Exhibit 10.11
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TRANSFER AND ADMINISTRATION AGREEMENT
by and among
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VARIABLE FUNDING CAPITAL CORPORATION,
as a Conduit Investor,
FIRST UNION NATIONAL BANK,
as a Committed Investor and as Liquidity Agent
DIRECT MERCHANTS CREDIT CARD BANK, NATIONAL ASSOCIATION
as Transferor,
and
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FIRST UNION SECURITIES, INC.,
as Deal Agent
Dated as of June 15, 2001
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TABLE OF CONTENTS
Page
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Article I Definitions.......................................................................... 1
Section 1.1 Certain Defined Terms.......................................................... 1
Section 1.2 Other Terms.................................................................... 1
Section 1.3 Computation of Time Periods.................................................... 1
Article II Purchase and Settlements............................................................ 2
Section 2.1 Facility....................................................................... 2
Section 2.2 Transfers; Certificates; Eligible Receivables.................................. 2
Section 2.3 Discount....................................................................... 4
Section 2.4 Discount, Fees and Other Costs and Expenses.................................... 4
Section 2.5 Application of Finance Charge Collections...................................... 4
Section 2.6 Application of Principal Collections; Excess Funding Account; Spread Account... 5
Section 2.7 Payment of Fees................................................................ 6
Section 2.8 Protection of Interest of VFCC and the Committed Investors..................... 6
Section 2.9 Deemed Collections; Application of Payments.................................... 7
Section 2.10 Payments and Computations, Etc................................................. 8
Section 2.11 Reports........................................................................ 8
Section 2.12 Collection Account............................................................. 8
Section 2.13 Right of Setoff................................................................ 9
Section 2.14 Sharing of Payments, Etc....................................................... 9
Section 2.15 Broken Funding................................................................. 9
Section 2.16 Illegality..................................................................... 10
Section 2.17 Inability to Determine Eurodollar Rate......................................... 10
Article III Representations and Warranties..................................................... 11
Section 3.1 Representations and Warranties of the Transferor............................... 11
Section 3.2 Reaffirmation of Representations and Warranties by the Transferor.............. 14
Article IV Conditions Precedent................................................................ 14
Section 4.1 Conditions to Effectiveness.................................................... 14
Article V Covenants............................................................................ 16
Section 5.1 Affirmative Covenants.......................................................... 16
Section 5.2 Negative Covenants............................................................. 19
Article VI Administration and Collections...................................................... 21
Section 6.1 Appointment of Collection Agent................................................ 21
Section 6.2 Duties of Collection Agent..................................................... 21
Section 6.3 Rights After Designation of New Collection Agent............................... 23
Section 6.4 Collection Agent Default....................................................... 23
Section 6.5 Indemnities by the Collection Agent............................................ 25
Article VII Termination Events................................................................. 25
Section 7.1 Termination Events............................................................. 25
Section 7.2 Remedies Upon the Occurrence of a Termination Event............................ 27
Section 7.3 Reconveyance Under Certain Circumstances....................................... 27
Article VIII Indemnification; Expenses; Related Matters........................................ 28
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Section 8.1 Indemnities by the Transferor........................................... 28
Section 8.2 Indemnity for Reserves and Expenses..................................... 30
Section 8.3 Indemnity for Taxes..................................................... 31
Section 8.4 Other Costs, Expenses and Related Matters............................... 31
Article IX Miscellaneous................................................................. 32
Section 9.1 Term of Agreement....................................................... 32
Section 9.2 Waivers; Amendments..................................................... 32
Section 9.3 Notices................................................................. 33
Section 9.4 Governing Law; Submission to Jurisdiction; Integration.................. 34
Section 9.5 Severability; Counterparts.............................................. 34
Section 9.6 Successors and Assigns.................................................. 35
Section 9.7 Confidentiality......................................................... 35
Section 9.8 No Bankruptcy Petition Against any Conduit Investor..................... 36
Section 9.9 Limited Recourse........................................................ 36
Section 9.10 Characterization of the Transactions Contemplated by the Agreement...... 37
Section 9.11 Waiver of Setoff........................................................ 37
Section 9.12 Conflict Waiver......................................................... 37
Section 9.13 Liability of Deal Agent................................................. 37
EXHIBITS
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EXHIBIT A Sample Credit Card Agreement
EXHIBIT B List of Accounts
EXHIBIT C [Reserved]
EXHIBIT D [Reserved]
EXHIBIT E Form of Monthly Statement
EXHIBIT F Form of Transfer Certificate
EXHIBIT G List of Actions and Suits
EXHIBIT H Location of Records
EXHIBIT I List of Subsidiaries, Divisions and Tradenames
EXHIBIT J Form of Secretary's Certificate
SCHEDULES
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SCHEDULE A Schedule of Definitions
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TRANSFER AND ADMINISTRATION AGREEMENT
TRANSFER AND ADMINISTRATION AGREEMENT (as amended, supplemented or
otherwise modified and in effect from time to time, this "Agreement"), dated as
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of June 15, 2001, by and among Direct Merchants Credit Card Bank, National
Association, as transferor (in such capacity, the "Transferor") and as
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collection agent (in such capacity, the "Collection Agent"), VARIABLE FUNDING
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CAPITAL CORPORATION, ("VFCC") and FIRST UNION SECURITIES, INC., ("FUSI"), as
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deal agent for the benefit of VFCC and the Committed Investors (in such
capacity, the "Deal Agent").
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PRELIMINARY STATEMENTS
WHEREAS, the Transferor may desire to convey, transfer and assign, from
time to time, undivided percentage interests in certain accounts receivable, and
VFCC may desire to, and the Committed Investors, if requested by VFCC, shall,
accept such conveyance, transfer and assignment of such undivided percentage
interests, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
Article I
Definitions
Section 1.1 Certain Defined Terms.
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Capitalized terms used herein shall have the meanings assigned to such
terms in, or incorporated by reference into, Schedule A attached hereto, which
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Schedule A is incorporated by reference herein.
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Section 1.2 Other Terms.
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All accounting terms not specifically defined herein shall be construed
in accordance with GAAP.
Section 1.3 Computation of Time Periods.
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Unless otherwise stated in this Agreement, in the computation of a
period of time from a specified date to a later specified date, the word "from"
means "from and including", the words "to" and "until" each means "to but
excluding", and the word "within" means "from and excluding a specified date and
to and including a later specified date".
Article II
Purchase and Settlements
Section 2.1 Facility.
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Upon the terms and subject to the conditions set forth herein and in
the other Transaction Documents prior to the Termination Date, (a) the
Transferor may, at its option, convey, transfer and assign to VFCC and to the
Committed Investors and (b) VFCC may, at its option and the Committed Investors
shall (if VFCC shall decline to accept such transfer), accept such conveyance,
transfer and assignment from the Transferor of, without recourse except as
provided herein, undivided percentage ownership interests in Transferred
Receivables, together with Related Security, Collections and Proceeds with
respect thereto, from time to time; provided, however, that no Transfer shall be
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made, or any Investor obligated to accept any Transfer, if on such day, after
giving effect to such Transfer, (i) the funds on deposit in the Spread Account
shall be less than the Required Spread Account Amount, (ii) the Average Net
Yield shall be less than or equal to 4.0%, (iii) the Net Investment exceeds the
Facility Limit or (iv) the Transferor Interest is less than the Required
Transferor Interest. By accepting any conveyance, transfer and assignment
hereunder, neither VFCC, the Deal Agent nor any Committed Investor assumes or
shall have any obligations or liability under any of the Credit Card Agreements,
all of which shall remain the obligations and liabilities of the Transferor.
Section 2.2 Transfers; Certificates; Eligible Receivables.
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(a) Incremental Transfers. Prior to the Termination Date, upon the
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terms and subject to the conditions set forth herein and in the other
Transaction Documents, (i) the Transferor may, at its option from time to time,
convey, transfer and assign to VFCC and to the Committed Investors and (ii) VFCC
may, at its option from time to time, and the Committed Investors shall, accept
such conveyance, transfer and assignment from the Transferor, without recourse
except as provided herein, undivided percentage ownership interests in
Transferred Receivables, together with Related Security, Collections and
Proceeds with respect thereto (each, an "Incremental Transfer") from time to
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time prior to the Termination Date; provided that after giving effect to the
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Transfer Price of any Incremental Transfer, the Net Investment shall not exceed
the Facility Limit; and, provided further, that the representations and
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warranties set forth in Section 3.1 shall be true and correct both immediately
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before and immediately after giving effect to any such Incremental Transfer and
the payment to the Transferor of the Transfer Price related thereto. Prior to
any such Incremental Transfer, the Transferor shall deliver to the Deal Agent,
an Account Schedule in accordance with Section 5.1(e) which shall include all
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Additional Accounts related to any Receivable transferred as of such Transfer
Date.
To effect an Incremental Transfer hereunder, the Transferor shall, by
notice to the Deal Agent given by telecopy, offer to convey, transfer and assign
to VFCC or the Committed Investors undivided percentage ownership interests in
Transferred Receivables and Related Security, Collections and Proceeds with
respect thereto by 12:00 (noon) (New York City time) one (1) Business Day prior
to the proposed date of any Incremental Transfer. Each such notice shall specify
(i) the desired Transfer Price (which shall be at least $1,000,000 or integral
multiples of $100,000 in excess thereof) or, to the extent that the then
available unused portion of
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the Facility Limit is less than such amount, such lesser amount equal to such
available portion of the Facility Limit; and (b) the desired date of such
Incremental Transfer. Each Incremental Transfer shall be subject to the
condition precedent that the Collection Agent shall have delivered to the Deal
Agent, as and when due in accordance with this Agreement, a completed Monthly
Statement prior to the desired date of such Incremental Transfer, together with
such other additional information as the Deal Agent may reasonably request. The
Deal Agent will promptly notify VFCC and the Committed Investors, as applicable,
of the Deal Agent's receipt of any request for an Incremental Transfer to be
made to such Person. At its option, VFCC shall reject any such offer by notice
given to the Transferor and the Deal Agent by electronic mail or telecopy.
Each notice of proposed Transfer shall be irrevocable and binding on
the Transferor, and the Transferor shall indemnify VFCC and the Committed
Investors against any loss or expense incurred by VFCC and the Committed
Investors, either directly or indirectly, as a result of any failure by the
Transferor to complete such Incremental Transfer, including, without limitation,
any loss (including loss of anticipated profits) or expense incurred by VFCC and
the Committed Investors, either directly or indirectly, by reason of the
liquidation or reemployment of funds acquired by VFCC or the Committed Investors
(including, without limitation, funds obtained by issuing Commercial Paper or
promissory notes, obtaining deposits as loans from third parties and
reemployment of funds) for VFCC or the Committed Investors, as applicable to
fund such Incremental Transfer.
On the date of the initial Incremental Transfer, the Transferor shall
deliver to the Deal Agent, as agent for the Investors, the Transfer Certificate
in the form of Exhibit F hereto (the "Transfer Certificate"). The Deal Agent
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shall indicate the amount of the initial Incremental Transfer together with the
date thereof on the grid attached to the Transfer Certificate. The Deal Agent
shall indicate the amount of the Incremental Transfer together with the date
thereof as well as any decrease in the Net Investment on the grid attached to
the Transfer Certificate. The Transfer Certificate shall evidence the
Incremental Transfers. Following each Incremental Transfer, the Deal Agent, on
behalf of VFCC and the Committed Investors, shall deposit to the Transferor's
account at the location indicated in Section 9.3 hereof, in same day funds, an
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amount equal to the Transfer Price for such Incremental Transfer made to VFCC or
the Committed Investors, as applicable.
(b) Reinvestment Transfers. On each Business Day occurring after the
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initial Incremental Transfer hereunder and prior to the Termination Date and
provided no Potential Termination Event has occurred and is continuing, the
Transferor hereby agrees to convey, transfer and assign to the Deal Agent, as
agent for the Investors, undivided percentage ownership interests in additional
Receivables arising under Eligible Accounts specified in the Account Schedule,
together with Related Security, Collections and Proceeds with respect thereto,
such that, after giving effect to such Transfer, (c) the amount of the Net
Investment at the close of business on such Business Day shall be equal to the
amount of the Net Investment at the close of the business on the Business Day
immediately preceding such Business Day plus the cash portion of the Transfer
Price of any Incremental Transfer made on such day, if any, and (d) the
Transferred Interest in each Transferred Receivable, together with Related
Security, Collections and Proceeds with respect thereto, shall be equal to the
Transferred Interest in each other
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Transferred Receivable, together with Related Security, Collections and Proceeds
with respect thereto.
(c) All Transfers. Each Transfer shall constitute a purchase of undivided
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percentage ownership interests in the Transferred Receivables, together with
Related Security, Collections and Proceeds with respect thereto, then existing,
as well as in all Receivables, together with Related Security, Collections and
Proceeds with respect thereto, transferred at any time after the date of such
Transfer.
Section 2.3 Discount.
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At all times hereafter, the Net Investment shall be allocated by the Deal
Agent to a Tranche and each Tranche shall accrue Discount at the applicable
Yield Rate. It is the intent of VFCC to fund Transfers by the issuance of
Commercial Paper. If for any reason VFCC is unable or determines that it is
undesirable to issue Commercial Paper to fund or maintain its investment in the
Transferred Interest, VFCC may fund pursuant to the Liquidity Purchase Agreement
or the Committed Investors shall fund at the Eurodollar Rate, if available, or
at the Base Rate. Nothing herein shall be deemed to constitute a commitment of
VFCC to issue Commercial Paper.
Section 2.4 Discount, Fees and Other Costs and Expenses.
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Notwithstanding the limitations on recourse under this Article II, the
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Transferor shall pay, as and when due in accordance with this Agreement and the
other Transaction Documents, all fees hereunder, Discount, Servicing Fees and
other Aggregate Unpaids that are properly due and payable by it. On each
Distribution Date, the Transferor shall pay to the Deal Agent, on behalf of VFCC
and/or the Committed Investors, as applicable, an amount equal to the accrued
and unpaid Discount for the related Monthly Period; provided that in the event
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of any repayment or prepayment of any portion of the Net Investment, accrued
Discount on the principal amount repaid or prepaid shall be payable on the date
of such repayment or prepayment. Discount shall accrue with respect to the
portion of the Net Investment allocated to such Tranche on each day occurring
during each Monthly Period related thereto.
Nothing in this Agreement or the other Transaction Documents shall limit in
any way the obligations of the Transferor to pay the amounts set forth in this
Section 2.4.
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Section 2.5 Application of Finance Charge Collections.
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On each Distribution Date, the Collection Agent shall cause Finance Charge
Collections of all Transferred Receivables and investment earnings on deposit in
the Collection Account, the Spread Account and the Excess Funding Account, all
to the extent received during the preceding Monthly Period and, to the extent
necessary, funds on deposit in the Spread Account on such Distribution Date, to
be distributed to the following Persons in the following amounts and in the
order set forth below:
(a) First, to the Deal Agent for payment to each Investor, as their
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interests may appear, the accrued and unpaid Discount for the prior
Monthly Period;
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(b) Second, to the Deal Agent for payment of the fees due and payable on
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such Distribution Date pursuant to the Fee Letter;
(c) Third, to the Collection Agent, the accrued and unpaid Servicing Fee
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for the prior Monthly Period;
(d) Fourth, to be applied pursuant to Section 2.6 below as a Principal
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Collection, an amount equal to the aggregate Dollar amount of the Principal
Balance of all Transferred Receivables that become Defaulted Receivables during
the prior Monthly Period;
(e) Fifth, for any Distribution Date on or after the Termination Date, to
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the reduction to zero of the Net Investment;
(f) Sixth, to the Spread Account in an amount equal to the excess, if any
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of Spread Account Required Amount on such Distribution Date over the Spread
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Account Balance on such day;
(g) Seventh, to each Affected Party and each Indemnified Party, any amount
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due and owing to such Person to the extent such amount has not been paid on such
day; and
(h) Eighth, any remaining amount to the Transferor.
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Section 2.6 Application of Principal Collections; Excess Funding Account;
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Spread Account.
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(a) Distributions Prior to Termination Date. On each Business Day prior to
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the occurrence of the Termination Date, the Collection Agent shall cause all
Principal Collections of all Transferred Receivables and funds allocated for
distribution pursuant to Section 2.5 (d) to be applied as follows:
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(i) First, if the Transferor Interest is less than the Required
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Transferor Interest, to the Excess Funding Account in an amount equal to
the excess of the Required Transferor Interest over the Transferor Interest
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(ii) Second, to the Spread Account in an amount equal to the excess,
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if any of Spread Account Required Amount on such day over the Spread
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Account Balance on such day; and
(iii) Third, if the Transferor Interest equals or exceeds the Required
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Transferor Interest both before and after giving effect to such
distribution, to the Transferor.
(b) Distributions On and After Termination Date. On each Distribution Date
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on and after the Termination Date, Principal Collections of all Transferred
Receivables, funds allocated for distribution pursuant to Section 2.5(d) and
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funds on deposit in the Excess Funding Account shall be applied as follows:
(i) First, to the Deal Agent for payment to each Investor as their
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interests may appear, to the reduction to zero of the Net Investment;
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(ii) Second, to the Deal Agent for payment to each Investor as their
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interests may appear, to the payment of all other Aggregate Unpaids to the
extent due and unpaid; and
(iii) Third, all remaining amounts to the Transferor.
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(c) Excess Funding Account. On or before the Effective Date the Collection
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Agent shall establish, and cause to be maintained during the term of this
Agreement, an account in the name of the Transferor, with FUNB entitled "Excess
Funding Account for the benefit of First Union Securities, Inc., as agent for
certain investor parties" (the "Excess Funding Account"). Funds allocated
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pursuant to subsection (a)(ii) above shall be deposited in the Excess Funding
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Account on each day such funds are so allocated. If, on any Business Day prior
to the occurrence of the Termination Date, the Transferor Interest exceeds the
Required Transferor Interest, the Collection Agent shall, upon receipt by the
Deal Agent of written certification from the Collection Agent of such excess,
including a calculation thereof, cause such excess to be distributed to the
Transferor. No such distribution may be made, however, if either, following such
distribution the Transferor Interest would not at least equal the Required
Transferor Interest or the Collection Agent has reason to believe that on the
next Business Day the Transferor Interest would not at least equal the Required
Transferor Interest.
(d) Spread Account. On or before the Effective Date the Collection Agent
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shall establish, and cause to be maintained during the term of this Agreement,
an account in the name of the Transferor with FUNB entitled "Spread Account for
the benefit of First Union Securities, Inc., as agent for certain investor
parties" (the "Spread Account"). Funds allocated pursuant to Section 2.5(f)
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shall be deposited in the Spread Account on each day such funds are so
allocated. Amounts on deposit in the Spread Account shall be distributed in
accordance with the provisions of and to the extent necessary to make the
distributions provided for in Section 2.5. On the Distribution Date following
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the Termination Date, all amounts then on deposit in the Spread Account shall be
applied as specified in Section 2.5.
(e) Investments. Amounts on deposit in the Collection Account, the Excess
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Funding Account and in the Spread Account shall be invested at the written
direction of the Collection Agent in Permitted Investments. Each such Permitted
Investment shall mature on the next Business Day following such investment. All
investment earnings shall be retained in the Collection Account, the Excess
Funding Account or the Spread Account, as applicable and shall be available for
distribution on each Distribution Date in accordance with Section 2.5. All
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investment losses incurred shall be for the account of the Collection Agent.
Section 2.7 Payment of Fees.
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Notwithstanding any limitation on recourse contained in this Agreement, the
Transferor shall pay, as and when due in accordance with the Fee Letter, the
fees specified in the Fee Letter.
Section 2.8 Protection of Interest of VFCC and the Committed Investors.
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(a) The Transferor agrees that it will, from time to time, at its expense,
promptly execute and deliver all instruments and documents and take all actions
as may be necessary or as the Deal Agent may reasonably request in order to
perfect or protect the Transferred Interest or
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to enable the Deal Agent, as agent for the Investors to exercise or enforce any
of its rights hereunder. Without limiting the foregoing, the Transferor will,
upon the request of the Deal Agent, in order to accurately reflect this purchase
and sale transaction, (i) execute and file such financing or continuation
statements or amendments thereto or assignments thereof (as permitted pursuant
to Section 10.6 hereof) as may be requested by the Deal Agent as agent for the
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Investors and (ii) ▇▇▇▇ its master data processing records and other documents
with a legend describing the conveyance of the Transferred Interest to the Deal
Agent as agent for the Investors. The Transferor shall, upon request of the Deal
Agent, obtain such additional search reports as the Deal Agent, as agent for the
Investors, shall request. To the fullest extent permitted by applicable law, the
Deal Agent as agent for the Investors shall be permitted to sign and file
continuation statements and amendments thereto and assignments thereof without
the Transferor's signature. The Transferor shall not change its jurisdiction of
formation, name, identity or corporate structure (within the meaning of Section
9-402(7) of the Relevant UCC), nor relocate its respective chief executive
office or any office where Records are kept unless it shall have: (A) given the
Deal Agent at least ten (10) days' prior notice thereof and (B) prepared at
Transferor's expense and delivered to the Deal Agent all financing statements,
instruments and other documents necessary to preserve and protect the
Transferred Interest or requested by the Deal Agent in connection with such
change or relocation. Any filings under the Relevant UCC or otherwise that are
occasioned by such change in name or location shall be made at the expense of
the Transferor.
(b) The Transferor shall, or shall cause the Collection Agent to, instruct
all Obligors to cause Collections to be deposited directly into the Lock-Box
Account. The Transferor and the Collection Agent shall cause FDR to identify all
Collections remitted to the Lock-Box Account using a unique portfolio
identification number established solely for the identification of Collections
and Proceeds related thereto.
Section 2.9 Deemed Collections; Application of Payments.
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(a) If, on any day, any representation or warranty made herein with
respect to any Transferred Receivable is determined to be incorrect or untrue in
any respect as of the date such representation or warranty was made, the
Transferor shall be deemed to have received on such day a Collection of such
Receivable in full and the Transferor shall, on such day, pay to the Collection
Agent an amount equal to the Outstanding Balance of such Receivable and such
amount shall be allocated and applied by the Collection Agent as a Collection
allocable to the Transferred Interest in accordance with Section 2.5 and 2.6
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hereof, as applicable. The Net Investment shall be reduced by the amount of such
payment actually received by the Deal Agent. Upon receipt by the Deal Agent of
such payment by the Transferor, each of VFCC and the Committed Investors, as the
case may be, shall convey all of its right, title and interest in such
Receivable, the Related Security and all Collections and Proceeds related
thereto not previously paid to the Investors to the Transferor.
(b) Any payment by an Obligor in respect of a Transferred Receivable
shall, except as otherwise specified by such Obligor or otherwise required by
Credit Card Agreement or law and unless otherwise instructed by VFCC, be applied
as a Collection of any Receivable of such Obligor included in the Transferred
Interest (starting with the oldest such Receivable) to the
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extent of any amounts then due and payable thereunder before being applied to
any other receivable or other indebtedness of such Obligor.
Section 2.10 Payments and Computations, Etc.
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All amounts to be paid or deposited by the Transferor or the Collection
Agent hereunder shall be paid or deposited in accordance with the terms hereof
no later than 12:00 (noon) (New York City time) on the day when due in
immediately available funds; if such amounts are payable to VFCC (or any
Committed Investor), they shall be paid or deposited in the Agent's Account,
until otherwise notified by the Deal Agent. On the date of any Incremental
Transfer hereunder, VFCC or the Committed Investors, as applicable, will make
available to the Transferor, in same day funds, the amount of such Incremental
Transfer on such day by remitting such amount to an account of the Transferor
specified in the related notice of Transfer no later than 5:00 pm (New York City
time). The Transferor shall, to the extent permitted by law, pay to the Deal
Agent, for the benefit of VFCC and/or the Committed Investors upon demand,
interest on all amounts not paid or deposited when due hereunder at a rate equal
to 2% per annum plus the Base Rate. All computations of Discount, interest and
all per annum fees hereunder shall be made on the basis of a year of 360 days
(or, in the case of Discount calculated at the Base Rate, a year of 365 or 366
days, as applicable) for the actual number of days (including the first but
excluding the last day) elapsed. Any computations by the Deal Agent of amounts
payable by the Transferor hereunder shall be binding upon the Transferor absent
manifest error.
Section 2.11 Reports.
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The Collection Agent shall prepare and forward to the Deal Agent and the
Transferor (a) on each Distribution Date, a Monthly Statement as of the end of
the last day of the immediately preceding Monthly Period and (b) on any other
Business Day, such other information as the Transferor or Deal Agent may
reasonably request. The Monthly Statement may be delivered in an electronic
format mutually agreed upon by the Collection Agent and the Deal Agent or,
pending such agreement, by facsimile. By delivery of a Monthly Statement, the
Collection Agent shall be deemed to have made a representation and warranty that
the information set forth therein is true and correct in all material respects.
Section 2.12 Collection Account.
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There shall be established on or before the day of the initial Incremental
Transfer hereunder, and maintained, for the benefit of the Deal Agent on behalf
of the Investors, a segregated account (the "Collection Account"), bearing a
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designation clearly indicating that the funds deposited therein are held for the
benefit of VFCC and the Committed Investors. The Collection Agent shall remit
daily to the Collection Account all Collections received with respect to any
Transferred Receivables; provided, however prior to the Termination Date and
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subject to Section 2.6, Principal Collections may be retained by the Transferor.
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Funds on deposit in the Collection Account (other than investment earnings)
shall be invested by the Deal Agent in Permitted Investments that will mature so
that such funds will be available for distribution in accordance with the terms
of Sections 2.5 and 2.6. On the last day of each Monthly Period, all interest
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and earnings (net of losses and investment expenses) on funds on deposit in the
Collection Account shall be retained in the Collection Account and be available
to make any
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payments required to be made hereunder (including Discount) by the Transferor.
On the date on which the Net Investment is zero, all accrued Discount, Servicing
Fees and all other Aggregate Unpaids have been paid in full, any funds remaining
on deposit in the Collection Account shall be paid to the Transferor.
Section 2.13 Right of Setoff.
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Each Investor is hereby authorized (in addition to any other rights it may
have) at any time after the occurrence of the Termination Date, or during the
continuation of a Potential Termination Event, to set-off, appropriate and apply
(without presentment, demand, protest or other notice which are hereby expressly
waived) any deposits and any other indebtedness held or owing by such Investor
to, or for the account of, the Transferor against the amount of the Aggregate
Unpaids owing by the Transferor to such Person (even if contingent or
unmatured).
Section 2.14 Sharing of Payments, Etc.
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If any Investor (for purposes of this Section 2.14 only, being a
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"Recipient") shall obtain any payment (whether voluntary, involuntary, through
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the exercise of any right of setoff, or otherwise) on account of any interest in
the Transferred Interest owned by it in excess of its ratable share of payments
on account of any interest in the Transferred Interest obtained by such Investor
entitled thereto, such Recipient shall forthwith purchase from the other
Investors entitled to a share of such amount participations in the percentage
interests owned by such Persons as shall be necessary to cause such Recipient to
share the excess payment ratably with each such other Person entitled thereto;
provided, however, that if all or any portion of such excess payment is
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thereafter recovered from such Recipient, such purchase from each such other
Person shall be rescinded and each such other Person shall repay to the
Recipient the purchase price paid by such Recipient for such participation to
the extent of such recovery, together with an amount equal to such other
Person's ratable share (according to the proportion of (a) the amount of such
other Person's required payment to (b) the total amount so recovered from the
Recipient) of any interest or other amount paid or payable by the Recipient in
respect of the total amount so recovered.
Section 2.15 Broken Funding.
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The Transferor shall be permitted to prepay all or any portion of the Net
Investment at any time; provided, the Deal Agent shall be provided with written
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notice by 12:00 (noon) (New York City time) at least one (1) Business Day prior
to any such optional prepayment. In the event of the payment of any portion or
all of the Net Investment (including as a result of the occurrence of the
Termination Date or an optional prepayment) then, in any such event, the
Transferor shall compensate the affected Investor or Investors for the loss,
cost and expense attributable to such event. Such loss, cost or expense to any
such Investor shall be determined by such Investor in its sole discretion. Each
such affected Investor shall deliver to the Transferor, a certificate of such
Investor setting forth any amount or amounts that such Investor is entitled to
receive pursuant to this Section 2.15 and shall be conclusive absent manifest
------------
error. The Transferor shall pay each such Investor the amount shown as due on
any such certificate on the date of such payment.
9
Section 2.16 Illegality.
----------
(a) Notwithstanding any other provision herein, if the adoption of any Law
or bank regulatory guideline or any amendment or change in the interpretation of
any existing or future Law or bank regulatory guideline by any Official Body
charged with the administration, interpretation or application thereof, or the
compliance with any directive of any Official Body (in the case of any bank
regulatory guideline, whether or not having the force of Law), shall make it
unlawful for any Committed Investor to acquire or maintain a Eurodollar Tranche
as contemplated by this Agreement, (i) such Committed Investor shall deliver a
certificate to the Transferor (with a copy to the Deal Agent) specifying that
such illegality has occurred, which certificate shall be conclusive absent
manifest error, (ii) the commitment of such Committed Investor hereunder to make
a portion of a Eurodollar Tranche, continue any portion of a Eurodollar Tranche
as such and convert a BR Tranche to a Eurodollar Tranche shall forthwith be
cancelled, and such cancellation shall remain in effect so long as the
circumstance described above exists, and (iii) such Committed Investor's portion
of any Eurodollar Tranche then outstanding shall be converted automatically to a
BR Tranche on the day the Deal Agent receives the certificated of the Committed
Investor referred to in clause (i) above.
----------
If any such conversion of a portion of a Eurodollar Tranche occurs on a day
which is not the last day of the related Monthly Period, the Transferor shall
pay to such Committed Investor such amounts, if any, as may be required to
compensate such Committed Investor. The affected Committed Investor will, if
circumstances subsequently change so that it is no longer unlawful for an
affected Committed Investor to acquire or to maintain a portion of a Eurodollar
Tranche as contemplated hereunder, notify the Transferor and the Deal Agent, and
upon receipt of such notice, the obligations of such Committed Investor to
acquire or maintain its acquisition of portions of Eurodollar Tranches or to
convert its portion of a BR Tranche into portions of Eurodollar Tranches shall
be reinstated.
(b) Each Committed Investor agrees that, upon the occurrence of any event
giving rise to the operation of Section 2.16(a) with respect to such Committed
---------------
Investor, it will, if requested by the Transferor and to the extent permitted by
law or by the relevant Official Body, endeavor in good faith to change the
office at which it books its portions of Eurodollar Tranches hereunder if such
change would make it lawful for such Committed Investor to continue to acquire
or to maintain its acquisition of portions of Eurodollar Tranches hereunder;
provided, however, that such change may be made in such manner that such
-------- -------
Committed Investor, in its sole determination, suffers no unreimbursed cost or
expense or any other disadvantage whatsoever.
Section 2.17 Inability to Determine Eurodollar Rate.
--------------------------------------
If, prior to the first day of any Monthly Period:
(a) the Deal Agent shall have determined (which determination in the
absence of manifest error shall be conclusive and binding upon the Transferor)
that, by reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for such
Monthly Period; or
10
(b) the Deal Agent shall have received notice from the Required Liquidity
Banks that the Eurodollar Rate determined or to be determined for such Monthly
Period will not adequately and fairly reflect the cost to such Committed
Investors (as conclusively certified by such Committed Investors) of purchasing
or maintaining their affected portions of Eurodollar Tranches during such
Monthly Period;
then, in either such event, the Deal Agent shall give telecopy or telephonic
notice thereof (confirmed in writing) to the Transferor and the Committed
Investors. Until such notice has been withdrawn by the Deal Agent, no further
Eurodollar Tranches shall be made.
Article III
Representations and Warranties
Section 3.1 Representations and Warranties of the Transferor.
------------------------------------------------
The Transferor hereby represents and warrants to the Deal Agent, VFCC and
the Committed Investors that:
(a) Existence and Power. The Transferor is a national banking association
-------------------
duly organized, validly existing and in good standing under the laws of the
United States of America and has all corporate power and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business in each jurisdiction in which its business is now conducted. The
Transferor is duly qualified to do business in, and is in good standing in,
every other jurisdiction in which the nature of its business requires it to be
so qualified, except where the failure to be so qualified or in good standing
would not have a Material Adverse Effect.
(b) Corporate and Governmental Authorization; Contravention. The execution,
-------------------------------------------------------
delivery and performance by the Transferor of this Agreement and the other
Transaction Documents to which the Transferor is a party are within the
Transferor's corporate powers, have been duly authorized by all necessary
corporate action, require no action by or in respect of, or filing with, any
Official Body or official thereof (except as contemplated by Section 2.8
-----------
hereof), and do not contravene, or constitute a default under, any provision of
applicable law, rule or regulation or of the Articles of Association or Bylaws
of the Transferor or of any agreement or of any judgment, injunction, order,
writ, decree or other instrument binding upon the Transferor or result in the
creation or imposition of any Adverse Claim on the assets of the Transferor
(except as contemplated by Section 2.8 hereof).
-----------
(c) Binding Effect. Each of this Agreement and the other Transaction
--------------
Documents to which the Transferor is a party constitutes, and the Transfer
Certificate, upon payment of the Transfer Price set forth therein, will
constitute the legal, valid and binding obligation of the Transferor,
enforceable against it in accordance with its terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws affecting the rights of
creditors generally and general equitable principles (whether considered in a
proceeding at law or in equity).
(d) Perfection. Immediately upon each Transfer hereunder, the Transferor
----------
shall be the owner of all of the Transferred Receivables, free and clear of all
Adverse Claims (other than Adverse Claims in favor of the Deal Agent, as agent
for the Investors). On or prior to each
11
Transfer and each recomputation of the Transferred Interest, all financing
statements and other documents required to be recorded or filed in order to
perfect and protect the Transferred Interest against all creditors of, and
purchases from, the Transferor will have been duly filed in each filing office
necessary for such purpose, and all filing fees and taxes, if any, payable in
connection with such filings shall have been paid in full.
(e) Accuracy of Information. All information heretofore furnished by or on
-----------------------
behalf of the Transferor (including, without limitation, the Monthly Statements,
any reports delivered pursuant to Section 2.11 hereof and the Transferor's
------------
financial statements) to VFCC, any Committed Investor or the Deal Agent for
purposes of, or in connection with, this Agreement and the other Transaction
Documents are, and all such information hereafter furnished by or on behalf of
the Transferor to VFCC, any Committed Investor or the Deal Agent will be, true
and correct in all material respects, on the date such information is stated or
certified.
(f) Tax Status. The Transferor has filed all tax returns (Federal, state
----------
and local) required to be filed and has paid or made adequate provision for the
payment of all taxes, assessments and other governmental charges.
(g) Action, Suits. Except as set forth in Exhibit G hereof, there are no
------------- ---------
actions, suits or proceedings pending or, to the knowledge of the Transferor
threatened, against or affecting the Transferor or its properties, in or before
any court, arbitrator or other body, which may, individually or in the
aggregate, have a Material Adverse Effect.
(h) Use of Proceeds. No proceeds of any Transfer will be used by the
---------------
Transferor (i) for a purpose that violates, or would be inconsistent with
Regulation T, U or X promulgated by the Board of Governors of the Federal
Reserve System or (ii) to acquire any security in any transaction which is
subject to Section 13 or 14 of the Securities Exchange Act of 1934, as amended.
(i) Place of Business. The principal place of business and chief executive
-----------------
office of the Transferor are located at its respective address indicated in
Section 9.3 hereof, and the offices where the Transferor keeps all its Records,
-----------
are located at the address(as) described on Exhibit H or such other locations
---------
notified to the Deal Agent in accordance with Section 2.8 hereof in
-----------
jurisdictions where all action required by Section 2.8 hereof has been taken and
-----------
completed.
(j) Good Title. Upon each Transfer and each recomputation of the
----------
Transferred Interest, the Deal Agent, on behalf of VFCC and the Committed
Investors, shall acquire (i) a valid and perfected first priority undivided
percentage ownership interest to the extent of the Transferred Interest or (ii)
a first priority perfected security interest in each Transferred Receivable that
exists on the date of such Transfer and recomputation and in the Related
Security, Collections and Proceeds with respect thereto, in either case free and
clear of any Adverse Claim
(k) Tradenames, Etc. As of the date hereof: (i) the Transferor has only
---------------
the divisions listed on Exhibit I hereto; and (ii) the Transferor has, within
---------
thelast five (5) years, operated only under the tradenames identified in
Exhibit I
---------
hereto, and, within the last five (5) years, has not
12
changed its name, merged with or into or consolidated with any other corporation
or been the subject of any proceeding under the Bankruptcy Code, except as
disclosed in Exhibit I hereto.
---------
(l) Nature of Receivables. Each (i) Receivable (A) represented by the
---------------------
Transferor or the Collection Agent to be an Eligible Receivable (including in
any Monthly Statement or other report delivered pursuant to Section 2.11 hereof)
------------
or (B) included in the calculation of the Net Receivables Balance in fact
satisfies at such time the definition of "Eligible Receivable" and (ii) each
Account related to each Transferred Receivable was selected randomly and without
any intent to disfavor the interests of the Investors from the pool of Accounts
either acquired by the Transferor in the GE Portfolio Acquisition or otherwise
owned or originated by the Transferor.
(m) [Reserved].
(n) Credit and Collection Policy. Since May 29, 2001, there have been no
----------------------------
material changes in the Credit and Collection Policy, other than as permitted
hereunder. Since such date, no material adverse change has occurred in the
overall rate of collection, delinquencies or defaults or in the Net Yield, of
the Receivables.
(o) Collections and Servicing. Since May 29, 2001 there has been no
-------------------------
material adverse change in the ability of the Collection Agent (to the extent it
is the Transferor or any Subsidiary or Affiliate of the Transferor) to service
and collect the Receivables.
(p) No Termination Event. No event has occurred and is continuing and no
--------------------
condition exists which constitutes a Termination Event or a Potential
Termination Event.
(q) Not an Investment Company. The Transferor is not, and is not
-------------------------
controlled by, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or is exempt from all provisions of such Act.
(r) ERISA. Each of the Transferor and its ERISA Affiliates is in
-----
compliance in all material respects with ERISA, the Pension Benefit Guaranty
Corporation has not notified any of them of any intention to file a lien or take
any adverse action with respect to any of them and no lien exists in favor of
the Pension Benefit Guaranty Corporation with respect to any of their respective
assets.
(s) Deposits to the Lock-Box Account. FDR has been instructed to identify
--------------------------------
all Collections remitted to the Lock-Box Account using a unique portfolio
identification number established solely for the identification of Collections
and Proceeds related thereto. All Obligors have been instructed to make payment
to the Lock-Box Account.
(v) Bulk Sales. No transaction contemplated hereby requires compliance
----------
with any "bulk sales" act or similar law.
(w) Bank Agreement. None of the Accounts related to any Transferred
--------------
Receivable was at any time subject to any transfer by the Transferor to Metris
under the Bank Agreement and the Transferor has designated as an Excluded
Account, each Account and the Receivables related thereto constituting a
Transferred Receivable by indicating in the appropriate computer files a code
which identifies each such Account and each such Account is an Excluded Account.
13
Section 3.2 Reaffirmation of Representations and Warranties by the
------------------------------------------------------
Transferor.
----------
On each day that a Transfer is made hereunder, the Transferor, by accepting
the proceeds of such Transfer, whether delivered to the Transferor pursuant to
Section 2.2(a) or Section 2.5 hereof, shall be deemed to have certified that all
-------------- -----------
representations and warranties described in Section 3.1 hereof are true and
-----------
correct on and as of such day as though made on and as of such day.
Article IV
Conditions Precedent
Section 4.1 Conditions to Effectiveness.
---------------------------
This Agreement shall become effective on the first day on which the Deal
Agent shall have received the following documents, instruments and fees, all of
which shall be in a form and substance reasonably acceptable to the Deal Agent,
VFCC and the Committed Investors (such day, the "Effective Date"):
--------------
(a) A Certificate of the Secretary of the Transferor in substantially the
form of Exhibit J hereto certifying (i) the names and signatures of the officers
---------
and employees authorized on its behalf to execute this Agreement and any other
documents to be delivered by it hereunder (on which Certificate the Deal Agent,
VFCC and the Committed Investors may conclusively rely until such time as the
Deal Agent shall receive from the Transferor a revised Certificate meeting the
requirements of this clause (a)(i)), (ii) a copy of the Transferor's By-Laws,
--------------
(iii) copy of a certificate dated not later than 40 days prior to the date
hereof of the Comptroller of the Currency certifying that the Transferor is a
national banking association formed under the laws of the United States and is
authorized thereunder to transact the business of banking as of the date of the
certificate, and (iv) a copy of resolutions of the Board of Directors of the
Transferor approving this transaction.
(b) A true and correct copy of the duly executed Bank Agreement and all
amendments thereto.
(c) Opinions of counsel to the Transferor with respect to corporate
matters, enforceability and related matters, insolvency matters and such other
matters as the Deal Agent may request, in form and substance satisfactory to the
Deal Agent and delivered by outside counsel (or, with respect to corporate
matters, by internal counsel) satisfactory to the Deal Agent.
(d) An executed copy of this Agreement and each other Transaction
Document.
(e) Evidence that the fees specified in the Fee Letter for payment on or
prior to the Effective Date have been paid to the Deal Agent.
(f) Such other documents, instruments, certificates and opinions as the
Deal Agent shall reasonably request.
14
Section 4.2 Conditions to Incremental Transfers.
-----------------------------------
(a) No Investor shall be required to accept the initial Incremental
Transfer hereunder prior to the Deal Agent's receipt of:
(i) A copy of the Intercreditor Agreement, duly executed by the
parties thereto in form and substance acceptable to the Deal Agent.
(ii) A copy of the notice to Metris by the Transferor, signed by
Metris, designating certain Accounts, including those Accounts under which
Transferred Receivables arise, as Excluded Accounts, in form and substance
acceptable to the Deal Agent.
(iii) An opinion of counsel to the Transferor with respect to the
perfection and priority of the interests in the Receivables, the Related
Security and the Collections related thereto granted hereunder by the
Transferor to the Deal Agent, as agent for the Investors.
(iv) An Account Schedule listing all of the Accounts related to
each Receivable in which the Transferor transfers an interest to the Deal
Agent, as agent for the Investors.
(v) File stamped copies of proper financing statements (Form
UCC-1) naming the Transferor as the debtor and the Deal Agent, as agent for
the Investors, as secured party, and other similar instruments or documents
as may be necessary or, in the reasonable opinion of the Deal Agent,
desirable under the Relevant UCC of all appropriate jurisdictions or any
comparable law to perfect the Deal Agent's security interest in all
Transferred Receivables, Related Security, Collections and Proceeds related
thereto.
(vi) Copies of proper financing statements (Form UCC-3), necessary
to terminate all security interests and other rights of any person in the
Transferred Receivables.
(vii) Certified copies of requests for information or copies (Form
UCC-11) (or a similar search report certified by parties acceptable to the
Deal Agent), dated a date reasonably near the initial Transfer, listing all
effective financing statements which name the Transferor (under its present
name and any previous names) as debtor and which are filed in jurisdictions
in which the filings were made pursuant to items (v) or (vi) above together
--------- ----
with copies of such financing statements (none of which shall cover any
Transferred Receivables or the related Accounts).
(viii) Such other documents, instruments, certificates and opinions
as the Deal Agent shall reasonably request.
15
(b) No Investor shall be required to accept an Incremental Transfer
hereunder prior to the Deal Agent's receipt of:
(i) An Account Schedule as of such Transfer Date; and
(ii) A copy of a notice to Metris by the Transferor, signed by
Metris, designating all Additional Accounts as Excluded Accounts, to the
extent any such Additional Account was not previously identified as an
Excluded Account, in form and substance acceptable to the Deal Agent.
Article V
Covenants
Section 5.1 Affirmative Covenants.
---------------------
At all times from the date hereof to the later to occur of (a) the
Termination Date or (b) the date on which the Net Investment has been reduced to
zero, all accrued Discount, Servicing Fees and all other Aggregate Unpaids shall
have been paid in full, in cash:
(a) Reporting. The Transferor will maintain a system of accounting
---------
established and administered in accordance with GAAP and will furnish to the
Deal Agent:
(i) Annual Reporting. Within ninety (90) days after the close of
----------------
each of the Transferor's fiscal years, audited annual financial statements
prepared in accordance with GAAP on a consolidated basis for the
Transferor, including balance sheets as of the end of such period, related
statements of operations, shareholder's equity and cash flows, accompanied
by an unqualified audit report certified by KPMG or other independent
certified public accountants, acceptable to the Deal Agent, prepared in
accordance with generally accepted auditing standards and any management
letter prepared by said accountants and by a certificate of said
accountants that, in the course of their regular audit, such accountants
have not obtained any knowledge of any Termination Event or Potential
Termination Event that has occurred, or if, in the opinion of such
accountants, any Termination Event or Potential Termination Event shall
exist, stating the nature and status thereof.
(ii) Quarterly Reporting. Within forty-five (45) days after the
-------------------
close of the first three (3) quarterly periods of each of the Transferor's
fiscal years, unaudited financial statements for the Transferor, including
related statements of operations, shareholder's equity and cash flows for
the period from the beginning of such fiscal year to the end of such
quarter, all certified by its senior financial officer or treasurer.
(iii) Compliance Certificate. Together with the financial statements
----------------------
required hereunder, a compliance certificate signed by the Transferor's
chief financial officer or treasurer stating that (A) the attached
financial statements have been prepared in accordance with GAAP and
accurately reflect the financial condition (except, in the case of
quarterly financial statements, for year-end audit adjustments) of the
Transferor subject to normal year-end adjusting entries and (B) to the best
of such Person's
16
knowledge, no Termination Event or Potential Termination Event exists, or
if any Termination Event or Potential Termination Event exists, stating the
nature and status thereof.
(iv) Shareholders Statements and Reports. Promptly upon the
-----------------------------------
furnishing thereof to the shareholders of the Transferor or generally to
the shareholders of the Parent, copies of all financial statements, reports
and proxy statements so furnished.
(v) Filings. Promptly upon the filing thereof, copies of all
-------
registration statements and annual, quarterly, monthly or other regular
reports which the Transferor files with the Securities and Exchange
Commission.
(vi) Notice of Collection Agent Default, Potential Collection Agent
---------------------------------------------------------------
Default, Termination Events or Potential Termination Events. Immediately,
-----------------------------------------------------------
but in any event no later than one (1) Business Day after a Responsible
Officer of the Transferor knows of the occurrence of a Collection Agent
Default, Potential Collection Agent Default, Termination Event or a
Potential Termination Event, a statement of the chief financial officer or
chief accounting officer of the Transferor setting forth details of such
Collection Agent Default, Potential Collection Agent Default, Termination
Event or Potential Termination Event and the action which the Transferor
proposes to take with respect thereto.
(vii) [Reserved.]
----------
(viii)Credit and Collection Policy. Within thirty (30) days after the
----------------------------
close of each of the Transferor's fiscal years, a complete copy of the
Credit and Collection Policy then in effect.
(ix) ERISA Reports. Promptly after the filing or receiving thereof,
-------------
copies of all reports and notices which the Transferor or any ERISA
Affiliate of the Transferor files under ERISA with the Internal Revenue
Service, the Pension Benefit Guaranty Corporation or the U.S. Department of
Labor or which the Transferor or any ERISA Affiliates of the Transferor
receives from the Internal Revenue Service, the Pension Benefit Guaranty
Corporation or the U.S. Department of Labor.
(x) Other Information. Such other information (including non-
-----------------
financial information) as the Deal Agent may from time to time reasonably
request with respect to the Transferor or any Subsidiary of any of the
Transferor.
(b) Conduct of Business. Transferor will carry on and conduct its
-------------------
business in substantially the same manner and in substantially the same fields
of enterprise as it is presently conducted and do all things necessary to remain
duly formed, validly existing and in good standing as a national banking
association, domestic corporation or other entity, as such Person is currently
comprised, in its jurisdiction of formation and maintain all requisite authority
to conduct its business in each jurisdiction in which its business is conducted,
except in each case where the failure to do so is not likely to have a Material
Adverse Effect.
17
(c) Compliance with Laws. The Transferor will comply with all laws,
--------------------
rules, regulations, orders, writs, judgments, injunctions, decrees or awards to
which it or its respective properties may be subject, except where the failure
to be in compliance is not likely to have a Material Adverse Effect.
(d) Furnishing of Information and Inspection of Records. The Transferor
---------------------------------------------------
will furnish to the Deal Agent from time to time such information with respect
to the Receivables as the Deal Agent may reasonably request, including, without
limitation, listings identifying the Accounts and the Obligor and the
Outstanding Balance for each Receivable. The Transferor will at any time and
from time to time during regular business hours permit the Deal Agent, or its
agents or representatives, (i) to examine and make copies of and abstracts from
all Records and (ii) to visit the offices and properties of the Transferor, for
the purpose of examining such Records, and to discuss matters relating to the
Receivables or the Transferor's performance hereunder and under the other
Transaction Documents to which such Person is a party with any of the officers,
directors, employees or independent public accountants of the Transferor having
knowledge of such matters.
(e) Keeping of Records and Books of Account. The Transferor will, and
---------------------------------------
will cause each other Person having possession of any Records to, at the
Transferor's expense, on or prior to the date hereof indicate clearly and
unambiguously in its master data processing records and on any storage
containers containing Records that the Receivables created in connection with
the Accounts have been conveyed to the Transferor and transferred to the Deal
Agent, for the benefit of the Investors. The Transferor further agrees to
deliver on each Transfer Date, or cause the Collection Agent to deliver to the
Deal Agent by such date, an Account Schedule. Such Account Schedule shall be
delivered to the Deal Agent as confidential and proprietary, and is hereby
incorporated into and made a part of this Agreement. The Transferor agrees to
deliver or to cause the Collection Agent to deliver to the Deal Agent (i) within
five (5) Business Days of the request therefor by the Deal Agent and in any
event promptly after any conversion of record-keeping and servicing functions
related to the ongoing activity of the Accounts, an updated Account Schedule
containing a true and complete list of all Accounts as of the last day of the
prior Monthly Period and (ii) on each Transfer Date, an updated Account
Schedule, which shall reflect any Additional Accounts, as of such Transfer Date.
Each Account Schedule shall be delivered to the Deal Agent as confidential and
proprietary, shall replace the previously delivered Account Schedule and shall
be incorporated into and made a part of this Agreement. The Collection Agent
agrees, on behalf of the Transferor, at its own expense, on any Transfer Date on
which any Additional Accounts have been added to indicate clearly and
unambiguously in its master data processing records and any storage containers
containing Records that the Receivables created in connection with such
Additional Accounts have been conveyed to the Transferor and transferred to the
Deal Agent, for the benefit of the Investors pursuant to this Agreement.
(f) Performance and Compliance with Credit Card Agreements. The
------------------------------------------------------
Transferor will timely and fully perform and comply with all material
provisions, covenants and other promises required to be observed by the
Transferor under the Credit Card Agreements related to the Receivables.
18
(g) Credit and Collection Policies. Each of the Transferor and the
------------------------------
Collection Agent will comply in all respects with the Credit and Collection
Policy in regard to each Account, each Receivable and the related Credit Card
Agreement.
(h) Collections. Each of the Transferor and the Collection Agent shall
-----------
instruct all Obligors to remit Collections directly to the Lock-Box Account.
(i) Collections Received. The Transferor and the Collection Agent shall
--------------------
hold in trust, and remit immediately (but in any event no later than two (2)
Business Days following its receipt thereof) to the Collection Account all
Collections received from time to time by the Transferor or the Collection
Agent, as the case may be.
(j) Financial Statements. The Transferor shall disclose (in a footnote or
--------------------
otherwise) in all of its respective financial statements (including any such
financial statements consolidated with any other Persons' financial statements)
the existence and nature of the transactions contemplated hereby and the
interest of the Investors in the Receivables and Related Security, Collections
and Proceeds with respect thereto.
(k) Bank Agreement. The Transferor shall designate each Account relating
--------------
to a Transferred Receivable as an Excluded Account in its computer files with a
code identifying each such Account.
Section 5.2 Negative Covenants.
------------------
During the term of this Agreement:
(a) No Sales, Liens, Etc. Except as otherwise provided herein, the
--------------------
Transferor will not sell, assign (by operation of law or otherwise) or otherwise
dispose of, or create or suffer to exist any Adverse Claim upon (or the filing
of any financing statement) or with respect to any of the Accounts related to
any Receivable in which an interest is granted hereunder, any of the
Receivables, Related Security, Collections or Proceeds thereto, or assign any
right to receive income in respect thereof.
(b) No Extension or Amendment of Receivables. Except as otherwise
----------------------------------------
permitted in Section 6.2 hereof, neither the Transferor nor the Collection Agent
-----------
will extend, amend or otherwise modify the terms of any Receivable, or amend,
modify or waive any term or condition of any Credit Card Agreement related
thereto.
(c) No Change in Business or Credit. The Transferor will not make any
-------------------------------
change in the character of its business which change could be reasonably likely
to impair the collectibility of any portion or all of the Receivables or
otherwise result in a Material Adverse Effect.
(d) No Mergers, Etc. The Transferor will not (i) consolidate or merge
---------------
with or into any other Person, or (ii) sell, lease or transfer all or
substantially all of its assets to any other Person (except pursuant to the
Transaction Documents).
(e) Change in Payment Instructions to Obligors; Deposits to the Lock-Box
--------------------------------------------------------------------
Account. The Transferor and the Collection Agent will not terminate the Lock-Box
-------
Account or make any
19
change in its instructions to (i) Obligors regarding payments to be made to the
Lock-Box Account or (ii) FDR regarding the handling of Collections and Proceeds
related thereto remitted to the Lock-Box Account.
(f) Change of Jurisdiction of Formation, Name, Etc. The Transferor will
----------------------------------------------
not change its jurisdiction of formation, name, identity or structure or the
location of its chief executive office, unless at least thirty (30) days prior
to the effective date of any such change the Transferor delivers to the Deal
Agent such documents, instruments or agreements, executed by the Transferor as
are necessary to reflect such change and to continue the perfection of the Deal
Agent's ownership interests or security interests in the Receivables and Related
Security, Collections and Proceeds with respect thereto which reflect such
change and enable the Deal Agent to continue to exercise its rights contained in
Section 2.8 hereof.
-----------
(g) The Transferor will not, without the prior written consent of the
Deal Agent, amend, modify, waive, restate, replace, in whole or in part, any
provision or all of the Bank Agreement that adversely affects either (i) the
ability or extent to which the Transferor may designate Accounts as Excluded
Accounts thereunder or (ii) any Account that has been designated as an Excluded
Account.
(h) The Transferor will not rescind any notification to Metris or
otherwise cause or permit any Account relating to any Transferred Receivable to
become subject to the Bank Agreement.
(i) ERISA Matters. The Transferor will not (i) engage or permit any of
-------------
its respective ERISA Affiliates to engage in any prohibited transaction (as
defined in Section 4975 of the Code and Section 406 of ERISA) for which an
exemption is not available or has not previously been obtained from the U.S.
Department of Labor; (ii) permit to exist any accumulated funding deficiency (as
defined in Section 302(a) of ERISA and Section 412(a) of the Code) with respect
to any Benefit Plan other than a Multiemployer Plan; (iii) fail to make any
payments to any Multiemployer Plan that the Transferor or any ERISA Affiliate of
the Transferor is required to make under the agreement relating to such
Multiemployer Plan or any law pertaining thereto; (iv) terminate any Benefit
Plan so as to result in any material liability (other than obligations or
liabilities existing as of the date of termination of such Benefit Plan); or (v)
permit to exist any occurrence of any reportable event described in Section 4043
of ERISA which represents a material risk of a liability to the Transferor or
any ERISA Affiliate of the Transferor under ERISA or the Code, if such
prohibited transactions, accumulated funding deficiencies, payments,
terminations and reportable events occurring within any fiscal year of the
Transferor involve a payment of money or an incurrence of liability by the
Transferor or any ERISA Affiliate of the Transferor.
(j) No Change in Credit and Collection Policy. The Transferor will not
-----------------------------------------
make any change in the Credit and Collection Policy other than those changes
made in the ordinary course of business and which would not have a Material
Adverse Effect without the prior written consent to the Deal Agent.
20
Article VI
Administration and Collections
Section 6.1 Appointment of Collection Agent.
-------------------------------
The servicing, administering and collection of the Transferred Receivables
shall be conducted by such Person (the "Collection Agent") so designated from
----------------
time to time in accordance with this Section 6.1. Until the Deal Agent gives
------------
written notice to the Transferor of the designation of a new Collection Agent
pursuant to the next sentence, the Transferor is hereby designated as, and
hereby agrees to perform the duties and obligations of, the Collection Agent
pursuant to the terms hereof. The Deal Agent may, and upon the direction of the
Required Liquidity Banks, the Deal Agent shall, after the occurrence and during
the continuation of a Collection Agent Default or any other Termination Event,
designate in writing as Collection Agent any Person (including itself) to
succeed the Transferor or any successor Collection Agent, on the condition in
each case that any such Person so designated shall agree to perform the duties
and obligations of the Collection Agent pursuant to the terms hereof. Following
a Collection Agent Default or a Termination Event, the Deal Agent may notify any
Obligor of the designation of a successor Collection Agent. The Collection Agent
may not delegate any of its rights, duties or obligations hereunder other than
to an Affiliate of the Collection Agent, or designate a substitute Collection
Agent, without the prior written consent of the Deal Agent, which consent may be
withheld for any or no reason. Notwithstanding any delegation or any of its
rights, duties or obligations hereunder or any designation of a substitute
Collection Agent hereunder, so long as the Transferor or any Affiliate of the
Transferor is the Collection Agent, (a) the Transferor shall be and remain
primarily liable to the Deal Agent and the Investors for the full and prompt
performance of all duties and responsibilities of the Collection Agent hereunder
and (b) the Deal Agent and the Investors shall be entitled to deal exclusively
with the Collection Agent in matters relating to the discharge by the Collection
Agent of its duties and responsibilities hereunder. As long as the Transferor or
any Affiliate of the Transferor is the Collection Agent, neither the Deal Agent
nor the Investors shall be required to give notice, demand or other
communication to any Person other than the Transferor in order for communication
to the Collection Agent and any delegate with respect thereto to be
accomplished. The Transferor, at all times that it or any of is Affiliates are
the Collection Agent, shall be responsible for providing any delegates of the
Collection Agent with any notice given to the Collection Agent under this
Agreement.
Section 6.2 Duties of Collection Agent.
--------------------------
(a) The Collection Agent shall take or cause to be taken all such action
as may be necessary or advisable to collect each Transferred Receivable from
time to time, all in accordance with applicable laws, rules and regulations,
with reasonable care and diligence, and in accordance with the Credit and
Collection Policy. Each of the Transferor, each Investor and the Deal Agent
hereby appoints as its agent the Collection Agent, from time to time designated
pursuant to Section 6.1 hereof, to enforce its respective rights and interests
-----------
in and under the Transferred Receivables and Related Security, Collections and
Proceeds with respect thereto. To the extent permitted by applicable law, the
Transferor (to the extent not then acting as Collection Agent hereunder) hereby
grants to any Collection Agent appointed hereunder an irrevocable power of
attorney to take in the Transferor's name and on behalf of the Transferor any
and all
21
steps necessary or desirable, in the reasonable determination of the Collection
Agent, to collect all amounts due under any and all Transferred Receivables,
including, without limitation, endorsing the Transferor's name on checks and
other instruments representing Collections and enforcing such Transferred
Receivables and the related Credit Card Agreements. The Collection Agent shall
segregate and deposit to the Collection Account all Collections of Transferred
Receivables as required pursuant to Article II hereof. The Transferor shall
----------
deliver to the Collection Agent and the Collection Agent shall hold in trust for
the Investors in accordance with their respective interests, all Records which
evidence or relate to Transferred Receivables, Related Security or Collections.
Notwithstanding anything to the contrary contained herein, following a
Termination Event or Potential Termination Event, the Deal Agent shall have the
absolute and unlimited right to direct the Collection Agent (whether the
Collection Agent is the Transferor or any other Person) to commence or settle
any legal action to enforce collection of any Transferred Receivable or to
foreclose upon or repossess any Related Security. The Collection Agent shall not
make the Deal Agent, or any Investor, a party to any litigation without the
prior written consent of such Person.
(b) The Collection Agent shall, as soon as practicable following receipt
thereof, turn over to the Transferor any collections of any indebtedness of any
Person which is not on account of a Transferred Receivable. The Collection
Agent, if other than the Transferor, shall as soon as practicable upon demand,
deliver to the Transferor all Records in its possession which evidence or relate
to indebtedness of an Obligor which is not a Transferred Receivable. The
Collection Agent will determine which Collections constitute Principal
Collections of Transferred Receivables and which Collections constitute Finance
Charge Collections of Transferred Receivables on the day of receipt of such
Collections.
(c) On or before ninety (90) days after the end of each fiscal year of the
Collection Agent, beginning with the fiscal year ending December 31, 2001, the
Collection Agent shall cause a firm of independent public accountants acceptable
to the Deal Agent at the expense of the Transferor (who may also render other
services to the Collection Agent, the Transferor or any Affiliates of the
Transferor) to furnish a report to the Deal Agent to the effect that they have
(i) selected at least three (3) Monthly Statements delivered during the fiscal
year then ended and verified that the amounts presented on such Monthly
Statements relating to collections, delinquencies, Net Yield, Average Net Yield
and write-offs of Transferred Receivables agreed with the information contained
within the Collection Agent's underlying accounting records for such Monthly
Period, (ii) recalculated the Net Receivables Balance as of the end of at least
three (3) Monthly Periods of each fiscal year, and (iii) such other exceptions
as shall be set forth in such statement.
(d) The Collection Agent will furnish to the Deal Agent from time to time
such information with respect to it and the Transferred Receivables as the Deal
Agent may reasonably request. The Collection Agent will, from time to time
during regular business hours as requested by the Deal Agent upon reasonable
notice and at the sole cost of the Collection Agent, permit the Deal Agent, or
its agents or representatives: to examine and make copies of and abstracts from
all Records in the possession or under the control of such Person relating to
the Accounts and the Receivables, including, without limitation, the related
Credit Card Agreements, and (ii) to visit the offices and properties of the
Collection Agent for the purpose of examining such materials described in clause
------
(i) above, and to discuss matters relating to the Collection Agent's
-
22
financial condition, the Accounts, the Receivables and/or the Collection
Agent's performance under the Transaction Documents and, in each case, with any
of the officers or employees of the Transferor or the Collection Agent having
knowledge of such matters (each of the foregoing examinations and visits, a
"Review"); provided, however, that, so long as the Termination Date has not
------ -------- -------
occurred (A) the Collection Agent shall only be responsible for the costs and
expenses of one (1) Review in any one calendar year and (B) the Deal Agent shall
not request more than two (2) Reviews in any one calendar year.
Section 6.3 Rights After Designation of New Collection Agent.
------------------------------------------------
At any time following the designation of a successor Collection Agent
pursuant to Section 6.1 hereof:
-----------
(a) The Deal Agent may, at its option, or shall, at the direction of the
Required Liquidity Banks, direct that payment of all amounts payable under any
Transferred Receivable be made directly to the Deal Agent or its designee for
the benefit of the Investors.
(b) The Transferor shall, at the Deal Agent's request and at the
Transferor's expense, give notice to each Obligor of a Transferred Receivable
and direct that payments be made directly to the Deal Agent or its designee.
(c) The Transferor shall, at the Deal Agent's request, (i) assemble all of
the Records of a Transferred Receivable, and shall make the same available to
the Deal Agent or its designee at a place selected by the Deal Agent or its
designee, and (ii) segregate all cash, checks and other instruments received by
it from time to time constituting Collections of Transferred Receivables in a
manner acceptable to the Deal Agent and shall, promptly upon receipt, remit all
such cash, checks and instruments, duly endorsed or with duly executed
instruments of transfer, to the Deal Agent or its designee.
(d) The Transferor hereby authorizes the Deal Agent to take any and all
steps in the Transferor's name and on behalf of the Transferor necessary or
desirable, in the determination of the Deal Agent, to collect all amounts due
under any and all Transferred Receivables, including, without limitation,
endorsing the Transferor's name on checks and other instruments representing
Collections relating to Transferred Receivables and enforcing such Transferred
Receivables and the related Credit Card Agreements.
Section 6.4 Collection Agent Default.
------------------------
The occurrence of any one or more of the following events shall constitute
a Collection Agent default (each, a "Collection Agent Default"):
-------------------------
(a) (i) the Collection Agent shall fail to observe or perform any term,
covenant or agreement hereunder (other than as referred to in clause (ii) of
-----------
this Section 6.4(a)) or under any of the other Transaction Documents to which
--------------
such Person is a party or by which such Person is bound, and such failure shall
remain unremedied for thirty (30) days, or (i) the Collection Agent shall fail
to make any payment or deposit required to be made by it hereunder and such
failure remains uncured for two (2) Business Days from the due date therefor or
the Collection Agent
23
shall fail to observe or perform in any material respect any term, covenant
or agreement on the Collection Agent's part to be performed under Section 2.8(b)
--------------
hereof;
(c) any representation, warranty, certification or statement made by the
Collection Agent in this Agreement, or in any of the other Transaction Documents
or in any certificate or report delivered by it pursuant to any of the foregoing
shall prove to have been incorrect in any material respect when made or deemed
made;
(d) (i) failure of the Collection Agent to pay any principal of, premium or
interest on, or any other amount payable in respect of, one or more items of
Indebtedness of the Collection Agent that is outstanding (or under which one or
more Persons have a commitment to extend credit) in an aggregate principal
amount of at least $500,000 at the time of such failure, when the same becomes
due and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall continue after the
applicable grace period, if any, specified in the agreements or instruments
relating to all such Indebtedness; or (ii) any other event shall occur or
condition shall exist under the agreements or instruments relating to one or
more items of Indebtedness of the Collection Agent that is outstanding (or under
which one or more Persons have a commitment to extend credit) in an aggregate
principal amount of at least $10,000,000 at the time of such other event or
condition, if the effect of such event or condition is to accelerate, or to
permit the acceleration of, the maturity of such Indebtedness or otherwise to
cause, or to permit the holder thereof to cause, such Indebtedness to mature; or
(iii) one or more items of Indebtedness of the Collection Agent that is
outstanding (or under which one or more Persons have a commitment to extend
credit) in an aggregate principal amount of at least $10,000,000 shall be
declared to be due and payable or required to be prepaid or redeemed (other than
by a regularly scheduled or required prepayment or redemption), purchased or
defeased, or an offer to prepay, redeem, purchase or defease such Indebtedness
shall be required to be made, in each case prior to the stated maturity thereof;
(e) any Event of Bankruptcy shall occur with respect to the Collection
Agent;
(f) the occurrence of any Termination Event; and
24
Section 6.5 Indemnities by the Collection Agent.
-----------------------------------
Without limiting any other rights that the Deal Agent, the Investors or any
Indemnified Party may have hereunder or under applicable law and in
consideration of its appointment as Collection Agent, the Collection Agent
hereby agrees to indemnify each Indemnified Party from and against any and all
Indemnified Amounts arising out of or resulting from (whether directly or
indirectly): (a) the failure of any information provided to the Deal Agent, VFCC
or the Committed Investors by the Collection Agent to be true and correct in all
material respects, (b) the failure of any representation, warranty or statement
made or deemed made by or on behalf of the Collection Agent under or in
connection with this Agreement to have been true and correct in all respects as
of the date made or deemed made, (c) the failure by the Collection Agent to
comply with any applicable law, rule or regulation with respect to any
Transferred Receivable or the related Credit Card Agreement or (d) any failure
of the Collection Agent to perform its covenants, duties or obligations in
accordance with the provisions hereof.
Article VII
Termination Events
Section 7.1 Termination Events.
------------------
The occurrence of any one or more of the following events shall constitute a
Termination Event:
(a) the Transferor or the Collection Agent shall fail to make any payment
or deposit to be made by it hereunder or under any of the Transaction Documents
when due hereunder or thereunder;
(b) any representation, warranty, certification or statement made by the
Transferor in this Agreement, any other Transaction Document to which it is a
party or in any other document delivered pursuant hereto or thereto shall prove
to have been incorrect in any material respect when made or deemed made;
(c) the Transferor or the Collection Agent shall default in the performance
of any covenant or indemnity (other than those covered by clause (a) above)
----------
under any Transaction Document;
(d) (i) failure of the Transferor to pay any principal of, premium or
interest on, or any other amount payable in respect of, one or more items of
Indebtedness of the Transferor that is outstanding (or under which one or more
Persons have a commitment to extend credit) in an aggregate principal amount of
at least $500,000 at the time of such failure, when the same becomes due and
payable (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise), and such failure shall continue after the applicable grace
period, if any, specified in the agreements or instruments relating to all such
Indebtedness; or (ii) any other event shall occur or condition shall exist under
the agreements or instruments relating to one or more items of Indebtedness of
the Transferor that is outstanding (or under which one or more Persons have a
commitment to extend credit) in an aggregate principal amount of at least
$10,000,000 at the time of such other event or condition, if the effect of such
event or condition
25
is to accelerate, or to permit the acceleration of, the maturity of such
Indebtedness or otherwise to cause, or to permit the holder thereof to cause,
such Indebtedness to mature; or (i) one or more items of Indebtedness of the
Transferor that is outstanding (or under which one or more Persons have a
commitment to extend credit) in an aggregate principal amount of at least
$10,000,000 shall be declared to be due and payable or required to be prepaid or
redeemed (other than by a regularly scheduled or required prepayment or
redemption), purchased or defeased, or an offer to prepay, redeem, purchase or
defease such Indebtedness shall be required to be made, in each case prior to
the stated maturity thereof;
(e) any Event of Bankruptcy shall occur with respect to (i) the
Transferor or (ii) any Affiliate of the Transferor, and with respect to any such
Affiliate, such Event of Bankruptcy would have a Material Adverse Effect;
(f) the Deal Agent, as agent for the Investors, fail or cease to have a
valid and perfected first priority ownership or security interest in the
Transferred Receivables and Related Security, Collections and Proceeds with
respect thereto, free and clear of any Adverse Claims;
(g) a Collection Agent Default shall have occurred;
(h) the Commitment Termination Date shall have occurred under the
Liquidity Purchase Agreement;
(i) the Transferor shall enter into any transaction or merger which is
reasonably likely to have a Material Adverse Effect;
(j) a notice of Lien has been filed against the Transferor or the
Collection Agent under Section 412(n) of the Code or Section 302(f) of ERISA for
a failure to make a required installment or other payment to a plan to which
such provisions apply;
(k) the Average Net Yield is less than 2.00%;
(l) on any Determination Date, the Transferor Interest is less than the
Required Transferor Interest;
(m) the Net Investment exceeds the Purchase Limit;
(n) any material adverse change in the operations of the Transferor or
the Collection Agent or any other event, which materially affects the
Transferor's or the Collection Agent's ability to either collect upon the
Transferred Receivables or the Transferor's ability to perform thereunder, which
has a material adverse effect on Investor or Deal Agent;
(o) the Average Payment Rate for any three consecutive Monthly Periods is
less than 5.75%;
(p) the Delinquency Ratio exceeds 12.00%;
(q) the Transferor shall, for any reason, fail to have a valid and
perfected ownership interest in the Transferred Receivables, free and clear of
any Adverse Claims;
26
(r) the Transferor shall cease to be at least "adequately capitalized"
for the purpose of 12 U.S.C. paragraph 1831, as amended, re-enacted or
redesignated from time to time or shall cease to maintain such amount of capital
as may be prescribed from time to time, whether by regulation, agreement or
order by any bank regulatory agency having jurisdiction over the Transferor.
Section 7.2 Remedies Upon the Occurrence of a Termination Event.
---------------------------------------------------
(a) Upon the occurrence of any Termination Event, the Deal Agent may, or
at the direction of the Required Liquidity Banks shall, by notice to the
Transferor and the Collection Agent, declare the Termination Date to have
occurred; provided, however, that in the case of any event described in Section
-------- ------- -------
7.1(e), 7.1(f), 7.1(j) and 7.1(q) above, the Termination Date shall be deemed to
------ ------ ------ ------
have occurred automatically upon the occurrence of such event. At all times
after the declaration or automatic occurrence of the Termination Date pursuant
to this Section 7.2(a), the Deal Agent may, with the consent of the Required
--------------
Liquidity Banks and shall, at the direction of the Required Liquidity Banks,
declare all outstanding Tranches to be ended and designate the Base Rate plus
2.00% as the Tranche Rate applicable to the Net Investment. If an event or
condition shall have occurred which constitutes a Potential Termination Event,
the Deal Agent may, by notice to the Transferor, declare such event or condition
a Potential Termination Event.
(b) In addition, if any Termination Event occurs hereunder, (i) the Deal
Agent, as agent for the Investors, shall have all of the rights and remedies
provided to a secured creditor or a purchaser of accounts under the Relevant UCC
by applicable law in respect thereto and (ii) the Facility Limit shall
immediately be reduced to zero.
Section 7.3 Reconveyance Under Certain Circumstances.
----------------------------------------
The Transferor agrees to accept the reconveyance from the Deal Agent, as
agent for the Investors, of the Transferred Interest if the Deal Agent notifies
the Transferor of a material breach of any representation or warranty made or
deemed made pursuant to Article III of this Agreement, and the Transferor shall
fail to cure or cause to be cured such breach within thirty (30) days (or, in
the case of the representations and warranties in Sections 3.1(d) and 3.1(j),
five (5) Business Days of such notice). The reconveyance price shall be paid by
the Transferor to the Deal Agent, for the account of the Investors, as their
interests may appear, in immediately available funds on such 30th day (or 5th
day, if applicable) in an amount equal to the Aggregate Unpaids. Upon receipt by
the Deal Agent of any repayment in full of the Aggregate Unpaids by the
Transferor, each of VFCC and the Committed Investors, as the case may be, shall
convey all of its right, title and interest in the Transferred Receivable, the
Related Security and all Collections and Proceeds related thereto not previously
paid to the Investors to the Transferor and the Deal Agent will, at the expense
of the Transferor, promptly execute and deliver all instruments and documents
and take all actions as may be necessary or as the Transferor may request in
order to release any Adverse Claim of the Deal Agent thereon or to enable the
Transferor to exercise or enforce any of its rights thereunder.
Upon the receipt of payment in full of the aggregate Dollar amount of any
Transferred Receivable that becomes a Defaulted Receivable in accordance with
Section 2.5(d), such Defaulted Receivable shall be automatically reconveyed to
--------------
the Transferor and each of VFCC and
27
the Committed Investors, as the case may be, shall convey all of its right,
title and interest in such Defaulted Receivable to the Transferor; provided that
--------
all Recoveries shall be applied in reduction of the Aggregate Unpaids to zero,
and thereafter Recoveries may be retained by the Transferor.
Article VIII
Indemnification; Expenses; Related Matters
Section 8.1 Indemnities by the Transferor.
-----------------------------
Without limiting any other rights which the Deal Agent, VFCC or the
Committed Investors may have hereunder or under applicable law, the Transferor
hereby agrees to indemnify VFCC, the Committed Investors and the Deal Agent and
any successors and permitted assigns and their respective officers, directors,
agents and employees (collectively, "Indemnified Parties") from and against any
-------------------
and all damages, losses, claims, liabilities, costs and expenses, including,
without limitation, reasonable attorneys' fees and disbursements (all of the
foregoing being collectively referred to as "Indemnified Amounts") awarded
-------------------
against or incurred by any of them in any action or proceeding arising out of or
as a result of this Agreement, the other Transaction Documents to which the
Transferor is a party, the ownership or maintenance, either directly or
indirectly, by the Deal Agent, VFCC or any Committed Investor of the Transferred
Interest or any of the other transactions contemplated hereby or thereby,
excluding, however, (x) Indemnified Amounts to the extent resulting from gross
negligence or willful misconduct on the part of such Indemnified Party; and (y)
recourse (except as otherwise specifically provided in this Agreement) for
uncollectible Transferred Receivables. Without limiting the generality of the
foregoing, the Transferor shall indemnify each Indemnified Party for Indemnified
Amounts relating to or resulting from:
(a) any representation or warranty made by the Transferor or any officers
of the Transferor under or in connection with this Agreement, any of the other
Transaction Documents to which it is a party, any Monthly Statement or any other
information or report delivered by any of them pursuant hereto or thereto, which
shall have been false or incorrect in any material respect when made or deemed
made;
(b) the failure by the Transferor (including, in its capacity as the
Collection Agent) to comply with any applicable law, rule or regulation with
respect to any Transferred Receivable or the related Credit Card Agreement, or
the nonconformity of any Transferred Receivable or the related Credit Card
Agreement with any such applicable law, rule or regulation;
(c) the failure to (i) vest and maintain vested in the Deal Agent, as
agent for the Investors, an undivided first priority, perfected percentage
ownership interest, to the extent of the Transferred Interest, in the
Transferred Receivables and Related Security, Collections and Proceeds with
respect thereto, free and clear of any Adverse Claim or (ii) to create or
maintain a valid and perfected first priority security interest in favor of the
Deal Agent, as agent for the Investors, in the Transferor's ownership interest
in, and lien on, the Transferred Receivables and Related Security, Collections
and Proceeds with respect thereto, free and clear of any Adverse Claim;
28
(d) the failure to file, or any delay in filing, financing statements,
continuation statements, or other similar instruments or documents under the
Relevant UCC or other applicable laws with respect to any of the Transferred
Receivables or Related Security, Collections and Proceeds with respect thereto;
(e) any dispute, claim, offset or defense (other than financial
inability to pay or discharge in bankruptcy) of the Obligor to the payment of
any Transferred Receivable (including, without limitation, a defense based on
such Receivable or the related Credit Card Agreement not being legal, valid and
binding obligation of such Obligor enforceable against it in accordance with its
terms), or any other claim resulting from the sale of merchandise or services
related to such Receivable or the furnishing or failure to furnish such
merchandise or services;
(f) any failure of the Collection Agent to perform its duties or
obligations in accordance with the provisions hereof;
(g) any failure of the Transferor or the Collection Agent to (i)
instruct FDR with respect to the identification and processing of Transferred
Receivables in accordance with the Transaction Documents or (ii) instruct the
Obligors to remit Collections directly to the Lock-Box Account;
(h) the failure by the Transferor to comply with any term, provision
or covenant contained in this Agreement or any of the other Transaction
Documents to which it is a party;
(i) the Net Investment exceeding the Facility Limit at any time on or
prior to the Termination Date;
(j) any repayment by any Indemnified Party of any amount previously
distributed in reduction of Net Investment which is required to be made;
(k) the commingling of Collections of Receivables at any time;
(l) any investigation, litigation or proceeding related to this
Agreement, any of the other Transaction Documents to which it is a party, the
use of proceeds of Transfers, the ownership of Transferred Interests, or any
Transferred Receivable, Related Security or Credit Card Agreement;
(m) [Reserved.]
(n) any inability to obtain any judgment in or utilize the court or
other adjudication system of, any state in which an Obligor may be located as a
result of the failure to qualify to do business or file any notice of business
activity report or any similar report;
(o) [Reserved.]
(p) any action taken by the Transferor or designee of the Transferor
in the enforcement or collection of any Transferred Receivable.
29
Section 8.2 Indemnity for Reserves and Expenses.
------------------------------------
(a) If after the date hereof, the adoption of any Law or
regulation or any amendment or change in the interpretation of any existing or
future Law or regulation by any Official Body charged with the administration,
interpretation or application thereof, or the compliance with any directive of
any Official Body (in the case of any regulation, whether or not having the
force of Law):
(i) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement (including, without limitation,
any such requirement imposed by the Board of Governors of the Federal
Reserve System) against assets of, deposits with or for the account of,
or credit extended by, any Indemnified Party or shall impose on any
Indemnified Party or on the United States market for certificates of
deposit or the London interbank market any other condition affecting
this Agreement, the other Transaction Documents, the ownership,
maintenance or financing of the Transferred Interest, the Transferred
Receivables or payments of amounts due hereunder or its obligation to
advance funds hereunder or under the other Transaction Documents, the
ownership, maintenance or financing of the Transferred Interest or the
Transferred Receivables; or
(ii) imposes upon any Indemnified Party any other expense
(including, without limitation, reasonable attorneys' fees and
expenses, and expenses of litigation or preparation therefor in
contesting any of the foregoing) with respect to this Agreement, the
other Transaction Documents, the ownership, maintenance or financing of
the Transferred Interest, the Transferred Receivables or payments of
amounts due hereunder or its obligation to advance funds hereunder or
otherwise in respect of this Agreement, the other Transaction
Documents, the ownership, maintenance or financing of the Transferred
Interests or the Transferred Receivables,
and the result of any of the foregoing is to increase the cost to such
Indemnified Party with respect to this Agreement, the other Transaction
Documents, the ownership, maintenance or financing of the Transferred Interest,
the Transferred Receivables, the obligations hereunder, the funding of any
Purchase hereunder or under the other Transaction Documents, then, within thirty
(30) days after demand by such Indemnified Party through the Deal Agent, the
Transferor shall pay to the Deal Agent, for the benefit of such Indemnified
Party, such additional amount or amounts as will compensate such Indemnified
Party for such increased cost or reduction.
(b) If any Indemnified Party shall have determined that after the
date hereof, the adoption of any applicable Law or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation thereof by
any Official Body, or any directive regarding capital adequacy (in the case of
any regulation, whether or not having the force of law) of any such Official
Body, has or would have the effect of reducing the rate of return on capital of
such Indemnified Party (or its parent) as a consequence of such Indemnified
Party's obligations hereunder or with respect hereto to a level below that which
such Indemnified Party (or its parent) could have achieved but for such
adoption, change, request or directive (taking into consideration its policies
with respect to capital adequacy), then from time to time, within ten (10) days
after demand by such Indemnified Party through the Deal Agent, the Transferor
shall
30
pay to the Deal Agent, for the benefit of such Indemnified Party, such
additional amount or amounts as will compensate such Indemnified Party (or its
parent) for such reduction.
Section 8.3 Indemnity for Taxes.
-------------------
(a) All payments made by the Transferor or the Collection Agent to the
Deal Agent for the benefit of VFCC and the Committed Investors under this
Agreement and any other Transaction Document shall be made free and clear of,
and without deduction or withholding for or on account of, any present or future
income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions
or withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any Official Body, excluding, to the extent this facility is deemed
to be indebtedness of the Transferor for the following purposes, franchise taxes
and taxes imposed on or measured by the recipient's net or gross receipts (all
such taxes, levies, imposts, duties, charges, fees, deductions or withholdings,
collectively or individually, "Taxes"). If any such Taxes are required to be
-----
withheld from any amounts payable to the Deal Agent or any Indemnified Party
hereunder, the amounts so payable to the Deal Agent or such Indemnified Party
shall be increased to the extent necessary to yield to the Deal Agent or such
Indemnified Party (after payment of all Taxes) all amounts payable hereunder at
the rates or in the amounts specified in this Agreement and the other
Transaction Documents. The Transferor shall indemnify the Deal Agent or any such
Indemnified Party for the full amount of any such Taxes within ten (10) days
after the date of written demand therefor by the Deal Agent.
(b) Each Indemnified Party that is not incorporated under the laws of
the United States of America or a state thereof or the District of Columbia
shall:
(i) deliver to the Transferor and the Deal Agent two duly
completed
copies of IRS Form W-8 BEN or Form W-8 ECI, or successor applicable form,
as the case may be;
(ii) deliver to the Transferor and the Deal Agent two (2)
further copies of any such form or certification on or before the date that
any such form or certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form
previously delivered by it to the Transferor; and
(iii) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by the Transferor or
the Deal Agent;
unless, in any such case, an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Indemnified Party from duly completing and
delivering any such form with respect to it, and such Indemnified Party so
advises the Transferor and the Deal Agent.
Section 8.4 Other Costs, Expenses and Related Matters.
------------------------------------------
(a) The Transferor agrees, upon receipt of a written invoice,
to pay or cause to be paid, and to save VFCC, the Committed Investors and the
Deal Agent harmless against liability for the payment of, all reasonable
out-of-pocket expenses (including, without limitation, attorneys' fees relating
to the joint representation of VFCC, the Committed Investors and the
31
Deal Agent, accountants' fees and expenses, any filing fees and expenses
incurred by officers or employees of VFCC, the Committed Investors and/or the
Deal Agent) or intangible, documentary or recording taxes incurred by or on
behalf of VFCC, any Committed Investor and the Deal Agent (i) in connection with
the negotiation, execution, delivery and preparation of this Agreement, the
other Transaction Documents and any documents or instruments delivered pursuant
hereto and thereto and the transactions contemplated hereby or thereby
(including, without limitation, the perfection or protection of the Transferred
Interest) and (ii) from time to time (A) relating to any amendments, waivers or
consents under this Agreement and the other Transaction Documents, (B) arising
in connection with VFCC's, any Committed Investor's or the Deal Agent's
enforcement or preservation of rights (including, without limitation, the
perfection and protection of the Transferred Interest under this Agreement), or
(C) arising in connection with any audit, dispute, disagreement, litigation or
preparation for litigation involving this Agreement or any of the other
Transaction Documents (all of such amounts, collectively, "Transaction Costs").
-----------------
(b) The Transferor shall pay the Deal Agent, for the account of VFCC
and the Committed Investors, as applicable, on demand any Early Collection Fee
due on account of the reduction of any portion or all of the Net Investment on
any day.
(c) Any notice by the Deal Agent claiming compensation under this
Article VIII and setting forth the additional amount or amounts to be paid to it
------------
hereunder shall be conclusive in the absence of manifest error. In determining
such amount, the Deal Agent or any applicable Indemnified Party may use any
reasonable averaging and attributing methods.
Article IX
Miscellaneous
Section 9.1 Term of Agreement.
-----------------
This Agreement shall terminate on the date following the Termination
Date upon which the Net Investment has been reduced to zero, and all accrued
Discount, Servicing Fees and all other Aggregate Unpaids have been paid in full,
in each case, in cash; provided, however, that (a) the indemnification and
-------- -------
payment provisions of Article VIII hereof, and (b) the agreements set forth in
------------
Section 9.8 and 9.9 hereof, shall be continuing and shall survive any
----------- ---
termination of this Agreement.
Section 9.2 Waivers; Amendments.
-------------------
No failure or delay on the part of the Deal Agent, VFCC or any
Committed Investor in exercising any power, right or remedy under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or remedy preclude any other further exercise thereof or
the exercise of any other power, right or remedy. The rights and remedies herein
provided shall be cumulative and nonexclusive of any rights or remedies provided
by law. Any provision of this Agreement may be amended, waived, supplemented or
otherwise modified if, but only if, such amendment, waiver, supplement or other
modification is in writing and is signed by the parties hereto and the Required
Liquidity Banks.
32
Section 9.3 Notices.
-------
Except as provided below, all communications and notices provided for
hereunder shall be in writing (including telecopy or electronic facsimile
transmission or similar writing) and shall be given to the other party at its
address or telecopy number set forth below or at such other address or telecopy
number as such party may hereafter specify for the purposes of notice to such
party. Each such notice or other communication shall be effective (a) if given
by telecopy, when such telecopy is transmitted to the telecopy number specified
in this Section 9.3 and confirmation is received, (b) if given by mail, upon
-----------
receipt, (c) if given by overnight courier, one (1) Business Day after deposit
thereof with a national overnight courier service, or (d) if given by any other
means, when received at the address specified in this Section 9.3.
-----------
If to VFCC:
----------
VARIABLE FUNDING CAPITAL CORPORATION
One First Union Center
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Conduit Administration
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
(with a copy to the Deal Agent)
If to the Transferor:
--------------------
Direct Merchants Credit Card Bank
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Treasurer
Telephone:▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Payment Information: ▇▇▇▇▇ Fargo, N.A.
ABA: 091 000 019
Account: 635 5021 385/Direct Merchants Credit Card Bank
Reference: First Union Conduit Funding
with a copy to:
Metris Company, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Treasurer
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
33
If to the Deal Agent:
--------------------
FIRST UNION SECURITIES, INC.
One First Union Center
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
9/th/ Floor
Attention: ▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
If to the Committed Investors, at their respective addresses set forth
in the Liquidity Purchase Agreement.
Section 9.4 Governing Law; Submission to Jurisdiction; Integration.
------------------------------------------------------
(a) This Agreement shall be governed by, and construed in accordance
with the laws of the State of New York. Each of the parties hereto hereby
submits to the nonexclusive jurisdiction of the United States District Court for
the Southern District of New York and of any New York state court sitting in The
City of New York for purposes of all legal proceedings arising out of or
relating to this Agreement or the transactions contemplated hereby. Each of the
parties hereto hereby irrevocably waives, to the fullest extent it may
effectively do so, any objection which it may now or hereafter have to the
laying of the venue of any such proceeding brought in such a court and any claim
that any such proceeding brought in such a court has been brought in an
inconvenient forum.
(b) Each of the parties hereto hereby waives, to the extent permitted
by law, any right to have a jury participate in resolving any dispute, whether
sounding in Credit Card Agreement, tort or otherwise among any of them arising
out of, connected with, relating to or incidental to the relationship between
them in connection with this Agreement or the other Transaction Documents.
(c) This Agreement contains the final and complete integration of all
prior expressions by the parties hereto with respect to the subject matter
hereof and shall constitute the entire Agreement among the parties hereto with
respect to the subject matter hereof superseding all prior oral or written
understandings.
Section 9.5 Severability; Counterparts.
--------------------------
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken together
shall constitute one and the same Agreement. Any provisions of this Agreement
which are prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
34
Section 9.6 Successors and Assigns.
----------------------
This Agreement shall be binding on the parties hereto and their
respective successors and assigns; provided, however, that, except as
-------- -------
specifically provided herein or in the other Transaction Documents, neither the
Transferor, nor the Collection Agent may assign any of its rights or delegate
any of its duties hereunder or under any of the other Transaction Documents to
which it is a party without the prior written consent of the Deal Agent. No
provision of this Agreement shall in any manner restrict the ability of VFCC or
any Committed Investor to assign, participate, grant security interests in, or
otherwise transfer any portion of the Transferred Interest. Without limiting the
foregoing, VFCC may (with the consent of each Committed Investor), in one or a
series of transactions, transfer all or any portion of the Transferred Interest
held by it, and its rights and obligations under this Agreement and the other
Transaction Documents to which it is a party, to a Conduit Assignee.
Section 9.7 Confidentiality.
---------------
(a) Each of the Transferor and the Collection Agent shall maintain,
and shall cause each officer, employee and agent of itself and its Affiliates to
maintain, the confidentiality of the Transaction Documents and all other
confidential proprietary information with respect to VFCC, the Deal Agent and
the Committed Investors and each of their respective businesses obtained by them
in connection with the structuring, negotiation and execution of the
transactions contemplated herein and in the other Transaction Documents, except
for information that has become publicly available or information disclosed (i)
to legal counsel, accountants and other professional advisors to the Transferor,
the Collection Agent and their Affiliates, (ii) as required by law, regulation
or legal process or (iii) in connection with any legal or regulatory proceeding
to which the Transferor, the Collection Agent or any of their Affiliates is
subject. Each of the Transferor and the Collection Agent hereby consents to the
disclosure of any non-public information with respect to it received by VFCC,
the Deal Agent or any Committed Investor to (A) any of VFCC, the Deal Agent, any
Committed Investor, (B) any nationally recognized rating agency providing a
rating or proposing to provide a rating to VFCC's Commercial Paper, (C) any
placement agent which proposes to offer and sell VFCC's Commercial Paper, (D)
any provider of VFCC's program-wide liquidity or credit support facilities, (E)
any potential Committed Investor or (F) any Participant or potential
Participant; provided that each such Person is informed of the confidential
--------
nature of such information and with respect to any prospective or actual
assignee or participant of such Person, each such Person shall expressly agree
to be bound by the confidentiality provisions of this Section 9.7.
------------
(b) Each of VFCC, the Deal Agent and the Committed Investors shall
maintain, and shall cause each officer, employee and agent of itself and its
Affiliates to maintain, the confidentiality of the Transaction Documents and all
other confidential proprietary information with respect to the Transferor, the
Collection Agent and their Affiliates and each of their respective businesses
obtained by them in connection with the structuring, negotiation and execution
of the transactions contemplated herein and in the other Transaction Documents,
except for information that has become publicly available or information
disclosed (i) to legal counsel, accountants and other professional advisors to
VFCC, the Deal Agent and the Committed Investors (each of whom shall expressly
agree to be bound by the confidentiality provisions set forth in this Section
-------
9.7), (ii) as required by law, regulation or legal process or (iii)
---
35
in connection with any legal or regulatory proceeding to which VFCC, the Deal
Agent and the Committed Investors is subject.
Section 9.8 No Bankruptcy Petition Against any Conduit Investor.
----------------------------------------------------
Each of the Transferor and the Collection Agent hereby covenants and agrees
that, prior to the date which is one year and one day after the payment in full
of all outstanding Commercial Paper or other indebtedness of any Conduit
Investor, it will not institute against, or join any other Person in instituting
against, any such Conduit Investor any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other similar proceeding under the laws
of the United States or any state of the United States.
Section 9.9 Limited Recourse.
----------------
Notwithstanding anything to the contrary contained herein, the obligations
of VFCC under this Agreement are solely the corporate obligations of VFCC and,
in the case of obligations of VFCC other than Commercial Paper, shall be payable
at such time as funds are actually received by, or are available to, VFCC in
excess of funds necessary to pay in full all outstanding Commercial Paper and,
to the extent funds are not available to pay such obligations, the claims
relating thereto shall not constitute a claim against VFCC but shall continue to
accrue. Each party hereto agrees that the payment of any claim (as defined in
Section 101 of the Bankruptcy Code) of any such party shall be subordinated to
the payment in full of all Commercial Paper.
No recourse under any obligation, covenant or agreement of VFCC contained
in this Agreement shall be had against any incorporator, stockholder, officer,
director, member, manager, employee or agent of VFCC, the Administrative Agent,
the Manager or any of their Affiliates (solely by virtue of such capacity) by
the enforcement of any assessment or by any legal or equitable proceeding, by
virtue of any statute or otherwise; it being expressly agreed and understood
that this Agreement is solely a corporate obligation of VFCC, and that no
personal liability whatever shall attach to or be incurred by any incorporator,
stockholder, officer, director, member, manager, employee or agent of VFCC, the
Administrative Agent, the Manager or any of their Affiliates (solely by virtue
of such capacity) or any of them under or by reason of any of the obligations,
covenants or agreements of VFCC contained in this Agreement, or implied
therefrom, and that any and all personal liability for breaches by VFCC of any
of such obligations, covenants or agreements, either at common law or at equity,
or by statute, rule or regulation, of every such incorporator, stockholder,
officer, director, member, manager, employee or agent is hereby expressly waived
as a condition of and in consideration for the execution of this Agreement;
provided that the foregoing shall not relieve any such Person from any liability
--------
it might otherwise have as a result of fraudulent actions taken or fraudulent
omissions made by them.
Notwithstanding anything in this Agreement to the contrary, VFCC shall not
have any obligation to pay any amount required to be paid by it hereunder in
excess of any amount available to VFCC after paying or making provision for the
payment of its Commercial Paper Notes. All payment obligations of VFCC hereunder
are contingent on the availability of funds in excess of the amounts necessary
to pay its Commercial Paper Notes; and each of the other parties
36
hereto agrees that it will not have a claim under Section 101(5) of the
Bankruptcy Code if and to the extent that any such payment obligation owed to it
by VFCC exceeds the amount available to VFCC to pay such amount after paying or
making provision for the payment of its Commercial Paper Notes.
Section 9.10 Characterization of the Transactions Contemplated by the
--------------------------------------------------------
Agreement
---------
It is the intention of the parties that the transactions contemplated
hereby constitute the sale of the Transferred Interest, conveying good title
thereto free and clear of any Adverse Claims to VFCC, and that the Transferred
Interest not be part of the Transferor's estate in the event of an insolvency.
If, notwithstanding the foregoing, the transactions contemplated hereby should
be deemed a financing, the parties intend that the Transferor shall be deemed to
have granted to the Deal Agent, on behalf of VFCC and the Committed Investors,
and the Transferor hereby grants to the Deal Agent, on behalf of VFCC and the
Committed Investors, a first priority perfected and continuing security interest
in all of the Transferor's right, title and interest in, to and under the
Transferred Receivables, together with Related Security, Collections and
Proceeds with respect thereto and that this Agreement shall constitute a
security agreement under applicable law.
Section 9.11 Waiver of Setoff.
----------------
Each of the Deal Agent, the Transferor and the Collection Agent hereby
waives any right of setoff it may have or to which it may be entitled under this
Agreement from time to time against VFCC or its assets.
Section 9.12 Conflict Waiver.
---------------
FUSI acts as Deal Agent and as Administrative Agent for VFCC and FUNB acts
as provider of other backup facilities for VFCC, and each of FUSI and FUNB may
provide other services or facilities from time to time (the "First Union
-----------
Roles"). Without limiting the generality of Section 4.8, each of the parties
----- -----------
hereto hereby acknowledges and consents to any and all First Union Roles, waives
any objections it may have to any actual or potential conflict of interest
caused by FUSI's acting as the Deal Agent and FUNB as a Committed Investor under
the Liquidity Purchase Agreement and acting as or maintaining any of the First
Union Roles, and agrees that in connection with any First Union Role, each of
FUSI and First Union may take, or refrain from taking, any action which it in
its discretion deems appropriate.
Section 9.13 Liability of Deal Agent.
-----------------------
Notwithstanding any provision of this Agreement: (a) the Deal Agent shall
not have any obligations under this Agreement other than those specifically set
forth herein, and no implied obligations of the Deal Agent shall be read into
this Agreement; and (b) in no event shall the Deal Agent be liable under or in
connection with this Agreement for indirect, special, or consequential losses or
damages of any kind, including lost profits, even if advised of the possibility
thereof and regardless of the form of action by which such losses or damages may
be claimed. Neither the Deal Agent nor any of its directors, officers, agents or
employees shall be liable for any action taken or omitted to be taken in good
faith by it or them under or in
37
connection with this Agreement, except for its or their own gross negligence or
willful misconduct. Without limiting the foregoing, the Deal Agent (i) may
consult with legal counsel (including counsel for VFCC), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts, (ii) shall not be responsible to
VFCC, the Transferor or the Collection Agent for any statements, warranties or
representations made in or in connection with this Agreement or the other
Transaction Documents, (iii) shall not be responsible to VFCC, the Transferor or
the Collection Agent for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or the other Transaction
Documents, (iv) shall incur no liability under or in respect of any of the
Commercial Paper or other obligations of VFCC under this Agreement or the other
Transaction Documents and (v) shall incur no liability under or in respect of
this Agreement or the other Transaction Documents by acting upon any notice
(including notice by telephone), consent, certificate or other instrument or
writing (which may be by facsimile) believed by it to be genuine and signed or
sent by the proper party or parties. Notwithstanding anything else herein or in
the other Transaction Documents, it is agreed that where the Deal Agent may be
required under this Agreement or the other Transaction Documents to give notice
of any event or condition or to take any action as a result of the occurrence of
any event or the existence of any condition, the Deal Agent agrees to give such
notice or take such action only to the extent that it has actual knowledge of
the occurrence of such event or the existence of such condition, and shall incur
no liability for any failure to give such notice or take such action in the
absence of such knowledge.
[remainder of page intentionally left blank]
38
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Transfer and Administration Agreement as of the date first written above.
VARIABLE FUNDING CAPITAL CORPORATION,
as a Conduit Investor
By: First Union Securities, Inc., as attorney-in-fact
By:_______________________________________________
Name:_____________________________________________
Title:____________________________________________
FIRST UNION SECURITIES, INC.,
as Deal Agent
By:_______________________________________________
Name:_____________________________________________
Title:____________________________________________
FIRST UNION NATIONAL BANK,
as a Committed Investor and as Liquidity Agent
By:_______________________________________________
Name:_____________________________________________
Title:____________________________________________
[additional signatures to follow]
DIRECT MERCHANTS CREDIT CARD BANK,
NATIONAL ASSOCIATION, as Transferor and
as Collection Agent
By:___________________________________________
Name:_________________________________________
Title:________________________________________
40
EXHIBIT A
---------
[SAMPLE CREDIT CARD AGREEMENT]
Exhibit A - Page 1
EXHIBIT B
---------
LIST OF ACCOUNTS
Collection Account:
------------------
Bank: First Union National Bank
ABA #: ▇▇▇▇▇▇▇▇▇
AC: 5000000016439
Account Number: 1076011676
Re: Metris/Collection Account
Attn: Structured Finance
Excess Funding Account:
----------------------
Bank: First Union National Bank
ABA #: ▇▇▇▇▇▇▇▇▇
AC: 5000000016439
Account Number: 1076011685
Re: Metris/Excess Funding Account
Attn: Structured Finance
Spread Account:
--------------
Bank: First Union National Bank
ABA #: ▇▇▇▇▇▇▇▇▇
AC: 5000000016439
Account Number: 1076011694
Re: Metris/Spread Account
Attn: Structured Finance
Exhibit B-Page 1
EXHIBIT C
---------
[RESERVED]
Exhibit C - Page 1
EXHIBIT D
---------
[RESERVED]
EXHIBIT E
---------
[FORM OF MONTHLY STATEMENT]
Exhibit E-Page 1
EXHIBIT F
---------
[FORM OF TRANSFER CERTIFICATE]
TRANSFER CERTIFICATE
--------------------
Reference is made to the Transfer and Administration Agreement, dated
as of June 15, 2001 (as amended, supplemented or otherwise modified and in
effect from time to time, the "Agreement"), by and among Direct Merchants Credit
---------
Card Bank, National Association as transferor (in such capacity, the
"Transferor") and as collection agent (in such capacity, the "Collection
---------- ----------
Agent"), Variable Funding Capital Corporation ("VFCC") and First Union
----- ----
Securities, Inc., as Deal Agent. Terms defined in the Agreement, or incorporated
therein by reference, are used herein as therein defined.
The Transferor hereby conveys, transfers and assigns to the Deal Agent,
for the benefit of VFCC and the Committed Investors, an undivided ownership
interest in the Transferred Receivables and the Related Security, Collections
and Proceeds with respect thereto (each, an "Incremental Transfer"). Each
--------------------
Incremental Transfer by the Transferor to VFCC, and each reduction or increase
in the Net Investment in respect of each Incremental Transfer evidenced hereby,
shall be indicated by the Deal Agent on the grid attached hereto which is part
of this Transfer Certificate.
This Transfer Certificate is made without recourse except as otherwise
provided in the Agreement.
This Transfer Certificate shall be governed by, and construed in
accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the undersigned has caused this Transfer
Certificate to be duly executed and delivered by its duly authorized officer as
of the date first above written.
DIRECT MERCHANTS CREDIT CARD BANK,
NATIONAL ASSOCIATION
By______________________________
Name:
Title:
Exhibit F-Page 1
GRID
Date of Amount of Net Investment
Incremental Transfer Incremental Transfer (Giving Effect to
-------------------- -------------------- Incremental Transfer)
---------------------
Exhibit F-Page 2
EXHIBIT G
---------
List of Actions and Suits
-------------------------
None
Exhbit G-Page 1
EXHIBIT H
---------
Location of Records
-------------------
Direct Merchants Credit Card Bank, N.A.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Metris Companies Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Metris Companies Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Exhibit H-Page 1
EXHIBIT I
---------
List of Subsidiaries, Divisions and Tradenames
----------------------------------------------
Direct Merchants Credit Card Bank, National Association - Utah
Exhibit I-Page 1
EXHIBIT J
---------
FORM OF SECRETARY'S CERTIFICATE
I, __________________, the undersigned ________________ of ____________
(" "), a ________ corporation, DO HEREBY CERTIFY that:
(1) Attached hereto as Annex A is a true and complete copy of the
Articles of Association _________________ of as in effect on the date hereof.
(2) Attached hereto as Annex B is a true and complete copy of the By-
laws of ___________ _____________ as in effect on the date hereof.
(3) Attached hereto as Annex C is a true and complete copy of the
resolutions duly adopted by the Board of Directors of ___________ [adopted by
consent] as of __________ _________, 199_, authorizing the execution, delivery
and performance of each of the documents mentioned therein, which resolutions
have not been revoked, modified, amended or rescinded and are still in full
force and effect.
(4) Attached hereto as Annex D are copies of good standing
certificates of ________________________, certified by the Secretaries of State
of the States of ___________ and ___________.
(5) The below-named persons have been duly qualified as and at all
times since ________________, 200_, to and including the date hereof have been
officers or representatives of _________________ holding the respective offices
or positions below set opposite their names and are authorized to execute on
behalf of ________________ the below-mentioned Transfer and Administration
Agreement and all other Transaction Documents (as defined in such Transfer and
Administration Agreement) to which ____________ is a party and the signatures
below set opposite their names are their genuine signatures:
Name Office Signatures
---- ------ ----------
_______________________ ______________________
_______________________ ______________________
The representations and warranties of contained in Article III of the
-----------
Transfer and Administration Agreement, dated as of __________ __, 199_ among
__________, __________, Variable Funding Capital Corporation and First Union
Securities, Inc. are true and correct as if made on the date hereof.
WITNESS my hand and seal of ___________________ as of this ____ day
of __________, 199_.
______________________________
Secretary
I, the undersigned, __________________ of_________________ , DO HEREBY
CERTIFY that _____________________ is the duly elected and qualified Secretary
of and the signature above is his/her genuine signature.
WITNESS my hand as of this ____ day of __________, 20_.
______________________________
[Officer]