyons
-----------------------------------
Timothy B. Lyons, Secretary
Exhibit 10.3
CREDIT CARD PROCESSING AGREEMENT
This Credit Card Processing Agreement is made as of this 31st
day of January, 1996 between WORLD FINANCIAL NETWORK NATIONAL BANK, a national
banking association (the "BANK"), and Victoria's Secret Stores, Inc., a Delaware
corporation (the "CORPORATION") and Lone Mountain Factoring, Inc., a Nevada
corporation ("FACTORING") (the Corporation and Factoring being collectively
referred to herein as the "COMPANY").
WHEREAS the Company and the Bank believe that it is desirable
and in their respective best interests for the Bank to continue, in a manner
generally consistent with past practices, to issue credit cards bearing the
trade names, trademarks, logos and service marks used in the Company's
Victoria's Secret retail or catalogue business (the "Business") which will allow
the customers of the Company to purchase goods from the Company using funds
advanced by the Bank; and
WHEREAS in order to implement such arrangements, the parties
hereto desire to enter into this Agreement;
NOW, THEREFORE, the parties hereby agree as follows:
Section 1. TRADEMARKS. The Company hereby authorizes the Bank
to use the trademark "Victoria's Secret", on credit cards owned or issued by the
Bank, monthly billing statements, collection correspondence, credit card
agreements, credit applications, customer service correspondence and in such
other written and oral communications with cardholders as are necessary or
convenient in connection with this Agreement, in each case consistent with past
practices. The "Victoria's Secret" trademark is referred to herein as the
"MARK". The Company shall have the right to approve in its sole discretion the
"art" (including colors and font styles) for all proposed uses of the Mark by
the Bank. The Bank shall not use the Mark for any purpose other than as set
forth in the first sentence of this Section l.
Section 2. CREDIT CARD SYSTEM.
2.1. NEW CREDIT CARDS.
2.1.1. ISSUANCE OF CREDIT CARDS. To the extent requested by
the Company, the Bank will issue credit cards bearing the Mark ("CREDIT CARDS")
to customers of the Business who apply for such Credit Cards and related
extensions of credit. Such customers (i) must qualify for the extension of
credit under credit standards related to new account approvals, credit limits
and authorization management ("CREDIT STANDARDS") which will be determined by
the Bank from time to time and (ii) must accept the Bank's standard form of
credit card agreement containing the terms and conditions governing extensions
of credit to Persons who hold Credit Cards and their authorized users (attached
hereto as Exhibit 2.1.1(a)). Notwithstanding the foregoing, (i) the Credit
Standards established by the Bank from time to time in connection with the
issuance of Credit Cards for use in connection with the Business shall be
consistent with past practices (as described in Exhibit 2.1.1(b)), with such
changes as shall be (A) approved by the Company in its reasonable discretion or
(B) determined by the Bank in good faith to be necessary from the standpoint of
safe and sound banking practices and (ii) the Bank may make any change in the
terms of its agreement with any person who holds a Credit Card (including
repayment terms, fees and finance charge rates) after prior notice to and
consultation with the Company. The Bank hereby confirms its understanding that
the Company intends to offer and promote credit as outlined in Section 2.2. The
Bank will bear the costs of the issuance of Credit Cards under this Section 2.1.
2.1.2. CREDIT MAXIMIZATION. The Company will be entitled to
use credit related promotional strategies consistent with past practices. The
Bank will work in good faith with the Company to develop business strategies
with respect to the issuance of Credit Cards intended to maximize the potential
of the Business and, in that regard, will consider in good faith proposals
involving variances from the Bank's general Credit Standards or changes in the
terms of the Bank's agreement with any person who holds a Credit Card; PROVIDED
that subject to compliance with the provisions of Section 2.1.1, Credit
Standards and the terms of such agreement shall in all circumstances be
determined by the Bank. The terms of any program involving variances from the
Bank's general Credit Standards or changes in the terms of the Bank's agreement
with any person who holds a Credit Card, including (without limitation) fees or
other charges to be paid by either party, shall be agreed on a
program-by-program basis.
2.2. PROMOTION. The Company will use its reasonable efforts to
promote the use of Credit Cards in the Business and to acquire new Cardholders
(as defined below), for the Bank through the use of, for example, "instant
credit," "quick credit," pre-approved solicitations, applications and
promotional material displayed in stores and inserted in catalogues and special
offers to Cardholders, in each case consistent with past practices. The costs
incurred by the Company and the Bank (including,
2
among other things, the cost of printing application forms, promotional
material, pre-approved solicitations and instant and quick credit contracts and
the cost of special offers) will be borne by the Company and the Bank on terms
to be negotiated from time to time in a manner consistent with past practices.
The Bank shall have two Business Days to review for legal compliance all credit
application forms and marketing materials (including, without limitation, those
referred to above) prior to their being printed.
Section 3. ACCEPTANCE OF CREDIT CARDS. The Company will
permit Persons who hold Credit Cards (subject to the restrictions of this
Agreement) or other credit cards owned by the Bank that the Bank has designated
and their authorized users ("CARDHOLDERS") to purchase goods sold by the
Business without any cash payment by use of a Credit Card, subject to the
following conditions:
3.1. CHARGE SLIP (CREDIT CARD PRESENTED). If the customer
presents a Credit Card at the time of sale, the Company will maintain a record
of the sale in a form acceptable to the Bank which reflects the following:
3.1.1. A brief identification of the property or service
purchased (the "TRANSACTION");
3.1.2. The date of the Transaction;
3.1.3. The dollar amount of the purchase price of the
merchandise or service which was the subject of the Transaction, including
applicable shipping, handling and taxes;
3.1.4. An imprint or electronic capture of the Credit Card
account number or, in the event of equipment malfunction, a written notation of
such account number; and
3.1.5. The Cardholder's signature.
3.2. CHARGE SLIP (CREDIT CARD NOT PRESENTED). The Bank
acknowledges and agrees that a Cardholder need not present a Credit Card at the
time of sale and that, subject to Section 3.5, the Company may accept charges to
a Credit Card verbally from the customer or via a written order form from the
customer. If the customer does not present a Credit Card at the time of sale,
the Company will maintain a record of the sale in a form acceptable to the Bank
which reflects, in lieu of the information set forth in Section 3.1.1 through
3.1.5, the following:
3.2.1. A brief identification of the Transaction;
3.2.2. The date of the Transaction;
3
3.2.3. The dollar amount of the purchase price of the
merchandise or service which was the subject of the Transaction, including
applicable shipping, handling and taxes;
3.2.4. A written notation of the Credit Card account number,
which shall have been obtained from the customer and recorded in the Company's
customer file;
3.2.5. The customer's name and address and, except in the case
of catalogue purchases, personal identification type and number; and
3.2.6. If applicable, the name and address to where the
merchandise which was the subject of the Transaction was shipped and the-date
and method of shipment.
3.3. RETENTION OF CHARGE SLIP. The Company will retain a
legible copy of each charge slip for six months following the date of the
Transaction and will provide such copy to the Bank within 30 days of the Bank's
request therefor; PROVIDED that the Bank will request delivery of such
information only in the case of a bona fide dispute (the existence of such
dispute to be determined by the Bank in its reasonable discretion) relating to
the underlying Transaction, upon the inquiry of the applicable Cardholder or as
requested by auditors of the Bank in connection with their audit of the Bank's
financial statements or by any governmental authority.
3.4. AUTHORIZATION. The Transaction is authorized by the Bank
in accordance with the floor limits and other procedures in effect at the time
or such authorization is dispensed with under rules established by the Bank from
time to time in accordance with Section 8.3 to deal with situations in which
authorization is not available because of disruption of the Bank's computer
system or other causes provided for in such rules, consistent with past
practice.
3.5. CHARGEBACKS. The Company agrees to accept as a chargeback
any charge on a Credit Card where:
3.5.1. The Cardholder disputes the charge and the Company
fails to provide a legible copy of the charge slip within 30 days of the Bank's
request therefor in accordance with Section 3.3;
3.5.2. The Company failed to obtain authorization from the
Bank in accordance with Section 3.4;
3.5.3. The Company failed to complete the charge slip in
accordance with Section 3.1 or 3.2, as applicable;
4
3.5.4. A Company employee fraudulently misused the Credit Card
or account number;
3.5.5. A dispute arises from the Cardholder being charged or
credited more than once for the same sale, payment or return;
3.5.6. A dispute with the Cardholder arises from a voided
Transaction or an invalid Credit Card account number;
3.5.7. A dispute with the Cardholder arises from an improperly
opened Credit Card account, or the account is otherwise uncollectible, where a
Company employee failed to comply with new account procedures in effect at the
time the account was opened;
3.5.8. The Bank, consistent with past practices, gives the
Cardholder credit for (or accepts as payment) a non-expired discount coupon or
gift certificate in respect of a prior purchase; or
3.5.9. A dispute arises from the Company's failure properly to
identify a catalogue purchaser as the Cardholder where such failure results in
merchandise being shipped without the actual Cardholder's authorization.
The amount charged back with supporting detail will be
invoiced to the Company weekly, and all required payments by the Company shall
be made within 30 days after receipt of an invoice. If the Company pays the Bank
any chargeback amount pursuant to this Section 3.5 or if such payment is netted
against amounts payable by the Bank pursuant to Section 4.1.1, any remittances
relating to such chargeback from the Cardholder subsequently collected by the
Bank shall, to the extent not refunded to the Cardholder, be credited by the
Bank to the Company.
Section 4. PAYMENT.
4.1. PAYMENT BY BANK.
4.1.1. The Bank will pay to the Company, as full consideration
for any Transaction between the Company and any Cardholder using a Credit Card,
as to which the Company has complied with the provisions of Section 3 above, the
amount shown on the records of the Company for each Transaction, including all
applicable shipping, handling and taxes, less a discount, which discount shall
be equal to the discount rate determined in accordance with Section 4.1.5
(expressed as a fraction) multiplied by the amount shown on the records of the
Company for each Transaction (exclusive of all applicable shipping, handling and
taxes).
5
4.1.2. The Bank will pay such amount by transferring
immediately available funds to an account designated by the Company at any bank
to which the Bank may make electronic fund transfers before the end of the
second Business Day following the receipt by the Bank of the information
required by Section 3.1 or 3.2, such information to be properly formatted and
edited and transferred via a telecommunications connection between the Company
and the Bank pursuant to such computer programs and telecommunications protocols
as the Bank may, in its reasonable discretion, designate from time to time,
subject to reasonable prior notice. The Company will transmit (in the manner
referred to above) to the Bank an audited and balanced file in the format
specified by the Bank containing all such information within two Business Days
after the occurrence of the underlying Transaction; PROVIDED that if, as a
result of technical disruptions, any store locations are not polled within a
normal period after the occurrence of the underlying Transactions, the Company
will transmit such information relating to such store locations as soon as
reasonably practicable after polling is completed.
4.1.3. The Company may not attempt to collect any amount from
any Cardholder with respect to a Transaction which has been paid for by the Bank
under this Section 4.1 and not charged back to the Company pursuant to Section
3.5.
4.1.4. The Company will, consistent with past practices,
accept payments from Cardholders for amounts due on Credit Cards ("IN-STORE
PAYMENTS"). Any In-Store Payments received by the Company will be held in trust
for the Bank and its assigns and netted against amounts payable by the Bank
pursuant to Section 4.1.1 (PROVIDED that the Company shall not be required to
keep In-Store Payments separate from other payments received by the Company) and
evidence of such payments will be transmitted to the Bank on a daily basis in
accordance with the procedures set forth in Section 4.1.2. Notwithstanding the
foregoing:
(a) if any bankruptcy or other insolvency proceeding has been
commenced against the Company (and so long as the same has not been dismissed),
the Company shall promptly comply with any written instruction (a "STORE PAYMENT
NOTICE") received by the Company from the Bank or any successor to the Bank as
"SERVICER" under the Pooling and Servicing Agreement referred to below (the Bank
or any such successor being the "SERVICER") to take either of the following
actions (as specified in such instruction):
(i) cease accepting In-Store Payments and
thereafter inform Cardholders who wish to make In-Store
Payments that payment should instead be sent to Servicer (but
only if the Servicer is required by the
6
Pooling and Servicing Agreement to give such notice); or
(ii) (A) deposit an amount equal to all
In-Store Payments received by each retail location operated by
the Company, not later than the Business Day following
receipt, into a segregated trust account (the "STORE ACCOUNT")
established by the Company for this purpose and, pending such
deposit, to hold all In-Store Payments in trust for the Bank
and its assigns, (B) use commercially reasonable efforts not
to permit any amounts or items not constituting In-Store
Payments to be deposited in the Store Account and (C) cause
all available funds in each Store Account to be transferred on
a daily basis to an account designated in the Store Payment
Notice;
PROVIDED that the Company need not take the actions specified in clause (i) or
clause (ii) if the Company or any of its affiliates provides the Servicer or the
Trustee under (and as defined in) the Pooling and Servicing Agreement with a
letter of credit, surety bond or other similar instrument covering collection
risk with respect to In-Store Payments and all conditions specified in the
Pooling and Servicing Agreement with respect to such letter of credit, surety
bond or other similar instrument are satisfied;
(b) if and to the extent that the Bank so requests in
writing at a time when the Bank is required by the Pooling and Servicing
Agreement to make such request, In-Store Payments shall no longer be netted
against amounts payable by the Bank pursuant to Section 4.1.1, but instead the
Company shall transfer to the Bank by wire transfer of immediately available
funds (or, if the aggregate amount to be transferred pursuant to this clause (b)
and Section 4.2 is less than $10,000, by check), not later than the third
Business Day following receipt of any In-Store Payments, an amount equal to the
sum of such In-Store Payments.
So long as the Company complies with instructions delivered in accordance with
paragraph (a) or (b), any amounts payable by the Bank pursuant to Section 4.1.1
shall be made without deduction for In-Store Payments.
For purposes of the foregoing, the "POOLING AND SERVICING
AGREEMENT" means the Pooling and Servicing Agreement dated as of January 17,
1996 among the Bank and The Bank of New York, as trustee, including each
Supplement thereunder, as the same may be amended, supplemented or otherwise
modified from time to time, except that no amendment, supplement or other
modification to such Agreement that affects the circumstances in which the
Company may be required to take the actions referred to in
7
paragraph (a) or (b) above or in Section 4.2.3 shall be given effect for
purposes of this Agreement unless consented to by the Company.
4.1.5. DISCOUNT RATE. The applicable discount rate referred to
in Section 4.1.1 shall be the then applicable discount rate determined in
accordance with the matrix set forth in Exhibit 4.1.5; PROVIDED that in the
event of a legislated or judicial reduction in the annual percentage rate or
fees that may be charged by the Bank to Cardholders, the Company and the Bank
agree to negotiate in good faith an increase in the discount rate.
4.2. PAYMENT BY COMPANY. If the Bank has paid the Company for
any Transaction and
4.2.1. If:
(a) the representations and warranties of the Company with
respect to such Transaction, as set forth in Sections 5.1 through 5.3 below, are
not true in all material respects; or
(b) any merchandise which was the subject of such Transaction
is returned to the Company and the Company, pursuant to its policies concerning
returned merchandise, accepts such merchandise for credit; or
(c) in order to settle a dispute concerning the nature,
quality or quantity of goods purchased from the Company with the Credit Card,
the Company agrees to refund all or part of the purchase price thereof; then
4.2.2. The Company:
(a) shall pay the Bank an amount equal-to the face amount of
such Transaction or portion thereof refunded to the customer, less any discount
actually taken by the Bank when it made payment to the Company in consideration
for such Transaction pursuant to Section 4.1.1;
(b) shall create a written memorandum of such Transaction
setting forth the information required by Section 3 above (a "CREDIT
MEMORANDUM");
(c) shall transmit the information contained in such Credit
Memorandum to the Bank by the method of electronic transmission referred to in
Section 4.1.2 above; and
(d) subject to Section 4.2.3, shall permit the payment
required by this Section 4.2 to be netted against amounts payable by the Bank
pursuant to Section 4.1.1. The
8
Company shall retain any such Credit Memorandum in the same manner and for the
same time as the charge slip referred to in Section 3.3 and shall promptly
deliver any such Credit Memorandum to the Bank upon its request. If the Company
pays the Bank any amount for a Transaction pursuant to this Section 4.2 or if
such payment is netted against amounts payable by the Bank pursuant to Section
4.1.1, any remittances relating to such Transaction from the customer
subsequently collected by the Bank shall, to the extent not refunded to the
Cardholder, be credited by the Bank to the Company.
4.2.3. Notwithstanding clause (d) of Section 4.2.2, if and to
the extent that the Bank so requests in writing at a time when the Bank is
required by the Pooling and Servicing Agreement to make such request, amounts
payable by the Company pursuant to Section 4.2 ("ADJUSTMENT PAYMENTS") shall no
longer be netted against amounts payable by the Bank pursuant to Section 4.1.1,
but instead the Company shall transfer the amount of each Adjustment Payment to
the Bank by wire transfer of immediately available funds (or, if the aggregate
amount to be transferred pursuant to this Section 4.2 and clause (b) of Section
4.1.4 is less than $10,000, by check), not later than the second Business Day
following the date on which the events giving risk to such Adjustment Payment
occur (and amounts payable by the Bank pursuant to Section 4.1.1 shall be made
without deduction for Adjustment Payments).
4.3. OTHER FEES.
4.3.1. DEFERRED PAYMENT. If any Transaction between the
Company and any Cardholder using a Credit Card is consummated on a deferred
payment basis (for which the period of deferral may not exceed 90 days), then
for each month during the period of deferral, the Company will pay the Bank an
amount equal to the Deferred Payment Rate for such month multiplied by the
average daily balance of purchase price so deferred during such month. For
purposes of this Section 4.3, "DEFERRED PAYMENT RATE" means, for any month, (i)
if the debt of the Bank has an implied investment grade rating at all times
during such month, the average interest rate paid by the Bank to obtain funds
during such month, and (ii) if the debt of the Bank does not have an implied
investment grade rating at all times during such month, the then-current
reference rate or index maintained or provided by a nationally recognized
investment banking firm (which firm shall be reasonably acceptable to the
Company and the Bank) in respect of issuers whose debt has the lowest investment
grade rating.
4.3.2. POSTAL RATE ADJUSTMENT. The Company agrees to reimburse
the Bank for any costs incurred by the
9
Bank as a result of changes in postal rates or rules applicable to mailings to
Cardholders after the date hereof; PROVIDED that the postal costs and postal
discounts applicable to mailings to Cardholders shall be no less favorable than
the postal costs and postal discounts applicable to comparable mailings to
holders of any other credit cards issued by the Bank. The Bank and the Company
agree to use their reasonable efforts to minimize postal costs and maximize
postal discounts.
4.3.3. SPECIAL PROJECTS. With respect to special services
provided by the Bank from time to time with respect to the Business (including,
without limitation, consulting, surveys, gift certificate calls and fulfillment,
rebate fulfillment, telemarketing and special processing or accounting reports
required in connection with promotional activities), the Company will pay to the
Bank amounts to be agreed on a program-by-program basis. To the extent not
otherwise provided for in this Agreement, (i) the Bank shall not incur expenses
required to be paid or reimbursed by the Company for any project in amounts in
excess of $1,000 without having first obtained prior written or oral
authorization from the Company for such expenses; and (ii) the Bank shall not
incur expenses required to be paid or reimbursed by the Company for any project
in amounts in excess of $50,000 without having first obtained prior written
authorization from the Company for such expenses; PROVIDED that, in the event
any terms of any such written authorization are in conflict with the terms of
this Agreement, the terms of this Agreement shall be controlling.
4.3.4. PAYMENTS. All amounts payable by the Company under this
Section 4.3 shall be paid by wire transfer of immediately available funds within
30 days after receipt of an invoice for such amounts.
4.4. SETOFFS. The Bank may at any time, in addition to all
other rights and remedies available to it, setoff against any amount owing to
the Company by the Bank under this Agreement, any amounts owing by the Company
to the Bank under this Agreement.
4.5. INVOICE. The amount of any invoice prepared and delivered
by the Bank under this Agreement shall be deemed to be correct, accurate and
binding upon the Company if the Company makes no objection within 30 days after
the date of such invoice; PROVIDED that the making of any objection shall not
relieve the Company of its obligation to make full payment of the amount set
forth on the related invoice when such amount is otherwise payable pursuant to
this Section 4, it being understood that the Company does not waive its rights
thereby and may, subject to Section
10
10.4, assert a claim with respect to such invoice in an appropriate proceeding.
Section 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Bank that:
5.1. VALID TRANSACTIONS. Each Transaction will be completed in
compliance with the provisions of Section 3 and will create a valid, binding and
legally enforceable obligation of the Cardholder whose name is shown on the
Credit Card to pay to the Company the amount shown on the charge slip, which
obligation to the Company will be discharged in full by the payment made to the
Company by the Bank in respect of such Transaction under Section 4.1 above.
5.2. ACCURATE INFORMATION. Each charge slip will accurately
reflect the Transaction described therein. Each charge slip and Credit
Memorandum and any charge slip or Credit Memorandum information transmitted to
the Bank by the Company will be complete and accurate and in a form deemed
necessary by the Bank to allow Cardholder billing in accordance with applicable
law. The Company will accurately report all returns and other credits to the
Bank within the time period specified in Section 4.
5.3. NO LIENS. No amount due to the Company with respect to
any Transaction will be subject to any lien or encumbrance in favor of any third
party or to any offset, counterclaim or defense of any Person other than the
Bank or its Affiliates.
5.4. MARK. The use of the Mark by the Bank under this
Agreement does not infringe the rights of any other Person.
Section 6. REPRESENTATIONS AND WARRANTIES OF THE BANK. The
Bank hereby represents and warrants to the Company that:
6.1. COMPLIANCE WITH LAWS. Each Credit Card and the related
credit card agreement, all monthly billing statements and any collection efforts
of the Bank conform and will conform in all material respects with all federal
or state laws or regulations applicable to the extension of credit to or the
collection of amounts from consumers including, without limitation, the Truth-
in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act
and federal and state bankruptcy and debtor relief laws ("CONSUMER LAWS")
6.2 NON-CONTRAVENTION. The performance by the Bank of its
obligations under this Agreement will not
11
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, any agreement or instrument to which the Bank is
party or by which the Bank is bound, nor will such performance result in any
violation of the provisions of the articles of association or the by-laws of the
Bank or any applicable law or statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the Bank.
Section 7. COVENANTS OF THE COMPANY. The Company hereby
covenants and agrees with the Bank as follows:
7.1. CREDIT CARD NOTICES AND COMMUNICATIONS. The Company will,
consistent with past practices, accept and turn over to the Bank promptly upon
receipt thereof by the Company (i) subject to Section 4.1.4, any payments made
by any Cardholder with respect to any Transaction or any Credit Card and (ii)
any notices or other communications received by the Company with respect to any
Credit Card including, without limitation, customer changes of address and other
information on approved forms.
7.2. COMPLIANCE WITH APPLICABLE LAW. The Company will, at all
times, comply in all material respects with all Consumer Laws.
7.3. RULES. The Company shall comply with such written rules
and operating instructions relating to the use of the Credit Cards, the
distribution of applications, Credit Card security, authorization procedures,
"downtime" procedures and other matters related to this Agreement as the Bank
may, from time to time, promulgate with prior notice to the Company; PROVIDED
that such rules and operating instructions shall be consistent with past
practices, with such changes as shall be approved-by the Company in its
reasonable discretion.
7.4. CARDHOLDER INQUIRIES AND COMPLAINTS. If a Cardholder
makes an inquiry or complaint to the Company about the nature, quality or
quantity of goods purchased from the Company with a Credit Card, or a Cardholder
has made an inquiry or complaint to the Bank concerning the nature, quality or
quantity of goods purchased from the Company with a Credit Card, the Company
shall deal directly with the Cardholder to resolve any such complaint or
inquiry. The Company shall answer all inquiries from the Bank about complaints
made to the Bank by Cardholders within 10 days after the Company receives an
inquiry from the Bank.
7.5. EQUIPMENT. The Company shall obtain and maintain at its
own expense such point of sale and authorization terminals, credit card
imprinters and other
12
items of equipment as are necessary for it to receive authorizations, transmit
charge slip and Credit Memorandum information, process credit applications and
perform its obligations under this Agreement. Such point of sale and
authorization terminals shall be capable of communicating with the computer
equipment maintained by the Bank according to such computer programs and
telecommunications protocols as may be specified by the Bank in its reasonable
discretion from time to time subject to reasonable prior notice of any change in
such equipment or protocols.
7.6. EXCLUSIVITY. The Company may not accept or promote any
credit card as payment for its goods or services unless such credit card is a
Credit Card, a proprietary credit card of another division of the Company or any
Affiliate of the Company (whether or not issued by the Bank) or a credit card
issued by a bank or other Person engaged in the business of issuing credit cards
to Persons for the purpose of making payments to third parties generally under
such names as Master Card, Visa, Discover, American Express or Optima. The
Company may not issue its own credit cards or enter into an agreement with any
third party under which credit cards bearing the Mark are issued; PROVIDED that
after the second anniversary of the date hereof, the Company shall be entitled
to negotiate with any third party with respect to the issuance of co-branded or
affinity bank credit cards bearing the Mark and to accept any Bona Fide Offer by
such third party if, at least 30 days prior to accepting such Bona Fide Offer,
the Company provides the Bank with an opportunity to submit a competing offer
with respect to the issuance of co-branded or affinity bank credit cards bearing
the Mark, which competing offer, if it has terms at least as favorable to the
Company as such Bona Fide Offer, shall be accepted by the Company in lieu of
such Bona Fide Offer. For purposes of this Section 7.6, "BONA FIDE OFFER" means
an offer to the Company with respect to a program of at least two years'
duration for the issuance of co-branded or affinity bank credit cards that is,
in the Company's reasonable judgment, generally competitive in light of
marketplace conditions existing at the time (such marketplace conditions to
include, without limitation, other offers with respect to co-branded or affinity
bank credit cards being made to the Company, its Affiliates and other retail or
catalogue merchants).
7.7. OBSOLETE MATERIALS. The Company shall reimburse the Bank
for the cost of replacing reasonable amounts of obsolete forms and other
materials if such replacement is requested by the Company due to changes in the
Mark or in the logo, colors or styles used to identify or promote the Business.
13
Section 8. COVENANTS OF THE BANK. The Bank hereby covenants
and agrees with the Company as follows:
8.1. COMPLIANCE WITH APPLICABLE LAW. The Bank will, in
issuing, billing, administering, and collecting with respect to the Credit Cards
and at all other times, comply in all material respects with all Consumer Laws.
8.2. COLLECTION. The Bank will use efforts to collect from
each Cardholder the purchase price and additional taxes and other charges of
Transactions consistent with past practices and with its efforts to collect
accounts receivable under other credit cards issued by it; PROVIDED that the
Bank will initiate collection of any account receivable under a Credit Card at
or before the time such account receivable is 60 days past due. The Bank will,
consistent with past practices, determine the use and timing of dunning letters,
statement messages and collection agents and will manage all written-off
accounts (including, without limitation, the management of outside collection
agencies). The Bank may implement reasonable variances from past collection
practices after prior notice to and consultation with the Company.
8.3. PERFORMANCE STANDARDS. In performing its obligations
under this Agreement, subject to Section 12.11, the Bank shall comply with the
performance standards set forth in Exhibit 8.3, as such performance standards
may be modified from time to time at the reasonable request of the Bank or the
Company. Within 10 days after the end of each fiscal month, the Bank will
deliver to the Company a compliance certificate of the chief executive officer
or chief financial officer of the Bank setting forth in reasonable detail data
demonstrating compliance during such calendar month with such performance
standards. Enhancements to, and modifications or upgrades of, the computer
processing, payment, billing and information services provided by the Bank will
be made from time to time at the reasonable request of the Company. Any such
enhancements, modifications or upgrades shall, to the extent requested by the
Company, be made on terms to be agreed upon.
8.4. FORCE MAJEURE EVENT. After the occurrence of a Force
Majeure Event (as defined in Section 12.11) which disrupts the availability of
the services provided hereunder, the Bank may elect to reestablish the
availability of such services. If any such Force Majeure Event comparably
disrupts the performance of services similar to the services provided hereunder
with respect to one or more other credit cards issued by the Bank, then the Bank
shall reestablish the availability of such services to the same extent and
within the same timetable under
14
comparable circumstances as the comparable services are reestablished with
respect to such other credit cards. The Bank shall promptly notify the Company
of any Force Majeure Event and shall inform the Company whether it will
reestablish services and the timetable therefor. If the Bank chooses not to
reestablish or take measures to reestablish such services within a reasonable
period of time as would be indicated by sound business practice, the Company
shall be free to obtain such services from any supplier thereof.
Section 9. PROPERTY RIGHTS.
9.1. RIGHTS OF THE COMPANY. The Company is the owner of the
names and addresses of customers of the Business; PROVIDED that (i) as set forth
in Section 9.2, the Bank is also the owner of such information with respect to
customers of the Business who are also Cardholders and (ii) The Limited, Inc.
("THE LIMITED") is also the owner of such information with respect to customers
of the Business until the second anniversary of the date, if any, on which the
Company ceases to be an Affiliate of The Limited.
9.2. RIGHTS OF BANK. Except as set forth in Section 9.1, the
Bank is the owner of all information relating to the Cardholders (including
names and addresses) and the Credit Cards, the copyright to all written material
contained in any credit card agreements, applications, billing statements and
other forms used by the Bank in the administration of its agreements with the
Cardholders, all credit scoring systems and all policies of credit insurance
issued to the Bank with respect to any Cardholder; PROVIDED that the Bank shall
not be entitled to sell, rent or otherwise disclose any information relating to
the Cardholders to any third party other than (i) Affiliates of the Company,
(ii) Persons who, in the sole judgment of The Limited, do not compete, directly
or indirectly, with any retail or catalogue business conducted by The Limited or
any of its Affiliates and (iii) in the case of disclosure, credit agencies.
Subject to Section 9.3, the Company will not have any rights in any information
or property of the Bank; PROVIDED that the Bank will provide the Company with
such information the Bank owns with respect to Cardholders as the Company may
reasonably request in order to develop potential marketing or credit strategies.
9.3. DATABASE. (a) It is the intention of the parties that the
Bank will manage, maintain and develop an information marketing database (the
"DATABASE") at its own expense, subject to a mutually satisfactory agreement
with the Company pursuant to which (i) the Company will agree to utilize the
Database, (ii) the Database will be accessible from the Company's offices and
(iii) the Bank will provide
15
the Company with information maintained as part of the Database on terms that
are no less favorable than those offered by the Bank to any other recipient of
comparable information.
(b) Notwithstanding the foregoing, the Bank will, from time to
time at the request of the Company, and without charge, promptly provide the
Company with a list of the names and addresses of all Cardholders, all holders
of other proprietary credit cards of the Company or any Affiliate of the Company
(if issued by the Bank) and all other customers of the Business, any other
business of the Company and the business of any other Affiliate of the Company.
The Company shall reimburse the Bank for its costs of producing and shipping
such list in the format required by the Company within 30 days after receipt
of-a request for such reimbursement from the Bank.
(c) Subject to Section 9.2, the Bank may make the Database
available, and provide information marketing services to, third parties on
terms reasonably determined by the Bank; PROVIDED that (i) the allocation
among the Bank, the Company and The Limited of fees charged by the Bank to
such third parties shall be agreed on a program-by-program basis or, in the
case of programs existing on the date hereof, continued consistent with past
practices and (ii) the Bank may not make the Database available, or provide
information marketing services to, any Person who, in the sole judgment of
The Limited, competes, directly or indirectly, with any retail or catalogue
business conducted by The Limited or any of its Affiliates.
9.4. ENVELOPE STUFFING.
9.4.1. Subject to the right of the Bank to include in mailings
to Cardholders periodic billing statements and any legal notices which the Bank
believes are necessary or appropriate to send to Cardholders, the Company shall
have the right to have materials advertising its products and services included
in the envelopes containing the periodic statements. Such materials shall
advertise only products and services related to the Business, shall (unless the
Company provides the Bank with notice as provided below) be limited to seven
panels per envelope and shall conform to size requirements established from time
to time by the Bank with reasonable prior notice of any changes. The Company
shall use reasonable efforts (i) to notify the Bank at least 15 days before the
proposed date of any such inclusion and shall provide the Bank with a draft copy
of any such advertising material at the time it notifies the Bank of such
mailing and (ii) to provide the Bank with a seasonal marketing plan at least 30
days before the beginning date of each Season. The Company shall
16
provide the Bank with the materials to be included in the mailing not less than
two Business Days prior to the initial insertion date. If the Company does not
notify the Bank of any such inclusion at least seven days before the proposed
date of such inclusion or if the material included does not take up the
available space, the Bank may utilize the space remaining inside the envelopes
for its own purposes; PROVIDED that (i) unless the Company provides the Bank
with notice at least 45 days before the proposed inclusion date of the Company's
intent to utilize more than seven panels per envelope, the Bank shall be
entitled to utilize at least three panels (or two panels and one "bangtail"
remittance envelope) per envelope for its own purposes and (ii) all materials
included by the Bank shall be subject to the approval of the Company, which
approval shall not be unreasonably withheld.
9.4.2. The Bank shall have the exclusive right to include in
any mailing to Cardholders materials advertising products and services not
related to the Business and the allocation between the Bank and the Company of
the revenues generated thereby shall be agreed on a program-by-program basis or,
in the case of programs existing on the date hereof, continued consistent with
past practices; PROVIDED that such products and services and the related
advertising materials shall be subject to the approval of the Company, which
approval shall not be unreasonably withheld or delayed (it being understood that
the Company may withhold such approval if it determines in its sole discretion
that the advertising of such products or services is inconsistent with the image
of the Business).
9.4.3. Notwithstanding the foregoing, (i) the Bank shall have
the right to use its own "bangtail" remittance envelopes to promote credit life
insurance to existing Cardholders no more than four times per year or two times
per Season and (ii) all materials used, or sent to Cardholders, by the Bank
under existing programs of the Bank (including, but not limited to, credit life
insurance) shall not be subject to the approval of the Company.
9.4.4. The Bank shall provide timely specifications (including
size and weight requirements) for all statement inserts, credit card carriers
and "bangtail" remittance envelopes.
Section 10. INDEMNIFICATION; CLAIMS AND ACTIONS.
10.1. INDEMNIFICATION BY THE COMPANY. The Company hereby
indemnifies the Bank, its Affiliates and the directors, officers, employees and
agents of the Bank or any Affiliate of the Bank (each, a "RELATED PARTY")
against, and agrees to hold them harmless from, any and all losses,
17
claims, damages and liabilities (including, without limitation, the legal fees
and other expenses reasonably incurred in connection with any suit, action or
proceeding or any claim asserted) ("Damages") incurred or suffered by any of
them arising out of or in any way related to any misrepresentation, breach of
any warranty or nonperformance of any covenant made by the Company under this
Agreement or relating to any personal or bodily injury or property damage
alleged to be caused by the sale of goods or rendering of services by the
Company.
10.2. INDEMNIFICATION BY THE BANK. The Bank hereby indemnifies
the Company and its Related Parties against, and agrees to hold them harmless
from, any and all Damages incurred or suffered by any of them arising out of or
in any way related to any misrepresentation, breach of any warranty, or
nonperformance of any covenant made by the Bank under this Agreement.
10.3. THIRD PARTY CLAIMS.
10.3.1. The Bank shall not be liable to the Company for or in
connection with any claim made against the Company by any other Person relating
in any manner to this Agreement or to any services or any other transactions
contemplated hereby (other than (i) claims based upon the Bank's failure to
perform its obligations under this Agreement, its or any of its Related Parties'
negligence or willful misconduct or its failure to comply with any law or
regulation (including, without limitation, any Consumer Law), (ii) claims by
employees or subcontractors of the Bank arising from the performance of services
under this Agreement (other than claims based upon the Company's or any if its
Related Parties' negligence or willful misconduct), (iii) claims relating to
acts or omissions of the Bank and its agents in connection with the collection
of amounts owing from Cardholders and (iv) claims relating to the submission by
the Bank or its agents of data concerning Cardholders to credit agencies), even
if the Bank has been advised of the possibility of such claims.
10.3.2. The Company shall not be liable to the Bank for or in
connection with any claim made against the Bank by any other Person relating in
any manner to this Agreement or to any services or other transactions
contemplated hereby (other than (i) claims based upon the Company's failure to
perform its obligations under this Agreement, its or any of its Related Parties'
negligence or willful misconduct or its failure to comply with any law or
regulation (including, without limitation, any Consumer Law), (ii) claims by
employees or subcontractors of the Company arising from this Agreement and (iii)
claims
18
relating to goods purchased from the Company), even if the Company has been
advised of the possibility of such claims.
10.4. DISPUTE RESOLUTION AND ACTIONS. The Bank and the Company
shall use their reasonable best efforts to resolve informally any claim of
either party under this Agreement. No action at law or in equity may be
instituted by any party with respect to any such claim unless such party has
satisfied its obligation under the first sentence of this Section 10.4.
10.5. LIMITATION ON ACTIONS. No action against either party,
regardless of form, arising out of or incidental to the matters contemplated by
this Agreement, may be brought by the other party more than one year after the
event giving rise to such cause of action occurred and is known or upon the
exercise of reasonable diligence should have been known to the injured party.
10.6. REIMBURSEMENT FOR LOSSES. If, as a result of any claim
made by the Bank against any third party (including, but not limited to, an
insurer), the Bank actually receives from such third party cash proceeds (or
non-cash proceeds, whether in the form of goods or services) which represent, in
whole or in part, compensation for or reimbursement of losses or costs actually
incurred by the Company, then the Bank will hold that portion of such proceeds
fairly allocable to the Company (taking into consideration all losses or costs
actually incurred by all parties for whose benefit such payments have been
received) in trust on behalf of the Company and will promptly pay over to the
Company such allocable amount of any such cash proceeds (or, as to non-cash
proceeds, the allocable portion or, at the discretion of the Bank, the cash
equivalent thereof).
10.7. SURVIVAL. The provisions of this Section 10 shall
survive the termination of this Agreement.
Section 11. TERMINATION.
11.1 TERM. This Agreement shall remain in effect until the
tenth anniversary of the date hereof, shall be automatically extended until the
twelfth anniversary of the date hereof if the Company does not give at least 12
months' prior written notice of its objection to such extension and shall be
further automatically extended in successive two-year increments if the Bank or
the Company does not give at least 12 months' prior written notice of its
objection to such extension, unless earlier terminated (a) by the Bank or the
Company in the event of a material breach by the other party of any of such
other party's obligations under this Agreement if any such breach remains
uncured 30 days after
19
written Notice thereof to such party, (b) automatically in the event that the
Bank or the Company commences a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereinafter in
effect, seeks the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its assets, consents to
any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it, makes
a general assignment for the benefit of creditors, or fails generally to pay its
debts as they become due, or (c) by the Company upon not less than 60 days'
prior written notice to the Bank at any time after the sixth anniversary of the
date hereof if, based on the application of the attached matrix, the applicable
discount rate exceeds the highest discount rate in such matrix and the costs to
the Company under this Agreement are substantially higher than the costs that
would be incurred by the Company for comparable credit card services over the
remaining term of this Agreement from an independent third-party financial
institution; PROVIDED that the Company shall not be entitled to terminate this
Agreement pursuant to clause (c) unless the Company provides the Bank with a
written description of the material terms on which such third party financial
institution proposes to provide such services and is entitled to submit a
counter-proposal within 30 days of receipt of such description. If the Bank
submits a counter- proposal with terms substantially similar to those set forth
in such third party's proposal or agrees to maintain the discount rate at the
highest discount rate in the attached matrix, this Agreement shall remain in
full force and effect, modified as may be necessary to reflect the terms
included in the Bank's counter- proposal. Subject to Section 11.2, the
termination of this Agreement shall not affect the obligations of the
Cardholders to the Bank, the obligation of the Company and the Bank to make the
payments required under Section 4 with respect to Transactions that occurred
before the date of termination, the rights of the Bank under Sections 4.4, 7.4
and 9.1 and the rights of the Company under Section 9.1. Sections 10, 11 and 12
of this Agreement shall survive any such termination.
11.2. EFFECT OF TERMINATION. Upon termination of this
Agreement, the Company will have the option to purchase the then- outstanding
Credit Card account balances not previously written- off by the Bank (subject to
the terms of any securitization of such account balances) at the face amount
thereof, without recourse to the Bank, and will be provided with all related
account information and other account data; PROVIDED that the Company will be
required to purchase such then-outstanding Credit Card account balances on such
terms if the Company objects to any automatic
20
extension of this Agreement pursuant to Section 11.1. All payments by the
Company pursuant to this Section 11.2 shall be made not later than one Business
Day after termination of this Agreement by wire transfer of immediately
available funds to an account notified by the Bank to the Company not less than
two Business Days prior to the payment date. Upon any termination of this
Agreement, (i) the Company (at its sole expense) shall notify all Cardholders
that the Bank is no longer the processor of their Credit Card accounts and (ii)
the Company and the Bank shall cooperate in facilitating the transition to a new
processor.
11.3. EXTENSION. Any services which the parties hereto
mutually agree to be rendered after the termination of this Agreement shall be
rendered pursuant to all of the terms and provisions of this Agreement.
Section 12. MISCELLANEOUS.
12.1. NOTICES. All notices, requests and other communications
to any party hereunder shall be in writing (including telecopy or similar
writing) and shall be given, if to the Company, to:
Victoria's Secret Stores, Inc.
Three Limited Parkway
Columbus, Ohio 43230
Attn: General Counsel
Telecopy: 614-479-7188
with a copy to:
The Limited, Inc.
Three Limited Parkway
Columbus, Ohio 43230
Attn: General Counsel
Telecopy: 614-479-7188
and a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attn: Dennis S. Hersch
Telecopy: 212-450-4800
and if to the Bank, to:
World Financial Network National Bank
4590 East Broad Street
Columbus, Ohio 43213
Attn: Daniel T. Groomes
Telecopy: 614-755-3418
21
or to such other address or telecopy number and with such other copies, as such
party may hereafter specify for the purpose by notice to the other parties. Each
such notice, request or other communication shall be effective (i) if given by
telecopy, when such telecopy is transmitted to the telecopy number specified in
this Section and evidence of receipt is received or (ii) if given by any other
means, upon delivery or refusal of delivery at the address specified in this
Section 12.1.
12.2. AMENDMENTS; NO WAIVERS.
12.2.1. Any provision of this Agreement may be amended only if
such amendment is in writing and signed by all parties thereto.
12.2.2. No failure or delay by any party in exercising any
right, power or privilege under this Agreement shall operate as a waiver thereof
nor shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
12.3. EXPENSES. All costs and expenses incurred in connection
with the this Agreement or the transactions contemplated hereby shall be paid by
the party incurring such cost or expense.
12.4. SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns; PROVIDED that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other party. Notwithstanding the foregoing, (i) the
Bank may from time to time assign any or all of its rights and obligations
hereunder to any Affiliate of the Bank, provided that any such assignee of the
Bank's obligations hereunder shall have the capability to perform such
obligations without impairing the quality of the services provided to the
Company, (ii) the Company shall assign or otherwise transfer all of its rights
and obligations under this Agreement (A) to the purchaser of all or
substantially all of the assets of the Business or (B) to any corporation which
is a successor (whether by merger, consolidation or otherwise) to the Company or
any successor (whether by merger, consolidation or otherwise) thereto, in each
case subject to the execution by such assignee or transferee of an agreement to
be bound by the provisions of this Agreement and (iii) the Bank may from time to
time sell accounts receivable for securitization, retaining its processing and
servicing
22
obligations with respect thereto (it being understood that (A) the purchaser of
such accounts receivable shall have no recourse against the Company for any
reason whatsoever and (B) the Bank hereby indemnifies the Company and its
Related Parties against, and agrees to hold them harmless from, any and all
Damages incurred or suffered by any of them in connection with any claims made
by such purchaser).
12.5. GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the law of the State of New York (without regard
to the choice of law provisions thereof).
12.6. COUNTERPARTS; EFFECTIVENESS. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto or
thereto shall have received a counterpart hereof signed by the other parties
hereto.
12.7. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements, understandings and negotiations, both written
and oral, between the parties with respect to such subject matter. No
representation, inducement, promise, understanding, condition or warranty not
set forth herein has been made or relied upon by any party hereto. Neither this
Agreement nor any provision thereof is intended to confer upon any Person other
than the parties any rights or remedies hereunder.
12.8. JURISDICTION. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated thereby may be brought
against any of the parties in the United States District Court for the Southern
District of New York or any state court sitting in the City of New York, Borough
of Manhattan, and each of the parties hereby consents to the exclusive
jurisdiction of such court (and of the appropriate appellate courts) in any such
suit, action or proceeding and waives any objection to venue laid therein.
Process in any such suit, action or proceeding may be served on any party
anywhere in the world, whether within or without the State of New York. Without
limiting the foregoing, the parties agree that service of process upon such
party at the address referred to in Section 12.1, together with written notice
of such service to such party, shall be deemed effective service of process upon
such party.
23
12.9. CAPTIONS. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
12.10. DEFINED TERMS. The following terms, as used herein,
shall have the following meanings:
12.10.1. "AFFILIATE" means, with respect to any Person, any
Person directly or indirectly controlling, controlled by, or under common
control with such other Person. For purposes of this definition, "CONTROL" when
used with respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise, and the terms "CONTROLLING" and
"CONTROLLED" have meanings correlative to the foregoing.
12.10.2. "BUSINESS DAY" means a day other than a Saturday,
Sunday or other day on which commercial banks in New York, New York or Columbus,
Ohio are authorized or required by law to close.
12.10.3. "PERSON" means an individual, a corporation, a
partnership, an association, a trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
12.10.4. "SEASON" means (i) the period from the first day of
the fiscal month of February to the last day of the fiscal month of July and
(ii) the period from the first day of the fiscal month of August to the last day
of the fiscal month of January.
12.11. FORCE MAJEURE. Notwithstanding the provisions of
Section 8.3, neither the Bank nor its affiliates shall be liable in any manner
to the Company for any failure to perform their obligations under this Agreement
resulting in any manner from delay, failure in performance, loss or damage due
to fire, strike, embargo, explosion, power blackout, earthquake, flood, war, the
elements, labor disputes, civil or military authority, acts of God, public
enemy, inability to secure fuel, acts or omissions of carriers or other causes
beyond their reasonable control, whether or not similar to any of the foregoing
(a "FORCE MAJEURE EVENT").
24
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their duly authorized officers effective on the day and year
first above written.
WORLD FINANCIAL NETWORK
NATIONAL BANK
By: /s/ TIMOTHY B. LYONS
--------------------------------
Name: Timothy B. Lyons
Title:
VICTORIA'S SECRET STORES, INC.
By: /s/ TIMOTHY B. LYONS
--------------------------------
Name: Timothy B. Lyons
Title:
LONE MOUNTAIN FACTORING, INC.
By: /s/ TIMOTHY B. LYONS
--------------------------------
Name: Timothy B. Lyons
Title:
25
Exhibit 10.4
CREDIT CARD PROCESSING AGREEMENT
This Credit Card Processing Agreement is made as of this 31st day of
January, 1996 between WORLD FINANCIAL NETWORK NATIONAL BANK, a national banking
association (the "BANK") , and Lerner New York, Inc., a Delaware corporation
(the "CORPORATION"), and Nevada Receivable Factoring, Inc., a Nevada corporation
("FACTORING") (the Corporation and Factoring being collectively referred to
herein as the "COMPANY").
WHEREAS the Company and the Bank believe that it is desirable and in their
respective best interests for the Bank to continue, in a manner generally
consistent with past practices, to issue credit cards bearing the trade names,
trademarks, logos and service marks used in the Company's Lerner New York retail
or catalogue business (the "BUSINESS") which will allow the customers of the
Company to purchase goods from the Company using funds advanced by the Bank; and
WHEREAS in order to implement such arrangements, the parties hereto desire
to enter into this Agreement;
NOW, THEREFORE, the parties hereby agree as follows:
Section 1. TRADEMARKS. The Company hereby authorizes the Bank to use the
trademark "Lerner New York" on credit cards owned or issued by the Bank, monthly
billing statements, collection correspondence, credit card agreements, credit
applications, customer service correspondence and in such other written and oral
communications with cardholders as are necessary or convenient in connection
with this Agreement, in each case consistent with past practices. The "Lerner
New York" trademark is referred to herein as the "MARK". The Company shall have
the right to approve in its sole discretion the "art" (including colors and font
styles) for all proposed uses of the Mark by the Bank. The Bank shall not use
the Mark for any purpose other than as set forth in the first sentence of this
Section 1.
Section 2. CREDIT CARD SYSTEM.
2.1. NEW CREDIT CARDS.
2.1.1. ISSUANCE OF CREDIT CARDS. To the extent requested by the Company,
the Bank will issue credit cards bearing the Mark ("CREDIT CARDS") to customers
of the Business who apply for such Credit Cards and related
extensions of credit. Such customers (i) must qualify for the extension of
credit under credit standards related to new account approvals, credit limits
and authorization management ("CREDIT STANDARDS") which will be determined by
the Bank from time to time and (ii) must accept the Bank's standard form of
credit card agreement containing the terms and conditions governing extensions
of credit to Persons who hold Credit Cards and their authorized users (attached
hereto as Exhibit 2.1.1(a)). Notwithstanding the foregoing, (i) the Credit
Standards established by the Bank from time to time in connection with the
issuance of Credit Cards for use in connection with the Business shall be
consistent with past practices (as described in Exhibit 2.1.1(b)), with such
changes as shall be (A) approved by the Company in its reasonable discretion or
(B) determined by the Bank in good faith to be necessary from the standpoint of
safe and sound banking practices and (ii) the Bank may make any change in the
terms of its agreement with any person who holds a Credit Card (including
repayment terms, fees and finance charge rates) after prior notice to and
consultation with the Company. The Bank hereby confirms its understanding that
the Company intends to offer and promote credit as outlined in Section 2.2. The
Bank will bear the costs of the issuance of Credit Cards under this Section 2.1.
2.1.2. CREDIT MAXIMIZATION. The Company will be entitled to use credit
related promotional strategies consistent with past practices. The Bank will
work in good faith with the Company to develop business strategies with respect
to the issuance of Credit Cards intended to maximize the potential of the
Business and, in that regard, will consider in good faith proposals involving
variances from the Bank's general Credit Standards or changes in the terms of
the Bank's agreement with any person who holds a Credit Card; PROVIDED that
subject to compliance with the provisions of Section 2.1.1, Credit Standards and
the terms of such agreement shall in all circumstances be determined by the
Bank. The terms of any program involving variances from the Bank's general
Credit Standards or changes in the terms of the Bank's agreement with any person
who holds a Credit Card, including (without limitation) fees or other charges to
be paid by either party, shall be agreed on a program-by-program basis.
2.2. PROMOTION. The Company will use its reasonable efforts to promote the
use of Credit Cards in the Business and to acquire new Cardholders (as defined
below), for the Bank through the use of, for example, "instant credit," "quick
credit," pre-approved solicitations, applications and promotional material
displayed in stores and inserted in catalogues and special offers to
Cardholders, in each case consistent with past practices. The costs incurred by
the Company and the Bank (including,
2
among other things, the cost of printing application forms, promotional
material, pre-approved solicitations and instant and quick credit contracts and
the cost of special offers) will be borne by the Company and the Bank on terms
to be negotiated from time to time in a manner consistent with past practices.
The Bank shall have two Business Days to review for legal compliance all credit
application forms and marketing materials (including, without limitation, those
referred to above) prior to their being printed.
Section 3. ACCEPTANCE OF CREDIT CARDS. The Company will permit Persons who
hold Credit Cards (subject to the restrictions of this Agreement) or other
credit cards owned by the Bank that the Bank has designated and their authorized
users ("CARDHOLDERS") to purchase goods sold by the Business without any cash
payment by use of a Credit Card, subject to the following conditions:
3.1. CHARGE SLIP (CREDIT CARD PRESENTED) . If the customer presents a
Credit Card at the time of sale, the Company will maintain a record of the sale
in a form acceptable to the Bank which reflects the following:
3.1.1. A brief identification of the property or service purchased (the
"TRANSACTION");
3.1.2. The date of the Transaction;
3.1.3. The dollar amount of the purchase price of the merchandise or
service which was the subject of the Transaction, including applicable shipping,
handling and taxes;
3.1.4. An imprint or electronic capture of the Credit Card account number
or, in the event of equipment malfunction, a written notation of such account
number; and
3.1.5. The Cardholder's signature.
3.2. CHARGE SLIP (CREDIT CARD NOT PRESENTED) The Bank acknowledges and
agrees that a Cardholder need not present a Credit Card at the time of sale and
that, subject to Section 3.5, the Company may accept charges to a Credit Card
verbally from the customer or via a written order form from the customer. If the
customer does not present a Credit Card at the time of sale, the Company will
maintain a record of the sale in a form acceptable to the Bank which reflects,
in lieu of the information set forth in Section 3.1.1 through 3.1.5, the
following:
3.2.1. A brief identification of the Transaction;
3.2.2. The date of the Transaction;
3
3.2.3. The dollar amount of the purchase price of the merchandise or
service which was the subject of the Transaction, including applicable shipping,
handling and taxes;
3.2.4. A written notation of the Credit Card account number, which shall
have been obtained from the customer and recorded in the Company's customer
file;
3.2.5. The customer's name and address and, except in the case of catalogue
purchases, personal identification type and number; and
3.2.6. If applicable, the name and address to where the merchandise which
was the subject of the Transaction was shipped and the date and method of
shipment.
3.3. RETENTION OF CHARGE SLIP. The Company will retain a legible copy of
each charge slip for six months following the date of the Transaction and will
provide such copy to the Bank within 30 days of the Bank's request there for;
PROVIDED that the Bank will request delivery of such information only in the
case of a bona fide dispute (the existence of such dispute to be determined by
the Bank in its reasonable discretion) relating to the underlying Transaction,
upon the inquiry of the applicable Cardholder or as requested by auditors of the
Bank in connection with their audit of the Bank's financial statements or by any
governmental authority.
3.4. AUTHORIZATION. The Transaction is authorized by the Bank in accordance
with the floor limits and other procedures in effect at the time or such
authorization is dispensed with under rules established by the Bank from time to
time in accordance with Section 8.3 to deal with situations in which
authorization is not. available because of disruption of the Bank's computer
system or other causes provided for in such rules, consistent with past
practice.
3.5. CHARGEBACKS. The Company agrees to accept as a chargeback any charge
on a Credit Card where:
3.5.1. The Cardholder disputes the charge and the Company fails to provide
a legible copy of the charge slip within 30 days of the Bank's request therefor
in accordance with Section 3.3;
3.5.2. The Company failed to obtain authorization from the Bank in
accordance with Section 3.4;
3.5.3. The Company failed to complete the charge slip in accordance with
Section 3.1 or 3.2, as applicable;
4
3.5.4. A Company employee fraudulently misused the Credit Card or account
number;
3.5.5. A dispute arises from the Cardholder being charged or credited more
than once for the same sale, payment or return;
3.5.6. A dispute with the Cardholder arises from a voided Transaction or an
invalid Credit Card account number;
3.5.7. A dispute with the Cardholder arises from an improperly opened
Credit Card account, or the account is otherwise uncollectible, where a Company
employee failed to comply with new account procedures in effect at the time the
account was opened;
3.5.8. The Bank, consistent with past practices, gives the Cardholder
credit for (or accepts as payment) a non-expired discount coupon or gift
certificate in respect of a prior purchase; or
3.5.9. A dispute arises from the Company's failure properly to identify a
catalogue purchaser as the Cardholder where such failure results in merchandise
being shipped without the actual Cardholder's authorization.
The amount charged back with supporting detail will be invoiced to the
Company weekly, and all required payments by the Company shall be made within 30
days after receipt of an invoice. If the Company pays the Bank any chargeback
amount pursuant to this Section 3.5 or if such payment is netted against amounts
payable by the Bank pursuant to Section 4.1.1, any remittances relating to such
chargeback from the Cardholder subsequently collected by the Bank shall, to the
extent not refunded to the Cardholder, be credited by the Bank to the Company.
Section 4. PAYMENT.
4.1. PAYMENT BY BANK.
4.1.1. The Bank will pay to the Company, as full consideration for any
Transaction between the Company and any Cardholder using a Credit Card, as to
which the Company has complied with the provisions of Section 3 above, the
amount shown on the records of the Company for each Transaction, including all
applicable shipping, handling and taxes, less a discount, which discount shall
be equal to the discount rate determined in accordance with Section 4.1.5
(expressed as a fraction) multiplied by the amount shown on the records of the
Company for each Transaction (exclusive of all applicable shipping, handling and
taxes).
5
4.1.2. The Bank will pay such amount by transferring immediately available
funds to an account designated by the Company at any bank to which the Bank may
make electronic fund transfers before the end of the second Business Day
following the receipt by the Bank of the information required by Section 3.1 or
3.2, such information to be properly formatted and edited and transferred via a
telecommunications connection between the Company and the Bank pursuant to such
computer programs and telecommunications protocols as the Bank may, in its
reasonable discretion, designate from time to time, subject to reasonable prior
notice. The Company will transmit (in the manner referred to above) to the Bank
an audited and balanced file in the format specified by the Bank containing all
such information within two Business Days after the occurrence of the underlying
Transaction; PROVIDED that if, as a result of technical disruptions, any store
locations are not polled within a normal period after the occurrence of the
underlying Transactions, the Company will transmit such information relating to
such store locations as soon as reasonably practicable after polling is
completed.
4.1.3. The Company may not attempt to collect any amount from any
Cardholder with respect to a Transaction which has been paid for by the Bank
under this Section 4.1 and not charged back to the Company pursuant to Section
3.5.
4.1.4. The Company will, consistent with past practices, accept payments
from Cardholders for amounts due on Credit Cards ("IN-STORE PAYMENTS"). Any
In-Store Payments received by the Company will be held in trust for the Bank and
its assigns and netted against amounts payable by the Bank pursuant to Section
4.1.1 (PROVIDED that the Company shall not be required to keep In-Store Payments
separate from other payments received by the Company) and evidence of such
payments will be transmitted to the Bank on a daily basis in accordance with the
procedures set forth in Section 4.1.2. Notwithstanding the foregoing:
(a) if any bankruptcy or other insolvency proceeding has been commenced
against the Company (and so long as the same has not been dismissed), the
Company shall promptly comply with any written instruction (a "STORE PAYMENT
NOTICE") received by the Company from the Bank or any successor to the Bank as
"Servicer" under the Pooling and Servicing Agreement referred to below (the Bank
or any such successor being the "SERVICER") to take either of the following
actions (as specified in such instruction)
(i) cease accepting In-Store Payments and thereafter inform
Cardholders who wish to make In-Store Payments that payment should instead
be sent to Servicer (but only if the Servicer is required by the
6
Pooling and Servicing Agreement to give such notice) or
(ii) (A) deposit an amount equal to all In-Store Payments received by
each retail location operated by the Company, not later than the Business
Day following receipt, into a segregated trust account (the "Store
Account") established by the Company for this purpose and, pending such
deposit, to hold all In-Store Payments in trust for the Bank and its
assigns, (B) use commercially reasonable efforts not to permit any amounts
or items not constituting In-Store Payments to be deposited in the Store
Account and (C) cause all available funds in each Store Account to be
transferred on a daily basis to an account designated in the Store Payment
Notice;
PROVIDED that the Company need not take the actions specified in clause (i) or
clause (ii) if the Company or any of its affiliates provides the Servicer or the
Trustee under (and as defined in) the Pooling and Servicing Agreement with a
letter of credit, surety bond or other similar instrument covering collection
risk with respect to In-Store Payments and all conditions specified in the
Pooling and Servicing Agreement with respect to such letter of credit, surety
bond or other similar instrument are satisfied;
(b) if and to the extent that the Bank so requests in writing at a time
when the Bank is required by the Pooling and Servicing Agreement to make such
request, In-Store Payments shall no longer be netted against amounts payable by
the Bank pursuant to Section 4.1.1, but instead the Company shall transfer to
the Bank by wire transfer of immediately available funds (or, if the aggregate
amount to be transferred pursuant to this clause (b) and Section 4.2 is less
than $10,000, by check), not later than the third Business Day following receipt
of any In-Store Payments, an amount equal to the sum of such In-Store Payments.
So long as the Company complies with instructions delivered in accordance with
paragraph (a) or (b), any amounts payable by the Bank pursuant to Section 4.1.1
shall be made without deduction for In-Store Payments.
For purposes of the foregoing, the "POOLING AND SERVICING AGREEMENT" means
the Pooling and Servicing Agreement dated as of January 17, 1996 among the Bank
and The Bank of New York, as trustee, including each Supplement thereunder, as
the same may be amended, supplemented or otherwise modified from time to time,
except that no amendment, supplement or other modification to such Agreement
that affects the circumstances in which the Company may be required to take the
actions referred to in
7
paragraph (a) or (b) above or in Section 4.2.3 shall be given effect for
purposes of this Agreement unless consented to by the Company.
4.1.5. DISCOUNT RATE. The applicable discount rate referred to in Section
4.1.1 shall be the then applicable discount rate determined in accordance with
the matrix set forth in Exhibit 4.1.5; PROVIDED that in the event of a
legislated or judicial reduction in the annual percentage rate or fees that may
be charged by the Bank to Cardholders, the Company and the Bank agree to
negotiate in good faith an increase in the discount rate.
4.2. PAYMENT BY COMPANY. If the Bank has paid the Company for any
Transaction and
4.2.1. If:
(a) the representations and warranties of the Company with respect to such
Transaction, as set forth in Sections 5.1 through 5.3 below, are not true in all
material respects; or
(b) any merchandise which was the subject of such Transaction is returned
to the Company and the Company, pursuant to its policies concerning returned
merchandise, accepts such merchandise for credit; or
(c) in order to settle a dispute concerning the nature, quality or quantity
of goods purchased from the Company with the Credit Card, the Company agrees to
refund all or part of the purchase price thereof; then
4.2.2. The Company:
(a) shall pay the Bank an amount equal to the face amount of such
Transaction or portion thereof refunded to the customer, less any discount
actually taken by the Bank when it made payment to the Company in consideration
for such Transaction pursuant to Section 4.1.1;
(b) shall create a written memorandum of such Transaction setting forth the
information required by Section 3 above (a "CREDIT MEMORANDUM")
(c) shall transmit the information contained in such Credit Memorandum to
the Bank by the method of electronic transmission referred to in Section 4.1.2
above; and
(d) subject to Section 4.2.3, shall permit the payment required by this
Section 4.2 to be netted against amounts payable by the Bank pursuant to Section
4.1.1. The
8
Company shall retain any such Credit Memorandum in the same manner an# for the
same time as the charge slip referred to in Section 3.3 and shall promptly
deliver any such Credit Memorandum to the Bank upon its request. If the Company
pays the Bank any amount for a Transaction pursuant to this Section 4.2 or if
such payment is netted against amounts payable by the Bank pursuant to Section
4.1.1, any remittances relating to such Transaction from the customer
subsequently collected by the Bank shall, to the extent not refunded to the
Cardholder, be credited by the Bank to the Company.
4.2.3. Notwithstanding clause (d) of Section 4.2.2, if and to the extent
that the Bank so requests in writing at a time when the Bank is required by the
Pooling and Servicing Agreement to make such request, amounts payable by the
Company pursuant to Section 4.2 ("ADJUSTMENT PAYMENTS") shall no longer be
netted against amounts payable by the Bank pursuant to Section 4.1.1, but
instead the Company shall transfer the amount of each Adjustment Payment to the
Bank by wire transfer of immediately available funds (or, if the aggregate
amount to be transferred pursuant to this Section 4.2 and clause (b) of Section
4.1.4 is less than $10,000, by check), not later than the second Business Day
following the date on which the events giving risk to such Adjustment Payment
occur (and amounts payable by the Bank pursuant to Section 4.1.1 shall be made
without deduction for Adjustment Payments)
4.3. OTHER FEES.
4.3.1. DEFERRED PAYMENT. If any Transaction between the Company and any
Cardholder using a Credit Card is consummated on a deferred payment basis (for
which the period of deferral may not exceed 90 days), then for each month during
the period of deferral, the Company will pay the Bank an amount equal to the
Deferred Payment Rate for such month multiplied by the average daily balance of
purchase price so deferred during such month. For purposes of this Section 4.3,
"DEFERRED PAYMENT RATE" means, for any month, (i) if the debt of the Bank has an
implied investment grade rating at all times during such month, the average
interest rate paid by the Bank to obtain funds during such month, and (ii) if
the debt of the Bank does not have an implied investment grade rating at all
times during such month, the then-current reference rate or index maintained or
provided by a nationally recognized investment banking firm (which firm shall be
reasonably acceptable to the Company and the Bank) in respect of issuers whose
debt has the lowest investment grade rating.
4.3.2. POSTAL RATE ADJUSTMENT. The Company agrees to reimburse the Bank for
any costs incurred by the
9
Bank as a result of changes in postal rates or rules applicable to mailings to
Cardholders after the date hereof; PROVIDED that the postal costs and postal
discounts applicable to mailings to Cardholders shall be no less favorable than
the postal costs and postal discounts applicable to comparable mailings to
holders of any other credit cards issued by the Bank. The Bank and the Company
agree to use their reasonable efforts to minimize postal costs and maximize
postal discounts.
4.3.3. SPECIAL PROJECTS. With respect to special services provided by the
Bank from time to time with respect to the Business (including, without
limitation, consulting, surveys, gift certificate calls and fulfillment, rebate
fulfillment, telemarketing and special processing or accounting reports required
in connection with promotional activities), the Company will pay to the Bank
amounts to be agreed on a program-by-program basis. To the extent not otherwise
provided for in this Agreement, (i) the Bank shall not incur expenses required
to be paid or reimbursed by the Company for any project in amounts in excess of
$1,000 without having first obtained prior-written or oral authorization from
the Company for such expenses; and (ii) the Bank shall not incur expenses
required to be paid or reimbursed by the Company for any project in amounts in
excess of $50,000 without having first obtained prior written authorization from
the Company for such expenses; PROVIDED that, in the event any terms of any such
written authorization are in conflict with the terms of this Agreement, the
terms of this Agreement shall be controlling.
4.3.4. PAYMENTS. All amounts payable by the Company under this Section 4.3
shall be paid by wire transfer of immediately available funds within 30 days
after receipt of an invoice for such amounts.
4.4. SETOFFS. The Bank may at any time, in addition to all other rights and
remedies available to it, setoff against any amount owing to the Company by the
Bank under this Agreement, any amounts owing by the Company to the Bank under
this Agreement.
4.5. INVOICE. The amount of any invoice prepared and delivered by the Bank
under this Agreement shall be deemed to be correct, accurate and binding upon
the Company if the Company makes no objection within 30 days after the date of
such invoice; PROVIDED that the making of any objection shall not relieve the
Company of its obligation to make full payment of the amount set forth on the
related invoice when such amount is otherwise payable pursuant to this Section
4, it being understood that the Company does not waive its rights thereby and
may, subject to Section
10
10.4, assert a claim with respect to such invoice in an appropriate proceeding.
Section 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Bank that:
5.1. VALID TRANSACTIONS. Each Transaction will be completed in compliance
with the provisions of Section 3 and will create a valid, binding and legally
enforceable obligation of the Cardholder whose name is shown on the Credit Card
to pay to the Company the amount shown on the charge slip, which obligation to
the Company will be discharged in full by the payment made to the Company by the
Bank in respect of such Transaction under Section 4.1 above.
5.2. ACCURATE INFORMATION. Each charge slip will accurately reflect the
Transaction described therein. Each charge slip and Credit Memorandum and any
charge slip or Credit Memorandum information transmitted to the Bank by the
Company will be complete and accurate and in a form deemed necessary by the Bank
to allow Cardholder billing in accordance with applicable law. The Company will
accurately report all returns and other credits to the Bank within the time
period specified in Section 4.
5.3. NO LIENS. No amount due to the Company with respect to any Transaction
will be subject to any lien or encumbrance in favor of any third party or to any
offset, counterclaim or defense of any Person other than the Bank or its
Affiliates.
5.4. MARK. The use of the Mark by the Bank under this Agreement does not
infringe the rights of any other Person.
Section 6. REPRESENTATIONS AND WARRANTIES OF THE BANK. The Bank hereby
represents and warrants to the Company that:
6.1. COMPLIANCE WITH LAWS. Each Credit Card and the related credit card
agreement, all monthly billing statements and any collection efforts of the Bank
conform and will conform in all material respects with all federal or state laws
or regulations applicable to the extension of credit to or the collection of
amounts from consumers including, without limitation, the Truth-in-Lending Act,
the Equal Credit Opportunity Act, the Fair Credit Reporting Act and federal and
state bankruptcy and debtor relief laws ("Consumer Laws")
6.2. NON-CONTRAVENTION. The performance by the Bank of its obligations
under this Agreement will not
11
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, any agreement or instrument to which the Bank is
party or by which the Bank is bound, nor will such performance result in any
violation of the provisions of the articles of association or the by-laws of the
flank or any applicable law or statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the Bank.
Section 7. COVENANTS OF THE COMPANY. The Company hereby covenants and
agrees with the Bank as follows:
7.1. CREDIT CARD NOTICES AND COMMUNICATIONS. The Company will, consistent
with past practices, accept and turn over to the Bank promptly upon receipt
thereof by the Company (i) subject to Section 4.1.4, any payments made by any
Cardholder with respect to any Transaction or any Credit Card and (ii) any
notices or other communications received by the Company with respect to any
Credit Card including, without limitation, customer changes of address and other
information on approved forms.
7.2. COMPLIANCE WITH APPLICABLE LAW. The Company will, at all times,
comply in all material respects with all Consumer Laws.
7.3. RULES. The Company shall comply with such written rules and operating
instructions relating to the use of the Credit Cards, the distribution of
applications, Credit Card security, authorization procedures, "downtime"
procedures and other matters related to this Agreement as the Bank may, from
time to time, promulgate with prior notice to the Company; PROVIDED that such
rules and operating instructions shall be consistent with past practices, with
such changes as shall be approved by the Company in its reasonable discretion.
7.4. CARDHOLDER INQUIRIES AND COMPLAINTS. If a Cardholder makes an inquiry
or complaint to the Company about the nature, quality or quantity of goods
purchased from the Company with a Credit Card, or a Cardholder has made an
inquiry or complaint to the Bank concerning the nature, quality or quantity of
goods purchased from the Company with a Credit Card, the Company shall deal
directly with the Cardholder to resolve any such complaint or inquiry. The
Company shall answer all inquiries from the Bank about complaints made to the
Bank by Cardholders within 10 days after the Company receives an inquiry from
the Bank.
7.5. EQUIPMENT. The Company shall obtain and maintain at its own expense
such point of sale and authorization terminals, credit card imprinters and other
12
items of equipment as are necessary for it to receive authorizations, transmit
charge slip and Credit Memorandum information, process credit applications and
perform its obligations under this Agreement. Such point of sale and
authorization terminals shall be capable of communicating with the computer
equipment maintained by the Bank according to such computer programs and
telecommunications protocols as may be specified by the Bank in its reasonable
discretion from time to time subject to reasonable prior notice of any change in
such equipment or protocols.
7.6. EXCLUSIVITY. The Company may not accept or promote any credit card as
payment for its goods or services unless such credit card is a Credit Card, a
proprietary credit card of another division of the Company or any Affiliate of
the Company (whether or not issued by the Bank) or a credit card issued by a
bank or other Person engaged in the business of issuing credit cards to Persons
for the purpose of making payments to third parties generally under such names
as Master Card, Visa, Discover, American Express or Optima. The Company may not
issue its own credit cards or enter into an agreement with any third party under
which credit cards bearing the Mark are issued; PROVIDED that after the second
anniversary of the date hereof, the Company shall be entitled to negotiate with
any third party with respect to the issuance of co-branded or affinity bank
credit cards bearing the Mark and to accept any Bona Fide Offer by such third
party if, at least 30 days prior to accepting such Bona Fide Offer, the Company
provides the Bank with an opportunity to submit a competing offer with respect
to the issuance of co-branded or affinity bank credit cards bearing the Mark,
which competing offer, if it has terms at least as favorable to the Company as
such Bona Fide Offer, shall be accepted by the Company in lieu of such Bona Fide
Offer. For purposes of this Section 7.6~ "Bona Fide Offer" means an offer to the
Company with respect to a program of at least two years' duration for the
issuance of co-branded or affinity bank credit cards that is, in the Company's
reasonable judgment, generally competitive in light of marketplace conditions
existing at the time (such marketplace conditions to include, without
limitation, other offers with respect to co-branded or affinity bank credit
cards being made to the Company, its Affiliates and other retail or catalogue
merchants)
7.7. OBSOLETE MATERIALS. The Company shall reimburse the Bank for the cost
of replacing reasonable amounts of obsolete forms and other materials if such
replacement is requested by the Company due to changes in the Mark or in the
logo, colors or styles used to identify or promote the Business.
13
Section 8. COVENANTS OF THE BANK. The Bank hereby covenants and agrees
with the Company as follows:
8.1. COMPLIANCE WITH APPLICABLE LAW. The Bank will, in issuing, billing,
administering, and collecting with respect to the Credit Cards and at all other
times, comply in all material respects with all Consumer Laws.
8.2. COLLECTION. The Bank will use efforts to collect from each Cardholder
the purchase price and additional taxes and other charges of Transactions
consistent with past practices and with its efforts to collect accounts
receivable under other credit cards issued by it; PROVIDED that the Bank will
initiate collection of any account receivable under a Credit Card at or before
the time such account receivable is 60 days past due. The Bank will, consistent
with past practices, determine the use and timing of dunning letters, statement
messages and collection agents and will manage all written-off accounts
(including, without limitation, the management of outside collection agencies) .
The Bank may implement reasonable variances from past collection practices after
prior notice to and consultation with the Company.
8.3. PERFORMANCE STANDARDS. In performing its obligations under this
Agreement, subject to Section 12.11, the Bank shall comply with the performance
standards set forth in Exhibit 8.3, as such performance standards may be
modified from time to time at the reasonable request of the Bank or the Company.
Within 10 days after the end of each fiscal month, the Bank will deliver to the
Company a compliance certificate of the chief executive officer or chief
financial officer of the Bank setting forth in reasonable detail data
demonstrating compliance during such calendar month with such performance
standards. Enhancements to, and modifications or upgrades of, the computer
processing, payment, billing and information services provided by the Bank will
be made from time to time at the reasonable request of the Company. Any such
enhancements, modifications or upgrades shall, to the extent requested by the
Company, be made on terms to be agreed upon.
8.4. FORCE MAJEURE EVENT. After the occurrence of a Force Majeure Event (as
defined in Section 12.11) which disrupts the availability of the services
provided hereunder, the Bank may elect to reestablish the availability of such
services. If any such Force Majeure Event comparably disrupts the performance of
services similar to the services provided hereunder with respect to one or more
other credit cards issued by the Bank, then the Bank shall reestablish the
availability of such services to the same extent and within the same timetable
under
14
comparable circumstances as the comparable services are reestablished with
respect to such other credit cards. The Bank shall promptly notify the Company
of any Force Majeure Event and shall inform the Company whether it will
reestablish services and the timetable therefor. If the Bank chooses not to
reestablish or take measures to reestablish such services within a reasonable
period of time as would be indicated by sound business practice, the Company
shall be free to obtain such services from any supplier thereof.
Section 9. PROPERTY RIGHTS.
9.1. RIGHTS OF THE COMPANY. The Company is the owner of the names and
addresses of customers of the Business; PROVIDED that (i) as set forth in
Section 9.2, the Bank is also the owner of such information with respect to
customers of the Business who are also Cardholders and (ii) The Limited, Inc.
("THE LIMITED") is also the owner of such information with respect to customers
of the Business until the second anniversary of the date, if any, on which the
Company ceases to be an Affiliate of The Limited.
9.2. RIGHTS OF BANK. Except as set forth in Section 9.1, the Bank is the
owner of all information relating to the Cardholders (including names and
addresses) and the Credit Cards, the copyright to all written material contained
in any credit card agreements, applications, billing statements and other forms
used-by the Bank in the administration of its agreements with the Cardholders,
all credit scoring systems and all policies of credit insurance issued to the
Bank with respect to any Cardholder; PROVIDED that the Bank shall not be
entitled to sell, rent or otherwise disclose any information relating to the
Cardholders to any third party other than (i) Affiliates of the Company, (ii)
Persons who, in the sole judgment of The Limited, do not compete, directly or
indirectly, with any retail or catalogue business conducted by The Limited or
any of its Affiliates and (iii) in the case of disclosure, credit agencies.
Subject to Section 9.3, the Company will not have any rights in any information
or property of the Bank; PROVIDED that the Bank will provide the Company with
such information the Bank owns with respect to Cardholders as the Company may
reasonably request in order to develop potential marketing or credit strategies.
9.3. DATABASE. (a) It is the intention of the parties that the Bank will
manage, maintain and develop an information marketing database (the "DATABASE")
at its own expense, subject to a mutually satisfactory agreement with the
Company pursuant to which (i) the Company will agree to utilize the Database,
(ii) the Database will be accessible from the Company's offices and (iii) the
Bank will provide
15
the Company with information maintained as part of the Database in terms that
are no less favorable than those offered by the Bank to any other recipient of
comparable information.
(b) Notwithstanding the foregoing, the Bank will, from time to time at the
request of the Company, and without charge, promptly provide the Company with a
list of the names and addresses of all Cardholders, all holders of other
proprietary credit cards of the Company or any Affiliate of the Company (if
issued by the Bank) and all other customers of the Business, any other business
of the Company and the business of any other Affiliate of the Company. The
Company shall reimburse the Bank for its costs of producing and shipping such
list in the format required by the Company within 30 days after receipt of a
request for such reimbursement from the Bank.
(c) Subject to Section 9.2, the Bank may make the Database available, and
provide information marketing services to, third parties on terms reasonably
determined by the Bank; PROVIDED that (i) the allocation among the Bank, the
Company and The Limited of fees 'charged by the Bank to such third parties shall
be agreed on a program-by-program basis or, in the case of programs existing on
the date hereof, continued consistent with past practices and (ii) the Bank may
not make the Database available, or provide information marketing services to,
any Person who, in the sole judgment of The Limited, competes, directly or
indirectly, with any retail or catalogue business conducted by The Limited or
any of its Affiliates.
9.4. ENVELOPE STUFFING.
9.4.1. Subject to the right of the Bank to include in mailings to
Cardholders periodic billing statements and any legal notices which the Bank
believes are necessary or appropriate to send to Cardholders, the Company shall
have the right to have materials advertising its products and services included
in the envelopes containing the periodic statements. Such materials shall
advertise only products and services related to the Business, shall (unless the
Company provides the Bank with notice as provided below) be limited to seven
panels per envelope and shall conform to size requirements established from time
to time by the Bank with reasonable prior notice of any changes. The Company
shall use reasonable efforts (i) to notify the Bank at least 15 days before the
proposed date of any such inclusion and shall provide the Bank with a draft copy
of any such advertising material at the time it notifies the Bank of such
mailing and (ii) to provide the Bank with a seasonal marketing plan at least 30
days before the beginning date of each Season. The Company shall
16
provide the Bank with the materials to be included in the mailing not less than
two Business Days prior to the initial insertion-date. If the Company does not
notify the Bank of any such inclusion at least seven days before the proposed
date of such inclusion or if the material included does not take up the
available space, the Bank may utilize the space remaining inside the envelopes
for its own purposes; PROVIDED that (i) unless the Company provides the Bank
with notice at least 45 days before the proposed inclusion date of the Company's
intent to utilize more than seven panels per envelope, the Bank shall be
entitled to utilize at least three panels (or two panels and one "bangtail"
remittance envelope) per envelope for its own purposes and (ii) all materials
included by the Bank shall be subject to the approval of the Company, which
approval shall not be unreasonably withheld.
9.4.2. The Bank shall have the exclusive right to include in any mailing to
Cardholders materials advertising products and services not related to the
Business and the allocation between the Bank and the Company of the revenues
generated thereby shall be agreed on a program-by-program basis or, in the case
of programs existing on the date hereof, continued consistent with past
practices; PROVIDED that such products and services and the related advertising
materials shall be subject to the approval of the Company, which approval shall
not be unreasonably withheld or delayed (it being understood that the Company
may withhold such approval if it determines in its sole discretion that the
advertising of such products or services is inconsistent with the image of the
Business)
9.4.3. Notwithstanding the foregoing, (i) the Bank shall have the right to
use its own "bangtail" remittance envelopes to promote credit life insurance to
existing Cardholders no more than four times per year or two times per Season
and (ii) all materials used, or sent to Cardholders, by the Bank under existing
programs of the Bank (including, but not limited to, credit life insurance)
shall not be subject to the approval of the Company.
9.4.4. The Bank shall provide timely specifications (including size and
weight requirements) for all statement inserts, credit card carriers and
"bangtail" remittance envelopes.
Section 10. INDEMNIFICATION; CLAIMS AND ACTIONS.
10.1. INDEMNIFICATION BY THE COMPANY. The Company hereby indemnifies the
Bank, its Affiliates and the directors, officers, employees and agents of the
Bank or any Affiliate of the Bank (each, a "RELATED PARTY") against, and agrees
to hold them harmless from, any and all losses,
17
claims, damages and liabilities (including, without limitation, the legal fees
and other expenses reasonably incurred in connection with any suit, action or
proceeding or any claim asserted) ("DAMAGES") incurred or suffered by any of
them arising out of or in any way related to any misrepresentation, breach of
any warranty or nonperformance of any covenant made by the Company under this
Agreement or relating to any personal or bodily injury or property damage
alleged to be caused by the sale of goods or rendering of services by the
Company.
10.2. INDEMNIFICATION BY THE BANK. The Bank hereby indemnifies the Company
and its Related Parties against, and agrees to hold them harmless from, any and
all Damages incurred or suffered by any of them arising out of or in any way
related to any misrepresentation, breach of any warranty, or nonperformance of
any covenant made by the Bank under this Agreement.
10.3. THIRD PARTY CLAIMS.
10.3.1. The Bank shall not be liable to the Company for or in connection
with any claim made against the Company by any other Person relating in any
manner to this Agreement or to any services or any other transactions
contemplated hereby (other than (i) claims based upon the Bank's failure to
perform its obligations under this Agreement, its or any of its Related Parties'
negligence or willful misconduct or its failure to comply with any law or
regulation (including, without limitation, any Consumer Law), (ii) claims by
employees or subcontractors of the Bank arising from the performance of services
under this Agreement (other than claims based upon the Company's or any if its
Related Parties' negligence or willful misconduct) (iii) claims relating to acts
or omissions of the Bank and its agents in connection with the collection of
amounts owing from Cardholders and (iv) claims relating to the submission by the
Bank or its agents of data concerning Cardholders to credit agencies), even if
the Bank has been advised of the possibility of such claims.
10.3.2. The Company shall not be liable to the Bank for or in connection
with any claim made against the Bank by any other Person relating in any manner
to this Agreement or to any services or other transactions contemplated hereby
(other than (i) claims based upon the Company's failure to perform its
obligations under this Agreement, its or any of its Related Parties' negligence
or willful misconduct or its failure to comply with any law or regulation
(including, without limitation, any Consumer Law), (ii) claims by employees or
subcontractors of the Company arising from this Agreement and (iii) claims
18
relating to goods purchased from the Company), even if the Company
has been advised of the possibility of such claims.
10.4. DISPUTE RESOLUTION AND ACTIONS. The Bank and the Company shall use
their reasonable best efforts to resolve informally any claim of either party
under this Agreement. No action at law or in equity may be instituted by any
party with respect to any such claim unless such party has satisfied its
obligation under the first sentence of this Section 10.4.
10.5. LIMITATION ON ACTIONS. No action against either party, regardless of
form, arising out of or incidental to the matters contemplated by this
Agreement, may be brought by the other party more than one year after the event
giving rise to such cause of action occurred and is known or upon the exercise
of reasonable diligence should have been known to the injured party.
10.6. REIMBURSEMENT FOR LOSSES. If, as a result of any claim made by the
Bank against any third party (including, but not limited to, an insurer), the
Bank actually receives from such third party cash proceeds (or non-cash
proceeds, whether in the form of goods or services) which represent, in whole or
in part, compensation for or reimbursement of losses or costs actually incurred
by the Company, then the Bank will hold that portion of such proceeds fairly
allocable to the Company (taking into consideration all losses or costs actually
incurred by all parties for whose benefit such payments have been received) in
trust on behalf of the Company and will promptly pay over to the Company such
allocable amount of any such cash proceeds (or, as to non-cash proceeds, the
allocable portion or, at the discretion of the Bank, the cash equivalent
thereof)
10.7. SURVIVAL. The provisions of this Section 10 shall survive the
termination of this Agreement.
Section 11. TERMINATION.
11.1 TERM. This Agreement shall remain in effect until the tenth
anniversary of the date hereof, shall be automatically extended until the
twelfth anniversary of the date hereof if the Company does not give at least 12
months' prior written notice of its objection to such extension and shall be
further automatically extended in successive two-year increments if the Bank or
the Company does not give at least 12 months' prior written notice of its
objection to such extension, unless earlier terminated (a) by the Bank or the
Company in the event of a material breach by the other party of any of such
other party's obligations under this Agreement if any such breach remains
uncured 30 days after
19
written notice thereof to such party, (b) automatically in the event that the
Bank or the Company commences a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereinafter in
effect, seeks the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its assets, consents to
any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it, makes
a general assignment for the benefit of creditors, or fails generally to pay its
debts as they become due, or (c) by the Company upon not less than 60 days'
prior written notice to the Bank at any time after the sixth anniversary of the
date hereof if, based on the application of the attached matrix, the applicable
discount rate exceeds the highest discount rate in such matrix and the costs to
the Company under this Agreement are substantially higher than the costs that
would be incurred by the Company for comparable credit card services over the
remaining term of this Agreement from an independent third-party financial
institution; PROVIDED that the Company shall not be entitled to terminate this
Agreement pursuant to clause (c) unless the Company provides the Bank with a
written description of the material terms on which such third party financial
institution proposes to provide such services and is entitled to submit a
counter-proposal within 30 days of receipt of such description. If the Bank
submits a counter-proposal with terms substantially similar to those set forth
in such third party's proposal or agrees to maintain the discount rate at the
highest discount rate in the attached matrix, this Agreement shall remain in
full force and effect, modified as may be necessary to reflect the terms
included in the Bank's counter-proposal. Subject to Section 11.2, the
termination of this Agreement shall not affect the obligations of the
Cardholders to the Bank, the obligation of the Company and the Bank to make the
payments required under Section 4 with respect to Transactions that occurred
before the date of termination, the rights of the Bank under Sections 4.4, 7.4
and 9.1 and the rights of the Company under Section 9.1. Sections 10, 11 and 12
of this Agreement shall survive any such termination.
11.2. EFFECT OF TERMINATION. (a) Upon termination of this Agreement, the
Company will have the option to purchase the then-outstanding Credit Card
account balances not previously written-off by the Bank (subject to the terms of
any securitization of such account balances) at the face amount thereof, without
recourse to the Bank, and will be provided with all related account information
and other account data; PROVIDED that the Company will be required to purchase
such then-outstanding Credit Card account balances on such terms if the Company
objects to any
20
automatic extension of this Agreement pursuant to Section All payments by the
Company pursuant to this Section 11.2 shall be made not later than one Business
Day after termination of this Agreement by wire transfer of immediately
available funds to an account notified by the Bank to the Company not less than
two Business Days prior to the payment date. Upon any termination of this
Agreement, (i) the Company (at its sole expense) shall notify all Cardholders
that the Bank is no longer the processor of their Credit Card accounts and (ii)
the Company and the Bank shall cooperate in facilitating the transition to a new
processor.
(b) Upon receipt of any notice of termination from the Company, or delivery
of any notice of termination by the Bank, the Bank shall divide all
then-outstanding Credit Card receivables generated through the use of Credit
Cards under the "Lerner" and "Lerner New York" Marks into separate retail and
mail order memo account balances based on the ratio of retail and mail order
purchases by the relevant Cardholder during the 12 months preceding the month in
which such notice is received or delivered by the Bank, as the case may be.
During the period between the delivery of such notice and termination of this
Agreement, purchases and returns through such Credit Cards shall be applied to
the relevant account balance based upon the source of the relevant purchase and
payments, finance charges and any other adjustments will be applied to the
separate balances based upon mail order/retail account balance ratios of such
accounts at the end of the preceding month. Upon termination of this Agreement,
the Company will have the option to purchase the then-outstanding "Lerner" and
"Lerner New York" retail account balances in accordance with subsection (a) of
this Section 11.2.
11.3. EXTENSION. Any services which the parties hereto mutually agree to be
rendered after the termination of this Agreement shall be rendered pursuant to
all of the terms and provisions of this Agreement.
Section 12. MISCELLANEOUS.
12.1. NOTICES. All notices, requests and other communications to any party
hereunder shall be in writing (including telecopy or similar writing) and shall
be given, if to the Company, to:
Lerner New York, Inc.
Three Limited Parkway
Columbus, Ohio 43230
Attn: General Counsel
Telecopy: 614-479-7188
21
with a copy to:
The Limited, Inc.
Three Limited Parkway
Columbus, Ohio 43230
Attn: General Counsel
Telecopy: 614-479-7188
and a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attn: Dennis S. Hersch
Telecopy: 212-450-4800
and if to the Bank, to:
World Financial Network National Bank
4590 East Broad Street
Columbus, Ohio 43213
Attn: Daniel T. Groomes
Telecopy: 614-755-3418
or to such other address or telecopy number and with such other copies, as such
party may hereafter specify for the purpose by notice to the other parties. Each
such notice, request or other communication shall be effective (i) if given by
telecopy, when such telecopy is transmitted to the telecopy number specified in
this Section and evidence of receipt is received or (ii) if given by any other
means, upon delivery or refusal of delivery at the address specified in this
Section 12.1.
12.2. AMENDMENTS; NO WAIVERS.
12.2.1. Any provision of this Agreement may be amended only if such
amendment is in writing and signed by all parties thereto.
12.2.2. No failure or delay by any party in exercising any right, power or
privilege under this Agreement shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
12.3. EXPENSES. All costs and expenses incurred in connection with the this
Agreement or the transactions contemplated hereby shall be paid by the party
incurring such cost or expense.
22
12.4. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns; PROVIDED that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of the other party. Notwithstanding the foregoing, (i) the Bank may from
time to time assign any or all of its rights and obligations hereunder to any
Affiliate of the Bank, provided that any such assignee of the Bank's obligations
hereunder shall have the capability to perform such obligations without
impairing the quality of the services provided to the Company, (ii) the Company
shall assign or otherwise transfer all of its rights and obligations under this
Agreement (A) to the purchaser of all or substantially all of the assets of the
Business or (B) to any corporation which is a successor (whether by merger,
consolidation or otherwise) to the Company or any successor (whether by merger,
consolidation or otherwise) thereto, in each case subject to the execution by
such assignee or transferee of an agreement to be bound by the provisions of
this Agreement and (iii) the Bank may from time to time sell accounts receivable
for securitization, retaining its processing and servicing obligations with
respect thereto (it being understood that (A) the purchaser of such accounts
receivable shall have no recourse against the Company for any reason whatsoever
and (B) the Bank hereby indemnifies the Company and its Related Parties against,
and agrees to hold them harmless from, any and all Damages incurred or suffered
by any of them in connection with any claims made by such purchaser)
12.5. GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the law of the State of New York (without regard to the choice
of law provisions thereof)
12.6. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto or thereto shall have
received a counterpart hereof signed by the other parties hereto.
12.7. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties with respect to the subject matter hereof and supersedes all
prior agreements, understandings and negotiations, both written and oral,
between the parties with respect to such subject matter. No representation,
inducement, promise, understanding, condition or warranty not set forth herein
has been made or relied upon by any party hereto. Neither this Agreement nor any
provision thereof is intended to
23
confer upon any Person other than the parties any rights or remedies' hereunder.
12.8. JURISDICTION. Any suit, action or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this
Agreement or the transactions contemplated thereby may be brought against any of
the parties in the United States District Court for the Southern District of New
York or any state court sitting in the City of New York, Borough of Manhattan,
and each of the parties hereby consents to the exclusive jurisdiction of such
court (and of the appropriate appellate courts) in any such suit, action or
proceeding and waives any objection to venue laid therein. Process in any such
suit, action or proceeding may be served on any party anywhere in the world,
whether within or without the State of New York. Without limiting the foregoing,
the parties agree that service of process upon such party at the address
referred to in Section 12.1, together with written notice of such service to
such party, shall be deemed effective service of process upon such party.
12.9. CAPTIONS. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
12.10. DEFINED TERMS. The following terms, as used herein, shall have the
following meanings:
12.10.1. "AFFILIATE" means, with respect to any Person, any Person directly
or indirectly controlling, controlled by, or under common control with such
other Person. For purposes of this definition, "CONTROL" when used with respect
to any Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "CONTROLLING" and
"CONTROLLED" have meanings correlative to the foregoing.
12.10.2. "BUSINESS DAY" means a day other than a Saturday, Sunday or other
day on which commercial banks in New York, New York or Columbus, Ohio are
authorized or required by law to close.
12.10.3. "PERSON" means an individual, a corporation, a partnership, an
association, a trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
12.10.4. "SEASON" means (i) the period from the first day of the fiscal
month of February to the last day of the fiscal month of July and (ii) the
period from the first
24
day of the fiscal month of August to the last day of the fiscal month of
January.
12.11. FORCE MAJEURE. Notwithstanding the provisions of Section 8.3,
neither the Bank nor its affiliates shall be liable in any mariner to the
Company far any failure to perform their obligations under this Agreement
resulting in any manner from delay, failure in performance, loss or damage due
to fire, strike, embargo, explosion, power blackout, earthquake, flood, war, the
elements, labor disputes, civil or military authority, acts of God, public
enemy, inability to secure fuel, acts or omissions of carriers or other causes
beyond their reasonable control, whether or not similar to any of the foregoing
(a "FORCE MAJEURE EVENT").
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers effective on the day and year first above
written.
25
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers effective on the day and year first above
written.
WORLD FINANCIAL NETWORK
NATIONAL BANK
By: /s/ Timothy B. Lyons
-------------------------------------
Name: Timothy B. Lyons
Title:
LERNER NEW YORK, INC.
By: /s/ Timothy B. Lyons
-------------------------------------
Name: Timothy B. Lyons
Title:
NEVADA RECEIVING FACTORING, INC.
By: /s/ Timothy B. Lyons
-------------------------------------
Name: Timothy B. Lyons
Title:
26
Exhibit 10.5
CREDIT CARD PROCESSING AGREEMENT
This Credit Card Processing Agreement is made as of this 31st day of
January, 1996 between WORLD FINANCIAL NETWORK NATIONAL BANK, a national banking
association (the "BANK"), and Express, Inc., a Delaware corporation (the
"CORPORATION"), and Retail Factoring, Inc., a Nevada corporation ("FACTORING")
(the Corporation and Factoring being collectively referred to herein as the
"COMPANY").
WHEREAS the Company and the Bank believe that it is desirable and in
their respective best interests for the Bank to continue, in a manner generally
consistent with past practices, to issue credit cards bearing the trade names,
trademarks, logos and service marks used in the Company's Express retail or
catalogue business (the "BUSINESS") which will allow the customers of the
Company to purchase goods from the Company using funds advanced by the Bank; and
WHEREAS in order to implement such arrangements, the parties hereto
desire to enter into this Agreement;
NOW, THEREFORE, the parties hereby agree as follows:
Section 1. TRADEMARKS. The Company hereby authorizes the Bank to use
the trademark "Express" on credit cards owned or issued by the Bank, monthly
billing statements, collection correspondence, credit card agreements, credit
applications, customer service correspondence and in such other written and oral
communications with cardholders as are necessary or convenient in connection
with this Agreement, in each case consistent with past practices. The "Express"
trademark is referred to herein as the "MARK". The Company shall have the right
to approve in its sole discretion the "art" (including colors and font styles)
for all proposed uses of the Mark by the Bank. The Bank shall not use the Mark
for any purpose other than as set forth in the first sentence of this Section 1.
Section 2. CREDIT CARD SYSTEM.
2.1. NEW CREDIT CARDS.
2.1.1. ISSUANCE OF CREDIT CARDS. To the extent requested by the
Company, the Bank will issue credit cards bearing the Mark ("CREDIT CARDS") to
customers of the Business who apply for such Credit Cards and related extensions
of credit. Such customers (i) must qualify for the extension of credit under
credit standards related to
new account approvals, credit limits and authorization management ("CREDIT
STANDARDS") which will be determined by the Bank from time to time and (ii)
must accept the Bank's standard form of credit card agreement containing the
terms and conditions governing extensions of credit to Persons who hold
Credit Cards and their authorized users (attached hereto as Exhibit
2.1.1(a)). Notwithstanding the foregoing, (i) the Credit Standards
established by the Bank from time to time in connection with the issuance of
Credit Cards for use in connection with the Business shall be consistent with
past practices (as described in Exhibit 2.1.1(b)), with such changes as shall
be (A) approved by the Company in its reasonable discretion or (B) determined
by the Bank in good faith to be necessary from the standpoint of safe and
sound banking practices and (ii) the Bank may make any change in the terms of
its agreement with any person who holds a Credit Card (including repayment
terms, fees and finance charge rates) after prior notice to and consultation
with the Company. The Bank hereby confirms its understanding that the
Company intends to offer and promote credit as outlined in Section 2.2. The
Bank will bear the costs of the issuance of Credit Cards under this Section
2.1.
2.1.2. CREDIT MAXIMIZATION. The Company will be entitled to use
credit related promotional strategies consistent with past practices. The Bank
will work in good faith with the Company to develop business strategies with
respect to the issuance of Credit Cards intended to maximize the potential of
the Business and, in that regard, will consider in good faith proposals
involving variances from the Bank's general Credit Standards or changes in the
terms of the Bank's agreement with any person who holds a Credit Card; PROVIDED
that subject to compliance with the provisions of Section 2.1.1, Credit
Standards and the terms of such agreement shall in all circumstances be
determined by the Bank. The terms of any program involving variances from the
Bank's general Credit Standards or changes in the terms of the Bank's agreement
with any person who holds a Credit Card, including (without limitation) fees or
other charges to be paid by either party, shall be agreed on a
program-by-program basis.
2.2. PROMOTION. The Company will use its reasonable efforts to
promote the use of Credit Cards in the Business and to acquire new Cardholders
(as defined below), for the Bank through the use of, for example, "instant
credit," "quick credit," pre-approved solicitations, applications and
promotional material displayed in stores and inserted in catalogues and special
offers to Cardholders, in each case consistent with past practices. The costs
incurred by the Company and the Bank (including, among other things, the cost of
printing application forms, promotional material, pre-approved solicitations and
instant
2
and quick credit contracts and the cost of special offers) will be borne by
the Company and the Bank on terms to be negotiated from time to time in a
manner consistent with past practices. The Bank shall have two Business Days
to review for legal compliance all credit application forms and marketing
materials (including, without limitation, those referred to above) prior to
their being printed.
Section 3. ACCEPTANCE OF CREDIT CARDS. The Company will permit
Persons who hold Credit Cards (subject to the restrictions of this Agreement) or
other credit cards owned by the Bank that the Bank has designated and their
authorized users ("CARDHOLDERS") to purchase goods sold by the Business without
any cash payment by use of a Credit Card, subject to the following conditions:
3.1. CHARGE SLIP (CREDIT CARD PRESENTED). If the customer presents a
Credit Card at the time of sale, the Company will maintain a record of the sale
in a form acceptable to the Bank which reflects the following:
3.1.1. A brief identification of the property or service purchased
(the "TRANSACTION");
3.1.2. The date of the Transaction;
3.1.3. The dollar amount of the purchase price of the merchandise or
service which was the subject of the Transaction, including applicable shipping,
handling and taxes;
3.1.4. An imprint or electronic capture of the Credit Card account
number or, in the event of equipment malfunction, a written notation of such
account number; and
3.1.5. The Cardholder's signature.
3.2. CHARGE SLIP (CREDIT CARD NOT PRESENTED). The Bank acknowledges
and agrees that a Cardholder need not present a Credit Card at the time of sale
and that, subject to Section 3.5, the Company may accept charges to a Credit
Card verbally from the customer or via a written order form from the customer.
If the customer does not present a Credit Card at the time of sale, the Company
will maintain a record of the sale in a form acceptable to the Bank which
reflects, in lieu of the information set forth in Section 3.1.1 through 3.1.5,
the following:
3.2.1. A brief identification of the Transaction;
3.2.2. The date of the Transaction;
3
3.2.3. The dollar amount of the purchase price of the merchandise or
service which was the subject of the Transaction, including applicable shipping,
handling and taxes;
3.2.4. A written notation of the Credit Card account number, which
shall have been obtained from the customer and recorded in the Company's
customer file;
3.2.5. The customer's name and address and, except in the case of
catalogue purchases, personal identification type and number; and
3.2.6. If applicable, the name and address to where the merchandise
which was the subject of the Transaction was shipped and the date and method of
shipment.
3.3. RETENTION OF CHARGE SLIP. The Company will retain a legible
copy of each charge slip for six months following the date of the Transaction
and will provide such copy to the Bank within 30 days of the Bank's request
therefor; PROVIDED that the Bank will request delivery of such information only
in the case of a bona fide dispute (the existence of such dispute to be
determined by the Bank in its reasonable discretion) relating to the underlying
Transaction, upon the inquiry of the applicable Cardholder or as requested by
auditors of the Bank in connection with their audit of the Bank's financial
statements or by any governmental authority.
3.4. AUTHORIZATION. The Transaction is authorized by the Bank in
accordance with the floor limits and other procedures in effect at the time or
such authorization is dispensed with under rules established by the Bank from
time to time in accordance with Section 8.3 to deal with situations in which
authorization is not available because of disruption of the Bank's computer
system or other causes provided for in such rules, consistent with past
practice.
3.5. CHARGEBACKS. The Company agrees to accept as a chargeback any
charge on a Credit Card where:
3.5.1. The Cardholder disputes the charge and the Company fails to
provide a legible copy of the charge slip within 30 days of the Bank's request
therefor in accordance with Section 3.3;
3.5.2. The Company failed to obtain authorization from the Bank in
accordance with Section 3.4;
3.5.3. The Company failed to complete the charge slip in accordance
with Section 3.1 or 3.2, as applicable;
4
3.5.4. A Company employee fraudulently misused the Credit Card or
account number;
3.5.5. A dispute arises from the Cardholder being charged or credited
more than once for the same sale, payment or return;
3.5.6. A dispute with the Cardholder arises from a voided Transaction
or an invalid Credit Card account number;
3.5.7. A dispute with the Cardholder arises from an improperly opened
Credit Card account, or the account is otherwise uncollectible, where a Company
employee failed to comply with new account procedures in effect at the time the
account was opened;
3.5.8. The Bank, consistent with past practices, gives the Cardholder
credit for (or accepts as payment) a non-expired discount coupon or gift
certificate in respect of a prior purchase; or
3.5.9. A dispute arises from the Company's failure properly to
identify a catalogue purchaser as the Cardholder where such failure results in
merchandise being shipped without the actual Cardholder's authorization.
The amount charged back with supporting detail will be invoiced to the
Company weekly, and all required payments by the Company shall be made within 30
days after receipt of an invoice. If the Company pays the Bank any chargeback
amount pursuant to this Section 3.5 or if such payment is netted against amounts
payable by the Bank pursuant to Section 4.1.1, any remittances relating to such
chargeback from the Cardholder subsequently collected by the Bank shall, to the
extent not refunded to the Cardholder, be credited by the Bank to the Company.
Section 4. PAYMENT.
4.1. PAYMENT BY BANK.
4.1.1. The Bank will pay to the Company, as full consideration for
any Transaction between the Company and any Cardholder using a Credit Card, as
to which the Company has complied with the provisions of Section 3 above, the
amount shown on the records of the Company for each Transaction, including all
applicable shipping, handling and taxes, less a discount, which discount shall
be equal to the discount rate determined in accordance with Section 4.1.5
(expressed as a fraction) multiplied by the amount shown on the records of the
Company for each Transaction (exclusive of all applicable shipping, handling and
taxes).
5
4.1.2. The Bank will pay such amount by transferring immediately
available funds to an account designated by the Company at any bank to which
the Bank may make electronic fund transfers before the end of the second
Business Day following the receipt by the Bank of the information required by
Section 3.1 or 3.2, such information to be properly formatted and edited and
transferred via a telecommunications connection between the Company and the
Bank pursuant to such computer programs and telecommunications protocols as
the Bank may, in its reasonable discretion, designate from time to time,
subject to reasonable prior notice. The Company will transmit (in the manner
referred to above) to the Bank an audited and balanced file in the format
specified by the Bank containing all such information within two Business
Days after the occurrence of the underlying Transaction; PROVIDED that if, as
a result of technical disruptions, any store locations are not polled within
a normal period after the occurrence of the underlying Transactions, the
Company will transmit such information relating to such store locations as
soon as reasonably practicable after polling is completed.
4.1.3. The Company may not attempt to collect any amount from any
Cardholder with respect to a Transaction which has been paid for by the Bank
under this Section 4.1 and not charged back to the Company pursuant to
Section 3.5.
4.1.4. The Company will, consistent with past practices, accept
payments from Cardholders for amounts due on Credit Cards ("IN-STORE
PAYMENTS"). Any In-Store Payments received by the Company will be held in
trust for the Bank and its assigns and netted against amounts payable by the
Bank pursuant to Section 4.1.1 (PROVIDED that the Company shall not be
required to keep In-Store Payments separate from other payments received by
the Company) and evidence of such payments will be transmitted to the Bank on
a daily basis in accordance with the procedures set forth in Section 4.1.2.
Notwithstanding the foregoing:
(a) if any bankruptcy or other insolvency proceeding has been
commenced against the Company (and so long as the same has not been
dismissed), the Company shall promptly comply with any written instruction (a
"STORE PAYMENT NOTICE") received by the Company from the Bank or any
successor to the Bank as "Servicer" under the Pooling and Servicing Agreement
referred to below (the Bank or any such successor being the "SERVICER") to
take either of the following actions (as specified in such instruction):
(i) cease accepting In-Store Payments and thereafter inform
Cardholders who wish to make In-Store Payments that payment should instead
be sent to Servicer (but only if the Servicer is required by the
6
Pooling and Servicing Agreement to give such notice); or
(ii) (A) deposit an amount equal to all In-Store Payments received by
each retail location operated by the Company, not later than the Business
Day following receipt, into a segregated trust account (the "STORE
ACCOUNT") established by the Company for this purpose and, pending such
deposit, to hold all In-Store Payments in trust for the Bank and its
assigns, (B) use commercially reasonable efforts not to permit any amounts
or items not constituting In-Store Payments to be deposited in the Store
Account and (C) cause all available funds in each Store Account to be
transferred on a daily basis to an account designated in the Store Payment
Notice;
PROVIDED that the Company need not take the actions specified in clause (i)
or clause (ii) if the Company or any of its affiliates provides the Servicer
or the Trustee under (and as defined in) the Pooling and Servicing Agreement
with a letter of credit, surety bond or other similar instrument covering
collection risk with respect to In-Store Payments and all conditions
specified in the Pooling and Servicing Agreement with respect to such letter
of credit, surety bond or other similar instrument are satisfied;
(b) if and to the extent that the Bank so requests in writing at a
time when the Bank is required by the Pooling and Servicing Agreement to make
such request, In-Store Payments shall no longer be netted against amounts
payable by the Bank pursuant to Section 4.1.1, but instead the Company shall
transfer to the Bank by wire transfer of immediately available funds (or, if
the aggregate amount to be transferred pursuant to this clause (b) and
Section 4.2 is less than $10,000, by check), not later than the third
Business Day following receipt of any In-Store Payments, an amount equal to
the sum of such In-Store Payments.
So long as the Company complies with instructions delivered in accordance
with paragraph (a) or (b), any amounts payable by the Bank pursuant to
Section 4.1.1 shall be made without deduction for In-Store Payments.
For purposes of the foregoing, the "POOLING AND SERVICING
AGREEMENT" means the Pooling and Servicing Agreement dated as of January 17,
1996 among the Bank and The Bank of New York, as trustee, including each
Supplement thereunder, as the same may be amended, supplemented or otherwise
modified from time to time, except that no amendment, supplement or other
modification to such Agreement that affects the circumstances in which the
Company may be required to take the actions referred to in
7
paragraph (a) or (b) above or in Section 4.2.3 shall be given effect for
purposes of this Agreement unless consented to by the Company.
4.1.5. DISCOUNT RATE. The applicable discount rate referred to in
Section 4.1.1 shall be the then applicable discount rate determined in
accordance with the matrix set forth in Exhibit 4.1.5; PROVIDED that in the
event of a legislated or judicial reduction in the annual percentage rate or
fees that may be charged by the Bank to Cardholders, the Company and the Bank
agree to negotiate in good faith an increase in the discount rate.
4.2. PAYMENT BY COMPANY. If the Bank has paid the Company for any
Transaction and
4.2.1. If:
(a) the representations and warranties of the Company with respect
to such Transaction, as set forth in Sections 5.1 through 5.3 below, are not
true in all material respects; or
(b) any merchandise which was the subject of such Transaction is
returned to the Company and the Company, pursuant to its policies concerning
returned merchandise, accepts such merchandise for credit; or
(c) in order to settle a dispute concerning the nature, quality or
quantity of goods purchased from the Company with the Credit Card, the
Company agrees to refund all or part of the purchase price thereof; then
4.2.2. The Company:
(a) shall pay the Bank an amount equal to the face amount of such
Transaction or portion thereof refunded to the customer, less any discount
actually taken by the Bank when it made payment to the Company in
consideration for such Transaction pursuant to Section 4.1.1;
(b) shall create a written memorandum of such Transaction setting
forth the information required by Section 3 above (a "CREDIT MEMORANDUM");
(c) shall transmit the information contained in such Credit
Memorandum to the Bank by the method of electronic transmission referred to
in Section 4.1.2 above; and
(d) subject to Section 4.2.3, shall permit the payment required by
this Section 4.2 to be netted against amounts payable by the Bank pursuant to
Section 4.1.1. The
8
Company shall retain any such Credit Memorandum in the same manner and for
the same time as the charge slip referred to in Section 3.3 and shall
promptly deliver any such Credit Memorandum to the Bank upon its request. If
the Company pays the Bank any amount for a Transaction pursuant to this
Section 4.2 or if such payment is netted against amounts payable by the Bank
pursuant to Section 4.1.1, any remittances relating to such Transaction from
the customer subsequently collected by the Bank shall, to the extent not
refunded to the Cardholder, be credited by the Bank to the Company.
4.2.3. Notwithstanding clause (d) of Section 4.2.2, if and to the
extent that the Bank so requests in writing at a time when the Bank is
required by the Pooling and Servicing Agreement to make such request, amounts
payable by the Company pursuant to Section 4.2 ("ADJUSTMENT PAYMENTS") shall
no longer be netted against amounts payable by the Bank pursuant to Section
4.1.1, but instead the Company shall transfer the amount of each Adjustment
Payment to the Bank by wire transfer of immediately available funds (or, if
the aggregate amount to be transferred pursuant to this Section 4.2 and
clause (b) of Section 4.1.4 is less than $10,000, by check), not later than
the second Business Day following the date on which the events giving risk to
such Adjustment Payment occur (and amounts payable by the Bank pursuant to
Section 4.1.1 shall be made without deduction for Adjustment Payments).
4.3. OTHER FEES.
4.3.1. DEFERRED PAYMENT. If any Transaction between the Company
and any Cardholder using a Credit Card is consummated on a deferred payment
basis (for which the period of deferral may not exceed 90 days), then for
each month during the period of deferral, the Company will pay the Bank an
amount equal to the Deferred Payment Rate for such month multiplied by the
average daily balance of purchase price so deferred during such month. For
purposes of this Section 4.3, "DEFERRED PAYMENT RATE" means, for any month,
(i) if the debt of the Bank has an implied investment grade rating at all
times during such month, the average interest rate paid by the Bank to obtain
funds during such month, and (ii) if the debt of the Bank does not have an
implied investment grade rating at all times during such month, the
then-current reference rate or index maintained or provided by a nationally
recognized investment banking firm (which firm shall be reasonably acceptable
to the Company and the Bank) in respect of issuers whose debt has the lowest
investment grade rating.
4.3.2. POSTAL RATE ADJUSTMENT. The Company agrees to reimburse
the Bank for any costs incurred by the
9
Bank as a result of changes in postal rates or rules applicable to mailings
to Cardholders after the date hereof; PROVIDED that the postal costs and
postal discounts applicable to mailings to Cardholders shall be no less
favorable than the postal costs and postal discounts applicable to comparable
mailings to holders of any other credit cards issued by the Bank. The Bank
and the Company agree to use their reasonable efforts to minimize postal
costs and maximize postal discounts.
4.3.3. SPECIAL PROJECTS. With respect to special services
provided by the Bank from time to time with respect to the Business
(including, without limitation, consulting, surveys, gift certificate calls
and fulfillment, rebate fulfillment, telemarketing and special processing or
accounting reports required in connection with promotional activities), the
Company will pay to the Bank amounts to be agreed on a program-by-program
basis. To the extent not otherwise provided for in this Agreement, (i) the
Bank shall not incur expenses required to be paid or reimbursed by the
Company for any project in amounts in excess of $1,000 without having first
obtained prior written or oral authorization from the Company for such
expenses; and (ii) the Bank shall not incur expenses required to be paid or
reimbursed by the Company for any project in amounts in excess of $50,000
without having first obtained prior written authorization from the Company
for such expenses; PROVIDED that, in the event any terms of any such written
authorization are in conflict with the terms of this Agreement, the terms of
this Agreement shall be controlling.
4.3.4. PAYMENTS. All amounts payable by the Company under this
Section 4.3 shall be paid by wire transfer of immediately available funds
within 30 days after receipt of an invoice for such amounts.
4.4. SETOFFS. The Bank may at any time, in addition to all other
rights and remedies available to it, setoff against any amount owing to the
Company by the Bank under this Agreement, any amounts owing by the Company to
the Bank under this Agreement.
4.5. INVOICE. The amount of any invoice prepared and delivered by
the Bank under this Agreement shall be deemed to be correct, accurate and
binding upon the Company if the Company makes no objection within 30 days
after the date of such invoice; PROVIDED that the making of any objection
shall not relieve the Company of its obligation to make full payment of the
amount set forth on the related invoice when such amount is otherwise payable
pursuant to this Section 4, it being understood that the Company does not
waive its rights thereby and may, subject to Section
10
10.4, assert a claim with respect to such invoice in an appropriate proceeding.
Section 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to the Bank that:
5.1. VALID TRANSACTIONS. Each Transaction will be completed in
compliance with the provisions of Section 3 and will create a valid, binding
and legally enforceable obligation of the Cardholder whose name is shown on
the Credit Card to pay to the Company the amount shown on the charge slip,
which obligation to the Company will be discharged in full by the payment
made to the Company by the Bank in respect of such Transaction under Section
4.1 above.
5.2. ACCURATE INFORMATION. Each charge slip will accurately
reflect the Transaction described therein. Each charge slip and Credit
Memorandum and any charge slip or Credit Memorandum information transmitted
to the Bank by the Company will be complete and accurate and in a form deemed
necessary by the Bank to allow Cardholder billing in accordance with
applicable law. The Company will accurately report all returns and other
credits to the Bank within the time period specified in Section 4.
5.3. NO LIENS. No amount due to the Company with respect to any
Transaction will be subject to any lien or encumbrance in favor of any third
party or to any offset, counterclaim or defense of any Person other than the
Bank or its Affiliates.
5.4. MARK. The use of the Mark by the Bank under this Agreement
does not infringe the rights of any other Person.
Section 6. REPRESENTATIONS AND WARRANTIES OF THE BANK. The Bank
hereby represents and warrants to the Company that:
6.1. COMPLIANCE WITH LAWS. Each Credit Card and the related
credit card agreement, all monthly billing statements and any collection
efforts of the Bank conform and will conform in all material respects with
all federal or state laws or regulations applicable to the extension of
credit to or the collection of amounts from consumers including, without
limitation, the Truth-in-Lending Act, the Equal Credit Opportunity Act, the
Fair Credit Reporting Act and federal and state bankruptcy and debtor relief
laws ("CONSUMER LAWS").
6.2. NON-CONTRAVENTION. The performance by the Bank of its
obligations under this Agreement will not
11
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, any agreement or instrument to which the Bank is
party or by which the Bank is bound, nor will such performance result in any
violation of the provisions of the articles of association or the by-laws of
the Bank or any applicable law or statute or any order, rule or regulation of
any court or governmental agency or body having jurisdiction over the Bank.
Section 7. COVENANTS OF THE COMPANY. The Company hereby covenants
and agrees with the Bank as follows:
7.1. CREDIT CARD NOTICES AND COMMUNICATIONS. The Company will,
consistent with past practices, accept and turn over to the Bank promptly
upon receipt thereof by the Company (i) subject to Section 4.1.4, any
payments made by any Cardholder with respect to any Transaction or any Credit
Card and (ii) any notices or other communications received by the Company
with respect to any Credit Card including, without limitation, customer
changes of address and other information on approved forms.
7.2. COMPLIANCE WITH APPLICABLE LAW. The Company will, at all
times, comply in all material respects with all Consumer Laws.
7.3. RULES. The Company shall comply with such written rules and
operating instructions relating to the use of the Credit Cards, the
distribution of applications, Credit Card security, authorization procedures,
"downtime" procedures and other matters related to this Agreement as the Bank
may, from time to time, promulgate with prior notice to the Company; PROVIDED
that such rules and operating instructions shall be consistent with past
practices, with such changes as shall be approved by the Company in its
reasonable discretion.
7.4. CARDHOLDER INQUIRIES AND COMPLAINTS. If a Cardholder makes
an inquiry or complaint to the Company about the nature, quality or quantity
of goods purchased from the Company with a Credit Card, or a Cardholder has
made an inquiry or complaint to the Bank concerning the nature, quality or
quantity of goods purchased from the Company with a Credit Card, the Company
shall deal directly with the Cardholder to resolve any such complaint or
inquiry. The Company shall answer all inquiries from the Bank about
complaints made to the Bank by Cardholders within 10 days after the Company
receives an inquiry from the Bank.
7.5. EQUIPMENT. The Company shall obtain and maintain at its own
expense such point of sale and authorization terminals, credit card
imprinters and other
12
items of equipment as are necessary for it to receive authorizations,
transmit charge slip and Credit Memorandum information, process credit
applications and perform its obligations under this Agreement. Such point of
sale and authorization terminals shall be capable of communicating with the
computer equipment maintained by the Bank according to such computer programs
and telecommunications protocols as may be specified by the Bank in its
reasonable discretion from time to time subject to reasonable prior notice of
any change in such equipment or protocols.
7.6. EXCLUSIVITY. The Company may not accept or promote any
credit card as payment for its goods or services unless such credit card is a
Credit Card, a proprietary credit card of another division of the Company or
any Affiliate of the Company (whether or not issued by the Bank) or a credit
card issued by a bank or other Person engaged in the business of issuing
credit cards to Persons for the purpose of making payments to third parties
generally under such names as Master Card, Visa, Discover, American Express
or Optima. The Company may not issue its own credit cards or enter into an
agreement with any third party under which credit cards bearing the Mark are
issued; PROVIDED that after the second anniversary of the date hereof, the
Company shall be entitled to negotiate with any third party with respect to
the issuance of co-branded or affinity bank credit cards bearing the Mark and
to accept any Bona Fide Offer by such third party if, at least 30 days prior
to accepting such Bona Fide Offer, the Company provides the Bank with an
opportunity to submit a competing offer with respect to the issuance of
co-branded or affinity bank credit cards bearing the Mark, which competing
offer, if it has terms at least as favorable to the Company as such Bona Fide
Offer, shall be accepted by the Company in lieu of such Bona Fide Offer. For
purposes of this Section 7.6, "BONA FIDE OFFER" means an offer to the Company
with respect to a program of at least two years' duration for the issuance of
co-branded or affinity bank credit cards that is, in the Company's reasonable
judgment, generally competitive in light of marketplace conditions existing
at the time (such marketplace conditions to include, without limitation,
other offers with respect to co-branded or affinity bank credit cards being
made to the Company, its Affiliates and other retail or catalogue merchants).
7.7. OBSOLETE MATERIALS. The Company shall reimburse the Bank for
the cost of replacing reasonable amounts of obsolete forms and other
materials if such replacement is requested by the Company due to changes in
the Mark or in the logo, colors or styles used to identify or promote the
Business.
13
Section 8. COVENANTS OF THE BANK. The Bank hereby covenants and
agrees with the Company as follows:
8.1. COMPLIANCE WITH APPLICABLE LAW. The Bank will, in issuing,
billing, administering, and collecting with respect to the Credit Cards and at
all other times, comply in all material respects with all Consumer Laws.
8.2. COLLECTION. The Bank will use efforts to collect from each
Cardholder the purchase price and additional taxes and other charges of
Transactions consistent with past practices and with its efforts to collect
accounts receivable under other credit cards issued by it; PROVIDED that the
Bank will initiate collection of any account receivable under a Credit Card at
or before the time such account receivable is 60 days past due. The Bank will,
consistent with past practices, determine the use and timing of dunning letters,
statement messages and collection agents and will manage all written-off
accounts (including, without limitation, the management of outside collection
agencies). The Bank may implement reasonable variances from past collection
practices after prior notice to and consultation with the Company.
8.3. PERFORMANCE STANDARDS. In performing its obligations under this
Agreement, subject to Section 12.11, the Bank shall comply with the performance
standards set forth in Exhibit 8.3, as such performance standards may be
modified from time to time at the reasonable request of the Bank or the Company.
Within 10 days after the end of each fiscal month, the Bank will deliver to the
Company a compliance certificate of the chief executive officer or chief
financial officer of the Bank setting forth in reasonable detail data
demonstrating compliance during such calendar month with such performance
standards. Enhancements to, and modifications or upgrades of, the computer
processing, payment, billing and information services provided by the Bank will
be made from time to time at the reasonable request of the Company. Any such
enhancements, modifications or upgrades shall, to the extent requested by the
Company, be made on terms to be agreed upon.
8.4. FORCE MAJEURE EVENT. After the occurrence of a Force Majeure
Event (as defined in Section 12.11) which disrupts the availability of the
services provided hereunder, the Bank may elect to reestablish the availability
of such services. If any such Force Majeure Event comparably disrupts the
performance of services similar to the services provided hereunder with respect
to one or more other credit cards issued by the Bank, then the Bank shall
reestablish the availability of such services to the same extent and within the
same timetable under
14
comparable circumstances as the comparable services are reestablished with
respect to such other credit cards. The Bank shall promptly notify the
Company of any Force Majeure Event and shall inform the Company whether it
will reestablish services and the timetable therefor. If the Bank chooses
not to reestablish or take measures to reestablish such services within a
reasonable period of time as would be indicated by sound business practice,
the Company shall be free to obtain such services from any supplier thereof.
Section 9. PROPERTY RIGHTS.
9.1. RIGHTS OF THE COMPANY. The Company is the owner of the names
and addresses of customers of the Business; PROVIDED that (i) as set forth in
Section 9.2, the Bank is also the owner of such information with respect to
customers of the Business who are also Cardholders and (ii) The Limited, Inc.
("THE LIMITED") is also the owner of such information with respect to customers
of the Business until the second anniversary of the date, if any, on which the
Company ceases to be an Affiliate of The Limited.
9.2. RIGHTS OF BANK. Except as set forth in Section 9.1, the Bank is
the owner of all information relating to the Cardholders (including names and
addresses) and the Credit Cards, the copyright to all written material contained
in any credit card agreements, applications, billing statements and other forms
used by the Bank in the administration of its agreements with the Cardholders,
all credit scoring systems and all policies of credit insurance issued to the
Bank with respect to any Cardholder; PROVIDED that the Bank shall not be
entitled to sell, rent or otherwise disclose any information relating to the
Cardholders to any third party other than (i) Affiliates of the Company, (ii)
Persons who, in the sole judgment of The Limited, do not compete, directly or
indirectly, with any retail or catalogue business conducted by The Limited or
any of its Affiliates and (iii) in the case of disclosure, credit agencies.
Subject to Section 9.3, the Company will not have any rights in any information
or property of the Bank; PROVIDED that the Bank will provide the Company with
such information the Bank owns with respect to Cardholders as the Company may
reasonably request in order to develop potential marketing or credit strategies.
9.3. DATABASE. (a) It is the intention of the parties that the Bank
will manage, maintain and develop an information marketing database (the
"DATABASE") at its own expense, subject to a mutually satisfactory agreement
with the Company pursuant to which (i) the Company will agree to utilize the
Database, (ii) the Database will be accessible from the Company's offices and
(iii) the Bank will provide
15
the Company with information maintained as part of the Database on terms that
are no less favorable than those offered by the Bank to any other recipient
of comparable information.
(b) Notwithstanding the foregoing, the Bank will, from time to time
at the request of the Company, and without charge, promptly provide the Company
with a list of the names and addresses of all Cardholders, all holders of other
proprietary credit cards of the Company or any Affiliate of the Company (if
issued by the Bank) and all other customers of the Business, any other business
of the Company and the business of any other Affiliate of the Company. The
Company shall reimburse the Bank for its costs of producing and shipping such
list in the format required by the Company within 30 days after receipt of a
request for such reimbursement from the Bank.
(c) Subject to Section 9.2, the Bank may make the Database available,
and provide information marketing services to, third parties on terms reasonably
determined by the Bank; PROVIDED that (i) the allocation among the Bank, the
Company and The Limited of fees charged by the Bank to such third parties shall
be agreed on a program-by-program basis or, in the case of programs existing on
the date hereof, continued consistent with past practices and (ii) the Bank may
not make the Database available, or provide information marketing services to,
any Person who, in the sole judgment of The Limited, competes, directly or
indirectly, with any retail or catalogue business conducted by The Limited or
any of its Affiliates.
9.4. ENVELOPE STUFFING.
9.4.1. Subject to the right of the Bank to include in mailings to
Cardholders periodic billing statements and any legal notices which the Bank
believes are necessary or appropriate to send to Cardholders, the Company shall
have the right to have materials advertising its products and services included
in the envelopes containing the periodic statements. Such materials shall
advertise only products and services related to the Business, shall (unless the
Company provides the Bank with notice as provided below) be limited to seven
panels per envelope and shall conform to size requirements established from time
to time by the Bank with reasonable prior notice of any changes. The Company
shall use reasonable efforts (i) to notify the Bank at least 15 days before the
proposed date of any such inclusion and shall provide the Bank with a draft copy
of any such advertising material at the time it notifies the Bank of such
mailing and (ii) to provide the Bank with a seasonal marketing plan at least 30
days before the beginning date of each Season. The Company shall
16
provide the Bank with the materials to be included in the mailing not less
than two Business Days prior to the initial insertion date. If the Company
does not notify the Bank of any such inclusion at least seven days before the
proposed date of such inclusion or if the material included does not take up
the available space, the Bank may utilize the space remaining inside the
envelopes for its own purposes; PROVIDED that (i) unless the Company provides
the Bank with notice at least 45 days before the proposed inclusion date of
the Company's intent to utilize more than seven panels per envelope, the Bank
shall be entitled to utilize at least three panels (or two panels and one
"bangtail" remittance envelope) per envelope for its own purposes and (ii)
all materials included by the Bank shall be subject to the approval of the
Company, which approval shall not be unreasonably withheld.
9.4.2. The Bank shall have the exclusive right to include in any
mailing to Cardholders materials advertising products and services not related
to the Business and the allocation between the Bank and the Company of the
revenues generated thereby shall be agreed on a program-by-program basis or, in
the case of programs existing on the date hereof, continued consistent with past
practices; PROVIDED that such products and services and the related advertising
materials shall be subject to the approval of the Company, which approval shall
not be unreasonably withheld or delayed (it being understood that the Company
may withhold such approval if it determines in its sole discretion that the
advertising of such products or services is inconsistent with the image of the
Business).
9.4.3. Notwithstanding the foregoing, (i) the Bank shall have the
right to use its own "bangtail" remittance envelopes to promote credit life
insurance to existing Cardholders no more than four times per year or two times
per Season and (ii) all materials used, or sent to Cardholders, by the Bank
under existing programs of the Bank (including, but not limited to, credit life
insurance) shall not be subject to the approval of the Company.
9.4.4. The Bank shall provide timely specifications (including size
and weight requirements) for all statement inserts, credit card carriers and
"bangtail" remittance envelopes.
Section 10. INDEMNIFICATION; CLAIMS AND ACTIONS.
10.1. INDEMNIFICATION BY THE COMPANY. The Company hereby indemnifies
the Bank, its Affiliates and the directors, officers, employees and agents of
the Bank or any Affiliate of the Bank (each, a "RELATED PARTY") against, and
agrees to hold them harmless from, any and all losses,
17
claims, damages and liabilities (including, without limitation, the legal
fees and other expenses reasonably incurred in connection with any suit,
action or proceeding or any claim asserted) ("DAMAGES") incurred or suffered
by any of them arising out of or in any way related to any misrepresentation,
breach of any warranty or nonperformance of any covenant made by the Company
under this Agreement or relating to any personal or bodily injury or property
damage alleged to be caused by the sale of goods or rendering of services by
the Company.
10.2. INDEMNIFICATION BY THE BANK. The Bank hereby indemnifies the
Company and its Related Parties against, and agrees to hold them harmless from,
any and all Damages incurred or suffered by any of them arising out of or in any
way related to any misrepresentation, breach of any warranty, or nonperformance
of any covenant made by the Bank under this Agreement.
10.3. THIRD PARTY CLAIMS.
10.3.1. The Bank shall not be liable to the Company for or in
connection with any claim made against the Company by any other Person relating
in any manner to this Agreement or to any services or any other transactions
contemplated hereby (other than (i) claims based upon the Bank's failure to
perform its obligations under this Agreement, its or any of its Related Parties'
negligence or willful misconduct or its failure to comply with any law or
regulation (including, without limitation, any Consumer Law), (ii) claims by
employees or subcontractors of the Bank arising from the performance of services
under this Agreement (other than claims based upon the Company's or any if its
Related Parties' negligence or willful misconduct), (iii) claims relating to
acts or omissions of the Bank and its agents in connection with the collection
of amounts owing from Cardholders and (iv) claims relating to the submission by
the Bank or its agents of data concerning Cardholders to credit agencies), even
if the Bank has been advised of the possibility of such claims.
10.3.2. The Company shall not be liable to the Bank for or in
connection with any claim made against the Bank by any other Person relating in
any manner to this Agreement or to any services or other transactions
contemplated hereby (other than (i) claims based upon the Company's failure to
perform its obligations under this Agreement, its or any of its Related Parties'
negligence or willful misconduct or its failure to comply with any law or
regulation (including, without limitation, any Consumer Law), (ii) claims by
employees or subcontractors of the Company arising from this Agreement and (iii)
claims
18
relating to goods purchased from the Company), even if the Company has been
advised of the possibility of such claims.
10.4. DISPUTE RESOLUTION AND ACTIONS. The Bank and the Company shall
use their reasonable best efforts to resolve informally any claim of either
party under this Agreement. No action at law or in equity may be instituted by
any party with respect to any such claim unless such party has satisfied its
obligation under the first sentence of this Section 10.4.
10.5. LIMITATION ON ACTIONS. No action against either party,
regardless of form, arising out of or incidental to the matters contemplated by
this Agreement, may be brought by the other party more than one year after the
event giving rise to such cause of action occurred and is known or upon the
exercise of reasonable diligence should have been known to the injured party.
10.6. REIMBURSEMENT FOR LOSSES. If, as a result of any claim made by
the Bank against any third party (including, but not limited to, an insurer),
the Bank actually receives from such third party cash proceeds (or non-cash
proceeds, whether in the form of goods or services) which represent, in whole or
in part, compensation for or reimbursement of losses or costs actually incurred
by the Company, then the Bank will hold that portion of such proceeds fairly
allocable to the Company (taking into consideration all losses or costs actually
incurred by all parties for whose benefit such payments have been received) in
trust on behalf of the Company and will promptly pay over to the Company such
allocable amount of any such cash proceeds (or, as to non-cash proceeds, the
allocable portion or, at the discretion of the Bank, the cash equivalent
thereof).
10.7. SURVIVAL. The provisions of this Section 10 shall survive the
termination of this Agreement.
Section 11. TERMINATION.
11.1 TERM. This Agreement shall remain in effect until the tenth
anniversary of the date hereof, shall be automatically extended until the
twelfth anniversary of the date hereof if the Company does not give at least 12
months' prior written notice of its objection to such extension and shall be
further automatically extended in successive two-year increments if the Bank or
the Company does not give at least 12 months' prior written notice of its
objection to such extension, unless earlier terminated (a) by the Bank or the
Company in the event of a material breach by the other party of any of such
other party's obligations under this Agreement if any such breach remains
uncured 30 days after
19
written notice thereof to such party, (b) automatically in the event that the
Bank or the Company commences a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its
debts under any bankruptcy, insolvency or other similar law now or
hereinafter in effect, seeks the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part
of its assets, consents to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, makes a general assignment for the benefit of
creditors, or fails generally to pay its debts as they become due, or (c) by
the Company upon not less than 60 days' prior written notice to the Bank at
any time after the sixth anniversary of the date hereof if, based on the
application of the attached matrix, the applicable discount rate exceeds the
highest discount rate in such matrix and the costs to the Company under this
Agreement are substantially higher than the costs that would be incurred by
the Company for comparable credit card services over the remaining term of
this Agreement from an independent third-party financial institution;
PROVIDED that the Company shall not be entitled to terminate this Agreement
pursuant to clause (c) unless the Company provides the Bank with a written
description of the material terms on which such third party financial
institution proposes to provide such services and is entitled to submit a
counter-proposal within 30 days of receipt of such description. If the Bank
submits a counter-proposal with terms substantially similar to those set
forth in such third party's proposal or agrees to maintain the discount rate
at the highest discount rate in the attached matrix, this Agreement shall
remain in full force and effect, modified as may be necessary to reflect the
terms included in the Bank's counter-proposal. Subject to Section 11.2, the
termination of this Agreement shall not affect the obligations of the
Cardholders to the Bank, the obligation of the Company and the Bank to make
the payments required under Section 4 with respect to Transactions that
occurred before the date of termination, the rights of the Bank under
Sections 4.4, 7.4 and 9.1 and the rights of the Company under Section 9.1.
Sections 10, 11 and 12 of this Agreement shall survive any such termination.
11.2. EFFECT OF TERMINATION. Upon termination of this Agreement, the
Company will have the option to purchase the then-outstanding Credit Card
account balances not previously written-off by the Bank (subject to the terms of
any securitization of such account balances) at the face amount thereof, without
recourse to the Bank, and will be provided with all related account information
and other account data; PROVIDED that the Company will be required to purchase
such then-outstanding Credit Card account balances on such terms if the Company
objects to any automatic
20
extension of this Agreement pursuant to Section 11.1. All payments by the
Company pursuant to this Section 11.2 shall be made not later than one
Business Day after termination of this Agreement by wire transfer of
immediately available funds to an account notified by the Bank to the Company
not less than two Business Days prior to the payment date. Upon any
termination of this Agreement, (i) the Company (at its sole expense) shall
notify all Cardholders that the Bank is no longer the processor of their
Credit Card accounts and (ii) the Company and the Bank shall cooperate in
facilitating the transition to a new processor.
11.3. EXTENSION. Any services which the parties hereto mutually
agree to be rendered after the termination of this Agreement shall be rendered
pursuant to all of the terms and provisions of this Agreement.
Section 12. MISCELLANEOUS.
12.1. NOTICES. All notices, requests and other communications to any
party hereunder shall be in writing (including telecopy or similar writing) and
shall be given, if to the Company, to:
Express, Inc.
Three Limited Parkway
Columbus, Ohio 43230
Attn: General Counsel
Telecopy: 614-479-7188
with a copy to:
The Limited, Inc.
Three Limited Parkway
Columbus, Ohio 43230
Attn: General Counsel
Telecopy: 614-479-7188
and a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attn: Dennis S. Hersch
Telecopy: 212-450-4800
and if to the Bank, to:
World Financial Network National Bank
4590 East Broad Street
Columbus, Ohio 43213
Attn: Daniel T. Groomes
Telecopy: 614-755-3418
21
or to such other address or telecopy number and with such other copies, as such
party may hereafter specify for the purpose by notice to the other parties.
Each such notice, request or other communication shall be effective (i) if given
by telecopy, when such telecopy is transmitted to the telecopy number specified
in this Section and evidence of receipt is received or (ii) if given by any
other means, upon delivery or refusal of delivery at the address specified in
this Section 12.1.
12.2. AMENDMENTS; NO WAIVERS.
12.2.1. Any provision of this Agreement may be amended only if such
amendment is in writing and signed by all parties thereto.
12.2.2. No failure or delay by any party in exercising any right,
power or privilege under this Agreement shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
12.3. EXPENSES. All costs and expenses incurred in connection with
the this Agreement or the transactions contemplated hereby shall be paid by the
party incurring such cost or expense.
12.4. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties and their respective
successors and assigns; PROVIDED that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of the other party. Notwithstanding the foregoing, (i) the Bank may from
time to time assign any or all of its rights and obligations hereunder to any
Affiliate of the Bank, provided that any such assignee of the Bank's obligations
hereunder shall have the capability to perform such obligations without
impairing the quality of the services provided to the Company,
(ii) the Company shall assign or otherwise transfer all of its rights and
obligations under this Agreement (A) to the purchaser of all or substantially
all of the assets of the Business or (B) to any corporation which is a successor
(whether by merger, consolidation or otherwise) to the Company or any successor
(whether by merger, consolidation or otherwise) thereto, in each case subject to
the execution by such assignee or transferee of an agreement to be bound by the
provisions of this Agreement and (iii) the Bank may from time to time sell
accounts receivable for securitization, retaining its processing and servicing
22
obligations with respect thereto (it being understood that (A) the purchaser of
such accounts receivable shall have no recourse against the Company for any
reason whatsoever and (B) the Bank hereby indemnifies the Company and its
Related Parties against, and agrees to hold them harmless from, any and all
Damages incurred or suffered by any of them in connection with any claims made
by such purchaser).
12.5. GOVERNING LAW. This Agreement shall be construed in accordance
with and governed by the law of the State of New York (without regard to the
choice of law provisions thereof).
12.6. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto or thereto shall
have received a counterpart hereof signed by the other parties hereto.
12.7. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements, understandings and negotiations, both written
and oral, between the parties with respect to such subject matter. No
representation, inducement, promise, understanding, condition or warranty not
set forth herein has been made or relied upon by any party hereto. Neither this
Agreement nor any provision thereof is intended to confer upon any Person other
than the parties any rights or remedies hereunder.
12.8. JURISDICTION. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated thereby may be brought
against any of the parties in the United States District Court for the Southern
District of New York or any state court sitting in the City of New York, Borough
of Manhattan, and each of the parties hereby consents to the exclusive
jurisdiction of such court (and of the appropriate appellate courts) in any such
suit, action or proceeding and waives any objection to venue laid therein.
Process in any such suit, action or proceeding may be served on any party
anywhere in the world, whether within or without the State of New York. Without
limiting the foregoing, the parties agree that service of process upon such
party at the address referred to in Section 12.1, together with written notice
of such service to such party, shall be deemed effective service of process upon
such party.
23
12.9. CAPTIONS. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
12.10. DEFINED TERMS. The following terms, as used herein, shall
have the following meanings:
12.10.1. "AFFILIATE" means, with respect to any Person, any Person
directly or indirectly controlling, controlled by, or under common control with
such other Person. For purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to
the foregoing.
12.10.2. "BUSINESS DAY" means a day other than a Saturday, Sunday or
other day on which commercial banks in New York, New York or Columbus, Ohio are
authorized or required by law to close.
12.10.3. "PERSON" means an individual, a corporation, a partnership,
an association, a trust or other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
12.10.4. "SEASON" means (i) the period from the first day of the
fiscal month of February to the last day of the fiscal month of July and (ii)
the period from the first day of the fiscal month of August to the last day of
the fiscal month of January.
12.11. FORCE MAJEURE. Notwithstanding the provisions of Section 8.3,
neither the Bank nor its affiliates shall be liable in any manner to the Company
for any failure to perform their obligations under this Agreement resulting in
any manner from delay, failure in performance, loss or damage due to fire,
strike, embargo, explosion, power blackout, earthquake, flood, war, the
elements, labor disputes, civil or military authority, acts of God, public
enemy, inability to secure fuel, acts or omissions of carriers or other causes
beyond their reasonable control, whether or not similar to any of the foregoing
(a "FORCE MAJEURE EVENT").
24
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers effective on the day and year first
above written.
WORLD FINANCIAL NETWORK
NATIONAL BANK
By: /s/ Timothy B. Lyons
----------------------------
Name: Timothy B. Lyons
Title:
EXPRESS, INC.
By: /s/ Timothy B. Lyons
----------------------------
Name: Timothy B. Lyons
Title:
RETAIL FACTORING, INC.
By: /s/ Timothy B. Lyons
----------------------------
Name: Timothy B. Lyons
Title:
25
Exhibit 10.6
CREDIT CARD PROCESSING AGREEMENT
This Credit Card Processing Agreement is made as of this
31st day of January, 1996 between WORLD FINANCIAL NETWORK NATIONAL BANK, a
national banking association (the "BANK"), and The Limited Stores, Inc., a
Delaware corporation (the "CORPORATION"), and American Receivable Factoring,
Inc., a Nevada corporation ("FACTORING") (the Corporation and Factoring being
collectively referred to herein as the "COMPANY").
WHEREAS the Company and the Bank believe that it is
desirable and in their respective best interests for the Bank to continue, in
a manner generally consistent with past practices, to issue credit cards
bearing the trade names, trademarks, logos and service marks used in the
Company's The Limited retail or catalogue business (the "BUSINESS") which will
allow the customers of the Company to purchase goods from the Company using
funds advanced by the Bank; and
WHEREAS in order to implement such arrangements, the parties
hereto desire to enter into this Agreement;
NOW, THEREFORE, the parties hereby agree as follows:
Section 1. TRADEMARKS. The Company hereby authorizes the
Bank to use the trademark "The Limited" on credit cards owned or issued by the
Bank, monthly billing statements, collection correspondence, credit card
agreements, credit applications, customer service correspondence and in such
other written and oral communications with cardholders as are necessary or
convenient in connection with this Agreement, in each case consistent with
past practices. The "The Limited" trademark is referred to herein as the
"MARK". The Company shall have the right to approve in its sole discretion the
"art" (including colors and font styles) for all proposed uses of the Mark by
the Bank. The Bank shall not use the Mark for any purpose other than as set
forth in the first sentence of this Section 1.
Section 2. CREDIT CARD SYSTEM.
2.1. NEW CREDIT CARDS.
2.1.1. ISSUANCE OF CREDIT CARDS. To the extent requested by
the Company, the Bank will issue credit cards bearing the Mark ("CREDIT CARDS")
to customers of the Business who apply for such Credit Cards and related
extensions of credit. Such customers (i) must qualify for
the extension of credit under credit standards related to new account
approvals, credit limits and authorization management ("CREDIT STANDARDS")
which will be determined by the Bank from time to time and (ii) must accept
the Bank's standard form of credit card agreement containing the terms and
conditions governing extensions of credit to Persons who hold Credit Cards and
their authorized users (attached hereto as Exhibit 2.1.1(a)). Notwithstanding
the foregoing, (i) the Credit Standards established by the Bank from time to
time in connection with the issuance of Credit Cards for use in connection
with the Business shall be consistent with past practices (as described in
Exhibit 2.1.1(b)), with such changes as shall be (A) approved by the Company
in its reasonable discretion or (B) determined by the Bank in good faith to be
necessary from the standpoint of safe and sound banking practices and (ii) the
Bank may make any change in the terms of its agreement with any person who
holds a Credit Card (including repayment terms, fees and finance charge rates)
after prior notice to and consultation with the Company. The Bank hereby
confirms its understanding that the Company intends to offer and promote
credit as outlined in Section 2.2. The Bank will bear the costs of the
issuance of Credit Cards under this Section 2.1.
2.1.2. CREDIT MAXIMIZATION. The Company will be entitled to
use credit related promotional strategies consistent with past practices. The
Bank will work in good faith with the Company to develop business strategies
with respect to the issuance of Credit Cards intended to maximize the
potential of the Business and, in that regard, will consider in good faith
proposals involving variances from the Bank's general Credit Standards or
changes in the terms of the Bank's agreement with any person who holds a
Credit Card; PROVIDED that subject to compliance with the provisions of
Section 2.1.1, Credit Standards and the terms of such agreement shall in all
circumstances be determined by the Bank. The terms of any program involving
variances from the Bank's general Credit Standards or changes in the terms of
the Bank's agreement with any person who holds a Credit Card, including
(without limitation) fees or other charges to be paid by either party, shall
be agreed on a program-by-program basis.
2.2. PROMOTION. The Company will use its reasonable efforts
to promote the use of Credit Cards in the Business and to acquire new
Cardholders (as defined below), for the Bank through the use of, for example,
"instant credit," "quick credit," pre-approved solicitations, applications and
promotional material displayed in stores and inserted in catalogues and
special offers to Cardholders, in each case consistent with past practices.
The costs incurred by the Company and the Bank (including, among other things,
the cost of printing application forms,
2
promotional material, pre-approved solicitations and instant and quick credit
contracts and the cost of special offers) will be borne by the Company and the
Bank on terms to be negotiated from time to time in a manner consistent with
past practices. The Bank shall have two Business Days to review for legal
compliance all credit application forms and marketing materials (including,
without limitation, those referred to above) prior to their being printed.
Section 3. ACCEPTANCE OF CREDIT CARDS. The Company will
permit Persons who hold Credit cards (subject to the restrictions of this
Agreement) or other credit cards owned by the Bank that the Bank has
designated and their authorized users ("CARDHOLDERS") to purchase goods sold
by the Business without any cash payment by use of a Credit Card, subject to
the following conditions:
3.1. CHARGE SLIP (CREDIT CARD PRESENTED). If the customer
presents a Credit Card at the time of sale, the Company will maintain a record
of the sale in a form acceptable to the Bank which reflects the following:
3.1.1. A brief identification of the property or service
purchased (the "TRANSACTION");
3.1.2. The date of the Transaction;
3.1.3. The dollar amount of the purchase price of the
merchandise or service which was the subject of the Transaction, including
applicable shipping, handling and taxes;
3.1.4. An imprint or electronic capture of the Credit Card
account number or, in the event of equipment malfunction, a written notation
of such account number; and
3.1.5 The Cardholder's signature.
3.2. CHARGE SLIP (CREDIT CARD NOT PRESENTED). The Bank
acknowledges and agrees that a Cardholder need not present a Credit Card at
the time of sale and that, subject to Section 3.5, the Company may accept
charges to a Credit Card verbally from the customer or via a written order
form from the customer. If the customer does not present a Credit Card at the
time of sale, the Company will maintain a record of the sale in a form
acceptable to the Bank which reflects, in lieu of the information set forth in
Section 3.1.1 through 3.1.5, the following:
3.2.1 A brief identification of the Transaction;
3.2.2. The date of the Transaction;
3
3.2.3. The dollar amount of the purchase price of the
merchandise or service which was the subject of the Transaction, including
applicable shipping, handling and taxes;
3.2.4. A written notation of the Credit Card account number,
which shall have been obtained from the customer and recorded in the Company's
customer file;
3.2.5. The customer's name and address and except in the
case of catalogue purchases, personal identification type and number; and
3.2.6. If applicable, the name and address to where the
merchandise which was the subject of the Transaction was shipped and the date
and method of shipment.
3.3. RETENTION OF CHARGE SLIP. The Company will retain a
legible copy of each charge slip for six months following the date of the
Transaction and will provide such copy to the Bank within 30 days of the
Bank's request therefor; PROVIDED that the Bank will request delivery of such
information only in the case of a bona fide dispute (the existence of such
dispute to be determined by the Bank in its reasonable discretion) relating to
the underlying Transaction, upon the inquiry of the applicable Cardholder or
as requested by auditors of the Bank in connection with their audit of the
Bank's financial statements or by any governmental authority.
3.4. AUTHORIZATION. The Transaction is authorized by the
Bank in accordance with the floor limits and other procedures in effect at the
time or such authorization is dispensed with under rules established by the
Bank from time to time in accordance with Section 8.3 to deal with situations
in which authorization is not available because of disruption of the Bank's
computer system or other causes provided for in such rules, consistent with
past practice.
3.5. CHARGEBACKS. The Company agrees to accept as a
chargeback any charge on a Credit Card where:
3.5.1. The Cardholder disputes the charge and the Company
fails to provide a legible copy of the charge slip within 30 days of the
Bank's request therefor in accordance with Section 3.3;
3.5.2. The Company failed to obtain authorization from the
Bank in accordance with Section 3.4;
3.5.3. The Company failed to complete the charge slip in
accordance with Section 3.1 or 3.2, as applicable;
4
3.5.4. A Company employee fraudulently misused the Credit
Card or account number;
3.5.5. A dispute arises from the Cardholder being charged or
credited more than once for the same sale, payment or return;
3.5.6. A dispute with the Cardholder arises from a voided
Transaction or an invalid Credit Card account number;
3.5.7. A dispute with the Cardholder arises from an
improperly opened Credit Card account, or the account is otherwise
uncollectible, where a Company employee failed to comply with new account
procedures in effect at the time the account was opened;
3.5.8. The Bank, consistent with past practices, gives the
Cardholder credit for (or accepts as payment) a non-expired discount coupon or
gift certificate in respect of a prior purchase; or
3.5.9. A dispute arises from the Company's failure properly
to identify a catalogue purchaser as the Cardholder where such failure results
in merchandise being shipped without the actual Cardholder's authorization.
The amount charged back with supporting detail will be
invoiced to the Company weekly, and all required payments by the Company shall
be made within 30 days after receipt of an invoice. If the Company pays the Bank
any chargeback amount pursuant to this Section 3.5 or if such payment is netted
against amounts payable by the Bank pursuant to Section 4.1.1, any remittances
relating to such chargeback from the Cardholder subsequently collected by the
Bank shall, to the extent not refunded to the Cardholder, be credited by the
Bank to the Company.
Section 4. PAYMENT.
4. 1 PAYMENT BY BANK.
4.1.1. The Bank will pay to the Company, as full
consideration for any Transaction between the Company and any Cardholder using
a Credit Card, as to which the Company has complied with the provisions of
Section 3 above, the amount shown on the records of the Company for each
Transaction, including all applicable shipping, handling and taxes, less a
discount, which discount shall be equal to the discount rate determined in
accordance with Section 4.1.5 (expressed as a fraction) multiplied by the
amount shown on the records of the Company for each Transaction (exclusive of
all applicable shipping, handling and taxes).
5
4.1.2. The Bank will pay such amount by transferring
immediately available funds to an account designated by the Company at any
bank to which the Bank may make electronic fund transfers before the end of
the second Business Day following the receipt by the Bank of the information
required by Section 3.1 or 3.2, such information to be properly formatted and
edited and transferred via a telecommunications connection between the Company
and the Bank pursuant to such computer programs and telecommunications
protocols as the Bank may, in its reasonable discretion, designate from time
to time, subject to reasonable prior notice. The Company will transmit (in the
manner referred to above) to the Bank an audited and balanced file in the
format specified by the Bank containing all such information within two
Business Days after the occurrence of the underlying Transaction; PROVIDED
that if, as a result of technical disruptions, any store locations are not
polled within a normal period after the occurrence of the underlying
Transactions, the Company will transmit such information relating to such
store locations as soon as reasonably practicable after polling is completed.
4.1.3. The Company may not attempt to collect any amount
from any Cardholder with respect to a Transaction which has been paid for by
the Bank under this Section 4.1 and not charged back to the Company pursuant
to Section 3.5.
4.1.4. The Company will, consistent with past practices,
accept payments from Cardholders for amounts due on Credit Cards ("IN-STORE
PAYMENTS"). Any In-Store Payments received by the Company will be held in
trust for the Bank and its assigns and netted against amounts payable by the
Bank pursuant to Section 4.1.1 (PROVIDED that the Company shall not be
required to keep In-Store Payments separate from other payments received by
the Company) and evidence of such payments will be transmitted to the Bank on
a daily basis in accordance with the procedures set forth in Section 4.1.2.
Notwithstanding the foregoing:
(a) if any bankruptcy or other insolvency proceeding has
been commenced against the Company (and so long as the same has not been
dismissed), the Company shall promptly comply with any written instruction (a
"STORE PAYMENT NOTICE") received by the Company from the Bank or any successor
to the Bank as "Servicer" under the Pooling and Servicing Agreement referred
to below (the Bank or any such successor being the "SERVICER") to take either
of the following actions (as specified in such instruction):
(i) cease accepting In-Store Payments and thereafter inform
Cardholders who wish to make In-Store Payments that payment should
instead be sent to Servicer (but only if the Servicer is required by the
6
Pooling and Servicing Agreement to give such notice); or
(ii) (A) deposit an amount equal to all In-Store Payments
received by each retail location operated by the Company, not later than
the Business Day following receipt, into a segregated trust account
(the "STORE ACCOUNT") established by the Company for this purpose and,
pending such deposit, to hold all In-Store Payments in trust for the
Bank and its assigns, (B) use commercially reasonable efforts not to
permit any amounts or items not constituting In-Store Payments to be
deposited in the Store Account and (C) cause all available funds in each
Store Account to be transferred on a daily basis to an account
designated in the Store Payment Notice;
PROVIDED that the Company need not take the actions specified in clause (i) or
clause (ii) if the Company or any of its affiliates provides the Servicer or
the Trustee under (and as defined in) the Pooling and Servicing Agreement with
a letter of credit, surety bond or other similar instrument covering
collection risk with respect to In-Store Payments and all conditions specified
in the Pooling and Servicing Agreement with respect to such letter of credit,
surety bond or other similar instrument are satisfied;
(b) if and to the extent that the Bank so requests in
writing at a time when the Bank is required by the Pooling and Servicing
Agreement to make such request, In-Store Payments shall no longer be netted
against amounts payable by the Bank pursuant to Section 4.1.1, but instead the
Company shall transfer to the Bank by wire transfer of immediately available
funds (or, if the aggregate amount to be transferred pursuant to this clause
(b) and Section 4.2 is less than $10,000, by check), not later than the third
Business Day following receipt of any In-Store Payments, an amount equal to
the sum of such In-Store Payments.
So long as the Company complies with instructions delivered in accordance with
paragraph (a) or (b), any amounts payable by the Bank pursuant to Section
4.1.1 shall be made without deduction for In-Store Payments.
For purposes of the foregoing, the "POOLING AND SERVICING
AGREEMENT" means the Pooling and Servicing Agreement dated as of January 17,
1996 among the Bank and The Bank of New York, as trustee, including each
Supplement thereunder, as the same may be amended, supplemented or otherwise
modified from time to time, except that no amendment, supplement or other
modification to such Agreement that affects the circumstances in which the
Company may be required to take the actions referred to in
7
paragraph (a) or (b) above or in Section 4.2.3 shall be given effect for
purposes of this Agreement unless consented to by the Company.
4.1.5. DISCOUNT RATE. The applicable discount rate referred
to in Section 4.1.1 shall be the then applicable discount rate determined in
accordance with the matrix set forth in Exhibit 4.1.5; PROVIDED that in the
event of a legislated or judicial reduction in the annual percentage rate or
fees that may be charged by the Bank to Cardholders, the Company and the Bank
agree to negotiate in good faith an increase in the discount rate.
4.2. PAYMENT BY COMPANY. If the Bank has paid the Company
for any Transaction and
4.2. 1. If:
(a) the representations and warranties of the Company with
respect to such Transaction, as set forth in Sections 5.1 through 5.3 below,
are not true in all material respects; or
(b) any merchandise which was the subject of such
Transaction is returned to the Company and the Company, pursuant to its
policies concerning returned merchandise, accepts such merchandise for credit;
or
(c) in order to settle a dispute concerning the nature,
quality or quantity of goods purchased from the Company with the Credit Card,
the Company agrees to refund all or part of the purchase price thereof; then
4.2. 2. The Company:
(a) shall pay the Bank an amount equal to the face amount of
such Transaction or portion thereof refunded to the customer, less any
discount actually taken by the Bank when it made payment to the Company in
consideration for such Transaction pursuant to Section 4.1.1;
(b) shall create a written memorandum of such Transaction
setting forth the information required by Section 3 above (a "CREDIT
MEMORANDUM);
(c) shall transmit the information contained in such Credit
Memorandum to the Bank by the method of electronic transmission referred to in
Section 4.1.2 above and
(d) subject to Section 4.2.3, shall permit the payment
required by this Section 4.2 to be netted against amounts payable by the Bank
pursuant to Section 4.1.1. The
8
Company shall retain any such Credit Memorandum in the same manner and for the
same time as the charge slip referred to in Section 3.3 and shall promptly
deliver any such Credit Memorandum to the Bank upon its request. if the
Company pays the Bank any amount for a Transaction pursuant to this Section
4.2 or if such payment is netted against amounts payable by the Bank pursuant
to Section 4.1.1, any remittances relating to such Transaction from the
customer subsequently collected by the Bank shall, to the extent not refunded
to the Cardholder, be credited by the Bank to the Company.
4.2.3. Notwithstanding clause (d) of Section 4.2.2, if and to
the extent that the Bank so requests in writing at a time when the Bank is
required by the Pooling and Servicing Agreement to make such request, amounts
payable by the Company pursuant to Section 4.2 ("ADJUSTMENT PAYMENTS") shall
no longer be netted against amounts payable by the Bank pursuant to Section
4.1.1, but instead the Company shall transfer the amount of each Adjustment
Payment to the Bank by wire transfer of immediately available funds (or, if
the aggregate amount to be transferred pursuant to this Section 4.2 and clause
(b) of Section 4.1.4 is less than $10,000, by check), not later than the
second Business Day following the date on which the events giving risk to such
Adjustment Payment occur (and amounts payable by the Bank pursuant to Section
4.1.1 shall be made without deduction for Adjustment Payments).
4.3. OTHER FEES.
4.3.1. DEFERRED PAYMENT. If any Transaction between the
Company and any Cardholder using a Credit Card is consummated on a deferred
payment basis (for which the period of deferral may not exceed 90 days), then
for each month during the period of deferral, the Company will pay the Bank an
amount equal to the Deferred Payment Rate for such month multiplied by the
average daily balance of purchase price so deferred during such month. For
purposes of this Section 4.3, "DEFERRED PAYMENT RATE" means, for any month,
(i) if the debt of the Bank has an implied investment grade rating at all
times during such month, the average interest rate paid by the Bank to obtain
funds during such month, and (ii) if the debt of the Bank does not have an
implied investment grade rating at all times during such month, the
then-current reference rate or index maintained or provided by a nationally
recognized investment banking firm (which firm shall be reasonably acceptable
to the Company and the Bank) in respect of issuers whose debt has the lowest
investment grade rating.
4.3.2. POSTAL RATE ADJUSTMENT. The Company agrees to
reimburse the Bank for any costs incurred by the
9
Bank as a result of changes in postal rates or rules applicable to mailings to
Cardholders after the date hereof; PROVIDED that the postal costs and postal
discounts applicable to mailings to Cardholders shall be no less favorable
than the postal costs and postal discounts applicable to comparable mailings
to holders of any other credit cards issued by the Bank. The Bank and the
Company agree to use their reasonable efforts to minimize postal costs and
maximize postal discounts.
4.3.3. SPECIAL PROJECTS. With respect to special services
provided by the Bank from time to time with respect to the Business
(including, without limitation, consulting, surveys, gift certificate calls
and fulfillment, rebate fulfillment, telemarketing and special processing or
accounting reports required in connection with promotional activities), the
Company will pay to the Bank amounts to be agreed on a program-by-program
basis. To the extent not otherwise provided for in this Agreement, (i) the
Bank shall not incur expenses required to be paid or reimbursed by the Company
for any project in amounts in excess of $1,000 without having first obtained
prior written or oral authorization from the Company for such expenses; and
(ii) the Bank shall not incur expenses required to be paid or reimbursed by
the Company for any project in amounts in excess of $50,000 without having
first obtained prior written authorization from the Company for such expenses;
PROVIDED that, in the event any terms of any such written authorization are in
conflict with the terms of this Agreement, the terms of this Agreement shall
be controlling.
4.3.4. PAYMENTS. All amounts payable by the Company under
this Section 4.3 shall be paid by ire transfer of immediately available funds
within 30 days after receipt of an invoice for such amounts.
4.4. SETOFFS. The Bank may at any time, in addition to all
other rights and remedies available to it, setoff against any amount owing to
the Company by the Bank under this Agreement, any amounts owing by the Company
to the Bank under this Agreement.
4.5. INVOICE. The amount of any invoice prepared and
delivered by the Bank under this Agreement shall be deemed to be correct,
accurate and binding upon the Company if the Company makes no objection within
30 days after the date of such invoice; PROVIDED that the making of any
objection shall not relieve the Company of its obligation to make full payment
of the amount set forth on the related invoice when such amount is otherwise
payable pursuant to this Section 4, it being understood that the Company does
not waive its rights thereby and may, subject to Section
10
10.4, assert a claim with respect to such invoice in an appropriate proceeding.
Section 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Bank that:
5.1. VALID TRANSACTIONS. Each Transaction will be completed
in compliance with the provisions of Section 3 and will create a valid,
binding and legally enforceable obligation of the Cardholder whose name is
shown on the Credit Card to pay to the Company the amount shown on the charge
slip, which obligation to the Company will be discharged in full by the
payment made to the Company by the Bank in respect of such Transaction under
Section 4.1 above.
5.2. ACCURATE INFORMATION. Each charge slip will accurately
reflect the Transaction described therein. Each charge slip and Credit
Memorandum and any charge slip or Credit Memorandum information transmitted to
the Bank by the Company will be complete and accurate and in a form deemed
necessary by the Bank to allow Cardholder billing in accordance with
applicable law. The Company will accurately report all returns and other
credits to the Bank within the time period specified in Section 4.
5.3. NO LIENS. No amount due to the Company with respect to
any Transaction will be subject to any lien or encumbrance in favor of any
third party or to any offset, counterclaim or defense of any Person other than
the Bank or its Affiliates.
5.4. MARK. The use of the mark by the Bank under this
Agreement does not infringe the rights of any other Person.
Section 6. REPRESENTATIONS AND WARRANTIES OF THE BANK. The
Bank hereby represents and warrants to the Company that:
6.1. COMPLIANCE WITH LAWS. Each Credit Card and the related
credit card agreement, all monthly billing statements and any collection
efforts of the Bank conform and will conform in all material respects with all
federal or state laws or regulations applicable to the extension of credit to
or the collection of amounts from consumers including, without limitation, the
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit
Reporting Act and federal and state bankruptcy and debtor relief laws
("CONSUMER LAWS").
6.2 NON-CONTRAVENTION. The performance by the Bank of its
obligations under this Agreement will not
11
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, any agreement or instrument to which the Bank is
party or by which the Bank is bound, nor will such performance result in any
violation of the provisions of the articles of association or the by-laws of
the Bank or any applicable law or statute or any order, rule or regulation of
any court or governmental agency or body having jurisdiction over the Bank.
Section 7. COVENANTS OF THE COMPANY. The Company hereby
covenants and agrees with the Bank as follows:
7.1. CREDIT CARD NOTICES AND COMMUNICATIONS. The Company
will, consistent with past practices, accept and turn over to the Bank
promptly upon receipt thereof by the Company (i) subject to Section 4.1.4, any
payments made by any Cardholder with respect to any Transaction or any Credit
Card and (ii) any notices or other communications received by the Company with
respect to any Credit Card including, without limitation, customer changes of
address and other information on approved forms.
7.2. COMPLIANCE WITH APPLICABLE LAW. The Company will, at
all times, comply in all material respects with all Consumer Laws.
7.3. RULES. The Company shall comply with such written rules
and operating instructions relating to the use of the Credit Cards, the
distribution of applications, Credit Card security, authorization procedures,
"downtime" procedures and other matters related to this Agreement as the Bank
may, from time to time, promulgate with prior notice to the Company; PROVIDED
that such rules and operating instructions shall be consistent with past
practices, with such changes as shall be approved by the Company in its
reasonable discretion.
7.4. CARDHOLDER INQUIRIES AND COMPLAINTS. If a Cardholder
makes an inquiry or complaint to the Company about the nature, quality or
quantity of goods purchased from the Company with a Credit Card, or a
Cardholder has made an inquiry or complaint to the Bank concerning the nature,
quality or quantity of goods purchased from the Company with a Credit Card,
the Company shall deal directly with the Cardholder to resolve any such
complaint or inquiry. The Company shall answer all inquiries from the Bank
about complaints made to the Bank by Cardholders within 10 days after the
Company receives an inquiry from the Bank.
7.5. EQUIPMENT. The company shall obtain and maintain at its
own expense such point of sale and authorization terminals, credit card
imprinters and other
12
items of equipment as are necessary for it to receive authorizations, transmit
charge slip and Credit Memorandum information, process credit applications and
perform its obligations under this Agreement. Such point of sale and
authorization terminals shall be capable of communicating with the computer
equipment maintained by the Bank according to such computer programs and
telecommunications protocols as may be specified by the Bank in its reasonable
discretion from time to time subject to reasonable prior notice of any change
in such equipment or protocols.
7.6. EXCLUSIVITY. The Company may not accept or promote any
credit card as payment for its goods or services unless such credit card is a
Credit Card, a proprietary credit card of another division of the Company or
any Affiliate of the Company (whether or not issued by the Bank) or a credit
card issued by a bank or other Person engaged in the business of issuing
credit cards to Persons for the purpose of making payments to third parties
generally under such names as Master Card, Visa, Discover, American Express or
Optima. The Company may not issue its own credit cards or enter into an
agreement with any third party under which credit cards bearing the Mark are
issued; PROVIDED that after the second anniversary of the date hereof, the
Company shall be entitled to negotiate with any third party with respect to
the issuance of co-branded or affinity bank credit cards bearing the Mark and
to accept any Bona Fide offer by such third party if, at least 30 days prior
to accepting such Bona Fide Offer, the Company provides the Bank with an
opportunity to submit a competing offer with respect to the issuance of
co-branded or affinity bank credit cards bearing the Mark, which competing
offer, if it has terms at least as favorable to the Company as such Bona Fide
Offer, shall be accepted by the Company in lieu of such Bona Fide Offer. For
purposes of this Section 7.6, "BONA FIDE OFFER" means an offer to the Company
with respect to a program of at least two years, duration for the issuance of
co-branded or affinity bank credit cards that is, in the Company's reasonable
judgment, generally competitive in light of marketplace conditions existing at
the time (such marketplace conditions to include, without limitation, other
offers with respect to co-branded or affinity bank credit cards being made to
the Company, its Affiliates and other retail or catalogue merchants).
7.7. OBSOLETE MATERIALS. The Company shall reimburse the
Bank for the cost of replacing reasonable amounts of obsolete forms and other
materials if such replacement is requested by the Company due to changes in
the Mark or in the logo, colors or styles used to identify or promote the
Business.
13
Section 8. COVENANTS OF THE BANK. The Bank hereby covenants
and agrees with the Company as follows:
8.1. COMPLIANCE WITH APPLICABLE LAW. The Bank will, in
issuing, billing, administering, and collecting with respect to the Credit
Cards and at all other times, comply in all material respects with all
Consumer Laws.
8.2. COLLECTION. The Bank will use efforts to collect from
each Cardholder the purchase price and additional taxes and other charges of
Transactions consistent with past practices and with its efforts to collect
accounts receivable under other credit cards issued by it; PROVIDED that the
Bank will initiate collection of any account receivable under a Credit Card at
or before the time such account receivable is 60 days past due. The Bank will,
consistent with past practices, determine the use and timing of dunning
letters, statement messages and collection agents and will manage all
written-off accounts (including, without limitation, the management of outside
collection agencies). The Bank may implement reasonable variances from past
collection practices after prior notice to and consultation with the Company.
8.3. PERFORMANCE STANDARDS. In performing its obligations
under this Agreement, subject to Section 12.11, the Bank shall comply with the
performance standards set forth in Exhibit 8.3, as such performance standards
may be modified from time to time at the reasonable request of the Bank or the
Company. Within 10 days after the end of each fiscal month, the Bank will
deliver to the Company a compliance certificate of the chief executive officer
or chief financial officer of the Bank setting forth in reasonable detail data
demonstrating compliance during such calendar month with such performance
standards. Enhancements to, and modifications or upgrades of, the computer
processing, payment, billing and information services provided by the Bank
will be made from time to time at the reasonable request of the Company. Any
such enhancements, modifications or upgrades shall, to the extent requested by
the Company, be made on terms to be agreed upon.
8.4. FORCE MAJEURE EVENT. After the occurrence of a Force
Majeure Event (as defined in Section 12.11) which disrupts the availability of
the services provided hereunder, the Bank may elect to reestablish the
availability of such services. If any such Force Majeure Event comparably
disrupts the performance of services similar to the services provided
hereunder with respect to one or more other credit cards issued by the Bank,
then the Bank shall reestablish the availability of such services to the same
extent and within the same timetable under
14
comparable circumstances as the comparable services are reestablished with
respect to such other credit cards. The Bank shall promptly notify the Company
of any Force Majeure Event and shall inform the Company whether it will
reestablish services and the timetable therefor. If the Bank chooses not to
reestablish or take measures to reestablish such services within a reasonable
period of time as would be indicated by sound business practice, the Company
shall be free to obtain such services from any supplier thereof.
Section 9. PROPERTY RIGHTS.
9.1. RIGHTS OF THE COMPANY. The Company is the owner of the
names and addresses of customers of the Business; PROVIDED that (i) as set
forth in Section 9.2, the Bank is also the owner of such information with
respect to customers of the Business who are also Cardholders and (ii) The
Limited, Inc. ("THE LIMITED") is also the owner of such information with
respect to customers of the Business until the second anniversary of the date,
if any, on which the Company ceases to be an Affiliate of The Limited.
9.2. RIGHTS OF BANK. Except as set forth in Section 9.1, the
Bank is the owner of all information relating to the Cardholders (including
names and addresses) and the Credit Cards, the copyright to all written
material contained in any credit card agreements, applications, billing
statements and other forms used by the Bank in the administration of its
agreements with the Cardholders, all credit scoring systems and all policies
of credit insurance issued to the Bank with respect to any Cardholder;
PROVIDED that the Bank shall not be entitled to sell, rent or otherwise
disclose any information relating to the Cardholders to any third party other
than (i) Affiliates of the Company, (ii) Persons who, in the sole judgment of
The Limited, do not compete, directly or indirectly, with any retail or
catalogue business conducted by The Limited or any of its Affiliates and (iii)
in the case of disclosure, credit agencies. Subject to Section 9.3, the
Company will not have any rights in any information or property of the Bank;
PROVIDED that the Bank will provide the Company with such information the Bank
owns with respect to Cardholders as the Company may reasonably request in
order to develop potential marketing or credit strategies.
9.3. DATABASE. (a) It is the intention of the parties that
the Bank will manage, maintain and develop an information marketing database
(the "DATABASE") at its own expense, subject to a mutually satisfactory
agreement with the Company pursuant to which (i) the Company will agree to
utilize the Database, (ii) the Database will be accessible from the Company's
offices and (iii) the Bank will provide
15
the Company with information maintained as part of the Database on terms that
are no less favorable than those offered by the Bank to any other recipient of
comparable information.
(b) Notwithstanding the foregoing, the Bank will, from time
to time at the request of the Company, and without charge, promptly provide
the Company with a list of the names and addresses of all Cardholders, all
holders of other proprietary credit cards of the Company or any Affiliate of
the Company (if issued by the Bank) and all other customers of the Business,
any other business of the Company and the business of any other Affiliate of
the Company. The Company shall reimburse the Bank for its costs of producing
and shipping such list in the format required by the Company within 30 days
after receipt of a request for such reimbursement from the Bank.
(c) Subject to Section 9.2, the Bank may make the Database
available, and provide information marketing services to, third parties on
terms reasonably determined by the Bank; PROVIDED that (i) the allocation
among the Bank, the Company and The Limited of fees charged by the Bank to
such third parties shall be agreed on a program-by-program basis or, in the
case of programs existing on the date hereof, continued consistent with past
practices and (ii) the Bank may not make the Database available, or provide
information marketing services to, any Person who, in the sole judgment of The
Limited, competes, directly or indirectly, with any retail or catalogue
business conducted by The Limited or any of its Affiliates.
9.4. ENVELOPE STUFFING.
9.4.1. Subject to the right of the Bank to include in
mailings to Cardholders periodic billing statements and any legal notices
which the Bank believes are necessary or appropriate to send to Cardholders,
the Company shall have the right to have materials advertising its products
and services included in the envelopes containing the periodic statements.
Such materials shall advertise only products and services related to the
Business, shall (unless the Company provides the Bank with notice as provided
below) be limited to seven panels per envelope and shall conform to size
requirements established from time to time by the Bank with reasonable prior
notice of any changes. The Company shall use reasonable efforts (i) to notify
the Bank at least 15 days before the proposed date of any such inclusion and
shall provide the Bank with a draft copy of any such advertising material at
the time it notifies the Bank of such mailing and (ii) to provide the Bank
with a seasonal marketing plan at least 30 days before the beginning date of
each Season. The Company shall
16
provide the Bank with the materials to be included in the mailing not less
than two Business Days prior to the initial insertion date. If the Company
does not notify the Bank of any such inclusion at least seven days before the
proposed date of such inclusion or if the material included does not take up
the available space, the Bank may utilize the space remaining inside the
envelopes for its own purposes; PROVIDED that (i) unless the Company provides
the Bank with notice at least 45 days before the proposed inclusion date of
the Company's intent to utilize more than seven panels per envelope, the Bank
shall be entitled to utilize at least three panels (or two panels and one
"bangtail" remittance envelope) per envelope for its own purposes and (ii) all
materials included by the Bank shall be subject to the approval of the
Company, which approval shall not be unreasonably withheld.
9.4.2. The Bank shall have the exclusive right to include in
any mailing to Cardholders materials advertising products and services not
related to the Business and the allocation between the Bank and the Company of
the revenues generated thereby shall be agreed on a program-by-program basis
or, in the case of programs existing on the date hereof, continued consistent
with past practices; PROVIDED that such products and services and the related
advertising materials shall be subject to the approval of the Company, which
approval shall not be unreasonably withheld or delayed (it being understood
that the Company may withhold such approval if it determines in its sole
discretion that the advertising of such products or services is inconsistent
with the image of the Business).
9.4.3. Notwithstanding the foregoing, (i) the Bank shall
have the right to use its own "bangtail" remittance envelopes to promote
credit life insurance to existing Cardholders no more than four times per year
or two times per Season and (ii) all materials used, or sent to Cardholders,
by the Bank under existing programs of the Bank (including, but not limited
to, credit life insurance) shall not be subject to the approval of the Company.
9.4.4. The Bank shall provide timely specifications
(including size and weight requirements) for all statement inserts, credit
card carriers and "bangtail" remittance envelopes.
Section 10. INDEMNIFICATION; CLAIMS AND ACTIONS.
10.1. INDEMNIFICATION BY THE COMPANY. The Company hereby
indemnities the Bank, its Affiliates and the directors, officers, employees
and agents of the Bank or any Affiliate of the Bank (each, a "RELATED PARTY")
against, and agrees to hold them harmless from, any and all losses,
17
claims, damages and liabilities (including, without limitation, the legal fees
and other expenses reasonably incurred in connection with any suit, action or
proceeding or any claim asserted) ("DAMAGES") incurred or suffered by any of
them arising out of or in any way related to any misrepresentation, breach of
any warranty or nonperformance of any covenant made by the Company under this
Agreement or relating to any personal or bodily injury or property damage
alleged to be caused by the sale of goods or rendering of services by the
Company.
10.2. INDEMNIFICATION BY THE BANK. The Bank hereby
indemnifies the Company and its Related Parties against, and agrees to hold
them harmless from, any and all Damages incurred or suffered by any of them
arising out of or in any way related to any misrepresentation, breach of any
warranty, or nonperformance of any covenant made by the Bank under this
Agreement.
10.3. THIRD PARTY CLAIMS/
10.3.1. The Bank shall not be liable to the Company for or
in connection with any claim made against the Company by any other Person
relating in any manner to this Agreement or to any services or any other
transactions contemplated hereby (other than (i) claims based upon the Bank's
failure to perform its obligations under this Agreement, its or any of its
Related Parties' negligence or willful misconduct or its failure to comply
with any law or regulation (including, without limitation, any Consumer Law),
(ii) claims by employees or subcontractors of the Bank arising from the
performance of services under this Agreement (other than claims based upon the
Company's or any if its Related Parties' negligence or willful misconduct),
(iii) claims relating to acts or omissions of the Bank and its agents in
connection with the collection of amounts owing from Cardholders and (iv)
claims relating to the submission by the Bank or its agents of data concerning
Cardholders to credit agencies), even if the Bank has been advised of the
possibility of such claims.
10.3.2. The Company shall not be liable to the Bank for or
in connection with any claim made against the Bank by any other Person
relating in any manner to this Agreement or to any services or other
transactions contemplated hereby (other than (i) claims based upon the
Company's failure to perform its obligations under this Agreement, its or any
of its Related Parties' negligence or willful misconduct or its failure to
comply with any law or regulation (including, without limitation, any Consumer
Law), (ii) claims by employees or subcontractors of the Company arising from
this Agreement and (iii) claims
18
relating to goods purchased from the Company), even if the Company has been
advised of the possibility of such claims.
10.4. DISPUTE RESOLUTION AND ACTIONS. The Bank and the
Company shall use their reasonable best efforts to resolve informally any
claim of either party under this Agreement. No action at law or in equity may
be instituted by any party with respect to any such claim unless such party
has satisfied its obligation under the first sentence of this Section 10.4.
10.5. LIMITATION AN ACTIONS. No action against either party,
regardless of form, arising out of or incidental to the matters contemplated
by this Agreement, may be brought by the other party more than one year after
the event giving rise to such cause of action occurred and is known or upon
the exercise of reasonable diligence should have been known to the injured
party.
10.6. REIMBURSEMENT FOR LOSSES. If, as a result of any claim
made by the Bank against any third party (including, but not limited to, an
insurer), the Bank actually receives from such third party cash proceeds (or
non-cash proceeds, whether in the form of goods or services) which represent,
in whole or in part, compensation for or reimbursement of losses or costs
actually incurred by the Company, then the Bank will hold that portion of such
proceeds fairly allocable to the Company (taking into consideration all losses
or costs actually incurred by all parties for whose benefit such payments have
been received) in trust on behalf of the Company and will promptly pay over to
the Company such allocable amount of any such cash proceeds (or, as to
non-cash proceeds, the allocable portion or, at the discretion of the Bank,
the cash equivalent thereof).
10.7. SURVIVAL. The provisions of this Section 10 shall
survive the termination of this Agreement.
Section 11. TERMINATION.
11.1 TERM. This Agreement shall remain in effect until the
tenth anniversary of the date hereof, shall be automatically extended until
the twelfth anniversary of the date hereof if the Company does not give at
least 12 months' prior written notice of its objection to such extension and
shall be further automatically extended in successive two-year increments if
the Bank or the Company does not give at least 12 months' prior written notice
of its objection to such extension, unless earlier terminated (a) by the Bank
or the Company in the event of a material breach by the other party of any of
such other party's obligations under this Agreement if any such breach remains
uncured 30 days after
19
written notice thereof to such party, (b) automatically in the event that the
Bank or the Company commences a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its
debts under any bankruptcy, insolvency or other similar law now or hereinafter
in effect, seeks the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of its assets,
consents to any such relief or to the appointment of or taking possession by
any such official in an involuntary case or other proceeding commenced against
it, makes a general assignment for the benefit of creditors, or fails
generally to pay its debts as they become due, or (c) by the Company upon not
less than 60 days' prior written notice to the Bank at any time after the
sixth anniversary of the date hereof if, based on the application of the
attached matrix, the applicable discount rate exceeds the highest discount
rate in such matrix and the costs to the Company under this Agreement are
substantially higher than the costs that would be incurred by the Company for
comparable credit card services over the remaining term of this Agreement from
an independent third party financial institution; PROVIDED that the Company
shall not be entitled to terminate this Agreement pursuant to clause (c)
unless the Company provides the Bank with a written description of the
material terms on which such third party financial institution proposes to
provide such services and is entitled to submit a counter-proposal within 30
days of receipt of such description. If the Bank submits a counter-proposal
with terms substantially similar to those set forth in such third party's
proposal or agrees to maintain the discount rate at the highest discount rate
in the attached matrix, this Agreement shall remain in full force and effect,
modified as may be necessary to reflect the terms included in the Bank's
counter-proposal. Subject to Section 11.2, the termination of this Agreement
shall not affect the obligations of the Cardholders to the Bank, the
obligation of the Company and the Bank to make the payments required under
Section 4 with respect to Transactions that occurred before the date of
termination, the rights of the Bank under Sections 4.4, 7.4 and 9.1 and the
rights of the Company under Section 9.1. Sections 10, 11 and 12 of this
Agreement shall survive any such termination.
11.2. EFFECT OF TERMINATION. Upon termination of this
Agreement, the Company will have the option to purchase the then-outstanding
Credit Card account balances not previously written-off by the Bank (subject
to the terms of any securitization of such account balances) at the face
amount thereof, without recourse to the Bank, and will be provided with all
related account information and other account data; PROVIDED that the Company
will be required to purchase such then-outstanding Credit Card account
balances on such terms if the Company objects to any automatic
20
extension of this Agreement pursuant to Section 11.1. All payments by the
Company pursuant to this Section 11.2 shall be made not later than one
Business Day after termination of this Agreement by wire transfer of
immediately available funds to an account notified by the Bank to the Company
not less than two Business Days prior to the payment date. Upon any
termination of this Agreement, (i) the Company (at its sole expense) shall
notify all Cardholders that the Bank is no longer the processor of their
Credit Card accounts and (ii) the Company and the Bank shall cooperate in
facilitating the transition to a new processor.
11.3. EXTENSION. Any services which the parties hereto
mutually agree to be rendered after the termination of this Agreement shall be
rendered pursuant to all of the terms and provisions of this Agreement.
Section 12. MISCELLANEOUS.
12.1. NOTICES. All notices, requests and other
communications to any party hereunder shall be in writing (including telecopy
or similar writing) and shall be given, if to the Company, to:
The Limited Stores, Inc.
Three Limited Parkway
Columbus, Ohio 43230
Attn: General Counsel
Telecopy: 614-479-7188
with a copy to:
The Limited, Inc.
Three Limited Parkway
Columbus, Ohio 43230
Attn: General Counsel
Telecopy: 614-479-7188
and a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attn: Dennis S. Hersch
Telecopy: 212-450-4800
and if to the Bank, to:
World Financial Network National Bank
4590 East Broad Street
Columbus, Ohio 43213
Attn: Daniel T. Groomes
Telecopy: 614-755-3418
21
or to such other address or telecopy number and with such other copies, as
such party may hereafter specify for the purpose by notice to the other
parties. Each such notice, request or other communication shall be effective
(i) if given by telecopy, when such telecopy is transmitted to the telecopy
number specified in this Section and evidence of receipt is received or (ii)
if given by any other means, upon delivery or refusal of delivery at the
address specified in this Section 12.1.
12.2. AMENDMENTS; NO WAIVERS.
12.2.1. Any provision of this Agreement may be amended only
if such amendment is in writing and signed by all parties thereto.
12.2.2. No failure or delay by any party in exercising any
right, power or privilege under this Agreement shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
12.3. EXPENSES. All costs and expenses incurred in
connection with the this Agreement or the transactions contemplated hereby
shall be paid by the party incurring such cost or expense.
12.4. SUCCESSORS AND ASSIGNS. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns; PROVIDED that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other party. Notwithstanding the
foregoing, (i) the Bank may from time to time assign any or all of its rights
and obligations hereunder to any Affiliate of the Bank, provided that any such
assignee of the Bank's obligations hereunder shall have the capability to
perform such obligations without impairing the quality of the services
provided to the Company, (ii) the Company shall assign or otherwise transfer
all of its rights and obligations under this Agreement (A) to the purchaser of
all or substantially all of the assets of the Business or (B) to any
corporation which is a successor (whether by merger, consolidation or
otherwise) to the Company or any successor (whether by merger, consolidation
or otherwise) thereto, in each case subject to the execution by such assignee
or transferee of an agreement to be bound by the provisions of this Agreement
and (iii) the Bank may from time to time sell accounts receivable for
securitization, retaining its processing and servicing
22
obligations with respect thereto (it being understood that (A) the purchaser
of such accounts receivable shall have no recourse against the Company for any
reason whatsoever and (B) the Bank hereby indemnities the Company and its
Related Parties against, and agrees to hold them harmless from, any and all
Damages incurred or suffered by any of them in connection with any claims made
by such purchaser).
12.5. GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the law of the State of New York (without
regard to the choice of law provisions thereof).
12.6. COUNTERPARTS; EFFECTIVENESS. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto or
thereto shall have received a counterpart hereof signed by the other parties
hereto.
12.7. ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement among the parties with respect to the subject matter hereof
and supersedes all prior agreements, understandings and negotiations, both
written and oral, between the parties with respect to such subject matter. No
representation, inducement, promise, understanding, condition or warranty not
set forth herein has been made or relied upon by any party hereto. Neither
this Agreement nor any provision thereof is intended to confer upon any Person
other than the parties any rights or remedies hereunder.
12.8. JURISDICTION. Any suit, action or proceeding seeking
to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated thereby may
be brought against any of the parties in the United States District Court for
the Southern District of New York or any state court sitting in the City of
New York, Borough of Manhattan, and each of the parties hereby consents to the
exclusive jurisdiction of such court (and of the appropriate appellate courts)
in any such suit, action or proceeding and waives any objection to venue laid
therein. Process in any such suit, action or proceeding may be served on any
party anywhere in the world, whether within or without the State of New York.
Without limiting the foregoing, the parties agree that service of process upon
such party at the address referred to in Section 12.1, together with written
notice of such service to such party, shall be deemed effective service of
process upon such party.
23
12.9. CAPTIONS. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
12.10. DEFINED TERMS. The following terms, as used herein,
shall have the following meanings:
12.10.1. "AFFILIATE" means, with respect to any Person, any
Person directly or indirectly controlling, controlled by, or under common
control with such other Person. For purposes of this definition, "CONTROL"
when used with respect to any Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise, and the terms
"CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing.
12.10.2. "BUSINESS DAY" means a day other than a Saturday,
Sunday or other day on which commercial banks in New York, New York or
Columbus, Ohio are authorized or required by law to close.
12.10.3. "PERSON" means an individual, a corporation., a
partnership, an association, a trust or other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof.
12.10.4. "SEASON" means (i) the period from the first day of
the fiscal month of February to the last day of the fiscal month of July and
(ii) the period from the first day of the fiscal month of August to the last
day of the fiscal month of January.
12.11. FORCE MAJEURE. Notwithstanding the provisions of
Section 8.3, neither the Bank nor its affiliates shall be liable in any manner
to the Company for any failure to perform their obligations under this
Agreement resulting in any manner from delay, failure in performance, loss or
damage due to fire, strike, embargo, explosion, power blackout, earthquake,
flood, war, the elements, labor disputes, civil or military authority, acts of
God, public enemy, inability to secure fuel, acts or omissions of carriers or
other causes beyond their reasonable control, whether or not similar to any of
the foregoing (a "FORCE MAJEURE EVENT").
24
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their duly authorized officers effective on the day and year
first above written.
WORLD FINANCIAL NETWORK
NATIONAL BANK
By: /s/ Timothy B. Lyons
------------------------------------
Name: Timothy B. Lyons
Title:
THE LIMITED STORES, INC.
By: /s/ Timothy B. Lyons
------------------------------------
Name: Timothy B. Lyons
Title:
AMERICAN RECEIVABLE FACTORING, INC.
By: /s/ Timothy B. Lyons
------------------------------------
Name: Timothy B. Lyons
Title:
25
AMENDMENT TO CREDIT CARD PROCESSING AGREEMENT
This Amendment is entered into as of October 5, 2000, and amends that certain
Credit Card Processing Agreement between World Financial Network National
Bank, ("Bank ") and The Limited Stores, Inc. and American Receivable
Factoring, Inc. (hereinafter referred to collectively as 'Company"), dated
January 31, 1996.
WHEREAS, Bank and Company entered into that certain Credit
Card Processing Agreement dated January, 31, 1996, (the "Agreement"); and,
WHEREAS, Bank and Company now desire to amend the Agreement
as set forth herein;
NOW, THEREFORE, Bank and Company hereby agree as follows:
1. Sections 9.3 (a) and 9.3(c) are hereby deleted in their entirety.
2. The Effective Date of this Amendment shall be June 1, 2000.
3. As hereby amended and supplemented, the Agreement shall remain in full
force and effect,
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment the date set forth above.
WORLD FINANCIAL NETWORK NATIONAL BANK
(Retail Factoring, Inc.)
By: /s/ Daniel T. Groomes
----------------------------------
Daniel T. Groomes, President
THE LIMITED STORES, INC. American Receivable Factoring, Inc.
By: /s/ Illegible By: /s/ Timothy B. Lyons
----------------------------------- -----------------------------------
Title: VP-CRM Title: VP
Limited Inc.
Exhibit 10.7
CREDIT CARD PROCESSING AGREEMENT
This Credit Card Processing Agreement is made as of this 31st day of
January, 1996 between WORLD FINANCIAL NETWORK NATIONAL BANK, a national banking
association (the "BANK"), and Structure, Inc., a Delaware corporation (the
"CORPORATION"), and Mountain Factoring, Inc., a Nevada corporation ("FACTORING")
(the Corporation and Factoring being collectively referred to herein as the
"COMPANY").
WHEREAS the Company and the Bank believe that it is desirable and in their
respective best interests for the Bank to continue, in a manner generally
consistent with past practices, to issue credit cards bearing the trade names,
trademarks, logos and service marks used in the Company's Structure retail or
catalogue business (the "BUSINESS") which will allow the customers of the
Company to purchase goods from the Company using funds advanced by the Bank; and
WHEREAS in order to implement such arrangements, the parties hereto desire
to enter into this Agreement;
NOW, THEREFORE, the parties hereby agree as follows:
Section 1. TRADEMARKS. The Company hereby authorizes the Bank to use the
trademark "Structure" on credit cards owned or issued by the Bank, monthly
billing statements, collection correspondence, credit card agreements, credit
applications, customer service correspondence and in such other written and oral
communications with cardholders as are necessary or convenient in connection
with this Agreement, in each case consistent with past practices. The
"Structure" trademark is referred to herein as the "MARK". The Company shall
have the right to approve in its sole discretion the "art" (including colors and
font styles) for all proposed uses of the Mark by the Bank. The Bank shall not
use the Mark for any purpose other than as set forth in the first sentence of
this Section 1.
Section 2. CREDIT CARD SYSTEM.
2.1. NEW CREDIT CARDS.
2.1.1. ISSUANCE OF CREDIT CARDS. To the extent requested by the Company,
the bank will issue credit cards bearing the Mark ("CREDIT CARDS") to customers
of the Business who apply for such Credit Cards and related extensions of
credit. Such customers (i) must qualify for
the extension of credit under credit standards related to new account
approvals, credit limits and authorization management ("CREDIT STANDARDS")
which will be determined by the Bank from time to time and (ii) must accept
the Bank's standard form of credit card agreement containing the terms and
conditions governing extensions of credit to Persons who hold Credit Cards
and their authorized users (attached hereto as Exhibit 2.1.1(a)).
Notwithstanding the foregoing, (i) the Credit Standards established by the
Bank from time to time in connection with the issuance of Credit Cards for
use in connection with the Business shall be consistent with past practices
(as described in Exhibit 2.1.1(b)), with such changes as shall be (A)
approved by the Company in its reasonable discretion or (B) determined by the
Bank in good faith to be necessary from the standpoint of safe and sound
banking practices and (ii) the Bank may make any change in the terms of its
agreement with any person who holds a Credit Card (including repayment terms,
fees and finance charge rates) after prior notice to and consultation with
the Company. The Bank hereby confirms its understanding that the Company
intends to offer and promote credit as outlined in Section 2.2. The Bank
will bear the costs of the issuance of Credit Cards under this Section 2.1.
2.1.2. CREDIT MAXIMIZATION. The Company will be entitled to use credit
related promotional strategies consistent with past practices. The Bank will
work in good faith with the Company to develop business strategies with respect
to the issuance of Credit Cards intended to maximize the potential of the
Business and, in that regard, will consider in good faith proposals involving
variances from the Bank's general Credit Standards or changes in the terms of
the Bank's agreement with any person who holds a Credit Card; PROVIDED that
subject to compliance with the provisions of Section 2.1.1, Credit Standards and
the terms of such agreement shall in all circumstances be determined by the
Bank. The terms of any program involving variances from the Bank's general
Credit Standards or changes in the terms of the Bank's agreement with any person
who holds a Credit Card, including (without limitation) fees or other charges to
be paid by either party, shall be agreed on a program-by-program basis.
2.2. PROMOTION. The Company will use its reasonable efforts to promote
the use of Credit Cards in the Business and to acquire new Cardholders (as
defined below), for the Bank through the use of, for example, "instant credit,"
"quick credit," pre-approved solicitations, applications and promotional
material displayed in stores and inserted in catalogues and special offers to
Cardholders, in each case consistent with past practices. The costs incurred by
the Company and the Bank (including, among other things, the cost of printing
application forms,
2
promotional material, pre-approved solicitations and instant and quick credit
contracts and the cost of special offers) will be borne by the Company and
the Bank on terms to be negotiated from time to time in a manner consistent
with past practices. The Bank shall have two Business Days to review for
legal compliance all credit application forms and marketing materials
(including, without limitation, those referred to above) prior to their being
printed.
Section 3. ACCEPTANCE OF CREDIT CARDS. The Company will permit Persons
who hold Credit Cards (subject to the restrictions of this Agreement) or other
credit cards owned by the Bank that the Bank has designated and their authorized
users ("CARDHOLDERS") to purchase goods sold by the Business without any such
payment by use of a Credit Card, subject to the following conditions:
3.1. CHARGE SLIP (CREDIT CARD PRESENTED). If the customer presents a
Credit Card at the time of sale, the Company will maintain a record of the sale
in a form acceptable to the Bank which reflects the following:
3.1.1. A brief identification of the property or service purchased (the
"TRANSACTION");
3.1.2. The date of the Transaction;
3.1.3. The dollar amount of the purchase price of the merchandise or
service which was the subject of the Transaction, including applicable shipping,
handling and taxes;
3.1.4. An imprint or electronic capture of the Credit Card account
number or, in the event of equipment malfunction, a written notation of such
account number; and
3.1.5. The Cardholder's signature.
3.2. CHARGE SLIP (CREDIT CARD NOT PRESENTED). The Bank acknowledges and
agrees that a Cardholder need not present a Credit Card at the time of sale and
that, subject to Section 3.5, the Company may accept charges to a Credit Card
verbally from the customer or via a written order form from the customer. If
the customer does not present a Credit Card at the time of sale, the Company
will maintain a record of the sale in a form acceptable to the Bank which
reflects, in lieu of the information set forth in Section 3.1.1 through 3.1.5,
the following:
3.2.1. A brief identification of the Transaction;
3.2.2. The date of the Transaction;
3
3.2.3. The dollar amount of the purchase price of the merchandise or
service which was the subject of the Transaction, including applicable shipping,
handling and taxes;
3.2.4. A written notation of the Credit Card account number, which shall
have been obtained from the customer and recorded in the Company's customer
file;
3.2.5. The customer's name and address and, except in the case of
catalogue purchases, personal identification type and number; and
3.2.6. If applicable, the name and address to where the merchandise
which was the subject of the Transaction was shipped and the date and method of
shipment.
3.3. RETENTION OF CHARGE SLIP. The Company will retain a legible copy of
each charge slip for six months following the date of the Transaction and will
provide such copy to the Bank within 30 days of the Bank's request therefor;
PROVIDED that the Bank will request delivery of such information only in the
case of a bona fide dispute (the existence of such dispute to be determined by
the Bank in its reasonable discretion) relating to the underlying Transaction,
upon the inquiry of the applicable Cardholder or as requested by auditors of the
Bank in connection with their audit of the Bank's financial statements or by any
governmental authority.
3.4. AUTHORIZATION. The Transaction is authorized by the Bank in
accordance with the floor limits and other procedures in effect at the time or
such authorization is dispensed with under rules established by the Bank from
time to time in accordance with Section 8.3 to deal with situations in which
authorization is not available because of disruption of the Bank's computer
system or other causes provided for in such rules, consistent with past
practice.
3.5. CHARGEBACKS. The Company agrees to accept as a chargeback any charge
on a Credit Card where:
3.5.1. The Cardholder disputes the charge and the Company fails to
provide a legible copy of the charge slip within 30 days of the Bank's request
therefor in accordance with Section 3.3;
3.5.2. The Company failed to obtain authorization from the Bank in
accordance with Section 3.4;
3.5.3. The Company failed to complete the charge slip in accordance with
Section 3.1 or 3.2, as applicable;
4
3.5.4. A Company employee fraudulently misused the Credit Card or
account number;
3.5.5. A dispute arises from the Cardholder being charged or credited
more than once for the same sale, payment or return;
3.5.6. A dispute with the Cardholder arises from a voided Transaction or
an invalid Credit Card account number;
3.5.7. A dispute with the Cardholder arises from an improperly opened
Credit Card account, or the account is otherwise uncollectible, where a Company
employee failed to comply with new account procedures in effect at the time the
account was opened;
3.5.8. The Bank, consistent with past practices, gives the Cardholder
credit for (or accepts as payment) a non-expired discount coupon or gift
certificate in respect of a prior purchase; or
3.5.9. A dispute arises from the Company's failure properly to identify
a catalogue purchaser as the Cardholder where such failure results in
merchandise being shipped without the actual Cardholder's authorization.
The amount charged back with supporting detail will be invoiced to the
Company weekly, and all required payments by the Company shall be made within 30
days after receipt of an invoice. If the Company pays the Bank any chargeback
amount pursuant to this Section 3.5 or if such payment is netted against amounts
payable by the Bank pursuant to Section 4.1.1, any remittances relating to such
chargeback from the Cardholder subsequently collected by the Bank shall, to the
extent not refunded to the Cardholder, be credited by the Bank to the Company.
Section 4. PAYMENT.
4.1. PAYMENT BY BANK.
4.1.1. The Bank will pay to the Company, as full consideration for any
Transaction between the Company and any Cardholder using a Credit Card, as to
which the Company has complied with the provisions of Section 3 above, the
amount shown on the records of the Company for each Transaction, including all
applicable shipping, handling and taxes, less a discount, which discount shall
be equal to the discount rate determined in accordance with Section 4.1.5
(expressed as a fraction) multiplied by the amount shown on the records of the
Company for each Transaction (exclusive of all applicable shipping, handling and
taxes).
5
4.1.2. The Bank will pay such amount by transferring immediately
available funds to an account designated by the Company at any bank to which the
Bank may make electronic fund transfers before the end of the second Business
Day following the receipt by the Bank of the information required by Section 3.1
or 3.2, such information to be properly formatted and edited and transferred via
a telecommunications connection between the Company and the Bank pursuant to
such computer programs and telecommunications protocols as the Bank may, in its
reasonable discretion, designate from time to time, subject to reasonable prior
notice. The Company will transmit (in the manner referred to above) to the Bank
an audited and balanced file in the format specified by the Bank containing all
such information within two Business Days after the occurrence of the underlying
Transaction; PROVIDED that if, as a result of technical disruptions, any store
locations are not polled within a normal period after the occurrence of the
underlying Transactions, the Company will transmit such information relating to
such store locations as soon as reasonably practicable after polling is
completed.
4.1.3. The Company may not attempt to collect any amount from any
Cardholder with respect to a Transaction which has been paid for by the Bank
under this Section 4.1 and not charged back to the Company pursuant to Section
3.5.
4.1.4. The Company will, consistent with past practices, accept
payments from Cardholders for amounts due on Credit Cards ("IN-STORE
PAYMENTS"). Any In-Store Payments received by the Company will be held in
trust for the Bank and its assigns and netted against amounts payable by the
Bank pursuant to Section 4.1.1 (PROVIDED that the Company shall not be
required to keep In-Store Payments separate from other payments received by
the Company) and evidence of such payments will be transmitted to the Bank on
a daily basis in accordance with the procedures set forth in Section 4.1.2.
Notwithstanding the foregoing:
(a) if any bankruptcy or other insolvency proceeding has been commenced
against the Company (and so long as the same has not been dismissed), the
Company shall promptly comply with any written instruction (a "STORE PAYMENT
NOTICE") received by the Company from the Bank or any successor to the Bank as
"Servicer" under the Pooling and Servicing Agreement referred to below (the Bank
or any such successor being the "SERVICER") to take either of the following
actions (as specified in such instruction).
(i) cease accepting In-Store Payments and thereafter inform
Cardholders who wish to make In-Store Payments that payment should instead
be sent to Servicer (but only if the Servicer is required by the
6
Pooling and Servicing Agreement to give such notice); or
(ii) (A) deposit an amount equal to all In-Store Payments received by
each retail location operated by the Company, not later than the Business
Day following receipt, into a segregated trust account (the "STORE
ACCOUNT") established by the Company for this purpose and, pending such
deposit, to hold all In-Store Payments in trust for the Bank and its
assigns, (B) use commercially reasonable efforts not to permit any amounts
or items not constituting In-Store Payments to be deposited in the Store
Account and (C) cause all available funds in each Store Account to be
transferred on a daily basis to an account designated in the Store Payment
Notice;
PROVIDED that the Company need not take the actions specified in clause (i) or
clause (ii) if the Company or any of its affiliates provides the Servicer or the
Trustee under (and as defined in) the Pooling and Servicing Agreement with a
letter of credit, surety bond or other similar instrument covering collection
risk with respect to In-Store Payments and all conditions specified in the
Pooling and Servicing Agreement with respect to such letter of credit, surety
bond or other similar instrument are satisfied;
(b) if and to the extent that the Bank so requests in writing at a time
when the Bank is required by the Pooling and Servicing Agreement to make such
request, In-Store Payments shall no longer be netted against amounts payable by
the Bank pursuant to Section 4.1.1, but instead the Company shall transfer to
the Bank by wire transfer of immediately available funds (or, if the aggregate
amount to be transferred pursuant to this clause (b) and Section 4.2 is less
than $10,000, by check), not later than the third Business Day following
receipt of any In-Store Payments, an amount equal to the sum of such In-Store
Payments.
So long as the Company complies with instructions delivered in accordance with
paragraph (a) or (b), any amounts payable by the Bank pursuant to Section 4.1.1
shall be made without deduction for In-Store Payments.
For purposes of the foregoing, the "POOLING AND SERVICING AGREEMENT" means
the Pooling and Servicing Agreement dated as of January 17, 1996 among the Bank
and The Bank of New York, as trustee, including each Supplement thereunder, as
the same may be amended, supplemented or otherwise modified from time to time,
except that no amendment, supplement or other modification to such Agreement
that affects the circumstances in which the Company may be required to take the
actions referred to in
7
paragraph (a) or (b) above or in Section 4.2.3 shall be given effect for
purposes of this Agreement unless consented to by the Company.
4.1.5. DISCOUNT RATE. The applicable discount rate referred to in
Section 4.1.1 shall be the then applicable discount rate determined in
accordance with the matrix set forth in Exhibit 4.1.5; PROVIDED that in the
event of a legislated or judicial reduction in the annual percentage rate or
fees that may be charged by the Bank to Cardholders, the Company and the Bank
agree to negotiate in good faith an increase in the discount rate.
4.2. PAYMENT BY COMPANY. If the Bank has paid the Company for any
Transaction and
4.2.1. If:
(a) the representations and warranties of the Company with respect to
such Transaction, as set forth in Sections 5.1 through 5.3 below, are not
true in all material respects; or
(b) any merchandise which was the subject of such Transaction is
returned to the Company and the Company, pursuant to its policies concerning
returned merchandise, accepts such merchandise for credit; or
(c) in order to settle a dispute concerning the nature, quality or
quantity of goods purchased from the Company with the Credit Card, the
Company agrees to refund all or part of the purchase price thereof; then
4.2.2. The Company:
(a) shall pay the Bank an amount equal to the face amount of such
Transaction or portion thereof refunded to the customer, less any discount
actually taken by the Bank when it made payment to the Company in
consideration for such Transaction pursuant to Section 4.1.1;
(b) shall create a written memorandum of such Transaction setting
forth the information required by Section 3 above (a "CREDIT MEMORANDUM").
(c) shall transmit the information contained in such Credit Memorandum
to the Bank by the method of electronic transmission referred to in Section
4.1.2 above; and
(d) subject to Section 4.2.3, shall permit the payment required by
this Section 4.2 to be netted against amounts payable by the Bank pursuant to
Section 4.1.1. The
8
Company shall retain any such Credit Memorandum in the same manner and for
the same time as the charge slip referred to in Section 3.3 and shall
promptly deliver any such Credit Memorandum to the Bank upon its request. If
the Company pays the Bank any amount for a Transaction pursuant to this
Section 4.2 or if such payment is netted against amounts payable by the Bank
pursuant to Section 4.1.1, any remittances relating to such Transaction from
the customer subsequently collected by the Bank shall, to the extent not
refunded to the Cardholder, be credited by the Bank to the Company.
4.2.3. Notwithstanding clause (d) of Section 4.2.2, if and to the
extent that the Bank so requests in writing at a time when the Bank is
required by the Pooling and Servicing Agreement to make such request, amounts
payable by the Company pursuant to Section 4.2 ("ADJUSTMENT PAYMENTS") shall
no longer be netted against amounts payable by the Bank pursuant to Section
4.1.1, but instead the Company shall transfer the amount of each Adjustment
Payment to the Bank by wire transfer of immediately available funds (or, if
the aggregate amount to be transferred pursuant to this Section 4.2 and
clause (b) of Section 4.1.4 is less than $10,000, by check), not later than
the second Business Day following the date on which the events giving risk to
such Adjustment Payment occur (and amounts payable by the Bank pursuant to
Section 4.1.1 shall be made without deduction for Adjustment Payments).
4.3. OTHER FEES.
4.3.1. DEFERRED PAYMENT. If any Transaction between the Company and
any Cardholder using a Credit Card is consummated on a deferred payment basis
(for which the period of deferral may not exceed 90 days), then for each
month during the period of deferral, the Company will pay the Bank an amount
equal to the Deferred Payment Rate for such month multiplied by the average
daily balance of purchase price so deferred during such month. For purposes
of this Section 4.3, "DEFERRED PAYMENT RATE" means, for any month, (i) if the
debt of the Bank has an implied investment grade rating at all times during
such month, the average interest rate paid by the Bank to obtain funds during
such month, and (ii) if the debt of the Bank does not have an implied
investment grade rating at all times during such month, the then-current
reference rate or index maintained or provided by a nationally recognized
investment banking firm (which firm shall be reasonably acceptable to the
Company and the Bank) in respect of issuers whose debt has the lowest
investment grade rating.
4.3.2. POSTAL RATE ADJUSTMENT. The Company agrees to reimburse the Bank
for any costs incurred by the
9
Bank as a result of changes in postal rates or rules applicable to mailings
to Cardholders after the date hereof; PROVIDED that the postal costs and
postal discounts applicable to mailings to Cardholders shall be no less
favorable than the postal costs and postal discounts applicable to comparable
mailings to holders of any other credit cards issued by the Bank. The Bank
and the Company agree to use their reasonable efforts to minimize postal
costs and maximize postal discounts.
4.3.3. SPECIAL PROJECTS. With respect to special services provided by
the Bank from time to time with respect to the Business (including, without
limitation, consulting, surveys, gift certificate calls and fulfillment,
rebate fulfillment, telemarketing and special processing or accounting
reports required in connection with promotional activities), the Company will
pay to the Bank amounts to be agreed on a program-by-program basis. To the
extent not otherwise provided for in this Agreement, (i) the Bank shall not
incur expenses required to be paid or reimbursed by the Company for any
project in amounts in excess of $1,000 without having first obtained prior
written or oral authorization from the Company for such expenses; and (ii)
the Bank shall not incur expenses required to be paid or reimbursed by the
Company for any project in amounts in excess of $50,000 without having first
obtained prior written authorization from the Company for such expenses;
PROVIDED that, in the event any terms of any such written authorization are
in conflict with the terms of this Agreement, the terms of this Agreement
shall be controlling.
4.3.4. PAYMENTS. All amounts payable by the Company under this Section
4.3 shall be paid by wire transfer of immediately available funds within 30
days after receipt of an invoice for such amounts.
4.4. SETOFFS. The Bank may at any time, in addition to all other
rights and remedies available to it, setoff against any amount owing to the
Company by the Bank under this Agreement, any amounts owing by the Company to
the Bank under this Agreement.
4.5. INVOICE. The amount of any invoice prepared and delivered by the
Bank under this Agreement shall be deemed to be correct, accurate and binding
upon the Company if the Company makes no objection within 30 days after the
date of such invoice; PROVIDED that the making of any objection shall not
relieve the Company of its obligation to make full payment of the amount set
forth on the related invoice when such amount is otherwise payable pursuant
to this Section 4, it being understood that the Company does not waive its
rights thereby and may, subject to Section
10
10.4, assert a claim with respect to such invoice in an appropriate
proceeding.
Section 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Bank that:
5.1. VALID TRANSACTIONS. Each Transaction will be completed in
compliance with the provisions of Section 3 and will create a valid, binding
and legally enforceable obligation of the Cardholder whose name is shown on
the Credit Card to pay to the Company the amount shown on the charge slip,
which obligation to the Company will be discharged in full by the payment
made to the Company by the Bank in respect of such Transaction under Section
4.1 above.
5.2. ACCURATE INFORMATION. Each charge slip will accurately reflect
the Transaction described therein. Each charge slip and Credit Memorandum
and any charge slip or Credit Memorandum information transmitted to the Bank
by the Company will be complete and accurate and in a form deemed necessary
by the Bank to allow Cardholder billing in accordance with applicable law.
The Company will accurately report all returns and other credits to the Bank
within the time period specified in Section 4.
5.3. NO LIENS. No amount due to the Company with respect to any
Transaction will be subject to any lien or encumbrance in favor of any third
party or to any offset, counterclaim or defense of any Person other than the
Bank or its Affiliates.
5.4. MARK. The use of the Mark by the Bank under this Agreement does
not infringe the rights of any other Person.
Section 6. REPRESENTATIONS AND WARRANTIES OF THE BANK. The Bank hereby
represents and warrants to the Company that:
6.1. COMPLIANCE WITH LAWS. Each Credit Card and the related credit
card agreement, all monthly billing statements and any collection efforts of
the Bank conform and will conform in all material respects with all federal
or state laws or regulations applicable to the extension of credit to or the
collection of amounts from consumers including, without limitation, the
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit
Reporting Act and federal and state bankruptcy and debtor relief laws
("CONSUMER LAWS").
6.2 NON-CONTRAVENTION. The performance by the Bank of its obligations
under this Agreement will not
11
conflict-with or result in a breach of any of the terms or provisions of, or
constitute a default under, any agreement or instrument to which the Bank is
party or by which the Bank is bound, nor will such performance result in any
violation of the provisions of the articles of association or the by-laws of
the Bank or any applicable law or statute or any order, rule or regulation of
any court or governmental agency or body having jurisdiction over the Bank.
Section 7. COVENANTS OF THE COMPANY. The Company hereby covenants and
agrees with the Bank as follows:
7.1. CREDIT CARD NOTICES AND COMMUNICATIONS. The Company will,
consistent with past practices, accept and turn over to the Bank promptly
upon receipt thereof by the Company (i) subject to Section 4.1.4, any
payments made by any Cardholder with respect to any Transaction or any Credit
Card and (ii) any notices or other communications received by the Company
with respect to any Credit Card including, without limitation, customer
changes of address and other information on approved forms.
7.2. COMPLIANCE WITH APPLICABLE LAW. The Company will, at all times,
comply in all material respects with all Consumer Laws.
7.3. RULES. The Company shall comply with such written rules and
operating instructions relating to the use of the Credit Cards, the
distribution of applications, Credit Card security, authorization procedures,
"downtime" procedures and other matters related to this Agreement as the Bank
may, from time to time, promulgate with prior notice to the Company; PROVIDED
that such rules and operating instructions shall be consistent with past
practices, with such changes as shall be approved by the Company in its
reasonable discretion.
7.4. CARDHOLDER INQUIRIES AND COMPLAINTS. If a Cardholder makes an
inquiry or complaint to the Company about the nature, quality or quantity of
goods purchased from the Company with a Credit Card, or a Cardholder has made
an inquiry or complaint to the Bank concerning the nature, quality or
quantity of goods purchased from the Company with a Credit Card, the Company
shall deal directly with the Cardholder to resolve any such complaint or
inquiry. The Company shall answer all inquiries from the Bank about
complaints made to the Bank by Cardholders within 10 days after the Company
receives an inquiry from the Bank.
7.5. EQUIPMENT. The Company shall obtain and maintain at its own
expense such point of sale and authorization terminals, credit card
imprinters and other
12
items of equipment as are necessary for it to receive authorizations,
transmit charge slip and Credit Memorandum information, process credit
applications and perform its obligations under this Agreement. Such point of
sale and authorization terminals shall be capable of communicating with the
computer equipment maintained by the Bank according to such computer programs
and telecommunications protocols as may be specified by the Bank in its
reasonable discretion from time to time subject to reasonable prior notice of
any change in such equipment or protocols.
7.6. EXCLUSIVITY. The Company may not accept or promote any credit card
as payment for its goods or services unless such credit card is a Credit Card, a
proprietary credit card of another division of the Company or any Affiliate of
the Company (whether or not issued by the Bank) or a credit card issued by a
bank or other Person engaged in the business of issuing credit cards to Persons
for the purpose of making payments to third parties generally under such names
as Master Card, Visa, Discover, American Express or Optima. The Company may not
issue its own credit cards or enter into an agreement with any third party under
which credit cards bearing the Mark are issued; PROVIDED that after the second
anniversary of the date hereof, the Company shall be entitled to negotiate with
any third party with respect to the issuance of co-branded or affinity bank
credit cards bearing the Mark and to accept any Bona Fide Offer by such third
party if, at least 30 days prior to accepting such Bona Fide Offer, the Company
provides the Bank with an opportunity to submit a competing offer with respect
to the issuance of co-branded or affinity bank credit cards bearing the Mark,
which competing offer, if it has terms at least as favorable to the Company as
such Bona Fide Offer, shall be accepted by the Company in lieu of such Bona Fide
Offer. For purposes of this Section 7.6, "BONA FIDE OFFER" means an offer to
the Company with respect to a program of at least two years' duration for the
issuance of co-branded or affinity bank credit cards that is, in the Company's
reasonable judgment, generally competitive in light of marketplace conditions
existing at the time (such marketplace conditions to include, without
limitation, other offers with respect to co-branded or affinity bank credit
cards being made to the Company, its Affiliates and other retail or catalogue
merchants).
7.7. OBSOLETE MATERIALS. The Company shall reimburse the Bank for the
cost of replacing reasonable amounts of obsolete forms and other materials if
such replacement is requested by the Company due to changes in the Mark or in
the logo, colors or styles used to identify or promote the Business.
13
Section 8. COVENANTS OF THE BANK. The Bank hereby covenants and agrees
with the Company as follows:
8.1. COMPLIANCE WITH APPLICABLE LAW. The Bank will, in issuing, billing,
administering, and collecting with respect to the Credit Cards and at all other
times, comply in all material respects with all Consumer Laws.
8.2. COLLECTION. The Bank will use efforts to collect from each
Cardholder the purchase price and additional taxes and other charges of
Transactions consistent with past practices and with its efforts to collect
accounts receivable under other credit cards issued by it; PROVIDED that the
Bank will initiate collection of any account receivable under a Credit Card at
or before the time such account receivable is 60 days past due. The Rank will,
consistent with past practices, determine the use and timing of dunning letters,
statement messages and collection agents and will manage all written-off
accounts (including, without limitation, the management of outside collection
agencies). The Bank may implement reasonable variances from past collection
practices after prior notice to and consultation with the Company.
8.3. PERFORMANCE STANDARDS. In performing its obligations under this
Agreement, subject to Section 12.11, the Bank shall comply with the performance
standards set forth in Exhibit 8.3, as such performance standards may be
modified from time to time at the reasonable request of the Bank or the Company.
Within 10 days after the end of each fiscal month, the Bank will deliver to the
Company a compliance certificate of the chief executive officer or chief
financial officer of the Bank setting forth in reasonable detail data
demonstrating compliance during such calendar month with such performance
standards. Enhancements to, and modifications or upgrades of, the computer
processing, payment, billing and information services provided by the Bank will
be made from time to time at the reasonable request of the Company. Any such
enhancements, modifications or upgrades shall, to the extent requested by the
Company, be made on terms to be agreed upon.
8.4. FORCE MAJEURE EVENT. After the occurrence of a Force Majeure Event
(as defined in Section 12.11) which disrupts the availability of the services
provided hereunder, the Bank may elect to reestablish the availability of such
services. If any such Force Majeure Event comparably disrupts the performance
of services similar to the services provided hereunder with respect to one or
more other credit cards issued by the Bank, then the Bank shall reestablish the
availability of such services to the same extent and within the same timetable
under
14
comparable circumstances as the comparable services are reestablished with
respect to such other credit cards. The Bank shall promptly notify the Company
of any Force Majeure Event and shall inform the Company whether it will
reestablish services and the timetable therefor. If the Bank chooses not to
reestablish or take measures to reestablish such services within a reasonable
period of time as would be indicated by sound business practice, the Company
shall be free to obtain such services from any supplier thereof.
Section 9. PROPERTY RIGHTS.
9.1. RIGHTS OF THE COMPANY. The Company is the owner of the names and
addresses of customers of the Business; PROVIDED that (i) as set forth in
Section 9.2, the Bank is also the owner of such information with respect to
customers of the Business who are also Cardholders and (ii) The Limited, Inc.
("THE LIMITED") is also the owner of such information with respect to customers
of the Business until the second anniversary of the date, if any, on which the
Company ceases to be an Affiliate of The Limited.
9.2. RIGHTS OF BANK. Except as set forth in Section 9.1, the Bank is the
owner of all information relating to the Cardholders (including names and
addresses) and the Credit Cards, the copyright to all written material contained
in any credit card agreements, applications, billing statements and other forms
used by the Bank in the administration of its agreements with the Cardholders,
all credit scoring systems and all policies of credit insurance issued to the
Bank with respect to any Cardholder; PROVIDED that the Bank shall not be
entitled to sell, rent or otherwise disclose any information relating to the
Cardholders to any third party other than (i) Affiliates of the Company, (ii)
Persons who, in the sole judgement of The Limited, do not compete, directly or
indirectly, with any retail or catalogue business conducted by The Limited or
any of its Affiliates and (iii) in the case of disclosure, credit agencies.
Subject to Section 9.3, the Company will not have any rights in any information
or property of the Bank; PROVIDED that the Bank will provide the Company with
such information the Bank owns with respect to Cardholders as the Company may
reasonably request in order to develop potential marketing or credit strategies.
9.3. DATABASE. (a) It is the intention of the parties that the Bank will
manage, maintain and develop an information marketing database (the "DATABASE")
at its own expense, subject to a mutually satisfactory agreement with the
Company pursuant to which (i) the Company will agree to utilize the Database,
(ii) the Database will be accessible from the Company's offices and (iii) the
Bank will provide
15
the Company with information maintained as part of the Database on terms that
are no less favorable than those offered by the Bank to any other recipient
of comparable information.
(b) Notwithstanding the foregoing, the Bank will, from time to time at
the request of the Company, and without charge, promptly provide the Company
with a list of the names and addresses of all Cardholders, all holders of
other proprietary credit cards of the Company or any Affiliate of the Company
(if issued by the Bank) and all other customers of the Business, any other
business of the Company and the business of any other Affiliate of the
Company. The Company shall reimburse the Bank for its costs of producing and
shipping such list in the format required by the Company within 30 days after
receipt of a request for such reimbursement from the Bank.
(c) Subject to Section 9.2, the Bank may make the Database available, and
provide information marketing services to, third parties on terms reasonably
determined by the Bank; PROVIDED that (i) the allocation among the Bank, the
Company and The Limited of fees charged by the Bank to such third parties shall
be agreed on a program-by-program basis or, in the case of programs existing on
the date hereof, continued consistent with past practices and (ii) the Bank may
not make the Database available, or provide information marketing services to,
any Person who, in the sole judgment of The Limited, competes, directly or
indirectly, with any retail or catalogue business conducted by The Limited or
any of its Affiliates.
9.4. ENVELOPE STUFFING.
9.4.1. Subject to the right of the Bank to include in mailings to
Cardholders periodic billing statements and any legal notices which the Bank
believes are necessary or appropriate to send to Cardholders, the Company
shall have the right to have materials advertising its products and services
included in the envelopes containing the periodic statements. Such materials
shall advertise only products and services related to the Business, shall
(unless the Company provides the Bank with notice as provided below) be
limited to seven panels per envelope and shall conform to size requirements
established from time to time by the Bank with reasonable prior notice of any
changes. The Company shall use reasonable efforts (i) to notify the Bank at
least 15 days before the proposed date of any such inclusion and shall
provide the Bank with a draft copy of any such advertising material at the
time it notifies the Bank of such mailing and (ii) to provide the Bank with a
seasonal marketing plan at least 30 days before the beginning date of each
Season. The Company shall
16
provide the Bank with the materials to be included in the mailing not less
than two Business Days prior to the initial insertion date. If the Company
does not notify the Bank of any such inclusion at least seven days before the
proposed date of such inclusion or if the material included does not take up
the available space, the Bank may utilize the space remaining inside the
envelopes for its own purposes; PROVIDED that (i) unless the Company provides
the Bank with notice at least 45 days before the proposed inclusion date of
the Company's intent to utilize more than seven panels per envelope, the Bank
shall be entitled to utilize at least three panels (or two panels and one
"bangtail" remittance envelope) per envelope for its own purposes and (ii)
all materials included by the Bank shall be subject to the approval of the
Company, which approval shall not be unreasonably withheld.
9.4.2. The Bank shall have the exclusive right to include in any mailing
to Cardholders materials advertising products and services not related to the
Business and the allocation between the Bank and the Company of the revenues
generated thereby shall be agreed on a program-by-program basis or, in the case
of programs existing on the date hereof, continued consistent with past
practices; PROVIDED that such products and services and the related advertising
materials shall be subject to the approval of the Company, which approval shall
not be unreasonably withheld or delayed (it being understood that the Company
may withhold such approval if it determines in its sole discretion that the
advertising of such products or services is inconsistent with the image of the
Business).
9.4.3. Notwithstanding the foregoing, (i) the Bank shall have the right to
use its own "bangtail" remittance envelopes to promote credit life insurance to
existing Cardholders no more than four times per year or two times per Season
and (ii) all materials used, or sent to Cardholders, by the Bank under existing
programs of the Bank (including, but not limited to, credit life insurance)
shall not be subject to the approval of the Company.
9.4.4. The Bank shall provide timely specifications (including size and
weight requirements) for all statement inserts, credit card carriers and
"bangtail" remittance envelopes.
Section 10. INDEMNIFICATION; CLAIMS AND ACTIONS.
10.1. INDEMNIFICATION BY THE COMPANY. The Company hereby indemnifies the
Bank, its Affiliates and the directors, officers, employees and agents of the
Bank or any Affiliate of the Bank (each, a "RELATED PARTY") against, and agrees
to hold them harmless from, any and all losses,
17
claims, damages and liabilities (including, without limitation, the legal
fees and other expenses reasonably incurred in connection with any suit,
action or proceeding or any claim asserted) ("DAMAGES") incurred or suffered
by any of them arising out of or in any way related to any misrepresentation,
breach of any warranty or nonperformance of any covenant made by the Company
under this Agreement or relating to any personal or bodily injury or property
damage alleged to be caused by the sale of goods or rendering of services by
the Company.
10.2. INDEMNIFICATION BY THE BANK. The Bank hereby indemnifies the
Company and its Related Parties against, and agrees to hold them harmless
from, any and all Damages incurred or suffered by any of them arising out of
or in any way related to any misrepresentation, breach of any warranty, or
nonperformance of any covenant made by the Bank under this Agreement.
10.3. THIRD PARTY CLAIMS.
10.3.1. The Bank shall not be liable to the Company for or in
connection with any claim made against the Company by any other Person
relating in any manner to this Agreement or to any services or any other
transactions contemplated hereby other than (i) claims based upon the Bank's
failure to perform its obligations under this Agreement, its or any of its
Related Parties' negligence or willful misconduct or its failure to comply
with any law or regulation (including, without limitation, any Consumer Law),
(ii) claims by employees or subcontractors of the Bank arising from the
performance of services under this Agreement (other than claims based upon
the Company's or any if its Related Parties' negligence or willful
misconduct), (iii) claims relating to acts or omissions of the Bank and its
agents in connection with the collection of amounts owing from Cardholders
and (iv) claims relating to the submission by the Bank or its agents of data
concerning Cardholders to credit agencies), even if the Bank has been
advised of the possibility of such claims.
10.3.2. The Company shall not be liable to the Bank for or in
connection with any claim made against the Bank by any other Person relating
in any manner to this Agreement or to any services or other transactions
contemplated hereby (other than (i) claims based upon the Company's failure
to perform its obligations under this Agreement, its or any of its Related
Parties' negligence or willful misconduct or its failure to comply with any
law or regulation (including, without limitation, any Consumer Law), (ii)
claims by employees or subcontractors of the Company arising from this
Agreement and (iii) claims
18
relating to goods purchased from the Company), even if the Company has been
advised of the possibility of such claims.
10.4. DISPUTE RESOLUTION AND ACTIONS. The Bank and the Company shall use
their reasonable best efforts to resolve informally any claim of either party
under this Agreement. No action at law or in equity may be instituted by any
party with respect to any such claim unless such party has satisfied its
obligation under the first sentence of this Section 10.4.
10.5. LIMITATION ON ACTIONS. No action against either party, regardless
of form, arising out of or incidental to the matters contemplated by this
Agreement, may be brought by the other party more than one year after the event
giving rise to such cause of action occurred and is known or upon the exercise
of reasonable diligence should have been known to the injured party.
10.6. REIMBURSEMENT FOR LOSSES. If, as a result of any claim made by
the Bank against any third party (including, but not limited to, an insurer),
the Bank actually receives from such third party cash proceeds (or non-cash
proceeds, whether in the form of goods or services) which represent, in whole
or in part, compensation for or reimbursement of losses or costs actually
incurred by the Company, then the Bank will hold that portion of such
proceeds fairly allocable to the Company (taking into consideration all
losses or costs actually incurred by all parties for whose benefit such
payments have been received) in trust on behalf of the Company and will
promptly pay over to the Company such allocable amount of any such cash
proceeds (or, as to non-cash proceeds, the allocable portion or, at the
discretion of the Bank, the cash equivalent thereof).
10.7. SURVIVAL. The provisions of this Section 10 shall survive the
termination of this Agreement.
Section 11. TERMINATION.
11.1 TERM. This Agreement shall remain in effect until the tenth
anniversary of the date hereof, shall be automatically extended until the
twelfth anniversary of the date hereof if the Company does not give at least 12
months' prior written notice of its objection to such extension and shall be
further automatically extended in successive two-year increments if the Bank or
the Company does not give at least 12 months' prior written notice of its
objection to such extension, unless earlier terminated (a) by the Bank or the
Company in the event of a material breach by the other party of any of such
other party's obligations under this Agreement if any such breach remains
uncured 30 days after
19
written notice thereof to such party, (b) automatically in the event that the
Bank or the Company commences a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its
debts under any bankruptcy, insolvency or other similar law now or
hereinafter in effect, seeks the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part
of its assets, consents to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, makes a general assignment for the benefit of
creditors, or fails generally to pay its debts as they become due, or (c) by
the Company upon not less than 60 days' prior written notice to the Bank at
any time after the sixth anniversary of the date hereof if, based on the
application of the attached matrix, the applicable discount rate exceeds the
highest discount rate in such matrix and the costs to the Company under this
Agreement are substantially higher than the costs that would be incurred by
the Company for comparable credit card services over the remaining term of
this Agreement from an independent third-party financial institution;
PROVIDED that the Company shall not be entitled to terminate this Agreement
pursuant to clause (c) unless the Company provides the Bank with a written
description of the material terms on which such third party financial
institution proposes to provide such services and is entitled to submit a
counter-proposal within 30 days of receipt of such description. If the Bank
submits a counter-proposal with terms substantially similar to those set
forth in such third party's proposal or agrees to maintain the discount rate
at the highest discount rate in the attached matrix, this Agreement shall
remain in full force and effect, modified as may be necessary to reflect the
terms included in the Bank's counter-proposal. Subject to Section 11.2, the
termination of this Agreement shall not affect the obligations of the
Cardholders to the Bank, the obligation of the Company and the Bank to make
the payments required under Section 4 with respect to Transactions that
occurred before the date of termination, the rights of the Bank under
Sections 4.4, 7.4 and 9.1 and the rights of the Company under Section 9.1.
Sections 10, 11 and 12 of this Agreement shall survive any such termination.
11.2. EFFECT OF TERMINATION. Upon termination of this Agreement, the
Company will have the option to purchase the then-outstanding Credit Card
account balances not previously written-off by the Bank (subject to the terms of
any securitization of such account balances) at the face amount thereof, without
recourse to the Bank, and will be provided with all related account information
and other account data; PROVIDED that the Company will be required to purchase
such then-outstanding Credit Card account balances on such terms if the Company
objects to any automatic
20
extension of this Agreement pursuant to Section 11.1. All payments by the
Company pursuant to this Section 11.2 shall be made not later than one
Business Day after termination of this Agreement by wire transfer of
immediately available funds to an account notified by the Bank to the Company
not less than two Business Days prior to the payment date. Upon any
termination of this Agreement, (i) the Company (at its sole expense) shall
notify all Cardholders that the Bank is no longer the processor of their
Credit Card accounts and (ii) the Company and the Bank shall cooperate in
facilitating the transition to a new processor.
11.3. EXTENSION. Any services which the parties hereto mutually agree to
be rendered after the termination of this Agreement shall be rendered pursuant
to all of the terms and provisions of this Agreement.
Section 12. MISCELLANEOUS.
12.1. NOTICES. All notices, requests and other communications to any
party hereunder shall be in writing (including telecopy or similar writing) and
shall be given, if to the Company, to:
Structure, Inc.
Three Limited Parkway
Columbus, Ohio 43230
Attn: General Counsel
Telecopy: 614-479-7188
with a copy to:
The Limited, Inc.
Three Limited Parkway
Columbus, Ohio 43230
Attn: General Counsel
Telecopy: 614-479-7188
and a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attn: Dennis S. Hersch
Telecopy: 212-450-4800
and if to the Bank, to:
World Financial Network National Bank
4590 East Broad Street
Columbus, Ohio 43213
Attn: Daniel T. Groomes
Telecopy: 614-755-3418
21
or to such other address or telecopy number and with such other copies, as
such party may hereafter specify for the purpose by notice to the other
parties. Each such notice, request or other communication shall be effective
(i) if given by telecopy, when such telecopy is transmitted to the telecopy
number specified in this Section and evidence of receipt is received or (ii)
if given by any other means, upon delivery or refusal of delivery at the
address specified in this Section 12.1.
12.2. AMENDMENTS; NO WAIVERS.
12.2.1. Any provision of this Agreement may be amended only if such
amendment is in writing and signed by all parties thereto.
12.2.2. No failure or delay by any party in exercising any right, power
or privilege under this Agreement shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
12.3. EXPENSES. All costs and expenses incurred in connection with the
this Agreement or the transactions contemplated hereby shall be paid by the
party incurring such cost or expense.
12.4. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns; PROVIDED that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of the other party. Notwithstanding the foregoing, (i) the Bank may from
time to time assign any or all of its rights and obligations hereunder to any
Affiliate of the Bank, provided that any such assignee of the Bank's obligations
hereunder shall have the capability to perform such obligations without
impairing the quality of the services provided to the Company, (ii) the Company
shall assign or otherwise transfer all of its rights and obligations under this
Agreement (A) to the purchaser of all or substantially all of the assets of the
Business or (B) to any corporation which is a successor (whether by merger,
consolidation or otherwise) to the Company or any successor (whether by merger,
consolidation or otherwise) thereto, in each case subject to the execution by
such assignee or transferee of an agreement to be bound by the provisions of
this Agreement and (iii) the Bank may from time to time sell accounts receivable
for securitization, retaining its processing and servicing
22
obligations with respect thereto (it being understood that (A) the purchaser
of such accounts receivable shall have no recourse against the Company for
any reason whatsoever and (B) the Bank hereby indemnifies the Company and its
Related Parties against, and agrees to hold them harmless from, any and all
Damages incurred or suffered by any of them in connection with any claims
made by such purchaser).
12.5. GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the law of the State of New York (without regard to the choice
of law provisions thereof).
12.6. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto or thereto shall have
received a counterpart hereof signed by the other parties hereto.
12.7. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties with respect to the subject matter hereof and supersedes all
prior agreements, understandings and negotiations, both written and oral,
between the parties with respect to such subject matter. No representation,
inducement, promise, understanding, condition or warranty not set forth herein
has been made or relied upon by any party hereto. Neither this Agreement nor
any provision thereof is intended to confer upon any Person other than the
parties any rights or remedies hereunder.
12.8. JURISDICTION. Any suit, action or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this
Agreement or the transactions contemplated thereby may be brought against any of
the parties in the United States District Court for the Southern District of New
York or any state court sitting in the City of New York, Borough of Manhattan,
and each of the parties hereby consents to the exclusive jurisdiction of such
court (and of the appropriate appellate courts) in any such suit, action or
proceeding and waives any objection to venue laid therein. Process in any such
suit, action or proceeding may be served on any party anywhere in the world,
whether within or without the State of New York. Without limiting the
foregoing, the parties agree that service of process upon such party at the
address referred to in Section 12.1, together with written notice of such
service to such party, shall be deemed effective service of process upon such
party.
23
12.9. CAPTIONS. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
12.10. DEFINED TERMS. The following terms, as used herein, shall have
the following meanings:
12.10.1. "AFFILIATE" means, with respect to any Person, any Person
directly or indirectly controlling, controlled by, or under common control with
such other Person. For purposes of this definition, "CONTROL" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "CONTROLLING" and
"CONTROLLED" have meanings correlative to the foregoing.
12.10.2. "BUSINESS DAY" means a day other than a Saturday, Sunday or
other day on which commercial banks in New York, New York or Columbus, Ohio
are authorized or required by law to close.
12.10.3. "PERSON" means an individual, a corporation, a partnership, an
association, a trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
12.10.4. "SEASON" means (i) the period from the first day of the fiscal
month of February to the last day of the fiscal month of July and (ii) the
period from the first day of the fiscal month of August to the last day of the
fiscal month of January.
12.11. FORCE MAJEURE. Notwithstanding the provisions of Section 8.3,
neither the Bank nor its affiliates shall be liable in any manner to the Company
for any failure to perform their obligations under this Agreement resulting in
any manner from delay, failure in performance, loss or damage due to fire,
strike, embargo, explosion, power blackout, earthquake, flood, war, the
elements, labor disputes, civil or military authority, acts of God, public
enemy, inability to secure fuel, acts or omissions of carriers or other causes
beyond their reasonable control, whether or not similar to any of the foregoing
(a "FORCE MAJEURE EVENT").
24
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers effective on the day and year
first above written.
WORLD FINANCIAL NETWORK
NATIONAL BANK
By: /s/ Timothy B. Lyons
--------------------
Name: Timothy B. Lyons
Title:
STRUCTURE, INC.
By: /s/ Timothy B. Lyons
--------------------
Name: Timothy B. Lyons
Title:
MOUNTAIN FACTORING, INC
By: /s/ Timothy B. Lyons
--------------------
Name: Timothy B. Lyons
Title:
25
Exhibit 10.8
CREDIT CARD PROCESSING AGREEMENT
This Credit Card Processing Agreement is made as of this 31st day
of January, 1996 between WORLD FINANCIAL NETWORK NATIONAL BANK, a national
banking association (the "BANK"), and Lane Bryant, Inc., a Delaware
corporation (the "CORPORATION"), and Sierra Nevada Factoring, Inc., a Nevada
corporation ("FACTORING") (the Corporation and Factoring being collectively
referred to herein as the "COMPANY").
WHEREAS the Company and the Bank believe that it is desirable and in
their respective best interests for the Bank to continue, in a manner generally
consistent with past practices, to issue credit cards bearing the trade names,
trademarks, logos and service marks used in the Company's Lane Bryant retail or
catalogue business (the "BUSINESS") which will allow the customers of the
Company to purchase goods from the Company using funds advanced by the Bank; and
WHEREAS in order to implement such arrangements, the parties hereto
desire to enter into this Agreement;
NOW, THEREFORE, the parties hereby agree as follows:
Section 1. TRADEMARKS. The Company hereby authorizes the Bank to use
the trademark "Lane Bryant" on credit cards owned or issued by the Bank, monthly
billing statements, collection correspondence, credit card agreements, credit
applications, customer service correspondence and in such other written and oral
communications with cardholders as are necessary or convenient in connection
with this Agreement, in each case consistent with past practices. The "Lane
Bryant" trademark is referred to herein as the "MARK". The Company shall have
the right to approve in its sole discretion the "art" (including colors and font
styles) for all proposed uses of the Mark by the Bank. The Bank shall not use
the Mark for any purpose other than as set forth in the first sentence of this
Section 1.
Section 2. CREDIT CARD SYSTEM.
2.1. NEW CREDIT CARDS.
2.1.1. ISSUANCE OF CREDIT CARDS. To the extent requested by the
Company, the Bank will issue credit cards bearing the Mark ("CREDIT CARDS") to
customers of the Business who apply for such Credit Cards and related extensions
of credit. Such customers (i) must qualify for the extension of credit under
credit standards related to
new account approvals, credit limits and authorization management ("CREDIT
STANDARDS") which will be determined by the Bank from time to time and (ii)
must accept the Bank's standard form of credit card agreement containing the
terms and conditions governing extensions of credit to Persons who hold
Credit Cards and their authorized users (attached hereto as Exhibit
2.1.1(a)). Notwithstanding the foregoing, (i) the Credit Standards
established by the Bank from time to time in connection with the issuance of
Credit Cards for use in connection with the Business shall be consistent with
past practices (as described in Exhibit 2.1.1(b)), with such changes as shall
be (A) approved by the Company in its reasonable discretion or (B) determined
by the Bank in good faith to be necessary from the standpoint of safe and
sound banking practices and (ii) the Bank may make any change in the terms of
its agreement with many person who holds a Credit Card (including repayment
terms, fees and finance charge rates) after prior notice to and consultation
with the Company. The Bank hereby confirms its understanding that the
Company intends to offer and promote credit as outlined in Section 2.2. The
Bank will bear the costs of the issuance of Credit Cards under this Section
2.1.
2.1.2. CREDIT MAXIMIZATION. The Company will be entitled to use
credit related promotional strategies consistent with past practices. The Bank
will work in good faith with the Company to develop business strategies with
respect to the issuance of Credit Cards intended to maximize the potential of
the Business and, in that regard, will consider in good faith proposals
involving variances from the Bank's general Credit Standards or changes in the
terms of the Bank's agreement with any person who holds a Credit Card; PROVIDED
that subject to compliance with the provisions of Section 2.1.1, Credit
Standards and the terms of such agreement shall in all circumstances be
determined by the Bank. The terms of any program involving variances from the
Bank's general Credit Standards or changes in the terms of the Bank's agreement
with any person who holds a Credit Card, including (without limitation) fees or
other charges to be paid by either party, shall be agreed on a
program-by-program basis.
2.2. PROMOTION. The Company will use its reasonable efforts to
promote the use of Credit Cards in the Business and to acquire new Cardholders
(as defined below), for the Bank through the use of, for example, "instant
credit," "quick credit," pre-approved solicitations, applications and
promotional material displayed in stores and inserted in catalogues and special
offers to Cardholders, in each case consistent with past practices. The costs
incurred by the Company and the Bank (including, among other things, the cost of
printing application forms, promotional material, pre-approved solicitations and
instant
2
and quick credit contracts and the cost of special offers) will be borne by
the Company and the Bank on terms to be negotiated from time to time in a
manner consistent with past practices. The Bank shall have two Business Days
to review for legal compliance all credit application forms and marketing
materials (including, without limitation, those referred to above) prior to
their being printed.
Section 3. ACCEPTANCE OF CREDIT CARDS. The Company will permit
Persons who hold Credit Cards (subject to the restrictions of this Agreement) or
other credit cards owned by the Bank that the Bank has designated and their
authorized users ("Cardholders") to purchase goods sold by the Business without
any cash payment by use of a Credit Card, subject to the following conditions:
3.1. CHARGE SLIP (CREDIT CARD PRESENTED). If the customer presents a
Credit Card at the time of sale, the Company will maintain a record of the sale
in a form acceptable to the Bank which reflects the following:
3.1.1. A brief identification of the property or service purchased
(the "TRANSACTION");
3.1.2. The date of the Transaction;
3.1.3. The dollar amount of the purchase price of the merchandise or
service which was the subject of the Transact ion, including applicable
shipping, handling and taxes;
3.1.4. An imprint or electronic capture of the Credit Card account
number or, in the event of equipment malfunction, a written notation of such
account number; and
3.1.5. The Cardholder's signature.
3.2. CHARGE SLIP (CREDIT CARD NOT PRESENTED). The Bank acknowledges
and agrees that a Cardholder need not present a Credit Card at the time of sale
and that, subject to Section 3.5, the Company may accept charges to a Credit
Card verbally from the customer or via a written order form from the customer.
If the customer does not present a Credit Card at the time of sale, the Company
will maintain a record of the sale in a form acceptable to the Bank which
reflects, in lieu of the information set forth in Section 3.1.1 through 3.1.5,
the following:
3.2.1. A brief identification of the Transaction;
3.2.2. The date of the Transaction;
3
3.2.3. The dollar amount of the purchase price of the merchandise or
service which was the subject of the Transaction, including applicable shipping,
handling and taxes;
3.2.4. A written notation of the Credit Card account number, which
shall have been obtained from the customer and recorded in the Company's
customer file;
3.2.5. The customer's name and address and, except in the case of
catalogue purchases, personal identification type and number; and
3.2.6. If applicable, the name and address to where the merchandise
which was the subject of the Transaction was shipped and the date and method of
shipment.
3.3. RETENTION OF CHARGE SLIP. The Company will retain a legible
copy of each charge slip for six months following the date of the Transaction
and will provide such copy to the Bank within 30 days of the Bank's request
therefor; PROVIDED that the Bank will request delivery of such information only
in the case of a bona fide dispute (the existence of such dispute to be
determined by the Bank in its reasonable discretion) relating to the underlying
Transaction, upon the inquiry of the applicable Cardholder or as requested by
auditors of the Bank in connection with their audit of the Bank's financial
statements or by any governmental authority.
3.4. AUTHORIZATION. The Transaction is authorized by the Bank in
accordance with the floor limits and other procedures in effect at the time or
such authorization is dispensed with under rules established by the Bank from
time to time in accordance with Section 8.3 to deal with situations in which
authorization is not available because of disruption of the Bank's computer
system or other causes provided for in such rules, consistent with past
practice.
3.5. CHARGEBACKS. The Company agrees to accept as a chargeback any
charge on a Credit Card where:
3.5.1. The Cardholder disputes the charge and the Company fails to
provide a legible copy of the charge slip within 30 days of the Bank's request
therefor in accordance with Section 3.3;
3.5.2. The Company failed to obtain authorization from the Bank in
accordance with Section 3.4;
3.5.3. The Company failed to complete the charge slip in accordance
with Section 3.1 or 3.2, as applicable;
4
3.5.4. A Company employee fraudulently misused the Credit Card or
account number;
3.5.5. A dispute arises from the Cardholder being charged or credited
more than once for the same sale, payment or return;
3.5.6. A dispute with the Cardholder arises from a voided Transaction
or an invalid Credit Card account number;
3.5.7. A dispute with the Cardholder arises from an improperly opened
Credit Card account, or the account is otherwise uncollectible, where a Company
employee failed to comply with new account procedures in effect at the time the
account was opened;
3.5.8. The Bank, consistent with past practices, gives the Cardholder
credit for (or accepts as payment) a non-expired discount coupon or gift
certificate in respect of a prior purchase; or
3.5.9. A dispute arises from the Company's failure properly to
identify a catalogue purchaser as the Cardholder where such failure results in
merchandise being shipped without the actual Cardholder's authorization.
The amount charged back with supporting detail will be invoiced to the
Company weekly, and all required payments by the Company shall be made within 30
days after receipt of an invoice. If the Company pays the Bank any chargeback
amount pursuant to this Section 3.5 or if such payment is netted against amounts
payable by the Bank pursuant to Section 4.1.1, any remittances relating to such
chargeback from the Cardholder subsequently collected by the Bank shall, to the
extent not refunded to the Cardholder, be credited by the Bank to the Company.
Section 4. PAYMENT.
4.1. PAYMENT BY BANK.
4.1.1. The Bank will pay to the Company, as full consideration for
any Transaction between the Company and any Cardholder using a Credit Card, as
to which the Company has complied with the provisions of Section 3 above, the
amount shown on the records of the Company for each Transaction, including all
applicable shipping, handling and taxes, less a discount, which discount shall
be equal to the discount rate determined in accordance with Section 4.1.5
(expressed as a fraction) multiplied by the amount shown on the records of the
Company for each Transaction (exclusive of all applicable shipping, handling and
taxes).
5
4.1.2. The Bank will pay such amount by transferring immediately
available funds to an account designated by the Company at any bank to which the
Bank may make electronic fund transfers before the end of the second Business
Day following the receipt by the Bank of the information required by Section 3.1
or 3.2, such information to be properly formatted and edited and transferred via
a telecommunications connection between the Company and the Bank pursuant to
such computer programs and telecommunications protocols as the Bank may, in its
reasonable discretion, designate from time to time, subject to reasonable prior
notice. The Company will transmit (in the manner referred to above) to the Bank
an audited and balanced file in the format specified by the Bank containing all
such information within two Business Days after the occurrence of the underlying
Transaction; PROVIDED that if, as a result of technical disruptions, any store
locations are not polled within a normal period after the occurrence of the
underlying Transactions, the Company will transmit such information relating to
such store locations as soon as reasonably practicable after polling is
completed.
4.1.3. The Company may not attempt to collect any amount from any
Cardholder with respect to a Transaction which has been paid for by the Bank
under this Section 4.1 and not charged back to the Company pursuant to Section
3.5.
4.1.4. The Company will, consistent with past practices, accept
payments from Cardholders for amounts due on Credit Cards ("IN-STORE PAYMENTS").
Any In-Store Payments received by the Company will be held in trust for the Bank
and its assigns and netted against amounts payable by the Bank pursuant to
Section 4.1.1 (PROVIDED that the Company shall not be required to keep In-Store
Payments separate from other payments received by the Company) and evidence of
such payments will be transmitted to the Bank on a daily basis in accordance
with the procedures set forth in Section 4.1.2. Notwithstanding the foregoing:
(a) if any bankruptcy or other insolvency proceeding has been
commenced against the Company (and so long as the same has not been dismissed),
the Company shall promptly comply with any written instruction (a "STORE PAYMENT
NOTICE") received by the Company from the Bank or any successor to the Bank as
"Servicer" under the Pooling and Servicing Agreement referred to below (the Bank
or any such successor being the "SERVICER") to take either of the following
actions (as specified in such instruction)
(i) cease accepting In-Store Payments and thereafter inform
Cardholders who wish to make In-Store Payments that payment should instead
be sent to Servicer (but only if the Servicer is required by the
6
Pooling and Servicing Agreement to give such notice); or
(ii) (A) deposit an amount equal to all In-Store Payments received by
each retail location operated by the Company, not later than the Business
Day following receipt, into a segregated trust account (the "Store
Account") established by the Company for this purpose and, pending such
deposit, to hold all In-Store Payments in trust for the Bank and its
assigns, (B) use commercially reasonable efforts not to permit any amounts
or items not constituting In-Store Payments to be deposited in the Store
Account and (C) cause all available funds in each Store Account to be
transferred on a daily basis to an account designated in the Store Payment
Notice;
PROVIDED that the Company need not take the actions specified in clause (i) or
clause (ii) if the Company or any of its affiliates provides the Servicer or the
Trustee under (and as defined in) the Pooling and Servicing Agreement with a
letter of credit, surety bond or other similar instrument covering collection
risk with respect to In-Store Payments and all conditions specified in the
Pooling and Servicing Agreement with respect to such letter of credit, surety
bond or other similar instrument are satisfied;
(b) if and to the extent that the Bank so requests in writing at a
time when the Bank is required by the Pooling and Servicing Agreement to make
such request, In-Store Payments shall no longer be netted against amounts
payable by the Bank pursuant to Section 4.1.1, but instead the Company shall
transfer to the Bank by wire transfer of immediately available funds (or, if the
aggregate amount to be transferred pursuant to this clause (b) and Section 4.2
is less than $10,000, by check), not later than the third Business Day following
receipt of any In-Store Payments, an amount equal to the sum of such In-Store
Payments.
So long as the Company complies with instructions delivered in accordance with
paragraph (a) or (b), any amounts payable by the Bank pursuant to Section 4.1.1
shall be made without deduction for In-Store Payments.
For purposes of the foregoing, the "POOLING AND SERVICING AGREEMENT"
means the Pooling and Servicing Agreement dated as of January 17, 1996 among the
Bank and The Bank of New York, as trustee, including each Supplement thereunder,
as the same may be amended, supplemented or otherwise modified from time to
time, except that no amendment, supplement or other modification to such
Agreement that affects the circumstances in which the Company may be required to
take the actions referred to in
7
paragraph (a) or (b) above or in Section 4.2.3 shall be given effect for
purposes of this Agreement unless consented to by the Company.
4.1.5. DISCOUNT RATE. The applicable discount rate referred to in
Section 4.1.1 shall be the then applicable discount rate determined in
accordance with the matrix set forth in Exhibit 4.1.5; PROVIDED that in the
event of a legislated or judicial reduction in the annual percentage rate or
fees that may be charged by the Bank to Cardholders, the Company and the Bank
agree to negotiate in good faith an increase in the discount rate.
4.2. PAYMENT BY COMPANY. If the Bank has paid the Company for any
Transaction and
4.2.1. If:
(a) the representations and warranties of the Company with respect to
such Transaction, as set forth in Sections 5.1 through 5.3 below, are not true
in all material respects; or
(b) any merchandise which was the subject of such Transaction is
returned to the Company and the Company, pursuant to its policies concerning
returned merchandise, accepts such merchandise for credit; or
(c) in order to settle a dispute concerning the nature, quality or
quantity of goods purchased from the Company with the Credit Card, the Company
agrees to refund all or part of the purchase price thereof; then
4.2.2. The Company:
(a) shall pay the Bank an amount equal to the face amount of such
Transaction or portion thereof refunded to the customer, less any discount
actually taken by the Bank when it made payment to the Company in consideration
for such Transaction pursuant to Section 4.1.1;
(b) shall create a written memorandum of such Transaction setting
forth the information required by Section 3 above (a "CREDIT MEMORANDUM");
(c) shall transmit the information contained in such Credit
Memorandum to the Bank by the method of electronic transmission referred to in
Section 4.1.2 above; and
(d) subject to Section 4.2.3, shall permit the payment required by
this Section 4.2 to be netted against amounts payable by the Bank pursuant to
Section 4.1.1. The
8
Company shall retain any such Credit Memorandum in the same manner and for
the same time as the charge slip referred to in Section 3.3 and shall
promptly deliver any such Credit Memorandum to the Bank upon its request. If
the Company pays the Bank any amount for a Transaction pursuant to this
Section 4.2 or if such payment is netted against amounts payable by the Bank
pursuant to Section 4.1.1, any remittances relating to such Transaction from
the customer subsequently collected by the Bank shall, to the extent not
refunded to the Cardholder, be credited by the Bank to the Company.
4.2.3. Notwithstanding clause (d) of Section 4.2.2, if and to the
extent that the Bank so requests in writing at a time when the Bank is required
by the Pooling and Servicing Agreement to make such request, amounts payable by
the Company pursuant to Section 4.2 ("ADJUSTMENT PAYMENTS") shall no longer be
netted against amounts payable by the Bank pursuant to Section 4.1.1, but
instead the Company shall transfer the amount of each Adjustment Payment to the
Bank by wire transfer of immediately available funds (or, if the aggregate
amount to be transferred pursuant to this Section 4.2 and clause (b) of Section
4.1.4 is less than $10,000, by check), not later than the second Business Day
following the date on which the events giving risk to such Adjustment Payment
occur (and amounts payable by the Bank pursuant to Section 4.1.1 shall be made
without deduction for Adjustment Payments).
4.3. OTHER FEES.
4.3.1. DEFERRED PAYMENT. If any Transaction between the Company and
any Cardholder using a Credit Card is consummated on a deferred payment basis
(for which the period of deferral may not exceed 90 days), then for each month
during the period of deferral, the Company will pay the Bank an amount equal to
the Deferred Payment Rate for such month multiplied by the average daily balance
of purchase price so deferred during such month. For purposes of this Section
4.3, "DEFERRED PAYMENT RATE" means, for any month, (i) if the debt of the Bank
has an implied investment grade rating at all times during such month, the
average interest rate paid by the Bank to obtain funds during such month, and
(ii) if the debt of the Bank does not have an implied investment grade rating at
all times during such month, the then-current reference rate or index maintained
or provided by a nationally recognized investment banking firm (which firm shall
be reasonably acceptable to the Company and the Bank) in respect of issuers
whose debt has the lowest investment grade rating.
4.3.2. POSTAL RATE ADJUSTMENT. The Company agrees to reimburse the
Bank for any costs incurred by the
9
Bank as a-result of changes in postal rates or rules applicable to mailings
to Cardholders after the date hereof; PROVIDED that the postal costs and
postal discounts applicable to mailings to Cardholders shall be no less
favorable than the postal costs and postal discounts applicable to comparable
mailings to holders of any other credit cards issued by the Bank. The Bank
and the Company agree to use their reasonable efforts to minimize postal
costs and maximize postal discounts.
4.3.3. SPECIAL PROJECTS. With respect to special services provided
by the Bank from time to time with respect to the Business (including, without
limitation, consulting, surveys, gift certificate calls and fulfillment, rebate
fulfillment, telemarketing and special processing or accounting reports required
in connection with promotional activities), the Company will pay to the Bank
amounts to be agreed on a program-by-program basis. To the extent not otherwise
provided for in this Agreement, (i) the Bank shall not incur expenses required
to be paid or reimbursed by the Company for any project in amounts in excess of
$1,000 without having first obtained prior written or oral authorization from
the Company for such expenses; and (ii) the Bank shall not incur expenses
required to be paid or reimbursed by the Company for any project in amounts in
excess of $50,000 without having first obtained prior written authorization from
the Company for such expenses; PROVIDED that, in the event any terms of any such
written authorization are in conflict with the terms of this Agreement, the
terms of this Agreement shall be controlling.
4.3.4. PAYMENTS. All amounts payable by the Company under this
Section 4.3 shall be paid by wire transfer of immediately available funds within
30 days after receipt of an invoice for such amounts.
4.4. SETOFFS. The Bank may at any time, in addition to all other
rights and remedies available to it, setoff against any amount owing to the
Company by the Bank under this Agreement, any amounts owing by the Company to
the Bank under this Agreement.
4.5. INVOICE. The amount of any invoice prepared and delivered by
the Bank under this Agreement shall be deemed to be correct, accurate and
binding upon the Company if the Company makes no objection within 30 days after
the date of such invoice; PROVIDED that the making of any objection shall not
relieve the Company of its obligation to make full payment of the amount set
forth on the related invoice when such amount is otherwise payable pursuant to
this Section 4, it being understood that the Company does not waive its rights
thereby and may, subject to Section
10
10.4, assert a claim with respect to such invoice in an appropriate
proceeding.
Section 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to the Bank that:
5.1. VALID TRANSACTIONS. Each Transaction will be completed in
compliance with the provisions of Section 3 and will create a valid, binding and
legally enforceable obligation of the Cardholder whose name is shown on the
Credit Card to pay to the Company the amount shown on the charge slip, which
obligation to the Company will be discharged in full by the payment made to the
Company by the Bank in respect of such Transaction under Section 4.1 above.
5.2. ACCURATE INFORMATION. Each charge slip will accurately reflect
the Transaction described therein. Each charge slip and Credit Memorandum and
any charge slip or Credit Memorandum information transmitted to the Bank by the
Company will be complete and accurate and in a form deemed necessary by the Bank
to allow Cardholder billing in accordance with applicable law. The Company will
accurately report all returns and other credits to the Bank within the time
period specified in Section 4.
5.3. NO LIENS. No amount due to the Company with respect to any
Transaction will be subject to any lien or encumbrance in favor of any third
party or to any offset, counterclaim or defense of any Person other than the
Bank or its Affiliates.
5.4. MARK. The use of the Mark by the Bank under this Agreement does
not infringe the rights of any other Person.
Section 6. REPRESENTATIONS AND WARRANTIES OF THE BANK. The Bank
hereby represents and warrants to the Company that:
6.1. COMPLIANCE WITH LAWS. Each Credit Card and the related credit
card agreement, all monthly billing statements and any collection efforts of the
Bank conform and will conform in all material respects with all federal or state
laws or regulations applicable to the extension of credit to or the collection
of amounts from consumers including, without limitation, the Truth-in-Lending
Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act and federal
and state bankruptcy and debtor relief laws ("CONSUMER LAWS")
6.2 NON-CONTRAVENTION. The performance by the Bank of its
obligations under this Agreement will not
11
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, any agreement or instrument to which the Bank is
party or by which the Bank is bound, nor will such performance result in any
violation of the provisions of the articles of association or the by-laws of
the Bank or any applicable law or statute or any order, rule or regulation of
any court or governmental agency or body having jurisdiction over the Bank.
Section 7. COVENANTS OF THE COMPANY. The Company hereby covenants
and agrees with the Bank as follows:
7.1. CREDIT CARD NOTICES AND COMMUNICATIONS. The Company will,
consistent with past practices, accept and turn over to the Bank promptly upon
receipt thereof by the Company (i) subject to Section 4.1.4, any payments made
by any Cardholder with respect to any Transaction or any Credit Card and (ii)
any notices or other communications received by the Company with respect to any
Credit Card including, without limitation, customer changes of address and other
information on approved forms.
7.2. COMPLIANCE WITH APPLICABLE LAW. The Company will, at all times,
comply in all material respects with all Consumer Laws.
7.3. RULES. The Company shall comply with such written rules and
operating instructions relating to the use of the Credit Cards, the distribution
of applications, Credit Card security, authorization procedures, "downtime"
procedures and other matters related to this Agreement as the Bank may, from
time to time, promulgate with prior notice to the Company; PROVIDED that such
rules and operating instructions shall be consistent with past practices, with
such changes as shall be approved by the Company in its reasonable discretion.
7.4. CARDHOLDER INQUIRIES AND COMPLAINTS. If a Cardholder makes an
inquiry or complaint to the Company about the nature, quality or quantity of
goods purchased from the Company with a Credit Card, or a Cardholder has made an
inquiry or complaint to the Bank concerning the nature, quality or quantity of
goods purchased from the Company with a Credit Card, the Company shall deal
directly with the Cardholder to resolve any such complaint or inquiry. The
Company shall answer all inquiries from the Bank about complaints made to the
Bank by Cardholders within 10 days after the Company receives an inquiry from
the Bank.
7.5. EQUIPMENT. The Company shall obtain and maintain at its own
expense such point of sale and authorization terminals, credit card imprinters
and other
12
items of-equipment as are necessary for it to receive authorizations,
transmit charge slip and Credit Memorandum information, process credit
applications and perform its obligations under this Agreement. Such point of
sale and authorization terminals shall be capable of communicating with the
computer equipment maintained by the Bank according to such computer programs
and telecommunications protocols as may be specified by the Bank in its
reasonable discretion from time to time subject to reasonable prior notice of
any change in such equipment or protocols.
7.6. EXCLUSIVITY. The Company may not accept or promote any credit
card as payment for its goods or services unless such credit card is a Credit
Card, a proprietary credit card of another division of the Company or any
Affiliate of the Company (whether or not issued by the Bank) or a credit card
issued by a bank or other Person engaged in the business of issuing credit cards
to Persons for the purpose of making payments to third parties generally under
such names as Master Card, Visa, Discover, American Express or Optima. The
Company may not issue its own credit cards or enter into an agreement with any
third party under which credit cards bearing the Mark are issued; PROVIDED that
after the second anniversary of the date hereof, the Company shall be entitled
to negotiate with any third party with respect to the issuance of co-branded or
affinity bank credit cards bearing the Mark and to accept any Bona Fide Offer by
such third party if, at least 30 days prior to accepting such Bona Fide Offer,
the Company provides the Bank with an opportunity to submit a competing offer
with respect to the issuance of co-branded or affinity bank credit cards bearing
the Mark, which competing offer, if it has terms at least as favorable to the
Company as such Bona Fide Offer, shall be accepted by the Company in lieu of
such Bona Fide Offer. For purposes of this Section 7.6, "Bona Fide Offer" means
an offer to the Company with respect to a program of at least two years'
duration for the issuance of co-branded or affinity bank credit cards that is,
in the Company's reasonable judgment, generally competitive in light of
marketplace conditions existing at the time (such marketplace conditions to
include, without limitation, other offers with respect to co-branded or affinity
bank credit cards being made to the Company, its Affiliates and other retail or
catalogue merchants)
7.7. OBSOLETE MATERIALS. The Company shall reimburse the Bank for
the cost of replacing reasonable amounts of obsolete forms and other materials
if such replacement is requested by the Company due to changes in the Mark or in
the logo, colors or styles used to identify or promote the Business.
13
Section 8. COVENANTS OF THE BANK. The Bank hereby covenants and
agrees with the Company as follows:
8.1. COMPLIANCE WITH APPLICABLE LAW. The Bank will, in issuing,
billing, administering, and collecting with respect to the Credit Cards and at
all other times, comply in all material respects with all Consumer Laws.
8.2. COLLECTION. The Bank will use efforts to collect from each
Cardholder the purchase price and additional taxes and other charges of
Transactions consistent with past practices and with its efforts to collect
accounts receivable under other credit cards issued by it; PROVIDED that the
Bank will initiate collection of any account receivable under a Credit Card at
or before the time such account receivable is 60 days past due. The Bank will,
consistent with past practices, determine the use and timing of dunning letters,
statement messages and collection agents and will manage all written-off
accounts (including, without limitation, the management of outside collection
agencies) . The Bank may implement reasonable variances from past collection
practices after prior notice to and consultation with the Company.
8.3. PERFORMANCE STANDARDS. In performing its obligations under this
Agreement, subject to Section 12.11, the Bank shall comply with the performance
standards set forth in Exhibit 8.3, as such performance standards may be
modified from time to time at the reasonable request of the Bank or the Company.
Within 10 days after the end of each fiscal month, the Bank will deliver to the
Company a compliance certificate of the chief executive officer or chief
financial officer of the Bank setting forth in reasonable detail data
demonstrating compliance during such calendar month with such performance
standards. Enhancements to, and modifications or upgrades of, the computer
processing, payment, billing and information services provided by the Bank will
be made from time to time at the reasonable request of the Company. Any such
enhancements, modifications or upgrades shall, to the extent requested by the
Company, be made on terms to be agreed upon.
8.4. FORCE MAJEURE EVENT. After the occurrence of a Force Majeure
Event (as defined in Section 12.11) which disrupts the availability of the
services provided hereunder, the Bank may elect to reestablish the availability
of such services. If any such Force Majeure Event comparably disrupts the
performance of services similar to the services provided hereunder with respect
to one or more other credit cards issued by the Bank, then the Bank shall
reestablish the availability of such services to the same extent and within the
same timetable under
14
comparable circumstances as the comparable services are reestablished with
respect to such other credit cards. The Bank shall promptly notify the
Company of any Force Majeure Event and shall inform the Company whether it
will reestablish services and the timetable therefor. If the Bank chooses
not to reestablish or take measures to reestablish such services within a
reasonable period of time as would be indicated by sound business practice,
the Company shall be free to obtain such services from any supplier thereof.
Section 9. PROPERTY RIGHTS.
9.1. RIGHTS OF THE COMPANY. The Company is the owner of the names
and addresses of customers of the Business; PROVIDED that (i) as set forth in
Section 9.2, the Bank is also the owner of such information with respect to
customers of the Business who are also Cardholders and (ii) The Limited, Inc.
("THE LIMITED") is also the owner of such information with respect to customers
of the Business until the second anniversary of the date, if any, on which the
Company ceases to be an Affiliate of The Limited.
9.2. RIGHTS OF BANK. Except as set forth in Section 9.1, the Bank is
the owner of all information relating to the Cardholders (including names and
addresses) and the Credit Cards, the copyright to all written material contained
in any credit card agreements, applications, billing statements and other forms
used by the Bank in the administration of its agreements with the Cardholders,
all credit scoring systems and all policies of credit insurance issued to the
Bank with respect to any Cardholder; PROVIDED that the Bank shall not be
entitled to sell, rent or otherwise disclose any information relating to the
Cardholders to any third party other than (i) Affiliates of the Company, (ii)
Persons who, in the sole judgment of The Limited, do not compete, directly or
indirectly, with any retail or catalogue business conducted by The Limited or
any of its Affiliates and (iii) in the case of disclosure, credit agencies.
Subject to Section 9.3, the Company will not have any rights in any information
or property of the Bank; PROVIDED that the Bank will provide the Company with
such information the Bank owns with respect to Cardholders as the Company may
reasonably request in order to develop potential marketing or credit strategies.
9.3. DATABASE. (a) It is the intention of the parties that the Bank
will manage, maintain and develop an information marketing database (the
"DATABASE") at its own expense, subject to a mutually satisfactory agreement
with the Company pursuant to which (i) the Company will agree to utilize the
Database, (ii) the Database will be accessible from the Company's offices and
(iii) the Bank will provide
15
the Company with information maintained as part of the Database on terms that
are no less favorable than those offered by the Bank to any other recipient
of comparable information.
(b) Notwithstanding the foregoing, the Bank will, from time to time at
the request of the Company, and without charge, promptly provide the Company
with a list of the names and addresses of all Cardholders, all holders of other
proprietary credit cards of the Company or any Affiliate of the Company (if
issued by the Bank) and all other customers of the Business, any other business
of the Company and the business of any other Affiliate of the Company. The
Company shall reimburse the Bank for its costs of producing and shipping such
list in the format required by the Company within 30 days after receipt of a
request for such reimbursement from the Bank.
(c) Subject to Section 9.2, the Bank may make the Database available,
and provide information marketing services to, third parties on terms reasonably
determined by the Bank; PROVIDED that (i) the allocation among the Bank, the
Company and The Limited of fees charged by the Bank to such third parties shall
be agreed on a program-by-program basis or, in the case of programs existing on
the date hereof, continued consistent with past practices and (ii) the Bank may
not make the Database available, or provide information marketing serviced to,
any Person who, in the sole judgment of The Limited, competes, directly or
indirectly, with any retail or catalogue business conducted by The Limited or
any of its Affiliates.
9.4. ENVELOPE STUFFING.
9.4.1. Subject to the right of the Bank to include in mailings to
Cardholders periodic billing statements and any legal notices which the Bank
believes are necessary or appropriate to send to Cardholders, the Company shall
have the right to have materials advertising its products and services included
in the envelopes containing the periodic statements. Such materials shall
advertise only products and services related to the Business, shall (unless the
Company provides the Bank with notice as provided below) be limited to seven
panels per envelope and shall conform to size requirements established from time
to time by the Bank with reasonable prior notice of any changes. The Company
shall use reasonable efforts (i) to notify the Bank at least 15 days before the
proposed date of any such inclusion and shall provide the Bank with a draft copy
of any such advertising material at the time it notifies the Bank of such
mailing and (ii) to provide the Bank with a seasonal marketing plan at least 30
days before the beginning date of each Season. The Company shall
16
provide the Bank with the materials to be included in the mailing not less
than two Business Days prior to the initial insertion date. If the Company
does not notify the Bank of any such inclusion at least seven days before the
proposed date of such inclusion or if the material included does not take up
the available space, the Bank may utilize the space remaining inside the
envelopes for its own purposes; PROVIDED that (i) unless the Company provides
the Bank with notice at least 45 days before the proposed inclusion date of
the Company's intent to utilize more than seven panels per envelope, the Bank
shall be entitled to utilize at least three panels (or two panels and one
"bangtail" remittance envelope) per envelope for its own purposes and (ii)
all materials included by the Bank shall be subject to the approval of the
Company, which approval shall not be unreasonably withheld.
9.4.2. The Bank shall have the exclusive right to include in any
mailing to Cardholders materials advertising products and services not related
to the Business and the allocation between the Bank and the Company of the
revenues generated thereby shall be agreed on a program-by-program basis or, in
the case of programs existing on the date hereof, continued consistent with past
practices; PROVIDED that such products and services and the related advertising
materials shall be subject to the approval of the Company, which approval shall
not be unreasonably withheld or delayed (it being understood that the Company
may withhold such approval if it determines in its sole discretion that the
advertising of such products or services is inconsistent with the image of the
Business)
9.4.3. Notwithstanding the foregoing, (i) the Bank shall have the
right to use its own "bangtail" remittance envelopes to promote credit life
insurance to existing Cardholders no more than four times per year or two times
per Season and (ii) all materials used, or sent to Cardholders, by the Bank
under existing programs of the Bank (including, but not limited to, credit life
insurance) shall not be subject to the approval of the Company.
9.4.4. The Bank shall provide timely specifications (including size
and weight requirements) for all statement inserts, credit card carriers and
"bangtail" remittance envelopes.
Section 10. INDEMNIFICATION; CLAIMS AND ACTIONS.
10.1. INDEMNIFICATION BY THE COMPANY. The Company hereby indemnifies
the Bank, its Affiliates and the directors, officers, employees and agents of
the Bank or any Affiliate of the Bank (each, a "RELATED PARTY") against, and
agrees to hold them harmless from, any and all losses,
17
claims, damages and liabilities (including, without limitation, the legal
fees and other expenses reasonably incurred in connection with any suit,
action or proceeding or any claim asserted) ("DAMAGES") incurred or suffered
by any of them arising out of or in any way related to any misrepresentation,
breach of any warranty or nonperformance of any covenant made by the Company
under this Agreement or relating to any personal or bodily injury or property
damage alleged to be caused by the sale of goods or rendering of services by
the Company.
10.2. INDEMNIFICATION BY THE BANK. The Bank hereby indemnifies the
Company and its Related Parties against, and agrees to hold them harmless from,
any and all Damages incurred or suffered by any of them arising out of or in any
way related to any misrepresentation, breach of any warranty, or nonperformance
of any covenant made by the Bank under this Agreement.
10.3. THIRD PARTY CLAIMS.
10.3.1. The Bank shall not be liable to the Company for or in
connection with any claim made against the Company by any other Person relating
in any manner to this Agreement or to any services or any other transactions
contemplated hereby (other than (i) claims based upon the Bank's failure to
perform its obligations under this Agreement, its or any of its Related Parties'
negligence or willful misconduct or its failure to comply with any law or
regulation (including, without limitation, any Consumer Law), (ii) claims by
employees or subcontractors of the Bank arising from the performance of services
under this Agreement (other than claims based upon the Company's or any if its
Related Parties' negligence or willful misconduct), (iii) claims relating to
acts or omissions of the Bank and its agents in connection with the collection
of amounts owing from Cardholders and (iv) claims relating to the submission by
the Bank or its agents of data concerning Cardholders to credit agencies), even
if the Bank has been advised of the possibility of such claims.
10.3.2. The Company shall not be liable to the Bank for or in
connection with any claim made against the Bank by any other Person relating in
any manner to this Agreement or to any services or other transactions
contemplated hereby (other than (i) claims based upon the Company's failure to
perform its obligations under this Agreement, its or any of its Related Parties'
negligence or willful misconduct or its failure to comply with any law or
regulation (including, without limitation, any Consumer Law) , (ii) claims by
employees or subcontractors of the Company arising from this Agreement and (iii)
claims
18
relating to goods purchased from the Company), even if the Company has been
advised of the possibility of such claims.
10.4. DISPUTE RESOLUTION AND ACTIONS. The Bank and the Company shall
use their reasonable best efforts to resolve informally any claim of either
party under this Agreement. No action at law or in equity may be instituted by
any party with respect to any such claim unless such party has satisfied its
obligation under the first sentence of this Section 10.4.
10.5. LIMITATION ON ACTIONS. No action against either party,
regardless of form, arising out of or incidental to the matters contemplated by
this Agreement, may be brought by the other party more than one year after the
event giving rise to such cause of action occurred and is known or upon the
exercise of reasonable diligence should have been known to the injured party.
10.6. REIMBURSEMENT FOR LOSSES. If, as a result of any claim made by
the Bank against any third party (including, but not limited to, an insurer),
the Bank actually receives from such third party cash proceeds (or non-cash
proceeds, whether in the form of goods or services) which represent, in whole or
in part, compensation for or reimbursement of losses or costs actually incurred
by the Company, then the Bank will hold that portion of such proceeds fairly
allocable to the Company (taking into consideration all losses or costs actually
incurred by all parties for whose benefit such payments have been received) in
trust on behalf of the Company and will promptly pay over to the Company such
allocable amount of any such cash proceeds (or, as to non-cash proceeds, the
allocable portion or, at the discretion of the Bank, the cash equivalent
thereof)
10.7. SURVIVAL. The provisions of this Section 10 shall survive the
termination of this Agreement.
Section 11. TERMINATION.
11.1 TERM. This Agreement shall remain in effect until the tenth
anniversary of the date hereof, shall be automatically extended until the
twelfth anniversary of the date hereof if the Company does not give at least 12
months' prior written notice of its objection to such extension and shall be
further automatically extended in successive two-year increments if the Bank or
the Company does not give at least 12 months' prior written notice of its
objection to such extension, unless earlier terminated (a) by the Bank or the
Company in the event of a material breach by the other party of any of such
other party's obligations under this Agreement if any such breach remains
uncured 30 days after
19
written notice thereof to such party, (b) automatically in the event that the
Bank or the Company commences a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its
debts under any bankruptcy, insolvency or other similar law now or
hereinafter in effect, seeks the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part
of its assets, consents to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, makes a general assignment for the benefit of
creditors, or fails generally to pay its debts as they become due, or (c) by
the Company upon not less than 60 days' prior written notice to the Bank at
any time after the sixth anniversary of the date hereof if, based on the
application of the attached matrix, the applicable discount rate exceeds the
highest discount rate in such matrix and the costs to the Company under this
Agreement are substantially higher than the costs that would be incurred by
the Company for comparable credit card services over the remaining term of
this Agreement from an independent third-party financial institution;
PROVIDED that the Company shall not be entitled to terminate this Agreement
pursuant to clause (c) unless the Company provides the Bank with a written
description of the material terms on which such third party financial
institution proposes to provide such services and is entitled to submit a
counter-proposal within 30 days of receipt of such description. If the Bank
submits a counter-proposal with terms substantially similar to those set
forth in such third party's proposal or agrees to maintain the discount rate
at the highest discount rate in the attached matrix, this Agreement shall
remain in full force and effect, modified as may be necessary to reflect the
terms included in the Bank's counter-proposal. Subject to Section 11.2, the
termination of this Agreement shall not affect the obligations of the
Cardholders to the Bank, the obligation of the Company and the Bank to make
the payments required under Section 4 with respect to Transactions that
occurred before the date of termination, the rights of the Bank under
Sections 4.4, 7.4 and 9.1 and the rights of the Company under Section 9.1.
Sections 10, 11 and 12 of this Agreement shall survive any such termination.
11.2. EFFECT OF TERMINATION. (a) Upon termination of this Agreement,
the Company will have the option to purchase the then-outstanding Credit Card
account balances not previously written-off by the Bank (subject to the terms of
any securitization of such account balances) at the face amount thereof, without
recourse to the Bank, and will be provided with all related account information
and other account data; PROVIDED that the Company will be required to purchase
such then-outstanding Credit Card account balances on such terms if the Company
objects to any
20
automatic extension of this Agreement pursuant to Section 11.1. All payments
by the Company pursuant to this Section 11.2 shall be made not later than one
Business Day after termination of this Agreement by wire transfer of
immediately available funds to an account notified by the Bank to the Company
not less than two Business Days prior to the payment date. Upon any
termination of this Agreement, (i) the Company (at its sole expense) shall
notify all Cardholders that the Bank is no longer the processor of their
Credit Card accounts and (ii) the Company and the Bank shall cooperate in
facilitating the transition to a new processor.
(b) Upon receipt of any notice of termination from the Company, or
delivery of any notice of termination by the Bank, the Bank shall divide all
then-outstanding Credit Card receivables generated through the use of Credit
Cards under the "Lerner" and "Lane Bryant" Marks into separate retail and mail
order memo account balances based on the ratio of retail and mail order
purchases by the relevant Cardholder during the 12 months preceding the month in
which such notice is received or delivered by the Bank, as the case may be.
During the period between the delivery of such notice and termination of this
Agreement, purchases and returns through such Credit Cards shall be applied to
the relevant account balance based upon the source of the relevant purchase and
payments, finance charges and any other adjustments will be applied to the
separate balances based upon mail order/retail account balance ratios of such
accounts at the end of the preceding month. Upon termination of this Agreement,
the Company will have the option to purchase the then-outstanding "Lerner" and
"Lane Bryant" retail account balances in accordance with subsection (a) of this
Section 11.2.
11.3. EXTENSION. Any services which the parties hereto mutually
agree to be rendered after the termination of this Agreement shall be rendered
pursuant to all of the terms and provisions of this Agreement.
Section 12. MISCELLANEOUS.
12.1. NOTICES. All notices, requests and other communications to any
party hereunder shall be in writing (including telecopy or similar writing) and
shall be given, if to the Company, to:
Lane Bryant, Inc.
Three Limited Parkway
Columbus, Ohio 43230
Attn: General Counsel
Telecopy: 614-479-7188
21
with a copy to:
The Limited, Inc.
Three Limited Parkway
Columbus, Ohio 43230
Attn: General Counsel
Telecopy: 614-479-7188
and a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attn: Dennis S. Hersch
Telecopy: 212-450-4800
and if to the Bank, to:
World Financial Network National Bank
4590 East Broad Street
Columbus, Ohio 43213
Attn: Daniel T. Groomes
Telecopy: 614-755-3418
or to such other address or telecopy number and with such other copies, as such
party may hereafter specify for the purpose by notice to the other parties.
Each such notice, request or other communication shall be effective (i) if given
by telecopy, when such telecopy is transmitted to the telecopy number specified
in this Section and evidence of receipt is received or (ii) if given by any
other means, upon delivery or refusal of delivery at the address specified in
this Section 12.1.
12.2. AMENDMENTS; NO WAIVERS.
12.2.1. Any provision of this Agreement may be amended only if such
amendment is in writing and signed by all parties thereto.
12.2.2. No failure or delay by any party in exercising any right,
power or privilege under this Agreement shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
12.3. EXPENSES. All costs and expenses incurred in connection with
the this Agreement or the transactions contemplated hereby shall be paid by the
party incurring such cost or expense.
22
12.4. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties and their respective
successors and assigns; PROVIDED that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of the other party. Notwithstanding the foregoing, (i) the Bank may from
time to time assign any or all of its rights and obligations hereunder to any
Affiliate of the Bank, provided that any such assignee of the Bank's obligations
hereunder shall have the capability to perform such obligations without
impairing the quality of the services provided to the Company, (ii) the Company
shall assign or otherwise transfer all of its rights and obligations under this
Agreement (A) to the purchaser of all or substantially all of the assets of the
Business or (B) to any corporation which is a successor (whether by merger,
consolidation or otherwise) to the Company or any successor (whether by merger,
consolidation or otherwise) thereto, in each case subject to the execution by
such assignee or transferee of an agreement to be bound by the provisions of
this Agreement and (iii) the Bank may from time to time sell accounts receivable
for securitization, retaining its processing and servicing obligations with
respect thereto (it being understood that (A) the purchaser of such accounts
receivable shall have no recourse against the Company for any reason whatsoever
and (B) the Bank hereby indemnifies the Company and its Related Parties against,
and agrees to hold them harmless from, any and all Damages incurred or suffered
by any of them in connection with any claims made by such purchaser)
12.5. GOVERNING LAW. This Agreement shall be construed in accordance
with and governed by the law of the State of New York (without regard to the
choice of law provisions thereof)
12.6. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto or thereto shall
have received a counterpart hereof signed by the other parties hereto.
12.7. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements, understandings and negotiations, both written
and oral, between the parties with respect to such subject matter. No
representation, inducement, promise, understanding, condition or warranty not
set forth herein has been made or relied upon by any party hereto. Neither this
Agreement nor any provision thereof is intended to
23
confer upon any Person other than the parties any rights or remedies
hereunder.
12.8. JURISDICTION. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated thereby may be brought
against any of the parties in the United States District Court for the Southern
District of New York or any state court sitting in the City of New York, Borough
of Manhattan, and each of the parties hereby consents to the exclusive
jurisdiction of such court (and of the appropriate appellate courts) in any such
suit, action or proceeding and waives any objection to venue laid therein.
Process in any such suit, action or proceeding may be served on any party
anywhere in the world, whether within or without the State of New York. Without
limiting the foregoing, the parties agree that service of process upon such
party at the address referred to in Section 12.1, together with written notice
of such service to such party, shall be deemed effective service of process upon
such party.
12.9. CAPTIONS. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
12.10. DEFINED TERMS. The following terms, as used herein, shall
have the following meanings:
12.10.1. "AFFILIATE" means, with respect to any Person, any Person
directly or indirectly controlling, controlled by, or under common control with
such other Person. For purposes of this definition, "CONTROL" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "CONTROLLING" and
"CONTROLLED" have meanings correlative to the foregoing.
12.10.2. "BUSINESS DAY" means a day other than a Saturday, Sunday or
other day on which commercial banks in New York, New York or Columbus, Ohio are
authorized or required by law to close.
12.10.3. "PERSON" means an individual, a corporation, a partnership,
an association, a trust or other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
12.10.4. "SEASON" means (i) the period from the first day of the
fiscal month of February to the last day of the fiscal month of July and (ii)
the period from the first
24
day of the fiscal month of August to the last day of the fiscal month of
January.
12.11. FORCE MAJEURE. Notwithstanding the provisions of Section 8.3,
neither the Bank nor its affiliates shall be liable in any manner to the Company
for any failure to perform their obligations under this Agreement resulting in
any manner from delays failure in performance, loss or damage due to fire,
strike, embargo, explosion, power blackout, earthquake, flood, war, the
elements, labor disputes, civil or military authority, acts of God, public
enemy, inability to secure fuel, acts or omissions of carriers or other causes
beyond their reasonable control, whether or not similar to any of the foregoing
(a "FORCE MAJEURE EVENT").
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers effective on the day and year first
above written.
25
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers effective on the day and year first above
written.
WORLD FINANCIAL NETWORK
NATIONAL BANK
By: /s/ Timothy B. Lyons
----------------------------
Name: Timothy B. Lyons
Title:
LANE BRYANT, INC.
By: /s/ Timothy B. Lyons
----------------------------
Name: Timothy B. Lyons
Title:
SIERRA NEVADA FACTORING, INC.
By: /s/ Timothy B. Lyons
----------------------------
Name: Timothy B. Lyons
Title:
26
Exhibit 10.9
CREDIT CARD PROCESSING AGREEMENT
This Credit Card Processing Agreement is made as of this 31st day of
January, 1996 between WORLD FINANCIAL NETWORK NATIONAL BANK, a national
banking association (the "BANK"), and Henri Bendel, Inc., a Delaware
corporation (the "CORPORATION"), and Western Factoring, Inc., a Nevada
corporation ("FACTORING") (the Corporation and Factoring being collectively
referred to herein as the "COMPANY").
WHEREAS the Company and the Bank believe that it is desirable and in
their respective best interests for the Bank to continue, in a manner
generally consistent with past practices, to issue credit cards bearing the
trade names, trademarks, logos and service marks used in the Company's Henri
Bendel retail or catalogue business (the "BUSINESS") which will allow the
customers of the Company to purchase goods from the Company using funds
advanced by the Bank; and
WHEREAS in order to implement such arrangements, the parties hereto
desire to enter into this Agreement;
NOW, THEREFORE, the parties hereby agree as follows:
Section 1. TRADEMARKS. The Company hereby authorizes the Bank to
use the trademark "Henri Bendel" on credit cards owned or issued by the Bank,
monthly billing statements, collection correspondence, credit card
agreements, credit applications, customer service correspondence and in such
other written and oral communications with cardholders as are necessary or
convenient in connection with this Agreement, in each case consistent with
past practices. The "Henri Bendel" trademark is referred to herein as the
"MARK". The Company shall have the right to approve in its sole discretion
the "art" (including colors and font styles) for all proposed uses of the
Mark by the Bank. The Bank shall not use the Mark for any purpose other than
as set forth in the first sentence of this Section 1.
Section 2. CREDIT CARD SYSTEM.
2.1. NEW CREDIT CARDS.
2.1.1. ISSUANCE OF CREDIT CARDS. To the extent requested by the
Company, the Bank will issue credit cards bearing the Mark ("CREDIT CARDS")
to customers of the Business who apply for such Credit Cards and related
extensions of credit. Such customers (i) must qualify for the extension of
credit under credit standards related to
new account approvals, credit limits and authorization management ("CREDIT
STANDARDS") which will be determined by the Bank from time to time and (ii)
must accept the Bank's standard form of credit card agreement containing the
terms and conditions governing extensions of credit to Persons who hold
Credit Cards and their authorized users (attached hereto as Exhibit
2.1.1(a)). Notwithstanding the foregoing, (i) the Credit Standards
established by the Bank from time to time in connection with the issuance of
Credit Cards for use in connection with the Business shall be consistent with
past practices (as described in Exhibit 2.1.1(b)), with such changes as shall
be (A) approved by the Company in its reasonable discretion or (B) determined
by the Bank in good faith to be necessary from the standpoint of safe and
sound banking practices and (ii) the Bank may make any change in the terms of
its agreement with any person who holds a Credit Card (including repayment
terms, fees and finance charge rates) after prior notice to and consultation
with the Company. The Bank hereby confirms its understanding that the
Company intends to offer and promote credit as outlined in Section 2.2. The
Bank will bear the costs of the issuance of Credit Cards under this Section
2.1.
2.1.2. CREDIT MAXIMIZATION. The Company will be entitled to use
credit related promotional strategies consistent with past practices. The
Bank will work in good faith with the Company to develop business strategies
with respect to the issuance of Credit Cards intended to maximize the
potential of the Business and, in that regard, will consider in good faith
proposals involving variances from the Bank's general Credit Standards or
changes in the terms of the Bank's agreement with any person who holds a
Credit Card; PROVIDED that subject to compliance with the provisions of
Section 2.1.1, Credit Standards and the terms of such agreement shall in all
circumstances be determined by the Bank. The terms of any program involving
variances from the Bank's general Credit Standards or changes in the terms of
the Bank's agreement with any person who holds a Credit Card, including
(without limitation) fees or other charges to be paid by either party, shall
be agreed on a program-by-program basis.
2.2. PROMOTION. The Company will use its reasonable efforts to
promote the use of Credit Cards in the Business and to acquire new
Cardholders (as defined below), for the Bank through the use of, for
example, "instant credit," "quick credit," pre-approved solicitations,
applications and promotional material displayed in stores and inserted in
catalogues and special offers to Cardholders, in each case consistent with
past practices. The costs incurred by the Company and the Bank (including,
among other things, the cost of printing application forms, promotional
material, pre-approved solicitations and instant
2
and quick credit contracts and the cost of special offers) will be borne by
the Company and the Bank on terms to be negotiated from time to time in a
manner consistent with past practices. The Bank shall have two Business Days
to review for legal compliance all credit application forms and marketing
materials (including, without limitation, those referred to above) prior to
their being printed.
Section 3. ACCEPTANCE OF CREDIT CARDS. The Company will permit
Persons who hold Credit Cards (subject to the restrictions of this Agreement)
or other credit cards owned by the Bank that the Bank has designated and
their authorized users ("CARDHOLDERS") to purchase goods sold by the Business
without any cash payment by use of a Credit Card, subject to the following
conditions:
3.1. CHARGE SLIP (CREDIT CARD PRESENTED). If the customer presents
a Credit Card at the time of sale, the Company will maintain a record of the
sale in a form acceptable to the Bank which reflects the following:
3.1.1. A brief identification of the property or service purchased
(the "TRANSACTION");
3.1.2. The date of the Transaction;
3.1.3. The dollar amount of the purchase price of the merchandise or
service which was the subject of the Transaction, including applicable
shipping, handling and taxes;
3.1.4. An imprint or electronic capture of the Credit Card account
number or, in the event of equipment malfunction, a written notation of such
account number; and
3.1.5. The Cardholder's signature.
3.2. CHARGE SLIP (CREDIT CARD NOT PRESENTED). The Bank
acknowledges and agrees that a Cardholder need not present a Credit Card at
the time of sale and that, subject to Section 3.5, the Company may accept
charges to a Credit Card verbally from the customer or via a written order
form from the customer. If the customer does not present a Credit Card at
the time of sale, the Company will maintain a record of the sale in a form
acceptable to the Bank which reflects, in lieu of the information set forth
in Section 3.1.1 through 3.1.5, the following:
3.2.1. A brief identification of the Transaction;
3.2.2. The date of the Transaction;
3
3.2.3. The dollar amount of the purchase price of the merchandise or
service which was the subject of the Transaction, including applicable
shipping, handling and taxes;
3.2.4. A written notation of the Credit Card account number, which
shall have been obtained from the customer and recorded in the Company's
customer file;
3.2.5. The customer's name and address and, except in the case of
catalogue purchases, personal identification type and number; and
3.2.6. If applicable, the name and address to where the merchandise
which was the subject of the Transaction was shipped and the date and method
of shipment.
3.3. RETENTION OF CHARGE SLIP. The Company will retain a legible
copy of each charge slip for six months following the date of the Transaction
and will provide such copy to the Bank within 30 days of the Bank's request
therefor; PROVIDED that the Bank will request delivery of such information
only in the case of a bona fide dispute (the existence of such dispute to be
determined by the Bank in its reasonable discretion) relating to the
underlying Transaction, upon the inquiry of the applicable Cardholder or as
requested by auditors of the Bank in connection with their audit of the
Bank's financial statements or by any governmental authority.
3.4. AUTHORIZATION. The Transaction is authorized by the Bank in
accordance with the floor limits and other procedures in effect at the time
or such authorization is dispensed with under rules established by the Bank
from time to time in accordance with Section 8.3 to deal with situations in
which authorization is not available because of disruption of the Bank's
computer system or other causes provided for in such rules, consistent with
past practice.
3.5. CHARGEBACKS. The Company agrees to accept as a chargeback
any charge on a Credit Card where:
3.5.1. The Cardholder disputes the charge and the Company fails to
provide a legible copy of the charge slip within 30 days of the Bank's
request therefor in accordance with Section 3.3;
3.5.2. The Company failed to obtain authorization from the Bank in
accordance with Section 3.4;
3.5.3. The Company failed to complete the charge slip in accordance
with Section 3.1 or 3.2, as applicable;
4
3.5.4. A Company employee fraudulently misused the Credit Card or
account number;
3.5.5. A dispute arises from the Cardholder being charged or
credited more than once for the same sale, payment or return;
3.5.6. A dispute with the Cardholder arises from a voided
Transaction or an invalid Credit Card account number;
3.5.7. A dispute with the Cardholder arises from an improperly
opened Credit Card account, or the account is otherwise uncollectible, where
a Company employee failed to comply with new account procedures in effect at
the time the account was opened;
3.5.8. The Bank, consistent with past practices, gives the
Cardholder credit for (or accepts as payment) a non-expired discount coupon
or gift certificate in respect of a prior purchase; or
3.5.9. A dispute arises from the Company's failure properly to
identify a catalogue purchaser as the Cardholder where such failure results
in merchandise being shipped without the actual Cardholder's authorization.
The amount charged back with supporting detail will be invoiced to
the Company weekly, and all required payments by the Company shall be made
within 30 days after receipt of an invoice. If the Company pays the Bank any
chargeback amount pursuant to this Section 3.5 or if such payment is netted
against amounts payable by the Bank pursuant to Section 4.1.1, any
remittances relating to such chargeback from the Cardholder subsequently
collected by the Bank shall, to the extent not refunded to the Cardholder, be
credited by the Bank to the Company.
Section 4. PAYMENT.
4.1. PAYMENT BY BANK.
4.1.1. The Bank will pay to the Company, as full consideration for
any Transaction between the Company and any Cardholder using a Credit Card,
as to which the Company has complied with the provisions of Section 3 above,
the amount shown on the records of the Company for each Transaction,
including all applicable shipping, handling and taxes, less a discount, which
discount shall be equal to the discount rate determined in accordance with
Section 4.1.5 (expressed as a fraction) multiplied by the amount shown on the
records of the Company for each Transaction (exclusive of all applicable
shipping, handling and taxes).
5
4.1.2. The Bank will pay such amount by transferring immediately
available funds to an account designated by the Company at any bank to which
the Bank may make electronic fund transfers before the end of the second
Business Day following the receipt by the Bank of the information required by
Section 3.1 or 3.2, such information to be properly formatted and edited and
transferred via a telecommunications connection between the Company and the
Bank pursuant to such computer programs and telecommunications protocols as
the Bank may, in its reasonable discretion, designate from time to time,
subject to reasonable prior notice. The Company will transmit (in the manner
referred to above) to the Bank an audited and balanced file in the format
specified by the Bank containing all such information within two Business
Days after the occurrence of the underlying Transaction; PROVIDED that if, as
a result of technical disruptions, any store locations are not polled within
a normal period after the occurrence of the underlying Transactions, the
Company will transmit such information relating to such store locations as
soon as reasonably practicable after polling is completed.
4.1.3. The Company may not attempt to collect any amount from any
Cardholder with respect to a Transaction which has been paid for by the Bank
under this Section 4.1 and not charged back to the Company pursuant to
Section 3.5.
4.1.4. The Company will, consistent with past practices, accept
payments from Cardholders for amounts due on Credit Cards ("IN-STORE
PAYMENTS"). Any In-Store Payments received by the Company will be held in
trust for the Bank and its assigns and netted against amounts payable by the
Bank pursuant to Section 4.1.1 (PROVIDED that the Company shall not be
required to keep In-Store Payments separate from other payments received by
the Company) and evidence of such payments will be transmitted to the Bank on
a daily basis in accordance with the procedures set forth in Section 4.1.2.
Notwithstanding the foregoing:
(a) if any bankruptcy or other insolvency proceeding has been
commenced against the Company (and so long as the same has not been
dismissed), the Company shall promptly comply with any written instruction (a
"STORE PAYMENT NOTICE") received by the Company from the Bank or any
successor to the Bank as "Servicer" under the Pooling and Servicing Agreement
referred to below (the Bank or any such successor being the "SERVICER") to
take either of the following actions (as specified in such instruction):
(i) cease accepting In-Store Payments and thereafter inform
Cardholders who wish to make In-Store Payments that payment should
instead be sent to Servicer (but only if the Servicer is required by
the
6
Pooling and Servicing Agreement to give such notice) or
(ii) (A) deposit an amount equal to all In-Store Payments
received by each retail location operated by the Company, not later than
the Business Day following receipt, into a segregated trust account (the
"STORE ACCOUNT") established by the Company for this purpose and,
pending such deposit, to hold all In-Store Payments in trust for the
Bank and its assigns, (B) use commercially reasonable efforts not to
permit any amounts or items not constituting In-Store Payments to be
deposited in the Store Account and (C) cause all available funds in
each Store Account to be transferred on a daily basis to an account
designated in the Store Payment Notice;
PROVIDED that the Company need not take the actions specified in clause (i)
or clause (ii) if the Company or any of its affiliates provides the Servicer
or the Trustee under (and as defined in) the Pooling and Servicing Agreement
with a letter of credit, surety bond or other similar instrument covering
collection risk with respect to In-Store Payments and all conditions
specified in the Pooling and Servicing Agreement with respect to such letter
of credit, surety bond or other similar instrument are satisfied;
(b) if and to the extent that the Bank so requests in
writing at a time when the Bank is required by the Pooling and Servicing
Agreement to make such request, In-Store Payments shall no longer be netted
against amounts payable by the Bank pursuant to Section 4.1.1, but instead
the Company shall transfer to the Bank by wire transfer of immediately
available funds (or, if the aggregate amount to be transferred pursuant to
this clause (b) and Section 4.2 is less than $10,000, by check), not later
than the third Business Day following receipt of any In-Store Payments, an
amount equal to the sum of such In-Store Payments.
So long as the Company complies with instructions delivered in accordance with
paragraph (a) or (b), any amounts payable by the Bank pursuant to Section 4.1.1
shall be made without deduction for In-Store Payments.
For purposes of the foregoing, the "POOLING AND SERVICING
AGREEMENT" means the Pooling and Servicing Agreement dated as of January 17,
1996 among the Bank and The Bank of New York, as trustee, including each
Supplement thereunder, as the same may be amended, supplemented or otherwise
modified from time to time, except that no amendment, supplement or other
modification to such Agreement that affects the circumstances in which the
Company may be required to take the actions referred to in
7
paragraph (a) or (b) above or in Section 4.2.3 shall be given effect for
purposes of this Agreement unless consented to by the Company.
4.1.5. DISCOUNT RATE. The applicable discount rate referred to in
Section 4.1.1 shall be the then applicable discount rate determined in
accordance with the matrix set forth in Exhibit 4.1.5; PROVIDED that in the
event of a legislated or judicial reduction in the annual percentage rate or
fees that may be charged by the Bank to Cardholders, the Company and the Bank
agree to negotiate in good faith an increase in the discount rate.
4.2. PAYMENT BY COMPANY. If the Bank has paid the Company for any
Transaction and
4.2.1 If:
(a) the representations and warranties of the Company with
respect to such Transaction, as set forth in Sections 5.1 through 5.3 below,
are not true in all material respects; or
(b) any merchandise which was the subject of such Transaction is
returned to the Company and the Company, pursuant to its policies concerning
returned merchandise, accepts such merchandise for credit; or
(c) in order to settle a dispute concerning the nature, quality
or quantity of goods purchased from the Company with the Credit Card, the
Company agrees to refund all or part of the purchase price thereof; then
4.2.2. The Company:
(a) shall pay the Bank an amount equal to the face amount of such
Transaction or portion thereof refunded to the customer, less any discount
actually taken by the Bank when it made payment to the Company in
consideration for such Transaction pursuant to Section 4.1.1;
(b) shall create a written memorandum of such Transaction setting
forth the information required by Section 3 above (a "CREDIT MEMORANDUM")
(c) shall transmit the information contained in such Credit
Memorandum to the Bank by the method of electronic transmission referred to
in Section 4.1.2 above; and
(d) subject to Section 4.2.3, shall permit the payment required
by this Section 4.2 to be netted against amounts payable by the Bank pursuant
to Section 4.1.1. The
8
Company shall retain any such Credit Memorandum in the same manner and for
the same time as the charge slip referred to in Section 3.3 and shall
promptly deliver any such Credit Memorandum to the Bank upon its request. If
the Company pays the Bank any amount for a Transaction pursuant to this
Section 4.2 or if such payment is netted against amounts payable by the Bank
pursuant to Section 4.1.1, any remittances relating to such Transaction from
the customer subsequently collected by the Bank shall, to the extent not
refunded to the Cardholder, be credited by the Bank to the Company.
4.2.3. Notwithstanding clause (d) of Section 4.2.2, if and to the
extent that the Bank so requests in writing at a time when the Bank is
required by the Pooling and Servicing Agreement to make such request, amounts
payable by the Company pursuant to Section 4.2 ("ADJUSTMENT PAYMENTS") shall
no longer be netted against amounts payable by the Bank pursuant to Section
4.1.1, but instead the Company shall transfer the amount of each Adjustment
Payment to the Bank by wire transfer of immediately available funds (or, if
the aggregate amount to be transferred pursuant to this Section 4.2 and
clause (b) of Section 4.1.4 is less than $10,000, by check), not later than
the second Business Day following the date on which the events giving risk to
such Adjustment Payment occur (and amounts payable by the Bank pursuant to
Section 4.1.1 shall be made without deduction for Adjustment Payments).
4.3. OTHER FEES.
4.3.1. DEFERRED PAYMENT. If any Transaction between the Company and
any Cardholder using a Credit Card is consummated on a deferred payment basis
(for which the period of deferral may not exceed 90 days), then for each
month during the period of deferral, the Company will pay the Bank an amount
equal to the Deferred Payment Rate for such month multiplied by the average
daily balance of purchase price so deferred during such month. For purposes
of this Section 4.3, "DEFERRED PAYMENT RATE" means, for any month, (i) if the
debt of the Bank has an implied investment grade rating at all times during
such month, the average interest rate paid by the Bank to obtain funds during
such month, and (ii) if the debt of the Bank does not have an implied
investment grade rating at all times during such month, the then-current
reference rate or index maintained or provided by a nationally recognized
investment banking firm (which firm shall be reasonably acceptable to the
Company and the Bank) in respect of issuers whose debt has the lowest
investment grade rating.
4.3.2. POSTAL RATE ADJUSTMENT. The Company agrees to reimburse the
Bank for any costs incurred by the
9
Bank as a result of changes in postal rates or rules applicable to mailings
to Cardholders after the date hereof; PROVIDED that the postal costs and
postal discounts applicable to mailings to Cardholders shall be no less
favorable than the postal costs and postal discounts applicable to comparable
mailings to holders of any other credit cards issued by the Bank. The Bank
and the Company agree to use their reasonable efforts to minimize postal
costs and maximize postal discounts.
4.3.3. SPECIAL PROJECTS. With respect to special services provided
by the Bank from time to time with respect to the Business (including,
without limitation, consulting, surveys, gift certificate calls and
fulfillment, rebate fulfillment, telemarketing and special processing or
accounting reports required in connection with promotional activities), the
Company will pay to the Bank amounts to be agreed on a program-by-program
basis. To the extent not otherwise provided for in this Agreement, (i) the
Bank shall not incur expenses required to be paid or reimbursed by the
Company for any project in amounts in excess of $1,000 without having first
obtained prior written or oral authorization from the Company for such
expenses; and (ii) the Bank shall not incur expenses required to be paid or
reimbursed by the Company for any project in amounts in excess of $50,000
without having first obtained prior written authorization from the Company
for such expenses; PROVIDED that, in the event any terms of any such written
authorization are in conflict with the terms of this Agreement, the terms of
this Agreement shall be controlling.
4.3.4. PAYMENTS. All amounts payable by the Company under this
Section 4.3 shall be paid by wire transfer of immediately available funds
within 30 days after receipt of an invoice for such amounts.
4.4. SETOFFS. The Bank may at any time, in addition to all other
rights and remedies available to it, setoff against any amount owing to the
Company by the Bank under this Agreement, any amounts owing by the Company to
the Bank under this Agreement.
4.5. INVOICE. The amount of any invoice prepared and delivered by
the Bank under this Agreement shall be deemed to be correct, accurate and
binding upon the Company if the Company makes no objection within 30 days
after the date of such invoice; PROVIDED that the making of any objection
shall not relieve the Company of its obligation to make full payment of the
amount set forth on the related invoice when such amount is otherwise payable
pursuant to this Section 4, it being understood that the Company does not
waive its rights thereby and may, subject to Section
10
10.4, assert a claim with respect to such invoice in an appropriate
proceeding.
Section 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to the Bank that:
5.1. VALID TRANSACTIONS. Each Transaction will be completed in
compliance with the provisions of Section 3 and will create a valid, binding
and legally enforceable obligation of the Cardholder whose name is shown on
the Credit Card to pay to the Company the amount shown on the charge slip,
which obligation to the Company will be discharged in full by the payment
made to the Company by the Bank in respect of such Transaction under Section
4.1 above.
5.2. ACCURATE INFORMATION. Each charge slip will accurately
reflect the Transaction described therein. Each charge slip and Credit
Memorandum and any charge slip or Credit Memorandum information transmitted
to the Bank by the Company will be complete and accurate and in a form deemed
necessary by the Bank to allow Cardholder billing in accordance with
applicable law. The Company will accurately report all returns and other
credits to the Bank within the time period specified in Section 4.
5.3. NO LIENS. No amount due to the Company with respect to any
Transaction will be subject to any lien or encumbrance in favor of any third
party or to any offset, counterclaim or defense of any Person other than the
Bank or its Affiliates.
5.4. MARK. The use of the Mark by the Bank under this Agreement
does not infringe the rights of any other Person.
Section 6. REPRESENTATIONS AND WARRANTIES OF THE BANK. The Bank
hereby represents and warrants to the Company that:
6.1. COMPLIANCE WITH LAWS. Each Credit Card and the related
credit card agreement, all monthly billing statements and any collection
efforts of the Bank conform and will conform in all material respects with
all federal or state laws or regulations applicable to the extension of
credit to or the collection of amounts from consumers including, without
limitation, the Truth-in-Lending Act, the Equal Credit Opportunity Act, the
Fair Credit Reporting Act and federal and state bankruptcy and debtor relief
laws ("CONSUMER LAWS")
6.2 NON-CONTRAVENTION. The performance by the Bank of its
obligations under this Agreement will not
11
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, any agreement or instrument to which the Bank is
party or by which the Bank is bound, nor will such performance result in any
violation of the provisions of the articles of association or the by-laws of
the Bank or any applicable law or statute or any order, rule or regulation of
any court or governmental agency or body having jurisdiction over the Bank.
Section 7. COVENANTS OF THE COMPANY. The Company hereby covenants and
agrees with the Bank as follows:
7.1. CREDIT CARD NOTICES AND COMMUNICATIONS. The Company will,
consistent with past practices, accept and turn over to the Bank promptly upon
receipt thereof by the Company (i) subject to Section 4.1.4, any payments made
by any Cardholder with respect to any Transaction or any Credit Card and (ii)
any notices or other communications received by the Company with respect to
any Credit Card including, without limitation, customer changes of address
and other information on approved forms.
7.2. COMPLIANCE WITH APPLICABLE LAW. The Company will, at all times,
comply in all material respects with all Consumer Laws.
7.3. RULES. The Company shall comply with such written rules and
operating instructions relating to the use of the Credit Cards, the
distribution of applications, Credit Card security, authorization procedures,
"downtime" procedures and other matters related to this Agreement as the Bank
may, from time to time, promulgate with prior notice to the Company; PROVIDED
that such rules and operating instructions shall be consistent with past
practices, with such changes as shall be approved by the Company in its
reasonable discretion.
7.4. CARDHOLDER INQUIRIES AND COMPLAINTS. If a Cardholder makes
an inquiry or complaint to the Company about the nature, quality or quantity
of goods purchased from the Company with a Credit Card, or a Cardholder has
made an inquiry or complaint to the Bank concerning the nature, quality or
quantity of goods purchased from the Company with a Credit Card, the Company
shall deal directly with the Cardholder to resolve any such complaint or
inquiry. The Company shall answer all inquiries from the Bank about
complaints made to the Bank by Cardholders within 10 days after the Company
receives an inquiry from the Bank.
7.5. EQUIPMENT. The Company shall obtain and maintain at its own
expense such point of sale and authorization terminals, credit card
imprinters and other
12
items of equipment as are necessary for it to receive authorizations, transmit
charge slip and Credit Memorandum information, process credit applications
and perform its obligations under this Agreement. Such point of sale and
authorization terminals shall be capable of communicating with the computer
equipment maintained by the Bank according to such computer programs and
telecommunications protocols as may be specified by the Bank in its reasonable
discretion from time to time subject to reasonable prior notice of any change
in such equipment or protocols.
7.6. EXCLUSIVITY. The Company may not accept or promote any
credit card as payment for its goods or services unless such credit card is a
Credit Card, a proprietary credit card of another division of the Company or
any Affiliate of the Company (whether or not issued by the Bank) or a credit
card issued by a bank or other Person engaged in the business of issuing
credit cards to Persons for the purpose of making payments to third parties
generally under such names as Master Card, Visa, Discover, American Express
or Optima. The Company may not issue its own credit cards or enter into an
agreement with any third party under which credit cards bearing the Mark are
issued; PROVIDED that after the second anniversary of the date hereof, the
Company shall be entitled to negotiate with any third party with respect to
the issuance of co-branded or affinity bank credit cards bearing the Mark and
to accept any Bona Fide Offer by such third party if, at least 30 days prior
to accepting such Bona Fide Offer, the Company provides the Bank with an
opportunity to submit a competing offer with respect to the issuance of
co-branded or affinity bank credit cards bearing the Mark, which competing
offer, if it has terms at least as favorable to the Company as such Bona Fide
Offer, shall be accepted by the Company in lieu of such Bona Fide Offer. For
purposes of this Section 7.6, "BONA FIDE OFFER" means an offer to the Company
with respect to a program of at least two years' duration for the issuance of
co-branded or affinity bank credit cards that is, in the Company's reasonable
judgment, generally competitive in light of marketplace conditions existing
at the time (such marketplace conditions to include, without limitation,
other offers with respect to co-branded or affinity bank credit cards being
made to the Company, its Affiliates and other retail or catalogue merchants)
7.7. OBSOLETE MATERIALS. The Company shall reimburse the Bank for
the cost of replacing reasonable amounts of obsolete forms and other
materials if such replacement is requested by the Company due to changes in
the Mark or in the logo, colors or styles used to identify or promote the
Business.
13
Section 8. COVENANTS OF THE BANK. The Bank hereby covenants and agrees
with the Company as follows:
8.1. COMPLIANCE WITH APPLICABLE LAW. The Bank will, in issuing,
billing, administering, and collecting with respect to the Credit Cards and at
all other times, comply in all material respects with all Consumer Laws.
8.2. COLLECTION. The Bank will use efforts to collect from each
Cardholder the purchase price and additional taxes and other charges of
Transactions consistent with past practices and with its efforts to collect
accounts receivable under other credit cards issued by it; PROVIDED that the
Bank will initiate collection of any account receivable under a Credit Card
at or before the time such account receivable is 60 days past due. The Bank
will, consistent with past practices, determine the use and timing of dunning
letters, statement messages and collection agents and will manage all
written-off accounts (including, without limitation, the management of outside
collection agencies). The Bank may implement reasonable variances from past
collection practices after prior notice to and consultation with the Company.
8.3. PERFORMANCE STANDARDS. In performing its obligations under
this Agreement, subject to Section 12.11, the Bank shall comply with the
performance standards set forth in Exhibit 8.3, as such performance standards
may be modified from time to time at the reasonable request of the Bank or
the Company. Within 10 days after the end of each fiscal month, the Bank
will deliver to the Company a compliance certificate of the chief executive
officer or chief financial officer of the Bank setting forth in reasonable
detail data demonstrating compliance during such calendar month with such
performance standards. Enhancements to, and modifications or upgrades of,
the computer processing, payment, billing and information services provided
by the Bank will be made from time to time at the reasonable request of the
Company. Any such enhancements, modifications or upgrades shall, to the
extent requested by the Company, be made on terms to be agreed upon.
8.4. FORCE MAJEURE EVENT. After the occurrence of a Force Majeure
Event (as defined in Section 12.11) which disrupts the availability of the
services provided hereunder, the Bank may elect to reestablish the
availability of such services. If any such Force Majeure Event comparably
disrupts the performance of services similar to the services provided
hereunder with respect to one or more other credit cards issued by the Bank,
then the Bank shall reestablish the availability of such services to the same
extent and within the same timetable under
14
comparable circumstances as the comparable services are reestablished with
respect to such other credit cards. The Bank shall promptly notify the
Company of any Force Majeure Event and shall inform the Company whether it
will reestablish services and the timetable therefor. If the Bank chooses
not to reestablish or take measures to reestablish such services within a
reasonable period of time as would be indicated by sound business practice,
the Company shall be free to obtain such services from any supplier thereof.
Section 9. PROPERTY RIGHTS.
9.1. RIGHTS OF THE COMPANY. The Company is the owner of the names
and addresses of customers of the Business; PROVIDED that (i) as set forth in
Section 9.2, the Bank is also the owner of such information with respect to
customers of the Business who are also Cardholders and (ii) The Limited, Inc.
("THE LIMITED") is also the owner of such information with respect to
customers of the Business until the second anniversary of the date, if any,
on which the Company ceases to be an Affiliate of The Limited.
9.2. RIGHTS OF BANK. Except as set forth in Section 9.1, the Bank
is the owner of all information relating to the Cardholders (including names
and addresses) and the Credit Cards, the copyright to all written material
contained in any credit card agreements, applications, billing statements and
other forms used by the Bank in the administration of its agreements with the
Cardholders, all credit scoring systems and all policies of credit insurance
issued to the Bank with respect to any Cardholder; PROVIDED that the Bank
shall not be entitled to sell, rent or otherwise disclose any information
relating to the Cardholders to any third party other than (i) Affiliates of
the Company, (ii) Persons who, in the sole judgment of The Limited, do not
compete, directly or indirectly, with any retail or catalogue business
conducted by The Limited or any of its Affiliates and (iii) in the case of
disclosure, credit agencies. Subject to Section 9.3, the Company will not
have any rights in any information or property of the Bank; PROVIDED that the
Bank will provide the Company with such information the Bank owns with
respect to Cardholders as the Company may reasonably request in order to
develop potential marketing or credit strategies.
9.3. DATABASE. (a) It is the intention of the parties that the
Bank will manage, maintain and develop an information marketing database (the
"DATABASE") at its own expense, subject to a mutually satisfactory agreement
with the Company pursuant to which (i) the Company will agree to utilize the
Database, (ii) the Database will be accessible from the Company's offices and
(iii) the Bank will provide
15
the Company with information maintained as part of the Database on terms that
are no less favorable than those offered by the Bank to any other recipient
of comparable information.
(b) Notwithstanding the foregoing, the Bank will, from time to
time at the request of the Company, and without charge, promptly provide the
Company with a list of the names and addresses of all Cardholders, all
holders of other proprietary credit cards of the Company or any Affiliate of
the Company (if issued by the Bank) and all other customers of the Business,
any other business of the Company and the business of any other Affiliate of
the Company. The Company shall reimburse the Bank for its costs of producing
and shipping such list in the format required by the Company within 30 days
after receipt of a request for such reimbursement from the Bank.
(c) Subject to Section 9.2, the Bank may make the Database
available, and provide information marketing services to, third parties on
terms reasonably determined by the Bank; PROVIDED that (i) the allocation
among the Bank, the Company and The Limited of fees charged by the Bank to
such third parties shall be agreed on a program-by-program basis or, in the
case of programs existing on the date hereof, continued consistent with past
practices and (ii) the Bank may not make the Database available, or provide
information marketing services to, any Person who, in the sole judgment of
The Limited, competes, directly or indirectly, with any retail or catalogue
business conducted by The Limited or any of its Affiliates.
9.4. ENVELOPE STUFFING.
9.4.1. Subject to the right of the Bank to include in mailings to
Cardholders periodic billing statements and any legal notices which the Bank
believes are necessary or appropriate to send to Cardholders, the Company
shall have the right to have materials advertising its products and services
included in the envelopes containing the periodic statements. Such materials
shall advertise only products and services related to the Business, shall
(unless the Company provides the Bank with notice as provided below) be
limited to seven panels per envelope and shall conform to size requirements
established from time to time by the Bank with reasonable prior notice of any
changes. The Company shall use reasonable efforts (i) to notify the Bank at
least 15 days before the proposed date of any such inclusion and shall
provide the Bank with a draft copy of any such advertising material at the
time it notifies the Bank of such mailing and (ii) to provide the Bank with a
seasonal marketing plan at least 30 days before the beginning date of each
Season. The Company shall
16
provide the Bank with the materials to be included in the mailing not less
than two Business Days prior to the initial insertion date. If the Company
does not notify the Bank of any such inclusion at least seven days before the
proposed date of such inclusion or if the material included does not take up
the available space, the Bank may utilize the space remaining inside the
envelopes for its own purposes; PROVIDED that (i) unless the Company provides
the Bank with notice at least 45 days before the proposed inclusion date of
the Company's intent to utilize more than seven panels per envelope, the Bank
shall be entitled to utilize at least three panels (or two panels and one
"bangtail" remittance envelope) per envelope for its own purposes and (ii)
all materials included by the Bank shall be subject to the approval of the
Company, which approval shall not be unreasonably withheld.
9.4.2. The Bank shall have the exclusive right to include in any
mailing to Cardholders materials advertising products and services not
related to the Business and the allocation between the Bank and the Company
of the revenues generated thereby shall be agreed on a program-by-program
basis or, in the case of programs existing on the date hereof, continued
consistent with past practices; PROVIDED that such products and services and
the related advertising materials shall be subject to the approval of the
Company, which approval shall not be unreasonably withheld or delayed (it
being understood that the Company may withhold such approval if it determines
in its sole discretion that the advertising of such products or services is
inconsistent with the image of the Business).
9.4.3. Notwithstanding the foregoing, (i) the Bank shall have the
right to use its own "bangtail" remittance envelopes to promote credit life
insurance to existing Cardholders no more than four times per year or two
times per Season and (ii) all materials used, or sent to Cardholders, by the
Bank under existing programs of the Bank (including, but not limited to,
credit life insurance) shall not be subject to the approval of the Company.
9.4.4. The Bank shall provide timely specifications (including size
and weight requirements) for all statement inserts, credit card carriers and
"bangtail" remittance envelopes.
Section 10. INDEMNIFICATION; CLAIMS AND ACTIONS.
10.1. INDEMNIFICATION BY THE COMPANY. The Company hereby
indemnifies the Bank, its Affiliates and the directors, officers, employees
and agents of the Bank or any Affiliate of the Bank (each, a "RELATED PARTY")
against, and agrees to hold them harmless from, any and all losses,
17
claims, damages and liabilities (including, without limitation, the legal
fees and other expenses reasonably incurred in connection with any suit,
action or proceeding or any claim asserted) ("DAMAGES") incurred or suffered
by any of them arising out of or in any way related to any misrepresentation,
breach of any warranty or nonperformance of any covenant made by the Company
under this Agreement or relating to any personal or bodily injury or property
damage alleged to be caused by the sale of goods or rendering of services by
the Company.
10.2. INDEMNIFICATION BY THE BANK. The Bank hereby indemnifies the
Company and its Related Parties against, and agrees to hold them harmless
from, any and all Damages incurred or suffered by any of them arising out of
or in any way related to any misrepresentation, breach of any warranty, or
nonperformance of any covenant made by the Bank under this Agreement.
10.3. THIRD PARTY CLAIMS.
10.3.1. The Bank shall not be liable to the Company for or in
connection with any claim made against the Company by any other Person
relating in any manner to this Agreement or to any services or any other
transactions contemplated hereby (other than (i) claims based upon the Bank's
failure to perform its obligations under this Agreement, its or any of its
Related Parties' negligence or willful misconduct or its failure to comply
with any law or regulation (including, without limitation, any Consumer Law),
(ii) claims by employees or subcontractors of the Bank arising from the
performance of services under this Agreement (other than claims based upon
the Company's or any if its Related Parties' negligence or willful misconduct)
(iii) claims relating to acts or omissions of the Bank and its agents in
connection with the collection of amounts owing from Cardholders and (iv)
claims relating to the submission by the Bank or its agents of data
concerning Cardholders to credit agencies), even if the Bank has been advised
of the possibility of such claims.
10.3.2. The Company shall not be liable to the Bank for or in
connection with any claim made against the Bank by any other Person relating
in any manner to this Agreement or to any services or other transactions
contemplated hereby (other than (i) claims based upon the Company's failure
to perform its obligations under this Agreement, its or any of its Related
Parties' negligence or willful misconduct or its failure to comply with any
law or regulation (including, without limitation, any Consumer Law), (ii)
claims by employees or subcontractors of the Company arising from this
Agreement and (iii) claims
18
relating to goods purchased from the Company), even if the Company has been
advised of the possibility of such claims.
10.4. DISPUTE RESOLUTION AND ACTIONS. The Bank and the Company
shall use their reasonable best efforts to resolve informally any claim of
either party under this Agreement. No action at law or in equity may be
instituted by any party with respect to any such claim unless such party has
satisfied its obligation under the first sentence of this Section 10.4.
10.5. LIMITATION ON ACTIONS. No action against either party,
regardless of form, arising out of or incidental to the matters contemplated
by this Agreement, may be brought by the other party more than one year after
the event giving rise to such cause of action occurred and is known or upon
the exercise of reasonable diligence should have been known to the injured
party.
10.6. REIMBURSEMENT FOR LOSSES. If, as a result of any claim made
by the Bank against any third party (including, but not limited to, an
insurer), the Bank actually receives from such third party cash proceeds (or
non-cash proceeds, whether in the form of goods or services) which represent,
in whole or in part, compensation for or reimbursement of losses or costs
actually incurred by the Company, then the Bank will hold that portion of
such proceeds fairly allocable to the Company (taking into consideration all
losses or costs actually incurred by all parties for whose benefit such
payments have been received) in trust on behalf of the Company and will
promptly pay over to the Company such allocable amount of any such cash
proceeds (or, as to non-cash proceeds, the allocable portion or, at the
discretion of the Bank, the cash equivalent thereof).
10.7. SURVIVAL. The provisions of this Section 10 shall survive the
termination of this Agreement.
Section 11. TERMINATION.
11.1 TERM. This Agreement shall remain in effect until the tenth
anniversary of the date hereof, shall be automatically extended until the
twelfth anniversary of the date hereof if the Company does not give at least
12 months' prior written notice of its objection to such extension and shall
be further automatically extended in successive two-year increments if the
Bank or the Company does not give at least 12 months' prior written notice of
its objection to such extension, unless earlier terminated (a) by the Bank or
the Company in the event of a material breach by the other party of any of
such other party's obligations under this Agreement if any such breach
remains uncured 30 days after
19
written notice thereof to such party, (b) automatically in the event that
the Bank or the Company commences a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or
hereinafter in effect, seeks the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part
of its assets, consents to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, makes a general assignment for the benefit of
creditors, or fails generally to pay its debts as they become due, or (c) by
the Company upon not less than 60 days' prior written notice to the Bank at
any time after the sixth anniversary of the date hereof if, based on the
application of the attached matrix, the applicable discount rate exceeds the
highest discount rate in such matrix and the costs to the Company under this
Agreement are substantially higher than the costs that would be incurred by
the Company for comparable credit card services over the remaining term of
this Agreement from an independent third-party financial institution;
PROVIDED that the Company shall not be entitled to terminate this Agreement
pursuant to clause (c) unless the Company provides the Bank with a written
description of the material terms on which such third party financial
institution proposes to provide such services and is entitled to submit a
counter-proposal within 30 days of receipt of such description. If the Bank
submits a counter-proposal with terms substantially similar to those set
forth in such third party's proposal or agrees to maintain the discount rate
at the highest discount rate in the attached matrix, this Agreement shall
remain in full force and effect, modified as may be necessary to reflect the
terms included in the Bank's counter-proposal. Subject to Section 11.2, the
termination of this Agreement shall not affect the obligations of the
Cardholders to the Bank, the obligation of the Company and the Bank to make
the payments required under Section 4 with respect to Transactions that
occurred before the date of termination, the rights of the Bank under
Sections 4.4, 7.4 and 9.1 and the rights of the Company under Section 9.1.
Sections 10, 11 and 12 of this Agreement shall survive any such termination.
11.2. EFFECT OF TERMINATION. Upon termination of this Agreement,
the Company will have the option to purchase the then-outstanding Credit Card
account balances not previously written-off by the Bank (subject to the terms
of any securitization of such account balances) at the face amount thereof,
without recourse to the Bank, and will be provided with all related account
information and other account data; PROVIDED that the Company will be
required to purchase such then-outstanding Credit Card account balances on
such terms if the Company objects to any automatic
20
extension of this Agreement pursuant to Section 11.1. All payments by the
Company pursuant to this Section 11.2 shall be made not later than one
Business Day after termination of this Agreement by wire transfer of
immediately available funds to an account notified by the Bank to the Company
not less than two Business Days prior to the payment date. Upon any
termination of this Agreement, (i) the Company (at its sole expense) shall
notify all Cardholders that the Bank is no longer the processor of their
Credit Card accounts and (ii) the Company and the Bank shall cooperate in
facilitating the transition to a new processor.
11.3. EXTENSION. Any services which the parties hereto mutually
agree to be rendered after the termination of this Agreement shall be
rendered pursuant to all of the terms and provisions of this Agreement.
Section 12. MISCELLANEOUS.
12.1. NOTICES. All notices, requests and other communications to
any party hereunder shall be in writing (including telecopy or similar
writing) and shall be given, if to the Company, to:
Henri Bendel, Inc.
Three Limited Parkway
Columbus, Ohio 43230
Attn: General Counsel
Telecopy: 614-479-7188
with a copy to:
The Limited, Inc.
Three Limited Parkway
Columbus, Ohio 43230
Attn: General Counsel
Telecopy: 614-479-7188
and a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attn: Dennis S. Hersch
Telecopy: 212-450-4800
and if to the Bank, to:
World Financial Network National Bank
4590 East Broad Street
Columbus, Ohio 43213
Attn: Daniel T. Groomes
Telecopy: 614-755-3418
21
or to such other address or telecopy number and with such other copies, as
such party may hereafter specify for the purpose by notice to the other
parties. Each such notice, request or other communication shall be effective
(i) if given by telecopy, when such telecopy is transmitted to the telecopy
number specified in this Section and evidence of receipt is received or (ii)
if given by any other means, upon delivery or refusal of delivery at the
address specified in this Section 12.1.
12.2. AMENDMENTS; NO WAIVERS.
12.2.1. Any provision of this Agreement may be amended only if such
amendment is in writing and signed by all parties thereto.
12.2.2. No failure or delay by any party in exercising any right,
power or privilege under this Agreement shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.
12.3. EXPENSES. All costs and expenses incurred in connection with
the this Agreement or the transactions contemplated hereby shall be paid by
the party incurring such cost or expense.
12.4. SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns; PROVIDED that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other party. Notwithstanding the
foregoing, (i) the Bank may from time to time assign any or all of its rights
and obligations hereunder to any Affiliate of the Bank, provided that any
such assignee of the Bank's obligations hereunder shall have the capability
to perform such obligations without impairing the quality of the services
provided to the Company, (ii) the Company shall assign or otherwise transfer
all of its rights and obligations under this Agreement (A) to the purchaser
of all or substantially all of the assets of the Business or (B) to any
corporation which is a successor (whether by merger, consolidation or
otherwise) to the Company or any successor (whether by merger, consolidation
or otherwise) thereto, in each case subject to the execution by such assignee
or transferee of an agreement to be bound by the provisions of this Agreement
and (iii) the Bank may from time to time sell accounts receivable for
securitization, retaining its processing and servicing
22
obligations with respect thereto (it being understood that (A) the purchaser
of such accounts receivable shall have no recourse against the Company for
any reason whatsoever and (B) the Bank hereby indemnifies the Company and its
Related Parties against, and agrees to hold them harmless from, any and all
Damages incurred or suffered by any of them in connection with any claims
made by such purchaser)
12.5. GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the law of the State of New York (without
regard to the choice of law provisions thereof)
12.6. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party here to or there to
shall have received a counterpart hereof signed by the other parties hereto.
12.7. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements, understandings and negotiations, both
written and oral, between the parties with respect to such subject matter.
No representation, inducement, promise, understanding, condition or warranty
not set forth herein has been made or relied upon by any party hereto.
Neither this Agreement nor any provision thereof is intended to confer upon
any Person other than the parties any rights or remedies hereunder.
12.8. JURISDICTION. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated thereby may
be brought against any of the parties in the United States District Court for
the Southern District of New York or any state court sitting in the City of
New York, Borough of Manhattan, and each of the parties hereby consents to
the exclusive jurisdiction of such court (and of the appropriate appellate
courts) in any such suit, action or proceeding and waives any objection to
venue laid therein. Process in any such suit, action or proceeding may be
served on any party anywhere in the world, whether within or without the
State of New York. Without limiting the foregoing, the parties agree that
service of process upon such party at the address referred to in Section
12.1, together with written notice of such service to such party, shall be
deemed effective service of process upon such party.
23
12.9. CAPTIONS. The captions herein are included for convenience
of reference only and shall be ignored in the construction or interpretation
hereof.
12.10. DEFINED TERMS. The following terms, as used herein, shall
have the following meanings:
12.10.1. "AFFILIATE" means, with respect to any Person, any Person
directly or indirectly controlling, controlled by, or under common control
with such other Person. For purposes of this definition, "CONTROL" when used
with respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise, and the terms
"CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing.
12.10.2. "BUSINESS DAY" means a day other than a Saturday, Sunday or
other day on which commercial banks in New York, New York or Columbus, Ohio
are authorized or required by law to close.
12.10.3. "PERSON" means an individual, a corporation, a partnership,
an association, a trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
12.10.4. "SEASON" means (i) the period from the first day of the
fiscal month of February to the last day of the fiscal month of July and (ii)
the period from the first day of the fiscal month of August to the last day
of the fiscal month of January.
12.11. FORCE MAJEURE. Notwithstanding the provisions of Section
8.3, neither the Bank nor its affiliates shall be liable in any manner to the
Company for any failure to perform their obligations under this Agreement
resulting in any manner from delay, failure in performance, loss or damage
due to fire, strike, embargo, explosion, power blackout, earthquake, flood,
war, the elements, labor disputes, civil or military authority, acts of God,
public enemy, inability to secure fuel, acts or omissions of carriers or
other causes beyond their reasonable control, whether or not similar to any
of the foregoing (a "FORCE MAJEURE EVENT")
24
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers effective on the day and year
first above written.
WORLD FINANCIAL NETWORK
NATIONAL BANK
By: /s/ Timothy B. Lyons
-------------------------------
Name: Timothy B. Lyons
Title:
HENRI BENDEL INC.
By: /s/ Timothy B. Lyons
-------------------------------
Name: Timothy B. Lyons
Title:
WESTERN FACTORING, INC.
By: /s/ Timothy B. Lyons
-------------------------------
Name: Timothy B. Lyons
Title:
AMENDMENT TO CREDIT CARD PROCESSING AGREEMENT
This Amendment is to that certain Credit Card Processing Agreement (the
"Agreement") between World Financial Network National Bank, ("Bank"), Henri
Bendel, Inc. (the "Corporation"), and Western Factoring, Inc. ("Factoring")
(the Corporation and Factoring being collectively referred to as the
"Company") dated January 31, 1996.
*************************
WHEREAS, Bank, the Corporation and Factoring entered into the Agreement
on January 31, 1996; and
WHEREAS, the Corporation has entered into a separate agreement with
Schotenstein Bernstein Capital Group ("SBCG"), pursuant to which SBCG will
operate the Henri Bendel Chicago store from April 5, 1998 through August 31,
1998; and
WHEREAS, the Corporation desires to permit SBCG to accept Credit Cards
from Cardholders in the Henri Bendel Chicago store; and
WHEREAS, Bank, the Corporation and Factoring now desire to amend the
Agreement as set forth herein;
NOW, THEREFORE, Bank, the Corporation and Factoring hereby agree as
follows:
1. The Agreement is hereby amended by addition of the following new
Section 13.
Section 13. OPERATION OF CHICAGO STORE.
13.1 ACCEPTANCE OF CREDIT CARDS. Pursuant to a separate agreement
between the Corporation and SBCG, SBCG shall operate the Henri Bendel
Chicago store from April 5, 1998 through August 31, 1998. SBCG shall be
permitted to accept Credit Cards from Cardholders to purchase goods sold
by the Business or by SBCG at the Chicago location, subject to all of
the terms and conditions set forth in the Agreement, including without
limitation Section 3. The Company shall ensure that all of the terms and
conditions of this Agreement are met with respect to any Credit Card
transactions accepted by SBCG and shall continue to be liable for the
performance of all of its obligations pursuant to the Agreement. The
Company will continue to operate the point of sale credit system located
at the Henri Bendel Chicago store and will continue to make daily
transmissions to Bank. Bank shall continue to make payments to the
Company pursuant to the Agreement and shall have no obligation to make
any payments to SBCG. The Company shall make separate settlements with
SBCG pursuant to a separate agreement between SBCG and the Company. The
Company shall ensure SBCG's compliance with all Consumer Laws and the
Bank's rules and operating instructions relating to the use of the
Credit Cards, distribution of applications, Credit Card security,
authorization procedures and "downtime" procedures. The Company shall be
responsible for all Cardholder inquiries and complaints related to SBCG
or the goods or services purchased from SBCG.
13.2 INDEMNIFICATION. The Company hereby indemnifies the Bank, its
Affiliates and the directors, officers, employees and agents of the Bank
or any Affiliate of the Bank against, and agrees to hold them harmless
from, any and all losses, claims, damages and liabilities (including,
without limitation, the legal fees and other expenses reasonably
incurred in connection with any suit, action or proceeding or any claim
asserted) incurred or suffered by any of them arising out of or in any
way related to any acts or omissions of SBCG in connection with SBCG's
acceptance of the Credit Cards or its operation of the Henri Bendel
Chicago store. The provisions of this subsection 13.2 shall survive the
termination of the Agreement.
2. The Effective Date of this Amendment shall be May 13, 1998.
3. As hereby amended and supplemented, the Agreement shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment the
dates set forth below.
World Financial Network National Bank
By: /s/ Daniel T. Groomes
----------------------------
Daniel T. Groomes, President
Date: 5/13/98
---------------------------
Henri Bendel, Inc. Western Factoring, Inc.
By: /s/ Husein Jafferjee By: /s/ Timothy Lyons
------------------------- -------------------------
Title: Vice President and CFO Title: VP
---------------------- ----------------------
Date: 5/18/98 Date: 6/1/98
---------------------- ----------------------
Exhibit 10.54
CONSUMER MARKETING DATABASE SERVICES AGREEMENT
AMONG
ADS ALLIANCE DATA SYSTEMS, INC.,
INTIMATE BRANDS, INC.
AND
THE LIMITED, INC.
DATED AS OF SEPTEMBER 1, 2000
TABLE OF CONTENTS
PAGE
----
Section 1. DEFINITIONS..................................................1
1.1 Certain Definitions..........................................1
1.2 Other Definitions............................................4
Section 2. DATABASE SERVICES............................................4
2.1 Database Services............................................4
2.2 Operating Procedures.........................................4
2.3 Software and Technology Ownership............................4
2.4 Data Entry and Transmission..................................5
2.5 ADS Intellectual Property....................................5
2.6 Ownership Rights of Parties..................................5
2.7 Data Use, Sales, and No-Compete Restrictions.................5
2.8 Revenue Sharing..............................................6
2.9 Consumer Privacy Protection..................................6
2.10 Name, Trademarks, and Service Marks..........................8
Section 3. FEES...............................................................8
3.1 Fees.........................................................8
3.2 Taxes........................................................8
3.3 Invoices.....................................................8
3.4 Suspension...................................................9
Section 4. REPRESENTATIONS AND WARRANTIES OF THE TLI ENTITIES...........9
4.1 Organization, Power and Qualification........................9
4.2 Authorization, Validity and Non-Contravention................9
4.3 Accuracy of Information.....................................10
4.4 Name, Trademarks and Service Marks..........................10
4.5 Ownership Rights............................................10
1
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
Section 5. COVENANTS OF THE TLI ENTITIES...............................10
5.1 Compliance with Law.........................................10
Section 6. REPRESENTATIONS AND WARRANTIES OF ADS.......................10
6.1 Organization, Power and Qualification.......................10
6.2 Authorization, Validity and Non-Contravention...............10
6.3 Accuracy of Information.....................................11
6.4 Ownership Rights............................................11
Section 7. COVENANTS OF ADS............................................11
7.1 Compliance with Law.........................................11
Section 8. INDEMNIFICATION.............................................12
8.1 Indemnification Obligations.................................12
8.2 LIMITATION ON LIABILITY.....................................13
8.3 NO WARRANTIES...............................................14
8.4 Notification of Indemnification; Conduct of Defense.........14
Section 9. TERM AND TERMINATION........................................14
9.1 Term........................................................14
9.2 Termination with Cause by ADS; ADS Termination Events.......14
9.3 Termination with Cause by the TLI Entities;
TLI Termination Events......................................15
9.4 Effect of Termination.......................................16
Section 10. MISCELLANEOUS...............................................17
10.1 Entire Agreement............................................17
10.2 Coordination of Public Statements...........................17
10.3 Amendment...................................................17
10.4 Successors and Assigns......................................17
10.5 Waiver......................................................18
2
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
10.6 Severability................................................18
10.7 Notices.....................................................18
10.8 Captions and Cross-References...............................18
10.9 GOVERNING LAW...............................................18
10.10 Counterparts................................................18
10.11 Force Majeure...............................................19
10.12 Relationship of Parties.....................................19
10.13 Survival....................................................19
10.14 Mutual Drafting.............................................19
10.15 Independent Contractor......................................19
10.16 No Third Party Beneficiaries................................20
10.17 Counterparts................................................20
10.18 Confidentiality.............................................20
10.19 Non-interference with Employees.............................21
10.20 Victoria's Secret Catalogue
SCHEDULES
A Database Services.................................................23
B Service Standards.................................................28
C Fees..............................................................33
D Demographic and Lifestyle Elements................................34
E Addresses of The Limited, Inc., Intimate Brands, Inc. and
Subsidiaries......................................................41
F TLI Entities' Privacy Policies....................................43
3
CONSUMER MARKETING DATABASE SERVICES AGREEMENT
THIS CONSUMER MARKETING DATABASE SERVICES AGREEMENT is made as of this 1st day
of September, 2000 among ADS Alliance Data Systems, Inc., with an office at 800
TechCenter Drive, Gahanna, Ohio 43230 (hereinafter referred to as "ADS"),
Intimate Brands, Inc., with its principal office at Three Limited Parkway,
Columbus, Ohio 43230 (hereinafter referred to as "IBI"), and The Limited, Inc.,
with its principal office at Three Limited Parkway, Columbus, Ohio 43230 ("TLI"
and, together with IBI, the "TLI Entities").
WITNESSETH:
WHEREAS, TLI has requested ADS to perform certain marketing database services
for TLI; and
WHEREAS, ADS has agreed to perform such database services subject to the terms
and conditions as more fully set forth herein;
NOW THEREFORE, in consideration of the terms and conditions hereof, and for
other good and valuable consideration, the receipt of which is hereby mutually
acknowledged by the parties, ADS and the TLI Entities agree as follows.
SECTION 1. DEFINITIONS
1.1 CERTAIN DEFINITIONS. As used herein and unless otherwise required
by the context, the following terms shall have the following respective
meanings.
"ADS Data" shall mean data provided by ADS to the Main Data Warehouse
which is owned by or licensed to ADS and/or its affiliates (other than TLI
Data). Such data may be of any Data Type.
"Affiliate" means any wholly-owned subsidiary or parent company of ADS,
TLI or IBI, or any other entity of which a majority is owned by ADS, TLI, IBI or
by the same entity owning ADS, TLI or IBI.
"Agreement" shall mean this Consumer Marketing Database Services
Agreement, including all Schedules hereto, and any future amendments or
supplements thereto.
"Applicable Law" shall mean any applicable federal, state or local law,
rule, regulation, administrative interpretation, order, writ, injunction,
directive, judgment or decree.
"Base Fee" shall have the meaning set forth in Schedule C hereto.
"Business Day" shall mean any day, except Saturday, Sunday, New Year's
Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day or Christmas
Day.
"CASS" shall mean the Coding Accuracy Support System as defined by the
United States Postal Service.
4
"Catalog" shall mean the catalog operations of any Subsidiary of either
of the TLI Entities.
"Contract Year" shall mean the consecutive one-year periods during the
Term commencing on the Effective Date of this Agreement.
"Customer" shall mean any individual who is a retail customer of a TLI
Store or a Catalog.
"Data" shall mean the ADS Data and the TLI Data.
"Database System" shall mean the information database system operated
by or on behalf of ADS, including but not limited to hardware, software and
other equipment.
"Data Mart" shall mean an application database created by ADS and used
for direct marketing analysis or segmentation selections.
"Data Type" shall mean any one or all of the following three types of
data:
CONSUMER DATA consists of information related to identifying and
maintaining accurate descriptions of consumers on the database.
Consumer Data is gained from a variety of sources, including without
limitation from ADS with respect to WFN's proprietary credit
cardholders, ADS or either TLI Entity and/or their Subsidiaries
purchasing identifying information from third parties, or either TLI
Entity and/or their Subsidiaries receiving information directly from
Customers. The primary element of Consumer Data is name and address
information, from which data elements from all Data Types are keyed.
Other Consumer Data elements include without limitation credit card
account information from proprietary or general-purpose card accounts,
proprietary account status, consumer responses to opinion surveys, and
demographic or psychographic information, which is usually licensed
from third-party vendors.
TRANSACTION DATA consists of information gained from purchase and/or
return transactions from the point of sale, as well as accompanying
information related to the retail, catalogue or web transactions of the
offering division or company. Transaction Data consists of details
about the items purchased or returned, price paid, discounts, or
ring-coded coupons used in the transaction, as well as other related
information regarding the organization of the brand, division, company,
and geography of the region, district and store of the transaction.
CONTACT DATA consists of information used to measure, manage, and
control the results of direct marketing campaigns and other consumer
contacts. Contact Data consists of campaign control information such as
direct mail drop dates and tape specifications,
5
consumer names and segments selected for contact, and response records
of those consumers who responded to individual contacts.
"Effective Date" shall mean September 1, 2000.
"Goods and Services" shall mean those certain products and/or services
sold by either TLI Entity and/or their Subsidiaries or a TLI Store to Customers
and shall not include any credit or other financial products, such as credit
cards or insurance products.
"Initial Term" shall have the meaning set forth in Section 9.1 of this
Agreement.
"Main Data Warehouse" shall mean the central repository where all Data
is assembled, manipulated and maintained.
"Operating Procedures" shall mean those written procedures mutually
agreed to by ADS, TLI and IBI, as the same may be modified from time to time by
written instrument executed by ADS, TLI and IBI.
"Retail Point of Sale System" shall mean the equipment and processes
used by either TLI Entity, its Subsidiary, licensee or franchisee to record a
purchase transaction when a Customer buys Goods and Services at a TLI Store.
"Renewal Term" shall mean each one (1) year renewal term of this
Agreement following the completion of the initial three (3) year term hereof.
"Services" shall mean those marketing database services set forth in
Schedule A hereto.
"Subsidiaries" shall mean Bath & Body Works, Inc., Victoria's Secret
Stores, Inc., Lerner New York, Inc., Lane Bryant, Inc., Express, LLC, The
Limited Stores, Inc. and Structure, Inc.
"Term" shall mean the Initial Term and any and all Renewal Terms as
defined in Section 9.1 of this Agreement.
"TLI Data" shall mean data provided to ADS under this Agreement by
either TLI Entity and/or their Subsidiaries which is owned by or licensed to
such entity. Such data may be of any Data Type and shall include, but not be
limited to, the data collected by TLI, IBI, their Subsidiaries and all TLI
Stores during a Transaction.
"TLI's Stores" shall mean those certain retail locations selling Goods
and Services of either TLI Entity or its Subsidiaries which are owned and
operated by either TLI Entity or which are franchisees of either TLI Entity or
the Subsidiaries, including, Bath & Body Works, Victoria's Secret Stores, Lerner
New York, Lane Bryant, Express, The Limited, and Structure stores.
6
"Transaction" shall mean any event encompassing when a Customer
purchases Goods and Services, including without limitation, purchases at any TLI
Stores, TLI's Catalog and through the Internet.
"USPS" shall mean the United States Postal Service.
"WFN" shall mean World Financial Network National Bank, an affiliate of
ADS.
1.2 OTHER DEFINITIONS. As used herein, terms defined in the
introductory paragraph hereof and in other sections of this Agreement shall have
such respective defined meanings. Defined terms stated in the singular shall
include reference to the plural and vice versa.
SECTION 2. DATABASE SERVICES
2.1 DATABASE SERVICES. Subject to the terms and conditions of this
Agreement, ADS shall perform the Services for the TLI Entities. During the Term,
neither TLI Entity nor their Subsidiaries shall appoint any third-party to
perform any of the Services for either TLI Entity or any one of the
Subsidiaries. It is understood and agreed that the TLI Entities and their
affiliates may manipulate, evaluate and otherwise utilize any and all Data,
including the TLI Data, in connection with their retail businesses. The TLI
Entities agree that it is their intent that if either TLI Entity or any one of
the Subsidiaries, acquires or commences any new businesses or subsidiaries,
unless prohibited from doing so by an existing agreement or other obligation,
the relevant TLI Entity intends to enter into an amendment to this Agreement to
bring all new businesses or subsidiaries within the scope of this Agreement,
except for any test, pilot or concept businesses or subsidiaries with less than
100 stores. It is understood and agreed that, unless and until each such
amendment is entered into, no new business or subsidiary shall be within the
scope of or subject to this Agreement, and no TLI Entity, nor Subsidiary shall
have any obligation under this Agreement with respect to any such business or
subsidiary or any information or data related thereto or arising therefrom.
2.2 OPERATING PROCEDURES. The TLI Entities, the Subsidiaries and all
TLI Stores shall observe and comply with the Operating Procedures and such other
reasonable procedures mutually agreed to in writing by TLI, IBI and ADS or as
required by Applicable Law.
2.3 SOFTWARE AND TECHNOLOGY OWNERSHIP. All software or other technology
owned, developed by or licensed to ADS (including, but not limited to, software
or other technology developed by or licensed to ADS in response to a TLI
Entity's request or to accommodate a TLI Entity's special requirements) will
remain the exclusive property of ADS, regardless of whether or not TLI or IBI is
required to pay ADS for such software or technology development (it being
understood that in no event shall either TLI Entity be required to pay for any
such software or technology development unless the relevant TLI Entity shall
have agreed to make such payment in writing in advance). Nothing in this
Agreement shall be deemed to convey a proprietary interest to TLI, IBI, any
Subsidiary or to any party other than ADS in any of the software,
7
hardware or technology used or provided by ADS to permit or facilitate use of
the Services, or in any of the derivative works thereof.
2.4 DATA ENTRY AND TRANSMISSION. ADS shall not be responsible for
errors in the Services to the extent such errors result from either TLI Entity's
or their Subsidiaries' error in inputting and/or transmitting Data or either TLI
Entity's or their Subsidiaries' failure to follow ADS's Operating Procedures.
ADS shall be entitled to rely upon information submitted by the TLI Entities,
the Subsidiaries and by other parties on their behalf.
2.5 ADS INTELLECTUAL PROPERTY. ADS intellectual property shall include,
without limitation: ADS's marketing database system and design, and ADS's unique
segmentation designs and incremental sales models, other models or modeled data
aggregations, and customer clustering and profiling products (i.e., Portrait).
2.6 OWNERSHIP RIGHTS OF PARTIES. Except as expressly set forth in this
Agreement, no Party will, as a result of this Agreement, or of performance
hereunder, acquire any property or other right, claim or interest, including any
patent right, trade secret, or copyright or other intellectual property right,
in any of the information systems, processes, equipment, or computer software of
the other, or any service marks or trademarks of the other.
2.7 DATA USE, SALES AND NO-COMPETE RESTRICTIONS. Each of TLI and IBI
agree that ADS shall have the exclusive right to provide, share, barter and/or
sell all TLI Data and data elements derived from the TLI Data PROVIDED that, in
no event shall ADS provide, share, barter and/or sell any TLI Data or any data
elements derived from any TLI Data without the prior written consent of the TLI
Entities which shall not be unreasonably withheld. Without limiting the
generality of the proviso to the immediately preceding sentence, ADS agrees that
it shall not (and shall cause it affiliates not to) provide, share, barter,
and/or sell TLI Data or any other data elements derived from the TLI Data which
could be identified by third parties as being derived from the TLI Data to any
third parties who, in the sole judgment of TLI and IBI, compete, directly or
indirectly, with any retail or catalogue business conducted by any TLI Entity or
any of their subsidiaries from time to time. It is understood that, subject to
compliance with the proviso to the first sentence of this Section 2.7, the
immediately preceding sentence shall not prohibit ADS to share TLI Data or other
data elements derived from the TLI Data with data "compilers" (or similar
entities); provided that ADS prohibits any such third party with whom it shares
TLI Data or any other data elements derived from the TLI Data which could be
identified by third parties as being derived from the TLI Data, from identifying
such data as being derived from ADS, the TLI Entities or their subsidiaries from
time to time. Neither TLI, IBI, nor any of the Subsidiaries may provide, share,
barter, and/or sell any Data or data elements contained in the Main Data
Warehouse to any third party without the prior express written consent of ADS.
ADS will control all such third-party Data transactions from one
organization within the Consumer Database Marketing Services area and will name
a single point of contact for managing the review and approval process with the
TLI Entities. TLI and IBI agree to name a
8
single point of contact for review and written approval of such third-party
data sales with ADS, which review and written approval shall be binding on
both TLI and IBI. The initial point of contact at ADS shall be the Consumer
Database Marketing Services Director of Product Management and the initial
point of contact for the TLI Entities shall be Vice-President, Database
Marketing. Any such point of contact may be changed at any time by the
relevant Party upon delivery to the other party of written notice to such
effect (which notice shall identify and provide contact information for the
new point of contact). ADS and the TLI Entities shall agree to work in good
faith to develop procedures to identify and agree to a jointly understood
list of non-competitive third party purchasers and/or categories of
purchasers from non-competitive categories and/or industries. This list will
be reviewed and accepted in writing by both ADS and the TLI Entities at least
annually.
ADS shall retain any and all rights which ADS has to the ADS Data. The TLI
Entities shall retain any and all rights which they have to the TLI Data.
Nothing contained in this Agreement shall be deemed to convey any rights or
proprietary interest in the Data to TLI, IBI or ADS other than the specific
rights to use the Data granted in this Agreement.
9
2.8 REVENUE SHARING. "Net Revenues" from Data sales to third parties
shall be shared between ADS and the TLI Entities on the following schedule
during the Term. Payments made by ADS to the TLI Entities shall be made to the
TLI Entity set forth in the Notices Section 10.7 of this Agreement. "Net
Revenues" shall mean gross revenues collected by ADS from sales of Data
elements from the Main Data Warehouse by ADS pursuant to Section 2.7 of this
Agreement, less the amount of: (a) customary trade, cash and quantity discounts
actually allowed and taken; (b) allowances actually given for returned or
rejected Data; (c) actual charges for losses; (d) government mandated and other
rebates; (e) value added tax, sales, use or turnover taxes, excise taxes,
customs duties and other applicable charges; and (f) processing expenses and
list brokerage fees. Contract Year 1: ADS shall retain one hundred percent
(100%) of the initial One Million Five Hundred Thousand Dollars ($1,500,000) of
Net Revenues. ADS shall retain seventy percent (70%) of all Net Revenues above
and beyond the initial One Million Five Hundred Thousand Dollars ($1,500,000)
of Net Revenues, and ADS shall pay the TLI Entities the remaining thirty
percent (30%) of all Net Revenues above and beyond the initial One Million Five
Hundred Thousand Dollars ($1,500,000) of Net Revenues. Contract Year 2: ADS
shall retain one hundred percent (100%) of the initial Two Million Five Hundred
Thousand Dollars ($2,500,000) of Net Revenues. ADS shall retain seventy percent
(70%) of all Net Revenues above and beyond the initial Two Million Five Hundred
Thousand Dollars ($2,500,000) of Net Revenues, and ADS shall pay the TLI
Entities the remaining thirty percent (30%) of all Net Revenues above and
beyond the initial Two Million Five Hundred Thousand Dollars ($2,500,000) of
Net Revenues. Contract Year 3 and during each Renewal Term: ADS shall retain
one hundred percent (100%) of the initial Three Million Five Hundred Thousand
Dollars ($3,500,000) of Net Revenues. ADS shall retain seventy percent (70%) of
all Net Revenues above and beyond the initial Three Million Five Hundred
Thousand Dollars ($3,500,000) of Net Revenues, and ADS shall pay the TLI
Entities the remaining thirty percent (30%) of all Net Revenues above and
beyond the initial Three Million Five Hundred Thousand Dollars ($3,500,000) of
Net Revenues.
2.9 CONSUMER PRIVACY PROTECTION. All provision, sharing and/or sales
of Data to third parties shall be subject to and effected in accordance with
the provisions of the ADS and WFN Privacy Policies and procedures for consumer
notification and provisions for opt-out. The ADS and WFN Privacy Policies may
be modified by ADS and/or WFN from time to time as regulation, legislation, or
commonly accepted industry practices change or otherwise in ADS' and/or WFN's
reasonable discretion. In addition to the requirements set forth in the
preceding sentences of this Section 2.9, ADS agrees to take all action
necessary to ensure that the provision, sharing, bartering and/or sale of TLI
Data or data elements derived from any TLI Data by ADS shall also be subject to
and effected in accordance with the privacy policies of the TLI Entities as in
effect from time to time. The TLI Entities' privacy policies in effect as of
the date hereof are found in Schedule F. In the event either of the TLI
Entities, during the Term of this Agreement, changes its privacy policies
(which each TLI Entity shall be entitled to do as it shall determine from time
to time), then the TLI Entity shall promptly notify ADS, in writing, of such
change. If such
10
change would, in ADS' reasonable business judgment, materially negatively
impact the ability of ADS to profit from the business arrangements established
by the terms of this Agreement, then ADS and the TLI Entities shall enter into
negotiations to execute a mutually satisfactory written amendment to this
Agreement designed to compensate ADS for such reduced profitability.
In determining the compensation to ADS, the parties shall consider the
following. In the event ADS would be unable as a result of the privacy policies
change to generate any Net Revenues, then the TLI Entities would pay to ADS the
following amounts set forth below:
(a) $690,000 per month for the remaining Services provided by
ADS; and
(b) An amount equal to (i) the monthly average from the six
(6) month period prior to the date on which the TLI Entity's privacy
policies revision took effect of the 70% portion of Net Revenues
retained by ADS pursuant to the Revenue Sharing provision of Section
2.8, multiplied by (ii) the number of months remaining in the Term.
If ADS would be able to generate some Net Revenues, but not to the
same extent as if the privacy policies were not changed, then the parties shall
negotiate in good faith to determine adequate compensation to ADS, taking into
consideration the full compensation set forth in the preceding paragraph.
If the parties fail to execute a mutually acceptable agreement with
ninety (90) days after the date on which the TLI Entities notified ADS of the
change, then the parties shall submit to arbitration as provided below.
Any controversy, claim or dispute between the parties related to or
arising out of this Section that cannot be resolved in the normal course of
business (which shall include at least one meeting between senior executive
officers of ADS and the TLI Entities) shall be settled by arbitration,
conducted on a confidential basis, under the then current Commercial Rules of
the American Arbitration Association. The arbitrators may not add to the terms
of this Agreement, but must resolve the dispute or disagreement in accordance
with the Agreement's existing terms. Any decision by the arbitrators shall be
binding and judgment upon the award rendered by the arbitrators may be entered
in any court having jurisdiction thereof. The arbitration shall be conducted by
three arbitrators. One arbitrator shall be selected by ADS, one arbitrator
shall be selected by the TLI Entities and the third arbitrator shall be
selected by the American Arbitration Association and shall be subject to
approval by ADS and the TLI Entities. The Arbitration shall be conducted in
accordance with the terms of this Agreement and the following principles:
(1) The parties agree that each party has the same discovery rights as are
afforded under the Federal Rules of Civil Procedure, including such discovery
of third parties as is necessary to resolve the controversy. Each party shall
bear its own costs (e.g., filing, attorney and expert
11
witness fees) and shall share equally the cost of arbitration (e.g.,
arbitrator, court reporter and hearing room fees). The arbitrator shall provide
detailed, written findings of fact and conclusions of law to the parties in
support of any award or decision the arbitrator makes.
(2) During any arbitration or other dispute resolution proceeding, the parties
shall remain obligated to perform as required under this Agreement; PROVIDED
that any payments that may be in dispute shall be made to the court or placed
in escrow, under terms that are mutually acceptable to the parties, until the
dispute is resolved.
2.10 NAME, TRADEMARKS AND SERVICE MARKS. The TLI Entities hereby grant
to ADS and purchasers of Data from ADS the non-exclusive right to use the
tradenames, logos, trademarks and service marks of the TLI Entities (including,
without limitation, the name, trademarks and service marks of the Subsidiaries)
for purposes of performing the Services, provided that (i) such use shall be in
accordance with any written usage guidelines provided to ADS in advance by the
TLI Entities and (ii) such usage shall be subject to the relevant TLI Entity's
prior written consent.
SECTION 3. FEES
3.1 FEES. The TLI Entities will pay to ADS the fees set forth in
Schedule C hereto during the Term.
3.2 TAXES. The TLI Entities will be responsible for payment of all
sales, use, excise, and value-added taxes, or taxes of a similar nature,
imposed by the United States, any state or local government, or other taxing
authority, on the Services paid for hereunder.
3.3 INVOICES. During the Term, ADS shall send quarterly invoices to
each of the Subsidiaries at the corresponding address initially set forth in
Schedule E of this Agreement, and each of the Subsidiaries shall pay ADS within
thirty (30) days after the date of the corresponding invoice. In the event of a
dispute as to the accuracy of an invoice or calculation made pursuant to this
Agreement, the TLI Entities shall within sixty (60) days of the date of the
invoice, request that ADS provide such supporting material as would be
reasonably designed to ascertain the accuracy of the invoice or calculation.
The TLI Entities shall nevertheless pay the portion of the invoice that is not
in dispute. The parties shall cooperate to resolve any payment disputes under
this Agreement in an expeditious manner. If indicated, ADS shall either
promptly issue invoice credit to the TLI Entities against the earliest
subsequent invoices or make prompt payment to the TLI Entities as per the terms
of such resolution. Any payment by ADS to the TLI Entities shall be made to the
TLI Entity set forth in the Notices Section 10.7 of this Agreement. If any
amount remains due and unpaid, the TLI Entities shall promptly pay such amount.
Invoices not paid within thirty (30) days of the invoice date may be assessed
interest by ADS at a rate equal to the prime interest rate as published for the
relevant period in the Wall Street Journal plus one and one-half percent
(1-1/2%) per annum.
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3.4 SUSPENSION. ADS shall have the right to suspend its performance of
the Services in the event that the TLI Entities fails to pay an undisputed
amount due to ADS hereunder within sixty (60) days after the date of the
corresponding invoice.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE TLI ENTITIES
Each TLI Entity hereby represents and warrants on behalf of itself to ADS as
follows:
4.1 ORGANIZATION, POWER AND QUALIFICATION. It is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate (or equivalent) power and authority to enter
into this Agreement on its own behalf and on behalf of each of its respective
Subsidiaries, and to carry out the provisions of this Agreement. It is duly
qualified and in good standing to do business in all the states where it is
located, except where the failure to so qualify would not have a material
adverse effect on its business, or where the failure to so qualify would not
have a material adverse effect on its ability to perform under this Agreement.
4.2 AUTHORIZATION, VALIDITY AND NON-CONTRAVENTION. (a) This Agreement
has been duly authorized by all necessary corporate proceedings, has been duly
executed and delivered and is a valid and legally binding agreement, duly
enforceable in accordance with its terms (except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors' rights generally and by general equity
principles).
(b) No consent, approval, authorization, order, registration or
qualification of or with any court or regulatory authority or other governmental
body having jurisdiction over it is required for, and the absence of which would
adversely affect, the legal and valid execution and delivery of this Agreement,
and the performance of the transactions contemplated by this Agreement.
(c) Its execution, delivery and performance of this Agreement by the
relevant TLI Entity hereunder, including, without limitation, its provision of
TLI Data to ADS and the compliance by it with all provisions of this Agreement
(i) will not conflict with or violate any Applicable Law, and (ii) will not
conflict with or result in a breach of or default under any of the terms or
provisions of any indenture, loan agreement or other contract or agreement
under which it is an obligor or by which its property is bound where such
conflict, breach or default would have a material adverse effect on it, nor
will such execution, delivery or compliance violate or result in the violation
of its Articles of Incorporation or by-laws.
13
4.3 ACCURACY OF INFORMATION. All factual information that is
generated by it internally and not from a third party and that is furnished
by it to ADS in writing at any time pursuant to any requirement of, or
furnished in response to any written request of, ADS under this Agreement or
any transaction contemplated hereby has been, and all such factual
information hereafter furnished by it to ADS will be, based on the relevant
TLI Entity's reasonable knowledge, true and accurate in every respect
material to the transactions contemplated hereby on the date as of which such
information was or will be stated or certified.
4.4 NAME, TRADEMARKS AND SERVICE MARKS. It has the legal right to use
and to permit ADS to use, to the extent set forth herein, the various
tradenames, trademarks, logos and service marks utilized by it in the conduct of
its business.
4.5 OWNERSHIP RIGHTS. It is the owner of or otherwise has the lawful
right to transfer, use and license the TLI Data pursuant to this Agreement.
SECTION 5. COVENANTS OF THE TLI ENTITIES
Each of the TLI Entities agrees on behalf of itself that during the Term of this
Agreement:
5.1 COMPLIANCE WITH LAW. It shall do or cause to be done all things
necessary to comply with all Applicable Laws (including but not limited to all
applicable state and federal privacy laws including without limitation the
federal Gramm-Leach-Bliley Act (15 U.S.C. 6801 et seq.) the federal Driver's
Privacy Protection Act (18 U.S.C. 2721 et seq.)) in connection with its
business, its use of the Data and its obligations pursuant to this Agreement. It
shall comply with the Direct Marketing Association's guidelines with respect to
the Data.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF ADS
ADS hereby represents and warrants to the TLI Entities as follows:
6.1 ORGANIZATION, POWER AND QUALIFICATION. ADS is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to enter into this Agreement
and to carry out the provisions of this Agreement. ADS is duly qualified and in
good standing to do business in all jurisdictions where such qualification is
necessary for ADS to carry out its obligations under this Agreement.
6.2 AUTHORIZATION, VALIDITY AND NON-CONTRAVENTION. (a) This Agreement
has been duly authorized by all necessary corporate proceedings, has been duly
executed and delivered by ADS and is a valid and legally binding agreement of
ADS duly enforceable in accordance with its terms (except as such enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium and other
laws relating to or affecting creditors' rights generally and by general equity
principles).
(b) No consent, approval, authorization, order, registration or
qualification of or with any court or regulatory authority or other governmental
body having jurisdiction over ADS is
14
required for, and the absence of which would materially adversely affect, the
legal and valid execution and delivery of this Agreement, and the performance
of the transactions contemplated by this Agreement.
(c) The execution, delivery and performance of this Agreement by ADS
hereunder including the provision, sale, barter or sharing of Data, and the
compliance by ADS with all provisions of this Agreement (i) will not conflict
with or violate any Applicable Law, (ii) will not conflict with or result in
a breach of the terms or provisions of any indenture, loan agreement or other
contract or agreement under which ADS is an obligor or by which its property
is bound where such conflict, breach or default would have a material adverse
effect on ADS, nor will such execution, delivery or compliance violate or
result in the violation of the Articles of Incorporation or by-laws of ADS.
6.3 ACCURACY OF INFORMATION. All factual information that is generated
by ADS internally and not from a third party that is furnished by ADS to the TLI
Entities in writing at any time pursuant to any requirement of, or furnished in
response to any written request of the TLI Entities under this Agreement or any
transaction contemplated hereby has been, and all such factual information
hereafter furnished by ADS to the TLI Entities will be, based on ADS' reasonable
knowledge, true and accurate in every respect material to the transactions
contemplated hereby on the date as of which such information has or will be
stated or certified.
6.4 OWNERSHIP RIGHTS. ADS represents and warrants that it is the owner
of or otherwise has the lawful right to transfer, use and license the ADS Data
pursuant to this Agreement.
SECTION 7. COVENANTS OF ADS
ADS agrees that during the Term of this Agreement:
7.1 COMPLIANCE WITH LAW. ADS shall do or cause to be done all things
necessary to comply with all Applicable Laws (including but not limited to all
applicable state and federal privacy laws including without limitation the
federal Gramm-Leach-Bliley Act (15 U.S.C. 6801 et seq.) the federal Driver's
Privacy Protection Act (18 U.S.C. 2721 et seq.)) in connection with its
business, its use of the Data and its obligations pursuant to this Agreement.
ADS shall comply with the Direct Marketing Association's guidelines with respect
to the Data. ADS shall do or cause to be done all things necessary to ensure
that (x) its actions with respect to obtaining Data and (y) the provision,
sharing, bartering and/or selling of Data to third parties complies (in the case
of clauses (x) and (y)) with Applicable Law (including the federal and state
privacy laws noted above) and shall require in its transactions with third
parties that the use of Data by such third parties complies with all Applicable
Laws.
15
SECTION 8. INDEMNIFICATION
8.1 INDEMNIFICATION OBLIGATIONS. (a) TLI shall be liable to and shall
indemnify and hold ADS and its affiliates, subsidiaries and parent and their
respective officers, directors, employees, subcontractors and their successors
and assigns, harmless from any and all Losses (as hereinafter defined) incurred
by reason of: (i) TLI's breach of any representation, warranty or covenant
hereunder, (ii) TLI's performance of or failure to perform its obligations
hereunder, (iii) any action or failure to act by TLI, any of the Subsidiaries or
a TLI Store and its respective officers, directors and/or employees, which
results in a claim against ADS, its officers, employees, affiliates,
subsidiaries, and parent, unless the proximate cause of any such claim is an act
or failure to act by ADS, its officers, directors or employees.
(b) IBI shall be liable to and shall indemnify and hold ADS and its
affiliates, subsidiaries and parent and their respective officers, directors,
employees, subcontractors and their successors and assigns, harmless from any
and all Losses (as hereinafter defined) incurred by reason of: (i) IBI's breach
of any representation, warranty or covenant hereunder, (ii) IBI's performance of
or failure to perform its obligations hereunder, (iii) any action or failure to
act by IBI, any of the Subsidiaries or a IBI Store and its respective officers,
directors and/or employees, which results in a claim against ADS, its officers,
employees, affiliates, subsidiaries, and parent, unless the proximate cause of
any such claim is an act or failure to act by ADS, its officers, directors or
employees.
(c) ADS shall be liable to and shall indemnify and hold TLI, IBI and
their respective affiliates, subsidiaries and parent and their respective
officers, directors, employees, sub-contractors and their successors and
assigns, harmless from any and all Losses (as hereinafter defined) incurred by
reason of: (i) ADS's breach of any representation, warranty or covenant
hereunder, (ii) ADS's performance or and failure to perform its obligations
hereunder, and (iii) any action or failure to act by ADS and its officers,
directors, and employees which results in a claim against TLI, IBI or their
officers, employees, affiliates, subsidiaries and parent, unless the proximate
cause of any such claim is an act or failure to act by TLI, IBI and their
respective officers, directors or employees.
(d) For purposes of this Section 8.1 the term "Losses" shall mean any
liability, damage, costs, fees, losses, judgments, penalties, fines, and
expenses, including without limitation, any reasonable attorneys' fees,
disbursements, settlements (which require the other party's consent which shall
not be unreasonably withheld), and court costs, reasonably incurred by ADS, TLI,
or IBI as the case may be, without regard to whether or not such Losses would be
deemed material under this Agreement except that Losses may not include any
overhead costs that any party would normally incur in conducting its everyday
business.
16
8.2 LIMITATION ON LIABILITY. (a) IN NO EVENT SHALL ADS, TLI OR IBI BE
LIABLE FOR ANY INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES ARISING
OUT OF THIS AGREEMENT.
(b) ADS' TOTAL ANNUAL LIABILITY TO THE TLI ENTITIES FOR ALL DAMAGES FOR
ANY CAUSE WHATSOEVER OCCURRING DURING ANY YEAR OF THE TERM OF THIS AGREEMENT,
SHALL NOT EXCEED ONE HUNDRED PERCENT (100%) OF THE ACTUAL FEES RECEIVED OR
RECEIVABLE BY ADS FROM THE TLI ENTITIES DURING SUCH YEAR. ADS' TOTAL CUMULATIVE
LIABILITY TO THE TLI ENTITIES UNDER THIS AGREEMENT FOR ALL DAMAGES FOR ANY CAUSE
WHATSOEVER, SHALL NOT EXCEED ONE HUNDRED PERCENT (100%) OF THE ACTUAL FEES
RECEIVED OR RECEIVABLE BY ADS FROM THE TLI ENTITIES DURING THE TERM OF THIS
AGREEMENT; PROVIDED, HOWEVER, THAT THE LIMITATIONS ON LIABILITY SET FORTH IN
CLAUSES (A) AND (B) OF THIS SECTION 8.2 SHALL NOT APPLY TO ADS' INDEMNITY
OBLIGATIONS WHEN THE INDEMNITY OBLIGATION ARISES FROM ALLEGATIONS OR CLAIMS WITH
RESPECT TO THE FOLLOWING:
(1) ADS' FAILURE TO COMPLY WITH ANY APPLICABLE LAWS OR THE TLI
ENTITIES' PRIVACY POLICIES AS IN EFFECT FROM TIME TO TIME;
(2) ADS' BREACH OF ANY OF ITS OBLIGATIONS UNDER SECTION 2.7; AND
(3) ADS' WILLFUL OR GROSSLY NEGLIGENT ACTS.
(c) THE TLI ENTITIES' TOTAL ANNUAL LIABILITY TO ADS FOR ALL DAMAGES FOR
ANY CAUSE WHATSOEVER OCCURRING DURING ANY YEAR OF THE TERM OF THIS AGREEMENT,
SHALL NOT EXCEED ONE HUNDRED PERCENT (100%) OF THE ACTUAL FEES PAID BY THE TLI
ENTITIES TO ADS DURING SUCH YEAR. THE TLI ENTITIES' TOTAL CUMULATIVE LIABILITY
TO ADS UNDER THIS AGREEMENT FOR ALL DAMAGES FOR ANY CAUSE WHATSOEVER, SHALL NOT
EXCEED ONE HUNDRED PERCENT (100%) OF THE ACTUAL FEES PAID BY THE TLI ENTITIES TO
ADS DURING THE TERM OF THIS AGREEMENT; PROVIDED, HOWEVER, THAT THE LIMITATIONS
ON LIABILITY SET FORTH IN CLAUSES (A) AND (C) OF THIS SECTION 8.2 SHALL NOT
APPLY TO THE TLI ENTITIES' INDEMNITY OBLIGATIONS WHEN THE INDEMNITY ARISES FROM
ALLEGATIONS OR CLAIMS WITH RESPECT TO THE TLI ENTITIES' WILLFUL OR GROSSLY
NEGLIGENT ACTS.
17
8.3 NO WARRANTIES. EXCEPT AS EXPRESSLY PROVIDED HEREIN, THERE ARE NO
EXPRESS OR IMPLIED WARRANTIES, INCLUDING THE IMPLIED WARRANTIES OF
NON-INFRINGEMENT, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE,
RESPECTING THE SERVICES PROVIDED BY ADS PURSUANT TO THIS AGREEMENT; PROVIDED
THAT THE PROVISIONS OF THIS SECTION 8.3 SHALL NOT LIMIT OR AFFECT ADS'
INDEMNIFICATION OBLIGATIONS SET FORTH IN SECTIONS 8.1, 8.2 AND 8.4.
8.4 NOTIFICATION OF INDEMNIFICATION; CONDUCT OF DEFENSE. (a) In no case
shall the indemnifying party be liable under Section 8.1 of this Agreement with
respect to any claim or claims made against the indemnified party or any other
person so indemnified unless it shall be notified in writing of the nature of
the claim within a reasonable time after the assertion thereof, but failure to
so notify the indemnifying party shall not relieve it from any liability which
it may have under other provisions of this Agreement.
(b) The indemnifying party shall be entitled to participate, at its own
expense, in the defense, or, if it so elects, within a reasonable time after
receipt of such notice, to assume the defense of any suit brought against the
indemnified party which gives rise to a claim against the indemnifying party,
but, if the indemnifying party so elects to assume the defense, such defense
shall be conducted by counsel chosen by it and approved by the indemnified party
or the person or persons so indemnified, who are the defendant or defendants in
any suit so brought, which approval shall not be unreasonably withheld. If the
indemnifying party elects to assume the conduct of the defense of any suit
brought to enforce any such claim and retains counsel to do so, the indemnified
party or the person or persons so indemnified who are the defendant or
defendants in the suit, shall bear the fees and expenses of any additional
counsel thereafter retained by the indemnified party or such other person or
persons.
SECTION 9. TERM AND TERMINATION
9.1 TERM. This agreement will be effective as of September 1, 2000 and
shall remain effective through August 31, 2003, unless sooner terminated in
accordance with this Section 9. After August 31, 2003 (the "Initial Term") the
agreement shall be extended automatically for one (1) year Renewal Terms unless
any party has notified the other in writing not later than six (6) months prior
to the end of the Initial Term or any subsequent Renewal Term, subject to the
termination provisions in Section 9 of this Agreement. Notice of termination
shall be given in the manner set forth in Section 10.7.
9.2 TERMINATION WITH CAUSE BY ADS; ADS TERMINATION EVENTS. Any of the
following conditions or events shall constitute a "ADS Termination Event"
hereunder, and ADS may terminate this Agreement immediately without further
action if either TLI Entity causes such ADS Termination Event to occur and be
continuing:
18
(a) If TLI or IBI shall (i) generally not pay its debts as they
become due; (ii) file, or consent by answer or otherwise to the filing against
it, of a petition for relief, reorganization or arrangement or any other
petition in bankruptcy, for liquidation or to take advantage of any bankruptcy
or insolvency law of any jurisdiction; (iii) make an assignment for the
benefit of its creditors; (iv) consent to the appointment of a custodian,
receiver, trustee or other officer with similar powers of itself or of any
substantial part of its property; (v) be adjudicated insolvent or be
liquidated; (vi) take corporate action in preparation for the events set forth
in subsections (ii), (iii), or (iv); (vii) have a materially adverse change in
its financial condition, including, but not limited to receiving a bond
downgrade or being downgraded by a rating agency to a rating below an
investment grade rating, or (viii) receive an adverse opinion by its auditors
or accountants as to its viability as a going concern or (ix) breach or fail
to perform or observe any covenant or agreement contained in any creditor loan
agreement, debt instrument or any other contract or agreement to which it is
bound; or
(b) If a court or government authority of competent jurisdiction
shall enter an order appointing, without consent by TLI or IBI, a custodian,
receiver, trustee or other officer with similar powers with respect to it or
with respect to any substantial part of its property, or if an order for
relief shall be entered in any case or proceeding for liquidation or
reorganization or otherwise to take advantage of any bankruptcy or insolvency
law of any jurisdiction, or ordering the dissolution, winding up or
liquidation of TLI or IBI, or if any petition for any such relief shall be
filed against TLI or IBI and such petition shall not be dismissed within 60
days; or
(c) If TLI or IBI shall materially default in the performance of
or compliance with any term or violates any of the covenants, representations,
warranties or agreements contained in this Agreement and TLI shall not have
remedied such default within thirty (30) days after written notice thereof
shall have been received by TLI or IBI from ADS; or
(d) If any law, ordinance, regulation or the like, including,
without limitation, any applicable state or federal law, prohibits or
significantly impacts ADS' performance of the Services. In the event of
termination on this basis, TLI, IBI and ADS shall negotiate in good faith to
establish mutually agreeable terms and condition for continued use of the then
existing Main Data Warehouse.
9.3 TERMINATION WITH CAUSE BY THE TLI ENTITIES; TLI TERMINATION
EVENTS. Any of the following conditions or events shall constitute an "TLI
Termination Event" hereunder, and the TLI Entities may terminate this
Agreement immediately without further action if ADS causes such TLI
Termination Event to occur and be continuing:
(a) If ADS shall (i) generally not be paying its debts as they
become due; (ii) file or consent by answer or otherwise to the filing against
it, of a petition for relief, reorganization or arrangement or any other
petition in bankruptcy, for liquidation or to take advantage of any bankruptcy
or insolvency law of any jurisdiction; (iii) make an assignment for the
benefit of its creditors; (iv) consent to the appointment of a custodian,
receiver, trustee or other officer with
19
similar powers for itself or of any substantial part of its property; (v) be
adjudicated insolvent or be liquidated; or (vi) take corporate action in
preparation for events set forth in subsections (ii), (iii) or (iv); (vii)
have a materially adverse change in its financial condition, including, but
not limited to receiving a bond downgrade or being downgraded by a rating
agency to a rating below an investment grade rating, or (viii) receive an
adverse opinion by its auditors or accountants as to its viability as a going
concern or (ix) breach or fail to perform or observe any covenant or agreement
contained in any creditor loan agreement, debt instrument or any other
contract or agreement to which it is bound; or
(b) If a court or government authority of competent jurisdiction
shall enter an order appointing, without consent by ADS, a custodian,
receiver, trustee or other officer with similar powers with respect to it or
with respect to any substantial part of its property, or if an order for
relief shall be entered in any case or proceeding for liquidation or
reorganization or otherwise to take advantage of any bankruptcy or insolvency
law of any jurisdiction, or ordering the dissolution, winding up or
liquidation of ADS, or if any petition for any such relief shall be filed
against ADS and such petition shall not be dismissed within 60 days; or
(c) If ADS shall materially default in the performance of or
compliance with any term or violates any of the covenants, representations,
warranties or agreements contained in this Agreement and ADS shall not have
remedied such default within thirty (30) days after written notice thereof
shall have been received by ADS from the TLI Entities.
(d) The TLI Entities may terminate this Agreement upon thirty
(30) days written notice if ADS Substantially fails to meet two or more of the
required service standards set forth in Schedule B hereto. It is understood
and agreed that the penalties specified in the Schedules hereto are in
addition to the rights of the TLI Entities under this Agreement, including
their right to terminate this Agreement pursuant to Section 9.1(c) and 9.3(d).
"Substantially" in this case means more than one-third of the time to provide
the Services in any given Contract Year, in accordance with the relevant
service standards and subject to Section 10.11.
9.4 EFFECT OF TERMINATION. Upon expiration or termination of
this Agreement, all of the following provisions shall be applicable:
(1) The TLI Entities shall pay ADS the full amount of any
and all outstanding invoices for undisputed fees or
charges within thirty (30) days;
(2) within ten (10) Business Days of the expiration or
termination of this Agreement, ADS shall deliver to
the TLI Entities (x) all of the TLI Data and all other
information or materials reflecting or based upon, in
whole or in part, any TLI Data which ADS developed for
the TLI Entities pursuant to this Agreement (the TLI
Data and such other information and materials are
referred to collectively as the "Relevant Data") in
cartridge media or such other format as the TLI
Entities shall reasonably request, (y) a copy
20
of ADS' data model, table structure, business rules
and all other documentation relating to the Services
which is reasonably required by TLI for the transition
of the Services, and (z) all other promotional or
other materials relating, directly or indirectly, to
any TLI Entity or any aspect of the business of either
TLI Entity;
(3) the rights of ADS to utilize any Relevant Data in any
manner whatsoever, directly or indirectly, for
internal purposes or otherwise (including, without
limitation, the provision, sharing, bartering or
selling of any Relevant Data to third parties) shall
cease immediately;
(4) from and after such expiration or termination, ADS shall
take all steps reasonably necessary or appropriate to
assist the TLI Entities in transitioning to another
provider of services similar to the Services,
including causing ADS personnel to be reasonably
available to the TLI Entities or such new service
provider as reasonably necessary or appropriate to
respond to inquiries and otherwise to facilitate the
transition; and
(5) all obligations of the parties hereunder shall cease
except such obligations which survive termination
pursuant to Section 10.13, it being understood,
however, that the parties shall be obligated to
perform all of their obligations hereunder until the
effective date of termination.
SECTION 10. MISCELLANEOUS
10.1 ENTIRE AGREEMENT. This Agreement constitutes the entire
Agreement and supersedes all prior agreements and understandings, whether oral
or written, among the parties hereto with respect to the subject matter hereof
and merges all prior discussions between them.
10.2 COORDINATION OF PUBLIC STATEMENTS. No party will make any
public announcement of this Agreement or provide any information concerning
this Agreement to any representative of any news, trade or other media without
the prior approval of the other party, and will not respond to any inquiry
from any public or governmental authority, except as required by law,
concerning this Agreement without prior consultation and coordination with the
other party.
10.3 AMENDMENT. Except as otherwise provided for in this
Agreement, the provisions herein may be modified only upon the mutual
agreement of the parties, however, no such modification shall be effective
until reduced to writing and executed by both parties.
10.4 SUCCESSORS AND ASSIGNS. This Agreement and all obligations
and rights arising hereunder shall be binding upon and inure to the benefit of
the parties hereto and their respective successors, transferees and assigns.
None of TLI, IBI or ADS may assign its rights and obligations under this
Agreement without the prior written consent, which consent shall not be
21
unreasonably withheld, of ADS (in the case of TLI or IBI) or TLI (in the case
of ADS); provided that a party may assign its rights and obligations to any
Affiliate of such party without the other parties' consent (it being
understood that no assignment pursuant to this proviso shall relieve the
assigning party of any of its obligations hereunder).
10.5 WAIVER. No waiver of the provisions hereto shall be
effective unless in writing and signed by the party to be charged with such
waiver. No waiver shall be deemed to be a continuing waiver in respect of any
subsequent breach or default either of similar or different nature unless
expressly so stated in writing. No failure or delay on the part of any party
in exercising any power or right under this Agreement shall be deemed to be a
waiver, nor does any single or partial exercise of any power or right preclude
any other or further exercise, or the exercise of any other power or right.
10.6 SEVERABILITY. If any of the provisions or parts of the
Agreement are determined to be illegal, invalid or unenforceable in any
respect under any applicable statute or rule of law, such provisions or parts
shall be deemed omitted without affecting any other provisions or parts of the
Agreement which shall remain in full force and effect, unless the declaration
of the illegality, invalidity or unenforceability of such provision or
provisions substantially frustrates the continued performance by, or
entitlement to benefits of, any party, in which case this Agreement may be
terminated by the affected party, without penalty.
10.7 NOTICES. All communications and notices pursuant hereto to
any party shall be in writing and addressed or delivered to it at its address
shown below, or at such other address as may be designated by it by notice to
the other party, and shall be deemed given when delivered by hand, or two (2)
Business Days after being mailed (with postage prepaid) or when sent by
receipted courier service:
If to ADS: If to the TLI Entities:
--------- ----------------------
800 TechCenter Drive The Limited, Inc.
Gahanna, Ohio 43230 Three Limited Parkway
Attn.: Dennis Kooker, VP Consumer Columbus, Ohio 43230
Database Marketing Services Attn.: Daniel P. Finkelman
With a Copy to: Karen Morauski
10.8 CAPTIONS AND CROSS-REFERENCES. The table of contents and
various captions in this Agreement are included for convenience only and shall
not affect the meaning or interpretation of any provision of this Agreement.
References in this Agreement to any Section are to such Section of this
Agreement.
10.9 GOVERNING LAW. THIS AGREEMENT SHALL BE A CONTRACT MADE UNDER
AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF OHIO, REGARDLESS OF THE
DICTATES OF OHIO CONFLICTS OF LAW, AND THE PARTIES HEREBY SUBMIT TO EXCLUSIVE
JURISDICTION AND VENUE IN THE UNITED
22
STATES FEDERAL DISTRICT COURT FOR THE NORTHERN DISTRICT OF OHIO OR ANY OF THE
STATE COURTS LOCATED IN FRANKLIN COUNTY, OHIO.
10.10 COUNTERPARTS. This Agreement may be signed in one or more
counterparts, all of which shall be taken together as one agreement.
10.11 FORCE MAJEURE. No party will be responsible for any failure
or delay in performance of its obligations under this Agreement because of
circumstances beyond its control, including, but not limited to, acts of God,
flood, criminal acts, fire, riot, computer viruses, computer hackers,
accident, strikes or work stoppage, embargo, sabotage, inability to obtain
material, equipment or phone lines, government action (including any laws,
ordinances, regulations or the like which restrict or prohibit the providing
of the services contemplated by this Agreement), and other causes whether or
not of the same class or kind as specifically named above. In the event a
party is unable to perform substantially for any of the reasons described in
this Section, it will notify the other party promptly of its inability so to
perform, and if the inability continues for at least thirty (30) consecutive
days, the party so notified may then terminate this Agreement forthwith. This
provision shall not, however, release the party unable to perform from using
its best efforts to avoid or remove such circumstance and such party unable to
perform shall continue performance hereunder with the utmost dispatch whenever
such causes are removed.
10.12 RELATIONSHIP OF PARTIES. This Agreement does not constitute
the parties as partners or joint venturers and no party will so represent
itself.
10.13 SURVIVAL. No termination of this Agreement shall in any way
affect or impair the powers, obligations, duties, rights, indemnities,
liabilities, covenants or warranties and/or representations of the parties
with respect to times and/or events occurring prior to such termination. No
powers, obligations, duties, rights, indemnities, liabilities, covenants or
warranties and/or representations of the parties with respect to times and/or
events occurring after termination shall survive termination except for the
following Sections: Section 3, Section 8, Section 10.7 and Section 10.18.
10.14 MUTUAL DRAFTING. This Agreement is the joint product of ADS,
IBI and TLI and each provision hereof has been subject to mutual consultation,
negotiation and agreement of ADS, IBI and TLI.
10.15 INDEPENDENT CONTRACTOR. The parties hereby declare and agree
that ADS is engaged in an independent business, and shall perform its
obligations under this Agreement as an independent contractor; that any of
ADS's personnel performing the services hereunder are agents, employees,
affiliates, or subcontractors of ADS and are not agents, employees,
affiliates, or subcontractors of the TLI Entities; that ADS has and hereby
retains the right to exercise full control of and supervision over the
performance of ADS's obligations hereunder and full control over the
employment, direction, compensation and discharge of any and all of the ADS's
agents,
23
employees, affiliates, or subcontractors, including compliance with workers'
compensation, unemployment, disability insurance, social security, withholding
and all other federal, state and local laws, rules and regulations governing
such matters; that ADS shall be responsible for ADS's own acts and those of
ADS's agents, employees, affiliates, and subcontractors; and that except as
expressly set forth in this Agreement, ADS does not undertake by this
Agreement or otherwise to perform any obligation of the TLI Entities, whether
regulatory or contractual, or to assume any responsibility for the TLI
Entities' business or operations.
10.16 NO THIRD PARTY BENEFICIARIES. The provisions of this
Agreement are for the benefit of the parties hereto and not for any other
person or entity.
10.17 COUNTERPARTS. This Agreement may be executed in several
counterparts all of which taken together shall constitute one single agreement
between the parties.
10.18 CONFIDENTIALITY. (a) No party shall disclose any information
not of a public nature concerning the business or properties of any other
party which it learns as a result of negotiating or implementing this
Agreement or the transactions contemplated hereby, including, without
limitation, the terms and conditions of this Agreement, trade secrets,
business and financial information, business methods, procedures, know-how and
other information of every kind that relates to the business of any party
except to the extent disclosure is required by applicable law, is necessary
for the performance of the disclosing party's obligation under this Agreement,
or is agreed to in writing by the other party; provided that: (i) prior to
disclosing any confidential information to any third party, the party making
the disclosure shall give notice to the other party of the nature of such
disclosure and of the fact that such disclosure will be made; and (ii) prior
to filing a copy of this Agreement with any governmental authority or agency,
the filing party will consult with the other party with respect to such filing
and shall redact such portions of this Agreement which the other party
requests be redacted, unless, in the filing party's reasonable judgment based
on the advice of its counsel (which advice shall have been discussed with
counsel to the other party), the filing party concludes that such request is
inconsistent with the filing party's obligations under applicable laws. No
party shall use the other party's name for advertising or promotional purposes
without such other party's written consent. None of the foregoing shall
preclude any party from disclosing Data in the course of exercising its rights
under Section 2.4 hereof.
(b) The obligations of this Section, shall not apply to any
information:
(i) which is generally known to the trade or to the public
at the time of such disclosure; or
(ii) which becomes generally known to the trade or the public
subsequent to the time of such disclosure; provided,
however, that such general knowledge is not the result
of a disclosure in violation of this Section; or
24
(iii) which is obtained by a party from a source other than the
other party, without breach of this Agreement or any other
obligation of confidentiality or secrecy owed to such
other party or any other person or organization; or
(iv) which is independently conceived and developed by the
disclosing party and proven by the disclosing party
through tangible evidence not to have been developed as a
result of a disclosure of information to the disclosing
party, or any other person or organization which has
entered into a confidential arrangement with the
non-disclosing party.
(c) If any disclosure is made pursuant to the provisions of this
Section, to any parent company, subsidiary, affiliate or third party, the
disclosing party shall be responsible for ensuring that such parent, subsidiary,
affiliate or third party keeps all such information in confidence and that any
third party executes a confidentiality agreement provided by the non-disclosing
party. Each party covenants that at all times it shall have in place procedures
designed to assure that each of its employees who is given access to the other
party's confidential information shall protect the privacy of such information.
Each party acknowledges that any breach of the confidentiality provisions of
this Agreement by it will result in irreparable damage to the other party and
therefore in addition to any other remedy that may be afforded by law any breach
or threatened breach of the confidentiality provisions of this Agreement may be
prohibited by restraining order, injunction or other equitable remedies of any
court. The provisions of this Section will survive termination or expiration of
this Agreement.
10.19 NON-INTERFERENCE WITH EMPLOYEES. The parties acknowledge that
their continuing relationship with their own employees is an essential
requirement of their business. Accordingly, during the Term of this Agreement
and continuing for six (6) months thereafter, unless it has received the other
parties' prior written consent, each party agrees not to solicit for employment
any person who is an employee of the other who is involved in any way in
providing or receiving the Services under this Agreement (it being understood
that general solicitations through newspaper advertisements, recruitment firms
and similar means not violate the provisions of this Section 10.19).
10.20 VICTORIA'S SECRET CATALOGUE. Notwithstanding any provision of
this Agreement to the contrary, (i) Victoria's Secret Catalogue is not a part of
or subject to this Agreement and (ii) any and all data or other information
derived from or attributable to the business or operations of Victoria's Secret
Catalogue ("VSC Data"), which may be present on the Main Data Warehouse from
time to time, shall not be subject to or considered a part of this Agreement.
Without limiting the generality of the foregoing, the rights granted to ADS and
its affiliates, and the restrictions imposed on the TLI Entities and their
affiliates, pursuant to this Agreement shall not extend to or encompass any such
VSC Data. Notwithstanding the foregoing, data derived from another business that
is the same as VSC Data, including without limitation customer names and
addresses, is subject to and considered a part of this Agreement.
25
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in manner
and form sufficient to bind them as of the date first above written.
THE LIMITED, INC. BY AND ON BEHALF OF ADS ALLIANCE DATA SYSTEMS, INC.
THE LIMITED, INC. AND ITS SUBSIDIARIES
By: /s/ Daniel P. Finkelman By: /s/ J.B. Sullivan
-------------------------- ------------------------
Title: Senior Vice President Title: Senior Vice President
-------------------------- ------------------------
Date: 9/15/00 Date: 9-15-00
-------------------------- ------------------------
INTIMATE BRANDS, INC. BY AND ON BEHALF OF INTIMATE
BRANDS, INC. AND ITS SUBSIDIARIES
By: /s/ Michael D. Newman
--------------------------
Title: CFO
--------------------------
Date: 9-26-00
--------------------------
26
EXHIBIT 10.56
PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
SUPPLIER AGREEMENT
BETWEEN
LOYALTY MANAGEMENT GROUP CANADA INC.
and
AIR CANADA
Dated as of April 24, 2000
TABLE OF CONTENTS
PAGE
ARTICLE 1 RIGHT TO PURCHASE..............................................................................1
1.1 Right to Purchase..............................................................................1
1.2 Capacity.......................................................................................2
1.3 Capacity Guarantee.............................................................................3
1.4 Insufficient Capacity..........................................................................4
1.5 Other Requirements.............................................................................4
1.6 Treatment of Passengers Holding Tickets........................................................4
1.7 Reports and Audits.............................................................................5
1.8 Protection of Program..........................................................................5
1.9 Determination of **** Routes...................................................................5
ARTICLE 2 FARES..........................................................................................6
2.1 Special Fares..................................................................................6
2.2 Additional Payment.............................................................................6
ARTICLE 3 TERM...........................................................................................7
3.1 Term...........................................................................................7
3.2 Breach.........................................................................................7
3.3 ****...........................................................................................7
3.4 Post-Termination Rights........................................................................7
ARTICLE 4 CONFIDENTIALITY AND TRADE-MARKS................................................................8
4.1 Confidentiality................................................................................8
4.2 Announcements..................................................................................9
4.3 Trade-Marks....................................................................................9
ARTICLE 5 WARRANTIES AND CCAA ****......................................................................10
5.1 Warranties....................................................................................10
5.2 Indemnity.....................................................................................10
5.3 CCAA Process ****.............................................................................11
ARTICLE 6 GENERAL.......................................................................................11
6.1 Entire Agreement..............................................................................11
6.2 Unconditional Obligation......................................................................11
6.3 Release.......................................................................................11
-i-
**** PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT.
6.4 Injunction....................................................................................11
6.5 Severability and Time of Essence..............................................................12
6.6 Governing Law.................................................................................12
6.7 Costs and Expenses............................................................................12
6.8 Waiver........................................................................................12
6.9 Successors and Assigns........................................................................12
6.10 Counterparts..................................................................................13
SCHEDULE A - Definitions and Interpretation
SCHEDULE B - Special Fares
SCHEDULE C - Reservations, Commissions and Travel Restrictions
SCHEDULE D - Other Commitments
SCHEDULE E - Job Description for LMGC Ombudsman
SCHEDULE F - LMGC News Release
SCHEDULE G - ****
SCHEDULE H - LMGC Projections
SCHEDULE I - ****
**** PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT.
-ii-
SUPPLIER AGREEMENT
THIS AGREEMENT is made as of April 24, 2000 between LOYALTY
MANAGEMENT GROUP CANADA INC. and AIR CANADA.
WHEREAS LMGC wishes to purchase airline tickets from
Airline, and Airline has agreed to sell airline tickets to LMGC, subject to
and in accordance with the terms of this Agreement;
AND WHEREAS terms used herein have the meanings set forth
in Schedule A hereto and the principals of interpretation set out therein
apply to this Agreement;
NOW THEREFORE, in consideration of the premises and the
mutual promises and covenants hereinafter set forth, the parties now agree as
follows:
ARTICLE 1
RIGHT TO PURCHASE
1.1 RIGHT TO PURCHASE.
(a) Starting on May 1, 2000 and thereafter throughout the Term, LMGC
shall have the right to buy Special Tickets from Airline and each Regional
Airline, and Airline will make available, and either cause each of the
Regional Airlines to make available or obtain itself from each such Regional
Airline and make available, for purchase by LMGC, Special Tickets, at the
Special Fares and otherwise on the terms and conditions hereof. Airline shall
also use its best efforts to cause CAI (so long as it is not a Regional
Airline (and as a result, subject to the previous sentence)) to comply with
the terms of this Agreement in all respects (including supplying Special
Tickets for Airline Seats at the Special Fares) as if it were a Regional
Airline. Any reference herein to the purchase by LMGC of Special Tickets or
Airline Seats includes any such purchase by any Subsidiary of LMGC (including
LMG Travel) and Airline agrees that any such Subsidiary may purchase Special
Tickets hereunder at the Special Fares.
(b) During the Initial Period (but subject to Section 1.2), LMGC may
purchase Special Tickets at the Special Fares for any Airline Seats offered
by Airline or any Regional Airline. During the Additional Period, however,
LMGC may only purchase Special Tickets at the Special Fares for itineraries
which ****
**** PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT.
-2-
1.2 CAPACITY.
(a) Except as otherwise provided herein, during the Initial Period LMGC
shall (and shall be entitled to) book Special Tickets in **** Class and shall
be entitled to the priority currently associated therewith (not to be lower
than that available to any other Person booking into **** Class). Except as
otherwise provided herein, during the Additional Period LMGC shall (and shall
be entitled to) book Special Tickets in a class to be designated by Airline
which may, but need not be, **** Class, and which will satisfy the
requirements for the Additional Period set out herein (the "Other Class").
(b) Airline agrees to load and maintain the Special Fares in **** Class
during the Initial Period and in the Other Class during the Additional Period,
and make such Special Fares accessible in SABRE throughout the Term and to
give LMGC and LMG Travel (and no one else outside of Airline or a Regional
Airline) access to such fares. No other Person or entity entitled to book into
**** Class at any time will have greater rights thereto or to the capacity
provided thereby, than LMGC. Airline represents and warrants to LMGC that the
following statements regarding **** Class are now true and covenants that such
statements will be true (subject to Section 1.2(c) below) throughout the Term:
(i) **** Class is loaded such that it is accessible in SABRE and can be viewed
by LMGC within SABRE, (ii) **** (iii) **** (iv) it regularly provides an
initial availability for a route when set of at least **** (v) there are no
partitions in such class that would affect LMGC and **** and (vi) ****. The
parties have discussed LMGC's current and projected needs and flight patterns
for Airline Seats and a description of such needs is attached as Schedule H
hereto. Airline confirms that it is its expectation that LMGC's rights to book
into **** Class as contemplated hereby will generally satisfy those needs
during the Initial Period, ****, and LMGC confirms that it is its expectation
that it will book to its forecasts, as reflected in Schedule H, during the
Initial Period, although it gives no warranty as to what actual levels of
bookings will be. ****
(c) If at any time or from time to time during the Initial Period, Airline
changes its booking classes so that **** Class no longer exists or makes any
material changes to the parameters associated with such class, Airline shall
designate another booking class into which LMGC shall be entitled to book
Special Tickets and which will provide LMGC with substantially the same
**** PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT.
-3-
parameters as described in Section 1.2(b). For purposes hereof, any such
replacement class shall thereafter be referred to as "**** Class".
(d) The parties will meet annually to review the concept of LMGC being
permitted access to the capacity provided from time to time by Airline under
"web specials" made available on Airline's web site. Such access would be
provided in order to permit LMGC to assist Airline in utilizing such capacity,
by issuing Special Tickets therefrom to its Collectors. The price payable by
LMGC for any Airline Seats booked therefrom shall not be any greater than
****. Airline will allow LMGC reasonable access on such basis to book Special
Tickets from at least one such web special during the Initial Period, but
otherwise Airline has no obligation to provide LMGC such access. LMGC's rights
under this Section 1.2(c) are in addition to, and not in limitation of, its
capacity entitlements under the balance of this Section 1.3.
1.3 CAPACITY GUARANTEE.
(a) The provisions of Sections 1.3(b) and (c) below shall apply only in
respect of itineraries booked by LMGC for the period on or after September 1,
2000 and LMGC acknowledges that Airline cannot commit to such capacity
guarantees for itineraries prior thereto. Airline shall however use its
commercially reasonable best efforts to ensure that LMGC's needs for capacity
are satisfied in respect of itineraries prior thereto.
(b) Subject to Section 1.3(a), Airline shall ensure that, at all times
during the Term, for each **** day period which commences at least **** days
after such time, ****
(c) In addition, but again subject to Section 1.3(a), Airline shall also
ensure that, at all times during the Term, for each **** day period which
commences at least **** days after such time, ****
**** PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT.
-4-
1.4 INSUFFICIENT CAPACITY. If at any time LMGC, acting reasonably,
determines (whether from reviewing the reports Airline provides under Section
1.7, from a review of SABRE or otherwise) that the capacity made available to
LMGC **** with respect to a particular **** day period that has not been
completed does not comply with Section 1.3, LMGC may notify Airline thereof.
****
1.5 OTHER REQUIREMENTS. Airline shall, and shall ensure that each
Regional Airline shall, comply with Schedule D hereto. In addition, the terms
of this Agreement will be subject to the reservations, commissions, travel,
ticket use and other procedures and requirements as set forth in Schedule C
hereto.
1.6 TREATMENT OF PASSENGERS HOLDING TICKETS. Except as described in
Schedule C, Airline shall, and shall ensure that each Regional Airline shall,
treat and serve each passenger holding a Special Ticket in the same manner as
each other economy passenger of Airline or such Regional Airline, as
applicable, including as to loading priorities, entitlement to denied
boarding
**** PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT.
-5-
compensation, flight cancellation compensation, baggage limits, or any
disruption or compensation, all in accordance with applicable industry
tariffs and conditions of carriage.
1.7 REPORTS AND AUDITS. On or before the 15th day of each month during
the Term, Airline shall provide LMGC with a report in mutually agreed upon
form showing both projected and historical data and, at a minimum, showing,
for at least each of the three months immediately thereafter, (i) those
routes for which there is no availability to LMGC in such month, (ii) those
routes for which there is low and rapidly diminishing capacity to LMGC in
such month, and (iii) those routes for which there is sufficient capacity to
LMGC in such month. Availability for this purpose shall be determined by
availability in the class or classes into which LMGC is then booking
hereunder and based on the aggregate number of Airline Seat available on such
routes during such month. LMGC shall have the right, on reasonable notice to
Airline and during normal business hours and no more than twice each calendar
year, to engage an independent third party to audit Airline's records in
order to confirm the accuracy of such reports, and in each case the cost of
such audit shall be paid by LMGC unless any such audit reveals that the
capacity shown to be available to LMGC in a report was incorrect by more than
****, in which case Airline shall pay the cost of such audit.
1.8 PROTECTION OF PROGRAM. Title to the Program, AMRM and all rights
represented thereby or related thereto, are reserved at all times to LMGC.
LMGC may determine, in its sole discretion, the duration, form, scope and
content of the Program and may effect termination, addition, deletion or
other modification or change thereof or thereto as it may, in its sole
discretion, determine. For greater certainty, this Section 1.8 is not
intended to give LMGC the right to change the Program in a manner that would
reduce its obligations hereunder.
1.9 DETERMINATION OF **** ROUTES.
****
****
(c) If at any time the parties are unable to agree by December 15th of any
year, for purposes of Section 1.9(a) or (b) above, as to the **** to be
described in Schedule G or the **** to be described in Schedule I, either
party may refer the matter to confidential and binding arbitration under the
ARBITRATIONS ACT (Ontario) before a single arbitrator who shall be instructed
to provide his or her determination as soon as possible. The cost thereof
shall be split equally between the parties. In the event of such a referral,
the applicable schedule
**** PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT.
-6-
shall only be amended under this Section 1.9 on the date of such
determination, and such determination shall be final and binding for purposes
of this Section 1.9.
ARTICLE 2
FARES
2.1 SPECIAL FARES.
(a) The Special Fares as of May 1, 2000 are as set out in Part 1 of
Schedule B. On ****, the Special Fares will be adjusted with respect to all
Special Tickets purchased on or after that date to the amounts set out in Part
2 of Schedule B. On ****, the Special Fares will be adjusted with respect to
all Special Tickets purchased on or after that date to the amounts set out in
Part 3 of Schedule B. **** as contemplated in Section 5.3, (i) on **** the
Special Fares will be adjusted with respect to all Special Tickets purchased
on or after that date to the amounts set out in Part 4 of Schedule B, and (ii)
on **** the Special Fares will be adjusted with respect to all Special Tickets
purchased on or after that date to the amounts set out in Part 5 of Schedule
B. ****
(b) For each Special Ticket purchased by LMGC hereunder, LMGC shall pay
Airline the applicable Special Fare. **** Infants (i.e. under 2 years old) who
do not occupy a separate Airline Seat shall be carried free of charge, except
for any applicable Additional Charges and except as otherwise required by
applicable law or by regulations or policies applicable to the airline
industry.
2.2 ADDITIONAL PAYMENT. As soon as possible, but in any event by July 1,
2000, Airline shall dedicate at least one employee exclusively for the purpose
of fulfilling the responsibilities and having the job position and
qualifications described in Schedule E hereto. In consideration of Airline
fulfilling such responsibility, LMGC shall, within 30 days of such person
being hired, pay to Airline an amount (which shall apply in respect of the
period from the date of hire up to and including December 31, 2000) determined
based on pro rating $**** over the period left in the 2000 calendar year from
the date of such hire. Within 30 days following commencement of each
subsequent calendar year during the Term, LMGC shall pay an additional $****
to Airline. The amount so paid by LMGC shall be applied on account of the
salary due to such individual and other related expenses of Airline in
connection therewith. If the Term ends part way through any calendar year,
Airline shall provide LMGC with a proportionate rebate of the amount so paid.
In addition, if at any time such position remains vacant during a calendar
year for more than 60 days in aggregate or such individual fails to fulfil
**** PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT.
-7-
the responsibilities set out in Schedule E, LMGC shall also be entitled to a
proportionate rebate of the amount paid based on the total period during
which such position remained vacant or during which such individual so failed
to fulfil such responsibilities.
ARTICLE 3
TERM
3.1 TERM. This Agreement shall be come into effect as of May 1, 2000 and
shall continue in full force and effect thereafter until December 31, 2004,
at which time this Agreement shall terminate, provided that Airline shall
still be bound to honour any Special Tickets purchased hereunder on or prior
to the termination date which have a travel date which occurs thereafter and
shall comply with Section 1.6 in connection therewith notwithstanding such
termination.
3.2 BREACH. If either party hereto fails to (i) pay any amounts when due
and payable hereunder, and such failure continues for a period of fifteen
Business Days after written notice of such failure referring to this Section
3.2 is given to such party by the other party; (ii) comply with Section 4.3
and such failure continues for a period of fifteen days after written notice
of such failure referring to this Section 3.2 is given by the other party, or
(iii) observe or perform any of its other obligations under this Agreement
and such failure continues for a period of thirty days after written notice
of such failure referring to this Section 3.2 is given by the other party,
then without prejudice to any other rights or remedies the other party may
have, this Agreement may be terminated by the other party by notice to the
defaulting party so long as such failure is still continuing at the time of
giving such notice.
3.3 ****
3.4 POST-TERMINATION RIGHTS. Notwithstanding any termination of this
Agreement, the parties shall continue to be liable for all financial and
other monetary obligations respectively incurred by each of them pursuant to
this Agreement prior to such termination until the time each of such
obligations shall have been fully satisfied, and exercise by either party of
its right to terminate under any provision of this Agreement will not affect
or impair its right to enforce its
**** PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT.
-8-
other rights or remedies under this Agreement. All obligations of each party
that have accrued before termination or that are of a continuing nature will
survive termination.
ARTICLE 4
CONFIDENTIALITY AND TRADE-MARKS
4.1 CONFIDENTIALITY.
(a) Throughout the Term and for a period of 5 years following the
termination of this Agreement, each party will, and will cause each of its
Representatives (as defined below) to, hold in strictest confidence and not
use in any manner whatsoever and only disclose to those of its
Representatives who have a need to know same for purposes of this Agreement,
any Confidential Information (as defined below) of the other party, whether
provided before or after the date of this Agreement, including any
Confidential Information provided by LMGC to Airline in connection with
Airline's initial determination of whether to enter into this Agreement;
provided that the foregoing will not apply (i) to use by LMGC of its data
base; (ii) where disclosure of Confidential Information is required by law or
in order to enforce rights under or in connection with this Agreement or the
subject matter hereof; (iii) where the Confidential Information which has
been disclosed had already ceased to be confidential through no fault of the
disclosing party or its Representatives; (iv) to disclosure by LMGC of any
terms of this Agreement to its or its Affiliates' actual or prospective
financiers or investors or otherwise in connection with a financing,
including disclosing to any underwriter, potential purchasers of LMGC's or
any of its Affiliate's shares or business and including their respective
counsel, or (v) to disclosure by Airline to CAI, unless the CCAA Plan is not
approved in which case Airline may not thereafter disclose Confidential
Information of LMGC to CAI unless otherwise permitted hereunder. In addition,
LMGC may disclose, on a confidential basis, the term of this Agreement, the
existence of price increases hereunder and the percentage amount thereof (but
not the actual fares), the confidentiality restrictions, termination events
and provisions relating to **** to existing, future or prospective Sponsors or
suppliers, and Airline may disclose, on a confidential basis, the term of this
Agreement, the existence of price increases hereunder and the aggregate
percentage amount thereof (but not the actual fares), the confidentiality
restrictions, termination events and provisions relating to ****.
(b) "Confidential Information" of a party means all information and
documents, whether on paper, in computer readable format or otherwise,
relating to such party's business, which is or is treated by such party as
being of a confidential nature (and is known or should have been known by the
other party hereto as being of a confidential nature or being so treated) and
has been or is from time to time made known to or is otherwise learned by the
other party or any of its Representatives as a result of the relationship
hereunder, including the terms (but not the existence) of this Agreement
(including the pricing hereunder). In the case of LMGC, its Confidential
Information will also include all information disclosed to or otherwise
learned by Airline concerning the Program, the terms (including pricing) of
the Terminated Supplier Agreement and the Short Term CAI Supplier Agreement
and the existence or substance of and the background to any discussions among
CAI, Airline and/or LMGC with regards to the subject
**** PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT.
-9-
matter hereof and termination of the Terminated Supplier Agreement, whether
before or after the date hereof. "Representative" means, with respect to any
party, any of its directors, officers or employees or outside auditors,
lawyers or advertising or p.r. agencies, but for greater certainty, not any
other outside consultants or agencies.
(c) If any party is served with a subpoena or other legal process or
other governmental request requiring the production or disclosure of any
Confidential Information, or for any other reason believes that it is
required by law to disclose any Confidential Information of the other party,
then that party will, before complying, promptly notify the other party and
use all reasonable efforts to permit the other party a reasonable period of
time to intervene and contest disclosure or production, and will in any event
use all reasonable efforts to ensure confidential treatment of such
Confidential Information if so disclosed.
4.2 ANNOUNCEMENTS. Airline acknowledges that LMGC intends to issue a news
release forthwith after execution hereof substantially in the form attached as
Schedule F, and consents thereto. Subject thereto, neither party shall issue
any news releases in respect of the entering into of this Agreement or the
background thereto, without the prior written consent of the other party,
which consent shall not be unreasonably withheld. In addition, but subject to
the exceptions as to confidentiality set forth in clauses (i) through (v) of
Section 4.1(a), throughout the Term (i) Airline will refrain, and will use all
reasonable efforts to ensure that its Representatives (as defined in Section
4.1) refrain, **** and (ii) LMGC will refrain, and will use all reasonable
efforts to ensure that its Representatives (as defined in Section 4.1)
refrain, ****
4.3 TRADE-MARKS.
(a) Except as otherwise provided herein or as required by law, neither
LMGC nor Airline shall use any logo or trade-mark of the other without the
prior written permission of the other. In addition, during the Initial
Period, LMGC may use the name "Air Canada" in advertising or promotional
material for purposes of identifying to current, future or potential
Collectors or Sponsors the availability of Airline Seats from Airline as a
redemption option and subject to the following restrictions ****
**** PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT.
-10-
(b) Notwithstanding the permission to use the name Air Canada as set
forth in Section 4.3(a), Airline shall have the right to examine and to
approve or disapprove in advance the contents and appearance of any
advertising or promotional materials proposed to be used by LMGC which
incorporate such name, but (i) Airline shall not unreasonably withhold or
delay its approval of such materials, (ii) it shall in any event provide its
decision as soon as possible and not later than 7 days after request therefor
from LMGC, and (iii) upon providing any approval, no further approval will be
required for subsequent materials which have the same or a substantially
similar approach to the display of such name.
(c) Neither party shall have any liability for any breach of this Section
4.3 unless such breach continues for a period of fifteen days after written
notice thereof referring to this Section 4.3 is given to such party by the
other party demanding that such breach cease, and in any event, the maximum
aggregate liability of either party for any breach of, or otherwise in
connection with, this Section 4.3, whether on one or more than one occasion,
is $****.
ARTICLE 5
WARRANTIES AND CCAA ****
5.1 WARRANTIES. Each of the parties hereto represents and warrants to
the other party, that (i) the entering into, execution and delivery of this
Agreement and the performance of its obligations hereunder have been duly and
validly authorized and approved by all necessary corporate action on its
part, (ii) no consent or approval of any other Person or of any court is
required to the entry into, execution or delivery of this Agreement or to the
performance of its obligations hereunder, except such as have been obtained,
(iii) this Agreement has been validly executed and delivered by such party,
and is a valid and legally binding obligation of such party enforceable
against such party in accordance with its terms, subject to usual exceptions
regarding bankruptcy and other laws affecting creditors rights generally and
those with respect to specific performance and injunction, and (iv) there are
no outstanding claims, litigation, arbitrations, investigations or other
proceedings existing or, to the knowledge of each party, pending or
threatened which would enjoin, restrict or prohibit performance by such party
of its obligations hereunder.
5.2 INDEMNITY. Each party shall indemnify and hold the other party (and
in the case of LMGC, any of its Subsidiaries who purchase tickets hereunder)
and their respective directors, officers, employees and agents harmless from
and against any and all losses, claims, damages, liabilities, costs, fees and
other expenses whatsoever (including legal fees on a solicitor and his own
client basis) suffered or incurred by the other party which arise from or are
caused by the non-performance or improper performance of any obligations of
such first party hereunder, or
**** PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT.
-11-
any breach or untruth of any of its representations or warranties contained
herein, or, in the case of the indemnity in favour of LMGC, any liability of
Airline or any Regional Airline to any Person for any injuries or damages
which result from the provision or sale of any air transportation or related
services and/or merchandise by or through Airline or any Regional Airline, to
such Person.
5.3 CCAA PROCESS ****. The parties acknowledge that, by Assignment dated
as of the date hereof, LMGC has assigned the Claim to Airline. ****
ARTICLE 6
GENERAL
6.1 ENTIRE AGREEMENT. This Agreement together with the Assignment
between the parties of even date contains the entire agreement between the
parties relating to the subject matter hereof and supersedes all previous
agreements, understandings or arrangements, verbal or written, relating
thereto. This Agreement may only be modified, superseded or amended by an
agreement or modification in writing signed by both of the parties hereto.
6.2 UNCONDITIONAL OBLIGATION. Airline's obligation to comply herewith
and provide Airline Seats to LMGC at the Special Fares and otherwise as
contemplated thereby, is an independent obligation of Airline which shall
apply notwithstanding any matter or thing affecting CAI, including any
reorganization, bankruptcy, receivership or other proceeding affecting CAI
and including the current proceedings under the CCAA affecting CAI (the "CCAA
Proceedings"), the treatment of CAI's obligations in the CCAA Proceedings,
the success or lack of success of the CCAA Proceedings, the treatment of the
Claim in the CCAA Proceedings, whether or not the Claim is disputed by any
other Person or Airline has the right to vote or receive distributions of the
Claim in the CCAA Proceedings, and regardless of the amount of any recovery
in respect of the Claim.
6.3 RELEASE. LMGC and Airline each release each other and their
respective Affiliates, other than, for greater certainty, CAI, from all
costs, damages and liability in connection with any matters which have
occurred prior to the date of this Agreement with respect to the Terminated
Supplier Agreement or any matter relating thereto.
6.4 INJUNCTION. Airline acknowledges that a breach of its obligations
under any of Sections 1.1, 1.2, 1.3, 1.4, 1.6, 1.7, 4.1, 4.2 or 4.3 and LMGC
acknowledges that a breach of any of its obligations under Sections 4.1, 4.2
or 4.3, will cause irreparable harm to the other party for
**** PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT.
-12-
which money damages alone will provide inadequate compensation. Accordingly,
the parties agree that injunctive relief to prevent any such breaches or a
mandatory order or specific performance requiring continued performance of
the provisions in question, as applicable, is appropriate and necessary to
prevent the continuation of such a breach.
6.5 SEVERABILITY AND TIME OF ESSENCE. If any provision of this Agreement
is held by a court of competent jurisdiction or by any governmental agency or
authority to be invalid, such holding shall not have the effect of
invalidating the other provisions of this Agreement which shall nevertheless
remain binding and effective between the parties. Time is of the essence
hereof.
6.6 GOVERNING LAW. This Agreement shall be construed under and governed
by the laws of the Province of Ontario and the laws of Canada applicable
therein. The Parties hereto attorn to the non-exclusive jurisdiction of the
courts of Ontario.
6.7 COSTS AND EXPENSES. ****
6.8 WAIVER. Any term or condition of this Agreement may be waived at any
time by the party which is entitled to the benefit thereof, but such waiver
shall only be effective if evidenced by a writing signed by such party. A
waiver on one occasion shall not be deemed to be a waiver of the same or of
any other breach on any other occasion. Any previous waiver, forbearance, or
course of dealing will not affect the right of either party to require strict
performance of any provision of this Agreement.
6.9 SUCCESSORS AND ASSIGNS. Neither party may assign its rights or
obligations hereunder without the prior written consent of the other, except
that either party may, without consent, assign its rights hereunder (i) to
any Affiliate either as part of a bona fide corporate reorganization, or a
sale of all or substantially all of its assets, but no such assignment shall
relieve such party from its obligations hereunder, and (ii) by way of
security to any financier; provided that ****
**** PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT.
-13-
6.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of
which taken together shall be deemed to constitute one and the same
instrument. Counterparts may be executed either in original or faxed form and
the parties hereto adopt any signatures received by a receiving fax machine
as original signatures of the parties; provided, however, that any party
providing its signature in such manner shall promptly forward to the other
party an original of the signed copy of this Agreement which was so faxed.
IN WITNESS WHEROF the parties have executed this Agreement as of
the date and year first above written.
LOYALTY MANAGEMENT GROUP CANADA INC.
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
AIR CANADA
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
SCHEDULE A
DEFINITIONS AND INTERPRETATION
In this Agreement (including the recitals hereto), the
following terms shall have the following meanings:
"ADDITIONAL PERIOD" means the period from and including January 1, 2003 to
and including December 31, 2004.
"AFFILIATE" has the meaning set out in the CANADA BUSINESS CORPORATIONS ACT.
"AGREEMENT" means this Agreement including the Schedules to this Agreement
all as amended or supplemented from time to time.
"AIR CARRIER" means an airline or air carrier, or a Person which otherwise
engages in the business of carrying passengers by air.
"AIRLINE" means Air Canada, its successors and permitted assigns.
"AIRLINE SEATS" means seats for travel on flights for any City Pair Served as
operated by Airline or any Regional Airline.
****
"AMRM" means AIR MILESTM reward miles.
"BUSINESS DAY" means any day on which banks are open for business in
Montreal, Quebec and Toronto, Ontario, excluding Saturdays, Sundays and
statutory holidays in those cities.
"CCAA" means the COMPANIES CREDITORS ARRANGEMENT ACT.
"CCAA PLAN" means the proposed plan of compromise and arrangement of Canadian
Airlines Corporation and CAI, intended to be filed with the Court of Queens
Bench of Alberta on April 25, 2000, or any subsequent plan of compromise and
arrangement issued by either or both of such Persons in connection with the
CCAA Proceedings.
"CCAA PROCEEDINGS" has the meaning set out in Section 6.2.
"CAI" means Canadian Airlines International Ltd., its successors and
permitted assigns.
"CITY PAIR" means two cities or other locations between which any Air Carrier
offers scheduled service, whether domestic or international and whether or
not non-stop or direct.
**** PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT.
-2-
"CITY PAIRS SERVED" means all City Pairs for which Airline or any Regional
Airline (or any combination thereof) has, at the time in question, scheduled
service, whether domestic or international.
"CLAIM" means the claim of LMGC and its subsidiaries against CAI assigned by
LMGC to Airline.
"COLLECTOR" means any Person who is registered with LMGC as a collector of
AMRM.
****
"INITIAL PERIOD" means the period from the date hereof to and including
December 31, 2002.
"LMGC" means Loyalty Management Group Canada Inc., its successors and
permitted assigns.
"LMG TRAVEL" means LMG Travel Services Limited and its successors.
****
"OTHER CLASS" has the meaning set out in Section 1.2(a).
"PERSON" includes an individual and his or her legal representatives, a
corporation, a partnership, a trust, an unincorporated organization, the
government of a country or any political subdivision thereof, or any agency
or department of any such government.
"PROGRAM" means the AIR MILESTM program established by LMGC in Canada.
"REGIONAL AIRLINES" means, at any time, each Affiliate of Airline which, at
such time, is an Air Carrier, including for greater certainty, any Air
Carrier which hereafter becomes an Affiliate of Airline (effective as of the
date it becomes an Affiliate of Airline). Without limiting the foregoing, if
the CCAA Plan is approved, CAI shall be deemed to be a Regional Airline,
whether or not it is then an Affiliate of Airline.
****
**** PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT.
-3-
"SHORT TERM CAI SUPPLIER AGREEMENT" means the letter agreement made as of the
date hereof between LMGC and CAI providing for the termination of the
Terminated Supplier Agreement and a new short term supplier arrangement
between LMGC and CAI.
"SPECIAL FARES" means the fares set out in Schedule B.
"SPECIAL TICKETS" means tickets (including electronic tickets) for Airline
Seats issued to passengers in connection with the Program.
"SPONSOR" means any Person granted a licence by LMGC or otherwise permitted
by LMGC to issue or arrange for the issuance of AMRM.
"SUBSIDIARY" has the meaning set out in the CANADA BUSINESS CORPORATIONS ACT.
"TERM" means the period from the date hereof to the date this Agreement
terminates.
"TERMINATED SUPPLIER AGREEMENT" means the Supplier Agreement made as of March
15, 1995 between LMGC and CAI, as amended.
****
****
"**** CLASS" means the booking class maintained by Airline currently **** and
designated as "**** class", or in the case of any Regional Airline which
utilizes different booking classes, a booking class that is comparable in all
material respects with **** Class, and in either event, any replacement class
therefor established hereunder from time to time.
The division of this Agreement into Articles and Sections,
the insertion of headings, and the provision of any table of contents are for
convenience of reference only and shall not affect the construction or
interpretation of this Agreement. Unless the context requires otherwise, (i)
words importing the singular include the plural and vice versa and words
importing gender include all genders, and (ii) references in this Agreement
to Sections or Schedules are to Sections or Schedules of this Agreement.
Except as otherwise expressly provided in the Agreement, all dollar amounts
referred to in this Agreement are stated in Canadian dollars. In this
Agreement, "including" means "including, without limitation" and "includes"
means "includes without limitation".
**** PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT.
SCHEDULE B
****
**** PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT.
SCHEDULE C
RESERVATIONS, COMMISSIONS AND TRAVEL RESTRICTIONS
1. Reservations, which must include round trip travel, must be made at least
14 days, but not more than 330 days, prior to planned departure date.
2. The return trip must be booked at the time a reservation is made for the
outbound segment.
3. All round trip travel must be completed not later than 315 days after the
date of reservation.
4. No blackout dates will be applicable for booking.
5. All travel must be on a round trip or an open jaw trip basis.
6. Each Special Ticket, which will not include en route stopovers, must
include a Saturday night stayover at destination.
7. ****
8. All Special Tickets and Special Fares are subject to the tariff
restrictions and Warsaw Convention Limitations, as applicable, with
respect to (but only with respect to) limits of compensation for, damage
to Persons or property.
The restrictions in clauses 1, 3, 5 and 6 shall not apply to tickets purchased
under web specials as contemplated in Section 1.2(c).
**** PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT.
SCHEDULE D
OTHER COMMITMENTS
1. Gold Collectors shall receive a discount of 10% off the cost of any
companion tickets purchased through LMGC or any of its Subsidiaries, up
to a maximum of **** return trips each calendar year. For purposes
hereof, a companion ticket means a ticket purchased in conjunction with
the purchase of, and having the same itinerary as, a Special Ticket.
2. During each 12 month period in the Initial Period, Airline shall make
available to LMGC, up to **** return trip Airline Seats, either on
Airline's or a Regional Airline's flights, as selected by LMGC, to be
used in connection with the Canadian Special Olympics. Such Airline Seats
shall be made available to LMGC at the Special Fares. These seats are
subject to regular availability of inventory as per this Agreement and
use thereof by LMGC shall be included in determining bookings made by
LMGC for purposes of Section 1.3 (b) and (c).
3. During each 12 month period in the Initial Period, Airline shall provide
LMGC with **** return trips on City Pairs Served, either on Airline's or
a Regional Airline's flights, to be used in connection with LMGC's
Sponsor activities. Ten such return trips shall be provided to LMGC at no
cost to LMGC and **** such return trips shall be provided to LMGC at a
cost equivalent to AD ****. LMGC and Airline shall mutually agree to the
destinations chosen for such return trips.
4. Airline shall make available to LMGC not less than ****
(return trip) for each 12 month period of the Term, of which no less than
**** shall be **** and the balance shall be ****.
**** PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT.
SCHEDULE E
JOB DESCRIPTION FOR LMGC OMBUDSMAN
OBJECTIVE
To maximize the inventory made available to LMGC under this Agreement.
TASKS
- Liasing between LMGC and Air Canada Revenue Management.
- ****
- ****
- ****
- Advising and reporting to LMGC of Air Canada's schedule ****.
- Identifying **** for LMGC.
- Implementing web specials and other potential marketing
opportunities for LMGC at Air Canada.
AIR MILES CONTACT
- Speak with Reward Services at LMGC at least once a week.
- Meet with Reward Services at LMGC at least quarterly, at LMGC
offices in Toronto.
QUALIFICATIONS
Minimum 3 years experience at Air Canada or Canadian Airlines in
revenue management, planning or financial analysis (if possible).
**** PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT.
SCHEDULE F
LMGC NEWS RELEASE
FOR IMMEDIATE RELEASE
AIR MILES PROGRAM REACHES AGREEMENT WITH AIR CANADA
COLLECTORS CAN NOW FLY ON CANADIAN AIRLINES AND AIR CANADA
----------------------------------------------------------
TORONTO, Ontario - April 26, 2000 - The Loyalty Group, operator of the AIR
MILES Reward Program, today announced it has reached an agreement with
Canadian Airlines and Air Canada that will allow it to offer reward flights
on both airlines to AIR MILES Collectors across Canada.
"We are thrilled to be able to continue to offer travel on Canadian Airlines
to our 11 million AIR MILES Collectors, and we welcome Air Canada as a new
airline supplier to the AIR MILES Reward Program," said John Scullion,
President and Chief Executive Officer, The Loyalty Group. "Canadian Airlines
has always been a valued supplier to the Program, and we now look forward to
extending that partnership with Air Canada," he added.
AIR MILES Collectors can continue to redeem their reward miles and book
domestic flights on Canadian Airlines and international flights on our four
other airline partners: American Airlines, KLM, Northwest Airlines and United
Airlines. Collectors can redeem their reward miles for Air Canada flights
beginning in May 2000.
Terms of the agreement are confidential and will not be disclosed. The
Loyalty Group's claim in connection with Canadian Airlines' restructuring
plan has been assigned to Air Canada as part of the new agreement with Air
Canada.
The Loyalty Group launched the AIR MILES Reward Program in March 1992,
offering Canadians the opportunity to collect AIR MILES reward miles while
shopping for everyday goods and services. There are over 100 participating
Sponsors across Canada representing over 12,000 retail locations. In addition
to free flights, AIR MILES reward miles can be exchanged for over 100
different rewards from movie passes to attractions to merchandise like
electronics, watches and toys.
For further information, contact:
John Wright
Senior Vice President
The Loyalty Group
(416) 228-6614
SCHEDULE G
****
**** PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT.
SCHEDULE H
****
**** PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT.
SCHEDULE I
****
**** PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT.
