Exhibit 10(e)
INTERIM MERCHANT AGREEMENT
BANK: Household Bank (SB), N.A. MERCHANT: Heilig-Meyers Company
1111 Town Center Drive 12560 West Creek Parkway
Las Vegas, Nevada 89144 Richmond, VA 23238
Facsimile No.:
This interim Merchant Agreement ("Interim Agreement") is made and entered into
as of the 13th day of September, 2000, by and between Household Bank (SB), N.A.
(herein "Household") and Heilig-Meyers Company, a Virginia corporation, debtor
and debtor-in possession (herein "Merchant").
WHEREAS, on August 16, 2000 Merchant filed a voluntary petition for relief
under Chapter II of Title II of the United States Code (the "Bankruptcy Code")
in the United States Bankruptcy Court for the Eastern District of Virginia (the
"Bankruptcy Court") in the case styled In re Heilig-Meyers Company, Case No.
00-34533 (the "Chapter II Case"); and
WHEREAS, Merchant and Household have agreed to use best efforts to
negotiate in good faith the terms of a Merchant Agreement ("Definitive
Agreement") in connection with the transaction contemplated hereby; and
WHEREAS, Merchant is continuing to operate and manage its business as a
debtor in possession, pursuant to Sections 1107 and 1108 of the Bankruptcy Code;
and
WHEREAS, Household has agreed to provide a private label revolving credit
program to Merchant to make financing available to consumers purchasing
Merchant's products; and
WHEREAS, the parties acknowledge and agree that this Interim Agreement is
subject to the approval of the Bankruptcy Court and that the Definitive
Agreement will be contingent upon and subject to the prior approval of the
Bankruptcy Court. The parties agree that it is an express condition of entering
into any Definitive Agreement that the transaction contemplated hereby is
approved by the Bankruptcy Court in a final order (the "Order") that is in form
and substance acceptable by Household, and that among other provisions, (i)
authorizes Merchant to enter into the Definitive Agreement, (ii) grants
Household an allowed administrative claim for any amounts owing to Household
under the Definitive Agreement and the Interim Agreement under Sections 503(b)
and 507(a)(1) of the Bankruptcy Code, (iii) grants Household the right to offset
obligations of Merchant against future sales and against any reserve account
established pursuant to the Definitive Agreement, without further order of the
Bankruptcy Court or other court and (iv) grants Household a perfected security
interest in any reserve account established under the Definitive Agreement.
NOW THEREFORE, in consideration of the foregoing and the mutual promises,
covenants, and agreements set forth below and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Merchant and Household agree as follows:
Section 1. Definitions.
In addition to the words and phrases defined above and elsewhere in this
Interim Agreement, the following words and phrases shall have the following
meanings:
(a) "Account" means a private label revolving credit card account
established by Household for the Cardholder to be used by the Cardholder to
finance the purchase of Goods and services from Merchant pursuant to the terms
of the Cardholder Agreement. An Account may have more than one Card issued for
it. Each Account shall be owned by, and deemed to be the property of, Household.
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(b) "Affiliate" means any entity that is owned by, owns or is under common
control with Household or its ultimate parent.
(c) "Applicable Law" means collectively or individually any applicable law,
rule, regulation or judicial, governmental or administrative order, decree,
ruling, opinion or interpretation.
(d) "Authorization" means permission from Household to make a Card Sale.
(e) "Authorization Center" means the facility designated by Household as
the facility to provide authorization to Merchant to make Card Sales.
(f) "Business Day" means any day except Saturday or Sunday or a day on
which banks are closed in the State of Nevada.
(g) "Card" means the private label credit card issued by Household for the
Program.
(h) "Cardholder" means (i) the person in whose name and Account is opened,
and (ii) any other authorized users of the Account and Card.
(i) "Cardholder Agreement" means as to any Account, the related agreement
between the Cardholder and Household, governing the terms and conditions of such
Account, as such agreement may be amended from time to time by Household.
(j) "Card Sale" means any sale of Goods that Merchant makes to a Cardholder
pursuant to this Interim Agreement and the Cardholder Agreement that is charged
to an Account.
(k) "Chargeback" means the return to Merchant and reimbursement to
Household of a Sales Slip or Card Sale for which Merchant was previously paid
pursuant to Section 6 herein.
(l) "Credit Slip" means evidence of a credit in a paper or electronic form
for Goods purchased from Merchant.
(m) "Effective Date" means the date which is five (5) days after the date
on which the Bankruptcy Court in the Chapter II Case enters an Order approving
this Interim Agreement and authorizing Merchant to perform this Interim
Agreement pending the execution of the Definitive Agreement.
(n) "Goods" means the products described in Section 2 below, certain
warranties expressly authorized by Household, and related services sold by
Merchant in the ordinary course of Merchant's business to consumers for
individual, family, personal or household use.
(o) "Month" means a calendar month unless used in connection with a Credit
Promotion period.
(p) "Operating Instructions" means the regulatory guidelines and operating
instructions and/or procedures designated by Household from time to time
concerning the Program.
(q) "Program" means the private label revolving credit card program
associated with Merchant whereby Accounts will be established and maintained by
Household. Cards issued by Household to qualified consumers purchasing
Merchant's Goods, and Card Sales funded all pursuant to the terms of this
Interim Agreement.
(r) "Program Year" means any consecutive twelve (12) Month period
commencing on the first day of funding of Accounts after the Effective Date and
each subsequent twelve (12) Month period.
(s) "SAC" means a Same as Cash credit promotion with or without payments,
whereby interest accrues but is not imposed if the purchase amount is paid off
prior to the expiration of the promotional period.
(t) "Sales Slip" means evidence of a Card Sale in paper or electronic form
for Goods purchased from Merchant.
(u) "SNAP" means System for New Account Processing operated by Household
and used to process applications for an Account.
(v) "Terminal" means an electronic terminal or computer capable of
communicating by means of an on-line or dial-up electronic link with an
Authorization Center.
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Section 2. Scope and Purpose.
Merchant engages in the sale of home furnishings, and other products and
related services (herein "Goods") and Merchant desires to make financing
available to consumers purchasing such Goods from Merchant through revolving
credit card accounts originated by Merchant and to participate in the Program in
accordance with the terms and conditions set forth in this Interim Agreement.
Household, a credit card bank in the business of providing revolving credit
financing pursuant to a credit card, has agreed to provide such financing under
the Program to individual qualified consumers purchasing Merchant's Goods
pursuant to the terms and conditions set forth in this Interim Agreement.
(a) Forms and Cards. Household will provide to Merchant standard Cardholder
Agreements, Sales Slips, Credit Slips, and other forms from time to time for use
by Merchant in the Program, which documents may be changed from time to time by
Household. Merchant shall be charged a fee for forms in excess of normal usage.
The design of Cards and billing statements shall be agreed upon by Household and
Merchant. The terms and conditions of Accounts and Cardholder Agreements shall
be determined by Household and are subject to change by Household from time to
time.
(b) Credit Review; Ownership of Accounts. All completed applications for
Accounts submitted by Merchant to Household whether mailed, telephoned or
otherwise electronically transmitted will be processed and approved or declined
in accordance with such credit criteria and procedures established from time to
time by Household, with Household having and retaining all rights to reject or
accept such applications. Household will only accept applications for revolving
credit pursuant to the credit card it issues for individual, personal, family or
household use. Household or its Affiliates shall own the Accounts, including the
Cardholder names and addresses associated with the Accounts, and shall bear the
credit risk for such Accounts. Except as otherwise provided in Section 8 and
Section 15 of this Interim Agreement, Merchant acknowledges and agrees that it
shall have no ownership interest in the Accounts. Household shall not be
obligated to take any action under an Account, including making future advances
or credit available to Cardholders. Household shall not be obligated to accept
applications for a Card or to approve any Card Sale for consumers that do not
have their principal residence and billing address in the United States.
(c) Card Promotions, Services and Enhancements. Household and Merchant may
from time to time mutually agree to offer to existing or potential Cardholders
special credit promotions, additional services and/or enhancements. The terms of
such promotions, services and enhancements shall be designated mutually agreed
upon by Household and are subject to change or discontinuance by Household. In
consideration of Household's providing special credit promotions and to
compensate Household for such promotions, Merchant agrees to pay to Household
for the period agreed upon by Household and Merchant such rates, discounts and
amounts as may be designated by Household. Household may deduct amounts owed to
it hereunder from amounts owed to Merchant under this Interim Agreement.
Section 3. Fees, Discounts, Charges, Rates, Funding and Reserves.
(a) Consumer Rate. The annual percentage rate ("APR") to be charged on
purchases with the Card shall be a variable APR of the Prime Rate plus 14.4% for
the "Standard APR", or the Prime Rate plus 18.4% for the "Default APR" (both the
"Spread"). The "Prime Rate" shall be determined based upon the highest Prime
Rate published in The Wall Street Journal, "Money Rates" section on the first or
last day of the Month and will take effect on the first day of the billing cycle
in the following Month. The APR shall not exceed the maximum interest rate
allowable by Applicable Law, and shall be subject to change from time to time by
Household upon notice to Merchant. The initial standard APR shall be 23.9% as of
the Effective Date.
(b) Merchant. Merchant agrees to pay Household the following nonrefundable
fees, charges and discounts (some of which are more fully described in this
Interim Agreement):
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(i) "Discount Fee": Each non-Promotional Sales Slip accepted, in
Household's sole discretion, and funded by Household shall be subject to a
Discount Fee, based on Household's Credit Guide Score assigned at the time
that the Cardholder applied for an Account. The initial Discount Fees shall
be as follows:
Customer Credit Guide Score Discount Fee
------------------------------------------------------
Higher than 1050 0.0%
1025 - 1049 15.18%
950 - 1024 17.31%
900 - 949 24.65%
provided, however, that nothing contained in this section
shall abrogate or otherwise affect Household's right, in its
sole discretion, to approve or decline applications in
accordance with credit criteria and procedures established
from time to time by Household.
(ii) "Credit Promotion Discount Fee": Household shall make certain
deferred payment and/or deferred interest credit promotions available to
Merchant ("Credit Promotions"). Each Sales Slip or Card Sale generated
pursuant to each Credit Promotion that is accepted, in Household's sole
discretion, and funded by Household shall be subject to a Credit Promotion
Discount Fee (in addition to any applicable Discount Fee payable under
Section 3.b(i)). The Initial Credit Promotion Discount Fees shall be as
follows:
Credit Promotion Credit Promotion Discount Fee
-----------------------------------------------------------
Non-Promotional Card Sales 0%
90 day SAC/without Payments 1.0%
90 day SAC/with Payments 0.5%
6 month SAC/with Payments 3.5%
12 month SAC/with Payments 8.0%
(iii) "Convenience Usage Charge": 0% of all finance charges that would
otherwise be paid by the Cardholder but for the payment in full of the
outstanding Account balance during any grace period or promotional period.
(Under the Program, Household may permit Cardholders to pay the entire
outstanding balance due without finance charges during any applicable grace
period or promotional period).
(iv) "Start-up Fee": $0.00.
(v) "Forms Fee": $0.00.
(vi) "Application Fee": $0.00 per Cardholder application presented to
Household under the Program.
(c) Acceptance, Offset & Funding. Subject to the terms, conditions,
warranties and representations in this Interim Agreement and provided that
Merchant has satisfied all of the conditions set forth in this Interim Agreement
including, without limitation, Sections 4, 5, and 7, Household agrees to pay to
Merchant the amount of each valid and authorized Sales Slip or Card Sale
presented to Household during the term of this Interim Agreement, less the
amount of the fees, charges, and discounts described above in this Section,
outstanding Account balances for Sales Slips subject to Chargeback,
reimbursements, refunds, customer credits and any other amounts owed to
Household by Merchant under this Interim Agreement. Household may also offset or
recoup said amounts from future amounts owed to Merchant under this Interim
Agreement. Any amounts owed by Merchant to Household which cannot be paid by the
aforesaid means shall be due and payable by Merchant on demand. If Merchant
fails or refuses to pay any amounts owed to Household under this Interim
Agreement after Household's demand, Household may cease authorizations for and
the funding or acceptance of any Sales Slips or Card Sales or any processing of
applications for an Account. Any payment made by Household to Merchant shall not
be final but shall be subject to subsequent review and verification by
Household. Household's liability to Merchant with respect to the funding or
processing of any Card Sale, Sales Slip or Credit Slip shall not exceed the
amount on the Sales Slip or Credit Slip in connection with such transaction. In
no event shall Household be liable for any incidental or consequential damages.
Funding of Card Sales and Sales Slips by Household to Merchants shall be made by
such means and in such manner mutually agreed to by Household and Merchant.
Household will use its best efforts to fund on the same Business Day after
receipt, verification and processing by Household of the transmission of the
transaction data, if such transmission is received by 7:00 a.m. Central Time; if
received later than 7:00 a.m. Central Time, then on the first Business Day after
said transmission.
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(d) Reserve. In order to secure Merchant's performance under this Interim
Agreement and the Definitive Agreement, Household shall establish a reserve (the
"Reserve") for the sole benefit of Household. The Reserve shall be considered
fully funded for each month in which its balance is no less than one percent
(1.00%) of the Account Balances at the end of such Month (the "Fully Funded
Amount"). For any month in which the amount in the Reserve is less than the
Fully Funded Amount, Household shall deduct from amounts otherwise payable to
Merchant during such month an amount equal to one-half percent (0.5%) of total
valid and authorized Sales Slips presented to Household during such month, net
of sales returns, for the sole benefit of Household. The purpose of the Reserve
is to provide for payment of any amounts due Household. Household may deduct
from the Reserve any amounts owing but not paid by Merchants. Household will
credit the Reserve with interest at the Federal Funds Rate. In the event that
there is a balance in the Reserve after all Heilig-Meyers private-label credit
card receivables owned by Household have been paid in full, Household shall pay
such balance to Merchant. In order to secure the performance of Merchant's
obligations hereunder, Merchant hereby grants Household a first priority
security interest in and lien upon the Reserve, and agrees to execute such
documents and take such other actions as Household reasonably determines are
necessary in order to perfect such security interest and lien.
Section 4. Merchant Responsibilities Concerning Consumer Transactions.
Merchant covenants and agrees:
(a) Merchant shall honor all valid Cards without discrimination, when
properly presented by Cardholder for payment of Goods.
(b) Merchant shall not require, through an increase in price or otherwise,
any Cardholder to pay any surcharge at the time of sale or pay any part of any
charge imposed by Household on Merchant.
(c) Merchant shall prominently display at each of its locations, if
appropriate, advertising and promotional materials relating to the Card,
including without limitation take-one applications for the Card and use or
display such materials in accordance with any specifications mutually agreed to
by Household and Merchant. Such materials shall be used only for the purpose of
soliciting accounts for the Program. Any solicitation, written material,
advertising or the like relating to the credit terms and credit products offered
pursuant to the Program shall be prepared or furnished by Household or if
prepared by Merchant, shall receive Household's prior review or written
approval. Household will charge Merchant and Merchant agrees to pay for any such
advertising and promotional materials requested by Merchants. Such review or
approval by Household shall be limited to the review and approval of the credit
terms and credit products and shall not be construed as review or approval of
any, advertised or solicitation materials for any other purpose or for
compliance with any provisions of any local, state or federal advertising laws
not related to credit terms or credit products. Any such materials shall not be
used by Merchant following termination of this Interim Agreement.
(d) Merchant shall use only the form of, or modes of transmission for,
Cardholder Agreements, Sales Slips and Credit Slips as are provided by
Household, and not use any Cardholder Agreements, Sales Slips, and Credit Slips
provided by Household other than in connection with an application for a Card or
a Card transaction.
(e) Merchant shall, with respect to applications for a Card:
(i) Make sure all information requested on the application is complete
and legible;
(ii) obtain the signature on the application of all persons whose name
will appear on the Account or will be responsible for the Account;
(iii) give the applicant the initial disclosures at the time of
signing the Cardholder Agreement prior to the first transaction under the
Account;
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(iv) verify the identification of the individual(s) applying for the
Account, which verification may include obtaining driver's license and
social security numbers;
(v) provide all information required by Household from time to time
for approval of applications by SNAP, telephone or other electronic
transmission and legibly insert the Account number and Approval number on
the application in the designated area; and
(vi) send the actual original approved signed application to Household
at Household's address on page one above or such other address designated
by Household within five (5) Business Days of approval of the application
by Household.
(f) Merchant shall, with respect to Sales Slips:
(i) Enter legibly on a single Sales Slip prior to obtaining the
Cardholder's signature (1) a description of all Goods purchased in the same
transaction in detail sufficient to identify the transaction; (2) the date
of the transaction; (3) the Authorization number; (4) the entire amount due
for the transaction (including any applicable taxes); and (5) if
applicable, the promotional credit plan and promotional period. (If the
promotional credit plan and promotional period cannot be entered on the
Sales Slip, Merchant shall provide the Cardholder with the Sales Slip, as
well as a handout or flyer explaining the promotional credit plan and the
promotional period.)
(ii) REQUEST AUTHORIZATION FROM HOUSEHOLD'S AUTHORIZATION CENTER UNDER
ALL CIRCUMSTANCES. (Household may refuse to accept or fund any Sales Slip
that is presented to Household for payment more than sixty (60) days after
the date of Authorization of the Card Sales). Merchant agrees not to divide
a single transaction between two or more Sales Slips or between a Household
Sales Slip and a sales slip for another credit provider. If Authorization
is granted, legibly enter the Authorization number in the designated area
on the Sales Slip. If Authorization is denied, do not complete the
transaction and follow any instructions from the Authorization Center;
(iii) If applicable, imprint legibly on the Sales Slip the embossed
legends from the Card or if the transaction is to be completed
electronically or otherwise without a Card imprint, then enter legibly on
the Sales Slip sufficient information to identify the Cardholder and
Merchant, including at least, Merchant's name and address, the Cardholder's
name, Account number and the effective date, if any, on the Card. Merchant
shall be deemed to warrant the Cardholder's true identity as an authorized
user of the Card;
(iv) check the effective date, if any on the Card;
(v) obtain the signature of the Cardholder on the Sales Slip, and
compare the signature on the Sales Slip with the signature panel of the
Card and if identification is uncertain or if Merchant otherwise questions
the validity of the Card, contact Household's Authorization Center for
instructions. For telephone orders (TO) or mail orders (MO) only, the Sales
Slip may be completed without the Cardholder's signature and a Card
imprint, but Merchant shall, in addition to all other requirements under
this Section 4, enter legibly on the signature line of the Sales Slip the
letters "TO" or "MO", as appropriate, and not deliver Goods or perform
services after being advised that the "TO" or "MO" has been canceled or
that the Card is not to be honored;
(vi) BE RESPONSIBLE FOR THE IDENTIFICATION OF THE CARDHOLDER;
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(vii) not present the Sales Slip to Household for funding until all
Goods are delivered and all the services are performed to the Cardholder's
reasonable satisfaction. However, if all or a portion of the Goods are to
be delivered or performed at a date later than ten (10) days from the date
of the Card Sale, and the Merchant requires a deposit, then the Cardholder
is to sign separate Sales Slips, one of which represents a "deposit" and
the second of which represents payment of the "balance". The "deposit"
Sales Slip may be presented for payment in Merchant's normal course, the
"balance" Sales Slip is to be presented for payment only upon delivery of
all Goods and performance of all services, and in addition to the other
applicable requirements specified in this Section 4, Merchant shall (1)
enter legibly on the Sales Slips the word "deposit" or "balance", as
appropriate, and (2) enter legibly the Authorization number on both Sales
Slips for the entire amount of the transaction. The deposit amount shall
not exceed 20% of the total Card Sale. If the Card Sale is canceled or the
Goods or services canceled or returned the Sales Slip is subject to
Chargeback;
(viii) enter the Card Sale into the Terminal; and
(ix) except with respect to telephone orders and mail orders, deliver
a true and completed copy of the Sales Slip to the Cardholder at the time
of delivery of the Goods.
(g) Credit Slips. If Goods are returned, any Card Sale or services are
terminated or canceled, or Merchant allows any price adjustment, then Merchant
shall not make any cash refund, but shall complete and deliver promptly to
Household a Credit Slip evidencing the refund or adjustment and deliver to the
Cardholder a true and complete copy of the Credit Slip at the time the refund or
adjustment is made. Merchant shall sign and date each Credit Slip and include
thereon a brief description of the Goods returned, services terminated or
canceled, refund or adjustment made, the date of the original Card Sale,
Authorization number, Cardholder's name, address and Account number, and the
date and amount of the credit, all in sufficient detail to identify the
transaction. Merchant shall imprint or legibly reproduce on each Credit Slip the
embossed legends from the Card. The amount of the Credit Slip cannot exceed the
amount of the original transaction as reflected on the Sales Slip. Merchant
shall issue Credit Slips only in connection with previous bona fide Card Sales
and only as permitted hereunder.
(h) Merchant shall not receive any payments from a Cardholder for charges
included on any Sales Slip resulting form the use of any Card, nor receive any
payments from a Cardholder to prepare and present a Credit Slip for the purpose
of effecting a credit to the Cardholder's Account.
(i) Cardholder Complaints. Merchant shall within three (3) business days of
receipt provide Household with a copy of any written complaint from any
Cardholder concerning his/her Account.
(j) Right of First Refusal. Merchant shall actively promote the Program.
Merchant agrees to make Household its sole and exclusive private label credit
card provider during the term of this Interim Agreement and Merchant shall not
issue, arrange to issue, or accept any other private label credit card or
co-branded credit card than the Card, under any of Merchant's names or logos. To
the extent Merchant displays other third party credit or charge card materials,
it shall display the advertising and promotional materials relating to the Card
in a manner and with a frequency equal to or greater than that accorded any
other third party credit or charge card.
(k) Merchant shall satisfy all other requirements designated in any
Operating Instructions or as may be required from time to time by Household. In
the event there is any inconsistency between any Operating Instructions and this
Interim Agreement, this Interim Agreement shall govern unless otherwise
expressly indicated by Household in any Operating Instructions.
Section 5. Merchant Representations and Warranties.
Merchant represents and warrants to Household as of the Effective Date and
throughout the term of this Interim Agreement the following:
(a) That each Card Sale will arise out of a bona fide sale of Goods by
Merchant and will not involve the use of the Card for any other purpose.
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(b) That each Card Sale will be to a consumer for personal, family, or
household purposes.
(c) That Cardholder applications will be available to the public (i)
without regard to race, color, religion, national origin, sex, marital status,
disability or age (provided the applicant has the capacity to enter into a
binding contract) and (ii) not in any manner which would discriminate against an
applicant or discourage an applicant from applying for the Card.
(d) That it has full corporate or other power and authority to enter into
this Interim Agreement; that all corporate or other action required under any
organization documents to make this Interim Agreement binding and valid upon
Merchant according to its term has been taken; and that this Interim Agreement
is and will be binding, valid and enforceable upon Merchant according to its
terms.
(e) Neither (i) the execution, delivery and performance of this Interim
Agreement, nor (ii) the consummation of the transactions contemplated hereby
will constitute a violation of law or a violation or default by Merchant under
its articles of incorporation, bylaws or any organization documents, or any
material agreement or contract and no authorization of any governmental
authority is required in connection with the performance by Merchant of its
obligations hereunder.
(f) Merchant has and will retain all licenses required by local or state
law to conduct its business and to perform its obligations under this Interim
Agreement.
Section 6. Chargebacks to Merchant.
Merchant agrees as follows:
(a) Chargebacks. Any Sales Slip or Card Sale is subject to Chargeback under
any one or more of the following circumstances, and thereupon the provisions of
Section 6.b below shall apply:
(i) The application or any information on the application or the Sales
Slip or any required information on the Sales Slip (such as the account
number, description of Merchant or Goods purchased, transaction amount or
date) promotional credit plan and promotional period is illegible or
incomplete, or the Sales Slip or application is not executed by the
Cardholder, or Authorization is not obtained from Household's Authorization
Center, or a valid Authorization number is not correctly and legibly
entered on the Sales Slip; or the Sales Slip is a duplicate of an item
previously paid, or the price of the Goods or services shown on the Sales
Slip differs from the amount shown on the Cardholder's copy of the Sales
Slip;
(ii) Household reasonably determines that (1) Merchant has breached or
failed to satisfy, any term, condition, covenant, warranty, or other
provision of this Interim Agreement, including, without limitation,
Sections 4 and 5 above, or of the Operating Instructions, in connection
with a Sales Slip, Card Sale or the transaction to which it relates, or an
application for a Card or the opening of an Account; or (2) the Sales Slip,
Cardholder Agreement or Card Sale is fraudulent or is subject to any claim
of illegality, cancellation, rescission, avoidance or offset for any reason
whatsoever, including, without limitation, negligence, fraud,
misrepresentation, or dishonesty on the part of the customer or Merchant or
its agents, employees, licensees, or franchisees, or that the related
transaction is not a bona fide transaction in Merchant's ordinary course of
business;
(iii) the Cardholder in good faith, as determined by Household,
disputes or denies the Card Sale or other Card transaction, the execution
of the Sales Slip or Cardholder Agreement, or the delivery, quality, or
performance of the goods, services or warranties purchased, or the
Cardholder has not authorized the Card Sale, or alleges that a credit
adjustment was requested and refused or that a credit adjustment was issued
by Merchant but not posted to the Account due to Merchant's failure to
submit the credit adjustment to Household; or
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(iv) Merchant fails to deliver to Household the Sales Slip, Credit
Slip, application or other records of the Card transaction within the times
required in this Interim Agreement.
(b) Resolution and Payment. Merchant is required to resolve any dispute or
other of the circumstances described above in (a) of this Section 6 to
Household's reasonable satisfaction within twenty-one (21) days of notice of
Chargeback or Merchant shall pay to Household the full amount of each such Sales
Slip or Card Sale subject to Chargeback or the portion thereof designated by
Household, as the case may be, plus the finance charges thereon, other fees and
charges provided for in the Cardholder Agreement. Upon Chargeback to Merchant of
a Sales Slip or Card Sale, Merchant shall bear all liability and risk of loss
associated with such Sales Slip or Account, or the applicable portion thereof,
without warranty by, or recourse or liability to, Household. Household may
deduct amounts owed to Household under this Section from any amounts owed to
Merchant under this Interim Agreement. Household shall be entitled to recover
reasonable attorney fees, incurred by Household to collect any Chargeback
amounts due Household which are not paid by Merchant in accordance with the
terms of the Interim Agreement.
(c) The terms and provisions of this Section 6 shall survive the
termination of this Interim Agreement.
Section 7. Tape or Electronic Transmission & Records.
Data, records and information shall be transmitted and maintained as
described below:
(a) Transmission of Data. In lieu of forwarding paper Sales Slips and
Credit Slips to Household, Merchant shall transmit to Household, by electronic
transmission or other form of transmission designated by Household all data
required by this Interim Agreement to appear on Sales Slips and Credit Slips.
All date transmitted shall be in a medium, form and format designated by
Household and shall be presorted according to Household's instructions. Any
errors in such data or in its transmission shall be the sole responsibility of
Merchant. The means of transmission indicated above in this Section shall be the
exclusive means utilized by Merchant for the transmission of Sales Slip or
Credit Slip transaction data to Household.
(b) Receipt of Transmission. Upon successful receipt of any transmission,
Household shall accept such transmission and pay Merchant in accordance with
this Interim Agreement, subject to subsequent review and verification by
Household and to all other rights of Household and obligations of Merchant as
set forth in this Interim Agreement. If data transmission is by tape, Merchant
agrees to deliver upon demand by Household a duplicate tape of any prior tape
transmission, if such demand is made within forty-five (45) days of the original
transmission.
(c) Records. Merchant shall maintain the actual paper Sales Slips, Credit
Slips, and other records pertaining to any transaction covered by this Interim
Agreement for such time and in such manner as Household or any law or regulation
may require, but in no event less than two (2) years after the date Merchant
presents each transaction data to Household, and Merchant shall make and retain
for at least four (4) years legible copies of both sides of such actual paper
Sales Slips, Credit Slips or other transaction records. Within fifteen (15)
days, or such earlier time as may be required by Household, of receipt of
Household's request, Merchant shall provide to Household the actual paper Sales
Slips, Credit Slips or other transaction records, any other documentary evidence
available to Merchant and reasonably requested by Household to meet its
obligations under law (including its obligations under the Fair Credit Billing
Act) or otherwise to respond to questions, complaints, lawsuits, counterclaims
or claims concerning Accounts or requests from Cardholders, or to enforce any
rights Household may have against a Cardholder, including, without limitation,
litigation by or against Household, collection efforts and bankruptcy
proceedings, or for any other reason. In the event Merchant fails to comply in
any respect with the provisions of this Section, Household may process a
Chargeback for each Card Sale involved pursuant to Section 6 above.
Promptly upon termination of this Interim Agreement or upon the request of
Household, Merchant will provide Household with all original and microfilm
copies of documents required to be retained under this Interim Agreement.
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Section 8. Payments by Cardholder and Endorsement.
Merchant agrees that Household has the sole right to receive payments on
any Sales Slip or Card Sale funded by Household. Unless specifically authorized
in writing by Household, Merchant agrees not to make any collections on any such
Sales Slip or Card Sale. Merchant agrees to hold in trust for Household any
payment received by Merchant of all or part of the amount of any such Sales Slip
or Card Sale and to deliver any such payment to Household together with the
Cardholder's name, Account number, and any correspondence accompanying the
payment within five (5) days of receipt by Merchant. Merchant agrees that
Merchant shall be deemed to have endorsed any Sales Slip, Credit Slip, or
Cardholder payments by check, money order, or other instrument made payable to
Merchant that a Cardholder presents to Household in Household's favor, and
Merchant hereby authorizes Household to supply such necessary endorsements on
behalf of Merchant.
Section 9. Merchant Credit Information.
Household may annually review Merchant's financial stability. To assist
Household in doing this, Merchant shall, upon Household's request, deliver to
Household no later than 90 days after the end of each fiscal year, a financial
statement certified by a duly authorized officer or representative of Merchant
with knowledge of the accuracy of the information contained therein, including,
without limitation, all footnotes, and supporting materials with sufficient
detail to accurately portray the financial condition of Merchant. Merchant
warrants and represents that its credit application and financial statements
submitted to Household by or on behalf of Merchant are true and accurate and
Merchant agrees to supply such additional credit information as Household may
reasonably request from time to time. Merchant understands that Household may
verify the information on any financial statement or other information provided
by Merchant and, from time to time, may seek credit and other information
concerning Merchant from others and may provide financial and other information
regarding the portfolio to its Affiliates or to others for purposes of its asset
securitizations and sales.
Section 10. Merchant Business Practices.
Merchant agrees to provide adequate services in connection with each Card
Sale pursuant to standard customs and trade practices and any applicable
manufacturer's warranties, and to provide such repairs, service and replacements
and take such other corrective action as may be required by Applicable Law or
any applicable warranty.
Section 11. Cardholder Account Information.
Merchant shall not sell, provide, or exchange Account information in the
form of imprinted Sales Slips, carbon copies of imprinted Sales Slips, mailing
lists, tapes or other media obtained by reason of a Card transaction to any
third party other than to Merchant's employees or agents for the purpose of
assisting Merchant in its business with Household or pursuant to a government
request.
Section 12. Change in Ownership.
Merchant agrees to send Household at least thirty (30) days prior written
notice of any change in Merchant's name or location, any material change in
ownership of Merchant's business or any change in Sales Slip or Credit Slip
information concerning Merchant.
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Section 13. Indemnification.
(a) Indemnification by Merchant. Merchant shall be liable to and shall
indemnify and hold harmless Household and its Affiliates and their respective
officers, employees, agents and directors from any losses, damages, claims or
complaints incurred by Household or any Affiliate of Household or their
respective officers, employees, agents and directors arising out of: (i)
Merchant's actual or alleged failure to comply with this interim Agreement or
any of the Operating Instructions; (ii) any lawsuit, legal proceeding,
arbitration proceeding, claim, dispute, complaint or setoff by a Cardholder made
in good faith with respect to anything actually or allegedly done or not done by
Merchant in connection with Card Sales, Card transactions or credits; (iii)
anything done or not done by Merchant in connection with the furnishing of any
goods, warranties or services purchased by Cardholders; (iv) the death or injury
to any person or the loss, destruction or damage to any property arising out
anything done or not done by Merchant in connection with the design, manufacture
or furnishing by Merchant of any Goods, warranties or services purchased by
Cardholders; (v) any claim or complaint of a third party or governmental agency
in connection with Merchant's advertisements and promotions relating to the
Card, credit terms or credit products which have not been reviewed or approved
by Household; (vi) any actual or alleged illegal or improper conduct of Merchant
or its employees or agents in connection with any of the transactions
contemplated by this Interim Agreement; and (vii) any lawsuit, legal proceeding,
arbitration proceeding, claim, dispute or complaint by a consumer made in good
faith or any lawsuit, legal proceeding or inquiry by a governmental agency that
Merchant has violated the Equal Credit Opportunity Act, Truth in Lending Act, or
any other Applicable Laws. Household may deduct any amounts incurred by
Household under this Section from amounts owed Merchant under this Interim
Agreement.
(b) Indemnification by Household. Household shall be liable to and shall
indemnify and hold harmless Merchant and its subsidiaries or affiliates and
their respective officers, employees, agents and directors from any losses,
damages, claims or complaints incurred by Merchant or any subsidiary or
affiliate of Merchant or their respective officers, employees, agents and
directors arising out of (i) Household's failure to comply with this Interim
Agreement or any of the Operating Instructions; (ii) any lawsuit, legal
proceeding, arbitration proceeding, claim, dispute or complaint by a Cardholder
made in good faith resulting from anything done or not done by Household in
connection with such Cardholder's Account; (iii) any illegal or improper conduct
of Household, or its employees or agents with respect to the Card, a Card Sale,
an Account or any other matters relating to the Program; (iv) any lawsuit, legal
proceeding, arbitration proceeding, claim, dispute, complaint or set off by a
consumer made in good faith or any lawsuit, legal proceeding or inquiry by a
governmental agency resulting from a violation by Household, with respect to the
Cardholder Agreement, of the Equal Credit Opportunity Act, Truth in Lending Act
or any other Applicable Laws; and (v) any claim, dispute or complaint of any
third party or governmental agency made in good faith in connection with
advertisements and promotions prepared by Household relating to the Card, credit
terms or credit products. Notwithstanding the foregoing, the indemnification by
Household shall not apply to any claim or complaint relating to the failure of
Merchant to resolve a billing inquiry or dispute with a Cardholder relating to
Goods or services purchased on the Card where such failure was not caused by
Household.
(c) Notice of Claim & Survival. In the event that Household or Merchant
shall receive any claim or demand or be subject to any suit or proceeding of
which a claim may be made against the other under this Section, the indemnified
party shall give prompt written notice thereof to the indemnifying party and the
indemnifying party will be entitled to participate in the settlement or defense
thereof with counsel satisfactory to indemnified party at the indemnifying
party's expense. In any case, the indemnifying party and the indemnified party
shall cooperate (at no cost to the indemnified party) in the settlement or
defense of any such claim, demand, suit, or proceeding. The terms of this
Section 13 shall survive the termination of this Interim Agreement.
Section 14. Nonwaiver.
Merchant's liability under this Interim Agreement, including, without
limitation, its liability under Section 6 above, shall not be affected by any
settlement, extension, forbearance, or variation in terms that Household may
grant in connection with any Sales Slip or Account or by the discharge or
release of the obligations of the Cardholder(s) or any other person by operation
of law or otherwise. Merchant hereby waives any failure or delay on Household's
part in asserting or enforcing any right that Household may have at any time
under this Interim Agreement or under any Account.
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Section 15. Term and Termination; Expense Reimbursement.
(a) Term. This Interim Agreement shall be affective as of the Effective
Date when executed by authorized officers of each of the parties. It shall
remain in effect for sixty (60) days, unless (i) otherwise terminated as
provided herein or (ii) earlier replaced by the Definitive Agreement. The
termination of this Interim Agreement shall not affect the rights and
obligations of the parties with respect to transactions and occurrences which
take place prior to the effective date of termination, except as otherwise
provided herein.
(b) Termination.
(i) This Interim Agreement shall automatically terminate:
(1) in the event that the Bankruptcy Court disapproves this
Interim Agreement;
(2) in thirty (30) days, in the event that the Bankruptcy Court
has not entered an Order, substantially in the form of
Exhibit A, approving this Interim Agreement; or
(3) in sixty (60) days, in the event that the parties have not
agreed to and executed the Definitive Agreement.
(ii) Household may terminate this Interim Agreement upon five (5)
days' written notice in the event that the percent of credit applications
received from applicants within any consecutive thirty (30) day period with
no available FICO score or with a FICO score of less than 580 is greater
than forty-five percent (45%) of the total number of credit applications
Household has processed under this Interim Agreement.
(c) Expense Reimbursement. In the event that the parties have not executed
the Definitive Agreement within sixty (60) days of the Effective Date of this
Interim Agreement, Heilig-Meyers shall reimburse Household for all out-of-pocket
expenses, not to exceed five hundred thousand dollars ($500,000.00), incurred by
Household in connection with implementing the Program, including costs
associated with systems development, installation of short-term processing
solutions, and the printing of credit applications. Any such expense for which
Household seeks reimbursement under this section shall be presented in a bill to
Heilig-Meyers which Heilig-Meyers shall pay within thirty days from the billing
date. The terms of this Section 15 c. shall survive the termination of this
Interim Agreement.
Section 16. Status of the Parties.
In performing their responsibilities pursuant to this Interim Agreement,
Household and Merchant are in the position of independent contractors, and in no
circumstances shall either party be deemed to be the agent or employee of the
other. This Interim Agreement is not intended to create, nor does it create and
shall not be construed to create, a relationship of principal and agent, partner
or joint venturer or an association for profit between Household or Merchant.
Any amounts ever owing by Merchant pursuant to this Interim Agreement represent
contractual obligations only and are not a loan or debt.
Section 17. Force Majeure.
Neither party to this Interim Agreement shall be liable to the other by
reason of any failure in performance of this Interim Agreement in accordance
with its terms if such failure arises out of a cause beyond the control and
without the fault or negligence of such party. Such causes may include but are
not limited to acts of God, of the public enemy or of civil or military
authority, unavailability of energy resources, system or communication failure,
delay in transportation, fires, strikes, riots or war. In the event of any force
majeure occurrence, the disabled party shall use its best efforts to meet its
obligations as set forth in this Interim Agreement.
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Section 18. Limited License.
Merchant hereby authorizes Household for purposes of this Interim Agreement
to use Merchant's name, logo, registered trademarks and servicemarks (if any)
and any other proprietary designations ("Proprietary Materials") on the Cards,
applications, periodic statements, billing statements, collection letters or
documents, promotional or advertising materials and otherwise on connection with
the Program, subject to Merchant's periodic reasonable review of such use and to
such reasonable specifications of Merchant. Merchant represents and warrants
that it has obtained appropriate federal and state trademark registrations to
protect its interest in the use and ownership of the Proprietary Materials.
Merchant shall indemnify, defend and hold Household harmless from any loss,
damage, expense or liability arising from any claims of alleged infringement of
the Proprietary Materials (including reasonable attorneys' fees and costs).
Merchant may not use any name or service mark of Household or any of its
Affiliates in any manner without the prior written consent of Household.
Section 19. Confidentiality.
Merchant will keep confidential and not disclose to any person or entity
(except to employees, officers, partners or directors of Merchant who are
engaged in the implementation and execution of the Program) all information,
software, systems and data, that Merchant receives from Household or from any
other source, relating to the Program and matters which are subject to the terms
of this Interim Agreement, including, but not limited to, Cardholder names and
addresses or other Account information, and shall use, or cause to be used, such
information solely for the purposes of the performance of Merchant's obligations
under the terms of this Interim Agreement. Household will keep confidential and
not disclose to any person or entity (except employees, officers, agents or
directors of Household, its subsidiaries or affiliates who are engaged in the
implementation and execution of the program) any information that Household
receives from Merchant which is designated confidential by Merchant. In the
event Household sells or assigns the Accounts or any portion of the Accounts
under the Program, Household may disclose any information under this provision
reasonably necessary or required to effectuate such sale or assignment. The
provisions of this Section 19 shall survive the termination of this Interim
Agreement.
Section 20. Additional Products & Services.
Household and/or any of its Affiliates may at any time, whether during or
after the term of this Interim Agreement and whether the Accounts are owned by
Household, solicit Cardholders for any other credit cards or other types of
accounts or financial or insurance services or products offered by Household
and/or any of its Affiliates.
Section 21. Notices.
All notices required or permitted by this Interim Agreement shall be in
writing and shall be sent to the respective parties as follows: if to Household,
to the Attention of President (with a copy to the Attention of General Counsel,
HRS USA Law Department, 2700 Sanders Road, Prospect Heights, Illinois 60070); if
to Merchant, to the Attention of ________________________________________ at
their respective addresses set forth on page one of this Interim Agreement or
such other addresses as each party may designate to the other by notice
hereunder. Said notices shall be deemed to be received when sent to the above
addresses (i) upon three (3) Business Days after deposit in the U.S. first class
mail with postage prepaid, (ii) upon personal delivery, or (iii) upon receipt by
telex, facsimile, or overnight/express courier service or mail.
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Section 22. Amendments and Supplementary Documents.
Reference herein to "this Interim Agreement" shall include any schedules,
appendices, exhibits, and amendments hereto. Household may amend this Interim
Agreement upon ten (10) days' prior written notice to Merchant if such
modification is reasonably determined by Household to be required by any state
or federal law, rule, regulation, governmental or judicial order, opinion,
interpretation or decision. Any amendment or modification to this Interim
Agreement must be in writing and signed by a duly authorized officer of
Household and Merchant to be effective and binding upon the parties; no oral
amendments or modifications shall be binding upon the parties.
Section 23. Assignment.
This Interim Agreement is binding upon the parties and their successors and
assigns. Notwithstanding, Merchant may not assign this Interim Agreement without
the prior written consent of Household. Any merger, consolidation, transfer of
assets or other transfer of control (defined to be a transfer on a cumulative
basis of more than 25% of voting control) shall be deemed to be an assignment
expressly prohibited by this Section 23 without the prior written consent of
Household. Any purported assignment without such consent shall be void.
Household may without Merchant's consent assign this Interim Agreement or any of
the rights or obligations hereunder to any Affiliate of Household at any time.
In the event of such assignment, the assignee shall have the same rights,
remedies and obligations as Household under this Interim Agreement.
Section 24. Nonwaiver and Extensions.
Household shall not by any act, delay, omission, or otherwise be deemed to
have waived any rights or remedies hereunder. Merchant agrees that Household's
failure to enforce any of its rights under this Interim Agreement shall not
affect any other right of Household or the same right in any other instance.
Section 25. Rights of Persons Not a Party.
This Interim Agreement shall not create any rights on the part of any
person or entity not a party hereto, whether as a third party beneficiary or
otherwise.
Section 26. Section Headings.
The headings of the sections of this Interim Agreement are for reference
only, are not a substantive part of this Interim Agreement and are not to be
used to affect the validity, construction or interpretation of this Interim
Agreement or any of its provisions.
Section 27. Integrations.
This Interim Agreement contains the entire agreement between the parties.
There are merged herein all prior oral or written agreements, amendments,
representations, promises and conditions in connection with the subject matter
hereof. Any representations, warranties, promises or conditions not expressly
incorporated herein shall not be binding on Household.
Section 28. Governing Law/Severability.
This Interim Agreement shall be governed by and construed in accordance
with the laws of the State of Illinois. If any provision of this Interim
Agreement is contrary to Applicable Law, such provision shall be deemed
ineffective without invalidating the remaining provisions hereof.
Section 29. JURISDICTION.
ANY SUIT, COUNTERCLAIM, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS INTERIM AGREEMENT MUST BE BROUGHT BY THE PARTIES SOLELY IN THE COURTS OF
THE STATE OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS; OR IN THE UNITED STATES BANKRUPTCY COURT FOR THE EASTERN
DISTRICT OF VIRGINIA AND MERCHANT AND HOUSEHOLD HEREBY IRREVOCABLY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF SUCH COURTS AND ANY APPELLATE COURTS THEREOF FOR THE
PURPOSE OF ANY SUCH SUIT, COUNTERCLAIM, ACTION, PROCEEDING OR JUDGMENT.
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Section 30. WAIVER OF JURY TRIAL.
HOUSEHOLD AND MERCHANT HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS INTERIM AGREEMENT, ANY RELATED
DOCUMENT OR UNDER ANY OTHER DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR ARISING FROM ANY
RELATIONSHIP EXISTING IN CONNECTION WITH THIS INTERIM AGREEMENT, AND AGREE THAT
ANY SUCH ACTION, SUIT, PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT
AND NOT BEFORE A JURY; THIS PROVISION IS A MATERIAL INDUCEMENT FOR HOUSEHOLD AND
MERCHANT ENTERING INTO THIS INTERIM AGREEMENT.
IN WITNESS WHEREOF, Household and Merchant have caused their duly authorized
representatives to execute this Interim Merchant Agreement as of the date set
forth above.
BANK: MERCHANT:
HOUSEHOLD BANK (SE), N.A. HEILIG-MEYERS COMPANY
By:/s/Joseph W. Wolf By:/s/David S. Herman
-------------------------- ---------------------------
Print Name: Joseph W. Wolf Print Name: David S. Herman
Title: Vice President Title: Senior Vice President -
Credit
ATTESTED OR WITNESSED
By:
--------------------------
Print Name:
Title:
-----------------------------
Merchant's Federal Tax ID#
136