MERCHANT SERVICES AGREEMENT

 

TABLE OF CONTENTS

 

ARTICLE I -	DEFINITIONS	1
1.1	Definitions	1
1.2	Construction	10
ARTICLE II -	CLIENT RELATIONSHIP TEAM AND PROGRAM COMMITTEE	10
2.1	General	10
2.2	Client Relationship Team	10
2.3	Operational Oversight; Meetings, Voting and Records	12
2.4	Program Committee	12
2.5	Dispute Resolution	13
ARTICLE III -	ISSUANCE OF ACCOUNTS AND ACCEPTANCE OF CARDS	13
3.1	Maintenance of Accounts of JNB	13
3.2	Procedures for Opening Accounts	14
3.3	Honoring of Cards	18
3.4	Acceptance of Cards by Bank	19
3.5	Operating Regulations	20
3.6	Completion of Sales Slips	20
3.7	Authorization	21
3.8	Settlement of Card Transactions	23
3.9	Cardholder Credits and Payments	24
3.10	Billing Inquiries and Cardholder Disputes	25
3.11	Chargeback Rights and Procedures	26
3.12	Representations and Warranties	27
3.13	Reports; Audit Rights	28
3.14	Conversion; Bank Performance	29
3.15	Internet Support	31
3.16	Second Look Program	31
3.17	Insurance	32
3.18	Zale Acquisitions; Unauthorized Goods and Services	33
3.19	Inactive Accounts	34
3.20	Monthly Cardholder Statements - Inserts and Messages	34
3.21	Access to Products and Services; Enhancements	36

 

 

3.22	Sales Tax Credits	36
ARTICLE IV -	FEES AND CERTAIN OTHER PAYMENTS	37
4.1	Fees and Certain Other Payments	37
ARTICLE V -	MISCELLANEOUS	39
5.1	Indemnification	39
5.2	Card Program Promotion; Advertising and Service Marks	41
5.3	Books and Records	43
5.4	Term and Termination	44
5.5	Termination-Related Obligations: Sunset Management	48
5.6	Status of the Parties	49
5.7	Force Majeure	49
5.8	Confidentiality	49
5.9	Access to Cardholder List	51
5.10	Arbitration	51
5.11	Financial Information	53
5.12	Assignability; Successors and Assigns	53
5.13	Agreement not to Sell	53
5.14	Cooperation	54
5.15	Amendment	54
5.16	Severability	54
5.17	Entire Agreement	54
5.18	Governing Law	54
5.19	Applicable Law or Regulation	54
5.20	Waivers	54
5.21	Notices	54
5.22	No Third-Party Rights	55
5.23	Captions	55
5.24	Counterparts	56
5.25	Consent to Jurisdiction	56

 

 

MERCHANT SERVICES AGREEMENT

 

This MERCHANT SERVICES AGREEMENT (“ Agreement ”) is made as of July 10, 2000 by and between HURLEY STATE BANK, a banking corporation organized and existing under the laws of the State of South Dakota (“ Bank ”), ZALE DELAWARE, INC., a corporation organized and existing under the laws of the State of Delaware ( “Z Del” ), and ZALE PUERTO RICO, INC., a corporation organized and existing under the laws of Puerto Rico (“ Zale Puerto Rico ”); Z Del and Zale Puerto Rico are hereinafter sometimes collectively referred to as “ Zale ”).

 

W I T N E S S E T H:

 

WHEREAS, each of Z Del and Zale Puerto Rico is in the business of offering certain goods and services for sale at retail sties, through catalogs, over the internet, and by other means and desires to offer its consumers the convenience of using Bank-issued credit cards branded with an appropriate Zale Mark in payment therefor, and

 

WHEREAS, in furtherance thereof, Zale and Bank have agreed that Bank shall, in accordance with the terms and conditions set forth herein, (a) Issue private label credit cards branded with appropriate Zale Marks to approved customers to be used by such customers for the purchase of goods and services offered by Zale in the ordinary course of business, and (b) service the accounts pursuant to which such cards are issued and that are established from time to time pursuant to this Agreement or that have been acquired by Bank through its merger with Jewelers National Bank, a national banking association (“ JNB” );

 

NOW, THEREFORE, in consideration of the foregoing premises and mutual covenants hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Bank, Z Del and Zale hereby agree as follows:

 

ARTICLE I -DEFINITIONS

 

1.1                                Definitions . As used herein, the following terms shall have the following respective meanings:

 

“ Account ” means a Card account, including any Card accounts acquired by Bank through its merger with JNB. An Account may have more than one Card issued to Cardholders with respect to such Account. All Accounts are, and are deemed to be, the property of Bank.

 

“ Acquired Business ” has the meaning given such term in Section 3.18(a)  hereof.

 

“ Accountholder ” means the Cardholder in whose name an Account is established and who is responsible for payment of sums due under such Account.

 

“ Add-on Sale ” means a Card Sale other than an Initial Sale.

 

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“ Adjusting Party ” has the meaning given such term in Section 3.2(c) hereof.

 

“ AFCC ” shall Mean Associates First Capital Corporation, a corporation organized and existing under the laws of the State of Delaware and the parent company of Bank.

 

“ Affiliate ” shall have the meaning assigned to such term in Rule 12b-2 of the Securities Exchange Act of 1934.

 

“ Applicable Law ” means all provisions of statutes, rules, regulations and orders of any Federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality or any court, in each case, whether of the United States or Puerto Rico, applicable to a Person, and ail orders and decrees of arbitrators in proceedings or actions in which the Person in question is a party.

 

“ Application ” means Bank’s credit application, containing substantially the same customer data fields as the form attached hereto as Exhibit A , as the same may be modified-from time to time in accordance with this Agreement, which must be completed by a consumer who wishes to open an Account and submitted to Bank for review.

 

“ Approved Sales Channels ” means Stores, catalogues, advertisements and other promotional materials, mail, telephone, Zale internet sites and any other manner of sale approved by the Client Relationship Team.

 

“ Arbitration Notice ” has the meaning given such term in Section 5.10 hereof.

 

“ Associates Securitization Facility ” means any securitization facility to which Bank and/or any of its Affiliates are party (and any contract, agreement or other document establishing or evidencing such facility) that includes any of the receivables originated under an Account.

 

“ Authorization ” means permission from Bank to make a Card Sale.

 

“ Authorization Center ” means a facility designated by Bank as a facility at which Card Sales are authorized and Applications are decisioned.

 

“ Authorized Goods and Services ” means (a) jewelry, watches, china, porcelain, ceramics, sliver, crystal, gift items, and other items typically offered for sale by Jewelry and/or fine gift stores; (b) insurance products and services; (c) gift cards, gift certificates, stored value cards and extended warranty services with respect to any of the foregoing; and (d) other products and services incidental or related to any of the foregoing offered by Zale in the ordinary course of business, through Approved Sales Channels, whether now existing or hereafter created.

 

“ Average Merchant Fee ”, with respect to any Decrease Period, shall mean the average amount, expressed as a percentage of Net Card Sales, of Merchant Fees actually paid by Zale

 

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hereunder for the most recent fiscal year of Zale ended immediately prior to such Decrease Period.

 

“ Bank indemnified Persons ” has the meaning given to such term in Section 5.1(a)  of this Agreement.

 

“ Bank’s Account issuance Criteria ” has the meaning given to such term in Section 3.2(a)  of this Agreement.

 

“ Business Day ” means Mondays through Fridays except days when Bank is authorized to be closed for business by South Dakota, Delaware, Illinois, Tennessee, Texas, Utah or federal law.

 

“ CEO ” has the meaning given to such term in Section 2.5(b)  of this Agreement.

 

“ Card ” means a credit card either (a) issued by JNB in respect of an Account acquired by Bank through its merger with JNB, or (b) issued by Bank and evidencing an Account, in either case on which shall appear a Zale Mark designated by Zale or such other design or designs as may be mutually acceptable to Zale and Bank.

 

“ Card Program ” means the credit card program established pursuant to this Agreement, under which Accounts will be established and/or maintained and Cards will be issued to Credit Applicants meeting Bank’s Account issuance Criteria, all upon the terms and conditions set forth herein.

 

“ Card Sale ” means the amount of any sale of Authorized Goods and Services, net of any portion paid in cash or by other means, that Zale makes to a Cardholder that is charged to an Account in accordance with the terms and conditions of this Agreement, including initial Sales and Add-on Sales.

 

“ Card Transactions ” means Card Sales and Credits.

 

“ Cardholder ” means any consumer to whom a Card has been issued and/or any consumer who has actual, implied or apparent authority to use a Card.

 

“ Chargeback ” means the refusal of Bank to pay Zale for a Card Sale for the reasons specifically set forth in Section 3.11 , hereof;

 

“ Chargeback Report ” has the meaning given to such term in Section 3.11 of this Agreement.

 

“ Client Relationship Team ” has the meaning given to such term in Section 2.2(a)  of this Agreement

 

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“ Confidential information ” has the meaning given to such term in Section 5.8(a)  of this Agreement.

 

“ Conversion ” means the date following execution and delivery of this Agreement on which Zale’s existing private label credit card program provided by JNB and the systems and programs utilized in connection therewith have been converted to the Card Program hereunder and the systems and programs utilized by Bank in connection with this Agreement in such a manner as could be reasonably expected to enable Bank to perform its obligations hereunder.

 

“ Conversion Date ” means the earlier of (a) the date on which Conversion has been substantially completed or (b) July 31, 2001.

 

“ Conversion Plan ” has the meaning given such term in Section 2.2(b)(1)  hereof.

 

“ Credit ” means a non-cash refund issued by Zale to a Cardholder (including without limitation pursuant to a return) on an Account of all or a portion of the amount of a Card Sale.

 

“ Credit Applicant ” means a consumer who submits an Application to Bank.

 

“ Credit Card Agreement ” means, with respect to an Account, the agreement between Bank and an Accountholder governing such Account, as such agreement may be amended, modified or otherwise changed from time to time in accordance with the provisions hereof.

 

“ Credit Plan ” means a plan pursuant to which an Accountholder agrees to repay amounts due from such Accountholder to Bank under an Account. A Credit Plan may be a: Regular Revolving Credit Plan or a Special Credit Plan.

 

“ Credit Slip ” means evidence of a Credit in electronic or paper form. .

 

“ Decrease Period ” has the meaning given to such term in Section 5.4(b)(v)  hereof.

 

“ Designated Third Party ” has the meaning given to such term in Section 5.4(f)  of this Agreement.

 

“ Dispute ” has the meaning given to such term in Section 2.4(a)  of this Agreement.

 

“ Effective Date ” means the Effective Time, as defined in the Merger Agreement, which shall be the date on which the provisions of this Agreement become effective; provided , however that if the Merger does not occur, this Agreement shall terminate and not become effective unless the parties hereto otherwise mutually agree.

 

“ Electronic Location ” means a Zale location at which there is an Electronic Terminal.

 

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“ Electronic Terminal ” means an electronic terminal or computer capable of communicating by means of an on-line or dial-up electronic link (whether routed through Bank’s facilities or otherwise) with an Authorization Center to obtain Authorizations and decisions with respect to Applications.

 

“ Fair Market Value ” has the meaning given to such term in Section 5.4(f)  of this Agreement.

 

“ Federal Funds Rate ” means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 0.01%) equal to the weighted average of the rates on overnight federal funds transactions with member banks of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day.

 

“ Floor Unit ” means $1000 United States dollars or such larger amount as may be determined from time to time by Bank, at or above which Authorization must be obtained by Zale to make a Card Sale when Zale’s ability to secure electronic Authorization of such Card Sale is not available.

 

“ Furnishing Party ” shall have the meaning given to such term in Section 5.8(a)  hereof.

 

“ Indemnified Party ” shall mean a Bank indemnified Person or a Zale indemnified Person, as the case may be.

 

“ Indemnifying Part ” shall mean a party required to indemnify an indemnified Party as provided in Section 5.1 hereof.

 

“ Initial Sale ” means the first Card Sale to a Cardholder occurring within thirty (30) days following the date on which such Cardholder’s Application is approved.

 

“ Initial Term ” has the meaning given to such term in Section 5.4(a) , of this Agreement

 

“ In-Store Payments ” has the meaning given to such term in Section 3.9(b)  hereof.

 

“ Insurance Agreement ” has the meaning given to such term in Section 3.17 hereof.

 

“ Material Change ” means any change, event, condition or occurrence, other than one required by Applicable Law, which could reasonably be expected to (a) cause a material decrease in any or all of the following: (i) the number of Applications, (ii) the use of Cards by Cardholders or (iii) Card Sales; or (b) have a material adverse effect on the Card Program; or (c) require material changes to or otherwise materially affect Zale’s existing Store procedures, operations, hardware (including without limitation Electronic Terminals) or software.

 

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“ Merchant Fee ” has the meaning given to such term in Section 4.1(a)  hereof.

 

“ Merchant Fee Differential ” means, with respect to any Decrease Period, an amount equal to the product of (a) the Average Merchant Fee with respect to such Decrease Period and (b) the difference between the Minimum Volume Amount and Net Card Sales with respect to such Decrease Period.

 

“ Merger ” means the merger of JNB with and into Bank as contemplated by the Merger Agreement.

 

“ Merger Agreement ” shall mean that certain Agreement and Plan of Merger, dated of even date herewith, among Zale Delaware, inc., Jewelers National Bank and Bank.

 

“ Minimum Volume Amount ” means Net Card Sales of $750,000,000.00, subject to adjustment from time to time as provided in Section 3.2(c)  hereof; provided however , that for purposes of this definition only, Net Card Sales shall include the net amount of credit sales of any division or subsidiary of Zale which is sold, conveyed, disposed of, divested or otherwise transferred by Zale which would have been Net Card Sales if such division or subsidiary were still a division or subsidiary of Zale, provided that such subsidiary or division so sold, conveyed, disposed of, divested or otherwise transferred (a) is willing to continue its credit operations with Bank pursuant to terms and conditions no less favorable to Bank than those contained herein (regardless of whether Bank actually agrees to such continuation) and (b) could reasonably be expected to fulfill its obligations thereunder for the term remaining under this Agreement (excluding any extension thereof).

 

“ Negative Significant Shift ” shall mean the-occurrence, determined on a consistent basis, as to any division of Zale, of any of the following:

 

(i)                                 the occurrence, during any calendar quarter, of any one of the following:

 

(A)                               a ten percent (10%) or greater increase in fifty percent (50%) or more of the vintage FICO band “over 60 days delinquent” buckets. For purposes of this measurement, FICO bands will be in twenty (20) point increments and Accounts which do not require immediate minimum payments (deferred payments) will be excluded;

 

(B)                                 a portfolio quarterly net loss rate 10% greater than the net loss rate for the same quarter in the prior calendar year. For purposes of this measure the net loss rate calculation will be based upon the net losses for the respective period as a percentage of the average receivables for the same quarter in the prior calendar year;

 

(C)                                 the portfolio 60+ delinquency rate increases by 10% or greater compared to the 60+ rate for the same quarter in the prior calendar year; or

 

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(D)                                an increase of 10% or more in the value of portfolio bankruptcy filings on Accounts not previously written off which are received in any quarter as a percent of average receivables when compared to the prior quarter or the average of the prior four quarters; or

 

(ii)                              the occurrence of any one of the following in two (2) consecutive calendar quarters or the occurrence of both of the following in the same calendar quarter:

 

(A)                               the average FICO score of approved Accounts in any quarter declines by 1.1% or greater compared to the average FICO score for the same quarter in the prior calendar year ; or

 

(B)                                 the average portfolio update FICO score of Accounts eligible to make purchases in any quarter declines by 1.1% or greater compared to the average portfolio update FICO score for the same quarter in the prior calendar year.

 

“ Net Card Sales ,” with respect to a given period, means (a) the total amount of Card Sales (including without limitation Card Sales under any Second Look Program provided by Bank to Zale) reported to Bank by Zale during such period in accordance with the provisions hereof minus (b) the total amount of Credits reported to Bank by Zale during such period in accordance with the provisions hereof.

 

“ Non-Adjusting Party ” has the meaning given such term in Section 3.2(c)  hereof.

 

“ Non-Adjusting Party ” has the meaning given such term in Section 5.2(b)  hereof.

 

“ Operating Regulations ” means the operating procedures reasonably agreed to by the Client Relationship Team on or prior to the Effective Date, which Operating Regulations shall apply to the Card Program during the term hereof and shall contain provisions dealing with, among others, those matters listed in Exhibit B attached hereto, as the same may be modified from time to time in accordance with the provisions of this Agreement, and which Operating Regulations, upon their adoption by the Client Relationship Team, shell be deemed to be incorporated herein by reference as fully as though set forth herein in their entirety.

 

“ Performance Standard ” means those standards set forth on Exhibit C hereto, as the same may be adjusted from time to time pursuant to Section 3.2(c)  hereof, which are the standards which shall govern Bank’s performance of certain obligations hereunder and which are incorporated into and hereby made a part of this Agreement as fully as though set forth herein in their entirety.

 

“ Person ” means any individual, sole proprietorship, partnership, limited liability company, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity, party or government (whether national, federal, state, county, city,

 

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municipal, or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof).

 

“ Positive Significant Shift ” shall mean the occurrence, determined as to any division of Zale, of any of the following:

 

(i)                                 the occurrence, during any calendar quarter, of any one of the following:

 

(A)                               a ten percent (10%) or greater decrease in fifty percent (50%) or more of the vintage FICO band “over 60 days delinquent” buckets. For purposes of this measurement, FICO bands will be in twenty (20) point increments and Accounts which do not require immediate minimum payments (deferred payments) will be excluded;

 

(B)                                 a portfolio quarterly net loss rate 10% less than the net loss rate for the same quarter in the prior calendar year. For purposes of this measure the net loss rate calculation will be based upon the net losses for the respective period as a percentage of the average receivables for the same quarter in the prior calendar year;

 

(C)                                 the portfolio 60+ delinquency rate decreases by 10% or greater compared to the 60+ rate for the same quarter in the prior calendar year, or

 

(D)                                a decrease of 10% or more in the value of portfolio bankruptcy filings on Accounts not previously written off which are received in any quarter as a percent of average receivables when compared to the prior quarter or the average of the prior four quarters; or

 

(ii)                              the occurrence of any one of the following in two (2) consecutive calendar quarters or the occurrence of both of the following in the same calendar quarter:

 

(A)                               the average FICO score of approved Accounts in any quarter increases by 1.1% or greater compared to the average FICO score for the same quarter in the prior calendar year; or

 

(B)                                 the average portfolio update FICO score of Accounts eligible to make purchased in any quarter increases by 1.1% or greater compared to the average portfolio update FICO score for the same quarter in the prior calendar year.

 

“ Program Committee ” means the Program Committee consisting of representatives of both Bank and Zale established pursuant to Section 2.4 hereof and having the responsibilities set forth in Section 2.4(a)  hereof.

 

“ Promotional Materials ” has the meaning given to such term in Section 5.2(b)  hereof.

 

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“ Proposing Party ” has the meaning given such term in Section 5.2(b)  hereof.

 

“ Receiving Party ” has the meaning given such term in Section 5.8(a)  hereof.

 

“ Regular Revolving Credit Plan ” means all Card Plans other than Special Credit Plans.

 

“ Repeated and Material Breach ” means multiple breaches of the Performance Standards and/or Bank’s payment obligations hereunder which, when considered in the aggregate, could reasonably be expected to have a materiel adverse effect on the Card Program or on Zale’s retail sales, business, customer service, financial condition or prospects.

 

“ Required Disclosures ” means forms of credit disclosures and disclosure documents provided by Bank and required by Applicable Law, which are to be used in connection with advertising, marketing and promoting the Card Program, accepting Applications and making Card Sales.

 

“ Sales Data ” means the electronic data relating to and arising out of Card Transactions.

 

“ Sales Slip ” means evidence of a Card Sale in electronic or paper form.

 

“ Second Look Notice ” has the meaning given such term in Section 3.16 of this Agreement

 

“ Second Look Program ” has the meaning given such term in Section 3.16 of this Agreement.

 

“ Settlement ” means the payment by Bank, from time to time as provided herein, to Zale of the amount of Net Card Sales effected by Zale.

 

“ Settlement Account ” means a deposit account at a financial institution designated by Zale from time to time as a Settlement Account for purposes of this Agreement.

 

“ Shift ” shall mean a Negative Significant Shift or Positive Significant Shift, as the context may require.

 

“ Special Credit Plan ” means a Credit Plan under which interest or payment is either waived, modified or deferred for a period of time after the Card Sale. Payments may or may not be required during the interest deferral, modification or waiver period, and a minimum purchase amount may be required. Special Credit Plans include without limitation those described in Schedule 1.1A of this Agreement

 

“ Store ” means a retail store in the United States or Puerto Rico owned or leased and operated by Zale.

 

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“ Subsequent Term ” has the meaning given to such term in Section 5.4(a)  hereof.

 

“ Tribunal ” has the meaning given to such term in Section 5.10 of this Agreement.

 

“ Unauthorized Goods and Services ” has the meaning given to such term in Section 3.18(b)  hereof.

 

“ Zale indemnified Persons ” has the meaning given to such term in Section 5.1(b)  of this Agreement.

 

“ Zale Mark ” means any name, logo, trademark, service mark or other proprietary designation of Zale (including any division of Zale) selected for use by Zale from time to time in connection with the Card Program. The Zale Marks in effect on the date hereof are set forth in Schedule 1.1B hereof.

 

1.2                                  Construction . Unless the context otherwise clearly indicates, words used in the singular include the plural and words used in the plural include the singular.

 

ARTICLE II -CLIENT RELATIONSHIP TEAM AND PROGRAM COMMITTEE

 

2.1                                  General .   Bank is the sole owner of the Accounts and is solely responsible for management, in a manner consistent with the provisions of this Agreement, of the Accounts and the Card Program. Zale and Bank shall at all times use reasonable efforts and cooperate in good faith to resolve disputes that arise from time to time in connection with the operation of the Card Program under this Agreement.

 

2.2                                  Client Relationship Team .

 

(a)                                   Structure . The ongoing operations of the Card Program will be subject to the continuing review of a Client Relationship Team (the “ Client Relationship Team ”). The Client Relationship Team will consist of dedicated representatives of both Zale and Bank.  Zale and Bank shall establish the number of representatives to be appointed by each of them to the Client Relationship Team from time to time. The initial members of the Client Relationship Team shall be those Persons or positions listed on Schedule 2.2(a)  hereto. Each of Zale and the Bank shall be entitled to remove one or more of its representatives and appoint substitute representatives at any time and from time to time during the term hereof upon written notice to the other party or parties hereto.

 

(b)                                  General Responsibility . The Client Relationship Team shall be the principal management interface between Zale and Bank with respect to the day-to-day operations of the Card Program. The Client Relationship Team shall cooperate and work together to facilitate Conversion, to expeditiously resolve problems which arise from time to time with respect to the implementation and ongoing operations of the Card Program and to facilitate the exchange of information to foster the successful operation of the Card Program in a manner reasonably consistent with the business interests of both Zale and Bank. Responsibilities of the Client Relationship Team shall include, without limitation, approving annual business plans and goals

 

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for operating performance, monitoring actual results against milestones and expectations, dealing with day-to-day operational issues and matters that arise in connection with the Card Program, reviewing and approving Material Changes in the Card Program proposed by the Bank, identifying market trends and analyzing the implications thereof for the Card Program and sponsoring Card Program improvement opportunities. Bank agrees that, at Zale’s request, it shall provide to one of Bank’s members of the Client Relationship Team online access to the Bank’s Accountholder records and that, to the full extent permitted by Applicable Law, such member shall, upon reasonable request by a Zale designated member of the Client Relationship Team, disclose any or all of such Accountholder records to such designated Zale member or members for reasons of account dispute resolution, issues regarding credits and chargebacks and similar purposes. Bank agrees that it will not make any Material Change without giving the Client Relationship Team prior notice of such change in such a manner as to allow such Client Relationship Testing an opportunity to discuss such proposed Material Change and the likely implications of such Material Change and securing the approval of the Client Relationship Team. Without limiting the generality of any of the foregoing, in addition to the responsibilities provided herein, the Client Relationship Team will serve as the forum in which Zale and the Bank shall at the appropriate time, or from time to time, as the case may be:

 

(i)                                      develop a plan (the “ Conversion Plan ”) for Conversion, which Conversion Plan shall contain such milestones and other details as shall be determined by the Client Relationship Team; discuss appropriate measures to implement the Conversion Plan; and monitor Bank’s progress in implementing the Conversion Plan;

 

(ii)                                   on or prior to the Effective Date, develop Operating Regulations for purposes of the Card Program;

 

(iii)                                review and approve Account acquisition and Cardholder development plans proposed by Bank and/or Zale and any marketing plans and related implementation schedules developed by Zale;

 

(iv)                               review and approve any proposal concerning special inserts, messages or letters to be included in Account statements to the extent such proposal is required to be approved by the Client Relationship Team as provided herein;

 

(v)                                  discuss and approve any proposals for new Card products;

 

(vi)                               discuss and approve any Material Changes proposed by Bank;

 

(vii)                            discuss issues related to processing and servicing the Accounts, the Cardholders and the Stores;

 

(viii)                         discuss and recommend actions to achieve improvement in the effectiveness and efficiency of Card Program operations;

 

(ix)                                 discuss plans for major systems changes affecting the Card Program and recommend action as needed;

 

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(x)                                    manage priorities and approve the implementation of any systems interface between Zale and Bank or designees of either Party;

 

(xi)                                 determine Card specifications including size, type of plastic, encoding and magnetic stripe;

 

(xii)                              discuss and develop proposals for new Credit Plans and other proposals and programs to maximize Card Sales;

 

(xiii)                           discuss such other marketing and operational matters in respect of the Card Program as are deemed appropriate by the Client Relationship Team or the parties hereto; and

 

(xiv)                          discuss unsatisfactory performance relative to the Card Program and develop plans and proposals to address such unsatisfactory performance.

 

2.3                                  Operational Oversight; Meetings, Voting and Records .

 

(a)                                   The Client Relationship Team members shall interface regularly as may be necessary or appropriate and shall work closely on all operational matters pertaining to the Card Program. In furtherance thereof, at Zale’s sale election, members of the Client Relationship Team may be located at either or both of Zale’s and Bank’s facilities. All costs and expenses associated with the provision of offices and administrative and secretarial support for such members shall be borne by the party incurring such costs or expenses.

 

(b)                                  Each of Zale and Bank shall be entitled to one vote with respect to all matters to be voted upon by the Client Relationship Team, regardless of the number of members of each party on the Client Relationship Team. Any one of the representatives of Zale and of Bank may cast the vote allocated to Zale or Bank, as the case may be, in the manner determined by such representatives. Any matter requiring approval of the Client Relationship Team shall require the affirmative vote of both Zale and Bank.

 

2.4                                  Program Committee .

 

(a)                                   For the purpose of periodically reviewing the Card Program and resolving any claim, controversy or dispute between Bank and Zale arising out of, relating to, or in connection with this Agreement or the agreements and transactions contemplated hereby, including the interpretation, validity, termination or breath hereof and any deadlock of the Client Relationship Team (any such claim, controversy or dispute, a “ Dispute ”), Bank and Zale each hereby agree to establish and maintain a Program Committee (the “ Program Committee ”). The Program Committee will consist of an equal number of senior management representatives of both Zale and Bank. The Program Committee shall establish the number of representatives to be appointed to the Program Committee from time to time; provided , however , that each of Bank and Zale shall always have an equal number of representatives. The initial number of such representatives for each of Zale and Bank will be three (3), and the initial members of the Program Committee shall be those Persons listed on Schedule 2.4 hereto. Each of Zale and Bank shall be entitled to remove one or more of its representatives and appoint substitute representatives at any time and from time to time during the term hereof upon written notice to the other party or parties hereto.

 

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(b)                                  The Program Committee shall meet (in person or by telephone or video conference) at such times and places as may be decided by the members of the Program Committee; provided , however , that the Program Committee shall meet (i) unless otherwise agreed by the parties hereto, at least quarterly to discuss the status of the Card Program; (ii) within five (5) days after either party hereto notifies the other of a Dispute; and (iii) as often as may be reasonably necessary to gather information with respect to the matter which is the subject of the Dispute and which is appropriate and germane to its resolution. The Program Committee will discuss each such Dispute and negotiate in good faith in an effort to resolve such Dispute as promptly and efficiently as reasonably possible. The members of the Program Committee shall appoint an acting chairman and adopt such other rules to facilitate the conduct of meetings as are agreed upon from time to time. Each of Zale and Bank shall be entitled to one vote with respect to all matters to be voted upon by the Program Committee. Any one of the representatives of Zale and of Bank may cast the vote allocated to Zale or Bank, as the case may be, in the manner determined by such representatives. The presence of a representative of both Zale and Bank who is authorized to vote shall constitute a quorum for meetings of the Program Committee. Any matter requiring approval of the Program Committee shall require the affirmative vote of both Zale and Bank. The Program Committee shall keep a written record of its proceedings, which record will be reviewed and approved by one representative of each of Zale and Bank designated by the respective parties for such purpose.

 

2.5           Dispute Resolution .

 

(a)            Any Dispute that cannot be resolved by the Program Committee shall be resolved in accordance with the procedures set forth below in this Section 2.5 . Each party covenants to the other party that it shall not resort to judicial remedies with respect to a Dispute except for relief in aid of arbitration and except as allowed pursuant to the provisions of this Section 2.5 . A party hereto that violates the covenants set forth in this Section 2.5 hereof shall pay all of the reasonable legal costs and expenses incurred by the other party or parties hereto in connection with the enforcement thereof.

 

(b)            If the Program Committee is unable to resolve any Dispute referred to it within fifteen (15) days of the date such Dispute was referred to it, such Dispute shall immediately be referred to the Chief Execution Officer (“ CEO” ) of Bank’s parent corporation and the CEO of Z Del’s parent corporation or their respective designees for their review and resolution. If such Dispute cannot be resolved by such officers within seven (7) days from the date such Dispute was first referred to them, the parties, or either of them, may initiate Arbitration according to the provisions of Section 5.10 hereof.

 

ARTICLE III -ISSUANCE OF ACCOUNTS AND ACCEPTANCE OF CARDS

 

3.1           Maintenance of Accounts of JNB . Bank hereby agrees, as of the Effective Date, to accept (i) all accountholders and cardholders of JNB as of the Effective Date as Accountholders and Cardholders hereunder, (ii) the cards held by such Accountholders as Cards for all purposes hereof and (iii) all Accounts of such accountholders as Accounts hereunder. Bank agrees to pay Zale for all Card Sales made to such Cardholders in accordance with the terms and conditions hereof.

 

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3.2            Procedures for Opening Accounts .

 

(a)            Bank’s Account Issuance Criteria .  Subject to the terms and conditions of this Agreement Bank shall receive Applications for Accounts and approve or decline such Applications solely in accordance with Bank’s Account issuance criteria (“ Bank’s Account Issuance Criteria ”) and the Performance Standards. Bank’s Account Issuance Criteria as of the date of this Agreement are attached hereto as Schedule 3.2(a)  and are incorporated herein as fully as though set forth herein. Bank hereby agrees that it shall not change or modify Bank’s Account issuance Criteria prior to the Conversion Data without Zale’s prior written approval. Thereafter, Bank may make changes to Bank’s Account issuance Criteria from time to time as Bank reasonably deems necessary, and such changes will not require the approval of the Client Relationship Team or Zale; provided , however , that Bank shall give Zale at least thirty (30) days notice of any such change which is a material change. Bank shall decision each Application in accordance with the terms hereof (including the Performance Standards) and, if such , Application is approved, promptly issue a Card to such Accountholder.

 

(b)                                  Adjustments to Credit Card Agreements . Bank may, in its sole but reasonable discretion, make changes to the terms and conditions of the Credit Card Agreements from time to time, and such changes shall not require the approval of the Client Relationship Team or Zale.

 

(c)                                   Adjustments to Performance Standards and Minimum Volume Amount .  Beginning twelve (12) months from the Conversion Date, upon the occurrence of any Negative Significant Shift, (i) the Credit Granting Criteria Standards portion of the Performance Standards applicable to the Zale division affected thereby may be adjusted by Bank, as provided herein, based on any such Shift (other than any such Shift caused by Bank’s action), and (ii) the Minimum Volume Amount may be adjusted by Zale, as provided herein, based on any such Shift (other than any such Shift caused by Zale’s action).

 

Once a Negative Significant Shift has occurred, Bank will provide reasonable documentation supporting such Negative Significant Shift to Zale, and (A) Bank may propose an adjustment, applicable only to the Zale division or divisions as to which such Shift has occurred and proportionate to such Shift, to any Performance Standard affected by such Shift and which is reasonably required to ensure that Bank maintains its same net position, relative to Bank’s exposure for liquidated damages, as it maintained prior to the occurrence of such Shift ( provided , however , that in all cases, the amount of liquidated damages provided for violation of any such Performance Standard shall remain the same); and (B) Zale may propose changes to the Minimum Volume Amount reasonably required to insure that Zale maintains its same net position relative to its exposure for termination by Bank pursuant to Section 5.4(b)(v)  hereof as it maintained prior to the occurrence of the Negative Significant Shift. The party proposing an adjustment pursuant to clause (A) or (B) above is herein referred to as the “Adjusting Party”, and the other party hereto is herein referred to as the Non-Adjusting Party .  If the Non-Adjusting Party agrees with the proposed adjustments, such adjustments will become effective at the beginning of the quarter immediately following the quarter in which a Shift occurred. If the Non-Adjusting Party does not agree with the changes proposed by the Adjusting Party, the Adjusting Party and the Non-Adjusting Party shall attempt in good faith to reach agreement on what adjustments, if any, are required to reflect the occurrence of such Shift. Notwithstanding anything to the contrary herein, if the Adjusting Party and the Non-Adjusting Party are unable to

 

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agree on such changes within fourteen (14) days of the Adjusting Party’s proposal, the parties shall submit the dispute directly to arbitration pursuant to Section 5.10 hereof or such other dispute resolution process as the parties may mutually agree. During the period a proposed adjustment by Bank is in arbitration, any liquidated damages payable by Bank for Bank’s breaches of those Performance Standards which are the subject of the arbitration or other process will be suspended; provided , however , that liquidated damages applicable to a breach of those Performance Standards established through arbitration will be applied retroactively to the date such Performance Standards were suspended. During the period a proposed adjustment by Zale is in arbitration, the Minimum Volume Amount as it existed at the time of the proposed adjustment shall remain in effect; provided , however , that Bank’s right to terminate for Zale’s failure to meet the Minimum Volume Amount shall be suspended, and Zale shall not be obligated to pay any Merchant Fee Differential to avoid a termination by Bank pursuant to Section 5.4(b)(v)  hereof; provided , however , that the Minimum Volume Amount established through arbitration shall apply retroactively and Zale shall have a minimum of thirty (30) days following determination of such Minimum Volume Amount to pay any Merchant Fee Differential required to avoid termination of this Agreement by Bank pursuant to Section 5.4(b)(v)  hereof. Bank and Zale agree that the Performance Standards or the Minimum Volume Amount, as the case may be, which were adjusted as a result of the foregoing provisions of this Section 3.2(c)  will be further adjusted, in the manner provided above, upon the earlier to occur of the following: (1) in the case of adjustments to the Performance Standards by Bank, at the time Bank returns to its original net position relative to liquidated damages for breach of the applicable Performance Standard; or (2) in the case of any adjustment to the Minimum Volume Amount by Zale, in the event Zale returns to its original net position relative to possible termination by Bank of this Agreement pursuant to Section 5.4(b)(v)  hereof; or (3) in the case of an adjustment by either Bank or Zale, the event which was the basis of an adjustment has shifted back to its prior performance level for a period of two (2) consecutive quarters and no other condition for adjustment exists under the definition of Negative Significant Shift.

 

(d)                                  Discussion of Quarterly Results . Once a Negative Significant Shift has occurred, Bank agrees to review with the Client Relationship Team at least quarterly the results of measures of those criteria which caused such Negative Significant Shift until such criteria have again shifted back to their prior performance levels.

 

(e)                                   Limitation on Bank’s Right to Make Changes . Notwithstanding any other provision hereof to the contrary, in the event Bank changes the Account issuance Criteria or the terms and conditions of the Credit Card Agreement and such change could reasonably be expected to require modifications to Zale’s existing Store procedures, operations, hardware or software, Bank and Zale shall negotiate in good faith regarding implementation of such modifications, including without limitation the method, timing, expense and who bears the cost of such modifications.

 

(f)                                     Terms and Conditions to Remain Competitive .  Notwithstanding any other provision hereof to the contrary, Bank agrees that during the term of this Agreement the Account terms and conditions hereunder will not competitively disadvantage Zale as to those terms and conditions offered by a majority of other similarly situated specialty jewelry retailers and department stares offering Authorized Goods and Services.

 

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(g)                                  Applications with Accompanying Sale . Applications transmitted to Bank in the manner specified in the Operating Regulations in conjunction with a sale of Authorized Goods and Services will be reviewed by Bank in accordance with Bank’s Account Issuance Criteria, and Bank will advise Zale in accordance with this Agreement, including the Performance Standards, whether such Application has been approved or denied. In connection with Applications submitted under this Section 3.2(b)  Zale shall be responsible for the following:

 

(i)                                      Insuring that all information required on the Application has been provided to Bank in accordance with the Operating Regulations and is as provided to Zale by the Credit Applicant;

 

(ii)                                   Obtaining a photo identification (such as, by way of example and not limitation driver’s license or passport) of the Credit Applicant in accordance with the Operating Regulations;

 

(iii)                                Upon either approval or denial of an Application, storing such Application in a manner deemed appropriate by Zale (including without limitation by imaging) and, only as may be reasonably requested by Bank from time to time, forwarding a copy of a requested original Application to Bank within fourteen (14) days following such request and, no more frequently than once every January, beginning in January, 2002, forwarding to Bank copies of all Applications submitted to Zale and approved by Bank during the calendar year immediately preceding the calendar year then most recently ended (e.g., copies of such Applications submitted and approved during calendar year 2000 would be forwarded to Bank in January, 2002);

 

(iv)                               Entering the Card Sale into the Electronic Terminal or other means by which information is being transmitted to Bank and recording, electronically or otherwise, any approval code provided by Bank to Zale at the time of such Card Sale; and

 

(v)                                  Providing to each Credit Applicant a copy of the Credit Card Agreement and any other Required Disclosures Bank has provided to Zale and instructed Zale to provide to Credit Applicant at the time of application.

 

(h)                                  Processing of Applications . In order to expedite processing of Applications for Accounts and minimize sales clerk time required in connection with each Application, to the extent Electronic Terminals are available, all Applications for Accounts and responses to such Applications shall be effected electronically, utilizing Store registers, by both Zale and Bank, in a manner reasonably consistent with the manner in which Zale processed applications for accounts under its credit program with JNB or as may be otherwise agreed by Zale and Bank.

 

(i)                                      Internet Applications . Customers of Zale who wish to apply for an Account may, at Zale’s election, do so via an internet link between any Zale e-commerce website and any Bank internet website, when such internet link becomes operative as provided in Section 3.15 hereof. Bank shall cooperate with Zale in implementing the process for internet Applications, which process shall be as “user-friendly” as reasonably possible. Bank shall be responsible for all

 

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Required Disclosures to be made to Credit Applicants over the internet to the extent Bank or its agent or representative is hosting the website on which internet Applications are received. With respect to any Applications or Authorizations received via the internet in connection with Special Credit Plans, Zale shall be responsible for providing a copy of any Required Disclosures Bank has provided to Zale with respect to such Special Credit Plan. Bank hereby licenses Zale the right to use Bank’s logo on any Zale internet site for purposes of promoting the Card Program, which use shall be subject to Bank’s reasonable approval. All Applications received by Bank via the internet will be processed only if all of the information requested on the website Application form has been completed; provided , however , that Bank will design such website to properly prompt Credit Applicants to supply such information and to fill in missing information. The Client Relationship Team shall, in a timely manner, establish Performance Standards for the processing of internet Applications and conduct of the Card Program via the internet.

 

(j)                                      Failure to Adhere to Procedures . Failure of Zale to adhere to the above described procedures for Applications may result in a Chargeback to the extent specifically provided in Section 3.11 hereof but only to the extent that Bank (i) has paid Zale for Authorized Goods and Services charged to such Account and (ii) has suffered financial loss because of Zale’s failure to observe such procedures.

 

(k)                                   Cost of Applications; Certain Required Disclosures . At its sole cost and expense Bank agrees to provide Zale, from time to time at such location or locations as may be specified by Zale, a sufficient number of copies of Required Disclosures (other than those contained in the Credit Card Agreement or in advertisements, for which printing costs shall be for the account of Zale but production of text shall be Bank’s responsibility) as may be required by Zale hereunder. Arrangements for and the cost of printing Applications, Credit Card Agreements and Sales Slips shall be Zale’s responsibility; or provided , however , that any and all costs and expenses incurred by Zale as a result of changes to any then existing form of the foregoing requested by Bank or required by Applicable Law, including without limitation additional costs resulting from the destruction of any existing copies of such form, shall be for the sole account of Bank, and Bank shall reimburse Zale upon demand for any such costs and expenses. Bank shall be responsible, at its sole cost and expense, for production of Cards, Card carriers, billing statements and remittance envelopes, provided , however , that any such costs and expenses resulting solely from a change required by Zale shall be for Zale’s account, and Zale shall reimburse Bank upon demand for any such costs and expenses. In addition to copies of the Credit Card Agreements provided by Zale to Credit Applicants at the time of application, Bank agrees to provide Accountholders, in the Card carrier envelope provided by Bank to such Accountholders, upon issuance of each Card, a copy of Bank’s Credit Card Agreement. Bank shall include in the Credit Card Agreement any Required Disclosures regarding those Special Credit Plans identified in Schedule 1.1B hereto and other Special Credit Plans hereafter adopted which Bank and Zale reasonably agree, at the time of any printing of the Credit Card Agreement, to include.  Other than any such Required Disclosures which Bank advises Zale (i) to distribute to Cardholders at the time of submission or approver of an Application, (ii) to include in advertisements or (iii) to distribute or disclose in connection with promotions, Bank shall be fully responsible, at Bank’s sole cost and expense, for providing and hereby covenants to provide Cardholders with all Required Disclosures. Bank and Zale shall reasonably cooperate and coordinate with respect to production of materials required to be produced by each of them hereunder.

 

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3.3            Honoring of Cards .

 

(a)            Provisions Regarding Honoring Cards . Subject to the terms and conditions of this Agreement, beginning on the Effective Date, Zale agrees to accept Cards for payment of Authorized Goods and Services in those instances when a Cardholder wishes to charge the purchase of Authorized Goods and Services to his or her Account.  Zale shall not attempt to discourage use of a Card by a Cardholder (except in accordance with this Agreement). Zale shall accept Cards bearing the Zale Mark for a particular division at all of such division’s Stores for the purchase of Authorized Goods and Services; provided , however , that except as otherwise contemplated hereby, the Sales Data resulting from each such acceptance of a Card shall be in United States dollars. If any facility or service is operated on Zale premises under a franchise, lease or license from Zale and such franchisee, lessee or licensee (which is not a party to a merchant services agreement with Bank) agrees with Zale to accept Cards, Card Transactions effected at such facility or service will be subject to the terms and conditions of this Agreement and shall be handled through Zale as if Zale had effected such Card Transactions at a Store, and the goods and services so sold shall be deemed to be Authorized Goods and Services for all purposes of this Agreement.  Payments due as a result of any such Credit Sale shall be deemed to be made by Zale for purposes hereof and shall be included in any Settlement made by Bank to Zale hereunder. Zale shall be obligated to pay its franchisee, lessee or licensee with respect to such Card Transactions.

 

(b)                                  Commencement of Card Acceptance; Exclusivity of Card Program .  Acceptance of Applications by Bank, authorization by Bank of Card Sales and acceptance of Cards by Zale will commence on the Effective Date or as soon thereafter as agreed to by Zale and Bank and will continue until the termination of this Agreement in accordance with the provisions hereof. During the term of this Agreement, except as otherwise contemplated hereby, neither Zale nor any other party on behalf of Zale will enter into any arrangement or agreement with a third party provider under which Zale issues, sponsors, participates in or accepts another private label credit card or private label credit account or license the use, in connection with any such arrangement or agreement, of any Zale Mark utilized by Zale and Bank on any Card; nor, except to the extent otherwise contemplated hereby, shall Zale or any other party on behalf of Zale enter into any arrangement or agreement with a third party provider under which Zale issues, sponsors or participates in the marketing of any cobranded credit card or credit account. Notwithstanding the foregoing, nothing contained in this Agreement will be construed to prohibit Zale from: (i) entering into a Second Look Program, provided , however , that Bank shall have a right of first refusal as set forth in Section 3.16 to provide such program; or (ii) accepting any major general purpose credit or debit card (including by way of example and not by way of NOVUS, American Express, MasterCard, Discover or Visa) as a means of payment by customers for purchases of Authorized Goods and Services. Zale agrees that Bank shall have the right to review and approve or decline each Application submitted by a Credit Applicant before such credit application is provided to any other Person.

 

(c)                                   Currencies other than United States Dollars . Bank will advise Zale promptly upon development by Bank of the capability to accept Sales Data in currencies other than United States dollars. In the event the Commonwealth of Puerto Rico proposes to adopt an official currency other than the United States dollar or an official currency other than the United States dollar is generally accepted in commercial transactions in Puerto Rico, or, if Zale, in good faith

 

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reasonably determines that its inability to offer Card Transactions, whether in the United States or Puerto Rico, in a particular official currency other than the United States dollar places Zale at a material competitive disadvantage, Zale may so notify Bank and, in such event, shall advise Bank of the official currency in which Zale wishes to make Card Transactions available, and Bank shall have an option, exercisable by delivery of written notice to Zale within thirty (30) days following such written request, of proceeding with the development and implementation of Card Transactions in such currency. In the event such capability is developed and implemented by Bank within a commercially reasonable period of lime following exercise of such option (and notwithstanding anything contained in Section 3.3(a)  above to the contrary), Card Transactions may be effected in such other currency upon terms and conditions to be mutually determined by Bank and Zale, which terms and conditions shall be as consistent as reasonably possible with the terms and conditions of this Agreement if (i) Bank falls to exercise such option or falls to develop and implement such capability within such commercially reasonable period of time following request (or such longer period as Zale may agree), or otherwise advises Zale in writing that it will not be able to develop and implement such capability within such commercially reasonable period of time, or (ii) Bank and Zale are unable to agree upon terms and conditions applicable to Card Transactions in such other currency within such commercially reasonable period of time, Zale shall have the right, without further notice to the Bank, to solicit bids from such other Persons as it may determine and to enter into agreements and arrangements with such other Persons to effect and process card transactions, utilizing another card program with a credit provider other than Bank, in such other currency. Bank agrees to cooperate with Zale and such other Persons in good faith to develop and to implement any such capability to be provided by Bank hereunder and ensure that such capability is integrated, to the extent reasonably necessary to the overall efficient and effective operation of Zale’s credit business, into the Card Program, upon terms and conditions mutually agreeable to Bank, Zale and such other Person.

 

3.4                             Acceptance of Cards by Bank . Bank shall accept each Card or Account number  presented by a Cardholder as the method of payment for Authorized Goods and Services and shall pay Zale for such Authorized Goods and Services charged pursuant thereto so long as the following conditions are met with respect to a specific Card Sale, and Zale, with respect to such Card Sale, complies in all material respects with the material procedures set forth herein and in the Operating Regulations relating to acceptance of Cards:

 

(a)                                   The Card or a valid Account number is provided to Zale;

 

(b)                                  The Card or a valid Account number is used as payment for Authorized Goods and Services purchased by a Cardholder;

 

(c)                                   Such Card Sale does not involve a cash advance to a Cardholder or payment of cash to a Cardholder;

 

(d)                                  Zale has followed in all material respects the procedures for completion of a Sales Slip with respect to such Card Sale as set forth in Section 3.6 of this Agreement; and

 

(e)                                   Zale has obtained Authorization for such Card Sale if required pursuant to Section 3.7 of this Agreement.

 

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3.5                             Operating Regulations . From time to time during the term hereof and subject to the provisions set forth below, upon notice to Zale at least thirty (30) days prior to implementation of any Material Change, Bank may make changes to the Operating Regulations. All Material Changes to the Operating Regulations shall be submitted to the Client Relationship Team in writing for review and must be approved by the Client Relationship Team. Any deadlock or dispute of the Client Relationship Team shall be resolved in accordance with 6A · Article 11 hereof. In the event of any conflict or inconsistency between the terms of this Agreement and those of the Operating Regulations, the provisions of this Agreement shall govern. Bank covenants and agrees to deliver to one or more of Zale’s representatives on the Client Relationship Team revised copies of the Operating Regulations promptly after making any change thereto; provided , however , that Zale will not be obligated to comply with any change(s) made to the Operating Regulations unless such updated copy including such change(s) has been so delivered and, in respect to changes which are not Material Changes but which require action- by Zale, until a reasonable period of time (considering those changes or adjustments, if any, which must be made by Zale as a result of such change in the Operating Regulations) has expired following such delivery.

 

3.6                             Completion of Sales Slips .

 

(a)                              General Requirements . Zale shall prepare a Sales Slip for use in connection with Card Sales. Each Sales Slip must be legible and fully completed with the information required under this Section 3.6 , as applicable.

 

(b)                             Mail/Telephone/Internet Orders . For each Card Sale effected by mall, telephone or internet, Zale shall record the following information on the Sales Slip prepared with respect to such Card Sale:

 

(i)                                      The date of such Card Sale;

 

(ii)                                   The name and location (city and state) of the Accountholder to whom the bill for the Card Sale will be sent, unless otherwise provided to Bank, ( e.g. batch reports, etc.);

 

(iii)                                A brief description of the Authorized Goods and Services purchased in such Card Sale;

 

(iv)                               The total amount of the Card Sale, including tax;

 

(v)                                  The Cardholder’s Account number;

 

(vi)                               The Authorization number (if any) provided by Bank to Zale;

 

(vii)                            The Credit Plan code (if any) provided by Bank to Zale;

 

(viii)                         Zale’s Bank-assigned Merchant number;

 

(ix)                                 The shipping address (if applicable); and

 

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(x)                                    The shipping date (if applicable).

 

(c)                              Store Sales . For Card Sales in Stores, each Sales Slip must be legible and fully completed with the same information required for Card Sales by mail, telephone and internet (specified in Section 3.6(b)  of this Agreement), other than the name and location of the Accountholder to whom the bill for the Card Sale will be sent and the shipping address and shipping date. A Sales Slip must be signed by a Cardholder for each Store Card Sale at the time such Card Sale is made and in the presence of an authorized representative or employee of Zale. For Card Sales to the Person representing himself to be the Person named on the Card, when the Card is physically presented to a Zale representative or employee, such representative or employee shall check to determine whether, in such representative’s or employee’s judgment, the signature on the Sales Slip is reasonably similar to the signore, if any, appearing on the signature panel of the Card. After completion of the Card Sale, Zale shall provide a legible and completed copy of the Sales Slip to the Cardholder.

 

(d)                             Signature .  For each Card Sale in a Store, if Zale fails to obtain the signature of a Cardholder on a Sales Slip, and for each sale over the internet, by mail or telephone, if Zale ships the products charged in the Card Sale to an address other than the address of the Accountholder and falls to obtain the signature of a Cardholder or a member of the Cardholder’s household (including without limitation any domestic employee) accepting delivery, and, in any such case, such Cardholder has not authorized the Card Sale or denies the validity of the Card Sale and such Cardholder falls to make payment for the Card Sale as provided in the Account terms and conditions, the Card Sale shall be subject to Chargeback to the extent provided in Section 3.11 of this Agreement. Electronic signatures which comply with Applicable Law shall be deemed to be Signatures for all purposes of this Section 3.6(d) .

 

3.7                             Authorization . (a) Bank agrees at all times during the term hereof, at its sole cost and expense, to maintain primary and back-up Authorization capacity sufficient to enable Bank to perform its obligations hereunder (including but not limited to adequate staffing), with such back-up Authorization capacity served by a power source totally separate from that utilized by the primary Authorization capacity such that if power were unavailable to the primary Authorization capacity, power would likely be available to the back-up capacity. Bank further agrees at all times to maintain one toll-free telephone number accessible from all Stores and available for use by Zale personnel in connection with Authorization and inquiries by Store personnel and regional managers and adequate to meet the Performance Standards. In accordance with the terms of this Section 3.7 , Zale must obtain Authorization for each proposed Card Sale other than Card Sales which are subject to the Floor Limit as provided below. Card Sales which occur at any time when those means of electronic Authorization specified in clause (b)(i) below are unavailable to Zale for any reason shall be subject to the Floor Limit and so long as such Card Sales are within the Floor Limit, shall be deemed to have received Authorization. Bank hereby agrees, at Zale’s request from time to time during the term hereof, to review the Floor Limit and to approve increases in the Floor Limit to the extent such increases are necessary or appropriate to cause Zale to remain competitive with other Bank clients selling goods and services substantially the same as Authorized Goods and Services. Bank shall authorize all Card Sales with respect to an Account up to a maximum amount equal to the approved amount for such Card Sale communicated to the Store by Bank and such amount and an additional amount not exceeding ten percent (10%) of such amount shall be deemed to be approved for purposes

 

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hereof). In order to expedite Authorization and minimize sales clerk time required in connection with each Card Sale, to the extent Electronic Terminals are available, all requests for Authorization and responses to such requests shall be effected electronically, utilizing Store registers, by both Zale and Bank, in a manner reasonably consistent with the manner in which Zale secured authorizations of charge sales under its credit program with JNB or as may be otherwise agreed by Zale and Bank. For purposes of this Agreement, the purchase of one or more items of Authorized Goods and Services made by a Cardholder at one Store and at one time will be deemed to constitute a single Card Sale.

 

(b)                             Obtaining Authorization.

 

(i)                                 Electronic Locations . To obtain Authorization for Card Sales made at Electronic Locations (including without limitation internet sales), Zale shall utilize an Electronic Terminal; provided , however , that if such Electronic Terminal is not properly functioning at the time of a Card Sale, to the extent a Card Sale exceeds the Floor Limit, the provisions applicable to non-Electronic Locations as set forth below shall apply. Bank has examined the Electronic Terminals Zale currently uses, and such Electronic Terminals are acceptable to Bank. After the date hereof, Electronic Terminals in Stores shall be substantially similar to those used by Zale on the date hereof or shall be of a type customarily used by retailers or of such other type as shall be reasonably acceptable to Bank. Zale agrees to adequately maintain its Electronic Terminals. At an Electronic Location, if a referral code is displayed on an Electronic Terminal, Zale shall follow Operating Regulations pertaining to procedures related to such referral code; provided, however , that in the event the Card Sale ultimately approved, such approval shall be communicated to Zale electronically.

 

(ii)                              Non-Electronic Authorization . To obtain Authorization at non-Electronic Locations or at Electronic Locations when Bank’s capability to provide electronic Authorization or Zale’s capability to obtain electronic Authorization is not operational and a Card Sale exceeds the Floor Unit, Zale shall contact Bank in accordance with the Operating Regulations. Bank will make commercially reasonable efforts to create backup capacity for Authorization when Electronic Terminals are not available (including without limitation via facsimile). If the Authorization Center approves the Card Sale by telephone, facsimile or other approved means, Zale shall record on the Sales Slip any Authorization code or number provided to Zale by Bank with respect to such Card Sale.

 

(c)                              Right of Chargeback . Bank agrees to respond to requests for Authorization by Zale hereunder in accordance with the Performance Standards. If Authorization is required hereunder for any Card Sale and Zale fails to obtain such Authorization, Bank may process a Chargeback for such Card Sale to the extent provided in Section 3.11 of this Agreement. If Authorization is required and Zale obtains such Authorization, but the amount of the Card Sale exceeds by more than-ten percent (10%) the authorized amount, Bank may process a Chargeback to the extent provided in Section 3.11 of this Agreement. Notwithstanding any provision hereof to the contrary, in no event shall any Card Sale be subject to Chargeback solely as a result of the fact that those means of Authorization specified in Section 3.7(b)(i)  were unavailable (for any reason other than one attributable solely to Zale’s negligence or willful misconduct), such Card Sale was subject to and within the Floor Limit and no Authorization was secured.

 

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(d)                             Cancellation of Account/Authorization . In connection with Card Transactions by catalogue, telephone or mail in which an Account is opened at the time of such transaction but a copy of the Credit Card Agreement is not delivered by Zale or Bank to the Credit Applicant at the time the Credit Applicant makes a purchase of Authorized Goods and Services, the Credit Applicant shall have the option, but only to the extent required by Applicable Law, to decline the terms and conditions of the Credit Card Agreement and close the Account upon receipt of a copy of such Credit Card Agreement. However, in the event such Credit Applicant so elects with respect to any such transaction, unless Bank can legally do so under Applicable Law, no sale will be posted to nor billed through such Credit Applicant’s Account. Bank shall notify Zale of any such event as promptly as reasonably possible and in any event within ten (10) Business Days of the date on which Bank learned that such Credit Applicant had so elected. Zale will be responsible for making alternate payment arrangements with the Credit Applicant with respect to such transaction, and Bank shall fully cooperate with Zale in Zale’s attempt to make such alternate arrangements.

 

3.8                             Settlement of Card Transactions .

 

(a)                              Remittance of Sales Data by Zale . From time to time at such intervals as shall be determined by Zale (but not more frequently than daily nor lees frequently than weekly) during the term hereof, Zale shall forward previously unreported Sales Data to Bank. All such Sales Data shall be in the form and format set forth in the Operating Regulations, or in such other form and format as Zale and Bank may agree. In the event all or a portion of such Sales Data is not forwarded by Zale to Bank or such data is forwarded but is unreadable as a result of an act or omission of Zale, Bank shall not be required to process the portion of the Sales Data containing the missing or unreadable data, but shall inform Zale or its designated agent of the missing or unreadable Sales Data within one (1) Business Day of Bank’s receipt of such Sales Data. Zale shall be responsible for retrieving and resubmitting the missing or unreadable portion of the Sales Data and, when Zale has done so, Bank shall process such Sales Data. Zale shall be responsible for the loss, damage or destruction of Sales Data until such Sales Data is received by Bank or by Bank’s designated processor or other agent, unless such loss, damage or destruction is caused by an act or omission of Bank or Bank’s designated processor or other agent.

 

(b)                             Obligation to Reimburse Zale for Sales Data . Subject to Bank’s right of Chargeback to the extent specifically provided for in Section 3.11 hereof, Bank shall reimburse Zale in accordance with the provisions of clause (c) below for all Card Sales included in Sales Data forwarded by Zale to Bank in accordance with the terms hereof. On each Business Day during the term of this Agreement, Bank will pay Zale an amount equal to the total amount of Net Card Sales, if any, submitted to and received by Bank in accordance with the terms hereof with respect to which Settlement is then due, together with the amount of any Merchant Fee adjustment for any Credits as provided in Section 3.9 hereof. Bank will not be required to reimburse Zale for any Card Sale not submitted to Bank within thirty (30) days of the date of such Card Sale unless Bank bills customer for such Card Sale.

 

(c)                              Method and Timing of Settlement .  For Sales Data electronically forwarded to Bank as provided herein by 1:00 p.m. prevailing Central time on a Business Day as provided in Section 3.8(a)  above, Bank will initiate a wire transfer in the amount of the Settlement due Zale no later than 2:00 p.m. prevailing Central time on the immediately following Business Day to a

 

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Settlement Account in accordance with Zale’s instructions. With respect to such Sales Data received by Bank after 1:00 p.m. prevailing Central time on a Business Day, Bank will initiate a wire transfer in the amount of the Settlement due Zale to such Settlement Account and in accordance with such instructions by 2:00 p.m. prevailing Central time on the second Business Day immediately following the data on which Bank received such Sales Data. Any amounts that are not wired by Bank in accordance with the schedule set forth in this Section 3.8(c)  shall bear interest at the Federal Funds Rate until paid in full, and any such accrued interest shall be payable on demand. Bank will not accept Sales Data in paper form (hard copy) unless all reasonable electronic means of transmitting such data are unavailable. Under no circumstances shall Bank debit (and Bank is not authorized to debit) any Settlement Account in the event the amount of Net Card Sales due to Zale with respect to such Business Day is a negative amount, but rather Bank shall offset the amount due Bank against the amount of future Settlements until any such amount due Bank has been satisfied. Bank may, at its option, offset against any amount wired to a Settlement Account hereunder an amount equal to any then due and unpaid Merchant Fees and Credits, provided that Bank provides written notice to Zale of such offset at the time thereof. Zale authorizes Bank and its designated agents and representatives to initiate credit (but not debit) entries to the Settlement Account as provided herein. Neither Bank nor Zale shall be liable for any delays in receipt of funds or errors in account entries caused by third parties not specifically engaged by Bank or Zale, as the case may be, to perform its obligations hereunder. Zale shall not close a Settlement Account without providing Bank at least five (5) Business Days prior written notice of such closure and, if such Settlement Account is the sole Settlement Account then maintained by Zale, substitution of another account. Zale shall be solely liable for all fees and costs associated with each Settlement Account; provided , however , that Bank shall be solely liable and responsible for any and all fees and costs associated with the credit of any amount to a Settlement Account.

 

(d)                             Wire Transfer of Settlement Amounts . All wire transfers of funds required under Section 3.8(c)  above shall be sent, at Bank’s sole cost and expense. In the event Zale is not receiving such funds on the same day the wires are initiated by Bank. Bank and Zale agree to cooperate to i