Document:

EXHIBIT 4.5

 

EXECUTION COPY

 

 

 

 

 

BARCLAYS
Dryrock Funding LLC,

Transferor

BARCLAYS BANK DELAWARE,

Servicer and Administrator

BARCLAYS
Dryrock Issuance Trust,

Issuer

and

U.S. BANK NATIONAL ASSOCIATION,

Indenture Trustee

 

 

 

AMENDED AND RESTATED

SERVICING AGREEMENT

Dated as of August 1, 2012

As amended and restated as of December
17, 2013

 

 

    	 

    	 

    

table of
contents

			PAGE

ARTICLE I

DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

	Section 1.1.	Definitions	1
	Section 1.2.	Other Definitional Provisions	4

ARTICLE II

Deposit of COLLECTIONS, ALLOCATIONS AND PAYMENTS

	Section 2.1.	Deposit of Collections; Direction to Indenture Trustee	6
	Section 2.2.	Payment of the Servicing Fee	6
	Section 2.3.	Adjustments for Miscellaneous Credits and Fraudulent Charges	6
	Section 2.4.	Interchange	7
	Section 2.5.	Designation of Remaining Principal Shortfalls	7

ARTICLE III

SERVICING OF RECEIVABLES

	Section 3.1.	Acceptance of Appointment and Other Matters Relating to the Servicer	8
	Section 3.2.	Representations and Warranties of the Servicer	9
	Section 3.3.	Reports and Records for the Owner Trustee, the Indenture Trustee and the Transferor	12
	Section 3.4.	Annual Certificate of Servicer	12
	Section 3.5.	Annual Servicing Report of Independent Public Accountants; Copies of Reports Available	12
	Section 3.6.	Notices to BBD Entities	13
	Section 3.7.	Recoveries	13
	Section 3.8.	Reports to the Commission	13
	Section 3.9.	Defaulted Receivables Assigned for Collection	13
	Section 3.10.	Covenants of the Servicer	13

ARTICLE IV

ADMINISTRATION OF THE TRUST; DUTIES OF THE ADMINISTRATOR

	Section 4.1.	Appointment of Administrator; Duties of Administrator	15
	Section 4.2.	Records	20
	Section 4.3.	Compensation	20
	Section 4.4.	Additional Information to be Furnished to Issuer and Indenture Trustee	20

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table of
contents

(continued)

			PAGE

 

	Section 4.5.	Independence of Administrator	20
	Section 4.6.	No Joint Venture	20
	Section 4.7.	Other Activities of Administrator	20
	Section 4.8.	Termination, Resignation and Removal of Administrator	21
	Section 4.9.	Action Upon Termination, Resignation or Removal	22

ARTICLE V

OTHER MATTERS RELATING TO THE SERVICER

	Section 5.1.	Liability of the Servicer	23
	Section 5.2.	Merger or Consolidation of, or Assumption of the Obligations of, the Servicer	23
	Section 5.3.	Limitation on Liability of the Servicer and Others	23
	Section 5.4.	Servicer Indemnification of the Owner Trustee, the Indenture Trustee and the Trust	24
	Section 5.5.	Resignation of the Servicer	25
	Section 5.6.	Access to Certain Documentation and Information Regarding the Collateral	25
	Section 5.7.	Delegation of Duties	26
	Section 5.8.	Examination of Records	26
	Section 5.9.	Notice of Breach of Representations and Warranties	26

ARTICLE VI

SERVICER DEFAULTS

	Section 6.1.	Servicer Defaults	27
	Section 6.2.	Indenture Trustee To Act as Successor Servicer; Appointment of Successor Servicer	29
	Section 6.3.	Notification to Noteholders	30
	Section 6.4.	Waiver of Past Defaults	30

ARTICLE VII

TERMINATION

	Section 7.1.	Termination of Agreement	32

ARTICLE VIII

MISCELLANEOUS PROVISIONS

	Section 8.1.	Amendment	33
	Section 8.2.	Protection of Right, Title and Interest in, to and under Trust Assets	34

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table of
contents

(continued)

			PAGE

 

	Section 8.3.	Governing Law; Consent to Jurisdiction; Waiver of Jury Trial	34
	Section 8.4.	Notices	35
	Section 8.5.	Severability of Provisions	36
	Section 8.6.	Further Assurances	36
	Section 8.7.	No Waiver; Cumulative Remedies	36
	Section 8.8.	Counterparts	36
	Section 8.9.	Binding; Third-Party Beneficiaries	36
	Section 8.10.	Actions by Noteholders	37
	Section 8.11.	Rule 144A Information	37
	Section 8.12.	Merger and Integration	37
	Section 8.13.	Headings	37
	Section 8.14.	Limitation of Liability	37
	Section 8.15.	Non-petition Covenant	37
	Section 8.16.	Force Majeure	38

ARTICLE IX

COMPLIANCE WITH REGULATION AB

	Section 9.1.	Intent of the Parties; Reasonableness	39
	Section 9.2.	Additional Representations and Warranties of the Servicer	39
	Section 9.3.	Information to Be Provided by the Servicer	39
	Section 9.4.	Report on Assessment of Compliance and Attestation	41
	Section 9.5.	Use of Subservicers and Servicing Participants	42

EXHIBITS

 

	Exhibit A	Form of Power of Attorney
	Exhibit B	Form of Opinion of Counsel with Respect to Amendments
	Exhibit C	Form of Annual Certification
	Exhibit D	Servicing Criteria to be Addressed in Assessment of Compliance

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AMENDED AND RESTATED
SERVICING AGREEMENT, dated as of August 1, 2012, as amended and restated as of December 17, 2013, by and among BARCLAYS DRYROCK
FUNDING LLC, a Delaware limited liability company, as transferor (the “Transferor”), BARCLAYS BANK DELAWARE,
a Delaware banking corporation, as servicer and as administrator (the “Servicer” and the “Administrator”),
BARCLAYS DRYROCK ISSUANCE TRUST, a statutory trust created under the laws of the State of Delaware, as issuer (the “Issuer”
or the “Trust”), and U.S. BANK NATIONAL ASSOCIATION, a national banking association, in its capacity as indenture
trustee (the “Indenture Trustee”).

In consideration
of the mutual agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree that this Agreement, together with the other Transaction Documents (each capitalized
term as hereinafter defined) will define the contractual obligations of the Transferor, the Servicer, the Administrator, the Issuer
and the Indenture Trustee, including, but not limited to, representations and warranties, ongoing disclosure requirements and measures
to avoid conflicts of interest, and hereby further agree as follows:

ARTICLE
I

DEFINITIONS AND OTHER PROVISIONS OF

GENERAL APPLICATION

Section 1.1.         
Definitions. Whenever used in this Agreement, the following words and phrases shall have the following meanings:

“Accumulation
Period” means any accumulation period defined in the related Indenture Supplement where (i) following the Revolving Period
or (ii) during the suspension of the Revolving Period, Principal Collections are accumulated in an account for the benefit of the
Noteholders of such Series or Class.

“Administrator”
has the meaning specified in the initial paragraph of this Agreement.

“Agreement”
means this Amended and Restated Servicing Agreement, as the same may be further amended, restated, supplemented or otherwise modified
from time to time.

“Authorized
Officer” (a) with respect to the Issuer and the Transferor, has the meaning specified in the Transfer Agreement
and, (b) with respect to the Servicer, means any Servicing Officer.

“BBD”
means Barclays Bank Delaware, a Delaware banking corporation.

“Collateral”
has the meaning specified in the Indenture.

“Corporate
Trust Office” (a) when used in respect of the Owner Trustee, has the meaning specified in the Trust Agreement and
(b) when used in respect of the Indenture Trustee, has the meaning specified in the Indenture.

    	

    	 

    

“Daily Servicer’s
Certificate” means a report prepared by the Servicer and delivered to the Indenture Trustee on each date on which a deposit
of Collections is made into the Collection Account, which report directs the Indenture Trustee with respect to the allocation of
the Finance Charge Collections, the allocation of the Principal Collections, the amounts to be paid to the holders of the Transferor
Interest, the amount, if any, to be withheld with respect to the Estimated Transferor’s Portion of the Servicing Fee, the
payment of the Estimated Transferor’s Portion of the Servicing Fee to the Servicer, the amount, if any, to be withheld and
deposited into the Excess Funding Account and such other matters as the Indenture Trustee may request direction.

“Derivative Agreement”
has the meaning specified in the Indenture.

“Derivative Counterparty”
has the meaning specified in the Indenture.

“Early Amortization Event”
has the meaning specified in the Indenture, as supplemented with respect to any Series or Class of Notes by the applicable Indenture
Supplement.

“Eligible
Servicer” means BBD or the Indenture Trustee or, if none of BBD or the Indenture Trustee is acting as Servicer, an entity
which, at the time of its appointment as Servicer, (a) is servicing a portfolio of credit accounts, (b) is legally qualified
and has the capacity to service the Accounts, (c) in the sole determination of the Transferor, which determination shall be
conclusive and binding, has demonstrated the ability to service professionally and competently a portfolio of similar accounts
in accordance with high standards of skill and care, (d) is qualified to use the software that is then being used to service
the Accounts or obtains the right to use or has its own software which is adequate to perform the duties of the Servicer under
this Agreement, and (e) has a net worth of at least $50,000,000 as of the end of its most recent fiscal quarter.

“Excess
Funding Amount” means, at any time, the aggregate amount on deposit in the Excess Funding Account.

“Exchange Act” means
the Securities Exchange Act of 1934, as amended.

“Execution Date” means
August 1, 2012.

“Indenture”
means the Amended and Restated Indenture, dated as of August 1, 2012, as amended and restated as of December 17, 2013, by
and between the Issuer and the Indenture Trustee, as the same may be amended, restated, supplemented or otherwise modified from
time to time.

“Indenture
Trustee” has the meaning specified in the first paragraph of this Agreement.

“Issuer” has the meaning
specified in the first paragraph of this Agreement.

“Monthly
Noteholders’ Statement” has the meaning specified in the Indenture.

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“Monthly
Servicer’s Certificate” means the certificate delivered by the Servicer as described in Section 3.3(b)
in substantially the form specified in the related Indenture Supplement.

“Notices” has the meaning
specified in Section 8.4(a).

“Outstanding” has the
meaning specified in the Indenture.

“Outstanding Dollar Principal
Amount” has the meaning specified in the Indenture.

“Owner Trustee”
has the meaning specified in the Trust Agreement.

“Paying
Agent” has the meaning specified in the Indenture.

“Receivables
Purchase Agreement” means the Amended and Restated Receivables Purchase Agreement, dated as of August 1, 2012, as
amended and restated as of December 17, 2013, by and between BBD and the Transferor, as the same may be amended, restated, supplemented
or otherwise modified from time to time.

“Remaining
Series Available Principal Collections Shortfall” has, with respect to any Series of Notes, the meaning specified in
the applicable Indenture Supplement for such Series of Notes.

“Securities Act” means
the Securities Act of 1933, as amended.

“Service Transfer”
has the meaning specified in Section 6.1.

“Servicer”
has the meaning specified in the initial paragraph of this Agreement.

“Servicer Default”
has the meaning specified in Section 6.1.

“Servicing
Criteria” means the “servicing criteria” set forth in Item 1122(d) of Regulation AB, as such may
be amended from time to time.

“Servicing
Fee” means, for any Monthly Period, one-twelfth of the product of (a) the Servicing Fee Percentage and (b) the
aggregate amount of Principal Receivables as of the close of business on the last day of the prior Monthly Period.

“Servicing Fee Percentage”
means 2.0%.

“Servicing
Officer” means any officer of the Servicer or an attorney-in-fact of the Servicer who in either case is involved in,
or responsible for, the administration and servicing of the Receivables and whose name appears on a list of servicing officers
furnished to the Transferor and the Indenture Trustee by the Servicer, as such list may from time to time be amended.

“Servicing
Participant” means the Servicer, any Subservicer or any Person that participates in any of the servicing functions specified
in Item 1122(d) of Regulation AB with

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respect to the Receivables. For the
avoidance of doubt, subject to Section 9.1, the term “Servicing Participant” shall not include the Owner
Trustee or the Indenture Trustee.

“Servicing Party” has
the meaning specified in Section 9.3(a).

“Shared
Excess Available Principal Collections” has, with respect to any Series of Notes, the meaning specified in the applicable
Indenture Supplement for such Series of Notes.

“Subservicer”
means any Person that services the Receivables on behalf of the Servicer or any Subservicer and is responsible for the performance
(whether directly or through Subservicers or Servicing Participants) of a substantial portion of the material servicing functions
required to be performed by the Servicer under this Agreement that are identified in Item 1122(d) of Regulation AB. For
the avoidance of doubt, subject to Section 9.1, the term “Subservicer” shall not include the Owner Trustee
or the Indenture Trustee.

“Successor
Servicer” has the meaning specified in Section 6.2(a).

“Supplemental
Credit Enhancement” means any Supplemental Credit Enhancement Agreement or Supplemental Liquidity Agreement entered into
by and between the Trust and the applicable Supplemental Credit Enhancement Provider or Supplemental Liquidity Provider.

“Termination
Notice” has the meaning specified in Section 6.1.

“Transfer
Agreement” means the Amended and Restated Transfer Agreement, dated as of August 1, 2012, as amended and restated
as of December 17, 2013, by and among the Transferor, the Issuer, and the Indenture Trustee, as amended, restated, supplemented
or otherwise modified from time to time.

“Transferor”
has the meaning specified in the first paragraph of this Agreement.

“Trust”
has the meaning specified in the first paragraph of this Agreement.

“Trust Agreement”
means the Second Amended and Restated Trust Agreement, dated as of August 1, 2012, as amended and restated as of December
17, 2013, by and between the Transferor and the Owner Trustee, as the same may be amended, restated, supplemented or otherwise
modified from time to time.

“UCC”
means the Uniform Commercial Code, as amended from time to time, as in effect in the relevant jurisdiction.

Section 1.2.         
Other Definitional Provisions.

(a)               
The terms defined in this Article have the meanings assigned to them in this Article, and, along with any other term defined
in any Section of this Agreement, include the plural as well as the singular, and are applicable to the masculine as well as to
the feminine and neuter genders of such terms.

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(b)              
 All capitalized terms used herein and not otherwise defined herein have the meanings ascribed to them in the Transfer Agreement
or, if not defined therein, in the Indenture or, if not defined therein, in the applicable Transaction Document.

(c)               
All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made
or delivered pursuant hereto unless otherwise defined therein.

(d)              
As used in this Agreement and in any certificate or other document made or delivered pursuant hereto or thereto, accounting
terms not otherwise defined in this Agreement or in any such certificate or other document, and accounting terms partly defined
in this Agreement or in any such certificate or other document to the extent not defined, shall have the respective meanings assigned
to them in accordance with generally accepted accounting principles and, except as otherwise herein expressly provided, the term
“generally accepted accounting principles” with respect to any computation required or permitted hereunder means such
accounting principles as are generally accepted in the United States of America at the date of such computation.

(e)               
The agreements, representations and warranties of Barclays Dryrock Funding LLC in this Agreement in its capacity as the
Transferor shall be deemed to be the agreements, representations and warranties of such entity solely in such capacity for so long
as such entity acts in such capacity under this Agreement. The agreements, representations and warranties of BBD in this Agreement
in its capacity as the Servicer shall be deemed to be the agreements, representations and warranties of such entity solely in such
capacity for so long as such entity acts in such capacity under this Agreement.

(f)               
Any reference to each Note Rating Agency shall only apply to any specific nationally recognized statistical rating organization
if such nationally recognized statistical rating organization is then rating any Outstanding Series or Class of Notes.

(g)              
Unless otherwise specified, references to any amount as on deposit or outstanding on any particular date shall mean such
amount at the close of business on such day.

(h)              
The words “hereof,” “herein,” “hereunder” and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; references to any Section,
Schedule or Exhibit are references to Sections, Schedules and Exhibits in or to this Agreement unless otherwise specified; and
the term “including” means “including without limitation.” Unless the context otherwise requires, terms
used herein that are defined in the New York UCC and not otherwise defined herein shall have the meanings set forth in the New
York UCC.

[END OF ARTICLE I]

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ARTICLE
II

Deposit of COLLECTIONS, ALLOCATIONS AND PAYMENTS

Section 2.1.         
Deposit of Collections; Direction to Indenture Trustee.

The Servicer shall
deposit all Collections into the Collection Account as promptly as possible after receipt by the Servicer. The Servicer shall not
commingle amounts received with respect to the Receivables with its own assets except for the time, not to exceed two business
days, necessary to clear any payments.

The Servicer (or,
if the authority of the Servicer has been revoked pursuant to Section 6.1, the Indenture Trustee, or, if a Successor
Servicer has been appointed, the Successor Servicer) shall instruct the Indenture Trustee in writing to allocate all funds deposited
into the Collection Account, all Default Amounts and the Servicing Fee as described in Article V of the Indenture and to apply
all funds on deposit in the Collection Account as described in Article V of the Indenture and the applicable Indenture
Supplements. The Servicer agrees to provide such written allocation and application instructions to the Indenture Trustee and to
direct that allocations be made as required by Article V of the Indenture.

Section 2.2.         
Payment of the Servicing Fee.

(a)               
As compensation for its servicing activities performed hereunder and as reimbursement for any expense incurred by it in
connection therewith, the Servicer shall be entitled to receive the Servicing Fee with respect to each Monthly Period prior to
the termination of the Trust pursuant to Article IX of the Trust Agreement. The Servicing Fee for each Monthly Period shall
be payable on the related Payment Date.

(b)              
To the extent the Estimated Transferor’s Portion of the Servicing Fee withheld by the Indenture Trustee pursuant to
Section 5.04(b) of the Indenture during any Monthly Period is less than the actual amount of the Servicing Fee allocated to the
Transferor Interest and payable on the Payment Date in such Monthly Period, the Transferor shall pay such amount directly to the
Servicer.

Section 2.3.         
Adjustments for Miscellaneous Credits and Fraudulent Charges.

(a)               
If the Servicer adjusts downward the amount of any Receivable because of a rebate, refund, unauthorized charge or billing
error to an Obligor, because such Receivable was created in respect of merchandise which was refused or returned by an Obligor,
or if the Servicer otherwise adjusts downward the amount of any Receivable without receiving Collections therefor or without charging
off such amount as uncollectible, then, in any such case, the amount of Principal Receivables used to calculate the Transferor
Amount, the Transferor Interest and (unless otherwise specified) any other amount required in any Transaction Document to be calculated
by reference to the amount of Principal Receivables, will be reduced by the amount of the adjustment. Similarly, the amount of
Principal Receivables used to calculate the Transferor Amount, the Transferor Interest and (unless otherwise specified) any other
amount required in any Transaction Document to be calculated by reference to the amount of Principal Receivables, will be reduced
by the amount of any Receivable which was discovered as having been created

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through a fraudulent or counterfeit
charge or with respect to which the Transferor’s covenant contained in Section 2.8(b) of the Transfer Agreement was breached.
Any adjustment required pursuant to either of the two preceding sentences shall be made on or prior to the end of the Monthly Period
in which such adjustment obligation arises.

(b)              
If (i) the Servicer makes a deposit into the Collection Account in respect of a Collection of a Receivable and such
Collection was received by the Servicer in the form of a check which is not honored for any reason or (ii) the Servicer makes
a mistake with respect to the amount of any Collection and deposits an amount that is less than or more than the actual amount
of such Collection, the Servicer shall appropriately adjust the amount subsequently deposited into the Collection Account to reflect
such dishonored check or mistake. Any Receivable in respect of which a dishonored check is received shall be deemed not to have
been paid. Notwithstanding the first two sentences of this paragraph, adjustments made pursuant to this Section 2.3
shall not require any change in any report previously delivered.

Section 2.4.         
Interchange. The Transferor shall transfer to the Trust all Interchange. All Interchange shall be deemed to be, and
shall be treated as, Finance Charge Collections under this Agreement, the Transfer Agreement and the Indenture.

Section 2.5.         
Designation of Remaining Principal Shortfalls. On each Note Transfer Date, the Servicer shall determine with respect
to the prior Monthly Period whether there is a Remaining Series Available Principal Collections Shortfall for any Series of Notes
after application of Shared Excess Available Principal Collections for the benefit of such Series of Notes for such Monthly Period.
The Servicer shall determine the aggregate amount of such Remaining Series Available Principal Collections Shortfalls for all Series
of Notes for such Monthly Period.

[END OF ARTICLE II]

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ARTICLE
III

SERVICING OF RECEIVABLES

Section 3.1.         
Acceptance of Appointment and Other Matters Relating to the Servicer.

(a)               
The Transferor hereby appoints BBD as the Servicer under this Agreement and BBD hereby accepts such appointment and agrees
to act as the Servicer under this Agreement. The Noteholders, by their acceptance of the Notes, shall be deemed to consent to BBD
acting as Servicer.

(b)              
The Servicer shall service and administer the Receivables, shall collect and deposit into the Collection Account, the Excess
Funding Account or any Supplemental Issuer Account payments due under the Receivables and shall charge off as uncollectible Receivables,
all in accordance with its customary and usual servicing procedures for servicing credit card receivables comparable to the Receivables
and in accordance with the Account Guidelines. The Servicer shall have full power and authority, acting alone or through any party
properly designated by it hereunder, to do any and all things in connection with such servicing and administration which it may
deem necessary or desirable. Without limiting the generality of the foregoing and subject to Section 6.1, the Servicer
or its designee is hereby authorized and empowered, (i) to instruct the Indenture Trustee in the Monthly Servicer’s
Certificate and/or the Daily Servicer’s Certificate to make deposits into, make allocations, withdrawals and payments to
or from the Collection Account, the Excess Funding Account and any Supplemental Issuer Account as set forth in this Agreement,
the Indenture or any Indenture Supplement, (ii) to take any action required or permitted under any Supplemental Credit Enhancement
Agreement or Derivative Agreement, as set forth in this Agreement, the Indenture or any Indenture Supplement, (iii) to instruct
the Indenture Trustee or the Trust in writing, as set forth in this Agreement, (iv) to execute and deliver, on behalf of the
Trust, any and all instruments of satisfaction or cancellation, or of partial or full release or discharge, and all other comparable
instruments, with respect to the Receivables and, after the delinquency of any Receivable and to the extent permitted under and
in compliance with applicable Requirements of Law, to commence collection or enforcement proceedings with respect to such Receivables,
and (v)  at the expense of the Transferor, to make any filings, reports, notices, applications and registrations with, and
to seek any consents or authorizations from, the Commission and any state securities authority on behalf of the Trust as may be
necessary or advisable to comply with any federal or state securities or reporting requirements or other laws or regulations. In
any action or proceeding that is described in clause (iv) of the preceding sentence, (A) the Servicer, whether acting
in its own name or on behalf of another and whether acting alone or through another, adequately represents each of the Transferor’s,
the Trust’s and the Indenture Trustee’s interests, (B) each of the Transferor, the Trust and the Indenture Trustee
will be bound by that action or by any judgment or other ruling in that proceeding, and (C) complete and final relief can
be accorded among the parties to that action or proceeding without joining the Transferor, the Trust or the Indenture Trustee.
Nothing in the immediately preceding sentence applies to interests of or claims against the Indenture Trustee in its individual
capacity or will relieve the Servicer of its obligation to service and administer the Receivables in accordance with the Servicer’s
customary and usual servicing procedures for servicing credit card receivables comparable to the

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Receivables and in accordance with the
Account Guidelines. Each of the Indenture Trustee and the Trust agree that it shall promptly follow the instructions of the Servicer
to withdraw funds from the applicable Issuer Account and to take any action required under any Supplemental Credit Enhancement
Agreement or Derivative Agreement at such time as required under this Agreement, the Indenture or any Indenture Supplement. Each
of the Indenture Trustee and the Trust shall execute and furnish the Servicer with such documents as may be necessary or appropriate
to enable the Servicer to carry out its servicing and administrative duties hereunder.

(c)               
The Servicer shall not, and no Successor Servicer shall, be obligated to use separate servicing procedures, offices, employees
or accounts for servicing the Receivables from the procedures, offices, employees and accounts used by the Servicer or such Successor
Servicer, as the case may be, in connection with servicing other comparable receivables.

(d)              
The Servicer shall comply with and perform its servicing obligations with respect to the Accounts and the Receivables in
accordance with the Account Agreements relating to the Accounts and the Account Guidelines and all applicable Requirements of Law
affecting the Accounts and the Receivables, except insofar as any failure to so comply or perform would not materially and adversely
affect the Trust or the Noteholders.

(e)               
Except as otherwise provided herein, the Servicer shall pay out of its own funds, without reimbursement, all expenses incurred
in connection with the servicing activities hereunder.

Section 3.2.         
Representations and Warranties of the Servicer. BBD, as initial Servicer, hereby makes, and any Successor Servicer
by its appointment hereunder shall make, with respect to itself, on the Execution Date, on each Addition Date and on each Issuance
Date on which it is the Servicer (and on the date of any such appointment), the following representations and warranties on which
the Transferor, the Trust, the Owner Trustee and the Indenture Trustee shall be deemed to have relied in accepting each Receivable
in trust under this Agreement, the Transfer Agreement and the Indenture, as applicable, and in entering into this Agreement, the
Transfer Agreement, the Indenture and any Indenture Supplement:

(a)               
Organization and Good Standing. The Servicer is an entity validly existing in good standing under the applicable
law of the jurisdiction of its incorporation and has, in all material respects, full power and authority to own its properties
and conduct its servicing business as presently owned or conducted, and to execute, deliver and perform its obligations under this
Agreement.

(b)              
Due Qualification. The Servicer is duly qualified to do business and is in good standing as a foreign corporation
or other foreign entity (or is exempt from such requirements) and has obtained all necessary licenses and approvals in each jurisdiction
in which the servicing of Receivables as required by this Agreement requires such qualification, except where the failure to so
qualify or obtain licenses or approvals would not have a material adverse effect on its ability to perform its obligations as Servicer
under this Agreement.

(c)               
Due Authorization. The execution, delivery, and performance by the Servicer of this Agreement and the other agreements
and instruments executed or to be executed

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by the Servicer as contemplated hereby
have been duly authorized by the Servicer by all necessary corporate action on the part of the Servicer.

(d)              
Binding Obligation. This Agreement constitutes a legal, valid and binding obligation of the Servicer, enforceable
against the Servicer in accordance with its terms, except as such enforceability may be limited by applicable Debtor Relief Laws
or by general principles of equity.

(e)               
No Conflict or Violation. The execution and delivery by the Servicer of this Agreement, the performance by the Servicer
of the transactions contemplated by this Agreement and the fulfillment by the Servicer of its obligations under this Agreement
will not conflict with or violate any Requirements of Law applicable to the Servicer or conflict with, result in any breach of
any of the material terms and provisions of, or constitute (with or without notice or lapse of time or both) a material default
under, any indenture, contract, agreement, mortgage, deed of trust or other instrument to which the Servicer is a party or by which
it or its properties are bound.

(f)               
No Proceedings. There are no Proceedings or investigations pending or, to the best knowledge of the Servicer, threatened,
against the Servicer before any Governmental Authority (i) asserting the invalidity of this Agreement, (ii) seeking to
prevent the consummation of any of the transactions contemplated by this Agreement, or (iii) seeking any determination or
ruling that, in the reasonable judgment of the Servicer, would materially and adversely affect the performance by the Servicer
of its obligations under this Agreement.

(g)              
All Consents. All authorizations, consents, orders or approvals of, or registrations or declarations with, any Governmental
Authority required to be obtained, effected or given by the Servicer in connection with the execution and delivery by the Servicer
of this Agreement and the performance by the Servicer of the transactions contemplated by this Agreement, have been duly obtained,
effected or given and are in full force and effect.

(h)              
Ordinary Course of Business. The Servicer entered into this Agreement in the ordinary course of business and not
with intent to hinder, delay or defraud BBD or its creditors.

(i)                
Compliance With Requirements of Law. The Servicer shall duly satisfy all obligations on its part to be fulfilled
under or in connection with each Receivable and the related Account, if any, will maintain in effect all qualifications required
under Requirements of Law in order to service properly each Receivable and the related Account, if any, and will comply in all
material respects with all other Requirements of Law in connection with servicing each Receivable and the related Account, if any,
the failure to comply with which would have an Adverse Effect.

(j)                
No Rescission or Cancellation. The Servicer shall not authorize any rescission or cancellation of any Receivable,
except in accordance with the Account Guidelines or as ordered by a court of competent jurisdiction or other Governmental Authority.

(k)              
Protection of Rights. The Servicer shall take no action which, nor omit to take any action the omission of which,
would impair the rights of the Trust, the Indenture Trustee

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or the Noteholders in any Receivable,
nor shall it reschedule, revise or defer payments due on any Receivable except in accordance with the Account Guidelines, nor shall
it sell any Trust Assets except as provided in any Transaction Document.

(l)                
Receivables Not To Be Evidenced by Instruments. Except in connection with its enforcement or collection of an Account,
the Servicer will take no action to cause any Receivable to be evidenced by any instrument (as defined in the UCC) and,
if any Receivable is so evidenced as a result of the Servicer’s action, it shall be assigned to the Servicer as provided
in this Section 3.2.

(m)            
Records. This Agreement has been approved by either the board of directors of the Servicer or by the assets and liability
committee of the Servicer and such approval is reflected in the minutes of such board or committee. This Agreement has been, continuously,
from the time of execution, in the official record of the Servicer.

In the event any
of the representations, warranties or covenants of the Servicer contained in Section 3.2(i), (j), (k)
or (l) with respect to any Receivable or the related Account is breached, and such breach has a material adverse effect
on the interest of the Indenture Trustee or the Trust in such Receivable and is not cured within 60 days (or such longer period,
not in excess of 150 days, as may be agreed to by the Indenture Trustee and the Transferor) of the earlier to occur of the discovery
of such event by the Servicer, or receipt by the Servicer of notice of such event given by the Indenture Trustee or the Transferor,
each such Receivable or, at the option of the Transferor, all Receivables in the Account or Accounts to which such event relates
shall be assigned and transferred to the Servicer on the terms and conditions set forth below; provided, however,
that such Receivables will not be assigned to the Servicer if, on any day prior to the end of such 60-day or longer period, (i) the
relevant representation and warranty shall be true and correct, or the related covenant shall have been complied with, in all material
respects and (ii) the Servicer shall have delivered to the Transferor and the Indenture Trustee a certificate of an Authorized
Officer of the Servicer describing the nature of the breach and the manner in which such breach was cured.

The Servicer shall
effect such assignment by making a deposit into the Collection Account in immediately available funds on the Note Transfer Date
following the Monthly Period in which such assignment obligation arises in an amount equal to the amount of such Receivables.

Upon each such assignment
to the Servicer, the Indenture Trustee and the Trust shall automatically and without further action sell, transfer, assign, set
over and otherwise convey to the Servicer, without recourse, representation or warranty, all right, title and interest of the Indenture
Trustee and the Trust in, to and under such Receivables, all Recoveries with respect thereto, all monies due or to become due and
all amounts received with respect thereto and all proceeds thereof. The Indenture Trustee and the Trust shall execute such documents
and instruments of transfer or assignment and take such other actions as shall be reasonably requested by the Servicer to effect
the conveyance of any such property pursuant to this Section 3.2. The obligation of the Servicer to accept assignment
of such property, and to make the deposits, if any, required to be made to the Collection Account as provided in the preceding
paragraph, shall constitute the sole remedy respecting the event giving rise to such obligation

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available to Noteholders (or the Indenture
Trustee on behalf of Noteholders) or the Trust, except as provided in Section 5.4

Section 3.3.         
Reports and Records for the Owner Trustee, the Indenture Trustee and the Transferor.

(a)               
Daily Records. On each Business Day, the Servicer shall make or cause to be made available at the office of the Servicer
for inspection by the Owner Trustee, the Indenture Trustee and the Transferor upon request a record (which may be in the form of
the Daily Servicers’ Certificate) setting forth (i) the Collections in respect of Principal Receivables and Finance
Charge Receivables deposited by the Servicer on such Business Day in each Issuer Account, and (ii) the aggregate amount of
Receivables as of such Business Day in each Account and each Removed Account. The Servicer shall, at all times, maintain its computer
files with respect to the Accounts and Removed Accounts in such a manner so that the Accounts and Removed Accounts may be specifically
identified and shall make available to the Indenture Trustee, the Owner Trustee and the Transferor at the office of the Servicer
on any Business Day any computer programs necessary to make such identification; provided, however, that the Indenture
Trustee, the Owner Trustee and the Transferor shall enter into such confidentiality agreements (including terms and provisions
for information security and data protection) as the Servicer may deem necessary to protect its interests.

(b)              
Monthly Servicer’s Certificate. Not later than the second Business Day preceding each Payment Date, the Servicer
shall, with respect to each outstanding Series, deliver to the Owner Trustee, the Indenture Trustee, the Transferor and each Note
Rating Agency a certificate of an Authorized Officer substantially in the form specified in the related Indenture Supplement (each
a “Monthly Servicer’s Certificate”).

Section 3.4.         
Annual Certificate of Servicer. The Servicer shall deliver to the Indenture Trustee, the Owner Trustee, the Transferor
and each Note Rating Agency on or before the 90th day following the end of each fiscal year, beginning with the fiscal
year ending December 31, 2012, the statement of compliance required under Item 1123 of Regulation AB with respect to
such fiscal year, which statement will be in the form of an Officer’s Certificate of the Servicer (with appropriate insertions)
to the effect that (a) a review of the activities of the Servicer during such fiscal year and of its performance under this
Agreement was made under the supervision of the officer signing such certificate and (b) to the best of such officer’s
knowledge, based on such review, the Servicer has fulfilled all its obligations under this Agreement in all material respects throughout
such fiscal year or, if there has been a failure to fulfill any such obligation in any material respect, specifying each such failure
known to such officer and the nature and status thereof.

Section 3.5.         
Annual Servicing Report of Independent Public Accountants; Copies of Reports Available.

(a)            
On or before the 90th day following the end of each fiscal year, beginning with the fiscal year ending December 31,
2012, the Servicer shall cause a firm of nationally recognized independent public accountants (who may also render other services
to the Servicer or the Transferor) to furnish to the Indenture Trustee, the Owner Trustee, the Servicer, the

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Transferor and each Note Rating Agency
each attestation report on assessments of compliance with the Servicing Criteria with respect to the Servicer or any affiliate
thereof during the related fiscal year delivered by such accountants pursuant to Rule 13(a)-18 or Rule 15(d)-18 of the
Exchange Act and Item 1122 of Regulation AB.

(b)           
A copy of each certificate and report provided pursuant to Section 3.3(b), Section 3.4 or this Section 3.5
may be obtained by any Noteholder or Note Owner by a request in writing to the Indenture Trustee addressed to the Corporate Trust
Office.

Section 3.6.         
Notices to BBD Entities. In the event that BBD is no longer acting as Servicer, any Successor Servicer shall deliver
or make available to BBD each certificate and report required to be provided thereafter pursuant to Section 3.3(b),
Section 3.4 and Section 3.5.

Section 3.7.         
Recoveries. If at any time the Servicer cannot identify the Recoveries that relate to specific Defaulted Receivables,
then the Servicer shall reasonably estimate, on or prior to each Note Transfer Date, the amount of Recoveries to be attributed
to such Defaulted Receivables.

Section 3.8.         
Reports to the Commission. The Servicer shall, on behalf of the Trust and at the expense of the Transferor, cause
to be filed with the Commission any periodic reports required to be filed under the provisions of the Exchange Act and the rules
and regulations of the Commission thereunder. The Transferor shall, at its own expense, cooperate in any reasonable request of
the Servicer in connection with such filings.

Section 3.9.         
Defaulted Receivables Assigned for Collection. On the date any Receivable becomes a Defaulted Receivable, the Transferor
shall automatically and without further action or consideration assign to the Servicer, solely for the purpose of collection, without
recourse, representation or warranty, such Defaulted Receivable and any related Finance Charge Receivables. The Servicer agrees
to take appropriate actions to collect all amounts due with respect to Defaulted Receivables assigned to it under this provision
(including any related Finance Charge Receivables), in accordance with its customary and usual servicing procedures for servicing
credit card receivables comparable to the Defaulted Receivables, the Account Guidelines, and the terms of this Agreement. Upon
collection of any amounts by the Servicer, with respect to any Defaulted Receivable assigned to it under this provision (including
any related Finance Charge Receivables), including Insurance Proceeds and the net proceeds of any sale of any such Defaulted Receivable
(including any related Finance Charge Receivables), the Servicer shall transfer such amounts to the Indenture Trustee for deposit
into the Collection Account. Such amounts shall be treated as Recoveries

Section 3.10.     
Covenants of the Servicer.

(a)            
The Servicer will maintain this Agreement, continuously, from the time of execution, in the official record of the Servicer.

(b)           
If the Issuer is required to pay penalties assessed against the Issuer due to and in connection with Subchapter 30 of Title
20 of New York City’s Administrative Code, then the Servicer shall indemnify the Issuer for any such penalties to be paid
by the Issuer.

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[END OF ARTICLE III]

    	14

    	 

    

ARTICLE
IV

ADMINISTRATION OF THE TRUST; DUTIES OF THE ADMINISTRATOR

Section 4.1.         
Appointment of Administrator; Duties of Administrator.

(a)               
The Issuer hereby appoints BBD to act as initial Administrator, subject to Section 4.8.

(b)              
Duties of Administrator with Respect to the Transaction Documents. The Administrator shall consult with the Owner
Trustee regarding the duties of the Issuer and the Owner Trustee under the Transaction Documents. The Administrator shall monitor
the performance of the Issuer and shall advise the Owner Trustee when action is necessary to comply with the Issuer’s or
the Owner Trustee’s duties under the Transaction Documents. The Owner Trustee shall have no obligation to take any action
unless instructed otherwise by the Administrator or the Beneficiary on behalf of the Issuer. The Administrator shall prepare for
execution by the Issuer, the Owner Trustee or the Beneficiary on behalf of the Issuer, or shall cause the preparation by other
appropriate Persons of, all such documents, reports, filings, instruments, certificates and opinions as it shall be the duty of
the Issuer or the Owner Trustee to prepare, file or deliver pursuant to any Transaction Document. The Administrator shall take
all appropriate action that it is the duty of the Issuer or the Owner Trustee to take pursuant to the Indenture and any Indenture
Supplement with respect to the following matters under the Indenture and any Indenture Supplement (parenthetical references are
to Articles or Sections of the Indenture):

(i)                
the duty to cause the Note Register to be kept, and, if the Indenture Trustee is at any time or for any Series not acting
as the Note Registrar, to notify the Indenture Trustee of the appointment of a new Note Registrar or Note Registrar for a specific
Series and the location, or change in location, of the Note Registrar (Section 4.05(a) of the Indenture) and the Series for
which such Note Registrar has been appointed;

(ii)              
preparing or obtaining the documents, legal opinions and instruments required for execution, authentication and delivery
of the Notes, and delivery of the same to the Indenture Trustee for authentication (Section 4.03, Section 4.04 and Section 4.10
of the Indenture), providing for the replacement of mutilated, destroyed, lost or stolen Notes (Section 4.06 of the Indenture),
providing for the exchange or transfer of Notes (Section 4.05 of the Indenture) and, to the extent set forth in the related
Indenture Supplement, notifying each Note Rating Agency in writing of the issuance of any Series or Class of Notes;

(iii)            
opening Issuer Accounts for the Issuer (Section 5.02 of the Indenture);

(iv)            
directing the Indenture Trustee with respect to the investment of funds in the Issuer Accounts (Section 5.03 of the
Indenture);

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(v)              
 preparing or obtaining the documents, legal opinions and instruments required to be delivered to the Indenture Trustee
with respect to the satisfaction and discharge of the Indenture (Section 6.01(c) of the Indenture) and preparing the documents
necessary for the Indenture Trustee to acknowledge the same (Section 6.01 of the Indenture);

(vi)            
on the resignation or removal of any Indenture Trustee, appointing a successor Indenture Trustee (Section 8.10(e) of
the Indenture) and giving written notice of such resignation or removal and appointment to each Noteholder (Section 8.10(f)
of the Indenture);

(vii)          
preparing or causing to be prepared tax returns for the Issuer (if required) and the reporting information for the Noteholders
(Section 8.15 of the Indenture);

(viii)        
furnishing to the Indenture Trustee a list of the names and addresses of the Registered Noteholders not more than 15 days
after each Record Date or at such other times as the Indenture Trustee may request in writing (Section 9.01 of the Indenture);

(ix)            
establishing reasonable rules for matters relating to any request, demand, authorization, direction, notice, consent, waiver
or other action provided by the Indenture to be given or taken by, or a meeting of, Noteholders not otherwise set forth in Section 9.04
of the Indenture (Section 9.04(g) of the Indenture);

(x)              
preparing for the Issuer such filings for filing with the Commission, and providing the Indenture Trustee with copies thereof
once filed, as required by the Exchange Act or otherwise as in accordance with rules and regulations prescribed from time to time
by the Commission (Section 9.05 of the Indenture);

(xi)            
preparing, completing and delivering to the Indenture Trustee (with a copy to each Note Rating Agency), a Monthly Noteholders’
Statement (Section 9.06 of the Indenture);

(xii)          
preparing or obtaining any necessary Opinion of Counsel, Issuer Tax Opinion, Officer’s Certificate, or other document
or instrument as may be required in connection with any supplemental indenture or amendment to the Indenture or any Indenture Supplement
(Article X of the Indenture);

(xiii)        
giving notice to each Note Rating Agency and collecting the vote of Noteholders, as necessary, in connection with any supplemental
indenture or amendment to the Indenture or any Indenture Supplement (Article X of the Indenture);

(xiv)        
appointing Paying Agents (Section 11.02 of the Indenture) and causing any such Paying Agents, if not the Indenture
Trustee-, to execute and deliver to the Indenture Trustee an instrument pursuant to which it agrees to act as Paying Agent as set
forth in Section 11.03 of the Indenture;

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(xv)          
 preparing Officer’s Certificates of the Issuer directing any Paying Agent, if not the Indenture Trustee, to pay to
the Indenture Trustee sums held in trust by the Issuer or such Paying Agent for the purpose of discharging the Indenture (Section 11.03
of the Indenture);

(xvi)        
preparing written statements for execution by an Authorized Officer (Section 11.04 of the Indenture);

(xvii)      
performing or causing to be performed all things necessary to preserve and keep in full force and effect the legal existence
of the Issuer (Section 11.05 of the Indenture);

(xviii)    
giving prompt written notice to the Indenture Trustee and each Note Rating Agency of each Event of Default under the Indenture
or any default of a Derivative Counterparty (Section 11.08 of the Indenture);

(xix)        
providing to Noteholders and prospective Noteholders information required to be provided by the Issuer pursuant to Rule 144A
under the Securities Act (Section 11.11 of the Indenture);

(xx)          
preparing and causing the Issuer to file UCC financing statements, amendments to such financing statements and continuation
statements (Section 11.12 of the Indenture);

(xxi)        
preparing or obtaining the instruments, documents, agreements and legal opinions required to be delivered by the Issuer
and preparing any notice required to be given to the Note Rating Agencies, in connection with the merger or consolidation of the
Issuer with any other Person (Section 11.13(a) of the Indenture) or the conveyance or transfer of any of the Issuer’s
property or assets (Section 11.13(b) of the Indenture);

(xxii)      
giving written notice to the affected Noteholders of any optional repurchase by the Servicer (Section 12.02 of the
Indenture) and to the Indenture Trustee and each Note Rating Agency with respect to any such optional repurchase or Early Amortization
Event (Section 12.03 of the Indenture);

(xxiii)    
to the extent set forth herein or in the Indenture, preparing or obtaining the instruments, documents, agreements and legal
opinions required to be delivered by the Issuer and/or the Indenture Trustee and preparing any notice required to be given by the
Issuer to the Note Rating Agencies, the Indenture Trustee and the Servicer in connection with addition or removal of Collateral,
and designating such Collateral to be added or removed, as the case may be;

(xxiv)    
to the extent set forth herein or in the Indenture, taking, or assisting the Issuer and/or the Indenture Trustee in taking,
all actions necessary and advisable to perfect and maintain the perfection of the lien of the Indenture on the Collateral in favor
of the Indenture Trustee and preparing for execution and delivery or filing by the Issuer all such supplements and amendments to
this Agreement and the Indenture and all such

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financing statements, amendments
to such financing statements, instruments of further assurance and other instruments; and

(xxv)      
to the extent set forth herein or in the Indenture, obtaining legal opinions with respect to the security interest in the
Collateral.

(c)               
Additional Duties.

(i)                
In addition to the duties of the Administrator set forth above, the Administrator shall perform such calculations and shall
prepare for execution by the Issuer and shall cause the preparation by other appropriate Persons of all such documents, reports,
filings, instruments, certificates and opinions as it shall be the duty of the Issuer or the Owner Trustee to prepare, file or
deliver pursuant to the Transaction Documents, and at the request of the Issuer shall take all appropriate action that it is the
duty of the Issuer or the Owner Trustee to take pursuant to the Transaction Documents. Subject to Section 4.5 of this
Agreement, and in accordance with the directions of the Issuer, the Administrator shall administer, perform or supervise the performance
of such other activities in connection with the Collateral (including the Transaction Documents) as are not covered by any of the
foregoing provisions and as are expressly requested by the Owner Trustee and are reasonably within the capability of the Administrator.

(ii)              
The Administrator shall perform the duties expressly required to be performed by the Administrator under the Trust Agreement.

(iii)            
In carrying out the foregoing duties or any of its other obligations under this Agreement, the Administrator may enter into
transactions with or otherwise deal with any of its Affiliates; provided, however, that the terms of any such transactions
or dealings shall be in accordance with any directions received from the Issuer and shall be, in the Administrator’s opinion,
no less favorable to the Issuer than would be available from unaffiliated parties.

(iv)            
The Owner Trustee shall, on behalf of the Issuer, execute and deliver to the Administrator and its agents, and to each successor
Administrator appointed pursuant to the terms hereof, one or more powers of attorney substantially in the form of Exhibit A,
appointing the Administrator the attorney-in-fact of the Issuer for the purpose of executing on behalf of the Issuer all such reports,
filings, certificates and opinions.

(d)              
Non-Ministerial Matters.

(i)                
Notwithstanding any other provision of this Agreement, with respect to matters that in the reasonable judgment of the Administrator
are non-ministerial, the Administrator shall not take any action unless within a reasonable time before the taking of such action,
the Administrator shall have notified the Owner Trustee on behalf of the Trust of the proposed action and the Trust shall have
provided consent or provided an alternative direction. For the purpose of the preceding sentence, “non-ministerial matters”
shall include:

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		(a)	the amendment of or any supplement to the Indenture;

		(b)	the initiation of any claim or lawsuit by the Issuer and the compromise of any action, claim or lawsuit brought by or against
the Issuer;

		(c)	the amendment, change or modification of the Transaction Documents;

		(d)	the appointment of successor Note Registrars, successor Paying Agents and successor trustees pursuant to the Indenture or the
appointment of successor Administrators, or the consent to the assignment by the Note Registrar, Paying Agent or trustee of its
obligations under the Indenture;

		(e)	the removal of the Indenture Trustee;

		(f)	the allocation, deposit, withdrawal or payment of funds under any Transaction Document, including the timing or amount of any
of the foregoing;

		(g)	the waiver of any default under any document, agreement, or instrument;

		(h)	the release of any part of the Collateral except in accordance with the Transaction Documents and Section 4.1(b) hereof;

		(i)	the entering into of any agreement by the Trust or the Owner Trustee;

		(j)	any matter described in Article V of the Trust Agreement;

		(k)	any matter that is reserved to the discretion of the Issuer under any Transaction Document or that could have a material impact
on the financial condition of the Trust or any Noteholder; and

		(l)	any filings required by the Delaware Statutory Trust Act.

(ii)              
Notwithstanding anything to the contrary in this Agreement, the Administrator shall not be obligated to, and shall not,
(s) make any payments to the Noteholders or the Transferor under the Transaction Documents, (t) take any other action
that the Issuer directs the Administrator not to take on its behalf, (u) take any action that would result in a violation or breach
of the covenants, agreements or obligations of the Trust or the Owner Trustee under any of the Transaction Documents, (v) pay or
incur any obligation or liability of the Trust or the Owner Trustee, (w) execute any document,

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agreement or instrument in the
name of the Trust or the Owner Trustee, (x) initiate or compromise any claim or lawsuit in the name of the Trust or the Owner Trustee,
(y) have possession of any assets of the Trust or the Owner Trustee, or (z) dispose of any assets of the Trust or the Owner Trustee,
whether by sale, pledge or otherwise.

(e)               
No Liability for Obligations of Other Parties. For the avoidance of doubt and notwithstanding the foregoing or any
act or omission taken by the Administrator hereunder on behalf of the Trust or the Owner Trustee, the obligations of the Trust
and the Owner Trustee hereunder and under the Transaction Documents shall remain solely the obligations of the Trust and the Owner
Trustee, and no such act or omission by the Administrator shall cause the Administrator or any of its Affiliates to be liable for
any such obligation.

Section 4.2.         
Records. The Administrator shall maintain appropriate books of account and records relating to services performed
hereunder, which books of account and records shall be accessible for inspection by the Issuer, the Owner Trustee, the Indenture
Trustee and the Transferor at any time during normal business hours.

Section 4.3.         
Compensation. As compensation for the performance of the Administrator’s obligations under this Agreement,
the Administrator shall be entitled to compensation in the amount of $2,500 per month, in addition to reimbursement for its liabilities
and extra out-of-pocket expenses related to its performance hereunder or under any Transaction Document. Such amounts shall be
paid by the Transferor in accordance with Section 6.3 of the Transfer Agreement.

Section 4.4.         
Additional Information to be Furnished to Issuer and Indenture Trustee. The Administrator shall furnish to the Issuer
or the Indenture Trustee from time to time such additional information regarding the Transaction Documents and the Trust as each
of them shall reasonably request.

Section 4.5.         
Independence of Administrator. For all purposes of this Agreement, the Administrator shall be an independent contractor
and shall not be subject to the supervision of the Issuer or the Owner Trustee with respect to the manner in which it accomplishes
the performance of its obligations hereunder. The Administrator shall have no authority to act for or represent the Issuer or the
Owner Trustee in any way and shall not otherwise be deemed an agent of the Issuer or the Owner Trustee.

Section 4.6.         
No Joint Venture. Nothing contained in this Agreement shall (i) constitute the Administrator and either of the
Issuer or the Owner Trustee as members of any partnership, joint venture, association, syndicate, unincorporated business or other
separate entity, (ii) be construed to impose any liability as such on any of them or (iii) be deemed to confer on any
of them any express, implied or apparent authority to incur any obligation or liability on behalf of the others.

Section 4.7.         
Other Activities of Administrator. Nothing herein shall prevent the Administrator or its Affiliates from engaging
in other businesses or, in its sole discretion, from acting in a similar capacity as an administrator for any other person or entity
even though such

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person or entity may engage in business
activities similar to those of the Issuer, the Owner Trustee or the Indenture Trustee.

Section 4.8.         
Termination, Resignation and Removal of Administrator.

(a)               
Subject to Section 4.8(d), the Administrator may resign its duties hereunder by providing the Issuer with at
least 60 days prior written notice.

(b)              
Subject to Section 4.8(d), the Issuer or the Transferor may, with written notice to each Note Rating Agency,
remove the Administrator without cause by providing the Administrator with at least 60 days prior written notice.

(c)               
Subject to Section 4.8(d), at the sole option of the Issuer or the Transferor and with written notice to each
Note Rating Agency, the Administrator may be removed immediately upon written notice of termination from the Issuer to the Administrator
if any of the following events shall occur:

(i)                
the Administrator shall default in the performance of any of its duties under this Agreement and, after written notice of
such default, shall not cure such default within 60 days (or, if such default cannot be cured in such time, shall not give within
60 days such assurance of cure as shall be reasonably satisfactory to the Transferor and the Issuer);

(ii)              
a court having jurisdiction in the premises shall enter a decree or order for relief, and such decree or order shall not
have been vacated within 60 days, in respect of the Administrator in any involuntary case under any applicable Debtor Relief Law
now or hereafter in effect or appoint a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for
the Administrator or any substantial part of its property or order the winding-up or liquidation of its affairs; or

(iii)            
the Administrator shall commence a voluntary case under any applicable Debtor Relief Law now or hereafter in effect, shall
consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of a
receiver, liquidator, assignee, trustee, custodian, sequestrator or similar official for the Administrator or any substantial part
of its property, shall consent to the taking of possession by any such official of any substantial part of its property, shall
make any general assignment for the benefit of its creditors or shall fail generally to pay its debts as they become due.

The Administrator
agrees that if any of the events specified in clause (ii) or (iii) of this Section 4.8(c) shall occur, it shall
give written notice thereof to the Issuer, the Owner Trustee and the Indenture Trustee within seven days after the happening of
such event.

(d)              
No termination, resignation or removal of the Administrator pursuant to this Section 4.8 shall be effective
until (i) a successor Administrator shall have been appointed by the Issuer and (ii) such successor Administrator shall
have agreed in writing to be bound by the terms of this Agreement in the same manner as the Administrator is bound hereunder.

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Section 4.9.         
Action Upon Termination, Resignation or Removal. Promptly upon the effective date of termination of the Administrator
pursuant to Section 4.8(c) or the resignation or removal of the Administrator pursuant to Section 4.8(a) or (b), respectively,
the Administrator shall be entitled to be paid all fees and reimbursable expenses accruing to it up to the date of such resignation
or removal. The Administrator shall forthwith upon such termination pursuant to Section 4.8(c) deliver to the Issuer all
property of the Issuer and all documents relating to the Collateral then in the custody of the Administrator. In the event of
the resignation or removal of the Administrator pursuant to Section 4.8(a) or (b), respectively, the Administrator shall
cooperate with the Issuer and take all reasonable steps requested to assist the Issuer in making an orderly transfer of the duties
of the Administrator.

Section 4.10.Liability
of the Administrator. The Administrator shall be liable under this Article IV only to the extent of the obligations
specifically undertaken by the Administrator in its capacity as Administrator.

Section 4.11.Limitation
on Liability of the Administrator and Others. Neither the Administrator nor any of the directors, officers, employees, members
or agents of the Administrator shall be under any liability to the Trust, the Owner Trustee, the Indenture Trustee, the Noteholders,
the Transferor, the Servicer or any other Person for any action taken, or for refraining from the taking of any action, in good
faith in its capacity as Administrator pursuant to this Agreement; provided, however, that this provision shall not protect the
Administrator or any directors, officers, employees, members or agents of the Administrator against any liability which would otherwise
be imposed by reason of willful misconduct, bad faith or gross negligence in the performance of duties or by reason of reckless
disregard of obligations and duties hereunder. The Administrator and any director, officer, employee, member or agent of the Administrator
may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person (other than the Administrator)
respecting any matters arising hereunder. The Administrator shall not be under any obligation to appear in, prosecute or defend
any legal action which is not incidental to its duties as Administrator in accordance with this Agreement and which in its reasonable
judgment may involve it in any expense or liability. The Administrator may, in its sole discretion, undertake any such legal action
which it may deem necessary or desirable for the benefit of the Noteholders with respect to this Agreement and the rights and duties
of the parties hereto and the interests of the Noteholders hereunder.

 

[END OF ARTICLE IV]

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ARTICLE
V

OTHER MATTERS RELATING TO THE SERVICER

Section 5.1.         
Liability of the Servicer. The Servicer shall be liable under this Article V only to the extent of the
obligations specifically undertaken by the Servicer in its capacity as Servicer.

Section 5.2.         
Merger or Consolidation of, or Assumption of the Obligations of, the Servicer. The Servicer shall not consolidate
with or merge into any other Person or convey, transfer or sell its properties and assets substantially as an entirety to any Person,
unless:

(a)               (i)     the Person formed by such consolidation or into which the Servicer is merged or the Person which acquires by conveyance,
transfer or sale the properties and assets of the Servicer substantially as an entirety shall be, if the Servicer is not the surviving
entity, a corporation or a banking association organized and existing under the laws of the United States of America or any state
or the District of Columbia, and, if the Servicer is not the surviving entity, such Person shall expressly assume, by an agreement
supplemental hereto, executed and delivered to the Trust and the Indenture Trustee, in form satisfactory to the Trust and the
Indenture Trustee, the performance of every covenant and obligation of the Servicer hereunder (to the extent that any right, covenant
or obligation of the Servicer, as applicable hereunder, is inapplicable to the successor entity, such successor entity shall be
subject to such covenant or obligation, or benefit from such right, as would apply, to the extent practicable, to such successor
entity);

        (ii)     the
Servicer has delivered to the Transferor, the Owner Trustee and the Indenture Trustee an Officer’s Certificate of the Servicer
and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or sale comply with this Section 5.2
and that all conditions precedent herein provided for relating to such transaction have been complied with; and

        (iii)     the
Servicer shall have given the Note Rating Agencies prompt notice of such consolidation, merger or transfer of properties and assets;
and

(b)              
the Person formed by such consolidation or into which the Servicer is merged or the Person which acquires by conveyance,
transfer or sale the properties and assets of the Servicer substantially as an entirety shall be or shall be immediately thereafter
an Eligible Servicer.

Section 5.3.         
Limitation on Liability of the Servicer and Others. Except as provided in Section 5.4, neither the Servicer
nor any of the directors, officers, employees, members or agents of the Servicer shall be under any liability to the Trust, the
Owner Trustee, the Indenture Trustee, the Noteholders, the Transferor or any other Person for any action taken, or for refraining
from the taking of any action, in good faith in its capacity as Servicer pursuant to this Agreement; provided, however,
that this provision shall not protect the Servicer or any directors, officers, employees, members or agents of the Servicer against
any liability which

    	23

    	 

    

would otherwise be imposed by reason
of willful misconduct, bad faith or gross negligence in the performance of duties or by reason of reckless disregard of obligations
and duties hereunder. The Servicer and any director, officer, employee, member or agent of the Servicer may rely in good faith
on any document of any kind prima facie properly executed and submitted by any Person (other than the Servicer) respecting
any matters arising hereunder. The Servicer shall not be under any obligation to appear in, prosecute or defend any legal action
which is not incidental to its duties as Servicer in accordance with this Agreement and which in its reasonable judgment may involve
it in any expense or liability. The Servicer may, in its sole discretion, undertake any such legal action which it may deem necessary
or desirable for the benefit of the Noteholders with respect to this Agreement and the rights and duties of the parties hereto
and the interests of the Noteholders hereunder.

Section 5.4.         
Servicer Indemnification of the Owner Trustee, the Indenture Trustee and the Trust.

(a)               
To the fullest extent permitted by applicable law, the Servicer shall indemnify and hold harmless each of the Owner Trustee
(as such and in its individual capacity), the Indenture Trustee and any trustees predecessor thereto (including the Indenture Trustee
in its capacity as Note Registrar or as Paying Agent) and their respective directors, officers, employees, members and agents from
and against any and all reasonable loss, liability, expense, damage or injury arising out of or relating to any claims, actions
or proceedings brought or asserted by third parties which are suffered or sustained by reason of (a) any acts or omissions
of the Servicer with respect to the Trust pursuant to this Agreement or (b) the administration of the Trust by the Owner Trustee,
including any judgment, award, settlement, reasonable attorneys’ fees and other costs or expenses incurred in connection
with the defense of any action, proceeding or claim; provided, however, that the Servicer shall not indemnify the
Owner Trustee (as such or in its individual capacity), the Indenture Trustee, any trustees predecessor thereto (including the Indenture
Trustee in its capacity as Note Registrar or as Paying Agent) or their respective directors, officers, employees, members and agents,
if such acts, omissions or alleged acts or omissions constitute or are caused by negligence or willful misconduct by the Owner
Trustee (as such or in its individual capacity), the Indenture Trustee, any trustees predecessor thereto (including the Indenture
Trustee in its capacity as Note Registrar or as Paying Agent) or their respective directors, officers, employees, members and agents.
Any such indemnification shall not be payable from the Trust Assets, but shall be payable only from the assets of the Servicer.
The provisions of this indemnity shall run directly to and be enforceable by an injured party subject to the limitations hereof
and shall survive the resignation or removal of the Servicer, the resignation or removal of the Owner Trustee and the Indenture
Trustee and the termination of this Agreement.

(b)              
To the fullest extent permitted by applicable law, the Servicer shall indemnify and hold harmless the Trust from and against
any and all reasonable loss, liability, expense, damage or injury arising out of or relating to any claims, actions or proceedings
brought or asserted by third parties which are suffered or sustained by reason of or relating to any material breach of Servicer’s
obligations under this Agreement; provided, however, that the Servicer shall not indemnify the Trust if such breach
is

    	24

    	 

    

caused by negligence or willful
misconduct by the Trust. Any such indemnification shall not be payable from the Trust Assets, but shall be payable only from the
assets of the Servicer. The provisions of this indemnity shall run directly to and be enforceable by an injured party subject to
the limitations hereof and shall survive the resignation or removal of the Servicer and the termination of this Agreement.

Section 5.5.         
Resignation of the Servicer. The Servicer shall not resign from the obligations and duties hereby imposed on it except
(a) upon determination that (i) the performance of its duties hereunder is no longer permissible under applicable law
and (ii) there is no reasonable action which the Servicer could take to make the performance of its duties hereunder permissible
under applicable law or (b) upon the assumption, by an agreement supplemental hereto, executed and delivered to the Transferor,
the Trust and the Indenture Trustee, in form satisfactory to the Transferor, the Trust and the Indenture Trustee, of the obligations
and duties of the Servicer hereunder by any of its Affiliates or by any other entity if the Note Rating Agency Condition has been
satisfied; provided that, in either case, the party assuming the obligations and duties of the Servicer qualifies as an
Eligible Servicer. Any determination permitting the resignation of the Servicer shall be evidenced as to clause (a) above
by an Opinion of Counsel to such effect delivered to the Transferor, the Owner Trustee and the Indenture Trustee. No resignation
shall become effective until the Indenture Trustee or a Successor Servicer shall have assumed the responsibilities and obligations
of the Servicer in accordance with Section 6.2. If, within 120 days of the date of the determination that the Servicer
may no longer act as Servicer under clause (a) above, the Indenture Trustee is unable to appoint a Successor Servicer, the
Indenture Trustee shall serve as Successor Servicer (but shall have continued authority to appoint another Person as Successor
Servicer). Notwithstanding the foregoing, the Indenture Trustee shall, if it is legally unable so to act, petition a court of competent
jurisdiction at the expense of the resigning Servicer to appoint any established institution qualifying as an Eligible Servicer
as the Successor Servicer hereunder. The Successor Servicer shall give prompt notice to each Note Rating Agency upon its appointment
as Successor Servicer. Notwithstanding anything in this Agreement to the contrary, BBD, as Servicer, may assign part or all of
its obligations and duties as Servicer under this Agreement to an Affiliate of BBD so long as BBD shall have fully guaranteed the
performance of such obligations and duties under this Agreement. Any such assignment described in the preceding sentence will not
constitute a resignation within the meaning of this Section 5.5.

Section 5.6.         
Access to Certain Documentation and Information Regarding the Collateral. The Servicer shall provide to the Trust
and the Indenture Trustee access to documentation regarding the Accounts and the Receivables in such cases where the Indenture
Trustee is required in connection with the enforcement of the rights of Noteholders or by applicable statutes or regulations to
review such documentation, such access being afforded without charge but only (a) upon reasonable request, (b) during
normal business hours, (c) subject to the Servicer’s normal security, data protection and confidentiality procedures
or such procedures as the Servicer may deem reasonably necessary and (d) at reasonably accessible offices in the continental
United States designated by the Servicer. Nothing in this Section 5.6 shall derogate from the obligation of the Transferor,
the Trust, the Owner Trustee, the Indenture Trustee and the Servicer to observe any applicable law prohibiting disclosure of information
regarding the Obligors, and the failure of the Servicer to provide access as provided in this Section 5.6 as a result
of such obligation shall not constitute a breach of this Section 5.6.

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Section 5.7.         
Delegation of Duties. Subject to Section 9.5, in the ordinary course of business, the Servicer may at any time
delegate all or part of its duties hereunder to any Person that agrees to conduct such duties in accordance with the Account Guidelines
and this Agreement. Any such delegation shall not relieve the Servicer of its liability and responsibility with respect to such
duties, and shall not constitute a resignation within the meaning of Section 5.5.

Section 5.8.         
Examination of Records. The Servicer shall indicate generally in its computer files or other records that the Receivables
arising in the Accounts have been conveyed to the Trust pursuant to the Transfer Agreement and assigned to the Indenture Trustee
under the Indenture. The Servicer shall, prior to the sale or transfer to a third party of any receivable held in its custody,
examine its computer records and other records to determine that such receivable is not, and does not include, a Receivable.

Section 5.9.         
Notice of Breach of Representations and Warranties. Upon discovery by the Servicer of a breach of the representations
and warranties set forth in Section 2.3 or Section 2.4 of the Transfer Agreement, the Servicer shall give prompt written
notice to the Transferor, the Indenture Trustee and the Owner Trustee following such discovery.

[END OF ARTICLE V]

    	26

    	 

    

ARTICLE
VI

SERVICER DEFAULTS

Section 6.1.         
Servicer Defaults. If any one of the following events (a “Servicer Default”) shall occur
and be continuing:

(a)               
any failure by the Servicer to make any payment, transfer or deposit or to give notice or instructions to the Indenture
Trustee to make any required payment, transfer or deposit on the date the Servicer is required to do so under the terms of this
Agreement, the Indenture or any applicable Indenture Supplement, or within the applicable grace period, which will not exceed five
(5) Business Days; provided, however, that any such failure caused by a nonwillful act of the Servicer shall not
constitute a Servicer Default if the Servicer promptly remedies such failure within five (5) Business Days after receiving notice
of such failure or otherwise becoming aware of such failure;

(b)              
failure on the part of the Servicer duly to observe or perform in any material respect any other covenants or agreements
of the Servicer set forth in this Agreement which has an Adverse Effect on any Noteholders and which continues unremedied for a
period of 60 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given
to the Servicer by the Owner Trustee or the Indenture Trustee, or to the Servicer, the Owner Trustee and the Indenture Trustee
by Noteholders evidencing not less than 50% of the Outstanding Dollar Principal Amount of the Outstanding Notes (or, with respect
to any such failure that does not relate to all Series and Classes of Notes, not less than 50% of the Outstanding Dollar Principal
Amount of all Series and Classes of Notes to which such failure related); or the Servicer shall assign or delegate its duties under
this Agreement, except as permitted by Section 5.2, Section 5.5 and Section 5.7;

(c)               
any representation, warranty or certification made by the Servicer in this Agreement or in any certificate delivered pursuant
hereto shall prove to have been incorrect when made, which has an Adverse Effect on the rights of any Noteholders and which Adverse
Effect continues for a period of 60 days after the date on which written notice thereof, requiring the same to be remedied, shall
have been given to the Servicer by the Owner Trustee or the Indenture Trustee, or to the Servicer, the Owner Trustee and the Indenture
Trustee by Noteholders evidencing not less than 50% of the Outstanding Dollar Principal Amount of the Outstanding Notes (or, with
respect to any such representation, warranty or certification that does not relate to all Series and Classes of Notes, not less
than 50% of the Outstanding Dollar Principal Amount of all Series and Classes of Notes adversely affected by such representation,
warranty or certification);

(d)              
the Servicer shall consent to the appointment of a bankruptcy trustee or conservator or receiver or liquidator in any bankruptcy
proceeding or other insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating
to the Servicer or of or relating to all or substantially all its property, or a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises for the appointment of a bankruptcy trustee or a conservator or receiver or liquidator
in any bankruptcy, insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings, or the winding-

    	27

    	 

    

up or liquidation of its affairs, shall
have been entered against the Servicer and such decree or order shall have remained in force undischarged or unstayed for a period
of 60 days; or the Servicer shall admit in writing its inability to pay its debts generally as they become due, file a petition
to take advantage of any applicable Debtor Relief Law, make any assignment for the benefit of its creditors or voluntarily suspend
payment of its obligations and such petition shall not have been dismissed within 60 days of the filing thereof; or

(e)               
any other Servicer Default described in any Indenture Supplement;

then, in the event
of any Servicer Default, so long as the Servicer Default shall not have been remedied, either the Indenture Trustee or Noteholders
evidencing more than 50% of the Outstanding Dollar Principal Amount of all Notes, by notice then given in writing to the Servicer
and the Owner Trustee (and to the Indenture Trustee if given by the Noteholders) (a “Termination Notice”), may
terminate all, but not less than all, of the rights and obligations of the Servicer as Servicer under this Agreement; provided,
however, if within 60 days of receipt of a Termination Notice the Indenture Trustee does not receive any bids from Eligible
Servicers in accordance with Section 6.2(d) to act as a Successor Servicer and receives an Officer’s Certificate
of the Servicer to the effect that the Servicer cannot in good faith cure the Servicer Default which gave rise to the Termination
Notice, the Indenture Trustee shall assume the role of Successor Servicer.

After receipt by
the Servicer of a Termination Notice, and on the date that a Successor Servicer is appointed by the Indenture Trustee pursuant
to Section 6.2, all authority and power of the Servicer under this Agreement shall pass to and be vested in the Successor
Servicer (a “Service Transfer”) and, without limitation, the Indenture Trustee is hereby authorized and empowered
(upon the failure of the Servicer to cooperate) to execute and deliver, on behalf of the Servicer, as attorney-in-fact or otherwise,
all documents and other instruments upon the failure of the Servicer to execute or deliver such documents or instruments, and to
do and accomplish all other acts or things necessary or appropriate to effect the purposes of such Service Transfer. The Servicer
agrees to cooperate with the Indenture Trustee and such Successor Servicer in effecting the termination of the responsibilities
and rights of the Servicer to conduct servicing hereunder, including the transfer to such Successor Servicer of all authority of
the Servicer to service the Trust Assets provided for under this Agreement, including, without limitation, all authority over all
Collections which shall on the date of transfer be held by the Servicer for deposit, or which have been deposited by the Servicer,
in the Collection Account, or which shall thereafter be received with respect to the Trust Assets, and in assisting the Successor
Servicer. The Servicer shall within 20 Business Days of the date of transfer, transfer its electronic records or electronic copies
thereof relating to the Trust Assets to the Successor Servicer in such electronic form as the Successor Servicer may reasonably
request and shall promptly transfer to the Successor Servicer all other records, correspondence and documents necessary for the
continued servicing of the Trust Assets in the manner and at such times as the Successor Servicer shall reasonably request. To
the extent that compliance with this Section 6.1 shall require the Servicer to disclose to the Successor Servicer information
of any kind which the Servicer deems to be confidential, the Successor Servicer shall be required to enter into such customary
licensing, security, data protection and confidentiality agreements as the Servicer shall deem reasonably necessary to protect
its interests.

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Notwithstanding the
foregoing, a delay in or failure of performance referred to in paragraph (a) above for a period of 10 Business Days after
the applicable grace period or under paragraph (b) or (c) above for a period of 60 Business Days after the applicable grace
period, shall not constitute a Servicer Default if such delay or failure could not be prevented by the exercise of reasonable diligence
by the Servicer and such delay or failure was caused by an act of God or the public enemy, acts of declared or undeclared war,
or terrorism, public disorder, rebellion or sabotage, epidemics, landslides, lightning, fire, hurricanes, earthquakes, floods or
similar causes. The preceding sentence shall not relieve the Servicer from using all commercially reasonable efforts to perform
its obligations in a timely manner in accordance with the terms of this Agreement and the Servicer shall provide the Indenture
Trustee, the Owner Trustee and the Transferor with an Officer’s Certificate of the Servicer giving prompt notice of such
failure or delay by it, together with a description of the efforts undertaken to perform its obligations.

Section 6.2.         
Indenture Trustee To Act as Successor Servicer; Appointment of Successor Servicer.

(a)               
On and after the receipt by the Servicer of a Termination Notice pursuant to Section 6.1, the Servicer shall
continue to perform all servicing functions under this Agreement until the date specified in the Termination Notice, which date
shall not be less than 60 days after receipt of such Termination Notice, unless the Indenture Trustee specifies a different date
or a different date is mutually agreed upon by the Servicer and the Indenture Trustee. The Indenture Trustee shall as promptly
as possible after the giving of a Termination Notice appoint an Eligible Servicer as a successor servicer (the “Successor
Servicer”), and such Successor Servicer shall accept its appointment by a written assumption in a form acceptable to
the Indenture Trustee and the Transferor. The Transferor shall have the right to nominate to the Indenture Trustee the name of
a potential successor servicer, which nominee shall be selected by the Indenture Trustee as the Successor Servicer. In the event
that a Successor Servicer has not been appointed or has not accepted its appointment at the time when the Servicer ceases to act
as Servicer, the Indenture Trustee without further action shall automatically be appointed as the Successor Servicer. The Indenture
Trustee may delegate any of its servicing obligations to an Affiliate or agent in accordance with Section 3.1(b) and
Section 5.7.

(b)              
Notwithstanding the foregoing, the Indenture Trustee shall, if it is legally unable so to act, petition a court of competent
jurisdiction to appoint any established institution qualifying as an Eligible Servicer as the Successor Servicer hereunder. The
Transferor shall notify each Note Rating Agency, the Owner Trustee, and the Administrator upon the removal of the Servicer and
upon the appointment of a Successor Servicer.

(c)               
Upon its appointment, the Successor Servicer shall be the successor in all respects to the Servicer with respect to servicing
functions under this Agreement and shall be subject to all the responsibilities, duties and liabilities relating thereto placed
on the Servicer by the terms and provisions hereof, and all references in this Agreement or any other Transaction Document to the
Servicer shall be deemed to refer to the Successor Servicer.

(d)              
In connection with any Termination Notice, the Indenture Trustee will review any bids which it obtains from Eligible Servicers
and shall be permitted to appoint any

    	29

    	 

    

Eligible Servicer submitting such a
bid as a Successor Servicer or, as provided in Section 6.2(a), the Successor Servicer nominated by the Transferor,
for servicing compensation not in excess of the Servicing Fee plus the sum of the amounts with respect to each Series and with
respect to each Payment Date equal to any Finance Charge Collections allocable to Noteholders of such Series which are payable
to the holders of the Transferor Interest after payment of all amounts owing to the Noteholders of such Series with respect to
such Payment Date or required to be deposited in the applicable Issuer Accounts with respect to such Payment Date; provided,
however, that any holder of the Transferor Interest shall be responsible for payment of its portion of such Servicing
Fee and all other such amounts in excess of such Servicing Fee. Each holder of the Transferor Interest agrees that, if BBD (or
any Successor Servicer) is terminated as Servicer hereunder, the portion of the Collections in respect of Finance Charge Receivables
that such holder is entitled to receive pursuant to any Transaction Document shall be reduced by an amount sufficient to pay the
Transferor’s share of the compensation of the Successor Servicer.

(e)               
All authority and power granted to the Servicer under this Agreement shall automatically cease and terminate upon termination
of the Trust pursuant to Article IX of the Trust Agreement, and shall pass to and be vested in the Transferor and, without
limitation, the Transferor is hereby authorized and empowered to execute and deliver, on behalf of the Servicer as attorney-in-fact
or otherwise, all documents and other instruments, and to do and accomplish all other acts or things necessary or appropriate to
effect the purposes of such transfer of servicing rights. The Servicer agrees to cooperate with the Transferor in effecting the
termination of the responsibilities and rights of the Servicer to conduct servicing of the Receivables. The Servicer shall transfer
its electronic records relating to the Receivables to the Transferor or its designee in such electronic form as it may reasonably
request and shall transfer all other records, correspondence and documents to it in the manner and at such times as it shall reasonably
request. To the extent that compliance with this Section 6.2 shall require the Servicer to disclose to the Transferor
information of any kind which the Servicer deems to be confidential, the Transferor shall be required to enter into such customary
licensing, security, data protection and confidentiality agreements as the Servicer shall deem necessary to protect its interests.

Section 6.3.         
Notification to Noteholders. Within five (5) Business Days after the Servicer becomes aware of any Servicer Default,
the Servicer shall give notice thereof to the Transferor, the Owner Trustee, the Indenture Trustee and each Note Rating Agency,
and the Indenture Trustee shall give notice to the Noteholders. Upon any termination or appointment of a Successor Servicer pursuant
to this Article, the Indenture Trustee shall give prompt notice thereof to the Noteholders.

Section
6.4.          Waiver
of Past Defaults. Noteholders evidencing more than 662⁄3% of the Outstanding Dollar Principal Amount of the Notes of each
Series or, with respect to any Series with two or more Classes, of each Class, (or, with respect to any default that does not
relate to or affect all Series, 662⁄3% of the Outstanding Dollar Principal Amount of the Notes of each Series to which such
default relates or, with respect to any such Series with two or more Classes, of each Class) may, on behalf of all Noteholders
of such Series or Class, waive any default by the Servicer in the performance of its obligations hereunder and its consequences,
except the failure to make any required deposits. Upon any such waiver of a past default, such default shall cease to exist, and
any default arising therefrom shall be deemed to have been

    	30

    	 

    

remedied for every purpose of this Agreement.
No such waiver shall extend to any subsequent or other default or impair any right consequent thereon except to the extent expressly
so waived.

[END OF ARTICLE VI]

    	31

    	 

    

ARTICLE
VII

TERMINATION

Section 7.1.         
Termination of Agreement. This Agreement and the respective obligations and responsibilities of the Trust, the Administrator
and the Servicer under this Agreement shall terminate, except with respect to the indemnification obligations described in Section 5.4,
the provisions of Section 6.2(e), and the provisions of Section 8.15, on the date on which the Trust is terminated
in accordance with Article IX of the Trust Agreement.

[END OF ARTICLE VII]

    	32

    	 

    

ARTICLE
VIII

MISCELLANEOUS PROVISIONS

Section 8.1.         
Amendment.

(a)               
This Agreement may be amended from time to time by the Servicer, the Transferor, the Administrator, the Issuer and the Indenture
Trustee, by a written instrument signed by each of them, without the consent of any of the Noteholders upon, unless otherwise specified
in this Section 8.1, (i) delivery to the Owner Trustee and the Indenture Trustee of an Issuer Tax Opinion, (ii) satisfaction
of the Note Rating Agency Condition, and (iii) delivery to the Indenture Trustee and the Owner Trustee of an Officer’s Certificate
of the Servicer, dated the date of any such amendment, stating that the Servicer reasonably believes that such amendment will not
have an Adverse Effect.

Notwithstanding any
other provision of this Section 8.1, this Agreement may be amended from time to time by an instrument signed by the Transferor
and BBD to modify, eliminate or add to the provisions of this Agreement to (i) facilitate compliance with the FDIC Rule or changes
in laws or regulations applicable to the Servicer, the Transferor, the Administrator, the Issuer, the Indenture Trustee or the
transactions described in this Agreement or (ii) cause the provisions herein to conform to or be consistent with or in furtherance
of the statements made with respect to this Agreement in any applicable Registration Statement on Form S-3, as amended, under the
Securities Act, in each case upon delivery by the Servicer to the Indenture Trustee and the Owner Trustee of (x) an Officer’s
Certificate of the Servicer, dated the date of any such amendment, to the effect that (A) the Servicer reasonably believes that
such amendment will not have an Adverse Effect or (B) such amendment is required to remain in compliance with the FDIC Rule or
any other change of law or regulation which applies to the Servicer, the Transferor, the Administrator, the Issuer, the Indenture
Trustee or the transactions governed by the Transaction Documents, or such amendment is required to cause the provisions herein
to conform to or be consistent with or in furtherance of the statements made with respect to this Agreement in any applicable Registration
Statement on Form S-3, as amended, under the Securities Act, and (y) an Issuer Tax Opinion with respect to such amendment.

In addition, notwithstanding
any other provision of this Section 8.1, this Agreement may be amended from time to time by an instrument signed by the
Servicer, the Transferor, the Administrator, the Issuer and the Indenture Trustee, to cure any ambiguity or to correct or supplement
any defective or inconsistent provision contained in this Agreement or in any amendment to this Agreement upon delivery by the
Servicer to the Indenture Trustee and the Owner Trustee of an Officer’s Certificate of the Servicer, dated the date of any
such amendment, to the effect that the Servicer reasonably believes that such amendment will not have an Adverse Effect.

(b)              
In addition to amendments permitted in Section 8.1(a), this Agreement may also be amended in writing from time
to time by the Servicer, the Administrator, the Transferor, the Indenture Trustee and the Trust with the consent of Noteholders
evidencing more than 662⁄3% of the Outstanding Dollar Principal Amount of all affected Series or Classes of Notes for which
the Servicer has not delivered an Officer’s Certificate stating that there is no

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Adverse Effect, for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner
the rights of any Noteholders. Prior to the execution of any such amendment pursuant to this Section 8.1(b), the Servicer
shall furnish notification of the substance of such amendment to each Note Rating Agency.

(c)               
It shall not be necessary for the consent of Noteholders under this Section 8.1 to approve the particular form
of any proposed amendment, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining
such consents and of evidencing the authorization of the execution thereof by Noteholders shall be subject to such reasonable requirements
as the Indenture Trustee may prescribe in the related Indenture Supplement.

Section 8.2.         
Protection of Right, Title and Interest in, to and under Trust Assets.

(a)               
Each of the Trust and the Indenture Trustee shall give the Servicer prompt notice of (i) any change in its name or (ii)
any change in its address as shown on any financing statement filed in connection with the transactions contemplated by any Transaction
Document if the address so shown ceases to be an address from which information concerning the Trust Assets can be obtained.

(b)              
The Servicer shall deliver to the Owner Trustee and the Indenture Trustee upon the execution and delivery of each amendment
to this Agreement pursuant to Section 8.1 an Opinion of Counsel to the effect specified in Exhibit B.

Section 8.3.         
Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.

(a)               
This Agreement will be construed in accordance with and governed by the laws of the State of New York, including Section
5-1401 of the General Obligations Law, without reference to its conflict of law provisions and the obligations, rights, and remedies
of the parties hereunder shall be determined in accordance with such laws.

(b)              
Each party hereto hereby consents and agrees that the state or federal courts located in the Borough of Manhattan in New
York City shall have exclusive jurisdiction to hear and determine any claims or disputes between them pertaining to this Agreement
or to any matter arising out of or relating to this Agreement; provided, that each party hereto acknowledges that any appeals
from those courts may have to be heard by a court located outside of the Borough of Manhattan in New York City; provided,
further, that nothing in this Agreement shall be deemed or operate to preclude the Transferor or the Issuer from bringing
suit or taking other legal action in any other jurisdiction to realize on the Receivables or to enforce a judgment or other court
order in favor of the Transferor or the Issuer. Each party hereto submits and consents in advance to such jurisdiction in any action
or suit commenced in any such court, and each party hereto hereby waives any objection that such party may have based upon lack
of personal jurisdiction, improper venue or forum non conveniens and hereby consents to the granting of such legal or equitable
relief as is deemed appropriate by such court. Each party hereto hereby waives personal service of the summons, complaint and other
process issued in any such action or suit and agrees that service of such summons, complaint, and other process

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may be made by registered or certified
mail addressed to such party at its address as determined in accordance with Section 8.4, and that service so made
shall be deemed completed upon the earlier of such party’s actual receipt thereof or three days after deposit in the United
States mail, proper postage prepaid. Nothing in this Section 8.3 shall affect the right of any party hereto to serve
legal process in any other manner permitted by law.

(c)               
Because disputes arising in connection with complex financial transactions are most quickly and economically resolved by
an experienced and expert person and the parties wish applicable state and federal laws to apply (rather than arbitration rules),
the parties desire that their disputes be resolved by a judge applying such applicable laws. Therefore, to achieve the best combination
of the benefits of the judicial system and of arbitration, the parties hereto waive all rights to trial by jury in any action,
suit, or proceeding brought to resolve any dispute, whether sounding in contract, tort or otherwise, arising out of, or connection
with, related to, or incidental to the relationship established among them in connection with this Agreement or the transactions
contemplated hereby.

Section 8.4.         
Notices. All demands, notices, instructions, directions and other communications (collectively, “Notices”)
under this Agreement shall be in writing and shall be deemed to have been duly given if personally delivered at, mailed by certified
mail, return receipt requested, or sent by electronic mail:

	
        (i) in the case of BBD, as the Servicer
or as the Administrator, to:

         

        Barclays Bank Delaware

        125 South West Street

        Wilmington, DE 19801

        Attention: Clinton Walker

        Phone Number: (302) 255-8100

        E-mail: cwalker@barclaycardus.com

	
         

        (ii) in the case of the Transferor, to:

        Barclays Dryrock Funding LLC

        100 S. West Street, Office 120

        Wilmington, DE 19801

        Attention: Clinton Walker

        Phone Number: (302) 255-7073

        E-mail: cwalker@barclaycardus.com

         

	(iii)  in the case of the Trust or the Owner Trustee, to:
	
        Wilmington Trust, National Association

        Rodney Square North

        1100 North Market St.

        Wilmington, DE 19890

        Attention: Corporate Trust Administration

        Phone Number: (302) 651-1000

    	35

    	 

    

 

	
        (iv) in the case of the Indenture Trustee,
        to:

        U.S. Bank National Association

        60 Livingston Avenue

        ED-MN-WS3D

        St. Paul, MN 55107-2290

        Attention: Structured Finance/Dryrock

        Phone Number: 1-800-934-6802

 

(v) to any other
Person as specified in the Indenture; or, as to each party, at such other address or electronic mail address as shall be designated
by such party in a written notice to each other party.

Section 8.5.         
Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement
shall for any reason whatsoever be held invalid, illegal or unenforceable, then such covenants, agreements, provisions, or terms
shall be deemed severable from the remaining covenants, agreements, provisions, and terms of this Agreement and shall in no way
affect the validity, legality or enforceability of such remaining covenants, agreements, provisions or terms of this Agreement.

Section 8.6.         
Further Assurances. The Servicer agrees to undertake and perform, from time to time, any and all acts and to execute
any and all further instruments required or reasonably requested by the Owner Trustee and the Indenture Trustee designed to more
fully effect the purposes of this Agreement, including, without limitation, actions or instruments to facilitate compliance with
the FDIC Rule.

Section 8.7.         
No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of any party hereto,
any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof; nor shall any single or partial exercise
of any right, remedy, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of
any other right, remedy, power or privilege. The rights, remedies, powers and privileges provided under this Agreement are cumulative
and not exhaustive of any rights, remedies, powers and privileges provided by law.

Section 8.8.         
Counterparts. This Agreement may be executed in two (2) or more counterparts (and by different parties on separate
counterparts), each of which shall be deemed an original, and all of which when taken together shall constitute one and the same
instrument.

Section 8.9.         
Binding; Third-Party Beneficiaries. This Agreement will inure to the benefit of and be binding upon the parties hereto,
the Noteholders, any Supplemental Credit Enhancement Providers, any Derivative Counterparties and their respective successors and
permitted assigns and, in addition, the Owner Trustee shall be a third party beneficiary hereof. Except as otherwise expressly
provided in this Agreement, no other Person will have any right or obligation hereunder.

    	36

    	 

    

Section 8.10.     
Actions by Noteholders.

(a)               
Wherever in this Agreement a provision is made that an action may be taken or a Notice, demand or instruction given by Noteholders,
such action, Notice, demand or instruction may be taken or given by any Noteholder, unless such provision requires a specific percentage
of Noteholders.

(b)              
Any Notice, request, demand, authorization, direction, consent, waiver or other act by a Noteholder shall bind such Noteholder
and every subsequent Holder of such Note and of any Note issued upon the registration of transfer thereof or in exchange therefor
or in lieu thereof in respect of anything done or omitted to be done by the Owner Trustee, the Indenture Trustee, the Transferor,
the Administrator or the Servicer in reliance thereon, whether or not notation of such action is made upon such Note.

Section 8.11.     
Rule 144A Information. For so long as any of the Notes are “restricted securities” within the meaning
of Rule 144(a)(3) under the Securities Act, the Servicer, the Administrator, and each of the Trust and the Indenture Trustee
agree to cooperate with each other and the Transferor to provide to any Holders of such Series or Class, upon the request of such
Noteholder, any information required to be provided to such Holder or prospective purchaser to satisfy the condition set forth
in Rule 144A(d)(4) under the Securities Act.

Section 8.12.     
Merger and Integration. Except as specifically stated otherwise herein, this Agreement sets forth the entire understanding
of the parties relating to the subject matter hereof, and all prior understandings, written or oral, are superseded by this Agreement.
This Agreement may not be amended, restated, waived, supplemented or otherwise modified from time to time, except as provided herein.

Section 8.13.     
Headings. The headings are for purposes of reference only and shall not otherwise affect the meaning or interpretation
of any provision hereof.

Section 8.14.     
Limitation of Liability. Notwithstanding any other provision herein or elsewhere, this Agreement has been executed
and delivered by Wilmington Trust, National Association, not in its individual capacity, but solely in its capacity as Owner Trustee
of the Trust. In no event shall Wilmington Trust, National Association in its individual capacity have any liability in respect
of the representations, warranties, or obligations of the Trust hereunder or under any other document, as to all of which recourse
shall be had solely to the Trust Assets, and for all purposes of this Agreement and each other document, the Owner Trustee (as
such or in its individual capacity) shall be subject to, and entitled to the benefits of, the terms and provisions of the Trust
Agreement.

Section 8.15.     
Non-petition Covenant. To the fullest extent permitted by applicable law, the Indenture Trustee, the Administrator,
and the Servicer, by entering into this Agreement, and each Noteholder, by accepting a Note, agrees that it will not at any time
acquiesce, petition or otherwise invoke the process of any Governmental Authority for the purpose of commencing or sustaining a
case against the Issuer or the Transferor under any Debtor Relief Law or appointing a receiver, conservator, liquidator, assignee,
trustee, custodian,

    	37

    	 

    

sequestrator or other similar official
for the Issuer or the Transferor or any substantial part of its property or ordering the winding-up or liquidation of the affairs
of the Issuer or the Transferor.

Section 8.16.     
Force Majeure. In no event shall the Indenture Trustee or the Trust be responsible or liable for any failure or delay
in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control,
including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear
or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software
and hardware) services; it being understood that the Indenture Trustee and the Trust shall use reasonable efforts which are consistent
with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

[END OF ARTICLE VIII]

    	38

    	 

    

ARTICLE
IX

COMPLIANCE WITH REGULATION AB

Section 9.1.         
Intent of the Parties; Reasonableness. The Transferor, the Servicer, the Issuer and the Indenture Trustee acknowledge
and agree that the purpose of this Article IX is to facilitate compliance by the Transferor with the provisions of
Regulation AB and related rules and regulations of the Commission. The Transferor shall not exercise its right to request
delivery of information or other performance under these provisions other than in good faith, or for purposes other than the Transferor’s
compliance with the Securities Act, the Exchange Act and the rules and regulations of the Commission thereunder (or the provision
in a private offering of disclosure comparable to that required under the Securities Act). The Servicer acknowledges that interpretations
of the requirements of Regulation AB may change over time, whether due to interpretive guidance provided by the Commission
or its staff, consensus among participants in the asset-backed securities markets, advice of counsel, or otherwise, and agrees
to comply with requests made by the Transferor in good faith for delivery of information under these provisions on the basis of
evolving interpretations of Regulation AB. The Servicer agrees to cooperate in good faith with any reasonable request by
the Transferor for information regarding the Servicer which is required in order to enable the Transferor to comply with the provisions
of Items 1103(a)(1), 1104(e), 1105, 1108, 1111(a)(8), 1117, 1118, 1119, 1121, 1122 and 1123 of Regulation AB as it relates
to the Servicer or to the Servicer’s obligations under this Agreement.

Section
9.2.          Additional
Representations and Warranties of the Servicer. The Servicer shall be deemed to represent to the Transferor, as of the date
on which information is provided to the Transferor under Section 9.3 that, except as disclosed in writing to the Transferor
prior to such date to the best of its knowledge: (i) the Servicer is not aware and has not received notice that any default,
early amortization or other performance triggering event has occurred as to any other securitization due to any act or failure
to act of the Servicer; (ii) the Servicer has not been terminated as servicer in a securitization involving credit card receivables,
either due to a servicing default or to application of a servicing performance test or trigger; (iii) no material noncompliance
with the applicable servicing criteria with respect to other securitizations of credit card receivables involving the Servicer
as servicer has been disclosed or reported by the Servicer; (iv) no material changes to the Servicer’s policies or
procedures with respect to the servicing function it will perform under this Agreement have occurred during the three-year period
immediately preceding the related Securitization Transaction; (v) there are no aspects of the Servicer’s financial
condition that could have a material adverse effect on the performance by the Servicer of its servicing obligations under this
Agreement; and (vi) there are no material legal or governmental proceedings pending (or known to be contemplated) against
the Servicer, any Subservicer or any unaffiliated third-party originator of Receivables.

Section
9.3.          Information
to Be Provided by the Servicer. In connection with any Securitization Transaction, the Servicer shall (i) within five
(5) Business Days following a request by the Transferor, provide to the Transferor, in writing, the information specified in this
Section 9.3, and (ii) as promptly as practicable following notice to or discovery by the Servicer of any changes
to such information, provide to the Transferor, in writing, such updated information.

    	39

    	 

    

(a)               
 If so requested by the Transferor, the Servicer shall provide to the Transferor such information regarding the Servicer
and each Subservicer (each of the Servicer and each Subservicer, for purposes of this paragraph, a “Servicing Party”),
as is requested for the purpose of compliance with Item 1108 of Regulation AB. Such information shall include, at a minimum:

(A)     the Servicing
Party’s name and form of organization;

(B)     a description
of how long the Servicing Party has been servicing credit card receivables; a general discussion of the Servicing Party’s
experience in servicing assets of any type as well as a more detailed discussion of the Servicing Party’s experience in,
and procedures for, the servicing function it will perform under this Agreement; information regarding the size, composition and
growth of the Servicing Party’s portfolio of credit card accounts of a type similar to the Accounts and information on factors
related to the Servicing Party that may be material, in the good faith judgment of the Transferor, to any analysis of the servicing
of the Receivables or the related asset-backed securities, as applicable, including, without limitation:

(1)     whether
any prior securitizations of credit card receivables involving the Servicing Party defaulted or experienced an early amortization
or other performance triggering event because of servicing during the three-year period immediately preceding the related Securitization
Transaction;

(2)     the
extent of outsourcing the Servicing Party utilizes;

(3)     whether
there has been previous disclosure of material noncompliance with the applicable servicing criteria with respect to other securitizations
of credit card receivables involving the Servicing Party as a servicer during the three-year period immediately preceding the related
Securitization Transaction;

(4)     whether
the Servicing Party has been terminated as servicer in a securitization of credit card receivables, either due to a servicing default
or to application of a servicing performance test or trigger; and

(5)     such
other information as the Transferor may reasonably request for the purpose of compliance with Item 1108(b)(2) of Regulation AB;

(C)     a description
of any material changes during the three-year period immediately preceding the related Securitization Transaction to the Servicing
Party’s policies or procedures with respect to the servicing function it will perform under this Agreement;

(D)     information
regarding the Servicing Party’s financial condition, to the extent that there is a material risk that an adverse financial
event or

    	40

    	 

    

circumstance involving the Servicing
Party could have a material adverse effect on the performance by the Servicing Party of its servicing obligations under this Agreement;

(E)     a description
of the Servicing Party’s processes and procedures designed to address any special or unique factors involved in servicing;

(F)     a description
of the Servicing Party’s processes for handling delinquencies, losses, bankruptcies and recoveries, such as sale of defaulted
receivables; and

(G)     information
as to how the Servicing Party defines or determines delinquencies and charge-offs, including the effect of any grace period, re-aging,
restructuring, partial payments considered current or other practices with respect to delinquency and loss experience.

(b)              
As a condition to the succession to the Servicer or any Subservicer as servicer or subservicer under this Agreement by any
Person (i) into which the Servicer or such Subservicer may be merged or consolidated, or (ii) which may be appointed
as a successor to the Servicer or such Subservicer, the Servicer shall provide to the Transferor at least fifteen (15) calendar
days prior to the effective date of such succession or appointment, (x) written notice to the Transferor of such succession
or appointment and (y) in writing and in form and substance reasonably satisfactory to the Transferor, all information reasonably
requested by the Transferor in order to comply with its reporting obligation under Item 6.02 of Form 8-K with respect
to any Series or Class.

(c)               
In addition to such information as the Servicer is obligated to provide pursuant to other provisions of this Agreement,
if so requested by the Transferor, the Servicer shall provide to the Transferor such information regarding the performance or servicing
of the Receivables as is reasonably required to facilitate preparation of distribution reports in accordance with Item 1121
of Regulation AB. Such information shall be provided concurrently with the distribution reports otherwise required to be delivered
monthly by the Servicer under this Agreement, commencing with the first such report due not less than ten (10) Business Days following
such request.

Section 9.4.         
Report on Assessment of Compliance and Attestation.

(a)               
(1) In the event that BBD is not the Servicer, then on or before the earlier of (a) March 31 and (b) thirty
(30) days prior to the date on which the Trust is required to file the report on Form 10-K in each calendar year, and (2) in
the event that BBD or an affiliate of BBD is the Servicer, then on or before the date on which the Trust is required to file the
report on Form 10-K in each calendar year, commencing in 2013, the Servicer shall:

(i)     deliver
to the Transferor a report regarding the Servicer’s assessment of compliance with the Servicing Criteria during the immediately
preceding calendar year, as required under Rules 13a-18 and 15d-18 of the Exchange Act and Item 1122 of Regulation AB.
Such report shall be addressed to the Transferor and signed by an authorized officer of the Servicer, and shall

    	41

    	 

    

address each of the Servicing Criteria
specified in Exhibit D or such criteria as mutually agreed upon by the Transferor and the Servicer;

(ii)     deliver
to the Transferor a report of a registered public accounting firm reasonably acceptable to the Transferor that attests to, and
reports on, the assessment of compliance made by the Servicer and delivered pursuant to the preceding paragraph. Such attestation
shall be in accordance with Rules 1-02(a)(3) and 2-02(g) of Regulation S-X under the Securities Act and the Exchange Act;

(iii)     cause
each Servicing Participant to deliver to the Transferor an assessment of compliance and accountants’ attestation as and when
provided in paragraphs (i) and (ii) of this Section 9.4; and

(iv)     deliver
to the Transferor and any other Person that will be responsible for signing the Sarbanes Certification on behalf of the Trust or
the Transferor with respect to a Securitization Transaction a certification in the form attached hereto as Exhibit C.

The Servicer acknowledges
that the parties identified in clause (iv) above may rely on the certification provided by the Servicer pursuant to such clause
in signing a Sarbanes Certification and filing such with the Commission.

(b)              
Each assessment of compliance provided by a Subservicer pursuant to Section 9.4(a)(i) shall address each of
the Servicing Criteria specified on a certification substantially in the form of Exhibit D hereto delivered to the
Transferor upon reasonable request of the Transferor after the execution of this Agreement or, in the case of a Subservicer subsequently
appointed as such, on or prior to the date of such appointment. An assessment of compliance provided by a Servicing Participant
(other than the Servicer or any Subservicer) pursuant to Section 9.4(a)(iii) need not address any elements of the Servicing
Criteria other than those specified by the Servicer pursuant to Section 9.5.

Section
9.5.          Use
of Subservicers and Servicing Participants. The Servicer shall use its best efforts to hire or otherwise utilize only the
services of Subservicers that agree to comply with the provisions of paragraph (a) of this Section 9.5. The Servicer
shall use its best efforts to hire or otherwise utilize only the services of Servicing Participants, and shall use its best efforts
to ensure that Subservicers hire or otherwise utilize only the services of Servicing Participants, to fulfill any of the obligations
of the Servicer as servicer under this Agreement, if those Servicing Participants agree to comply with the provisions of paragraph (b)
of this Section 9.5.

(a)               
It shall not be necessary for the Servicer to seek the consent of the Transferor to the utilization of any Subservicer.
The Servicer shall use its best efforts to cause any Subservicer used by the Servicer (or by any Subservicer) to comply with the
provisions of this Section 9.5 and with Section 3.4, Section 9.2, Section 9.3(c)
and Section 9.7(a)(i) and (ii) of this Agreement to the same extent as if such Subservicer were the Servicer.
The Servicer shall be responsible for obtaining from each Subservicer and delivering to the Transferor any servicer

    	42

    	 

    

compliance statement required to be
delivered by such Subservicer under Section 3.4, any assessment of compliance and attestation required to be delivered
by such Subservicer under Section 9.4(a)(i) or (ii) and the certification, if any, required to be delivered
to the Person that will be responsible for signing the Sarbanes Certification under Section 9.4 as and when required
to be delivered.

(b)              
It shall not be necessary for the Servicer to seek the consent of the Transferor to the utilization of any Servicing Participant.
The Servicer shall promptly upon request provide to the Transferor a written description (in form and substance satisfactory to
the Transferor) of the role and function of each Servicing Participant utilized by the Servicer or any Subservicer, specifying
(i) the identity of each such Servicing Participant and (ii) which elements of the Servicing Criteria will be addressed
in assessments of compliance provided by each Servicing Participant.

(c)               
As a condition to the utilization of any Servicing Participant, the Servicer shall use its best efforts to cause any such
Servicing Participant used by the Servicer (or by any Subservicer) to comply with the provisions of Section 9.4 of
this Agreement to the same extent as if such Servicing Participant were the Servicer. The Servicer shall be responsible for obtaining
from each Servicing Participant and delivering to the Transferor any assessment of compliance and attestation required to be delivered
by such Servicing Participant under Section 9.4, in each case as and when required to be delivered.

[END OF ARTICLE IX]

    	43

    	 

    

IN WITNESS WHEREOF,
the Transferor, the Servicer, the Administrator, the Indenture Trustee and the Trust have caused this Agreement to be executed
by their respective officers as of the day and year first above written.

	 	BARCLAYS DRYROCK FUNDING LLC,

as Transferor
	 	
        By: /s/ Deepesh Jain                                     

        Name: Deepesh Jain

        Title: Vice President and Treasurer

         

	 	BARCLAYS BANK DELAWARE,

as Servicer and Administrator
	 	
        By: /s/ Gerald Pavelich                             

        Name: Gerald Pavelich

        Title: Chief Financial Officer

	  	 
	 	BARCLAYS DRYROCK ISSUANCE TRUST
	 	By:  WILMINGTON TRUST, NATIONAL ASSOCIATION,

not in its individual capacity but solely

as Owner Trustee on behalf of the Trust
	 	
        By: /s/ Jeanne Oller                                      

        Name: Jeanne M. Oller

        Title: Vice President

	  	 
	 	
        U.S. BANK NATIONAL ASSOCIATION,

        as Indenture Trustee

	  	 
	 	
        By: /s/ Tammy Scultz-Fugh                              

        Name: Tamara Schultz-Fugh

        Title: Vice President

 

[SIGNATURE PAGE TO AMENDED AND RESTATED SERVICING AGREEMENT]

    	 

    	 

    

EXHIBIT A

FORM OF POWER OF ATTORNEY

 

STATE OF DELAWARE)

) ss.:

COUNTY OF NEW CASTLE)

KNOW ALL MEN BY THESE PRESENTS, that
Barclays Dryrock Issuance Trust, a Delaware statutory trust (the “Trust”), does hereby make, constitute and
appoint Barclays Bank Delaware, as Administrator under the Servicing Agreement (as defined below), and its agents and attorneys,
as Attorneys-in-Fact to execute on behalf of the Trust all such documents, reports, filings, certificates and opinions as it shall
be the duty of the Trust to prepare, file or deliver pursuant to the Transaction Documents, including, without limitation, to appear
for and represent the Trust in connection with the preparation, filing and audit of federal, state and local tax returns pertaining
to the Trust, and with full power to perform any and all acts associated with such returns and audits that the Trust could perform,
including, without limitation, the right to distribute and receive confidential information, defend and assert positions in response
to audits, initiate and defend litigation, and to execute waivers of restriction on assessments of deficiencies, consents to the
extension of any statutory or regulatory time limit, and settlements. For the purpose of this power of attorney, the term “Servicing
Agreement” means the Amended and Restated Servicing Agreement, dated as of August 1, 2012, as amended and restated as of
December 17, 2013, by and among Barclays Dryrock Funding LLC, as Transferor, Barclays Bank Delaware, as Servicer and as Administrator,
Barclays Dryrock Issuance Trust, as Issuer and U.S. Bank National Association, as Indenture Trustee, as such may be amended from
time to time.

Notwithstanding anything contained herein to
the contrary, this power of attorney has been countersigned by Wilmington Trust, National Association not in its individual capacity
but solely in its capacity as Owner Trustee of the Trust, and in no event shall Wilmington Trust, National Association in its individual
capacity have any liability for the representations, warranties, covenants, agreements or other obligations of the Trust hereunder
or in any of the certificates, notices or agreements delivered pursuant hereto, as to all of which recourse shall be had solely
to the assets of the Trust. For all purposes of this power of attorney, in the performance of its duties or obligations hereunder
or in the performance of any duties or obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and entitled
to the benefits of, the terms and provisions of Articles V, VI, VII and VIII of the Trust Agreement.

 

    	A-1

    	 

    

All powers of attorney
for this purpose heretofore filed or executed by the Trust are hereby revoked.

EXECUTED this ____ of ____, 20_.

BARCLAYS DRYROCK ISSUANCE TRUST

 

	By:	WILMINGTON TRUST, NATIONAL ASSOCIATION

not in its individual capacity, but solely

as Owner Trustee

	 	 	 
	 	 	 
	By:	 	 
	 	Name:	 
	 	Title:	 

 

[Power of Attorney]

    	 

    	 

    

EXHIBIT B

FORM
OF OPINION OF COUNSEL

WITH RESPECT TO AMENDMENTS

Provisions to be included in

Opinion of Counsel to be delivered pursuant

to Section 8.2(b)

The opinions set
forth below may be subject to all the qualifications, assumptions, limitations and exceptions taken or made in the Opinions of
Counsel delivered on any applicable amendment date.

		(i)	The amendment to the Amended and Restated Servicing Agreement attached as an exhibit to the opinion
(the “Amendment”) has been duly authorized, executed and delivered by the Servicer and constitutes the legal,
valid and binding agreement of the Servicer, enforceable in accordance with its terms, except as such enforceability may be limited
by Debtor Relief Laws and as such enforceability may be limited by general principles of equity (whether considered in a suit at
law or in equity).

		(ii)	The Amendment has been entered into in accordance with the terms and provisions of Section 8.1
of the Amended and Restated Servicing Agreement.

    	B-1

    	 

    

EXHIBIT C

 

FORM OF ANNUAL CERTIFICATION

		Re:	The [       ] agreement dated as of [     ], 20[   ] (the “Agreement”), by and among [IDENTIFY PARTIES]

I, ________________________________,
the _______________________ of [NAME OF COMPANY] (the “Company”), certify to the Transferor, and its officers,
with the knowledge and intent that they will rely upon this certification, that:

(1)     I have
reviewed the report on assessment of the Company’s compliance provided in accordance with Rules 13a-18 and 15d-18 under
the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Item 1122 of Regulation AB
(the “Servicing Assessment”), and the registered public accounting firm’s attestation report provided
in accordance with Rules 13a-18 and 15d-18 under the Exchange Act and Section 1122(b) of Regulation AB (the “Attestation
Report”), that were delivered by the Company to the Transferor pursuant to the Agreement (collectively, the “Company
Information”);

(2)     To the
best of my knowledge, the Company Information, taken as a whole, does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made, in the light of the circumstances under which such statements were
made, not misleading with respect to the period of time covered by the Company Information;

(3)     To the
best of my knowledge, all of the Company Information required to be provided by the Company under the Agreement has been provided
to the Transferor; and

(4)     To the
best of my knowledge, except as disclosed in the Servicing Assessment or the Attestation Report, the Company has fulfilled its
obligations in all material respects under the Agreement.

 

Date: _________________________

 

 

By: ___________________________

Name:

Title:

 

    	C-1

    	 

    

EXHIBIT D

 

SERVICING CRITERIA
TO BE ADDRESSED IN ASSESSMENT OF COMPLIANCE

The assessment of
compliance to be delivered by the [Servicer] [Subservicer] shall address, at a minimum, the criteria identified as below as “Applicable
Servicing Criteria”:

	Servicing Criteria	Applicable Servicing Criteria for Servicer	Applicable Servicing Criteria for a Subservicer
	Reference	Criteria	 	 
	 	General Servicing Considerations	 	 
	1122(d)(1)(i)	Policies and procedures are instituted to monitor any performance or other triggers and events of default in accordance with the transaction agreements.	 	 
	1122(d)(1)(ii)	If any material servicing activities are outsourced to third parties, policies and procedures are instituted to monitor the third party’s performance and compliance with such servicing activities.	 	 
	1122(d)(1)(iii)	Any requirements in the transaction agreements to maintain a back-up servicer for the credit card accounts or accounts are maintained.	 	 
	1122(d)(1)(iv)	A fidelity bond and errors and omissions policy is in effect on the party participating in the servicing function throughout the reporting period in the amount of coverage required by and otherwise in accordance with the terms of the transaction agreements.	 	 
	 	Cash Collection and Administration	 	 
	1122(d)(2)(i)	Payments on credit card accounts are deposited into the appropriate custodial bank accounts and related bank clearing accounts no more than two business days following receipt, or such other number of days specified in the transaction agreements.	 	 
	1122(d)(2)(ii)	Disbursements made via wire transfer on behalf of an obligor or to an investor are made only by authorized personnel.	 	 
	1122(d)(2)(iii)	Advances of funds or guarantees regarding collections, cash flows or distributions, and any interest or other fees charged for such advances, are made, reviewed and approved as specified in the transaction agreements.	 	 
	1122(d)(2)(iv)	The related accounts for the transaction, such as cash reserve accounts or accounts established as a form of overcollateralization, are separately maintained (e.g., with respect to commingling of cash) as set forth in the transaction agreements.	 	 
	1122(d)(2)(v)	Each custodial account is maintained at a federally insured depository institution as set forth in the transaction agreements. For purposes of this criterion, “federally insured depository institution” with respect to a foreign financial institution means a foreign financial institution that meets the requirements of Rule 13k-1(b)(1) of the Securities Exchange Act.	 	 
	1122(d)(2)(vi)	Unissued checks are safeguarded so as to prevent unauthorized access.	 	 
	1122(d)(2)(vii)	Reconciliations are prepared on a monthly basis for all asset-backed securities related bank accounts, including custodial accounts and related bank clearing accounts. These reconciliations are (A) mathematically accurate; (B) prepared within 30 calendar days after the bank statement cutoff date, or such other number of days specified in the transaction agreements; (C) reviewed and approved by someone other than the person who prepared the reconciliation; and (D) contain explanations for reconciling items. These reconciling items are resolved within 90 calendar days of their original identification, or such other number of days specified in the transaction agreements.	 	 

    	D-1

    	 

    

 

	Servicing Criteria	Applicable Servicing Criteria for Servicer	Applicable Servicing Criteria for a Subservicer
	Reference	Criteria	 	 
	 	Investor Remittances and Reporting	 	 
	1122(d)(3)(i)	Reports to investors, including those to be filed with the Commission, are maintained in accordance with the transaction agreements and applicable Commission requirements. Specifically, such reports (A) are prepared in accordance with timeframes and other terms set forth in the transaction agreements; (B) provide information calculated in accordance with the terms specified in the transaction agreements; (C) are filed with the Commission as required by its rules and regulations; and (D) agree with investors’ or the trustee’s records as to the total unpaid principal balance and number of credit card accounts serviced by the Servicer.	 	 
	1122(d)(3)(ii)	Amounts due to investors are allocated and remitted in accordance with timeframes, distribution priority and other terms set forth in the transaction agreements.	 	 
	1122(d)(3)(iii)	Disbursements made to an investor are posted within two business days to the Servicer’s investor records, or such other number of days specified in the transaction agreements.	 	 
	1122(d)(3)(iv)	Amounts remitted to investors per the investor reports agree with cancelled checks, or other form of payment, or custodial bank statements.	 	 
	 	Pool Asset Administration	 	 
	1122(d)(4)(i)	Collateral or security on credit card accounts is maintained as required by the transaction agreements or related asset pool documents.	 	 
	1122(d)(4)(ii)	Account and related documents are safeguarded as required by the transaction agreements	 	 
	1122(d)(4)(iii)	Any additions, removals or substitutions to the asset pool are made, reviewed and approved in accordance with any conditions or requirements in the transaction agreements.	 	 
	1122(d)(4)(iv)	Payments on credit card accounts, including any payoffs, made in accordance with the related credit card accounts documents are posted to the Servicer’s obligor records maintained no more than two business days after receipt, or such other number of days specified in the transaction agreements, and allocated to principal, interest or other items (e.g., escrow) in accordance with the related asset pool documents.	 	 
	1122(d)(4)(v)	The Servicer’s records regarding the accounts and the accounts agree with the Servicer’s records with respect to an obligor’s unpaid principal balance.	 	 
	1122(d)(4)(vi)	Changes with respect to the terms or status of an obligor's account  (e.g., loan modifications or re-agings) are made, reviewed and approved by authorized personnel in accordance with the transaction agreements and related pool asset documents.	 	 
	1122(d)(4)(vii)	Loss mitigation or recovery actions (e.g., forbearance plans, modifications and deeds in lieu of foreclosure, foreclosures and repossessions, as applicable) are initiated, conducted and concluded in accordance with the timeframes or other requirements established by the transaction agreements.	 	 
	1122(d)(4)(viii)	Records documenting collection efforts are maintained during the period an Account is delinquent in accordance with the transaction agreements. Such records are maintained on at least a monthly basis, or such other period specified in the transaction agreements, and describe the entity’s activities in monitoring delinquent Accounts including, for example, phone calls, letters and payment rescheduling plans in cases where delinquency is deemed temporary (e.g., illness or unemployment).	 	 
	1122(d)(4)(ix)	Adjustments to interest rates or rates of return for Accounts with variable rates are computed based on the related Account documents.	 	 

    	D-2

    	 

    

	Servicing Criteria	Applicable Servicing Criteria for Servicer	Applicable Servicing Criteria for a Subservicer
	Reference	Criteria	 	 

	1122(d)(4)(x)	Regarding any funds held in trust for an obligor (such as escrow accounts): (A) such funds are analyzed, in accordance with the obligor’s Account documents, on at least an annual basis, or such other period specified in the transaction agreements; (B) interest on such funds is paid, or credited, to obligors in accordance with applicable Account documents and state laws; and (C) such funds are returned to the obligor within 30 calendar days of full repayment of the related Accounts, or such other number of days specified in the transaction agreements.	 	 
	1122(d)(4)(xi)	Payments made on behalf of an obligor (such as tax or insurance payments) are made on or before the related penalty or expiration dates, as indicated on the appropriate bills or notices for such payments, provided that such support has been received by the servicer at least 30 calendar days prior to these dates, or such other number of days specified in the transaction agreements.	 	 
	1122(d)(4)(xii)	Any late payment penalties in connection with any payment to be made on behalf of an obligor are paid from the servicer’s funds and not charged to the obligor, unless the late payment was due to the obligor’s error or omission.	 	 
	1122(d)(4)(xiii)	Disbursements made on behalf of an obligor are posted within two business days to the obligor’s records maintained by the servicer, or such other number of days specified in the transaction agreements.	 	 
	1122(d)(4)(xiv)	Delinquencies, charge-offs and uncollectible accounts are recognized and recorded in accordance with the transaction agreements.	 	 
	1122(d)(4)(xv)	Any external enhancement or other support, identified in Item 1114(a)(1) through (3) or Item 1115 of Regulation AB, is maintained as set forth in the transaction agreements.	 	 
	 	 	 	 

 

[NAME OF [SERVICER] [Subservicer]

 

 

Date: _________________________

 

 

By: ________________________________

Name:

Title:

 

    	D-3f8k121213ex4i_yappncorp.htm

Exhibit 4.1

 

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

	
Principal Amount: $42,500.00

	
Issue Date: December 4, 2013

Purchase Price: $42,500.00

CONVERTIBLE PROMISSORY NOTE

FOR VALUE RECEIVED, YAPPN CORP., a Delaware corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of ASHER ENTERPRISES, INC., a Delaware corporation, or registered assigns (the “Holder”) the sum of $42,500.00 together with any interest as set forth herein, on September 6, 2014 (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of eight percent (8%) (the “Interest Rate”) per annum from the date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise.  This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid (“Default Interest”).  Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed.  All payments due hereunder (to the extent not converted into common stock, $0.001 par value per share (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America.  All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note.  Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date.  As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed.  Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the “Purchase Agreement”).

  

  

  

 

This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

The following terms shall apply to this Note:

ARTICLE I. CONVERSION RIGHTS

1.1 Conversion Right. The Holder shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III, each in respect of the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non- assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price  (the “Conversion Price”) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 9.99% of the outstanding shares of Common Stock.  For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso, provided, further, however, that the limitations on conversion may be waived by the Holder upon, at the election of the Holder, not less than 61 days’ prior notice to the Borrower, and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be specified in such notice of waiver).  The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”).  The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.

  

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1.2 Conversion Price.

(a) Calculation of Conversion Price. The conversion price (the “Conversion Price”) shall equal the Variable Conversion Price (as defined herein) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events).  The "Variable Conversion Price" shall mean 61% multiplied by the Market Price (as defined herein) (representing a discount rate of 39%).  “Market Price” means the average of the lowest three (3) Trading Prices (as defined below) for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.  “Trading Price” means, for any security as of any date, the closing bid price on the OTCQB, or applicable trading market (the “OTCQB”) as reported by a reliable reporting service (“Reporting Service”) designated by the Holder (i.e. Bloomberg) or, if the OTCQB is not the principal trading market for such security, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the “pink sheets” by the National Quotation Bureau, Inc.  If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Borrower and the holders of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required in order to determine the Conversion Price of such Notes.  “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the OTCQB, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.

(b) Conversion Price During Major Announcements. Notwithstanding anything contained in Section 1.2(a) to the contrary, in the event the Borrower (i) makes a public announcement that it intends to consolidate or merge with any other corporation (other than a merger in which the Borrower is the surviving or continuing corporation and its capital stock is unchanged) or sell or transfer all or substantially all of the assets of the Borrower or (ii) any person, group or entity (including the Borrower) publicly announces a tender offer to purchase 50% or more of the Borrower’s Common Stock (or any other takeover scheme) (the date of the announcement referred to in clause (i) or (ii) is hereinafter referred to as the  “Announcement Date”), then the Conversion Price shall, effective upon the Announcement Date and continuing through the Adjusted Conversion Price Termination Date (as defined below), be equal to the lower of (x) the Conversion Price which would have been applicable for a Conversion occurring on the Announcement Date and (y) the Conversion Price that would otherwise be in effect. From and after the Adjusted Conversion Price Termination Date, the Conversion Price shall be determined as set forth in this Section 1.2(a).  For purposes hereof,  “Adjusted Conversion Price Termination Date” shall mean, with respect to any proposed transaction or tender offer (or takeover scheme) for which a public announcement as contemplated by this Section 1.2(b) has been made, the date upon which the Borrower (in the case of clause (i) above) or the person, group or entity (in the case of clause (ii) above) consummates or publicly announces the termination or abandonment of the proposed transaction or tender offer (or takeover scheme) which caused this Section 1.2(b) to become operative.

  

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1.3 Authorized Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement.  The Borrower is required at all times to have authorized and reserved four times the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Notes in effect from time to time)(the “Reserved Amount”).  The Reserved Amount shall be increased from time to time in accordance with the Borrower’s obligations pursuant to Section 4(g) of the Purchase Agreement.  The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable.  In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Notes.  The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.

If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note.

1.4 Method of Conversion.

(a) Mechanics of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time from time to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower.

(b) Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted.  The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion.  In the event of any dispute or discrepancy, such records of the Borrower shall, prima facie, be controlling and determinative in the absence of manifest error.  Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid principal amount of this Note.  The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.

  

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(c) Payment of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.

(d) Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement.

(e) Obligation of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion.  If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion.  The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 6:00 p.m., New York, New York time, on such date.

  

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(f) Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions contained in Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system.

(g) Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section 1.3 above, which failure shall be governed by such Section) the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock.  Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note.  The Borrower agrees that the right to convert is a valuable right to the Holder.  The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify.  Accordingly the parties acknowledge that the liquidated damages provision contained in this Section 1.4(g) are justified.

1.5 Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless  (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of  counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement).  Except as otherwise provided in the Purchase Agreement (and subject to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

  

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The legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold.  In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

1.6 Effect of Certain Events.

(a) Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either:  (i) be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III) or (ii) be treated pursuant to Section 1.6(b) hereof.  “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.

(b) Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof.  The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b).  The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.

  

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(c) Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.

(d) Adjustment Due to Dilutive Issuance. If, at any time when any Notes are issued and outstanding, the Borrower issues or sells, or in accordance with this Section 1.6(d) hereof is deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith) less than the Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration per share received by the Borrower in such Dilutive Issuance.

The Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or grants any warrants, rights or options (not including employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase Common Stock or other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”) and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share.  For purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or granting of all such Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the exercise of all such Options, plus, in the case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion of Convertible Securities, if applicable).  No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon exercise of such Options.

  

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Additionally, the Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or sells any Convertible Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options), and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share.  For the purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities.  No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.

(e) Purchase Rights. If, at any time when any Notes are issued and outstanding, the Borrower issues any convertible securities or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

(f) Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described in this Section 1.6, the Borrower, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based.  The Borrower shall, upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note.

  

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1.7 Trading Market Limitations. Unless permitted by the applicable rules and regulations of the principal securities market on which the Common Stock is then listed or traded, in no event shall the Borrower issue upon conversion of or otherwise pursuant to this Note and the other Notes issued pursuant to the Purchase Agreement more than the maximum number of shares of Common Stock that the Borrower can issue pursuant to any rule of the principal United States securities market on which the Common Stock is then traded (the “Maximum Share Amount”), which shall be 9.99% of the total shares outstanding on the Closing Date (as defined in the Purchase Agreement), subject to equitable adjustment from time to time for stock splits, stock dividends, combinations, capital reorganizations and similar events relating to the Common Stock occurring after the date hereof.  Once the Maximum Share Amount has been issued, if the Borrower fails to eliminate any prohibitions under applicable law or the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Borrower or any of its securities on the Borrower’s ability to issue shares of Common Stock in excess of the Maximum Share Amount, in lieu of any further right to convert this Note, this will be considered an Event of Default under Section 3.3 of the Note.

1.8 Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms  of this Note.  Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted.  In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion Default Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any subsequent Conversion Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.3) for the Borrower’s failure to convert this Note.

  

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1.9 Prepayment. Notwithstanding anything to the contrary contained in this Note, at any time during the period beginning on the Issue Date and ending on the date which is thirty (30) days following the issue date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9.  Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice.  On the date fixed for prepayment (the “Optional Prepayment Date”), the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date.  If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Optional Prepayment Amount”) equal to 110%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.  If the Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

Notwithstanding anything to the contrary contained in this Note, at any time during the period beginning  on the date which is thirty-one (31) days following the issue date and ending on the date which is sixty (60) days following the issue date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9.  Any Optional Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice.  On the Optional Prepayment Date, the Borrower shall make payment of the Second Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date.  If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Second Optional Prepayment Amount”) equal to 115%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.  If the Borrower delivers an Optional Prepayment Notice and fails to pay the Second Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

  

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Notwithstanding anything to the contrary contained in this Note, at any time during the period beginning  on the date which is sixty-one (61) days following the issue date and ending on the date which is ninety (90) days following the issue date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9.  Any Optional Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice.  On the Optional Prepayment Date, the Borrower shall make payment of the Third Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date.  If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Third Optional Prepayment Amount”) equal to 120%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.  If the Borrower delivers an Optional Prepayment Notice and fails to pay the Third Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

Notwithstanding anything to the contrary stated elsewhere herein, at any time during the period beginning on the date that is ninety-one (91) day from the issue date and ending one hundred twenty (120) days following the issue date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9.  Any Optional Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice.  On the Optional Prepayment Date, the Borrower shall make payment of the Fourth Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date.  If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Fourth Optional Prepayment Amount”) equal to 125%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.

 

Notwithstanding any to the contrary stated elsewhere herein, at any time during the period beginning on the date that is one hundred twenty-one (121) day from the issue date and ending one hundred fifty (150) days following the issue date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9.  Any Optional Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice.  On the Optional Prepayment Date, the Borrower shall make payment of the Fifth Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date.  If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Fifth Optional Prepayment Amount”) equal to 130%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.  If the Borrower delivers an Optional Prepayment Notice and fails to pay the Fifth Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

 

  

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Notwithstanding any to the contrary stated elsewhere herein, at any time during the period beginning on the date that is one hundred fifty-one (151) day from the issue date and ending one hundred eighty (180) days following the issue date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9.  Any Optional Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice.  On the Optional Prepayment Date, the Borrower shall make payment of the Sixth Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date.  If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Sixth Optional Prepayment Amount”) equal to 135%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.  If the Borrower delivers an Optional Prepayment Notice and fails to pay the Sixth Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

 

After the expiration of one hundred eighty (180) following the date of the Note, the Borrower shall have no right of prepayment.

ARTICLE II.  CERTAIN COVENANTS

2.1 Distributions on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority of the Borrower’s disinterested directors.

  

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2.2 Restriction on Stock Repurchases. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants, rights or options to purchase or acquire any such shares.

2.3 Borrowings. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, (a) create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of any other person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments for deposit or collection, or (b) suffer to exist any liability for borrowed money, except any borrowings that do not render the Borrower a "Shell" company as defined in Rule 12b-2 under the Securities Exchange Act of 1934.

2.4 Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business except when any sale, lease or disposition is done for fair consideration and does not render the Borrower a "Shell" company as defined in Rule 12b-2 under the Securities Exchange Act of 1934.  Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.

2.5 Advances and Loans. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances (a) in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior to the date hereof, (b) made in the ordinary course of business, or (c) that do not render the Borrower a "Shell" company as defined in Rule 12b-2 under the Securities Exchange Act of 1934 that do  or (d) not in excess of $100,000.

 

ARTICLE III.  EVENTS OF DEFAULT

If any of the following events of default (each, an “Event of Default”) shall occur:

3.1 Failure to Pay Principal or Interest.  The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity, upon acceleration or otherwise.

  

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3.2 Conversion and the Shares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion.  It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty eight (48) hours of a demand from the Holder.

3.3 Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of ten (10) days after written notice thereof to the Borrower from the Holder.

3.4 Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

3.5 Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.

3.6 Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $50,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.

3.7 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.

  

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3.8 Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTCBB, OTCQB or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the NYSE MKT.

3.9 Failure to Comply with the Exchange Act.  The Borrower shall fail to comply with the reporting requirements of the Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.

3.10 Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

3.11 Cessation of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.

3.12 Maintenance of Assets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future).

3.13 Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

3.14 Reverse Splits. The Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder.

 

3.15 Replacement of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.

 

3.16 Cross-Default. Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements” means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term “Other Agreements” shall not include the related or companion documents to this Note.  Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to the Holder.

 

  

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Upon the occurrence and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Sum (as defined herein).  UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO: (Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the occurrence and during the continuation of any Event of Default specified in Sections 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due on this Note upon a Trading Market Prepayment Event pursuant to Section 1.7 or upon acceleration), 3.3, 3.4, 3.6, 3.8, 3.9, 3.11, 3.12, 3.13, 3.14, and/or 3. 15 exercisable through the delivery of written notice to the Borrower by such Holders (the “Default Notice”), and upon the occurrence of an Event of Default specified the remaining sections of Articles III (other than failure to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the greater of (i) 150% times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”) plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Sum”) or (ii) the “parity value” of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article I, treating the Trading Day immediately preceding the Mandatory Prepayment Date as the “Conversion Date” for purposes of determining the lowest applicable Conversion Price, unless the Default Event arises as a result of a breach in respect of a specific Conversion Date in which case such Conversion Date shall be the Conversion Date), multiplied by (b) the highest Closing Price for the Common Stock during the period beginning on the date of first occurrence of the Event of Default and ending one day prior to the Mandatory Prepayment Date (the “Default Amount”) and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity. 

  

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If the Borrower fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.

ARTICLE IV. MISCELLANEOUS

4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges.  All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

4.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice.  Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.  The addresses for such communications shall be:

If to the Borrower, to:

YAPPN CORP.

1001 Avenue of the Americas - 11th floor

New York, NY 10018

Attn: DAVID LUCATCH, Chief Executive Officer

facsimile:

 

With a copy by fax only to (which copy shall not constitute notice):

Sichenzia Ross Friedman Ference LLP

Attn: Harvey Kesner, Esq.

61 Broadway

New York, New York 10006

facsimile: 212-930-9725

  

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If to the Holder:

ASHER ENTERPRISES, INC.

1 Linden Pl., Suite 207

Great Neck, NY. 11021

Attn: Curt Kramer, President

facsimile: 516-498-9894

With a copy by fax only to (which copy shall not constitute notice):

Naidich Wurman Birnbaum & Maday, LLP

80 Cuttermill Road, Suite 410

Great Neck, NY 11021

Attn: Bernard S. Feldman, Esq.

facsimile: 516-466-3555

4.3 Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder.  The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.

4.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns.  Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a) of the 1933 Act).  Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.

4.5 Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.

4.6 Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws.  Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of New York or in the federal courts located in the state and county of Nassau.  The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens.  The Borrower and Holder waive trial by jury.  The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs.  In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.   Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

  

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4.7 Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding principal amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note.  The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.

4.8 Purchase Agreement. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.

4.9 Notice of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders).  In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time.  The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9.

4.10 Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby.  Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.

  

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IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this December 4, 2013.

YAPPN CORP.

By:                                                                                                  

       CRAIG MCCANNELL

       Chief Financial Officer

 

  

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EXHIBIT A --  NOTICE OF CONVERSION

The undersigned hereby elects to convert $                                principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of YAPPN CORP., a Delaware corporation (the “Borrower”) according to the conditions of the convertible note of the Borrower dated as of December 4, 2013 (the “Note”), as of the date written below.  No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.

Box Checked as to applicable instructions:

	
  

	
o

	
The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).

Name of DTC Prime Broker:

Account Number:

	
  

	
o

	
The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:

ASHER ENTERPRISES, INC.

1 Linden Pl., Suite 207

Great Neck, NY. 11021

Attention: Certificate Delivery

(516) 498-9890

Date of Conversion:                                                                                                           

Applicable Conversion Price:                                                             $                           

Number of Shares of Common Stock to be Issued

    Pursuant to Conversion of the Notes:                                                                        

Amount of Principal Balance Due remaining

    Under the Note after this conversion:                                                                        

ASHER ENTERPRISES, INC.

By:                                                                                                 

Name: Curt Kramer

Title:   President

Date:                              

1 Linden Pl., Suite 207

Great Neck, NY. 11021

 

 

A-1

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