Purchase and Assumption Agreement between Fidelity Federal Bank and Household Bank (SB), N.A.

Summary

This agreement, dated December 11, 2000, is between Fidelity Federal Bank and Household Bank (SB), N.A. It outlines the sale of the ADC Portfolio, a group of credit card accounts, from Fidelity Federal Bank to Household Bank. The agreement details the assets being sold, the liabilities assumed by the buyer, the purchase price, and related terms. It also addresses the termination of a prior servicing agreement, amendments to earlier agreements, and the handling of certain funds. Both parties agree to specific representations, warranties, and indemnification obligations, with closing conditions and dispute resolution procedures included.

EX-10.11 4 0004.txt PURCHASE AND ASSUMPTION AGREEMENT Exhibit 10.11 PURCHASE AND ASSUMPTION AGREEMENT Dated as of December 11th, 2000 Between Fidelity Federal Bank, A Federal Savings Bank And - -------------------------------------------------------------------------------- Household Bank (SB), N.A. - -------------------------------------------------------------------------------- Article 1 - DEFINITIONS 1 1.1 Definitions 1 1.2 Construction 7 Article 2 - PURCHASE AND SALE OF ACQUIRED ASSETS 7 2.1 Acquired Assets 7 2.2 Assumed Liabilities 8 2.3 Purchase Price 8 2.4 Hold Back Amount 8 2.5 Allocation of Purchase Price 8 2.6 Use of Name and Trademarks 9 2.7 Seller's Repurchase Obligations 9 2.8 Repurchase Price 10 2.9 Exclusive Remedy 10 2.10 Continued Processing 11 Article 3 - THE CLOSING 11 3.1 The Closing 11 3.2 Documents and Certificates 11 3.3 Valuation Date Statement 12 3.4 Payments on the Closing Date 12 3.5 Settlement Date Statement 12 3.6 Payments on the Settlement Date 12 3.7 Post Closing Payments 13 3.8 Payment of Hold Back Amount 13 3.9 Power of Attorney 14 3.10 Dispute Resolution 14 Article 4 - CONDITIONS OF CLOSING 15 4.1 Conditions Applicable to Purchaser 15 4.2 Conditions Applicable to Seller 16 Article 5 - REPRESENTATIONS AND WARRANTIES 17 5.1 Representations and Warranties of Seller 17 5.2 Representations and Warranties of Purchaser 21 Article 6 - CERTAIN COVENANTS 23 6.1 Mutual Covenants and Agreements 23 6.2 Additional Covenants 25 6.3 Covenants of Purchaser 28 Article 7 - INDEMNIFICATION 29 7.1 Seller's Indemnification Obligations 29 7.2 Purchaser's Indemnification Obligations 29 7.3 Definition of Losses 29 7.4 Procedures 30 Article 8 - TERMINATION 32 8.1 Termination by Either Party 32 8.2 Effect of Termination 33 Article 9 - MISCELLANEOUS 33 9.1 Survival of Representations and Warranties 33 9.2 Notices 33 9.3 Assignment 34 9.4 Entire Agreement 34 9.5 Amendments and Waivers 34 9.6 Expenses 35 9.7 Captions; Counterparts 35 9.8 Governing Law 35 9.9 Severability 35 9.10 Independent Contractors 35 9.11 No Joint Venture 35 9.12 Attorneys' Fees 35 9.13 Regulatory Approval 35 9.14 Dispute Resolution 36 PURCHASE AND ASSUMPTION AGREEMENT This Purchase and Assumption Agreement (the "Agreement") is made and entered into as of the 11th day of December , 2000 by and between Fidelity Federal Bank, A Federal Savings Bank, a federally chartered savings bank ("Seller"), and Household Bank (SB), N.A., a national banking association ("Purchaser"). WITNESSETH ---------- A. Seller and Purchaser are parties to a Purchase and Assumption Agreement dated as of June 2, 2000 pursuant to which (A) Seller sold to Purchaser, and Purchaser purchased from Seller (i) certain credit card receivables related to the MMG Portfolio, as defined therein; (ii) the Fixed Assets located at the Beaverton Operations Center, as defined therein, and certain other assets, and (B) Purchaser assumed certain liabilities (such agreement, the "Prior Sale Agreement", and such transaction, the "Prior Sale"). B. In connection with the Prior Sale, Seller and Purchaser entered into a (i) Servicing Agreement pursuant to which Purchaser agreed to service certain credit card receivables described herein as the ADC Portfolio (the "Servicing Agreement") and (ii) an Escrow Agreement. C. Seller now wishes to sell to Purchaser, and Purchaser wishes to purchase from Seller, the ADC Portfolio. In connection with such transaction, Seller and Purchaser wish to terminate, effective on the Closing Date, as defined herein, the Servicing Agreement. In addition, effective on the Closing Date, Seller and Purchaser wish to amend the Prior Sale Agreement and the Escrow Agreement to provide for a hold back amount, and treatment thereof, which is consistent with this Agreement. D. The Seller and Purchaser are entering into this Agreement to reflect the terms and conditions relating to the sale and purchase of accounts comprising the ADC Portfolio, and related receivables. ARTICLE 1 - DEFINITIONS ----------------------- 1.1 Definitions. Except as otherwise specifically indicated, the following terms shall have the meanings specified herein. "Accountants" shall have the meaning specified in SECTION 3.10. "Account Representations and Warranties" shall mean the representations and warranties set forth in SECTIONS 5.1(d) (to the extent such representation and warranty relates to an Account), (f), (g), (h) (i), (j), (k), (l) (o), (p) AND (q). "Accounts" shall mean all accounts that are part of the ADC Portfolio that are identified by name and account number on the computer tape of accounts generated as of the close of processing on the day immediately preceding the Closing Date and reflected in the aggregate on the relevant CD-121 report for such day (the "Accounts Tape"), excluding any Charged-Off Account, any Alabama Opt-Out Account and any Mississippi Account. 1 "Accrued Interest" shall mean the aggregate amount of periodic finance charges not posted to the Accounts as of the relevant time, but which was earned up to and including the relevant time and which will be posted to the Accounts at the end of the respective billing cycles immediately following the relevant time. "Acquired Assets" shall have the meaning specified in SECTION 2.1. "ADC" shall mean American Direct Credit, LLC. "ADC Portfolio" shall mean all credit card accounts originated under the Seller's agreement with ADC dated March 5, 1997, as amended, and included on the Seller's servicing system as bank identified number ("BIN") 549062. "Affiliate" shall mean, with respect to any person, corporation or entity, any other person, corporation or entity that directly or indirectly controls, is controlled by or is under common control with such person, corporation or entity. "Alabama Class Action" shall mean the case entitled ELOISE MITCHELL, ET AL. v A & P DISTRIBUTING, ET AL. pending in the Circuit Court of Sumter County, State of Alabama. "Alabama Opt-Out Account" shall mean an account with respect to which the Cardholder (i) is a member of the plaintiff class in the Alabama Class Action and (ii) has elected to opt out of the proposed settlement in the Alabama Class Action. "Agreement" shall have the meaning specified in the Introduction. "Assignment and Assumption Agreement" shall have the meaning specified in SECTION 3.2. "Assumed Liabilities" shall have the meaning specified in SECTION 2.2. "Bank Plus" shall mean Bank Plus Corporation, a Delaware corporation, the corporate parent of Seller. "Bankrupt Account" shall mean an Account that fits one or more of the following descriptions as of the Cut-Off Time: (i) is identified on the Seller's processing system as an external status code "B"; or (ii) the Cardholder has filed bankruptcy, the filing date occurred after the Account open date and before the Cut-Off Time and the bankruptcy proceeding has not been dismissed before the Closing Date. 2 "Books and Records" shall mean all books and records, if any, in the possession of Seller or Seller's processor relating to the Acquired Assets, including all existing records, applications for Accounts, cardholder agreements, disclosure statements, acceptance certificates for prescreened offers, periodic statements, credit and collection files, file maintenance data and correspondence, and other records relating to the Acquired Assets whether in documentary form or on microfilm, microfiche, magnetic tape, computer disk or other form. "Business Day" shall mean each day other than Saturday, Sunday or a day on which banking institutions in the State of California are authorized or obligated by law or regulation to close. "Cardholder" shall mean an applicant in whose name an Account was established or is maintained. "Cardholder Agreement" shall mean an agreement between Seller and a Cardholder containing the terms and conditions of the relevant Account. "Charged-Off Account" shall mean an Account that fits one of the following descriptions as of the Cut-Off Time: (i) any Account which has been identified on the Seller's processing system with the external status code "Z"; (ii) any Account with a balance that is equal to or more than 180 days contractually delinquent; (iii) any Account that is not statused as charged-off on the Seller's processing system but should have been so statused prior to the Cut-Off Time in accordance with the Policies and Procedures. "Closing" shall have the meaning specified in SECTION 3.1. "Closing Date" shall have the meaning specified in SECTION 3.1. "Closing Time" shall have the meaning specified in SECTION 3.1. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Conversion Date" shall mean the date on which processing of the Accounts is transferred to Purchaser or its agent. "Covered Account" shall have the meaning specified in SECTION 2.7. 3 "Credit Balances" shall mean all balances owing by Seller to Cardholders on Accounts as of the relevant date. "Credit Card" shall mean a MasterCard credit card issued by Seller to a Cardholder. "Credit Card Marks" shall mean such trademarks and service marks of Seller as have been used in connection with the Accounts, provided that such term shall not include trademarks or service marks of ADC, MasterCard or any network. "Credit Card Receivables" shall mean all amounts owing, whether or not billed, to Seller by Cardholders with respect to Accounts, including extensions of credit, accrued and posted periodic finance charges, and any other charges and fees assessed on said Accounts, plus Accrued Interest at the relevant time. "Current Policies and Procedures" shall mean the Policies and Procedures as in effect on the date of this Agreement. "Cut-Off Time" shall mean 11:59 P.M. on the Closing Date. "Deceased Account" shall mean an Account that fits one or more of the following descriptions as of the Cut-Off Time: (i) any Account which has been identified on the Seller's processing system in a type code credit rating or user status code as deceased; or (ii) any Account for which the Cardholder has died before the Cut-Off Time, as evidenced by a death certificate "Escrow Holder' shall mean Bank One Trust Company, National Association, or any successor thereto. "Escrow Agreement" shall mean the Escrow Agreement between Escrow Holder, Seller and Purchaser relating to the Prior Sale, amended to comply with the provisions of this Agreement. "Escrow Amendment" shall have the meaning specified in SECTION 3.2. "Estimated Liquidated Amount" shall have the meaning specified in SECTION 3.8. "Excluded Account" shall mean, as of the Cut-Off Time, any Account that does not comply with the representations and warranties contained in this Agreement, and: (i) Any Account which as of the Cut-Off Time is, or should have been, classified as fraud/stolen ("U"), which was generated from fraud activity perpetrated prior to the Cut-Off Time; 4 (ii) Any Account the outstanding balance of which are classified, or should have been classified by Seller, as of the Cut-Off Time, as one hundred twenty (120) days or more past due; and (iii) Any Account classified, or that should have been classified by Seller, as of the Cut-Off Time, as a Bankrupt Account, a Lost Account, or a Deceased Account. "FDR" shall mean First Data Resources Inc. "FDR Agreement" shall mean that certain Service Agreement between FDR and Seller dated October 14, 1999. "Federal Funds Rate" shall mean, for any period during which the Federal Funds Rate is to be charged pursuant to this Agreement, the average of the high and low "Federal Funds" interest rates for any day (or the previous business day if such day is not a business day), excluding the day that payment is made, as such rate is reported on the following business day in the Money Rates Column of the Wall Street Journal or as determined in such other mutually acceptable manner as the parties agree if the Wall Street Journal is no longer reporting such rate. "Hold Back Amount" shall mean an amount equal to $4,285,000, which amount shall replace the hold back amount required under the Prior Sale Agreement, plus an additional amount equal to 15% of the Purchase Price under this Agreement. It is the intent of this Agreement that the Hold Back Amount shall be an aggregate amount which covers liabilities under this Agreement, the Prior Sale Agreement and the Servicing Agreement (to the extent such liabilities survive the termination of the Servicing Agreement). "Indemnified Party" shall have the meaning specified in SECTION 7.4(a). "Indemnifying Party" shall have the meaning specified in SECTION 7.4(a). "Losses" shall have the meaning specified in SECTION 7.3. "Lost Account" shall mean an Account which as of the Cut-Off Time is identified on the Seller's processing system with the external status code "L". "MasterCard" shall mean MasterCard International Incorporated. "Mississippi Account" shall mean an Account as to which, as of June 30, 2000, the Cardholder was a resident of Mississippi, or, which is demonstrated by a Cardholder to have been originated at the time the Cardholder was a resident of Mississippi. "Operating Regulations" shall mean the by-laws, rules and regulations of MasterCard. 5 "Policies and Procedures" shall mean the written policies and procedures of Seller relating to the Accounts, as in effect from time to time. "Post Closing Payments" shall have the meaning specified in SECTION 3.7. "Prior Sale" shall have the meaning specified in Recital A. "Prior Sale Agreement" shall have the meaning specified in Recital A. "Prior Sale Amendment" shall have the meaning specified in SECTION 3.2. "Prior Closing Date" shall mean June 30, 2000, the closing date of the Prior Sale. "Protected Party" shall have the meaning specified in SECTION 6.1(c). "Purchase Price" shall have the meaning specified in SECTION 2.3. "Purchaser" shall have the meaning specified in the Introduction. "Related Agreements" shall mean the Assignment and Assumption Agreement, the Escrow Agreement Amendment, and the Prior Sale Agreement Amendment. "Repurchase Price" shall have the meaning specified in SECTION 2.8. "Seller" shall have the meaning assigned in the Introduction. "Servicing Agreement" shall have the meaning specified in Recital B. "Servicer" shall mean the Purchaser in its capacity under the Servicing Agreement. "Settlement Date" shall mean the date (not later than sixty (60) days after the Closing Date) on which the parties make any adjustment to the Purchase Price and the corresponding payment. "Settlement Date Statement" shall mean a statement, substantially in the form of EXHIBIT A attached hereto, which contains a computation of the Purchase Price as of the Closing Date. "Tax" shall mean any federal, state, local or foreign net income, gross income, gross receipts, windfall profit, severance, property, production, sales, use, license, excise, franchise, employment, payroll, withholding, alternative or add-on minimum, ad valorem, value added, transfer, stamp, or environmental tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or penalty, addition to tax or additional amount imposed by any governmental authority. 6 "Total Estimated Liquidated Amount of Damages" shall mean the sum of any Estimated Liquidated Amount relating to any claim or claims for indemnification for which notice has been given by Purchaser pursuant to SECTION 7.4(a) of this Agreement or the Prior Sale Agreement or pursuant to SECTION 12.3(A) of the Servicing Agreement between the Closing Date and the relevant date. "Unauthorized Use" shall mean use that was made by a person other than the Cardholder who did not have actual, implied or apparent authority for such use of the Account and from which the Cardholder received no benefit. "Valuation Date" shall mean the close of business on the fifth Business Day prior to the Closing Date or such other date as the parties may mutually agree. "Valuation Date Statement" shall mean a statement, substantially in the form of EXHIBIT B attached hereto and incorporated herein, which contains a good faith computation of the Purchase Price (based, in the case of the Accounts, on a computer printout relating to the Accounts, and including estimated Accrued Interest), excluding the Post Closing Payments described in SECTION 3.7, as of the Valuation Date. 1.2 CONSTRUCTION. Unless the context otherwise clearly indicates, words used in the singular include the plural and words used in the plural include the singular. The Schedules and Exhibits referred to herein shall be construed with and as an integral part of this Agreement to the same extent as if they were set forth verbatim herein. ARTICLE 2 - PURCHASE AND SALE OF ACQUIRED ASSETS ------------------------------------------------ 2.1 ACQUIRED ASSETS. (a) On the Closing Date, Purchaser agrees to purchase from Seller, and Seller agrees to sell, convey, assign and transfer to Purchaser, all of Seller's right, title and interest in, to and under the following assets and the following rights and privileges granted by Seller, as the same exist on the Closing Date: (i) the Accounts; (ii) the Credit Card Receivables; (iii) the Credit Cards with respect to the Accounts; (iv) the plastic stock, statement stock and related materials relating to the Accounts; and (v) the MasterCard bank identified number 549062. (b) The items described in SECTION 2.1(a), are hereinafter sometimes referred to as the "Acquired Assets". 7 2.2 ASSUMED LIABILITIES. On and after the Closing Date, Purchaser shall assume and perform and discharge the following obligations of Seller with respect to the Acquired Assets (collectively, the "Assumed Liabilities"): (i) the obligation to pay fees and assessments to MasterCard on the Accounts accruing on and after the Closing Date; (ii) all of Seller's obligations under the Operating Regulations with respect to the Accounts, including any obligations relating to the bank identified number; (iii) all of Seller's obligations under the Cardholder Agreements, except the obligation to pay Credit Balances, and (iv) all of the obligations assumed by Purchaser under SECTION 2.10 of this Agreement. Except as expressly set forth in this Agreement, Purchaser shall not be deemed to have assumed any other liability or obligation of the Seller. Without limiting the generality of the foregoing, Purchaser does not assume, and nothing in this Agreement shall be deemed to evidence any intent to assume, and the term Assumed Liabilities does not include, any Taxes for which Seller is liable under SECTION 6.2(f) or SECTION 9.6. 2.3 PURCHASE PRICE. The purchase price for the Acquired Assets (the "Purchase Price") shall be an amount, determined as of the Cut-Off Time, equal to (a) 44% multiplied by an amount equal to the total amount of all Credit Card Receivables except for Credit Card Receivables with respect to Excluded Accounts minus (b) six hundred thousand dollars ($600,000). 2.4 HOLD BACK AMOUNT. In order to (A) provide for a source of funds to indemnify and defend Purchaser and its Affiliates and their respective stockholders, officers, directors and employees (i) pursuant to Section 7.1 of each of this Agreement and the Prior Sale Agreement and (ii) pursuant to SECTION 12.2 of the Servicing Agreement and (B) to secure Seller's obligations to repurchase or adjust the purchase price in respect of Covered Accounts pursuant to SECTION 2.7 of each of this Agreement and the Prior Sale Agreement, Purchaser shall deposit from the Purchase Price hereunder with the Escrow Holder on the Closing Date an amount equal to the difference between the amount in Escrow on the day prior to the Closing Date and the Hold Back Amount. The Hold Back Amount shall be held by the Escrow Holder pursuant to the terms of an Escrow Agreement as amended and restated in the form attached hereto as EXHIBIT E and shall be payable to Seller as provided in SECTION 3.8. 2.5 ALLOCATION OF PURCHASE PRICE. The Purchaser and Seller agree that the Purchase Price shall be allocated among the Acquired Assets (and adjusted on the Settlement Date to reflect any post-closing adjustments as described in Article III hereof) as set forth on SCHEDULE 2.5 attached hereto and in accordance with Section 1060 of the Code and the regulations promulgated thereunder, the fair market values as set forth in SCHEDULE 2.5 having been agreed to by the parties. Purchaser and Seller will file all tax returns and other tax related schedules and documents required to be filed by them in accordance with those fair market values and allocations, and will not adopt or otherwise assert tax positions inconsistent therewith. Notwithstanding the foregoing, in the event the Internal Revenue Service challenges any position taken by the parties hereto, the party against which a challenge is made may settle or litigate such challenge without the consent of, or liability to, the other parties. 8 2.6 USE OF NAME AND TRADEMARKS. (a) LIMITED LICENSE. On and after the Closing Seller grants to Purchaser a limited, nonexclusive, nontransferable except as to an Affiliate, nonsublicensable license to use, for the time and subject to the limitations set forth herein (i) to use the name of Seller and the Credit Card Marks on periodic statements for as long as statement stock exists at FDR but in no event more than six (6) months; and (ii) to use the name of Seller (but not the Credit Card Marks) to identify the former owner of the Accounts in connection with customer service and collection purposes until two (2) years from the Closing Date. Purchaser and such Affiliate shall use the Credit Card Marks in accordance with such license solely in the forms and formats currently in use for Credit Cards, periodic statements and communications, or in the forms and formats and on such forms as Seller shall approve in writing prior to any such use, which approval shall not be unreasonably withheld. Purchaser shall not have any obligation to recall Credit Cards using the name of Seller or the Credit Card Marks. Purchaser agrees that it shall not use the name of Seller, or the Credit Card Marks except as permitted under this SECTION 2.6. (b) RIGHTS RESERVED BY SELLER. It is expressly agreed that Purchaser is not purchasing or acquiring any right, title or interest in the Credit Card Marks. Purchaser acknowledges that Seller exclusively owns the Credit Card Marks and goodwill related thereto and symbolized thereby. Purchaser shall not combine the Credit Card Marks with any other mark or term, and shall not use the Credit Card Marks in any manner which will materially damage or diminish Seller's goodwill. Purchaser shall immediately upon receipt of written notice from Seller, which notice shall provide detailed and legally sufficient information about inconsistent usage of the Credit Card Marks, cease any act or practice that has or is likely to materially damage or diminish the goodwill of Seller or its Affiliates. 2.7 SELLER'S REPURCHASE OBLIGATIONS. After the Closing Date, in the event any Account acquired hereunder by Purchaser is a Mississippi Account, an Alabama Opt-Out Account or an Account which should have been classified as an Excluded Account (each such Account, a "Covered Account"), Purchaser may, from time to time (but no more frequently than once each quarter), on or before the date which is one year after the Closing Date, (i) in the case of a Covered Account which is a Mississippi Account or an Alabama Opt-Out Account or as to which a representation and warranty has been breached, request that Seller repurchase such Covered Account (and all other Acquired Assets relating to such Covered Account) and Seller shall repurchase such Account (and all other Acquired Assets relating to such Covered Account) for an amount equal to the Repurchase Price set forth in SECTION 2.8; and (ii) 9 in the case of a Covered Account which should have been classified as an Excluded Account on the Closing Date, reduce the Purchase Price by an amount equal to the Repurchase Price: PROVIDED, however, that Seller shall not be required to effect such repurchase or adjustment until the sum of such adjustments and repurchases, and any prior adjustments or payments of the Repurchase Price, is in excess of $25,000, at which time Seller shall be required to repurchase all such Covered Accounts or adjust the Purchase Price with respect to all such Covered Accounts. Notwithstanding the foregoing, Seller shall be required to repurchase all Mississippi Accounts and all Alabama Opt-Out Accounts without regard to the financial floor. Requests to repurchase Covered Accounts or adjust the Purchase Price may be made during the period from the Closing Date until the date which is one year after the Closing Date. On the Settlement Date, or if such request is made later than four Business Days before the Settlement Date, then within twenty days after the receipt from Purchaser of a list of Covered Accounts to be repurchased, Seller shall deliver to Purchaser an amount equal to the aggregate Repurchase Price for such Covered Accounts. If despite its best efforts Seller is unable to deliver such amount within twenty days after such request, Purchaser shall provide Seller with written notice of default, and, upon Seller's failure to repurchase or adjust the Purchase Price within five (5) days of such notice, Purchaser may secure the disbursement of such funds from the Escrow Holder in accordance with the Escrow Agreement. 2.8 REPURCHASE PRICE. The Repurchase Price for a Covered Account (the "Repurchase Price") shall be equal to 44% of the outstanding balance of such Covered Account as of the Cut-Off Time, unless Purchaser did not pay for such Covered Account, in which case the Repurchase Price shall be equal to 0% of the outstanding balance of such Covered Account as of the Cut-Off Time, less any payment received with respect thereto by Purchaser between the Closing Date and the date of repurchase, plus purchases and cash advances made with respect thereto by Purchaser between the Closing Date and the date of repurchase. If the Repurchase Price is a negative amount, Purchaser shall pay Seller such amount. Upon payment of the Repurchase Price as set forth herein with respect to an account which has been repurchased, Purchaser shall deliver to Seller all files and Books and Records relating to such repurchased Covered Account and shall execute and deliver such instruments of transfer or assignment, in each case without recourse, as shall be necessary to revest in Seller title to such repurchased Covered Account on the same basis owned by Seller immediately prior to the Closing Date. 2.9 EXCLUSIVE REMEDY. Repurchase of an account or adjustment of the Purchase Price as set forth in SECTIONS 2.7 and 2.8 shall be the sole and exclusive remedy for any breach of an Account Representation and Warranty, except to the extent the indemnification provisions of ARTICLE 7 are available in the event of any Loss. Except as provided in the preceding sentence, the indemnification provisions of Article 7 shall be the sole and exclusive remedy for any Loss. 10 2.10 CONTINUED PROCESSING. Prior to the Closing Date, Seller shall ensure the continued processing of the Accounts by FDR and EDS subject to the agreements currently in place between Seller and such parties and shall not amend such agreements without the prior written consent of Purchaser. (a) FDR. Effective on the Closing Date, Seller shall assign and Purchaser shall assume all rights and obligations of Seller under the FDR Agreement; provided that Seller shall pay all processing fees charged by FDR with respect to (i) the processing of the ADC Portfolio prior to the Closing Date and (ii) the processing of credit card accounts which are not within the definition of Accounts. (b) EDS. Purchaser shall pay all processing fees, excluding minimum processing penalties and termination penalties, charged by EDS directly related to the processing of the ADC Portfolio. Seller shall maintain the existing agreement with EDS in full force and effect up to and including April 30, 2001. Seller shall obtain from EDS any required consent or nonobjection of EDS to Purchaser's full participation rights and access, including without limitation any consent or nonobjection required to permit Purchaser to convert payment processing to Purchaser at any time without the imposition of a penalty on Purchaser, and assistance from EDS for such conversion, and right to audit EDS. ARTICLE 3 - THE CLOSING ----------------------- 3.1 THE CLOSING. Subject to the satisfaction or waiver of all conditions set forth in ARTICLE 4, the closing of the transactions contemplated herein (the "Closing") shall be by facsimile transmission (FAX) at 11 a.m. Pacific Time on December 29, 2000, or at such other time, place and manner as may be mutually agreed by the parties hereto (such time and date being referred to herein as the "Closing Time" and the "Closing Date," respectively). 3.2 DOCUMENTS AND CERTIFICATES. At the Closing, Seller shall deliver to Purchaser, and Purchaser shall deliver to Seller, (i) an agreement (the "Assignment and Assumption Agreement") which conveys to Purchaser all of Seller's rights, title and interest in and to the Acquired Assets to be transferred thereby and under which Purchaser shall assume the Assumed Liabilities; (ii) an amendment to the Prior Sale Agreement which effects modifications to the amount and treatment of the Hold Back Amount described therein (the "Prior Sale Amendment"); (iii) an amendment to the Escrow Agreement which instructs the Escrow Holder with respect to the foregoing matters (the "Escrow Amendment"); and an instrument terminating the rights and obligations of the parties to the Servicing Agreement (the "Servicing Termination"). The Assignment and Assumption Agreement, Prior Sale Amendment, Escrow Amendment and Servicing Termination shall be in the forms of Exhibit C, D, E and F attached hereto and shall be dated the Closing Date, appropriately completed and duly executed. Seller, Purchaser and FDR shall execute all required documentation relating to the assignment and assumption by Purchaser of the FDR Agreement. Seller shall execute and deliver all such additional instruments, documents or certificates as may be reasonably requested by Purchaser for the consummation at the Closing of the transactions contemplated by this Agreement. 11 3.3 VALUATION DATE STATEMENT. Servicer shall use its reasonable best efforts to deliver to Purchaser the Valuation Date Statement, along with the appropriate reports and other supporting calculations, as soon as possible after the Valuation Date. Seller shall have the right to review the Valuation Date Statement, together with any supporting documents reasonably requested by Purchaser to verify the accuracy and completeness of the valuations set forth therein and the Valuation Date Statement shall be revised by Servicer to reflect any corrections agreed to by Servicer and Seller. 3.4 PAYMENTS ON THE CLOSING DATE. On the Closing Date, Purchaser shall pay Seller an amount equal to (i) the Purchase Price (excluding the Post Closing Payments described in SECTION 3.7) based on the Valuation Date Statement less (ii) the amount equal to the difference between the amount in Escrow on the day prior to the Closing Date and the Hold Back Amount. Payment to Seller on the Closing Date shall be made by a Fedwire transfer no later than 11 a.m. Pacific Time in immediately available U.S. dollars to an account designated in writing by Seller. 3.5 SETTLEMENT DATE STATEMENT. Purchaser shall use its reasonable best efforts to deliver to Seller the Settlement Date Statement as soon as possible but at least five (5) Business Days prior to the Settlement Date. Seller shall have the right to review the Settlement Date Statement, together with any supporting documents reasonably requested by Seller to verify the accuracy and completeness of the valuations set forth therein and the Settlement Date Statement shall be revised by Purchaser to reflect any corrections agreed to by Purchaser and Seller. 3.6 PAYMENTS ON THE SETTLEMENT DATE. If the Purchase Price for the Acquired Assets as reflected on the Settlement Date Statement is greater than the Purchase Price paid by Purchaser on the Closing Date, then Purchaser shall remit the difference to Seller, together with interest on such amount at the Federal Funds Rate divided by three hundred sixty (360) for each day during the period from the Closing Date to the Settlement Date. If the Purchase Price for the Acquired Assets as reflected on the Settlement Date Statement is less than the Purchase Price paid by Purchaser on the Closing Date, then Seller shall remit the difference to Purchaser together with interest on such amount at the Federal Funds Rate divided by three hundred sixty (360) for each day during the period from the Closing Date to the Settlement Date. Payments shall be remitted no later than 11 a.m. Pacific Time by a Fedwire transfer in immediately available U.S. dollars to an account designated by the party to which payment is due. 12 3.7 POST CLOSING PAYMENTS. (a) If (i) Seller is debited by MasterCard after the Cut-Off Time for a chargeback in respect of which Seller provided a Cardholder a credit on an Account prior to the Cut-Off Time, or (ii) a check from a Cardholder in payment of amounts owed on an Account, which was credited to such Account prior to the Cut-Off Time, is returned unpaid by the drawee after the Cut-Off Time, or (iii) Purchaser provides a credit on an Account with respect to Unauthorized Use of an Account prior to the Cut-Off Time, (iv) Purchaser provides a credit on an Account in connection with a transaction posted before the Cut-Off Time as a result of rights asserted by the Cardholder under 12 CFR ss.226.12(c) or 12 CFR ss.226.13(d), then an adjustment to the Purchase Price shall be made in favor of Seller (in the case of clause (i) or (ii)), Purchaser (in the case of clause (iii) or (iv)) in the amount of 44% of such chargeback, check or credit or adjustment (as the case may be). The party with knowledge of the facts relating to such Accounts or amounts shall provide to the other party written notice and supporting documentation (to the extent available to such party) as promptly as practicable after discovery such facts. On the Settlement Date, or if such notice and supporting documentation is received by such party after the fourth Business Day before the Settlement Date, within five (5) Business Days after receipt of said notice, Seller or Purchaser, as the case may be, shall reimburse the other party, in immediately available funds, for the amount of said adjustment, together with interest on the reimbursed amount computed from and including the Closing Date through and excluding the date of reimbursements at an interest rate equal to the Federal Funds Rate divided by 360 for each day during such period. Notwithstanding the foregoing, the parties agree that this SECTION 3.7 shall be implemented fairly and equitably so as to avoid the double payment or failure to pay any amount which would result in the unjust enrichment of any party pursuant to the terms hereof. 3.8 PAYMENT OF HOLD BACK AMOUNT. (a) The Escrow Agreement shall provide that upon the expiration of two (2) years from the Closing Date, the remaining balance of the Hold Back Amount held by the Escrow Holder shall be remitted by the Escrow Holder to Seller; provided, however, that there shall be retained in escrow an amount equal to the Total Estimated Liquidated Amount of Damages under this Agreement and the Prior Sale Agreement. (b) An Estimated Liquidated Amount shall be proposed with respect to a claim of indemnification by Purchaser in writing promptly after the giving of notice of such claim pursuant to SECTION 7.4(a) of this Agreement or SECTION 12.3(A) of the Servicing Agreement, and in no event later than the second anniversary of the Closing Date. An Estimated Liquidated Amount shall be proposed only with respect to, and be applicable only to, claims actually asserted by third parties. Within five Business Days of such proposal, Seller shall either accept each such Estimated Liquidated Amount or reject such Estimated Liquidated Amount and propose an alternative Estimated Liquidated Amount. If Seller rejects the Purchaser's proposed 13 Estimated Liquidated Amount, or Purchaser rejects the Seller's alternative Estimated Liquidated Amount, Seller and Purchaser shall negotiate in good faith in an attempt to agree upon the applicable Estimated Liquidated Amount, and if such parties shall fail to agree for a period of ten Business Days, the amount of the Estimated Liquidated Amount shall be subject to dispute resolution in accordance with SECTION 9.14, and the amount of such Estimated Liquidated Amount as determined in accordance therewith shall be final. In no event shall the Hold Back Amount or its payment in accordance with SECTION 3.8 be deemed to limit the time in which Purchaser may bring a claim, or the amount of claims that Purchaser may bring, under this Agreement. Purchaser and Seller shall account to one another with respect to actual costs and liabilities incurred with respect to a claim for indemnification as to which an Estimated Liquidated Amount has been fixed. In the event actual costs expended with respect to such a claim for indemnification are less than such Estimated Liquidated Amount, then at the time such indemnification claim is finally resolved, and provided that the second anniversary of the Closing Date shall have occurred, Purchaser shall cause the Escrow Holder to remit to Seller, as a reduction of the Total Estimated Liquidated Amount of Damages any excess of the Estimated Liquidated Amount over actual costs expended with respect to such claim. 3.9 POWER OF ATTORNEY. Effective upon the Closing Date and thereafter, Seller hereby irrevocably names, constitutes, and appoints Purchaser, acting through itself or its officers, agents, employees and representatives, its duly authorized special, limited attorney-in-fact and agent with full power and authority to endorse in Seller's name, any checks relating to the Accounts. 3.10 DISPUTE RESOLUTION. Seller and Purchaser agree to attempt in good faith to resolve any disputes arising in connection with the payments made or demanded by the parties under this Article 3. In the event Purchaser and Seller are unable to resolve any such dispute (other than the determination of the Estimated Liquidated Amount as provided in SECTION 3.8), either party may request a mutually agreed upon nationally recognized firm of independent accountants (the "Accountants") to reconcile any financial items in dispute. In the event Purchaser and Seller are unable to mutually agree as to the identity of the Accountants, then the dispute resolution procedures specified in SECTION 9.14 shall be followed in order to identify the mutually agreed upon Accountants. Any such request shall be in writing, shall specify with particularity the disputed amounts being submitted for determination and a direction to the Accountants to proceed with such review as soon as practicable. The requesting party shall furnish the other party hereto with a copy of such request at the same time it is submitted to the Accountants. Purchaser and Seller shall cooperate fully in assisting the Accountants in their review, including, without limitation, by providing the Accountants full access to all files, books and records relevant thereto and providing such other information 14 as the Accountants may reasonably request in connection with any such review. One-half (1/2) of the fees and disbursements of such Accountants arising out of such review shall be borne by each of Purchaser and Seller. In the event the determination made by the Accountants requires either party to make payment to the other of any additional amount, such party shall make such payment no later than five (5) Business Days following receipt from the Accountants of written notice to both parties of such determination plus interest on any amount due at a rate equal to the Federal Funds Rate divided by 360 for each day during the period from the date on which a payment was required pursuant to the terms of this Agreement through the date of payment. ARTICLE 4 - CONDITIONS OF CLOSING --------------------------------- 4.1 CONDITIONS APPLICABLE TO PURCHASER. The obligation of Purchaser under this Agreement to consummate the transactions contemplated by this Agreement is subject to the satisfaction or waiver by Purchaser of the following conditions as of the Closing Date: (a) RELATED AGREEMENTS. Seller shall have executed and delivered to Purchaser each of the Related Agreements. (b) FINANCING STATEMENTS. At or before the Closing Date, Seller shall have executed and delivered to Purchaser, financing statements, prepared by Purchaser, in the appropriate form for filing under the Uniform Commercial Code of the States of California and Nevada to give notice of Purchaser's interest in the Credit Card Receivables. (c) BOARD RESOLUTIONS. Purchaser shall have received from Seller certified resolutions of Seller's Board of Directors authorizing the execution and delivery of this Agreement and the Related Agreements and the consummation of the transactions contemplated hereby and thereby. (d) PERFORMANCE OF THIS AGREEMENT. All the terms, covenants and conditions of this Agreement to be complied with and performed by Seller at or prior to the Closing Date shall have complied with and performed in all material respects. (e) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and warranties of Seller (other than the Account Representations and Warranties) shall be true and correct in all material respects on the Closing Date as though made on the Closing Date, except for changes therein specifically permitted by this Agreement or resulting from any transactions expressly consented to in writing by Purchaser. (f) NO MATERIAL ADVERSE CHANGE. Since October 31, 2000, there shall have been no material adverse change in the condition, financial or otherwise, of the Acquired Assets other than fluctuations in the value of the Credit Card Receivables. 15 (g) LITIGATION. No action, suit, litigation or proceeding related to any of the transactions contemplated hereby shall have been threatened or instituted by a governmental body which in the opinion of Purchaser (after consultation with its counsel) is reasonably likely to restrict or prohibit any of the transactions contemplated hereby or to have a material adverse effect on the Acquired Assets. (h) CONSENTS. All consents of any person, and all consents, licenses, permits or approvals or authorizations or exemptions by notice or report to, or registrations, filings or declarations with, any governmental authority, in connection with the execution or delivery by Seller, and the validity or enforceability against Seller, of this Agreement and the Related Agreements and the consummation of the transactions contemplated hereby and thereby, or the performance by Purchaser or Seller of their obligations hereunder or thereunder, have been obtained at or prior to the Closing Date. (i) ACQUISITION LAWFUL. The acquisition of the Acquired Assets shall not violate any applicable statute, rule or regulation in effect on the Closing Date. (j) NO INJUNCTION. There must not be in effect any injunction that restricts or prohibits the consummation of any of the transactions contemplated hereby, has been issued, or has otherwise become effective, since the date of this Agreement. 4.2 CONDITIONS APPLICABLE TO SELLER. The obligation of Seller under this Agreement to consummate the transactions contemplated by this Agreement is subject to the satisfaction or waiver by Seller of the following conditions as of the Closing Date: (a) RELATED AGREEMENTS. Purchaser shall have executed and delivered to Seller each of the Related Agreements. (b) BOARD RESOLUTIONS. Seller shall have received from Purchaser certified resolutions of Purchaser's Board of Directors authorizing the execution and delivery of this Agreement and the Related Agreements and the consummation of the transactions contemplated hereby and thereby. (c) PERFORMANCE OF THIS AGREEMENT. All the terms, covenants and condition of this Agreement to be complied with and performed by Purchaser at or prior to the Closing Date shall have been fully complied with and performed in all material respects. (d) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and warranties of Purchaser as set forth in SECTION 5.2 hereof shall be true and correct on the Closing Date shall have been fully complied with and performed in all material respects. 16 (e) LITIGATION. No action, suit, litigation or proceeding related to any of the transactions contemplated hereby shall have been threatened or instituted by a governmental body which in the opinion of Seller (after consultation with its counsel) is reasonably likely to restrict or prohibit the consummation of any of the transactions contemplated hereby. (f) CONSENTS. All consents of any person and all consents, licenses, permits or approvals or authorizations or exemptions by notice or report to, or registrations, filings or declarations with, any governmental authority, including without limitation the Office of Thrift Supervision, in connection with the execution or delivery by Purchaser, and the validity or enforceability against Purchaser, of this Agreement and the Related Agreements, and the consummation of the transactions contemplated hereby and thereby, or the performance by Purchaser or Seller of their obligations hereunder or thereunder, have been obtained at or prior to the Closing Date, without the imposition of any conditions by the Office of Thrift Supervision which, in the reasonable judgment of Seller, are materially burdensome. (g) ACQUISITION LAWFUL. The sale of the Acquired Assets shall not violate any applicable statute, rule or regulation in effect on the Closing Date. (h) NO INJUNCTIONS. There must not be in effect any injunction that restricts or prohibits the consummation of any of the transactions contemplated hereby, has been issued, or has otherwise become effective, since the date of this Agreement. (i) FDR AGREEMENT. Purchaser shall have assumed and FDR shall have agreed to the assumption of all Seller's obligations under the FDR Agreement. ARTICLE 5 - REPRESENTATIONS AND WARRANTIES ------------------------------------------ 5.1 REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby represents and warrants to Purchaser (but subject to the last, undesignated, paragraph of this Section 5.1) as follows: (a) ORGANIZATION. Seller is a federally chartered savings bank validly existing and in good standing under the laws of the United States of America. (b) CAPACITY; AUTHORITY; VALIDITY. Subject to any required approval of the Office of Thrift Supervision, Seller has all necessary power and authority to enter into this Agreement and the Related Agreements to which it is a party and to perform all of the obligations to be performed by it under this Agreement and the Related Agreements. Subject to any required approval of the Office of Thrift Supervision, this Agreement and the Related Agreements and the consummation by Seller of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action of Seller and this Agreement has been duly executed and 17 delivered by Seller and when executed by Seller, this Agreement and the Related Agreements will constitute the valid and binding obligations of Seller, enforceable against Seller in accordance with their respective terms (except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship, the rights and obligations of receivers and conservators of insured depository institutions under 12 U.S.C.ss.1821(d) and (e) and other laws relating to or affecting creditors' rights generally and by general equity principles). (c) CONFLICTS; DEFAULTS. Neither the execution and delivery of this Agreement and the Related Agreements by the Seller, nor the consummation of the transactions contemplated hereby and thereby will (i) conflict with, result in the breach of, any order, law, regulation, contract, instrument or commitment to which Seller is a party or by which it is bound, (ii) violate the articles of incorporation or bylaws, or any other equivalent organizational document, of Seller, (iii) require any consent, approval, authorization or filing under any law, regulation, judgment, order, writ, decree, permit, license or agreement to which Seller is a party, or (iv) subject to consent of FDR and EDS pursuant to SECTION 2.11 of this Agreement, require the consent or approval of any other party to any contract, instrument or commitment which Seller is a party, in each case other than (x) approvals of regulatory authorities, if any, which have been obtained or will be obtained prior to or on the Closing Date and (y) any of the foregoing which would not have a material adverse effect on the Acquired Assets. Seller is not subject to any agreement with any regulatory authority which would prevent the consummation by Seller of the transactions contemplated by this Agreement and the Related Agreements. (d) TITLE TO ACQUIRED ASSETS. Seller has good and marketable title to the Acquired Assets, free and clear of any lien, pledge, claim, security interest, encumbrance, charge or restriction of any kind, except for (i) the rights of Cardholders; and (ii) restrictions imposed by the Operating Regulations, including without limitation restrictions imposed on the bank identifying numbers. (e) LITIGATION. Except as set forth on SCHEDULE 5.1(e), there is no claim, or any litigation, proceeding, arbitration, investigation or controversy pending, against or affecting the Seller, which will have a material adverse effect on the Seller's interest in the Acquired Assets or the ability of the Seller to consummate the transactions contemplated hereby and by the Related Agreements and, to the best of Seller's knowledge, no such claim, litigation, proceeding, arbitration, investigation or controversy has been threatened or is contemplated. 18 (f) COMPLIANCE WITH LAWS. (i) The Accounts, Cardholder Agreements and all related documents comply in all material respects with all applicable laws, rules and regulations and Seller has complied in all material respects with all applicable federal and state laws and regulations and the Operating Regulations with respect to the origination, maintenance and servicing of the Accounts, including any change in the terms of any Account; (ii) the interest rates, fees and charges in connection with the Accounts comply with all applicable federal and state laws and regulations and with the Operating Regulations; (iii) other than in the Cardholder Agreements and as reflected in the Books and Records, Seller has made no promise, agreement or commitment to any Cardholder in connection with an Account, except in the ordinary course of business in connection with collection and customer service; (iv) each Cardholder Agreement is the legal, valid and binding obligation of the Cardholder and is enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors' rights generally and by general equity principles, and is not subject to offset, recoupment, adjustment or any other claim except for the rights of Cardholders under 12 CFRss.226.12(c), 12 CFR ss.226.13(d) and the Soldiers and Sailors Civil Relief Act; and (v) except for billing inquiries reflected in the Books and Records, each of the Credit Card Receivables arises from a bona fide sale or loan transaction or from a fee assessed in connection therewith. (g) CARDHOLDER AGREEMENTS. Attached as SCHEDULE 5.1(g) is a true, accurate and complete copy of each form of Cardholder Agreement governing an Account. (h) ABSENCE OF CERTAIN ACCOUNTS. None of the Accounts transferred as part of the Acquired Assets are: (i) any merchant accounts and their associated processing; (ii) any debit accounts and their associated processing; (iii) any accounts and associated receivables that are classified, or that should have been classified, as of the Cut-Off Time, as a commercial loan or which are generated by any commercial entity; and (iv) any test accounts opened or maintained by Seller with respect to the MasterCard system for verification or other internal purposes. (i) ABSENCE OF DEFAULTS. There is no default, breach, violation, or event of acceleration existing under any Account and no event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration except for payment defaults that are less than one hundred eighty days past due. Seller has not waived any default, breach, violation or event of acceleration with respect to an Account, except as reflected in the Books and Records or otherwise in accordance with the Policies and Procedures. 19 (j) PROCESSING. Each Account has been processed by Seller in conformance in all material respects with all of the requirements of the Policies and Procedures. (k) PERFORMANCE OF OBLIGATIONS. Seller has performed all obligations required to be performed by it to date under the Cardholder Agreements, and Seller is not in default under, and no event has occurred which, with the lapse of time or action by a third party, could result in a default of Seller under, any such agreements. Each Cardholder Agreement is the legal, valid and binding obligations of Seller, enforceable by the respective parties thereto in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship, the rights and obligations of conservators or receivers on insured depository institutions under 12 U.S.C. ss.1821(d) and (e) and other laws relating to or affecting creditors' rights generally and by general equity principles. (l) OPERATION OF BUSINESS. Seller has not (i) effected any change in the Current Policies and Procedures that would have a material adverse effect on the Acquired Assets; (ii) entered into any transaction or made any commitment or agreement in connection with the Accounts, other than in the ordinary course of Seller's business consistent with past practice; (iii) amended the terms of any Cardholder Agreement, except on an individual basis in accordance with the Current Policies and Procedures; or (iv) engaged in any settlement or reage of delinquent Accounts under terms inconsistent with the Policies or Procedures. (m) FINDERS OR BROKERS. Seller acknowledges that it has not agreed to pay any fee or any agent, broker, finder, or other person retained by it, for or on account of services rendered as a broker or finder in connection with this Agreement or the transactions contemplated hereby. (n) EFFECT OF LAW ON CLOSING. There is no federal or state statute, rule or regulation, or order or rule of any federal or state regulatory agency which would prevent the Seller from selling the Acquired Assets to Purchaser as contemplated by this Agreement. (o) BOOKS AND RECORDS. The Books and Records relating to an Account accurately reflect in all material respects the terms and conditions of such Account. (p) ENHANCEMENT PROGRAMS. SCHEDULE 5.1(p) sets forth a list of benefits or enhancement programs currently in effect with respect to the Accounts. (q) ACCURACY OF STATEMENTS. No written statement, report, or other document, furnished pursuant to this Agreement or during Purchaser's due diligence with respect to this Agreement, including documents and information in the form of microfilm, microfiche, magnetic tape, computer disc, or in any other 20 form, contains any untrue statement of a material fact by Seller or omits to state a material fact necessary to make the statements of Seller contained therein not misleading, the effect of which untrue statement or omission would be to materially and adversely affect the Acquired Assets taken as a whole. (r) CONSENTS. Except for (i) any required approval of the Office of Thrift Supervision under Section 563.22 of the OTS Regulations, and (ii) any required FDR and EDS consent pursuant to SECTION 2.10 of this Agreement, no consent, approval or authorization of any federal, state or local government authority or agency or any other third party is required for the execution, delivery and performance by the Seller of this Agreement and the consummation by them of the transactions contemplated hereby. (s) ACCURACY OF BAD DEBT EXPERIENCE. The month end delinquency and charge-off reports covering the period from June 30, 1999 to May 31, 2000 and in the form set forth on SCHEDULE 5.1(s), have been prepared in accordance with the Policies and Procedures, and Seller has no reason to believe that such reports are inaccurate in any material respect. Nothing in this SECTION 5.1 is intended to constitute a representation and warranty of Seller as to any matter arising from an action or omission of Purchaser in its capacity as Servicer on and after the Prior Closing Date. 5.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby represents and warrants to Seller as follows: (a) ORGANIZATION. Purchaser is a national banking association, validly existing and in good standing under the laws of the United States. (b) CAPACITY; AUTHORITY; VALIDITY. Purchaser has all necessary corporate power and authority to enter into this Agreement and the Related Agreements and to perform all of the obligations to be performed by it under this Agreement and the Related Agreements. This Agreement and the Related Agreements and the consummation by Purchaser of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action of Purchaser, and this Agreement and the Related Agreements have been duly executed and delivered by Purchaser, and constitute the valid and binding obligations of Purchaser, and this Agreement and the Related Agreements have been duly executed and delivered by Purchaser, and constitute the valid and binding obligations of Purchaser, enforceable against Purchaser in accordance with their respective terms (except as such enforcement may be limited to bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship, the rights and obligations of receivers and conservators of insured depository institutions under 12 U.S.C. ss.1821(d) and (e) and other laws relating to or affecting creditors' right generally and by general equity principles. 21 (c) CONFLICTS; DEFAULTS. Neither the execution and delivery of this Agreement and the Related Agreements by Purchaser nor the consummation of the transactions contemplated hereby or thereby by Purchaser will (i) conflict with, result in the breach of, constitute a default under, or accelerate the performance required by, the terms of any order, law, regulation, contract, instrument or commitment to which Purchaser is a party or by which Purchaser is bound, (ii) violate the organizational documents of Purchaser, (iii) require any consent, approval, authorization or filing under any law, regulation, judgment, order, writ, decree, permit or license to which Purchaser is a party or by which Purchaser is bound, other than the approvals of regulatory authorities, if any, which have been obtained or will be obtained prior to or on the Closing Date. Purchaser is not subject to any agreement or understanding with any regulatory authority which would prevent the consummation by Purchaser of the transactions contemplated by this Agreement and the Related Agreements. (d) FINDERS OR BROKERS. Purchaser has not agreed to pay any fee or commission to any agent, broker, finder, or other person for or on account of services rendered as a broker, or finder in connection with this Agreement or the transactions contemplated hereby which would give rise to any valid claim against Seller for any brokerage commission or finder's fee or like payment. (e) EFFECT OF LAW ON CLOSING. There is no federal or state statute, rule or regulation, or order or rule of any federal or state regulatory agency, which would prevent Purchaser from purchasing the Acquired Assets and assuming the Assumed Liabilities as contemplated by this Agreement. (f) SOURCE OF FUNDING. Purchaser has the necessary sources of funding to consummate the transactions contemplated in this Agreement in accordance with the terms hereof. (g) MASTERCARD MEMBER. Purchaser is qualified to participate in, and is a member in good standing of, the MasterCard credit card program. (h) INVESTIGATION. Purchaser has made such independent investigation as Purchaser deems necessary as to the nature and value of the Acquired Assets, including each Account, and as to all other facts that Purchaser deems material to Purchaser's purchase. Purchaser is entering into this Agreement on the basis of that investigation and Purchaser's own judgment and experience. Purchaser has made an independent determination that the Purchase Price represents the fair and reasonable value of the Acquired Assets, including the Accounts. Purchaser has relied upon representations regarding the nature and value of the Acquired Assets only as made to Purchaser by Seller in this Agreement. The foregoing shall not in any way limit the representations and warranties and indemnification provisions otherwise provided in this Agreement. 22 ARTICLE 6 - CERTAIN COVENANTS ----------------------------- 6.1 MUTUAL COVENANTS AND AGREEMENTS. Each party hereto covenants and agrees that: COOPERATION. It shall cooperate with the other parties hereto in furnishing any information or performing any action reasonably requested by that party, both before and after the Closing, which information or action is necessary for the prompt consummation of the transactions contemplated by, and the exercise of rights and performance of obligations under, this Agreement. Without limiting the generality of the foregoing, Purchaser shall provide to Seller (and shall cause its employees and third parties engaged to provide services to the Purchaser to provide) (i) such information as is requested by regulators or examiners having jurisdiction over Seller relating to the Accounts, the Cardholders or the transactions described herein and (ii) reasonable access to and the ability to copy such Books and Records as is determined to be necessary by Seller in connection with the Alabama Class Action and the settlement thereof. The Purchaser agrees to maintain the Books and Records for the Accounts for at least two years after the Closing Date and permit the Office of Thrift Supervision access to the Books and Records upon reasonable notice. (a) (b) OTHER REQUIRED INFORMATION. It shall furnish to the other parties hereto all information as is required to be set forth in any application or statement to be filed with any local, state or federal governmental agency or authority in connection with the regulatory approval or review of the transactions contemplated by this Agreement. (c) CONFIDENTIALITY. All information furnished by a party (the "Protected Party") to any other party in connection with this Agreement and the transactions contemplated hereby (including the books and records delivered by Seller relating to Credit Card Accounts not being sold to Purchaser under this Agreement pursuant to SECTION 6.2(g) of this Agreement) shall be received in confidence and kept confidential by such other party, and shall be used by it only in connection with this Agreement and the transactions contemplated hereby, except to the extent that such information: (i) is already lawfully known to such other party when received; (ii) thereafter becomes lawfully obtainable from other sources; (iii) is required to be disclosed to MasterCard; (iv) is disclosed to 23 its Affiliates, provided that such parties agree to be bound by the provisions of this SECTION 6.1(c); (v) is disclosed to its auditors or counsel or is required to be disclosed to its lenders or rating agencies; or (vi) is required by law, regulation or court order or request of examining authorities to be disclosed by such other party, provided that prior notice of such disclosure (other than to its Affiliates, auditors, counsel, lenders or examining authorities) has been given to the Protected Party, when legally permissible, and that such party which is required to make the disclosure uses its reasonable best efforts to provide sufficient notice to permit the Protected Party to take legal action to prevent the disclosure. Following the Closing Date, Purchaser shall have no obligation of confidentiality to Seller with respect to information which is contained in or derived from the Books and Records or is otherwise information Purchaser determines is reasonably required to be disclosed in connection with the securitization and sale of interests in the Accounts. In the event that the transactions contemplated by this Agreement shall fail to be consummated, such other party shall promptly cause all originals and copies of documents or extracts thereof containing such information and data as to such Protected Party to be returned to the Protected Party or destroyed and shall cause an officer to so certify to the Protected Party. This SECTION 6.1(c) shall survive any termination of this Agreement. (d) PRESS RELEASES. Except as may be (i) required by law or regulation or a court or regulatory authority or the rules of a stock exchange, or (ii) necessary to disclose to lenders and rating agencies, or (iii) required to be disclosed under applicable securities laws pursuant to advice of such party's securities counsel, neither Seller nor Purchaser, nor any of their respective Affiliates, subsequent to the date hereof, shall issue a press release or make any public announcement related to the transactions contemplated hereby until such transactions are consummated without consulting the other party hereto and giving due consideration to any comments provided by such other party, provided that no party shall, either before or after the Closing Date, issue a press release or make any public announcement which identifies or refers to any other party, the purchase price or the detailed terms of the transaction without the prior approval of the other party. Notwithstanding the above, either party may issue a press release or make a public announcement disclosing the existence of this agreement (but not the parties thereto), the financial impact of this Agreement to such party (but not the purchase price, either as a dollar amount or a percentage), the identity of the assets sold or purchased under this Agreement and the anticipated closing date of this Agreement without the prior approval of the other party. This SECTION 6.1(d) shall survive any termination of this Agreement. (e) NOTICE TO CARDHOLDERS. Seller and Purchaser shall cooperate with each other in good faith to enable Purchaser, prior to the Conversion Date, to prepare, print and mail a notice notifying each Cardholder on a timely basis of the purchase of the Accounts by Purchaser and such other information as may be required to be given to such Cardholder and other matters 24 which the parties determine to be appropriate. Any such notice shall be in a form consented to by each of the parties hereto prior to mailing, but no party shall unreasonably withhold such consent. Purchaser shall bear the expenses of such notice, and Seller shall bear the expense of any subsequent notice notifying certain cardholders that their Account has been repurchased by Seller. (f) MISCELLANEOUS AGREEMENTS AND CONSENTS. Subject to the terms and conditions herein provided, each party to this Agreement shall use its reasonable best efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, appropriate or desirable hereunder and under applicable laws and regulations, to consummate and make effective the transactions contemplated by this Agreement. Each party to this Agreement will use its reasonable best efforts to obtain consents of all third parties and governmental bodies necessary for the consummation of the transactions contemplated by this Agreement. The parties and their respective officers, directors and/or employees shall use their reasonable best efforts to take such further actions subsequent to the Closing Date as are reasonably necessary, appropriate or desirable to carry out the purposes of this Agreement. (g) ADVICE ON CHANGES. Between the date hereof and the Closing Date, each party shall promptly advise the other of any fact known to it which, if existing or known at the date hereof, would have been required to be set forth or disclosed in or pursuant to this Agreement or of any fact which, if existing or known at the date hereof, would have made any of the representations of such party contained herein untrue in any material respect. (h) PRESERVE ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each party hereto shall refrain from taking any action which would render any representation or warranty of such party contained in ARTICLE 5 of this Agreement inaccurate as of the Closing Date. Each party shall promptly notify the other parties of any action, suit or proceeding that shall be instituted or threatened against such party to restrain, prohibit or otherwise challenge the legality of any transaction contemplated by this Agreement. 6.2 ADDITIONAL COVENANTS. Seller and Purchaser agree as follows: (a) PRESERVATION OF CREDIT CARD BUSINESS. Seller has previously discontinued its credit card business, including its servicing activities, and has engaged Purchaser to service the ADC Portfolio. To the extent consistent with the foregoing, from the date of this Agreement and continuing until the Closing Date, Seller shall, and shall cause Purchaser and other of its agents, if any, to: (i) maintain and service the Accounts in substantially the same manner as previously maintained and 25 serviced during the period after the Prior Closing Date and in accordance with the Current Policies and Procedures as currently in effect; (ii) maintain and service the Accounts in compliance with applicable federal and state laws and regulations to the extent of Seller's maintenance and servicing of the Accounts during the period after the Prior Closing Date; and (iii) except with the written consent of Purchaser, not make any change to the Current Policies and Procedures except as required by law, safe or sound banking practices or the Operating Regulations. Seller shall take all actions to cause its agents to, post all payments received prior to the Cut-Off Time to the applicable Account as of the Cut-Off Time. (b) PRESERVATION OF ACCOUNTS. From the date of this Agreement and continuing until the Closing Date, Seller shall: (i) not sell, assign, transfer, pledge or encumber, or permit the encumbrance of, any Account without the prior written consent of Purchaser; (ii) not take any substantial action with respect to the Accounts which will impair any material rights of Seller, and shall not amend any Cardholder Agreement other than on a per customer basis in accordance with the Current Policies and Procedures; and (iii) comply with the terms and conditions of the Cardholder Agreements, as then in effect. (c) ACCESS. From the date of this Agreement and continuing until the Closing Date, Seller shall (i) permit Purchaser and its authorized representatives full access, during reasonable hours, to the Books and Records as they relate to the Acquired Assets; (ii) furnish Purchaser with true, accurate and complete copies of such contracts and other such records and all other information in its possession with respect to the Acquired Assets as Purchaser or its authorized representatives may reasonably request; and (iii) cause its personnel and its agents to provide Purchaser assistance in its investigation of such matters; provided, however, that such investigation shall be conducted in a manner which does not unreasonably interfere with Seller's normal operations, and provided further that the Seller shall not be required to divulge, and shall not divulge, any records, including certain information, to the extent prohibited by applicable statutes or regulations. The access afforded pursuant to this Section 6.2(c) is solely for the purposes of viewing the conduct of business by the Seller between the date of this Agreement and the Closing Date, and shall not be construed as affording the Purchaser an opportunity to conduct due diligence with respect to the Acquired Assets, which the parties agree and acknowledge was conducted prior to execution of this Agreement. (d) USE OF LIST. Seller agrees that for a period of two (2) years from the Closing Date, neither Seller, nor any Affiliate of Seller, will (i) sell or otherwise provide the names and addresses or other identifying information concerning the Cardholders, in whole or in part, to any third party or (ii) knowingly use such names and addresses or other identifying information concerning the Cardholders to solicit any Cardholder for a Credit Card Account or for a credit card substitute or credit card replacement product. The foregoing shall not be interpreted to preclude general media advertising or promotion or advertising or promotion efforts targeted to customers of the Seller for mortgage, insurance or other 26 banking products and services. Purchaser acknowledges that the Cardholders were initially solicited by ADC, and Purchaser acknowledges that Seller has no control over ADC and Seller shall not be held in any way liable for any use of the names and addresses of Cardholders with respect to any solicitation by ADC. (e) FURTHER ASSURANCES. On or after the Closing Date, Seller shall, to the extent of its obligations hereunder (i) give such further assurances to Purchaser, execute, acknowledge and deliver all such acknowledgements and other instruments and take such further action as may be reasonably necessary or appropriate to fully and effectively carry out the transactions contemplated hereby; and (ii) reasonably assist Purchaser in the orderly transition of the operations and servicing relating to the Acquired Assets. (f) RESPONSIBILITY FOR TAXES. Seller shall be liable for and pay (i) any Taxes relating to the Acquired Assets that accrue or otherwise relate to any taxable year or period (or portion thereof) ending on or prior to the Closing Date and (ii) any Taxes imposed upon the Seller as a result of the sale of the Acquired Assets to the Purchaser. For purposes of this Agreement, Taxes attributable to a portion of a taxable year or period shall be determined on a "closing of the books" basis as of the Closing Date, except that Taxes imposed on a periodic basis (such as property Taxes) shall be allocated on a daily basis. Seller shall be responsible for any applicable 2000 federal or state information reporting for events or payments occurring during the period beginning January 1, 2000 and ending on the Closing Date. (g) BOOKS AND RECORDS. Seller will make the Books and Records available for delivery to Purchaser on or within five Business Days of the Closing Date. To the extent Seller delivers originals and does not retain copies of such Books and Records, Purchaser shall, upon the request of Seller and at Seller's expense, deliver to Seller copies of Books and Records as Seller may require to meet legal, regulatory, Tax, accounting and auditing requirements. Except as set forth above, from and after the Conversion Date, Seller shall have no further obligations to provide the Purchaser access to any of its books and records. (h) NO SHOP. Upon and after execution of this Agreement, and until the earlier of the Closing Date or the termination of this Agreement in accordance with its terms, the Seller will not, directly or indirectly, solicit, or cause any other person to solicit, any offer to acquire the Acquired Assets or assume the Assumed Liabilities (whether by merger, purchase of assets or other similar transaction) other than the acquisition and assumption contemplated by this Agreement. The Seller will not, directly or indirectly, furnish any information 27 concerning the Acquired Assets or Assumed Liabilities to any person which is seeking to acquire the Acquired Assets or Assumed Liabilities, in whole or in part, except in response to unsolicited inquiries or offers by third parties and under circumstances where the Seller advises such other person in writing of the existence of this Agreement and the Related Agreements and that any such offer or inquiry shall be in the nature of a backup offer or inquiry. If Seller receives an unsolicited inquiry or proposal concerning the availability of the Acquired Assets or Assumed Liabilities for purchase, Seller agrees to promptly inform Purchaser of the substance of such inquiry or proposal including the identity of the person making such inquiry or proposal, but solely if such inquiry or proposal is in writing. (i) AGREEMENTS WITH THIRD PARTIES. Seller shall furnish to Purchaser, prior to the Closing Date, copies of existing contracts with third parties relating to the Acquired Assets and Assumed Liabilities and shall represent that Purchaser will not incur any liability thereunder as a result of this Agreement other than the Assumed Liabilities. (j) REMOVAL FROM BIN. Seller and Purchaser shall cooperate to remove any accounts which have been classified or should have been classified as a Charged-Off Account, an Alabama Opt-Out Account or a Mississippi Account from bank identified number ("BIN") 549062 as soon as possible. (k) RETURN OF CREDIT BALANCES. Seller shall have paid to Cardholders all Credit Balances created prior to the Cut-Off Time. (l) TRAILING ACTIVITY. Seller and Purchaser shall cooperate to establish a process prior to the Closing Date to settle trailing activity. (m) PAYMENT OF CLAIMS IN ALABAMA CLASS ACTION. Seller shall be responsible for the payment of any amounts required to be paid in cash to Cardholders who have submitted claims in the Alabama Class Action and shall reimburse Purchaser for any credit given by Purchaser after the Closing Date to Cardholders who have submitted claims in the Alabama Class Action. 6.3 COVENANTS OF PURCHASER. Purchaser shall be liable for and pay any Taxes relating to the Acquired Assets that accrue or otherwise relate to any taxable year or period (or portion thereof), as determined in accordance with SECTION 6.2(f) beginning after the Closing Date; except for (i) Taxes imposed upon the Seller as a result of the sale of the Acquired Assets to the Purchaser and (ii) any other Taxes for which the Seller is responsible as set forth in SECTION 6.2(f)(i). Purchaser shall be liable for and shall pay and perform any Assumed Liability arising after the Closing Date, including without limitation all obligations arising under any Cardholder Agreement. Purchaser shall comply in all material respects with applicable law in its administration of the Accounts, in each case, after the Closing Date. Purchaser shall be responsible for any applicable 2000 federal or state information reporting for events or payments occurring subsequent to the Closing Date. 28 ARTICLE 7 - INDEMNIFICATION 7.1 SELLER'S INDEMNIFICATION OBLIGATIONS. Seller shall indemnify, defend and hold Purchaser and its Affiliates and their respective stockholders, officers, directors and employees, harmless from and against any and all Losses (as hereinafter defined) arising from: (i) breach by Seller of any representation, warranty or covenant expressly made by Seller hereunder or under a Related Agreement; (ii) failure by the Seller to perform its obligations hereunder or under the Related Agreement; (iii) Seller's ownership of or actions with respect to the Acquired Assets, including, without limitation Seller's relationships with ADC, prior to the Closing Date; (iv) any actions taken by FDR, Citizens Bank, EDS or Bank Plus Credit Services Corporation prior to the Closing Date with respect to the Acquired Assets; (v) the failure of the Accounts, Cardholder Agreements and all related documents, in effect at or prior to the Closing Date, to comply in any respect with all applicable laws, rules and regulations or (vi) the failure of the Seller prior to the Closing Date to comply in all respects with all applicable federal and state laws and regulations and the Operating Regulations with respect to the origination, maintenance and servicing of the Accounts, including any change in the terms of any Account. 7.2 PURCHASER'S INDEMNIFICATION OBLIGATIONS. Purchaser shall be liable to and shall indemnify, defend and hold Seller and its Affiliates and their respective stockholders, officers, directors and employees, harmless from and against any and all Losses arising from: (i) breach by Purchaser of any representation, warranty or covenant hereunder or under a Related Agreement; (ii) failure by Purchaser to perform its obligations hereunder or under a Related Agreement, including without limitation any failure by Purchaser on and after the Closing Date to discharge the Assumed Liabilities; (iii) Purchaser's ownership of or actions with respect to the Acquired Assets after the Closing Date; or (iv) the failure of the Purchaser after the Closing Date to comply in all respects with all applicable federal and state laws and regulations and the Operating Regulations with respect to the maintenance and servicing of the Accounts, including any change in the terms of any Account. 7.3 DEFINITION OF LOSSES. For purposes of this ARTICLE 7, the term "Loss" or "Losses" shall mean any liability, damage, costs and expenses arising from a claim asserted by a bona fide third party, not an Affiliate of an Indemnified Party, including, without limitation, any attorneys' fees, disbursements and court costs, in each case reasonably incurred by Purchaser or Seller, as the case may be, without regard to whether or not such Losses would be deemed material under this Agreement. 29 7.4 PROCEDURES. (a) NOTICE OF CLAIMS. The parties agree that in case any claim is made, any suit or action is commenced, or any knowledge is received of a state of facts which, if not corrected, may give rise to a right of indemnification for such party hereunder ("Indemnified Party") from the other party ("Indemnifying Party") the Indemnified Party will give notice to the Indemnifying Party as promptly as practicable after the receipt by the Indemnified Party of notice or knowledge of such claim, suit, action or state of facts. Notice to the Indemnifying Party under the preceding sentence shall be given no later than fifteen (15) days after receipt by the Indemnifying Party of service of process in the event a suit or action has commenced or thirty (30) days under all other circumstances. The failure to give prompt notice shall not relieve an Indemnifying Party of its obligation to indemnify except to the extent the Indemnifying Party is prejudiced by such failure. The Indemnified Party shall make available and provide access (and shall cause its employees and third parties engaged to provide services to the Indemnified Party to make available and provide access) to the Indemnifying Party and its counsel and accountants at reasonable times and for reasonable periods, during normal business hours, all books and records of the Indemnified Party or such third party relating to any such possible claim for indemnification, and shall permit copying of the same. Each party hereunder will render to the other (and shall cause any employees or other third parties employed or engaged by such Party to render) such assistance as it may reasonably require of the other in order to insure prompt and adequate defense of any suit, claim or proceeding based upon a state of acts which may give rise to a right of indemnification hereunder. The Indemnifying Party shall have the right to defend, compromise and settle (without agreeing or admitting to any liability as to the Indemnified Party in the event of a compromise or settlement) any third party person suit, claim or proceeding in the name of the Indemnified Party to the extent that the Indemnifying Party may be liable to the Indemnified Party in connection therewith. The Indemnifying Party shall notify the Indemnified Party within ten (10) days of having been notified pursuant to this SECTION 7.4(a) if the Indemnifying Party elects to assume the defense of any such claim, suit or proceeding and employ counsel, provided that the Indemnified Party does not object to such counsel in a reasonable exercise of its discretion. The Indemnified Party shall have the right to employ its own counsel if the Indemnifying Party so elects to assume such defense, but the fees and expenses of such counsel shall be the at the Indemnified Party's expense, unless (i) the employment of such counsel shall have been authorized in writing by the Indemnifying Party; (ii) the Indemnifying Party shall not have employed counsel to take charge of the defense of such action after electing to assume the defense thereof; or (iii) the use of such counsel chosen by the Indemnifying Party to represent such Indemnified Party would present such counsel with an actual or potential conflict of interest (in which case the 30 Indemnifying Party shall not have the right to assume the defense of such action on the Indemnified Party's behalf) or (iv) the actual or potential defendants in, or targets of, any such action include both Seller and Purchaser, and in the reasonable opinion of counsel to the Purchaser or Seller, there may be legal defenses available to the Indemnified Parties which are different or additional to those available to the Indemnifying Parties and as a result of which it would be inappropriate for one counsel to represent both the Purchaser or Seller (in which case the Indemnifying Party shall not have the right to assume the defense of such action on the Indemnified Party's behalf). (b) SETTLEMENT OF CLAIMS. The Indemnified Party may at any time notify the Indemnifying Party of its intention to settle or compromise any claim, suit or action against the Indemnified Party (without the consent of the Indemnifying Party) in respect of which indemnification payments may be sought from the Indemnifying Party hereunder, provided that the Indemnifying Party shall have no further liability in respect thereof. (c) SUBROGATION. The Indemnifying Party shall be subrogated to any claims or rights of the Indemnified Party as against any other persons with respect to any amount paid by the Indemnifying Party under this ARTICLE 7. The Indemnified Party shall cooperate with the Indemnifying Party, at the Indemnifying Party's expense, in the assertion by the Indemnifying Party of any such claim against such other persons. (d) PAYMENT TO PURCHASER. Purchaser shall have the right to secure reimbursement for costs and liabilities incurred for which indemnification is provided hereunder, from the Escrow Holder on a quarterly basis in accordance with the Escrow Agreement. (e) PAYMENT TO INDEMNIFYING PARTY. In the event Seller is the Indemnifying Party with respect to a claim, suit, action or state of facts with respect to which Seller is providing the defense of Purchaser or an Indemnified Party affiliated with Purchaser, Seller shall have the right to secure reimbursement for the incremental costs incurred solely in connection with the defense or payment of such claim, suit, action or state of facts from the Escrow Holder on a quarterly basis in accordance with the Escrow Agreement; provided that Purchaser and Seller shall have agreed in writing to the dollar amount of such incremental costs and provided further that if the parties fail to agree for a period of sixty (60) days, the amount of incremental costs to be reimbursed shall be subject to dispute resolution in accordance with SECTION 9.14. Notwithstanding the foregoing, no such reimbursement may be requested or provided before the first anniversary of the Closing Date, and on and after such first anniversary Seller may request and receive reimbursement for costs incurred for which indemnification is provided hereunder without regard to whether such costs were paid or incurred prior to or after such first anniversary date. 31 (f) DOCUMENTATION. With respect to a request for reimbursement under paragraph (e) above Seller shall provide such documentation relating to such claim as Purchaser shall reasonably request. (g) CERTAIN LIMITATIONS. Neither party shall have any liability for indemnification to the other party pursuant to this ARTICLE 7 unless and until the aggregate amount of all Losses for which a party is entitled to receive indemnification from the other party exceeds $200,000 (solely under this Agreement and the Servicing Agreement and not under the Prior Sale Agreement) at which time the Indemnified Party shall be entitled to indemnification under ARTICLE 7 for all Losses as exceed $200,000. Notwithstanding anything to the contrary in this Agreement or the Prior Sale Agreement, there shall be no liability of Seller under this Article 7 (including all liabilities under the Prior Sale Agreement) in an aggregate amount in excess of the Hold Back Amount or such lesser amount as is on deposit with the Escrow Holder from time to time. Notwithstanding anything to the contrary, there shall be full liability without respect to any financial floor for indemnification for any claim brought in connection with Taxes, any Mississippi Account, any Alabama Opt-Out Account or any Excluded Account subject to repurchase, any liabilities retained by Seller pursuant to SECTION 6.2(j) and any liabilities under agreements that pertain to the Acquired Assets that are not specifically assumed by Purchaser hereunder. (h) SURVIVAL OF INDEMNIFICATION OBLIGATIONS. The obligations of the parties set forth in this ARTICLE 7 shall survive the Closing Date for a period of two (2) years from the Closing Date, except that a claim for indemnification for which notice was given pursuant to SECTION 7.4(a) hereof by an Indemnified Party prior to the end of such period shall survive until such claim is fully and finally determined, and except that the indemnification by Seller shall continue as to: (i) the obligations and representations of Seller and Purchaser under the Assignment and Assumption Agreement, as to which no time limitation shall apply; (ii) the representations and warranties of Seller set forth in SECTIONS 5.1(a), 5.1(b), 5.1(c) and 5.1(d), and the covenant of Seller set forth in SECTION 6.2(f) as to all of which no time limitation shall apply; and (iii) the representations and warranties of Purchaser set forth in SECTION 5.2(a), 5.2(b) and 5.2(c), and the covenant of Purchaser set forth in SECTION 6.3 (insofar as it relates to the payment of Taxes) as to which no time limitation shall apply. ARTICLE 8 - TERMINATION 8.1 TERMINATION BY EITHER PARTY. Anything contained in this Agreement to the contrary notwithstanding, this Agreement may be terminated prior to the Closing Date: 32 (a) by either Purchaser or Seller if a material breach of any provision of this Agreement has been committed by the other party and such breach has not been waived; (b) by the mutual consent of the parties; or (c) by Purchaser or Seller if the Closing Date has not occurred by January 15, 2001 by reason of the act or failure to act of the nonterminating party. 8.2 EFFECT OF TERMINATION. In the event that this Agreement shall be terminated pursuant to this ARTICLE 8, all further obligations of the parties under this Agreement (other than SECTIONS 6.1(c), 6.1(d) and 9.6) shall be terminated without further liability of any party to the other, provided that nothing herein shall relieve any party from liability for its breach of this Agreement. ARTICLE 9 - MISCELLANEOUS ------------------------- 9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and warranties of each party contained in this Agreement or in any certificates or other instruments delivered pursuant to this Agreement will survive the Closing of the transactions contemplated herein through the period during which claims for indemnification may be made pursuant to ARTICLE 7. All of such representations and warranties will be effective regardless of any investigation that any party has undertaken or failed to undertake. 9.2 NOTICES. All notices and other communications by Purchaser or Seller hereunder shall be in writing to the other party and shall be deemed to have been duly given when delivered in person or to an overnight courier service, receipt requested, or sent via telecopy transmission, receipt requested or when posted by the United States registered or certified mail, with postage prepaid, addressed as follows: If to Seller: Fidelity Federal Bank, A Federal Savings Bank 4565 Colorado Boulevard Los Angeles, California 90039 Attn: John M. Michel Fax Number: 818 ###-###-#### copy to: Fidelity Federal Bank, A Federal Savings Bank 4565 Colorado Boulevard Los Angeles, California Attn: Godfrey B. Evans, Esq. Fax Number: 818 ###-###-#### If to Purchaser: Household Bank (SB), N.A. 1441 Schilling Place Salinas, CA 93901 Attn: President/CEO Fax Number: 831 ###-###-#### 33 copy to: Household Credit Services, Inc. 2700 Sanders Road Prospect Heights, IL 60070 Attn: General Counsel Fax Number: 847 ###-###-#### or to such other addresses as a party may from time to time designate by notice as provided herein, except that notices of change of address shall be effective only upon actual receipt. 9.3 ASSIGNMENT. Prior to the Closing, the rights of any party under this Agreement shall not be assigned or transferred, except to an Affiliate, by any party without the prior written approval of the other parties hereto. Following the Closing, the rights of any party under this Agreement shall not be assigned or transferred, except to an Affiliate, by any party without the prior written approval of the other parties hereto, which approval shall not be unreasonably withheld; PROVIDED HOWEVER, that the foregoing shall not prohibit or require the other party's consent to an assignment in connection with a merger or consolidation with any other party or the sale of all or substantially all of a party's assets to another federally insured depository institution. 9.4 ENTIRE AGREEMENT. This Agreement, together with the exhibits to this Agreement, constitutes the entire agreement by the parties and supersedes any other agreement, whether written or oral, that may have been made or entered into by or on behalf of Seller and Purchaser relating to the matters contemplated hereby. 9.5 AMENDMENTS AND WAIVERS. This Agreement may be amended, modified, superseded, or canceled, and any of the terms, representations, warranties or covenants hereof may be waived, only by written instrument executed by each of the parties or, in the case of a waiver, by the party waiving compliance. In the course of the planning and coordination of this Agreement, written documents have been exchanged between the parties. Such written documents shall not be deemed to amend or supplement this Agreement. The failure of any party at any time or times to require performance of any provision hereof shall in no manner affect the right at a later time to enforce the same. No waiver by any party of any condition or of any breach of any term, representation, warranty or covenant under this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any other condition or of any breach of any such condition of breach or waiver of any other condition or of any breach of any other term, representation, warranty or covenant under this Agreement. 34 9.6 EXPENSES. The parties will each bear their own legal, accounting and other costs in connection with the transactions herein, including Taxes, attributable to the sale of the Acquired Assets from Seller to Purchaser, unless otherwise specified in this Agreement. Each party hereto agrees to timely sign and deliver such certificates or forms as may be reasonably requested to establish an exemption form (or otherwise reduce), or file Tax returns with respect to, such Taxes. 9.7 CAPTIONS; COUNTERPARTS. The captions in this Agreement are for convenience only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement. This Agreement may be executed in two or more counterparts, each of which shall be an originals, but all of which together shall constitute one and the same instrument. 9.8 GOVERNING LAW. This Agreement shall be governed by and construed and interpreted in accordance with the internal laws of the State of Delaware, without regard to principles of conflict of laws. 9.9 SEVERABILITY. If any provision of this Agreement or portion thereof is held invalid, illegal, void or unenforceable by reason of any rule or law, administrative or judicial provision or public policy, such provision shall be ineffective only to the extent invalid, illegal, void or unenforceable, and the remainder of such provision and all other provisions of this Agreement shall nevertheless remain in full force and effect. 9.10 INDEPENDENT CONTRACTORS. In the performance of its duties or obligations under this Agreement, no Seller shall be deemed to be, permit itself to be, or understood to be the agent of Purchaser and Seller shall at all times take such measures as are necessary to ensure that its status shall be that of an independent contractor operating as a separate entity. 9.11 NO JOINT VENTURE. Nothing in this Agreement shall be deemed to create a partnership or joint venture among the Seller and Purchaser. Except as expressly set forth herein, no party shall have any authority to bind or commit any other party. 9.12 ATTORNEYS' FEES. In the event of any litigation, arbitration or other proceeding to enforce, interpret or declare the rights or obligations of any party to this Agreement, the prevailing party shall be entitled to costs, including attorneys' fees, in connection with any such proceeding. 9.13 REGULATORY APPROVAL. Purchaser acknowledges that this Agreement is subject to approval or nonobjection of the Regional Director of the Office of Thrift Supervision pursuant to Thrift Bulletin 50. Purchaser expressly authorizes Seller to submit this Agreement to the Regional Director of the Office of Thrift Supervision for review, and this Agreement shall not become effective until such approval or nonobjection by the Office of Thrift Supervision has been obtained. 35 9.14 DISPUTE RESOLUTION. Purchaser and Seller shall each designate a representative (each, a "Representative") to oversee compliance with each party's respective obligations under this Agreement. If either Purchaser or Seller disputes the other's determination under or interpretation of any Section of this Agreement (a "Dispute"), the following procedure shall be followed to resolve such Dispute: STEP 1: The Representatives shall meet (by conference telephone call or in person at a mutually agreeable site) to attempt to resolve the Dispute in a mutually acceptable manner. If agreement is reached pursuant to this Step 1, payment or other resolution shall be made or performed within five days in accordance with such agreement. If no agreement is reached within a reasonable time, the parties shall proceed to Step 2. STEP 2: The chief executive officer of Purchaser and the chief executive officer of Bank Plus shall meet (by conference telephone call or in person at a mutually agreeable site) within 72 hours after notice of an impasse is given pursuant to Step 1. The chief executive officers shall attempt to resolve the Dispute in a mutually acceptable manner. If agreement is reached pursuant to this Step 2, payment or other resolution shall be made or performed within five days in accordance with such agreement. If no agreement is reached within a reasonable time, Purchaser or Seller may pursue any legal or equitable remedies available to them. Notwithstanding the foregoing, Purchaser and Seller shall give due consideration to whether arbitration might be a mutually acceptable way to resolve the dispute. If and to the extent the parties mutually agree, Purchaser and Seller shall submit the Dispute involved in such impasse to an arbitrator jointly selected by the parties who shall be a person reasonably experienced in matters involving commercial transactions. Any such arbitration shall be conducted under the auspices, and pursuant to the Commercial Arbitration Rules, of the American Arbitration Association and in accordance with the Federal Arbitration Act (PROVIDED, HOWEVER, that in the event of conflict between such rules or Act and the terms of this Agreement, the terms of this Agreement shall govern) and be conducted at such location as Purchaser and Seller shall mutually agree; PROVIDED, HOWEVER, that if the parties are unable to agree on a location, the arbitration shall be conducted in San Francisco, California. Each party shall bear its own expenses but those related to fees and expenses of the arbitrator shall be borne equally. The award rendered by the arbitrator shall be final and conclusive upon the parties and judgment thereon may be entered in any court having jurisdiction. All statutes of limitation which would otherwise be applicable shall apply to any arbitration proceeding. Unless otherwise agreed to in writing by Purchaser and Seller, a final decision of the arbitrator may be appealed to any court of competent jurisdiction by either party. 36 IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be duly executed as of the date first above written. Fidelity Federal Bank, A Federal Savings Bank, Seller By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- Household Bank (SB), N.A., Purchaser By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- 37