Document:

ex101.htm

 

Exhibit 10.1

 

 EXECUTION COPY

AMENDED AND RESTATED

 

NOTE PURCHASE AGREEMENT

 

 

by and among

 

 

MERRILL LYNCH MORTGAGE CAPITAL INC.,

 

as an Investor,

 

 

 

COMPUCREDIT FUNDING CORP.,

 

as Transferor,

 

 

COMPUCREDIT CORPORATION,

 

as Servicer,

 

 

COMPUCREDIT CREDIT CARD MASTER NOTE BUSINESS TRUST,

 

 

as Issuer

 

 

 

(Variable Funding Notes, Series 2004-One, Class A, Class B, and Class C)

 

 

Dated as of March 1, 2010

 

	
{O1516654;4}

	  	  

  

  

  

Table of Contents

 

	 	 	 	 	Page
	
ARTICLE I DEFINITIONS

	  	 	 	1
	
SECTION 1.1

	
Defined Terms.

	 	 	1
	
SECTION 1.2

	
Other Terms

	 	 	6
	
SECTION 1.3

	
Computation of Time Periods

	 	 	6
	
ARTICLE II PURCHASE AND SALE

	  	 	 	6
	
SECTION 2.1

	
Purchase and Sale of the Offered Notes

	 	 	6
	
SECTION 2.2

	
Purchases of Note Principal Balance Increases

	 	 	7
	
SECTION 2.3

	
[Reserved]

	 	 	7
	
SECTION 2.4

	
Note Interest, Additional Interest, Fees and Other Costs and Expenses

	 	 	7
	
SECTION 2.5

	
Payments and Computations, Etc

	 	 	8
	
ARTICLE III CONDITIONS PRECEDENT

	  	 	 	8
	
SECTION 3.1

	
Conditions Precedent on the Effective Date

	 	 	8
	
SECTION 3.2

	
Conditions Precedent on each Increase Date

	 	 	8
	
ARTICLE IV REPRESENTATIONS AND WARRANTIES

	  	 	 	9
	
SECTION 4.1

	
Representations and Warranties of the Issuer, the Transferor and the Servicer

	 	 	9
	
SECTION 4.2

	
Covenants of the Issuer, the Transferor and the Servicer

	 	 	11
	
SECTION 4.3

	
Periodic Notices and Reports

	 	 	13
	
SECTION 4.4

	
Representations and Warranties of the Investors

	 	 	14
	
ARTICLE V INDEMNIFICATION; EXPENSES; RELATED MATTERS

	  	 	 	14
	
SECTION 5.1

	
Indemnities by the Transferor

	 	 	14
	
SECTION 5.2

	
Yield Protection

	 	 	15
	
SECTION 5.3

	
Taxes

	 	 	15
	
SECTION 5.4

	
Other Costs and Expenses; Breakage Costs

	 	 	16
	
SECTION 5.5

	
Indemnities by the Servicer

	 	 	16

 

 

  

i

  

 

	
ARTICLE VI MISCELLANEOUS

	  	 	 	16
	
SECTION 6.1

	
Term of Agreement; Survival

	 	 	16
	
SECTION 6.2

	
Waivers; Amendments

	 	 	16
	
SECTION 6.3

	
Notices; Payments

	 	 	17
	
SECTION 6.4

	
Governing Law; Submission to Jurisdiction; Appointment of Service Agent

	 	 	18
	
SECTION 6.5

	
Integration

	 	 	18
	
SECTION 6.6

	
Severability of Provisions

	 	 	18
	
SECTION 6.7

	
Counterparts; Facsimile Delivery

	 	 	19
	
SECTION 6.8

	
Successors and Assigns; Binding Effect

	 	 	19
	
SECTION 6.9

	
Confidentiality Agreement

	 	 	19
	
SECTION 6.10

	
No Bankruptcy Petition Against the Issuer or the Transferor

	 	 	19
	
SECTION 6.11

	
No Recourse Against Issuer

	 	 	19
	
SECTION 6.12

	
Limitation of Liability

	 	 	19
	
SECTION 6.13

	
Amounts Limited to Available Collections

	 	 	19
	
SECTION 6.14

	
Transferor Net Worth

	 	 	19

SCHEDULES AND EXHIBITS

EXHIBIT A                      Increase Notice

EXHIBIT B                      Tradenames of Transferor

EXHIBIT C                      Form of Daily Servicing Report

SCHEDULE 1

	
{O1516654;4}

	
 

	  

 

  

ii

  

This AMENDED AND RESTATED NOTE PURCHASE AGREEMENT, dated as of March 1, 2010 (as amended, supplemented or otherwise modified and in effect from time to time, this “Agreement”), is by and among MERRILL LYNCH MORTGAGE CAPITAL INC., a Delaware corporation, as an investor (together with its successors and assigns, the “Investors”), COMPUCREDIT FUNDING CORP., a Nevada corporation, as transferor (together with its successors and assigns in such capacity, the “Transferor”), COMPUCREDIT CORPORATION, a Georgia corporation, as servicer (together with its successors and assigns, the “Servicer”) and COMPUCREDIT CREDIT CARD MASTER NOTE BUSINESS TRUST, a Nevada business trust, as issuer (the “Issuer”).

 

W  I  T  N  E  S  S  E  T  H

 

WHEREAS, Investors, Transferor, Servicer and Issuer previously entered into the Note Purchase Agreement, dated as of January 30, 2004 (as amended from time to time, the “Original Agreement”)

 

WHEREAS, the Issuer previously issued Class A Notes, Class B Notes, Class C Notes and Class D Notes (the “Notes”) pursuant to the Original Supplement (as defined in the Indenture Supplement) and the Indenture;

 

WHEREAS, on the terms and conditions specified in the Original Agreement, the Transfer and Servicing Agreement, the Indenture and the Indenture Supplement, the Transferor caused the Issuer to sell the Class A Notes, Class B Notes and Class C Notes (the “Offered Notes”) to the Investors on the Effective Date; and

 

WHEREAS, the parties to the Original Agreement desire to amend and restate the Original Agreement in accordance with the provisions of Section 6.2(b) of the Original Agreement to read in its entirety as set below, including but not limited to splitting the existing Class C Notes (the "Existing Class C Notes") into two subclasses of notes, the Class C-1 Notes and Class C-2 Notes.

 

NOW THEREFORE, pursuant to Section 6.2(b) of the Original Agreement, the parties hereby agree that effective on and as of the Amendment Date (as defined below), the Original Agreement is hereby amended to read in its entirety as follows:

 

In consideration of the premises and the mutual covenants herein contained, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE I

 

 

DEFINITIONS

 

SECTION 1.1 Defined Terms.

 

  Capitalized terms used herein (including in the preamble and recitals hereof) and not defined herein are defined in, or incorporated by reference into, the Indenture, the Indenture Supplement or the Transfer and Servicing Agreement, as applicable.  Additionally, the following terms shall have the following meanings for all purposes of this Agreement:

 

“Adjusted Net Portfolio Yield” shall mean, with respect to any Monthly Period, the annualized percentage equivalent of a fraction, (A) the numerator of which is equal to (1) Reallocated Series Finance Charge Collections with respect to such Monthly Period, plus (2) without duplication of amounts referred to in clause (1) above, the amount of Interchange to be included as Series 2004-One Allocable Finance Charge Collections for such Monthly Period pursuant to subsection 3.01(c) of the Indenture Supplement, plus (3) any Interest Rate Cap Payments for the related Distribution Date, plus (4) any Pre-Funding Investment Proceeds, Yield Supplement Investment Proceeds and Incentive Servicing Fee Investment Proceeds, plus (5) the amount of funds, if any, to be withdrawn from the Yield Supplement Account that, pursuant to subsection 4.15(c) of the Indenture Supplement, are required to be included in Available Funds on such Distribution Date, minus (6) the Series Default Amount for the Distribution Date with respect to such Monthly Period, minus (7) the amount set forth in Item 1 of Schedule 1 hereto and (B) the denominator of which is the Average Note Principal Balance for such Monthly Period.

 

  

1

  

“Adjusted Net Yield” means, with respect to any Monthly Period, (a) the Adjusted Net Portfolio Yield with respect to such Monthly Period minus (b) the Base Rate with respect to such Monthly Period.

 

“Agreement” is defined in the preamble.

 

“Amendment Date” means March 1, 2010.

 

“Backup Servicing Agreement” means the Backup Servicing Agreement, dated as of January 30, 2004 and as amended from time to time, by and among the Indenture Trustee, the Issuer, the Servicer, the Transferor and First National Bank of Omaha, as the Backup Servicer.

 

“Bankruptcy Code” means the United States Bankruptcy Code, 11 U.S.C. §§ 101 et seq., as amended.

 

“Class A Additional Interest” is defined  in Section 2.4.

 

“Class A Daily Interest” is defined  in Section 2.4.

 

“Class A Interest Rate” means (a) for any Interest Period, LIBOR for such Interest Period and (b) for the remaining portion of any Interest Period during which any Class A Note Principal Balance Increase is purchased by the Investors on a day other than on the first day of the Interest Period (each, a “Class A Stub Period”), LIBOR for that Class A Stub Period, in each case as determined in accordance with Section 2.4, and in each case plus the then applicable Class A Margin.

 

“Class A Interest Shortfall” is defined in Section 2.4.

 

“Class A Margin” is defined in the Fee Letter.

 

“Class A Maximum Principal Amount” means an amount not to exceed the amount set forth in Item 2(a) of Schedule 1 hereto; minus the aggregate outstanding principal amount of notes issued by the Issuer (other than the Offered Notes) and purchased pursuant to the Master Repurchase Agreement that have total credit enhancement greater than or equal to the total credit enhancement provided to the Class A Notes; provided, however that at any time the Class A Maximum Principal Amount shall not be more than the amount that equals the amount set forth in Item 2(b) of Schedule 1 hereto.

 

“Class A Monthly Interest” is defined in Section 2.4.

 

“Class A Stub Period” is defined in the definition of “Class A Interest Rate.”

 

“Class B Additional Interest” is defined  in Section 2.4.

 

“Class B Daily Interest” is defined  in Section 2.4.

 

“Class B Interest Rate” means (a) for any Interest Period, LIBOR for such Interest Period and (b) for the remaining portion of any Interest Period during which any Class B Note Principal Balance Increase is purchased by the Investors on a day other than on the first day of the Interest Period (each, a “Class B Stub Period”), LIBOR for that Class B Stub Period, in each case as determined in accordance with Section 2.4, and in each case plus the then applicable Class B Margin.

 

“Class B Interest Shortfall” is defined in Section 2.4.

 

“Class B Margin” is defined in the Fee Letter.

 

  

2

  

“Class B Maximum Principal Amount” means an amount not to exceed the amount set forth in Item 3(a) of Schedule 1 hereto; minus the aggregate outstanding principal amount of notes issued by the Issuer (other than the Offered Notes) and purchased pursuant to the Master Repurchase Agreement that have total credit enhancement greater than or equal to the total credit enhancement provided to the Class B Notes but less than the Class A Notes; provided, however that at any time the Class B Maximum Principal Amount shall not be more than the amount that equals the amount set forth in Item 3(b) of Schedule 1 hereto.

 

“Class B Monthly Interest” is defined in Section 2.4.

 

“Class B Stub Period” is defined in the definition of “Class B Interest Rate.”

 

“Class C Maximum Principal Amount” means an amount not to exceed the amount set forth in Item 4 of Schedule 1 hereto minus the aggregate principal amount of notes issued by the Issuer (other than the Offered Notes) and purchased pursuant to the Master Repurchase Agreement that have total credit enhancement greater than or equal to the total credit enhancement provided to the Class B Notes and Class C Notes.

 

“Class C-1 Additional Interest” is defined in Section 2.4.

 

“Class C-1 Daily Interest” is defined  in Section 2.4.

 

“Class C-1 Interest Rate” means (a) for any Interest Period, LIBOR for such Interest Period and (b) for the remaining portion of any Interest Period during which any Class C-1 Note Principal Balance Increase is purchased by the Investors on a day other than on the first day of the Interest Period (each, a “Class C-1 Stub Period”), LIBOR for that Class C-1 Stub Period, in each case as determined in accordance with Section 2.4, and in each case plus the then applicable Class C-1 Margin.

 

“Class C-1 Interest Shortfall” is defined in Section 2.4.

 

“Class C-1 Margin” is defined in the Fee Letter.

 

 “Class C-1 Monthly Interest” is defined in Section 2.4.

 

“Class C-1 Stub Period” is defined in the definition of “Class C-1 Interest Rate.”

 

“Class C-2 Additional Interest” is defined in Section 2.4.

 

“Class C-2 Daily Interest” is defined  in Section 2.4.

 

  

3

  

“Class C-2 Interest Rate” means (a) for any Interest Period, LIBOR for such Interest Period and (b) for the remaining portion of any Interest Period during which any Class C-2 Note Principal Balance Increase is purchased by the Investors on a day other than on the first day of the Interest Period (each, a “Class C-2 Stub Period”), LIBOR for that Class C-2 Stub Period, in each case as determined in accordance with Section 2.4, and in each case plus the then applicable Class C-2 Margin; provided, however, that to the extent the Class C-2 Margin for such Interest Period or Class C-2 Stub Period is 0%, then the Class C-2 Interest Rate for such period shall be 0%.

 

“Class C-2 Interest Shortfall” is defined in Section 2.4.

 

“Class C-2 Margin” is defined in the Fee Letter.

 

“Class C-2 Monthly Interest” is defined in Section 2.4.

 

“Class C-2 Stub Period” is defined in the definition of “Class C-2 Interest Rate.”

 

“Closing Date” means January 30, 2004.

 

“Commitment Percentage” means, for each Investor and for each Class, the percentage set forth immediately below such Investor’s name on the signature pages of this Agreement or in any assignment to an Investor in accordance with the provisions set forth herein; provided, however, that the aggregate Commitment Percentage with respect to all of the Investors shall at all times equal 100%.

 

“CompuCredit” means CompuCredit Corporation, a Georgia corporation, and its successors and permitted assigns.

 

“Effective Date” is defined in subsection 2.1(a).

 

“ERISA” means The Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and the rulings issued thereunder.

 

“Excepted Persons” is defined in Section 6.9.

 

“Excluded Liabilities” is defined in Section 5.1.

 

“Excluded Taxes” means, with respect to any Indemnified Party, (i) any tax (including any franchise tax) imposed on or measured by the gross or net income, branch profits, gross or net receipts, capital, net worth and similar items (including any interests, penalties or additions with respect thereto) of such Indemnified Party by the United States and by the jurisdictions or political subdivision or taxing authority thereof in which such Indemnified Party’s principal office or lending offices are located or are resident, managed or controlled or in which such Indemnified Party or lending office is incorporated or organized or otherwise doing business, (ii) in the case of the United States or any state thereof (including the District of Columbia), any taxes imposed by the United States by means of withholding at the source unless such withholding results from a change in applicable law, treaty or regulations or the interpretation or administration thereof after the date such Indemnified Party becomes entitled to the benefits of any of the Transaction Documents with respect to the Class A Note Principal Balance, Class B Note Principal Balance or Class C Note Principal Balance, as applicable, or portion thereof affected by such change (provided that taxes withheld pursuant to Section 1446 of the Code shall be Excluded Taxes in any event), (iii) any taxes to which an Indemnified Party is subject (to the extent of the tax rate then in effect) on the date this Agreement is executed or to which an Indemnified Party would be subject on such date if a payment hereunder had been received by such Person on such date, and with respect to any Indemnified Party that becomes a party hereto after the date hereof, any taxes to which such Indemnified Party is subject on the date it becomes a party hereto (other than in each case taxes for which each of the other Indemnified Parties is entitled to reimbursement pursuant to the terms of this Agreement), and (iv) taxes to which the Indemnified Party becomes subject subsequent to the date referred to in clause (iii) above as a result of a change in residence, place of incorporation, or principal place of business of such Indemnified Party, a change in the branch or lending office of such Indemnified Party participating in the transactions specified herein or other similar circumstances or as a result of the recognition by an Indemnified Party of gain on the sale, assignment or participation by such Indemnified Party of any interest to which it is entitled hereunder or under the  other Transaction Documents.

 

“Expiration Date” means the earlier to occur of (i) the Scheduled Expiration Date and (ii) the occurrence of an Early Redemption Event.

 

“Fee Letter”  means the letter agreement, dated as of the Amendment Date, between the Transferor and the Investor, setting forth, among other things, the Class A Margin, Class B Margin, Class C-1 Margin, Class C-2 Margin and the Unused Fee.

 

“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such accounting profession, in effect from time to time.

 

“Increase Date” shall mean a date upon which a Note Principal Balance Increase occurs.

 

“Increase Notice” is defined in subsection 2.2(c).

 

“Indemnified Amounts” is defined in Section 5.1.

 

“Indemnified Parties” is defined in Section 5.1.

 

“Indenture” means the Master Indenture, dated as of July 14, 2000, by and among the Issuer, the Servicer and the Indenture Trustee, as the same may from time to time be amended, supplemented or otherwise modified and in effect.

 

“Indenture Supplement” means the Amended and Restated Series 2004-One Indenture Supplement, dated as of March 1, 2010, to the Master Indenture, by and among the Issuer, the Servicer and the Indenture Trustee, as the same may from time to time be amended, supplemented or otherwise modified and in effect.

 

“Indenture Trustee” means The Bank of New York Mellon, a New York banking corporation, as indenture trustee, and its successors and assigns in such capacity.

 

“Initial Note Principal Balance” is defined in the Indenture Supplement.

 

“Insolvency Event”  means, with respect to a specified Person, (a) the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of such Person or any substantial part of its property in an involuntary case under any applicable Insolvency Law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or ordering the winding-up or liquidation of such Person’s affairs, and such decree or order shall remain unstayed and in effect for a period of sixty (60) consecutive days; or (b) the commencement by such Person of a voluntary case under any applicable Insolvency Law now or hereafter in effect, or the consent by such Person to the entry of an order for relief in an involuntary case under any such law, or the consent by such Person to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or the making by such Person of any general assignment for the benefit of creditors, or the failure by such Person generally to pay its debts as such debts become due, or the taking of action by such Person in furtherance of any of the foregoing.

  

4

  

 

“Insolvency Laws” means the Bankruptcy Code and all other applicable liquidation, conservatorship, bankruptcy, moratorium, arrangement, receivership, insolvency, reorganization, suspension of payments, or similar debtor relief laws from time to time in effect affecting the rights of creditors generally.

 

“Investors” is defined in the preamble.

 

“Issuer” is defined in the preamble.

 

“Law” means any law (including common law), constitution, statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree or award of any Governmental Authority.

 

“LIBOR” is defined in Section 2.4.

 

“LIBOR Determination Date” means the second Business Day prior to the commencement of each LIBOR Period.  For purposes of this definition, a “Business Day” is any day on which banks in London and New York are open for the transaction of international business.

 

“LIBOR Period” is defined in Section 2.4.

 

“Master Repurchase Agreement” is defined in Item 5 of Schedule 1 hereto.

 

“Maximum Principal Amount” means the sum of the Class A Maximum Principal Amount, Class B Maximum Principal Amount and Class C Maximum Principal Amount.

 

“1940 Act” means The Investment Company Act of 1940, as amended.

 

“Note Principal Balance” is defined in the Indenture Supplement.

 

“Note Principal Balance Increase” is defined in the Indenture Supplement.

 

“Notes” is defined in the recitals.

 

“Offered Notes” is defined in the recitals.

 

“Owner Trustee” means Wilmington Trust FSB, a federal savings bank, as owner trustee of the Issuer, and its successors and assigns in such capacity.

 

“payor” is defined in Section 5.3.

 

“Plan” means an “employee benefit plan” as defined in Section 3(3) of ERISA.

 

“Potential Early Redemption Event”  means an event which, but for the lapse of time or the giving of notice, or both, would constitute an Early Redemption Event.

 

“Proprietary Information” means with respect to information furnished to the Investors pursuant to clauses 4.3(a)(vii) and (viii), (a) confidential or proprietary information relating to pricing or compensation paid by the Servicer to any third parties with whom the Servicer has a contractual relationship that directly relates to the Receivables and the performance by the Servicer or such third parties of their obligations under such agreements; (b) data on an account-by-account basis, modeling results or projections, account management strategies; and (c) other similar information that the Servicer reasonably regards as proprietary to its business; provided, however, that Proprietary Information shall not include (i) monthly reports containing complete and accurate data classified according to the data fields and other categories as set forth in Exhibit B to the Indenture Supplement and (ii) the tax treatment and tax structure of the transactions contemplated herein.

 

“recipient” is defined in Section 5.3.

 

  

5

  

“Reportable Event” is defined in Title IV of ERISA.

 

“Repurchase Transaction” is defined in Item 6 of Schedule 1 hereto.

 

“Requirements of Law” means, with respect to any Person, the certificate of incorporation or articles of association and by-laws or other organizational or governing documents of such Person, and any Law applicable to or binding upon such Person or to which such Person is subject.

 

“Scheduled Expiration Date” means the January 2010 Payment Date, or such later date to which the Scheduled Expiration Date may be extended (if extended) in the sole discretion of the Investors in accordance with the terms of subsection 2.2(b).

 

“Servicer” is defined in the preamble.

 

“Solvent” means, as to any Person at any time, having a state of affairs such that all of the following conditions are met: (a) the fair value of the property of such Person is greater than the amount of such Person’s liabilities as such value is established and liabilities evaluated for purposes of Section 101(32) of the Bankruptcy Code, (b) the present fair salable value of the property of such Person in an orderly liquidation of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person believes it is able to realize upon its property and pay its debts and other liabilities as they mature in the normal course of business, (d) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature, and (e) such Person is not engaged in business or a transaction, and is not about to engage in a business or a transaction, for which such Person’s property would constitute unreasonably small capital.

 

“Taxes” is defined in Section 5.3.

 

“Transaction Documents” means, collectively, this Agreement, the Fee Letter, the Indenture, the Indenture Supplement, the Transfer and Servicing Agreement, each Receivables Purchase Agreement, the Backup Servicing Agreement and all of the other related instruments, documents and other agreements executed and delivered by the Transferor, the Issuer or the Servicer, in each case, as the same may be amended, restated, supplemented or otherwise modified from time to time.

 

“Transfer and Servicing Agreement” means the Transfer and Servicing Agreement, dated as of July 14, 2000, by and among the Transferor, the Issuer, the Servicer and the Indenture Trustee, as the same may from time to time be amended, supplemented or otherwise modified and in effect.

 

“Transferor” is defined in the preamble.

 

“UCC”  means the applicable Uniform Commercial Code.

 

“Unused Fee” is defined in the Fee Letter.

 

SECTION 1.2 Other Terms.  All terms defined directly or by incorporation herein shall have the defined meanings when used in any certificate or other document delivered pursuant thereto unless otherwise defined therein. For purposes of this Agreement and all such certificates and other documents, unless the context otherwise requires: (a) accounting terms not otherwise defined herein, and accounting terms partly defined herein to the extent not defined, shall have the respective meanings given to them under, and shall be construed in accordance with, GAAP; (b) terms used in Article 9 of the UCC in the State of New York, and not specifically defined herein, are used herein as defined in such Article 9; (c) references to any amount as on deposit or outstanding on any particular date means such amount at the close of business on such day; (d) the words “hereof,” “herein” and “hereunder” and words of similar import refer to this Agreement (or the certificate or other document in which they are used) as a whole and not to any particular provision of this Agreement (or such certificate or document); (e) references to any Section, Schedule or Exhibit are references to Sections, Schedules and Exhibits in or to this Agreement (or the certificate or other document in which the reference is made) and references to any paragraph, subsection, clause or other subdivision within any Section or definition refer to such paragraph, subsection, clause or other subdivision of such Section or definition; (f) the term “including” means “including without limitation”; (g) references to any Law refer to that Law as amended from time to time and include any successor Law; (h) references to any agreement refer to that agreement as from time to time amended or supplemented or as the terms of such agreement are waived or modified in accordance with its terms; (i) references to any Person include that Person’s successors and permitted assigns; and (j) headings are for purposes of reference only and shall not otherwise affect the meaning or interpretation of any provision hereof.

 

SECTION 1.3 Computation of Time Periods.  Unless otherwise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word “from” means “from and including”, the words “to” and “until” each means “to but excluding”, and the word “within” means “from and excluding a specified date and to and including a later specified date”.

 

ARTICLE II                      

 

PURCHASE AND SALE

 

SECTION 2.1 Purchase and Sale of the Offered Notes.  (a) The closing of the purchase and sale of the Offered Notes took place at the Washington, D.C. offices of Orrick, Herrington & Sutcliffe LLP on the Closing Date (such date, the “Effective Date”).

 

(b) On the Effective Date, the Transferor caused the Issuer to issue to the Investors, in the name of the Investors, the Offered Notes.

 

(c) On the Effective Date, the Transferor caused the Class A Notes, Class B Notes and Existing Class C Notes, each dated the Effective Date, to be delivered to the Investors, registered in the name of the Investors, having a maximum principal amount equal to the Class A Maximum Principal Amount, Class B Maximum Principal Amount and Class C Maximum Principal Amount, respectively, duly authenticated in accordance with the provisions of the Indenture.

 

  

6

  

(d) On the terms and subject to the conditions specified in the Original Agreement and the Original Supplement, each Investor on the Effective Date made available to the Transferor, on behalf of the Issuer, in same day funds, at such bank or other location reasonably designated by the Transferor, an amount equal to its Commitment Percentage of the Class A Initial Note Principal Balance, Class B Initial Note Principal Balance and Class C Initial Note Principal Balance.

 

(e) On the terms and subject to the conditions specified in this Agreement and the Indenture Supplement, the Investors, from time to time during the period from the Effective Date to the last day of the Revolving Period, have acquired Note Principal Balance Increases by providing funds to the Transferor.

 

(f) On the Amendment Date and pursuant to the Indenture and the Indenture Supplement, the Class C Noteholders will deposit the Existing Class C Notes with the Note Registrar in exchange for the newly issued Class C-1 Notes and Class C-2 Notes.

 

SECTION 2.2 Purchases of Note Principal Balance Increases.  (a) Subject to the terms and conditions hereof, including Article III, in consideration for the sale, assignment and transfer of the Offered Notes by the Transferor to the Investors hereunder from time to time during the Revolving Period, on request of the Transferor on behalf of the Issuer in accordance with subsection 2.2(c), the Investors shall pay to the Issuer an amount equal in each instance to the lesser of (i) the amount requested by the Issuer, (ii) the largest amount that will not cause the aggregate Note Principal Balance to exceed the Maximum Principal Amount and (iii) the largest amount for each Class of Offered Notes that will not cause the Class A Note Principal Balance, the Class B Note Principal Balance or the Class C Note Principal Balance to exceed the Class A Maximum Principal Amount, Class B Maximum Principal Amount or Class C Maximum Principal Amount, respectively.

 

(b) [Reserved].

 

(c) The purchase of each Note Principal Balance Increase shall be made pursuant to the terms of an increase notice (the “Increase Notice”) in form substantially similar to that attached hereto as Exhibit A, delivered by the Transferor, on behalf of the Issuer, to Investors not later than 2:00 p.m. (New York City time) on a Business Day which is not later than three (3) Business Days prior to the proposed Increase Date.  Each such notice shall specify (i) the aggregate amount of the Note Principal Balance Increase with regard to the Class A Notes, Class B Notes and/or Class C Notes, as applicable, which amount must satisfy the applicable minimum requirement set forth below and (ii) the proposed Increase Date.  Any such notice, once given, shall be irrevocable.  The Issuer shall deliver no more than four such notices to the Investors in any calendar month, and each amount specified in any such notice must be in an aggregate amount of not less than $5,000,000.  On the date of purchase of the Note Principal Balance Increase, each Investor shall, upon satisfaction of the applicable conditions set forth in Article III, make available to the Transferor, on behalf of the Issuer, in same day funds, at such bank or other location reasonably designated by the Transferor, on behalf of the Issuer, in its Increase Notice given pursuant to this subsection 2.2(c), an amount equal to its Commitment Percentage of the Note Principal Balance Increase.

 

SECTION 2.3 [Reserved].

 

SECTION 2.4 Note Interest, Additional Interest, Fees and Other Costs and Expenses.  (a) The Issuer or the Transferor, as applicable, shall pay, as and when due in accordance with the Indenture Supplement and this Agreement, all fees hereunder and under the Fee Letter, the Class A Monthly Interest, the Class B Monthly Interest, the Class C Monthly Interest, the Class A Additional Interest, the Class B Additional Interest, the Class C Additional Interest and all amounts payable by it pursuant to Article V, if any.

 

(b) The amount of interest (the “Class A Daily Interest”) allocable to the Class A Notes with respect to any day falling in any Interest Period shall be an amount equal to the sum of (a) the product of (i) the Class A Interest Rate for that Interest Period, (ii) a fraction the numerator of which is 1 and the denominator of which is 360 and (iii) the Class A Note Principal Balance as of the close of business on the first day of such Interest Period, minus any principal payments made on the Class A Notes during that Interest Period and on or prior to that day; plus (b) for each Class A Note Principal Balance Increase purchased by the Investors during that Interest Period and on or prior to such day, the product of (i) the applicable Class A Interest Rate, (ii) a fraction the numerator of which is 1 and the denominator of which is 360 and (iii) such Class A Note Principal Balance Increase.  The amount of interest (the “Class A Monthly Interest”) which shall accrue for the benefit of the Investors with respect to any Interest Period shall be the sum of the Class A Daily Interest for each day in such Interest Period.

 

On the Determination Date preceding each Distribution Date, the Servicer shall determine an amount (the “Class A Interest Shortfall”) equal to the excess, if any, of (x) the Class A Monthly Interest for the Interest Period applicable to the Distribution Date over (y) the amount available to be paid to the Investors in respect of interest on such Distribution Date.  If there is a Class A Interest Shortfall with respect to any Distribution Date, an additional amount (“Class A Additional Interest”) shall be payable as provided herein to the Investors on each Distribution Date following such Distribution Date on which there was a Class A Interest Shortfall, to and including the Distribution Date on which such Class A Interest Shortfall is paid to the Investors, equal to the product of (i) the Class A Interest Rate for the current Interest Period, (ii) a fraction the numerator of which is the actual number of days in the related Interest Period and the denominator of which is 360 and (iii) such Class A Interest Shortfall remaining unpaid.  Notwithstanding anything to the contrary herein, Class A Additional Interest shall be payable or distributed to the Investors only to the extent permitted by applicable law.

 

(c) The amount of interest (the “Class B Daily Interest”) allocable to the Class B Notes with respect to any day falling in any Interest Period shall be an amount equal to the sum of (a) the product of (i) the Class B Interest Rate for that Interest Period, (ii) a fraction the numerator of which is 1 and the denominator of which is 360 and (iii) the Class B Note Principal Balance as of the close of business on the first day of such Interest Period, minus any principal payments made on the Class B Notes during that Interest Period and on or prior to that day; plus (b) for each Class B Note Principal Balance Increase purchased by the Investors during that Interest Period and on or prior to such day, the product of (i) the applicable Class B Interest Rate, (ii) a fraction the numerator of which is 1 and the denominator of which is 360 and (iii) such Class B Note Principal Balance Increase.  The amount of interest (the “Class B Monthly Interest”) which shall accrue for the benefit of the Investors with respect to any Interest Period shall be the sum of the Class B Daily Interest for each day in such Interest Period.

 

On the Determination Date preceding each Distribution Date, the Servicer shall determine an amount (the “Class B Interest Shortfall”) equal to the excess, if any, of (x) the Class B Monthly Interest for the Interest Period applicable to the Distribution Date over (y) the amount available to be paid to the Investors in respect of interest on such Distribution Date.  If there is a Class B Interest Shortfall with respect to any Distribution Date, an additional amount (“Class B Additional Interest”) shall be payable as provided herein to the Investors on each Distribution Date following such Distribution Date on which there was a Class B Interest Shortfall, to and including the Distribution Date on which such Class B Interest Shortfall is paid to the Investors, equal to the product of (i) the Class B Interest Rate for the current Interest Period, (ii) a fraction the numerator of which is the actual number of days in the related Interest Period and the denominator of which is 360 and (iii) such Class B Interest Shortfall remaining unpaid.  Notwithstanding anything to the contrary herein, Class B Additional Interest shall be payable or distributed to the Investors only to the extent permitted by applicable law.

 

(d) The amount of interest (the “Class C-1 Daily Interest”) allocable to the Class C-1 Notes with respect to any day falling in any Interest Period shall be an amount equal to the sum of (a) the product of (i) the Class C-1 Interest Rate for that Interest Period, (ii) a fraction the numerator of which is 1 and the denominator of which is 360 and (iii) the Class C-1 Note Principal Balance as of the close of business on the first day of such Interest Period, minus any principal payments made on the Class C-1 Notes during that Interest Period and on or prior to that day; plus (b) for each Class C-1 Note Principal Balance Increase purchased by the Investors during that Interest Period and on or prior to such day, the product of (i) the applicable Class C-1 Interest Rate, (ii) a fraction the numerator of which is 1 and the denominator of which is 360 and (iii) such Class C-1 Note Principal Balance Increase.  The amount of interest (the “Class C-1 Monthly Interest”) which shall accrue for the benefit of the Investors with respect to any Interest Period shall be the sum of the Class C-1 Daily Interest for each day in such Interest Period.

  

7

  

 

On the Determination Date preceding each Distribution Date, the Servicer shall determine an amount (the “Class C-1 Interest Shortfall”) equal to the excess, if any, of (x) the Class C-1 Monthly Interest for the Interest Period applicable to the Distribution Date over (y) the amount available to be paid to the Investors in respect of interest on such Distribution Date.  If there is a Class C-1 Interest Shortfall with respect to any Distribution Date, an additional amount (“Class C-1 Additional Interest”) shall be payable as provided herein to the Investors on each Distribution Date following such Distribution Date on which there was a Class C-1 Interest Shortfall, to and including the Distribution Date on which such Class C-1 Interest Shortfall is paid to the Investors, equal to the product of (i) the Class C-1 Interest Rate for the current Interest Period, (ii) a fraction the numerator of which is the actual number of days in the related Interest Period and the denominator of which is 360 and (iii) such Class C-1 Interest Shortfall remaining unpaid.  Notwithstanding anything to the contrary herein, Class C-1 Additional Interest shall be payable or distributed to the Investors only to the extent permitted by applicable law.

 

(e) The amount of interest (the “Class C-2 Daily Interest”) allocable to the Class C-2 Notes with respect to any day falling in any Interest Period shall be an amount equal to the sum of (a) the product of (i) the Class C-2 Interest Rate for that Interest Period, (ii) a fraction the numerator of which is 1 and the denominator of which is 360 and (iii) the Class C-2 Note Principal Balance as of the close of business on the first day of such Interest Period, minus any principal payments made on the Class C-2 Notes during that Interest Period and on or prior to that day; plus (b) for each Class C-2 Note Principal Balance Increase purchased by the Investors during that Interest Period and on or prior to such day, the product of (i) the applicable Class C-2 Interest Rate, (ii) a fraction the numerator of which is 1 and the denominator of which is 360 and (iii) such Class C-2 Note Principal Balance Increase.  The amount of interest (the “Class C-2 Monthly Interest”) which shall accrue for the benefit of the Investors with respect to any Interest Period shall be the sum of the Class C-2 Daily Interest for each day in such Interest Period.

 

On the Determination Date preceding each Distribution Date, the Servicer shall determine an amount (the “Class C-2 Interest Shortfall”) equal to the excess, if any, of (x) the Class C-2 Monthly Interest for the Interest Period applicable to the Distribution Date over (y) the amount available to be paid to the Investors in respect of interest on such Distribution Date.  If there is a Class C-2 Interest Shortfall with respect to any Distribution Date, an additional amount (“Class C-2 Additional Interest”) shall be payable as provided herein to the Investors on each Distribution Date following such Distribution Date on which there was a Class C-2 Interest Shortfall, to and including the Distribution Date on which such Class C-2 Interest Shortfall is paid to the Investors, equal to the product of (i) the Class C-2 Interest Rate for the current Interest Period, (ii) a fraction the numerator of which is the actual number of days in the related Interest Period and the denominator of which is 360 and (iii) such Class C-2 Interest Shortfall remaining unpaid.  Notwithstanding anything to the contrary herein, Class C-2 Additional Interest shall be payable or distributed to the Investors only to the extent permitted by applicable law.

 

(f) For purposes of determining Class A Monthly Interest, Class B Monthly Interest, Class C-1 Monthly Interest or Class C-2 Monthly Interest, as applicable, for any Interest Period, the Transferor may elect on each LIBOR Determination Date to determine LIBOR based on a one month, two month or three month period (each, a “LIBOR Period”).  If the Transferor chooses a one month LIBOR Period, then the related Interest Period will correspond to that LIBOR Period.  If the Transferor chooses a two or three month LIBOR Period, then the next two or three Interest Periods, as applicable, will together make up that LIBOR Period.  The “LIBOR Period” for any Class A Stub Period, Class B Stub Period or Class C Stub Period, as applicable, shall be one month, and shall commence on (and include) the related Increase Date and end on (but exclude) the next succeeding Distribution Date.  “LIBOR” shall mean, as of any LIBOR Determination Date, the offered rate for deposits in United States dollars for one month, two months or three months (as applicable commencing on the first day of the relevant LIBOR Period) which appears on Telerate Page 3750 as of 11:00 A.M., London time, on the LIBOR Determination Date for such LIBOR Period.  If such rate does not appear on Telerate Page 3750, the rate for such LIBOR Determination Date will be determined on the basis of the rates at which deposits in the United States dollars are offered by four major banks in the London interbank market selected by the Investors at approximately 11:00 a.m., London time, on such LIBOR Determination Date to prime banks in the London interbank market for a period equal to one month, two months or three months (as applicable commencing on the first day of the relevant LIBOR Period).  The Investors will request the principal London office of each such bank to provide a quotation of its rate.  If at least two such quotations are provided, the rate for such LIBOR Determination Date will be the arithmetic mean of the quotations.  If fewer than two quotations are provided as requested, the rate for such LIBOR Determination Date will be the arithmetic mean of the rates quoted by four major banks in New York City, selected by the Investors, at approximately 11:00 a.m., New York City time, on the LIBOR Determination Date for loans in United States dollars to leading European banks for a period equal to one month, two months or three months (as applicable commencing on the first day of such LIBOR Period).

 

(g) The Issuer may repay all or any portion of the Note Principal Balance, plus any other costs or fees set forth in Article V, at any time upon three (3) Business Days notice to the Investors with prior written consent of the Investors in their sole discretion.

 

SECTION 2.5 Payments and Computations, Etc.  All amounts to be paid or deposited by the Transferor or the Servicer hereunder shall be paid or deposited in accordance with the terms hereof no later than 3:00 p.m. (New York City time) on the day when due in same day funds; if such amounts are payable to the Investors they shall be paid or deposited in the account indicated under the heading “Payment Information” in Section 6.3, until otherwise notified by the Investors.  All computations of per annum fees hereunder shall be made on the basis of a year of 360 days for the actual number of days (including the first but excluding the last day) elapsed.  Any computations by the Investors of amounts payable under Article V shall be supported by a certificate prepared in good faith setting forth the basis and the calculation of the amount (in reasonable detail) of each request by the Investors, shall be binding upon the Trustee and the Transferor absent manifest error, and the Investors shall deliver a copy thereof to the Transferor and the Servicer.  Nothing in this Section 2.5 shall be deemed to require the Trustee or the Transferor to pay any amount to the Investors to the extent the Investors have been compensated therefor under another provision of this Agreement or to the extent such amount is already reflected in the computations of Class A Additional Interest, Class B Additional Interest, Class C-1 Additional Interest, Class C-2 Additional Interest or any other fees hereunder.

 

ARTICLE III                                

 

CONDITIONS PRECEDENT

 

SECTION 3.1 [Reserved].

 

SECTION 3.2 Conditions Precedent on each Increase Date.  On any Increase Date, each Investor shall purchase and pay for any Note Principal Balance Increases, provided that each of the following conditions have been satisfied or waived.

 

(a) Not less than three (3) Business Days prior to the proposed Increase Date, the Investors shall have received a duly completed Increase Notice.

 

(b) On the Increase Date the following statements shall be true and the Transferor, the Issuer and the Servicer shall be deemed to have certified (with respect to the Servicer and clauses (x) through (xv) below, to the best of the Servicer’s knowledge), each as to itself only and not as to any other, that:

 

  

8

  

(i) Its representations and warranties contained in Section 4.1 (other than subsections 4.1(m) and 4.1(n)) are true and correct on and as of such day as though made on and as of such date;

 

(ii) No event has occurred and is continuing, or would result from such Transaction which constitutes an Early Redemption Event or Potential Early Redemption Event;

 

(iii) On and as of such day, after giving effect to such purchase of the Note Principal Balance Increase, the Class A Note Principal Balance, Class B Note Principal Balance and Class C Note Principal Balance will not exceed the Class A Maximum Principal Amount, Class B Maximum Principal Amount and Class C Maximum Principal Amount, respectively;

 

(iv) On and as of such day, it has performed all of the agreements contained in this Agreement, the Affinity Card Agreement and each other Transaction Document to which it is a party to be performed by such person at or prior to such day and to the extent each is a party thereto;

 

(v) No law or regulation shall prohibit, and no order, judgment or decree of any federal, state or local court or governmental body, agency or instrumentality shall prohibit or enjoin, the paying of such Note Principal Balance Increase by the Investors in accordance with the provisions hereof;

 

(vi) No Class A Monthly Interest, Class B Monthly Interest, Class C-1 Monthly Interest, Class C-2 Monthly Interest, Class A Additional Interest, Class B Additional Interest, Class C-1 Additional Interest, Class C-2 Additional Interest other fees and costs due and payable to the Investors pursuant to this Agreement and the other Transaction Documents or any unreimbursed Reduction Amounts shall be outstanding as of such Increase Date;

 

(vii) On and as of such day, after giving effect to any purchase of the Note Principal Balance Increase, the Spread Account Amount shall be greater than the Required Spread Account Amount;

 

(viii) On and as of such day, after giving effect to each Note Principal Balance Increase, (A) the sum of the Class B Note Principal Balance, the Class C Note Principal Balance and the Class D Note Principal Balance shall equal the Required Aggregate Class Amount; and (B) the Series Allocation Percentage of the total Receivables in the Issuer shall be equal to or greater than the Note Principal Balance;

 

(ix) The Servicer shall be in compliance with the reporting obligation set forth in clause 4.3(a)(iii);

 

(x) The Net Yield for the next preceding Monthly Period for which a Monthly Servicer’s Statement is required to be delivered shall have been at least 4.00%; provided, however, that if such Monthly Period is not the immediately prior Monthly Period and if the Net Yield for such Monthly Period shall be 4.20% or less, the Investors shall have no obligation to purchase such Note Principal Balance Increase until the Servicer shall have provided to the Investors the Monthly Servicer’s Statement for the immediately prior Monthly Period conclusively showing that the Net Yield for such Monthly Period is not less than 4.00%;

 

(xi) The Monthly Payment Rate for the next preceding Monthly Period for which a Monthly Servicer’s Statement is required to be delivered shall have not been less than 4.50%; provided, however, that if such Monthly Period is not the immediately prior Monthly Period and if the Monthly Payment Rate for such Monthly Period shall be 4.725% or less, the Investors shall have no obligation to purchase such Note Principal Balance Increase until the Servicer shall have provided to the Investors the Monthly Servicer’s Statement for the immediately prior Monthly Period conclusively showing that the Monthly Payment Rate for such Monthly Period is not less than 4.50%;

 

(xii) The weighted average FICO score of all Eligible Accounts for the next preceding Monthly Period for which a Monthly Servicer’s Statement is required to be delivered shall be not less than 580; provided, however, that if such Monthly Period is not the immediately prior Monthly Period and if the weighted average FICO score of all Eligible Accounts for such Monthly Period shall be less than 590, the Investors shall have no obligation to purchase such Note Principal Balance Increase until the Servicer shall have provided to the Investors the Monthly Servicer’s Statement for the immediately prior Monthly Period conclusively showing that the weighted average FICO score for such Monthly Period is not less than 580;

 

(xiii) The Monthly Delinquency Rate for the next preceding Monthly Period for which a Monthly Servicer’s Statement is required to be delivered shall not exceed 14.50%; provided, however, that if such Monthly Period is not the immediately prior Monthly Period and if the Monthly Delinquency Rate for such Monthly Period shall be more than 13.775%, the Investors shall have no obligation to purchase such Note Principal Balance Increase until the Servicer shall have provided to the Investors the Monthly Servicer’s Statement for the immediately prior Monthly Period conclusively showing that the Monthly Delinquency Rate for such Monthly Period is not more than 14.50%;

 

(xiv) The Monthly Default Rate for the next preceding Monthly Period for which a Monthly Servicer’s Statement is required to be delivered shall not exceed 20.75%; provided, however, that if such Monthly Period is not the immediately prior Monthly Period and if the Monthly Default Rate for such Monthly Period shall be more than 19.713%, the Investors shall have no obligation to purchase such Note Principal Balance Increase until the Servicer shall have provided to the Investors the Monthly Servicer’s Statement for the immediately prior Monthly Period conclusively showing that the Monthly Default Rate for such Monthly Period is not more than 20.75%; and

 

(xv) The Adjusted Net Yield for the next preceding Monthly Period for which a Monthly Servicer’s Statement is required to be delivered shall have been at least 3.00%; provided, however, that if such Monthly Period is not the immediately prior Monthly Period and if the Adjusted Net Yield for such Monthly Period shall be less than 3.15%, the Investors shall have no obligation to purchase such Note Principal Balance Increase until the Servicer shall have provided to the Investors the Monthly Servicer’s Statement for the immediately prior Monthly Period conclusively showing that the Adjusted Net Yield for such Monthly Period is not less than 3.00%;

 

ARTICLE IV                                

 

 REPRESENTATIONS AND WARRANTIES

 

SECTION 4.1 Representations and Warranties of the Issuer, the Transferor and the Servicer.  As of the Amendment Date and as of any Increase Date, each of the Transferor, the Issuer and the Servicer, as to itself only and not as to any other, represents and warrants to the Investors, that all representations and warranties made by it in this Section 4.1 (with respect to the Amendment Date only, other than Section 4.1(s)), with respect to itself, are true and correct as of such day as though made on and as of such day:

  

9

  

 

(a) Organization and Good Standing.  The Transferor and the Servicer, as applicable, is a corporation duly organized and validly existing in good standing under the laws of the State of Nevada, in the case of the Transferor, and the State of Georgia, in the case of the Servicer, and has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Agreement and any other Transaction Documents to which it is a party.  The Issuer is a business trust duly organized and validly existing in good standing under the laws of the State of Nevada and has full power, authority and legal right to execute, deliver and perform its obligations under this Agreement and any other Transaction Documents to which it is a party.

 

(b) Due Qualification.  Each of the Issuer, the Transferor and the Servicer, as applicable, is duly qualified to do business and is in good standing as a corporation or a business trust, as applicable, and has obtained all necessary licenses and approvals with respect thereto, in each jurisdiction in which failure to so qualify or to obtain such licenses and approvals would have a material adverse effect on the Issuer’s, the Transferor’s or the Servicer’s, as applicable, ability to perform its obligations under the Transaction Documents to which each is a party.

 

(c) Due Authorization.  The execution and delivery by the Issuer, the Transferor and the Servicer, as applicable, of this Agreement and the other Transaction Documents to which it is a party, and the consummation by the Issuer, the Transferor and the Servicer, as applicable, of the transactions provided for in this Agreement and the other Transaction Documents to which it is a party have been duly authorized by the Issuer, the Transferor and the Servicer, as applicable, by all necessary action on the part of the Issuer, the Transferor and the Servicer, as the case may be.

 

(d) No Violation.  The execution and delivery by it of this Agreement and the other Transaction Documents to which it is a party, the performance of it of the transactions contemplated hereby and thereby and the fulfillment of the terms hereof and thereof applicable to the Issuer, the Transferor or the Servicer, as the case may be, will not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, any Requirements of Law applicable to the Issuer, the Transferor or the Servicer, as applicable, the Nevada certificate of trust or the Trust Agreement of the Issuer or any indenture, contract, agreement, mortgage, deed of trust, or other instrument to which the Issuer, the Transferor or the Servicer, as applicable, is a party or by which it or any of its respective property is bound.

 

(e) Binding Obligation.  This Agreement and the other Transaction Documents to which it is a party constitute legal, valid and binding obligations of the Issuer, the Transferor and the Servicer, as applicable, enforceable against such party in accordance with their respective terms, except as enforceability may be limited by applicable Insolvency Laws or other similar laws now or hereafter in effect, affecting the enforcement of the rights of creditors generally and except as such enforceability may be limited by general principles of equity (whether considered in a proceeding at law or in equity).

 

(f) No Proceedings.  There are no proceedings or investigations pending or, to the best knowledge of the Issuer, the Transferor or the Servicer, as applicable, threatened, against the Issuer, the Transferor or the Servicer, as applicable, before any court, regulatory body, administrative agency, or other tribunal or governmental instrumentality (i) asserting the invalidity of this Agreement, the Affinity Card Agreement or the other Transaction Documents to which it is a party, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement, the Affinity Card Agreement or the other Transaction Documents to which it is a party, (iii) seeking any determination or ruling that, in the reasonable judgment of the Issuer, the Transferor or the Servicer, as applicable, would materially and adversely affect the performance by the Issuer, the Transferor or the Servicer, as applicable, of its obligations under this Agreement, the Affinity Card Agreement or the other Transaction Documents to which it is a party, (iv) seeking any determination or ruling that would materially and adversely affect the validity or enforceability of this Agreement, the Affinity Card Agreement or the other Transaction Documents to which it is a party, or (v) seeking any determination or ruling that, if adversely determined, would materially and adversely affect the condition (financial or otherwise), business, properties, prospects, profits or operations of the Issuer, the Transferor or the Servicer, as applicable, or any of its respective Affiliates; provided, however, that the Servicer makes no representation as to the condition (financial or otherwise), business, properties, prospects, profits or operation of the Transferor or the Issuer.

 

(g) All Consents Required.  All approvals, authorizations, consents, orders or other actions of any Person or of any Governmental Authority required to be obtained by the Transferor, the Issuer and the Servicer, as applicable, on or prior to the date hereof in connection with the execution and delivery by the Transferor, the Issuer and the Servicer, as applicable, of this Agreement, the Affinity Card Agreement and the other Transaction Documents to which it is a party, the performance by the Transferor, the Issuer and the Servicer, as applicable, of the transactions contemplated by this Agreement, the Affinity Card Agreement and the other Transaction Documents to which it is a party and the fulfillment by the Transferor, the Issuer and the Servicer of the terms hereof and thereof applicable to the Transferor, the Issuer or the Servicer, as applicable, have been obtained and are in full force and effect.

 

(h) Solvency: Transferor.  The Transferor will be Solvent following the consummation on the Effective Date of the transactions contemplated by this Agreement, the Indenture, the Indenture Supplement and the other Transaction Documents to which it is a party, including the transfer by the Transferor to the Issuer of the Transferred Assets.  The transfers of the Receivables to the Issuer for the benefit of the Noteholders are not being made by the Transferor with actual intent to hinder, delay or defraud itself or its creditors.

 

(i) Taxes.  The Transferor and the Issuer have filed or caused to be filed all Tax returns (federal, state and local) are required to be filed.  The Transferor and the Issuer have paid or caused to be paid all present Taxes, assessments and other governmental charges made against it or any of its property (other than any amount of Tax the validity of which is currently being contested in good faith by appropriate proceedings and with respect to which reserves in accordance with generally accepted accounting principles have been provided on the books of the Transferor), and, to the best of the Transferor’s and the Issuer’s knowledge, no Tax lien has been filed and no claim is being asserted, with respect to any such Tax, fee or other charge.

 

(j) ERISA.  The Transferor, the Issuer and their respective ERISA benefit plans are in compliance with ERISA in all material respects.

 

  

10

  

(k) Use of Proceeds.  Neither the Transferor nor the Issuer is engaged in the business of extending credit for the purposes of purchasing or carrying margin stock, and no proceeds of any acquisition of an interest in the Notes, directly or indirectly, will be used for a purpose that violates, or would be inconsistent with, Regulations T, U and X promulgated by the Federal Reserve Board from time to time.

 

(l) Reports Accurate.  No information, exhibit, financial statement, document, book, record or report furnished by the Transferor, the Issuer or the Servicer, as applicable, to the Investors in connection with this Agreement, any other Transaction Documents to which it is a party or any transaction contemplated hereby is inaccurate in any material respect as of the date it is dated or as of the date so furnished, and no such document contains any material misstatement of fact or omits to state a material fact or any fact necessary to make the statements contained therein not misleading.

 

(m) Place of Business.  As of the Amendment Date, the principal place of business and chief executive office of the Transferor is located at 101 Convention Center Drive, Suite 850-14A, Las Vegas, Nevada 89109, the principal place of business and primary office of the Issuer is located at 3993 Howard Hughes Parkway, Suite 250, Las Vegas, Nevada 89109, and the principal place of business and chief executive office of the Servicer is located at Five Concourse Parkway, Suite 400, Atlanta, Georgia 30328, and the office where the Servicer keeps all of the instruments, documents, agreements, books and records relating to the Accounts and the Receivables is located in DeKalb County, Georgia.

 

(n) Tradenames.  As of the Closing Date, the Transferor has, within the last five (5) years, operated only under the tradenames identified in Exhibit B hereto, and, within the last five (5) years, has not changed its name, merged with or into or consolidated with any other corporation (except as has otherwise been disclosed to the Investors) or been the subject of any bankruptcy, insolvency or similar proceeding applicable to the Transferor.

 

(o) Value.  The Transferor has received or will receive reasonably equivalent value in return for the transfer of its interest in the Receivables and the other property transferred pursuant to the Transfer and Servicing Agreement.

 

(p) Security Interest.  The Transferor has granted a security interest (as defined in the UCC) to the Issuer in the Receivables, which is enforceable in accordance with applicable law upon execution and delivery of the Transfer and Servicing Agreement.  The Issuer has granted a security interest (as defined in the UCC) to the Indenture Trustee, in the Receivables, which is enforceable in accordance with applicable law upon execution and delivery of the Indenture and the Indenture Supplement.  Upon the filing of UCC-1 financing statements naming the Indenture Trustee as secured party and the Issuer as debtor, the Indenture Trustee shall have a first priority perfected security interest in the Receivables.  All filings (including, without limitation, such UCC filings) as are necessary in any jurisdiction to perfect the interest of the Indenture Trustee in the Receivables have been made.

 

(q) Investment Company Act.  Neither the Transferor nor the Issuer is or is controlled by, an “investment company” within the meaning of the 1940 Act.

 

(r) Transferor Amount; Receivables.  The Transferor Amount is not less than the Required Transferor Amount.  As of December 31, 2003, the aggregate amount outstanding under the Receivables was approximately $1,270,283,631.16, of which approximately $1,146,402,639.82 was Principal Receivables and approximately $123,880,991.34 was Finance Charge Receivables.

 

(s) No Early Redemption Event.  After giving effect to issuance of the Notes, the purchase, on the Effective Date, of the Class A Notes, Class B Notes and Class C Notes in the amount of the Class A Initial Note Principal Balance, Class B Initial Note Principal Balance and Class C Initial Note Principal Balance, respectively, and the purchase on each Increase Date of each Note Principal Balance Increase, no Early Redemption Event or Servicer Default has occurred and is continuing, and no event, act or omission has occurred and is continuing which, with the lapse of time, the giving of notice or both, would constitute such an Early Redemption Event or a Servicer Default.

 

(t) No General Solicitation.  Neither of the Transferor nor any of its affiliates (as defined in Rule 501(b) under the Securities Act) or any Person (other than the Investors and their respective affiliates, as to whom the Transferor makes no representation) acting on its behalf has engaged, in connection with the offering of the Offered Notes, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act.

 

(u) No Registration under the Securities Act, Trust Indenture Act.  It is not necessary in connection with the offer, sale and delivery of the Offered Notes to the Investors to register the Offered Notes under the Securities Act.  The Indenture and the Indenture Supplement are not required to be qualified under the Trust Indenture Act of 1939.

 

(v) Additional Representations and Warranties.  The representations and warranties of the Transferor in the Transfer and Servicing Agreement, with regard to itself as Transferor and with respect to the Receivables (individually and in the aggregate), are true and correct as of the applicable date set forth in the Transfer and Servicing Agreement.  The representations and warranties of the Servicer in the Indenture, the Indenture Supplement and the Transfer and Servicing Agreement, with regard to itself as Servicer, are true and correct as of the applicable date set forth in the Indenture, the Indenture Supplement or the Transfer and Servicing Agreement.  The representations and warranties of the Issuer in the Indenture, the Indenture Supplement and the Transfer and Servicing Agreement with regard to itself as Issuer, are true and correct as of the applicable date set forth in the Indenture, the Indenture Supplement or the Transfer and Servicing Agreement.

 

(w) Credit Card Guidelines.  Since December 31, 2003, there have been no material changes in the Credit Card Guidelines other than as permitted hereunder.

 

(x) Collections and Servicing.  Since December 31, 2003, there has been no material change in the ability of the Servicer to service and collect the Receivables.

 

(y) Special Purpose Entity.  The Transferor represents, warrants and covenants that it has not and shall not take or refrain from taking, as applicable, each of the activities applicable to it specified in the non-consolidation opinion of Orrick, Herrington & Sutcliffe LLP, delivered on the Closing Date, upon which the conclusions expressed therein are based.

 

(z) Accuracy of Representations and Warranties.  Each representation or warranty by the Transferor, the Issuer and the Servicer, as applicable, contained herein or in any certificate or other document furnished by the Transferor, the Issuer or the Servicer, as applicable, pursuant hereto or in connection herewith is true and correct in all material respects as of the date specified in such certificate or document.

 

The representations and warranties set forth in this section shall survive the purchase of any portion of the Offered Notes by an Investor.  Upon discovery by the Transferor, the Servicer, the Issuer or any Investor of a breach of any of the foregoing representations and warranties, the party discovering such breach shall give prompt written notice to the others.

 

SECTION 4.2 Covenants of the Issuer, the Transferor and the Servicer.  Each of the Transferor, the Issuer and the Servicer covenants, with respect to itself only and not as to any other, as follows:

 

  

11

  

(a) Compliance with Laws, Preservation of Corporate or Trust Existence.  Each of the Issuer, the Transferor and the Servicer, as applicable, will comply in all material respects with all applicable laws, rules, regulations and orders and preserve and maintain its corporate or trust existence, rights, franchises, qualifications and privileges, except to the extent that failure to do so could not reasonably be expected (a) to have a material adverse effect on the Issuer, the Transferor or the Servicer, as applicable, or on the transaction documented under this Agreement, or (b) have an Adverse Effect.  The Transferor and the Issuer will comply, in all material respects, with all acts, rules, regulations, orders, decrees and directions of any Governmental Authority applicable to the Accounts or any part thereof, provided, however, that the Issuer and the Transferor may contest any act, rule, regulation, order, decree or direction in any reasonable manner which will not materially and adversely affect the rights of the Indenture Trustee in the Receivables or the collectability of the Receivables.

 

(b) Organization.  Each of the Issuer, the Transferor and the Servicer, as applicable, will preserve and maintain its existence as a corporation or as a trust, as applicable, duly organized and existing under the laws of the State of Nevada, in the case of the Transferor and the Issuer, and the State of Georgia, in the case of the Servicer; provided, however, that the Issuer, the Transferor and the Servicer, as applicable, may consolidate or merge to the extent permitted by the Transaction Documents.

 

(c) Books and Records.  The Servicer, will, at its own cost and expense, maintain Records with respect to the Accounts and the Receivables and copies of all documents relating to each Account as custodian for the Indenture Trustee, and (ii) prior to the Effective Date or the Increase Date, indicate clearly and unambiguously in its computer files that the Receivables have been transferred and assigned to the Indenture Trustee for the benefit of the Investors pursuant to the Transaction Documents.

 

(d) Access to Information.  From the Effective Date until the Expiration Date, each of the Issuer, the Transferor and the Servicer, as applicable, will, at any time and from time to time during regular business hours, on at least five (5) Business Days (or if an Early Redemption Event or Potential Early Redemption Event has occurred, one Business Day) notice to the Issuer, the Transferor or the Servicer, as the case may be, permit the Investors, or their agents or representatives, at (in the case of one visit per year or at any time if an Early Redemption Event or Potential Early Redemption Event has occurred) the Issuer’s or the Transferor’s, as applicable, cost and expense (and otherwise at the expense of the Investors), (a) to examine all books, records and documents (including computer tapes and disks) in the possession or under the control of the Issuer, the Transferor or the Servicer, as the case may be, relating to the Receivables (other than names of account holders and strategic plans for the Servicer’s credit card business), including the forms of Credit Card Agreements under which such Receivables arise, and (b) to visit the offices and properties of the Issuer, the Transferor or the Servicer, as applicable, for the purpose of examining such materials described in clause (a) above and observing and discussing collection practices and business and financial prospects generally.  In addition, each of the Issuer, the Transferor and the Servicer, as applicable, will, instruct its independent accountants and financial advisors to cooperate with the Investors and their agents and representatives in their investigation pursuant to this subsection 4.2(d).  Any information obtained by the Investors pursuant to this subsection 4.3(d) shall be held in confidence by the Investors in accordance with the provisions of Section 6.9 hereof.

 

(e) No Reduction of Periodic Finance Charges.  The Transferor and the Issuer hereby agree that, except as otherwise required by any Requirements of Law, or as is deemed by the Transferor or the Issuer to be necessary in order for the Transferor to maintain its credit card business, based upon a good faith assessment by the Transferor, in its sole discretion, of the nature of the competition in the credit card business, it shall not at any time reduce the periodic finance charges assessed on any Receivable or other fees on any Account if, as a result of such reduction, the Transferor’s reasonable expectation of the Net Portfolio Yield minus the Base Rate as calculated for the Monthly Period following such reduction would be less than 4.0% and unless such reduction is made applicable to the comparable segment of the consumer revolving credit card receivables owned and serviced by the Transferor that have characteristics the same as, or substantially similar to, the Receivables that arise in the Accounts that are the subject of such change.

 

(f) Credit Card Agreements.  Each of the Transferor and the Issuer shall comply with and perform its obligations, if any, under the applicable Credit Card Agreements relating to the Accounts and the Credit Card Guidelines, except to the extent that failure to do so could not reasonably be expected (a) to have a material adverse effect on the Transferor or the Issuer, as applicable, or on the transaction documented under this Agreement, or (b) have an Adverse Effect.

 

(g) Notice of Liens.  The Transferor and the Issuer shall advise the Investors promptly, in reasonable detail, (i) of any Lien asserted or claim made against any of the Receivables (other than any Lien permitted hereunder or under the Indenture), (ii) of the occurrence of any breach by the Transferor or the Issuer of any of its representations, warranties and covenants contained herein and (iii) of the occurrence of any other event which has an Adverse Effect.

 

(h) Change of Location.  Each of the Transferor and the Issuer, as applicable, (i) will not without providing thirty (30) days prior written notice to the Investors and without filing such amendments to any previously filed financing statements as the Investors may reasonably require, change its name, type or jurisdiction of organization, (ii) will not delete or otherwise impair the marking of its Records referred to in the Transfer and Servicing Agreement and (iii) will promptly take all actions required of each relevant jurisdiction in order to continue the first priority perfected security interest of the Indenture Trustee in the Trust Assets.

 

(i) Other Actions.  Each of the Transferor, the Issuer and the Servicer, as applicable, shall execute and deliver to the Investors all such documents and instruments and do all such other acts and things as may be necessary or reasonably required by the Investors, or the Indenture Trustee to enable the Indenture Trustee or the Investors to exercise and enforce their respective rights under this Agreement or the Transaction Documents and to realize thereon, and the Transferor, the Servicer and the Issuer shall record and file and re-record and refile all such documents and instruments, at such time or times, in such manner and at such place or places, as may be necessary or reasonably required by the Indenture Trustee or the Investors to validate, preserve, perfect and protect the position of the Indenture Trustee or the Investors under this Agreement, the Indenture, the Indenture Supplement and the Receivables Purchase Agreements (to the extent the Transferor, the Issuer or the Servicer is a party thereto), and the Transferor, the Issuer and the Servicer shall maintain this Agreement (including the Fee Letter) as part of its official records; provided, however, that none of the Transferor, the Issuer or the Servicer will have any obligation to prepare or file financing statements in the names of the Investors.

 

(j) Consent of the Investors.  The Transferor, the Issuer or the Servicer, as applicable, shall obtain the written consent (which consent shall not be unreasonably withheld) of the Investors prior to taking any action under the Transaction Documents relating to or affecting Series 2004-One that would require the satisfaction of the Rating Agency Condition under the Transaction Documents.

 

(k) Notice of Delegation of Servicer’s Duties.  The Servicer promptly shall notify the Investors of any delegation by the Servicer of any of the Servicer’s duties under the Indenture or the Indenture Supplement which is not in the ordinary course of business of the Servicer.

 

(l) Notice of Resignation or Removal of the Indenture Trustee.  The Transferor, the Issuer or the Servicer, as applicable, promptly shall notify the Investors of any resignation or removal of the Indenture Trustee under the Indenture.

 

(m) [Reserved].

 

  

12

  

(n) No Change in Business or Credit Card Guidelines.  Neither the Transferor nor the Issuer will make any change in the character of its business or, except pursuant to any Requirements of Law, in the Credit Card Guidelines, which change would, in either case, impair the collectibility of any Receivable or otherwise (a) have a material adverse effect on the Transferor, the Issuer or the Servicer, as applicable, or on the transaction documented under this Agreement, or (b) have an Adverse Effect.

 

(o) Performance of Agreements.  For the benefit of the Investors, each of the Transferor, the Issuer and the Servicer, as applicable, shall perform on a timely basis each of its respective agreements, warranties and indemnities under, and comply in all material respects with each of the respective terms and provisions applicable to it in, the Affinity Card Agreement and the Transaction Documents to which each is a party.

 

(p) Amendments to the Transaction Documents.  Each of the Transferor, the Issuer and the Servicer, as applicable, shall not terminate (except in accordance with the terms thereof and only if at the time of such termination none of the Note Principal Balance or other amount payable to the Investors hereunder is unpaid), amend, waive or otherwise modify the Affinity Card Agreement or any Transaction Document to which it is a party without the prior written consent of the Investors, in each case in its sole discretion, unless the Transferor, the Issuer or the Servicer as applicable delivers to the Investors an Officer’s Certificate, in form and substance satisfactory to the Investors, to the effect that such termination, amendment, waiver or modification does not adversely affect the interest of the Investors in any material respect.

 

(q) Timely Payments.  Each of the Transferor, the Issuer and the Servicer, as applicable, shall timely make all payments, deposits or transfers, and give all instructions to transfer, required to be made by it hereunder and under the Transaction Documents.

 

(r) Periodic Reports of the Servicer and the Accountants.  The Servicer shall furnish to the Investors (i) a copy of each annual certified public accountants’ reports received by the Indenture Trustee pursuant to Section 3.06 of the Transfer and Servicing Agreement (other than any portion of such reports relating to other outstanding Series), (ii) with respect to each Distribution Date with respect to the Transfer and Servicing Agreement, a copy of the completed report furnished to the Indenture Trustee pursuant to Section 3.04(b) of the Transfer and Servicing Agreement, and (iii) a copy of any other report furnished to the Indenture Trustee pursuant to Section 3.05 of the Transfer and Servicing Agreement (other than any portion of such reports relating to other outstanding Series).

 

(s) Opinion of Counsel.  The Transferor shall deliver to the Investors copies of all opinions delivered to the Indenture Trustee under the Indenture or the Indenture Supplement.

 

SECTION 4.3 Periodic Notices and Reports.

 

(a) Financial Reporting.  From the Effective Date until the Expiration Date, the Transferor, the Issuer or the Servicer, as applicable, shall furnish to the Investors:

 

(i) Annual Reporting.  Within one hundred twenty (120) days following the end of each fiscal year of the Servicer, beginning with the fiscal year ending December 31, 2003, the audited consolidated balance sheet of the Servicer and its consolidated subsidiaries as of the end of such fiscal year, and the related audited consolidated statements of income and cash flows of the Servicer and its consolidated subsidiaries for such fiscal year, accompanied by any management letter of the Servicer’s independent certified public accountants and an Officer’s Certificate of the Servicer; provided, however, to the extent that CompuCredit is no longer acting as Servicer, the Transferor shall deliver related audited consolidated reports of the consolidated group of which the Transferor is a member;

 

(ii) Quarterly Reporting.  Within sixty (60) days following the end of each of the first three fiscal quarters of the Servicer of each fiscal year, beginning with the fiscal quarter ending March 31, 2004, the unaudited consolidated balance sheet of the Servicer and its consolidated subsidiaries as of the end of such fiscal quarter, and the related unaudited consolidated statements of income and cash flows of the Servicer and its consolidated subsidiaries for such fiscal quarter; provided, however, to the extent that CompuCredit is no longer acting as Servicer, the Transferor shall deliver related unaudited consolidated reports of the consolidated group of which the Transferor is a member;

 

(iii) Monthly Reporting.  The Servicer shall furnish to the Investors (or cause to be furnished to the Investors), on a monthly basis on or before each Determination Date, such information relating to the status of the Receivables, accounts relating to the Indenture or the Indenture Supplement for the preceding Monthly Period and such other information with respect to the Issuer’s property in a certificate substantially in the form of Exhibit B to the Indenture Supplement;

 

(iv) Compliance Certificate.  Together with the financial statements required under this Section, a compliance certificate signed by the Servicer’s chief financial officer, chairman, president, treasurer or executive officer stating that, to the best of such Person’s knowledge after reasonable investigation, the financial statements delivered to the Investors have been prepared in accordance with GAAP and accurately reflect the financial condition of the Servicer and a certificate of the Transferor that no Early Redemption Event or Potential Early Redemption Event exists, or if any Early Redemption Event or Potential Early Redemption Event exists, stating the nature and status thereof;

 

(v) Credit Card Guidelines.  Within thirty (30) days after the date any material change in or material amendment to the Credit Card Guidelines is made, the Transferor shall provide the Investors with a copy of such change or amendment.  If requested by the Investors, within ninety (90) days after the close of each of its fiscal years, the Transferor shall provide the Investors with a complete copy of the Credit Card Guidelines then in effect;

 

(vi) Filings with Governmental Authorities.  Promptly after the same are sent, copies of all financial statements and reports that the Transferor or the Issuer may make to, or file with, the Securities and Exchange Commission or any successor or analogous governmental authority;

 

(vii) Additional Receivables Information. The Servicer shall promptly provide to the Investors additional Receivables or financial information requested by any of the Investors in such Investor’s reasonable discretion, including master file information on CD ROM or other such format as reasonably acceptable to such Investor;

 

(viii) Other Information.  Such other information, documents, records or reports respecting the Accounts, the Receivables or the servicing thereof or the Issuer as the Investors may from time to time reasonably request (as can be reasonably obtained or provided by the Transferor or the Servicer); and such publicly available information, documents, records or reports respecting the Servicer, the Transferor, the Issuer or the condition or operations, financial or otherwise, of the Servicer, the Issuer or the Transferor as the Investors may from time to time reasonably request; and

 

(ix) Daily Reporting.  From and after March 1, 2004, the Servicer shall furnish to the Investors (or cause to be furnished to the Investors) on each Business Day such information relating to the status of the Receivables in a certificate substantially in the form of Exhibit C attached hereto;

  

13

  

 

provided, however, for so long as CompuCredit is subject to, and in compliance with, the requirements of the Securities Exchange Act of 1934, as amended, and such requirements require public disclosure of the items specified in the above clauses (i), (ii), (iv) and (vi), CompuCredit shall be required to furnish such items only upon the request of the Investors; provided, further, that with respect to clauses (vii) and (viii) above, neither the Servicer nor the Transferor shall be required to disclose any information reasonably determined by it to be Proprietary Information.

 

(b) Notices.  The Transferor, the Issuer and the Servicer, as applicable, shall notify the Investors in writing of any of the following with respect to itself only promptly upon learning of the occurrence thereof, describing the same and, if applicable, the steps being taken with respect thereto:

 

(i) Notice of Early Redemption Events and Supplemental Servicer Default.  As soon as possible and in any event, within five (5) days after learning of the occurrence of any Early Redemption Event, Potential Early Redemption Event or Supplemental Servicer Default, accompanied by a statement of the chief financial officer or chief accounting officer of the Transferor or the Issuer or an Officer’s Certificate of a Servicing Officer, as applicable;

 

(ii) Judgment and Proceedings.  The entry of any judgment or decree against the Transferor or the Issuer, as applicable, in excess of $10,000, or with respect to the Servicer, $1,000,000, or the institution of any material lawsuit or other proceeding against any such Person;

 

(iii) Adverse Effect.  The occurrence of any event or condition which has, or could reasonably be expected to have, an Adverse Effect;

 

(iv) Litigation.  The institution of any litigation, arbitration proceeding or governmental proceeding against the Transferor, the Issuer or the Servicer, as applicable, or to which such Person becomes a party and in which the amount in controversy exceeds the sum of $1,000,000 in respect of the Transferor and the Issuer or $5,000,000 in respect of the Servicer;

 

(v) ERISA.  The occurrence of any Reportable Event under Section 4043(c) (5), (6) or (9) of ERISA with respect to any Plan of the Transferor, the Issuer or the Servicer, as applicable, any decision to terminate or withdraw from a Plan of the Transferor, the Issuer or the Servicer, as applicable, any finding made with respect to a Plan of the Transferor, the Issuer or the Servicer, as applicable, under Section 4041(c) or (e) of ERISA, the commencement of any proceeding with respect to a Plan of the Transferor, the Issuer or the Servicer, as applicable under Section 4042 of ERISA, the failure to make any required installment or other required payment under Section 412 of the Code or Section 302 of ERISA on or before the date for such installment or payment, or any material increase in the actuarial present value of unfunded vested benefits under all Plans of the Transferor, the Issuer or the Servicer, as applicable, over the preceding year;

 

(vi) Defaults Under Other Agreements.  The occurrence of a default or an event of default under any other financing arrangement pursuant to which the Transferor, the Issuer or the Servicer is a debtor or an obligor; and

 

(vii) Debt Ratings.  Any upgrade or downgrade in the public or private debt rating of the Servicer, the Issuer or the Transferor or its parent.

 

(c) Copies of Notices.  The Transferor, the Issuer and the Servicer, as applicable, shall promptly furnish to the Investors a copy of each certificate, report, statement, notice or other communication (including without limitation, a copy of any Opinion of Counsel delivered pursuant to Section 8.06 of the Indenture) furnished by or on behalf of itself under the Transaction Documents to the holders of the Offered Notes, to the Indenture Trustee or to the Rating Agencies concurrently therewith and furnish to the Investors promptly after receipt thereof a copy of each notice, demand or other communication received by or on behalf of it pursuant to this Agreement, the Transfer and Servicing Agreement, the Indenture, the Indenture Supplement, any Receivables Purchase Agreement, the Backup Servicing Agreement or the Affinity Card Agreement.  Each such communication provided hereunder shall be furnished to the Investors in writing.

 

SECTION 4.4 Representations and Warranties of the Investors.

 

(a) Each Investor hereby agrees to treat the Offered Notes for purposes of federal and state income or franchise taxes and any other tax imposed on or measured by income, as indebtedness unless otherwise required by the Internal Revenue Service.

 

(b) Merrill Lynch Mortgage Capital Inc. hereby makes the representation and warranty set forth in Item 7 to Schedule 1 hereto.

 

ARTICLE V                      

 

INDEMNIFICATION; EXPENSES; RELATED MATTERS

 

SECTION 5.1 Indemnities by the Transferor.  Without limiting any other rights which the Indemnified Parties may have hereunder or under applicable Law, the Transferor hereby agrees to indemnify each Investor and its respective officers, directors, employees and agents (collectively, “Indemnified Parties”) from and against any and all damages, losses, claims, liabilities, costs and expenses, including reasonable attorneys’ fees and disbursements (all of the foregoing being collectively referred to as “Indemnified Amounts”) awarded against or incurred by any of them in any action or proceeding between the Transferor and any of the Indemnified Parties (but only to the extent that the Indemnified Party is the prevailing party in such action or proceeding against the Transferor) or between any of the Indemnified Parties and any third party or otherwise arising out of or as a result of this Agreement, the other Transaction Documents, the ownership or maintenance, either directly or indirectly, by such Investor of the Offered Notes or any of the other transactions contemplated hereby or thereby, except, (i) Indemnified Amounts to the extent resulting from gross negligence, fraud or willful misconduct on the part of such Indemnified Party, (ii) to the extent that any claim, damage, loss, liability, cost or expense relates to Excluded Taxes or amounts payable by the Issuer under Sections 5.2, 5.3, or 5.4 (iii) for recourse for the payment of principal of or interest on, or other amounts due in respect of, the Offered Notes as a result of nonpayment by Obligors on the Accounts or the related Receivables (collectively, the “Excluded Liabilities”).  Without limiting the generality of the foregoing, the Transferor shall indemnify each Indemnified Party for Indemnified Amounts relating to or resulting from:

 

(a) reliance on any representation or warranty made by the Transferor or any officers of the Transferor under or in connection with this Agreement, any of the other Transaction Documents, or any other information or report delivered by the Transferor pursuant hereto, or pursuant to any of the other Transaction Documents which shall have been incomplete, false or incorrect in any material respect when made or deemed made;

 

  

14

  

(b) the failure by the Transferor to comply with any applicable Law with respect to any Receivable or the related Credit Card Agreement, or the nonconformity of any Receivable or the related Credit Card Agreement with any such applicable Law;

 

(c) any valid dispute, claim, offset or defense (other than discharge in bankruptcy) of the Obligor to the payment of any Receivable (including a defense based on such Receivable or the related Credit Card Agreement not being the legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms);

 

(d) the failure by the Transferor to comply with any term, provision or covenant contained in this Agreement or any of the other Transaction Documents to which it is a party or to perform any of its respective duties or obligations under the Receivables or related Contracts; or

 

(e) any action taken by the Transferor in the enforcement or collection of any Receivable.

 

Promptly after receipt by an Indemnified Party of notice of the commencement of any action, such Indemnified Party will, if a claim in respect thereof is to be made under this Section 5.1, notify the Transferor, provided, however, the omission to so notify the Transferor will not relieve the Transferor from any liability which it may have to any such Indemnified Party under this Section 5.1, except to the extent the Transferor was actually prejudiced by the failure to give such notices promptly.

 

Each Indemnified Party shall use its good faith efforts to mitigate, reduce or eliminate any losses, expenses or claims for indemnification pursuant to this Section 5.1; provided, however, that nothing contained herein shall obligate any Indemnified Party to take any action that imposes on such Person any additional costs or legal or regulatory burdens which in such Person’s reasonable opinion, would have an adverse effect on its business, operations or financial condition.

 

SECTION 5.2 Yield Protection.  (a)  If after the Effective Date, the adoption of any Law or bank regulatory guideline or any amendment or change in the administration, interpretation or application of any existing or future Law or bank regulatory guideline by any Governmental Authority charged with the administration, interpretation or application thereof, or the compliance with any directive of any Governmental Authority (in the case of any bank regulatory guideline, whether or not having the force of Law):

 

(i) shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including any such requirement imposed by the Board of Governors of the Federal Reserve System) against assets of, deposits with or for the account of, or credit extended by, any Indemnified Party or shall impose on any Indemnified Party or on the United States market for certificates of deposit or the London interbank market any other similar condition affecting this Agreement, the other Transaction Documents, the ownership, maintenance or financing of the Offered Notes, or payments of amounts due hereunder or its obligation to advance funds hereunder or otherwise in respect of this Agreement, the other Transaction Documents, the ownership, maintenance or financing of the Offered Notes; or

 

(ii) imposes upon any Indemnified Party any other condition or expense (including any loss of margin, reasonable attorneys’ fees and expenses, and expenses of litigation or preparation therefor in contesting any of the foregoing) with respect to this Agreement, the other Transaction Documents, the ownership, maintenance or financing of the Offered Notes, or, other than Excluded Taxes, payments of amounts due hereunder or its obligation to advance funds hereunder or otherwise in respect of this Agreement, the other Transaction Documents, the ownership, maintenance or financing of the Offered Notes, and the result of any of the foregoing is to increase the cost to or to reduce the amount of any sum received or receivable by such Indemnified Party with respect to this Agreement, the other Transaction Documents, the ownership, maintenance or financing of the Offered Notes, the Receivables, the obligations hereunder, the funding of any purchases hereunder by an amount deemed by such Indemnified Party to be material, then, on the next succeeding Distribution Date after written demand by such Indemnified Party, the Transferor shall pay to such Investor such additional amount or amounts as will compensate such Indemnified Party for such increased cost or reduction.

 

(b) If any Indemnified Party shall have determined that after the date hereof, the adoption of any applicable Law or bank regulatory guideline regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, or any request or directive regarding capital adequacy (in the case of any bank regulatory guideline, whether or not having the force of law) of any such Governmental Authority, has or would have the effect of reducing the rate of return on capital of such Indemnified Party (or its parent) as a consequence of such Indemnified Party’s obligations hereunder or with respect hereto to a level below that which such Indemnified Party (or its parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Indemnified Party to be material, then on the next succeeding Distribution Date after written demand by such Indemnified Party, the Transferor shall pay to such Investor such additional amount or amounts as will compensate such Indemnified Party (or its parent) for such reduction.

 

(c) After learning of any event occurring after the date hereof which will entitle an Indemnified Party to compensation pursuant to this Article V, the applicable Investor shall notify the Transferor in writing.  A notice by such Investor or the applicable Indemnified Party claiming compensation under this Section and setting forth in reasonable detail an explanation therefor and a calculation of the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error.  In determining such amount, such Investor or any applicable Indemnified Party may use any reasonable averaging and attributing methods and shall describe such methods in reasonable detail in any notice to the Transferor seeking compensation pursuant to this Article V.

 

SECTION 5.3 Taxes.  (a) All payments and distributions made hereunder by the Transferor or the Servicer (each, a “payor”) to each Investor (a “recipient”) shall be made, to the extent permitted by applicable law, free and clear of and without deduction for any present or future income, excise, stamp or franchise taxes and any other taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority on any recipient (or any assignee of such parties), but excluding Excluded Taxes (such non-excluded items being called “Taxes”).  In the event that any withholding or deduction from any payment made by the payor hereunder is required in respect of any Taxes, then the Transferor shall:

 

(i) pay directly to the relevant authority the full amount required to be so withheld or deducted;

 

(ii) promptly forward to such Investor an official receipt or other documentation satisfactory to such Investor evidencing such payment to such authority; and

 

(iii) pay to the recipient such additional amount or amounts as is necessary to ensure that the net amount actually received by the recipient will equal the full amount such recipient would have received had no such withholding or deduction been required.

 

Moreover, if any Taxes are directly asserted against any recipient with respect to any payment received by such payment recipient hereunder, the recipient may pay such Taxes and the Transferor will promptly pay such additional amounts (including any penalties, interest or expenses), as shall be necessary in order that the net amount received by the payment recipient after the payment of such Taxes (including any Taxes on such additional amount) shall equal the amount such payment recipient would have received had such Taxes not been asserted.

  

15

  

 

If the Transferor fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the recipient the required receipts or other required documentary evidence, the Transferor shall indemnify the recipient for any incremental Taxes, interest, or penalties that may become payable by any recipient as a result of any such failure.

 

(b) Each Investor that is not incorporated under the laws of the United States of America or a state thereof or the District of Columbia shall, prior to becoming a party to any Transaction Document, deliver to the Transferor two duly completed copies of Internal Revenue Service Form W-8ECI, or an applicable successor form.  Each Investor that is incorporated under the laws of the United States of America or a state thereof or the District of Columbia shall, prior to becoming a party to any Transaction Document, deliver to the Transferor two duly completed copies of an Internal Revenue Service Form W-9 or applicable successor form.

 

(i) Each Investor shall deliver to the Transferor two (2) further copies of any such form or certification previously delivered on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Transferor; and

 

(ii) Each Investor shall obtain such extensions of time for filing and complete such forms or certifications as may reasonably be requested by the Transferor; unless, in any such case, an event (including, without limitation, any change in treaty, law or regulation) has occurred after the Effective Date and prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Investor from duly completing and delivering any such form with respect to it, and such Investor so advises the Transferor.  In such event, the Investor shall make reasonable efforts to cooperate with the Transferor in availing itself of any other then reasonably available exemption for Taxes.  Each such Investor so organized shall certify (i) in the case of an Internal Revenue Service Form W-8ECI, that it is entitled to receive payments under the this Agreement and the other Transaction Documents without deduction or withholding of any United States federal income taxes and (ii) in the case of an Internal Revenue Service Form W-9, that it is entitled to an exemption from United States backup withholding tax.

 

SECTION 5.4 Other Costs and Expenses; Breakage Costs.  (a) To the fullest extent permitted by applicable law, the Transferor agrees, on the next succeeding Distribution Date after receipt of a written invoice, to pay or cause to be paid, and to save each Investor harmless against liability for the payment of, all reasonable out of pocket expenses (including attorneys’ fees and expenses, any filing fees and expenses incurred by officers or employees of the Investor and fees and expenses of the Investor with respect to one audit per year; provided, however, that upon the occurrence of an Early Redemption Event, the Investors shall be reimbursed by the Transferor for reasonable fees and expenses incurred in connection with an unlimited number of audits) or intangible, documentary or recording taxes incurred by or on behalf of the Investor (i) in connection with the preparation, negotiation, execution and delivery of this Agreement, the other Transaction Documents and any documents or instruments delivered pursuant hereto and thereto and the transactions contemplated hereby or thereby (including the perfection or protection of the Offered Notes) and (ii) from time to time (A) relating to any amendments, waivers or consents under this Agreement and the other Transaction Documents, or (B) arising in connection with an Investor’s enforcement or preservation of rights under this Agreement or in any of the other Transaction Documents.

 

(b) The Issuer shall pay an Investor, on the next succeeding Distribution Date after request from such Investor, such amount or amounts as shall compensate such Investor for any loss (including loss of profit), cost or expense incurred by an Investor (as reasonably determined by such Investor) as a result of any reduction of the Class A Note Principal Balance, Class B Note Principal Balance or Class C Note Principal Balance, as applicable, other than at the end of a LIBOR Period and for which the Transferor failed to provide notice to the Investor pursuant to subsection 2.4(c).  After such Investor receives actual knowledge of any of the events specified in this subsection 5.4(b), a certificate of such Investor setting forth in reasonable detail a calculation of any amount or amounts that such Investor is entitled to receive pursuant to this subsection 5.4(b) and the reason(s) therefor shall be delivered to the Transferor (with a copy to the Investor) and shall be conclusive absent manifest error.

 

SECTION 5.5 Indemnities by the Servicer.  (a) The Servicer shall indemnify and hold harmless each Indemnified Party from and against any loss, liability, expense, damage or injury suffered or sustained by reason of willful misfeasance, bad faith, or negligence in the performance of the duties of the Servicer, by reason of reckless disregard of obligations and duties of the Servicer hereunder or under the Indenture, the Indenture Supplement and the Transfer and Servicing Agreement or by reason of the failure of any representation or warranty made or deemed made by the Servicer (or any of its officers) under or in connection with this Agreement to have been true and correct in all material respects as of the date made or deemed made; provided, however, that the Servicer shall not indemnify any such Indemnified Party for any such loss, liability, expense, damage or injury suffered or sustained by reason of any action taken or omitted at the written request of any such Indemnified Party; and provided, further, that the Servicer shall not indemnify any such Indemnified Party for any such loss, liability, expense, damage or injury incurred with respect to any action taken by such Indemnified Party constituting fraud, gross negligence, breach of fiduciary duty or willful misconduct, with respect to the uncollectibility of the Receivables or with respect to any federal, state or local income or franchise taxes (or any interest or penalties with respect thereto) required to be paid by any such Indemnified Party in connection herewith to any taxing authority.  The Servicer shall not be liable for acts or omissions of any Successor Servicer.  The provisions of this indemnity shall run directly to and be enforceable by an injured party subject to the limitations hereof.

 

(b) Each Indemnified Party shall use its good faith efforts to mitigate, reduce or eliminate any losses, expenses or claims for indemnification pursuant to this Section 5.5; provided, however, that nothing contained herein shall obligate any Indemnified Party to take any action that imposes on such Person any additional costs or legal or regulatory burdens which in such Person’s reasonable opinion, would have an adverse effect on its business, operations or financial condition.

 

ARTICLE VI                                

 

 

MISCELLANEOUS

 

SECTION 6.1 Term of Agreement; Survival.  This Agreement shall terminate on the Expiration Date; provided, however, that (i) the rights and remedies of the parties hereto with respect to any representations or warranties made or deemed to be made by such party in this Agreement, and (ii) the provisions of Article V and Sections 6.10 and 6.11 of this Agreement shall survive the termination of this Agreement and the payment in full of the Note Principal Balance.  Furthermore, all representations, warranties, covenants, guaranties and indemnifications contained in this Agreement and the Transaction Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the sale and transfer of the Offered Notes.

 

SECTION 6.2 Waivers; Amendments.  (a)  No failure or delay on the part of any party hereto in exercising any power, right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or remedy preclude any other further exercise thereof or the exercise of any other power, right or remedy.  The rights and remedies herein provided shall be cumulative and nonexclusive of any rights or remedies provided by law.

  

16

  

 

(b) This Agreement may be amended from time to time only with the written consent of each party hereto.

 

SECTION 6.3 Notices; Payments.  All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing (including facsimile, telegraphic, telex or cable communication) and mailed, facsimiled, telegraphed, cabled or delivered, as to each party hereto, at its address specified below or at such other address as shall be designated by such party in a written notice to the other party hereto.  All such notices and communications shall, when mailed, facsimiled, telegraphed or cabled, be effective three (3) days after deposit in the mails, when confirmed by telephone, delivered to the telegraph company or delivered to the cable company, respectively.

 

If to the Investors:

 

Merrill Lynch Mortgage Capital Inc.

 

335 Madison Avenue, 5th Floor

 

New York, New York  10017

 

Attention:                      Stephen Quine

 

Telephone:                      (646) 556-0678

 

Telecopy:                      (646) 556-0351

 

In respect of all other matters:

 

William Lovett, AVP Credit Services Consultant

Bank of America

Merrill Lynch (North Tower)

4 World Financial Center, 17th Floor

 

New York, New York  10080

 

Telephone:                      (212) 449-1722

 

Telecopy:                      (212) 738-1425

 

 

Payment Information:

Bankers Trust Co.

Bank ABA# 021-001-033

Account# A/C 008-12-914

Acct:  MLMCI

REF: Compucredit Aqua

If to the Transferor:

 

CompuCredit Funding Corp.

 

101 Convention Center Drive

 

Suite 850-14A

 

Las Vegas, Nevada  89109

 

Attention:                      Treasurer

 

Telephone:                      (702) 949-0190

 

  

17

  

Telecopy:                      (702) 598-3651

 

Payment Information:

 

ABA #

 

Account No.

 

If to the Servicer:

 

CompuCredit Corporation

 

Five Concourse Parkway, Suite 400

 

Atlanta, Georgia  30328

 

Attention:                      General Counsel

 

Telephone:                      (770) 828-2850

 

Telecopy:                      (770) 206-6187

 

If to the Issuer:

 

CompuCredit Credit Card Master Note Business Trust

 

c/o Wilmington Trust FSB

 

3993 Howard Hughes Parkway, Suite 250

 

Las Vegas, Nevada  89109

 

Attention:                      Corporate Trust Administration

 

Telephone:                      (702) 866-2202

 

Telecopy:                      (702) 866-2244

 

SECTION 6.4 Governing Law; Submission to Jurisdiction; Appointment of Service Agent

 

(A) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICTS OF LAW PRINCIPLES THEREOF OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).  EACH OF THE PARTIES HERETO HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN THE CITY OF NEW YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.  NOTHING IN THIS SECTION 6.4 SHALL AFFECT THE RIGHT OF ANY PARTY TO BRING ANY ACTION OR PROCEEDING AGAINST ANY OF THE PARTIES HERETO OR ANY OF THEIR RESPECTIVE PROPERTY IN THE COURTS OF OTHER JURISDICTIONS.

 

(b) EACH OF THE PARTIES HERETO HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG ANY OF THEM ARISING OUT OF, CONNECTED WITH, RELATING TO OR INCIDENTAL TO THE RELATIONSHIP BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS.

 

(c) Each of the parties hereto hereby irrevocably and unconditionally consents to service of process in the manner provided for notices in Section 6.3 of this Agreement; provided, that nothing in this Agreement shall affect the right of any such party to serve process in any other manner permitted by law.

 

SECTION 6.5 Integration.  This Agreement contains the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire Agreement among the parties hereto with respect to the subject matter hereof superseding all prior oral or written understandings.

 

SECTION 6.6 Severability of Provisions.  If any one or more of the provisions of this Agreement shall for any reason whatsoever be held invalid, then such provisions shall be deemed severable from the remaining provisions of this Agreement and shall in no way affect the validity or enforceability of such other provisions.

 

  

18

  

SECTION 6.7 Counterparts; Facsimile Delivery.  This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement. Delivery by facsimile of an executed signature page of this Agreement shall be effective as delivery of an executed counterpart hereof.

 

SECTION 6.8 Successors and Assigns; Binding Effect.  This Agreement shall be binding upon each of and inure to the benefit of the Transferor, the Issuer, the Servicer and the Investors and their respective successors and permitted assigns (including any subsequent holders of the Offered Notes).  Notwithstanding anything to the contrary contained herein, except as provided in Section 5.02 or 6.02 of the Transfer and Servicing Agreement, this Agreement may not be assigned by the Transferor, the Issuer or the Servicer without the prior consent of the Investors (which consent shall not unreasonably be withheld or delayed).  No Investor may Transfer its rights hereunder in whole or in part to any Person except in compliance with the Indenture Supplement and the requirements of Section 4.4.  Notwithstanding anything contained herein to the contrary, the Investors may at any time enter into a Repurchase Transaction, provided that the aggregate number of beneficial owners, Participants or record owners of the Offered Notes shall not be more than the number set forth in Item 8 of Schedule 1 hereto.  For the avoidance of doubt, a purchaser in a Repurchase Transaction shall not constitute a beneficial owner or a Participant for purposes of this Section 6.8 and Section 9.04 of the Indenture Supplement, but shall constitute a record owner.

 

SECTION 6.9 Confidentiality Agreement.  Each of the parties hereto hereby agrees that it will not disclose the contents of this Agreement or any other Proprietary Information or confidential information of or with respect to the Investors, the Transferor, the Servicer or the Issuer to any other Person; except that each such party and its officers and employees may (i) disclose such information to its external accountants, attorneys, investors, potential investors and the agents of such Persons (“Excepted Persons”), and as required by an applicable law or order of any judicial or administrative proceeding or regulatory examination, and (ii) disclose the Agreement and such information in any suit, action, proceeding or investigation (whether in law or in equity or pursuant to arbitration) involving this Agreement for the purpose of defending itself, reducing its liability, or protecting or exercising any of its claims, rights, remedies or interests under or in connection with this Agreement; provided, however, that each Excepted Person shall, as a condition to any such disclosure, agree for the benefit of the Transferor and the Investors that such information shall be used solely in connection with such Excepted Person’s evaluation of, or relationship with, the Transferor and its Affiliates, and each Investor and potential Investor, to the extent that such Investor or potential Investor actually receives the confidential information described below, will enter into a confidentiality agreement for the benefit of the Transferor and its Affiliates in form and substance similar to the Confidentiality Agreement entered into by the Transferor and Merrill Lynch Mortgage Capital Inc. in connection with the transactions contemplated by this Agreement.  It is understood that the financial terms that may not be disclosed except in compliance with this Section 6.9 are: all fees and other pricing terms, and all provisions relating to Early Redemption Events.  Each of the parties hereto agrees that the remedies and procedures available to the Company (as defined in the Confidentiality Agreement) contained in the Confidentiality Agreement are incorporated herein by reference and may be exercised by each of the Investors as if any such party were the Company referred to in the Confidentiality Agreement.

 

Notwithstanding anything herein to the contrary, each party (and each employee, representative or other agent of each party) hereto may disclose to any and all persons, without limitation of any kind, any information with respect to the United States federal income “tax treatment” and “tax structure” of the transactions contemplated hereby (including opinions or other tax analyses) that are provided to such parties (or their representatives) relating to such tax treatment and tax structure; provided that with respect to any document or similar item that in either case contains information concerning the tax treatment or tax structure of the transaction as well as other information, this sentence shall only apply to such portions of the document or similar item that relate to the tax treatment or tax structure of the transactions contemplated hereby.

 

SECTION 6.10 No Bankruptcy Petition Against the Issuer or the Transferor.  Each of the parties hereto, by entering into this Agreement, covenants and agrees that it will not at any time institute against, or join any other Person in instituting against, the Issuer or the Transferor any proceeding of a type referred to in the definition of Insolvency Event.

 

SECTION 6.11 No Recourse Against Issuer.  Notwithstanding anything to the contrary contained herein, the obligations of the Issuer under this Agreement, the Indenture and the Indenture Supplement shall be payable at such time as funds are received by or are available to the Issuer in excess of funds necessary to pay in full all outstanding Notes and, to the extent funds are not available to pay such obligations, the claims relating thereto shall not constitute a claim against the Issuer but shall continue to accrue.  Each party hereto agrees that the payment by the Issuer of any “claim” (as defined in Section 101 of Title 11 of the Bankruptcy Code) of any such party hereunder shall be subordinated to the payment in full of all Notes.

 

SECTION 6.12 Limitation of Liability.  It is expressly understood and agreed by the parties hereto that (a) this Agreement is executed and delivered by Wilmington Trust FSB, not individually or personally but solely as trustee of the Issuer, in the exercise of the powers and authority conferred and vested in it under the Trust Agreement, (b) each of the representations, undertakings and agreements herein made on the part of the Issuer is made and intended not as personal representations, undertakings and agreements by Wilmington Trust FSB but is made and intended for the purpose of binding only the Issuer and (c) under no circumstances shall Wilmington Trust FSB be personally liable for the payment of any indebtedness or expenses of the Issuer or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Issuer under this Agreement or the other Transaction Documents to which the Issuer is a party.

 

SECTION 6.13 Amounts Limited to Available Collections.  Notwithstanding anything else in this Agreement to the contrary, the obligations of the Transferor hereunder shall be payable hereunder solely to the extent funds are available therefor and, to the extent such funds are insufficient or unavailable to pay any amounts owing by the Transferor hereunder, it shall not constitute a claim against the Transferor.

 

SECTION 6.14 Transferor Net Worth.  On the date of execution of this Agreement, the Transferor shall have a net worth calculated in accordance with generally accepted accounting principles of at least $10,000,000 and (ii) the Transferor shall make no distributions of dividends or returns of capital comprising its net worth, as calculated in accordance with GAAP, except to the extent that, after giving effect thereto, the Transferor shall have a net worth at least equal to $10,000,000.

 

  

19

  

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date and year first above written.

 

COMPUCREDIT FUNDING CORP., as Transferor

By:   /s/Joshua C. Miller                                                             

Name: Joshua C. Miller

Title: Assistant Secretary

COMPUCREDIT CORPORATION, as Servicer

By:  /s/J.Paul Whitehead, III                                                              

Name: J.Paul Whitehead, III

Title: Chief Financial Officer

COMPUCREDIT CREDIT CARD MASTER NOTE BUSINESS TRUST, as Issuer

By:     Wilmington Trust FSB, not in its individual capacity but solely as Owner Trustee

By:      /s/Donald G. Mackelcan                                                          

Name: Donald G. Mackelcan

Title:  Senior Vice President

MERRILL LYNCH MORTGAGE CAPITAL INC., as Investor

By:  /s/Wendy J. Gorman                                                              

Name: Wendy J. Gorman                                                                

Title:   Senior vice President

Class A Commitment Percentage: 100%

Class B Commitment Percentage: 100%

Class C-1 Commitment Percentage: 100%

Class C-2 Commitment Percentage: 100%

 

S-1ex102.htm

 

Exhibit 10.2

EXECUTION COPY

 

AMENDED AND RESTATED SERIES 2004-ONE INDENTURE SUPPLEMENT

 

Dated as of March 1, 2010

 

to

 

MASTER INDENTURE

 

Dated as of July 14, 2000

 

____________________________________________________________________

 

COMPUCREDIT CREDIT CARD MASTER NOTE BUSINESS TRUST

 

SERIES 2004-ONE

 

Series 2004-One Asset Backed Notes

 

Class A Floating Rate Asset Backed Variable Funding Notes

Class B Floating Rate Asset Backed Variable Funding Notes

Class C Floating Rate Asset Backed Variable Funding Notes

Class D Asset Backed Variable Funding Notes

____________________________________________________________________

 

 

among

 

COMPUCREDIT CREDIT CARD MASTER NOTE BUSINESS TRUST

 

Issuer

 

COMPUCREDIT CORPORATION

 

Servicer

 

and

 

THE BANK OF NEW YORK MELLON

 

Indenture Trustee

 

on behalf of the Series 2004-One Noteholders

 

{O1516522;8}

  

  

  

	 	TABLE OF CONTENTS	Page
	
ARTICLE I

	
Creation of the Series 2004-One Notes

	
1

	
Section 1.01.

	
Designation.

	
1

	
ARTICLE II

	
Definitions

	
1

	
Section 2.01.

	
Definitions.

	
1

	
ARTICLE III

	
Servicing Fee and Interchange

	
11

	
Section 3.01.

	
Servicing Compensation; Interchange.

	
11

	
ARTICLE IV

	
Rights of Series 2004-One Noteholders and Allocation and Application of Collections

	
12

	
Section 4.01.

	
Collections and Allocations.

	
12

	
Section 4.02.

	
Determination of Class D Monthly Interest.

	
13

	
Section 4.03.

	
[Reserved].

	
13

	
Section 4.04.

	
Required Amounts.

	
13

	
Section 4.05.

	
Application of Available Funds and Available Principal Collections.

	
13

	
Section 4.06.

	
Defaulted Amounts; Reduction Amounts.

	
14

	
Section 4.07.

	
Reallocated Principal Collections.

	
15

	
Section 4.08.

	
Excess Finance Charge Collections.

	
15

	
Section 4.09.

	
Reallocated Series Finance Charge Collections.

	
15

	
Section 4.10.

	
Shared Principal Collections.

	
16

	
Section 4.11.

	
Spread Account.

	
16

	
Section 4.12.

	
Principal Amount Increases.

	
16

	
Section 4.13.

	
Interest Rate Caps.

	
17

	
Section 4.14.

	
Pre-Funding Account.

	
18

	
Section 4.15.

	
Yield Supplement Account.

	
18

	
Section 4.16.

	
Incentive Servicing Fee Account.

	
19

	
ARTICLE V

	
Distributions and Reports to Series 2004-One Noteholders

	
20

	
Section 5.01.

	
Distributions.

	
20

	
Section 5.02.

	
Reports and Statements to Series 2004-One Noteholders.

	
20

	
ARTICLE VI

	
Early Redemption Events

	
21

	
Section 6.01.

	
Early Redemption Events.

	
21

	
ARTICLE VII

	
Optional Redemption; Series Termination

	
22

	
Section 7.01.

	
Optional Redemption.

	
22

	
Section 7.02.

	
Stated Maturity Date.

	
22

	
ARTICLE VIII

	
Redemption of Series 2004-One Notes; Final Distributions

	
22

	
Section 8.01.

	
Sale of Receivables or Redemption of the Notes pursuant to Section 2.06 or 8.01 of the Transfer and Servicing Agreement and Sections 5.05 and 5.18 of the Indenture and Section 7.01.

	
22

	
ARTICLE IX

	
Miscellaneous Provisions

	
23

	
Section 9.01.

	
Ratification of Agreement.

	
23

	
Section 9.02.

	
Counterparts.

	
23

	
Section 9.03.

	
Governing Law.

	
23

	
Section 9.04.

	
Tax Matters.

	
23

	
Section 9.05.

	
Transfer of Class D Notes..

	
25

	
Section 9.06.

	
Limitation of Owner Trustee Liability.

	
25

	
Section 9.07.

	
Limitation of Indenture Trustee Liability.

	
25

	
Section 9.08.

	
Paired Series.

	
25

 

  

i

  

 

AMENDED AND RESTATED SERIES 2004-ONE INDENTURE SUPPLEMENT, dated as of March 1, 2010 (this “Supplement”), among COMPUCREDIT CREDIT CARD MASTER NOTE BUSINESS TRUST, a business trust organized and existing under the laws of the State of Nevada (the “Issuer”), COMPUCREDIT CORPORATION, a Georgia corporation, as Servicer (the “Servicer”), and THE BANK OF NEW YORK MELLON, a banking corporation organized and existing under the laws of the State of New York, not in its individual capacity, but solely as Indenture Trustee (together with its successors in the trusts thereunder as provided in the Indenture, the “Indenture Trustee”) under the Master Indenture dated as of July 14, 2000 (as amended and in effect from time to time, the “Indenture”) among the Issuer, the Servicer and the Indenture Trustee.

 

WHEREAS, Section 2.10 of the Indenture provides that the Issuer may, pursuant to one or more Indenture Supplements, direct the Indenture Trustee, on behalf of the Issuer, to issue one or more Series of Notes and to set forth the Principal Terms of such Series.  The Issuer, the Servicer and the Indenture Trustee have previously created and issued a Series of Notes pursuant to the Series 2004-One Indenture Supplement to the Master Indenture, dated as of January 30, 2004, as amended (the "Original Supplement"); and

 

WHEREAS, the Issuer, the Servicer and the Indenture Trustee desire to amend and restate the Original Supplement in accordance with the provisions of Section 9.02 of the Master Indenture to read in its entirety as set forth below, including but not limited to splitting the Class C Notes into two subclasses of notes, the Class C-1 Notes and Class C-2 Notes.

 

NOW THEREFORE, pursuant to Section 9.02 of the Master Indenture, the parties hereby agree that effective on and as of the Amendment Date (as defined below), the Original Supplement is hereby amended to read in its entirety as follows:

 

 

ARTICLE I                      

 

 

Creation of the Series 2004-One Notes

 

Section 1.01. Designation.

 

(a) On the Closing Date the Indenture and the Original Supplement created and designated a Series of Notes issued and known as the “CompuCredit Credit Card Master Note Business Trust, Series 2004-One Notes” or the “Series 2004-One Notes.”  The Series 2004-One Notes were issued in four Classes, the first of which is known as the “Class A Series 2004-One Floating Rate Asset Backed Variable Funding Notes”, the second of which is known as the “Class B Series 2004-One Floating Rate Asset Backed Variable Funding Notes”, the third of which is known as the “Class C Series 2004-One Floating Rate Asset Backed Variable Funding Notes”, which are hereby subdivided on the Amendment Date into the “Class C-1 Series 2004-One Floating Rate Asset Backed Variable Funding Notes” and the “Class C-2 Series 2004-One Floating Rate Asset Backed Variable Funding Notes”, and the fourth of which is known as the “Class D Series 2004-One Asset Backed Variable Funding Notes”.  The Series 2004-One Notes shall be due and payable on the Stated Maturity Date.

 

(b) Series 2004-One shall be included in Group VIII and shall be a variable funding Series, an Excess Allocation Series and a Principal Sharing Series.  Except with respect to a Paired Series designated pursuant to Section 9.08, Series 2004-One shall not be subordinated to any other Series.  Notwithstanding any provision in the Indenture or this Supplement to the contrary, the first Distribution Date with respect to Series 2004-One shall be the March 2004 Distribution Date.  The Interest Rate Cap Provider shall not be a Series Enhancer for purposes of the Indenture, this Supplement and the other Transaction Documents.

 

(c) In the event that any term or provision contained herein shall conflict with or be inconsistent with any term or provision contained in the Indenture, the terms and provisions of this Supplement shall be controlling.

 

ARTICLE II                      

 

 

Definitions

 

Section 2.01. Definitions.

 

(a) All capitalized terms not otherwise defined herein are defined in the Indenture, the Transfer and Servicing Agreement or the Trust Agreement (including by way of reference to other documents).  Each capitalized term defined herein shall relate only to the Series 2004-One Notes and no other Series of Notes issued by the Issuer.  Whenever used in this Supplement, the following words and phrases shall have the following meanings, and the definitions of such terms are applicable to the singular as well as the plural forms of such terms and the masculine as well as the feminine and neuter genders of such terms.

 

“Additional Monthly Servicing Fee” shall have the meaning specified in subsection 3.01(d).

 

“Additional Monthly Servicing Fee Rate” shall mean as of any date of determination (1) to the extent that a Supplemental Servicer Default has not occurred and is then continuing and CompuCredit is the Servicer, the percentage specified in Item 12(a) of Schedule 2.01; and (2) to the extent that a Supplemental Servicer Default has occurred and is then continuing or CompuCredit is not the Servicer, the percentage specified in Item 12(b) of Schedule 2.01.

 

  

1

  

“Aggregate Interest Rate Caps Notional Amount” shall mean an amount equal to the sum of the notional amounts or equivalent amounts of all outstanding Interest Rate Caps and Replacement Interest Rate Caps.

 

“Allocation Amount” shall mean, as of any date of determination, an amount equal to (a) the Initial Note Principal Balance plus (b) the total amount of Class A Note Principal Balance Increases, Class B Note Principal Balance Increases, Class C-1 Note Principal Balance Increases, Class C-2 Note Principal Balance Increases and Class D Note Principal Balance Increases  on or prior to such date, minus (c) the Pre-Funding Allocation Adjustment, minus (d) the total amount of principal payments made on the Series 2004-One Notes prior to such date, minus (e) the excess, if any, of the total amount of Reduction Amounts for all prior Distribution Dates and Reallocated Principal Collections that under Section 4.07 were used to fund the Class A Required Amount, the Class B Required Amount or the Class C Required Amount on all prior Distribution Dates over such Reduction Amounts and Reallocated Principal Collections reimbursed pursuant to subsection 4.05(a)(xi) prior to such date.

 

"Amendment Date" is defined in the Note Purchase Agreement.

 

“Available Funds” shall mean, for any Distribution Date, an amount equal to the sum of (a) the Reallocated Series Finance Charge Collections, (b) the Excess Finance Charge Collections allocated to Series 2004-One, (c) the amount of funds, if any, to be withdrawn from the Spread Account, which pursuant to subsection 4.11(c) are required to be included in Available Funds with respect to such Distribution Date, (d) the Interest Rate Cap Payments, if any, (e) any Pre-Funding Investment Proceeds, Yield Supplement Investment Proceeds and Incentive Servicing Fee Investment Proceeds and (f) the amount of funds, if any, to be withdrawn from the Yield Supplement Account that, pursuant to subsection 4.15(c), are required to be included in Available Funds on such Distribution Date.

 

“Available Principal Collections” shall mean, with respect to any Monthly Period, an amount equal to the sum of (a) (i) an amount equal to the Fixed/Floating Allocation Percentage of Series 2004-One Allocable Principal Collections received during such Monthly Period minus (ii) the amount of Reallocated Principal Collections with respect to such Monthly Period which pursuant to Section 4.07 are required to fund the Class A Required Amount, the Class B Required Amount or the Class C Required Amount for the related Distribution Date minus (iii) during the Planned Redemption Period, the total amount paid to the Transferor for the purchase price of Principal Receivables pursuant to subsection 4.01(c)(ii)(y) during such Monthly Period, (b) any Shared Principal Collections with respect to other Series that are allocated to Series 2004-One in accordance with Section 4.02 of the Transfer and Servicing Agreement and Section 4.10, (c) the net proceeds of the sale of all or a portion of an Interest Rate Cap received during such Monthly Period and (d) any other amounts which pursuant to subsection 4.05(a) are to be treated as Available Principal Collections with respect to the related Distribution Date.

 

“Available Spread Account Amount” shall mean, with respect to any Distribution Date, the lesser of (a) the principal amount on deposit in the Spread Account on such date (before giving effect to any deposit to be made to the Spread Account on such date) and (b) the Required Spread Account Amount.

 

“Average Allocation Amount” shall mean, for any period, the sum of the Allocation Amounts for each day in such period divided by the number of days in such period.

 

“Average Note Principal Balance” shall mean, for any period, the sum of the Note Principal Balances for each day in such period divided by the number of days in such period.

 

“Average Principal Receivables” shall mean, for any period, the sum of the Principal Receivables for each day in such period divided by the number of days in such period.

 

“Backup Servicer” shall mean First National Bank of Omaha and its successors and assigns in such capacity.

 

“Base Rate” shall mean, with respect to any Monthly Period, the annualized percentage equal to (a) the sum of the Class A Monthly Interest, the Class B Monthly Interest, the Class C-1 Monthly Interest, the Class C-2 Monthly Interest, the Monthly Servicing Fee, the Monthly Backup Servicer Fee, the Monthly Supplemental Servicing Fee, the Additional Monthly Servicing Fee and the Incentive Servicing Fee and an amount equal to the product of (x) the Series 2004-One Allocation Percentage and (y) any amount that the Transferor is required to deposit on the related Distribution Date into the Special Funding Account pursuant to Section 3.08 of the Transfer and Servicing Agreement but fails to deposit, in each case with respect to the related Distribution Date  divided by (b) the Average Note Principal Balance for such Monthly Period.

 

“Change of Control” shall mean any of the following:

 

(1)           the direct or indirect disposition of substantially all the assets of CompuCredit (whether by sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions to any person (as such term is used in Section 13(d)(3) of the Exchange Act)) (excluding, for the avoidance of doubt, portfolio sales to the extent such sales would be customary for a business comparable to CompuCredit);

 

(2)           the consummation of any transaction or series of related transactions (including any merger or consolidation) resulting in any Person (other than Key Stockholders and their affiliates) becoming the beneficial owner (as determined in accordance with Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person will be deemed to have beneficial ownership of all shares that such Person has the right to acquire, whether such right is exercisable immediately or only after passage of time) of more than 40% of the voting stock of CompuCredit; provided, however, that no Change of Control shall be deemed to have occurred pursuant to this clause (2) if David G. Hanna, Frank J. Hanna and entities controlled by them hold, in aggregate for both such individuals and their controlled entities, beneficial ownership of the voting stock of CompuCredit in a percentage greater than the percentage of such Person’s beneficial ownership of the voting stock of CompuCredit;

 

(3)           the first day on which the majority of the Board of Directors of CompuCredit are not Continuing Directors; or

 

(4)           the first day when David G. Hanna, Frank J. Hanna and entities controlled by them cease to hold, in aggregate for both such individuals and their controlled entities, beneficial ownership of at least 40% of the voting securities of CompuCredit on a fully diluted basis.

 

“Class A Additional Interest” shall have the meaning specified in the Note Purchase Agreement.

 

“Class A Average Note Principal Balance” shall mean, for any period, the sum of the Class A Note Principal Balances for each day in such period divided by the number of days in such period.

 

“Class A Costs” shall mean, with respect to any Distribution Date, the Class A Percentage of the Unused Fee and any amounts owing to the Class A Noteholders pursuant to Article V of the Note Purchase Agreement.

  

2

  

 

“Class A Initial Note Principal Balance” shall mean the amount specified in Item 1 of Schedule 2.01.

 

“Class A Monthly Interest” shall have the meaning specified in the Note Purchase Agreement.

 

“Class A Note Principal Balance” shall mean, on any date, (a) the Class A Initial Note Principal Balance, plus (b) the total amount of Class A Note Principal Balance Increases made on or prior to such date, minus (c) the total amount of principal payments made on the Class A Notes on or prior to such date.

 

“Class A Note Principal Balance Increase” shall have the meaning specified in subsection 4.12(a).

 

“Class A Noteholder” shall mean the Person in whose name a Class A Note is registered in the Note Register.

 

“Class A Notes” shall mean any one of the Notes executed by the Issuer and authenticated by or on behalf of the Indenture Trustee pursuant to the Original Supplement or, with respect to any replacement Notes issued after the Amendment Date, pursuant to this Supplement, substantially in the form of Exhibit A-1.

 

“Class A Percentage” shall mean the percentage equivalent of a fraction the numerator of which is the Class A Note Principal Balance and the denominator of which is the Note Principal Balance.

 

“Class A Required Amount” shall have the meaning specified in Section 4.04.

 

“Class B Additional Interest” shall have the meaning specified in the Note Purchase Agreement.

 

“Class B Average Note Principal Balance” shall mean, for any period, the sum of the Class B Note Principal Balances for each day in such period divided by the number of days in such period.

 

“Class B Costs” shall mean, with respect to any Distribution Date, the Class B Percentage of the Unused Fee and any amounts owing to the Class B Noteholders pursuant to Article V of the Note Purchase Agreement.

 

“Class B Initial Note Principal Balance” shall mean the amount specified in Item 2 of Schedule 2.01.

 

“Class B Monthly Interest” shall have the meaning specified in the Note Purchase Agreement.

 

“Class B Note Principal Balance” shall mean, on any date, (a) the Class B Initial Note Principal Balance, plus (b) the total amount of Class B Note Principal Balance Increases made on or prior to such date, minus (c) the total amount of principal payments made on the Class B Notes on or prior to such date.

 

“Class B Note Principal Balance Increase” shall have the meaning specified in subsection 4.12(a).

 

“Class B Noteholder” shall mean the Person in whose name a Class B Note is registered in the Note Register.

 

“Class B Notes” shall mean any one of the Notes executed by the Issuer and authenticated by or on behalf of the Indenture Trustee pursuant to the Original Supplement or, with respect to any replacement Notes issued after the Amendment Date, pursuant to this Supplement, substantially in the form of Exhibit A-2.

 

“Class B Percentage” shall mean the percentage equivalent of a fraction, the numerator of which is the Class B Note Principal Balance and the denominator of which is the Note Principal Balance.

 

“Class B Required Amount” shall have the meaning specified in Section 4.04.

 

“Class C Initial Note Principal Balance” shall mean the amount specified in Item  3(c) of Schedule 2.01.

 

“Class C Note Principal Balance” shall mean, on any date, the sum of the Class C-1 Note Principal Balance and the Class C-2 Note Principal Balance, each as of such date.

 

“Class C Noteholder” shall mean the Person in whose name a Class C Note is registered in the Note Register.

 

“Class C Notes” shall mean any one of the Class C-1 Notes or Class C-2 Notes.

 

“Class C Required Amount” shall have the meaning specified in Section 4.04.

 

“Class C-1 Additional Interest” shall have the meaning specified in the Note Purchase Agreement.

 

 “Class C-1 Average Note Principal Balance” shall mean, for any period, the sum of the Class C-1 Note Principal Balances for each day in such period divided by the number of days in such period.

 

“Class C-1 Costs” shall mean, with respect to any Distribution Date, the Class C-1 Percentage of the Unused Fee and any amounts owing to the Class C-1 Noteholders pursuant to Article V of the Note Purchase Agreement.

 

  

3

  

“Class C-1 Initial Note Principal Balance” shall mean the amount specified in Item 3(a) of Schedule 2.01.

 

“Class C-1 Monthly Interest” shall have the meaning specified in the Note Purchase Agreement.

 

 “Class C-1 Note Principal Balance” shall mean, on any date, (a) the Class C-1 Initial Note Principal Balance, plus (b) the total amount of Class C-1 Note Principal Balance Increases made on and after the Amendment Date and on or prior to such date, minus (c) the total amount of principal payments made on the Class C-1 Notes on or prior to such date.

 

“Class C-1 Note Principal Balance Increase” shall have the meaning specified in subsection 4.12(a).

 

“Class C-1 Noteholder” shall mean the Person in whose name a Class C-1 Note is registered in the Note Register.

 

“Class C-1 Notes” shall mean any one of the Class C-1 Notes executed by the Issuer and authenticated by or on behalf of the Indenture Trustee, substantially in the form of Exhibit A-3.

 

 “Class C-1 Percentage” shall mean the percentage equivalent of a fraction, the numerator of which is the Class C-1 Note Principal Balance and the denominator of which is the Note Principal Balance.

 

“Class C-2 Additional Interest” shall have the meaning specified in the Note Purchase Agreement.

 

“Class C-2 Average Note Principal Balance” shall mean, for any period, the sum of the Class C-2 Note Principal Balances for each day in such period divided by the number of days in such period.

 

“Class C-2 Costs” shall mean, with respect to any Distribution Date, the Class C-2 Percentage of the Unused Fee and any amounts owing to the Class C-2 Noteholders pursuant to Article V of the Note Purchase Agreement.

 

“Class C-2 Initial Note Principal Balance” shall mean the amount specified in Item 3(b) of Schedule 2.01.

 

“Class C-2 Monthly Interest” shall have the meaning specified in the Note Purchase Agreement.

 

“Class C-2 Note Principal Balance” shall mean, on any date, (a) the Class C-2 Initial Note Principal Balance, plus (b) the total amount of Class C-2 Note Principal Balance Increases made on and after the Amendment Date and on or prior to such date, minus (c) the total amount of principal payments made on the Class C-2 Notes on or prior to such date.

 

“Class C-2 Note Principal Balance Increase” shall have the meaning specified in subsection 4.12(a).

 

“Class C-2 Noteholder” shall mean the Person in whose name a Class C-2 Note is registered in the Note Register.

 

“Class C-2 Notes” shall mean any one of the Class C-2 Notes executed by the Issuer and authenticated by or on behalf of the Indenture Trustee, substantially in the form of Exhibit A-3.

 

“Class C-2 Percentage” shall mean the percentage equivalent of a fraction, the numerator of which is the Class C-2 Note Principal Balance and the denominator of which is the Note Principal Balance.

 

“Class D Additional Interest” shall mean, with respect to any Interest Period, $0; provided, however, that upon notice to the Indenture Trustee and the Servicer, Class D Additional Interest shall equal such other amount as shall be agreed upon by the Issuer and the Class D Noteholders from time to time.

 

“Class D Average Note Principal Balance” shall mean, for any period, the sum of the Class D Note Principal Balances for each day in such period divided by the number of days in such period.

 

“Class D Initial Note Principal Balance” shall mean the amount specified in Item 4 of Schedule 2.01.

 

“Class D Monthly Interest” shall have the meaning specified in Section 4.02.

 

“Class D Note Interest Rate” shall mean, for any Interest Period, a per annum rate of 0%; provided, however, that upon notice to the Indenture Trustee and the Servicer, the Class D Note Interest Rate shall equal such other rate as shall be agreed upon by the Issuer and the Class D Noteholders from time to time.

 

“Class D Note Principal Balance” shall mean, on any date, (a) the Class D Initial Note Principal Balance, plus (b) the total amount of Class D Note Principal Balance Increases made on or prior to such date, minus (c) the total amount of principal payments made on the Class D Notes on or prior to such date.

 

“Class D Note Principal Balance Increase” shall have the meaning specified in subsection ­4.12(b).

 

“Class D Noteholder” shall mean the Person in whose name a Class D Note is registered in the Note Register.

 

“Class D Notes” shall mean any one of the Notes executed by the Issuer and authenticated by or on behalf of the Indenture Trustee pursuant to the Original Supplement or, with respect to any replacement Notes issued after the Amendment Date, pursuant to this Supplement, substantially in the form of Exhibit A-4.

 

“Class D Percentage” shall mean the percentage equivalent of a fraction, the numerator of which is the Class D Note Principal Balance and the denominator of which is the Note Principal Balance.

  

4

  

 

“Closing Date” shall mean January 30, 2004.

 

“Consolidated Total Equity” shall mean, with respect to any fiscal quarter, the total shareholders equity of CompuCredit and its consolidated subsidiaries that, in accordance with GAAP, is reflected on the consolidated balance sheet of CompuCredit and its consolidated subsidiaries for such fiscal quarter.

 

“Continuing Directors” shall mean the Persons who constituted the Board of Directors of CompuCredit on the Closing Date (the “Incumbent Directors”); provided that any Person becoming a director of CompuCredit during any calendar year shall be considered to be an Incumbent Director if such Person’s election, appointment or nomination was recommended or approved by at least two-thirds of the other Incumbent Directors continuing in office following such election, appointment or nomination present, in person or by telephone, at any meeting of the Board of Directors of CompuCredit, after the giving of sufficient notice to each Incumbent Director so as to provide a reasonable opportunity for such Incumbent Directors to be present at such meeting.

 

“Corporate Finance Event” shall mean the occurrence of any of the following:

 

(1)           as of any fiscal quarter end, the Consolidated Total Equity of CompuCredit shall have fallen by an aggregate of more than $150,000,000 from its December 31, 2003 balance of $574,000,000;

 

(2)           as of any fiscal quarter end, the Consolidated Total Equity of CompuCredit shall have fallen by more than $50,000,000 from its balance as of the immediately preceding fiscal quarter end; or

 

(3)           the ratio of the Consolidated Total Equity of CompuCredit to the originated Receivables shall fall to less than 10%.

 

“Distribution Date” shall mean the fifteenth day of each calendar month, or if such fifteenth day is not a Business Day, the next succeeding Business Day; provided, that the first Distribution Date for Series 2004-One shall be as set forth in subsection 1.01(b).

 

“Early Redemption Event” shall mean any Early Redemption Event specified in Section 5.01 of the Indenture and any Early Redemption Event specified in Section 6.01.

 

“Early Redemption Period” shall mean the period commencing at the close of business on the Business Day immediately preceding the day on which an Early Redemption Event with respect to Series 2004-One is deemed to have occurred, and ending on the first to occur of (i) the payment in full of the Note Principal Balance and all other unpaid amounts owing to the Class A Noteholders, the Class B Noteholders and the Class C Noteholders pursuant to the Note Purchase Agreement or (ii) the Stated Maturity Date.

 

“Excess Finance Charge Collections” shall have the meaning specified in Section 4.05 of the Transfer and Servicing Agreement, as further described in Section 4.08.

 

“Expiration Date” shall have the meaning specified in the Note Purchase Agreement.

 

“Fee Letter” shall have the meaning specified in the Note Purchase Agreement.

 

“Fees and Costs” shall mean, with respect to any Distribution Date, the sum of the Class A Costs, the Class B Costs, Class C-1 Costs and the Class C-2 Costs for such Distribution Date.

 

“FICO” shall mean Fair, Isaacs & Co.

 

“Finance Charge Shortfall” shall have the meaning specified in Section 4.08.

 

“Fixed/Floating Allocation Percentage” shall mean, with respect to any day during a Monthly Period, the percentage equivalent (which percentage shall never exceed 100%) of a fraction, the numerator of which is (a) during the Revolving Period, the Series Adjusted Allocation Amount for Series 2004-One as of the last day of the immediately preceding Monthly Period (or, in the case of the first Monthly Period, the Initial Note Principal Balance minus, if applicable, the Pre-Allocated Allocation Amount) and (b) during a Redemption Period, the Series Adjusted Allocation Amount for Series 2004-One as of the close of business on the date on which the Revolving Period, shall have terminated, plus, on and after a Paired Series Final Payment Date, the related Pre-Allocated Allocation Amount, if any, used in calculating the Series Adjusted Allocation Amount for Series 2004-One on the date on which the Revolving Period shall have terminated or been suspended, and the denominator of which is the product of (x) the greater of (A) the sum of (i) the total amount of Principal Receivables as of the last day of the immediately preceding Monthly Period (or with respect to the first Monthly Period, the total amount of Principal Receivables as of the Closing Date), (ii) the Special Funding Amount as of such last day (or with respect to the first Monthly Period, the Closing Date) and (iii) the amount of Collections of Principal Receivables on deposit in the Collection Account as of such last day (or with respect to the first Monthly Period, as of the Closing Date) and (B) the sum of the numerators used to determine the series allocation percentages with respect to Collections of Principal Receivables for all Series of Notes Outstanding, and (y) the Series 2004-One Allocation Percentage as of the last day of the immediately preceding Monthly Period; provided, however, that with respect to any Monthly Period in which one or more Reset Dates occurs, the Fixed/Floating Allocation Percentage shall be recalculated as provided above but as of such Reset Date for the period from and including such Reset Date to but excluding the next such Reset Date, if any, or if no other Reset Date occurs during such Monthly Period, to and including the last day of such Monthly Period, as applicable; provided further, that the numerator in clause (b) above shall continue to be the Series Adjusted Allocation Amount for Series 2004-One as of the close of business on the date on which the Revolving Period shall have been terminated or suspended plus, on or after a Paired Series Final Payment Date, the related Pre-Allocated Allocation Amount, if any, used in calculating the Series Adjusted Allocation Amount for Series 2004-One on the date on which the Revolving Period shall have terminated, unless the Series 2004-One Notes are paid in full on such date.

 

“Floating Allocation Percentage” shall mean, with respect to any day during a Monthly Period, the percentage equivalent (which percentage shall never exceed 100%) of a fraction, the numerator of which is the Allocation Amount as of the last day of the preceding Monthly Period (or in the case of the first Monthly Period, the Initial Note Principal Balance) and the denominator of which is the product of (x) the Series 2004-One Allocation Percentage with respect to such Monthly Period and (y) the greater of (A) the sum of (i) the total amount of Principal Receivables as of such day (or with respect to the first Monthly Period, the total amount of Principal Receivables on the Closing Date), (ii) the Special Funding Amount as of such last day (or with respect to the first Monthly Period, the Closing Date) and (iii) the amount of Collections of Principal Receivables on deposit in the Collection Account as of such last day (or with respect to the first Monthly Period, as of the Closing Date) and (B) the sum of the numerators used to determine the series allocation percentages with respect to Collections of Finance Charge Receivables for all Series of Notes Outstanding; provided, however, that with respect to any Monthly Period in which one or more Reset Dates occurs, the Floating Allocation Percentage shall be recalculated as provided above but as of such Reset Date, for the period from and after the date on which any such Reset Date occurs to but excluding the date, if any, that another such Reset Date occurs or, if no other Reset Date occurs during such Monthly Period, to and including the last day of such Monthly Period.

  

5

  

 

“GAAP” shall have the meaning specified in the Note Purchase Agreement.

 

“Group VIII” shall mean Series 2004-One and each other Series specified in the related Supplement to be included in Group VIII.

 

“Group VIII Series Additional Amounts” shall mean, with respect to any Monthly Period, the sum of (a) Series 2004-One Additional Amounts for such Distribution Date and (b) for all other Series included in Group VIII, the sum of (i) the aggregate net amount by which the allocation amounts of such Series have been reduced as a result of allocation reductions, subordination of principal collections and, if applicable, funding the series default amounts in respect of any Class of Notes or Series Enhancement of such Series as of such Distribution Date and (ii) if the applicable Indenture Supplements so provide, the aggregate unpaid amount of interest at the applicable note interest rates that has accrued on the amounts described in the preceding clause (i) for such Distribution Date.

 

“Group VIII Series Default Amount” shall mean, with respect to any Distribution Date, the sum of (a) the Series Default Amount for such Distribution Date and (b) the aggregate amount of the series default amounts for all other Series included in Group VIII for such Distribution Date.

 

“Group VIII Series Finance Charge Collections” shall mean, with respect to any Distribution Date, the sum of (a) Series Finance Charge Collections for such Distribution Date and (b) the aggregate amount of the series finance charge collections for all other Series included in Group VIII for such Distribution Date.

 

“Group VIII Series Monthly Fees” shall mean with respect to any Distribution Date, the sum of (a) Series 2004-One Monthly Fees for such Distribution Date and (b) the aggregate amount of the servicing fees, series fees, fees payable to any Series Enhancer and any other similar fees, which are payable out of reallocated series finance charge collections pursuant to the related Indenture Supplements, for all other Series included in Group VIII for such Distribution Date.

 

“Group VIII Series Monthly Interest” shall mean, with respect to any Distribution Date, the sum of (a) Series 2004-One Monthly Interest for such Distribution Date and (b) the aggregate amount of monthly interest, including overdue monthly interest and interest on such overdue monthly interest, if such amounts are payable out of reallocated series finance charge collections pursuant to the related Indenture Supplements, for all other Series included in Group VIII for such Distribution Date.

 

“Incentive Servicing Fee” shall have the meaning specified in subsection 3.01(e).

 

“Incentive Servicing Fee Account” shall have the meaning specified in subsection 4.16(a).

 

“Incentive Servicing Fee Rate” shall mean as of any date of determination (1) to the extent that a Supplemental Servicer Default has not occurred and is then continuing, CompuCredit is the Servicer and such date is within the Incentive Servicing Fee Term, the percentage specified in Item 13(a) of Schedule 2.01; and (2) otherwise, the percentage specified in Item 13(b) of Schedule 2.01.

 

“Incentive Servicing Fee Investment Proceeds” shall have the meaning set forth in subsection 4.16(b).

 

“Incentive Servicing Fee Term” shall mean the period from the Amendment Date to the June 2011 Distribution Date.

 

“Initial Note Principal Balance” shall mean the sum of the Class A Initial Note Principal Balance, the Class B Initial Note Principal Balance, the Class C Initial Note Principal Balance and the Class D Initial Note Principal Balance.

 

“Interest Period” shall mean, with respect to any Distribution Date, the period from and including the Distribution Date immediately preceding such Distribution Date (or, in the case of the first Distribution Date, from and including the Closing Date), to but excluding such Distribution Date.

 

“Interest Rate Cap Payments” shall mean, for any Distribution Date, the total amount of the payments made by the Interest Rate Cap Providers under the Interest Rate Caps and any Replacement Interest Rate Cap.

 

“Interest Rate Cap Provider” shall mean each obligor under an Interest Rate Cap, or if any Replacement Interest Rate Cap is obtained under Section 4.13, any obligor under such Replacement Interest Rate Cap.

 

“Interest Rate Caps” shall mean each interest rate cap agreement between the Issuer and an Interest Rate Cap Provider entered into with respect to the Class A Notes, the Class B Notes or the Class C Notes which shall have a cap of LIBOR equal to 9.0%.

 

“Investment Letter” shall have the meaning specified in subsection 9.04(c).

 

“Key Stockholders” shall mean David G. Hanna, Frank J. Hanna III, Richard W. Gilbert and Richard R. House.

 

“LIBOR” shall have the meaning specified in the Note Purchase Agreement.

 

“Maximum Principal Amount” shall have the meaning specified in the Note Purchase Agreement.

 

“Merrill” shall mean Merrill Lynch Mortgage Capital Inc. and its permitted successors and assigns.

 

  

6

  

“Monthly Backup Servicer Fee” shall mean, with respect to any Distribution Date, an amount equal to (a) one-twelfth of the product of (1) the percentage specified in Item 5 of Schedule 2.01 and (2) the Servicing Base Amount less (b) any amount paid on the same Distribution Date in respect of a fee to the Backup Servicer pursuant to any Indenture Supplement relating to any other Series.

 

“Monthly Default Rate” shall mean, with respect to any Monthly Period, the ratio of the Defaulted Amount net of Recoveries to the Average Principal Receivables for such Monthly Period multiplied by 12.

 

“Monthly Delinquency Rate” shall mean, with respect to any Monthly Period, the ratio of the total amount of Receivables that were more than 60 days contractually past due (but were not Defaulted Receivables) to the total amount of Receivables as of the last day of such Monthly Period.

 

“Monthly Payment Rate” shall mean, with respect to any Monthly Period, a fraction, the numerator of which is the total amount of Collections of Receivables for such Monthly Period and the denominator of which is the Average Principal Receivables for such Monthly Period.

 

“Monthly Servicer’s Statement” shall have the meaning specified in subsection 5.02(a).

 

“Monthly Servicing Fee” shall have the meaning specified in subsection 3.01(a).

 

“Monthly Supplemental Servicing Fee” shall have the meaning specified in subsection 3.01(b).

 

“Net Portfolio Yield” shall mean, with respect to any Monthly Period, the annualized percentage equivalent of a fraction, (A) the numerator of which is equal to (1) Reallocated Series Finance Charge Collections with respect to such Monthly Period, plus (2) without duplication of amounts referred to in clause (1) above, the amount of Interchange to be included as Series 2004-One Allocable Finance Charge Collections for such Monthly Period pursuant to subsection 3.01(c), plus (3) any Interest Rate Cap Payments for the related Distribution Date, plus (4) any Pre-Funding Investment Proceeds, Yield Supplement Investment Proceeds and Incentive Servicing Fee Investment Proceeds, plus (5) the amount of funds, if any, to be withdrawn from the Yield Supplement Account that, pursuant to subsection 4.15(c), are required to be included in Available Funds on such Distribution Date, minus (6) the Series Default Amount for the Distribution Date with respect to such Monthly Period, and (B) the denominator of which is the Average Note Principal Balance for such Monthly Period.

 

“Net Yield” shall mean, with respect to any Monthly Period, (a) the Net Portfolio Yield with respect to such Monthly Period minus (b) the Base Rate with respect to such Monthly Period.

 

“Note Assignment” shall have the meaning specified in subsection 9.04(e).

 

“Note Principal Balance” shall mean, for any date of determination, the sum of the Class A Note Principal Balance, the Class B Note Principal Balance, the Class C Note Principal Balance and the Class D Note Principal Balance.

 

“Note Principal Balance Increase” shall mean a Class A Note Principal Balance Increase, a Class B Note Principal Balance Increase, a Class C-1 Note Principal Balance Increase, a Class C-2 Note Principal Balance Increase or a Class D Note Principal Balance Increase.

 

“Note Purchase Agreement” shall mean the Amended and Restated Note Purchase Agreement dated as of March 1, 2010 by and among Merrill, the Transferor, the Servicer and the Issuer, and all amendments thereto.

 

"Original Supplement" shall have the meaning specified in the recitals.

 

“Paired Series” shall have the meaning specified in Section 9.08.

 

“Paired Series Final Payment Date” shall mean, with respect to any Paired Series, the date on which the full amount of the principal of the Notes of such Paired Series and all interest accrued thereon has been paid in full and such Notes have been fully discharged and have no interest in the Trust Estate.

 

“Participant” shall have the meaning specified in subsection 9.04(f).

 

“Payment Date” shall mean each Distribution Date.

 

“Planned Redemption Event” shall mean the occurrence of any one of the following events:

 

(1)           [Reserved];

 

(2)           [Reserved];

 

(3)           the Expiration Date shall have occurred and no Event of Default, Servicer Default or other Early Redemption Event shall have occurred; or

 

(4)           CompuCredit shall experience a negative Rolling Return on Average Managed Assets for two consecutive fiscal quarters.

 

“Planned Redemption Period” shall mean, unless an Early Redemption Event with respect to Series 2004-One shall have occurred prior thereto, the period commencing on the occurrence of a Planned Redemption Event and ending upon the first to occur of (x) the commencement of the Early Redemption Period, (y) the payment in full of the Note Principal Balance and all other unpaid amounts owing to the Class A Noteholders, the Class B Noteholders and the Class C Noteholders pursuant to the Note Purchase Agreement and (z) the Stated Maturity Date.

  

7

  

 

“Pre-Allocated Allocation Amount” shall mean the sum for each Paired Series of (1) prior to the Paired Series Final Payment Date for such Paired Series, the lesser of (or if (a) and (b) are equal amounts, such equal amount) (a) the aggregate amount of all principal payments made on, or deposited into the applicable principal funding account on behalf of, the Notes of such Paired Series and (b) the aggregate amount of all Note Principal Balance Increases relating to the reduction of the allocation amount or adjusted allocation amount, as applicable, of such Paired Series specified in the related Indenture Supplement minus the Pre-Funding Allocation Adjustment related to all such Note Principal Balance Increases, and (2) on and after the Paired Series Final Payment Date for such Paired Series, $0.

 

“Pre-Funding Account” shall have the meaning specified in subsection 4.14(a).

 

“Pre-Funding Allocation Adjustment” shall mean, for any date of determination, (I) if no Paired Series is outstanding, the amount on deposit in the Pre-Funding Account or (II) if a Paired Series is outstanding and amounts have been deposited in the Pre-Funding Account in connection with such Paired Series, for any date of determination prior to the Paired Series Final Payment Date for such Paired Series, an amount not less than $0 equal to (1) the sum of (i) the aggregate amount deposited in the Pre-Funding Account in connection with such Paired Series, (ii) without duplication of the amounts deposited in the Pre-Funding Account, the aggregate amount deposited in the Yield Supplement Account pursuant to subsection 4.15(a) in connection with such Paired Series and (iii) the total amount of Class D Note Principal Balance Increases in connection with such Paired Series, minus (2) the aggregate amount deposited in the principal funding account for such Paired Series or the aggregate amount of principal paid on the Notes of such Paired Series, as applicable.

 

“Pre-Funding Investment Proceeds” shall have the meaning set forth in subsection 4.14(b).

 

“Private Holder” shall mean each holder of a right to receive interest or principal in respect of any direct or indirect interest in the Issuer, including any financial instrument or contract the value of which is determined in whole or in part by reference to the Issuer (including the assets of the Issuer, income of the Issuer or distributions made by the Issuer), but excluding any interest in the Issuer represented by any Series or Class of Notes or any other interest as to which the Transferor has provided to the Indenture Trustee an Opinion of Counsel to the effect that such Series, Class or other interest will be treated as debt or otherwise not as an equity interest in either the Issuer or the Receivables for federal income tax purposes, in each case, provided such interest is not convertible or exchangeable into an interest in the Issuer or the Issuer’s income or equivalent value.  Notwithstanding the immediately preceding sentence, (i) “Private Holder” shall also include any other Person that the Transferor determines is, may be or may become a “partner” within the meaning of Section 1.7704-1(h)(1)(ii) (including by reason of Section 1.7704-1(h)(3)) of the United States Treasury Regulations.  “Private Holders” shall include the Holders of the Trust Certificate, the Transferor Certificates or any interest in either, the Servicer and the Series 2004-One Noteholders. Any person holding more than one interest in the Issuer each of which separately would cause such Person to be a Private Holder shall be treated as a single Private Holder.  Each holder of an interest in a Private Holder which is a partnership, S corporation or a grantor trust under the Code shall be treated as a Private Holder unless excepted with the consent of the Transferor (which consent shall be based on an Opinion of Counsel generally to the effect that the action taken pursuant to the consent will not cause the Issuer to become a publicly traded partnership treated as a corporation).

 

“Rating Agency Condition” shall mean, for the purpose of this Series, notwithstanding anything to the contrary in the Transaction Documents, the consent of Merrill.

 

“Reallocated Principal Collections” shall mean, with respect to any Distribution Date, an amount equal to the lesser of (I) the product of (a) the Series 2004-One Allocable Principal Collections deposited in the Collection Account for the related Monthly Period, (b) the Fixed/Floating Allocation Percentage for the related Monthly Period and (c) the Subordination Percentage, and (II) the greater of (x) (1) the sum of (i) the Class B Note Principal Balance, (ii) the Class C Note Principal Balance and (iii) the Class D Note Principal Balance minus (2) the excess, if any, of the total amount of Reduction Amounts for all prior Distribution Dates and Reallocated Principal Collections that under Section 4.07 were used to fund the Class A Required Amount, the Class B Required Amount or the Class C Required Amount on all prior Distribution Dates over such Reduction Amounts and Reallocated Principal Collections reimbursed pursuant to subsection 4.05(a)(xi) prior to such date and (y) zero.

 

“Reallocated Series Finance Charge Collections” shall mean that portion of Group VIII Series Finance Charge Collections allocated to Series 2004-One pursuant to Section 4.09.

 

“Redemption Amount” shall mean, with respect to any Distribution Date, after giving effect to any deposits and distributions otherwise to be made on such Distribution Date, the sum of (i) the Note Principal Balance on such Distribution Date plus (ii) Series 2004-One Monthly Interest for such Distribution Date plus (iii) Fees and Costs due and unpaid.

 

“Redemption Period” shall mean, with respect to Series 2004-One, the Planned Redemption Period or the Early Redemption Period (or both), as the context requires.

 

“Reduction Amounts” shall have the meaning specified in Section 4.06.

 

“Replacement Interest Rate Cap” shall mean one or more interest rate cap agreements entered into in replacement of an Interest Rate Cap satisfying the conditions specified in Section 4.13.

 

“Repurchase Transaction” shall have the meaning specified in the Note Purchase Agreement.

 

"Required Aggregate Class Amount" shall mean with respect to the Class B Notes, the Class C Notes and the Class D Notes, for any date of determination, an aggregate amount equal to the product of (i) Subordination Percentage and (ii) the Note Principal Balance on such date of determination, determined after giving effect to all increases in the principal balance of, or all payments of principal, if any, with respect to the Series 2004-One Notes on such date of determination; provided, however, that in no event shall the Required Aggregate Class Amount with respect to the Class B Notes exceed the amount set forth in Item 7 of Schedule 2.01; provided, further, however, that in no event shall the Required Aggregate Class Amount with respect to the Class C Notes exceed the amount set forth in Item 8 of Schedule 2.01.

 

“Required Minimum Principal Balance” shall mean with respect to any date, for the purpose of this Series, notwithstanding anything to the contrary in the Transaction Documents, (a) the sum of the numerators used to determine the Series Allocation Percentages with respect to Principal Receivables for each Series outstanding on such date minus (b) the Special Funding Amount on such date minus (c) the Collections in respect of Principal Receivables on deposit in the Collection Account on such date.

 

“Required Rating” shall mean, for any Interest Rate Cap Provider, a short-term debt rating of at least P-1 by Moody’s or at least A-1 by Standard & Poor’s.

 

“Required Spread Account Amount” shall mean, on any date of determination an amount equal to the product of (i) the sum of (a) the Required Spread Account Percentage in effect on such date and (b) the Supplemental Percentage in effect on such date and (ii) the sum of the Class A Note Principal Balance, the Class B Note Principal Balance and the Class C Note Principal Balance on such date.

 

  

8

  

“Required Spread Account Percentage” shall mean, as of any date of determination, if the most recent three-month average (calculated as of the Determination Date immediately preceding such date, unless such date is a Determination Date, in which case calculated as of such Determination Date) of the Net Yield for such date is greater than or equal to the percentage set forth in the left-hand column of the table below, and less than the percentage set forth in the middle column of the table below, an amount equal to the percentage set forth next to such percentages in the right-hand column of the table below:

 

	
Three-Month

Average Net Yield

	  
	
 

Greater Than

Or Equal To

	
 

Less

Than

	
Required

Spread Account

Percentage

	
5.5%

	  	
0.0%

	
5.0%

	
5.5%

	
3.0%

	
4.5%

	
5.0%

	
3.5%

	
4.0%

	
4.5%

	
4.0%

	
3.5%

	
4.0%

	
5.0%

	
3.0%

	
3.5%

	
6.0%

	  	
3.0%

	
7.0%

 

provided, however, that for the purpose of determining the Required Spread Account Percentage for the first two Distribution Dates following the Closing Date, the three-month average of the Net Yield for the March 2004 Distribution Date will be deemed to be the average of 12.57%, 11.91% and the Net Yield for the Monthly Period immediately preceding the March 2004 Distribution Date (such average computed by totaling the three rates and dividing by three), and the three-month average of the Net Yield for the April 2004 Distribution Date will be deemed to be the average of 11.91% and the Net Yield for the two Monthly Periods immediately preceding the April 2004 Distribution Date (such average computed by totaling the three rates and dividing by three); provided, further, however, the Required Spread Account Percentage with respect to any Distribution Date will not be reduced from a higher Required Spread Account Percentage applicable to the immediately preceding Distribution Date unless the Net Yield calculated for such current Distribution Date and the two immediately preceding Distribution Dates each would have otherwise permitted at least such a reduction in the Required Spread Account Percentage (assuming that references to the three-month average Net Yield in the table above are deemed to refer to Net Yield), and may only be reduced by a single step increment from the Required Spread Account Percentage applicable to the immediately preceding Distribution Date.

 

“Reset Date” shall mean each of (a) an Addition Date, (b) the date on which a Note Principal Balance Increase occurs, (c) the date of any increase or decrease (other than regularly scheduled redemptions or early redemptions but including any optional redemption in the principal balance of the Notes of any Series) in the note principal balance or allocation amount for a variable funding series, (d) any date on which a new Series is issued, (e) any date on which any funds are withdrawn from the Pre-Funding Account and (f) any date on which principal is paid on, or deposited into the applicable principal funding account on behalf of, the Notes of any Paired Series.

 

“Revolving Period” shall mean the period beginning at the close of business on the Closing Date and ending on the earlier of (a) the close of business on the day immediately preceding the day the Planned Redemption Period commences and (b) the close of business on the day immediately preceding the day the Early Redemption Period commences.

 

“Rolling Return on Average Managed Assets” shall mean, with respect to CompuCredit and any fiscal quarter, the ratio of (1) the cumulative dollar return on its managed assets for the immediately preceding four fiscal quarters divided by (2) its average managed assets for the immediately preceding four fiscal quarters.

 

“Series 2004-One” shall mean the Series of Notes the terms of which are specified in this Supplement.

 

“Series 2004-One Additional Amounts” shall mean, with respect to any Distribution Date, the sum of the amounts determined pursuant to subsection 4.05(a)(xi) for such Distribution Date.

 

“Series 2004-One Allocable Defaulted Amount” shall mean the Series Allocable Defaulted Amount with respect to Series 2004-One.

 

“Series 2004-One Allocable Finance Charge Collections” shall mean the Series Allocable Finance Charge Collections with respect to Series 2004-One.

 

“Series 2004-One Allocable Principal Collections” shall mean the Series Allocable Principal Collections with respect to Series 2004-One.

 

“Series 2004-One Allocation Percentage” shall mean the Series Allocation Percentage with respect to Series 2004-One which shall be an amount equal to, with respect to any Monthly Period, the percentage equivalent of a fraction, the numerator of which is the Series Adjusted Allocation Amount for Series 2004-One as of the last day of the immediately preceding Monthly Period plus the Series Required Transferor Amount as of such last day, and the denominator of which is the Trust Adjusted Allocation Amount plus the Required Transferor Amount as of such last day; provided, however, that with respect to any Monthly Period in which one or more Reset Dates occurs, the Series 2004-One Allocation Percentage shall be recalculated as provided above but as of such Reset Date for the period from and after the date on which any such Reset Date occurs to but excluding the date, if any, that another such Reset Date occurs or, if no other Reset Date occurs during such Monthly Period, to and including the last day of such Monthly Period.

 

“Series 2004-One Monthly Fees” shall mean, with respect to any Distribution Date, the sum of the amounts determined pursuant to subsections 4.05(a)(i), (v), (vii), (viii) and (xiv).

 

“Series 2004-One Monthly Interest” shall mean, with respect to any Distribution Date, the amounts payable pursuant to subsections 4.05(a)(ii), (iii), (iv), (ix) and (xv) for such Distribution Date.

 

“Series 2004-One Note” shall mean a Class A Note, a Class B Note, a Class C Note or a Class D Note.

 

“Series 2004-One Noteholder” shall mean a Class A Noteholder, a Class B Noteholder, a Class C Noteholder or a Class D Noteholder.

 

  

9

  

“Series Allocation Amount” shall mean, for Series 2004-One, with respect to any date of determination, the Initial Note Principal Balance plus the aggregate principal amount of Note Principal Balance Increases, minus any payments of principal to the Series 2004-One Noteholders at any time other than during a Redemption Period, minus the Pre-Funding Allocation Adjustment, minus the Pre-Allocated Allocation Amount, but only for purposes of the definition of Series Adjusted Allocation Amount and Trust Adjusted Allocation Amount and only to the extent such terms are used in the definition of Series 2004-One Allocable Principal Collections (including as such term is used in the definition of Series 2004-One Allocation Percentage, but solely to the extent that the defined term Series 2004-One Allocation Percentage is used in the definition of Series 2004-One Allocable Principal Collections and Required Minimum Principal Balance (through the defined term Series Allocation Percentage as it relates to Series 2004-One)) and Fixed/Floating Allocation Percentage.

 

“Series Default Amount” shall mean, with respect to any Monthly Period, an amount equal to the product of (a) the Series 2004-One Allocable Defaulted Amount for the related Monthly Period and (b) the Floating Allocation Percentage for such Monthly Period.

 

“Series Finance Charge Collections” shall mean with respect to any Distribution Date, an amount equal to the product of (a) the Floating Allocation Percentage for the related Monthly Period and (b) the Series 2004-One Allocable Finance Charge Collections for the related Monthly Period.

 

“Series Principal Shortfall” shall have the meaning specified in Section 4.10.

 

“Series Required Transferor Amount” shall mean an amount equal to 0% of the Allocation Amount.

 

“Servicing Base Amount” shall have the meaning specified in subsection 3.01(a).

 

“Servicing Fee Rate” shall mean the percentage specified in Item 10(a) of Schedule 2.01 provided, that if an Early Redemption Event specified in subsection 6.01(c)(i) or 6.01(m) occurs and the Early Redemption Period begins and CompuCredit is replaced as Servicer by the Backup Servicer, then the Servicing Fee Rate shall be the percentage specified in Item 10(b) of Schedule 2.01.

 

“Special Payment Date” shall mean each Distribution Date with respect to the Planned Redemption Period or Early Redemption Period.

 

“Spread Account” shall have the meaning specified in subsection 4.11(a).

 

“Spread Account Draw Amount” shall have the meaning specified in subsection 4.11(c).

 

“Spread Account Surplus” shall mean, as of any date of determination, the amount, if any, by which the amount on deposit in the Spread Account exceeds the Required Spread Account Amount.

 

“Stated Maturity Date” shall mean the 42nd Distribution Date following the earlier to occur of (1) the start of the Planned Redemption Period and (2) the start of the Early Redemption Period.

 

“Subordination Percentage” shall mean the percentage specified in Item 11 of Schedule 2.01.

 

“Supplemental Percentage” shall mean the product of (a) 2% and (b) the number, if any, of the following events which have occurred as of any Transfer Date and have not been cured:

 

(1)           the average of the Monthly Default Rates for any three consecutive Monthly Periods exceeds 19%;

 

(2)           the average of the Monthly Delinquency Rates for any three consecutive Monthly Periods exceeds 13.5%;

 

(3)           the average of the Monthly Payment Rates for any three consecutive Monthly Periods is less than 4.5%;

 

(4)           the Trust Ineligible Receivables that are less than 61 days contractually past due as of the last day of the immediately preceding Monthly Period divided by the Principal Receivables as of the last day of the immediately preceding Monthly Period is less than 2%; and

 

(5)           the weighted average FICO score of all of the Eligible Accounts for the immediately preceding Monthly Period is less than 580.

 

If any event set forth in clauses (1) through (3) shall occur, such event shall be deemed cured only if, subsequent thereto, for three consecutive Monthly Periods the related three month average ratios or rates shall no longer exceed the ratios (with respect to clauses (1) and (2)) or be less than the rates (with respect to clause (3)) set forth in such clause.  If the event set forth in clause (4) above shall occur, such event shall be deemed cured only if, subsequent thereto, the percentage determined in accordance with clause (4) above shall exceed 2% for three consecutive Monthly Periods.  If the event set forth in clause (5) above shall occur, such event shall be deemed cured only if, subsequent thereto, the weighted average FICO score shall exceed 580 for three consecutive Monthly Periods.  The Supplemental Percentage shall not decrease more than 2% per month following any such cure.

 

“Supplemental Servicer Default” shall mean the occurrence of any of the following events:

 

(1)           A Governmental Authority brings or threatens any action, proceeding or investigation against the Servicer before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality which, if decided adversely, would have a material adverse effect on the Servicer, the Accounts, the Receivables, the Transaction Documents or the transactions contemplated therein;

 

(2)           The occurrence of a Default or default or event that is, or with notice or the lapse of time or both would become a Servicer Default; or

 

(3)           The failure of the Servicer to satisfy any of the "Servicer Level Requirements" specified in the third column of Exhibit E for two consecutive Monthly Periods.

 

  

10

  

“Supplemental Servicing Fee Rate” shall mean (1) with respect to any Distribution Date with respect to the Revolving Period or Planned Redemption  Period, 0%, (2) with respect to any Distribution Date with respect to the Early Redemption Period if CompuCredit is not the Servicer, 0% and (3) with respect to any Distribution Date with respect to the Early Redemption Period if CompuCredit is the Servicer, 3.9%.

 

“Term Series” shall mean a Series (other than Series 2004-One) issued out of the Trust in a public or private offering that is not a variable funding Series (i.e., a Series that permits the increase or decrease of the outstanding principal balance of the Notes of such Series during the Revolving Period of such Series).

 

“Transaction Documents” shall have the meaning specified in the Note Purchase Agreement.

 

“Transfer” shall have the meaning specified in subsection 9.04(g).

 

“Transferor Percentage” shall mean 100% minus (a) the Floating Allocation Percentage, when used at any time with respect to Defaulted Receivables or with respect to Collections of Finance Charge Receivables or (b) the Fixed/Floating Allocation Percentage, when used at any time with respect to Collections of Principal Receivables.

 

“Trust Ineligible Receivables” shall mean, with respect to any date of determination, an amount equal to the total receivables balance outstanding on Ineligible Receivables (without giving effect to Section 2.05 of the Transfer and Servicing Agreement) for such date of determination.

 

“Unused Fee” shall have the meaning specified in the Note Purchase Agreement.

 

“Yield Supplement Account” shall have the meaning set forth in subsection 4.15(a).

 

“Yield Supplement Investment Proceeds” shall have the meaning set forth in subsection 4.15(b).

 

(b) The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Supplement shall refer to this Supplement as a whole and not to any particular provision of this Supplement; references to any Article, subsection, Section or Exhibit are references to Articles, subsections, Sections and Exhibits in or to this Supplement unless otherwise specified; and the term “including” means “including without limitation”.

 

(c) The Corporate Financial Events and Rolling Return on Average Managed Assets computations shall be made without regard to any potential reductions in the Consolidated Total Equity of CompuCredit that may be caused by any potential future changes in GAAP that might affect the off-balance sheet classification of any securitization arrangement that CompuCredit has in place at December 31, 2003.

 

ARTICLE III                                

 

 

Servicing Fee and Interchange

 

Section 3.01. Servicing Compensation; Interchange.

 

(a) Servicing Fee.  The share of the Servicing Fee allocable to the Series 2004-One Noteholders with respect to any Distribution Date (the “Monthly Servicing Fee”) shall be equal to one-twelfth of the product of (1) the Servicing Fee Rate and (2) (i) the Average Allocation Amount for the Monthly Period preceding such Distribution Date, minus (ii) the product of the average daily amount, if any, on deposit in the Special Funding Account during the Monthly Period preceding such Distribution Date and the Series 2004-One Allocation Percentage with respect to such Monthly Period (the amount calculated pursuant to this clause (2) is referred to as the “Servicing Base Amount”).  The remainder of the Servicing Fee shall be paid by the Issuer and the Noteholders of other Series (as provided in the Transfer and Servicing Agreement and the related Supplements) and in no event shall the Indenture Trustee or the Series 2004-One Noteholders be liable for the share of the Servicing Fee to be paid by the Issuer or the Noteholders of any other Series.

 

(b) Supplemental Servicing Fee.  In addition to the Monthly Servicing Fee, there shall also be payable to the Servicer and allocated to the Series 2004-One Noteholders a monthly supplemental servicing fee (the “Monthly Supplemental Servicing Fee”), which shall be equal to one-twelfth of the product of (1) the Supplemental Servicing Fee Rate and (2) the Servicing Base Amount.  The Transferor shall pay to Servicer (solely to the extent that the Servicer is CompuCredit) out of its own funds the amount of any Monthly Supplemental Servicing Fee that is not paid on any Distribution Date from Available Funds pursuant to subsection 4.05(a)(xiv).

 

(c) Interchange.  On or before each Determination Date, the Servicer shall notify the Transferor and the Indenture Trustee in writing of the amount of Interchange to be included as Series 2004-One Allocable Finance Charge Collections with respect to the preceding Monthly Period as determined pursuant to this subsection 3.01(c).  Such amount of Interchange shall be equal to the product of (i) the amount of Interchange attributable to the Accounts, as reasonably estimated by the Servicer for the preceding Monthly Period, and (ii) the Series 2004-One Allocation Percentage for the preceding Monthly Period.  On each Transfer Date, pursuant to the Transfer and Servicing Agreement, the Transferor shall pay to the Servicer, and the Servicer shall deposit into the Collection Account, in same day funds, the amount of Interchange to be so included as Series 2004-One Allocable Finance Charge Collections with respect to the preceding Monthly Period and such Interchange shall be treated as a portion of Series 2004-One Allocable Finance Charge Collections for all purposes of this Supplement and the Indenture.

 

(d) Additional Monthly Servicing Fee.  In addition to the Monthly Servicing Fee and the Supplemental Servicing Fee, there shall also be payable to the Servicer and allocated to the Series 2004-One Noteholders an additional monthly servicing fee (the “Additional Monthly Servicing Fee”), which shall be equal to one-twelfth of the product of (1) the Additional Monthly Servicing Fee Rate and (2) the Servicing Base Amount.  The Transferor shall pay to Servicer (solely to the extent that the Servicer is CompuCredit) out of its own funds the amount of any Additional Monthly Servicing Fee that is not paid on any Distribution Date from Available Funds pursuant to subsection 4.05(a)(vii).

 

(e) Incentive Servicing Fee.  In addition to the Monthly Servicing Fee, the Supplemental Servicing Fee and the Additional Monthly Servicing Fee, there shall also be payable to the Servicer pursuant to subsection 4.16(c) and allocated from Series 2004-One an incentive servicing fee (the “Incentive Servicing Fee”), which shall be equal to one-twelfth of the product of (1) the Incentive Servicing Fee Rate and (2) the Servicing Base Amount.  The Servicer shall deposit such funds into the Incentive Servicing Fee Account pursuant to subsection 4.05(a)(viii).

  

11

  

 

ARTICLE IV                                

 

 

Rights of Series 2004-One Noteholders and

 

Allocation and Application of Collections

 

Section 4.01. Collections and Allocations.

 

(a) Allocations.  Collections of Finance Charge Receivables and Principal Receivables and Defaulted Receivables allocated to Series 2004-One pursuant to Section 4.01 of the Transfer and Servicing Agreement (and, as described herein, Collections of Finance Charge Receivables reallocated from other Series in Group VIII) shall be allocated and distributed or reallocated as set forth in this Article.

 

(b) Payments to the Issuer.  The Servicer shall on any Business Day requested by the Issuer, withdraw from the Collection Account and pay to the Issuer for application as provided in the Trust Agreement the following amounts:

 

(i) an amount equal to the Transferor Percentage for the related Monthly Period of Series 2004-One Allocable Finance Charge Collections deposited in the Collection Account, but only if the Transferor Amount (determined after giving effect to any Principal Receivables transferred to the Issuer on such date) exceeds zero; and

 

(ii) an amount equal to the Transferor Percentage for the related Monthly Period of Series 2004-One Allocable Principal Collections deposited in the Collection Account, but only if the Transferor Amount (determined after giving effect to any Principal Receivables transferred to the Issuer on such date) exceeds zero.

 

The withdrawals to be made from the Collection Account pursuant to this subsection 4.01(b) do not apply to deposits into the Collection Account that do not represent Collections, including payment for the reassignment of the Receivables and Participation Interests pursuant to Section 2.06 of the Transfer and Servicing Agreement, payment of the purchase price for the Series 2004-One Notes pursuant to Section 8.01 of the Transfer and Servicing Agreement, payment of the redemption price for the Series 2004-One Notes pursuant to Section 7.01 and proceeds from the sale, disposition or liquidation of Receivables pursuant to Section 5.05 of the Indenture.

 

(c) Allocations to the Series 2004-One Noteholders.  The Servicer shall, prior to the close of business on any Deposit Date, allocate to the Series 2004-One Noteholders the following amounts as set forth below:

 

(i) Allocations of Finance Charge Collections. The Servicer shall allocate to the Series 2004-One Noteholders and retain in the Collection Account for application as provided herein an amount equal to the product of (A) the Floating Allocation Percentage and (B) the Series 2004-One Allocation Percentage and (C) the aggregate amount of Collections of Finance Charge Receivables deposited in the Collection Account on such Deposit Date; provided, however, that after the date on which an amount of collections of Finance Charge Receivables equal to the sum of the amounts specified in subsections 4.05(a)(i) through (xv) have been deposited into the Collection Account and allocated to the Series 2004-One Noteholders (and, with respect to the amounts specified in subsection 4.05(a)(xiii), deposited into the Spread Account), such amount shall be paid to the Issuer for application pursuant to the Trust Agreement.

 

(ii) Allocations of Principal Collections.  The Servicer shall allocate to the Series 2004-One Noteholders the following amounts as set forth below:

 

(w)           Allocations During the Revolving Period. During the Revolving Period (A) an amount equal to the product of (I) the Subordination Percentage and (II) the Fixed/Floating Allocation Percentage and (III) the Series 2004-One Allocation Percentage and (IV) the aggregate amount of Collections of Principal Receivables deposited in the Collection Account on such Deposit Date, shall be allocated to the Series 2004-One Noteholders and retained in the Collection Account until applied as provided herein; provided, however, that any such amount may be withdrawn from the Collection Account and paid to the Issuer for application pursuant to the Trust Agreement, but only if (i) the Transferor Amount on such date is greater than the Required Transferor Amount (after giving effect to all Principal Receivables transferred to the Issuer on such day) and (ii) the Available Spread Account Amount is equal to or greater than the Required Spread Account Amount (after giving effect to any deposits into the Spread Account on such Deposit Date pursuant to subsection 4.05(a)(xiii)); and (B) an amount equal to the product of (I) 100% minus the Subordination Percentage for the immediately preceding Monthly Period and (II) the Fixed/Floating Allocation Percentage and (III) the Series 2004-One Allocation Percentage and (IV) the aggregate amount of Collections of Principal Receivables deposited in the Collection Account on such Deposit Date shall be first, if on such Deposit Date the Available Spread Account Amount is less than the Required Spread Account Amount (after giving effect to any deposits into the Spread Account on such Deposit Date pursuant to subsection 4.05(a)(xiii)), deposited into the Spread Account, second, if any other Principal Sharing Series is outstanding and in its redemption period or accumulation period, retained in the Collection Account for application, to the extent necessary, as Shared Principal Collections on the related Distribution Date, and third, paid to the Issuer for application pursuant to the Trust Agreement on each Distribution Date; provided, however, that any such amount to be paid to the Issuer shall be paid to the Issuer only if the Transferor Amount on such date is greater than the Required Transferor Amount (after giving effect to all Principal Receivables transferred to the Issuer on such day) and otherwise shall be deposited in the Special Funding Account.

 

(x)           [Reserved].

 

(y)           Allocations During the Planned Redemption Period.  During the Planned Redemption Period, an amount equal to the product of (I) the Fixed/Floating Allocation Percentage and (II) the Series 2004-One Allocation Percentage and (III) the aggregate amount of Collections of Principal Receivables deposited in the Collection Account on such Deposit Date, shall be first paid to the Transferor in an amount not to exceed the product of (A) the Fixed/Floating Allocation Percentage, (B) the Series 2004-One Allocation Percentage and (C) the sum of (1) the amount of all newly created Principal Receivables that are required to be purchased by the Issuer on such Business Day and (2) the amount of all Principal Receivables created on a prior Business Day the purchase price of which was not paid by the Issuer on a prior Business Day pursuant to this clause (y), and second allocated to the Series 2004-One Noteholders and retained in the Collection Account until applied as provided herein; provided, however, that after the date on which an amount of such Collections equal to the Note Principal Balance has been deposited into the Collection Account and allocated to the Series 2004-One Noteholders, such amount shall be first, if any other Principal Sharing Series is outstanding and in its redemption period or accumulation period, retained in the Collection Account for application, to the extent necessary, as Shared Principal Collections on the related Distribution Date, and second paid to the Issuer for application pursuant to the Trust Agreement only if the Transferor Amount on such Deposit Date is greater than the Required Transferor Amount (after giving effect to all Principal Receivables transferred to the Issuer on such day) and otherwise shall be deposited in the Special Funding Account.

  

12

  

 

(z)           Allocations During the Early Redemption Period.  During the Early Redemption Period, an amount equal to the product of (I) the Fixed/Floating Allocation Percentage and (II) the Series 2004-One Allocation Percentage and (III) the aggregate amount of Collections of Principal Receivables deposited in the Collection Account on such Deposit Date, shall be allocated to the Series 2004-One Noteholders and retained in the Collection Account until applied as provided herein; provided, however, that after the date on which an amount of such Collections equal to the Note Principal Balance has been deposited into the Collection Account and allocated to the Series 2004-One Noteholders, any amounts in excess of such amounts shall be first, if any other Principal Sharing Series is outstanding and in its redemption period or accumulation period, retained in the Collection Account for application, to the extent necessary, as Shared Principal Collections on the related Distribution Date, and second paid to the Issuer for application pursuant to the Trust Agreement, but only if the Transferor Amount on such date is greater than the Required Transferor Amount (after giving effect to all Principal Receivables transferred to the Issuer on such day) and otherwise shall be deposited in the Special Funding Account.

 

Section 4.02. Determination of Class D Monthly Interest.

 

The amount of monthly interest (“Class D Monthly Interest”) distributable from the Collection Account with respect to the Class D Notes on any Distribution Date shall be an amount equal to the product of (i)(A) a fraction, the numerator of which is the actual number of days in the immediately preceding Interest Period and the denominator of which is 360, times (B) the Class D Note Interest Rate and (ii) the Class D Average Note Principal Balance for the related Interest Period.

 

Section 4.03. [Reserved].

 

Section 4.04. Required Amounts.

 

With respect to each Distribution Date, on the related Determination Date, the Servicer shall determine the amount (the “Class A Required Amount”), if any, by which (x) the amounts payable pursuant to subsections 4.05(a)(i), 4.05(a)(ii), 4.05(a)(v) and 4.05(a)(xiv) for such Distribution Date exceed (y) the Available Funds for such Distribution Date available to fund such amounts.  In the event that the Class A Required Amount for such Distribution Date is greater than zero, the Servicer shall give written notice to the Indenture Trustee of such Class A Required Amount on the date of computation.

 

With respect to each Distribution Date, on the related Determination Date, the Servicer shall determine the amount (the “Class B Required Amount”), if any, by which (x) the amounts payable pursuant to subsection 4.05(a)(iii) for such Distribution Date exceed (y) the Available Funds for such Distribution Date available to fund such amounts.  In the event that the Class B Required Amount for such Distribution Date is greater than zero, the Servicer shall give written notice to the Indenture Trustee of such Class B Required Amount on the date of computation.

 

With respect to each Distribution Date, on the related Determination Date, the Servicer shall determine the amount (the “Class C Required Amount”), if any, by which (x) the amounts payable pursuant to subsections 4.05(a)(iv) and 4.05(a)(ix) for such Distribution Date exceed (y) the Available Funds for such Distribution Date available to fund such amounts.  In the event that the Class C Required Amount for such Distribution Date is greater than zero, the Servicer shall give written notice to the Indenture Trustee of such Class C Required Amount on the date of computation.

 

Section 4.05. Application of Available Funds and Available Principal Collections.

 

The Servicer shall apply, or shall cause the Indenture Trustee to apply by written instruction to the Indenture Trustee, on each Distribution Date, Available Funds and Available Principal Collections on deposit in the Collection Account with respect to such Distribution Date to make the following distributions.

 

(a) On each Distribution Date, an amount equal to the Available Funds with respect to such Distribution Date will be distributed in the following priority:

 

(i) an amount equal to the Monthly Servicing Fee for such Distribution Date, plus the amount of any Monthly Servicing Fee previously due but not distributed to the Servicer on a prior Distribution Date, shall be distributed to the Servicer (unless such amount has been netted against deposits to the Collection Account in accordance with Section 4.01 of the Transfer and Servicing Agreement);

 

(ii) an amount equal to Class A Monthly Interest for such Distribution Date, plus the amount of any Class A Monthly Interest previously due but not distributed to Class A Noteholders on a prior Distribution Date, plus the amount of any Class A Additional Interest for such Distribution Date and any Class A Additional Interest previously due but not distributed to Class A Noteholders on a prior Distribution Dare, shall be distributed to the Class A Noteholders on the applicable Distribution Date;

 

(iii) an amount equal to Class B Monthly Interest for such Distribution Date, plus the amount of any Class B Monthly Interest previously due but not distributed to Class B Noteholders on a prior Distribution Date, plus the amount of any Class B Additional Interest for such Distribution Date and any Class B Additional Interest previously due but not distributed to Class B Noteholders on a prior Distribution Date shall be distributed to the Class B Noteholders;

 

(iv) an amount equal to Class C-1 Monthly Interest for such Distribution Date, plus the amount of any Class C-1 Monthly Interest previously due but not distributed to Class C-1 Noteholders on a prior Distribution Date, plus the amount of Class C-1 Additional Interest for such Distribution Date and any Class C-1 Additional Interest previously due but not distributed to Class C-1 Noteholders on a prior Distribution Date shall be distributed to Class C-1 Noteholders;

 

(v) an amount equal to the Monthly Backup Servicer Fee for such Distribution Date, plus the amount of any Monthly Backup Servicer Fee previously due but not distributed to the Backup Servicer on a prior Distribution Date, shall be distributed to the Backup Servicer;

 

(vi) pro rata, based on the amount owed, (1) an amount equal to the accrued and unpaid Class A Costs shall be distributed to the Class A Noteholders, (2) an amount equal to the accrued and unpaid Class B Costs shall be distributed to the Class B Noteholders, (3) an amount equal to the accrued and unpaid Class C-1 Costs shall be distributed to the Class C-1 Noteholders, and (4) an amount equal to the accrued and unpaid Class C-2 Costs shall be distributed to the Class C-2 Noteholders

  

13

  

 

(vii) an amount equal to the Additional Monthly Servicing Fee then due and payable, plus the amount of any Additional Monthly Servicing Fee previously due but not distributed to the Servicer on a prior Distribution Date, shall be distributed to the Servicer (solely to the extent the Servicer is CompuCredit);

 

(viii) an amount equal to the Incentive Servicing Fee then due and payable, plus the amount of any Incentive Servicing Fee previously due but not distributed on a prior Distribution Date, shall be deposited into the Incentive Servicing Fee Account;

 

(ix) an amount equal to Class C-2 Monthly Interest for such Distribution Date, plus the amount of any Class C-2 Monthly Interest previously due but not distributed to Class C-2 Noteholders on a prior Distribution Date, plus the amount of Class C-2 Additional Interest for such Distribution Date and any Class C-2 Additional Interest previously due but not distributed to Class C-2 Noteholders on a prior Distribution Date shall be distributed to Class C-2 Noteholders;

 

(x) an amount equal to the Series Default Amount for such Distribution Date shall be treated as a portion of Available Principal Collections for such Distribution Date;

 

(xi) an amount equal to the aggregate amount of Reduction Amounts and Reallocated Principal Collections that under Section 4.07 were used to fund the Class A Required Amount, the Class B Required Amount or the Class C Required Amount on a prior Distribution Date and which have not been previously reimbursed shall be treated as a portion of Available Principal Collections for such Distribution Date;

 

(xii) if an Event of Default and acceleration of the maturity of the Series 2004-One Notes pursuant to Section 5.03 of the Indenture has occurred on or prior to such Distribution Date, an amount up to the Note Principal Balance on such Distribution Date shall be treated as a portion of Available Principal Collections for such Distribution Date;

 

(xiii) on each Distribution Date prior to the date on which the Spread Account terminates pursuant to subsection 4.11(e), an amount up to the excess, if any, of the Required Spread Account Amount for such Distribution Date over the Available Spread Account Amount for such Distribution Date shall be deposited into the Spread Account;

 

(xiv) an amount equal to the Monthly Supplemental Servicing Fee for such Distribution Date, plus the amount of any Monthly Supplemental Servicing Fee previously due but not distributed to CompuCredit on a prior Distribution Date, shall be distributed to CompuCredit;

 

(xv) an amount equal to any Class D Monthly Interest for such Distribution Date plus the amount of any Class D Monthly Interest previously due but not distributed to Class D Noteholders on a prior Distribution Date, plus the amount of any Class D Additional Interest for such Distribution Date and any Class D Additional Interest previously due but not paid on a prior Distribution Date shall be distributed to the Class D Noteholders; and

 

(xvi) the balance, if any, will constitute a portion of Excess Finance Charge Collections for such Distribution Date and shall be available for allocation to other Series or to the Issuer as described in Section 4.05 of the Transfer and Servicing Agreement.

 

(b) On each Distribution Date with respect to the Revolving Period, an amount equal to the Available Principal Collections deposited in the Collection Account for the related Monthly Period shall be treated as Shared Principal Collections and applied in accordance with Section 4.02 of the Transfer and Servicing Agreement.

 

(c) [Reserved].

 

(d) On each Distribution Date with respect to the Planned Redemption Period or the Early Redemption Period, an amount equal to the Available Principal Collections deposited in the Collection Account for the related Monthly Period shall be distributed in the following order of priority:

 

(i) an amount up to the Class A Note Principal Balance shall be distributed to the Class A Noteholders;

 

(ii) for each Distribution Date beginning on the Distribution Date on which the Class A Note Principal Balance shall have been paid in full, an amount up to the Class B Note Principal Balance shall be distributed to the Class B Noteholders;

 

(iii) for each Distribution Date beginning on the Distribution Date on which the Class B Note Principal Balance shall have been paid in full, an amount up to the Class C-1 Note Principal Balance shall be distributed to the Class C-1 Noteholders;

 

(iv) for each Distribution Date beginning on the Distribution Date on which the Class C-1 Note Principal Balance shall have been paid in full, an amount up to the Class C-2 Note Principal Balance shall be distributed to the Class C-2 Noteholders;

 

(v) for each Distribution Date beginning on the Distribution Date on which the Class C-2 Note Principal Balance shall have been paid in full, an amount up to the Class D Note Principal Balance shall be distributed to the Class D Noteholders; and

 

(vi) for each Distribution Date beginning on the Distribution Date on which the Class D Notes are paid in full, an amount equal to the balance, if any, of such Available Principal Collections shall be treated as Shared Principal Collections and applied in accordance with Section 4.02 of the Transfer and Servicing Agreement.

 

Section 4.06. Defaulted Amounts; Reduction Amounts.

 

  

14

  

On each Determination Date, the Servicer shall calculate the Series Default Amount for the related Distribution Date.  If, on any Distribution Date, the Series Default Amount for the related Monthly Period exceeds the Available Funds allocated and available for that purpose pursuant to subsection 4.05(a)(x) for such Distribution Date, the Allocation Amount (after giving effect to any reductions for Reallocated Principal Collections that under Section 4.07 were used to fund the Class A Required Amount, the Class B Required Amount or the Class C Required Amount on such Distribution Date), will be reduced, subject to the succeeding sentence, by the amount of such excess (a “Reduction Amount”), but not by more than the Series Default Amount for such Distribution Date.  In the event that such reduction would cause the Allocation Amount to be a negative number, the Allocation Amount shall be reduced to zero.  Reduction Amounts shall thereafter be reimbursed and the Allocation Amount increased (but not by an amount in excess of the aggregate unreimbursed Reduction Amounts) on any Distribution Date by the amount of Available Funds allocated and available for that purpose pursuant to subsection 4.05(a)(xi).

 

Section 4.07. Reallocated Principal Collections.

 

(a) On each Distribution Date, the Servicer shall apply, or shall cause the Indenture Trustee to apply in accordance with the Monthly Servicer’s Statement, Reallocated Principal Collections with respect to such Distribution Date, to fund the Class A Required Amount. On each Distribution Date, the Allocation Amount shall be reduced by the amount of Reallocated Principal Collections used to fund the Class A Required Amount for such Distribution Date, but in any event the Allocation Amount shall not be reduced by operation of this subsection 4.07(a) to an amount less than the Class A Note Principal Balance.

 

(b) On each Distribution Date the Servicer shall apply, or shall cause the Indenture Trustee to apply in accordance with the Monthly Servicer’s Statement, Reallocated Principal Collections with respect to such Distribution Date, to fund the Class B Required Amount.  On each Distribution Date, the Allocation Amount shall be reduced by the amount of Reallocated Principal Collections used to fund the Class B Required Amount for such Distribution Date, but in any event the Allocation Amount shall not be reduced by operation of this subsection 4.07(b) to an amount less than the sum of the Class A Note Principal Balance and the Class B Note Principal Balance.

 

(c) On each Distribution Date the Servicer shall apply, or shall cause the Indenture Trustee to apply in accordance with the Monthly Servicer’s Statement, Reallocated Principal Collections with respect to such Distribution Date, to fund the Class C Required Amount. On each Distribution Date, the Allocation Amount shall be reduced by the amount of Reallocated Principal Collections used to fund the Class C Required Amount for such Distribution Date, but in any event the Allocation Amount shall not be reduced by operation of this subsection 4.07(c) to an amount less than the sum of the Class A Note Principal Balance, the Class B Note Principal Balance and the Class C Note Principal Balance.

 

(d) Reallocated Principal Collections used to fund the Class A Required Amount, the Class B Required Amount and the Class C Required Amount shall thereafter be reimbursed, and the Allocation Amount increased (but not by an amount in excess of the aggregate unreimbursed Reallocated Principal Collections used to fund the Class A Required Amount, Class B Required Amount or the Class C Required Amount) on any Distribution Date by the amount of Available Funds allocated and available for that purpose pursuant to subsection 4.05(a)(xi).

 

Section 4.08. Excess Finance Charge Collections.

 

Series 2004-One shall be an Excess Allocation Series.  Subject to Section 4.05 of the Transfer and Servicing Agreement, Excess Finance Charge Collections with respect to all the Excess Allocation Series for any Distribution Date will be allocated to Series 2004-One in an amount equal to the product of (x) the aggregate amount of Excess Finance Charge Collections with respect to all the Excess Allocation Series for such Distribution Date and (y) a fraction, the numerator of which is the Finance Charge Shortfall for Series 2004-One for such Distribution Date and the denominator of which is the aggregate amount of Finance Charge Shortfalls for all the Excess Allocation Series for such Distribution Date.  The “Finance Charge Shortfall” for Series 2004-One for any Distribution Date will be equal to the excess, if any, of (a) the full amount required to be paid, without duplication, pursuant to subsections 4.05(a)(i) through (xv) on such Distribution Date over (b) the Reallocated Series Finance Charge Collections for such Distribution Date.

 

Section 4.09. Reallocated Series Finance Charge Collections.

 

(a) That portion of Group VIII Series Finance Charge Collections for any Distribution Date equal to the amount of Reallocated Series Finance Charge Collections for such Distribution Date will be allocated to Series 2004-One and will be distributed as set forth in this Supplement.

 

(b) Reallocated Series Finance Charge Collections with respect to any Distribution Date shall equal the sum of (i) the aggregate amount of Series 2004-One Monthly Interest, Series Default Amount, Series 2004-One Monthly Fees and Series 2004-One Additional Amounts for such Distribution Date and (ii) that portion of excess Group VIII Series Finance Charge Collections to be included in Reallocated Series Finance Charge Collections pursuant to subsection (c) hereof; provided, however, that if the amount of Group VIII Series Finance Charge Collections for such Distribution Date is less than the sum of (w) Group VIII Series Monthly Interest, (x) Group VIII Series Default Amount, (y) Group VIII Series Monthly Fees and (z) Group VIII Series Additional Amounts, then Reallocated Series Finance Charge Collections shall equal the sum of the following amounts for such Distribution Date:

 

(A)           the product of (I) Group VIII Series Finance Charge Collections (up to the amount of Group VIII Series Monthly Interest) and (II) a fraction, the numerator of which is Series 2004-One Monthly Interest and the denominator of which is Group VIII Series Monthly Interest;

 

(B)           the product of (I) Group VIII Series Finance Charge Collections less the amount of Group VIII Series Monthly Interest (such amount not less than zero) (up to the Group VIII Series Default Amount) and (II) a fraction, the numerator of which is the Series Default Amount and the denominator of which is the Group VIII Series Default Amount;

 

(C)           the product of (I) Group VIII Series Finance Charge Collections less the sum of (i) Group VIII Series Monthly Interest and (ii) the Group VIII Series Default Amount (such amount not less than zero) (up to Group VIII Series Monthly Fees) and (II) a fraction, the numerator of which is Series 2004-One Monthly Fees and the denominator of which is Group VIII Series Monthly Fees; and

 

(D)           the product of (I) Group VIII Series Finance Charge Collections less the sum of (i) Group VIII Series Monthly Interest, (ii) the Group VIII Series Default Amount and (iii) Group VIII Series Monthly Fees (such amount not less than zero) and (II) a fraction, the numerator of which is Series 2004-One Additional Amounts and the denominator of which is Group VIII Series Additional Amounts.

 

(c) If the amount of Group VIII Series Finance Charge Collections for such Distribution Date exceeds the sum of (i) Group VIII Series Monthly Interest, (ii) Group VIII Series Default Amount, (iii) Group VIII Series Monthly Fees and (iv) Group VIII Series Additional Amounts, then Reallocated Series Finance Charge Collections for such Distribution Date shall include an amount equal to the product of (x) the amount of such excess and (y) a fraction, the numerator of which is the Allocation Amount as of the last day of the second preceding Monthly Period and the denominator of which is the sum of such Allocation Amount and the aggregate allocation amounts for all other Series included in Group VIII as of such last day.

  

15

  

 

Section 4.10. Shared Principal Collections.

 

Subject to Section 4.02 of the Transfer and Servicing Agreement, Shared Principal Collections for any Distribution Date will be allocated to Series 2004-One  in an amount equal to the product of (x) the aggregate amount of Shared Principal Collections with respect to all Principal Sharing Series for such Distribution Date and (y) a fraction, the numerator of which is the Series Principal Shortfall for such Distribution Date and the denominator of which is the aggregate amount of Principal Shortfalls for all the Series which are Principal Sharing Series for such Distribution Date.  The “Series Principal Shortfall” will be equal to (a) for any Distribution Date with respect to the Revolving Period, zero; and (b) for any Distribution Date with respect to the Planned Redemption Period or the Early Redemption Period, the excess, if any, of the Allocation Amount over the amount of Available Principal Collections for such Distribution Date (excluding any portion thereof attributable to Shared Principal Collections).

 

Section 4.11. Spread Account.

 

(a) The Servicer shall establish and maintain, in the name of the Indenture Trustee, for the benefit of the Class A Noteholders, the Class B Noteholders and the Class C Noteholders, an Eligible Deposit Account (the “Spread Account”) bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Class A Noteholders, the Class B Noteholders and the Class C Noteholders.  The Spread Account shall initially be established with the Indenture Trustee.  The Indenture Trustee shall possess all right, title and interest in all funds on deposit from time to time in the Spread Account and in all proceeds thereof.  The Spread Account shall be under the sole dominion and control of the Indenture Trustee.  If at any time the Spread Account ceases to be an Eligible Deposit Account, the Indenture Trustee (or the Servicer on its behalf) shall within 10 Business Days (or such longer period, not to exceed 30 calendar days, as to which Merrill shall consent) establish a new Spread Account meeting the conditions specified above as an Eligible Deposit Account, and shall transfer any cash or any investments to such new Spread Account.  The Indenture Trustee, at the written direction of the Servicer, shall (i) make withdrawals from the Spread Account from time to time in an amount up to the Available Spread Account Amount at such time, for the purposes set forth in this Supplement, and (ii) on each Distribution Date prior to the termination of the Spread Account make a deposit into the Spread Account in the amount specified in, and otherwise in accordance with, subsection 4.05(a)(xiii).

 

(b) Funds on deposit in the Spread Account shall be invested at the written direction of the Servicer by the Indenture Trustee in Eligible Investments.  In no event shall the Indenture Trustee be liable for the selection of Eligible Investments or for investment losses incurred thereon (except with respect to investments on which the institution acting as the Indenture Trustee is an obligor).  The Indenture Trustee shall have no liability in respect of losses incurred as a result of the liquidation of any Eligible Investment prior to its stated maturity or the failure of the Servicer to provide timely written investment direction.  The Indenture Trustee shall have no obligation to invest or reinvest any amounts held hereunder in the absence of written investment direction.  Funds on deposit in the Spread Account on any Transfer Date, after giving effect to any withdrawals from the Spread Account on such Transfer Date, shall be invested in such investments that will mature so that such funds will be available for withdrawal on or prior to the following Transfer Date.  The Indenture Trustee shall hold such Eligible Investments as provided in Section 6.15 of the Indenture.  No such Eligible Investment shall be disposed of prior to its maturity; provided, however, that the Indenture Trustee may sell, liquidate or dispose of any such Eligible Investment before its maturity, at the written direction of the Servicer, if such sale, liquidation or disposal would not result in a loss of all or part of the principal portion of such Eligible Investment or if, prior to the maturity of such Eligible Investment, a default occurs in the payment of principal, interest or any other amount with respect to such Eligible Investment.  On each Distribution Date, all interest and earnings (net of losses and investment expenses) accrued since the preceding Distribution Date on funds on deposit in the Spread Account shall be retained in the Spread Account (to the extent that the Available Spread Account Amount is less than the Required Spread Account Amount) and the balance, if any, shall be deposited in the Collection Account and treated as Collections of Finance Charge Receivables allocable to Series 2004-One.  Except as provided in the immediately preceding sentence with respect to investment earnings retained in the Spread Account, for purposes of determining the availability of funds or the balance in the Spread Account for any reason under this Supplement, investment earnings on such funds shall be deemed not to be available or on deposit.

 

(c) In the event that for any Distribution Date (x) the sum of the amounts required pursuant to subsections 4.05(a)(i) through (x) exceeds (y) the amount of Reallocated Series Finance Charge Collections and Excess Finance Charge Collections allocated to Series 2004-One  (any such excess, the “Spread Account Draw Amount”), the Spread Account Draw Amount, up to the Available Spread Account Amount, shall be withdrawn from the Spread Account on the related Transfer Date by the Indenture Trustee (acting in accordance with the written instructions of the Servicer), deposited into the Collection Account and included in Available Funds for such Distribution Date.  Notwithstanding anything else to the contrary in this Section 4.11, if an Event of Default shall have occurred with respect to Series 2004-One and the maturity of the Series 2004-One Notes shall have been accelerated under Section 5.03 of the Indenture, any amounts remaining on deposit in the Spread Account shall be applied to pay interest and principal on the Class A Notes, the Class B Notes and the Class C Notes as provided in Section 5.05 of the Indenture.

 

(d) Prior to the occurrence of an Event of Default with respect to the Series 2004-One Notes and acceleration of the maturity of the Series 2004-One Notes under Section 5.03 of the Indenture, but subject to the limitations contained below in this paragraph, in the event that the Spread Account Surplus on any Distribution Date, after giving effect to all deposits to and withdrawals from the Spread Account with respect to such Distribution Date, is greater than zero, the Indenture Trustee, acting in accordance with the written instructions of the Servicer, shall withdraw from the Spread Account and pay to the Issuer for distribution pursuant to the Trust Agreement, an amount equal to such Spread Account Surplus.  Notwithstanding the foregoing, if a Spread Account Surplus exists as a result of a reduction in the Required Spread Account Percentage or the Supplemental Percentage, no amounts may be withdrawn from the Spread Account unless an auditor reasonably selected by Merrill performs an audit of Servicer reporting and Trust accounting.  This audit may be waived by Merrill in its sole discretion.  This audit shall be at the expense of the Transferor and shall not supercede Merrill’s other audit rights set forth in the Note Purchase Agreement.  If Merrill shall elect to conduct an audit pursuant to this subsection 4.11(d), the results of such audit shall be completed within 30 days following the Distribution Date in which the Spread Account Surplus first existed, and if such audit shall not be completed within such 30-day period, such Spread Account Surplus shall then be withdrawn from the Spread Account as provided above.  The Transferor shall provide Merrill and its auditor with reasonable access to the required documents and facilities to enable the auditor to complete the audit within such 30-day period.

 

(e) Upon the earlier to occur of (i) the day on which the principal balance of the Class A Notes, the Class B Notes and the Class C Notes and all other accrued and unpaid amounts owing to the Class A Noteholders, the Class B Noteholders and the Class C Noteholders pursuant to the Note Purchase Agreement are paid in full to the Class A Noteholders, the Class B Noteholders and the Class C Noteholders and (ii) the termination of the Issuer pursuant to the Trust Agreement, the Indenture Trustee, acting in accordance with the instructions of the Servicer, after the prior payment of all amounts owing to the Class A Noteholders, the Class B Noteholders and the Class C Noteholders which are payable from the Spread Account as provided herein, shall withdraw from the Spread Account and pay to the Issuer (or if the Issuer has been terminated, the Transferor) for application pursuant to the Trust Agreement all amounts, if any, on deposit in the Spread Account and the Spread Account shall be deemed to have terminated for purposes of this Supplement.

 

Section 4.12. Principal Amount Increases.

 

(a) Each of the Class A Noteholders, the Class B Noteholders and the Class C Noteholders agree, by acceptance of their Class A Notes, Class B Notes and Class C Notes, that the Issuer may, from time to time prior to the commencement of the Planned Redemption Period or the Early Redemption Period, request upon three Business Days prior irrevocable written notice to each of the Indenture Trustee, the Servicer and the Class A Noteholders, the Class B Noteholders and the Class C Noteholders substantially in the form of Exhibit A to the Note Purchase Agreement that the Class A Noteholders, the Class B Noteholders, the Class C-1 Noteholders and the Class C-2 Noteholders fund increases in the outstanding principal balance of their Class A Notes, Class B Notes, Class C-1 Notes and Class C-2 in the specified amounts (each such amount, a “Class A Note Principal Balance Increase”, “Class B Note Principal Balance Increase”, a “Class C-1 Note Principal Balance Increase”, and a “Class C-2 Note Principal Balance Increase”, respectively); provided, however, that any applicable conditions set forth in Sections 2.2(c) and 3.2 of the Note Purchase Agreement shall have been satisfied or waived as provided therein.  The Class A Noteholders shall fund a Class A Note Principal Balance Increase, the Class B Noteholders shall fund a Class B Note Principal Balance Increase, the Class C-1 Noteholders shall fund a Class C-1 Note Principal Balance Increase and the Class C-2 Noteholders shall fund a Class C-2 Note Principal Balance Increase, upon payment, in same day funds, to the Issuer of the amount of such Class A Note Principal Balance Increase, Class B Note Principal Balance Increase, Class C-1 Note Principal Balance Increase or Class C-2 Note Principal Balance Increase, as applicable, in accordance with the payment instructions specified in the notice delivered with respect to such Class A Note Principal Balance Increase, Class B Note Principal Balance Increase, Class C-1 Note Principal Balance Increase or Class C-2 Note Principal Balance Increase.

  

16

  

 

(b) The Class D Noteholders agree, by acceptance of the Class D Notes, that the Issuer may from time to time, prior to the commencement of the Planned Redemption Period or the Early Redemption Period, request upon one Business Day prior written notice to each of the Indenture Trustee, the Servicer and the Class D Noteholders substantially in the form of Exhibit C that the Class D Noteholders fund increases in the outstanding principal balance of the Class D Notes (each such amount, a “Class D Note Principal Balance Increase”); provided, however, that (i) after giving effect to such Class D Note Principal Balance Increase, the Transferor Amount shall not be less than the Required Transferor Amount and (ii) after giving effect to such Class D Note Principal Balance Increase, (a) the product of the Transferor Amount and the Series 2004-One Allocation Percentage shall not be less than (b) the Series Required Transferor Amount.  The Class D Noteholders shall fund such increase through a reduction of the Transferor Amount by the amount of such Class D Note Principal Balance Increase.

 

(c) [Reserved].

 

(d) No decrease in the outstanding principal balance of the Class A Notes, the Class B Notes or the Class C Notes pursuant to Section 4.03 shall limit the ability of the Issuer to increase the outstanding principal balance of the Class A Notes, the Class B Notes and the Class C Notes pursuant to subsection 4.12(a).

 

Section 4.13. Interest Rate Caps.

 

(a) The Issuer hereby covenants and agrees that, at any time LIBOR is greater than 6.0%, it shall obtain one or more Interest Rate Caps such that the Aggregate Interest Rate Caps Notional Amount equals or exceeds the Maximum Principal Amount.  The Issuer hereby assigns, sets-over, conveys, pledges and grants a security interest and lien (free and clear of all other Liens) to the Indenture Trustee for the benefit of the Class A Noteholders, the Class B Noteholders and the Class C Noteholders in all of the Issuer’s right, title and interest now existing or hereafter arising in and to the Interest Rate Caps and all proceeds thereof, to secure its obligations hereunder to the Class A Noteholders, the Class B Noteholders and the Class C Noteholders.  The Issuer hereby further agrees to authorize and execute all such instruments, documents and financing statements and amendments thereto and take all such further action requested by the Indenture Trustee to evidence and perfect the grant of a security interest in the Interest Rate Caps pursuant to this subsection 4.13(a).  The Issuer agrees that each Interest Rate Cap shall provide for payments to the Indenture Trustee and that such payments shall be deposited into the Collection Account as provided for in the Monthly Servicer’s Statement.

 

(b) In the event that any Interest Rate Cap Provider defaults in its obligation to make a payment to the Indenture Trustee under one or more Interest Rate Caps, the Indenture Trustee shall make a demand at the written direction of the Servicer on such Interest Rate Cap Provider, or any guarantor, if applicable, demanding payment by 12:30 p.m., New York time, on the date when due.  The Indenture Trustee shall give notice at the written direction of the Servicer to the Class A Noteholders, Class B Noteholders and Class C Noteholders upon the continuing failure by any Interest Rate Cap Provider to perform its obligation during the two Business Days following a demand made by the Indenture Trustee on such Interest Rate Cap Provider, and shall take such action with respect to such continuing failure directed to be taken by the holders of more than 50% of the aggregate principal amount of the Class A Notes, the Class B Notes and the Class C Notes.

 

(c) In the event that either Rating Agency shall withdraw or downgrade its applicable rating of any Interest Rate Cap Provider below the applicable Required Rating, then within 30 days after the Issuer, the Transferor and the Servicer receive notice of such withdrawal or downgrade, either (x) the Interest Rate Cap Provider will enter into an arrangement the purpose of which shall be to assure performance by the Interest Rate Cap Provider of its obligations under its Interest Rate Cap(s); or (y) the Servicer shall use all commercially reasonable efforts on behalf of the Issuer to, at the Issuer's option, either (i) cause the Interest Rate Cap Provider to pledge securities in the manner provided by applicable law which shall be held by the Indenture Trustee or its agent free and clear of the Lien of any third party, in a manner conferring on the Indenture Trustee a perfected first priority Lien in such securities securing the Interest Rate Cap Provider’s performance of its obligations under the applicable Interest Rate Cap(s), or (ii) provided that a Replacement Interest Rate Cap meeting the requirements of subsection 4.13(d) has been obtained, direct the Indenture Trustee in writing (A) to provide written notice to the Interest Rate Cap Provider of its intention to terminate the applicable Interest Rate Cap(s) within such 30-day period and (B) to terminate the applicable Interest Rate Cap within such 30-day period, to request the payment to it of all amounts due to the Issuer under the applicable Interest Rate Cap(s) through the termination date and to deposit any such amounts so received, on the day of receipt, to the Collection Account for the benefit of the Class A Noteholders, the Class B Noteholders and the Class C Noteholders.

 

(d) Unless an alternative arrangement pursuant to clause (x) or (y)(i) of subsection 4.13(c) is being established, the Servicer shall, on behalf of the Issuer and at the expense of the applicable Interest Rate Cap Provider, use all commercially reasonable efforts to obtain a Replacement Interest Rate Cap meeting the requirements of this subsection 4.13(d) during the 30-day period referred to in subsection 4.13(c). The Indenture Trustee shall not terminate the applicable Interest Rate Cap(s) unless, prior to the expiration of the 30-day period referred to in subsection 4.13(c), the Issuer delivers to the Indenture Trustee (i) a Replacement Interest Rate Cap, and (ii) to the extent applicable, an Opinion of Counsel as to the due authorization, execution and delivery and validity and enforceability of such Replacement Interest Rate Cap.

 

(e) The Servicer shall notify the Indenture Trustee within five Business Days after obtaining knowledge that either Rating Agency’s applicable rating of any Interest Rate Cap Provider has been withdrawn or reduced below the applicable Required Rating.

 

(f) Notwithstanding the foregoing, the Issuer may at any time obtain a Replacement Interest Rate Cap, provided that the Issuer delivers to the Indenture Trustee an Opinion of Counsel as to the due authorization, execution and delivery and validity and enforceability of such Replacement Interest Rate Cap.

 

(g) The Issuer shall sell all or a portion of the Interest Rate Caps subject to the following conditions having been met:

 

(i) the sum of the notional amounts of all Interest Rate Caps after giving effect to such sale shall equal or exceed the sum of the Class A Note Principal Balance, the Class B Note Principal Balance and the Class C Note Principal Balance as of the date of such sale after giving effect to all payments and allocations made pursuant to this Supplement; and

 

  

17

  

(ii) the minimum notional amount denomination of any Interest Rate Cap to be sold is $1,000,000.

 

The Servicer, on behalf of the Transferor, shall have the duty of obtaining a fair market value price for the sale of the Issuer’s rights under any Interest Rate Cap, notifying the Indenture Trustee of prospective purchasers and bids, and selecting the purchaser of such Interest Rate Cap. The Indenture Trustee upon receipt of the purchase price in the Collection Account shall execute all documentation necessary to effect the transfer of the Issuer’s rights under the Interest Rate Cap and to release the Lien of the Indenture Trustee on the Interest Rate Cap and proceeds thereof to the extent of such sale.  The Indenture Trustee shall have no liability for acting in accordance with the Servicer’s instructions with respect to the sale of the Interest Rate Caps.

 

(h)           Funds deposited in the Collection Account in respect of the sale of all or a portion of an Interest Rate Cap shall be applied as Available Principal Collections pursuant to this Supplement.

 

Section 4.14. Pre-Funding Account.

 

(a) The Servicer shall establish and maintain, in the name of the Indenture Trustee, for the benefit of the Noteholders, an Eligible Deposit Account (the “Pre-Funding Account”) bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Class A Noteholders, the Class B Noteholders and the Class C Noteholders.  The Pre-Funding Account shall initially be established with the Indenture Trustee.  The Indenture Trustee shall possess all right, title and interest in all funds on deposit from time to time in the Pre-Funding Account and in all proceeds thereof.  The Pre-Funding Account shall be under the sole dominion and control of the Indenture Trustee for the benefit of the Class A Noteholders, the Class B Noteholders and the Class C Noteholders.  If at any time the Pre-Funding Account ceases to be an Eligible Deposit Account, the Indenture Trustee (or the Servicer on its behalf) shall within 10 Business Days (or such longer period, not to exceed 30 calendar days, as to which Merrill shall consent) establish a new Pre-Funding Account meeting the conditions specified above as an Eligible Deposit Account, and shall transfer any cash or any investments to such new Pre-Funding Account.  The Indenture Trustee, at the written direction of the Servicer, shall (i) make withdrawals from the Pre-Funding Account from time to time for the purposes set forth in this Supplement, and (ii) on a date on which a Note Principal Balance Increase occurs, if directed to by the Servicer, make a deposit into the Pre-Funding Account from the money received in payment of the purchase price for such Note Principal Balance Increase in the amount specified by the Servicer, equal to the least of (1) the sum of the Class A Note Principal Balance Increase, the Class B Note Principal Balance Increase, the Class C-1 Note Principal Balance Increase and the Class C-2 Note Principal Balance Increase, (2) the amount specified by the Servicer equal to the positive difference between the Note Principal Balance and the Allocation Amount (after giving effect to such Note Principal Balance Increase), and (3) unless a deposit to the Yield Supplement Account is made in connection with such deposit to the Pre-Funding Account, an amount equal to the product of (x) 0.10 and (y) the Note Principal Balance (after giving effect to such Note Principal Balance Increase).

 

(b) Funds on deposit in the Pre-Funding Account shall be invested at the written direction of the Servicer by the Indenture Trustee in Eligible Investments.  In no event shall the Indenture Trustee be liable for the selection of Eligible Investments or for investment losses incurred thereon, except with respect to investments on which the institution acting as the Indenture Trustee is an obligor.  The Indenture Trustee shall have no liability in respect of losses incurred as a result of the liquidation of any Eligible Investment prior to its stated maturity or the failure of the Servicer to provide timely written investment direction.  The Indenture Trustee shall have no obligation to invest or reinvest any amounts held hereunder in the absence of written investment direction.  Funds on deposit in the Pre-Funding Account on any Transfer Date, after giving effect to any withdrawals from the Pre-Funding Account on such Transfer Date, shall be invested in such investments that will mature so that such funds will be available for withdrawal on or prior to the following Transfer Date.  The Indenture Trustee shall hold such Eligible Investments as provided in Section 6.15 of the Indenture.  No such Eligible Investment shall be disposed of prior to its maturity; provided, however, that the Indenture Trustee may sell, liquidate or dispose of any such Eligible Investment before its maturity, at the written direction of the Servicer, if such sale, liquidation or disposal would not result in a loss of all or part of the principal portion of such Eligible Investment or if, prior to the maturity of such Eligible Investment, a default occurs in the payment of principal, interest or any other amount with respect to such Eligible Investment.  On each Distribution Date, all interest and earnings (net of losses and investment expenses) accrued since the preceding Distribution Date on funds on deposit in the Pre-Funding Account (“Pre-Funding Investments Proceeds”) shall be deposited in the Collection Account and treated as a portion of Available Funds for that Distribution Date.  For purposes of determining the availability of funds or the balance in the Pre-Funding Account for any reason under this Supplement, except as otherwise provided in the preceding sentence, investment earnings on such funds shall be deemed not to be available or on deposit.

 

(c) On any Deposit Date in a Monthly Period during the Revolving Period, the Servicer may withdraw from the Pre-Funding Account an amount not to exceed the least of (1) the positive difference, if any, between (I) the Transferor Amount and (II) the Required Transferor Amount, (2) the positive difference, if any, between (I) the total amount of Principal Receivables plus the amount of Collections of Principal Receivables on deposit in the Collection Account and (II) the Required Minimum Principal Balance minus, if a Paired Series has been designated pursuant to Section 9.08 and the related Paired Series Final Payment Date has not occurred, the aggregate amount of all principal payments made on, or deposited into the applicable principal funding account on behalf of, the Notes of such Paired Series, and (3) the amount on deposit in the Pre-Funding Account, and pay such amount to the Issuer for application pursuant to the Trust Agreement.

 

(d) If a Paired Series has been designated pursuant to Section 9.08 and the related Paired Series Final Payment Date has not occurred, at the instruction of the Transferor, on any Deposit Date in a Monthly Period during the Revolving Period, the Servicer may withdraw from the Pre-Funding Account an amount not to exceed the sum of (i) the positive difference between (I) the lesser of (x) the product of (1) the Series Allocation Percentage for such Paired Series, (2) the Fixed/Floating Allocation Percentage for such Paired Series and (3) the amount of Principal Receivables generated since the first day of such Monthly Period and (y) the product of (A) the percentage specified in Item 1 of Schedule 4.14 and (B) the amount of Principal Collections deposited in the Collection Account and allocated to such Paired Series pursuant to the applicable provisions of the Indenture Supplement for such Paired Series plus on the Distribution Date that occurs during such Monthly Period the amount of Shared Principal Collections allocated to such Paired Series plus the available funds (as such term is defined in the Indenture Supplement for such Paired Series) that pursuant to the applicable provisions in the Indenture Supplement for such Paired Series are treated as a portion of available principal collections (as such term is defined in the Indenture Supplement for such Paired Series), and (II) the amount previously withdrawn from the Pre-Funding Account since the first day of such Monthly Period and (ii) the total with respect to all previous Monthly Periods pursuant to which amounts have been deposited in the Pre-Funding Account in connection with such Paired Series, as of the last day of each such Monthly Period, of the positive difference between the amounts specified in clauses (I) and (II), after giving effect to all withdrawals from the Pre-Funding Account on such date, including pursuant to the immediately following sentence, and pay such amount to the Issuer for application pursuant to the Trust Agreement; provided that no such withdrawal shall be made from the Pre-Funding Account pursuant to this Section 4.14(d) unless, after giving effect to such withdrawal and all other withdrawals, deposits and adjustments to be made on such day pursuant to this Supplement, (1) the Transferor Amount would be equal to or greater than the Required Transferor Amount and (2) the total amount of Principal Receivables plus the amount of Collections of Principal Receivables on deposit in the Collection Account would be equal to or greater than the Required Minimum Principal Balance.

 

(e) In the event that there are funds on deposit in the Pre-Funding Account on the earlier to occur of (1) the first Distribution Date following the end of the Revolving Period, and (2) the second Distribution Date following the date on which the most recent Note Principal Balance Increase occurred, the Servicer shall cause the Indenture Trustee to apply all amounts on deposit in the Pre-Funding Account to the Paying Agent for pro rata payment of principal on the Class A Notes, the Class B Notes and the Class C Notes.

 

Section 4.15. Yield Supplement Account.

 

  

18

  

(a) The Servicer shall establish and maintain, in the name of the Indenture Trustee, for the benefit of the Class A Noteholders, the Class B Noteholders and the Class C Noteholders, an Eligible Deposit Account (the “Yield Supplement Account”) bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Class A Noteholders, the Class B Noteholders and the Class C Noteholders.  The Yield Supplement Account shall initially be established with the Indenture Trustee.  The Indenture Trustee shall possess all right, title and interest in all funds on deposit from time to time in the Yield Supplement Account and in all proceeds thereof.  The Yield Supplement Account shall be under the sole dominion and control of the Indenture Trustee for the benefit of the Class A Noteholders, the Class B Noteholders and the Class C Noteholders.  If at any time the Yield Supplement Account ceases to be an Eligible Deposit Account, the Indenture Trustee (or the Servicer on its behalf) shall within 10 Business Days (or such longer period, not to exceed 30 calendar days, as to which the Indenture Trustee shall consent) establish a new Yield Supplement Account meeting the conditions specified above as an Eligible Deposit Account, and shall transfer any cash or any investments to such new Yield Supplement Account.  The Indenture Trustee, at the written direction of the Servicer, shall (i) make withdrawals from the Yield Supplement Account on each Distribution Date on or prior to the termination of the Yield Supplement Account for the purposes set forth in this Supplement, and (ii) on the date of each Note Principal Balance Increase effected in connection with a Paired Series, if withdrawals will be made from the Pre-Funding Account pursuant to subsection 4.14(d) and otherwise at the written direction of the Transferor in its discretion, withdraw from the Pre-Funding Account and deposit in the Yield Supplement Account an amount equal to 0.50% of the sum of the Class A Note Principal Balance Increase, the Class B Note Principal Balance Increase, the Class C-1 Note Principal Balance Increase and the Class C-2 Note Principal Balance Increase.

 

(b) Funds on deposit in the Yield Supplement Account shall be invested at the written direction of the Servicer by the Indenture Trustee in Eligible Investments.  In no event shall the Indenture Trustee be liable for the selection of Eligible Investments or for investment losses incurred thereon, except with respect to investments on which the institution acting as the Indenture Trustee is an obligor.  The Indenture Trustee shall have no liability in respect of losses incurred as a result of the liquidation of any Eligible Investment prior to its stated maturity or the failure of the Servicer to provide timely written investment direction.  The Indenture Trustee shall have no obligation to invest or reinvest any amounts held hereunder in the absence of written investment direction.  Funds on deposit in the Yield Supplement Account on any Transfer Date, after giving effect to any withdrawals from the Yield Supplement Account on such Transfer Date, shall be invested in such investments that will mature so that such funds will be available for withdrawal on or prior to the following Transfer Date.  The Indenture Trustee shall hold such Eligible Investments as provided in Section 6.15 of the Indenture.  No such Eligible Investment shall be disposed of prior to its maturity; provided, however, that the Indenture Trustee may sell, liquidate or dispose of any such Eligible Investment before its maturity, at the written direction of the Servicer, if such sale, liquidation or disposal would not result in a loss of all or part of the principal portion of such Eligible Investment or if, prior to the maturity of such Eligible Investment, a default occurs in the payment of principal, interest or any other amount with respect to such Eligible Investment.  On each Distribution Date, all interest and earnings (net of losses and investment expenses) accrued since the preceding Distribution Date on funds on deposit in the Yield Supplement Account (“Yield Supplement Investment Proceeds”) shall be deposited in the Collection Account and treated as a portion of Available Funds for such Distribution Date.  For purposes of determining the availability of funds or the balance in the Yield Supplement Account for any reason under this Supplement, except as otherwise provided in the preceding sentence, investment earnings on such funds shall be deemed not to be available or on deposit.

 

(c) On each Distribution Date with respect to the Revolving Period, if amounts are on deposit in the Yield Supplement Account, the Servicer shall cause the Indenture Trustee through written instruction to withdraw from the Yield Supplement Account and deposit in the Collection Account for application as Available Funds an amount equal to the product of (1) the percentage equivalent of a fraction, with respect to a specific deposit, the numerator of which is the amount withdrawn from the Pre-Funding Account during the related Monthly Period and the denominator of which is the total amount deposited into the Pre-Funding Account in connection with a Note Principal Balance Increase pursuant to which such deposit was made to the Yield Supplement Account and (2) the total amount of such deposit to the Yield Supplement Account.

 

(d) On the first Distribution Date with respect to the Planned Redemption Period or the Early Redemption Period, the Servicer shall cause the Indenture Trustee through written instruction to withdraw all amounts on deposit in the Yield Supplement Account and distribute such amount to the Paying Agent for pro rata payment of principal on the Class A Notes, the Class B Notes and the Class C Notes.

 

Section 4.16. Incentive Servicing Fee Account.

 

(a) The Servicer shall establish and maintain with the Indenture Trustee and in the name of the Indenture Trustee, for the benefit of the Class A Noteholders, the Class B Noteholders, the Class C Noteholders and, to the extent set forth in this Section 4.16, the Servicer, an Eligible Deposit Account (the “Incentive Servicing Fee Account”) bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Class A Noteholders, the Class B Noteholders, the Class C Noteholders and, to the extent set forth in this Section 4.16, the Servicer.  The Indenture Trustee shall possess all right, title and interest in all funds on deposit from time to time in the Incentive Servicing Fee Account and in all proceeds thereof.  The Incentive Servicing Fee Account shall be under the sole dominion and control of the Indenture Trustee for the benefit of the Class A Noteholders, the Class B Noteholders, the Class C Noteholders and, to the extent set forth in this Section 4.16, the Servicer.  If at any time the Incentive Servicing Fee Account ceases to be an Eligible Deposit Account, the Indenture Trustee (or the Servicer on its behalf) shall within 10 Business Days (or such longer period, not to exceed 30 calendar days, as to which the Indenture Trustee shall consent) establish a new Incentive Servicing Fee Account meeting the conditions specified above as an Eligible Deposit Account, and shall transfer any cash or any investments to such new Incentive Servicing Fee Account.

 

(b) Funds on deposit in the Incentive Servicing Fee Account shall be invested at the written direction of the Servicer by the Indenture Trustee in Eligible Investments.  In no event shall the Indenture Trustee be liable for the selection of Eligible Investments or for investment losses incurred thereon, except as obligor with respect to investments on which the institution acting as the Indenture Trustee is an obligor.  The Indenture Trustee shall have no liability in respect of losses incurred as a result of the liquidation of any Eligible Investment prior to its stated maturity or the failure of the Servicer to provide timely written investment direction.  The Indenture Trustee shall have no obligation to invest or reinvest any amounts held hereunder in the absence of written investment direction.  Funds on deposit in the Incentive Servicing Fee Account on any Transfer Date, after giving effect to any withdrawals from the Incentive Servicing Fee Account on such Transfer Date, shall be invested in such investments that will mature so that such funds will be available for withdrawal on or prior to the following Transfer Date.  The Indenture Trustee shall hold such Eligible Investments as provided in Section 6.15 of the Indenture.  No such Eligible Investment shall be disposed of prior to its maturity; provided, however, that the Servicer may direct the Indenture Trustee to sell, liquidate or dispose of any such Eligible Investment before its maturity, in writing, if such sale, liquidation or disposal would not result in a loss of all or part of the principal portion of such Eligible Investment or if, prior to the maturity of such Eligible Investment, a default occurs in the payment of principal, interest or any other amount with respect to such Eligible Investment.  On each Distribution Date, all interest and earnings (net of losses and investment expenses) accrued since the preceding Distribution Date on funds on deposit in the Incentive Servicing Fee Account (“Incentive Servicing Fee Investment Proceeds”) shall be deposited in the Collection Account and treated as a portion of Available Funds for such Distribution Date.  For purposes of determining the availability of funds or the balance in the Incentive Servicing Fee Account for any reason under this Supplement, except as otherwise provided in the preceding sentence, investment earnings on such funds shall be deemed not to be available or on deposit.

 

(c) On the June 2011 Distribution Date, if amounts are on deposit in the Incentive Servicing Fee Account, the Servicer shall cause the Indenture Trustee through written instruction to withdraw from the Incentive Servicing Fee Account and distribute such amount to the Paying Agent for pro rata payment of principal on the Class A Notes, the Class B Notes, the Class C-1 Notes and the Class C-2 Notes; provided, however, that such entire amount shall be paid to the Servicer in an amount equal to the amount specified in Item 14 of Schedule 2.01, so long as each of the following conditions have been satisfied on such Distribution Date: (w) the aggregate amount of principal payments on the Class A Notes, Class B Notes and Class C Notes during the Incentive Servicing Fee Term exceeds $310,000,000; (x) the Monthly Delinquency Rates for the May 2011 Monthly Period is less than 16.5%; (y) the aggregate outstanding amount of all Principal Receivables with respect to Accounts that with respect to the May 2011 Monthly Period are in or subject to consumer credit counseling services or similar arrangements is less than an amount equal to 30.0% of the aggregate outstanding amount of all Principal Receivables for such Monthly Period; and (z) a Supplemental Servicer Default has not occurred and is then continuing.

 

(d) On the first Distribution Date after the occurrence of an Event of Default, the Servicer shall cause the Indenture Trustee through written instruction to withdraw all amounts on deposit in the Incentive Servicing Fee Account and distribute such amount to the Paying Agent for pro rata payment of principal on the Class A Notes, the Class B Notes, the Class C-1 Notes and the Class C-2 Notes.

  

19

  

 

ARTICLE V                      

 

 

Distributions and Reports to

 

Series 2004-One Noteholders

 

Section 5.01. Distributions.

 

(a) On each Distribution Date, the Paying Agent, in accordance with the Monthly Servicer’s Statement, shall distribute to each Class A Noteholder of record on the related Record Date (other than as provided in Section 10.02 of the Indenture) such Class A Noteholders’ pro rata share of the amounts held by the Paying Agent that are allocated and available on such Distribution Date to pay interest on the Class A Notes and Class A Costs pursuant to this Supplement.

 

(b) On each Special Payment Date, the Paying Agent, in accordance with the Monthly Servicer’s Statement, shall distribute to each Class A Noteholder of record on the related Record Date (other than as provided in Section 10.02 of the Indenture) such Class A Noteholders’ pro rata share of the amounts held by the Paying Agent that are allocated and available on such date to pay principal of the Class A Notes pursuant to this Supplement up to a maximum amount on any such date equal to the Class A Note Principal Balance on such date.

 

(c) On each Distribution Date, the Paying Agent, in accordance with the Monthly Servicer’s Statement, shall distribute to each Class B Noteholder of record on the related Record Date (other than as provided in Section 10.02 of the Indenture) such Class B Noteholders’ pro rata share of the amounts held by the Paying Agent that are allocated and available on such Distribution Date to pay interest on the Class B Notes and Class B Costs pursuant to this Supplement.

 

(d) On each Special Payment Date, the Paying Agent, in accordance with the Monthly Servicer’s Statement, shall distribute to each Class B Noteholder of record on the related Record Date (other than as provided in Section 10.02 of the Indenture) such Class B Noteholders’ pro rata share of the amounts held by the Paying Agent that are allocated and available on such date to pay principal of the Class B Notes pursuant to this Supplement up to a maximum amount on any such date equal to the Class B Note Principal Balance on such date.

 

(e) On each Distribution Date, the Paying Agent, in accordance with the Monthly Servicer’s Statement, shall distribute to each Class C-1 Noteholder of record on the related Record Date (other than as provided in Section 10.02 of the Indenture) such Class C-1 Noteholders’ pro rata share of the amounts held by the Paying Agent that are allocated and available on such Distribution Date to pay interest on the Class C-1 Notes and Class C-1 Costs pursuant to this Supplement.

 

(f) On each Special Payment Date, the Paying Agent, in accordance with the Monthly Servicer’s Statement, shall distribute to each Class C-1 Noteholder of record on the related Record Date (other than as provided in Section 10.02 of the Indenture) such Class C-1 Noteholders’ pro rata share of the amounts held by the Paying Agent that are allocated and available on such date to pay principal of the Class C-1 Notes pursuant to this Supplement up to a maximum amount on any such date equal to the Class C-1 Note Principal Balance on such date.

 

(g) On each Distribution Date, the Paying Agent, in accordance with the Monthly Servicer’s Statement, shall distribute to each Class C-2 Noteholder of record on the related Record Date (other than as provided in Section 10.02 of the Indenture) such Class C-2 Noteholders’ pro rata share of the amounts held by the Paying Agent that are allocated and available on such Distribution Date to pay interest on the Class C-2 Notes and Class C-2 Costs pursuant to this Supplement.

 

(h) On each Special Payment Date, the Paying Agent, in accordance with the Monthly Servicer’s Statement, shall distribute to each Class C-2 Noteholder of record on the related Record Date (other than as provided in Section 10.02 of the Indenture) such Class C-2 Noteholders’ pro rata share of the amounts held by the Paying Agent that are allocated and available on such date to pay principal of the Class C-2 Notes pursuant to this Supplement up to a maximum amount on any such date equal to the Class C-2 Note Principal Balance on such date

 

(i) On each Distribution Date, the Paying Agent, in accordance with the Monthly Servicer’s Statement, shall distribute to each Class D Noteholder of record on the related Record Date (other than as provided in Section 10.02 of the Indenture) such Class D Noteholders’ pro rata share of the amounts held by the Paying Agent that are allocated and available on such Distribution Date to pay interest on the Class D Notes pursuant to this Supplement.

 

(j) On each Special Payment Date, the Paying Agent, in accordance with the Monthly Servicer’s Statement, shall distribute to each Class D Noteholder of record on the related Record Date (other than as provided in Section 10.02 of the Indenture) such Class D Noteholders’ pro rata share of the amounts held by the Paying Agent that are allocated and available on such date to pay principal of the Class D Notes pursuant to this Supplement up to a maximum amount on any such date equal to the Class D Note Principal Balance on such date.

 

(k) The distributions to be made pursuant to this Section 5.01 are subject to the provisions of Sections 2.06 and 8.01 of the Transfer and Servicing Agreement and Section 5.05 of the Indenture and Section 8.01.

 

(l) Except as provided in Section 10.02 of the Indenture with respect to a final distribution, distributions to Series 2004-One Noteholders hereunder shall be made by wire transfer of same day funds to the account that has been designated by the applicable Noteholders not less than ten Business Days prior to such Distribution Date.

 

Section 5.02. Reports and Statements to Series 2004-One Noteholders.

 

  

20

  

(a) Not later than each Determination Date, the Servicer shall deliver to Merrill, the Indenture Trustee and the Paying Agent (i) a statement (“Monthly Servicer’s Statement”) substantially in the form of Exhibit B prepared by the Servicer and (ii) a certificate of a Servicing Officer substantially in the form attached thereto.

 

(b) A copy of each statement or certificate provided pursuant to subsection 5.02(a) may be obtained by any Series 2004-One Noteholder by a request in writing to the Servicer.

 

(c) On or before January 31 of each calendar year, beginning with calendar year 2005, the Paying Agent, on behalf of the Indenture Trustee, shall furnish or cause to be furnished to each Person who at any time during the preceding calendar year was a Series 2004-One Noteholder, a statement prepared by the Servicer containing the information which is required to be contained in the statement to Series 2004-One Noteholders, as set forth in subsection 5.02(a) aggregated for such calendar year or the applicable portion thereof during which such Person was a Series 2004-One Noteholder, together with other information as is required to be provided by an issuer of indebtedness under the Code.  Such obligation of the Paying Agent shall be deemed to have been satisfied to the extent that substantially comparable information shall be provided by the Paying Agent pursuant to any requirements of the Code as from time to time in effect.

 

ARTICLE VI                                

 

 

Early Redemption Events

 

Section 6.01. Early Redemption Events.

 

If any one of the following events shall occur with respect to the Series 2004-One Notes:

 

(a) (i)  failure on the part of the Transferor or the Issuer to make any payment or deposit required by the terms of the Transfer and Servicing Agreement, the Indenture or this Supplement on or before the date occurring five (5) Business Days after the date such payment or deposit is required to be made therein or herein or (ii) failure on the part of the Transferor duly to observe or perform any other covenants or agreements of the Transferor set forth in the Transfer and Servicing Agreement, the Note Purchase Agreement or the CFC Receivables Purchase Agreement, or failure on the part of the Issuer duly to observe or perform any other covenants of the Issuer set forth in the Indenture, the Note Purchase Agreement or this Supplement, which failure has a material adverse effect on the Series 2004-One Noteholders and which continues unremedied for a period of ten (10) days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Transferor and the Issuer by the Indenture Trustee, or to the Transferor, the Issuer and the Indenture Trustee by Class A Noteholders, Class B Noteholders and Class C Noteholders holding not less than 50% of the outstanding principal balance of the sum of the Class A Notes, the Class B Notes and the Class C Notes;

 

(b) any representation or warranty made by (i) the Transferor in the Transfer and Servicing Agreement or the Note Purchase Agreement or (ii) the Issuer in the Indenture, the Note Purchase Agreement or this Supplement shall prove to have been incorrect when made or when delivered, which continues to be incorrect for a period of sixty (60) days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Transferor and the Issuer by the Indenture Trustee, or to the Transferor, the Issuer and the Indenture Trustee by Class A Noteholders, Class B Noteholders and Class C Noteholders holding not less than 50% of the outstanding principal balance of the sum of the Class A Notes, the Class B Notes and the Class C Notes and as a result of which the interests of the Class A Noteholders, the Class B Noteholders and the Class C Noteholders are materially and adversely affected for such period; provided, however, that an Early Redemption Event pursuant to this subsection 6.01(b) shall not be deemed to have occurred hereunder if the Transferor is treating the related Receivable as an Ineligible Receivable or has accepted reassignment of the related Receivable, or all of such Receivables, if applicable, during such period in accordance with the provisions of the Transfer and Servicing Agreement;

 

(c) (i)           any Servicer Default shall occur or (ii) the Servicer shall fail to deliver the Monthly Servicer’s Statement when required pursuant to subsection 5.02(a)(i) and such failure shall continue unremedied for a period of 30 days or more;

 

(d) the average Net Yield for any three consecutive Monthly Periods is reduced to a rate which is less than 3.0%;

 

(e) the Net Yield for any Monthly Period is reduced to a rate which is less than 2.0%;

 

(f) the average of the Monthly Payment Rates for any three consecutive Monthly Periods shall be less than 4.5%;

 

(g) the weighted average FICO score of all Eligible Accounts for the immediately preceding three Monthly Periods shall be less than 580;

 

(h) a Corporate Finance Event shall have occurred as of a fiscal quarter end and such Corporate Finance Event shall not have been cured by the next fiscal quarter end;

 

(i) the Indenture Trustee shall, for any reason, fail to have a valid and perfected first priority security interest in such of the Receivables as shall constitute part of the Trust Estate;

 

(j) [Reserved];

 

(k) if, on any date, the product of (i) the Floating Allocation Percentage, (ii) the Series 2004-One Allocation Percentage (using, if a Paired Series has been designated pursuant to Section 9.08 and its Paired Series Final Payment Date has not occurred, for purposes of any Paired Series, the Series Allocation Amount and Series Adjusted Allocation Amount used to calculate the Series Allocation Percentage for allocating Series Allocable Finance Charge Collections to each Series) and (iii) the sum of the Special Funding Amount, the amount on deposit in the Collection Account in respect of Collections of Principal Receivables and the total amount of Principal Receivables on such date, is less than the Allocation Amount on such date;

 

(l) the average of the Monthly Default Rates for any three consecutive Monthly Periods shall exceed 21%;

 

  

21

  

(m) without limiting any of the foregoing, the occurrence of an Event of Default with respect to Series 2004-One and acceleration of the maturity of the Series 2004-One Notes in accordance with Section 5.03 of the Indenture;

 

(n) the average of the Monthly Delinquency Rates for three consecutive Monthly Periods shall exceed 16.5%;

 

(o) (i) a Change of Control shall have occurred or (ii) CompuCredit or a successor thereto as a result of a merger or other transaction permitted under Section 6.02 of the Transfer and Servicing Agreement shall cease to own 100% of the issued and outstanding capital stock of the Transferor;

 

(p) (i) the failure of any Interest Rate Cap Provider to make any payment under an Interest Rate Cap within 30 days of the date such payment was due or (ii) following the withdrawal or reduction of the Required Rating of an Interest Rate Cap Provider, the failure of (x) the Interest Rate Cap Provider to enter into an arrangement satisfying the requirements of subsection 4.13(c)(x) or (y) the Issuer, to (i) cause the Interest Rate Cap Provider to pledge securities in accordance with subsection 4.13(c)(y)(i) or (ii) replace the Interest Rate Cap with a Replacement Interest Rate Cap, and such failure shall continue for a period of 30 days;

 

(q) failure on the part of the Transferor duly to designate additional Eligible Accounts within 10 days after it is required to designate such additional Eligible Accounts pursuant to subsection 2.09(e) of the Transfer and Servicing Agreement;

 

(r) an early redemption event relating to any other Series shall have occurred (other than an early redemption event occurring during the controlled accumulation period for such other Series relating to the diminution of net yield as a result of the negative arbitrage resulting from depositing amounts in a principal funding account);

 

(s) [Reserved]; or

 

(t) any material adverse change in the operations of the Issuer, the Transferor, the Servicer or an Account Owner, or any other event, which materially affects the Issuer’s, the Transferor’s, the Servicer’s or an Account Owner’s ability to either collect upon the Receivables or to perform thereunder, which has a material adverse effect on the Class A Noteholders, the Class B Noteholders or the Class C Noteholders;

 

then, in the case of any event described in subparagraph (a), (b) or (c), after the applicable grace period, if any, set forth in such subparagraphs, either the Indenture Trustee or the Holders of Class A Notes, the Class B Notes and the Class C Notes evidencing more than 50% of the sum of the Class A Note Principal Balance, the Class B Note Principal Balance and the Class C Note Principal Balance, by notice then given in writing to the Issuer, the Transferor, the Servicer and the Indenture Trustee, may declare that an Early Redemption Event has occurred with respect to Series 2004-One as of the date of such notice, and, in the case of any event described in subparagraph (d), (e), (f), (g), (h), (i), (k), (l), (m), (n), (o), (p), (q), (r) or (t) shall occur with respect to Series 2004-One without any notice or other action on the part of the Indenture Trustee or the Series 2004-One Noteholders immediately upon the occurrence of such event.

 

ARTICLE VII                                

 

 

Optional Redemption; Series Termination

 

Section 7.01. Optional Redemption.

 

(a) On any day occurring on or after the date on which the Note Principal Balance is reduced to 10% or less of the highest Note Principal Balance at any time on or after the Closing Date, the Servicer shall have the option to redeem the Series 2004-One Notes, at a redemption price equal to (i) if such day is a Distribution Date, the Redemption Amount for such Distribution Date or (ii) if such day is not a Distribution Date, the Redemption Amount for the Distribution Date first following such day.

 

(b) The Servicer shall give the Issuer, the Transferor and the Indenture Trustee at least 30 days’ prior written notice of the date on which the Servicer intends to exercise such redemption option.  The Issuer shall deposit the Redemption Amount into the Collection Account in same day funds and the Issuer shall initiate such deposit prior to 10:00 a.m. New York City time on such day.  Such redemption option is subject to payment in full of the Redemption Amount.  Following the deposit of the Redemption Amount into the Collection Amount in accordance with the foregoing, the Allocation Amount for Series 2004-One shall be reduced to zero and the Series 2004-One Noteholders shall have no further interest in the Trust Estate.  The Redemption Amount shall be distributed as set forth in subsection 8.01(b).

 

Section 7.02. Stated Maturity Date.

 

On the Stated Maturity Date, the right of the Series 2004-One Noteholders to receive payments from the Issuer will be limited solely to the right to receive payments pursuant to Section 5.05 of the Indenture and Section 8.01.

 

ARTICLE VIII                                

 

 

Redemption of Series 2004-One Notes; Final Distributions

 

Section 8.01. Sale of Receivables or Redemption of the Notes pursuant to Section 2.06 or 8.01 of the Transfer and Servicing Agreement and Sections 5.05 and 5.18 of the Indenture and Section 7.01.

 

(a) (i)           The amount to be paid by the Transferor with respect to Series 2004-One in connection with a reassignment of Receivables to the Transferor pursuant to Section 2.06 of the Transfer and Servicing Agreement shall equal the Redemption Amount for the first Distribution Date following the Monthly Period in which the reassignment obligation arises under the Transfer and Servicing Agreement.

  

22

  

 

(ii) The amount to be paid by the Transferor with respect to Series 2004-One in connection with a purchase of the Notes pursuant to Section 8.01 of the Transfer and Servicing Agreement shall equal the Redemption Amount for the Distribution Date of such purchase.

 

(b) With respect to the Redemption Amount deposited into the Collection Account pursuant to Section 7.01 or any amounts allocable to the Series 2004-One Notes deposited into the Collection Account pursuant to Sections 5.05 and 5.18 of the Indenture, the Indenture Trustee shall, in accordance with the written direction of the Servicer, not later than 2:30 p.m., New York City time, on the related Distribution Date, make deposits or distributions of the following amounts (in the priority set forth below and, in each case, after giving effect to any deposits and distributions otherwise to be made on such date) in same day funds: (1) the Class A Note Principal Balance on such Distribution Date shall be distributed to the Paying Agent for payment to the Class A Noteholders and an amount equal to the sum of (A) the Class A Monthly Interest for such Distribution Date, (B) any Class A Monthly Interest previously due but not distributed to the Class A Noteholders on a prior Distribution Date, (C) any Class A Additional Interest for such Distribution Date and any Class A Additional Interest previously due but not distributed to the Class A Noteholders on a prior Distribution Date and (D) any Class A Costs due and unpaid shall be distributed to the Paying Agent for payment to the Class A Noteholders; (2) the Class B Note Principal Balance on such Distribution Date shall be distributed to the Paying Agent for payment to the Class B Noteholders and an amount equal to the sum of (A) the Class B Monthly Interest for such Distribution Date, (B) any Class B Monthly Interest previously due but not distributed to the Class B Noteholders on a prior Distribution Date, (C) any Class B Additional Interest for such Distribution Date and any Class B Additional Interest previously due but not distributed to Class B Noteholders on a prior Distribution Date and (D) any Class B Costs due and unpaid shall be distributed to the Paying Agent for payment to the Class B Noteholders; (3) the Class C-1 Note Principal Balance on such Distribution Date shall be distributed to the Paying Agent for payment to the Class C-1 Noteholders and an amount equal to the sum of (A) the Class C-1 Monthly Interest for such Distribution Date, (B) any Class C-1 Monthly Interest previously due but not distributed to the Class C-1 Noteholders on a prior Distribution Date, (C) the amount of Class C-1 Additional Interest for such Distribution Date and any Class C-1 Additional Interest previously due but not distributed to the Class C-1 Noteholders on a prior Distribution Date and (D) any Class C-1 Costs due and unpaid shall be distributed to the Paying Agent for payment to the Class C-1 Noteholders; (4) the Class C-2 Note Principal Balance on such Distribution Date shall be distributed to the Paying Agent for payment to the Class C-2 Noteholders and an amount equal to the sum of (A) the Class C-2 Monthly Interest for such Distribution Date, (B) any Class C-2 Monthly Interest previously due but not distributed to the Class C-2 Noteholders on a prior Distribution Date, (C) the amount of Class C-2 Additional Interest for such Distribution Date and any Class C-2 Additional Interest previously due but not distributed to the Class C-2 Noteholders on a prior Distribution Date and (D) any Class C-2 Costs due and unpaid shall be distributed to the Paying Agent for payment to the Class C-2 Noteholders; and (5) the Class D Note Principal Balance on such Distribution Date shall be distributed to the Paying Agent for payment to the Class D Noteholders and an amount equal to the sum of (A) the Class D Monthly Interest for such Distribution Date, (B) any Class D Monthly Interest previously due but not distributed to the Class D Noteholders on a prior Distribution Date and (C) the amount of Class D Additional Interest for such Distribution Date and any Class D Additional Interest previously due but not distributed to the Class D Noteholders on a prior Distribution Date shall be distributed to the Paying Agent for payment to the Class D Noteholders.

 

(c) Notwithstanding anything to the contrary in this Supplement or the Indenture, all amounts distributed to the Paying Agent pursuant to subsection 8.01(b) for payment to the Series 2004-One Noteholders shall be deemed distributed in full to the Series 2004-One Noteholders on the date on which such funds are distributed to the Paying Agent pursuant to this Section and the Series 2004-One Notes shall be deemed to be no longer Outstanding as such term is defined in Section 1.01 of the Indenture.

 

ARTICLE IX                                

 

 

Miscellaneous Provisions

 

Section 9.01. Ratification of Agreement.

 

As supplemented by this Supplement, the Indenture is in all respects ratified and confirmed and the Indenture as so supplemented by this Supplement shall be read, taken and construed as one and the same instrument.

 

Section 9.02. Counterparts.

 

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

 

Section 9.03. Governing Law.

 

THIS SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN.

 

Section 9.04. Tax Matters.

 

(a) Notwithstanding anything to the contrary herein, each of the Paying Agent, the Servicer or the Indenture Trustee shall be entitled  to withhold for payment to the applicable Governmental Authority any amount that it determines in its sole discretion is required to be withheld pursuant to Section 1446 of the Code and such amount shall be deemed to have been paid for all purposes of the Indenture.

 

(b) Each of the Series 2004-One Noteholders other than a purchaser in a Repurchase Transaction agrees that prior to the date on which the first interest payment hereunder is due thereto, it will provide to the Servicer and the Indenture Trustee (i) if such Series 2004-One Noteholder is created or organized in or under the laws of a jurisdiction outside the United States, two duly completed copies of the United States Internal Revenue Service Form W-8ECI or, if the Transferor in its sole discretion consents, Form W-8BEN claiming treaty benefits, or in either case successor applicable or required forms, (ii) if required by the Transferor, a duly completed copy of United States Internal Revenue Service Form W-9 or successor applicable or required forms, and (iii) such other forms and information as may be reasonably required to confirm the availability of any applicable exemption from United States federal, state or local withholding taxes.  Each Series 2004-One Noteholder other than a purchaser in a Repurchase Transaction agrees to provide to the Servicer and Indenture Trustee, like additional subsequent duly completed forms (subject to like consent) satisfactory to the Servicer and Indenture Trustee on or before the date that any such form expires or becomes obsolete, or upon the occurrence of any event requiring an amendment, resubmission or change in the most recent form previously delivered by it, and to provide such extensions or renewals as may be reasonably requested by the Servicer or Indenture Trustee.  Each Series 2004-One Noteholder other than a purchaser in a Repurchase Transaction certifies, represents and warrants that as of the date of this Agreement, or in the case of such a Series 2004-One Noteholder which is an assignee as of the date of such Note Assignment, that it is entitled (x) to receive payments under this Supplement without deduction or withholding (other than pursuant to Section 1446 of the Code, if applicable) of any United States federal income taxes and (y) to an exemption from United States backup withholding tax.  Each such Series 2004-One Noteholder other than a purchaser in a Repurchase Transaction represents and warrants that it shall pay any taxes imposed on such Series 2004-One Noteholder attributable to its interest in the Series 2004-One Notes.

  

23

  

 

(c) Each Series 2004-One Noteholder other than a purchaser in a Repurchase Transaction agrees with the Transferor that: (a) such Series 2004-One Noteholder will deliver to the Transferor on or before the Closing Date or the effective date of any participation or Note Assignment a letter (an “Investment Letter”) in the form of Exhibit D, executed by such assignee Series 2004-One Noteholder, in the case of a Note Assignment, or by the Participant, in the case of a participation, with respect to the purchase by such Series 2004-One Noteholder or Participant of a portion of an interest relating to the Series 2004-One Note and (b) all of the statements made by such Series 2004-One Noteholder or Participant, as applicable, in its Investment Letter shall be true and correct as of the date made.

 

(d) Each Series 2004-One Noteholder other than a purchaser in a Repurchase Transaction, by its holding of an interest in the Series 2004-One Notes, hereby severally represents, warrants and covenants, and each Series 2004-One Noteholder other than a purchaser in a Repurchase Transaction that acquires an interest in the Series 2004-One Notes by Note Assignment shall be deemed to have severally represented, warranted and covenanted upon such Note Assignment that:  (i) such Series 2004-One Noteholder has not acquired and shall not sell, trade or transfer any interest in the Series 2004-One Notes, nor cause any interest in the Series 2004-One Notes to be marketed, on or through either (A) an “established securities market (or the substantial equivalent thereof)” within the meaning of Section 7704(b)(1) of the Code (including an interdealer quotation system that regularly disseminates firm buy or sell quotations by identified brokers or dealers by electronic means or otherwise) or (B) a “secondary market (or the substantial equivalent thereof)” within the meaning of Section 7704(b)(2) of the Code (including a market wherein interests in the Series 2004-One Notes are regularly quoted by any person making a market in such interests and a market wherein any person regularly makes available bid or offer quotes with respect to interests in the Series 2004-One Notes and stands ready to effect buy or sell transactions at the quoted prices for itself or on behalf of others), and (ii) unless the Transferor consents otherwise, such Series 2004-One Noteholder (A) is properly classified as, and shall remain classified as, a “corporation” as described in Section 7701(a)(3) of the Code and (B) is not, and shall not become, an “S corporation” as described in Section 1361 of the Code.  Each Series 2004-One Noteholder other than a purchaser in a Repurchase Transaction represents, warrants and covenants that it shall (A) cause each of its Participants otherwise permitted hereunder to make representations, warranties and covenants similar to the foregoing for the benefit of the Transferor and the Issuer at the time such Participant becomes a Participant and (B) forward a copy of such representations, warranties and covenants to the Indenture Trustee.  In the event of any breach of the representation, warranty and covenant of a Series 2004-One Noteholder or its Participant that such Series 2004-One Noteholder or participant shall remain classified as a corporation other than an S corporation, such Series 2004-One Noteholder shall notify the Transferor promptly upon such Series 2004-One Noteholder’s becoming aware of such breach, and thereupon the Series 2004-One Noteholder hereby agrees to use reasonable efforts to procure a replacement investor which is acceptable to the Transferor not so affected to replace such affected Series 2004-One Noteholder.  In any such event, the Transferor shall also have the right to procure a replacement investor.  Each affected Series 2004-One Noteholder hereby agrees to take all actions necessary to permit a replacement investor to succeed to its rights and obligations hereunder.  Each Series 2004-One Noteholder other than a purchaser in a Repurchase Transaction which has a Participant which has breached its representation, warranty and covenant that it shall remain classified as a corporation other than an S corporation hereby agrees (without limiting the right of the Transferor to procure a replacement investor for such Series 2004-One Noteholder as provided above in this paragraph) to notify the Transferor of such breach promptly upon such Series 2004-One Noteholder’s becoming aware thereof and to use reasonable efforts to procure a replacement Participant, as applicable, not so affected which is acceptable to the Transferor to replace any such Participant.

 

(e) Subject to the provisions of subsection (g), each Series 2004-One Noteholder may at any time sell, assign or otherwise transfer, to the extent of such Series 2004-One Noteholder’s interest in the Series 2004-One Notes (each, a “Note Assignment”), to any Person to which the Transferor may consent, which consent shall not be unreasonably withheld (it being understood that such consent shall be considered to be withheld reasonably on the basis that following such proposed Note Assignment the number of Private Holders would exceed 80 or the Issuer would otherwise be in jeopardy of being treated as taxable as a publicly traded partnership pursuant to Section 7704 of the Code), all or part of its interest in the Series 2004-One Notes; provided, however, that any Note Assignment shall be void unless (i) the minimum amount of such Note Assignment shall be $5,000,000, (ii) such assignee Series 2004-One Noteholder shall comply with this Section 9.04 and shall have delivered to the Indenture Trustee, prior to the effectiveness of such Note Assignment, a copy of an agreement under which such assignee Series 2004-One Noteholder has made the representations, warranties and covenants required to be made pursuant to this Section 9.04, (iii) following the Note Assignment there shall not be in the aggregate more than the number set forth in Item 1 of Schedule 9.04 of  beneficial owners of an interest or Participants holding an interest in the Class A Notes, the Class B Notes or the Class C Notes, and (iv) such proposed assignee shall provide the forms described in clauses (i), (ii) and (iii) of subsection 9.04(b) (subject to the Transferor’s consent, as applicable and as set forth therein) in the manner described therein.  In connection with any Note Assignment, the assignor Series 2004-One Noteholder shall request in writing to the Indenture Trustee (who shall promptly deliver it to the Transferor) for the consent of the Transferor (the Transferor shall respond to any such request within ten Business Days after its receipt and the Transferor will not unreasonably withhold such consent) it being understood that the obtaining of such consent is a condition to the effectiveness of the Note Assignment.  Each assignee Series 2004-One Noteholder is subject to the terms and conditions of subsection 9.04(b) on an ongoing basis and hereby makes the certifications, representations and warranties contained therein.

 

(f) Subject to the provisions of subsection (g), any Series 2004-One Noteholder may at any time grant a participation in all or part (but not less than $20,000) of its interest in Series 2004-One Notes to any Person to whom the Transferor may consent (each such Person, a “Participant”) , which consent shall not be unreasonably withheld (it being understood that such consent shall be considered to be withheld reasonably on the basis that following such proposed participation the number of Private Holders would exceed 80 or the Issuer would otherwise be in jeopardy of being treated as taxable as a publicly traded partnership pursuant to section 7704 of the Code); provided, however, that such participation shall be void, unless (i) such Participant complies with the applicable provisions of this Section 9.04, (ii) such Series 2004-One Noteholder delivers to the Indenture Trustee, prior to the effectiveness of its participation, a copy of an agreement under which such Participant has made the representations, warranties and covenants required to be made pursuant to this Section and (iii) there shall not be more than the number set forth in Item 1 of Schedule 9.04 of  beneficial owners of an interest or Participants holding an interest in the Class A Notes, the Class B Notes or the Class C Notes after giving effect to such participation.  In connection with the granting of any such participation to any  Person, the granting Series 2004-One Noteholder shall provide a written request to the Indenture Trustee (who shall promptly deliver it to the Transferor) for the consent of the Transferor to the granting of the specified interest to any identified prospective Participant.  The Transferor shall respond to any such request within ten Business Days after its receipt, it being understood that the obtaining of such consent is a condition to the effectiveness of a participation. Each Series 2004-One Noteholder hereby acknowledges and agrees that any such participation will not alter or affect in any way whatsoever such Series 2004-One Noteholder’s direct obligations hereunder and that the Transferor shall have no obligation to have any communication or relationship whatsoever with any Participant of such Series 2004-One Noteholder in order to enforce the obligations of such Series 2004-One Noteholder hereunder.  Each Series 2004-One Noteholder shall promptly notify the Indenture Trustee (which shall promptly notify the Transferor) in writing of the identity and interest of each Participant upon any such disposition.  As a condition of granting any participation, the Series 2004-One Noteholder hereby agrees to deliver to the Transferor a certification of the proposed Participant pursuant to which the Participant certifies, represents and warrants that (i) such Participant is entitled to (x) receive payments with respect to its participation without deduction or withholding of any United States federal income taxes and (y) an exemption from United States backup withholding tax, (ii) prior to the date on which the first interest payment is due to the Participant, such Series 2004-One Noteholder will provide to the Servicer and Indenture Trustee, the forms described in clauses (i), (ii) and (iii) of subsection 9.04(b) (subject to the Transferor’s consent, as applicable and as set forth therein) as though the Participant were a Series 2004-One Noteholder, (iii) such Series 2004-One Noteholder similarly will provide subsequent forms as described in subsection 9.04(b) with respect to such Participant as though it were a Series 2004-One Noteholder, and (iv) such Participant will pay any taxes imposed on its participation interest in the Series 2004-One Notes.

 

(g) Except (i) as provided in subsections (e) and (f) above and (ii) in connection with any pledge to any Federal Reserve Bank to secure any obligation of a Series 2004-One Noteholder, no Series 2004-One Noteholder may sell, transfer, assign, exchange, participate or otherwise convey or pledge, hypothecate, rehypothecate, or otherwise grant a security interest (each, a “Transfer”) other than pursuant to a Repurchase Transaction (provided that the aggregate number of beneficial owners, Participants or record owners of the Class A Notes, Class B Notes or Class C Notes shall not at any time exceed the number set forth in Item 1 of Schedule 9.04) in a Series 2004-One Note and any Transfer shall be void.  For the avoidance of doubt, a purchaser in a Repurchase Transaction shall not constitute a beneficial owner or a Participant for purposes of this Section 9.04, but shall constitute a record owner.

 

  

24

  

 

Section 9.05. Transfer of Class D Notes.  Any transfer of the Class D Notes shall be subject to delivery to the Indenture Trustee of a Tax Opinion with respect to such transfer.

 

Section 9.06. Limitation of Owner Trustee Liability.

 

It is expressly understood and agreed by the parties that (a) this Supplement is executed and delivered by Wilmington Trust FSB, not individually or personally, but solely as Owner Trustee, in the exercise of the powers and authority conferred and vested in it, pursuant to the Trust Agreement, (b) each of the representations, undertakings and agreements herein made on the part of the Issuer or Owner Trustee is made and intended not as personal representations, undertakings and agreements by Wilmington Trust FSB but is made and intended for the purpose of binding only the Issuer, (c) nothing herein contained shall be construed as creating any liability on Wilmington Trust FSB, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto and by any person claiming by, through or under the parties hereto, and (d) under no circumstances shall Wilmington Trust FSB be personally liable for the payment of any indebtedness or expenses of the Issuer or Owner Trustee or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Issuer or Owner Trustee under this Agreement or any other related documents.

 

Section 9.07. Limitation of Indenture Trustee Liability.

 

It is expressly understood and agreed by the parties that with respect to the execution of this Supplement by The Bank of New York Mellon (a) this Supplement is executed and delivered by The Bank of New York Mellon, not individually or personally, but solely as Indenture Trustee, in the exercise of the powers and authority conferred and vested in it, pursuant to the Indenture, (b) nothing herein contained shall be construed as creating any liability on The Bank of New York Mellon, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto and by any person claiming by, through or under the parties hereto, and (c) under no circumstances shall The Bank of New York Mellon be personally liable for the payment of any indebtedness or expenses of the Issuer or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Issuer under this Supplement or any other related documents.

 

Section 9.08. Paired Series.

 

The Transferor may, as long as no Planned Redemption Event or Early Redemption Event shall have occurred, designate a Series that will begin its scheduled Redemption Period (as such term is defined in the Indenture) within 60 days as a paired Series (each, a “Paired Series”).  The Transferor shall send written notice of such designation to the Indenture Trustee, the Servicer and Merrill no more than 60 days nor less than 30 days prior to the scheduled start of the Redemption Period (as such term is defined in the Indenture) for such Paired Series.  Each such written designation shall include an Officer’s Certificate of the Transferor to the effect that the Transferor reasonably believes that such designation will not, based on the facts known to the Person executing such Officer’s Certificate, result in the occurrence of a Default or an Early Redemption Event for any Series outstanding (including Series 2004-One).

 

{O1516522;8}

  

25

  

IN WITNESS WHEREOF, the Issuer, the Servicer and the Indenture Trustee have caused this Indenture Supplement to be duly executed by their respective officers thereunto duly authorized, all as of the day and year first above written.

 

COMPUCREDIT CREDIT CARD MASTER NOTE BUSINESS TRUST,

 

Issuer

 

By:           WILMINGTON TRUST FSB

 

not in its individual capacity, but solely

 

as Owner Trustee

 

By:           /s/Donald G. Mackelcan

 

Name: Donald G. Mackelcan

 

Title:  Senior Vice President

 

 

THE BANK OF NEW YORK MELLON,

 

not in its individual capacity, but solely as

 

Indenture Trustee

 

By:           /s/Catherine L. Cerilles

 

Name: Catherine L. Cerilles

 

Title:  Vice President

 

 

COMPUCREDIT CORPORATION,

 

Servicer

 

By:          /s/J.Paul Whitehead, III

 

Name: J.Paul Whitehead, III

 

Title:   Chief Financial Officer

 

 

[Signature Page to Series 2004-One Indenture Supplement]

 

 

26

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00171-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00171-of-00352.parquet"}]]