AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT Dated as of June 2, 2005 Among CATALOG RECEIVABLES LLC as Seller and SPIRIT OF AMERICA, INC. as Servicer and SHEFFIELD RECEIVABLES CORPORATION as Purchaser and BARCLAYS BANK PLC as Administrator
EXHIBIT
10.1.31
AMENDED
AND RESTATED
Dated
as of June 2, 2005
Among
CATALOG
RECEIVABLES LLC
as
Seller
and
SPIRIT
OF AMERICA, INC.
as
Servicer
and
SHEFFIELD
RECEIVABLES CORPORATION
as
Purchaser
and
BARCLAYS
BANK PLC
as
Administrator
AMENDED
AND RESTATED
Dated
as of June 2, 2005
THIS
IS
AN AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT (this “Agreement”),
among
CATALOG RECEIVABLES LLC, a Delaware limited liability company (“Seller”),
SPIRIT OF AMERICA, INC., (“Spirit”)
a
Delaware corporation, as servicer (in such capacity, “Servicer”),
SHEFFIELD RECEIVABLES CORPORATION, a Delaware corporation (“Purchaser”),
BARCLAYS BANK PLC, a public limited company organized under the laws of England
and Wales (“Barclays”),
as
administrator for Purchaser (in such capacity, the “Administrator”).
Unless otherwise indicated, capitalized terms used in this Agreement are
defined
in Appendix A.
Background
1. Seller
is
engaged in the business of purchasing receivables arising in revolving credit
card accounts originated by Crosstown Traders, Inc., a Delaware corporation,
and
its subsidiaries.
2. Seller
has, and expects to have, Pool Receivables in which Seller intends to sell
an
undivided interest. Seller has requested Purchaser, and Purchaser has agreed,
subject to the terms and conditions contained in this Agreement, to purchase
such undivided interest, referred to herein as the Asset Interest, from Seller
from time to time during the term of this Agreement (the “Transaction”).
3. Seller
and Purchaser desire that, subject to the terms and conditions of this
Agreement, certain of the daily Collections in respect of the Asset Interest
be
reinvested in Pool Receivables, which reinvestment shall constitute part
of the
Asset Interest.
4. Spirit
has been requested, and is willing, to act as the Servicer of the Pool
Receivables in accordance with the terms hereof.
5. Barclays
has been requested, and is willing, to act as the Administrator.
6. To
effect
the Transaction, Seller, Servicer, Purchaser and Administrator initially
entered
into the Receivables Purchase Agreement, dated as of May 18, 2005 (the
“Prior
RPA”).
7. This
Agreement amends and restates the Prior RPA in its entirety to recognize
the
addition of each of the Sub-Originators as a Transferring Party.
NOW,
THEREFORE, in consideration of the premises and the mutual agreements herein
contained, the parties hereto, intending to be legally bound hereby, agree
as
follows:
ARTICLE
I
PURCHASES
AND REINVESTMENTS
SECTION
1.01 Commitments
to Purchase; Limits on Purchaser’s Obligations.
Upon
the terms and subject to the conditions of this Agreement, from time to time
prior to the Termination Date, Seller may request that Purchaser purchase
from
Seller ownership interests in the Pool Assets (each being a “Purchase”)
and
Purchaser shall make such Purchase; provided
that no
Purchase shall be made by Purchaser to the extent that, after giving effect
thereto, the then Senior Investor Balance would exceed the lesser of (a)
the
Facility Limit and (b) the Benchmark Amount; and provided
further
that
each Purchase made pursuant to this Section
1.01
shall
have a Purchase Price of at least $500,000 and shall be in integral multiples
of
$250,000.
SECTION
1.02 Purchase
Procedures; Assignment of Purchaser’s Interests.
(a) Notice
of Purchase.
Each
Purchase from Seller by Purchaser shall be made on notice from Seller to
the Administrator received by the Administrator not later than 11:00 a.m.
(New York City time) on the second Business Day before the date of such proposed
Purchase. Each such notice of a proposed Purchase shall specify the desired
amount and date of such Purchase. The “Purchase
Price”
for
each Purchase shall be the lesser of (i) the amount requested by Seller pursuant
to this Section
1.02(a)
and (ii)
the amount permitted pursuant to Section
1.01.
(b) Funding
of Purchase.
On the
date of each Purchase, Purchaser shall, upon satisfaction of the applicable
conditions set forth in Article
V,
make
available to the Administrator at the Administrator’s Office (or to such account
as designated by the Administrator) the amount of its Purchase in same day
funds, and after receipt by the Administrator of such funds, the Administrator
will (a) apply such funds to make a deposit to the Cash Collateral Account
to
the extent necessary to cause the amount on deposit therein to equal or exceed
the Required Cash Collateral Amount, and (b) make the remaining portion of
such
funds immediately available to Seller at such office or to such account as
Seller shall designate in writing to the Administrator on or prior to the
date
hereof (or such other office or account as Seller shall designate from time
to
time).
(c) Assignment
of Asset Interest.
Seller
hereby sells, assigns and transfers to Purchaser, effective on and as of
the
date of each Purchase by the Purchaser hereunder, the corresponding undivided
ownership interest in the Pool Assets.
SECTION
1.03 Reinvestments
of Certain Collections; Payment of Remaining
Collections.
(a)
On the
close of business on each Business Day during the period from the date hereof
to
the Final Payout Date, Servicer shall, out of all Collections received on
such
day:
(i) determine
the portion of such Collections attributable on such day to the Asset Interest
by multiplying (x) the amount of such Collections times
(y) the
Asset Interest at such time;
(ii) out
of
the portion of such Collections allocated to the Asset Interest pursuant
to
clause
(i),
set
aside and deposit into the Collection Account within two Business Days an
amount
at least equal to the sum of the estimated amount of Earned Discount
accrued in respect of the Senior Investor Balance (based on rate information
provided by the Administrator pursuant to Section
2.03),
all
other amounts due to Purchaser or the Administrator hereunder and the Servicer’s
Fee (in each case, accrued through such day) and an amount equal to any Cash
Collateral Shortfall and any Reserve Account Shortfall not so previously
set
aside;
(iii) apply
the
Collections allocated to the Asset Interest pursuant to clause
(i)
and not
required to be set aside pursuant to clause
(ii)
to the
purchase from Seller of ownership interests in Pool Assets (each such purchase
being a “Reinvestment”);
provided
that (A)
if the then Senior Investor Balance would exceed the Benchmark Amount, then
the
Servicer shall not reinvest, but shall set aside and deposit into the Collection
Account within two Business Days, a portion of such Collections which, together
with other Collections previously set aside and then so held in the Collection
Account, shall equal the amount necessary to reduce the Senior Investor Balance
to the Benchmark Amount; (B) if the conditions precedent to Reinvestment
in
Section
5.02
are not
satisfied then Servicer shall not reinvest, but shall set aside and hold
for the
benefit of Purchaser, any of such remaining Collections, which Collections
shall
be deposited into the Collection Account within two Business Days; and (C)
if
the Seller shall have requested a reduction in the Senior Investor Balance,
then, during the times specified in Section
3.02(b)(ii),
Servicer shall not reinvest, but shall set aside and hold for the benefit
of
Purchaser, a portion of such Collections until the amount thereof not so
reinvested shall equal the amount of such reduction; and
(iv) pay
to
Seller (A) the portion of such Collections not allocated to the Asset Interest
pursuant to clause
(i)
and (B)
the Collections applied to Reinvestment pursuant to clause
(iii).
(b) Unreinvested
Collections.
Servicer shall set aside in the Collection Account and hold in trust for
the
benefit of Purchaser all Collections which pursuant to clause
(iii)
of
Section
1.03(a),
may not
be reinvested in Pool Assets. If, prior to the date when such Collections
are
required to be paid to the Administrator for the benefit of Purchaser pursuant
to Section
3.01,
the
amount of Collections so set aside exceeds the amount, if any, necessary
to
reduce the Senior Investor Balance to the Discounted Principal Receivables
Balance, and the conditions precedent to Reinvestment set forth in Section
5.02
are
satisfied, then the Servicer shall apply such Collections (or, if less, a
portion of such Collections equal to the amount of such excess) to the making
of
a Reinvestment.
SECTION
1.04 Asset
Interest.
(a) Components
of Asset Interest.
On any
date the Asset Interest will represent Purchaser’s combined undivided percentage
ownership interest in (i) all then outstanding Pool Receivables, (ii) related
Contracts, (iii) all Related Security with respect to such Pool Receivables,
(iv) all Collections with respect thereto, (v) all rights of Seller (directly
or
as assignee of Transferor) under the First Tier Agreement and the Second
Tier
Agreement, (vi) all books and records evidencing or related to the foregoing,
and (vii) all proceeds of the foregoing (collectively, the “Pool
Assets”);
provided,
that,
the
Pool Assets shall not include any interests in any returned, repossessed
or
foreclosed goods and/or merchandise the sale of which gave rise to a
Receivable.
(b) Computation
of Asset Interest.
On any
date, the Asset Interest shall be equal to a fraction (expressed as a
percentage), the numerator of which is the Senior Investor Balance and the
denominator of which is the Benchmark Amount, each as of such day; provided,
however,
that
during the Liquidation Period, the Asset Interest shall be the Asset Interest
computed as of the day immediately preceding the commencement of the Liquidation
Period; provided,
further,
that
the Asset Interest shall not exceed 100%.
(c) Frequency
of Computation.
The
Asset Interest shall be computed as of the close of business on each Business
Day (after giving effect to Section
1.03)
and
shall be reported as of the end of the Due Period in the Information Package
delivered on each Report Date.
SECTION
1.05 Reduction
of Facility Limit; Termination.
Upon
three Business Days’ prior written notice to the Administrator, the Seller may
reduce the Facility Limit, or terminate this Agreement, provided
that,
after giving effect thereto, the Facility Limit is not less than the Senior
Investor Balance. Any such reduction or termination shall be
permanent.
ARTICLE
II
COMPUTATIONAL
RULES
SECTION
2.01 Computation
of Senior Investor Balance.
In
making any determination of the Senior Investor Balance, the following rules
shall apply:
(a) Senior
Investor Balance shall not be considered reduced by any allocation, setting
aside or distribution of any portion of Collections unless such Collections
shall have been actually delivered to the Administrator pursuant hereto;
and
(b) Senior
Investor Balance shall not be considered reduced by any distribution of any
portion of Collections if at any time such distribution is rescinded or
otherwise returned for any reason.
SECTION
2.02 Computation
of Earned Discount.
In
making any determination of Earned Discount, the following rules shall
apply:
(a) the
Administrator shall determine the Earned Discount accruing with respect to
the
Senior Investor Balance, in accordance with the definition of Earned
Discount;
(b) no
provision of this Agreement shall require the payment or permit the collection
of Earned Discount in excess of the maximum permitted by applicable law;
and
(c) Earned
Discount shall not be considered paid by any distribution if at any time
such
distribution is rescinded or otherwise returned for any reason.
SECTION
2.03 Estimates
of Earned Discount Rate, Fees, etc.
For
purposes of determining the amounts required to be set aside by Servicer
pursuant to Section
1.03,
the
Administrator shall notify Servicer from time to time of the Earned Discount
Rate applicable to the Senior Investor Balance and the rates at which fees
and
other amounts are accruing hereunder. It is understood and agreed that (i)
the
Earned Discount Rate may change from time to
time,
(ii) certain rate information provided by the Administrator to Servicer shall
be
based upon the Administrator’s good faith estimate, (iii) the amount of Earned
Discount actually accrued with respect to any Settlement Period may exceed,
or
be less than, the amount set aside with respect thereto by Servicer, and
(iv)
the amount of fees or other payables accrued hereunder with respect to any
Settlement Period may exceed, or be less than, the amount set aside with
respect
thereto by Servicer. Failure to set aside any amount so accrued shall not
relieve Servicer of its obligation to remit Collections to the Administrator
with respect to such accrued amount, as and to the extent provided in
Section
3.01.
ARTICLE
III
SETTLEMENTS
SECTION
3.01 Settlement
Procedures.
The
parties hereto will take the following actions with respect to each Settlement
Period:
(a) Information
Package.
On or
before the Report Date preceding each Settlement Date, Servicer shall deliver
to
the Administrator an electronic mail containing such information as shall
be
agreed in writing by Servicer and the Administrator prior to the Initial
Funding
Date (each, an “Information
Package”).
(b) Earned
Discount; Other Amounts Due.
(i)
On the
tenth day before each Settlement Date, the Administrator shall notify Servicer
of (x) the amount of Earned Discount that will have accrued in respect of
the
Senior Investor Balance during such Settlement Period (the amount of such
Earned
Discount shall be calculated using an estimate of the CP Rate, if necessary,
for
the remaining days in such Settlement Period; provided that each such estimated
amount shall be adjusted as provided in the following paragraph (ii)), and
(y)
all fees and other amounts accrued and payable by Seller under this Agreement
(other than the Senior Investor Balance).
(ii) If
the
Administrator shall have notified Servicer of the estimated amount of Earned
Discount as provided in clause
(i)
above
with respect to a Settlement Period and, on or prior to the applicable
Settlement Date, the Administrator shall have determined that such estimate
is
inaccurate, the Administrator shall notify Servicer as soon as reasonably
practicable and the Earned Discount for the subsequent Settlement Period
shall
be adjusted as follows. If the actual Earned Discount exceeds the estimated
amount thereof, such excess shall be added to the Earned Discount for the
subsequent Settlement Period (and in any event paid to the Administrator
by
Seller on or prior to the Final Payout Date). If the actual Earned Discount
is
less than the estimated amount thereof, the difference shall be subtracted
from
the Earned Discount for the subsequent Settlement Period (and in any event
credited to amounts owed by Seller to the Administrator by Seller on the
Final
Payout Date). Notwithstanding the foregoing, any reconciliation in respect
of
the final Settlement Period as a consequence of any estimate described above
shall be effected on the final Settlement Date.
(c) Settlement
Date Procedure - Reinvestment Period.
On the
twentieth (20th)
day of
each calendar month (commencing in August, 2005), or if such day is not a
Business Day, the next succeeding Business Day (each, a “Settlement
Date”)
prior
to the Termination Date, the Servicer shall transfer from the Collection
Account
all Available Funds, and shall apply such amount in the following
order:
(1) to
the
Administrator on behalf of the Purchaser, an amount equal to the (i) Earned
Discount accrued during such Settlement Period, plus any previously accrued
Earned Discount not paid on a prior Settlement Date, and (ii) Program Fees
accrued during such Settlement Period, plus any previously accrued Program
Fees
and not paid on a prior Settlement Date;
(2) to
the
Administrator on behalf of the Purchaser, an amount equal to the Unused Program
Fees accrued during such Settlement Period, plus any previously accrued Unused
Program Fees not paid on a prior Settlement Date;
(3) to
the
Administrator, an amount equal to the amount, if any, necessary to reduce
the
Senior Investor Balance to the Benchmark Amount (calculated after giving
effect
to any distribution to be made from the Cash Collateral Account on such day)
and
to reduce the Senior Investor Balance in accordance with Section
3.02(b),
which
amount shall be distributed by the Administrator to the Purchaser for
application to the Senior Investor Balance;
(4) to
the
Servicer, an amount equal to the Servicer’s Fee for such preceding Due Period,
plus any previously accrued and unpaid Servicer’s Fee for the payment of the
accrued and unpaid Servicer’s Fees;
(5) to
the
Reserve Account, to the extent necessary to cause funds on deposit therein
to
equal the Required Reserve Account Amount;
(6) to
the
Cash Collateral Account, to the extent necessary to cause funds on deposit
therein to equal (or, if Seller shall so direct, to exceed) the Required
Cash
Collateral Amount; and
(7) to
the
Administrator, all other amounts then due under this Agreement to the
Administrator, the Purchaser, the Affected Parties or the Indemnified
Parties;
(8) to,
or at
the direction of, Seller any remaining amounts.
(d) Settlement
Date Procedure - Liquidation Period.
On each
Settlement Date during the Liquidation Period, the Servicer shall transfer
from
the Collection Account all Available Funds, and shall apply such amount in
the
following order:
(1) to
the
Administrator on behalf of the Purchaser, an amount equal to the (i) Earned
Discount accrued during such Settlement Period, plus any previously
accrued Earned Discount not paid on a prior Settlement Date, and (ii) Program
Fees accrued during such Settlement Period, plus any previously accrued Program
Fees and not paid on a prior Settlement Date;
(2) to
the
Administrator on behalf of the Purchaser, an amount equal to the Unused Program
Fees accrued during such Settlement Period, plus any previously accrued Unused
Program Fees not paid on a prior Settlement Date;
(3) to
the
Administrator, an amount equal to any remaining Purchaser’s Share of Collections
until the Senior Investor Balance is reduced to zero, which amount shall
be
distributed by the Administrator to the Purchaser for application to the
Senior
Investor Balance;
(4) to
the
Servicer, an amount equal to the Servicer’s Fee for such preceding Due Period,
plus any previously accrued and unpaid Servicer’s Fee for the payment of the
accrued and unpaid Servicer’s Fees;
(5) to
the
Administrator, all other amounts then due under this Agreement to the
Administrator, the Purchaser, the Affected Parties or the Indemnified Parties;
and
(6) to,
or at
the direction of, Seller any remaining amounts.
(e) Non-Distribution
of Servicer’s Fee.
Unless
the Administrator gives written notice to the contrary to Servicer (which
notice
may be given at any time), from and after the date on which the amounts (if
any)
set aside pursuant to Section
1.03
for any
Settlement Period in respect of payments required to be made prior to the
payment of the Servicer’s Fee on the related Settlement Date are sufficient to
make such payments, the amounts (if any) set aside pursuant to Section
1.03
in
respect of the Servicer’s Fee may be paid to Servicer, in which case no
distribution shall be made in respect of Servicer’s Fee pursuant to clause
(c)
or
(d)
above.
(f) Cap
Agreements.
(i) Prior
to
the Initial Funding Date, Seller shall obtain a Cap Agreement in substantially
the form of Exhibit
B.
The Cap
Agreement shall entitle the Seller to receive monthly the Cap Payment, if
any,
as set forth in the Cap Agreement. Payments received by Seller under the
Cap
Agreement shall be deposited in the Collection Account within two Business
Days
of such receipt (or, if earlier, on the related Settlement Date), except
that
any payments received under a Cap Agreement as a result of the early termination
thereof may instead be applied by Seller to the acquisition of a Replacement
Interest Rate Cap.
(ii) The
Administrator hereby appoints the Servicer to act as calculation agent under
the
Cap Agreements and the Servicer accepts such appointment.
SECTION
3.02 Deemed
Collections; Reduction of Senior Investor Balance, Etc.
(a) Deemed
Collections.
If on
any day
(i) any
Pool
Receivable is
(A) reduced
as a result of any defective, rejected or returned merchandise or services,
any
cash discount, or any incorrect billing or other adjustment by Seller or
any
Affiliate of Seller,
(B) reduced
or canceled as a result of a setoff in respect of any claim by the Obligor
thereof against Seller or any Affiliate of Seller or any other Person (whether
such claim arises out of the same or a related or an unrelated transaction),
or
(C) reduced
on account of the obligation of Seller to pay to the related Obligor any
rebate
or refund; or
(ii) any
of
the representations or warranties of Seller set forth in Section
6.01(j)
were not
true when made with respect to any Pool Receivable, or any of the
representations or warranties of Seller set forth in Section 6.01(j)
are no
longer true with respect to any Pool Receivable,
then,
on
such day, Seller shall be deemed to have received a Collection of such Pool
Receivable
(I)
in
the case of clause
(i)
above,
in the amount of such reduction or cancellation; and
(II)
in
the case of clause
(ii)
above,
in the outstanding amount of such Pool Receivable.
If
Seller
shall have deposited into the Collection Account the full outstanding amount
of
any Pool Receivable pursuant to this Section
3.2(a),
Purchaser and the Administrator shall reconvey any interest they have in
such
Pool Receivable, and the Contracts and Related Security with respect thereto,
to
Seller, without representation or warranty, but free and clear of all liens
created by Purchaser and the Administrator. Any such reconveyed Receivable
(and
the Contracts and Related Security with respect thereto) shall be released
from
the ownership and security interests created under this Agreement and shall
no
longer be considered Pool Assets. It is understood and agreed that Seller
may
reconvey any such released Receivables, Contracts and Related Securities
to
Transferor, and Transferor may reconvey such assets to Parent Originator,
in
accordance with the terms of the Second Tier Agreement and the First Tier
Agreement. At the expense of Seller, the Administrator and Purchaser shall
execute such instruments and documents as Seller shall reasonably request
to
evidence such release, and, subject to giving at least five Business Days
prior
written notice to the Administrator, Seller is authorized to file amendments
to
the financing statements filed against the Transferring Parties in connection
with the Transaction Documents to evidence such release.
(b) Seller’s
Optional Reduction of Senior Investor Balance.
Seller
may at any time elect to reduce the Senior Investor Balance as
follows:
(i) Seller
shall give the Administrator at least three Business Days’ prior written
notice of such reduction (including the amount of such proposed reduction
and
the proposed date on which such reduction will commence),
(ii) on
the
proposed date of commencement of such reduction and on each day thereafter,
Servicer shall refrain from reinvesting Collections pursuant to Section
1.03
until
the amount thereof not so reinvested shall equal the amount of such reduction,
and
(iii) Servicer
shall hold such Collections in trust for Purchaser, pending payment to the
Administrator, as provided in Section
3.01;
provided
that,
(A) the
amount of any such reduction shall be not less than $100,000 and the Senior
Investor Balance after giving effect to such reduction shall be not less
than
$100,000 (unless such reduction reduces Senior Investor Balance to zero),
and
(B) Seller
shall use reasonable efforts to attempt to choose a reduction amount, and
the
date of commencement thereof, so that such reduction shall commence and conclude
in the same Settlement Period to the extent possible.
SECTION
3.03 Payments
and Computations, Etc.
(a) Payments.
All
amounts to be paid or deposited by Seller or Servicer to the Administrator
or
any other Person hereunder (other than amounts payable under Section 4.02)
shall
be paid or deposited in accordance with the terms hereof no later than 11:00
a.m. (New York City time) on the day when due in lawful money of the United
States of America in same day funds to the Administrator at the bank account
listed on Schedule
B,
for
credit to such account as the Administrator shall specify.
(b) Method
of Computation.
All
computations of interest, Earned Discount, any fees payable under Sections
4.01(a)
and
(b)
and any
other fees payable by Seller to Purchaser or the Administrator in connection
with Purchases or the Asset Interest hereunder shall be made on the basis
of a
year of 360 days for the actual number of days (including the first day but
excluding the last day) elapsed.
SECTION
3.04 Treatment
of Collections and Deemed Collections.
Seller
shall deliver to Servicer all Collections deemed received by Seller pursuant
to
Section
3.02(a)
during
any Due Period by no later than the second Business Day preceding the related
Settlement Date, and Servicer shall deposit any deemed Collections to the
Collection Account within two Business Days of receipt thereof. So long as
Seller shall hold any Collections or deemed Collections required to be paid
to
Servicer or the Administrator, it shall hold such Collections in trust and
shall
clearly ▇▇▇▇ its records to reflect such trust; provided
that
Seller shall not be required to hold such Collections in a separate deposit
account containing only such Collections.
SECTION
3.05 Collection
Account.
Seller
shall establish an Eligible Account in the name of the Seller, which is
designated as the “Collection
Account”.
The
Collection Account shall be maintained at the Transaction Account Bank subject
to the terms of the Account Control Agreement and Section
3.08.
SECTION
3.06 Reserve
Account.
(a) Seller
shall establish an Eligible Account in the name of the Seller until the Senior
Investor Balance is reduced to zero, which is designated as the “Reserve
Account”.
The
Reserve Account shall be maintained at the Transaction Account Bank subject
to
the terms of the Account Control Agreement and Section
3.08.
(b) If
on any
Settlement Date a Shortfall shall exist, the Administrator shall withdraw
from
the Reserve Account an amount equal to the lesser of such Shortfall or the
amount on deposit in the Reserve Account, and apply such funds in the same
manner as Collections pursuant to Section
3.01(c)
or
3.01(d),
as
applicable.
(c) If
on any
Settlement Date or on the Final Payout Date, as applicable, after giving
effect
to all other withdrawals from and payments to the Reserve Account, the funds
on
deposit in the Reserve Account (exclusive of earnings on the investment of
such
funds) shall exceed the Required Reserve Account Amount, the Servicer (with
prior written notice to the Administrator) shall withdraw such excess and
pay
such excess to, or at the direction of, Seller.
SECTION
3.07 Cash
Collateral Account.
(a) Seller
shall establish an Eligible Account in the name of the Seller until the Senior
Investor Balance is reduced to zero, which is designated as the “Cash
Collateral Account”.
The
Cash Collateral Account shall be maintained at the Transaction Account Bank
subject to the terms of the Account Control Agreement and Section
3.08.
(b) If
on any
Settlement Date a Shortfall shall remain after giving effect to any application
of funds from the Reserve Account pursuant to Section
3.06,
the
Administrator shall withdraw from the Cash Collateral Account an amount equal
to
the lesser of such Shortfall or the amount on deposit in the Cash Collateral
Account, and apply such funds in the same manner as Collections pursuant
to
Section
3.01(c)
or
3.01(d),
as
applicable.
(c) If
on any
Settlement Date or on the Final Payout Date, as applicable, after giving
effect
to all other withdrawals from and payable to the Collection Account, the
funds
on deposit in the Cash Collateral Account (exclusive of earnings on the
investment of such funds) shall exceed the Required Cash Collateral Amounts
and
Seller shall request Servicer to do so, the Servicer (with prior written
notice
to the Administrator) shall withdraw such excess and pay such excess to,
or at
the direction of, Seller.
SECTION
3.08 Accounts
Generally.
(a) Funds
on
deposit in each Transaction Account shall be invested by the Transaction
Account
Bank in Permitted Investments at the direction of Seller. Such investments
made
at any time will mature so that funds will be available for withdrawal no
later
than the following
Settlement Date. All earnings on such investment during any such Settlement
Period shall be deemed to be Available Funds on the related Settlement
Date.
(b) If
any
Transaction Account shall cease to be an Eligible Account, the Administrator,
until the Senior Investor Balance has been reduced to zero, shall, as necessary,
cause each such account to be moved to an institution at which it shall be
an
Eligible Account.
(c) The
Administrator shall have exclusive control of the Transaction Accounts. To
the
extent that a Transaction Account constitutes a “securities account” as defined
in Section 8-501(a) of the UCC, the Transaction Account Bank shall act as
securities intermediary and will treat the Administrator as entitled to exercise
the rights that comprise such property, including all security entitlements,
securities, financial assets, investment property and instruments (each as
defined in the UCC) attributable to such Transaction Account. In the event
that
a Transaction Account is not considered to be a “securities account” under
applicable law, such Transaction Account shall be deemed to be a “deposit
account” (as defined in the UCC) to the extent a security interest can be
granted and perfected under the UCC in such Transaction Account as a deposit
account, and the Transaction Account Bank shall maintain such account not
as a
securities intermediary but as a “bank” (as defined in the UCC). The
Administrator shall be deemed to be the customer of the Transaction Account
Bank
for purposes of such Transaction Account and as such shall be entitled to
all
rights that customers of banks have under applicable law with respect to
deposit
accounts, including the right to withdraw funds from, or close, such Transaction
Account (which rights shall be exercised in accordance with the terms of
this
Agreement). Unless a Replacement Event shall take place and be continuing,
the
Administrator shall instruct the Transaction Account Bank to allow Servicer
access to funds in the Transaction Accounts in order to effect the application
of funds described in (and subject to the terms of) this Agreement and the
other
Transaction Documents.
ARTICLE
IV
FEES
AND YIELD PROTECTION
SECTION
4.01 Fees.
(a) Structuring
Fee.
Seller
shall pay to the Administrator a structuring fee (“Structuring
Fee”)
payable on such dates and in such amounts as are set forth in the letter
dated
the date hereof from the Administrator to Seller (the “Structuring
Fee Letter”).
(b) Other
Fees.
Seller
shall pay to the Administrator, for the account of the Purchaser, certain
ongoing fees payable on such dates and in such amounts as are set forth in
the
letter dated the date hereof from the Administrator to Seller (the “Program
Fee Letter”).
SECTION
4.02 Yield
Protection.
(a) If
(i)
Regulation D or (ii) any Regulatory Change occurring after the date
hereof:
(A) shall
impose, modify or deem applicable any reserve (including, without limitation,
any reserve imposed by the Federal Reserve Board, but excluding any reserve
included in the determination of Earned Discount), special deposit
or
similar requirement against assets of any Affected Party, deposits or
obligations with or for the account of any Affected Party or with or for
the
account of any affiliate (or entity deemed by the Federal Reserve Board to
be an
affiliate) of any Affected Party, or credit extended by any Affected Party;
(B) shall
change the amount of capital maintained or required or requested or directed
to
be maintained by any Affected Party;
(C) shall
impose any other condition affecting any Asset Interest owned or funded in
whole
or in part by any Affected Party, or its obligations or rights, if any, to
make
Purchases or Reinvestments or to provide funding therefor; or
(D) shall
change the rate for, or the manner in which the Federal Deposit Insurance
Corporation (or a successor thereto) assesses, deposit insurance premiums
or
similar charges;
and
the
result of any of the foregoing is or would be:
(x) to
increase the cost to (or in the case of Regulation D referred to above, to
impose a cost on) an Affected Party funding or making or maintaining any
Purchases or Reinvestments, any purchases, reinvestments, or loans or other
extensions of credit under the Liquidity Agreement, or any commitment of
such
Affected Party with respect to any of the foregoing,
(y) to
reduce
the amount of any sum received or receivable by an Affected Party under this
Agreement, or under the Liquidity Agreement with respect thereto,
or
(z) in
the
reasonable determination of such Affected Party, to reduce the rate of return
on
the capital of an Affected Party as a consequence of its obligations hereunder
or arising in connection herewith to a level below that which such Affected
Party could otherwise have achieved but for Regulation D or such Regulatory
Change,
then
within thirty days after demand by such Affected Party (which demand shall
be
accompanied by a statement setting forth the basis of such demand), Seller
shall
pay directly to such Affected Party such additional amount or amounts as
will
compensate such Affected Party for such additional or increased cost or such
reduction. This Section
4.02(a)
shall
not apply to taxes.
(b) Each
Affected Party will promptly notify Seller and the Administrator of any event
of
which it has knowledge which will entitle such Affected Party to compensation
pursuant to this Section
4.02;
provided,
however,
no
failure to give or delay in giving such notification shall adversely affect
the
rights of any Affected Party to such compensation.
(c) In
determining any amount provided for or referred to in this Section
4.02,
an
Affected Party may use any reasonable averaging and attribution methods that
it
(in its sole discretion) shall deem applicable. Any Affected Party when making
a
claim under this Section
4.02
shall
submit to Seller a statement as to such increased cost or reduced return
(including calculation
thereof in reasonable detail), which statement shall, in the absence of
demonstrable error, be conclusive and binding upon Seller.
(d) Purchaser
agrees that it shall use its reasonable best efforts to take any action that
will avoid the need to pay, or reduce the amount of, any increased amounts
referred to in paragraph
(a);
provided
that
Purchaser shall not be obligated to take any actions that would, in the
reasonable opinion of Purchaser, be disadvantageous to Purchaser.
(e) Subject
to Section
4.02(g),
any and
all payments made under this Agreement shall be made free and clear of, and
without deduction for, any and all present or future Taxes. If any amount
of
Taxes shall be required by law to be deducted from or in respect of any sum
payable hereunder to any Foreign assignee or participant of Purchaser, (i)
the
sum payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section
4.02(e)),
such
Foreign assignee or participant of Purchaser, as the case may be, receives
an
amount equal to the sum it would have received had no such deductions been
made,
(ii) Seller shall make such deductions and (iii) Seller shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(f) Each
Foreign assignee or participant of Purchaser, on or prior to the date pursuant
to which it becomes an assignee or participant of Purchaser, and from time
to
time thereafter if requested in writing by Seller (unless such Foreign assignee
or participant of Purchaser can no longer lawfully do so due to a change
in law
subsequent to the date it became an assignee or participant of Purchaser
hereunder), shall provide Seller with Internal Revenue Service Form W-8BEN
or
W-8ECI, as appropriate, or any successor form prescribed by the Internal
Revenue
Service, certifying that such Foreign assignee or participant of Purchaser
is
entitled to benefits under an income tax treaty to which the United States
is a
party which reduces the rate of withholding tax on payments of interest to
zero
or certifying that the income receivable pursuant to this Agreement is
effectively connected with the conduct of a trade or business in the United
States.
(g) For
any
period with respect to which a Foreign assignee or participant of Purchaser
has
failed to provide the Seller with the appropriate form described in Section
4.02(f)
(other
than if such failure is due to a change in law occurring subsequent to the
date
on which a form originally was required to be provided), such Foreign assignee
or participant of Purchaser shall not be entitled to payments of additional
amounts under Section
4.02(e).
SECTION
4.03 Funding
Losses.
In the
event that the Purchaser or any Liquidity Bank shall incur any loss or expense
(including any loss or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by the Purchaser or such
Liquidity Bank to make any Purchase or Liquidity Funding or maintain any
Purchase or Liquidity Funding) as a result of (i) any settlement with respect
to
any portion of the Senior Investor Balance being made on any day other than
a
Settlement Date, or (ii) any Purchase not being made in accordance with a
request therefore under Section
1.02
(other
than by reason of (a) a default by the Purchaser or such Liquidity Bank,
(b)
Purchaser’s failure to make available to the Administrator the required funds as
set forth in Section
1.02(b)
or (c)
the Administrator’s failure to make available the required funds to Seller as
set forth in Section
1.02(b)),
then,
upon written
notice from the Administrator to Seller and Servicer, Seller shall pay to
Servicer, and Servicer shall pay to the Administrator for the account of
the
Purchaser or such Liquidity Bank, the amount of such loss or expense. Such
written notice (which shall include calculations in reasonable detail) shall,
in
the absence of manifest error, be conclusive and binding upon the Seller
and
Servicer.
ARTICLE
V
CONDITIONS
OF PURCHASES
SECTION
5.01 Conditions
Precedent to Initial Purchase.
The
initial Purchase hereunder is subject to the satisfaction of the conditions
specified under this Section
5.01
on or
before the Initial Funding Date (any or all of which may be waived by the
Administrator in its sole discretion).
(a) The
Administrator shall have received the following, each (unless otherwise
indicated) dated such date and in form and substance satisfactory to the
Administrator:
(i) Certified
copies of resolutions of the Board of Directors, Managers or members, as
applicable, of each of the Seller, the Transferor, the Originators and the
Servicer authorizing the execution, delivery and performance of this Agreement
and the other Transaction Documents to which it is a party;
(ii) Certified
copy of the organizational documents and governing instruments, as applicable,
of each of the Seller, the Transferor, the Originators and the
Servicer;
(iii) Good
standing certificates for each of the Seller, the Transferor, the Originators
and the Servicer issued as of a recent date acceptable to the Administrator
by the Secretary of State of the jurisdiction where the Seller, the
Transferor, each Originator and the Servicer, respectively, is
organized;
(iv) A
certificate of the Secretary or an Assistant Secretary of each of the Seller,
the Transferor, the Originators and the Servicer certifying the names of
its
officer or officers authorized to sign this Agreement and other Transaction
Documents to which it is a party;
(v) Such
proper financing statements (Form UCC-1), to be filed against each of the
Seller, the Transferor and the Originators as may be necessary or, in the
opinion of the Administrator, desirable under the UCC or any comparable law
of
all appropriate jurisdictions to perfect Purchaser’s interests in the Pool
Assets;
(vi) A
search
report provided in writing to the Administrator, listing all effective financing
statements that name any of the Originators, the Transferor or the Seller
as
debtor and that are filed in the jurisdictions in which filings were made
pursuant to subsection
(e)
above
and in such other jurisdictions that Administrator shall reasonably request,
together with copies of such financing statements (none of which shall cover
any
Pool Assets);
(vii) Favorable
opinions of counsel to the Seller, the Transferor, the Originators and the
Servicer, in form and substance reasonably satisfactory to the
Administrator;
(viii) A
written
agreement between Servicer and the Administrator as to the form and required
content of the Information Package, and a pro forma
Information Package, prepared in respect of the proposed initial Purchase,
as of
a date no more than 3 Business Days prior to the Initial Funding Date;
and
(ix) Fully
executed copies of the Fee Letter, the First Tier Agreement, the Second Tier
Agreement, the Account Control Agreement, the FSC Guaranty and the Cap
Agreement, each of which agreements shall be in form and substance reasonably
satisfactory to the Administrator;
(b) each
of
the Transaction Accounts shall have been established; and
(c) the
Stock
Purchase Agreement shall have been executed and delivered by the parties
thereto
in a form substantially similar to the form disclosed to the Administrator
prior
to the date hereof (or with such changes as could not reasonably be expected
to
have a Material Adverse Effect), a copy of such Stock Purchase Agreement
shall
have been delivered to the Administrator, and each Originator shall have
become
a direct or an indirect subsidiary of Charming Shoppes Inc. as contemplated
thereby.
SECTION
5.02 Conditions
Precedent to All Purchases and Reinvestments.
Each
Purchase (including the initial Purchase) and each Reinvestment hereunder
shall
be subject to the further conditions precedent that on the date of such Purchase
or Reinvestment the following statements shall be true (and Seller by accepting
the amount of such Purchase or by receiving the proceeds of such Reinvestment
shall be deemed to have certified that):
(a) the
representations and warranties contained in Sections
6.01
and
6.02
are
correct in all material respects on and as of such day as though made on
and as
of such day and shall be deemed to have been made on such day (except to
the
extent they explicitly refer to an earlier date),
(b) no
event
has occurred and is continuing, or would result from such Purchase or
Reinvestment, that constitutes a Liquidation Event or Unmatured Liquidation
Event,
(c) after
giving effect to each proposed Purchase or Reinvestment, the Senior Investor
Balance will not exceed the lesser of the Facility Limit and the Benchmark
Amount, and
(d) the
Termination Date shall not have occurred,
provided,
however,
the
absence of the occurrence and continuance of an Unmatured Liquidation Event
shall not be a condition precedent to any Reinvestment or any Purchase which
does not cause the Senior Investor Balance, after giving effect to such
Reinvestment or Purchase, to exceed the Senior Investor Balance as of the
opening of business of the day of such Reinvestment or Purchase.
ARTICLE
VI
REPRESENTATIONS
AND WARRANTIES
SECTION
6.01 Representations
and Warranties of Seller.
As of
the Closing Date, the Initial Funding Date and each other date specified
in
Section 5.02,
Seller
represents and warrants as follows:
(a) Organization
and Good Standing.
Seller
has been duly organized and is validly existing as a limited liability company
in good standing under the laws of Delaware, with power and authority to
own its
properties and to conduct its business as such properties are presently owned
and such business is presently conducted, and had at all relevant times,
and now
has, all necessary power, authority, and legal right to acquire and own the
Pool
Receivables.
(b) Due
Qualification.
Seller
is duly qualified to do business and is in good standing (or is exempt from
such
requirement), and has obtained all necessary licenses and approvals, in all
jurisdictions in which the failure to so qualify or obtain such licenses
or
approvals would have a Material Adverse Effect.
(c) Power
and Authority; Due Authorization.
Seller
(i) has all necessary power, authority and legal right to (A) execute and
deliver the Transaction Documents to which it is a party, (B) carry out the
terms of the Transaction Documents to which it is a party, and (C) sell and
assign the Asset Interest on the terms and conditions herein provided and
(ii)
has duly authorized by all necessary limited liability company action the
execution, delivery and performance of the Transaction Documents to which
it is
a party and the sale and assignment of the Asset Interest on the terms and
conditions herein provided.
(d) Enforceability.
This
Agreement constitutes, and each other Transaction Document to be executed
by
Seller when duly executed and delivered will constitute, a legal, valid and
binding obligation of Seller enforceable in accordance with its terms, except
as
enforceability may be limited by bankruptcy, insolvency, reorganization,
or
other similar laws affecting the enforcement of creditors’ rights generally and
by general principles of equity, regardless of whether such enforceability
is
considered in a proceeding in equity or at law.
(e) No
Conflict.
The
execution and delivery of this Agreement and each other Transaction Document,
the performance of the transactions contemplated hereunder and thereunder
and
the fulfillment of the terms hereof and thereof will not conflict with, 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 default under, any
indenture, contract, agreement, mortgage, deed of trust, or other instrument
to
which the Seller is a party or by which it or any of its properties are
bound.
(f) No
Violation.
The
consummation of the transactions contemplated by the Transaction Documents
and
the fulfillment of the terms thereof will not violate in any material respect
any Requirements of Law applicable to the Seller.
(g) No
Proceedings.
There
are no proceedings pending or, to the best knowledge of the Seller, threatened
against the Seller before any Governmental Authority (i) asserting the
invalidity
of this Agreement or any other Transaction Document, (ii) seeking to prevent
the
consummation of any of the transactions contemplated by this Agreement or
any
other Transaction Document, (iii) seeking any determination or ruling that,
in
the reasonable judgment of the Seller, could reasonably be expected to have
a
Material Adverse Effect or (iv) seeking any determination or ruling that
would
materially and adversely affect the validity or enforceability of this Agreement
or any other Transaction Document.
(h) All
Consents Required.
All
appraisals, authorizations, consents, orders or other actions of any Person
or
of any Governmental Authority required in connection with the execution and
delivery by the Seller of this Agreement and each other Transaction Document,
the performance of the transactions contemplated hereunder and thereunder
and
the fulfillment of the terms hereof, have been obtained.
(i) Investment
Company Act.
The
Seller is not an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.
(j) Quality
of Title.
Immediately prior to the transfer of an interest therein to Purchaser, each
Pool
Receivable, together with each other Pool Asset, is owned by Seller free
and
clear of any Lien (other than any Lien arising solely as the result of any
action taken by Purchaser (or any assignee thereof) or by the Administrator);
when Purchaser makes a Purchase or Reinvestment, it shall have acquired and
shall at all times thereafter continuously maintain a valid and perfected
first
priority security interest in the Asset Interest, free and clear of any Lien
(other than any Lien arising solely as the result of any action taken by
Purchaser (or any assignee thereof) or by the Administrator); and no financing
statement or other instrument similar in effect naming Seller as debtor or
Seller covering any Pool Receivable or any other Pool Asset is on file in
any
recording office except (i) financing statements evidencing Liens released
on
the Initial Funding Date, which financing statements will be terminated within
ten days after the Initial Funding Date, and (ii) such as may be filed in
favor
of Purchaser or the Administrator in accordance with this Agreement or in
connection with any Lien arising solely as the result of any action taken
by
Purchaser (or any assignee thereof) or by the Administrator.
SECTION
6.02 Representations
and Warranties of Servicer.
As of
the Closing Date, the Initial Funding Date and each other date specified
in
Section 5.02,
Servicer represents and warrants as follows:
(a) Organization
and Good Standing.
Servicer has been duly organized and is validly existing as a corporation
in
good standing under the laws of Delaware, with power and authority to own
its
properties and to conduct its business as such properties are presently owned
and such business is presently conducted, and had at all relevant times,
and now
has, all necessary power, authority, and legal right to service the Pool
Receivables.
(b) Due
Qualification.
Servicer is duly qualified to do business and is in good standing (or exempt
from such requirements), and has obtained all necessary licenses and approvals,
in all jurisdictions in which the failure to so qualify or obtain such licenses
or approvals would have a Material Adverse Effect.
(c) Power
and Authority; Due Authorization.
Servicer (i) has all necessary power, authority and legal right to (A) execute
and deliver the Transaction Documents to which it is a party, and (B) carry
out
the terms of the Transaction Documents to which it is a party and (ii) has
duly
authorized by all necessary corporate action the execution, delivery and
performance of the Transaction Documents to which it is a party.
(d) Enforceability.
This
Agreement constitutes, and each other Transaction Document to be executed
by the
Servicer when duly executed and delivered will constitute, a legal, valid
and
binding obligation of the Servicer enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, or other similar laws affecting the enforcement of creditors’
rights generally and by general principles of equity, regardless of whether
such
enforceability is considered in a proceeding in equity or at law.
(e) No
Conflict.
The
execution and delivery of this Agreement and each other Transaction Document,
the performance of the transactions contemplated hereunder and thereunder
and
the fulfillment of the terms hereof and thereof will not conflict with, 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 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 any of its properties are
bound.
(f) No
Violation.
The
consummation of the transactions contemplated by the Transaction Documents
and
the fulfillment of the terms thereof will not violate in any material respect
any Requirements of Law applicable to the Servicer.
(g) No
Proceedings.
There
are no proceedings pending or, to the best knowledge of the Servicer, threatened
against the Servicer before any Governmental Authority (i) asserting the
invalidity of this Agreement or any other Transaction Document, (ii) seeking
to
prevent the consummation of any of the transactions contemplated by this
Agreement or any other Transaction Document, (iii) seeking any determination
or
ruling that, in the reasonable judgment of the Servicer, would materially
and
adversely affect the performance by the Servicer of its obligations under
this
Agreement or any other Transaction Document, (iv) seeking any determination
or
ruling that would materially and adversely affect the validity or enforceability
of this Agreement or any other Transaction Document.
(h) All
Consents Required.
All
appraisals, authorizations, consents, orders or other actions of any Person
or
of any Governmental Authority required in connection with the execution and
delivery by the Servicer of this Agreement and each other Transaction Document,
the performance of the transactions contemplated hereunder and thereunder
and
the fulfillment of the terms hereof, have been obtained.
(i) Credit
and Collection Policy.
The
copy of the Credit and Collection Policy delivered by or on behalf of Servicer
to the Administrator prior to the Closing Date is a true and complete copy
thereof, as in effect on the Closing Date.
ARTICLE
VII
GENERAL
COVENANTS OF SELLER AND SERVICER
SECTION
7.01 Covenants
of Seller and Servicer.
From
the date hereof until the Final Payout Date, the Seller and Servicer, each
as to
itself, hereby covenants and agrees as follows:
(a) UCC
Matters.The
Seller shall not change its name, identity, limited liability company structure
or state of registration in any manner that would (i) make any financing
statement or continuation statement filed in accordance with this Agreement
“seriously misleading” within the meaning of Section 9-506, 9-507 or 9-508 of
the UCC or any other applicable provisions of the UCC or (ii) change the
location of the Seller for purposes of Section 9-307 of the UCC, unless it
shall
have given to the Administrator at least thirty (30) days’ prior written notice
thereof and shall have taken all action prior to making such change (or shall
have made arrangements to take such action substantially simultaneously with
such change, if it is not possible to take such action in advance) necessary
or
advisable in the reasonable opinion of the Administrator to amend all previously
filed financing statements or continuation statements, or to file appropriate
new financing statements.
(b) Compliance
with Requirements of Law.
The
Servicer shall duly satisfy all obligations on its part to be fulfilled under
or
in connection with each Pool Receivable and the related Account and Contract,
will maintain in effect all qualifications required under Requirements of
Law in
order to service properly each Pool Receivable and the related Account and
Contract, and will comply in all material respects with all other Requirements
of Law in connection with servicing each Pool Receivable and the related
Account
and Contract, the failure to comply with which would have a Material Adverse
Effect.
(c) No
Rescission or Cancellation.
The
Servicer shall not permit any rescission or cancellation of any Pool Receivable
except as ordered by a court of competent jurisdiction or other Governmental
Authority or in compliance with the Credit and Collection Policy.
(d) Protection
of the Purchaser’s Rights.
The
Servicer shall take no action which, nor omit to take any action the omission
of
which, would impair the rights of the Purchaser in, or to receive, the
Collections, nor shall it reschedule, revise or defer payments due on any
Pool
Receivable except in accordance with the respective cardholder agreements
and
Credit and Collection Policy.
(e) Receivables
Not to be Evidenced by Promissory Notes.
Except in connection with its enforcement or collection of a Pool Receivable,
the Servicer will take no action to cause any Pool Receivable to be evidenced
by
any “instrument” (as defined in the UCC).
(f) Preservation
of Corporate Existence.
(i) The
Seller covenants and agrees to maintain at all times its existence as a limited
liability company and all of its rights, privileges and franchises necessary
in
the normal conduct of its business, except for any right, privilege or franchise
(a) that the Seller determines, in its reasonable, good faith business judgment,
is no longer necessary or
desirable in the conduct of its business, and (b) the loss of which will
not
adversely affect the rights of the Administrator or the Purchaser or have
a
Material Adverse Effect.
(ii) The
Servicer covenants and agrees maintain at all times its corporate existence
and
all of its rights, privileges and franchises necessary in the normal conduct
of
its business, except for any right, privilege or franchise (a) that the Servicer
determines, in its reasonable, good faith business judgment, is no longer
necessary or desirable in the conduct of its business, and (b) the loss of
which
will not adversely affect the rights of the Administrator or the Purchaser
or
have a Material Adverse Effect
(g) Access
to Information.
The
Seller and the Servicer covenant and agree to permit the Administrator or
any of
its agents or representatives, during regular business hours and upon at
least
two Business Days’ prior notice (A) to examine all books, records and documents
(including, without limitation, computer tapes and disks) in the possession
or
under the control of Seller or of Servicer relating to Pool Receivables,
including, without limitation, the related Accounts and Contracts and other
agreements, and (B) to visit the offices and properties of Seller or of Servicer
for the purpose of examining such materials described in clause
(A)
above;
provided,
however,
that,
unless a Liquidation Event is continuing, no more than one such review shall
be
conducted during each fiscal year of Servicer.
Unless
otherwise agreed by the parties hereto, any information obtained by the
Administrator pursuant to this Section
7.01(g)
shall be
held in confidence by the Administrator unless and to the extent such
information (i) has become available to the public, (ii) is required or
requested by any Governmental Authority or in any court proceeding or (iii)
is
required by any Requirement of Law. In the case of any disclosure permitted
by
clause
(ii)
or
(iii),
the
Administrator shall use commercially reasonable efforts to (x) provide the
Seller with advance notice of any such disclosure and (y) cooperate with
the
Seller in limiting the extent or effect of any such disclosure.
(h) Credit
and Collection Policies.
The
Servicer shall comply in all material respects with its Credit and Collection
Policy in regard to each Pool Receivable and the related Contract.
(i) Collections.
The
Seller shall transfer to the Servicer all Collections received by the Seller
in
respect of the Pool Receivables as soon as practicable after receipt thereof
by
the Seller; provided that deemed Collections shall be transferred to the
Servicer in accordance with Section
3.02.
The
Servicer shall cause all collections received by the Servicer to be deposited
into the Collection Account within 2 Business Days after receipt
thereof.
(j) Status
of Seller.
The
Seller shall maintain its existence as a bankruptcy remote entity and hereby
agrees to comply with the limitations on its activities set forth in
Section
9(j)
of its
LLC Agreement.
(k) Sales,
Liens, Etc.
Except
as otherwise provided herein, Seller shall not sell, assign (by operation
of law
or otherwise) or otherwise dispose of, or create or suffer to exist any Lien
upon or with respect to, any Pool Receivable or related Account or Contract
or
Related Security, or any interest therein.
(l) Replacement
Servicer.
The
Servicer shall provide within 60 days after the Closing Date a written plan
(the
“Replacement
Servicer Plan”),
which
is acceptable to the Administrator, for transferring its servicing duties
with
respect to the Pool Receivables, the related Accounts and Contracts to a
replacement servicer in the instance of a Replacement Event.
SECTION
7.02 Reporting
Requirements of Seller and Servicer.
From
the date hereof until the Final Payout Date, Seller and Servicer shall, unless
the Administrator shall otherwise consent in writing, furnish to the
Administrator:
(a) Liquidation
and Replacement Events.
As soon
as possible and in any event within five Business Days after the occurrence
of
any Liquidation Event, any Unmatured Liquidation Event or any Replacement
Event,
a notice of such event;
(b) Litigation.
As soon
as possible and in any event within three Business Days of Seller’s or
Servicer’s knowledge thereof, notice of (i) any litigation, investigation or
proceeding which could have a Material Adverse Effect and (ii) any material
adverse development in previously disclosed litigation;
(c) Change
in Credit and Collection Policy.
In the
case of Servicer, prior to its effective date, notice of any material change
in
the Credit and Collection Policy, which, in the Servicer’s reasonable opinion,
could have a Material Adverse Effect; it being understood and agreed that
the
Administrator shall promptly deliver a copy of any such notice to ▇▇▇▇▇’▇;
and
(d) Other.
Promptly, from time to time, such other information, documents, records or
reports respecting the Receivables or the condition or operations, financial
or
otherwise, of the Originators, the Seller and the Transferor as the
Administrator may from time to time reasonably request in order to protect
the
interests of the Administrator or Purchaser under this Agreement.
SECTION
7.03 Transaction
Documents.
Neither
Seller nor Servicer shall amend, modify, waive or provide consent under the
provisions of any agreement expressly referenced in the definition of
“Transaction Document” unless the Administrator shall have given its prior
written consent, which shall not be unreasonably withheld. Seller and Servicer
shall take such actions as the Administrator shall reasonably request to
enforce
the rights and remedies of Seller under the Transaction Documents, including
any
rights it may have as assignee of Transferor.
ARTICLE
VIII
ADMINISTRATION
AND COLLECTION
SECTION
8.01 Designation
of Servicer.
(a) Appointment
of Servicer.
The
servicing, administering and collection of the Pool Receivables shall be
conducted by the Person designated as Servicer hereunder (“Servicer”)
from
time to time in accordance with this Section
8.01.
Until
the Administrator gives to Seller and to Servicer a Successor Notice (as
defined
in Section
8.01(b)),
Spirit
of America, Inc. is hereby designated as, and hereby agrees to perform the
duties and obligations of, Servicer pursuant to the terms hereof.
(b) Successor
Notice.
Upon
Servicer’s receipt of a notice from the Administrator of the Administrator’s
designation of a new Servicer (a “Successor
Notice”),
Servicer agrees that it will terminate its activities as Servicer hereunder
in a
manner that the Administrator reasonably believes will facilitate the transition
of the performance of such activities to the new Servicer, and the Administrator
(or its designee) shall assume each and all of Seller’s obligations to service
and administer such Receivables, on the terms and subject to the conditions
herein set forth, and Servicer shall use its best efforts to assist the
Administrator (or its designee) in assuming such obligations. The Administrator
agrees not to give Servicer a Successor Notice until after the occurrence
of a
Replacement Event, in which case such Successor Notice may be given at any
time
in the Administrator’s discretion. If Servicer disputes the occurrence of a
Replacement Event, Servicer may take appropriate action to resolve such dispute;
provided
that
Servicer must terminate its activities hereunder as Servicer and allow the
newly
designated Servicer to perform such activities in accordance with the
Replacement Servicer Plan on the date provided by the Administrator as described
above, notwithstanding the commencement or continuation of any proceeding
to
resolve the aforementioned dispute; provided,
further
that in
the event that such dispute is resolved in favor of Servicer and no other
Replacement Event has occurred and is continuing, at Seller’s written request,
Servicer shall be reinstated as Servicer.
(c) Subcontracts.
Servicer may, with the prior consent of the Administrator, subcontract with
any
other person for servicing, administering or collecting the Pool Receivables,
provided that (i) Servicer shall remain liable for the performance of the
duties
and obligations of Servicer pursuant to the terms hereof and (ii) such
subcontract provides for termination upon the occurrence of a Liquidation
Event.
The Administrator hereby acknowledges and consents to the appointment of
Parent
Originator and/or Total System Services, Inc. as an approved
subcontractor.
SECTION
8.02 Duties
of Servicer.
(a) Appointment;
Duties in General.
Each of
Seller, Purchaser and the Administrator hereby appoints as its agent Servicer,
as from time to time designated pursuant to Section
8.01,
to
enforce its rights and interests in and under the Pool Receivables, the Related
Security and the related Contracts. Servicer shall take or cause to be taken
all
such actions as may be necessary or advisable to collect each Pool 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 and Collection Policy.
(b) Documents
and Records.
Seller
shall deliver to Servicer, and Servicer shall hold in trust for Seller and
Purchaser in accordance with their respective interests, all documents,
instruments and records (including, without limitation, computer tapes or
disks)
that evidence or relate to Pool Receivables.
(c) Certain
Duties to Seller.
Servicer shall, as soon as practicable following receipt, turn over to Seller
(i) that portion of Collections of Pool Receivables representing Seller’s
undivided interest therein, and (ii) the Collections of any Receivable which
is
not a Pool Receivable. Servicer, if other than Seller, shall, as soon as
practicable upon demand, deliver to Seller all documents, instruments and
records in its possession that evidence or relate to Receivables
of Seller other than Pool Receivables, and copies of documents, instruments
and
records in its possession that evidence or relate to Pool
Receivables.
(d) Termination.
Servicer’s authorization under this Agreement shall terminate upon the Final
Payout Date.
(e) Power
of Attorney.
Seller
hereby grants to Servicer an irrevocable power of attorney, with full power
of
substitution, coupled with an interest, to take in the name of Seller all
steps
which are necessary or advisable to endorse, negotiate or otherwise realize
on
any writing or other right of any kind held or transmitted by Seller or
transmitted or received by Purchaser (whether or not from Seller) in connection
with any Receivable.
(f) Procedures
of Independent Accountants.
No
later than May 31 of each calendar year, commencing May 31, 2006, Servicer
shall
cause a firm of nationally recognized independent certified public accountants
to perform the procedures described in Exhibit
A
hereto,
and to provide a report with respect to such procedures to the Administrator.
It
is understood and agreed that such accountants may also perform other services
for Servicer or its Affiliates. Such report may assume the accuracy of
information provided by Servicer’s third party agents (other than Originators),
and the accountants may qualify the report in a manner that is typical for
reports of this type.
SECTION
8.03 Rights
of the Administrator.
At
any
time following the designation of a Servicer other than Spirit of America,
Inc.
pursuant to Section
8.01:
(i) The
Administrator may direct the Obligors of Pool Receivables, or any of them,
to
pay all amounts payable under any Pool Receivable directly to the Administrator
or its designee.
(ii) Seller
shall, at the Administrator’s request and at Seller’s expense, give notice of
the ownership of the Pool Receivables by Purchaser to each said Obligor and
direct that payments be made directly to the Administrator or its
designee.
(iii) Seller
shall, at the Administrator’s request, (A) assemble all of the documents,
instruments and other records (including, without limitation, computer programs,
tapes and disks) which evidence the Pool Receivables, and the related Accounts
and Contracts and Related Security, or which are otherwise reasonably necessary
or desirable to service such Pool Receivables, and make the same available
to
the Administrator at a place selected by the Administrator and (B) segregate
all
cash, checks and other instruments received by it from time to time constituting
Collections of Pool Receivables in a manner reasonably acceptable to the
Administrator and promptly upon receipt, remit all such cash, checks and
instruments, duly endorsed or with duly executed instruments of transfer,
to the
Administrator.
(iv) Each
of
Seller and Purchaser hereby authorizes the Administrator, and grants to the
Administrator an irrevocable power of attorney, to take any and all steps
in
Seller’s name and on behalf of Seller and Purchaser which are reasonably
necessary or desirable,
in the determination of the Administrator, to collect all amounts due under
any
and all Pool Receivables, including, without limitation, endorsing Seller’s name
on checks and other instruments representing Collections and enforcing such
Pool
Receivables and the related Contracts; provided
that the
Administrator shall not exercise its rights under such Power of Attorney
unless
a Successor Notice shall have been delivered pursuant to Section
8.01(b).
SECTION
8.04 Limitation
of Liability.
The
Administrator and the Purchaser shall not have any obligation or liability
with
respect to any Pool Receivables, Contracts or Accounts related thereto or
any
other related agreements, nor shall any of them be obligated to perform any
of
the obligations of Seller thereunder.
SECTION
8.05 Further
Action Evidencing Purchases and Reinvestments.
(a) Further
Assurances.
Seller
agrees that from time to time, at its expense, it will promptly execute and
deliver all further instruments and documents, and take all further action
that
the Administrator or its designee may reasonably request in order to perfect,
protect or more fully evidence the Purchases hereunder and the resulting
Asset
Interest, or to enable Purchaser or the Administrator or its designee to
exercise or enforce any of their respective rights hereunder or under any
Transaction Document. Without limiting the generality of the foregoing, Seller
will upon the request of the Administrator or its designee execute and file
such
financing or continuation statements, or amendments thereto or assignments
thereof, and such other instruments or notices, as may be necessary or
appropriate.
(b) Additional
Financing Statements; Performance by Administrator.
Seller
hereby authorizes the Administrator or its designee to file one or more
financing or continuation statements, and amendments thereto and assignments
thereof, relative to all or any of the Pool Assets now existing or hereafter
arising in the name of Seller. If Seller fails to perform any of its agreements
or obligations under this Agreement, the Administrator or its designee may
(but
shall not be required to) itself perform, or cause performance of, such
agreement or obligation, and the reasonable expenses of the Administrator
or its
designee incurred in connection therewith shall be payable by Seller as provided
in Section
14.05.
SECTION
8.06 Application
of Collections.
Any
payment by an Obligor in respect of any indebtedness owed by it to Seller
shall,
except as otherwise specified by such Obligor, as required by the underlying
Contract or law or unless the Administrator instructs otherwise, be applied,
first,
as a
Collection of any Pool Receivable or Receivables then outstanding of such
Obligor in the order of the age of such Pool Receivables or Receivables,
starting with the oldest of such Pool Receivable or Receivables and,
second,
to any
other indebtedness of such Obligor.
SECTION
8.07 Lockbox
Accounts.
(a) The
Servicer hereby confirms that Schedule
C
hereto
describes all of the Lockbox Accounts into which Collections will be paid
as of
the Initial Funding Date. Within 60 days of the Initial Funding Date, Servicer
and Seller shall cause each bank at which a Lockbox Account is maintained
to
enter into a Lockbox Agreement with Seller, Servicer and the Administrator.
Neither
Seller nor Servicer shall establish, or permit to be established, any other
Lockbox Account unless the related account bank shall have entered into a
Lockbox Agreement with Seller, Servicer and the Administrator.
(b) Servicer
shall direct all Obligors to make payments in respect of the Receivables
to a
Lockbox Account described in the notice given to the Administrator pursuant
to
clause (a) above or to another Lockbox Account as to which a Lockbox Agreement
is in effect.
(c) The
Administrator shall be entitled to exercise its rights under the Lockbox
Agreement during the continuance of a Liquidation Event or a Replacement
Event,
and agrees that it shall not exercise such rights at any other
time.
SECTION
8.08 Access
to Records.
The
Administrative Agent and the Purchaser agree, for the benefit of the Bank
Agent,
that the Bank Agent may have reasonable access to any books and records of
the
Transferring Parties, and use any equipment (including data processing
equipment) of the Transferring Parties, that may be in the possession or
control
of the Administrative Agent and the Purchaser during reasonable business
hours
and at its own expense, but without any obligation to pay rent or compensation
to the Transferring Parties, the Administrative Agent or the Purchaser, to
the
extent necessary to service and collect upon the collateral on which the
Bank
Agent has a lien.
ARTICLE
IX
SECURITY
INTEREST
SECTION
9.01 Grant
of Security Interest.
To
secure all obligations of Seller and Servicer arising in connection with
this
Agreement and each other Transaction Document to which either of them is
a
party, whether now or hereafter existing, due or to become due, direct or
indirect, or absolute or contingent, including, without limitation, all
Indemnified Amounts, payments on account of Collections and fees, in each
case
pro rata
according to the respective amounts thereof, Seller hereby assigns and grants
to
the Administrator, for the benefit of the Secured Parties, a security interest
in all of Seller’s right, title and interest (including specifically any
undivided interest retained by Seller hereunder) now or hereafter existing
in,
to and under (i) all the Pool Assets, (ii) the Transaction Accounts and all
funds and other financial assets credited thereto, (iii) the Cap Agreement,
and
(iv) proceeds of the foregoing.
SECTION
9.02 Further
Assurances.
The
provisions of Section
8.05
shall
apply to the security interest granted under Section
9.01
as well
as to the Purchases, Reinvestments and all the Asset Interests
hereunder.
SECTION
9.03 Remedies.
Upon
the occurrence of a Liquidation Event, Purchaser shall have, with respect
to the
collateral granted pursuant to Section
9.01,
and in
addition to all other rights and remedies available to Purchaser or the
Administrator under this Agreement or other applicable law, all the rights
and
remedies of a secured party upon default under the UCC.
ARTICLE
X
LIQUIDATION
EVENTS
SECTION
10.01 Liquidation
Events.
The
following events shall be “Liquidation
Events”
hereunder:
(a) Seller,
Transferor, any Originator or Servicer shall fail to perform or observe in
any
material respect any term, covenant or agreement that is an obligation of
Seller, Transferor, any Originator or Servicer under the Transaction Documents
(other than as referred to in clause
(b)
next
following) and such failure shall remain unremedied for fifteen days after
(1) written notice thereof shall have been given by the Administrator to
Seller, Transferor, any Originator or Servicer, as applicable, or (2) Seller,
Transferor, any Originator or Servicer, as applicable, has actual knowledge
thereof, and such failure shall have a Material Adverse Effect; or
(b) Seller,
Transferor, any Originator or Servicer shall fail to make any payment or
deposit
to be made by it hereunder when due and such failure shall remain unremedied
for
more than one Business Day; or
(c) Any
representation or warranty made or deemed to be made by the Seller, Transferor,
any Originator or the Servicer under a Transaction Document or Information
Package or other information or report delivered pursuant hereto shall prove
to
have been incorrect in any material respect when made and shall continue
to be
incorrect for a period of fifteen days after (i) written notice thereof shall
have been given by the Administrator to the Seller or the Servicer (if Seller
or
its Affiliate is Servicer) or (ii) Seller or the Servicer (if Seller or its
Affiliate is Servicer) has actual knowledge thereof, and such incorrect
statement shall have a Material Adverse Effect; provided,
that
with respect to the breach of the representations or warranties set forth
in
Section
6.01(j),
compliance by Seller with the provisions of Section
3.02
in
respect thereof shall be deemed to cure such breach; or
(d) An
Event
of Bankruptcy shall have occurred and remain continuing with respect to the
Seller, the Transferor, the Servicer or any Originator; or
(e) Any
Originator, Seller or Transferor shall become an “investment company” or a
company controlled by an “investment company” within the meaning of the
Investment Company Act of 1940, as amended; or
(f) On
any
Settlement Date, the Average Excess Spread Percentage is less than 1.0%;
or
(g) On
any
Settlement Date, the Average Monthly Principal Payment Rate Percentage is
less
than 6.0%; or
(h) On
any
Settlement Date, the Average Dilution Percentage is greater than 8.0%;
or
(i) Any
Originator, Seller, Transferor or Servicer (if Servicer is Seller or its
Affiliate) is subject to a Change in Control; or
(j) Any
Originator shall become unable for any reason to transfer Receivables to
the
Transferor pursuant to the First Tier Agreement; or the Transferor shall
become
unable for any reason to transfer Receivables to the Seller pursuant to the
Second Tier Agreement; or
(k) On
any
Settlement Date (after giving effect to all allocations of funds on such
date),
the Senior Investor Balance shall exceed the Benchmark Amount by more than
$100,000, and such condition shall be unremedied for more than five Business
Days; or
(l) A
Cap
Replacement Event shall have occurred and be continuing.
SECTION
10.02 Remedies.
(a) Optional
Liquidation.
Upon
the occurrence of a Liquidation Event (other than a Liquidation Event described
in subsection
(d)
of
Section
10.01),
the
Administrator shall, at the request, or may with the consent, of Purchaser,
by
notice to Seller declare the Purchase Termination Date to have occurred and
the
Liquidation Period to have commenced.
(b) Automatic
Liquidation.
Upon
the occurrence of a Liquidation Event described in subsection
(d)
of
Section
10.01,
the
Purchase Termination Date shall occur and the Liquidation Period shall commence
automatically.
(c) Optional
Waiver.
Upon
the occurrence of any Liquidation Event, the Administrator, acting on behalf
of
the Purchaser, shall have the right to waive such Liquidation Event by providing
a written notice of such waiver to the Seller and the Servicer, in which
event
clauses
(a)
and
(b)
above
shall not be applicable to such Liquidation Event. The Administrator will
promptly give ▇▇▇▇▇’▇ written notice of the execution of any such
waiver.
ARTICLE
XI
THE
ADMINISTRATOR
SECTION
11.01 Authorization
and Action.
Purchaser hereby irrevocably appoints, designates and authorizes the
Administrator to take such action as agent on its behalf under the provisions
of
this Agreement or any other Transaction Document and to exercise such powers
and
perform such duties as are expressly delegated to the Administrator by the
terms
of this Agreement or any other Transaction Document, together with such powers
as are reasonably incidental thereto. The Administrator shall not have any
duties or responsibilities, except those expressly set forth herein or in
any
other Transaction Document, or any fiduciary relationship with the Purchaser,
and no implied covenants, functions, responsibilities, duties, obligations
or
liabilities on the part of the Administrator shall be read into this Agreement
or any other Transaction Document or otherwise exist for the Administrator.
In
performing its functions and duties hereunder and under the other Transaction
Documents, (i) the Administrator shall act solely as agent for the Purchaser
and
the Secured Parties and (ii) the Administrator shall not be deemed to have
assumed any obligation or relationship of trust or agency with or for any
Transferring Party or the Servicer or any of such parties’ successors or
assigns. The Administrator shall not be required to take any action that
exposes
the Administrator to personal liability or that is contrary to this Agreement,
any other Transaction Document or applicable law. The
appointment and authority of the Administrator hereunder shall terminate
immediately following the Final Payout Date.
SECTION
11.02 Administrator’s
Reliance, Etc.
The
Administrator and its directors, officers, agents or employees shall not
be (i)
liable to Purchaser for any action taken or omitted to be taken by it or
them
under or in connection with the Transaction Documents, including, without
limitation, the servicing, administering or collecting of Pool Receivables
as
Servicer pursuant to Section
8.01
(except
for its or their own gross negligence, breach of contract or willful misconduct)
or (ii) responsible in any manner to the Purchaser for any recitals, statements,
representations or warranties made by any Transferring Party or the Servicer
contained in this Agreement, any other Transaction Document or any certificate,
report, statement or other document referred to or provided for in, or received
under or in connection with, this Agreement, or any other Transaction Document
or for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement, or any other Transaction Document or any other
document furnished in connection herewith or therewith, or for any failure
of
any Transferring Party or the Servicer to perform its obligations hereunder
or
thereunder, or for the perfection, priority, condition, value or sufficiency
of
any collateral pledged in connection herewith. Without limiting the generality
of the foregoing, the Administrator: (a) may consult with legal counsel
(including counsel for Seller), independent certified public accountants
and
other experts selected by it and shall not be liable for any action taken
or
omitted to be taken in good faith by it in accordance with the advice of
such
counsel, accountants or experts; (b) makes no warranty or representation
to
Purchaser or any other holder of any interest in Pool Receivables and shall
not
be responsible to Purchaser or any such other holder for any statements,
warranties or representations made in or in connection with any Transaction
Document; (c) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of
any
Transaction Document on the part of Seller or to inspect the property (including
the books and records) of Seller; (d) shall not be responsible to Purchaser
or
any other holder of any interest in Pool Receivables for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of
any
Transaction Document; and (e) shall not be deemed to have knowledge of any
Unmatured Liquidation Event or Liquidation Event unless the Administrator
has
received notice from any Transferring Party, the Servicer or the
Purchaser.
SECTION
11.03 Barclays
and Affiliates.
Barclays and any of its Affiliates may generally engage in any kind of business
with Seller or any Obligor, any of their respective Affiliates and any Person
who may do business with or own securities of Seller or any Obligor or any
of
their respective Affiliates, all as if Barclays were not the Administrator
and
without any duty to account therefor to Purchaser or any other holder of
an
interest in Pool Receivables.
SECTION
11.04 Reliance
by Administrator.
The
Administrator shall in all cases be entitled to rely, and shall be fully
protected in relying, upon any document or conversation reasonably believed
by
it to be genuine and correct and to have been signed, sent or made by the
proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to Seller (it being understood that counsel to
the
Seller has no duty to or client-relationship with the Administrator)),
independent accountants and other experts selected by the Administrator.
The
Administrator shall in all cases be fully justified in failing or refusing
to
take any action under this Agreement or any other Transaction Document unless
it
shall first receive
such advice or concurrence of the Purchaser as it deems appropriate and it
shall
first be indemnified to its satisfaction, provided
that
unless and until the Administrator shall have received such advice, or unless
the Purchaser shall have directed the Administrator to take or refrain from
taking any action, the Administrator may take or refrain from taking any
action,
as the Administrator shall deem advisable and in the best interest of the
Purchaser. The Administrator shall in all cases be fully protected in acting,
or
in refraining from acting, in accordance with a request of the Purchaser
and
such request and any action taken or failure to act pursuant thereto shall
be
binding upon the Purchaser.
SECTION
11.05 Non-Reliance.
The
Purchaser expressly acknowledges that none of the Administrator or any of
its
respective officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representations or warranties to it and that no act
by
the Administrator hereafter taken, including, without limitation, any review
of
the affairs of any Transferring Party or the Servicer, shall be deemed to
constitute any representation or warranty by the Administrator. The Purchaser
represents and warrants to the Administrator that it has and will, independently
and without reliance upon the Administrator and based on such documents and
information as it has deemed appropriate, made its own appraisal of an
investigation into the business, operations, property, prospects, financial
and
other conditions and creditworthiness of the Seller and made its own decision
to
enter into this Agreement, the other Transaction Documents and all other
documents related hereto or thereto.
ARTICLE
XII
ASSIGNMENT
OF PURCHASER’S INTEREST
SECTION
12.01 Restrictions
on Assignments.
(a) Except
as
provided in the next sentence, neither the Seller nor Servicer may assign
its
rights, or delegate its duties hereunder or any interest herein without the
prior written consent of the Administrator. Servicer may assign its rights
as
Servicer under this Agreement to any of its Affiliates without prior written
consent of the Administrator, provided
that
Servicer shall have given the Administrator ten days’ prior written notice
thereof. Purchaser may not assign its rights hereunder (although it may delegate
its duties hereunder as expressly indicated herein) or the Asset Interest
(or
any portion thereof) to any Person without the prior written consent of Seller,
which shall not be unreasonably withheld (it being recognized and understood
by
all parties hereto that all parties hereto shall deem it reasonable for Seller
to withhold such consent if any such proposed assignment would, in the
reasonable determination of Seller, cause Seller to be required to pay to
any
Affected Party any of the amounts referred to in Section
4.02);
provided,
however,
that
Purchaser may assign all of its rights and interests in the Transaction
Documents, together with all its interest in the Asset Interest, to Barclays
or
any Affiliate of Barclays, or to any “bankruptcy remote” special purpose entity,
the business of which is administered by Barclays or any Affiliate of Barclays
or to any Liquidity Bank; provided,
further,
that
such assignment shall not be expected to cause an increase in the Earned
Discount Rate.
(b) Seller
agrees to advise the Administrator within five Business Days after notice
to
Seller of any proposed assignment by Purchaser of the Asset Interest (or
any
portion thereof), not otherwise
permitted under subsection
(a),
of
Seller’s consent or non-consent to such assignment and, if it does not consent,
the reasons therefor. If Seller does not consent to such assignment, Purchaser
may immediately assign such Asset Interest (or portion thereof) to Barclays
or
any Affiliate of Barclays. All of the aforementioned assignments shall be
upon
such terms and conditions as Purchaser and the assignee may mutually
agree.
SECTION
12.02 Rights
of Assignee.
Upon
the assignment by Purchaser in accordance with this Article XII,
the
assignee receiving such assignment shall have all of the rights of Purchaser
with respect to the Transaction Documents and the Asset Interest (or such
portion thereof as has been assigned).
SECTION
12.03 Evidence
of Assignment.
Any
assignment of the Asset Interest (or any portion thereof) to any Person may
be
evidenced by such instrument(s) or document(s) as may be reasonably satisfactory
to Purchaser, the Administrator and the assignee.
ARTICLE
XIII
INDEMNIFICATION
SECTION
13.01 Indemnities
by Seller.
(a) General
Indemnity.
Without
limiting any other rights which any such Person may have hereunder or under
applicable law, Seller hereby agrees to indemnify each of the Administrator,
Purchaser, the Liquidity Banks, the Liquidity Agent, each of their respective
Affiliates, and all successors, transferees, participants and assigns and
all
officers, directors, shareholders, controlling persons, employees and agents
of
any of the foregoing (each an “Indemnified
Party”),
forthwith on demand, from and against any and all damages, losses, claims,
liabilities and related costs and expenses, including reasonable attorneys’ fees
and disbursements (all of the foregoing being collectively referred to as
“Indemnified
Amounts”)
awarded against or incurred by any of them arising out of or relating to
the
Transaction Documents, the Stock Purchase Agreement or the transactions
contemplated thereby or the ownership or funding of the Asset Interest or
in
respect of any Receivable or Account or any Contract, excluding,
however,
(a)
Indemnified Amounts to the extent resulting from gross negligence, breach
of
contract or willful misconduct on the part of any Indemnified Party or successor
Servicer pursuant to Section
8.01(b)
if such
successor Servicer is not an Affiliate of the Seller, (b) recourse (except
as
otherwise specifically provided in this Agreement) for any Receivable that
is
not paid as a result of credit related issues, or (c) any tax based upon
or
measured by net income.
(b) Procedure.
In
order for an Indemnified Party to be entitled to any indemnification provided
for under this Agreement in respect of, arising out of, or involving a claim
made by any Person against the Indemnified Party (a “Third
Party Claim”),
such
Indemnified Party must notify the Seller in writing of the Third Party Claim
within a reasonable time after receipt by such Indemnified Party of written
notice of the Third Party Claim unless the Seller shall have previously obtained
actual knowledge thereof. Thereafter, the Indemnified Party shall deliver
to the
Seller, within a reasonable time after the Indemnified Party’s receipt thereof,
copies of all notices
and documents (including court papers) received by the Indemnified Party
relating to the Third Party Claim.
(c) Defense
of Claims.
If a
Third Party Claim is made against an Indemnified Party, (a) the Seller will
be entitled to participate in the defense thereof and, (b) if it so
chooses, to assume the defense thereof with counsel selected by the Seller,
provided that in connection with such assumption (i) such counsel is not
reasonably objected to by the Indemnified Party, (ii) no material conflict
of
interest shall exist in relation to such Third Party Claim between such
Indemnified Party and Seller, and (iii) the Seller, subject to Section
14.15,
first
admits in writing its liability to indemnify the Indemnified Party with respect
to all elements of such claim in full to the extent such claim is valid.
Should
the Seller so elect to assume the defense of a Third Party Claim, the Seller
will not be liable to the Indemnified Party for any legal expenses subsequently
incurred by the Indemnified Party in connection with the defense thereof.
If the
Seller elects to assume the defense of a Third Party Claim, the Indemnified
Party will (i) cooperate in all reasonable respects with the Seller in
connection with such defense and (ii) not admit any liability with respect
to,
or settle, compromise or discharge, such Third Party Claim without the Seller’s
prior written consent, as the case may be. If the Seller shall assume the
defense of any Third Party Claim, the Indemnified Party shall be entitled
to
participate in (but not control) such defense with its own counsel at its
own
expense. If the Seller does not assume the defense of any such Third Party
Claim, the Indemnified Party may defend the same in such manner as it may
deem
appropriate, including settling such claim or litigation after giving prompt
notice to the Seller of such terms and, subject to Section
14.15,
the
Seller will promptly reimburse the Indemnified Party upon written request.
Anything contained in this Agreement to the contrary notwithstanding, the
Seller
shall not be entitled to assume the defense of any part of a Third Party
Claim
that seeks an order, injunction or other equitable relief or relief for other
than money damages against the Indemnified Party.
ARTICLE
XIV
MISCELLANEOUS
SECTION
14.01 Amendments,
Etc.
No
amendment or waiver of any provision of this Agreement nor consent to any
departure by Seller therefrom shall in any event be effective unless the
same
shall be in writing and signed by (a) Seller, the Administrator and Purchaser
(with respect to an amendment) or (b) the Administrator and Purchaser (with
respect to a waiver or consent by them) or Seller (with respect to a waiver
or
consent by it), as the case may be, and then such waiver or consent shall
be
effective only in the specific instance and for the specific purpose for
which
given.
SECTION
14.02 Notices,
Etc.
All
notices and other communications provided for hereunder shall, unless otherwise
stated herein, be in writing (including facsimile communication) and shall
be
personally delivered or sent by express mail or courier or by certified mail,
postage prepaid, or by facsimile, to the intended party at the address or
facsimile number of such party set forth in Schedule
A
or at
such other address or facsimile number as shall be designated by such party
in a
written notice to the other parties hereto. All such notices and communications
shall be effective, (a) if personally delivered or sent by express mail or
courier
or if sent by certified mail, when received, and (b) if transmitted by
facsimile, when sent, receipt confirmed by telephone or electronic
means.
SECTION
14.03 No
Waiver; Remedies.
No
failure on the part of the Administrator, any Affected Party, any Indemnified
Party, Purchaser or any other holder of the Asset Interest (or any portion
thereof) to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of
any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION
14.04 Binding
Effect; Survival.
This
Agreement shall be binding upon and inure to the benefit of Seller, the
Administrator, Purchaser and their respective successors and assigns, the
provisions of Section
8.08
shall
inure to the benefit of the Bank Agent and its successors and assigns and
the
provisions of Section
4.02
and
Article
XIII
shall
inure to the benefit of the Affected Parties and the Indemnified Parties,
respectively, and their respective successors and assigns; provided,
however,
nothing
in the foregoing shall be deemed to authorize any assignment not permitted
by
Section 12.01.
This
Agreement shall create and constitute the continuing obligations of the parties
hereto in accordance with its terms, and shall remain in full force and effect
until the Final Payout Date. The rights and remedies with respect to any
breach
of any representation and warranty made by Seller pursuant to Article
VI
and the
indemnification and payment provisions of Article
XIII
and
Sections
4.02,
14.05,
14.06,
14.08,
and
14.15
shall be
continuing and shall survive any termination of this Agreement.
SECTION
14.05 Costs,
Expenses and Taxes.
In
addition to its obligations under Article
XIII,
Seller
agrees to pay on demand:
(a) all
reasonable costs and expenses incurred by the Administrator and the Purchaser
and their respective Affiliates in connection with the negotiation, preparation,
execution and delivery, the administration (including periodic auditing)
or the
enforcement of, or any actual or claimed breach of, this Agreement and the
other
Transaction Documents, including, without limitation (i) the reasonable fees
and
expenses of counsel to any of such Persons incurred in connection with any
of
the foregoing or in advising such Persons as to their respective rights and
remedies under any of the Transaction Documents, and (ii) all reasonable
out-of-pocket expenses (including reasonable fees and expenses of independent
accountants), incurred in connection with any review of Seller’s books and
records either prior to the execution and delivery hereof or pursuant to
Section
7.01(g);
and
(b) all
stamp
and other taxes and fees payable or determined to be payable in connection
with
the execution, delivery, filing and recording of this Agreement or the other
Transaction Documents, and agrees to indemnify each Indemnified Party against
any liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and fees.
SECTION
14.06 No
Proceedings/Purchaser.
Seller,
Servicer, Barclays (individually and as Administrator) each hereby agrees
that
it will not institute against Purchaser, or join any other Person in instituting
against Purchaser, any insolvency proceeding (namely, any proceeding of the
type
referred to in the definition of Event of Bankruptcy) so long as any Commercial
Paper Notes issued by Purchaser shall be outstanding or there shall not have
elapsed one
year
plus one day since the last day on which any such Commercial Paper Notes
shall
have been outstanding. The foregoing shall not limit Seller’s right to file any
claim in or otherwise take any action with respect to any insolvency proceeding
that was instituted by any Person other than Seller.
SECTION
14.07 No
Proceedings/Seller and Transferor.
The
Purchaser and the Administrator each hereby agrees that it will not institute
against Seller or Transferor, or join any other Person in instituting against
Seller or Transferor, any insolvency proceeding (namely, any proceeding of
the
type referred to in the definition of Event of Bankruptcy) prior to the date
which is one year and one day after Final Payout Date. The foregoing shall
not
limit the right of the Purchaser or the Administrator to take any action
with
respect to any insolvency proceeding that was instituted by a Person other
than
Seller.
SECTION
14.08 Confidentiality.
(a) Each
of
the Purchaser and the Administrator covenants and agrees, and the Administrator
shall cause each Affected Party to covenant and agree, on behalf of itself
and
its Affiliates, that all information (“Seller
Information”)
relating to the Seller, the Servicer (if an Affiliate of the Seller), their
Affiliates, the structured financing conducted by any of them or the
transactions contemplated by the Transaction Documents, in part or in whole,
shall be held in confidence and each agrees not to use and not to disclose
any
of the contents of, provide any Person with copies of or use for any purpose
not
related to the Purchases hereunder any Seller Information other than disclosure
to:
(i) Governmental
Authorities with appropriate jurisdiction, including bank examiners or similar
regulatory authorities;
(ii) any
officer, director, member, manager, employee or outside accountant, auditor
or
attorney (each, a “Representative”)
of the
Purchaser, the Administrator or any Affected Party with a need to know such
Seller Information in connection with the Purchases (it being understood
that
the officers, directors and employees of the Administrator and the other
Affected Parties covered by this clause
(i)
do not
include any individual whose responsibilities relate to any credit card or
other
consumer financing business conducted by the Administrator or any other Affected
Party or its respective Affiliates);
(iii) any
Rating Agency; or
(iv) to
any
surety or guarantor to the Purchaser.
(b) Each
of
Seller and Servicer covenants and agrees, on behalf of itself and its
Affiliates, that all of the information in the Fee Letters (the “Purchaser
Information”)
shall
be held in confidence and each agrees (x) not to disclose the Purchaser
Information to the selling shareholders, or any Representative of the selling
shareholders, under the Stock Purchase Agreement, and (y) not to use and
not to
disclose any of the contents of, provide any Person with copies of or use
for
any purpose not related to the transactions contemplated by the Transaction
Documents any Purchaser Information, other than in each case disclosure
to:
(i) Governmental
Authorities with appropriate jurisdiction;
(ii) any
Representative of Seller, Servicer or their Affiliates with the need to know
such Purchaser Information in connection with the transactions contemplated
by
the Transaction Documents; or
(iii) any
Rating Agency.
(c) Notwithstanding
the above stated obligations, no Person will be liable for disclosure or
use of
Seller Information or Purchaser Information which (A) was required by law,
including pursuant to regulation or administrative order, a subpoena or other
legal process, (B) was in such Person’s possession or known to such Person prior
to receipt or (C) is or becomes known to the public (without breach of any
obligations hereunder). For the avoidance of doubt, disclosure by any Person
(including without limitation by filing documents or reports with the Securities
and Exchange Commission) of Seller Information or Purchaser Information made
in
good faith to comply with federal or state banking or securities laws shall
be
deemed to be “required by law” within the meaning of the preceding
sentence.
(d) Notwithstanding
the above stated obligations, the parties to this Agreement acknowledge and
agree that (i) any obligations of confidentiality contained herein do not
apply
and have not applied from the commencement of discussions between the parties
to
the tax treatment and tax structure of the transactions contemplated by this
Agreement and other Transaction Documents, and (ii) each party (and each
of its
employees, representatives or other agents) may disclose to any and all persons,
without limitation of any kind, the tax treatment and tax structure of the
transactions contemplated by this Agreement and other Transaction Documents
and
all materials of any kind (including opinions or other tax analyses) that
are
provided to such party relating to such tax treatment and tax structure,
all
within the meaning of the U.S. Department of Treasury Regulations, Section 1.6011-4.
SECTION
14.09 Captions
and Cross References.
The
various captions (including, without limitation, the table of contents) in
this
Agreement are provided solely for convenience of reference and shall not
affect
the meaning or interpretation of any provision of this Agreement. Unless
otherwise indicated, references in this Agreement to any Section, Appendix,
Schedule or Exhibit are to such Section of or Appendix, Schedule or Exhibit
to
this Agreement, as the case may be, and references in any Section, subsection,
or clause to any subsection, clause or subclause are to such subsection,
clause
or subclause of such Section, subsection or clause.
SECTION
14.10 Integration;
Survival.
This
Agreement, together with the other Transaction Documents when executed and
delivered by the respective parties thereto, contains a final and complete
integration of all prior expressions by the parties hereto with respect to
the
subject matter hereof and shall constitute the entire understanding among
the
parties hereto with respect to the subject matter hereof, superseding all
prior
oral or written understandings. Sections
14.06,
14.07
and
14.08
shall
survive termination of this Agreement.
SECTION
14.11 Governing
Law.
THIS AGREEMENT, INCLUDING THE RIGHTS AND DUTIES OF THE PARTIES HERETO, SHALL
BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE
OF NEW YORK, EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE INTERESTS OF
PURCHASER IN THE RECEIVABLES IS GOVERNED BY THE LAWS OF THE JURISDICTION
OTHER
THAN THE STATE OF NEW YORK.
SECTION
14.12 Waiver
Of Jury Trial.
EACH OF THE PARTIES HERETO EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY
IN ANY
ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT,
ANY
OTHER TRANSACTION DOCUMENT OR ANY AMENDMENT, INSTRUMENT OR DOCUMENT DELIVERED
OR
WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM
ANY
BANKING OR OTHER RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT
OR ANY
OTHER TRANSACTION DOCUMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING
SHALL
BE TRIED BEFORE A COURT AND NOT A JURY TRIAL.
SECTION
14.13 Consent
To Jurisdiction; Waiver Of Immunities.
EACH OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT IT IRREVOCABLY (i)
SUBMITS TO THE JURISDICTION, FIRST, OF ANY UNITED STATES FEDERAL COURT, AND
SECOND, IF FEDERAL JURISDICTION IS NOT AVAILABLE, OF ANY NEW YORK STATE COURT,
IN EITHER CASE SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING
ARISING
OUT OF OR RELATING TO THIS AGREEMENT, (ii) AGREES THAT ALL CLAIMS IN RESPECT
OF
SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED ONLY IN SUCH NEW YORK
STATE OR FEDERAL COURT AND NOT IN ANY OTHER COURT, AND (iii) WAIVES, TO THE
FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM
TO
THE MAINTENANCE OF SUCH ACTION OR PROCEEDING.
SECTION
14.14 Execution
in Counterparts.
This
Agreement may be executed in any number of counterparts and by the 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.
SECTION
14.15 No
Recourse Against Other Parties.
No
recourse under any obligation, covenant or agreement of any of the
Securitization Entities contained in this Agreement shall be had against
any
incorporator, stockholder, officer, director or employee of such Securitization
Entity, 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 Purchaser,
and that no personal liability whatever shall attach to or be incurred by
the
incorporators, stockholders, officers, directors, employees or Affiliate
of such
Securitization Entity, or any of them under or by reason of any of the
obligations, covenants or agreements of such Securitization Entity contained
in
this Agreement, or implied therefrom, and that any and all personal liability
for breaches by such Securitization Entity of any of such obligations, covenants
or agreements either at common law or at equity, or by statute or constitution,
of every such incorporator, stockholder, officer, director, employee or
Affiliate is hereby expressly waived as a condition of and in consideration
for
the execution of this Agreement; provided,
however,
that
nothing in this Section
14.15
shall
relieve
any of the foregoing persons or entities from any liability arising from
his,
her or its willful misconduct or intentional misrepresentations.
SECTION
14.16 Amendment
and Restatement.
This
Agreement amends and restates the Prior RPA, and upon the effectiveness of
this
Agreement, the terms and provisions of the Prior RPA shall be superseded
hereby
in their entirety. From and after the effectiveness hereof, all references
to
the Prior RPA in any other instrument or document shall be deemed to be
references to this Agreement.
[Signature
Page to Follow]
IN
WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their
respective officers thereunto duly authorized, as of the date first above
written.
CATALOG
RECEIVABLES LLC,
as
Seller
By:
Name:
Title:
SPIRIT
OF AMERICA, INC.,
as
Servicer
By:
Name:
Title:
SHEFFIELD
RECEIVABLES CORPORATION,
as
Purchaser
By:
Name:
Title:
BARCLAYS
BANK PLC,
as
Administrator
By:
Name:
Title:
Appendix
A
Schedule
A
Addresses
for Notices
Catalog
Receivables LLC
c/o
Fashion Service Corp.
▇▇▇
▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇
▇.
▇▇▇▇▇
Telephone:
(▇▇▇)
▇▇▇-▇▇▇▇
Telecopy:
(▇▇▇) ▇▇▇-▇▇▇▇
with
a
copy to:
▇▇▇
▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
Legal Department
Telephone:
(▇▇▇)
▇▇▇-▇▇▇▇
Telecopy:
(▇▇▇)
▇▇▇-▇▇▇▇
Spirit
of
America, Inc.
▇▇▇
▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇
▇.
▇▇▇▇▇
Telephone:
(▇▇▇)
▇▇▇-▇▇▇▇
Telecopy:
(▇▇▇) ▇▇▇-▇▇▇▇
with
a
copy to:
▇▇▇
▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
Legal Department
Telephone:
(▇▇▇)
▇▇▇-▇▇▇▇
Telecopy:
(▇▇▇)
▇▇▇-▇▇▇▇
Sheffield
Receivables Corporation
c/o
Barclays Bank PLC
▇▇▇
▇▇▇▇
▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇▇ ▇▇▇▇, Asset Securitization Group
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Telecopy:
(▇▇▇) ▇▇▇-▇▇▇▇
Barclays
Bank PLC
▇▇▇
▇▇▇▇
▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇▇ ▇▇▇▇, Asset Securitization Group
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Telecopy:
(▇▇▇) ▇▇▇-▇▇▇▇
Schedule
B
Payment
Account
Bank: Barclays
Bank
ABA: ▇▇▇▇▇▇▇▇▇
Acct: 050791516
Name: Sheffield
4(2) Funding Account
Ref: Charming
Shoppes - Catalog Receivables LLC
Schedule
C
Lockbox
Accounts
▇▇▇▇▇
Fargo Bank
Bedford
Fair Apparel
Credit
Card Settlement
6355059754
▇▇▇▇▇
Fargo Bank
LM
&
B Catalog
Credit
Card Settlement
6355065388
▇▇▇▇▇
Fargo Bank
Monterey
Bay Clothing
Credit
Card Settlement
4100173897
JPMorgan
Chase Bank (formerly Bank One N.A.)
Arizona
Mail Order
Credit
Depository Account
634888481
JPMorgan
Chase Bank (formerly Bank One N.A.)
Bedford
Fair Apparel
Credit
Depository Account
634888499
JPMorgan
Chase Bank (formerly Bank One N.A.)
LM
&
B Catalog
Credit
Depository Account
634888507
JPMorgan
Chase Bank (formerly Bank One N.A.)
Monterey
Bay Clothing
Credit
Depository Account
635885700
Exhibit
A
Procedures
of Independent Accountants
| 1. |
Select
a random sample of 5 applications for testing of proper approval
or denial
of credit, applying the criteria specified in the Credit and Collection
Policies.
|
| 2. |
Select
a random sample of 5 transactions representing both credit authorizations
and line changes and will review them for compliance with Credit
and
Collection Policies.
|
| 3. |
Perform
observation tests for 5 individual delinquent accounts to determine
if the
collections procedures are being performed in accordance with the
Credit
and Collection Policies.
|
| 4. |
For
a random selection of 5 accounts which are in excess of 30 days delinquent
and up to 90 days delinquent, review prior account statements or
system
records to determine if the system is properly aging the balances.
|
| 5. |
For
a random selection of 5 accounts which are in excess of 90 days
delinquent, review prior account statements or system records to
determine
if the system is properly aging the balances.
|
| 6. |
Select
a random sample of 5 accounts, if any, which are in excess of 180
days
delinquent and determine whether the account has been written off
in
accordance with Credit and Collection
Policies.
|
| 7. |
Select
5 days during the past 6 months and verify (i) Servicer’s calculation of
the Asset Interest for such day and (ii) Servicer’s allocations of daily
Collections for such days complies with Section 1.03 of the Receivables
Purchase Agreement.
|
| 8. |
Select
2 monthly servicing reports within the past 6 months and reconcile
the
following with Servicer’s systems and
records:
|
| a. |
Beginning
and ending outstanding Principal Receivables
balance
|
| b. |
Beginning
and ending Discounted Principal Receivables
Balance
|
| c. |
Beginning
and ending Finance Charge Receivables
balance
|
| d. |
Monthly
Finance Charge Collections, including Discount Collections
component
|
| e. |
Monthly
Principal Collections
|
| f. |
Monthly
Charged-Off Receivables
|
| g. |
Benchmark
Amount
|
| h. |
Required
Reserve Account Amount
|
| i. |
Required
Reserve Account Percentage
|
| j. |
Required
Cash Collateral Amount
|
| k. |
Cash
Collateral Shortfall, Excess Cash Collateral, and Reserve Account
Shortfall if any
|
| 9. |
Select
2 monthly servicing reports within the past 6 months and recalculate
the
following:
|
| a. |
Portfolio
Excess Spread Percentage including Portfolio Excess Spread
Amount
|
| b. |
Monthly
Principal Payment Rate
|
| c. |
Dilution
Percentage
|
| 10. |
Check
the amounts distributed under the monthly reports selected and verify
compliance with the waterfall allocation as specified in Section
3.01 of
the Receivables Purchase Agreement. Verify the flow of funds to and
from
accounts as complying with Section 3.01 of the Receivables Purchase
Agreement.
|
Exhibit
B
Form
of
Cap Agreement
Exhibit
C
Form
of
First Tier Agreement
Exhibit
D
Form
of
Second Tier Agreement