Exhibit 10.8
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRANSFER AND ADMINISTRATION AGREEMENT
among
SHEFFIELD RECEIVABLES CORPORATION,
as Buyer,
COMPUCREDIT ACQUISITION FUNDING CORP. II,
as the Transferor,
COMPUCREDIT CORPORATION,
individually and
as the Servicer
and the Guarantor
and
BARCLAYS BANK PLC
as the Agent
Dated as of November 30, 1998
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EXHIBITS
EXHIBIT A Form of Credit Card Agreement
EXHIBIT B [Reserved]
EXHIBIT C Form of Statement of Estimated Amounts
EXHIBIT D Form of Independent Accountants Report
EXHIBIT E Form of Monthly Servicer Report
EXHIBIT F [Reserved]
EXHIBIT G [Reserved]
EXHIBIT H List of Actions and Suits
EXHIBIT I [Reserved]
EXHIBIT J List of Subsidiaries, Divisions and Tradenames
EXHIBIT K Form of Investment Letter
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS...........................................................................................1
SECTION 1.1. Certain Defined Terms.................................................................1
SECTION 1.2. Other Terms..........................................................................25
SECTION 1.3. Computation of Time Periods..........................................................25
ARTICLE II TRANSFERS AND SETTLEMENTS...........................................................................25
SECTION 2.1. Facility.............................................................................25
SECTION 2.2. Transfers............................................................................25
SECTION 2.3. Selection of Interest Rates and Collection Periods...................................28
SECTION 2.4. [Reserved]...........................................................................28
SECTION 2.5. Allocation of Collections............................................................28
SECTION 2.6. [Reserved]...........................................................................29
SECTION 2.7. Fees29
SECTION 2.8. Protection of Transferred Interest of the Owners.....................................29
SECTION 2.9. Deemed Collections; Application of Payments..........................................31
SECTION 2.10. Payments and Computations, Etc.......................................................33
SECTION 2.11. Reports..............................................................................33
SECTION 2.12. Collection Account...................................................................34
SECTION 2.13. Sharing of Payments, Etc.............................................................35
SECTION 2.14. Defaulted Receivables................................................................36
SECTION 2.15. Optional Amortization................................................................36
ARTICLE III REPRESENTATIONS AND WARRANTIES.....................................................................36
SECTION 3.1. Representations and Warranties of the Transferor.....................................36
SECTION 3.2. [Reserved]...........................................................................40
SECTION 3.3. Representations and Warranties of the Servicer.......................................40
SECTION 3.4. Reaffirmation of Representations and Warranties by the Servicer......................41
ARTICLE IV CONDITIONS PRECEDENT................................................................................42
SECTION 4.1. Conditions to Closing................................................................42
ARTICLE V COVENANTS............................................................................................44
SECTION 5.1. Affirmative Covenants of Transferor..................................................44
i
SECTION 5.2. Negative Covenants of the Transferor.................................................52
SECTION 5.3. Affirmative Covenants of the Servicer................................................53
SECTION 5.4. Negative Covenants of the Servicer...................................................55
ARTICLE VI ADMINISTRATION AND COLLECTIONS......................................................................57
SECTION 6.1. Appointment of Servicer..............................................................57
SECTION 6.2. Duties of Servicer...................................................................57
SECTION 6.3. Rights After Designation of New Servicer.............................................58
SECTION 6.4. Servicer Default.....................................................................59
SECTION 6.5. Responsibilities of the Transferor...................................................59
ARTICLE VII TERMINATION EVENTS.................................................................................60
SECTION 7.1. Termination Events...................................................................60
SECTION 7.2. Termination..........................................................................63
SECTION 7.3. Optional Repurchase..................................................................64
ARTICLE VIII INDEMNIFICATION; EXPENSES; RELATED MATTERS........................................................64
SECTION 8.1. Indemnities by the Transferor........................................................64
SECTION 8.2. Indemnity for Taxes, Reserves and Expenses...........................................68
SECTION 8.3. Taxes................................................................................70
SECTION 8.4. Other Costs, Expenses and Related Matters............................................71
SECTION 8.5. Amounts Limited to Available Funds...................................................72
SECTION 8.6. Indemnification by Servicer..........................................................72
ARTICLE IX THE AGENT...........................................................................................74
SECTION 9.1. Authorization and Action.............................................................74
SECTION 9.2. Agent's Reliance, Etc................................................................74
SECTION 9.3. Termination Events...................................................................75
SECTION 9.4. Agents and Affiliates................................................................75
SECTION 9.5. Indemnification of the Agent.........................................................75
SECTION 9.6. Non-Reliance.........................................................................76
ii
SECTION 9.7. Resignation of Agent.................................................................76
SECTION 9.8. Payments by the Agent................................................................77
SECTION 9.9. UCC Filings..........................................................................77
ARTICLE X GUARANTY AND GUARANTOR COVENANTS.....................................................................77
SECTION 10.1. Guaranty.............................................................................77
SECTION 10.2. Waivers..............................................................................78
SECTION 10.3. Reinstatement........................................................................79
SECTION 10.4. Subrogation..........................................................................79
SECTION 10.5. Net Worth Ratio......................................................................79
SECTION 10.6. Financial Reporting..................................................................79
SECTION 10.7. Notices..............................................................................80
SECTION 10.8. Sub-Servicing Fee....................................................................80
SECTION 10.9. Co-Beneficiary Designations..........................................................81
ARTICLE XI MISCELLANEOUS.......................................................................................81
SECTION 11.1. Term of Agreement....................................................................81
SECTION 11.2. Waivers; Amendments..................................................................81
SECTION 11.3. Notices..............................................................................82
SECTION 11.4. Governing Law; Submission to Jurisdiction; Integration...............................84
SECTION 11.5. Severability; Counterparts...........................................................84
SECTION 11.6. Successors and Assigns...............................................................85
SECTION 11.7. Disclosure...........................................................................85
SECTION 11.8. Confidentiality Agreement............................................................85
SECTION 11.9. No Bankruptcy Petition...............................................................86
SECTION 11.10. No Recourse Against Stockholders, Officers or Directors..............................86
SECTION 11.11. Tax Matters..........................................................................86
SECTION 11.12. Tax Treatment........................................................................90
iii
TRANSFER AND ADMINISTRATION AGREEMENT
TRANSFER AND ADMINISTRATION AGREEMENT (this "Agreement"), dated as of
November 30, 1998, by and among SHEFFIELD RECEIVABLES CORPORATION, a Delaware
corporation (the "Buyer"), COMPUCREDIT ACQUISITION FUNDING CORP. II, a Nevada
corporation, as transferor (in such capacity, the "Transferor"), COMPUCREDIT
CORPORATION, a Georgia corporation, individually, as servicer (in such capacity,
the "Servicer") and as guarantor (in such capacity, the "Guarantor"), and
BARCLAYS BANK PLC, as agent for the Buyer and the other "Owners" (as defined
below) (the "Agent").
PRELIMINARY STATEMENTS
WHEREAS, the Transferor may desire to convey, transfer and assign, from
time to time, undivided percentage interests in certain accounts receivable, and
Buyer shall accept such conveyance, transfer and assignment of such undivided
percentage interests, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 As used in this Agreement, the following terms shall have the
following meanings:
"Accounts" means each credit card account established pursuant to a
Credit Card Agreement with an Obligor as of the Cut-Off Date, which account (i)
(a) was sold to CB&T pursuant to the Sale and Purchase Agreement by the Original
Seller, (b) is a credit card account of an Obligor into which an Account of such
Obligor is, pursuant to the Conversion, transferred in accordance with the
Credit Card Guidelines, (c) is a Transferred Account or (d) is a Related
Account, and (ii) is identified by account number and by the principal
receivables thereof as of the Cut-Off Date and referred to in the Account
Schedule delivered to the Agent on the Closing Date pursuant to Section 2.8(b),
as such schedule is amended, modified or supplemented thereafter pursuant to
Section 2.8(b).
"Account Owner" means CB&T or any other entity which is the issuer of
the credit card relating to an Account pursuant to a Credit Card Agreement,
subject to Section 5.2(h) hereof.
"Account Schedule" means the schedule of Accounts (which schedule may
be in the form of a computer file or microfiche) of the Transferor delivered to
the
1
Agent on the Closing Date, as amended or modified from time to time pursuant to
the terms of this Agreement.
"Adverse Claim" means a lien, security interest, charge or encumbrance,
or other right or claim in, of or on any Person's assets or properties in favor
of any other Person (including any UCC financing statement or any similar
instrument filed against such Person's assets or properties) excluding, however,
Permitted Liens.
"Affected Assets" means, collectively, the Receivables and the Related
Security, Collections and Proceeds relating thereto.
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. A Person shall be deemed to control another
Person if the controlling Person possesses, directly or indirectly, the power to
direct or cause the direction of the management or policies of the controlled
Person, whether through ownership of voting stock, by contract or otherwise.
"Affinity Card Agreement" means the Affinity Card Agreement, dated
January 6, 1997, among CB&T, CompuCredit and CAC, and all schedules and exhibits
thereto, as the same has been and may hereafter be amended, modified or
supplemented and in effect from time to time.
"Agent" means Barclays Bank PLC, in its capacity as agent for the Buyer
and the other Owners, and any successor thereto appointed pursuant to Article
IX.
"Aggregate Unpaids" means, at any time, an amount equal (without
duplication) to the sum of (i) the aggregate accrued and unpaid Carrying Costs
at such time, (ii) the Net Investment at such time and (iii) all other amounts
owed (whether due or accrued) under the Transaction Documents by the Transferor
to the Buyer and the other Owners at such time, including, without limitation,
any Early Collection Fee then due and owing.
"Alternative Rate" shall mean, with respect to any Collection Period
(or portion thereof), an interest rate per annum equal to the LIBO Rate (Reserve
Adjusted); provided, however, that:
(i) If the Majority Owners shall notify the Agent prior to the related
rate determination date that a LIBO Rate Disruption Event has occurred and
is continuing, then the "Alternative Rate" for such Collection Period
(or portion thereof) shall be an interest rate per annum equal to the
Base Rate in effect from time to time during such Collection Period (or
portion thereof) unless the Agent and the Transferor agree in writing
to a different rate;
(ii) if any Owner shall have notified the Agent on or before the
applicable rate determination date that the LIBO Rate for any Collection
Period
2
(or portion thereof) does not accurately reflect the cost to such
Owner of funding its investment in the Transferred Interest for such
Collection Period (or portion thereof), then the "Alternative Rate" with
respect to such Owner's share of the Transferred Interest for such
Collection Period (or portion thereof) shall be an interest rate per annum
equal to the Base Rate in effect from time to time during such Collection
Period (or portion thereof) unless the Agent and the Transferor agree in
writing to a different rate;
(iii) if for any reason the Alternative Rate becomes applicable on
notice to the Agent of less than three Business Days (determined giving
effect to the LIBO Rate (Reserve Adjusted) provisions of the definition of
"Business Day"), the "Alternative Rate" shall be the Base Rate in effect
from time to time during the period prior to the satisfaction of such three
Business Days' notice requirement (determined giving effect to the LIBO
Rate (Reserve Adjusted) provisions of the definition of "Business Day");
and
(iv) notwithstanding anything to the contrary in clauses (i) through
(iii) above, at all times following the occurrence of a Termination Event
(other than a Termination Event pursuant to Section 7.1(i)) the
"Alternative Rate" for any Collection Period (or portion thereof) shall be
a rate per annum equal to the sum of (i) the Base Rate in effect from time
to time during such Collection Period and (ii) 2.00% per annum, unless the
Agent and the Transferor agree in writing to a different rate.
"Applicable Rate" shall mean, for any Collection Period, the Cost of
Funds for such Collection Period, adjusted, as necessary, to yield, when applied
to the Net Investment, an amount sufficient to pay interest on the incremental
effective principal balance of any funding resulting from the capitalization of
interest, if any, during such Collection Period. In the case of the final
Collection Period (as described in the definition of Collection Period), on the
fifth Business Day immediately preceding the final Remittance Date, the Agent
shall notify the Servicer of the Applicable Rate for the related Collection
Period. The Applicable Rate reported pursuant to the preceding sentence shall be
calculated using an estimate of the component rates for the remaining days in
such Collection Period. On the Remittance Date for such Collection Period, the
Agent shall redetermine the Applicable Rate in respect of such Collection Period
and if such redetermined Applicable Rate is higher or lower than the Applicable
Rate reported to the Servicer on the fifth Business Day immediately preceding
the corresponding Remittance Date, the Agent shall, within three Business Days
following such Remittance Date, advise the Servicer of such redetermined
Applicable Rate, specifying the amount of any resulting underpayment or
overpayment of interest on such Remittance Date.
"Arrangement Fee" means the fee payable by the Transferor to the
Administrative Agent pursuant to Section 2.7 hereof, the terms of which are set
forth in the Fee Letter.
3
"Assignment" means any sale, assignment or transfer by the Buyer or any
other Owner of all or any part of its interest in this Agreement, but shall not
include a participation as described in Section 11.11(f).
"Bankruptcy Code" has the meaning assigned to that term in Section
3.1(k).
"Barclays" shall mean Barclays Bank PLC and its successors.
"Base Rate" or "BR" means, a rate per annum equal to the greater of (i)
the prime rate of interest publicly announced by Barclays from time to time,
changing when and as said prime rate changes (such rate not necessarily being
the lowest or best rate charged by Barclays) and (ii) the sum of (a) 0.50% and
(b) the rate equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a Business
Day, the average of the quotations for such day for such transactions received
by Barclays from three Federal funds brokers of recognized standing selected by
it. "Benefit Plan" means any employee benefit plan as defined in Section 3(3) of
ERISA in respect of which the Transferor or any ERISA Affiliate thereof is, or
at any time during the immediately preceding six years was, an "employer" as
defined in Section 3(5) of ERISA. "Business Day" means any day other than (a) a
Saturday or Sunday or (b) any other day on which national banking associations
or state banking institutions in New York, New York, Atlanta, Georgia, Columbus,
Georgia or any other State in which the principal executive offices of
CompuCredit, the Transferor, the Agent, CB&T or any other Account Owner, as the
case may be, are located, are authorized or obligated by law, executive order,
or governmental decree to be closed, and, when used with respect to the
determination of any LIBO Rate (Reserve Adjusted) or any notice with respect
thereto, any such day which is also a day for trading by and between banks in
United States dollar deposits in the London interbank market.
"Buyer" means Sheffield Receivables Corporation, a Delaware
corporation. "CAC" means CompuCredit Acquisition Corporation, a Nevada
corporation, together with its successors and assigns.
"Capitalized Lease" of a Person means any lease of property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with GAAP.
4
"Carrying Costs" shall mean with respect to any Remittance Date, an
amount equal to the sum of (i) the product of (A) the Applicable Rate in effect
with respect to the Collection Period ending immediately prior to such
Remittance Date, (B) the average daily Net Investment during such Collection
Period, and (C) a fraction the numerator of which is the actual number of days
in such Collection Period and the denominator of which is 360, plus (ii) all
Early Collection Fees incurred by Owners during the immediately preceding
Collection Period, plus (iii) the product of (A) the Program Fee Rate, (B) (1)
the average daily Facility Limit during such Collection Period, minus (2) that
portion of the average daily Net Investment during such Collection Period that
is funded other than through the issuance of Related Commercial Paper and (C) a
fraction the numerator of which is the actual number of days in such Collection
Period and the denominator of which is 360, plus (iv) any amounts owed to any
Indemnified Parties pursuant to Section 8.1, 8.2, 8.3, 8.4 and 8.6, plus (v) any
past due Carrying Costs owing in respect of any prior Collection Period,
together with interest thereon (to the extent permitted by applicable law) at a
rate equal to the sum of the Base Rate and 2.00% per annum for the period from
and including the original due date for such past due Carrying Costs to but
excluding the date on which they are paid in full together with such interest
thereon.
"Cash Advance Fees" shall mean cash advance transaction fees, if any,
as specified in the Credit Card Agreement applicable to each Account.
"CB&T" means Columbus Bank and Trust Company, a state chartered bank
organized under the laws of the State of Georgia, together with its successors
and assigns.
"CB&T Agreement" means the subservicer letter agreement, dated the date
hereof, among CB&T, CAC and the Agent, as it may be amended, modified or
supplemented from time to time.
"Charge-Off Rate" means, for any Collection Period, the annualized
percentage equivalent of a fraction, the numerator of which is equal to the
aggregate amount of the Principal Receivables of all Receivables that became
Defaulted Receivables during such Collection Period, less all Recoveries
received during such Collection Period, and the denominator of which is the
average daily Principal Receivables during such Collection Period.
"Closing Date" means November 30, 1998.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collection Account" has the meaning assigned to that term in Section
2.12.
"Collection Period" means the calendar month ending immediately prior
to a Remittance Date, or in the case of the first Collection Period, the period
commencing
5
on (and including) the Closing Date to the end of the calendar month ending
immediately prior to the first Remittance Date and in the case of the final
Collection Period, the period commencing on (and including) the first day of the
calendar month immediately preceding the month in which the final Remittance
Date falls and ending on (but excluding) the final Remittance Date.
"Collections" means, with respect to any Receivable, all cash
collections and other cash proceeds of such Receivable, including, without
limitation, all Recoveries, Finance Charges, Interchange and cash proceeds of
Related Security with respect to such Receivable; provided, however, the
Sub-Servicing Fee and any commissions and similar amounts received in respect of
any benefit agreements with respect to receipts from parties using the Obligors
for product marketing purposes shall be excluded from "Collections." For the
purposes hereof, "cash" shall include payments received in the form of checks,
wire transfers, electronic transfers, ATM transfers and any other form of
payment made in accordance with a Credit Card Agreement.
"Commercial Paper" means the promissory notes issued by Buyer in the
commercial paper market.
"CompuCredit" means CompuCredit Corporation, a Georgia corporation.
"Conversion" means the transfer of the processing of the Accounts to
CB&T pursuant to the Interim Servicing Agreement.
"Cost of Funds" shall mean, for any Collection Period, the weighted
average (based upon time and dollar amount) of the following rates applicable
during such Collection Period for each Owner: (a) to the extent such Owner is
the Buyer and funds its share of the Net Investment for such Collection Period
(or any portion thereof) by issuing Related Commercial Paper, a rate equal to
the CP Rate for such Collection Period (or portion thereof) and (b) to the
extent such Owner either (i) is not the Buyer or (ii) is the Buyer and funds its
share of the Net Investment for such Collection Period (or any portion thereof)
other than by issuing Related Commercial Paper, a rate equal to the Alternative
Rate for such Collection Period (or any portion thereof) or such other rate as
the Agent and the Transferor shall agree to in writing.
"CP Margin" shall have the meaning specified in the Fee Letter.
"CP Rate" shall mean with respect to any Collection Period (or portion
thereof), the sum of (i) the CP Margin and (ii) the per annum rate calculated to
yield the "weighted average cost" (as defined below) related to the issuance of
Related Commercial Paper during such Collection Period (or portion thereof);
provided, however, that if any component of such rate is a discount rate, in
calculating the "CP Rate" for such Collection Period (or portion thereof) the
Buyer shall for such component use the rate resulting from converting such
discount rate to an interest-bearing equivalent rate per annum. As used in this
definition, the Buyer's "weighted average cost" for any Collection Period means
the sum of (x) the actual interest paid to
6
purchasers of the applicable Related Commercial Paper, (y) the commissions of
placement agents and dealers in respect of such Related Commercial Paper not to
exceed 0.05% per annum without prior written notification to the Transferor, and
(z) other borrowings by the Purchaser to fund small or odd dollar amounts that
are not easily accommodated in the commercial paper market; and provided,
further, that at all times following the occurrence of a Termination Event
(other than a Termination Event pursuant to Section 7.1(i)), the "CP Rate" for
any Collection Period (or portion thereof) shall be the Alternative Rate in
effect from time to time.
"Credit Card Agreement" shall mean, with respect to a revolving credit
card account, the agreements (including any applicable truth in lending
disclosure statements), in substantially the form or forms attached as Exhibit A
hereto on the Closing Date and pursuant to Section 5.3(k), between an Account
Owner and the Obligor governing the terms and conditions of such account, as
such agreements or statements may be amended, modified or otherwise changed from
time to time and as distributed (including any amendments and revisions thereto)
to holders of such account.
"Credit Card Guidelines" shall mean the respective policies and
procedures of the Servicer, as such policies and procedures relate to the
Accounts and as such may be amended from time to time, (a) relating to the
operation of its credit card business, which generally are applicable to its
portfolio of revolving credit card accounts or, in the case of an Account Owner
that has only a portion of its portfolio subject to a receivables purchase
agreement, applicable to such portion of its portfolio, and in each case which
are consistent with prudent practice, including the policies and procedures for
determining the creditworthiness of credit card customers and the extension of
credit to credit card customers, and (b) relating to the maintenance of credit
card accounts and collection of credit card receivables.
"Credit Support Agreement" means the agreement between Buyer and the
Credit Support Provider evidencing the obligation of the Credit Support Provider
to provide credit support to Buyer in connection with the issuance by Buyer of
Commercial Paper.
"Credit Support Provider" means the Person or Persons who provides
credit support to Buyer in connection with the issuance by Buyer of Commercial
Paper.
"Cut-Off Date" means November 6, 1998.
"Deemed Collections" means any Collections on any Receivable deemed to
have been received pursuant to Section 2.9(b) and (c) hereof.
"Defaulted Receivable" means a Receivable: (i) as to which any payment,
or part thereof, remains unpaid for 180 days or more from the original due date
for payment under such Receivable; (ii) as to which an Event of Bankruptcy has
occurred and is continuing with respect to the Obligor thereof; (iii) which has
been identified by
7
the Transferor, the Servicer or the Sub-Servicer as uncollectible; (iv) as to
which the Obligor is deceased; or (v) which, consistent with the Credit Card
Guidelines, should be written off as uncollectible. A Receivable shall become a
Defaulted Receivable no later than on the day on which such Receivable is
recorded as charged-off on the Servicer's computer file of revolving credit card
accounts.
"Delinquent Receivable" means a Receivable: (i) as to which any
payment, or part thereof, remains unpaid for more than 60 days from the original
due date for payment under such Receivable and (ii) which is not a Defaulted
Receivable.
"Early Collection Fee" means, for any funding period during which the
portion of the Net Investment that was allocated to such funding period is
reduced for any reason whatsoever, the excess, if any, of (i) the additional
interest that would have accrued during such funding period if such reductions
had not occurred, minus (ii) the income, if any, received by the recipient of
such reductions from investing the proceeds of such reductions.
"Eligible Account" shall mean, as of the Cut-Off Date, each Account
other than the following:
(i) Any account that has a disputed balance;
(ii) Any account (a) with respect to which a filing has been made by
the related Obligor under the Bankruptcy Code or any other bankruptcy,
insolvency or other similar laws providing for relief of debtors, whether
such filing is voluntary or involuntary or (b) which has or should have (in
accordance with the Policies and Procedures) a status code of External
Status 'B';
(iii) Any account (a) that has charged-off or (b) which has or should
have (in accordance with the Policies and Procedures) a status code of
External Status 'Z';
(iv) Any account (a) the Obligor of which is deceased or (b) which has
or should have (in accordance with the Policies and Procedures) a status
code of RMS Status 'I';
(v) Any account that is currently under litigation;
(vi) Any account that has been classified, or should have been
classified (in accordance with the Policies and Procedures) as a
Lost/Stolen/Fraud (External Status 'L' or 'U') account;
(vii) Any account with a net credit balance;
8
(viii) Any account classified, or that should have been classified (in
accordance with the Policies and Procedures) as revoked (External Status
'E') or interest prohibited (External Status 'I') or customer closed
(External Status `C') account, in each case, with a zero balance;
(ix) Any account that is not subject to a valid Credit Card Agreement
that is the legal, valid and binding obligation of the related Obligor and
that is enforceable in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights
generally and by general equity principles or as otherwise may be limited
by a right to offset, recoupment, adjustment or any other claim under 12
CFR Section 226.12(c), 12 CFR Section 226.13(d) and the Soldiers and
Sailors Civil Relief Act.
"Eligible Investments" means negotiable instruments or securities
represented by instruments in bearer or registered form, or, in the case of
deposits described below, deposit accounts held in the name of the Agent, other
than securities issued by or obligations of CompuCredit or any Affiliate
thereof, which mature so that funds will be available no later than the close of
business on the Business Day preceding the Remittance Date following each
Collection Period and which evidence:
(a) direct obligations of, or obligations fully guaranteed as to timely
payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit of
depository institutions or trust companies incorporated under the laws of the
United States of America or any state thereof, including the District of
Columbia (or domestic branches of foreign banks) and subject to supervision and
examination by federal or state banking or depository institution authorities;
provided that at the time of the Buyer's investment or contractual commitment to
invest therein, the short-term debt rating of such depository institution or
trust company shall be A-1+ by Standard and Poor's and P-1 by Moody's;
(c) commercial paper having, at the time of the Buyer's investment or
contractual commitment to invest therein, a rating of A-1+ by Standard & Poor's
and P-1 by Moody's;
(d) demand deposits, time deposits and certificates of deposit which
are fully insured by the FDIC having, at the time of the Buyer's investment
therein, a rating of A-1+ by Standard & Poor's and P-1 by Moody's;
(e) bankers' acceptance issued by any depository institution or trust
company referred to in clause (b) above; or
9
(f) investments in money market funds having a rating from either of
Standard & Poor's or Moody's in the highest investment category granted thereby
or otherwise approved by the Agent.
"Eligible Pool Balance" means, as determined as of any day, an
amount equal to the sum of (i) the product of *[material omitted] and the
amount of Principal Receivables that are not Delinquent Receivables on and as
of such day and (ii) the product of *[material omitted] and the amount of
Principal Receivables that are Delinquent Receivables on and as of such day.
From and after a Termination Date, the Eligible Pool Balance shall be equal
to zero.
"Eligible Receivable" means, at any time, any Receivable:
(i) with respect to which the related Account is an Eligible Account as
of the Cut-Off Date;
(ii) which has been originated by the Original Seller or the Account
Owner in the ordinary course of its business, sold to CAC pursuant to the
Initial Purchase Agreement and sold to the Transferor pursuant to (and in
accordance with) the Receivables Purchase Agreement and to which the
Transferor has good title thereto, free and clear of all Adverse Claims
(other than any lien for municipal or other local taxes if such taxes are
not then due and payable or if the Transferor is then contesting the
validity thereof in good faith by appropriate proceedings and has set aside
on its books adequate reserves with respect thereto);
(iii) which (together with the Related Security, Collections and
Proceeds related thereto) has been the subject of either a Transfer or the
grant of a first priority perfected security interest therein (and in the
Collections and Related Security related thereto), effective until the
termination of this Agreement;
(iv) the Obligor of which is a United States resident (except for
Receivables in an outstanding amount not to exceed at any time $500,000
individually or in the aggregate), is not an Affiliate of any of the
parties hereto, and is not a government or a governmental subdivision or
agency;
(v) which (A) arises pursuant to an Account with respect to which each
of CB&T, CAC, the Transferor and the Original Seller, as applicable, have
performed all obligations required to be performed by it thereunder, and
(B) has been billed in accordance with the Credit Card Agreement related
thereto;
(vi) which is an "eligible asset" as defined in Rule 3a-7 under the
Investment Company Act of 1940, as amended;
* Deleted per the Registrant's request for confidential treatment and filed
separately with the Commission pursuant to Rule 406 of the Securities Act
of 1933.
10
(vii) a purchase of which with the proceeds of Commercial Paper would
constitute a "current transaction" within the meaning of Section 3(a)(3) of
the Securities Act of 1933, as amended;
(viii) which is an "account", "chattel paper" or "general intangible"
within the meaning of Article 9 of the UCC of all applicable jurisdictions;
(ix) which (A) satisfies all applicable requirements of the Credit Card
Guidelines and (B) is assignable without the consent of, or notice to, the
Obligor thereunder;
(x) which has not been compromised, adjusted or modified (including by
the extension of time for payment or the granting of any discounts,
allowances or credits); provided, however, that only such portion of such
Receivable that is the subject of such compromise, adjustment or
modification shall be deemed to be ineligible pursuant to the terms of this
clause (x);
(xi) which is serviced by the Servicer or the Sub-Servicer;
(xii) which, at all times will be the legal, valid and binding payment
obligation of the Obligor thereon enforceable against such Obligor in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws, now or hereafter in effect, affecting the enforcement of
creditors' rights in general and except as such enforceability may be
limited by general principles of equity (whether considered in a suit at
law or in equity);
(xiii) which is denominated and payable only in United States dollars
in the United States;
(xiv) with respect to which all material consents, licenses, approvals
or authorizations of, or registrations or declarations with, any
Governmental Authority required to be obtained, effected or given by the
Transferor or Account Owner in connection with the creation of such
Receivable or the execution, delivery, creation and performance by the
Account Owner of the Credit Card Agreement pursuant to which such
Receivable was created, have been duly obtained, effected or given and are
in full force and effect;
(xv) which was created in compliance in all material respects with all
Requirements of Law applicable to the institution which owned such
Receivable at the time of its creation and pursuant to a Credit Card
Agreement which complies in all material respects with all Requirements of
Law applicable to CB&T or other Account Owner, as the case may be;
(xvi) which, as of the Transfer Date is not subject to any right of
rescission, setoff, counterclaim or any other defense (including defenses
arising
11
out of violations of usury laws) of the Obligor, other than defenses
arising out of applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of
creditors' rights in general; and
(xvii) as to which, as of the Transfer Date, the Account Owner, has not
taken any action which would impair, or omitted to take any action the
omission of which would impair, the rights of the Agent, the Buyer or any
other Owner therein.
"ERISA" means the U.S. Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"ERISA Affiliate" means, with respect to any Person, (i) any
corporation which is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Code) as such Person; (ii) a trade
or business (whether or not incorporated) under common control (within the
meaning of Section 414(c) of the Code) with such Person; or (iii) a member of
the same affiliated service group (within the meaning of Section 414(n) of the
Code) as such Person, any corporation described in clause (i) above or any trade
or business described in clause (ii) above.
"Event of Bankruptcy" means, (x) with respect to the Transferor, that
(a) such Person shall consent to the appointment of a bankruptcy trustee or
conservator or receiver or liquidator in any bankruptcy proceeding or other
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to such Person or of or relating to all or
substantially all of the property of such Person; or (b) an action seeking a
decree or order of a court or agency or supervisory authority having
jurisdiction in the premises for the appointment of a bankruptcy trustee or a
conservator or receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or the winding-up
or liquidation of its affairs, shall have been commenced against such Person and
either such decree or order shall have been entered against such Person or such
action shall have remained in force undischarged or unstayed for a period of 60
days; or (c) such Person shall admit in writing its inability to pay its debts
generally as they become due, file, or consent or fail to object (or object
without dismissal of any such filing within 60 days of such filing) to the
filing of, a petition to take advantage of any applicable bankruptcy,
insolvency, reorganization, receivership or conservatorship statute or make any
assignment for the benefit of its creditors or voluntarily suspend payment of
its obligations and (y) with respect to any Person other than the Transferor,
that such Person (a) shall consent to the appointment of a bankruptcy trustee or
conservator or receiver or liquidator in any bankruptcy proceeding or other
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to such Person or of or relating to all or
substantially all of the property of such Person; or (b) a decree or order of a
court or agency or supervisory authority having jurisdiction in the premises for
the appointment of a bankruptcy trustee or a conservator or receiver or
liquidator in any insolvency,
12
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or the winding-up or liquidation of its affairs, shall have been
entered against such Person and such decree or order shall have remained in
force undischarged or unstayed for a period of 60 days; or (c) such Person shall
admit in writing its inability to pay its debts generally as they become due,
file a petition to take advantage of any applicable bankruptcy, insolvency or
reorganization statute or make any assignment for the benefit of its creditors
or voluntarily suspend payment of its obligations.
"Excluded Taxes" shall have the meaning specified in Section 8.3
hereof.
"Facilities Management Agreement" means the Facilities Management
Services Agreement dated as of August 1, 1998 by and between CB&T and
CompuCredit and all amendments, modifications and supplements thereto and
restatements thereof.
"Facility Limit" means (a) on the Closing Date, an amount equal to the
Initial Net Investment; (b) during the period commencing on the Remittance Date
immediately following the Closing Date and ending on the December 1999
Remittance Date, an amount equal to the Net Investment (after giving effect to
the application of Collections on such Remittance Date); (c) during the period
commencing on the January 2000 Remittance Date and ending on the July 2000
Remittance Date, the lesser of (i) the Facility Limit on the December 1999
Remittance Date and (ii) the product of (A) the Facility Limit on the Closing
Date and (B) 95%; (d) during the period commencing on the August 2000 Remittance
Date and ending on the February 2001 Remittance Date, the lesser of (i) the
Facility Limit on the December 1999 Remittance Date and (ii) the product of (A)
the Facility Limit on the Closing Date and (B) 90%; (e) during the period
commencing on the March 2001 Remittance Date and ending on the September 2001
Remittance Date, the lesser of (i) the Facility Limit on the December 1999
Remittance Date and (ii) the product of (A) the Facility Limit on the Closing
Date and (B) 80%; and (f) thereafter, the lesser of (i) the Facility Limit on
the December 1999 Remittance Date and (ii) the product of (A) the Facility Limit
on the Closing Date and (B) 70%; or, in each case, such other lesser amount as
determined at the Transferor's sole discretion and presented in writing to the
Agent two (2) Business Days prior to the date that such lesser amount takes
effect; provided, that, any reduction in the Facility Limit shall be permanent.
"Facility Termination Date" means November 29, 1999, or such later date
to which the Facility Termination Date may be extended by Transferor, the Agent
and the Buyer not later than 30 days prior to the then current Facility
Termination Date.
"Fee Letter" means the letter agreement dated November 30, 1998 among
the Agent, the Buyer and the Transferor with respect to the fees to be paid by
the Transferor hereunder, as amended, modified or supplemented and in effect
from time to time.
13
"Finance Charge Receivables" shall mean all amounts billed to the
Obligors on any Account, as determined based on either (a) the actual amounts
posted on the system servicing reports provided to the Servicer by the
Sub-Servicer or any Affiliate of the Sub-Servicer, or other provider of such
reports, if available to the Servicer, or (b) if such actual amounts are not
available to the Servicer, the amount of Finance Charge Receivables for the
prior Collection Period or other reasonable estimation method, in respect of (i)
all Periodic Rate Finance Charges, (ii) Cash Advance Fees, (iii) annual
membership fees and annual service charges, (iv) Late Fees, (v) Overlimit Fees,
and (vi) any other fees with respect to the Accounts designated by the
Transferor at any time and from time to time to be included as Finance Charge
Receivables (but any such amount estimated pursuant to this clause (b) shall be
reduced by the amount of all accrued Finance Charge Receivables on Defaulted
Receivables for such Collection Period). Finance Charge Receivables shall also
include (a) Interchange payable to the Account Owners in respect of the
Receivables, (b) all Recoveries with respect to Receivables previously charged
off as uncollectible and (c) all amounts paid by CB&T to CAC pursuant to Section
8.1(e)(iii) of the Affinity Card Agreement.
"Finance Charges" means, with respect to an Account, any finance,
interest, late or similar charges owing by an Obligor pursuant to such Account.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
accounting profession, which are in effect as of the date of this Agreement.
"Governmental Authority" shall mean the United States of America, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantor" means CompuCredit and its successors and assigns.
"Guaranty" means the Guaranty of CompuCredit contained in Article X of
this Agreement.
"Incremental Transfer" means a Transfer which is made pursuant to
Section 2.2(a) hereof.
"Indebtedness" means, with respect to any Person, without duplication,
such Person's (i) obligations for borrowed money, (ii) obligations representing
the deferred purchase price of property other than accounts payable arising in
the ordinary course of such Person's business on terms customary in the trade,
(iii) obligations, whether or not assumed, secured by liens or payable out of
the proceeds or production from property now or hereafter owned or acquired by
such Person, (iv) obligations which are evidenced by notes, acceptances, or
other instruments, (v) Capitalized Lease
14
obligations and (vi) any agreement by which such Person assumes, guarantees,
endorses, contingently agrees to purchase or provide funds for the payment of,
or otherwise becomes liable upon, the obligation of any other Person, or agrees
to maintain the net worth or working capital or other financial condition of any
other Person or otherwise assures any other creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement or take-or-pay contract and shall include, without limitation, the
contingent liability of such Person in connection with any application for a
letter of credit.
"Indemnified Amounts" has the meaning specified in Section 8.1 hereof.
"Indemnified Parties" has the meaning specified in Section 8.1 hereof.
"Initial Net Investment" means $54,873,067.49.
"Initial Purchase Agreement" means the receivables purchase agreement,
dated the date hereof, between CB&T, as seller, and CAC, as purchaser, as
amended, modified or supplemented and in effect from time to time.
"Insurance Proceeds" shall mean any amounts received by the Servicer
pursuant to the payment of benefits under any credit life insurance policies,
credit disability or unemployment insurance policies covering any Obligor with
respect to Receivables under such Obligor's Account.
"Interchange" shall mean interchange fees payable to CB&T or any other
Account Owner (net of any interchange fees paid by such Account Owner), in its
capacity as credit card issuer, through Novus Network, VISA or MasterCard in
connection with cardholder charges for goods or services with respect to the
Accounts. Any reference in this Agreement to Interchange shall refer to only the
fractional undivided interest in the interchange fees that are transferred by
CAC to the Transferor pursuant to the Receivables Purchase Agreement, which
fractional undivided interest may be less than 100% interest therein.
"Interim Servicing Agreement" means the Interim Servicing Agreement,
dated as of November 30, 1998, among CAC, CB&T and Novus Services, Inc., as
amended, modified or supplemented and in effect from time to time.
"Investment Letter" has the meaning set forth in Section 11.11(c)
hereof.
"Late Fees" shall have the meaning specified in the Credit Card
Agreement applicable to each Account for late fees or similar terms.
"Law" means any law (including common law), constitution, statute,
treaty, regulation, rule, ordinance, order, injunction, writ, decree or award of
any Governmental Authority.
15
"LIBO Rate" means, with respect to any Collection Period, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on
Telerate Page 3750 as the London interbank offered rate for deposits in U.S.
dollars at approximately 11:00 a.m. (London time) two Business Days prior to the
first day of such Collection Period for a term of one month. If for any reason
such rate is not available, the term "LIBO Rate" shall mean, for any Collection
Period, the rate per annum (rounded upwards, if necessary, to the nearest 1/100
of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered
rate for deposits in dollars at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Collection Period for a term of one
month; provided, however, if more than one rate is specified on the Reuters
Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such
rates. In the event no such rate appears as described in the preceding
sentences, the LIBO Rate shall be, with respect to any Collection Period, the
per annum rate of interest at which U.S. Dollar deposits in immediately
available funds are offered to the Agent by prime banks in the interbank
eurodollar market at or about 10:00 a.m., London time, on the second Business
Day before (and for value on) the first day of such Collection Period (or
portion thereof) and in an amount of not less than $1,000,000 for such
Collection Period (or portion thereof).
"LIBO Rate (Reserve Adjusted)" shall mean, with respect to any
Collection Period (or portion thereof), the sum of (a) 0.875% per annum and (b)
the per annum rate of interest (rounded upward, if necessary, to the nearest
whole multiple of 1/16th of one percent per annum) determined by dividing (i)
the LIBO Rate for such Collection Period (or portion thereof) by (ii) one minus
the LIBO Rate Reserve Percentage (expressed as a decimal) applicable during such
Collection Period (or portion thereof).
"LIBO Rate Disruption Event" shall mean, for any Owner for any
Collection Period, any of the following: (i) a determination by such Owner that
it would be contrary to law or to the directive of any central bank or other
Governmental Authority to obtain U.S. Dollars in the London interbank market to
fund or maintain its investment in the Transferred Interest for such Collection
Period or (ii) the inability of such Owner by reason of circumstances affecting
the London interbank market generally, to obtain U.S. Dollars in such market to
fund its investment in the Transferred Interest for such Collection Period.
"LIBO Rate Reserve Percentage" shall mean, with respect to any
Collection Period (or portion thereof), the reserve percentage (rounded upwards,
if necessary, to the nearest 1/16th of one percent per annum) applicable during
such Collection Period (or portion thereof) (or, if more than one such
percentage shall be so applicable during such Collection Period, the daily
average of such percentages for those days in such Collection Period (or portion
thereof) during which any such percentages shall be in effect) under regulations
issued from time to time by the Board of Governors of the Federal Reserve System
(or any successor) for determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other marginal reserve
requirement) for banks or other financial
16
institutions subject to such regulations with respect to liabilities or assets
consisting of or including "eurocurrency liabilities" as defined in Regulation D
issued by the Board of Governors of the Federal Reserve System or any successor
regulation having a term equal to such Collection Period (or portion thereof).
"Liquidity Provider" means the Person or Persons who will provide
liquidity support to Buyer in connection with the issuance by Buyer of
Commercial Paper.
Liquidity Provider Agreement" means the agreement between Buyer and the
Liquidity Provider evidencing the obligation of the Liquidity Provider to
provide liquidity support to Buyer in connection with the issuance by Buyer of
Commercial Paper.
"Majority Owners" shall mean, at any time, the Agent and those Owners
holding interests in the Transferred Interest aggregating in excess of 51% of
the outstanding Net Investment as of such date.
"Material Adverse Effect" means any event or condition which would have
a material adverse effect on (i) the collectibility of the Receivables, (ii) the
condition (financial or otherwise), businesses or properties of the Transferor,
Account Owner, Servicer or Sub-Servicer or (iii) the ability of the Transferor,
Account Owner, Servicer or Sub-Servicer to perform its respective obligations
under the Transaction Documents to which it is a party.
"Monthly Servicer Report" means a report, in substantially the form
attached hereto as Exhibit E or in such other form as is mutually agreed to by
the Transferor and the Agent, furnished by the Servicer pursuant to Section 2.11
hereof.
"Moody's" means Xxxxx'x Investors Service, Inc.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA which is or was at any time during the current year or the
immediately preceding five years contributed to by the Transferor or any ERISA
Affiliate thereof on behalf of its employees.
"Net Investment" means the sum of the amounts paid to the Transferor by
the Buyer less the aggregate amount of Collections received and applied by the
Agent to reduce such Net Investment pursuant to Section 2.5, 2.12, 2.15 or 7.3
hereof; provided that such Net Investment shall be restored and reinstated in
the amount of any Collections so received and applied if at any time the
distribution of such Collections is rescinded or must otherwise be returned for
any reason.
"Notice of Termination Event" shall have the meaning specified in
Section 9.3 hereof.
17
"Obligor" means a Person obligated to make payments for the provision
of goods and services pursuant to an Account.
"Officer's Certificate" shall mean, unless otherwise specified in this
Agreement, a certificate delivered to the Agent signed by the President, any
Vice President, the Treasurer, Chief Financial Officer, Controller or Member of
the Transferor or the Servicer, as the case may be, (or an officer holding an
office with equivalent or more senior responsibilities or, in the case of the
Servicer, a Servicing Officer, and, in the case of the Transferor, any executive
of the Transferor designated in writing by a Vice President or more senior
officer of the Transferor for this purpose) or by the President, any Vice
President, the Chief Financial Officer, Controller or Member of a successor
Servicer.
"Optional Amortization Amount" shall have the meaning specified in
Section 2.15.
"Optional Amortization Date" shall have the meaning specified in
Section 2.15.
"Optional Amortization Notice" shall have the meaning specified in
Section 2.15.
"Original Seller" means, Greenwood Trust Company, a Delaware
state-chartered bank.
"Other Transferor" means any Person other than the Transferor that has
entered into a receivables purchase agreement, transfer and administration
agreement or other similar agreement with Buyer.
"Overlimit Fees" shall have the meaning specified in the Credit Card
Agreement applicable to each Account for overlimit fees or similar terms if such
fees are provided for with respect to such Account.
"Owner" shall mean the Buyer and all other owners by assignment,
participation or otherwise of any interest in the Transferred Interest.
"Participant" has the meaning set forth in Section 11.11(f) hereof.
"Payment Rate" means, as of any month, the percentage equivalent of a
fraction, the numerator of which is equal to the average monthly
amount of all Collections (including amounts retained by the Sub-Servicer in
respect of the Sub-Servicing Fee) received during the preceding three Collection
Periods and the denominator of which is equal to the average monthly amount of
Principal Receivables outstanding during the preceding three Collection Periods.
18
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any other
entity succeeding to the functions currently performed by the Pension Benefit
Guaranty Corporation.
"Periodic Rate Finance Charges" shall have the meaning specified in the
Credit Card Agreement applicable to each Account for finance charges (due to
periodic rate) or any similar term.
"Permitted Assignee" shall mean each of Barclays, each Liquidity
Provider, each Credit Support Provider and each other Person consented to by the
Transferor, such consent not to be unreasonably withheld.
"Permitted Liens" means the liens (a) created under this Agreement, (b)
arising under the Purchase Agreement or (c) otherwise permitted by the Agent in
writing. A "Permitted Lien" shall also include the sale, pledge, transfer,
conveyance, hypothecation or granting of a security interest in the Transferor's
Interest to any Person so long as (i) any claim of such Person in the
Transferor's Interest or Affected Assets is in all respects subordinate to the
claims of the Buyer, the Agent and the other Owners and the purchaser under the
Purchase Agreement and the Agent shall be satisfied with the terms of such
subordination.
"Person" means any corporation, limited liability company, natural
person, firm, joint venture, partnership, trust, unincorporated organization,
enterprise, government or any department or agency of any government.
"Policies and Procedures" means the written policies and procedures of
the Original Seller relating to the Accounts, as in effect from time to time.
"Potential Termination Event" means an event which but for the lapse of
time or the giving of notice, or both, would constitute a Termination Event.
"Principal Receivables" means, at any time, the then outstanding
principal amount of Eligible Receivables excluding any accrued and outstanding
Finance Charges related thereto and giving effect to the amount of any credit
balances and other adjustments existing with respect to such Receivable on such
day. The outstanding principal amount of any Defaulted Receivables shall be
considered to be zero for the purposes of any determination hereunder of the
aggregate outstanding amount of Principal Receivables.
"Private Holder" shall mean (i) each holder of a right to receive
interest or principal in respect of any direct or indirect interest in the
Transferred Interest including any financial instrument or contract the value of
which is determined in whole or in part by reference to the Transferred Interest
and (ii) any other Person that the Transferor determines is, may be or may
become a "partner" within the meaning of Section 1.7704-1(h)(1)(ii) of the
United States Treasury Regulations (including by reason of Section
1.7704-1(h)(3)). Any Person holding more than one interest in the Transferred
19
Interest each of which separately would cause such Person to be a Private Holder
shall be treated as a single Private Holder. Each holder of an interest in a
Private Holder which is a partnership, an S Corporation or a grantor trust under
the Code shall be treated as a Private Holder unless excepted with the consent
of the Transferor.
"Proceeds" means "proceeds" as defined in Section 9-306(1) of the UCC.
"Program Fee" means the fee payable by the Transferor to the Agent
pursuant to Section 2.7 hereof, computed as described in clause (iii) of the
definition of Carrying Costs.
"Program Fee Rate" has the meaning specified in the Fee Letter.
"Purchase Agreement" means that certain Purchase Agreement dated as of
November 30, 1998 by and among the Transferor and Cargill Financial Services
Corporation.
"Purchase Termination Date" means the date upon which the Transferor
shall cease, for any reason whatsoever, to make purchases of Receivables from
CAC under the Receivables Purchase Agreement or the Receivables Purchase
Agreement shall terminate for any reason whatsoever.
"Reassignment Amount" shall mean, with respect to any Remittance Date,
after giving effect to any deposits and distributions otherwise to be made on
such Remittance Date, for the Buyer, without duplication, the sum of (a) the Net
Investment on such Remittance Date plus (b) accrued interest, fees, and all
other Aggregate Unpaids due and owing to the Buyer for such Remittance Date.
"Receivable" means the indebtedness owed by any Obligor under an
Account and sold by (i) to the extent outstanding on the Cut-Off Date, the
Original Seller to CB&T pursuant to the Sale and Purchase Agreement, (ii) CB&T
to CAC pursuant to the Initial Purchase Agreement and (iii) CAC to the
Transferor pursuant to the Receivables Purchase Agreement, arising in connection
with the sale or lease of merchandise or the rendering of services, and includes
the right to payment of any Finance Charges and other obligations of such
Obligor with respect thereto. Notwithstanding the foregoing, once a Receivable
has been deemed collected pursuant to Section 2.9 hereof, it shall no longer
constitute a Receivable hereunder.
"Receivables Purchase Agreement" means the Receivables Purchase
Agreement, dated as of the date hereof, by and between CAC, as seller, and the
Transferor, as purchaser, as such agreement may be amended, modified or
supplemented and in effect from time to time.
"Recipients" shall have the meaning specified in Section 2.13 hereof.
20
"Records" means all Credit Card Agreements and other documents, books,
records and other information (including, without limitation, computer programs,
tapes, discs, punch cards, data processing software and related property and
rights) maintained with respect to Receivables, the Accounts and the related
Obligors.
"Recoveries" means all amounts received or collected by the Servicer or
the Sub-Servicer (net of out-of-pocket costs of collection) with respect to
Defaulted Receivables, including any amounts received through the sale or other
disposition of the Defaulted Receivables to unaffiliated third parties.
"Related Account" shall mean an Account with respect to which a new
credit account number has been issued by the applicable Account Owner or
Servicer or the Transferor under circumstances resulting from an error or a lost
or stolen credit card and not requiring standard application and credit
evaluation procedures under the Credit Card Guidelines.
"Related Commercial Paper" shall mean Commercial Paper issued by the
Buyer the proceeds of which were allocated in whole or in part by the Buyer (or
the Agent or its behalf) to acquire, or refinance the acquisition of, an
interest in Receivables with respect to the Transferor.
"Related Security" means with respect to any Receivable, all of the
Transferor's rights, title and interest in, to and under:
(i) all of the Transferor's interest, if any, in the
merchandise (including returned or repossessed merchandise), if
any, the sale of which gave rise to such Receivable; (ii) all
other security interests or liens and property subject thereto
from time to time, if any, purporting to secure payment of such
Receivable, whether pursuant to the Account related to such
Receivable or otherwise, together with all financing statements
signed by an Obligor describing any collateral securing such
Receivable;
(iii) all guarantees, indemnities, warranties,
insurance (and proceeds and premium refunds thereof) or other
agreements or arrangements of any kind from time to time
supporting or securing payment of such Receivable whether
pursuant to the Account related to such Receivable or otherwise;
(iv) all Records related to such Receivable;
(v) all rights and remedies of the Transferor under
the Receivables Purchase Agreement, together with all financing
statements filed by the Transferor against CAC in connection
therewith; and
(vi) all Proceeds of any of the foregoing.
21
"Remittance Date" means January 15, 1999 and thereafter the fifteenth
day of each calendar month, or if such day is not a Business Day, the next
succeeding Business Day.
"Reportable Event" shall mean any of the events set forth in Section
4043(b) of ERISA, other than those events for which notice to the PBGC is waived
under applicable PBGC regulations.
"Required Subordinate Percentage" shall equal 45%.
"Requirements of Law" shall mean any law, treaty, rule or regulation,
or determination of an arbitrator of Governmental Authority, whether Federal,
state or local (including usury laws, the Federal Truth in Lending Act and
Regulation B and Regulation Z of the Board of Governors of the Federal Reserve
System), and, when used with respect to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person.
"Sale and Purchase Agreement" means the sale and purchase agreement,
dated as of November 10, 1998, by and among the Original Seller, CAC and CB&T,
as it may be amended, modified or supplemented and in effect from time to time.
"Section 8.2 Costs" has the meaning specified in Section 8.2(f) hereof.
"Servicer" means at any time the Person then authorized pursuant to
Section 6.1 hereof to service, administer and collect Receivables.
"Servicer Advance" has the meaning set forth in Section 2.5(c) hereof.
"Servicer Default" has the meaning set forth in Section 6.4 hereof.
"Servicing Fee" means, with respect to any Remittance Date, the fee
payable to the Servicer on such Remittance Date with respect to the Accounts in
an amount equal to (a) one-twelfth of the product of (i) 6% per annum prior to
the third anniversary of the Closing Date and 4% per annum thereafter and (ii)
the average daily Principal Receivables during the related Collection Period
minus (b) the Sub-Servicing Fee with respect to such Collection Period. Such fee
shall accrue from the initial Transfer Date to the date on which the Net
Investment is reduced to zero. Such fee shall be payable only from Collections
pursuant to, and subject to the priority of payments set forth in, Section 2.5
hereof.
"Servicing Officer" shall mean any officer of the Servicer or an
attorney-in-fact of the Servicer who in either case is involved in, or
responsible for, the administration and servicing of the Receivables and whose
name appears on a list of servicing officers furnished to the Agent by the
Servicer, as such list may from time to time be amended.
22
"Standard & Poor's" or "S&P" means Standard & Poor's Ratings Services,
a division of The XxXxxx-Xxxx Companies, Inc.
"Subordinate Percentage" shall mean an amount, stated as a percentage,
equal to (a) 1 minus (b) the Net Investment divided by the Principal
Receivables.
"Sub-Servicer" shall mean CB&T or any other third party contractual
servicer approved of in writing by the Agent.
"Sub-Servicing Fee" means, with respect to any Collection Period, the
fee excluded from Collections and payable by the Servicer to the Sub-Servicer
with respect to the Accounts. Such fee shall accrue from the initial Transfer
Date to the date on which the Net Investment is reduced to zero.
"Subsidiary" of a Person means any Person more than 50% of the
outstanding voting interests of which shall at any time be owned or controlled,
directly or indirectly, by such Person or by one or more Subsidiaries of such
Person or any similar business organization which is so owned or controlled.
"Taxes" shall have the meaning specified in Section 8.3 hereof.
"Telerate Page 3750" means the display designated as page 3750 on the
Telerate Service (or such other page as may replace page 3750 on that service or
such other service or services as may be nominated by the British Bankers'
Association for the purpose of displaying London interbank offered
rates for U.S. dollar deposits).
"Termination Date" means the earliest of (i) the date of termination of
the commitment of the Liquidity Provider under the Liquidity Provider Agreement,
(ii) the date of termination of the commitment of the Credit Support Provider
under the Credit Support Agreement, (iii) the day upon which the Termination
Date is declared or automatically occurs pursuant to Section 7.2(a) hereof, (iv)
two Business Days prior to the Facility Termination Date, (v) the Purchase
Termination Date or (vi) the Optional Amortization Date or the date on which the
Transferor exercises the purchase option described in Section 7.3(b).
"Termination Event" means an event described in Section 7.1 hereof.
"Three-Month Average Charge-Off Rate" means, as of any month, the
annualized percentage equivalent of a fraction, the numerator of which is equal
to the aggregate amount of Principal Receivables that became Defaulted
Receivables during the preceding three consecutive Collection Periods, less all
Recoveries received during such Collection Periods, and the denominator of which
is the average daily Principal Receivables during such preceding three
Collection Periods.
"Transaction Costs" has the meaning specified in Section 8.4(a) hereof.
23
"Transaction Documents" means, collectively, this Agreement, the
Receivables Purchase Agreement, the Initial Purchase Agreement, the CB&T
Agreement, the Interim Servicing Agreement, the Fee Letter, the Affinity Card
Agreement, the Sale and Purchase Agreement, and all of the other instruments,
documents and other agreements executed and delivered by CB&T, CAC, CompuCredit
or the Transferor in connection with any of the foregoing, in each case, as the
same may be amended, restated, supplemented or otherwise modified from time to
time.
"Transfer" means a conveyance, transfer and assignment by the
Transferor to the Buyer of an undivided percentage interest in Receivables
hereunder (including, without limitation, as a result of any reinvestment of
Collections in Transferred Interests pursuant to Sections 2.2(b), 2.2 (e) and
2.5).
"Transfer Date" means, with respect to each Transfer, the Business Day
on which such Transfer is made.
"Transfer Price" means with respect to any Transfer, the amount paid to
the Transferor by the Buyer as described in the notice delivered by the
Transferor pursuant to Section 2.2(b).
"Transferor" means CompuCredit Acquisition Funding Corp. II, a Nevada
corporation, and its successors and permitted, as approved in writing by the
Agent, assigns.
"Transferor's Interest" means the Principal Receivables less the Net
Investment.
"Transferred Account" shall mean each account into which an Account
shall be transferred, provided that such transfer is made in accordance with the
Credit Card Guidelines.
"Transferred Interest" means, at any time of determination, an
undivided percentage interest in (i) each and every then outstanding Receivable,
(ii) all Related Security with respect to each such Receivable, (iii) all
Collections with respect thereto, and (iv) other Proceeds of the foregoing. The
Transferred Interest in each Receivable, together with Related Security,
Collections and Proceeds with respect thereto, shall at all times be equal to
the Transferred Interest in each other Receivable, together with Related
Security, Collections and Proceeds with respect thereto. To the extent that the
Transferred Interest shall decrease as a result of a recalculation of the
Transferor's Interest, the Agent, on behalf of the Buyer shall be considered to
have reconveyed to the Transferor an undivided percentage interest in each
Receivable, together with Related Security, Collections and Proceeds with
respect thereto, in an amount equal to such decrease such that in each case the
Transferred Interest in each Receivable shall be equal to the Transferred
Interest in each other Receivable. The Transferred Interest
24
shall be determined as a percentage equal to the Net Investment divided by the
Principal Receivables.
"UCC" means, with respect to any state, the Uniform Commercial Code as
from time to time in effect in such state.
"U.S." or "United States" means the United States of America.
SECTION 1.2. Other Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. All terms used in Article 9
of the UCC in the State of New York, and not specifically defined herein, are
used herein as defined in such Article 9.
SECTION 1.3. Computation of Time Periods. Unless otherwise stated in
this Agreement, in the computation of a period of time from a specified date to
a later specified date, the word "from" means "from and including", the words
"to" and "until" each means "to but excluding", and the word "within" means
"from and excluding a specified date and to and including a later specified
date".
ARTICLE II
TRANSFERS AND SETTLEMENTS
SECTION 2.1 Facility. Upon the terms and subject to the conditions
herein set forth, at any time prior to the earlier of the Termination Date and
the occurrence of any Termination Event, (x) the Transferor may, at its option,
convey, transfer and assign to the Agent, on behalf of the Buyer and (y) the
Agent, on behalf of the Buyer shall accept such conveyance, transfer and
assignment from the Transferor of, without recourse except as provided herein,
undivided percentage interests in all of the Transferor's right, title and
interest in and to the Receivables, together with Related Security, Collections
and Proceeds with respect thereto, from time to time. By accepting any
conveyance, transfer and assignment hereunder, none of the Buyer, the Agent or
any of the other Owners from time to time assumes or shall have any obligations
or liability under any of the Accounts, all of which shall remain the
obligations and liabilities of the Transferor, CAC and any Account Owner.
SECTION 2.2. Transfers.
(a) Upon the terms and subject to the conditions herein set forth, the
Transferor may, at its option, convey, transfer and assign to the Agent, on
behalf of Buyer, and the Agent, on behalf of the Buyer, provided that neither
the Termination Date nor a Termination Event shall have occurred, shall accept
such conveyance, transfer and assignment from the Transferor, without recourse
except as provided herein, of undivided percentage interests in the Receivables,
together with Related Security, Collections and Proceeds with respect thereto
(each, an "Incremental
25
Transfer"); provided, however, that (a) the amount of any such Incremental
Transfer made to Buyer, shall not exceed the least of the following amounts
after giving effect to such Incremental Transfer, each as determined on the
Business Day prior to the date of such Incremental Transfer: (x) the Facility
Limit minus the Net Investment, (y) the amount of the Eligible Pool Balance
minus the Net Investment, and (z) the aggregate amount of principal receivables
purchases made by Obligors which were not funded pursuant to Section 2.5 (a)(v)
since the date of the last Incremental Transfer, (b) that after giving effect to
the payment to the Transferor of such Transfer Price, no Termination Event shall
have occurred, (c) the representations and warranties set forth in Sections 3.1
and 3.3 hereof shall be true and correct as of the date of any such Incremental
Transfer, (d) the payment to the Transferor of the Transfer Price related
thereto and the Monthly Servicer Report shall have been delivered as required by
Section 2.11 hereof and (e) the Transferor shall have delivered to the Agent on
the date of such Incremental Transfer a certificate in form and substance
satisfactory to the Agent, dated such date certifying that the conditions
specified in the preceding clauses (a) through (d) of this Section 2.2(a) have
been satisfied; provided further, however, that each such Incremental Transfer
other than the initial Incremental Transfer, shall occur only on a Remittance
Date.
(b) The Transferor shall, by notice to the Agent given by 10:00 a.m.
(New York City time) at least two (2) Business Days prior to the proposed date
of any Incremental Transfer by telecopy, offer to convey, transfer and assign to
the Agent, on behalf of Buyer, undivided percentage interests in the Receivables
and the other Affected Assets relating thereto. Each such notice shall specify
(x) the desired Transfer Price (which shall be at least $1,000,000 or integral
multiples of $100,000 in excess thereof) or, to the extent that the then
available unused portion of the Facility Limit is less than such amount, such
lesser amount equal to such available portion of the Facility Limit), (y) the
desired date of such Incremental Transfer and (z) the desired funding period(s)
and allocation of the Net Investment arising in connection with such Incremental
Transfer thereto as required by Section 2.3. The Agent will promptly notify the
Buyer, of the Agent's receipt of any request for an Incremental Transfer to be
made to the Agent on behalf of such Person. Each notice of proposed Transfer
shall be irrevocable and binding on the Transferor and the Transferor shall
indemnify the Buyer against any loss or expense incurred by the Buyer, either
directly or indirectly (including through the Liquidity Provider Agreement) as a
result of any failure by the Transferor to complete such Incremental Transfer,
including, without limitation, any loss or expense incurred by the Buyer, either
directly or indirectly (including pursuant to the Liquidity Provider Agreement)
by reason of the liquidation or reemployment of funds acquired by the Buyer (or
the Liquidity Provider) (including, without limitation, funds obtained by
issuing commercial paper or promissory notes or obtaining deposits as loans from
third parties) for the Buyer to fund such Incremental Transfer.
(c) On the date of the initial Incremental Transfer, the Agent, on
behalf of the Buyer shall deliver written confirmation to the Transferor of the
Transfer Price, the funding period(s) and the Applicable Rate(s) relating to
such Transfer. On the date of
26
each subsequent Incremental Transfer, the Agent shall send written confirmation
to the Transferor of the Transfer Price, the funding period(s) and the
Applicable Rate(s) applicable to such Incremental Transfer. Following each
Incremental Transfer, the Buyer shall deposit to the Transferor's account at the
location indicated in Section 11.3 hereof, in immediately available funds, an
amount equal to the Transfer Price for such Incremental Transfer made to the
Buyer.
(d) By no later than 11:00 a.m. (New York City time) on the date of any
Incremental Transfer, the Buyer shall remit the Transfer Price for such
Incremental Transfer to the account of the Agent specified therefor from time to
time by the Agent by notice to such Persons. Following each Incremental Transfer
and the Agent's receipt of funds from the Buyer, the Agent shall remit the
Transfer Price to the Transferor's account at the location indicated in Section
11.3 hereof, in immediately available funds, an amount equal to the Transfer
Price for such Incremental Transfer.
(e) On each Business Day occurring after the initial Incremental
Transfer hereunder and prior to the earlier of the Termination Date and the
occurrence of any Termination Event, the Transferor hereby agrees to convey,
transfer and assign to the Agent, on behalf of the Buyer, and the Agent, on
behalf of the Buyer, shall, agree to purchase from the Transferor undivided
percentage interests in each and every Receivable, together with Related
Security, Collections and Proceeds with respect thereto, to the extent of the
aggregate amount of principal receivables purchases made since the preceding
purchase under this Section 2.2(e), net of purchases made pursuant to Section
2.2(a) hereof since such preceding purchase, such that after giving effect to
such Transfer, no Termination Event or Potential Termination Event shall occur
and the Subordinate Percentage is at least equal to or greater than the Required
Subordinate Percentage.
(f) The Transferor agrees to pay to CAC any portion of the purchase
price for Receivables received by the Transferor hereunder which is due and
owing to CAC for the purchase of such Receivables on the same Business Day as
such price was paid to the Transferor hereunder.
(g) The Transferor hereby grants to the Agent, on behalf of the Buyer
and the other Owners from time to time, a first priority perfected and
continuing security interest in all of the Transferor's right, title and
interest in, to and under the Receivables, together with Related Security,
Collections and Proceeds with respect thereto, and together with all of the
Transferor's rights under the Receivables Purchase Agreement with respect to the
Receivables and with respect to any obligations thereunder of CAC with respect
to the Receivables. This Agreement shall constitute a security agreement under
applicable law. The Transferor hereby assigns to the Agent, on behalf of Buyer
and the other Owners from time to time, all of its rights and remedies under the
Receivables Purchase Agreement with respect to the Receivables and with respect
to any obligations thereunder of CAC with respect to the Receivables.
27
SECTION 2.3. Selection of Interest Rates and Collection Periods
(a) Prior to the Termination Date. At all times hereafter, but prior to
the Termination Date, the Transferor may, subject to the Agent's approval and
the limitations described below, request that the Net Investment be allocated
among one or more funding periods, so that the aggregate amounts so allocated at
all times shall equal the Net Investment. The Transferor shall give the Agent
irrevocable notice by telephone of the new requested funding period(s) at least
two (2) Business Days prior to the expiration of any then existing funding
period; provided, however, that the Agent may select, (i) in its sole
discretion, any such new funding period if the Transferor fails to provide such
notice on a timely basis or (ii) any such new funding period if the Agent
determines after consultation and with the consent of the Transferor, that the
funding period requested by the Transferor is unavailable or for any reason
commercially undesirable. The Buyer confirms that it is its intention to fund
all or substantially all of the Net Investment held on its behalf by issuing
Related Commercial Paper; provided that the Buyer may determine, from time to
time, in its reasonable judgment, that funding the Net Investment by means of
Related Commercial Paper is not possible or is not desirable for any reason. In
the case of any funding period outstanding upon the Termination Date, such
funding period shall end on such date.
(b) After the Termination Date; Transferred Interest Held on Behalf of
Buyer. At all times on and after the Termination Date, the Agent shall select
all funding periods and the Alternative Rate shall be applicable to each such
funding period.
SECTION 2.4. [Reserved]
SECTION 2.5. Allocation of Collections. (a) On each Remittance Date,
the Servicer shall apply Collections (including, without limitation, the amount
of Deemed Collections)for the immediately preceding Collection Period in the
following order:
(i) first, to repay any unreimbursed Servicer Advances;
(ii) second, to the payment to the Agent of any accrued and unpaid
Carrying Costs for any preceding Collection Period;
(iii) third, to the Agent for the benefit of the Owners, in reduction
of the Net Investment, any excess of the Net Investment over the amount of
the Eligible Pool Balance as of the last Business Day of the immediately
preceding Collection Period;
(iv) fourth, to the Servicer for any accrued and unpaid Servicing Fees
for any preceding Collection Period;
(v) fifth, to the Transferor to be applied to the purchase of
additional undivided percentage interests in the Receivables pursuant to
Section 2.2(e)
28
equal to the aggregate amount of principal receivables purchases made by
Obligors during such Collection Period, minus the amount of purchases made
pursuant to Sections 2.2(a) and 2.2(e) since the preceding Remittance Date;
(vi) sixth, to the Agent in reduction of the Net Investment, until the
Net Investment is reduced to zero;
(vii) seventh, to the Agent, without duplication, in satisfaction of
all other Aggregate Unpaids that are due and owing on such Remittance Date;
and
(viii) eighth, any amounts remaining after application in accordance
with clauses (i) through (vii) above shall be distributed to the
Transferor.
(b) In the event that, on any date, there are not sufficient
Collections to pay the Carrying Costs due and payable on such day, the Servicer,
acting upon written notice from the Agent, shall make an advance in an amount
equal to the shortfall in funds available on such day (each, a "Servicer
Advance") and pay to the Agent, the amount of such advance, provided, that the
Servicer shall not be required to make a Servicer Advance to the extent that it
determines, in its sole discretion, that such advance is unlikely to be
recovered from Collections in subsequent Collection Periods. On each Remittance
Date, the Servicer shall be entitled to reimbursement, without interest, for any
Servicer Advances not previously reimbursed in accordance with Section
2.5(a)(i).
(c) Subject to Section 2.12, the Servicer may apply Collections to pay
Carrying Costs related to the funding of the Net Investment through the issuance
of Related Commercial Paper on any date that such Related Commercial Paper
becomes due and payable.
SECTION 2.6. .[Reserved]
SECTION 2.7. Fees. Notwithstanding any limitation on recourse
contained in this Agreement, the Transferor shall pay the following
non-refundable fees:
(a) On each Remittance Date, to the Agent, for the account of the
Buyer, the Agent and certain other parties, as determined by the Agent, the
Program Fee accrued during the related Collection Period and to the extent not
paid on or prior to such Remittance Date pursuant to Section 2.5(a)(ii).
(b) On the date of execution hereof, to the Agent solely for its own
account, the Arrangement Fee.
SECTION 2.8. Protecton of Transferred Interest of the Owners. (a)
The Transferor agrees that it will from time to time, at its expense,
promptly execute and deliver all instruments and documents and take all actions
as may be required by law or as the Agent may reasonably request in order to
perfect or protect
29
the Transferred Interest or to enable the Agent, the Buyer or any other Owner to
exercise or enforce any of their respective rights hereunder. Without limiting
the foregoing, the Transferor will upon the request of the Agent, the Buyer or
any of the other Owners, in order to accurately reflect the Transfers hereunder
and the Transferred Interest, (x) execute and file such financing or
continuation statements or amendments thereto or assignments thereof (as
permitted pursuant to Section 9.9 hereof) as may be reasonably requested by the
Agent, the Buyer or any of the other Owners and (y) xxxx its respective master
data processing records and other documents with a legend describing the
conveyance to the Agent, for the benefit of the Buyer and other Owners, of the
Transferred Interest. The Transferor shall obtain such additional search reports
as the Agent, the Buyer or any of the other Owners shall reasonably request. To
the fullest extent permitted by applicable law, the Agent shall be permitted to
sign and file continuation statements and amendments thereto and assignments
thereof without the Transferor's signature. Carbon, photographic or other
reproduction of this Agreement or any financing statement shall be sufficient as
a financing statement. The Transferor shall not change its respective name,
identity or corporate structure (within the meaning of Section 9-402(7) of the
UCC as in effect in the States of New York, Georgia and Nevada) nor relocate its
respective chief executive office or any office where Records are kept unless it
shall have: (i) given the Agent at least thirty (30) days prior notice thereof
and (ii) prepared at Transferor's expense and delivered to the Agent all
financing statements, instruments and other documents necessary to preserve and
protect the Transferred Interest or requested by the Agent in connection with
such change or relocation. Any filings under the UCC or otherwise that are
occasioned by such change in name or location shall be made at the expense of
Transferor.
(b) On the Closing Date, the Transferor agrees to deliver or to cause
the Servicer to deliver to the Agent a computer file or microfiche list
containing a true and complete list of all Accounts, identified by account
number and by Receivable balance as of the Cut-Off Date. Such file or list shall
be marked as the Account Schedule delivered to the Agent as confidential and
proprietary, and is hereby incorporated into and made a part of this Agreement.
The Transferor agrees to deliver or to cause the Servicer to deliver to the
Agent within five (5) Business Days of the request therefor by the Agent a
computer file or microfiche list containing a true and complete list of all
Accounts, including all Accounts created on or after the Cut-Off Date, in
existence as of the last day of the prior Collection Period, identified by
account number and by Receivable balance as of the last day of the prior
Collection Period. Such file or list shall be marked as the Account Schedule
delivered to the agent as confidential and proprietary, shall replace the
previous Account Schedule delivered to the Agent and shall be incorporated into
and made a part of this Agreement. The Servicer agrees, at its own expense, by
the end of each Collection Period in which any Accounts or Related Accounts have
been originated, to indicate clearly and unambiguously in its master data
processing records that the Receivables created in connection with such Accounts
have been conveyed to the Transferor and transferred
30
to the Agent, for the benefit of the Buyer and the other Owners, pursuant to
this Agreement.
SECTION 2.9. Deemed Collections Application of Payments. (a) If (i) the
Servicer makes a deposit into the Collection Account in respect of a Collection
of a Receivable and such Collection was received by the Servicer in the form of
a check which is not honored for any reason or (ii) the Servicer makes a mistake
with respect to the amount of any Collection and deposits an amount that is less
than or more than the actual amount of such Collection, the Servicer shall
appropriately adjust the amount subsequently deposited into the Collection
Account to reflect such dishonored check or mistake. Any Receivable in respect
of which a dishonored check is received shall be deemed not to have been paid.
Notwithstanding the first two sentences of this paragraph, adjustments made
pursuant to this Section shall not require any changes in any report previously
delivered pursuant to Section 2.11.
(b) If the Servicer adjusts downward the amount of any Receivable
because of a rebate, refund, unauthorized charge or billing error to a
cardholder, because such Receivable was created in respect of merchandise which
was refused or returned by a cardholder, or if the Servicer otherwise adjusts
downward the amount of any Receivable without receiving Collections therefor or
charging off such amount as uncollectible, then, in any such case, the amount of
Principal Receivables used to calculate the Transferor's Interest and (unless
otherwise specified) any other amount required herein to be calculated by
reference to the amount of Principal Receivables, will be reduced by the amount
of the adjustment. Similarly, the amount of Principal Receivables used to
calculate the Transferor's Interest and (unless otherwise specified) any other
amount required herein to be calculated by reference to the amount of Principal
Receivables will be reduced by the principal amount of any Receivable which was
discovered as having been created through a fraudulent or counterfeit charge or
with respect to which the covenant contained in subsection 5.1(j) was breached.
Any adjustment required pursuant to either of the two preceding sentences shall
be made on or prior to the end of the Collection Period in which such adjustment
obligation arises. In the event that, following the exclusion of such Principal
Receivables from the calculation of the Subordinate Percentage, the Subordinate
Percentage would be less than the Required Subordinate Percentage, not later
than seven days after such adjustment, the Transferor shall make a deposit into
the Collection Account in immediately available funds in an amount equal to such
adjustment.
(c) (i) If on any day any of the representations or warranties in
Article III (except for the representations and warranties in Sections 3.1(l)
and 3.3(f)) was or becomes untrue with respect to a Receivable (whether on or
after the date of any transfer of an interest therein to the Agent or the Buyer
as contemplated hereunder), the Transferor shall be deemed to have received on
such day a Collection of such Receivable in full and the Transferor shall on
such day make a deposit into the Collection Account in immediately available
funds in an amount equal to the amount of such Receivable, to be applied as
Collections in accordance with Section 2.5 hereof.
31
(ii) If any Account for which a Credit Card (as defined in the
Sale and Purchase Agreement) is in effect shall not constitute an Eligible
Account as of the Cut-Off Date, (x) the Transferor shall be deemed to have
received on such day a Collection in respect of such Account in an amount
specified in the following clause (y) and (y) the Transferor shall make a
deposit into the Collection Account in immediately available funds in an amount
equal to the amount received by the Transferor pursuant to the Sale and Purchase
Agreement in respect of such Account, when such amount is received by the
Transferor or CAC, as the case may be, or within 2 Business Days after receipt
by the Account Owner, in each case pursuant to the Sale and Purchase Agreement,
to be applied as Collections in accordance with Section 2.5 hereof.
(iii) If on any day any Receivable related to an Account
governed by the terms of a Credit Card Agreement (other than the Credit Card
Agreement entered into with the Original Seller) is not an Eligible Receivable
or a Defaulted Receivable, (x) the Transferor shall be deemed to have received
on the date on which it is determined that such Receivable is not an Eligible
Receivable or Defaulted Receivable a Collection of such Receivable in full and
(y) the Transferor shall make a deposit into the Collection Account in
immediately available funds in the amount of such Receivable, to be applied as
Collections in accordance with Section 2.5 hereof.
(d) In the event that the Transferor is unable for any reason to
transfer Receivables to the Agent in accordance with the provisions of this
Agreement, including by reason of any order of any Governmental Authority (a
"Transfer Restriction Event"), then, in any such event, (a) the Transferor and
the Servicer agree (except as prohibited by any such order) to allocate and pay
to the Agent, after the date of such inability, all Collections, including
Collections of Receivables transferred to the Agent prior to the occurrence of
such event, and all amounts which would have constituted Collections but for the
Transferor's inability to transfer Receivables (up to an aggregate amount equal
to the amount of Receivables transferred to the Agent by the Transferor up to
the Transferred Interest on such date), (b) the Transferor and the Servicer
agree that such amounts will be applied as Collections in accordance with
Article II and (c) for so long as the allocation and application of all
Collections and all amounts that would have constituted Collections are made in
accordance with clauses (a) and (b) above, Principal Receivables and all amounts
which would have constituted Principal Receivables but for the Transferor's
inability to transfer Receivables to the Agent which are written off as
uncollectible in accordance with this Agreement shall continue to be allocated
in accordance with Article II. For the purpose of the immediately preceding
sentence, the Transferor and the Servicer shall treat the first received
Collections with respect to the Accounts as allocable to the Agent until the
Agent shall have been allocated and paid Collections in an amount equal to the
aggregate amount of Principal Receivables up to the Transferred Interest as of
the date of the occurrence of such event. If Transferor and the Servicer are
unable pursuant to any requirements of law to allocate Collections as described
above, the Transferor and the Servicer agree that, after the occurrence of such
event, payments on each Account with respect to the
32
principal balance of such Account shall be allocated first to the oldest
principal balance of such Account and shall have such payments applied as
Collections in accordance with Article II. The parties hereto agree that Finance
Charge Receivables, whenever created and accrued in respect of Principal
Receivables which have been conveyed to the Agent shall continue to be a part of
the Transferred Interest notwithstanding any cessation of the transfer of
additional Principal Receivables to the Agent and Collections with respect
thereto shall continue to be allocated and paid in accordance with Article II.
SECTION 2.10. Payments and Computations, Etc. All amounts to be paid or
deposited by the Transferor or the Servicer hereunder shall be paid or deposited
in accordance with the terms hereof no later than 4:00 p.m. (New York City time)
on the day when due in immediately available funds; if such amounts are payable
to the Agent (whether on behalf of the Buyer or any other Owner or otherwise)
they shall be paid or deposited in the account of the Agent indicated in Section
11.3 hereof, until otherwise notified by the Agent. The Transferor shall, to the
extent permitted by law, pay to the Agent, for the benefit of the Buyer and the
other Owners upon demand, interest on all amounts not paid or deposited when due
hereunder at a rate equal to 2% per annum plus the Base Rate. All computations
of interest and all per annum fees hereunder shall be made on the basis of a
year of 360 days for the actual number of days (including the first but
excluding the last day) elapsed. Any computations by the Agent of amounts
payable by the Transferor hereunder shall be binding upon the Transferor absent
manifest error.
SECTION 2.11. Reports. (a) Reports and Records for the Agent.
(i) Daily Records. On each Business Day, the Servicer shall
make or cause to be made available at the office of the Servicer for inspection
by the Agent upon request a record setting forth (i) the Collections in respect
of Principal Receivables and in respect of Finance Charge Receivables processed
by the Servicer on the second preceding Business Day in respect of each Account
and (ii) the amount of Receivables as of the close of business on the second
preceding Business Day in each Account. The Servicer shall, at all times,
maintain its computer files with respect to the Accounts in such a manner so
that the Accounts may be specifically identified and shall make available to the
Agent at the office of the Servicer on any Business Day any computer programs
necessary to make such identification.
(ii) Monthly Servicer Report. Not later than the second
Business Day preceding each Remittance Date, the Servicer shall deliver to the
Agent a Monthly Servicer's Report signed by a Servicing Officer in substantially
the form of Exhibit E hereto.
(b) Quarterly Certificate. The Servicer shall deliver, or the
Transferor shall cause the Servicer to deliver, to the Agent within fifteen (15)
days after the end of each calendar quarter of each calendar year, beginning
with the calendar quarter
33
ending June 30, 1998, an Officer's Certificate stating that (a) a review of the
activities of the Servicer during the preceding calendar quarter (or such
shorter period as may have elapsed since the Closing Date), and of its
performance under this Agreement was made under the supervision of the officer
signing such certificate and (b) to the best of such officer's knowledge, based
on such review, the Servicer has fully performed all of its obligations under
this Agreement throughout such quarter (or such shorter period as may have
elapsed since the Closing Date), or, if there has occurred an event which, with
the giving of notice or passage of time or both, would constitute a Termination
Event or Servicer Default, specifying each such event known to such officer, the
nature and status thereof and the actions which the Transferor or the Servicer,
as the case may be, proposes to take with respect thereto.
(c) Semi-Annual Servicing Report of Independent Public Accountants. On
or before October 15 of each year, for the period from January 1 through June 30
for such year, and on or before April 15 of each year, for the period from July
1 through December 31, beginning with October 15, 1999 (for the period from the
Closing Date through June 30, 1999), the Servicer shall cause a firm of
nationally recognized independent public accountants (who may also render other
services to the Servicer or the Transferor) to furnish a report to the Agent to
the effect that such firm has applied the procedures and made the examinations
set forth in Exhibit D hereto.
SECTION 2.12 Colection Account. There shall be established on the day
of the initial Incremental Transfer hereunder and maintained with NationsBank,
N.A., a segregated account (the "Collection Account"), bearing a designation
clearly indicating that the funds deposited therein are held for the benefit of
the Agent, on behalf of the Buyer and the Owners, provided, however, that if at
any time the short-term debt rating of NationsBank, N.A. shall be lower than
"A-1+" or "P-1" by Standard & Poor's or Xxxxx'x, respectively, the Servicer
shall instruct NationsBank, N.A. to transfer such Collection Account and all
funds deposited therein into a new account that it will establish and maintain
in the name of the Agent, on behalf of the Buyer and the other Owners, which
shall be a fully segregated account with the trust department bearing a
designation clearly indicating that the funds deposited therein are held in
trust for the benefit of the Agent, on behalf of the Buyer and the other Owners.
The Servicer and the Transferor shall remit or cause to be remitted daily within
two Business Days of receipt to the Collection Account all Collections received
with respect to any Receivables; provided, however, prior to the date of the
Conversion, the Servicer and Transferor shall remit daily within two Business
Days of receipt to the Collection Account all Collections received with respect
to any Receivables less the aggregate amount of principal receivables purchases
made hereunder since the last day on which Collections were remitted to the
Collection Account. Funds on deposit in the Collection Account (other than
investment earnings) shall be invested by the Agent in Eligible Investments that
will mature so that such funds will be available on the Business Day preceding
the Remittance Date following such investment. All interest and earnings (net of
losses and investment expenses) on funds on deposit in the Collection Account
shall be retained in the Collection Account and be available to make any
payments
34
required to be made pursuant to Section 2.5(a). Notwithstanding the foregoing,
so long as (i) no Termination Event or Potential Termination Event shall have
occurred and be continuing and (ii) the amount of the Eligible Pool Balance
shall exceed the Net Investment as of the last day of the most recent Collection
Period, the Servicer shall be entitled to withdraw any Collections held in the
Collection Account in excess of the amount estimated by the Servicer to accrue
during such Collection Period for Carrying Costs; provided, that, within two
Business Days after the first such withdrawal of every calendar month, the
Servicer shall deliver to the agent a statement in the form of Exhibit C hereto;
provided further, however, that the Servicer may withdraw Collections during any
Collection Period only to the extent such withdrawn amounts are applied (a) to
pay Carrying Costs or to reduce the Net Investment during such Collection
Period, (b) to make purchases pursuant to Section 2.2(e) during such Collection
Period or (c) in respect of amounts which would otherwise be distributed on the
related Remittance Date pursuant to Section 2.5(a)(i) or 2.5(a)(iv). Any such
amounts withdrawn from the Collection Account during the preceding Collection
Period shall be deemed to have been applied in accordance with Section 2.5(a).
Any amounts withdrawn pursuant to clause (c) above in respect of Section
2.5(a)(iv) shall be based on the Servicer's reasonable estimation of the
Servicing Fees for the applicable Collection Period and in any event shall not
exceed the amount received by the Servicer in respect of Servicing Fees for the
immediately preceding Collection Period. On the Business Day preceding the
Remittance Date, the Servicer shall remit to the Collection Account the excess,
if any, of (i) the amount withdrawn pursuant to clause (c) above in respect of
Section 2.5(a)(iv) over (ii) the Servicing Fees for the immediately preceding
Collection Period.
SECTION 2.13.Sharing of Payments. Etc. If any Owner (for purposes of
this Section 2.13 only, being a "Recipient") shall obtain any payment (whether
voluntary, involuntary, through the exercise of any right of setoff, or
otherwise) on account of a Transferred Interest owned by it (other than pursuant
to Section 2.7, or Article VIII and other than as a result of the differences in
the timing of the applications of Collections pursuant to Section 2.5) in excess
of its ratable share of payments on account of the Transferred Interest obtained
by the Owners entitled thereto, such Recipient shall forthwith purchase from the
other Owners entitled to a share of such amount of the Transferred Interest
owned by such Persons hereunder as shall be necessary to cause such Recipient to
share the excess payment with each such other Person entitled thereto; provided,
however, that if all or any portion of such excess payment is thereafter
recovered from such Recipient, such purchase from each such other Person shall
be rescinded and each such other Person shall repay to the Recipient the
purchase price paid by such Recipient for such amount to the extent of such
recovery, together with an amount equal to such other Person's share (according
to the proportion of (a) the amount of such other Person's required payment to
(b) the total amount so recovered from the Recipient) of any interest or other
amount paid or payable by the Recipient in respect of the total amount so
recovered.
SECTION 2.14. Defaulted Receivables. On the date when any Receivable in
an Account becomes a Defaulted Receivable, the Agent shall
35
automatically and without further action or consideration transfer, set over and
otherwise convey to the Transferor with respect to such Account, without
recourse, representation or warranty, all right, title and interest of the Agent
in and to the Defaulted Receivables in such Account, all monies due or to become
due with respect thereto, all Proceeds thereof and any Insurance Proceeds
relating thereto; provided, that Recoveries of such Account shall remain
property of the Agent and be applied as provided herein.
SECTION 2.15. Optional Amortization. On any day prior to the occurrence
of a Termination Event, the Transferor may in its sole discretion cause the
Servicer to provide written notice to the Agent (an "Optional Amortization
Notice") at least five Business Days prior to any Business Day that is the last
day of a Collection Period stating its intention to cause a full amortization of
the Net Investment on the following Remittance Date (the "Optional Amortization
Date") in an amount equal to the sum of (a) the Net Investment and (b) all
Aggregate Unpaids on such Optional Amortization Date (the "Optional Amortization
Amount"). The Optional Amortization Notice shall state the Optional Amortization
Date and the allocation of the Optional Amortization Amount among the various
outstanding funding periods that mature on such Optional Amortization Date. The
Optional Amortization Amount shall be paid from any Collections on deposit in
the Collection Account or from the proceeds of the issuance of one or more
interests in the Transferred Interest issued substantially contemporaneously
with such full amortization (or any combination of the above).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of the Transferor. As of
the Closing Date, each Remittance Date and the date of each Incremental Transfer
hereunder, the Transferor represents and warrants to the Agent, the Buyer and
the other Owners that:
(a) Corporate Existence and Power. The Transferor is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all corporate power and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business in each jurisdiction in which its business is now conducted. The
Transferor is duly qualified to do business in, and is in good standing (or is
exempt from such requirement), in every other jurisdiction in which the nature
of its business requires it to be so qualified, except where the failure to be
so qualified or in good standing would not have a Material Adverse Effect.
(b) Corporate and Governmental Authorization; Contravention. The
execution, delivery and performance by the Transferor of this Agreement, the
Receivables Purchase Agreement, the Fee Letter and the other Transaction
36
Documents to which the Transferor is a party are within the Transferor's
corporate powers, have been duly authorized by all necessary corporate action,
require no action by or in respect of, or filing with, any Governmental
Authority or official thereof (except as contemplated by Section 2.8 hereof),
and do not contravene, or constitute a default under, any provision of
applicable law, rule or regulation or of the Certificate of Incorporation or
Bylaws of the Transferor or of any agreement, judgment, injunction, order, writ,
decree or other instrument binding upon the Transferor or result in the creation
or imposition of any Adverse Claim on the assets of the Transferor (except as
contemplated by Section 2.8 hereof).
(c) Binding Effect. Each of this Agreement, the Receivables Purchase
Agreement, the Fee Letter, and the other Transaction Documents to which the
Transferor is a party constitutes the legal, valid and binding obligation of the
Transferor, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws affecting
the rights of creditors generally.
(d) Perfection. Immediately preceding each Transfer hereunder, the
Transferor shall be the owner of all of the Receivables, free and clear of all
Adverse Claims. On or prior to each Transfer, all financing statements and other
documents required to be recorded or filed in order to perfect and protect the
Agent's Transferred Interest against all creditors of and purchasers from the
Transferor will have been duly filed in each filing office necessary for such
purpose and all filing fees and taxes, if any, payable in connection with such
filings shall have been paid in full.
(e) Accuracy of Information. All information heretofore furnished by
the Transferor (including without limitation, the Monthly Servicer Reports,
Account Schedule, any reports delivered pursuant to Section 2.11 hereof and the
Transferor's financial statements) to the Buyer, any other Owner, the Agent or
the Administrative Agent for purposes of or in connection with this Agreement or
any transaction contemplated hereby is, and all such information hereafter
furnished by the Transferor to the Buyer, any other Owner, the Agent or the
Administrative Agent will be, true and accurate in every material respect, on
the date such information is stated or certified.
(f) Tax Status. The Transferor has filed all tax returns (federal,
state and local) required to be filed and has paid or made adequate provision
for the payment of all taxes, assessments and other governmental charges other
than taxes, assessments and other governmental charges being contested in good
faith, and for which adequate reserves have been set aside on the books of the
Transferor.
(g) Action, Suits. Except as set forth in Exhibit H hereof, there are
no actions, suits or proceedings pending, or to the knowledge of the Transferor
threatened, against or affecting the Transferor or any Affiliate of the
Transferor or their respective properties, in or before any court, arbitrator or
other body, which may, individually or in the aggregate, have a Material Adverse
Effect.
37
(h) Use of Proceeds. No proceeds of any Transfer will be used by the
Transferor to acquire any security in any transaction which is subject to
Section 13 or 14 of the Securities Exchange Act of 1934, as amended.
(i) Place of Business. The principal place of business and chief
executive office of the Transferor are located at the address of the Transferor
indicated in Section 11.3 hereof.
(j) Good Title. Upon each Transfer, the Agent shall acquire a valid and
perfected first priority undivided percentage interest to the extent of the
Transferred Interest or a first priority perfected security interest in each
Receivable that exists on the date of such Transfer and in the Related Security,
Collections and Proceeds with respect thereto free and clear of any Adverse
Claim.
(k) Tradenames, Etc. As of the date hereof: (i) the Transferor has only
the subsidiaries and divisions listed on Exhibit J hereto; and (ii) the
Transferor has, within the last five (5) years, operated only under the
tradenames identified in Exhibit J hereto, and, within the last five (5) years,
has not changed its name, merged with or into or consolidated with any other
corporation or been the subject of any proceeding under Title 11, United States
Code (the "Bankruptcy Code"), except as disclosed in Exhibit J hereto.
(l) Nature of Receivables. Each Receivable (x) represented by the
Transferor or the Servicer to be an Eligible Receivable (including in any
Monthly Servicer Report or other report delivered pursuant to Section 2.11
hereof) or (y) included in the calculation of Principal Receivables in fact
satisfies at such time the definition of "Eligible Receivable" set forth herein
and, in the case of clause (y) above, is not a Receivable of the type excluded
from the definition of "Principal Receivables."
(m) Coverage Requirement; Amount of Receivables. The Subordinate
Percentage as of the most recent calculation date is not less than the Required
Subordinate Percentage.
(n) Credit Card Guidelines. Since November 1, 1998, there have been no
material changes in the Credit Card Guidelines other than as permitted
hereunder.
(o) No Termination Event. No event has occurred and is continuing and
no condition exists which constitutes a Termination Event or a Potential
Termination Event.
(p) Not an Investment Company. The Transferor is not, and is not
controlled by, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or is exempt from all provisions of such Act.
38
(q) ERISA. Each of the Transferor and its ERISA Affiliates is in
compliance in all material respects with ERISA and no lien exists in favor of
the PBGC on any of the Receivables.
(r) Bulk Sales. No transaction contemplated hereby or by the
Receivables Purchase Agreement requires compliance with any bulk sales act or
similar law.
(s) Transfers Under Receivables Purchase Agreement. Each Receivable
which has been transferred to the Transferor by CAC has been purchased by the
Transferor from CAC pursuant to, and in accordance with, the terms of the
Receivables Purchase Agreement, by CAC from CB&T pursuant to the Initial
Purchase Agreement and, to the extent applicable, by CB&T from the Original
Seller under the Sale and Purchase Agreement.
(t) Preference; Voidability. The Transferor shall have given reasonably
equivalent value to CAC in consideration for the transfer to the Transferor of
the Receivables and Related Security from CAC, and each such transfer shall not
have been made for or on account of an antecedent debt owed by CAC to the
Transferor and no such transfer is or may be voidable under any Section of the
Bankruptcy Reform Act of 1978 (11 U.S.C. Sections 101 et seq.), as amended.
(u) Representations and Warranties of the Transferor. Each of the
representations and warranties of the Transferor set forth in the Receivables
Purchase Agreement is true and correct in all material respects and the
Transferor hereby remakes all such representations and warranties for the
benefit of the Agent, the Buyer, each other Owner and the Administrative Agent.
(v) Notice of Breach. The representations and warranties set forth in
this Section 3.1 shall survive the transfers and assignments of the Receivables.
Upon discovery by the Transferor, the Servicer or the Agent of a breach of any
of the representations and warranties set forth in this Section 3.1, the party
discovering such breach shall give prompt written notice thereof to the other
parties within three Business Days following such discovery, provided that the
failure to give notice within three Business Days does not preclude subsequent
notice.
(w) Notice of Events Having a Material Adverse Effect. The Transferor
shall advise the Agent promptly, in reasonable detail, of the occurrence of any
event, other than as described in Section 3.1(v) or Section 5.1(l), which would
have a material adverse effect on the Agent's, Buyer's or any other Owner's
interest in the Receivables or the collectibility thereof.
(x) Notice of Amendments to Affinity Card Agreement and Facilities
Management Agreement. The Transferor shall deliver to the Agent promptly copies
of all changes or amendments to the Affinity Card Agreement and the Facilities
Management Agreement.
39
SECTION 3.2. [Reserved]
SECTION 3.3. Representations and Warranties of the Servicer. As of the
Closing Date, the Servicer represents and warrants to the Agent, the Buyer and
the other Owners that:
(a) Corporate Existence and Power. The Servicer is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all corporate power and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business in each jurisdiction in which its business is now conducted. The
Servicer is duly qualified to do business in, and is in good standing (or is
exempt from such requirement), in every other jurisdiction in which the nature
of its business requires it to be so qualified, except where the failure to be
so qualified or in good standing would not have a Material Adverse Effect.
(b) Corporate and Governmental Authorization; Contravention. The
execution, delivery and performance by the Servicer of this Agreement are within
the Servicer's corporate powers, have been duly authorized by all necessary
corporate action, require no action by or in respect of, or filing with, any
Governmental Authority or official thereof, and do not contravene, conflict
with, or constitute a default under, any provision of applicable law, rule or
regulation or of the Certificate of Incorporation or Bylaws of the Servicer or
of any agreement, judgment, injunction, order, writ, decree or other instrument
binding upon the Servicer or result in the creation or imposition of any Adverse
Claim on the assets of the Servicer or any of its Subsidiaries.
(c) Binding Effect. This Agreement and each other Transaction Document
to which the Servicer is a party constitute the legal, valid and binding
obligations of the Servicer, enforceable against the Servicer in accordance with
its terms, subject to applicable bankruptcy, insolvency, moratorium or other
similar laws affecting the rights of creditors.
(d) Accuracy of Information. All information heretofore furnished by
the Servicer to the Agent, the Buyer, any other Owner or the Administrative
Agent for purposes of or in connection with this Agreement or any transaction
contemplated hereby is, and all such information hereafter furnished by the
Servicer to the Agent, the Buyer, any other Owner or the Administrative Agent
will be, true, accurate and complete in every material respect, on the date such
information is stated or certified.
(e) Action, Suits. Except as set forth in Exhibit H, there are no
actions, suits or proceedings pending, or to the knowledge of the Servicer
threatened, against or affecting the Servicer or any Affiliate of the Servicer
or their respective properties, in or before any court, arbitrator or other
body, which may, individually or in the aggregate, have a Material Adverse
Effect.
40
(f) Nature of Receivables. Each Receivable included in the calculation
of Principal Receivables in fact satisfies at such time the definition of
"Eligible Receivable" and is not a Receivable excluded from the definition of
"Principal Receivables".
(g) Amount of Receivables. As of November 6, 1998, the aggregate amount
of Receivables was approximately *[material omitted].
(h) Credit Card Guidelines. Since November __, 1998, there have been no
material changes in the Credit Card Guidelines other than as permitted
hereunder.
(i) Collections and Servicing. Since November 1, 1998, there has been
no material adverse change in the ability of the Servicer or Sub-Servicer to
service and collect the Receivables.
(j) Not an Investment Company. The Servicer is not, and is not
controlled by, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or is exempt from all provisions of such Act.
(k) No Conflict. The execution and delivery of this Agreement by the
Servicer, and the performance of the transactions contemplated by this Agreement
and the fulfillment of the terms hereof and thereof applicable to the Servicer,
will not conflict with, violate or result in any breach of any of the material
terms and provisions of, or constitute (with or without notice or lapse of time
or both) a material default under, any indenture, contract, agreement, mortgage,
deed of trust or other instrument to which the Servicer is a party or by which
it or its properties are bound.
(l) All Consents. All authorizations, consents, orders or approvals of
or registrations or declarations with any Governmental Authority required to be
obtained, effected or given by the Servicer in connection with the execution and
delivery of this Agreement by the Servicer and the performance of the
transactions contemplated by this Agreement by the Servicer, have been duly
obtained, effected or given and are in full force and effect.
(m) Tax Status. The Servicer has filed all tax returns (federal, state
and local) required to be filed and has paid or made adequate provision for the
payment of all taxes, assessments and other governmental charges, other than
taxes, assessments and other governmental charges being contested in good faith.
(n) ERISA. The Servicer is in compliance in all material respects with
ERISA.
SECTION 3.4. Reaffirmation of Representation and Warranties by the
Servicer. On each Remittance Date and on the date of each Incremental Transfer
made hereunder, the Servicer shall be deemed to have certified that all
representations
* Deleted per the Registrant's request for confidential treatment and filed
separately with the Commission pursuant to Rule 406 of the Securities Act
of 1933.
41
and warranties described in Section 3.3 hereof are correct on and as of such day
as though made on and as of such date.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1 Conditions to Closing. On or prior to the Closing Date, the
sales of Accounts and initial Receivables under the Sale and Purchase Agreement,
and the sale of Receivables under the Initial Purchase Agreement and Receivables
Purchase Agreement shall have been consummated and the Transferor shall deliver
to the Agent the following documents and instruments and pay the following fees,
all of which shall be in form and substance acceptable to the Agent:
(a) A copy of the resolutions of the Board of Directors of the
Transferor certified by its Secretary approving the execution, delivery and
performance by the Transferor of this Agreement, the Receivables Purchase
Agreement and the other Transaction Documents to be delivered by the Transferor
hereunder or thereunder.
(b) A copy of the resolutions of the Board of Directors of each of CAC
and CompuCredit certified by its Secretary approving the execution, delivery and
performance by it of this Agreement and the other Transaction Documents to which
it is a party to be delivered by it hereunder or thereunder.
(c) The Articles of Incorporation of the Transferor certified by the
Secretary of State or other similar official of the Transferor's jurisdiction of
incorporation dated a date reasonably prior to the Closing Date.
(d) The Articles of Incorporation of each of CAC and CompuCredit
certified by the Secretary of State or other similar official of its
jurisdiction of incorporation dated a date reasonably prior to the Closing Date.
(e) A Good Standing Certificate for the Transferor issued by the
Secretary of State or a similar official of the Transferor's jurisdiction of
incorporation and certificates of qualification as a foreign corporation issued
by the Secretaries of State or other similar officials of each jurisdiction
where such qualification is material to the transactions contemplated by this
Agreement and the other Transaction Documents, in each case, dated a date
reasonably prior to the Closing Date.
(f) A Good Standing Certificate for the each of CAC and CompuCredit
issued by the Secretary of State or a similar official of its jurisdiction of
incorporation and certificates of qualification as a foreign corporation issued
by the Secretaries of State or other similar officials of each jurisdiction when
such qualification is material to the transactions contemplated by this
Agreement and the Receivables Purchase
42
Agreement and the other Transaction Documents, in each case, dated a date
reasonably prior to the Closing Date.
(g) A Certificate of the Secretary of the Transferor substantially in
the form requested by the Agent.
(h) A Certificate of the Secretary of CompuCredit substantially in the
form requested by the Agent.
(i) Copies of proper financing statements (Form UCC-1), dated a date
reasonably near to the date of the initial Incremental Transfer naming the
Transferor as the debtor in favor of the Agent, for the benefit of the Buyer and
the other Owners, as secured party or other similar instruments or documents as
may be necessary or in the reasonable opinion of the Agent desirable under the
UCC of all appropriate jurisdictions or any comparable law to perfect the
Agent's undivided percentage interest in all Receivables and the Related
Security, Collections and Proceeds relating thereto.
(j) Copies of proper financing statements (Form UCC-1), dated a date
reasonably near to the date of the initial Incremental Transfer naming (i) CAC
as the debtor in favor of the Transferor as secured party and the Agent, for the
benefit of the Buyer and the other Owners, as assignee of the secured party,
(ii) CB&T as the debtor in favor of CAC as secured party and (iii) the Original
Seller as the debtor and CB&T as secured party, or other similar instruments or
documents as may be necessary or in the reasonable opinion of the Agent
desirable under the UCC of all appropriate jurisdictions or any comparable law
to perfect the Transferor's interest in all Receivables.
(k) Copies of proper financing statements (Form UCC-3), if any,
necessary to terminate all security interests and other rights of any person in
Accounts or Receivables previously granted.
(l) Certified copies of request for information or copies (Form UCC-11)
(or a similar search report certified by parties acceptable to the Agent) dated
a date reasonably near the date of the initial Incremental Transfer listing all
effective financing statements which name CB&T, CAC or the Transferor (under
their respective present names and any previous names) as debtor and which are
filed in jurisdictions in which the filings were made pursuant to items (i) or
(j) above together with copies of such financing statements (none of which shall
cover any Receivables or Accounts).
(m) An opinion of Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP and Xxxxx, Day,
Xxxxxx & Xxxxx, counsel to the Transferor, the Servicer and CAC, covering the
matters requested by the Agent.
(n) An opinion of Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP, counsel to the
Transferor and CAC, covering certain bankruptcy and insolvency matters (i.e.
"true sale" and nonconsolidation) in form and substance satisfactory to the
Agent and Agent's counsel.
43
(o) The Account Schedule, consisting of a computer tape setting forth
all Receivables and the Principal Receivables thereon as of the Cut-Off Date and
such other information as the Agent may reasonably request.
(p) An executed copy, including exhibits and opinions thereto, of this
Agreement, the Initial Purchase Agreement, the Receivables Purchase Agreement,
the Fee Letter and each of the other Transaction Documents.
(q) The Arrangement Fee in accordance with Section 2.7(b).
(r) A summary of daily net settlements to the extent provided by the
Original Seller for the period from November 7, 1998 through the Closing Date.
(s) Evidence of the appointment of CT Corporation as agent for process
as required by Section 11.4 hereof.
(t) An executed copy of the CB&T Agreement.
(u) Copies of all documents relating to the servicing of Accounts,
including all fee schedules and exhibits.
(v) An executed copy of the Fee Letter.
(w) The form of Credit Card Agreement currently in effect.
(x) A copy of the Credit Card Guidelines.
ARTICLE V
COVENANTS
SECTION 5.1 Affirmative covenants of Transferor. At all times from the
date hereof to the later to occur of (i) the Termination Date or (ii) the date
on which the Net Investment has been reduced to zero, all Carrying Costs and all
other Aggregate Unpaids shall have been paid in full, in cash, unless the Agent
shall otherwise consent in writing:
(a) Financial Reporting. The Transferor will maintain a system of
accounting established and administered in accordance with GAAP, and furnish to
the Agent:
(i) Annual Reporting. Within one hundred and five (105) days
after the close of the Transferor's fiscal years, beginning with the fiscal year
ending in 1998, unaudited financial statements, prepared in accordance with GAAP
for the Transferor, including balance sheets (but excluding financial footnotes,
except for footnotes regarding accounting policies and procedures) as of the end
of such period,
44
related statements of operations, shareholder's equity and cash flows, and
accompanied by a certificate of the chief financial officer or chairman,
president, treasurer or any executive vice president of the Transferor, stating
that no Termination Event or Potential Termination Event exists, or if any
Termination Event or Potential Termination Event exists, stating the nature and
status thereof.
(ii) Quarterly Reporting. Within sixty (60) days after the
close of the first three quarterly periods of the Transferor's fiscal years,
unaudited balance sheets, excluding financial footnotes, as at the close of each
such period and related statements of operations, shareholder's equity and cash
flows for the period from the beginning of such fiscal year to the end of such
quarter, all certified by its chief financial officer.
(iii) Compliance Certificate. Together with the financial
statements required hereunder, a compliance certificate signed by the
Transferor's chief financial officer stating that (x) the attached financial
statements (except for the financial footnotes excluded as described above) have
been prepared in accordance with GAAP and, to the best of such Person's
knowledge, accurately reflect the financial condition of the Transferor and (y)
to the best of such Person's knowledge, no Termination Event or Potential
Termination Event exists, or if any Termination Event or Potential Termination
Event exists, stating the nature and status thereof.
(iv) Shareholders Statements and Reports. Promptly upon the
furnishing thereof to the shareholders of the Transferor, copies of all
financial statements, reports and proxy statements so furnished.
(v) S.E.C. Filings. Promptly upon the filing thereof, copies
of all registration statements and annual, quarterly, monthly or other regular
reports which the Transferor files with the Securities Exchange Commission.
(vi) Notice of Termination Events or Potential Termination
Events. As soon as possible and in any event within two (2) days after the
occurrence of each Termination Event or each Potential Termination Event, a
statement of the chief financial officer or chief accounting officer of the
Transferor setting forth details of such Termination Event or Potential
Termination Event and the action which the Transferor proposes to take with
respect thereto.
(vii) ERISA. Promptly after the filing or receiving thereof,
copies of all reports and notices with respect to any Reportable Event (as
defined in Article IV of ERISA) which the Transferor or any ERISA Affiliate
thereof, files under ERISA with the Internal Revenue Service, the PBGC or the
U.S. Department of Labor or which the Transferor or any ERISA Affiliates
thereof, receive from the Internal Revenue Service, the PGBC or the U.S.
Department of Labor.
(viii) Notices under Transaction Documents. Promptly after its
receipt thereof, copies of all notices, amendments and waivers given to the
Transferor
45
by CB&T, CompuCredit or CAC under or pursuant to any of the Transaction
Documents.
(ix) Other Information. Such other information (including
non-financial information) as the Agent may from time to time reasonably request
(as can reasonably be obtained by the Transferor).
(b) Conduct of Business. The Transferor will carry on and conduct its
business in substantially the same manner and in substantially the same fields
of enterprise as it is presently conducted and do all things necessary to remain
duly incorporated, validly existing and in good standing as a domestic
corporation in its jurisdiction of incorporation and maintain all requisite
authority to conduct its business in each jurisdiction in which its business is
conducted.
(c) Compliance with Laws. The Transferor will comply with all laws,
rules, regulations, orders, writs, judgments, injunctions, decrees or awards to
which it or its respective properties may be subject.
(d) Furnishing of Information and Inspection of Records. The Transferor
will furnish to the Agent from time to time such information with respect to the
Receivables as the Agent may reasonably request, including, without limitation,
listings identifying the Principal Receivables for each Receivable. The
Transferor will, at any time and from time to time during regular business hours
permit the Agent, or its agents or representatives, at the Transferor's expense
(i) to examine and make copies of and take abstracts from all Records and (ii)
to visit the offices and properties of the Transferor for the purpose of
examining such Records, and to discuss matters relating to Receivables or the
Transferor's performance hereunder and under the other Transaction Documents to
which such Person is a party with any of the officers, directors, employees or
independent public accountants of the Transferor having knowledge of such
matters. In addition, the Transferor shall (x) use its best efforts to permit
the Agent to have access to the premises and employees of Novus Services, Inc.,
as servicer under the Interim Servicing Agreement, for the purpose of obtaining
such information with respect to the Receivables as the Agent shall reasonably
request and (y) if access cannot be obtained, as referred to in clause (x)
above, if requested by the Agent, the Transferor shall exercise its rights under
the Receivables Purchase Agreement to cause CAC to visit the premises of Novus
Services, Inc. in order to obtain all such information as is reasonably
requested by the Agent. Notwithstanding the foregoing, the Agent or its agents
and representatives shall not visit the offices and properties as described in
clause (ii) above more frequently than (a) once a month for the first six months
after the Closing Date and two times thereafter until the first anniversary of
the Closing Date and (b) four times per year after the first anniversary of the
Closing Date; provided that, neither of the limitations set forth in (a) or (b)
above shall apply upon the occurrence and during the continuance of a
Termination Event or Potential Termination Event.
46
(e) Keeping of Records and Books of Account. The Transferor will
maintain and implement administrative and operating procedures (including,
without limitation, an ability to recreate records evidencing Receivables in the
event of the destruction of the originals thereof), and keep and maintain, all
documents, books, records and other information reasonably necessary or
advisable for the collection of all Receivables (including, without limitation,
records adequate to permit the daily identification of each new Receivable and
all Collections of and adjustments to each existing Receivable). The Transferor
will give the Agent notice of any material change in the administrative and
operating procedures of the Transferor referred to in the previous sentence.
(f) Treatment. The Transferor will not (i) account for (including for
accounting and tax purposes), or otherwise treat, the transactions contemplated
by the Receivables Purchase Agreement in any manner other than as a sale of
Receivables by CAC to the Transferor or (ii) account for or otherwise treat the
transactions contemplated hereby in any manner other than as a pledge of
Receivables by the Transferor to the Agent for the benefit of the Buyer and the
other Owners, as applicable. In addition, the Transferor shall disclose (in a
footnote or otherwise) in all of its respective financial statements (including
any such financial statements consolidated with any other Persons' financial
statements) the existence and nature of the transaction contemplated hereby and
by the Receivables Purchase Agreement and the interest of the Transferor and the
Agent, on behalf of the Buyer and the other Owners, as owner and pledgee,
respectively, in the Affected Assets.
(g) Separate Business. The Transferor shall:
(i) Maintain in full effect its existence, rights and
franchises as a corporation or (after 10 days' prior notice given to
the Agent and the execution and delivery by the Transferor of all
documents and opinions of counsel as the Agent shall request, together
with the Agent's approval of any organizational documents therefor) a
limited liability corporation, under the laws of the state of its
organization or incorporation and will obtain and preserve its
qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement and the Receivables Purchase Agreement
and each other instrument or agreement necessary or appropriate to the
proper administration hereof and to permit and effectuate the
transactions contemplated hereby.
(ii) Maintain its own deposit account or accounts, separate
from those of any Affiliate of such Transferor, with commercial banking
institutions. The funds of such Transferor will not be diverted to any
other Person or for other than the corporate use of such Transferor,
and, except as may be expressly permitted by this Agreement or the
Receivables
47
Purchase Agreement, the funds of such Transferor shall not be
commingled with those of any Affiliate of such Transferor.
(iii) Ensure that, to the extent that it shares the same
officers or other employees as any of its partners, members, managers,
stockholders or Affiliates, the salaries of and the expenses related to
providing benefits to such officers and other employees shall be fairly
allocated among such entities, and each such entity shall bear its fair
share of the salary and benefit costs associated with all such common
officers and employees.
(iv) Ensure that, to the extent that it jointly contracts with
any of its partners, members, managers, stockholders or Affiliates to
do business with vendors or service providers or to share overhead
expenses, the costs incurred in so doing shall be allocated fairly
among such entities, and each such entity shall bear its fair share of
such costs. To the extent that such Transferor contracts or does
business with vendors or service providers where the goods and services
provided are partially for the benefit of any other Person, the costs
incurred in so doing shall be fairly allocated to or among such
entities for whose benefit the goods and services are provided, and
each such entity shall bear its fair share of such costs. All material
transactions between such Transferor and any of its partners, members,
managers, stockholders or Affiliates shall be only on an arm's-length
basis and shall receive the approval of such Transferor's Board of
Directors, partners, members, managers or other governing body
including at least one Independent Director (defined below).
(v) Maintain a principal executive and administrative office
through which its business is conducted and a telephone number separate
from those of its members or stockholders and Affiliates. To the extent
that such Transferor and any of its members or stockholders or
Affiliates have offices in contiguous space, there shall be fair and
appropriate allocation of overhead costs among them, and each such
entity shall bear its fair share of such expenses.
(vi) Conduct its affairs strictly in accordance with its
Certificate of Incorporation or other certificate of formation, as the
case may be, and observe all necessary, appropriate and customary
corporate formalities (or such formalities appropriate to the entity),
including, but not limited to, holding all regular and special
stockholders' and directors', or partners', members' or managers', as
the case may be, meetings appropriate to authorize all entity action,
keeping separate and accurate minutes of such meetings, passing all
resolutions or consents necessary to authorize actions taken or to be
taken, and maintaining accurate and separate books, records, accounts
and other corporate documents and records,
48
including, but not limited to, payroll and intercompany transaction
accounts. Regular stockholders' or other owners' and directors',
partners', members' or managers', as the case may be, meetings shall be
held at least annually. The Transferor shall not engage in any business
not permitted by its Certificate of Incorporation, as in effect on the
Closing Date.
(vii) Ensure that its Board of Directors shall at all times
include at least one Independent Director (for purposes hereof,
"Independent Director" shall mean any member of the Board of Directors,
or partner, member or manager, as the case may be, of such Transferor
that is not and has not at any time been (x) a director, partner,
member, manager, officer, agent, employee or shareholder of any
Affiliate of such Transferor (other than any director of the Transferor
who is also a similarly unaffiliated director and/or officer of a
special purpose corporation which has been established by CAC or any of
its Affiliates in conjunction with the securitization by CAC or such
Affiliate of its credit card receivables) or (y) a member of the
immediate family of any of the foregoing); provided, that, within 90
days after the Closing Date, the Transferor shall appoint an
Independent Director reasonably satisfactory to the Agent, the consent
of the Agent not to be unreasonably withheld.
(viii) Ensure that decisions with respect to its business and
daily operations shall be independently made by such Transferor
(although the officer making any particular decision may also be an
officer, partner, member, manager or director of an Affiliate of such
Transferor) and shall not be dictated by an Affiliate of such
Transferor.
(ix) Act solely in its own corporate or entity name and
through its own authorized officers, members, managers and agents, and
no Affiliate of such Transferor shall be appointed to act as agent of
such Transferor, except as expressly contemplated by this Agreement or
the Receivables Purchase Agreement. The Transferor shall at all times
use its own stationery.
(x) Ensure that no Affiliate of such Transferor shall advance
funds to such Transferor, and no Affiliate of such Transferor will
otherwise guaranty debts of, such Transferor, except for the guaranty
of CompuCredit contained in this Agreement; provided, however, that (i)
an Affiliate of such Transferor may provide funds to such Transferor in
connection with the capitalization of such Transferor, including
capital necessary to assure that such Transferor has "substantial
assets" as described in Treasury Regulation Section 301.7701-2(d)(2) as
in effect prior to amendment by Treasury Decision 8697 on December 17,
1996.
49
(xi) Other than organizational expenses and as expressly
provided herein, pay all expenses, indebtedness and other obligations
incurred by it from Transferor's own separate assets.
(xii) Not enter into any guaranty, or otherwise become liable,
with respect to any obligation of any Affiliate of such Transferor nor
shall the Transferor make any loans to any Person.
(xiii) Ensure that any financial reports required of such
Transferor shall comply with generally accepted accounting principles
and shall be issued separately from, but may be consolidated with, any
reports prepared for any of its Affiliates, provided that any such
consolidated reports shall indicate that the assets of the Transferor
are not available to the creditors of any Affiliate of the Transferor.
(xiv) Ensure that at all times it is adequately capitalized to
engage in the transactions contemplated in its Certificate of
Incorporation or other organization documents.
(xv) Not commingle its assets with any Affiliate of the
Transferor, except as provided in the Transaction Documents.
(xvi) Make investments directly or by brokers engaged and paid
by Transferor or its agents (provided that if any such agent is an
Affiliate of the Transferor it shall be compensated at a fair market
rate for its services).
(h) Corporate Documents. The Transferor shall not amend, alter, change
or repeal Articles II, IV(b), IX, X, XI or XII of its Articles of Incorporation
or Articles II, Article IV Section 4(b) or Article VII Section 2(a) of its
bylaws without the prior written consent of the Agent.
(i) Receivables Purchase Agreement. The Transferor, in its capacity as
purchaser of the Receivables from CAC (as purchaser of the Receivables from
CB&T) pursuant to the Receivables Purchase Agreement, will at all times enforce
the covenants and agreements of CAC in the Receivables Purchase Agreement and
vigorously pursue all its rights and remedies thereunder, including, without
limitation, its rights and remedies with respect to the Sale and Purchase
Agreement and Initial Purchase Agreement. With respect to any Receivable sold by
CAC, the Transferor shall, and shall cause CAC to, effect such sale under, and
pursuant to the terms of, a Receivables Purchase Agreement, including, without
limitation, the payment by the Transferor in cash to CAC of an amount equal to
the purchase price for such Receivable as required or permitted by the terms of
such Receivables Purchase Agreement.
50
(j) Security Interests. Except for the conveyance hereunder and under
the Purchase Agreement, the Transferor will not sell, pledge, assign or transfer
to any other Person, or grant, create, incur, assume or suffer to exist any
Adverse Claim on, any Receivable (or any underlying receivable) conveyed by it
to the Agent, on behalf of the Buyer and the other Owners, whether now existing
or hereafter created, or any interest therein, and the Transferor shall defend
the right, title and interest of the Agent, on behalf of the Buyer and the other
Owners in, to and under the Receivables, whether now existing or hereafter
created, against all claims of third parties claiming through or under the
Transferor; provided, however, the Transferor may sell, pledge, transfer,
convey, hypothecate or otherwise grant a security interest in the Transferor's
Interest to any Person so long as (i) any claim of any such Person in the
Affected Assets pursuant to any such sale, pledge, transfer, conveyance,
hypothecation or grant of a security interest in the Transferor's Interest is in
all respects subordinate to the claims of the Agent, the Buyer and the other
Owners, and the Agent shall be satisfied with the terms of such subordination,
(ii) such person shall agree in writing to be bound by the provisions of this
Agreement relating to the Transferor's Interest and to Sections 11.9 and 11.10
hereof and (iii) such Person shall execute any documents, or deliver any
opinions, reasonably requested by the Agent in order to ensure that the rights
and remedies of the Agent, the Buyer and the other Owners with respect to the
Transferred Interest are not impaired as a result of any such sale, pledge,
transfer, conveyance, hypothecation or security interest.
(k) Delivery of Collections or Recoveries. In the event that the
Transferor receives Collections or Recoveries, the Transferor agrees to pay to
the Servicer all such Collections and Recoveries as soon as practicable after
receipt thereof but in no event later than two Business Days after receipt.
(l) Notice of Liens. The Transferor shall notify the Agent in writing
promptly after becoming aware of any Adverse Claim on any Receivable conveyed by
it to the Agent, the Buyer or any Owner other than the conveyances hereunder,
under the Purchase Agreement and under the receivables purchase agreements.
(m) Amounts. The Transferor agrees to remit, or cause to be remitted,
to the Collection Account, all amounts paid as adjustments after the Closing
Date with respect to the purchase price paid for the Receivables under the Sale
and Purchase Agreement, and all amounts required to be paid by CB&T to the
Agent, Buyer, any other Owner or Transferor pursuant to the CB&T Agreement and
received by the Transferor, all of the foregoing to be deemed part of
"Collections."
(n) Receivables Purchase Agreement. The Transferor further covenants
that it will not amend, modify or supplement the Receivables Purchase Agreement
or enter into a new receivables purchase agreement without the prior written
consent of the Agent and will not take any other action under any other
Transaction Documents to which it is a party that would have a material adverse
effect on the
51
Agent, the Buyer, or any other Owner or which is inconsistent with the terms of
any other Transaction Document.
SECTION 5.2. Negative Covenants of the Transferor. At all times from
the date hereof to the later to occur of (i) the Termination Date or (ii) the
date on which the Buyer's Net Investment has been reduced to zero, all Carrying
Costs and all other Aggregate Unpaids shall have been paid in full, in cash,
unless the Agent shall otherwise consent in writing:
(a) No Sales, Liens, Etc. Except as otherwise provided herein and in
the Receivables Purchase Agreement, the Transferor will not sell, assign (by
operation of law or otherwise) or otherwise dispose of, or create or suffer to
exist any Adverse Claim upon (or the filing of any financing statement) or with
respect to any of the Affected Assets.
(b) No Extension or Amendment of Receivables. Except as otherwise
permitted in Section 6.2 hereof or the Credit Card Guidelines, the Transferor
will not extend, amend or otherwise modify the terms of any Receivable, or
amend, modify or waive any term or condition of any Account related thereto.
(c) Change of Name, Etc. The Transferor will not change its name,
identity or structure or the location of its chief executive office, unless at
least 10 days prior to the effective date of any such change the Transferor
delivers to the Agent such documents, instruments or agreements, executed by the
Transferor, as are necessary to reflect such change and to continue the
perfection of the Agent's security interests in the Affected Assets.
(d) Other Debt. Except as provided for herein, the Transferor will not
create, incur, assume or suffer to exist any Indebtedness whether current or
funded, or any other liability other than (i) indebtedness of the Transferor
under the Transaction Documents and (ii) other Indebtedness incurred in the
ordinary course of its business in an amount not to exceed $100,000 at any time
outstanding.
(e) ERISA Matters. The Transferor will not (i) engage or permit any of
its respective ERISA Affiliates to engage in any prohibited transaction (as
defined in Section 4975 of the Code and Section 406 of ERISA) for which an
exemption is not available or has not previously been obtained from the U.S.
Department of Labor; (ii) permit to exist any accumulated funding deficiency (as
defined in Section 302(a) of ERISA and Section 412(a) of the Code) or funding
deficiency with respect to any Benefit Plan other than a Multiemployer Plan;
(iii) fail to make any payments to any Multiemployer Plan that the Transferor or
any ERISA Affiliate thereof is required to make under the agreement relating to
such Multiemployer Plan or any law pertaining thereto; (iv) terminate any
Benefit Plan so as to result in any liability; or (v) permit to exist any
occurrence of any reportable event described in Title IV of ERISA which
represents a material risk of a liability to the Transferor or any ERISA
Affiliate under ERISA or the Code.
52
(f) Changes to Credit Card Agreements. The Transferor shall not change
(or consent to change) the terms and provisions of the Credit Card Agreements or
the Credit Card Guidelines in any respect (including, without limitation, the
calculation of the amount, and the timing, of uncollectible Receivables) except
to the extent (a) such change is made applicable to the comparable segment of
the consumer revolving credit accounts owned or serviced by the Transferor, that
have characteristics the same as, or substantially similar to, the Accounts that
are the subject of such change or (b) if it does not own or service such a
comparable segment, it will not make any such change with the intent to
materially benefit itself over the Agent, the Buyer or any other Owner, and such
change does not materially and adversely affect the rights of the Agent, the
Buyer or any other Owner in the Receivables or the collectibility of the
Receivables. References to the Receivables in this paragraph shall be deemed to
refer to the Receivables in the aggregate.
(g) No Assignment. The Transferor shall not assign any of its rights
(other than as permitted pursuant to Section 5.1(j)) or delegate any of its
duties hereunder or under any of the other Transaction Documents to which it is
a party without the prior written consent of the Agent.
(h) No Designation. The Transferor shall not designate or permit to be
designated an Account Owner other than CB&T without the prior written consent of
the Agent and the execution and delivery of all financing statements and
agreements required by the Agent to perfect and protect the interests of the
Agent, the Buyer and the other Owners herein, which shall be satisfactory to the
Agent.
(i) Receivables Not To Be Evidenced by Promissory Notes. Except in
connection with its enforcement or collection of an Account, the Transferor will
take no action to cause any Receivable in which an undivided interest is
conveyed by it hereunder to be evidenced by any instrument (as defined in the
UCC) and if any such Receivable is so evidenced, it shall be treated as a
Receivable which is subject to Section 2.9 (b) hereof.
SECTION 5.3. Affirmative Covenants of the Servicer. At all times from
the date hereof to the later to occur of (i) the Termination Date or (ii) the
date on which the Net Investment has been reduced to zero, all Carrying Costs
shall have been paid in full and all other Aggregate Unpaids shall have been
paid in full, in cash, unless the Agent shall otherwise consent in writing:
(a) Conduct of Business. The Servicer will carry on and conduct its
business in substantially the same manner and in substantially the same fields
of enterprise as it is presently conducted and do all things necessary to remain
duly incorporated, validly existing and in good standing as a domestic
corporation in its jurisdiction of incorporation and maintain all requisite
authority to conduct its business in each jurisdiction in which its business is
conducted.
53
(b) Compliance with Laws. The Servicer shall duly satisfy all
obligations on its part to be fulfilled under or in connection with each
Receivable and the related Account, if any, will maintain in effect all
qualifications required under Requirements of Law in order to service properly
each Receivable and the related Account, if any, and will comply in all material
respects with all other Requirements of Law in connection with servicing each
Receivable and the related Account the failure to comply with which would have a
material adverse effect on the Agent's, the Buyer's or any other Owner's
interest in the Receivables or the collectibility thereof.
(c) Furnishing of Information and Inspection of Records. The Servicer
will furnish to the Agent from time to time such information with respect to the
Accounts and the Receivables as the Agent may reasonably request, including,
without limitation, listings identifying the Obligor and the related Principal
Receivables. The Servicer will, at any time and from time to time during regular
business hours permit the Agent, or its agents or representatives, at the
Servicer's expense (i) to examine and make copies of and take abstracts from all
Records and (ii) subject to the same limitations as the last sentence of Section
5.1(d) with respect to the Servicer, to visit the offices and properties of the
Servicer for the purpose of examining such Records, and to discuss matters
relating to Receivables or the Servicer's performance hereunder and under the
other Transaction Documents to which such Person is a party with any of the
officers, directors, employees or independent public accountants of the Servicer
having knowledge of such matters.
(d) Keeping of Records and Books of Account. The Servicer will maintain
and implement administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing Receivables in the event
of the destruction of the originals thereof), and keep and maintain, all
documents, books, records and other information reasonably necessary or
advisable for the collection of all Receivables (including, without limitation,
records adequate to permit the daily identification of each new Receivable and
all Collections of and adjustments to each existing Receivable). The Servicer
will give the Agent notice of any material change in the administrative and
operating procedures of the Servicer referred to in the previous sentence.
(e) Credit Card Guidelines. The Servicer will comply in all material
respects with the Credit Card Guidelines in regard to each Receivable and the
related Account.
(f) Collections Received. The Servicer shall hold in trust, and
deposit, immediately, but in any event not later than two Business Days after
its receipt thereof, to the Collection Account any Collections received from
time to time by the Servicer.
(g) FICO Risk Scores. The Servicer will, once every three months,
update the Fair, Xxxxxx & Co. credit risk score with respect to each Account the
54
Receivables of which have not become Defaulted Receivables and append the
Account Schedule to reflect such updated scores.
(h) Status Reports. The Servicer shall provide the Agent with a copy of
the "monthly status report" received by the Servicer referenced in Section 2.17
of the Affinity Card Agreement or Section 1 of the Facilities Management
Agreement.
(i) Facilities Management Agreement. The Servicer shall deliver to the
Agent an execution copy of the Facilities Management Agreement, if and when
executed.
(j) Notices. The Servicer shall promptly notify the Agent of CB&T's
failure to observe, keep or perform any material term, condition, covenant,
representation or warranty of the Facilities Management Agreement, Affinity Card
Agreement or Initial Purchase Agreement. Promptly after its receipt thereof, the
Servicer shall deliver to the Agent copies of all notices, amendments and
waivers delivered by or to the Servicer under or pursuant to any of the
Transaction Documents. The Servicer shall deliver to the Agent (a) on or as soon
as practicable after the Closing Date, the Valuation Date Statement (as defined
in the Sale and Purchase Agreement) and (b) when delivered pursuant to the Sale
and Purchase Agreement, copies of all other reports relating to the valuation of
the Accounts or Receivables on the Closing Date.
(k) New Credit Card Agreement. Promptly after the date of the
Conversion, deliver to the Agent any new form of Credit Card Agreement to be
used by the Servicer.
(l) Amounts. The Servicer agrees to remit, or cause to be remitted, to
the Collection Account, all amounts paid as adjustments after the Closing Date
with respect to the purchase price paid for the Receivables under the Sale and
Purchase Agreement, and all amounts required to be paid by CB&T to the Agent, or
Transferor pursuant to the CB&T Agreement and received by the Servicer, all of
the foregoing to be deemed part of "Collections."
SECTION 5.4. Negative Convenants of the Servicer. At all times from the
date hereof to the later to occur of (i) the Termination Date or (ii) the date
on which the Buyer's Net Investment has been reduced to zero, all Carrying Costs
and all other Aggregate Unpaids shall have been paid in full, in cash, unless
the Agent shall otherwise consent in writing:
(a) No Extension or Amendment of Receivables. Except as otherwise
permitted in Section 6.2 hereof and the Credit Card Guidelines, the Servicer
will not extend, amend or otherwise modify the terms of any Receivable, or
amend, modify or waive any term or condition of any Account related thereto.
55
(b) No Change in Business or Credit Card Guidelines. The Servicer will
not make any change in the character of its business or in the Credit Card
Guidelines, which change would, in either case, impair the collectibility of any
substantial portion of the Receivables or otherwise result in a material adverse
effect on the Agent's, [Liquidity Banks]' or Buyer's interest in the Receivables
or the collectibility thereof.
(c) Marketing or Sale of Accounts. The Servicer will not, and will not
permit any of its Affiliates to, market for balance transfers any Accounts with
respect to which Transferred Interests in Receivables have been conveyed
hereunder, except for Accounts with Defaulted Receivables and other credit card
accounts, provided, that, such credit card accounts shall constitute Accounts
hereunder and the receivables created thereunder shall constitute Receivables
hereunder.
(d) Amendment to Transaction Documents. The Servicer will not amend,
modify, or supplement any Transaction Document to which it is a party or waive
any provisions thereof, in each case except with the prior written consent of
the Agent, except that no such consent shall be required with respect to any
amendment to the Affinity Card Agreement or Facilities Management Agreement;
provided, however, that each of the Buyer, each other Owner (by acceptance of
its interest in the Transferred Interest) and the Agent agrees that any
termination or revocation of, or reduction in, the Letter of Credit (as such
term is defined in the Affinity Card Agreement) with the consent of CB&T shall
be deemed not to have a material adverse effect on the interests of the Agent,
the Buyer or any of the other Owners and shall not require any consent of the
Agent or the Administrative Agent (but notice thereof shall be provided to the
Agent); nor shall the Servicer take any other action under such Transaction
Documents that shall have a material adverse effect on the interests of the
Agent, the Buyer, or any of the other Owners or which is inconsistent with the
terms of such Transaction Document. The Servicer shall deliver to the Agent
promptly copies of all changes or amendments to the Affinity Card Agreement and
the Facilities Management Agreement.
(e) No Rescission or Cancellation. The Servicer shall not permit any
rescission or cancellation of any Receivable except in accordance with the
Credit Card Guidelines or as ordered by a court of competent jurisdiction or
other Governmental Authority.
(f) Protection of Rights. The Servicer shall take no action which, nor
omit to take any action the omission of which, would impair the rights of the
Agent, the Buyer or any other Owner, as the case may be, in any Receivable or
the related Account, if any, nor shall it reschedule, revise or defer payments
due on any Receivable except in accordance with the Credit Card Guidelines.
(g) Receivable Not To Be Evidenced by Promissory Notes. Except in
connection with its enforcement or collection of an Account, the Servicer will
take no action to cause any Receivable to be evidenced by any instrument (as
defined in the
56
UCC) and if any Receivable is so evidenced as a result of the Servicer's actions
it shall be treated as a Receivable which is subject to Section 2.9(b) hereof.
ARTICLE VI
ADMINISTRATION AND COLLECTIONS
SECTION 6.1 Appointment of Servicer. The servicing, administering and
collection of the Receivables shall be conducted by such Person (the "Servicer")
so designated from time to time in accordance with this Section 6.1. CompuCredit
is hereby designated as, and hereby agrees to perform the duties and obligations
of, the Servicer pursuant to the terms hereof. The Servicer may not, except
pursuant to the Affinity Card Agreement, the Facilities Management Agreement or
the CB&T Agreement, delegate any of its rights, duties or obligations hereunder,
or designate a substitute Servicer, without the prior written consent of the
Agent, and provided that the Servicer shall continue to remain solely liable for
the performance of the duties as Servicer hereunder notwithstanding any such
delegation hereunder. The Agent may, and upon the direction of the Majority
Investors the Agent shall, after the occurrence of a Servicer Default designate
as Servicer any Person (including itself) to succeed CompuCredit or any
successor Servicer, on the condition in each case that any such Person so
designated shall agree to perform the duties and obligations of the Servicer
pursuant to the terms hereof. The Agent may notify any Obligor of the
Transferred Interest.
SECTION 6.2. Duties of Servicer
(a) The Servicer shall take or cause to be taken all such action as may
be necessary or advisable to collect each Receivable from time to time, all in
accordance with applicable laws, rules and regulations, with reasonable care and
diligence, and in accordance with the Credit Card Guidelines. Each of the
Transferor, the Buyer, the Agent and any other Owners hereby appoints as its
agent the Servicer, from time to time designated pursuant to Section 6.1 hereof,
to enforce its respective rights and interests in and under the Affected Assets.
To the extent permitted by applicable law, each of the Transferor and the
existing Servicer hereby grants to any Servicer appointed hereunder an
irrevocable power of attorney to take any and all steps in the Transferor's
and/or the existing Servicer's name and on behalf of the Transferor or the
existing Servicer necessary or desirable, in the reasonable determination of the
Servicer, to collect all amounts due under any and all Receivables, including,
without limitation, endorsing the Transferor's and/or the existing Servicer's
name on checks and other instruments representing Collections and enforcing such
Receivables and the related Accounts. The Servicer shall set aside for the
account of the Transferor and the Agent their respective allocable shares of the
Collections of Receivables in accordance with Section 2.5 hereof. The Servicer
shall segregate and deposit to the Agent's account the Agent's allocable share
of Collections of Receivables when required
57
pursuant to Article II hereof. The Transferor shall deliver to the Servicer and
the Servicer shall hold in trust for the Transferor and the Agent, on behalf of
the Buyer and any other Owner, in accordance with their respective interests,
all Records which evidence or relate to Receivables or Related Security. The
Servicer shall not make the Agent, the Buyer or any other Owner a party to any
litigation without the prior written consent of such Person.
(b) The Servicer shall, as soon as practicable following receipt
thereof, turn over to the Transferor any collections of any indebtedness of any
Person which is not on account of a Receivable. The Servicer, if other than the
Transferor or CompuCredit or an Affiliate of the Transferor or CompuCredit,
shall as soon as practicable upon demand, deliver to CompuCredit all Records in
its possession which evidence or relate to indebtedness of an Obligor which is
not a Receivable.
(c) Notwithstanding anything to the contrary contained in this Article
VI, the Servicer, if not the Transferor, CompuCredit or any Affiliate of the
Transferor or CompuCredit, shall have no obligation to collect, enforce or take
any other action described in this Article VI with respect to any indebtedness
that is not included in the Transferred Interest other than to deliver to the
Transferor the collections and documents with respect to any such indebtedness
as described in Section 6.2(b) hereof.
SECTION 6.3. Rights After Designation of New Servicer. At any time
following the designation of a Servicer (other than the Transferor, CompuCredit
or any Affiliate of the Transferor or CompuCredit) pursuant to Section 6.1
hereof:
(i) The Agent may direct that payment of all amounts payable
under any Receivable be made directly to the Agent or its designee.
(ii) The Transferor shall, at the Agent's request and at the
Transferor's expense, give notice of the Agent's, the Transferor's,
Buyer's and/or any other Owners' respective undivided interests in the
Receivables to each Obligor and direct that payments be made directly
to the Agent or its designee.
(iii) The Transferor shall, at the Agent's request, (A)
assemble all of the Records, and shall make the same available to the
Agent or its designee at a place selected by the Agent or its designee,
and (B) segregate all cash, checks and other instruments received by it
from time to time constituting Collections of Receivables in a manner
acceptable to the Agent and shall, promptly upon receipt, remit all
such cash, checks and instruments, duly endorsed or with duly executed
instruments of transfer, to the Agent or its designee.
(iv) The Transferor and the existing Servicer hereby authorize
the Agent to take any and all steps in the Transferor's or the existing
58
Servicer's name and on behalf of the Transferor and the existing
Servicer necessary or desirable, in the determination of the Agent, to
collect all amounts due under any and all Receivables, including,
without limitation, endorsing the Transferor's or the existing
Servicer's name on checks and other instruments representing
Collections and enforcing such Receivables and the related Accounts.
SECTION 6.4. Servicer Default. The occurrence of any one or more of the
following events shall constitute a Servicer Default:
(a) the Servicer shall fail to make any payment, transfer or deposit
required to be made by it hereunder within five Business Days after the date on
which it was required to be made hereunder; or
(b) the Servicer shall fail duly to observe or perform in any material
respect any other covenants or agreements of the Servicer set forth in this
Agreement, which continues unremedied for a period of 10 days; or the Servicer
shall assign or delegate its duties under this Agreement, except as permitted by
Section 6.1 hereof; or
(c) any representation, warranty, certification or statement made by
the Servicer in this Agreement or in any of the other Transaction Documents or
in any certificate or report delivered by it pursuant to any of the foregoing
shall prove to have been incorrect when made or deemed made, which has a
material adverse effect on the rights of the Agent, the Buyer or any other Owner
and which continues for a period of 10 days; or
(d) any Event of Bankruptcy shall occur with respect to the Servicer.
SECTION 6.5. Responsibilities of the Transferor. Anything herein to the
contrary notwithstanding, the Transferor shall (i) perform all of its
obligations under the Accounts related to the Receivables to the same extent as
if interests in such Receivables had not been transferred hereunder and the
exercise by the Agent, the Buyer and any other Owner of their rights hereunder
and under the Receivables Purchase Agreement shall not relieve the Transferor
from such obligations and (ii) pay when due any taxes, including without
limitation, any sales taxes payable in connection with the Receivables and their
creation and satisfaction. Neither the Agent, the Buyer nor any other Owner
shall have any obligation or liability with respect to any Receivable or related
Accounts, nor shall it be obligated to perform any of the obligations of CAC or
the Transferor thereunder.
59
ARTICLE VII
TERMINATION EVENTS
SECTION 7.1 Termination Events. The occurrence of any one or more of
the following events shall constitute a Termination Event:
(a) any representation or warranty made by the Transferor in any
Transaction Document shall prove to have been incorrect when made, and as a
result of which the interests of the Agent, the Buyer or any other Owner
hereunder are materially and adversely affected;
(b) any failure by the Transferor to make any payment, transfer or
deposit on or before the date such payment, transfer or deposit is required to
be made under the terms of this Agreement which continues unremedied for a
period of five Business Days;
(c) failure on the part of the Transferor duly to observe or perform in
any material respect any other covenants or agreements of the Transferor set
forth in any Transaction Document and which continues unremedied for a period of
10 days;
(d) a failure by the Transferor, CompuCredit or any direct Affiliate
thereof to perform any term, provision or condition contained in any agreement
to which any such Person is a party and under which any Indebtedness owing by
the Transferor, CompuCredit or any direct Affiliate thereof greater than
$5,000,000 was created or is governed, regardless of whether such failure
constitutes an "event of default" or "default" under any such agreement; or any
Indebtedness owing by the Transferor, CompuCredit or any direct affiliate
thereof (other than Indebtedness of CompuCredit of the type described in clause
(vi) of the definition of "Indebtedness") greater than $5,000,000 shall be
declared to be due and payable or required to be prepaid (other than by a
regularly scheduled payment) prior to the date of maturity thereof;
(e) any Event of Bankruptcy shall occur with respect to the Transferor,
CAC, the Account Owner, the Servicer or the Sub-Servicer;
(f) the Agent, on behalf of the Buyer and the other Owners, shall, for
any reason, fail or cease to have a valid and perfected first priority security
interest in the Receivables;
(g) a Servicer Default shall have occurred, and as a result of which
the interests of the Agent, the Buyer or any other Owner are materially and
adversely affected;
(h) there shall have occurred any material adverse change in the
operations of the Transferor, Servicer or Sub-Servicer, or any other event,
which materially adversely affects the Transferor's, Servicer's or
Sub-Servicer's ability either to
60
collect upon the Receivables or to perform its obligations under the Transaction
Documents;
(i) (a) the Liquidity Provider or the Credit Support Provider shall
have given notice that an event of default has occurred and is continuing under
any of its respective agreements with Buyer; or (b) the Transferor, CAC or any
Account Owner is unable for any reason to transfer Receivables in accordance
with the provisions of the applicable Transaction Documents; or (c) the
Transferor, CAC or any Account Owner for any reason ceases to transfer the
Receivables in accordance with the provisions of the applicable Transaction
Documents; or (d) a regulatory, tax or accounting body has ordered that the
activities of the Buyer, any Liquidity Provider or Credit Support Provider
contemplated hereby be terminated or, as a result of any other event or
circumstance, the activities of the Buyer, any Liquidity Provider or Credit
Support Provider contemplated hereby may reasonably be expected to cause the
Buyer, such Liquidity Provider or such Credit Support Provider, the Person then
acting as the administrator or the manager for the Buyer, or any of their
respective Affiliates, as applicable, to suffer materially adverse regulatory,
accounting or tax consequences.
(j) the Subordinate Percentage is less than the Required Subordinate
Percentage;
(k) CB&T or CAC shall default in the performance of any payment or
undertaking to be performed or observed by it under the CB&T Agreement, Affinity
Card Agreement or the Facilities Management Agreement and such default shall
continue beyond any applicable grace period and shall have a material adverse
effect on the interests of the Agent, the Buyer or any other Owner;
(l) for so long as the Affinity Card Agreement is in effect, the Letter
of Credit (as such term is defined in the Affinity Card Agreement) maintained by
CompuCredit in favor of CB&T pursuant to Section 3.3 of the Affinity Card
Agreement shall, without the consent of CB&T, be terminated, revoked or reduced,
or shall be drawn on, and such termination, revocation or reduction shall not
have been remedied within five days and, in the case of a drawing, such drawing
shall not have been reimbursed within five days;
(m) if CB&T is acting as Servicer or Sub-Servicer with respect to the
Receivables or the Accounts in any material respect, the rating of the senior
unsecured debt of CB&T is downgraded below Baa2 by Moody's or BBB by Standard &
Poor's, respectively;
(n) CompuCredit Corporation shall at any time fail to own more than 50%
of the outstanding voting stock of CompuCredit Acquisition Corporation or
CompuCredit Acquisition Corporation shall at any time fail to own more than 50%
of the outstanding voting stock of the Transferor;
61
(o) any of Messrs. Xxxxx X. Xxxxx, Xxxxx X. Xxxxxx or Xxxxxxx Xxxxxxx
shall cease to be employed by CompuCredit, its Affiliates or agents, and such
individual's position shall not be filled within 60 days of such individual's
termination of employment or status as an agent by an individual approved by the
Agent;
(p) the Payment Rate for any of the months ending after the Closing
Date set forth below shall be equal to or less than the percentage set forth
opposite such month below:
Month After Closing Date Percentage
------------------------ ----------
Months 7 through 9 2.3%
Months 10 through 15 2.5%
Months 16 through 20 2.7%
Months 21 through 25 2.9%
Month 26 and thereafter 3.0%;
(q) the Charge-Off Rate for any of the months ending after the Closing
Date set forth below shall equal or exceed the percentage set forth opposite
such month below:
Month After Closing Date Percentage
------------------------ ----------
Month 7 42%
Month 8 41%
Month 9 40%
Month 10 39%
Month 11 38%;
(r) the Three-Month Average Charge-Off Rate for any of the months
ending after the Closing Date set forth below shall equal or exceed the
percentage set forth opposite such month below:
Month After Closing Date Percentage
------------------------ ----------
Months 12 through 17 38%
Months 18 through 24 35%
Month 25 and thereafter 28%;
(s) the Transferor consolidates or merges with or into any other
Person, except that the Transferor may merge with or into another Person so long
as (a) the surviving entity is either the Transferor or a Subsidiary of
CompuCredit, (b) no Termination Event would occur as a result of such merger and
(c) where a Subsidiary of CompuCredit is the surviving entity, such Subsidiary
assumes in writing all obligations of the Transferor under the Transaction
Documents;
62
(t) CompuCredit consolidates or merges with or into any other Person,
except that CompuCredit may merge with or into another Person so long as (a) the
surviving entity is either the Servicer or a Subsidiary of CompuCredit, (b) no
Termination Event would occur as a result of such merger and (c) where a
Subsidiary of CompuCredit is the surviving entity, such Subsidiary assumes in
writing all obligations of CompuCredit under the Transaction Documents;
(u) any failure by CompuCredit to perform any term, provision or
condition of the Guaranty and, in the case of its failure to make a payment
under the Guaranty, such payment equals or exceeds $500,000 individually or in
the aggregate; or
(v) an Event of Default (as such term is defined in the Purchase
Agreement) under Section 7.1(a) of the Purchase Agreement shall have occurred
and be continuing if at such time the Senior Amounts (as such term is defined in
the Purchase Agreement) have been paid in full and the Termination Date has not
occurred.
SECTION 7.2. Termination
(a) Upon the occurrence of any Termination Event, the Agent may, or at
the direction of the Majority Owners shall, by notice to the Transferor and the
Servicer declare the Termination Date to have occurred; provided, however, that
in the case of any event described in Section 7.1(e), 7.1(f), or 7.1(v) above,
the Termination Date shall be deemed to have occurred automatically upon the
occurrence of such event unless such Termination Event shall have been waived by
the Majority Investors. Upon any such declaration or automatic occurrence, the
Agent shall have, in addition to all other rights and remedies under this
Agreement or otherwise, all other rights and remedies provided under the UCC of
the applicable jurisdiction and other applicable laws, all of which rights shall
be cumulative.
(b) At all times after the declaration or automatic occurrence of the
Termination Date pursuant to Section 7.2(a), the Base Rate plus 2.00% shall be
the Applicable Rate applicable to the Net Investment.
(c) Upon the occurrence of a Termination Event, unless waived by the
Agent, the Transferor shall have the option of repurchasing the Transferred
Interest by payment to the Agent of the sum of (a) the Net Investment and (b)
(without duplication) all other Aggregate Unpaids as of the date of any such
repurchase.
(d) Any waiver of a Termination Event under this Section (or any other
waiver under this Agreement) may be made upon written notice to the Transferor
for any period of time specified by the Agent, or may be a permanent waiver. In
the event that any such period is specified, the Agent may, in its sole
discretion upon written notice to the Transferor, extend such waiver for a
further period or periods, or upon written notice to the Transferor may declare
a Termination Event after any such period
63
has expired, all without prejudice to its further rights and remedies hereunder.
SECTION 7.3. Optional Repurchase
(a) On any day occurring on or after the date on which the Net
Investment is reduced to 10% or less of the Initial Net Investment at any time
on or after the Closing Date, the Transferor may, at its option, purchase the
Net Investment at a purchase price equal to (i) if such day is a Remittance
Date, the applicable Reassignment Amount for such Remittance Date or (ii) if
such day is not a Remittance Date, the applicable Reassignment Amount for the
Remittance Date following such day.
(b) The Transferor shall give the Servicer and the Agent at least 30
days prior written notice of the date on which the Transferor intends to
exercise such purchase option. Not later than 11:00 a.m., New York City time, on
such day the Transferor shall deposit the applicable Reassignment Amount into
the Collection Account in immediately available funds. Such purchase option is
subject to payment in full of the applicable Reassignment Amount. Following the
deposit of the applicable Reassignment Amount into the Collection Account in
accordance with the foregoing, the Net Investment shall be reduced to zero and
the Buyer shall have no further interest in the Receivables. The Reassignment
Amount shall be distributed as set forth in accordance with the priorities set
forth in Section 2.5.
ARTICLE VIII
INDEMNIFICATION; EXPENSES; RELATED MATTERS
SECTION 8.1. Indemnities by the Transferor (a) Without limiting any
other rights which the Agent, the Buyer or any other Owner may have hereunder or
under applicable law, the Transferor hereby agrees to indemnify the Buyer, each
other Owner, the Agent, the Administrative Agent, the Liquidity Provider and the
Credit Support Provider and any successors and permitted assigns and any of
their respective officers, directors and employees (collectively, "Indemnified
Parties") from and against any and all damages, losses, claims, liabilities,
costs and expenses, including, without limitation, reasonable and actual
attorneys' fees (which such attorneys may be employees of the Liquidity
Provider, the Credit Support Provider, the Agent or the Administrative Agent, as
applicable) and disbursements (all of the foregoing being collectively referred
to as "Indemnified Amounts") awarded against or incurred by any of them in any
action or proceeding between the Transferor or CompuCredit (including, in its
capacity as the Servicer) and any of the Indemnified Parties or between any of
the Indemnified Parties and any third party or otherwise arising out of or as a
result of this Agreement, the other Transaction Documents, the ownership or
maintenance, either directly or indirectly, by the Agent, the Buyer or any other
Owner of the Transferred Interest or any of the other transactions contemplated
hereby or thereby, excluding, however, (i) Indemnified Amounts to the extent
resulting from gross negligence or willful misconduct on the part of an
Indemnified Party, (ii) recourse (except as otherwise
64
specifically provided in this Agreement) for uncollectible Receivables, (iii)
Indemnified Amounts specifically excluded from coverage under Sections 8.2, 8.3
and 8.4 and (iv) Taxes and Excluded Taxes. Without limiting the generality of
the foregoing, the Transferor shall indemnify each Indemnified Party for
Indemnified Amounts relating to or resulting from:
(i) any representation or warranty made by the Transferor or any
officers of the Transferor under or in connection with this Agreement, the
Receivable Purchase Agreement, any of the other Transaction Documents, any
Monthly Servicer Report or any other information or report delivered by the
Transferor or the Servicer pursuant hereto, which shall have been false or
incorrect in any material respect when made or deemed made;
(ii) the failure by the Transferor to comply with any applicable law,
rule or regulation with respect to any Receivable or the related Account, or the
nonconformity of any Receivable or the related Account with any such applicable
law, rule or regulation;
(iii) the failure to vest and maintain vested in the Agent, on behalf
of the Buyer and the other Owners, an undivided first priority, perfected
security interest (to the extent of the Transferred Interest) in the Affected
Assets free and clear of any Adverse Claim (except as may be expressly permitted
under the Transaction Documents);
(iv) the failure to file, or any delay in filing, financing statements,
continuation statements, or other similar instruments or documents under the UCC
of any applicable jurisdiction or other applicable laws with respect to any of
the Affected Assets;
(v) any dispute, claim, offset or defense (other than discharge in
bankruptcy) of the Obligor to the payment of any Receivable (including, without
limitation, a defense based on such Receivable or the related Account not being
the legal, valid and binding obligation of such Obligor enforceable against it
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws, now or hereafter in effect, affecting the enforcement of creditors' rights
in general and except as such enforceability may be limited by general
principles of equity (whether considered in a suit at law or in equity)), or any
other claim resulting from the sale of merchandise or services related to such
Receivable or the furnishing or failure to furnish such merchandise or services;
(vi) any products liability claim or personal injury or property damage
suit or other similar or related claim or action of whatever sort arising out of
or in connection with merchandise or services which are the subject of any
Receivable;
65
(vii) the failure by the Transferor to comply with any term, provision
or covenant contained in this Agreement or any of the other Transaction
Documents to which it is a party or to perform any of its respective duties
under the Accounts;
(viii) any repayment by any Indemnified Party of any amount previously
distributed in reduction of the Net Investment which such Indemnified Party
believes in good faith is required to be made;
(ix) the commingling by the Transferor or the Servicer of Collections
of Receivables at any time with other funds;
(x) any investigation, litigation or proceeding related to this
Agreement, any of the other Transaction Documents, the use of proceeds of
Transfers by the Transferor, the interests in the Transferred Interests, or any
Receivable or Related Security;
(xi) any inability to obtain any judgment in or utilize the court or
other adjudication system of, any state in which an Obligor may be located as a
result of the failure of the Transferor to qualify to do business or file any
notice of business activity report or any similar report;
(xii) any failure of the Transferor to give reasonably equivalent value
to CAC in consideration of the purchase by the Transferor from CAC of any
Receivable, or any attempt by any Person to void, rescind or set-aside any such
transfer under statutory provisions or common law or equitable action,
including, without limitation, any provision of the Bankruptcy Code; or
(xiii) any action taken by the Transferor in the enforcement or
collection of any Receivable.
provided, however, that if the Buyer enters into agreements for the
purchase of interests in receivables from one or more Other Transferors, Buyer
shall allocate such Indemnified Amounts which are in connection with the
[Liquidity Provider Agreement, the Credit Support Agreement or the credit
support furnished by the Credit Support Provider] to the Transferor and each
Other Transferor; and provided, further, that if such Indemnified Amounts are
attributable to the Transferor or the Servicer and not attributable to any Other
Transferor, the Transferor shall be solely liable for such Indemnified Amounts
or if such Indemnified Amounts are attributable to Other Transferors and not
attributable to the Transferor or the Servicer, such Other Transferors shall be
solely liable for such Indemnified Amounts.
(b) Procedures. Promptly after receipt by an Indemnified Party under
Section 8.1 of written notice of any damage, loss or expense in respect of which
indemnity may be sought hereunder by it, such Indemnified Party will, if a claim
is to be made against the Transferor, notify the Transferor thereof in writing;
but the omission so to notify the Transferor will not relieve the Transferor
from any liability (otherwise than
66
under this Section 8.1) which it may have to any Indemnified Party except as may
be required or provided otherwise than under this Section 8.1. Thereafter, the
Indemnified Party and the Transferor shall consult, to the extent appropriate,
with a view to minimizing the cost to the Transferor of its obligations
hereunder. In case any Indemnified Party receives written notice of any damage,
loss or expense in respect of which indemnity may be sought hereunder by it and
it notifies the Transferor thereof, the Transferor will be entitled to
participate therein, and to the extent that it may elect by written notice
delivered to the Indemnified Party promptly after receiving the aforesaid notice
from such Indemnified Party, to assume the defense thereof, with counsel
reasonably satisfactory at all times to such Indemnified Party; provided,
however, that if the parties against which any damage, loss or expense arises
include both the Indemnified Party and the Transferor and the Indemnified Party
shall have reasonably concluded that there may be legal defenses available to it
or other Indemnified Parties which are different from or additional to those
available to the Transferor and may conflict therewith, the Indemnified Party or
Parties shall have the right to select one separate counsel for such Indemnified
Party or Parties to assume such legal defenses and otherwise to participate in
the defense of such damage, loss or expenses on behalf of such Indemnified Party
or Parties. Upon receipt of notice from the Transferor to such Indemnified Party
of its election to assume the defense of such damage, loss or expense and
approval by the Indemnified Party of counsel, the Transferor shall not be liable
to such Indemnified Party under this Section 8.1 for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof unless (i) the Indemnified Party shall have employed such counsel in
connection with assumption of legal defenses in accordance with the proviso to
the next preceding sentence, (ii) the Transferor shall not have employed and
continued to employ counsel reasonably satisfactory to the Indemnified Party to
represent the Indemnified Party within a reasonable time after notice of
commencement of the action or (iii) the Transferor shall have authorized the
employment of counsel for the Indemnified Party at the expense of the
Transferor.
(c) Notwithstanding any other provisions contained in this Section 8.1,
(i) the Transferor shall not be liable for any settlement, compromise or consent
to the entry of any order adjudicating or otherwise disposing of any damage,
loss, or expense effected without its consent and (ii) after the Transferor has
assumed the defense of any damage, loss or expense under Section 8.1 with
respect to any Indemnified Party, it will not settle, compromise or consent to
entry of any order adjudicating or otherwise disposing thereof (1) if such
settlement, compromise or order involved the payment of money damages except if
the Transferor agrees with such Indemnified Party to pay such money damages and,
if not simultaneously paid, to furnish such Indemnified Party with satisfactory
evidence of its ability to pay such money damages, (2) if such settlement,
compromise or order involves any relief against such Indemnified Party, other
than the payment of money damages, except with the prior written consent of such
Indemnified Party and (3) if such settlement, compromise or order does not
provide a full release of the Indemnified Party, without the prior written
consent of such Indemnified Party.
67
(d) Each Indemnified Party shall use its good faith efforts to
mitigate, reduce or eliminate any losses, expenses or claims for indemnification
pursuant to this Section 8.1.
SECTION 8.2. Indemnity for Taxes, Reserves and Expenses. (a) if
after the date hereof, the adoption of any Law or bank regulatory guideline
or any amendment or change in the interpretation of any existing or future
Law or bank regulatory guideline by any Governmental Authority charged with
the administration, interpretation or application thereof, or the compliance
with any directive of any Governmental Authority (in the case of any bank
regulatory guideline, whether or not having the force of Law):
(i) shall subject any Indemnified Party to any tax, duty or other
charge (other than Excluded Taxes) with respect to this Agreement, the other
Transaction Documents, the ownership, maintenance or financing of the
Transferred Interest, the Receivables or payments of amounts due hereunder, or
shall change the basis of taxation of payments to any Indemnified Party of
amounts payable in respect of this Agreement, the other Transaction Documents,
the ownership, maintenance or financing of the Transferred Interest, the
Receivables or payments of amounts due hereunder or its obligation to advance
funds hereunder, under the Liquidity Provider Agreement, the Credit Support
Agreement or the credit support furnished by the Credit Support Provider or
otherwise in respect of this Agreement, the other Transaction Documents, the
ownership, maintenance or financing of the Transferred Interest or the
Receivables (except for changes in the rate of general corporate, franchise, net
income or other income tax imposed on such Indemnified Party;
(ii) shall impose, modify or deem applicable any reserve, special
deposit or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve System)
against assets of, deposits with or for the account of, or credit extended by,
any Indemnified Party or shall impose on any Indemnified Party or on the United
States market for certificates of deposit or the London interbank market any
other condition affecting this Agreement, the other Transaction Documents, the
ownership, maintenance or financing of the Transferred Interest, the Receivables
or payments of amounts due hereunder or its obligation to advance funds
hereunder, under the Liquidity Provider Agreement, the Credit Support Agreement
or the credit support provided by the Credit Support Provider or otherwise in
respect of this Agreement, the other Transaction Documents, the ownership,
maintenance or financing of the Transferred Interest or the Receivables; or
(iii) other than Taxes or Excluded Taxes, imposes upon any Indemnified
Party any other expense (including, without limitation, reasonable attorneys'
fees and expenses, and expenses of litigation or preparation therefor in
contesting any of the foregoing) with respect to this Agreement, the other
Transaction Documents, the ownership, maintenance or financing of the
Transferred Interest, the Receivables or payments of amounts due hereunder or
its obligation to advance funds
68
hereunder under the Liquidity Provider Agreement, the Credit Support Agreement
or the credit support furnished by the Credit Support Provider or otherwise in
respect of this Agreement, the other Transaction Documents, the ownership,
maintenance or financing of the Transferred Interests or the Receivables; and
the result of any of the foregoing is to increase the cost to such Indemnified
Party with respect to this Agreement, the other Transaction Documents, the
ownership, maintenance or financing of the Transferred Interest, the
Receivables, the obligations hereunder, the funding of any purchases hereunder,
the Liquidity Provider Agreement, the Credit Support Agreement, or the credit
support provided by the Credit Support Provider by an amount deemed by such
Indemnified Party to be material, then, within ten (10) days after demand by
such Indemnified Party through the Agent, the Transferor shall pay to the Agent,
for the benefit of such Indemnified Party, such additional amount or amounts as
will compensate such Indemnified Party for such increased cost or reduction.
(b) If any Indemnified Party shall have determined that after the date
hereof, the adoption of any applicable Law or bank regulatory guideline
regarding capital adequacy, or any change therein, or any change in the
interpretation thereof by any Governmental Authority, or any directive regarding
capital adequacy (in the case of any bank regulatory guideline, whether or not
having the force of law) of any such Governmental Authority, has or would have
the effect of reducing the rate of return on capital of such Indemnified Party
as a consequence of such Indemnified Party's obligations hereunder or with
respect hereto to a level below that which such Indemnified Party (or its
parent) could have achieved but for such adoption, change, request or directive
(taking into consideration its policies with respect to capital adequacy) by an
amount deemed by such Indemnified Party to be material, then from time to time,
within ten (10) days after demand by such Indemnified Party through the Agent,
the Transferor shall pay to the Agent, for the benefit of such Indemnified
Party, such additional amount or amounts as will compensate such Indemnified
Party (or its parent) for such reduction.
(c) The Buyer and each other Owner will promptly notify the Agent and
the Agent will promptly notify the Transferor of any event of which it has
knowledge, occurring after the date hereof, which will entitle an Indemnified
Party to compensation pursuant to this Section 8.2, provided, that any failure
by any such Person to deliver any such notice shall not impair or affect in any
manner the Transferor's obligations under this Section. A notice by the Agent or
the applicable Indemnified Party claiming compensation under this Section and
setting forth the additional amount or amounts to be paid to it hereunder shall
be conclusive in the absence of manifest error, provided that such
determinations and allocations are made in good faith and on a reasonable basis,
reasonable written evidence (including an explanation of the applicable
regulatory change and a reasonably detailed computation of an accounting for any
amounts demanded) of which shall be provided to the Transferor upon request. In
determining such amount, the Agent or any applicable Indemnified Party may use
any reasonable averaging and attributing methods.
69
(d) Each Indemnified Party agrees that it will use reasonable efforts
to reduce or eliminate any claim for indemnity pursuant to this Section 8.2
including, subject to applicable law, a change in the funding office of such
Indemnified Party; provided, however, that nothing contained herein shall
obligate any Indemnified Party to take any action that imposes on such
Indemnified Party any additional costs or legal or regulatory burdens which such
Indemnified Party reasonably considers material, nor which, in such Indemnified
Party's reasonable opinion, would have an adverse effect on its business,
operations or financial condition.
(e) In determining amounts indemnified against under this Section 8.2,
the parties shall take into account any Tax benefits to the Indemnified Party of
the payment of Tax and the receipt of the indemnity provided for this Section
8.2.
(f) Anything in this Section 8.2 to the contrary notwithstanding, if
Buyer enters into agreements for the acquisition of interests in receivables
from one or more Other Transferors, Buyer shall allocate the liability for any
amounts under this Section 8.2 which are in connection with the Liquidity
Provider Agreement, the Credit Support Agreement or the credit support provided
by the Credit Support Provider ("Section 8.2 Costs") to the Transferor and each
Other Transferor; provided, however, that if such Section 8.2 Costs are
attributable to the Transferor, CAC or the Servicer and not attributable to any
Other Transferor, the Transferor shall be solely liable for such Section 8.2
Costs or if such Section 8.2 Costs are attributable to Other Transferors and not
attributable to the Transferor, CAC or the Servicer, such Other Transferors
shall be solely liable for such Section 8.2 Costs.
(g) Each Indemnified Party agrees to promptly notify the Transferor if
such Person receives notice of any potential tax assessment by any federal,
state or local tax authority for which the Transferor may be liable pursuant to
Section 8.2 or 8.3 hereof. Each Indemnified Party further agrees that the
Transferor shall bear no cost (including costs relating to penalties and
interest) relating to the failure of such Person to file in a timely manner any
tax returns required to be filed by such Person in accordance with applicable
statutes and regulations.
SECTION 8.3. Taxes. All payments made hereunder by the Transferor,
CompuCredit or the Servicer (each, a "payor") to the Buyer, any Owner or the
Agent (each, a "recipient") shall be made free and clear of and without
deduction for any present or future income, excise, stamp or franchise taxes and
any other taxes, fees, duties, withholdings or other charges of any nature
whatsoever imposed by any taxing authority on any recipient (or any assignee of
such parties), but excluding (i) income and withholding taxes (including,
without limitation, branch profits taxes, minimum taxes and taxes computed under
alternative methods, at least one of which is based on net income) and franchise
taxes that are based on net income or any other tax upon or measured by income
or gross receipts imposed on a recipient, in each case as a result of a present
or former connection between the jurisdiction of the government or taxing
authority imposing such tax and such recipient (including, without limitation,
70
withholding taxes attributable to the treatment of the recipient as having
"effectively connected taxable income" within the meaning of Section 1446(c) of
the Code); (ii) any taxes, levies, imposts, duties, charges, or fees that would
not have been imposed but for the failure by such recipient to provide and keep
current certification or other documentation required to qualify for an
exemption from or reduced rate thereof; and (iii) any taxes, levies, imposts,
duties, charges, or fees imposed as a result of change by any recipient of the
office in which any purchase hereunder is made, accounted for or booked other
than those Taxes that would have been applicable if such office had not been
changed, including any such change pursuant to any Requirement of Law and any
change in circumstances which, in the good faith judgment of the recipient and
the Transferor leaves such recipient no practicable alternative except to change
such office or as a result of the sale, transfer or assignment by any recipient
of its interest hereunder (all such exclusions being herein called "Excluded
Taxes" and all such non-excluded taxes, levies, imposts, duties, charges, or
fees being hereinafter called "Taxes"). In the event that any withholding or
deduction from any payment made by the payor hereunder is required in respect of
any Taxes then such payor shall:
(a) pay directly to the relevant authority the full amount required to
be so withheld or deducted;
(b) promptly forward to the Agent an official receipt or other
documentation satisfactory to the Agent evidencing such payment to such
authority; and
(c) pay to the recipient such additional amount or amounts as is
necessary to ensure that the net amount actually received by the recipient will
equal the full amount such recipient would have received had no such withholding
or deduction been required.
Moreover, if any Taxes are directly asserted against any recipient with respect
to any payment received by such recipient hereunder, the recipient may pay such
Taxes and the payor will promptly pay such additional amounts (including any
penalties, interest or expenses) as shall be necessary in order that the net
amount received by the recipient after the payment of such Taxes (including any
Taxes on such additional amount) shall equal the amount such recipient would
have received had such Taxes not been asserted.
If the payor fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to the recipient the required receipts or other
required documentary evidence, the payor shall indemnify the recipient for any
incremental Taxes, interest, or penalties that may become payable by any
recipient as a result of any such failure.
SECTION 8.4. Other Costs, Expenses and Related Matters. (a) The
Transferor agrees, upon receipt of a written invoice, to pay or cause to be
paid, and to save the Buyer, any other Owner and the Agent harmless against
liability
71
for the payment of, all reasonable out-of-pocket expenses (including, without
limitation, attorneys', accountants' and other third parties' fees and expenses,
any filing fees and expenses incurred by officers or employees of the Buyer, any
other Owner and/or the Agent or intangible, documentary or recording taxes
incurred by or on behalf of the Buyer, any other Owner and the Agent) (i) in
connection with the negotiation, execution, delivery and preparation of this
Agreement, the other Transaction Documents and any documents or instruments
delivered pursuant hereto and thereto and the transactions contemplated hereby
or thereby (including, without limitation, the perfection or protection of the
Transferred Interest), and (ii) from time to time (a) relating to any
amendments, waivers or consents under this Agreement and the other Transaction
Documents, (b) arising in connection with the Buyer's, any other Owner's, the
Agent's or the enforcement or preservation of rights (including, without
limitation, the perfection and protection of the Transferred Interest under this
Agreement), or (c) arising in connection with any audit, dispute, disagreement,
litigation or preparation for litigation involving this Agreement or any of the
other Transaction Documents (all of such amounts, collectively, "Transaction
Costs").
(b) The Transferor shall pay the Agent, for the account of Buyer and
the other Owner, as applicable, on demand any Early Collection Fee due on
account of the reduction of the Net Investment on a day other than the last day
of a funding period.
SECTION 8.5. Amounts Limited to Available Funds. Notwithstanding
anything else in this Agreement to the contrary, the obligations of the
Transferor under this Article VIII shall be payable hereunder solely to the
extent funds are available therefor and, to the extent such funds are
insufficient or unavailable to pay any amounts owing by the Transferor pursuant
to this Article VIII, it shall not constitute a claim against the Transferor.
SECTION 8.6. Indemnification by Servicer. (a) The Servicer shall
indemnify and hold harmless the Indemnified Parties from and against any loss,
liability, expense, damage or injury suffered or sustained by reason of willful
misfeasance, bad faith, or negligence in the performance of the duties of the
Servicer or by reason of reckless disregard of obligations and duties of the
Servicer hereunder or by reason of any acts, omissions or alleged acts or
omissions of the Servicer pursuant to this Agreement; provided, however, that
the Servicer shall not indemnify any such Indemnified Party for any such loss,
liability, expense, damage or injury suffered or sustained by reason of any
action taken or omitted at the written request of such Indemnified Party; and
provided, further, that the Servicer shall not indemnify any such Indemnified
Party for any such loss, liability, expense, damage or injury incurred with
respect to any action taken by such Indemnified Party constituting fraud, gross
negligence, breach of fiduciary duty or willful misconduct, with respect to the
uncollectibility of the Receivables or with respect to any federal, state or
local income or franchise taxes (or any interest or penalties with respect
thereto) required to be paid by any such Indemnified Party in connection
herewith to any taxing authority. The Servicer shall not be liable for acts or
omissions of any successor Servicer. The provisions of
72
this indemnity shall run directly to and be enforceable by an injured party
subject to the limitations hereof.
(b) Promptly after receipt by an Indemnified Party under Section 8.6 of
written notice of any damage, loss or expense in respect of which indemnity may
by sought hereunder by it, such Indemnified Party will, if a claim is to be made
against the Servicer, notify the Servicer thereof in writing; but the omission
so to notify the Servicer will not relieve the Servicer from any liability
(otherwise than under this Section 8.6) which it may have to any Indemnified
Party except as may be required or provided otherwise than under this Section
8.6. Thereafter, the Indemnified Party and the Servicer shall consult, to the
extent appropriate, with a view to minimizing the cost to the Servicer of its
obligations hereunder. In case any Indemnified Party receives written notice of
any damage, loss or expense in respect of which indemnity may be sought
hereunder by it and it notifies the Servicer thereof, the Servicer will be
entitled to participate therein, and to the extent that it may elect by written
notice delivered to the Indemnified Party promptly after receiving the aforesaid
notice from such Indemnified Party, to assume the defense thereof, with counsel
reasonably satisfactory at all times to such Indemnified Party; provided,
however, that if the parties against which any damage, loss or expense arises
include both the Indemnified Party and the Servicer and the Indemnified Party
shall have reasonably concluded that there may be legal defenses available to it
or other Indemnified Parties which are different from or additional to those
available to the Servicer and may conflict therewith, the Indemnified Party or
parties shall have the right to select one separate counsel for such Indemnified
Party or parties to assume such legal defenses and otherwise to participate in
the defense of such damage, loss or expenses on behalf of such Indemnified Party
or parties. Upon receipt of notice from the Servicer to such Indemnified Party
of its election as to assume the defense of such damage, loss, or expense and
approval by the Indemnified Party of counsel, the Servicer shall not be liable
to such Indemnified Party under this Section 8.6 for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof unless (i) the Indemnified Party shall have employed such counsel in
connection with assumption of legal defenses in accordance with the proviso to
the next preceding sentence, (ii) the Servicer shall not have employed and
continued to employ counsel reasonably satisfactory to the Indemnified Party to
represent the Indemnified Party within a reasonable time after notice of
commencement of the action or (iii) the Servicer shall have authorized the
employment of counsel for the Indemnified Party at the expense of the Servicer.
(c) Notwithstanding any other provisions contained in this Section 8.6,
(i) the Servicer shall not be liable for any settlement, compromise or consent
to the entry of any order adjudicating or otherwise disposing of any damage,
loss, or expense effected without its consent and (ii) after the Servicer has
assumed the defense of any damage, loss or expense under Section 8.6(b) with
respect to any Indemnified Party, it will not settle, compromise or consent to
entry of any order adjudicating or otherwise disposing thereof (1) if such
settlement, compromise or order involved the payment of
73
money damages except if the Servicer agrees with such Indemnified Party to pay
such money damages and, if not simultaneously paid, to furnish such Indemnified
Party with satisfactory evidence of its ability to pay such money damages, (2)
if such settlement, compromise or order involves any relief against such
Indemnified Party, other than the payment of money damages, except with the
prior written consent of such Indemnified Party and (3) if such settlement,
compromise or order does not provide a full release of the Indemnified Party,
without the prior written consent of such Indemnified Party.
ARTICLE IX
THE AGENT
SECTION 9.1. Authorization and Action. The Buyer and each other Owner
hereby irrevocably appoints and authorizes the Agent to act as its agent under
this Agreement and the other Transaction Documents with such powers and
discretion as are specifically delegated to the Agent by the terms of this
Agreement and the other Transaction Documents, together with such other powers
as are reasonably incidental thereto. The Agent (which term as used in this
sentence and in Section 9.5 and the first sentence of Section 9.6 hereof shall
include its affiliates and its own and its affiliates' officers, directors,
employees, and agents): (a) shall not have any duties or responsibilities except
those expressly set forth in this Agreement and shall not be a trustee or
fiduciary for the Buyer or any other Owner; (b) shall not be responsible to the
Buyer or any other Owner for any recital, statement, representation or warranty
(whether written or oral) made in or in connection with any Transaction Document
or any certificate or other document referred to or provided for in, or received
by any of them under, any Transaction Document, or for the value, validity,
effectiveness, genuineness, enforceability, or sufficiency of any Transaction
Document, or any other document referred to or provided for therein or for any
failure by any of the Transferor, CAC, CompuCredit or any other Person to
perform any of its obligations thereunder; (c) shall not be responsible for or
have any duty to ascertain, inquire into, or verify the performance or
observance of any covenants or agreements by any of the Transferor, CAC or the
Servicer or the satisfaction of any condition or to inspect the property
(including the books and records) of any of the Transferor, CAC or the Servicer
or any of their Subsidiaries or Affiliates; (d) shall not be required to
initiate or conduct any litigation or collection proceedings under any
Transaction Document; and (e) shall not be responsible for any action taken or
omitted to be taken by it under or in connection with any Transaction Document,
except for its own gross negligence or willful misconduct. The Agent may employ
agents and attorneys-in-fact and shall not be responsible for the negligence or
misconduct of any such agents or attorneys-in-fact selected by it with
reasonable care.
SECTION 9.2. Agent's Reliance, Etc. The Agent shall be entitled to rely
upon any certification, notice, instrument, writing, or other communication
(including, without limitation, any thereof by telephone or telecopy) believed
by it to be
74
genuine and correct and to have been signed, sent or made by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel
(including counsel for any of the Transferor, CAC or CompuCredit), independent
accountants, and other experts selected by the Agent. As to any matters not
expressly provided for by this Agreement, the Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Majority Investors, and such
instructions shall be binding on the Buyer and all of the other Owners;
provided, however, that the Agent shall not be required to take any action that
exposes the Agent to personal liability or that is contrary to any Transaction
Document or applicable law or unless it shall first be indemnified to its
satisfaction by the other Owners against any and all liability and expense which
may be incurred by it by reason of taking any such action.
SECTION 9.3. Termination Events. The Agent shall not be deemed to have
knowledge or notice of the occurrence of a Potential Termination Event or a
Termination Event unless the Agent has received written notice from a Buyer, any
other Owner or the Transferor specifying such Potential Termination Event or
Termination Event and stating that such notice is a "Notice of Termination
Event". In the event that the Agent receives such a notice of the occurrence of
a Potential Termination Event or Termination Event, the Agent shall give prompt
notice thereof to the Buyer and any other Owners. The Agent shall (subject to
Section 9.2 hereof) take such action with respect to such Potential Termination
Event or Termination Event as shall reasonably be directed by the Majority
Investors, provided that, unless and until the Agent shall have received such
directions, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Potential Termination
Event or Termination Event as it shall deem advisable in the best interest of
the Buyer and any other Owners.
SECTION 9.4. Agents and Affiliates. To the extent that the Agent or any
of its Affiliates shall become an Owner hereunder, the Agent or such Affiliate,
in such capacity, shall have the same rights and powers under this Agreement as
would any Owner hereunder and may exercise the same as though it were not the
Agent. The Agent and its Affiliates may generally engage in any kind of business
with the Transferor or any Obligor, any of their respective Affiliates and any
Person who may do business with or own securities of the Transferor or any
Obligor or any of their respective Affiliates, all as if it were not the Agent
hereunder and without any duty to account therefor to the Owners.
SECTION 9.5. Indemnification of the Agent. The Owners agree to
indemnify the Agent (to the extent not reimbursed by the Transferor), ratably in
accordance with their Pro Rata Shares, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including attorneys' fees), or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against the Agent
(including by the Buyer
75
or any other Owner) in any way relating to or arising out of this Agreement or
any other Transaction Document or the transactions contemplated thereby or any
action taken or omitted by the Agent under this Agreement or any other
Transaction Document, provided that no other Owners shall be liable for any of
the foregoing to the extent they arise from the gross negligence or willful
misconduct of the Person indemnified. Without limitation of the foregoing, the
other Owners agree to reimburse the Agent, ratably in accordance with their Pro
Rata Shares, promptly upon demand for any out-of-pocket expenses (including
attorneys' fees) incurred by the Agent in connection with the administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement and the other Transaction Documents, to
the extent that such expenses are incurred in the interests of or otherwise in
respect of the other Owners hereunder and/or thereunder and to the extent that
the Agent is not reimbursed for such expenses by the Transferor. The agreements
contained in this Section shall survive payment in full of the Buyer's Net
Investment and all other amounts payable under this Agreement.
SECTION 9.6. Non-Reliance. Each of the Buyer and each other Owner
agrees that it has, independently and without reliance on the Agent or the Buyer
or any other Owner, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the Transferor, CAC, CompuCredit,
CB&T and their Subsidiaries and decision to enter into this Agreement and that
it will, independently and without reliance upon the Agent, the Buyer or any
other Owner, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under the Transaction Documents. Except for notices,
reports, and other documents and information expressly required to be furnished
to the Buyer and the other Owners by the Agent hereunder, the Agent shall not
have any duty or responsibility to provide any party hereunder with any credit
or other information concerning the affairs, financial condition, or business of
any of the Transferor, CAC, CompuCredit, CB&T or any of their Subsidiaries or
Affiliates that may come into the possession of the Agent or any of its
Affiliates.
SECTION 9.7. Resignation of Agent. The Agent may resign at any time by
giving notice thereof to the Buyer, any other Owners and the Transferor. Upon
any such resignation, the Majority Investors shall have the right to appoint a
successor Agent. If no successor Agent shall have been so appointed by the
Majority Investors and shall have accepted such appointment within thirty (30)
days after the retiring Agent's giving of notice of resignation, then the
retiring Agent may, on behalf of the Buyer and any other Owner, appoint a
successor Agent which shall be a commercial bank organized under the laws of the
United States of America having combined capital and surplus of at least
$100,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor, such successor shall thereupon succeed to and become vested with all
the rights, powers, discretion, privileges, and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
76
hereunder. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Article IX shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
Agent.
SECTION 9.8. Payments by the Agent. Unless specifically allocated to an
Owner, pursuant to the terms of this Agreement, all amounts received by the
Agent on behalf of the Owners shall be paid by the Agent to the Owners (at their
respective accounts specified in writing to the Agent) in accordance with their
respective related interests in the Net Investment on the Business Day received
by the Agent, unless such amounts are received after 12:00 noon on such Business
Day, in which case the Agent shall use its reasonable efforts to pay such
amounts to the Owners on such Business Day, but, in any event, shall pay such
amounts to the Owners in accordance with their respective related pro rata
interests in the Net Investment not later than the following Business Day.
SECTION 9.9. UCC Filings. The Owners and the Transferor expressly
recognize and agree that the Agent may be listed as the assignee or secured
party of record on the various UCC filings required to be made hereunder in
order to perfect the transfer of the Transferred Interest from the Transferor to
the Owners, that such listing shall be for administrative convenience only in
creating a record or nominee owner to take certain actions hereunder on behalf
of the Owners and that such listing will not affect in any way the status of the
Owners as the beneficial owners of their respective interests in the Transferred
Interest. In addition, such listing shall impose no duties on the Agent other
than those expressly and specifically undertaken in accordance with this Article
IX.
ARTICLE X
GUARANTY AND GUARANTOR COVENANTS
SECTION 10.1 Guaranty. In consideration of, and in order to induce the
Buyer, any other Owner and the Agent to enter into this Agreement and to accept
the Transfers hereunder, the Guarantor hereby unconditionally and irrevocably
guarantees to the Buyer, any other Owner, the Agent, Liquidity Provider and
Credit Support Provider and their respective successors and assigns, the due and
punctual performance and payment by the Transferor, of all representations and
warranties, covenants, agreements, terms, conditions and indemnities to be
performed and observed by the Transferor under this Agreement, including,
without limitation, the due and punctual payment of all sums which are or may
become due and owing by the Transferor under the terms and provisions of this
Agreement; provided, however, that the Guarantor shall not bear any recourse for
losses on Receivables with respect to which the Obligors have failed to make
payments and, notwithstanding any other provision of this Section 10.1, if the
Transferor is unable to pay, as a result of Obligors' failing to make payment on
Receivables, any amount of the Buyer's Net Investment or
77
any amount constituting Carrying Costs, then CompuCredit shall not be liable for
such amounts (except for amounts with respect to the breach of any of the
Transferor's obligations under Article VIII hereunder or of any of its
representations or warranties or other covenants and indemnifications
hereunder). In no event shall CompuCredit be liable for the nonperformance,
nonobservance or failure to pay by any Person other than the Transferor.
SECTION 10.2. Waivers. (a) The Guarantor hereby waives promptness,
diligence and notice of acceptance of the guaranty made in Section 10.1 (the
"Guaranty") of any action taken or omitted in reliance hereon or of any default
in the payment of any such sums or in the performance of any covenants,
agreements, terms, conditions and any demand, protest or other notice of any
kind. The Guarantor expressly waives the right to require any party to protect,
secure, perfect, insure, proceed against or exhaust any collateral in which a
security interest, lien, mortgage or like encumbrance has been granted by the
Transferor as security for the payment of any sums due hereunder or to exhaust
any right or take any action against the Transferor or any other Person or any
collateral.
(b) The obligations of the Guarantor under this Guaranty constitute a
present and continuing guaranty of payment and not of collectibility and all
payments made by the Guarantor hereunder will be made without set-off,
counterclaim or other defense. The obligations of the Guarantor under this
Guaranty shall be absolute and unconditional and shall not be subject to any
counterclaim, set-off, deduction or defense. This Guaranty shall remain in full
force and effect without regard to and shall not be released, discharged or in
any way affected or impaired by any thing, event, happening, matter,
circumstance or condition whatsoever, whether or not the Guarantor shall have
any knowledge or notice thereof or consent thereto, including, without
limitation: (i) any amendment or modification of or supplement to any
Transaction Documents, assignment or transfer of any interest of the Buyer, any
other Owner or Agent therein, including, without limitation, any renewal or
extension of the terms of payment of any sums due or contingently due hereunder
or the granting of time in respect of any payment, any furnishing or acceptance
of security or any release of any security so furnished or accepted for any sum
due or contingently due hereunder; (ii) any waiver, consent, extension, granting
of time, forbearance, indulgence or other action or inaction under or in respect
of any Transaction Document or any exercise or no exercise of any right, remedy
or power in respect thereof; (iii) any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation or similar proceedings with
respect to the Guarantor, Transferor or any other Person, or the properties or
creditors thereof; (iv) the occurrence of any Termination Event under this
Agreement, or any invalidity, illegality or any unenforceability of, or any
misrepresentation, irregularity or other defect in, any provision of any
Transaction Document; (v) any transfer or purported transfer, any consolidation
or merger of the Transferor or any other Person with or into any other
corporation or entity, or any change whatsoever in the objects, capital
structure, constitution or business of the Transferor or any other Person; (vi)
any failure on the part of the Transferor or any other
78
Person to perform or comply with any term of any Transaction Document; (vii) any
suit or other action brought by any creditors of the Transferor for any reason
whatsoever, including, without limitation, any suit or action in any way
attacking or involving any Transaction Document or (viii) any limitation
contained in Section 8.5 hereof.
SECTION 10.3. Reinstatement. The obligations of the Guarantor in
respect of this Guaranty shall continue to be effective or shall be reinstated,
as the case may be, if at any time any payment in respect of any obligations
guaranteed hereunder is rescinded or must otherwise be returned by any of the
parties in whose favor this Guaranty is being made upon the insolvency,
bankruptcy or reorganization of the Transferor or otherwise, all as though such
payment had not been made.
SECTION 10.4. Subrogation. If the Guarantor shall make any payment due
in respect of this Guaranty, it shall to the extent permitted by applicable law,
be subrogated to the rights of the party in respect of which such payment was
made; provided however, that such rights of subrogation and all indebtedness and
claims arising therefrom shall be, and the Guarantor hereby declares that they
are, and shall at all times be, in all respects subordinate and junior to all
sums due or contingently due under the Transaction Documents. The Guarantor
hereby agrees that the foregoing right of subrogation shall not be effective
until, and that it shall not be entitled to receive any payment, under any
condition, in respect of any such subrogated claim unless and until, all sums
which may become due, or are stated in the Transaction Documents to become due,
shall have become due, shall have been paid in full or funds for their payment
shall have been duly and sufficiently provided.
SECTION 10.5. Net Worth Ratio. The Guarantor agrees that, at all times
during the period referred to in the first paragraph of Section 5.2 hereof, the
ratio of (a) its tangible net worth (equal to shareholders' equity according to
GAAP minus any write-up in the book value of assets resulting from the
revaluation thereof subsequent to the date hereof minus treasury stock minus
patents, copyrights, trademarks or goodwill and other like intangibles,
excluding capitalized software not in excess of $4,000,000) to (b) total assets
managed by the Guarantor (determined, with respect to the Receivables and other
credit card receivables acquired by the Guarantor or any Affiliate of the
Guarantor, based on the purchase price paid with respect to the Receivables
pursuant to the Sale and Purchase Agreement with respect to the Receivables and
any other similar purchase agreement with respect to any other credit card
receivables) shall not be less than .08:1.
SECTION 10.6. Financial Reporting. CompuCredit will maintain, a system
of accounting established and administered in accordance with GAAP, and will
furnish to the Agent:
(i) Annual Reporting. (A) Within one hundred five (105) days
after the close of CompuCredit's fiscal year, (beginning with the
fiscal year ending in 1998) audited financial statements, prepared in
accordance with GAAP
79
on a consolidated basis for CompuCredit, including balance sheets as of
the end of such period, related statements of operations, shareholder's
equity and cash flows, accompanied by an unqualified audit report
certified by independent certified public accountants, which
accountants shall be acceptable to the Agent, prepared in accordance
with GAAP and, upon the Agent's request, any management letter prepared
by said accountants and accompanied by a certificate of said
accountants that CompuCredit is in compliance with its agreement set
forth in Section 10.5 or, if CompuCredit is not in compliance with such
agreement, stating the nature and status thereof and showing the
computation of the financial ratios and restrictions set forth in
Section 10.5.
(ii) Quarterly Reporting. Within sixty (60) days after the
close of the first three quarterly periods of CompuCredit's fiscal
year, for CompuCredit consolidated unaudited balance sheets (excluding
financial footnotes) as at the close of each such period and
consolidated related statements of operations, shareholder's equity and
cash flows for the period from the beginning of such fiscal year to the
end of such quarter, and showing the computation of each of the
financial ratios and restrictions set forth in Section 10.5 all
certified by its chief financial officer, chairman, president,
treasurer or any executive vice president.
(iii) Compliance Certificate. Together with the financial
statements required hereunder, a compliance certificate signed by the
chief financial officer, chairman, president, treasurer or any
executive vice president of CompuCredit stating that the attached
financial statements (except for the financial footnotes excluded in
clause (ii) above) have been prepared in accordance with GAAP and, to
the best of such person's knowledge, accurately reflect the financial
condition of CompuCredit, and showing compliance with, the financial
ratios and restrictions set forth in Section 10.5.
(iv) Shareholders Statements and Reports. Promptly upon the
furnishing thereof to the shareholders of CompuCredit, copies of all
financial statements, reports and proxy statements so furnished.
(v) S.E.C._Filings. Promptly upon the filing thereof, copies
of all registration statements and annual, quarterly, monthly or other
regular reports which CompuCredit files with the Securities and
Exchange Commission.
SECTION 10.7. Notices. CompuCredit shall promptly notify the Agent of
(i) a Termination Event or (ii) CB&T's failure to observe, keep or perform any
material term, condition, covenant, representation or warranty of the Facilities
Management Agreement or the Affinity Card Agreement, in each case, of which it
has knowledge.
SECTION 10.8. Sub Servicing Fee. On the last day of any Collection
Period, the Servicer shall pay to the Agent, for the benefit of the Buyer and
any other
80
Owner, as applicable, the amount of any Sub-Servicing Fee retained by the
Sub-Servicer during such Collection Period in excess of one-twelfth of the
product of (i) 4% per annum and (ii) the average daily Principal Receivables
during such Collection Period. Such amount shall be paid by the Servicer in
immediately available funds to the Collection Account, to be distributed on the
next Remittance Date in accordance with Section 2.5 hereof.
SECTION 10.9. Co-Beneficiary Designations. By no later than 30 days
after the Closing Date, CompuCredit shall cause (and shall furnish the Agent
with evidence demonstrating) the Agent to be designated a (a) co-beneficiary of
the "Key Person" insurance obtained by CompuCredit with respect to the following
principals of CompuCredit: Xxxxx X. Xxxxx, Xxxxx X. Xxxxxx, and Xxxx Xxxxxxx,
and (b) co-insured party on the fidelity bond insurance policy obtained by
CompuCredit covering losses from employee, officer and director theft, fraud,
misappropriation, and embezzlement, for all employees, officers and directors of
CompuCredit, in the amount of at least $25 million.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Term of Agreement. This Agreement shall terminate on the
date following the Termination Date upon which the Buyer's Net Investment has
been reduced to zero, all Carrying Costs have been paid in full and all other
Aggregate Unpaids have been paid in full, in each case, in cash; provided,
however, that (i) the rights and remedies of the Agent, Buyer, other Owner and
the Administrative Agent with respect to any representation and warranty made or
deemed to be made by the Transferor pursuant to this Agreement, (ii) the
indemnification and payment provisions of Article VIII, and (iii) the agreement
set forth in Section 11.9 hereof, shall be continuing and shall survive any
termination of this Agreement.
SECTION 11.2. Waivers; Amendments. (a) No failure or delay on the part
of the Agent, Buyer, the Administrative Agent or any other Owner in exercising
any power, right or remedy under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or
remedy preclude any other further exercise thereof or the exercise of any other
power, right or remedy. The rights and remedies herein provided shall be
cumulative and nonexclusive of any rights or remedies provided by law.
(b) Any provision of this Agreement or any other Transaction Document may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed by the Transferor, the Servicer, Buyer and the Majority Owner (and, if
Article IX or the rights or duties of the Agent are affected thereby, by the
Agent); provided that no such amendment or waiver shall, unless signed by each
other Owner directly affected thereby, (i) [increase the Commitment of any other
Owner, (ii) reduce the Buyer's Net
81
Investment or rate of interest to accrue thereon or any fees or other amounts
payable hereunder, (iii) postpone any date fixed for the payment of any
scheduled distribution in respect of the Buyer's Net Investment or interest with
respect thereto or any fees or other amounts payable hereunder [or for
termination of any Commitment,] (iv) change the [percentage of the Commitments]
or the number of other Owners, which shall be required for the other Owners or
any of them to take any action under this Section or any other provision of this
Agreement, (v) release all or substantially all of the property with respect to
which a security interest therein has been granted hereunder to the Agent or the
other Owners or (vi) extend or permit the extension of the Commitment
Termination Date. In the event the Agent requests Buyer's or any other Owner's
consent pursuant to the foregoing provisions and the Agent does not receive a
consent (either positive or negative) from Buyer or such other Owner within 10
Business Days of Buyer's or other Owner's receipt of such request, then Buyer or
such other Owner (and its percentage interest hereunder) shall be disregarded in
determining whether the Agent shall have obtained sufficient consent hereunder.
SECTION 11.3. Notices. Except as provided below, all communications and
notices provided for hereunder shall be in writing (including telecopy or
electronic facsimile transmission or similar writing) and shall be given to the
other party at its address or telecopy number set forth below or at such other
address or telecopy number as such party may hereafter specify for the purposes
of notice to such party. Each such notice or other communication shall be
effective (i) if given by telecopy, when such telecopy is transmitted to the
telecopy number specified in this Section 11.3 and confirmation is received,
(ii) if given by mail, 3 Business Days following such posting, postage prepaid,
U.S. certified or registered, (iii) if given by overnight courier, one (1)
Business Day after deposit thereof with a national overnight courier service, or
(iv) if given by any other means, when received at the address specified in this
Section 11.3. However, anything in this Section to the contrary notwithstanding,
the Transferor hereby authorizes Buyer to effect Transfers and funding period
selections based on telephonic notices made by any Person which Buyer in good
faith believes to be acting on behalf of the Transferor. The Transferor agrees
to deliver promptly to Buyer a written confirmation of each telephonic notice
signed by an authorized officer of Transferor. However, the absence of such
confirmation shall not affect the validity of such notice. If the written
confirmation differs in any material respect from the action taken by Buyer, the
records of Buyer shall govern absent manifest error.
82
If to the Buyer:
Sheffield Receivables Corporation
c/o Barclays Bank PLC
000 Xxxxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
(with a copy to the Agent)
If to the Transferor:
CompuCredit Acquisition Funding Corp. II
Xxx Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Telephone: (000) 000-000-0000
Telecopy: (000) 000-000-0000
Payment Information:
NationsBank, N.A.
Atlanta, Georgia
ABA # 000000000
Account: CompuCredit Acquisition Funding Corp. II
Account No. 000-000-0000
If to CompuCredit Corporation:
CompuCredit Corporation
Xxx Xxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
If to the Agent:
Barclays Bank PLC,
000 Xxxxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
83
SECTION 11.4. Governing Law; Submission to Jurisdiction; Integration
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAW
PRINCIPLES THEREOF. EACH OF THE PARTIES HERETO HEREBY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN THE CITY OF NEW
YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. Each of the parties hereto
hereby irrevocably waives, to the fullest extent it may effectively do so, any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. Nothing in
this Section 11.4 shall affect the right of the parties hereto to bring any
action or proceeding against any other party hereto or its property in the
courts of other jurisdictions.
(b) EACH OF THE PARTIES HERETO HEREBY WAIVES ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE AMONG ANY OF THEM ARISING OUT OF, CONNECTED WITH, RELATING TO OR
INCIDENTAL TO THE RELATIONSHIP BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR
THE OTHER TRANSACTION DOCUMENTS.
(c) This Agreement contains the final and complete integration of all
prior expressions by the parties hereto with respect to the subject matter
hereof and shall constitute the entire Agreement among the parties hereto with
respect to the subject matter hereof superseding all prior oral or written
understandings.
(d) The Transferor and CompuCredit each hereby appoint CT Corporation
located at 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 as the authorized agent upon
whom process may be served in any action arising out of or based upon this
Agreement, the other Transaction Documents to which such Person is a party or
the transactions contemplated hereby or thereby that may be instituted in the
United States District Court for the Southern District of New York and of any
New York State court sitting in The City of New York by Buyer, the Agent, any
other Owner, or any assignee of any of them.
SECTION 11.5. Severability; Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be
an original and all of which when taken together shall constitute one and the
same Agreement. Any provisions of this Agreement which are prohibited or
unenforceable in any jurisdiction
84
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
SECTION 11.6. Successors and Assigns. (a) This Agreement shall be
binding on the parties hereto and their respective successors and assigns;
provided, however, that (other than as permitted pursuant to Section 5.1(j) and
under the Purchase Agreement) neither the Transferor nor CompuCredit may assign
any of its rights or delegate any of its duties hereunder or under the
Receivables Purchase Agreement or under any of the other Transaction Documents
to which it is a party without the prior written consent of the Agent.
(b) Each of the Transferor and CompuCredit hereby agrees and consents
to the assignment by Buyer from time to time of all or any part of its rights
under, interest in and title to this Agreement and the Transferred Interest to
any Liquidity Provider; provided, however, that any such assignment shall be
made in accordance with the provisions of Section 11.11 hereof.
SECTION 11.7. Disclosure. Each of the Transferor and CompuCredit hereby
consents to the disclosure of any non-public information with respect to it
received by the Buyer, the Agent, any other Owner or the Administrative Agent to
any of the Buyer, the Agent, any nationally recognized rating agency rating
Buyer's Commercial Paper, the Agent, any other Owner, or, to the extent that it
is an Affiliate of the Agent, [the Liquidity Provider or the Credit Support
Provider] in relation to this Agreement.
SECTION 11.8. Confidentiality Agreement. Each of the Transferor and
CompuCredit hereby agrees that it will not disclose the contents of this
Agreement or any other proprietary or confidential information of the Buyer, the
Agent, any Liquidity Provider or any other Owner to any other Person except (i)
its auditors and attorneys, employees or financial advisors (other than any
commercial bank) and any nationally recognized rating agency, provided such
auditors, attorneys, employees, financial advisors or rating agencies are
informed of the highly confidential nature of such information, (ii) as
otherwise required by applicable law or order of a court of competent
jurisdiction, or (iii) required in response to any summons or subpoena or in
connection with any litigation; and provided, further, however, that the
Transferor and the Servicer shall have no obligation of confidentiality in
respect of any information which may be generally available to the public or
becomes available to the public through no fault of theirs. Such documents shall
include, but not be limited to, research studies, proprietary technology, trade
secrets, know-how, market studies and forecasts, competitive analyses, pricing
policies, the substance of agreements with customers and others, marketing
arrangements, customer lists and other documents embodying such confidential
information.
85
SECTION 11.9. No Bankruptcy Petition. (a) Each of the Transferor and
CompuCredit hereby covenants and agrees that, prior to the date which is one
year and one day after the payment in full of all outstanding Commercial Paper
or other indebtedness of Buyer, it will not institute against, or join any other
Person in instituting against, Buyer any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceeding
under the laws of the United States or any state of the United States.
(b) Notwithstanding any prior termination of this Agreement, the Buyer,
any other Owner, the Agent, the Servicer, each Person which acquires an interest
in the Transferor's Interest and each of their respective successors and
assigns, shall not, prior to the date which is one year and one day after the
termination of this Agreement, acquiesce, petition or otherwise invoke or cause
the Transferor to invoke the process of any Governmental Authority for the
purpose of commencing or sustaining a case against the Transferor under any
Federal or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Transferor or any substantial part of its property or ordering the
winding-up or liquidation of the affairs of the Transferor.
SECTION 11.10. No Recourse Against Stockholders, Officers or Directors.
No recourse under any obligation, covenant or agreement of Buyer contained in
this Agreement shall be had against any stockholder, officer or director of
Buyer, as such, by the enforcement of any assessment or by any legal or
equitable proceeding, by virtue of any statute or otherwise; it being expressly
agreed and understood that this Agreement is solely a corporate obligation of
Buyer, and that no personal liability whatsoever shall attach to or be incurred
by the stockholders, officers or directors of the buyer, as such, or any of
them, under or by reason of any of the obligations, covenants or agreements of
Buyer contained in this Agreement, or implied therefrom, and that any and all
personal liability for breaches by Buyer of any of such obligations, covenants
or agreements, either at common law or at equity, or by statute or constitution,
of every such stockholder, officer or director of the Buyer is hereby expressly
waived as a condition of and consideration for the execution of this Agreement.
SECTION 11.11. Tax Matters
(a) Notwithstanding anything to the contrary herein, the Servicer shall
be entitled to withhold any amount that it determines in its sole discretion is
required to be withheld pursuant to Section 1446 of the Code and such amount
shall be deemed to have been paid for all purposes of the Agreement.
(b) Each Owner agrees that prior to the date on which the first
interest payment hereunder is due thereto, it will provide to the Servicer (i)
if such Owner is incorporated or organized under the laws of a jurisdiction
outside the United States, two duly completed copies of the United States
Internal Revenue Service Form 4224 or, if
86
the Transferor in its sole discretion consents, Form 1001, or in either case
successor applicable or required forms, (ii) upon the request of the Transferor,
a duly completed copy of United States Internal Revenue Service Form W-9 or, if
the Transferor in its sole discretion consents, Form W-8, or in either case
successor applicable or required forms, and (iii) such other forms and
information as may be required to confirm the availability of any applicable
exemption from United States federal, state or local withholding taxes. Each
Owner agrees to provide to the Servicer like additional subsequent duly
completed forms (subject to like consent) satisfactory to the Servicer on or
before the date that any such form expires or becomes obsolete, or upon the
occurrence of any event requiring an amendment, resubmission or change in the
most recent form previously delivered by it, and to provide such extensions or
renewals as may be reasonably requested by the Servicer. Each Owner certifies,
represents and warrants that as of the date of this Agreement, or in the case of
an Owner which is an assignee as of the date of such Assignment, that it is
entitled (x) to receive payments under this Agreement without deduction or
withholding (other than pursuant to Section 1446 of the Code, if applicable) of
any United States federal income taxes and (y) to an exemption from United
States backup withholding tax. Each Owner represents and warrants (but without
limitation to its rights under Section 8.2 that it shall pay any taxes imposed
on such Owner (but without limitation to its rights under Section 8.2)
attributable to its interest in the Transferred Interest.
(c) Each Owner agrees with the Transferor that: (i) such Owner, will
deliver to the Transferor, on or before the Closing Date or the effective date
of any participation or Assignment, a letter in the form annexed hereto as
Exhibit K (an "Investment Letter"), executed by such assignee, with respect to
the purchase by such Owner, of a portion of an interest relating to the
Transferred Interest and (ii) all of the statements made by such Owner, as
applicable, in its Investment Letter shall be true and correct as of the date
made.
(d) Each Owner, by its holding of an interest in the Transferred
Interest, hereby severally represents, warrants and covenants, and each Buyer or
Owner, as applicable, that acquires an interest in the Transferred Interest by
Assignment shall be deemed to have severally represented, warranted and
covenanted upon such Assignment that: (i) such Buyer or Owner, as applicable,
has not acquired and shall not sell, trade or transfer any interest in the
Transferred Interest, nor cause any interest in the Transferred Interest to be
marketed, on or through either (A) an "established securities market" (or the
substantial equivalent thereof) within the meaning of Section 7704(b)(1) of the
Code (including an interdealer quotation system that regularly disseminates firm
buy or sell quotations by identified brokers or dealers by electronic means or
otherwise) or (B) a "secondary market" (or the substantial equivalent thereof)
within the meaning of Section 7704(b)(2) of the Code (including a market wherein
interests in the Transferred Interest are regularly quoted by any person making
a market in such interests and a market wherein any person regularly makes
available bid or offer quotes with respect to interests in the Transferred
Interest and stands ready to effect buy or sell transactions at the quoted
prices for itself or on behalf of others), and
87
(ii) unless the Transferor consents otherwise, such Buyer or Owner, as
applicable, (A) is properly classified as, and shall remain classified as, a
"corporation" as described in Section 7701(a)(3) of the Code and (B) is not, and
shall not become, an "S corporation" as described in Section 1361 of the Code.
Each Buyer or Owner, as applicable, represents, warrants and covenants that it
shall (A) cause each of its Participants otherwise permitted hereunder to make
representations, warranties and covenants similar to the foregoing for the
benefit of the Transferor at the time such Participant becomes a Participant and
(B) forward a copy of such representations, warranties and covenants to the
Transferor. In the event of any breach of the representation, warranty and
covenant of a Buyer or Owner, as applicable, or its Participant that such Buyer
or Owner, as applicable, or Participant shall remain classified as a corporation
other than an S corporation, such Buyer or Owner, as applicable, shall notify
the Transferor promptly upon such Buyer or Owner, as applicable, becoming aware
of such breach, and thereupon the Buyer or Owner, as applicable, hereby agrees
to use reasonable efforts to procure a replacement investor not so affected
which is acceptable to the Transferor and the Buyer to replace such affected
Buyer or Owner, as applicable. In any such event, the Transferor shall also have
the right to procure a replacement investor, provided such replacement investor
(i) is acceptable to the Buyer and the Agent and (ii) any replacement of the
Buyer will terminate the obligations of the Agent hereunder and (iii) any
replacement of the Agent, in its capacity as Agent hereunder or as an Owner,
shall require the replacement of the Buyer. Each affected Buyer and Owner hereby
agrees to take all actions necessary to permit a replacement investor to succeed
to its rights and obligations hereunder. Each Buyer and Owner which has a
Participant which has breached its representation, warranty and covenant that it
shall remain classified as a corporation other than an S corporation hereby
agrees (without limiting the right of the Transferor to procure a replacement
investor for such Buyer or Owner as applicable, as provided above in this
paragraph) to notify the Transferor of such breach promptly upon such Buyer or
Owner, as applicable, becoming aware thereof and to use reasonable efforts to
procure a replacement Participant, as applicable, not so affected which is
acceptable to the Transferor and the Buyer to replace any such Participant.
(e) Subject to the provisions of subsection (g), each Owner may at any
time sell, assign or otherwise transfer, to the extent of such Owner's interest
in the Transferred Interest, to (i) a Permitted Assignee, in the case of an
Assignment by Buyer or its assigns or (ii) any other Person to which the
Transferor may consent, which consent shall not be unreasonably withheld (it
being understood that such consent shall be considered to be withheld reasonably
on the basis that, and no Assignment pursuant to clause (i) or (ii) above shall
be permitted if, following such proposed Assignment the number of Private
Holders would exceed 80 or otherwise cause the arrangement created pursuant to
this Agreement to be in jeopardy of being treated as taxable as a publicly
traded partnership pursuant to Section 7704 of the Code) all or part of its
interest in the Transferred Interest; provided, however, that any Assignment
shall be void unless (x) the minimum amount of such Assignment shall be
$5,000,000, (y) such assignee Buyer or other Owner, as applicable, shall comply
with this Section 11.11 and
88
shall have delivered to the Transferor, prior to the effectiveness of such
Assignment, a copy of an agreement under which such assignee has made the
representations, warranties and covenants required to be made pursuant to this
Section 11.11, and (z) such proposed assignee shall provide the forms described
in Section 11.11(b) (subject to the Transferor's consent, as applicable and as
set forth therein) in the manner described therein. In connection with any
Assignment, the assignor Buyer or the Owner, as applicable, shall request in
writing to the Transferor for the consent of the Transferor (if required
pursuant to this Section) (the Transferor shall respond to any such request
within ten Business Days after its receipt and the Transferor will not
unreasonably withhold such consent) it being understood that the obtaining of
such consent (if required pursuant to this Section) is a condition to the
effectiveness of the Assignment. Each assignee of a Buyer or other Owner, as
applicable, is subject to the terms and conditions of subsection 11.11(b) on an
ongoing basis and hereby makes the certifications, representations and
warranties contained therein.
(f) Subject to the provisions of subsection (g), any Owner may at any
time grant a participation in all or part of its interest in the Transferred
Interest to (i) a Permitted Assignee, in the case of a participation granted by
Buyer or its assigns or (ii) any other Person to which the Transferor may
consent, which consent shall not be unreasonably withheld (it being understood
that such consent shall be considered to be withheld reasonably on the basis
that, and no participation pursuant to clause (i) or (ii) above shall be
permitted if, following such proposed participation the number of Private
Holders would exceed 80 or otherwise cause the arrangement created pursuant to
this Agreement to be in jeopardy of being treated as taxable as a publicly
traded partnership pursuant to Section 7704 of the Code) (each such Person, a
"Participant"); provided, however, that such participation shall be void, unless
such Participant complies with the applicable provisions of this Section 11.11
and such Buyer or other Owner, as applicable, delivers to the Transferor, prior
to the effectiveness of its participation, a copy of an agreement under which
such Participant has made the representations, warranties and covenants to be
made pursuant to this Section 11.11. In connection with the granting of any such
participation to any Person, the granting Buyer or other Owner, as applicable,
shall provide a written request to the Transferor for the consent of the
Transferor to the granting of the specified interest to any identified
prospective Participant, if such consent is required to be given pursuant to
this Section, and the Transferor shall respond to any such request within ten
Business Days after its receipt, it being understood that the obtaining of such
consent (if so required) is a condition to the effectiveness of a participation.
Each Buyer and other Owner hereby acknowledges and agrees that any such
participation will not alter or affect in any way whatsoever such Buyer's and
other Owner's direct obligations hereunder and that the Transferor shall have no
obligation to have any communication or relationship whatsoever with any
Participant of such Buyer or other Owner, as applicable, in order to enforce the
obligations of such Buyer or other Owner, as applicable, hereunder. Each Buyer
and other Owner shall promptly notify the Transferor in writing of the identity
and interest of each Participant upon any such disposition. As a condition of
granting any participation, the applicable Buyer or other Owner hereby agrees to
deliver to the
89
Transferor a certification of the proposed Participant pursuant to which the
Participant certifies, represents and warrants that (i) such Participant is
entitled to (x) receive payments with respect to its participation without
deduction or withholding of any United States federal income taxes and (y) an
exemption from United States backup withholding tax, (ii) prior to the date on
which the first interest payment is due to the Participant, such Buyer or other
Owner, as applicable, will provide to the Servicer the forms described in
clauses (i), (ii) and (iii) of subsection 11.11(b) (subject to the Transferor's
consent, as applicable and as set forth therein) as though the Participant were
a Buyer or other Owner, as applicable, (iii) such Buyer or other Owner similarly
will provide subsequent forms as described in subsection 11.11(b) with respect
to such Participant as though it were a Buyer or other Owner, as applicable, and
(iv) such Participant will pay any taxes imposed on its participation interest
in the Transferred Interest.
(g) Except (i) as provided in subsections (e) and (f) above and in
Sections 9.9 and 11.6 hereof and (ii) in connection with any pledge to any
Federal Reserve Bank to secure any obligation of the Buyer or other Owner,
neither the Buyer nor any other Owner may transfer, assign, exchange or
otherwise convey or pledge, hypothecate, or otherwise grant a security interest
in the Transferred Interest and any such attempted transfer, assignment,
exchange, conveyance, pledge, hypothecation or grant shall be void.
SECTION 11.12. Tax Treatment. The Transferor has entered into this
Agreement, and the interests of the Buyer in the Transferred Interest will be
issued, with the intention that, for federal, state and local income and
franchise tax purposes, the Transferred Interest will qualify as indebtedness
secured by the Receivables. The Transferor, by entering into this Agreement, and
the Buyer, by the acceptance of any such interest in the Transferred Interest,
agree to treat such interest in the Transferred Interest for federal, state and
local income and franchise tax purposes as indebtedness of the Transferor. The
Buyer agrees that it will cause any Person acquiring an interest in the
Transferred Interest through it to comply with this Agreement as to treatment as
indebtedness under applicable tax law, as described in this Section 9.11. None
of the parties hereto shall make the election provided for in Treasury
Regulation section 301.7701-3(c). The provisions of this Agreement shall be
construed in furtherance of the foregoing intended tax treatment.
90
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Transfer and Administration Agreement as of the date first
written above.
SHEFFIELD RECEIVABLES CORPORATION,
as Buyer
By:/s/ Xxxxxxx Xxxx
-------------------------------------
Name:
Title:
COMPUCREDIT ACQUISITION FUNDING CORP. II,
as the Transferor
By:/s/ Xxxxxx Xxxxxxx
-------------------------------------
Name: Xxxxxx Xxxxxxx
Title: Secretary and Treasurer
COMPUCREDIT CORPORATION, individually
and as Servicer and Guarantor
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Chief Financial Officer
BARCLAYS BANK PLC
as the Agent
By: [illegible]
-------------------------------------
Name:
Title:
[Signature Page to Transfer and Administration Agreement]
91
