Exhibit 10.17(b)
AMENDMENT NO. 1
TO
INDENTURE AND SERVICING AGREEMENT
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CREDITRUST SPV98-2, LLC,
as Issuer
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee and Backup Servicer of the Receivables
and
CREDITRUST CORPORATION,
as Servicer of the Receivables
and
ASSET GUARANTY INSURANCE COMPANY
as Note Insurer
Dated as of February 16, 1999
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CREDITRUST RECEIVABLES-BACKED NOTES, SERIES 1998-2
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This Amendment No. 1 to Indenture and Servicing Agreement, dated as of
February 16, 1999 (this "Amendment No. 1"), is executed by and among Creditrust
SPV98-2, LLC, as issuer (the "Issuer"), Norwest Bank Minnesota, National
Association, as trustee (in such capacity, the "Trustee"), and as backup
servicer (in such capacity, the "Backup Servicer"), Creditrust Corporation, as
servicer (the "Servicer") and Asset Guaranty Insurance Company, as note insurer
(the "Note Insurer").
RECITALS
WHEREAS, the parties hereto have executed and delivered an Indenture and
Servicing Agreement (the "Indenture") dated as of December 1, 1998, by and among
the Issuer, the Trustee and Backup Servicer, the Servicer and the Note Insurer
in connection with the issuance and sale by the Issuer of the 8.61% Creditrust
Receivables-Backed Notes, Series 1998-2;
WHEREAS, the Servicer intends to make an underwritten public offer of
shares of its common stock, which may include certain shares of common stock of
Xxxxxx X. Xxxxxx, pursuant to an underwriting agreement among Servicer, Xxxxxx
X. Xxxxxx, and the underwriters named therein (the "1999 Offering");
WHEREAS, Section 8.01(l) of the Indenture provides, in part, that any
reduction of Xx. Xxxxxx'x personal investment in the Servicer below an amount
equal to 51% of the outstanding common stock of the Servicer constitutes a
Servicer Default, and since a Servicer Default would occur as a result of the
1999 Offering, the parties hereto have agreed to amend the Indenture; and,
WHEREAS, the parties hereto have obtained the consent (the "Consent") of
the Noteholders evidencing not less than 66 2/3% of the Voting Interests, and
the Trustee has furnished to the Rating Agency and the Placement Agent written
notification of the substance of this Amendment No. 1 and the Consent.
NOW, THEREFORE, in consideration of the mutual agreements herein contained,
each party agrees as follows for the benefit of the other parties and the
Noteholders to the extent provided herein:
ARTICLE I
DEFINITIONS; AMENDMENTS; TRUSTEE COVENANT
SECTION 1.1. Definitions. Any capitalized term used herein but not
defined herein shall have the meaning ascribed to it in the Indenture.
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SECTION 1.2. General Covenants of Servicer. (a) SECTION 7.07(b) of the
Indenture is hereby amended to read as follows:
"(b) Stockholders' Equity. Servicer shall not permit its
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stockholders' equity as required to be shown on its consolidated
financial statements in accordance with GAAP to be less than the
sum of (i) $20,000,000, plus (ii) 75% of the cumulative after-tax
consolidated net ending at the end of the Servicer's then most
recent fiscal quarter (treated for this purpose as a single
accounting period), plus (iii) 75% of the net proceeds received
by the Servicer from any issuance for cash of common or preferred
stock of Servicer. For purposes of this section, if net earnings
of the Servicer for any period shall be less than zero, the
amount calculated pursuant to clause (ii) above for such period
shall be zero."
(b) SECTION 7.07 of the Indenture is hereby amended by adding the following
provisions at the end of that Section:
"(o) Servicer shall not permit the ratio of the Debt of
Servicer to stockholders' equity of the Servicer as required to
be shown on its consolidated financial statements in accordance
with GAAP to be greater than 2.5 to 1, at the end of any fiscal
quarter of Servicer commencing with its fiscal quarter ending
March 31, 1999. In any measurement of Debt for purposes of this
covenant, the amount of the Debt shall be reduced by the amount
of any reserves held by a creditor, or held by a trustee or other
fiduciary for the benefit of such creditor, to secure the repayment
of such Debt.
The term "Debt" as used in this Section 7.07(o), with respect
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to Servicer means, at any date of determination and without
duplication: (i) obligations created, issued or incurred by Servicer
for borrowed money; (ii) obligations of Servicer to pay the deferred
portion of the purchase price of property or services, other than
trade accounts payable arising, and accrued expenses incurred, in
the ordinary course of business; (iii) obligations of Servicer as
a lessee which are capitalized in accordance with GAAP; and
(iv) obligations of other Persons of the type described in
clauses (i), (ii) and (iii) of this definition to the extent
guaranteed by Servicer; the term "Debt" excludes obligations created,
issued or incurred by a subsidiary of Servicer for borrowed money,
whether or not such obligations are required to be shown on the
consolidated financial statements of Servicer under GAAP, except
to the extent that any such obligations are created, issued,
incurred or guaranteed by Servicer.
(p) Servicer shall not permit the ratio of Current Assets to
Current Liabilities to be less than 2 to 1, at the end of any fiscal
quarter of Servicer commencing with its fiscal quarter ending
March 31, 1999.
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The term "Current Assets" means the sum of the following, as
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and to the extent required to be shown on the consolidated financial
statements of Servicer in accordance with GAAP: (i) all cash and
cash equivalents, plus (ii) other marketable securities valued at
fair market value.
The term "Current Liabilities" means all accounts payable and
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accrued expenses as and to the extent required to be shown on the
consolidated financial statements of Servicer in accordance
with GAAP."
SECTION 1.3. Servicer Default. SECTION 8.01(l) of the Indenture is hereby
amended to read as follows:
"(l) There occurs any reduction of Xxxxxx X. Xxxxxx'x personal
investment in Servicer: (1) below an amount equal to 35% of the
outstanding common stock of Servicer; or (2) except for the sale of
up to 1,050,000 shares of common stock of Servicer on or before
May 15, 1999, as the result of sales of common stock of Servicer by
Xxxxxx X. Xxxxxx. For purposes of the preceding sentence, the
personal investment in Servicer by Xxxxxx X. Xxxxxx shall not be
deemed to have been reduced as the result of any transfers by
Xxxxxx X. Xxxxxx to family members, personal foundations, trusts,
partnerships, limited liability companies and the like for estate
planning purposes so long as Xxxxxx X. Xxxxxx retains the ability to
participate in decisions to vote and dispose of such common stock."
SECTION 1.4. Trustee Covenant. In accordance with Section 11.01(d) of the
Indenture, the Trustee hereby agrees and covenants to furnish, promptly after
the execution of this Amendment No. 1, written notification of the substance of
this Amendment No. 1 and the Consent to each of the Noteholders.
SECTION 1.5. Required Reserve Amount. Section 1 of the Indenture is
hereby amended by changing the definition of Required Reserve Amount to read in
its entirety as follows, effective on the date which is five (5) Business Days
after the 1999 Offering is closed. Not later than such effective date, the
Issuer will cause to be deposited with Trustee the amount necessary to increase
the amount on deposit in the Reserve Account to $3,250,000.
" 'Required Reserve Amount' means the amount required to be
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maintained on deposit in the Reserve Account for so long as the Notes
are outstanding. The amount is $3,250,000."
ARTICLE II
MISCELLANEOUS PROVISIONS
SECTION 2.1. Amendment. This Amendment No. 1 shall only be amended in the
same manner as the Indenture shall be amended.
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SECTION 2.2. Entire Agreement; Effect. This Amendment No.1, together with
the Transaction Documents, is intended by the parties to and does constitute the
entire agreement of the parties with respect to the transaction contemplated
hereunder. This Amendment No. 1 supersedes any and all prior understandings,
and it does not alter, amend or waive any of the terms or provisions of the
Indenture except for those terms or provisions expressly amended hereby.
SECTION 2.3. Governing Law. This Amendment No. 1 shall be governed by and
construed in accordance with the laws of the State of New York and the
obligations, rights and remedies of the parties under this Amendment No.1 shall
be determined in accordance with such laws, including Section 5-1401 of the
General Obligation Law of New York, but otherwise without regard to conflict of
laws provisions.
SECTION 2.4. Severability of Provisions; Counterparts. If any one or more
of the covenants, agreements, provisions or terms of this Amendment No. 1 shall
be for any reason whatsoever held invalid or unenforceable in any jurisdiction,
then such covenants, agreements, provisions or terms shall be deemed severable
from the remaining covenants, agreements, provisions or terms of this Amendment
No. 1 and shall in no way affect the validity or enforceability of the other
provisions of this Amendment No. 1 or the Notes, or the rights of the
Noteholders. This Amendment No. 1 may be executed simultaneously in any number
of counterparts, each of which shall be deemed to be an original, and all of
which shall constitute but one and the same instrument.
SECTION 2.5. Note Insurer. This Amendment No. 1 is not evidence of any
position by the Note Insurer, affirmative or negative, as to whether action by
the Noteholders, or any other party, is required in addition to the execution of
this Amendment No. 1 by the Note Insurer. No representation is made by the Note
Insurer as to the necessity for or the satisfaction of any additional action or
condition under the Indenture with respect to the amendment thereof. This
Amendment No. 1 does not modify the obligations of Note Insurer under the Policy
as set forth therein.
SECTION 2.6. Effective Date. This Amendment No. 1 shall be of no force and
effect unless and until the 1999 Offering is closed.
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IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to be duly
executed by their respective officers as of the day and year first above
written.
CREDITRUST SPV98-2, LLC,
as Issuer
By: /s/ Xxxxxx X. Xxxxxx
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Xxxxxx X. Xxxxxx
President
CREDITRUST CORPORATION,
as Servicer
By: /s/ Xxxxxx X. Xxxxxx
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Xxxxxx X. Xxxxxx
Chairman and
Chief Executive Officer
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, not in its individual capacity,
but solely as Trustee and as Backup Servicer
By: /s/ Xxxxx X. Xxxxxxxxx
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Xxxxx X. Xxxxxxxxx
Assistant Vice President
ASSET GUARANTY INSURANCE
COMPANY
By: /s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx
Vice President
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