PayPal Holdings
PayPal Holdings, Inc. (Form: 8-K, Received: 11/16/2017 16:32:40)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 10, 2017

 

 

PayPal Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-36859   47-2989869

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

2211 North First Street

San Jose, CA 95131

(Address of principal executive offices)

(408) 967-1000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company   ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Item 1.01. Entry into a Material Definitive Agreement.

On November 16, 2017 PayPal Holdings, Inc. (the “Company”) announced an arrangement (the “ Transaction ”) under which Synchrony Bank, a federal savings association (“ Synchrony ”), will acquire the U.S. consumer credit receivables portfolio held by certain affiliates of the Company (the “ Portfolio ”), which totaled approximately $5.8 billion in receivables as of October 2017. The purchase price is subject to a post-closing true-up to reflect trailing transactions and mischaracterized accounts, in addition to an adjustment for any unbilled accrued deferred interest on the principal balance of deferred interest promotional pre-closing purchases realized over the 6 months following the closing.

In connection with the Transaction, each of Bill Me Later, Inc., a Delaware corporation and indirect wholly-owned subsidiary of the Company (“ BMLI ”), and PayPal (Europe) S.À R.L. et CIE, S.C.A., a Luxembourg registered credit institution registered with the Luxembourg trade and companies’ register under number R.C.S. Luxembourg B118 349 and an indirect wholly-owned subsidiary of the Company (“ LuxCo, ” and together with BMLI, the “ Sellers ”), entered into a purchase and sale agreement (each, a “ Purchase Agreement ”), dated as of November 10, 2017, with Synchrony pursuant to which each Seller agreed to sell to Synchrony the receivables (other than charged-off receivables) in the Portfolio. In addition, the Company has agreed to guaranty the payment obligations of each Seller under the respective Purchase Agreement.

Each of the Sellers and Synchrony has made customary representations, warranties and covenants in the applicable Purchase Agreement and has agreed to provide customary indemnification to the counterparty thereto. In connection therewith, BMLI is obligated to service the Portfolio in the ordinary course of business and consistent with certain policies and procedures, and each of the Sellers has agreed to refrain from taking certain actions between signing and closing, including selling or encumbering the assets to be sold to Synchrony under the Purchase Agreements.

The consummation of the transactions contemplated by the Purchase Agreements is subject to certain conditions, including, without limitation: (i) receipt of a non-objection letter from the Commission de Surveilance du Secteur Financier in respect of the sale by LuxCo, (ii) the absence of any action or investigation by a governmental authority seeking to restrain or prohibit the Transaction and (iii) the consummation of certain purchase and sale transactions between Synchrony, on the one hand, and each of Chestnut Receivables LLC and Comenity Capital Bank, on the other hand, with respect to the purchase and sale of certain Portfolio-related assets. Moreover, the obligation of each Seller, on the one hand, and Synchrony, on the other hand, to consummate the Transaction is subject to certain other conditions, including, without limitation: (a) the accuracy of the representations and warranties made by Synchrony and each Seller, respectively, subject to customary materiality qualifiers; and (b) the compliance in all material respects by Synchrony and each Seller, respectively, with its pre-closing covenants and obligations. Pursuant to the terms of each Purchase Agreement, either Seller or Synchrony may terminate such Purchase Agreement if the closing has not occurred by October 1, 2018.

The representations, warranties and covenants contained in the Purchase Agreements have been made solely for the benefit of the applicable parties specified therein. In addition, such representations, warranties and covenants: (i) have been made only for purposes of the applicable Purchase Agreement; (ii) have been qualified by confidential disclosures made to the other parties in the disclosure schedules delivered in connection with the Purchase Agreements; (iii) are subject to materiality qualifications contained in the applicable Purchase Agreement, which may differ from what may be viewed as material by investors; (iv) were made only as of the date of the applicable Purchase Agreement or such other date as is specified therein; and (v) have been included in the applicable Purchase Agreement for the purpose of allocating risk between the contracting parties rather than establishing matters as fact.

The foregoing description of the Purchase Agreements and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of each Purchase Agreement, which are attached hereto as Exhibits 2.1 and 2.2, respectively, and are incorporated by reference into this Current Report on Form 8-K.


Item 8.01. Other Events

On November 16, 2017 the Company and Synchrony issued a joint press release regarding the Transaction, a copy of which is filed as Exhibit 99.1 hereto and incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit

Number

  

Description of Exhibit

  2.1    Purchase and Sale Agreement, dated as of November 10, 2017, by and between Synchrony and BMLI*
  2.2    Purchase and Sale Agreement, dated as of November 10, 2017, by and between Synchrony and LuxCo*
99.1    Joint Press Release of the Company and Synchrony, dated as of November 16, 2017.

 

* The Company agrees to furnish supplementally a copy of any omitted exhibit or schedule to the Securities and Exchange Commission upon request.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

      PayPal Holdings, Inc.
      (Registrant)
Date: November 16, 2017      

/s/ Brian Y. Yamasaki

      Name: Brian Y. Yamasaki
      Title:   Vice President, Corporate Legal and Secretary

Exhibit 2.1

EXECUTION COPY

PURCHASE AND SALE AGREEMENT

BY AND BETWEEN

SYNCHRONY BANK,

AND

BILL ME LATER, INC.

 

 

DATED AS OF NOVEMBER 10, 2017


Table of Contents

 

     Page  

ARTICLE I

  

DEFINITIONS

     1  

Section 1.1

  Definitions of Certain Terms      1  

Section 1.2

  Interpretation      12  

ARTICLE II

  

PURCHASE, SALE AND ASSUMPTION

     14  

Section 2.1

  Purchase and Sale of Assets      14  

Section 2.2

  Assumption of Liabilities      14  

Section 2.3

  Excluded Assets and Liabilities      14  

Section 2.4

  Purchase Price; Total Consideration; Purchase Price Adjustment      15  

Section 2.5

  Tax Treatment      17  

Section 2.6

  Excluded Receivables      17  

ARTICLE III

  

CLOSING; ASSIGNMENT

     17  

Section 3.1

  The Closing      17  

ARTICLE IV

  

REPRESENTATIONS AND WARRANTIES OF THE PARTIES

     18  

Section 4.1

  Representations of Seller      18  

Section 4.2

  Representations of Purchaser      23  

ARTICLE V

  

COVENANTS

     24  

Section 5.1

  Access; Transition Support Efforts      24  

Section 5.2

  Operation of the Acquired Assets Prior to the Closing      24  

Section 5.3

  Filings and Consents      25  

Section 5.4

  Acquisition Proposals      25  

Section 5.5

  Repayment of Credit Balances      26  

Section 5.6

  Other PSAs      26  

Section 5.7

  True Sale Opinion      26  

Section 5.8

  Review of Accounts      26  

ARTICLE VI

  

TAX MATTERS

     26  

Section 6.1

  Responsibility for Taxes      26  


ARTICLE VII

  

CONDITIONS

     29  

Section 7.1

  Conditions Precedent to Obligation of Purchaser      29  

Section 7.2

  Conditions Precedent to Obligation of Seller      30  

ARTICLE VIII

  

INTENTIONALLY OMITTED

     32  

ARTICLE IX

  

TERMINATION

     32  

Section 9.1

  Termination      32  

Section 9.2

  Effect of Termination      33  

Section 9.3

  Termination Fee      33  

ARTICLE X

  

SURVIVAL; INDEMNIFICATION

     34  

Section 10.1

  Survival      34  

Section 10.2

  Indemnification by Seller      34  

Section 10.3

  Limitations on Indemnification Obligations of Seller      35  

Section 10.4

  Indemnification by Purchaser      35  

Section 10.5

  Limitations on Indemnification Obligations of Purchaser      36  

Section 10.6

  Indemnification; Notice and Settlements      37  

Section 10.7

  Additional Indemnification Provisions      38  

Section 10.8

  Exclusive Remedy      38  

Section 10.9

  Mitigation      38  

Section 10.10

  Coordination with New Program Agreement      38  

Section 10.11

  Measure of Damages      39  

ARTICLE XI

  

MISCELLANEOUS

     39  

Section 11.1

  Notices      39  

Section 11.2

  Successors and Assigns      40  

Section 11.3

  Entire Agreement; Amendment; Waiver      41  

Section 11.4

  Counterparts      41  

Section 11.5

  Governing Law and Venue      41  

Section 11.6

  Waiver of Jury Trial      41  

Section 11.7

  Severability      41  

Section 11.8

  Public Announcement      42  

Section 11.9

  Third-Party Beneficiaries      42  

Section 11.10

  Expenses      42  

Section 11.11

  Specific Performance and Other Equitable Relief      42  

Section 11.12

  Confidentiality      43  

Section 11.13

  Further Assurances      44  

 

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Schedules and Exhibits

 

Schedule 1.1(a)   Master File Format and Layout
Schedule 1.1(b)   Program Toll-Free Numbers
Exhibit A   Form of Bill of Sale and Assumption Agreement
Exhibit B   Form of PayPal Guaranty
Exhibit C   Form of True Sale Opinion
Exhibit D   Form of Chestnut Participation Termination Letter
Exhibit E   Form of Comenity Termination Letter

 

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PURCHASE AND SALE AGREEMENT , dated as of November 10, 2017 (this “ Agreement ”), by and between Synchrony Bank, a federal savings association (“ Purchaser ”) and Bill Me Later, Inc., a Delaware corporation (“ BMLI ” or “ Seller ”).

RECITALS

WHEREAS , as an integral part of, an inducement to, and in consideration for, the transactions contemplated by this Agreement, concurrently with the execution and delivery of this Agreement, (i) PayPal is executing and delivering to Purchaser the PayPal Guaranty and (ii) Purchaser is entering into each of the Comenity Purchase Agreement, the Chestnut Purchase Agreement and the LuxCo Purchase Agreement.

WHEREAS , in consideration for the representations and warranties set forth herein (including those representations and warranties with respect to the Aggregate Assets, as a whole, and each of the Acquired Assets that are the subject of (and as defined in) the Comenity Purchase Agreement, the Chestnut Purchase Agreement or the LuxCo Purchase Agreement, as the case may be), Purchaser is willing to enter into this Agreement and to consummate the transactions contemplated hereby and thereby.

WHEREAS , the parties hereto desire to enter into this Agreement to provide for the purchase by Purchaser, and the sale by Seller, of the Acquired Assets, on the terms and subject to the conditions set forth herein.

WHEREAS , concurrently with the execution and delivery of this Agreement, Purchaser and PayPal, Inc., a Delaware corporation, are entering into that certain Fourth Amended and Restated Consumer Revolving Credit Program Agreement (the “ New Program Agreement ”).

NOW , THEREFORE , in consideration of the foregoing, and of the mutual representations, promises and agreements contained in this Agreement, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Definitions of Certain Terms .

In this Agreement, the following terms are used with the meanings assigned below:

Account Agreement ” means all agreements entered into and in effect between Comenity and a Borrower prior to the Cut-off Time (together, in each case, with all modifications, amendments, supplements or other changes thereto) under which a Borrower Account has been established and/or maintained with such Borrower, or which otherwise relates to a Borrower Account, and which contains the terms and conditions applicable to the Borrower Account.

Acquired Assets ” means all right, title and interest of Seller in and to the following assets and properties:


(1) all Gross Receivables (other than Charged-Off Receivables) as of the Cut-off Time;

(2) the Program Toll-Free Numbers (at the time and in the manner contemplated by the New Program Agreement); and

(3) all rights (including rights of recovery (other than with respect to Excluded Receivables)), claims, credits, causes of action and rights of setoff against third parties related to the assets described in clauses (1)  and (2)  above.

Action ” means any claim, action, complaint, petition, suit or other proceeding, whether civil, criminal or administrative, at law or in equity, or before any arbitrator or Governmental Authority.

Affiliate ” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person. The term “control” (including, with correlative meaning, the terms “controlled by” and “under common control with”) as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

After-Tax Basis ” means that, in determining the amount of a payment necessary to indemnify any party against, or reimburse any party for, a Loss, the amount of such Loss shall be determined net of any net Tax benefit derived by the Indemnified Party in the taxable year that the Loss is sustained as the result of sustaining such Loss and the amount of such payment shall be increased to take into account any net Tax cost incurred by the recipient thereof in the taxable year of the receipt or accrual of the payment as a result of the receipt or accrual of the payment.

Aggregate Assets ” means (i) the Acquired Assets and (ii) the assets to be conveyed to Purchaser under each of the Comenity Purchase Agreement, the Chestnut Purchase Agreement and LuxCo Purchase Agreement.

Aggregate Purchase Price ” means the sum of (i) the Total Consideration, plus (ii) the Comenity Purchase Price, plus (iii) the Chestnut Purchase Price, plus (iv) the LuxCo Total Consideration.

Agreed Percentage ” means the percentage set forth on Schedule A .

Agreement ” shall have the meaning set forth in the preamble.

Applicable Order ” means, with respect to any Person, a judgment, injunction, writ, decree, memorandum of understanding, order or requirement of any Governmental Authority, in each case legally binding on that Person or on any of the Acquired Assets.

Assumed Liabilities ” means only the following Liabilities:

(1) all of the obligations to each Borrower under the terms of the Account Agreements to the extent the same are required to be performed after the Cut-off Time, and to the extent such obligations are not included in the Assumed Liabilities under any Other PSA;

 

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(2) all Liabilities in respect of Taxes for which Purchaser is liable pursuant to Article VI ;

(3) all Liabilities arising out of the ownership or administration of the Acquired Assets or the operation by Purchaser of its business related thereto with respect to any period commencing after the Cut-off Time; and

(4) all Liabilities arising out of any charge backs or credit with respect to the pre-Cut-off Time Borrower Account activity incurred and processed in the ordinary course of business consistent with past practice.

Bill of Sale and Assumption Agreement ” shall have the meaning set forth in Section 3.1(a) .

BMLI ” shall have the meaning set forth in the preamble hereto.

BMLI Percentage ” means a percentage equal to 100% less the Chestnut Participation Percentage and less the Comenity Legacy Pool Percentage as of the Cut-off Time.

Borrower ” means a Person or Persons in whose name(s) a Borrower Account has been established pursuant to an Account Agreement, or who is obligated to make a payment with respect to any Borrower Account, including any guarantor, co-signor, surety or authorized user.

Borrower Accounts ” means, as of the Cut-off Time, all open consumer credit accounts under the Program, other than the Excluded Accounts.

Borrower Data ” collectively means, to the extent in the possession or control of Seller, any Affiliate of Seller, or any service provider of Seller or any Affiliate of Seller, as of the Cut-off Time, and in each case whether in hard copy or electronic (including image) format, (a) the files, documents and information reflected on or in the systems or files of Seller, Seller’s Affiliates, and any third party used to process or service the Borrower Accounts to the extent relating to the Acquired Assets (including Borrower Account applications, Account Agreements and modifications, amendments, supplements or other changes thereto, general credit information and records reflecting actions taken to cure any delinquency, charge transaction data and historical customer statements, including online statements (as applicable), Program privacy notices, electronic payment authorization agreements, credit bureau reports, adverse action notices, change in terms notices, and other Borrower notices or disclosures relating to the Acquired Assets); (b) the historical reflection of such files and information, in whatever medium such files and information is stored; (c) all correspondence between Seller or Seller’s Affiliates and any Borrowers in connection with the Program; (d) all customer service and collections correspondence, notes and other documentation in connection with the Program; and (e) all correspondence with any Governmental Authority related to the Borrower Accounts or the Program Agreement but only to the extent that such correspondence exclusively relates to the Borrower Accounts (and, for the avoidance of doubt, does not include information about Seller’s other accounts or programs). Borrower Data includes solely the data, files, documents and other

 

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materials and information referenced above that arise out of Seller’s or an Affiliate of Seller’s or any of Seller’s or its Affiliates’ service provider’s servicing of Borrower Accounts for Comenity under the Program Agreement. Data that Seller or its Affiliates possess as both service provider to Comenity and in connection with the provision of the PayPal Wallet or other products or services shall be considered both (a) data retained by Seller or Seller’s Affiliates that is not subject to the requirements herein regarding Borrower Data and (b) Borrower Data.

Borrower Lists ” means the list or lists, whether in print, electronic media or other form, of any Borrowers (including, to the extent available, their names, addresses, telephone numbers and social security numbers) and of Persons that have accepted offers for a Borrower Account and in whose names Borrower Accounts have been opened.

Business Day ” means any day other than a Saturday, a Sunday or a day on which banks located in New York, New York generally are required or authorized by law or executive order to close.

Charged-Off Receivables ” means any amounts owing from Borrowers with respect to Gross Receivables in the Legacy Pool under Borrower Accounts that have been charged-off or were required to have been charged-off in accordance with the Program Policies and Procedures.

Chestnut ” means Chestnut Receivables Financing LLC.

Chestnut Participation ” means the undivided participation interest held by Chestnut in the Legacy Pool.

Chestnut Participation Termination Letter ” means the letter agreement attached hereto as Exhibit D.

Chestnut Participation Percentage ” means 85%.

Chestnut Purchase Agreement ” means a Purchase and Sale Agreement, dated as of the date hereof, by and between Purchaser and Chestnut, pursuant to which the Purchaser will purchase and acquire the Chestnut Participation.

Chestnut Purchase Price ” means the “Purchase Price” as defined in the Chestnut Purchase Agreement.

Chestnut Transaction ” means the transactions contemplated by the Chestnut Purchase Agreement.

Claim Notice ” shall have the meaning set forth in Section 10.6(a) .

Closing ” shall have the meaning set forth in Section 3.1 .

Closing Date ” shall have the meaning set forth in Section 3.1 .

Closing Date Deadline ” shall have the meaning set forth in Section 9.1(d) .

 

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Closing Master File ” means a Master File relating to each of the Borrower Accounts as of the Cut-off Time.

Code ” means the Internal Revenue Code of 1986, as amended from time to time.

Comenity ” means Comenity Capital Bank, a Utah industrial bank.

Comenity Legacy Pool Participation ” means the undivided participation interest held by Comenity in the Legacy Pool pursuant to the Sale and Participation Agreement.

Comenity Legacy Pool Percentage ” means approximately 5.0% as of the date hereof, and such actual percentage as of the Cut-off Time equal to the percentage of the Legacy Pool that has been participated to Comenity pursuant to the Sale and Participation Agreement.

Comenity Non-Legacy Pool Participation ” means the undivided participation interest held by Comenity in the Non-Legacy Pool pursuant to the Sale and Participation Agreement.

Comenity Non-Legacy Pool Percentage ” means approximately 5.0% as of the date hereof, and such actual percentage as of the Cut-off Time equal to the percentage of the Non-Legacy Pool that has been participated to Comenity pursuant to the Sale and Participation Agreement.

Comenity Participation ” means the Comenity Legacy Pool Participation and the Comenity Non-Legacy Pool Participation.

Comenity Purchase Agreement ” means the Purchase and Sale Agreement, dated as of the date hereof, by and between Purchaser and Comenity.

Comenity Purchase Price ” means the “Purchase Price” as defined in the Comenity Purchase Agreement.

Comenity Transaction ” means the transactions contemplated by the Comenity Purchase Agreement.

Confidential Information ” shall have the meaning set forth in Section 11.12(a) .

Constituent Documents ” means the charter and bylaws of a corporation, the certificate of limited partnership and limited partnership agreement of a limited partnership, the trust agreement of a trust and the comparable documents of other entities.

Contract ” means with respect to any Person, any agreement, contract, subcontract, indenture, deed of trust or other agreement by which that Person, or any of the Acquired Assets, is bound or subject.

Correction Amount ” shall have the meaning set forth in Section 2.4(b) .

Cut-off Time ” means 11:59 p.m. prevailing Eastern Time on the calendar day immediately preceding the Closing Date.

 

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Deductible ” means an amount equal to $10,750,000.

Deferred Interest Payment ” means an amount equal to the BMLI Percentage multiplied by the product of (i) the Agreed Percentage and (ii) the unbilled accrued deferred interest on the principal balance of deferred interest promotional purchases in the Legacy Pool as of the Cut-off Time, with respect to such deferred interest promotional purchases for which the promotional period has not expired prior to the Cut-off Time, and which unbilled deferred interest actually becomes due and payable by the applicable Borrowers following the Cut-off Time pursuant to the Program Policies and Procedures; provided that the Deferred Interest Payment shall not include any unbilled accrued deferred interest on the principal balance of deferred interest promotional purchases in the Legacy Pool as of the Cut-off Time, to the extent such unbilled accrued deferred interest is in respect of any Excluded Receivable.

Designated Accounts ” means as of the Cut-off Time, all consumer credit accounts under the Program that (a) are accounts held by a Borrower with respect to whom Seller has received written notice that as of the Cut-off Time has filed, or has had filed against such Borrower, proceedings in bankruptcy, trusteeship or receivership; (b) are determined in accordance with Program Policies and Procedures to have fraudulent activity (but not including any replacement account established to hold the portion of the balance of the original account that was not fraudulent); or (c) are not in the name of a living individual and for which no other Person is contractually obligated for the payment thereof.

Designated Receivables ” means, as of the Cut-off Time, all Gross Receivables in respect of Designated Accounts.

Disclosing Party ” shall have the meaning set forth in Section 11.12(a) .

Estimated Closing Statement ” means a statement showing (i) Seller’s estimated good faith calculation of the Purchase Price, based on data that was current no more than five Business Days prior to the Cut-off Time and (ii) the Estimated Deferred Interest Payment.

Estimated Deferred Interest Payment ” means an amount equal to Seller’s good faith estimate of the Deferred Interest Payment.

Estimated Purchase Price ” means the good faith estimate of Purchase Price set forth in the Estimated Closing Statement.

Excluded Accounts ” means, as of the Cut-off Time, all consumer credit accounts under the Program (a) that are (1) listed on the “Specially Designated Nationals and Blocked Persons” list published by OFAC on its official website or any replacement website or other replacement official publication of such list, (2) listed on the U.S. Department of State’s Terrorist Exclusion List, or (3) located in or operating under a license issued by a jurisdiction identified by the U.S. Department of State as a sponsor of international terrorism, by the U.S. Secretary of the Treasury as warranting special measures due to money laundering concerns, or as noncooperative with international anti-money laundering principles or procedures by an intergovernmental group or organization of which the U.S. is a member; (b) that have been paid-in-full and closed; (c) with respect to which Seller has made a collection settlement offer to the Borrower, which settlement offer has been fully paid, regardless of whether there remains a deficiency balance as of the Cut-off Time; (d) with respect to which there has been issued an IRS Form 1099-C, or (e) that are accounts subject to collection litigation proceedings instituted by Seller or Comenity.

 

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Excluded Assets ” means the assets of Seller and each of its Affiliates that are not Acquired Assets.

Excluded Liabilities ” means all of the Liabilities of Seller and its Affiliates, other than the Assumed Liabilities, of whatever nature, whether currently in existence or arising hereafter, including: (a) any Liabilities in respect of Taxes for which Seller is liable pursuant to this Agreement; (b) any expenses incurred by Seller incident to its negotiation and preparation of this Agreement; (c) any Liabilities to the extent related to or arising from any Excluded Assets and (d) all Liabilities arising out of the ownership or administration of the Acquired Assets or the operation by Seller of its businesses related thereto with respect to any period commencing and ending before the Cut-off Time (other than with respect to Liabilities of the type described in clause (4) of the definition of “ Assumed Liabilities ”).

Excluded Receivables ” means, as of the Cut-off Time, (i) all Gross Receivables in respect of Excluded Accounts, (ii) all Charged-Off Receivables and (iii) Designated Receivables as of the Cut-off Time that are charged off or required to be charged-off during the 120-day period after the Closing Date in accordance with the Program Policies and Procedures.

Federal Funds Rate ” means the offered rate as reported in The Wall Street Journal in the “Money Rates” section for reserves traded among commercial banks for overnight use in amounts of one million dollars or more, or, if no such rate is published for a day, the rate published for the preceding Business Day.

Final Closing Statement ” means a statement showing the calculation of the amount of the Purchase Price.

Financing Statements ” shall have the meaning set forth in Section 2.1(b)(2) .

Fundamental Representations ” shall have the meaning set forth in Section 10.2(b)(1) .

GAAP ” means generally accepted accounting principles in the United States, consistently applied.

Governmental Authority ” means any domestic or foreign federal, state, provincial, tribal or local (or any other political subdivision thereof or supranational) governmental, regulatory or self-regulatory authority, agency, instrumentality, court, tribunal, commission, arbitrator or other governmental, regulatory or self-regulatory entity of applicable jurisdiction, including the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the Bureau of Consumer Financial Protection.

Gross Receivables ” means all amounts owing from Borrowers with respect to Borrower Accounts (including outstanding loans, cash advances, accrued interest, and other extensions of credit, finance charges and any other finance and non-finance fees, charges and interest assessed on the Borrower Accounts).

 

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Historical FDR Standard Master File ” means the FDR standard master file maintained by or on behalf of Seller or an Affiliate of Seller with respect to the Borrower Accounts, as delivered by or on behalf of Seller on October 5, 2017 through October 9, 2017, as updated on October 19, 2017.

Indemnified Party ” shall have the meaning set forth in Section 10.6(a) .

Indemnifying Party ” shall have the meaning set forth in Section 10.6(a) .

Knowledge of Purchaser ” means the actual knowledge, after reasonable inquiry, of Jill Zellmer, Brian Wenzel or Curtis Howse or, in each case, any successor to such individual holding the same or similar functional position or substantially comparable authority to any of the foregoing at Purchaser, any Affiliate of Purchaser or any successor to Purchaser or any Affiliate of Purchaser. For purposes of the definition of “Knowledge of Purchaser,” “reasonable inquiry” by any Person shall be deemed satisfied if such individual reviews his or her files and makes inquiries of his or her direct reports.

Knowledge of Seller ” means the actual knowledge, after reasonable inquiry, of Jeffrey Levine or Ryan Marsh or any successor to such individual holding the same or similar functional position or substantially comparable authority to any of the foregoing at Seller, any Affiliate of Seller or any successor to Seller or any Affiliate of Seller. For purposes of the definition of “Knowledge of Seller,” “reasonable inquiry” by any Person shall be deemed satisfied if such individual reviews his or her files and makes inquiries of his or her direct reports.

Legacy Pool ” means the pool of Gross Receivables owing from Borrowers with respect to Borrower Accounts that were originated prior to September 1, 2010 or otherwise allocated to such pool in accordance with the Sale and Participation Agreement.

Liability ” means any debt, obligation or liability of any nature (including any unknown, undisclosed, unmatured, unaccrued, unasserted, contingent, indirect, conditional, implied, vicarious, derivative, joint, several or secondary liability), regardless of whether such debt, obligation or liability would be required to be disclosed on a balance sheet prepared in accordance with GAAP and regardless of whether such debt, obligation or liability is immediately due and payable.

Lien ” means any mortgage, deed of trust, lien, pledge, claim, security interest, encumbrance, hypothecation, charge, option, right of first refusal, transfer restriction, conditional sale agreement or any other interest or restriction of any nature or kind.

Losses ” means any loss, damage, injury, Liability, claim, settlement, judgment, award, fine, penalty, Tax, fee (including reasonable attorneys’ fees and incidental damages reasonably incurred (including reasonable costs of investigation)), charge, cost or expense of any nature. For the sake of clarity, (a) the amount of any settlement shall not be determinative as to the quantum of indemnifiable “Losses” hereunder (which quantum, if any, shall be determined in accordance with Article X ) and (b) “Losses” (i) shall include any costs or expenses of any Actions relating to the enforcement of any Seller Indemnitee’s or Purchaser Indemnitee’s rights pursuant to Article X (but only if such Seller Indemnitee or Purchaser Indemnitee is actually entitled to be indemnified for the underlying claim pursuant to Article X ) and (ii) shall exclude special, punitive and consequential damages, unless specifically awarded by a Governmental Authority to a third party and paid to such third party by Seller Indemnitee or Purchaser Indemnitee.

 

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LuxCo ” means PayPal (Europe) S.À R.L. et CIE, S.C.A.

LuxCo Purchase Agreement ” means a Purchase and Sale Agreement, dated as of the date hereof, by and between Purchaser and LuxCo.

LuxCo Total Consideration ” means the “Total Consideration” as defined in the LuxCo Purchase Agreement.

LuxCo Transaction ” means the transactions contemplated by the LuxCo Purchase Agreement.

Master File ” means the Borrower Account file of the system of records (commonly known as a master file) maintained by or on behalf of Seller or an Affiliate of Seller with respect to the Borrower Accounts, including identification and other customer data, Borrower Account information, Borrower Lists, and any and all Borrower Account adjustments made by or on behalf of Seller and the information set forth on Schedule 1.1(a) .

Material Adverse Effect ” means any change, event or effect that, individually or together with any other changes, events or effects, has or could reasonably be expected to have a materially adverse effect on the Aggregate Assets, taken as a whole; provided, however, that the term “Material Adverse Effect” shall not include any change, event or effect attributable to or resulting from: (a) any changes in generally applicable economic conditions or the financing, currency or capital markets in general; (b) any events or changes affecting the banking industry, including the credit card services business or the credit card industry; (c) changes in Requirements of Law, GAAP or regulatory accounting principles; (d) the announcement of the execution of this Agreement, to the extent arising from the identity of the Purchaser; and (e) any action required by the terms of this Agreement or taken at the request of Purchaser; provided that, with respect to each change, event or effect described in clause (a), (b) or (c), such change, event or effect shall only be taken into account in determining a Material Adverse Effect to the extent such change, event or effect disproportionately adversely impacts the Aggregate Assets as compared to other similarly situated portfolios.

Net Receivables ” means all amounts owing (after deduction of unapplied cash and credit balances that remain outstanding, in each case, as of the Cut-off Time) from Borrowers with respect to Borrower Accounts (including outstanding loans, cash advances, accrued interest and other extensions of credit, finance charges and any other finance and non-finance fees, charges and interest assessed on the Borrower Accounts, but excluding unbilled deferred interest that has accrued prior to the Cut-off Time with respect to deferred interest promotional purchases for which the promotional period has not expired prior to the Cut-off Time); provided, however, that the value ascribed to Charged-Off Receivables and Designated Receivables shall be zero.

New Program Agreement ” shall have the meaning set forth in the Recitals.

 

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Non-Legacy Pool ” means the pool of Gross Receivables owing from Borrowers with respect to Borrower Accounts that were originated on or after September 1, 2010, excluding Gross Receivables otherwise allocated to the Legacy Pool in accordance with the Sale and Participation Agreement.

Objection Notice ” shall have the meaning set forth in Section 2.4(b) .

OFAC ” means the U.S. Office of Foreign Asset Control.

Other PSAs ” means collectively the LuxCo Purchase Agreement, Chestnut Purchase Agreement and Comenity Purchase Agreement.

Participations ” means the Chestnut Participation and the Comenity Participation.

PayPal ” means PayPal Holdings, Inc., a Delaware corporation.

PayPal Guaranty ” means a guaranty of PayPal, in the form attached hereto as Exhibit B .

Person ” means an individual, a corporation, a partnership, joint venture, joint-stock company, unincorporated organization, a limited liability company, an association, a trust, or other entity or organization, including a Governmental Authority or instrumentality thereof.

Post-Cut-off Time Payments ” shall have the meaning set forth in Section 2.4(c) .

Post-Closing Tax Period ” means any Tax period (or portion thereof) beginning on the day the Closing occurs.

Pre-Closing Tax Period ” means any Tax period (or portion thereof) ending on or before the day immediately preceding the day on which the Closing occurs.

Program ” means the program providing for the origination, establishment, maintenance, servicing and collection of open-end consumer credit accounts pursuant to and in accordance with the Program Agreement.

Program Agreement ” means that certain Program Agreement, dated as of June 14, 2013, by and among Comenity, PayPal and BMLI.

Program Policies and Procedures ” means the policies, procedures and standards with respect to Borrower Accounts established in connection with the Program (including credit, underwriting, servicing and collection practices, accounting policies (including reserve policies) and practices for charge-offs).

Program Toll-Free Numbers ” means the toll free numbers used by Seller in connection with servicing Borrower Accounts and set forth on Schedule 1.1(b) .

PSA Residual Information ” shall have the meaning set forth in Section 11.12(c) .

 

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Purchase Price ” means an amount equal to (i) the product of (A) the BMLI Percentage multiplied by (B) the Agreed Percentage of the amount of Net Receivables in the Legacy Pool as of the Cut-off Time, minus (ii) the Reserve Adjustment Amount.

Purchaser ” shall have the meaning set forth in the preamble hereto.

Purchaser Fundamental Representations ” shall have the meaning set forth in Section 10.4(b)(1) .

Purchaser Indemnitees ” shall have the meaning set forth in Section 10.2 .

Receiving Party ” shall have the meaning set forth in Section 11.12(a) .

Representatives ” shall have the meaning set forth in Section 11.12(a) .

Requirements of Law ” means any U.S. federal, state and local and non-U.S. law, ordinance, statute, written or oral regulatory guidance, treaty, rule, code, judgment, order, decree, regulation or other determination of any arbitrator or Governmental Authority, including all Applicable Orders.

Requisite Regulatory Approvals ” means the consents, registrations, approvals, permits or authorizations set forth on Schedule 4.1(c) hereto.

Reserve Adjustment Amount ” means an amount calculated by applying (A) the loan loss reserve methodology used by Seller and LuxCo with respect to Net Receivables in the Legacy Pool held by Seller during the last full calendar quarter ending prior to the transition to the application of gain on sale accounting by Seller to (B) the aggregate Net Receivables in the Legacy Pool owned by Seller as of the end of the calendar quarter immediately prior to the Cut-off Time.

Sale and Participation Agreement ” means the Receivables Sale and Participation Agreement by and between Comenity and LuxCo dated as of June 14, 2013.

Seller ” shall have the meaning set forth in the preamble hereto.

Seller Indemnitees ” shall have the meaning set forth in Section 10.4(a) .

Seller Marks ” means trade names, trademarks, logos, service marks, trade styles, trade dress and other related identifying marks owned by Seller or an Affiliate of Seller and used in the Program, in each case as set forth on Schedule 1.1(c) .

Signing Top Form Agreements ” shall have the meaning set forth in Section 4.1(p)(2) .

Special Tax Arrangement ” shall have the meaning set forth in Section 6.1(i) .

 

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Taxes ” means any federal, state, local or foreign income, gross income, gross receipts, value-added, goods and services, windfall profit, severance, property, production, sales, use, license, excise, franchise, capital, profits, employment, payroll, withholding, alternative or add-on minimum, ad valorem, transfer, stamp, occupation, conveyance or environmental tax, or any other tax, custom, levy, duty, governmental fee or other like assessment or charge of any kind whatsoever, any information reporting obligation, together with any interest or penalty, addition to tax or additional amount imposed by any Governmental Authority (including by reason of any failure or delay in the payment of such taxes). Without limiting the foregoing, the terms “Taxes” shall include all United States and non-United States taxes, and federal, state and local taxes, whether owing to any taxing authority or to other Persons; and shall include any transferee Liability in respect of any taxes, including any taxes incurred as a result of being a member of any affiliated, consolidated, combined, or unitary group under Treasury Regulations § 1.1502-6 or any similar provision of foreign, state or local Requirements of Law.

Tax Return ” means any and all returns, reports and forms (including elections, declarations, amendments, schedules, information returns or attachments thereto) required to be filed with a Governmental Authority with respect to Taxes.

Termination Fee ” shall have the meaning set forth in Section 9.3(a) .

Third Person Claim ” shall have the meaning set forth in Section 10.6(a) .

Total Consideration ” means an amount equal to the sum of (i) Purchase Price plus (ii) the Deferred Interest Payment.

Transaction Documents ” means this Agreement, the PayPal Guaranty and the Bill of Sale and Assumption Agreement.

Transfer Taxes ” means all Taxes incurred with respect to the sale or transfer of the Acquired Assets from Seller to Purchaser, regardless of upon whom such Taxes are levied or imposed by Requirements of Law, including sales and use Taxes, real property transfer Taxes, and stamp, documentary, filing, recording, permit or authorization duties or fees; provided , however , that the term “ Transfer Taxes ” shall not include (a) any Tax measured by, imposed on or applicable to net income, (b) any franchise Tax or business license Tax, (c) any Tax in lieu of a net income Tax, franchise Tax or business license Tax, (d) the Business and Occupation Tax imposed by the State of Washington or any similar tax imposed by a political subdivision of the State of Washington, and (e) the Commercial Activity Tax imposed by the State of Ohio or any similar Tax imposed by any political subdivision of the State of Ohio.

True Sale Opinion ” means an opinion from Sidley Austin LLP, legal counsel to Seller, addressed to Seller and provided to Purchaser, subject to Section 5.7 , in the form attached as Exhibit C hereto.

Undifferentiated Losses ” shall have the meaning set forth in Section 10.10(c) .

Section 1.2 Interpretation .

(a) In this Agreement, unless the context otherwise requires, any reference to:

 

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(1) the “preamble,” “Recitals,” “Articles,” “Sections” or “Schedules” refers to the preamble or Recitals to, an Article or Section of, or a Schedule to, this Agreement;

(2) a Contract (including this Agreement) refers to such Contract, as amended, modified, supplemented or replaced from time to time in accordance with the terms thereof;

(3) a statute or regulation refers to the statute or regulation, as amended, modified or supplemented from time to time;

(4) this Agreement is to this Agreement, including the Schedules and Exhibits hereto;

(b) Whenever the word “include,” “includes” or “including” is used in this Agreement, it will be deemed to be followed by the words “without limitation.”

(c) Terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa.

(d) References to “U.S.” shall mean the United States of America.

(e) References to money or dollar amounts shall mean U.S. Dollars unless specified otherwise.

(f) References to “days,” “months” and “years” shall mean calendar days, months and years unless specified otherwise.

(g) The terms “shall” and “will” shall receive the same interpretive meaning.

(h) The terms “hereof,” “herein,” “hereby,” “hereto” and derivative or similar words refer to this Agreement.

(i) The Table of Contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

(j) Each of the parties has participated in the negotiation and drafting of this Agreement and if an ambiguity or question of interpretation should arise, this Agreement shall be construed as if drafted by all of the parties hereto and no presumption or burden of proof shall arise favoring or burdening any party by virtue of the authorship of any of the provisions in any of this Agreement.

(k) A reference to any Person includes such Person’s successors and permitted assigns.

(l) Unless the context otherwise requires, the word “or” when used in this Agreement will be deemed to have the inclusive meaning represented by the phrase “and/or.”

 

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ARTICLE II

PURCHASE, SALE AND ASSUMPTION

Section 2.1 Purchase and Sale of Assets .

(a) On the terms and subject to the conditions of this Agreement, at the time of the Closing and effective as of the Cut-off Time, Seller shall sell, convey and assign to Purchaser, free and clear of all Liens (other than the Participations), the Acquired Assets, and Purchaser shall purchase all of such Acquired Assets.

(b)

(1) The parties hereto intend that for all purposes the transactions contemplated hereby shall be treated as a purchase and sale of the Acquired Assets. Notwithstanding such intent, if for any reason the transactions contemplated hereby are not treated as a purchase and sale of the Acquired Assets by any court of competent jurisdiction, then, as of the Closing, Seller hereby grants to Purchaser a first priority security interest in all of Seller’s right to and interest in, whether now existing or hereafter created or acquired, the Acquired Assets and proceeds thereof to secure a loan deemed to have been made by the Purchaser to Seller in an amount equal to the Purchase Price.

(2) Purchaser shall prepare at or prior to the Closing Date such financing statements (the “ Financing Statements ”) as Purchaser reasonably determines are necessary or appropriate to fully preserve, maintain and protect the interest of Purchaser in the Acquired Assets and proceeds thereof. Seller hereby authorizes Purchaser to file such Financing Statements and any continuation statements and amendments thereto in all jurisdictions and with all filing offices as Purchaser may reasonably determine are necessary or advisable to protect the interest of Purchaser in the Acquired Assets and proceeds thereof. Following the filing of such Financing Statements in such jurisdictions as Purchaser may reasonably determine are necessary or appropriate to fully preserve, maintain and protect the interest of Purchaser in the Acquired Assets and proceeds thereof, Purchaser shall provide Seller with file-stamped copies of, or filing receipts for, such Financing Statements as soon as available following such filing.

Section 2.2 Assumption of Liabilities . On the terms and conditions of this Agreement, at the time of the Closing and effective as of the Cut-off Time, Purchaser shall assume, pay, discharge and perform as and when due the Assumed Liabilities.

Section 2.3 Excluded Assets and Liabilities . Notwithstanding any provision in this Agreement, Purchaser is acquiring only the Acquired Assets and not any Excluded Assets and assuming only the Assumed Liabilities and not any Excluded Liabilities. The Excluded Assets and Excluded Liabilities will not be conveyed hereunder by Seller and its Affiliates, as the case may be.

 

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Section 2.4 Purchase Price; Total Consideration; Purchase Price Adjustment .

(a) No later than two Business Days before the Closing, Seller will deliver to Purchaser the Estimated Closing Statement, the Estimated Closing Statement (as defined in the Comenity Purchase Agreement) and a statement setting forth an estimate of the Payoff Amount (as defined in the Chestnut Participation Termination Letter) as contemplated by the second paragraph of Section 1 of the Chestnut Participation Termination Letter.

(b) Seller shall deliver or cause to be delivered to Purchaser the Closing Master File within ten Business Days after the Closing. Within 45 days after the Closing, Purchaser will deliver to Seller a Final Closing Statement and reasonably detailed documentation to support the calculations contained therein. Seller will, within 60 days after delivery of the Final Closing Statement and the related information, determine and notify Purchaser if Seller believes that there were any (1) inaccuracies in the preparation of the Final Closing Statement or (2) differences between the Estimated Closing Statement and the Final Closing Statement that require an adjustment of the Purchase Price, together with Seller’s calculation of the Purchase Price and reasonably detailed documentation to support the calculation thereof (any such notice, an “ Objection Notice ”). If Seller does not deliver an Objection Notice prior to the end of such 60-day period, the Final Closing Statement (and the Purchase Price set forth therein), as delivered by Purchaser, shall be final and binding upon the parties. To the extent that Seller delivers an Objection Notice prior to the end of such 60-day period, Seller and Purchaser shall use commercially reasonable efforts to resolve any differences with respect to the adjustments to the Purchase Price required by this Section 2.4(b) . If any disputes with respect to such adjustments to the Purchase Price remain unresolved for more than ten Business Days after the expiration of the above-referenced 60-day period, Purchaser and Seller will promptly select a mutually agreed-upon, nationally recognized accounting firm to determine the correct Purchase Price, which determination will be conclusive and binding on Purchaser and Seller and unappealable absent manifest error. The fees of such accounting firm will be shared by Purchaser and Seller in proportion to the relative differences between their respective calculations of the Purchase Price and the amount determined by the accounting firm. After the Purchase Price has been finally determined in accordance with this Section 2.4(b) , the party that had a net benefit from such inaccuracies and/or differences, if applicable, will promptly pay to the other party in immediately available funds (in U.S. dollars) to an account designated by such other party an amount equal to the absolute value of the difference between the Purchase Price as originally calculated in the Estimated Closing Statement and the Purchase Price as finally determined pursuant to this Section 2.4(b) (any such payment being referred to herein as the “ Correction Amount ”). Payment of the Correction Amount will be accompanied by a payment of interest on such Correction Amount for the period from and including the Closing Date but excluding the date of payment of such Correction Amount at a rate per annum equal to the Federal Funds Rate on the Closing Date. Any such Correction Amount shall be treated as an adjustment to the Purchase Price.

(c) Seller shall be entitled to retain payments on Borrower Accounts from Borrowers received and posted to the Borrower Accounts by Seller on or prior to the Cut-off Time. All payments received by Seller after the Cut-off Time related to the Borrower Accounts or received prior to the Cut-off Time but not posted to the relevant Borrower Account on or prior to the Cut-off Time shall belong to Purchaser and shall be an Acquired Asset (any such payments, “ Post-Cut-off Time Payments ”). Upon receipt of any Post-Cut-off Time Payment, Seller shall remit the full amount of such Post-Cut-off Time Payment to Purchaser in accordance with the terms of the New Program Agreement.

 

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(d) If during the 120-day period following the Closing Date, it is determined that any Gross Receivable purchased at Closing was (or, in the case of an Excluded Receivable identified in clause (iii) of the definition of Excluded Receivables, becomes) an Excluded Receivable, then Seller shall repurchase such Gross Receivable from Purchaser, on demand, for an amount equal to (A) the BMLI Percentage multiplied by the product of the Agreed Percentage and the amount of such Net Receivable as of the Cut-off Time as reflected in the Final Closing Statement as finally determined in accordance with Section 2.4(b) , less (B) any payments received by Purchaser in respect of such Excluded Receivable between the Cut-off Time and the date of such payment, and upon receipt of such payment Purchaser will reconvey such Excluded Receivable to Seller. Any payments under this Section 2.4(d) shall be deemed to be an adjustment to the Total Consideration hereunder.

(e) If during the 120-day period following the Closing Date, it is determined that (i) any Gross Receivable designated as an Excluded Receivable as of the Cut-off Time should have not been so classified or (ii) any Designated Receivable as of the Cut-off Time is not charged off and is not required to be charged-off during such 120-day period in accordance with the Program Policies and Procedures, then Purchaser shall purchase (in the case of any such Excluded Receivable) such Gross Receivable from Seller or pay for (in the case of any such Designated Receivable) such Gross Receivable to Seller, on demand, for an amount equal (A) to the BMLI Percentage multiplied by the product of the Agreed Percentage and the amount of such Net Receivable, in each case as of the Cut-off Time less (B) any payments received by Seller in respect of such Gross Receivable between the Cut-off Time and the date of such payment, and upon receipt of such payment such Seller will convey such Gross Receivable designated as an Excluded Receivable as of the Cut-off Time to Purchaser. Any payments under this Section 2.4(e) shall be deemed to be an adjustment to the Total Consideration hereunder, and any Designated Receivable in respect of which payment is required to be made by Purchaser under this Section 2.4(e) shall no longer be deemed to be a Designated Receivable.

(f) No later than 270 days following the Closing, Seller will deliver to Purchaser a statement setting forth the Deferred Interest Payment (which amount shall be calculated after giving effect to the determinations made in clauses (d) and (e) above), and reasonably detailed documentation to support the calculation thereof. Purchaser will, within 30 days after delivery of the such statement and the related information, determine and notify Seller if Purchaser believes that there were any (1) inaccuracies in the calculation of the Deferred Interest Payment or (2) differences between the Estimated Deferred Interest Payment and the Deferred Interest Payment that require an adjustment, together with Purchaser’s calculation of the Deferred Interest Payment and reasonably detailed documentation to support the calculation thereof. If Purchaser does not deliver such notice prior to the end of such 30-day period, the Deferred Interest Payment as determined by Seller, shall be final and binding upon the parties. To the extent that Purchaser does deliver such notice prior to the end of such 30-day period, Seller and Purchaser shall use commercially reasonable efforts to resolve any differences with respect to the adjustments to the Deferred Interest Payment. If any disputes with respect to such adjustments to the Deferred Interest Payment remain unresolved for more than ten Business Days after the expiration of the above-referenced 30-day period, Purchaser and Seller will

 

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promptly select a mutually agreed-upon, nationally recognized accounting firm to determine the correct Deferred Interest Payment, which determination will be conclusive and binding on Purchaser and Seller and unappealable absent manifest error. The fees of such accounting firm will be shared by Purchaser and Seller in proportion to the relative differences between their respective calculations of the Deferred Interest Payment and the amount determined by the accounting firm. After the Deferred Interest Payment has been finally determined in accordance with this Section 2.4(f) , the party that had a net benefit from such inaccuracies and/or differences, if applicable, will promptly pay to the other party in immediately available funds (in U.S. dollars) to an account designated by such other party an amount equal to the absolute value of the difference between the Estimated Deferred Interest Payment as originally calculated in the Estimated Closing Statement and the Deferred Interest Payment as finally determined pursuant to this Section 2.4(f) .

Section 2.5 Tax Treatment . For the avoidance of any doubt, Seller and Purchaser agree that the transactions contemplated hereby shall be treated by each of Seller, Purchaser and their respective Affiliates, as a sale of the Acquired Assets as such by Seller to Purchaser for all federal and state income Tax purposes and not as a sale of any equity interest encompassing the Acquired Assets. Seller and Purchaser and their respective Affiliates shall report, act and file Tax Returns in all respects and for all purposes consistent with such treatment and will not voluntarily take any position inconsistent therewith upon any examination of any Tax Return, in any audit, proceeding or otherwise with respect to any Tax Return unless prohibited by any Requirement of Law.

Section 2.6 Excluded Receivables. It is hereby acknowledged and agreed by Purchaser that (a) with respect to the Excluded Receivables identified in clauses (i) and (ii) of the definition of Excluded Receivables, immediately following the consummation of the Comenity Transaction, Purchaser shall be deemed to have sold, conveyed and assigned to Seller, and relinquished, released and disclaimed any further rights with respect to, all such Excluded Receivables as of the Cut-off Time and (b) with respect to the Excluded Receivables identified in clause (iii) of the definition of Excluded Receivables, as of the 120th day after the Closing Date, Purchaser shall hereby sell, convey and assign to Seller, and shall be deemed to have relinquished, released and disclaimed any further rights with respect to, all such Excluded Receivables as of such date.

ARTICLE III

CLOSING; ASSIGNMENT

Section 3.1 The Closing . The closing of the purchase and sale of the Acquired Assets and assumption of the Assumed Liabilities (the “ Closing ”) will take place at 8:00 a.m. prevailing Eastern Time on July 2, 2018, or, if each of the conditions set forth in Sections 7.1 and 7.2 (other than such conditions which, by their nature, are to be satisfied at the Closing) have not been satisfied or waived on or prior to such date, on the second Business Day following the satisfaction or waiver of such conditions or such other date as Seller and Purchaser may mutually agree in writing (the “ Closing Date ”). The parties intend that the transactions contemplated hereby shall be consummated concurrently with the consummation of the Chestnut Transaction, Comenity Transaction and LuxCo Transaction.

 

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(a) At the Closing, Seller and Purchaser will deliver or cause to be delivered to each other an instrument of sale, assignment, transfer and conveyance of the Acquired Assets and the assumption of the Assumed Liabilities, respectively, in substantially the form set forth in Exhibit A , duly executed by Seller and Purchaser (the “ Bill of Sale and Assumption Agreement ”).

(b) Purchaser will pay at the Closing an amount equal to the Estimated Purchase Price plus the Estimated Deferred Interest Payment, by wire transfer of immediately available funds (in U.S. dollars) to an account or accounts of Seller or an Affiliate thereof, such account or accounts to be specified by Seller not less than two Business Days before the Closing Date.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE PARTIES

Section 4.1 Representations of Seller . Seller represents and warrants to Purchaser as follows:

(a) Existence and Authority . Seller is a corporation, duly organized, validly existing and in good standing under the laws of Delaware, and Seller has the requisite power and authority to own its assets and to administer and service the Borrower Accounts as currently conducted, and is duly qualified and/or licensed to do business in each jurisdiction where the ownership or operation of the Acquired Assets requires such qualification or license.

(b) Authorization and Validity . Seller has full power and authority to execute and deliver this Agreement and the other Transaction Documents to which it is a party, to consummate the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder. The execution and delivery by Seller of this Agreement and the other Transaction Documents to which it is a party and the performance of Seller’s obligations hereunder and thereunder have been duly authorized by all requisite action. This Agreement is the legal, valid and binding obligation of Seller enforceable in accordance with its terms, and each of the other Transaction Documents has been duly authorized by Seller and upon execution and delivery by Seller will be a legal, valid and binding obligation of Seller enforceable against Seller in accordance with its terms (except as may be limited by bankruptcy, insolvency, reorganization, moratorium and other Requirements of Law relating to or affecting creditors’ rights generally and by general equity principles).

(c) Governmental and Third-Party Consents . Except as set forth in Schedule 4.1(c) , no consent, approval, license, permit, or authorization from, or filing or registrations with, or report, declaration or exemption by notice to, any Governmental Authority is required to be obtained or made by Seller or any of its Affiliates (other than those previously obtained) in connection with the execution, delivery or performance of the Transaction Documents by such party or the consummation by such party of the transactions contemplated by the Transaction Documents.

(d) No Conflict . Except as set forth in Schedule 4.1(d) , neither the execution and delivery of this Agreement or any of the other Transaction Documents or the consummation of any of the transactions contemplated hereby or thereby nor the compliance with or fulfillment of the terms, conditions and provisions hereof or thereof will:

 

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(1) conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination or cancellation or a loss of rights under, or result in the creation or imposition of any Lien upon any of the Acquired Assets, under (A) the Constituent Documents of Seller, (B) any Account Agreement, (C) any other material note, instrument, agreement, mortgage, or lease to which any of the Acquired Assets is subject or by which Seller (with respect to the Acquired Assets) is bound, (D) any Applicable Order to which Seller is a party or by which Seller is bound, or (E) any Requirements of Laws affecting Seller (with respect to the Acquired Assets) or the Acquired Assets; or

(2) require the approval, consent, authorization or act of, or the making by Seller of any declaration, filing or registration with, any Person.

(e) Acquired Assets and Assumed Liabilities . Except as set forth on Schedule 4.1(e) , Seller is, and as of the Closing Date (and immediately prior to the Closing) will be, the owner of and have good and valid title to, the Acquired Assets free and clear of all Liens (other than the Participations), and (i) BMLI has granted an undivided participation interest in the Gross Receivables of BMLI to Chestnut, which is represented by the Chestnut Participation and (ii) each of LuxCo and the Seller has granted an undivided participation interest in the Gross Receivables of Seller to Comenity, which is represented by the Comenity Participation.

(f) Borrower Data . All Borrower Data has been maintained in the ordinary course in accordance with the Program Policies and Procedures as then in effect. As of the Closing, Seller shall have delivered (or otherwise made available) to Purchaser all data regarding historical changes in fees and interest rates with respect to the Borrower Accounts in a format that enables Purchaser to re-evaluate such changes to the extent required by the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009, if any.

(g) Compliance with Laws . Except as set forth in Schedule 4.1(g) , (1) neither Seller with respect to the Program or the Acquired Assets, nor any Acquired Assets or any assets to be conveyed to Purchaser under the LuxCo Purchase Agreement, is subject to any Applicable Order, and (2) Seller has complied in all material respects with all Requirements of Laws and Applicable Orders applicable to the Program and the Aggregate Assets and Comenity has complied in all material respects with all Requirements of Laws and Applicable Orders applicable to the Program and the Aggregate Assets to the extent such compliance is the responsibility of Seller or its Affiliates of their obligations under the Program Agreement.

(h) Borrower Accounts . With respect to the Borrower Accounts, except as set forth on Schedule 4.1(h) :

(1) Each Borrower Account complies in all material respects with (A) the applicable Account Agreement to which it relates, including to the extent such Account Agreement has been amended or modified and (B) all policies, notices, disclosures or other communications provided to the applicable Borrower or otherwise applicable to such Borrower Account;

 

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(2) No Borrower Account is secured by any collateral whatsoever;

(3) Each Borrower Account is payable only in U.S. dollars;

(4) All applications submitted for the establishment of a Borrower Account have been evaluated in all material respects by Seller on behalf of the originating bank in accordance with the Program Policies and Procedures applicable at the respective times of evaluation;

(5) Each Borrower Account has been solicited, opened and originated, maintained and serviced in compliance, in all material respects, with all applicable Requirements of Law;

(6) Each Borrower Account has been originated pursuant to, or acquired and converted under, or owned by Comenity under, the Program; and

(7) No Borrower Account includes a minimum payment calculation that is established by Seller as a set payment for a particular balance until such balance is paid in full (other than a payment calculation that is modified for a consumer credit counseling service, hardship or other debt management program).

(i) Gross Receivables . With respect to each and every Gross Receivable (other than Excluded Receivables), except as set forth on Schedule 4.1(i) :

(1) such Gross Receivable has arisen in the ordinary course under a Borrower Account;

(2) such Gross Receivable is not subject to offset, recoupment, adjustment or any other valid and cognizable claim or defense of a Borrower except as may be limited by (A) bankruptcy, insolvency, reorganization, moratorium and other Requirements of Law relating to or affecting creditors’ rights generally and by general equity principles; (B) the rights of Borrowers under 12 CFR 1026.12(c), 12 CFR 1026.13(d) and the Servicemembers Civil Relief Act; (C) account fraud, deceased Borrowers, legal proceedings (including any collection matters) and chargeback disputes; (D) claims and defenses with respect to disputed transactions asserted by Borrowers in the ordinary course; and (E) reasonable and customary waivers by Seller of certain terms of such accounts on a case-by-case basis, solely to the extent that each of the foregoing has occurred in the ordinary course of operating an open-end consumer credit business and in compliance with the Program Policies and Procedures as then in effect; and

(3) such Gross Receivable represents the legal, valid and binding payment obligation of the Borrower thereon (other than any authorized user) and is enforceable against such Borrower in accordance with its terms, except as such enforceability may be limited by (A) bankruptcy, insolvency, reorganization, moratorium or other Requirements of Law relating to or affecting creditors’ rights generally and by

 

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general equity principles; (B) the rights of Borrowers under 12 CFR 1026.12(c), 12 CFR 1026.13(d) and the Servicemembers Civil Relief Act; (C) Borrower Account fraud, legal proceedings (including any collection matters) and chargeback disputes; and (D) reasonable and customary waivers by Seller of certain terms of such accounts on a case-by-case basis, solely to the extent that each of the foregoing has occurred in the ordinary course of operating an open-end consumer credit business and in compliance with the Program Policies and Procedures.

(j) Accuracy of Historical FDR Standard Master File and Closing Master File . The Historical FDR Standard Master File was true, complete and accurate in all material respects as and when delivery was fully completed, and the Closing Master File will be true, complete and accurate in all material respects as of the Cut-off Time.

(k) Absence of Certain Changes. Except as set forth on Schedule 4.1(k):

(1) Since July 12, 2017, Seller has serviced and maintained the Aggregate Assets, in all material respects, in accordance with the Program Policies and Procedures as then in effect (it being acknowledged that any act (or omission) by Seller between the date hereof and the Closing that was not in violation of Section 5.2 shall not be deemed to be a breach of the foregoing representation and warranty). Without limiting the foregoing, since July 12, 2017, Seller has not (A) sold, leased or otherwise disposed of any of the Acquired Assets, except in accordance with the Program Policies and Procedures as then in effect; or (B) other than Liens to be released on or before the Closing Date or Liens in respect of the Participations, created any Lien over any part of the Acquired Assets.

(2) Since the date of this Agreement, there has not been any change, effect or event that has had or would reasonably be expected to have a Material Adverse Effect.

(l) Litigation . Except as set forth on Schedule 4.1(l) , there are no Actions, or, to the Knowledge of Seller, investigations, pending against Seller or any Affiliate of Seller, related to any Acquired Asset or, to the Knowledge of Seller, threatened against Seller or any Affiliate of Seller, related to any Acquired Asset. There are no Actions, or, to the Knowledge of Seller, investigations, pending, or to the Knowledge of Seller, threatened, against or relating to Seller, that has materially impaired or which, if adversely determined, would, individually or in the aggregate, reasonably be expected to materially impair the ability of Seller to perform its obligations under, or materially delay the consummation of the transactions contemplated by, this Agreement.

(m) Account Agreements . Each Account Agreement constitutes a valid and binding obligation of the parties thereto (including any cosigner, guarantor or surety) and is in full force and effect and (except for those Account Agreements which by their terms will expire or terminate prior to the Closing Date) may be transferred to Purchaser pursuant to this Agreement without breaching the terms thereof and without the consent, approval or act of any other party. Except as would not have a material negative impact, individually or in the aggregate, on the Borrower Accounts, Comenity is not in default under any Account Agreements with respect to such Borrower Accounts. No Account Agreement is subject to any debt cancellation agreement or similar arrangement with any Borrower.

 

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(n) No Brokers or Finders . Seller is solely responsible for and shall pay any Liability incurred by it for any financial advisory fees, brokerage fees, commissions or finder’s fees directly or indirectly in connection with this Agreement or the transactions contemplated hereby or by the Transaction Documents.

(o) No Prior Sale, Assignment or Securitization . Except for the Participations, Seller has not previously sold, assigned or securitized any of the Gross Receivables or any other Acquired Assets or has any contractual or other obligation to sell, assign, securitize or otherwise transfer any Gross Receivable or other Acquired Asset to any other party. To the extent that any of the Gross Receivables or other Acquired Assets has been securitized, Seller has the ability to repurchase such Gross Receivable or other Acquired Asset prior to the Closing.

(p) Form of Account Agreements . Seller has made available to Purchaser true and correct copies of the forms of the Account Agreements that represent, as of the date hereof, at least 95% of the Gross Receivables subject to Account Agreements (the “ Signing Top Form Agreements ”). Such Account Agreements are in the form of the Signing Top Form Agreements without modification (other than the inclusion of the applicable Borrower’s personal information and insertion of pricing variables).

(q) Accounting Treatment of Transfer . Seller intends to treat the conveyance of the Acquired Assets to Purchaser pursuant to this Agreement as a sale for purposes of GAAP.

(r) Intellectual Property . Seller or one of its Affiliates owns the Seller Marks.

(s) True Sale Opinion . If the Closing were to occur simultaneously with the execution of this Agreement, the True Sale Opinion would be issued by counsel to Seller and delivered to Seller on the date hereof.

(t) Disclaimer of Warranties . EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE OTHER DOCUMENTS ENTERED INTO PURSUANT TO THIS AGREEMENT, SELLER MAKES NO REPRESENTATION OR WARRANTY WITH RESPECT TO THE AGGREGATE ASSETS AND SPECIFICALLY MAKES NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND NONE SHALL BE IMPLIED AND ANY AND ALL REPRESENTATIONS AND WARRANTIES, WHETHER OR NOT RELATING TO THE AGGREGATE ASSETS, OTHER THAN THOSE SET FORTH IN THIS AGREEMENT AND OTHER DOCUMENTS ENTERED INTO PURSUANT TO THIS AGREEMENT, EXPRESS OR IMPLIED, ARE EXCLUDED; PROVIDED , HOWEVER , THAT THE FOREGOING DISCLAIMER AND EXCLUSION SHALL NOT APPLY TO, AND PURCHASER DOES NOT DISCLAIM RELIANCE ON, ANY REPRESENTATION THAT WAS KNOWINGLY, INTENTIONALLY AND FRAUDULENTLY MADE BY SELLER RELATING TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, REGARDLESS OF WHETHER SUCH REPRESENTATION IS SET FORTH IN THIS AGREEMENT.

 

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Section 4.2 Representations of Purchaser . Purchaser represents and warrants to Seller as follows:

(a) Existence . Purchaser is a federal savings association, duly organized, validly existing and is in good standing under the laws of United States. Purchaser has the requisite power and authority to own its assets and the Acquired Assets, and is duly qualified and/or licensed to do business in each jurisdiction where the ownership or operation of its businesses and the Acquired Assets requires such qualification or license.

(b) Authorization and Validity . Purchaser has full power and authority to execute and deliver this Agreement and the other Transaction Documents, to consummate the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder. The execution and delivery of this Agreement and the other Transaction Documents by Purchaser and the performance of Purchaser’s obligations hereunder and thereunder have been duly authorized by all requisite action. This Agreement is the legal, valid and binding obligation of Purchaser enforceable in accordance with its terms, and each of the other Transaction Documents has been duly authorized by Purchaser and upon execution and delivery by Purchaser will be a legal, valid and binding obligation of Purchaser enforceable against Purchaser in accordance with its terms (except as may be limited by bankruptcy, insolvency, reorganization, moratorium and other Requirements of Law relating to or affecting creditors’ rights generally and by general equity principles).

(c) Governmental and Third-Party Consents . No consent, approval, license, permit, or authorization from, or filing or registrations with, or report, declaration or exemption by notice to, any Governmental Authority is required to be obtained or made by Purchaser or any of its Affiliates (other than those previously obtained) in connection with the execution, delivery or performance of the Transaction Documents by such party or the consummation by such party of the transactions contemplated by the Transaction Documents.

(d) No Conflict . Except as set forth in Schedule 4.2(d) , neither the execution and delivery of this Agreement or any of the other Transaction Documents or the consummation of any of the transactions contemplated hereby or thereby nor compliance with or fulfillment of the terms, conditions and provisions hereof or thereof will:

(1) conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination or cancellation or a loss of rights under, or result in the creation or imposition of any Lien upon any of the Acquired Assets, under (A) the Constituent Documents of Purchaser, (B) any Contract to which Purchaser is a party, (C) any other material note, instrument, agreement, mortgage, lease, license, franchise, permit or other authorization, right, restriction or obligation to which Purchaser is a party, (D) any Applicable Order to which Purchaser is a party or is bound, or (E) any Requirements of Laws affecting Purchaser; or

(2) require the approval, consent, authorization or act of, or the making by Purchaser of any declaration, filing or registration with, any Person other than a Governmental Authority.

 

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(e) Litigation . There are no Actions, or, to the Knowledge of Purchaser, investigations, pending, or to the Knowledge of Purchaser, threatened, against or relating to Purchaser, that has materially impaired or which, if adversely determined, would, individually or in the aggregate, reasonably be expected to materially impair the ability of Purchaser to perform its obligations under, or materially delay the consummation of the transactions contemplated by, this Agreement.

(f) Financing . Purchaser will have as of immediately prior to the expected Closing sufficient funds available to consummate the transactions contemplated hereby and the Other PSAs and pay the Aggregate Purchase Price and to discharge when due any expenses incurred by Purchaser or any of its Affiliates in connection with the transactions contemplated by this Agreement.

(g) Brokers or Finders . Any liability incurred by Purchaser for any financial advisory fees, brokerage fees, commissions or finder’s fees directly or indirectly in connection with this Agreement and the other Transaction Documents or the transactions contemplated by this Agreement and the other Transaction Documents will be borne by Purchaser.

ARTICLE V

COVENANTS

Section 5.1 Access; Transition Support Efforts . Until the Closing Date, Seller shall provide Purchaser and its representatives with reasonable access, during normal business hours and to the extent the same does not unreasonably disrupt the operation of Seller’s businesses, to such personnel, books and records and other materials of Seller and LuxCo as may be reasonably requested by Purchaser from time to time to facilitate the consummation of the transactions contemplated hereby and the Other PSAs.

Section 5.2 Operation of the Acquired Assets Prior to the Closing . From the date hereof until the Closing, except as otherwise provided in this Agreement or the New Program Agreement, or consented to in writing by Purchaser, Seller shall service the Program (including the Aggregate Assets) in the ordinary course of business and consistent with the Program Policies and Procedures as in effect on the date hereof. Without limiting the generality of the foregoing, Seller shall not (and shall not cause or permit any Affiliate to), without the prior written consent of Purchaser, do any of the following between the date hereof and the Closing, except (i) as otherwise expressly contemplated by the Transaction Documents, the Comenity Purchase Agreement or the New Program Agreement, (ii) as required by Requirements of Law or (iii) as set forth in Schedule 5.2 :

(a) sell, assign, lease, encumber or otherwise transfer or dispose of any of the Acquired Assets, including the securitization of any Gross Receivables or other Acquired Assets to the extent that Seller does not have the right to repurchase such Gross Receivables prior to the Closing;

(b) re-age any of the Borrower Accounts and/or Gross Receivables other than in accordance with the Program Policies and Procedures in effect as of the date hereof and consistent with Seller’s past practice thereunder for the 12 months preceding the date hereof; or

 

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(c) agree with any Person or otherwise commit itself to do any of the foregoing.

Section 5.3 Filings and Consents .

(a) Each party shall use reasonable best efforts to file, as soon as practicable after the date hereof, all notices, reports and other documents required to be filed by such party with any Governmental Authority with respect to the transactions contemplated by this Agreement, and to submit promptly any additional information requested by any such Governmental Authority. Without limiting the generality of the foregoing, each party shall, promptly after the date hereof, prepare and file any notifications required under any applicable antitrust or competition laws or regulations in connection with this Agreement. Each party shall respond as promptly as practicable to any inquiries or requests received from any state attorney general, antitrust authority or other Governmental Authority in connection with antitrust or related matters. Subject to the confidentiality provisions set forth in Section 11.12 , Purchaser and Seller shall promptly supply the other with any information that may be required in order to effectuate any filings (including applications) pursuant to (and to otherwise comply with its obligations set forth in) this Section 5.3(a) . Except where prohibited by applicable Requirements of Law or any Governmental Authority, and subject to the confidentiality provisions set forth in Section 11.12 , Seller and Purchaser shall (1) cooperate with each other with respect to any filings made in connection with this Agreement and (2) provide the other party with copies of any publicly available documents made or submitted by it with or to any Governmental Authority in connection with this Agreement promptly upon the other party’s request.

(b) Purchaser and Seller shall use their respective reasonable best efforts to take, or cause to be taken, all actions necessary to make effective the transactions contemplated by this Agreement as soon as practicable. Without limiting the generality of the foregoing, each party to this Agreement: (1) shall make all filings (if any) and give all notices (if any) required to be made and given by such party in connection with the transactions contemplated by this Agreement; and (2) shall use reasonable best efforts to obtain the Requisite Regulatory Approvals.

(c) Notwithstanding anything to the contrary contained in Section 5.3(b) or elsewhere in this Agreement, in connection with its efforts to obtain the Requisite Regulatory Approvals, Purchaser shall not have any obligation under this Agreement to divest or agree to divest, or cause any of its Affiliates to divest, any of their respective businesses, product lines or assets, or to take or agree to take (or cause any of its Affiliates to take or agree to take) any other action with respect to, or to agree (or cause any of its Affiliates to agree) to, any limitation or restriction on any of their respective businesses, product lines or assets.

Section 5.4 Acquisition Proposals . Seller shall not, and shall not authorize or permit any representative or any Affiliate of Seller to, directly or indirectly, solicit or encourage, or furnish information with respect to the Acquired Assets to or engage in any discussions with any Person in connection with, any proposal for the acquisition of all or a substantial portion of the Acquired Assets, other than as contemplated by this Agreement. Seller shall promptly cease or cause to be terminated any existing activities or discussions with any Person with respect to any of the foregoing and will promptly request the return of any confidential information provided to any Person in connection with a prospective acquisition of the Acquired Assets, other than Purchaser.

 

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Section 5.5 Repayment of Credit Balances . Notwithstanding any provision of Section 5.2 to the contrary, Seller shall use commercially reasonable efforts to eliminate any credit balances existing in a Borrower Account in favor of a Borrower prior to the Closing, provided that any credit balance that remains outstanding as of the Closing will not exceed one percent (1%) of the amount of the Gross Receivables as of the Cut-off Time.

Section 5.6 Other PSAs. Purchaser shall use its reasonable best efforts to cause the consummation of the sale of the Chestnut Participation pursuant to the Chestnut Purchase Agreement and the sale of the Comenity Participation pursuant to the Comenity Purchase Agreement. In addition, Purchaser agrees to enforce its rights against the counterparties to the Chestnut Purchase Agreement and Comenity Purchase Agreement as directed by Seller.

Section 5.7 True Sale Opinion . If between the date hereof and the Closing Date, any facts, circumstances or changes in Requirements of Law arise such that the condition set forth in Section 7.2(h) is not capable of being satisfied as a result thereof, Purchaser and Seller agree to cooperate and use reasonable best efforts to modify the terms and conditions hereof (and the Other PSAs, as applicable) in order to cause the satisfaction of the condition precedent set forth in Section 7.2(h) ; provided, however, that neither party shall be required to make any economic or financial concessions or accommodations that are not reimbursed by the other party in connection with performing its obligations under this Section 5.7 .

Section 5.8 Review of Accounts . Seller shall, as of the Business Day immediately preceding the Closing Date, (i) match any Borrower Accounts against any appropriate database(s) to determine if any of the Borrowers have filed for bankruptcy or insolvency protection under the United States Bankruptcy Code and (ii) keep a record of any Borrowers that have filed for such protection.

ARTICLE VI

TAX MATTERS

Section 6.1 Responsibility for Taxes .

(a) Seller shall be liable for and pay, all Taxes (other than Transfer Taxes) of, due from or otherwise imposed on Seller or upon any of its Affiliates or upon Purchaser or any of its Affiliates (by reason of transferee or successor liability or otherwise) (1) relating to the Acquired Assets or the operation of the Program by Seller or its Affiliates for Pre-Closing Tax Periods, (2) imposed on Seller’s (or its Affiliates’) net income or gross receipts arising from the sale of the Acquired Assets, or (3) that are attributable to any act with respect to the Acquired Assets taken by Seller or an Affiliate of Seller on the Closing Date prior to the Closing that is outside the ordinary course of business.

(b) Purchaser shall be liable for and pay all Taxes (other than Transfer Taxes) of, due from or otherwise imposed on Purchaser or upon any of its Affiliates or upon Seller or any of its Affiliates (1) relating to the Acquired Assets or the operation of the Program for Post-Closing Tax Periods or (2) imposed on the basis of Purchaser’s (or its Affiliates’) net income or gross receipts arising from its purchase of the Acquired Assets, but excluding any Taxes for which Seller is liable pursuant to Section 6.1(a)(2) .

 

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(c) For purposes of this Section 6.1 , Taxes attributable to a portion of a taxable year or period shall be determined on a “closing of the books” basis as of the end of the day immediately preceding the Closing Date, except that Taxes, if any, imposed on a periodic basis (such as property taxes) shall be allocated on a daily basis.

(d) Notwithstanding anything herein to the contrary, all Transfer Taxes shall be borne and paid 50% by Seller and 50% by Purchaser. Any Tax Returns with respect to Transfer Taxes shall be prepared by the party that customarily has primary responsibility for filing such Tax Returns pursuant to applicable Requirements of Law. Seller and Purchaser shall provide to one another a true copy of each such return as filed and evidence of the timely filing thereof.

(e) Neither party nor any of its Affiliates shall be entitled to any information regarding (except to the extent required by the next sentence) any access to, any right to review or any right to obtain any consolidated, combined, affiliated or unitary Tax Return which includes Seller or Purchaser. Seller and Purchaser shall provide each other with such assistance as reasonably may be requested by either of them, including reasonable requests for information, including any IRS Form 1099-C or other information Tax Return, relating to the Acquired Assets, in connection with (1) the preparation of any Tax Return, or (2) any audit or other examination by any Governmental Authority, or any judicial or administrative proceedings relating to liability for Taxes; provided , however , that, in accordance with the previous sentence of this Section 6.1(e) , in no event shall either party or their respective Affiliates be required to provide the other party with access to or copies of its or its Affiliates’ Tax Returns (other than such an IRS Form 1099-C or any such information Tax Return). The party requesting assistance hereunder shall reimburse the other party for reasonable out-of-pocket expenses incurred in providing such assistance, provided , however , that, (i) Seller shall have no obligation to provide any information to Purchaser with respect to any sales tax recovery proceeding instituted by Seller or Purchaser except to the extent attributable to a Post-Closing Tax Period or otherwise required pursuant to either Section 6.1(d) or Section 6.1(i) to the extent such information does not constitute part of the Acquired Assets, and (ii) for purposes of receiving reimbursement, no independent contractors, such as accountants or attorneys, shall be consulted without the written consent of the party requesting assistance, which consent shall not be unreasonably withheld or delayed.

(f) Seller and Purchaser each shall be entitled to any refund of any Taxes for which it is liable under this Section 6.1 and any refund received by the other party shall be transferred to the party which is liable for the Tax under this Section 6.1 .

(g) With regard to the preparation and filing of U.S. information returns on IRS Forms 1099-C for “identifiable events,” within the meaning of the Treasury Regulations under Section 6050P of the Code, with respect to the Borrower Accounts governing Gross Receivables in the Legacy Pool, Seller shall be responsible for preparing and filing such forms for “identifiable events” that occur prior to the Closing Date and Purchaser shall be responsible for preparing and filing such forms for “identifiable events” that occur on or after the Closing

 

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Date (it being acknowledged and agreed that Seller shall be responsible for preparing and filing such forms for “identifiable events” that occur on or after the Closing Date with respect to Borrower Accounts governing Gross Receivables in the Legacy Pool that have been charged-off or were required to have been charged-off in accordance with the Program Policies and Procedures as of the Cut-off Time).

(h) With regard to the preparation and filing of U.S. information returns on IRS Forms 1099-MISC, if any, with respect to the Borrower Accounts governing Gross Receivables in the Legacy Pool, Seller shall be responsible for preparing and filing such forms for events that occur prior to the Closing Date, and Purchaser shall be responsible for preparing and filing such forms for events that occur on or after the Closing Date.

(i) In addition to its other obligations pursuant to this Section 6.1, Seller agree (1) to inform Purchaser in writing, within 10 Business Days after execution of this Agreement, of all Special Tax Arrangements that are in effect with respect to any of the Acquired Assets as of the date of such writing and (2) to provide Purchaser in writing on such date a description of each such Special Tax Arrangement in sufficient detail as will reasonably inform Purchaser and its Affiliates so that they may investigate the opportunity to continue (or to apply for the continuation, transfer or renewal of) such Special Tax Arrangement after the Closing; provided , however , that Seller shall not be required to disclose any information with respect to a Special Tax Arrangement to the extent the disclosure of such information to Purchaser (i) would be prohibited by a legally binding confidentiality restriction in an agreement between Seller or an Affiliate of Seller and a Taxing authority or would otherwise be prevented by applicable Requirements of Law, or (ii) in the reasonable, good faith judgment of Seller, could adversely impact Seller’s or any of its Affiliates’ working relationship with the relevant Taxing authority or jeopardize Seller’s or any of its Affiliates’ ability to continue to benefit from the Special Tax Arrangement. As used in this Section 6.1(i) , the term “ Special Tax Arrangement ” means any material concession, exemption, reduced rate, allowance, credit, holiday, suspension, election, registration, permit, operating method or reporting method that relates specifically to the Acquired Assets or the operation of the Program by Seller or its Affiliates, is not applicable to other substantial assets or operations of Seller or an Affiliate generally and has the effect of reducing the amount of, or eliminating, any Tax that would apply to any of the Acquired Assets in the absence of such concession, exemption, etc.; provided that any such concession, exemption, etc. will be considered material if, and only if, it results in a net Tax savings to Seller and its Affiliates of at least $25,000 for the 12-month period prior to the date on which the Special Tax Arrangement is required to be reported pursuant to this Section 6.1(i) (with such net Tax savings for any Special Tax Arrangement in effect for less than 12 months being determined on an annualized basis). If Seller or an Affiliate enters into a new Special Tax Arrangement with respect to any of the Acquired Assets after the date of execution of this Agreement, then Seller shall update the information provided pursuant to this Section 6.1(i) one month prior to the Closing, and again within one week after the Closing, in each case to the extent the information described in the first sentence of this Section 6.1(i) was not already provided with respect to such Special Tax Arrangement. Purchaser and Seller agree that, notwithstanding any other provision of this Agreement to the contrary, Seller and its Affiliates shall have no liability hereunder for a failure to comply with this Section 6.1(i) unless Seller and its Affiliates do not make a good faith attempt to do so.

 

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(j) Seller shall cause, or have caused previously, an election under Section 754 of the Code to be filed with the protective IRS Form 1065 filed related to the Program for the taxable year that includes the Closing Date, with respect to the arrangements that may include and be among any of PayPal, Comenity, LuxCo, BMLI, Chestnut, and/or any of their Affiliates, as the case may be.

ARTICLE VII

CONDITIONS

Section 7.1 Conditions Precedent to Obligation of Purchaser . The obligation of Purchaser to consummate the transactions contemplated hereunder is subject to the satisfaction, on or prior to the Closing, of the following conditions, any or all of which may be waived in writing, in whole or in part, by Purchaser:

(a) Requisite Regulatory Approvals . The Requisite Regulatory Approvals shall have been obtained or made and shall be in full force and effect and all waiting periods required by applicable Requirements of Law in connection therewith shall have expired or been terminated.

(b) No Injunction or Other Restraint . No Action or investigation shall have been commenced by a Governmental Authority and shall remain pending that seeks to restrain or prohibit or otherwise challenge the legality or validity of the execution and delivery of (i) this Agreement or the transactions contemplated hereby or (ii) any Other PSA or any of the transactions contemplated thereby, and no Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Requirements of Law (whether temporary, preliminary or permanent) that remains in effect and that has the effect of making the transactions contemplated by this Agreement or by any Other PSA illegal or otherwise restraining, enjoining or prohibiting the consummation of the transactions contemplated hereby or thereby, and neither Seller nor Purchaser shall have received written notice from any Governmental Authority that it has determined to institute any Action to restrain or enjoin the consummation of the transactions contemplated hereby or any Other PSA or to nullify or render ineffective the execution and delivery of (x) this Agreement or the transactions contemplated hereby if consummated or (y) any Other PSA or any of the transactions contemplated thereby if consummated, and neither Seller nor Purchaser shall have received written notice from any bank regulatory authority with jurisdiction over any of the parties hereto that it has determined to take any other action that would result in the prohibition or a material change in the terms of the transactions contemplated by this Agreement or any Other PSA.

(c) Accuracy of Representations and Warranties . (i) Each of the Fundamental Representations qualified as to materiality shall be true and correct in all respects, and those not so qualified shall be true and correct in all material respects, in each case, as of the date of this Agreement and at and as of the Closing, as if made at and as of the Closing (other than such representations and warranties as are made as of another date, which shall be true and correct as if made as of such date) and (ii) all other representations and warranties of Seller contained in this Agreement shall have been true and correct as of the date of this Agreement and shall be true and correct at and as of the Closing, as if made at and as of the Closing (other than such representations and warranties as are made as of another date, which shall be true and correct as

 

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if made as of such date) (disregarding all qualifications as to “materiality,” “Material Adverse Effect” or a similar qualifier), except, in each case of this clause (ii), to the extent that their failure to be so true and correct would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect; provided , however , that only those matters disclosed in the Schedules shall be deemed included in the Schedules hereto for purposes of determining the accuracy of the representations and warranties of Seller as of the Closing.

(d) Compliance with Covenants . The covenants and agreements contained in this Agreement to be complied with and/or performed by Seller at or before the Closing Date shall have been complied with and/or performed in all material respects.

(e) Closing Certificate . Seller shall have furnished Purchaser with a certificate, executed by a duly authorized officer of each Seller, certifying the matters set forth in Sections 7.1(c) and 7.1(d) as of the Closing Date.

(f) Transaction Documents . Seller shall have delivered to Purchaser duly executed counterparts of the Bill of Sale and Assumption Agreement, and the New Program Agreement shall be in full force and effect. Chestnut shall have delivered the letter agreement attached hereto as Exhibit D and Comenity shall have delivered the letter agreement attached hereto as Exhibit E.

(g) Chestnut Transaction . The Chestnut Transaction will close concurrently with the Closing.

(h) LuxCo Transaction . The LuxCo Transaction will close concurrently with the Closing.

(i) Comenity Transaction . The Comenity Transaction will close concurrently with the Closing.

Section 7.2 Conditions Precedent to Obligation of Seller. The obligation of Seller to consummate the transactions contemplated hereunder is subject to the satisfaction, on or prior to the Closing, of the following conditions, any or all of which may be waived in writing, in whole or in part, by Seller:

(a) Requisite Regulatory Approvals . The Requisite Regulatory Approvals shall have been obtained or made and shall be in full force and effect and all waiting periods required by applicable Requirements of Law in connection therewith shall have expired or been terminated.

(b) No Injunction or Other Restraint . No Action or investigation shall have been commenced by a Governmental Authority and shall remain pending that seeks to restrain or prohibit or otherwise challenge the legality or validity of the execution and delivery of (i) this Agreement or the transactions contemplated hereby or (ii) any Other PSA or any of the transactions contemplated thereby, and no Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Requirements of Law (whether temporary, preliminary or permanent) that remains in effect and that has the effect of making the transactions contemplated by this Agreement or by any Other PSA illegal or otherwise restraining, enjoining or prohibiting

 

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the consummation of the transactions contemplated hereby or thereby, and neither Seller nor Purchaser shall have received written notice from any Governmental Authority that it has determined to institute any Action to restrain or enjoin the consummation of the transactions contemplated hereby or any Other PSA or to nullify or render ineffective the execution and delivery of (x) this Agreement or the transactions contemplated hereby if consummated or (y) any Other PSA or any of the transactions contemplated thereby if consummated, and neither Seller nor Purchaser shall have received written notice from any bank regulatory authority with jurisdiction over any of the parties hereto that it has determined to take any other action that would result in the prohibition or a material change in the terms of the transactions contemplated by this Agreement or any Other PSA.

(c) Accuracy of Representations and Warranties . Each of the representations and warranties of Purchaser contained in this Agreement shall have been true and correct in all material respects as of the date of this Agreement and shall be true and correct in all material respects at and as of the Closing, as if made at and as of the Closing (other than any representation and warranty that is qualified by “materiality,” “material adverse effect” or a similar qualifier, which representation and warranty shall have been true and correct in all respects as of the date of this Agreement and shall be true and correct in all respects at and as of the Closing as if made at and as of the Closing), other than such representations and warranties as are made as of another date, which shall be true and correct in all material respects as if made as of such date, other than any representation and warranty is qualified by “materiality,” “material adverse effect” or a similar qualifier, which representation and warranty shall be true and correct in all respects.

(d) Compliance with Covenants . The covenants and agreements contained in this Agreement to be complied with and/or performed by Purchaser at or before the Closing Date shall have been complied with and/or performed in all material respects.

(e) Closing Certificate . Purchaser shall have furnished Seller with a certificate, executed by a duly authorized officer of Purchaser, certifying the matters set forth in Sections 7.2(c) and 7.2(d) as of the Closing Date.

(f) Transaction Documents . Purchaser shall have delivered to Seller a duly executed counterpart of the Bill of Sale and Assumption Agreement, and the New Program Agreement shall be in full force and effect. Chestnut shall have delivered the letter agreement attached hereto as Exhibit D and Comenity shall have delivered the letter agreement attached hereto as Exhibit E.

(g) No Material Adverse Effect . No Material Adverse Effect shall have occurred since the date of this Agreement.

(h) True Sale Opinion . Seller shall have received an opinion from counsel substantially in the form of the True Sale Opinion, and a letter authorizing Seller to provide a copy of such opinion to Seller’s financial auditors solely as an evidential matter in support of such auditors’ evaluation of management’s assertion that the transfer of the Acquired Assets meets the isolation criterion of ASC 860.

 

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(i) Chestnut Transaction . The Chestnut Transaction will close concurrently with the Closing.

(j) LuxCo Transaction . The LuxCo Transaction will close concurrently with the Closing.

(k) Comenity Transaction . The Comenity Transaction will close concurrently with the Closing.

ARTICLE VIII

INTENTIONALLY OMITTED

ARTICLE IX

TERMINATION

Section 9.1 Termination . This Agreement may be terminated and the transactions contemplated by this Agreement may be abandoned, at any time before the Closing only:

(a) by the mutual written consent of Purchaser and Seller;

(b) by either Purchaser or Seller, upon written notice to the other party, if any non-appealable final order, decree, judgment, injunction or action by any Governmental Authority of competent jurisdiction prohibiting consummation of the transactions contemplated by this Agreement becomes final and non-appealable;

(c) by either Purchaser or Seller, upon written notice to the other party, if there is enacted any law or regulation by any Governmental Authority that makes consummation of the transactions contemplated by this Agreement illegal or otherwise prohibited;

(d) by either Purchaser or Seller if the Closing has not occurred by October 1, 2018 (the “ Closing Date Deadline ”); provided , however , that neither Purchaser, on the one hand, nor Seller, on the other hand, may terminate this Agreement pursuant to this Section 9.1(d) if its (or one of its Affiliates’) breach of any representation, warranty or covenant contained herein has been the cause of or resulted in the failure to consummate such transactions by such date;

(e) by Purchaser in the event of any breach by Seller of any of Seller’s agreements, representations or warranties contained herein, but only to the extent that (1) such breach, if in existence on the Closing Date, would prevent the satisfaction of a condition set forth in Section 7.1 , and (2) Seller fails to cure such breach within 45 days after receipt of notice from Purchaser requesting such breach to be cured;

(f) by either Purchaser or Seller, in the event that the Comenity Transaction, the LuxCo Transaction or the Chestnut Transaction is terminated in accordance with its terms; or

(g) by Seller in the event of any breach by Purchaser of any of Purchaser’s agreements, representations or warranties contained herein, but only to the extent that (1) such breach, if in existence on the Closing Date, would prevent the satisfaction of a condition set forth in Section 7.2 , and (2) Purchaser fails to cure such breach within 45 days after receipt of notice from Seller requesting such breach to be cured.

 

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(h) by Purchaser in the event (i) Seller or LuxCo fails to complete the Closing on or before the third Business Day prior to the Closing Date Deadline, (ii) all conditions set forth in Section 7.2 (in the case of Seller) or Section 7.2 of the LuxCo Purchase Agreement (in the case of LuxCo) have been satisfied or waived at the time of such termination if the Closing were held at the time of such termination (other than the condition set forth in Section 7.2(h ) or Section 7.2(h) of the LuxCo Purchase Agreement, respectively, the conditions that would be satisfied if the condition set forth in Section 7.2(h ) or Section 7.2(h) of the LuxCo Purchase Agreement were satisfied, and the conditions which, by their nature, are to be satisfied at the Closing, all of which would be satisfied at the Closing) and (iii) Purchaser has irrevocably confirmed to Seller in writing that (A) all conditions set forth in Section 7.1 or Section 7.1 of the LuxCo Purchase Agreement, as applicable (in each case, other than those conditions which, by their nature, are to be satisfied at the Closing, have been satisfied (or that it would be willing to waive any unsatisfied conditions in Section 7.1 or Section 7.1 of the LuxCo Purchase Agreement, as applicable, for purposes of consummating the Closing)) and (B) Purchaser is ready, willing and able to effect the Closing at the time of such termination.

Section 9.2 Effect of Termination . In the event of the termination of this Agreement as provided in Section 9.1 , this Agreement shall thereupon become null and void and of no further force and effect, except for the provisions of Section 9.1 , this Section 9.2 , Section 9.3 and Article XI ; provided , further , that nothing herein shall affect the rights or remedies of any party with respect to any breach of any provision of this Agreement prior to termination, including any breach of the obligation to close. Notwithstanding the foregoing, nothing in this Section 9.2 shall be deemed to release any party from any Liability for any breach by such party of any of the terms or provisions of this Agreement or impair the right of any party to compel specific performance by any other party of its obligations under this Agreement.

Section 9.3 Termination Fee .

(a) In the event that this Agreement is validly terminated pursuant to Section 9.1(h) , then promptly upon demand after the date of such termination, Seller shall pay to Purchaser such amounts as may be requested by Purchaser and as may be necessary to reimburse Purchaser from time to time for all of its actual, out-of-pocket, documented costs and expenses incurred in connection with its pre-funding arrangements to fund the Aggregate Purchase Price or in connection with liquidating any such pre-funding arrangements, including any legal, consulting, financial advisor and accounting fees and expenses, in each case incurred in connection with such pre-funding arrangements or in connection with the liquidation thereof (the “ Termination Fee ”) by wire transfer of immediately available funds to one or more accounts designated in writing by Purchaser; provided, however, that in no event shall Seller be required to pay to Purchaser more than $75,000,000 (in the aggregate) under or pursuant to this Section 9.3(a) .

 

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(b) Notwithstanding anything else herein or in any Other PSA, payment of the Termination Fee pursuant to Section 9.3(a) in the circumstances in which it is payable shall be the sole and exclusive remedy (whether based on contract, equity, tort or any other theory) of Purchaser against Seller, its Affiliates and any of its or their respective Representatives for any losses, damages or liabilities suffered or incurred as a result of or under this Agreement or the transactions contemplated by this Agreement or the Other PSAs, including the failure of the Closing to occur. Purchaser shall not bring any action, suit or other proceeding in connection with any such failure of the Closing to occur. In no event shall Seller be obligated to both specifically perform the terms of this Agreement and pay any monetary damages, including all or a portion of the Termination Fee.

(c) The parties hereto acknowledge and agree that (i) in no event shall Seller be required to pay the full Termination Fee on more than one occasion and (ii) any payment of the Termination Fee described in this Section 9.3 is not a penalty but is liquidated damages in a reasonable amount that will compensate Purchaser in the circumstances in which such fee is payable.

ARTICLE X

SURVIVAL; INDEMNIFICATION

Section 10.1 Survival . All representations, warranties, covenants and obligations contained in this Agreement shall survive the consummation of the transactions contemplated by this Agreement; provided , however , that, except as otherwise provided in this Article X , the representations and warranties contained in Article IV (other than the Fundamental Representations) shall terminate on the 18-month anniversary of the Closing Date. Except as otherwise provided herein, no claim shall be made for the breach of any representation or warranty contained in Article IV or under any certificate delivered with respect thereto under this Agreement after the date on which such representations and warranties terminate as set forth in this Section 10.1 .

Section 10.2 Indemnification by Seller .

(a) Seller will save, defend and indemnify Purchaser and its Affiliates and each of their respective directors, officers and employees (collectively with Purchaser and its Affiliates, the “ Purchaser Indemnitees ”) against, and agrees to hold each of them harmless from, any and all Losses incurred or suffered by any Purchaser Indemnitees and arising out of or resulting from (1) the failure of any representation or warranty made by Seller to be true and correct as of the Closing as if made on the Closing Date, (2) any breach of an agreement or covenant made by Seller in this Agreement, (3) any failure of Seller or any of its Affiliates to comply with any applicable “bulk sales” or similar Requirements of Law in connection with the consummation of the transactions contemplated hereby or (4) any Excluded Liability related to or arising out of the Aggregate Assets or the Program.

(b) The indemnification provided for in this Section 10.2 shall terminate on the 18-month anniversary of the Closing Date, except for:

(1) the representations and warranties of Seller set forth in Sections 4.1(a) , (b) , (e)  and (n)  (collectively, the “ Fundamental Representations ”) and the indemnification obligations set forth in Sections 10.2(a)(3) and 10.2(a)(4) , which shall survive indefinitely;

 

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(2) the covenants set forth in Section 6.1 , all of which shall survive for 60 days following the expiration of the relevant statutes of limitations; and

(3) any Loss of which any Purchaser Indemnitee has notified Seller in accordance with the requirements of Section 10.6 on or prior to the date such indemnification would otherwise terminate in accordance with this Section 10.2 , as to which the obligation of Seller shall continue until the liability of Seller shall have been determined pursuant to this Article X , and Seller shall have reimbursed all Purchaser Indemnitees for the full amount of such Loss in accordance with the terms hereof.

Section 10.3 Limitations on Indemnification Obligations of Seller .

(a) Deductible . Notwithstanding anything to the contrary contained herein, Seller shall have no obligation to indemnify Purchaser or any Purchaser Indemnitees with respect to any Losses described in Section 10.2(a)(1) until the aggregate amount of the Losses for which the Purchaser Indemnitees are otherwise entitled to indemnification under Section 10.2(a)(1) exceeds the Deductible and, in which event, Seller shall be obligated to pay only the amount of all of the Losses for which the Purchaser Indemnitees are entitled to indemnification under Section 10.2(a)(1) that are in excess of the Deductible; provided , however , that the limitations contained in this Section 10.3(a) shall not apply to claims for indemnification in respect of breaches of any Fundamental Representations.

(b) Cap . Notwithstanding anything to the contrary contained herein, Seller shall have no Liability to indemnify Purchaser or any Purchaser Indemnitees from and against (1) Losses described in Section 10.2(a)(1) (other than in respect of any Fundamental Representations) to the extent such Losses exceed 6% of the Aggregate Purchase Price, (2) Losses arising from a breach of any Fundamental Representations or Losses described in Section 10.2(a)(2) (other than such Losses arising out of or resulting from any breaches of Section 5.2) or in Section 10.2(a)(3) to the extent such Losses exceed the Total Consideration or (3) Losses described in Section 10.2(a)(2) that arise out of or result from any breaches of Section 5.2, to the extent such Losses exceed the Aggregate Purchase Price; provided, however, that the limitations contained in this Section 10.3(b) shall not apply to claims for indemnification with respect to Section 6.1 .

(c) Solely for purposes of calculating the amount of any Losses arising from a breach of any representation or warranty of Seller under Section 10.2(a)(1) (and not for purposes of determining whether a breach has occurred), such representation and warranty shall be considered without regard to any qualification by or reference to or the words “material,” “Material Adverse Effect,” “materially” or words of like import contained therein.

Section 10.4 Indemnification by Purchaser .

(a) Purchaser will save, defend and indemnify Seller and its Affiliates and each of their respective directors, officers and employees, (collectively with Seller and its Affiliates, “ Seller Indemnitees ”) against, and agrees to hold each of them harmless from, any and all Losses incurred or suffered by any Seller Indemnitee arising out of or resulting from (1) the failure of any representation or warranty made by Purchaser to be true and correct as of the Closing as if made on the Closing Date, (2) any breach of an agreement or covenant made by Purchaser in this Agreement or (3) any Assumed Liability.

 

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(b) The indemnification provided for in this Section 10.3 shall terminate on the 18-month anniversary of the Closing Date, except for:

(1) the representations and warranties of Purchaser set forth in Sections 4.2(a) , (b) , (f)  and (g)  (collectively, the “ Purchaser Fundamental Representations ”) and the indemnification obligations set forth in Section 10.3(a)(3) , which shall survive indefinitely;

(2) the covenants set forth in Section 6.1 , which shall survive for 60 days following the expiration of the relevant statutes of limitations; and

(3) any Loss of which any Seller Indemnitee has notified Purchaser in accordance with the requirements of Section 10.6 on or prior to the date such indemnification would otherwise terminate in accordance with this Section 10.4 , as to which the obligation of Purchaser shall continue until the liability of Purchaser shall have been determined pursuant to this Article X , and Purchaser shall have reimbursed all Seller Indemnitees for the full amount of such Loss in accordance with the terms hereof.

Section 10.5 Limitations on Indemnification Obligations of Purchaser .

(a) Deductible . Notwithstanding anything to the contrary contained herein, Purchaser shall have no obligation to indemnify Seller or any Seller Indemnitees with respect to any Losses described in Section 10.4(a)(1) until the aggregate amount of the Losses for which the Seller Indemnitees are otherwise entitled to indemnification under Section 10.4(a)(1) exceeds the Deductible and, in which event, Purchaser shall be obligated to pay only the amount of all of the Losses for which the Seller Indemnitees are entitled to indemnification under Section 10.4(a)(1) that are in excess of the Deductible; provided , however , that the limitations contained in this Section 10.5(a) shall not apply to claims for indemnification in respect of breaches of any Purchaser Fundamental Representations.

(b) Cap . Notwithstanding anything to the contrary contained herein, Purchaser shall have no Liability to indemnify Seller or any Seller Indemnitees from and against (1) Losses described in Section 10.4(a)(1) (other than in respect of any Purchaser Fundamental Representations) to the extent such Losses exceed 6% of the Total Consideration or (2) Losses arising from a breach of any Purchaser Fundamental Representations or described in Section 10.4(a)(2) to the extent such Losses exceed the Total Consideration; provided, however, that the limitations contained in this Section 10.5(b) shall not apply to claims for indemnification with respect to Section 6.1 .

(c) Solely for purposes of calculating the amount of any Losses arising from a breach of any representation or warranty of Purchaser under Section 10.4(a)(1) (and not for purposes of determining whether a breach has occurred), such representation and warranty shall be considered without regard to any qualification by or reference to or the words “material,” “Material Adverse Effect,” “materially” or words of like import contained therein.

 

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Section 10.6 Indemnification; Notice and Settlements .

(a) In the event that any Purchaser Indemnitee or Seller Indemnitee (the “ Indemnified Party ”) has or deems in good faith to have incurred or suffered, or believes in good faith that it may reasonably incur or suffer, Losses for which it may be entitled to indemnification hereunder, such Indemnified Party may give to the party obligated to provide indemnification to such Indemnified Party (the “ Indemnifying Party ”) a notice (a “ Claim Notice ”) describing in reasonable detail the facts giving rise to any claim for indemnification hereunder and shall include in such Claim Notice (if then known) the amount or the method of computation of the amount of such claim, and a reference to the provision of this Agreement or any other agreement, document or instrument executed hereunder or in connection herewith upon which such claim is based; provided , however , that a Claim Notice in respect of any pending or threatened action at law or suit in equity by or against a third Person as to which indemnification will be sought (each such action or suit being a “ Third Person Claim ”) shall be given promptly after the Indemnified Party becomes aware of the commencement of the action or suit; provided further ; however , that failure to give such notice shall not limit the obligations of any Indemnifying Party hereunder except to the extent that such failure to give notice materially prejudices the defense of such Third Person Claim.

(b) After the giving of any Claim Notice pursuant hereto, the amount of indemnification to which an Indemnified Party shall be entitled under this Article X shall be determined: (i) by the written agreement between the Indemnified Party and the Indemnifying Party; (ii) by a final judgment or decree of any court of competent jurisdiction; or (iii) by any other means to which the Indemnified Party and the Indemnifying Party shall agree. The judgment or decree of a court shall be deemed final when the time for appeal, if any, shall have expired and no appeal shall have been taken or when all appeals taken shall have been finally determined.

(c) The Indemnifying Party shall have the right to conduct and control, through counsel of its choosing, the defense, compromise or settlement of any Third Person Claim against any Indemnified Party as to which indemnification will be sought by any Indemnified Party from any Indemnifying Party hereunder, and in any such case the Indemnified Party shall cooperate in connection therewith and shall furnish such records, information and testimony and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested by the Indemnifying Party in connection therewith; provided , however , that:

(1) the Indemnified Party may participate in, through counsel chosen by it and at its own expense, but may not determine or conduct, the defense of any such Third Person Claim as to which the Indemnifying Party has so elected to conduct and control the defense thereof; and

(2) the Indemnifying Party shall not, without the written consent of the Indemnified Party (which written consent shall not be unreasonably conditioned, withheld or delayed), pay, compromise or settle any such Third Person Claim.

 

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(d) If the Indemnifying Party elects not to proceed with the defense of any Third Person Claim, then the Indemnified Party shall have the right to conduct and control, through counsel reasonably satisfactory to the Indemnifying Party, the defense, compromise or settlement of any such Third Person Claim against such Indemnified Party as to which indemnification will be sought by any Indemnified Party from any Indemnifying Party hereunder; provided , however , that the Indemnified Party shall not pay, settle or compromise any such Third Person Claim without the prior written consent of the Indemnifying Party (which consent shall not be unreasonably conditioned, withheld or delayed).

(e) In the event of any conflict between the provisions of Article VI and the provisions of this Article X , the provisions of Article VI shall control in all respects.

Section 10.7 Additional Indemnification Provisions . With respect to each indemnification obligation contained in this Agreement, all Losses shall be calculated (a) on an After-Tax Basis and (b) net of actual recoveries under existing insurance policies (net of any applicable collection costs and reserves, deductibles, premium adjustments and retrospectively rated premiums), it being understood that an Indemnified Party shall not be obligated to seek recovery under or maintain insurance policies. No Purchaser Indemnitee shall make any claim for indemnification under this Article X in respect of the amount of any Loss to the extent that such amount was included in the calculation of the Total Consideration pursuant to Section 2.4 and effected a dollar-for-dollar reduction thereof, and no Purchaser Indemnitee shall be entitled to recover pursuant to the provisions of Article VI or the provisions of this Article X to the extent it has recovered such Losses based on a claim for indemnification under any Other PSA or the New Program Agreement.

Section 10.8 Exclusive Remedy . Except (x) in respect of intentional fraud knowingly committed, (y) with respect to any equitable remedies pursuant to Section 11.11 or (z) for breach of Section 11.12 hereof, Seller and Purchaser acknowledge and agree that the indemnification provisions of this Article X shall be the exclusive remedy between the parties following the Closing for the matters covered by this Agreement (including any liabilities arising prior to the Closing), and no party shall seek any other monetary recovery from the other party with respect to such matters under theories of strict liability, negligence or other theory of recovery, whether under contract or tort or at law or in equity; provided , however , that the foregoing limitations shall not apply to any damages to the extent arising out of, relating to or caused by intentional fraud knowingly committed by Seller or Purchaser, respectively, or any remedies that cannot be waived as a matter of law.

Section 10.9 Mitigation . Each of the parties agrees to use commercially reasonable efforts to mitigate their respective Losses to the extent required by applicable Requirements of Law.

Section 10.10 Coordination with New Program Agreement . If an event or circumstance related to the Program that gives rise to a party’s rights under Article IX of the New Program Agreement or Schedule 9.5 of the New Program Agreement also arises out of a pattern, practice, event or circumstance that existed in the Program prior to the Cut-off Time and that also may be subject to indemnification pursuant to this Agreement, the following shall, but without any duplication, govern the coordination of rights under this Agreement and the New Program Agreement:

 

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(a) Except as set forth in Section 9.6(a) of the New Program Agreement, the rights and remedies with respect to Losses that arise out of acts or omissions prior to the Closing shall be governed by this Agreement; and

(b) The rights and remedies with respect to Losses that arise out of acts or omissions after the Closing shall (to the extent applicable) be governed by Article IX of the New Program Agreement and Schedule 9.5 of the New Program Agreement;

(c) If Losses arising out of or relating to a pattern, practice, event or circumstance described above are not differentiated according to the timing of the underlying event or circumstance (“ Undifferentiated Losses ”), e.g., attorneys’ fees, that applies to the resolution of the entire matter, the Undifferentiated Losses shall be allocated between this Agreement and the New Program Agreement in proportion to the amount of Losses that are ordered or agreed to be remediated with respect to the periods before and after the Closing Date. For example, if Borrowers were overcharged interest in an amount equal to $2,000,000 for the year immediately preceding the Closing Date and $1,000,000 for the 6 months immediately following the Closing Date and a court order $3,000,000 in remediation to Borrowers and $300,000 in attorneys’ fees, then indemnification with respect to $2,000,000 of the payments to Borrowers and $200,000 of attorneys’ fees would be governed by this Agreement and the remainder would be governed by Article IX of the New Program Agreement and Schedule 9.5 of the New Program Agreement.

Section 10.11 Measure of Damages . Each of the parties agrees that with respect to any breach of any representation, warranty or covenant of Seller contained herein that relates to the Program or the Aggregate Assets, the full measure of Losses incurred by Purchaser shall take into account and be measured with reference to the Losses affecting the Program or the Aggregate Assets, as the case may be (as opposed to solely the Acquired Assets).

ARTICLE XI

MISCELLANEOUS

Section 11.1 Notices . All notices, requests, demands or other communications that are required or may be given pursuant to the terms of this Agreement shall be in writing and shall be deemed to have been duly given: (a) on the date of delivery, if personally delivered by hand, (b) upon the fourth day after such notice is deposited in the United States mail, if mailed by registered or certified mail, postage prepaid, return receipt requested or (c) on the Business Day scheduled for delivery (or if such date is not a Business Day, the next Business Day), if such notice is sent by a nationally recognized overnight express courier if addressed as follows:

if to Purchaser to:

Synchrony Bank

170 W. Election Road

Draper, Utah 84020

Attention: President

 

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with copies to:

Synchrony Financial

777 Long Ridge Rd., Building S

Stamford, CT 06927

Attention: Chief Financial Officer

and

Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, NY 10153

Attention: Jon-Paul Bernard

if to Seller to:

PayPal, Inc.

115 Barrow Street, 6 th Floor

New York, NY 10014

Attn: Jeff Levine

with a copy to:

PayPal, Inc.

9690 Deereco Road, Suite 110

Timonium, MD 21093

Attn: Mark Britto

Notices and other communications may also be sent to such other address or addresses as Purchaser or Seller may from time to time designate by notice as provided herein, except that notices of change of address will be effective only upon receipt.

Section 11.2 Successors and Assigns . This Agreement shall be binding upon: (a) Seller and Seller’s successors and permitted assigns (if any) and (b) Purchaser and its successors and permitted assigns (if any). Subject to the terms and conditions of the New Program Agreement, following the Closing, Purchaser may freely assign any or all of its rights under this Agreement (including its indemnification rights under Article X ), in whole or in part, to any other Person (1) that is an Affiliate of Purchaser or (2) in connection with any merger or consolidation or the sale, transfer or other disposition of the Acquired Assets, in each case, without obtaining the consent or approval of any other party hereto or of any other Person; provided , however , that no such assignment shall release Purchaser from any Liabilities under this Agreement. Seller shall not be permitted to assign any of Seller’s rights or delegate any of Seller’s obligations under this Agreement without Purchaser’s prior written consent. Any attempted assignment or delegation in violation of this Section 11.2 shall be null and void.

 

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Section 11.3 Entire Agreement; Amendment; Waiver . The Transaction Documents embody the entire agreement of the parties hereto with respect to the purchase and sale of the Acquired Assets and supersede all prior agreements with respect thereto. Any waiver by either party of a breach of any provision of this Agreement shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Agreement. Any waiver must be in writing and signed by the party to be charged therewith. The waiver of any condition to Closing based on the accuracy of any representation or warranty, or the performance of or compliance with any covenant or obligation, will not affect the right to indemnification, payment of damages or other remedy based on the inaccuracy of such representation or warranty or the failure to perform or comply with such covenant or obligation. In no event shall a term or provision of this Agreement be deemed to have been modified or amended, unless a modification or amendment is in writing and signed by the parties hereto. Purchaser shall not amend, waive or propose to amend or waive any term of any Other PSA, and shall not consent to the amendment or waiver of any Other PSA, without the prior written consent of Seller.

Section 11.4 Counterparts . This Agreement may be executed in two or more counterparts any of which may be delivered by facsimile or electronic transmission and all of which will together constitute one and the same instrument. The parties acknowledge that delivery of executed copies of this Agreement may be effected by facsimile, electronic or other comparable means.

Section 11.5 Governing Law and Venue . The parties acknowledge that this Agreement shall be governed, enforced, performed and construed in accordance with the laws of the State of New York (excepting only those conflicts of laws provisions which would serve to defeat the operation of New York substantive law). Each party acknowledges that its legal counsel participated in the drafting of this Agreement. The parties hereby irrevocably submit themselves to the exclusive personal and subject matter jurisdiction of the state and federal courts located in the State of New York for the resolution of all disputes, whether at law or in equity, arising from or relating to this Agreement and/or the enforcement or interpretation of any of the terms or conditions hereof.

Section 11.6 Waiver of Jury Trial . EACH PARTY HERETO IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

Section 11.7 Severability . If any term or condition of this Agreement should be held invalid by a court, arbitrator or tribunal of competent jurisdiction in any respect, such invalidity shall not affect the validity of any other term or condition hereof. If any term or condition of this Agreement should be held to be unreasonable as to time, scope or otherwise by such a court, arbitrator or tribunal, it shall be construed by limiting or reducing it to a minimum extent so as to be enforceable under then applicable Requirements of Law.

 

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Section 11.8 Public Announcement . From and after the date hereof, except as expressly contemplated by this Agreement, neither Seller nor Purchaser shall (and each of Seller and Purchaser shall ensure that none of its respective Representatives shall) issue any press release or make any public statement regarding (or otherwise disclose to any Person the existence or terms of) this Agreement, any Other PSA or any of the transactions or documents contemplated by this Agreement (including the New Program Agreement) or the Other PSAs, without the other party’s prior written consent, except (a) as required in order to fulfill its obligations hereunder ( e.g. , in connection with seeking the Requisite Regulatory Approvals); (b) for disclosure of information that (i) is not inconsistent with any mutually agreed release or announcement previously issued or (ii) is required by applicable Requirements of Law or the rules or regulations of any stock exchange on which a party’s ultimate parent company’s securities are traded or of any other Governmental Authority having jurisdiction over such party; and (c) for disclosures to Persons involved in dispute resolution proceedings hereunder (including courts, arbitrators, witnesses, experts and attorneys) who are instructed or otherwise under a legal or ethical obligation to maintain the confidentiality of the disclosed information. Purchaser shall not provide the counterparty to any Other PSA with consent to issue any press release or make any public statement regarding (or otherwise disclose to any Person the existence or terms of) any Other PSA or any of the transactions or documents contemplated by the Other PSAs, without the prior written consent of Seller.

Section 11.9 Third-Party Beneficiaries . Nothing in this Agreement, expressed or implied, will confer on any person, other than the parties hereto or their respective successors and assigns, any rights, remedies, obligations or liabilities; provided , however , that the provisions of Article X will inure to the benefit of the Indemnified Parties.

Section 11.10 Expenses . Except as otherwise expressly stated in this Agreement or in the New Program Agreement, any expenses incurred by either of the parties hereto shall be borne by the party incurring such cost, expense or charge whether or not the series of transactions contemplated by this Agreement shall be consummated.

Section 11.11 Specific Performance and Other Equitable Relief . The parties hereby expressly recognize and acknowledge that given the uniqueness of the Acquired Assets and the transactions contemplated hereby, neither party will have an adequate remedy at law for money damages in the event that this Agreement has not been performed in accordance with its terms and that immediate, extensive and irreparable damage would result in the event that this Agreement is not specifically enforced. Therefore, in addition to, and not in limitation of, any other remedy available to the parties hereto, in the event of any breach or threatened breach by a party to this Agreement of any covenant, obligation or other provision of such party set forth in this Agreement, the non-breaching party shall be entitled to a decree or order of specific performance or mandamus to enforce the observance and performance of such covenant, obligation or other provision and an injunction restraining such breach or threatened breach, without the requirement to provide any bond or other security in connection with any such decree, order or injunction or in connection with any related action. Each party hereby submits to the exclusive jurisdiction of the state or federal courts of the State of New York in any equitable proceeding for the enforcement of any such decree of specific performance, and agrees that such decree of specific performance may be entered in any court, in or out of the State of New York, having jurisdiction thereof.

 

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Section 11.12 Confidentiality .

(a) General Confidentiality Obligation . All information furnished by a party (the “ Disclosing Party ”) to any other party (the “ Receiving Party ”) in connection with this Agreement or the other Transaction Documents shall be kept confidential and each party shall cause their respective Affiliates, officers, directors, employees, agents and advisors (including, attorneys, accountants, consultants, bankers and financial advisors) (collectively, with regard to either party, such party’s “ Representatives ”), to keep confidential and not disclose to any third party any and all information concerning the series of transactions contemplated herein, the terms of this Agreement and any other agreement or document executed in connection herewith and any and all information obtained from the other party concerning the assets, properties and business of the other party (such information, collectively, the “ Confidential Information ” of the Disclosing Party), and shall not use such Confidential Information for any purpose other than consummating the transaction contemplated by this Agreement; provided , however , that neither party shall be subject to the above obligations with respect to any such information provided to it by the other party that: (1) was in the Receiving Party’s possession or in the public domain at the time of the Disclosing Party’s disclosure (other than in connection with the structuring, negotiation and execution of this Agreement and any other agreement or document executed in connection herewith and the transactions contemplated herein), or subsequently enters the public domain other than in violation of this Agreement by the Receiving Party; (2) is obtained by the Receiving Party from a third party, that is not known by the Receiving Party to be subject to a confidentiality agreement with the Disclosing Party; (3) is independently developed by or on behalf of the Receiving Party or any of its Affiliates without the use of Confidential Information; (4) is discovered through examination of publicly available records or products; (5) is authorized for public disclosure by the Disclosing Party; or (6) is disclosed by a party to its auditors or counsel or is required to be disclosed to its lenders, to the extent required for the purpose of consummating the transactions contemplated hereby. The parties recognize and acknowledge that, following the Closing, the Master File, Borrower Data, and all information contained therein including the Borrower Lists shall be treated in accordance with Articles III and X of the New Program Agreement. Disclosure of the other party’s Confidential Information shall not be precluded under this Agreement if such disclosure is (i) required by Requirements of Law, including the rules and regulations of any stock exchange on which the Receiving Party’s ultimate parent company’s securities are traded or of any other Governmental Authority having jurisdiction over the Receiving Party or (ii) in response to a valid subpoena or order of a court or other Governmental Authority or other valid legal process; provided , however , that, in the event that either party hereto receives a request to disclose any Confidential Information in connection with a process described in the preceding clause (2)  of this Section 11.12(a) , such party shall (A) to the extent practicable in the circumstances, notify the other party thereof promptly after receipt of such request, (B) consult with the other party on the advisability of taking steps to resist or vary such request, and (C) if disclosure is required or deemed advisable, cooperate with the other party in any attempt that it may make to obtain a protective order or other reliable assurance that confidential treatment will be applied to the Confidential Information. Any expenses incurred hereunder shall be the responsibility of the party that owns such Confidential Information.

(b) Return of Confidential Information . In the event that the transactions contemplated by this Agreement shall fail to be consummated, each party shall promptly cause all originals and copies of documents or extracts thereof containing such Confidential Information and data as to a Disclosing Party to be returned to the Disclosing Party or destroyed,

 

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at such party’s election, and, upon written request from the Disclosing Party, shall cause an officer to so certify to the Disclosing Party; provided , however , that a party may retain a list containing general descriptions of information destroyed; provided further , however , that nothing herein shall require (1) the Receiving Party or its Representatives to erase any Confidential Information that is an archived computer system backup in accordance with its or their security and/or disaster recovery procedures and (2) if statutory or regulatory document retention obligations or internal compliance policies require the Receiving Party to retain a certain portion of the Confidential Information, the Receiving Party may retain copies of such portion as part of its customary storage archives, provided that access to any such Confidential Information so retained shall be limited only to such persons as may be necessary to comply with the applicable statutory or regulatory document retention obligations or compliance policies.

(c) Post-Closing .

(1) On and after the Closing Date, Purchaser shall be deemed to be the Disclosing Party with respect to all information furnished by Seller to Purchaser relating to the Acquired Assets that were sold under this Agreement, and Seller shall be deemed to be the Receiving Party of such information.

(2) Subject to the limitations of this Section 11.12(c) , Purchaser hereby agrees that Seller may use and disclose PSA Residual Information solely as contemplated by the New Program Agreement.

(3) “ PSA Residual Information ” means information described in clause (a)  or clause (b)  of the definition of Borrower Data, including information from a Borrower List in the possession or control of Seller, its Affiliates or service providers.

(d) Violation of Law . Notwithstanding anything to the contrary in this Agreement, a party shall not be obligated to take any action with respect to the collection, use or disclosure of information made in connection with this Agreement that such party reasonably believes would cause or would be reasonably expected to cause a party to violate any Requirements of Law (including privacy and security laws and the reuse and re-disclosure provisions of the Gramm-Leach-Bliley Act).

Section 11.13 Further Assurances . Each party shall, whenever and as often as reasonably requested to do so by the other party, execute, acknowledge and deliver any and all such other and further acts, assignments, endorsements, transfers and any instruments of further assurance, approvals and consents as are necessary or proper in order to complete, ensure and perfect the transactions contemplated hereby.

[ Signature page follows ]

 

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IN WITNESS WHEREOF, this Agreement has been executed on behalf of each of the parties hereto as of the day and year first above written.

 

SYNCHRONY BANK
By:   /s/ Thomas Quindlen
  Name: Thomas Quindlen
  Title: EVP Retail Card
BILL ME LATER, INC.
By:   /s/ A.C. Glasby
  Name: A.C. Glasby
  Title: VP Treasurer, PayPal

Exhibit 2.2

EXECUTION COPY

PURCHASE AND SALE AGREEMENT

BY AND BETWEEN

SYNCHRONY BANK,

AND

PAYPAL (EUROPE) S.À R.L. et CIE, S.C.A

 

 

DATED AS OF NOVEMBER 10, 2017


Table of Contents

 

         Page  
ARTICLE I  
DEFINITIONS  

Section 1.1

  Definitions of Certain Terms      1  

Section 1.2

  Interpretation      12  
ARTICLE II  
PURCHASE, SALE AND ASSUMPTION  

Section 2.1

  Purchase and Sale of Assets      13  

Section 2.2

  Assumption of Liabilities      14  

Section 2.3

  Excluded Assets and Liabilities      14  

Section 2.4

  Purchase Price; Purchase Price Adjustment      14  

Section 2.5

  Tax Treatment      17  

Section 2.6

  Excluded Receivables      17  
ARTICLE III  
CLOSING; ASSIGNMENT  

Section 3.1

  The Closing      17  
ARTICLE IV  
REPRESENTATIONS AND WARRANTIES OF THE PARTIES  

Section 4.1

  Representations of Seller      18  

Section 4.2

  Representations of Purchaser      20  
ARTICLE V  
COVENANTS  

Section 5.1

  Operation of the Acquired Assets Prior to the Closing      22  

Section 5.2

  Filings and Consents      22  

Section 5.3

  Acquisition Proposals      23  

Section 5.4

  True Sale Opinions      23  
ARTICLE VI  
TAX MATTERS  

Section 6.1

  Responsibility for Taxes      23  
ARTICLE VII  
CONDITIONS  

Section 7.1

  Conditions Precedent to Obligation of Purchaser      26  

Section 7.2

 

Conditions Precedent to Obligation of Seller

     27  

 

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ARTICLE VIII  
INTENTIONALLY OMITTED  
ARTICLE IX  
TERMINATION  

Section 9.1

 

Termination

     28  

Section 9.2

 

Effect of Termination

     28  
ARTICLE X  
SURVIVAL; INDEMNIFICATION  

Section 10.1

  Survival      29  

Section 10.2

 

Indemnification by Seller

     29  

Section 10.3

 

Limitations on Indemnification Obligations of Seller

     30  

Section 10.4

 

Indemnification by Purchaser

     30  

Section 10.5

 

Limitations on Indemnification Obligations of Purchaser

     31  

Section 10.6

 

Indemnification; Notice and Settlements

     31  

Section 10.7

 

Additional Indemnification Provisions

     33  

Section 10.8

 

Exclusive Remedy

     33  

Section 10.9

 

Mitigation

     33  

Section 10.10

 

Coordination with New Program Agreement

     33  
ARTICLE XI  
MISCELLANEOUS  

Section 11.1

  Notices      34  

Section 11.2

 

Successors and Assigns

     35  

Section 11.3

 

Entire Agreement; Amendment; Waiver

     35  

Section 11.4

 

Counterparts

     35  

Section 11.5

 

Governing Law and Venue

     36  

Section 11.6

 

Waiver of Jury Trial

     36  

Section 11.7

 

Severability

     36  

Section 11.8

 

Public Announcement

     36  

Section 11.9

 

Third-Party Beneficiaries

     36  

Section 11.10

 

Expenses

     36  

Section 11.11

 

Specific Performance and Other Equitable Relief

     37  

Section 11.12

 

Confidentiality

     37  

Section 11.13

 

Further Assurances

     39  
Schedules and Exhibits  

Exhibit A

 

Form of Bill of Sale and Assumption Agreement

  

Exhibit B

 

Form of PayPal Guaranty

  

Exhibit C-1

 

Form of LuxCo True Sale Opinion

  

Exhibit C-2

 

Form of U.S. True Sale Opinion

  

Exhibit D

 

Form of Chestnut Participation Termination Letter

  

Exhibit E

 

Form of Comenity Termination Letter

  

 

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PURCHASE AND SALE AGREEMENT , dated as of November 10, 2017 (this “ Agreement ”), by and between Synchrony Bank, a federal savings association (“ Purchaser ”) and PayPal (Europe) S.À R.L. et CIE, S.C.A., a Luxembourg registered credit institution registered with the Luxembourg trade and companies’ register under number R.C.S. Luxembourg B118 349 (“ LuxCo ” or “ Seller ”).

RECITALS

WHEREAS , as an integral part of, an inducement to, and in consideration for, the transactions contemplated by this Agreement, concurrently with the execution and delivery of this Agreement, (i) PayPal is executing and delivering to Purchaser the PayPal Guaranty and (ii) Purchaser is entering into each of the Comenity Purchase Agreement, the Chestnut Purchase Agreement and the BMLI Purchase Agreement.

WHEREAS , in consideration for the representations and warranties set forth herein, Purchaser is willing to enter into this Agreement and to consummate the transactions contemplated hereby and thereby.

WHEREAS , the parties hereto desire to enter into this Agreement to provide for the purchase by Purchaser, and the sale by Seller, of the Acquired Assets, on the terms and subject to the conditions set forth herein.

WHEREAS , concurrently with the execution and delivery of this Agreement, Purchaser and PayPal, Inc., a Delaware corporation, are entering into that certain Fourth Amended and Restated Consumer Revolving Credit Program Agreement (the “ New Program Agreement ”).

NOW, THEREFORE , in consideration of the foregoing, and of the mutual representations, promises and agreements contained in this Agreement, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Definitions of Certain Terms .

In this Agreement, the following terms are used with the meanings assigned below:

Account Agreement ” means all agreements entered into and in effect between Comenity and a Borrower prior to the Cut-off Time (together, in each case, with all modifications, amendments, supplements or other changes thereto) under which a Borrower Account has been established and/or maintained with such Borrower, or which otherwise relates to a Borrower Account, and which contains the terms and conditions applicable to the Borrower Account.

Acquired Assets ” means all right, title and interest of Seller in and to the following assets and properties:

(1) all Gross Receivables (other than Charged-Off Receivables) as of the Cut-off Time; and

 

1


(2) all rights (including rights of recovery (other than with respect to Excluded Receivables)), claims, credits, causes of action and rights of setoff against third parties related to the assets described in clause (1)  above.

Action ” means any claim, action, complaint, petition, suit or other proceeding, whether civil, criminal or administrative, at law or in equity, or before any arbitrator or Governmental Authority.

Affiliate ” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person. The term “control” (including, with correlative meaning, the terms “controlled by” and “under common control with”) as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

After-Tax Basis ” means that, in determining the amount of a payment necessary to indemnify any party against, or reimburse any party for, a Loss, the amount of such Loss shall be determined net of any net Tax benefit derived by the Indemnified Party in the taxable year that the Loss is sustained as the result of sustaining such Loss and the amount of such payment shall be increased to take into account any net Tax cost incurred by the recipient thereof in the taxable year of the receipt or accrual of the payment as a result of the receipt or accrual of the payment.

Aggregate Assets ” means (i) the Acquired Assets and (ii) the assets to be conveyed to Purchaser under each of the Comenity Purchase Agreement, the Chestnut Purchase Agreement and BMLI Purchase Agreement.

Aggregate Purchase Price ” means the sum of (i) the Total Consideration, plus (ii) the Comenity Purchase Price, plus (iii) the Chestnut Purchase Price, plus (iv) the BMLI Total Consideration.

Agreed Percentage ” means the percentage set forth on Schedule A .

Agreement ” shall have the meaning set forth in the preamble.

Applicable Order ” means, with respect to any Person, a judgment, injunction, writ, decree, memorandum of understanding, order or requirement of any Governmental Authority, in each case legally binding on that Person or on any of the Acquired Assets.

Assumed Liabilities ” means only the following Liabilities:

(1) all Liabilities in respect of Taxes for which Purchaser is liable pursuant to Article  VI ;

(2) all Liabilities arising out of the ownership or administration of the Acquired Assets or the operation by Purchaser of its business related thereto with respect to any period commencing after the Cut-off Time; and

 

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(3) all Liabilities arising out of any charge backs or credit with respect to the pre-Cut-off Time Borrower Account activity incurred and processed in the ordinary course of business consistent with past practice.

Bill of Sale and Assumption Agreement ” shall have the meaning set forth in Section  3.1(a) .

BMLI ” means Bill Me Later Inc., a Delaware corporation.

BMLI Purchase Agreement ” means a Purchase and Sale Agreement, dated as of the date hereof, by and between Purchaser and BMLI.

BMLI Receivables ” means the Gross Receivables to be conveyed pursuant to the BMLI Purchase Agreement.

BMLI Total Consideration ” means the “Total Consideration” as defined in the BMLI Purchase Agreement.

BMLI Transaction ” means the transactions contemplated by the BMLI Purchase Agreement.

Borrower ” means a Person or Persons in whose name(s) a Borrower Account has been established pursuant to an Account Agreement, or who is obligated to make a payment with respect to any Borrower Account, including any guarantor, co-signor, surety or authorized user.

Borrower Accounts ” means, as of the Cut-off Time, all open consumer credit accounts under the Program, other than the Excluded Accounts.

Borrower Data ” collectively means, to the extent in the possession or control of Seller or any service provider of Seller, as of the Cut-off Time, and in each case whether in hard copy or electronic (including image) format, (a) the files, documents and information reflected on or in the systems or files of Seller or any service provider of Seller and any third party used to process or service the Borrower Accounts to the extent relating to the Acquired Assets (including Borrower Account applications, Account Agreements and modifications, amendments, supplements or other changes thereto, general credit information and records reflecting actions taken to cure any delinquency, charge transaction data and historical customer statements, including online statements (as applicable), Program privacy notices, electronic payment authorization agreements, credit bureau reports, adverse action notices, change in terms notices, and other Borrower notices or disclosures relating to the Acquired Assets); (b) the historical reflection of such files and information, in whatever medium such files and information is stored; (c) all correspondence between Seller or any service provider of Seller and any Borrowers in connection with the Program; (d) all customer service and collections correspondence, notes and other documentation in connection with the Program; and (e) all correspondence with any Governmental Authority related to the Borrower Accounts or the Program Agreement but only to the extent that such correspondence exclusively relates to the Borrower Accounts (and, for the avoidance of doubt, does not include information about Seller’s other accounts or programs). Borrower Data includes solely the data, files, documents and other materials and information referenced above that arise out of Seller’s or any of Seller’s or its Affiliates’ service provider’s

 

3


servicing of Borrower Accounts for Comenity under the Program Agreement. Data that Seller or any of its Affiliates possess as both service provider to Comenity and in connection with the provision of the PayPal Wallet or other products or services shall be considered both Borrower Data and data retained by Seller or Seller’s Affiliates that is not subject to the requirements herein regarding Borrower Data.

Borrower Lists ” means the list or lists, whether in print, electronic media or other form, of any Borrowers (including, to the extent available, their names, addresses, telephone numbers and social security numbers) and of Persons that have accepted offers for a Borrower Account and in whose names Borrower Accounts have been opened.

Business Day ” means any day other than a Saturday, a Sunday or a day on which banks located in New York, New York generally are required or authorized by law or executive order to close.

Charged-Off Receivables ” means any amounts owing from Borrowers with respect to Gross Receivables in the Non-Legacy Pool under Borrower Accounts that have been charged-off or were required to have been charged-off in accordance with the Program Policies and Procedures.

Chestnut ” means Chestnut Receivables Financing LLC.

Chestnut Purchase Agreement ” means a Purchase and Sale Agreement, dated as of the date hereof, by and between Purchaser and Chestnut.

Chestnut Purchase Price ” means the “Purchase Price” as defined in the Chestnut Purchase Agreement.

Chestnut Transaction ” means the transactions contemplated by the Chestnut Purchase Agreement.

Claim Notice ” shall have the meaning set forth in Section  10.6(a) .

Closing ” shall have the meaning set forth in Section  3.1 .

Closing Date ” shall have the meaning set forth in Section  3.1 .

Closing Master File ” means a Master File relating to each of the Borrower Accounts as of the Cut-off Time.

Code ” means the Internal Revenue Code of 1986, as amended from time to time.

Comenity ” means Comenity Capital Bank, a Utah industrial bank.

Comenity Non-Legacy Pool Participation ” means the undivided participation interest held by Comenity in the Non-Legacy Pool pursuant to the Sale and Participation Agreement.

 

4


Comenity Non-Legacy Pool Percentage ” means approximately 5.0% as of the date hereof, and such actual percentage as of the Cut-off Time equal to the percentage of the Non-Legacy Pool that has been participated to Comenity pursuant to the Sale and Participation Agreement.

Comenity Purchase Agreement ” means the Purchase and Sale Agreement, dated as of the date hereof, by and between Purchaser and Comenity.

Comenity Purchase Price ” means the “Purchase Price” as defined in the Comenity Purchase Agreement.

Comenity Transaction ” means the transactions contemplated by the Comenity Purchase Agreement.

Confidential Information ” shall have the meaning set forth in Section  11.12(a) .

Constituent Documents ” means the charter and bylaws of a corporation, the certificate of limited partnership and limited partnership agreement of a limited partnership, the trust agreement of a trust and the comparable documents of other entities.

Contract ” means with respect to any Person, any agreement, contract, subcontract, indenture, deed of trust or other agreement by which that Person, or any of the Acquired Assets, is bound or subject.

Correction Amount ” shall have the meaning set forth in Section  2.4(b) .

Cut-off Time ” means 11:59 p.m. prevailing Eastern Time on the calendar day immediately preceding the Closing Date.

Deductible ” means an amount equal to $10,750,000.

Deferred Interest Payment ” means an amount equal to the LuxCo Percentage multiplied by the product of (i) the Agreed Percentage and (ii) the unbilled accrued deferred interest on the principal balance of deferred interest promotional purchases in the Non-Legacy Pool as of the Cut-off Time, with respect to such deferred interest promotional purchases for which the promotional period has not expired prior to the Cut-off Time, and which unbilled deferred interest actually becomes due and payable by the applicable Borrowers following the Cut-off Time pursuant to the Program Policies and Procedures; provided that the Deferred Interest Payment shall not include any unbilled accrued deferred interest on the principal balance of deferred interest promotional purchases in the Non-Legacy Pool as of the Cut-off Time, to the extent such unbilled accrued deferred interest is in respect of any Excluded Receivable.

Designated Accounts ” means as of the Cut-off Time, all consumer credit accounts under the Program that (a) are accounts held by a Borrower with respect to whom Seller has received written notice that as of the Cut-off Time has filed, or has had filed against such Borrower, proceedings in bankruptcy, trusteeship or receivership; (b) are determined in accordance with Program Policies and Procedures to have fraudulent activity (but not including any replacement account established to hold the portion of the balance of the original account that was not fraudulent); or (c) are not in the name of a living individual and for which no other Person is contractually obligated for the payment thereof.

 

5


Designated Receivables ” means, as of the Cut-off Time, all Gross Receivables in respect of Designated Accounts.

Disclosing Party ” shall have the meaning set forth in Section  11.12(a) .

Estimated Closing Statement ” means a statement showing (i) Seller’s estimated good faith calculation of the Purchase Price, based on data that was current no more than five Business Days prior to the Cut-off Time and (ii) the Estimated Deferred Interest Payment.

Estimated Deferred Interest Payment ” means an amount equal to Seller’s good faith estimate of the Deferred Interest Payment.

Estimated Purchase Price ” means the good faith estimate of Purchase Price set forth in the Estimated Closing Statement.

Excluded Accounts ” means, as of the Cut-off Time, all consumer credit accounts under the Program (a) that are (1) listed on the “Specially Designated Nationals and Blocked Persons” list published by OFAC on its official website or any replacement website or other replacement official publication of such list, (2) listed on the U.S. Department of State’s Terrorist Exclusion List, or (3) located in or operating under a license issued by a jurisdiction identified by the U.S. Department of State as a sponsor of international terrorism, by the U.S. Secretary of the Treasury as warranting special measures due to money laundering concerns, or as noncooperative with international anti-money laundering principles or procedures by an intergovernmental group or organization of which the U.S. is a member; (b) that have been paid-in-full and closed; (c) with respect to which Seller has made a collection settlement offer to the Borrower, which settlement offer has been fully paid, regardless of whether there remains a deficiency balance as of the Cut-off Time; (d) with respect to which there has been issued an IRS Form 1099-C, or (e) that are accounts subject to collection litigation proceedings instituted by Seller or Comenity.

Excluded Assets ” means the assets of Seller and each of its Affiliates that are not Acquired Assets.

Excluded Liabilities ” means all of the Liabilities of Seller and its Affiliates, other than the Assumed Liabilities, of whatever nature, whether currently in existence or arising hereafter, including: (a) any Liabilities in respect of Taxes for which Seller is liable pursuant to this Agreement; (b) any expenses incurred by Seller incident to its negotiation and preparation of this Agreement; (c) any Liabilities to the extent related to or arising from any Excluded Assets and (d) all Liabilities arising out of the ownership or administration of the Acquired Assets or the operation by Seller of its businesses related thereto with respect to any period commencing and ending before the Cut-off Time (other than with respect to Liabilities of the type described in clause (3) of the definition of “ Assumed Liabilities ”).

Excluded Receivables ” means, as of the Cut-off Time, (i) all Gross Receivables in respect of Excluded Accounts, (ii) all Charged-Off Receivables and (iii) Designated Receivables as of the Cut-off Time that are charged off or required to be charged-off during the 120-day period after the Closing Date in accordance with the Program Policies and Procedures.

 

6


Federal Funds Rate ” means the offered rate as reported in The Wall Street Journal in the “Money Rates” section for reserves traded among commercial banks for overnight use in amounts of one million dollars or more, or, if no such rate is published for a day, the rate published for the preceding Business Day.

Final Closing Statement ” means a statement showing the calculation of the amount of the Purchase Price.

Financing Statements ” shall have the meaning set forth in Section  2.1(b)(2) .

Fundamental Representations ” shall have the meaning set forth in Section  10.2(b)(1) .

GAAP ” means generally accepted accounting principles in the United States, consistently applied.

Governmental Authority ” means any domestic or foreign federal, state, provincial, tribal or local (or any other political subdivision thereof or supranational) governmental, regulatory or self-regulatory authority, agency, instrumentality, court, tribunal, commission, arbitrator or other governmental, regulatory or self-regulatory entity of applicable jurisdiction, including the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Bureau of Consumer Financial Protection and the Commission de Surveilance du Secteur Financier.

Gross Receivables ” means all amounts owing from Borrowers with respect to Borrower Accounts (including outstanding loans, cash advances, accrued interest, and other extensions of credit, finance charges and any other finance and non-finance fees, charges and interest assessed on the Borrower Accounts).

Indemnified Party ” shall have the meaning set forth in Section  10.6(a) .

Indemnifying Party ” shall have the meaning set forth in Section  10.6(a) .

Knowledge of Purchaser ” means the actual knowledge, after reasonable inquiry, of Jill Zellmer, Brian Wenzel or Curtis Howse or, in each case, any successor to such individual holding the same or similar functional position or substantially comparable authority to any of the foregoing at Purchaser, any Affiliate of Purchaser or any successor to Purchaser or any Affiliate of Purchaser. For purposes of the definition of “Knowledge of Purchaser,” “reasonable inquiry” by any Person shall be deemed satisfied if such individual reviews his or her files and makes inquiries of his or her direct reports.

Knowledge of Seller ” means the actual knowledge, after reasonable inquiry, of David Ferri and Ryan Marsh or any successor to such individual holding the same or similar functional position or substantially comparable authority to any of the foregoing at Seller, any Affiliate of Seller or any successor to Seller or any Affiliate of Seller. For purposes of the definition of “Knowledge of Seller,” “reasonable inquiry” by any Person shall be deemed satisfied if such individual reviews his or her files and makes inquiries of his or her direct reports.

 

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Legacy Pool ” means the pool of Gross Receivables owing from Borrowers with respect to Borrower Accounts that were originated prior to September 1, 2010 or otherwise allocated to such pool in accordance with the Sale and Participation Agreement.

Liability ” means any debt, obligation or liability of any nature (including any unknown, undisclosed, unmatured, unaccrued, unasserted, contingent, indirect, conditional, implied, vicarious, derivative, joint, several or secondary liability), regardless of whether such debt, obligation or liability would be required to be disclosed on a balance sheet prepared in accordance with GAAP and regardless of whether such debt, obligation or liability is immediately due and payable.

Lien ” means any mortgage, deed of trust, lien, pledge, claim, security interest, encumbrance, hypothecation, charge, option, right of first refusal, transfer restriction, conditional sale agreement or any other interest or restriction of any nature or kind.

Losses ” means any loss, damage, injury, Liability, claim, settlement, judgment, award, fine, penalty, Tax, fee (including reasonable attorneys’ fees and incidental damages reasonably incurred (including reasonable costs of investigation)), charge, cost or expense of any nature. For the sake of clarity, (a) the amount of any settlement shall not be determinative as to the quantum of indemnifiable “Losses” hereunder (which quantum, if any, shall be determined in accordance with Article X) and (b) “Losses” (i) shall include any costs or expenses of any Actions relating to the enforcement of any Seller Indemnitee’s or Purchaser Indemnitee’s rights pursuant to Article X (but only if such Seller Indemnitee or Purchaser Indemnitee is actually entitled to be indemnified for the underlying claim pursuant to Article X) and (ii) shall exclude special, punitive and consequential damages, unless specifically awarded by a Governmental Authority to a third party and paid to such third party by Seller Indemnitee or Purchaser Indemnitee.

LuxCo ” shall have the meaning set forth in the preamble hereto.

LuxCo Percentage ” means a percentage equal to 100% less the Comenity Non-Legacy Pool Percentage as of the Cut-off Time.

LuxCo True Sale Opinion ” means an opinion from Allen & Overy LLP to Seller, addressed to Seller and provided to Purchaser, subject to Section  5.4 , in the form attached as Exhibit C-1 hereto.

Luxembourg ” means the Grand-Duchy of Luxembourg.

Master File ” means the Borrower Account file of the system of records (commonly known as a master file) maintained by or on behalf of Seller or an Affiliate of Seller with respect to the Borrower Accounts, including identification and other customer data, Borrower Account information, Borrower Lists, and any and all Borrower Account adjustments made by or on behalf of Seller and the information set forth on Schedule 1.1(a).

 

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Material Adverse Effect ” means any change, event or effect that, individually or together with any other changes, events or effects, has or could reasonably be expected to have a materially adverse effect on the Aggregate Assets, taken as a whole; provided, however, that the term “Material Adverse Effect” shall not include any change, event or effect attributable to or resulting from: (a) any changes in generally applicable economic conditions or the financing, currency or capital markets in general; (b) any events or changes affecting the banking industry, including the credit card services business or the credit card industry; (c) changes in Requirements of Law, GAAP or regulatory accounting principles; (d) the announcement of the execution of this Agreement, to the extent arising from the identity of the Purchaser; and (e) any action required by the terms of this Agreement or taken at the request of Purchaser; provided that, with respect to each change, event or effect described in clause (a), (b) or (c), such change, event or effect shall only be taken into account in determining a Material Adverse Effect to the extent such change, event or effect disproportionately adversely impacts the Aggregate Assets as compared to other similarly situated portfolios.

Net Receivables ” means all amounts owing (after deduction of unapplied cash and credit balances that remain outstanding, in each case, as of the Cut-off Time) from Borrowers with respect to Borrower Accounts (including outstanding loans, cash advances, accrued interest and other extensions of credit, finance charges and any other finance and non-finance fees, charges and interest assessed on the Borrower Accounts, but excluding unbilled deferred interest that has accrued prior to the Cut-off Time with respect to deferred interest promotional purchases for which the promotional period has not expired prior to the Cut-off Time); provided, however, that the value ascribed to Charged-Off Receivables and Designated Receivables shall be zero.

New Program Agreement ” shall have the meaning set forth in the Recitals.

Non-Legacy Pool ” means the pool of Gross Receivables owing from Borrowers with respect to Borrower Accounts that were originated on or after September 1, 2010, excluding Gross Receivables otherwise allocated to the Legacy Pool in accordance with the Sale and Participation Agreement.

Objection Notice ” shall have the meaning set forth in Section  2.4(b) .

OFAC ” means the U.S. Office of Foreign Asset Control.

Other PSAs ” means collectively the BMLI Purchase Agreement, Chestnut Purchase Agreement and Comenity Purchase Agreement.

PayPal ” means PayPal Holdings, Inc., a Delaware corporation.

PayPal Guaranty ” means a guaranty of PayPal, in the form attached hereto as Exhibit B .

Person ” means an individual, a corporation, a partnership, joint venture, joint-stock company, unincorporated organization, a limited liability company, an association, a trust, or other entity or organization, including a Governmental Authority or instrumentality thereof.

Post-Cut-off Time Payments ” shall have the meaning set forth in Section  2.4(c) .

 

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Post-Closing Tax Period ” means any Tax period (or portion thereof) beginning on the day the Closing occurs.

Pre-Closing Tax Period ” means any Tax period (or portion thereof) ending on or before the day immediately preceding the day on which the Closing occurs.

Program ” means the program providing for the origination, establishment, maintenance, servicing and collection of open-end consumer credit accounts pursuant to and in accordance with the Program Agreement.

Program Agreement ” means that certain Program Agreement, dated as of June 14, 2013, by and among Comenity, PayPal and BMLI.

Program Policies and Procedures ” means the policies, procedures and standards with respect to Borrower Accounts established in connection with the Program (including credit, underwriting, servicing and collection practices, accounting policies (including reserve policies) and practices for charge-offs).

PSA Residual Information ” shall have the meaning set forth in Section  11.12(c) .

Purchase Price ” means an amount equal to (i) the product of (A) the LuxCo Percentage multiplied by (B) the Agreed Percentage of the amount of Net Receivables in the Non-Legacy Pool as of the Cut-off Time, minus (ii) the Reserve Adjustment Amount.

Purchaser ” shall have the meaning set forth in the preamble hereto.

Purchaser Fundamental Representations ” shall have the meaning set forth in Section  10.4(b)(1) .

Purchaser Indemnitees ” shall have the meaning set forth in Section  10.2 .

Receiving Party ” shall have the meaning set forth in Section  11.12(a) .

Representatives ” shall have the meaning set forth in Section  11.12(a) .

Requirements of Law ” means any U.S. federal, state and local and non-U.S. law, ordinance, statute, written or oral regulatory guidance, treaty, rule, code, judgment, order, decree, regulation or other determination of any arbitrator or Governmental Authority, including all Applicable Orders.

Requisite Regulatory Approvals ” means the consents, registrations, approvals, permits or authorizations set forth on Schedule 4.1(c) hereto.

Reserve Adjustment Amount ” means an amount calculated by applying (A) the loan loss reserve methodology used by Seller and LuxCo with respect to Net Receivables in the Non-Legacy Pool held by Seller during the last full calendar quarter ending prior to the transition to the application of gain on sale accounting by Seller to (B) the aggregate Net Receivables in the Non-Legacy Pool owned by Seller as of the end of the calendar quarter immediately prior to the Cut-off Time.

 

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Sale and Participation Agreement ” means the Receivables Sale and Participation Agreement by and between Comenity and LuxCo dated as of June 14, 2013.

Seller ” shall have the meaning set forth in the preamble hereto.

Seller Indemnitees ” shall have the meaning set forth in Section  10.4(a) .

Special Tax Arrangement ” shall have the meaning set forth in Section  6.1(i) .

Taxes ” means any federal, state, local or foreign income, gross income, gross receipts, value-added, goods and services, windfall profit, severance, property, production, sales, use, license, excise, franchise, capital, profits, employment, payroll, withholding, alternative or add-on minimum, ad valorem, transfer, stamp, occupation, conveyance or environmental tax, or any other tax, custom, levy, duty, governmental fee or other like assessment or charge of any kind whatsoever, any information reporting obligation, together with any interest or penalty, addition to tax or additional amount imposed by any Governmental Authority (including by reason of any failure or delay in the payment of such taxes). Without limiting the foregoing, the terms “Taxes” shall include all United States and non-United States taxes, and federal, state and local taxes, whether owing to any taxing authority or to other Persons; and shall include any transferee Liability in respect of any taxes, including any taxes incurred as a result of being a member of any affiliated, consolidated, combined, or unitary group under Treasury Regulations § 1.1502-6 or any similar provision of foreign, state or local Requirements of Law.

Tax Return ” means any and all returns, reports and forms (including elections, declarations, amendments, schedules, information returns or attachments thereto) required to be filed with a Governmental Authority with respect to Taxes.

Third Person Claim ” shall have the meaning set forth in Section  10.6(a) .

Total Consideration ” means an amount equal to the sum of (i) the Purchase Price plus (ii) the Deferred Interest Payment.

Transaction Documents ” means this Agreement, the PayPal Guaranty and the Bill of Sale and Assumption Agreement.

Transfer Taxes ” means all Taxes incurred with respect to the sale or transfer of the Acquired Assets from Seller to Purchaser, regardless of upon whom such Taxes are levied or imposed by Requirements of Law, including sales and use Taxes, real property transfer Taxes, and stamp, documentary, filing, recording, permit or authorization duties or fees; provided , however , that the term “ Transfer Taxes ” shall not include (a) any Tax measured by, imposed on or applicable to net income, (b) any franchise Tax or business license Tax, (c) any Tax in lieu of a net income Tax, franchise Tax or business license Tax, (d) the Business and Occupation Tax imposed by the State of Washington or any similar tax imposed by a political subdivision of the State of Washington, and (e) the Commercial Activity Tax imposed by the State of Ohio or any similar Tax imposed by any political subdivision of the State of Ohio.

 

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True Sale Opinions ” means the LuxCo True Sale Opinion and the U.S. True Sale Opinion.

Undifferentiated Losses ” shall have the meaning set forth in Section  10.10(c) .

U.S. True Sale Opinion ” means an opinion from Sidley Austin LLP to Seller, addressed to Seller and provided to Purchaser, subject to Section  5.4 , in the form attached as Exhibit C-2 hereto.

Section 1.2 Interpretation .

(a) In this Agreement, unless the context otherwise requires, any reference to:

(1) the “preamble,” “Recitals,” “Articles,” “Sections” or “Schedules” refers to the preamble or Recitals to, an Article or Section of, or a Schedule to, this Agreement;

(2) a Contract (including this Agreement) refers to such Contract, as amended, modified, supplemented or replaced from time to time in accordance with the terms thereof;

(3) a statute or regulation refers to the statute or regulation, as amended, modified or supplemented from time to time;

(4) this Agreement is to this Agreement, including the Schedules and Exhibits hereto;

(b) Whenever the word “include,” “includes” or “including” is used in this Agreement, it will be deemed to be followed by the words “without limitation.”

(c) Terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa.

(d) References to “U.S.” shall mean the United States of America.

(e) References to money or dollar amounts shall mean U.S. Dollars unless specified otherwise.

(f) References to “days,” “months” and “years” shall mean calendar days, months and years unless specified otherwise.

(g) The terms “shall” and “will” shall receive the same interpretive meaning.

(h) The terms “hereof,” “herein,” “hereby,” “hereto” and derivative or similar words refer to this Agreement.

(i) The Table of Contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

 

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(j) Each of the parties has participated in the negotiation and drafting of this Agreement and if an ambiguity or question of interpretation should arise, this Agreement shall be construed as if drafted by all of the parties hereto and no presumption or burden of proof shall arise favoring or burdening any party by virtue of the authorship of any of the provisions in any of this Agreement.

(k) A reference to any Person includes such Person’s successors and permitted assigns.

(l) Unless the context otherwise requires, the word “or” when used in this Agreement will be deemed to have the inclusive meaning represented by the phrase “and/or.”

ARTICLE II

PURCHASE, SALE AND ASSUMPTION

Section 2.1 Purchase and Sale of Assets .

(a) On the terms and subject to the conditions of this Agreement, at the time of the Closing and effective as of the Cut-off Time, Seller shall sell, convey and assign to Purchaser, free and clear of all Liens (other than the Comenity Non-Legacy Pool Participation), the Acquired Assets, and Purchaser shall purchase all of such Acquired Assets.

(b) (1) The parties hereto intend that for all purposes the transactions contemplated hereby shall be treated as a purchase and sale of the Acquired Assets. Notwithstanding such intent, if for any reason the transactions contemplated hereby are not treated as a purchase and sale of the Acquired Assets by any court of competent jurisdiction, then, as of the Closing, Seller hereby grants to Purchaser a first priority security interest in all of Seller’s right to and interest in, whether now existing or hereafter created or acquired, the Acquired Assets and proceeds thereof to secure a loan deemed to have been made by the Purchaser to Seller in an amount equal to the Purchase Price.

(2) Purchaser shall prepare at or prior to the Closing Date such financing statements (the “ Financing Statements ”) as Purchaser reasonably determines are necessary or appropriate to fully preserve, maintain and protect the interest of Purchaser in the Acquired Assets and proceeds thereof. Seller hereby authorizes Purchaser to file such Financing Statements and any continuation statements and amendments thereto in all jurisdictions and with all filing offices as Purchaser may reasonably determine are necessary or advisable to protect the interest of Purchaser in the Acquired Assets and proceeds thereof. Following the filing of such Financing Statements in such jurisdictions as Purchaser may reasonably determine are necessary or appropriate to fully preserve, maintain and protect the interest of Purchaser in the Acquired Assets and proceeds thereof, Purchaser shall provide Seller with file-stamped copies of, or filing receipts for, such Financing Statements as soon as available following such filing.

 

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Section 2.2 Assumption of Liabilities . On the terms and conditions of this Agreement, at the time of the Closing and effective as of the Cut-off Time, Purchaser shall assume, pay, discharge and perform as and when due the Assumed Liabilities.

Section 2.3 Excluded Assets and Liabilities . Notwithstanding any provision in this Agreement, Purchaser is acquiring only the Acquired Assets and not any Excluded Assets and assuming only the Assumed Liabilities and not any Excluded Liabilities. The Excluded Assets and Excluded Liabilities will not be conveyed hereunder by Seller and its Affiliates, as the case may be.

Section 2.4 Purchase Price; Purchase Price Adjustment .

(a) No later than two Business Days before the Closing, Seller will deliver or cause to be delivered to Purchaser the Estimated Closing Statement.

(b) Seller shall deliver or cause to be delivered to Purchaser the Closing Master File within ten Business Days after the Closing. Within 45 days after the Closing, Purchaser will deliver to Seller a Final Closing Statement and reasonably detailed documentation to support the calculations contained therein. Seller will, within 60 days after delivery of the Final Closing Statement and the related information, determine and notify Purchaser if Seller believes that there were any (1) inaccuracies in the preparation of the Final Closing Statement or (2) differences between the Estimated Closing Statement and the Final Closing Statement that require an adjustment of the Purchase Price, together with Seller’s calculation of the Purchase Price and reasonably detailed documentation to support the calculation thereof (any such notice, an “ Objection Notice ”). If Seller does not deliver an Objection Notice prior to the end of such 60-day period, the Final Closing Statement (and the Purchase Price set forth therein), as delivered by Purchaser, shall be final and binding upon the parties. To the extent that Seller delivers an Objection Notice prior to the end of such 60-day period, Seller and Purchaser shall use commercially reasonable efforts to resolve any differences with respect to the adjustments to the Purchase Price required by this Section  2.4(b) . If any disputes with respect to such adjustments to the Purchase Price remain unresolved for more than ten Business Days after the expiration of the above-referenced 60-day period, Purchaser and Seller will promptly select a mutually agreed-upon, nationally recognized accounting firm in the United States to determine the correct Purchase Price, which determination will be conclusive and binding on Purchaser and Seller and unappealable absent manifest error. The fees of such accounting firm will be shared by Purchaser and Seller in proportion to the relative differences between their respective calculations of the Purchase Price and the amount determined by the accounting firm. After the Purchase Price has been finally determined in accordance with this Section  2.4(b) , the party that had a net benefit from such inaccuracies and/or differences, if applicable, will promptly pay to the other party in immediately available funds (in U.S. dollars) to an account designated by such other party an amount equal to the absolute value of the difference between the Purchase Price as originally calculated in the Estimated Closing Statement and the Purchase Price as finally determined pursuant to this Section  2.4(b) (any such payment being referred to herein as the “ Correction Amount ”). Payment of the Correction Amount will be accompanied by a payment of interest on such Correction Amount for the period from and including the Closing Date but excluding the date of payment of such Correction Amount at a rate per annum equal to the Federal Funds Rate on the Closing Date. Any such Correction Amount shall be treated as an adjustment to the Purchase Price.

 

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(c) Seller shall be entitled to retain payments on Borrower Accounts from Borrowers received and posted to the Borrower Accounts by Seller on or prior to the Cut-off Time. All payments received by Seller after the Cut-off Time related to the Borrower Accounts or received prior to the Cut-off Time but not posted to the relevant Borrower Account on or prior to the Cut-off Time shall belong to Purchaser and shall be an Acquired Asset (any such payments, “ Post-Cut-off Time Payments ”). Upon receipt of any Post-Cut-off Time Payment, Seller shall remit the full amount of such Post-Cut-off Time Payment to Purchaser in accordance with the terms of the New Program Agreement.

(d) If during the 120-day period following the Closing Date, it is determined that any Gross Receivable purchased at Closing was (or, in the case of an Excluded Receivable identified in clause (iii) of the definition of Excluded Receivables, becomes) an Excluded Receivable, then Seller shall repurchase such Gross Receivable from Purchaser, on demand, for an amount equal to (A) the LuxCo Percentage multiplied by the product of the Agreed Percentage and the amount of such Net Receivable as of the Cut-off Time as reflected in the Final Closing Statement as finally determined in accordance with Section  2.4(b) , less (B) any payments received by Purchaser in respect of such Excluded Receivable between the Cut-off Time and the date of such payment, and upon receipt of such payment Purchaser will reconvey such Excluded Receivable to Seller. Any payments under this Section  2.4(d) shall be deemed to be an adjustment to the Total Consideration hereunder.

(e) If during the 120-day period following the Closing Date, it is determined that (i) any Gross Receivable designated as an Excluded Receivable as of the Cut-off Time should have not been so classified or (ii) any Designated Receivable as of the Cut-off Time is not charged off and is not required to be charged-off during such 120-day period in accordance with the Program Policies and Procedures, then Purchaser shall purchase (in the case of any such Excluded Receivable) such Gross Receivable from Seller or pay for (in the case of any such Designated Receivable) such Gross Receivable to Seller, on demand, for an amount equal to (A) the LuxCo Percentage multiplied by the product of the Agreed Percentage and the amount of such Net Receivable, in each case as of the Cut-off Time, less (B) any payments received by Seller in respect of such Gross Receivables between the Cut-off Time and the date of such payment, and upon receipt of such payment such Seller will convey such Gross Receivable designated as an Excluded Receivable as of the Cut-off Time to Purchaser. Any payments under this Section  2.4(e) shall be deemed to be an adjustment to the Total Consideration hereunder, and any Designated Receivable in respect of which payment is required to be made by Purchaser under this Section  2.4(e) shall no longer be deemed to be a Designated Receivable.

(f) No later than 270 days following the Closing, Seller will deliver or cause to be delivered to Purchaser a statement setting forth the Deferred Interest Payment (which amount shall be calculated after giving effect to the determinations made in clauses (d) and (e) above), and reasonably detailed documentation to support the calculation thereof. Purchaser will, within 30 days after delivery of the such statement and the related information, determine and notify Seller if Purchaser believes that there were any (1) inaccuracies in the calculation of the Deferred Interest Payment or (2) differences between the Estimated Deferred Interest

 

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Payment and the Deferred Interest Payment that require an adjustment, together with Purchaser’s calculation of the Deferred Interest Payment and reasonably detailed documentation to support the calculation thereof. If Purchaser does not deliver such notice prior to the end of such 30-day period, the Deferred Interest Payment as determined by Seller, shall be final and binding upon the parties. To the extent that Purchaser does deliver such notice prior to the end of such 30-day period, Seller and Purchaser shall use commercially reasonable efforts to resolve any differences with respect to the adjustments to the Deferred Interest Payment. If any disputes with respect to such adjustments to the Deferred Interest Payment remain unresolved for more than ten Business Days after the expiration of the above-referenced 30-day period, Purchaser and Seller will promptly select a mutually agreed-upon, nationally recognized accounting firm in the United States to determine the correct Deferred Interest Payment, which determination will be conclusive and binding on Purchaser and Seller and unappealable absent manifest error. The fees of such accounting firm will be shared by Purchaser and Seller in proportion to the relative differences between their respective calculations of the Deferred Interest Payment and the amount determined by the accounting firm. After the Deferred Interest Payment has been finally determined in accordance with this Section  2.4(f) , the party that had a net benefit from such inaccuracies and/or differences, if applicable, will promptly pay to the other party in immediately available funds (in U.S. dollars) to an account designated by such other party an amount equal to the absolute value of the difference between the Estimated Deferred Interest Payment as originally calculated in the Estimated Closing Statement and the Deferred Interest Payment as finally determined pursuant to this Section  2.4(f) .

 

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Section 2.5 Tax Treatment . For the avoidance of any doubt, Seller and Purchaser agree that the transactions contemplated hereby shall be treated by each of Seller, Purchaser and their respective Affiliates, as a sale of the Acquired Assets as such by Seller to Purchaser for all federal and state income Tax purposes and not as a sale of any equity interest encompassing the Acquired Assets. Seller and Purchaser and their respective Affiliates shall report, act and file Tax Returns in all respects and for all purposes consistent with such treatment and will not voluntarily take any position inconsistent therewith upon any examination of any Tax Return, in any audit, proceeding or otherwise with respect to any Tax Return unless prohibited by any Requirement of Law.

Section 2.6 Excluded Receivables. It is hereby acknowledged and agreed by Purchaser that (a) with respect to the Excluded Receivables identified in clauses (i) and (ii) of the definition of Excluded Receivables, immediately following the consummation of the Comenity Transaction, Purchaser shall be deemed to have sold, conveyed and assigned to Seller, and relinquished, released and disclaimed any further rights with respect to, all such Excluded Receivables as of the Cut-off Time and (b) with respect to the Excluded Receivables identified in clause (iii) of the definition of Excluded Receivables, as of the 120th day after the Closing Date, Purchaser shall hereby sell, convey and assign to Seller, and shall be deemed to have relinquished, released and disclaimed any further rights with respect to, all such Excluded Receivables as of such date.

ARTICLE III

CLOSING; ASSIGNMENT

Section 3.1 The Closing . The closing of the purchase and sale of the Acquired Assets and assumption of the Assumed Liabilities (the “ Closing ”) will take place at 8:00 a.m. prevailing Eastern Time on July 2, 2018, or, if each of the conditions set forth in Sections  7.1 and 7.2 (other than such conditions which, by their nature, are to be satisfied at the Closing) have not been satisfied or waived on or prior to such date, on the second Business Day following the satisfaction or waiver of such conditions or such other date as Seller and Purchaser may mutually agree in writing (the “ Closing Date ”). The parties intend that the transactions contemplated hereby shall be consummated concurrently with the consummation of the Chestnut Transaction, Comenity Transaction and BMLI Transaction.

(a) At the Closing, Seller and Purchaser will deliver or cause to be delivered to each other an instrument of sale, assignment, transfer and conveyance of the Acquired Assets and the assumption of the Assumed Liabilities, respectively, in substantially the form set forth in Exhibit  A , duly executed by Seller and Purchaser (the “ Bill of Sale and Assumption Agreement ”).

(b) Purchaser will pay at the Closing an amount equal to the Estimated Purchase Price plus the Estimated Deferred Interest Payment, by wire transfer of immediately available funds (in U.S. dollars) to an account or accounts of Seller or an Affiliate thereof, such account or accounts to be specified by Seller not less than two Business Days before the Closing Date. Purchaser acknowledges that it has undertaken to repay the Reserve Adjustment Amount to LuxCo if due as set forth in Section 8.3(f) of the New Program Agreement.

 

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE PARTIES

Section 4.1 Representations of Seller. Seller represents and warrants to Purchaser as follows:

(a) Existence and Authority . Seller is a corporate partnership limited by shares ( société en commandiate par action) duly incorporated under Luxembourg law, and Seller has the requisite licences, power and authority to own its assets, and is duly qualified and/or licensed to do business in each jurisdiction where the ownership or operation of the Acquired Assets requires such qualification or license.

(b) Authorization and Validity . Seller has full power and authority to execute and deliver this Agreement and the other Transaction Documents to which it is a party, to consummate the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder. The execution and delivery by Seller of this Agreement and the other Transaction Documents to which it is a party and the performance of Seller’s obligations hereunder and thereunder have been duly authorized by all requisite action. This Agreement is the legal, valid and binding obligation of Seller enforceable in accordance with its terms, and each of the other Transaction Documents to which it is a party has been duly authorized by Seller and upon execution and delivery by Seller will be a legal, valid and binding obligation of Seller enforceable against Seller in accordance with its terms (except as may be limited by bankruptcy, insolvency, reorganization, moratorium, reprieve from payment and liquidation proceedings and other Requirements of Law relating to or affecting creditors’ rights generally and by general equity principles).

(c) Governmental and Third-Party Consents . Except as set forth in Schedule  4.1(c) , no consent, approval, license, permit, or authorization from, or filing or registrations with, or report, declaration or exemption by notice to, any Governmental Authority is required to be obtained or made by Seller or any of its Affiliates (other than those previously obtained) in connection with the execution, delivery or performance of the Transaction Documents by such party or the consummation by such party of the transactions contemplated by the Transaction Documents.

(d) No Conflict . Except as set forth in Schedule 4.1(d) , neither the execution and delivery of this Agreement or any of the other Transaction Documents or the consummation of any of the transactions contemplated hereby or thereby nor the compliance with or fulfillment of the terms, conditions and provisions hereof or thereof will:

(1) conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination or cancellation or a loss of rights under, or result in the creation or imposition of any Lien upon any of the Acquired Assets, under (A) the Constituent Documents of Seller, (B) any Account Agreement, (C) any other material note, instrument, agreement, mortgage, or lease to which any of the Acquired Assets is subject or by which Seller (with respect to the Acquired Assets) is bound, (D) any Applicable Order to which Seller is a party or by which Seller is bound, or (E) any Requirements of Laws affecting Seller (with respect to the Acquired Assets) or the Acquired Assets; or

 

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(2) require the approval, consent, authorization or act of, or the making by Seller of any declaration, filing or registration with, any Person.

(e) Acquired Assets and Assumed Liabilities . Except as set forth on Schedule 4.1(e) , Seller is, and as of the Closing Date (and immediately prior to the Closing) will be, the owner of and have good and valid title to, the Acquired Assets free and clear of all Liens (other than the Comenity Non-Legacy Pool Participation), and LuxCo has granted an undivided participation interest in the Gross Receivables of LuxCo to Comenity, which is represented by the Comenity Non-Legacy Pool Participation.

(f) Absence of Certain Changes . Since July 12, 2017, except as set forth on Schedule 4.1(f) , Seller has not (A) sold, leased or otherwise disposed of any of the Acquired Assets, except in accordance with the Program Policies and Procedures as then in effect; or (B) other than Liens to be released on or before the Closing Date or Liens in respect of the Comenity Non-Legacy Pool Participation, created any Lien over any part of the Acquired Assets (it being acknowledged that any act (or omission) by Seller between the date hereof and the Closing that was not in violation of Section  5.2 shall not be deemed to be a breach of the foregoing representation and warranty).

(g) Litigation . Except as set forth on Schedule 4.1(g) , there are no Actions, or, to the Knowledge of Seller, investigations, pending against Seller related to any Acquired Asset or, to the Knowledge of Seller, threatened against Seller, related to any Acquired Asset. There are no Actions, or, to the Knowledge of Seller, investigations, pending, or to the Knowledge of Seller, threatened, against or relating to Seller, that has materially impaired or which, if adversely determined, would, individually or in the aggregate, reasonably be expected to materially impair the ability of Seller to perform its obligations under, or materially delay the consummation of the transactions contemplated by, this Agreement.

(h) No Brokers or Finders . Seller is solely responsible for and shall pay any Liability incurred by it for any financial advisory fees, brokerage fees, commissions or finder’s fees directly or indirectly in connection with this Agreement or the transactions contemplated hereby or by the Transaction Documents.

(i) No Prior Sale, Assignment or Securitization . Except for the Comenity Non-Legacy Pool Participation, Seller has not previously sold, assigned or securitized any of the Gross Receivables or any other Acquired Assets or has any contractual or other obligation to sell, assign, securitize or otherwise transfer any Gross Receivable or other Acquired Asset to any other party. To the extent that any of the Gross Receivables or other Acquired Assets has been securitized, Seller has the ability to repurchase such Gross Receivable or other Acquired Asset prior to the Closing.

(j) Accounting Treatment of Transfer . Seller intends to treat the conveyance of the Acquired Assets to Purchaser pursuant to this Agreement as a sale for purposes of GAAP.

 

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(k) True Sale Opinions . If the Closing were to occur simultaneously with the execution of this Agreement, each True Sale Opinion would be issued by counsel to Seller and would be delivered to Seller on the date hereof.

(l) Disclaimer of Warranties . EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE OTHER DOCUMENTS ENTERED INTO PURSUANT TO THIS AGREEMENT, SELLER MAKES NO REPRESENTATION OR WARRANTY WITH RESPECT TO THE ACQUIRED ASSETS AND SPECIFICALLY MAKES NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND NONE SHALL BE IMPLIED AND ANY AND ALL REPRESENTATIONS AND WARRANTIES, WHETHER OR NOT RELATING TO THE ACQUIRED ASSETS, OTHER THAN THOSE SET FORTH IN THIS AGREEMENT AND OTHER DOCUMENTS ENTERED INTO PURSUANT TO THIS AGREEMENT, EXPRESS OR IMPLIED, ARE EXCLUDED; PROVIDED , HOWEVER , THAT THE FOREGOING DISCLAIMER AND EXCLUSION SHALL NOT APPLY TO, AND PURCHASER DOES NOT DISCLAIM RELIANCE ON, ANY REPRESENTATION THAT WAS KNOWINGLY, INTENTIONALLY AND FRAUDULENTLY MADE BY SELLER RELATING TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, REGARDLESS OF WHETHER SUCH REPRESENTATION IS SET FORTH IN THIS AGREEMENT.

Section 4.2 Representations of Purchaser . Purchaser represents and warrants to Seller as follows:

(a) Existence . Purchaser is a federal savings association, duly organized, validly existing and is in good standing under the laws of United States. Purchaser has the requisite power and authority to own its assets and the Acquired Assets, and is duly qualified and/or licensed to do business in each jurisdiction where the ownership or operation of its businesses and the Acquired Assets requires such qualification or license.

(b) Authorization and Validity . Purchaser has full power and authority to execute and deliver this Agreement and the other Transaction Documents, to consummate the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder. The execution and delivery of this Agreement and the other Transaction Documents by Purchaser and the performance of Purchaser’s obligations hereunder and thereunder have been duly authorized by all requisite action. This Agreement is the legal, valid and binding obligation of Purchaser enforceable in accordance with its terms, and each of the other Transaction Documents has been duly authorized by Purchaser and upon execution and delivery by Purchaser will be a legal, valid and binding obligation of Purchaser enforceable against Purchaser in accordance with its terms (except as may be limited by bankruptcy, insolvency, reorganization, moratorium and other Requirements of Law relating to or affecting creditors’ rights generally and by general equity principles).

(c) Governmental and Third-Party Consents . No consent, approval, license, permit, or authorization from, or filing or registrations with, or report, declaration or exemption by notice to, any Governmental Authority is required to be obtained or made by Purchaser or any of its Affiliates (other than those previously obtained) in connection with the execution, delivery or performance of the Transaction Documents by such party or the consummation by such party of the transactions contemplated by the Transaction Documents.

 

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(d) No Conflict . Except as set forth in Schedule  4.2(d) , neither the execution and delivery of this Agreement or any of the other Transaction Documents or the consummation of any of the transactions contemplated hereby or thereby nor compliance with or fulfillment of the terms, conditions and provisions hereof or thereof will:

(1) conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination or cancellation or a loss of rights under, or result in the creation or imposition of any Lien upon any of the Acquired Assets, under (A) the Constituent Documents of Purchaser, (B) any Contract to which Purchaser is a party, (C) any other material note, instrument, agreement, mortgage, lease, license, franchise, permit or other authorization, right, restriction or obligation to which Purchaser is a party, (D) any Applicable Order to which Purchaser is a party or is bound, or (E) any Requirements of Laws affecting Purchaser; or

(2) require the approval, consent, authorization or act of, or the making by Purchaser of any declaration, filing or registration with, any Person other than a Governmental Authority.

(e) Litigation . There are no Actions, or, to the Knowledge of Purchaser, investigations, pending, or to the Knowledge of Purchaser, threatened, against or relating to Purchaser, that has materially impaired or which, if adversely determined, would, individually or in the aggregate, reasonably be expected to materially impair the ability of Purchaser to perform its obligations under, or materially delay the consummation of the transactions contemplated by, this Agreement.

(f) Financing . Purchaser will have as of immediately prior to the expected Closing sufficient funds available to consummate the transactions contemplated hereby and the Other PSAs and pay the Aggregate Purchase Price and to discharge when due any expenses incurred by Purchaser or any of its Affiliates in connection with the transactions contemplated by this Agreement.

(g) Brokers or Finders . Any liability incurred by Purchaser for any financial advisory fees, brokerage fees, commissions or finder’s fees directly or indirectly in connection with this Agreement and the other Transaction Documents or the transactions contemplated by this Agreement and the other Transaction Documents will be borne by Purchaser.

 

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ARTICLE V

COVENANTS

Section 5.1 Operation of the Acquired Assets Prior to the Closing . Seller shall not without the prior written consent of Purchaser, do any of the following between the date hereof and the Closing, except (i) as otherwise expressly contemplated by the Transaction Documents, the Comenity Purchase Agreement or the New Program Agreement, (ii) as required by Requirements of Law or (iii) as set forth in Schedule 5.1:

(a) sell, assign, lease, encumber or otherwise transfer or dispose of any of the Acquired Assets, including the securitization of any Gross Receivables or other Acquired Assets to the extent that Seller does not have the right to repurchase such Gross Receivables prior to the Closing;

(b) re-age any of the Borrower Accounts and/or Gross Receivables other than in accordance with the Program Policies and Procedures in effect as of the date hereof and consistent with past practice under the Program for the 12 months preceding the date hereof; or

(c) agree with any Person or otherwise commit itself to do any of the foregoing.

Section 5.2 Filings and Consents .

(a) Each party shall use reasonable best efforts to file, as soon as practicable after the date hereof, all notices, reports and other documents required to be filed by such party with any Governmental Authority with respect to the transactions contemplated by this Agreement, and to submit promptly any additional information requested by any such Governmental Authority. Without limiting the generality of the foregoing, each party shall, promptly after the date hereof, prepare and file any notifications required under any applicable antitrust or competition laws or regulations in connection with this Agreement. Each party shall respond as promptly as practicable to any inquiries or requests received from any state attorney general, antitrust authority or other Governmental Authority in connection with antitrust or related matters. Subject to the confidentiality provisions set forth in Section  11.12 , Purchaser and Seller shall promptly supply the other with any information that may be required in order to effectuate any filings (including applications) pursuant to (and to otherwise comply with its obligations set forth in) this Section  5.2(a) . Except where prohibited by applicable Requirements of Law or any Governmental Authority, and subject to the confidentiality provisions set forth in Section  11.12 , Seller and Purchaser shall (1) cooperate with each other with respect to any filings made in connection with this Agreement and (2) provide the other party with copies of any publicly available documents made or submitted by it with or to any Governmental Authority in connection with this Agreement promptly upon the other party’s request.

(b) Purchaser and Seller shall use their respective reasonable best efforts to take, or cause to be taken, all actions necessary to make effective the transactions contemplated by this Agreement as soon as practicable. Without limiting the generality of the foregoing, each party to this Agreement: (1) shall make all filings (if any) and give all notices (if any) required to be made and given by such party in connection with the transactions contemplated by this Agreement; and (2) shall use reasonable best efforts to obtain the Requisite Regulatory Approvals.

 

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(c) Notwithstanding anything to the contrary contained in Section  5.2(b) or elsewhere in this Agreement, in connection with its efforts to obtain the Requisite Regulatory Approvals, Purchaser shall not have any obligation under this Agreement to divest or agree to divest, or cause any of its Affiliates to divest, any of their respective businesses, product lines or assets, or to take or agree to take (or cause any of its Affiliates to take or agree to take) any other action with respect to, or to agree (or cause any of its Affiliates to agree) to, any limitation or restriction on any of their respective businesses, product lines or assets.

Section 5.3 Acquisition Proposals . Seller shall not, and shall not authorize or permit any representative or any Affiliate of Seller to, directly or indirectly, solicit or encourage, or furnish information with respect to the Acquired Assets to or engage in any discussions with any Person in connection with, any proposal for the acquisition of all or a substantial portion of the Acquired Assets, other than as contemplated by this Agreement. Seller shall promptly cease or cause to be terminated any existing activities or discussions with any Person with respect to any of the foregoing and will promptly request the return of any confidential information provided to any Person in connection with a prospective acquisition of the Acquired Assets, other than Purchaser.

Section 5.4 True Sale Opinions . If between the date hereof and the Closing Date, any facts, circumstances or changes in Requirements of Law arise such that the condition set forth in Section  7.2(h) is not capable of being satisfied as a result thereof, Purchaser and Seller agree to cooperate and use reasonable best efforts to modify the terms and conditions hereof in order to cause the satisfaction of the condition precedent set forth in Section  7.2(h) ; provided, however, that neither party shall be required to make any economic or financial concessions or accommodations that are not reimbursed by the other party in connection with performing its obligations under this Section  5.4 .

ARTICLE VI

TAX MATTERS

Section 6.1 Responsibility for Taxes .

(a) Seller shall be liable for and pay, all Taxes (other than Transfer Taxes) of, due from or otherwise imposed on Seller or upon any of its Affiliates or upon Purchaser or any of its Affiliates (by reason of transferee or successor liability or otherwise) (1) relating to the Acquired Assets or the operation of the Program by Seller or its Affiliates for Pre-Closing Tax Periods, (2) imposed on Seller’s (or its Affiliates’) net income or gross receipts arising from the sale of the Acquired Assets, or (3) that are attributable to any act with respect to the Acquired Assets taken by Seller or an Affiliate of Seller on the Closing Date prior to the Closing that is outside the ordinary course of business.

(b) Purchaser shall be liable for and pay all Taxes (other than Transfer Taxes) of, due from or otherwise imposed on Purchaser or upon any of its Affiliates or upon Seller or any of its Affiliates (1) relating to the Acquired Assets or the operation of the Program for Post-Closing Tax Periods or (2) imposed on the basis of Purchaser’s (or its Affiliates’) net income or gross receipts arising from its purchase of the Acquired Assets, but excluding any Taxes for which Seller is liable pursuant to Section  6.1(a)(2) .

 

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(c) For purposes of this Section  6.1 , Taxes attributable to a portion of a taxable year or period shall be determined on a “closing of the books” basis as of the end of the day immediately preceding the Closing Date, except that Taxes, if any, imposed on a periodic basis (such as property taxes) shall be allocated on a daily basis.

(d) Notwithstanding anything herein to the contrary, all Transfer Taxes shall be borne and paid 50% by Seller and 50% by Purchaser, except that any Transfer Taxes which would not be due if Seller was formed in the United States shall be borne and paid by Seller. Any Tax Returns with respect to Transfer Taxes shall be prepared by the party that customarily has primary responsibility for filing such Tax Returns pursuant to applicable Requirements of Law. Seller and Purchaser shall provide to one another a true copy of each such return as filed and evidence of the timely filing thereof.

(e) Neither party nor any of its Affiliates shall be entitled to any information regarding (except to the extent required by the next sentence) any access to, any right to review or any right to obtain any consolidated, combined, affiliated or unitary Tax Return which includes Seller or Purchaser. Seller and Purchaser shall provide each other with such assistance as reasonably may be requested by either of them, including reasonable requests for information, including any IRS Form 1099-C or other information Tax Return, relating to the Acquired Assets, in connection with (1) the preparation of any Tax Return, or (2) any audit or other examination by any Governmental Authority, or any judicial or administrative proceedings relating to liability for Taxes; provided , however , that, in accordance with the previous sentence of this Section  6.1(e) , in no event shall either party or their respective Affiliates be required to provide the other party with access to or copies of its or its Affiliates’ Tax Returns (other than such an IRS Form 1099-C or any such information Tax Return). The party requesting assistance hereunder shall reimburse the other party for reasonable out-of-pocket expenses incurred in providing such assistance, provided , however , that, (i) Seller shall have no obligation to provide any information to Purchaser with respect to any sales tax recovery proceeding instituted by Seller or Purchaser except to the extent attributable to a Post-Closing Tax Period or otherwise required pursuant to either Section  6.1(d) or Section  6.1(i) to the extent such information does not constitute part of the Acquired Assets, and (ii) for purposes of receiving reimbursement, no independent contractors, such as accountants or attorneys, shall be consulted without the written consent of the party requesting assistance, which consent shall not be unreasonably withheld or delayed.

(f) Seller and Purchaser each shall be entitled to any refund of any Taxes for which it is liable under this Section  6.1 and any refund received by the other party shall be transferred to the party which is liable for the Tax under this Section  6.1 .

(g) With regard to the preparation and filing of U.S. information returns on IRS Forms 1099-C for “identifiable events,” within the meaning of the Treasury Regulations under Section 6050P of the Code, with respect to the Borrower Accounts governing Gross Receivables in the Non-Legacy Pool, Seller shall be responsible for preparing and filing such

 

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forms for “identifiable events” that occur prior to the Closing Date and Purchaser shall be responsible for preparing and filing such forms for “identifiable events” that occur on or after the Closing Date (it being acknowledged and agreed that Seller shall be responsible for preparing and filing such forms for “identifiable events” that occur on or after the Closing Date with respect to the Borrower Accounts governing Gross Receivables in the Non-Legacy Pool that have been charged-off or were required to have been charged-off in accordance with the Program Policies and Procedures as of the Cut-off Time).

(h) With regard to the preparation and filing of U.S. information returns on IRS Forms 1099-MISC, if any, with respect to the Borrower Accounts governing Gross Receivables in the Non-Legacy Pool, Seller shall be responsible for preparing and filing such forms for events that occur prior to the Closing Date, and Purchaser shall be responsible for preparing and filing such forms for events that occur on or after the Closing Date.

(i) In addition to its other obligations pursuant to this Section 6.1, Seller agree (1) to inform Purchaser in writing, within 10 Business Days after execution of this Agreement, of all Special Tax Arrangements that are in effect with respect to any of the Acquired Assets as of the date of such writing and (2) to provide Purchaser in writing on such date a description of each such Special Tax Arrangement in sufficient detail as will reasonably inform Purchaser and its Affiliates so that they may investigate the opportunity to continue (or to apply for the continuation, transfer or renewal of) such Special Tax Arrangement after the Closing; provided , however , that Seller shall not be required to disclose any information with respect to a Special Tax Arrangement to the extent the disclosure of such information to Purchaser (i) would be prohibited by a legally binding confidentiality restriction in an agreement between Seller or an Affiliate of Seller and a Taxing authority or would otherwise be prevented by applicable Requirements of Law, or (ii) in the reasonable, good faith judgment of Seller, could adversely impact Seller’s or any of its Affiliates’ working relationship with the relevant Taxing authority or jeopardize Seller’s or any of its Affiliates’ ability to continue to benefit from the Special Tax Arrangement. As used in this Section 6.1(i), the term “ Special Tax Arrangement ” means any material concession, exemption, reduced rate, allowance, credit, holiday, suspension, election, registration, permit, operating method or reporting method that relates specifically to the Acquired Assets or the operation of the Program by Seller or its Affiliates, is not applicable to other substantial assets or operations of Seller or an Affiliate generally and has the effect of reducing the amount of, or eliminating, any Tax that would apply to any of the Acquired Assets in the absence of such concession, exemption, etc.; provided that any such concession, exemption, etc. will be considered material if, and only if, it results in a net Tax savings to Seller and its Affiliates of at least $25,000 for the 12-month period prior to the date on which the Special Tax Arrangement is required to be reported pursuant to this Section 6.1(i) (with such net Tax savings for any Special Tax Arrangement in effect for less than 12 months being determined on an annualized basis). If Seller or an Affiliate enters into a new Special Tax Arrangement with respect to any of the Acquired Assets after the date of execution of this Agreement, then Seller shall update the information provided pursuant to this Section  6.1(i) one month prior to the Closing, and again within one week after the Closing, in each case to the extent the information described in the first sentence of this Section  6.1(i) was not already provided with respect to such Special Tax Arrangement. Purchaser and Seller agree that, notwithstanding any other provision of this Agreement to the contrary, Seller and its Affiliates shall have no liability hereunder for a failure to comply with this Section  6.1(i) unless Seller and its Affiliates do not make a good faith attempt to do so.

 

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(j) Seller shall cause, or have caused previously, an election under Section 754 of the Code to be filed with the protective IRS Form 1065 filed related to the Program for the taxable year that includes the Closing Date, with respect to the arrangements that may include and be among any of PayPal, Comenity, LuxCo, BMLI, Chestnut, and/or any of their Affiliates, as the case may be.

ARTICLE VII

CONDITIONS

Section 7.1 Conditions Precedent to Obligation of Purchaser . The obligation of Purchaser to consummate the transactions contemplated hereunder is subject to the satisfaction, on or prior to the Closing, of the following conditions, any or all of which may be waived in writing, in whole or in part, by Purchaser:

(a) Requisite Regulatory Approvals . The Requisite Regulatory Approvals shall have been obtained or made and shall be in full force and effect and all waiting periods required by applicable Requirements of Law in connection therewith shall have expired or been terminated.

(b) No Injunction or Other Restraint . No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Requirements of Law (whether temporary, preliminary or permanent) that remains in effect and that has the effect of making the transactions contemplated by this Agreement illegal or otherwise restraining, enjoining or prohibiting the consummation of the transactions contemplated hereby.

(c) Accuracy of Representations and Warranties . (i) Each of the Fundamental Representations qualified as to materiality shall be true and correct in all respects, and those not so qualified shall be true and correct in all material respects, in each case, as of the date of this Agreement and at and as of the Closing, as if made at and as of the Closing (other than such representations and warranties as are made as of another date, which shall be true and correct as if made as of such date) and (ii) all other representations and warranties of Seller contained in this Agreement shall have been true and correct as of the date of this Agreement and shall be true and correct at and as of the Closing, as if made at and as of the Closing (other than such representations and warranties as are made as of another date, which shall be true and correct as if made as of such date) (disregarding all qualifications as to “materiality,” “Material Adverse Effect” or a similar qualifier), except, in each case of this clause (ii), to the extent that their failure to be so true and correct would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect; provided , however , that only those matters disclosed in the Schedules shall be deemed included in the Schedules hereto for purposes of determining the accuracy of the representations and warranties of Seller as of the Closing.

(d) Compliance with Covenants . The covenants and agreements contained in this Agreement to be complied with and/or performed by Seller at or before the Closing Date shall have been complied with and/or performed in all material respects.

 

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(e) Closing Certificate . Seller shall have furnished Purchaser with a certificate, executed by a duly authorized officer of each Seller, certifying the matters set forth in Sections  7.1(c) and 7.1(d) as of the Closing Date.

(f) Transaction Documents . Seller shall have delivered to Purchaser a duly executed counterpart of the Bill of Sale and Assumption Agreement. Chestnut shall have delivered the letter agreement attached hereto as Exhibit D and Comenity shall have delivered the letter agreement attached hereto as Exhibit E. Seller shall have furnished Purchaser with a properly completed IRS Form W-8BEN-E executed by a duly authorized officer of Seller.

(g) Chestnut Transaction . The Chestnut Transaction will close concurrently with the Closing.

(h) BMLI Transaction . The BMLI Transaction will close concurrently with the Closing.

(i) Comenity Transaction . The Comenity Transaction will close concurrently with the Closing.

Section 7.2 Conditions Precedent to Obligation of Seller. The obligation of Seller to consummate the transactions contemplated hereunder is subject to the satisfaction, on or prior to the Closing, of the following conditions, any or all of which may be waived in writing, in whole or in part, by Seller:

(a) Requisite Regulatory Approvals . The Requisite Regulatory Approvals shall have been obtained or made and shall be in full force and effect and all waiting periods required by applicable Requirements of Law in connection therewith shall have expired or been terminated.

(b) No Injunction or Other Restraint . No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Requirements of Law (whether temporary, preliminary or permanent) that remains in effect and that has the effect of making the transactions contemplated by this Agreement illegal or otherwise restraining, enjoining or prohibiting the consummation of the transactions contemplated hereby.

(c) Accuracy of Representations and Warranties . Each of the representations and warranties of Purchaser contained in this Agreement shall have been true and correct in all material respects as of the date of this Agreement and shall be true and correct in all material respects at and as of the Closing, as if made at and as of the Closing (other than any representation and warranty that is qualified by “materiality,” “material adverse effect” or a similar qualifier, which representation and warranty shall have been true and correct in all respects as of the date of this Agreement and shall be true and correct in all respects at and as of the Closing as if made at and as of the Closing), other than such representations and warranties as are made as of another date, which shall be true and correct in all material respects as if made as of such date, other than any representation and warranty is qualified by “materiality,” “material adverse effect” or a similar qualifier, which representation and warranty shall be true and correct in all respects.

 

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(d) Compliance with Covenants . The covenants and agreements contained in this Agreement to be complied with and/or performed by Purchaser at or before the Closing Date shall have been complied with and/or performed in all material respects.

(e) Closing Certificate . Purchaser shall have furnished Seller with a certificate, executed by a duly authorized officer of Purchaser, certifying the matters set forth in Sections 7.2(c) and 7.2(d) as of the Closing Date.

(f) Transaction Documents . Purchaser shall have delivered to Seller a duly executed counterpart of the Bill of Sale and Assumption Agreement. Chestnut shall have delivered the letter agreement attached hereto as Exhibit D and Comenity shall have delivered the letter agreement attached hereto as Exhibit E.

(g) No Material Adverse Effect . No Material Adverse Effect shall have occurred since the date of this Agreement.

(h) True Sale Opinions . Seller shall have received an opinion from counsel substantially in the form of the LuxCo True Sale Opinion and the U.S. True Sale Opinion, and a letter authorizing Seller to provide a copy of each such opinion to Seller’s financial auditors solely as an evidential matter in support of such auditors’ evaluation of management’s assertion that the transfer of the Acquired Assets meets the isolation criterion of ASC 860.

(i) Chestnut Transaction . The Chestnut Transaction will close concurrently with the Closing.

(j) BMLI Transaction . The BMLI Transaction will close concurrently with the Closing.

(k) Comenity Transaction . The Comenity Transaction will close concurrently with the Closing.

ARTICLE VIII

INTENTIONALLY OMITTED

ARTICLE IX

TERMINATION

Section 9.1 Termination . This Agreement may be terminated and the transactions contemplated by this Agreement may be abandoned, at any time before the Closing only by either Purchaser or Seller, in the event that the BMLI Purchase Agreement is terminated in accordance with its terms.

Section 9.2 Effect of Termination . In the event of the termination of this Agreement as provided in Section  9.1 , this Agreement shall thereupon become null and void and of no further force and effect, except for the provisions of Section  9.1 , this Section  9.2 and Article  XI ; provided , further , that nothing herein shall affect the rights or remedies of any party with respect to any breach of any provision of this Agreement prior to termination, including any breach of the obligation to close. Notwithstanding the foregoing, nothing in this Section  9.2 shall be deemed to release any party from any Liability for any breach by such party of any of the terms or provisions of this Agreement or impair the right of any party to compel specific performance by any other party of its obligations under this Agreement.

 

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ARTICLE X

SURVIVAL; INDEMNIFICATION

Section 10.1 Survival . All representations, warranties, covenants and obligations contained in this Agreement shall survive the consummation of the transactions contemplated by this Agreement; provided , however , that, except as otherwise provided in this Article  X , the representations and warranties contained in Article  IV (other than the Fundamental Representations) shall terminate on the 18-month anniversary of the Closing Date. Except as otherwise provided herein, no claim shall be made for the breach of any representation or warranty contained in Article  IV or under any certificate delivered with respect thereto under this Agreement after the date on which such representations and warranties terminate as set forth in this Section  10.1 .

Section 10.2 Indemnification by Seller .

(a) Seller will save, defend and indemnify Purchaser and its Affiliates and each of their respective directors, officers and employees (collectively with Purchaser and its Affiliates, the “ Purchaser Indemnitees ”) against, and agrees to hold each of them harmless from, any and all Losses incurred or suffered by any Purchaser Indemnitees and arising out of or resulting from (1) the failure of any representation or warranty made by Seller to be true and correct as of the Closing as if made on the Closing Date, (2) any breach of an agreement or covenant made by Seller in this Agreement, (3) any failure of Seller to comply with any applicable “bulk sales” or similar Requirements of Law in connection with the consummation of the transactions contemplated hereby or (4) any Excluded Liability of Seller related to or arising out of the Acquired Assets or the Program.

(b) The indemnification provided for in this Section  10.2 shall terminate on the 18-month anniversary of the Closing Date, except for:

(1) the representations and warranties of Seller set forth in Sections  4.1(a) , (b) , (e) and (h) (collectively, the “ Fundamental Representations ”) and the indemnification obligations set forth in Sections  10.2(a)(3) and 10.2(a)(4) , which shall survive indefinitely;

(2) the covenants set forth in Section  6.1 , all of which shall survive for 60 days following the expiration of the relevant statutes of limitations; and

(3) any Loss of which any Purchaser Indemnitee has notified Seller in accordance with the requirements of Section  10.6 on or prior to the date such indemnification would otherwise terminate in accordance with this Section  10.2 , as to which the obligation of Seller shall continue until the liability of Seller shall have been determined pursuant to this Article  X , and Seller shall have reimbursed all Purchaser Indemnitees for the full amount of such Loss in accordance with the terms hereof.

 

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Section 10.3 Limitations on Indemnification Obligations of Seller .

(a) Deductible . Notwithstanding anything to the contrary contained herein, Seller shall have no obligation to indemnify Purchaser or any Purchaser Indemnitees with respect to any Losses described in Section  10.2(a)(1) until the aggregate amount of the Losses for which the Purchaser Indemnitees are otherwise entitled to indemnification under Section  10.2(a)(1) exceeds the Deductible and, in which event, Seller shall be obligated to pay only the amount of all of the Losses for which the Purchaser Indemnitees are entitled to indemnification under Section  10.2(a)(1) that are in excess of the Deductible; provided , however , that the limitations contained in this Section  10.3(a) shall not apply to claims for indemnification in respect of breaches of any Fundamental Representations.

(b) Cap . Notwithstanding anything to the contrary contained herein, Seller shall have no Liability to indemnify Purchaser or any Purchaser Indemnitees from and against (1) Losses described in Section  10.2(a)(1) (other than in respect of any Fundamental Representations) to the extent such Losses exceed 6% of the Total Consideration or (2) Losses arising from a breach of any Fundamental Representations or Losses described in Section  10.2(a)(2) or in Section  10.2(a)(3) to the extent such Losses exceed the Total Consideration; provided, however, that the limitations contained in this Section  10.3(b) shall not apply to claims for indemnification with respect to Section  6.1 .

(c) Solely for purposes of calculating the amount of any Losses arising from a breach of any representation or warranty of Seller under Section  10.2(a)(1) (and not for purposes of determining whether a breach has occurred), such representation and warranty shall be considered without regard to any qualification by or reference to or the words “material,” “Material Adverse Effect,” “materially” or words of like import contained therein.

Section 10.4 Indemnification by Purchaser .

(a) Purchaser will save, defend and indemnify Seller and its Affiliates and each of their respective directors, officers and employees, (collectively with Seller and its Affiliates, “ Seller Indemnitees ”) against, and agrees to hold each of them harmless from, any and all Losses incurred or suffered by any Seller Indemnitee arising out of or resulting from (1) the failure of any representation or warranty made by Purchaser to be true and correct as of the Closing as if made on the Closing Date, (2) any breach of an agreement or covenant made by Purchaser in this Agreement or (3) any Assumed Liability.

(b) The indemnification provided for in this Section  10.3 shall terminate on the 18-month anniversary of the Closing Date, except for:

(1) the representations and warranties of Purchaser set forth in Sections 4.2(a) , (b) , (f) and (g) (collectively, the “ Purchaser Fundamental Representations ”) and the indemnification obligations set forth in Section  10.3(a)(3) , which shall survive indefinitely;

(2) the covenants set forth in Section  6.1 , which shall survive for 60 days following the expiration of the relevant statutes of limitations; and

 

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(3) any Loss of which any Seller Indemnitee has notified Purchaser in accordance with the requirements of Section  10.6 on or prior to the date such indemnification would otherwise terminate in accordance with this Section  10.4 , as to which the obligation of Purchaser shall continue until the liability of Purchaser shall have been determined pursuant to this Article  X , and Purchaser shall have reimbursed all Seller Indemnitees for the full amount of such Loss in accordance with the terms hereof.

Section 10.5 Limitations on Indemnification Obligations of Purchaser .

(a) Deductible . Notwithstanding anything to the contrary contained herein, Purchaser shall have no obligation to indemnify Seller or any Seller Indemnitees with respect to any Losses described in Section  10.4(a)(1) until the aggregate amount of the Losses for which the Seller Indemnitees are otherwise entitled to indemnification under Section  10.4(a)(1) exceeds the Deductible and, in which event, Purchaser shall be obligated to pay only the amount of all of the Losses for which the Seller Indemnitees are entitled to indemnification under Section  10.4(a)(1) that are in excess of the Deductible; provided , however , that the limitations contained in this Section  10.5(a) shall not apply to claims for indemnification in respect of breaches of any Purchaser Fundamental Representations.

(b) Cap . Notwithstanding anything to the contrary contained herein, Purchaser shall have no Liability to indemnify Seller or any Seller Indemnitees from and against (1) Losses described in Section  10.4(a)(1) (other than in respect of any Purchaser Fundamental Representations) to the extent such Losses exceed 6% of the Total Consideration or (2) Losses arising from a breach of any Purchaser Fundamental Representations or described in Section  10.4(a)(2) to the extent such Losses exceed the Total Consideration; provided, however, that the limitations contained in this Section  10.5(b) shall not apply to claims for indemnification with respect to Section  6.1 .

(c) Solely for purposes of calculating the amount of any Losses arising from a breach of any representation or warranty of Purchaser under Section  10.4(a)(1) (and not for purposes of determining whether a breach has occurred), such representation and warranty shall be considered without regard to any qualification by or reference to or the words “material,” “Material Adverse Effect,” “materially” or words of like import contained therein.

Section 10.6 Indemnification; Notice and Settlements .

(a) In the event that any Purchaser Indemnitee or Seller Indemnitee (the “ Indemnified Party ”) has or deems in good faith to have incurred or suffered, or believes in good faith that it may reasonably incur or suffer, Losses for which it may be entitled to indemnification hereunder, such Indemnified Party may give to the party obligated to provide indemnification to such Indemnified Party (the “ Indemnifying Party ”) a notice (a “ Claim Notice ”) describing in reasonable detail the facts giving rise to any claim for indemnification hereunder and shall include in such Claim Notice (if then known) the amount or the method of computation of the amount of such claim, and a reference to the provision of this Agreement or any other agreement, document or instrument executed hereunder or in connection herewith upon which such claim is based; provided , however , that a Claim Notice in respect of any pending or threatened action at law or suit in equity by or against a third Person as to which

 

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indemnification will be sought (each such action or suit being a “ Third Person Claim ”) shall be given promptly after the Indemnified Party becomes aware of the commencement of the action or suit; provided further ; however , that failure to give such notice shall not limit the obligations of any Indemnifying Party hereunder except to the extent that such failure to give notice materially prejudices the defense of such Third Person Claim.

(b) After the giving of any Claim Notice pursuant hereto, the amount of indemnification to which an Indemnified Party shall be entitled under this Article  X shall be determined: (i) by the written agreement between the Indemnified Party and the Indemnifying Party; (ii) by a final judgment or decree of any court of competent jurisdiction; or (iii) by any other means to which the Indemnified Party and the Indemnifying Party shall agree. The judgment or decree of a court shall be deemed final when the time for appeal, if any, shall have expired and no appeal shall have been taken or when all appeals taken shall have been finally determined.

(c) The Indemnifying Party shall have the right to conduct and control, through counsel of its choosing, the defense, compromise or settlement of any Third Person Claim against any Indemnified Party as to which indemnification will be sought by any Indemnified Party from any Indemnifying Party hereunder, and in any such case the Indemnified Party shall cooperate in connection therewith and shall furnish such records, information and testimony and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested by the Indemnifying Party in connection therewith; provided , however , that:

(1) the Indemnified Party may participate in, through counsel chosen by it and at its own expense, but may not determine or conduct, the defense of any such Third Person Claim as to which the Indemnifying Party has so elected to conduct and control the defense thereof; and

(2) the Indemnifying Party shall not, without the written consent of the Indemnified Party (which written consent shall not be unreasonably conditioned, withheld or delayed), pay, compromise or settle any such Third Person Claim.

(d) If the Indemnifying Party elects not to proceed with the defense of any Third Person Claim, then the Indemnified Party shall have the right to conduct and control, through counsel reasonably satisfactory to the Indemnifying Party, the defense, compromise or settlement of any such Third Person Claim against such Indemnified Party as to which indemnification will be sought by any Indemnified Party from any Indemnifying Party hereunder; provided , however , that the Indemnified Party shall not pay, settle or compromise any such Third Person Claim without the prior written consent of the Indemnifying Party (which consent shall not be unreasonably conditioned, withheld or delayed).

(e) In the event of any conflict between the provisions of Article  VI and the provisions of this Article  X , the provisions of Article  VI shall control in all respects.

 

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Section 10.7 Additional Indemnification Provisions . With respect to each indemnification obligation contained in this Agreement, all Losses shall be calculated (a) on an After-Tax Basis and (b) net of actual recoveries under existing insurance policies (net of any applicable collection costs and reserves, deductibles, premium adjustments and retrospectively rated premiums), it being understood that an Indemnified Party shall not be obligated to seek recovery under or maintain insurance policies. No Purchaser Indemnitee shall make any claim for indemnification under this Article  X in respect of the amount of any Loss to the extent that such amount was included in the calculation of the Total Consideration pursuant to Section  2.4 and effected a dollar-for-dollar reduction thereof, and no Purchaser Indemnitee shall be entitled to recover pursuant to the provisions of Article VI or the provisions of this Article X to the extent it has recovered such Losses based on a claim for indemnification under any Other PSA or the New Program Agreement.

Section 10.8 Exclusive Remedy . Except (x) in respect of intentional fraud knowingly committed, (y) with respect to any equitable remedies pursuant to Section  11.11 or (z) for breach of Section  11.12 hereof, Seller and Purchaser acknowledge and agree that the indemnification provisions of this Article  X shall be the exclusive remedy between the parties following the Closing for the matters covered by this Agreement (including any liabilities arising prior to the Closing), and no party shall seek any other monetary recovery from the other party with respect to such matters under theories of strict liability, negligence or other theory of recovery, whether under contract or tort or at law or in equity; provided , however , that the foregoing limitations shall not apply to any damages to the extent arising out of, relating to or caused by intentional fraud knowingly committed by Seller or Purchaser, respectively, or any remedies that cannot be waived as a matter of law.

Section 10.9 Mitigation . Each of the parties agrees to use commercially reasonable efforts to mitigate their respective Losses to the extent required by applicable Requirements of Law.

Section 10.10 Coordination with New Program Agreement . If an event or circumstance related to the Program that gives rise to a party’s rights under Article IX of the New Program Agreement or Schedule 9.5 of the New Program Agreement also arises out of a pattern, practice, event or circumstance that existed in the Program prior to the Cut-off Time and that also may be subject to indemnification pursuant to this Agreement, the following shall, but without any duplication, govern the coordination of rights under this Agreement and the New Program Agreement:

(a) Except as set forth in Section 9.6(a) of the New Program Agreement, the rights and remedies with respect to Losses that arise out of acts or omissions prior to the Closing shall be governed by this Agreement; and

(b) The rights and remedies with respect to Losses that arise out of acts or omissions after the Closing shall (to the extent applicable) be governed by Article IX of the New Program Agreement and Schedule 9.5 of the New Program Agreement;

(c) If Losses arising out of or relating to a pattern, practice, event or circumstance described above are not differentiated according to the timing of the underlying event or circumstance (“ Undifferentiated Losses ”), e.g., attorneys’ fees, that applies to the resolution of the entire matter, the Undifferentiated Losses shall be allocated between this Agreement and the New Program Agreement in proportion to the amount of Losses that are ordered or agreed to be remediated with respect to the periods before and after the Closing Date.

 

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ARTICLE XI

MISCELLANEOUS

Section 11.1 Notices . All notices, requests, demands or other communications that are required or may be given pursuant to the terms of this Agreement shall be in writing and shall be deemed to have been duly given: (a) on the date of delivery, if personally delivered by hand, (b) upon the fourth day after such notice is deposited in the United States mail, if mailed by registered or certified mail, postage prepaid, return receipt requested or (c) on the Business Day scheduled for delivery (or if such date is not a Business Day, the next Business Day), if such notice is sent by a nationally recognized overnight express courier if addressed as follows:

if to Purchaser to:

Synchrony Bank

170 W. Election Road

Draper, Utah 84020

Attention: President

with copies to:

Synchrony Financial

777 Long Ridge Rd., Building S

Stamford, CT 06927

Attention: Chief Financial Officer

and

Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, NY 10153

Attention: Jon-Paul Bernard

if to Seller to:

PayPal (Europe) S.À R.L. et CIE, S.C.A.

22 – 24 boulevard Royal

Luxembourg

L-2449

Attn: Rupert Keeley

 

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with a copy to:

PayPal (Europe) S.À R.L. et CIE, S.C.A.

22 – 24 boulevard Royal

Luxembourg

L-2449

Attn: David Ferri

Notices and other communications may also be sent to such other address or addresses as Purchaser or Seller may from time to time designate by notice as provided herein, except that notices of change of address will be effective only upon receipt.

Section 11.2 Successors and Assigns . This Agreement shall be binding upon: (a) Seller and Seller’s successors and permitted assigns (if any) and (b) Purchaser and its successors and permitted assigns (if any). Subject to the terms and conditions of the New Program Agreement, following the Closing, Purchaser may freely assign any or all of its rights under this Agreement (including its indemnification rights under Article  X ), in whole or in part, to any other Person (1) that is an Affiliate of Purchaser or (2) in connection with any merger or consolidation or the sale, transfer or other disposition of the Acquired Assets, in each case, without obtaining the consent or approval of any other party hereto or of any other Person; provided , however , that no such assignment shall release Purchaser from any Liabilities under this Agreement. Seller shall not be permitted to assign any of Seller’s rights or delegate any of Seller’s obligations under this Agreement without Purchaser’s prior written consent. Any attempted assignment or delegation in violation of this Section  11.2 shall be null and void.

Section 11.3 Entire Agreement; Amendment; Waiver . The Transaction Documents embody the entire agreement of the parties hereto with respect to the purchase and sale of the Acquired Assets and supersede all prior agreements with respect thereto. Any waiver by either party of a breach of any provision of this Agreement shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Agreement. Any waiver must be in writing and signed by the party to be charged therewith. The waiver of any condition to Closing based on the accuracy of any representation or warranty, or the performance of or compliance with any covenant or obligation, will not affect the right to indemnification, payment of damages or other remedy based on the inaccuracy of such representation or warranty or the failure to perform or comply with such covenant or obligation. In no event shall a term or provision of this Agreement be deemed to have been modified or amended, unless a modification or amendment is in writing and signed by the parties hereto.

Section 11.4 Counterparts . This Agreement may be executed in two or more counterparts any of which may be delivered by facsimile or electronic transmission and all of which will together constitute one and the same instrument. The parties acknowledge that delivery of executed copies of this Agreement may be effected by facsimile, electronic or other comparable means.

 

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Section 11.5 Governing Law and Venue . The parties acknowledge that this Agreement shall be governed, enforced, performed and construed in accordance with the laws of the State of New York (excepting only those conflicts of laws provisions which would serve to defeat the operation of New York substantive law). Each party acknowledges that its legal counsel participated in the drafting of this Agreement. The parties hereby irrevocably submit themselves to the exclusive personal and subject matter jurisdiction of the state and federal courts located in the State of New York for the resolution of all disputes, whether at law or in equity, arising from or relating to this Agreement and/or the enforcement or interpretation of any of the terms or conditions hereof.

Section 11.6 Waiver of Jury Trial . EACH PARTY HERETO IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

Section 11.7 Severability . If any term or condition of this Agreement should be held invalid by a court, arbitrator or tribunal of competent jurisdiction in any respect, such invalidity shall not affect the validity of any other term or condition hereof. If any term or condition of this Agreement should be held to be unreasonable as to time, scope or otherwise by such a court, arbitrator or tribunal, it shall be construed by limiting or reducing it to a minimum extent so as to be enforceable under then applicable Requirements of Law.

Section 11.8 Public Announcement . From and after the date hereof, except as expressly contemplated by this Agreement, neither Seller nor Purchaser shall (and each of Seller and Purchaser shall ensure that none of its respective Representatives shall) issue any press release or make any public statement regarding (or otherwise disclose to any Person the existence or terms of) this Agreement, any Other PSA or any of the transactions or documents contemplated by this Agreement (including the New Program Agreement) or the Other PSAs, without the other party’s prior written consent, except (a) as required in order to fulfill its obligations hereunder ( e.g. , in connection with seeking the Requisite Regulatory Approvals); (b) for disclosure of information that (i) is not inconsistent with any mutually agreed release or announcement previously issued or (ii) is required by applicable Requirements of Law or the rules or regulations of any stock exchange on which a party’s ultimate parent company’s securities are traded or of any other Governmental Authority having jurisdiction over such party; and (c) for disclosures to Persons involved in dispute resolution proceedings hereunder (including courts, arbitrators, witnesses, experts and attorneys) who are instructed or otherwise under a legal or ethical obligation to maintain the confidentiality of the disclosed information. Purchaser shall not provide the counterparty to any Other PSA with consent to issue any press release or make any public statement regarding (or otherwise disclose to any Person the existence or terms of) any Other PSA or any of the transactions or documents contemplated by the Other PSAs, without the prior written consent of Seller.

Section 11.9 Third-Party Beneficiaries . Nothing in this Agreement, expressed or implied, will confer on any person, other than the parties hereto or their respective successors and assigns, any rights, remedies, obligations or liabilities; provided , however , that the provisions of Article  X will inure to the benefit of the Indemnified Parties.

Section 11.10 Expenses . Except as otherwise expressly stated in this Agreement or in the New Program Agreement, any expenses incurred by either of the parties hereto shall be borne by the party incurring such cost, expense or charge whether or not the series of transactions contemplated by this Agreement shall be consummated.

 

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Section 11.11 Specific Performance and Other Equitable Relief . The parties hereby expressly recognize and acknowledge that given the uniqueness of the Acquired Assets and the transactions contemplated hereby, neither party will have an adequate remedy at law for money damages in the event that this Agreement has not been performed in accordance with its terms and that immediate, extensive and irreparable damage would result in the event that this Agreement is not specifically enforced. Therefore, in addition to, and not in limitation of, any other remedy available to the parties hereto, in the event of any breach or threatened breach by a party to this Agreement of any covenant, obligation or other provision of such party set forth in this Agreement, the non-breaching party shall be entitled to a decree or order of specific performance or mandamus to enforce the observance and performance of such covenant, obligation or other provision and an injunction restraining such breach or threatened breach, without the requirement to provide any bond or other security in connection with any such decree, order or injunction or in connection with any related action. Each party hereby submits to the exclusive jurisdiction of the state or federal courts of the State of New York in any equitable proceeding for the enforcement of any such decree of specific performance, and agrees that such decree of specific performance may be entered in any court, in or out of the State of New York, having jurisdiction thereof.

Section 11.12 Confidentiality .

(a) General Confidentiality Obligation . All information furnished by a party (the “ Disclosing Party ”) to any other party (the “ Receiving Party ”) in connection with this Agreement or the other Transaction Documents shall be kept confidential and each party shall cause their respective Affiliates, officers, directors, employees, agents and advisors (including, attorneys, accountants, consultants, bankers and financial advisors) (collectively, with regard to either party, such party’s “ Representatives ”), to keep confidential and not disclose to any third party any and all information concerning the series of transactions contemplated herein, the terms of this Agreement and any other agreement or document executed in connection herewith and any and all information obtained from the other party concerning the assets, properties and business of the other party (such information, collectively, the “ Confidential Information ” of the Disclosing Party), and shall not use such Confidential Information for any purpose other than consummating the transaction contemplated by this Agreement; provided , however , that neither party shall be subject to the above obligations with respect to any such information provided to it by the other party that: (1) was in the Receiving Party’s possession or in the public domain at the time of the Disclosing Party’s disclosure (other than in connection with the structuring, negotiation and execution of this Agreement and any other agreement or document executed in connection herewith and the transactions contemplated herein), or subsequently enters the public domain other than in violation of this Agreement by the Receiving Party; (2) is obtained by the Receiving Party from a third party, that is not known by the Receiving Party to be subject to a confidentiality agreement with the Disclosing Party; (3) is independently developed by or on behalf of the Receiving Party or any of its Affiliates without the use of Confidential Information; (4) is discovered through examination of publicly available records or products; (5) is authorized for public disclosure by the Disclosing Party; or (6) is disclosed by a party to its auditors or counsel or is required to be disclosed to its lenders, to the extent required for the purpose of

 

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consummating the transactions contemplated hereby. The parties recognize and acknowledge that, following the Closing, Borrower Data and all information contained therein including the Borrower Lists shall be treated in accordance with Articles III and X of the New Program Agreement. Disclosure of the other party’s Confidential Information shall not be precluded under this Agreement if such disclosure is (i) required by Requirements of Law, including the rules and regulations of any stock exchange on which the Receiving Party’s ultimate parent company’s securities are traded or of any other Governmental Authority having jurisdiction over the Receiving Party or (ii) in response to a valid subpoena or order of a court or other Governmental Authority or other valid legal process; provided , however , that, in the event that either party hereto receives a request to disclose any Confidential Information in connection with a process described in the preceding clause (2)  of this Section  11.12(a) , such party shall (A) to the extent practicable in the circumstances, notify the other party thereof promptly after receipt of such request, (B) consult with the other party on the advisability of taking steps to resist or vary such request, and (C) if disclosure is required or deemed advisable, cooperate with the other party in any attempt that it may make to obtain a protective order or other reliable assurance that confidential treatment will be applied to the Confidential Information. Any expenses incurred hereunder shall be the responsibility of the party that owns such Confidential Information.

(b) Return of Confidential Information . In the event that the transactions contemplated by this Agreement shall fail to be consummated, each party shall promptly cause all originals and copies of documents or extracts thereof containing such Confidential Information and data as to a Disclosing Party to be returned to the Disclosing Party or destroyed, at such party’s election, and, upon written request from the Disclosing Party, shall cause an officer to so certify to the Disclosing Party; provided , however , that a party may retain a list containing general descriptions of information destroyed; provided further , however , that nothing herein shall require (1) the Receiving Party or its Representatives to erase any Confidential Information that is an archived computer system backup in accordance with its or their security and/or disaster recovery procedures and (2) if statutory or regulatory document retention obligations or internal compliance policies require the Receiving Party to retain a certain portion of the Confidential Information, the Receiving Party may retain copies of such portion as part of its customary storage archives, provided that access to any such Confidential Information so retained shall be limited only to such persons as may be necessary to comply with the applicable statutory or regulatory document retention obligations or compliance policies.

(c) Post-Closing.

(1) On and after the Closing Date, Purchaser shall be deemed to be the Disclosing Party with respect to all information furnished by Seller to Purchaser relating to the Acquired Assets that were sold under this Agreement, and Seller shall be deemed to be the Receiving Party of such information.

(2) Subject to the limitations of this Section  11.12(c) , Purchaser hereby agrees that Seller may use and disclose PSA Residual Information solely as contemplated by the New Program Agreement.

 

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(3) “ PSA Residual Information ” means information described in clause (a)  or clause (b)  of the definition of Borrower Data, including information from a Borrower List in the possession or control of Seller, its Affiliates or service providers.

(d) Violation of Law . Notwithstanding anything to the contrary in this Agreement, a party shall not be obligated to take any action with respect to the collection, use or disclosure of information made in connection with this Agreement that such party reasonably believes would cause or would be reasonably expected to cause a party to violate any Requirements of Law (including privacy and security laws and the reuse and re-disclosure provisions of the Gramm-Leach-Bliley Act).

Section 11.13 Further Assurances . Each party shall, whenever and as often as reasonably requested to do so by the other party, execute, acknowledge and deliver any and all such other and further acts, assignments, endorsements, transfers and any instruments of further assurance, approvals and consents as are necessary or proper in order to complete, ensure and perfect the transactions contemplated hereby.

[ Signature page follows ]

 

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IN WITNESS WHEREOF, this Agreement has been executed on behalf of each of the parties hereto as of the day and year first above written.

 

SYNCHRONY BANK
By:  

/s/ Thomas Quindlen

  Name: Thomas Quindlen
  Title:   EVP Retail Card
PAYPAL (EUROPE) S.À R.L. ET CIE, S.C.A.
By:  

/s/ Sean Byrne

  Name: Sean Byrne
  Title:   Chief Operating Officer

Exhibit 99.1

 

LOGO

PayPal and Synchrony Financial Announce Expanded Strategic Credit Relationship

Synchrony Financial to Acquire U.S. Consumer Credit Receivables from PayPal, Companies Extend Co-Brand Credit Card Relationship

SAN JOSE, Calif. and STAMFORD, Conn. – November 16, 2017 – PayPal Holdings, Inc. (NASDAQ: PYPL) and Synchrony Financial (NYSE: SYF) today announced an agreement to significantly expand their strategic consumer credit relationship. Under the terms of the transaction, Synchrony Financial will acquire $6.8 billion in receivables, including PayPal’s U.S. consumer credit receivables portfolio, which totaled approximately $5.8 billion in receivables as of October 31, 2017, and approximately $1 billion in participation interests in receivables held by certain investors and a chartered financial institution. Subject to regulatory approval and other customary conditions, this transaction is expected to close in the third quarter of 2018.

In addition, at closing, PayPal and Synchrony Bank will extend the existing co-brand consumer credit card program agreement, and Synchrony Bank will also become the exclusive issuer of the PayPal Credit online consumer financing program, in the U.S. for 10 years.

“Providing great payments experiences to our customers is at the core of everything we do,” said Dan Schulman, President and CEO of PayPal. “Our expanded relationship with Synchrony Financial will free up cash currently used to fund consumer credit receivables for other uses, while accelerating our ability to deliver engaging credit and payments experiences for our customers. We believe this transaction significantly advances our strategic and financial goals.”

“This collaboration builds on a key partner relationship in the rapidly growing digital payments space and expands our capabilities within the merchant environment,” said Margaret Keane, President and Chief Executive Officer of Synchrony Financial. “The partnership with PayPal extends our expertise in advanced analytics and underwriting across all digital channels, providing deeper insights into the unique needs of the PayPal customer.”

Since 2004, PayPal and Synchrony Bank have partnered to offer PayPal-branded consumer credit card options that enable cardholders to shop online and in stores. PayPal and Synchrony Bank will be expanding their program agreement to include the PayPal Credit online consumer financing program available to PayPal’s U.S. customers. Through this expanded relationship, PayPal will continue to provide access to innovative consumer credit products, while Synchrony Bank will provide program management capabilities. This transaction enables PayPal to control customer-facing activities, which aligns with PayPal’s strategy of enhancing the consumer experience, while simultaneously allowing for more efficient capital allocation.

Online consumer financing has been a strategic offering of the PayPal platform since 2008, and is a proven driver of consumer and merchant engagement. The expanded agreement with Synchrony Bank for both the U.S. PayPal Credit online consumer financing program and the U.S. PayPal-branded

 

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consumer credit card program complements PayPal’s successful partnering strategy and allows PayPal to collaborate with an industry leader to enrich and expand PayPal’s consumer credit offerings. The expanded relationship will enable innovative customer experiences by leveraging the joint capabilities and strengths of each company.

BofA Merrill Lynch acted as the financial advisor to PayPal. Morgan Stanley & Co. LLC acted as the financial advisor to Synchrony Financial.

PayPal will host a conference call to discuss the transaction at 5:30 a.m. Pacific Standard Time (PST) today. A live webcast of the conference call, together with a slide presentation, can be accessed through the company’s Investor Relations website at https://investor.paypal-corp.com . In addition, an archive of the webcast will be accessible for 90 days through the same link.

About PayPal

Fueled by a fundamental belief that having access to financial services creates opportunity, PayPal (Nasdaq: PYPL) is committed to democratizing financial services and empowering people and businesses to join and thrive in the global economy. Our open digital payments platform gives PayPal’s 218 million active account holders the confidence to connect and transact in new and powerful ways, whether they are online, on a mobile device, in an app, or in person. Through a combination of technological innovation and strategic partnerships, PayPal creates better ways to manage and move money, and offers choice and flexibility when sending payments, paying or getting paid. Available in more than 200 markets around the world, the PayPal platform, including Braintree, Venmo and Xoom, enables consumers and merchants to receive money in more than 100 currencies, withdraw funds in 56 currencies and hold balances in their PayPal accounts in 25 currencies. For more information on PayPal, visit https://www.paypal.com/about . For PayPal financial information, visit https://investor.paypal-corp.com .

Forward Looking Statements About PayPal

This announcement contains “forward-looking” statements within the meaning of applicable securities laws. Forward-looking statements and information relate to future events and future performance and reflect, among other things PayPal’s expectations regarding the anticipated benefits of this transaction and the timing of the closing of the transaction. Forward looking statements may be identified by words such as “seek”, “believe”, “plan”, “estimate”, “anticipate”, expect”, “intend”, and statements that an event or result “may”, “will”, “should”, “could”, or “might” occur or be achieved and any other similar expressions.

Forward-looking statements involve risks and uncertainties which may cause actual results to differ materially from the statements made. Factors that could cause or contribute to such differences include, but are not limited to, the timing and possible outcome of regulatory approvals in connection with the transaction, the possibility that the transaction may not close, and the possibility that the anticipated benefits of the transaction may not be realized. More information about these and other factors can be found in PayPal Holdings, Inc.’s most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings with the Securities and Exchange Commission (the “SEC”), and its future filings with the SEC.

 

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There are no assurances PayPal can fulfill forward-looking statements and information. Such forward-looking statements and information are only predictions based on current information available to the PayPal management team as of the date that such predictions are made; actual events or results may differ materially as a result of risks facing PayPal, some of which are beyond PayPal’s control. Although PayPal believes that any forward-looking statements and information contained in this press release are based on reasonable assumptions, readers cannot be assured that actual outcomes or results will be consistent with such statements. Accordingly, readers should not place undue reliance on forward-looking statements and information.

About Synchrony Financial

Synchrony Financial (NYSE: SYF ) is one of the nation’s premier consumer financial services companies. Our roots in consumer finance trace back to 1932, and today we are the largest provider of private label credit cards in the United States based on purchase volume and receivables.* We provide a range of credit products through programs we have established with a diverse group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations and healthcare service providers to help generate growth for our partners and offer financial flexibility to our customers. Through our partners’ over 365,000 locations across the United States and Canada, and their websites and mobile applications, we offer our customers a variety of credit products to finance the purchase of goods and services. Synchrony Financial offers private label credit cards, Dual Card™, and general purpose co-branded credit cards, promotional financing and installment lending, loyalty programs and FDIC-insured savings products through Synchrony Bank. More information can be found at www.synchronyfinancial.com, facebook.com/SynchronyFinancial, www.linkedin.com/company/synchrony-financial and twitter.com/SYFNews.

 

* Source: The Nilson Report (June 2017, Issue # 1112) - based on 2016 data.

Forward Looking Statements About Synchrony Financial

This announcement contains certain forward-looking statements within the meaning of applicable securities laws. Forward-looking statements may be identified by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “targets,” “outlook,” “estimates,” “will,” “should,” “may” or words of similar meaning, but these words are not the exclusive means of identifying forward-looking statements. Forward-looking statements are based on management’s current expectations and assumptions, and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, actual results could differ materially from those indicated in these forward-looking statements.

We caution you against relying on any forward-looking statements, including those that are included in our public filings, which should be read in conjunction with the other cautionary statements that are included in our public filings, including under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, as filed on February 23, 2017. You should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties, or potentially inaccurate assumptions that could cause our current expectations or beliefs to change. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law.

 

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For PayPal

Investors:

Gabrielle Rabinovitch

Vice President, Investor Relations

grabinovitch@paypal.com

or

Media:

Amanda Miller, 408-219-0563

Director, Corporate Communications

amanmiller@paypal.com

For Synchrony Financial

Investors:

Greg Ketron, 203-585-6291

Investor Relations

investorrelations@syf.com

or

Media:

Lisa Lanspery, 203-585-6143

Corporate Communications

Lisa.Lanspery@syf.com

###

 

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