EX-10.1 ASSET PURCHASE AGREEMENT



 






Exhibit 10.1




EXECUTION COPY




ASSET PURCHASE AGREEMENT




by and among




WELLS FARGO & COMPANY




ISLAND FINANCE PUERTO RICO, INC.




ISLAND FINANCE SALES FINANCE CORPORATION




and




SANTANDER BANCORP




and




SANTANDER FINANCIAL SERVICES, INC.




for the purchase and sale of certain assets of




Island Finance Puerto Rico, Inc. and Island Finance Sales Finance Corporation




Dated as of January 22, 2006














 





TABLE OF CONTENTS







	 	 	 	 	 
	 	 	 	Page
	ARTICLE I DEFINITIONS
	 	 	1	 
	 
	 	 	 	 
	ARTICLE II PURCHASE AND DELIVERY OF PURCHASED ASSETS;

	 	 	11	 
	ASSUMPTION OF ASSUMED LIABILITIES
	 	 	 	 
	 
	 	 	 	 
	2.1 Delivery of Assets; Assumption of Assumed Liabilities;
Closing Payment
	 	 	11	 
	2.2 Purchase Price
	 	 	15	 
	2.3 Determination of Purchase Price
	 	 	17	 
	2.4 Settlement of Purchase Price
	 	 	18	 
	2.5 Contracts Not Transferable
	 	 	18	 
	2.6 Limited Power of Attorney
	 	 	18	 
	2.7 Excess Loan Loss Adjustment
	 	 	19	 
	 
	 	 	 	 
	ARTICLE
III CLOSING DATE
	 	 	21	 
	 
	 	 	 	 
	ARTICLE
IV REPRESENTATIONS AND WARRANTIES OF WELLS FARGO
AND THE SELLERS
	 	 	22	 
	 
	 	 	 	 
	4.1 Organization, Power, Etc.
	 	 	22	 
	4.2 Authority Relative to Agreement and Ancillary Agreements
	 	 	22	 
	4.3 Non-Contravention
	 	 	22	 
	4.4 Consents, Etc.
	 	 	23	 
	4.5 Title to Purchased Assets
	 	 	23	 
	4.6 Reserved
	 	 	23	 
	4.7 Reports; Financial Statements
	 	 	24	 
	4.8 Litigation
	 	 	24	 
	4.9 Compliance with Laws; Licenses
	 	 	25	 
	4.10 No Undisclosed Liabilities
	 	 	25	 
	4.11 Absence of Certain Changes or Events
	 	 	25	 
	4.12 Personnel and Employee Benefits Matters
	 	 	26	 
	4.13 Taxes
	 	 	26	 
	4.14 Leases; Personal Properties
	 	 	26	 
	4.15 Certain Labor Matters
	 	 	27	 
	4.16 Brokers
	 	 	28	 
	4.17 Receivables
	 	 	28	 
	4.18 Environmental Liability
	 	 	29	 
	4.19 No Defaults
	 	 	29	 
	4.20 Certain Contracts
	 	 	29	 
	4.21 Trademarks, Trade Names and Other Intellectual Property
	 	 	29	 
	4.22 Books and Records
	 	 	30	 
	4.23 Accuracy of Disclosures
	 	 	30	 






i









 






	 	 	 	 	 
	ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER
	 	 	31	 
	 
	 	 	 	 
	5.1 Organization, Power, Etc.
	 	 	31	 
	5.2 Authority Relative to Agreement and Ancillary Agreements
	 	 	31	 
	5.3 Non-Contravention
	 	 	31	 
	5.4 Consents, Etc.
	 	 	32	 
	5.5 Brokers
	 	 	32	 
	5.6 Available Funds
	 	 	32	 
	5.7 Reserved
	 	 	32	 
	5.8 No Regulatory Impediment
	 	 	32	 
	 
	 	 	 	 
	ARTICLE
VI COVENANTS AND AGREEMENTS
	 	 	33	 
	 
	 	 	 	 
	6.1 Conduct of Business
	 	 	33	 
	6.2 Access; Confidentiality
	 	 	34	 
	6.3 Best Efforts; Taking of Necessary Action
	 	 	34	 
	6.4 Purchase of Island Insurance
	 	 	35	 
	6.5 Insurance; Risk of Loss
	 	 	35	 
	6.6 Wells Fargo Name and Mark, Etc.
	 	 	36	 
	6.7 Assistance in Proceedings, Etc.
	 	 	36	 
	6.8 Supplements to Schedules
	 	 	37	 
	6.9 Public Announcements
	 	 	37	 
	6.10 Further Assurances
	 	 	37	 
	6.11 No Negotiation
	 	 	38	 
	6.12 Interim Financial Statements
	 	 	38	 
	6.13 Agreement Not to Compete
	 	 	38	 
	6.14 No Exchange of Customer Information
	 	 	41	 
	6.15 Agreements Not to Solicit Employees
	 	 	41	 
	6.16 Injunctive Relief
	 	 	42	 
	6.17 Confidentiality
	 	 	42	 
	6.18 Municipal License and Property Taxes
	 	 	42	 
	6.19 Special Tax Reimbursement
	 	 	42	 
	6.20 Treatment of Certain Records After the Closing
	 	 	43	 
	6.21 Payments on Excluded Receivables and Excluded Charge Off Accounts
	 	 	43	 
	 
	 	 	 	 
	ARTICLE
VII EMPLOYEE MATTERS
	 	 	44	 
	 
	 	 	 	 
	7.1 Employees
	 	 	44	 
	7.2 Defined Benefit Pension Plan
	 	 	45	 
	7.3 Savings Plan
	 	 	45	 
	7.4 Employee Welfare Benefit Plans and Group Insurance Contracts
	 	 	45	 
	7.5 Severance; Reimbursement for Severance Payments
	 	 	47	 
	7.6 Reserved
	 	 	47	 
	7.7 Reserved
	 	 	47	 
	7.8 Accrued Vacation and Sick Leave
	 	 	47	 
	7.9 Benefit Program Participation
	 	 	49	 
	7.10 Information and Data Exchange
	 	 	49	 
	7.11 Indemnification
	 	 	49	 






ii









 






	 	 	 	 	 
	ARTICLE
VIII CONDITIONS TO THE CLOSING
	 	 	50	 
	 
	 	 	 	 
	8.1 Conditions to the Obligations of Each Party
	 	 	50	 
	8.2 Additional Conditions to the Obligations
of Purchaser
	 	 	51	 
	8.3 Additional Conditions to the Obligations
of Wells Fargo and the Sellers
	 	 	52	 
	 
	 	 	 	 
	ARTICLE
IX TERMINATION, AMENDMENT AND WAIVER
	 	 	53	 
	 
	 	 	 	 
	9.1 Termination
	 	 	53	 
	9.2 Effect of Termination
	 	 	53	 
	 
	 	 	 	 
	ARTICLE X INDEMNIFICATION BY WELLS FARGO
	 	 	54	 
	 
	 	 	 	 
	10.1 Indemnification
	 	 	54	 
	10.2 Indemnification Procedures, Etc.
	 	 	54	 
	10.3 Limitation on Liability
	 	 	56	 
	10.4 General
	 	 	58	 
	 
	 	 	 	 
	ARTICLE
XI INDEMNIFICATION BY PURCHASER
	 	 	58	 
	 
	 	 	 	 
	11.1 Indemnification
	 	 	58	 
	11.2 Indemnification Procedures, Etc.
	 	 	59	 
	11.3 Limitation on Liability
	 	 	60	 
	11.4 General
	 	 	61	 
	 
	 	 	 	 
	ARTICLE
XII GENERAL PROVISIONS
	 	 	62	 
	 
	 	 	 	 
	12.1 Survival; Agreed Disclaimer of Effect of Knowledge
	 	 	62	 
	12.2 Notices
	 	 	63	 
	12.3 Interpretation
	 	 	64	 
	12.4 Amendment and Modification; Waiver
	 	 	64	 
	12.5 Entire Agreement
	 	 	64	 
	12.6 Fees and Expenses
	 	 	64	 
	12.7 Disclosure Schedules
	 	 	64	 
	12.8 Third Party Beneficiaries
	 	 	64	 
	12.9 Assignment; Binding Effect
	 	 	64	 
	12.10 Governing Law
	 	 	65	 
	12.11 Counterparts
	 	 	65	 






iii














 









	 	 	 
	Annex 1.1

	 	Excluded Charge Off Accounts
	Annex 1.2

	 	Excluded Receivables
	Annex 1.3

	 	Certain Material Contracts
	Annex 1.4

	 	Intellectual Property
	Annex 2.1(b)(vii)

	 	Excluded Facilities
	Annex 2.1(b)(viii)

	 	Excluded Contracts
	Annex 2.1(b)(xviii)

	 	Other Excluded Assets
	Annex 2.1(c)(v)

	 	Other Assumed Liabilities
	Annex 6.13(d)

	 	Non-Solicitation Procedures
	Annex 6.15(a)

	 	Senior Management
	Annex 6.15(b)

	 	Introduced Employees
	Annex 7.1(b)

	 	Excluded Employees
	Annex 7.1(d)

	 	Purchaser Employee Benefit Plans, Policies and Arrangements
	 
	Exhibit A

	 	Form of Limited Power of Attorney
	Exhibit B

	 	Island Insurance Stock Purchase Agreement
	Exhibit C

	 	Subscriber Agreement
	Exhibit D

	 	Assignment and Assumption Agreement
	Exhibit E

	 	Form of Lease Assignment and Assumption Agreement
	Exhibit F

	 	Transition Agreement
	Exhibit G

	 	Servicing Management Agreement
	Exhibit H

	 	Bill of Sale





Sellers Disclosure Schedule

Purchaser Disclosure Schedule




iv














 








ASSET PURCHASE AGREEMENT




          ASSET PURCHASE AGREEMENT, dated as of January 22, 2006 (“Agreement”), by and among WELLS FARGO
& COMPANY, a Delaware corporation (“Wells Fargo”), ISLAND FINANCE PUERTO RICO, INC., a Delaware
corporation (“Island Finance PR”), ISLAND FINANCE SALES FINANCE CORPORATION, a Cayman Islands
corporation (“Island Finance SFC,” and, together with Island Finance PR, the “Sellers”), and
SANTANDER BANCORP, a Puerto Rico corporation (“Santander”), and its subsidiary SANTANDER FINANCIAL
SERVICES, INC., a Puerto Rico corporation (“Santander Financial” and, together with Santander,
“Purchaser”).




WITNESSETH:




          WHEREAS, the Sellers own certain assets related to the Puerto Rican Island Finance business of
Wells Fargo and its Affiliates (the “Island Finance Business”), and the Sellers are the obligors
under certain liabilities and obligations related to such Island Finance Business; and




          WHEREAS, on the terms and subject to the conditions set forth herein, Sellers desire to sell,
and Purchaser (through Santander Financial) desires to purchase, the assets referred to above, and
Sellers desire to assign, and Purchaser desires to assume (through Santander Financial), the
liabilities and obligations referred to above.




          NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements
hereinafter set forth, the parties hereto agree as follows:




ARTICLE I

DEFINITIONS




          The following capitalized terms when used in this Agreement shall have the following meanings:





     “Actual Loan Losses” has the meaning set forth in Section 2.7(e).




     “Affiliate” means any person or entity that controls, is controlled by or is under
common control with another person or entity. “Control” (including the terms “controlled
by” and “under common control with”) means the possession, directly or indirectly, of the
power to direct or cause the direction of the management policies of a person or entity,
whether through the ownership of voting securities, by contract, indenture or credit
arrangement, as trustee or executor, or otherwise.




     “Aggregate Purchaser Damages” has the meaning set forth in Section 10.3(a).




     “Aggregate Seller Damages” has the meaning set forth in Section 11.3.



1









 






     “Agreement” has the meaning set forth in the introductory paragraph hereof.




     “Ancillary Agreements” means the Island Insurance Stock Purchase Agreement, the
Subscriber Agreement, the Assignment and Assumption Agreement, the Lease Assignment and
Assumption Agreements, the Bill of Sale, the Transition Agreement, the Servicing Management
Agreement, and any other agreement executed and delivered by Purchaser, Wells Fargo or the
Sellers pursuant to or contemporaneously with this Agreement.




     “Applicable Law” has the meaning set forth in Section 4.3.




     “Arrangements” means all “employee benefit plans” within the meaning of section 3(3) of
ERISA and all other employee benefit plans, contracts, agreements, practices, policies,
commitments or arrangements, whether or not subject to ERISA, written or oral, funded or
unfunded, insured or self-insured, registered or unregistered, which Wells Fargo or either
Seller, with respect to the Island Finance Business, maintains, contributes to, is a party
to or otherwise has or could have any obligation or liability under, with respect to any
current or former officer, consultant, director, Employee, including, without limitation,
the following: all employment, severance, change-in-control and fringe benefit arrangements;
all stock option, stock bonus, and stock purchase programs; all retirement, incentive,
bonus, profit sharing, gain sharing, deferred compensation, retention bonus, or other
similar arrangements; and all health, welfare, medical, dental, disability, life insurance
and other similar plans, programs, arrangements, agreements or practices.




     “Assignment and Assumption Agreement” has the meaning set forth in Section 8.1(d).




     “Assumed Liabilities” has the meaning set forth in Section 2.1(c).




     “Assumed Liability Adjustment Amount” has the meaning set forth in Section 2.2(g).




     “Base Price” has the meaning set forth in Section 2.2(a).




     “Bill of Sale” has the meaning set forth in Section 8.2(h).




     “Business Day” means any day which is not a Saturday, Sunday or a day on which banks in
New York City or Puerto Rico are authorized or obligated by law or executive order to be
closed.




     “Cash Adjustment Amount” has the meaning set forth in Section 2.2(e).




     “Claim” or “Claims” have the meanings set forth in Section 7.11(a).



2









 






     “Claim Notice” has the meaning set forth in Section 10.2(a).




     “Closing” has the meaning set forth in Article III.




     “Closing Balance Sheet” has the meaning set forth in Section 2.3(a).




     “Closing Date” has the meaning set forth in Article III.




     “Closing Payment” has the meaning set forth in Section 2.1(e).




     “COBRA” has the meaning set forth in Section 7.4(g).




     “Code” shall mean the Internal Revenue Code of 1986, as amended.




     “Confidential Memorandum” means the Confidential Memorandum, dated March 2005, provided
to Purchaser by Wells Fargo.




     “Confidentiality Agreement” means the Confidentiality Agreement, dated March 4, 2005,
between Wells Fargo and Santander relating to, among other things, the confidentiality of
certain information provided by or on behalf of Sellers to Purchaser with respect to, among
other things, the Island Finance Business.




     “Consumer Finance Business” has the meaning set forth in Section 6.13(b).




     “Contract” means any agreement, contract, lease, note, loan, evidence of indebtedness,
purchase order, letter of credit, indenture, employment agreement, instrument, obligation or
commitment to which either Seller is a party or is bound (or has otherwise acquired rights
and duties thereunder) and which relates to the Island Finance Business.




     “Contract Files” means the Records relating to or evidencing a Contract maintained by
Island Finance PR or Island Finance SFC as of the Closing Date.




     “Customer Information” has the meaning set forth in Section 6.14.




     “Damages” has the meaning set forth in Section 10.1.




     “December Balance Sheet” has the meaning set forth in Section 4.7(b).




     “Defined Benefit Pension Plan” has the meaning set forth in Section 7.2.




     “Disclosure Schedules” means the Purchaser Disclosure Schedule and the Sellers
Disclosure Schedule.




     “Effective Benefits Date” has the meaning set forth in Section 7.1(b).



3









 






     “Effective Benefits Time” has the meaning set forth in Section 7.4(b).




     “18 Month Anniversary” has the meaning set forth in Section 2.7(e).




     “Eligible Receivables” has the meaning set forth in Section 2.7(e).




     “Employee” means (i) any full- or part-time employee of either Seller that is employed
exclusively or primarily in the Island Finance Business as conducted as of the date hereof
or (ii) any full- or part-time employee of Wells Fargo or any of its Affiliates that is
dedicated exclusively to the Island Finance Business as conducted on the date hereof.




     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.




     “ERISA Affiliate” means, with respect to an entity, any other entity which is (or at
the relevant time was) a member of a “controlled group of corporations” with, under common
control with, or a member of an “affiliated service group” with, such entity, as defined in
Section 414(b), (c), (m) or (o) of the Code.




     “Excess Eligible Receivable Losses” has the meaning set forth in Section 2.7(a).




     “Excluded Assets” has the meaning set forth in Section 2.1(b).




     “Excluded Charge Off Accounts” means the charged off accounts set forth in Annex
1.1, which shall be updated as of the Closing Date, and any and all rights in respect
thereof (including, without limitation, rights to any payments received thereon). The
Excluded Charge Off Accounts shall not be included in the Purchased Assets.




     “Excluded Liabilities” has the meaning set forth in Section 2.1(d).




     “Excluded Receivables” means those Receivables with respect to which the relevant
Seller has determined that it would not proceed with a foreclosure, as listed on Annex
1.2, which shall be updated as of the end of the calendar month immediately preceding
the Closing Date. The Excluded Receivables shall not be included in the Purchased Assets.




     “Exempt Transferred Employee” has the meaning set forth in Section 7.8(e).




     “Facilities” means all Leased Premises (including the Leases related thereto) and
related facilities (and any improvements thereto) used by either Seller (or both Sellers) in
the operation of the Island Finance Business, including the Tangible Personal Property used
or operated by either Seller (or both Sellers) in the operation of the Island Finance
Business.



4









 






     “15 Month Anniversary” has the meaning set forth in Section 2.7(e).




     “Financial Statements” has the meaning set forth in Section 4.7(b).




     “First Anniversary Date” has the meaning set forth in Section 10.3(a).




     “GAAP” means generally accepted accounting principles in the United States.




     “Governmental Authority” has the meaning set forth in Section 4.3.




     “Governmental Authorization” means any consent, approval, authorization, registration
or permit or similar right issued, granted or given by any Governmental Authority or
pursuant to any Applicable Law.




     “Incidental Consumer Finance Activities” has the meaning set forth in Section 6.13(d).




     “Indemnified Purchaser Entities” has the meaning set forth in Section 10.1.




     “Indemnified Seller Entities” has the meaning set forth in Section 11.1.




     “Independent Accountants” has the meaning set forth in Section 2.3(c).




     “Intellectual Property” means all of the following, to the extent they exist: (i)
trademarks and service marks (registered and unregistered), trade dress, and trade names and
all applications or registrations in any jurisdiction relating to the foregoing; (ii)
patents, patentable inventions, discoveries, improvements, ideas, know-how, formula
methodology, processes, technology and computer programs, software and databases (including
source code, object code, development documentation, programming tools, drawings,
specifications and data) and all applications or registrations in any jurisdiction
pertaining to any of the foregoing, including all re-issues, continuations, divisions,
continuations-in-part, renewals or extensions thereof; (iii) all trade secrets, including
confidential and other non-public information, and the right in any jurisdiction to limit
the use or disclosure thereof; (iv) copyrights in writings, designs, mask works or other
works, and applications or registrations in any jurisdiction relating to the foregoing; (v)
database rights; (vi) Internet websites, domain names and registrations or applications
thereof; (vii) licenses, immunities, covenants not to sue and the like relating to any of
the foregoing; (viii) books and records described or used in connection with any of the
foregoing; and (ix) claims or causes of action arising out of or related to infringement or
misappropriation of any of the foregoing.




     “Intellectual Property Licenses” has the meaning set forth in Section 4.21(a).




     “International Business” means the business conducted by Wells Fargo and/or its
Affiliates in Mexico, Panama and the Lesser Antilles.




5









 







     “Introduced Employee” has the meaning set forth in Section 6.15(b).




     “IRS” means the Internal Revenue Service of the United States of America or any
successor agency or authority.




     “Island Finance Business” has the meaning set forth in the preamble to this Agreement.
The parties hereto expressly acknowledge and agree that the Island Finance Business does not
include the business of the Reliable Entities or the International Business.




     “Island Finance PR” has the meaning set forth in the introductory paragraph hereof.




     “Island Finance Reports” has the meaning set forth in Section 4.7(a).




     “Island Finance SFC” has the meaning set forth in the introductory paragraph hereof.




     “Island Insurance” has the meaning set forth in Section 6.4.




     “Lease” has the meaning set forth in Section 4.14(a).




     “Lease Assignment and Assumption Agreements” has the meaning set forth in Section
8.1(e).




     “Leased Premises” has the meaning set forth in Section 4.14(a).




     “Legacy Real Estate Receivables” has the meaning set forth in Section 2.7(e).




     “Lesser Antilles” means, collectively, Anguilla, Saint Kitts and Nevis, Antigua and
Barbuda, Monserrat, Guadeloupe, Dominica, Martinique, Saint Lucia, Barbados, Saint Vincent
and the Grenadines, Grenada, Trinidad and Tobago, the islands off the coast of Venezuela,
the Netherlands Antilles and Aruba, but excluding the United States Virgin Islands and the
British Virgin Islands.




     “Liability” means any direct or indirect liability, indebtedness, obligation,
commitment, expense, claim, deficiency, guaranty or endorsement of or by any person or
entity, whether known or unknown, accrued or unaccrued, absolute or contingent, disputed or
undisputed, liquidated or unliquidated, secured or unsecured, joint or several, due or to
become due, vested or unvested, executory, determined, determinable or otherwise and
regardless of when or by whom asserted.




     “License” means all Governmental Authorizations of the Sellers necessary for the
conduct of, or relating to the operation of, the Island Finance Business.




     “Lien” means any mortgage, pledge, lien, charge or other encumbrance.



6









 






     “Loss Reimbursement Threshold” has the meaning set forth in Section 2.7(a).




     “Material Adverse Effect” means any effect on the Island Finance Business (other than
as a result of changes in prevailing interest rates, in general economic conditions
affecting the industries in which the Island Finance Business operates (except to the extent
the Island Finance Business is affected in a significantly disproportionate manner as
compared to other companies in the same industry and geographical market (it being
acknowledged that such geographical market is the Commonwealth of Puerto Rico)), or in law
or applicable regulations or the official interpretations thereof or in GAAP) that is,
either individually or in the aggregate, materially adverse to (i) the business, assets,
operations, financial condition or results of operations of the Island Finance Business, or
(ii) the ability of Wells Fargo or Sellers to perform its obligations under this Agreement
and the Ancillary Agreements or to the ability of Wells Fargo or Sellers to consummate the
transactions contemplated by this Agreement.




     “Material Contract” means (i) the Leases included in the Purchased Assets, (ii) the
Contracts set forth in Annex 1.3, and (iii) each other contract, agreement, lease or
commitment, whether written or oral, to which Wells Fargo or either Seller is a party and
that is material to the operation of the Island Finance Business.




     “Maximum Reimbursement Amount” has the meaning set forth in Section 2.7(a).




     “Maximum Special Tax Reimbursement Amount” has the meaning set forth in Section
6.19(a).




     “Net Receivables” has the meaning set forth in Section 2.2(c).




     “Noncompete Term” has the meaning set forth in Section 6.13(a).




     “Non-Exempt Transferred Employee” has the meaning set forth in Section 7.8(e).




     “Ordinary Course of Business” means an action taken by a Seller that (i) is consistent
in nature, scope and magnitude with the past practices of the Island Finance Business and is
taken in the ordinary course of the normal, day-to-day operations of the Island Finance
Business; (ii) does not require specific authorization by the board of directors or
shareholders of such Seller; and (iii) is not in knowing or material violation of Applicable
Law.




     “Personal Loan with a Mortgage Guaranty” has the meaning set forth in Section 6.13(b).




     “Prepaid Asset Adjustment Amount” has the meaning set forth in Section 2.2(f).




     “Proceeding” means any action, arbitration, audit, hearing, litigation, investigation
or suit (whether civil, criminal, administrative, judicial or investigative)



7









 







commenced, brought, conducted or heard by or before, or otherwise involving, any
Governmental Authority, court or arbitrator.




     “Purchase Price” has the meaning set forth in Section 2.2(a).




     “Purchase Money Secured Loan” has the meaning set forth in Section 6.13(b).




     “Purchased Assets” means substantially all of the assets of the Sellers relating to the
Island Finance Business, including the following (but excluding the Excluded Assets):




(i) all Facilities (including the Leases related thereto) except the Facilities set
forth on Annex 2.1(b)(vii);




(ii) all Receivables (other than Excluded Receivables or Excluded Charge Off
Accounts);




(iii) all Contracts and related Contract Files except (i) the Contracts set forth on
Annex 2.1(b)(viii) and related Contract Files and (ii) the Contracts and
related Contract Files for the Excluded Receivables and the Excluded Charge Off
Accounts;




(iv) all Licenses or renewals thereof, in each case to the extent transferable by
the applicable Seller to Purchaser;




(v) copies of all data and Records related to and used exclusively or primarily in
the operation of the Island Finance Business (other than customer specific data and
Records relating to names, addresses and social security numbers of obligors on the
Excluded Receivables and the Excluded Charge Off Accounts), including lists and
Records pertaining to current and former clients and customers (such as credit
scores and analysis, loss history, related write-offs, and similar data and
Records), current and historical operational data and Records, current and
historical financial data and Records, operating guides and manuals, advertising
materials, sales and promotional materials, studies, reports, correspondence and
similar documents and Records and, subject to Applicable Law, copies of personnel
Records;




(vi) all Intellectual Property used exclusively in the operation of the Island
Finance Business, to the extent transferable by the applicable Seller to Purchaser,
including but not limited to: (A) behavioral and applications scoring models, and
(B) all trademarks and service marks (registered and unregistered), trade dress, and
trade names (including the name “Island Finance” and any similar names) used by the
Sellers in Puerto Rico (other than any such trademarks, service marks, trade dress
and trade names containing the designation “Wells Fargo” or “Reliable” or indicating
any affiliation with “Wells Fargo” or “Reliable”), and all applications or
registrations in Puerto Rico and the United States pertaining to the



8









 







foregoing, which Intellectual Property is listed in Annex 1.4;
provided, that nothing herein shall be deemed to (x) permit Purchaser or its
Affiliates to use any such trademarks, service marks, trade dress and trade names in
the Lesser Antilles, or (y) prohibit or restrict Wells Fargo or its Affiliates from
(1) using any such trademarks, service marks, trade dress and trade names in the
Lesser Antilles or (2) using trademarks, service marks, trade dress and trade names
containing the designation, or otherwise associated with, “Credito Progreso” in
Mexico;




(vii) except as set forth in Section 2.1(b)(xii), all rights of the Sellers relating
to deposit payments and prepaid expenses in connection with the Island Finance
Business, and claims for refunds and rights to offsets in respect thereof;




(viii) all insurance benefits, including rights and proceeds, arising from or
relating to the Purchased Assets or the Assumed Liabilities prior to the Closing
Date, unless expended in accordance with this Agreement; and




(ix) all Customer Information (other than customer specific data and Records
relating to names, addresses and social security numbers of obligors on the Excluded
Receivables and the Excluded Charge Off Accounts); and




(x) all cash and cash equivalents.




     “Purchaser” has the meaning set forth in the introductory paragraph hereof.




     “Purchaser Disclosure Schedule” means the disclosure schedule delivered by Purchaser to
Sellers at the time of execution hereof.




     “Purchaser First Anniversary Payment Amount” has the meaning set forth in Section 11.3.




     “Receivables” means all loans, sale contracts, credit agreements, invoices and other
obligations or rights to payments of the Island Finance Business owned by either Seller and
the full benefit of all security for such receivables or rights to payments, including any
claim, remedy or other right related to any of the foregoing.




     “Receivables Adjustment Amount” has the meaning set forth in Section 2.2(b).




     “Record” means information that is inscribed on a tangible medium or that is stored in
an electronic or other medium and is retrievable in perceivable form.




     “Recoveries” has the meaning set forth in Section 2.7(e).




     “Reliable Entities” has the meaning set forth in Section 2.1(b).




     “Santander” has the meaning set forth in the introductory paragraph hereof.



9









 






     “Santander Financial” has the meaning set forth in the introductory paragraph hereof.




     “Savings Plan” has the meaning set forth in Section 7.3.




     “Secondary Maximum Amount” has the meaning set forth in Section 2.7(a).




     “Seller First Anniversary Payment Amount” has the meaning set forth in Section 10.3(a).




     “Sellers” has the meaning set forth in the introductory paragraph hereof.




     “Sellers Disclosure Schedule” means the disclosure schedule delivered by Wells Fargo to
Purchaser at the time of execution hereof.




     “Senior Management” has the meaning set forth in Section 6.15(a).




     “Servicing Management Agreement” has the meaning set forth in Section 8.1(g).




     “Severance Reimbursement Notice” has the meaning set forth in Section 7.5(c).




     “Special 2006 Income Taxes” has the meaning set forth in Section 6.19(a).




     “Special Tax Notice” has the meaning set forth in Section 6.19(b).




     “Subscriber Agreement” has the meaning set forth in Section 8.1(c).




     “Tangible Personal Property” means all machinery, equipment, tools, furniture, office
equipment, computer hardware, supplies, materials and other items of tangible personal
property of every kind owned or leased by either Seller (wherever located and whether or not
carried on Sellers’ books) exclusively or primarily for use in the operation of the Island
Finance Business, together with any express or implied warranty (to the extent such warranty
is transferable) by manufacturers or sellers or lessors of any item or component part
thereof and all maintenance records or other documents relating thereto.




     “Tangible Property Adjustment Amount” has the meaning set forth in Section 2.2(d).




     “Tax Returns” means all returns, declarations, reports, estimates, information returns,
statements and other documents required to be filed in respect of Taxes, and “Tax Return”
means any of the foregoing Tax Returns.




     “Taxes” means any and all federal, state, Commonwealth of Puerto Rico, county,
provincial, local, municipal, foreign and other taxes, levies or other assessments,
including without limitation all net income, gross income, gross receipts, premium,
estimated, sales, use, ad valorem, property, transfer, franchise, profits, license,



10









 







withholding, payroll, employment, social security, disability, excise, severance,
stamp, occupation, customs, duties, or guaranty fund assessments, whether disputed or not,
together with any interest, surcharges, additions to tax or interest, and penalties with
respect thereto imposed by any taxing authority or Governmental Authority upon the Island
Finance Business.




     “Temporary Leave” has the meaning set forth in Section 7.1(a).




     “Third Party Consents” has the meaning set forth in Section 4.4(b).




     “Threshold Amount” has the meaning set forth in Section 10.3(a).




     “Transferred Employees” has the meaning set forth in Section 7.1(b).




     “Transition Agreement” has the meaning set forth in Section 8.1(f).




     “Wells Fargo” has the meaning set forth in the introductory paragraph hereof.



ARTICLE II

PURCHASE AND DELIVERY OF PURCHASED ASSETS;

ASSUMPTION OF ASSUMED LIABILITIES




          2.1 Delivery of Assets; Assumption of Assumed Liabilities; Closing Payment.




          (a) On the terms and subject to the conditions of this Agreement, the Sellers shall, at the
Closing on the Closing Date, sell, convey, transfer, assign and deliver to Purchaser, and Purchaser
shall purchase and acquire from the Sellers, free and clear of all Liens (other than Liens created
or incurred by Purchaser or any of its Affiliates or Liens with respect to Leased Premises or
personal property of the type specifically excepted in Section 4.14 hereof), all right, title and
interest of the Sellers in and to the Purchased Assets.




          (b) Notwithstanding anything to the contrary contained in Section 2.1(a) or elsewhere in this
Agreement, the following assets of the Sellers (collectively, the “Excluded Assets”) are not part
of the sale and purchase contemplated hereunder, are excluded from the Purchased Assets and shall
remain the property of Island Finance PR and Island Finance SFC, as the case may be, after the
Closing:





     (i) all stock and other securities of, all ownership, partnership, beneficiary
and other interests (direct or indirect) in, and all rights with respect to Reliable
Finance Holding Company, LLC, Reliable Finance Holding Company (partnership),
Reliable Financial Services, Inc. (including Reliable Financial Services, Inc. doing
business as (d/b/a) Reliable Mortgage), Reliable Insurance Services Corp., and
Island Finance Sales Finance Trust (collectively, the “Reliable Entities”), and all
assets and rights of any kind, character or description of the Reliable Entities;



11









 






     (ii) all intercompany receivables (including without limitation all
intercompany notes or other indebtedness) representing amounts due or owing to a
Seller from Wells Fargo or any Affiliate of Wells Fargo (including, without
limitation, the Sellers);




     (iii) all short-term investments;




     (iv) all minute books, stock Records and corporate seals;




     (v) any shares of capital stock of either Seller held in treasury;




     (vi) all insurance policies and rights thereunder (except to the extent
specified in the definition of Purchased Assets);




     (vii) all of the Facilities (and the Leases related thereto) set forth in
Annex 2.1(b)(vii);




     (viii) all of the Contracts set forth in Annex 2.1(b)(viii) and related
Contract Files, all of the Contracts and related Contract Files for the Excluded
Receivables and the Excluded Charge Off Accounts, and all customer specific data and
Records relating the Excluded Receivables and the Excluded Charge Off Accounts;




     (ix) except as contemplated by Section 7.3, all rights in connection with and
assets of pension plans and other Arrangements (including without limitation rights
in connection with and assets of the Defined Benefit Pension Plan and the Savings
Plan);




     (x) any Intellectual Property that is not used exclusively in the operation of
the Island Finance Business or listed in Annex 1.4;




     (xi) all personnel Records and other Records that either Seller is required by
Applicable Law to retain in their possession; provided, however,
that, subject to any required consent of any Employee or other person or entity, to
the extent necessary to the operation of the Island Finance Business and to the
fullest extent permitted by Applicable Law, the Sellers shall provide copies of such
Records to Purchaser at the Closing;




     (xii) all claims for refunds of Taxes and other governmental charges of
whatever nature;




     (xiii) all rights to or in any judgment, order, injunction, decree, ruling or
award of any court, arbitrator or Governmental Authority entered or obtained prior
to the Closing Date;



12









 






     (xiv) all Licenses that are not transferable to Purchaser under Applicable Law;




     (xv) all Records and other information relating to, and all other assets of,
the International Business;




     (xvi) all rights under this Agreement and any of the Ancillary Agreements;




     (xvii) the Excluded Receivables and the Excluded Charge Off Accounts; and




     (xviii) the property and assets set forth in Annex 2.1(b)(xviii).



          (c) On the terms and subject to the conditions of this Agreement, Purchaser shall, at the
Closing on the Closing Date, assume and agree to discharge only the following liabilities of the
Sellers (collectively, the “Assumed Liabilities”):





     (i) any trade account payable incurred by either Seller in the Ordinary Course
of Business between the date of the December Balance Sheet and the Closing Date that
remains unpaid as of the Closing Date;




     (ii) any Liability to the customers of either Seller incurred in the Ordinary
Course of Business reflected on the December Balance Sheet and outstanding as of the
Closing Date (other than any Liability arising out of or relating to an act or
omission by the Sellers or their Affiliates that occurred on or prior to the Closing
Date);




     (iii) any Liability arising on or after the Closing Date under the Leases and
Contracts assigned pursuant to this Agreement (other than any Liability under such
Contracts arising out of or relating to a breach by the Sellers or their Affiliates
that occurred prior to the Closing Date);




     (iv) any Liability arising under any Contract included in the Purchased Assets
that is entered into by either Seller after the date hereof in accordance with the
provisions of this Agreement (other than any Liability under such Contracts arising
or relating to a breach by the Sellers or their Affiliates that occurred prior to
the Closing Date);




     (v) any other Liability described on Annex 2.1(c)(v); and




     (vi) any Liability arising with respect to the Purchased Assets on or after the
Closing Date (other than any Liability related to the Purchased Assets arising out
of or relating to an act or omission the Sellers or their Affiliates that occurred
on or prior to the Closing Date).



13









 





          (d) Notwithstanding Section 2.1(c) or any other provision of this Agreement to the contrary,
all Liabilities of the Sellers (other than the Assumed Liabilities) shall remain the Liabilities of
the Sellers and shall not be assumed by Purchaser pursuant hereto (collectively, the “Excluded
Liabilities”). Without limiting the generality of the foregoing, the Excluded Liabilities shall
include the following:





     (i) any Liability of the Reliable Entities;




     (ii) any Liability for Taxes arising as a result of the operation of the Island
Finance Business or ownership of the Purchased Assets prior to the Closing Date,
including any deferred Taxes of any nature or any Liability for Taxes that will
arise as a result of the consummation of the transactions contemplated by this
Agreement;




     (iii) any Liability under any Contract not assumed by Purchaser under Section
2.1(c);




     (iv) any Liability under any Contract assumed by Purchaser that arises out of
or relates to any breach by either Seller that occurred prior to the Closing Date;




     (v) any Liability under any of the Arrangements or any Liability arising prior
to the Effective Benefits Time relating to payroll, bonus, incentives (including
sales commissions), vacation (subject to Section 7.8), sick leave (subject to
Section 7.8), workers’ compensation, unemployment benefits, statutory licenses,
working hours, pension benefits, employee stock option or profit-sharing plans,
health care plans or benefits or any other employee plans or benefits of any kind
applicable to the Employees or former Employees;




     (vi) any Liability under any employment, severance, retention or termination
agreement with any Employees or former Employees;




     (vii) any Liability arising out of or relating to any grievance of any Employee
or former Employee relating to events that occurred prior to the Closing Date;




     (viii) any Liability to indemnify, reimburse or advance amounts to any officer,
director, Employee or agent of either Seller arising out of or relating to events
occurring prior to the Closing Date;




     (ix) any Liability arising out of any Proceeding relating to the Island Finance
Business that was pending prior to the Closing Date;



14









 






     (x) any Liability arising out of any Proceeding relating to the Island Finance
Business commenced on or after the Closing Date and arising out of or relating to
any events occurring prior to the Closing Date;




     (xi) any Liability arising out of or resulting from either Seller’s compliance
or non-compliance with any Applicable Law or judgment, order, injunction, decree,
ruling or award of any court or Governmental Authority;




     (xii) any Liability of either Seller arising out of or resulting from the
consummation of the transactions contemplated by this Agreement or the Ancillary
Agreements (including any Liability (except for Assumed Liabilities) of a Seller
that becomes a Liability of Purchaser under any bulk sales or transfer law or under
any common law doctrine of successor liability);




     (xiii) any Liability of either Seller based upon its acts and omissions
occurring after the Closing Date;




     (xiv) any Liability to the customers of either Seller incurred in the Ordinary
Course of Business not reflected in the December Balance Sheet and outstanding as of
the Closing Date or otherwise arising out of or relating to an act or omission of
the Sellers or their Affiliates that occurred prior to the Closing Date; and




     (xv) any Liability of either Seller not related to the Purchased Assets or the
Island Finance Business.



     (e) On the terms and subject to the conditions of this Agreement, and against delivery of the
Purchased Assets, Purchaser shall (i) pay, at the Closing on the Closing Date, by wire transfer of
U.S. Dollars in immediately available funds to such accounts of Sellers as Wells Fargo shall
designate in writing to Purchaser, not less than one Business Day prior to the Closing Date, an
estimate of the Purchase Price based upon a balance sheet of the Island Finance Business as of the
most recent calendar month end delivered by Wells Fargo to Purchaser and calculated in a manner
consistent with Section 2.2 (the “Closing Payment”), and (ii) on and as of the opening of business
on the Closing Date, assume and agree to perform, pay and discharge when due, the Assumed
Liabilities.




     2.2 Purchase Price.



     (a) In consideration for the Purchased Assets, Purchaser shall pay a purchase price (the
“Purchase Price”) equal to Seven Hundred Million United States Dollars (US$700,000,000.00) (the
“Base Price”), (i) plus or minus the Receivables Adjustment Amount, (ii) plus or minus the Tangible
Property Adjustment Amount, (iii) plus or minus the Cash Adjustment Amount, (iv) plus or minus the
Prepaid Asset Adjustment Amount, and (v) plus or minus the Assumed Liability Adjustment Amount.



15









 





     (b) The term “Receivables Adjustment Amount” shall mean the amount, expressed in United States
Dollars, by which the Net Receivables are less than or exceed Five Hundred Sixty Million United
States Dollars (US$560,000,000.00). If the Net Receivables are less than Five Hundred Sixty
Million United States Dollars (US$560,000,000.00), the Receivables Adjustment Amount shall be
subtracted from the Base Price. If the Net Receivables exceed Five Hundred Sixty Million United
States Dollars (US$560,000,000.00), the Receivables Adjustment Amount shall be added to the Base
Price.



     (c) The term “Net Receivables” shall mean the amount, expressed in United States Dollars,
determined by subtracting (i) Thirty Four Million United States Dollars (US$34,000,000.00) (the
assumed and stipulated allowance for loan losses relating to the Receivables as of the Closing
Date) from (ii) the amount of the Receivables (excluding the Excluded Receivables) as of the
Closing Date.



     (d) The term “Tangible Property Adjustment Amount” shall mean the amount, expressed in United
States Dollars, by which the book value as of the Closing Date of the Tangible Personal Property
included in the Purchased Assets is less than or exceeds Three Million One Hundred Thousand United
States Dollars (US$3,100,000.00); provided, however, that if the book value of such
Tangible Personal Property as of the Closing Date exceeds Three Million Six Hundred Thousand United
States Dollars (US$3,600,000.00), then it shall be deemed for purposes of this Section 2.2 to equal
Three Million Six Hundred Thousand United States Dollars (US$3,600,000.00). If the book value of
such Tangible Personal Property as of the Closing Date is less than Three Million One Hundred
Thousand United States Dollars (US$3,100,000.00), the Tangible Property Adjustment Amount shall be
subtracted from the Base Price. If the book value of such Tangible Personal Property as of the
Closing Date exceeds Three Million One Hundred Thousand United States Dollars (US$3,100,000.00),
the Tangible Property Adjustment Amount shall be added to the Base Price.



     (e) The term “Cash Adjustment Amount” shall mean the amount, expressed in United States
Dollars, by which the amount of cash and cash equivalents included in the Purchased Assets is less
than or exceeds Two Million Seven Hundred Thousand United States Dollars (US$2,700,000.00). If the
amount of such cash and cash equivalents is less than Two Million Seven Hundred Thousand United
States Dollars (US$2,700,000.00), the Cash Adjustment Amount shall be subtracted from the Base
Price. If the amount of such cash and cash equivalents exceeds Two Million Seven Hundred Thousand
United States Dollars (US$2,700,000.00), the Cash Adjustment Amount shall be added to the Base
Price.



     (f) The term “Prepaid Asset Adjustment Amount” shall mean the amount, expressed in United
States Dollars, by which the book value as of the Closing Date of the prepaid expenses and deposit
payments included in the Purchased Assets pursuant to clause (vii) of the definition thereof is
less than or exceeds Two Million Two Hundred Thousand United States Dollars (US$2,200,000.00). If
the book value of such prepaid expenses and deposit payments as of the Closing Date is less than
Two Million Two Hundred Thousand United States Dollars (US$2,200,000.00), the Prepaid Asset
Adjustment Amount shall be subtracted from the Base Price. If the book value of such prepaid
expenses and deposit payments as of the Closing



16









 







Date exceeds Two Million Two Hundred Thousand United States Dollars (US$2,200,000.00), the
Prepaid Asset Adjustment Amount shall be added to the Base Price.



     (g) The term “Assumed Liability Adjustment Amount” shall mean the amount, expressed in United
States Dollars, by which the sum of (i) the trade account payables included in the Assumed
Liabilities pursuant to Section 2.1(c)(i), and (ii) the other Liabilities described on Annex
2.1(c)(v) and included in the Assumed Liabilities pursuant to Section 2.1(c)(v), is less than
or exceeds Five Million United States Dollars (US$5,000,000.00). If such sum exceeds Five Million
United States Dollars (US$5,000,000.00), the Assumed Liability Adjustment Amount shall be
subtracted from the Base Price. If such sum is less than Five Million United States Dollars
(US$5,000,000.00), the Assumed Liability Adjustment Amount shall be added to the Base Price.



     2.3 Determination of Purchase Price. The Purchase Price shall be determined following
the Closing Date as follows:



     (a) As soon as practicable after the Closing Date, but in no event more than thirty (30) days
after the Closing Date, Wells Fargo shall deliver to Purchaser a balance sheet of the Island
Finance Business as of the Closing Date (the “Closing Balance Sheet”). The Closing Balance Sheet
shall present fairly in all material respects the financial position of the Island Finance Business
in conformity with GAAP applied on a basis consistent with the December Balance Sheet. During the
preparation of the Closing Balance Sheet and through the date of the final determination of the
Purchase Price pursuant to Section 2.3(b) or (c), Purchaser shall cooperate fully with Wells Fargo
in the preparation of the Closing Balance Sheet.



     (b) Purchaser may dispute any item reflected on the Closing Balance Sheet that impacts the
calculation of the Purchase Price by notifying Wells Fargo in writing within thirty (30) days after
the date on which Purchaser has received the Closing Balance Sheet. If Purchaser does not so notify
Wells Fargo within such period, the Closing Balance Sheet shall be final, binding and conclusive on
the parties for purposes of calculating the Purchase Price. If Purchaser does so notify Wells
Fargo, Purchaser and Wells Fargo shall attempt to reconcile their differences, and any written
resolution by them as to any disputed amounts shall be final, binding and conclusive on the
parties.



     (c) If Purchaser and Wells Fargo are unable to reach a resolution with respect to all of the
items specified in the notice referred to in Section 2.3(b) within thirty (30) days after the date
of receipt by Wells Fargo of such notice, then either Purchaser or Wells Fargo may submit the items
remaining in dispute for resolution to a nationally recognized accounting firm mutually acceptable
to Purchaser and Wells Fargo (the “Independent Accountants”), which shall, within thirty (30) days
after such submission or such longer period as the Independent Accountants may require, determine
and report to Wells Fargo and Purchaser upon such remaining disputed items, and such determination
shall be final, binding and conclusive on the parties hereto; provided, however,
that if the aggregate amount in dispute is less than the Independent Accountants’ estimate of the
amount of their fees and disbursements in connection with the resolution of such dispute, then such
dispute shall not be submitted to the Independent Accountants and the Purchase Price shall be
conclusively deemed to equal the quotient of (x) the



17









 







sum of (i) the Purchase Price proposed by Wells Fargo and (ii) the Purchase Price proposed by
Purchaser, divided by (y) two (2). The fees and disbursements of the Independent Accountants shall
be borne by each of Purchaser and Wells Fargo, respectively, in accordance with the proportions
derived from the following formula:



Purchase
Price Submitted – Purchase Price Determined by Independent
Accountants 



     Purchase Price Submitted – Purchase Price Submitted by Other Party



By way of illustration, if Wells Fargo submits to the Independent Accountants that the Purchase
Price should equal US$700 million, Purchaser submits that the Purchase Price should equal US$680
million, and the Independent Accountants determine that the Purchase Price equals US$693 million,
then Wells Fargo would bear 35% and Purchaser would bear 65% of the fees and disbursements of the
Independent Accountants.



     2.4 Settlement of Purchase Price. If the Purchase Price as finally determined pursuant
to Section 2.3(b) or (c) exceeds the Closing Payment, Purchaser shall, within five (5) Business
Days after such final determination, pay such excess to the Seller(s) designated by Wells Fargo. If
the Purchase Price as finally determined pursuant to Section 2.3(b) or (c) is less than the Closing
Payment, Wells Fargo shall, within five (5) Business Days after such final determination, pay such
difference to Purchaser. The party making such payment shall pay interest thereon to the other
party for the period from the Closing Date to the date of payment at the annual rate announced from
time to time as the rate charged to a member bank by the Federal Reserve on overnight loans.
Payment of such excess (or difference) and interest thereon shall be made by wire transfer in
immediately available funds to the account or accounts as Wells Fargo or Purchaser, as the case may
be, shall designate in writing to the other.



     2.5 Contracts Not Transferable. Notwithstanding any provision of this Agreement to
the contrary, nothing in this Agreement shall be deemed to constitute a transfer or assignment of
(or agreement to transfer or assign) any Contract if a transfer or assignment (or attempted
transfer or assignment), without the consent or waiver of any person or entity, would constitute a
breach thereof or in any way adversely affect the rights of Purchaser or either Seller thereunder.
The Sellers and Purchaser shall use their respective best efforts to obtain any consent or waiver
required to assign to Purchaser all rights, benefits and interests under each Contract being
assumed by Purchaser (or make available to Purchaser the practical benefit thereof) in a manner to
permit the Island Finance Business to be conducted in all material respects as currently conducted
following the Closing Date.



     2.6 Limited Power of Attorney. Contingent upon and effective as of the Closing, the
Sellers appoint Purchaser, its agents, employees, successors and assigns, as their
attorney-in-fact, which such appointment is coupled with an interest, with full power of revocation
and substitution by Purchaser, in the name and stead of each Seller, but on behalf of Purchaser or
its assignees, to do any of the following with respect to the Receivables included in the Purchased
Assets: (a) receive, endorse and collect all payments, checks, money orders, drafts or other
instruments or documents made payable to or owed to either Seller in connection with such
Receivables; (b) execute on behalf of either Seller, or enforce, release, modify and transfer



18









 







the rights, privileges and interests (including security interests and real estate mortgages)
of either Seller with respect to such Receivables, including any claims thereunder and certificates
of title or other title documents or security documents; (c) enforce and exercise any rights and
remedies of either Seller with respect to such Receivables; and (d) demand, collect and receive any
and all such Receivables. On the Closing Date and from time-to-time thereafter, the Sellers will
execute such limited powers of attorney in the form attached hereto as Exhibit A as
Purchaser may reasonably request in order to more effectively effectuate any of the foregoing.



     2.7 Excess Loan Loss Adjustment



     (a) In the event that the aggregate amount of Actual Loan Losses incurred by Purchaser, net of
Recoveries, exceed Thirty-Four Million United States Dollars (US$34,000,000.00) (the “Loss
Reimbursement Threshold”) prior to the 15 Month Anniversary, Wells Fargo shall reimburse (or shall
cause its Affiliates to reimburse) Purchaser for the amount of subsequent Actual Loan Losses in
respect of Eligible Receivables, net of Recoveries (such subsequent Actual Loan Losses in respect
of Eligible Receivables, net of Recoveries, hereinafter “Excess Eligible Receivable Losses”) up to
the amount of Twenty-One Million United States Dollars (US$21,000,000.00) (the “Maximum
Reimbursement Amount”) for Excess Eligible Receivable Losses occurring on or prior to the 15 Month
Anniversary; provided, however, that in the event that the amount of Excess
Eligible Receivable Losses has not reached the Maximum Reimbursement Amount by the 15 Month
Anniversary, then Wells Fargo shall further reimburse (or shall cause its Affiliates to further
reimburse) Purchaser for any Excess Eligible Receivable Losses that occur after the 15 Month
Anniversary but prior to the 18 Month Anniversary, up to the amount of Seven Million United States
Dollars (US$7,000,000.00) (the “Secondary Maximum Amount”), but in no event will the aggregate
amount of Excess Eligible Receivable Losses for which Wells Fargo or its Affiliates are required to
reimburse Purchaser exceed the Maximum Reimbursement Amount. Notwithstanding the foregoing, Wells
Fargo and its Affiliates shall have no obligation to reimburse Purchaser for any Excess Eligible
Receivable Losses incurred after the date on which the Servicing Management Agreement is terminated
pursuant to the terms thereof.



     (b) Reimbursement payments required pursuant to Section 2.7(a) shall be made on a monthly
basis within fifteen (15) days following the end of each applicable calendar month, beginning after
the calendar month end at which the aggregate amount of Actual Loan Losses, net of Recoveries,
first exceed the Loss Reimbursement Threshold. Monthly reimbursement payments pursuant to Section
2.7 shall cease upon the earliest to occur of (i) the reimbursement payment that reaches either the
Maximum Reimbursement Amount or the Secondary Maximum Amount, (ii) the reimbursement payment, if
any, following the calendar month in which the Servicing Management Agreement is terminated
pursuant to the terms thereof, or (iii) the reimbursement payment, if any, following the calendar
month in which the 18 Month Anniversary occurs. The amount of each monthly reimbursement payment
shall be equal to the aggregate amount of Excess Eligible Receivable Losses during such month (or,
alternatively, as applicable, during the portion of such month that precedes (x) the date on which
the Servicing Management Agreement is terminated pursuant to the terms thereof or (y) the 18 Month
Anniversary); provided, however, that (A) any monthly reimbursement payment that
would cause the aggregate sum (including such payment) of all reimbursement payments



19









 







pursuant to this Section 2.7 to exceed the Maximum Reimbursement Amount shall be reduced such that
the aggregate sum (including such payment) of all reimbursement payments pursuant to this Section
2.7 shall equal the Maximum Reimbursement Amount, and (B) any monthly reimbursement payment that
would cause the aggregate sum (including such payment) of all reimbursement payments pursuant to
this Section 2.7 related to Excess Eligible Receivable Losses incurred after the 15 Month
Anniversary to exceed the Secondary Maximum Amount shall be reduced such that the aggregate sum
(including such payment) of all reimbursement payments pursuant to this Section 2.7 related to
Excess Eligible Receivable Losses incurred after the 15 Month Anniversary shall equal the Secondary
Maximum Amount.



     (c) Reserved.



     (d) Until the expiration of Wells Fargo’s reimbursement obligation pursuant to this Section
2.7, Purchaser agrees to provide Wells Fargo (or such Affiliate as Wells Fargo directs), no less
than monthly, a list and description of all Receivables included in the Purchased Assets that are
charged off after the Closing Date and a list of all Recoveries.



     (e) For purposes of this Agreement:




     (i) “Actual Loan Losses” shall mean: (A) with respect to Eligible Receivables,
losses incurred after the Closing Date when Eligible Receivables are charged off as
a result of (1) being more than one hundred eighty (180) days past due or (2) the
obligor(s) declaring bankruptcy; and (B) with respect to Legacy Real Estate
Receivables, losses incurred after the Closing Date when Legacy Real Estate
Receivables are either charged off or written down to a reduced collectable value in
accordance with the policies set forth in Annex 1 to Exhibit B to the Servicing
Management Agreement. For purposes hereof: (x) a delinquent Eligible Receivable is
charged off as of the end of the month in which such Eligible Receivable becomes
more than one hundred eighty (180 days) past due; and (y) an Eligible Receivable
with respect to which the obligor(s) declare(s) bankruptcy is charged off in the
first week of the month following the month in which the obligor(s) file(s) for
bankruptcy. No change in charge off policies or write down policies after the date
of this Agreement, whether as a result of changes in (or in interpretations of) GAAP
or otherwise, shall affect the manner in which Actual Loan Losses are computed for
purposes of this Agreement.




     (ii) “Eligible Receivables” shall mean all Receivables included in the
Purchased Assets other than: (A) Receivables that are secured by real estate; (B)
Receivables that have been increased, rewritten, modified or amended after the
Closing (other than modifications or amendments made in connection with payment
plans entered (1) for the purpose of enhancing the collectability of a Receivable
and (2) in accordance with the collection policies and procedures of the Island
Finance Business in place immediately prior to the Closing, as may be modified
pursuant to the Servicing Management Agreement); and (C) Receivables with respect to
which Purchaser has made an independent decision to



20









 







extend further credit to an obligor thereon after the Closing (whether such
further credit is extended pursuant to a separate transaction or otherwise).




     (iii) “18 Month Anniversary” shall mean the date that is eighteen (18) months
after the Closing Date.




     (iv) “15 Month Anniversary” shall mean the date that is fifteen (15) months
after the Closing Date.




     (v) “Legacy Real Estate Receivables” means all Receivables included in the
Purchased Assets that are secured by real estate other than: (A) Receivables
secured by real estate that have been increased, rewritten, modified or amended
after the Closing (other than modifications or amendments made in connection with
payment plans entered (1) for the purpose of enhancing the collectability of such a
Receivable and (2) in accordance with the collection policies and procedures of the
Island Finance Business in place immediately prior to the Closing, as may be
modified pursuant to the Servicing Management Agreement); and (B) Receivables
secured by real estate with respect to which Purchaser has made an independent
decision to extend further credit to an obligor thereon after the Closing (whether
such further credit is extended pursuant to a separate transaction or otherwise).




     (vi) “Recoveries” mean any and all post-charge off or post-write down
recoveries on the Receivables included in the Purchased Assets realized after the
Closing Date through the 18 Month Anniversary.



ARTICLE III

CLOSING DATE




          Unless this Agreement shall have been terminated and the transactions herein abandoned
pursuant to Section 9.1, subject to the provisions of Article VIII, the closing of the purchase and
sale of the Purchased Assets (the “Closing”), and the assumption by Purchaser of the Assumed
Liabilities, provided for in Article II shall take place at the offices of Banco Santander Central
Hispano, S.A. (New York Branch) located at 45 East 53rd Street, 8th Floor,
New York City, New York, at 10:00 a.m., Eastern time, on the later of (i) February 28, 2006, and
(ii) the last Business Day of the calendar month in which the conditions set forth in Article VIII
have been satisfied or waived (unless the parties agree that Closing on such date would be
infeasible due to lack of sufficient time to prepare necessary Closing documentation, in which case
the Closing shall occur on the last Business Day of the following calendar month), or at such other
place and time and on such other date as the parties may agree. The date on which the Closing
occurs is herein called the “Closing Date.”




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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF WELLS FARGO AND THE SELLERS




          Wells Fargo and the Sellers, jointly and severally, represent and warrant to Purchaser that,
except as set forth in the Sellers Disclosure Schedule:




          4.1 Organization, Power, Etc.




          (a) Wells Fargo is a corporation duly incorporated, validly existing and in good standing
under the laws of the State of Delaware.




          (b) Each of the Sellers has been duly incorporated and is validly existing and in good
standing under the laws of its jurisdiction of incorporation, and each of the Sellers has full
power and authority to own or use the properties and assets it purports to own or use, to carry on
its business as it is now being conducted, and to perform all of its obligations under this
Agreement. Each of the Sellers is duly qualified or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction in which the nature of its business or
properties makes such qualification or license necessary.




          4.2 Authority Relative to Agreement and Ancillary Agreements. Each of Wells Fargo and
its Affiliates (including the Sellers) has the corporate power and authority to execute and deliver
this Agreement and the Ancillary Agreements to which it is a party, and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this Agreement by
Wells Fargo and the Sellers and the consummation by Wells Fargo and the Sellers of the transactions
contemplated hereby have been duly authorized by all necessary corporate action of Wells Fargo and
the Sellers. This Agreement constitutes the legal, valid and binding obligation of each of Wells
Fargo and the Sellers enforceable against each of them in accordance with its terms, except as
affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors’ rights generally, and general equitable principles
(whether considered in a Proceeding at equity or law). When executed and delivered, each of the
Ancillary Agreements to which Wells Fargo or any of its Affiliates (including the Sellers) is a
party will constitute the legal, valid and binding obligation of Wells Fargo and each such
Affiliate enforceable against each of them in accordance with their respective terms, except as
affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors’ rights generally, and general equitable principles
(whether considered in a Proceeding at equity or law).




          4.3 Non-Contravention. The execution and delivery of this Agreement by Wells Fargo and
each of the Sellers do not, and the consummation by Wells Fargo and the Sellers of the transactions
contemplated hereby and the performance by Wells Fargo and the Sellers of the obligations which
they are obligated to perform hereunder do not and will not: (a) conflict with or violate any
provision of the certificate of incorporation or by-laws or other organizational documents of Wells
Fargo or the Sellers; or (b) assuming that all consents, authorizations, orders or approvals of,
filings or registrations with, and notices to, each United States federal, state, territorial,
Puerto Rico and foreign governmental commission, board or other regulatory authority or agency
(“Governmental Authority”) listed in Section 4.4(a) of the

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Sellers Disclosure Schedule and all Third Party Consents listed in Section 4.4(b) of the
Sellers Disclosure Schedule have been obtained or made, (i) violate any law, regulation, rule,
order, judgment or decree to which Wells Fargo or the Sellers or any of their respective properties
or assets is subject (“Applicable Law”) or the terms and conditions of any Governmental
Authorization related or issued to the Island Finance Business, (ii) violate, result in the
termination or the acceleration of (or create in any third party the right to accelerate,
terminate, suspend, materially modify or cancel), or conflict with or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default) under, or result in
a breach under, any Material Contract to which Wells Fargo or the Sellers is a party or by which
any of their respective properties is bound or under the terms and conditions of any Governmental
Authorization related or issued to the Island Finance Business, or (iii) result in the creation of
any Lien (other than Liens created or incurred by Purchaser or any of its Affiliates) on any of the
assets or properties of the Island Finance Business; provided, however, that with
respect to clause (i) above, the fact that a License or other Governmental Authorization cannot be
transferred to Purchaser at or following the Closing shall not be deemed to constitute a breach of
this Section 4.3.




          4.4 Consents, Etc.




          (a) Except as described in Section 4.4(a) of the Sellers Disclosure Schedule, no consent,
authorization, order or approval of, filing or registration with, act of or from, or notice to, any
Governmental Authority, is required for the execution and delivery of this Agreement or any
Ancillary Agreement by Wells Fargo or either Seller and for the consummation or effectiveness of
the transactions contemplated hereby and thereby in accordance with their respective terms, except
for such consents, authorizations, orders, approvals, filings, registrations or notices which are
required solely by reason of the specific regulatory status of Purchaser or its Affiliates.




          (b) Except as described in Section 4.4(b) of the Sellers Disclosure Schedule, no consent,
authorization, approval, waiver, order, license, certificate or permit or act of or from, or notice
to, any party to any Material Contract (collectively, “Third Party Consents”) to which Wells Fargo
or either Seller is a party or by which any of their respective properties are bound is required
for the execution and delivery of this Agreement or any Ancillary Agreement by Wells Fargo or
either Seller and the consummation or effectiveness of the transactions contemplated hereby or
thereby in accordance with their respective terms, except for such Third Party Consents which are
required solely by reason of the specific regulatory status of Purchaser or its Affiliates.




          4.5 Title to Purchased Assets. Upon the delivery and payment for the Purchased Assets
as contemplated herein, the Sellers will transfer to Purchaser good, valid and transferable title
to the Purchased Assets, free and clear of any Liens (other than Liens created or incurred by
Purchaser or any of its Affiliates or Liens with respect to Leased Premises or personal property of
the type specifically excepted in Section 4.14 hereof).




          4.6 Reserved.




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          4.7 Reports; Financial Statements.




          (a) Since December 31, 2002, the Sellers or their Affiliates have filed all material reports,
registrations and statements, together with any required amendments thereto, that were required to
be filed in connection with the Island Finance Business with any applicable Governmental Authority
or other regulatory authorities. All such material reports, registrations and statements filed
with any Governmental Authority or such other regulatory authority are collectively referred to
herein as the “Island Finance Reports.” As of their respective dates, the Island Finance Reports
complied in all material respects with all the applicable rules and regulations promulgated by the
relevant regulatory authorities and the information contained therein was, as of the respective
dates thereof, true and correct in all material respects. Neither the Sellers nor any of their
Affiliates are or were required to report loan data with respect to the Receivables included in the
Purchased Assets pursuant to the Home Mortgage Disclosure Act of 1975, as amended, or Regulation C
thereunder, for any of the years ended December 31, 2003, 2004, or 2005.




          (b) Except as provided in Section 4.7(b) of the Sellers Disclosure Schedule, the unaudited
combined balance sheets of the Island Finance Business as at December 31, 2004, and as at December
31, 2005 (the “December Balance Sheet”), and the unaudited statements of results of operations of
the Island Finance Business for the periods then ended and for the period ended December 31, 2003
(collectively, the “Financial Statements”), copies of which previously have been provided to
Purchaser, were prepared in accordance with GAAP applied on a consistent basis during the periods
involved (except for the omission of full footnotes thereto) and fairly present the financial
position of the Island Finance Business as of the dates thereof and the results of its operations
for the periods then ended (subject, in the case of interim statements, to normal year-end
adjustments, which are not material individually or in the aggregate). Wells Fargo or the Sellers
also have delivered to Purchaser copies of all letters from outside auditors to either Seller’s
board of directors (or the audit committee thereof) related to the Island Finance Business during
the thirty-six (36) months preceding the execution of this Agreement, together with copies of all
responses thereto.




          4.8 Litigation. Except as set forth in Section 4.8 of the Sellers Disclosure Schedule,
as of the date of this Agreement there are no Proceedings pending, or to the knowledge of Wells
Fargo or the Sellers, threatened (a) against either Seller or the Purchased Assets that would
reasonably be expected to (i) have a Material Adverse Effect or (ii) cause a material disruption to
the operation of the Island Finance Business as presently conducted, or (b) that seek to delay,
limit or enjoin the transactions contemplated by this Agreement. Except as set forth in Section
4.8 of the Sellers Disclosure Schedule, to the knowledge of Wells Fargo or the Sellers, no event
has occurred or circumstance exists that is reasonably likely to give rise to or serve as a basis
for the commencement of any such Proceeding. Wells Fargo has delivered or made available to
Purchaser copies of all pleadings, correspondence and other material documents relating to each
Proceeding listed in Section 4.8 of the Sellers Disclosure Schedule. Section 4.8 of the Sellers
Disclosure Schedule lists, as of the date of this Agreement, all orders, judgments, injunctions and
decrees applicable to the Island Finance Business, Island Finance PR, Island Finance SFC or their
respective properties or to Wells Fargo or Wells Fargo Financial with respect to the Island Finance
Business. None of Wells Fargo or the Sellers is in violation of any





24










 






such orders, judgments, injunctions or decrees, and, except as set forth in Section 4.8
of the Sellers Disclosure Schedule, no such orders, judgments, injunctions or decrees materially
impair the ability of the Sellers to conduct the Island Finance Business as presently conducted.



          4.9 Compliance with Laws; Licenses.




          (a) The operations of the Island Finance Business are being and have been conducted in all
material respects in compliance with all Applicable Laws.




          (b) The Sellers hold all material Licenses necessary for the operation of the Island Finance
Business as presently conducted; each such License is listed on Section 4.9(b) of the Sellers
Disclosure Schedule, is in full force and effect and has been validly issued. True and correct
copies of the Licenses listed in Section 4.9(b) of the Sellers Disclosure Schedule have been made
available to Purchaser. Except as set forth in Section 4.9(b) of the Sellers Disclosure Schedule,
no Proceedings are pending or, to the knowledge of Wells Fargo or the Sellers, threatened by a
Governmental Authority for the suspension, revocation, modification or termination of any such
License or that has caused or would be reasonably expected to cause (i) a Material Adverse Effect
or (ii) a material disruption to the operation of the Island Finance Business. Neither Seller is
in default in any material respect under any such License.




          4.10 No Undisclosed Liabilities. Except as disclosed in Section 4.10 of the Sellers
Disclosure Schedule, the Sellers have no Liabilities other than (i) Excluded Liabilities, (ii)
liabilities pursuant to any Contract entered into in the Ordinary Course of Business which is
disclosed in the Sellers Disclosure Schedule, (iii) liabilities disclosed, reserved for or
otherwise reflected in the December Balance Sheet, and (iv) liabilities incurred in the Ordinary
Course of Business by the Sellers after December 31, 2005.




          4.11 Absence of Certain Changes or Events. Since December 31, 2004 and through the
date of this Agreement, except as set forth in Section 4.11 of the Sellers Disclosure Schedule or
in the December Balance Sheet (or any notes thereto), there has not been:




          (a) any change by the Sellers in accounting methods, principles or practices, except as
required by law or official interpretations thereof or by changes in GAAP;




          (b) other than in the Ordinary Course of Business, an entry by either Seller into any Material
Contract or amendment to any such Material Contract;




          (c) any change or development in or affecting either Seller that has had or could reasonably
be expected to have, a Material Adverse Effect;




          (d) any payment (except in the Ordinary Course of Business) or material increase by either
Seller of any bonuses, salaries or other compensation to, or entry into any employment, severance
or similar Contract with, any Employee;




25









 








          (e) material damage to or destruction or loss of any Purchased Asset(s), whether or not
covered by insurance, that is (are), individually or in the aggregate, material to the Island
Finance Business;




          (f) any notice of any new labor union organizing activity, or actual or threatened strikes,
work stoppages, slowdowns or lockouts relating to Employees; or




          (g) a commitment, whether or not in writing, by Wells Fargo or the Sellers to do any of the
foregoing.




          4.12 Personnel and Employee Benefits Matters.




          (a) Section 4.12(a) of the Sellers Disclosure Schedule contains a true and complete list of
all Arrangements as of the date of this Agreement. Wells Fargo and the Sellers have delivered to
Purchaser true, correct and complete copies of such Arrangements as are necessary for Purchaser to
perform its obligations under the provisions of Article VII hereof. Except as otherwise provided
in Article VII hereof, following the Closing, Purchaser will not have any Liability under or in
respect of the Arrangements.




          (b) Each Arrangement in all material respects conforms to, and its administration is in all
material respects in compliance with, all Applicable Laws.




          4.13 Taxes.




          (a) Wells Fargo, the Sellers or their Affiliates have filed or caused to be filed on a timely
basis all material Tax Returns with respect to the Island Finance Business. All Tax Returns filed
by Wells Fargo, the Sellers or their Affiliates with respect to the Island Finance Business are
true, correct and complete in all material respects. Wells Fargo, the Sellers or their Affiliates
have paid, or made provisions for the payment of, all material Taxes with respect to the Island
Finance Business that have or may become due for the periods covered by such Tax Returns. There
are no Liens on any of the Purchased Assets that arose in connection with any failure or alleged
failure to pay any Taxes, and Wells Fargo and the Sellers have no knowledge of any basis for the
assertion of any claims attributable to Taxes that, if adversely determined, would result in any
such Lien.




          (b) All material Taxes that the Sellers are or were required by Applicable Law to withhold,
deduct or collect have been duly withheld, deducted and collected and, to the extent required, have
been paid to the proper Governmental Authority or other person.




          4.14 Leases; Personal Properties.




          (a) Section 4.14(a) of the Sellers Disclosure Schedule lists all real estate leased (the
“Leased Premises”), as of the date of this Agreement, by either Seller, in each case as lessee.
Each lease (a “Lease”) with respect to a Leased Premises (excluding Leased Premises listed in
Annex 2.1(b)(vii)) is a valid and binding obligation of the Seller which is the lessee
thereof and is in full force and effect and there is not under any such Lease (excluding Leases




26









 








with respect to Leased Premises listed in Annex 2.1(b)(vii)), any material existing
default or any event which, with notice or lapse of time, would constitute a material default by
such Seller or, to the knowledge of Wells Fargo or the Sellers, by any other party thereto. The
Sellers’ possession and quiet enjoyment of the Leased Premises under each such Lease (excluding
Leased Premises listed in Annex 2.1(b)(vii)) has not been disturbed and, to Sellers’
knowledge, there is no dispute with respect to any such Lease (excluding Leased Premises listed in
Annex 2.1(b)(vii)). The Sellers have valid interests in such Leases (excluding Leases with
respect to Leased Premises listed in Annex 2.1(b)(vii)), free and clear of Liens (excluding
any Liens, including mortgage liens, with respect to the real property to which any such Lease
relates) and have not subleased, licensed or otherwise granted to any person or entity the right to
use or occupy the Leased Premises (excluding Leased Premises listed in Annex 2.1(b)(vii))
or any portion thereof, except (a) as disclosed in Section 4.14(a) of the Sellers Disclosure
Schedule, (b) for defects in title or Liens which do not materially interfere with the present use
of the Leased Premises or otherwise materially impair business operations, and (c) Liens for Taxes
not yet delinquent or being contested in good faith. True and correct copies of each such Lease
(excluding Leases with respect to Leased Premises listed in Annex 2.1(b)(vii)), including
all effective amendments thereto, have been made available to Purchaser. No security deposit or
portion thereof deposited with respect to such Lease has been applied in respect of a breach or
default under such Lease which has not been redeposited in full. Except as set forth in Section
4.14(a) of the Sellers Disclosure Schedule, neither Seller owns any real property (other than real
property acquired in satisfaction of debts previously contracted in good faith).



          (b) Except as set forth in Section 4.14(b) of the Sellers Disclosure Schedule, the Sellers
have good title free and clear of any Liens (other than (i) Liens securing indebtedness of Island
Finance PR or Island Finance SFC, as the case may be, which is created substantially simultaneously
with the purchase of the relevant personal property and which do not encumber property other than
such personal property, and (ii) statutory Liens of landlords, vendors, mechanics, materialmen,
repairmen and other like Liens) to all personal property reflected in the balance sheet for the
Island Finance Business as of December 31, 2004, and all personal property acquired since such
date, except such personal properties as have been disposed of in the Ordinary Course of Business.




          4.15 Certain Labor Matters.




          (a) Except as set forth in Section 4.15(a) of the Sellers Disclosure Schedule, with respect to
the Sellers: (i) there is no collective bargaining agreement or relationship with any labor
organization and none of the Employees are represented by any labor union; (ii) there is no
obligation to recognize or agreement to recognize any union or other collective bargaining unit;
(iii) since January 1, 2003 no labor organization or group of employees has filed any
representation petition or made any written or oral demand for recognition; (iv) to the knowledge
of Wells Fargo or the Sellers, no union organizing or decertification efforts are underway or
threatened; (v) no strike, work stoppage, slowdown, material grievance collective bargaining
dispute, claim of unfair labor practice or other material labor dispute has occurred since January
1, 2003 and none is underway or, to the knowledge of Wells Fargo or the Sellers, threatened; and
(vi) there is no material Proceeding relating to workers’ compensation pending or, to the knowledge
of Wells Fargo or the Sellers, threatened.




27









 








          (b) All relationships between the Sellers and their respective contractors, subcontractors,
personnel supplied by temporary staffing agencies and similar arrangements are independent
contractor relationships and do not give rise to any employer-employee relationship with respect to
the Sellers.




          (c) Except as set forth on Section 4.15(c) of the Sellers Disclosure Schedule, each of the
Sellers is in compliance in all material respects with all Applicable Laws relating to the
employment of labor, including without limitation those relating to wages, salary withholding,
employee health and safety, statutory bonus, vacation, working hours, collective bargaining and
benefits for employees and former employees, unemployment compensation, disability compensation,
worker’s compensation, equal employment opportunity and discrimination (including age, sex,
maternity, marriage, race, national origin, veteran status, disability, social condition, religious
beliefs, political ideas and any other discrimination), immigration control, terminations and the
payment and withholding of social security and other Taxes or obligations. To the knowledge of
Wells Fargo or the Sellers, the Sellers do not have any material Liability for any arrearages of
wages, commissions and benefits for Employees, employment Taxes or penalties or other sums for
failure to comply with any of the foregoing that are not reflected in the most recent financial
statements of the Island Finance Business.




          (d) Except as set forth on Section 4.15(d) of the Sellers Disclosure Schedule, as of the date
of this Agreement there is no material employment-related charge, complaint, grievance,
investigation, inquiry or obligation of any kind, pending or, to the knowledge of Wells Fargo or
the Sellers, threatened in any forum, related to an alleged violation or breach by either Seller,
or their respective officers or directors, of any Applicable Law or Material Contract relating to
the employment of labor.




          (e) Wells Fargo, the Sellers or their Affiliates maintain one or more insurance policies in
full force and effect with the Puerto Rico State Insurance Fund to cover the Employees; and, except
as set forth in Section 4.15(e) of the Sellers Disclosure Schedule, all premiums on said policies
have been paid and there are no outstanding debts with respect thereto. Since January 1, 2002,
except as set forth on Section 4.15(e) of the Sellers Disclosure Schedule, no work-related accident
has occurred for which either Seller is or may be classified as an uninsured employer by the Puerto
Rico State Insurance Fund.




          4.16 Brokers. No broker, investment banker, financial advisor or other person or
entity, is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or
commission in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Wells Fargo, the Sellers, their Affiliates or any of their
respective officers, directors or employees.




          4.17 Receivables. All of the Receivables (other than the Excluded Receivables and the
Excluded Charge Off Accounts), together with any instruments securing the same, (i) were made for
valuable consideration, (ii) constitute valid obligations in all material respects of the persons
or entities shown as indebted thereon by the records of the Sellers, (iii) are legally enforceable
in all material respects according to their terms (except as affected by bankruptcy,




28









 








insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating
to or affecting creditors’ rights generally), (iv) are not subject to valid rights of offset or
similar claims, and (v) were originated in all material respects in compliance with Applicable Law.
All amounts shown on the Records of the Sellers to be owing and unpaid on the respective
Receivables (other than the Excluded Receivables and Excluded Charge Off Accounts) reflect the true
and correct outstanding balances owing and unpaid thereon as of the respective dates indicated
therein. The information shown in the Records of the Sellers concerning the Receivables (other than
the Excluded Receivables and the Excluded Charge Off Accounts), the security therefor and the
persons or entities shown as indebted thereon is complete and correct in all material respects.



          4.18 Environmental Liability. Except as set forth in Section 4.18 of the Sellers
Disclosure Schedule, as of the date of this Agreement, there is no pending or, to the knowledge of
Wells Fargo or the Sellers, threatened Proceeding of any nature seeking to impose on either Seller,
or that could reasonably be expected to result in the imposition on either Seller of, any liability
arising from the release of hazardous substances under any local, state, Puerto Rico or federal
environmental statute, regulation or ordinance including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, and, to the knowledge
of Wells Fargo and the Sellers, as of the date of this Agreement, there is no basis for any such
Proceeding. Except as set forth in Section 4.18 of the Sellers Disclosure Schedule, as of the date
of this Agreement, neither Seller is subject to any agreement, order, judgment, or decree by or
with any Governmental Authority or any other person or entity imposing any such environmental
liability.




          4.19 No Defaults. Except as set forth in Section 4.19 of the Sellers Disclosure
Schedule (i) neither Seller is in default in any material respect, nor has any event occurred
which, with the passage of time or the giving of notice, or both, would constitute a default in any
material respect, by either Seller, under any Material Contract that is included in the Purchased
Assets, and (ii) all parties with whom either Seller has entered into any Material Contract
included in the Purchased Assets (other than those relating to any Receivables or others arising in
the Ordinary Course of Business), or which owes to either Seller any material obligations (other
than those relating to any Receivables or others arising in the Ordinary Course of Business) are,
to the knowledge of Wells Fargo and the Sellers, in compliance therewith in all material respects.




          4.20 Certain Contracts. Except as set forth in Section 4.20 of the Sellers Disclosure
Schedule, neither Seller is a party or subject to any contract containing covenants which limit its
ability to compete in any line of business, or with any person or entity, or which involve any
restriction of the geographical area in which, or method by which, it may carry on its business
(other than as may be required by law or applicable regulatory authorities).




          4.21 Trademarks, Trade Names, and Other Intellectual Property.




          (a) Section 4.21 of the Sellers Disclosure Schedule lists:





               (i) Intellectual Property. All patents, trademarks, service marks,
trade names or registered copyrights owned by the Sellers or their Affiliates or
used in



29









 





the ordinary conduct of the Island Finance Business, and all applications or
registrations for any of the foregoing; and




               (ii) Intellectual Property Licenses. All licenses or other Contracts
relating to the Intellectual Property used in the ordinary conduct of the Island
Finance Business (excluding computer software that is generally available to the
public and that has a purchase price of less than US$1,000 per application per user)
(the “Intellectual Property Licenses”), and the term (including any renewal options)
thereof.



          (b) Except as disclosed in Section 4.21 of the Sellers Disclosure Schedule: (i) the Sellers
own all right, title and interest, free and clear of all restrictions (other than as set forth in
the Intellectual Property Licenses) and Liens, in and to, or have the right to use, all
Intellectual Property that is used in the ordinary conduct of the Island Finance Business; (ii)
since December 31, 2000, no person has challenged or, to the knowledge of Wells Fargo and the
Sellers, threatened to challenge any the rights of either Seller with respect to the Intellectual
Property that is used in the ordinary conduct of the Island Finance Business; and (iii) the use by
the Sellers of the Intellectual Property that is used in the ordinary conduct of the Island Finance
Business does not, to the knowledge of Wells Fargo and the Sellers, violate, infringe upon or
misappropriate any patent, trademark, service mark, trade name, copyright, technology, know-how,
process, trade secret or other rights or other intellectual properties of any other person or
entity.




          4.22 Books and Records. The books of account and other financial Records of the
Sellers relating to the Island Finance Business, all of which have been made available to
Purchaser, are complete and correct in all material respects and represent actual bona fide
transactions and have been maintained in accordance with sound business practices and the
requirements of Section 13(b)(2) of the Securities Exchange Act of 1934 (regardless of whether the
Sellers are subject to that Section or not), including the maintenance of an adequate system of
internal controls.




          4.23 Accuracy of Disclosures. The representations and warranties set forth in this
Article IV (as qualified or modified by the Sellers Disclosure Schedule) and the information
contained in the Sellers Disclosure Schedule are true and accurate in all material respects and do
not contain any untrue statement of material fact or omit to state any material fact necessary in
order to make such representations, warranties and information not misleading.




30









 








ARTICLE V



REPRESENTATIONS AND WARRANTIES OF PURCHASER




          Purchaser represents and warrants to Wells Fargo and the Sellers that, except as set forth in
the Purchaser Disclosure Schedule:




          5.1 Organization, Power, Etc.




          (a) Purchaser is a corporation duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation.




          (b) Purchaser has full power and authority to own all of its properties and assets and to
carry on its business as it is now being conducted, and, where applicable, is duly qualified or
licensed to do business as a foreign corporation and is in good standing in each jurisdiction in
which the nature of its business or properties makes such qualification or license necessary.




          5.2 Authority Relative to Agreement and Ancillary Agreements. Purchaser has the
corporate power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery by Purchaser of this Agreement and the
consummation by Purchaser of the transactions contemplated hereby have been duly authorized by all
necessary corporate action. This Agreement constitutes a valid and legally binding agreement of
Purchaser enforceable against Purchaser in accordance with its terms, except as affected by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors’ rights generally, general equitable principles (whether
considered in a proceeding at equity or law). When executed and delivered, each of the Ancillary
Agreements to which Purchaser or any of its Affiliates is a party will constitute the legal, valid
and binding obligation of Purchaser and each such Affiliate enforceable against each of them in
accordance with their respective terms, except as affected by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’
rights generally, and general equitable principles (whether considered in a Proceeding at equity or
law).




          5.3 Non-Contravention. The execution and delivery of this Agreement by Purchaser does
not, and the consummation by Purchaser of the transactions contemplated hereby and the performance
by Purchaser of the obligations which it is obligated to perform hereunder will not: (a) violate
any provision of the certificate of incorporation or by-laws or other organizational documents of
Purchaser; or (b) assuming that all consents, authorizations, orders or approvals of, filings or
registrations with, and notices to, each Governmental Authority listed in Section 5.4(a) of the
Purchaser Disclosure Schedule and all third party consents, authorizations, approvals, waivers,
orders, licenses, certificates, permits, acts and notices listed in Section 5.4(b) of the Purchaser
Disclosure Schedule have been obtained or made, (i) violate any law, regulation, rule, order,
judgment or decree to which Purchaser is subject, or (ii) violate, result in the termination or the
acceleration of, or conflict with or constitute a default under, any material contract, agreement
or instrument to which Purchaser is a party or by which any of its property is bound, except, in
the case of clause (b) for such violations, terminations,




31









 








accelerations, conflicts or defaults as would not prohibit or otherwise materially impair
Purchaser’s ability to consummate the transactions contemplated by this Agreement on a timely
basis.



          5.4 Consents, Etc.




          (a) Except as described in Section 5.4(a) of the Purchaser Disclosure Schedule, no consent,
authorization, order or approval of, filing or registration with, or notice to, any Governmental
Authority is required for the execution and delivery of this Agreement by Purchaser and the
consummation by Purchaser of the transactions contemplated hereby, except for such consents,
authorizations, orders, approvals, filings, registrations or notices (i) which Wells Fargo, the
Sellers or their Affiliates are required to obtain or make or (ii) the failure of which to be
obtained or made would not prohibit or otherwise materially impair the consummation by Purchaser of
the transactions contemplated hereby.




          (b) Except as described in Section 5.4(b) of the Purchaser Disclosure Schedule, no consent,
authorization, approval, waiver, order, license, certificate or permit or act of or from, or notice
to, any party to any material contract, agreement or instrument to which Purchaser is a party or by
which any of its property is bound is required for the execution and delivery of this Agreement by
Purchaser and the consummation by Purchaser of the transactions contemplated hereby, except for
such consents, authorizations, approvals, waivers, orders, licenses, certificates, permits, acts or
notices (i) which Wells Fargo, the Sellers or their Affiliates are required to obtain or make or
(ii) the failure of which to be obtained or made would not prohibit or otherwise materially impair
the consummation by Purchaser of the transactions contemplated hereby.




          5.5 Brokers. No broker, investment banker, financial advisor or other person or
entity, other than Sandler O’Neill & Partners, L.P., the fees and expenses of which will be paid by
Purchaser, is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or
commission in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Purchaser or its Affiliates.




          5.6 Available Funds. Purchaser has, or prior to the Closing will have, available to it
all funds necessary to satisfy all of its obligations hereunder and in connection with the
transactions contemplated hereby, including the obligation to purchase the Purchased Assets
pursuant to this Agreement on the terms and conditions set forth herein. 




          5.7 Reserved.




          5.8 No Regulatory Impediment. Except as disclosed in Section 5.8 of the Purchaser
Disclosure Schedule, as of the date of this Agreement, Purchaser is not aware of any fact relating
to its business, operations, financial condition or legal status that might reasonably be expected
to impair its ability to obtain, on a timely basis, all consents, approvals, licenses and permits
from Governmental Authorities necessary for the consummation of the transactions contemplated
hereby.




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ARTICLE VI

COVENANTS AND AGREEMENTS




          6.1 Conduct of Business. Wells Fargo and the Sellers agree that, during the period
from the date hereof to the Closing Date, except as otherwise permitted pursuant to the prior
written consent of Purchaser or except as permitted or contemplated by this Agreement:




          (a) the Island Finance Business will be operated in the Ordinary Course of Business, credit
will be extended in accordance with existing lending policies and practices, and the Sellers shall
use commercially reasonable efforts, consistent with past practice, to preserve for Purchaser the
business organization and operations of the Sellers and the good will of those having business
relationships with the Sellers;




          (b) The Sellers will comply in all material respects with the provisions of all Applicable
Laws and Material Contracts;




          (c) The Sellers will maintain their properties in good repair and condition, ordinary wear and
tear excepted;




          (d) The Sellers will maintain proper business and accounting records in accordance with past
practice and no change shall be made by either Seller in accounting methods, principles or
practices, unless required by law or official interpretations thereof or by changes in GAAP;




          (e) Wells Fargo and the Sellers will confer with Purchaser prior to implementing operational
decisions that could reasonably be expected to have a material effect on the Island Finance
Business;




          (f) Wells Fargo and the Sellers will not make material changes in the current management
personnel of the Island Finance Business without prior consultation with Purchaser;




          (g) each of Wells Fargo, the Sellers and their Affiliates will keep in full force and effect,
without amendment (or, in the event of expiration or termination, use commercially reasonable
efforts to renew or replace on substantially similar terms) all material rights relating to the
Island Finance Business;




          (h) Wells Fargo, the Sellers and their Affiliates will maintain in full force and effect (or,
in the event of expiration or termination, use commercially reasonable efforts to renew or replace
on substantially similar terms) all existing insurance policies in place to cover and protect the
assets of the Island Finance Business against loss, damage or destruction;




33









 








          (i) Wells Fargo, the Sellers and their Affiliates shall execute and deliver all documents,
make all truthful oaths, testify in any Proceedings and do all other acts as may reasonably be
requested by Purchaser in order to consummate the transactions contemplated by this Agreement, all
without further consideration (except as otherwise provided in this Agreement or the Ancillary
Agreements);




          (j) the Sellers will maintain all books and Records of the Sellers relating to the Island
Finance Business in the Ordinary Course of Business; and




          (k) Wells Fargo, the Sellers and their Affiliates will not make any commitment, whether or not
in writing, which conflicts with any of the foregoing.




          6.2 Access; Confidentiality. Wells Fargo and the Sellers agree to permit Purchaser
and its accountants, counsel and other authorized representatives to have, during the period from
the date of this Agreement to the Closing Date, reasonable access to the premises (including the
Leased Premises), books and records, properties, contracts, Governmental Authorizations, and other
documents and data of the Sellers that relate to the Island Finance Business upon reasonable
advance notice and during normal business hours or other mutually agreed times, to investigate the
business affairs of the Island Finance Business, and to make orderly transition arrangements for
the consummation of the transactions contemplated hereby; provided that such access shall
not unreasonably interfere with the normal operations of the Sellers. The Sellers agree to make
available to Purchaser, upon reasonable advance notice and during normal business hours or other
mutually agreed times, the officers and other key Employees of the Sellers, as Purchaser may
reasonably request, provided that such availability shall not unreasonably interfere with
the normal operations of the Sellers. The Sellers shall furnish Purchaser with such financial and
operational data and other information with respect to the business and properties of the Island
Finance Business as Purchaser shall from time to time reasonably request. Any information regarding
the Island Finance Business or otherwise heretofore or hereafter obtained from the Sellers or their
Affiliates or their respective representatives by Purchaser or its representatives shall be subject
to the terms of the Confidentiality Agreement, and such information shall be held by Purchaser and
its representatives in accordance with the terms of the Confidentiality Agreement.




          6.3 Best Efforts; Taking of Necessary Action.




          (a) Each of the parties hereto agrees to use its best efforts to take or cause to be taken all
action and promptly to do or cause to be done all things necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement, including, but not
limited to, the execution of those agreements, instruments and documents described in Article VIII
hereof and those other actions described in Article VIII hereof.




          (b) Purchaser shall (i) as soon as practicable after the date hereof, file such applications,
notices, registrations and requests as may be required or advisable to be filed by it with any
Governmental Authority in connection with the transactions contemplated hereby, and (ii) use its
best efforts to consult with and keep Wells Fargo informed as to the status of such matters. To the
extent that any application, notice, registration or request so filed contains any




34









 








significant information relating to Wells Fargo, the Sellers, or the Island Finance Business,
prior to submitting such application, notice, registration or request to any Governmental
Authority, Purchaser will permit Wells Fargo to review such information. Wells Fargo shall use its
best efforts to cooperate with Purchaser in the preparation and filing of any applications,
notices, registrations and responses to requests for additional information from Governmental
Authorities made by Purchaser with any Governmental Authority in connection with the transactions
contemplated by this Agreement, including providing such information as Purchaser may reasonably
request for inclusion in such applications, notices, registrations and responses.



          (c) Each of Wells Fargo and the Sellers shall (i) as soon as practicable after the date
hereof, file such applications, notices, registrations and requests as may be required or advisable
to be filed by it with any Governmental Authority in connection with the transactions contemplated
hereby, and (ii) use its best efforts to consult with and keep Purchaser informed as to the status
of such matters. To the extent that any application, notice, registration or request so filed
contains any significant information relating to Purchaser or its Affiliates, prior to submitting
such application, notice, registration or request to any Governmental Authority, Wells Fargo or the
applicable Seller will permit Purchaser to review such information. Purchaser shall use its best
efforts to cooperate with Wells Fargo and the Sellers in the preparation and filing of any
applications, notices, registrations and responses to requests for additional information from
Governmental Authorities made by Wells Fargo or a Seller with any Governmental Authority in
connection with the transactions contemplated by this Agreement, including providing such
information as Wells Fargo or a Seller may reasonably request for inclusion in such applications,
notices, registrations and responses.




          (d) Following the Closing, to the extent required by the terms of the applicable Lease, each
of the parties hereto agrees to use commercially reasonable efforts to promptly obtain a Lease
Assignment and Assumption Agreement executed by the lessor of any Facility included in the
Purchased Assets with respect to which no such Lease Assignment and Assumption Agreement has been
obtained at the time of the Closing.




          6.4 Purchase of Island Insurance. Promptly following the execution hereof, each of
Wells Fargo and Purchaser shall use its best efforts to execute and deliver, or cause its Affiliate
to execute and deliver, as the case may be, a definitive stock purchase agreement relating to the
purchase and sale of all of the outstanding shares of capital stock (other than directors’
qualifying shares) of Island Insurance Corporation, a Puerto Rico corporation (“Island Insurance”),
substantially in the form attached hereto as Exhibit B (the “Island Insurance Stock
Purchase Agreement”).




          6.5 Insurance; Risk of Loss. Effective as of the Closing Date: (a) Wells Fargo will
terminate or cause its Affiliates to terminate all insurance coverage (other than credit-related
insurance with respect to Receivables) relating to the Purchased Assets, the Island Finance
Business and current or former employees of the Sellers under the general corporate policies of
insurance, cancelable surety bonds and hold harmless agreements of Wells Fargo for the benefit of
all of its controlled subsidiaries, as listed in Section 6.5 of the Sellers Disclosure Schedule
(provided, that no such termination of occurrence liability policies shall be effected so
as to prevent either Seller from recovering under such policies for losses from events occurring
prior




35









 








to the Closing Date); and (b) Purchaser shall become solely responsible for all insurance
coverage and related risk of loss based on events occurring on and after the Closing Date with
respect to the Island Finance Business and the Purchased Assets.



          6.6 Wells Fargo Name and Mark, Etc.




          (a) After the Closing, Purchaser will immediately cease the use of the designation “Wells
Fargo” in connection with Purchaser’s operation of the Island Finance Business and will eliminate
the use of any other designation indicating affiliation after the Closing Date with Wells Fargo or
any of its Affiliates (including the Reliable Entities). Without limiting the generality of the
foregoing, Purchaser will cease immediately after the Closing any use of the designation “Wells
Fargo” and any other designation indicating affiliation after the Closing Date with Wells Fargo or
any of its Affiliates (including the Reliable Entities) on any stationery, checks, contracts,
purchase orders, customer agreements and other business forms which can result in a legal
commitment of Wells Fargo or any of its Affiliates by stickering the name used by Purchaser (which
shall not include any use of the designation “Wells Fargo” or any other designation indicating
affiliation after the Closing Date with Wells Fargo or any of its Affiliates (including the
Reliable Entities)) over such designation or by such other method as Purchaser shall select.




          (b) Notwithstanding the transfer of certain trade names to Purchaser pursuant to Section 2.1
hereof, for a period ending on the later of September 1, 2006 or the date which is six (6) months
after the Closing Date , Purchaser agrees that neither it nor its Affiliates will use the names
“Island Mortgage” or “Island Finance Mortgage” (or any other name including the terms “Island
Mortgage” or “Island Finance Mortgage”) in connection with its or their business. For its part,
Wells Fargo agrees that neither it nor its Affiliates will use the names “Island Mortgage” or
“Island Finance Mortgage” (or any other name including the terms “Island Mortgage” or “Island
Finance”) in connection with its or their business in Puerto Rico, the United States or any other
country (except the Lesser Antilles).




          (c) Except as specified in subsection (b) above, nothing in this Section 6.6 shall affect
Purchaser’s nor its Affiliates’ right to use the name “Island Finance” and related names,
trademarks and logos in Puerto Rico, the United States and other countries (except the Lesser
Antilles).




          6.7 Assistance in Proceedings, Etc.




          (a) After the Closing Date, Purchaser shall cooperate with Wells Fargo, the Sellers and their
counsel (including their experts or other agents) in the contest or defense of, and make available
any Transferred Employee (to the extent such Transferred Employee is still employed by the
Purchaser or its Affiliates at the time of any request for assistance) to be interviewed, provide
any testimony (including depositions, trial testimony and responding to interrogatories) and access
to the Records transferred in connection with the transactions contemplated hereby in connection
with, any Proceeding involving or relating to the Island Finance Business or the Purchased Assets
arising out of a transaction or event that occurred prior to the Closing Date.




36









 








          (b) After the Closing Date, Wells Fargo and the Sellers will cooperate with Purchaser and its
counsel (including its experts and agents), and make available any employee engaged in the Island
Finance Business prior to the Closing Date (to the extent such employee is still employed by the
Wells Fargo or its Affiliates at the time of any request for assistance) to be interviewed, provide
any testimony (including depositions, trial testimony and responding to interrogatories) and access
to Records relating to the Island Finance Business or the Purchased Assets retained by Wells Fargo
or Sellers in connection with, any Proceeding involving or relating to the Island Finance Business
or the Purchased Assets arising out of a transaction or event that occurred prior to the Closing
Date.




          (c) Wells Fargo, Sellers or one or more of their Affiliates as they may designate will
continue to manage and prosecute or defend the ongoing litigation and other Proceedings set forth
on Sections 4.8 and 4.15 of Sellers Disclosure Schedules. Wells Fargo and Sellers acknowledge and
agree that Liabilities arising out of such Proceedings after the Closing Date are Excluded
Liabilities.




          6.8 Supplements to Schedules. On the date which is ten (10) Business Days prior to the
anticipated Closing Date, and at the Closing, Wells Fargo shall furnish Purchaser with a supplement
to the Sellers Disclosure Schedule, and Purchaser shall furnish Sellers with a supplement to the
Purchaser Disclosure Schedule, in each case to reflect any additional matters, occurrences or other
disclosures of which the Sellers or Purchaser, as the case may be, becomes aware during the period
commencing on the date of this Agreement and ending immediately prior to the Closing. The
supplements to the Sellers Disclosure Schedule and Purchaser Disclosure Schedule furnished pursuant
hereto are for informational purposes only and shall not in any way alter or affect, or be deemed
to alter or affect, the representations and warranties of the Sellers set forth in Article IV
hereof or of Purchaser set forth in Article V hereof for any purpose, including without limitation
for purposes of Articles VIII, IX, XI or XII hereof, and shall not change, or be deemed to change,
in any way the dates as of which such representations and warranties are deemed to have been made.




          6.9 Public Announcements. Wells Fargo and Purchaser have agreed on the text of an
initial joint press release announcing the execution of this Agreement and the transactions
contemplated hereby. Subject to the following sentence, no other news release or public
announcement pertaining to this Agreement or the transactions contemplated hereby shall be made by
or on behalf of any party hereto without the prior approval of the other parties. Notwithstanding
the foregoing, nothing herein shall prohibit any party from (x) making any disclosure to its
employees or the employees of any of its Affiliates which does not include any material information
which has not previously been publicly released in accordance herewith, or (y) making any
disclosure that, in the opinion of its counsel, is required by any applicable law, regulation or
listing agreement of Wells Fargo or Purchaser with, or rule of, any securities exchange on which
securities of Wells Fargo or Purchaser are listed.




          6.10 Further Assurances. Each party shall cooperate with the other parties, and
execute and deliver, or use its best efforts to cause to be executed and delivered, all such other
instruments, including instruments of conveyance, assignment and transfer, and to make all




37









 








filings with and to obtain all consents, approvals or authorizations of any Governmental
Authority or any other person or entity under any permit, license, agreement, indenture or other
instruments, and take all such other actions as such party may reasonably be requested to take by
the other parties hereto from time to time, consistent with the terms of this Agreement, in order
to effectuate the provisions and purposes of this Agreement and the transactions contemplated
hereby.



          6.11 No Negotiation. Until such time as this Agreement is terminated pursuant to
Article IX, Wells Fargo, the Sellers and their Affiliates shall not, directly or indirectly,
solicit, initiate or encourage any inquiries or proposals from, discuss or negotiate with or
provide any non-public information to any person or entity (other than Purchaser and its
Affiliates) relating to an acquisition of all or part of the Island Finance Business, the Purchased
Assets or Island Insurance.




          6.12 Interim Financial Statements. Until the Closing Date, Wells Fargo and the
Sellers shall deliver to Purchaser within fifteen (15) days after the end of each month (i) a copy
of the unaudited consolidated balance sheets and profit and loss statement of the Island Finance
Business for such month prepared in a manner and containing information consistent with Sellers’
current practices, and (ii) a risk management portfolio analysis of the Receivables as of the end
of each such month.




          6.13 Agreement Not to Compete.




          (a) As an inducement for Purchaser to enter into this Agreement and to accord to Purchaser the
full value of its purchase under this Agreement, except as described in paragraphs (c) through (f)
below, for a period of thirty-six (36) months from the Closing Date (the “Noncompete Term”),
neither Wells Fargo nor any of its Affiliates (including, but not limited to the Sellers) will,
directly or indirectly, engage or invest in, own, manage, operate, control or participate in the
ownership, management, operation, or control of, any person, entity or business engaged in the
Consumer Finance Business anywhere within Puerto Rico. Wells Fargo, the Sellers and their
Affiliates agree and acknowledge that this covenant is reasonable with respect to its duration,
geographical area and scope.




          (b) For purposes hereof, the following capitalized terms shall have the following meanings:





               (i) “Consumer Finance Business” means any of the following lending activities
conducted, individually or in combination, within Puerto Rico: (A) the origination
of unsecured small personal loans, which are capped currently at US$5,000, that are
governed by and regulated under Act No. 106 of June 28, 1965, as amended (known
internally by Island Finance PR as “CSLs”); (B) the origination of unsecured small
personal loans, which are capped currently at US$5,000, made as lines of credit that
are governed by and regulated under Act No. 68 of June 19, 1964, as amended (known
internally by Island Finance PR as “Cash on Demand” or “CODs”); (C) the origination
of unsecured loans in excess of US$5,000 that are governed by and regulated under
Act No. 214 of October 14,



38









 






1995, as amended; (D) the origination of Personal Loans with a Mortgage
Guarantee that are governed by and regulated under Act No. 97 of June 5, 1973, as
amended; and (E) the purchase of open-end (revolving) or close-end sales finance
contracts related to sales financing to consumers. For purposes of this definition,
the current caps under applicable law shall not be deemed a limitation to this
agreement not to compete, and the Consumer Finance Business shall also include: (x)
any of the foregoing lending activities carried out under: (i) the aforementioned
laws or the regulations promulgated thereunder, as such laws or regulations may be
amended or modified, (ii) any successor law or regulation, or (iii) under any other
legal or regulatory scheme that replaces or substitutes the previously mentioned
laws or regulations; and (y) one or more of the foregoing lending activities if
regulation under law with respect to any such lending activity ceases, in which
case, the covenant not to compete shall continue in full force and effect
notwithstanding such deregulation. Notwithstanding the foregoing, the Consumer
Finance Business shall not include: (1) the origination of Purchase Money Secured
Loans; (2) the refinancing of existing real estate secured loans with a new mortgage
loan with a principal balance greater than US$60,000.00; (3) the origination of
second mortgage loans made in conjunction with the refinancing of an existing real
estate secured loan where the total new financing is for a combined principal loan
balance in excess of US$60,000.00; (4) the origination of mortgage loans secured by
non-residential real estate with a principal loan balance greater than US$60,000.00;
or (5) the origination of mortgage loans issued to employees of Wells Fargo or its
Affiliates.




               (ii) “Personal Loan with a Mortgage Guaranty” shall mean a loan (other than a
Purchase Money Secured Loan) guaranteed by a real estate mortgage for the primary
purpose of consolidating existing debt with a principal balance not in excess of
US$60,000.00.




               (iii) “Purchase Money Secured Loan” shall mean a mortgage loan issued in
connection with the purchase of real estate.



          (c) Purchaser acknowledges that one or more of the Reliable Entities presently are engaged in
dealer floor plan financing, the purchase of auto-secured retail installment receivables, and
providing financing for ancillary products (such as sound systems, security systems, and
generators) in conjunction with an auto-secured retail installment contract in Puerto Rico, and
will be entering into the origination of traditional residential mortgage lending products (such as
Purchase Money Secured Loans, loans in connection with the refinancing of existing mortgages,
cash-out refinances and second mortgage loans made in conjunction with a first mortgage) within
Puerto Rico. During the Noncompete Term, Reliable may engage in the foregoing activities or
businesses within Puerto Rico; provided, that such mortgage lending products, other than
Purchase Money Secured Loans, may not include (1) the refinancing of existing real estate secured
loans with a new mortgage loan with a principal balance of less than US$60,000.00, (2) the
origination of second mortgage loans made in conjunction with the refinancing of an existing real
estate secured loan where the total new financing is for a combined principal loan balance of less
than US$60,000.00, (3) the origination




39









 








of mortgage loans secured by non-residential real estate with a principal loan balance of less
than US$60,000.00.



          (d) Purchaser further acknowledges that certain business units of Wells Fargo and its
Affiliates based outside of Puerto Rico presently are engaged in certain lending activities that
involve loan or credit products that may be included within those described in the definition of
Consumer Finance Business, including without limitation (i) the origination of small business
loans, lines of credit and credit cards through direct-mail and telemarketing solicitations and
agent banking relationships (known internally as “Business Direct” loans), (ii) the origination and
refinancing of student loans for educational and related expenses (federal or private), and (iii)
the origination of credit card receivables (collectively, such lending activities engaged in by
business units based outside of Puerto Rico being referred to as “Incidental Consumer Finance
Activities”). During the Noncompete Term, Wells Fargo and its Affiliates shall be permitted to
continue to engage in such Incidental Consumer Finance Activities; provided,
however, that Wells Fargo and its Affiliates shall put in place such procedures as are
reasonably necessary or required in order to prevent their business units that are engaged in such
Incidental Consumer Finance Activities from soliciting any person who was a customer of the Island
Finance Business as of the Closing Date with any loan or credit product that is included within
those described in the definition of Consumer Finance Business (a general description of which
procedures are included on Annex 6.13(d)); provided, further, that such
business units of Wells Fargo and its Affiliates engaged in such Incidental Consumer Finance
Activities shall not be based in Puerto Rico (it being understood and acknowledged that the
foregoing shall not be construed to restrict the Reliable Entities from engaging in the activities
permitted under Section 6.13(c)).




          (e) Nothing in this Section 6.13 will prohibit the acquisition by Wells Fargo or its
Affiliates of entities or groups of affiliated entities engaged in the Consumer Finance Business in
Puerto Rico (or the assets of such entities or groups of affiliated entities), provided
that the Consumer Finance Business of any such entity or group of affiliated entities in Puerto
Rico does not constitute (as of the date of the last available financial statements of such entity
or group of affiliated entities prior to execution of a definitive agreement for an acquisition)
greater than ten percent (10%) of the consolidated assets and revenues of such entity or group of
affiliated entities.




          (f) Nothing in this Section 6.13 will prohibit Wells Fargo or its Affiliates from: (i)
acquiring and owning securities representing in the aggregate not more than five percent (5%) of
the voting power of any publicly traded entity (including any such entity that is engaged in the
Consumer Finance Business); (ii) acquiring and owning as a passive investor (and not with the
purpose or effect of (A) changing or influencing the control of the issuer or (B) transferring
knowledge or providing expertise to the issuer to assist it in competing with the Consumer Finance
Business of Purchaser) securities representing in the aggregate more than five percent (5%) of the
voting power of any publicly traded entity (including any such entity that is engaged in the
Consumer Finance Business) under circumstances that would not require the filing of a Schedule 13D
with the United States Securities and Exchange Commission; (iii) acquiring securities of any entity
(including any entity that is engaged in the Consumer Finance Business) in satisfaction of debt,
and owning any securities acquired in such manner; or (iv)




40









 








acquiring and owning securities in a fiduciary capacity or in the ordinary conduct of a
broker-dealer business.



          (g) If a court construes the covenant in this Section 6.13, or any part thereof, to be
unenforceable because of its duration or the area covered thereby, the court shall reduce the
duration or the area to the extent necessary so that the provision, as reduced, shall then be
enforceable.




          6.14 No Exchange of Customer Information. Wells Fargo, the Sellers and their
Affiliates represent and agree that neither Wells Fargo, the Sellers nor any of their Affiliates
(i) have, since March 1, 2005, shared or exchanged any past or current customer names, addresses
and/or any other customer information (such as customer preferences and pricing information, or any
other customer contact information), customer lists or other customer-related documents of the
Island Finance Business (collectively, the “Customer Information”) with the Reliable Entities or
(ii) will share or exchange any Customer Information with the Reliable Entities or any other
Affiliate of Wells Fargo (including Affiliates of Wells Fargo engaged in Incidental Consumer
Finance Activities), the Sellers or the Reliable Entities or any other person or entity, except as
may be required by Applicable Law or in connection with a sale or potential sale of Excluded
Receivables or Excluded Charge Off Accounts (provided that such Customer Information shall be
limited to that relating exclusively to Excluded Receivables or Excluded Charge Off Accounts).




          6.15 Agreements Not to Solicit Employees.




          (a) For a period of thirty-six (36) months from the Closing Date, neither Wells Fargo nor any
of its Affiliates will hire or solicit to hire (i) any Transferred Employee (other than a
Transferred Employee (other than a member of Senior Management) whose employment by the Purchaser
and its Affiliates has been terminated or has otherwise ceased for a period of sixty (60) or more
consecutive days) or (ii) any member of Senior Management (other than a member of Senior Management
whose employment by the Purchaser and its Affiliates has been terminated or has otherwise ceased
for a period of ninety (90) or more consecutive days) or (iii) cause or seek to cause any
Transferred Employee (including a member of Senior Management) to leave the employ of Purchaser or
its Affiliates. For purposes of this Section 6.15(a), “Senior Management” shall mean the persons
listed on Annex 6.15(a).




          (b) For a period of twenty-four (24) months from the Closing Date, Wells Fargo and its
Affiliates and Purchaser and its Affiliates agree not to hire or solicit to hire any person
employed by the other party and/or its Affiliates who is listed on Annex 6.15(b) (an
“Introduced Employee”) (other than an Introduced Employee whose employment by the other party or
any of its Affiliates has been terminated or has otherwise ceased for a period of sixty (60) or
more consecutive days) or cause or seek to cause any Introduced Employee to leave the employ of the
other party or any of its Affiliates. Notwithstanding the foregoing, the restrictions in this
Section 6.15(b) shall only apply to those hiring managers who have devoted significant substantive
attention to the transactions contemplated by this Agreement; provided, however,
that such persons shall not facilitate or assist any other person in engaging in any conduct
otherwise prohibited by this Section 6.15(b) (other than hiring recommendation approvals by




41









 








persons who have devoted significant substantive attention to the transactions contemplated by
this Agreement, as long as such persons have not otherwise engaged in conduct otherwise prohibited
by this Section 6.15(b)).



          6.16 Injunctive Relief. The parties acknowledge that the remedy at law for breaches
of the provisions of Sections 6.13, 6.14 and 6.15 will be inadequate and that, in addition to any
other remedy the other parties may have, Wells Fargo, the Sellers and their Affiliates (including
the Reliable Entities), and Purchaser and its Affiliates, as applicable, shall be entitled to an
injunction restraining any such breach, without any bond or other security being required.




          6.17 Confidentiality. Wells Fargo will hold in confidence all documents and
information concerning Purchaser and its Affiliates furnished to it by or on behalf of Purchaser on
terms and subject to conditions equivalent to those set forth in the Confidentiality Agreement with
respect to documents and information concerning Wells Fargo and its Affiliates furnished to
Purchaser.




          6.18 Municipal License and Property Taxes. Notwithstanding anything to the contrary
herein, neither Wells Fargo nor the Sellers shall seek, claim or be entitled to any refund or other
payment from Purchaser relating to or in respect of any prorated benefit derived by Purchaser from
the Sellers’ payment prior to the Closing of any municipal license and property Taxes for any
fiscal year; provided, however, that the foregoing shall in no way affect the
rights of either Seller or any Affiliate thereof with respect to any refund related to any such
municipal license or property Taxes.




          6.19 Special Tax Reimbursement.




          (a) Wells Fargo and the Sellers, jointly and severally, agree to reimburse Purchaser up to the
Maximum Special Tax Reimbursement Amount in accordance with Section 6.19(b) for all amounts paid by
Purchaser in respect of the operation of the Island Finance Business during Purchaser’s fiscal year
ending December 31, 2006 pursuant to (i) the 2.5% special income tax imposed by Puerto Rico Act No.
41 of August 1, 2005 and (ii) any temporary special income tax that may be imposed by the
Government of the Commonwealth of Puerto Rico upon corporations or financial institutions
(collectively, such special income taxes being referred to herein as the “Special 2006 Income
Taxes”). For purposes hereof, “Maximum Special Tax Reimbursement Amount” means the product of (i)
Eight Hundred Thousand United States Dollars (US$800,000.00), multiplied by (ii) a fraction, (A)
the numerator of which is the actual number of days elapsed between the Closing Date and December
31, 2006, and (B) the denominator of which is Three Hundred Sixty-Five (365).




          (b) Within twenty (20) Business Days following the filing of Purchaser’s Puerto Rico income
tax returns for its fiscal year ended December 31, 2006, which returns shall be filed within the
time period prescribed by applicable law (after giving effect to permitted extensions), Purchaser
shall deliver to Wells Fargo a copy of such tax returns and a written notice setting forth the
amount of the Special 2006 Income Taxes paid by Purchaser and summarizing the computation thereof
(the “Special Tax Notice”). Absent manifest error, and subject to the maximum aggregate amount
limitation in Section 6.19(a), Wells Fargo (or an




42









 








Affiliate) shall pay the amount of the Special 2006 Income Taxes set forth on the Special Tax
Notice within ten (10) Business Days following receipt thereof. Such payment shall be made by wire
transfer of U.S. Dollars in immediately available funds to such account as Purchaser shall
designate on the Special Tax Notice. Purchaser agrees that any refund with respect to the Special
2006 Income Taxes subsequently received by Purchaser or any Affiliate or successor of Purchaser
will be promptly paid to Wells Fargo or such Affiliate(s) of Wells Fargo as Wells Fargo directs.



          6.20 Treatment of Certain Records after the Closing. (a) After the Closing,
Purchaser shall promptly notify Wells Fargo following any discovery that Purchaser or any of its
Affiliates received in connection with the transactions contemplated hereby and is in possession of
any Records or other information not included in the Purchased Assets (including Records, Contracts
or Contract Files relating to the International Business, the Excluded Receivables or the Excluded
Charge Off Accounts) and shall, at the election of Wells Fargo, destroy such Records or information
or return such Records or information to Wells Fargo or such Affiliate(s) of Wells Fargo as Wells
Fargo directs. Further, Purchaser agrees that it and its Affiliates: (i) unless otherwise required
by applicable law, shall hold any such Records or other information in strict confidence and shall
not disclose any such Records or other information to any other person, entity or Governmental
Authority; (ii) shall not use any such Records or other information to the detriment of the
business of Wells Fargo or its Affiliates (including the International Business); and (iii) shall
use commercially reasonable efforts to attempt to locate any such Records upon the request of Wells
Fargo or a Seller.




          (b) After the Closing, Wells Fargo shall promptly notify Purchaser following any discovery
that Wells Fargo or any of its Affiliates is in possession of any Records or other information
related to the Island Finance Business (other than such Records or other information that
constitute Excluded Assets) and shall, at the election of Purchaser, destroy such Records or
information or deliver such Records or information to Purchaser or such Affiliate(s) of Purchaser
as Purchaser directs; provided, however, that Wells Fargo need not notify Purchaser
of its or any of its Affiliates’ possession of, or deliver or destroy, any such Records or
information: (i) that are required by Applicable Law to be retained by Wells Fargo or any of its
Affiliates (including Sellers); or (ii) that are necessary in connection with the performance by
Wells Fargo or any of its Affiliates of services or other obligations under this Agreement or any
Ancillary Agreement. Further, Wells Fargo agrees that it and its Affiliates: (A) unless otherwise
required by applicable law, shall hold any such Records or other information in strict confidence
and shall not disclose any such Records or other information to any other person, entity or
Governmental Authority; (B) shall not use any such Records or other information to the detriment of
the Consumer Finance Business of Purchaser; and (C) shall use commercially reasonable efforts to
attempt to locate any such Records upon the request of Purchaser.




          6.21 Payments on Excluded Receivables and Excluded Charge Off Accounts. Purchaser
agrees that any payments, proceeds (including insurance policy proceeds) or refunds received by
Purchaser in respect of the Excluded Receivables and Excluded Charge Off Accounts after the Closing
are the property of the applicable Seller and shall be forwarded to the applicable Seller in
accordance with this Section 6.21. Purchaser agrees that it shall accept payments, proceeds
(including insurance policy proceeds) or refunds in respect of the Excluded




43









 








Receivables and the Excluded Charge Off Accounts on behalf of the Sellers after the Closing.
Any such payments, proceeds (including insurance policy proceeds) or refunds in respect of the
Excluded Receivables and the Excluded Charge Off Accounts received by Purchaser after the Closing
shall be delivered by Purchaser to the applicable Seller on a monthly basis no later than fifteen
(15) calendar days following the end of each month in which any such payments, proceeds (including
insurance policy proceeds) or refunds are received by Purchaser. After the Closing Date, Purchaser
will provide Sellers with monthly reports listing payments, proceeds (including insurance policy
proceeds) and refunds received by Purchaser in respect of the Excluded Receivables and Excluded
Charge Off Accounts. Purchaser and Sellers agree to cooperate with one another to develop and put
in place processes and systems to facilitate the identification of payments, proceeds (including
insurance policy proceeds) or refunds received in respect of the Excluded Receivables and Excluded
Charge Off Accounts and Purchaser’s performance of the obligations set forth in this Section 6.21.



ARTICLE VII

EMPLOYEE MATTERS




          7.1 Employees. (a) Section 7.1(a) of the Sellers Disclosure Schedule sets forth a
complete list of all Employees as of the date hereof, including active Employees and those
Employees on vacation, family leave, medical or sick leave, pregnancy leave, military leave, leave
of absence, short term disability, long term disability, workers’ compensation, or lay off
(collectively, “Temporary Leave”). Wells Fargo and the Sellers will supplement and update Section
7.1(a) of the Sellers Disclosure Schedule in accordance with Section 6.8 hereof.




          (b) Except for those Employees listed on Annex 7.1(b), Wells Fargo and the Sellers
shall cause all Employees (including active Employees and Employees on Temporary Leave) employed
immediately prior to the Closing to be terminated without severance as of the Closing Date.
Effective as of the date immediately following the Closing Date (the “Effective Benefits Date”),
Purchaser shall offer employment to all such Employees (other than those Employees listed on
Annex 7.1(b)) upon the terms and conditions described below. Purchaser shall offer each
such Employee a base salary or an hourly wage and commissions (if any) that are at least equivalent
to the base salary or hourly wage and commissions (if any) paid to such Employee immediately prior
to the Closing; provided, however, that Purchaser shall offer any such Employee on
Temporary Leave a base salary or an hourly wage and commissions (if any) that are at least
equivalent to the base salary or hourly wage and commissions (if any) paid to such Employee
immediately prior to such time as he or she went on Temporary Leave. All Employees who accept such
offers of employment are referred to herein as “Transferred Employees.”




          (c) Reserved.




          (d) On the Effective Benefits Date, Purchaser agrees to provide the Transferred Employees with
employee benefit plans, arrangements and programs described on Annex 7.1(d) hereto.




44









 








          (e) To the extent that service is relevant for purposes of eligibility, vesting, benefit
accrual, benefit contributions, benefit calculations or allowances (including, without limitation,
entitlement to vacation and sick days) under any employee benefit plan, program or arrangement
established or maintained by Purchaser for the benefit of Transferred Employees, such plan, program
or arrangement shall credit such Transferred Employees for service on or prior to the Closing Date
with the Sellers or their Affiliates; provided, that Purchaser shall not be obligated to
give credit for such service to the extent it (i) would result in duplication of any benefits to
which a Transferred Employee is entitled to or had previously received under any comparable plans,
programs or arrangements maintained by the Sellers on or prior to the Closing Date or by Purchaser
after the Closing Date, or (ii) was not service which was recognized for purposes of such
comparable plans, programs or arrangements.




          (f) Notwithstanding the foregoing, except as expressly stated within this Agreement, nothing
contained in this Agreement shall (i) restrict or otherwise inhibit the rights of Purchaser to
terminate the employment of any Transferred Employee on or after the Effective Benefits Date or
(ii) be construed or interpreted to restrict any party’s right or authority to amend or terminate
any of its employee benefit plans, policies, arrangements or programs effective on or after the
Effective Benefits Date.




          7.2 Defined Benefit Pension Plan. Effective as of the Closing Date, the Employees who
were immediately prior to the Closing Date participants in the Puerto Rico Financial Retirement
Plan (the “Defined Benefit Pension Plan”) shall be treated as having terminated employment with the
Sellers and their Affiliates and shall no longer accrue benefits under the Defined Benefit Pension
Plan. The Sellers shall have taken all such action prior to the Closing Date as may be required to
achieve this result.




          7.3 Savings Plan. Subject to and in accordance with the terms of the Puerto Rico
Financial Investment and Savings Plan (the “Savings Plan”), as soon as practicable following the
Closing Date, the Sellers or their Affiliates, as applicable, will spin-off and transfer the
account balances (including loan accounts and liabilities) of each Transferred Employee who was
immediately prior to the Closing Date a participant in the Savings Plan to a savings plan
maintained by Purchaser, in a trustee-to-trustee transfer. Purchaser will use its best efforts to
obtain a determination letter with respect to such savings plan from the Puerto Rico Treasury
Department as soon as reasonably practicable following the date hereof.




          7.4 Employee Welfare Benefit Plans and Group Insurance Contracts.




          (a) Purchaser shall establish or cause to be established, effective as of the Closing Date,
employee welfare benefit plans and/or group insurance contracts in accordance with the provisions
of Section 7.1(d).




          (b) Wells Fargo and the Sellers shall be responsible for payment of any premiums under
employee welfare benefits and group insurance contracts for the Transferred Employees relating to
periods prior to the 12:00:01 AM of the Effective Benefits Date, (the “Effective Benefits Time”)
and for any liability for all claims, expenses and treatments, including administrative expenses
related thereto, which are in fact covered and payable under




45









 








the terms of such employee welfare benefits plans and group insurance contracts and incurred
prior to the Effective Benefits Time, irrespective of whether any such claim is filed or submitted
before or after the Effective Benefits Time.



          (c) Purchaser shall be responsible for payment of any premiums relating to periods from and
subsequent to the Effective Benefits Time, for Purchaser’s employee welfare benefits plans and
group insurance contracts and for any liability for all claims, expenses and treatments, including
administrative expense related thereto, which are in fact covered and payable under the terms of
Purchaser’s employee welfare benefits plans and group insurance contracts, as such terms may exist
from time to time, and incurred from and subsequent to the Effective Benefits Time.




          (d) With respect to the employee welfare benefits plans and group insurance contracts of
Purchaser, Purchaser shall cause the waiver for Transferred Employees and their eligible dependents
of (regardless whether the restriction waived is imposed by Purchaser or its insurers) (i) any
eligibility waiting periods and (ii) any pre-existing conditions and actively-at-work exclusions;
except that Purchaser may require any Transferred Employee or eligible dependent thereof who, as of
the Closing Date, is then in the process of satisfying any similar exclusion or waiting period
under the applicable employee welfare benefits plans or group insurance contracts of Wells Fargo or
the Sellers to fully satisfy the balance of the applicable time period for such exclusion or
waiting period under the employee welfare benefits plans and group insurance contracts of
Purchaser.




          (e) With respect to the calendar year in which the Closing Date occurs, all medical and dental
expenses incurred with respect to any Transferred Employee and/or eligible dependents thereof in
the portion of such calendar year immediately preceding the Effective Benefits Date shall be taken
into account for purposes of satisfying any deductible under the medical and dental coverage of the
employee welfare benefits plans and group insurance contacts of Purchaser for such calendar year
provided any such expenses were qualified to be taken into account for purposes of satisfying any
deductible under the applicable employee welfare benefits plans or group insurance contracts of
Wells Fargo or the Sellers. Wells Fargo agrees to provide to Purchaser, as soon as practicable
following the Closing Date, information regarding medical and dental expenses necessary for
Purchaser to administer this provision.




          (f) Reserved.




          (g) Wells Fargo or the Sellers shall provide any benefits to which any former Employee
(including a Transferred Employee) or his or her spouses, former spouses or other qualifying
beneficiaries, may be entitled, as of the Closing Date, by reason of qualifying events occurring on
or prior to the Closing Date, by virtue of any provision of any employee welfare benefit plan or
group insurance contract or any laws, statutes or regulations requiring any continuation of benefit
coverage upon the happening of certain events, such as the termination of employment or change in
beneficiary or dependent status, including without limitation, with respect to the United States,
such requirements under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
(known as “COBRA”), from and after the Effective Benefits Date through the remaining period of
required coverage.




46









 








          7.5 Severance; Reimbursement for Severance Payments.




          (a) In the event the employment of any Transferred Employee with Purchaser terminates within
the period of fifteen (15) months after the Closing Date, Purchaser (or an Affiliate of Purchaser)
shall pay and provide severance, notice and termination pay benefits calculated and determined in
accordance with the policies and practices of Purchaser, which policies and practices have been
disclosed by Purchaser to Wells Fargo prior to the date hereof.




          (b) Wells Fargo and the Sellers, jointly and severally, agree to reimburse Purchaser up to a
maximum aggregate amount of Two Million Four Hundred Sixty Five Thousand United States Dollars
(US$2,465,000.00) in accordance with Section 7.5(c) for all severance and termination pay benefits
paid by Purchaser (or its Affiliates) in accordance with Section 7.5(a) to any Transferred Employee
whose employment with Purchaser terminates during such fifteen (15) month period for reasons other
than cause.




          (c) Within fifteen (15) days following the end of each of the first fifteen (15) calendar
months following the Closing Date, Purchaser shall deliver to Wells Fargo a notice (a “Severance
Reimbursement Notice”) setting forth (i) the name and date of termination of each Transferred
Employee whose employment with Purchaser terminated during such month for reasons other than cause,
(ii) the amount of severance and termination pay benefits (if any) paid by Purchaser (or an
Affiliate of Purchaser) pursuant to Section 7.5(a) to each such Transferred Employee during such
month, and (iii) the aggregate amount of all severance and termination pay benefits paid by
Purchaser (or its Affiliates) pursuant to Section 7.5(a) to all such Transferred Employees during
such month. Absent manifest error, and subject to the maximum aggregate amount limitation in
Section 7.5(b), Wells Fargo (or an Affiliate) shall pay the aggregate amount of severance and
termination pay benefits set forth on a Severance Reimbursement Notice within five (5) Business
Days following receipt thereof. Such payment shall be made by wire transfer of U.S. Dollars in
immediately available funds to such account as Purchaser shall designate on the Severance
Reimbursement Notice.




          7.6 Reserved




          7.7 Reserved




          7.8 Accrued Vacation and Sick Leave.




          (a) Immediately prior to the Closing, the Sellers will pay to each Exempt Transferred Employee
the amount associated with any accrued vacation days of such Exempt Transferred Employee in excess
of ten (10). At the Closing, the Sellers will pay to Purchaser, in respect of each Exempt
Transferred Employee, the amount associated with up to ten (10) accrued vacation days of such
Exempt Transferred Employee (provided, that if such Exempt Transferred Employee has fewer than ten
(10) accrued vacation days under the employee benefit plans, programs and arrangements of Sellers
immediately prior to the Closing, such payment will be equal to the amount associated with the
actual number of accrued vacation days of such Exempt Transferred Employee under the employee
benefit plans, programs and arrangements of Sellers




47









 








immediately prior to the Closing). On the Effective Benefits Date, Purchaser shall cause each
Exempt Transferred Employee to be credited under its employee benefit plans, arrangements and
programs with the number of days of accrued vacation that is equal to the lesser of (x) the number
of days of accrued vacation of such Exempt Transferred Employee under the employee benefit plans,
programs and arrangements of Sellers immediately prior to the Closing or (y) ten (10) days of
accrued vacation.



In addition, at the Closing, the Sellers will pay to Purchaser, in respect of each Non-Exempt
Transferred Employee, the amount associated with the actual number of accrued vacation days of such
Non-Exempt Transferred Employee under the employee benefit plans, programs and arrangements of
Sellers immediately prior to the Closing. On the Effective Benefits Date, Purchaser shall cause
each such Non-Exempt Transferred Employee to be credited under its employee benefit plans,
arrangements and programs with the number of days of accrued vacation that is equal to the number
of days of accrued vacation of such Non-Exempt Transferred Employee under the employee benefit
plans, programs and arrangements of Sellers immediately prior to the Closing.



          (b) On the Effective Benefits Date, Purchaser shall cause each Transferred Employee to be
credited under its employee benefit plans, arrangements and programs with the number of days of
accrued sick leave that is equal to the lesser of (i) the number of days of accrued sick leave of
such Transferred Employee under the employee benefit plans, programs and arrangements of Sellers
immediately prior to the Closing or (ii) fifteen (15) days of accrued sick leave.




          (c) Not less than three (3) nor more than ten (10) Business Days prior to the Closing Date,
Sellers shall provide to Purchaser a document setting forth: (i) the number of days of accrued
vacation and the number of days of accrued sick leave for each of the Transferred Employees; and
(ii) an indication as to whether each such Transferred Employee is an Exempt Transferred Employee
or a Non-Exempt Transferred Employee. The Sellers shall cooperate with the Purchaser to ensure
that the correct number of days of accrued vacation and accrued sick leave are credited to the
Transferred Employees pursuant to Sections 7.8(a) and 7.8(b) hereof.




          (d) Notwithstanding anything to the contrary contained in this Agreement, the obligations of
Purchaser to credit Transferred Employees with accrued vacation and sick leave pursuant to Sections
7.8(a) and 7.8(b) shall not be deemed Excluded Liabilities (under Section 2.1(d)(v) or otherwise)
for which Purchaser is entitled to indemnification or any other right of recovery under this
Agreement; provided, that (i) the foregoing shall not effect the right of Purchaser to
receive the payments described in Section 7.8(a) hereof, and (ii) Purchaser shall be entitled to
indemnification with respect to Damages arising from incorrect information contained in the
document referred to in Section 7.8(c) above. Purchaser’s obligation to credit Transferred
Employees with accrued vacation and sick leave pursuant to Sections 7.8(a) and 7.8(b) shall not
reduce or otherwise impact the Purchase Price.




          (e) For purposes of this Section 7.8: (i) “Exempt Transferred Employee” means a Transferred
Employee who, immediately prior to the Closing, (A) had duties of an executive, professional or
administrative nature, and (B) received a salary that exceeded the




48









 








minimum amount required by Regulation No. 13 of the Puerto Rico Labor Department and 29 CFR
Part 541; and (ii) “Non-Exempt Transferred Employee” means a Transferred Employee that is not an
Exempt Transferred Employee.



          7.9 Benefit Program Participation. Except as specifically provided in this Article
VII, all Transferred Employees will cease participation in all benefit plans and programs of the
Sellers and their Affiliates as of the Closing Date.




          7.10 Information and Data Exchange. Subject to applicable law, Wells Fargo and
Purchaser shall furnish, or shall cause to be furnished to the other, a list of all benefit plan
participants and employee data or information in its (or its Affiliates’) possession which is
necessary for such other party or its Affiliates to maintain and implement any benefit plan or
arrangement covered by this Agreement, or to comply with the provisions of this Agreement, and
which is not otherwise readily available to such other party. Subject to applicable law, each of
Wells Fargo and Purchaser shall have the right, at its own cost and expense, at any reasonable
time, with reasonable intervals, during normal business hours, upon reasonable prior written
notice, to examine employee records in connection with legitimate business purposes, and to audit,
examine and make copies of or extracts from the books, accounts and other records of the other and
its Affiliates in order to verify the accuracy of such records insofar as they are relevant to this
Agreement. Such audit, examination, copying and extracting may be conducted by employees of Wells
Fargo and its Affiliates or Purchaser and its Affiliates or a firm of independent public
accountants or other experts designated by the requesting party; provided that, prior
thereto, such firm delivers to the party to be audited an appropriate confidentiality agreement.




          7.11 Indemnification.




          (a) Purchaser shall hold harmless, indemnify and defend Wells Fargo and the Sellers from and
against any and all costs, expenses, claims, damages, lawsuits, reasonable attorneys’ and
accountants’ fees and costs, losses, deficiencies, assessments, administrative orders, fines,
penalties, actions, Proceedings, judgments, liabilities and obligations of any kind or description
(a “Claim” or “Claims”) asserted against, incurred or required to be paid by Wells Fargo or either
Seller (regardless of when asserted or by whom), associated with or arising under any employee
benefit plan, policy, program or arrangement established, adopted or made applicable to the
Transferred Employees by Purchaser effective on or after the Closing Date or any liability of
Purchaser with respect to Transferred Employees pursuant to the terms and conditions set forth in
this Agreement.




          (b) Wells Fargo and the Sellers shall hold harmless, indemnify and defend Purchaser from and
against any and all Claims, asserted against, incurred or required to be paid by Purchaser
(regardless of when asserted or by whom), associated with or arising under any employee benefit
plan, policy, program or arrangement maintained by Wells Fargo or either Seller applicable to
Employees and not expressly assumed by Purchaser pursuant to this Agreement, regardless of whether
such Claim is asserted before, on or after the Effective Benefits Date.




49









 








ARTICLE VIII

CONDITIONS TO THE CLOSING




          8.1 Conditions to the Obligations of Each Party. The respective obligations of
Purchaser, Wells Fargo and the Sellers hereunder are subject to the satisfaction or waiver, at or
prior to the Closing Date, of the following conditions:




          (a) No Injunction. At the Closing Date, there shall be no (i) injunction, restraining
order or decree of any nature of any court or Governmental Authority of competent jurisdiction in
effect that restrains or prohibits the purchase of the Purchased Assets, or the assumption of the
Assumed Liabilities, hereunder, (ii) pending Proceeding brought by any Governmental Authority which
seeks to restrain or prohibit the purchase of the Purchased Assets, or the assumption of the
Assumed Liabilities, hereunder, or (iii) pending or threatened Proceeding before any court or
Governmental Authority wherein an unfavorable decision could reasonably be expected to adversely
affect the ability of Purchaser to own or operate the Island Finance Business in a manner
substantially similar to the manner in which it is conducted by the Sellers as of the Closing Date.




          (b) Regulatory Authorizations. All licenses, consents, authorizations, orders or
approvals of each Governmental Authority listed in Sections 4.4(a) and 5.4(a) of the Sellers
Disclosure Schedule and the Purchaser Disclosure Schedule, respectively, shall have been obtained
and any applicable waiting periods in respect thereof (including all applicable waiting periods
specified under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) shall have
expired or been terminated, except for such licenses, consents, authorizations, orders and
approvals the failure of which to have been obtained would not (i) reasonably be expected to affect
Purchaser’s ability to operate the Island Finance Business in a manner substantially similar to the
manner in which it is conducted by the Sellers as of the Closing Date; or (ii) prohibit the
purchase of the Purchased Assets, or the assumption of the Assumed Liabilities, by Purchaser
hereunder.




          (c) Subscriber Agreement. A subscriber agreement relating to SUPREME, the system of
record of the Island Finance Business, and You Owe Me (YOM), a debt collection system utilized by
the Island Finance Business, substantially in the form attached hereto as Exhibit C (the
“Subscriber Agreement”) shall have been executed and delivered by the parties thereto.




          (d) Assignment and Assumption Agreement. An assignment and assumption agreement
relating to the Contracts included in the Purchased Assets substantially in the form attached
hereto as Exhibit D (the “Assignment and Assumption Agreement”) shall have been executed
and delivered by the parties thereto.




          (e) Lease Assignment and Assumption Agreements. Lease assignment and assumption
agreements relating to not less than eighty percent (80%) of the Facilities included in




50









 








the Purchased Assets substantially in the form attached hereto as Exhibit E (the
“Lease Assignment and Assumption Agreements”) shall have been executed and delivered by Island
Finance PR, Purchaser, and, to the extent required by the terms of the applicable Lease, the
lessor.



          (f) Transition Agreement. A transition agreement substantially in the form of attached
hereto as Exhibit F (the “Transition Agreement”) shall have been executed and delivered by
the parties thereto.




          (g) Servicing Management Agreement. A servicing management agreement, substantially
in the form attached hereto as Exhibit G (the “Servicing Management Agreement”), shall have
been executed and delivered by the parties thereto.




          8.2 Additional Conditions to the Obligations of Purchaser. The obligation of Purchaser
to consummate the transactions contemplated by this Agreement is subject to the satisfaction or
waiver, at or prior to the Closing Date, of each of the following additional conditions:




          (a) Representations and Warranties. The representations and warranties of Wells Fargo
and the Sellers contained in this Agreement that are not made subject to a “materiality” or
“Material Adverse Effect” qualification shall be true and correct in all material respects as of
the Closing as though made at and as of the Closing, and the representations and warranties of
Wells Fargo and the Sellers contained in this Agreement that are made subject to a “materiality” or
“Material Adverse Effect” qualification shall be true and correct in all respects as of the Closing
as though made at and as of the Closing; provided, that, to the extent that any
representation and warranty is made as of a specified date other than the Closing Date, such
representation and warranty shall be true and correct in all material respects (if not subject to a
“materiality” or “Material Adverse Effect” qualification) or true and correct in all respects (if
subject to a “materiality” or “Material Adverse Effect” qualification) as of such date.




          (b) Performance of Covenants. Wells Fargo and the Sellers shall have performed and
complied in all material respects with all covenants and conditions contained in this Agreement to
be performed or complied with by them prior to or at the Closing.




          (c) Certificate. Purchaser shall have received a certificate of Wells Fargo, dated the
Closing Date, executed on behalf of Wells Fargo, to the effect that the conditions specified in
paragraphs (a), (b) and (d) of this Section 8.2 have been fulfilled.




          (d) No Material Adverse Change. Since the date of this Agreement, no change or
development in or affecting the business or operations of the Island Finance Business shall have
occurred which, individually or in the aggregate, has had, or would reasonably be expected to have,
a Material Adverse Effect.




          (e) No Calamity. The Island Finance Business considered as a whole shall not have
sustained since the date of this Agreement any material loss or interference with its




51









 








business from any civil disturbance or any fire, explosion, flood or any other calamity or
natural disaster, whether or not covered by insurance.



          (f) Burdensome Regulatory Requirements. None of the licenses, consents,
authorizations, orders or approvals referred to in Section 8.1(b) shall contain any condition or
requirement relating to the Island Finance Business that, in the good faith judgment of Purchaser,
is unreasonably burdensome to Purchaser.




          (g) Consents. All consents from any third party pursuant to the terms of any Material
Contract included in the Purchased Assets to consummate the transactions contemplated hereby
(including the assignment and assumption of such Contract) shall have been duly obtained without
any material condition adverse to Purchaser, except as the parties may otherwise agree.




          (h) Bill of Sale. The Sellers shall have executed and delivered to Purchaser a bill
of sale relating to the Tangible Personal Property substantially in the form attached hereto as
Exhibit H (the “Bill of Sale”).




          (i) Other Instruments of Transfer. Wells Fargo or the Sellers shall have executed (if
necessary) and delivered such other deeds, assignments, certificates of title and instruments of
transfer and conveyance as have been reasonably requested by Purchaser, each in form and substance
reasonably satisfactory to Purchaser.




          8.3 Additional Conditions to the Obligations of Wells Fargo and the Sellers. The
obligation of Wells Fargo and the Sellers to consummate the transactions contemplated by this
Agreement is subject to the satisfaction or waiver, at or prior to the Closing Date, of each of the
following additional conditions:




          (a) Representations and Warranties. The representations and warranties of Purchaser
contained in this Agreement shall be true and correct in all material respects as of the Closing as
though made at and as of the Closing, except to the extent that any representation and warranty is
made as of a specified date other than the Closing Date, in which case such representation and
warranty shall be true and correct in all material respects as of such date.




          (b) Performance of Covenants. Purchaser shall have performed and complied in all
material respects with all covenants and conditions contained in this Agreement to be performed or
complied with by Purchaser prior to or at the Closing.




          (c) Certificate. Wells Fargo shall have received a certificate of Purchaser, dated the
Closing Date, executed on behalf of Purchaser, to the effect that the conditions specified in
paragraphs (a) and (b) above have been fulfilled.





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ARTICLE IX

TERMINATION, AMENDMENT AND WAIVER




     9.1 Termination. This Agreement may be terminated and the transactions contemplated
hereby abandoned at any time prior to the Closing Date:



     (a) By mutual written consent of Wells Fargo, the Sellers and Purchaser;



     (b) By Wells Fargo and the Sellers upon written notice given to Purchaser in the event of a
breach or default in the performance by Purchaser of any representation, warranty, covenant or
agreement contained in this Agreement which breach or default (i) is, either individually or in the
aggregate, material in the context of the transactions contemplated hereby, and (ii) has not been,
or cannot be, cured within thirty (30) days after written notice of such breach or default,
describing such breach or default in reasonable detail, is given by Wells Fargo and the Sellers to
Purchaser;



     (c) By Purchaser upon written notice given to Wells Fargo and the Sellers in the event of a
breach or default in the performance by Wells Fargo or the Sellers of any representation, warranty,
covenant or agreement contained in this Agreement which breach or default (i) is, either
individually or in the aggregate, material in the context of the transactions contemplated hereby,
and (ii) has not been, or cannot be, cured within thirty (30) days after written notice of such
breach or default, describing such breach or default in reasonable detail, is given by Purchaser to
Wells Fargo and the Sellers;



     (d) By Wells Fargo and the Sellers upon written notice to Purchaser, or by Purchaser upon
written notice to Wells Fargo and the Sellers, in the event that any Governmental Authority
(including any court of competent jurisdiction) shall have issued an order, decree or ruling or
taken any other official action enjoining or otherwise prohibiting the transactions contemplated by
this Agreement or denying approval of any application or notice for approval to consummate the
transactions contemplated hereby, and such order, decree, ruling or other action shall have become
final and non-appealable;



     (e) By Wells Fargo and the Sellers upon written notice to Purchaser, or by Purchaser upon
written notice to Wells Fargo and the Sellers, in the event that the Closing shall not have taken
place on or before June 30, 2006, provided that the failure of the Closing to occur on or
before such date is not the result of a breach of any covenant, agreement, representation or
warranty hereunder by the party or parties seeking such termination.



     9.2 Effect of Termination. In the event of the termination of this Agreement as
provided above, this Agreement (other than this Section) shall become void and of no further force
and effect and, other than in the event of a termination pursuant to Section 9.1(b) or 9.1(c) as a
result of a willful breach or default by the non-terminating party or parties, there shall be no
duties, liabilities or obligations of any kind or nature whatsoever on the part of any party hereto
to the other parties based either upon this Agreement or the transactions contemplated hereby,
except that the representations and obligations of the parties referred to in Sections 4.16, 5.5
and 13.6 shall continue to apply following any such termination of this Agreement. In the event of



53









 







the termination of this Agreement pursuant to Section 9.1(b) or 9.1(c) as a result of a
willful breach or default by the non-terminating party or parties, the terminating party or parties
shall be indemnified by the non-terminating party or parties and shall have the right to sue the
non-terminating party or parties for any and all Damages sustained or incurred as a result of such
termination.



ARTICLE X

INDEMNIFICATION BY WELLS FARGO




     10.1 Indemnification. In addition to and not in limitation of the indemnities
provided in Section 7.11(b) (which Section sets forth the exclusive remedy of Purchaser in respect
of the matters covered thereby), from and after the Closing Date, subject to the other provisions
of this Article X, Wells Fargo agrees to indemnify Purchaser, its Affiliates and their respective
officers, directors and employees (collectively, the “Indemnified Purchaser Entities”) and to hold
each of them harmless from and against, and agrees to assume liability for, any and all
Proceedings, demands, assessments, judgments, claims, liabilities, losses, costs, damages or
expenses, including interest, penalties, and reasonable attorneys’ fees, expenses and disbursements
in connection with any Proceeding against such person or entity (but excluding loss of profits or
other consequential damages and net of any Tax benefit) (collectively, “Damages”), suffered, paid
or incurred by such Indemnified Purchaser Entity resulting from, caused by, or in connection with:
(a) any breach of any of the representations and warranties made by Wells Fargo and Sellers to
Purchaser in this Agreement (provided, that, for purposes of this Section 10.1(a), the
determination of whether such breach has occurred will disregard (i) “materiality” or “Material
Adverse Effect” qualifiers and (ii) “knowledge” qualifiers, other than those involving knowledge of
acts, activities or omissions or contemplated or threatened acts, activities or omissions of third
parties (including, without limitation, Governmental Authorities); (b) any breach by Wells Fargo or
the Sellers of any covenant or agreement of Wells Fargo or the Sellers contained in this Agreement;
or (c) any of the Excluded Liabilities, including but not limited to all Liabilities related to the
pending Proceedings described in Sections 4.8 and 4.15 of the Sellers Disclosure Schedules.



     10.2 Indemnification Procedures, Etc.



     (a) If an Indemnified Purchaser Entity believes that a claim, demand or other circumstance
exists that has given or may reasonably be expected to give rise to a right of indemnification
under this Article X (whether or not the amount of Damages relating thereto is then quantifiable),
such Indemnified Purchaser Entity shall promptly assert its claim for indemnification by giving
written notice thereof (a “Claim Notice”) to Wells Fargo. Each Claim Notice shall describe the
claim in reasonable detail. The failure to so notify Wells Fargo shall not relieve Wells Fargo of
any obligation to indemnify any Indemnified Purchaser Entity unless (and then only to the extent
that) such failure shall have adversely affected Wells Fargo’s ability to defend against, settle or
satisfy any claim to which the Claim Notice relates. Notwithstanding the foregoing, with respect
to claims for indemnification that do not involve a third-party claim (defined below), the
Indemnified Purchaser Entities shall not deliver a Claim Notice with respect to any such claims
unless the aggregate amount of Damages for all claims included within such Claim Notice exceeds One
Hundred Thousand United States Dollars ($100,000.00). Wells



54









 







Fargo shall not assert that any delay in delivering a Claim Notice resulting from the
Indemnified Purchaser Entities’ compliance with the foregoing sentence has adversely affected Wells
Fargo’s ability to defend against, settle or satisfy the claims for indemnification specified
therein.



     (b) If any claim or demand by an Indemnified Purchaser Entity under this Article X relates to
an action or claim filed or made against an Indemnified Purchaser Entity by a third party (a
“third-party claim”), Wells Fargo will have the right to defend such Indemnified Purchaser Entity
against the third-party claim with counsel of its choice reasonably satisfactory to the Indemnified
Purchaser Entity so long as (i) Wells Fargo advises the Indemnified Purchaser Entity in writing of
its election to assume such defense within fifteen (15) Business Days of receipt of the Claim
Notice with respect to such third-party claim (provided, that if the Claim Notice specifies that it
relates to a labor claim subject to summary proceedings legislation, Wells Fargo must advise the
Indemnified Purchaser Entity in writing of its election to assume such defense within five (5)
Business Days), (ii) the third-party claim involves money damages only and does not seek an
injunction or other equitable relief (or the Indemnified Purchaser Entity consents in writing to
Wells Fargo assuming such defense notwithstanding the fact that the third-party claim seeks an
injunction or other equitable relief) and (iii) Wells Fargo conducts the defense of the third-party
claim actively and diligently.



     (c) Notwithstanding anything to the contrary in this Section 10.2: (i) an Indemnified
Purchaser Entity will be entitled to participate in the defense of any third-party claim and to
employ counsel of its choice for such purpose at its own sole cost and expense; and (ii) an
Indemnified Purchaser Entity will be entitled to assume control of the defense of such third-party
claim and Wells Fargo will pay the reasonable fees and expenses of a single counsel retained by
such Indemnified Purchaser Entity (excluding the fees and expenses of the Indemnified Purchaser
Entity’s counsel incurred prior to the date of such assumption of the defense), if: (A) the
Indemnified Purchaser Entity reasonably concludes that such third-party claim could reasonably be
expected to have a materially adverse effect on the business or reputation of Santander; (B) the
Indemnified Purchaser Entity reasonably concludes that there exists a conflict of interest that,
under applicable principles of legal ethics, would prohibit a single legal counsel from
representing both the Indemnified Purchaser Entity and Wells Fargo in such third-party claim, and
such conflict has not been timely waived; (C) the Indemnified Purchaser Entity reasonably concludes
that there are significant and colorable legal defenses available to it that are inconsistent with
those defenses available to Wells Fargo; (D) such third-party claim could involve the imposition of
criminal penalties upon the Indemnified Purchaser Entity; or (E) Wells Fargo either (1) has failed
to give a notice of defense under Section 10.2(b)(i) and timely assume the defense of such
third-party claim or (2) is failing to conduct the defense of such third-party claim actively and
diligently. In the event that an Indemnified Purchaser Entity assumes the defense of a third-party
claim in accordance with the preceding sentence, (x) Wells Fargo will reimburse the Indemnified
Purchaser Entity promptly and periodically for the costs of defending against the third-party claim
(including reasonable fees and expenses of a single counsel), and (y) Wells Fargo will remain
responsible for any Damages the Indemnified Purchaser Entity may suffer resulting from, caused by,
or in connection with the third-party claim to the fullest extent provided in this Article X.



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     (d) So long as Wells Fargo is conducting the defense of the third-party claim in accordance
with Section 10.2(b) or an Indemnified Purchaser Entity is conducting the defense pursuant to any
of Sections 10.2(c)(ii)(A) through 10.2(c)(ii)(D), (i) the Indemnified Purchaser Entity will not
consent to the entry of any judgment on, or enter into any settlement with respect to, the
third-party claim without the prior written consent of Wells Fargo, which consent shall not be
unreasonably withheld, and (ii) Wells Fargo will not consent to the entry of any judgment on, or
enter into any settlement with respect to, the third-party claim without the prior written consent
of the Indemnified Purchaser Entity, which consent shall not be unreasonably withheld, unless such
judgment or settlement involves only the payment of money damages by Wells Fargo and does not
impose an injunction or other equitable relief upon the Indemnified Purchaser Entity. In the event
that an Indemnified Purchaser Entity assumes control of the defense of a third-party claim pursuant
to Section 10.2(c)(ii)(E), the Indemnified Purchaser Entity may defend against, and consent to the
entry of any judgment or enter into any settlement with respect to, a third-party claim in any
manner it reasonably may deem appropriate (and the Indemnified Purchaser Entity need not consult
with, or obtain any consent from, Wells Fargo in connection therewith); provided,
however, that no such judgment or settlement shall impose an injunction or other equitable
relief upon Wells Fargo or any of its Affiliates unless Wells Fargo has consented thereto in
advance in writing.



     (e) If Wells Fargo elects to defend any such third-party claim, then each Indemnified
Purchaser Entity shall make available to Wells Fargo all information reasonably available to such
Indemnified Purchaser Entity relating to such third-party claim. In addition, the parties hereto
shall render to each other such assistance as may reasonably be requested in order to ensure the
proper and adequate defense of any such third-party claim. The party in charge of the defense shall
keep the other party fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto.



     10.3 Limitation on Liability. (a) Notwithstanding anything to the contrary contained
in this Article X, the Indemnified Purchaser Entities shall not be entitled to indemnification
pursuant to this Article X, with respect to any claim for indemnification pursuant to Section
10.1(a):




     (i) until the earlier to occur of (A) the first anniversary of the Closing Date
(“First Anniversary Date”) or (B) the date on which the aggregate Damages to all
Indemnified Purchaser Entities (without duplication), with respect to all claims for
indemnification pursuant to Section 10.1(a) (“Aggregate Purchaser Damages”), exceed
Three Million United States Dollars (US$3,000,000.00) (the “Threshold Amount”),
whereupon (subject to the provisions of clause (iv) below) Wells Fargo shall be
obligated to pay in full all such amounts (including all amounts comprising the
Threshold Amount or such lesser amount of Aggregate Purchaser Damages payable on the
First Anniversary Date, which lesser amount shall be the “Seller First Anniversary
Payment Amount”); provided that in the event that the Threshold Amount has
not been reached by the First Anniversary Date, Wells Fargo shall be obligated to
pay all amounts in excess of the Seller First Anniversary Payment Amount with
respect to Aggregate Purchaser



56









 







Damages on the earlier to occur of (A) the date on which the Threshold Amount
is reached or (B) the second anniversary of the Closing Date;




     (ii) with respect to any claim for indemnification based upon (x) a breach of
any representation and warranty made by Wells Fargo and the Sellers to Purchaser in
this Agreement (other than those in Sections 4.2, 4.5 (for which a claim for
indemnification may be made without any limitation on time), 4.13 and 4.18), the
Claim Notice with respect to which is not received on or before the date that is two
years after the Closing Date, or (y) a breach of any representation and warranty
made by Wells Fargo to Purchaser in Sections 4.13 or 4.18 of this Agreement, the
Claim Notice with respect to which is not received on or before the date that is
sixty (60) days following (1) the date of expiration of the applicable statute of
limitations with respect to the matters to which such claim relates (assuming no
waiver or extension thereof effected in accordance with clause (2) below), or (2) if
Purchaser waives or extends the applicable statute of limitations with the prior
consent of the Wells Fargo, which consent shall not be unreasonably withheld, the
date of final settlement of such open tax period or the end of such extension, as
the case may be;




     (iii) for Damages to the extent such Damages are incurred based on or in
respect of any activities of Purchaser or its Affiliates from and after the Closing
Date; or




     (iv) for aggregate Damages in excess of (x) One Hundred Thirty-Seven Million
United States Dollars (US$137,000,000.00) with respect to all claims for
indemnification pursuant to Section 10.1(a) (other than those based upon a breach of
the representations and warranties made by Wells Fargo and the Sellers to Purchaser
in Sections 4.5 or 4.17), or (y) the amount of the Purchase Price with respect to
all claims for indemnification pursuant to Section 10.1(a) that are based upon a
breach of the representations and warranties made by Wells Fargo and the Sellers to
Purchaser in Sections 4.5 or 4.17.



     (b) Notwithstanding anything contained in Article IV or any other provision of this Agreement
to the contrary, Purchaser understands and agrees that Wells Fargo and the Sellers are not making
any representation or warranty whatsoever, express or implied, other than those representations and
warranties of Wells Fargo and the Sellers expressly set forth in Article IV (including, and as
qualified or modified by, the Sellers Disclosure Schedule) and Section 6.14 hereof.



     (c) Purchaser understands and agrees that any cost estimates, projections, forecasts, or other
predictions which have been or may be provided to Purchaser by or on behalf of Wells Fargo or
either Seller (including in the Confidential Memorandum) are not and shall not be deemed to be
representations or warranties of Wells Fargo or the Sellers. Purchaser acknowledges and agrees that
(i) there are uncertainties inherent in attempting to make such estimates, projections, forecasts
and other predictions, (ii) Purchaser is familiar with such uncertainties, (iii) Purchaser is
taking full responsibility for making its own evaluation of the



57









 







adequacy and accuracy of all estimates, projections, forecasts and other predictions so
furnished to it, and (iv) Purchaser shall have no claim against Wells Fargo or either Seller or any
of their respective officers, directors, Affiliates or agents with respect thereto.



     10.4 General.



     (a) Reserved.



     (b) To the extent that an Indemnified Purchaser Entity is entitled to indemnification with
respect to any claim made under this Article X, Wells Fargo shall be subrogated to any right of
action (other than a right of action against another Indemnified Purchaser Entity) which such
Indemnified Purchaser Entity may have against any other person or entity with respect to any matter
giving rise to such claim for indemnification hereunder.



     (c) The indemnification provided in this Article X shall be the exclusive post-Closing remedy
available to Purchaser with respect to any breach of any representation, warranty, covenant or
agreement made by Sellers to Purchaser in this Agreement, except as to covenants or agreements
contained in Sections 6.6(b), 6.13, 6.14, 6.15 and 6.17 or as otherwise expressly provided in this
Agreement; provided, that (i) this Section 10.4(c) shall not be deemed a waiver by any
party of any right to specific performance or injunctive relief (including, without limitation, the
right of Purchaser to seek injunctive relief pursuant to the terms of Section 6.16), and (ii)
except as set forth in Sections 10.3(b), 10.3(c) and 11.4(d), nothing in this Agreement shall
prohibit or limit any remedy available at law or in equity for any fraud committed or made by any
party in connection with the transactions contemplated by this Agreement.



ARTICLE XI

INDEMNIFICATION BY PURCHASER




     11.1 Indemnification. In addition to and not in limitation of the indemnities
provided in Section 7.11(a) (which Section sets forth the exclusive remedy of Wells Fargo and the
Sellers in respect of the matters covered thereby), from and after the Closing Date, subject to the
other provisions of this Article XI, Purchaser agrees to indemnify Wells Fargo, the Sellers, their
respective Affiliates and their respective officers, directors and employees (collectively, the
“Indemnified Seller Entities”) and to hold each of them harmless from and against, and agrees to
assume liability for, any and all Damages suffered, paid or incurred by such Indemnified Seller
Entity resulting from or caused by: (a) any breach of any of the representations and warranties
made by Purchaser to Wells Fargo and the Sellers in this Agreement (provided, that, for
purposes of this Section 10.1(a), the determination of whether such breach has occurred will
disregard (i) “materiality” or “Material Adverse Effect” qualifiers and (ii) “knowledge”
qualifiers, other than those involving knowledge of acts, activities or omissions or contemplated
or threatened acts, activities or omissions of third parties (including, without limitation,
Governmental Authorities)); (b) any breach by Purchaser of any covenant or agreement of Purchaser
contained in this Agreement; or (c) any of the Assumed Liabilities. For purposes of the indemnity
provided in this Section 11.1 in respect of the matters referred to in clause (c) above,
indemnification payments made by Wells Fargo pursuant to Section 10.1(a) shall not be deemed to be
“Damages suffered, paid or incurred” by an Indemnified Seller Entity.



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     11.2 Indemnification Procedures, Etc.



     (a) If an Indemnified Seller Entity believes that a claim, demand or other circumstance exists
that has given or may reasonably be expected to give rise to a right of indemnification under this
Article XI (whether or not the amount of Damages relating thereto is then quantifiable), such
Indemnified Seller Entity shall promptly assert its claim for indemnification by giving written
notice thereof (a “Claim Notice”) to Purchaser. Each Claim Notice shall describe the claim in
reasonable detail. The failure to so notify Purchaser shall not relieve Purchaser of any obligation
to indemnify any Indemnified Seller Entity unless (and then only to the extent that) such failure
shall have adversely affected Purchaser’s ability to defend against, settle or satisfy any claim to
which the Claim Notice relates. Notwithstanding the foregoing, with respect to claims for
indemnification that do not involve a third-party claim (defined below), the Indemnified Seller
Entities shall not deliver a Claim Notice with respect to any such claims unless the aggregate
amount of Damages for all claims included within such Claim Notice exceeds One Hundred Thousand
United States Dollars ($100,000.00). Purchaser shall not assert that any delay in delivering a
Claim Notice resulting from the Indemnified Seller Entities’ compliance with the foregoing sentence
has adversely affected Purchaser’s ability to defend against, settle or satisfy the claims for
indemnification specified therein.



     (b) If any claim or demand by an Indemnified Seller Entity under this Article XI relates to an
action or claim filed or made against an Indemnified Seller Entity by a third party (a “third-party
claim”), Purchaser will have the right to defend such Indemnified Seller Entity against the
third-party claim with counsel of its choice reasonably satisfactory to the Indemnified Seller
Entity so long as (i) Purchaser advises the Indemnified Seller Entity in writing of its election to
assume such defense within fifteen (15) Business Days of receipt of the Claim Notice with respect
to such third-party claim (provided, that if the Claim Notice specifies that it relates to
a labor claim subject to summary proceedings legislation, Purchaser must advise the Indemnified
Seller Entity in writing of its election to assume such defense within five (5) Business Days),
(ii) the third-party claim involves money damages only and does not seek an injunction or other
equitable relief (or the Indemnified Seller Entity consents in writing to Purchaser assuming such
defense notwithstanding the fact that the third-party claim seeks an injunction or other equitable
relief) and (iii) Purchaser conducts the defense of the third-party claim actively and diligently.



     (c) Notwithstanding anything to the contrary in this Section 11.2: (i) an Indemnified Seller
Entity will be entitled to participate in the defense of any third-party claim and to employ
counsel of its choice for such purpose at its own sole cost and expense; and (ii) an Indemnified
Seller Entity will be entitled to assume control of the defense of such third-party claim and
Purchaser will pay the reasonable fees and expenses of a single counsel retained by such
Indemnified Seller Entity (excluding the fees and expenses of the Indemnified Seller Entity’s
counsel incurred prior to the date of such assumption of the defense), if: (A) the Indemnified
Seller Entity reasonably concludes that such third-party claim could reasonably be expected to have
a materially adverse effect on the business or reputation of Wells Fargo; (B) the Indemnified
Seller Entity reasonably concludes that there exists a conflict of interest that, under applicable
principles of legal ethics, would prohibit a single legal counsel from representing both



59









 







the Indemnified Seller Entity and Wells Fargo in such third-party claim, and such conflict has
not been timely waived; (C) the Indemnified Purchaser Entity reasonably concludes that there may be
significant and colorable legal defenses available to it that are inconsistent with those defenses
available to Purchaser; (D) such third-party claim could involve the imposition of criminal
penalties upon the Indemnified Seller Entity; or (E) Purchaser either (1) has failed to give a
notice of defense under Section 11.2(b)(i) and timely assume the defense of such third-party claim
or (2) is failing to conduct the defense of such third-party claim actively and diligently. In the
event that an Indemnified Seller Entity assumes the defense of a third-party claim in accordance
with the preceding sentence, (x) Purchaser will reimburse the Indemnified Seller Entity promptly
and periodically for the costs of defending against the third-party claim (including reasonable
fees and expenses of a single counsel), and (y) Purchaser will remain responsible for any Damages
the Indemnified Seller Entity may suffer resulting from, caused by, or in connection with the
third-party claim to the fullest extent provided in this Article XI.



     (d) So long as Purchaser is conducting the defense of the third-party claim in accordance with
Section 11.2(b) or an Indemnified Seller Entity is conducting the defense pursuant to any of
Sections 11.2(c)(ii)(A) through 11.2(c)(ii)(D), (i) the Indemnified Seller Entity will not consent
to the entry of any judgment on, or enter into any settlement with respect to, the third-party
claim without the prior written consent of Purchaser, which consent shall not be unreasonably
withheld, and (ii) Purchaser will not consent to the entry of any judgment on, or enter into any
settlement with respect to, the third-party claim without the prior written consent of the
Indemnified Seller Entity, which consent shall not be unreasonably withheld, unless such judgment
or settlement involves only the payment of money damages by Purchaser and does not impose an
injunction or other equitable relief upon the Indemnified Seller Entity. In the event that an
Indemnified Seller Entity assumes control of the defense of a third-party claim pursuant to Section
11.2(c)(ii)(E), the Indemnified Seller Entity may defend against, and consent to the entry of any
judgment or enter into any settlement with respect to, a third-party claim in any manner it
reasonably may deem appropriate (and the Indemnified Seller Entity need not consult with, or obtain
any consent from, Purchaser in connection therewith); provided, however, that no
such judgment or settlement shall impose an injunction or other equitable relief upon Purchaser or
any of its Affiliates unless Purchaser has consented thereto in advance in writing.



     (e) If Purchaser elects to defend any such third-party claim, then each Indemnified Seller
Entity shall make available to Purchaser all information reasonably available to such Indemnified
Seller Entity relating to such third-party claim. In addition, the parties hereto shall render to
each other such assistance as may reasonably be requested in order to ensure the proper and
adequate defense of any such third-party claim. The party in charge of the defense shall keep the
other party fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto.



     11.3 Limitation on Liability. Notwithstanding anything to the contrary contained in
this Article XI, the Indemnified Seller Entities shall not be entitled to indemnification pursuant
to this Article XI, with respect to any claim for indemnification pursuant to Section 11.1(a):



60









 






     (i) until the earlier to occur of (A) the First Anniversary Date or (B) the
date on which the aggregate Damages to all Indemnified Seller Entities (without
duplication), with respect to all claims for indemnification pursuant to Section
10.1(a) (“Aggregate Seller Damages”), exceed the Threshold Amount, whereupon
(subject to the provisions of clause (iv) below) Purchaser shall be obligated to pay
in full all such amounts (including all amounts comprising the Threshold Amount or
such lesser amount of Aggregate Seller Damages payable on the First Anniversary
Date, which lesser amount shall be the “Purchaser First Anniversary Payment
Amount”); provided that in the event that the Threshold Amount has not been
reached by the First Anniversary Date, Purchaser shall be obligated to pay all
amounts in excess of the Purchaser First Anniversary Payment Amount with respect to
Aggregate Seller Damages on the earlier to occur of (A) the date on which the
Threshold Amount is reached or (B) the second anniversary of the Closing Date;




     (ii) with respect to any claim for indemnification based upon a breach of any
representation and warranty made by Purchaser in this Agreement (other than those in
Section 5.2 (for which a claim for indemnification may be made without any
limitation on time)), the Claim Notice with respect to which is not received on or
before the date that is two years after the Closing Date;




     (iii) for Damages to the extent such Damages are incurred based on or in
respect of any activities of Wells Fargo, the Sellers or their Affiliates from and
after the Closing Date, or the business of the Sellers prior to the Closing Date
except with respect to the Assumed Liabilities; or




     (iv) for aggregate Damages in excess of the amount of One Hundred Thirty-Seven
Million United States Dollars (US$137,000,000.00).



     11.4 General.



     (a) Reserved.



     (b) To the extent that an Indemnified Seller Entity is entitled to indemnification with
respect to any claim made under this Article XI, Purchaser shall be subrogated to any right of
action (other than a right of action against another Indemnified Seller Entity) which such
Indemnified Seller Entity may have against any other person or entity with respect to any matter
giving rise to a claim for indemnification hereunder.



     (c) The indemnification provided in this Article XI shall be the exclusive post-Closing remedy
available to Sellers with respect to any breach of any representation, warranty, covenant or
agreement made by Purchaser to Wells Fargo and the Sellers in this Agreement, except as to
covenants or agreements contained in Section 6.2, 6.6(a), 6.6(b) or 6.15 or as otherwise expressly
provided in this Agreement; provided, that (i) this Section 11.4(c) shall not be deemed a
waiver by any party of any right to specific performance or injunctive relief (including, without
limitation, the right of Wells Fargo and the Sellers to seek injunctive relief



61









 







pursuant to the terms of Section 6.16), and (ii) except as set forth in Sections 10.3(b),
10.3(c) and 11.4(d), nothing in this Agreement shall prohibit or limit any remedy available at law
or in equity for any fraud committed or made by any party in connection with the transactions
contemplated by this Agreement.



     (d) Notwithstanding anything contained in Article V or any other provision of this Agreement
to the contrary, Wells Fargo and the Sellers understand and agree that Purchaser is not making any
representation or warranty whatsoever, express or implied, other than those representations and
warranties of Purchaser expressly set forth in Article V (including, and as qualified or modified
by, the Purchaser Disclosure Schedule).



ARTICLE XII

GENERAL PROVISIONS




     12.1 Survival; Agreed Disclaimer of Effect of Knowledge.



     (a) Each of the representations and warranties of the parties hereunder shall survive the
Closing to and until the date which is two years from the Closing Date, at which date they shall
terminate and be of no further force or effect; provided, however, that,
notwithstanding the foregoing, (a) the representations and warranties of Wells Fargo and the
Sellers in Sections 4.13 and 4.18 shall survive the Closing to and until the date which is sixty
(60) days following (i) the date of expiration of the applicable statute of limitations with
respect to the matters covered by such representations and warranties (assuming no waiver or
extension thereof effected in accordance with clause (ii) below), or (ii) if Purchaser waives or
extends the applicable statute of limitations with the prior consent of Wells Fargo, which consent
shall not be unreasonably withheld, the date of final settlement of such open tax period or the end
of such extension, as the case may be, at which date they shall terminate and be of no further
force or effect; and (b) the representations and warranties of Wells Fargo and the Sellers in
Section 4.5 shall survive the Closing without limitation. Nothing in this Section 12.1 shall affect
an Indemnified Purchaser Entity’s or an Indemnified Seller Entity’s right to indemnification under
Article X or XI, respectively, for the breach of a representation or warranty if a Claim Notice
with respect thereto (which Claim Notice shall describe the alleged breach in reasonable detail,
including specific assertions as to the underlying supporting facts, as opposed to a general
assertion of breach) is received by the Wells Fargo or Purchaser, respectively, within the survival
periods referred to above.



     (b) Each of Wells Fargo and the Sellers, for their part, and Purchaser, for its part,
acknowledging that the other is entitled to rely on their or its representations and warranties in
this Agreement (with such representations and warranties qualified only as provided therein and by
the disclosures in the applicable Disclosure Schedule), in order to preserve the benefit of the
bargain otherwise represented by this Agreement, agrees that neither the survival of such
representations, warranties, covenants and agreements, nor their enforceability, nor any remedies
for breaches of them will be affected by any knowledge of a party regardless of when or how such
party acquired such knowledge, specifically including knowledge of a breach obtained after the
signing of this Agreement and before the Closing occurs.



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     12.2 Notices. All notices and other communications required or permitted to be given
hereunder shall be in writing and shall be deemed given if delivered personally, transmitted by
facsimile (and telephonically confirmed), mailed by registered or certified mail with postage
prepaid and return receipt requested, or sent by commercial overnight courier, courier fees prepaid
(if available; otherwise, by the next best class of service available), to the parties at the
following addresses:




	 	(a)	 	if to Wells Fargo or a Seller, to them at:
	 
	 	 	 	Wells Fargo & Company

MAC #N9305-173

Wells Fargo Center

Sixth and Marquette

Minneapolis, MN 55479

Attn: Corporate Secretary

Fax: 612-667-6082
	 
	 	 	 	with a copy to:
	 
	 	 	 	Wells Fargo Financial, Inc.

800 Walnut Street

Des Moines, Iowa 50309

Attn: General Counsel

Fax: (515) 237-7602
	 
	 	(b)	 	if to Purchaser, to it at:
	 
	 	 	 	Santander BanCorp

207 Ponce de Leon Avenue

San Juan, Puerto Rico 00918

Attn: President

Fax: (787) 767-7913
	 
	 	 	 	with a copy to:
	 
	 	 	 	Santander Financial Services, Inc.

207 Ponce de Leon Avenue

San Juan, Puerto Rico 00918

Attn: General Counsel

Fax: (787) 777-4557




or to such other person, entity or address as any party shall specify by notice in writing to the
other parties in accordance with this Section 12.2. All such notices or other communications shall
be deemed to have been received on the date of the personal delivery or on the third


63









 






Business Day after the mailing or dispatch thereof; provided that notice of change of
address shall be effective only upon receipt.




     12.3 Interpretation. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of this Agreement.



     12.4 Amendment and Modification; Waiver.



     (a) This Agreement and the Disclosure Schedules hereto may not be amended except by an
instrument or instruments in writing signed and delivered on behalf of each of the parties hereto.



     (b) At any time prior to the Closing Date, any party hereto which is entitled to the benefits
hereof may (a) extend the time for the performance of any of the obligations or other acts of the
other parties, (b) waive any inaccuracy in the representations and warranties of the other parties
contained herein or in any Disclosure Schedule hereto or in any document delivered pursuant hereto,
and (c) waive compliance with any of the agreements of the other parties or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid
if set forth in an instrument in writing signed and delivered on behalf of such party.



     12.5 Entire Agreement. This Agreement (including the Disclosure Schedules, documents
and instruments referred to herein), the Confidentiality Agreement and any prior written
communications between the parties made with specific reference to this Agreement constitute the
entire agreement and supersede all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof.



     12.6 Fees and Expenses. Whether or not the transactions contemplated hereby are
consummated, all fees and expenses incurred in connection with this Agreement, and the transactions
contemplated hereby, shall be paid by the party incurring such expenses.



     12.7 Disclosure Schedules. Sellers and Purchaser agree that, for purposes of the
representations and warranties of such parties in this Agreement, items disclosed in one Section of
the Sellers Disclosure Schedule are deemed to be disclosed in all other Sections of the Sellers
Disclosure Schedule and items disclosed in one Section of the Purchaser Disclosure Schedule are
deemed to be disclosed in all other Sections of the Purchaser Disclosure Schedule.



     12.8 Third Party Beneficiaries. Nothing in this Agreement, express or implied, is
intended to confer upon any person or entity other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations or liabilities under or by reason of this
Agreement.



     12.9 Assignment; Binding Effect. This Agreement shall not be assigned by any party
hereto without the prior written consent of the other parties. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective successors and assigns.



64









 





     12.10 Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Puerto Rico without regard to conflicts of laws principles
thereof.



     12.11 Counterparts. This Agreement 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.



(Signature Page Follows)




65









 





     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on their
behalf by their respective officers hereunto duly authorized all as of the date first written
above.



	 	 	 	 	 	 	 
	 	 	WELLS FARGO & COMPANY	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/
Bruce E. Helsel
	 	 
	 

	 	Name:
	 	Bruce E. Helsel	 	 
	 	 	Title:	Senior Vice President	 
	 
	 	 	 	 	 	 
	 	 	ISLAND FINANCE PUERTO RICO, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/
Gary M. Poetting
	 	 
	 

	 	Name:
	 	Gary M. Poetting	 	 
	 	 	Title:	Vice President	 
	 
	 	 	 	 	 	 
	 	 	ISLAND FINANCE SALES FINANCE CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/
Tim Johnson
	 
	 

	 	Name:
	 	Tim Johnson	 	 
	 	 	Title:	Vice President	 
	 
	 	 	 	 	 	 
	 	 	SANTANDER BANCORP	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/
José R. González
	 	 
	 

	 	Name:
	 	José R. González	 	 
	 	 	Title:	President	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/
Carlos M. García
	 	 
	 

	 	Name:
	 	Carlos M. García	 	 
	 	 	Title:	Senior Executive VP & COO	 
	 
	 	 	 	 	 	 
	 	 	SANTANDER FINANCIAL SERVICES, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/
María Calero
	 	 
	 

	 	Name:
	 	María Calero	 	 
	 	 	Title:	Executive Vice President	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/
Rafael S. Bonilla
	 	 
	 

	 	Name:
	 	Rafael S. Bonilla	 	 
	 	 	Title:	Senior Vice President	 







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