Exhibit 2.2
MEMORANDUM OF UNDERSTANDING
This Memorandum of Understanding is dated as of January 9, 2004, and is
entered into by and among Washington Mutual, Inc., a Delaware corporation (the
"Seller Parent"), Great Western Service Corporation Two, a California
corporation (the "Seller"), and CitiFinancial Credit Company, a Delaware
corporation ("Purchaser"), in order to memorialize certain agreements and
understandings reached among them with respect to the matters referenced herein
arising in connection with the closing of the transactions contemplated by the
Stock and Asset Purchase Agreement by and among Seller Parent, Seller and
Purchaser dated as of November 24, 2003 (the "Purchase Agreement"). All
capitalized terms used herein but not otherwise defined herein shall have the
meanings ascribed to them in the Purchase Agreement. All section references made
herein are references to sections of the Purchase Agreement unless otherwise
explicitly stated.
1. Permitted Transactions.
a. Notwithstanding anything to the contrary in the Purchase
Agreement, effective as of 11:59 p.m., December 31, 2003,
Seller Parent and Seller caused the following actions to
occur, each with the prior written consent of Purchaser:
i. FG transferred to Washington Mutual Finance, LLC, a
Delaware limited liability company ("WMF LLC"), all of
FG's right, title and interest in the FG Transferred
Assets which relate to FG's consumer finance, insurance,
financial services and other businesses in Kentucky and
North Carolina.
ii. FG transferred to Washington Mutual Finance, Inc., an
Ohio corporation ("WMF Inc."), all of FG's right, title
and interest in the FG Transferred Assets which relate
to FG's consumer finance, insurance, financial services
and other businesses in Tennessee.
iii. WMF LLC assumed any and all FG Assumed Liabilities that
relate to FG's consumer finance, insurance, financial
services and other businesses in Kentucky and North
Carolina.
iv. WMF Inc. assumed any and all FG Assumed Liabilities that
relate to FG's consumer finance, insurance, financial
services and other businesses in Tennessee.
b. Notwithstanding anything to the contrary in the Purchase
Agreement, effective as of 11:59 p.m., December 18, 2003,
Seller Parent and Seller caused the following actions to
occur, each with the prior written consent of Purchaser:
i. FG assigned, transferred and set over to WMF LLC, all of
its rights, title, interest and obligations in, to and
under all of FG's real property leases which relate to
FG's consumer finance, insurance, financial services and
other businesses in Kentucky and North Carolina.
ii. FG assigned, transferred and set over to WMF Inc., all
of its rights, title, interest and obligations in, to
and under all of FG's real property leases which relate
to FG's consumer finance, insurance, financial services
and other businesses in Tennessee.
iii. FG assigned, transferred and set over to Washington
Mutual Finance of Virginia, LLC, a Delaware limited
liability company, all of its rights, title, interest
and obligations in, to and under all of FG's real
property leases which relate to FG's consumer
finance, insurance, financial services and other
businesses in Virginia.
c. Notwithstanding the provisions of clauses (a) and (b) of this
Paragraph 1, any FG Transferred Assets not so transferred to a
Subject Company and any FG Assumed Liabilities not so assumed
by a Subject Company shall constitute "FG Transferred Assets"
and "FG Assumed Liabilities" for all purposes under the
Purchase Agreement.
d. Notwithstanding anything to the contrary in the Purchase
Agreement, effective as of 12:01 a.m., January 1, 2004, Seller
Parent and Seller, with the prior written consent of
Purchaser, (i) caused the Company to assign to Seller all of
the Company's right, title and interest to the intercompany
receivables owed to the Company by the Excluded Subsidiaries
such that Seller Parent and Seller shall have the right to
collect such receivables directly from the Excluded
Subsidiaries and (ii) released the Company from all of its
intercompany obligations to Seller Parent and Seller in an
amount equal to the intercompany obligations described in
clause (i).
e. Notwithstanding anything to the contrary in the Purchase
Agreement, effective on or prior to the date hereof, Seller
Parent and Seller, with the prior written consent of
Purchaser, caused the Company to transfer to Seller Parent (or
any affiliate of Seller Parent) all of the Company's right,
title and interest in and to the following domain names and
all Company Intellectual Property associated with each such
name (provided that Purchaser and the Subject Companies shall,
in accordance with Section 6.8 of the Purchase Agreement, have
the right to use the following domain names from and after the
Closing for the periods contemplated by such Section):
i. xxx.xxxxxxxxx.xxx;
ii. xxx.xxxxxxxx.xxx;
iii. xxx.xxxxxxxxxxxxxx.xxx; and
iv. xxx.xxxxx-xxxxxxxxx.xxx.
f. Notwithstanding anything to the contrary in the Purchase
Agreement, effective on or prior to the date hereof, Seller
Parent and Seller, with the prior written consent of
Purchaser, caused the Company to accept the transfer to it of
Seller Parent's
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right, title and interest in and to the following domain names
and all Company Intellectual Property associated with each
such name:
i. xxx.xxxxxxxxxxxxxxx.xxx;
ii. xxx.xxxxxxxxxx.xxx; and
iii. xxx.xxxxx.xxx.
2. Closing Date. Unless the Purchase Agreement shall have been
terminated and the transactions contemplated thereby and hereby abandoned
pursuant to Section 9.1 of the Purchase Agreement, subject to the provisions of
Article VIII of the Purchase Agreement, the Closing shall take place on January
9, 2004; provided, however, that notwithstanding the foregoing, for financial
accounting purposes only, the Closing shall be deemed to have occurred at 9:00
a.m., New York City time, on January 1, 2004 (such time and date being referred
to herein as the "Financial Accounting Closing").
3. Amendments to Purchase Agreement Regarding Aristar. The fourth
"WHEREAS" clause of the recitals to the Purchase Agreement is hereby amended and
restated in its entirety to read:
"WHEREAS, the Company owns (x) all of the membership interests of
Washington Mutual Finance Group, LLC, a Delaware limited liability
company ("FG"), and Washington Mutual Finance, Inc. of Mississippi,
LLC, a Delaware limited liability company ("Washington Mutual
Mississippi") and (y) all of the capital stock of Aristar Management,
Inc., a Florida corporation ("Aristar Management" and, together with FG
and Washington Mutual Mississippi, the "Excluded Subsidiaries"), and
Seller Parent, Seller and Purchaser desire that the membership
interests and capital stock of the Excluded Subsidiaries be transferred
by the Company to Seller Parent or its designee prior to the sale of
the Stock; and".
4. Amendments to Purchase Agreement Regarding the Closing.
a. Article I of the Purchase Agreement is hereby amended by
inserting the following definition in the appropriate
alphabetical place:
""FG Transfer Related Debt" means any indebtedness payable to
FG in connection with notes made pursuant to (a) the General
Conveyance and Assignment Agreement (Kentucky), dated as of
December 31, 0000, xxxxxxx XX, Xxxxxxxxxx Mutual Finance, LLC,
a Delaware limited liability company ("WMF LLC"), and Seller,
(b) the General Conveyance and Assignment Agreement (North
Carolina), dated as of December 31, 2003, between FG, WMF LLC
and Seller or (c) the General Conveyance and Assignment
Agreement (Tennessee), dated as of December 31, 0000, xxxxxxx
XX, Xxxxxxxxxx Mutual Finance, Inc., an Ohio corporation ("WMF
Inc."), and Seller, each in connection with the transfer of
certain assets and liabilities from FG.".
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b. The definition of "Excluded Liability" in Article I of the
Purchase Agreement is hereby amended and restated in its
entirety to read:
"Excluded Liability" means any liabilities arising out of or
in connection with (i) the Reorganization, (ii) the Company's
sale of First Community Industrial Bank and any assets or
liabilities sold, assigned or otherwise transferred as part of
that transaction, or (iii) the Transition Servicing.
c. The definition of "Statement of Closing Date Receivables" in
Article I of the Purchase Agreement is hereby amended and
restated in its entirety to read:
"Statement of Closing Date Receivables" means the statement of
Closing Date Receivables as of 9:00 a.m. (New York City time),
January 1, 2004 after giving effect to the transactions
contemplated by Section 6.7(e), to be prepared and delivered
pursuant to Section 2.4, as finally determined in accordance
with Section 2.4(b).".
d. Section 2.2 of the Purchase Agreement is hereby amended and
restated in its entirety to read:
"2.2 Closing; Payment of Purchase Price; Assumption of FG
Assumed Liabilities. (a) On the terms and subject to the
conditions of this Agreement and against delivery of the
certificates evidencing the Stock as provided in Section
2.1(a) and the instruments of conveyance and assignment for
the FG Transferred Assets as provided in Section 2.1(b),
Purchaser shall:
(i) pay, at the Closing on the Closing Date, by wire
transfer of immediately available funds to the account of
Seller and to such other accounts as, in each case, Seller
shall designate in writing to Purchaser not less than one
Business Day prior to the Closing Date, an amount equal to (A)
$1,244,250,000 (the "Purchase Price") less (B) the aggregate
amount of the principal of the FG Transfer Related Debt
(provided that a portion of the Purchase Price may be deferred
pursuant to Section 3.1 until the Insurance Subsidiary
Purchase) less (C) $570,000 (the "FG Transferred Assets
Purchase Price");
(ii) pay, at the Closing on the Closing Date, by wire
transfer of immediately available funds to the account of FG,
as Seller shall designate in writing to Purchaser not less
than one Business Day prior to the Closing Date, an amount
equal to the FG Transferred Asset Purchase Price;
(iii) on and as of the opening of business on the
Closing Date, expressly assume and agree to thereafter
perform, pay and discharge when due, the FG Assumed
Liabilities and the Employee Assumed Liabilities; and
(iv) deliver to FG such fully executed acceptances,
consents, instruments of assumption and other instruments as
shall be reasonably necessary and effective to vest in
Purchaser sole responsibility to perform, pay and discharge,
when due, the FG Assumed Liabilities and the Employee Assumed
Liabilities.
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(b) On the Closing Date, immediately following the
consummation of the transactions described in Sections 2.1 and
2.2(a), Purchaser shall cause:
(i) WMF Inc. and WMF LLC to pay, by wire transfer of
immediately available funds to the account of FG and to such
other accounts as, in each case, Seller shall designate in
writing to Purchaser not less than one Business Day prior to
the Closing Date, the aggregate amount of the principal of the
FG Transfer Related Debt;
(ii) each Subject Company to pay, by wire transfer of
immediately available funds to the account of Seller Parent
and to such other accounts as, in each case, Seller Parent
shall designate in writing to Purchaser not less than one
Business Day prior to the Closing Date, an amount equal to
$154,756,673 (the "Estimated Intercompany Balance", which
constitutes an estimated aggregate amount of the principal of,
accrued and unpaid interest on and any premium in respect of,
all indebtedness of the Subject Companies and/or Purchaser, on
the one hand, to Seller Parent and/or its affiliates (for the
avoidance of doubt, other than the Subject Companies), on the
other hand, under the borrowing arrangements described in
Section 1(b) of the Seller Disclosure Schedule; and
(iii) each Subject Company to pay, by wire transfer of
immediately available funds to the account or accounts as
Seller Parent shall designate in writing to Purchaser not less
than one Business Day prior to the Closing Date, the aggregate
amount of the principal of, accrued and unpaid interest on and
any premium in respect of, all indebtedness of the Subject
Companies that is due and payable on or before the Closing
Date under the instruments identified in any of clauses (i),
(ii) and (iii) of the definition of Company Specified Debt.
(c) On the Closing Date, Seller shall deliver to Purchaser a
statement describing, as of the Closing, the actual aggregate
amount (the "Actual Intercompany Balance") of the principal
of, accrued and unpaid interest on and any premium in respect
of, all indebtedness of the Subject Companies and/or
Purchaser, on the one hand, to Seller Parent and/or its
affiliates (for the avoidance of doubt, other than the Subject
Companies), on the other hand, under the borrowing
arrangements described in Section 1(b) of the Seller
Disclosure Schedule. If the Actual Intercompany Balance
exceeds the Estimated Intercompany Balance, then Purchaser, on
the first Business Day immediately following the Closing Date
(unless the Actual Intercompany Balance is reasonably disputed
by Purchaser, in which case Purchaser shall take the actions
required by this sentence within one Business Day of the
parties resolving such dispute), shall cause each Subject
Company to pay, by wire transfer of immediately available
funds to the account of Seller Parent and to such other
accounts as, in each case, Seller Parent shall designate in
writing to Purchaser on such date, an amount equal to such
excess. If, on the other hand, the Estimated Intercompany
Balance exceeds the Actual Intercompany Balance, then Seller,
on the first Business Day immediately following the Closing
Date, shall pay, by wire transfer of immediately available
funds to the account of the Company and to such other accounts
as, in each case,
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the Company shall designate in writing to Purchaser on such
date, an amount equal to such excess.
(d) It is the intent of the parties that, for purposes of
computing "ADSP" and "AGUB" (as those terms are defined in the
Treasury Regulations promulgated under Section 338 of the
Code), the FG Transfer Related Debt and the other indebtedness
of the Subject Companies described in (and paid pursuant to)
Section 2.2(b) shall be treated as outstanding at the
beginning of the date immediately following the Closing Date
in accordance with the "next day rule" set forth in Treasury
Regulation Section 1.338-1(d) and, unless otherwise required
by Applicable Law as a result of a change in such law after
the date hereof or the publication after the date hereof of
any judicial or administrative authority interpreting current
law that is contrary to such treatment, the parties shall
report the transactions contemplated hereby in a manner
consistent with such intent."
5. Amendments to Purchase Agreement Regarding Reorganization.
a. Article I of the Purchase Agreement is hereby amended by
inserting the following definition in the appropriate
alphabetical place:
""Tax Sharing Agreement" means the Tax Sharing Agreement dated
as of August 31, 1999 among Seller Parent, the Subject
Companies and others.".
b. Section 6.7 of the Purchase Agreement is hereby amended and
restated in its entirety to read:
"6.7 Reorganization. At or prior to the Closing, Seller and
Seller Parent shall take, or shall cause the Company or its
Subsidiaries to take, each of the following actions (collectively,
the "Reorganization"):
(a) The Company (or its applicable Subsidiaries) shall,
effective as of 12:01 a.m., New York City time, on January 1,
2004, dividend and transfer to Seller (or its designee) all of
the outstanding shares of capital stock of the Excluded
Subsidiaries then owned by the Company (or its applicable
Subsidiaries).
(b) [Reserved]
(c) [Reserved]
(d) Seller shall cause the Company Credit Agreement to
be terminated or, at Seller's sole discretion, amended to
provide that no Subject Company shall have any rights or
obligations with respect thereto, effective as of the Closing.
(e) Prior to the Closing, Seller Parent and Seller shall
cause the Subject Companies and FG (with respect to the FG
Transferred Assets only) to run through the Lexis-Nexis Xxxxx
Database (the "Xxxxx Database"), as of January 1, 2004, all of
their respective Receivables related to a personal loan
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(unless a Subject Company or FG has a security interest with
respect to such loan in the obligor's automobile) or a sales
finance loan, on which payments to be made by the obligor
under such loans are thirty days or more past due
(collectively, the "Past Due Receivables"). Seller Parent and
Seller shall cause the Subject Companies and FG (with respect
to the FG Transferred Assets only) to charge-off, as of
January 1, 2004 and prior to the Financial Accounting Closing,
each such Past Due Receivable if the obligor under such Past
Due Receivable is identified as bankrupt in the Xxxxx Database
(such charged-off Past Due Receivables being collectively
referred to herein as the "Charged-Off Receivables").
(f) Prior to the Closing, Seller shall cause the
provision for loan losses with respect to the Company and the
FG Transferred Assets to be equal to $147,728,620 in the
aggregate..
(g) Seller shall cause (i) all accrued but unused
vacation time to which any employee of the Subject Companies
and any employee of FG in the FG Transferred Business is
entitled pursuant to the Vacation Policy, (ii) the Variable
Plan Payments, (iii) all other bonus, incentive and
performance compensation payments or awards under the Benefit
Plans with respect to employees of the Subject Companies and
employees of FG in the FG Transferred Business and (iv) all
operational liabilities of the Subject Companies and the FG
Transferred Business to be fully accrued on the Company's
books and records as of January 1, 2004 and prior to the
Financial Accounting Closing (provided that the reserves for
payroll taxes in respect of bonuses shall not exceed
$300,000)."
6. Amendments to Purchase Agreement Regarding Employment Arrangements.
a. The definition of "Affected Employees" in Article I of the
Purchase Agreement is hereby amended and restated in its
entirety to read:
""Affected Employees" means the FG Employees and those former
employees of any of the Subject Companies whose employment was
transferred to Aristar Management pursuant to Section 7.2(a)
(other than employees who are on long-term disability leave)."
b. Clause (i) of the definition of "Excluded Litigation" in
Article I of the Purchase Agreement is hereby amended and
restated in its entirety to read:
"(i) in which the Excluded Subsidiaries are named as
defendants, except to the extent arising out of or related to
the FG Transferred Assets, FG Transferred Business, FG Assumed
Liabilities or Employee Assumed Liabilities".
c. The definition of "Pre-Closing FG Employee Related
Liabilities" in Article I of the Purchase Agreement is hereby
amended and restated in its entirety to read:
""Pre-Closing FG Employee Related Liabilities" means all
liabilities relating to (i) individuals who are, immediately
prior to the Closing Date, former employees of
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FG, other than former employees of FG who become Affected
Employees or (ii) employees of FG who do not become FG
Employees (including employees of FG, if any, who are on
long-term disability leave as of the Closing)."
d. Article I of the Purchase Agreement is hereby amended in part
by inserting the following definitions in the appropriate
alphabetical place:
""Employee Assumed Liabilities" means, subject to the terms
and conditions of the Employee Lease, any and all liabilities
and obligations of any kind or nature, whether such
liabilities or obligations are known or unknown, disclosed or
undisclosed, matured or unmatured, accrued, absolute,
contingent or otherwise, that (i) relate to the employment by
Aristar Management of the Affected Employees or (ii) arise
after the Closing Date and relate to the employment, failure
to employ or termination of employment of the Affected
Employees.
"Employee Lease" shall mean the Employee Lease, dated as of
January 8, 2004, by and among Seller, Seller Parent, Aristar
Management, Purchaser and CitiFinancial Inc.
"Lease Period" shall have the meaning set forth in the
Employee Lease."
e. The definition of "FG Employees" in Article I of the Purchase
Agreement is hereby amended and restated in its entirety to
read:
""FG Employees" means all employees who were employed by or on
behalf of FG in connection with the FG Transferred Business
immediately prior to January 1, 2004 (other than those
employees who are on long-term disability leave), (i) whose
employment was transferred to Aristar Management pursuant to
Section 7.2(a) and (ii) who remain employed by Aristar
Management as of the Closing Date."
f. Section 3.1(a), Section 5.6, Section 8.1(a) and Section
11.2(a) of the Purchase Agreement are hereby amended in part
by inserting the phrase "and the Employee Assumed Liabilities"
after the phrase "FG Assumed Liabilities".
g. Section 4.19 and Section 6.3(e) of the Purchase Agreement are
hereby amended in part by inserting the phrase "or an Employee
Assumed Liability" after the phrase "FG Assumed Liability".
h. The first sentence of Section 7.1(a) of the Purchase Agreement
is hereby amended and restated in its entirety to read:
"Except as otherwise provided in this Article VII, for the
twelve-month period following the Closing Date, Purchaser
shall provide, or shall cause to be provided, to each Affected
Employee (i) salary or wages, as applicable, at least equal to
those provided to such Affected Employee immediately prior to
the Closing Date and (ii) employee benefits that are no less
favorable in the aggregate than the employee benefits provided
by Purchaser to its similarly situated employees."
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i. Section 7.1(b), Section 7.1(c), Section 7.6 and Section 7.8 of
the Purchase Agreement are hereby amended in part to change
the references to "Closing Date" to "last day of the Lease
Period".
j. Section 7.2 of the Purchase Agreement is hereby amended and
restated in its entirety to read:
"7.2 Transfer of Employment. (a) Seller and its affiliates
have taken all such actions as may be necessary to cause all
employees who were employed by or on behalf of FG in
connection with the FG Transferred Business immediately prior
to January 1, 2004 and all employees of the Subject Companies
(in each case other than those employees who are on long-term
disability leave) to become employees of Aristar Management
effective January 1, 2004. Notwithstanding the foregoing, if
any employee described in the preceding sentence goes on
long-term disability during the Lease Period, Seller shall be
responsible for all long-term disability benefits with respect
to such employee during and after the Lease Period.
(b) As of the last day of the Lease Period, the Affected
Employees (excluding Affected Employees on long-term
disability leave) who remain employed by Aristar Management as
of such date shall become employees of Purchaser or an
affiliate thereof designated by Purchaser."
k. Section 7.4 of the Purchase Agreement is hereby amended in
part to change the reference to "Transition Services
Agreement" to "Employee Lease".
l. The initial clause of Section 11.1(b) of the Purchase
Agreement is hereby amended and restated in its entirety to
read:
"Except with respect to any claims or liabilities under the
Employee Lease, notwithstanding anything to the contrary
contained in this Section 11.1, the Indemnified Purchaser
Entities shall be entitled to indemnification pursuant to
Section 11.1(a) with respect to any claim for indemnification
pursuant to Section 11.1(a)(i):".
m. The initial clause of Section 11.2(b) of the Purchase
Agreement is hereby amended and restated in its entirety to
read:
"Except with respect to any claims or liabilities under the
Employee Lease, notwithstanding anything to the contrary
contained in this Section 11.2, the Indemnified Seller
Entities shall be entitled to indemnification pursuant to
Section 11.2(a) with respect to any claim for indemnification
pursuant to Section 11.2(a)(i):".
7. Texas LP Restructuring.
a. Pursuant to Section 10.7(d) of the Purchase Agreement, Seller
Parent and Seller have caused (or shall cause) the following
actions to occur (such actions described
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in clauses (i) through (v) below, and only such actions,
constitute the "Restructuring" for purposes of the amendment
of Section 10.7(d) of the Purchase Agreement set forth below
in Paragraph 7(b) of this Memorandum of Understanding):
i. Each of Washington Mutual Finance of Texas, LLC
("WMFT"), Washington Mutual Finance Asset Holdings, LLC
("WMFAH") and Texas LP has obtained a valid Employer
Identification Number ("EIN") for U.S. federal income
tax purposes and provided a copy of its EIN to
Purchaser.
ii. Each of WMFT and WMFAH has duly and validly filed a
valid IRS Form 8832 (Entity Classification Election) and
elected to be treated, effective as of January 1, 2004,
as an "association taxable as a corporation" for U.S.
federal income tax purposes.
iii. WMFT and WMFAH are both (or will both be) included on
the Section 338 Schedule delivered to Purchaser pursuant
to Section 10.7(a) of the Purchase Agreement.
iv. Seller Parent and Seller shall, at Purchaser's request
in accordance with Section 10.7(a) of the Purchase
Agreement, join Purchaser in making an election under
Code Section 338(h)(10) in connection with the
acquisition by Purchaser of both WMFT and WMFAH.
v. On or before the date required under Code Section 6031
(determined without regard to extensions) (such date,
the "Due Date"), Texas LP shall file an IRS Form 1065
(Partnership Return) for its taxable year beginning on
January 1, 2004 and ending on the Closing Date (the
"Short Taxable Year"), and shall make a Code Section 754
election in a written statement (the "Section 754
Election Statement") filed with Texas LP's Form 1065 for
such period. The Section 754 Election Statement shall
(A) set forth the name and address of the partnership,
(B) be signed by one of the partners and (C) contain a
declaration that the partnership elects under Code
Section 754 to apply the provisions of Code Section
734(b) and Code Section 743(b). Seller Parent and Seller
shall provide Purchaser with a copy of Texas LP's IRS
Form 1065 (including the Section 754 Election Statement)
for the Short Taxable Year at least forty-five (45) days
prior to the Due Date (and prior to the filing of such
form) and shall reflect thereon any good faith comments
that are submitted by Purchaser in writing at least ten
(10) days before the Due Date.
Purchaser acknowledges that the foregoing actions shall
constitute full satisfaction of Seller's and Seller Parent's
obligations under Section 10.7(d) of the Purchase Agreement.
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b. The first sentence of Section 10.7(d) of the Purchase
Agreement is hereby amended and restated in its entirety to
read:
"In the case of Washington Mutual Finance, LP (TX) ("Texas
LP"), Seller and Seller Parent shall, at the expense of Seller
and Seller Parent, take all steps reasonably necessary, at
Purchaser's direction (and to the extent that such steps in
and of themselves will not delay the Closing), to restructure
the acquisition by Purchaser of Texas LP (or its assets) so as
to provide Purchaser with a fair market value basis in the
assets of Texas LP for Texas income or franchise tax purposes
(the "Restructuring"); provided, however, that, so long as
Seller and Seller Parent carry out the steps of the
Restructuring, Seller and Seller Parent shall not have any
obligation to indemnify Purchaser for any incremental Taxes or
loss of Tax benefits relating to the basis in the assets of
Texas LP for state and local income or franchise tax
purposes."
8. Tax Sharing Agreement. Section 10.3(d) of the Purchase Agreement is
hereby amended and restated in its entirety to read:
"(i) Notwithstanding anything in any other agreement to the
contrary, all liabilities and obligations between the Seller Parent
or any members of the Seller Parent's Group on the one hand, and the
Subject Companies on the other hand, under any Tax allocation, Tax
sharing, Tax reimbursement and similar agreements and arrangements
in effect prior to the Closing Date shall cease and terminate as of
the Closing Date and will no longer be enforceable; provided,
however, that Purchaser shall have the right to review the
calculation of all payments made by the Subject Companies after the
date of this Agreement to Seller and its affiliates (other than the
Subject Companies) pursuant to the Tax Sharing Agreement, and may
dispute the calculation of any such payments, but only on the basis
that they were not arrived at in a manner consistent with the Tax
Sharing Agreement or were arrived at based on mathematical or
clerical error; provided, further, that the Purchaser shall have
notified Seller in writing of each disputed item, specifying the
estimated amount thereof in dispute and setting forth, in reasonable
detail, the basis for such dispute, within 15 Business Days of
Purchaser's delivery of the Statement of Closing Date Receivables to
Seller pursuant to Section 2.4. In the event of such a dispute,
Seller and Purchaser shall attempt to reconcile their differences,
and any resolution by them as to any disputed amounts shall be
final, binding and conclusive on the parties hereto. If Seller and
Purchaser are unable to reach a resolution with such effect within
10 Business Days after the receipt by Seller of Purchaser's written
notice of dispute, Seller and Purchaser shall submit the items
remaining in dispute for resolution to the Independent Accounting
Firm, which shall, within 15 Business Days after such submission,
determine and report to Seller and Purchaser upon such remaining
disputed items, only on the basis of whether or not they were
arrived at in a manner consistent with the Tax Sharing Agreement or
whether or not they were arrived at based on mathematical or
clerical error and such report shall be final, binding and
conclusive on Seller and Purchaser. The fees and disbursements of
the Independent Accounting Firm shall be shared equally by Seller
and Purchaser.
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(ii) If, based on either the (i) the resolution of all disputes,
pursuant to Section 10.3(d), by Seller and Purchaser or (ii) the
resolution of all disputes, pursuant to Section 10.3(d), by the
Independent Accounting Firm, the disputed payments under the Tax
Sharing Agreement are determined to have been made in error, then
Purchaser shall, and Seller shall cause the Subject Companies to,
reconcile the differences by making a payment in cash by wire transfer
of immediately available federal funds to such bank account(s) as shall
be designated in writing by Purchaser within one (1) Business Day of
such resolution. Any payments required to be made pursuant to this
Section 10.3(d)(ii) shall bear interest from the Closing through the
date of payment at the prime lending rate prevailing during such period
as published in The Wall Street Journal.".
9. Apportionment of Taxes. The first sentence of Section 10.2 of the
Purchase Agreement is hereby amended and restated in its entirety to read:
"In order to apportion any Taxes relating to any taxable year
that includes the Interim Period, the parties hereto shall, to
the extent permitted by Applicable Law, treat for all purposes
the Closing Date as the last day of the taxable year of the
Subject Companies, and such Interim Period shall be treated as
a short taxable year and a Pre-Closing Period for purposes of
this Agreement; provided, however, that the parties shall
allocate the items of the Subject Companies for the month in
which the Closing Date occurs in accordance with the
provisions set forth in Treasury Regulation Section
1.1502-76(b)(2)(iii)."
10. Insurance Subsidiary Closing. Immediately prior to the Closing,
Seller Parent and Seller shall cause the Company to distribute to Seller its
entire equity interest in the Insurance Subsidiaries and the Purchase Price
payable by Purchaser on the Closing Date shall be reduced, pursuant to Section
3.1 of the Purchase Agreement, in an amount equal to $109,460,815. Subject to
the terms and conditions set forth in the Purchase Agreement, upon receipt of
the Insurance Regulatory Approvals, the parties shall take all actions
contemplated by Section 3.1 of the Purchase Agreement to consummate the sale and
delivery of the capital stock of the Insurance Subsidiaries to Purchaser or its
designee(s) (provided, however, that in no event shall such delivery to
Purchaser's designee(s) release Purchaser from its obligations under the
Purchase Agreement).
11. Seller Disclosure Schedule.
a. Section 4.4(b) of the Seller Disclosure Schedule is hereby
amended by deleting Item 1 therein and renumbering Item 2 as
Item 1.
b. Section 4.16(a) of the Seller Disclosure Schedule is hereby
amended and replaced in its entirety by Schedule 4.16(a)
delivered to Purchaser by Seller on the date hereof.
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12. Transition Services.
a. Section 6.11 of the Purchase Agreement is hereby amended and
restated in its entirety to read:
"(a) Promptly following the Closing, but in no event later
than ten Business Days after the date hereof, Seller Parent
shall, and Purchaser shall cause the Company to, negotiate in
good faith to agree upon and execute mutually acceptable
agreements whereby (i) Purchaser will cause the Company to
service the loan and receivables portfolios owned by Seller
and/or its affiliates identified on Exhibit A-1 attached
hereto and (ii) Seller Parent will cause an affiliate to
service the loan and receivables portfolios owned by the
Company identified on Exhibit A-2 attached hereto.
(b) Promptly following the Closing, but in no event later than
ten Business Days after the date hereof, Purchaser shall cause
the Company to, and Seller Parent shall cause FG and
Washington Mutual Mississippi to, negotiate in good faith to
agree upon and execute mutually acceptable agreements whereby
the Company shall provide FG and Washington Mutual Mississippi
continued use of and access to the Company's technology
platform, including the "Access" system, as necessary for FG
and Washington Mutual Mississippi to service their respective
loan and receivables portfolios (provided that Seller Parent
will use reasonable efforts to minimize the scope of such
services). Until the earlier of (i) the date of execution of
such agreements or (ii) January 19, 2004, the Company shall,
consistent with past practice, provide collection and recovery
services to FG and Washington Mutual Mississippi with respect
to their loan and receivables portfolios (such assistance
being referred to herein as the "Transition Servicing")
(provided that Seller Parent will use reasonable efforts to
minimize the scope of such services).
(c) Promptly following the Closing, but in no event later than
ten Business Days after the date hereof, Seller Parent and
Purchaser shall negotiate in good faith to agree upon and
execute mutually acceptable agreements for the Company to have
continued access to third-party vendor services that, prior to
the Closing, have traditionally been made available to the
Company through contracts to which the Seller is a party,
subject to any prohibitions and limitations contained in such
contracts and only to the extent that such services are not
reasonably available to the Company as a subsidiary of
Purchaser. Pending execution of such agreements, Seller agrees
to continue to provide such services, as may be requested by
the Purchaser, to the Company on terms consistent with past
practice, subject to any prohibitions and limitations
contained in such contracts.
(d) After the Closing, Purchaser will cause the Company to
provide to Seller Parent the services described in Exhibit B
attached hereto for the term set forth in Exhibit B or, if
earlier, until such time as Seller Parent notifies Purchaser
that it no longer requires such services. In consideration for
the performance of such services, Seller Parent shall pay the
Company the fee set forth in Exhibit B.".
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b. The Agreement is hereby amended to include the attached
Exhibit A and Exhibit B as "Exhibit A" and "Exhibit B"
thereto, respectively.
13. Governing Law. THIS MEMORANDUM OF UNDERSTANDING AND THE RIGHTS AND
DUTIES OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF DELAWARE.
14. Counterparts. This Memorandum of Understanding may be executed in
two or more counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument.
15. Legal Effect. This Memorandum of Understanding constitutes an
amendment and modification to the Purchase Agreement in accordance with Section
12.4 thereof and shall be deemed effective as of and from the date of the
Purchase Agreement. Except as otherwise expressly provided in this Memorandum of
Understanding, all of the terms, conditions and provisions of the Purchase
Agreement shall remain the same, the Purchase Agreement, as amended hereby,
shall continue in full force and effect, and this Memorandum of Understanding
and the Purchase Agreement shall be read and construed as one instrument.
[THE REMAINDER OF THIS PAGE INTENTIONALLY IS LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Memorandum of
Understanding to be executed on their behalf by their respective officers
hereunto duly authorized all as of the date first written above.
WASHINGTON MUTUAL, INC.
By: /s/ Xxxx Xxxxx
----------------------------------
Name: Xxxx Xxxxx
Title: Executive Vice President
GREAT WESTERN SERVICE CORPORATION TWO
By: /s/ Xxx X. Xxxxxxx
----------------------------------
Name: Xxx X. Xxxxxxx
Title: Executive Vice President
CITIFINANCIAL CREDIT COMPANY
By: /s/ Xxxxx Xxxxxxxxx
----------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Executive Vice President
MOU - Signature Page
