EXHIBIT 4.6 - FORM OF TRANSFER AND SERVICING AGREEMENT
TRANSFER AND SERVICING AGREEMENT
among
DC FUNDING INTERNATIONAL, INC.
Transferor,
FIRST NORTH AMERICAN NATIONAL BANK,
Servicer,
and
FNANB CREDIT CARD MASTER NOTE TRUST,
Issuer
Dated as of [ ], 2002
ARTICLE I DEFINITIONS ......................................................... 1
Section 1.1. Definitions .................................................. 1
Section 1.2. Other Definitional Provisions ................................ 1
Section 1.3. Monthly Allocation of Finance Charge Receivables ............. 2
ARTICLE II CONVEYANCE OF RECEIVABLES ........................................... 3
Section 2.1. Conveyance of Receivables .................................... 3
Section 2.2. Acceptance by Issuer ......................................... 5
Section 2.3. Representations and Warranties of Transferor Relating to
Transferor ................................................... 5
Section 2.4. Representations and Warranties of Transferor Relating to
this Agreement and the Receivables ........................... 7
Section 2.5. Covenants of Transferor ...................................... 12
Section 2.6. Addition of Accounts ......................................... 16
Section 2.7. Removal of Accounts .......................................... 19
Section 2.8. Discount Option .............................................. 21
ARTICLE III ADMINISTRATION AND SERVICING OF RECEIVABLES ......................... 21
Section 3.1. Acceptance of Appointment and Other Matters Relating to
the Servicer ................................................. 21
Section 3.2. Servicing Compensation ....................................... 22
Section 3.3. Representations; Warranties and Covenants of the Servicer .... 23
Section 3.4. Reports and Records for the Indenture Trustee; Bank
Account Statements ........................................... 25
Section 3.5. Annual Servicer's Certificate ................................ 25
Section 3.6. Annual Independent Public Accountants' Servicing
Report ....................................................... 26
Section 3.7. Tax Treatment ................................................ 26
Section 3.8. Notices to Transferor ........................................ 27
Section 3.9. Reports to the Commission .................................... 27
ARTICLE IV OTHER MATTERS RELATING TO TRANSFEROR ................................ 27
Section 4.1. Liability of Transferor ...................................... 27
Section 4.2. Merger or Consolidation of, or Assumption of the
Obligations of, Transferor etc ............................... 27
i
Section 4.3. Limitation on Liability of Transferor ....................... 28
ARTICLE V OTHER MATTERS RELATING TO THE SERVICER .............................. 29
Section 5.1. Liability of the Servicer ................................... 29
Section 5.2. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer ................................ 29
Section 5.3. Limitation on Liability of the Servicer and Others .......... 30
Section 5.4. Indemnification of the Issuer and the Owner Trustee ......... 30
Section 5.5. The Servicer Not to Resign .................................. 31
Section 5.6. Access to Certain Documentation and Information Regarding
the Receivables ............................................. 31
Section 5.7. Delegation of Duties ........................................ 32
Section 5.8. Examination of Records ...................................... 32
ARTICLE VI INSOLVENCY EVENTS ................................................... 32
Section 6.1. Rights upon the Occurrence of an Insolvency Event ........... 32
ARTICLE VII SERVICER DEFAULTS ................................................... 33
Section 7.1. Servicer Defaults ........................................... 33
Section 7.2. Indenture Trustee to Act; Appointment of Successor .......... 34
Section 7.3. Notification to Noteholders ................................. 36
ARTICLE VIII TERMINATION ......................................................... 36
Section 8.1. Termination of Agreement .................................... 37
ARTICLE IX MISCELLANEOUS PROVISIONS ............................................ 37
Section 9.1. Amendment; Waiver of Past Defaults .......................... 37
Section 9.2. Protection of Right, Title and Interest to Issuer ........... 39
Section 9.3. GOVERNING LAW ............................................... 40
Section 9.4. Notices; Payments ........................................... 40
Section 9.5. Severability of Provisions .................................. 41
Section 9.6. Further Assurances .......................................... 41
Section 9.7. No Waiver; Cumulative Remedies .............................. 41
Section 9.8. Counterparts ................................................ 41
Section 9.9. Third-Party Beneficiaries ................................... 41
ii
Section 9.10. Actions by Noteholders ................................ 42
Section 9.11. Rule 144A Information ................................. 42
Section 9.12. Merger and Integration ................................ 42
Section 9.13. No Bankruptcy Petition ................................ 42
Section 9.14. Rights of Indenture Trustee ........................... 43
Section 9.15. Rights of the Owner Trustee ........................... 43
Section 9.16. Limited Recourse ...................................... 43
EXHIBITS
EXHIBIT A Form of Assignment of Receivables in Additional Accounts ... ▇-▇
▇▇▇▇▇▇▇ ▇-▇ Form of Reassignment of Receivables in Removed Accounts ... B-1
EXHIBIT C-1 Form of Series Closing Date Report ......................... ▇-▇
▇▇▇▇▇▇▇ ▇-▇ Form of Monthly Servicer's Certificate ..................... D-1
EXHIBIT E Form of Annual Servicer's Certificate ...................... E-1
EXHIBIT F-1 Form of Opinion of Counsel with Respect to Amendments ...... F-1-1
EXHIBIT F-2 Form of Opinion of Counsel with Respect to Accounts ........ F-2-1
EXHIBIT F-3 Provisions to be Included in Annual Opinion of Counsel ..... F-3-1
EXHIBIT G-1 Certificate of Incorporation ............................... G-1
EXHIBIT H-1 Procedure for Removal of Defaulted Accounts ................ H-1
SCHEDULES
SCHEDULE 1 List of Accounts ........................................... 1-1
iii
TRANSFER AND SERVICING AGREEMENT, dated as of [ ], 2002 (this
"Agreement") among DC FUNDING INTERNATIONAL, INC., a Delaware corporation, as
Transferor, FIRST NORTH AMERICAN NATIONAL BANK, a national banking association,
as Servicer, and FNANB CREDIT CARD MASTER NOTE TRUST, a business trust organized
under the laws of the State of Delaware, as Issuer.
In consideration of the mutual agreements herein contained, each party
agrees as follows for the benefit of the other parties, the Noteholders and any
Series Enhancer to the extent provided herein, in the Indenture and in any
Indenture Supplement:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. Capitalized terms used herein and not otherwise
defined herein are defined in Annex A to the Indenture, dated as of the date
hereof, between FNANB Credit Card Master Note Trust and JPMorgan Chase Bank.
Section 1.2. Other Definitional Provisions. (a) All terms defined in Annex
A to the Indenture or in this Agreement shall have the defined meanings when
used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein. The definitions of all terms defined herein
shall include the singular as well as the plural form of such terms and the
masculine of such terms as well as the feminine and neuter genders of such
terms.
(b) As used herein and in any certificate or other document
made or delivered pursuant hereto, accounting terms not defined in Annex A to
the Indenture, and accounting terms partly defined in Annex A to the Indenture
to the extent not defined, shall have the respective meanings given to them
under GAAP on the date of determination. To the extent that the definitions of
accounting terms herein are inconsistent with the meanings of such terms under
GAAP, the definitions contained herein shall control.
(c) The representations, warranties and covenants of DC
Funding in this Agreement in its capacity as Transferor shall be deemed to be
the representations, warranties and covenants of DC Funding solely in such
capacity for so long as it acts in such capacity under this Agreement. The
representations, warranties and covenants of the Bank in this Agreement in its
capacity as Servicer shall be deemed to be the representations, warranties and
covenants of the Bank solely in such capacity for so long as it acts in such
capacity under this Agreement.
(d) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
1
whole and not to any particular provision of this Agreement; Section,
subsection, Schedule and Exhibit references contained in this Agreement are
references to Sections, subsections, Schedules and Exhibits in or to this
Agreement unless otherwise specified; and the word "including" means including
without limitation.
ARTICLE II
CONVEYANCE OF RECEIVABLES
Section 2.1. Conveyance of Receivables. By execution of this Agreement, the
Transferor does hereby transfer, assign, set over and otherwise convey to the
Issuer, for the benefit of the Noteholders, without recourse except as provided
herein, (a) all its right, title and interest in, to and under the Collateral
Certificate, and (b) effective on the Certificate Trust Termination Date, all
its right, title and interest in and to the Receivables created on or after the
Certificate Trust Termination Date, all monies due or to become due and all
amounts received with respect to such Receivables (including Finance Charge
Receivables and Recoveries), all proceeds of such Receivables (including
Insurance Proceeds) and the Interchange Amount with respect to each Collection
Period commencing on or after the Certificate Trust Termination Date. Effective
on the Certificate Trust Termination Date, the Transferor does hereby further
transfer, assign, set-over, and otherwise convey to the Issuer, for the benefit
of the Noteholders, all of its rights, remedies, powers, privileges and claims
under or with respect to the Receivables Purchase Agreement (whether arising
pursuant to the terms of the Receivables Purchase Agreement or otherwise
available to the Transferor at law or in equity), including, without limitation,
the rights of the Transferor to enforce the Receivables Purchase Agreement and
to give or withhold any and all consents, requests, notices, directions,
approvals, extensions or waivers under or with respect to the Receivables
Purchase Agreement. The property described in the prior two sentences, together
with all monies as are from time to time deposited in the Collection Account,
the Excess Funding Account and any other account or accounts maintained for the
benefit of the Noteholders (including, to the extent specified in the related
Indenture Supplement, investment earnings on such amounts), all proceeds of the
foregoing and all monies as are from time to time available under any
Enhancement for any Series for payment to Noteholders, shall constitute the
property of the Issuer (the "Trust Assets"). The foregoing transfer, assignment,
set-over and conveyance does not constitute and is not intended to result in a
creation or an assumption by the Issuer, the Indenture Trustee or any Noteholder
of any obligation of the Servicer, the Transferor or any other Person in
connection with the Accounts, the Receivables or under any agreement or
instrument relating thereto including, without limitation, any obligation to any
Obligors, merchant service establishments or insurers.
In connection with the foregoing transfers, (i) on or prior to the date
of this Agreement, the Transferor shall deliver to the Owner Trustee a
registered certificate representing the Collateral Certificate, and (ii) on or
prior to the Certificate Trust Termination Date, the Transferor agrees to record
and file (and
2
does hereby authorize the Issuer to record and file), at the expense of the
Transferor, financing statements (and continuation statements with respect to
such financing statements when applicable) with respect to the Receivables
created on or after the Certificate Trust Termination Date for the transfer of
accounts (as defined in the UCC as in effect in the Relevant UCC State) meeting
the requirements of applicable state law in such manner and in such
jurisdictions as are necessary to perfect the transfers and assignments of such
Receivables by the Transferor to the Issuer, and to deliver a file-stamped copy
of such financing statements or other evidence of such filings to the Indenture
Trustee on or prior to the Certificate Trust Termination Date (which may, for
the purposes of this Section 2.1, consist of telephone confirmation of such
filing) and, in the case of continuation statements, as soon as reasonably
practical after receipt thereof.
In connection with the foregoing transfers, the Transferor agrees, at
its own expense, on or prior to the Certificate Trust Termination Date, to
indicate clearly and unambiguously in its computer files that the Receivables
created on or after the Certificate Trust Termination Date in connection with
the Accounts (other than any Additional Account or Automatic Additional Account
designated after the Certificate Trust Termination Date) have been transferred
to the Issuer pursuant to this Agreement for the benefit of the Noteholders. The
Transferor further agrees to deliver to the Owner Trustee (a) on or before the
third Business Day following the Certificate Trust Termination Date, a computer
file or microfiche list containing a true and complete list of all such
Accounts, identified by account number as of the Certificate Trust Termination
Date and (b) so long as Automatic Additional Accounts are being included
automatically pursuant to Section 2.6(d), on or prior to each Distribution Date
after the Certificate Trust Termination Date, a new computer file or microfiche
list containing a true and complete list of all Accounts identified as described
in the preceding clause (a) as of the last day of the most recent Collection
Period or an Officer's Certificate stating that the file or list of Accounts
most recently delivered pursuant to this subsection remains a true and complete
list of all Accounts. Such file or list shall be marked as Schedule 1 to this
Agreement, shall be delivered to the Indenture Trustee as confidential and
proprietary, and is hereby incorporated into and made a part of this Agreement.
Any such additional file or list shall be marked as Schedule 1 to this
Agreement, shall be delivered to the Indenture Trustee as confidential and
proprietary, shall replace the then existing Schedule 1 to this Agreement, and
shall be incorporated into and made a part of this Agreement. The Transferor
agrees, at its own expense, by the end of each Collection Period beginning on or
after the Certificate Trust Termination Date in which any Transferred Accounts
have been originated to indicate clearly and unambiguously in its computer files
that the Receivables created in connection with the Transferred Accounts have
been transferred to the Issuer pursuant to this Agreement for the benefit of the
Noteholders.
The parties hereto intend that each transfer of Receivables and other
Trust Assets pursuant to this Section 2.1 or any Assignment constitute a sale,
and not a secured borrowing, for all purposes, including for accounting
purposes. If and to
3
the extent that, notwithstanding such intent, the transfer pursuant to this
Section 2.1 is not deemed to constitute a sale, the Transferor shall be deemed
hereunder to have granted and does hereby grant to the Issuer, for the benefit
of the Noteholders, a security interest in all of its right, title and interest,
whether now owned or hereafter acquired, in and to the Receivables and all other
Trust Assets to secure the payment of each Series and this Agreement shall
constitute a security agreement under the UCC.
Section 2.2. Acceptance by Issuer.
(a) The Issuer hereby acknowledges its acceptance, to the extent validly
transferred, assigned, set over or otherwise conveyed to the Issuer as provided
in Section 2.1, of all right, title and interest previously held by the
Transferor in and to (i) the Collateral Certificate and (ii) the Receivables
created on or after the Certificate Trust Termination Date and all other Trust
Assets and declares that it shall hold such right, title and interest, in trust
as herein set forth and subject to the terms hereof, for the benefit of all
Noteholders.
(b) The Owner Trustee hereby agrees not to disclose to any Person
(including any Noteholder or Note Owner) any of the account numbers or other
information contained in the computer files or microfiche lists delivered to the
Issuer by the Transferor pursuant to Sections 2.1 and 2.6, except as is required
in connection with the performance of its duties hereunder or as may be provided
in any Indenture Supplement, or in connection with audits, examinations,
investigations and other inquiries which are required in connection with the
Owner Trustee's regulatory supervision or in response to a court order,
subpoena, or other judicial or governmental demand or in enforcing the rights of
the Noteholders or to a Successor Servicer appointed pursuant to Section 7.2(a)
or a successor Owner Trustee appointed pursuant to the Trust Agreement. The
Owner Trustee agrees to take such measures as shall be necessary or reasonably
requested by the Transferor or the Bank to protect and maintain the security and
confidentiality of such information.
(c) The Owner Trustee shall have no power to create, assume or incur
indebtedness or other liabilities in the name of the Issuer other than as
contemplated in the Transaction Documents.
Section 2.3. Representations and Warranties of the Transferor Relating to
the Transferor. The Transferor hereby represents and warrants to the Issuer as
of the date of this Agreement and, with respect to any Series, as of the date of
the related Indenture Supplement and the related Closing Date, unless otherwise
stated in such Indenture Supplement, that:
(i) Organization and Good Standing. The Transferor is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has full power, authority and legal right to own its properties
and conduct its business as such properties are presently owned and such
business
4
is presently conducted, to execute, deliver and perform its obligations under
this Agreement.
(ii) Due Qualification. The Transferor is duly qualified to do
business and is in good standing (or is exempt from such requirements) and has
obtained all necessary licenses and approvals with respect to the Transferor, in
each jurisdiction in which failure to so qualify or to obtain such licenses and
approvals would render any Account Agreement relating to an Account or any
Receivable unenforceable by it or the Issuer or would have a material adverse
effect on the Noteholders or on the Transferor's or the Servicer's ability to
perform its obligations under this Agreement; provided, however, that no
representation or warranty is made with respect to any qualifications, licenses
or approvals which the Indenture Trustee would have to obtain to do business in
any state in which the Indenture Trustee seeks to enforce any Receivable.
(iii) Due Authorization. The execution, delivery and performance of
this Agreement by the Transferor and the consummation by the Transferor of the
transactions provided for in this Agreement have been duly authorized by the
Transferor by all necessary action on the part of the Transferor.
(iv) No Violation. The execution and delivery of this Agreement by the
Transferor, the performance by the Transferor of the transactions contemplated
by this Agreement and the fulfillment by the Transferor of the terms hereof will
not conflict with, violate or result in any breach of any of the material terms
and provisions of, or constitute (with or without notice or lapse of time or
both) a default under, any Requirement of Law applicable to the Transferor or
any material indenture, contract, agreement, mortgage, deed of trust or other
instrument to which the Transferor is a party or by which it or any of its
properties are bound.
(v) No Proceedings. There are no proceedings or investigations
pending or, to the best knowledge of the Transferor, threatened against the
Transferor before any court, regulatory body, administrative agency, arbitrator
or other tribunal or governmental instrumentality (i) asserting the invalidity
of this Agreement, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement, (iii) seeking any determination or
ruling that, in the reasonable judgment of the Transferor, would materially and
adversely affect the performance by the Transferor of its obligations under this
Agreement, (iv) seeking any determination or ruling that would materially and
adversely affect the validity or enforceability of this Agreement or (v) seeking
to affect adversely the Federal income tax attributes of the Issuer.
(vi) All Consents Required. All approvals, authorizations, consents,
orders or other actions of any Person or of any Governmental Authority required
to be obtained on or prior to the date as of which this representation is being
made in connection with the execution and delivery by the Transferor of this
Agreement, the performance by the Transferor of the transactions contemplated
5
by this Agreement and the fulfillment by the Transferor of the terms hereof,
have been obtained.
(vii) Computer File. From and after the Certificate Trust Termination
Date, the initial computer file or microfiche list delivered pursuant to Section
2.1 is complete and accurately reflects the information regarding the
Receivables under the Accounts in all material respects as of the applicable
time referred to in Section 2.1.
The representations and warranties set forth in this Section 2.3 shall survive
the transfer and assignment of the Collateral Certificate and the Receivables to
the Issuer and termination of the rights and obligations of the Servicer
pursuant to Section 7.1. Upon discovery by the Transferor, the Servicer or the
Owner Trustee of a breach of any of the representations and warranties set forth
in this Section 2.3, the party discovering such breach shall give prompt written
notice thereof to the others.
Section 2.4. Representations and Warranties of the Transferor Relating to
this Agreement and the Receivables.
(a) Binding Obligation; Valid Transfer and Security Interest. The
Transferor hereby represents and warrants to the Issuer, as of date of this
Agreement and, with respect to any Series, as of the related Closing Date,
unless otherwise stated in the related Indenture Supplement, that:
(i) This Agreement constitutes a legal, valid and binding
obligation of the Transferor, enforceable against the Transferor in
accordance with its terms, subject to applicable bankruptcy, insolvency,
receivership, conservatorship, reorganization, moratorium or other similar
laws now or hereafter in effect affecting the enforcement of creditors'
rights in general and except as such enforceability may be limited by
general principles of equity (whether considered in a proceeding at law or
in equity).
(ii) This Agreement constitutes either (A) a valid transfer and
assignment to the Issuer of all right, title and interest of the Transferor
in and to (1) the Collateral Certificate, and (2) effective on the
Certificate Trust Termination Date, the Receivables created on or after the
Certificate Trust Termination Date (other than Receivables in Additional
Accounts), all monies due or to become due and all amounts received with
respect thereto on or after the Certificate Trust Termination Date and all
proceeds thereof (to the extent set forth in Section 9-315 of the UCC as in
effect in the Relevant UCC State), and such Collateral Certificate and
Receivables and all proceeds thereof will be transferred to the Issuer free
and clear of any Lien of any Person claiming through or under the
Transferor or any of its Affiliates, except for (x) Liens permitted under
Section 2.5(b), (y) the interest of the Transferor as holder of the
Exchangeable Transferor
6
Certificate or any other Class held by the Transferor from time to time and
(z) any right of the holder of the Exchangeable Transferor Certificate to
receive interest accruing on, and investment earnings with respect to, the
Collection Account or any other account or accounts maintained for the
benefit of the Noteholders or any Enhancement Provider as provided in the
Transaction Documents or (B) a grant of a security interest (as defined in
the UCC as in effect in the Relevant UCC State) in such property to the
Issuer.
(iii) If this Agreement constitutes the grant of a security interest
in the Trust Assets to the Issuer:
(A) this Agreement creates a valid and continuing security
interest (as defined in the UCC of the Relevant UCC State) in the
Trust Assets in favor of the Issuer, which security interest is prior
to all other Liens, and is enforceable as such against creditors of
and purchasers from the Transferor;
(B) the Receivables transferred by the Transferor
constitute "accounts" within the meaning of the UCC of the Relevant
UCC State;
(C) at the time of its transfer of any Trust Assets to the
Issuer pursuant to this Agreement, the Transferor owned and had good
and marketable title to such Trust Assets free and clear of any Lien,
claim or encumbrance of any Person (other than any Lien described in
clause (x), (y) or (z) of paragraph (ii) above);
(D) the Transferor has caused or will have caused, within
ten (10) days of the Certificate Trust Termination Date, the filing of
all appropriate financing statements in the proper filing office in
the appropriate jurisdictions under applicable law in order to perfect
the security interest in the Receivables and the proceeds thereof
granted to the Issuer pursuant to this Agreement;
(E) other than the security interest granted to the Issuer
pursuant to this Agreement or an Assignment or any security interest
that has been released, the Transferor has not pledged, assigned,
sold, granted a security interest in, or otherwise conveyed the Trust
Assets;
(F) the Transferor has not authorized the filing of and is
not aware of any financing statements filed against the Transferor
that include a description of the Receivables created on or after the
Certificate Trust Termination Date other than any financing statement
relating to the transfer of the Receivables to
7
the Transferor pursuant to the Receivables Purchase Agreement or the
security interest granted to the Issuer pursuant to this Agreement or
an Assignment or any financing statement that has been terminated; and
(G) the Transferor is not aware of any judgment or tax lien
filings against the Transferor.
Except as otherwise specifically provided in the Transaction Documents,
neither the Transferor nor any Person claiming through or under the Transferor
shall have any claim to or interest in the Collection Account or any other
account or accounts maintained for the benefit of Noteholders or any Enhancement
Provider, except for any right of the Transferor to receive interest accruing
on, and investment earnings with respect to, any such account as provided in the
Transaction Documents and, if this Agreement constitutes the grant of a security
interest in such property, except for the interest of the Transferor in such
property as a debtor for purposes of the UCC as in effect in the Relevant UCC
State.
(b) Eligibility of Receivables. The Transferor shall be deemed to represent
and warrant to the Issuer (i) on each day on or after the Certificate Trust
Termination Date on which the Transferor designates an Automatic Additional
Account pursuant to Section 2.6(d), that each Automatic Additional Account
designated on such day is an Eligible Account and that no selection procedures
believed by the Transferor to be materially adverse to the interests of the
Noteholders or any Enhancement Provider were used in selecting such Automatic
Additional Account from the available Eligible Accounts in the Transferor's
portfolio of MasterCard and VISA credit card accounts, (ii) on each day on or
after the Certificate Trust Termination Date on which any new Receivable is
created (including, without limitation, any Receivable created in any Automatic
Additional Account), that each Receivable created on such day is an Eligible
Receivable and (iii) on each day on or after the Certificate Trust Termination
Date on which a computer file or microfiche list is delivered pursuant to
Section 2.1(b) (including, without limitation, any computer file or microfiche
list delivered with respect to Automatic Additional Accounts), that such
computer file or microfiche list is an accurate and complete listing of all the
Accounts in all material respects as of the last day of the preceding Collection
Period and that the information contained therein with respect to the identity
of such Accounts and the Receivables existing thereunder was true and correct in
all material respects as of the last day of such preceding Collection Period.
(c) Notice of Breach. The representations and warranties set forth in this
Section 2.4 shall survive the transfer and assignment of the Collateral
Certificate and the Receivables to the Issuer and the termination of the rights
and obligations of the Servicer pursuant to Section 7.1. The representations and
warranties set forth in Section 2.4(a)(iii) shall not be waived by any of the
parties to this Agreement unless the Rating Agency Condition shall have been
satisfied. Upon discovery by the Transferor, the Servicer or the Owner Trustee
of a breach
8
of any of the representations and warranties set forth in this Section 2.4, the
party discovering such breach shall give prompt written notice thereof to the
others.
(d) Transfer of Ineligible Receivables.
(i) Automatic Removal. In the event that a Receivable created on or after
the Certificate Trust Termination Date is not an Eligible Receivable as a result
of the failure to satisfy the conditions set forth in clause (iv) of the
definition of Eligible Receivable, and either of the following two conditions is
met:
(A) the Lien on such Receivable (1) ranks prior to the Lien
created pursuant to this Agreement, (2) arises in favor of the United
States or any state or any agency or instrumentality thereof or
involves taxes or liens arising under Title IV of ERISA, or (3) has
been consented to by the Transferor; or
(B) the Lien on such Receivable is not of the types described in
clause (A) above, but, as a result of such breach or event, such
Receivable becomes a Receivable in a Defaulted Account or the Issuer's
rights in, to or under such Receivable or its proceeds are materially
impaired or the proceeds of such Receivable are not available for any
reason to the Issuer free and clear of any Lien (other than Liens
permitted under Section 2.5(b));
then, upon the earlier to occur of the discovery of such breach or event by the
Transferor or the Servicer or receipt by the Transferor or the Servicer of
written notice of such breach or event given by the Issuer, each such Receivable
or, at the option of the Transferor, all such Receivables with respect to the
related Account, shall be automatically removed from the Issuer on the terms and
conditions set forth in Section 2.4(d)(iii).
(ii) Removal after Cure Period. In the event that any of the
representations and warranties set forth in Section 2.4(b) or in Section 5(c),
5(d), 5(e) or 5(f) of any Assignment is breached with respect to a Receivable
(other than as a result of the failure to satisfy the conditions set forth in
clause (iv) of the definition of Eligible Receivable) and, as a result of such
breach, such Receivable becomes a Receivable in a Defaulted Account or the
Issuer's rights in, to or under such Receivable or its proceeds are materially
impaired or the proceeds of such Receivable are not available for any reason to
the Issuer free and clear of any Lien (other than Liens permitted under Section
2.5(b)), then, upon the expiration of 60 days or any longer period agreed upon
by the Indenture Trustee (not to exceed an additional 90 days) from the earlier
to occur of the discovery of any such breach by the Transferor or the Servicer
or receipt by the Transferor or the Servicer of written notice of such breach
given by the Owner Trustee, each such Receivable or, at the option of the
Transferor, all such Receivables with respect to the related
9
Account, shall be removed from the Issuer on the terms and conditions set forth
in Section 2.4(d)(iii); provided, however, that no such removal shall be
required to be made if, on any day within such applicable period, (A) such
representation and warranty with respect to such Receivable shall then be true
and correct in all material respects as if such Receivable had been created on
such day, and (B) the related Account is no longer a Defaulted Account as the
result of the breach of such representation and warranty, and the Issuer's
rights in, to or under such Receivable or its proceeds are no longer materially
impaired as a result of a breach of such representation and warranty, and the
proceeds of such Receivable are available to the Issuer free and clear of all
Liens resulting in the breach of such representation and warranty, as
applicable.
(iii) Reassignment Terms and Conditions. When required or permitted
with respect to a Receivable by the provisions of Section 2.4(d)(i) or Section
2.4(d)(ii) (an "Ineligible Receivable"), the Transferor shall accept
reassignment of such Ineligible Receivable by directing the Servicer to deduct
the principal balance of such Ineligible Receivable from the Aggregate Principal
Receivables and to decrease the Transferor Amount by such amount. On and after
the date of such reassignment, each Ineligible Receivable shall be deducted from
the Aggregate Principal Receivables used in the calculation of any Invested
Percentage, any Fixed Allocation Percentage, any Floating Allocation Percentage,
the Transferor Percentage and the Transferor Amount. In the event that the
exclusion of an Ineligible Receivable from the calculation of the Transferor
Amount would cause the Transferor Amount to be reduced below zero or would
otherwise not be permitted by law, the Transferor shall deposit into the Excess
Funding Account not later than 3:00 P.M. (New York City time) on the date of
such reassignment, in immediately available funds, an amount equal to the amount
by which the Transferor Amount would be reduced below zero. The Transferor shall
make such deposit out of funds received by it from the Bank pursuant to Section
6.1 of the Receivables Purchase Agreement. Any such deposit into the Excess
Funding Account in connection with the reassignment of an Ineligible Receivable
shall be considered a payment in full of the Ineligible Receivable and such
deposit shall be applied in accordance with the provisions of Article VIII of
the Indenture. Upon the reassignment to the Transferor of an Ineligible
Receivable, the Issuer shall, without further action, be deemed to transfer,
assign, set over and otherwise convey to the Transferor, without recourse,
representation or warranty, all right, title and interest of the Issuer in and
to such Ineligible Receivable, all monies due or to become due and all amounts
received with respect thereto and all proceeds thereof. The Owner Trustee shall
execute such documents and instruments of transfer or assignment as are prepared
by the Transferor and take such other actions as shall reasonably be requested
by the Transferor to effect the conveyance of such Ineligible Receivable
pursuant to this subsection. In the event that on any day within 60 days, or any
longer period agreed upon by the Indenture Trustee (not to exceed an additional
120 days), of the date on which the removal of Receivables which are not
Eligible Receivables from the Issuer pursuant to this Section 2.4(d)(iii) is
effected, (A) the applicable representations and warranties with respect to such
Receivable shall be true and
10
correct in all material respects on such date and (B) the Receivable is an
Eligible Receivable, the related Account is no longer a Defaulted Account and
the Issuer's rights in, to or under such Receivable or its proceeds are no
longer materially impaired as a result of the breach of such representation and
warranty and the proceeds of such Receivable are available to the Issuer free
and clear of all Liens resulting in the breach of such representation and
warranty, the Transferor may, but shall not be required to, direct the Servicer
to include such Receivable in the Issuer. Upon reinclusion of a Receivable in
the Issuer pursuant to this subsection, the Transferor shall be deemed to make
the applicable representations and warranties in Section 2.4(b) as of the date
of such addition, as if the Receivable had been created on such date, and shall
execute all such necessary documents and instruments of transfer or assignment
and take such other actions as shall be necessary to effect and perfect the
reconveyance of such Receivable to the Issuer. The obligation of the Transferor
set forth in this subsection shall constitute the sole remedy respecting any
breach by the Transferor of the representations and warranties set forth in the
above-referenced subsections with respect to such Receivable available to the
Issuer, the Noteholders or the Indenture Trustee on behalf of the Noteholders.
Notwithstanding any other provision of this Section 2.4(d), a reassignment of an
Ineligible Receivable shall not occur if the Transferor fails to make a deposit
or designation of Additional Accounts required by this Section 2.4(d) with
respect to such Ineligible Receivable.
(iv) No Impairment. For the purposes of Sections 2.4(d)(i) and
2.4(d)(ii), proceeds of a Receivable shall not be deemed to be impaired
hereunder solely because such proceeds are held by the Servicer for more than
the applicable period under Section 9-315 of the UCC as in effect in the
Relevant UCC State.
(e) Reassignment of Issuer Portfolio.
In the event that on and after the Certificate Trust Termination Date,
(i) any of the representations and warranties set forth in Section 2.3(i),
2.3(iii) or 2.4(a) or in Section 5(a) or 5(b) of any Assignment is breached or
(ii) a material amount of Receivables are not Eligible Receivables and, in
either case, such event has a materially adverse effect on the Noteholders
(without regard to the amount of any Enhancement), either the Indenture Trustee
or the Holders of Notes aggregating more than 50% of the Aggregate Invested
Amount, by notice then given in writing to the Transferor (and to the Indenture
Trustee and the Servicer, if given by the Noteholders), may direct the
Transferor to accept reassignment of all Receivables within 60 days of such
notice, or within such longer period as may be specified in such notice (not to
exceed an additional 90 days), and the Transferor shall be obligated to accept
such reassignment on a Distribution Date specified by the Transferor occurring
within such applicable period on the terms and conditions set forth below;
provided, however, that no such reassignment shall be required to be made, and
the Transferor shall not be obligated to accept such reassignment, if, on the
Business Day prior to such Distribution Date, the representations and warranties
set forth in Sections 2.3(i), 2.3(iii) and 2.4(a) or in Sections 5(a) and 5(b)
of such Assignment shall then be true and correct in all
11
material respects or there shall no longer be a material amount of Receivables
which are not Eligible Receivables, as the case may be. The Transferor shall
deposit in the Collection Account on the Business Day prior to such Distribution
Date (in immediately available funds) an amount equal to the reassignment
deposit amount for such Receivables for distribution pursuant to the provisions
of Article VIII of the Indenture. The deposit amount for such reassignment shall
be equal to the Aggregate Invested Amount at the close of business on the Record
Date related to the Distribution Date with respect to which such deposit is made
(less the aggregate principal amount then on deposit in the Excess Funding
Account and any principal funding account relating to any Series), plus (i) an
amount equal to all accrued but unpaid interest on the Notes of all Series at
the applicable Note Interest Rates through the end of the respective interest
accrual period(s) of such Series and (ii) any other unpaid amounts required to
be paid pursuant to this Section 2.4(e) or under any Indenture Supplement or
Enhancement Agreement. The Transferor shall make such deposit out of funds
received by it from the Bank pursuant to Section 6.2 of the Receivables Purchase
Agreement. Payment of the reassignment deposit amount and all other amounts in
the Collection Account in respect of the preceding Collection Period shall be
considered a prepayment in full of all such Receivables. On the Distribution
Date with respect to which such amount has been deposited in full into the
Collection Account, the Receivables and all monies due or to become due and all
amounts received with respect thereto and all proceeds thereof (after payment of
all amounts otherwise due on or before such date pursuant to the terms of any
Indenture Supplement or Enhancement Agreement) shall be released to the
Transferor and the Owner Trustee shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, representation or
warranty, as shall be reasonably requested by the Transferor to vest in the
Transferor, or its designee or assignee, all right, title and interest of the
Issuer in and to the Receivables, all monies due or to become due and all
amounts received with respect thereto and all proceeds thereof. If the Indenture
Trustee or the Noteholders give a notice directing the Transferor to accept
reassignment as provided herein and the Transferor is obligated to accept such
reassignment as provided herein, then such obligation of the Transferor shall
constitute the sole remedy respecting a breach of the representations and
warranties contained in Section 2.3(i), 2.3(iii) or 2.4(a) or Section 5(a) or
5(b) of any Assignment or there being a material amount of Receivables which are
not Eligible Receivables available to the Issuer, the Noteholders or the
Indenture Trustee on behalf of the Noteholders.
(f) Nothing contained in this Section 2.4 shall create an obligation on
the part of the Owner Trustee to verify the accuracy or continued accuracy of
the representations or warranties contained in this Section 2.4. The Owner
Trustee shall have no obligation to give any notice pursuant to this Section 2.4
unless it has actual knowledge of facts which would permit the giving of such
notice.
Section 2.5. Covenants of the Transferor. The Transferor hereby
covenants that:
12
(a) Receivables Not to be Evidenced by Instruments or Chattel Paper. The
Transferor will take no action to cause any Receivable to be evidenced by an
instrument or chattel paper (each as defined in the UCC as in effect in the
Relevant UCC State) and will not cause or permit the Bank to take any such
action (other than in its capacity as Servicer in connection with its
enforcement or collection of an Account).
(b) Security Interests. Except for the conveyances hereunder and under the
Pooling and Servicing Agreement, the Transferor will not sell, pledge, assign or
transfer to any other Person, or grant, create, incur, assume or suffer to exist
any Lien arising through or under the Transferor on, any Receivable, whether now
existing or hereafter created, or any interest therein, the Transferor will
notify the Indenture Trustee of the existence of any Lien on any Receivable
transferred by the Transferor immediately upon discovery thereof, and, on and
after the Certificate Trust Termination Date, the Transferor will defend the
right, title and interest of the Issuer in, to and under the Receivables,
whether now existing or hereafter created, against all claims of third parties
claiming through or under the Transferor; provided, however, that nothing in
this Section 2.5(b) shall prevent or be deemed to prohibit the Transferor from
suffering to exist upon any of the Receivables any Liens for municipal or other
local taxes and other governmental charges if such taxes or governmental charges
shall not at the time be due and payable or if the Transferor or the Bank shall
currently be contesting the validity thereof in good faith by appropriate
proceedings and the Transferor shall have set aside on its books adequate
reserves under generally accepted accounting principles with respect thereto;
and, provided further, that nothing in this subsection shall prohibit the
Transferor from conveying an interest in the Exchangeable Transferor Certificate
in accordance with the Trust Agreement.
(c) Account Agreements and Account Guidelines. The Receivables Purchase
Agreement may permit the Bank to change the terms and provisions of the Account
Agreements or the Account Guidelines in any respect (including, without
limitation, the required minimum monthly payment, the calculation of the amount,
or the timing, of charge-offs and the Finance Charges and other fees to be
assessed thereon) only if such change (i) would not, in the reasonable belief of
the Bank, cause an Early Amortization Event to occur and (ii) is made applicable
to the comparable segment of the revolving credit card accounts owned and
serviced by the Bank that have characteristics the same as, or substantially
similar to, the Accounts that are the subject of such change, except as
otherwise restricted by an endorsement, sponsorship or other agreement between
the Bank and an unrelated third party or by the terms of the Account Agreements.
(d) Account Allocations. In the event that the Transferor is unable for
any reason to transfer Receivables created on and after the Certificate Trust
Termination Date to the Issuer in accordance with the provisions of this
Agreement (including, without limitation, by reason of the application of the
provisions of Section 6.1 or a binding order of any Governmental Authority),
then, in any such event, (A) the Transferor agrees (except as prohibited by any
13
such order) to allocate and pay to the Issuer, after the date of such inability,
all Collections of Principal Receivables and Discount Option Receivables
transferred to the Issuer prior to the occurrence of such event and all amounts
which would have constituted Collections of Principal Receivables and Discount
Option Receivables but for the Transferor's inability to transfer such
Receivables to the Issuer (up to an aggregate amount equal to the Aggregate
Principal Receivables and the Discount Option Receivables in the Issuer as of
such date), (B) the Transferor agrees to have such amounts applied as
Collections in accordance with Article VIII of the Indenture and (C) for only so
long as all Collections and all amounts which would have constituted Collections
are allocated and applied in accordance with clauses (A) and (B) above, all
Collections of Principal Receivables and Discount Option Receivables and all
amounts which would have constituted Collections of Principal Receivables and
Discount Option Receivables but for the Transferor's inability to transfer
Receivables to the Issuer which are charged off as uncollectible in accordance
with this Agreement and the Account Guidelines shall continue to be allocated in
accordance with Article VIII of the Indenture and all amounts which would have
constituted Collections of Principal Receivables and Discount Option Receivables
but for the Transferor's inability to transfer Receivables to the Issuer shall
be deemed to be Collections of Principal Receivables for the purpose of
calculating the Invested Percentage with respect to any Series and the Aggregate
Invested Percentage. If the Transferor is unable pursuant to any Requirement of
Law to allocate amounts as described above, the Transferor agrees (except as
prohibited by law) to allocate payments on each Account with respect to the
balance of such Account first to the oldest Receivable in such Account and to
have such payments applied as Collections in accordance with Article VIII of the
Indenture. Finance Charge Receivables, whenever created, accrued in respect of
Principal Receivables or Discount Option Receivables which have been conveyed to
the Issuer, or which would have been conveyed to the Issuer but for the
Transferor's inability to transfer Receivables to the Issuer, shall continue to
be property of the Issuer notwithstanding any cessation of the transfer of
additional Principal Receivables and Discount Option Receivables to the Issuer
and Collections with respect thereto shall continue to be allocated and paid in
accordance with Article VIII of the Indenture.
(e) Delivery of Collections. In the event that the Transferor receives
Collections, the Transferor agrees to pay to the Servicer all payments received
by the Transferor with respect to such Collections promptly, and in no event
later than two Business Days, after receipt thereof by the Transferor.
(f) Separate Corporate Existence. The Transferor shall operate as an
entity with assets and liabilities distinct from those of Circuit City, the Bank
and each other Affiliate of Circuit City and shall comply with the provisions of
its certificate of incorporation attached as Exhibit G-1.
(g) Amendments to Certificate of Incorporation. The Transferor shall
deliver to each Rating Agency prior written notice of any amendment to its
amended and restated certificate of incorporation and shall not amend, alter,
14
change or repeal Article III, VI, VII, VIII, IX, X or XI of its amended and
restated certificate of incorporation or the defined term "Independent Director"
or "Material Action" set forth in Article XII of its amended and restated
certificate of incorporation unless the Rating Agency Condition shall have been
satisfied.
(h) Amendments to Receivables Purchase Agreement. The Transferor shall not
amend, supplement or otherwise modify the Receivables Purchase Agreement to add
any Person as a seller thereunder or enter into a new receivables purchase
agreement with any Person other than the Bank unless, in each case, the Rating
Agency Condition shall have been satisfied.
Section 2.6. Addition of Accounts.
(a) If, as of the end of any Collection Period beginning on or after the
Certificate Trust Termination Date, (i) the Transferor Amount (after giving
effect to any amounts deposited in the Excess Funding Account) is less than the
Minimum Transferor Amount or (ii) the Aggregate Principal Receivables is less
than the Minimum Aggregate Principal Receivables, then the Transferor shall,
before the close of business on the following Transfer Date, designate
additional Eligible Accounts (the "Additional Accounts") to be included as
Accounts in a sufficient amount such that, after giving effect to such
designation, the Transferor Amount at least equals the Minimum Transferor Amount
and the Aggregate Principal Receivables at least equals the Minimum Aggregate
Principal Receivables; provided, however, that the Transferor need not make any
such designation to the extent that the deficiencies described in clauses (i)
and (ii) above have been eliminated on or before such Transfer Date through
reductions in the Aggregate Invested Amount or through increases in the amount
on deposit in the Excess Funding Account.
(b) In addition to its obligation under Section 2.6(a), the Transferor
may, but shall not be obligated to, designate from time to time Additional
Accounts to be included as Accounts as of the related Additional Account Closing
Date.
(c) The Transferor agrees that any designation of Additional Accounts
under Section 2.6(a) and any designation of Additional Accounts made on or after
the Certificate Trust Termination Date under Section 2.6(b) shall satisfy the
following conditions:
(i) On or before the fifth Business Day prior to the Additional
Account Closing Date, the Transferor shall have given the Owner Trustee,
the Indenture Trustee, the Servicer, each Rating Agency and each other
Person entitled thereto pursuant to the related Indenture Supplement
written notice that the Additional Accounts will be included as Accounts
and specifying the approximate aggregate amount of the Receivables to be
transferred;
15
(ii) On or before the Additional Account Closing Date, the Transferor
shall have delivered to the Owner Trustee (and the Owner Trustee shall have
accepted on behalf of the Issuer for the benefit of the Noteholders and any
Enhancement Provider) a written assignment substantially in the form of
Exhibit A (the "Assignment") and shall have clearly indicated in its
computer files that the Receivables created in connection with the
Additional Accounts have been transferred to the Issuer and the Transferor
shall have delivered to the Owner Trustee a computer file or microfiche
list represented by the Transferor to contain a true and complete list of
the Additional Accounts identified by account number and by Receivable
balance in the Additional Accounts as of the Additional Account Cut-Off
Date, which computer file or microfiche list shall be as of the date of
such Assignment incorporated into and made a part of such Assignment and
this Agreement;
(iii) The Transferor shall represent and warrant that (x) each
Additional Account was, as of the Additional Account Cut-Off Date, an
Eligible Account, (y) no selection procedures believed by the Transferor to
be materially adverse to the interests of any outstanding Series of Notes
or any Enhancement Provider were used in selecting the Additional Accounts
from the available Eligible Accounts in the Transferor's portfolio of
MasterCard and VISA credit card accounts; and (z) as of the Additional
Account Closing Date, the Transferor is not insolvent and will not be made
insolvent by the transfer of the Receivables in the Additional Accounts;
(iv) The Transferor shall represent and warrant that, as of the
Additional Account Closing Date, the Assignment constitutes either (A) a
valid transfer and assignment to the Issuer of all right, title and
interest of the Transferor in and to the Receivables then existing and
thereafter created in the Additional Accounts, all monies due or to become
due and all amounts received with respect thereto on or after the
Additional Account Cut-Off Date and all proceeds thereof (to the extent set
forth in Section 9-315 of the UCC as in effect in the Relevant UCC State),
and such Receivables and all proceeds thereof will be transferred to the
Issuer free and clear of any Lien of any Person claiming through or under
the Transferor or any of its Affiliates, except for (x) Liens permitted
under Section 2.5(b), (y) the interest of the Transferor as holder of the
Exchangeable Transferor Certificate or any other Class held by the
Transferor from time to time and (z) any right of the holder of the
Exchangeable Transferor Certificate to receive interest accruing on, and
investment earnings with respect to, the Collection Account or any other
account or accounts maintained for the benefit of the Noteholders or any
Enhancement Provider as provided in this Agreement and any Indenture
Supplement or (B) a grant of a security interest (as defined in the UCC as
in effect in the Relevant UCC State) in such property to the Issuer.
16
(v) If the Assignment constitutes the grant of a security interest in
such property to the Issuer, the Transferor shall represent and warrant, as
of the Additional Account Closing Date, that:
(A) the Assignment creates a valid and continuing security
interest (as defined in the UCC of the Relevant UCC State) in such
property in favor of the Issuer, which security interest is prior to
all other Liens, and is enforceable as such against creditors of and
purchasers from the Transferor;
(B) the Receivables transferred by the Transferor pursuant to
the Assignment constitute "accounts" within the meaning of the UCC of the
Relevant UCC State;
(C) the Transferor owns and has good and marketable title to the
property transferred under the Assignment free and clear of any Lien,
claim or encumbrance of any Person (other than any Lien described in
clause (x), (y) or (z) of paragraph (iv) above);
(D) the Transferor has caused or will have caused, within ten
(10) days of the execution of the Assignment, the filing of all
appropriate financing statements in the proper filing office in the
appropriate jurisdictions under applicable law in order to perfect the
security interest in the Receivables and the proceeds thereof granted
to the Issuer pursuant to the Assignment;
(E) other than the security interest granted to the Issuer
pursuant to this Agreement or an Assignment, the Transferor has not
pledged, assigned, sold, granted a security interest in, or otherwise
conveyed any of the Receivables in the Additional Accounts or the
proceeds thereof;
(F) the Transferor has not authorized the filing of and is not
aware of any financing statements filed against the Transferor that
include a description of the Receivables in the Additional Accounts
other than any financing statement relating to the transfer of the
Receivables to the Transferor pursuant to the Receivables Purchase
Agreement or the security interest granted to the Issuer pursuant to
this Agreement or an Assignment or any financing statement that has
been terminated; and
(G) the Transferor is not aware of any judgment or tax lien
filings against the Transferor.
(vi) The Transferor shall deliver to the Indenture Trustee (with a
copy to the Rating Agencies) an Officer's Certificate confirming the items
set forth in paragraphs (ii) through (v) above and paragraph (viii)
17
below (and the Indenture Trustee may conclusively rely on such Officer's
Certificate, shall have no duty to make inquiries with regard to the
matters set forth therein and shall incur no liability in so relying);
(vii) The Transferor shall deliver to the Indenture Trustee, with a
copy to each Rating Agency, an Opinion of Counsel with respect to the
Receivables in the Additional Accounts substantially in the form of Exhibit
F-2;
(viii) The Transferor shall record and file (and does hereby authorize
the Issuer to record and file) financing statements with respect to the
Receivables then existing and thereafter created in the Additional Accounts
for the transfer of accounts (as defined in the UCC as in effect in the
Relevant UCC State) meeting the requirements of applicable state law in
such manner and in such jurisdictions as are necessary to perfect the
transfer and assignment of the Receivables in the Additional Accounts by
the Transferor to the Issuer; and
(ix) The Rating Agencies shall have received from the Transferor
five Business Days' notice, in the case of Additional Accounts being added
pursuant to Section 2.6(a), and ten Business Days' notice, in the case of
Additional Accounts being added pursuant to Section 2.6(b), of such
proposed addition of Additional Accounts and, in the event that Additional
Accounts are being added pursuant to Section 2.6(b), the Rating Agency
Condition shall have been satisfied.
(d) The Transferor may, but shall not be obligated to, designate from time
to time additional consumer revolving credit card accounts (the "Automatic
Additional Accounts") to be included as Accounts by causing such Accounts to be
identified pursuant to Section 2.2(d) of the Receivables Purchase Agreement in
the Bank's master computer files by the four digit identifying code number 2003,
2004, 2009, 3101, 3102, 3103, 3104, 3312, 3313, 3314, 3315, 3316, 3317, 4951,
4952, 4954, 4955, 4957 or 4969 and (i) in the case of Automatic Additional
Accounts designated before the Certificate Trust Termination Date, in the
computer file or microfiche list delivered to the trustee of the FNANB Credit
Card Master Trust by the Transferor with respect to such Accounts pursuant to
Section 2.1(b) of the Pooling and Servicing Agreement, and (ii) in the case of
Automatic Additional Accounts designated on or after the Certificate Trust
Termination Date, in the computer file or microfiche list delivered to the
Indenture Trustee by the Transferor with respect to such Accounts pursuant to
Section 2.1(c). For purposes of this Section 2.6(d), Automatic Additional
Accounts shall be deemed to include only Eligible Accounts designated on or
after the Certificate Trust Termination Date (x) of a type included as Accounts
on the Certificate Trust Termination Date or any Additional Account Closing Date
(but only if such Additional Account Closing Date related to Additional Accounts
added pursuant to Section 2.6(b)) or consented to in writing by each Rating
18
Agency and (y) not prohibited from being included as Accounts pursuant to the
terms of any Indenture Supplement.
If the number of Automatic Additional Accounts designated during any
calendar quarter or any period of twelve consecutive months (including Automatic
Additional Accounts designated pursuant to the Pooling and Servicing Agreement
during either such period) exceeds the applicable Aggregate Automatic Addition
Limit, then, upon discovery of such excess designation, (x) the Excess Automatic
Additional Accounts shall be deemed to be Removed Accounts and (y) the Issuer
shall, without further action, be deemed to transfer, assign, set-over and
otherwise convey to the Transferor, without recourse, representation or
warranty, all right, title and interest of the Issuer in and to the Receivables
in the Excess Automatic Additional Accounts, all monies due or to become due and
all amounts received with respect thereto and all proceeds thereof. The Owner
Trustee shall execute such documents and instruments of transfer or assignment
as are prepared by the Transferor and take such other actions as shall be
reasonably requested by the Transferor to effect the conveyance of such
Receivables pursuant to this Section 2.6(d). If the removal of Excess Automatic
Additional Accounts causes the Transferor Amount to be less than the Minimum
Transferor Amount or the Aggregate Principal Receivables to be less than the
Minimum Aggregate Principal Receivables, then the Transferor shall, no later
than 10 Business Days after such removal, designate Additional Accounts to be
included as Accounts in accordance with Section 2.6(a) in an amount such that,
after giving effect to such designation, the Transferor Amount at least equals
the Minimum Transferor Amount and the Aggregate Principal Receivables at least
equals the Minimum Aggregate Principal Receivables; provided, however, that the
Transferor need not make any such designation to the extent that such
deficiencies have been eliminated on or before such tenth Business Day through
reductions in the Aggregate Invested Amount or through increases in the amount
on deposit in the Excess Funding Account. The removal of Excess Automatic
Additional Accounts in accordance with this Section 2.6(d) shall be deemed to
cure any violation of the Aggregate Automatic Addition Limit, and such removal
shall constitute the sole remedy respecting any such violation available to the
Issuer, the Noteholders or the Indenture Trustee on behalf of the Noteholders.
The Transferor shall record and file (and does hereby authorize the Issuer
to record and file), at the expense of the Transferor, financing statements (and
continuation statements with respect to such financing statements when
applicable) with respect to the Receivables then existing and thereafter created
in the Automatic Additional Accounts for the transfer of accounts (as defined in
the UCC as in effect in the Relevant UCC State) meeting the requirements of
applicable state law in such manner and in such jurisdictions as are necessary
to perfect the transfer and assignment of such Receivables by the Transferor to
the Issuer, and to deliver a file-stamped copy of such financing statements or
other evidence of such filings to the Indenture Trustee.
19
Section 2.7. Removal of Accounts.
(a) On and after the Certificate Trust Termination Date, the Transferor
may, but shall not be obligated to, designate from time to time Accounts for
deletion and removal ("Removed Accounts") from the Accounts; provided, however,
that the Transferor shall not make more than one such designation in any
Collection Period; and, provided further, that the Transferor shall select the
Removed Accounts on a random basis. On or before the fifth Business Day (the
"Removal Notice Date") prior to the date on which the designated Removed
Accounts will be reassigned by the Issuer to the Transferor (the "Removal
Date"), the Transferor shall give the Indenture Trustee and the Servicer written
notice that the Receivables in such Removed Accounts are to be reassigned to the
Transferor.
(b) On and after the Certificate Trust Termination Date, the Transferor
shall be permitted to designate and require reassignment to it of Receivables in
Removed Accounts only upon satisfaction of the following conditions:
(i) On or prior to the Removal Date, the Transferor shall have
delivered to the Owner Trustee for execution a written instrument of
reassignment substantially in the form of Exhibit B-1 (the "Reassignment")
and a computer file or microfiche list containing a true and complete list
of all Removed Accounts identified by account number and by the aggregate
balance of the Receivables in such Removed Accounts as of the Removal
Notice Date, which computer file or microfiche list shall as of the Removal
Date modify and amend and be made a part of this Agreement;
(ii) The Transferor shall represent and warrant that no selection
procedures believed by the Transferor to be materially adverse to the
interests of any outstanding Series of Notes or any Enhancement Provider
were used in selecting the Removed Accounts to be removed from the Issuer;
(iii) The removal of any Receivables in any Removed Accounts on any
Removal Date shall not, in the reasonable belief of the Transferor, (A)
cause an Early Amortization Event, or an event which, with notice or lapse
of time or both, would constitute an Early Amortization Event, to occur;
provided, however, for the purpose of this subsection 2.7(b)(iii), the
Receivables of each Removed Account shall be deemed to have been removed as
of the Removal Date, (B) cause the Transferor Interest Percentage to be
less than the Minimum Transferor Interest Percentage on such Removal Date,
(C) cause the aggregate amount of Principal Receivables to be less than the
Minimum Aggregate Principal Receivables, or (D) result in the failure to
make any payments specified in the related Indenture Supplement with
respect to any Series;
20
(iv) The Rating Agencies shall have received five Business
Days' notice from the Transferor of such proposed removal of Accounts
and the Rating Agency Condition shall have been satisfied; and
(v) The Transferor shall deliver to the Indenture Trustee (with a
copy to the Rating Agencies) an Officer's Certificate confirming the
items set forth in paragraphs (i) through (iv) above (and the Indenture
Trustee may conclusively rely on such Officer's Certificate, shall have
no duty to make inquiries with regard to the matters set forth therein
and shall incur no liability in so relying).
(c) Upon satisfaction of the above conditions, the Owner Trustee shall
execute and deliver the Reassignment to the Transferor, and the Receivables in
the Removed Accounts shall no longer constitute a part of the Issuer.
(i) On and after the Certificate Trust Termination Date, the
Transferor may, but shall not be obligated to, designate from time to
time Zero Balance Accounts for deletion and removal from the Accounts;
provided, however, that, prior to such designation and removal, the
Transferor shall have delivered to each Rating Agency and the Indenture
Trustee an Officer's Certificate to the effect that the removal of the
Receivables in the Zero Balance Accounts shall not, in the reasonable
belief of the Transferor, cause an Early Amortization Event to occur.
The Indenture Trustee may conclusively rely on such Officer's
Certificate, shall have no duty to make inquiries with regard to the
matters set forth therein and shall incur no liability in so relying.
On or before the date on which the designated Zero Balance Accounts are
removed, the Transferor shall deliver to the Indenture Trustee a
computer file or microfiche list containing a true and complete list of
such Zero Balance Accounts identified by account number, which computer
file or microfiche list shall as of the removal date modify and amend
and be made a part of this Agreement. On the date on which the
designated Zero Balance Accounts are removed, the Issuer shall, without
further action, be deemed to transfer, assign, set-over and otherwise
convey to the Transferor, without recourse, representation or warranty,
all right, title and interest of the Issuer in and to the Receivables
in such Zero Balance Accounts, all monies due or to become due and all
amounts received thereafter with respect thereto and all proceeds
thereof. The Owner Trustee shall execute such documents and instruments
of transfer or assignment as are prepared by the Transferor and take
such other actions as shall be reasonably requested by the Transferor
to effect the conveyance of such Receivables pursuant to this Section
2.7(c).
(d) On and after the Certificate Trust Termination Date, the Transferor
may, but shall not be obligated to, designate from time to time Defaulted
Accounts for deletion and removal from the Accounts; provided, however, that
each such designation must be approved in writing by each Rating Agency or be
21
made in accordance with the procedure attached as Exhibit H-1. On or before the
date on which the designated Defaulted Accounts are removed, the Transferor
shall deliver to the Indenture Trustee a computer file or microfiche list
containing a true and complete list of such Defaulted Accounts identified by
account number, which computer file or microfiche list shall as of the removal
date modify and amend and be made a part of this Agreement. On the date on which
the designated Defaulted Accounts are removed, the Issuer shall, without further
action, be deemed to transfer, assign, set-over and otherwise convey to the
Transferor, without recourse, representation or warranty, all right, title and
interest of the Issuer in and to the Receivables (including, without limitation,
all Finance Charge Receivables) in such Defaulted Accounts, all monies due or to
become due and all amounts received thereafter with respect thereto and all
proceeds thereof; provided, however, that all Recoveries with respect to such
Receivables shall be applied as provided herein. The Owner Trustee shall execute
such documents and instruments of transfer or assignment as are prepared by the
Transferor and take such other actions as shall be reasonably requested by the
Transferor to effect the conveyance of such Receivables pursuant to this Section
2.7(d).
Section 2.8. Discount Option Receivables. (a) The Transferor agrees that a
specified percentage (the "Discount Percentage") of the Receivables in the
Accounts shall be treated as Discount Option Receivables in accordance with the
provisions of this Section 2.8. The Discount Percentage shall not apply to
Finance Charges, cash advance fees, annual fees, late charges, overlimit
charges, returned check charges or any other fees and charges on the Accounts
(other than Insurance Charges) or to Receivables in Defaulted Accounts. The
Discount Percentage may be fixed or variable.
(b) Discount Option Receivables shall be considered Finance Charge
Receivables for all purposes hereunder, including for the purposes of allocating
Collections pursuant to Article VIII of the Indenture.
(c) Prior to the Certificate Trust Termination Date, the Discount
Percentage shall be determined in accordance with the Pooling and Servicing
Agreement. On and after the Certificate Trust Termination Date, the Transferor
may, without notice to or consent of the Noteholders, from time to time,
increase, reduce or eliminate (in each case subject to the limitations described
below) the Discount Percentage for Discount Option Receivables arising in all or
certain of the Accounts on and after the date of such change; provided, however,
that the Transferor shall not change any existing Discount Option Receivables
into Principal Receivables and the Transferor shall not increase the Discount
Percentage during any Early Amortization Period or if such increase would cause
the Aggregate Principal Receivables to be less than the Minimum Aggregate
Principal Receivables.
(d) The Transferor shall provide to the Servicer, the Indenture Trustee and
each Rating Agency 30 days' prior written notice of any increase, reduction or
22
elimination of the Discount Percentage, and such increase, reduction or
elimination shall become effective on the date specified in such notice only if
(i) the Transferor has delivered to the Indenture Trustee an Officer's
Certificate to the effect that the Transferor reasonably believes that such
increase, reduction or elimination will not at the time of its occurrence cause
an Early Amortization Event or an event which with notice or the lapse of time
or both would constitute an Early Amortization Event to occur with respect to
any Series and (ii) if such designation would cause the Discount Percentage to
be less than 1.0% or more than 3.0%, the Rating Agency Condition has been
satisfied with respect to such increase, reduction or elimination. The Indenture
Trustee may conclusively rely on such Officer's Certificate, shall have no duty
to make inquiries with regard to the matters set forth therein and shall incur
no liability in so relying.
(e) On each Date of Processing of any Collections during the time the
discount option is in effect, Collections in an amount equal to the product of
(i) a fraction the numerator of which is the amount of Discount Option
Receivables and the denominator of which is the amount of all of the Principal
Receivables (including Discount Option Receivables) at the end of the prior
Collection Period and (ii) Collections of Receivables that arise in the Accounts
during such time that would otherwise be Principal Collections will be deemed
Finance Charge Collections and will be applied accordingly.
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
Prior to the Certificate Trust Termination Date, the Receivables shall
be serviced as provided in the Pooling and Servicing Agreement and this Article
III shall have no effect. On and after the Certificate Trust Termination Date:
Section 3.1. Appointment and Other Matters Relating to the Servicer.
(a) The Bank confirms that it has agreed to act as the Servicer under
this Agreement.
(b) The Servicer shall service and administer the Receivables and shall
collect payments due under the Receivables in accordance with its customary and
usual servicing procedures for servicing credit card receivables comparable to
the Receivables and in accordance with the applicable Account Guidelines and
shall have full power and authority, acting alone or through any party properly
designated by it hereunder, to do any and all things in connection with such
servicing and administration which it may deem necessary or desirable. Without
limiting the generality of the foregoing and subject to Section 7.1, the
Servicer is hereby authorized and empowered (i) to make withdrawals and payments
and to instruct the Indenture Trustee to make withdrawals and payments from the
Collection Account, the Excess Funding Account or any other account or accounts
maintained for the benefit of the Noteholders or with regard to any
23
Enhancement as set forth in this Agreement and any Indenture Supplement, (ii)
unless such power and authority is revoked by the Indenture Trustee on account
of the occurrence of a Servicer Default pursuant to Section 7.1, to instruct the
Indenture Trustee to take any action permitted or required under any Enhancement
at such time as is set forth in this Agreement or any Indenture Supplement,
(iii) to execute and deliver, on behalf of the Issuer for the benefit of the
Noteholders, any and all instruments of satisfaction or cancellation, or of
partial or full release or discharge, and all other comparable instruments, with
respect to the Receivables and, after the delinquency of any Receivable and to
the extent permitted under and in compliance with applicable law and
regulations, to commence enforcement proceedings with respect to such
Receivables and (iv) to make any filings, reports, notices, applications, or
registrations with, and to seek any consents or authorizations from, the
Securities and Exchange Commission and any state securities laws authority on
behalf of the Issuer as may be necessary or advisable to comply with any Federal
or state securities laws or reporting requirements. Prior to receipt by a
Responsible Officer of the Indenture Trustee of written notice of a Servicer
Default the Indenture Trustee shall promptly follow the written instructions of
the Servicer to withdraw funds from the Collection Account and any other account
or accounts maintained for the benefit of the Noteholders or with regard to any
Enhancement. The Owner Trustee shall furnish the Servicer with limited powers of
attorney and other documents necessary or appropriate to enable the Servicer to
carry out its servicing and administrative duties hereunder, and the Owner
Trustee shall not be held responsible for any act or omission by the Servicer in
its use of such powers of attorney.
(c) In the event that the Transferor is unable for any reason to transfer
Receivables to the Issuer in accordance with the provisions of this Agreement
(including, without limitation, by reason of the application of the provisions
of Section 6.1 or a binding order of any Governmental Authority), then, in any
such event, (A) the Servicer agrees (except as prohibited by any such order) to
allocate, after the date of such inability, all Collections of Principal
Receivables and Discount Option Receivables and all amounts which would have
constituted Collections of Principal Receivables and Discount Option Receivables
but for the Transferor's inability to transfer such Receivables to the Issuer
(up to an aggregate amount equal to the Aggregate Principal Receivables and the
Discount Option Receivables in the Issuer as of such date) in accordance with
Section 2.5(d) and to apply such amounts as Collections in accordance with
Article VIII of the Indenture and (B) for only so long as all Collections and
all amounts which would have constituted Collections are allocated and applied
in accordance with clause (A) above, all Collections of Principal Receivables
and Discount Option Receivables and all amounts which would have constituted
Collections of Principal Receivables and Discount Option Receivables but for the
Transferor's inability to transfer Receivables to the Issuer which are charged
off as uncollectible in accordance with this Agreement and the Account
Guidelines shall continue to be allocated in accordance with Article VIII of the
Indenture and all amounts which would have constituted Collections of Principal
Receivables and Discount Option Receivables but for the Transferor's inability
to transfer
24
Receivables to the Issuer shall be deemed to be Collections of Principal
Receivables for the purpose of calculating the Invested Percentage with respect
to any Series and the Aggregate Invested Percentage. If the Servicer is unable
pursuant to any Requirement of Law to allocate amounts as described above, the
Servicer agrees (except as prohibited by law) to allocate, after the date on
which the Transferor becomes unable to do so, payments on each Account with
respect to the balance of such Account first to the oldest Receivable in such
Account and to have such payments applied as Collections in accordance with
Article VIII of the Indenture. Finance Charge Receivables, whenever created,
accrued in respect of Principal Receivables or Discount Option Receivables which
have been conveyed to the Issuer, or which would have been conveyed to the
Issuer but for the Transferor's inability to transfer Receivables to the Issuer,
shall continue to be property of the Issuer notwithstanding any cessation of the
transfer of additional Principal Receivables and Discount Option Receivables to
the Issuer and Collections with respect thereto shall continue to be allocated
and paid in accordance with Article VIII of the Indenture.
(d) The Servicer shall not be obligated to use separate servicing
procedures, offices, employees or accounts for servicing the Receivables from
the procedures, offices, employees and accounts used by the Servicer in
connection with servicing other revolving consumer credit card receivables.
(e) The Servicer shall maintain fidelity bond coverage insuring against
losses through wrongdoing of its officers and employees who are involved in the
servicing of Receivables covering such actions with such insurers and in such
amounts as the Servicer believes to be commercially reasonable from time to
time.
(f) The Servicer shall comply with and perform its obligations under
the Account Agreements and the Account Guidelines except insofar as any failure
to so comply would not materially and adversely affect the rights of the Issuer
or the Noteholders hereunder or under the Notes.
Section 3.2 Servicing Compensation. As full compensation for its
servicing activities hereunder and reimbursement for its expenses as set forth
in the immediately following paragraph and for fees required to be paid to the
Administrator pursuant to the Administration Agreement, the Servicer shall be
entitled to receive a monthly servicing fee with respect to any Collection
Period (or portion thereof) prior to the termination of the Issuer pursuant to
the Indenture (the "Monthly Servicing Fee") payable in arrears on each
Distribution Date in an amount equal to, with respect to each Series then
outstanding, one-twelfth of the product of the Servicing Fee Percentage for such
Series and the sum of an allocable portion of the Transferor Amount and the
Invested Amount of such Series, each as of the last day of the Collection Period
preceding the Collection Period with respect to which the Monthly Servicing Fee
is being paid. The share of the Monthly Servicing Fee allocable to each Series
of Noteholders with respect to any Distribution Date (with respect to any such
Series, the "Investor Monthly
25
Servicing Fee") shall be determined and paid to the Servicer in accordance with
the related Indenture Supplement. The remainder of the Monthly Servicing Fee
shall be paid by the Transferor, and in no event shall the Issuer, the Indenture
Trustee, any Enhancement Provider or the Noteholders be liable for the share of
the Monthly Servicing Fee to be paid by the Transferor. The share of the Monthly
Servicing Fee to be paid by the Transferor shall not be paid from the Trust
Assets and shall be paid only to the extent that the Transferor has funds
available for that purpose. If the Transferor does not have funds available to
make such payment, the Servicer shall not be entitled to assert a claim against
the Transferor for the unpaid amount. In the case of the Collection Period in
which the Certificate Trust Termination Date occurs, the Monthly Servicing Fee
and the Investor Monthly Servicing Fee shall accrue from the Certificate Trust
Termination Date.
The Servicer's expenses include the amounts due to the Indenture
Trustee and the reasonable fees and disbursements of independent accountants and
all other expenses incurred by the Servicer in connection with its activities
hereunder; provided, however, that the Servicer shall not be liable for any
liabilities, costs or expenses of the Issuer, the Noteholders or the Note Owners
arising under any tax law, including, without limitation, any Federal, state or
local income or franchise taxes or any other tax imposed on or measured by
income (or any interest or penalties with respect thereto or arising from a
failure to comply therewith), except to the extent incurred as a result of the
Servicer's violation of the provisions of this Agreement. The Servicer shall be
required to pay such expenses for its own account and shall not be entitled to
any payment therefor other than the Monthly Servicing Fee.
Section 3.3. Representations, Warranties and Covenants of the Servicer.
The Bank, as initial Servicer, hereby makes, and any Successor Servicer by its
appointment hereunder shall make, the following representations, warranties and
covenants with respect to any Series (with appropriate modifications to Section
3.3(a) to reflect such Successor Servicer's organizational structure), as of the
date of the related Indenture Supplement and the related Closing Date, or, if
such Successor Servicer is appointed thereafter, as of the date of such
appointment, unless otherwise stated in such Indenture Supplement, on which the
Owner Trustee has relied in accepting the Receivables and the other property
conveyed pursuant to Section 2.1 in trust and in authenticating the Notes:
(a) Organization and Good Standing. The Servicer is a national banking
association duly organized, validly existing and in good standing under the laws
of the United States, and has full power, authority and legal right to own its
properties and conduct its business as such properties are presently owned and
such business is presently conducted, and to execute, deliver and perform its
obligations under this Agreement.
(b) Due Qualification. The Servicer is duly qualified to do business
and is in good standing (or is exempt from such requirements) in any state where
such qualification is necessary in order to service the Receivables as required
by
26
this Agreement and has obtained all necessary licenses and approvals as required
under Federal and state law, and if the Servicer shall be required by any
Requirement of Law to so qualify or register or obtain such license or approval,
then it shall do so except where the failure to obtain such license or approval
does not materially affect the Servicer's ability to perform its obligations
hereunder or the enforceability of any Receivable.
(c) Due Authorization. The execution, delivery and performance of this
Agreement by the Servicer and the consummation by the Servicer of the
transactions provided for in this Agreement have been duly authorized by the
Servicer by all necessary action on the part of the Servicer.
(d) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Servicer, enforceable against the Servicer in
accordance with its terms, subject to applicable bankruptcy, insolvency,
receivership, conservatorship, reorganization, moratorium or other similar laws
now or hereafter in effect affecting the enforcement of creditors' rights in
general and the rights of creditors of national banking associations and except
as such enforceability may be limited by general principles of equity (whether
considered in a proceeding at law or in equity).
(e) No Violation. The execution and delivery of this Agreement by the
Servicer, the performance by the Servicer of the transactions contemplated by
this Agreement and the fulfillment by the Servicer of the terms hereof, will not
conflict with, violate or result in any breach of any of the material terms and
provisions of, or constitute (with or without notice or lapse of time or both) a
default under, any Requirement of Law applicable to the Servicer or any material
indenture, contract, agreement, mortgage, deed of trust or other instrument to
which the Servicer is a party or by which it is bound.
(f) No Proceedings. There are no proceedings or investigations pending
or, to the best knowledge of the Servicer, threatened against the Servicer
before any court, regulatory body, administrative agency or other tribunal or
governmental instrumentality seeking to prevent the issuance of the Notes or the
consummation of any of the transactions contemplated by this Agreement, 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 seeking any determination or ruling that
would materially and adversely affect the validity or enforceability of this
Agreement.
(g) Compliance with Requirements of Law. The Servicer shall duly
satisfy in all material respects its obligations under or in connection with
each Receivable and the corresponding Account, will maintain in effect all
material qualifications required under all Requirements of Law in order to
service properly each Receivable and the corresponding Account and will comply
in all material respects with all other Requirements of Law in connection with
servicing each
27
Receivable and the related Account the failure to comply with which would have a
material adverse effect on the Noteholders (without regard to the amount of any
Enhancement).
(h) No Rescission or Cancellation. Except in connection with an
Adjustment Payment pursuant to Section 3.8, the Servicer shall not permit any
rescission or cancellation of any Receivable except as ordered by a court of
competent jurisdiction or other Governmental Authority or in the ordinary course
of its business and in accordance with the applicable Account Guidelines.
(i) Protection of Noteholders' Rights. The Servicer shall take no
action which, nor omit to take any action the omission of which, would impair
the rights of Noteholders in any Receivable or the rights of any Enhancement
Provider, nor shall it reschedule, revise, waive or defer payments due on any
Receivable except in accordance with the applicable Account Guidelines.
(j) All Consents Required. All approvals, authorizations, consents,
orders or other actions of any Person or of any Governmental Authority required
to be obtained on or prior to each date as of which this representation is being
made in connection with the execution and delivery by the Servicer of this
Agreement, the performance by the Servicer of the transactions contemplated by
this Agreement and the fulfillment by the Servicer of the terms hereof, have
been obtained; provided, however, that no representation or warranty is made
regarding state securities or "Blue Sky" laws in connection with any
distribution of the Notes.
(k) Receivables Not to be Evidenced by Instruments or Chattel Paper.
Except in connection with its enforcement or collection of an Account, the
Servicer will take no action to cause any Receivable to be evidenced by an
instrument or chattel paper (each as defined in the UCC as in effect in the
Relevant UCC State).
In the event of a breach of any of the covenants set forth in Section
3.3(g), (h), (i) or (k) with respect to a Receivable, and such breach has a
material adverse effect on the Noteholders' interest in such Receivable (without
regard to the amount of any Enhancement) then, upon the expiration of 60 days or
any longer period agreed upon by the Indenture Trustee (not to exceed an
additional 120 days) from the earlier to occur of the discovery of any such
event by the Servicer or receipt by the Servicer of written notice of any such
event given by the Indenture Trustee, unless such breach has been cured, each
such Receivable or, at the option of the Transferor, all such Receivables with
respect to the related Account, shall be assigned and transferred to the
Servicer upon the deposit by the Servicer into the Collection Account in
immediately available funds prior to the next succeeding Distribution Date of an
amount equal to the amount of each such Receivable at the end of the Collection
Period preceding such Distribution Date, plus the amount of finance charges at
the monthly periodic rate applicable to such Receivable from the last date
billed through the end of such Collection Period to the extent not included in
the amount of such Receivable. Any such deposit into
28
the Collection Account in connection with any such assignment of a Receivable
shall be considered a payment in full of such Receivable and such deposit shall
be applied in accordance with the provisions of Article VIII of the Indenture.
Upon the assignment to the Servicer of such a Receivable, the Issuer shall,
without further action, be deemed to transfer, assign, set-over and otherwise
convey to the Servicer, without recourse, representation or warranty, all the
right, title and interest of the Issuer in and to such Receivable, all monies
due or to become due and all amounts received thereafter with respect thereto
and all proceeds thereof. The Owner Trustee shall execute such documents and
instruments of transfer or assignment, in each case without recourse,
representation or warranty, and take such other actions as shall reasonably be
requested by the Servicer to effect the conveyance of such Receivable pursuant
to this subsection. The obligation of the Servicer set forth in this Section 3.3
shall constitute the sole remedy respecting any breach by the Servicer of the
representations and warranties set forth in the above-referenced subsections
with respect to such Receivable available to Noteholders or the Indenture
Trustee on behalf of Noteholders. Notwithstanding any other provision of this
Section 3.3, no assignment of a Receivable to the Servicer pursuant to this
Section 3.3 shall occur if the Servicer fails to make the deposit required by
this Section 3.3 with respect to such Receivable.
Section 3.4. Reports and Records for the Indenture Trustee; Bank
Account Statements.
(a) Initial Report. On the Closing Date with respect to each Series
that closes after the Certificate Trust Termination Date, the Servicer shall
prepare and deliver to the Indenture Trustee and the Rating Agencies an
Officer's Certificate substantially in the form of Exhibit C-1 setting forth the
Aggregate Principal Receivables, the Transferor Amount and the Transferor
Interest Percentage as of the end of the day two Business Days preceding such
Closing Date and the expected Transferor Interest Percentage after giving effect
to the issuance of such Series.
(b) Daily Reports. For so long as deposits of Collections are required
to be made daily by the Servicer pursuant to Section 8.3(e) of the Indenture, on
each Business Day commencing on the Closing Date with respect to the first
Series that closes after the Certificate Trust Termination Date, the Servicer
shall prepare, and make available for inspection by the Indenture Trustee, and
maintain at the office of the Servicer a record setting forth the aggregate
amount of Collections processed by the Servicer on the second preceding Business
Day. The Servicer shall prepare such other reports on a daily (or less frequent)
basis as may be required by any Indenture Supplement.
(c) Monthly Servicer's Certificate. On each Determination Date after
the Certificate Trust Termination Date, the Servicer shall deliver to the
Indenture Trustee, the Paying Agent and the Rating Agencies an Officer's
Certificate signed by a Servicing Officer substantially in the form of Exhibit
D-1 (which certificate
29
shall attach for each Series the monthly statement to be delivered to
Noteholders on the following Distribution Date pursuant to the related Indenture
Supplement) setting forth the following information (which, in the case of
clauses (iii), (iv) and (v) below, will be stated on the basis of an original
principal amount of $1,000 per Note): (i) the aggregate amount of Collections
processed for the immediately preceding Collection Period and the aggregate
amount of Collections of Finance Charge Receivables and the aggregate amount of
Collections of Principal Receivables processed during such Collection Period;
(ii) the Invested Percentage with respect to the immediately preceding
Collection Period of each Series of Notes with respect to Collections of
Principal Receivables and the Invested Percentage with respect to such
Collection Period of each Series of Notes with respect to Collections of Finance
Charge Receivables and Defaulted Receivables; (iii) for each Series and for each
Class within any such Series, the total amount to be distributed to Noteholders
on the next succeeding Distribution Date, if applicable; (iv) for each Series
and for each Class within any such Series, the amount of such distribution
allocable to principal, if applicable; (v) for each Series and for each Class
within any such Series, the amount of such distribution allocable to interest,
if applicable; (vi) the aggregate outstanding balance of the Accounts which were
delinquent by 31 to 60, 61 to 90 and 91 or more days as of the close of business
on the last day of the immediately preceding Collection Period; (vii) for each
Series and for each Class within any such Series, the Investor Default Amount
for the related Distribution Date; (viii) for each Series and for each Class
within any such Series, the amount of the Investor Charge Offs and the amount of
the reimbursements of Investor Charge Offs for the next succeeding Distribution
Date; (ix) for each Series, the Investor Monthly Servicing Fee for the next
succeeding Distribution Date; (x) for each Series, the existing deficit
controlled amortization amount or deficit controlled accumulation amount, if
applicable; (xi) the aggregate amount of Receivables in the Issuer at the close
of business on the last day of the immediately preceding Collection Period;
(xii) for each Series, the Invested Amount at the close of business on the last
day of the immediately preceding Collection Period; (xiii) the available amount
of any Enhancement for each Series; and (xiv) whether an Early Amortization
Event with respect to any Series shall have occurred during or with respect to
the immediately preceding Collection Period. The Indenture Trustee shall be
under no duty to recalculate, verify or recompute the information supplied to it
under this Section 3.4.
Section 3.5 Annual Servicer's Certificate. The Servicer shall deliver
to the Indenture Trustee and the Rating Agencies, on or before June 30 of each
year, beginning with the first June 30/th/ falling after the Certificate Trust
Termination Date, an Officer's Certificate signed by a Servicing Officer and
substantially in the form of Exhibit E (a) stating that a review of the
activities of the Servicer during the preceding Fiscal Year and of its
performance under this Agreement was made under the supervision of the officer
signing such certificate and (b) stating that to the best of such officer's
knowledge, based on such review, either there has occurred no event which, with
the giving of notice or passage of time or both, would constitute a Servicer
Default and the Servicer has fully performed all
30
its obligations under this Agreement throughout such year or, if there has
occurred such an event, specifying each such event known to such officer and the
nature and status thereof. A copy of such Officer's Certificate may be obtained
by any Noteholder or Note Owner by a request in writing to the Indenture Trustee
addressed to the Corporate Trust Office
Section 3.6. Annual Independent Public Accountants' Servicing Report.
(a) On or before June 30 of each year, beginning with the first June
30/th/ falling after the Certificate Trust Termination Date, the Servicer shall
cause a firm of nationally recognized independent public accountants (who may
also render other services to the Servicer or the Transferor) to furnish a
report prepared in accordance with standards established by the American
Institute of Certified Public Accountants and, accordingly, including such
procedures as they considered necessary in the circumstances, to the Indenture
Trustee, the Rating Agencies and, as required, any Enhancement Provider to the
effect that, in their opinion, the monthly Servicer's Certificates issued during
the period covered by the report (which shall be the preceding Fiscal Year) are,
in all material respects, in conformity with the terms and conditions set forth
in Section 3.4(c). Such procedures will include comparisons of the mathematical
calculations of each amount set forth in the monthly Servicer's Certificates
forwarded by the Servicer pursuant to Section 3.4(c) during the period covered
by such report with the Servicer's computer reports that were the source of such
amounts, and such report shall state that, on the basis of such comparison, such
accountants are of the opinion that such amounts are in agreement, except for
such exceptions as they believe to be immaterial and such other exceptions as
shall be set forth in such report. A copy of such report may be obtained by any
Noteholder or Note Owner by a request in writing to the Indenture Trustee
addressed to the Corporate Trust Office.
(b) On or before June 30 of each year, beginning with the first June
30/th/ falling after the Certificate Trust Termination Date, the Servicer shall
cause a firm of nationally recognized independent public accountants (who may
also render other services to the Servicer or the Transferor) to furnish a
report to the Indenture Trustee, the Rating Agencies and, as required, any
Enhancement Provider to the effect that in connection with their examination of
the monthly Servicer's Certificates, nothing came to their attention that caused
them to believe that the Servicer failed to comply with the terms and conditions
set forth in Sections 3.2 and 3.4(c).
(c) On or before June 30 of each year, beginning with the first June
30/th/ falling after the Certificate Trust Termination Date, the Servicer shall
cause a firm of nationally recognized independent public accountants (who may
also render other services to the Servicer or the Transferor) to furnish a
report to the Indenture Trustee to the effect that such firm has applied certain
procedures agreed upon with the Servicer to certain documents and records
relating to the
31
administration and servicing of Accounts under this Agreement and any Indenture
Supplement during the preceding fiscal year, and has reported on the findings.
Section 3.7. Tax Treatment. The Transferor has structured the
Transaction Documents (other than any Notes held by the Transferor) with the
intention that such Notes will qualify under applicable tax law as indebtedness
of the Transferor or, if specified in the applicable Indenture Supplement, an
interest in a partnership (and not as an association or publicly traded
partnership taxable as a corporation for purposes of federal income tax law),
and the Transferor, any entity acquiring any direct or indirect interest in the
Exchangeable Transferor Certificate, each Noteholder (or Note Owner) by
acceptance of its Note (or, in the case of a Note Owner, by virtue of such Note
Owner's acquisition of a beneficial interest therein) and each holder of an
interest in any Enhancement Invested Amount by its acceptance thereof agree, and
shall be deemed to agree, to treat such Notes (or beneficial interest therein)
or Enhancement Invested Amount for purposes of Federal, state and local income
or franchise taxes and any other tax imposed on or measured by income, as
indebtedness or, if specified in the applicable Indenture Supplement, an
interest in a partnership. Each Noteholder agrees that it will cause any Note
Owner acquiring an interest in a Note through it to comply with this Agreement
as to treatment as indebtedness or, if specified in the applicable Indenture
Supplement, an interest in a partnership, for certain tax purposes. Consistent
with the foregoing, the Owner Trustee shall not file a Federal income tax return
on behalf of the Issuer or apply for a taxpayer identification number on behalf
of the Issuer unless required to do so as a result of a determination by the
Internal Revenue Service or pursuant to the terms of any Indenture Supplement.
Section 3.8 Adjustments. (a) If the Transferor or the Servicer adjusts
downward the amount of any Principal Receivable because of a rebate, refund,
unauthorized charge or billing error to an Obligor, or because such Receivable
was created in respect of goods or services which were refused, returned or not
received by an Obligor, or if the Transferor or the Servicer otherwise adjusts
downward the amount of any Principal Receivable without receiving Collections
therefor or without charging off such amount as uncollectible, then, in any such
case, the Servicer shall deduct from the Aggregate Principal Receivables and
decrease the Transferor Amount by the amount of such adjustment. Similarly, the
amount of the Aggregate Principal Receivables and the Transferor Amount will be
reduced by the amount of any Principal Receivable which was discovered as having
been created through a fraudulent or counterfeit charge or with respect to which
the covenant contained in Section 2.5(b) was breached. Any adjustment required
pursuant to either of the two preceding sentences shall be made on or prior to
the end of the Collection Period in which such adjustment obligation arises. In
the event that, following any such exclusion, the Transferor Amount would be
less than the Minimum Transferor Amount, within two Business Days of the date on
which such adjustment obligation arises, the Transferor shall pay to the
Servicer for deposit into the Excess Funding Account, in immediately available
funds, an amount equal to the
32
amount by which the Transferor Amount would be reduced below the Minimum
Transferor Amount. Any amount deposited into the Excess Funding Account pursuant
to the immediately preceding sentence (an "Adjustment Payment") shall be applied
in accordance with Article VIII of the Indenture and the terms of each Indenture
Supplement. If the Transferor fails to make any required Adjustment Payment and,
as a result of such failure, the Transferor Amount is less than zero as of the
last day of any Collection Period, the amount of such deficiency (the
"Adjustment Amount") shall, to the extent such Adjustment Amount is not
otherwise reduced, be allocated among all then outstanding Series. An Adjustment
Amount shall be reduced to the extent that amounts are deposited in the Excess
Funding Account, the Aggregate Principal Receivables increase, the Aggregate
Invested Amount is reduced (other than as a result of the allocation of an
Adjustment Amount) or the Transferor subsequently makes a required Adjustment
Payment. In the event that the Servicer adjusts upwards the principal amount of
any Receivable, the Aggregate Principal Receivables shall be increased by the
amount of such upward adjustment.
(b) If (i) the Servicer makes a deposit into the Collection Account in
respect of a Collection of a Receivable and such Collection was received by the
Servicer in the form of a check which is not honored for any reason or (ii) the
Servicer makes a mistake with respect to the amount of any Collection and
deposits an amount that is less than or more than the actual amount of such
Collection, the Servicer shall appropriately adjust the amount subsequently
deposited into the Collection Account to reflect such dishonored check or
mistake. Any Receivable in respect of which a dishonored check is received shall
be deemed not to have been paid. Notwithstanding the first two sentences of this
paragraph, no adjustments shall be made pursuant to this paragraph that will
change any amount of Collections previously reported pursuant to Section 3.4(c).
(c) In the event that the Transferor shall fail to pay to the Servicer for
deposit into the Excess Funding Account any amount required to be so paid
pursuant to Section 3.8(a), and shall not have subsequently paid such amount, no
Collections of Principal Receivables allocable to the Notes shall be distributed
or otherwise released to the Transferor hereunder, but shall instead be
deposited in the Excess Funding Account for so long as any Series Adjustment
Amount shall exist. In addition, in the event that the Transferor shall
repurchase the Receivables or the Notes of any Series, including pursuant to
Section 7.2, the purchase price with respect to any Series shall include the
Series Adjustment Amount of such Series, if any.
Section 3.9. Reports to the Commission. The Servicer shall, on behalf of
the Issuer, cause to be filed with the Securities and Exchange Commission any
periodic reports required to be filed under the provisions of the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Securities and Exchange Commission thereunder. The Transferor shall, at the
expense of the Servicer, cooperate in any reasonable request of the Servicer in
connection with such filings.
33
ARTICLE IV
OTHER MATTERS RELATING TO THE TRANSFEROR
Section 4.1. Liability of the Transferor. The Transferor shall be liable in
accordance herewith only to the extent of the obligations specifically
undertaken by the Transferor in such capacity herein.
Section 4.2. Merger or Consolidation of, or Assumption of the Obligations
of, the Transferor.
(a) The Transferor shall not consolidate with or merge into any other
business entity or convey or transfer its properties and assets substantially as
an entirety to any Person, unless:
(i) the business entity formed by such consolidation or into which
the Transferor is merged or the Person which acquires by conveyance or
transfer the properties and assets of the Transferor substantially as an
entirety shall be organized and existing under the laws of the United
States or any State or the District of Columbia, and if the Transferor is
not the surviving entity, shall expressly assume, by an agreement
supplemental hereto, executed and delivered to the Owner Trustee, in form
satisfactory to the Owner Trustee, the performance of every covenant and
obligation of the Transferor, as applicable, hereunder and shall benefit
from all the rights granted to the Transferor, as applicable, hereunder. To
the extent that any right, covenant or obligation of the Transferor is
inapplicable to the successor entity, such successor entity shall be
subject to such covenant or obligation, or benefit from such right, as
would apply, to the extent practicable, to such successor entity;
(ii) the Transferor has delivered to the Indenture Trustee an
Officer's Certificate signed by a Vice President or more senior officer of
the Transferor stating that such consolidation, merger, conveyance or
transfer and such supplemental agreement comply with this Section 4.2 and
that all conditions precedent herein provided for relating to such
transaction have been complied with and an Opinion of Counsel stating that
such supplemental agreement constitutes a legal, valid and binding
obligation of the Transferor, enforceable against the Transferor in
accordance with its terms, subject to applicable bankruptcy, insolvency,
receivership, conservatorship, reorganization, moratorium or other similar
laws now or hereafter in effect affecting the enforcement of creditors'
rights in general and except as such enforceability may be limited by
general principles of equity (whether considered in a proceeding at law or
in equity); and
(iii) if the surviving entity is subject to the bankruptcy laws of the
United States, the Transferor shall have received written notice from
34
each Rating Agency that such consolidation, merger, conveyance or
transfer will not result in a downgrading or withdrawal of its then
current rating of any outstanding Series of Notes and shall have
delivered copies of each such notice to the Servicer and the Indenture
Trustee; and
(iv) if the surviving entity is not subject to the bankruptcy
laws of the United States, the Transferor shall have delivered to each
Rating Agency notice of such consolidation, merger, conveyance or
transfer.
(b) The obligations of the Transferor hereunder shall not be assignable
nor shall any Person succeed to the obligations of the Transferor hereunder
except in each case in accordance with the provisions of the foregoing
paragraph.
Section 4.3. Limitation on Liability of the Transferor. The directors,
officers, employees or agents of the Transferor shall not be under any liability
to the Issuer, the Servicer, the Owner Trustee, the Indenture Trustee, the
Noteholders, any Enhancement Provider or any other Person hereunder or pursuant
to any document delivered hereunder, it being expressly understood that all such
liability is expressly waived and released as a condition of, and as
consideration for, the execution of this Agreement and the issuance of the
Notes; provided, however, that this provision shall not protect the directors,
officers, employees or agents of the Transferor against any liability which
would otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of duties or by reason of reckless disregard of
obligations or duties hereunder or pursuant to any document delivered hereunder.
The Transferor shall not be under any liability to the Issuer, the Servicer, the
Owner Trustee, the Indenture Trustee, the Noteholders, any Enhancement Provider
or any other Person for any action taken or for refraining from the taking of
any action in its capacity as Transferor pursuant to this Agreement whether
arising from express or implied duties under this Agreement; provided, however,
that this provision shall not protect the Transferor against any liability which
would otherwise be imposed by reason of its willful misfeasance, bad faith or
gross negligence in the performance of duties or by reason of its reckless
disregard of its obligations or duties hereunder. The Transferor and any
director, officer, employee or agent of the Transferor may rely in good faith on
any document of any kind prima facie properly executed and submitted by any
Person respecting any matters arising hereunder.
ARTICLE V
OTHER MATTERS RELATING TO THE SERVICER
Section 5.1. Liability of the Servicer. The Servicer shall be liable in
accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer in such capacity herein.
Section 5.2 Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer. The Servicer shall not consolidate with or merge
35
into any other business entity or convey or transfer its properties and assets
substantially as an entirety to any Person, unless:
(a) the business entity formed by such consolidation or into which the
Servicer is merged or the Person which acquires by conveyance or transfer
the properties and assets of the Servicer substantially as an entirety
shall be organized and existing under the laws of the United States or any
State or the District of Columbia, and if the Servicer is not the surviving
entity, shall be an Eligible Servicer and shall expressly assume, by an
agreement supplemental hereto, executed and delivered to the Owner Trustee,
the performance of every covenant and obligation of the Servicer, as
applicable, hereunder and shall benefit from all the rights granted to the
Servicer, as applicable, hereunder. To the extent that any right, covenant
or obligation of the Servicer is inapplicable to the successor entity, such
successor entity shall be subject to such covenant or obligation, or
benefit from such right, as would apply, to the extent practicable, to such
successor entity;
(b) the Servicer has delivered to the Indenture Trustee an Officer's
Certificate stating that such consolidation, merger, conveyance or transfer
and such supplemental agreement comply with this Section 5.2 and that all
conditions precedent herein provided for relating to such transaction have
been complied with and an Opinion of Counsel that such supplemental
agreement constitutes a legal, valid and binding obligation of the
Servicer, enforceable against the Servicer in accordance with its terms,
subject to applicable bankruptcy, insolvency, receivership,
conservatorship, reorganization, moratorium or other similar laws now or
hereafter in effect affecting the enforcement of creditors' rights in
general and except as such enforceability may be limited by general
principles of equity (whether considered in a proceeding at law or in
equity);
(c) if the surviving entity is subject to the bankruptcy laws of the
United States, the Servicer shall have received written notice from each
Rating Agency that such consolidation, merger, conveyance or transfer will
not result in a downgrading or withdrawal of its then current rating of any
outstanding Series of Notes and shall have delivered copies of each such
notice to the Transferor and the Indenture Trustee; and
(d) if the surviving entity is not subject to the bankruptcy laws of
the United States, the Servicer shall have delivered to each Rating Agency
notice of such consolidation, merger, conveyance or transfer.
Section 5.3 Limitation on Liability of the Servicer and Others. The
directors, officers, employees or agents of the Servicer shall not be under any
liability to the Issuer, the Transferor, the Owner Trustee, the Indenture
Trustee, the Noteholders, any Enhancement Provider or any other Person hereunder
or pursuant to any document delivered hereunder, it being expressly understood
that
36
all such liability is expressly waived and released as a condition of, and as
consideration for, the execution of this Agreement; provided, however, that this
provision shall not protect the directors, officers, employees or agents of the
Servicer against any liability which would otherwise be imposed by reason of
willful misfeasance, bad faith or gross negligence in the performance of duties
or by reason of reckless disregard of obligations or duties hereunder or
pursuant to any document delivered hereunder. Except as provided in Section 5.4,
the Servicer shall not be under any liability to the Issuer, the Transferor, the
Owner Trustee, the Indenture Trustee, the Noteholders, any Enhancement Provider
or any other Person for any action taken or for refraining from the taking of
any action in its capacity as Servicer pursuant to this Agreement whether
arising from express or implied duties under this Agreement; provided, however,
that this provision shall not protect the Servicer against any liability which
would otherwise be imposed by reason of its willful misfeasance, bad faith or
gross negligence in the performance of duties or by reason of its reckless
disregard of obligations or duties hereunder. The Servicer and any director,
officer, employee or agent of the Servicer may rely in good faith on any
document of any kind prima facie properly executed and submitted by any Person
respecting any matters arising hereunder. The Servicer shall not be under any
obligation to appear in, prosecute or defend any legal action which is not
incidental to its duties to service the Receivables in accordance with this
Agreement which in its reasonable opinion may involve it in any expense or
liability.
Section 5.4 Indemnification of the Issuer and the Owner Trustee. The
Servicer shall indemnify and hold harmless the Issuer, the Owner Trustee and the
Indenture Trustee, including the directors, officers, employees and agents of
the Owner Trustee and the Indenture Trustee, from and against any loss,
liability, claim, damage, injury or expense (including, without limitation,
reasonable fees and expenses of counsel) arising out of or relating to (i) any
acts or omissions of the Servicer with respect to the Issuer in breach of this
Agreement or (ii) the administration by the Owner Trustee of the Issuer;
provided, however, that the Servicer shall not indemnify or hold harmless the
Issuer, the Owner Trustee or the Indenture Trustee, or any director, officer,
employee or agent of the Owner Trustee or the Indenture Trustee for any loss,
liability, claim, damage, injury or expense arising out of or relating to (i)
the willful misfeasance, bad faith or negligence of the Owner Trustee or the
Indenture Trustee in the performance of its duties hereunder or (ii) any action
taken by the Owner Trustee or the Indenture Trustee at the request of the
Noteholders; and, provided further, that the Servicer shall not indemnify the
Issuer from or against (i) any Federal, state or local taxes (or any interest or
penalties with respect thereto) required to be paid by the Issuer or the
Noteholders in connection herewith to any taxing authority or (ii) any loss,
liability, claim, damage, injury or expense incurred by the Noteholders in their
capacity as investors as a result of any action taken by the Noteholders or as a
result of the performance of the Receivables, market fluctuations, a shortfall
in any Enhancement or other similar market or investment risks (except to the
extent that such loss, liability, claim, damage, injury or expense was incurred
by reason of the failure by the Servicer to act in accordance with this
Agreement and the
37
Account Guidelines). Subject to Section 4.1 and Section 7.2(b), any
indemnification pursuant to this Section 5.4 shall only be from the assets of
the Servicer. The provisions of this indemnity shall run directly to and be
enforceable by an injured party subject to the limitations hereof and shall
survive the termination of this Agreement, the resignation and removal of the
Owner Trustee and payment in full of the Notes.
The Servicer shall indemnify the Indenture Trustee as provided in Section
6.7 of the Indenture.
Section 5.5. The Servicer Not to Resign. The Servicer shall not resign from
the obligations and duties hereby imposed on it as such except upon
determination that (i) the performance of its duties hereunder is or will become
impermissible under applicable law, regulation or order and (ii) there is no
reasonable action which the Servicer could take to make the performance of its
duties hereunder permissible under applicable law. Any such determination
permitting the resignation of the Servicer shall be evidenced as to clause (i)
of this Section 5.5 by an Opinion of Counsel to such effect delivered to the
Indenture Trustee. No such resignation shall be effective until the Indenture
Trustee or a successor to the Servicer has assumed the Servicer's
responsibilities and obligations under this Agreement. If the Trustee is unable
within 120 days of the date of such determination to appoint a Successor
Servicer pursuant to Section 7.2(a), the Indenture Trustee or its duly appointed
agent (which may not be the outgoing Servicer) shall serve as Successor Servicer
hereunder but the Indenture Trustee shall have continued authority to appoint
another Person as Successor Servicer.
Section 5.6. Access to Certain Documentation and Information Regarding the
Receivables. The Servicer shall provide to the Indenture Trustee access to the
documentation regarding the Accounts and the Receivables in such cases where the
Indenture Trustee is required in connection with the enforcement of the rights
of the Noteholders, or by applicable statutes or regulations, to review such
documentation, such access being afforded without charge but only (i) upon
reasonable request, (ii) during normal business hours, (iii) subject to such
security and confidentiality procedures as the Servicer may deem reasonably
necessary and (iv) at offices designated by the Servicer. Nothing in this
Section 5.6 shall derogate from the obligation of the Transferor, the Indenture
Trustee or the Servicer to observe any applicable law prohibiting disclosure of
information regarding the Obligors and the failure of the Servicer to provide
access as provided in this Section 5.6 as a result of such obligation shall not
constitute a breach of this Section 5.6.
Section 5.7. Delegation of Duties. It is understood and agreed by the
parties hereto that the Servicer may delegate certain of its duties hereunder to
any Person who agrees to conduct such duties in accordance with the applicable
Account Guidelines and the usual and customary servicing policies and procedures
of the Servicer. The fees of any Person to whom such duties are
38
delegated shall be for the account of the Servicer. Any such delegations shall
not relieve the Servicer of its liability and responsibility with respect to
such duties, and shall not constitute a resignation within the meaning of
Section 5.5 hereof. If any such delegation is not in the ordinary course of
business, notification thereof shall be given by the Servicer to each Rating
Agency.
Section 5.8. Examination of Records. Each of the Transferor and the
Servicer shall clearly and unambiguously identify each Account (including any
Account designated pursuant to Section 2.6) in its computer or other records to
reflect that the Receivables arising in such Account have been conveyed to the
Issuer pursuant to this Agreement. Each of the Transferor and the Servicer
shall, prior to the sale or transfer to a third party of any receivable held in
its custody, examine its computer and other records to determine that such
receivable is not a Receivable.
ARTICLE VI
INSOLVENCY EVENTS
Section 6.1. Rights upon the Occurrence of Certain Insolvency Events. If,
in each case on or after the Certificate Trust Termination Date, Transferor
shall consent or fail to object to the appointment of a bankruptcy trustee,
conservator, receiver or liquidator in any bankruptcy proceeding, insolvency,
readjustment of debt, marshaling of assets and liabilities or similar proceeding
of or relating to the Transferor or of or relating to all or substantially all
of its property, or a decree or order of a court, agency or supervisory
authority having jurisdiction in the premises for the appointment of a
bankruptcy trustee, conservator, receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceeding, or for the winding-up or liquidation of its affairs, shall have been
entered against the Transferor or an action seeking any such decree or order
shall have been commenced and, notwithstanding an objection by the Transferor,
shall have remained undischarged or unstayed for a period of sixty (60) days; or
the Transferor shall admit in writing its inability to pay its debts generally
as they become due, file or consent or fail to object (or object without
dismissal of any such filing within sixty (60) days of such filing or the
earlier entry of any order providing for such relief) to the filing of a
petition to take advantage of any applicable bankruptcy, insolvency or
reorganization statute, make an assignment for the benefit of its creditors or
voluntarily suspend payment of its obligations, Transferor shall on the day any
such event occurs immediately cease to transfer Principal Receivables to the
Issuer and shall promptly give notice to the Indenture Trustee, the Owner
Trustee and the Rating Agencies thereof.
ARTICLE VII
SERVICER DEFAULTS
39
Section 7.1. Servicer Defaults. If any one of the following events (a
"Servicer Default") shall occur and be continuing after the Certificate Trust
Termination Date:
(a) any failure by the Servicer to make any payment, transfer or deposit or
to give instructions or notice to the Indenture Trustee to make such payment,
transfer or deposit or to give notice to the Indenture Trustee as to any
required drawing or payment under any Enhancement on or before the date
occurring five Business Days after the date such payment, transfer, deposit or
drawing or such instruction or notice is required to be made or given, as the
case may be, under the terms of this Agreement, the Indenture or any Indenture
Supplement;
(b) failure on the part of the Servicer duly to observe or perform any
other covenants or agreements of the Servicer set forth in this Agreement, which
has a material adverse effect on the Noteholders of any Series then outstanding
(without regard to the amount of any Enhancement) and which continues unremedied
for a period of 60 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Servicer by the
Indenture Trustee or the Transferor, or to the Servicer, the Transferor and the
Indenture Trustee by the Holders of Notes aggregating more than 50% of the
outstanding principal amount of any Series adversely affected thereby, and which
continues to materially adversely affect the rights of the Noteholders of any
Series then outstanding (without regard to the amount of any Enhancement) or the
Servicer shall delegate its duties under this Agreement, except as permitted by
Section 5.7; provided, however, that any such failure that relates to any
particular Receivable or group of Receivables shall not constitute a Servicer
Default if the Servicer has made a deposit in the Collection Account with
respect to such failure in accordance with Section 3.3;
(c) any representation, warranty or certification made by the Servicer in
this Agreement or in any certificate delivered pursuant to this Agreement shall
prove to have been incorrect when made, which has a material adverse effect on
the rights of the Noteholders of any Series then outstanding (without regard to
the amount of any Enhancement) and which continues to be incorrect in any
material respect and which continues to affect materially and adversely the
rights of the Noteholders of any Series (without regard to the amount of any
Enhancement) for a period of 60 days after the date on which written notice of
such failure, requiring the same to be remedied, shall have been given to the
Servicer by the Indenture Trustee or the Transferor, or to the Servicer, the
Transferor and the Indenture Trustee by the Holders of Notes evidencing
Undivided Interests aggregating more than 50% of the outstanding principal
amount of any Series adversely affected thereby; or
(d) the Servicer shall consent to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshaling of
assets and liabilities or similar proceedings of or relating to the Servicer or
of or
40
relating to all or substantially all of its property, or a decree or order of a
court or agency or supervisory authority having jurisdiction in the premises for
the appointment of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall have
been entered against the Servicer and such decree or order shall have remained
in force undischarged or unstayed for a period of 60 days; or the Servicer shall
admit in writing its inability to pay its debts generally as they become due,
file a petition to take advantage of any applicable insolvency or reorganization
statute, make an assignment for the benefit of its creditors or voluntarily
suspend payment of its obligations;
then, so long as such Servicer Default shall not have been remedied, the
Indenture Trustee, the Transferor or the Holders of Notes aggregating more than
50% of the Aggregate Invested Amount, by notice then given in writing to the
Servicer (and to the Indenture Trustee and the Transferor if given by the
Noteholders) (a "Termination Notice"), may terminate all of the rights and
obligations of the Servicer as Servicer under this Agreement and in and to the
Receivables and the proceeds thereof and appoint a new Servicer (a "Service
Transfer"). The rights and interests of the Transferor Interest will not be
affected by any Service Transfer. The Indenture Trustee, upon giving or
receiving a Termination Notice shall immediately notify the Rating Agencies and
any Enhancement Provider of such notice. After receipt by the Servicer of such
Termination Notice, and on the date that a Successor Servicer shall have been
appointed by the Trustee pursuant to Section 7.2, all authority and power of the
Servicer under this Agreement shall pass to and be vested in a Successor
Servicer, and, without limitation, the Indenture Trustee is hereby authorized
and empowered (upon the failure of the Servicer to cooperate) to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, all
documents and other instruments upon the failure of the Servicer to execute or
deliver such documents or instruments, and to do and accomplish all other acts
or things necessary or appropriate to effect the purposes of such Service
Transfer. The Servicer agrees to take all reasonable actions to cooperate with
the Indenture Trustee and such Successor Servicer in effecting the termination
of the responsibilities and rights of the Servicer to conduct servicing
hereunder, including, without limitation, the transfer to such Successor
Servicer of all authority of the Servicer to service the Receivables provided
for under this Agreement, including, without limitation, all authority over all
Collections which shall on the date of transfer be held by the Servicer for
deposit, or which have been deposited by the Servicer, in the Collection
Account, or which shall thereafter be received with respect to the Receivables,
and in assisting the Successor Servicer and in enforcing all rights to
Recoveries. The Servicer shall promptly transfer its electronic records relating
to the Receivables to the Successor Servicer in such electronic form as the
Successor Servicer may reasonably request and shall promptly transfer to the
Successor Servicer all other records, correspondence and documents necessary for
the continued servicing of the Receivables in the manner and at such times as
the Successor Servicer shall reasonably request. To the extent that compliance
with this Section 7.1 shall
41
require the Servicer to disclose to the Successor Servicer information of any
kind which the Servicer reasonably deems to be confidential, the Successor
Servicer shall be required to enter into such customary licensing and
confidentiality agreements as the Servicer shall deem necessary to protect its
interest.
Notwithstanding the foregoing, a delay in or failure of performance
referred to in Section 7.1(a) for a period of 10 Business Days after the
applicable grace period or a delay in or failure of performance referred to in
Section 7.1(b) or (c) for a period of 60 Business Days after the applicable
grace period shall not constitute a Servicer Default if such delay or failure
could not be prevented by the exercise of reasonable diligence by the Servicer
and such delay or failure was caused by an act of God or the public enemy, acts
of declared or undeclared war, public disorder, rebellion, riot or sabotage,
epidemics, landslides, lightning, fire, hurricanes, tornadoes, earthquakes,
nuclear disasters or meltdowns, floods, power outages or similar causes. The
preceding sentence shall not relieve the Servicer from using its best efforts to
perform its obligations in a timely manner in accordance with the terms of this
Agreement and the Servicer shall provide the Indenture Trustee, any Enhancement
Provider, the Transferor and the Holders of Notes with an Officer's Certificate
giving prompt notice of such failure or delay by it, together with a description
of the cause of such failure or delay and its efforts so to perform its
obligations. The Servicer shall immediately notify a Responsible Officer of the
Indenture Trustee in writing of any Servicer Default.
Section 7.2. Indenture Trustee to Act; Appointment of Successor. (a) On and
after the receipt by the Servicer of a Termination Notice pursuant to Section
7.1, the Servicer shall continue to perform all servicing functions under this
Agreement until the date specified in the Termination Notice or otherwise
specified by the Indenture Trustee in writing or, if no such date is specified
in such Termination Notice, or otherwise specified by the Indenture Trustee,
until a date mutually agreed upon by the Servicer and Indenture Trustee. The
Indenture Trustee shall as promptly as possible after the giving of a
Termination Notice appoint a successor servicer (the "Successor Servicer"), and
such Successor Servicer shall accept its appointment by a written assumption in
a form acceptable to the Indenture Trustee and the Transferor. The Transferor
shall have the right to nominate to the Indenture Trustee the name of a
potential successor servicer which nominee shall be selected by the Indenture
Trustee as the Successor Servicer. The Indenture Trustee may obtain bids from
any potential successor servicer. If the Indenture Trustee is unable to obtain
any bids from any potential successor servicer, the Indenture Trustee has not
appointed the Transferor's nominee and the Servicer delivers to the Indenture
Trustee an Officer's Certificate to the effect that it cannot in good faith cure
the Servicer Default which gave rise to a transfer of servicing, then the
Indenture Trustee shall notify each Enhancement Provider that a sale of the
Receivables is proposed and shall provide each Enhancement Provider an
opportunity to bid on the Receivables and shall offer the Transferor the right
of first refusal to purchase the Receivables on terms equivalent to the best
purchase offer as determined by the Indenture Trustee, but in no event less than
an amount equal to the Aggregate Invested Amount (less the
42
aggregate principal amount on deposit in the Excess Funding Account and any
principal funding account with respect to any Series) on the date of such
purchase plus all accrued but unpaid interest on the Notes of all Series at the
applicable Note Interest Rates through the end of the applicable interest
accrual periods of such Series plus any other unpaid amounts required to be paid
pursuant to this Section 7.2 under any Indenture Supplement; provided, however,
that, if the Transferor shall not have a rating of P-3 or Baa3 or higher by
Moody's and BBB- or higher by Standard & Poor's, no such reassignment shall
occur unless the Transferor shall deliver to the Indenture Trustee and the
Rating Agencies an Opinion of Counsel reasonably acceptable to the Indenture
Trustee that such reassignment would not constitute a fraudulent conveyance. In
the event that a Successor Servicer has not been appointed and has not accepted
its appointment at the time when the Servicer ceases to act as Servicer, the
Indenture Trustee (as trustee hereunder) without further action shall
automatically be appointed the Successor Servicer. Notwithstanding the above,
the Indenture Trustee shall, if it is legally unable so to act, petition a court
of competent jurisdiction to appoint any established financial institution
having a net worth of not less than $50,000,000 and whose regular business
includes the servicing of charge card or revolving credit receivables as the
Successor Servicer hereunder. Notwithstanding anything to the contrary in this
Agreement, the entire amount of the reassignment deposit amount shall be
distributed to the Noteholders of the related Series on the subsequent
Distribution Date for such Series pursuant to the related Indenture Supplement
(except for amounts payable to any Enhancement Provider under the applicable
Enhancement Agreement, which amounts shall be distributed to such Enhancement
Provider.)
(b) Upon its appointment, the Successor Servicer shall be the successor in
all respects to the Servicer with respect to servicing functions under this
Agreement and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Servicer by the terms and provisions
hereof, and all references in this Agreement to the Servicer shall be deemed to
refer to the Successor Servicer; provided, however, that the outgoing Servicer
shall not be relieved of any liability hereunder for its actions prior to the
transfer of servicing hereunder; and, provided further, that (i) the outgoing
Servicer shall not indemnify the Issuer, the Owner Trustee or the Indenture
Trustee under Section 5.4 for acts, omissions or alleged acts or omissions by a
Successor Servicer and (ii) the outgoing Servicer shall not pay or reimburse the
Indenture Trustee pursuant to any Transaction Document for any expense,
disbursement or advance of the Indenture Trustee related to or arising as a
result of the negligence or bad faith of the Successor Servicer. Any Successor
Servicer, by its acceptance of its appointment, will automatically agree to be
bound by the terms and provisions of any applicable Enhancement agreement.
(c) In connection with such appointment and assumption, the Indenture
Trustee shall be entitled to such compensation, or may make such arrangements
for the compensation of the Successor Servicer out of Collections, as it and
such Successor Servicer shall agree; provided, however, that no such
43
compensation shall be in excess of the Monthly Servicing Fee permitted to the
Servicer pursuant to Section 3.2.
(d) All authority and power granted to the Successor Servicer under this
Agreement shall automatically cease and terminate upon termination of the Issuer
pursuant to the Trust Agreement and shall pass to and be vested in the
Transferor and, without limitation, the Transferor is hereby authorized and
empowered to execute and deliver, on behalf of the Successor Servicer, as
attorney-in-fact or otherwise, all documents and other instruments, and to do
and accomplish all other acts or things necessary or appropriate to effect the
purposes of such transfer of servicing rights. The Successor Servicer agrees to
cooperate with the Transferor in effecting the termination of the
responsibilities and rights of the Successor Servicer to conduct servicing on
the Receivables. The Successor Servicer shall transfer its electronic records
relating to the Receivables to the Transferor in such electronic form as the
Transferor may reasonably request and shall transfer all other records,
correspondence and documents to the Transferor in the manner and at such times
as the Transferor shall reasonably request. To the extent that compliance with
this Section 7.2 shall require the Successor Servicer to disclose to the
Transferor information of any kind which the Successor Servicer deems to be
confidential, the Transferor shall be required to enter into such customary
licensing and confidentiality agreements as the Successor Servicer shall deem
necessary to protect its interests.
Section 7.3. Notification to Noteholders. Upon the occurrence of any
Servicer Default, the Servicer shall give prompt written notice thereof to the
Indenture Trustee, the Rating Agencies and any Enhancement Provider, and the
Indenture Trustee shall give notice to the Noteholders at their respective
addresses appearing in the Note Register. Upon any termination or appointment of
a Successor Servicer pursuant to this Article VII, the Indenture Trustee shall
give prompt written notice thereof to the Noteholders at their respective
addresses appearing in the Note Register, the Rating Agencies and to any
Enhancement Provider.
Section 7.4 Waiver of Past Defaults. The Holders of Notes aggregating more
than 66-2/3% of the Invested Amount of any Series then outstanding affected by
any default by the Servicer or the Transferor may, on behalf of all Holders of
Notes of such affected Series, waive any default by the Servicer or the
Transferor in the performance of their respective obligations hereunder and its
consequences, except a default resulting from the failure to make any required
deposits or payments of interest or principal with respect to any Series. Upon
any such waiver of a past default, such default shall cease to exist, and any
default arising therefrom shall be deemed to have been remedied for every
purpose of this Agreement. No such waiver shall extend to any subsequent or
other default or impair any right consequent thereon except to the extent
expressly so waived.
44
ARTICLE VIII
TERMINATION
Section 8.1. Termination of Agreement. This Agreement and the respective
obligations and responsibilities of the Issuer, the Transferor and the Servicer
under this Agreement shall terminate, except with respect to the duties
described in Section 5.4, on the Trust Termination Date.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1. Amendment; Waiver of Past Defaults.
(a) This Agreement may be amended from time to time by the Servicer, the
Transferor and the Issuer, without the consent of any of the Noteholders, to
cure any ambiguity, to correct or supplement any provisions herein which may be
inconsistent with any other provisions herein, to add one or more new
identifying code numbers to the definition of Creation Date or the first
paragraph of Section 2.6(d) or to add any other provisions with respect to
matters or questions raised under this Agreement which shall not be inconsistent
with the provisions of this Agreement, including any matters arising under
Section 2.5(d) necessary to effect the conveyance contemplated thereunder;
provided, however, that such action shall not adversely affect in any material
respect the interests of any of the Noteholders; and, provided further, that an
amendment pursuant to this Section 9.1(a) shall not effect a significant change
in the Permitted Activities of the Issuer. Prior to executing any amendment in
accordance with this Section 9.1(a), the Indenture Trustee and the Owner Trustee
shall receive and shall be permitted to rely upon an Opinion of Counsel to the
effect that the conditions and requirements of this Section 9.1(a) have been
satisfied (without implying that such a rating confirmation is required to be
obtained, such Opinion of Counsel may rely as to any rated Series solely on a
rating confirmation from the Rating Agencies that such amendment shall not cause
a reduction or withdrawal of the rating of any outstanding Series of Notes). The
Transferor shall deliver prior written notice of any amendment pursuant to this
Section 9.1(a) to each Rating Agency.
(b) This Agreement may also be amended from time to time by the Servicer,
the Transferor and the Issuer, without the consent of any of the Noteholders,
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or modifying in any manner
the rights of the Noteholders of any Series then issued and outstanding;
provided, however, that (i) the Servicer shall have provided an Opinion of
Counsel to the Indenture Trustee to the effect that such amendment will not
materially and adversely affect the interests of the Noteholders of any
outstanding Series, which Opinion of Counsel may rely as to any rated Series
45
solely on the rating confirmation referred to in clause (iii) below (or 100% of
the Class of Noteholders so affected shall have consented), (ii) such amendment
shall not, as evidenced by an Opinion of Counsel, cause any outstanding Series
as to which an opinion that it was debt was given on its Closing Date to fail to
qualify as debt for Federal income tax purposes, cause the Issuer to be
characterized for Federal income tax purposes as an association taxable as a
corporation or otherwise have any material adverse impact on the Federal income
tax characterization of any outstanding Series of Notes or the Federal income
taxation of any Noteholder or any Note Owner and (iii) the Rating Agency
Condition shall have been satisfied; and, provided further, that such amendment
shall not effect a significant change in the Permitted Activities of the Issuer
or reduce in any manner the amount of, or delay the timing of, or change the
priority of, distributions which are required to be made on any Note of such
Series without the consent of the related Noteholder or change the definition of
or the manner of calculating the interest of any Note of such Series without the
consent of the related Noteholder or reduce the required percentage for consents
to amendments pursuant to Section 9.1(c) without the consent of each affected
Noteholder.
(c) This Agreement may also be amended from time to time by the Servicer,
the Transferor and the Issuer, with the consent of the Holders of Notes
aggregating not less than 66-2/3% of the Invested Amount of all Series adversely
affected, for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Agreement or modifying in any
manner the rights of the Noteholders of any Series then issued and outstanding;
provided, however, that no such amendment shall (i) reduce in any manner the
amount of, or delay the timing of, distributions which are required to be made
on any Note of such Series without the consent of the related Noteholders, (ii)
change the definition of or the manner of calculating the Invested Amount, the
Invested Percentage, the applicable available amount under any Enhancement or
the Investor Default Amount of such Series without the consent of the related
Noteholders or (iii) reduce the aforesaid percentage required to consent to any
such amendment, without the consent of the related Noteholders. Any amendment
pursuant to this Section 9.1(c) shall require that each Rating Agency rating the
affected Series confirm that such amendment will not cause a reduction or
withdrawal of the rating of any outstanding Series of Notes.
(d) Promptly after the execution of any such amendment other than an
amendment pursuant to Section 9.1(a), the Issuer shall furnish written
notification (or in the case of Bearer Notes, publication notice in the manner
described in the related Indenture Supplement) of the substance of such
amendment to each Noteholder, and the Servicer shall furnish written
notification of the substance of such amendment to any related Enhancement
Provider and each Rating Agency.
(e) It shall not be necessary for the consent of Noteholders under this
Section 9.1 to approve the particular form of any proposed amendment, but it
shall be sufficient if such Noteholders shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
46
execution thereof by Noteholders shall be subject to such reasonable
requirements as the Trustee may prescribe.
(f) Any Assignment or Reassignment regarding the addition to or removal of
Receivables from the Issuer respectively, as provided in Sections 2.6 and 2.7,
respectively, executed in accordance with the provisions hereof shall not be
considered amendments to this Agreement, including, without limitation, for the
purpose of Sections 9.1(a), (b), (c) and (g).
(g) Prior to the execution of any amendment to this Agreement, the
Indenture Trustee shall be entitled to receive and rely upon an Opinion of
Counsel substantially in the form of Exhibit F-2. The Indenture Trustee may, but
shall not be obligated to, enter into any such amendment which affects the
Indenture Trustee's own rights, duties or immunities under this Agreement or
otherwise.
(h) Notwithstanding anything in this Section 9.1 to the contrary, this
Agreement shall not be amended to replace DC Funding as Transferor or to add any
Person as Transferor unless the Rating Agency Condition shall have been
satisfied.
Section 9.2. Protection of Right, Title and Interest to Issuer.
(a) The Servicer shall cause this Agreement, all amendments hereto and/or
all financing statements, amendments and continuation statements and any other
necessary documents covering the right, title and interest of the Issuer in the
property conveyed hereunder to be promptly recorded, registered and filed, and
at all times to be kept recorded, registered and filed, all in such manner and
in such places as may be required by law fully to preserve and protect the
right, title and interest of the Issuer and the Indenture Trustee hereunder to
the Trust Assets and to maintain the perfection and priority of the security
interest of the Issuer and the Indenture Trustee in the Receivables and the
proceeds thereof. The Servicer shall deliver to the Issuer and the Indenture
Trustee file-stamped copies of, or filing receipts for, any document recorded,
registered or filed as provided above, as soon as available following such
recording, registration or filing. The Transferor shall cooperate fully with the
Servicer in connection with the obligations set forth above and will execute any
and all documents reasonably required to fulfill the intent of this Section 9.2.
(b) The Transferor shall not change its name, identity, organizational
structure or jurisdiction of organization unless it has first (i) made all
filings in all relevant jurisdictions under the UCC and other applicable law as
are necessary to continue and maintain the first-priority perfected ownership or
security interest of the Issuer and the Indenture Trustee in the Receivables and
the other property conveyed to the Issuer and the Indenture Trustee hereunder
and (ii) delivered to the Servicer, the Issuer, the Indenture Trustee and each
Rating Agency an Opinion of Counsel to the effect that all necessary filings
have been made under the UCC in all relevant jurisdictions as are necessary to
continue and maintain the first-
47
priority perfected ownership or security interest of the Issuer and the
Indenture Trustee in the Receivables conveyed to the Issuer hereunder and the
proceeds thereof.
(c) The Servicer will at all times maintain each office from which it
services Receivables within the United States.
(d) The Transferor will deliver to the Issuer, the Indenture Trustee and
each Rating Agency: (i) upon each date on and after the Certificate Trust
Termination Date that any Additional Accounts are to be included in the Accounts
pursuant to Section 2.6 (other than Section 2.6(d)), an Opinion of Counsel
substantially in the form of Exhibit F-2; and (ii) on or before the first June
30th of each year falling after the Certificate Trust Termination Date, an
Opinion of Counsel, dated as of a date within 90 days of such day, substantially
in the form of Exhibit F-3.
Section 9.3. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW), AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
Section 9.4. Notices. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if sent by
facsimile transmission to, sent by courier to or mailed by registered mail,
return receipt requested, to (a) in the case of the Transferor, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇ 11, Bermuda, telecopy number (▇▇▇) ▇▇▇-▇▇▇▇,
telephone number (▇▇▇) ▇▇▇-▇▇▇▇, (b) in the case of the Servicer, ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief Financial Officer, telecopy
number (▇▇▇) ▇▇▇-▇▇▇▇, telephone number (▇▇▇) ▇▇▇-▇▇▇▇, (c) in the case of the
Issuer, care of the Owner Trustee, (d) in the case of the Owner Trustee, ▇▇▇▇▇▇
Square North, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
Corporate Trust Administration, telecopy number (▇▇▇) ▇▇▇-▇▇▇▇, telephone number
[______], (e) in the case of the Indenture Trustee, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: [______], telecopy number [______],
telephone number [______], and (f) as to such other parties to which notices
hereunder are required to be given pursuant to the terms of any Indenture
Supplement, the addresses specified in any Indenture Supplement or, as to each
party, such other address as shall be designated by such party in a written
notice to each other party. Any notice required or permitted to be mailed to a
Noteholder shall be given by first class mail, postage prepaid, at the address
of such Noteholder as shown in the Note Register. Any notice so mailed within
the time prescribed in this Agreement shall be conclusively presumed to have
been duly given, whether or not the Noteholder receives such notice.
48
Copies of all notices, reports, certificates and amendments required to be
delivered to the Rating Agencies hereunder shall be mailed as follows: ▇▇▇▇▇'▇
Investors Service, Inc., ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention:
ABS Monitoring Department; Standard & Poor's, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, Attention: Asset Backed Surveillance Department; and Fitch, Inc.,
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Asset Backed
Surveillance.
Section 9.5. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Notes or
rights of the Noteholders thereof.
Section 9.6. Assignment. Notwithstanding anything to the contrary contained
herein, except as provided in Sections 4.2, 5.2 and 5.5, this Agreement may not
be assigned by the Transferor or the Servicer, as the case may be, without the
prior consent of Holders of Notes aggregating more than 66-2/3% of the Aggregate
Invested Amount. The Transferor or the Servicer, as applicable, shall deliver to
each Rating Agency prior written notice of any such assignment.
Section 9.7. Further Assurances. The Transferor and the Servicer agree to
do and perform, from time to time, any and all acts and to execute any and all
further instruments required or reasonably requested by the Indenture Trustee
more fully to effect the purposes of this Agreement including, without
limitation, the authorization of any financing statements or continuation
statements relating to the property of the Issuer for filing under the
provisions of the UCC as in effect in the Relevant UCC State.
Section 9.8. No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Transferor, the Servicer, the Indenture
Trustee or the Noteholders, any right, remedy, power or privilege hereunder,
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exhaustive of any rights, remedies, powers and privileges provided by law.
Section 9.9. Counterparts. This Agreement may be executed in two or more
counterparts (and by different parties on separate counterparts), each of which
shall be an original, but all of which together shall constitute one and the
same instrument.
49
Section 9.10. Third-Party Beneficiaries. This Agreement will inure to the
benefit of and be binding upon the parties hereto, the Noteholders and the Note
Owners and their respective successors and permitted assigns. Except as
otherwise provided in this Agreement, no other person will have any right or
obligation hereunder.
Section 9.11. Actions by Noteholders. (a) Wherever in this Agreement a
provision is made that an action may be taken or a notice, demand or instruction
given by Noteholders, such action, notice or instruction may be taken or given
by any Noteholder of any Series, unless such provision requires a specific
percentage of Noteholders of a certain Series or all Series.
(b) Any request, demand, authorization, direction, notice, consent, waiver
or other act by a Noteholder shall bind such Noteholder and every subsequent
holder of such Note issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof in respect of anything done or omitted to
be done by the Indenture Trustee or the Servicer in reliance thereon, whether or
not notation of such action is made upon such Note.
Section 9.12. Merger and Integration. Except as specifically stated
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived or supplemented except as provided herein.
Section 9.13. Headings. The headings herein are for purposes of reference
only and shall not otherwise affect the meaning or interpretation of any
provision hereof.
Section 9.14. Nonpetition Covenant. (a) To the fullest extent permitted by
applicable law, notwithstanding any prior termination of this Agreement, the
Transferor, the Servicer, the Indenture Trustee (in its capacity as Indenture
Trustee hereunder and not in its individual capacity) and the Owner Trustee (in
its capacity as Owner Trustee hereunder and not in its individual capacity)
shall not, prior to the date which is one year and one day after the termination
of this Agreement with respect to the Issuer, acquiesce, petition or otherwise
invoke or cause the Issuer to invoke the process of any Governmental Authority
for the purpose of commencing or sustaining a case against the Issuer under any
Federal or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Issuer or any substantial part of its property or ordering the winding-up
or liquidation of the affairs of the Issuer.
(b) To the fullest extent permitted by applicable law, notwithstanding any
prior termination of this Agreement, the Issuer, the Servicer, the Indenture
Trustee (in its capacity as Indenture Trustee hereunder and not in its
individual capacity) and the Owner Trustee (in its capacity as Owner Trustee
hereunder and not in its individual capacity) shall not, prior to the date which
is one year and one
50
day after the termination of this Agreement with respect to the Transferor,
acquiesce, petition or otherwise invoke or cause the Transferor to invoke the
process of any Governmental Authority for the purpose of commencing or
sustaining a case against the Transferor under any Federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Transferor or
any substantial part of its property or ordering the winding-up or liquidation
of the affairs of the Transferor.
Section 9.15. Limitation of Liability of Owner Trustee. It is expressly
understood and agreed by the parties hereto that (a) this Agreement is executed
and delivered by Wilmington Trust Company, not individually or personally but
solely as Owner Trustee of the Trust, in the exercise of the powers and
authority conferred and vested in it under the Trust Agreement, (b) each of the
representations, undertakings and agreements herein made on the part of the
Trust is made and intended not as personal representations, undertakings and
agreements by Wilmington Trust Company, but is made and intended for the purpose
for binding only the Trust, (c) nothing herein contained shall be construed as
creating any liability on Wilmington Trust Company, individually or personally,
to perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties hereto and by any
Person claiming by, through or under the parties hereto and (d) under no
circumstances shall Wilmington Trust Company be personally liable for the breach
or failure of any obligation, representation, warranty or covenant made or
undertaken by the Trust under this Agreement or the other related documents.
51
IN WITNESS WHEREOF, Transferor, the Servicer and the Issuer have caused
this Transfer and Servicing Agreement to be duly executed by their respective
officers as of the day and year first above written.
DC FUNDING INTERNATIONAL, INC.,
as Transferor
By: ____________________________________
Name:
Title:
FIRST NORTH AMERICAN NATIONAL BANK, as
Servicer
By: ____________________________________
Name:
Title:
FNANB CREDIT CARD MASTER NOTE TRUST,
Issuer
By: WILMINGTON TRUST COMPANY,
not in its individual capacity but solely
as Owner Trustee on behalf of the Issuer
By: ____________________________________
Name:
Title:
Acknowledged and Accepted:
JPMORGAN CHASE BANK,
not in its individual capacity but
solely as Indenture Trustee
By: ___________________________________
Name:
Title:
FNANB Credit Card Master Note Trust
Transfer and Servicing Agreement Signature Page