Loading...Loading...Discover Financial Services DFS reported better-than-expected second-quarter earnings results, after the closing bell on Wednesday.Discover reported GAAP earnings of $6.06 per share, beating the estimate of $3.07 per share, and quarterly Net Interest Income (NII) of $3.524 billion, according to data from Benzinga Pro.Net interest income for the quarter increased by $347 million, or 11% year-over-year, driven by higher average receivables and net interest margin expansion. Net interest ma ...

Momentum investing is all about the idea of following a stock's recent trend, which can be in either direction. In the 'long' context, investors will essentially be "buying high, but hoping to sell even higher." And for investors following this methodology, taking advantage of trends in a stock's price is key; once a stock establishes a course, it is more than likely to continue moving in that direction. The goal is that once a stock heads down a fixed path, it will lead to timely and profitable trades.Even ...

Loading...Loading...Discover Financial Services DFS shares are trading higher today after the company reported better-than-expected second-quarter EPS results yesterday.The company reported GAAP earnings of $6.06 per share, beating the estimate of $3.07 per share, and quarterly Net Interest Income (NII) of $3.524 billion.RBC Capital Markets analyst Jon G. Arfstrom says the stock’s performance (Sector Perform, with a $140 price target) is likely to be influenced primarily by the pending merger with Capital O ...

Discover Financial Services (DFS) reported strong second-quarter results supported by interest income growth, thanks to a high-interest rate environment, lower provision for credit losses, growing loans, PULSE volumes and margin expansion. The positives were partially offset by higher expenses.It reported second-quarter 2024 adjusted earnings per share of $6.06, which comfortably beat the Zacks Consensus Estimate of $3.06. Also, the bottom line jumped 71% year over year.Discover Financial's revenues, net of ...

Financial Data and Key Metrics Changes - The company reported net income of $1.5 billion, a 70% increase from the prior year quarter [8] - Net interest margin ended at 11.17%, up 11 basis points year-over-year and 14 basis points sequentially [9] - Total operating expenses increased by $325 million or 23% year-over-year, primarily due to expected regulatory penalties [13] Business Line Data and Key Metrics Changes - Card receivables increased by 7% year-over-year, while personal loans rose by 13% [9][10] - Student loans decreased by 1% year-over-year, with the company entering an agreement to sell its student loan portfolio [10] - Non-interest income grew by $313 million or 45%, driven by lower rewards costs and unusual items [12] Market Data and Key Metrics Changes - Average consumer deposits were up 15% year-over-year and 1% sequentially [11] - Discover card sales declined by 3% compared to the prior year, with spending at restaurants showing a sequential decline [9] Company Strategy and Development Direction - The company is simplifying operations by selling its private student loan portfolio, which is expected to be completed in four tranches by the end of 2024 [5][10] - The merger with Capital One is progressing well, with integration planning and regulatory applications underway [7] Management Comments on Operating Environment and Future Outlook - Management expressed confidence that credit losses are near peak and will plateau during the second half of 2024 [8] - The company revised its 2024 outlook, expecting loan growth to decline in low single digits due to the asset sale [16] Other Important Information - The company entered into a settlement agreement to resolve merchant class actions related to card misclassification [6] - The common equity Tier 1 ratio for the period was 11.9%, up 100 basis points [15] Summary of Q&A Session Questions and Answers - There was no question-and-answer session following the prepared remarks, and inquiries should be directed to the Investor Relations team [3]

Discover Financial Services reported second-quarter results that indicated consumers are turning to debit transactions, while the company’s card sales slipped year on year.CFO John Greene said on the Thursday (July 18) earnings call that Discover card sales were down 3% from the prior year. Supplemental materials from Discover indicate that Discover’s credit card sales volumes were $53.4 billion in the most recent quarter. The company’s PULSE volumes were up 18%, driven by an increase in debit transaction v ...

Market Overview - Major indices are experiencing a rotation, with the Dow gaining +243 points (+0.59%) and reaching an all-time closing high, while the Nasdaq dropped -512 points (-2.77%) [1] - Year-to-date performance shows the Nasdaq up +21%, S&P 500 +17%, Russell 2000 +11%, and Dow +9%, contrasting with the Russell's +10% gain over the past month [2] Company Earnings - Discover Financial Services (DFS) reported earnings of $6.06 per share, exceeding estimates by $3.00, with revenues of $4.54 billion surpassing expectations of $4.16 billion; total loans increased +8% year-over-year [3] - United Airlines (UAL) posted earnings of $4.14 per share, beating the consensus of $3.97, but sales of $14.99 billion fell short of projections of $15.13 billion; next-quarter earnings guidance was lowered to $2.75-3.25 per share [4] - Darden Restaurants (DRI) announced the acquisition of Chuy's Holdings (CHUY) for $37.50 per share, totaling approximately $605 million, with shares trading up +47% [4] Sector Performance - Semiconductor stocks are facing declines, with ASML down -12.7%, AMD -10.2%, and NVIDIA -6.6%, influenced by political commentary regarding China and Taiwan [2]

For the quarter ended June 2024, Discover (DFS) reported revenue of $4.54 billion, up 17% over the same period last year. EPS came in at $6.06, compared to $3.54 in the year-ago quarter.The reported revenue represents a surprise of +9.09% over the Zacks Consensus Estimate of $4.16 billion. With the consensus EPS estimate being $3.06, the EPS surprise was +98.04%.While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street expectations to determine their next m ...

Discover (DFS) came out with quarterly earnings of $6.06 per share, beating the Zacks Consensus Estimate of $3.06 per share. This compares to earnings of $3.54 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 98.04%. A quarter ago, it was expected that this credit card issuer and lender would post earnings of $2.98 per share when it actually produced earnings of $1.10, delivering a surprise of -63.09%.Over the last four quarter ...

[Agreement Preamble and Recitals](index=9&type=section&id=Agreement%20Preamble%20and%20Recitals) [Parties and Agreement Date](index=9&type=section&id=Parties%20and%20Agreement%20Date) This Purchase Agreement was made on **July 17, 2024**, between Discover Bank, a Delaware state chartered non-member bank (the "Seller"), and Santiago Holdings, LP, an Ontario limited partnership (the "Buyer"), outlining the sale of certain assets from the Seller to the Buyer - The agreement is a Purchase Agreement dated **July 17, 2024**[23](index=23&type=chunk) Agreement Parties | Role | Entity | Description | | :--- | :--- | :--- | | **Seller** | Discover Bank | A Delaware state chartered non-member bank | | **Buyer** | Santiago Holdings, LP | An Ontario limited partnership | - The core of the transaction is the sale and transfer of "Purchased Assets" from Seller to Buyer, and the assumption of "Assumed Liabilities" by the Buyer[24](index=24&type=chunk) - Concurrently with this agreement, a Limited Guarantee is being executed by certain guarantors in favor of the Seller to guarantee some of Buyer's obligations[24](index=24&type=chunk) [Definitions](index=10&type=section&id=ARTICLE%20I%20DEFINITIONS) [Definitions](index=10&type=section&id=Section%201.1%20Definitions) This article provides definitions for key terms used throughout the purchase agreement, establishing specific meanings for fundamental terms such as "Assumed Loans," "Purchased Assets," and "Purchase Price" to ensure clarity on the transaction's scope and mechanics - **Assumed Loan:** Defined as any loan set forth on the Assumed Loan Portfolio Tape (Exhibit A) and any Prefunded Loan[33](index=33&type=chunk) - **Purchased Assets:** Includes the Assumed Loans, their receivables, servicing rights, and related documents The full definition is in Section 2.1[160](index=160&type=chunk)[196](index=196&type=chunk) - **Excluded Assets:** Assets not being sold, including cash, Charged-Off Loans, Write-Off Loans, and Seller's Intellectual Property The full definition is in Section 2.2[100](index=100&type=chunk)[198](index=198&type=chunk) - **Retained Liabilities:** Liabilities not assumed by the Buyer, including those related to the operation of the business prior to closing and obligations under the Consent Order The full definition is in Section 2.4[162](index=162&type=chunk)[202](index=202&type=chunk) - **Consent Order:** Refers to Seller's **December 2020** consent order with the U.S Consumer Financial Protection Bureau (CFPB), scheduled to expire on **December 22, 2030**[69](index=69&type=chunk) [Purchase and Sale](index=27&type=section&id=ARTICLE%20II%20PURCHASE%20AND%20SALE) [Purchase and Sale of Purchased Assets](index=27&type=section&id=Section%202.1%20Purchase%20and%20Sale%20of%20Purchased%20Assets) This section outlines the fundamental transaction where the Seller agrees to sell, and the Buyer agrees to purchase, all of the Seller's rights, title, and interest in the "Purchased Assets," free and clear of all encumbrances, except for permitted ones - The core Purchased Assets being sold include: - The applicable Assumed Loans - Corresponding Assumed Loan Receivables, Servicing Rights, and Loan Documents - Applicable Books and Records - Certain claims and rights to tax refunds arising after the Effective Time[196](index=196&type=chunk) [Excluded Assets](index=28&type=section&id=Section%202.2%20Excluded%20Assets) This section specifies which assets are explicitly not part of the sale and will be retained by the Seller, ensuring clarity on the boundaries of the transaction - Key Excluded Assets include: - Cash and cash equivalents - Charged-Off Loans and Write-Off Loans - Intellectual Property, including the "Discover" marks - Furniture, equipment, and real property - Insurance policies - Claims and causes of action arising on or prior to the Effective Time[198](index=198&type=chunk)[199](index=199&type=chunk) [Assumption of Assumed Liabilities](index=29&type=section&id=Section%202.3%20Assumption%20of%20Assumed%20Liabilities) This section details the specific liabilities of the Seller that the Buyer agrees to assume and discharge as part of the transaction, effective as of the closing - Assumed Liabilities primarily consist of: - All liabilities arising from the Purchased Assets after the Effective Time, including Seller Borrower Benefits - Taxes attributable to the Purchased Assets for any Post-Closing Tax Period - Transfer Taxes for which the Buyer is liable under Section 9.3[200](index=200&type=chunk) [Retained Liabilities](index=30&type=section&id=Section%202.4%20Retained%20Liabilities) This section clarifies that the Seller will retain and remain responsible for all liabilities not explicitly defined as "Assumed Liabilities," serving as a critical risk allocation provision - Key Retained Liabilities include: - Liabilities arising from the business or assets on or prior to the Effective Time - Liabilities related to any Excluded Asset or Excluded Business - Pre-Closing Tax Period taxes - Obligations and penalties arising from the CFPB Consent Order - Seller's indebtedness for borrowed money[202](index=202&type=chunk) [Servicing Released; Rights and Risks Transferred](index=30&type=section&id=Section%202.5%20Servicing%20Released%3B%20Rights%20and%20Risks%20Transferred) This section establishes that the Assumed Loans are sold on a "servicing-released" basis, clarifying that upon closing, the Buyer assumes the risk of the loans' performance and is responsible for all future servicing costs - The Assumed Loans are sold on a servicing-released basis, with servicing to be conducted by Servicer (Nelnet Servicing, LLC) on behalf of the Buyer post-closing[203](index=203&type=chunk) - Following the closing, the Buyer bears the risk of loan performance, including delayed payments, non-payment, and default[206](index=206&type=chunk) - The agreement intends for the transaction to be a true sale However, if deemed a loan, it grants Buyer a security interest in the Purchased Assets as a protective measure[206](index=206&type=chunk) [Purchase Price](index=31&type=section&id=Section%202.6%20Purchase%20Price) This section defines the formula for calculating the cash purchase price that the Buyer will pay to the Seller at both the Initial Closing and any Subsequent Closings - The purchase price for each closing is calculated as the sum of: 1. A specified Purchase Price Percentage multiplied by the aggregate Principal Balance of the loans being transferred 2. The aggregate Outstanding Interest on those loans 3. The Purchase Price Percentage multiplied by the aggregate Prefunded Loan Payment Amount for that closing[207](index=207&type=chunk)[208](index=208&type=chunk) [Closings](index=32&type=section&id=Section%202.7%20Closings) This section outlines the mechanics of the transaction's closings, including the timing of the Initial Closing and Subsequent Closings, the specific documents and payments to be delivered by each party, and provisions for delaying a closing under certain circumstances - The transaction will occur in multiple closings: an "Initial Closing" followed by one or more "Subsequent Closings" as per a defined schedule[210](index=210&type=chunk)[211](index=211&type=chunk) - At each closing, Seller must deliver key documents including a Bill of Sale, officer's certificate, and the physical or electronic loan notes Buyer must deliver the estimated purchase price and its corresponding documents[212](index=212&type=chunk)[214](index=214&type=chunk) - A closing can be postponed for up to **90 days** (with a possible **60-day extension**) if the designated Servicer experiences an Insolvency Proceeding or a material licensing failure[216](index=216&type=chunk)[217](index=217&type=chunk) [Closing and Post-Closing Statements](index=35&type=section&id=Section%202.8%20Closing%20and%20Post-Closing%20Statements) This section details the process for preparing and delivering financial statements to determine the purchase price, with the Seller responsible for creating estimated and preliminary statements - No later than **five business days** before each closing, Seller will provide an "Estimated Closing Statement" with a good faith estimate of the purchase price[220](index=220&type=chunk) - Within **seven business days** after each closing, Seller will provide a "Preliminary Closing Statement" with the determined purchase price components[222](index=222&type=chunk) - Both parties must provide reasonable access to records and personnel to assist in the preparation and review of these statements[222](index=222&type=chunk)[223](index=223&type=chunk) [Reconciliation of Estimated Closing Statement; Adjustment](index=37&type=section&id=Section%202.9%20Reconciliation%20of%20Estimated%20Closing%20Statement%3B%20Adjustment) This section establishes the procedure for finalizing the purchase price after each closing, including a Buyer review period, a dispute resolution mechanism, and a final payment adjustment - Buyer has a **20-business-day** "Review Period" after receiving the Preliminary Closing Statement to submit a "Notice of Disagreement"[227](index=227&type=chunk) - If disagreements cannot be resolved through good faith negotiation, the dispute is submitted to an Accounting Firm (KPMG LLP or another nationally recognized firm) for a final and binding determination[28](index=28&type=chunk)[229](index=229&type=chunk)[231](index=231&type=chunk) - A "Post-Closing Adjustment" payment is made by either Buyer or Seller within three business days after the Final Closing Statement is determined, to reconcile the estimated price paid at closing with the final calculated price[233](index=233&type=chunk)[234](index=234&type=chunk)[235](index=235&type=chunk) [Tax Withholding](index=40&type=section&id=Section%202.10%20Tax%20Withholding) This section states that the Buyer is not entitled to deduct or withhold any amounts from payments to the Seller, except as required by law, and if withholding is legally required, Buyer must provide notice and cooperate with Seller to obtain relief - Buyer and its representatives shall not withhold from any amount payable under the agreement unless required by law[240](index=240&type=chunk) - No withholding is permitted if Seller delivers a duly executed IRS Form W-9, unless there is a change in law after the agreement date[240](index=240&type=chunk) [Representations and Warranties of Seller](index=40&type=section&id=ARTICLE%20III%20REPRESENTATIONS%20AND%20WARRANTIES%20OF%20SELLER) [Assumed Loans](index=41&type=section&id=Section%203.5%20Assumed%20Loans) The Seller provides extensive representations regarding the quality and characteristics of the Assumed Loans, including data accuracy, clear title, compliance with laws, and legal validity of loan documents - Seller represents that the information in the Specified Fields of the Assumed Loan Portfolio Tape is **true and complete in all material respects** as of the Loan Tape Date (**June 30, 2024**)[132](index=132&type=chunk)[250](index=250&type=chunk) - Seller affirms it has **good and marketable title** to the Assumed Loans, free of any encumbrances other than permitted ones[251](index=251&type=chunk) - Each Assumed Loan originated by Seller was done so in **material compliance** with Seller's Origination Policies and applicable law, including the Consent Order[254](index=254&type=chunk) - The Assumed Loan Documents are represented as **legal, valid, and binding obligations**, enforceable against the parties involved, subject to standard exceptions[261](index=261&type=chunk) [Seller Borrower Benefits](index=44&type=section&id=Section%203.7%20Seller%20Borrower%20Benefits) The Seller represents that it has provided a complete list and description of all borrower benefit programs (Seller Borrower Benefits) associated with the Assumed Loans and has correctly applied these benefits to all eligible borrowers - A **true and complete list** of all Seller Borrower Benefits is provided in the Seller Disclosure Letter[271](index=271&type=chunk) - Seller affirms that it has **correctly applied all earned benefits** to the applicable borrowers[273](index=273&type=chunk) [Consent Order](index=45&type=section&id=Section%203.9%20Consent%20Order) The Seller represents that it has used reasonable best efforts to comply with its obligations under the **December 2020** CFPB Consent Order and believes it is in compliance with respect to the Assumed Loans, except where failure would not have a Material Adverse Effect - Seller represents it has used **reasonable best efforts to comply** with the Consent Order and believes it is in compliance with respect to the Assumed Loans, except for non-compliance that would not cause a Material Adverse Effect[277](index=277&type=chunk) [Disclaimer of Warranties](index=46&type=section&id=Section%203.13%20Disclaimer%20of%20Warranties) This section contains a broad disclaimer stating that the Seller makes no representations or warranties, either express or implied, beyond those explicitly set forth in Article III, emphasizing that the Buyer is not relying on any other information or projections provided - **Seller explicitly disclaims any representation or warranty** beyond what is expressly stated in Article III, including any implied warranties of value, condition, or suitability of the purchased assets[281](index=281&type=chunk) - Any estimates, forecasts, or other information provided outside of the formal representations (e.g., in data rooms or presentations) **cannot be relied upon and do not create liability** for the Seller[282](index=282&type=chunk) [Representations and Warranties of Buyer](index=47&type=section&id=ARTICLE%20IV%20REPRESENTATIONS%20AND%20WARRANTIES%20OF%20BUYER) [Solvency](index=49&type=section&id=Section%204.6%20Solvency) The Buyer represents and warrants that, after giving effect to the transaction, it will be solvent, meaning it will have the ability to pay its debts as they mature and not have unreasonably small capital for its business - Buyer warrants that it will **not be insolvent** after the closing, meaning its assets will exceed its liabilities and it can pay its debts as they come due[292](index=292&type=chunk) [Investigation by Buyer](index=49&type=section&id=Section%204.8%20Investigation%20by%20Buyer) The Buyer confirms that it is a sophisticated purchaser, has conducted its own independent investigation and evaluation of the purchased assets and assumed liabilities, and is not relying on any information outside of the Seller's express representations in the agreement - Buyer acknowledges it is an **informed and sophisticated purchaser** capable of evaluating the merits and risks of the transaction[294](index=294&type=chunk) - Buyer confirms it has had the opportunity to ask questions and has reviewed the provided materials to its satisfaction, making an **informed decision**[296](index=296&type=chunk) [Funding](index=50&type=section&id=Section%204.9%20Funding) The Buyer represents that it has secured sufficient funds and binding commitments through Debt and Equity Commitment Letters to fulfill all its financial obligations under the agreement, including paying the Purchase Price and related fees - Buyer has delivered **true and complete copies** of its executed Debt and Equity Commitment Letters, which are in full force and effect[297](index=297&type=chunk) - The commitments are **sufficient to cover the Purchase Price** and all other fees and expenses related to the transaction[297](index=297&type=chunk) - Buyer has **no reason to believe the financing will not be available** at each closing, assuming its own conditions are met[298](index=298&type=chunk) [Disclaimer of Warranties](index=51&type=section&id=Section%204.13%20Disclaimer%20of%20Warranties) This section contains the Buyer's acknowledgment that the Seller is not making any representations other than those explicitly in Article III, confirming the Buyer is taking the assets "as is and where is with all faults" and is not relying on any other information from the Seller - Buyer explicitly acknowledges that it is taking the Purchased Assets and Assumed Liabilities on an **"as is and where is with all faults" basis** as of the closing[304](index=304&type=chunk) - Buyer confirms its purchase is **not made in reliance upon any representation, warranty, or information from the Seller**, whether oral or written, except for those expressly set forth in Article III of the agreement[304](index=304&type=chunk) [Covenants](index=53&type=section&id=ARTICLE%20V%20COVENANTS) [Conduct of Business](index=53&type=section&id=Section%205.1%20Conduct%20of%20Business) This section outlines the Seller's obligations regarding the operation of the business between the signing of the agreement and the final closing, prohibiting certain significant actions without the Buyer's consent - From the date of the agreement until the **Final Closing**, Seller must conduct the Business in the **Ordinary Course of Business**[308](index=308&type=chunk) - Seller is restricted from certain actions, including: - Acquiring assets that would become Purchased Assets (other than originating Prefunded Loans) - Selling or transferring Purchased Assets (except in the ordinary course, like charge-offs) - **Materially changing Seller Borrower Benefits adversely** - **Amending Seller Origination or Loan Servicing Policies in a manner adverse to the Buyer**[309](index=309&type=chunk)[310](index=310&type=chunk) [Borrower Benefits; Prefunded Loans](index=55&type=section&id=Section%205.2%20Borrower%20Benefits%3B%20Prefunded%20Loans) This section contains the Buyer's covenant to honor the existing Seller Borrower Benefits for all transferred loans, ensuring continuity for customers by maintaining these benefits for currently enrolled borrowers and making them available to others who may qualify - Post-closing, Buyer must **maintain the Seller Borrower Benefits** for all borrowers who are receiving them at the time of transfer[314](index=314&type=chunk) - Buyer must also make these benefits **available to other borrowers** of Assumed Loans who subsequently qualify for them[314](index=314&type=chunk) - Seller is required to provide Buyer with **updated lists of loans eligible for and receiving these benefits** prior to each closing[322](index=322&type=chunk)[323](index=323&type=chunk)[324](index=324&type=chunk) [Publicity](index=59&type=section&id=Section%205.3%20Publicity) This section restricts both parties from making public announcements about the transaction without the prior written consent of the other party, with specific exceptions for legally required disclosures and cooperation on such disclosures - **Neither party can issue a public release or announcement** about the agreement without the other's prior written consent[327](index=327&type=chunk) - Exceptions are made for disclosures required by law, governmental entities, or stock exchanges, provided the parties cooperate and, where possible, seek **confidential treatment for sensitive information** like the identity of Buyer's investors[327](index=327&type=chunk)[328](index=328&type=chunk) [Confidentiality](index=61&type=section&id=Section%205.4%20Confidentiality) This section establishes the post-closing confidentiality obligations for both parties, requiring the Buyer to keep "Seller Confidential Information" confidential and the Seller to keep "Business Confidential Information" confidential for **three years**, with exceptions for legally required disclosures - The pre-existing Confidentiality Agreement remains in effect until the **Final Closing**[331](index=331&type=chunk) - For **three years** post-closing, both parties must **maintain the confidentiality** of specified information received from the other, subject to exceptions for legal or regulatory requirements[332](index=332&type=chunk)[335](index=335&type=chunk) - **"Business Confidential Information"** is defined as information related to the Transferred Assets and Liabilities, including borrower data[338](index=338&type=chunk) - **"Seller Confidential Information"** is defined as all other non-public information provided by the Seller not directly related to the transferred assets[337](index=337&type=chunk) [Non-Solicitation](index=70&type=section&id=Section%205.8%20Non-Solicitation) This section contains mutual non-solicitation covenants, where the Buyer agrees not to solicit key Seller employees for a specified period, and the Seller agrees not to solicit transferred loan borrowers for competing student loan products for **six years** - Buyer agrees **not to solicit or hire** specified "Covered Employees" of the Seller for a period lasting until **18 months** after the Final Closing or **two years** after the Initial Closing, whichever is later[359](index=359&type=chunk) - Seller agrees **not to solicit borrowers** of the Assumed Loans for student loan consolidation or refinancing products for a period of **six years** from the Initial Closing Date[361](index=361&type=chunk) - Exceptions to these restrictions include **general public advertisements and solicitations** not targeted at the specific employees or borrowers[360](index=360&type=chunk)[361](index=361&type=chunk) [Consent Order Matters](index=73&type=section&id=Section%205.13%20Consent%20Order%20Matters) This section obligates the Buyer to provide reasonable cooperation to the Seller in connection with the Seller's ongoing compliance with the **2020** CFPB Consent Order, including providing information and participating in discussions with the CFPB if necessary - Buyer must **reasonably cooperate with Seller** regarding its communications with the CFPB and performance of obligations under the Consent Order[371](index=371&type=chunk) - This cooperation includes providing **documents and information reasonably requested** by Seller to comply with the Consent Order[371](index=371&type=chunk) - These obligations **survive any merger or transfer** of the loans and must be assumed by any successor or assignee[372](index=372&type=chunk) [Servicing of Assumed Loans](index=74&type=section&id=Section%205.15%20Servicing%20of%20Assumed%20Loans) This section mandates that from the closing date forward, all servicing and administration of the Assumed Loans must adhere to the "Specified Provisions" detailed in Exhibit C, which are related to the Consent Order, with the Buyer responsible for ensuring compliance - Post-closing, all servicing of the Assumed Loans must **comply with the "Specified Provisions"** listed in Exhibit C, which relate to the Consent Order[375](index=375&type=chunk) - Seller has the right to **unilaterally amend Exhibit C** to reflect changes in the Consent Order, and Buyer must implement these changes, with Seller paying for the associated additional costs[376](index=376&type=chunk) - Buyer must ensure Seller is a party to or **third-party beneficiary** of all servicing agreements for the Assumed Loans, with rights to enforce the Specified Provisions[379](index=379&type=chunk) [Financing Activities](index=76&type=section&id=Section%205.17%20Financing%20Activities) This section clarifies the roles regarding the Buyer's financing, stating that while the transaction is not contingent on financing, the Seller agrees to provide reasonable cooperation for the Buyer's debt financing and any subsequent securitization transactions - Buyer's obligation to close is **not subject to any financing condition**[386](index=386&type=chunk) - Seller agrees to provide **reasonable cooperation** for Buyer's Debt Financing, such as participating in meetings and providing necessary information, so long as it does not unreasonably interfere with its business[387](index=387&type=chunk) - Buyer must use **reasonable best efforts to arrange and consummate the Debt Financing** as outlined in the Debt Commitment Letter[397](index=397&type=chunk) - Buyer must **reimburse Seller for reasonable out-of-pocket costs** incurred during this cooperation and indemnify Seller against losses arising from the financing activities[394](index=394&type=chunk) [Conditions to the Closings](index=83&type=section&id=ARTICLE%20VI%20CONDITIONS%20TO%20THE%20CLOSINGS) [Mutual Condition to Obligations of the Parties](index=83&type=section&id=Section%206.1%20Mutual%20Condition%20to%20Obligations%20of%20the%20Parties) This section establishes the single mutual condition that must be met for either party to be obligated to close the transaction: the absence of any law, injunction, or pending governmental action that would prevent, prohibit, or make the closing illegal - The obligation for both parties to close is **contingent on the absence of any legal restraint** (law, injunction, etc) from a competent governmental entity that would prevent or prohibit the transaction[410](index=410&type=chunk) [Conditions to Obligations of Buyer](index=84&type=section&id=Section%206.2%20Conditions%20to%20Obligations%20of%20Buyer) This section lists the conditions that must be satisfied for the Buyer to be obligated to proceed with a closing, primarily relating to the accuracy of the Seller's representations and warranties and the Seller's performance of its covenants - Buyer's obligation to close is conditioned on: - The **truth and correctness of Seller's representations and warranties** (with fundamental reps needing to be correct in all respects and others correct except where failure would not have a Material Adverse Effect) - Seller's **compliance in all material respects with its covenants** - Receipt of a **certificate from a Seller officer** confirming these conditions are met[412](index=412&type=chunk)[413](index=413&type=chunk)[414](index=414&type=chunk) [Conditions to Obligations of Seller](index=84&type=section&id=Section%206.3%20Conditions%20to%20Obligations%20of%20Seller) This section lists the conditions that must be satisfied for the Seller to be obligated to proceed with a closing, mirroring the conditions for the Buyer and relating to the accuracy of the Buyer's representations and warranties and the Buyer's performance of its covenants - Seller's obligation to close is conditioned on: - The **truth and correctness of Buyer's representations and warranties** - Buyer's **compliance in all material respects with its covenants** - Receipt of a **certificate from a Buyer officer** confirming these conditions are met[415](index=415&type=chunk)[417](index=417&type=chunk)[418](index=418&type=chunk) [Termination](index=85&type=section&id=ARTICLE%20VII%20TERMINATION) [Termination of Agreement](index=85&type=section&id=Section%207.1%20Termination%20of%20Agreement) This section specifies the circumstances under which the agreement can be terminated, providing separate termination rights before the Initial Closing and for Subsequent Closings, including mutual consent, failure to close by an outside date, uncured breaches, or legal prohibition - The agreement can be terminated prior to the Initial Closing by mutual consent, if the closing doesn't occur by the **"Initial Outside Date" of January 17, 2025**, or due to an uncured material breach by the other party[421](index=421&type=chunk)[422](index=422&type=chunk) - After the Initial Closing, the obligation to conduct Subsequent Closings can be terminated if all loans are not transferred by the **"Final Outside Date" of July 17, 2025**, or for similar reasons of breach or legal prohibition[423](index=423&type=chunk)[424](index=424&type=chunk) [Effect of Termination](index=87&type=section&id=Section%207.2%20Effect%20of%20Termination) This section describes the consequences of a valid termination, generally rendering the agreement void while certain provisions survive, and importantly, termination does not relieve a party from liability for Fraud or an Intentional Breach - Upon termination, the agreement becomes **void**, but certain sections (including confidentiality, fees, and miscellaneous provisions) survive[425](index=425&type=chunk) - Termination does not release either party from liability for **Fraud** or an **"Intentional Breach"** of the agreement[425](index=425&type=chunk)[427](index=427&type=chunk) [Indemnification](index=88&type=section&id=ARTICLE%20VIII%20INDEMNIFICATION) [Obligations of Seller](index=88&type=section&id=Section%208.1%20Obligations%20of%20Seller) This section details the Seller's post-closing indemnification obligations, where the Seller agrees to indemnify the Buyer for losses arising from breaches of its representations and covenants, as well as for any Retained Liabilities, subject to specific financial limitations - Seller will **indemnify Buyer for losses** from: (i) breach of Seller's representations/warranties, (ii) breach of Seller's covenants, and (iii) any Excluded Assets or Retained Liabilities[429](index=429&type=chunk) Indemnification Limitations | Limitation Type | Threshold/Cap | Applies To | | :--- | :--- | :--- | | **Deductible** | **1.5% of Total Purchase Price** | General representation breaches (excluding fundamental reps, fraud, and certain loan reps) | | **De Minimis** | **$100,000 per claim** | General representation breaches | | **Cap** | **8% of Total Purchase Price** | General representation breaches | | **Overall Liability** | **Total Purchase Price** | Breaches of reps/warranties (other than fraud) and covenants | [Obligations of Buyer](index=89&type=section&id=Section%208.2%20Obligations%20of%20Buyer) This section outlines the Buyer's reciprocal indemnification obligations, where the Buyer agrees to indemnify the Seller for losses arising from breaches of its representations and covenants, as well as for any Assumed Liabilities and from its ownership and operation of the business post-closing, also subject to a deductible and cap - Buyer will **indemnify Seller for losses** from: (i) breach of Buyer's representations/warranties, (ii) breach of Buyer's covenants, (iii) any Transferred Assets and Liabilities, and (iv) Buyer's ownership or operation of the business[434](index=434&type=chunk)[435](index=435&type=chunk) - Buyer's indemnification for representation breaches is subject to the same deductible (**1.5% of Total Purchase Price**) and cap (**8% of Total Purchase Price**) as the Seller's[435](index=435&type=chunk)[436](index=436&type=chunk) [Indemnification Procedures](index=90&type=section&id=Section%208.3%20Indemnification%20Procedures) This section establishes the formal process for handling indemnification claims, covering requirements for claim notices, the indemnifying party's control of defense for third-party claims, and the rights and obligations during defense and settlement - An Indemnified Party must promptly provide a **detailed "Claim Notice"** to the Indemnifying Party upon learning of a potential claim[438](index=438&type=chunk) - The Indemnifying Party has **60 days** to decide whether to assume control of the defense of a third-party claim at its own expense[439](index=439&type=chunk) - If the Indemnifying Party assumes the defense, it **cannot settle the claim without the Indemnified Party's consent** if the settlement involves non-monetary relief or an admission of wrongdoing[440](index=440&type=chunk) [Sole Remedy](index=95&type=section&id=Section%208.6%20Sole%20Remedy) This section establishes that, after the closing, the indemnification provisions in Article VIII and the tax provisions in Article IX will be the sole and exclusive remedy for the parties for any matters arising from the agreement, with exceptions for Fraud or specific performance - Post-closing, the indemnification procedures in Articles VIII and IX are the **sole and exclusive remedy** for any breaches or other matters arising from the agreement[455](index=455&type=chunk) - This exclusivity does not apply to claims of **Fraud**, the right to seek **specific performance (Section 10.14)**, or the **purchase price adjustment mechanism (Section 2.9)**[455](index=455&type=chunk) [Tax Matters](index=95&type=section&id=ARTICLE%20IX%20TAX%20MATTERS) [Tax Indemnification](index=95&type=section&id=Section%209.1%20Tax%20Indemnification) This section allocates tax liability between the parties, with the Seller responsible for and indemnifying the Buyer against pre-closing taxes related to purchased assets, and the Buyer responsible for and indemnifying the Seller against post-closing taxes related to purchased assets - Seller **indemnifies Buyer for taxes** attributable to the Purchased Assets for any Pre-Closing Tax Period[457](index=457&type=chunk) - Buyer **indemnifies Seller for taxes** attributable to the Purchased Assets for any Post-Closing Tax Period[458](index=458&type=chunk) - For tax periods that straddle the closing date, taxes are allocated between the pre-closing and post-closing periods on a **closing-of-the-books basis** for income taxes and on a **per-diem basis** for periodic taxes[459](index=459&type=chunk) [Transfer Taxes](index=97&type=section&id=Section%209.3%20Transfer%20Taxes) This section explicitly states that all transfer taxes incurred as a result of the transaction will be borne by the Buyer, and the parties agree to cooperate to minimize these taxes where legally permissible - **All Transfer Taxes** resulting from the transaction are to be borne by the Buyer[464](index=464&type=chunk) [Tax Contests](index=97&type=section&id=Section%209.4%20Tax%20Contests) This section grants the Seller the right to control any tax audit, examination, or assessment that could result in an indemnity payment from the Seller to the Buyer, requiring the controlling party to keep the other informed and obtain consent for settlement - Seller has the right to **control any tax audit or claim** ("Tax Claim") that could lead to an indemnification payment by Seller[465](index=465&type=chunk) [Miscellaneous](index=98&type=section&id=ARTICLE%20X%20MISCELLANEOUS) [Survival](index=98&type=section&id=Section%2010.1%20Survival) This section defines how long the representations, warranties, and covenants in the agreement remain in effect after the closing, with general representations surviving for **15 months** and "Fundamental Representations" for **three years** - General representations and warranties survive for **15 months** following each applicable closing[473](index=473&type=chunk) - **Fundamental Representations** (related to organization, authorization, title, and brokers' fees) survive for **three years** from the Initial Closing Date[473](index=473&type=chunk) - Claims for **Fraud** are not subject to these time limitations[473](index=473&type=chunk) [Choice of Law](index=99&type=section&id=Section%2010.3%20Choice%20of%20Law) This section specifies that the agreement and any related actions will be governed by and interpreted in accordance with the internal laws of the State of New York, without regard to its conflict of laws principles - The agreement is **governed by the laws of the State of New York**[479](index=479&type=chunk) [Jurisdiction; Service of Process; WAIVER OF JURY TRIAL](index=100&type=section&id=Section%2010.5%20Jurisdiction%3B%20Service%20of%20Process%3B%20WAIVER%20OF%20JURY%20TRIAL) This section establishes that any legal action related to the agreement must be brought exclusively in the U.S District Court for the Southern District of New York or, if jurisdiction is not accepted, in Delaware state courts, and crucially, both parties irrevocably waive their right to a trial by jury - The parties submit to the **exclusive jurisdiction** of the U.S District Court for the Southern District of New York or Delaware courts for any disputes[482](index=482&type=chunk) - Both parties **irrevocably waive their right to a trial by jury** in any action connected with the agreement[486](index=486&type=chunk) [Specific Performance](index=105&type=section&id=Section%2010.14%20Specific%20Performance) This section acknowledges that monetary damages would be an inadequate remedy for a breach of the agreement, granting both parties the right to seek specific performance and injunctive relief to enforce the terms without needing to prove actual harm or post a bond - The parties agree that **irreparable damage would result from a breach** and that monetary damages are not an adequate remedy[505](index=505&type=chunk) - Either party is entitled to seek **specific performance and injunctive relief** to enforce the agreement's terms[505](index=505&type=chunk) [Non-Petition and Limited Recourse](index=106&type=section&id=Section%2010.18%20Non-Petition%20and%20Limited%20Recourse) This section contains two key provisions: the Seller agrees not to initiate insolvency proceedings against any of the Buyer's special purpose entities, and any claims or liabilities under the agreement are limited to the signatory parties, excluding their affiliates, directors, officers, or employees - Seller agrees **not to file or join in any petition for an Insolvency Proceeding** against any of Buyer's special purpose entity assignees ("SPE Assignee") for **one year and one day** after the financing is paid off[511](index=511&type=chunk) - Recourse for any claims under the agreement is **strictly limited to the signatory parties** No personal liability shall attach to any affiliates, directors, officers, employees, or partners of the parties ("Non-Recourse Parties")[513](index=513&type=chunk) [Lender Limitations](index=107&type=section&id=Section%2010.19%20Lender%20Limitations) This section protects the Buyer's financing sources, with the Seller agreeing that it has no rights or claims against the Debt Financing Sources in connection with the agreement or the financing, and that the Debt Financing Sources have no liability to the Seller - Seller agrees it has **no rights or claims against any of the Debt Financing Sources** related to the agreement or the financing[513](index=513&type=chunk) - The Debt Financing Sources are explicitly stated to have **no liability to the Seller or its affiliates** under the agreement[513](index=513&type=chunk) [Exhibits](index=5&type=section&id=Exhibits) [List of Exhibits](index=5&type=section&id=List%20of%20Exhibits) The agreement references several exhibits that form part of the overall contract, containing detailed information and standard forms necessary for the execution of the transaction - The agreement includes the following key exhibits: - **Exhibit A:** Assumed Loan Portfolio Tape - **Exhibit B:** Form of Bill of Sale and Assignment and Assumption Agreement - **Exhibit C:** Specified Provisions (related to servicing and the Consent Order)[17](index=17&type=chunk)