Exhibit No. 10.9
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PURCHASE AND ASSUMPTION AGREEMENT
Dated as of June 2, 2000
Between
Fidelity Federal Bank, A Federal Savings Bank
And
Household Bank (SB), N.A.
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TABLE OF CONTENTS
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Page No.
ARTICLE 1 - DEFINITIONS
1.1 Definitions 1
1.2 Construction 7
ARTICLE 2 - PURCHASE AND SALE OF ACQUIRED ASSETS
2.1 Acquired Assets 7
2.2 Assumed Liabilities 7
2.3 Purchase Price 8
2.4 Hold Back Amount 8
2.5 Allocation of Purchase Price 8
2.6 Reimbursement and Proration of Certain Expenses 9
2.7 Use of Name and Trademarks 9
2.8 Seller's Repurchase Obligations 10
2.9 Repurchase Price 10
2.10 Exclusive Remedy 11
2.11 Continued Processing 11
ARTICLE 3 - THE CLOSING
3.1 The Closing 12
3.2 Documents and Certificates 12
3.3 Valuation Date Statement 12
3.4 Payments on the Closing Date 12
3.5 Settlement Date Statement 13
3.6 Payments on the Settlement Date 13
3.7 Post Closing Payments 13
3.8 Payment of Hold Back Amount 14
3.9 Power of Attorney 14
3.10 Dispute Resolution 14
ARTICLE 4 - CONDITIONS OF CLOSING
4.1 Conditions Applicable to Purchaser 15
4.2 Conditions Applicable to Seller 17
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of Seller 18
5.2 Representations and Warranties of Purchaser 22
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ARTICLE 6 - CERTAIN COVENANTS
6.1 Mutual Covenants and Agreement 24
6.2 Additional Covenants 27
6.3 Covenants of Purchaser 31
ARTICLE 7 - INDEMNIFICATION
7.1 Seller's Indemnification Obligations 31
7.2 Purchaser's Indemnification Obligations 32
7.3 Definition of Losses 32
7.4 Procedures 32
ARTICLE 8 - TERMINATION
8.1 Termination By Either Party 34
8.2 Effect of Termination 35
ARTICLE 9 - CONVERSION
9.1 Expenses 35
ARTICLE 10 - MISCELLANEOUS
10.1 Survival of Representations and Warranties 35
10.2 Notices 36
10.3 Assignment 36
10.4 Entire Agreement 37
10.5 Amendments and Waivers 37
10.6 Expenses 37
10.7 Captions; Counterparts 37
10.8 Governing Law 37
10.9 Severability 38
10.10 Independent Contractors 38
10.11 No Joint Venture 38
10.12 Attorneys' Fees 38
10.13 Dispute Resolution 38
EXHIBIT A Form of Settlement Date Statement
EXHIBIT B Form of Valuation Date Statement
EXHIBIT C Form of Assignment and Assumption Agreement
EXHIBIT D Form of ▇▇▇▇ of Sale
EXHIBIT E Form of Escrow Agreement
SCHEDULE 2.1 List of Fixed Assets
SCHEDULE 2.2 List of Software License Agreements
SCHEDULE 2.5 Allocation of Purchase Price
SCHEDULE 4.1(g) Form of Cardholder Agreements
SCHEDULE 5.1 (e) List of Litigation and Other Proceedings
SCHEDULE 5.1(p) List of Enhancement Programs
SCHEDULE 5.1(s) Accuracy of Bad Debt Experience
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PURCHASE AND ASSUMPTION AGREEMENT
This Purchase and Assumption Agreement (the "Agreement") is made and entered
into as of the 2nd day of June, 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 is the owner of certain unsecured consumer lines of credit
accessible by credit cards collectively designated as the MMG Portfolio. Seller
is also the owner of certain unsecured consumer lines of credit accessible by
credit cards collectively designated as the ADC Portfolio.
B. Seller desires to sell, and Purchaser desires to purchase, on the
terms set forth herein, the properties, rights and privileges of Seller in and
to the accounts comprising the MMG Portfolio, and related receivables.
C. Seller desires to grant to Purchaser an option to purchase the ADC
Portfolio and to engage Purchaser to service the ADC Portfolio following the
Closing Date hereunder pursuant to the terms of a Servicing Agreement between
Seller and Purchaser (the "Servicing Agreement").
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 MMG 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.
"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.
"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.
"Affinity Marketers" shall mean RevCorp, MMG, Hometown Dealers,
Nationwide Capital Company, LLP and Preferred Consumers Network.
"Agreement" shall have the meaning specified in the Introduction.
"Assignment and Assumption Agreement" shall have the meaning specified
in SECTION 3.2.
"Assumed Lease" shall mean that certain Lease Agreement between Bank
Plus Credit Services Corporation as lessee and Landlord as lessor dated
October 1, 1998 under which Seller occupies the Beaverton Operations
Center.
"Assumed Liabilities" shall have the meaning specified in SECTION 2.2.
"Bank Plus" shall mean Bank Plus Corporation, a Delaware corporation,
as successor in interest to Bank Plus Credit Services Corporation, and
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.
"Beaverton Operations Center" shall mean the facilities occupied by
Seller under the Assumed Lease, which are located at ▇▇▇▇▇ ▇. ▇.
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇.
"▇▇▇▇ of Sale" shall have the meaning specified in Section 3.2.
"Books and Records" shall mean all books and records 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 2.8.
"Credit Balances" shall mean all amounts 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.
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"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 any Affinity
Marketer, 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 April 13, 2000.
"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
"Employees" shall have the meaning specified in SECTION 6.2(j).
"Escrow Holder" shall mean the entity selected by Purchaser and Seller
to hold the funds in the escrow.
"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 are, or
should have been, classified as fraud/stolen ("U"),
which was generated from fraud activity perpetrated
prior to the Cut-Off Time;
(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
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(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.
"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.
"Fixed Assets" shall have the meaning specified in SECTION 2.1.
"Hold Back Amount" shall mean an amount equal to ten percent (10%) of
the Purchase Price.
"Indemnified Party" shall have the meaning specified in SECTION 7.4(a).
"Indemnifying Party" shall have the meaning specified in SECTION
7.4(a).
"Landlord" shall mean Center Developments Oreg. Ltd.
"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.
"MMG" shall mean MMG Direct, Inc., a Texas corporation.
"MMG Portfolio" shall mean all credit card accounts originated under
the Seller's agreements with MMG dated November 21, 1997 and December
10, 1997 and included on the Seller's servicing system as bank
identified number ("BIN") 541444 which includes principal codes 00, 01,
03, 04, 10 and 11.
"Operating Regulations" shall mean the by-laws, rules and regulations
of MasterCard.
"Policies and Procedures" shall mean the written policies and
procedures of Seller relating to the Accounts, as in effect from time
to time.
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"Post Closing Payments" shall have the meaning specified in SECTION
3.7.
"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 ▇▇▇▇ of Sale and the Servicing Agreement.
"Repurchase Price" shall have the meaning specified in SECTION 2.9.
"RevCorp" shall mean Revelation Corporation of America, a Delaware
corporation.
"Seller" shall have the meaning assigned in the Introduction.
"Servicing Agreement" shall have the meaning specified in Recital C.
"Settlement Date" shall mean the date (not later than forty-five (45)
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.
"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.
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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;
(v) the MasterCard bank identified number 541444; and
(vi) the furniture, fixtures, assets, leasehold
improvements, equipment and other tangible personal
property (collectively, the "Fixed Assets") located
at the Beaverton Operations Center and identified on
SCHEDULE 2.1.
(b) On the Closing Date, Seller shall terminate the sublease
between Seller and Bank Plus relating to the Beaverton
Operations Center, cause Bank Plus to assign to Purchaser all
of the rights and privileges under the Assumed Lease and
notify and obtain the consent of the Landlord to such
assignment. The rights and privileges of Bank Plus under the
Assumed Lease, together with the items described in SECTION
2.1(A), are hereinafter sometimes referred to as the "Acquired
Assets".
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
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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,
(iv) all of Seller's obligations under the Assumed Lease (v) all of
Seller's obligations to comply with the restrictions of the software
license agreements set forth in SCHEDULE 2.2 relating to any item of
Fixed Assets; and (vi) all of the obligations assumed by Purchaser
under SECTION 2.11 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 10.6.
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 (x) 42.5% multiplied by an amount equal to the total
amount of all Credit Card Receivables except for Credit Card
Receivables with respect to Excluded Accounts plus (y) an amount equal
to fifty percent (50%) of the book value of the Fixed Assets, provided
that such amount shall not exceed $1.6 million.
2.4 HOLD BACK AMOUNT. In order to secure Seller's obligations (i) to
indemnify Purchaser and its Affiliates and their respective
stockholders, officers, directors and employees pursuant to SECTION
7.1, (ii) to repurchase or adjust the purchase price in respect of
Covered Accounts pursuant to SECTION 2.8, (iii) to indemnify Purchaser
and its Affiliates and their respective stockholders, officers,
directors and employees pursuant to SECTION 12.2 of the Servicing
Agreement, and (iv) to pay compensation pursuant to SECTION 6.4 of the
Servicing Agreement, Purchaser shall deposit with the Escrow Holder on
the Closing Date the portion of the Purchase Price equal to the Hold
Back Amount. The Hold Back Amount shall be held by the Escrow Holder
pursuant to the terms of an Escrow Agreement 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 REIMBURSEMENT AND PRORATION OF CERTAIN EXPENSES. All expenses relating
to the Beaverton Operations Center (i) due and payable after the
Closing Date for periods prior to the Closing Date or (ii) paid prior
to the Closing Date for periods after the Closing Date including,
without limitation and to the extent applicable, rents, real estate
taxes, assessments, utility payments, medical benefit premiums for
employees hired by Purchaser, payments due on the Assumed Lease (other
than payments to obtain consents or similar approvals to transfer the
Assumed Lease to Purchaser) and similar expenses, shall be prorated
between the Purchaser and the Seller (on the basis of the actual number
of days elapsed and a 360 day year or shorter period as applicable
pursuant to the relevant invoice therefor) as of the Closing Date. For
prorations, if any, which cannot be reasonably calculated as of the
Closing Date, a post-closing adjustment shall be made as soon as
reasonably possible thereafter and in no event later than the
Settlement Date, and payment of such prorated amount shall be taken
into account in the payment made on the Settlement Date. Any payments
made or agreed to in order to obtain the consent or other approval from
a party to the Assumed Lease to permit the transfer of such Assumed
Lease to Purchaser shall be solely the cost and expense of Seller.
2.7 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 utilize the name or any trademark or
service ▇▇▇▇ of the Affinity Marketers, except that the name
of an Affinity Marketer may be used solely in collection and
customer service activities to refer to Accounts as previously
having been identified with such Affinity Marketer. 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, the Credit Card Marks or
the name or trademark or service ▇▇▇▇ of any Affinity Marketer
except as permitted under this SECTION 2.7.
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(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 ▇▇▇▇ 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.
2.8 SELLER'S REPURCHASE OBLIGATIONS. After the Closing Date, in the event
any Account acquired hereunder by Purchaser is 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 as to
which a representation and warranty has been breached request that
Seller repurchase such Account (and all other Acquired Assets relating
to such Account) and Seller shall repurchase such Account (and all
other Acquired Assets relating to such Account) for an amount equal to
the Repurchase Price set forth in SECTION 2.9; and (ii) 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 ▇▇▇▇ ▇▇▇▇▇▇
shall be required to repurchase all such Covered Accounts or adjust the
Purchase Price with respect to all such Covered Accounts. Such requests
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 5 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.
2.9 REPURCHASE PRICE. The Repurchase Price for a Covered Account (the
"Repurchase Price") shall be equal to 42.5% 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. 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
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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. The Escrow Agreement shall provide that in the event
of the failure or refusal of the Seller to repurchase or adjust the
Purchase Price in respect of a Covered Account in response to a request
given pursuant to SECTION 2.8 of this Agreement, where such failure or
refusal continues after five (5) days' written notice of such default
has been given to Seller, Purchaser may instruct the Escrow Holder to
remit such amount to Purchaser.
2.10 EXCLUSIVE REMEDY. Repurchase of an account or adjustment of the
Purchase Price as set forth in SECTIONS 2.8 and 2.9 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.
2.11 CONTINUED PROCESSING. Prior to the Conversion 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. Purchaser shall pay all processing fees, excluding
minimum processing penalties, conversion and termination
penalties, charged by FDR directly related to the processing
of the MMG Portfolio based on an allocation of fees mutually
agreed upon by the parties to ensure that Purchaser pays only
such fees related to the MMG Portfolio. Seller shall maintain
the existing agreement with FDR in full force and effect until
November 30, 2001 or such earlier date as mutually agreed to
by the parties. Prior to the Closing Date, Seller shall obtain
from FDR its written consent to Purchaser's full
participation, rights and access to the FDR processing system
for the MMG Portfolio, including but not limited to, making
PCF and other system setting changes, direct terminal access
and/or dial up service, inventory supply control, letter,
statement and notice modifications, authorization parameter
control, collection management settings and controls,
charge-off parameters, the ability to add or modify system
enhancements, credit control process changes, credit bureau
reporting and updates and card activation services.
(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 MMG
Portfolio. Seller shall maintain the existing agreement with
EDS in full force and effect, and, prior to the Closing Date
shall obtain from EDS its written consent to Purchaser's full
participation, rights and access to the EDS processing system
for the MMG Portfolio, including but not limited to the right
to convert the payment processing to Purchaser at any time
without the imposition of a penalty on Purchaser, assistance
from EDS for such conversion, and the right to audit EDS.
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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 June 30, 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, (i) Seller shall deliver to
Purchaser, and Purchaser shall deliver to Seller, 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,
other than the Fixed Assets, to be transferred thereby and under which
Purchaser shall assume the Assumed Liabilities and (ii) Seller shall
deliver to Purchaser, a ▇▇▇▇ of sale (the "▇▇▇▇ of Sale") which conveys
to Purchaser all of Seller's right, title and interest in and to the
Fixed Assets to be transferred thereby. The Assignment and Assumption
Agreement shall be in the form of Exhibit C attached hereto and the
▇▇▇▇ of Sale shall be in the form of Exhibit D attached hereto, each
dated the Closing Date, and shall be appropriately completed and duly
executed. Seller shall execute and deliver all such additional
instruments, documents or certificates as may be reasonably requested
by Purchasers for the consummation at the Closing of the transactions
contemplated by this Agreement. At the Closing, Seller shall cause to
be delivered to Purchaser, and Purchaser shall deliver to Seller, an
assignment and assumption of the Assumed Lease under which Bank Plus
transfers to Purchaser its interest as lessee in the Assumed Lease and
Purchaser assumes all obligations arising after the Closing Date under
the Assumed Lease.
3.3 VALUATION DATE STATEMENT. Seller 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. Purchaser 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 Seller to reflect any corrections agreed
to by Purchaser 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 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.
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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.
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, or (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)) and Purchaser (in the case of clause (iii) or (iv)) in the
amount of 42.5% of such chargeback, check or credit (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.
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(b) On the 60th day after the Closing Date, Purchaser shall provide to
Seller a list of Accounts as to which annual fees were required under
the Current Policies and Procedures to be refunded to the Cardholder,
and which have so been refunded, which list will set forth the amount
refunded with respect to each Account. Within 15 days after such list
is provided, Seller shall reimburse to Purchaser the aggregate amount
of such refunds, up to a maximum of $100,000.
3.8 PAYMENT OF HOLD BACK AMOUNT. The Escrow Agreement shall provide that
upon the expiration of two (2) years from the Closing Date, the Hold
Back Amount shall be remitted by the Escrow Holder to Seller; provided,
however, that there shall be retained in escrow an amount equal to the
Estimated Liquidated Amount of any claim or claims for indemnification
for which notice has been given by Purchaser pursuant to SECTION 7.4(a)
of this Agreement or pursuant to SECTION 12.3(A) of the Servicing
Agreement between the Closing Date and such two year anniversary date.
The Estimated Liquidated Amount shall be proposed by Purchaser in
writing promptly after the giving of notice 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 and
shall be based only upon claims actually asserted by third parties.
Within five Business Days of such proposal, Seller shall either accept
such Estimated Liquidated Amount or reject such Estimated Liquidated
Amount and propose an Estimated Liquidated Amount. If Seller rejects
the Purchaser's proposed Estimated Liquidated Amount, Seller and
Purchaser shall negotiate in good faith in an attempt to agree upon the
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 10.13, 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.
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
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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. 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 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 Oregon 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.
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(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 April 13, 2000, there shall
have been no material adverse change in the condition,
financial or otherwise, of the Acquired Assets other than
fluctuations in value of the Credit Card Receivables.
(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.
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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.
(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, 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.
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(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.
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES
------------------------------------------
5.1 REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby represents and
warrants to Purchaser 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 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. 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 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 the Landlord with respect to the Assumed Lease, of
the licensors with respect to any software license relating to
any item of Fixed Assets, and of FDR and EDS pursuant to
SECTION 2.11 of this Agreement, require the consent or
18
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;(ii)
restrictions imposed by the Operating Regulations, including
without limitation restrictions imposed on the bank
identifying numbers, (iii) the rights, if any, of licensors
under software license agreements relating to the Fixed Assets
and (iv) any lien, claim, encumbrance or restriction on the
fee simple interest of the Landlord.
(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.
(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 CRF ss.226.12(c), 12 CRF
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.
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(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. No Seller has 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.
(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.
20
(l) OPERATION OF BUSINESS. Since April 13, 2000, 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
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) ACCURACY OF TAPES. Each Account is in all material respects as
described in the Tapes provided pursuant to SECTION 3.2
hereof, and when delivered by Seller to Purchaser, the
information contained in such Tapes shall be correct in all
material respects.
(s) ACCURACY OF BAD DEBT EXPERIENCE. The month end delinquency and
charge-off reports covering the period from March 31, 1999 to
April 30, 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.
21
(t) CONSENTS. Except for (i) the approval of the Office of Thrift
Supervision under Section 563.22 of the OTS Regulations, (ii)
Landlord consent with respect to the Assumed Lease, (iii)
rights of licensors with respect to software licenses relating
to the Fixed Assets, and (iv) FDR and EDS consent pursuant to
Section 2.11 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.
(u) ASSUMED LEASE. Seller has delivered to Purchaser a true and
correct copy of the Assumed Lease. Seller has not agreed to
make any payments or modifications to the Assumed Lease which
would materially alter the financial obligations of Seller or
Purchaser (as assignee) thereunder as such existed as of April
13, 2000. The Assumed Lease is legal, valid and binding and
enforceable in accordance with its terms and Seller knows of
no defaults and is not in default thereunder. No event or
condition has occurred or exists (or, to the best of Seller's
knowledge, alleged by any other party thereto to have occurred
or to exist), which constitutes, or with lapse of time or
giving of notice or both might constitute, a default or beach
under the Assumed Lease. No security deposit or prepaid is
held by the Landlord with respect to the Assumed Lease.
(v) EMPLOYEE INFORMATION. Information regarding Employee
compensation and benefits made available by Seller to
Purchaser was correct in all material respects as of the date
such information was provided.
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
22
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.
(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.
23
(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.
ARTICLE 6 - CERTAIN COVENANTS
-----------------------------
6.1 MUTUAL COVENANTS AND AGREEMENTS. Each party hereto covenants and agrees
that:
(a) COOPERATION. It shall cooperate with the other parties hereto
in furnishing any information or performing any action
reasonably requested by that party, which information or
action is necessary for the prompt consummation of the
transactions contemplated by this Agreement.
(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
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
24
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 (other than information concerning the Employees)
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
which the parties determine to be appropriate. Any such notice
25
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, and under the Assumed Lease,
to consummate and make effective the transactions contemplated
by this Agreement, including without limitation securing the
consent of the landlord with respect to the Assumed Lease.
Without limiting the generality of the foregoing, Purchaser
agrees that it will, at the request of Seller, provide such
financial statements and other information as is necessary to
secure the consent of the Landlord to the assignment and
assumption of the Assumed Lease. 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.
26
6.2 ADDITIONAL COVENANTS. Seller and Purchaser agree as follows:
(a) PRESERVATION OF CREDIT CARD BUSINESS. From the date of this
Agreement and continuing until the Closing Date, Seller shall,
and shall cause its agents to: (i) maintain and service the
Accounts in substantially the same manner as previously
maintained and serviced 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; 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, and shall 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; (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; and
(iv) provide to Purchaser reasonable access to the Beaverton
Operations Center, upon reasonable notice, to allow Purchaser
to reasonably prepare the Beaverton Operations Center for
operation following the Closing. Purchaser shall perform such
27
activities in a manner which shall not unduly interfere with
Seller's operation of the Beaverton Operations Center and
shall indemnify Seller for any damage, loss, costs or expense
arising from such actions. 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
banking products and services. Purchaser acknowledges that the
Cardholders were initially solicited by an Affinity Marketer,
and Purchaser acknowledges that Seller has no control over any
Affinity Marketer 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 any Affinity Marketer.
(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.
28
(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; PROVIDED, HOWEVER, that Books and
Records (i) with respect to the Fixed Assets and (ii) not
located at the Beaverton Operations Center shall be made
available to Purchaser only to the extent that Purchaser has
identified a specific item of Books and Records and has
requested such item to be made available. 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
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) EMPLOYEE INFORMATION. Seller has made available to Purchaser
information regarding the compensation and benefits paid to
the employees of Seller employed at the Beaverton Operations
Center (the "Employees") as well as similar information which
may be available with respect to other persons who may be
providing services to Seller at the Beaverton Operations
Center pursuant to a contract. Seller will retain the
personnel files for all such Employees, but may make such
files available for review by Purchaser if the relevant
29
Employee provides written consent to Seller to do so. Seller
shall use commercially reasonable efforts to secure such
consent from each Employee identified by Purchaser. >From the
date of this Agreement to ten Business Days prior to the
Closing Date, Purchaser may interview and make offers of
employment to any Employee, but shall have no obligation to
hire any Employee. Within five Business Days after the end of
such period, Purchaser shall provide Seller with a true and
complete list of Employees to whom it will extend an offer of
employment if the Employee is actively working on the Closing
Date, together with a summary of the terms of such offers.
Purchaser acknowledges that Seller shall rely upon such list
and other information provided under this Section in the
administration of its benefits and severance plans. Seller
shall remain liable for wages, incentives, bonuses,
commissions, severance, retention or other payments or
benefits that were granted or earned and not yet paid to
Employees prior to the Closing Date and for any such payments
or benefits after the Closing Date with respect to Employees
not hired by Purchaser. Except as provided in the following
sentence, Purchaser shall to the extent possible afford
Employees hired by it after the Closing Date the ability to
participate in all employee benefit plans offered by Purchaser
with full credit for service with Seller of such Employee and
shall notify Seller of any instance in which an Employee hired
by it is not given the ability to so participate with such
full credit. Regarding Purchaser's defined benefit (pension)
plan, Employees hired by Purchaser will receive (i) credit for
service for purposes of eligibility starting from their date
of hire with Seller, including its predecessors, as used by
Seller for purposes of determining eligibility although they
will still be deemed to be hired after 1999 for purposes of
determining the applicability to them of the plan's
account-based formula and (ii) service credit from the day
after the Closing Date for purposes of vesting, benefit
accrual or determination of appropriate accrual or account
formulas. Purchaser shall not assume any responsibility under
Seller plans with respect to any current or future
post-retirement welfare benefit obligations to any Employees,
including medical, dental and life insurance benefits. Seller
shall not assume any responsibility under Purchaser plans with
respect to any current or future post-retirement welfare
benefit obligations to any Employees hired by Purchaser,
including medical, dental and life insurance benefits.
Purchaser and Seller mutually and expressly agree not to
discriminate against any of the Employees because of age,
race, color, religion, sex, national origin, ancestry,
disability, handicap or veteran status or any other basis
prohibited by applicable federal, state or local law, and
further agree, to the extent applicable, to comply with all
applicable requirements of the equal opportunity and
affirmative action clauses set forth in Executive Order 11246,
as amended, in the regulations of the Department of Labor
implementing the Vietnam Era Veterans Readjustment Act of
1974, and in the Rehabilitation Act of 1973, as amended, which
together with the implementing rules and regulations
30
prescribed by the Secretary of Labor are incorporated herein
by reference. Nothing in this Agreement is intended as
creating any rights or privileges in any Employee or other
person not a party hereto
(k) REMOVAL FROM BIN. Seller shall assign from principle codes 00,
01, 03, 04, 10, and 11 to principle code 13, any accounts
which have been classified or should have been classified as a
Charged-Off Account and shall remove such accounts from bank
identified number ("BIN") 541444 as soon as possible.
(l) RETURN OF CREDIT BALANCES. Seller shall have paid to
Cardholders all Credit Balances created prior to the Cut-Off
Time.
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 pay all compensation and benefits accruing after the
Closing Date for any Employee or other person employed by Purchaser
after the Closing Date. Purchaser shall be liable for and shall pay and
perform any Assumed Liability and obligation or liability arising from
its operation of the Beaverton Operations Center 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 operation of the Beaverton
Operations Center and its administration of the Accounts, in each case,
after the Closing Date.
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 MMG, Nationwide Capital Company, L.L.C., RevCorp, and the
Preferred Consumers Network 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 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;
31
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 "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 either Seller, as the case may be, without regard to
whether or not such Losses would be deemed material under this
Agreement.
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 acts 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 to
the Indemnifying Party and its counsel and accountants at
reasonable times and for reasonable period, during normal
business hours, all books and records of the Indemnified Party
relating to any such possible claim for indemnification, and
each party hereunder will render to the other 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.
32
The Indemnifying Party shall have the right to
defend, compromise and settle 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 any 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) such
Indemnified Party shall have reasonably concluded that there
may be defenses available to it which are different from or
additional to those available to the Indemnifying Party (in
which case the Indemnifying Party shall not have the right to
direct the defense of such action on behalf of the Indemnified
Party), in any of which events said reasonable fees and
expenses shall be borne by the Indemnifying Party.
(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. The Indemnifying Party shall remit payment for the
amount of a valid and substantial claim for indemnification
hereunder within fifteen Business Days of the receipt of a
claim notice therefor. In the event the Indemnifying Party is
the Seller, and Seller has not made payment for the amount of
such claim within five (5) days after the end of such fifteen
Business Day period, the Escrow Agreement shall provide that
Purchaser may instruct the Escrow Holder to remit such amount
from the funds from the Hold Back Amount.
33
(e) 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 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, there shall be full liability without respect to any
financial floor for indemnification for any claim brought in
connection with Taxes, 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.
(f) 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, 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 two (2) year 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:
(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
July 15, 2000 by reason of the act or failure to act of the
nonterminating party.
34
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
10.6) 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 - CONVERSION
----------------------
9.1 CONVERSION EXPENSES. Seller shall be responsible for the payment of all
costs to convert the Accounts from the processing systems of FDR and
EDS to another data processor designated by Purchaser, and for the
destruction of unutilized inventory stored at FDR. The obligation of
Seller to pay such costs shall be subject to the condition that such
costs and expenses be reasonable in the discretion of Purchaser and
customary in connection with conversion activities and that the parties
shall have mutually reviewed such costs and expenses prior to incurring
such costs and expenses. Seller agrees that unless it has obtained the
consent of FDR to provide Purchaser with all rights and access
necessary to effect the conversion, Seller shall, as its sole cost and
expense, provide (in a timely fashion that meets all of the conversion
timelines established by Purchaser and agreed to by Seller in the
Conversion Schedule) such conversion tapes or transmissions and other
necessary materials in a form reasonably requested by Purchaser as
necessary to install and maintain the information contained therein on
the system of Purchaser. Such support ("Conversion Support") shall
include: (i) assisting Purchaser in completion of MasterCard and/or
VISA required questionnaires and forms within their prescribed time
frames; (ii) providing test copies and layouts of all critical files
upon fifteen (15) days written notice; (iii) providing necessary
support to complete the mapping of the fields of FDR's files to
Purchaser's processor's files upon fifteen (15) days written notice
(such support may, at Purchaser's discretion, include visits by
appropriate FDR representative(s) to Purchaser's facility in order to
facilitate mapping); (iv) participating in up to three mock conversions
upon fifteen (15) days written notice; (v) suspending monetary and
non-monetary activity three days prior to Conversion; (vi) providing
Preliminary Tapes at each of the mock conversions and two days prior to
the actual Conversion (tapes shall be "as of" the appropriate date);
(vii) providing Final Tapes as agreed to by the parties prior to the
Conversion Date; (viii) all other support that is customary for such
conversions; and (ix) provide hard copy settlement reports both pre and
post conversion.
ARTICLE 10 - MISCELLANEOUS
--------------------------
10.1 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.
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10.2 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
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax Number: 818/▇▇▇-▇▇▇▇
copy to: Fidelity Federal Bank, A Federal Savings Bank
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax Number: 818/▇▇▇-▇▇▇▇
If to Purchaser: Household Bank (SB), N.A.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President/CEO
Fax Number: 831/▇▇▇-▇▇▇▇
copy to: Household Credit Services, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: General Counsel
Fax Number: 847/▇▇▇-▇▇▇▇
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.
10.3 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
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consolidation or the sale of all or substantially all of a party's
assets to another federally insured depository institution and provided
further that no party shall agree to any sale of all or substantially
all of its assets unless the acquirer thereof will agree to be bound to
fulfill the other party's indemnification obligations hereunder. No
assignment shall relieve a party of its obligations hereunder. The
indemnification obligations of Fidelity assumed under this SECTION 10.3
by any acquirer of all or substantially all of the assets of Fidelity
shall not exceed $52 million.
10.4 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.
10.5 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.
10.6 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.
10.7 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.
10.8 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.
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10.9 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.
10.10 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.
10.11 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.
10.12 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.
10.13 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.
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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: ____________________________________
Name: _________________________
Title: ________________________
Household Bank (SB), N.A., Purchaser
By: ____________________________________
Name: _________________________
Title: ________________________
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