**EXHIBIT 10.4**

 

**EXECUTION COPY**

 

**TRANSFERAND SERVICING AGREEMENT**

 

 

among

 

 

**PACCT, LLC,**

Transferor,

 

 

**COMPUCREDIT CORPORATION,**

Servicer

 

 

**CSG FUNDING, LLC**

O/C Holder

 

 

and

 

 

**CSGQ,**

Issuer

 

 

Dated as of June 25, 2002

 

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**TABLE OFCONTENTS**

 
| ARTICLE I      | DEFINITIONS                                                                                                                               |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------|
|           |                                                                                                                                      |
| Section 1.01.  | Definitions                                                                                                                               |
|           |                                                                                                                                      |
| Section 1.02.  | Other  Definitional Provisions                                                                                                            |
|           |                                                                                                                                      |
| ARTICLE II     | CONVEYANCE OF  RECEIVABLES                                                                                                                |
|           |                                                                                                                                      |
| Section 2.01.  | Conveyance of  Receivables                                                                                                                |
|           |                                                                                                                                      |
| Section 2.02.  | Acceptance by Trust                                                                                                                       |
|           |                                                                                                                                      |
| Section 2.03.  | Representations and Warranties of the  Transferor Relating to the Transferor                                                              |
|           |                                                                                                                                      |
| Section 2.04.  | Representations and Warranties of the  Transferor Relating to this Agreement and the Receivables Purchase Agreements  and the Receivables |
|           |                                                                                                                                      |
| Section 2.05.  | Reassignment of Ineligible Receivables                                                                                                    |
|           |                                                                                                                                      |
| Section 2.06.  | Covenants of the Transferor                                                                                                               |
|           |                                                                                                                                      |
| Section 2.07.  | Covenants of the Transferor with Respect  to Receivables Purchase Agreements                                                              |
|           |                                                                                                                                      |
| Section 2.08.  | Removal of Receivables                                                                                                                    |
|           |                                                                                                                                      |
| ARTICLE  III   | ADMINISTRATION  AND SERVICING OF RECEIVABLES                                                                                              |
|           |                                                                                                                                      |
| Section  3.01. | Acceptance  of Appointment and Other Matters Relating to the Servicer                                                                     |
|           |                                                                                                                                      |
| Section 3.02.  | Servicing Compensation                                                                                                                    |
|           |                                                                                                                                      |
| Section 3.03.  | Representations, Warranties and Covenants  of the Servicer                                                                                |
|           |                                                                                                                                      |
| Section 3.04.  | Reports and Records for the Owner Trustee  and the Indenture Trustee                                                                      |
|           |                                                                                                                                      |
| Section 3.05.  | Annual Certificate of Servicer                                                                                                            |
|           |                                                                                                                                      |
| Section 3.06.  | Annual Servicing Report of Independent  Public Accountants; Copies of Reports Available                                                   |
|           |                                                                                                                                      |
| Section 3.07.  | Tax Treatment                                                                                                                             |
|           |                                                                                                                                      |
| Section 3.08.  | Notices to CompuCredit                                                                                                                    |
|           |                                                                                                                                      |
| Section 3.09.  | Adjustments                                                                                                                               |
|           |                                                                                                                                      |
| ARTICLE  IV    | OTHER  MATTERS RELATING TO THE TRANSFEROR                                                                                                 |
|           |                                                                                                                                      |
| Section 4.01.  | Liability of the Transferor                                                                                                               |   |
|           |                                                                                                                                      |   |
| Section 4.02.  | Merger or Consolidation of, or Assumption  of the Obligations of, the Transferor                                                          |   |
|           |                                                                                                                                      |   |
| Section 4.03.  | Limitations on Liability of the Transferor                                                                                                |   |
|           |                                                                                                                                      |   |
| ARTICLE  V     | OTHER  MATTERS RELATING TO THE SERVICER                                                                                                   |
|           |                                                                                                                                      |
| Section 5.01.  | Liability of the Servicer                                                                                                                 |   |
|                |                                                                                                                                           |  |  |  |  |

 

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| Section 5.02. | Merger or Consolidation of, or Assumption  of the Obligations of, the Servicer |   |
|---------------|--------------------------------------------------------------------------------|--------|
|          |                                                                           |   |
| Section 5.03. | Limitation on Liability of the Servicer  and Others                            |   |
|          |                                                                           |   |
| Section 5.04. | Servicer Indemnification of the Trust                                          |   |
|          |                                                                           |   |
| Section 5.05. | Resignation of the Servicer                                                    |   |
|          |                                                                           |   |
| Section 5.06. | Access to Certain Documentation and  Information Regarding the Receivables     |   |
|          |                                                                           |   |
| Section 5.07. | Delegation of Duties                                                           |   |
|          |                                                                           |   |
| Section 5.08. | Examination of Records                                                         |   |
|          |                                                                           |   |
| Section 5.09. | Removal of CompuCredit under Credit Card  Service and Administration Agreement |   |
|          |                                                                           |   |
| ARTICLE VI    | [Reserved]                                                                     |
|          |                                                                           |
| ARTICLE VII   | SERVICER DEFAULTS                                                              |
|          |                                                                           |
| Section 7.01. | Servicer Defaults                                                              |   |
|          |                                                                           |   |
| Section 7.02. | Note Administrator To Act; Appointment of  Successor                           |   |
|          |                                                                           |   |
| Section 7.03. | Notification to Noteholders                                                    |   |
|          |                                                                           |   |
| ARTICLE VIII  | TERMINATION                                                                    |
|          |                                                                           |
| Section 8.01. | Termination of Agreement                                                       |   |
|          |                                                                           |   |
| ARTICLE  IX   | MISCELLANEOUS  PROVISIONS                                                      |
|          |                                                                           |
| Section 9.01. | Amendment; Waiver of Past Defaults                                             |
|          |                                                                           |
| Section 9.02. | Protection of Right, Title and Interest to  Trust Assets                       |
|          |                                                                           |
| Section 9.03. | GOVERNING LAW                                                                  |
|          |                                                                           |
| Section 9.04. | Notices; Payments                                                              |
|          |                                                                           |
| Section 9.05. | Severability of Provisions                                                     |
|          |                                                                           |
| Section 9.06. | Further Assurances                                                             |
|          |                                                                           |
| Section 9.07. | No Waiver; Cumulative Remedies                                                 |
|          |                                                                           |
| Section 9.08. | Counterparts                                                                   |
|          |                                                                           |
| Section 9.09. | Third-Party Beneficiaries                                                      |
|          |                                                                           |
| Section 9.10. | Actions by Noteholders                                                         |
|          |                                                                           |
| Section 9.11. | Rule 144A Information                                                          |
|          |                                                                           |
| Section 9.12. | Merger and Integration                                                         |
|          |                                                                           |
| Section 9.13. | Headings                                                                       |
|          |                                                                           |
| Section 9.14. | Assignment                                                                     |
|               |                                                                                |        |  |  |  |

 

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| Section 9.15. | Nonpetition Covenant                                                                       |
|---------------|--------------------------------------------------------------------------------------------|
|          |                                                                                       |
| Section 9.16. | Limitation of Liability                                                                    |
|          |                                                                                       |
| Section 9.17  | FASB Statement No. 140                                                                     |
|          |                                                                                       |
| Section 9.18  | Additional Representations and Warranties  of the Transferor                               |
|          |                                                                                       |
| Section 9.19  | Subordination                                                                              |
|          |
| EXHIBITS      |
|          |
| EXHIBIT  A    | Form  of Annual Servicer’s Certificate                                                |
|          |                                                                                       |
| EXHIBIT  B    | Form  of Reassignment                                                                      |
|          |                                                                                       |
| EXHIBIT C-1   | Form of Opinion of Counsel with Respect to  Amendments                                     |
|          |                                                                                       |
| EXHIBIT C-2   | Form of Annual Opinion of Counsel with  Respect to Accounts                                |
|          |                                                                                       |
| EXHIBIT C-3   | Form of Annual Opinion of Counsel to be  Delivered to Moody’s Investors Service, Inc. |
|          |                                                                                       |
|          |                                                                                       |
| SCHEDULES     |
|          |
| SCHEDULE  1   | List  of Accounts                                                                          |
|          |                                                                                       |
| SCHEDULE  2   | Purchase  Price                                                                            |
|          |                                                                                       |
| SCHEDULE  3   | Bank  Agent Numbers                                                                        |
|               |                                                                                            |  |

 

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TRANSFER AND SERVICING AGREEMENT, dated as of June 25,2002, among PACCT, LLC, a Delaware limited liability company, as Transferor,COMPUCREDIT CORPORATION, a Georgia corporation, as Servicer, CSG FUNDING, LLC,a Delaware limited liability company, as O/C Holder, and CSGQ TRUST, a Delawarebusiness trust, as Issuer.

 

In consideration of the mutual agreements hereincontained, each party agrees as follows for the benefit of the other parties,the Noteholders and any Series Enhancer (as defined below) to the extentprovided herein, in the Indenture and in any Indenture Supplement:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.01.          Definitions.Whenever used in this Agreement, the following words and phrases shall have thefollowing meanings, and the definitions of such terms are applicable to thesingular as well as the plural forms of such terms and to the masculine as wellas to the feminine and neuter genders of such terms.

 

“Account” shall mean (a) each Initial Account,(b)  each Related Account, and (c) each Transferred Account, but shallexclude any Account all the Receivables in which are either: (i) on the RemovalDate, removed pursuant to Section 2.08 or (ii) reassigned to an Accounts Ownerpursuant to a Receivables Purchase Agreement.

 

“Accounts Owner” shall mean, with respect to anAccount, Providian, initially, and subsequently shall mean any Person who hasacquired such an Account and has assumed the obligations of the Accounts Ownerunder an account ownership and administration agreement or similar agreement.

 

“Accounts Ownership and Administration Agreement”shall mean the Accounts Ownership and Administration Agreement, dated as ofJune 25, 2002, among CSG, LLC, CompuCredit and the Accounts Owner, as amended,amended and restated, supplemented or otherwise modified from time to time inaccordance with the terms thereof.

 

“Adverse Effect” shall mean, with respect toany action, that such action will (a) result in the occurrence of a RedemptionEvent or an Event of Default or (b) materially and adversely affect the amountor timing of distributions to be made to the Noteholders of any Series or Classpursuant to this Agreement, the Indenture or the related Indenture Supplement.

 

“Affiliate” shall mean, with respect to anyspecified Person, any other Person controlling or controlled by or under commoncontrol with such specified Person.  Forthe purposes of this definition, “control” shall mean the power to direct themanagement and policies of a Person, directly or indirectly, whether throughthe ownership of voting securities, by contract or otherwise; and the terms“controlling” and “controlled” have meanings correlative to the foregoing.

 

“Agreement” shall mean this Transfer andServicing Agreement, as the same may be amended, supplemented or otherwisemodified from time to time.

 

“Business Day” shall mean any day other than(a) a Saturday or Sunday or (b) any other day on which bankinginstitutions in New York, New York or any other State in which the principalexecutive offices of the Issuer, the Transferor, the Servicer, the AccountsOwner, the Owner Trustee, the Indenture Trustee, the Certificate Trustee, theCertificate Administrator or the Note Administrator are

 

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located, are authorized or obligated by law, executive order orgovernmental decree to be closed or (c) for purposes of any particular Series,any other day specified in the related Indenture Supplement.

 

“Cash Advance Fees” shall mean cash advancetransaction fees and cash advance late fees, if any, as specified in the CreditCard Agreement applicable to each Account.

 

“Class” shall have the meaning specified in theIndenture.

 

“Class Action Settlement” shall mean thesettlement agreement in In re Providian Credit Card Cases, Judicial CouncilCoordination Proceeding No. 4085.

 

“Closing Date” shall mean, with respect to anySeries, the closing date specified in the related Indenture Supplement.

 

“Collections” shall mean all payments by or onbehalf of Obligors (including Insurance Proceeds) received in respect of theReceivables, in the form of cash, checks, wire transfers, electronic transfers,ATM transfers or any other form of payment in accordance with a Credit CardAgreement in effect from time to time and all other amounts specified by thisAgreement, the Indenture or any Indenture Supplement as constitutingCollections.  All payments of therepurchase price with respect to Ineligible Receivables that are repurchasedfrom the Issuer by the Transferor or the Accounts Owner and all Recoveries withrespect to Receivables previously charged off as uncollectible will be treatedas Collections of Finance Charge Receivables. Collections with respect to any Monthly Period shall includeInterchange, calculated pursuant to subsection 3.03(m), paid to the Trustwith respect to such Monthly Period, to be applied as if such amount wereCollections of Finance Charge Receivables for all purposes.  All payments received by the Accounts Ownerwith respect to refused and returned merchandise shall, to the extent therelated Principal Receivable has been purchased from the Accounts Owner andconveyed to the Trust, be treated as Collections of Principal Receivables.

 

 “CompuCredit”shall mean CompuCredit Corporation, a Georgia corporation.

 

“Contractually Delinquent” with respect to anAccount, shall mean an Account as to which the required minimum payment set forthon the related billing statement has not been received by the due date thereof.

 

“Corporate Trust Office” shall have the meaning(a) when used in respect of the Owner Trustee, specified in the Trust Agreementand (b) when used in respect of the Indenture Trustee or Note Administrator,specified in the Indenture.

 

“Credit Card Agreement” shall mean, withrespect to a revolving credit card account, the agreement or agreements betweenan Accounts Owner (including any predecessor in interest to such AccountsOwner) and the Obligor governing the terms and conditions of such account, assuch agreements may be amended, modified or otherwise changed from time to timeand as distributed (including any amendments and revisions thereto) to holdersof such account.

 

“Credit Card Guidelines” shall mean the writtenpolicies and procedures of the Servicer for servicing credit card receivablescomparable to the Receivables established in accordance with the Credit CardService and Administration Agreement.

 

“Credit Card Service and Administration Agreement”shall mean that certain Credit Card Service and Administration Agreement, datedas of April 11, 2002, between CompuCreditand CSG, LLC.

 

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“Cut-Off Date” shall have the meaning specifiedin the Indenture.

 

“Cut-Off Time” shall mean 11:59 p.m. on January31, 2002.

 

“Date of Processing” shall mean, with respectto any transaction or receipt of Collections, the date on which suchtransaction is first recorded on the Servicer’s computer file of revolvingcredit card accounts (without regard to the effective date of such recordationor the date on which any subservicer records such transaction on its computerfile).

 

“Defaulted Amount” shall mean, with respect toany Monthly Period, an amount (which shall not be less than zero) equal to (a)the amount of Principal Receivables and Finance Charge Receivables which becameDefaulted Receivables in such Monthly Period (after giving effect to anyadjustments made pursuant to Section 3.09), *plus* (b) any Receivables which areidentified as not being Eligible Receivables during such Monthly Period, *plus*(c) any adjustments with respect to such Monthly Period pursuant to subsection3.09(a).

 

“Defaulted Receivables” shall mean, with respectto any Monthly Period, all Principal Receivables and Finance Charge Receivableswhich are charged off as uncollectible in such Monthly Period in accordancewith the Credit Card Guidelines and the Servicer’s customary and usualservicing procedures for servicing consumer revolving credit card and otherrevolving credit account receivables comparable to the Receivables.  A Receivable shall become a DefaultedReceivable on the day on which such Receivable is recorded as charged off onthe Servicer’s computer master file of consumer revolving credit card accountsbut, in any event, shall be deemed a Defaulted Receivable no later than themonth following the day the related Account becomes 180 days ContractuallyDelinquent unless the Obligor cures such default by making a partial paymentwhich satisfies the criteria for curing delinquencies set forth in theapplicable Credit Card Guidelines.

 

“Determination Date” shall have the meaningspecified in the Indenture.

 

“Distribution Date” shall mean, with respect toany Series, the date specified in the applicable Indenture Supplement.

 

“Dollars,” “$” or “U.S. $” shallmean United States dollars.

 

“Eligible Account” shall mean, as of theCut-Off Time, each MasterCard®(1) or VISA®(2) consumerrevolving credit card account owned by Providian:

 

(a)           whichis in existence and maintained by Providian;

 

(b)           whichis payable in Dollars;

 

(c)           theObligor of which has provided, as his or her billing address, an addresslocated in the United States or the Obligor of which has a military address;

 

(d)           theObligor of which has not been identified by Providian or the Servicer in itscomputer files as having been declared bankrupt;

 

(e)           whichhas not been identified as an account the credit card or cards with respect

 

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(1) MasterCard is a registered trademark of MasterCard InternationalIncorporated

(2) VISA is a registered trademark of VISA USA, Inc.

 

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to which have been reported to Providian as having been lost or stolenor which has an Obligor who has not been identified as deceased;

 

(f)            whichdoes not have outstanding Receivables which have been sold or pledged to anyparty other than the Transferor pursuant to a Receivables Purchase Agreement,except to the extent any such pledge or lien has been released;

 

(g)           which does not have any Receivablesthat give rise to any claim against any governmental agency, including, withoutlimitation, the United States of America or any one of the states thereof, orany agency, instrumentality, or department thereof;

 

(h)           which is not a Secured Account; and

 

(i)            which does not have any Receivablesthat have been identified by Providian or the relevant Obligor as having beenincurred as a result of fraudulent use of any related credit card.

 

“Eligible Receivable” shall mean eachReceivable:

 

(a)         which has arisen in an EligibleAccount;

 

(b)         which was created in compliance, in allmaterial respects, with all Requirements of Law applicable to the institutionwhich owned such Receivable at the time of its creation and pursuant to aCredit Card Agreement which complies in all material respects with allRequirements of Law applicable to Providian or any other Accounts Owner, asapplicable;

 

(c)         with respect to which all materialconsents, licenses, approvals or authorizations of, or registrations ordeclarations with, any Governmental Authority required to be obtained, effectedor given in connection with the creation of such Receivable or the execution,delivery and performance by Providian or any other Accounts Owner, asapplicable, of its obligations, if any, under the related Credit Card Agreementpursuant to which such Receivable was created, have been duly obtained,effected or given and are in full force and effect;

 

(d)         as to which at the time of its transferto the Trust, the Transferor or the Trust will have good and marketable titlethereto, free and clear of all Liens (other than any Lien for municipal orother local taxes if such taxes are not then due and payable or if theTransferor is then contesting the validity thereof in good faith by appropriateproceedings and has set aside on its books adequate reserves with respectthereto);

 

(e)           whichhas been the subject of either a valid transfer and assignment from theTransferor to the Trust of all of the Transferor’s right, title and interesttherein (including any proceeds thereof), or the grant of a first priorityperfected security interest therein (and in the proceeds thereof), effectiveuntil the termination of the Trust;

 

(f)            which,at the time of its transfer to the Trust, is the legal, valid and bindingpayment obligation of the Obligor thereon enforceable against such Obligor inaccordance with its terms, except as such enforceability may be limited byapplicable bankruptcy, insolvency, reorganization, moratorium or other similarlaws, now or hereafter in effect, affecting the enforcement of creditors’rights in general and except as such enforceability may be limited by generalprinciples of equity (whether considered in a suit at law or in equity), andexcept as such enforceability may be limited by a right to offset, recoupment,adjustment or any other claim under 12 CFR § 226.12(c), 12 CFR § 226.13(d) andthe Soldiers’ and Sailors’ Civil Relief Act of 1940, as amended;

 

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(g)           which,at the time of its transfer to the Trust, has not been waived or modifiedexcept as permitted in accordance with the customary policies and procedures,as amended from time to time, of Providian or any other Accounts Owner, asapplicable, and then only if such waiver or modification is reflected in theapplicable Accounts Owner’s or the Servicer’s computer file of revolving creditcard accounts or, with respect to terms other than pricing terms, otherwise onits books and records;

 

(h)           which,at the time of its transfer to the Trust, is not subject to any right ofrescission, setoff, counterclaim or any other defense (including defensesarising out of violations of usury laws) of the Obligor, other than defensesarising out of applicable bankruptcy, insolvency, reorganization, moratorium orother similar laws affecting the enforcement of creditors’ rights in generaland except as such enforceability may be limited by general principles ofequity (whether considered in a suit at law or equity), and other than underthe Class Action Settlement;

 

(i)          as to which, at the time of itstransfer to the Trust, Providian or any other Accounts Owner, as applicable,has satisfied all of its obligations under the applicable Credit Card Agreementto the applicable Obligor required to be satisfied by such time, and other thanunder the Class Action Settlement;

 

(j)          as to which, at the time of itstransfer to the Trust, none of the Transferor, the Servicer, or Providian orany other Accounts Owner, as the case may be, has taken any action which wouldimpair, or omitted to take any action the omission of which would impair, therights of the Trust or the Noteholders therein; and

 

(k)         which constitutes an “account” underand as defined in Article 9 of the UCC in effect in the States of Delaware, NewYork or any other state where the filing of a financing statement is requiredto perfect the Trust’s interest in the Receivables and the proceeds thereof.

 

“Eligible Servicer” shall mean the NoteAdministrator or, if the Note Administrator is not acting as Servicer, anentity which, at the time of its appointment as Servicer, (a) is servicinga portfolio of revolving credit card accounts, (b) is legally qualifiedand has the capacity to service the Accounts, (c) has demonstrated theability to service professionally and competently a portfolio of similaraccounts in accordance with high standards of skill and care, (d) isqualified to use the software that is then being used to service the Accountsor obtains the right to use or has its own software which is adequate toperform its duties under this Agreement and (e) has a net worth of atleast $50,000,000 as of the end of its most recent fiscal quarter.

 

“Event of Default” shall have the meaningspecified in the Indenture.

 

“Excluded Account” shall mean any account andits associated receivables that met one of the following criteria as of theCut-Off Time:

 

(a)           anyaccount that has a disputed balance of which Providian has written notice as ofthe Cut-Off Time;

 

(b)           anyaccount (i) with respect to which a filing has been made by the relatedcardholder under Title 11 of the United States Code or any other bankruptcy,insolvency or other similar laws providing for relief of debtors, whether suchfiling is voluntary or involuntary or (ii) which has or should have (inaccordance with Providian’s customary policies and procedures) an internalcredit rating to that effect;

 

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(c)           anyaccount (i) that has been charged-off or (ii) which has or should have (inaccordance with Providian’s customary policies and procedures) an accountstatus to that effect;

 

(d)           anyaccount (i) the cardholder of which is deceased or (ii) which has or shouldhave (in accordance with Providian’s customary policies and procedures) anaccount status to that effect;

 

(e)           anyaccount that is currently under litigation other than accounts that are inlegal collection but have not been charged-off; provided that accounts that aresubject to the Class Action Settlement shall not be Excluded Accounts solely byreason of being subject thereto;

 

(f)            anyaccount where the applicable cardholder would have been a member of a classaction lawsuit relating to the business practices of Providian or itsaffiliates but for the fact that such cardholder opted out of the applicablesuit or settlement;

 

(g)           anyaccount (i) with respect to which the related cardholder has notified Providianinvolves or is alleged to involve unauthorized use or fraud or a lost or stolencredit card or (ii) that has been classified, or should have been classified(in accordance with Providian’s customary policies and procedures) byProvidian, as of the Cut-Off Time, as a Lost/Stolen/Fraud credit rating;

 

(h)           anyclosed account with a net credit balance as of the Cut-Off Time;

 

(i)            anyaccount in the name of an employee, officer or director of Providian;

 

(j)            anyaccount classified, or that should have been classified (in accordance withProvidian’s customary policies and procedures) by Providian, as of the Cut-OffTime, as a security account closure or that has an internal credit rating tothat effect;

 

(k)           anyaccount that is not subject to a valid cardholder agreement that is the legal,valid and binding obligation of the related cardholder, enforceable inaccordance with its terms, except as such enforcement may be limited bybankruptcy, insolvency, reorganization, moratorium and other laws relating toor affecting creditors’ rights generally and by general equity principles or asotherwise may be limited by a right to offset, recoupment, adjustment or anyother claim under 12 CFR § 226.12(c), 12 CFR § 226.13(d) and the Soldiers’ andSailors’ Civil Relief Act of 1940, as amended;

 

(l)            anyaccount that is a Secured Account;

 

(m)          anyaccount as to which a corporate entity is the cardholder or which is issued toa cardholder due to his or her status as an employee of a company having acommercial credit card account with Providian;

 

(n)           anyaccount the cardholder of which does not have an address located in the UnitedStates, except for cardholders that have a military address;

 

(o)           anyaccount which is a merchant account and its associated processing;

 

(p)           anyaccount that has a zero balance as of the Cut-Off Time;

 

(q)           anyaccount on which the related cardholder has never made a payment;

 

(r)            anyaccount that is payable in a currency other than Dollars;

 

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(s)           anyaccount that is or may potentially be included in a certain class actionlitigation against Providian known as the “Alabama Litigation” as defined inthe Sale and Purchase Agreement;

 

(t)            anyaccount that has been re-aged in a manner not in accordance with Providian’scustomary policies and procedures; and

 

(u)           anyaccount that has activated credit protection.

 

“FDIC” shall mean the Federal Deposit InsuranceCorporation or any successor.

 

“Finance Charge Receivables” shall mean allamounts billed to the Obligors on any Account in respect of (a) allPeriodic Rate Finance Charges, (b) Cash Advance Fees, (c) annualmembership fees and annual service charges, (d) Late Fees,(e) Overlimit Fees and (f) all other fees and charges that arereflected as fees on the related Processor’s system.  Finance Charge Receivables shall also include Interchange and allRecoveries with respect to Receivables previously charged off as uncollectibleor which became Ineligible Receivables and are repurchased from the Issuer bythe Transferor or by the Accounts Owner.

 

“Governmental Authority” shall mean the UnitedStates of America, any state or other political subdivision thereof and anyentity exercising executive, legislative, judicial, regulatory oradministrative functions of or pertaining to government.

 

“Indenture” shall mean the Master Indenture, dated as of June 25, 2002, among theIssuer, the Indenture Trustee and the Note Administrator, as the same may beamended, supplemented or otherwise modified from time to time.

 

“Indenture Collateral” shall have the meaningspecified in Section 2.01.

 

“Indenture Supplement” shall have the meaningspecified in the Indenture.

 

“Indenture Trustee” shall mean U.S. BankNational Association, in its capacity as trustee under the Indenture, itssuccessors in interest and any successor indenture trustee under the Indenture.

 

“Ineligible Receivables” shall mean anyReceivable that has been determined to be a Receivable arising from a CoveredAccount (as defined in the Receivables Purchase Agreement).

 

“Initial Account” shall mean each MasterCard®and VISA® consumer revolving credit card account, which account isin existence at the Cut-Off Time and is identified in the computer file ormicrofiche list delivered to the Owner Trustee by the Transferor pursuant toSection 2.01 on or prior to the Initial Issuance Date.

 

“Initial Issuance Date” shall mean June 25,2002, the date that the Transferor Certificate is delivered by the Trust to theTransferor pursuant to the Trust Agreement.

 

“Insolvency Event” shall mean the consent of orfailure of the Transferor to object to the appointment of a bankruptcy trusteeor conservator, receiver or liquidator in any bankruptcy proceeding or otherinsolvency, readjustment of debt, marshalling of assets and liabilities orsimilar proceedings of or relating to the Transferor or relating to all orsubstantially all of the Transferor’s property, or the commencement of anaction seeking a decree or order of a court or agency or supervisory authorityhaving jurisdiction in the premises for the appointment of a bankruptcy trusteeor conservator, receiver or

 

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liquidator in any insolvency, readjustment of debt, marshalling ofassets and liabilities or similar proceedings, or for the winding-up,insolvency, bankruptcy, reorganization, conservatorship, receivership orliquidation of such entity’s affairs, or notwithstanding an objection by theTransferor any such action shall have remained undischarged or unstayed for aperiod of sixty (60) days or upon entry of any order or decree providing forsuch relief; or the Transferor shall admit in writing its inability to pay itsdebts generally as they become due, file, or consent or fail to object (orobject without dismissal of any such filing within sixty (60) days of suchfiling) to the filing of, a petition to take advantage of any applicablebankruptcy, insolvency or reorganization, receivership or conservatorshipstatute, make an assignment for the benefit of its creditors or voluntarilysuspend payment of its obligations; or any order or decree providing for reliefunder any applicable bankruptcy, insolvency or reorganization, receivership orconservatorship statute shall be entered.

 

“Insurance Proceeds” shall mean any amountsreceived pursuant to the payment of benefits under any credit life insurancepolicies, credit disability or unemployment insurance policies covering anyObligor with respect to Receivables under such Obligor’s Account.

 

“Interchange” shall mean the portion allocableto the Accounts of interchange fees payable to the Accounts Owner throughMasterCard or VISA in connection with cardholder charges for goods, servicesand cash advances.

 

“Invested Amount” shall mean, with respect toany Series and for any date, an amount equal to the invested amount or adjustedinvested amount, as applicable, specified in the related Indenture Supplement.

 

“Issuer” shall mean the Trust.

 

“Knowledge” shall mean, with respect to theServicer, what is actually known without independent investigation by anyofficer of the Servicer with a title of Vice President or above.

 

“Late Fees” shall have the meaning specified inthe Credit Card Agreement applicable to each Account for late fees or similaritems.

 

“Lien” shall mean any mortgage, deed of trust,pledge, hypothecation, assignment, deposit arrangement, equity interest,encumbrance, lien (statutory or other), preference, participation interest,priority or other security agreement or preferential arrangement of any kind ornature whatsoever, including any conditional sale or other title retentionagreement, any financing lease having substantially the same economic effect asany of the foregoing and the filing of any financing statement under the UCC orcomparable law of any jurisdiction to evidence any of the foregoing; provided,however, that any assignment permitted by subsection 3.06(b) of theTrust Agreement or Section 4.02 of, and the lien created by, this Agreementshall not be deemed to constitute a Lien.

 

“MasterCard” shall mean MasterCardInternational Incorporated, and its successors in interest.

 

“Monthly Period” shall have the meaningspecified in the Indenture.

 

“Monthly Servicing Fee” shall have the meaningspecified in Section 3.02.

 

“Moody’s” shall mean Moody’s Investors Service,Inc. and any successors thereto.

 

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“Non-Conforming Terms Change Receivables” shallmean Receivables with respect to which (a) the Accounts Owner (i) fails toimplement a change requested by CSG, LLC under the Accounts Ownership Agreementand (ii) fails to present documentation, within ten (10) Business Days afterreceiving such request for an Account change, evidencing the rights of suchAccounts Owner to object to, and decline to implement, such change inaccordance with the terms of Section 2.02 of the Accounts Ownership Agreement,and (b) the Servicer has notified the Purchaser and the Trust that CSG, LLC hasdetermined to suspend purchases rather than seek injunctive relief with respectto such failure pursuant to such Section.

 

“Note Administrator” shall mean Citibank, N.A.,in its capacity as note administrator under the Indenture, its successors ininterest and any successor note administrator under the Indenture.

 

“Note Interest Rate” shall have the meaningspecified in the Indenture.

 

“Note Owner” shall have the meaning specifiedin the Indenture.

 

“Note Register” shall have the meaningspecified in the Indenture.

 

“Noteholder” or “Holder” shall have themeaning specified in the Indenture.

 

“Notices” shall have the meaning specified insubsection 9.04(a).

 

“O/C Holder” shall mean CSG Funding, LLC.

 

“Obligor” shall mean, with respect to anyAccount, the Person or Persons obligated to make payments with respect to suchAccount, including any guarantor thereof, but excluding any merchant.

 

“Officer’s Certificate” shall have the meaningspecified in the Indenture.

 

“Opinion of Counsel” shall have the meaningspecified in the Indenture.

 

“Overlimit Fees” shall have the meaningspecified in the Credit Card Agreement applicable to each Account for overlimitfees or similar items if such fees are provided for with respect to suchAccount.

 

“Owner Trustee” shall mean Wilmington TrustCompany, not in individual its capacity, but solely as owner trustee under theTrust Agreement, its successors in interest and any successor owner trusteeunder the Trust Agreement.

 

“Paying Agent” shall have the meaning specifiedin the Indenture.

 

“Periodic Rate Finance Charges” shall have themeaning specified in the Credit Card Agreement applicable to each Account forfinance charges (due to periodic rate) or any similar items.

 

“Person” shall mean any legal person, includingany individual, corporation, limited liability company, partnership, jointventure, association, joint-stock company, trust, unincorporated organization,governmental entity or other entity of any nature.

 

“Principal Receivables” shall mean allReceivables other than Finance Charge Receivables or DefaultedReceivables.  In calculating theaggregate amount of Principal Receivables on

 

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any day, the amount of Principal Receivables shall be reduced by theaggregate amount of credit balances in the Accounts on such day.

 

“Processor” shall mean First Data Resources,Inc. or Total System Services, Inc.

 

“Providian” shall mean Providian National Bank.

 

“Rating Agency” shall have the meaningspecified in the Indenture.

 

“Rating Agency Condition” shall have themeaning specified in the Indenture.

 

“Receivables” shall mean all amounts shown onthe Servicer’s records as amounts payable by Obligors on any Account from timeto time, with respect to Principal Receivables and Finance ChargeReceivables.  Receivables which becomeDefaulted Receivables will cease to be included as Receivables as of the day onwhich they become Defaulted Receivables.

 

“Receivables Purchase Agreement” shall mean anyreceivables purchase agreement entered into between an Accounts Owner and theTransferor whereby Receivables with respect to the Accounts, certain rights towhich were purchased under the Sale and Purchase Agreement, are transferredfrom such Accounts Owner to the Transferor, or any other receivables purchaseagreement relating to the Accounts entered into between the Transferor and anAccounts Owner in the future; provided that before the Transferor shallenter into any such other receivables purchase agreement, (a) the Rating AgencyCondition is satisfied with respect to such receivables purchase agreement and(b) the O/C Holder shall have delivered to the Indenture Trustee and the NoteAdministrator an Officer’s Certificate to the effect that such officerreasonably believes that the execution and delivery of such receivablespurchase agreement and the transfer of Receivables to the Transferor will nothave an Adverse Effect.

 

“Recoveries” shallmean (i) all amounts received (net of out-of-pocket costs of collection, to theextent such costs can be netted out) including Insurance Proceeds, which arereasonably estimated by the Servicer to be attributable to DefaultedReceivables, including the net proceeds of any sale of such DefaultedReceivables and (ii) all amounts received from the Accounts Owner in respect ofsuch party’s repurchase of Ineligible Receivables from the Issuer.

 

“Redemption Event” shall have the meaningspecified in the Indenture.

 

“Registered Notes” shall have the meaningspecified in the Indenture.

 

“Related Account” shall mean an Account withrespect to which a new credit account number has been issued by the applicableAccounts Owner or the Servicer under circumstances resulting from a lost orstolen credit card and not requiring standard application and credit evaluationprocedures under the Credit Card Guidelines.

 

“Removal Date” shall have the meaning specifiedin subsection 2.08(a) or subsection 2.08(b), as applicable.

 

“Removed Receivables” shall have the meaningspecified in subsection 2.08(a) and subsection 2.08(b).

 

“Requirements of Law” shall mean any law,treaty, rule or regulation, or determination of an arbitrator or GovernmentalAuthority, whether Federal, state or local (including usury laws, the FederalTruth in Lending Act and Regulation B and Regulation Z of the Board ofGovernors of the

 

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Federal Reserve System), and, when used with respect to any Person, thecertificate of incorporation and by-laws or other organizational or governingdocuments of such Person.

 

“Sale and Purchase Agreement” shall mean theSale and Purchase Agreement, dated as of April 11, 2002, as amended by theFirst Amendment to the Sale and Purchase Agreement, dated as of May 30, 2002,each between Providian and CSG, LLC, as modified by the Sale and Purchase SideAgreement, dated as of June 25, 2002, among Providian, CSG, LLC and theTransferor, as each such agreement may be amended, supplemented or otherwisemodified from time to time.

 

“Secured Account” shall mean any Account forwhich the related Obligor has pledged assets or made a cash collateral depositas security for payment of the Receivables arising in such Account.

 

“Series” shall have the meaning specified inthe Indenture.

 

“Series Account” shall have the meaningspecified in the Indenture.

 

“Series Enhancement” shall have the meaningspecified in the Indenture.

 

“Series Enhancer” shall have the meaningspecified in the Indenture.

 

“Service Transfer” shall have the meaningspecified in Section 7.01.

 

“Servicer” shall mean CompuCredit and, afterany Service Transfer, the Successor Servicer.

 

“Servicer Default” shall have the meaningspecified in Section 7.01.

 

“Servicing Fee” shall have the meaningspecified in Section 3.02.

 

“Servicing Fee Rate” shall mean, with respectto any Series, the servicing fee rate specified in the related IndentureSupplement.

 

“Standard & Poor’s” shall mean Standard& Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc.,and any successors thereto.

 

“Successor Servicer” shall have the meaningspecified in subsection 7.02(a).

 

“Tax Opinion” shall have the meaning specifiedin the Indenture.

 

“Termination Notice” shall have the meaningspecified in subsection 7.01(d).

 

“Transaction Documents” shall have the meaningspecified in the Indenture.

 

“Transfer Agent and Registrar” shall have themeaning specified in the Indenture.

 

“Transferor” shall mean PACCT, LLC, or itssuccessor under this Agreement.

 

“Transferor Amount” shall have the meaningspecified in the Indenture.

 

“Transferor Certificates” shall have themeaning specified in the Trust Agreement.

 

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“Transferred Account” shall mean each accountinto which an Account shall be transferred; provided that (i) suchtransfer was made in accordance with the Credit Card Guidelines and (ii) suchaccount can be traced or identified as an account into which an Account hasbeen transferred.

 

“Trust” shall mean the CSGQ Trust.

 

“Trust Agreement” shall mean the TrustAgreement relating to the Trust, dated as of June 24, 2002, among theTransferor, the O/C Holder and the Owner Trustee, as the same may be amended,supplemented or otherwise modified from time to time.

 

“Trust Assets” shall have the meaning specifiedin Section 2.01.

 

“UCC” shall mean the Uniform Commercial Code,as amended from time to time, as in effect in any specified jurisdiction.

 

“VISA” shall mean VISA U.S.A., Inc., and itssuccessors in interest.

 

Section 1.02.          OtherDefinitional Provisions.

 

(a)           Withrespect to any Series, all terms used herein and not otherwise defined hereinshall have meanings ascribed to them in the Trust Agreement, the Indenture orthe related Indenture Supplement, as applicable.

 

(b)           Allterms defined in this Agreement shall have the defined meanings when used inany certificate or other document made or delivered pursuant hereto unlessotherwise defined therein.

 

(c)           Asused in this Agreement and in any certificate or other document made ordelivered pursuant hereto or thereto, accounting terms not defined in thisAgreement or in any such certificate or other document, and accounting termspartly defined in this Agreement or in any such certificate or other documentto the extent not defined, shall have the respective meanings given to themunder GAAP.  To the extent that thedefinitions of accounting terms in this Agreement or in any such certificate orother document are inconsistent with the meanings of such terms under GAAP, thedefinitions contained in this Agreement or in any such certificate or otherdocument shall control.

 

(d)           Anyreference to a Rating Agency shall apply to a specific rating agency only ifsuch rating agency is then rating any outstanding Series.

 

(e)           Unlessotherwise specified, references to any amount as on deposit or outstanding onany particular date shall mean such amount at the close of business on suchday.

 

(f)            Thewords “hereof,” “herein,” “hereunder” and words of similar import when used inthis Agreement shall refer to this Agreement as a whole and not to anyparticular provision of this Agreement; references to any subsection, Section,Schedule or Exhibit are references to subsections, Sections, Schedules and Exhibitsin or to this Agreement unless otherwise specified; and the term “including”means “including without limitation.”

 

**[**END OF ARTICLE I**]**

 

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ARTICLE II

 

CONVEYANCE OF RECEIVABLES

 

Section 2.01.          Conveyanceof Receivables. By execution of this Agreement, PACCT, LLC does hereby transfer, assign,set over and otherwise convey to the Trust, without recourse except as providedherein, all its right, title and interest, whether now owned or hereafteracquired, in, to and under the Receivables existing at the close of business onthe Cut-Off Date and thereafter created from time to time in the InitialAccounts until the termination of the Trust, all Interchange and Recoveriesallocable to the Trust as provided herein, all its right, title and interestin, to and under the Receivables Purchase Agreement, all monies due or tobecome due and all amounts received or receivable with respect thereto and allproceeds (including “proceeds” as defined in the UCC) thereof.  The property described in the precedingsentence, together with all monies and other property credited to theCollection Account and the Series Accounts (including any subaccounts of anysuch account), the rights of the Trust under this Agreement and the TrustAgreement and the right to receive Recoveries attributed to cardholder chargesfor merchandise and services in the Accounts shall constitute the assets of theTrust (the “**Trust Assets**”). The foregoing does not constitute and is not intended to result in thecreation or assumption by the Trust, the Owner Trustee (as such or in itsindividual capacity), the Indenture Trustee, the Note Administrator, theCertificate Trustee, the Certificate Administrator or any Noteholder of anyobligation of any Accounts Owner, any Transferor, the Servicer or any otherPerson in connection with the Accounts or the Receivables or under anyagreement or instrument relating thereto, including any obligation to Obligors,merchant banks, merchants clearance systems, VISA, MasterCard or insurers.  The Obligors shall not be notified inconnection with the creation of the Trust of the transfer, assignment, set-overand conveyance of the Receivables to the Trust.

 

The Transferor agrees to record and file, at the O/CHolder’s expense, financing statements (and continuation statements whenapplicable) with respect to the Receivables conveyed by the Transferor existingat the Cut-Off Time and thereafter created meeting the requirements ofapplicable state law in such manner and in such jurisdictions as are necessaryto perfect, and maintain the perfection of, the transfer and assignment of itsinterest in such Receivables to the Trust, and to deliver a file stamped copyof each such financing statement or other evidence of such filing to the OwnerTrustee as soon as practicable after the first Closing Date, in the case ofReceivables arising in the Initial Accounts. The Owner Trustee shall be under no obligation whatsoever to file suchfinancing or continuation statements or to make any other filing under the UCCin connection with such transfer and assignment.

 

The Transferor further agrees, at the O/C Holder’sexpense, on or prior to (x) the first Closing Date, in the case of the InitialAccounts and (y) the applicable Removal Date, in the case of the Accountsrelating to any Removed Receivables, (a) to cause the Accounts Owner toindicate in its respective computer files that Receivables created (orreassigned, in the case of Removed Receivables) in connection with the Accountshave been conveyed to the Trust pursuant to this Agreement (or conveyed to theServicer or its designee in accordance with Section 2.08, in the case ofRemoved Receivables) by including in (or deleting from in the case of RemovedReceivables) such computer files the bank agent numbers as indicated on **Schedule3** to this Agreement indicating the Trust’s ownership of theReceivables, and (b) to deliver to the Trust a computer file or microfiche listcontaining a true and complete list of all such Accounts specifying for eachsuch Account, as of the Cut-Off Date, in the case of the Initial Accounts, andthe applicable Removal Date in the case of Accounts relating to any RemovedReceivables, its account number and the aggregate amount outstanding in suchAccount.  Each such file or list, assupplemented, from time to time, to reflect Removed Receivables, shall bemarked as **Schedule 1** to this Agreement and is hereby incorporatedinto and made a part of this Agreement. The Transferor further agrees not to alter the code referenced in thisparagraph with respect to any Account during the term of this Agreement unlessand until the Receivables in such Account become Removed Receivables.

 

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The parties to this Agreement intend that theconveyance of the Receivables and other Trust Assets pursuant to this Agreementconstitute a sale, and not a secured borrowing, for accounting purposes.  Notwithstanding such intent, if thearrangements with respect to the Receivables hereunder shall constitute a loanand not a purchase and sale of such Receivables, it is the intention of theparties hereto that this Agreement shall constitute a security agreement underapplicable law, and the Transferor hereby grants to the Trust a first priorityperfected security interest in all of the Transferor’s right, title andinterest, whether owned as of the Cut-Off Date or thereafter acquired, in, toand under the Trust Assets, and all money, accounts, general intangibles,chattel paper, instruments, documents, goods, investment property, depositaccounts, certificates of deposit, letters of credit, and advices of creditconsisting of, arising from or related to the Trust Assets, and all proceedsthereof, to secure its obligations hereunder.

 

To the extent that the Transferor retains any interestin the Trust Assets, the Transferor hereby grants to the Indenture Trustee forthe benefit of the Noteholders and the O/C Holder a security interest in all ofthe Transferor’s right, title, and interest, whether owned on the Cut-Off Dateor thereafter acquired, in, to, and under the Trust Assets, and all money,accounts, general intangibles, chattel paper, instruments, documents, goods,investment property, deposit accounts, certificates of deposit, letters of credit,and advices of credit consisting of, arising from, or related to the TrustAssets, and all proceeds thereof (collectively, the “**Indenture Collateral**”),to secure its obligations hereunder. With respect to the Indenture Collateral,the Indenture Trustee shall have all of the rights that it has under theIndenture and all of the rights of a secured creditor under the UCC.

 

In consideration for the Receivables in the Accountsat the initial Closing Date and the other Trust Assets transferred to the Truston the date of this Agreement, the Trust shall convey to the Transferor thesecurities set forth on **Schedule 2** hereto.  With respect to the transfer of theReceivables in the Accounts created after the initial Closing Date, the Trustshall pay to the Transferor an amount equal to the principal amount of suchReceivables; provided that if so directed by CSG, LLC in accordance withthe terms of Section 2.02 of the Accounts Ownership and AdministrationAgreement, the Trust shall not make any payments to the Transferor (but theTransferor shall remain obligated to transfer such Receivables to the Trust inaccordance with the first paragraph of this Section 2.01) with respect to anyNon-Conforming Terms Change Receivables (as defined in the Receivables PurchaseAgreement).

 

Section 2.02.          Acceptanceby Trust.

 

(a)           TheTrust hereby acknowledges its acceptance of all right, title and interest tothe property, now existing and hereafter created, conveyed to the Trustpursuant to Section 2.01.  The Trustfurther acknowledges that, prior to or simultaneously with the execution anddelivery of this Agreement, the Transferor delivered to the Trust the computerfile or microfiche list relating to the Initial Accounts described in the thirdparagraph of Section 2.01.  The Trustshall maintain a copy of **Schedule 1**, as delivered from time totime, with the Administrator.

 

(b)           TheTrust hereby agrees not to disclose to any Person any of the account numbers orother information contained in the computer files or microfiche lists marked as**Schedule1** and delivered to the Trust, from time to time, except (i) to aSuccessor Servicer or as required by a Requirement of Law, (ii) in connectionwith the performance of the Owner Trustee’s or the Trust’s duties hereunder,(iii) to the Note Administrator and the O/C Holder in connection with itsduties hereunder and under the other Transaction Documents, (iv) to theIndenture Trustee in connection with its duties in enforcing the rights ofNoteholders or (v) to bona fide creditors or potential creditors of anyAccounts Owner, the Servicer, or the Transferor for the limited purpose ofenabling any such creditor to identify applicable Receivables or Accountssubject to this Agreement.  The Trustagrees to take such measures as shall be reasonably requested by the Transferoror the O/C Holder to protect and maintain the security and

 

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confidentiality of such information and, in connection therewith, shallallow the Transferor or the O/C Holder or their duly authorized representativesto inspect the Trust’s security and confidentiality arrangements as theyspecifically relate to the administration of the Trust from time to time duringnormal business hours upon prior written notice.  The Trust shall provide the Transferor and the O/C Holder withnotice five (5) Business Days prior to disclosure of any information of thetype described in this subsection 2.02(b).

 

Section 2.03.          Representationsand Warranties of the Transferor Relating to the Transferor.  The Transferor hereby represents andwarrants to the Trust (and agrees that the Owner Trustee, the NoteAdministrator and the Indenture Trustee may conclusively rely on each suchrepresentation and warranty in accepting the Receivables in trust and theIndenture Trustee may conclusively rely on each such representation andwarranty in authenticating the Notes) and the Servicer as of each Closing Datethat:

 

(a)           Organizationand Good Standing.  The Transferoris duly formed, validly existing and in good standing under the laws of thejurisdiction of its formation and has, in all material respects, full power andauthority to own its properties and conduct its business as presently owned orconducted, and to execute, deliver and perform its obligations under thisAgreement and any Receivables Purchase Agreement to which it is a party.

 

(b)           DueQualification.  The Transferor isduly qualified to do business and is in good standing as a foreign limitedliability company (or is exempt from such requirements) and has obtained allnecessary licenses and approvals, in each jurisdiction in which failure to soqualify or to obtain such licenses and approvals would (i) render any CreditCard Agreement relating to an Account specified in a Receivables Purchase Agreementwith the Transferor or any Receivable conveyed to the Trust unenforceable bythe Transferor or the Trust or (ii) have a material adverse effect on theNoteholders.

 

(c)           DueAuthorization.  (i) Theexecution and delivery of this Agreement and any Receivables Purchase Agreementto which it is a party and the order to the Owner Trustee to have the Notesauthenticated and delivered and the consummation by the Transferor of thetransactions provided for in this Agreement and any Receivables Purchase Agreementto which it is a party have been duly authorized by the Transferor by allnecessary limited liability company action on the part of the Transferor and(ii) this Agreement and each Receivables Purchase Agreement to which it is aparty will remain, from the time of its execution, an official record of theTransferor.

 

(d)           NoConflict.  The execution anddelivery by the Transferor of this Agreement and each Receivables PurchaseAgreement to which it is a party, and the performance of the transactionscontemplated by this Agreement and each Receivables Purchase Agreement to whichit is a party and the fulfillment of the terms hereof and thereof applicable tothe Transferor, will not conflict with or violate any Requirements of Lawapplicable to the Transferor or conflict with, result in any breach of any ofthe material terms and provisions of, or constitute (with or without notice orlapse of time or both) a material default under, any indenture, contract,agreement, mortgage, deed of trust or other instrument to which the Transferoris a party or by which it or its properties are bound.

 

(e)           NoProceedings.  There are noproceedings or investigations pending or, to the best knowledge of theTransferor, threatened against the Transferor before any Governmental Authority(i) asserting the invalidity of this Agreement and any Receivables PurchaseAgreement to which it is a party, (ii) seeking to prevent the consummation ofany of the transactions contemplated by this Agreement or any ReceivablesPurchase Agreement to which it is a party, (iii) seeking any determination orruling that, in the reasonable judgment of the Transferor, would materially andadversely affect the performance by the Transferor of its obligations underthis Agreement or any Receivables Purchase

 

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Agreement to which it is a party, (iv) seeking any determination orruling that would materially and adversely affect the validity orenforceability of this Agreement or any Receivables Purchase Agreement to whichit is a party or (v) seeking to affect adversely the income or franchise taxattributes of the Trust under the United States Federal or any State income orfranchise tax systems.

 

(f)            AllConsents.  All authorizations,consents, orders or approvals of or registrations or declarations with anyGovernmental Authority required to be obtained, effected or given by theTransferor in connection with the execution and delivery by the Transferor ofthis Agreement or any Receivables Purchase Agreement to which it is a party andthe performance of the transactions contemplated by this Agreement or anyReceivables Purchase Agreement to which it is a party by the Transferor havebeen duly obtained, effected or given and are in full force and effect.

 

(g)           Insolvency.  No Insolvency Event with respect to theTransferor has occurred and the transfer of the Receivables by the Transferorto the Trust has not been made in contemplation of the occurrence thereof orwith the intent to hinder, delay or defraud the Transferor or the creditors ofthe Transferor.

 

The representations and warranties of the Transferorset forth in this Section 2.03 shall survive the transfer and assignment by theTransferor of the Receivables to the Trust, the pledge of the Receivables tothe Indenture Trustee pursuant to the Indenture, and the issuance of theNotes.  Upon discovery by theTransferor, the Servicer or the Owner Trustee of a breach of any of therepresentations and warranties by the Transferor set forth in this Section 2.03,the party discovering such breach shall give prompt written notice to the otherparties, the O/C Holder and the Indenture Trustee.  The Transferor (or, to the extent appropriate, the O/C Holder)agrees to cooperate with the Servicer and the Owner Trustee in attempting tocure any such breach.

 

Section 2.04.          Representationsand Warranties of the Transferor Relating to this Agreement and the ReceivablesPurchase Agreements and the Receivables.

 

(a)           Representationsand Warranties.  The Transferorhereby severally represents and warrants as of the date of this Agreement andas of each Closing Date, to the Trust and the Servicer that:

 

(i)            each of this Agreement and eachReceivables Purchase Agreement to which it is a party, constitutes a legal,valid and binding obligation of the Transferor enforceable against theTransferor in accordance with its terms, except as such enforceability may belimited by applicable bankruptcy, insolvency, reorganization, moratorium orother similar laws affecting creditors’ rights generally from time to time ineffect or general principles of equity;

 

(ii)           each Receivable conveyed to the Trustby the Transferor has been conveyed to the Trust free and clear of any Lien ofany Person claiming through or under the Transferor or any of its Affiliates(other than Liens permitted under subsection 2.06(b)) and in compliance withall Requirements of Law applicable to the Transferor;

 

(iii)          all authorizations, consents, ordersor approvals of or registrations or declarations with any GovernmentalAuthority required to be obtained, effected or given by the Transferor inconnection with the conveyance by the Transferor of Receivables to the Trusthave been duly obtained, effected or given and are in full force and effect;

 

(iv)          this Agreement constitutes an absolutesale, transfer and assignment to the Trust of all right, title and interest ofthe Transferor in the Receivables conveyed to the Trust by the Transferor andthe proceeds thereof and Recoveries and Interchange identified as relating tothe

 

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Receivables conveyed to the Trust by the Transferoror, if this Agreement does not constitute a sale of such property, itconstitutes a grant of a first priority perfected “security interest” (asdefined in the UCC) in such property to the Trust, which, in the case ofexisting Receivables and the proceeds thereof and said Recoveries andInterchange, is enforceable upon execution and delivery of this Agreement, andwhich will be enforceable with respect to such Receivables hereafter andthereafter created and the proceeds thereof upon such creation.  Upon the filing of the financing statementsand, in the case of Receivables hereafter created and the proceeds thereof,upon the creation thereof, the Trust shall have a first priority perfectedsecurity or ownership interest in such property and proceeds;

 

(v)           as of the Cut-Off Time, eachReceivable was an Eligible Receivable;

 

(vi)          as of the Cut-Off Time, each Accountin which the Receivables arose was an Eligible Account;

 

(vii)         as of the Cut-Off Time, each Account inwhich the Receivables arose was not an Excluded Account;

 

(viii)        as of the time of transfer to the Trustby the Transferor, each Receivable is an Eligible Receivable; and

 

(ix)           except as otherwise expresslyprovided in this Agreement, the Indenture or any Indenture Supplement, neitherthe Transferor nor any Person claiming through or under the Transferor has anyclaim to or interest in the Collection Account, any Series Account or any SeriesEnhancement.

 

(b)           Notice of Breach.  The representations and warranties set forthin Section 2.03 and this Section 2.04 shall survive the transfers andassignments of the Receivables to the Trust, the pledge of the Receivables tothe Indenture Trustee pursuant to the Indenture, and the issuance of theNotes.  Upon discovery by anyTransferor, the Servicer or the Owner Trustee of a breach of any of therepresentations and warranties set forth in Section 2.03 or this Section 2.04,the party discovering such breach shall give notice to the other parties and tothe Indenture Trustee, the Note Administrator and the O/C Holder within three(3) Business Days following such discovery; provided that the failure togive notice within three (3) Business Days does not preclude subsequent notice.

 

Section 2.05.          Reassignmentof Ineligible Receivables.  Uponreassignment of any Ineligible Receivable to an Accounts Owner pursuant to aReceivables Purchase Agreement or the Sale and Purchase Agreement and paymentto the Trust of the amount required to be paid to it by such Accounts Owner,the Trust shall automatically and without further action be deemed to transfer,assign, set over and otherwise convey to the applicable Accounts Owner or itsdesignee, without recourse, representation or warranty, all the right, titleand interest of the Trust in and to such Ineligible Receivable, all Interchangeand Recoveries related thereto, all monies and amounts due or to become due andall proceeds thereof.  The Trust shallexecute such documents and instruments of transfer or assignment and take suchother actions as shall reasonably be requested and provided by the applicableAccounts Owner to effect the conveyance of such Ineligible Receivables.

 

Section 2.06.          Covenantsof the Transferor.  The Transferorhereby severally covenants that:

 

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(a)           ReceivablesNot To Be Evidenced by Promissory Notes. Except in connection with its enforcement or collection of anyReceivable, the Transferor will take no action to cause any Receivable conveyedby it to the Trust to be evidenced by any instrument (as defined in the UCC).

 

(b)           SecurityInterests.  Except for theconveyances hereunder, the Transferor will not sell, pledge, assign or transferto any other Person, or grant, create, incur, assume or suffer to exist anyLien on, any Receivable conveyed by it to the Trust, whether now existing orhereafter created, or any interest therein, and the Transferor shall defend theright, title and interest of the Trust and the Indenture Trustee in, to andunder the Receivables, whether now existing or hereafter created, against allclaims of third parties claiming through or under the Transferor; provided,however, that nothing in this subsection 2.06(b) shall prevent or bedeemed to prohibit the Transferor from suffering to exist upon any of theReceivables transferred by it to the Trust any Liens for municipal or otherlocal taxes if such taxes shall not at the time be due and payable or if theTransferor shall currently be contesting the validity thereof in good faith byappropriate proceedings and shall have set aside on its books adequate reserveswith respect thereto.

 

(c)           TransferorAmount.  Except for (i) theconveyances hereunder, in connection with any transaction permitted bysubsection 4.02(a)(i) and as provided in Section 2.11 of the Indenture or(ii) conveyances with respect to which the Rating Agency Condition shallhave been satisfied and a Tax Opinion shall have been delivered, the Transferoragrees not to transfer, sell, assign, exchange or otherwise convey or pledge,hypothecate or otherwise grant a security interest in the Transferor Amount orthe Transferor Certificate and any such attempted transfer, assignment,exchange, conveyance, pledge, hypothecation, grant or sale shall be void.

 

(d)           Deliveryof Collections or Recoveries.  Inthe event that the Transferor receives Collections or Recoveries, theTransferor agrees to pay the Servicer all such Collections and Recoveries assoon as practicable after receipt thereof but in no event later than twoBusiness Days after the date of receipt thereof.

 

(e)           Noticeof Liens.  The Transferor shallnotify the Owner Trustee, the Indenture Trustee, the O/C Holder and each SeriesEnhancer promptly after becoming aware of any Lien on any Receivable (or on theunderlying receivable) other than the conveyances hereunder and under theIndenture.

 

Section 2.07.          Covenantsof the Transferor with Respect to Receivables Purchase Agreements.  The Transferor hereby covenants that it willat all times enforce the covenants and agreements of the Accounts Owner underthe terms of the Receivables Purchase Agreements to which it is a party,including covenants to the effect set forth below:

 

(a)           CreditCard Agreements and Guidelines. Such Accounts Owner shall comply with and perform its obligations underthe Credit Card Agreements relating to the Accounts owned by it and the CreditCard Guidelines and all applicable rules and regulations of MasterCard and VISAexcept insofar as any failure so to comply or perform would not materially andadversely affect the rights of the Trust or the Noteholders.  Subject to compliance with all Requirementsof Law, such Accounts Owner may change the terms and provisions of the CreditCard Agreements or the Credit Card Guidelines with respect to any of theAccounts owned by it in any respect (including the calculation of the amount orthe timing of charge-offs and the Periodic Rate Finance Charges and other feesto be assessed thereon) only if (i) such change is permitted by the AccountsOwnership and Administration Agreement or the relevant Receivables PurchaseAgreement or (ii) the Servicer reasonably determines at the time of such actionthat such change is reasonably likely to increase aggregate Collections on theReceivables and that such action, at the time of such action, will not have amaterial adverse effect on the Noteholders.

 

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(b)           MasterCardand VISA.  Such Accounts Owner, tothe extent applicable to Accounts owned or serviced by such Accounts Owner,shall use its best efforts to remain, either directly or indirectly, a memberin good standing of the MasterCard system, the VISA system and any othersimilar entity’s or organization’s system relating to any other type ofconsumer revolving credit card accounts included as Accounts.

 

(c)           Amendments.  The Transferor further covenants that itwill not enter into any amendments to any Receivables Purchase Agreement orenter into a new Receivables Purchase Agreement unless the Rating AgencyCondition has been satisfied.

 

Section 2.08.          Removalof Receivables.  (a) On any day ofany Monthly Period the Servicer shall have the right to require the assignmentto it or its designee of all the Trust’s right, title and interest in, to andunder the Receivables then existing and thereafter created, all Interchange andRecoveries related thereto after the Removal Date, all monies due or to becomedue and all amounts received or receivable with respect thereto, and allproceeds thereof in or with respect to Receivables relating to closed Accountsthe balances of which have been reduced to zero (such Receivables beingreferred to in this subsection as the “**Removed Receivables**”) (unless otherwiseset forth in the applicable Indenture Supplement), upon satisfaction of theconditions in clauses (i) through (iv) below:

 

(i)            on or before the fifth Business Dayimmediately preceding the Removal Date, the Servicer shall have given writtennotice to the Owner Trustee, the Indenture Trustee, the Note Administrator, theAccounts Owner, the Transferor, the O/C Holder, the Rating Agency and eachSeries Enhancer (unless such notice requirement is otherwise waived) of suchremoval and specifying the date for removal of the Removed Receivables (suchdate referred to in this subsection as the “**Removal Date**”);

 

(ii)           on or prior to the date that is five(5) Business Days before the Removal Date, the Servicer shall amend **Schedule1** by delivering to the Owner Trustee a computer file ormicrofiche list containing a true and complete list of the Removed Receivables;

 

(iii)          the Servicer shall have representedand warranted as of the Removal Date that the list of Removed Receivablesdelivered pursuant to paragraph (ii) above, as of the Removal Date, is true andcomplete in all material respects; and

 

(iv)          the removal of the Removed Receivablesshall not preclude the transfers of Receivables and other Trust Assets pursuantto this Agreement from being accounted for as sales under GAAP.

 

Upon satisfaction of the above conditions, the OwnerTrustee, on behalf of the Trust, shall execute and deliver to the Transferor,the O/C Holder and the Servicer a written reassignment in substantially theform of **Exhibit B** (the “**Reassignment**”) and shall, withoutfurther action, transfer, assign, set over and otherwise convey to the Serviceror its designee, effective as of the Removal Date, without recourse,representation or warranty, all the right, title and interest of the Trust inand to the Removed Receivables existing as of the Removal Date and thereaftercreated, all Collections allocable or with respect thereto, all monies due orto become due and all amounts received or receivable with respect thereto, andall proceeds thereof.  In addition, theOwner Trustee, on behalf of the Trust, shall execute such other documents andinstruments of transfer or assignment and take such other actions as shallreasonably be requested by the Transferor or the Servicer to effect theconveyance of Receivables pursuant to this subsection 2.08(a).

 

(b) On the 10th day of each calendar month (or, ifsuch day is not a Business Day, the

 

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next Business Day) (such date referred to in this subsection as the “**Removal Date**”),the Trust shall automatically and without further action or consideration,transfer, assign, set over and otherwise convey to the Servicer, withoutrecourse, representation or warranty, all right, title and interest of theTrust in, to and under each Receivable relating to Accounts that have beencharged-off with respect to the prior Monthly Period (such Receivables beingreferred to in this subsection as the “**Removed Receivables**”), all Collectionsallocable or with respect thereto, all monies and amounts due or to become duewith respect thereto, and all proceeds thereof; provided that Recoveries ofsuch Removed Receivables shall be treated as Collections of Finance ChargeReceivables.  The Trust shall executeand deliver such instruments of transfer and assignment (including any UCCtermination statements), in each case without recourse, as shall be reasonablyrequested by the Servicer to vest in the Servicer or its designee all right,title and interest that the Trust had in such Removed Receivables.

 

**[**END OF ARTICLE II**]**

 

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ARTICLE III

 

ADMINISTRATION ANDSERVICING

OF RECEIVABLES

 

Section 3.01.          Acceptanceof Appointment and Other Matters Relating to the Servicer.

 

(a)           Beginningon the Closing Date, CompuCredit agrees to act as the initial Servicer underthis Agreement, and the Noteholders and the O/C Holder by their acceptance ofNotes and the O/C Certificate, respectively, consent to CompuCredit acting asServicer.

 

(b)           Asagent for the Transferor and the Trust, the Servicer shall service theReceivables, shall collect and deposit into the Collection Account amountsreceived with respect to the Receivables and shall charge off as uncollectibleReceivables, all in accordance with its customary and usual servicingprocedures for servicing credit card receivables comparable to the Receivablesand in accordance with the Credit Card Guidelines.

 

(c)           Asagent for the Transferor and the Trust, the Servicer shall have full power andauthority, acting alone or through any party properly designated by ithereunder, to do any and all things in connection with such servicing andadministration which it may deem necessary or desirable.  Without limiting the generality of the foregoingand subject to Section 7.01, the Servicer or its designee is hereby authorizedand empowered, unless such power is revoked by the Indenture Trustee on accountof the occurrence of a Servicer Default pursuant to Section 7.01, (i) toinstruct the Owner Trustee or the Note Administrator to make withdrawals andpayments from the Collection Account and any Series Account, as set forth inthis Agreement, the Indenture or any Indenture Supplement, (ii) to take anyaction required or permitted under any Series Enhancement, as set forth in thisAgreement, the Indenture or any Indenture Supplement, (iii) to execute anddeliver, on behalf of the Trust, any and all instruments of satisfaction orcancellation, or of partial or full release or discharge, and all othercomparable instruments, with respect to the Receivables and, after thedelinquency of any Receivable and to the extent permitted under and incompliance with applicable Requirements of Law, to commence collectionproceedings with respect to such Receivable, (iv) to make any filings, reports,notices, applications and registrations with, and to seek any consents orauthorizations from, the Securities and Exchange Commission and any statesecurities authority on behalf of the Trust as may be necessary or advisable tocomply with any Federal or state securities or reporting requirements or otherlaws or regulations and (v) to enforce on behalf of the Transferor, the Trust,the Noteholders and the O/C Holder all rights and powers granted to theTransferor under the Sale and Purchase Agreement or any Receivables PurchaseAgreement, including the institution of appropriate legal proceedings.  The Owner Trustee, the Note Administratorand the Indenture Trustee upon written request therefor shall furnish the Servicerwith any documents necessary or appropriate to enable the Servicer to carry outits servicing and administrative duties hereunder.

 

(d)           Neitherthe Servicer nor any Successor Servicer shall be obligated to use separateservicing procedures, offices, employees or accounts for servicing theReceivables from the procedures, offices, employees and accounts used by theServicer or such Successor Servicer, as the case may be, in connection withservicing other credit card receivables.

 

(e)           TheServicer shall comply with and perform its servicing obligations with respectto the Accounts and Receivables in accordance with the Credit Card Agreementsrelating to the Accounts and the Credit Card Guidelines and all applicablerules and regulations of MasterCard and VISA, except insofar as any failure toso comply or perform would not materially and adversely affect the Trust or theNoteholders.

 

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Section 3.02.          ServicingCompensation.

 

As full compensation for its servicing activitieshereunder and as reimbursement for any expense incurred by it in connectiontherewith, the Servicer shall be entitled to receive a servicing fee (the “**ServicingFee**”) with respect to each Monthly Period beginning with thefirst Monthly Period, payable monthly on the related Distribution Date, in anamount equal to one-twelfth of the product of (a) the weighted average of theServicing Fee Rates with respect to each outstanding Series (based upon theServicing Fee Rate for each Series and the Invested Amount (or such other amountas specified in the related Indenture Supplement) of such Series, in each caseas of the last day of the prior Monthly Period or, in the case of the firstMonthly Period, as of the Closing Date) and (b)(i) the sum of (A) the amount ofReceivables on the first day of the Monthly Period preceding such DistributionDate (or, in the case of the first Monthly Period, the Closing Date) and (B)the amount of Receivables on the last day of the Monthly Period preceding suchDistribution Date divided by (ii) two. The share of the Servicing Fee allocable to a Series with respect to anyMonthly Period (the “**Monthly Servicing Fee**”) shall bedetermined in accordance with the relevant Indenture Supplement.  The portion of the Servicing Fee withrespect to any Monthly Period not paid pursuant to the preceding sentence shallbe paid by the Holders of the Transferor Certificates on the relatedDistribution Date and in no event shall the Trust, the O/C Holder, the OwnerTrustee (as such or in its individual capacity), the Indenture Trustee, theNote Administrator, the Certificate Administrator, the Certificate Trustee, theNoteholders of any Series or any Series Enhancer be liable for the share of theServicing Fee with respect to any Monthly Period to be paid by the Holders ofthe Transferor Certificates.

 

Section 3.03.          Representations,Warranties and Covenants of the Servicer. The Servicer hereby makes, and any Successor Servicer by its appointmenthereunder shall make, with respect to itself, on each Closing Date (and on thedate of any such appointment, in the case of any Successor Servicer), thefollowing representations, warranties and covenants on which the Trust and theIndenture Trustee shall be deemed to have relied in accepting the Receivablesin trust and in entering into the Indenture:

 

(a)           Organizationand Good Standing.  The Servicer isa corporation or limited liability company validly existing and in goodstanding under the applicable law of the jurisdiction of its incorporation ororganization, or is a national bank duly organized and validly existing in goodstanding under the laws of the United States, and has, in all materialrespects, full power and authority to own its properties and conduct its creditcard servicing business as presently owned or conducted, and to execute,deliver and perform its obligations under this Agreement.

 

(b)           DueQualification.  The Servicer is dulyqualified to do business and is in good standing as a foreign corporation orother foreign entity (or is exempt from such requirements) and has obtained allnecessary licenses and approvals in each jurisdiction in which the servicing ofthe Receivables (including the underlying receivables) as required by thisAgreement requires such qualification except where the failure to so qualify orobtain licenses or approvals would not have a material adverse effect on itsability to perform its obligations as Servicer under this Agreement.

 

(c)           DueAuthorization.  The execution,delivery, and performance of this Agreement and the other agreements andinstruments executed or to be executed by the Servicer as contemplated herebyhave been duly authorized by the Servicer by all necessary action on the partof the Servicer.

 

(d)           BindingObligation.  This Agreementconstitutes a legal, valid and binding obligation of the Servicer, enforceablein accordance with its terms, except as such enforceability may be limited byapplicable bankruptcy, insolvency, reorganization, moratorium or other similarlaws affecting creditors’ rights generally from time to time in effect or bygeneral principles of equity.

 

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(e)           NoConflict.  The execution anddelivery of this Agreement by the Servicer, and the performance of thetransactions contemplated by this Agreement and the fulfillment of the termshereof applicable to the Servicer will not conflict with, violate or result inany breach of any of the material terms and provisions of, or constitute (withor without notice or lapse of time or both) a material default under, anyindenture, contract, agreement, mortgage, deed of trust or other instrument towhich the Servicer is a party or by which it or its properties are bound.

 

(f)            NoViolation.  The execution anddelivery of this Agreement by the Servicer, the performance of the transactionscontemplated by this Agreement and the fulfillment of the terms hereofapplicable to the Servicer will not conflict with or violate any Requirementsof Law applicable to the Servicer in any material respect.

 

(g)           NoProceedings.  There are noproceedings or investigations pending or, to the best knowledge of theServicer, threatened against the Servicer before any Governmental Authorityseeking to prevent the consummation of any of the transactions contemplated bythis Agreement or seeking any determination or ruling that, in the reasonablejudgment of the Servicer, would materially and adversely affect the performanceby the Servicer of its obligations under this Agreement.

 

(h)           Compliancewith Requirements of Law.  TheServicer shall duly satisfy all obligations on its part to be fulfilledhereunder in connection with each Receivable (and the underlying receivable)and the related Account, if any, and will maintain in effect all qualificationsrequired under Requirements of Law, and will comply in all material respectswith all other Requirements of Law in connection with servicing each Receivableand the related Account the failure to comply with which would have an AdverseEffect.

 

(i)            NoRescission or Cancellation.  Subjectto Section 3.09, the Servicer shall not permit any rescission or cancellationof any Receivable (or the underlying receivable) except in accordance with theCredit Card Guidelines or as ordered by a court of competent jurisdiction orother Governmental Authority.

 

(j)            Protectionof Rights. The Servicer shall take no action which, nor omit to take anyaction the omission of which, would substantially impair the rights of theTrust, the Indenture Trustee or the Noteholders in any Receivable (or theunderlying receivable) or the related Account, if any, nor shall it reschedule,revise or defer payments due on any Receivable except in accordance with theCredit Card Guidelines.

 

(k)           ReceivablesNot To Be Evidenced by Promissory Notes. Except in connection with its enforcement or collection of an Account,the Servicer will take no action to cause any Receivable to be evidenced by anyinstrument (as defined in the UCC).

 

(l)            AllConsents.  All authorizations,consents, orders or approvals of or registrations or declarations with anyGovernmental Authority required to be obtained, effected or given by theServicer in connection with the execution and delivery of this Agreement by theServicer and the performance of the transactions contemplated by this Agreementby the Servicer, have been duly obtained, effected or given and are in fullforce and effect.

 

(m)          Interchange.  With respect to any Distribution Date, on orprior to the immediately preceding Determination Date, the Servicer shallnotify the Transferor, the Note Administrator and the O/C Holder of theamount of Interchange required to be included as Collections of Finance ChargeReceivables with respect to the related Monthly Period.  Not later than 1:00 p.m., New York Citytime, on the related Transfer Date, the Servicer shall deposit, or cause to bedeposited, into the

 

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Collection Account, in immediately available funds, the amount ofInterchange to be so included as Collections of Finance Charge Receivables withrespect to such Monthly Period.

 

Notwithstanding anything in this Agreement to thecontrary, but without limiting its representations, warranties and covenants inthis Section 3.03, the Servicer makes no representation or warranty withrespect to title to any Accounts or the enforceability, collectibility or valueof any Receivable.

 

Section 3.04.          Reportsand Records for the Owner Trustee and the Indenture Trustee.

 

(a)           DailyRecords.  On each Business Day, theServicer shall make or cause to be made available at the office of the Servicerfor inspection by the Owner Trustee, the Note Administrator and the IndentureTrustee upon request a record setting forth (i) the Collections in respect ofPrincipal Receivables and in respect of Finance Charge Receivables processed bythe Processor and delivered to the Servicer on the second preceding BusinessDay in respect of each Account and (ii) the amount of Receivables as of theclose of business on the second preceding Business Day in each Account.  The Servicer shall, at all times, maintainits computer files with respect to the Accounts in such a manner so that theAccounts may be specifically identified and shall make available to the OwnerTrustee, the Note Administrator and the Indenture Trustee at the office of theServicer on any Business Day any computer programs necessary to make suchidentification.  The Owner Trustee, theNote Administrator and the Indenture Trustee shall enter into such reasonableconfidentiality agreements as the Servicer shall deem necessary to protect itsinterests and as are reasonably acceptable in form and substance to the OwnerTrustee, the Note Administrator and the Indenture Trustee.

 

(b)           Statementto Noteholders.  On eachDistribution Date, the Servicer will provide to the Note Administrator theinformation (in electronic format acceptable to the Note Administrator)necessary for the Note Administrator to prepare, with respect to eachoutstanding Series, the Statement to Noteholders setting forth certaininformation relating to the Trust and each Series, substantially in the formset forth in the related Indenture Supplement.

 

Section 3.05.          AnnualCertificate of Servicer.  TheServicer shall deliver to the Owner Trustee, the Indenture Trustee, the NoteAdministrator and each Rating Agency on or before June 30 of each calendaryear, beginning with June 30, 2003, an Officer’s Certificate substantially inthe form of **Exhibit A**.

 

Section 3.06.          AnnualServicing Report of Independent Public Accountants; Copies of Reports Available.

 

(a)           Onor before June 30 of each calendar year, beginning with June 30, 2003, theServicer shall cause a firm of nationally recognized independent publicaccountants (selected by the Servicer and who may also render other services tothe Servicer or the Transferor or any Accounts Owner) to furnish a report(addressed to the Indenture Trustee) to the Indenture Trustee, the NoteAdministrator, the Transferor, the Servicer and each Rating Agency to theeffect that they have applied certain procedures agreed upon with the Servicerand examined certain documents and records relating to the servicing of theReceivables under this Agreement, the Indenture and each Indenture Supplementfor the prior calendar year and that, on the basis of such agreed-uponprocedures, nothing has come to the attention of such accountants that causedthem to believe that the servicing (including the allocation of Collections setforth in Article VIII of the Indenture and in each Indenture Supplement)has not been conducted in compliance with the terms and conditions set forth inArticle III, Article VIII of the Indenture and the applicableprovisions of each Indenture Supplement, except for such exceptions as they

 

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believe to be immaterial and such other exceptions as shall be setforth in such statement.  Such reportshall set forth the agreed-upon procedures performed.

 

(b)           Onor before June 30 of each calendar year, beginning with June 30, 2003, theServicer shall cause a firm of nationally recognized independent publicaccountants (who may also render other services to the Servicer or Transferor)to furnish a report to the Indenture Trustee, the Note Administrator, theTransferor, the Servicer and each Rating Agency to the effect that they haveapplied certain procedures agreed upon with the Servicer to compare themathematical calculations of certain amounts set forth in the Servicer’scertificates delivered pursuant to subsection 3.04(b) during the period coveredby such report with the Servicer’s computer reports that were the source ofsuch amounts and that on the basis of such agreed-upon procedures andcomparison, such accountants are of the opinion that such amounts are inagreement, except for such exceptions as they believe to be immaterial and suchother exceptions as shall be set forth in such statement.  Such report shall set forth the agreed-uponprocedures performed.

 

(c)           Acopy of each certificate and report provided pursuant to subsection 3.04(b), orSection 3.05 or 3.06, may be obtained by any Noteholder or Note Owner from theOwner Trustee by a request in writing to the Owner Trustee addressed to theCorporate Trust Office.

 

Section 3.07.          TaxTreatment.  Unless otherwisespecified in the Indenture or an Indenture Supplement with respect to aparticular Series, the Issuer has entered into this Agreement, and the Noteswill be issued, with the intention that, for federal, state and local incomeand franchise tax purposes, (i) the Notes of each Series which are characterizedas indebtedness at the time of their issuance will qualify as indebtednesssecured by the Receivables and (ii) the Trust shall not be treated as anassociation or publicly traded partnership taxable as a corporation.  The Transferor, by entering into thisAgreement, and each Noteholder, by the acceptance of any such Note (and eachNote Owner, by its acceptance of an interest in the applicable Note), agree totreat such Notes for federal, state and local income and franchise tax purposesas indebtedness of the Transferor.  EachHolder of such Note agrees that it will cause any Note Owner acquiring aninterest in a Note through it to comply with this Agreement as to treatment ofsuch Note as indebtedness under applicable tax law, as described in thisSection 3.07.  The parties hereto agreethat they shall not cause or permit the making, as applicable, of any electionunder Treasury Regulation Section 301.7701-3 whereby the Trust or any portionthereof would be treated as a corporation for federal income tax purposes and,except as required by Section 6.12 of the Indenture, shall not file tax returnsor obtain any federal employer identification number for the Trust but shalltreat the Trust as a security device for federal income tax purposes.  The provisions of this Agreement shall beconstrued in furtherance of the foregoing intended tax treatment.

 

Section 3.08.          Noticesto CompuCredit.  In the event thatCompuCredit is no longer acting as Servicer, any Successor Servicer shalldeliver or make available to CompuCredit each certificate and report requiredto be provided thereafter pursuant to subsection 3.04(b) and Sections 3.05 and3.06.

 

Section 3.09.          Adjustments.

 

(a)           Ifthe Servicer or the Accounts Owner adjusts downward the amount of anyReceivable because of a rebate, refund, unauthorized charge or billing error toa cardholder, or because such Receivable was created in respect of merchandisewhich was refused or returned by a cardholder, then, in any such case, anyamount required herein or in the Indenture or any Indenture Supplement to becalculated by reference to the amount of Receivables, will be reduced by theamount of the adjustment.  Similarly,the amount of Receivables used to calculate any amount required herein or inany Indenture Supplement to be calculated by reference to the amount ofReceivables will be reduced by the principal amount of any Receivable which wasdiscovered as having been created through a fraudulent or

 

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counterfeit charge or with respect to which the covenant contained insubsection 2.06(b) was breached.  Anyadjustment required pursuant to either of the two preceding sentences shall bemade on or prior to the end of the Monthly Period in which such adjustmentobligation arises.

 

(b)           If(i) the Servicer makes a deposit into the Collection Account in respect ofa Collection of a Receivable and such Collection was received by the Servicerin the form of a check which is not honored for any reason or (ii) theServicer makes a mistake with respect to the amount of any Collection anddeposits an amount that is less than or more than the actual amount of suchCollection, the Servicer shall appropriately adjust the amount subsequentlydeposited into the Collection Account to reflect such dishonored check ormistake.  Any Receivable in respect ofwhich a dishonored check is received shall be deemed not to have beenpaid.  Notwithstanding the first twosentences of this paragraph, adjustments made pursuant to this Section 3.09shall not require any change in any report previously delivered pursuant tosubsection 3.04(a).

 

(c)           Anypayments received by the Accounts Owner with respect to refused or returnedmerchandise shall, to the extent the related Principal Receivable has beenpurchased from the Accounts Owner and conveyed to the Trust, be paid to theServicer and deposited in the Collection Account and treated as Collections ofPrincipal Receivables.

 

**[**END OF ARTICLE III**]**

 

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ARTICLE IV

 

OTHER MATTERS RELATING TOTHE TRANSFEROR

 

Section 4.01.          Liabilityof the Transferor.  The Transferorshall be liable for all obligations, covenants, representations and warrantiesof the Transferor arising under or related to this Agreement.  The Transferor shall be liable only to theextent of the obligations specifically undertaken by it in its capacity asTransferor.

 

Section 4.02.          Mergeror Consolidation of, or Assumption of the Obligations of, the Transferor.

 

(a)           TheTransferor shall not dissolve, liquidate, consolidate with or merge into anyother corporation or convey, transfer or sell its properties and assetssubstantially as an entirety to any Person unless:

 

(i)            (x) the corporation formed bysuch consolidation or into which the Transferor is merged or the Person whichacquires by conveyance, transfer or sale the properties and assets of theTransferor substantially as an entirety shall be, if the Transferor is not thesurviving entity, organized and existing under the laws of the United States ofAmerica or any state or the District of Columbia, and shall be a savingsassociation, a national banking association, a bank or other entity which isnot eligible to be a debtor in a case under Title 11 of the United States Codeor shall be a special purpose corporation or other special purpose entity whosepowers and activities are limited to substantially the same degree as providedin the organizational documents of PACCT, LLC and, if the Transferor is not thesurviving entity, shall expressly assume, by an agreement supplemental hereto,executed and delivered to the Owner Trustee, the Indenture Trustee and theServicer, in form reasonably satisfactory to the Owner Trustee, the IndentureTrustee and the Servicer, the performance of every covenant and obligation ofthe Transferor hereunder; and (y) the Transferor or the surviving entity, asthe case may be, has delivered to the Owner Trustee, the Indenture Trustee andthe Servicer (with a copy to each Rating Agency) an Officer’s Certificate andan Opinion of Counsel each stating that such consolidation, merger, conveyance,transfer or sale and such supplemental agreement comply with this Section, thatsuch supplemental agreement is a valid and binding obligation of such survivingentity enforceable against such surviving entity in accordance with its terms,except as such enforceability may be limited by applicable bankruptcy,insolvency, reorganization, moratorium or other similar laws affectingcreditors’ rights generally from time to time in effect or general principlesof equity, and that all conditions precedent herein provided for relating tosuch transaction have been complied with;

 

(ii)           the Rating Agency Condition shallhave been satisfied with respect to such consolidation, merger, conveyance ortransfer; and

 

(iii)          the Transferor shall have delivered tothe Owner Trustee, the Indenture Trustee, the Note Administrator and eachRating Agency a Tax Opinion, dated the date of such consolidation, merger,conveyance or transfer, with respect thereto.

 

(b)           Exceptas permitted by subsection 2.06(c), the obligations, rights or any part thereofof the Transferor hereunder shall not be assignable nor shall any Personsucceed to such obligations or rights of the Transferor hereunder except(i) for conveyances, mergers, consolidations, assumptions, sales ortransfers in accordance with the provisions of the foregoing paragraph and(ii) for conveyances, mergers, consolidations, assumptions, sales ortransfers to other entities (1) which the

 

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Transferor, the O/C Holder and the Servicer determine will not resultin an Adverse Effect, (2) which meet the requirements of clauses (ii) and(iii) of the preceding paragraph and (3) for which such purchaser,transferee, pledgee or entity shall expressly assume, in an agreementsupplemental hereto, executed and delivered to the Owner Trustee, the O/CHolder, the Servicer, the Note Administrator and the Indenture Trustee inwriting in form satisfactory to the Owner Trustee, the O/C Holder, theServicer, the Note Administrator and the Indenture Trustee, the performance ofevery covenant and obligation of the Transferor thereby conveyed.

 

Section 4.03.          Limitationson Liability of the Transferor. Subject to Section 4.01, neither the Transferor nor any of thedirectors, officers, employees, incorporators or agents of the Transferoracting in such capacities shall be under any liability to the Trust, the OwnerTrustee, the Note Administrator, the Indenture Trustee, the Noteholders, theO/C Holder, any Series Enhancer or any other Person for any action taken, orfor refraining from the taking of any action, in good faith in such capacitiespursuant to this Agreement, it being expressly understood that such liabilityis expressly waived and released as a condition of, and consideration for, theexecution of this Agreement, the Indenture and any Indenture Supplement and theissuance of the Notes; provided, however, that this provisionshall not protect any Transferor or any such Person against any liability whichwould otherwise be imposed by reason of willful misfeasance, bad faith or grossnegligence in the performance of duties or by reason of reckless disregard ofobligations and duties hereunder.  TheTransferor and any director, officer, employee or agent of the Transferor mayrely in good faith on any document of any kind prima facie properly executedand submitted by any Person (other than the Transferor) respecting any mattersarising hereunder.

 

**[**END OF ARTICLE IV**]**

 

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ARTICLE V

 

OTHER MATTERS RELATING TOTHE SERVICER

 

Section 5.01.          Liabilityof the Servicer.  The Servicer shallbe liable under this Agreement only to the extent of the obligationsspecifically undertaken by the Servicer in its capacity as Servicer.

 

Section 5.02.          Mergeror Consolidation of, or Assumption of the Obligations of, the Servicer.  The Servicer shall not consolidate with ormerge into any other corporation or convey, transfer or sell its properties andassets substantially as an entirety to any Person, unless:

 

(a)           (i)            the corporation formed by suchconsolidation or into which the Servicer is merged or the Person which acquiresby conveyance, transfer or sale the properties and assets of the Servicersubstantially as an entirety shall be, if the Servicer is not the survivingentity, a corporation or a national banking association organized and existingunder the laws of the United States of America or any state or the District ofColumbia, and, if the Servicer is not the surviving entity, such corporationshall expressly assume, by an agreement supplemental hereto, executed anddelivered to the Owner Trustee, the Note Administrator and the IndentureTrustee, in form satisfactory to the Owner Trustee, the Note Administrator andthe Indenture Trustee, the performance of every covenant and obligation of theServicer hereunder and under any other Transaction Document to which theServicer is a party;

 

(ii)           the Servicer has delivered to theOwner Trustee, the Note Administrator and the Indenture Trustee an Officer’sCertificate and an Opinion of Counsel each stating that such consolidation,merger, conveyance, transfer or sale complies with this Section 5.02 and thatall conditions precedent herein provided for relating to such transaction havebeen complied with; and

 

(iii)          the Rating Agency Condition shall havebeen satisfied with respect to such consolidation, merger, transfer or sale;and

 

(b)           the corporation formed by suchconsolidation or into which the Servicer is merged or the Person which acquiresby conveyance or transfer the properties and assets of the Servicersubstantially as an entirety shall be an Eligible Servicer.

 

Section 5.03.          Limitationon Liability of the Servicer and Others. Subject to Section 5.04, neither the Servicer nor any of the directors,officers, employees or agents of the Servicer in its capacity as Servicer shallbe under any liability to the Trust, the Owner Trustee, the Indenture Trustee,the Certificate Administrator, the Certificate Trustee, the Note Administrator,the Noteholders, the O/C Holder, any Series Enhancer or any other Person forany action taken, or for refraining from the taking of any action, in goodfaith in its capacity as Servicer pursuant to this Agreement; provided, however,that this provision shall not protect the Servicer or any such Person againstany liability which would otherwise be imposed by reason of willfulmisfeasance, bad faith or gross negligence in the performance of duties or byreason of reckless disregard of obligations and duties hereunder.  The Servicer and any director, officer,employee or agent of the Servicer may rely in good faith on any document of anykind prima facie properly executed and submitted by any Person (other than theServicer) respecting any matters arising hereunder.  The Servicer shall not be under any obligation to appear in,prosecute or defend any legal action which is not incidental to its duties asServicer in accordance with this Agreement and which in its reasonable judgmentmay involve it in any expense or liability. The Servicer may, but shall not be obligated to, undertake any suchlegal action which it may deem necessary or desirable for

 

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the benefit of the Noteholders with respect to this Agreement and therights and duties of the parties hereto and the interests of the Noteholdershereunder.

 

Section 5.04.          ServicerIndemnification of the Trust.  TheServicer shall indemnify and hold harmless the Trust and its directors,officers, employees and agents from and against any and all loss, liability,claim, expense, damage or injury suffered or sustained by reason of theServicer’s willful misfeasance, bad faith or negligence in the performance ofits duties under this Agreement, or by reason of reckless disregard of itsobligations and duties under this Agreement, including any judgment, award,settlement, reasonable attorneys’ fees and other costs or expenses incurred inconnection with the defense of any action, Proceeding or claim; provided,however, that the Servicer shall not indemnify the Trust, anyNoteholders or the O/C Holder as to any losses, claims or damages incurred byany of them in their capacities as investors, including without limitationlosses incurred as a result of Defaulted Receivables.  Indemnification pursuant to this Section 5.04 shall not bepayable from the Trust Assets.  TheServicer’s obligations under this Section 5.04 shall survive the termination ofthis Agreement or the Trust or the earlier removal or resignation of the OwnerTrustee or the Indenture Trustee, as applicable.

 

Section 5.05.          Resignationof the Servicer.  The Servicer shallnot resign from the obligations and duties hereby imposed on it except(a) upon determination that (i) the performance of its dutieshereunder is no longer permissible under applicable law and (ii) there isno reasonable action which the Servicer could take to make the performance ofits duties hereunder permissible under applicable law or (b) upon theassumption, by an agreement supplemental hereto, executed and delivered to theOwner Trustee, the Note Administrator, the Transferor and the IndentureTrustee, in form reasonably satisfactory to the Owner Trustee, the NoteAdministrator, the Transferor and the Indenture Trustee, of the obligations andduties of the Servicer hereunder by any of its Affiliates that is a direct orindirect wholly owned subsidiary of CompuCredit or by any entity theappointment of which shall have satisfied the Rating Agency Condition and, ineither case, qualifies as an Eligible Servicer; provided, however, the NoteAdministrator shall have no obligation whatsoever to assume the obligations andduties of the Servicer hereunder pursuant to this Section 5.05(b) unless theNote Administrator expressly agrees in writing to do so.  Any determination permitting the resignationof the Servicer shall be evidenced as to clause (a) above by an Opinion ofCounsel to such effect delivered to the Owner Trustee, the Note Administratorand the Indenture Trustee.  Noresignation shall become effective until the Note Administrator or a SuccessorServicer shall have assumed the responsibilities and obligations of theServicer in accordance with Section 7.02 hereof.  If within 120 days of the date of the determination that theServicer may no longer act as Servicer under clause (a) above the NoteAdministrator, on behalf of the Indenture Trustee, is unable to appoint aSuccessor Servicer, the Note Administrator shall serve as Successor Servicer.  Notwithstanding the foregoing, if the NoteAdministrator is legally unable so to act, the Note Administrator, on behalf ofthe Indenture Trustee, shall petition a court of competent jurisdiction toappoint any established institution qualifying as an Eligible Servicer as theSuccessor Servicer hereunder.  The Trustshall give prompt notice to each Rating Agency and each Series Enhancer uponthe appointment of a Successor Servicer. Notwithstanding anything in this Agreement to the contrary, CompuCreditmay assign part or all of its obligations and duties as Servicer under thisAgreement to an Affiliate of CompuCredit so long as CompuCredit shall havefully guaranteed the performance of such obligations and duties under thisAgreement, subject to Section 5.01 above.

 

Section 5.06.          Accessto Certain Documentation and Information Regarding the Receivables.  The Servicer shall provide to the OwnerTrustee, the Note Administrator and the Indenture Trustee access to thedocumentation regarding the Accounts and the Receivables in such cases wherethe Owner Trustee or the Indenture Trustee, as applicable, is required inconnection with the enforcement of the rights of Noteholders or by applicablestatutes or regulations to review such documentation, such access being affordedwithout charge but only (a) upon reasonable request, (b) duringnormal business hours, (c) subject to the Servicer’s normal security andconfidentiality procedures and (d) at reasonably

 

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accessible offices in the continental United States designated by theServicer.  Nothing in this Section shallderogate from the obligation of the Transferor, the Owner Trustee, theIndenture Trustee, the Note Administrator, the O/C Holder and the Servicer toobserve any applicable law prohibiting disclosure of information regarding theObligors and the failure of the Servicer to provide access as provided in thisSection as a result of such obligation shall not constitute a breach of thisSection.

 

Section 5.07.          Delegationof Duties.  In the ordinary courseof business, the Servicer may at any time delegate its duties hereunder withrespect to the Accounts and the Receivables to any Person that agrees toconduct such duties in accordance with the Credit Card Guidelines and thisAgreement.  Such delegation shall notrelieve the Servicer of its liability and responsibility with respect to suchduties, and shall not constitute a resignation within the meaning of Section5.05.

 

Section 5.08.          Examinationof Records.  The Servicer shallindicate generally in their computer files or other records that theReceivables arising in the Accounts have been conveyed to the Trust, pursuantto this Agreement.  The Servicer shall,prior to the sale or transfer to a third party of any receivable held in itscustody, examine its computer records and other records to determine that suchreceivable is not, and does not include, a Receivable.

 

Section 5.09.          Removalof CompuCredit under Credit Card Service and Administration Agreement.  If CSG, LLC terminates CompuCredit for causeor following a termination event under the Credit Card Service andAdministration Agreement, CSG, LLC may cause the O/C Holder to removeCompuCredit as Servicer under this Agreement; provided, however,that no removal shall become effective until a Successor Servicer shall haveassumed the responsibilities and obligations of CompuCredit as Servicer inaccordance with Section 7.02 hereof. Upon the occurrence of a termination event under the Credit Card Serviceand Administration Agreement, CSG, LLC shall cause the O/C Holder to providewritten notice of such termination event to the Indenture Trustee, theTransferor and the Note Administrator.

 

**[**END OF ARTICLE V**]**

 

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ARTICLE VI

 

[Reserved].

** **

**[**END OF ARTICLE VI**]**

 

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ARTICLE VII

 

SERVICER DEFAULTS

 

Section 7.01.          ServicerDefaults.  If any one of thefollowing events (a “**Servicer Default**”) shall occur and becontinuing:

 

(a)           anyfailure by the Servicer to make any required payment, transfer or deposit underthe terms of this Agreement, the Indenture or any Indenture Supplement, or togive instructions or notice to the Note Administrator to make such payment,transfer or deposit, which failure continues unremedied for a period of five(5) Business Days following receipt by the Servicer of written notice of suchfailure from the Transferor, the O/C Holder, the Note Administrator or theIndenture Trustee or after the Servicer obtains Knowledge of such failure;

 

(b)           failureon the part of the Servicer duly to observe or perform in any material respectany other covenants or agreements of the Servicer set forth in this Agreementwhich has an Adverse Effect and which continues unremedied for a period ofsixty (60) days after the date on which notice of such failure, requiring thesame to be remedied, shall have been given to the Servicer by the OwnerTrustee, the Indenture Trustee or the O/C Holder, or to the Servicer, the OwnerTrustee, the Indenture Trustee and the O/C Holder by Holders of Notesevidencing not less than 10% of the aggregate unpaid principal amount of allNotes (or, with respect to any such failure that does not relate to all Series,10% of the aggregate unpaid principal amount of all Series to which suchfailure relates);

 

(c)           anyrepresentation, warranty or certification made by the Servicer in thisAgreement or in any certificate delivered pursuant to this Agreement shallprove to have been incorrect when made, which has an Adverse Effect on therights of the Noteholders of any Series (which determination shall be madewithout regard to whether funds are then available pursuant to any SeriesEnhancement) and which Adverse Effect continues for a period of ninety (90) daysafter the date on which notice thereof, requiring the same to be remedied,shall have been given to the Servicer by the Owner Trustee or the IndentureTrustee, or to the Servicer, the Owner Trustee and the Indenture Trustee by theHolders of Notes evidencing not less than 10% of the aggregate unpaid principalamount of all Notes (or, with respect to any such representation, warranty orcertification that does not relate to all Series, 10% of the aggregate unpaidprincipal amount of all Series to which such representation, warranty orcertification relates); or

 

(d)           theServicer shall consent to the appointment of a bankruptcy trustee orconservator or receiver or liquidator in any bankruptcy proceeding or otherinsolvency, readjustment of debt, marshalling of assets and liabilities orsimilar proceedings of or relating to the Servicer or of or relating to all orsubstantially all its property, or a decree or order of a court or agency orsupervisory authority having jurisdiction in the premises for the appointmentof a bankruptcy trustee or a conservator or receiver or liquidator in anybankruptcy, insolvency, readjustment of debt, marshalling of assets andliabilities or similar proceedings, or the winding-up or liquidation of itsaffairs, shall have been entered against the Servicer and such decree or ordershall have remained in force undischarged or unstayed for a period of ninety(90) days; or the Servicer shall admit in writing its inability to pay itsdebts generally as they become due, file a petition to take advantage of anyapplicable bankruptcy, insolvency or reorganization statute, make anyassignment for the benefit of its creditors or voluntarily suspend payment ofits obligations.

 

Then, in the event of any Servicer Default, so long asthe Servicer Default shall not have been remedied, the Indenture Trustee or theHolders of Notes evidencing more than 50% of the aggregate unpaid principalamount of all Notes, or, if all the Notes of a Series have been paid in full,the O/C

 

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Holder, by notice then given to the Servicer, the O/C Holder, the NoteAdministrator, the Certificate Trustee, the Certificate Administrator and theOwner Trustee (and to the Indenture Trustee if given by the Noteholders) (a “**TerminationNotice**”), may terminate all but not less than all the rights andobligations of the Servicer as Servicer under this Agreement.

 

After receipt by the Servicer of a Termination Notice,and on the date that a Successor Servicer is appointed by the NoteAdministrator, on behalf of the Indenture Trustee pursuant to Section 7.02, allauthority and power of the Servicer under this Agreement shall pass to and bevested in the Successor Servicer (a “**Service Transfer**”); and, withoutlimitation, the Note Administrator and the Indenture Trustee are herebyauthorized and empowered (upon the failure of the Servicer to cooperate) toexecute and deliver, on behalf of the Servicer, as attorney-in-fact orotherwise, all documents and other instruments necessary or appropriate toeffect the Service Transfer that are prepared by and at the expense of theServicer.  The Servicer agrees tocooperate with the Indenture Trustee, the Note Administrator and such SuccessorServicer in effecting the termination of the responsibilities and rights of theServicer to conduct servicing hereunder, including the transfer to suchSuccessor Servicer of all authority of the Servicer to service the Receivablesprovided for under this Agreement, including all authority over all Collectionswhich shall on the date of transfer be held by the Servicer for deposit, orwhich have been deposited by the Servicer, in the Collection Account, or whichshall thereafter be received with respect to the Receivables, and in assistingthe Successor Servicer.  The Servicershall within twenty (20) Business Days transfer its electronic records relatingto the Receivables to the Successor Servicer in such electronic form as theSuccessor Servicer may reasonably request and shall promptly transfer to theSuccessor Servicer all other records, correspondence and documents necessaryfor the continued servicing of the Receivables in the manner and at such timesas the Successor Servicer shall reasonably request.  Any and all costs incurred in connection with the transfer ofservicing shall be included as Program Expenses.  To the extent that compliance with this Section shall require theServicer to disclose to the Successor Servicer information of any kind whichthe Servicer deems to be confidential, the Successor Servicer shall be requiredto enter into such customary licensing and confidentiality agreements as theServicer shall deem reasonably necessary to protect its interests.

 

Notwithstanding the foregoing, a delay in or failureof performance referred to in paragraphs (a), (b) and (c) above after theapplicable grace period, if any, as a consequence of an act of God, fire,explosion, terrorism, widespread or continued public utility failure, majoraccident, flood, embargo, war, nuclear disaster, riot, labor dispute,termination or interruption of service from third party vendors whose servicesare material to the performance by the Servicer of its obligations under thisAgreement, earthquake, severe weather or failures of the Federal Reserve Bankshall not constitute a Servicer Default during the period of suchdisability.  In the event of any suchforce majeure occurrence as set forth in this paragraph, the Servicer shall usecommercially reasonable efforts to meet its obligations under thisAgreement.  In the case of any suchoccurrence, the Servicer shall promptly and in writing advise the IndentureTrustee, the Note Administrator, the Certificate Trustee, the CertificateAdministrator, the Owner Trustee, the Transferor, the O/C Holder and any SeriesEnhancer if it is unable to perform due to a force majeure event, the expectedduration of such inability to perform and of any developments (or changestherein) that appear likely to affect the ability of the Servicer to performany of its obligations hereunder in whole or in part.

 

Section 7.02.          NoteAdministrator To Act; Appointment of Successor.

 

(a)           Onand after the receipt by the Servicer of a Termination Notice pursuant toSection 7.01, the Servicer shall continue to perform all servicing functionsunder this Agreement and shall continue to be paid therefor until the datespecified in the Termination Notice or otherwise specified by the IndentureTrustee or until a date mutually agreed upon by the Servicer and the IndentureTrustee.  The Note Administrator, onbehalf of the Indenture Trustee, shall as promptly as possible after the givingof a

 

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Termination Notice appoint an Eligible Servicer as a successor servicer(the “**SuccessorServicer**”), and such Successor Servicer shall accept itsappointment by a written assumption in a form reasonably acceptable to the NoteAdministrator and the Indenture Trustee. In the event that a Successor Servicer has not been appointed or has notaccepted its appointment at the time when the Servicer ceases to act asServicer pursuant to Section 5.05(a) or this Section 7.02(a), the NoteAdministrator without further action shall automatically be appointed theSuccessor Servicer; provided, however, that this shall not beconstrued as permitting a Servicer resignation except for the limited reasonsset forth in Section 5.05.  The NoteAdministrator may delegate any of its servicing obligations to an Affiliate oragent in accordance with subsection 3.01(b) and Section 5.07.  Notwithstanding the foregoing, if the NoteAdministrator is legally unable to so act, the Note Administrator, on behalf ofthe Indenture Trustee, shall petition at the expense of the O/C Holder a courtof competent jurisdiction to appoint any established institution qualifying asan Eligible Servicer as the Successor Servicer hereunder.  The Note Administrator shall give promptnotice to each Rating Agency and each Series Enhancer upon the appointment of aSuccessor Servicer.

 

(b)           Uponits appointment, the Successor Servicer shall be the successor in all respectsto the Servicer with respect to servicing functions under this Agreement andshall be subject to all the responsibilities, duties and liabilities relatingthereto placed on the Servicer by the terms and provisions hereof, allreferences in this Agreement to the Servicer shall be deemed to refer to theSuccessor Servicer and the outgoing Servicer shall be relieved of any furtherobligations hereunder, except for its indemnification obligations, if any, underArticle V.

 

(c)           Inconnection with any Termination Notice, the Note Administrator, on behalf ofthe Indenture Trustee, will review any bids which it obtains from EligibleServicers and shall be permitted to appoint any Eligible Servicer submittingsuch a bid as a Successor Servicer for servicing compensation not in excess ofthe aggregate Servicing Fees for all Series *plus* the sum of the amounts with respectto each Series and with respect to each Distribution Date equal to anyCollections of Finance Charge Receivables allocable to Noteholders of suchSeries which are payable to the O/C Holder after payment of all amounts owingto the Noteholders of such Series with respect to such Distribution Date orrequired to be deposited in the applicable Series Accounts with respect to suchDistribution Date and any amounts required to be paid to any Series Enhancerfor such Series with respect to such Distribution Date pursuant to the terms ofany Enhancement Agreement; provided, however, that the Transferorshall be responsible for any Servicing Fees not otherwise allocable to anySeries.  The Note Administrator will beentitled to obtain, at the expense of the Master Trust from amounts held in theCollection Account, and rely on the determination of an investment banking firmin connection with the solicitation and evaluation of any such bids and theconsummation of such sale.

 

(d)           Allauthority and power granted to the Servicer under this Agreement shallautomatically cease and terminate upon termination of the Trust pursuant toSection 8.01 of the Trust Agreement, and shall pass to and be vested in the O/CHolder and, without limitation, the O/C Holder is hereby authorized andempowered to execute and deliver (or cause to be executed and delivered), onbehalf of the Servicer, as attorney-in-fact or otherwise, all documents andother instruments, and to do and accomplish (or cause to be done andaccomplished) all other acts or things necessary or appropriate to effect thepurposes of such transfer of servicing rights. The Servicer agrees to cooperate with the O/C Holder in effecting thetermination of the responsibilities and rights of the Servicer to conductservicing of the Receivables.  TheServicer shall transfer its electronic records relating to the Receivables tothe O/C Holder or its designee in such electronic form as it may reasonablyrequest and shall transfer all other records, correspondence and documents toit in the manner and at such times as it shall reasonably request.  To the extent that compliance with thisSection shall require the Servicer to disclose to the O/C Holder or itsdesignee information of any kind which the Servicer deems to be confidential,the O/C

 

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Holder and, if applicable, its designee, shall be required to enterinto such customary licensing and confidentiality agreements as the Servicershall deem necessary to protect its interests.

 

(e)           TheSuccessor Servicer will not be responsible for delays attributable to theServicer’s failure to deliver information, defects in the information suppliedby the Servicer or other circumstances beyond the control of the SuccessorServicer.

 

The Successor Servicer will make arrangements with theServicer for the prompt and safe transfer of, and the Servicer shall provide tothe Successor Servicer, all necessary servicing files and records, including(as deemed necessary by the Successor Servicer at such time): (i) microficheloan documentation, (ii) servicing system tapes, (iii) Receivable paymenthistory, (iv) collections history and (v) the trial balances, as of the closeof business on the day immediately preceding conversion to the SuccessorServicer, reflecting all applicable Receivable information.

 

The Successor Servicer shall have no responsibilityand shall not be in default hereunder nor incur any liability for any failure,error, malfunction or any delay in carrying out any of its duties under thisAgreement if any such failure or delay results from the Successor Serviceracting in accordance with information prepared or supplied by a Person otherthan the Successor Servicer or the failure of any such Person to prepare orprovide such information.  The SuccessorServicer shall have no responsibility, shall not be in default and shall incurno liability (i) for any act or failure to act by any third party, includingthe Servicer, the Issuer or the Indenture Trustee or for any inaccuracy oromission in a notice or communication received by the Successor Servicer fromany third party or (ii) which is due to or results from the invalidity,unenforceability of any Receivable with applicable law or the breach or theinaccuracy of any representation or warranty made with respect to anyReceivable.

 

If the Note Administrator or any other Successor Servicerassumes the role of Successor Servicer hereunder, such Successor Servicer shallbe entitled to the benefits of (and subject to the provisions of) Section 5.07concerning delegation of duties to subservicers

 

Section 7.03.          Notificationto Noteholders.  Within two (2)Business Days after the Servicer becomes aware of any Servicer Default, theServicer shall give notice thereof to the Owner Trustee, the Indenture Trustee,the Transferor, the O/C Holder, the Note Administrator, each Rating Agency andeach Series Enhancer and the Indenture Trustee shall give notice to theNoteholders.  Upon any termination orappointment of a Successor Servicer pursuant to this Article, the IndentureTrustee shall give prompt notice thereof to the Noteholders.

 

**[**END OF ARTICLE VII**]**

 

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ARTICLE VIII

 

TERMINATION

 

Section 8.01.          Terminationof Agreement.  This Agreement andthe respective obligations and responsibilities of the Trust, the Transferorand the Servicer under this Agreement shall terminate on the Trust TerminationDate, except for the indemnification, if any, of the Servicer under Article V.

 

**[**END OF ARTICLE VIII**]**

 

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ARTICLE IX

 

MISCELLANEOUS PROVISIONS

 

Section 9.01.          Amendment;Waiver of Past Defaults.

 

(a)           ThisAgreement may be amended by the parties hereto from time to time prior to, orin connection with, the issuance of the first Series of Notes hereunder withoutthe requirement of any consents or the satisfaction of any conditions set forthbelow.  This Agreement may be amendedfrom time to time by the Servicer, the Transferor, acting on the instruction ofthe O/C Holder and the Trust, by a written instrument signed by each of them,without the consent of the Indenture Trustee, the Note Administrator or any ofthe Noteholders; provided that (1) the O/C Holder shall havedelivered to the Indenture Trustee, the Note Administrator and the OwnerTrustee an Officer’s Certificate, dated the date of any such amendment, statingthat such O/C Holder reasonably believes that such amendment will not have anAdverse Effect and (2) the Rating Agency Condition shall have beensatisfied with respect to any such amendment. Additionally, notwithstanding the preceding sentence, this Agreementwill be amended by the Servicer and the Trust at the direction of theTransferor, acting at the direction of the O/C Holder, without the consent ofthe Indenture Trustee, the Note Administrator or any of the Noteholders orSeries Enhancers to add, modify or eliminate such provisions as may benecessary or advisable in order (i) to enable all or a portion of the Trust(a) to qualify as, and to permit an election to be made to cause the Trustto be treated as, a “financial asset securitization investment trust” asdescribed in the provisions of Section 860L of the Code or (b) to avoidthe imposition of state or local income or franchise taxes imposed on theTrust’s property or its income or (ii) to allow the transfer of Receivables tothe Trust as contemplated in this Agreement to qualify for sale treatment underGAAP or to allow the Trust to qualify as a qualified special purpose entityunder FASB Statement No. 140; provided, however, that(1) the O/C Holder delivers to the Indenture Trustee, the NoteAdministrator and the Owner Trustee a Tax Opinion and an Officer’s Certificateto the effect that the proposed amendments meet the requirements set forth inthis subsection, (2) the Rating Agency Condition shall have been satisfiedwith respect to any such amendment and (3) such amendment does not affectthe rights, duties or obligations of the Indenture Trustee, the NoteAdministrator or the Owner Trustee hereunder.

 

(b)           ThisAgreement may also be amended from time to time by the Servicer, the Transferor,acting at the direction of the O/C Holder, and the Trust, with the consent ofthe Holders of Notes evidencing not less than 50% of the aggregate unpaidprincipal amount of the Notes of all affected Series for which the O/C Holderhas not delivered an Officer’s Certificate stating that there is no AdverseEffect, for the purpose of adding any provisions to or changing in any manneror eliminating any of the provisions of this Agreement or of modifying in anymanner the rights of the Noteholders; provided, however, that nosuch amendment shall (i) reduce in any manner the amount of or delay the timingof any distributions (changes in Redemption Events or Events of Default thatdecrease the likelihood of the occurrence thereof shall not be considered delaysin the timing of distributions for purposes of this clause) to be made toNoteholders or deposits of amounts to be so distributed or the amount availableunder any Series Enhancement without the consent of each affected Noteholder,(ii) change the definition of or the manner of calculating the interest of anyNoteholder without the consent of each affected Noteholder, (iii) reduce theaforesaid percentage required to consent to any such amendment without theconsent of each Noteholder or (iv) adversely affect the rating of any Series orClass by each Rating Agency without the consent of the Holders of Notes of suchSeries or Class evidencing not less than 50% of the aggregate unpaid principalamount of the Notes of such Series or Class.

 

(c)           Promptlyafter the execution of any such amendment or consent (other than an amendmentpursuant to paragraph (a)), the Trust shall furnish notification of thesubstance of such amendment to the Indenture Trustee, the Note Administratorand each Noteholder, and the Servicer shall

 

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furnish notification of the substance of such amendment to each RatingAgency and each Series Enhancer.

 

(d)           Itshall not be necessary for the consent of Noteholders under this Section 9.01 toapprove the particular form of any proposed amendment, but it shall besufficient if such consent shall approve the substance thereof.  The manner of obtaining such consents and ofevidencing the authorization of the execution thereof by Noteholders shall besubject to such reasonable requirements as the Indenture Trustee may prescribe.

 

(e)           Notwithstandinganything in this Section 9.01 to the contrary, no amendment may be made to thisAgreement which would adversely affect in any material respect the interests ofany Series Enhancer without the consent of such Series Enhancer.

 

(f)            AnyIndenture Supplement executed in accordance with the provisions ofArticle X of the Indenture shall not be considered an amendment of thisAgreement for the purposes of this Section 9.01.

 

(g)           TheHolders of Notes evidencing more than 50% of the aggregate unpaid principalamount of the Notes of each Series or, with respect to any Series with two ormore Classes, of each Class (or, with respect to any default that does not relateto all Series, 50% of the aggregate unpaid principal amount of the Notes ofeach Series to which such default relates or, with respect to any such Serieswith two or more Classes, of each Class) may, on behalf of all Noteholders,waive any default by the Transferor or the Servicer in the performance of theirobligations hereunder and its consequences, except the failure to make anydistributions required to be made to Noteholders or to make any requireddeposits of any amounts to be so distributed. Upon any such waiver of a past default, such default shall cease toexist, and any default arising therefrom shall be deemed to have been remediedfor every purpose of this Agreement.  Nosuch waiver shall extend to any subsequent or other default or impair any rightconsequent thereon except to the extent expressly so waived.  Promptly after any such waiver of a pastdefault, the Servicer shall furnish notification of the substance of suchwaiver to each Rating Agency.

 

(h)           Eachof the Indenture Trustee, the Note Administrator and the Owner Trustee may, butshall not be obligated to, enter into any amendment which affects theirrespective rights, duties, benefits, protections, privileges or immunitiesunder this Agreement or otherwise.  Inconnection with the execution of any amendment hereunder, each of the OwnerTrustee, the Indenture Trustee and the Note Administrator shall be entitled toreceive the Opinion of Counsel described in subsection 9.02(d).

 

(i)            Notesheld by the Transferor or any of its agents or affiliates will not beconsidered in the determination of (i) whether the requisite percentage ofNotes Outstanding has been obtained in support of any amendment under thisSection 9.01 and (ii) the amount of Notes Outstanding in connection with the calculationof such requisite percentage.

 

Section 9.02.          Protectionof Right, Title and Interest to Trust Assets.

 

(a)           TheTransferor, acting at the direction of the O/C Holder, shall cause thisAgreement, all amendments and supplements hereto and all financing statementsand continuation statements and any other necessary documents covering theIndenture Trustee’s and the Trust’s right, title and interest to the TrustAssets to be promptly recorded, registered and filed, and at all times to bekept recorded, registered and filed, all in such manner and in such places asmay be required by law fully to preserve and protect the right, title andinterest of the Indenture Trustee, Noteholders and the Trust hereunder to allproperty comprising the Trust Assets. The O/C Holder shall deliver to the Owner Trustee and Indenture Trusteefile-stamped copies of, or filing receipts for, any document recorded,registered or

 

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filed as provided above, as soon as available following such recording,registration or filing.  The O/C Holdershall cooperate fully with the Servicer in connection with the obligations setforth above and will execute any and all documents reasonably required tofulfill the intent of this paragraph.

 

(b)           Withinthirty (30) days after any Transferor makes any change in its name, identity orcorporate structure which would make any financing statement or continuationstatement filed in accordance with paragraph (a) seriously misleading withinthe meaning of Section 9-506 (or any comparable provision) of the UCC, theTransferor shall give the Owner Trustee, the O/C Holder, the Note Administratorand the Indenture Trustee notice of any such change and the O/C Holder shallfile such financing statements or amendments as may be necessary to continuethe perfection of the Trust’s security interest or ownership interest in theReceivables and the proceeds thereof.

 

(c)           TheTransferor shall give the Owner Trustee, the Note Administrator and theIndenture Trustee prompt notice of any relocation of its chief executive officeor any change in the jurisdiction under whose laws it is organized and whether,as a result of such relocation or change, the applicable provisions of the UCCwould require the filing of any amendment of any previously filed financing orcontinuation statement or of any new financing statement and shall file suchfinancing statements or amendments as may be necessary to perfect or tocontinue the perfection of the Trust’s security interest in the Receivables andthe proceeds thereof.  The Transferorshall at all times maintain its chief executive offices within the UnitedStates and shall at all times be organized under the laws of a jurisdictionlocated within the United States.

 

(d)           TheO/C Holder shall deliver to the Owner Trustee, the Indenture Trustee, the NoteAdministrator and each Rating Agency (i) upon the execution and deliveryof each amendment of this Agreement, an Opinion of Counsel to the effectspecified in **Exhibit C-1**; and (ii)  on or before June 30of each year, beginning with June 30, 2003, an Opinion of Counselsubstantially in the form of **Exhibit C-2**.  In addition, the O/C Holder shall deliver toMoody’s (so long as Moody’s is a Rating Agency) on or before June 30 of eachyear, beginning with June 30, 2003, an Opinion of Counsel substantially in theform of **Exhibit C-3**.

 

Section 9.03.          **GOVERNINGLAW.  THIS AGREEMENT SHALL BECONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUTREFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND OBLIGATIONS, RIGHTS ANDREMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCHLAWS.**

** **

Section 9.04.          Notices;Payments.

 

(a)           Alldemands, notices, instructions, directions and communications (collectively, “**Notices**”)under this Agreement shall be in writing and shall be deemed to have been dulygiven if personally delivered, mailed by registered mail, return receiptrequested, or sent by facsimile transmission (i) in the case of theTransferor, to PACCT, LLC, c/o Providian Financial Corporation, 201 MissionStreet, San Francisco, California 94105, Attention: Chief Financial Officer,(ii) in the case of the Servicer, to CompuCredit Corporation, 245 PerimeterCenter Parkway, Suite 600, Atlanta, Georgia, 30346,  Attention: General Counsel, (iii) in the case of the Trustor the Owner Trustee, to Wilmington Trust Company, Rodney Square North, 1100North Market Street, Wilmington, Delaware 19890-0001, Attention: CorporateTrust Administration, (iv) in the case of the Rating Agency for aparticular Series, the address, if any, specified in the Indenture Supplementrelating to such Series, and (v) to any other Person as specified in theIndenture or any Indenture Supplement; or, as to each party, at such otheraddress or facsimile number as shall be designated by such party in a writtennotice to each other party.

 

40

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(b)           AnyNotice required or permitted to be given to a Holder of Registered Notes shallbe given by first-class mail, postage prepaid, at the address of such Holder asshown in the Note Register.  Any Noticeso mailed within the time prescribed in this Agreement shall be conclusivelypresumed to have been duly given, whether or not the Noteholder receives suchNotice.

 

Section 9.05.          Severabilityof Provisions.  If any one or moreof the covenants, agreements, provisions or terms of this Agreement shall forany reason whatsoever be held invalid, then such provisions shall be deemedseverable from the remaining provisions of this Agreement and shall in no wayaffect the validity or enforceability of the remaining provisions or of theNotes or the rights of the Noteholders.

 

Section 9.06.          FurtherAssurances.  The Transferor, the O/CHolder and the Servicer agree to do and perform, from time to time, any and allacts and to execute any and all further instruments required or reasonablyrequested by the Owner Trustee, the Note Administrator and the IndentureTrustee more fully to effect the purposes of this Agreement, including theexecution of any financing statements or continuation statements relating tothe Receivables for filing under the provisions of the UCC of any applicablejurisdiction.

 

Section 9.07.          NoWaiver; Cumulative Remedies.  Nofailure to exercise and no delay in exercising, on the part of the Trust, theOwner Trustee, the Indenture Trustee, the Note Administrator or theNoteholders, any right, remedy, power or privilege under this Agreement shalloperate as a waiver thereof; nor shall any single or partial exercise of anyright, remedy, power or privilege under this Agreement preclude any other orfurther exercise thereof or the exercise of any other right, remedy, power orprivilege.  The rights, remedies, powersand privileges provided under this Agreement are cumulative and not exhaustiveof any rights, remedies, powers and privileges provided by law.

 

Section 9.08.          Counterparts.  This Agreement may be executed in two ormore counterparts (and by different parties on separate counterparts), each ofwhich shall be an original, but all of which together shall constitute one andthe same instrument.

 

Section 9.09.          Third-PartyBeneficiaries.  This Agreement willinure to the benefit of the Owner Trustee and inure to the benefit of and bebinding upon the parties hereto, the Indenture Trustee, the Note Administrator,the Noteholders, any Series Enhancer and their respective successors andpermitted assigns.  Except as otherwiseexpressly provided in this Agreement, no other Person will have any right orobligation hereunder.

 

Section 9.10.          Actionsby Noteholders.

 

(a)           Whereverin this Agreement a provision is made that an action may be taken or a Noticegiven by Noteholders, such action or Notice may be taken or given by anyNoteholder, unless such provision requires a specific percentage ofNoteholders.

 

(b)           AnyNotice, request, authorization, direction, consent, waiver or other act by theHolder of a Note shall bind such Holder and every subsequent Holder of suchNote and of any Note issued upon the registration of transfer thereof or inexchange therefor or in lieu thereof in respect of anything done or omitted tobe done by the Owner Trustee, the Transferor, the O/C Holder or the Servicer inreliance thereon, whether or not notation of such action is made upon such Note.

 

Section 9.11.          Rule144A Information.  For so long asany of the Notes of any Series or Class are “restricted securities” within themeaning of Rule 144(a)(3) under the Securities Act, each of the Transferor, theOwner Trustee, the Indenture Trustee, the Note Administrator, the Servicer andany Series

 

41

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Enhancer agrees to cooperate with each other to provide to anyNoteholders of such Series or Class and to any prospective purchaser of Notesdesignated by such Noteholder, upon the request of such Noteholder orprospective purchaser, any information required to be provided to such holderor prospective purchaser to satisfy the condition set forth in Rule 144A(d)(4)under the Securities Act.

 

Section 9.12.          Mergerand Integration.  Except asspecifically stated otherwise herein, this Agreement sets forth the entireunderstanding of the parties relating to the subject matter hereof, and allprior understandings, written or oral, are superseded by this Agreement.  This Agreement may not be modified, amended,waived or supplemented except as provided herein.

 

Section 9.13.          Headings.  The headings herein are for purposes ofreference only and shall not otherwise affect the meaning or interpretation ofany provision hereof.

 

Section 9.14.          Assignment.  Notwithstanding anything to the contrarycontained herein, except as provided in Section 5.02, this Agreement may not beassigned by the Servicer without the prior consent of Holders of Notesevidencing not less than 50% of the aggregate unpaid principal amount of allSeries of Notes.  The Servicer shallgive the Rating Agencies prior written notice of any such assignment.

 

Section 9.15.          NonpetitionCovenant.  Notwithstanding any priortermination of this Agreement, the Servicer, the Owner Trustee, the IndentureTrustee, the Note Administrator, the O/C Holder and the Transferor shall not,prior to the date which is one year and one day after the termination of thisAgreement, acquiesce, petition or otherwise invoke or cause the Trust to invokethe process of any Governmental Authority for the purpose of commencing orsustaining a case against the Trust under any Federal or state bankruptcy,insolvency or similar law or appointing a receiver, liquidator, assignee, trustee,custodian, sequestrator or other similar official of the Trust or anysubstantial part of its property or ordering the winding-up or liquidation ofthe affairs of the Trust.

 

Section 9.16.          Limitationof Liability.  Notwithstanding anyother provision herein or elsewhere, this Agreement has been executed anddelivered by Wilmington Trust Company, not in its individual capacity, butsolely in its capacity as Owner Trustee of the Trust.  In no event shall Wilmington Trust Company in its individualcapacity have any liability in respect of the representations, warranties, orobligations of the Trust hereunder or under any other document, as to all ofwhich recourse shall be had solely to the assets of the Trust, and for allpurposes of this Agreement and each other document, the Owner Trustee (as suchor in its individual capacity) shall be subject to, and entitled to thebenefits of, the terms and provisions of the Trust Agreement.

 

Section 9.17           FASBStatement No. 140.  Subject tosubsection 9.01(a), the parties hereto agree to take commercially reasonablesteps to cause the transfer of the Receivables to qualify for sale treatmentunder GAAP and to cause the Trust to continue to qualify as a qualified specialpurpose entity under FASB Statement No. 140.

 

Section 9.18           AdditionalRepresentations and Warranties of the Transferor. The Transferor herebymakes the following representations and warranties.  Such representations and warranties shall survive until thetermination of this Agreement.  Such representationsand warranties speak as of the date that the Collateral (as defined below) istransferred to the Trust but shall not be waived by any of the parties to thisAgreement unless the Rating Agency Condition is satisfied with respect to suchwaiver.

 

(a)           ThisAgreement creates a valid and continuing security interest (as defined in theapplicable UCC) in favor of the Trust in the Receivables described in Section2.01 of this Agreement (the 

 

42

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“**Collateral**”), which security interest is prior to allother liens, and is enforceable as such against creditors of and purchasersfrom the Transferor.

 

(b)           TheCollateral constitutes “accounts” within the meaning of the applicable UCC.

 

(c)           Atthe time of the transfer of the Collateral pursuant to this Agreement, theTransferor owned and had good and marketable title to the Collateral free andclear of any lien, claim or encumbrance of any Person.

 

(d)           TheTransferor has caused or will have caused, within ten (10) days of the initialexecution of this Agreement, the filing of all appropriate financing statementsin the proper filing office in the appropriate jurisdictions under applicablelaw in order to perfect the security interest in the Collateral granted to theTrust pursuant to this Agreement.

 

(e)           TheTransferor has registered the Trust as the registered owner of the Collateral.

 

(f)            Otherthan the security interest granted to the Trust and the Indenture Trusteepursuant to this Agreement, the Transferor has not pledged, assigned, sold,granted a security interest in, or otherwise conveyed the Collateral.  The Transferor has not authorized the filingof and is not aware of any financing statements against it that include adescription of the Collateral other than any financing statement relating tothe security interest granted to the Trust and the Indenture Trustee pursuantto this Agreement or that has been terminated. The Transferor is not aware of any judgment or tax lien filings againstit.

 

Section 9.19           Subordination.To the extent that any Noteholders or the O/C Holder of the Trust are deemed tohave any interest in any assets of CSGQ Trust that are pledged for the benefitof other noteholders or the O/C holders of CSGQ Trust, such Noteholders or O/CHolder agrees that their interest in those assets is subordinate to the claimsor rights of such other noteholders or O/C holders of CSGQ Trust to thoseassets.  Further, any Noteholders or O/CHolders who are deemed to have a subordinate interest in the assets of  CSGQ Trust shall be deemed to agree that theAgreement constitutes a subordination agreement for purposes of Section 5.10(a)of Title 11 of the United States Code.

 

**[**END OF ARTICLE IX**]**

 

43

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IN WITNESS WHEREOF, the Transferor, the Servicer, theO/C Holder and the Issuer have caused this Transfer and Servicing Agreement tobe duly executed by their respective officers as of the day and year firstabove written.

 
|   | COMPUCREDIT CORPORATION, as Servicer |
|--------|--------------------------------------|
|   |                                 |   |   |
|   |                                 |   |   |
|   | By:                                  |   |   |
|   |                                 | Name: |   |
|   |                                 | Title: |   |
|   |                                 |   |   |
|   |                                 |   |   |
|   | CSGQ TRUST,                          |
|   |                                 | as Issuer |   |
|   |                                 |   |   |
|   |                                 | By: | Wilmington Trust Company,  not in its individual capacity  but solely as Owner Trustee  on behalf of the Trust |
|   |                                 |   |   |
|   |                                 |   |   |
|   |                                 | By: |   |   |
|   |                                 |   | Name: |
|   |                                 |   | Title: |
|   |                                 |   |   |
|   |                                 |   |   |
|   | PACCT, LLC,                          |   |
|   | as Transferor                        |
|   |                                 |   |   |
|   |                                 |   |   |
|   | By:                                  |   |   |
|   |                                 | Name: |   |
|   |                                 | Title: |   |
|   |                                 |   |   |
|   |                                 |   |   |
|   | CSG FUNDING, LLC,                    |
|   | as O/C Holder                        |
|   |                                 |   |   |
|   |                                 |   |   |
|   | By:                                  |   |   |
|   |                                 | Name: |   |
|   |                                 | Title: |   |
|        |                                      |  |  |  |  |  |  |  |

 

----

 
| Acknowledged and  Accepted:      |
|----------------------------------|
|                             |
| U.S. BANK NATIONAL  ASSOCIATION, |
| as Indenture Trustee             |
|                             |
| By:                              |   |   |
|                             | Name: |
|                             | Title: |
|                             |
|                             |
| CITIBANK, N.A.,                  |
| as Note Administrator            |
|                             |
| By:                              |   |   |
|                             | Name: |
|                             | Title: |

 

----

 

EXHIBIT A

 

**FORM OF ANNUAL SERVICER’S CERTIFICATE**

 

(To be delivered on orbefore March 31 ofeach calendar year beginning with March 31, 2003,pursuant to Section 3.05 of the Transfer andServicing Agreement referred to below)

 

**CSGQ TRUST**

 

The undersigned, a duly authorized representative ofCompuCredit Corporation (“**CompuCredit**”), as Servicer, pursuant tothe Transfer and Servicing Agreement, dated as of June 25, 2002 (as amended andsupplemented, the “**Agreement**”), among PACCT, LLC, CSGQTrust and CompuCredit does hereby certify that:

 

1.    CompuCredit, is, as of the date hereof, the Servicer under theAgreement.  Capitalized terms used inthis Certificate have their respective meanings as set forth in the Agreement.

 

2.    The undersigned is duly authorized pursuant to the Agreement toexecute and deliver this Certificate to the Trust.

 

3.    A review of the activities of the Servicer during the year endedDecember 31,        , and of its performanceunder the Agreement was conducted under my supervision.

 

4.    Based on such review, the Servicer has, to the best of myknowledge, performed in all material respects its obligations under theAgreement throughout such year and no default in the performance of suchobligations has occurred or is continuing except as set forth in paragraph 5below.

 

5.    The following is a description of each default in the performanceof the Servicer’s obligations under the provisions of the Agreement known to meto have been made by the Servicer during the year ended December 31,       , which sets forth in detail (i) thenature of each such default, (ii) the action taken by the Servicer, if any, toremedy each such default and (iii) the current status of each such default: **[**Ifapplicable, insert “None.”**]**

 

IN WITNESS WHEREOF, the undersigned has duly executedthis Certificate this          day of                      ,20     .

 
|   | COMPUCREDIT CORPORATION, |
|--------|--------------------------|
|   | Servicer                 |
|   |                     |
|   |                     |
|   | By:                      |   |   |
|   |                     |   | Name: |
|   |                     | Title: |
|        |                          |  |  |  |

 

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EXHIBITB

 

**FORM OF REASSIGNMENT OF RECEIVABLES IN REMOVED RECEIVABLES**

**(As required by Section 2.08(a) of**

**the Transfer and Servicing Agreement)**

 

REASSIGNMENT No.       OF RECEIVABLES, dated as of                    ,(3) by and between PACCT, LLC, a Delaware limited liability company, asTransferor (the “**Transferor**”), COMPUCREDIT CORPORATION,a Georgia corporation, as Servicer (the “**Servicer**”), CSGQ TRUST (the “**Trust**”)and CSG FUNDING, LLC, as O/C Holder (the “**O/C Holder**”), pursuant to the Transferand Servicing Agreement referred to below.

 

WITNESSETH:

 

WHEREAS the Transferor, the Servicer, the Trust andthe O/C Holder are parties to the Transfer and Servicing Agreement, dated as ofJune 25, 2002 (as amended and supplemented, the “**Agreement**”);

 

WHEREAS pursuant to the Agreement, the Servicer wishesto remove from the Trust all Receivables owned by the Trust in certaindesignated Accounts (the “**Removed Receivables**”) and to cause theTrust to reconvey such Removed Receivables, whether now existing or hereaftercreated, from the Trust to the Servicer; and

 

WHEREAS the Trust is willing to accept suchdesignation and to reconvey the Receivables in the Removed Receivables subjectto the terms and conditions hereof;

 

NOW, THEREFORE, the Transferor, the O/C Holder, theServicer and the Trust hereby agree as follows:

 

1.             Defined Terms. All terms defined in the Agreement and used herein shall have suchdefined meanings when used herein, unless otherwise defined herein.

 

“**Removal Date**” shall mean, with respectto the Removed Receivables designated hereby,           ,    .

 

“**Removal Notice Date**” shall mean, withrespect to the Removed Receivables              ,     

 

2.             Designation of Removed Receivables.  On or before the Removal Date, the Servicerwill deliver to the Owner Trustee a computer file or microfiche list containinga true and complete schedule identifying all Accounts the Receivables of whichare being removed from the Trust, specifying for each such Account, as of theRemoval Notice Date, its account number and the aggregate amount outstanding insuch Account, which computer file or microfiche list shall supplement Schedule1 to the Agreement.

 

3.             Conveyance of Receivables.  (a)  The Trust does herebytransfer, assign, set over and otherwise convey to the Servicer, without recourse,all right, title and interest of the Trust in, to and under the Receivablesexisting at the close of business on the Removal Date and thereafter createdfrom time to time in the Removed Receivables designated hereby, all Interchangeand Recoveries related

 

----

(3)  To be dated as of theRemoval Date.

 

D-1-1

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thereto, all monies due or to become due and all amounts received orreceivable with respect thereto and all proceeds thereof.

 

(b)           Inconnection with such transfer, the Trust agrees to execute and deliver to theServicer on or prior to the date this Reassignment is delivered, applicablepartial release and/or termination statements prepared by the O/C Holder withrespect to the Removed Receivables reassigned hereby and the proceeds thereofevidencing the release by the Trust of its interest in the Removed Receivables,and meeting the requirements of applicable state law, in such manner and suchjurisdictions as are necessary to terminate or release such interest.

 

4.             Representations and Warranties.  The Servicer represents and warrants to theTrust as of the Removal Date:

 

(a)           LegalValid and Binding Obligation.  ThisReassignment constitutes a legal, valid and binding obligation of the Servicerenforceable against the Servicer, in accordance with its terms, except as suchenforceability may be limited by applicable bankruptcy, insolvency,reorganization, moratorium or other similar laws now or hereafter in effectaffecting the enforcement of creditors’ rights in general and except as suchenforceability may be limited by general principles of equity (whetherconsidered in a suit at law or in equity); and

 

(b)           RedemptionEvent; Event of Default.  TheServicer reasonably believes that (A) the removal of the Removed Receivableswill not, based on the facts known to the Servicer, then or thereafter cause aRedemption Event or Event of Default to occur with respect to any Series and(B) no selection procedure was utilized by the Servicer  which would result in a selection of RemovedReceivables that would be materially adverse to the interests of theNoteholders of any Series as of the Removal Date.

 

(c)           Listof Removed Accounts.  The list ofRemoved Receivables delivered pursuant to subsection 2.08(a)(ii) of theAgreement, as of the Removal Date, is true and complete in all materialrespects.

 

5.             Ratification of Agreement.  As supplemented by this Reassignment, theAgreement is in all respects ratified and confirmed and the Agreement as sosupplemented by this Reassignment shall be read, taken and construed as one andthe same instrument.

 

6.             Counterparts. This Reassignment may be executed in two or more counterparts, and bydifferent parties on separate counterparts, each of which shall be an original,but all of which shall constitute one and the same instrument.

 

7.             GOVERNING LAW. THIS REASSIGNMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THESTATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THEOBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINEDIN ACCORDANCE WITH SUCH LAWS.

 

8.             Limitation of Liability.  Notwithstanding any other provision hereinor elsewhere, this Reassignment has been executed and delivered by WilmingtonTrust Company, not in its individual capacity, but solely in its capacity asOwner Trustee of the Trust, in no event shall Wilmington Trust Company in itsindividual capacity have any liability in respect of the representations,warranties, or obligations of the Trust hereunder or under any other document,as to all of which recourse shall be had solely to the assets of the Trust, andfor all purposes of this Reassignment and each other document, the

 

B-2

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Owner Trustee (as such or in its individual capacity) shall be subjectto, and entitled to the benefits of, the terms and provisions of the TrustAgreement.

 

B-3

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IN WITNESS WHEREOF, the Transferor, the Servicer, theTrust and the O/C Holder have caused this Reassignment to be duly executed bytheir respective officers as of the day and year first above written.

 

 
|   | COMPUCREDIT CORPORATION, as Servicer |
|--------|--------------------------------------|
|   |                                 |   |   |
|   |                                 |   |   |
|   | By:                                  |   |   |
|   |                                 | Name: |   |
|   |                                 | Title: |   |
|   |                                 |   |   |
|   |                                 |   |   |
|   | CSGQ TRUST,                          |
|   |                                 | as Issuer |   |
|   |                                 |   |   |
|   |                                 | By: | Wilmington Trust Company,  not in its individual capacity  but solely as Owner Trustee  on behalf of the Trust |
|   |                                 |   |   |
|   |                                 |   |   |
|   |                                 | By: |   |   |
|   |                                 |   | Name: |
|   |                                 |   | Title: |
|   |                                 |   |   |
|   |                                 |   |   |
|   | PACCT, LLC,                          |   |
|   | as Transferor                        |
|   |                                 |   |   |
|   |                                 |   |   |
|   | By:                                  |   |   |
|   |                                 | Name: |   |
|   |                                 | Title: |   |
|   |                                 |   |   |
|   |                                 |   |   |
|   | CSG FUNDING, LLC,                    |
|   | as O/C Holder                        |
|   |                                 |   |   |
|   |                                 |   |   |
|   | By:                                  |   |   |
|   |                                 | Name: |   |
|   |                                 | Title: |   |
|        |                                      |  |  |  |  |  |  |  |

 

B-4

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EXHIBITC-1

 

**FORM OF OPINION OF COUNSEL**

**WITH RESPECT TO AMENDMENTS**

 

Provisions to be includedinOpinion of Counsel to be delivered pursuantto subsection 9.02(d)(i)

 

The opinions set forth below may be subject to all thequalifications, assumptions, limitations and exceptions taken or made in theOpinions Of Counsel delivered on any applicable delivery date.

 

(i)            The amendment to the Transfer andServicing Agreement, attached hereto as Schedule 1 (the “**Amendment**” ), has beenduly authorized, executed and delivered by the Transferor and constitutes thelegal, valid and binding agreement of the Transferor, enforceable in accordancewith its terms, except as such enforceability may be limited by applicablebankruptcy, insolvency, reorganization, moratorium or other laws from time totime in effect affecting creditors’ rights generally.  The enforceability of the Transferor’s obligations is alsosubject to general principles of equity (regardless of whether suchenforceability is considered in a proceeding in equity or at law)

 

(ii)           The Amendment is authorized andpermitted by the terms and provisions of Section 9.01 of the Transfer andServicing Agreement.

 

C-1-1

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**EXHIBIT C-2**

 

**FORM OF ANNUAL OPINION OF COUNSEL**

**WITH RESPECT TO ACCOUNTS**

 

Provisions to be includedinOpinion of Counsel to be delivered pursuantto subsection 9.02(d)(ii)

 

The opinion set forth below may be subject to all thequalifications, assumptions, limitations and exceptions taken or made in theOpinions of Counsel delivered on any applicable delivery date with respect tosimilar matters.

 

1.             No filing or other action, other than such filing orother action described in such opinion, is necessary from the date of suchopinion through June 30 of the following year to continue the perfectedstatus of the security interest of the Trust in the Receivables described inthe financing statements referenced in such opinion.

 

C-2-1

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**EXHIBIT C-3**

 

**FORM OF ANNUAL OPINION OF COUNSEL**

**TO BE DELIVERED TO MOODY’S INVESTORS SERVICE, INC.**

 

Provisions to be includedinOpinion of Counsel to be delivered pursuantto subsection 9.02

 

The opinion set forth below may be subject to all thequalifications, assumptions, limitations and exceptions taken or made in theOpinions of Counsel delivered on any applicable delivery date with respect tosimilar matters.

 

1.             Ifthe matter were properly briefed and presented to a court, the court would holdthat the Receivables constitute “accounts,” as defined under Section 9–102of the UCC.

 

C-3-1

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SCHEDULE1

 

List of Accounts

 

**[**Original list delivered to Trust**]**

 

S-1

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SCHEDULE2

 

Purchase Price

 

Principal Amount ofSecurities

 

| Class A-1  Certificates |   | $      | [                     ] |
|-------------------------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------|
|                    |   |   |
| Class A-2  Certificates |   | $      | [                     ] |
|                    |   |   |
| Class A-3  Certificates |   | $      | [                     ] |
|                    |   |   |
| Class A-4  Certificates |   | $      | [                     ] |
|                    |   |   |
| Class B Notes           |   | $      | [                     ] |
|                    |   |   |
| O/C Certificate         |   | $      | [                     ] |
|                    |   |   |
| Variable Funding  Notes |   | $      | [                     ] |

 

S-1

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SCHEDULE3

 

BANK AGENT NUMBERS

[Attached]

 

S-1

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