Agreement Relating To Fleet Credit Card Services, L.P. Dated 5/28/04

Exhibit 10.1


AGREEMENT RELATING TO
FLEET CREDIT CARD SERVICES, L.P.


THIS AGREEMENT (the "AGREEMENT") is made and entered into as of the 28th day of May, 2004 (the "EFFECTIVE DATE"), by and between ADVANTA CORP. ("AC"), ADVANTA NATIONAL BANK ("ANB"), ADVANTA SERVICE CORP. ("ASC"), FLEET CREDIT CARD HOLDINGS, INC. ("FCCH"), FLEET CREDIT CARD SERVICES, L.P. ("SERVICES") and BANK OF AMERICA CORP. ("BAC"). AC, ANB and ASC are sometimes referred to herein individually as an "ADVANTA PARTNER" and collectively as "ADVANTA." Each Advanta Partner, FCCH, Services and BAC are sometimes referred to herein individually as a "PARTY" and collectively as the "PARTIES." Any capitalized term used in this Agreement and not otherwise defined herein shall have the same meaning given such term in the Limited Partnership Agreement of Fleet Credit Card Services, L.P., dated as of May 26, 1998 (the "LIMITED PARTNERSHIP AGREEMENT").


STATEMENT OF PURPOSE


Since February 20, 1998, Services (or its predecessor, Fleet Credit Card LLC) has owned and operated the consumer credit card business of FleetBoston Financial Corporation and its Affiliates (collectively "FLEET"), which business resulted from the contribution by Advanta and Fleet Financial Group, Inc. (the predecessor to Fleet) of the assets and liabilities of their respective consumer credit card businesses to Fleet Credit Card LLC pursuant to that certain Contribution Agreement, dated as of October 28, 1997, as amended (the "CONTRIBUTION AGREEMENT"). Services is a Rhode Island limited partnership that is governed by the terms and conditions of the Limited Partnership Agreement. FCCH is the sole general partner of Services and owns a 98.7% Interest in Services, and AC, ANB and ASC are the sole limited partners in Services and collectively own a 1.3% Interest in Services. Effective as of April 1, 2004, Fleet merged with and into BAC, with BAC being the survivor corporation. BAC now desires to combine the credit card business owned and operated by Services with BAC's consumer credit card business primarily owned and operated by BAC's subsidiary, Bank of America, N.A. (USA) ("BANA(USA)"), and BAC and Advanta also desire to settle certain issues that have arisen relating to the ownership and operation of, and contributions to, Services, all as set forth in this Agreement.


ACCORDINGLY, in consideration of the premises and the mutual covenants and agreements set forth below, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto hereby agree as follows:


1. STRUCTURE OF COMBINED CREDIT CARD BUSINESS.


(a) Drop Down. As soon as reasonably practicable following the Effective Date, BAC and Services shall cause their respective credit card businesses to be combined into a single new entity (referred to herein as "NEWCO"), which shall be a limited liability company or limited partnership, as selected by BAC in its sole discretion. This combination into Newco shall be referred to as the "DROP DOWN" structure and shall be accomplished by the contribution by Services of all of its assets and liabilities to Newco and by the contribution of all of the assets


and liabilities of BAC's consumer credit card business to Newco; provided, however, certain of the credit card assets and liabilities of BAC's credit card business may be transferred to Newco through a rights or participation agreement. Anything in this Agreement to the contrary notwithstanding, BAC, BANA(USA), Newco and Services covenant that no Advanta Partner shall recognize any taxable income or gain, directly or indirectly, as a result of the transfer of the assets and liabilities of Services to Newco pursuant to the Drop Down; provided, however, each Advanta Partner's sole remedy for any breach of this covenant shall be a claim for indemnification to the extent applicable under Subparagraph 1(d)(ii)(A)(2) below.


(b) Ownership. The initial owners of Newco shall be Services and BANA(USA) (or, as determined by BAC in its sole discretion, a subsidiary of BANA(USA)) (the "BANA(USA) OWNER"), and the percentage ownership interest of each such owner in Newco shall be equal to the quotient of (i) the fair market value of such owner's business contributed to Newco divided by (ii) the sum of the fair market values of both owner's businesses contributed to Newco; provided, however, that the product of (A) the fair market value of Services' business times (B) 1.3% shall not be less than $38.0 million. Subject to the preceding sentence, the determination of the fair market value of each of these businesses shall be made as soon as possible after the Effective Date by Goldman Sachs & Co. and Goldman Sachs & Co.'s appraisal shall be final and binding on the Parties hereto. The fees paid to Goldman Sachs & Co. for its valuation services shall be paid equally by Services and BAC. Effective upon the consummation of the Drop Down, Advanta's Percentage in Services shall be 1.3%, and, from and after the Drop Down, Advanta's interest in Newco shall only be indirect through its Interest in Services, and Advanta shall not be a partner, member or other owner of Newco.


(c) Future Acquisitions. Neither Services nor Advanta shall be entitled in any way, directly or indirectly, to participate in or benefit from any single credit card portfolio acquisition having an aggregate acquisition cost in excess of $250 million or other business acquired by or contributed to Newco (or any other BAC subsidiary or affiliate) (an "ACQUISITION") after the Effective Date, and in the event of any such Acquisition(s) by Newco, Newco's governing documents shall be modified as necessary, in BAC's discretion, to cause all participation in or benefit from such Acquisition(s) to inure solely to the benefit of the BANA(USA) Owner. Notwithstanding the foregoing, neither the acquisition by Newco of BAC's consumer credit card business pursuant to the Drop Down structure set forth in Paragraph 1(a) above nor the acquisition of credit card accounts or receivables in the ordinary course of business of Newco shall be deemed to be an Acquisition for the purposes of this Agreement. In connection with any Acquisition, BAC shall cause Newco to be compensated for Newco's costs plus a reasonable profit (which may provide for less profit than an arms length agreement with a third-party provider due to economies of scale generated by Newco's business and such Acquisition) for the use of any Newco property or personnel by any such acquired business in which Advanta and Services do not participate.


(d) Governance. Newco shall be governed by an operating agreement (or, if applicable, limited partnership agreement) that will provide that the BANA(USA) Owner will be the manager (or general partner) of Newco and of the combined business with the sole authority, subject to Subparagraph 1(d)(i) below, to operate Newco in the best interest of Newco in its sole discretion without any requirement to obtain Services' approval, except as may be required by applicable law. Newco's governing documents shall also have no requirement to obtain


2


Advanta's consent for any purpose. Newco's initial governing documents shall be agreed upon and executed by Services and the BANA(USA) Owner and Newco's owners shall have the right to amend such governing documents in their discretion from time to time; provided, however, as long as any Advanta Partner is a Partner in Services, Newco's governing documents shall be required to include provisions in substantially the following form:


(i) Newco and each of its owners shall not


(A) approve any act that would reduce the Percentage owned
by Advanta in Services below 1% in the aggregate;


(B) reduce the total amount of (x) the indebtedness of
Services and (y) the indebtedness of Newco that is allocable to
Services (the sum of (x) and (y) being hereafter referred to as the
"ALLOCABLE INDEBTEDNESS") if the reduction causes the amount of any
Advanta Partner's share of the Allocable Indebtedness to be less
than such Advanta Partner's Deficit Balance Amount (as defined
below). For purposes of this Agreement, the term "DEFICIT BALANCE
AMOUNT" means an amount, to the extent such amount is negative,
equal to the adjusted income tax basis of an Advanta Partner's
Interest computed without taking into account the increase in such
Advanta Partner's adjusted income tax basis attributable to such
Advanta Partner's share of liabilities of Services;


(C) approve any sale, transfer or other disposition of
Newco's property or assets that were Restricted Sale Assets at
Services, if any such sale, transfer or other disposition would
result in the recognition of gain or income to any Advanta Partner
under Section 704(c) of the Code;


(D) make any election that would result in Services being
taxed as other than a "partnership" for federal income tax purposes,
including (but not limited to) electing to be taxed as other than a
"partnership" by filing Form 8832, "Entity Classification Election"
or making any election inconsistent with Section 4.5.3 of the
Limited Partnership Agreement;


(E) on or before February 20, 2009, make any distribution of
Services property (other than money) to any Advanta Partner; or


(F) approve any activities of Services or Newco that are not
part of or incidental to the business of banking or are not
permissible for any operating subsidiary of a national bank.


To the extent that Newco or any of its owners breaches any of the above
provisions (other than Subparagraph 1(d)(i)(F)), Advanta's sole remedy
shall be a claim for indemnification to the extent applicable under
Subparagraph 1(d)(ii) below.


(ii) (A) Newco, its owners, BAC and BANA(USA) shall indemnify,
defend and hold harmless Advanta from and against any and all
Damages for Indemnified Taxes (as defined below) owed or incurred by
Advanta or any Advanta Affiliate as the result of (1) Newco or any
of its owners taking any action


3


in violation of the provisions of Subparagraph 1(d)(i) above or (2)
the transfer of the assets and liabilities of Services to Newco
pursuant to the Drop Down; provided, however, such indemnification
shall not include any indemnity for Damages for Indemnified Taxes
relating to the Book/Tax Differential. The amount of the Indemnified
Taxes for purposes of this indemnification shall be computed in the
manner set forth in Section 7.2.6 of the Limited Partnership
Agreement, to the extent that such section specifies the procedure
for identifying the person that makes this computation. Payments to
Advanta under this indemnification provision shall be "grossed-up"
in the same manner as described in Section 6.4.3 of the Limited
Partnership Agreement.


(B) For purposes of this indemnification, the term
"INDEMNIFIED TAXES" shall mean Taxes owed or incurred due to (1) the
recognition of gain or income pursuant to Section 704(c) of the Code
for up to the $540,909,000 amount of built-in gain of the Restricted
Sale Assets (the "BUILT-IN GAIN AMOUNT") upon any sale, transfer or
other disposition of any such Restricted Sale Assets or (2) the
recognition of gain or income as the result of a breach of
Subparagraph 1(d)(i)(B) above. The Built-in Gain Amount and the
Deficit Balance Amount shall be adjusted by the amount of the gain
recognition for which indemnity payments, if any, are payable to
Advanta from time to time pursuant to this Subparagraph 1(d)(ii).


(C) Indemnification procedures shall be substantially
similar to Section 6.5 of the Limited Partnership Agreement (as
amended by this Agreement).


(iii) BAC shall cause Newco to provide copies of Newco's quarterly
and annual financial statements to Services on a timely basis, and
Services agrees to transmit such information to each Advanta Partner
promptly upon receipt.


(e) BAC Covenant. Notwithstanding any other provision herein to the contrary, BAC shall assume the obligations of Fleet and Fleet's Affiliates (other than Services) under the terms of the Limited Partnership Agreement and the Contribution Agreement, and Advanta shall have the right to enforce such obligations against BAC directly without the necessity to make demand on any other Person.


2. LIMITED PARTNERSHIP AGREEMENT MATTERS.


(a) Consent to Drop Down. To the extent required by the Limited Partnership Agreement and subject to the provisions of this Agreement (other than Paragraph 3 below), each Advanta Partner hereby consents to the Drop Down. In this regard, Advanta acknowledges that BAC intends after the Effective Date, and before and after the consummation of the Drop Down, to consolidate and outsource operations, close facilities, hire and terminate employees, acquire and dispose of assets and perform such other activities to operate the business and attain best practices in the discretion of BAC with respect to the business of Services and the combined business of Newco. Advanta's consent to the Drop Down is without prejudice to their rights to indemnification as provided in Subparagraph 1(d)(ii)(A)(2) above as a result of the transfer of the assets and liabilities of Services to Newco pursuant to the Drop Down.


4


(b) Amendments to Limited Partnership Agreement. The Limited Partnership Agreement is hereby amended as follows:


(i) Section 4.6 is hereby deleted in its entirety and the
following new Section 4.6 is substituted in lieu thereof:


"4.6 Net Gains from Sales. Net Gains from Sales shall be
allocated as follows: A percentage of the Net Gains from Sales
shall be allocated to the Advanta Partners and the balance
shall be allocated to the Fleet Partners. The percentage
referred to in the immediately preceding sentence shall (A) be
zero with respect to any Advanta Partner that does not have a
Deficit Balance Amount (as defined in Section 5.7.2) and (B)
with respect to each Advanta Partner that has a Deficit
Balance Amount, be determined by dividing the Deficit Balance
Amount (which for this purpose shall be a positive number) of
such Advanta Partner by the outstanding Company "excess
nonrecourse liabilities" (within the meaning of Section
1.752-3(a)(3) of the Regulations) at the end of the fiscal
year or at other applicable times (including immediately
before a disposition giving rise to the Net Gains from Sales),
and expressing the resulting decimal as a percentage."


(ii) The second sentence of Section 4.7.2 is hereby deleted in its
entirety and the following new sentence is substituted in lieu thereof:


"Notwithstanding the immediately preceding sentence, the
Company shall compute the amount of nonrecourse liabilities
allocable to the Advanta Partners in such manner, and
utilizing such conventions and methodologies, so as to
maximize the amount of nonrecourse liabilities allocable to
the Advanta Partners under Section 1.752-3(a) of the
Regulations."


(iii) Section 5.7.1 is hereby deleted in its entirety and the
following new Section 5.7.1 is substituted in lieu thereof:


"5.7.1 app ...