Exhibit 10.11
PURCHASE AND ASSUMPTION AGREEMENT
Dated as of December 11th, 2000
Between
Fidelity Federal Bank, A Federal Savings Bank
And
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Household Bank (SB), N.A.
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Article 1 - DEFINITIONS 1
1.1 Definitions 1
1.2 Construction 7
Article 2 - PURCHASE AND SALE OF ACQUIRED ASSETS 7
2.1 Acquired Assets 7
2.2 Assumed Liabilities 8
2.3 Purchase Price 8
2.4 Hold Back Amount 8
2.5 Allocation of Purchase Price 8
2.6 Use of Name and Trademarks 9
2.7 Seller's Repurchase Obligations 9
2.8 Repurchase Price 10
2.9 Exclusive Remedy 10
2.10 Continued Processing 11
Article 3 - THE CLOSING 11
3.1 The Closing 11
3.2 Documents and Certificates 11
3.3 Valuation Date Statement 12
3.4 Payments on the Closing Date 12
3.5 Settlement Date Statement 12
3.6 Payments on the Settlement Date 12
3.7 Post Closing Payments 13
3.8 Payment of Hold Back Amount 13
3.9 Power of Attorney 14
3.10 Dispute Resolution 14
Article 4 - CONDITIONS OF CLOSING 15
4.1 Conditions Applicable to Purchaser 15
4.2 Conditions Applicable to Seller 16
Article 5 - REPRESENTATIONS AND WARRANTIES 17
5.1 Representations and Warranties of Seller 17
5.2 Representations and Warranties of Purchaser 21
Article 6 - CERTAIN COVENANTS 23
6.1 Mutual Covenants and Agreements 23
6.2 Additional Covenants 25
6.3 Covenants of Purchaser 28
Article 7 - INDEMNIFICATION 29
7.1 Seller's Indemnification Obligations 29
7.2 Purchaser's Indemnification Obligations 29
7.3 Definition of Losses 29
7.4 Procedures 30
Article 8 - TERMINATION 32
8.1 Termination by Either Party 32
8.2 Effect of Termination 33
Article 9 - MISCELLANEOUS 33
9.1 Survival of Representations and Warranties 33
9.2 Notices 33
9.3 Assignment 34
9.4 Entire Agreement 34
9.5 Amendments and Waivers 34
9.6 Expenses 35
9.7 Captions; Counterparts 35
9.8 Governing Law 35
9.9 Severability 35
9.10 Independent Contractors 35
9.11 No Joint Venture 35
9.12 Attorneys' Fees 35
9.13 Regulatory Approval 35
9.14 Dispute Resolution 36
PURCHASE AND ASSUMPTION AGREEMENT
This Purchase and Assumption Agreement (the "Agreement") is made and entered
into as of the 11th day of December , 2000 by and between Fidelity Federal Bank,
A Federal Savings Bank, a federally chartered savings bank ("Seller"), and
Household Bank (SB), N.A., a national banking association ("Purchaser").
WITNESSETH
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A. Seller and Purchaser are parties to a Purchase and Assumption
Agreement dated as of June 2, 2000 pursuant to which (A) Seller sold to
Purchaser, and Purchaser purchased from Seller (i) certain credit card
receivables related to the MMG Portfolio, as defined therein; (ii) the Fixed
Assets located at the Beaverton Operations Center, as defined therein, and
certain other assets, and (B) Purchaser assumed certain liabilities (such
agreement, the "Prior Sale Agreement", and such transaction, the "Prior Sale").
B. In connection with the Prior Sale, Seller and Purchaser entered into
a (i) Servicing Agreement pursuant to which Purchaser agreed to service certain
credit card receivables described herein as the ADC Portfolio (the "Servicing
Agreement") and (ii) an Escrow Agreement.
C. Seller now wishes to sell to Purchaser, and Purchaser wishes to
purchase from Seller, the ADC Portfolio. In connection with such transaction,
Seller and Purchaser wish to terminate, effective on the Closing Date, as
defined herein, the Servicing Agreement. In addition, effective on the Closing
Date, Seller and Purchaser wish to amend the Prior Sale Agreement and the Escrow
Agreement to provide for a hold back amount, and treatment thereof, which is
consistent with this Agreement.
D. The Seller and Purchaser are entering into this Agreement to reflect
the terms and conditions relating to the sale and purchase of accounts
comprising the ADC Portfolio, and related receivables.
ARTICLE 1 - DEFINITIONS
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1.1 Definitions. Except as otherwise specifically indicated, the following
terms shall have the meanings specified herein.
"Accountants" shall have the meaning specified in SECTION 3.10.
"Account Representations and Warranties" shall mean the representations
and warranties set forth in SECTIONS 5.1(d) (to the extent such
representation and warranty relates to an Account), (f), (g), (h) (i),
(j), (k), (l) (o), (p) AND (q).
"Accounts" shall mean all accounts that are part of the ADC Portfolio
that are identified by name and account number on the computer tape of
accounts generated as of the close of processing on the day immediately
preceding the Closing Date and reflected in the aggregate on the
relevant CD-121 report for such day (the "Accounts Tape"), excluding
any Charged-Off Account, any Alabama Opt-Out Account and any
Mississippi Account.
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"Accrued Interest" shall mean the aggregate amount of periodic finance
charges not posted to the Accounts as of the relevant time, but which
was earned up to and including the relevant time and which will be
posted to the Accounts at the end of the respective billing cycles
immediately following the relevant time.
"Acquired Assets" shall have the meaning specified in SECTION 2.1.
"ADC" shall mean American Direct Credit, LLC.
"ADC Portfolio" shall mean all credit card accounts originated under
the Seller's agreement with ADC dated March 5, 1997, as amended, and
included on the Seller's servicing system as bank identified number
("BIN") 549062.
"Affiliate" shall mean, with respect to any person, corporation or
entity, any other person, corporation or entity that directly or
indirectly controls, is controlled by or is under common control with
such person, corporation or entity.
"Alabama Class Action" shall mean the case entitled XXXXXX XXXXXXXX, ET
AL. v A & P DISTRIBUTING, ET AL. pending in the Circuit Court of Sumter
County, State of Alabama.
"Alabama Opt-Out Account" shall mean an account with respect to which
the Cardholder (i) is a member of the plaintiff class in the Alabama
Class Action and (ii) has elected to opt out of the proposed settlement
in the Alabama Class Action.
"Agreement" shall have the meaning specified in the Introduction.
"Assignment and Assumption Agreement" shall have the meaning specified
in SECTION 3.2.
"Assumed Liabilities" shall have the meaning specified in SECTION 2.2.
"Bank Plus" shall mean Bank Plus Corporation, a Delaware corporation,
the corporate parent of Seller.
"Bankrupt Account" shall mean an Account that fits one or more of the
following descriptions as of the Cut-Off Time:
(i) is identified on the Seller's processing system as an
external status code "B"; or
(ii) the Cardholder has filed bankruptcy, the filing date
occurred after the Account open date and before the
Cut-Off Time and the bankruptcy proceeding has not
been dismissed before the Closing Date.
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"Books and Records" shall mean all books and records, if any, in the
possession of Seller or Seller's processor relating to the Acquired
Assets, including all existing records, applications for Accounts,
cardholder agreements, disclosure statements, acceptance certificates
for prescreened offers, periodic statements, credit and collection
files, file maintenance data and correspondence, and other records
relating to the Acquired Assets whether in documentary form or on
microfilm, microfiche, magnetic tape, computer disk or other form.
"Business Day" shall mean each day other than Saturday, Sunday or a day
on which banking institutions in the State of California are authorized
or obligated by law or regulation to close.
"Cardholder" shall mean an applicant in whose name an Account was
established or is maintained.
"Cardholder Agreement" shall mean an agreement between Seller and a
Cardholder containing the terms and conditions of the relevant Account.
"Charged-Off Account" shall mean an Account that fits one of the
following descriptions as of the Cut-Off Time:
(i) any Account which has been identified on the Seller's
processing system with the external status code "Z";
(ii) any Account with a balance that is equal to or more
than 180 days contractually delinquent;
(iii) any Account that is not statused as charged-off on
the Seller's processing system but should have been
so statused prior to the Cut-Off Time in accordance
with the Policies and Procedures.
"Closing" shall have the meaning specified in SECTION 3.1.
"Closing Date" shall have the meaning specified in SECTION 3.1.
"Closing Time" shall have the meaning specified in SECTION 3.1.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Conversion Date" shall mean the date on which processing of the
Accounts is transferred to Purchaser or its agent.
"Covered Account" shall have the meaning specified in SECTION 2.7.
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"Credit Balances" shall mean all balances owing by Seller to
Cardholders on Accounts as of the relevant date.
"Credit Card" shall mean a MasterCard credit card issued by Seller to a
Cardholder.
"Credit Card Marks" shall mean such trademarks and service marks of
Seller as have been used in connection with the Accounts, provided that
such term shall not include trademarks or service marks of ADC,
MasterCard or any network.
"Credit Card Receivables" shall mean all amounts owing, whether or not
billed, to Seller by Cardholders with respect to Accounts, including
extensions of credit, accrued and posted periodic finance charges, and
any other charges and fees assessed on said Accounts, plus Accrued
Interest at the relevant time.
"Current Policies and Procedures" shall mean the Policies and
Procedures as in effect on the date of this Agreement.
"Cut-Off Time" shall mean 11:59 P.M. on the Closing Date.
"Deceased Account" shall mean an Account that fits one or more of the
following descriptions as of the Cut-Off Time:
(i) any Account which has been identified on the Seller's
processing system in a type code credit rating or
user status code as deceased; or
(ii) any Account for which the Cardholder has died before
the Cut-Off Time, as evidenced by a death certificate
"Escrow Holder' shall mean Bank One Trust Company, National
Association, or any successor thereto.
"Escrow Agreement" shall mean the Escrow Agreement between Escrow
Holder, Seller and Purchaser relating to the Prior Sale, amended to
comply with the provisions of this Agreement.
"Escrow Amendment" shall have the meaning specified in SECTION 3.2.
"Estimated Liquidated Amount" shall have the meaning specified in
SECTION 3.8.
"Excluded Account" shall mean, as of the Cut-Off Time, any Account that
does not comply with the representations and warranties contained in
this Agreement, and:
(i) Any Account which as of the Cut-Off Time is, or
should have been, classified as fraud/stolen ("U"),
which was generated from fraud activity perpetrated
prior to the Cut-Off Time;
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(ii) Any Account the outstanding balance of which are
classified, or should have been classified by Seller,
as of the Cut-Off Time, as one hundred twenty (120)
days or more past due; and
(iii) Any Account classified, or that should have been
classified by Seller, as of the Cut-Off Time, as a
Bankrupt Account, a Lost Account, or a Deceased
Account.
"FDR" shall mean First Data Resources Inc.
"FDR Agreement" shall mean that certain Service Agreement between FDR
and Seller dated October 14, 1999.
"Federal Funds Rate" shall mean, for any period during which the
Federal Funds Rate is to be charged pursuant to this Agreement, the
average of the high and low "Federal Funds" interest rates for any day
(or the previous business day if such day is not a business day),
excluding the day that payment is made, as such rate is reported on the
following business day in the Money Rates Column of the Wall Street
Journal or as determined in such other mutually acceptable manner as
the parties agree if the Wall Street Journal is no longer reporting
such rate.
"Hold Back Amount" shall mean an amount equal to $4,285,000, which
amount shall replace the hold back amount required under the Prior Sale
Agreement, plus an additional amount equal to 15% of the Purchase Price
under this Agreement. It is the intent of this Agreement that the Hold
Back Amount shall be an aggregate amount which covers liabilities under
this Agreement, the Prior Sale Agreement and the Servicing Agreement
(to the extent such liabilities survive the termination of the
Servicing Agreement).
"Indemnified Party" shall have the meaning specified in SECTION 7.4(a).
"Indemnifying Party" shall have the meaning specified in SECTION
7.4(a).
"Losses" shall have the meaning specified in SECTION 7.3.
"Lost Account" shall mean an Account which as of the Cut-Off Time is
identified on the Seller's processing system with the external status
code "L".
"MasterCard" shall mean MasterCard International Incorporated.
"Mississippi Account" shall mean an Account as to which, as of June 30,
2000, the Cardholder was a resident of Mississippi, or, which is
demonstrated by a Cardholder to have been originated at the time the
Cardholder was a resident of Mississippi.
"Operating Regulations" shall mean the by-laws, rules and regulations
of MasterCard.
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"Policies and Procedures" shall mean the written policies and
procedures of Seller relating to the Accounts, as in effect from time
to time.
"Post Closing Payments" shall have the meaning specified in SECTION
3.7.
"Prior Sale" shall have the meaning specified in Recital A.
"Prior Sale Agreement" shall have the meaning specified in Recital A.
"Prior Sale Amendment" shall have the meaning specified in SECTION 3.2.
"Prior Closing Date" shall mean June 30, 2000, the closing date of the
Prior Sale.
"Protected Party" shall have the meaning specified in SECTION 6.1(c).
"Purchase Price" shall have the meaning specified in SECTION 2.3.
"Purchaser" shall have the meaning specified in the Introduction.
"Related Agreements" shall mean the Assignment and Assumption
Agreement, the Escrow Agreement Amendment, and the Prior Sale Agreement
Amendment.
"Repurchase Price" shall have the meaning specified in SECTION 2.8.
"Seller" shall have the meaning assigned in the Introduction.
"Servicing Agreement" shall have the meaning specified in Recital B.
"Servicer" shall mean the Purchaser in its capacity under the Servicing
Agreement.
"Settlement Date" shall mean the date (not later than sixty (60) days
after the Closing Date) on which the parties make any adjustment to the
Purchase Price and the corresponding payment.
"Settlement Date Statement" shall mean a statement, substantially in
the form of EXHIBIT A attached hereto, which contains a computation of
the Purchase Price as of the Closing Date.
"Tax" shall mean any federal, state, local or foreign net income, gross
income, gross receipts, windfall profit, severance, property,
production, sales, use, license, excise, franchise, employment,
payroll, withholding, alternative or add-on minimum, ad valorem, value
added, transfer, stamp, or environmental tax, or any other tax, custom,
duty, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, addition to tax or
additional amount imposed by any governmental authority.
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"Total Estimated Liquidated Amount of Damages" shall mean the sum of
any Estimated Liquidated Amount relating to any claim or claims for
indemnification for which notice has been given by Purchaser pursuant
to SECTION 7.4(a) of this Agreement or the Prior Sale Agreement or
pursuant to SECTION 12.3(A) of the Servicing Agreement between the
Closing Date and the relevant date.
"Unauthorized Use" shall mean use that was made by a person other than
the Cardholder who did not have actual, implied or apparent authority
for such use of the Account and from which the Cardholder received no
benefit.
"Valuation Date" shall mean the close of business on the fifth Business
Day prior to the Closing Date or such other date as the parties may
mutually agree.
"Valuation Date Statement" shall mean a statement, substantially in the
form of EXHIBIT B attached hereto and incorporated herein, which
contains a good faith computation of the Purchase Price (based, in the
case of the Accounts, on a computer printout relating to the Accounts,
and including estimated Accrued Interest), excluding the Post Closing
Payments described in SECTION 3.7, as of the Valuation Date.
1.2 CONSTRUCTION. Unless the context otherwise clearly indicates, words
used in the singular include the plural and words used in the plural
include the singular. The Schedules and Exhibits referred to herein
shall be construed with and as an integral part of this Agreement to
the same extent as if they were set forth verbatim herein.
ARTICLE 2 - PURCHASE AND SALE OF ACQUIRED ASSETS
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2.1 ACQUIRED ASSETS. (a) On the Closing Date, Purchaser agrees to purchase
from Seller, and Seller agrees to sell, convey, assign and transfer to
Purchaser, all of Seller's right, title and interest in, to and under
the following assets and the following rights and privileges granted by
Seller, as the same exist on the Closing Date:
(i) the Accounts;
(ii) the Credit Card Receivables;
(iii) the Credit Cards with respect to the Accounts;
(iv) the plastic stock, statement stock and related
materials relating to the Accounts; and
(v) the MasterCard bank identified number 549062.
(b) The items described in SECTION 2.1(a), are hereinafter
sometimes referred to as the "Acquired Assets".
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2.2 ASSUMED LIABILITIES. On and after the Closing Date, Purchaser shall
assume and perform and discharge the following obligations of Seller
with respect to the Acquired Assets (collectively, the "Assumed
Liabilities"): (i) the obligation to pay fees and assessments to
MasterCard on the Accounts accruing on and after the Closing Date; (ii)
all of Seller's obligations under the Operating Regulations with
respect to the Accounts, including any obligations relating to the bank
identified number; (iii) all of Seller's obligations under the
Cardholder Agreements, except the obligation to pay Credit Balances,
and (iv) all of the obligations assumed by Purchaser under SECTION 2.10
of this Agreement. Except as expressly set forth in this Agreement,
Purchaser shall not be deemed to have assumed any other liability or
obligation of the Seller. Without limiting the generality of the
foregoing, Purchaser does not assume, and nothing in this Agreement
shall be deemed to evidence any intent to assume, and the term Assumed
Liabilities does not include, any Taxes for which Seller is liable
under SECTION 6.2(f) or SECTION 9.6.
2.3 PURCHASE PRICE. The purchase price for the Acquired Assets (the
"Purchase Price") shall be an amount, determined as of the Cut-Off
Time, equal to (a) 44% multiplied by an amount equal to the total
amount of all Credit Card Receivables except for Credit Card
Receivables with respect to Excluded Accounts minus (b) six hundred
thousand dollars ($600,000).
2.4 HOLD BACK AMOUNT. In order to (A) provide for a source of funds to
indemnify and defend Purchaser and its Affiliates and their respective
stockholders, officers, directors and employees (i) pursuant to Section
7.1 of each of this Agreement and the Prior Sale Agreement and (ii)
pursuant to SECTION 12.2 of the Servicing Agreement and (B) to secure
Seller's obligations to repurchase or adjust the purchase price in
respect of Covered Accounts pursuant to SECTION 2.7 of each of this
Agreement and the Prior Sale Agreement, Purchaser shall deposit from
the Purchase Price hereunder with the Escrow Holder on the Closing Date
an amount equal to the difference between the amount in Escrow on the
day prior to the Closing Date and the Hold Back Amount. The Hold Back
Amount shall be held by the Escrow Holder pursuant to the terms of an
Escrow Agreement as amended and restated in the form attached hereto as
EXHIBIT E and shall be payable to Seller as provided in SECTION 3.8.
2.5 ALLOCATION OF PURCHASE PRICE. The Purchaser and Seller agree that the
Purchase Price shall be allocated among the Acquired Assets (and
adjusted on the Settlement Date to reflect any post-closing adjustments
as described in Article III hereof) as set forth on SCHEDULE 2.5
attached hereto and in accordance with Section 1060 of the Code and the
regulations promulgated thereunder, the fair market values as set forth
in SCHEDULE 2.5 having been agreed to by the parties. Purchaser and
Seller will file all tax returns and other tax related schedules and
documents required to be filed by them in accordance with those fair
market values and allocations, and will not adopt or otherwise assert
tax positions inconsistent therewith. Notwithstanding the foregoing, in
the event the Internal Revenue Service challenges any position taken by
the parties hereto, the party against which a challenge is made may
settle or litigate such challenge without the consent of, or liability
to, the other parties.
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2.6 USE OF NAME AND TRADEMARKS.
(a) LIMITED LICENSE. On and after the Closing Seller grants to
Purchaser a limited, nonexclusive, nontransferable except as
to an Affiliate, nonsublicensable license to use, for the time
and subject to the limitations set forth herein (i) to use the
name of Seller and the Credit Card Marks on periodic
statements for as long as statement stock exists at FDR but in
no event more than six (6) months; and (ii) to use the name of
Seller (but not the Credit Card Marks) to identify the former
owner of the Accounts in connection with customer service and
collection purposes until two (2) years from the Closing Date.
Purchaser and such Affiliate shall use the Credit Card Marks
in accordance with such license solely in the forms and
formats currently in use for Credit Cards, periodic statements
and communications, or in the forms and formats and on such
forms as Seller shall approve in writing prior to any such
use, which approval shall not be unreasonably withheld.
Purchaser shall not have any obligation to recall Credit Cards
using the name of Seller or the Credit Card Marks. Purchaser
agrees that it shall not use the name of Seller, or the Credit
Card Marks except as permitted under this SECTION 2.6.
(b) RIGHTS RESERVED BY SELLER. It is expressly agreed that
Purchaser is not purchasing or acquiring any right, title or
interest in the Credit Card Marks. Purchaser acknowledges that
Seller exclusively owns the Credit Card Marks and goodwill
related thereto and symbolized thereby. Purchaser shall not
combine the Credit Card Marks with any other xxxx or term, and
shall not use the Credit Card Marks in any manner which will
materially damage or diminish Seller's goodwill. Purchaser
shall immediately upon receipt of written notice from Seller,
which notice shall provide detailed and legally sufficient
information about inconsistent usage of the Credit Card Marks,
cease any act or practice that has or is likely to materially
damage or diminish the goodwill of Seller or its Affiliates.
2.7 SELLER'S REPURCHASE OBLIGATIONS. After the Closing Date, in the event
any Account acquired hereunder by Purchaser is a Mississippi Account,
an Alabama Opt-Out Account or an Account which should have been
classified as an Excluded Account (each such Account, a "Covered
Account"), Purchaser may, from time to time (but no more frequently
than once each quarter), on or before the date which is one year after
the Closing Date, (i) in the case of a Covered Account which is a
Mississippi Account or an Alabama Opt-Out Account or as to which a
representation and warranty has been breached, request that Seller
repurchase such Covered Account (and all other Acquired Assets relating
to such Covered Account) and Seller shall repurchase such Account (and
all other Acquired Assets relating to such Covered Account) for an
amount equal to the Repurchase Price set forth in SECTION 2.8; and (ii)
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in the case of a Covered Account which should have been classified as
an Excluded Account on the Closing Date, reduce the Purchase Price by
an amount equal to the Repurchase Price: PROVIDED, however, that Seller
shall not be required to effect such repurchase or adjustment until the
sum of such adjustments and repurchases, and any prior adjustments or
payments of the Repurchase Price, is in excess of $25,000, at which
xxxx Xxxxxx shall be required to repurchase all such Covered Accounts
or adjust the Purchase Price with respect to all such Covered Accounts.
Notwithstanding the foregoing, Seller shall be required to repurchase
all Mississippi Accounts and all Alabama Opt-Out Accounts without
regard to the financial floor. Requests to repurchase Covered Accounts
or adjust the Purchase Price may be made during the period from the
Closing Date until the date which is one year after the Closing Date.
On the Settlement Date, or if such request is made later than four
Business Days before the Settlement Date, then within twenty days after
the receipt from Purchaser of a list of Covered Accounts to be
repurchased, Seller shall deliver to Purchaser an amount equal to the
aggregate Repurchase Price for such Covered Accounts. If despite its
best efforts Seller is unable to deliver such amount within twenty days
after such request, Purchaser shall provide Seller with written notice
of default, and, upon Seller's failure to repurchase or adjust the
Purchase Price within five (5) days of such notice, Purchaser may
secure the disbursement of such funds from the Escrow Holder in
accordance with the Escrow Agreement.
2.8 REPURCHASE PRICE. The Repurchase Price for a Covered Account (the
"Repurchase Price") shall be equal to 44% of the outstanding balance of
such Covered Account as of the Cut-Off Time, unless Purchaser did not
pay for such Covered Account, in which case the Repurchase Price shall
be equal to 0% of the outstanding balance of such Covered Account as of
the Cut-Off Time, less any payment received with respect thereto by
Purchaser between the Closing Date and the date of repurchase, plus
purchases and cash advances made with respect thereto by Purchaser
between the Closing Date and the date of repurchase. If the Repurchase
Price is a negative amount, Purchaser shall pay Seller such amount.
Upon payment of the Repurchase Price as set forth herein with respect
to an account which has been repurchased, Purchaser shall deliver to
Seller all files and Books and Records relating to such repurchased
Covered Account and shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, as shall be
necessary to revest in Seller title to such repurchased Covered Account
on the same basis owned by Seller immediately prior to the Closing
Date.
2.9 EXCLUSIVE REMEDY. Repurchase of an account or adjustment of the
Purchase Price as set forth in SECTIONS 2.7 and 2.8 shall be the sole
and exclusive remedy for any breach of an Account Representation and
Warranty, except to the extent the indemnification provisions of
ARTICLE 7 are available in the event of any Loss. Except as provided in
the preceding sentence, the indemnification provisions of Article 7
shall be the sole and exclusive remedy for any Loss.
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2.10 CONTINUED PROCESSING. Prior to the Closing Date, Seller shall ensure
the continued processing of the Accounts by FDR and EDS subject to the
agreements currently in place between Seller and such parties and shall
not amend such agreements without the prior written consent of
Purchaser.
(a) FDR. Effective on the Closing Date, Seller shall assign and
Purchaser shall assume all rights and obligations of Seller
under the FDR Agreement; provided that Seller shall pay all
processing fees charged by FDR with respect to (i) the
processing of the ADC Portfolio prior to the Closing Date and
(ii) the processing of credit card accounts which are not
within the definition of Accounts.
(b) EDS. Purchaser shall pay all processing fees, excluding
minimum processing penalties and termination penalties,
charged by EDS directly related to the processing of the ADC
Portfolio. Seller shall maintain the existing agreement with
EDS in full force and effect up to and including April 30,
2001. Seller shall obtain from EDS any required consent or
nonobjection of EDS to Purchaser's full participation rights
and access, including without limitation any consent or
nonobjection required to permit Purchaser to convert payment
processing to Purchaser at any time without the imposition of
a penalty on Purchaser, and assistance from EDS for such
conversion, and right to audit EDS.
ARTICLE 3 - THE CLOSING
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3.1 THE CLOSING. Subject to the satisfaction or waiver of all conditions
set forth in ARTICLE 4, the closing of the transactions contemplated
herein (the "Closing") shall be by facsimile transmission (FAX) at 11
a.m. Pacific Time on December 29, 2000, or at such other time, place
and manner as may be mutually agreed by the parties hereto (such time
and date being referred to herein as the "Closing Time" and the
"Closing Date," respectively).
3.2 DOCUMENTS AND CERTIFICATES. At the Closing, Seller shall deliver to
Purchaser, and Purchaser shall deliver to Seller, (i) an agreement (the
"Assignment and Assumption Agreement") which conveys to Purchaser all
of Seller's rights, title and interest in and to the Acquired Assets to
be transferred thereby and under which Purchaser shall assume the
Assumed Liabilities; (ii) an amendment to the Prior Sale Agreement
which effects modifications to the amount and treatment of the Hold
Back Amount described therein (the "Prior Sale Amendment"); (iii) an
amendment to the Escrow Agreement which instructs the Escrow Holder
with respect to the foregoing matters (the "Escrow Amendment"); and an
instrument terminating the rights and obligations of the parties to the
Servicing Agreement (the "Servicing Termination"). The Assignment and
Assumption Agreement, Prior Sale Amendment, Escrow Amendment and
Servicing Termination shall be in the forms of Exhibit C, D, E and F
attached hereto and shall be dated the Closing Date, appropriately
completed and duly executed. Seller, Purchaser and FDR shall execute
all required documentation relating to the assignment and assumption by
Purchaser of the FDR Agreement. Seller shall execute and deliver all
such additional instruments, documents or certificates as may be
reasonably requested by Purchaser for the consummation at the Closing
of the transactions contemplated by this Agreement.
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3.3 VALUATION DATE STATEMENT. Servicer shall use its reasonable best
efforts to deliver to Purchaser the Valuation Date Statement, along
with the appropriate reports and other supporting calculations, as soon
as possible after the Valuation Date. Seller shall have the right to
review the Valuation Date Statement, together with any supporting
documents reasonably requested by Purchaser to verify the accuracy and
completeness of the valuations set forth therein and the Valuation Date
Statement shall be revised by Servicer to reflect any corrections
agreed to by Servicer and Seller.
3.4 PAYMENTS ON THE CLOSING DATE. On the Closing Date, Purchaser shall pay
Seller an amount equal to (i) the Purchase Price (excluding the Post
Closing Payments described in SECTION 3.7) based on the Valuation Date
Statement less (ii) the amount equal to the difference between the
amount in Escrow on the day prior to the Closing Date and the Hold Back
Amount. Payment to Seller on the Closing Date shall be made by a
Fedwire transfer no later than 11 a.m. Pacific Time in immediately
available U.S. dollars to an account designated in writing by Seller.
3.5 SETTLEMENT DATE STATEMENT. Purchaser shall use its reasonable best
efforts to deliver to Seller the Settlement Date Statement as soon as
possible but at least five (5) Business Days prior to the Settlement
Date. Seller shall have the right to review the Settlement Date
Statement, together with any supporting documents reasonably requested
by Seller to verify the accuracy and completeness of the valuations set
forth therein and the Settlement Date Statement shall be revised by
Purchaser to reflect any corrections agreed to by Purchaser and Seller.
3.6 PAYMENTS ON THE SETTLEMENT DATE. If the Purchase Price for the Acquired
Assets as reflected on the Settlement Date Statement is greater than
the Purchase Price paid by Purchaser on the Closing Date, then
Purchaser shall remit the difference to Seller, together with interest
on such amount at the Federal Funds Rate divided by three hundred sixty
(360) for each day during the period from the Closing Date to the
Settlement Date. If the Purchase Price for the Acquired Assets as
reflected on the Settlement Date Statement is less than the Purchase
Price paid by Purchaser on the Closing Date, then Seller shall remit
the difference to Purchaser together with interest on such amount at
the Federal Funds Rate divided by three hundred sixty (360) for each
day during the period from the Closing Date to the Settlement Date.
Payments shall be remitted no later than 11 a.m. Pacific Time by a
Fedwire transfer in immediately available U.S. dollars to an account
designated by the party to which payment is due.
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3.7 POST CLOSING PAYMENTS. (a) If (i) Seller is debited by MasterCard after
the Cut-Off Time for a chargeback in respect of which Seller provided a
Cardholder a credit on an Account prior to the Cut-Off Time, or (ii) a
check from a Cardholder in payment of amounts owed on an Account, which
was credited to such Account prior to the Cut-Off Time, is returned
unpaid by the drawee after the Cut-Off Time, or (iii) Purchaser
provides a credit on an Account with respect to Unauthorized Use of an
Account prior to the Cut-Off Time, (iv) Purchaser provides a credit on
an Account in connection with a transaction posted before the Cut-Off
Time as a result of rights asserted by the Cardholder under 12 CFR
ss.226.12(c) or 12 CFR ss.226.13(d), then an adjustment to the Purchase
Price shall be made in favor of Seller (in the case of clause (i) or
(ii)), Purchaser (in the case of clause (iii) or (iv)) in the amount of
44% of such chargeback, check or credit or adjustment (as the case may
be). The party with knowledge of the facts relating to such Accounts or
amounts shall provide to the other party written notice and supporting
documentation (to the extent available to such party) as promptly as
practicable after discovery such facts. On the Settlement Date, or if
such notice and supporting documentation is received by such party
after the fourth Business Day before the Settlement Date, within five
(5) Business Days after receipt of said notice, Seller or Purchaser, as
the case may be, shall reimburse the other party, in immediately
available funds, for the amount of said adjustment, together with
interest on the reimbursed amount computed from and including the
Closing Date through and excluding the date of reimbursements at an
interest rate equal to the Federal Funds Rate divided by 360 for each
day during such period. Notwithstanding the foregoing, the parties
agree that this SECTION 3.7 shall be implemented fairly and equitably
so as to avoid the double payment or failure to pay any amount which
would result in the unjust enrichment of any party pursuant to the
terms hereof.
3.8 PAYMENT OF HOLD BACK AMOUNT.
(a) The Escrow Agreement shall provide that upon the expiration of
two (2) years from the Closing Date, the remaining balance of
the Hold Back Amount held by the Escrow Holder shall be
remitted by the Escrow Holder to Seller; provided, however,
that there shall be retained in escrow an amount equal to the
Total Estimated Liquidated Amount of Damages under this
Agreement and the Prior Sale Agreement.
(b) An Estimated Liquidated Amount shall be proposed with respect
to a claim of indemnification by Purchaser in writing promptly
after the giving of notice of such claim pursuant to SECTION
7.4(a) of this Agreement or SECTION 12.3(A) of the Servicing
Agreement, and in no event later than the second anniversary
of the Closing Date. An Estimated Liquidated Amount shall be
proposed only with respect to, and be applicable only to,
claims actually asserted by third parties. Within five
Business Days of such proposal, Seller shall either accept
each such Estimated Liquidated Amount or reject such Estimated
Liquidated Amount and propose an alternative Estimated
Liquidated Amount. If Seller rejects the Purchaser's proposed
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Estimated Liquidated Amount, or Purchaser rejects the Seller's
alternative Estimated Liquidated Amount, Seller and Purchaser
shall negotiate in good faith in an attempt to agree upon the
applicable Estimated Liquidated Amount, and if such parties
shall fail to agree for a period of ten Business Days, the
amount of the Estimated Liquidated Amount shall be subject to
dispute resolution in accordance with SECTION 9.14, and the
amount of such Estimated Liquidated Amount as determined in
accordance therewith shall be final. In no event shall the
Hold Back Amount or its payment in accordance with SECTION 3.8
be deemed to limit the time in which Purchaser may bring a
claim, or the amount of claims that Purchaser may bring, under
this Agreement. Purchaser and Seller shall account to one
another with respect to actual costs and liabilities incurred
with respect to a claim for indemnification as to which an
Estimated Liquidated Amount has been fixed. In the event
actual costs expended with respect to such a claim for
indemnification are less than such Estimated Liquidated
Amount, then at the time such indemnification claim is finally
resolved, and provided that the second anniversary of the
Closing Date shall have occurred, Purchaser shall cause the
Escrow Holder to remit to Seller, as a reduction of the Total
Estimated Liquidated Amount of Damages any excess of the
Estimated Liquidated Amount over actual costs expended with
respect to such claim.
3.9 POWER OF ATTORNEY. Effective upon the Closing Date and thereafter,
Seller hereby irrevocably names, constitutes, and appoints Purchaser,
acting through itself or its officers, agents, employees and
representatives, its duly authorized special, limited attorney-in-fact
and agent with full power and authority to endorse in Seller's name,
any checks relating to the Accounts.
3.10 DISPUTE RESOLUTION. Seller and Purchaser agree to attempt in good faith
to resolve any disputes arising in connection with the payments made or
demanded by the parties under this Article 3. In the event Purchaser
and Seller are unable to resolve any such dispute (other than the
determination of the Estimated Liquidated Amount as provided in SECTION
3.8), either party may request a mutually agreed upon nationally
recognized firm of independent accountants (the "Accountants") to
reconcile any financial items in dispute. In the event Purchaser and
Seller are unable to mutually agree as to the identity of the
Accountants, then the dispute resolution procedures specified in
SECTION 9.14 shall be followed in order to identify the mutually agreed
upon Accountants. Any such request shall be in writing, shall specify
with particularity the disputed amounts being submitted for
determination and a direction to the Accountants to proceed with such
review as soon as practicable. The requesting party shall furnish the
other party hereto with a copy of such request at the same time it is
submitted to the Accountants. Purchaser and Seller shall cooperate
fully in assisting the Accountants in their review, including, without
limitation, by providing the Accountants full access to all files,
books and records relevant thereto and providing such other information
14
as the Accountants may reasonably request in connection with any such
review. One-half (1/2) of the fees and disbursements of such
Accountants arising out of such review shall be borne by each of
Purchaser and Seller. In the event the determination made by the
Accountants requires either party to make payment to the other of any
additional amount, such party shall make such payment no later than
five (5) Business Days following receipt from the Accountants of
written notice to both parties of such determination plus interest on
any amount due at a rate equal to the Federal Funds Rate divided by 360
for each day during the period from the date on which a payment was
required pursuant to the terms of this Agreement through the date of
payment.
ARTICLE 4 - CONDITIONS OF CLOSING
---------------------------------
4.1 CONDITIONS APPLICABLE TO PURCHASER. The obligation of Purchaser under
this Agreement to consummate the transactions contemplated by this
Agreement is subject to the satisfaction or waiver by Purchaser of the
following conditions as of the Closing Date:
(a) RELATED AGREEMENTS. Seller shall have executed and delivered
to Purchaser each of the Related Agreements.
(b) FINANCING STATEMENTS. At or before the Closing Date, Seller
shall have executed and delivered to Purchaser, financing
statements, prepared by Purchaser, in the appropriate form for
filing under the Uniform Commercial Code of the States of
California and Nevada to give notice of Purchaser's interest
in the Credit Card Receivables.
(c) BOARD RESOLUTIONS. Purchaser shall have received from Seller
certified resolutions of Seller's Board of Directors
authorizing the execution and delivery of this Agreement and
the Related Agreements and the consummation of the
transactions contemplated hereby and thereby.
(d) PERFORMANCE OF THIS AGREEMENT. All the terms, covenants and
conditions of this Agreement to be complied with and performed
by Seller at or prior to the Closing Date shall have complied
with and performed in all material respects.
(e) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Seller (other than the
Account Representations and Warranties) shall be true and
correct in all material respects on the Closing Date as though
made on the Closing Date, except for changes therein
specifically permitted by this Agreement or resulting from any
transactions expressly consented to in writing by Purchaser.
(f) NO MATERIAL ADVERSE CHANGE. Since October 31, 2000, there
shall have been no material adverse change in the condition,
financial or otherwise, of the Acquired Assets other than
fluctuations in the value of the Credit Card Receivables.
15
(g) LITIGATION. No action, suit, litigation or proceeding related
to any of the transactions contemplated hereby shall have been
threatened or instituted by a governmental body which in the
opinion of Purchaser (after consultation with its counsel) is
reasonably likely to restrict or prohibit any of the
transactions contemplated hereby or to have a material adverse
effect on the Acquired Assets.
(h) CONSENTS. All consents of any person, and all consents,
licenses, permits or approvals or authorizations or exemptions
by notice or report to, or registrations, filings or
declarations with, any governmental authority, in connection
with the execution or delivery by Seller, and the validity or
enforceability against Seller, of this Agreement and the
Related Agreements and the consummation of the transactions
contemplated hereby and thereby, or the performance by
Purchaser or Seller of their obligations hereunder or
thereunder, have been obtained at or prior to the Closing
Date.
(i) ACQUISITION LAWFUL. The acquisition of the Acquired Assets
shall not violate any applicable statute, rule or regulation
in effect on the Closing Date.
(j) NO INJUNCTION. There must not be in effect any injunction that
restricts or prohibits the consummation of any of the
transactions contemplated hereby, has been issued, or has
otherwise become effective, since the date of this Agreement.
4.2 CONDITIONS APPLICABLE TO SELLER. The obligation of Seller under this
Agreement to consummate the transactions contemplated by this Agreement
is subject to the satisfaction or waiver by Seller of the following
conditions as of the Closing Date:
(a) RELATED AGREEMENTS. Purchaser shall have executed and
delivered to Seller each of the Related Agreements.
(b) BOARD RESOLUTIONS. Seller shall have received from Purchaser
certified resolutions of Purchaser's Board of Directors
authorizing the execution and delivery of this Agreement and
the Related Agreements and the consummation of the
transactions contemplated hereby and thereby.
(c) PERFORMANCE OF THIS AGREEMENT. All the terms, covenants and
condition of this Agreement to be complied with and performed
by Purchaser at or prior to the Closing Date shall have been
fully complied with and performed in all material respects.
(d) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Purchaser as set forth in
SECTION 5.2 hereof shall be true and correct on the Closing
Date shall have been fully complied with and performed in all
material respects.
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(e) LITIGATION. No action, suit, litigation or proceeding related
to any of the transactions contemplated hereby shall have been
threatened or instituted by a governmental body which in the
opinion of Seller (after consultation with its counsel) is
reasonably likely to restrict or prohibit the consummation of
any of the transactions contemplated hereby.
(f) CONSENTS. All consents of any person and all consents,
licenses, permits or approvals or authorizations or exemptions
by notice or report to, or registrations, filings or
declarations with, any governmental authority, including
without limitation the Office of Thrift Supervision, in
connection with the execution or delivery by Purchaser, and
the validity or enforceability against Purchaser, of this
Agreement and the Related Agreements, and the consummation of
the transactions contemplated hereby and thereby, or the
performance by Purchaser or Seller of their obligations
hereunder or thereunder, have been obtained at or prior to the
Closing Date, without the imposition of any conditions by the
Office of Thrift Supervision which, in the reasonable judgment
of Seller, are materially burdensome.
(g) ACQUISITION LAWFUL. The sale of the Acquired Assets shall not
violate any applicable statute, rule or regulation in effect
on the Closing Date.
(h) NO INJUNCTIONS. There must not be in effect any injunction
that restricts or prohibits the consummation of any of the
transactions contemplated hereby, has been issued, or has
otherwise become effective, since the date of this Agreement.
(i) FDR AGREEMENT. Purchaser shall have assumed and FDR shall have
agreed to the assumption of all Seller's obligations under the
FDR Agreement.
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES
------------------------------------------
5.1 REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby represents and
warrants to Purchaser (but subject to the last, undesignated, paragraph
of this Section 5.1) as follows:
(a) ORGANIZATION. Seller is a federally chartered savings bank
validly existing and in good standing under the laws of the
United States of America.
(b) CAPACITY; AUTHORITY; VALIDITY. Subject to any required
approval of the Office of Thrift Supervision, Seller has all
necessary power and authority to enter into this Agreement and
the Related Agreements to which it is a party and to perform
all of the obligations to be performed by it under this
Agreement and the Related Agreements. Subject to any required
approval of the Office of Thrift Supervision, this Agreement
and the Related Agreements and the consummation by Seller of
the transactions contemplated hereby and thereby have been
duly and validly authorized by all necessary corporate action
of Seller and this Agreement has been duly executed and
17
delivered by Seller and when executed by Seller, this
Agreement and the Related Agreements will constitute the valid
and binding obligations of Seller, enforceable against Seller
in accordance with their respective terms (except as such
enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium, receivership, conservatorship, the
rights and obligations of receivers and conservators of
insured depository institutions under 12 U.S.C.ss.1821(d) and
(e) and other laws relating to or affecting creditors' rights
generally and by general equity principles).
(c) CONFLICTS; DEFAULTS. Neither the execution and delivery of
this Agreement and the Related Agreements by the Seller, nor
the consummation of the transactions contemplated hereby and
thereby will (i) conflict with, result in the breach of, any
order, law, regulation, contract, instrument or commitment to
which Seller is a party or by which it is bound, (ii) violate
the articles of incorporation or bylaws, or any other
equivalent organizational document, of Seller, (iii) require
any consent, approval, authorization or filing under any law,
regulation, judgment, order, writ, decree, permit, license or
agreement to which Seller is a party, or (iv) subject to
consent of FDR and EDS pursuant to SECTION 2.11 of this
Agreement, require the consent or approval of any other party
to any contract, instrument or commitment which Seller is a
party, in each case other than (x) approvals of regulatory
authorities, if any, which have been obtained or will be
obtained prior to or on the Closing Date and (y) any of the
foregoing which would not have a material adverse effect on
the Acquired Assets. Seller is not subject to any agreement
with any regulatory authority which would prevent the
consummation by Seller of the transactions contemplated by
this Agreement and the Related Agreements.
(d) TITLE TO ACQUIRED ASSETS. Seller has good and marketable title
to the Acquired Assets, free and clear of any lien, pledge,
claim, security interest, encumbrance, charge or restriction
of any kind, except for (i) the rights of Cardholders; and
(ii) restrictions imposed by the Operating Regulations,
including without limitation restrictions imposed on the bank
identifying numbers.
(e) LITIGATION. Except as set forth on SCHEDULE 5.1(e), there is
no claim, or any litigation, proceeding, arbitration,
investigation or controversy pending, against or affecting the
Seller, which will have a material adverse effect on the
Seller's interest in the Acquired Assets or the ability of the
Seller to consummate the transactions contemplated hereby and
by the Related Agreements and, to the best of Seller's
knowledge, no such claim, litigation, proceeding, arbitration,
investigation or controversy has been threatened or is
contemplated.
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(f) COMPLIANCE WITH LAWS. (i) The Accounts, Cardholder Agreements
and all related documents comply in all material respects with
all applicable laws, rules and regulations and Seller has
complied in all material respects with all applicable federal
and state laws and regulations and the Operating Regulations
with respect to the origination, maintenance and servicing of
the Accounts, including any change in the terms of any
Account; (ii) the interest rates, fees and charges in
connection with the Accounts comply with all applicable
federal and state laws and regulations and with the Operating
Regulations; (iii) other than in the Cardholder Agreements and
as reflected in the Books and Records, Seller has made no
promise, agreement or commitment to any Cardholder in
connection with an Account, except in the ordinary course of
business in connection with collection and customer service;
(iv) each Cardholder Agreement is the legal, valid and binding
obligation of the Cardholder and is enforceable in accordance
with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium and other
laws relating to or affecting creditors' rights generally and
by general equity principles, and is not subject to offset,
recoupment, adjustment or any other claim except for the
rights of Cardholders under 12 CFRss.226.12(c), 12 CFR
ss.226.13(d) and the Soldiers and Sailors Civil Relief Act;
and (v) except for billing inquiries reflected in the Books
and Records, each of the Credit Card Receivables arises from a
bona fide sale or loan transaction or from a fee assessed in
connection therewith.
(g) CARDHOLDER AGREEMENTS. Attached as SCHEDULE 5.1(g) is a true,
accurate and complete copy of each form of Cardholder
Agreement governing an Account.
(h) ABSENCE OF CERTAIN ACCOUNTS. None of the Accounts transferred
as part of the Acquired Assets are: (i) any merchant accounts
and their associated processing; (ii) any debit accounts and
their associated processing; (iii) any accounts and associated
receivables that are classified, or that should have been
classified, as of the Cut-Off Time, as a commercial loan or
which are generated by any commercial entity; and (iv) any
test accounts opened or maintained by Seller with respect to
the MasterCard system for verification or other internal
purposes.
(i) ABSENCE OF DEFAULTS. There is no default, breach, violation,
or event of acceleration existing under any Account and no
event which, with the passage of time or with notice and the
expiration of any grace or cure period, would constitute a
default, breach, violation or event of acceleration except for
payment defaults that are less than one hundred eighty days
past due. Seller has not waived any default, breach, violation
or event of acceleration with respect to an Account, except as
reflected in the Books and Records or otherwise in accordance
with the Policies and Procedures.
19
(j) PROCESSING. Each Account has been processed by Seller in
conformance in all material respects with all of the
requirements of the Policies and Procedures.
(k) PERFORMANCE OF OBLIGATIONS. Seller has performed all
obligations required to be performed by it to date under the
Cardholder Agreements, and Seller is not in default under, and
no event has occurred which, with the lapse of time or action
by a third party, could result in a default of Seller under,
any such agreements. Each Cardholder Agreement is the legal,
valid and binding obligations of Seller, enforceable by the
respective parties thereto in accordance with its terms,
except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium, receivership,
conservatorship, the rights and obligations of conservators or
receivers on insured depository institutions under 12 U.S.C.
ss.1821(d) and (e) and other laws relating to or affecting
creditors' rights generally and by general equity principles.
(l) OPERATION OF BUSINESS. Seller has not (i) effected any change
in the Current Policies and Procedures that would have a
material adverse effect on the Acquired Assets; (ii) entered
into any transaction or made any commitment or agreement in
connection with the Accounts, other than in the ordinary
course of Seller's business consistent with past practice;
(iii) amended the terms of any Cardholder Agreement, except on
an individual basis in accordance with the Current Policies
and Procedures; or (iv) engaged in any settlement or reage of
delinquent Accounts under terms inconsistent with the Policies
or Procedures.
(m) FINDERS OR BROKERS. Seller acknowledges that it has not agreed
to pay any fee or any agent, broker, finder, or other person
retained by it, for or on account of services rendered as a
broker or finder in connection with this Agreement or the
transactions contemplated hereby.
(n) EFFECT OF LAW ON CLOSING. There is no federal or state
statute, rule or regulation, or order or rule of any federal
or state regulatory agency which would prevent the Seller from
selling the Acquired Assets to Purchaser as contemplated by
this Agreement.
(o) BOOKS AND RECORDS. The Books and Records relating to an
Account accurately reflect in all material respects the terms
and conditions of such Account.
(p) ENHANCEMENT PROGRAMS. SCHEDULE 5.1(p) sets forth a list of
benefits or enhancement programs currently in effect with
respect to the Accounts.
(q) ACCURACY OF STATEMENTS. No written statement, report, or other
document, furnished pursuant to this Agreement or during
Purchaser's due diligence with respect to this Agreement,
including documents and information in the form of microfilm,
microfiche, magnetic tape, computer disc, or in any other
20
form, contains any untrue statement of a material fact by
Seller or omits to state a material fact necessary to make the
statements of Seller contained therein not misleading, the
effect of which untrue statement or omission would be to
materially and adversely affect the Acquired Assets taken as a
whole.
(r) CONSENTS. Except for (i) any required approval of the Office
of Thrift Supervision under Section 563.22 of the OTS
Regulations, and (ii) any required FDR and EDS consent
pursuant to SECTION 2.10 of this Agreement, no consent,
approval or authorization of any federal, state or local
government authority or agency or any other third party is
required for the execution, delivery and performance by the
Seller of this Agreement and the consummation by them of the
transactions contemplated hereby.
(s) ACCURACY OF BAD DEBT EXPERIENCE. The month end delinquency and
charge-off reports covering the period from June 30, 1999 to
May 31, 2000 and in the form set forth on SCHEDULE 5.1(s),
have been prepared in accordance with the Policies and
Procedures, and Seller has no reason to believe that such
reports are inaccurate in any material respect.
Nothing in this SECTION 5.1 is intended to constitute a representation
and warranty of Seller as to any matter arising from an action or
omission of Purchaser in its capacity as Servicer on and after the
Prior Closing Date.
5.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby
represents and warrants to Seller as follows:
(a) ORGANIZATION. Purchaser is a national banking association,
validly existing and in good standing under the laws of the
United States.
(b) CAPACITY; AUTHORITY; VALIDITY. Purchaser has all necessary
corporate power and authority to enter into this Agreement and
the Related Agreements and to perform all of the obligations
to be performed by it under this Agreement and the Related
Agreements. This Agreement and the Related Agreements and the
consummation by Purchaser of the transactions contemplated
hereby and thereby have been duly and validly authorized by
all necessary corporate action of Purchaser, and this
Agreement and the Related Agreements have been duly executed
and delivered by Purchaser, and constitute the valid and
binding obligations of Purchaser, and this Agreement and the
Related Agreements have been duly executed and delivered by
Purchaser, and constitute the valid and binding obligations of
Purchaser, enforceable against Purchaser in accordance with
their respective terms (except as such enforcement may be
limited to bankruptcy, insolvency, reorganization, moratorium,
receivership, conservatorship, the rights and obligations of
receivers and conservators of insured depository institutions
under 12 U.S.C. ss.1821(d) and (e) and other laws relating to
or affecting creditors' right generally and by general equity
principles.
21
(c) CONFLICTS; DEFAULTS. Neither the execution and delivery of
this Agreement and the Related Agreements by Purchaser nor the
consummation of the transactions contemplated hereby or
thereby by Purchaser will (i) conflict with, result in the
breach of, constitute a default under, or accelerate the
performance required by, the terms of any order, law,
regulation, contract, instrument or commitment to which
Purchaser is a party or by which Purchaser is bound, (ii)
violate the organizational documents of Purchaser, (iii)
require any consent, approval, authorization or filing under
any law, regulation, judgment, order, writ, decree, permit or
license to which Purchaser is a party or by which Purchaser is
bound, other than the approvals of regulatory authorities, if
any, which have been obtained or will be obtained prior to or
on the Closing Date. Purchaser is not subject to any agreement
or understanding with any regulatory authority which would
prevent the consummation by Purchaser of the transactions
contemplated by this Agreement and the Related Agreements.
(d) FINDERS OR BROKERS. Purchaser has not agreed to pay any fee or
commission to any agent, broker, finder, or other person for
or on account of services rendered as a broker, or finder in
connection with this Agreement or the transactions
contemplated hereby which would give rise to any valid claim
against Seller for any brokerage commission or finder's fee or
like payment.
(e) EFFECT OF LAW ON CLOSING. There is no federal or state
statute, rule or regulation, or order or rule of any federal
or state regulatory agency, which would prevent Purchaser from
purchasing the Acquired Assets and assuming the Assumed
Liabilities as contemplated by this Agreement.
(f) SOURCE OF FUNDING. Purchaser has the necessary sources of
funding to consummate the transactions contemplated in this
Agreement in accordance with the terms hereof.
(g) MASTERCARD MEMBER. Purchaser is qualified to participate in,
and is a member in good standing of, the MasterCard credit
card program.
(h) INVESTIGATION. Purchaser has made such independent
investigation as Purchaser deems necessary as to the nature
and value of the Acquired Assets, including each Account, and
as to all other facts that Purchaser deems material to
Purchaser's purchase. Purchaser is entering into this
Agreement on the basis of that investigation and Purchaser's
own judgment and experience. Purchaser has made an independent
determination that the Purchase Price represents the fair and
reasonable value of the Acquired Assets, including the
Accounts. Purchaser has relied upon representations regarding
the nature and value of the Acquired Assets only as made to
Purchaser by Seller in this Agreement. The foregoing shall not
in any way limit the representations and warranties and
indemnification provisions otherwise provided in this
Agreement.
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ARTICLE 6 - CERTAIN COVENANTS
-----------------------------
6.1 MUTUAL COVENANTS AND AGREEMENTS. Each party hereto covenants and agrees
that:
COOPERATION. It shall cooperate with the other parties hereto in furnishing any
information or performing any action reasonably requested by that party, both
before and after the Closing, which information or action is necessary for the
prompt consummation of the transactions contemplated by, and the exercise of
rights and performance of obligations under, this Agreement. Without limiting
the generality of the foregoing, Purchaser shall provide to Seller (and shall
cause its employees and third parties engaged to provide services to the
Purchaser to provide) (i) such information as is requested by regulators or
examiners having jurisdiction over Seller relating to the Accounts, the
Cardholders or the transactions described herein and (ii) reasonable access to
and the ability to copy such Books and Records as is determined to be necessary
by Seller in connection with the Alabama Class Action and the settlement
thereof. The Purchaser agrees to maintain the Books and Records for the Accounts
for at least two years after the Closing Date and permit the Office of Thrift
Supervision access to the Books and Records upon reasonable notice.
(a)
(b) OTHER REQUIRED INFORMATION. It shall furnish to the other
parties hereto all information as is required to be set forth
in any application or statement to be filed with any local,
state or federal governmental agency or authority in
connection with the regulatory approval or review of the
transactions contemplated by this Agreement.
(c) CONFIDENTIALITY. All information furnished by a party (the
"Protected Party") to any other party in connection with this
Agreement and the transactions contemplated hereby (including
the books and records delivered by Seller relating to Credit
Card Accounts not being sold to Purchaser under this Agreement
pursuant to SECTION 6.2(g) of this Agreement) shall be
received in confidence and kept confidential by such other
party, and shall be used by it only in connection with this
Agreement and the transactions contemplated hereby, except to
the extent that such information: (i) is already lawfully
known to such other party when received; (ii) thereafter
becomes lawfully obtainable from other sources; (iii) is
required to be disclosed to MasterCard; (iv) is disclosed to
23
its Affiliates, provided that such parties agree to be bound
by the provisions of this SECTION 6.1(c); (v) is disclosed to
its auditors or counsel or is required to be disclosed to its
lenders or rating agencies; or (vi) is required by law,
regulation or court order or request of examining authorities
to be disclosed by such other party, provided that prior
notice of such disclosure (other than to its Affiliates,
auditors, counsel, lenders or examining authorities) has been
given to the Protected Party, when legally permissible, and
that such party which is required to make the disclosure uses
its reasonable best efforts to provide sufficient notice to
permit the Protected Party to take legal action to prevent the
disclosure. Following the Closing Date, Purchaser shall have
no obligation of confidentiality to Seller with respect to
information which is contained in or derived from the Books
and Records or is otherwise information Purchaser determines
is reasonably required to be disclosed in connection with the
securitization and sale of interests in the Accounts. In the
event that the transactions contemplated by this Agreement
shall fail to be consummated, such other party shall promptly
cause all originals and copies of documents or extracts
thereof containing such information and data as to such
Protected Party to be returned to the Protected Party or
destroyed and shall cause an officer to so certify to the
Protected Party. This SECTION 6.1(c) shall survive any
termination of this Agreement.
(d) PRESS RELEASES. Except as may be (i) required by law or
regulation or a court or regulatory authority or the rules of
a stock exchange, or (ii) necessary to disclose to lenders and
rating agencies, or (iii) required to be disclosed under
applicable securities laws pursuant to advice of such party's
securities counsel, neither Seller nor Purchaser, nor any of
their respective Affiliates, subsequent to the date hereof,
shall issue a press release or make any public announcement
related to the transactions contemplated hereby until such
transactions are consummated without consulting the other
party hereto and giving due consideration to any comments
provided by such other party, provided that no party shall,
either before or after the Closing Date, issue a press release
or make any public announcement which identifies or refers to
any other party, the purchase price or the detailed terms of
the transaction without the prior approval of the other party.
Notwithstanding the above, either party may issue a press
release or make a public announcement disclosing the existence
of this agreement (but not the parties thereto), the financial
impact of this Agreement to such party (but not the purchase
price, either as a dollar amount or a percentage), the
identity of the assets sold or purchased under this Agreement
and the anticipated closing date of this Agreement without the
prior approval of the other party. This SECTION 6.1(d) shall
survive any termination of this Agreement.
(e) NOTICE TO CARDHOLDERS. Seller and Purchaser shall cooperate
with each other in good faith to enable Purchaser, prior to
the Conversion Date, to prepare, print and mail a notice
notifying each Cardholder on a timely basis of the purchase of
the Accounts by Purchaser and such other information as may be
required to be given to such Cardholder and other matters
24
which the parties determine to be appropriate. Any such notice
shall be in a form consented to by each of the parties hereto
prior to mailing, but no party shall unreasonably withhold
such consent. Purchaser shall bear the expenses of such
notice, and Seller shall bear the expense of any subsequent
notice notifying certain cardholders that their Account has
been repurchased by Seller.
(f) MISCELLANEOUS AGREEMENTS AND CONSENTS. Subject to the terms
and conditions herein provided, each party to this Agreement
shall use its reasonable best efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things
necessary, appropriate or desirable hereunder and under
applicable laws and regulations, to consummate and make
effective the transactions contemplated by this Agreement.
Each party to this Agreement will use its reasonable best
efforts to obtain consents of all third parties and
governmental bodies necessary for the consummation of the
transactions contemplated by this Agreement. The parties and
their respective officers, directors and/or employees shall
use their reasonable best efforts to take such further actions
subsequent to the Closing Date as are reasonably necessary,
appropriate or desirable to carry out the purposes of this
Agreement.
(g) ADVICE ON CHANGES. Between the date hereof and the Closing
Date, each party shall promptly advise the other of any fact
known to it which, if existing or known at the date hereof,
would have been required to be set forth or disclosed in or
pursuant to this Agreement or of any fact which, if existing
or known at the date hereof, would have made any of the
representations of such party contained herein untrue in any
material respect.
(h) PRESERVE ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each
party hereto shall refrain from taking any action which would
render any representation or warranty of such party contained
in ARTICLE 5 of this Agreement inaccurate as of the Closing
Date. Each party shall promptly notify the other parties of
any action, suit or proceeding that shall be instituted or
threatened against such party to restrain, prohibit or
otherwise challenge the legality of any transaction
contemplated by this Agreement.
6.2 ADDITIONAL COVENANTS. Seller and Purchaser agree as follows:
(a) PRESERVATION OF CREDIT CARD BUSINESS. Seller has previously
discontinued its credit card business, including its servicing
activities, and has engaged Purchaser to service the ADC
Portfolio. To the extent consistent with the foregoing, from
the date of this Agreement and continuing until the Closing
Date, Seller shall, and shall cause Purchaser and other of its
agents, if any, to: (i) maintain and service the Accounts in
substantially the same manner as previously maintained and
25
serviced during the period after the Prior Closing Date and in
accordance with the Current Policies and Procedures as
currently in effect; (ii) maintain and service the Accounts in
compliance with applicable federal and state laws and
regulations to the extent of Seller's maintenance and
servicing of the Accounts during the period after the Prior
Closing Date; and (iii) except with the written consent of
Purchaser, not make any change to the Current Policies and
Procedures except as required by law, safe or sound banking
practices or the Operating Regulations. Seller shall take all
actions to cause its agents to, post all payments received
prior to the Cut-Off Time to the applicable Account as of the
Cut-Off Time.
(b) PRESERVATION OF ACCOUNTS. From the date of this Agreement and
continuing until the Closing Date, Seller shall: (i) not sell,
assign, transfer, pledge or encumber, or permit the
encumbrance of, any Account without the prior written consent
of Purchaser; (ii) not take any substantial action with
respect to the Accounts which will impair any material rights
of Seller, and shall not amend any Cardholder Agreement other
than on a per customer basis in accordance with the Current
Policies and Procedures; and (iii) comply with the terms and
conditions of the Cardholder Agreements, as then in effect.
(c) ACCESS. From the date of this Agreement and continuing until
the Closing Date, Seller shall (i) permit Purchaser and its
authorized representatives full access, during reasonable
hours, to the Books and Records as they relate to the Acquired
Assets; (ii) furnish Purchaser with true, accurate and
complete copies of such contracts and other such records and
all other information in its possession with respect to the
Acquired Assets as Purchaser or its authorized representatives
may reasonably request; and (iii) cause its personnel and its
agents to provide Purchaser assistance in its investigation of
such matters; provided, however, that such investigation shall
be conducted in a manner which does not unreasonably interfere
with Seller's normal operations, and provided further that the
Seller shall not be required to divulge, and shall not
divulge, any records, including certain information, to the
extent prohibited by applicable statutes or regulations. The
access afforded pursuant to this Section 6.2(c) is solely for
the purposes of viewing the conduct of business by the Seller
between the date of this Agreement and the Closing Date, and
shall not be construed as affording the Purchaser an
opportunity to conduct due diligence with respect to the
Acquired Assets, which the parties agree and acknowledge was
conducted prior to execution of this Agreement.
(d) USE OF LIST. Seller agrees that for a period of two (2) years
from the Closing Date, neither Seller, nor any Affiliate of
Seller, will (i) sell or otherwise provide the names and
addresses or other identifying information concerning the
Cardholders, in whole or in part, to any third party or (ii)
knowingly use such names and addresses or other identifying
information concerning the Cardholders to solicit any
Cardholder for a Credit Card Account or for a credit card
substitute or credit card replacement product. The foregoing
shall not be interpreted to preclude general media advertising
or promotion or advertising or promotion efforts targeted to
customers of the Seller for mortgage, insurance or other
26
banking products and services. Purchaser acknowledges that the
Cardholders were initially solicited by ADC, and Purchaser
acknowledges that Seller has no control over ADC and Seller
shall not be held in any way liable for any use of the names
and addresses of Cardholders with respect to any solicitation
by ADC.
(e) FURTHER ASSURANCES. On or after the Closing Date, Seller
shall, to the extent of its obligations hereunder (i) give
such further assurances to Purchaser, execute, acknowledge and
deliver all such acknowledgements and other instruments and
take such further action as may be reasonably necessary or
appropriate to fully and effectively carry out the
transactions contemplated hereby; and (ii) reasonably assist
Purchaser in the orderly transition of the operations and
servicing relating to the Acquired Assets.
(f) RESPONSIBILITY FOR TAXES. Seller shall be liable for and pay
(i) any Taxes relating to the Acquired Assets that accrue or
otherwise relate to any taxable year or period (or portion
thereof) ending on or prior to the Closing Date and (ii) any
Taxes imposed upon the Seller as a result of the sale of the
Acquired Assets to the Purchaser. For purposes of this
Agreement, Taxes attributable to a portion of a taxable year
or period shall be determined on a "closing of the books"
basis as of the Closing Date, except that Taxes imposed on a
periodic basis (such as property Taxes) shall be allocated on
a daily basis. Seller shall be responsible for any applicable
2000 federal or state information reporting for events or
payments occurring during the period beginning January 1, 2000
and ending on the Closing Date.
(g) BOOKS AND RECORDS. Seller will make the Books and Records
available for delivery to Purchaser on or within five Business
Days of the Closing Date. To the extent Seller delivers
originals and does not retain copies of such Books and
Records, Purchaser shall, upon the request of Seller and at
Seller's expense, deliver to Seller copies of Books and
Records as Seller may require to meet legal, regulatory, Tax,
accounting and auditing requirements. Except as set forth
above, from and after the Conversion Date, Seller shall have
no further obligations to provide the Purchaser access to any
of its books and records.
(h) NO SHOP. Upon and after execution of this Agreement, and until
the earlier of the Closing Date or the termination of this
Agreement in accordance with its terms, the Seller will not,
directly or indirectly, solicit, or cause any other person to
solicit, any offer to acquire the Acquired Assets or assume
the Assumed Liabilities (whether by merger, purchase of assets
or other similar transaction) other than the acquisition and
assumption contemplated by this Agreement. The Seller will
not, directly or indirectly, furnish any information
27
concerning the Acquired Assets or Assumed Liabilities to any
person which is seeking to acquire the Acquired Assets or
Assumed Liabilities, in whole or in part, except in response
to unsolicited inquiries or offers by third parties and under
circumstances where the Seller advises such other person in
writing of the existence of this Agreement and the Related
Agreements and that any such offer or inquiry shall be in the
nature of a backup offer or inquiry. If Seller receives an
unsolicited inquiry or proposal concerning the availability of
the Acquired Assets or Assumed Liabilities for purchase,
Seller agrees to promptly inform Purchaser of the substance of
such inquiry or proposal including the identity of the person
making such inquiry or proposal, but solely if such inquiry or
proposal is in writing.
(i) AGREEMENTS WITH THIRD PARTIES. Seller shall furnish to
Purchaser, prior to the Closing Date, copies of existing
contracts with third parties relating to the Acquired Assets
and Assumed Liabilities and shall represent that Purchaser
will not incur any liability thereunder as a result of this
Agreement other than the Assumed Liabilities.
(j) REMOVAL FROM BIN. Seller and Purchaser shall cooperate to
remove any accounts which have been classified or should have
been classified as a Charged-Off Account, an Alabama Opt-Out
Account or a Mississippi Account from bank identified number
("BIN") 549062 as soon as possible.
(k) RETURN OF CREDIT BALANCES. Seller shall have paid to
Cardholders all Credit Balances created prior to the Cut-Off
Time.
(l) TRAILING ACTIVITY. Seller and Purchaser shall cooperate to
establish a process prior to the Closing Date to settle
trailing activity.
(m) PAYMENT OF CLAIMS IN ALABAMA CLASS ACTION. Seller shall be
responsible for the payment of any amounts required to be paid
in cash to Cardholders who have submitted claims in the
Alabama Class Action and shall reimburse Purchaser for any
credit given by Purchaser after the Closing Date to
Cardholders who have submitted claims in the Alabama Class
Action.
6.3 COVENANTS OF PURCHASER. Purchaser shall be liable for and pay any Taxes
relating to the Acquired Assets that accrue or otherwise relate to any
taxable year or period (or portion thereof), as determined in
accordance with SECTION 6.2(f) beginning after the Closing Date; except
for (i) Taxes imposed upon the Seller as a result of the sale of the
Acquired Assets to the Purchaser and (ii) any other Taxes for which the
Seller is responsible as set forth in SECTION 6.2(f)(i). Purchaser
shall be liable for and shall pay and perform any Assumed Liability
arising after the Closing Date, including without limitation all
obligations arising under any Cardholder Agreement. Purchaser shall
comply in all material respects with applicable law in its
administration of the Accounts, in each case, after the Closing Date.
Purchaser shall be responsible for any applicable 2000 federal or state
information reporting for events or payments occurring subsequent to
the Closing Date.
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ARTICLE 7 - INDEMNIFICATION
7.1 SELLER'S INDEMNIFICATION OBLIGATIONS. Seller shall indemnify, defend
and hold Purchaser and its Affiliates and their respective
stockholders, officers, directors and employees, harmless from and
against any and all Losses (as hereinafter defined) arising from: (i)
breach by Seller of any representation, warranty or covenant expressly
made by Seller hereunder or under a Related Agreement; (ii) failure by
the Seller to perform its obligations hereunder or under the Related
Agreement; (iii) Seller's ownership of or actions with respect to the
Acquired Assets, including, without limitation Seller's relationships
with ADC, prior to the Closing Date; (iv) any actions taken by FDR,
Citizens Bank, EDS or Bank Plus Credit Services Corporation prior to
the Closing Date with respect to the Acquired Assets; (v) the failure
of the Accounts, Cardholder Agreements and all related documents, in
effect at or prior to the Closing Date, to comply in any respect with
all applicable laws, rules and regulations or (vi) the failure of the
Seller prior to the Closing Date to comply in all respects with all
applicable federal and state laws and regulations and the Operating
Regulations with respect to the origination, maintenance and servicing
of the Accounts, including any change in the terms of any Account.
7.2 PURCHASER'S INDEMNIFICATION OBLIGATIONS. Purchaser shall be liable to
and shall indemnify, defend and hold Seller and its Affiliates and
their respective stockholders, officers, directors and employees,
harmless from and against any and all Losses arising from: (i) breach
by Purchaser of any representation, warranty or covenant hereunder or
under a Related Agreement; (ii) failure by Purchaser to perform its
obligations hereunder or under a Related Agreement, including without
limitation any failure by Purchaser on and after the Closing Date to
discharge the Assumed Liabilities; (iii) Purchaser's ownership of or
actions with respect to the Acquired Assets after the Closing Date; or
(iv) the failure of the Purchaser after the Closing Date to comply in
all respects with all applicable federal and state laws and regulations
and the Operating Regulations with respect to the maintenance and
servicing of the Accounts, including any change in the terms of any
Account.
7.3 DEFINITION OF LOSSES. For purposes of this ARTICLE 7, the term "Loss"
or "Losses" shall mean any liability, damage, costs and expenses
arising from a claim asserted by a bona fide third party, not an
Affiliate of an Indemnified Party, including, without limitation, any
attorneys' fees, disbursements and court costs, in each case reasonably
incurred by Purchaser or Seller, as the case may be, without regard to
whether or not such Losses would be deemed material under this
Agreement.
29
7.4 PROCEDURES.
(a) NOTICE OF CLAIMS. The parties agree that in case any claim is
made, any suit or action is commenced, or any knowledge is
received of a state of facts which, if not corrected, may give
rise to a right of indemnification for such party hereunder
("Indemnified Party") from the other party ("Indemnifying
Party") the Indemnified Party will give notice to the
Indemnifying Party as promptly as practicable after the
receipt by the Indemnified Party of notice or knowledge of
such claim, suit, action or state of facts. Notice to the
Indemnifying Party under the preceding sentence shall be given
no later than fifteen (15) days after receipt by the
Indemnifying Party of service of process in the event a suit
or action has commenced or thirty (30) days under all other
circumstances. The failure to give prompt notice shall not
relieve an Indemnifying Party of its obligation to indemnify
except to the extent the Indemnifying Party is prejudiced by
such failure. The Indemnified Party shall make available and
provide access (and shall cause its employees and third
parties engaged to provide services to the Indemnified Party
to make available and provide access) to the Indemnifying
Party and its counsel and accountants at reasonable times and
for reasonable periods, during normal business hours, all
books and records of the Indemnified Party or such third party
relating to any such possible claim for indemnification, and
shall permit copying of the same. Each party hereunder will
render to the other (and shall cause any employees or other
third parties employed or engaged by such Party to render)
such assistance as it may reasonably require of the other in
order to insure prompt and adequate defense of any suit, claim
or proceeding based upon a state of acts which may give rise
to a right of indemnification hereunder.
The Indemnifying Party shall have the right to
defend, compromise and settle (without agreeing or admitting
to any liability as to the Indemnified Party in the event of a
compromise or settlement) any third party person suit, claim
or proceeding in the name of the Indemnified Party to the
extent that the Indemnifying Party may be liable to the
Indemnified Party in connection therewith. The Indemnifying
Party shall notify the Indemnified Party within ten (10) days
of having been notified pursuant to this SECTION 7.4(a) if the
Indemnifying Party elects to assume the defense of any such
claim, suit or proceeding and employ counsel, provided that
the Indemnified Party does not object to such counsel in a
reasonable exercise of its discretion. The Indemnified Party
shall have the right to employ its own counsel if the
Indemnifying Party so elects to assume such defense, but the
fees and expenses of such counsel shall be the at the
Indemnified Party's expense, unless (i) the employment of such
counsel shall have been authorized in writing by the
Indemnifying Party; (ii) the Indemnifying Party shall not have
employed counsel to take charge of the defense of such action
after electing to assume the defense thereof; or (iii) the use
of such counsel chosen by the Indemnifying Party to represent
such Indemnified Party would present such counsel with an
actual or potential conflict of interest (in which case the
30
Indemnifying Party shall not have the right to assume the
defense of such action on the Indemnified Party's behalf) or
(iv) the actual or potential defendants in, or targets of, any
such action include both Seller and Purchaser, and in the
reasonable opinion of counsel to the Purchaser or Seller,
there may be legal defenses available to the Indemnified
Parties which are different or additional to those available
to the Indemnifying Parties and as a result of which it would
be inappropriate for one counsel to represent both the
Purchaser or Seller (in which case the Indemnifying Party
shall not have the right to assume the defense of such action
on the Indemnified Party's behalf).
(b) SETTLEMENT OF CLAIMS. The Indemnified Party may at any time
notify the Indemnifying Party of its intention to settle or
compromise any claim, suit or action against the Indemnified
Party (without the consent of the Indemnifying Party) in
respect of which indemnification payments may be sought from
the Indemnifying Party hereunder, provided that the
Indemnifying Party shall have no further liability in respect
thereof.
(c) SUBROGATION. The Indemnifying Party shall be subrogated to any
claims or rights of the Indemnified Party as against any other
persons with respect to any amount paid by the Indemnifying
Party under this ARTICLE 7. The Indemnified Party shall
cooperate with the Indemnifying Party, at the Indemnifying
Party's expense, in the assertion by the Indemnifying Party of
any such claim against such other persons.
(d) PAYMENT TO PURCHASER. Purchaser shall have the right to secure
reimbursement for costs and liabilities incurred for which
indemnification is provided hereunder, from the Escrow Holder
on a quarterly basis in accordance with the Escrow Agreement.
(e) PAYMENT TO INDEMNIFYING PARTY. In the event Seller is the
Indemnifying Party with respect to a claim, suit, action or
state of facts with respect to which Seller is providing the
defense of Purchaser or an Indemnified Party affiliated with
Purchaser, Seller shall have the right to secure reimbursement
for the incremental costs incurred solely in connection with
the defense or payment of such claim, suit, action or state of
facts from the Escrow Holder on a quarterly basis in
accordance with the Escrow Agreement; provided that Purchaser
and Seller shall have agreed in writing to the dollar amount
of such incremental costs and provided further that if the
parties fail to agree for a period of sixty (60) days, the
amount of incremental costs to be reimbursed shall be subject
to dispute resolution in accordance with SECTION 9.14.
Notwithstanding the foregoing, no such reimbursement may be
requested or provided before the first anniversary of the
Closing Date, and on and after such first anniversary Seller
may request and receive reimbursement for costs incurred for
which indemnification is provided hereunder without regard to
whether such costs were paid or incurred prior to or after
such first anniversary date.
31
(f) DOCUMENTATION. With respect to a request for reimbursement
under paragraph (e) above Seller shall provide such
documentation relating to such claim as Purchaser shall
reasonably request.
(g) CERTAIN LIMITATIONS. Neither party shall have any liability
for indemnification to the other party pursuant to this
ARTICLE 7 unless and until the aggregate amount of all Losses
for which a party is entitled to receive indemnification from
the other party exceeds $200,000 (solely under this Agreement
and the Servicing Agreement and not under the Prior Sale
Agreement) at which time the Indemnified Party shall be
entitled to indemnification under ARTICLE 7 for all Losses as
exceed $200,000. Notwithstanding anything to the contrary in
this Agreement or the Prior Sale Agreement, there shall be no
liability of Seller under this Article 7 (including all
liabilities under the Prior Sale Agreement) in an aggregate
amount in excess of the Hold Back Amount or such lesser amount
as is on deposit with the Escrow Holder from time to time.
Notwithstanding anything to the contrary, there shall be full
liability without respect to any financial floor for
indemnification for any claim brought in connection with
Taxes, any Mississippi Account, any Alabama Opt-Out Account or
any Excluded Account subject to repurchase, any liabilities
retained by Seller pursuant to SECTION 6.2(j) and any
liabilities under agreements that pertain to the Acquired
Assets that are not specifically assumed by Purchaser
hereunder.
(h) SURVIVAL OF INDEMNIFICATION OBLIGATIONS. The obligations of
the parties set forth in this ARTICLE 7 shall survive the
Closing Date for a period of two (2) years from the Closing
Date, except that a claim for indemnification for which notice
was given pursuant to SECTION 7.4(a) hereof by an Indemnified
Party prior to the end of such period shall survive until such
claim is fully and finally determined, and except that the
indemnification by Seller shall continue as to: (i) the
obligations and representations of Seller and Purchaser under
the Assignment and Assumption Agreement, as to which no time
limitation shall apply; (ii) the representations and
warranties of Seller set forth in SECTIONS 5.1(a), 5.1(b),
5.1(c) and 5.1(d), and the covenant of Seller set forth in
SECTION 6.2(f) as to all of which no time limitation shall
apply; and (iii) the representations and warranties of
Purchaser set forth in SECTION 5.2(a), 5.2(b) and 5.2(c), and
the covenant of Purchaser set forth in SECTION 6.3 (insofar as
it relates to the payment of Taxes) as to which no time
limitation shall apply.
ARTICLE 8 - TERMINATION
8.1 TERMINATION BY EITHER PARTY. Anything contained in this Agreement to
the contrary notwithstanding, this Agreement may be terminated prior to
the Closing Date:
32
(a) by either Purchaser or Seller if a material breach of any
provision of this Agreement has been committed by the other
party and such breach has not been waived;
(b) by the mutual consent of the parties; or
(c) by Purchaser or Seller if the Closing Date has not occurred by
January 15, 2001 by reason of the act or failure to act of the
nonterminating party.
8.2 EFFECT OF TERMINATION. In the event that this Agreement shall be
terminated pursuant to this ARTICLE 8, all further obligations of the
parties under this Agreement (other than SECTIONS 6.1(c), 6.1(d) and
9.6) shall be terminated without further liability of any party to the
other, provided that nothing herein shall relieve any party from
liability for its breach of this Agreement.
ARTICLE 9 - MISCELLANEOUS
-------------------------
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each party contained in this Agreement or in any
certificates or other instruments delivered pursuant to this Agreement
will survive the Closing of the transactions contemplated herein
through the period during which claims for indemnification may be made
pursuant to ARTICLE 7. All of such representations and warranties will
be effective regardless of any investigation that any party has
undertaken or failed to undertake.
9.2 NOTICES. All notices and other communications by Purchaser or Seller
hereunder shall be in writing to the other party and shall be deemed to
have been duly given when delivered in person or to an overnight
courier service, receipt requested, or sent via telecopy transmission,
receipt requested or when posted by the United States registered or
certified mail, with postage prepaid, addressed as follows:
If to Seller: Fidelity Federal Bank, A Federal Savings Bank
0000 Xxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxx
Fax Number: 818/000-0000
copy to: Fidelity Federal Bank, A Federal Savings Bank
0000 Xxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx
Attn: Xxxxxxx X. Xxxxx, Esq.
Fax Number: 818/000-0000
If to Purchaser: Household Bank (SB), N.A.
0000 Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attn: President/CEO
Fax Number: 831/000-0000
33
copy to: Household Credit Services, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxxx Xxxxxxx, XX 00000
Attn: General Counsel
Fax Number: 847/000-0000
or to such other addresses as a party may from time to time designate
by notice as provided herein, except that notices of change of address
shall be effective only upon actual receipt.
9.3 ASSIGNMENT. Prior to the Closing, the rights of any party under this
Agreement shall not be assigned or transferred, except to an Affiliate,
by any party without the prior written approval of the other parties
hereto. Following the Closing, the rights of any party under this
Agreement shall not be assigned or transferred, except to an Affiliate,
by any party without the prior written approval of the other parties
hereto, which approval shall not be unreasonably withheld; PROVIDED
HOWEVER, that the foregoing shall not prohibit or require the other
party's consent to an assignment in connection with a merger or
consolidation with any other party or the sale of all or substantially
all of a party's assets to another federally insured depository
institution.
9.4 ENTIRE AGREEMENT. This Agreement, together with the exhibits to this
Agreement, constitutes the entire agreement by the parties and
supersedes any other agreement, whether written or oral, that may have
been made or entered into by or on behalf of Seller and Purchaser
relating to the matters contemplated hereby.
9.5 AMENDMENTS AND WAIVERS. This Agreement may be amended, modified,
superseded, or canceled, and any of the terms, representations,
warranties or covenants hereof may be waived, only by written
instrument executed by each of the parties or, in the case of a waiver,
by the party waiving compliance. In the course of the planning and
coordination of this Agreement, written documents have been exchanged
between the parties. Such written documents shall not be deemed to
amend or supplement this Agreement. The failure of any party at any
time or times to require performance of any provision hereof shall in
no manner affect the right at a later time to enforce the same. No
waiver by any party of any condition or of any breach of any term,
representation, warranty or covenant under this Agreement, whether by
conduct or otherwise, in any one or more instances, shall be deemed to
be or construed as a further or continuing waiver of any other
condition or of any breach of any such condition of breach or waiver of
any other condition or of any breach of any other term, representation,
warranty or covenant under this Agreement.
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9.6 EXPENSES. The parties will each bear their own legal, accounting and
other costs in connection with the transactions herein, including
Taxes, attributable to the sale of the Acquired Assets from Seller to
Purchaser, unless otherwise specified in this Agreement. Each party
hereto agrees to timely sign and deliver such certificates or forms as
may be reasonably requested to establish an exemption form (or
otherwise reduce), or file Tax returns with respect to, such Taxes.
9.7 CAPTIONS; COUNTERPARTS. The captions in this Agreement are for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement. This
Agreement may be executed in two or more counterparts, each of which
shall be an originals, but all of which together shall constitute one
and the same instrument.
9.8 GOVERNING LAW. This Agreement shall be governed by and construed and
interpreted in accordance with the internal laws of the State of
Delaware, without regard to principles of conflict of laws.
9.9 SEVERABILITY. If any provision of this Agreement or portion thereof is
held invalid, illegal, void or unenforceable by reason of any rule or
law, administrative or judicial provision or public policy, such
provision shall be ineffective only to the extent invalid, illegal,
void or unenforceable, and the remainder of such provision and all
other provisions of this Agreement shall nevertheless remain in full
force and effect.
9.10 INDEPENDENT CONTRACTORS. In the performance of its duties or
obligations under this Agreement, no Seller shall be deemed to be,
permit itself to be, or understood to be the agent of Purchaser and
Seller shall at all times take such measures as are necessary to ensure
that its status shall be that of an independent contractor operating as
a separate entity.
9.11 NO JOINT VENTURE. Nothing in this Agreement shall be deemed to create a
partnership or joint venture among the Seller and Purchaser. Except as
expressly set forth herein, no party shall have any authority to bind
or commit any other party.
9.12 ATTORNEYS' FEES. In the event of any litigation, arbitration or other
proceeding to enforce, interpret or declare the rights or obligations
of any party to this Agreement, the prevailing party shall be entitled
to costs, including attorneys' fees, in connection with any such
proceeding.
9.13 REGULATORY APPROVAL. Purchaser acknowledges that this Agreement is
subject to approval or nonobjection of the Regional Director of the
Office of Thrift Supervision pursuant to Thrift Bulletin 50. Purchaser
expressly authorizes Seller to submit this Agreement to the Regional
Director of the Office of Thrift Supervision for review, and this
Agreement shall not become effective until such approval or
nonobjection by the Office of Thrift Supervision has been obtained.
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9.14 DISPUTE RESOLUTION. Purchaser and Seller shall each designate a
representative (each, a "Representative") to oversee compliance with
each party's respective obligations under this Agreement. If either
Purchaser or Seller disputes the other's determination under or
interpretation of any Section of this Agreement (a "Dispute"), the
following procedure shall be followed to resolve such Dispute:
STEP 1: The Representatives shall meet (by conference
telephone call or in person at a mutually agreeable site) to attempt to
resolve the Dispute in a mutually acceptable manner. If agreement is
reached pursuant to this Step 1, payment or other resolution shall be
made or performed within five days in accordance with such agreement.
If no agreement is reached within a reasonable time, the parties shall
proceed to Step 2.
STEP 2: The chief executive officer of Purchaser and the chief
executive officer of Bank Plus shall meet (by conference telephone call
or in person at a mutually agreeable site) within 72 hours after notice
of an impasse is given pursuant to Step 1. The chief executive officers
shall attempt to resolve the Dispute in a mutually acceptable manner.
If agreement is reached pursuant to this Step 2, payment or other
resolution shall be made or performed within five days in accordance
with such agreement. If no agreement is reached within a reasonable
time, Purchaser or Seller may pursue any legal or equitable remedies
available to them. Notwithstanding the foregoing, Purchaser and Seller
shall give due consideration to whether arbitration might be a mutually
acceptable way to resolve the dispute.
If and to the extent the parties mutually agree, Purchaser and
Seller shall submit the Dispute involved in such impasse to an
arbitrator jointly selected by the parties who shall be a person
reasonably experienced in matters involving commercial transactions.
Any such arbitration shall be conducted under the auspices, and
pursuant to the Commercial Arbitration Rules, of the American
Arbitration Association and in accordance with the Federal Arbitration
Act (PROVIDED, HOWEVER, that in the event of conflict between such
rules or Act and the terms of this Agreement, the terms of this
Agreement shall govern) and be conducted at such location as Purchaser
and Seller shall mutually agree; PROVIDED, HOWEVER, that if the parties
are unable to agree on a location, the arbitration shall be conducted
in San Francisco, California. Each party shall bear its own expenses
but those related to fees and expenses of the arbitrator shall be borne
equally. The award rendered by the arbitrator shall be final and
conclusive upon the parties and judgment thereon may be entered in any
court having jurisdiction. All statutes of limitation which would
otherwise be applicable shall apply to any arbitration proceeding.
Unless otherwise agreed to in writing by Purchaser and Seller, a final
decision of the arbitrator may be appealed to any court of competent
jurisdiction by either party.
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IN WITNESS WHEREOF, Seller and Purchaser have caused this
Agreement to be duly executed as of the date first above written.
Fidelity Federal Bank, A Federal Savings
Bank, Seller
By:
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Name:
-------------------------------------
Title:
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Household Bank (SB), N.A., Purchaser
By:
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Name:
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Title:
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