AMENDED AND RESTATED PRIVATE LABEL CONSUMER CREDIT CARD PROGRAM AGREEMENT
EXHIBIT
10.1
AMENDED
AND RESTATED
This
AMENDED
AND RESTATED PRIVATE LABEL CONSUMER CREDIT CARD PROGRAM
AGREEMENT
is made
as of December 14, 2005 by and between GE Money Bank (as successor in interest
to Conseco Finance Corp., “Bank”)
and
Select Comfort Corporation (“Select
Comfort”)
and
Select Comfort Retail Corporation (“SCRC”
and
collectively with Select Comfort “Retailer”).
Certain capitalized terms used in this Agreement are defined in the attached
Appendix A.
WHEREAS,
Retailer and Bank currently are parties to that certain Revolving Credit
Program
Agreement, dated as of May 17, 1999 (as amended by that certain First Amendment
dated February 20, 2001, that certain Second Amendment dated April 13, 2001,
that certain Third Amendment dated June 19, 2002, that certain Fourth Amendment
dated June 23, 2003, that certain Fifth Amendment executed during 2005, and
as
may have otherwise been amended from time to time, the “Prior
Program Agreement”).
WHEREAS,
pursuant to the Prior Program Agreement, Bank and Retailer established a
program
(the “Prior
Program”)
to
extend and service customized credit programs to qualified consumer customers
of
Retailer for the purchase of products and services from Retailer.
WHEREAS,
Retailer desires to continue to make the financing of its products and services
available to its customers through a private label revolving consumer credit
program offered by Bank, and Bank is willing to make such private label
revolving consumer financing available on the terms and subject to the
conditions set forth in this Agreement; and
WHEREAS,
Retailer and Bank wish, pursuant to this Agreement, to replace the Prior
Program
with the Program (as defined in Section 1.1 below) and to amend, restate
and
replace the Prior Program Agreement in its entirety.
In
consideration of the following terms and conditions, and for good and valuable
consideration the receipt and sufficiency of which is acknowledged, Retailer
and
Bank agree as follows:
ARTICLE
1 -
ESTABLISHMENT AND SCOPE OF THE PROGRAM
1.1 Bank
to Continue
Program.
Bank and Retailer are entering into this Agreement in order to continue to
offer
a private label revolving consumer credit program to qualified consumer
customers of Retailer for the financing of purchases of products and services
from Retailer, all in accordance with the terms of this Agreement (collectively,
the “Program”).
1.2. Effect
on Prior Program Agreement.
Bank
and Retailer acknowledge and agree that this Agreement amends, restates,
replaces and continues the Prior Program and that the
Prior
Program Agreement and all Accounts, Accountholders, Purchases and Credit
Cards
(as such terms are defined in the Prior Program Agreement) arising or issued
under or accruing in connection with the Prior Program or the Prior Program
Agreement shall, as of the Program Commencement Date, be subject to and governed
by this Agreement, rather than the Prior Program Agreement. All credit offerings
and other features made available to Cardholders under the Prior Program
as of
the Program Commencement Date shall continue to be made available to Retailer’s
customers; provided
that all
such offerings and features shall be subject in all respects to the terms
of
this Agreement, after the Program Commencement Date.
1.3 Scope
of the Program.
(a) During
the Term, Retailer shall continue
to make the Program available to its customers, including processing Account
applications and accepting Credit Cards in accordance with the Operating
Procedures at all Store Locations, Retailer’s website and Retailer’s direct
marketing call center, and Bank will extend credit directly to Cardholders
under
the Program to finance purchases from Retailer.
(b) The
Program is intended to be used by Cardholders for purchases made primarily
for
personal, family or household use and Bank does not intend to extend credit
under the Program for purchases made primarily for commercial and business
purposes. Retailer acknowledges that Bank’s obligation to continue to extend
credit under the Program is contingent on Retailer continuing to sell the
type
of goods and services generally similar to those sold by Retailer as of the
Program Commencement Date.
ARTICLE
2 -
RESPONSIBILITIES UNDER THE PROGRAM
2.1 Bank’s
Responsibilities.
During the Term, Bank’s responsibilities in conducting the Program include the
following:
(a) Extend
consumer credit to qualified customers of Retailer in accordance with this
Agreement and the Cardholder Agreements.
(b) Establish
(and modify from time to time in its discretion) Cardholder finance charge
rates
and other fees and Account terms.
(c) Produce
and deliver to Retailer at a central location, Bank’s credit applications and
Cardholder Agreements and other standard Program materials.
(d) Produce
and distribute Credit Cards and Credit Card carriers in accordance with the
design utilized under the Prior Program.
(e) Establish
(and modify from time to time in its discretion) the credit criteria used
to
evaluate applications for Cardholder Agreements.
(f) Promptly
determine and communicate its decision with respect to any application for
a
Credit Card; and, assign (and modify from time to time in its discretion)
credit
lines, authorize charges, and service Accounts.
(g) Prepare
and mail periodic billing statements to Cardholders with Active
Accounts.
(h) Provide
toll-free numbers and, during Bank’s standard operating hours, customer service
personnel for customer and store inquiries.
(i) Receive
and post payments, collect Accounts, and take all further actions Bank deems
necessary or appropriate in connection with Account administration.
(j) Perform
its responsibilities under this Agreement and the Program and conduct its
activities as a Bank, to the extent relating to the Program, including its
policies, services, practices, solicitations, and advertising in compliance
with
all applicable laws.
2.2 Retailer’s
Responsibilities.
Retailer’s responsibilities in conducting the Program include the
following:
(a) Accept
Credit Cards for customer purchases from Retailer at Store Locations in
accordance with and otherwise conduct its activities relating to the Program
in
compliance with the Operating Procedures. In the absence of a Credit Card
(or in
the case of Absentee Purchases), follow the procedures for Card-Not-Present
Purchases as provided for in the Operating Procedures.
(b) Promote
the Program and the use of Credit Cards to its customers, including by producing
customized store signage, media advertising and through other promotional
methods.
(c) Train
its
personnel sufficiently so as to be able to properly fulfill Retailer’s
responsibilities under the Program.
(d) Except
for Account applications sent directly to Bank by applicants, transmit all
Account application information to Bank electronically and otherwise process
and
retain such applications in accordance
2
(e) Only
submit Charge Transaction Data in respect of products or services reasonably
related to the types of products or services offered for sale by Retailer
at
Store Locations (or as otherwise permitted hereunder) as of the Program
Commencement Date.
(f) Perform
its responsibilities under this Agreement and the Program, and conduct its
activities as a Retailer, including its policies, products, business,
point-of-sale and sales practices, and advertising, in compliance with all
applicable laws.
(g) With
respect to documents and forms to be executed by a Cardholder or an applicant
for a Credit Card or which constitute a disclosure required by Bank and/or
applicable law in connection with the Program, only use such documents and
forms
that were provided to Retailer, or approved in writing, by Bank (and only
the
latest version of such documents), and; refrain from modifying any such approved
documents or forms without Bank’s prior written consent.
(h) Cooperate
in the resolution of any Cardholder disputes in any case in which Bank
reasonably determines that such dispute relates to Retailer (or its products
or
practices) or the resolution thereof will be facilitated by Retailer’s
cooperation; respond within twenty (20) days to any dispute forwarded to
Retailer from Bank, and; forward to Bank promptly after receipt by Retailer
copies of any communication relating to an Account received from any
person.
(i) Maintain
a policy for the exchange, return, and adjustment of products and services
which
is adequately communicated to customers and is in accordance with all applicable
laws (in connection therewith Retailer represents and warrants that, as of
the
Program Commencement Date, the return policy in effect is the same as that
most
recently delivered by Retailer to Bank prior thereto); notify Bank in advance
of
(if practicable), but in any event within fifteen (15) days after, any change
in
such return policy following the Program Commencement Date; provide a credit
to
the applicable Account upon the exchange or return of a good or service financed
on such Account (but do not credit an Account in any case where the purchased
good or service was not originally financed on an Account), and; include
the
resulting credit in the next transmission of Charge Transaction Data to Bank
(but in no event more than one (1) business day after the credit was
issued).
(j) Retain
copies, in either hard copy or digital form, of all Charge Slips and Credit
Slips, whether or not a hard copy was originally produced, for at least
twenty-five (25) months (or such longer period as may be required by law);
except as otherwise provided for herein in connection with disputes or
chargebacks, provide copies of either of the foregoing to Bank within twenty
(20) days after Bank’s request, to the extent received before the end of such
twenty-five (25) month period (or such longer period as may be required by
law);
in consultation with Bank, produce and use Charge Slips and Credit Slips
which
are able to be captured and reproduced electronically; and, send to Bank
(at the
address used immediately prior to the Program Commencement Date), at Retailer’s
expense, all applications and Cardholder Agreements received from customers
and
processed by Retailer since the date Retailer last sent such materials to
Bank
(provided,
that in
no event shall Retailer forward such applications and Cardholder Agreements
to
Bank less than once per calendar month).
(k) Maintain
connectivity to Bank’s systems in the manner employed prior to the Program
Commencement Date for purposes of processing applications and sending Charge
Transaction Data to Bank.
ARTICLE
3 -
SETTLEMENT AND PAYMENT TERMS
3.1 Settlement
Procedures.
(a) Retailer
will transmit Charge Transaction Data to Bank daily and otherwise in accordance
with the Operating Procedures. If Charge Transaction Data is received by
Bank’s
processing center before 5:00
p.m.
(central time) on any business day, Bank will process the Charge Transaction
Data and initiate payment on the same business day . If the Charge Transaction
Data is received after 5:00 p.m. (central time)
3
on
any
business day, or at any time on a day other than a business day, Bank will
process the Charge Transaction Data and initiate payment on the first business
day thereafter.
(b) Provided
no circumstance exists that would entitle Bank to give notice of termination
of
this Agreement pursuant to Section 9.2, upon
receipt, verification and processing of Charge Transaction Data by Bank during
the Term, Bank will remit to Retailer in respect of such Charge Transaction
Data
an amount equal to the sum of the total charges identified in such Charge
Transaction Data less the sum of (i) the total amount of any credits
included in such Charge Transaction Data, (ii) the applicable Program
Fees,
and (iii) at Bank’s option, any other amounts then owed by Retailer to Bank
(including, without limitation, amounts charged back to Retailer pursuant
to
Article 7). Bank shall not be obligated to fund any Charge Transaction
Data
submitted by Retailer more than one hundred eighty (180) days after the date
of
the applicable purchase transaction.
3.2
Bank Payment Terms.
(a) Bank
will
transfer funds payable to Retailer under this Agreement via Automated Clearing
House (“ACH”) deposit to an account maintained in the name of Retailer pursuant
to written instructions delivered to Bank by Retailer.
(b) Notwithstanding
any other provision of this Agreement, Bank will have the right to net, setoff
or recoup any amounts due to it under this Agreement against any amounts
owing
to Retailer under this Agreement; provided,
that
Bank will provide written notice to Retailer with respect to any setoff or
recoupment not related to Program Fees, chargebacks or credits as provided
for
in Section 3.1(b). Nothing in this Section or any other provision of this
Agreement is intended to limit Bank’s common law rights of setoff and
recoupment.
3.3 Retailer
Payment Terms.
Unless
otherwise provided for elsewhere in this Agreement, any amounts payable by
Retailer to Bank under this Agreement will be due when invoiced by Bank and
shall be paid in immediately available funds within fifteen (15) days after
the
date of such invoice. Unless the parties otherwise agree, Retailer will transfer
funds payable to Bank under this Section 3.3 via wire transfer to
a deposit
account maintained in Bank’s name pursuant to written instructions delivered to
Retailer by Bank.
3.4 Program
Fees.
Retailer
shall pay to Bank the Program Fees applicable to each submission to Bank
of
Charge Transaction Data.
(a) The
Program Fee applicable to all purchases subject to the Base Rate in any
submission of Charge Transaction Data shall be an amount equal to the product
of
(a) the Base Rate, and (b) the difference
between (i) the aggregate amount of charges on all Accounts reflected in
such
Charge Transaction Data (excluding any charges for which the parties have
established a Promotional Rate), less
(ii) the
aggregate amount of any credits on Accounts reflected in such Charge Transaction
Data.
(b) The
Program Fee applicable to each purchase subject to a Promotional Rate in
any
submission of Charge Transaction Data shall be an amount equal to the product
of
(a) the applicable Promotional Rate, and (b) the amount of the charge subject
to
such promotion.
3.5 Program
Fee Percentages.
(a) The
Program Fee Percentages available under the Program as of the Program
Commencement Date are set forth on Schedule 3.5.
(b) Subject
only to the provisions of this Section 3.5(b) and Section 3.6
below,
Bank agrees not to alter the Program Fee Percentages described on the attached
Schedule 3.5. Except
as
provided for in clause (i) below, beginning at the end of the first Program
Year
and as of the end of each Program Year thereafter prior to the termination
of
the Agreement, the following pricing amendment provisions will apply:
(i) [***
Confidential portion has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Commission.]
(A) It
is the
intention of Bank and Retailer that Promotional Rates
for
each Program Year be adjusted annually [*** Confidential portion has been
omitted pursuant to a request for
4
confidential
treatment and has been filed separately with the Commission.]
(ii) At
the
beginning
of each Program Year after the Program Year ending October 31, 2006, Bank
shall
adjust the Promotional Rates set forth in paragraphs D., E., and F. of Schedule
3.5 in
accordance with the terms and conditions set forth therein.
(iii) At
the
beginning of each Program Year after
the
Program Year ending October 31, 2006,
Bank
shall adjust the Promotional Rate applicable to the “24 Equal Pay” credit based
promotion set forth in paragraph G. of Schedule 3.5 in accordance with the
terms
and conditions set forth therein.
(iv) At
the
beginning of each Program Year after
the
Program Year ending October 31, 2006,
Bank
shall adjust the Promotional Rate applicable to the “18 Month NPDI” promotion
set forth in paragraph C. of Schedule 3.5 in accordance with the terms and
conditions set forth therein.
(v) At
the
beginning of each Program Year after the Program Year ending October 31,
2006,
Bank shall have the right to adjust any
or
all
Promotional Rates set
forth
on
Schedule 3.5 if,
for the
immediately preceding Program Year, Net Program Sales applicable to Direct
Purchases and ECOM Purchases exceed,
in the aggregate, [*** Confidential portion has been omitted pursuant to
a
request for confidential treatment and has been filed separately with the
Commission.]
of total
Net Program Sales for such Program Year. If Bank elects to make any changes
under this clause (v), Retailer shall have the rights set forth in Section
9.2(m).
(vi) In
determining the extent of any adjustment to Promotional Rates provided for
under
any of clauses 3.5(b)(ii) through (v) at the beginning of any Program Year,
Bank
shall take into account [*** Confidential portion has been omitted pursuant
to a
request for confidential treatment and has been filed separately with the
Commission.] for the immediately preceding Program Year as provided for under
3.5(b)(i).
(c) If
Bank
and Retailer agree to offer any additional credit-based promotion not included
on Schedule 3.5, Bank will establish in writing, with acknowledgment
by
Retailer, the Promotional Rate applicable to the calculation of the Program
Fee
payable by Retailer for qualifying purchases, as well as such other terms
and
conditions as the parties shall agree. Bank’s approval of any billing and credit
terms for any promotion is not intended to be and will not be construed to
be an
approval of any materials used in advertising or soliciting participation
in
such promotions.
(d) Any
Charge Transaction Data that does not meet the coding requirements (e.g.,
transaction code requirements) of any credit-based promotion will automatically
default and be subject to the Base Rate; provided however,
that if
Bank honors any such incorrectly coded credit-based promotion, Retailer shall
pay to Bank the incremental difference between the Program Fee at the Base
Rate
and the Program Fee applicable to the Promotional Rate honored by
Bank.
3.6 Interest
Rate Adjustor.
In
addition to Bank’s right to adjust the Promotional Rates as set forth above, as
of the end of each calendar quarter between the Program Commencement Date
and
the expiration or termination of the Agreement, the Promotional Rate for
each
credit-based promotion then offered to Cardholders by Bank shall be
automatically adjusted if, during such calendar quarter, a Prime Rate Trigger
Movement has occurred. The amount of any such adjustment shall be calculated
as
follows: (A) for every Prime Rate Unit by which the Prime Rate exceeds
the
Index Rate corresponding to such credit-based promotion, the Base Retailer
Promotion Fee Percentage shall increase by an amount equal to the number
of such
Prime Rate Units, multiplied
by
the
Index Rate Adjustor, and (B) for every Prime Rate Unit by which the
Prime
Rate is below the Index Rate corresponding to such credit-based promotion,
the
Base Retailer Promotion Fee Percentage shall decrease by an amount equal
to the
number of such Prime Rate Units, multiplied
by
the
Index Rate Adjustor. Bank shall give prompt notice to Retailer of each
adjustment. As used herein, the following terms shall have the following
meanings: “Base
Retailer Promotion Fee Percentage”
shall
mean, with respect to any Program Fee Percentage relating to any credit-based
promotion, the percentage that was offered by Bank to Retailer at the time
such
credit-based promotion was first made available under the Program; “Index
Rate”
shall
mean, (x) for any credit-based promotion set forth on Schedule 3.5 as of
the
Program Commencement Date, a Prime Rate of 6.50%, and (y) for any credit-based
promotion established by the parties following the Program Commencement Date
pursuant to Section 3.5(c), the Prime Rate that was in effect as of the first
day such credit-based promotion was made available under the Program;
“Index
Rate Adjustor”
shall
5
mean,
for
any credit-based promotion, the increase or decrease in the corresponding
Program Fee Percentage indicated by the following calculation: [*** Confidential
portion has been omitted pursuant to a request for confidential treatment
and
has been filed separately with the Commission.] “Prime
Rate Trigger Movement”
shall
mean, as of the end of any calendar quarter, after taking into account
all
movements in the Prime Rate during such quarter, an increase or decrease
in the
Prime Rate, relative to the Prime Rate in effect as of the end of the
immediately preceding calendar quarter, equal to at least one Prime Rate
Unit;
“Prime
Rate Unit”
shall
mean a .25% (25 basis point) increment. [*** Confidential portion has been
omitted pursuant to a request for confidential treatment and has been filed
separately with the Commission.]
ARTICLE
4 -
OTHER PROGRAM ECONOMICS
4.1 Allocation
of Program Expenses.
Unless
otherwise specifically provided in this Agreement, each party will be
responsible for all costs and expenses incurred by it in connection with
complying with its responsibilities under this Agreement.
4.2 Solicitation
of Cardholders for Other Products.
(a) Bank
(or
its
designees) may (i) solicit Cardholders for and offer to Cardholders (or arrange
for a third party to solicit and/or provide) financial or credit products
and
services offered by Bank or its Affiliates, including Debt Cancellation Programs
and Value-Added Programs (ii) market and offer other credit and financial
products and services (including, without limitation a general purpose bankcard)
to customers at the point of sale or as a companion product for an established
Account, and (iii) solicit Cardholders for and offer other products and services
to Cardholders that do not compete with the products or services produced
or
sold by Retailer. Bank may not use the Retailer Marks in any such solicitation
without the express written consent of Retailer and Bank shall follow any
guidelines provided by Retailer in respect thereof.
(b) Bank
will
be entitled to retain for its account any proceeds generated from the provision
of the goods and services referred to in Section 4.2(a).
4.3 [***
Confidential portion has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Commission.]
4.4 [***
Confidential portion has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Commission.]
ARTICLE
5 -
PROMOTION OF THE PROGRAM
5.1 Annual
Marketing Plans.
During
the Term, Bank and Retailer will work together in good faith to agree for
each
Program Year on a marketing plan to promote the Program and each party agrees
to
implement such marketing plan. Bank and Retailer may from time to time also
mutually agree on additional specific marketing activities for the Program
(and
will not unreasonably withhold consent to any specific marketing plan proposed
by the other party). The costs of implementing each marketing plan (or for
implementing any marketing or promotional initiatives developed by the parties
outside of such plan) shall be paid for by Retailer unless specifically set
forth in such plan.
5.2 Responsibility
of Retailer to Promote the Program.
(a) Without
limiting Retailer’s obligations under any marketing plan, Retailer will actively
support and promote the Program by, among other things:
(i) encouraging
the establishment and use of Accounts as a preferred method of payment for
Retailer’s products and services (through, for example, offering credit-based
promotions);
and
(ii) providing
and utilizing store signage, credit advertisements, promotional inserts,
statement messages and other marketing materials promoting Program.
(b) Retailer
will not seek or obtain any special agreement or condition from, nor
discriminate in any way against, Cardholders or any person with respect to
the
terms of any Account
6
transaction.
Retailer will not charge any credit surcharge, application, processing
or other
Program related fee to Cardholders.
ARTICLE
6 -
OTHER AGREEMENTS
6.1 Ownership
of Accounts; Credit Losses.
(a) Bank
is
and will be the sole and exclusive owner of all Accounts and Account
Documentation, and will be entitled to receive all payments made by Cardholders
on Accounts. Bank shall be identified as the creditor and owner of the Accounts
for all purposes, and Retailer shall not represent or imply otherwise. Retailer
acknowledges that it has no right, title or interest in any Accounts or Account
Documentation and will not, at any time, have any right to any proceeds or
payments made under the Accounts unless Retailer subsequently purchases or
otherwise acquires such Accounts from Bank. Retailer further acknowledges
that
neither the Cardholder Information nor any of the Account Documentation nor
any
of the information included in the Account Documentation will be deemed to
be
Confidential Information of Retailer for purposes of Section 13.1
hereof.
Retailer authorizes and empowers Bank to sign and endorse Retailer’s name upon
any checks, drafts, money orders or other forms of payment in respect of
any
Account that may have been issued by the Cardholder in Retailer’s name. This
limited power of attorney conferred in this Section 6.1 is deemed
a power
coupled with an interest and will be irrevocable prior to the Final Liquidation
Date.
(b) Bank
will
bear all credit losses on Accounts (other than as permitted by Bank’s chargeback
rights in Article 7 and other than credit losses incurred after the
Accounts are purchased or otherwise acquired by Retailer or a third
party).
6.2 Ownership
and Use of Cardholder Information.
Bank is
the sole and exclusive owner of all lists of Cardholders and applicants
generated by the Program (including, without limitation, names, addresses,
telephone numbers, e-mail addresses, dates of birth, social security and
similar
numbers, and account and similar access numbers) (the “Cardholder
Information”).
Further, Bank’s ownership of the Cardholder Information notwithstanding,
Retailer may use the Cardholder contact information (names, addresses, telephone
numbers and e-mail addresses) contained in the Cardholder Information during
the
Term to promote the Program and to promote the products and services sold
by
Retailer under the Program. During the Term, Bank may use the Cardholder
Information to exercise its rights and fulfill its obligations under this
Agreement and with respect to the administration and liquidation (including
sale) of Accounts after the expiration or earlier termination of the Term.
Under
no circumstances will Cardholder Information be deemed to include information
received by Retailer separate or apart from the Program, even if such
information is in whole or in part identical to any such information received
by
Bank through the Program, including information received by Bank as part
of
Credit Card applications. Such independently developed information shall
not be
subject to the use restrictions set forth in this Section 6.2 and may be
used by
Retailer in any lawful manner.
6.3 Cardholder
Terms.
Bank may
establish and modify the ordinary finance charge rates applicable to credit
extended to Cardholders. Bank may also establish (and modify from time to
time)
all other terms upon which credit will be extended to Cardholders, including
without limitation, repayment terms, default finance charges, late fees,
overlimit charges, returned check charges, and other ordinary fees and charges.
Bank shall consult with Retailer and give notice to Retailer prior to amending
or modifying the finance charge rates and fees set forth on Schedule 6.3.
6.4 Credit
Criteria.
Bank
shall establish in its discretion and may modify from time to time any or
all of
the credit criteria used in evaluating applicants under the Program (including,
without limitation, the creditworthiness of individual applicants, the range
of
credit limits to be made available to individual Cardholders and whether
to
suspend or terminate the credit privileges of any Cardholder). Bank will
consult
with Retailer regarding any changes to the credit criteria used for the Program
which, in Bank’s reasonable opinion, could reasonably be expected to have a
material adverse affect on the Program and will promptly notify Retailer
in
writing of any such change.
6.5 Operating
Procedures.
Retailer
and Bank acknowledge that, under the Prior Program Agreement, Bank developed
and
provided to Retailer, operating procedures (the “Operating
Procedures”)
governing the flow of application information and Charge Transaction Data,
the
logistics and specific procedures involved in the establishment and maintenance
of Accounts under the Program and settlement procedures for
7
charges
submitted to Bank. Such Operating Procedures will continue to govern such
issues
and procedures under the Program, and Bank may amend them from time to
time upon
notice to Retailer; provided,
that,
except for modifications (i) required by applicable law, or (ii) which
Bank
reasonably determines are necessary or appropriate to comply with (or avoid
violation of) applicable regulatory authority, Bank shall obtain the prior
written consent of Retailer before modifying any terms and conditions of
the
Operating Procedures the amendment of which is reasonably likely to result
in
any material and adverse (in terms of time or cost) alteration of the methods
and procedures through which Retailer must process applications or charge
or
credit transactions under, or otherwise participates in, the Program. The
Operating Procedures will include any supplemental procedures developed
or
required from time to time by Bank (or by Bank and Retailer, as the case
may be)
in connection with Retailer’s request to provide for purchases through the
Retailer Website.
6.6 Credit
Review Point.
Bank
shall provide a credit allocation for the Program in the amount of the Credit
Review Point. Following notice to Retailer, Bank will not be obligated to
make
any extension of credit under the Program if, after such extension, Aggregate
Outstanding Indebtedness would exceed the Credit Review Point then in effect
(except to the extent set forth in Section 9.2(j)(iii)). If at any time
Aggregate Outstanding Indebtedness equals or exceeds eighty percent (80%)
of the
Credit Review Point then in effect, the following terms and conditions shall
apply:
(a) [***
Confidential portion has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Commission.]
(b) [***
Confidential portion has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Commission.]
(i) Bank
may
increase the Credit Review Point to an amount that will accommodate the then
outstanding Indebtedness, and anticipated growth in such Indebtedness (as
applicable), based on Bank’s good faith projections. If Bank selects this
option, then Bank’s written notice to Retailer will include the amount of the
increased Credit Review Point.
(ii) Bank
may
elect not to increase
the Credit Review Point.
(c) Following
any notice of termination under Section 9.2(j) (or Bank’s election not to
increase the Credit Review Point under clause (ii) above), Bank shall provide
Retailer with reports at the end of each month (such reports to be included
with
the standard monthly reporting package being provided to Retailer by Bank
at
such time) setting forth the amount of Aggregate
Outstanding Indebtedness as of the end of such month.
6.7 Retailer
Financial Reports.
(a) If
at any
time during the Term
Retailer is not obligated to, or for any other reason does not, file periodic
financial reports with the Securities and Exchange Commission pursuant to
the
reporting requirements of Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended, Retailer will:
(i) As
soon
as practicable but in any event not more than ninety (90) days after the
end of
each fiscal year, deliver to Bank its audited annual financial statements,
including its audited consolidated balance sheet, income statement and statement
of cash flows and financial position.
(ii) As
soon
as practicable but in any event not more than sixty (60) days after the end
of
each fiscal quarter, deliver to Bank its unaudited quarterly financial
statements, including its unaudited consolidated balance sheet, income statement
and statement of cash flows and financial position, accompanied by a certificate
from Retailer’s chief financial officer that such financial statements were
prepared in accordance with generally accepted accounting principles
applied on a consistent basis and present fairly the consolidated financial
position of Retailer as of the end of such fiscal quarter and the results
of its
operations, subject to normal year end audit adjustments.
(b) Retailer
shall maintain, on a consolidated basis, compliance
with the financial covenants set forth in Schedule 6.7; provided,
that
Retailer’s failure to satisfy either of such covenants shall constitute a Letter
of Credit Event only and not an event giving rise to a right of termination
by
Bank.
8
In
addition, as soon as reasonably practicable, but in any event within sixty
(60)
days after the end of each fiscal quarter of Retailer, Retailer shall deliver
to
Bank a compliance certificate certified by Retailer’s chief financial officer
establishing Retailer’s compliance (or non-compliance) with the covenants set
forth in Schedule 6.7 as of the end of such quarter, and which shall separately
set forth the calculation of its compliance (or non-compliance) with the
covenants set forth in Schedule 6.7.
6.8 Inserts
and Billing Messages.
(a) For
each
billing statement sent to Cardholders during a billing cycle during the Term,
Bank will make available to Retailer a space for two (2) customized messages
on
the billing statement and Bank will include as many Retailer inserts into
each
billing statement as possible (but in no event more than six (6) without
causing
the weight of the billing statement package to exceed one ounce);
provided
that if
Bank is required by law to send a notice in such month (or if Bank reasonably
believes a notice is necessary or desirable to protect Bank’s interest in the
Accounts), then such notice shall take priority over any proposed insert
or
statement message as applicable. If Retailer wishes Bank to include Retailer’s
inserts in any billing statements in which the inclusion of such inserts
will
cause the postage on such billing statements to exceed one ounce, then Retailer
will provide at least five (5) days prior notice to Bank to enable Bank to
adjust its process and Retailer will pay the overweight postage charges
resulting therefrom. The foregoing notwithstanding, Bank is not required
to
include any Retailer statement messages or billing inserts unless Bank receives
such statement messages or copies of the billing inserts at least fifteen
(15)
days prior to the calendar month for the scheduled mailing date. Retailer
will
provide copies of all billing inserts to Bank at its own cost.
(b) The
form
of customized messages and all billing inserts will comply with Bank’s
specifications as provided to Retailer from time to time, and Bank shall
have
the right to reject any message or billing statement that Bank reasonably
believes is detrimental to the image of the Bank or the Program. For the
avoidance of doubt, for purposes of Retailer’s rights under this Section, only
billing inserts and statement messages regarding the Program, or goods and
services available for purchase from Retailer under the Program, shall qualify
for inclusion in Cardholder billing statements.
6.9 Extended
Warranties.
Retailer
will not be permitted to finance on Accounts extended warranties, service
contracts, gift certificates, cash cards or stored value cards without the
prior
written approval of Bank. With respect to any of the foregoing, if Retailer
seeks Bank’s consent to finance such products under the Program, Retailer agrees
to review with Bank its offering of and procedures concerning the sale and
fulfillment of such products. Retailer understands that any third party insurer
of any extended warranty program proposed by Retailer shall be subject to
financial review by Bank and must otherwise be reasonably acceptable to Bank.
Even where approved by Bank, Retailer shall be responsible for ensuring that
any
extended warranties, service contracts, gift certificates, cash cards or
stored
value cards fully comply with all applicable laws. Nothing in this
Section 6.9 shall restrict Retailer from selling products subject
to normal
manufacturer’s warranties included in the standard purchase price as long as no
additional seller’s warranties are provided.
6.10 Third
Party Participation.
As of
the date of this Agreement, Retailer represents and warrants that no Affiliate
of Retailer is engaged in the business of selling goods or services to retail
consumers other than those Affiliates, if any, whose existence and retail
consumer sales activities have been disclosed to Bank prior to the date hereof.
Retailer shall not after the Program Commencement Date permit any Affiliate
to
charge any purchase to an Account or to submit any Charge Transaction Data
to
Bank without (i) the prior written consent of Bank; (ii) such
Affiliate having entered into a written agreement with Bank to be a
“Retailer”
hereunder (on such modified terms and conditions as Bank may require); and
(iii) such Affiliate having executed or authorized the filing of such
additional documents (including but not limited to UCC financing statements)
as
Bank may require. Retailer has not and will not permit any licensee, subtenant
or third party operating in or from a Store Location to accept Credit Cards
for
purchases by Cardholders without first obtaining Bank’s prior written
approval.
6.11 Sales
Taxes and Related Record Retention.
(a) Retailer
will pay when due any sales taxes relating to the sale of goods or services
financed on Accounts. Retailer agrees that Bank shall be entitled to any
and all
recoveries of taxes of any type that were imposed on the sale of goods or
services attributable to any Account that Bank determines to be non-collectable
during the Term
through any and all potential means, including, but not limited to, refunds,
9
deductions,
credits or audit offsets. Retailer shall cooperate with Bank in the recovery
of
any and all such taxes by such means as Bank reasonably determines, including
but not limited to executing any and all forms or other documentation deemed
necessary by Bank or required by any taxing authority, and retaining and
timely
producing all supporting documentation and data relative to such Accounts;
provided,
that
Retailer shall have no such obligation to cooperate to the extent Retailer
reasonably determines that doing so will result in Retailer violating any
applicable law. Bank acknowledges and agrees that (i) Retailer shall have
no
obligation to independently pursue the recovery of any such taxes in the
absence
of a written request from Bank, and (ii) Bank shall not be entitled to
recover
any such taxes from Retailer except to the extent Retailer shall have recovered
such taxes from the applicable taxing authority. Bank shall reimburse Retailer
for all reasonable expenses incurred by Retailer for copying, mailing or
transmitting such documentation or data at the direction of Bank as contemplated
by this Agreement.
(b) Retailer
will retain a record of each purchase included in any Charge Transaction
Data
submitted to Bank under the Program for at least four (4) years from the
date of
each purchase (which record may be maintained in electronic format, but must
show the Account number, amount of sales, use or excise tax included in each
such purchase and the street address of the Store Location where each such
purchase was made (or a store number or other information from which the
street
address of the location of the sale can be readily ascertained)). Retailer
will
provide such information to Bank within twenty (20) days after Bank’s
request.
6.12 Use
of Names and Marks.
Retailer
hereby grants Bank a nonexclusive, royalty-free, non-transferable (provided
that
such restriction shall not limit Bank’s right to use contractors and Affiliates
to produce the branded materials contemplated hereby) license to use the
Retailer Marks within the geographic region contemplated hereby (which, for
purposes of Retail Purchases, shall mean the United States of America) in
connection with the continuing administration and operation of the Program
and
the ownership and liquidation of the Accounts (including, without limitation,
the exercise by Bank of all of its rights under this Agreement and under
applicable law, and the fulfillment of all of Bank’s obligations under this
Agreement and under applicable law). Without the prior written consent of
Bank,
Retailer may not use Bank’s (or any Affiliate thereof) names or any related
marks, logos or similar proprietary designations; provided,
that
Retailer may use Bank’s business name, in the nominative sense, in connection
with any credit disclosure verbiage included in any advertising of the Program
(or any credit-based promotion offered thereunder) by Retailer.
6.13 Intellectual
Property.
All
technology, software, or other material developed, invented, created or authored
by either party in connection with the Program shall belong solely and
exclusively to the developing party, including all intellectual property
rights
relating thereto.
6.14 Securitization.
Bank and
its Affiliates may securitize, participate or otherwise convey or transfer
an
interest in, or pledge or create a lien in respect of, any or all of the
Accounts and/or Indebtedness at any time during the Term; provided,
that no
such action will adversely effect any of the rights of Retailer to purchase
the
Accounts and Indebtedness in accordance with the terms of this Agreement.
Retailer agrees to cooperate with Bank and its Affiliates and use commercially
reasonable efforts (without being required to incur any material out-of-pocket
costs) to assist Bank and its Affiliates in connection with any such
matter.
6.15 Grant
of Security Interest/Precautionary Filing.
(a) Both
(i) against the possibility that it is determined that Article 9
of
the UCC applies or may apply to the transactions contemplated hereby, and
(ii) to secure payment of and performance by Retailer of any and all
indebtedness, liabilities or obligations, now existing or hereafter arising
pursuant to this Agreement, including indebtedness, liabilities and obligations
that may be deemed to exist in the event of the applicability of Article 9
of the UCC to, and any recharacterization of, any transactions contemplated
hereby, Retailer grants to Bank a security interest in all of Retailer’s right,
title and interest, if any, now existing or hereafter arising in all
(i) Accounts, Account Documentation and Indebtedness, (ii) all
deposits, credit balances and reserves on Bank’s books relating to any such
Accounts
(including the Collateral Account), (iii) all goods financed on Accounts
and returned to Retailer by Cardholders for which Retailer has not repaid
Bank,
and (iv) all proceeds of any of the foregoing.
(b) Retailer
represents and warrants that it has not and will not grant any security interest
to or authorize the filing of any financing statement in favor of any person
that attaches to or covers any of the
10
property
set forth in the preceding subsection (a) or that would attach to
or cover
such property, if contrary to the intent of the parties to this Agreement,
Retailer was determined to have any rights therein, other than any security
interests or financing statements that have lapsed or been
terminated.
(c) Retailer
agrees to cooperate fully with Bank, as Bank may reasonably request, in order
to
give effect to the security interests granted by this Section 6.15.
Retailer hereby authorizes Bank to file such UCC-l or comparable statements
as
Bank deems necessary or appropriate to perfect such security interests. Retailer
represents and warrants that as of the date hereof the following is the true
and
correct corporate name, state of organization, and principal place of business
of Select Comfort and
SCRC,
respectively:
(i)
Select Comfort Corporation; incorporated in the State of Minnesota; principal
place of business, 0000 Xxxxxxx Xxxx Xxxxx, Xxxxx 000, Xxxxxxxxxxx, Xxxxxxxxx,
00000; and, Select Comfort Retail Corporation; incorporated in the State
of
Minnesota; principal place of business, 0000 Xxxxxxx Xxxx Xxxxx, Xxxxx 000,
Xxxxxxxxxxx, Xxxxxxxxx, 00000. Retailer agrees to provide Bank with thirty
(30)
days’ prior written notice of any change in any of the foregoing corporate name,
or any state of incorporation.
(d) Unless
Bank shall have otherwise consented in writing, Retailer shall not create,
assume or suffer to exist any lien on any of its right, title or interest
under
this Agreement or in the proceeds thereof. Without limiting the foregoing,
Bank
hereby consents to the security interest of the Working Capital Lender in
this
Agreement and such proceeds; provided,
that
Retailer acknowledges that such security interest is subject in all respects
to
any and all rights of Bank hereunder or under applicable law to set-off,
net or
recoup amounts due Bank against amounts due Retailer.
6.16 In-Store
Payments.
Retailer
shall not accept any payment on an Account. Retailer will make available
to
Cardholders at all Store Locations (and at such other locations or venues
at or
through which Cardholders may seek information about the Program) the address
to
be used for making payments on Accounts directly to Bank. If notwithstanding
the
foregoing, Retailer inadvertently receives any payment on an Account, Retailer
agrees that it will receive and hold such payment in trust for Bank and will
promptly (but not later than three (3) business days after Retailer realizes
it
has received such payment) deliver such payment to Bank in the form received
together with such endorsements or other documents of assignment as may be
necessary to permit Bank to receive the benefit thereof to the same extent
as if
payment had been made directly to Bank.
6.17 Relationship
Managers.
Bank and
Retailer shall each designate one employee (with sufficient authority to
facilitate decision-making on behalf of Bank and Retailer, respectively,
and
with sufficient knowledge and experience to effectively and efficiently manage
the relationship contemplated hereby) who shall be charged with day-to-day
administrative responsibility for the Program (each, a “Relationship
Manager”)
during
the Term, and who shall make available a sufficient amount of his or her
working
time, attention, skill, and efforts necessary to furthering the interests
of the
Program. Either party may replace its Relationship Manager at any time upon
notice to the other party, so long as the replacement Relationship Manager
meets
the foregoing qualifications.
6.18 Direct
and ECOM Purchases.
Retailer
will process all Direct Purchases, all ECOM Purchases and all applications
received via telephone or through the mail in accordance with the terms of
this
Agreement, the Operating Procedures, and any specific procedures governing
such
transactions developed by Bank and Retailer. Without limiting the foregoing,
(i) if a prospective Cardholder is submitting an application via telephone,
Retailer will ensure that all consumer credit disclosures, as provided to
Retailer by Bank from time to time, have been provided to the prospective
Cardholder as part of such telephone call. Retailer shall continue to provide
such disclosures consistent with the manner in which such disclosures were
provided under the Prior Program as of the Program Commencement Date (as
such
disclosures and/or delivery procedures may be amended from time to time by
Bank
in its reasonable discretion), and (ii) Retailer will cause all such
applications to be separately tagged with a special processing indicator
and all
Direct Purchases and all ECOM Purchases to be separately tagged with a unique
sale number.
6.19 Letter
of Credit.
(a) Subject
to Section 6.19(c), at
any
time following the occurrence of a Letter of Credit Event, Bank may require
that
Retailer deliver to Bank within ten (10) days after Bank’s request an Eligible
Letter of Credit in an amount equal to the Letter of Credit Amount. If, at
any
time, an event shall occur which would
11
cause
any
Letter of Credit previously delivered to Bank to cease to be an Eligible
Letter
of Credit or no longer to be in an amount equal to or greater than the
Letter of
Credit Amount, then within ten (10) days after the earlier of (i) the
date
on which Retailer first learns of the occurrence of such event; or (ii) the
date on which Retailer first receives notice thereof from Bank, Retailer
shall
cause a substitute Eligible Letter of Credit to be issued and delivered
to Bank
in a face amount equal to or greater than the Letter of Credit Amount.
On or
before thirty (30) days prior to the expiration of each Letter of Credit
provided to Bank, Retailer shall cause a substitute Eligible Letter of
Credit to
be issued and delivered to Bank in a face amount equal to or greater than
the
Letter of Credit Amount.
(b) Any
amounts drawn under a Letter of Credit hereunder in excess of the amounts
due
Bank hereunder shall be held by Bank in a non-interest bearing account on
Bank’s
books (the “Collateral
Account”)
and
shall secure Retailer’s full and prompt payment of all further amounts due
hereunder. If Retailer fails to pay any amounts hereunder when due, Bank
may
immediately, and without prior notice to Retailer, further draw on the Letter
of
Credit or, if applicable, debit any such unpaid amount from any amounts then
remaining in the Collateral Account. In addition, if Retailer fails to provide
a
substitute or replacement Eligible Letter of Credit as required by this Section
6.19, Bank may draw on the full amount available under the Letter of Credit,
apply any amounts received in such drawing against Retailer’s outstanding
obligations hereunder, and credit the Collateral Account with the amount
equal
to any remaining balance. Retailer hereby grants Bank a security interest
in the
Collateral Account, which security interest shall be in addition to any right
of
setoff or recoupment that Bank may otherwise have under this Agreement or
applicable law.
(c) If,
following Retailer’s delivery of an Eligible Letter of Credit to Bank in
compliance with the terms of this Section 6.19, Retailer is able to obtain
and
maintain compliance with the financial covenants set forth in Schedule 6.7
for a
period of three (3) consecutive fiscal quarters of Retailer, then Bank shall
return the Letter of Credit and/or any proceeds in the Collateral Account
within
thirty (30) days after the end of the applicable fiscal quarter.
(d) The
obligations under this Section 6.19 shall apply at all times until
the
earlier of (i) six (6) months after the expiration or earlier termination
of the
Term, and (ii) the sale of the Accounts to Retailer (or its designee) pursuant
to Section 10.1, at which time, Bank shall surrender any outstanding Letter
of
Credit to Retailer and pay to Retailer an amount equal to the amount remaining
in the Collateral Account, if any. Such surrender or repayment shall be
accompanied by an accounting of credit and debit activity for the Collateral
Account, if any.
(e) Bank
agrees to pay for the fees required by the issuing bank for any Letter of
Credit
requested by Bank hereunder; provided,
that
the maximum amount payable by Bank in respect of each such fee shall not
exceed
1.5% of the applicable Letter of Credit Amount.
ARTICLE
7 -
CHARGEBACKS
7.1 Chargeback
Rights.
Subject
to Section 7.2, Bank will have the right to chargeback to Retailer the principal
balance relating to any Indebtedness, if with respect to the corresponding
charge or credit or the related Charge Transaction Data or the underlying
transaction:
(a) The
Cardholder disputes a charge and Retailer cannot provide Bank with the
applicable Charge
Slip that resolves the dispute within twenty (20) days after Bank’s
request;
(b) The
Cardholder or any person disputes the existence of an Account and Retailer
cannot provide Bank with an executed application that resolves the dispute
within twenty (20) days after Bank’s request (Bank having reasonably determined
after a review of its records that it does not have such Cardholder application
in its possession);
(c) The
Cardholder disputes the amount of an Account and/or refuses to pay alleging
dissatisfaction with products or services received, a breach of any warranty
or
representation by Retailer in connection with the transaction, or an offset
or
counterclaim based on an act or omission of Retailer, provided
that any
such dispute(s) constitutes a bona fide claim presented by a Cardholder in
good
faith in the reasonable opinion of Bank;
12
(d) The
Cardholder disputes a charge or the amount or existence of an Account and/or
otherwise refuses to pay and Retailer failed to comply with any Operating
Procedure(s) with respect to the corresponding charge, credit, or Account
(provided
that any
such dispute(s) constitutes a bona fide claim presented by a Cardholder in
good
faith in the reasonable opinion of Bank), or Bank determines that any charge,
credit or Account was subject to any acts of fraud performed by or in collusion
with Retailer’s employees, contractors or agents;
(e) The
Cardholder disputes the amount or existence of, or otherwise refuses to pay,
all
or any portion of the Indebtedness resulting from a Card-Not-Present Purchase;
provided
that any
such dispute or refusal constitutes a bona fide claim presented by a Cardholder
in good faith in the reasonable opinion of Bank; or
(f) Bank
determines that any warranty made by Retailer pursuant to Section 11.2
was
false or inaccurate in any respect when made.
(g) Such
charge, credit, Charge Transaction Data or the underlying transaction relates
to
any purchases financed on an Account opened pursuant to an Internet Application,
and (i) the Cardholder asserts that the Cardholder or an authorized
user
did not make or authorize the purchase in dispute, or (ii) any person
asserts that such person’s name, social security number or other identifying
information was used to make any purchase (or to open an Account on which
such
purchase was made) and that such person did not make or authorize the purchase
or open the Account in dispute, or (iii) Bank determines in good faith
that
a purchase was transacted or an Account was opened in a suspicious or fraudulent
manner.
In
its
reasonable discretion, Bank may compromise and settle any claim made by any
Cardholder (including claims made on behalf of an authorized user) relating
to
such Cardholder’s Account. No such compromise or settlement will impair Bank’s
right to chargeback under this Section 7.1 any portion of such Account
not
paid pursuant to any such settlement or compromise. If the full amount or
any
portion of any charge is charged back, Bank will assign all rights to payment
for the amount charged back to Retailer upon the request of Retailer, without
recourse or warranty, except that such rights are free and clear of any lien
or
encumbrance of Bank.
7.2 Fraud
Losses on Accounts.
(a) Notwithstanding
Bank’s right to chargeback to Retailer any Indebtedness under Section 7.1, if
Bank determines in its reasonable discretion that the basis for such chargeback
right constitutes Uncontrollable Fraud, then, with respect to each such
incidence of Uncontrollable Fraud during any Program Year (and without limiting
Retailer’s obligation with respect to amounts payable for any other reason under
Section 7.1, including without limitation amounts payable as a result of
fraud
performed by or in collusion with Retailer’s employees, contractors or agents),
Bank’s right to chargeback the related charge or credit under Section 7.1 shall
be limited
to fifty percent (50%) of the aggregate amount otherwise subject to chargeback
until the Fraud Cap then in effect for such Program Year has been reached.
Once
the Fraud Cap has been reached for any Program Year, Retailer shall be
responsible and liable for all subsequent chargebacks attributable to
Uncontrollable Fraud and shall pay Bank such amount as set forth in Section
7.2(b). As used herein, the following terms shall have the following meanings:
(i) “Uncontrollable
Fraud”
shall
mean acts of fraud perpetrated by persons other than employees, contractors
or
agents of Retailer, which acts of fraud occur despite Retailer’s full compliance
with this Agreement and the Operating Procedures then in effect (in calculating
fraud losses, an incident of Uncontrollable Fraud will be attributed to the
Program Year in which the fraudulent act was discovered); and (ii) “Fraud
Cap”
means,
for any Program Year, an amount equal to [*** Confidential portion has been
omitted pursuant to a request for confidential treatment and has been filed
separately with the Commission.]. For purposes of this Section, Bank
acknowledges and agrees that, with respect to its chargeback rights under
Sections 7.1(b) and 7.1(g) in connection with any Account application the
information for which was provided over the telephone or through the Internet,
so long as Retailer followed any applicable Operating Procedures with respect
to
the completion of such application, Bank’s chargeback rights shall be subject to
the Uncontrollable Fraud provisions of this Section 7.2 notwithstanding that
Retailer cannot provide to Bank a copy of such application.
(b) To
the
extent, for any Program Year, Bank’s losses resulting from Uncontrollable Fraud
exceed the Fraud Cap for such Program Year, Retailer shall pay to Bank promptly
upon demand, the amount by which such losses exceed the Fraud Cap.
13
ARTICLE
8 -
EXCLUSIVITY
8.1 Exclusivity.
(a) Retailer
will not (and will cause its Affiliates
not to) either within the United States or in connection with Direct Purchases
or ECOM Purchases of merchandise priced by Retailer in United States Dollars
(or
otherwise intended by Retailer for purchase by consumers residing within
the
United States) (i) directly or indirectly, accept for payment, promote,
sponsor, solicit, permit solicitation of, or make available to retail consumer
customers of Retailer or any of its Affiliates or otherwise provide, any
consumer credit or charge program that bears, uses or refers to any trade
names
of Retailer, or in any way competes with the Program, other than (A) any
program offered by Bank or an Affiliate of Bank, (B) any generally
accepted
multi-purpose credit or charge cards or by generally accepted multi-purpose
debit or secured cards in each case, such as American Express, MasterCard,
Visa
and Discover cards (provided that none of the cards referred to in this
clause (B) may be “co-branded,”“sponsored” or “co-sponsored” with Retailer
or bear Retailer’s name or marks), or (C) a Second Source Program, or
(ii) promote any other charge or credit payment vehicle not otherwise
prohibited hereby (e.g.
general
purpose credit cards) more favorably than Accounts and Credit Cards as a
method
for the payment of Retailer’s goods and services. Without limiting the
foregoing, if Retailer shall have exercised its termination rights under
Section
9.2(l) and for any reason Retailer thereafter determines not to implement
its
Internal Program, the provisions of this Section 8.1 shall continue to apply
through fifth anniversary of the Program Commencement Date.
(b) Until
the
expiration or termination of the Term, if Retailer desires to make arrangements
for the provision by any person of any consumer credit program for the financing
of purchases from Retailer or its Affiliates in Canada, then Retailer shall
engage in good faith discussions with Bank regarding the possibility of Bank
(or
an Affiliate of Bank) providing such program.
(c) The
provisions of Section 8.1(a) notwithstanding,
(i) following
the date of any notice of termination by either party under Section 9.1 or
9.2,
in order
to provide for an orderly transition to a potential replacement financing
arrangement, Retailer may initiate negotiations for such replacement
program; provided
that
Retailer shall not (x) except as may be required under applicable
securities laws, announce such replacement program earlier than ninety (90)
days
prior to the scheduled end of the Term (provided,
that no
such announcement or other activity shall in any way portray Bank or the
Program
in a negative fashion), or (y) begin accepting applications or processing
transactions under such replacement programs earlier than the end of the
Term.
(ii) Retailer
may operate a consumer financing program otherwise precluded under Section
8.1(a) if Retailer’s participation therein arises as a result of Retailer’s
acquisition (whether through merger, stock purchase or asset purchase) of
an
unrelated third party, which entity was, at the time of such acquisition,
party
to a contract for the provision of a consumer financing program (in each
case,
an “Acquired
Program”).
Retailer shall notify Bank of the acquisition at the earliest reasonably
practicable date following the public announcement of the acquisition and
shall
thereafter provide Bank with such information regarding the Acquired Program
as
Bank may reasonably request in order to ascertain the extent to which Bank
is
able to integrate the Acquired Program into the Program.
(iii) Within
sixty (60) days following receipt by Bank of the requested information, Bank
will notify Retailer whether (A) it agrees to integrate the Acquired Program
into the Program upon the same terms and conditions then prevailing under
the
Program; (B) it proposes additional or separate Program Fee Percentages for
the
Acquired Program, in which case the notice from Bank will include such
additional or separate Program Fee Percentages; or (C) it declines to do
either
of the above. If the scheduled expiration date of the Acquired Program is
less
than sixty (60) days after the date of receipt by Bank of the requested
information, then Bank may nonetheless inform Retailer of its intention to
integrate the Acquired Program so long as such notice is given not less than
fifteen (15) days prior to such expiration date. Retailer may, in its sole
discretion, extend the Acquired Program for such period of time as Retailer
may
deem necessary or appropriate to allow for additional time for evaluation;
provided,
that if
Bank notifies Retailer of its intention to integrate the Acquired Program
into
the Program, Retailer shall not thereafter initiate or agree to any such
extension.
14
(iv) If
Bank
notifies Retailer that it agrees to integrate the Acquired Program into the
Program upon the same terms and conditions then prevailing under the Program,
then Retailer and Bank shall execute all such further documents and instruments
and do all such further things as may be reasonably necessary and practicable
to
integrate the Acquired Program into the Program under such prevailing terms
and
conditions to be effective following the expiration or termination of the
Acquired Program.
(v) If
Bank
notifies Retailer that it proposes additional or separate Program Fee
Percentages for the Acquired Program, then Bank and Retailer shall engage
in
good faith discussions regarding such proposed terms. If the parties do not
reach agreement on any such proposed terms, or if Bank declines to provide
any
proposed terms, then Retailer may (A) continue indefinitely the Acquired
Program
with the existing provider; (B) take the Acquired Program in-house; or (C)
engage any other party to provide a program to replace the Acquired
Program.
(vi) During
any period that the Acquired Program is operated separately from the Program
and
in any of the cases described in clause (v) above, Retailer may (A) re-brand
the
Acquired Program using any of the Retailer’s Marks (provided that Retailer shall
differentiate the branding of the Acquired Program to the extent that Retailer
determines may be necessary or desirable to avoid confusion with the Program,
but in no event shall such re-branding result in the Acquired Program using
the
same
overall
credit card
design
as is used for the Program); and (B) expand the Acquired Program to additional
retail locations that were not Store Locations immediately prior to the
effective date of the acquisition of any Acquired Program, but only if such
additional retail locations will carry product lines that are consistent
with
the concept of the retail locations and product lines included in the Acquired
Program (it being understood that any additional retail locations that will
carry product lines that are consistent with the product lines carried by
the
Retailer prior to the acquisition of the Acquired Program shall be included
in
the Program). For the avoidance of doubt, (I) an Acquired Program shall not
be
used to finance Retail Purchases, Direct
Purchases or ECOM Purchases;
provided, that Bank acknowledges that an Acquired Program may include separate
retail locations and separate telephone and/or internet sales and/or application
acquisition channels and the foregoing limitation shall not prohibit the
use of
such separate retail locations or other sales and/or account acquisition
channels,
and
(II) if
Retailer
shall from time to time decide to offer new or additional product lines at
Store
Locations, Bank shall extend the Program and the ability of Cardholders to
finance such newly added goods and/or services so long as such goods and/or
services are generally similar to those sold by Retailer as of the Program
Commencement Date.
(vii) If
Bank
elects to cease remitting payments to Retailer pursuant to Section 3.1(b),
based
on the existence of a right of termination pursuant to Section 9.2, Retailer
may
immediately thereafter begin accepting applications and/or processing
transactions under a replacement program and the exclusivity provisions of
this
Section 8.1 shall be permanently cancelled and terminated.
ARTICLE
9 -
TERM/TERMINATION
9.1 Program
Term.
This
Agreement shall continue until February 15, 2011 and shall automatically
renew
for additional two (2) year terms (each such period, a “Term”),
unless either party shall give written notice to the other party at least
twelve
(12) months prior to the end of the scheduled expiration of such Term of
its
intention to terminate the Program.
9.2 Termination
of Agreement.
Notwithstanding anything in Section 9.1 to the contrary, this Agreement
may
be terminated prior to the end of any Term as provided below:
(a) Except
with respect to breaches of the provisions of Section 6.19 (which are addressed
in Section 9.2(o)), if
a party
breaches any covenant or agreement contained in this Agreement (i) which
does not involve the payment of money to the other party hereto and such
breach
continues for a period of thirty (30) days after the non-breaching party
has
given written notice of the breach, or (ii) which involves the payment
of
money to the other party hereto and such breach continues for a period of
three
(3) days after the non-breaching party has given written notice of the breach,
then, in either case, the non-breaching party shall have the right to terminate
this Agreement. The foregoing clause (ii) notwithstanding, the failure
of a
party to make a payment due hereunder shall not give rise to a termination
right
in the other party if the amount which such party has failed to pay is less
than
$50,000 and such party, acting in good faith, has delivered a written notice
to
the other party contesting its obligation to make such payment. In any case,
to
be effective, a termination notice must be delivered within sixty (60) days
after the expiration of the applicable cure periods set
15
forth
above. This Agreement will terminate one hundred and twenty (120) days
after
delivery of such notice of termination.
(b) If
any
representation or warranty made by a party proves not to have been true and
correct in all material respects as of the date when made, then the other
party
shall have the right to terminate this Agreement; provided,
however,
that
breaches by Retailer under Section 11.2 shall not give rise to a right of
termination hereunder unless such breaches have, in Bank’s reasonable
determination become chronic and/or persistent, and Retailer has not, after
written notice from Bank, cured such breaches and resolved or corrected,
to
Bank’s reasonable satisfaction, any underlying systems, personnel, or other
problem(s) giving rise to such breaches, in each case within thirty (30)
days
after written notice by Bank. In order to be effective, the notice of
termination must be delivered within sixty (60) days after the date such
other
party first becomes aware that such representation or warranty is not true
and
correct (or, in the case of chronic and/or persistent breaches under Section
11.2, within sixty (60) days after the date on which Bank reasonably determined
that such breaches under Section 11.2 have become chronic or
persistent). This
Agreement will terminate one hundred and twenty (120) days after delivery
of
such notice of termination.
(c) If
a
party (i) is no longer Solvent; (ii) generally does not pay
its debts
as such debts become due, or admits in writing its inability to pay its debts
generally; (iii) makes a general assignment for the benefit of its
creditors, (iv) has any proceeding instituted by or against it seeking
to
adjudicate it bankrupt or insolvent or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition
of
it or its debts under any law relating to bankruptcy, insolvency, or
reorganization or relief of debtors, or seeking the entry of an order for
relief
or the appointment of a receiver, trustee, custodian or other similar official
for it or for any substantial part of its property; or (v) takes any
corporate action to authorize any of the actions set forth above in (i) through
(iv) above, then the other party shall have the right to terminate this
Agreement. In order to be effective, the notice of termination must be delivered
within one hundred and eighty (180) days after such other party becomes aware
of
the occurrence of such event; provided,
that in
the case of an occurrence under clause (iv), this Agreement shall
terminate
automatically unless the parties shall mutually agree in writing to continue
the
Program. In any case in which notice is required for termination, this Agreement
will terminate upon delivery of such notice.
(d) If,
with
respect to Retailer, any of the following events occur, then Bank shall have
the
right to terminate this Agreement: (i) any person or group of persons
acting in concert acquires, after the date of this Agreement, beneficial
ownership of fifty percent (50%) or more of the combined voting power of
the
then outstanding voting securities of Retailer entitled to vote generally
in the
election of directors; (ii) the stockholders of Retailer approve a
reorganization, merger or consolidation (each a “Reorganization”),
in
each case through which the persons who were the respective beneficial owners
of
the voting securities of Retailer immediately prior to such Reorganization
do
not beneficially own, following such Reorganization, directly or indirectly,
more than fifty percent (50%) of the combined voting power of the then
outstanding voting securities entitled to vote generally in the election
of
directors of the corporation, as a result of such Reorganization; or
(iii) all or substantially all of the assets or property of Retailer
are
sold or otherwise disposed of in one transaction or series of related
transactions. In order to be effective, the notice of termination must be
delivered within one hundred and eighty (180) days after Bank becomes aware
of
the occurrence of such event. This Agreement will terminate one hundred and
twenty (120) days after delivery of such notice of termination.
(e) If
a
party is in default under any material loan agreement, indenture or other
instrument relating to any indebtedness for borrowed money and such default
gives any person, either with or without notice and without giving effect
to any
extension of any grace period, the right to accelerate such indebtedness,
then
the non-defaulting party hereunder shall have the right to terminate this
Agreement. In order to be effective, the notice of termination must be delivered
within ninety (90) days after such non-defaulting party becomes aware of
the
occurrence of such event. This Agreement will terminate thirty (30) days
after
delivery of such notice, unless the underlying default is cured during such
thirty (30) day period.
(f) If
a
material adverse change has occurred in the operations, financial condition,
business or prospects of a party hereto, which the other party has determined,
in good faith, has had, or is reasonably likely to have, a material adverse
effect on the ongoing operation or continued viability of the Program, then
the
other party shall have the right to terminate this Agreement. In order to
be
effective, the notice of termination must be delivered within ninety (90)
days
after the terminating party makes such determination. This Agreement will
terminate sixty (60) days after delivery of such notice of
termination.
16
(g) Bank
shall have the right to terminate the Agreement upon written notice if
(i) usury rates for the State of Utah (or any other State in which
the Bank
may choose to locate) change, laws regulating Bank’s rate or fee structure
change, or federal or state laws, regulations or other authority preempt
the
exportation of Bank’s rate or fee structure; (ii) Bank determines, in good
faith, that any of the foregoing has had, or is reasonably likely to have,
a
material adverse effect on Bank’s ability to provide the Program or perform the
transactions contemplated hereby or on Program economics; (iii) Bank
has
sought to engage Retailer in a good-faith renegotiation of the terms of this
Agreement; (iv) the parties hereto have not agreed to modifications
to the
terms of this Agreement that Bank reasonably believes necessary to prevent
a
material adverse effect on the economics of the Program or on Bank (or on
its
ability to perform the transactions contemplated by this Agreement) resulting
from the change in usury rates or other laws regulating Bank’s rate or fee
structure or the exportation thereof; and (v) either Bank is required
to
initiate changes to the Program to comply with applicable law or more than
one
hundred and twenty (120) days have passed since Bank first sought to engage
Retailer in a good faith renegotiation of the terms of this
Agreement.
(h) If
any
judicial or administrative agency or body determines that the Program does
not
qualify (or if Bank reasonably determines that there is a material risk that
the
Program will not qualify, in which case Bank shall promptly notify Retailer
of
such determination) as an “open-end” credit facility under Regulation Z, 12
C.F.R. 226.2(a)(20), then Bank shall have the right to terminate this Agreement.
In order to be effective, the notice of termination must be delivered within
sixty (60) days after such determination. This Agreement will terminate upon
delivery of such notice of termination.
(i) If
a
final judgment or judgments for the payment of money in excess of One Million
Dollars ($1,000,000) is rendered against Retailer and the same is not either
(i) covered by insurance where the insurer has affirmatively and expressly
accepted liability therefore or (ii) vacated, stayed, bonded, paid,
or
discharged prior to expiration of the applicable appeal period, then Bank
shall
have the right to terminate this Agreement. In order to be effective, the
notice
of termination must be delivered within sixty (60) days after Bank becomes
aware
of the occurrence of such event. This Agreement will terminate one hundred
and
twenty (120) days after delivery of such notice of termination.
(j) Retailer
shall have the following termination rights with respect to the Credit Review
Point:
(i) [***
Confidential portion has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Commission.]
(ii) Upon
receipt of Bank’s notice to Retailer regarding its election whether or not to
increase the Credit Review Point then in effect pursuant to Section 6.6(b),
Retailer may terminate this Agreement without cause. In order to be effective,
Retailer’s notice of termination must be delivered within thirty (30) days after
Bank notifies Retailer pursuant to Section 6.6(b). This Agreement
will then
terminate in accordance with the terms of clause (iii) below.
(iii) If
Retailer has given notice of its intention to terminate this Agreement pursuant
to either of clauses (i) or (ii) above, or if Bank has elected not to increase
the Credit Review Point pursuant to Section 6.6, this Agreement will terminate
one hundred and twenty (120) days after Aggregate Outstanding Indebtedness
reaches ninety five percent (95%) of the Credit Review Point (even if during
such period Aggregate Outstanding Indebtedness exceeds the Credit Review
Point).
(k) Either
Bank or Retailer shall have the right to terminate the Agreement upon written
notice to the other party hereto, if the performance by the other party of
its
obligations under this Agreement is prevented or materially impeded, without
ability to cure, for a period of not less than 60 consecutive days by a Force
Majeure Event.
Without
derogating from the foregoing sixty (60) day period applicable to the
establishment of a termination right due to a Force Majeure Event, the
termination notice required hereunder may be given by the affected party
at any
time following the onset of a Force Majeure Event, but in any event must
provide
at least thirty (30) days’ prior notice of the effective date of any such
termination.
(l) Retailer
shall have the right to terminate the Agreement upon not less than 180 days
prior written notice (which termination notice may not have an effective
date
earlier than the third anniversary of the Program Commencement Date) if Retailer
has established a private label credit program substantially
17
similar
to the Program and through which Retailer will be extending the financing
directly (including through a wholly-owned subsidiary) to consumers to
finance
the purchase of goods and services from Retailer (the “Internal
Program”).
Without limiting Retailer’s obligation to provide the foregoing written notice
to Bank, the Program shall not terminate more than ten (10) days prior
to the
implementation of the Internal Program; provided,
that,
if so requested by Retailer, Bank shall use its commercially reasonable
efforts
to terminate the Program on the business day immediately preceding the
implementation of an Internal Program (or such greater number of days (not
exceeding ten (10)), as Retailer may request).
(m) Retailer
shall have the right to terminate the Agreement as set forth below if, during
any Program Year, Bank elects to increase the Promotional Rates set forth
on
Schedule 3.5 pursuant to clause (v) of Section 3.5(b) (in each case
“New
Pricing”);
provided,
that
Retailer may not elect to terminate this Agreement under this Section 9.2(m)
unless it has completed the “Competitive Pricing Procedures”. For purposes of
this Section 9.2(m), “Competitive
Pricing Procedures”
means
the following procedures, which shall be implemented if Retailer asserts
that
such New Pricing is materially non-competitive. In such case, Retailer will
have
sixty (60) days from the date of Bank’s notice to Retailer setting forth the
proposed New Pricing to obtain a bona fide written proposal from an issuer
of
private label credit programs (“Competing
Offer”)
and to
submit such Competing Offer to Bank. If Retailer fails to submit a Competing
Offer within such period, then Retailer’s option to terminate this Agreement as
a result of such New Pricing will expire. If Retailer presents Bank with
a
Competing Offer and Bank does not meet the Competing Offer (in an aggregate
economic sense, taking into account all proposed terms of any Competing Offer
relative to all terms of the Program), then over the sixty (60) day period
following Bank’s receipt of the Competing Offer (the “Negotiation
Period”),
Retailer and Bank will use commercially reasonable efforts to negotiate mutually
agreeable New Pricing. If Retailer and Bank are unable to agree on New Pricing
by the end of the Negotiation Period, then Retailer may, during the thirty
(30)
days immediately following the end of the Negotiation Period, give a written
notice of termination to Bank. This Agreement will terminate sixty (60) days
after any such termination notice. In each case, regardless of whether Retailer
terminates this Agreement, the New Pricing shall become effective immediately
upon Bank’s notice thereof to Retailer (unless Bank’s notice of New Pricing
indicates a later date) and shall remain effective until the Final Liquidation
Date or the date when Bank and Retailer agree on other pricing.
(n) [***
Confidential portion has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Commission.]
(o) Bank
shall have the right to terminate the Agreement upon not less than thirty
(30)
days prior written notice if Retailer fails to provide a Letter of Credit
as
provided for in Section 6.19.
ARTICLE
10 -
POST TERM PROVISIONS
10.1 Purchase
of Accounts by Retailer upon Termination.
(a) Retailer
will
have
the option to purchase, or to arrange for the purchase of, not less than
all of
the Accounts and related Indebtedness (other than Accounts that have been
written-off by Bank) exercisable as provided in Sections 10.1(b) and 10.1(c)
below, for a purchase price payable in immediately available funds in an
amount
equal to [*** Confidential portion has been omitted pursuant to a request
for
confidential treatment and has been filed separately with the
Commission.].
(b) Retailer’s
option to purchase, or arrange for the purchase of, the Accounts and
Indebtedness under Section 10.1(a) may be exercised as
follows:
(i) If
the
Agreement is expiring based on either party’s decision not to renew it under
Section 9.1, Retailer may exercise its purchase option by giving notice
of
such election within one hundred and eighty (180) days prior to the expiration
of the Agreement. Retailer must thereafter complete such purchase on the
first
business day after the expiration of this Agreement.
(ii) If
the
Agreement terminates pursuant to Section 9.2 following the delivery
of a
termination notice by Retailer, Retailer must exercise its option by giving
notice of such election with such
18
termination
notice. Retailer must thereafter complete such purchase within one hundred
twenty (120) days after the effective date of such
termination.
(iii) If
the
Agreement terminates pursuant to Section 9.2 following the delivery
of a
termination notice by Bank, Retailer may exercise its option by giving notice
of
such election within thirty (30) days following delivery of such notice of
termination. Retailer must thereafter complete such purchase within ninety
(90)
days after the effective date of such termination.
(c) Anything
in Section 10.1(a) or (b) to the contrary notwithstanding, if,
after
giving notice of its intent to purchase or cause a third party to purchase
the
Accounts and Indebtedness, Retailer subsequently decides not to pursue such
purchase of the Accounts and Indebtedness, Retailer shall have no obligation
to
complete the purchase of the Accounts; provided,
that
(x) Retailer shall notify Bank, in writing, as soon as Retailer decides not
to
go forward with such purchase, and (y) Retailer shall reimburse Bank for
all
costs and expenses incurred by Bank as of the date of such notice in connection
with the sale of the Accounts and Indebtedness (subject to the limitations
contained in Section 10.1(d)(iii)). Any notice given by Retailer under this
Section 10.1(c) shall be irrevocable and shall relieve Bank of any further
obligation under this Agreement to sell the Accounts and Indebtedness pursuant
to Section 10.1 to Retailer or any third party with whom Retailer has made
arrangements to purchase the Accounts and Indebtedness.
(d) If
Retailer notifies Bank of Retailer’s intention to purchase, or arrange for the
purchase of, the Accounts and Indebtedness under Sections 10.1(a)
and
(b):
(i) Bank
shall use its commercially reasonable efforts to provide Retailer or its
designee with such materials as are customary for the industry to conduct
due
diligence.
(ii) Retailer
and Bank agree to work in good faith to prepare the necessary purchase documents
on terms and conditions that are reasonable and customary for the
industry.
(iii) Retailer
will bear all of its expenses in converting the Accounts and Indebtedness
to
itself or its designee and [*** Confidential portion has been omitted pursuant
to a request for confidential treatment and has been filed separately with
the
Commission.]of Bank’s costs of responding to due diligence requests and its
deconversion costs (including third party expenses and material internal
costs
of Bank, including the hourly cost of Bank’s personnel’s time); provided,
that
prior to any such reimbursement, Bank shall provide Retailer with a reasonably
detailed statement of such external and internal expenses.
10.2 Bank’s
Rights If Retailer Does Not Purchase Accounts.
If
Retailer does not exercise its option to purchase, or arrange for the purchase
of, the Accounts and Indebtedness under Section 10.1 upon the expiration
or
earlier termination of the Agreement, Bank will have the right, in addition
to
and without waiving any other rights it may have under the terms of this
Agreement or applicable law, to (a) liquidate any or all of the Accounts,
(b) convert the Accounts to another credit or charge program maintained
by
Bank or any of its Affiliates, or (c) sell the Accounts, whether by
securitization or otherwise to any third party; provided,
that
Bank shall not sell the Accounts to any third party which is in the business
of
manufacturing or selling beds and related accessories. Following the termination
or expiration of the Term, at Bank’s election Bank may continue to provide
purchase authorizations and extend financing under the Program on Accounts
existing as of the effective date of such termination or expiration (it being
understood that no new Accounts shall be opened after such effective date)
for
up to one hundred twenty (120) days in order to effect the conversion
solicitation contemplated above and Retailer shall accept the Credit Cards
for
such period for purposes of such add-on purchases; provided
that
such one hundred twenty (120) day period shall be extended an additional
day for
each day after such expiration or termination during which Retailer retains
the
right to purchase the Accounts under Section 10.1 (up to the number of days
preceding the expiration of the applicable notice period under Section
10.1(b)(ii) or (iii), as the case may be). Retailer
will cooperate with Bank and take any action reasonably requested by Bank,
and
Bank may use the Retailer Marks, if any, to communicate with Cardholders
and
authorized users, in connection with any such liquidation, conversion,
substitution or sale.
10.3 Survival
Provisions.
(a) Except
as
is expressly provided to the contrary in this Agreement, all of the terms,
conditions and covenants of this Agreement (including the applicable provisions
of Section 2.2 that relate to
19
(b) In
addition, all warranties, representations and indemnities contained in this
Agreement, and the parties’ obligations under Sections 6.1 (Ownership of
Accounts), 6.2 (Ownership and Use of Cardholder Information), 6.11
(Sales
Taxes and Related Record Retention), 6.13 (Intellectual Property), and
Articles 10 and 13, will survive the termination of this Agreement
and the
Final Liquidation Date.
ARTICLE
11 -
REPRESENTATIONS AND WARRANTIES
11.1 Representations
and Warranties.
Each
party makes the following representations and warranties to the other party
as
of the date of this Agreement, and Retailer makes such representations and
warranties on and as of each date on which Charge Transaction Data is
transmitted to Bank:
(a) Such
party is duly organized, validly existing, and in good standing under the
laws
of its jurisdiction of incorporation or organization, as the case may
be.
(b) Such
party has the requisite organizational power and authority to conduct its
business as presently conducted and hereafter contemplated to be conducted
and
to execute, deliver and perform this Agreement.
(c) This
Agreement has been duly executed and delivered by such party, and constitutes
the legal, valid, and binding obligation of such party, enforceable against
such
party in accordance with its terms.
(d) The
execution and delivery of this Agreement by such party and the consummation
of
the transactions contemplated hereby do not and will not (i) conflict
with
the organizational documents of such party, (ii) conflict with, or
result
in a breach of any provisions of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under any
material agreement of such party; or (iii) constitute a violation
of any
material order, judgment or decree to which such party is bound. No consent,
approval, permit, waiver, authorization, notice or filing is required to
be made
or obtained in connection with the execution, delivery and performance by
such
party of this Agreement.
(e) All
information furnished by such party to the other for purposes of or in
connection with this Agreement is true and correct in all material respects
and
no such information omits to state a material fact necessary to make the
information so furnished not misleading. Except as disclosed to the other
party
(or, in
the case of Retailer, as described from time to time in Retailer’s periodic
filings with the Securities and Exchange Commission), there is no fact known
to
such party (including, without limitation, threatened or pending litigation)
that could materially and adversely affect the financial condition, business,
property, or prospects of such party.
11.2 Presentment
Warranties.
With
respect to each submission of Charge Transaction Data to Bank, Retailer
represents and warrants as follows with respect to such Charge Transaction
Data
and each underlying transaction:
(a) All
purchases included in the Charge Transaction Data constitute bona fide,
arms-length sales by Retailer of the goods or services described therein
in the
ordinary course of Retailer’s business;
Retailer
has delivered to the Cardholder (or its designee) or shipped via third party
from its manufacturing plant directly to the Cardholder (or its designee)
all
the products and fully performed all the services covered by the Charge
Transaction Data;
(b) The
charges included in the Charge Transaction Data did not involve a cash advance
or goods or services not listed in the applicable invoice or receipt; only
goods
and services sold by Retailer (which shall be deemed to include applicable
sales
tax and delivery charges) are included in the Charge Transaction Data; the
charges represent the entire purchase price of the goods and services identified
in the Charge Transaction Data other than an additional partial-payment by
a
Cardholder, including by cash or check, or financed by any means other than
the
Account;
20
(c) To
the
best of Retailer’s knowledge, the goods and services covered by the Charge
Transaction Data were sold by Retailer to Cardholders or authorized users
for
personal, family or household purposes;
(d) Except
for Card-Not-Present-Purchases, Retailer obtained a signed invoice or receipt
for each charge included in the Charge Transaction Data;
(e) All
“purchases” (which, for purposes hereof, shall be deemed to have occurred on the
date Retailer has delivered to the Cardholder (or its designee) or shipped
via
third party from its manufacturing plant directly to the Cardholder (or its
designee) the item(s) financed on such Cardholder’s Account) included in the
Charge Transaction Data occurred no earlier than five (5) days prior to the
submission of such Charge Transaction Data; and all transactions included
in the
Charge Transaction Data were conducted in accordance with the Operating
Procedures, this Agreement and all applicable laws; and
(f) Each
invoice or receipt included in the Charge Transaction Data (or, in the case
of
Absentee Purchases, the purchase information in the Charge Transaction Data)
is
not invalid, illegible, inaccurate or incomplete and has not been materially
altered since being signed or submitted by the Cardholder; the Account number
and name of the Cardholder has been accurately printed on each Charge Slip
and
has been included in each transmission of Charge Transaction Data; Retailer
has
obtained a valid authorization from Bank for each purchase (unless otherwise
waived by Bank).
ARTICLE
12 -
INDEMNIFICATION
12.1 Indemnification
by Retailer.
Retailer
agrees to indemnify and hold harmless Bank, its Affiliates, and their respective
employees, officers, directors and agents, from and against any and all Damages
to the extent such Damages arise out of, are connected with, or result
from:
(a) Any
breach by Retailer of any of the terms, covenants, representations, warranties
or other provisions contained in this Agreement;
(b) Any
products or services sold by Retailer (including, without limitation, any
failure to provide the service as promised, any product defects, or product
liability or warranty claims relating thereto);
(c) Any
act
or omission, where there was a duty to act, by Retailer or its employees,
officers, directors or agents including without limitation, the failure of
Retailer to comply with any law, rule or regulation applicable to
Retailer;
(d) Any
advertisements, solicitations or other promotions of the Program or of goods
or
services eligible for purchase under the Program conducted by or on behalf
of
Retailer (excluding those conducted by Bank);
(e) The
acquisition by Retailer from Bank, in connection with a charge or credit
to an
Account, of a Cardholder’s Account number by telephone or by some other
means;
(f) Bank’s
use of the Retailer Marks in accordance with the terms of this Agreement;
(g) Any
activities, acts or omissions of any third party to whom Cardholder Information
is transferred or made available by or on behalf of Retailer, including without
limitation, information transferred or made available to a third party
by
Bank on
Retailer’s behalf; or
(h) Third
party claims asserted with respect to Retailer’s operation of any Acquired
Program, including any advertising or disclosures in connection therewith.
The
foregoing indemnity obligation of Retailer shall not apply to any Damages
of
Bank to the extent caused by the gross negligence, willful misconduct or
illegal
acts of Bank.
21
12.2 Indemnification
by Bank.
Bank
agrees to indemnify and hold harmless Retailer, its Affiliates, and their
respective employees, officers, directors and agents, from and against any
and
all Damages to the extent such Damages arise out of, are connected with or
result from:
(a) Any
breach by Bank of any of the terms, covenants, representations, warranties
or
other provisions contained in this Agreement;
(b) Any
act
or omission, where there was a duty to act, by Bank or its employees, officers,
directors, or agents, including without limitation, the failure of Bank to
comply with any law, rule or regulation applicable to Bank,
including the provisions of the Xxxxx-Xxxxx-Xxxxxx Act;
(c) Any
failure of the form of credit applications or Cardholder Agreement as prepared
by Bank, or the failure of any other form of document prepared by Bank for
presentation to any Account applicant or Cardholder (including billing
statements and changes in terms notices) to comply with, as applicable, the
Consumer Credit Protection Act, the Truth in Lending Act, the Fair Debt
Collection Practices Act, the Equal Credit Opportunity Act, the Fair Credit
Billing Act, the Fair Credit Reporting Act and the regulations implementing
each
of them;
(d) Any
advertisements, solicitations or other promotions by or on behalf of Bank
(other
than those conducted by Retailer) of the Program; or
(e) Any
activities, acts or omissions of any third party to whom Cardholder Information
is transferred or made available by or on behalf of Bank.
The
foregoing indemnity obligation of Bank shall not apply to any Damages of
Retailer to the extent caused by the gross negligence, willful misconduct
or
illegal acts of Retailer.
12.3 Indemnification
Procedures.
(a) A
party
entitled to indemnification will give prompt written notice to the indemnifying
party of any claim, assertion, event, condition or proceeding by any third
party
concerning any liability or damage as to which it may request indemnification
under this Article 12. The failure to give such notice will not relieve
the
indemnifying party from liability hereunder unless and solely to the extent
the
indemnifying party did not know of such third party claim and such failure
results in the forfeiture by the other party of substantial rights and
defenses.
(b) An
indemnifying party will have the right, upon written notice to the indemnified
party, to conduct at its expense the defense against such third party claim
in
its own name, or, if necessary, in the name of the indemnified party. When
the
indemnifying party assumes the defense, the indemnified party will have the
right to approve the defense counsel and the indemnified party will have
no
liability for any compromise or settlement of any third party claim that
is
effected without its prior written consent (such consent not to be unreasonably
withheld), unless the sole relief provided is monetary damages that are paid
in
full by the Indemnifying Party and such compromise or settlement includes
a
release of each indemnified party from any liabilities arising out of the
third
party claim. If the indemnifying party delivers a notice electing to conduct
the
defense of the third party claim, the indemnified party will, at the
indemnifying party’s expense, cooperate with and make available to the
indemnifying party such assistance, personnel, witnesses and materials as
the
indemnifying party may reasonably request. If the indemnifying party does
not
deliver a notice electing to conduct the defense of the third party claim,
the
indemnified party will have the sole right to conduct such defense and the
indemnified party may pay, compromise or defend such third party claim or
proceeding at the indemnifying party’s expense. Regardless of which party
defends the third party claim, the other party will have the right at its
sole
expense to participate in the defense assisted by counsel of its own
choosing.
ARTICLE
13 -
MISCELLANEOUS
13.1 Confidentiality.
(a) All
material and information supplied by one party to another party under this
Agreement, including, but not limited to, information concerning a party’s
marketing plans, objectives or financial
22
(b) Section
13.1(a) to the contrary notwithstanding, if Retailer is obligated to file
periodic reports with the Securities and Exchange Commission, then Retailer
shall have the right to file a copy of this Agreement with the applicable
commission or governmental agency to the extent necessary, in Retailer’s
reasonable opinion, to comply with any applicable disclosure laws or regulations
(including any reporting requirement of the Securities Exchange Commission),
or
any listing requirement of any stock exchange, including NASDAQ, applicable
to
Retailer.
Because
Retailer has indicated that it will be filing a copy of this Agreement pursuant
to the preceding sentence, Retailer shall (i) file such copy with such requested
redactions as Bank shall have provided to Retailer not later than two (2)
days
after the execution of this Agreement, and (ii) file a confidential treatment
request in a form reasonably acceptable to Bank.
13.2 Binding
Effect.
This
Agreement is binding upon and inures to the benefit of the parties hereto
and
their respective successors and permitted assigns.
13.3 Assignment.
Neither
Bank nor Retailer may assign its rights or delegate its obligations under
this
Agreement without the prior written consent of the other party, which consent
will not be unreasonably withheld, provided that Bank may, without such consent
(i) assign all or part of its rights and delegate some or all of its
obligations under this Agreement to an Affiliate; (ii) engage third
parties
to perform some or all of Bank’s obligations under this Agreement, including,
without limitation the servicing and administration of Accounts; and
(iii) assign all or some of its rights hereunder to any person acquiring
any or all Accounts after the termination or expiration of this Agreement.
Notwithstanding any assignment, Bank will remain liable for all of its
obligations under this Agreement. The preceding sentence notwithstanding,
Retailer may, without Bank’s consent, upon not less than sixty (60) day’s
prior written notice to Bank, assign its rights and obligations under this
Agreement to an Affiliate of Retailer so long as (i) the combined financial
strength of Retailer and such Affiliate is not materially less than that
of
Retailer prior to such assignment, as reasonably determined by Bank, and
(ii)
such Affiliate executes such documents as Bank may reasonably request to
establish such Affiliate as a party hereto, and (iii) such Affiliate is not
a
competitor of Bank and sells products that are reasonably similar to those
sold
by Retailer. Notwithstanding any such assignment or delegation, each of Bank
and
Retailer shall remain primarily liable to the other party with respect to
all of
the obligations and liabilities arising under this Agreement.
13.4 Governing
Law.
Except
to the extent superceded by federal law applicable to banks or savings
associations, this Agreement and all rights and obligations hereunder,
including, but not limited to, matters of construction, validity and
performance, shall be governed by and construed in accordance with the laws
of
the State of Utah. THE PARTIES HERETO WAIVE THEIR RIGHT TO REQUEST A TRIAL
BY
JURY IN ANY SUIT, ACTION OR PROCEEDING IN ANY COURT OF LAW, TRIBUNAL, OR
OTHER
LEGAL PROCEEDING ARISING OUT OF OR INVOLVING THIS AGREEMENT, OR ANY DOCUMENT
DELIVERED IN CONNECTION HEREWITH, OR RELATING TO ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
23
13.5 Privacy.
(a) Retailer
and Bank will only use, maintain and/or disclose Cardholder Information in
compliance with all applicable privacy and security laws and with the policies
set forth in this Section 13.5 and related disclosures made by Bank
(collectively, the “Bank
Privacy Disclosures”),
and
each will ensure that persons to whom it transfers Cardholder Information
do the
same. Retailer acknowledges that it is subject to the reuse and redisclosure
provisions of the Xxxxx-Xxxxx-Xxxxxx Act (the “Xxxxx-Xxxxx-Xxxxxx Act” as
defined in Title V, Subtitle A of 15 U.S.C. 6801 et seq. (as
it may be
amended from time to time) and the implementing privacy and security regulations
issued pursuant to the Xxxxx-Xxxxx-Xxxxxx Act (as the same may be amended
from
time to time)), and that it will ensure that Cardholder Information received
from Bank under the “private label exception” found in the Xxxxx-Xxxxx-Xxxxxx
Act is used only in connection with the Program and for no other
purpose.
(b) Retailer
and Bank will each establish and maintain appropriate administrative, technical
and physical safeguards to protect the security, confidentiality and integrity
of the Cardholder Information. These safeguards will be designed to protect
the
security, confidentiality and integrity of the Cardholder Information, 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.
(c) Retailer
and Bank will each ensure that any third party to whom it transfers or discloses
Cardholder Information signs a written contract with the transferor in which
such third party agrees to (i) restrict its use of Cardholder Information
to the use specified in the written contract; (ii) to comply with
all
applicable laws (including, without limitation, privacy and security laws
and
the reuse and redisclosure provisions of the Xxxxx-Xxxxx-Xxxxxx Act) and
the
Bank Privacy Disclosures, and (iii) implement and maintain appropriate
safeguards as stated in paragraph (b) above. Information transferred
by
Bank on Retailer’s behalf and following Retailer’s request will be considered
information transferred by Retailer hereunder. Retailer agrees to transfer
or
make available to third parties only such Cardholder Information as is
reasonably necessary to carry out the contemplated task.
(d) Retailer
and Bank shall notify the other party immediately following discovery or
notification of any actual or threatened breach of security of the systems
maintained by the Retailer and Bank, respectively. The party that suffers
the
breach of security (the “Affected
Party”)
agrees
to take action immediately, at its own expense, to investigate the actual
or
threatened breach, to identify and mitigate the effects of any such breach
and
to implement reasonable and appropriate measures in response to such breach.
The
Affected Party also will provide the other party with all available information
regarding such breach to assist that other party in implementing its information
security response program and, if applicable, in notifying affected Cardholders.
For the purposes of this subsection (d), the term “breach of security” or
“breach” means the unauthorized access to or acquisition of any record
containing personally identifiable information relating to a Cardholder,
whether
in paper, electronic, or other form, in a manner that renders misuse of the
information reasonably possible or that otherwise compromises the security,
confidentiality, or integrity of the information.
(e) Notwithstanding
anything else contained in this Agreement, neither Bank nor Retailer will,
and
neither of them will be obligated to, take any action that either of them
believes in good faith would violate, or is reasonably likely to cause either
of
them to violate, any applicable law (including, without limitation, privacy
and
security laws and the reuse and redisclosure provisions of the
Xxxxx-Xxxxx-Xxxxxx Act) or the Bank Privacy Disclosures, or that would cause
either of them to become a “consumer reporting agency” for purposes of the
federal Fair Credit Reporting Act, as it may be amended from time to
time.
(f) Retailer
and Bank, respectively, will use reasonable measures designed to properly
dispose of all records containing personally identifiable information relating
to Cardholders, whether in paper, electronic, or other form, including adhering
to policies and procedures that require the destruction or erasure of electronic
media containing such personally identifiable information so that the
information cannot practicably be read or reconstructed.
13.6 Financial
Accommodation.
Retailer
acknowledges that this Agreement is a “financial accommodation” contract (as
such term is used in Section 365(c)(2) of Title 11 of the United
States Code) for the benefit of Retailer.
24
13.7 No
Third Party Beneficiaries.
Except
as otherwise expressly set forth in this Agreement, this Agreement does not
confer upon any person, other than the parties, any rights or remedies under
this Agreement.
13.8 Amendments.
This
Agreement may not be amended except by written instrument signed by Retailer
and
Bank.
13.9 No
Partnership.
Nothing
contained in this Agreement will be construed to constitute Retailer and
Bank as
partners, joint venturers, principal and agent, or employer and
employee.
13.10 Notices.
All
notices and communications given under this Agreement must be in writing
and
must be sent by hand, by facsimile (with verbal confirmation of receipt),
by
certified mail, return receipt requested, or by nationally recognized overnight
courier service addressed to the party to whom such notice or other
communication is to be given or made at such party’s address as set forth below
and will be deemed given one (1) business day after being sent, as
follows:
|
if
to Retailer:
|
if
to Bank:
|
|
Select
Comfort Corporation
0000
Xxxxxxx Xxxx Xxxxx
Xxxxxxxxxxx,
Xxxxxxxxx 00000
Facsimile:
(000) 000-0000
Attn:
Chief Financial Officer
|
GE
Money Bank
0000
Xxxxx Xxxxxxxxx Xxxx
Xxxxx
000
Xxxx
Xxxx Xxxx, Xxxx 00000-0000
Facsimile:
(000) 000-0000
Attn:
President
|
|
with
a copy to:
Select
Comfort Corporation
0000
Xxxxxxx Xxxx Xxxxx
Xxxxxxxxxxx,
Xxxxxxxxx 00000
Facsimile:
(000) 000-0000
Attn:
General Counsel
|
with
a copy to:
GE
Retail Sales Finance
000
Xxxxxx Xxxxxxxxx
Xxxxxxxxx,
XX 00000
Facsimile:
(000) 000-0000
Attn:
Counsel
|
provided,
however,
that a
party may notify the other party in writing (in accordance with the notice
provisions in this Section) from time to time of an alternative address for
notices under this Section and, in such case, notices hereunder will be
effective if sent to the last address so designated.
13.11 Incorporation
of Appendices.
Each of
the Appendices attached hereto is hereby incorporated by reference.
13.12 Nonwaiver;
Remedies Cumulative; Severability.
All
remedies are cumulative and not exclusive, and no delay in exercising a right
will be deemed a waiver thereof. If any provision of this Agreement is held
to
be invalid, void or unenforceable, all other provisions will remain valid
and be
enforced and construed as if such invalid provision were never a part of
this
Agreement.
13.13 Damages
Waiver.
Notwithstanding anything to the contrary in this Agreement, Bank and Retailer
shall not be liable to the other under or in connection with this Agreement
or
the Program for any indirect or consequential or other damages relating to
prospective profits, income, anticipated sales or investments, or goodwill,
or
for any punitive or exemplary damages; provided,
that
the damages limitation set forth in this Section 13.13 shall not apply
to
any Damages arising out of the failure of the parties under any of Sections
9.2(l)(but only to the extent such Section requires ongoing adherence to
Section
8.1), 13.1 or 13.5, or from Damages which result from an obligation
of Bank
or Retailer to pay any third party damages claims to the extent such third
party
claims otherwise fall under Bank’s or Retailer’s respective indemnity
obligations hereunder.
25
13.14 Joint
and Several Obligations. Each
obligation of Retailer hereunder shall be a joint and several obligation
of each
of Select Comfort and
SCRC.
For
purposes of this Agreement, (i) any discretionary action or election that
is
authorized or permitted to Retailer hereunder (e.g., purchase of the Accounts
or
termination of this Agreement) may be made or taken only by Select Comfort,
and
(ii) notice given or demand made upon any of the Retailer parties shall be
deemed to be notice given to or demand made upon all of the Retailer parties.
Retailer covenants for the benefit of Bank to enter into such agreements
and to
make such other arrangements as may be necessary to provide Select Comfort
the
power and authority to exercise all rights provided to Retailer hereunder
and to
ensure that each of the Retailer parties receives copies of all such notices
or
demands from any other Retailer party. Whenever this Agreement requires that
payments be made to Retailer, Bank may make such payments directly to Select
Comfort, which shall receive such payment in trust for itself and all other
parties entitled to all or any portion thereof. Bank shall have no obligation
to
ensure and no liability for the correct application of any payments made
by it
among the Retailer parties. Bank may exercise its chargeback rights under
Article 7 against any of the Retailer parties, regardless of which of them
originated the corresponding Account or purchase transaction.
13.15 Entire
Agreement.
This
Agreement (together with the schedules, exhibits and appendices attached
to this
Agreement) is the entire agreement of the parties with respect to the subject
matter of this Agreement and supersedes all other prior understandings, writings
and agreements whether written or oral, including the Prior Program Agreement.
In that regard, Bank and Retailer acknowledge and agree that as of the Program
Commencement Date, this Agreement replaces the Prior Program Agreement and
that
all Accounts, transactions, Accountholders, Purchases and Credit Cards (as
defined in the Prior Program Agreement) and all other matters arising under
or
accruing in connection with the Prior Program Agreement, regardless of the
date
thereof, shall be subject to and governed by this Agreement.
13.16 Further
Assurances.
Retailer
and Bank agree to execute all such further documents and instruments and
to do
all such further things as any other party may reasonably request in order
to
give effect to and to consummate the transactions contemplated by this
Agreement.
13.17 Multiple
Counterparts.
This
Agreement may be executed in any number of multiple counterparts, all of
which
will constitute but one and the same original.
IN
WITNESS WHEREOF,
Retailer and Bank have caused this Agreement to be executed by their respective
officers thereunto duly authorized as of the date first above
written.
|
SELECT
COMFORT CORPORATION
By:
/s/ Xxxx X. Xxxxxxx
Name:
Xxxx X. Xxxxxxx
Title:
SVP & General Counsel
|
GE
MONEY BANK
By:
/s/ Xxxxxxx X. Xxxxxxxxxx
Name:
Xxxxxxx X. Xxxxxxxxxx
Title:
SVP
|
|
SELECT
COMFORT RETAIL CORPORATION
By:
/s/ Xxxx X. Xxxxxxx
Name:
Xxxx X. Xxxxxxx
Title:
SVP & General Counsel
|
26
Appendix
A
Definitions
A. Certain
Defined Terms.
As used
in this Agreement, the following terms will have the following
meanings:
“Absentee
Purchase”
means a
purchase of any of products or services from Retailer charged to an Account
where the Account information necessary to effect the purchase is provided
on
the telephone, by mail or through a Retailer Website.
“Account”
means
the legal relationship established by and between a Cardholder and Bank pursuant
to a Cardholder Agreement, together with all Indebtedness owing thereunder
from
time to time and any current or future guaranties, security or other credit
support therefor.
“Account
Documentation”
means
any and all Account information, credit applications, Cardholder Agreements,
Charge Transaction Data, Charge Slips, Credit Slips, payments, credit
information and documents or forms of any type and in any media relating
to the
Program, excluding materials used for advertising or solicitations.
“Active
Account”
means,
as of any given date, any Account (other than an Account that has been written
off in accordance with Bank’s write-off policies) that had a debit or credit
balance at any time after the beginning of the complete billing cycle
immediately preceding such date.
“Affiliate”
means,
with respect to any person, each person that controls, is controlled by or
is
under common control with such person. For the purpose of this definition,
“control” of a person shall mean 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.
“Aggregate
Outstanding Indebtedness”
means,
as of any date of determination, an amount equal to the aggregate amount
of
Indebtedness on all Accounts (other than Accounts that have been written
off by
Bank) as of such date.
“Agreement”
means
this Private Label Consumer Credit Card Program Agreement, including all
schedules and appendices, as it may be amended from time to time.
“Average
Aggregate Outstanding Indebtedness”
means
with respect to any period, (i) the sum of the Aggregate Outstanding
Indebtedness on each day during such period divided
by
(ii) the number of days in such period.
“Bank”
has the
meaning given to it in the recitals.
“Bank’s
Required Net Revenue”
shall
mean, for each Program Year, the product of Average Aggregate Outstanding
Indebtedness for such Program Year, multiplied
by
the
percentage corresponding to such Program Year as set forth below:
Year
1 -
[*** Confidential portion has been omitted pursuant to a request for
confidential treatment and has been filed separately with the
Commission.]%
Year
2 -
[*** Confidential portion has been omitted pursuant to a request for
confidential treatment and has been filed separately with the
Commission.]%
Year
3 -
[*** Confidential portion has been omitted pursuant to a request for
confidential treatment and has been filed separately with the
Commission.]%
Year
4 -
[*** Confidential portion has been omitted pursuant to a request for
confidential treatment and has been filed separately with the
Commission.]%
Year
5 -
[*** Confidential portion has been omitted pursuant to a request for
confidential treatment and has been filed separately with the
Commission.]%
27
“Base
Rate”
means
the percentage set by Bank used in calculating the Program Fee payable in
connection with each submission by Retailer to Bank of Charge Transaction
Data
pertaining to purchases not made pursuant to a credit-based promotion. The
initial Base Rates available under the Program are set forth on Schedule
3.5.
“Card-Not-Present
Purchases”
means a
purchase of Retailer’s products and/or services financed on an Account
(i) where the person transacting such purchase does not present a
Credit
Card relating to such Account, but states that he or she is a Cardholder
or an
authorized user, and Retailer does not do all of the following: (a) check
such person’s identification, (b) confirm such person’s identity and status
as a Cardholder or an authorized user prior to such purchase in accordance
with
the Operating Procedures, and (c) obtain such person’s signature on the
invoice; or (ii) where such purchase constitutes an Absentee
Purchase.
“Cardholder”
means
any natural person who has entered into a Cardholder Agreement with Bank
or
which is or may become obligated under or with respect to an
Account.
“Cardholder
Agreement”
means
the open-end revolving credit agreement, in either tangible or electronic
form,
between Bank and each Cardholder pursuant to which such Cardholder and its
authorized user(s), if any, may make purchases on credit provided by
Bank.
“Cardholder
Information”
has the
meaning given to it in Section 6.2.
“Charge
Slip”
means a
sales receipt, register receipt tape or other invoice or documentation, in
each
case, which may include any electronic or digital format capable of reproduction
in perceivable form, and evidencing a charge to an Account. The extent to
which
a Charge Slip must be signed by the Cardholder is set forth in the Operating
Procedures.
“Charge
Transaction Data”
means
Account and related Cardholder and/or authorized user identification and
transaction information transmitted by Retailer to Bank with regard to a
charge
or a credit to an Account.
“Confidential
Information”
has the
meaning given to it in Section 13.1.
“Credit
Card”
means
the plastic card issued by Bank under the Program exclusively for use with
the
Program which evidences the right of a Cardholder and, if the Cardholder
has so
designated, any authorized user(s) to make purchases of goods and services
from
Retailer under the Program.
“Credit
Review Point”
means
Three Hundred Forty Five Million Dollars ($345,000,000) or such other higher
amount as Bank, in its sole discretion, may from time to time specify to
Retailer in writing.
“Credit
Slip”
means a
sales credit receipt, register receipt, tape or other invoice or documentation,
in each case, which may include any electronic or digital format capable
of
reproduction in perceivable form, and evidencing a credit to an
Account.
“Damages”
means
any and all losses, liabilities, costs, and expenses (including, without
limitation, reasonable attorneys’ fees and expenses, reasonable out-of-pocket
costs, interest and penalties), settlements, equitable relief, judgments,
damages, claims (including, without limitation, counter and cross-claims,
and
allegations whether or not proven) demands, offsets, defenses, actions, or
proceedings by whomsoever asserted.
“Debt
Cancellation Program”
means
any program which may be offered through Bank pursuant to Section 4.2
under
which Bank, any Affiliate of Bank, or any third party makes available debt
cancellation coverage to Cardholders.
“Direct
Purchases”
means
purchases of good and services from Retailer and financed on Accounts which
purchases are transacted by Retailer through its call center. Direct Purchases
specifically exclude ECOM Purchases.
“ECOM
Purchases”
means
purchases of good and services from Retailer and financed on Accounts which
purchases are transacted by Retailer through its call center, but only to
the
extent such call center
28
“Eligible
Letter of Credit”
shall
mean a standby irrevocable Letter of Credit in form reasonably acceptable
to
Bank, satisfying the following conditions:
(i) the
Letter of Credit shall not expire earlier than the first anniversary of the
date
of issuance or the date of any renewal thereof;
(ii) the
Letter of Credit shall be issued or confirmed by a bank reasonably acceptable
to
Bank which is chartered under the laws of the United States and maintains
offices located in the continental United States;
(iii) the
Letter of Credit shall expressly permit multiple draws;
(iv) the
Letter of Credit shall be assignable and transferable;
(v) payment
under the Letter of Credit shall be made at the issuing or confirming bank’s
counters at one or more offices located in the continental United States
upon
presentation of a draft with an accompanying certificate from any officer
of the
Letter of Credit beneficiary to the effect either:
(A) that
Retailer has failed to renew the Letter of Credit or provide a substitute
Letter
of Credit in accordance with Section 6.19 of this Agreement and that the
amount
of the draft is less than or equal to the full undrawn amount of the Letter
or
Credit; or
(B) that
Retailer has failed to pay any amounts due under this Agreement and that
the
amount of the draft is equal to or less than the past due amounts;
or
(C) that
Retailer has filed for (or is the subject of an involuntary procedure with
respect to) bankruptcy or similar protection and the amount of the draft
is less
than or equal to the full undrawn amount of the Letter of Credit.
“Final
Liquidation Date”
will
mean the first day after the termination or expiration of this Agreement
on
which Bank no longer owns any Active Accounts.
“Force
Majeure Event”
means
any of the following: acts of God, fire, earthquake, explosion, accident,
terrorism, war, nuclear disaster, riot, material changes in applicable laws
or
regulations, including, but not limited to, a change in state or federal
law, or
other event beyond a party’s reasonable control, rendering it illegal,
impossible or untenable for such party to perform as contemplated in, or
to
offer the Program on the terms contemplated under, this Agreement.
"GAAP"
shall
mean generally accepted accounting principles in the United States of America
as
in effect on the Program Commencement Date, consistently applied.
“Indebtedness”
means
any and all amounts owing from time to time with respect to an Account whether
or not billed, including, without limitation, any unpaid balance, finance
charges (inclusive of finance charges subject to possible reversals due to
unexpired credit-based promotions), late charges, and NSF fees.
“Internal
Program”
has the
meaning given to it in Section 9.2(l).
“Letter
of Credit”
means
each letter of credit provided by Retailer to Bank in support of Retailer’s
obligations under this Agreement, as the same may be amended from time to
time.
“Letter
of Credit Amount”
means,
as of the date of a request by Bank for a Letter of Credit under Section
6.19,
the sum of the following [*** Confidential portion has been omitted pursuant
to
a request for confidential treatment and has been filed separately with the
Commission.].
29
“Letter
of Credit Event”
means
the failure of Retailer to satisfy and fully perform each financial covenant
contained on the attached Schedule 6.7.
“Loan
Loss Reserve”
means a
loan loss reserve established and maintained by Bank on its books in such
amounts as are necessary in Bank’s opinion to offset expected net write-offs on
Accounts or to reflect changes in experience consistent with GAAP. Amounts
allocated to the loan loss reserve may be determined by Bank in its discretion
and may be changed by Bank from time to time after review of Bank’s internal
reserve policies. Loan loss reserve amounts may also be changed by Bank as
required by applicable law, regulation or changes in GAAP.
“Net
Program Sales”
means,
for any given period, the aggregate amount of sales to Cardholders resulting
in
charges to Accounts during such period less aggregate credits to Accounts
during
such period, in each case as reflected in the Charge Transaction
Data.
“Operating
Procedures”
has the
meaning given in Section 6.5.
“Prime
Rate”
shall
mean, as of any date of determination, the highest bank prime or reference
loan
rate as published in the Wall Street Journal in its “Money Rates” section (or if
The Wall Street Journal shall cease to be published or to publish such rates,
in
such other publication as Bank may, from time to time, specify) on such date,
or
if The Wall Street Journal is not published on such date, on the last day
before
such date on which The Wall Street Journal is published, whether or not such
rate is actually ever charged or paid by any entity.
“Prior
Program”
has the
meaning given to it in the recitals hereto.
“Prior
Program Agreement”
has the
meaning given to it in the recitals hereto.
“Program”
has the
meaning given to it in Section 1.1.
“Program
Commencement Date”
means December 14, 2005, or such other date as the parties shall mutually
agree in writing.
“Program
Fee”
means a
fee payable in connection with each submission by Retailer to Bank of Charge
Transaction Data pertaining to a purchase financed on an Account, calculated
as
set forth in Section 3.4.
“Program
Fee Percentage”
means
the percentage set by Bank and used in calculating the Program Fees, including
the Base Rate and the Promotional Rates. As of the Program Commencement Date,
the Program Fee Percentages are set forth on Schedule 3.5. Pursuant
to the
provisions of Sections 3.5 and 3.6, Bank may, under certain circumstances,
reset the Program Fee Percentages by written notice to Retailer and such
reset
Program Fee Percentage will be used in calculating the Program Fee in respect
of
all Charge Transaction Data submitted in respect of any Accounts at any time
thereafter (until such Program Fee Percentage is again reset in accordance
with
the terms hereof.).
“Program
Year”
means
the twelve month period between November 1st
of any
calendar year and October 31st
of the
immediately succeeding calendar year. The period between October 31, 2010
and
February 2011 shall constitute the beginning of another Program Year for
all
purposes of this Agreement; provided,
that
any rights of either party which vest based upon the conclusion of a full
twelve
month Program Year shall not vest unless the initial Term hereof is extended
as
provided for in Section 9.1.
“Promotional
Rate”
means
the percentage set by Bank used in calculating the Program Fee payable in
connection with each submission by Retailer to Bank of Charge Transaction
Data
pertaining to a purchase that is subject to an approved credit-based promotion.
The initial Promotional Rates available under the Program are set forth on
Schedule 3.5.
“Retail
Purchase”
means
purchases of goods and services from Retailer and financed on Accounts which
purchases are transacted at a Store Location.
“Retailer”
means,
jointly
and severally, each of Select Comfort and SCRC,
and
their respective successors and permitted assigns. Unless the context otherwise
suggests, (a) all references to “Retailer” shall
30
“Retailer
Marks”
means
the names and any related marks, tradestyles, trademarks, service marks,
logos
or similar proprietary designations that have been used in connection with
the
Prior Program, or as they may be amended by Retailer from time to time
hereafter.
“Retailer
Website”
means
the internet website with the internet address xxx.xxxxxxxxxxxxx.xxx, and
any
other internet website maintained, operated or controlled by Retailer that
Bank
agrees in writing may constitute the Retailer Website.
“Second
Source Program”
means
any consumer credit program that is available only to persons who submitted
properly completed credit applications to, and were rejected by, Bank
immediately preceding such person’s application to such other credit
program.
“Select
Comfort”
has the
meaning given in the preamble paragraph hereto, and includes such entities
successors and permitted assigns.
“SCRC”
has the
meaning given in the preamble paragraph hereto, and includes such entities
successors and permitted assigns.
“Solvent”
means,
as to any person, (i) that the present fair salable value of such
person’s
assets exceeds the total amount of its liabilities; (ii) that such
person
is generally able to pay its debts as they come due; and (iii) that
such
person does not have unreasonably small capital to carry on such person’s
business as theretofore operated and as thereafter contemplated. The phrase
“present fair salable value of such person’s assets” means that value that could
be obtained if such person’s assets were sold within a reasonable time in one or
more arm’s-length transactions in an existing and not theoretical
market.
“Store
Location”
means
those retail stores owned or operated by Retailer within the United States;
provided,
that
Store Locations shall not include any retail location acquired by Retailer
as
part of an Acquired Program or any retail location opened subsequent to the
acquisition of an Acquired Program to the extent provided for in Section
8.1(c)(vi)(B).
“Term”
has the
meaning given to it in Section 9.1.
“Value-Added
Program”
means
any products or services that enhance the features of the Program or an
Account.
“Working
Capital Lender”
means
Bank of America, N.A., or any successor thereto under that certain Credit
Agreement dated as of May 23, 2003.
B. Miscellaneous.
As used
in this Agreement, (i) all references to the plural number shall include
the singular number (and vice versa); (ii) all references to the masculine
gender shall include the feminine gender (and vice versa) and (iii) all
references to “herein,”“hereof,”“hereunder,”“hereinbelow,”“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. References herein
to
any document including, without limitation, this Agreement shall be deemed
a
reference to such document as it now exists, and as from time to time hereafter
the same may be amended. References herein to a “person” or “persons” shall be
deemed to be references to an individual, corporation, limited liability
company, partnership, trust, unincorporated association, joint venture,
joint-stock company, or any other form of entity. Captions of the sections
of
this Agreement are for convenience of reference only and are not intended
as a
summary of such sections and do not affect, limit, modify or construe the
contents thereof.
00
Xxxxxxxx
X
Additional
Terms and Conditions Applicable to Internet Transactions
In
addition to the other terms and conditions of this Agreement, the following
supplemental terms and conditions will apply to all Internet Applications.
A. Internet
Applications; Link to Bank Webpage.
Retailer
shall maintain a logo advertisement on the Retailer Website, which logo
advertisement shall contain an imbedded link to a webpage hosted by Bank
or its
agent (the “Bank
Webpage”).
If
the link contained in such logo advertisement does not link directly to the
Bank
Webpage, Retailer shall be responsible for the content of any intermediate
links
and shall ensure such intermediate link clearly indicates that it is hosted
by
Retailer and not Bank. If for any reason the logo advertisement referred
to
above shall cease to be displayed on the Retailer Website’s homepage or in the
agreed upon manner, Retailer shall immediately notify Bank. Retailer shall
not
permit any link to the Bank Webpage to exist: (i) on the Retailer Website
at any
time other than during the Term; or (ii) on any internet website (other than
the
Retailer Website) maintained, operated or controlled by Retailer or under
any
Retailer Xxxx.
B. Bank
Webpage.
Bank
shall have the sole right to determine the design and content of the Bank
Webpage. During the Term: (i) Bank shall maintain and operate the
Bank
Webpage; (ii) each of Bank and Retailer shall use reasonable efforts
to
conform their respective websites to be reasonably compatible; and
(iii) Bank shall provide to Retailer prior notification of planned
changes
in the Bank Webpage to permit Retailer to make any required changes in the
Retailer Website.
C. Security.
Bank
agrees that the direct access medium or method used to store, present or
transmit Internet Applications, terms and conditions, and/or Account information
will be secured in a manner which ensures that such information cannot be
altered, viewed or captured by an unauthorized party.
D. Fraud
Mitigation.
The
parties acknowledge that the infrastructure required for Internet Application
processing is dynamic and agree to cooperate in implementing enhancements
and
developments with respect to the operation and security of Internet Application
processing under the Program. Retailer and Bank agree to cooperate in a
commercially reasonable manner by committing systems and other resources,
and by
providing information with respect to the development, establishment and
implementation of fraud mitigation strategies in connection with Internet
Applications. Retailer and Bank further agree to use commercially reasonable
efforts to implement such mitigation strategies as are developed from time
to
time.
E. Definitions.
As used
in this Appendix, the following terms shall have the following
meanings:
“Internet
Application”
means
any application which is received by Bank through any of the following:
(a) the Retailer Website; or (b) any electronic means other
than
facsimile or telephone, including, without limitation, the Internet, e-mail,
kiosks located within or without of a Store Location, wireless devices other
than telephones, and other electronic data transmission devices.
32
SCHEDULE
3.5
To
Credit
Card Program Agreement
Initial
Revised Program Fee Percentages
[***
Confidential portion has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Commission.]
33
SCHEDULE
3.6
To
Credit
Card Program Agreement
Illustrative
Chart of Cost of Funds Adjustments
[***
Confidential portion has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Commission.]
34
SCHEDULE
4.3
To
Credit
Card Program Agreement
[***
Confidential portion has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Commission.]
35
SCHEDULE
6.3
To
Credit
Card Program Agreement
Initial
Terms Offered to Cardholders
| Ÿ |
APR
-
|
| – |
Variable
Rate equal to the Prime Rate +
15.90%
|
| - |
Maximum
Standard Rate 24.75%
|
| - |
Minimum
Standard Rate 21.90%
|
| - |
Default
Rate 26.99%
|
| Ÿ |
Finance
Charge Calculation
|
| – |
2
Cycle ADB
|
| – |
Finance
Charges on Finance Charge &
Fees
|
| – |
Minimum
Finance Charge of $1.00 per
statement
|
| Ÿ |
Repayment
Terms - 3% of outstanding balance or $15.00, whichever is
greater
|
| Ÿ |
Late
Payment Fee shall be as follows:
|
|
New Balance
|
Late
Payment Fee
|
|
Under $100
|
$15
|
|
$100-$999.99
|
$29
|
|
$1000 or above
|
$35
|
| Ÿ |
Other
Fees - $30 on NSF checks
|
$30 on Overlimit
36
SCHEDULE
6.7
To
Credit
Card Program Agreement
Financial
Covenants
(1) CONSOLIDATED
NET WORTH.
Retailer shall, as of the end of each fiscal quarter of Retailer, cause
consolidated Net Worth to be equal to or greater than the sum of (a) $40,000,000
plus
(b) an
amount equal to 50% of the Consolidated Net Income earned in each fiscal
quarter
after December 28, 2002 (with no deduction for a net loss in any such fiscal
quarter). The foregoing to the contrary notwithstanding, if at any time Retailer
and the Working Capital Lender agree to alter the foregoing quarterly
consolidated Net Worth amount, such revised consolidated Net Worth shall
be
incorporated into this Schedule 6.7 and shall supercede and replace the
foregoing consolidated Net Worth requirement so long as such revised requirement
does not provide for quarterly consolidated Net Worth of Retailer below (a)
$60,000,000 plus
(b) an
amount equal to 50% of Consolidated Net Income earned in each fiscal quarter
after the effective date of such revision (with no deduction for a net loss
in
any such fiscal quarter).
(2) CONSOLIDATED
FIXED CHARGE COVERAGE RATIO.
Retailer shall, as of the end of each fiscal quarter of Retailer, cause the
Consolidated Fixed Charge Coverage Ratio to be equal to or greater than 1.25:1.
"Attributable
Indebtedness"
means,
on any date, (a) in respect of any capital lease of any person, the capitalized
amount thereof that would appear on a balance sheet of such person prepared
as
of such date in accordance with GAAP, and (b) in respect of any Synthetic
Lease
Obligation, the capitalized amount of the remaining lease payments under
the
relevant lease that would appear on a balance sheet of such person prepared
as
of such date in accordance with GAAP if such lease were accounted for as
a
capital lease.
"Consolidated
Capital Expenditures"
means,
as of the last day of any fiscal quarter for any period, the capital
expenditures of Retailer and its Affiliates for such period, as the same
are (or
would in accordance with GAAP be) set forth in the consolidated statement
of
changes in financial position of Retailer and its Affiliates for such
period.
"Consolidated
EBITDAR"
means,
for any period, for Retailer and its Affiliates on a consolidated basis,
an
amount equal to the sum of (a) Consolidated Net Income, plus (without
duplication) (b) Consolidated Interest Charges, (c) the amount of taxes,
based
on or measured by income, used or included in the determination of such
Consolidated Net Income, (d) the amount of depreciation and amortization
expense
deducted in determining such Consolidated Net Income, (e) Consolidated Rental
Payments used or included in the determination of Consolidated Net Income,
and
(f) the amount of non-cash equity compensation expense, if any, of Retailer
and
its Affiliates.
"Consolidated
Fixed Charge Coverage Ratio"
means
as of any date of determination, the ratio of:
(a)
Consolidated EBITDAR for the period of the four fiscal quarters then most
recently ended, less (i) Consolidated Capital Expenditures for such period,
less
(ii) the amount of all taxes based on or measured by income,
used or included in the determination of Consolidated Net Income, paid or
required to be paid in cash by Retailer and its Affiliates on a consolidated
basis during such period, to
(b)
the
sum of (i) Consolidated Interest Charges paid or required to be paid during
such
period, plus (ii) all scheduled payments of principal made or required to
be
made with respect to all Indebtedness (which, for purposes of this Schedule
6.7
shall have the meaning given below) (including the principal portion of capital
leases) of Retailer and its Affiliates on a consolidated basis during such
period, plus (iii) all scheduled Consolidated Rental Payments of Retailer
and
its Affiliates during such period, plus (iv) all Restricted Payments comprising
dividends during such period.
"Consolidated
Interest Charges"
means,
for any period, for Retailer and its Affiliates on a consolidated basis,
the sum
of (a) all interest, premium payments, fees, charges and related expenses
of
Retailer and its Affiliates in connection with borrowed money (including
capitalized interest) or in connection with the deferred purchase price of
assets, in each case to the extent treated as interest in accordance with
GAAP,
and (b) the portion
37
of
rent expense of Retailer and its Affiliates with respect to such period under
capital leases that is treated as interest in accordance with GAAP.
"Consolidated
Net Income"
means,
for any period, for Retailer and its Affiliates on a consolidated basis,
the net
income of Retailer and its Affiliates after extraordinary items (excluding
gains
or losses from Dispositions of assets) for that period.
"Consolidated
Net Worth"
means,
as of any date of determination, for Retailer and its Affiliates on a
consolidated basis, Shareholders' Equity of Retailer and its Affiliates on
that
date.
"Consolidated
Rental Payments"
means,
for any period, for Retailer and its Affiliates all payments under operating
leases.
"Disposition"
or
"Dispose"
means
the sale, transfer, license or other disposition (including any sale and
leaseback transaction) of any property by any person, including any sale,
assignment, transfer or other disposal, with or without recourse, of any
notes
or accounts receivable or any rights and claims associated
therewith.
"Guaranty
Obligation"
means,
as to any person, any (a) obligation, contingent or otherwise, of such person
guarantying or having the economic effect of guarantying any Indebtedness
or
other obligation payable or performable by another person (the "primary
obligor")
in any
manner, whether directly or indirectly, and including any obligation of such
person, direct or indirect, (i) to purchase or pay (or advance or supply
funds
for the purchase or payment of) such Indebtedness or other obligation, (ii)
to
purchase or lease property, securities or services for the purpose of assuring
the obligee in respect of such Indebtedness or other obligation of the payment
or performance of such Indebtedness or other obligation, (iii) to maintain
working capital, equity capital or any other financial statement condition
or
liquidity of the primary obligor so as to enable the primary obligor to pay
such
Indebtedness or other obligation, or (iv) entered into for the purpose of
assuring in any other manner the obligee in respect of such Indebtedness
or
other obligation of the payment or performance thereof or to protect such
obligee against loss in respect thereof (in whole or in part), or (b) any
lien,
hypothecation or similar encumbrance on any assets of such person securing
any
Indebtedness or other obligation of any other person, whether or not such
Indebtedness or other obligation is assumed by such person. The amount of
any
Guaranty Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the related primary obligation, or portion thereof,
in
respect of which such Guaranty Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
as
determined by the guarantying person in good faith.
"Indebtedness"
means,
as to any person at a particular time, all of the following (without
duplication), whether or not included as indebtedness or liabilities in
accordance with GAAP:
(a)
all
obligations of such person for borrowed money and all obligations of such
person
evidenced by bonds, debentures, notes, loan agreements or other similar
instruments;
(b)
all
direct or contingent obligations of such person arising under letters of
credit
(including standby and commercial), bankers' acceptances, bank guaranties,
surety bonds and similar instruments;
(c)
net
obligations under any Swap Contract in an amount equal to the Swap Termination
Value thereof;
(d)
all
obligations of such person to pay the deferred purchase price of property
or
services (other than trade accounts payable in the ordinary course of
business);
(e)
indebtedness (excluding prepaid interest thereon) secured by a lien,
hypothecation or similar encumbrance on property owned or being purchased
by
such person (including indebtedness arising under conditional sales or other
title retention agreements), whether or not such indebtedness shall have
been
assumed by such person or is limited in recourse;
(f)
capital leases and Synthetic Lease Obligations; and
(g)
all
Guaranty Obligations of such person in respect of any of the
foregoing.
38
For
all
purposes hereof, the Indebtedness of any person shall include the Indebtedness
of any partnership or joint venture (other than a joint venture that is itself
a
corporation or limited liability company) in which such person is a general
partner or a joint venturer, unless such Indebtedness is expressly made
non-recourse to such person (subject only to customary exceptions acceptable
to
Bank). The amount of any capital lease or Synthetic Lease Obligation as of
any
date shall be deemed to be the amount of Attributable Indebtedness in respect
thereof as of such date.
"Restricted
Payment"
means
any dividend or other distribution (whether in cash, securities or other
property) with respect to any capital stock of Retailer or any Affiliate
thereof, or any payment (whether in cash, securities or other property),
including any sinking fund or similar deposit on account of the purchase,
redemption, retirement, acquisition, cancellation or termination of any such
capital stock or of any option, warrant or other right to acquire any such
capital stock.
"Shareholders'
Equity"
means,
as of any date of determination for Retailer and its Affiliates on a
consolidated basis, shareholders' equity as of that date determined in
accordance with GAAP.
"Swap
Contract"
means
(a) any and all rate swap transactions, basis swaps, credit derivative
transactions, forward rate transactions, commodity swaps, commodity options,
forward commodity contracts, equity or equity index swaps or options, bond
or
bond price or bond index swaps or options or forward bond or forward bond
price
or forward bond index transactions, interest rate options, forward foreign
exchange transactions, cap transactions, floor transactions, collar
transactions, currency swap transactions, cross-currency rate swap transactions,
currency options, spot contracts, or any other similar transactions or any
combination of any of the foregoing (including any options to enter into
any of
the foregoing), whether or not any such transaction is governed
by or subject to any master agreement, and (b) any and all transactions of
any
kind, and the related confirmations, which are subject to the terms and
conditions of, or governed by, any form of master agreement published by
the
International Swaps and Derivatives Association, Inc., any “International
Foreign Exchange Master Agreement”, or any other master agreement (any such
master agreement, together with any related schedules, a "Master
Agreement"),
including any such obligations or liabilities under any Master
Agreement.
"Swap
Termination Value"
means,
in respect of any one or more Swap Contracts, after taking into account the
effect of any legally enforceable netting agreement relating to such Swap
Contracts, (a) for any date on or after the date such Swap Contracts have
been
closed out and termination value(s) determined in accordance therewith, such
termination value(s), and (b) for any date prior to the date referenced in
clause (a) the amount(s) determined as the xxxx-to-market value(s) for such
Swap
Contracts, as determined based upon one or more mid-market or other readily
available quotations provided by any recognized dealer in such Swap Contracts
which may include the Working Capital Lender).
"Synthetic
Lease Obligation"
means
the monetary obligation of a person under (a) a so-called synthetic, off-balance
sheet or tax retention lease, or (b) an agreement for the use or possession
of
property creating obligations that do not appear on the balance sheet of
such
person but which, upon the insolvency or bankruptcy of such person, would
be
characterized as the indebtedness of such person (without regard to accounting
treatment).
39
