CREDIT CARD ACCOUNT PURCHASE
AGREEMENT
This Credit Card
Account Purchase Agreement (“Agreement”) is made as of
this 15 day of April, 2008 (the “Effective Date”),
by and between U.S. Bank National Association ND, d/b/a Elan
Financial Services, a national bank with its main office located at
4325 17 th
Ave. SW, Fargo, North Dakota 58103
(“Purchaser”), and Delaware National Bank, a national
association, with its main office located at 21035 Dupont Highway,
Georgetown, Delaware 19947 (“Seller”).
WHEREAS, Seller is
the issuer of MasterCard- or Visa-branded credit card accounts;
and
WHEREAS, Seller
desires to sell and transfer and Purchaser desires to purchase the
Accounts (as defined below), at the beginning of the Business Day,
on April 15, 2008, (the “Closing Date”) as well as
all Account balances owed by Cardholders (as defined below) on such
Accounts.
WHEREAS, Purchaser
desires to convert the Seller’s Accounts and their respective
balances to the Purchaser’s own processing platform and
Seller agrees to assist in this effort.
NOW, THEREFORE, in
consideration of the mutual covenants contained in this Agreement,
and for other good and valuable consideration, Purchaser and Seller
agree as follows:
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A.
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For
purposes of this Agreement and except as otherwise specifically set
forth in the text of the Agreement, capitalized terms shall have
the meanings specified in Exhibit A, attached hereto and
incorporated by reference. If there is a conflict between the
definition ascribed to a capitalized term defined herein and the
same term defined in another agreement entered into by the parties
to this Agreement, the definition set forth in this Agreement shall
control for the purposes of this Agreement and any Exhibits and
Schedules attached hereto or referenced in this
Agreement.
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B.
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All
terms defined in this Agreement shall have the same meaning in any
Exhibits and Schedules attached hereto or referenced in this
Agreement.
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C.
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Other terms defined herein shall
have the meanings set forth in the context of their use.
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II. GENERAL RIGHTS AND
RESPONSIBILITIES
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1.
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Seller agrees to sell, and Purchaser
agrees to purchase open Accounts and closed Accounts with a
balance, as they exist as of the Seller’s close of business
on the Closing Date (separately and collectively, the
“Accounts to be Sold”). Accounts to be Sold shall not
include any Ineligible Account as defined in Section II.A.2.
below.
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2.
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“Ineligible Account”
means an Account:
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a.
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which has been identified in the
Seller’s processing system as deceased, or with respect to
which the Cardholder obligated on such Account has died before the
Closing Date and there is no remaining Cardholder obligated on such
Account;
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b.
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which as of the Closing Date was or
should have been canceled or blocked because (i) an applicable
Cardholder has notified Seller that the Credit Card was lost or
stolen; (ii) fraud (either in connection with the use of, the
application for, or the establishment of such Credit Card) or
unauthorized use occurred; or (iii) an applicable Cardholder
notified Seller (or Seller otherwise became aware using
Seller’s Policies and Procedures) that fraud or unauthorized
use may have occurred in connection with any such Account. Should
those circumstances be identified post Closing Date, Purchaser
agrees to purchase the legitimate portion of the balances and such
balances will become an Account to be Sold;
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c.
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with respect to which any Cardholder
obligated on such Account is, or within thirty (30) days after
the Closing Date has filed to be, a debtor in a proceeding
instituted under the United States Bankruptcy Code or any
bankruptcy, insolvency or other law for the relief of debtors prior
to the Closing Date and for which, other than such Cardholder,
there is no other responsible Cardholder obligated on the Account;
or any such Account where the Cardholder is working with Seller or
a consumer credit counseling service for altered pay-off
terms;
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d.
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which is, as of the Closing Date,
five or more payments past due;
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e.
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which was or should have been
written off prior to the Closing Date in accordance with
Seller’s customary accounting practices;
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f.
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which has been closed in accordance
with Seller’s Policies and Procedures and has a balance that
is equal to or less than zero as of the Closing Date;
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g.
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which as of the Closing Date is
subject to any lien, interest, or right of any affiliate of Seller
or any third party, excluding Secured Accounts that are subject to
recourse; or is an Account that is securitized;
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h.
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which as of the Closing Date has an
annual percentage rate on any balance that cannot be changed by
Seller because of the terms or provisions of the Cardholder
Agreement or any marketing materials for such Account or any
Requirements of Law (including, but not limited to, Accounts
subject to a consumer credit counseling service payment plan
agreement or court order, but specifically excluding any Accounts
subject to the Servicemembers Civil Relief Act as of the Closing
Date), or any Limited-Change Accounts);
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i.
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which as of the Closing Date is not
governed by the terms of a Cardholder Agreement;
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j.
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on
which there exists a billing dispute as of the Closing Date,
excluding billing disputes relating to a purchase;
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k.
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which as of the Closing Date has an
outstanding compliance or arbitration case that has not been
decided and processed by Seller accordingly; or
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l.
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which as of the Closing Date is the
subject matter of current litigation (or past litigation but with
appeals available) or similar dispute with Seller.
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B.
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Purchase Price, Assignment and
Transfer of Accounts to be Sold .
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1.
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Purchase Price
. The purchase price of
the Accounts to be Sold (the “Purchase Price”) shall be
calculated as follows: 100% of the Principal Balance as of the
Cut-Off Time of the Accounts to be Sold, plus the Premium described
in Schedule A.
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2
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a.
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Upon and as of the Closing Date,
subject to the satisfaction or waiver of each condition precedent
specified in Section X of this Agreement, Seller hereby sells,
assigns, transfers, and conveys to Purchaser and Purchaser
purchases, all of Seller’s right, title and interest in and
to all of the following assets (collectively, the “Assets to
be Sold”):
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1.
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the
Accounts to be Sold;
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2.
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all
Related Receivables;
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3.
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the
Customer Base of the Accounts to be Sold;
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4.
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the
Credit Cards and all instruments and other Account Documentation
relating to the Accounts to be Sold;
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5.
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any
rights or claims which Seller may have against any third Persons
with respect to any indebtedness owing or purportedly owing on any
Account to be Sold (which transfer of such rights and claims to
Purchaser shall not affect Purchaser’s rights to require a
repurchase by Seller as described in Section II.C. below with
respect to any Account sold to Purchaser);
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6.
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all
of Seller’s rights pursuant to the Cardholder Agreements
governing the Accounts to be Sold and the related Credit Cards;
and
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7.
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all
rights to any interchange fees paid or payable from a National
Association with respect to such Accounts to be Sold associated
with Cardholder transactions that occur after the Cut-Off
Time.
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b.
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Seller for itself and its successors
or assigns covenants to and agrees with Purchaser and its
successors and assigns that Seller shall execute all documents that
Purchaser may reasonably require to evidence Purchaser’s
ownership of the Accounts to be Sold. Seller shall cooperate with
Purchaser in preparing, executing and delivering any bills of sale,
assignments, or other documents, if any, as Purchaser, or counsel
for Purchaser, may reasonably require from time to time for
purposes of transferring the Accounts to be Sold to Purchaser,
evidencing Purchaser’s ownership of the Accounts to be Sold,
or carrying out any of the other objectives of this
Agreement.
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c.
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Insofar as the same is necessary to
facilitate the preservation or exercise of Purchaser’s rights
and powers created or transferred by this Agreement, Seller hereby
constitutes and appoints Purchaser and its successors and assigns
(and the officers, agents, employees or representatives thereof)
the true and lawful attorney or attorneys of Seller, with full
power of substitution, for Seller and in Seller’s name and
stead or otherwise, by and on behalf of and for the benefit of
Purchaser and its successors and assigns, to demand and receive the
Assets to be Sold and from time to time to institute and prosecute
in the name of Seller or otherwise, at the sole expense and for the
benefit of Purchaser and its successors and assigns, any and all
proceedings at law, in equity or otherwise that Purchaser and its
successors and assigns may deem proper in order to enforce any
claim, right or title of any kind in and to the Assets to be Sold
and to defend or compromise any and all actions, suits or
proceedings with respect to any of the Assets to be Sold and to do
all such other lawful acts and things in relation thereto as
Purchaser and its successors and assigns shall deem desirable,
Seller hereby declaring that the appointment hereby made and the
power hereby granted is irrevocable by Seller in any manner or for
any reason except as provided otherwise in this
Agreement.
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d.
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Seller shall take no action after
the Closing Date that would be inconsistent with the effective
transfer by Seller to Purchaser hereunder as of the Closing Date of
Seller’s entire right, title and interest in and to the
Accounts to be Sold. The parties agree that the transactions
contemplated herein constitute a sale and assignment of the
Accounts to be Sold to Purchaser and not a loan.
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3.
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Seller shall provide Purchaser, no
later than five (5) Business Days after the Closing Date, with
all necessary system reports to support the Preliminary Purchase
Price. No later than ten (10) Business Days following the
receipt of such information from Seller, Purchaser shall prepare a
Preliminary Closing Statement, in the form set forth in
Schedule A, setting forth the calculation of the Preliminary
Purchase Price. Payment terms relating to the Preliminary Purchase
Price are set forth in Section II.B.5., below.
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4.
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Within forty-five (45) days
after the Closing Date, Purchaser shall prepare a Closing
Statement, a form of which is attached hereto as Schedule A-1.
The Closing Statement will be used in part to identify adjustments
of the Preliminary Purchase Price based upon changes in
identification of Accounts to be Sold, including, without
limitation, Accounts to be Sold that should have been identified as
Ineligible Accounts. Payment terms relating to the Closing Payment
are set forth in Section II.B.5., below.
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5.
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Seller shall provide Purchaser with
written instructions designating the deposit account to which the
Preliminary Purchase Price and Closing Payment shall be transferred
or deposited by wire transfer or ACH. The Preliminary Purchase
Price shall be paid no later than five (5) Business Days
following presentation and mutual agreement on the Preliminary
Closing Statement. The Closing Payment shall be made to Seller no
later than five (5) Business Days after presentation and
mutual agreement of the Closing Statement.
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6.
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If
within fifteen (15) Business Days after Seller’s receipt
of the Preliminary Closing Statement or the Closing Statement,
Purchaser and Seller do not mutually agree on any line item in the
Preliminary Closing Statement or the Closing Statement (other than
the Preliminary Purchase Price or the Closing Payment), then Seller
shall notify Purchaser in writing of all line items in dispute.
Within fifteen (15) Business Days after Seller’s notice
to Purchaser that some line items remain in dispute, the parties
shall contract with an independent public accounting firm mutually
acceptable to Seller and Purchaser to audit the line items in
dispute on the Preliminary Closing Statement or the Closing
Statement and any other items that must be reviewed to resolve the
dispute. The cost of such audit and the preparation of the revised
Preliminary Closing Statement or the Closing Statement
(respectively the “Audited Preliminary Closing
Statement” or “Audited Closing Statement”) shall
be shared equally between Purchaser and Seller. The Audited
Preliminary Closing Statement or Audited Closing Statement prepared
by such accounting firm shall be final, conclusive and binding on
the parties for matters covered thereby and a judgment may be
entered thereon. The Audited Preliminary Closing Statement or the
Audited Closing Statement shall be in a form substantially similar
to the Preliminary Closing Statement or the Closing Statement,
except that they will reflect either the Preliminary Purchase Price
or the Closing Payment established by the third party
auditor.
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1.
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Within ninety (90) days after
the Conversion Date, if Purchaser determines that any of the
Accounts to be Sold that were sold to Purchaser should have been
deemed to be an Ineligible Account as of the Closing Date,
Purchaser shall so notify Seller and Seller shall repurchase the
Ineligible Account(s) by paying to Purchaser, a purchase price
equal to the principal balance, which means the net amount,
including interest, fees, and any other charges owing by a
Cardholder to Purchaser on the Cardholder’s Account, of any
credit balance in favor of the Cardholder, and less disputed items
as recorded in the periodic statement of such Account most recently
rendered prior to the repurchase date, plus all debits and less any
credit properly posted to
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such Account pursuant to the terms
of the Cardholder Agreement as of the repurchase date, minus the
revenue Purchaser collected on such Ineligible Account(s) and, at
Purchaser’s discretion, the Premium for such Ineligible
Account(s). Failure by Purchaser to identify within such ninety
(90) days any Accounts to be Sold to be repurchased hereunder
shall result in forfeiture of Purchaser’s right to require
Seller to repurchase hereunder.
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2.
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By
no later than the Closing Date, Seller shall provide Purchaser with
a list of Accounts that have credit limits or balances that exceed
$50,000, along with the required financial documents pursuant to
Section II.F. Purchaser will apply Purchaser’s
established underwriting criteria to the Accounts based on the
financial reports Seller provides to Purchaser. If Purchaser does
not approve the Account(s), Seller shall execute a separate Full
Recourse Agreement on each Account, and the Account(s) will then
become Full Recourse Account(s). If Purchaser has purchased such
Accounts and Seller fails to execute any Full Recourse Agreement
with respect to any such Account, Seller, on Purchaser’s
written demand for repurchase, shall repay to Purchaser the
principal balance, which means the net amount, including interest,
fees, and any other charges owing by a Cardholder to Purchaser on
the Cardholder’s Account, of any credit balance in favor of
the Cardholder, and less disputed items as recorded in the periodic
statement of such Account most recently rendered prior to the
repurchase date, plus all debits and less any credit properly
posted to such Account pursuant to the terms of the Cardholder
Agreement as of the repurchase date, minus the revenue Purchaser
collected on such Account(s), and, at Purchaser’s discretion,
the Premium for said Accounts.
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3.
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By
no later than the Closing Date, Seller shall provide Purchaser with
a list of Secured Accounts. Seller shall execute a separate Full
Recourse Agreement on each Secured Account, and the Secured
Account(s) will then become Full Recourse Account(s). If Purchaser
has purchased such Secured Accounts and Seller fails to execute any
Full Recourse Agreement with respect to any such Secured Account,
Seller, on Purchaser’s written demand for repurchase, shall
repay to Purchaser the principal balance, which means the net
amount, including interest, fees, and any other charges owing by a
Cardholder to Purchaser on the Cardholder’s Secured Account,
of any credit balance in favor of the Cardholder, and less disputed
items as recorded in the periodic statement of such Secured Account
most recently rendered prior to the repurchase date, plus all
debits and less any credit properly posted to such Secured Account
pursuant to the terms of the Cardholder Agreement as of the
repurchase date, minus the revenue Purchaser collected on such
Secured Account(s), and, at Purchaser’s discretion, the
Premium for said Secured Accounts.
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4.
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Payments pursuant to the repurchase
obligations set forth in Sections II.C.1. to 3. above, or
pursuant to Section VI.C., shall be made via wire transfer if
the repurchase occurs during the Interim Servicing Period, or via
ACH if the repurchase occurs after the Interim Servicing Period or
if there is no Interim Servicing Period, within five
(5) Business Days after notice by Purchaser. Purchaser will
execute and deliver to Seller any documents reasonably necessary to
reassign and transfer any purchased Account(s) to Seller, and will
take all steps reasonably necessary to facilitate the transfer of
the Account(s), including title therein, back to Seller. Following
the repurchase of an Account by Seller hereunder (“as
is” and without recourse to Purchaser), Purchaser will close
the Account on its books, and Seller shall own, have full servicing
responsibility for, and assume all obligations with respect to,
such Account(s) (whether arising before, on, or after the Closing
Date). Purchaser shall be responsible for necessary reporting to a
credit bureau related to the Accounts and Purchaser’s
records, and Seller shall be responsible for any credit bureau
reporting necessary related to the continued existence and
collection, if any, of the Account(s) by Seller.
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D.
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Assumption of Liabilities
. Except as otherwise
expressly set forth herein or, if applicable, in the Interim
Servicing Agreement, upon the satisfaction or waiver of each
condition precedent specified in Section X.A of this
Agreement, Purchaser shall assume the following obligations, each
without the execution or delivery of any additional document, on
the Closing Date:
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1.
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All
of the obligations of Seller arising after the Cut-Off Time to
perform under the Cardholder Agreements, and the Security
Agreements included in the Accounts to be Sold (excluding
obligations for Account Benefits pursuant to Section III.B.);
and
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2.
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All
of the obligations of Seller arising after the Cut-Off Time to
perform with respect to the Accounts to be Sold under any
Requirements of Law, except for those charges: (a) arising
from Seller’s violation on or before Cut-Off Time to any
Requirements of Law; or (b) arising from or relating to any
special assessments with respect to periods up to and including the
Cut-Off time (collectively, the “Assumed Liabilities”).
Prior to the Conversion Date, the payments to be made by Purchaser
to Seller under this section shall be made pursuant to
Section III of the Interim Servicing Agreement.
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3.
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Except as provided above, Purchaser
shall not assume any liability, commitment, or any other obligation
of Seller, whether absolute, contingent, or otherwise known or
unknown of any nature, kind or description whatsoever, arising from
or related to the operation of the Seller’s business prior
to, at or after the Cut-Off Time.
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4.
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Seller expressly retains all
liability arising out of or from the Account Benefits, including,
but not limited to, points and the cost of the possible redemption
of such points prior to the Cut-Off Time. Purchaser assumes
liability for points existing as of the Cut-Off Time or
subsequently incurred; provided, that Purchaser will only assume
liability for cash reward points earned subsequent to the Cut-Off
Time.
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E.
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Cooperation with Sale and Conversion
Manager .
Seller shall cooperate fully with Purchaser in connection with the
sale and transfer of the Accounts, and shall designate a dedicated
Conversion Manager within its organization to act as the primary
contact for Purchaser. The Conversion Manager will be familiar with
this Agreement and have decision making authority and the ability
to coordinate activities contemplated under this Agreement to help
facilitate the sale and transfer of the Accounts to be Sold. Seller
and Purchaser shall schedule and attend meetings necessary to
facilitate the smooth transfer of the Accounts to be Sold, and
shall establish and adhere to timelines set up, as described
further in Schedule B, to facilitate the transfer of the
Accounts to be Sold. Should Seller be party to an agreement with a
third party who is performing any functions related to the Accounts
to be Sold (including, but not limited to processing or reward
administration), Seller shall work with such third party to
determine their respective obligations with respect to their
agreement and facilitate the timely cancellation of any such
agreement as well as timely transfer of such Accounts, following as
closely as reasonably possible the timelines established by
Purchaser.
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F.
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Information Access, Records
Retention and Risk of Loss . Seller shall provide Purchaser
and its officers, accountants, counsel and other representatives
reasonable access to review the Account Documentation and
Seller’s Policies and Procedures and, commencing on the
Closing Date, such other properties, reports, books, contracts, and
customer records that relate to the Accounts to be Sold subject to
reasonable security requirements, during Seller’s normal
business hours through a mutually agreeable process upon three
(3) Business Days’ notice, throughout the period
commencing on the date of this Agreement. In the case of
Purchaser’s review of Seller’s Policies and Procedures,
Purchaser and its officers, accountants, counsel and other
representatives, unless otherwise permitted by Seller in writing,
may not photocopy any of Seller’s Policies and Procedures and
may retain only summary notes regarding the same. In addition,
Seller shall provide Purchaser with portfolio summary reports (as
further described below in Section II.G.) within three
(3) Business Days after such information becomes available in
each month prior to the Closing Date. Seller will, for a period of
seven (7) years after the date of this Agreement, or longer as
necessary for compliance with the Requirements of Law, maintain in
a fully accessible fashion the Account Documentation and all of its
books and records, including, without limitation, information
received from Cardholder applicants for purposes of USA PATRIOT Act
compliance, relating to the Accounts to be Sold. Seller will, upon
Purchaser’s request, transfer or make available to Purchaser
Account Documentation, books and records as Purchaser may request,
and will, upon Purchaser’s request, provide witnesses and/or
signed affidavits to establish the reliability and authenticity of
such books and records. Where any
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Account included in Accounts to be
Sold has a credit limit or balance greater than fifty thousand
dollars ($50,000), Seller shall provide Purchaser with copies of
financial information provided to Seller by the Cardholder in
connection with the establishment and maintenance of such Account,
provided, however, that if Seller is unable to provide such
financial information, Seller acknowledges that Purchaser may
request such information from the Account obligor. While such
documentation and information is in the control of Seller, the cost
to transfer or make available Account Documentation and books and
records to Purchaser as provided herein shall be borne by Seller.
Further, the risk of loss, damage or destruction from any cause to
any Account Documentation of Accounts to be Sold shall be borne by
Seller at all times between the date hereof and the date such
Account Documentation or Accounts to be Sold is in
Purchaser’s possession, and once in Purchaser’s
possession, thereafter by the Purchaser.
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G.
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Master File Information
. Seller shall transmit
to Purchaser, in a secure format (which may include, but is not
limited to, an electronic and encrypted transmission) as requested
by Purchaser, Cardholder information reasonably necessary to
facilitate Purchaser’s timely mailing of change in terms and
other notice(s), as described in this Section II.G., as well
as determination of the Purchase Price as described in
Section II.B.1. Seller agrees to provide Purchaser, at
Seller’s cost and up to four (4) times prior to the
Conversion Date (according to the timeline set forth in
Schedule B), with master file information about the Accounts
to be Sold in a format prescribed and containing information
requested by Purchaser, which will include, without limitation,
Cardholder name, address and social security number but will be
limited to information available on Seller’s servicer’s
(“FDR”) system. Each transmission of the master file
information provided hereunder shall have been produced no earlier
than five (5) Business Days prior to the date the information
is transferred to Purchaser and shall be current as of said
production date and contain all of the Accounts to be Sold. In
addition to other uses in connection with the transfer of the
Accounts to be Sold, the master file information will be used to
identify Accounts for which Purchaser needs more information.
Seller shall research and provide an answer to any reasonable
request made by Purchaser for more information within five
(5) Business Days of each request by Purchaser. Seller shall
provide to Purchaser, no later than ten (10) Business Days
after the Conversion Date, the last six months of Account
statements for each Account to be Sold.
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H.
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Notices to Cardholders and Issuance
of Replacement Credit Cards.
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1.
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Thirty (30) days prior to the
Conversion Date, Seller shall provide to Purchaser a complete list
of Limited-Change Accounts, so that such Accounts may be excluded
from Purchaser’s change in terms process.
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2.
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After Closing Date and prior to the
Conversion Date, Purchaser, at its own expense and upon prior
written notice to Seller, shall send out one or more notices to
Cardholders informing them of the termination of Seller’s
credit card plan and the substitution of Purchaser’s plan,
any changes to certain benefits offered to Cardholders and any new
Account Benefits, and certain changes in terms to be made to the
Accounts to be Sold all in a manner which serves to preserve and
promote the goodwill and business reputation of both Seller and
Purchaser. Purchaser may require Seller to notify certain
Cardholders of notice of termination of such Cardholders’
Accounts with Seller. Notices will be sent sufficiently in advance
of the Conversion Date so as to comply with any applicable
Requirements of Law. Prior to the mailing of any change in terms
notice(s) to Cardholders, such notices may be reviewed and approved
(such approval rights shall not include approval of any Account
terms, such as pricing, new Account Benefits or changes to the
Cardholder Agreements) by Seller, which approval shall not be
unreasonably withheld or delayed and shall be deemed given if
Seller does not reply within ten (10) Business Days following
Purchaser’s request for review.
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3.
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Based upon the current status of
each Account to be Sold, Purchaser will, in its sole discretion,
determine whether or not to continue or cancel an Account. Seller
understands that Purchaser will be relying on information received
from Seller and its current processor (if any) for purposes of
making these decisions and, to the extent such information is
accurate, Purchaser will hold Seller harmless with respect to these
decisions. The notices described in Section II.H.1. above
will
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inform Cardholders, as appropriate,
that either the Cardholder will be receiving a new Credit Card from
Purchaser, or the Cardholder’s account with Seller is being
terminated and no new Credit Card will be issued. Purchaser will
provide to Seller a list of the Accounts that will show which
products the Accounts will be converted to, as well as show which
Accounts will not be issued a new Credit Card.
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4.
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In
order to facilitate the smooth transfer of balances to Purchaser,
Seller shall change the cycle dates of the Accounts to be Sold to
one cycle so that all Accounts to be Sold cycle on the Cut-Off
Time, or the last processing date prior to the Conversion Date, to
ensure that all such Accounts have a final statement with an ending
Principal Balance that reflects the amount that is transferred as
of the Conversion Date. If Seller fails or is unable to change the
cycle dates of the Accounts to be Sold to one cycle date, the
Accounts will not be billed for fees and interest beginning after
the date of the last statement produced by Seller through the end
of the first statement period produced by Purchaser. This will
result in reduced revenue to Seller pursuant to the Joint Marketing
Agreement between Seller and Purchaser, which will not be
reimbursed by Purchaser.
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5.
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Seller shall not share with or
otherwise communicate to any third party the notices to be provided
by Purchaser to Cardholders, prior to the mailing of any such
notice, except with Purchaser’s prior written
permission.
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6.
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In
connection with the notification to Cardholders described in
Section II.H.1. above, Seller authorizes Purchaser, and grants
to Purchaser during the term of this Agreement a limited license,
to use the Seller Marks in accordance with the provisions of this
Agreement. Seller represents, warrants and covenants that it or an
affiliate of Seller is and shall remain the sole owner of the
Seller Marks, and that it has authority to grant the license for
such use, and that use of the Seller Marks by Purchaser will not
infringe upon the trade name, copyright, trademark or other
intellectual property rights of any third party. Except as
otherwise agreed to by the parties, following termination of this
Agreement Purchaser shall not have the right to disseminate any
Cardholder communications using the Seller Marks.
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I.
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Seller Acknowledgments
. Seller acknowledges
and agrees to the following:
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1.
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it
shall be solely responsible for determining the disposition of
funds held by Seller in connection with an Account to be Sold that
is a Secured Account;
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2.
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if
the Accounts to be Sold are branded as “MasterCard”
accounts, they will continue to be branded MasterCard as of the
Conversion Date;
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3.
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it
shall be solely responsible for costs incurred with its current
third party processor (if any) due to trailing transactions that
apply to any Account to be Sold following the Conversion
Date;
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4.
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it
shall obtain a deconversion date from Seller’s third party
processor no later than twenty (20) Business Days from the
Closing Date, which date must be approved by Purchaser;
and
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5.
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it
shall be solely responsible for any deconversion fees or other fees
or charges assessed to Seller by any third party providing
servicing, rewards program administration, or other services for
the Accounts to be Sold.
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J.
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Collections Rights
. After the Closing
Date, and except where provided elsewhere in this Agreement,
Purchaser shall have the sole right to make collections with
respect to the Accounts to be Sold. Notwithstanding the foregoing,
prior to the Conversion Date, Seller shall make collections on the
Accounts to be Sold for the Purchaser pursuant to the terms of an
Interim Servicing Agreement, if applicable. From the date of this
Agreement until the Conversion Date, Seller shall not change
Seller’s Policies and Procedures with respect to its
collection practices of the Accounts to be Sold except as may be
required by Requirements of Law or otherwise as mutually agreed in
writing between the parties.
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K.
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Compliance with the FCRA
. Except as provided in
Section II.C.3., Seller shall be solely responsible for all
reporting to credit reporting agencies prior to the Conversion Date
as well as final reporting to credit reporting agencies relating to
the satisfaction of balances of Accounts to be Sold (including, but
not limited to, notifying the credit reporting agency that Accounts
have been sold and that the balances are zero). In order to comply
with the requirements of the Fair Credit Reporting Act, Seller
agrees that prior to the Conversion Date it shall, in accordance
with Purchaser’s specifications and at Seller’s cost,
provide to Purchaser information that is formatted as specified by
Purchaser with the date on which each Account to be Sold that is
reported to a credit reporting agency as being delinquent as of the
Conversion Date first went delinquent. Purchaser shall only be
liable to report on the Accounts to be Sold activity related to
Purchaser’s experience with the Accounts after the Conversion
Date.
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L.
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Forwarding of Notices
. From the Effective
Date, Seller shall forward to Purchaser within two
(2) Business Days after its receipt thereof any notice,
summons, inquiry (but not general Account inquiries), or other
information of any kind (including, but not limited to, notices of
bankruptcy or other insolvency proceedings) relating to, or in any
way affecting Accounts to be Sold. Any such communication shall be
sent by Seller to Purchaser in accordance with the procedure
described in Section XI.C. of this Agreement.
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III. SELLER PROGRAM, ACCOUNT
BENEFITS AND CARDHOLDER SERVICE
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A.
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Seller Program
. After the date of this
Agreement, and before the Conversion Date, Seller will not, without
Purchaser’s consent: (1) engage in or participate in any
material transaction or incur or sustain any material obligation
with respect to the credit card business, except in the ordinary
course of business; (2) transfer, assign, encumber, or
otherwise dispose of, or enter into any agreement to transfer,
assign, encumber, or dispose of any Account to be Sold, except in
the ordinary course of business; (3) change Seller’s
Policies and Procedures with respect to the Accounts to be Sold
except as may be required by Requirements of Law (in which case
Seller shall promptly notify Purchaser of such change); or
(4) conduct its credit card plan in other than a normal and
regular manner, as it has been previously conducted; or
(5) take any action that would adversely affect the Accounts
to be Sold. From the date of this Agreement, Seller shall not
offer, or enter into an agreement with a third party with the
intent to offer, to existing and potential Cardholders any Account
terms that restrict Purchaser’s ability to change such
terms.
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B.
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Account Benefits
.
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1.
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To
the extent that Seller provides, or facilitates through a third
party the provision of Account Benefits to Cardholders related to
use of their Accounts, Seller shall cooperate with Purchaser to
facilitate the continued enjoyment by Cardholders of the applicable
Account Benefit(s) as close to the Conversion Date as possible, but
may not terminate Seller’s Account Benefits prior to the time
that Purchaser may communicate Purchaser’s Account Benefits
to Cardholders. Where a third party is providing one or more
Account Benefit(s), Seller shall be solely responsible for working
with providers of such benefits for the timely cancellation of such
benefits (which Seller acknowledges was Seller’s decision in
connection with entering into this Agreement), and Seller shall
indemnify and hold harmless Purchaser from any claims that a third
party Account Benefit provider may have in connection with the
cancellation of the agreement between such third party and Seller.
Purchaser may communicate with Cardholders about Purchaser’s
Account Benefits including, but not limited to, Purchaser’s
reward program, if applicable, at anytime prior to cancellation or
termination of Seller’s Account Benefits. Purchaser’s
communication of the Purchaser’s Account Benefits will be
sent to Cardholders prior to the Conversion Date, which may
necessitate that such communication occur prior to the Closing
Date. Purchaser shall work with Seller to ascertain the applicable
timelines for such communications, some of which may be set forth
in Schedule B.
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2.
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In
connection with any existing reward program related to any
Account(s) to be Sold, if the reward program liability to
Cardholders is cash, Seller shall be solely responsible for, and
Purchaser shall have no liability for any cash reward of
Cardholders earned and not paid prior to the Closing Date.
Purchaser shall be liable for cash rewards earned between the
Closing Date and
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the
Conversion Date. Seller shall provide to Purchaser within thirty
(30) days after the Closing Date the amount of cash rewards
earned and not paid prior to the Closing Date together with
supporting information. Within five (5) Business Days after
the Conversion Date, Seller shall remit payment of cash rewards to
qualifying Cardholders, subject to reimbursement by Purchaser of an
amount equal to cash rewards earned by Cardholders between the
Closing Date and the Conversion Date upon Purchaser’s receipt
of an invoice and supporting documentation from Seller for the
amounts remitted. If the reward program liability consists of a
“points” program, which points are redeemable for
something other than cash, such as travel, services, or
merchandise, Purchaser will award to Cardholders points equal to
their outstanding points as of the final redemption period for the
points, as established by the Seller or third party facilitating
such program, if any. Seller acknowledges that the Premium takes
into account Purchaser’s assumption of any points-based
reward liability outstanding as of Closing Date. Redemptions that
occur prior to the Closing Date are at Seller’s expense. In
connection with any existing reward program related to any
Account(s) to be Sold, Seller shall promptly provide Purchaser with
the current program rules, and when the first master file
information is provided (pursuant to Schedule B), provide
Purchaser with information necessary to identify the Accounts to be
Sold that have a reward component.
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3.
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Seller shall provide Purchaser with
electronic files related to reward points as provided by Seller or
a third party facilitating the reward program, if any, applicable
to Accounts to be Sold, in the following format:
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a.
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a
Monthly Cardholder Liability Report, which will include the
beginning reward point balance plus new points earned for the
month, less redemptions for the month equaling the ending reward
point balance; and
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b.
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a
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