EXHIBIT 10.1
================================================================================
PURCHASE, SALE AND SERVICING TRANSFER AGREEMENT
AMONG
CITIBANK, N.A.,
FEDERATED DEPARTMENT STORES, INC.,
FDS BANK
AND
PRIME II RECEIVABLES CORPORATION
DATED AS OF JUNE 1, 2005
================================================================================
TABLE OF CONTENTS
PAGE
----
RECITALS.................................................................................. 1
ARTICLE I DEFINITIONS..................................................................... 2
SECTION 1.1. Definitions of Certain Terms........................................ 2
SECTION 1.2. Interpretation...................................................... 20
ARTICLE II FIRST CLOSING, PURCHASE, SALE AND ASSUMPTION................................... 21
SECTION 2.1. Purchase and Sale of FDS Assets and the Prime Stock................. 21
SECTION 2.2. Assumption of FDS Liabilities....................................... 21
SECTION 2.3. FDS Purchase Price; FDS Purchase Price Adjustment................... 21
SECTION 2.4. The First Closing................................................... 22
ARTICLE III SECOND CLOSING, PURCHASE, SALE AND ASSUMPTION................................. 23
SECTION 3.1. Purchase and Sale of the GE/Macy's Assets........................... 23
SECTION 3.2. Assumption of the GE/Macy's Liabilities............................. 23
SECTION 3.3. GE/Macy's Purchase Price; GE/Macy's Purchase Price Adjustment....... 23
SECTION 3.4. The Second Closing.................................................. 24
ARTICLE IV THIRD CLOSING, PURCHASE, SALE AND ASSUMPTION................................... 25
SECTION 4.1. Purchase and Sale of the May Assets................................. 25
SECTION 4.2. Assumption of the May Liabilities................................... 25
SECTION 4.3. May Purchase Price; May Purchase Price Adjustment................... 25
SECTION 4.4. The Third Closing................................................... 26
ARTICLE V REPRESENTATIONS OF THE PARTIES.................................................. 27
SECTION 5.1. Representations of FDS.............................................. 27
SECTION 5.2. Representations of the Purchaser.................................... 35
SECTION 5.3. No Other Representations or Warranties; No Recourse................. 39
ARTICLE VI COVENANTS...................................................................... 39
SECTION 6.1. Conduct of Business................................................. 39
SECTION 6.2. Certain Changes..................................................... 40
SECTION 6.3. Access and Confidentiality.......................................... 42
SECTION 6.4. Reasonable Best Efforts; Other Filings.............................. 43
SECTION 6.5. Additional Instruments.............................................. 45
SECTION 6.6. Non-Solicitation.................................................... 45
SECTION 6.7. Credit Card Marks; Branding......................................... 45
SECTION 6.8. Notice to Cardholders............................................... 46
SECTION 6.9. Cooperation in Obtaining Approval and Consents...................... 47
i
SECTION 6.10. Post-Closing Access................................................ 47
SECTION 6.11. Cooperation in Litigation.......................................... 47
SECTION 6.12. Preservation of and Access to Books and Records.................... 48
SECTION 6.13. Bulk Sales Law..................................................... 48
SECTION 6.14. CEBA Bank.......................................................... 48
SECTION 6.15. Third-Party Consents............................................... 49
SECTION 6.16. May Portfolio...................................................... 49
SECTION 6.17. Interim Servicing.................................................. 51
SECTION 6.18. Securitization Matters............................................. 51
ARTICLE VII CONDITIONS TO EFFECT THE FIRST PURCHASE AND ASSUMPTION........................ 51
SECTION 7.1. Conditions to Each Party's Obligations.............................. 51
SECTION 7.2. Conditions to Obligations of the Purchaser.......................... 52
SECTION 7.3. Conditions to Obligations of the Sellers............................ 53
ARTICLE VIII CONDITIONS TO EFFECT THE SECOND PURCHASE AND ASSUMPTION...................... 54
SECTION 8.1. Conditions to Each Party's Obligations.............................. 54
SECTION 8.2. Conditions to Obligations of the Purchaser.......................... 55
SECTION 8.3. Conditions to Obligations of FDS and FDS Bank....................... 55
ARTICLE IX CONDITIONS TO EFFECT THE THIRD PURCHASE AND ASSUMPTION......................... 56
SECTION 9.1. Conditions to Each Party's Obligations.............................. 56
SECTION 9.2. Conditions to Obligations of the Purchaser.......................... 57
SECTION 9.3. Conditions to Obligations of FDS and FDS Bank....................... 57
ARTICLE X TERMINATION..................................................................... 58
SECTION 10.1. Termination Prior to the First Closing............................. 58
SECTION 10.2. Termination Prior to the Second Closing............................ 58
SECTION 10.3. Termination Prior to the Third Closing............................. 59
SECTION 10.4. Effect of Termination.............................................. 59
ARTICLE XI TAX MATTERS.................................................................... 60
SECTION 11.1. Cooperation........................................................ 60
SECTION 11.2. Tax Returns........................................................ 60
SECTION 11.3. Conveyance Taxes................................................... 60
SECTION 11.4. Refunds............................................................ 60
SECTION 11.5. Tax Filing Obligations............................................. 60
SECTION 11.6. Purchase Price Allocations; Section 338(h)(10) Election............ 61
SECTION 11.7. Straddle Periods................................................... 63
SECTION 11.8. Tax Contests....................................................... 63
SECTION 11.9. Payments........................................................... 64
SECTION 11.10. Survival of Tax Indemnities....................................... 64
ii
SECTION 11.11. FIRPTA Certificates............................................... 64
SECTION 11.12. Tax Sharing Agreements............................................ 64
ARTICLE XII SURVIVAL; INDEMNIFICATION..................................................... 64
SECTION 12.1. Survival........................................................... 64
SECTION 12.2. Indemnification by the Sellers..................................... 65
SECTION 12.3. Indemnification by the Purchaser................................... 66
SECTION 12.4. Notice, Settlements and Other Matters.............................. 66
ARTICLE XIII MISCELLANEOUS................................................................ 68
SECTION 13.1. Notices............................................................ 68
SECTION 13.2. Expenses and Certain Post-Closing Matters.......................... 70
SECTION 13.3. Successors and Assigns............................................. 71
SECTION 13.4. Entire Agreement; Amendment; Waiver................................ 71
SECTION 13.5. Counterparts....................................................... 71
SECTION 13.6. Governing Law...................................................... 71
SECTION 13.7. Waiver of Jury Trial and Venue..................................... 72
SECTION 13.8. Severability....................................................... 72
SECTION 13.9. No Petition........................................................ 72
SECTION 13.10. Public Announcement............................................... 72
SECTION 13.11. Third-Party Beneficiaries......................................... 72
SECTION 13.12. Schedules......................................................... 73
iii
SCHEDULES AND ANNEXES
Schedule 1.1(a) Assigned Contracts
Schedule 1.1(b)(1) Form of First Closing Statement
Schedule 1.1(b)(2) Form of Second Closing Statement
Schedule 1.1(b)(3) Form of Third Closing Statement
Schedule 1.1(c)(1) Seller's Knowledge
Schedule 1.1(c)(2) Purchaser's Knowledge
Schedule 1.1(d) Form of Master File
Schedule 1.1(e) Prime Securitization Bank Accounts
Schedule 1.1(f) Prime Securitization Documents
Schedule 1.1(g) Prime II Securitization Documents
Schedule 1.1(h) Termination Fee
Schedule 5.1(c) Governmental and Third Party Consents of the Sellers
Schedule 5.1(e)(2) SEC Reports; Other Financial Information
Schedule 5.1(f) Absence of Certain Changes
Schedule 5.1(h) Litigation
Schedule 5.1(l)(4) Accounts
Schedule 5.1(q) Outstanding Liabilities of Prime
Schedule 5.1(r) Intellectual Property
Schedule 5.2(c) Governmental and Third Party Consents of the Purchaser
Schedule 6.16 May Portfolio Calculations and Procedures
Schedule 6.17 Interim Servicing Reports
Schedule 7.1 Requisite Third Party Consents
Schedule 9.2(b) May Financial Information
Annex A Program Agreement
Annex B Form of First Instrument of Assignment and Assumption
Annex C Form of Second Instrument of Assignment and Assumption
Annex D Form of Third Instrument of Assignment and Assumption
Annex E Summary of Terms of CEBA Equity Interests
iv
PURCHASE, SALE AND SERVICING TRANSFER AGREEMENT, dated as of June 1,
2005 (this "Agreement"), among Federated Department Stores, Inc., a Delaware
corporation ("FDS"), FDS Bank, a federally-chartered stock savings bank ("FDS
Bank"), Prime II Receivables Corporation, a Delaware corporation ("Prime II"),
and Citibank, N.A., a national banking association (the "Purchaser").
RECITALS
WHEREAS, FDS is, among other things, (i) engaged in the business of
selling merchandise through retail stores and by other means and (ii) indirectly
through certain of its subsidiaries, including FDS Bank, engaged in the Business
(as defined herein);
WHEREAS, the Prime Credit Card Master Trust (the "Prime Master
Trust") was formed pursuant to that certain Amended and Restated Pooling and
Servicing Agreement, dated as of December 15, 1992, as amended and/or
supplemented through the date of this Agreement and as it may be further amended
and/or supplemented through the First Closing Date (as defined herein) to the
extent permitted by this Agreement, including all series supplements thereto
(the "Prime Pooling and Servicing Agreement"), by and among Prime Receivables
Corporation, a Delaware corporation ("Prime"), as transferor, FDS Bank (as
successor to FDS National Bank), as servicer, and JPMorgan Chase Bank (formerly
known as The Chase Manhattan Bank and as successor to Chemical Bank), as
trustee;
WHEREAS, the Prime Credit Card Master Trust II (the "Prime II Master
Trust") was formed pursuant to that certain Pooling and Servicing Agreement,
dated as of January 22, 1997, as amended and/or supplemented through the date of
this Agreement and as it may be further amended and/or supplemented through the
First Closing Date, including all series supplements thereto (the "Prime II
Pooling and Servicing Agreement"), by and among Prime II, as transferor, FDS
Bank (as successor to FDS National Bank), as servicer, and JPMorgan Chase Bank
(formerly known as The Chase Manhattan Bank), as trustee (the Prime Pooling and
Servicing Agreement and the Prime II Pooling and Servicing Agreement together
the "Pooling and Servicing Agreements");
WHEREAS, pursuant to this Agreement, (i) the Sellers referred to
herein desire to sell or cause to be sold to the Purchaser, and the Purchaser
desires to purchase the Acquired Assets and Stock (as defined herein), including
the Accounts (as defined herein) and related credit card relationships from and
after the closing of such sale or sales, and to assume the Assumed Liabilities
(as defined herein) pursuant to the terms contained and in the manner described
herein, and (ii) the Purchaser desires to form a federally-chartered bank, which
will be a subsidiary of the Purchaser ("CEBA Bank") and assign to CEBA Bank the
Acquired Assets and Stock and cause CEBA Bank to assume the Assumed Liabilities
as more fully specified herein;
WHEREAS, (i) on the date hereof, FDS, FDS Bank, FACS Group, Inc. and
the Purchaser are entering into a Program Agreement (the "Program Agreement") in
the form attached hereto as Annex A, to become effective as of the Effective
Date (as defined in the Program Agreement), that provides for, among other
things, the issuance of proprietary cards and co-branded credit cards, the
issuance of existing and new credit related products, the processing and
servicing of the related Accounts, and the conduct of related marketing
activities, and (ii) on
or prior to the First Closing Date, the Purchaser shall assign all of its rights
and obligations under the Program Agreement to CEBA Bank.
NOW, THEREFORE, in consideration of the premises, and of the mutual
representations and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions of Certain Terms.
(a) In this Agreement, the following terms are used with the
meanings assigned below:
"Accounts" means the collective reference to the FDS Accounts, the
GE/Macy's Accounts and the May Accounts.
"Account Agreement" means an agreement (including related
disclosure) between FDS Bank, GE Bank or May Bank, as the case may be, and
a Person or Persons under which Accounts are established and Credit Cards
are issued to or on behalf of such Person or Persons, as such agreement
may be amended, modified or otherwise changed from time to time (including
pursuant to change of terms notices or any debt cancellation agreements).
"Acquired Assets and Stock" means the collective reference to the
FDS Assets, the Prime Stock, the GE/Macy's Assets and the May Assets.
"Affiliate" means, with respect to any Person, each Person that
controls, is controlled by, or is under common control with, such Person.
For purposes of this definition, "control" of a Person means the
possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of
voting securities, by contract or otherwise. From and after the closing of
the May Merger, for all purposes under this Agreement, May Co. and its
Affiliates shall be considered Affiliates of the Sellers. Notwithstanding
the foregoing, solely for purposes of this Agreement, and regardless of
its characterization under applicable Requirements of Law or the Program
Agreement, upon issuance to FDS Bank of the CEBA Equity Interests, CEBA
Bank shall be deemed to be an Affiliate of the Purchaser and not an
Affiliate of the Sellers from and after the First Closing.
"Ancillary Agreements" means the Program Agreement, the First
Instrument of Assignment and Assumption, the Second Instrument of
Assignment and Assumption and the Third Instrument of Assignment and
Assumption.
"Ancillary Products" has the meaning set forth in the Program
Agreement.
2
"Applicable Order" means, with respect to any Person, a judgment,
injunction, writ, decree or order of any Governmental Authority, in each
case legally binding on that Person or on any material amount of its
property.
"Assigned Contracts" means the Contracts listed on Schedule 1.1(a).
"Assumed Liabilities" means the collective reference to the FDS
Liabilities, the GE/Macy's Liabilities and the May Liabilities.
"Books and Records" means books, records, original documents, files,
correspondence, books of account, Credit Card applications, customer
service and collection records, billing tapes, month-end tapes, papers,
statement forms, plastics, application forms and other data maintained by
or on behalf of Sellers or any of their Affiliates, whether in hard copy
or electronic format or any other form, including those relating to the
Prime Master Trust, in each case to the extent within the Sellers' control
and possession and primarily used in the Business, other than the FDS
Cardholder List, the GE/Macy's Cardholder List, the May Cardholder List,
the Master File and any of the foregoing relating principally to the
Excluded Assets and other than Tax Returns or Tax work papers. For the
avoidance of doubt, the term "Books and Records" does not include any FDS
Shopper Data (to the extent not included in the Master File (and without
limiting FDS's ownership of such FDS Shopper Data contained in the Master
File)), FDS Systems (as defined in the Program Agreement) or any of the
Sellers' minute books, stock ledgers, internal accounting records or other
corporate records and documents.
"Business" means the Credit Card business relating to the Acquired
Assets and Stock conducted by FDS and its Subsidiaries and (to the extent
of FDS's ability to control matters relating to the accounts under the
GE/Macy's Program Agreement prior to the termination of the GE/Macy's
Program Agreement) GE Bank and its Affiliates, including (A) the extension
of credit to Cardholders, the servicing of the Accounts (including
servicing under the Pooling and Servicing Agreements), billings,
collections, processing of Account transactions, the administration of the
Accounts and Gross Receivables (including the Securitization Receivables)
and all aspects of the proprietary Credit Card program relating to the
Accounts and (B) the offering of any Ancillary Products to Cardholders but
excluding (i) the operations, systems and facilities of FACS Group, Inc.,
(ii) all Employees, (iii) the Excluded Assets, and (iv) the May Business
prior to the closing of the May Merger.
"Business Day" means any day, other than a Saturday or Sunday, on
which both FDS and the Purchaser are open for business at their respective
U.S. headquarters.
"Card Associations" means VISA U.S.A., Inc. and VISA International
Inc.
"Cardholder" means a Person or Persons to whom a Credit Card is or
has been issued by FDS Bank or May Bank or is or has been issued by GE
Bank in accordance with the GE/Macy's Program Agreement and in whose
name(s) an Account, in connection with which the Credit Card may be used,
has been established pursuant to an Account Agreement.
3
"Charged Off Accounts" means, collectively, all Credit Card Accounts
that (a) would constitute FDS Accounts, but for clause (ii) of the
definition of FDS Accounts, (b) would constitute GE/Macy's Accounts but
for clause (ii) of the definition of GE/Macy's Accounts, and (c) would
constitute May Accounts but for clause (ii) of the definition of May
Accounts.
"Code" means the Internal Revenue Code of 1986, as amended.
"Constituent Documents" means the articles of association, articles
of incorporation, certificate of incorporation, by-laws and/or other
organizational documents, as appropriate, of any Person.
"Contract" means, with respect to any Person, any agreement,
undertaking, contract, obligation, indenture, deed of trust or other
instrument, document or agreement by which that Person, or any amount of
its properties or assets, is bound and/or subject.
"Credit Card" means a proprietary or co-branded card that may be
used by the Cardholder or authorized user to purchase goods and services,
obtain cash advances or convenience checks and/or transfer balances
through open-end revolving credit, commonly known as a credit or charge
card; provided that the term does not include: (i) any gift card; (ii) any
debit card, smart card, stored value card, electronic or digital cash card
or any other card that does not provide the holder thereof with the
ability to obtain credit other than through an overdraft line or similar
feature; (iii) any secured card, including any card secured by a lien on
real or other property or by a deposit (other than any credit card issued
in respect of any Prepaid Employee Account (as defined in the Program
Agreement), which shall be deemed a Credit Card for purposes of this
Agreement); or (iv) any card issued to the holder of a securities
brokerage account that allows the holder to obtain credit through a margin
account.
"Credit Card Account" means any account under which a purchase, cash
advance, credit transaction, convenience check or transfer balance may be
or has been made by a Cardholder by means of a Credit Card, which is
recorded as an Account on the computer system or internal processing
system of FDS or any of its Subsidiaries, or any third party processor
used by FDS or its Subsidiaries, and established pursuant to an Account
Agreement.
"Employees" means all current and former full-time and part-time
employees of FDS and its Subsidiaries (whether or not on vacation,
military leave, sick leave, maternity leave, disability or other leave of
absence) who are employed principally in connection with the Business, in
their capacity as such.
"Estimated FDS Purchase Price" means the amount payable by the
Purchaser on the First Closing Date in accordance with the Estimated First
Closing Statement.
"Estimated First Closing Statement" means a statement prepared by
the Sellers, substantially in the form of Schedule 1.1(b)(1), showing in
reasonable detail the calculation of the Estimated FDS Purchase Price,
based on data available as of the fifth Business Day preceding the First
Cut-Off Time.
4
"Estimated GE/Macy's Purchase Price" means the amount payable by the
Purchaser on the Second Closing Date in accordance with the Estimated
Second Closing Statement.
"Estimated May Purchase Price" means the amount payable by the
Purchaser on the Third Closing Date in accordance with the Estimated Third
Closing Statement or such other amount payable pursuant to Section 6.16.
"Estimated Second Closing Statement" means a statement prepared by
the Sellers, substantially in the form of Schedule 1.1(b)(2), in each case
showing in reasonable detail the calculation of the Estimated GE/Macy's
Purchase Price, based on data available as of the fifth Business Day
preceding the Second Cut-Off Time.
"Estimated Third Closing Statement" means a statement prepared by
the Sellers, substantially in the form of Schedule 1.1(b)(3), or such
other Schedule as may be prepared pursuant to Section 6.16, in each case
showing in reasonable detail the calculation of the Estimated May Purchase
Price, based on data available as of the fifth Business Day preceding the
Third Cut-Off Time.
"Excluded Assets" means the assets, properties and rights of the
Sellers and their Affiliates, other than the FDS Assets, the GE/Macy's
Assets and the May Assets, including the following:
(1) all rights under any Contracts other than (A) the Prime
Securitization Documents, (B) the Account Agreements and (C) to the
extent set forth in clause (9) of the definition of FDS Assets, the
Assigned Contracts;
(2) all rights to receive Interchange Fees with respect to
Account transactions occurring prior to the First Cut-Off Time in
the case of the FDS Accounts, the Second Cut-Off Time in the case of
the GE/Macy's Accounts or the Third Cut-Off Time in the case of the
May Accounts;
(3) all cash and cash equivalents on hand and cash and cash
equivalents in bank accounts maintained by the Sellers or any of
their Affiliates, other than in the Prime Securitization Bank
Accounts;
(4) all insurance policies maintained by or for the benefit of
the Sellers or any of their Affiliates and all claims accrued
thereunder;
(5) all Intellectual Property Rights (including the FDS
Licensed Marks), other than Transferred Intellectual Property;
(6) all FDS Assets, GE/Macy's Assets and May Assets sold or
otherwise disposed of, and FDS Assets, GE/Macy's Assets and May
Assets otherwise becoming no longer a part of the Acquired Assets
and Stock, in each case without violation of this Agreement;
5
(7) all assets relating to the employee benefit agreements,
plans or other arrangements of the Sellers and their Subsidiaries;
(8) all rights, claims, credits or other rights to payment,
causes of action, or rights of set-off against third parties, other
than those referred to in clause (13) of the definition of FDS
Assets, clause (10) of the definition GE/Macy's Assets, and clause
(10) of the definition of May Assets;
(9) the Constituent Documents of FDS Bank and May Bank;
(10) all licenses, permits or other authorizations of any
Governmental Authorities held or used by the Sellers and their
Affiliates, whether or not related to or used in the Business;
(11) all interests in real property of the Sellers and their
Affiliates, whether or not related to or used in the Business;
(12) all tangible personal property of the Sellers and their
Affiliates, whether or not related to or used in the Business;
(13) all right, title and interest of the Sellers and their
Affiliates in and to any and all other assets and properties, of any
kind whatsoever, that are not used in the conduct of the Business;
(14) all FDS Shopper Data (whether or not any portion thereof
is duplicated in the Transferred Intellectual Property (and without
limiting the Purchaser's rights to the Transferred Intellectual
Property pursuant to this Agreement and the Program Agreement));
(15) all current Taxes receivable, deferred Tax assets and
prepaid Taxes, Tax payments due from Affiliates, and entitlements to
refunds or credits for overpayment of Taxes, all to the extent set
forth in Article XI;
(16) all Charged Off Accounts;
(17) all amounts owing to the Sellers from the Cardholders
with respect to Charged Off Accounts; and
(18) all Interchange Fees relating to the Charged Off
Accounts.
Except in the case of any assets described in clause (15) above, the term
"Excluded Assets" does not include any of the foregoing to the extent
owned or held by Prime.
"Excluded Liabilities" means Liabilities of the Sellers or their
Affiliates (or any of their respective predecessors), or GE Bank or its
Affiliates (or any of their respective predecessors) with respect to the
GE/Macy's Assets, or May Co. or its Affiliates (or any of their respective
predecessors) with respect to the May Assets, of any kind whatsoever,
6
other than the Assumed Liabilities, whether presently in existence or
arising hereafter, including:
(1) all Liabilities for Taxes (i) with respect to the FDS
Assets, Prime, the Master Trusts or the Business for any period (or
portion thereof, in the case of a Straddle Period) ending on or
prior to the First Closing Date, (ii) with respect to the GE/Macy's
Assets for any period (or portion thereof, in the case of a Straddle
Period) ending on or prior to the Second Closing Date, and (iii)
with respect to the May Assets for any period (or portion thereof,
in the case of a Straddle Period) ending on or prior to the Third
Closing Date;
(2) all Liabilities of the Sellers or their Affiliates
relating to the Employees, or any current or former employees,
officers or directors of the Sellers or their Affiliates;
(3) all Liabilities to the extent related to or arising from
any Excluded Asset;
(4) all Liabilities (except for Taxes described in clause (1)
above) related to, associated with or arising out of any action,
claim, suit or proceeding or otherwise arising out of or relating to
the operation of the Business or the FDS Assets prior to the First
Closing, whether such action, claim, suit or proceeding is brought,
or such Liability becomes payable, prior to, on or after the First
Closing;
(5) all Liabilities (except for Taxes described in clause (1)
above) related to, associated with or arising out of any action,
claim, suit or proceeding or otherwise arising out of or relating to
the operation of the GE/Macy's Assets prior to the Second Closing,
whether such action, claim, suit or proceeding is brought, or such
Liability becomes payable, prior to, on or after the Second Closing
Date;
(6) all Liabilities (except for Taxes described in clause (1)
above) related to, associated with or arising out of any action,
claim, suit or proceeding or otherwise arising out of or relating to
the operation of the May Assets prior to the Third Closing, whether
such action, claim, suit or proceeding is brought, or such Liability
becomes payable, prior to, on or after the Third Closing Date;
(7) all loan loss reserves maintained by the Sellers and their
Affiliates in respect of (i) the Accounts and (ii) the amounts owing
in respect thereof from Cardholders;
(8) all legal, accounting, brokerage and finder's fees, if
any, or other fees and expenses incurred by any of the Sellers in
connection with this Agreement or the consummation of the
transactions contemplated hereby;
(9) all Liabilities related to, associated with or arising out
of any employee benefit plans, programs, agreements or arrangements
sponsored or maintained by the Sellers or their Affiliates, or with
respect to which the Sellers or their Affiliates have any
obligation; and
7
(10) all Liabilities from Loyalty Programs (as defined in the
Program Agreement) arising out of all sales to Cardholders or
authorized users of (i) Charged Off Accounts, (ii) FDS Accounts
through the First Cut-Off Time Date, (iii) GE/Macy's Accounts
through the Second Cut-Off Time Date, and (iv) May Accounts through
the Third Cut-Off Time Date.
Except in the case of Tax Liabilities described in clause (1) hereof and
in the definition of Prime Excluded Taxes, the term "Excluded Liabilities"
does not include any Liabilities of Prime.
"Federal Funds Rate" means the offered rate as reported in The Wall
Street Journal in the "Money Rates" section for reserves traded among
commercial banks for overnight use in amounts of one million dollars
($1,000,000) or more or, if no such rate is published for a day, the rate
published for the preceding Business Day, calculated on a daily basis
based on a 365 day year.
"FDS Account" means any Credit Card Account that exists and is owned
by FDS or one of its Subsidiaries as of the First Cut-Off Time, other than
(i) a GE/Macy's Account or a May Account and (ii) any Credit Card Account
that, as of the First Cut-Off Time, has been (or should have been) charged
off in accordance with the Sellers' standard policies and procedures as in
effect on the date of this Agreement.
"FDS Assets" means all right, title and interest of the Sellers in
and to the following assets, properties and rights:
(1) the FDS Accounts;
(2) the Gross Receivables (other than Prime Securitization
Receivables) on the FDS Accounts as of the First Cut-Off Time;
(3) all Interchange Fees relating to the FDS Accounts and
payable with respect to transactions occurring after the First
Cut-Off Time;
(4) the applications for FDS Accounts pending and
solicitations for FDS Accounts outstanding;
(5) the Account Agreements for the FDS Accounts;
(6) the FDS Cardholder List;
(7) the portion of the Master File, as of the First Cut-Off
Time, applicable to the FDS Accounts;
(8) the Prime Securitization Assets;
(9) all rights of the Sellers arising under the Assigned
Contracts in respect of periods on or after the First Closing;
8
(10) the Books and Records (if any), other than Books and
Records that relate principally to the GE/Macy's Accounts or the May
Accounts;
(11) FDS Bank's ICA numbers and bank identification numbers
(BINs);
(12) all inventories and other goods and supplies in stock and
used or held for use by the Sellers and their Affiliates in
connection with the FDS Accounts, including plastics, applications,
and periodic statements; and
(13) all rights, claims, credits, causes of action or rights
of set-off against third parties relating principally to the assets
listed in clauses (1) through (12) above, in each case, arising upon
or after the First Closing.
The term "FDS Assets" does not include any of the foregoing to the extent
owned or held by Prime.
"FDS Cardholder List" means a list, as of the First Cut-Off Time, of
the names, addresses, telephone numbers and taxpayer identification
numbers and social security numbers of all Cardholders with respect to the
FDS Accounts as and to the extent maintained by FDS or any of its
Subsidiaries.
"FDS Liabilities" means the following Liabilities of the Sellers:
(1) except for the obligations of Prime, which shall be
retained by Prime and transferred pursuant to this Agreement
together with the Prime Stock, all of the obligations of the
Sellers, as servicer or in any other capacity, to the Prime Master
Trust and under any Prime Securitization Documents;
(2) all obligations of the Sellers arising under the Assigned
Contracts in respect of periods on or after the First Closing
(excluding any obligations to the extent related to any breach or
default by any Seller under any Assigned Contract occurring prior to
the First Closing);
(3) all Liabilities for Taxes relating to the FDS Assets or
the Business for any period (or portion thereof, in the case of a
Straddle Period) beginning after the First Closing Date (other than
any Liabilities for Taxes in respect of the GE/Macy's Assets or the
May Assets);
(4) all Liabilities to the extent related to, associated with
or arising out of the FDS Assets or the operation of the Business by
the Purchaser and its Affiliates (other than with respect to the
GE/Macy's Assets or the May Assets), in each case from and after the
First Closing Date;
(5) from and after the First Closing, all obligations to FDS
Account Cardholders in their capacity as such or to perform under
Account Agreements for the FDS Accounts, including payment of credit
balances (excluding any such
9
obligations to the extent related to any breach or default by the
Sellers prior to the First Closing);
(6) all fees, operating assessments and other charges relating
to the FDS Accounts that are incurred or accrue on or after the
First Closing Date (including fees, assessments and other charges of
the Card Associations relating to the Accounts, but excluding
(except as otherwise expressly provided in this Agreement) all
obligations to the Card Associations arising out of or relating to
the consummation of the transactions contemplated by this Agreement
and the Ancillary Agreements); and
(7) all obligations of the Sellers to perform from and after
the First Closing under the applicable by-laws, rules and
regulations of the Card Associations with respect to the FDS
Accounts.
The term "FDS Liabilities" does not include any Liabilities of Prime.
"FDS Licensed Marks" has the meaning set forth in the Program
Agreement.
"FDS Purchase Price" means the purchase price payable in accordance
with the Final First Closing Statement, as finally determined in
accordance with Section 2.3.
"FDS Shopper Data" has the meaning set forth in the Program
Agreement.
"Final First Closing Statement" means a statement prepared by FDS
substantially in the form of Schedule 1.1(b)(1), showing in reasonable
detail FDS's calculation of the FDS Purchase Price, based on the data
available as of the First Cut-Off Time.
"Final Second Closing Statement" means a statement prepared by FDS,
substantially in the form of Schedule 1.1(b)(2), showing in reasonable
detail FDS's calculation of the GE/Macy's Purchase Price, based on the
data available as of the Second Cut-Off Time.
"Final Third Closing Statement" means a statement prepared by FDS,
substantially in the form of Schedule 1.1(b)(3), or such other statement
as may be prepared pursuant to Section 6.16, in each case, showing in
reasonable detail FDS's calculation of the May Purchase Price, based on
the data available as of the Third Cut-Off Time.
"First Cut-Off Time" means 11:59 P.M. Eastern time on the Saturday
immediately preceding the First Closing Date.
"First Instrument of Assignment and Assumption" means the Instrument
of Assignment and Assumption in the form attached as Annex B, to be
entered into at the First Closing.
"Fiscal Month" has the meaning set forth in the Program Agreement.
10
"GAAP" means generally accepted accounting principles in the United
States, consistently applied.
"GE Bank" means GE Capital Consumer Card Co., an Ohio banking
corporation.
"GE/Macy's Account" means a Credit Card Account owned by GE Bank or
one of its Affiliates as of the Second Cut-Off Time and governed by the
GE/Macy's Program Agreement that exists as of the Second Cut-Off Time,
other than (i) a May Account and (ii) any Credit Card Account that, as of
the Second Cut-Off Time, has been (or should have been) charged off in
accordance with the standard policies and procedures of GE Bank as in
effect as of the date of this Agreement.
"GE/Macy's Assets" means all right, title and interest of the
Sellers in and to the following assets, properties and rights:
(1) the GE/Macy's Accounts;
(2) the Gross Receivables on the GE/Macy's Accounts as of the
Second Cut-Off Time;
(3) all Interchange Fees relating to the GE/Macy's Accounts
and payable with respect to transactions occurring after the Second
Cut-Off Time;
(4) the applications for GE/Macy's Accounts pending and
solicitations for GE/Macy's Accounts outstanding (if any);
(5) the Account Agreements for the GE/Macy's Accounts;
(6) the GE/Macy's Cardholder List;
(7) the portion of the Master File, as of the Second Cut-Off
Time, applicable to the GE/Macy's Accounts;
(8) the Books and Records that relate to the GE/Macy's
Accounts (if any);
(9) all inventories and other goods and supplies in stock and
used or held for use by the Sellers and their Affiliates in
connection with the GE/Macy's Accounts, including plastics,
applications, and periodic statements; and
(10) all rights, claims, credits, causes of action or rights
of set-off against third parties relating principally to the assets
listed in clauses (1) through (9) above, in each case, arising upon
or after the Second Closing.
"GE/Macy's Cardholder List" means a list, as of the Second Cut-Off
Time, of the names, addresses, telephone numbers and taxpayer
identification numbers and social security numbers of all Cardholders with
respect to the GE/Macy's Accounts as and to the extent maintained by FDS
or any of its Subsidiaries.
11
"GE/Macy's Liabilities" means the following Liabilities of the
Sellers:
(1) all Liabilities for Taxes relating to the GE/Macy's Assets
for any period (or portion thereof, in the case of a Straddle
Period) beginning after the Second Closing Date;
(2) from and after the Second Closing, all obligations to
GE/Macy's Account Cardholders in their capacity as such or to
perform under Account Agreements for the GE/Macy's Accounts,
including payment of credit balances (excluding any such obligations
to the extent related to any breach or default by the Sellers or GE
Bank prior to the Second Closing);
(3) all fees, operating assessments and other charges relating
to the GE/Macy's Accounts that are incurred or accrue on or after
the Second Closing Date (including fees, assessments and other
charges of the Card Associations relating to the Accounts, but
excluding (except as otherwise expressly provided in this Agreement)
all obligations to the Card Associations arising out of or relating
to the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements);
(4) all obligations of the Sellers to perform from and after
the Second Closing under the applicable by-laws, rules and
regulations of the Card Associations with respect to the GE/Macy's
Accounts; and
(5) all Liabilities to the extent related to, associated with
or arising out of the GE/Macy's Assets or the operation of the
Business by the Purchaser or its Affiliates with respect to the
GE/Macy's Assets, in each case from and after the Second Closing.
"GE/Macy's Program Agreement" means the Amended and Restated Credit
Card Program Agreement, dated as of June 4, 1996, by and among GE Capital
Consumer Card Co., FDS, and the other parties thereto, as amended,
restated or otherwise modified from time to time.
"GE/Macy's Purchase Price" means the purchase price payable in
accordance with the Final Second Closing Statement, as finally determined
in accordance with Section 3.3.
"Governmental Authority" means any domestic or foreign governmental,
regulatory or self-regulatory authority, agency, court, tribunal,
commission or other governmental, regulatory or self-regulatory entity
exercising legislative, judicial, regulatory or administrative functions.
"Gross Receivables" means amounts owing (net of credit balances) to
the Sellers from Cardholders with respect to Accounts (including
outstanding loans, cash advances, balance consolidation receivables and
other extensions of credit, accrued finance charges and late charges,
whether or not posted, and any other accrued fees, charges and interest
assessed on such Accounts, whether or not posted).
12
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvement Act of
1976, as amended.
"Intellectual Property Right" means any intellectual property right,
including any trademark, service mark or other source indicator and all
goodwill associated therewith, invention, patent, copyright, confidential
or proprietary information (including trade secret and know-how) and any
registration or application for registration of any of the foregoing.
"Interchange Fees" means the fees paid or payable in connection with
the exchange of credit card transactions between members of the applicable
Card Association pursuant to the applicable by-laws, rules and regulations
of such Card Association.
"Knowledge" means, with respect to the Sellers, the actual knowledge
of the persons named on Schedule 1.1(c)(1) hereto and, with respect to the
Purchaser, the actual knowledge of the persons named on Schedule 1.1(c)(2)
hereto, in each case after reasonable inquiry.
"Liability" means any debt, liability, commitment, obligation, claim
or cause of action of any kind whatsoever, whether due or to become due,
known or unknown, accrued or fixed, absolute or contingent, or otherwise.
"Lien" means, with respect to any property, any lien, security
interest, mortgage, pledge, charge, encumbrance, adverse claim, reversion,
reverter or restriction of any kind relating to that property, including
the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such
property.
"Master File" means the master file maintained by FDS Bank and its
Affiliates with respect to the Accounts, including identification and
other customer data and Account information, the names and addresses of
Cardholders with respect to the Accounts and any and all Account
adjustments made by or on behalf of the Sellers in the form attached
hereto as Schedule 1.1(d).
"Master Trusts" means the collective reference to the Prime Master
Trust and the Prime II Master Trust.
"Material Adverse Effect" means:
(a) with respect to the Business (or the Acquired Assets and
Stock), any change, event or effect that is materially adverse to the
assets, the results of operations or financial condition of the Business
(or the Acquired Assets and Stock), taken as a whole, excluding any effect
or change attributable to or resulting from (1) economic, business or
financial conditions generally or events affecting the credit card
services or consumer credit business, the banking or financial services
industry or the retail department store industry to the extent such events
or conditions do not have a disproportionate effect on the Business (or
the Acquired Assets and Stock) relative to other entities operating
businesses similar to the Business (or the Acquired Assets and Stock), (2)
financial market conditions, including interest rates or changes therein,
(3)
13
changes in laws, GAAP or regulatory accounting principles, (4) any action,
omission, change, effect, circumstance or condition contemplated by this
Agreement, or attributable to the signing and announcement of this
Agreement with the Purchaser or the transactions contemplated by this
Agreement and the Ancillary Agreements, or (5) any actions or omissions
required by the terms of this Agreement or the Ancillary Agreements or any
action taken or not taken at the request or direction of the other party
or parties hereto; and/or
(b) with respect to the Sellers or the Purchaser, a material
impairment of the ability of the relevant Person or Persons to perform its
or their material obligations under this Agreement or the Ancillary
Agreements on a timely basis.
"May Account" means a Credit Card Account owned by FDS or a
Subsidiary of FDS prior to the Third Closing and associated with a retail
division of May Co. as conducted as of the closing of May Merger (or a
successor to such business as conducted by FDS and its Subsidiaries
following the May Merger) that exists as of the Third Cut-Off Time, other
than any Credit Card Account that, as of the Third Cut-Off Time, has been
(or should have been) charged off in accordance with May Bank's or the
Sellers' standard policies and procedures as in effect on the date of this
Agreement.
"May Assets" means all right, title and interest of the Sellers in
and to the following assets, properties and rights:
(1) the May Accounts;
(2) the Gross Receivables on the May Accounts as of the Third
Cut-Off Time;
(3) all Interchange Fees relating to the May Accounts and
payable with respect to transactions occurring after the Third
Cut-Off Time;
(4) the applications for May Accounts pending and
solicitations for May Accounts outstanding (if any);
(5) the Account Agreements for the May Accounts;
(6) the May Cardholder List;
(7) the portion of the Master File, as of the Third Cut-Off
Time, applicable to the May Accounts;
(8) the Books and Records that relate to the May Accounts (if
any);
(9) all inventories and other goods and supplies in stock and
used or held for use by the Sellers and their Affiliates in
connection with the May Accounts, including plastics, applications,
and periodic statements; and
14
(10) all rights, claims, credits, causes of action or rights
of set-off against third parties relating principally to the assets
listed in clauses (1) through (9) above, in each case, arising upon
or after the Third Closing.
"May Bank" means May National Bank of Ohio.
"May Cardholder List" means a list, as of the Third Cut-Off Time, of
the names, addresses, telephone numbers and taxpayer identification
numbers and social security numbers of all Cardholders with respect to the
May Accounts as and to the extent maintained by FDS or any of its
Subsidiaries.
"May Co." means The May Department Stores Company, a Delaware
corporation.
"May Liabilities" means the following Liabilities of the Sellers:
(1) all Liabilities for Taxes relating to the May Assets for
any period (or portion thereof, in the case of a Straddle Period)
beginning after the Third Closing Date;
(2) from and after the Third Closing, all obligations to May
Account Cardholders in their capacity as such or to perform under
Account Agreements for the May Accounts, including payment of credit
balances (excluding any such obligations to the extent related to
any breach or default by the Sellers or its Affiliates prior to the
Third Closing);
(3) all fees, operating assessments and other charges relating
to the May Accounts that are incurred or accrue on or after the
Third Closing Date (including fees, assessments and other charges of
the Card Associations relating to the Accounts, but excluding
(except as otherwise expressly provided in this Agreement) all
obligations to the Card Associations arising out of or relating to
the consummation of the transactions contemplated by this Agreement
and the Ancillary Agreements);
(4) all obligations of the Sellers to perform from and after
the Third Closing under the applicable by-laws, rules and
regulations of the Card Associations with respect to the May
Accounts; and
(5) all Liabilities to the extent related to, associated with
or arising out of the May Assets or the operation of the Business by
the Purchaser or its Affiliates with respect to the May Assets, in
each case from and after the Third Closing.
"May Merger" means the merger of May Co. with and into Milan
Acquisition Corp., a Subsidiary of FDS, pursuant to the Agreement and Plan
of Merger, dated as of February 27, 2005, by and among FDS, Milan
Acquisition Corp. and May Co., as amended or otherwise modified from time
to time.
15
"May Purchase Price" means the purchase price payable in accordance
with the Final Third Closing Statement, as finally determined in
accordance with Section 3.3.
"Permissible Liens" means Liens (i) for Taxes, assessments and other
governmental charges or levies (1) not yet due or (2) which are being
contested in good faith by appropriate action and as to which adequate
reserves for contested amounts have been set aside in accordance with GAAP
or (ii) created under the Securitization Documents.
"Person" means any individual, corporation, business trust,
partnership, association, limited liability company or similar
organization, or any Governmental Authority.
"Previously Disclosed" means, with respect to the Sellers or the
Purchaser, information set forth in the Schedules, whether in response to
an express informational requirement or as an exception to one or more
specified representations or covenants.
"Prime Excluded Taxes" means all:
(1) Taxes imposed on or payable by Prime as a result of the
Section 338(h)(10) Election;
(2) Taxes imposed on any member of an affiliated,
consolidated, combined or unitary group of which Prime is or was a
member on or prior to the First Closing Date, including pursuant to
Treasury Regulation Section 1.1502-6; and
(3) Taxes imposed on or payable by the Purchaser or any of its
Affiliates (including Prime and the Prime Master Trust) as a result
of (a) a breach of the representation set forth in Section 5.1(o)(2)
that is not attributable to an action by the Purchaser or any of its
Affiliates on or after the First Closing Date or (b) a breach by FDS
of the covenant set forth in Section 11.6(a).
"Prime Securitization Assets" means the collective reference to (i)
any certificate or interest in the Prime Master Trust retained by FDS or
any of its Subsidiaries; (ii) all right, title and interest of each of the
Sellers in the Prime Securitization Bank Accounts; (iii) all right, title
and interest of each of the Sellers in and to the Prime Securitization
Receivables; and (iv) all other rights, title and interests of each of the
Sellers and their Subsidiaries under each of the Prime Securitization
Documents, in each case, other than the Prime Securitization Interests.
"Prime Securitization Bank Accounts" means any spread account,
reserve account, collection account, principal funding account or other
similar accounts created pursuant to the Prime Securitization Documents,
including the bank accounts listed on Schedule 1.1(e).
"Prime Securitization Documents" means the Prime Pooling and
Servicing Agreement and the other documents designated as such on Schedule
1.1(f).
16
"Prime Securitization Interests" means the interests in the Prime
Securitization Assets held by Prime, including its interest in any
transferor certificate or investor certificates retained or acquired by
it, and the rights and obligations of Prime in its capacity as transferor
under the Prime Securitization Documents.
"Prime Securitization Receivables" means, as of any date, the Gross
Receivables that have been transferred to the Prime Master Trust and that
have not been reassigned to the transferor under the Prime Pooling and
Servicing Agreement.
"Prime Stock" means all of the outstanding shares of Prime Common
Stock as of the First Closing Date.
"Prime II Securitization Documents" means the Prime II Pooling and
Servicing Agreement and the other documents designated as such on Schedule
1.1(g).
"Prime II Securitization Receivables" means, as of any date, the
Gross Receivables that have been transferred to the Prime II Master Trust
and that have not been reassigned to the transferor under the Prime II
Pooling and Servicing Agreement.
"Purchase Price" means the sum of the FDS Purchase Price, the
GE/Macy's Purchase Price and the May Purchase Price.
"Requirement of Law" means, with respect to any Person, any law,
ordinance, statute, order, treaty, rule or regulation or determination of
an arbitrator or of a Governmental Authority, in each case binding on that
Person or its property.
"Required Amendments and Confirmations" means all amendments to the
Prime Securitization Documents in a form reasonably acceptable to the
parties and the receipt of any consent required by any rating agency in
order to consummate the transactions contemplated hereby without violation
of the terms of any Prime Securitization Document.
"Requisite Regulatory Approvals" means the consents, registrations,
approvals, permits or authorizations designated as such in the Schedule
5.1(c) with respect to the Sellers and Schedule 5.2(c) with respect to the
Purchaser.
"Second Cut-Off Time" means 11:59 P.M. Eastern time on the Saturday
immediately preceding the Second Closing Date.
"Second Instrument of Assignment and Assumption" means the
Instrument of Assignment and Assumption in the form attached as Annex C,
to be entered into at the Second Closing.
"Securitization Documents" means the collective reference to the
Prime Securitization Documents and the Prime II Securitization Documents.
"Securitization Receivables" means, as of any date, the collective
reference to the Prime Securitization Receivables and the Prime II
Securitization Receivables.
17
"Sellers" means the collective reference to FDS, FDS Bank and Prime
II; provided that with respect to the Second Purchase and Assumption (and
the obligations and conditions to be satisfied in connection therewith)
and the Third Purchase and Assumption (and the obligations and conditions
to be satisfied in connection therewith), the "Sellers" shall mean FDS and
FDS Bank.
"Servicer" means FDS, acting in its capacity as servicer, or any
successor servicer, under and pursuant to the Prime Pooling and Servicing
Agreement.
"Servicer Default" has the meaning ascribed to such term in the
Prime Pooling and Servicing Agreement.
"Straddle Period" means any taxable period beginning on or before
and ending after the First Closing Date, the Second Closing Date or the
Third Closing Date, as applicable.
"Subsidiary" when used with respect to any Person, means another
Person, where an amount of the voting securities, or other voting
ownership or voting partnership interests of the second Person sufficient
to elect at least a majority of its board of directors or similar
governing body (or if there are not such voting interests, fifty percent
(50%) or more of the equity interest of which) is owned directly or
indirectly by the first Person or by another Subsidiary of the first
Person.
"Tax Return" means any return, declaration, report or similar
statement required to be filed with respect to any Taxes (including any
attached schedules) including any information return, claim for refund,
amended return and declaration of estimated Tax.
"Taxes" means any income, alternative or add-on minimum tax, gross
receipts, sales, use, transfer, gains, ad valorem, franchise, profits,
license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, environmental or windfall profit tax,
custom, duty or other tax, governmental fee or other like assessment or
charge, together with any interest or any penalty, addition to tax or
additional amount imposed by any Governmental Authority responsible for
the imposition of any such tax (domestic or foreign).
"Termination Fee" means the amount designated as such on Schedule
1.1(h).
"Third Cut-Off Time" means 11:59 P.M. Eastern time on the Saturday
immediately preceding the Third Closing Date.
"Third Instrument of Assignment and Assumption" means the Instrument
of Assignment and Assumption in the form attached as Annex D, to be
entered into at the Third Closing.
"Transferred Intellectual Property" means all rights to the FDS
Cardholder List, the GE/Macy's Cardholder List, the May Cardholder List
and the Master File (in each case, subject to the restrictions set forth
in the Program Agreement).
18
(b) Each of the following terms is defined in the section of
this Agreement set forth opposite such term:
Term Section
- ---- --------
Actions................................................................. 6.11(a)
Accountant.............................................................. 2.3(c)
Adverse Development..................................................... 5.1(m)
Agreement............................................................... Preamble
CEBA Bank............................................................... Recitals
CEBA Capital Stock...................................................... 5.2(n)
CEBA Equity Interests................................................... 6.14(c)
Confidentiality Agreements.............................................. 6.3(c)
Credit Card Marks....................................................... 6.7
De Minimis Claim........................................................ 12.2
Exchange Act............................................................ 5.1(e)
FDS..................................................................... Preamble
FDS Account Assets...................................................... 11.6(b)
FDS Allocation Amount................................................... 11.6(b)
FDS Bank................................................................ Preamble
FDS Confidentiality Agreement........................................... 6.3(c)
First Closing........................................................... 2.4(a)
First Closing Allocation................................................ 11.6(b)
First Closing Date...................................................... 2.4(a)
First Purchase and Assumption........................................... 2.4(a)
Form 8023............................................................... 11.6(a)
GE/Macy's Account Assets................................................ 11.6(d)
Indemnified Party....................................................... 12.4(a)
Indemnifying Party...................................................... 12.4(a)
Interim Services........................................................ 6.17
IRS..................................................................... 11.6(a)
Jones Day Opinion....................................................... 6.18(a)
Losses.................................................................. 12.2
May Account Assets...................................................... 11.6(e)
May Business............................................................ 6.1(b)
May Confidentiality Agreement........................................... 6.3(c)
Minimum FDS Allocation.................................................. 11.6(b)
Minimum GE/Macy's Allocation............................................ 11.6(d)
Minimum May Allocation.................................................. 11.6(e)
OCC..................................................................... 10.4(b)
Pooling and Servicing Agreements........................................ Recitals
Prime................................................................... Recitals
Prime Allocation........................................................ 11.6(c)
Prime Common Stock...................................................... 5.1(q)
Prime Master Trust...................................................... Recitals
Prime Pooling and Servicing Agreement................................... Recitals
Prime II................................................................ Preamble
19
Term Section
- ---- ---------
Prime Stock Amount...................................................... 11.6(b)
Prime II Master Trust................................................... Recitals
Prime II Pooling and Servicing Agreement................................ Recitals
Program Agreement....................................................... Recitals
Purchaser............................................................... Preamble
SEC..................................................................... 5.1(e)
SEC Documents........................................................... 5.1(e)
Second Closing.......................................................... 3.4(a)
Second Closing Allocation............................................... 11.6(d)
Second Closing Date..................................................... 3.4(a)
Second Purchase and Assumption.......................................... 3.4(a)
Section 338(h)(10) Election............................................. 11.6(a)
Securities Act.......................................................... 5.1(e)
Servicer Default or Termination......................................... 5.1(m)
Specified Assets........................................................ 5.1(s)(1)
Tax Contest............................................................. 11.8
Third Closing........................................................... 4.4(a)
Third Closing Allocation................................................ 11.6(e)
Third Closing Date...................................................... 4.4(a)
Third Purchase and Assumption........................................... 4.4(a)
SECTION 1.2. Interpretation.
(a) In this Agreement, unless the context otherwise requires,
references to:
(1) the Preamble or the Recitals, Sections, Annexes or
Schedules refer to the Preamble or a Recital or Section of, or Annex
or Schedule to, this Agreement;
(2) any Contract (including this Agreement) refer to the
Contract as amended, modified, supplemented or replaced from time to
time, in a manner permitted by this Agreement;
(3) any statute or regulation refer to the statute or
regulation as amended, modified, supplemented or replaced from time
to time (and, in the case of statutes, include any rules and
regulations promulgated under the statute) and to any section of any
statute or regulation include any successor to the section;
(4) any Governmental Authority include any successor to the
Governmental Authority; and
(5) this Agreement are to this Agreement and the Schedules to
it.
(b) The table of contents and headings contained in this Agreement
are for reference purposes only and do not limit or otherwise affect any of the
provisions of this Agreement.
20
(c) The references to "Second Closing and "Third Closing" and
similar terms are not intended to dictate the order in which the events referred
to using those terms must occur. The Third Closing may occur prior to the Second
Closing.
(d) Whenever the word "include," "includes" or "including" is used
in this Agreement, it shall be deemed to be followed by the words "without
limitation."
(e) This Agreement is the product of negotiation by the parties
having the assistance of counsel and other advisers. It is the intention of the
parties that this Agreement not be construed more strictly with regard to one
party than with regard to any other.
ARTICLE II
FIRST CLOSING, PURCHASE, SALE AND ASSUMPTION
SECTION 2.1. Purchase and Sale of FDS Assets and the Prime Stock. On
the terms and subject to the conditions of this Agreement, at the First Closing
and effective from and after the First Closing Date, the Sellers shall sell,
convey and assign (or cause their Subsidiaries to sell, convey and assign) to
the Purchaser, free and clear of all Liens, except Permissible Liens, and the
Purchaser shall purchase, the FDS Assets and the Prime Stock. Immediately
following receipt of the FDS Assets and the Prime Stock, the Purchaser shall
transfer, contribute or otherwise assign the FDS Assets and the Prime Stock to
CEBA Bank.
SECTION 2.2. Assumption of FDS Liabilities. On the terms and subject
to the conditions of this Agreement, at the First Closing and effective from and
after the First Closing Date, the Purchaser shall assume, pay, defend, discharge
and perform as and when due the FDS Liabilities. Immediately following its
assumption of the FDS Liabilities, the Purchaser shall cause CEBA Bank to assume
the FDS Liabilities. The Excluded Liabilities shall be retained by the Sellers
and their Affiliates, as applicable. The GE/Macy's Liabilities shall be retained
by the Sellers and their Affiliates, as applicable, until the Second Closing.
The May Liabilities shall be retained by the Sellers and their Affiliates (or
May Co. and its Affiliates), as applicable, until the Third Closing.
SECTION 2.3. FDS Purchase Price; FDS Purchase Price Adjustment.
(a) On the second Business Day before the First Closing, FDS, on
behalf of the Sellers, shall deliver to the Purchaser the Estimated First
Closing Statement reflecting the Sellers' good faith calculation of the
Estimated FDS Purchase Price to be paid by the Purchaser at the First Closing.
(b) Within forty-five (45) days after the First Closing, FDS, on
behalf of the Sellers, shall deliver to the Purchaser the Final First Closing
Statement prepared based on the information in the Master File, other than
information relating to the GE/Macy's Accounts, as of the First Cut-Off Time and
copies of the Master File, other than information relating to the GE/Macy's
Accounts, as of the First Cut-Off Time.
(c) The Purchaser shall, within forty-five (45) days after receipt
of the Final First Closing Statement, advise the Sellers in writing and in
reasonable detail if it believes that the
21
Final First Closing Statement did not accurately reflect the items required to
be included therein in accordance with the provisions of this Agreement and
Schedule 1.1(b)(1) hereto, in each case stating in reasonable detail the basis
of its belief. In the event the Purchaser delivers such an objection, the
Sellers and the Purchaser shall attempt in good faith to resolve their
differences. In the event all differences are not resolved within sixty (60)
days following receipt of the Final First Closing Statement by the Purchaser,
then the issues remaining unresolved shall be determined by Deloitte Touche
Tohmatsu (the "Accountant"). The Accountant shall resolve all disputed items in
accordance with the provisions of this Agreement. In making its determination,
the Accountant may only consider those items and amounts as to which the
Purchaser and the Sellers have disagreed within the time periods and on the
grounds specified. The Accountant's determination shall be conclusive and
binding on the Purchaser and the Sellers absent manifest error. The fees of the
Accountant shall be shared by the Purchaser and the Sellers in proportion to the
relative differences between their respective calculations of the FDS Purchase
Price and the amount determined by the Accountant.
(d) If the Estimated FDS Purchase Price exceeds the FDS Purchase
Price, then FDS, on behalf of the Sellers, shall, within five (5) Business Days
after the FDS Purchase Price has been finally determined pursuant to Section
2.3(c), pay such excess (plus the amount of interest on such excess calculated
in accordance with item 7 of the Estimated First Closing Statement) by wire
transfer of immediately available funds (in U.S. dollars) to the Purchaser,
together with interest on the foregoing amount for the period from and including
the First Closing Date to but excluding the date of such payment at a rate per
annum equal to the Federal Funds Rate. If the Estimated FDS Purchase Price is
less than the FDS Purchase Price, then the Purchaser shall, within five (5)
Business Days after the FDS Purchase Price has been finally determined pursuant
to Section 2.3(c), pay such deficiency (plus the amount of interest on such
deficiency calculated in accordance with item 7 of the Estimated First Closing
Statement) by wire transfer of immediately available funds (in U.S. dollars) to
FDS on behalf of the Sellers, together with interest on the foregoing amount for
the period from and including the First Closing Date to but excluding the date
of such payment at a rate per annum equal to the Federal Funds Rate. Each party
to this Agreement shall make available to the other parties, and to the
Accountant, its and its accountants work papers (to the extent possible),
schedules and other supporting data as may be reasonably requested by such other
parties to enable them to verify the amounts set forth in the Final First
Closing Statement.
SECTION 2.4. The First Closing.
(a) The closing (the "First Closing") of the purchase and sale of
the FDS Assets and the Prime Stock and the assumption of the FDS Liabilities
hereunder (collectively, the "First Purchase and Assumption") shall take place
at the offices of Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New
York, New York, or by facsimile transmission on the first Business Day of the
Fiscal Month after the Fiscal Month in which the last of the conditions set
forth in Article VII (other than conditions relating solely to the delivery of
documents to be dated the First Closing Date) has been satisfied or waived in
accordance with the terms of this Agreement or at such other date or location as
the parties hereto jointly designate in writing (the "First Closing Date").
22
(b) At the First Closing, the Purchaser shall, and the Sellers shall
and shall cause Prime to, deliver or cause to be delivered to each other (i)
instruments of sale, assignment, transfer and conveyance of the FDS Assets, the
Prime Stock and the FDS Liabilities, respectively (which shall be the First
Instrument of Assignment and Assumption), (ii) a receipt for the FDS Purchase
Price, and (iii) such other instruments as are necessary or appropriate to
reflect any alternative arrangements described in Section 6.15, in each case,
appropriately executed by the Sellers and the Purchaser.
(c) At the First Closing, the Purchaser shall pay the Estimated FDS
Purchase Price (plus the amount of any interest thereon as set forth on and
calculated in accordance with item 7 of the Estimated First Closing Statement)
by wire transfer of immediately available funds (in U.S. dollars) prior to 11:00
A.M. Eastern time on the First Closing Date to an account specified by FDS at
least three (3) Business Days prior to the First Closing Date.
(d) Immediately following the First Closing, the Purchaser shall
cause CEBA Bank to issue to FDS Bank (or its assignee), and FDS Bank (or its
assignee) shall purchase, the CEBA Equity Interests, for a purchase price equal
to one hundred dollars ($100) payable by wire transfer of immediately available
funds to an account or accounts specified by the Purchaser at least three (3)
Business Days prior to the First Closing Date.
ARTICLE III
SECOND CLOSING, PURCHASE, SALE AND ASSUMPTION
SECTION 3.1. Purchase and Sale of the GE/Macy's Assets. On the terms
and subject to the conditions of this Agreement, at the Second Closing and
effective from and after the Second Closing Date, the Sellers shall sell, convey
and assign (or cause their Subsidiaries to sell, assign or convey) to Purchaser,
free and clear of all Liens, except Permissible Liens, the GE/Macy's Assets, and
the Purchaser shall purchase the GE/Macy's Assets. Immediately following receipt
of the GE/Macy's Assets, the Purchaser shall transfer, contribute or otherwise
assign the GE/Macy's Assets to CEBA Bank.
SECTION 3.2. Assumption of the GE/Macy's Liabilities. On the terms
and subject to the conditions of this Agreement, at the Second Closing and
effective from and after the Second Closing Date, the Purchaser shall assume,
pay, defend, discharge and perform as and when due the GE/Macy's Liabilities.
Immediately following its assumption of the GE/Macy's Liabilities, the Purchaser
shall cause CEBA Bank to assume the GE/Macy's Liabilities. The Excluded
Liabilities shall be retained by the Sellers and their Affiliates or GE Bank and
their Affiliates, as applicable. The May Liabilities shall be retained by the
Sellers and their Affiliates, as applicable, until the Third Closing.
SECTION 3.3. GE/Macy's Purchase Price; GE/Macy's Purchase Price
Adjustment.
(a) On the second Business Day before the Second Closing, FDS, on
behalf of the Sellers, shall deliver to the Purchaser the Estimated Second
Closing Statement reflecting the
23
Sellers' good faith calculation of the Estimated GE/Macy's Purchase Price to be
paid by the Purchaser at the Second Closing.
(b) Within forty-five (45) days after the Second Closing, FDS, on
behalf of the Sellers, shall deliver to the Purchaser the Final Second Closing
Statement prepared based on the information in the Master File with respect to
the GE/Macy's Accounts as of the Second Cut-Off Time and copies of the Master
File with respect to the GE/Macy's Accounts as of the Second Cut-Off Time.
(c) The Purchaser shall, within forty-five (45) days after receipt
of the Final Second Closing Statement, advise the Sellers in writing and in
reasonable detail if it believes that the Final Second Closing Statement did not
accurately reflect the items required to be included therein in accordance with
the provisions of this Agreement and Schedule 1.1(b)(2) hereto, in each case
stating in reasonable detail the basis of its belief. In the event the Purchaser
delivers such an objection, the Sellers and the Purchaser shall attempt in good
faith to resolve their differences. In the event all differences are not
resolved within sixty (60) days following receipt of the Final Second Closing
Statement by the Purchaser, then the issues remaining unresolved shall be
determined by the Accountant. The Accountant shall resolve all disputed items in
accordance with the provisions of this Agreement. In making its determination,
the Accountant may only consider those items and amounts as to which the
Purchaser and the Sellers have disagreed within the time periods and on the
grounds specified. The Accountant's determination shall be conclusive and
binding on the Purchaser and the Sellers absent manifest error. The fees of the
Accountant shall be shared by the Purchaser and the Sellers in proportion to the
relative differences between their respective calculations of the GE/Macy's
Purchase Price and the amount determined by the Accountant.
(d) If the Estimated GE/Macy's Purchase Price exceeds the GE/Macy's
Purchase Price, then FDS, on behalf of the Sellers, shall, within five (5)
Business Days after the GE/Macy's Purchase Price has been finally determined
pursuant to Section 3.3(c), pay such excess (plus the amount of interest on such
excess calculated in accordance with item 5 of the Estimated Second Closing
Statement) by wire transfer of immediately available funds (in U.S. dollars) to
the Purchaser, together with interest on the foregoing amount for the period
from and including the Second Closing Date to but excluding the date of such
payment at a rate per annum equal to the Federal Funds Rate. If the Estimated
GE/Macy's Purchase Price is less than the GE/Macy's Purchase Price, then the
Purchaser shall, within five (5) Business Days after the GE/Macy's Purchase
Price has been finally determined pursuant to Section 3.3(c), pay such
deficiency (plus the amount of interest on such deficiency calculated in
accordance with item 5 of the Estimated Second Closing Statement) by wire
transfer of immediately available funds (in U.S. dollars) to FDS on behalf of
the Sellers, together with interest on the foregoing amount for the period from
and including the Second Closing Date to but excluding the date of such payment
at a rate per annum equal to the Federal Funds Rate. Each party to this
Agreement shall make available to the other parties, and to the Accountant, its
and its accountants work papers (to the extent possible), schedules and other
supporting data as may be reasonably requested by such parties to enable them to
verify the amounts set forth in the Final Second Closing Statement.
SECTION 3.4. The Second Closing.
24
(a) The closing (the "Second Closing") of the purchase and sale of
the GE/Macy's Assets and assumption of the GE/Macy's Liabilities hereunder
(collectively, the "Second Purchase and Assumption") shall take place at the
offices of Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, New
York, or by facsimile transmission on the first Business Day of the Fiscal Month
after the Fiscal Month in which the last of the conditions set forth in Article
VIII (other than conditions relating solely to the delivery of documents to be
dated the Second Closing Date) has been satisfied or waived in accordance with
the terms of this Agreement or at such other date or location as the parties
hereto jointly designate in writing (the "Second Closing Date"). The parties
understand and intend that the Second Purchase and Assumption shall occur
concurrently with the termination of the GE/Macy's Program Agreement.
(b) At the Second Closing, the Purchaser and the Sellers shall
deliver or cause to be delivered to each other (i) instruments of sale,
assignment, transfer and conveyance of the GE/Macy's Assets and the GE/Macy's
Liabilities, respectively (which shall be the Second Instrument of Assignment
and Assumption), (ii) a receipt for the GE/Macy's Purchase Price, and (iii) such
other instruments as are necessary or appropriate to reflect any alternative
arrangements described in Section 6.15, in each case, appropriately executed by
the Sellers and the Purchaser.
(c) At the Second Closing, the Purchaser shall pay the Estimated
GE/Macy's Purchase Price (plus the amount of any interest thereon as set forth
on and calculated in accordance with item 5 of the Estimated Second Closing
Statement) by wire transfer of immediately available funds (in U.S. dollars)
prior to 11:00 A.M. Eastern time on the Second Closing Date to an account or
accounts specified by FDS at least three (3) Business Days prior to the Second
Closing Date.
ARTICLE IV
THIRD CLOSING, PURCHASE, SALE AND ASSUMPTION
SECTION 4.1. Purchase and Sale of the May Assets. On the terms and
subject to the conditions of this Agreement, at the Third Closing and effective
from and after the Third Closing Date, the Sellers shall or shall cause May Bank
to sell, convey and assign to Purchaser, free and clear of all Liens, except
Permissible Liens, the May Assets, and the Purchaser shall purchase the May
Assets. Immediately following receipt of the May Assets, the Purchaser shall
transfer, contribute or otherwise assign the May Assets to CEBA Bank.
SECTION 4.2. Assumption of the May Liabilities. On the terms and
subject to the conditions of this Agreement, at the Third Closing and effective
from and after the Third Closing Date, the Purchaser shall assume, pay, defend,
discharge and perform as and when due the May Liabilities. Immediately following
its assumption of the May Liabilities, the Purchaser shall cause CEBA Bank to
assume the May Liabilities. The Excluded Liabilities shall be retained by the
Sellers and their Affiliates, as applicable.
SECTION 4.3. May Purchase Price; May Purchase Price Adjustment.
25
(a) On the second Business Day before the Third Closing, FDS, on
behalf of the Sellers, shall deliver to the Purchaser the Estimated Third
Closing Statement reflecting the Sellers' good faith calculation of the
Estimated May Purchase Price to be paid by the Purchaser at the Third Closing.
(b) Within forty-five (45) days after the Third Closing, FDS, on
behalf of the Sellers, shall deliver to the Purchaser the Final Third Closing
Statement prepared based on the information in the Master File with respect to
the May Accounts as of the Third Cut-Off Time and copies of the Master File with
respect to the May Accounts as of the Third Cut-Off Time.
(c) The Purchaser shall, within thirty (30) days after receipt of
the Final Third Closing Statement, advise the Sellers in writing and in
reasonable detail if it believes that the Final Third Closing Statement did not
accurately reflect the items required to be included therein in accordance with
the provisions of this Agreement and Schedule 1.1(b)(3) hereto, in each case
stating in reasonable detail the basis of its belief. In the event the Purchaser
delivers such an objection, the Sellers and the Purchaser shall attempt in good
faith to resolve their differences. In the event all differences are not
resolved within forty-five (45) days following receipt of the Final Third
Closing Statement by the Purchaser, then the issues remaining unresolved shall
be determined by the Accountant. The Accountant shall resolve all disputed items
in accordance with the provisions of this Agreement. In making its
determination, the Accountant may only consider those items and amounts as to
which the Purchaser and the Sellers have disagreed within the time periods and
on the grounds specified. The Accountant's determination shall be conclusive and
binding on the Purchaser and the Sellers absent manifest error. The fees of the
Accountant shall be shared by the Purchaser and the Sellers in proportion to the
relative differences between their respective calculations of the May Purchase
Price and the amount determined by the Accountant.
(d) If the Estimated May Purchase Price exceeds the May Purchase
Price, then FDS, on behalf of the Sellers, shall, within five (5) Business Days
after the May Purchase Price has been finally determined pursuant to Section
4.3(c), pay such excess (plus the amount of interest on such excess calculated
in accordance with item 5 of the Estimated Third Closing Statement) by wire
transfer of immediately available funds (in U.S. dollars) to the Purchaser,
together with interest on the foregoing amount for the period from and including
the Third Closing Date to but excluding the date of such payment at a rate per
annum equal to the Federal Funds Rate. If the Estimated May Purchase Price is
less than the May Purchase Price, then the Purchaser shall, within five (5)
Business Days after the May Purchase Price has been finally determined pursuant
to Section 4.3(c), pay such deficiency (plus the amount of interest on such
deficiency calculated in accordance with item 5 of the Estimated Third Closing
Statement) by wire transfer of immediately available funds (in U.S. dollars) to
FDS on behalf of the Sellers, together with interest on the foregoing amount for
the period from and including the Third Closing Date to but excluding the date
of such payment at a rate per annum equal to the Federal Funds Rate. Each party
to this Agreement shall make available to the other parties, and to the
Accountant, its and its accountants work papers (to the extent possible),
schedules and other supporting data as may be reasonably requested by such
parties to enable them to verify the amounts set forth in the Final Third
Closing Statement.
SECTION 4.4. The Third Closing.
26
(a) The closing (the "Third Closing") of the purchase and sale of
the May Assets and assumption of the May Liabilities hereunder (collectively,
the "Third Purchase and Assumption") shall take place at the offices of Simpson
Thacher & Bartlett LLP, 425 Lexington Avenue, New York, New York, or by
facsimile transmission on a date specified by FDS (upon not less than ninety
(90) days' prior written notice to the Purchaser) occurring no more than twelve
(12) months following the date of the closing of the May Merger (and following
the completion of reasonable due diligence as set forth in Section 6.16) and no
earlier than the first Business Day of the Fiscal Month after the Fiscal Month
in which the last of the conditions set forth in Article IX (other than
conditions relating solely to the delivery of documents to be dated the Third
Closing Date) has been satisfied or waived in accordance with the terms of this
Agreement or at such other date or location as the parties hereto jointly
designate in writing (the "Third Closing Date").
(b) At the Third Closing, the Purchaser and the Sellers shall
deliver or cause to be delivered to each other (i) instruments of sale,
assignment, transfer and conveyance of the May Assets and the May Liabilities,
respectively (which shall be the Third Instrument of Assignment and Assumption),
(ii) a receipt for the May Purchase Price, and (iii) such other instruments as
are necessary or appropriate to reflect any alternative arrangements described
in Section 6.15, in each case, appropriately executed by the Sellers and the
Purchaser.
(c) At the Third Closing, the Purchaser shall pay the Estimated May
Purchase Price (plus the amount of any interest thereon as set forth on and
calculated in accordance with item 5 of the Estimated Third Closing Statement)
by wire transfer of immediately available funds (in U.S. dollars) prior to 11:00
A.M. Eastern time on the Third Closing Date to an account or accounts specified
by FDS at least three (3) Business Days prior to the Third Closing Date.
ARTICLE V
REPRESENTATIONS OF THE PARTIES
SECTION 5.1. Representations of FDS. Except as Previously Disclosed
against a specific representation and warranty set forth in this Section 5.1 and
other than with respect to the May Assets and the May Liabilities, FDS
represents to the Purchaser as follows:
(a) Existence and Authority. FDS Bank is a stock savings bank, duly
organized, validly existing and in good standing under the laws of the United
States of America. Each of FDS, Prime and Prime II is duly organized, validly
existing and in good standing under its jurisdiction of organization. Each of
the Sellers and Prime has the requisite power and authority to own the Acquired
Assets and Stock owned by it and to carry on the Business as currently conducted
by it, and is duly qualified to do business in each jurisdiction where the
ownership or operation of the Acquired Assets and Stock owned or operated by it
or the conduct of the Business conducted by it requires such qualification,
except for any failure to have such authority or be so qualified that would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Business or the Sellers.
(b) Authorization and Validity. Each Seller has the requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and each of the
27
Ancillary Agreements to which it is a party. Each of this Agreement and each
Ancillary Agreement has been duly authorized by each Seller party thereto by all
necessary corporate action. This Agreement has been duly executed and delivered
by each Seller party hereto and each Ancillary Agreement has been, or shall have
been at the First Closing Date (or the Second Closing Date with respect to the
Second Instrument of Assignment and Assumption), duly executed and delivered by
each Seller party thereto. Assuming that this Agreement has been, and that the
Ancillary Agreements have been or shall be on or prior to the First Closing Date
(or the Second Closing Date with respect to the Second Instrument of Assignment
and Assumption), duly authorized, executed and delivered by the Purchaser, this
Agreement is, and the Ancillary Agreements are or shall be at the First Closing
Date (or the Second Closing Date with respect to the Second Instrument of
Assignment and Assumption), the legal, valid and binding obligations of the
Sellers party hereto and thereto, enforceable against such Sellers in accordance
with their respective terms, subject to applicable bankruptcy, insolvency,
moratorium, reorganization, fraudulent transfer and other laws affecting
creditors' rights generally and to general equitable principles.
(c) Governmental and Third-Party Consents. No notices, reports or
other filings are required to be made by the Sellers or Prime with, nor are any
consents, registrations, approvals, permits or authorizations required to be
obtained by the Sellers or Prime from, any Governmental Authority or any other
third party in connection with the execution, delivery or performance of this
Agreement and the Ancillary Agreements by the Sellers or the consummation by
them of the transactions contemplated by this Agreement or the Ancillary
Agreements, except for (i) the Requisite Regulatory Approvals, (ii) the Required
Amendments and Confirmations and (iii) such other notices, reports, filings,
consents, registrations, approvals, permits or authorizations the failure to
obtain would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect (excluding for these purposes clause (a)(4)
of the definition of Material Adverse Effect) on the Business or the Sellers.
FDS has no reason to believe that the Sellers will not be able to obtain the
Requisite Regulatory Approvals required to be obtained by them on a timely
basis.
(d) No Conflicts. The execution, delivery and performance by the
applicable Sellers of this Agreement and the Ancillary Agreements do not, and
(subject to obtaining the Requisite Regulatory Approvals, the Required
Amendments and Confirmations and other Previously Disclosed governmental and
third-party consents, registrations, approvals, permits and authorizations
referred to in Section 5.1(c)) the consummation of the transactions contemplated
by this Agreement and the Ancillary Agreements will not:
(1) breach, violate, conflict with, or be prohibited by the
Constituent Documents of the Sellers or Prime;
(2) breach, violate, conflict with, or be prohibited by any
Requirement of Law or Applicable Order applicable to the Sellers or
Prime;
(3) breach, violate, conflict with, be prohibited by, require
any additional approval under or result in a default under the
terms, conditions or provisions of any Contract of any of the
Sellers or Prime, or give any third party the right to
28
terminate or cancel any right of any Seller or Prime under any
Contract of such Person, or accelerate the performance of its
obligations thereunder; or
(4) result in the creation of any Lien on the properties or
assets of any of the Sellers or Prime, including the Acquired Assets
and Stock, other than Permissible Liens;
except in each case described in clause (3) or (4), for any breach, violation,
default, termination, cancellation, acceleration or Lien that would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect (excluding for these purposes clause (a)(4) of the definition of
Material Adverse Effect) on the Business or the Sellers.
(e) SEC Reports; Other Financial Information.
(1) The Prime Master Trust and Prime have each filed with the
Securities and Exchange Commission (the "SEC") all forms, reports
and other documents (including all prospectuses and registration
statements) required to be filed by it with respect to all periods
commencing on or after January 1, 2002 (the "SEC Documents"). As of
their respective filing dates (or effective dates, in the case of
prospectuses and registration statements), the SEC Documents
complied in all material respects with the requirements of the
Securities Act of 1933 (the "Securities Act") or the Securities
Exchange Act of 1934 (the "Exchange Act"), as applicable, and the
rules and regulations of the SEC promulgated thereunder, as modified
by SEC staff interpretive or no-action positions relating to credit
card securitizations and did not contain any untrue statement of any
material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light
of the circumstances in which they were made, not misleading.
(2) The financial information included in the items listed in
Schedule 5.1(e)(2) was true and accurate in all material respects as
of the dates set forth therein.
(f) Absence of Certain Changes. Since January 29, 2005, the Business
has been conducted in the ordinary course of business consistent with past
practice and there has not been (1) any material change in: (x) any financial
accounting practices, policies or procedures (to the extent any such change
would be binding on or otherwise affect the Business or the Purchaser following
the Closing, and except for any change in accounting practices, polices and
procedures required by reason of a concurrent change in GAAP); (y) any
collections, pricing, origination, charge-off, reaging, credit or underwriting
practices, policies and procedures of Sellers with respect to the Accounts; or
(z) the servicing practices, policies and procedures of the Sellers with respect
to the Gross Receivables or the Prime Securitization Receivables, except in each
case for any such changes after the date hereof as approved in writing by the
Purchaser, or (2) any Material Adverse Effect on the Business or the Sellers.
(g) Title to Properties; Encumbrances. A Seller has good title to or
a valid leasehold interest in, or is licensed or otherwise entitled to use, all
of the Acquired Assets and
29
Stock (other than the Accounts, to which Section 5.1(l) is applicable), free and
clear of all Liens, other than Permissible Liens. Upon consummation of the
transactions contemplated by this Agreement, including the execution and
delivery of the documents to be delivered at the First Closing, at the First
Closing (and at the Second Closing with respect to the GE/Macy's Assets), the
Purchaser shall be vested with good and marketable title in and to the Acquired
Assets and Stock (other than the Accounts, to which Section 5.1(l) is
applicable), free and clear of all Liens other than Permissible Liens, and the
Required Amendments and Confirmations when obtained and effective, shall
constitute a valid assignment of the Sellers' rights and interest in the
applicable Securitization Documents enforceable against the Sellers and, upon
the filing of appropriate financing statements and all required continuations,
amendments and replacements thereof, against all other persons.
(h) Litigation. FDS has Previously Disclosed a list and a summary
description of each pending Action with respect to Accounts pending as of the
date hereof in which the Seller or any of its Affiliates (or the Seller or any
of its Affiliates or GE Bank or any of its Affiliates in the case of GE/Macy's
Accounts) is a named defendant. There are no actions, suits, proceedings or
claims pending, in arbitration or before any Governmental Authority, against any
of the Sellers or Prime or their Subsidiaries, or to the Sellers' Knowledge,
threatened against any of the Sellers or Prime or their Subsidiaries, in each
case that would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Business or the Sellers.
(i) Contracts. Each Assigned Contract constituting part of the
Acquired Assets and Stock is a valid, legally binding agreement of the Seller or
Subsidiary thereof that is party thereto. The Sellers have made available to the
Purchaser true and complete copies of all Assigned Contracts. Neither such
Seller or Subsidiary nor, to the Sellers' Knowledge, any other party thereto is
in default under the terms of any such Contract, except for any such failures to
be valid and binding and such defaults as would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Business or the Sellers. None of the Sellers or any Subsidiary of any Seller has
received any written notice of termination, cancellation, breach or default
under any Assigned Contract.
(j) Books and Records. All Books and Records of the Sellers relating
to the Business, the Master File, the FDS Cardholder List, the GE/Macy's
Cardholder List and the May Cardholder List have been maintained accurately and
in accordance with all Requirements of Law applicable to the Sellers and the
Business in all material respects.
(k) Compliance with Laws. Except to the extent that a breach of any
of the following would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect (excluding for these purposes clause
(a)(4) of the definition of Material Adverse Effect) on the Business or the
Sellers:
(1) since January 1, 2003, the Sellers and Prime have been in
compliance with all Requirements of Law relating to the Business and
the Acquired Assets and Stock; and
(2) since January 1, 2003, the Sellers and Prime have not been
subject to any capital plan or supervisory agreement,
cease-and-desist or similar order or
30
directive or memorandum of understanding between any of them and any
Governmental Authority or issued by any Governmental Authority, nor
has any of them adopted any board resolutions at the request of any
Governmental Authority.
(1) Accounts.
(1) FDS Bank or Prime is the sole owner of and has good and
marketable title to the FDS Accounts, the Gross Receivables on the
FDS Accounts and the Prime Securitization Assets (subject in each
case to the rights, claims and interests arising under the
Securitization Documents). Upon the First Closing, subject to the
filing of appropriate financing statements and all required
continuations, amendments and replacements thereof, all right, title
and interest in and to the FDS Accounts, the Gross Receivables on
the FDS Accounts, and the Prime Securitization Assets shall vest or
be vested in the Purchaser free and clear of all Liens other than
Permissible Liens (and subject in each case to the rights, claims
and interests arising under the Securitization Documents).
(2) As of the Second Closing, FDS Bank shall be the sole owner
of and have good and marketable title to the GE/Macy's Accounts and
the Gross Receivables on the GE/Macy's Accounts. This Agreement
shall, following the Second Closing Date, and subject to the filing
of appropriate financing statements and all required continuations,
amendments and replacements thereof, vest in the Purchaser all
right, title and interest in and to the GE/Macy's Accounts and the
Gross Receivables on the GE/Macy's Accounts, free and clear of all
Liens other than Permissible Liens.
(3) To the Sellers' Knowledge, each Account Agreement (other
than any Account Agreement with respect to any Charged Off Account)
is a valid and legally binding obligation of each obligor
thereunder, including any cosigner, guarantor or surety, and is
enforceable against such obligors in accordance with its terms,
subject to (i) possible claims and defenses on disputed card
transactions asserted by a Cardholder, (ii) applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and
other laws relating to or affecting creditors' rights generally and
the effect of general equitable principles, and (iii) the
Servicemembers Civil Relief Act.
(4) Since January 29, 2005, except for changes after the date
hereof permitted by Section 6.2, (i) the Sellers have not effected
any material change in operating policies and procedures of the
Business relating to the maintenance of, and collection policies
with respect to, the Accounts (other than changes permitted to be
made by GE Bank pursuant to the GE/Macy's Program Agreement) and
(ii) the Business has been operated in all material respects in
compliance with the policies and procedures of the Sellers and GE
Bank (other than changes permitted to be made by GE Bank pursuant to
the GE/Macy's Program Agreement).
31
(5) Each Account complies with, and was solicited and opened
in accordance with, in all material respects the applicable rules
and regulations of the applicable Card Association.
(6) Each Account complies in all material respects with the
applicable Account Agreement.
(7) All Account applications have been taken and evaluated and
applicants notified in a manner that complied with all applicable
Requirements of Law.
(8) All Accounts have been solicited, originated, maintained
and serviced in compliance with all applicable Requirements of Law.
(9) All disclosures made in connection with the Accounts
complied in all material respects with all applicable Requirements
of Law.
(10) To the Sellers' Knowledge, each of the Gross Receivables
arises from or in connection with a bona fide sale or loan
transaction (including any amounts in respect of finance charges,
annual fees and other charges and fees assessed on the Accounts).
(m) Securitization. Except to the extent that any breaches of the
following would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Business or the Sellers:
(1) each Seller or Prime and, to the Knowledge of Sellers,
each other party thereto has performed in all material respects each
obligation to be performed by it under each of the Prime
Securitization Documents, including the filing of any financing
statements, continuation statements or amendments under the Uniform
Commercial Code of each applicable jurisdiction with the appropriate
filing offices;
(2) each of the Prime Securitization Interests, each series of
certificates in Prime Master Trust and each of the Securitization
Documents to which any Seller, Prime or Prime Master Trust, as the
case may be, is a party is in full force and effect and is a valid,
binding and enforceable obligation of such Seller, Prime or Prime
Master Trust, as the case may be, and to the Knowledge of Sellers,
the other parties thereto, subject to applicable bankruptcy,
insolvency, moratorium, reorganization, fraudulent transfer and
other laws affecting creditors' rights generally and to general
equitable principles;
(3) true and complete copies of the Prime Securitization
Documents have been made available to Purchaser and there have been
no amendments or modifications to the Securitization Documents made
since the date such copies were made available to Purchaser;
(4) the Prime Pooling and Servicing Agreement is not required
to be qualified as an indenture under the Trust Indenture Act of
1939, as amended, and
32
the Prime Master Trust is not required to be registered as an
investment company under the Investment Company Act of 1940, as
amended;
(5) Prime is the sole owner of the transferor interest under
the Prime Securitization Documents;
(6) the listing of the Securitization Documents set forth in
Schedule 1.1(f) and Schedule 1.1(g) is a true, accurate and complete
list of the Contracts to which any of the Sellers, Prime or Prime II
is a party relating to the Master Trusts;
(7) no interests in the Prime Master Trust have been issued
since December 2004;
(8) no event or condition exists which is or with either
notice or the passage of time would (i) constitute a default, event
of default, amortization event, specified event or other event or
circumstance, (ii) require any accelerated application of cash flows
received in respect of the Prime Securitization Receivables, or
(iii) trigger any requirement under any Prime Securitization
Document to (A) fund an increase in any spread account, reserve
account or similar account, (B) draw on any such account under the
terms of any Prime Securitization Document or (C) otherwise increase
any credit enhancement required under the Prime Securitization
Documents (each, an "Adverse Development");
(9) no event or condition exists which constitutes an Adverse
Development or a Servicer Default or other similar event permitting
the termination of the Servicer under the Prime Securitization
Documents (a "Servicer Default or Termination"); and
(10) assuming all required consents and approvals referred to
in Section 5.1(c) are obtained, the consummation of the transactions
contemplated hereby (including, without limitation, the execution
and delivery of the Required Amendments and Confirmations) shall not
cause the occurrence of an Adverse Development or a Servicer Default
or Termination.
(n) Servicing Qualifications. Each of FDS Bank and FACS Group, Inc.
is licensed and qualified in all jurisdictions necessary to conduct the
servicing activities with respect to the Accounts in which it is engaged in
accordance with all applicable Requirements of Law, except where the failure to
be so qualified would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Business or the Sellers.
(o) Taxes.
(1) The Sellers, Prime and the Master Trusts have filed all
material Tax Returns that they were required to file (taking into
account all applicable extensions) on or before the date hereof (in
the case of the Sellers, solely to the extent of any Tax Returns
related to the Business), and all Taxes required to be
33
shown on such Tax Returns or otherwise due and owing with respect to
Prime, the FDS Assets, the GE/Macy's Assets or the Business have
been timely paid.
(2) For federal, Ohio and New York State Tax purposes, all
interests in the Prime Master Trust held by Prime or sold to
investors are indebtedness of Prime, interests in an entity other
than an association taxable as a corporation or a publicly traded
partnership, or interests in a disregarded entity.
(3) There are no pending or (to the Knowledge of the Sellers)
threatened actions or proceedings for the assessment or collection
of a material amount of Taxes with respect to Prime, nor has Prime
or any Affiliate thereof received any notice or inquiry from any
jurisdiction in which Prime does not currently file Tax Returns to
the effect that Prime may be subject to taxation by such
jurisdiction.
(p) No Brokers or Finders. The Assumed Liabilities do not include,
and Prime has not incurred, any liability for any financial advisory fees,
brokerage fees, commissions or finder's fees directly or indirectly in
connection with this Agreement or the transactions contemplated hereby or by the
Ancillary Agreements.
(q) Prime. The authorized capital stock of Prime consists of 100
shares of Common Stock, par value $0.01 per share, of which 100 shares are
issued and outstanding ("Prime Common Stock"). All of the issued and outstanding
shares of Prime Common Stock are beneficially and legally owned by FDS, free and
clear of all Liens. All of the issued and outstanding shares of Prime Common
Stock are duly authorized, validly issued, fully paid and nonassessable. There
are no outstanding (i) securities convertible into or exchangeable for Prime
Common Stock, (ii) options, warrants, calls or other rights to purchase or
subscribe for Prime Common Stock or (iii) contracts of any kind to which Prime
or any of its Affiliates is subject or bound requiring the issuance after the
date of this Agreement of (x) Prime Common Stock, (y) any convertible or
exchangeable security of the type referred to in clause (i) or (z) any options,
warrants, calls or rights of the type referred to in clause (ii). Prime does not
own, directly or indirectly, any equity interest or investment in any Person.
Prime was established for the sole purpose of entering into, and engaging in the
transactions contemplated by, the Prime Securitization Documents and since its
formation, (i) has engaged in no other business activities, (ii) has conducted
its business and operations only as contemplated by the Prime Securitization
Documents and (iii) has no outstanding Liabilities.
(r) Intellectual Property. None of the Sellers, Prime and their
Subsidiaries has granted any license or other right to any third party to use
the Transferred Intellectual Property (i) in connection with any Credit Card
program or (ii) that would violate any rights in the Transferred Intellectual
Property granted to the Purchaser pursuant to the Program Agreement. To the
Seller's Knowledge, there has been no misappropriation of any trade secrets or
other confidential or proprietary information contained in the Transferred
Intellectual Property by any Person.
(s) Certain Securitization Matters.
34
(1) None of (i) the FDS Accounts, the GE/Macy's Accounts or
the May Accounts, as applicable; (ii) the Gross Receivables (other
than the Prime Securitization Receivables) on such Accounts; and/or
(iii) Interchange Fees, Account Agreements and Master Files related
to such Accounts (collectively, the "Specified Assets") were
acquired by the Seller thereof in contemplation of the transactions
contemplated by this Agreement. No Seller of any of the Specified
Assets has any rights under the Program Agreement to purchase any of
the Program Assets (as defined in the Program Agreement) upon
termination of the Program or otherwise, with any such purchase
rights vesting solely in FDS and its Subsidiaries other than the
Seller of such Specified Assets. In connection with the First
Closing and Assumption, the Specified Assets that constitute FDS
Assets will be sold by FDS Bank or Prime II to the Purchaser. In
connection with the termination of the GE/Macy's Program Agreement,
the Specified Assets that constitute GE/Macy's Assets will be sold
by GE Bank and/or one of its Affiliates to FDS Bank and, in
connection with the Second Closing and Assumption, be sold by FDS
Bank to the Purchaser. In connection with the May Merger and the
Third Closing and Assumption, the Specified Assets that constitute
May Assets will either be sold (i) directly by May Bank and/or one
of its Affiliates to the Purchaser or (ii) by May Bank and/or one of
its Affiliates to FDS Bank and subsequently sold by FDS Bank to the
Purchaser (it being understood that during the period from the
closing of the May Merger until the Third Purchase and Assumption,
the Specified Assets that constitute May Assets shall be owned by
May Bank and/or one of its Affiliates reasonably acceptable to the
Purchaser and/or FDS Bank).
(2) The Purchase Price for the Acquired Assets and Stock shall
be fairly allocated among the Sellers and that portion of the
Purchase Price allocable to the Acquired Assets and Stock
transferred by each Seller shall be paid to such Seller. No
allocation made pursuant to this Section 5.1(s)(2) shall apply for
any Tax or accounting purposes.
(3) In the event FDS exercises the purchase right under the
Program Agreement, FDS has no present intention to cause any
particular entity to be the transferee of such Program Assets, with
FDS reserving all rights to decide at the time of transfer who such
transferee will be.
SECTION 5.2. Representations of the Purchaser. Except as Previously
Disclosed, the Purchaser represents to the Sellers as follows:
(a) Existence and Authority. The Purchaser is a validly existing
national banking association, duly organized and in good standing under the laws
of the United States of America, and has the corporate power and authority to
carry on its business as now conducted and to acquire and operate the Business
as currently conducted or as proposed to be conducted. The Purchaser and its
deposits are insured by the Federal Deposit Insurance Corporation to the fullest
extent permitted by law.
35
(b) Authorization and Validity. The Purchaser has the requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and each of the Ancillary Agreements to which it is a
party. This Agreement and each Ancillary Agreement have been duly authorized by
the Purchaser by all necessary corporate action. This Agreement has been duly
executed and delivered by the Purchaser and each Ancillary Agreement has been or
shall have been, at the First Closing Date (or the Second Closing Date with
respect to the Second Instrument of Assignment and Assumption), duly executed
and delivered by the Purchaser. Assuming that this Agreement has been, and the
Ancillary Agreements have been or shall be on or prior to the First Closing Date
(or the Second Closing Date with respect to the Second Instrument of Assignment
and Assumption), duly authorized, executed and delivered by the Sellers party
thereto, this Agreement is, and the Ancillary Agreements shall be at the First
Closing Date (or the Second Closing Date with respect to the Second Instrument
of Assignment and Assumption), the legal, valid and binding obligations of the
Purchaser, enforceable against the Purchaser in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, moratorium, reorganization,
fraudulent transfer and other laws affecting creditors' rights generally and to
general equitable principles.
(c) Governmental and Third-Party Consents. No notices, reports or
other filings are required to be made by the Purchaser with, nor are any
consents, registrations, approvals, permits or authorizations required to be
obtained by the Purchaser from, any Governmental Authority or any other third
party in connection with the execution, delivery and performance of this
Agreement and the Ancillary Agreements by the Purchaser, as applicable, or the
consummation by the Purchaser of the transactions contemplated by this Agreement
or the Ancillary Agreements, except for the Requisite Regulatory Approvals and
for such other notices, reports, filings, consents, registrations, approvals,
permits or authorizations the failure to obtain which would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
(excluding for these purposes clause (a)(4) of the definition of Material
Adverse Effect) on the Purchaser or on the Business following the First Closing
Date. The Purchaser has no reason to believe that it will not be able to obtain
the Requisite Regulatory Approvals on a timely basis.
(d) No Conflicts. The execution, delivery and performance by the
Purchaser of this Agreement and the Ancillary Agreements do not, and (subject to
obtaining the Requisite Regulatory Approvals and the other Previously Disclosed
governmental and third-party consents, registrations, approvals, permits and
authorizations referred to in Section 5.2(c)) the consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements will
not:
(1) breach, violate, conflict with or be prohibited by the
Purchaser's Constituent Documents;
(2) breach, violate, conflict with or be prohibited by any
Requirement of Law or Applicable Order applicable to the Purchaser;
or
(3) breach, violate, conflict with, be prohibited by, require
any additional approval under or result in a default under the
terms, conditions or provisions of any Contract of the Purchaser, or
give any third party the right to terminate or
36
cancel any right of the Purchaser, conflict with, be prohibited by,
require any additional approval under any such Contract, or
accelerate the performance of its obligation thereunder;
except in each case described in clause (3), for any breach, violation, default,
termination, cancellation, acceleration or Lien that would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
(excluding for these purposes clause (a)(4) of the definition of Material
Adverse Effect) on the Purchaser or on the Business following the First Closing
Date.
(e) Absence of Certain Changes. Since January 29, 2005, there has
not been any change in the financial condition or results of operations of the
Purchaser that has had, individually or in the aggregate, a Material Adverse
Effect on the Purchaser or on the Business as of the First Closing Date.
(f) Compliance with Laws. Except to the extent that a breach of any
of the following would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect (excluding for these purposes clause
(a)(4) of the definition of Material Adverse Effect) on the Purchaser or the
Business as of the First Closing Date:
(1) the Purchaser is in compliance with all Requirements of
Law relating to its credit card business; and
(2) neither the Purchaser nor any of its Affiliates is subject
to any capital plan or supervisory agreement, cease-and-desist or
similar order or directive or memorandum of understanding between it
and any Governmental Authority or issued by any Governmental
Authority, nor has any of them adopted any board resolutions at the
request of any Governmental Authority.
(g) Servicing Qualifications. The Purchaser is licensed and
qualified in all jurisdictions necessary to service the Accounts in accordance
with all applicable Requirements of Law, except where the failure to be so
qualified would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Purchaser or the Business or on the
ability of the Purchaser to perform its duties as servicer, or on ability of the
Purchaser to perform its duties as sub-servicer, under the Prime Pooling and
Servicing Agreement following the First Closing Date.
(h) Financing. The Purchaser has sufficient cash, available lines of
credit or other sources of immediately available funds to enable it to pay the
Estimated FDS Purchase Price as required by Section 2.4(c), the Estimated
GE/Macy's Purchase Price as required by Section 3.4(c), and the Estimated May
Purchase Price as required by Section 4.4(c), and to timely pay any other
amounts to be paid by it under this Agreement.
(i) Litigation. Except as described in filings made prior to the
date hereof by the Purchaser or Citigroup, Inc. with the SEC, there are no
actions, suits, proceedings or claims pending, in arbitration or before any
Governmental Authority, against the Purchaser or its Affiliates, or to the
Purchaser's Knowledge, threatened against Purchaser or any of its Affiliates,
37
in each case that would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Purchaser or on the Business.
(j) No Brokers or Finders. Any liability incurred by the Purchaser
or its Affiliates for any financial advisory fees, brokerage fees, commissions
or finder's fees directly or indirectly in connection with this Agreement or the
transactions contemplated hereby or by the Ancillary Agreements shall be borne
by the Purchaser.
(k) Restricted Securities. The Purchaser understands that the shares
of Prime Stock are "restricted securities" under applicable U.S. federal and
state securities laws and that, pursuant to such laws, Purchaser must hold those
securities indefinitely unless they are registered with the SEC and qualified by
applicable state Governmental Authorities or an exemption from such registration
and qualification is available.
(l) Investment Representation. The Purchaser is purchasing the Prime
Stock for its own account with the present intention of holding such securities
for investment purposes and not with a view to or for sale in connection with
any public distribution of such securities in violation of any federal or state
securities laws. The Purchaser is an "accredited investor" as defined in
Regulation D promulgated by the SEC under the Securities Act. Purchaser
understands the risks of the transactions contemplated hereby and of ownership
of the Prime Stock. Purchaser acknowledges that the Prime Stock has not been
registered under the Securities Act or any state or foreign securities laws and
that the Prime Stock may not be sold, transferred, offered for sale, pledged,
hypothecated or otherwise disposed of unless such sale, transfer, offer, pledge,
hypothecation or other disposition is pursuant to the terms of an effective
registration statement under the Securities Act and qualification under any
applicable state or foreign securities laws or pursuant to an exemption from
registration under the Securities Act and any applicable state or foreign
securities laws.
(m) License. The Purchaser is licensed to participate in the
programs of each of the Card Associations to the extent necessary to consummate
the transactions contemplated by this Agreement and the Ancillary Agreements and
to perform its obligations hereunder and thereunder. The Purchaser is a member
in good standing of the Card Associations.
(n) Organization and Capitalization of CEBA Bank. At the time of the
First Closing, CEBA Bank will be a national bank, duly organized, validly
existing and in good standing under the laws of the United States of America. At
the time of the First Closing, all of the issued and outstanding shares of
capital stock of CEBA Bank (the "CEBA Capital Stock") shall be beneficially and
legally owned by the Purchaser, free and clear of all Liens other than
Permissible Liens. All of the issued and outstanding shares of CEBA Capital
Stock will be duly authorized, validly issued, fully paid and nonassessable
(except as provided in 12 U.S.C. Section. 55). Upon the issuance of the CEBA
Equity Interests to FDS Bank (or its assignee) pursuant to Section 2.4(d) all of
the CEBA Equity Interests will be duly authorized, validly issued, fully paid
and nonassessable (except as provided in 12 U.S.C. Section. 55). Other than as
contemplated by this Agreement, there will be no outstanding (i) securities
convertible into or exchangeable for CEBA Capital Stock, (ii) options, warrants,
calls or other rights to purchase or subscribe for CEBA Capital Stock or (iii)
contracts of any kind to which CEBA Bank or any of its Affiliates is subject or
bound requiring the issuance after the date of this Agreement of (x) CEBA
Capital Stock, (y)
38
any convertible or exchangeable security of the type referred to in clause (i)
or (z) any options, warrants, calls or rights of the type referred to in clause
(ii). CEBA Bank will not own, directly or indirectly, any equity interest or
investment in any Person.
(o) Operations of CEBA Bank. CEBA Bank will be established for the
sole purpose of entering into, and engaging in the transactions contemplated by,
this Agreement and the Ancillary Agreements, and following its formation, as of
the First Closing, (i) will not have engaged in any other business activities
other than organization and qualification of CEBA Bank under applicable
Requirements of Law and with the applicable Governmental Authorities, (ii) will
have conducted its business and operations only as contemplated by this
Agreement or the Ancillary Agreements and applicable Requirements of Law and
(iii) will not have incurred any Liabilities other than Liabilities incurred or
arising out of this Agreement or the Ancillary Agreements or in connection with
the organization and qualification of CEBA Bank under applicable Requirements of
Law and with the applicable Governmental Authorities. CEBA Bank will not at any
time during the Term (as defined in the Program Agreement) engage in any
business or issue any Credit Cards except pursuant to the Program Agreement.
CEBA Bank will at all times during the Term conform its operations so as to meet
the requirements of 12 U.S.C. Section.1841(c)(2) or any comparable successor
statute.
SECTION 5.3. No Other Representations or Warranties; No Recourse.
Except as expressly set forth in this Article V or the Ancillary Agreements,
neither the Sellers nor the Purchaser have made or make any other express or
implied representations, or any express or implied warranty, either written or
oral, with respect to the Acquired Assets and Stock, the Assumed Liabilities,
the Sellers, the Business or the Purchaser, respectively, or as to any other
matter whatsoever. Except as otherwise expressly provided herein or in any
Ancillary Agreement, the sale of the Acquired Assets and Stock is without
recourse of any kind to FDS or its Affiliates or to the Purchaser or its
Affiliates. THE PURCHASER ACKNOWLEDGES THAT THE SELLERS DISCLAIM ALL WARRANTIES
OTHER THAN THOSE EXPRESSLY CONTAINED IN THIS AGREEMENT OR ANY ANCILLARY
AGREEMENT, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR WARRANTY OF FITNESS FOR
A PARTICULAR PURPOSE.
ARTICLE VI
COVENANTS
SECTION 6.1. Conduct of Business.
(a) Except as otherwise contemplated hereby or by the Ancillary
Agreements, and except for transactions in the ordinary course of business,
until the First Closing Date (and, with respect to the GE/Macy's Assets, until
the Second Closing Date), FDS and FDS Bank shall, and shall cause Prime to,
conduct the Business (for purposes of this Section 6.1(a), after the First
Closing, solely with respect to the GE/Macy's Assets and GE/Macy's Liabilities)
or cause the Business to be conducted in the ordinary course consistent with
past practice. Without limiting the generality of the foregoing, FDS and FDS
Bank shall (as it relates to the Business), and shall cause Prime to, use their
respective reasonable best efforts to preserve intact the business organizations
and relationships with third parties relating to the Business, to keep available
the
39
services of required employees of the Business and to preserve beneficial
relationships with customers in connection with the Business, following
substantially the same practices and standards, in all material respects,
including collection practices and accounting practices for charge-offs and
reserves, as in effect on the date of this Agreement (subject to such changes
therein as may be made by GE Bank in accordance with the provisions of the
GE/Macy's Program Agreement).
(b) Prior to the closing of the May Merger, FDS shall not waive any
of its contractual rights against May Co. to require May Co. to continue
ordinary course operations and refrain from specified activities, in each case
as such operations and activities relate to the credit card business of May Co.,
May Bank and their Subsidiaries (the "May Business"). From and after the closing
of the May Merger, except as otherwise contemplated hereby or by the Ancillary
Agreements, and except for transactions in the ordinary course of business,
until the Third Closing Date, FDS and FDS Bank shall conduct the May Business or
cause the May Business to be conducted in the ordinary course consistent with
past practice (except to the extent permitted in Section 6.2). Without limiting
the generality of the foregoing, subject to Section 6.2(b), FDS and FDS Bank
shall (as it relates to the May Business) use their respective reasonable best
efforts to preserve intact the business organizations and relationships with
third parties relating to the May Business, to keep available the services of
required employees of the May Business and to preserve beneficial relationships
with customers in connection with the May Business, following substantially the
same practices and standards, in all material respects, including collection
practices and accounting practices for charge-offs and reserves, as in effect on
the closing date of the May Merger.
SECTION 6.2. Certain Changes.
(a) Without limiting Section 6.1, except as otherwise contemplated
hereby (including Section 6.2(b)) or by the Ancillary Agreements or as required
by the applicable Requirements of Law or the GE/Macy's Program Agreement with
respect to the GE/Macy's Assets, from the date of this Agreement until the First
Closing Date (or, with respect to the GE/Macy's Assets, the Second Closing Date
or, with respect to the May Assets, the Third Closing Date) without the prior
written consent of the Purchaser (which consent shall not be unreasonably
withheld or delayed), the Sellers shall not and shall cause their Subsidiaries
not to:
(i) enter into or amend any Assigned Contract except in the
ordinary course of the Business consistent with past practice and only to the
extent such entry or amendment would not have a Material Adverse Effect on the
Business;
(ii) amend any of the Prime Securitization Documents;
(iii) except for the acquisition of May Co., acquire a
material amount of assets from any other Person or all or substantially all of
the assets of any Person, whether by merger, asset purchase or otherwise, if, in
either case, such assets would constitute Acquired Assets and Stock;
40
(iv) materially change the aggregate expenses that would be
incurred by FDS and its Affiliates in the servicing of the Program or the
performance of interim services in accordance with the Program Agreement;
(v) make any material change in: (x) any financial accounting
practices, policies or procedures (to the extent any such change would be
binding on or otherwise affect the Business or the Purchaser following the First
Closing, the Second Closing or the Third Closing, as the case may be, and except
for any change in accounting practices, polices and procedures required by
reason of a concurrent change in GAAP); (y) any collections, pricing,
origination, charge-off, reaging, credit or underwriting practices, policies and
procedures of Sellers with respect to the Accounts; or (z) the servicing
practices, policies and procedures of the Sellers with respect to the Gross
Receivables or the Prime Securitization Receivables;
(vi) sell, lease or otherwise dispose of any of the Acquired
Assets and Stock, except (1) in the ordinary course of business and in
transactions that individually or in the aggregate with all such other
dispositions would not have a Material Adverse Effect on the Sellers or the
Business, (2) in connection with securitizations of receivables arising under
the Accounts (provided that the benefits thereof are transferable to the
Purchaser at the First Closing), (3) pursuant to the terms of Contracts or
commitments existing as of the date of this Agreement and Previously Disclosed,
or (4) as otherwise Previously Disclosed; or
(vii) except in the ordinary course of business consistent
with past practice, settle any material claim, action or proceeding or waive any
material rights or claims in respect of the Business in a manner that would
adversely affect the Business or any of the Acquired Assets and Stock or Assumed
Liabilities after the First Closing; or
(viii) agree with any Person or otherwise commit themselves to
do any of the foregoing.
(b) Notwithstanding the provisions of Sections 6.1(b) and 6.2(a),
FDS may sell assets that would otherwise constitute Acquired Assets hereunder in
connection with dispositions by FDS of any stores or other retail channels of
FDS and its Affiliates or May Co. and its Affiliates in connection with the May
Merger; provided that (i) such dispositions shall be effected pursuant to a
settlement with or other written commitment to a Governmental Authority in
connection with such Governmental Authority's review of the May Merger or, (ii)
if such dispositions are not effected pursuant to such a settlement or
commitment referred to in clause (i), the Gross Receivables disposed of in
connection with all such dispositions of May Assets effected prior to the
closing of the May Merger in reliance upon this Section 6.2(b) shall not exceed
$150,000,000 in the aggregate.
(c) The parties acknowledge that FDS intends to use its commercially
reasonable efforts following the closing of the May Merger to align to the
extent reasonably practicable the account terms, policies, practices and
procedures applicable to the May Accounts and the May Business with the account
terms, policies, practices and procedures applicable to the other Accounts and
the Business. Accordingly, notwithstanding the provisions of Sections 6.1(b) and
6.2(a), the Sellers and their Subsidiaries may make changes to the account
terms, policies, practices and procedures applicable to the May Accounts and the
May Business to the
41
extent such changes are in furtherance of such alignment. The parties further
acknowledge that the completion of such efforts by FDS is not a condition to the
Purchaser's obligation to effect the Third Purchase and Assumption.
SECTION 6.3. Access and Confidentiality.
(a) Until the First Closing Date (and, with respect to the GE/Macy's
Assets, until the Second Closing Date and with respect to the May Assets,
following the closing of the May Merger and until the Third Closing Date), upon
reasonable prior notice and subject to applicable Requirements of Law relating
to the exchange of information, FDS and FDS Bank shall, and shall cause Prime
to, permit the Purchaser and its authorized representatives to have reasonable
access, during regular business hours for purposes consistent with this
Agreement, to the properties and Books and Records relating to the Business,
including the Master File, the FDS Cardholder List, the GE/Macy's Cardholder
List and the May Cardholder List, to the extent that such access does not unduly
interfere with the business of the Sellers; provided that the Purchaser and such
representatives comply with the confidentiality obligations contained herein and
in the Confidentiality Agreement; and provided, further, that the foregoing
shall not (1) require the Sellers to permit any inspection, or to disclose any
information, that in their reasonable judgment would result in the disclosure of
any trade secrets of third parties or trade secrets of the Sellers or their
Affiliates unrelated to the Business or violate any obligations of the Sellers
to any third party with respect to confidentiality if the Sellers shall have
used reasonable best efforts to obtain the consent of such third party to such
inspection or disclosure or (2) require any disclosure by the Sellers that
could, as a result of such disclosure, have the effect of causing the waiver of
any attorney-client privilege.
(b) If this Agreement is terminated, each party, at its own expense,
shall promptly deliver (without retaining any copies) to the other party or (at
their option) confirm in writing to the other party that it has completely
destroyed all information furnished to such party or its representatives by the
other party or any of their agents, employees or representatives in connection
with this Agreement, whether so obtained before or after the execution hereof,
and all analyses, compilations, forecasts, studies or other documents prepared
by such party or its representatives that contain or reflect any such
information; provided, however, that the foregoing shall not apply to summary
analyses made by such party that such party is required to retain (i) as part of
the minutes of the proceedings of its board of directors or any committee
thereof, or (ii) to comply with applicable Requirements of Law. Notwithstanding
the return or destruction of such information by the receiving party and/or its
agents, employees and representatives, the receiving party and its agents,
employees and representatives will continue to be bound by its obligations
hereunder and under the Confidentiality Agreements regarding the use and
confidentiality of such information. Notwithstanding the foregoing provisions of
this Section 6.3(b), the Purchaser shall not be required to return information
relating to the FDS Assets or the FDS Liabilities after the First Closing, the
GE/Macy's Assets or the GE/Macy's Liabilities after the Second Closing, or the
May Assets or the May Liabilities after the Third Closing.
(c) In addition to the confidentiality arrangements contained
herein, all information provided or obtained in connection with the transactions
contemplated by this Agreement and by the Ancillary Agreements (including
pursuant to clause (a) above) on or prior
42
to the First Closing Date (or, with respect to information relating to the
GE/Macy's Assets and GE/Macy's Liabilities, on or prior to the Second Closing
Date and with respect to information relating to the May Assets and May
Liabilities, on or prior to the Third Closing Date) shall be held by the
Purchaser in accordance with the Confidentiality Agreement, dated November 19,
2004 between Citicorp Credit Services Inc. (USA) and FDS (the "FDS
Confidentiality Agreement") and the Confidentiality Agreement, dated April 26,
2005 between Citicorp Credit Services Inc. (USA) and FDS (the "May
Confidentiality Agreement" and together with the FDS Confidentiality Agreement,
the "Confidentiality Agreements"). In the event of a conflict or inconsistency
between the terms of this Agreement and the Confidentiality Agreements, the
terms of this Agreement shall govern.
(d) The parties agree that monetary damages would not be a
sufficient remedy for any breach of the foregoing provisions of this Section 6.3
and the provisions of the Confidentiality Agreements, and that, in addition to
all other remedies, each Party will be entitled to seek specific performance and
to seek injunctive or other equitable relief as a remedy for any breach of the
foregoing provisions of this Section 6.3 and the provisions of the
Confidentiality Agreements.
(e) From the date hereof through the First Closing Date (and with
respect to the GE/Macy's Assets, through the Second Closing Date, and with
respect to the May Assets, from the closing of the May Merger through the Third
Closing Date), the Sellers shall provide to the Purchaser on a monthly basis the
reports that would be required to be provided to the Purchaser pursuant to
Section 7.1 of the Program Agreement following the Effective Date thereunder (or
in the case of the May Assets, such similar existing reports as are reasonably
available to FDS).
(f) From the date hereof through the Second Closing Date, the
Sellers shall provide the Purchaser reasonable prior written notice (including a
description of such change) of any material changes in the credit and
underwriting, risk management, reaging, posting, collection or operating
policies and procedures with respect to the Business made pursuant to the
GE/Macy's Program Agreement. From the date of the closing of the May Merger
through the Third Closing Date, the Sellers shall provide the Purchaser
reasonable prior written notice describing any such material changes to be made
in connection with the May Business.
SECTION 6.4. Reasonable Best Efforts; Other Filings.
(a) Subject to the terms and conditions of this Agreement, the
Purchaser shall, and shall cause its Subsidiaries to, and FDS and FDS Bank
shall, and shall cause their Subsidiaries to, use reasonable best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable Requirements of Law, so
as to permit consummation of the transactions contemplated by this Agreement as
promptly as reasonably practicable and shall cooperate fully with each other to
that end.
(b) Without limiting Section 6.4(a), FDS and FDS Bank shall, and
shall cause their Subsidiaries to, and the Purchaser shall and shall cause its
Affiliates to, use reasonable best efforts to prepare all documentation, to
effect all filings and to obtain all permits, consents, approvals and
authorizations of all Governmental Authorities necessary to consummate the
43
transactions contemplated by this Agreement and the Ancillary Agreements,
including taking all reasonable actions necessary to defend, mitigate or rescind
the effect of any litigation or administrative proceeding involving any
Governmental Authority adversely affecting the consummation of the transactions
contemplated by this Agreement or the validity or enforceability of this
Agreement, including promptly appealing any adverse court or administrative
decision. Each of the Sellers, on the one hand, and the Purchaser, on the other
hand, shall consult with the other with respect to the obtaining of such
permits, consents, approvals and authorizations and to keep the other apprised
of the status thereof. Subject to appropriate confidentiality and legal
privilege protections, the Sellers and the Purchaser shall each furnish to the
others such necessary information and reasonable assistance as any of the
parties may reasonably request in connection with the foregoing.
(c) Without limiting the foregoing, the parties shall use their
reasonable best efforts to obtain (i) the Requisite Regulatory Approvals with
respect to the First Purchase and Assumption, the Second Purchase and Assumption
and the Third Purchase and Assumption, and (ii) with the cooperation of FDS and
its Subsidiaries, any licenses, permits or other qualifications with respect to
the Purchaser or any of its Affiliates necessary to satisfy the condition set
forth in Section 7.3(e) and to allow the Purchaser to perform its obligations
under the Program Agreement, in each case in time to permit the First Closing
Date to occur on or before August 29, 2005 or, if the First Closing Date has not
then occurred, as promptly thereafter as reasonably practicable. The parties
hereby agree, without any request or demand by the other parties, (i) to make
all necessary filings related to the Requisite Regulatory Approvals with respect
to the First Purchase and Assumption no later than fifteen (15) Business Days
from the execution and delivery of this Agreement, (ii) to supply as promptly as
practicable to the appropriate Governmental Authorities any additional
information and documentary material that may be requested in connection with
the receipt of the Requisite Regulatory Approvals and (iii) to prosecute
actively all such filings and pursue the receipt of each Requisite Regulatory
Approval and the licenses, permits or other qualifications referred to in clause
(ii) above.
(d) The Sellers and the Purchaser agree to take such actions with
respect to the Prime Securitization Assets and Prime Securitization Documents
prior to the First Closing Date as the other parties may reasonably request,
including those actions that are incident to the receipt of ratings
confirmations from the rating agencies in connection with the purchase of the
Prime Stock and the assumption by the Purchaser of the roles of servicer and
transferor (and the role of the Purchaser as sub-servicer) under the Prime
Securitization Documents.
(e) The Purchaser shall promptly notify the Sellers in writing, and
FDS and FDS Bank shall promptly notify the Purchaser in writing, upon (i)
becoming aware of any order or decree or any complaint seeking an order or
decree restraining or enjoining the execution of any Ancillary Agreement or the
consummation of the transactions contemplated by this Agreement or any Ancillary
Agreement, or (ii) receiving any notice from any Governmental Authority of its
intention to (A) institute a suit or proceeding to restrain or enjoin the
execution of any Ancillary Agreement or the consummation of the transactions
contemplated by this Agreement or any Ancillary Agreement, (B) nullify or render
ineffective this Agreement or the Ancillary Agreements if such transactions are
consummated, or (C) fail to issue or give any of the Requisite Regulatory
Approvals.
44
(f) Any filing fees under the HSR Act or any other domestic or
foreign antitrust merger control laws shall be borne by the Purchaser.
(g) The parties agree that if so requested by FDS not later than the
earlier to occur of (i) fifteen (15) days prior to the First Closing Date and
(ii) the date on which the Purchaser has received all Requisite Regulatory
Approvals required to be obtained by it, the parties will negotiate in good
faith with respect to such mutually acceptable changes to the terms of this
Agreement and the Program Agreement as FDS may reasonably request in order to
maintain the status of FDS Bank as a savings association in good standing with
the Office of Thrift Supervision, including without limitation amending such
agreements to provide that some or all of the Employee Accounts (as defined in
the Program Agreement) shall be retained following the First Closing at FDS
Bank; provided, however, that no such changes shall be made to the extent they
would affect the ability of the Purchaser and the CEBA Bank to file a
consolidated federal income Tax Return following the First Closing Date in
accordance with Section 6.14(d).
(h) The parties agree that in the event that the OCC is not willing
to approve the ownership of the CEBA Equity Interests by FDS Bank, the parties
shall negotiate in good faith with respect to mutually acceptable changes to the
terms of this Agreement and the Program Agreement to provide for such other
corporate or ownership structure of the issuer of Credit Cards under the Program
as the parties mutually agree; provided that failure of the OCC to approve (i)
the ownership of the CEBA Equity Interests by FDS Bank or (ii) such alternative
corporate or ownership structure shall not give rise to the payment of the
Termination Fee pursuant to Section 10.4(b).
SECTION 6.5. Additional Instruments. At the reasonable request of
FDS or FDS Bank, on the one hand, or the Purchaser, on the other hand, at or
after the First Closing, the other Person shall promptly execute and deliver, or
cause to be executed and delivered, to the requesting party such assignments,
bills of sale, assumption agreements, consents and other similar instruments in
addition to those required by this Agreement, in form and substance reasonably
satisfactory to the requesting party, as may be reasonably necessary to carry
out or implement any provision of this Agreement or any Ancillary Agreement or
to make effective the First Purchase and Assumption, the Second Purchase and
Assumption or the Third Purchase and Assumption, as the case may be.
SECTION 6.6. Non-Solicitation. The Purchaser shall continue to
comply with the provisions of Section 6 of the FDS Confidentiality Agreement
during the eighteen (18) month period following the First Closing Date. The
Purchaser shall continue to comply with the provisions of Section 6 of the May
Confidentiality Agreement during the eighteen (18) month period following the
Third Closing Date. The parties agree that money damages would not be a
sufficient remedy for any breach of this Section 6.6 and that, in addition to
all other remedies, the Sellers and their Affiliates will be entitled to seek
specific performance and to seek injunctive or other equitable relief as a
remedy for any breach of this Section 6.6 or the provisions of the
Confidentiality Agreement. Purchaser waives any requirements for the securing or
posting of any bond in connection with such remedy.
SECTION 6.7. Credit Card Marks; Branding. It is expressly agreed
that, except for the license granted in the Program Agreement, the Purchaser is
not purchasing or acquiring
45
any right, title or interest in the FDS Licensed Marks or other trademarks or
service marks of the Sellers or their Affiliates that the Sellers have used
prior to the date of this Agreement (or shall use or own thereafter) in
connection with the Accounts or the Business (collectively, the "Credit Card
Marks"). The Purchaser acknowledges that the Sellers or their Affiliates own the
Credit Card Marks and goodwill related thereto and symbolized thereby.
SECTION 6.8. Notice to Cardholders.
(a) First Purchase and Assumption.
(i) Promptly following the First Closing Date, the Purchaser
shall prepare jointly with FDS and FDS Bank a form or forms of notice to
each Cardholder who has an FDS Account owned by the Purchaser as of the
First Closing Date to the effect that such Account has been acquired by
the Purchaser, provided that such notice shall be sent to any Cardholder
that has an inactive Account following the date such Account becomes
active. Such notice shall be in the form approved by both parties, which
approval shall not be unreasonably withheld or delayed, and shall comply
with all applicable Requirements of Law and the by-laws, rules and
regulations of the Card Associations if applicable. The costs of
preparation and mailing of such notices shall be borne by the Purchaser.
The mailing shall be made in such manner and at such time as the Sellers
and the Purchaser may mutually agree.
(ii) From and after the date of this Agreement and until the
First Closing, the Purchaser and its Affiliates shall not communicate with
the FDS Account Cardholders (whether by mail, by telephone or otherwise)
regarding the Business or their FDS Accounts without the prior written
consent of the Sellers, which consent shall not be unreasonably withheld
or delayed.
(b) Second Purchase and Assumption.
(i) Promptly following the Second Closing Date, the Purchaser
shall prepare jointly with FDS and FDS Bank a form or forms of notice to
each Cardholder who has a GE/Macy's Account to the effect that such
Account has been acquired by the Purchaser; provided that such notice
shall be sent to any Cardholder that has an inactive Account following the
date such Account becomes active. Such notice shall be in the form
approved by both parties, which approval shall not be unreasonably
withheld or delayed, and shall comply with all applicable Requirements of
Law and the by-laws, rules and regulations of the Card Associations if
applicable. The costs of preparation and mailing of such notices shall be
borne by the Purchaser. The mailing shall be made in such manner and at
such time as the Sellers and the Purchaser may mutually agree.
(ii) From and after the date of this Agreement and until the
Second Closing, the Purchaser and its Affiliates shall not communicate
with the GE/Macy's Account Cardholders (whether by mail, by telephone or
otherwise) regarding the Business or their GE/Macy's Accounts without the
prior written consent of the Sellers, which consent shall not be
unreasonably withheld or delayed.
(c) Third Purchase and Assumption.
46
(i) Promptly following the Third Closing Date, the Purchaser
shall prepare jointly with FDS and FDS Bank or May Bank, as the case may
be, a form or forms of notice to each Cardholder who has a May Account to
the effect that such Account has been acquired by the Purchaser; provided
that such notice shall be sent to any Cardholder that has an inactive
Account following the date such Account becomes active. Such notice shall
be in the form approved by both parties, which approval shall not be
unreasonably withheld or delayed, and shall comply with all applicable
Requirements of Law and the by-laws, rules and regulations of the Card
Associations if applicable. The costs of preparation and mailing of such
notices shall be borne by the Purchaser. The mailing shall be made in such
manner and at such time as the Sellers and the Purchaser may mutually
agree.
(ii) From and after the date of this Agreement and until the
Third Closing, the Purchaser and its Affiliates shall not communicate with
the May Account Cardholders (whether by mail, by telephone or otherwise)
regarding the Business or their May Accounts without the prior written
consent of the Sellers, which consent shall not be unreasonably withheld
or delayed.
SECTION 6.9. Cooperation in Obtaining Approval and Consents. The
Purchaser agrees to cause one or more of its Affiliates to assume or to join as
joint and several indemnitors, and irrevocable and unconditional guarantors and
sureties, of the obligations of the Purchaser to the extent reasonably requested
by the applicable trustees or rating agencies and any other party whose consent,
approval or action is reasonably required in connection with transfer of the
Prime Securitization Assets and related Liabilities of the Sellers.
SECTION 6.10. Post-Closing Access. The Purchaser shall, upon
reasonable notice and subject to applicable Requirements of Law relating to the
exchange of information, afford to the Sellers, their Affiliates and their
representatives reasonable access (including the right to copy), without charge,
during normal business hours, to the Acquired Assets and Stock, the Books and
Records relating thereto, any Person who maintains or controls any of the
foregoing for the Purchaser or its Subsidiaries, all as may be reasonably
requested by the Sellers or any of their Affiliates in order to enable the
Sellers to (i) prepare the First Final Closing Statement, the Second Final
Closing Statement, and the Third Final Closing Statement and participate in the
resolution of any disputes relating thereto; (ii) permit the performance of any
covenants required to be performed under this Agreement and the Ancillary
Agreements after the First Closing Date, the Second Closing Date or the Third
Closing Date by the Sellers; (iii) permit the preparation of any Tax Return or
other document required to be filed with any Governmental Authority; and (iv)
respond to any proceeding or to any claim made, or to any request for
information, by any Governmental Authority or any other Person not a party
hereto (other than an Affiliate of the Purchaser), including any Cardholder with
respect to matters that may constitute Excluded Liabilities.
SECTION 6.11. Cooperation in Litigation. (a) Subject to Section
12.4, the Sellers and the Purchaser shall cooperate, to the extent reasonably
requested by the other, in the handling and disposition of any claim, action,
suit, arbitration, proceeding, investigation or regulatory inquiry ("Actions"),
whether or not listed on the Schedules and whether or not pending or threatened
prior to the First Closing, the Second Closing or the Third Closing, that
47
arise out of or are related to any event or occurrence with respect to the
Business prior to the First Closing (or, with respect to the GE/Macy's Assets or
the GE/Macy's Liabilities, the Second Closing and with respect to the May Assets
or May Liabilities, the Third Closing Date); provided, however, that the party
ultimately responsible for discharging such Action shall have the authority to
take such actions as it deems necessary or advisable, in its sole discretion, to
discharge such Action, subject, however, to the provisions of this Agreement.
(b) The Sellers shall be entitled to keep copies of all litigation
filings, correspondence, Books and Records and other documentation of any kind
that the Sellers reasonably determine are necessary or desirable in connection
with the handling and disposition of the Actions by the Sellers and their
Affiliates.
SECTION 6.12. Preservation of and Access to Books and Records. The
Purchaser shall preserve and keep all Books and Records of the Business and all
information relating to the accounting, business, financial and Tax affairs of
the Business that are in existence on the First Closing Date or that come into
existence after the First Closing Date but relate to the Business prior to the
First Closing Date (in the case of the FDS Assets and the FDS Liabilities) or
the Second Closing Date (in the case of the GE/Macy's Assets and the GE/Macy's
Liabilities) or the Third Closing Date (in the case of the May Assets and the
May Liabilities) for a period of seven (7) years after the Third Closing Date,
or for any longer period (i) as may be required by any federal, state, local or
foreign governmental body or agency, (ii) as may be reasonably necessary with
respect to the prosecution or defense of any audit or other Action that is then
pending or threatened, or (iii) that is equivalent to the period established by
any applicable statute of limitations (excluding any extension or waiver
thereof) with respect to matters pertaining to Taxes. For a period of four (4)
years following the seven (7) year period specified above, if the Purchaser
wishes to destroy such records, the Purchaser shall first provide the Sellers
the opportunity to take possession of the same (at the Sellers' cost and
expense).
SECTION 6.13. Bulk Sales Law. The Purchaser hereby waives compliance
by the Sellers, in connection with the transactions contemplated hereby, with
the provisions of any applicable bulk sales law (including the Uniform
Commercial Code Bulk Transfer provisions).
SECTION 6.14. CEBA Bank.
(a) As promptly as practicable after the date of this Agreement (but
in any event prior to the First Closing), the Purchaser shall form CEBA Bank by
(i) causing an organizing group to execute and file with the OCC all required
organization documents; (ii) applying for deposit insurance; and (iii) filing
any other required documents with such other applicable Governmental Authorities
as the Purchaser shall determine to be necessary or appropriate.
(b) The Purchaser shall use its reasonable best efforts to, as
promptly as practicable following the formation of CEBA Bank, cause CEBA Bank to
be (i) licensed and qualified in all jurisdictions necessary to service the
Accounts in accordance with all applicable Requirements of Law, except where the
failure to be so qualified would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on CEBA Bank or the
Business or on the ability of CEBA Bank to perform its duties as servicer, or on
ability of CEBA Bank to perform its duties as sub-servicer, under the Prime
Pooling and Servicing
48
Agreement following the First Closing Date and (ii) licensed to participate in
the programs of each of the Card Associations to the extent necessary to perform
its obligations hereunder and thereunder following the First Closing.
(c) Pursuant to Section 2.4(d), at the First Closing, the Purchaser
shall cause CEBA Bank to issue to FDS Bank (or its assignee) shares of CEBA
Preferred Stock with the rights and preferences set forth in Annex E (the "CEBA
Equity Interests"). Upon the issuance of the CEBA Equity Interests to FDS Bank
(or its assignee), the CEBA Equity Interests will be duly authorized, validly
issued, fully paid and nonassessable.
(d) The Purchaser and the CEBA Bank shall file a consolidated
federal income Tax Return following the First Closing Date.
SECTION 6.15. Third-Party Consents.
(a) To the extent that any consent needed to assign to the Purchaser
any Assigned Contract has not been obtained on or prior to the First Closing
Date or the Second Closing Date, as applicable, this Agreement and any document
delivered pursuant hereto shall not constitute an assignment or attempted
assignment thereof if such assignment or attempted assignment would constitute a
breach of such Assigned Contract or would give rise to a valid right of
termination thereof. If any such third-party consent shall not be obtained on or
prior to the First Closing Date or the Second Closing Date, as applicable, then
the parties shall cooperate in entering into alternative arrangements at the
First Closing Date or the Second Closing Date, as applicable, pursuant to which
the Purchaser would obtain substantially all of the benefits and become
responsible for substantially all of the obligations under such Assigned
Contract.
(b) The Purchaser and the Sellers shall use commercially reasonable
efforts (which for purposes of this Section 6.15 shall not require any payment
of money by the Sellers or the Purchaser, except as agreed between them in
writing) to seek any required consents to the assignment of the Assigned
Contracts which have not been obtained as of the First Closing Date or the
Second Closing Date, as applicable, and promptly upon receipt of such consents
shall effect such assignments.
(c) The parties shall cooperate to (i) identify Contracts of May Co.
and its Affiliates that should be assigned to the Purchaser in connection with
the Third Assignment and Assumption and shall mutually agree on the Contracts
that shall be so assigned and (ii) identify such third party consents the
parties mutually agree are necessary in connection with the Third Assignment and
Assumption. The Sellers shall update their Schedules relating to Sections 5.1(c)
and 5.1(d) and Schedules 1.1(a) and 7.1 prior to the Third Closing to reflect
the existence of any such Contracts or consents and Sections 6.15(a) and 6.15(b)
shall apply to such Assigned Contracts mutatis mutandis with respect to the
Third Closing Date.
SECTION 6.16. May Portfolio.
(a) FDS shall permit the Purchaser to conduct reasonable due
diligence with respect to the May Assets and the May Liabilities at a time to be
mutually agreed by the parties between sixty (60) days and one hundred twenty
(120) days prior to the anticipated Third
49
Closing Date. Except as set forth in Sections 6.16(b), the Purchaser's rights
and obligations hereunder shall not be affected in any manner by such due
diligence.
(b) In the event that:
(i) the requirement set forth in Schedule 6.16 with respect to
this Section 6.16(b)(i) shall not have been satisfied, or
(ii) as a result of the due diligence specified in Schedule
6.16, the Purchaser determines that FDS will be unable to make one or more of
the representations and warranties referred to in Section 9.2(b) and that such
failure would constitute a failure of the closing condition set forth in Section
9.2(b) and provides written notice of such determination to FDS, or
(iii) following the closing of the May Merger, FDS provides
written notice to the Purchaser that FDS will be unable to make one or more of
the representations and warranties referred to in Section 9.2(b) and that such
failure would constitute a failure of the closing condition set forth in Section
9.2(b),
then the following shall apply. In the event of a notice delivered by the
Purchaser to FDS, the Purchaser may elect in such notice (A) to close the Third
Purchase and Assumption and waive the obligation of FDS to make the
representations and warranties with respect to the facts and circumstances
giving rise to the inability of FDS to make such representations or warranties
identified pursuant to clause (b)(ii) or (b)(iii) above or permit FDS to modify
such representations and warranties such that FDS is able to make such
representations and warranties, or (B) to initiate a renegotiation of the May
Purchase Price (it being understood that the Purchaser shall not propose any
adjustment to the financial or other terms and conditions of the Program
Agreement other than as expressly contemplated in Sections 4.8 and 4.9 of the
Program Agreement; provided that (i) the Purchaser will take into account the
terms and conditions of the Program Agreement when proposing any adjustment to
the May Purchase Price and (ii) nothing herein shall preclude the Purchaser from
proposing to reduce the May Purchase Price to below the Gross Receivables value
of the May Assets). In the event of a notice delivered by FDS to Purchaser, the
Purchaser shall, within ten (10) Business Days following the receipt of such
notice, make one of the specified elections set forth in the previous sentence
by written notice to FDS. If Purchaser makes an election set forth in clause (A)
above, the parties shall cooperate to close the Third Purchase and Assumption in
accordance with such election; provided that the closing of the Third Purchase
and Assumption shall not constitute a waiver by the Purchaser of any of its
rights to be indemnified for Losses other than Losses arising out of or relating
to the facts and circumstances giving rise to the inability of FDS to make the
representations and warranties identified pursuant to clause (b)(ii) or (b)(iii)
above. If Purchaser makes an election set forth in clause (B) above, the parties
shall negotiate in good faith to agree upon a revised May Purchase Price;
provided that if the parties do not agree upon a revised May Purchase Price
within thirty (30) days following the date of the receipt of the notice of
election by Purchaser, then FDS may take either of the following actions in its
sole discretion: (Y) accept the price last proposed by the Purchaser during the
thirty (30) day period as the new May Purchase Price; or (Z) terminate this
Agreement in its entirety pursuant to Section 10.3.
50
SECTION 6.17. Interim Servicing. Notwithstanding that following the
First Closing FDS is no longer the Servicer, FDS hereby agrees that during the
period from the First Closing and until December 15, 2005, it shall use its
reasonable best efforts to prepare or cause to be prepared the reports specified
in Schedule 6.17 and deliver or cause to be delivered such reports to Purchaser
within time frames mutually agreed upon by the parties. FDS hereby agrees to
provide Purchaser with all necessary and reasonable access to its facilities and
personnel necessary for Purchaser to (i) verify the accuracy and completeness of
the data contained in each such report and (ii) prepare the annual servicer's
certificate and the annual independent accountants' report in accordance with
the Prime Pooling and Servicing Agreement. In consideration for performing the
services set forth in this Section 6.17 (the "Interim Services"), Purchaser
shall pay by wire transfer of immediately available funds (in U.S. dollars) to
FDS within ten (10) Business Days of the receipt of any invoice from FDS in
respect of the Interim Services the actual costs and expenses (including
allocated costs and expenses) incurred by FDS and its Affiliates in providing
the Interim Services as set forth on such invoice. The amount of such payment
shall not be a "Program Expense" under the Program Agreement. The Purchaser
shall indemnify and hold harmless FDS and its Affiliates from any and all Losses
arising from the performance of the Interim Services, except to the extent any
of the foregoing acted with gross negligence or willful misconduct in performing
such Interim Services.
SECTION 6.18. Securitization Matters. (a) At the First Closing Date,
FDS shall cause Jones Day, counsel to FDS, to deliver to the Purchaser a
reliance letter with respect to the most recent opinion of Jones Day with
respect to the Prime Securitization Receivables (the "Jones Day Opinion"),
together with a certificate from a duly authorized officer of FDS that the
assumptions set forth or referred to in the Jones Day Opinion have been complied
with in all material respects since the date of such opinion.
(b) In the event that FDS is unable to make any of the
representations and warranties set forth in Section 5.1(s) at the First Closing
or the Second Closing or the Third Closing, as applicable, FDS shall not be
required to make such representations and warranties and FDS shall make such
other representations and warranties with respect to the subject matter of
Section 5.1(s) as shall be mutually agreed between the Purchaser and FDS.
ARTICLE VII
CONDITIONS TO EFFECT THE FIRST PURCHASE AND ASSUMPTION
SECTION 7.1. Conditions to Each Party's Obligations. The respective
obligations of the Sellers and the Purchaser to effect the First Purchase and
Assumption are subject to the fulfillment or written waiver, at or prior to the
First Closing Date, of the following conditions:
(a) Governmental and Regulatory Approvals. All of the Requisite
Regulatory Approvals shall have been obtained and shall be in full force and
effect and all waiting periods required by law (including under the HSR Act)
shall have expired or been terminated, and all other approvals or authorizations
of, filings and registrations with, and notifications to, all Governmental
Authorities required to effect the First Purchase and Assumption shall have been
51
obtained and shall be in full force and effect, except to the extent that the
failure to obtain such an approval or authorization (other than a Requisite
Regulatory Approval) would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on the Business or on the Sellers or
the Purchaser.
(b) Third Party Consents. The consents and approvals of the Persons
set forth in Schedule 7.1 with respect to the First Closing shall have been
obtained and shall be in full force and effect, except to the extent that the
failure to obtain such a consent or approval would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Business.
(c) No Injunction or Prohibition. No Governmental Authority of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, by-law, judgment, decree, injunction or
other order (whether temporary, preliminary or permanent) that is in effect and
prohibits or makes illegal consummation of the transactions contemplated by this
Agreement or the Ancillary Agreements.
(d) Program Agreement. The Program Agreement shall have been duly
executed and delivered by the parties thereto.
(e) Instrument of Assignment and Assumption. The First Instrument of
Assignment and Assumption shall have been duly executed and delivered by the
parties thereto.
(f) Financing Statements. Sellers shall have executed and delivered
UCC-1 financing statements to be filed in the Offices of the Secretaries of
State of any state necessary to perfect the sale of the Gross Receivables
purchased pursuant to the First Purchase and Assumption.
(g) Required Amendments and Confirmations. The Required Amendments
and Confirmations shall have been obtained and shall have become effective in
accordance with their terms.
(h) Prime II. The Sellers shall have given all notices and satisfied
all conditions necessary to pay, and shall have paid in full, the investor
certificates issued by Prime II Master Trust and shall have terminated the Prime
II Master Trust.
(i) Card Associations. The Card Associations shall have confirmed
that, upon the consummation of the First Purchase and Assumption, CEBA Bank
shall be a Participating Member in the VISA Partnership Program in good standing
with all necessary power and authority under the by-laws and membership and
operating rules of the Card Associations to carry on the Business and issue
Credit Cards as contemplated by the Program Agreement.
SECTION 7.2. Conditions to Obligations of the Purchaser. The
obligations of the Purchaser to effect the First Purchase and Assumption are
subject to the fulfillment or waiver by it in writing, at or prior to the First
Closing Date, of the following additional conditions:
52
(a) Performance. The Sellers shall have performed in all material
respects all their covenants and agreements set forth in this Agreement to the
extent required to be performed at or prior to the First Closing Date.
(b) Representations. The representations of FDS set forth in this
Agreement shall be true and correct as of (1) the date of this Agreement and (2)
the First Closing Date (except that representations that by their terms speak as
of the date of this Agreement or some other date shall be true and correct only
as of such date), except to the extent that any failure to be so true and
correct (after excluding the effect of any Knowledge, Material Adverse Effect or
other materiality qualifier set forth in any such representation) would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Business or the Sellers.
(c) Certificate. The Purchaser shall have received a certificate
signed on each Sellers' behalf by an executive officer of each Seller, dated the
First Closing Date, to the effect that the conditions set forth in Sections
7.2(a) and 7.2(b) have been satisfied.
(d) Securitization Opinions. The Purchaser shall have received
copies of any Tax opinions or other opinions to the trustee expressly required
by the Securitization Documents to be delivered on behalf of the Sellers in
order to consummate the transactions contemplated hereby.
SECTION 7.3. Conditions to Obligations of the Sellers. The
obligations of the Sellers to effect the First Purchase and Assumption are
subject to the fulfillment or waiver by them in writing, at or prior to the
First Closing Date, of the following additional conditions:
(a) Performance. The Purchaser shall have performed in all material
respects all its covenants and agreements set forth in this Agreement to the
extent required to be performed at or prior to the First Closing Date.
(b) Representations. The representations of the Purchaser set forth
in this Agreement shall be true and correct as of (i) the date of this Agreement
and (ii) the First Closing Date (except that any representations that by their
terms speak as of the date of this Agreement or some other date shall be true
and correct only as of such date), except to the extent that any failure to be
so true and correct (after excluding the effect of any Knowledge, Material
Adverse Effect or materiality qualifier set forth in any such representation)
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Business following the First Closing Date or on
the Purchaser.
(c) Certificate. The Sellers shall have received a certificate
signed on the Purchaser's behalf by an executive officer of the Purchaser, dated
the First Closing Date, to the effect that the conditions set forth in Sections
7.3(a) and 7.3(b) have been satisfied.
(d) Securitization Opinions. The Sellers shall have received copies
of any Tax opinions or other opinions provided to the Purchaser, on behalf of
the Sellers, as required by the Securitization Documents, rating agencies or
trustee in connection with the acquisition of the Prime Stock and the assumption
of the roles of transferor and servicer under the Prime Master Trust in order to
consummate the transactions contemplated hereby.
53
(e) CEBA Equity Interests. The Purchaser shall have taken all of the
required actions, corporate and otherwise, to cause CEBA Bank to issue to FDS
Bank (or its assignee) the CEBA Equity Interests.
ARTICLE VIII
CONDITIONS TO EFFECT THE SECOND PURCHASE AND ASSUMPTION
SECTION 8.1. Conditions to Each Party's Obligations. The respective
obligations of the Sellers and the Purchaser to effect the Second Purchase and
Assumption are subject to the fulfillment or written waiver, at or prior to the
Second Closing Date, of the following conditions:
(a) Governmental and Regulatory Approvals. All of the Requisite
Regulatory Approvals shall have been obtained and shall be in full force and
effect and all waiting periods required by law (including under the HSR Act)
shall have expired or been terminated, and all other approvals or authorizations
of, filings and registrations with, and notifications to, all Governmental
Authorities required to effect the Second Purchase and Assumption shall have
been obtained or made and shall be in full force and effect, except to the
extent that the failure to obtain such an approval or authorization (other than
a Requisite Regulatory Approval) would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the GE/Macy's
Assets following the Second Closing Date.
(b) Third Party Consents. The consents and approvals of the Persons
set forth in Schedule 7.1 with respect to the Second Closing shall have been
obtained and shall be in full force and effect, except to the extent that the
failure to obtain such a consent or approval would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
GE/Macy's Assets following the Second Closing Date.
(c) No Injunction or Prohibition. No Governmental Authority of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, by-law, judgment, decree, injunction or
other order (whether temporary, preliminary or permanent) that is in effect and
prohibits or makes illegal consummation of the transactions contemplated by this
Agreement or the Ancillary Agreements to occur on the Second Closing Date.
(d) Instrument of Assignment and Assumption. The Second Instrument
of Assignment and Assumption shall have been duly executed and delivered by the
parties thereto.
(e) Financing Statements. Sellers shall have executed and delivered
UCC-1 financing statements to be filed in the Offices of the Secretaries of
State of any states necessary to perfect the sale of the Gross Receivables
purchased pursuant to the Second Purchase and Assumption.
(f) Completion of First Closing. The First Purchase and Assumption
shall have been completed either prior to or contemporaneously with the Second
Purchase and Assumption.
54
(g) Termination of GE/Macy's Program Agreement. The GE/Macy's
Program Agreement shall have terminated and the GE/Macy's Accounts and related
assets and liabilities shall have been reconveyed to the Sellers or their
designee (which may be the Purchaser) prior to or contemporaneously with the
Second Closing.
SECTION 8.2. Conditions to Obligations of the Purchaser. The
obligations of the Purchaser to effect the Second Purchase and Assumption are
subject to the fulfillment or written waiver, at or prior to the Second Closing
Date, of the following additional conditions:
(a) Performance of Obligations. The Sellers shall have performed in
all material respects all their covenants and agreements set forth in this
Agreement with respect to the GE/Macy's Assets and the GE/Macy's Liabilities to
the extent required to be performed at or prior to the Second Closing Date.
(b) Representations. The representations of FDS set forth in this
Agreement (other than the representations in Sections 5.1(e)(1), (l)(1), (m),
(n) and (q), and any other representations of FDS to the extent relating to the
FDS Assets and the FDS Liabilities) shall be true and correct as of (i) the date
of this Agreement and (ii) the Second Closing Date (except that representations
that by their terms speak as of the date of this Agreement or some other date
shall be true and correct only as of such date), except to the extent that any
failure to be so true and correct (after excluding the effect of any Knowledge,
Material Adverse Effect or materiality qualifier set forth in any such
representation) would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the GE/Macy's Assets or on the Sellers.
(c) Certificate. The Purchaser shall have received a certificate
signed on each Seller's behalf by an executive officer of each Seller, dated the
Second Closing Date, to the effect that the conditions set forth in Sections
8.2(a) and 8.2(b) have been satisfied.
SECTION 8.3. Conditions to Obligations of FDS and FDS Bank. The
obligations of the Sellers to effect the Second Purchase and Assumption are
subject to the fulfillment or waiver in writing, at or prior to the Second
Closing Date, of the following additional conditions:
(a) Performance. The Purchaser shall have performed in all material
respects all its covenants and agreements set forth in this Agreement to the
extent required at or prior to the Second Closing Date.
(b) Representations. The representations of the Purchaser set forth
in this Agreement (other than the representations in Sections 5.2(e), (k) and
(l)) shall be true and correct as of the date of this Agreement and the Second
Closing Date (except that any representations that by their terms speak as of
the date of this Agreement or some other date shall be true and correct only as
of such date), except to the extent that any failure to be so true and correct
(after excluding the effect of any Knowledge, Material Adverse Effect or
materiality qualifier set forth in any such representation) would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on the GE/Macy's Assets or on the Purchaser.
55
(c) Certificate. The Sellers shall have received a certificate
signed on the Purchaser's behalf by an executive officer of the Purchaser, dated
the Second Closing Date, to the effect that the conditions set forth in Sections
8.3(a) and 8.3(b) have been satisfied.
ARTICLE IX
CONDITIONS TO EFFECT THE THIRD PURCHASE AND ASSUMPTION
SECTION 9.1. Conditions to Each Party's Obligations. The respective
obligations of the Sellers and the Purchaser to effect the Third Purchase and
Assumption are subject to the fulfillment or written waiver, at or prior to the
Third Closing Date, of the following conditions:
(a) Governmental and Regulatory Approvals. All of the Requisite
Regulatory Approvals shall have been obtained and shall be in full force and
effect and all waiting periods required by law (including under the HSR Act)
shall have expired or been terminated, and all other approvals or authorizations
of, filings and registrations with, and notifications to, all Governmental
Authorities required to effect the Third Purchase and Assumption shall have been
obtained or made and shall be in full force and effect, except to the extent
that the failure to obtain such an approval or authorization (other than a
Requisite Regulatory Approval) would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the May Assets
following the Third Closing Date.
(b) Third Party Consents. The consents and approvals of the Persons
set forth in Schedule 7.1 with respect to the Third Closing shall have been
obtained and shall be in full force and effect, except to the extent that the
failure to obtain such a consent or approval would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the May
Assets following the Third Closing Date.
(c) No Injunction or Prohibition. No Governmental Authority of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, by-law, judgment, decree, injunction or
other order (whether temporary, preliminary or permanent) that is in effect and
prohibits or makes illegal consummation of the transactions contemplated by this
Agreement or the Ancillary Agreements to occur on the Third Closing Date.
(d) Instrument of Assignment and Assumption. The Third Instrument of
Assignment and Assumption shall have been duly executed and delivered by the
parties thereto.
(e) Financing Statements. Sellers shall have executed and delivered
UCC-1 financing statements to be filed in the Offices of the Secretaries of
State of any states necessary to perfect the sale of the Gross Receivables
purchased pursuant to the Third Purchase and Assumption.
(f) Completion of First and Second Closing. The First and Second
Purchase and Assumption shall have been completed either prior to or
contemporaneously with the Third Purchase and Assumption.
56
(g) Closing of the May Merger. The May Merger shall have been
consummated.
SECTION 9.2. Conditions to Obligations of the Purchaser. The
obligations of the Purchaser to effect the Third Purchase and Assumption are
subject to the fulfillment or written waiver, at or prior to the Third Closing
Date, of the following additional conditions:
(a) Performance of Obligations. The Sellers shall have performed in
all material respects all their covenants and agreements set forth in this
Agreement with respect to the May Assets and the May Liabilities to the extent
required to be performed at or prior to the Third Closing Date.
(b) Representations. Subject to Sections 6.16(b) and (c), FDS shall
make the representations set forth in Section 5.1, as of the Third Closing Date,
mutatis mutandis as if the May Assets were the FDS Assets or the GE/Macy's
Assets, as applicable, and the May Liabilities were the FDS Liabilities or the
GE/Macy's Liabilities, as applicable (to the extent the categories of FDS
Assets, FDS Liabilities, GE/Macy's Assets and GE/Macy's Liabilities, on the one
hand, and the May Assets and the May Liabilities, on the other hand, are of
similar nature); provided that the representation contained in Section 5.1(e)(2)
shall be made with respect to the financial information set forth in Schedule
9.2(b); provided, further, that FDS shall not make the representations in
Sections 5.1(e)(1), (l)(1), (m), (n) and (q) or any representations with respect
to the Prime Stock, the FDS Assets, the FDS Liabilities, the GE/Macy's Assets or
the GE/Macy's Liabilities; and provided, further, that solely for the purposes
of the representations and warranties made pursuant to this Section 9.2(b) and
all rights arising therefrom, including any rights to indemnification, the term
"Business" shall include the May Business.
(c) Certificate. The Purchaser shall have received a certificate
signed on each Seller's behalf by an executive officer of each Seller, dated the
Third Closing Date, to the effect that the conditions set forth in Section
9.2(a) have been satisfied and making the representations specified in Section
9.2(b).
SECTION 9.3. Conditions to Obligations of FDS and FDS Bank. The
obligations of the Sellers to effect the Third Purchase and Assumption are
subject to the fulfillment or waiver in writing, at or prior to the Third
Closing Date, of the following additional conditions:
(a) Performance. The Purchaser shall have performed in all material
respects all its covenants and agreements set forth in this Agreement to the
extent required at or prior to the Third Closing Date.
(b) Representations. The representations of the Purchaser set forth
in this Agreement (other than the representations in Sections 5.2(e), (k) and
(l)) shall be true and correct as of the date of this Agreement and the Third
Closing Date (except that any representations that by their terms speak as of
the date of this Agreement or some other date shall be true and correct only as
of such date), except to the extent that any failure to be so true and correct
(after excluding the effect of any Knowledge, Material Adverse Effect or
materiality qualifier set forth in any such representation) would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on the May Assets or on the Purchaser.
57
(c) Certificate. The Sellers shall have received a certificate
signed on the Purchaser's behalf by an executive officer of the Purchaser, dated
the Third Closing Date, to the effect that the conditions set forth in Sections
9.3(a) and 9.3(b) have been satisfied.
ARTICLE X
TERMINATION
SECTION 10.1. Termination Prior to the First Closing. This Agreement
may be terminated at any time before the First Closing Date:
(a) by the mutual written consent of the parties hereto;
(b) by either the Purchaser or FDS, if any Requisite Regulatory
Approval or any other approval of a Governmental Authority, the lack of which
would result in the failure to satisfy the condition set forth in Section
7.1(a), has been denied by the applicable Governmental Authority and such denial
has become final and nonappealable;
(c) by either the Purchaser or FDS, if prior to the First Closing,
(i) any permanent injunction or action by any Governmental Authority of
competent jurisdiction prohibiting consummation of the transactions contemplated
by this Agreement or the Ancillary Agreements becomes final and nonappealable;
(ii) any law or regulation makes consummation of the transactions contemplated
by this Agreement or the Ancillary Agreements illegal or otherwise prohibited;
or (iii) consummation of the transactions contemplated by this Agreement or the
Ancillary Agreements would violate any nonappealable final order, decree or
judgment of any Governmental Authority having competent jurisdiction;
(d) by either the Purchaser or FDS if the First Purchase and
Assumption is not consummated by March 1, 2006; provided, however, that neither
the Purchaser nor FDS may terminate this Agreement pursuant to this Section
10.1(d) if such party's breach of any representation, warranty or covenant
contained herein has been the cause of or resulted in the failure to consummate
such transactions by such date; or
(e) by either the Purchaser or FDS, in the event of a breach or
default in the performance by the other party of any representation, warranty,
covenant or agreement of such other party, which breach or default (i) would,
individually or in the aggregate with all other uncured breaches and defaults of
such other party, constitute grounds for the conditions set forth in Section
7.2(a) or (b) or Section 7.3(a) or (b), as the case may be, not to be satisfied
at the First Closing Date, and (ii) has not been, or cannot be, cured within
thirty (30) days after written notice, describing such breach or default in
reasonable detail, is given by the terminating party to the breaching or
defaulting party.
SECTION 10.2. Termination Prior to the Second Closing(a) . This
Agreement may be terminated following the First Closing Date and prior to the
Second Closing Date by either the Purchaser or FDS if the Second Purchase and
Assumption is not consummated by December 31, 2006; provided, however, that
neither the Purchaser nor FDS may terminate this Agreement pursuant to this
Section 10.2 if such party's breach of any representation, warranty or covenant
58
contained herein has been the cause of or resulted in the failure to consummate
such transactions by such date.
SECTION 10.3. Termination Prior to the Third Closing. This Agreement
may be terminated pursuant to Section 6.16(b) following the First Closing Date
and prior to the Third Closing Date.
SECTION 10.4. Effect of Termination.
(a) If this Agreement is terminated, it shall become void and of no
further effect and no party hereto (or any of its Affiliates, directors,
officers, representatives or agents) shall have any liability or further
obligation to any other party to this Agreement, except (i) for payment of the
Termination Fee if applicable in accordance with Section 10.4(b), (ii) the
representations set forth in Sections 5.1(p) and 5.2(j) and the obligations set
forth in Sections 6.3(b)-(d), this Section 10.4 and Article XIII (other than
Section 13.10 thereof) shall continue to apply following any such termination
and (iii) termination of this Agreement shall not relieve any party of any
liability arising out of or resulting from any knowing, willful or intentional
breach of this Agreement by such party prior to such termination.
Notwithstanding the foregoing, if this Agreement is terminated after the First
Closing Date or the Second Closing Date, then this Agreement shall remain in
effect but solely as to the matters relating to any Acquired Assets and Stock
sold to the Purchaser prior to such termination.
(b) If this Agreement is terminated pursuant to Section 10.1(b) as a
result of the Purchaser's failure to obtain the approval of the Office of the
Comptroller of the Currency (the "OCC") required to be obtained by it or
approval of the Board of Governors of the Federal Reserve System where such
approval is necessary pursuant to any Requirement of Law or because the OCC or
the Board of Governors of the Federal Reserve System shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, by-law,
judgment, decree, injunction or other order (whether temporary, preliminary or
permanent) that prohibits or makes illegal consummation of the transactions
contemplated by this Agreement or the Ancillary Agreements, then the Purchaser
shall promptly, but in no event later than date of such termination, pay FDS an
amount equal to the Termination Fee by wire transfer of immediately available
funds. The parties acknowledge that the agreement contained in this Section
10.4(b) is an integral part of the transactions contemplated by this Agreement,
and that, without this agreement, FDS and FDS Bank would not enter into this
Agreement; accordingly, if the Purchaser fails to pay promptly any amount due
pursuant to this Section 10.4(b), and, in order to obtain such payment, FDS or
FDS Bank commences a suit which results in a judgment against the Purchaser for
the Termination Fee, the Purchaser shall pay to FDS its reasonable costs and
expenses (including reasonable attorneys' fees and expenses) in connection with
such suit, together with interest on the amount of the fee at the Federal Funds
Rate in effect on the date such payment was required to be made notwithstanding
the provisions of Section 10.4(b). The parties agree that any remedy or amount
payable pursuant to this Section 10.4(b) shall constitute FDS's sole and
exclusive remedy for the Purchaser's failure to obtain the approvals referred to
above from the OCC or the Board of Governors of the Federal Reserve System.
59
ARTICLE XI
TAX MATTERS
SECTION 11.1. Cooperation. The parties hereto shall furnish or cause
to be furnished (and shall cause Prime to furnish) to each other, promptly upon
reasonable request, any information and assistance relating to the Acquired
Assets and Stock, the Business and Prime as the requesting party deems
reasonably necessary in connection with the filing of any Tax Returns, the
preparation for any audit by any Governmental Authority, the response to any
inquiry by a Governmental Authority, the mailing or filing of any notice and the
prosecution or defense of any claim, suit or proceeding relating to any Tax
Returns or any other filing required to be made with any Governmental Authority
or any other matter related to Taxes.
SECTION 11.2. Tax Returns. All Tax Returns filed by the Sellers or
Prime for periods ending on or before the First Closing Date (or the Second
Closing Date in the case of the GE/Macy's Assets and the Third Closing Date in
the case of the May Assets) shall remain the property of the Sellers. The
Purchaser shall be given access to Tax Returns as deemed reasonably necessary in
the sole discretion of the Sellers.
SECTION 11.3. Conveyance Taxes. All excise, sales, use, transfer,
documentary, stamp or similar Taxes that are payable or that arise as a result
of the consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements and any recording or filing fees with respect thereto shall
be borne by the Purchaser. Such Taxes shall not be considered Excluded
Liabilities.
SECTION 11.4. Refunds. The Purchaser shall, if the Sellers so
request and at the Sellers' expense (for reasonable out-of-pocket costs and
expenses), cooperate with the Sellers to file for and obtain any Tax refund or
credit related to the Business or the Acquired Assets and Stock or Prime that
relates to any period ending on or before the First Closing Date (in the case of
Prime, the FDS Assets or the Business (other than the GE/Macy's Assets and the
May Assets)), the Second Closing Date (in the case of the GE/Macy's Assets) or
the Third Closing Date (in the case of the May Assets). If the Purchaser at any
time receives a Tax refund or credit described in the immediately preceding
sentence, the Purchaser shall promptly pay over such refund or the amount of
such credit to the Sellers; provided, however, that, if a Governmental Authority
at any time requires the Purchaser to reimburse such Governmental Authority for
the amount of any refund or credit previously paid to the Sellers, the Sellers
jointly and severally shall indemnify, hold harmless and reimburse the Purchaser
and its Affiliates for the amount of such refund or credit, including all
interest, penalties, costs and expenses associated therewith. Any Tax refunds or
credits relating to Prime, the FDS Assets, the GE/Macy's Assets, the May Assets
or the Business with respect to a Straddle Period shall be equitably apportioned
between the Purchaser, on the one hand, and the Sellers, on the other hand.
Notwithstanding the foregoing, the Purchaser shall be entitled to all refunds
with respect to any Taxes paid pursuant to Section 11.3.
SECTION 11.5. Tax Filing Obligations. FDS shall include Prime's
taxable income and the income of the Master Trusts through the close of business
on the First Closing Date in FDS's consolidated federal income Tax Returns and
in any combined, consolidated or unitary Tax Returns that include Prime, and
shall pay or cause Prime to pay any Taxes due with
60
respect thereto. FDS shall prepare and timely file (or cause to be prepared and
timely filed) all Tax Returns with respect to (i) Prime, the FDS Assets and the
Business (other than the GE/Macy's Assets and the May Assets) for all periods
ending on or before the First Closing Date, (ii) the GE/Macy's Assets for all
periods ending on or before the Second Closing Date and (iii) the May Assets for
all periods ending on or before the Third Closing Date. With respect to state
and local Tax Returns required to be filed after the First Closing Date (in the
case of Prime, the FDS Assets or the Business (other than the GE/Macy's Assets
and the May Assets)), the Second Closing Date (in the case of the GE/Macy's
Assets) or the Third Closing Date (in the case of the May Assets), FDS shall,
when permitted by applicable Requirements of Law, elect to file a short-period
Tax Return for the portion of such period which ends on the First Closing Date,
the Second Closing Date or the Third Closing Date as applicable. FDS shall
prepare and timely file (or cause to be prepared and timely filed) all such
short-period Tax Returns.
SECTION 11.6. Purchase Price Allocations; Section 338(h)(10)
Election.
(a) FDS and the Purchaser shall join in timely making an election
under Section 338(h)(10) of the Code and any comparable provision of state,
local or foreign Tax law with respect to the sale of the Prime Stock
(collectively, the "Section 338(h)(10) Election"). FDS and the Purchaser shall
cooperate in the completion and timely filing of the Section 338(h)(10) Election
in accordance with the provisions of Treasury Regulation Section 1.338(h)(10)-1
and any comparable provisions of state, local or foreign Tax law. In furtherance
of the foregoing, (i) prior to the First Closing Date, FDS and the Purchaser
shall agree, based on information then available, on the form and content of
Internal Revenue Service ("IRS") Form 8023 ("Form 8023"), and (ii) on or prior
to the First Closing Date, FDS and the Purchaser shall execute two originals of
such Form 8023, containing information then available. Such Form 8023 shall be
filed in accordance with applicable Requirements of Law.
(b) Following the First Closing Date, the Purchaser and the Sellers
shall attempt to agree on the allocation solely for Tax purposes of (i) the FDS
Purchase Price between the FDS Assets (the "FDS Allocation Amount") and the
Prime Stock (the "Prime Stock Amount"), and (ii) the FDS Allocation Amount, the
FDS Liabilities, to the extent required, and any other relevant amount among the
FDS Assets (together, the "First Closing Allocation"). The First Closing
Allocation shall comply with the requirements of Sections 338 and 1060 of the
Code and shall provide for an allocation of not less than the following amount
(the "Minimum FDS Allocation") to items (1), (4), (5), (6) and (7) of the
definition of "FDS Assets" (such assets, collectively, the "FDS Account
Assets"):
.06 x [(FDS Purchase Price + FDS Liabilities) - $50,000,000)] +
$50,000,000.
If the parties cannot agree on the First Closing Allocation within ninety (90)
days after the First Closing Date, the First Closing Allocation shall be
determined by the Accountant through the dispute resolution method described in
Section 2.3(c); provided, that the Accountant shall not allocate less than the
Minimum FDS Allocation to the FDS Account Assets. Notwithstanding anything to
the contrary contained herein, the Purchaser and the Sellers shall use the First
Closing Allocation, as finally determined pursuant to this Section 11.6(b), for
all Tax purposes, including the filing of IRS Forms 8594 and 8883 and all other
Tax Returns. If the FDS Purchase
61
Price or the FDS Liabilities are adjusted, the parties shall revise the First
Closing Allocation on a basis consistent with this Section 11.6(b) in order to
reflect such adjustment.
(c) Following the determination of the Prime Stock Amount pursuant
to Section 11.6(b) above, the Purchaser and the Sellers shall attempt to agree
on the allocation solely for Tax purposes of the Prime Stock Amount, any other
relevant items appropriately treated as purchase price attributable to the Prime
Stock and the Liabilities of Prime among the assets of Prime in compliance with
the requirements of Sections 338 and 1060 of the Code (the "Prime Allocation").
If the parties cannot agree on the Prime Allocation within forty-five (45) days
after the determination of the Prime Stock Amount, each of the Sellers, on the
one hand, and the Purchaser, on the other hand, shall use its own allocation for
all Tax purposes, including the filing of IRS Form 8883 and all other Tax
Returns. If the Prime Stock Amount or a Liability of Prime is adjusted, the
parties shall revise the Prime Allocation, if any, on a basis consistent with
this Section 11.6(c) in order to reflect such adjustment.
(d) Following the Second Closing Date, the Purchaser and the Sellers
shall attempt to agree on the allocation solely for Tax purposes of the
GE/Macy's Purchase Price, the GE/Macy's Liabilities, to the extent required, and
any other relevant amount among the GE/Macy's Assets (the "Second Closing
Allocation"). The Second Closing Allocation shall comply with the requirements
of Sections 338 and 1060 of the Code and shall provide for an allocation of not
less the following amount (the "Minimum GE/Macy's Allocation") to items (1),
(4), (5), (6) and (7) of the definition of "GE/Macy's Assets" (such assets,
collectively, the "GE/Macy's Account Assets"):
.06 x [(GE/Macy's Purchase Price + GE/Macy's Liabilities) - $20,000,000)]
+ $20,000,000.
If the parties cannot agree on the Second Closing Allocation within ninety (90)
days after the Second Closing Date, the Second Closing Allocation shall be
determined by the Accountant through the dispute resolution method described in
Section 2.3(c); provided, that the Accountant shall not allocate less than the
Minimum GE/Macy's Allocation to the GE/Macy's Account Assets. Notwithstanding
anything to the contrary contained herein, the Purchasers and the Sellers shall
use the Second Closing Allocation, as finally determined pursuant to this
Section 11.6(d), for all Tax purposes, including the filing of IRS Form 8594 and
all other Tax Returns. If the GE/Macy's Purchase Price or the GE/Macy's
Liabilities are adjusted, the parties shall revise the Second Closing Allocation
on a basis consistent with this Section 11.6(d) in order to reflect such
adjustment.
(e) Following the Third Closing Date, the Purchaser and the Sellers shall
attempt to agree on the allocation solely for Tax purposes of the May Purchase
Price, the May Liabilities, to the extent required, and any other relevant
amount among the May Assets (the "Third Closing Allocation"). The Third Closing
Allocation shall comply with the requirements of Sections 338 and 1060 of the
Code and shall provide for an allocation of not less than the following amount
(the "Minimum May Allocation") to items (1), (4), (5), (6) and (7) of the
definition of "May Assets" (such assets, collectively, the "May Account
Assets"):
.06 x [(May Purchase Price + May Liabilities) - $30,000,000)] +
$30,000,000.
62
If the parties cannot agree on the Third Closing Allocation within ninety (90)
days after the Third Closing Date, the Third Closing Allocation shall be
determined by the Accountant through the dispute resolution method described in
Section 2.3(c); provided, that the Accountant shall not allocate less than the
Minimum May Allocation to the May Account Assets. Notwithstanding anything to
the contrary contained herein, the Purchaser and the Sellers shall use the Third
Closing Allocation, as finally determined pursuant to this Section 11.6(e), for
all Tax purposes, including the filing of IRS Form 8594 and all other Tax
Returns. If the May Purchase Price or the May Liabilities are adjusted, the
parties shall revise the Third Closing Allocation on a basis consistent with
this Section 11.6(e) in order to reflect such adjustment.
(f) The Purchaser, on the one hand, and the Sellers, on the other
hand, shall promptly inform one another of any challenge by any Governmental
Authority to any allocation made pursuant to this Section 11.6 and shall consult
and keep one another reasonably informed with respect to the status of any
discussion, proposal or submission regarding such challenge. Notwithstanding the
foregoing, in the event the IRS (or any other Governmental Authority) challenges
any allocation made pursuant to this Section 11.6, the applicable party may
settle or litigate such challenge without the consent of the other parties.
SECTION 11.7. Straddle Periods. In the case of Taxes that are
payable with respect to a Straddle Period, the portion of any such Tax that is
allocable to the portion of the period ending on the First Closing Date, the
Second Closing Date or the Third Closing Date, as applicable, shall be:
(a) in the case of income Taxes, sales Taxes, employment Taxes and
other Taxes that are readily apportionable based on an actual or deemed closing
of the books deemed to equal the amount which would be payable if the taxable
period ended on the First Closing Date, the Second Closing Date or the Third
Closing Date, as applicable; and
(b) in the case of all other Taxes, deemed to be the amount of such
Taxes for the entire Straddle Period multiplied by a fraction the numerator of
which is the number of calendar days in the portion of the Straddle Period
ending on the First Closing Date, the Second Closing Date or the Third Closing
Date, as applicable, and the denominator of which is the number of calendar days
in the entire Straddle Period.
SECTION 11.8. Tax Contests. (a) The Sellers shall control the
conduct of any audit or other administrative or judicial proceeding with respect
to Taxes relating to Prime, the FDS Assets, the GE/Macy's Assets, the May Assets
or the Business (a "Tax Contest") solely to the extent of any issues for which
the Sellers have an indemnification obligation under this Agreement (other than
with respect to a Straddle Period or a Tax Contest involving a consolidated,
combined, affiliated or unitary Tax Return which includes the Purchaser or any
Affiliate thereof (including Prime), which Tax Contest shall be conducted as
provided in clauses (b)-(c) below), and the Purchaser shall control the conduct
of all other Tax Contests with respect to any Tax Liability relating to Prime,
the FDS Assets, the GE/Macy's Assets, the May Assets or the Business; (b) in the
case of any Tax Contest with respect to a Straddle Period, the controlling party
shall be whichever of the Purchaser, on the one hand, or the Sellers, on the
other hand, would bear the greater Tax Liability with respect to such Tax
Contest if the Governmental
63
Authority was successful in such proceeding; provided, however, that neither
party shall settle such Tax Contest without the prior written consent of the
other party, which consent shall not be unreasonably withheld and (c) neither
any Seller nor any Affiliate thereof shall be entitled to (i) review any
consolidated, combined, affiliated or unitary Tax Return which includes the
Purchaser or any Affiliate thereof (including Prime), or (ii) participate in any
Tax Contest with respect to any consolidated, combined, affiliated or unitary
Tax Return which includes the Purchaser or any Affiliate thereof (including
Prime).
SECTION 11.9. Payments. Payment by an indemnifying party of any
amount with respect to Taxes under this Agreement shall be made within fifteen
(15) days following written notice by the indemnified party that payment of such
amounts to the appropriate Governmental Authority is due. In the case of a Tax
that is contested in accordance with the provisions of this Article XI, payment
of the Tax to the appropriate Governmental Authority shall be considered to be
due no earlier than the date a final determination to such effect is made by the
appropriate Governmental Authority.
SECTION 11.10. Survival of Tax Indemnities. The obligations of the
parties with respect to indemnification for Taxes under this Agreement, and the
representations and warranties set forth in Section 5.1(o), shall remain in full
force and effect until sixty (60) days after the expiration of all applicable
statutes of limitations (including extensions) for the assessment or collection
of Taxes for which indemnification may be claimed under this Agreement.
SECTION 11.11. FIRPTA Certificates. On or prior to each of the First
Closing Date, the Second Closing Date and the Third Closing Date, the Purchaser
shall have received from each of the Sellers a certificate in compliance with
Treasury Regulation Section 1.1445-2(b), certifying that such Seller is not a
"foreign person" under Section 1445 of the Code.
SECTION 11.12. Tax Sharing Agreements. Notwithstanding anything to
the contrary contained herein, all Liabilities and obligations between the
Sellers and any of their Affiliates (other than Prime), on the one hand, and
Prime, on the other hand, under any Tax allocation, Tax sharing, Tax
reimbursement or other similar agreement or arrangement in effect prior to the
First Closing Date shall cease and terminate as of the First Closing Date and
shall no longer be enforceable.
ARTICLE XII
SURVIVAL; INDEMNIFICATION
SECTION 12.1. Survival.
(a) The representations or warranties of the parties in this
Agreement shall survive the First Closing until the eighteen (18) month
anniversary of the First Closing Date; provided that (i) the representations and
warranties made pursuant to Sections 5.1(a), (b), (g), (l)(1), (l)(2) and (p)
and Sections 5.2(a), (b) and (j) shall survive indefinitely and (ii) the
representations and warranties in Section 5.1(o) shall survive as provided in
Article XI. In addition, the representations or warranties of FDS in Sections
5.1(c), (d), (e)(2), (f), (h), (j), (k), (l)(3)-(10), (r) and (s) in each case
with respect to the GE/Macy's Assets and GE/Macy's
64
Liabilities, and the representations of the Purchaser in Section 5.2, except
pursuant to Section 5.2(e), shall survive the Second Closing until the eighteen
(18) month anniversary of the Second Closing Date.
(b) The representations or warranties of FDS made pursuant to
Section 9.2(b) and the representations of the Purchaser made pursuant to Section
5.2 (except in respect of the representation set forth in Section 5.2(e)) shall
survive the Third Closing until the eighteen (18) month anniversary of the Third
Closing Date; provided that (i) the representations and warranties made on the
same basis as Sections 5.1(a), (b), (g), (l)(2) and (p) and the representations
and warranties made pursuant to Sections 5.2(a), (b) and (j) shall survive
indefinitely and (ii) the representations and warranties made on the same basis
as Section 5.1(o) shall survive as provided in Article XI.
(c) No claim for indemnification pursuant to this Article XII for
breach of any representation or warranty may be brought after the date on which
such representation or warranty no longer survives; provided, that if a written
notice of a claim for indemnification is given to the indemnifying party in
accordance with Section 12.4(a) prior to the termination of the applicable
survival period, the indemnifying party's obligation hereunder with respect to
such indemnification claim shall survive until such claim has been finally
resolved.
SECTION 12.2. Indemnification by the Sellers. Subject to the
provisions of this Article XII, after the First Closing Date, FDS shall
indemnify the Purchaser and its Affiliates against, and agree to hold each of
them harmless from, any and all damage, loss, liability, cost, claim, interest,
award, judgment, penalty or expense (including reasonable expenses of
investigation and reasonable attorneys' fees and expenses in connection with any
action, suit or proceeding) ("Losses") incurred or suffered by the Purchaser or
any of its Affiliates because of (1) any breach of a representation or warranty
of the Sellers contained in Section 5.1 or made pursuant to Section 9.2(b) (and,
with respect to representations and warranties made pursuant to Section 9.2(b),
the references to Section 5.1 throughout this Section 12.2 shall be deemed to
refer to the corresponding representations and warranties made pursuant to
Section 9.2(b)) determined without regard to any Knowledge, Material Adverse
Effect or materiality qualifier therein (except in the case of the
representations set forth in Sections 5.1(e)(1) and (f)), (2) any breach of an
agreement or covenant made by the Sellers in this Agreement, (3) any Excluded
Liability, (4) any Excluded Asset, (5) any Prime Excluded Taxes, (6) the failure
by the Sellers to comply with any applicable bulk sales laws (notwithstanding
the waiver contained in Section 6.13) or (7) any Action brought by a Cardholder
against (x) any Seller with respect to one or more FDS Accounts that is pending
as of the First Closing Date, (y) any Seller or GE Bank with respect to one or
more GE/Macy's Accounts that is pending as of the Second Closing Date, and (z)
any Seller, May Co. or May Bank with respect to one or more May Accounts that is
pending as of the Third Closing Date. Notwithstanding the foregoing, the
Purchaser and its Affiliates shall not be entitled to indemnification pursuant
to clause (1) of this Section 12.2 (other than for breaches of Sections 5.1(a),
(b), (g), (l)(1) and (l)(2), which shall not be subject to the following
limitations): (a) in respect of any individual set of claims, facts or
occurrences or any series of related claims, facts or occurrences (each a "De
Minimis Claim"), if the aggregate Losses in respect of such De Minimis Claim is
less than twenty-five thousand dollars ($25,000); provided, however, in the
event that the aggregate Losses in respect of all such De Minimis Claims exceed
five million dollars ($5,000,000), thereafter indemnification claims pursuant to
clause (1) of this Section 12.2
65
shall be subject to indemnification without regard to the limitations set forth
in this clause (a); (b) for any Losses until the aggregate amount of all Losses
incurred or suffered by the Purchaser or any of its Affiliates (excluding Losses
related to De Minimis Claims) exceeds twenty-five million dollars ($25,000,000),
in which case the Purchaser and its Affiliates shall be entitled to
indemnification for the full amount of Losses in excess of such threshold; and
(c) for Losses, in the aggregate, incurred or suffered by the Purchaser or any
of its Affiliates in excess of four-hundred million dollars ($400,000,000).
SECTION 12.3. Indemnification by the Purchaser. The Purchaser agrees
to indemnify each Seller and each of their respective Affiliates against, and
agree to hold each of them harmless from, any and all Losses incurred or
suffered by a Seller or any such Affiliate because of (1) any breach of a
representation or warranty of the Purchaser contained in Section 5.2 determined
without regard to any Knowledge, Material Adverse Effect or materiality
qualifier therein (except in the case of the representation set forth in
Sections 5.2(e)), (2) any breach of an agreement or covenant made by the
Purchaser in this Agreement, (3) any Assumed Liability, (4) any Liability for
Taxes of Prime other than Prime Excluded Taxes or Taxes that constitute Excluded
Liabilities or (5) the operation of the Business from and after the First
Closing (and with respect to the GE/Macy's Assets and the GE/Macy's Liabilities
from and after the Second Closing and with respect to the May Assets and the May
Liabilities from and after the Third Closing). Notwithstanding the foregoing,
the Sellers and their Affiliates shall not be entitled to indemnity pursuant to
clause (1) of this Section 12.3 (other than for breaches of Sections 5.2(a) and
(b), which shall not be subject to the following limitations): (a) in respect of
any De Minimis Claims; provided, however, in the event that the aggregate Losses
in respect of all such De Minimis Claims exceed $5,000,000, thereafter
indemnification claims pursuant to clause (1) of this Section 12.3 shall be
subject to indemnification without regard to the limitations set forth in this
clause (a); (b) for any Losses until the aggregate amount of all Losses incurred
or suffered by the Sellers or any of their Affiliates (excluding Losses related
to De Minimis Claims) exceeds twenty-five million dollars ($25,000,000), in
which case the Sellers and their Affiliates shall be entitled to indemnification
for the full amount of Losses in excess of such threshold; and (c) for Losses,
in the aggregate, incurred or suffered by the Sellers or their Affiliates in
excess of four-hundred million dollars ($400,000,000).
SECTION 12.4. Notice, Settlements and Other Matters.
(a) A party seeking indemnification pursuant to Section 12.2 or
Section 11.4 (an "Indemnified Party") must give prompt written notice to the
party from whom such indemnification is sought (the "Indemnifying Party") of the
assertion of any claim, or the commencement of any action or proceeding, in
respect of which indemnity may be sought hereunder specifying in reasonable
detail the individual items of the Losses in respect of which indemnification is
sought including the amount, the date each such item was paid, incurred or
properly accrued, and the specific details of the breach of representation,
warranty or covenant or other claim or matter to which such item is related. In
the event that any third party claim is made against the Indemnified Party and
the Indemnified Party notifies the Indemnifying Party of the commencement
thereof, the Indemnifying Party may elect at any time to negotiate a settlement
or a compromise of such action or claim or to defend such action or claim, in
each case at its sole cost and expense (subject to the limitations set forth in
Section 12.2, if the Sellers are the Indemnifying Party, or Section 12.3, if the
Purchaser is the Indemnifying Party) and with
66
its own counsel. If, within thirty (30) days of receipt from an Indemnified
Party of the notice referred to above, the Indemnifying Party (i) advises the
Indemnified Party in writing that it shall not elect to defend, settle or
otherwise compromise or pay such action or claim or (ii) fails to make such an
election in writing, the Indemnified Party may (subject to the Indemnifying
Party's continuing right of election in the preceding sentence), at its option,
defend, settle, compromise or pay such action or claim; provided that any such
settlement or compromise shall be permitted hereunder only with the written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld. Unless and until the Indemnifying Party makes an election in
accordance with this Section to defend, settle, compromise or pay such action or
claim, all of the Indemnified Party's reasonable costs arising out of the
defense, settlement, compromise or payment thereof shall be Losses subject to
indemnification by the Indemnifying Party (subject to the provisions and
limitations of Sections 12.2 and 12.3, as applicable). Each Indemnified Party
shall make available to the Indemnifying Party all information reasonably
available to such Indemnified Party relating to such action or claim. If the
Indemnifying Party elects to defend any such action or claim, the Indemnified
Party may participate in such defense with counsel of its choice at the
Indemnified Party's sole cost and expense.
(b) The Indemnified Party shall have the right to reject any
settlement proposed by the Indemnifying Party if the Indemnified Party is not
fully and unconditionally released from any liability resulting from that claim
or is required to pay any costs, expenses or damages to any person as a result
of the claim that are not covered by the indemnity provided herein. The
Indemnified Party shall not have the right to settle any third party claim
without the written consent of the Indemnifying Party if the Indemnifying Party
is contesting such claim in good faith and has assumed the defense of such claim
from the Indemnified Party or if the period for determining whether or not to
assume the defense of such claim from the Indemnified Party has not expired.
(c) In calculating the amount of any Losses of an Indemnified Party
under this Article XII, there shall be subtracted the amount of any (1) Tax
benefits actually realized by the Indemnified Party with respect to such Losses,
(2) insurance proceeds and third-party payments actually received by the
Indemnified Party with respect to such Losses and (3) any merchant charge-backs
or other set-offs that would be permissible under the operating rules and
regulations of the applicable Card Association in effect at that time (whether
or not such charge-back or other set-off was actually made), and there shall be
added the amount of any related Tax costs or other expenses. In the event that
the Indemnifying Party reimburses the Indemnified Party for any Losses prior to
the realization or receipt of any proceeds, benefits, payments, charge-backs or
set-offs contemplated by clauses (1), (2) or (3) above, the Indemnified Party
shall remit to the Indemnifying Party any such amounts that the Indemnified
Party subsequently receives or realizes with respect to such Losses (net of any
related Tax costs or other expenses to the extent such amounts were not
previously taken into account). Upon the payment of any claim hereunder, the
Indemnifying Party shall be subrogated to the extent of such payment to the
rights of the Indemnified Party against any person with respect to the subject
matter of such claim.
(d) Without limitation of their respective rights and obligations as
set forth elsewhere in this Article XII, and subject to the procedures for
indemnification claims set forth in this Article XII, the Indemnified Party
shall act in good faith, shall use commercially reasonable
67
efforts to mitigate any Losses (including by seeking to fully realize or receive
any proceeds, benefits, payments, charge-backs or set-offs contemplated by
clauses (1), (2) and (3) of Section 12.4(c)), shall use similar discretion in
the use of personnel and the incurring of expenses as the Indemnified Party
would use if it were engaged and acting entirely at its own cost and for its own
account, and shall consult regularly with the Indemnifying Party with respect to
all its matters of interest to the Indemnifying Party under this Article XII.
(e) All indemnity payments shall be treated as additional
adjustments to the amount of the total consideration paid for the Acquired
Assets and Stock and the Business for all Tax purposes.
(f) Notwithstanding anything to the contrary contained herein, the
indemnification provided for herein shall not cover, and in no event shall any
party hereto be liable for, any indirect damages, including consequential,
incidental, exemplary or special damages, or punitive damages (except to the
extent necessary to reimburse an Indemnified Party for judgments actually
awarded to third parties in respect of such types of damages).
(g) After the First Closing Date, Article XI and this Article XII
shall constitute the Sellers' and the Purchaser's exclusive remedy for any of
the matters addressed herein or other claim arising out of or relating to this
Agreement; provided, however, that this provision shall not impair the ability
of either party to obtain specific performance or other equitable relief.
Notwithstanding the foregoing, the indemnification obligations and other
obligations set forth in Article XI of this Agreement, and any claims arising
out of the matters addressed in Article XI of this Agreement, shall, to the
extent addressed therein, be governed solely by such Article XI and not by this
Article XII.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1. Notices. All notices and other communications by the
Purchaser or the Sellers hereunder shall be in writing to the other party and
shall be deemed to have been duly given when delivered in person, when received
via facsimile or overnight courier, or when posted by United States registered
or certified mail, with postage prepaid, addressed as follows:
if to the Purchaser to:
Citibank, N.A.
701 E. 60th North
Sioux Falls, South Dakota 57104
Attention: David Zimbeck
Facsimile: (605) 330-6745
with a copy to:
68
Citigroup Inc.
399 Park Avenue
New York, New York 10043
Attention: Andrew Felner
Facsimile: (212) 793-6072
with a copy to:
Shearman & Sterling LLP
599 Lexington Avenue
New York, New York 10022-6069
Attention: Creighton O'M Condon
Facsimile: (212) 848-7179
if to the Sellers to:
c/o Federated Department Stores, Inc.
7 West Seventh Street
Cincinnati, Ohio 45202
Attention: Vice Chair - Finance
Facsimile: (513) 579-7462
with a copy to:
c/o Federated Department Stores, Inc.
7 West Seventh Street
Cincinnati, Ohio 45202
Attention: General Counsel
Facsimile: (513)-579-7354
and
FDS Bank
9111 Duke Boulevard
Mason, Ohio 45040
Attention: President
Facsimile: (513) 573-2720
and
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
Attention: Lee Meyerson, Esq.
Maripat Alpuche, Esq.
Facsimile: (212) 455-2502
69
Notices and other communications may also be sent to such other
address or addresses as the Purchaser or the Sellers may from time to time
designate by notice as provided herein, except that notices of change of address
shall be effective only upon receipt.
SECTION 13.2. Expenses and Certain Post-Closing Matters.
(a) Except as otherwise provided herein, all legal and any other
third-party costs and expenses incurred in connection herewith and the
transactions contemplated by this Agreement and the Ancillary Agreements shall
be paid by the party incurring such expenses, except that all fees or other
amounts payable to any Governmental Authority in connection with the HSR Act and
the organization and qualification of CEBA Bank in accordance with this
Agreement shall be paid by the Purchaser.
(b) Any fees and assessments and similar charges payable to a Card
Association with respect to the FDS Accounts shall be prorated between the
parties for the Sellers' account prior to the First Closing Date and for the
Purchaser's account from and after the First Closing Date. Any fees and
assessments and similar charges payable to a Card Association with respect to
the GE/Macy's Accounts shall be prorated between the parties for the Sellers'
account prior to the Second Closing Date and for the Purchaser's account from
and after the Second Closing Date. Any fees and assessments and similar charges
payable to a Card Association with respect to the May Accounts shall be prorated
between the parties for the Sellers' account prior to the Third Closing Date and
for the Purchaser's account from and after the Third Closing Date. Except as
described above, all fees and assessments and similar charges payable by FDS
Bank or its Affiliates to a Card Association arising out of or relating to the
consummation of the transactions contemplated by this Agreement or the Ancillary
Agreements, shall be for the account of the Sellers. To the extent possible,
such prorations shall be made as soon as possible thereafter in accordance with
the adjustment procedures set forth in Section 2.3, Section 3.3 and Section 4.3.
(c) Collection efforts and related expenses on the FDS Accounts made
or incurred by the Sellers prior to the First Closing Date shall be the
responsibility of the Sellers, and all monies paid or otherwise collected
thereon prior to the First Closing Date (and all monies paid or otherwise
collected on charged-off accounts prior to the First Closing Date) shall be
retained by the Sellers subject to their contractual obligations under the
Securitization Documents. As between the Sellers and the Purchaser, collection
efforts and related expenses on the GE/Macy's Accounts made or incurred prior to
the Second Closing Date shall be the responsibility of the Sellers, and all
monies paid or otherwise collected thereon prior to the Second Closing Date (and
all monies paid or otherwise collected on charged-off accounts prior to the
Second Closing Date) shall be retained by the Sellers subject to their
contractual obligations under the Securitization Documents and the GE/Macy's
Program Agreement. As between the Sellers and the Purchaser, collection efforts
and related expenses on the May Accounts made or incurred prior to the Third
Closing Date shall be the responsibility of the Sellers, and all monies paid or
otherwise collected thereon prior to the Third Closing Date (and all monies paid
or otherwise collected on charged-off accounts prior to the Third Closing Date)
shall be retained by the Sellers subject to their contractual obligations under
the Securitization Documents.
70
(d) The Purchaser shall be responsible for all fees of the rating
agencies in connection with confirming ratings and providing approvals for the
contemplated assumptions and any proposed amendments of the Prime Securitization
Documents by the Purchaser.
(e) The Purchaser shall pay to the Sellers, as soon as practicable
following receipt thereof, any payments or other proceeds that constitute
Excluded Assets and are received after the First Closing by the Purchaser or any
of its Affiliates, including Interchange Fees received by the Purchaser in
respect of transactions under FDS Accounts occurring prior to the First Cut-Off
Time, any Interchange Fees received by the Purchaser in respect of transactions
under GE/Macy's Accounts occurring prior to the Second Cut-Off Time and any
Interchange Fees received by the Purchaser in respect of transactions under May
Accounts occurring prior to the Third Cut-Off Time. The Sellers shall pay to the
Purchaser, as soon practicable following receipt thereof, any payments or other
proceeds that constitute Acquired Assets and Stock and are received after the
First Closing (or the Second Closing with respect to the GE/Macy's Assets or the
Third Closing with respect to the May Accounts) by the Sellers or any of their
Affiliates (other than pursuant to this Agreement), including Interchange Fees
received by the Sellers in respect of transactions under FDS Accounts occurring
on or after the First Cut-Off Time, any Interchange Fees received by the Sellers
in respect of transactions under GE/Macy's Accounts occurring on or after the
Second Cut-Off Time and any Interchange Fees received by the Sellers in respect
of transactions under May Accounts occurring on or after the Third Cut-Off Time.
SECTION 13.3. Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties and their respective
successors and permitted assigns. This Agreement and the rights and obligations
hereunder may not be assigned by any party to any person without the prior
written consent of the other parties hereto, and any purported assignment
without such consent shall be void; provided that FDS Bank may, without such
consent, assign its right and obligation to purchase the CEBA Equity Interests
pursuant to Section 2.4(d) to FDS or any other Subsidiary of FDS upon written
notice to the Purchaser.
SECTION 13.4. Entire Agreement; Amendment; Waiver. This Agreement
and the Ancillary Agreements, including the annexes and schedules hereto and
thereto, embody the entire agreement of the parties hereto with respect to the
subject matter hereof and supersede all prior agreements with respect thereto,
other than the Confidentiality Agreement. No representation, warranty,
inducement, promise, understanding or condition not set forth in this Agreement
(or the other documents referred to in the preceding sentence) has been made or
relied on by any party in entering into this Agreement. This Agreement may be
amended, and any provision hereof waived, but only in writing signed by the
party against whom such amendment or waiver is sought to be enforced.
SECTION 13.5. Counterparts. This Agreement may be executed in two or
more counterparts any of which may be delivered by facsimile transmission and
all of which shall together constitute one and the same instrument.
SECTION 13.6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed within such State, and the obligations,
rights and remedies of the parties hereunder shall be determined in accordance
with such laws.
71
SECTION 13.7. Waiver of Jury Trial and Venue.
(a) Each party hereto hereby waives all right to trial by jury in
any action or proceeding to enforce or defend any rights under this Agreement.
(b) Each party hereto hereby irrevocably submits to the jurisdiction
of the United States District Court of Delaware or, if such federal jurisdiction
is unavailable, in the state courts of the State of Delaware over any action
arising out of this Agreement, and each party hereto hereby irrevocably waives
any objection which such party may now or hereafter have to the laying of
improper venue or forum non conveniens. Each party hereto agrees that a judgment
in any such action or proceeding may be enforced in other jurisdictions by suit
on the judgment or in any manner provided by law. Any and all service of process
and any other notice in any such suit, action or proceeding with respect to this
Agreement shall be effective against any party hereto if given as provided
herein.
SECTION 13.8. Severability. In case any one or more of the
provisions contained herein shall be invalid, illegal or unenforceable in any
respect under any law, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby, and this Agreement shall be reformed, construed and enforced
as if such invalid, illegal or unenforceable provision or portion of any
provision had never been contained herein and there had been contained herein
instead such valid, legal and enforceable provisions as would most nearly
accomplish the intent and purpose of such invalid, illegal or unenforceable
provision.
SECTION 13.9. No Petition. The Purchaser covenants and agrees that
it shall not, prior to the date that is one year and one day after the final
payment of any series of investor certificates or any other series issued by the
Master Trusts, acquiesce, petition or otherwise invoke the process of any
Governmental Authority for the purpose of commencing or sustaining a case
against Prime, Prime II or Master Trusts under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of Prime, Prime II or
the Master Trusts or any substantial part of its property or ordering the
winding up or liquidation of the affairs of Prime, Prime II or the Master
Trusts.
SECTION 13.10. Public Announcement. Except for any notice which is
required by law or regulation, each of the Purchaser, on the one hand, and each
Seller, on the other hand, agrees that it shall not issue a press release, make
any other public statement or make any statement to the Employees with respect
to the transactions contemplated by this Agreement or the Ancillary Agreements
without the prior written consent of the other, which consent shall not be
unreasonably withheld or delayed. Each of the Purchaser, on the one hand, and
each Seller, on the other hand, agrees, if possible, to notify and consult with
the other at least twenty-four (24) hours in advance of filing any notice
required by law or regulation.
SECTION 13.11. Third-Party Beneficiaries. Nothing in this Agreement,
expressed or implied, shall confer on any person, other than the parties hereto
and Prime or their respective successors and permitted assigns, any rights,
remedies, obligations or liabilities; provided that the provisions of Article
XII shall inure to the benefit of the Indemnified Parties.
72
SECTION 13.12. Schedules. The Schedules to this Agreement set forth,
among other things, items the disclosure of which is required under this
Agreement either in response to an express disclosure requirement contained in a
provision of this Agreement or as an exception to one or more of the
representations or covenants contained in this Agreement; provided that the mere
inclusion of an item in a Schedule as an exception to a representation shall not
be considered an admission by the disclosing party that such item (or any
non-disclosed item or information of comparable or greater significance)
represents a material exception or fact, event or circumstance or that such item
has had or is reasonably expected to result in a Material Adverse Effect with
respect to the disclosing party or the Business.
[Remainder of Page Intentionally Left Blank]
73
IN WITNESS WHEREOF, this Agreement has been executed on behalf of
each of the parties hereto as of the day and year first above written.
CITIBANK, N.A.
By: /s/ Ray Quinlan
Name: Ray Quinlan
Title: Executive Vice President
FEDERATED DEPARTMENT STORES, INC.
By: /s/ Ronald W. Tysoe
Name: Ronald W. Tysoe
Title: Vice Chair
FDS BANK
By: /s/ Teresa Huxel
Name: Teresa Huxel
Title: President and Chief Financial Officer
PRIME II RECEIVABLES CORPORATION
By: /s/ Susan P. Storer
Name: Susan P. Storer
Title: President