Exhibit 10.1
FINAL
PRIVATE LABEL CREDIT CARD PROGRAM AGREEMENT
This Program Agreement is made as of the 7th day of August, 2004, by
and between DILLARD'S, INC. ("Dillard's"), a Delaware corporation with its
principal offices at 1600 Cantrell Road, Little Rock, Arkansas 72201, and GE
CAPITAL CONSUMER CARD CO. ("Bank"), a Federal savings bank with its home
office at 5300 Kings Island Drive, Mason, Ohio 45040.
W I T N E S S E T H:
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WHEREAS, Bank has established programs to extend private label card
credit to qualified customers for the purchase of goods and services;
WHEREAS, Dillard's is engaged, among other activities, in operating
retail department stores and a Private Label Credit Card Business;
WHEREAS, concurrently with the execution of this Agreement, Bank and
Dillard's are entering a purchase, sale and servicing transfer agreement (the
"Purchase Agreement") pursuant to which Bank shall purchase Dillard's Private
Label Credit Card Business, including certain credit card accounts and
associated receivables ("Purchased Accounts");
WHEREAS, it is a condition precedent to the obligations of Dillard's
under the Purchase Agreement that Dillard's and Bank enter into this
Agreement;
WHEREAS, Dillard's has requested that Bank establish a program
pursuant to which Bank shall issue Private Label Credit Cards, which shall be
accepted only by Dillard's Channels; and
WHEREAS, the parties agree that the goodwill associated with the
"Dillard's" mark contemplated for use hereunder is of substantial value which
is dependent upon the maintenance of high quality services and appropriate use
of the mark pursuant to this Agreement;
NOW, THEREFORE, in consideration of the terms, conditions and mutual
covenants contained herein, and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Dillard's and Bank
agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Generally.
The following terms shall have the following meanings when used in
this Agreement:
o "Account" means a Private Label Credit Card accessed open end credit
account established in favor of a Cardholder, pursuant to which such
Cardholder may finance the
purchase of Goods and/or Services from Dillard's Channels and other
charges that may be made using the Private Label Credit Card, all
subject to the terms of a Credit Card Agreement. The term Account
includes Purchased Accounts.
o "Account Documentation" means, with respect to an Account, any and
all documentation relating to that Account, including, without
limitation, Credit Card Documentation, checks or other forms of
payment with respect to an Account, credit bureau reports (to the
extent not prohibited from transfer by contract with the credit
bureau), adverse action notices, change of terms notices, other
notices, correspondence, memoranda, documents, stubs, instruments,
certificates, agreements, magnetic tapes, disks, hard copy formats
or other computer-readable data transmissions, any microfilm,
electronic or other copy of any of the foregoing, and any other
written, electronic or other records or materials of whatever form
or nature, including, without limitation, tangible and intangible
information, arising from or relating or pertaining to any of the
foregoing to the extent related to the Program; provided that
Account Documentation shall not include Dillard's register tapes,
invoices, sales or shipping slips, delivery and other receipts or
other indicia of the sale of Goods and/or Services.
o "Accountants" has the meaning set forth in Section 10.2 hereof.
o "Affiliate" means, with respect to any Person, each Person that
controls, is controlled by, or is under common control with, such
Person.
o "Agreement" means this Program Agreement, together with all of its
schedules and exhibits, and, if modified, altered, supplemented,
amended and/or restated, as the same may be so modified, altered,
supplemented, amended and/or restated from time to time.
o "Applicable Law" means all federal, state and local laws, statutes,
regulations, written regulatory guidance, orders or directives, as
may be amended and in effect from time to time during the Term of
this Agreement, including, but not limited to: (i) the Truth in
Lending Act and Regulation Z; (ii) the Equal Credit Opportunity Act
and Regulation B; (iii) the Fair Debt Collection Practices Act; (iv)
the Fair Credit Reporting Act; (v) the Gramm-Leach-Bliley Act and
its implementing regulations ("GLBA"); (vii) the PATRIOT Act and its
implementing regulations; and (vii) the Unfair and Deceptive Trade
Practices Act.
o Approval Rate Threshold" means the approval rates set forth in
Schedule 3.4(a)-1.
o "Average Daily Club Plan Receivables" means, for any calendar year
or Program Year, as appropriate, the quotient obtained by dividing
(a) the sum of Club Plan Cardholder Indebtedness as of the end of
the day for each day of such year by (b) the number of days in the
such year.
o "Average Daily Receivables" means, for any calendar month, calendar
year or Program Year, the quotient obtained by dividing (a) the sum
of Cardholder Indebtedness as of the end of day for each day of the
calendar month, calendar year or Program Year, as the
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case may be, by (b) the number of days in the calendar month,
calendar year or Program Year, as the case may be.
o "Bank" has the meaning set forth on page 1.
o "Bank Event of Default" means the occurrence of any one of the
events listed in Section 12.2 hereof or an Event of Default of Bank.
o "Bank Licensed Marks" means the trademarks, tradenames, service
marks, logos and other proprietary designations of Bank listed on
Schedule B and licensed to Dillard's under Section 8.2 hereof.
o "Bankruptcy Code" means Title 11 of the United States Code, as
amended, or any other applicable state or federal bankruptcy,
insolvency, moratorium or other similar law and all laws relating
thereto.
o "Billing Cycle" means the interval of time between regular periodic
Billing Dates for an Account.
o "Billing Date" means, for any Account, the last day of a Billing
Cycle as of when the Account is billed.
o "Billing Statement" means a summary of Account credit and debit
transactions for a Billing Cycle including a descriptive statement
covering purchases of Goods and/or Services and a statement with
only past-due account information.
o "Business Day" means any day, other than a Saturday, Sunday or legal
holiday, on which Dillard's and Bank both are open for business.
o "Cardholder" means any Person who has been issued a Credit Card and
includes any authorized user(s).
o "Cardholder Indebtedness" means all amounts charged and owing to
Bank by Cardholders with respect to Accounts (including finance
charges, NSF fees, late charges, pay-by-phone fees and any other
fees and charges), whether or not billed, less the amount of any
credit balances owing by Bank to Cardholders, including any credits
associated with returns of Goods and/or Services and similar credits
and adjustments, whether or not billed.
o "Cardholder Data" means all personally identifiable information
about a Cardholder received by Bank in connection with the
Cardholder's application for or use of a Private Label Credit Card
or Account.
o "Cardholder List" means any list in electronic form that identifies
or provides a means of differentiating Cardholders, including any
such electronic listing that includes the names, addresses, email
addresses (as available), telephone numbers or social security
numbers of any or all Cardholders.
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o "Change in Control" means any acquisition of Control of Dillard's by
an entity other than an Affiliate of Dillard's, or acquisition of
Control of Bank by an entity other than an Affiliate of Bank, as the
case may be.
o "Charge Transaction Data" means the transaction information with
regard to each purchase of Goods and/or Services by a Cardholder on
credit and each return of Goods and/or Services for credit in the
form of electronic information as more particularly set forth in the
Operating Procedures.
o "Club Plans" has the meaning set forth in Schedule 2.3(b).
o "Club Plan Cardholder Indebtedness" means Cardholder Indebtedness
related to Club Plan purchases.
o "Co-Branded Credit Card" means a credit card that bears a Dillard's
Licensed Mark and the trademarks, tradenames, service marks, logos
and other proprietary designations of VISA U.S.A., Inc., MasterCard
International Inc., American Express, Discover or any other payment
system that is generally accepted by sellers in the general purpose
department store business.
o "Competing Program" has the meaning set forth in Section 2.5(a)
hereof.
o "Comparable Private Label Credit Card Programs" means private label
credit card programs operated by Bank involving department store,
specialty apparel and other soft line retailers listed in Schedule
1.1, or as the parties may otherwise from time to time mutually
agree.
o "Confidential Information" has the meaning set forth in Section 11.1
hereof.
o "Control" of a Person means the possession, directly or indirectly,
of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by
contract or otherwise.
o "Conversion Date" means a date between the Effective Date and March
31, 2005, mutually agreed between Dillard's and Bank.
o "Credit Card Agreement" means the credit card agreement between Bank
and a Cardholder, including those assigned to Bank by Dillard's
under the Purchase Agreement (and any replacement of such agreement)
governing the use of an Account, together with any amendments,
modifications or supplements which now or hereafter may be made to
such Credit Card Agreement (and any replacement of such agreement).
o "Credit Card Application" means the credit application which must be
completed and submitted by individuals who wish to become
Cardholders.
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o "Credit Card Documentation" means, with respect to Accounts, all
Credit Card Applications, Credit Card Agreements, Credit Cards,
Value Proposition agreements and Billing Statements relating to such
Accounts.
o "Debt Cancellation Revenue" means the aggregate gross premiums and
revenue associated with the Bank's sale of debt cancellation
products to Cardholders.
o "Default Adjustment" has the meaning set forth in Schedule
14.2(d)-1.
o "Dillard's Channels" means all retail establishments owned or
operated by Dillard's in the United States (including Licensee
departments therein) and all mail order, catalog, electronic mail
outlets (including websites operated by Dillard's or its Licensees)
and other direct access media within the United States that are
owned or operated by Dillard's or its Licensees.
o "Dillard's Event of Default" means the occurrence of any one of the
events listed in Section 12.3 hereof or an Event of Default of
Dillard's.
o "Dillard's Licensed Marks" means the trademarks, tradenames, service
marks, logos and other proprietary designations of Dillard's listed
on Schedule A and licensed to Bank by Dillard's under Section 8.1
hereof.
o "Dillard's Operating Procedures" shall mean the operating procedures
employed by Dillard's prior to the Effective Date, a copy of which
is attached hereto as Schedule 3.1.
o "Dillard's Shopper" shall mean any Person who makes purchases of
Goods and/or Services.
o "Dillard's Shopper Data" shall mean all personally identifiable
information regarding a Dillard's Shopper that is obtained by
Dillard's in connection with the Dillard's Shopper making a purchase
of Goods and/or Services.
o "Disclosing Party" has the meaning set forth in Section 11.1 hereof.
o "Effective Date" means the Closing Date, as that term is defined in
the Purchase Agreement. If the Purchase Agreement terminates without
consummation of the Closing, this Agreement shall be null and void.
o "Enhancement Products" means the Credit Card enhancement products
(other than debt cancellation product) listed in Schedule 4.11, or
such other products as shall be approved by the Marketing Committee
from time to time.
o "Event of Default" means the occurrence of any one of the events
listed in Section 12.1 hereof.
o "Fair Market Value" has the meaning set forth in Section 14.3
hereof.
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o "Federal Funds Rate" means the offered rate as reported in The Wall
Street Journal in the "Money Rates" section for reserves traded
among commercial banks for overnight use in amounts of one million
dollars or more, as published in the most recent Friday edition
prior to any required payment or settlement date in which such
offered rate is reported, and if such rate is not so reported in any
Friday edition of The Wall Street Journal during the thirty day
period preceding such required payment or settlement date, such
offered rate as reported in another publication reasonably
acceptable to parties.
o "Financing Income" means, with respect to any period, an amount
equal to (a) the sum of assessed or accrued finance charges, late
charges, NSF fees, pay-by-phone fees and other similar fees under
the Program during such period, minus (b) the sum of concessions,
reversals and write-offs of such finance charges, late charges, NSF
fees, pay-by-phone fees and other similar fees and other adjustments
during such period in the normal course of business (other than
fraud losses).
o "Funding Costs" has the meaning set forth in Schedule 7.3.
o "GAAP" means generally accepted accounting principles, consistently
applied.
o "Goods and/or Services" means the products and services sold by or
through Dillard's Channels, including for personal, family,
household or business purposes.
o "Governmental Authority" means any federal, state or local domestic,
foreign or supranational governmental, regulatory or self-regulatory
authority, agency, court, tribunal, commission or other
governmental, regulatory or self-regulatory entity.
o "Indemnified Party" has the meaning set forth in Section 15.3
hereof.
o "Indemnifying Party" has the meaning set forth in Section 15.3
hereof.
o "Initial Term" has the meaning set forth in Section 13.1 hereof.
o "Inserts" has the meaning set forth in Section 4.8 hereof.
o "In-Store Payment" means any payment on an Account made to Dillard's
by a Cardholder or a person acting on behalf of a Cardholder.
o "Intellectual Property" means, on a worldwide basis, other than with
respect to Dillard's Licensed Marks or Bank Licensed Marks, any and
all: (i) rights associated with works of authorship, including
copyrights, moral rights and mask-works; (ii) trade marks and
service marks and the goodwill associated therewith; (iii) trade
secret rights; (iv) patents, designs, algorithms and other
industrial property rights; (v) other intellectual and industrial
property rights of every kind and nature, however designated,
whether arising by operation of law, contract, license or otherwise;
and (vi) applications, registrations, renewals, extensions,
continuations, divisions or reissues thereof now or hereafter in
force (including any rights in any of the foregoing).
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o "Internet Services" has the meaning set forth in Section 3.8(a).
o "Knowledge" means, with respect to either Dillard's or the Bank, the
actual knowledge of the executive officers of the organization who
have managerial responsibility for the Program.
o "LIBOR" means the one month London Inter-Bank Offering Rate that
appears on the Bloomberg U.S. Government/Swap/Agency Composite
screen as of 11 a.m. (London time) each day, expressed as an annual
rate, and if such rate is not available from Bloomberg (or its
successor), LIBOR shall be determined from such financial reporting
service or other information as shall be mutually acceptable to the
parties.
o "Licensee(s)" means any person(s) to the extent such person is
authorized by Dillard's to operate in and sell goods and/or services
from Dillard's Channels under the Dillard's Licensed Marks.
o "Marketing Commitment" and "Market Commitment Quotient" have the
respective meanings set forth in Schedule 4.1(a).
o "Marketing Committee" shall mean the committee established pursuant
to Section 4.2 hereof.
o "Marketing Fund" means an accounting entry on the books of Bank
representing the unused portion of the Marketing Commitment.
o "Marketing Plan" means the document that outlines the objectives,
strategies and tactics of new account solicitation, usage and
awareness programs for the applicable calendar year.
o "Monthly Settlement Sheet" has the meaning set forth in Section 7.2
hereof.
o "Net Credit Sales" means, for any calendar year, an amount equal to
(a) gross credit sales on Accounts during such calendar year, minus
(b) the sum of credits for returned goods and cancelled services and
other credits related to the price of Goods and/or Services (such as
concessions, discounts and adjustments) on Accounts during such
calendar year.
o "New Mark" has the meaning set forth in Sections 8.1(b) and 8.2(b)
hereof.
o "Nominated Purchaser" has the meaning set forth in Section 14.2(a).
o "Operating Procedures" has the meaning set forth in Section 3.1(a).
o "Person" means and includes any individual, partnership, joint
venture, corporation, company, bank, trust, unincorporated
organization, government or any department, agency or
instrumentality thereof.
o "POS" means point of sale.
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o "Premium" has the meaning assigned to such term in the Purchase
Agreement.
o "Private Label Credit Card" or "Credit Card" means a card issued by
Bank to a Cardholder in connection with the Program (or by a
subsidiary of Dillard's in connection with a predecessor program),
in each case which bears a Dillard's Licensed Mark and may be used
to finance purchases of Goods and/or Services.
o "Private Label Credit Card Business" means the Business, as that
term is defined in the Purchase Agreement.
o "Program" means the private label credit card program established by
Dillard's and Bank and made available to Cardholders and qualified
applicants for the purchase of Goods and/or Services through
Dillard's Channels, including, without limitation, the extension of
credit, billings, collections, customer service, accounting between
the parties and all other aspects of the customized credit plan
specified herein and in Credit Card Agreements.
o "Program Purchase Date" has the meaning set forth in Section
14.2(c).
o "Program Assets" means the Accounts, Account Documentation,
Cardholder List, Solicitation Materials and all Cardholder
Indebtedness (whether held by Bank or a third party).
o "Program Net Losses" has the meaning set forth in Schedule 7.3.
o "Program Privacy Policy" shall mean the privacy policy and
associated disclosures to be provided by Bank to Cardholders in
connection with the Program, in the form consistent with the terms
of this Agreement and Applicable Law, as agreed to by the Marketing
Committee.
o "Program Purchase Date" has the meaning set forth in Section 14.2(c)
hereof.
o "Program Website" has the meaning set forth in Section 3.8(a).
o "Program Year" shall mean each full twelve calendar month period
following the Effective Date, except that, if the Effective Date
falls on a date other than the first day of a calendar month, the
first Program Year will include the days of such calendar month
after the Effective Date and the next full twelve calendar months.
o "Purchase Agreement" has the meaning set forth on page 1 hereof.
o "Purchased Accounts" has the meaning set forth on page 1 hereof.
o "Qualified Dillard's Customer" shall mean customers of Dillard's
that Dillard's determines are available to be solicited for Accounts
under the Program.
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o "Qualified Dillard's Customer List" means the list of Qualified
Dillard's Customers provided from time to time by Dillard's to Bank
for purposes of soliciting such Persons for the Program in
accordance with a Marketing Plan.
o "Receiving Party" has the meaning set forth in Section 11.1 hereof.
o "Renewal Term" has the meaning set forth in Section 13.1 hereof.
o "Risk Adjusted Margin" has the meaning set forth in Schedule 7.3.
o "Risk Management Policies" has the meaning set forth in Section
3.4(a) hereof.
o "Significant Failure" has the meaning set forth in Schedule 5.5(b).
o "SLA" means each individual performance standard set forth at
Schedule 5.2.
o "Solicitation Materials" means documentation, materials, artwork,
copy, trademarks (excluding the Dillard's Licensed Marks and the
Bank Licensed Marks), copyrights and any protectible items, in any
format or media (including television and radio), used to promote or
identify the Program to Cardholders and potential Cardholders,
including, without limitation, direct mail solicitation materials
and coupons.
o "Subsequent Failure" has the meaning set forth in Schedule 5.5(b).
o "Supported Accounts" has the meaning set forth in Section 3.5
hereof.
o "Term" means the Initial Term and each Renewal Term.
o "Termination Period" means the period beginning with the date of any
notice of termination pursuant to Article 13 and ending on the
Program Purchase Date, if Dillard's or its designee purchases the
Program Assets or upon notice that Dillard's will not purchase the
Program Assets if it determines not to do so.
o "Trademark Style Guide" means any rules governing the manner of
usage of trademarks, tradenames, service marks, logos and other
proprietary designations.
o "Transaction" means any purchase of Goods and/or Services through a
Dillard's Channel using a Private Label Credit Card or Account
number.
o "Unamortized Premium" means (i) the Premium, less 1/120th thereof
for each full month that transpires after the Effective Date; plus
(ii) unamortized premium related to each retail credit card business
portfolio acquired by Bank in connection with an acquisition
pursuant to Section 2.6 of this Agreement, based upon an
amortization schedule agreed upon by Dillard's and Bank.
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o "Value Proposition" means Dillard's current POS new account opening
day 10% discounts, promotional card event discounts, and any other
card-related promotional or rewards programs as may be established
by the Marketing Committee from time to time.
1.2 Miscellaneous.
As used herein,
(a) all references to the plural number shall include the singular
number (and vice versa),
(b) all references to "herein," "hereunder," "hereinabove" or like words
shall refer to this Agreement as a whole and not to any particular
section, subsection or clause contained in this Agreement, and
(c) all references to "include," "includes" or "including" shall be
deemed to be followed by the words "without limitation."
ARTICLE 2
ESTABLISHMENT OF THE PROGRAM
2.1 Generally.
Pursuant to the terms and conditions of this Agreement, Dillard's and
Bank shall establish and participate in the Program commencing on the
Effective Date.
2.2 Credit Program.
(a) Beginning as of the Effective Date, Bank shall offer Private Label
Credit Cards to qualified customers in accordance with this
Agreement and the Cardholder Agreement.
(b) Beginning as of the Effective Date, or such later date as shall be
agreed by the Marketing Committee, the terms and conditions for new
Accounts shall be those specified in Schedule 2.2 hereto.
2.3 Value Proposition.
(a) Beginning as of the Effective Date, Bank shall offer to Cardholders
the Value Proposition.
(b) Bank shall offer "Club Plans" as provided in Schedule 2.3(b).
2.4 Conversion of Purchased Accounts.
On the Conversion Date, subject to Applicable Law, Bank shall convert all
of the Purchased Accounts to the terms and conditions specified in Schedule
2.2 hereto, provided that
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Bank on the Conversion Date shall not decrease or eliminate (but may increase)
any existing credit line assignments. As soon as reasonably practicable after
the Effective Date, and in any event prior to the Conversion Date, Bank shall
prepare and send a change in terms notice as required by Applicable Law to
each Person obligated on a Purchased Account. Descriptions of the terms and
conditions of the Account and the Value Proposition, if any, shall be included
as part of such notices to the extent required by Applicable Law. All such
notices and descriptions shall be reviewed and approved by the Marketing
Committee. Bank shall issue new Private Label Credit Cards and shall use its
best efforts to maintain existing Account numbers on the Accounts.
2.5 Exclusivity.
(a) General. Except as otherwise provided in this Section 2.5, during
the Term of this Agreement (excluding the Termination Period),
Dillard's, on behalf of itself and its Affiliates, agrees not to
enter into or be a party to an agreement or arrangement, or act as a
partner of a bank or credit card issuer, relating to a program for a
private label credit card bearing a Dillard's Licensed Mark or other
mark using the Dillard's name in the United States (such a program,
a "Competing Program"). In addition, Dillard's, on behalf of itself
and its Affiliates, shall not itself or themselves operate or
participate in a Competing Program. Bank shall have exclusive rights
with respect to the Program.
(b) Second-Look Credit Card Program. Notwithstanding Section 2.5(a),
Dillard's shall have the right at any time during the Term of this
Agreement to establish an unadvertised program for issuing credit
cards, including private label credit cards using the Dillard's
Licensed Marks, to customers whose Credit Card Applications have
been declined by Bank, provided that Dillard's shall ensure that if
the Dillard's Licensed Marks are used in connection with such
program, they are used in a manner which clearly differentiates them
from the use of the Dillard's Licensed Marks in the Program.
Notwithstanding the foregoing, Dillard's shall have the right to
include references to such credit cards in any materials listing
approved forms of payment, and to provide applications and brochures
for such program to customers whose Credit Card Applications have
been declined by Bank.
(c) Co-Branded Program. If Dillard's determines to offer Co-Branded
Credit Cards during the Term, it shall follow the procedures set
forth in Schedule 2.5(c).
(d) Retail Portfolio Acquisition. Notwithstanding Section 2.5(a), Bank's
sole rights with respect to credit card portfolios acquired by
Dillard's or its Affiliates are set forth in Section 2.6 below.
(e) Other Products. For clarity, other than the products set forth in
Section 2.5(a), this Agreement does not restrict in any way
Dillard's rights with respect to other payment products, including
debit cards, gift cards or stored value cards.
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2.6 Retail Portfolio Acquisition.
(a) In the event that Dillard's purchases another retailer, or any
stores or other channels thereof, that directly or through a third
party has a proprietary or co-branded credit card portfolio, Bank
agrees to participate in the purchase of some or all of the credit
card business of such retailer in the following manner.
(i) Retailer that Operates a Credit Card Business. In connection
with Dillard's purchase of any portion of the retail operations
of a retailer that directly or through an Affiliate provides a
proprietary or co-branded credit card, Bank agrees to negotiate
in good faith a joint bid with Dillard's to acquire the related
credit card business offered for sale by such retailer in
connection with Dillard's acquisition of the retailer, or any
of its stores or other channels. In the event that the bid is
successful, Bank shall be solely responsible for funding the
portion of the purchase price allocable to the credit card
portfolio, taking into account the entire financial terms of
this Agreement, including the same revenue share percentage as
provided under Section 7.3(a) hereof. If Dillard's and Bank
cannot agree on the portion of the purchase price to be
allocated to the credit card portfolio, Bank shall nonetheless
consummate such purchase on commercially reasonable terms and
conditions, and the parties shall promptly submit the dispute
regarding purchase price allocation for resolution pursuant to
Section 10.2. Pending the outcome of the dispute resolution
procedures set forth at Section 10.2, Bank shall fund the
portion of the purchase price equal to (A) its last good faith
offer, which shall be no less than the book value of any
receivables acquired, plus (B) one half (1/2) of the
difference between the amounts Dillard's and Bank respectively
believe should be allocated to the credit card portfolio
purchase price. If Bank fails to acquire such credit card
portfolio, Dillard's shall have the right to purchase and
operate such retailer's credit card business itself or to
engage a third party to do so. If Dillard's, directly or with a
third party, acquires the credit card business of another
retailer pursuant to this provision and this Agreement
otherwise continues in effect, Section 2.5 shall not apply to
such acquired credit card business or to the associated
acquired retail operations, including any growth thereof. In
such event, Bank shall use commercially reasonable efforts to
assist Dillard's in the conversion and servicing of the
portfolio until such time as Dillard's, itself or through a
third party, can provide such servicing, all for servicing fees
to be agreed upon by the parties.
(ii) Retailer that has a Credit Card with another Issuer. In
connection with Dillard's purchase of any portion of the retail
operations of a retailer that has a proprietary or co-branded
credit card through a third-party issuer, Bank agrees that it
shall negotiate in good faith for the purchase of the
retailer's credit card portfolio from such third party issuer
associated with the retail assets being acquired. In the event
that Bank is unsuccessful in its bid for the credit card
portfolio, Dillard's may offer the credit card
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program of such third party issuer until the expiration or
other termination of the agreement governing such program, and
Bank shall negotiate in good faith for the purchase of the
credit card portfolio at that time. In the event that Bank is
unable to acquire the credit card portfolio associated with the
retail assets acquired by Dillard's, Dillard's shall have the
right to purchase and operate such retailer's credit card
business itself or to engage a third party to do so. If
Dillard's, directly or with a third party, acquires the credit
card business of another retailer pursuant to this provision,
Section 2.5 shall not apply to such acquired credit card
business or to the associated acquired retail operations,
including any growth thereof.
(iii) Retailer that has a Proprietary or Co-Branded Credit Card with
Bank. In connection with Dillard's purchase of a retailer that
has a proprietary or co-branded credit card portfolio operated
by Bank, Bank agrees to integrate such credit card portfolio
with the Program as provided in Section 2.6(b) below.
(iv) Co-Branded Credit Card. Neither Bank nor Dillard's shall have
any obligation under this Section 2.6(a)(i) or (ii) with
respect to any co-branded credit card, except as provided at
Section 2.5(c), if Bank is not already providing a Co-Branded
Credit Card program for Dillard's at the time of the proposed
acquisition.
(b) Conversion of Purchased Accounts. If Bank acquires any credit card
portfolio pursuant to Section 2.6(a)(i) or (ii), or operates a
credit card portfolio as set forth in Section 2.6(a)(iii), Bank
shall integrate such credit card portfolio with the Program as
follows.
(i) Private label credit card accounts shall be converted to
Accounts established under the Program, which converted
Accounts shall be subject to the same terms and conditions and
to this Agreement, and participate in the Program, as if they
were originated under this Agreement.
(ii) If Dillard's has a Co-Branded Credit Card program with Bank at
the time of such purchase, purchased co-branded credit card
accounts shall be converted to Co-Branded Credit Card accounts,
which converted accounts shall be subject to the same terms and
conditions and participate in such program as if they were
originated under the Co-Branded Credit Card program agreement.
(iii) If Dillard's does not have a Co-Branded Credit Card program
with Bank at the time of such purchase, purchased co-branded
credit card accounts shall continue under the same terms and
conditions being offered to the purchased retailer's customers,
or such other terms and conditions upon which Dillard's and
Bank shall mutually agree.
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(iv) Bank shall cover all costs related to conversions pursuant to
this Section 2.6(b), including replacement of credit cards,
notices to Cardholders and complying with other requirements of
Applicable Law.
2.7 Retail Portfolio Disposition.
(a) In the event that Dillard's arranges for the disposition of any of
its retail stores in the United States during the Term of this
Agreement, Dillard's shall have the right to dispose of the portion
of the Program Assets related to such disposition (provided each
Account may be tracked to the market serviced by such retail stores)
and Bank shall provide all cooperation necessary to consummate such
disposition to the same extent as if such disposition were a
transfer of Program Assets upon the expiration of this Agreement as
provided in Article 14. If Bank does not believe that the price
negotiated with the purchaser of the Program Assets represents the
fair market value of such portion of the Program Assets, and
Dillard's and Bank are unable to reach agreement, Dillard's and Bank
each shall nominate an investment banker who together shall select a
third investment banker to determine the fair market value of such
portion of the Program Assets, pursuant to the procedure set forth
in Section 14.3 hereof. Notwithstanding any such dispute, Bank shall
consummate such sale on the terms negotiated with the purchaser of
the Program Assets pending the resolution of such dispute.
(b) In the event that Dillard's sells retail stores and associated
Accounts pursuant to Section 2.7(a), Dillard's shall pay Bank the
amount, if any, calculated under Schedule 2.7(b).
ARTICLE 3
ADMINISTRATION OF THE PROGRAM
3.1 Operation of the Program.
(a) Except as modified by agreement of the parties or the Marketing
Committee from time to time, the Operating Procedures shall be the
Dillard's Operating Procedures. The parties shall cooperate to
review and update Operating Procedures as appropriate prior to the
Effective Date, but in any event such Operating Procedures shall be
at least as favorable, in the aggregate, as operating procedures
applicable to Bank's other Comparable Private Label Credit Card
Programs.
(b) Bank shall provide, either directly or indirectly, the services,
materials and personnel necessary to operate the Program in
accordance herewith and in accordance with the Operating Procedures
and any Marketing Plan agreed to by the parties from time to time.
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(c) Dillard's shall participate in the Program in accordance herewith
and in accordance with the Operating Procedures and any Marketing
Plan agreed to by the parties from time to time.
(d) In the event of any conflict between the Operating Procedures and
this Agreement, this Agreement shall control.
3.2 Ownership of Accounts.
(a) Except to the extent of Dillard's ownership of the Dillard's
Licensed Marks and its option to purchase the Program Assets under
Section 14.2, Bank shall be the sole and exclusive owner of all
Accounts and Account Documentation and shall have all rights,
powers, and privileges with respect thereto as such owner,
including, without limitation, the right, power and privilege to
review periodically the creditworthiness of Cardholders to determine
the range of credit limits or finance charge rates to be made
available to individual Cardholders and whether to suspend or
terminate the credit privileges of any Cardholder, provided however,
that the Bank shall only decrease credit limits or suspend or
terminate credit privileges to the extent set forth in Schedule
3.2(a). All purchases of Goods and/or Services in connection with
the Accounts and the Cardholder Indebtedness shall create the
relationship of debtor and creditor between the Cardholder and Bank,
respectively. Dillard's acknowledges and agrees that (i) it has no
right, title or interest (except for its right, title and interest
in the Dillard's Licensed Marks and its option to purchase the
Program Assets under Section 14.2) in or to, any of the Accounts or
Account Documentation or any proceeds of the foregoing, and (ii)
Bank extends credit directly to Cardholders.
(b) Except as expressly provided herein, Bank shall be entitled to (i)
receive all payments made by Cardholders on Accounts, (ii) retain
for its account all Cardholder Indebtedness and such other fees and
income authorized by the Credit Card Agreements and collected by
Bank with respect to the Accounts and Cardholder Indebtedness, and
(iii) retain for its account all income from selling credit card
Enhancement Products.
(c) Bank shall fund all Cardholder Indebtedness on the Accounts.
(d) Bank shall have the exclusive right to effect collection of
Cardholder Indebtedness, except as provided in Section 6.5, and
shall notify Cardholders to make payment directly to it in
accordance with its instructions; provided, however, that Bank at
its option may make all collections for its account using a Program
name which includes the name of Dillard's and, if Bank so elects,
the name of Bank, and may direct all checks to be made payable to
"Dillard's" or, with Dillard's approval, another name combined with
the name Dillard's. Dillard's grants to Bank a limited power of
attorney (coupled with an interest) to sign and endorse Dillard's
name upon any form of payment that may have been issued in Dillard's
name in respect of any Account.
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(e) Notwithstanding the foregoing, Dillard's shall accept payments made
with respect to an Account in a Dillard's store as provided in
Section 6.3.
3.3 Branding of Accounts/Credit Cards/Credit Card Documentation/Solicitation
Materials.
(a) Subject to finalization of any Marketing Plan and approval of the
Marketing Committee, Bank shall be responsible for, and bear the
cost of, design, development and delivery (other than delivery at
Dillard's Channels) of the Credit Card Documentation, Solicitation
Materials and Private Label Credit Cards.
(b) Dillard's Licensed Marks shall appear prominently on the face of the
Private Label Credit Cards. The Private Label Credit Cards shall not
bear Bank's Licensed Marks; provided, however, the Bank's name will
appear on the back of the Card in order to identify Bank as the
credit provider under the Program, together with any other
disclosures required by Applicable Law.
3.4 Risk Management/Credit Standards.
(a) Bank shall be solely responsible for developing and implementing
risk management policies, procedures and practices for the Program
in accordance with this Agreement, including policies, procedures
and practices for credit and Account openings, transaction
authorization, collections, credit line management, over-limit
decisions, Account closures, payment crediting and charge-offs
(collectively, "Risk Management Policies"). Bank shall set Risk
Management Policies that, in the aggregate, target the Approval Rate
Thresholds for new Accounts opened at in-store point of sale and for
new Accounts opened on the basis of mail-in applications. In the
event such Approval Rate Thresholds are not achieved, Bank shall
take the actions specified in Schedule 3.4(a)-2.
(b) Bank shall communicate to Dillard's its Risk Management Policies and
on a monthly basis shall provide either updates of material changes
or a statement that no material change has occurred.
(c) Bank shall perform all necessary security functions to minimize
fraud in the Program due to lost, stolen or counterfeit cards and
fraudulent applications. Dillard's agrees and acknowledges that it
shall cooperate with Bank in such functions. All fraud losses other
than fraud of Dillard's, its Licensees, employees or agents, shall be
at the Bank's expense.
3.5 Exception Accounts.
(a) Notwithstanding the foregoing, Bank shall, upon request by
Dillard's, offer a Private Label Credit Card and Account to any
customer that does not satisfy Bank's credit standards ("Supported
Accounts"), provided that Bank shall have no obligation to issue
such a Private Label Credit Card and Account if, at the time
Dillard's makes such a request to Bank, the aggregate Cardholder
Indebtedness associated with Supported Accounts exceeds one percent
(1%) of the aggregate Cardholder Indebtedness for all Accounts. By
March 1 of each calendar year,
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Bank shall provide to Dillard's a report setting forth (i) the total
net amount of write-offs with respect to all Supported Accounts in
the preceding calendar year, (ii) the total net amount of charges
incurred by Supported Accounts during the same period, (iii) the
total net amount of write-offs with respect to all other Accounts in
the preceding calendar year, and (iv) the total net amount of
charges incurred by all other Accounts during the same period. If
the ratio of (i)/(ii) is greater than the ratio of (iii)/(iv), Bank
shall include in its next Monthly Settlement Sheet and Dillard's
shall pay an amount equal to (i) minus the product of (ii)
multiplied by the ratio of (iii)/(iv).
(b) Notwithstanding the foregoing, Bank or an Affiliate of Bank shall,
upon request by Dillard's, offer a product similar to a Private
Label Credit Card and Account to any Dillard's employee that does
not satisfy Bank's credit standards, provided that the terms of such
product shall require that such employee must prepay the amount that
can be drawn through the use of a card.
3.6 Changes to Terms and Conditions of Accounts.
(a) Changes to terms and conditions of Accounts shall only be made in
the manner specified in Schedule 3.6.
(b) Bank shall notify Dillard's in writing at least thirty (30) days
prior to a notification to Cardholders of any change to features,
terms or conditions required by Applicable Law, unless Bank is
required by Applicable Law to implement such change in less than
thirty (30) days, in which case Bank shall provide Dillard's with
notice as soon as practicable.
3.7 Value Proposition.
Bank shall be responsible for tracking and servicing all rewards under
the Value Proposition associated with the Program, such as printing coupons on
monthly Billing Statements subject to any Marketing Plan. The terms and
conditions of the Value Proposition may be modified by approval of the
Marketing Committee subject to the requirements of Applicable Law.
3.8 Internet Services.
(a) Cardholder Website. Bank shall develop and maintain a
Dillard's-branded website for Cardholders and potential Cardholders,
with the look and feel consistent with the Dillard's website
("Program Website"). The Program Website shall be accessed solely by
means of links from the Dillard's website and shall contain or
otherwise be associated with only such material and links as shall
be agreed by the Marketing Committee from time to time. Dillard's
will provide such links on (i) its home page, (ii) its check-out
pages, and (iii) such other pages as the Marketing Committee shall
determine from time to time. The Program Website shall also include
links back to the Dillard's website, on the Program Website home
page and such other pages as the Marketing Committee shall determine
from time to time. The Program Website shall include the following
17
functions, and such other functions as may be approved by the
Marketing Committee from time to time (the Program Website and such
functionality, collectively, the "Internet Services").
(i) Applications. The Program Website shall permit potential
Cardholders to access a Credit Card Application, and to
complete and submit the Credit Card Application online.
(ii) Cardholder Customer Service. The Program Website shall permit
Cardholders to (A) view the Cardholder's Account information
and Billing Statements; (B) view electronic copies of sales
slips of the Cardholder's Dillard's transactions, including the
Cardholder's signature; and (C) make payments on the
Cardholder's Account via automated clearing house transfer or
other payment mechanism approved by the Marketing Committee.
(b) Performance Standards. Bank shall provide the Internet Services free
from programming errors and defects in workmanship and materials
that materially impact functionality, accuracy or security of the
Internet Services or the ability of Cardholders to use the Internet
Services and in accordance with industry standards. Bank shall
conform the Program Website, in the aggregate, to the performance
capabilities, characteristics, specifications, functions and other
standards generally applicable to Comparable Private Label Credit
Card Program websites and required under this Agreement.
(c) Customer Privacy. Bank shall ensure that the Program Privacy Policy
is clearly and prominently posted on the pages of the Program
Website.
(d) Server Condition. Bank shall use commercially reasonable efforts to
cause the server it will use to host the Program Website to (i) be
in good operating condition and current with evolving technologies,
(ii) contain sufficient operating capability to allow unlimited
access to the Program Website, twenty-four (24) hours a day, seven
days a week, and (iii) operate and allow access without
interruption.
(e) Internet Services Representations and Warranties. Bank represents
and warrants as of the Effective Date and during the Term of this
Agreement that:
(i) the Program Website is solely under Bank's control; and
(ii) Bank has the license, right or privilege to use the hardware,
software and content acquired from third parties for use in the
Internet Services, and that it is the owner of all other
hardware, software and content used in the Internet Services
and that neither the Internet Services as a whole, nor any part
thereof, infringes upon or violates any patent, copyright,
trade secret, trademark, invention, proprietary information,
nondisclosure or other rights of any third party.
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3.9 Sales Taxes.
Dillard's will pay when due any sales taxes relating to the sale of Goods
and/or Services. Bank shall notify Dillard's of any amounts written-off on
Accounts by Bank, identified by Account, and shall sign such forms and provide
any such other information as requested by Dillard's to enable Dillard's to
recover any sales tax charged to any Account that has been written-off by
Bank. Bank will pay Dillard's reasonable out-of-pocket costs incurred in
connection with Dillard's obtaining such sales tax recovery and Dillard's
shall use commercially reasonable efforts to recover such amount. Dillard's
shall pay to Bank an amount equal to recovered sales taxes, and such amount
shall be treated as a recovery on such written-off Accounts. In the event
Dillard's is audited or assessed by a state, and as a result any amount of
sales tax previously recovered is repaid to the state, Bank shall repay such
amount to Dillard's, and such amount shall be treated as a deduction from
recoveries in the next settlement payment for the Program. Bank also shall
fully cooperate in any such audit or assessment.
ARTICLE 4
MARKETING OF THE PROGRAM
4.1 Marketing Commitment.
(a) Bank hereby agrees to credit into a Marketing Fund maintained by the
Bank, by the tenth (10th) day of each calendar month, an amount
equal to the Marketing Commitment Quotient to be determined pursuant
to Schedule 4.1(a), for purposes of funding marketing activities for
the Program, as further provided herein.
(b) The Marketing Commitment shall cover Dillard's costs related to
marketing the Program through such promotions as may be established
by the Marketing Committee from time to time, including the items
specified in Schedule 4.1(b).
(c) Dillard's shall provide to Bank at the beginning of each month an
accounting of its use, if any, of the Marketing Commitment in the
prior month, and Bank shall reimburse Dillard's from the Marketing
Fund for such amounts as provided in Section 7.3. To the extent that
Dillard's expenditures of the Marketing Commitment in any calendar
month exceed the amount in the Marketing Fund, Dillard's shall be
entitled to reimbursement from the Marketing Fund at such time as
additional funds become available. Any amount in the Marketing Fund
for a given month that is not spent in that month shall remain
available for use during the Term of this Agreement.
(d) Bank shall be entitled to submit a monthly statement for the prior
month's marketing costs it incurs pursuant to this Agreement or as
determined by the Marketing Committee, and may seek reimbursement
for such prior month's marketing costs, including costs related to
funding the Value Proposition. To the extent that Bank's
expenditures of the Marketing Commitment in any calendar month
exceed the amount in the Marketing Fund, Bank shall be entitled to
reimbursement from the Marketing Fund at such time as additional
funds become
19
available. In the event that both Dillard's and Bank are seeking
reimbursement from the Marketing Fund during the same month,
Dillard's and Bank shall have equal prioritization and share on a
pro rata basis.
(e) For avoidance of doubt, the Marketing Commitment shall not be used
to fund the following activities, which shall be funded by Bank as
stated below.
(i) Club Plans. Bank shall offer Club Plans as provided in Schedule
2.3(b).
(ii) Direct Mail Solicitations. From time to time pursuant to the
Marketing Plan then in effect, Bank shall perform direct mail
solicitations at its own cost based on the Qualified Dillard's
Customer List provided by Dillard's to Bank. Bank shall
determine which Qualified Dillard's Customers are solicited for
Accounts on the basis of the Risk Management Policies then in
effect. Notwithstanding the foregoing, Bank shall have no
obligation to solicit any Qualified Dillard's Customer who has
provided to Bank or any other Person any notice that such
Qualified Dillard's Customer does not wish to receive
solicitations.
(iii) Other Marketing Initiatives. Any other marketing initiatives
as established by the Marketing Committee pursuant to a
Marketing Plan that allocates such costs to Bank.
4.2 Establishment of a Marketing Committee.
Dillard's and Bank shall establish the Marketing Committee consisting of
6 members, 3 to be nominated by Dillard's and 3 to be nominated by Bank. The
names of the initial appointees are set out in Schedule 4.2 hereto. At least
one of Dillard's representatives and at least one of Bank's representatives on
the Marketing Committee shall be senior representatives of their respective
organizations and shall have overall responsibilities for the Program for
their respective organizations. Each party may substitute committee members
upon five (5) Business Days' notice to the other party.
4.3 Functions of the Marketing Committee.
The Marketing Committee shall:
(a) Develop the initial Marketing Plan and thereafter approve subsequent
Marketing Plans.
(b) Coordinate and review the marketing activities and marketing
performance for the Program through oversight of the implementation
of Marketing Plans.
(c) Approve Credit Card Documentation, Solicitation Materials and the
Credit Card design, subject to changes Bank determines need to be
made to comply with Applicable Law.
20
(d) Direct ongoing new product and Value Proposition development and
monitor performance of marketing initiatives.
(e) Direct ongoing research and in-market testing in order to maximize
relevance, appeal and productivity of Account acquisition and usage
development programs.
(f) Establish and approve additional marketing initiatives and terms for
employees of Dillard's and its Affiliates.
(g) Approve additional Enhancement Products.
(h) Oversee the operational aspects of the Program.
(i) Review risk management, customer service, and reporting aspects of
the Program.
(j) Approve amendments to customer service and reporting standards
established under this Agreement, to the extent that authority to
change such aspects of the Program does not reside with a single
party to this Agreement, subject to changes Bank determines need to
be made to comply with Applicable Law.
(k) Develop customer service monitoring programs and standards.
(l) Carry out such other tasks as are assigned to it by this Agreement
or jointly by the parties.
4.4 Marketing Committee Meetings.
The Marketing Committee will meet from time to time as its members
consider necessary, but in no event less than once per calendar quarter. The
first meeting must be held within fifteen (15) days of the Effective Date for
the purpose of developing an initial Marketing Plan. It will then determine
when it will meet after that date to conduct other business required by this
Agreement. Meetings may be held in person or wholly or partly by way of
telephone or video conference.
4.5 Proceedings in Marketing Committee Meetings.
All decisions of the Marketing Committee must be unanimous decisions. A
quorum of the Marketing Committee will be made up of at least one
representative of Dillard's and one representative of Bank.
4.6 Procedural Matters.
The Marketing Committee must determine the frequency, place and agenda
for its meetings, the manner in which meetings will be called and all
procedural matters. With the exception of the matters specified in Section
4.5, any procedural or other matter specified in this Article concerning the
Marketing Committee is subject to amendment in writing by the Marketing
Committee.
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4.7 Marketing Plans.
(a) Within 30 days after the Effective Date, the Marketing Committee
shall approve a Marketing Plan for the balance of calendar year 2004
and for calendar year 2005. On or before sixty (60) days prior to
the end of calendar year 2005 and the end of each calendar year
thereafter, the Marketing Committee shall approve a Marketing Plan
for the next calendar year.
(b) At least once per calendar year, the Marketing Committee shall
consider features, terms, conditions and other aspects of other
private label credit card programs in order to identify marketplace
developments for possible inclusion in the Program to ensure that
the Program remains competitive with other private label credit card
programs. If the Marketing Committee determines that a change to the
Program may be required, Bank shall develop a plan with respect to
implementation of such change, including the impact the proposed
change would have, if any, on the revenue share, and shall present
such plan to the Marketing Committee for its review and decision.
The Marketing Committee shall decide whether to test or launch any
such Program changes for Cardholders or potential Cardholders.
(c) Each Marketing Plan shall outline all programs, to the extent
established and mutually agreed upon by Dillard's and Bank, and
shall include at least the following information for each program:
(i) description of offer(s);
(ii) description of target audience;
(iii) planned budget, specifying Bank's share and Dillard's share,
if any; and
(iv) target implementation date (e.g., mailing dates, calling dates,
delivery dates).
(d) Each Marketing Plan shall address development of Solicitation
Materials and Credit Card Documentation; new account acquisition
strategies, including direct mailing and "take-one" acquisitions;
preparation of unique collateral materials for Dillard's employees;
activation, retention and usage; statement design and messaging;
advertising of the Program; and such other marketing matters as the
parties shall agree to.
(e) Each Marketing Plan shall specify which party is responsible for
each Marketing Plan item and shall contain a budget specifying the
parties' financial responsibilities during the applicable calendar
year.
(f) Any Marketing Plan may be modified or supplemented by the parties
from time to time upon mutual agreement, provided such modifications
or supplements, as the case may be, are approved by the Marketing
Committee.
22
(g) All marketing initiatives developed under this Agreement shall
contain unique marketing source codes to facilitate post-marketing
research and analysis.
4.8 Communications with Cardholders.
(a) Dillard's Inserts. Dillard's shall have the exclusive right to
communicate with Cardholders, except for any message required by
Applicable Law or communications approved by the Marketing
Committee, through use of inserts, fillers and bangtails
(collectively, "Inserts"), including Inserts selectively targeted
for particular classes of Cardholders, in any and all Billing
Statements, subject to such production requirements as contained in
the Operating Procedures and Applicable Law. Dillard's shall be
responsible for the content of, and the cost of preparing and
printing, any Inserts not required by Applicable Law or approved by
the Marketing Committee. All Inserts shall conform to Bank's
customary production standards and requirements, including size and
weight requirements. If the insertion of Inserts in particular
Billing Statements would increase the postage costs for such Billing
Statement, Dillard's agrees to either pay for the incremental
postage cost or prioritize the use of Inserts to avoid postage cost
over-runs. Notwithstanding the foregoing, (i) any message required
by Applicable Law, and (ii) collection messages letters for
Cardholders who are 60 days or more delinquent shall take precedence
over any Dillard's Inserts.
(b) Billing Statement Messages. Dillard's shall have the exclusive right
to use Billing Statement messages and Billing Statement envelope
messages in each Billing Cycle to communicate with Cardholders,
except for any message required by Applicable Law or communications
approved by the Marketing Committee, subject to such production
requirements as contained in the Operating Procedures and Applicable
Law. Dillard's shall be responsible for the content of any such
messages not required by Applicable Law or approved by the Marketing
Committee. Notwithstanding the foregoing, (i) any message required
by Applicable Law, and (ii) collection and/or customer service
messages letters, shall take precedence over any Dillard's messages.
(c) Bank Promotions. Bank may promote the Program to Qualified Dillard's
Customers using such Dillard's customer mailings as the Marketing
Committee agrees to in advance, subject to such production
requirements as contained in the Operating Procedures and Applicable
Law. Bank shall be responsible for the content of, and the cost of
preparing and printing, any such promotions. If the insertion of
such promotions in Dillard's customer mailings would increase the
postage costs for such mailings, Bank agrees to either pay for the
incremental postage cost or prioritize the use of promotions to
avoid postage cost over-runs.
4.9 Customer Information.
(a) All sharing, use and disclosure of information regarding
Cardholders, Qualified Dillard's Customers and Dillard's Shoppers
shall be subject to the provisions of Sections 4.9, 4.10, 4.11 and
4.12. The parties acknowledge that the same or
23
similar information may be contained in Cardholder Data, the
Qualified Dillard's Customer List and Dillard's Shopper Data, and
that each such pool of data will therefore be considered separate
information subject to the specific provisions applicable to that
data hereunder. By way of example and not limitation: (i) if a
Qualified Dillard's Customer receives a Private Label Credit Card,
the Bank may use and disclose the Cardholder Data for all purposes
permitted with respect to Cardholder Data hereunder, notwithstanding
that the Cardholder originated as a Qualified Dillard's Customer;
and (ii) if a Cardholder makes a purchase of Goods and/or Services
with a Private Label Credit Card, Dillard's may use and disclose the
Dillard's Shopper Data relating to that purchase for all purposes
permitted with respect to Dillard's Shopper Data hereunder,
notwithstanding that such information may also constitute Cardholder
Data.
(b) Dillard's and Bank will each establish and maintain appropriate
administrative, technical and physical safeguards to protect the
security, confidentiality and integrity of the Cardholder Data, the
Qualified Dillard's Customer List and Dillard's Shopper Data. These
safeguards will be designed to protect the security, confidentiality
and integrity of the Cardholder Data, the Qualified Dillard's
Customer List and Dillard's Shopper Data, ensure against any
anticipated threats or hazards to its security and integrity, and
protect against unauthorized access to or use of such information or
associated records which could result in substantial harm or
inconvenience to any Cardholder or applicant. Dillard's and Bank
will each ensure that any third party to whom it transfers or
discloses Cardholder Data, the Qualified Dillard's Customer List or
Dillard's Shopper Data signs a written contract with the transferor
in which such third party agrees to substantively the same privacy
and security provisions as those in this Agreement. Information
transferred by one party on behalf or at the direction of the other
will be considered information transferred by the party requesting
or directing the transfer. Each party shall use the same degree of
care in protecting Cardholder Data, the Qualified Dillard's Customer
List and Dillard's Shopper Data against unauthorized disclosure as
it accords to its own confidential customer information, but in no
event less than a reasonable standard of care.
4.10 Qualified Dillard's Customer List.
(a) Subject to compliance with Applicable Law, Dillard's privacy policy,
the Marketing Plan and such criteria (including format) as may be
mutually agreed from time to time, Dillard's shall make available to
Bank, free of any charge, the Qualified Dillard's Customer List in
electronic form. As between Dillard's and Bank, the Qualified
Dillard's Customer List will be owned exclusively by Dillard's. Bank
acknowledges and agrees that it has no proprietary interest in the
Qualified Dillard's Customer List.
(b) Bank shall not use, or permit to be used, directly or indirectly,
the Qualified Dillard's Customer List, except as provided in this
Section 4.10. Bank may use the Qualified Dillard's Customer List in
compliance with Applicable Law solely for purposes of soliciting
customers listed in the Qualified Dillard's Customer
24
List for Private Label Credit Cards, as required by Applicable Law
or as otherwise agreed by the Marketing Committee in writing.
(c) Bank shall not disclose, or permit to be disclosed, the Qualified
Dillard's Customer List, except as provided in this Section 4.10.
Bank may disclose the Qualified Dillard's Customer List in
compliance with Applicable Law solely:
(i) to its subcontractors in connection with a permitted use of
such Qualified Dillard's Customer List under this Section 4.10,
provided that each such subcontractor agrees to be bound by
this Section 4.10, or a comparable contractual commitment with
the same effect;
(ii) to its Affiliates and its Affiliates' employees, agents,
attorneys and accountants with a need to know such Qualified
Dillard's Customer List in connection with a permitted use of
such Qualified Dillard's Customer List under this Section;
provided that (A) any such Person is bound by terms
substantially similar to this Section as a condition of
employment, of access to Qualified Dillard's Customer List or
by professional obligations imposing comparable terms; and (B)
Bank shall be responsible for the compliance of each such
Person with the terms of this Section; or
(iii) to any Governmental Authority with authority over Bank (A) in
connection with an examination of Bank; or (B) pursuant to a
specific requirement to provide such Qualified Dillard's
Customer List by such Governmental Authority or pursuant to
compulsory legal process; provided that Bank seeks the full
protection of confidential treatment for any disclosed
Qualified Dillard's Customer List to the extent available under
Applicable Law governing such disclosure, and with respect to
clause (B), to the extent permitted by Applicable Law, Bank (1)
provides at least ten (10) Business Days' prior notice of such
proposed disclosure to Dillard's if reasonably possible under
the circumstances, and (2) seeks to redact Qualified Dillard's
Customer List to the fullest extent possible under Applicable
Law governing such disclosure.
(d) Upon the termination of this Agreement, Bank's rights to use and
disclose the Qualified Dillard's Customer List shall terminate.
Promptly following such termination, Bank shall return or destroy
all Qualified Dillard's Customer Lists and shall certify such return
or destruction to Dillard's upon request.
4.11 Cardholder Data.
(a) As between Bank and Dillard's, Cardholder Data shall be the property
of and exclusively owned by Bank. Dillard's acknowledges and agrees
that it has no proprietary interest in the Cardholder Data.
(b) Bank's privacy policy applicable to the Cardholder Data is the
Program Privacy Policy. Any modifications to the Program Privacy
Policy shall be approved by
25
the Marketing Committee, provided that the Program Privacy Policy
shall comply with Applicable Law at all times.
(c) Bank shall not use, or permit to be used, Cardholder Data, except as
provided in this Section 4.11. Bank may use the Cardholder Data in
compliance with Applicable Law and the Program Privacy Policy solely
(i) for purposes of soliciting customers listed in the Cardholder
Data for Private Label Credit Cards, Enhancement Products listed in
Schedule 4.11, and any other products and services approved by the
Marketing Committee, (ii) as otherwise necessary to carry out its
obligations or exercise its rights hereunder, or (iii) as required
by Applicable Law. Bank has no rights to use the Cardholder Data for
marketing purposes except as expressly provided herein.
(d) Bank shall not disclose, or permit to be disclosed, the Cardholder
Data, except as provided in this Section 4.11. Bank shall not,
directly or indirectly, sell or otherwise transfer any right in or
to the Cardholder Data. Bank may disclose the Cardholder Data in
compliance with Applicable Law and the Program Privacy Policy
solely:
(i) to its subcontractors in connection with a permitted use of
such Cardholder Data under this Section 4.11, provided that
each such subcontractor agrees to be bound by this Section
4.11, or a comparable contractual commitment with the same
effect;
(ii) to its Affiliates and its Affiliates' employees, agents,
attorneys and accountants with a need to know such Cardholder
Data in connection with a permitted use of such Cardholder Data
under this Section; provided that (A) any such Person is bound
by terms substantially similar to this Section as a condition
of employment or of access to Cardholder Data or by
professional obligations imposing comparable terms; and (B)
Bank shall be responsible for the compliance of each such
Person with the terms of this Section; or
(iii) to any Governmental Authority with authority over Bank (A) in
connection with an examination of Bank; or (B) pursuant to a
specific requirement to provide such Cardholder Data by such
Governmental Authority or pursuant to compulsory legal process;
provided that Bank seeks the full protection of confidential
treatment for any disclosed Cardholder Data to the extent
available under Applicable Law governing such disclosure, and
with respect to clause (B), to the extent permitted by
Applicable Law, Bank (1) provides at least 10 Business Days'
prior notice of such proposed disclosure to Dillard's if
reasonably possible under the circumstances and (2) seeks to
redact Cardholder Data to the fullest extent possible under
Applicable Law governing such disclosure.
(e) Subject to Applicable Law and the Program Privacy Policy, Bank shall
report to Dillard's on a weekly basis, in a format agreed to by the
parties in advance,
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(i) for any customer who has applied for a Credit Card, had the
opportunity to make an opt out choice, was not approved for a
Credit Card and did not opt out, regardless of the marketing
channel of such application, the customer's name, address,
email address, telephone number, social security number and all
other commercially reasonable information supplied on the
application or prescreened response submitted by the customer.
(ii) for any Cardholder, (1) the Cardholder's name, address, email
address, telephone number, social security number and Account
number; (2) any reported change to any of the foregoing
information; (3) Cardholder transaction and experience data;
and (4) any such other Cardholder Data as Dillard's may
reasonably request.
(iii) the Cardholder's name and account number for any Account that
is 60 days or more delinquent.
(iv) the Cardholder's name and account number for any Account that
has been closed.
(f) Bank shall cooperate with Dillard's to provide Dillard's the maximum
ability permissible under Applicable Law to use and disclose
Cardholder Data, including, as necessary or appropriate, through use
of consents, opt-in provisions or opt-out provisions, to the extent
requested by Dillard's.
(g) Dillard's shall not use, or permit to be used, Cardholder Data,
except as provided in this Section 4.11. Dillard's may use the
Cardholder Data in compliance with Applicable Law and the Program
Privacy Policy solely (i) for purposes of promoting the Program or
promoting products and services available for purchase on an Account
at or through any Dillard's Channel, (ii) as otherwise necessary to
carry out its obligations under this Agreement, and (iii) as
required by Applicable Law.
(h) Dillard's shall not disclose, or permit to be disclosed, the
Cardholder Data, except as provided in this Section 4.11. Dillard's
may disclose the Cardholder Data in compliance with Applicable Law
and the Program Privacy Policy solely:
(i) to its subcontractors in connection with a permitted use of
such Cardholder Data under this Section 4.11, provided that
each such subcontractor agrees to be bound by this Section
4.11, or a comparable contractual commitment with the same
effect;
(ii) to its Affiliates and its Affiliates' employees, agents,
attorneys and accountants with a need to know such Cardholder
Data in connection with a permitted use of such Cardholder Data
under this Section; provided that (A) any such Person is bound
by terms substantially similar to this Section as a condition
of employment or of access to Cardholder Data or by
professional obligations imposing comparable terms; and (B)
Dillard's
27
shall be responsible for the compliance of each such Person
with the terms of this Section; or
(iii) to any Governmental Authority with authority over Dillard's
(A) in connection with an examination of Dillard's; or (B)
pursuant to a specific requirement to provide for such
Cardholder Data by such Governmental Authority or pursuant to
compulsory legal process; provided that Dillard's seeks the
full protection of confidential treatment for any disclosed
Cardholder Data to the extent available under Applicable Law
governing such disclosure, and with respect to clause (B), to
the extent permitted by Applicable Law, Dillard's (1) provides
at least 10 Business Days' prior notice of such proposed
disclosure to Bank if reasonably possible under the
circumstances and (2) seeks to redact Cardholder Data to the
fullest extent possible under Applicable Law governing such
disclosure.
(i) With respect to use and disclosure of Cardholder Data following the
termination of this Agreement:
(i) The rights and obligations of the parties under this Section
4.11 shall continue through any Termination Period.
(ii) If Dillard's exercises its rights under Section 14.2, Bank
shall transfer its right, title and interest in the Cardholder
Data to Dillard's or its Nominated Purchaser as part of such
transaction, and Bank's right to use and disclose the
Cardholder Data shall terminate upon the termination of the
Termination Period.
(iii) If Dillard's provides notice that it will not exercise its
rights under Section 14.2, upon termination of the Termination
Period, Dillard's right to use and disclose the Cardholder Data
shall terminate upon the termination of the Termination Period.
4.12 Dillard's Shopper Data.
(a) Bank acknowledges that Dillard's gathers information about
purchasers of Goods and/or Services and that Dillard's has rights to
use and disclose such information independent of whether such
information also constitutes Cardholder Data. Bank shall cooperate
in Dillard's maintenance of such Dillard's Shopper Data, including
by incorporating in the Credit Card Application and Cardholder
Agreement mutually agreed provisions pursuant to which applicants
and Cardholders will agree that they are providing their identifying
information (including name, address, telephone number, email
address and social security number) and all updates thereto to both
Bank and Dillard's. To the extent Bank is the direct recipient of
such data, Bank shall provide such data to Dillard's in such format
and at such times as shall be agreed by the Marketing Committee. As
between Dillard's and Bank, all Dillard's Shopper Data will be owned
exclusively
28
by Dillard's. Bank acknowledges and agrees that it has no
proprietary interest in the Dillard's Shopper Data.
(b) Bank shall not use, or permit to be used, directly or indirectly,
the Dillard's Shopper Data except to transfer such data to Dillard's
to the extent it is received by Bank.
(c) Bank shall not disclose, or permit to be disclosed, the Dillard's
Shopper Data, except as provided in this Section 4.12. Bank may
disclose the Dillard's Shopper Data in compliance with Applicable
Law solely:
(i) to its subcontractors in connection with a permitted use of
such Dillard's Shopper Data under this Section 4.12, provided
that each such subcontractor agrees to be bound by this Section
4.12, or a comparable contractual commitment with the same
effect;
(ii) to its Affiliates and its Affiliates' employees, agents,
attorneys and accountants with a need to know such Dillard's
Shopper Data in connection with a permitted use of such
Dillard's Shopper Data under this Section; provided that (A)
any such Person is bound by terms substantially similar to this
Section as a condition of employment, of access to Dillard's
Shopper Data or by professional obligations imposing comparable
terms; and (B) Bank shall be responsible for the compliance of
each such Person with the terms of this Section; or
(iii) to any Governmental Authority with authority over Bank (A) in
connection with an examination of Bank; or (B) pursuant to a
specific requirement to provide such Dillard's Shopper Data by
such Governmental Authority or pursuant to compulsory legal
process; provided that Bank seeks the full protection of
confidential treatment for any disclosed Dillard's Shopper Data
to the extent available under Applicable Law governing such
disclosure, and with respect to clause (B), to the extent
permitted by Applicable Law, Bank (1) provides at least ten
(10) Business Days' prior notice of such proposed disclosure to
Dillard's if reasonably possible under the circumstances, and
(2) seeks to redact Dillard's Shopper Data to the fullest
extent possible under Applicable Law governing such disclosure.
(d) Upon the termination of this Agreement, Bank's rights to use and
disclose the Dillard's Shopper Data shall terminate. Promptly
following such termination, Bank shall return or destroy all
Dillard's Shopper Data and shall certify such return or destruction
to Dillard's upon request.
4.13 Liability for Materials Developed and Used in Connection with the
Program.
Bank shall be responsible for ensuring that all Solicitation Materials,
Account Documentation and Credit Card designs comply with Applicable Law and
the Operating Procedures, provided that Bank has produced or approved such
materials, documents or designs.
29
Notwithstanding the foregoing, each party shall be solely responsible for
ensuring that its respective Inserts and statement messages comply with
Applicable Law.
4.14 Access to Bank Mailing Lists.
Upon Dillard's reasonable request and subject to Applicable Law and any
contractual constraints, Bank shall (a) conduct marketing research, mailing
and other related marketing efforts on behalf of Dillard's, which may include
marketing materials related to Dillard's, the Goods and/or Services, or the
Private Label Credit Cards, at Dillard's option, based upon the customer data
bases and customer data base analysis tools maintained by Bank and its
Affiliates, including nonpersonally identifiable transaction and experience
data across Bank's credit card portfolios, and (b) provide use of its data
bases, analytic tools and support services at no charge to Dillard's.
Dillard's shall be responsible for all out-of-pocket expenses, including the
costs of all marketing materials and mailing services at cost.
4.15 Bank Internal Marketing Commitment.
Each Program Year during the Term, Bank shall spend the amount specified
in Schedule 4.15 on the resources specified therein.
ARTICLE 5
OPERATING STANDARDS
5.1 Reports.
Within thirty (30) days after the end of each calendar month to begin
after the Effective Date, Bank shall provide to the Marketing Committee the
reports specified in Schedule 5.1A, and to Dillard's the reports specified in
Schedule 5.1B, and such other reports as are mutually agreed to by the parties
from time to time.
5.2 Servicing.
Bank shall service all Accounts under the Program in accordance with the
terms and conditions of this Agreement, including the service level standards
set forth in Schedule 5.2, as they may be amended from time to time by the
Marketing Committee. Without limiting the generality of the foregoing, Bank
shall be solely responsible for Credit Card Application processing, customer
service, statementing, payment processing, transaction authorization and
processing, Value Proposition administration, collections and risk management.
To the extent not otherwise provided in this Agreement or the Operating
Procedures, including the Service Level Standards at Schedule 5.2, Bank shall
service the Accounts under the Program in the manner in which Bank, in the
aggregate, services its other Comparable Private Label Credit Card Programs.
30
5.3 Customer Service.
(a) Bank shall be solely responsible for customer service for the
Program in accordance with this Agreement, including the service
level standards set forth in Schedule 5.2 as attached hereto,
including, but not limited to, with respect to processing Cardholder
telephone and mail inquiries and disputes.
(b) As of the Effective Date, Bank shall establish a separate toll-free
customer service telephone number for the Program at Bank's expense,
which toll-free number shall be provided by and remain the property
of Dillard's. Any publication of the toll-free number shall be
approved by the Marketing Committee.
(c) Customer service shall be provided by a dedicated group with
overflow calls going to the Bank's regular customer service unit. If
the overflow calls for any two (2) consecutive months exceed ten
percent (10%) of total calls for the month, Bank shall increase the
number of the dedicated group. The foregoing notwithstanding, to the
extent such group is not fully utilized for activities related to
the Program, Bank may utilize the dedicated group in connection with
other activities for its customers that are not retail department
stores for up to two percent (2%) of average monthly customer
service calls handled by the dedicated group.
(d) All customer service policies, scripts and form correspondence shall
be approved by the Marketing Committee, provided that Bank may
include items or make changes required by Applicable Law.
(e) As of the Effective Date, Bank shall provide live telephonic
customer service, in English and Spanish, 365 days per year 24 hours
per day.
(f) Customer service shall be Dillard's branded to the extent legally
permissible. Notwithstanding the foregoing, Bank shall have the
right in its sole discretion to take whatever steps and make such
disclosures it believes are necessary to ensure that at all times
the Bank is considered the creditor on the Accounts.
(g) If Bank receives a Cardholder complaint regarding the quality or
delivery of Goods and/or Services, Bank shall refer such complaint
to Dillard's in accordance with the Operating Procedures.
5.4 Customer Service Standards.
(a) Beginning with the first full calendar month following the Effective
Date and each calendar month thereafter, Bank's performance of its
obligations for customer service shall be monitored by the Marketing
Committee in accordance with the service level standards set forth
in Schedule 5.2.
(b) The Marketing Committee shall implement a joint customer service
monitoring program, which shall include the jointly developed
scoring procedure and model attached hereto as Schedule 5.3.
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(c) Subject to the following sentence, Dillard's and Bank (or their
respective subcontractors, as applicable), will jointly observe and
score inbound/outbound telephone customer contacts that Bank has
with Cardholders. A Bank representative may, but will not be
required to, accompany the Dillard's representative during the
observations. Dillard's will, however, conduct and score
observations alone if a representative of Bank does not join in the
observation.
(d) Notwithstanding 5.4(c), Bank will make arrangements to allow
Dillard's to monitor customer service telephone calls remotely at
any time and without prior notice.
(e) Customer service observations may be conducted by Dillard's on any
day and at any time during the day or night, provided that such
observations shall not unreasonably interfere with Bank's normal
business operations.
5.5 Non-Performance of Service Level Standards.
(a) Bank shall report to Dillard's monthly, in a mutually agreed format,
Bank's performance under each of the SLAs set forth at Schedule 5.2.
If Bank fails to meet any SLA, Bank shall (i) immediately report to
Dillard's the reasons for the SLA failure(s); and (ii) promptly take
any action necessary to correct and prevent recurrence of such
failure(s).
(b) With respect to any SLA starred on Schedule 5.2 hereof ("Starred
SLA"), the provisions set forth in Schedule 5.5(b) shall apply.
(c) The provisions of this Section 5.5 shall apply beginning ninety (90)
days after the Effective Date with respect to operations assumed by
Bank as of the Effective Date, and ninety (90) days after the
Conversion Date with respect to any other operations.
5.6 Access.
In addition to access as provided in Section 5.4(c), each party will
permit the other party to visit its facilities related to the Program during
normal business hours with reasonable advance notice. Each party will also
permit the other party to review and obtain copies of the books and records
relating to the Program. Dillard's authorizes Bank to monitor the
administration and promotion of the Program through mystery shopping and by
other reasonable means and the results of such monitoring shall be reviewed
with the Marketing Committee.
5.7 Disaster Recovery.
Bank will maintain in effect during the Term a disaster recovery and
business continuity plan that complies with Applicable Law and that is
designed to ensure that no outage of services hereunder will continue for more
than thirty (30) minutes. Bank will provide Dillard's access to review such
plan upon request. Bank will test such plan annually and will promptly
implement
32
such plan upon the occurrence of a disaster or business interruption, giving
the Program high priority in its recovery efforts.
ARTICLE 6
MERCHANT SERVICES
6.1 Transmittal and Authorization of Charge Transaction Data.
(a) Dillard's will accept the Private Label Credit Cards for
Transactions. Dillard's will transmit Charge Transaction Data for
authorization of Transactions to Bank as provided in the Operating
Procedures. If Dillard's is unable to communicate with Bank for any
reason, Dillard's may complete Transactions without receipt of
further authorization as provided in the Operating Procedures.
(b) Bank shall authorize or decline Transactions on a real time basis as
provided in the Operating Procedures, including transactions
involving split-tender (i.e., a portion of the total transaction
amount is billed to a Private Label Credit Card and the remainder is
paid through one or more other forms of payment) or down-payments on
Goods and/or Services for later delivery.
6.2 POS Terminals.
Dillard's shall maintain POS terminals capable of processing (a) bankcard
transactions and (b) Private Label Credit Card transactions as handled as of
the Effective Date. To the extent that Bank requires other equipment or
hardware changes to such terminals for transmission of Charge Transaction Data
under this Agreement, Bank shall provide, or pay for the purchase,
installation and maintenance of, such other equipment or required hardware
changes to Dillard's POS credit card terminals.
6.3 In-Store Payments.
Dillard's may accept In-Store Payments from Cardholders on their Accounts
in accordance with the Operating Procedures. Dillard's shall, as necessary,
provide proper endorsements on such items. Bank grants to Dillard's a limited
power of attorney (coupled with an interest) to sign and endorse Bank's name
upon any form of payment that may have been issued in Bank's name in respect
of any Account. Dillard's and Bank shall jointly develop procedures in the
Operating Procedures with respect to the manner in which such In-Store
Payments shall be processed. Dillard's shall notify Bank upon receipt of
In-Store Payments and Bank shall include the Charge Transaction Data related
to such In-Store Payments in the net settlement in respect of the day
immediately following such receipt on the same basis as other Charge
Transaction Data. Dillard's shall issue receipts for such payments in
compliance with Applicable Law.
33
6.4 Settlement Procedures.
(a) Dillard's will transmit Charge Transaction Data (including Charge
Transaction Data arising in connection with sales by Licensees) to
Bank in accordance with the Operating Procedures. If Charge
Transaction Data is received by Bank's processing center before 6:00
am (EST) on any Business Day, Bank will process the Charge
Transaction Data for payment on the same Business Day, and will
issue instructions for wire transfer of funds to Dillard's
designated settlement account with respect thereto by noon of the
same Business Day. If the Charge Transaction Data is received after
6:00 am (EST) on any Business Day, or at any time on a day other
than a Business Day, Bank will process the Charge Transaction Data
for payment on the following Business Day.
(b) Bank will remit to Dillard's, for itself and any Licensees, an
amount equal to: the sum of the total of charges identified in such
Charge Transaction Data, in each case adjusted for the
reconciliation of recent Charge Transaction Data, less the sum of
(i) the total amount of any credits included in such Charge
Transaction Data, (ii) the total amount of In-Store Payments (if
any), and (iii) any amounts charged back to Dillard's pursuant to
Section 6.5. Dillard's shall be responsible for allocating such
remittances among all Dillard's Channels as appropriate and Bank
shall have no responsibility or liability in connection therewith
(it being agreed that Bank has no obligation to accept Charge
Transaction Data directly from, or make remittances to, any person
other than Dillard's).
6.5 Bank Right to Charge Back.
Bank shall have the right to charge back to Dillard's the amount of any
Cardholder Indebtedness, including Cardholder Indebtedness incurred prior to
the Effective Date with respect to Purchased Accounts, relating to Charge
Transaction Data only to the extent provided in Schedule 6.5.
6.6 Exercise of Chargeback.
If Bank exercises its right of chargeback, Bank may set off all amounts
charged back against any sums due Dillard's under this Agreement, or Bank may
demand payment from Dillard's for the full amount of such chargeback. In the
event of a chargeback pursuant to this Article 6, upon payment in full of the
related amount by Dillard's, Bank shall immediately assign to Dillard's,
without any representation, warranty or recourse, (i) all right to payments of
amounts charged back in connection with such Cardholder charge, and (ii) any
security interest granted by Dillard's under Section 16.1. Bank shall fully
cooperate in any effort by Dillard's to collect the chargeback amount,
including by executing and delivering any document necessary or useful to such
collection efforts.
6.7 Covenants of Dillard's.
Dillard's makes the following covenants to Bank, each and all of which
shall survive the execution and delivery of this Agreement.
34
(a) Forms and Materials. Dillard's shall use only forms and materials,
including in electronic format, provided or approved by Bank
(including through the Marketing Committee) when taking any action
with regard to the Program.
(b) Special Agreements or Conditions. Dillard's will not charge any
credit card surcharge, application, processing or other Program
related fee to Cardholders.
ARTICLE 7
COSTS AND EXPENSES
7.1 Bank Responsibility for Program Operation.
Except as otherwise specified in any annual Marketing Plan or any other
provision of this Agreement, Bank shall be responsible for the costs of
operating the Program including, without limitation, the costs of marketing,
systems operations and customer services.
7.2 Monthly Statement to Dillard's.
Within five (5) Business Days after the end of each calendar month, Bank
shall deliver to Dillard's, in a mutually agreed format, a statement setting
forth the information specified in Schedule 7.2. Each such statement,
including supporting documentation, shall be known as a "Monthly Settlement
Sheet."
7.3 Compensation.
The Bank shall pay Dillard's on a monthly basis the compensation set
forth in Schedule 7.3.
7.4 Resolution.
Any disputes regarding the amounts owed under this Agreement shall be
resolved in accordance with Section 10.2.
ARTICLE 8
LICENSING OF TRADEMARKS; INTELLECTUAL PROPERTY
8.1 The Dillard's Licensed Marks.
(a) Grant of License to Use the Dillard's Licensed Marks. Dillard's
hereby grants to Bank a non-exclusive, royalty-free,
non-transferable right and license to use the Dillard's Licensed
Marks in the United States in connection with the creation,
establishment, marketing and administration of, and the provision of
services related to, the Program, all pursuant to, and in accordance
with, this Agreement
35
and any applicable Trademark Style Guide. Those services shall
include, without limitation, the solicitation of Cardholders and
potential Cardholders, acceptance of Credit Card Applications, the
issuance and reissuance of Credit Cards, the provision of accounting
services to Cardholders, the provision of Billing Statements and
other correspondence relating to Accounts to Cardholders, the
extension of credit to Cardholders, and the advertisement or
promotion of the Program. All use of the Dillard's Licensed Marks
shall be approved by the Marketing Committee. The license hereby
granted is solely for the use of Bank and may be used as necessary
to permit the exercise by Bank of any of its rights under this
Agreement to (i) delegate its obligations to Affiliate(s) and/or
third party subcontractors, and (ii) sell the Accounts and
Cardholder Indebtedness to third parties for liquidation. The
licenses granted hereby may not be sublicensed in connection with
the sale of Goods and/or Services without the prior written approval
of Dillard's. Any subcontractor or third party shall agree to comply
with all of the standards specified herein and the limitations on
the use of the Dillard's Licensed Marks contained in this Section.
(b) New Marks. If Dillard's adopts a trademark, trade name, service
mark, logo or other proprietary mark which is used by Dillard's in
connection with the Program but which is not listed on Schedule A
hereto (a "New Mark"), Bank may request that Dillard's add such New
Mark to Schedule A hereto and license its use hereunder, Dillard's
shall not unreasonably fail to do so, and such New Mark shall be
added to Schedule A by amendment of this Agreement.
(c) Termination of License. Except to the extent otherwise provided in
Section 14.4, the license granted in this section shall terminate
six (6) months from the Program Purchase Date or six (6) months
after termination of this Agreement under Section 14.4 as
applicable. Upon such termination of this license, as provided in
this subsection (c) and Section 14.4, all rights in the Dillard's
Licensed Marks shall revert to Dillard's, the goodwill connected
therewith shall remain the property of Dillard's, and Bank shall:
(i) discontinue immediately all use of the Dillard's Licensed Marks,
or any of them, and any colorable imitation thereof; and (ii) at
Bank's option, delete the Dillard's Licensed Marks from or destroy
all unused Credit Cards, Credit Card Applications, Account
Documentation, periodic statements, materials, displays, advertising
and sales literature and any other items bearing any of the
Dillard's Licensed Marks.
(d) Ownership of the Dillard's Licensed Marks. Bank acknowledges that
(i) the Dillard's Licensed Marks, all rights therein, and the
goodwill associated therewith, are, and shall remain, the exclusive
property of Dillard's, (ii) it shall take no action which will
adversely affect Dillard's exclusive ownership of the Dillard's
Licensed Marks, or the goodwill associated with the Dillard's
Licensed Marks (it being understood that the collection of Accounts,
adverse action letters, and changes in terms of Accounts do not
adversely affect goodwill, if done in accordance with the terms of
this Agreement), and (iii) any and all goodwill arising from use of
the Dillard's Licensed Marks by Bank shall inure to the benefit of
Dillard's. Nothing herein shall give Bank any proprietary interest
in or
36
to the Dillard's Licensed Marks, except the right to use the
Dillard's Licensed Marks in accordance with this Agreement, and Bank
shall not contest Dillard's title in and to the Dillard's Licensed
Marks.
(e) Infringement by Third Parties. Bank shall use reasonable efforts to
notify Dillard's, in writing, in the event that it has Knowledge of
any infringing use of any of the Dillard's Licensed Marks by any
third party. If any of the Dillard's Licensed Marks is infringed,
Dillard's alone has the right, in its sole discretion, to take
whatever action it deems necessary to prevent such infringing use;
provided, however, that if Dillard's fails to take reasonable steps
to prevent infringement of the Dillard's Licensed Marks by any
department store retailer and such infringement has an adverse
effect upon the Program or the rights of Bank hereunder, Bank may
request that Dillard's take action necessary to alleviate such
adverse impact. Bank shall reasonably cooperate with and assist
Dillard's, at Dillard's expense, in the prosecution of those actions
that Dillard's determines, in its sole discretion, are necessary or
desirable to prevent the infringing use of any of the Dillard's
Licensed Marks.
8.2 The Bank Licensed Marks.
(a) Grant of License to Use the Bank Licensed Marks. Bank hereby grants
to Dillard's a non-exclusive, royalty-free, non-transferable right
and license to use the Bank Licensed Marks in the United States in
connection with the creation, establishment, marketing and
administration of, and the provision of services related to, the
Program, all pursuant to, and in accordance with, this Agreement and
any applicable Trademark Style Guide. Those services shall include,
without limitation, the solicitation of Cardholders and the
advertisement or promotion of the Program. All use of the Bank
Licensed Marks shall be approved by the Marketing Committee. The
license hereby granted is solely for the use of Dillard's and may be
used as necessary to permit the exercise by Dillard's of any of its
rights under this Agreement to delegate obligations to Affiliate(s)
and/or third party contractors. The license granted hereby may not
be sublicensed in connection with the sale of Goods and/or Services
without the prior written approval of Bank. Any subcontractor or
third party shall agree to comply with all of the standards
specified herein and the limitations on the use of the Bank Licensed
Marks contained in this Section.
(b) New Marks. If Bank adopts a trademark, trade name, service mark logo
or other proprietary mark which is used by Bank in connection with
its extension of bank card credit to customers but which is not
listed on Schedule B hereto (a "New Mark"), Dillard's may request
that Bank add such New Mark to Schedule B hereto and license its use
hereunder, Bank shall not unreasonably fail to do so, and such New
Mark shall be added to Schedule B by amendment of this Agreement.
The foregoing notwithstanding, it is understood and agreed that Bank
shall not be required to add a New Mark to Schedule B if such New
Mark was developed by Bank primarily for another charge, credit or
debit program.
37
(c) Termination of License. The license granted in this Section shall
terminate six (6) months after the Program Purchase Date or six (6)
months after termination after this Agreement under Section 14.4 as
applicable. Upon such termination of this license, as provided in
this subsection (c), all rights in the Bank Licensed Marks shall
revert to Bank, the goodwill connected therewith shall remain the
property of Bank, and Dillard's shall: (i) discontinue immediately
all use of the Bank Licensed Marks, or any of them, and any
colorable imitation thereof; and (ii) at Dillard's option, delete
the Bank Licensed Marks from or destroy all unused Credit Card
Applications, Account Documentation, periodic statements, materials,
displays, advertising and sales literature and any other items
bearing any of the Bank Licensed Marks.
(d) Ownership of the Bank Licensed Marks. Dillard's acknowledges that
(i) the Bank Licensed Marks, all rights therein, and the goodwill
associated therewith, are, and shall remain, the exclusive property
of Bank, (ii) it shall take no action which will adversely affect
Bank's exclusive ownership of the Bank Licensed Marks or the
goodwill associated with the Bank Licensed Marks, and (iii) any and
all goodwill arising from use of the Bank Licensed Marks by
Dillard's shall inure to the benefit of Bank. Nothing herein shall
give Dillard's any proprietary interest in or to the Bank Licensed
Marks, except the right to use the Bank Licensed Marks in accordance
with this Agreement, and Dillard's shall not contest Bank's title in
and to the Bank Licensed Marks.
(e) Infringement by Third Parties. Dillard's shall use reasonable
efforts to notify Bank, in writing, in the event that it has
Knowledge of any infringing use of any of the Bank Licensed Marks by
any third party. If any of the Bank Licensed Marks is infringed,
Bank alone has the right, in its sole discretion, to take whatever
action it deems necessary to prevent such infringing use; provided,
however, that if Bank fails to take reasonable steps to prevent
infringement of the Bank Licensed Marks by any credit provider and
such infringement has an adverse effect upon the Program or the
rights of Dillard's hereunder, Dillard's may request that Bank take
action necessary to alleviate such adverse impact. Dillard's shall
reasonably cooperate with and assist Bank, at Bank's expense, in the
prosecution of those actions that Bank determines, in its sole
discretion, are necessary or desirable to prevent the infringing use
of any of the Bank Licensed Marks.
8.3 Ownership of Intellectual Property.
(a) Ownership of Intellectual Property. Each party shall continue to own
all of its Intellectual Property that existed as of the Effective
Date. Each party also shall own all right, title and interest in the
Intellectual Property it develops independently of the other party
during the Term.
(b) Joint Intellectual Property. Any Intellectual Property developed
through the combined efforts of the parties during the Term of this
Agreement shall be owned jointly by the parties. Each party shall
have the right to use, license and otherwise
38
exploit jointly owned Intellectual Property without any restriction
or obligation to account to the other party. Patents and inventions
shall be deemed to be developed jointly only if employees or
contractors of each party who have assigned all such patent rights
to such party are deemed co-inventors under the patent law. Software
and other works of authorship and associated copyrights shall be
deemed to be jointly developed only if the parties are deemed
co-authors of such software or other work of authorship under the
copyright law or otherwise deemed co-owners of such copyright.
Otherwise, all patents, patentable inventions, software, other works
of authorship and related copyrights shall be deemed to be developed
solely by one party. Thus, to the extent that a work created by one
party is based on or incorporates Intellectual Property of the other
party but the parties are not joint inventors or joint authors under
the patent or copyright law, respectively, then one party shall be
the sole owner of the Intellectual Property in the underlying work
and the other party shall be the sole owner of the Intellectual
Property in the new work.
ARTICLE 9
REPRESENTATIONS, WARRANTIES AND COVENANTS
9.1 General Representations and Warranties of Dillard's.
To induce Bank to establish and administer the Program, Dillard's makes
the following representations and warranties to Bank, each and all of which
shall survive the execution and delivery of this Agreement, and each and all
of which shall be deemed to be restated and remade with the same force and
effect on each day of the Term.
(a) Corporate Existence. Dillard's (i) is a corporation duly organized,
validly existing and in good standing under the laws of the State of
its incorporation; (ii) is duly licensed or qualified to do business
as a corporation and is in good standing as a foreign corporation in
all jurisdictions in which the nature of the activities conducted or
proposed to be conducted by it or the character of the assets owned
or leased by it makes such licensing or qualification necessary to
perform its obligations required hereunder except to the extent that
its non-compliance would not have a material and adverse effect on
Dillard's ability to perform its obligations hereunder; and (iii)
has all necessary licenses, permits, consents or approvals from or
by, and has made all necessary notices to, all governmental
authorities having jurisdiction, to the extent required for
Dillard's current ownership, lease or conduct and operation, except
to the extent that the failure to obtain such licenses, permits,
consents or approvals or to provide such notices would not have a
material and adverse effect on Dillard's ability to perform its
obligations required hereunder.
(b) Capacity; Authorization; Validity. Dillard's has all necessary
corporate power and authority to (i) execute and enter into this
Agreement, and (ii) perform the obligations required of Dillard's
hereunder and the other documents, instruments
39
and agreements relating to the Program and this Agreement executed
by Dillard's pursuant hereto. The execution and delivery by
Dillard's of this Agreement and all documents, instruments and
agreements executed and delivered by Dillard's pursuant hereto, and
the consummation by Dillard's of the transactions specified herein
have been duly and validly authorized and approved by all necessary
corporate action of Dillard's. This Agreement (i) has been duly
executed and delivered by Dillard's, (ii) constitutes the valid and
legally binding obligation of Dillard's, and (iii) is enforceable in
accordance with its terms (subject to applicable bankruptcy,
insolvency, reorganization, receivership or other laws affecting the
rights of creditors generally and by general equity principles
including, without limitation, those respecting the availability of
specific performance).
(c) Conflicts; Defaults; Etc. The execution, delivery and performance of
this Agreement by Dillard's, its compliance with the terms hereof,
and its consummation of the transactions specified herein will not
(i) conflict with, violate, result in the breach of, constitute an
event which would, or with the lapse of time or action by a third
party or both would, result in a default under, or accelerate the
performance required by, the terms of any material contract,
instrument or agreement to which Dillard's is a party or by which it
is bound, or by which Dillard's assets are bound, except for
conflicts, breaches and defaults which would not have a material and
adverse effect upon Dillard's ability to perform its obligations
under this Agreement; (ii) conflict with or violate the articles of
incorporation or by-laws, or any other equivalent organizational
document(s), of Dillard's; (iii) violate any Applicable Law or
conflict with, or require any consent or approval under any
judgment, order, writ, decree, permit or license, to which Dillard's
is a party or by which it is bound or affected, except to the extent
that such violation or the failure to obtain such consent or
approval would not have a material and adverse effect upon Dillard's
ability to perform its obligations under this Agreement; (iv)
require the consent or approval of any other party to any contract,
instrument or commitment to which Dillard's is a party or by which
it is bound; or (v) require any filing with, notice to, consent or
approval of, or any other action to be taken with respect to, any
regulatory authority.
(d) Solvency. Dillard's is solvent.
(e) No Default. Neither Dillard's nor, to the best of its Knowledge, its
Affiliates are in default with respect to any contract, agreement,
lease, or other instrument to which it is a party or by which it is
bound, except for defaults which would not have a material and
adverse effect upon Dillard's ability to perform its obligations
under this Agreement, nor has Dillard's received any notice of
default under any contract, agreement, lease or other instrument
which default or notice of default would materially and adversely
affect the performance by Dillard's of its obligations under this
Agreement. No Dillard's Event of Default has occurred and is
continuing.
40
(f) Books and Records. All of Dillard's and, to the best of its
Knowledge, its Affiliates' records, files and books of account
relating to the Program, including but not limited to, records
provided to the Bank regarding Dillard's Account activities, are in
all material respects complete and correct and are maintained in
accordance with Applicable Law.
(g) No Litigation. No action, claim or any litigation, proceeding,
arbitration, investigation or controversy is pending or, to the best
of Dillard's Knowledge, threatened against Dillard's or its
Affiliates other than Dillard National Bank, at law, in equity or
otherwise, before any court, board, commission, agency or
instrumentality of any federal, state, or local government or of any
agency or subdivision thereof or before any arbitrator or panel of
arbitrators, to which Dillard's is a party, which, if adversely
determined, would have a material and adverse effect on Dillard's
ability to perform its obligations under this Agreement nor, to the
best of Dillard's Knowledge, do facts exist which might give rise to
any such proceedings with respect to Dillard's or its Affiliates
other than Dillard National Bank. Except as otherwise disclosed in
the Purchase Agreement, Dillard's, further, is not the subject of
(i) any action by a regulatory authority, or (ii) any agreement,
orders or directives with any regulatory authority with respect to
its operations that would have a material and adverse effect on
Dillard's ability to perform its obligations under this Agreement
nor, to the best of Dillard's Knowledge, do facts exist which might
give rise to any such circumstances.
(h) Dillard's Licensed Marks. Dillard's is the owner of the Dillard's
Licensed Marks and Dillard's has the right, power and authority to
license to Bank and authorized designees the use of the Dillard's
Licensed Marks in connection with the Program and the use of the
Dillard's Licensed Marks by said licensees in a manner approved (or
deemed approved) by Dillard's shall not (i) violate any Applicable
Law or (ii) infringe upon the right(s) of any third party.
9.2 General Representations and Warranties of Bank.
To induce Dillard's to enter into this Agreement and participate in the
Program, Bank makes the following representations and warranties to Dillard's,
each and all of which shall survive the execution and delivery of this
Agreement, and each and all of which shall be deemed to be restated and remade
with the same force and effect on each day of the Term.
(a) Corporate Existence. Bank (i) is a banking corporation duly
organized, validly existing, and in good standing under the laws of
the United States with its home office as indicated in the first
paragraph of this Agreement; (ii) is duly licensed or qualified to
do business as a banking corporation and is in good standing as a
foreign corporation in all jurisdictions in which the nature of the
activities conducted or proposed to be conducted by it or the
character of the assets owned or leased by it makes such licensing
or qualification necessary to perform its obligations hereunder
except to the extent that its non-compliance would not have a
material and adverse effect on Bank, the Program, the Accounts,
Cardholder Indebtedness or Bank's ability to perform its obligations
hereunder; and has all
41
necessary licenses, permits, consents, or approvals from or by, and
has made all necessary notices to, all governmental authorities
having jurisdiction, to the extent required for Bank's current
ownership, lease or conduct and operation, except to the extent that
the failure to obtain such licenses, permits, consents, approvals or
to provide such notices would not have a material and adverse effect
on Bank, the Program, the Accounts, Cardholder Indebtedness or
Bank's ability to perform its obligations under this Agreement.
(b) Capacity; Authorization; Validity. Bank has all necessary power and
authority to (i) execute and enter into this Agreement, and (ii)
perform all of the obligations required of Bank hereunder and the
other documents, instruments and agreements relating to the Program
and this Agreement executed by Bank pursuant hereto. The execution
and delivery by Bank of this Agreement and all documents,
instruments and agreements executed and delivered by Bank pursuant
hereto, and the consummation by Bank of the transactions specified
herein, have been duly and validly authorized and approved by all
necessary corporate action of Bank. This Agreement (i) has been duly
executed and delivered by Bank, (ii) constitutes the valid and
legally binding obligations of Bank, and (iii) is enforceable in
accordance with its respective terms (subject to applicable
bankruptcy, insolvency, reorganization, receivership or other laws
affecting the rights of creditors generally and financial
institutions in particular and by general equity principles
including, without limitation, those respecting the availability of
specific performance).
(c) Conflicts; Defaults; Etc. The execution, delivery and performance of
this Agreement by Bank, its compliance with the terms hereof, and
the consummation of the transactions specified herein will not (i)
conflict with, violate, result in the breach of, constitute an event
which would, or with the lapse of time or action by a third party or
both would, result in a default under, or accelerate the performance
required by, the terms of any material contract, instrument or
agreement to which Bank is a party or by which it is bound, except
for conflicts, breaches and defaults which would not have a material
and adverse effect upon Bank, the Program, the Accounts, Cardholder
Indebtedness or Bank's ability to perform its obligations under this
Agreement; (ii) conflict with or violate the articles of
incorporation or by-laws, or any other equivalent organizational
document(s) of Bank; (iii) violate any Applicable Law or conflict
with, or require any consent or approval under any judgment, order,
writ, decree, permit or license, to which Bank is a party or by
which it is bound or affected, except to the extent that such
violation or the failure to obtain such consent or approval would
not have a material and adverse effect upon Bank, the Program, the
Accounts, the Cardholder Indebtedness or Bank's ability to perform
its obligations under this Agreement; (iv) require the consent or
approval of any other party to any contract, instrument or
commitment to which Bank is a party or by which it is bound; or (v)
require any filing with, notice to, consent or approval of, or any
other action to be taken with respect to, any regulatory authority.
(d) Solvency. Bank is solvent.
42
(e) No Default. Neither Bank nor, to the best of its Knowledge, its
Affiliates are in default with respect to any contract, agreement,
lease, or other instrument to which it is a party or by which it is
bound, except for defaults which would not have a material and
adverse effect upon Bank, the Program, the Accounts, Cardholder
Indebtedness or Bank's ability to perform its obligations under this
Agreement, nor has Bank received any notice of default under any
such contract, agreement, lease or other instrument which default or
notice of default would materially and adversely affect the
performance by Bank of its obligations under this Agreement. No Bank
Event of Default has occurred and is continuing.
(f) Books and Records. All of Bank's and, to the best of its Knowledge,
its Affiliates' records, files and books of account relating to the
Program are in all material respects complete and correct and are
maintained in accordance with Applicable Law.
(g) No Litigation. No action, claim, or any litigation, proceeding,
arbitration, investigation or controversy is pending or, to the best
of Bank's Knowledge, threatened against Bank or its Affiliates, at
law, in equity or otherwise, before any court, board, commission,
agency or instrumentality of any federal, state, or local government
or of any agency or subdivision thereof or before any arbitrator or
panel of arbitrators, to which Bank is a party, which, if adversely
determined, would have a material and adverse effect on Bank, the
Program, the Accounts, Cardholder Indebtedness or Bank's ability to
perform its obligations under this Agreement, nor, to the best of
Bank's Knowledge, do facts exist which might give rise to any such
proceedings. Bank, further, is not the subject of (i) any action by
a regulatory authority, or (ii) any agreement, orders or directives
with any regulatory authority with respect to its operations
affecting the Accounts, Cardholder Indebtedness and the Program, any
other aspect of Bank's business that relates to the Program or the
ability of Bank to consummate the transactions specified herein,
which, in either case, if adversely determined or enforced, would
have a material and adverse effect on Bank, the Program, the
Accounts, Cardholder Indebtedness or Bank's ability to perform its
obligations under this Agreement, nor, to the best of Bank's
Knowledge, do facts exist which might give rise to any such
circumstances.
(h) FDIC Insurance. Bank is FDIC-insured, and to the best of Bank's
Knowledge, no proceeding is contemplated to revoke such insurance.
(i) The Bank Licensed Marks. Bank is the owner of the Bank Licensed
Marks and has the right, power and authority to license to Dillard's
the use of the Bank Licensed Marks in connection with the Program
and the use of the Bank Licensed Marks by Dillard's in a manner
approved (or deemed approved) by Bank shall not (i) violate any
Applicable Law or (ii) infringe upon the right(s) of any third
party.
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9.3 General Covenants of Dillard's.
Dillard's makes the following covenants to Bank, each and all of which
shall survive the execution and delivery of this Agreement:
(a) Maintenance of Existence and Conduct of Business. Dillard's shall
preserve and keep in full force and effect its corporate existence
and remain primarily in the retail business, other than in the event
of a Change in Control, merger or consolidation in which Dillard's
is not the surviving entity.
(b) Litigation. Dillard's promptly shall notify Bank in writing if it
receives written notice of any litigation that, if adversely
determined, would have a material and adverse effect on the Program,
the Accounts in the aggregate or Dillard's ability to perform its
obligations hereunder.
(c) Enforcement of Rights. Except as otherwise specified herein,
Dillard's shall enforce its rights against third parties to the
extent that a failure to enforce such rights could reasonably be
expected to materially and adversely affect the Program, Accounts in
the aggregate or Dillard's ability to perform its obligations
hereunder. Dillard's shall not enter into any agreement which, at
the time such agreement is executed, could reasonably be expected to
have a material and adverse effect on the Program, the Accounts in
the aggregate or Dillard's ability to perform its obligations
hereunder.
(d) Reports and Notices. Dillard's will provide Bank with a telephonic
or telefacsimile notice specifying the nature of any Event of
Default where Dillard's is the defaulting party or Dillard's Event
of Default, or any event which, with the giving of notice or passage
of time or both, would constitute a Dillard's Event of Default or
any Event of Default where Dillard's is the defaulting party or any
development or other information which is likely to have a material
and adverse effect on the Program, the Accounts in the aggregate or
Dillard's ability to perform its obligations pursuant to this
Agreement. Notices pursuant to this Section 9.3(d) relating to
Dillard's Events of Default or any Event of Default where Dillard's
is the defaulting party shall be provided within two (2) Business
Days after Dillard's has Knowledge of the existence of such default.
Notices relating to all other events or developments described in
this Section 9.3(d) shall be provided (i) within two (2) Business
Days after Dillard's becomes aware of the existence of such event or
development if such event or development has already occurred, and
(ii) with respect to events or developments that have yet to occur,
as early as reasonably practicable under the circumstances. Any
notice provided under this section shall be confirmed in writing to
Dillard's within five (5) Business Days after the transmission of
the initial notice.
(e) Applicable Law/Operating Procedures. Dillard's shall at all times
during the Term of this Agreement comply in all material respects
with Applicable Law affecting obligations under this Agreement and
the Operating Procedures.
44
(f) Disputes with Cardholders. Dillard's shall cooperate with Bank in a
timely manner (but in no event less promptly than required by
Applicable Law) to resolve all disputes with Cardholders.
(g) Books and Records. Dillard's shall keep adequate records and books
of account supporting Charge Transaction Data and reflecting all of
Dillard's other financial transactions relating to the Program.
9.4 General Covenants of Bank.
Bank makes the following covenants to Dillard's, each and all of which
shall survive the execution and delivery of this Agreement:
(a) Maintenance of Existence and Conduct of Business. Bank shall
preserve and keep in full force and effect its corporate existence
and remain primarily in substantially the same line(s) of business
(i.e., banking) in which it was engaged on the Effective Date, other
than in the event of a Change in Control, merger or consolidation in
which Bank is not the surviving entity.
(b) Litigation. Bank promptly shall notify Dillard's in writing if it
receives written notice of any litigation that, if adversely
determined, would have a material and adverse effect on the Program,
the Accounts in the aggregate or Bank's ability to perform its
obligations hereunder.
(c) Enforcement of Rights. Except as otherwise specified herein, Bank
shall enforce its rights against third parties to the extent that a
failure to enforce such rights could reasonably be expected to
materially and adversely affect the Program, Dillard's or Bank's
ability to perform its obligations hereunder. Bank shall not enter
into any agreement which, at the time such agreement is executed,
could reasonably be expected to have a material and adverse effect
on Dillard's, the Program or Bank's ability to perform its
obligations hereunder.
(d) Reports and Notices. Bank will provide Dillard's with a telephonic
or telefacsimile notice specifying the nature of any Event or
Default where Bank is defaulting party or any Bank Event of Default,
or any event which, with the giving of notice or passage of time or
both, would constitute a Bank Event of Default or any Event of
Default where Bank is the defaulting party, or any development or
other information which is likely to have a material and adverse
effect on the Program, the Accounts in the aggregate or Bank's
ability to perform its obligations pursuant to this Agreement.
Notice pursuant to this Section 9.4(d) relating to Bank Events of
Default or any Event of Default where Bank is the defaulting party
shall be provided within two (2) Business Days after Bank becomes
aware of the existence of such default. Notices relating to all
other events or developments described in this Section 9.4(d) shall
be provided (i) within two (2) Business Days after Bank becomes
aware of the existence of such event or development if such event or
development has already occurred, and (ii) with respect to events or
developments that have yet to occur, as early as
45
reasonably practicable under the circumstances. Any notice produced
under this section shall be confirmed in writing to Bank within five
(5) Business Days after transmission of the initial notice.
(e) Applicable Law/Operating Procedures. Bank shall at all times during
the Term comply in all material respects with Applicable Law and the
Operating Procedures. Bank shall at all times during the Term
maintain its bank charter and FDIC insurance.
(f) Books and Records. Bank shall keep adequate records and books of
account with respect to the Accounts and Cardholder Indebtedness in
which proper entries, reflecting all of Bank's financial
transactions relating to the Program, are made in accordance with
GAAP. Bank shall keep adequate records and books of account with
respect to its activities, in which proper entries reflecting all of
Bank's financial transactions are made in accordance with GAAP. All
of Bank's records, files and books of account shall be in all
material respects complete and correct and shall be maintained in
accordance with good business practice and Applicable Law.
9.5 Financial Covenants; Financial Statements.
(a) If General Electric Capital Corporation does not have at least an A
rating from two nationally recognized statistical rating
organizations, Bank shall promptly notify Dillard's. If Dillard's
does not receive reasonable financial assurances in Dillard's
reasonable judgment from General Electric Capital Corporation or
Bank of the ability of Bank to perform its obligations under this
Agreement, Dillard's may terminate this Agreement, in which event
the parties shall have the rights set forth in Article 14 and, if
Dillard's determines to purchase the Program Assets, the purchase
price shall be as stated in Section 14.2(d)(i).
(b) If at any time during the term of this Agreement Dillard's or
General Electric Company does not file periodic reports on a timely
basis with the Securities and Exchange Commission ("SEC"):
(i) Dillard's or Bank (as appropriate based on the party not
filing) will provide to the other (i) its audited annual
financial statements within 90 days of the end of the fiscal
year, and (ii) its unaudited quarterly financial statements
within 60 days of the end of the fiscal quarter. Such
statements shall include the consolidated balance sheet, income
statement and statement of cash flows and financial position,
accompanied by the certification on behalf of such entity by
its chief financial officer that such financial statements were
prepared in accordance with GAAP applied on a consistent basis
(except for normal year end adjustments and the absence of
footnotes on the quarterly statements) and present fairly the
consolidated financial position of such entity as of the end of
such calendar period and the results of its operations.
46
(ii) Dillard's or Bank (as appropriate based on the party not
filing) shall make its chief financial officer, or a
knowledgeable designee, available to discuss such party's
financial results with a representative of the other party.
Such party shall provide the other party copies of all
compliance certificates delivered to its lenders under its
credit facilities, if any.
ARTICLE 10
AUDIT/ACCESS
10.1 Audit/Access Rights.
Twice per year or at any time that a party disputes the amount of any
monies owed by either party to the other hereunder, such party, at its sole
cost and expense and upon two (2) days' prior notice to the other party, may
conduct an audit of those of the other party's financial and operational
records that are under the control and/or direction of the other party and
relate to the Program or can be reasonably segregated. Such audit shall be
conducted during normal business hours in accordance with generally accepted
auditing standards and the auditing party shall employ such reasonable
procedures and methods as necessary and appropriate in the circumstances,
minimizing interference with the audited party's normal business operations.
The audited party shall use reasonable commercial efforts to facilitate the
auditing party's review, including making reasonably available such personnel
of the audited party to assist the auditing party as reasonably requested. The
audited party shall deliver any document or instrument necessary for the
auditing party to obtain such records from any Person maintaining records for
the audited party and shall maintain records pursuant to its regular record
retention policies. For purposes of this provision, the audited party also
shall be required to provide records relating to the Program held by Persons
performing services in connection with the Program at the auditing party's
request. Notwithstanding the generality of the foregoing, however, a party
shall not be required to provide access to records to the extent that (a) such
access is prohibited by Applicable Law, (b) such records are legally
privileged, (c) such records are company planning documents of such party or
any of its Affiliates, operating budgets, management reviews or employee
records, and (d) such records relate to other customers or operations of such
party other than the Program or to personnel records not normally disclosed in
connection with audits.
10.2 Dispute Resolution.
The parties agree to attempt in good faith to resolve any disputes
arising in connection with the payments made or demanded by the parties under
this Agreement excluding Article 14 hereof. In the event the parties are
unable to resolve any such dispute, either party may request a nationally
recognized firm of independent accountants mutually agreeable to the parties
(the "Accountants") to reconcile any amounts in dispute. Any such request
shall be in writing and shall specify with particularity the disputed amounts
being submitted for determination. Each party agrees to promptly and in good
faith take all necessary action to designate the Accountants no later than ten
(10) Business Days after a request that such a designation be made. The
parties shall cooperate fully in assisting the Accountants in their review,
including, without limitation, by providing the Accountants full access to all
files, books and records relevant thereto and
47
providing such other information as the Accountants may reasonably request in
connection with any such review. In the event the determination made by the
Accountants requires either party to make payment to the other of any
additional amount, such party shall (i) make such payment no later than five
(5) Business Days following receipt from the Accountants of written notice to
both parties of such determination plus interest at the Federal Funds Rate on
any amount due computed from and including the date such amount should have
been paid through and excluding the date of payment; and (ii) shall pay (A)
the fees and disbursements of such Accountants arising out of such reviews,
and (B) the prevailing party's audit expenses, if any. The determination of
the Accountants shall be final and binding on the parties subject to the
correction of obvious errors.
ARTICLE 11
CONFIDENTIALITY
11.1 General Confidentiality.
(a) For purposes of this Agreement, "Confidential Information" means any
and all of the following: (i) information that is provided by or on
behalf of either Dillard's or Bank to the other party or its agents
in connection with the Program; (ii) information about Dillard's or
Bank or their Affiliates, or their respective businesses or
employees, that is otherwise obtained by the other party in
connection with the Program, in each case including, without
limitation: (A) information concerning marketing plans, objectives
and financial results; (B) information regarding business systems,
methods, processes, financing data, programs and products; (C)
information unrelated to the Program obtained by Dillard's or Bank
in connection with this Agreement, including, without limitation, by
accessing or being present at the business location of the other
party; and (D) proprietary technical information, including source
codes; (iii) the terms and conditions of this Agreement; or (iv) the
Marketing Plan. Confidential Information shall not include
Cardholder Data, the Qualified Dillard's Customer List or Dillard's
Shopper Data.
(b) The restrictions on disclosure of Confidential Information under
this Article 11 shall not apply to, with respect to Dillard's or
Bank, information that: (i) is already rightfully known to such
party at the time it obtains Confidential Information from the other
party; (ii) is or becomes generally available to the public other
than as a result of disclosure in breach of this Agreement or any
other confidentiality obligations; (iii) is lawfully received on a
non-confidential basis from a third party authorized to disclose
such information without restriction and without breach of this
Agreement; (iv) is contained in, or is capable of being discovered
through examination of publicly available records or products; (v)
is required to be disclosed by Applicable Law (provided that the
party subject to such Applicable Law shall notify the other party of
any such use or requirement prior to disclosure of any Confidential
Information obtained from the other party in order to afford such
other party an opportunity to seek a protective order to
48
prevent or limit disclosure of the Confidential Information to third
parties and shall disclose Confidential Information of the other
party only to the extent required by such Applicable Law); or (vi)
is developed by Dillard's or Bank without the use of any
proprietary, non-public information provided by the other party
under this Agreement. Nothing herein shall be construed to permit
the Receiving Party (as defined below) to disclose to any third
party any Confidential Information that the Receiving Party is
required to keep confidential under Applicable Law.
(c) The terms and conditions of this Agreement shall be the Confidential
Information of both Dillard's and Bank. The Marketing Plan shall be
the Confidential Information of both Dillard's and Bank.
(d) If Dillard's or Bank receive Confidential Information of the other
Party ("Receiving Party"), the Receiving Party shall do the
following with respect to the Confidential Information of the other
party ("Disclosing Party"): (i) keep the Confidential Information of
the Disclosing Party secure and confidential; (ii) treat all
Confidential Information of the Disclosing Party with the same
degree of care as it accords its own Confidential Information, but
in no event less than a reasonable degree of care; and (iii)
implement and maintain commercially reasonable physical, electronic,
administrative and procedural security measures, including
commercially reasonable authentication, access controls, virus
protection and intrusion detection practices and procedures. For
purposes of this subsection, both parties shall be considered the
Receiving Party of Confidential Information comprised of the terms
and/or conditions of this Agreement and the Marketing Plan.
(e) Upon reasonable request, Dillard's and Bank each shall have the
right to review the other party's information security standards and
shall notify the other party prior to materially modifying such
procedures.
11.2 Use and Disclosure of Confidential Information
(a) Each Receiving Party shall use and disclose the Confidential
Information of the Disclosing Party only for the purpose of
performing its obligations or enforcing its rights with respect to
the Program or as otherwise expressly permitted by this Agreement,
and shall not accumulate in any way or make use of such Confidential
Information for any other purpose.
(b) Each Receiving Party shall: (i) limit access to the Disclosing
Party's Confidential Information to those employees, authorized
agents, vendors, consultants, service providers and subcontractors
who have a reasonable need to access such Confidential Information
in connection with the Program; and (ii) ensure that any Person with
access to the Disclosing Party's Confidential Information agrees to
be bound by the provisions of this Article 11 and maintains the
existence of this Agreement and the nature of their obligations
hereunder strictly confidential.
49
11.3 Unauthorized Use or Disclosure of Confidential Information
Each Receiving Party agrees that any unauthorized use or disclosure of
Confidential Information of the Disclosing Party might cause immediate and
irreparable harm to the Disclosing Party for which money damages might not
constitute an adequate remedy. In that event, the Receiving Party agrees that
injunctive relief may be warranted in addition to any other remedies the
Disclosing Party may have. In addition, the Receiving Party agrees promptly to
advise the Disclosing Party by telephone and in writing via facsimile of any
security breach that may have compromised any Confidential Information, of any
unauthorized misappropriation, disclosure or use by any person of the
Confidential Information of the Disclosing Party which may come to its
attention and to take all steps at its own expense reasonably requested by the
Disclosing Party to limit, stop or otherwise remedy such misappropriation,
disclosure or use.
11.4 Return or Destruction of Confidential Information
Upon the termination or expiration of this Agreement, the Receiving Party
shall comply with the Disclosing Party's reasonable instructions regarding the
disposition of the Disclosing Party's Confidential Information, which may
include return of any and all of the Disclosing Party's Confidential
Information (including any electronic or paper copies, reproductions, extracts
or summaries thereof); provided, however: the Receiving Party in possession of
tangible property containing the Disclosing Party's Confidential Information
may retain one archived copy of such material, subject to the terms of this
Agreement, which may be used solely for regulatory purposes and may not be
used for any other purpose. Such compliance shall be certified in writing,
including a statement that no copies of Confidential Information have been
kept, except as necessary for regulatory purposes.
ARTICLE 12
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
12.1 Events of Default.
The occurrence of any one or more of the following events (regardless of
the reason therefor) shall constitute an Event of Default hereunder:
(a) A party shall fail to make a payment of any material amount due and
payable pursuant to this Agreement and such failure shall remain
unremedied for a period of five (5) Business Days after the
non-defaulting party shall have given written notice thereof, unless
such failure to pay is the subject of a dispute resolution under
Section 10.2, in which case, the five (5) Business Day period shall
commence upon receipt of the written notice from the Accountants.
(b) A party shall fail to perform, satisfy or comply with any
obligation, condition, covenant or other provision contained in this
Agreement (other than failure to comply with any service level
standard set forth in Schedule 5.2), and (i) such failure shall
remain unremedied for a period of thirty (30) days after the other
party shall have given written notice thereof or, if the same cannot
be cured in a
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commercially reasonable manner within such time, the same shall not
constitute an Event of Default if the party shall have initiated and
diligently pursued a cure within such time and such cure is
completed within ninety (90) days from the date of written notice
regarding such failure, and (ii) such failure shall either have a
material and adverse effect on the Program or the Bank's or
Dillard's Licensed Marks, or materially diminish the economic value
of the Program to the other party.
(c) Any representation or warranty contained in this Agreement shall not
be true and correct in any respect as of the date when made or
reaffirmed, and (i) the party making such representation or warranty
shall fail to cure the event giving rise to such breach within
thirty (30) days after the other party shall have given written
notice thereof or, if the same cannot be cured in a commercially
reasonable manner within such time, the same shall not constitute an
Event of Default if the party shall have initiated a cure within
such time and such cure shall be completed within ninety (90) days
from the date of written notice regarding such breach, and (ii) such
failure shall either have a material and adverse effect on the
Program or materially diminish the economic value of the Program to
the other party.
12.2 Defaults by Bank.
The occurrence of any one or more of the following events (regardless of
the reason therefore) shall constitute an event of default by Bank hereunder:
(a) Bank fails to settle Charge Transaction Data in full when due and
the failure continues for two (2) Business Days after receipt of
notice by Bank from Dillard's (which notice may be by fax with a
confirmation call) that such settlement payment was not received.
(b) Bank shall no longer be solvent or shall fail generally to pay its
debts as they become due or there shall be a substantial cessation
of Bank's regular course of business.
(c) The Federal Deposit Insurance Corporation or any other regulatory
authority having jurisdiction over Bank shall order the appointment
of a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) of Bank or of any substantial
part of its properties, or order the winding-up or liquidation of
the affairs of Bank, and such order shall not be vacated,
discharged, stayed or bonded within sixty (60) days from the date of
entry thereof.
(d) Bank shall (i) consent to the institution of proceedings specified
in paragraph (c) above or to the appointment of or taking possession
by a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) of Bank of any substantial part
of its properties, or (ii) take corporate action in furtherance of
any such action.
(e) Bank shall fail to meet one or more SLAs expressly giving rise to
the right to terminate hereunder in accordance with Section 5.5 and
Schedule 5.2.
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12.3 Defaults by Dillard's.
The occurrence of any one or more of the following events (regardless of
the reason therefor) shall constitute an event of default by Dillard's
hereunder:
(a) Dillard's fails to report In-Store Payments within two (2) Business
Days after receipt thereof and the failure continues for two (2)
Business Days after receipt of notice by Dillard's from Bank (which
notice may be by fax with a confirmation call) that such report was
not received.
(b) Dillard's shall no longer be solvent or shall fail generally to pay
its debts as such debts become due or there shall be a substantial
cessation of Dillard's regular course of business.
(c) A petition under the U.S. Bankruptcy Code or similar law shall be
filed against Dillard's or any of its Affiliates and not be
dismissed within sixty (60) days.
(d) A decree or order by a court having jurisdiction (i) for relief in
respect of Dillard's pursuant to the Bankruptcy Code or any other
applicable bankruptcy or other similar law, (ii) for appointment of
a custodian, receiver, liquidator, assignee, trustee, or
sequestrator (or similar official) of Dillard's or of any
substantial part of its properties, or (iii) ordering the winding-up
or liquidation of the affairs of Dillard's shall be entered, and
shall not be vacated, discharged, stayed or bonded within sixty (60)
days from the date of entry thereof.
(e) Dillard's shall (i) file a petition seeking relief pursuant to the
Bankruptcy Code or any other applicable bankruptcy or other similar
law, (ii) consent to the institution of proceedings pursuant thereto
or to the filing of any such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee,
trustee or sequestrator (or similar official) of Dillard's or any
substantial part of its properties, or (iii) take corporate action
in furtherance of any such action.
12.4 Remedies for Events of Default.
In addition to any other rights or remedies available to the parties at
law or in equity, the following remedies shall be available:
(a) Upon the occurrence of an Event of Default pursuant to Section 12.1,
the non-defaulting party shall be entitled, in addition to its
remedies under Sections 12.4(b) and (c) (as appropriate), to collect
any amount indisputably in default plus interest based on the
Federal Funds Rate and calculated on a three hundred and sixty (360)
day year basis.
(b) Within one hundred and eighty (180) days after the occurrence of an
Event of Default where Bank is a defaulting party or a Bank Event of
Default, Dillard's may terminate this Agreement upon written notice
in accordance with Article 13 hereof.
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(c) Within one hundred and eighty (180) days after the occurrence of an
Event of Default where Dillard's is the defaulting party or of a
Dillard's Event of Default, Bank may, at Bank's option, terminate
this Agreement upon written notice to Dillard's in accordance with
Article 13 hereof, and recover the unamortized portion of the
premium paid pursuant to the Purchase Agreement.
ARTICLE 13
TERM/TERMINATION
13.1 Term.
This Agreement shall continue in full force and effect for ten (10) years
from the Effective Date (the "Initial Term"). The Agreement shall renew
automatically without further action of the parties for successive one (1)
year terms (each a "Renewal Term") unless either party provides written notice
of termination at least six (6) months prior to the expiration of the Initial
Term or current Renewal Term, as the case may be.
13.2 Termination by Dillard's Prior to the End of the Initial Term or a
Renewal Term.
Dillard's may terminate this Agreement upon written notice prior to the
end of the Initial Term or any Renewal Term:
(a) within one hundred and eighty (180) days after the occurrence of a
Bank Event of Default or any other Event of Default where Bank is
the defaulting party.
(b) upon thirty (30) days written notice if there is (i) a Change in
Control of Bank, (ii) a merger or consolidation of Bank, and Bank or
an Affiliate of Bank is not the surviving entity, or (iii) a sale of
all or substantially all of the assets of Bank to any entity other
than an Affiliate of Bank.
(c) upon thirty (30) days written notice if any of the events in
Schedule 13.2(c) occur.
13.3 Termination by Bank Prior to the End of the Initial Term or Renewal Term.
Bank may terminate this Agreement prior to the end of the Initial Term or
any Renewal Term within one hundred and eighty (180) days after the occurrence
of a Dillard's Event of Default or any other Event of Default where Dillard's
is the defaulting party.
ARTICLE 14
EFFECTS OF TERMINATION
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14.1 General Effects.
(a) All solicitations, marketing and advertising of the Program, other
than acceptance of applications through Dillard's Channels in the
ordinary course of business consistent with past practice, shall
cease upon notice of termination of this Agreement by either party,
except as the parties may mutually agree, provided that the parties
will continue to operate the Program and service the Accounts in
good faith and in the ordinary course of their respective
businesses, subject to the terms of this Agreement, until the
provisions of Sections 14.2, 14.3 and 14.4 are satisfied. Parties
will cooperate to ensure the orderly wind-down or transfer of the
Program.
(b) Upon any termination of this Agreement, the parties shall have any
rights or remedies available to such party under this Agreement or
in law or at equity. Upon the satisfaction of the provisions of
Section 14.2, 14.3 and 14.4, all obligations of the parties under
this Agreement shall cease, except that the provisions specified in
Section 16.23 shall survive.
14.2 Dillard's Option to Purchase the Program Assets.
(a) If this Agreement expires or is terminated by either party for
whatever reason, Dillard's has the option to purchase from, or
arrange the purchase by a third party nominated by Dillard's or
otherwise selected in accordance with Section 14.3 hereof (a
"Nominated Purchaser") from, Bank the Program Assets (including all
relevant Account Documentation, account information and history and
other data reasonably necessary to enable continuing operation and
management of the Accounts) on such terms and conditions reasonably
acceptable to Dillard's (or a Nominated Purchaser) and Bank,
including commercially reasonable representations and warranties.
(b) The purchase option given by Section 14.2(a) is exercisable by
Dillard's or the Nominated Purchaser serving notice on Bank within
sixty (60) days after receipt of the master file to be provided
pursuant to Section 14.2(e).
(c) If such purchase option is exercised, Dillard's or the Nominated
Purchaser must complete the purchase of the Program Assets within
one hundred eighty (180) days after the notice has been given
pursuant to Section 14.2(b); provided, however, that such times may
be extended for required regulatory approvals, rating agency
consents, and to complete any interim servicing obligation agreed to
by Dillard's and the Bank. The date of such completion shall be the
"Program Purchase Date."
(d) The purchase price for the Program Assets shall be as set forth in
Schedule 14.2(d)-2.
(e) The Parties will use reasonable commercial efforts to minimize
transaction costs and Bank will provide Dillard's and its Nominated
Purchasers reasonable access to the records and accounts relating to
the Program Assets for the purpose of
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conducting due diligence investigations to determine whether they
wish to purchase the Program Assets and shall provide a master file
of the Accounts; provided, however, that Bank will be entitled to
require Dillard's and any Nominated Purchaser to enter into
confidentiality arrangements reasonably acceptable to the Bank
before providing them with such access, and such access will be on
terms reasonably specified by Bank.
14.3 Determination of Fair Market Value.
In the event that this Agreement terminates and, if Dillard's notifies
Bank that it shall purchase the Program Assets, Bank and Dillard's (or its
Nominated Purchaser) shall attempt to mutually determine the fair market value
of the Program Assets, based on the assumption that Dillard's (or its
successor) will continue to be a going concern as a retailer and will continue
to provide support for the Program ("Fair Market Value"). If the parties
cannot reach such agreement, each party shall nominate an investment banker
who together shall select a third investment banker to value the Program
Assets. In such case, the Fair Market Value shall be the average of the two
closest valuations provided by the investment bankers; provided, however, if
the median valuation is within plus or minus twenty (20) percent of the mean
of the three valuations, the Fair Market Value shall be the mean. Dillard's
may in its sole discretion select any purchaser to purchase the Program
Assets, provided that the Bank shall receive an amount equal to the purchase
price as determined above.
14.4 Rights of Bank if Purchase Option not Exercised.
(a) If this Agreement is terminated and Dillard's does not give written
notice that it will exercise its option referred to in Section 14.2,
Dillard's shall have no further rights whatsoever in the Program
Assets, provided that Bank shall have given Dillard's ten (10) days
advance written notice of the expiration of the repurchase option
period. Bank has the right at its sole discretion on or after the
termination of the Agreement to:
(i) issue to Cardholders that Bank considers creditworthy a
replacement or substitute credit card (which card must not bear
any Dillard's Licensed Mark) with such characteristics as the
Bank considers appropriate (the cost of card re-design and
re-issue being borne by Bank). Dillard's shall be permitted to
add an enclosure to the last two billing statements stating
that the Program has been terminated;
(ii) subject to Applicable Law and to the terms of the relevant
Credit Agreement, notify Cardholders that Bank will cease
providing credit under the Accounts and to require repayment of
all amounts outstanding on all Accounts until all associated
receivables have been repaid;
(iii)sell the Accounts and associated receivables to a third party
purchaser selected by Bank at a price agreed between Bank and
the purchaser; or
(iv) any combination of (i), (ii) and (iii).
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(b) Within ninety (90) days after Dillard's has given notice that it
will not exercise its option to purchase or the period in which it
may exercise its option has expired, Bank shall no longer utilize
any of Dillard's Licensed Marks and must rebrand the Private Label
Credit Cards. The foregoing notwithstanding, Bank may use the
Dillard's Licensed Marks to communicate with Cardholders in
connection with the billing and collection of Accounts and as
otherwise required by Applicable Law for up to 180 days thereafter.
(c) Dillard's and Bank shall reasonably agree upon a termination letter
to be sent to Cardholders if Dillard's shall not exercise its
purchase option.
ARTICLE 15
INDEMNIFICATION
15.1 Dillard's Indemnification of Bank.
From and after the Effective Date, Dillard's shall indemnify and hold
harmless Bank, its Affiliates, their respective officers, directors,
employees, agents and representatives and any Person claiming by or through
any of them from and against and in respect of any and all losses,
liabilities, damages, costs and expenses of whatever nature, including
reasonable attorneys' fees and expenses, which are caused or incurred by,
result from, arise out of or relate to:
(a) the gross negligence, recklessness or willful misconduct (including
acts and omissions) of any Dillard's Channel relating to the
Program;
(b) any breach by any Dillard's Channel or any of its Affiliates,
employees or agents of any of the terms, covenants, representations,
warranties or other provisions contained in this Agreement or of the
obligations of any Dillard's Channel or its Affiliates under any
Credit Card Agreement, if any;
(c) the failure of any Dillard's Channel to satisfy any of its
obligations or liabilities to third parties in connection with the
Program, including its obligations to Cardholders in respect of the
purchase of Goods and/or Services;
(d) any actions or omissions by Bank taken or not taken at Dillard's
written request or direction pursuant to this Agreement except where
Bank would have been otherwise required to take such action (or
refrain from acting) absent the request or direction of Dillard's;
(e) dishonest or fraudulent acts by any Dillard's Channel or its
Affiliates, employees or agents in connection with the Program;
(f) any Solicitation Materials distributed by any Dillard's Channel and
not approved by the Marketing Committee or provided by the Bank;
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(g) any claim, suit or proceedings by any third party arising out of the
failure of Dillard's Channel to comply with Applicable Law in
connection with the Program or the Operating Procedures unless such
failure was the result of any action taken or not taken by such
Dillard's Channel at the specific written request or direction of
Bank;
(h) Dillard's Inserts or Billing Statement messages; and
(i) allegations by a third party that the use of the Dillard's Licensed
Marks or any materials or documents provided by any Dillard's
Channel in connection with the Program constitutes: (i) libel,
slander, and/or defamation; (ii) infringement of intellectual
property, including trademark infringement or dilution, or copyright
infringement; (iii) unfair competition or misappropriation of
another's ideas or trade secret; (iv) invasion of rights of privacy
or rights of publicity; or (v) breach of contract or tortious
interference.
15.2 Bank's Indemnification of Dillard's.
From and after the Effective Date, Bank shall indemnify and hold harmless
Dillard's, its Affiliates, their respective officers, directors, employees,
agents and representatives and any Person claiming by or through any of them
from and against and in respect of any and all losses, liabilities, damages,
costs and expenses of whatever nature, including reasonable attorneys' fees
and expenses, which are caused or incurred by, result from, arise out of or
relate to:
(a) Bank's gross negligence, recklessness or willful misconduct
(including acts and omissions) relating to the Program;
(b) any breach by Bank or any of its Affiliates, employees or agents of
any of the terms, covenants, representations, warranties or other
provisions contained in this Agreement, or any Credit Card
Agreement;
(c) Bank's failure to satisfy any of its material obligations or
liabilities to third parties in connection with the Program,
including Cardholders;
(d) any actions or omissions by Dillard's taken or not taken at Bank's
written request or direction pursuant to this Agreement, except
where Dillard's would have been otherwise required to take such
action (or refrain from acting) absent the request or direction of
Bank;
(e) dishonest or fraudulent acts by Bank, its Affiliates, agents or
employees in connection with the Program;
(f) any Account Documentation approved by the Marketing Committee and
used by Dillard's in that form and in accordance with Bank's
instructions and the Operating Procedures that fails to comply with
Applicable Law or regulation unless such failure to comply is as a
result of modification to such Account Documentation by Dillard's;
57
(g) any claim, suit or proceedings by any third party arising out of the
failure of Bank to comply with Applicable Law in connection with the
Program or the Operating Procedures unless such failure was the
result of any action taken or not taken by Bank at the specific
written request or direction of Dillard's;
(h) the Bank's Inserts or Billing Statement messages; and
(i) allegations by a third party that the use of the Bank Licensed Marks
or any materials or documents provided by Bank in connection with
the Program constitutes: (i) libel, slander, and/or defamation; (ii)
infringement of intellectual property, including but not limited to
trademark infringement or dilution, or copyright infringement, (iii)
unfair competition or misappropriation of another's ideas or trade
secret; (iv) invasion of rights of privacy or rights of publicity;
or (v) breach of contract or tortious interference.
15.3 Procedures.
(a) In case any claim is made, or any suit or action is commenced,
against either party (the "Indemnified Party") in respect of which
indemnification may be sought by it under this Article 15, the
Indemnified Party shall promptly give the other party (the
"Indemnifying Party") notice thereof and the Indemnifying Party
shall be entitled to participate in the defense thereof and, with
prior written notice to the Indemnified Party given not later than
twenty (20) days after the delivery of the applicable notice, to
assume, at the Indemnifying Party's expense, the defense thereof,
with counsel reasonably satisfactory to such Indemnified Party.
After notice from the Indemnifying Party to such Indemnified Party
of its election so to assume the defense thereof, the Indemnifying
Party will not be liable to such Indemnified Party under this
Section for any attorneys' fees or other expenses subsequently
incurred by such Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation.
(b) The Indemnified Party shall have the right to employ its own counsel
if the Indemnifying Party elects to assume such defense, but the
fees and expenses of such counsel shall be at the Indemnified
Party's expense, unless (i) the employment of such counsel has been
authorized in writing by the Indemnifying Party, (ii) the
Indemnifying Party has not employed counsel to take charge of the
defense within twenty (20) days after delivery of the applicable
notice or, having elected to assume such defense, thereafter ceases
its defense of such action, or (iii) the Indemnified Party has
reasonably concluded that there may be defenses available to it
which are different from or additional to those available to the
Indemnifying Party (in which case the Indemnifying Party shall not
have the right to direct the defense of such action on behalf of the
Indemnified Party), in any of which event attorneys' fees and
expenses shall be borne by the Indemnifying Party.
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(c) The Indemnifying Party shall promptly notify the Indemnified Party
if the Indemnifying Party desires not to assume, or participate in
the defense of, any such claim, suit or action.
(d) The Indemnified Party or Indemnifying Party may at any time notify
the other of its intention to settle or compromise any claim, suit
or action against the Indemnified Party in respect of which payments
may be sought by the Indemnified Party hereunder, and (i) the
Indemnifying Party may settle or compromise any such claim, suit or
action solely for the payment of money damages, but shall not agree
to any other settlement or compromise without the prior written
consent of the Indemnified Party, which consent shall not be
unreasonably withheld (it being agreed that any failure of an
Indemnified Party to consent to any settlement or compromise
involving relief other than monetary damages shall not be deemed to
be unreasonably withheld), and (ii) the Indemnified Party may settle
or compromise any such claim, suit or action solely for an amount
not exceeding One Thousand Dollars ($1,000), but shall not settle or
compromise any other matter without the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably
withheld.
15.4 Notice and Additional Rights and Limitations.
(a) If an Indemnified Party fails to give prompt notice of any claim
being made or any suit or action being commenced in respect of which
indemnification under this Article 15 may be sought, such failure
shall not limit the liability of the Indemnifying Party; provided,
however, that this provision shall not be deemed to limit the
Indemnifying Party's rights to recover for any loss, cost or expense
which it can establish resulted from such failure to give prompt
notice.
(b) This Article 15 shall govern the obligations of the parties with
respect to the subject matter hereof but shall not be deemed to
limit the rights which any party might otherwise have at law or in
equity.
(c) Notwithstanding anything to the contrary in this Agreement, no party
shall be liable to the other for any indirect, consequential,
punitive or exemplary damages relating to or arising out of this
Agreement or the Program; provided, that the damages limitation set
forth in this Section 15.4(c) shall not apply to any damages which
result from an obligation of Bank or Dillard's to pay any third
party damages claims to the extent such third party claims otherwise
fall under Bank's or Dillard's respective indemnity obligations
hereunder.
ARTICLE 16
MISCELLANEOUS
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16.1 Precautionary Security Interest.
Dillard's and Bank agree that this Agreement contemplates the extension
of credit by Bank to Cardholders. However, as a precaution in the unlikely
event that any person asserts that Article 9 of the UCC applies or may apply
to the transactions contemplated hereby, and to secure Dillard's payment of
and performance of all obligations of Dillard's to Bank, Dillard's hereby
grants to Bank a first priority present and continuing security interest in
and to the following, whether now existing or hereafter created or acquired:
(i) all Accounts, Cardholder Indebtedness, Account Documentation and Charge
Transaction Data, (ii) all deposits, credit balances and reserves on Bank's
books relating to the Program, and (iii) all proceeds of the Cardholder
Indebtedness. In addition, Dillard's agrees to take any reasonable action
requested by Bank, at Bank's expense, to establish the first lien and
perfected status of such security interest; and appoints Bank as Dillard's
attorney-in-fact to take any such action on Dillard's behalf.
16.2 Securitization; Participation.
(a) Bank shall have the right to securitize the Cardholder Indebtedness
or any part thereof by itself or as part of a larger offering at any
time. Such securitization shall not affect Dillard's rights or
Bank's obligations hereunder, including with respect to customer
service, payment processing or collections. Bank shall not
securitize the Cardholder Indebtedness in any manner that may
encumber the right of Dillard's, or its Nominated Purchaser, to
purchase any of the Program Assets upon termination of this
Agreement. To the extent any of Dillard's Licensed Marks are used in
any securitization documents, such marks will not be used in a way
that adversely affects Dillard's or the Dillard's Licensed Marks.
(b) In the event Dillard's elects to purchase the Program Assets
pursuant to Section 14.2(a) and any securitization(s) originally
closed by Dillard's or its Affiliates shall remain outstanding,
Dillard's or its Nominated Purchaser shall acquire the Program
Assets subject to such securitization(s) and shall assume all
obligations of the Bank and its Affiliates with respect thereto,
including servicing, repurchase and indemnification obligations
pursuant to instruments in form and substance satisfactory to the
parties, as soon as reasonably possible consistent with Section 14.2
and any necessary consents or approvals. Dillard's (or its Nominated
Purchaser) and Bank shall cooperate to obtain any consent, approval,
rating affirmation or other requirements applicable to such purchase
and assumption. The purchase price set forth in Section 14.2(d)
shall be reduced by the outstanding principal balance of the
obligations of the Dillard's Credit Card Master Trust on the Program
Purchase Date. Compliance by Dillard's with this Section 16.2 shall
be a condition precedent to the obligation of the Bank to sell the
Program Assets to Dillard's pursuant to Section 14.2 hereof.
(c) With respect to any matters herein relating to the Dillard's Credit
Card Master Trust, in the event of any conflict between this
Agreement and the terms of any Securitization Documents (as defined
in the Purchase Agreement), the Securitization Documents shall
govern.
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16.3 Assignment.
Except as provided in this Section 16.3, neither party shall assign this
Agreement or any of its rights hereunder without the prior written consent of
the other party; provided, however, that either party may, without the consent
of the other party, assign this Agreement in whole or in part to an Affiliate
of such party or as part of a transfer of all or substantially all of the
assets of such party to another Person, if such Affiliate or Person expressly
assumes, in a form reasonably satisfactory to the non-assigning party, all of
the obligations of the assigning party.
16.4 Sale or Transfer of Accounts.
Except as otherwise provided herein, the Bank shall not sell or transfer
in whole or in part any Accounts other than Accounts and/or Cardholder
Indebtedness that have been written off by Bank in accordance with its
write-off policies. Proceeds of any such sale or transfer shall be treated as
a recovery on Cardholder Indebtedness.
16.5 Subcontracting.
It is understood and agreed that, in fulfilling its obligations under
this Agreement, either party may utilize its Affiliates or other Persons to
perform functions. The party shall be responsible for functions performed by
such Affiliates or other Persons to the same extent the party would be
responsible if it performed such functions itself.
16.6 Amendment.
Except as provided herein, this Agreement may not be amended except by a
written instrument signed by Bank and Dillard's.
16.7 Non-Waiver.
No delay by a party hereto in exercising any of its rights hereunder, or
partial or single exercise of such rights, shall operate as a waiver of that
or any other right. The exercise of one or more of a party's rights hereunder
shall not be a waiver of, or preclude the exercise of, any rights or remedies
available to such party under this Agreement or in law or at equity.
16.8 Severability.
If any provision of this Agreement is held to be invalid, void or
unenforceable, all other provisions shall remain valid and be enforced and
construed as if such invalid provision were never a part of this Agreement.
16.9 Waiver of Jury Trial and Venue.
(a) The parties hereto waive all right to trial by jury in any action or
proceeding to enforce or defend any rights under this Agreement.
(b) Any lawsuit brought by either party against the other shall be
brought in the State or United States District Court for Delaware.
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16.10 Governing Law; Compliance with Law.
(a) This Agreement and all rights and obligations hereunder, including,
without limitation, matters of construction, validity and
performance, shall be governed by and construed in accordance with
the laws of the State of Delaware, without regard to internal
principles of conflict of laws, and applicable federal law.
(b) Each party shall comply with Applicable Law in connection with its
activities and the performance of its rights and obligations
hereunder. Notwithstanding anything else contained in this
Agreement, neither party shall be obligated to take any action that
such party believes in good faith would violate, or is reasonably
likely to cause either of them to violate, any Applicable Law or
that would cause such party to become a "consumer reporting agency"
for purposes of the federal Fair Credit Reporting Act.
16.11 Captions.
Captions of the articles and sections of this Agreement are for
convenient reference only and are not intended as a summary of such articles
or sections and do not affect, limit, modify or construe the contents thereof.
16.12 Notices.
Any notice, approval, acceptance or consent required or permitted under
this Agreement shall be in writing to the other party and shall be deemed to
have been duly given when delivered in person or, if sent by United States
registered or certified mail, with postage prepaid, or by a nationally
recognized overnight delivery service, when received, addressed as follows:
If to Dillard's: Dillard's, Inc.
Attention: President
1600 Cantrell Road
Little Rock, Arkansas 72201
Fax: 501-376-5917
With a copy to: Dillard's, Inc.
Attention: General Counsel
1600 Cantrell Road
Little Rock, Arkansas 72201
Fax: 501-376-5031
If to Bank: GE CAPITAL CONSUMER CARD CO., FSB
Attention: President
5300 Kings Island Drive
Mason, Ohio 45040
Fax: 678-518-3134
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With a copy to: General Counsel
GE Consumer Finance - Americas
1600 Summer Street
Stamford, Connecticut 06927
Fax: 203-585-6297
16.13 Further Assurances.
Dillard's and Bank agree to produce or execute such other documents or
agreements as may be necessary or desirable for the execution and
implementation of this Agreement and the consummation of the transactions
specified herein and to take all such further action as the other party may
reasonably request in order to give evidence to the consummation of the
transactions specified herein.
16.14 No Joint Venture.
Nothing contained in this Agreement shall be deemed or construed by the
parties or any third party to create the relationship of principal and agent,
partnership, joint venture or of any association between Dillard's and Bank,
and no act of either party shall be deemed to create any such relationship.
Dillard's and Bank each agree to such further actions as the other may request
to evidence and affirm the non-existence of any such relationship.
16.15 Press Releases.
Dillard's and Bank each shall obtain the prior written approval of the
other party with regard to the substance and timing of any press releases
which announce the execution of this Agreement or the transactions specified
herein, which prior approval shall not unreasonably be withheld. At all times
thereafter, Dillard's and Bank, prior to issuing any press releases concerning
this Agreement or the transactions specified herein, shall consult with each
other concerning the proposed substance and timing of such releases and give
due consideration to the comments of the other party relating thereto. The
foregoing notwithstanding, it is understood that neither party shall be
required to consult with the other party with regard to (a) press releases and
other announcements as may be required by Applicable Law or the applicable
rules and regulations of any governmental agency or stock exchange and (b)
publications prepared solely by and for employees of Dillard's or Bank, or
their respective Affiliates, all of which may be issued without prior
consultation with, or the prior written consent of, the other party.
16.16 Set-Off.
Dillard's and Bank agree that each party has the right to set-off,
combine, consolidate or otherwise appropriate and apply (i) any assets of the
other party held by the party or (ii) any indebtedness or other liabilities at
any time owing by the party to the other party, as the case may
63
be, against or on account of any undisputed amounts owed by the other party
under this Agreement, except as expressly set forth herein.
16.17 Conflict of Interest.
Each party hereto, in performing it obligations hereunder, shall
establish and maintain appropriate business standards, procedures and
controls. Each party shall review such standards, procedures and controls with
reasonable frequency during the Term of this Agreement including, without
limitation, those related to the activities of its employees and agents in
their relations with the employees, agents and representatives of the other
parties hereto and with other third parties.
16.18 Third Parties.
There are no third-party beneficiaries to this Agreement. The parties do
not intend: (i) the benefits of this Agreement to inure to any third party; or
(ii) any rights, claims or causes of action against a party to be created in
favor of any person or entity other than the other party.
16.19 Force Majeure.
If performance of any service or obligation under this Agreement,
including the service level standards at Schedule 5.2, is prevented,
restricted, delayed or interfered with by reason of labor disputes, strikes,
acts of God, floods, lightning, severe weather, shortages of materials,
rationing, utility or communication failures, earthquakes, war, revolution,
civil commotion, acts of public enemies, blockade, embargo or any law, order,
proclamation, regulation, ordinance, demand or requirement having legal effect
of any government or any judicial authority or representative of any such
government, or any other act whatsoever, whether similar or dissimilar to
those referred to in this clause, which are beyond the reasonable control of a
party and could not have been prevented by reasonable precautions, then such
party shall be excused from such performance to the extent of and during the
period of such prevention, restriction, delay or interference. A party excused
from performance pursuant to this Section shall exercise all reasonable
efforts to continue to perform its obligations hereunder, including by
implementing its disaster recovery and business continuity plan as provided in
Section 5.7, and shall thereafter continue with reasonable due diligence and
good faith to remedy its inability to so perform except that nothing herein
shall obligate either party to settle a strike or other labor dispute when it
does not wish to do so.
16.20 Entire Agreement.
This Agreement, together with the Schedules hereto which are expressly
incorporated herein by reference, supersedes any other agreement, whether
written or oral, that may have been made or entered into by Dillard's and Bank
(or by any officer or employee of either of such parties) relating to the
matters specified herein, and constitutes the entire agreement by the parties
related to the matters specified herein or therein.
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16.21 Binding Effect; Effectiveness.
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and permitted assigns. This
Agreement is the product of negotiation by the parties having the assistance
of counsel and other advisers. It is the intention of the parties that this
Agreement not be construed more strictly with regard to one party than with
regard to the other.
16.22 Counterparts/Facsimiles.
This Agreement may be executed in any number of counterparts, all of
which together shall constitute one and the same instrument, but in making
proof of this Agreement, it shall not be necessary to produce or account for
more than one such counterpart. Any telefacsimile of an executed counterpart
shall be deemed an original.
16.23 Survival.
Upon the termination of this Agreement, the parties shall have the rights
and remedies described herein. Upon such termination, all obligations of the
parties under this Agreement shall cease, except that the obligations of the
parties pursuant to Sections 4.9 (Customer Information), 6.5 (Chargebacks),
6.6 (Chargeback Procedures), 8.1 (The Dillard's Licensed Marks), 8.2 (The Bank
Licensed Marks), 10.1 (Audit), 10.2 (Dispute Resolution), 14 (Effects of
Termination), 15 (Indemnification), 11 (Confidentiality), 16.1 (UCC),16.9
(Waiver of Jury Trial and Venue) and 16.10 (Governing Law) shall survive the
expiration or termination of this Agreement. In furtherance and not in
limitation of the foregoing, Bank shall be entitled to collect Accounts in any
lawful manner.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed as of the date first above written.
DILLARD'S, INC.
By: /s/ James I. Freeman
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Title: Senior Vice President
GE CAPITAL CONSUMER CARD CO.
By: /s/ Donald R. Ramon
--------------------------------------------
Title: Chief Operating Officer