AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 27, 1998
REGISTRATION NO. 333-29495
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 5
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PARTNERS FIRST RECEIVABLES FUNDING, LLC
(Originator of the Trust described herein)
(Exact name of registrant as specified in its charter)
PARTNERS FIRST CREDIT CARD MASTER TRUST
(Issuer with respect to the Certificates)
DELAWARE 52-2072056
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
PARTNERS FIRST RECEIVABLES FUNDING, LLC
900 ELKRIDGE LANDING ROAD
SUITE 301
LINTHICUM, MARYLAND 21090-2925
(410) 855-8600
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
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TERENCE F. BROWNE, ESQ.
GENERAL COUNSEL
PARTNERS FIRST HOLDINGS, LLC
900 ELKRIDGE LANDING ROAD
SUITE 300
LINTHICUM, MARYLAND 21090-2925
(410) 865-8700
(Name, address, including zip code, and telephone number, including
area code, of agents for service)
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COPIES TO:
ANDREW M. FAULKNER, ESQ. EDWARD M. DESEAR, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & ORRICK, HERRINGTON & SUTCLIFFE LLP
FLOM LLP 666 FIFTH AVENUE
919 THIRD AVENUE NEW YORK, NEW YORK 10103
NEW YORK, NEW YORK 10022-9931 (212) 506-5000
(212) 735-2853
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after this Registration Statement becomes effective as
determined by market conditions.
If the only securities being registered on this form are to be offered
pursuant to dividend or interest reinvestment plans, please check the
following box. |_|
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number
of the earlier effective registration statement for the same offering.
|_| _______________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_| ____________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS AMOUNT TO PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO BE BE REGISTERED OFFERING PRICE OFFERING PRICE (1) REGISTRATION FEE
REGISTERED PER UNIT (1)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Backed
Certificates...... $1,000,000 100% $1,000,000 $303.03(2)
</TABLE>
- --------------------
(1) Estimated solely for purpose of calculating the registration fee.
(2) $303.03 of which was previously paid in connection with the original
filing of the Registration Statement.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
============================================================================
[FLAG]
The information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with
the Securities and Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall there be
any sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED FEBRUARY 27, 1998
PROSPECTUS
PARTNERS FIRST CREDIT CARD MASTER TRUST
ASSET BACKED CERTIFICATES
PARTNERS FIRST RECEIVABLES FUNDING, LLC
TRANSFEROR
PARTNERS FIRST HOLDINGS, LLC
SERVICER
---------------
Partners First Receivables Funding, LLC ("PFRF"), as transferor (in
such capacity, the "Transferor"), may sell from time to time one or more
series (each, a "Series") of asset backed certificates (the
"Certificates") evidencing undivided interests in certain assets of the
Partners First Credit Card Master Trust (the "Trust"), to be created
pursuant to a pooling and servicing agreement (the "Pooling and Servicing
Agreement") among the Transferor, Partners First Holdings, LLC, as
Servicer (in such capacity, the "Servicer"), and The Bank of New York, as
trustee (the "Trustee"). The property of the Trust will include, among
other things, the receivables (the "Receivables") that are generated from
time to time in a portfolio of consumer revolving credit card accounts
(the "Accounts"), collections thereon, funds on deposit in certain
accounts of the Trust, any Participation Interests (as defined herein)
included in the Trust, collections thereon and any Credit Enhancement (as
defined herein) with respect to any particular Series or Class as more
fully described herein and, with respect to a Series offered hereby, in
the related Prospectus Supplement (as defined below). The Receivables in
the Accounts are sold to PFRF and then transferred by PFRF to the Trust
as more fully described herein. All of the Receivables in the Trust on
the date hereof were originated by BankBoston (NH), National Association
("BKB") and Harris Trust and Savings Bank ("Harris"). As more fully set
forth herein, it is anticipated that in the future, Receivables
originated by financial institutions other than BKB and Harris may be
included in the Trust, upon satisfaction of certain conditions, including
the Rating Agency Condition.
Certificates will be sold from time to time under this Prospectus
on terms determined for each Series at the time of the sale and described
in the related prospectus supplement (each, a "Prospectus Supplement").
Each Series will consist of one or more classes of Certificates (each, a
"Class"). Each Certificate will represent an undivided interest in
certain assets of the Trust and the interest of the holders of each Class
or Series will include the right to receive a varying percentage of each
month's collections with respect to the Receivables at the times, in the
manner and to the extent described herein and, with respect to any Series
offered hereby, in the related Prospectus Supplement. Interest and
principal payments with respect to each Series offered hereby will be
made as specified in the related Prospectus Supplement. A Series offered
hereby (or any Class within such Series) may be entitled to the benefits
of a cash collateral account or guaranty, spread account, yield
supplement account, collateral interest, letter of credit, surety bond,
insurance policy or other form of credit enhancement as specified in the
Prospectus Supplement relating to such Series. In addition, any Series
offered hereby may include one or more Classes which are subordinated in
right and priority of payment to one or more other Classes of such Series
or another Series, in each case to the extent described in the related
Prospectus Supplement. Each Series of Certificates or Class offered
hereby will be rated in one of the four highest categories by at least
one nationally recognized statistical rating organization.
POTENTIAL INVESTORS SHOULD CONSIDER THE INFORMATION SET FORTH IN "RISK
FACTORS" COMMENCING ON PAGE 28 HEREIN.
---------------
THE CERTIFICATES REPRESENT BENEFICIAL INTERESTS IN THE TRUST ONLY AND DO
NOT REPRESENT INTERESTS IN OR RECOURSE OBLIGATIONS OF THE TRANSFEROR, THE
SERVICER OR ANY AFFILIATE OF EITHER OF THEM. A CERTIFICATE IS NOT A
DEPOSIT AND NEITHER THE CERTIFICATES NOR THE UNDERLYING ACCOUNTS OR
RECEIVABLES ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE
ACCOMPANYING PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
---------------
Certificates may be sold by the Transferor directly to purchasers,
through agents designated from time to time, through underwriting
syndicates led by one or more managing underwriters or through one or
more underwriters acting alone. If underwriters or agents are involved in
the offering of the Certificates of any Series offered hereby, the name
of the managing underwriter or underwriters or agents will be set forth
in the related Prospectus Supplement. If an underwriter, agent or dealer
is involved in the offering of the Certificates of any Series offered
hereby, the underwriter's discount, agent's commission or dealer's
purchase price will be set forth in, or may be calculated from, the
related Prospectus Supplement, and the net proceeds to the Transferor
from such offering will be the public offering price of such Certificates
less such discount in the case of an underwriter, the purchase price of
such Certificates less such commission in the case of an agent or the
purchase price of such Certificates in the case of a dealer, and less, in
each case, the other expenses of the Transferor associated with the
issuance and distribution of such Certificates. See "Plan of
Distribution."
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF CERTIFICATES
OF ANY SERIES UNLESS ACCOMPANIED BY THE RELATED PROSPECTUS SUPPLEMENT.
---------------
THE DATE OF THIS PROSPECTUS IS FEBRUARY __, 1998
TABLE OF CONTENTS
Page
----
PROSPECTUS SUPPLEMENT....................................................6
REPORTS TO CERTIFICATEHOLDERS............................................6
AVAILABLE INFORMATION....................................................6
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..........................6
PROSPECTUS SUMMARY.......................................................8
RISK FACTORS............................................................28
USE OF PROCEEDS.........................................................38
THE TRUST...............................................................39
CREDIT CARD ACTIVITIES..................................................39
General...........................................................39
Business Strategy.................................................40
Processing and Servicing of Credit Card Accounts..................41
Account Origination...............................................41
Underwriting Procedures...........................................42
Additional Accounts...............................................43
Billing and Payments..............................................43
Interchange.......................................................45
Collection of Delinquent Accounts.................................46
Recoveries........................................................46
Fraud Prevention..................................................47
PARTNERS FIRST HOLDINGS, LLC............................................47
PARTNERS FIRST RECEIVABLES FUNDING, LLC.................................48
THE ACCOUNTS............................................................48
DESCRIPTION OF THE CERTIFICATES.........................................49
General...........................................................49
Book-Entry Registration...........................................49
Definitive Certificates...........................................52
Interest..........................................................53
Principal.........................................................53
Pay Out Events and Reinvestment Events............................55
Servicing Compensation and Payment of Expenses....................56
Termination of the Trust..........................................57
DESCRIPTION OF THE POOLING AND SERVICING AGREEMENT......................57
Conveyance of Receivables.........................................57
Representations and Warranties....................................58
Transferor Certificates...........................................60
Additions of Accounts or Participation Interests..................60
Removal of Accounts...............................................61
Discount Option...................................................61
Yield Supplement Account..........................................62
Premium Option....................................................62
Indemnification...................................................63
Collection and Other Servicing Procedures.........................63
New Issuances.....................................................64
Collection Account................................................66
Allocations.......................................................67
Groups of Series..................................................68
Reallocations Among Certificates of Different Series
within a Reallocation Group....................................68
Sharing of Excess Finance Charge Collections Among
Excess Allocation Series.......................................69
Shared Principal Collections......................................70
Paired Series.....................................................70
Special Funding Account...........................................71
Funding Period; Pre-Funding Account...............................71
Defaulted Receivables; Rebates and Fraudulent Charges.............72
Credit Enhancement................................................72
Interest Rate Swaps and Related Caps, Floors and Collars..........74
Servicer Covenants................................................75
Certain Matters Regarding the Servicer............................75
Servicer Default..................................................75
Evidence as to Compliance.........................................77
Amendments........................................................77
List of Certificateholders........................................78
The Trustee.......................................................78
DESCRIPTION OF THE PURCHASE AGREEMENTS..................................78
PFR Purchase Agreements...........................................78
Transferor Purchase Agreement.....................................80
Formation Transactions; Account Origination.......................81
Limitations on Liability..........................................82
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES................................82
Transfer of Receivables...........................................82
Certain Matters Relating to Insolvency............................83
Consumer Protection Laws..........................................85
Proposed Legislation..............................................86
U.S. FEDERAL INCOME TAX CONSEQUENCES....................................86
General...........................................................86
Characterization of the Certificates as Indebtedness..............86
Taxation of Interest Income of Certificateholders.................87
Sale of a Certificate.............................................88
Tax Characterization of the Trust.................................88
FASIT ............................................................90
Foreign Investors.................................................90
Defeasance........................................................91
STATE AND LOCAL TAXATION................................................91
ERISA CONSIDERATIONS....................................................93
PLAN OF DISTRIBUTION....................................................95
LEGAL MATTERS...........................................................96
INDEX OF DEFINED TERMS..................................................97
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to any Series will, among other
things, set forth with respect to such Series: (a) the initial aggregate
principal amount of each Class of such Series; (b) the rate of interest
on each Certificate (the "Certificate Rate") (or method of determining
the Certificate Rate) of each such Class; (c) the expected date or dates
on which the Invested Amount with respect to each such Class will have
been paid to the holders of the Certificates of such Class
("Certificateholders"); (d) the extent to which any Class within a Series
is subordinated to any other Class of such Series or any other Series;
(e) the Distribution Dates for the respective Classes; (f) relevant
financial information with respect to the Receivables; (g) additional
information with respect to any Series Enhancement relating to such
Series; and (h) the plan of distribution of such Series.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates (as defined herein) are
issued, monthly and annual unaudited reports, containing information
concerning the Trust and prepared by the Servicer, will be sent on behalf
of the Trust to Cede & Co. ("Cede"), as nominee of The Depository Trust
Company ("DTC") and registered holder of the Certificates pursuant to the
Pooling and Servicing Agreement. Such reports will be made available by
DTC and its participants to the Certificateholders in accordance with the
rules, regulations and procedures creating and affecting DTC. See
"Description of the Pooling and Servicing Agreement -- Evidence as to
Compliance." Such reports will not constitute financial statements
prepared in accordance with generally accepted accounting principles. The
Pooling and Servicing Agreement does not require the sending of, and the
Transferor does not intend to send, any of its financial reports to the
Certificateholders or to the owners of beneficial interests in the
Certificates ("Certificate Owners").
AVAILABLE INFORMATION
The Transferor, as originator of the Trust, has filed a
Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act"), with the Securities and Exchange Commission (the
"Commission") with respect to the Certificates offered pursuant to this
Prospectus. For further information, reference is made to the
Registration Statement and amendments thereof and exhibits thereto, which
are available for inspection without charge at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549; Seven World Trade Center, New York, New
York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of the Registration Statement and
amendments thereof and exhibits thereto may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Servicer will file with
the Commission such periodic reports, if any, with respect to the Trust
as are required under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules and regulations of the Commission
thereunder. In addition, the Commission maintains a public access site on
the Internet through the World Wide Web at which site reports, proxy and
information statements and other information regarding registrants,
including all electronic filings, may be viewed. The Internet address of
the Commission's World Wide Web site is http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf of
the Trust, pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Certificates offered hereby shall be
deemed to be incorporated by reference into this Prospectus and to be
part hereof. Any statement contained herein or in a document deemed to be
incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained in any other subsequently filed document which also is deemed
to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be
deemed, except as modified or superseded, to constitute a part of this
Prospectus.
The Servicer will provide without charge to each person to whom a
copy of this Prospectus is delivered, on the written or oral request of
any such person, a copy of any or all of the documents incorporated
herein by reference, except the exhibits to such documents (unless such
exhibits are specifically incorporated by reference in such documents).
Written requests for such copies should be directed to Partners First
Holdings, LLC; 900 Elkridge Landing Road, Suite 300, Linthicum, Maryland
21090-2925; Attention: Chief Financial Officer. Telephone requests for
such copies should be directed to (410) 865-8700.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to
the detailed information appearing elsewhere in this Prospectus and in
any accompanying Prospectus Supplement. Reference is made to the Index of
Defined Terms beginning on page 96 herein for the location herein of the
definitions of certain capitalized terms used herein. Unless the context
requires otherwise, certain capitalized terms, when used herein and in
any accompanying Prospectus Supplement, relate only to the particular
Series being offered by such Prospectus Supplement.
Issuer........................ Partners First Credit Card Master
Trust (the "Trust"). The Trust, as a
master trust, is expected to issue
series of Certificates (each, a
"Series") from time to time. See "The
Trust."
Servicer...................... Partners First Holdings, LLC, a
Delaware limited liability company
("Holdings"), as Servicer (in such
capacity, the "Servicer"). The
Servicer will receive a fee as
servicing compensation from the Trust
in respect of each Series in the
amounts and at the times specified in
the related Prospectus Supplement (the
"Servicing Fee"). The Servicing Fee
may be payable from Finance Charge
Receivables, Interchange or other
amounts as specified in the related
Prospectus Supplement.
In certain limited circumstances,
Holdings may resign or be removed, in
which event the Trustee or, so long as
it meets certain eligibility standards
set forth in the Pooling and Servicing
Agreement, a third-party Servicer may
be appointed as successor Servicer
(Holdings, or any such successor
Servicer, is referred to herein as the
"Servicer"). Holdings is permitted to
delegate certain of its duties as
Servicer to any of its affiliates or,
subject to certain conditions, to
third party service providers, but any
such delegation will not relieve the
Servicer of its liability and
responsibility with respect to such
duties under the Pooling and Servicing
Agreement or any Supplement. Holdings
has delegated certain of its servicing
duties to First Data Resources Inc.
("FDR"). See "Description of the
Certificates -- Servicing Compensation
and Payment of Expenses."
Trustee....................... The Bank of New York (the "Trustee"), a
New York banking corporation.
Transferor.................... Partners First Receivables Funding,
LLC ("PFRF" or, in its capacity as
transferor, the "Transferor"), a
Delaware limited liability company and
a special purpose wholly owned
subsidiary of Partners First
Receivables, LLC ("PFR"), a Delaware
limited liability company. PFR is a
wholly owned subsidiary of Holdings.
Account Originators........... Pursuant to separate Contribution
Agreements (each, a "Contribution
Agreement"), on January 29, 1998, the
date of issuance of the first Series
of Certificates (the "Initial Series
Issuance Date") BankBoston (NH),
National Association ("BKB"), a
national banking association organized
under the laws of the United States,
and Harris Trust and Savings Bank, a
bank chartered under the laws of the
State of Illinois ("Harris"), each
contributed to Partners First
Holdings, LLC ("Holdings") all of
their respective rights under
specified consumer revolving credit
card accounts originated by BKB or
Harris, as applicable, except (i) the
related cardholder agreements, (ii)
all rights to create, enforce and
collect receivables and any other
amounts owing under the Partners First
Portfolio (as defined below) and (iii)
all rights to amend and modify the
related cardholder agreements
(collectively, the "Retained Rights").
As used herein "Partners First
Portfolio" means (i) the credit card
accounts originated or acquired by BKB
and Harris and contributed to Holdings
pursuant to the Contribution
Agreements on the Initial Series
Issuance Date, (ii) any other consumer
revolving credit card accounts
originated by BKB or Harris, as
applicable, following the Initial
Series Issuance Date and transferred
to Holdings by BKB or Harris pursuant
to the Assistance Agreements and (iii)
any other credit card accounts over
which Holdings has acquired control
pursuant to an agreement with the
financial institution which originated
or acquired such credit card accounts.
Under the Contribution Agreements and
the Assistance Agreements, Holdings
has the right to designate the
financial institutions that will
exercise the Retained Rights with
respect to the credit card accounts in
the Partners First Portfolio. On the
Initial Series Issuance Date, Holdings
designated each of BKB and Harris as
the Account Originator with respect to
specified credit card accounts in the
Partners First Portfolio. As used
herein, "Account Originator" means, as
of any date of determination, each
financial institution which (i) has
been designated by Holdings as the
financial institution that will
exercise the Retained Rights with
respect to credit card accounts in the
Partners First Portfolio; (ii) if such
financial institution is not an
affiliate of Holdings, has entered
into a written agreement with Holdings
in the form of, or substantially
similar to, the Assistance Agreements
(as defined below) and (iii) has
entered into a receivables purchase
agreement with PFR in, or
substantially in, the form of the PFR
Purchase Agreements (as defined
below).
On the Initial Series Issuance Date,
Holdings entered into separate
Assistance Agreements (each, an
"Assistance Agreement") with each of
BKB and Harris, pursuant to which each
of BKB and Harris appointed Holdings
its sole and exclusive agent to
exercise all of its rights and perform
all of its obligations with respect to
the credit card accounts in the
Partners First Portfolio originated by
BKB and Harris, respectively, except
for the power to determine the terms
under which new credit card accounts
will be originated, whether to extend
credit under the credit card accounts,
and to effect Interchange (as defined
below) settlement. In connection with
such appointment, Holdings authorized
each of BKB and Harris to use, on a
non-exclusive basis, Holdings' rights
under the credit card accounts in the
Partners First Portfolio and related
assets including certain proprietary
information related thereto, to the
extent necessary for each of BKB and
Harris to perform the forgoing
functions. In its capacity as agent
under the Assistance Agreements,
Holdings will perform certain
functions including, making
recommendations with respect to the
Credit Card Guidelines (as defined
below), administering the Credit Card
Guidelines, managing the Partners
First Portfolio, arranging for the
billing and collection of any
receivables arising thereunder, and
otherwise servicing and administering
the credit card accounts in the
Partners First Portfolio and the
related receivables. As used herein,
"Credit Card Guidelines" means, with
respect to any credit card account and
the related receivables, the
respective policies and procedures of
the applicable Account Originator,
relating to (i) the determination of
the creditworthiness of cardholders
and potential cardholders, (ii) the
extension of credit under the credit
card accounts, and (iii) the
maintenance and enforcement of the
credit card accounts and the
collection of the related receivables.
Until some time prior to end of March
1998, each of BKB and Harris will
remain Account Originators, originate
new credit card accounts into the
Partners First Portfolio and exercise
the Retained Rights with respect to
the credit card accounts originated by
BKB and Harris, respectively. In March
1998, Holdings will designate BKB as
the Account Originator with respect to
the existing credit card accounts in
the Partners First Portfolio,
including the Accounts. Harris will
continue to be an Account Originator
with respect to any new credit card
accounts, including any New Accounts,
originated by it. In addition, it is
anticipated that Holdings will
establish or acquire a federally
insured financial institution (the
"Bank"), which will be a wholly owned
subsidiary of Holdings, and will
designate the Bank as the sole Account
Originator with respect to the credit
card accounts in the Partners First
Portfolio, including the Accounts and
any New Accounts. Effective as of the
date of the Banks's appointment as
Account Originator each of BKB and
Harris will cease to be an Account
Originator.
It is anticipated that the Partners
First Portfolio may include credit
card accounts originated by financial
institutions other than BKB, Harris or
the Bank. In addition, prior to the
establishment or acquisition of the
Bank, Holdings may designate other
financial institutions as Account
Originators with respect to the
Partners First Portfolio, including
the Accounts. Any such financial
institution would originate credit
card accounts. However, any such
credit card accounts and any credit
card accounts originated by the Bank
may only be designated as Accounts and
the related Receivables may only be
included in the Trust, if certain
conditions, including the Rating
Agency Condition, are satisfied.
Transfer of Receivables....... Pursuant to separate PFR Purchase
Agreements (as defined below) entered
into between PFR and each of BKB and
Harris on the Initial Series Issuance
Date, each of BKB and Harris sold and
will sell to PFR, all of their
respective right, title and interest
in and to (i) the receivables existing
on the Initial Series Issuance Date in
designated credit card accounts
originated by BKB and Harris, as
applicable, (ii) all of the
receivables created in such credit
card accounts following the Initial
Series Issuance Date and (iii) the
receivables in each new designated
credit card account originated
following the Initial Series Issuance
Date by BKB and Harris, as applicable,
whether such receivables are then
existing or are thereafter created.
Pursuant to the PFR Purchase
Agreements, on the Initial Series
Issuance Date, PFR acquired
approximately $1,870,000,000 aggregate
principal amount of receivables of
which approximately $1,190,000,000
aggregate principal amount of
receivables were conveyed to PFR by
BKB and approximately $680,000,000
aggregate principal amount of
receivables were conveyed to PFR by
Harris. As used herein, "PFR Purchase
Agreement" means a receivables
purchase agreement entered into
between PFR and an Account Originator
providing for the sale by such Account
Originator to PFR of all of its right,
title and interest in and to
receivables created under specified
credit card accounts originated by
such Account Originator. See
"Description of the Purchase
Agreements - PFR Purchase Agreements."
In connection with the anticipated
establishment or acquisition by
Holdings of the Bank, PFR and the Bank
will enter into one or more
receivables purchase agreements in, or
substantially in, the form of the PFR
Purchase Agreements entered into
between PFR and each of BKB and
Harris.
Pursuant to the receivables purchase
agreement entered into between PFR and
the Transferor on the Initial Series
Issuance Date (the "Transferor
Purchase Agreement" and, together with
the PFR Purchase Agreements, the
"Purchase Agreements"), PFR sells to
the Transferor all of the Eligible
Receivables included in the
receivables purchased from BKB and
Harris immediately upon giving effect
to any such purchase by PFR. Subject
to satisfaction of certain conditions,
including the Rating Agency Condition,
pursuant to the Transferor Purchase
Agreement, upon the execution of a PFR
Purchase Agreement between PFR and the
Bank or any other Account Originator,
PFR will sell to the Transferor all of
the Eligible Receivables included in
the receivables acquired by PFR
pursuant to the PFR Purchase Agreement
with such other Account Originator.
Pursuant to the Transferor Purchase
Agreement, on the Initial Series
Issuance Date, PFR transferred
approximately $1,846,000,000 aggregate
principal amount of Receivables (the
"Initial Receivables") to the
Transferor, which in turn transferred
the Initial Receivables to the Trust.
The Initial Receivables constituted
all of the Eligible Receivables
acquired by PFR from BKB and Harris on
the Initial Series Issuance Date.
If so provided in a PFR Purchase
Agreement, the Account Originator will
assign to PFR the right to Recoveries
(as defined herein) and Interchange
(as defined herein) allocable to the
receivables subject to such PFR
Purchase Agreement. Pursuant to their
respective PFR Purchase Agreements,
each of BKB and Harris assigns to PFR
the right to Recoveries and
Interchange allocable to the
receivables conveyed by BKB or Harris,
as applicable, to PFR or its
approximate equivalent in the form of
Discount Option Receivables (as
defined herein) allocable to the
Receivables. See "Description of the
Purchase Agreements."
Pursuant to the Transferor Purchase
Agreement, PFR assigns to the
Transferor all of its rights to
Recoveries, if any, and Interchange,
if any, assigned to it pursuant to the
PFR Purchase Agreements. See
"Description of the Purchase
Agreements - Transferor Purchase
Agreement."
The Transferor in turn transfers the
Receivables and the rights to
Recoveries and Interchange acquired by
it under the Transferor Purchase
Agreement to the Trust pursuant to the
Pooling and Servicing Agreement. See
"Description of the Pooling and
Servicing Agreement -- Conveyance of
Receivables."
Trust Assets.................. The assets of the Trust (the "Trust
Assets") include the receivables
("Receivables") arising under certain
VISA(R)and MasterCard(R)* revolving
credit card accounts (the "Accounts"),
and the proceeds thereof, including
recoveries on charged-off Receivables
("Recoveries"), and any other fees,
proceeds of credit insurance policies
relating to the Receivables and may
include the right to receive
Interchange (as defined herein), if
any, allocable to the Certificates,
funds on deposit in certain accounts
of the Trust for the benefit of
Certificateholders, Participation
Interests (as defined herein), if any,
and any Credit Enhancement (as defined
herein) issued with respect to a
particular Series (the drawing on or
payment of any Series Enhancement for
the benefit of a Series or Class of
Certificateholders will not be
available to the Certificateholders of
any other Series or Class).
"Interchange" consists of certain fees
received by Account Originators from
VISA and MasterCard as partial
compensation for taking credit risk,
absorbing fraud losses and funding
receivables for a limited period prior
to initial billing. "Series
Enhancement" means, with respect to
any Series or Class of Certificates,
any Credit Enhancement (as defined
herein), interest rate swap agreement,
interest rate cap agreement or other
similar arrangement for the benefit of
Certificateholders of such Series or
Class. The subordination of any Series
or Class of Certificates to another
Series or Class of Certificates shall
be deemed to be a Series Enhancement.
"Participation Interests" means
participations representing undivided
interests in a pool of assets
primarily consisting of revolving
credit card receivables, charge card
receivables and other self-liquidating
financial assets. See "Description of
the Pooling and Servicing Agreement --
Additions of Accounts or Participation
Interests."
- -----------
* VISA and MasterCard are registered trademarks of VISA U.S.A. Inc.
("VISA") and MasterCard International Incorporated ("MasterCard"),
respectively.
To the extent provided in any
Supplement (as defined herein), or in
an amendment to the Pooling and
Servicing Agreement, all or a portion
of the Receivables or Participation
Interests conveyed to the Trust and
all collections received with respect
thereto may be allocated to one or
more Series or groups of Series (each,
a "Group") as long as the Rating
Agency Condition (as defined herein)
shall have been satisfied with respect
to such allocation, and the Servicer
shall have delivered an officer's
certificate to the Trustee to the
effect that the Servicer reasonably
believes such allocation will not have
an Adverse Effect (as defined herein).
The Certificates.............. The Certificates will be issued in
Series, each of which will consist of
one or more Classes. The specific
terms of a Series or Class will be
established as described herein under
"Description of the Pooling and
Servicing Agreement-- New Issuances."
However, while the specific terms of
any Series or Class offered hereby
will be described in the related
Prospectus Supplement, the terms of
such Series or Class will not be
subject to prior review by, or consent
of, the holders of the Certificates of
any previously issued Series.
The Certificates of a Series offered
hereby will generally be available for
purchase in minimum denominations of
$1,000 and in integral multiples
thereof and will only be available in
book-entry form except in certain
limited circumstances as described
herein under "Description of the
Certificates -- Definitive
Certificates" and in the related
Prospectus Supplement. Interests in
the Trust Assets will be allocated
among (a) the Certificateholders,
including Credit Enhancers (as defined
herein) holding uncertificated
subordinated interests (each, an
"Enhancement Invested Amount"), of a
particular Series (the
"Certificateholders' Interest"), (b)
the Certificateholders (including such
holders of Enhancement Invested
Amounts) of other Series, if any, (c)
the holders of any Participations and
(d) the interest of the Transferor and
its permitted transferees (the
"Transferor's Interest"), as described
below. The Invested Amount of a Series
offered hereby will, except as
otherwise provided herein and except
with respect to Certificates with a
variable principal amount, remain
fixed at the aggregate initial
principal amount of the Certificates
of such Series. The
Certificateholders' Interest of a
Series will include the right to
receive (but only to the extent needed
to make required payments under the
Pooling and Servicing Agreement,
including the related Supplement, and
subject to any reallocation of such
amounts if the related Supplement so
provides) varying percentages of
collections of Finance Charge
Receivables and Principal Receivables
and will be allocated a varying
percentage of the Receivables in
Defaulted Accounts with respect to
each calendar month (each, a "Monthly
Period"). See "Description of the
Certificates -- Interest" and "--
Principal." If the Certificates of a
Series offered hereby include more
than one Class of Certificates, the
collections allocable to the Invested
Amount of such Series may be further
allocated among each Class in such
Series as described in the related
Prospectus Supplement.
The Transferor's
Interest...................... The Transferor's Interest at any time
represents the right to the Trust
Assets in excess of the
Certificateholders' Interest, the
interest of any holder of a
Participation and Enhancement Invested
Amounts of all Series then
outstanding. The principal amount of
the Transferor's Interest (the
"Transferor Amount") will fluctuate as
the amount of the Principal
Receivables held by the Trust changes
from time to time. In addition, the
Transferor intends to cause the
issuance of Series from time to time
and any such issuance will have the
effect of decreasing the Transferor
Amount to the extent of the initial
Invested Amount of such Series. See
"Risk Factors-- Issuance of New
Series."
The level of the "Required Transferor
Amount," which equals the sum of the
Series Required Transferor Amounts for
each outstanding Series, is intended
to enable the Transferor's Interest to
absorb fluctuations in the amount of
Principal Receivables held by the
Trust from time to time (due to, among
other things, seasonal purchase and
payment habits of cardholders or
adjustments in the amount of Principal
Receivables because of rebates,
refunds, fraudulent charges or
otherwise). See "Risk Factors --
Generation of Additional Receivables;
Dependency on Cardholder Repayments"
and "Description of the Pooling and
Servicing Agreement -- Defaulted
Receivables; Rebates and Fraudulent
Charges."
Issuance of New Series........ The Pooling and Servicing Agreement
authorizes the Trustee to issue four
types of certificates: (a) one or more
Series of Certificates, (b)
Participations representing
participation interests in the
Receivables, as described below, (c) a
certificate evidencing the
Transferor's Interest in the Trust
retained by the Transferor (the
"Transferor Certificate"), which
Transferor Certificate will be held by
the Transferor, and (d) certificates
("Supplemental Certificates") held by
transferees of a portion of the
Transferor Certificate. The Transferor
Certificate and any Supplemental
Certificates are collectively referred
to as the "Transferor Certificates."
See "Description of the Pooling and
Servicing Agreement -- The Transferor
Certificates." On the Initial Series
Issuance Date, the Transferor will
issue a Supplemental Certificate to an
affiliate of the Transferor.
The Pooling and Servicing Agreement
provides that, pursuant to any one or
more supplements to the Pooling and
Servicing Agreement (each, a
"Supplement"), the Transferor may
cause the Trustee without the consent
of the Certificateholders to issue one
or more new Series and accordingly
cause a reduction in the Transferor's
Interest represented by the Transferor
Certificates. There can be no
assurance that the terms of any Series
might not have an impact on the timing
or amount of payments received by a
Certificateholder of another Series.
Under the Pooling and Servicing
Agreement, the Transferor may define,
with respect to any Series, the
Principal Terms of such Series. See
"Description of the Pooling and
Servicing Agreement -- New Issuances."
The Transferor may offer any Series to
the public or other investors under a
disclosure document (a "Disclosure
Document"), which will consist of a
Prospectus Supplement in the case of a
Series offered hereby, in transactions
either registered under the Securities
Act or exempt from registration
thereunder, directly or through one or
more underwriters or placement agents,
in fixed-price offerings or in
negotiated transactions or otherwise.
See "Plan of Distribution."
A new Series may be issued only upon
satisfaction of the conditions
described herein under "Description of
the Pooling and Servicing Agreement --
New Issuances" including, among
others, that (a) such issuance will
satisfy the Rating Agency Condition
(as defined herein) and (b) the
Transferor shall have delivered to the
Trustee and certain providers of
Series Enhancement a certificate of an
authorized officer to the effect that,
in the reasonable belief of the
Transferor, such issuance will not,
based on the facts known to such
representative at the time of such
certification, have an Adverse Effect.
The Pooling and Servicing Agreement
provides that, pursuant to any one or
more supplements to the Pooling and
Servicing Agreement (each, a
"Participation Supplement"), the
Transferor may direct the Trustee to
issue on behalf of the Trust one or
more participations (each, a
"Participation"), to be delivered to
or upon the order of the Transferor
upon the satisfaction of certain
conditions described herein under
"Description of the Pooling and
Servicing Agreement --New Issuances."
In addition to the foregoing, it is a
condition to the issuance of each
Series offered hereby, that on the
related Series Issuance Date, the
aggregate amount of Receivables which
are more than 30-days past due, will
not exceed 20% of the aggregate amount
of Receivables in the Trust.
The Accounts.................. The Accounts generally consist of VISA
and MasterCard consumer revolving
credit card accounts included in the
Partners First Portfolio, which were
designated from time to time by the
Transferor (or an affiliate thereof),
that, in each case, meet the criteria
provided in the Pooling and Servicing
Agreement for an Eligible Account (as
defined herein), but do not include
any Removed Accounts (as defined
herein). The Accounts are not being
sold or transferred to the Trust and
will continue to be controlled and
held by the Account Originators unless
transferred as described herein. See
"Credit Card Activities" and
"Description of the Purchase
Agreements."
The Transferor conveyed to the Trust
Receivables existing on the Initial
Series Issuance Date in certain VISA
and MasterCard consumer revolving
credit card accounts (the "Initial
Accounts") that met the criteria
provided in the Pooling and Servicing
Agreement for an Eligible Account as
of the Initial Series Issuance Date
and will convey Receivables arising in
the Initial Accounts from time to time
thereafter until the termination of
the Trust. The Initial Accounts
constituted all of the Eligible
Accounts in the Partners First
Portfolio on the Initial Series
Issuance Date. In addition, pursuant
to the Pooling and Servicing
Agreement, the Transferor expects
(subject to certain limitations and
conditions), and in some circumstances
will be obligated, to have Additional
Accounts designated, the Receivables
of which will be included in the Trust
or, in lieu thereof or in addition
thereto, to include Participation
Interests in the Trust. Additional
Accounts include New Accounts and
Aggregate Addition Accounts (as
defined herein). The Transferor will
convey to the Trust all Receivables in
Additional Accounts, whether such
Receivables are then existing or
thereafter created. The addition to
the Trust of Receivables in Aggregate
Addition Accounts or Participation
Interests will be subject to certain
conditions, including, among others,
that (a) unless such addition is a
required addition or a designation of
New Accounts, such addition will
satisfy the Rating Agency Condition
and (b) the Transferor shall have
delivered to the Trustee a certificate
of an authorized officer to the effect
that, in the reasonable belief of the
Transferor, such addition will not
have an Adverse Effect. The Transferor
will also have the right, in certain
circumstances, to remove from the
Trust all Receivables of certain
designated Accounts (the "Removed
Accounts"). See "Description of the
Pooling and Servicing Agreement --
Additions of Accounts or Participation
Interests;" "-- Removal of Accounts"
and "Risk Factors -- Addition of Trust
Assets."
The Receivables............... The Receivables include (a) periodic
finance charges, cash advance fees,
late charges, annual membership fees,
returned check fees, overlimit fees
and other miscellaneous fees and the
interest portion of any Participation
Interests as determined pursuant to
the applicable Supplement (the
"Finance Charge Receivables"), and (b)
amounts charged by cardholders for
merchandise and services, amounts
advanced to cardholders as cash
advances and the principal portion of
any Participation Interests as
determined pursuant to the applicable
Supplement (the "Principal
Receivables"). Recoveries attributed
to charged- off Receivables up to the
amount of Defaulted Receivables in any
Monthly Period will be treated as
collections of Principal Receivables.
The excess, if any, of Recoveries over
Defaulted Receivables will be treated
as collections of Finance Charge
Receivables. In addition, certain
Interchange or its equivalent in the
form of Discount Option Receivables
attributed to cardholder charges for
merchandise and services in the
Accounts will be treated as
collections of Finance Charge
Receivables. See "Credit Card
Activities-- Interchange."
All receivables arising in the
Partners First Portfolio will
automatically be sold to PFR. Pursuant
to the Transferor Purchase Agreement,
all new Eligible Receivables arising
in the Accounts during the term of the
Trust will automatically be sold by
PFR to the Transferor and then
transferred by the Transferor to the
Trust. Accordingly, the amount of
Receivables in the Trust will
fluctuate from day to day as new
Receivables are generated and as
existing Receivables are collected,
charged-off as uncollectible or
otherwise adjusted.
If so specified in the related
Prospectus Supplement, the Servicer
will establish and maintain a Yield
Supplement Account for the benefit of
the Certificateholders of such Series.
Amounts on deposit in the Yield
Supplement Account for any Series
(together with investment earnings
thereon) will be released and
deposited into the Collection Account
in the amounts and at the times
specified in the Prospectus Supplement
for such Series. Each such deposit
into the Collection Account will be
treated as collections of Finance
Charge Receivables allocable to the
Certificates of the related Series.
The Yield Supplement Account for any
Series will be funded with proceeds
from the offering of the related
Series of Certificates.
Clearance and
Settlement.................... Unless otherwise specified in the
related Prospectus Supplement, the
Certificates will be available for
purchase in minimum denominations of
$1,000 and integral multiples thereof
in book- entry form only.
Certificateholders may elect to hold
their Certificates through any of DTC
(in the United States) or Cedel Bank,
societe anonyme ("Cedel") or the
Euroclear System ("Euroclear") (in
Europe). See "Description of the
Certificates -- Book-Entry
Registration."
Interest...................... Interest will accrue on the Invested
Amount or outstanding principal amount
of the Certificates of a Series or
Class offered hereby at the per annum
rate either specified in or determined
in the manner specified in the related
Prospectus Supplement. Except as
otherwise provided herein, collections
of Finance Charge Receivables and
certain other amounts allocable to the
Invested Amount of a Series offered
hereby will generally be used to make
interest payments to
Certificateholders of such Series on
each Interest Payment Date with
respect thereto; provided that if an
Early Amortization Period commences
with respect to such Series,
thereafter interest will be
distributed to such Certificateholders
monthly on each Special Payment Date
(defined herein). If the Interest
Payment Dates for a Series or Class
occur less frequently than monthly,
such collections or other amounts (or
the portion thereof allocable to such
Class) will be deposited in one or
more trust accounts (each, an
"Interest Funding Account") and used
to make interest payments to
Certificateholders of such Series or
Class on the following Interest
Payment Date with respect thereto. If
a Series has more than one Class of
Certificates, each such Class may have
a separate Interest Funding Account.
See "Description of the Certificates--
Interest."
Principal..................... The principal of the Certificates of
each Series offered hereby will be
scheduled to be paid either (a) in
full on an expected date specified in
the related Prospectus Supplement (the
"Expected Final Payment Date"), in
which case such Series will have a
Controlled Accumulation Period as
described below under "-- Controlled
Accumulation Period," or (b) in
installments commencing on a date
specified in the related Prospectus
Supplement (the "Principal
Commencement Date"), in which case
such Series will have a Controlled
Amortization Period as described below
under "--Controlled Amortization
Period." If a Series has more than one
Class of Certificates, each Class may
have a different method of paying
principal, Expected Final Payment Date
or Principal Commencement Date. The
payment of principal with respect to
the Certificates of a Series or Class
may commence earlier than the
applicable Expected Final Payment Date
or Principal Commencement Date, and
the final principal payment with
respect to the Certificates of a
Series or Class may be made later than
the applicable Expected Final Payment
Date or other expected date, if a Pay
Out Event occurs with respect to such
Series or Class or under certain other
circumstances described herein. See
"Risk Factors-- Generation of
Additional Receivables; Dependency on
Cardholder Repayments" for a
description of factors that may affect
the timing of principal payments on
Certificates. See "Description of the
Certificates -- Principal."
Revolving Period.............. The Certificates of each Series
offered hereby will have a revolving
period (the "Revolving Period") that
will commence on the date of issuance
of the related Series (the "Series
Closing Date") or on a date prior
thereto specified in the related
Supplement and, for a Series offered
hereby, the related Prospectus
Supplement (the "Series Cut-Off Date")
and continue until the earlier of (a)
the commencement of the Early
Amortization Period or Early
Accumulation Period with respect to
such Series and (b) the date specified
in the related Prospectus Supplement
as the end of the Revolving Period
with respect to such Series. If the
related Prospectus Supplement provides
that a Series is a Principal Sharing
Series (as defined herein), during the
Revolving Period with respect to such
Series, collections of Principal
Receivables and certain other amounts
otherwise allocable to the
Certificateholders' Interest of such
Series will be treated as Shared
Principal Collections and will be
distributed to, or for the benefit of,
the Certificateholders of other
Principal Sharing Series or the
holders of the Transferor Certificates
or deposited into the Special Funding
Account, as more fully described in
the related Prospectus Supplement. If
the related Prospectus Supplement
provides that a Series is not a
Principal Sharing Series, during the
Revolving Period with respect to such
Series, collections of Principal
Receivables and certain other amounts
otherwise allocable to the
Certificateholders' Interest of such
Series will be paid to the holders of
the Transferor Certificates or
deposited into the Special Funding
Account, as more fully described in
the related Prospectus Supplement. See
"Description of the Certificates--
Principal," and "--Pay Out Events and
Reinvestment Events" for a discussion
of the events that might lead to the
termination of the Revolving Period
with respect to a Series prior to its
scheduled date.
Controlled Accumulation
Period........................ If the related Prospectus Supplement
so specifies, unless an Early
Amortization Period or, if so
specified in the related Prospectus
Supplement, an Early Accumulation
Period commences with respect to a
Series offered hereby, the
Certificates of such Series will have
a scheduled accumulation period (the
"Controlled Accumulation Period") that
will commence at the close of business
on the date or dates specified in or
determined as specified in such
Prospectus Supplement and continue
until the earliest of (a) the
commencement of the Early Amortization
Period or, if so specified in the
related Prospectus Supplement, an
Early Accumulation Period with respect
to such Series, (b) payment in full of
the Invested Amount, including the
Enhancement Invested Amount, if any,
of the Certificates of such Series,
and (c) the series termination date
with respect to such Series (the
"Series Termination Date"). The
Controlled Accumulation Period may be
postponed under the conditions set
forth in "Description of the
Certificates -- Principal." During the
Controlled Accumulation Period with
respect to a Series, collections of
Principal Receivables and, if so
specified in the related Prospectus
Supplement, certain other amounts
allocable to the Certificateholders'
Interest of such Series (including
Shared Principal Collections (as
defined herein), if any, allocable to
such Series) will be deposited on each
Distribution Date in a trust account
established for the benefit of the
Certificateholders of such Series
(each, a "Principal Funding Account")
and used to make principal
distributions to the
Certificateholders of such Series or
any Class thereof when due. The amount
to be deposited in the Principal
Funding Account (the "Controlled
Deposit Amount") for any Series
offered hereby on any Distribution
Date may, but will not necessarily, be
limited to an amount equal to an
amount specified in or determined as
specified in the related Prospectus
Supplement (the "Controlled
Accumulation Amount") plus any
existing deficit controlled
accumulation amount arising from prior
Distribution Dates. If the Prospectus
Supplement for a Series so specifies,
the amount to be deposited in the
Principal Funding Account on a
Distribution Date may be a variable
amount. If a Series has more than one
Class of Certificates, each Class may
have a separate Principal Funding
Account and Controlled Accumulation
Amount and the Controlled Accumulation
Period with respect to each Class may
commence on different dates. In
addition, the related Prospectus
Supplement may describe certain
priorities among such Classes with
respect to deposits of principal into
such Principal Funding Accounts.
Early Accumulation
Period........................ If so specified and under the
conditions set forth in the Prospectus
Supplement relating to a Series having
a Controlled Accumulation Period,
during the period from the day on
which a Reinvestment Event (as defined
herein) has occurred, until the
earliest of (a) the commencement of
the Early Amortization Period (if
any), (b) payment in full of the
Invested Amount, including the
Enhancement Invested Amount, if any,
of the Certificates of such Series,
and (c) the Series Termination Date
with respect to such Series (the
"Early Accumulation Period"),
collections of Principal Receivables
and, if so specified in the related
Prospectus Supplement, certain other
amounts allocable to the
Certificateholders' Interest of such
Series (including Shared Principal
Collections, if any, allocable to such
Series) will be deposited on each
Distribution Date in the Principal
Funding Account and used to make
distributions of principal to the
Certificateholders of such Series or
any Class thereof on the Expected
Final Payment Date. The amount to be
deposited in the Principal Funding
Account during the Early Accumulation
Period will not be limited to any
Controlled Deposit Amount. See
"Description of the Certificates --
Pay Out Events and Reinvestment
Events" for a discussion of the events
which might lead to commencement of an
Early Accumulation Period.
Controlled Amortization
Period........................ If the related Prospectus Supplement
so specifies, unless an Early
Amortization Period commences with
respect to a Series offered hereby,
the Certificates of such Series will
have an amortization period (the
"Controlled Amortization Period") that
will commence at the close of business
on the date specified in such
Prospectus Supplement and continue
until the earliest of (a) the
commencement of the Early Amortization
Period with respect to such Series,
(b) payment in full of the Invested
Amount, including the Enhancement
Invested Amount, if any, of the
Certificates of such Series and (c)
the Series Termination Date with
respect to such Series. During the
Controlled Amortization Period with
respect to a Series, collections of
Principal Receivables and certain
other amounts allocable to the
Certificateholders' Interest of such
Series (including Shared Principal
Collections, if any, allocable to such
Series) will be used on each
Distribution Date to make principal
distributions to Certificateholders of
such Series or any Class thereof then
scheduled to receive such
distributions. The amount to be
distributed to Certificateholders of
any Series offered hereby on any
Distribution Date may, but will not
necessarily, be limited to an amount
(the "Controlled Distribution Amount")
equal to an amount (the "Controlled
Amortization Amount") specified in the
related Prospectus Supplement plus any
existing deficit controlled
amortization amount arising from prior
Distribution Dates. If a Series has
more than one Class of Certificates,
each Class may have a different
Controlled Amortization Amount. In
addition, the related Prospectus
Supplement may describe certain
priorities among such Classes with
respect to such distributions.
Early Amortization
Period........................ During the period from the day on
which a Pay Out Event has occurred
with respect to a Series to the date
on which the Invested Amount,
including the Enhancement Invested
Amount, if any, of the Certificates of
such Series has been paid in full or
the related Series Termination Date
has occurred (the "Early Amortization
Period"), collections of Principal
Receivables and certain other amounts
allocable to the Certificateholders'
Interest of such Series (including
Shared Principal Collections, if any,
allocable to such Series) will be
distributed as principal payments to
the Certificateholders of such Series
monthly on each Distribution Date
beginning with the first Special
Payment Date with respect to such
Series. During the Early Amortization
Period with respect to a Series,
distributions of principal to
Certificateholders will not be subject
to any Controlled Deposit Amount or
Controlled Distribution Amount. In
addition, upon the commencement of the
Early Amortization Period with respect
to a Series, any funds on deposit in a
Principal Funding Account with respect
to such Series will be paid to the
Certificateholders of the relevant
Class or Series on the first Special
Payment Date with respect to such
Series. See "Description of the
Certificates -- Pay Out Events and
Reinvestment Events" for a discussion
of the events that might lead to the
commencement of the Early Amortization
Period with respect to a Series.
Allocations Among Series...... Pursuant to the Pooling and Servicing
Agreement, during each Monthly Period,
the Servicer is required to first
allocate to each Series collections of
Principal Receivables and Finance
Charge Receivables and the Defaulted
Receivables with respect to such
Monthly Period based on the Series
Allocation Percentage (as defined
herein). See "Description of the
Pooling and Servicing Agreement--
Allocations." Subject to reallocation
among Series in a Reallocation Group,
such amounts allocated to each Series
are then further allocated within each
Series to the Certificateholders, any
Series Enhancement and the holders of
the Transferor Certificates pursuant
to the terms of the related
Supplement.
Sharing of Excess Finance
Charge Collections Among
Excess Allocation Series...... If the Prospectus Supplement for a
Series so provides, any Series may be
designated as a Series that shares
with other Series similarly
designated, subject to certain
limitations, certain Excess Finance
Charge Collections (as defined herein)
allocable to any such Series (an
"Excess Allocation Series"). Subject
to certain limitations described under
"Description of the Pooling and
Servicing Agreement-- Sharing of
Excess Finance Charge Collections
Among Excess Allocation Series,"
collections of Finance Charge
Receivables and certain other amounts
allocable to the Certificateholders'
Interest of any Series that is
designated as an Excess Allocation
Series in excess of the amounts
necessary to make required payments
with respect to such Series (including
payments to the provider of any
related Series Enhancement) will be
applied to cover shortfalls with
respect to amounts payable from
collections of Finance Charge
Receivables allocable to any other
Series designated as an Excess
Allocation Series, in each case pro
rata based upon the amount of the
shortfall with respect to amounts
payable from Collections of Finance
Charge Receivables, if any, with
respect to each other Excess
Allocation Series. See "Description of
the Pooling and Servicing Agreement--
Sharing of Excess Finance Charge
Collections Among Excess Allocation
Series."
Shared Principal
Collections................... If the Prospectus Supplement for a
Series so provides, any Series may be
designated as a Series that shares
with other Series similarly
designated, subject to certain
limitations, certain excess
collections of Principal Receivables
and certain other amounts allocable to
the Certificateholders' Interest of
such Series (a "Principal Sharing
Series"). To the extent that
collections of Principal Receivables
and certain other amounts that are
allocated to the Certificateholders'
Interest of any Principal Sharing
Series are not needed to make payments
to the Certificateholders of such
Series or required to be deposited in
a Principal Funding Account for such
Series and to the extent that any
amounts are specified in any
Participation Supplement to be treated
as Shared Principal Collections, such
amounts may be applied to cover
principal payments due to or for the
benefit of Certificateholders of
another Principal Sharing Series. Any
such reallocation will not result in a
reduction in the Invested Amount of
the Series to which such collections
were initially allocated. See
"Description of the Pooling and
Servicing Agreement-- Shared Principal
Collections."
Reallocations Among Series
in a Reallocation Group....... If so provided in the related
Prospectus Supplement, the
Certificates of a Series may be
included in a Group that will be
subject to reallocations of
collections of Finance Charge
Receivables and other amounts or
obligations among the Series in such
Group (a "Reallocation Group").
Collections of Finance Charge
Receivables allocable to each Series
in a Reallocation Group will be
aggregated and made available for
certain required payments for all
Series in such Group. Consequently,
the issuance of new Series in such
Group may have the effect of reducing
or increasing the amount of
collections of Finance Charge
Receivables allocable to the
Certificates of other Series in such
Group. See "Risk Factors-- Issuance of
New Series."
Paired Series................. If so provided in the related
Prospectus Supplement, a Series of
Certificates may be issued (a "Paired
Series") that is paired with one or
more other Series or a portion of one
or more other Series previously issued
by the Trust (a "Prior Series"). A
Paired Series may be issued at or
after the commencement of a Controlled
Accumulation Period or Controlled
Amortization Period for a Prior
Series. As the Invested Amount of the
Prior Series having a Paired Series is
reduced, the Invested Amount of the
Paired Series will increase by an
equal amount. Upon payment in full of
such Prior Series, the Invested Amount
of the Paired Series will be equal to
the amount of the Invested Amount paid
to Certificateholders of such Prior
Series. If a Pay Out Event or
Reinvestment Event occurs with respect
to the Prior Series having a Paired
Series or with respect to the Paired
Series when such Prior Series is in a
Controlled Amortization Period or
Controlled Accumulation Period, the
percentage specified in the applicable
Prospectus Supplement for the
allocation of collections of Principal
Receivables to the Certificateholders'
Interest of such Prior Series (the
"Principal Allocation Percentage") and
the Series Allocation Percentage for
the Prior Series and the Principal
Allocation Percentage and the Series
Allocation Percentage for the Paired
Series will be reset as specified in
the related Prospectus Supplement and
the Controlled Amortization Period,
Controlled Accumulation Period, Early
Amortization Period or Early
Accumulation Period for such Prior
Series could be lengthened.
Special Funding Account....... If on any date the Transferor Amount
is less than or equal to the Required
Transferor Amount, the Servicer will
not distribute to the holders of the
Transferor Certificates any
collections of Principal Receivables
that otherwise would be distributed to
the holders of the Transferor
Certificates, but shall deposit such
funds in the Special Funding Account.
Funds on deposit in the Special
Funding Account will be withdrawn and
paid to the holders of the Transferor
Certificates on any Distribution Date
to the extent that, after giving
effect to such payment, the Transferor
Amount exceeds the Required Transferor
Amount on such date; provided,
however, that if a Controlled
Accumulation Period, Early
Accumulation Period, Controlled
Amortization Period or Early
Amortization Period commences with
respect to any Series, any funds on
deposit in the Special Funding Account
will be released and treated as
collections of Principal Receivables
to the extent needed to cover
principal payments due to or for the
benefit of such Series. See
"Description of the Pooling and
Servicing Agreement -- Special Funding
Account."
Funding Period; Pre-Funding
Account........................ The Prospectus Supplement relating to
a Series of Certificates may specify
that for a period beginning on the
Series Closing Date and ending on a
specified date before the commencement
of a Controlled Amortization Period or
Controlled Accumulation Period with
respect to such Series (the "Funding
Period"), the aggregate amount of
Principal Receivables in the Trust
allocable to such Series may be less
than the aggregate principal amount of
the Certificates of such Series and an
amount equal to the amount of such
deficiency (the "Pre- Funding Amount")
will be held in a trust account
established with the Trustee for the
benefit of Certificateholders of such
Series (the "Pre-Funding Account")
pending the transfer of additional
Principal Receivables to the Trust or
pending the reduction of the Invested
Amounts of other Series issued by the
Trust. The related Prospectus
Supplement will specify the initial
Invested Amount on the Series Closing
Date with respect to such Series, the
aggregate principal amount of the
Certificates of such Series (the "Full
Invested Amount") and the date by
which the Invested Amount is expected
to equal the Full Invested Amount. The
Invested Amount will increase as
Principal Receivables are delivered to
the Trust or as the Invested Amounts
of other Series of the Trust are
reduced. The Invested Amount may also
decrease due to the occurrence of a
Pay Out Event as specified in the
related Prospectus Supplement. See
"Risk Factors -- Pre- Funding
Account."
During the Funding Period, funds on
deposit in the Pre-Funding Account for
a Series of Certificates will be
withdrawn and paid to the Transferor
to the extent of any increases in the
Invested Amount. In the event that the
Invested Amount does not for any
reason equal the Full Invested Amount
by the end of the Funding Period, any
amount remaining in the Pre-Funding
Account and any additional amounts
specified in the related Prospectus
Supplement will be payable to the
Certificateholders of such Series in a
manner and at such time as set forth
in the related Prospectus Supplement.
If so specified in the related
Prospectus Supplement, funds in the
Pre-Funding Account with respect to
any Series will be invested by the
Trustee in Eligible Investments or
will be subject to a guaranteed rate
or investment agreement or other
similar arrangement, and investment
earnings and any applicable payment
under any such investment arrangement
will be applied to pay interest on the
Certificates of such Series.
Credit Enhancement............ The credit enhancement (the "Credit
Enhancement") with respect to a Series
offered hereby may include a letter of
credit, a cash collateral account or
guaranty, spread account, yield
supplement account, a collateral
interest, a surety bond, an insurance
policy, guaranteed rate agreement,
maturity liquidity facility, tax
protection agreement or any other form
of credit enhancement described in the
related Prospectus Supplement. Credit
Enhancement may also be provided to a
Class or Classes of a Series or to a
Series by subordination provisions
which require that distributions of
principal or interest be made with
respect to the Certificates of such
Class or Classes or such Series before
distributions are made to one or more
other Classes of such Series or to
another Series (if the Supplement for
such Series so provides).
The type, characteristics and amount
of the Credit Enhancement with respect
to any Series will be determined based
on several factors, including the
characteristics of the Receivables and
Accounts underlying or comprising the
Trust Assets as of the Series Closing
Date with respect thereto, and will be
established on the basis of
requirements of each applicable Rating
Agency. The terms of the Credit
Enhancement with respect to any Series
offered hereby will be described in
the related Prospectus Supplement. If
so specified in the Prospectus
Supplement for a Series, the level of
Credit Enhancement for such Series may
be reduced if such reduction satisfies
the Rating Agency Condition. See
"Description of the Pooling and
Servicing Agreement -- Credit
Enhancement" and "Risk Factors --
Limited Nature of Rating."
Servicing..................... Holdings, in its capacity as Servicer
under the Pooling and Servicing
Agreement, is the initial Servicer for
the Trust. The Servicer is responsible
for servicing, managing and making
collections on the Receivables. The
"Distribution Date" for a Series will
be the day occurring in each month
(or, if such day is not a business
day, the next business day) or such
other date specified in the Supplement
for a Series. The "Transfer Date" for
a Series will be the business day
preceding each Distribution Date or
such other date specified in the
Supplement for a Series. On the
earlier of (a) the second business day
following the Date of Processing and
(b) the day on which the Servicer
deposits any collections into the
Collection Account, subject to certain
exceptions described herein, the
Servicer will pay to the holders of
the Transferor Certificates and any
Participations their allocable portion
of any collections then held by the
Servicer. The "Date of Processing" is
the business day on which a record of
any transaction is first recorded
pursuant to the Servicer's data
processing procedures. The
"Determination Date" for a Series will
be the third business day preceding
the Distribution Date in each Monthly
Period, or such other date specified
in the Supplement for a Series. On
each Determination Date, the Servicer
will calculate the amounts to be
allocated to the Certificateholders of
each Class or Series, the holders of
any Participations and the holders of
the Transferor Certificates as
described herein in respect of
collections of Receivables received
with respect to the preceding Monthly
Period.
Income Tax Withholding........ Interest on the Certificates will be
subject to United States withholding
tax and backup withholding unless the
holder complies with applicable IRS
identification requirements.
Tax Status.................... Except to the extent otherwise
specified in the related Prospectus
Supplement, it is anticipated that
special tax counsel will be of the
opinion that the Certificates of each
Class offered hereby of each Series
will be characterized as indebtedness
for Federal income tax purposes.
Except to the extent otherwise
specified in the related Prospectus
Supplement, the Certificate Owners
will agree to treat the Certificates
offered hereby as debt for Federal
income tax purposes. See "U.S. Federal
Income Tax Consequences" for
additional information concerning the
application of Federal income tax
laws.
ERISA Considerations.......... See "ERISA Considerations" herein and
"Summary of Series Terms -- ERISA
Considerations" in the applicable
Prospectus Supplement.
Certificate Rating............ It will be a condition to the issuance
of each Series of Certificates or
Class thereof offered pursuant to this
Prospectus and the related Prospectus
Supplement that they be rated in one
of the four highest applicable rating
categories by at least one nationally
recognized statistical rating
organization selected by the
Transferor, as specified in the
applicable Supplement (each rating
agency rating any Series, a "Rating
Agency"). The rating or ratings
applicable to the Certificates of each
such Series or Class thereof will be
set forth in the related Prospectus
Supplement. A security rating should
be evaluated independently of similar
ratings of different types of
securities. A rating is not a
recommendation to buy, sell or hold
securities and may be subject to
revision or withdrawal at any time by
the assigning Rating Agency. Each
rating should be evaluated
independently of any other rating. See
"Risk Factors-- Limited Nature of
Rating."
Listing....................... If so specified in the Prospectus
Supplement relating to a Series,
application will be made to list the
Certificates of such Series, or all or
a portion of any Class thereof, on the
Luxembourg Stock Exchange or any other
specified exchange.
RISK FACTORS
Investors should consider the following risk factors in connection
with the purchase of the Certificates.
Limited Liquidity. It is anticipated that, to the extent permitted,
the underwriters of any Series of Certificates offered hereby will make a
market in such Certificates, but in no event will any such underwriters
be under an obligation to do so. There can be no assurance that a
secondary market will develop or, if a secondary market does develop,
that it will provide Certificateholders of any Series offered hereby with
liquidity of investment or that it will continue for the life of such
Certificates.
Limited Operating History. Holdings was formed in December 1997 and
has no operating history, underwriting or servicing experience, or
delinquency, default and loss experience with respect to credit card
accounts, other than through BKB and Harris. Holdings will delegate
substantially all of its servicing functions to FDR, which will service
the credit card accounts in the Partners First Portfolio, including the
Accounts. BKB began originating and servicing credit card accounts in
September 1995 and therefore, has limited underwriting and servicing
experience, and limited delinquency, default and loss experience with
respect to the Accounts. As of the Initial Series Issuance Date,
approximately 63% of the Receivables designated to be included in the
Trust were originated or purchased by BKB. Until some time prior to the
end of March 1998, each of BKB and Harris will remain Account Originators
and will exercise the Retained Rights with respect to the Accounts
originated by BKB and Harris, as applicable. In March 1998, Holdings will
designate BKB as the sole Account Originator with respect to the existing
credit card accounts in the Partners First Portfolio, including the
Accounts. Harris will continue to be an Account Originator with respect
to new credit card accounts originated by it, including New Accounts. In
addition, it is anticipated that upon the establishment or acquisition by
Holdings of the Bank, Holdings will designate the Bank as the sole
Account Originator with respect to the credit card accounts in the
Partners First Portfolio, including the Accounts and any New Accounts,
and, in connection therewith, each of BKB and Harris will cease to be an
Account Originator. As an Account Originator, the Bank will also
originate credit card accounts; however, none of such credit card
accounts may be designated as Accounts and none of the related
receivables may be transferred to the Trust unless certain conditions,
including the Rating Agency Condition, are satisfied. The Bank will have
little or no operating history, underwriting or servicing experience, or
delinquency, default or loss experience with respect to credit card
accounts, and will rely on the experience of Holdings to assist the Bank
in setting the Credit Card Guidelines, including assisting the Bank in
determining the underwriting and origination policies with respect to the
Accounts and will rely on FDR for the implementation of such policies.
The average age of a credit card issuer's portfolio of accounts is
an indicator of the stability of delinquency and loss levels of that
portfolio. A portfolio of older accounts generally behaves more
predictably than a newly originated portfolio. Approximately 95% of the
Receivables transferred to the Trust that were created under Accounts in
the BKB Portfolio were generated under Accounts which BKB originated
within the 24-month period preceding the Initial Series Issuance Date and
over 48% of such Receivables were generated under Accounts which BKB
originated within the 12-month period preceding the Initial Series
Issuance Date. Approximately 12% of the Receivables transferred to the
Trust that were created under Accounts in the Harris Portfolio were
generated under Accounts which Harris originated within the 24-month
period preceding the Initial Series Issuance Date. The Accounts
originated or purchased by BKB represent a significant portion of the
Trust's initial portfolio. The levels of such delinquencies and losses
may increase as the average age of the Accounts increases, until the
Accounts become more seasoned.
Limited History of Trust and Transferor. The Transferor was formed
in January 1998, and the Trust was formed on the Initial Series Issuance
Date. The Transferor and the Trust have no substantial assets other than
their respective interests in the Receivables and the proceeds thereof as
described herein.
Reliance on First Data Resources Inc. Holdings has delegated the
majority of both the credit card processing and account servicing
functions to FDR, a subsidiary of First Data Corp. ("FDC"), pursuant to a
seven-year contract, automatically renewable for an additional two-year
period, entered into on the Initial Series Issuance Date. Under the terms
of this contract, Holdings will be required to obtain some of these
services from FDR on an exclusive basis. If FDR should fail to perform
its functions or become insolvent or if the agreement is terminated, a
Pay Out Event could occur and delays in payments on the Receivables and
possible reductions in the dollar amounts thereof could also occur. See
"Credit Card Activities -- Processing and Servicing of Credit Card
Accounts."
Non-Recourse to the Account Originators, PFR, the Transferor or
Affiliates Thereof. No Certificateholder will have recourse for payment
of its Certificates to any assets of the Account Originators, PFR, the
Transferor (other than the Transferor Certificate, to the extent
described herein), or any affiliate thereof. Consequently,
Certificateholders must rely solely upon payments on the Receivables for
the payment of principal of and interest on the Certificates.
Furthermore, under the Pooling and Servicing Agreement, the
Certificateholders have an interest in the Receivables and collections
thereon only to the extent of the Certificateholders' Interest and, to
the limited extent described herein, the Transferor's Interest. Should
the Certificates not be paid in full on a timely basis,
Certificateholders may not look to any assets of any of the Account
Originators, PFR, the Transferor (other than the Transferor Certificate,
to the extent described herein), or any affiliate thereof to satisfy
their claims.
Characteristics as a Sale; Insolvency and Receivership Risks. Each
Account Originator and PFR represents and warrants in the applicable
Purchase Agreement that the transfer of all Receivables pursuant thereto
to the applicable purchaser is a valid sale and assignment of such
Receivables from such party to such purchaser, or if notwithstanding
their intent, the respective sales of Receivables are not treated as
sales, the respective Purchase Agreements will be deemed to create a
security interest in the Receivables.
With respect to Receivables conveyed by an Account Originator to
PFR, in a receivership or conservatorship of the Account Originator, if
the conveyance of Receivables by such Account Originator is not treated
as a sale, but is deemed to create a security interest in the Receivables
conveyed, PFR's interest in such Receivables may be subject to tax or
other governmental liens relating to the Account Originator arising
before the subject Receivables came into existence and to certain
administrative expenses of the receivership, conservatorship or
bankruptcy proceeding. Each of the Account Originators has taken or will
take certain actions required to perfect PFR's interest in the
Receivables conveyed by such Account Originator.
A conservator or receiver would have the power under the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") to
repudiate contracts of, and to request a stay of up to 90 days of any
judicial action or proceeding involving, an Account Originator. However,
notwithstanding the insolvency of, or the appointment of a receiver or
conservator for, an Account Originator, subject to certain
qualifications, a valid perfected security interest of PFR in the
Receivables conveyed to it by the Account Originator should be
enforceable (to the extent of PFR's "actual direct compensatory damages"
(as described below)) and payments to PFR with respect to the subject
Receivables (up to the amount of such damages) should not be subject to
an automatic stay of payment or to recovery by such a conservator or
receiver. If, however, the conservator or receiver were to assert that
the security interest was unperfected or unenforceable, or were to
require PFR to establish its right to those payments by submitting to and
completing the administrative claims procedure established under FIRREA,
or the conservator or receiver were to request a stay of proceedings with
respect to the Account Originator, as provided under FIRREA, delays in
payments to the Trust and on the Certificates and possible reductions in
the amount of those payments could occur. In the event of a repudiation
of obligations by a conservator or receiver, FIRREA provides that a claim
for the repudiated obligation is limited to "actual direct compensatory
damages" determined as of the date of the appointment of the conservator
or receiver (which in most cases are expected to include the outstanding
principal on the Certificates plus interest accrued thereon to the date
of payment). The Federal Deposit Insurance Corporation ("FDIC") has not
adopted a formal policy statement on payment of principal and interest on
collateralized borrowings of banks that are repudiated. The Transferor
believes that the general practice of the FDIC in such circumstances is
to permit the collateral to be applied to pay the principal owed plus
interest at the contract rate up to the date of payment, together with
the costs of liquidation of the collateral if provided for in the
contract. In one case involving the repudiation by the Resolution Trust
Corporation (the "RTC") of certain secured zero-coupon bonds issued by a
savings association, a United States federal district court held that
"actual direct compensatory damage" in the case of a marketable security
meant the value of the repudiated bonds as of the date of repudiation. If
that court's view were applied to determine PFR's "actual direct
compensatory damages" in the event a conservator or receiver of an
Account Originator repudiated the Purchase Agreement pursuant to which
the subject Receivables were conveyed, the amount paid to
Certificateholders could, depending upon circumstances existing on the
date of the repudiation, be less than the principal of the Certificates
and the interest accrued thereon to the date of payment. See "Certain
Legal Aspects of the Receivables -- Certain Matters Relating to
Insolvency."
In addition, in the event of a Servicer Default, if the Servicer
were to become subject to a bankruptcy proceeding or if a conservator or
receiver were to be appointed for the Servicer, and no Servicer Default
other than such bankruptcy proceeding, conservatorship or receivership
exists, the bankruptcy trustee or the Servicer, as debtor in possession,
or the conservator or receiver, as the case may be, may have the power to
prevent either the Trustee or the majority of the Certificateholders from
effecting a transfer of servicing to a successor Servicer.
With respect to Receivables conveyed by PFR to the Transferor, if
PFR were to become subject to a bankruptcy proceeding and the conveyance
of Receivables by PFR to the Transferor is not treated as a sale, but is
deemed to create a security interest in the Receivables conveyed, the
Transferor's interest in such Receivables may be subject to tax or other
governmental liens relating to PFR arising before the Receivables came
into existence and to certain administrative expenses of the bankruptcy
proceeding. PFR has taken or will take certain actions required to
perfect the Transferor's interest in the Receivables conveyed to it by
the Account Originators.
In a receivership or conservatorship of an Account Originator, or
in a bankruptcy proceeding involving PFR, if a receiver or conservator
for the Account Originator, or if a bankruptcy trustee for PFR, PFR as
debtor in possession, or a creditor of PFR were to take the view that the
transfer of the Receivables from PFR to the Transferor should be
recharacterized as a pledge of such Receivables, then delays in payments
on the Certificates or (should the bankruptcy court rule in favor of any
such trustee, debtor in possession or creditor) reductions in such
payments on such Certificates could result. In addition, in a bankruptcy
proceeding involving Holdings or PFR, if a bankruptcy trustee for
Holdings, Holdings as debtor in possession, or a creditor of Holdings, or
if a bankruptcy trustee for PFR, PFR as debtor in possession, or a
creditor of PFR were to take the view that any of Holdings, PFR or the
Transferor should be substantively consolidated, then delays in payments
on the Certificates or (should the bankruptcy court rule in favor of any
such trustee, debtor in possession or creditor) reductions in such
payments on such Certificates could result.
Although the Pooling and Servicing Agreement provides that the
Transferor will transfer all of its right, title, and interest in and to
the Receivables to the Trust, a court could treat such transactions as an
assignment of collateral as security for the benefit of holders of
Certificates issued by the Trust. It is possible that the risk of such
treatment may be increased by the retention by the Transferor of the
Transferor Certificate and any other Class of Certificates that may be
issued and retained by the Transferor or by the issuance of a
Supplemental Certificate to an Affiliate of the Transferor. The
Transferor represents and warrants in the Pooling and Servicing Agreement
that the transfer of the Receivables to the Trust is either a valid
transfer and assignment of the Receivables to the Trust or the grant to
the Trust of a security interest in the Receivables. The Transferor has
taken and will take certain actions required to perfect the Trust's
interest in the Receivables and warrants that if the transfer to the
Trust is deemed to be a grant to the Trust of a security interest in the
Receivables, the Trustee will have a first priority perfected security
interest therein, subject only to tax or government lien or other
nonconsensual liens. If the transfer of the Receivables to the Trust is
deemed to create a security interest therein under the Uniform Commercial
Code "UCC", a tax or government lien or other nonconsensual lien on
property of the Transferor arising before Receivables come into existence
may have priority over the Trust's interest in such Receivables. In the
event of the insolvency of the Transferor, certain administrative
expenses may also have priority over the Trust's interest in such
Receivables. See "Certain Legal Aspects of the Receivables -- Transfer of
Receivables."
To the extent that the Transferor is deemed to have granted a
security interest in the Receivables to the Trust and such security
interest was validly perfected before any insolvency of the Transferor
and was not granted or taken in contemplation of insolvency or with the
intent to hinder, delay, or defraud the Transferor or its creditors, such
security interest should not be subject to avoidance in the event of
insolvency or receivership of the Transferor, and payments to the Trust
with respect to the Receivables should not be subject to recovery by a
bankruptcy trustee or receiver of the Transferor. If, however, such a
bankruptcy trustee or receiver were to assert a contrary position, delays
in payments on the Certificates and possible reductions in the amount of
those payments could occur.
In the event of a Servicer Default relating to the bankruptcy or
insolvency of the Servicer, and no Servicer Default other than such
bankruptcy or insolvency-related Servicer Default exists, the bankruptcy
trustee, conservator or receiver may have the power to prevent either the
Trustee or the Certificateholders from appointing a successor Servicer.
If the Transferor consents or fails to object to the appointment of a
bankruptcy trustee or conservator, receiver or liquidator in any
bankruptcy, insolvency or similar proceedings of or relating to the
Transferor, or the commencement of an action for the appointment of a
bankruptcy trustee or conservator, receiver or liquidator in any
insolvency or similar proceedings, or for the winding-up, insolvency,
bankruptcy, reorganization, conservatorship, receivership or liquidation
of the Transferor's affairs, or notwithstanding an objection by the
Transferor any such action remains undischarged or unstayed for a period
of 60 days; or the Transferor admits in writing its inability to pay its
debts generally as they become due, files, or consents or fails to object
(or objects without dismissal of any such filing within 60 days of such
filing) to the filing of, a petition to take advantage of any applicable
bankruptcy, insolvency or reorganization, receivership or conservatorship
statute, makes an assignment for the benefit of its creditors or
voluntarily suspends payment of its obligations (any such event being an
"Insolvency Event"), new Principal Receivables would not be transferred
by the Transferor to the Trust. In the event of an Insolvency Event, the
Trustee would sell the Receivables (unless Holders (as defined herein) of
Certificates evidencing undivided interests aggregating more than 50% of
the aggregate unpaid principal amount of each Series (or with respect to
any Series with two or more Classes, 50% of the unpaid principal amount
of each Class) and certain other persons specified in the Supplement for
a Series instruct otherwise and provided that a trustee for the
Transferor does not order a sale despite such instructions not to sell),
thereby causing early termination of the Trust. The entire proceeds of
such sale or liquidation will be treated as collections of Receivables
and allocated accordingly among the Certificateholders of each Series,
the holders of any Participations and the Transferor. Upon the occurrence
of a Pay Out Event, if a trustee, receiver or conservator is appointed
for the Transferor and no Pay Out Event other than such insolvency of the
Transferor exists, the trustee may have the power to prevent the early
sale, liquidation or disposition of the Receivables and the commencement
of the Early Amortization Period or Early Accumulation Period and may be
able to require that new Principal Receivables be transferred to the
Trust. In addition, the trustee, receiver or conservator for the
Transferor may have the power to cause early sale of the Receivables and
the early payment of the Certificates or to prohibit the continued
transfer of Receivables to the Trust. See "Certain Legal Aspects of the
Receivables -- Certain Matters Relating to Insolvency."
While Holdings is the Servicer, cash collections held by Holdings
may, subject to certain conditions, be commingled and used for the
benefit of Holdings prior to each Transfer Date and, in the event of the
insolvency or bankruptcy of Holdings or, in certain circumstances, the
lapse of certain time periods, the Trust may not have a perfected
security interest in such collections and accordingly, be entitled to
such collections. Holdings will be allowed to make monthly rather than
daily deposits of collections to the Collection Account if either (i)
Holdings or an affiliate of Holdings acceptable to the Rating Agencies
obtains a commercial paper rating of at least A-1 and P-1 (or its
equivalent) by the applicable Rating Agency or (ii) or Holdings makes
other arrangements that satisfy the Rating Agency Condition. Unless
otherwise provided in the related Prospectus Supplement, if either of the
foregoing conditions are not satisfied, then Holdings will, within five
business days, commence the deposit of collections directly into the
Collection Account within two business days of the Date of Processing.
Consumer Protection Laws. The Accounts and Receivables are subject
to numerous Federal and state consumer protection laws which impose
requirements on the solicitation, making, enforcement and collection of
consumer loans. Such laws, as well as any new laws or rulings which may
be adopted (including, but not limited to, federal or state interest rate
caps on credit cards), may adversely affect the Servicer's ability to
collect on the Receivables or maintain the required level of periodic
finance charges, annual membership fees and other fees. In addition,
failure by the Servicer to comply with such requirements could adversely
affect the ability of the Servicer, as agent for and on behalf of the
related Account Originator, to enforce the Accounts or Receivables.
Pursuant to the Pooling and Servicing Agreement, the Transferor
makes certain representations and warranties relating to the validity and
enforceability of the Accounts and the Receivables and pursuant to the
applicable Purchase Agreement the Account Originators and PFR make
similar representations and warranties with respect to the Receivables
conveyed by each such party. However, it is not anticipated that the
Trustee will make any examination of the Receivables or the records
relating thereto for the purpose of establishing the presence or absence
of defects, compliance with such representations and warranties, or for
any other purpose. The sole remedy if any such representation or warranty
is not complied with and such noncompliance continues beyond the
applicable cure period, is that the Receivables affected thereby will be
reassigned to the Transferor (for reassignment, in turn, to PFR). In
addition, in the event of the breach of certain representations and
warranties, the Transferor may be obligated to accept the reassignment of
the entire Trust Portfolio. The proceeds of any such reassignment will be
deposited in the Collection Account and treated as collections of
Principal Receivables. If the proceeds from such reassignment and any
amounts on deposit in the Collection Account, the Reserve Account and any
amounts available from any Credit Enhancement are not sufficient to pay
any Certificates in full, the amount of principal returned to
Certificateholders will be reduced and some or all of the
Certificateholders will incur a loss. In addition, because the proceeds
of any such reassignment will be distributed to Certificateholders as
principal prior to the scheduled date of such repayment,
Certificateholders would not receive the benefit of the interest rate on
the Certificates specified in the applicable Prospectus Supplement for
the period of time originally expected on the amount of such early
repayment, and accordingly, Certificateholders will bear the reinvestment
risk resulting from faster payment of principal of the Certificates.
There can be no assurance that a Certificateholder would be able to
reinvest such early repayment amount at a similar rate of return. See
"Description of the Pooling and Servicing Agreement -- Representations
and Warranties" and "-- Servicer Covenants" and "Certain Legal Aspects of
the Receivables -- Consumer Protection Laws."
Application of federal and state bankruptcy and debtor relief laws
would affect the interests of Certificateholders in the Receivables if
such laws result in any Receivables being written off as uncollectible
when there are no funds available pursuant to any applicable Credit
Enhancement or other sources. See "Description of the Pooling and
Servicing Agreement -- Defaulted Receivables; Rebates and Fraudulent
Charges."
Proposed Legislation -- Limitation on Finance Charges. Congress and
the states may enact new laws and amendments to existing laws to regulate
further the credit card industry or to reduce finance charges or other
fees or charges applicable to credit card accounts. The potential effect
of any such legislation could be to reduce the yield on the Accounts. If
such yield is reduced, a Pay Out Event or Reinvestment Event could occur,
and the Early Amortization Period or Early Accumulation Period would
commence. See "Description of the Certificates -- Pay Out Events and
Reinvestment Events."
Generation of Additional Receivables; Dependency on Cardholder
Repayments. On the Initial Series Issuance Date, each of BKB and Harris
contributed to Holdings all of their respective rights under the credit
card accounts in the Partners First Portfolio, including the Accounts,
except (i) the related cardholder agreements, (ii) all rights to create,
enforce and collect receivables and any other amounts arising under the
credit card accounts in the Partners First Portfolio and (iii) all rights
to amend and modify the related cardholder agreements. Under the
Contribution Agreements and the Assistance Agreements, Holdings
designated each of BKB and Harris as the Account Originators with respect
to the credit card accounts in the Partners First Portfolio originated by
BKB and Harris, respectively. In March 1998, upon the anticipated
designation of BKB as the Account Originator with respect to the credit
card accounts in the Partners First Portfolio, including the Accounts,
BKB will maintain the cardholder relationships under such credit counts,
including the Accounts and any New Accounts originated by BKB. Upon the
anticipated formation or acquisition of the Bank, the Bank will maintain
the cardholder relationships under all of the Accounts originated by each
of BKB and Harris. There can be no assurance that holders of Harris
credit cards whose account relationships will be maintained by BKB, or
that the holders of BKB and Harris credit cards, whose account
relationships will be maintained by the Bank, will be willing to continue
their credit card relationship with BKB or the Bank, as applicable. The
failure of BKB or the Bank to retain sufficient numbers of these account
relationships could have a material adverse effect on the Trust. The
Receivables may be paid at any time and there is no assurance that there
will be additional Receivables created in the Accounts, that Receivables
will be added to the Trust from Additional Accounts designated to the
Trust, or that any particular pattern of cardholder repayments will
occur. The commencement and continuation of a Controlled Amortization
Period or a Controlled Accumulation Period will be dependent upon the
continued generation of new Receivables to be conveyed to the Trust. A
significant decline in the amount of Receivables generated could result
in the occurrence of a Pay Out Event or Reinvestment Event and the
commencement of the Early Amortization Period or the Early Accumulation
Period. The full payment of the Invested Amount of a Series or Class is
dependent on cardholder repayments and will not be made if such repayment
amounts are insufficient to pay such Series or Class its Invested Amount
in full by the Series Termination Date. The Pooling and Servicing
Agreement provides that the Transferor will be required, and the
Transferor Purchase Agreement provides that PFR and the Transferor will
be required (subject to certain conditions), to designate Additional
Accounts, the Receivables of which will be added to the Trust in the
event that the amount of the Principal Receivables is not maintained at
the Required Minimum Principal Balance or if the Transferor Amount is
less than the Required Transferor Amount. Under the PFR Receivables
Purchase Agreement, the receivables in each newly originated credit card
account are sold to PFR. However, if the Account Originators fail to
originate enough new credit card accounts and as a result Additional
Accounts are not designated by the Transferor and PFR when required, a
Pay Out Event or Reinvestment Event may occur and result in the
commencement of an Early Amortization Period or Early Accumulation
Period. In addition, a decrease in the effective yield on the Receivables
due to, among other things, a change in the annual percentage rates
applicable to the Accounts, an increase in the level of delinquencies or
an increase in convenience use (i.e., where cardholders pay their
Receivables early and thus avoid all finance charges on purchases) could
cause the commencement of an Early Amortization Period or Early
Accumulation Period as well as result in decreased protection to
Certificateholders against defaults under the Accounts.
Non-relationship Accounts. For business reasons, BKB has excluded
from the BKB Portfolio accounts of cardholders with whom BKB had banking
relationships or potential banking relationships in addition to the
credit card relationship. Accordingly, the Receivables in the Trust which
arise under the Accounts included in the BKB Portfolio include only
credit card accounts with cardholders that do not have and are not
expected to have any other significant banking relationship with BKB.
Limitations on Liability. In the event of a breach of a
representation or warranty by BKB or Harris under their respective
Purchase Agreements or Assignment and Assumption Agreements, BKB or
Harris, as applicable, will be liable to PFR for damages. Holdings has
agreed to indemnify BKB and Harris for any losses suffered by BKB or
Harris, as applicable, resulting from, among other things, damages
payable to PFR in respect of a breach by BKB or Harris of any of their
respective representations or warranties under the applicable Assignment
and Assumption Agreement, to the extent that BKB or Harris, as
applicable, would not have suffered such losses under the Initial
Receivables Purchase Agreements, and except for any such losses caused by
the gross negligence or willful misconduct of BKB or Harris, as
applicable. In each of the Assistance Agreements, Holdings agrees to
indemnify BKB and Harris for any losses suffered by BKB or Harris, as
applicable, resulting from, among other things, damages payable to PFR in
respect of a breach by BKB or Harris, of any of their respective
representations or warranties under the Additional Receivables Purchase
Agreements, except to the extent caused by the gross negligence or wilful
misconduct of BKB or Harris, as applicable. Under the Additional
Receivables Purchase Agreements, the liability of BKB and Harris for any
breach of any representation or warranty is limited to the amount of any
recovery by BKB or Harris, as applicable, from Holdings pursuant to
Holdings' obligation to indemnify BKB and Harris.
Social, Legal,Technological, Economic and Other Factors. Changes in
card use and payment patterns by cardholders result from a variety of
social, legal, technological and economic factors. Social factors include
potential changes in consumers' attitudes towards financing purchases
with debt. Legal factors include changes in the laws affecting creditor's
rights. Technological factors include new methods of payment, such as
debit cards, electronic billing and payment services and personal
computer banking services. Economic factors include the rate of
inflation, unemployment levels, tax law changes, bankruptcy levels and
relative interest rates. The use of incentive programs (e.g., gift awards
for card usage) may also affect card use. The Transferor and Holdings are
unable to determine and have no basis to predict whether or to what
extent legal, economic or social factors will affect card use or
repayment patterns. See "The Accounts."
Competition in the Credit Card Industry. The credit card industry
is highly competitive and operates in a legal and regulatory environment
increasingly focused on the cost of services charged for credit cards. As
new credit card issuers seek to enter the market and issuers seek to
expand their market share, there is increased use of advertising, target
marketing and pricing competition. Congress and the states may enact new
laws and amendments to existing laws to regulate further the credit card
industry or to reduce finance charges or other fees or charges applicable
to credit card accounts. In addition, certain credit card issuers assess
annual percentage rates or other fees or charges at rates lower than the
rate currently being assessed on most of the Accounts. If cardholders
choose to utilize competing sources of credit, the rate at which new
Receivables are generated in the Accounts may be reduced and certain
purchase and payment patterns with respect to Receivables may be
affected. The Trust will be dependent upon the continued ability of the
Account Originator to generate new Receivables. If the rate at which new
Receivables are generated declines significantly and the Transferor and
PFR do not designate Additional Accounts, a Pay Out Event or Reinvestment
Event could occur, in which event an Early Amortization Period or Early
Accumulation Period would commence.
In September 1994, the United States Court of Appeals for the Tenth
Circuit reversed a 1992 Utah federal court decision that the VISA
association violated antitrust laws when it denied membership in VISA to
a subsidiary of Sears Roebuck & Co., on the basis that another former
Sears subsidiary at the time was the issuer of the Discover credit card,
a competitor of the VISA credit card. In June 1995, the United States
Supreme Court declined to review the decision of the court of appeals.
MasterCard has settled a similar lawsuit. This settlement by MasterCard
or a similar lawsuit against VISA could result in increased competition
among issuers of VISA and MasterCard credit cards and thereby have
adverse consequences for members of the MasterCard and VISA associations,
such as the Account Originators.
Ability of Holdings and the Account Originators to Change Terms of
the Accounts; Decrease in Finance Charges. Pursuant to the Pooling and
Servicing Agreement, the Transferor is not transferring to the Trust the
Accounts but only the Receivables arising in the Accounts. The Account
Originators and, upon the anticipated acquisition or formation of the
Bank, the Bank will have the right to determine the annual percentage
rates and the fees which are applicable from time to time to the
Accounts, to alter the Minimum Monthly Payment required under the
Accounts and to change various other terms with respect to the Accounts.
A decrease in the annual percentage rates or a reduction in fees would
decrease the effective yield on the Accounts and could result in the
occurrence of a Pay Out Event or Reinvestment Event and the commencement
of an Early Amortization Period or Early Accumulation Period. An
alteration of payment terms may result in fewer payments on Receivables
being made in any month. Under the Pooling and Servicing Agreement and
under the applicable Purchase Agreement, each Account Originator agrees
that, unless required by law or unless it deems it necessary to maintain
on a competitive basis its credit card business or a program operated by
such credit card business based on a good faith assessment by it of the
nature of the competition with respect to the credit card business or
such program, it will not take any action which would have the effect of
reducing the Portfolio Yield (as defined herein) to a level that could
reasonably be expected to cause any Series to experience a Pay Out Event
or Reinvestment Event based on the insufficiency of the Series Adjusted
Portfolio Yield or any similar test or take any action that would have
the effect of reducing the Portfolio Yield to less than the highest
Average Rate (as defined herein) for any Group. "Portfolio Yield" means,
with respect to the Trust as a whole and, with respect to any Monthly
Period, the annualized percentage equivalent of a fraction (a) the
numerator of which is the aggregate of the sum of the Series Allocable
Finance Charge Collections (as defined herein) for all Series during the
immediately preceding Monthly Period calculated on a cash basis after
subtracting therefrom the Series Allocable Defaulted Amount (as defined
herein) for all Series for such Monthly Period and (b) the denominator of
which is the total amount of Principal Receivables as of the last day of
such immediately preceding Monthly Period. Unless otherwise provided in
the Prospectus Supplement with respect to any Series, "Average Rate"
means, with respect to any Group, the percentage equivalent of a decimal
equal to the sum of the amounts for each outstanding Series (or each
Class within a Series consisting of more than one Class) within such
Group obtained by multiplying (a) the certificate rate for such Series or
Class (adjusted to take into account any payments made pursuant to any
interest rate agreements) and (b) a fraction, the numerator of which is
the aggregate unpaid principal amount of the Certificates of such Series
or Class and the denominator of which is the aggregate unpaid principal
amount of all Certificates within such Group. In addition, each Account
Originator also agrees that, unless required by law and except as
provided above, such Account Originator will take no action with respect
to the applicable credit card agreements or the applicable credit card
guidelines that, at the time of such action, such Account Originator
reasonably believes will have a material adverse effect on PFR and the
Transferor and the Certificateholders, as assignees. In servicing the
Accounts, each of the Servicer and any successor Servicer will be
required to exercise the same care and apply the same policies that it
exercises in handling similar matters for its own or other comparable
accounts. Except as specified above, there are no restrictions specified
in the Purchase Agreements on the ability of an Account Originator to
change the terms of its Accounts.
There can be no assurances that changes in applicable law, changes
in the marketplace or prudent business practice might not result in a
determination by an Account Originator to decrease customer finance
charges, fees or otherwise take actions which would change other Account
terms. Under certain circumstances, the Transferor will have the right
and the Transferor and PFR may be required from time to time to designate
Receivables from time to time existing in Additional Accounts or
Participation Interests for inclusion in the Trust. However, such
Additional Accounts or Participation Interests may not be of the same
credit quality or have the same characteristics as the Accounts, the
Receivables of which have been conveyed to the Trust. See "Description of
the Pooling and Servicing Agreement -- Additions of Accounts or
Participation Interests."
Pre-Funding Account. With respect to any Series having a
Pre-Funding Account, in the event there is an insufficient amount of
Principal Receivables in the Trust at the end of the applicable Funding
Period, the Certificateholders of such Series will be repaid principal
from amounts on deposit in the Pre-Funding Account (to the extent of such
insufficiency) following the end of such Funding Period, as described
more fully in the Prospectus Supplement. As a result of such repayment,
Certificateholders would receive a principal payment earlier than they
expected. In addition, Certificateholders would not receive the benefit
of the interest rate on the Certificates specified in the applicable
Prospectus Supplement for the period of time originally expected on the
amount of such early repayment and, accordingly, Certificateholders will
bear the reinvestment risk resulting from faster payment of principal of
the Certificates. There can be no assurance that a Certificateholder
would be able to reinvest such early repayment amount at a similar
return.
Premium Option. Under the Pooling and Servicing Agreement the
Transferor may, by exercising the Premium Option, at any time or from
time to time designate a specified percentage of the amount of
Receivables arising in all or a specified portion of the Accounts that
otherwise would be treated as Finance Charge Receivables to be treated as
Principal Receivables. The Transferor might exercise the Premium Option
because an increase in the amount of collections of Principal Receivables
could result in a faster repayment of principal to Certificateholders
during an Amortization Period or accumulation of principal during an
Accumulation Period. Exercise of the Premium Option by the Transferor
could result in a reduction of the portfolio yield with respect to
collections of Finance Charge Receivables thereby reducing amounts
initially allocated to make interest payments with respect to the
Certificates and cover losses allocated to the Certificates. See
"Description of the Pooling and Servicing Agreement -- Premium Option."
Basis Risk. The Accounts generally have finance charges set at a
variable rate above the prime rate or another specified index. Any Class
of Certificates offered hereby may bear interest at a floating rate based
on a different floating rate index. If there is a decline in the Prime
Rate or such other specified index, the amount of collections of Finance
Charge Receivables on the Accounts may be reduced, whereas the amounts
payable as interest with respect to the Certificates and other amounts
required to be funded out of collections of Finance Charge Receivables
may not be similarly reduced.
Risks of Swaps. The Trustee on behalf of the Trust may enter into
interest rate swaps and related caps, floors and collars to minimize the
risk to Certificateholders from adverse changes in interest rates.
However, such transactions will not eliminate fluctuations in the value
of the Receivables or prevent such losses if the value of the Receivables
decline.
The Trust's ability to hedge all or a portion of its portfolio of
Receivables through transactions in Swaps (as defined herein) depends on
the degree to which interest rate movements in the market generally
correlate with interest rate movements in the Receivables.
The Trust's ability to engage in transactions involving Swaps will
depend on the degree to which the Trust can identify acceptable
counterparties (as defined herein). There can be no assurance that
acceptable counterparties will be available for a specific Swap at any
specific time.
The costs to the Trust of hedging transactions vary among the
various hedging techniques and also depend on such factors as market
conditions and the length of the contract. Furthermore, the Trust's
ability to engage in hedging transactions may be limited by tax
considerations.
Swaps are not traded on markets regulated by the Commission or the
Commodity Futures Trading Commission, but are arranged through financial
institutions acting as principals or agents. In an over-the-counter
environment, many of the protections afforded to exchange participants
are not available. For example, there are no daily fluctuation limits,
and adverse market movements could therefore continue to an unlimited
extent over a period of time. Because the performance of over-the-counter
Swaps is not guaranteed by any settlement agency, there is a risk of
counterparty default.
The Trust may consider taking advantage of investment opportunities
in Swaps that are not presently contemplated for use by the Trust or that
are not currently available but that may be developed, to the extent such
opportunities are both consistent with the Trust's objectives and legally
permissible investments for the Trust. Such opportunities, if they arise,
may involve risks that differ from or exceed those involved in the
activities described above and will be more fully described in the
applicable Prospectus Supplement. See "Description of the Pooling and
Servicing Agreement -- Interest Rate Swaps and Related Caps, Floors and
Collars."
Limited Nature of Rating. Any rating assigned to the Certificates
of a Series or a Class by a Rating Agency will reflect such Rating
Agency's assessment of the likelihood that Certificateholders of such
Series or Class will receive the payments of interest and principal
required to be made under the Pooling and Servicing Agreement and the
related Supplement and will be based primarily on the value of the
Receivables in the Trust and the availability of any Credit Enhancement
with respect to such Series or Class. Any such rating will therefore
generally address credit risk and will not, unless otherwise specified in
the related Prospectus Supplement with respect to any Class or Series
offered hereby, address the likelihood that the principal of, or interest
on, any Certificates of such Class or Series will be prepaid, paid on a
scheduled date or paid on any particular date before the applicable
Series Termination Date. In addition, any such rating will not address
the possibility of the occurrence of a Pay Out Event or Reinvestment
Event with respect to such Class or Series or the possibility of the
imposition of United States withholding tax with respect to non-U.S.
Certificateholders. Further, the available amount of any Credit
Enhancement with respect to any such Series or Class will be limited and
will be subject to reduction from time to time as described in the
related Prospectus Supplement. In addition, the rating of any Series or
Class may be dependent upon the rating of any provider of Series
Enhancement for such Series or Class. The rating of the Certificates of a
Class or Series will not be a recommendation to purchase, hold or sell
such Certificates, and such rating will not comment as to the
marketability of such Certificates, any market price or suitability for a
particular investor. There is no assurance that any rating will remain
for any given period of time or that any rating will not be lowered or
withdrawn entirely by a Rating Agency if in such Rating Agency's judgment
circumstances so warrant.
Issuance of New Series. The Trust, as a master trust, is expected
to issue new Series from time to time. While the terms of any Series will
be specified in a Supplement, the provisions of a Supplement and,
therefore, the terms of any new Series, will not be subject to the prior
review or consent of holders of the Certificates of any previously issued
Series. Such terms may include methods for determining applicable
investor percentages and allocating collections, provisions creating
different or additional security or other Series Enhancements, provisions
subordinating such Series to other Series or subordinating other Series
(if the Supplement relating to such Series so permits) to such Series,
and any other amendment or supplement to the Pooling and Servicing
Agreement which is made applicable only to such Series. The obligation of
the Trustee to issue any new Series is subject to the following
conditions, among others: (a) such issuance will not result in any Rating
Agency reducing or withdrawing its then existing rating of the
Certificates of any outstanding Series or Class with respect to which it
is a Rating Agency (the notification in writing by each Rating Agency to
the Transferor, the Servicer and the Trustee that any action will not
result in such a reduction or withdrawal is referred to herein as the
"Rating Agency Condition") and (b) the Transferor shall have delivered to
the Trustee a certificate of an authorized officer to the effect that, in
the reasonable belief of the Transferor, such issuance will not (i)
result in the occurrence of a Pay Out Event or Reinvestment Event or (ii)
materially adversely affect the timing or amount of payments to
Certificateholders of any Series or Class (any of the conditions referred
to in the preceding clauses (i) and (ii) are referred to herein as an
"Adverse Effect"). There can be no assurance, however, that the issuance
of any other Series, including any Series issued from time to time
hereafter, might not have an impact on the timing or amount of payments
received by a Certificateholder. In addition, the Supplements relating to
Series which are part of a Group as described herein may provide that
collections of Receivables allocable to such Series will be reallocated
among all Series in the Group. Consequently, the issuance of new Series
in a Group may have the effect of reducing the amount of collections of
Receivables which are reallocated to the Certificates of existing Series
in such Group. For example, in a Reallocation Group, which will provide
for the reallocation of collections of Finance Charge Receivables
allocable to a Series among all Series in such Group, an additional
Series which is issued with a larger claim with respect to monthly
interest than that of previously issued Series in such Group (due to a
higher certificate rate) will receive a proportionately larger
reallocation of collections of Finance Charge Receivables. Such issuance
will reduce the amount of collections of Finance Charge Receivables which
are reallocated to the existing Series in such Group. Furthermore, there
can be no assurance that, for any Series in a Group, the Trust will issue
any other Series in such Group. Accordingly, the anticipated benefits of
sharing or reallocation collections of Receivables may not be realized.
See "Description of the Pooling and Servicing Agreement -- New Issuances"
and "-- Groups of Series."
Addition of Trust Assets. The Transferor may from time to time
designate Participation Interests to be conveyed to the Trust or may
designate Additional Accounts, the Receivables in which will be conveyed
to the Trust. In addition, under certain circumstances, the Transferor
will be obligated to designate Aggregate Addition Accounts or, at the
Transferor's option, Participation Interests for inclusion in the Trust.
"Aggregate Addition Accounts" means revolving credit card accounts
established pursuant to a credit card agreement between the Account
Originators and the person or persons obligated to make payments
thereunder, excluding any merchant, which is designated by the Transferor
to be included as an Account. Aggregate Addition Accounts may be subject
to different eligibility criteria than the Initial Accounts and may
include accounts originated using criteria different from those which
were applied to the Initial Accounts, because such accounts were
originated at a later date or were part of a portfolio of credit card
accounts which were not part of the Initial Accounts or which were
acquired from another credit card issuer. Moreover, Aggregate Addition
Accounts may not be accounts of the same type previously included in the
Trust. Consequently, there can be no assurance that such Aggregate
Addition Accounts will be of the same credit quality as the Accounts, the
Receivables of which were initially included in the Trust. In addition,
such Aggregate Addition Accounts may consist of credit card accounts
which have different terms than the Accounts, the Receivables of which
are now included in the Trust, including lower periodic finance charges,
which may have the effect of reducing the average yield on the portfolio
of Accounts. The designation of Aggregate Addition Accounts will be
subject to the satisfaction of certain conditions, including that (a)
such addition will satisfy the Rating Agency Condition and (b) the
Transferor shall have delivered to the Trustee a certificate of an
authorized officer to the effect that, in the reasonable belief of the
Transferor, such addition will not have an Adverse Effect. The Transferor
expects to convey from time to time to the Trust the Receivables arising
in certain Aggregate Addition Accounts in accordance with the provisions
of the Pooling and Servicing Agreement.
After obtaining the consent of each Rating Agency, the Transferor
may also, from time to time, at its sole discretion, designate newly
originated Eligible Accounts to be included as Accounts ("New Accounts")
subject to the limitations and conditions specified in this paragraph.
For purposes of the definition of New Accounts, Eligible Accounts will be
deemed to include only types of revolving credit card accounts which are
included as Initial Accounts or which have previously been included in
any Aggregate Addition if the assignment related to such Aggregate
Addition provides that such type of revolving credit card account is
permitted to be designated as a New Account. Until such time as each
applicable Rating Agency otherwise consents, the number of New Accounts
may be subject to certain restrictions. To the extent New Accounts are
designated for inclusion in the Trust, the Transferor will deliver to the
Trustee, at least semiannually, an opinion of counsel with respect to the
New Accounts included as Accounts confirming the validity and perfection
of each transfer of such New Accounts. If such opinion of counsel with
respect to any New Accounts is not so received, all Receivables arising
in the New Accounts to which such failure relates will be removed from
the Trust. The Transferor will designate New Accounts subject to the
following conditions, among others: (a) the New Accounts will all be
Eligible Accounts; (b) such conveyance will not result in the occurrence
of a Pay Out Event or Reinvestment Event; and (c) such conveyance will
not have been made in contemplation of an insolvency event with respect
to the Transferor, PFR, Holdings or any Account Originator. New Accounts
and Aggregate Addition Accounts are collectively referred to herein as
"Additional Accounts."
Any Participation Interests to be included as Trust Assets or any
Eligible Accounts, other than New Accounts, to be included as Accounts
after the Initial Series Issuance Date, are collectively referred to
herein as an "Aggregate Addition." "Eligible Account" means a revolving
credit card account owned by the applicable Account Originator which, as
of the respective date of designation, (a) is a revolving credit card
account in existence and maintained by the applicable Account Originator,
(b) is payable in United States dollars, (c) has a cardholder whose
address is in the United States or its territories or possessions or a
military address, (d) except as provided below has a cardholder who has
not been identified by the Servicer in its computer files as being
involved in any voluntary or involuntary bankruptcy proceeding, (e) has
not been identified as an account with respect to which the related card
has been lost or stolen, (f) is not sold or pledged to any other party
except for any sale by the applicable Account Originator to PFR, (g) does
not have receivables which have been sold or pledged by the applicable
Account Originator to any other party other than PFR, (h) except as
provided below, does not have receivables that are Defaulted Receivables,
(i) does not have any receivables that have been identified by the
Servicer or the related cardholder as having been incurred as a result of
fraudulent use of any related credit card, (j) was created in accordance
with the credit card guidelines of the applicable Account Originator, and
(k) with respect to Additional Accounts, certain other accounts which
shall have satisfied the Rating Agency Condition. Accounts which relate
to bankrupt obligors or certain charged-off receivables may be designated
as Accounts provided that the amount of Principal Receivables in any such
Account is deemed to be zero for purposes of all allocations under the
Pooling and Servicing Agreement. See "Description of the Pooling and
Servicing Agreement -- Addition of Accounts or Participation Interests."
Allocations. To the extent provided in any Supplement, or any
amendment to the Pooling and Servicing Agreement, portions of the
Receivables or Participation Interests conveyed to the Trust and all
collections received with respect thereto may be allocated to one or more
Series or Groups as long as the Rating Agency Condition shall have been
satisfied with respect to such allocation and the Servicer shall have
delivered an officer's certificate to the Trustee to the effect that the
Servicer reasonably believes such allocation will not have an Adverse
Effect.
USE OF PROCEEDS
Unless otherwise specified in the related Prospectus Supplement,
the net proceeds from the sale of the Certificates of any Series offered
hereby, before the deduction of expenses, will be paid to the Transferor.
Unless otherwise specified in the related Prospectus Supplement, the
Transferor will use such proceeds to pay PFR the purchase price of the
Receivables, which in turn will apply such amounts to pay the Account
Originators the purchase price of the Receivables acquired from such
parties.
THE TRUST
The Trust has been formed pursuant to the Pooling and Servicing
Agreement. The Trust does not and will not engage in any business
activity other than acquiring and holding the Receivables and the other
assets of the Trust and proceeds therefrom, issuing Certificates, the
Transferor Certificate, Participations and any Supplemental Certificate
and making payments thereon and on any Series Enhancements and related
activities. As a consequence, the Trust does not and is not expected to
have any source of capital other than the Trust Assets. The Trust is
administered in accordance with the laws of the State of Delaware.
The Transferor conveyed to the Trust, without recourse, its
interests in all Eligible Receivables existing in the Initial Accounts at
the close of business on the Initial Series Issuance Date, and will
convey to the Trust, without recourse, its interest in all Eligible
Receivables arising under such Accounts thereafter, in exchange for the
net cash proceeds from the sale of one or more Series of Certificates
plus the Transferor Certificate representing the Transferor's Interest.
In addition, the Transferor may convey from time to time to the Trust,
without recourse, except as provided in the Pooling and Servicing
Agreement, its interests in all Eligible Receivables existing in certain
Additional Accounts and Participation Interests, if any, at the close of
business on each applicable date of designation thereof. The Trust Assets
consist of the Eligible Receivables arising under certain VISA(R) and
MasterCard(R) revolving credit card accounts (the "Accounts"), and the
proceeds thereof, including recoveries on charged-off Receivables,
proceeds of credit insurance policies relating to the Receivables and may
include the right to receive Interchange, if any, allocable to the
Certificates, funds on deposit in certain accounts of the Trust for the
benefit of Certificateholders, Participation Interests, if any, and any
Credit Enhancement issued with respect to a particular Series (the
drawing on or payment of any Series Enhancement for the benefit of a
Series or Class of Certificateholders will not be available to the
Certificateholders of any other Series or Class). Pursuant to the
Transferor Purchase Agreement, the Transferor has the right (subject to
certain limitations and conditions, including satisfaction of the Rating
Agency Condition) and in some circumstances under the Pooling and
Servicing Agreement is obligated, to require PFR to designate from time
to time Additional Accounts to be included as Accounts and the Transferor
will convey to the Trust, pursuant to the Pooling and Servicing
Agreement, its interests in all Eligible Receivables of such Additional
Accounts or Participation Interests. Under the Pooling and Servicing
Agreement, the Transferor may convey Participation Interests to the
Trust. See "Description of the Pooling and Servicing Agreement --
Additions of Accounts or Participation Interests." In addition, the
Transferor may, but is not obligated to, designate from time to time
Participation Interests or Receivables from Accounts to be removed from
the Trust. See "Description of the Pooling and Servicing Agreement --
Removal of Accounts."
CREDIT CARD ACTIVITIES
GENERAL
The Receivables conveyed and to be conveyed to the Trust pursuant
to the Pooling and Servicing Agreement have been or will be generated
from transactions made by holders of certain credit card accounts (the
"Trust Portfolio") that have been selected from the total portfolio of
VISA and MasterCard accounts originated by BKB (the "BKB Portfolio") and
Harris (the "Harris Portfolio"). The BKB Portfolio includes all credit
card accounts originated by it with the exception of those accounts of
cardholders having other banking relationships or potential banking
relationships with BKB or its affiliates including cardholders with
billing addresses in Massachusetts, Rhode Island, Connecticut and New
Hampshire and student, VIP, foreign accounts and accounts with employees
of BKB and its affiliates. The Harris Portfolio includes all of its
credit card accounts except corporate accounts. The Receivables also will
include all fees billed to the Accounts. The Accounts were generated
under the VISA and MasterCard associations of which BKB and Harris are
members. The Accounts and Receivables will primarily be serviced by First
Data Resources Inc. ("FDR"). It is anticipated that in the future,
Receivables originated by financial institutions other than BKB and
Harris may be included in the Trust Portfolio, upon satisfaction of
certain conditions, including the Rating Agency Condition.
The BKB Portfolio and the Harris Portfolio include VISA Classic and
MasterCard standard accounts, which are standard accounts, and VISA Gold
and Gold MasterCard accounts, which are premium accounts. Premium
accounts are generally subject to stricter underwriting criteria than
standard accounts, including higher income requirements. Premium accounts
generally have higher credit limits and provide cardholders with services
not available to cardholders of standard accounts. For the BKB originated
accounts, the same finance charges are applied to its premium and
standard accounts. In general, for the Harris Portfolio, premium accounts
are priced at a lower annual percentage rate than standard accounts;
however, there are exceptions based on risk profile and cardholder
behavior. With regard to both portfolios, for accounts with an annual
membership fee, premium accounts are assessed a higher fee than standard
accounts.
Cardholders may use their VISA and MasterCard credit cards for
three types of transactions: credit card purchases, cash advances and
convenience checks issued by the Account Originator. Cardholders obtain
cash advances when they use their VISA or MasterCard credit card to
obtain cash from a financial institution or via an automated teller
machine. Cardholders may also effect balance consolidations by
transferring their balances from credit card accounts at other financial
institutions to their credit card account at the Account Originator. The
balances so transferred are then consolidated with their account at the
Account Originator. Balance consolidations, which have been treated by
BKB in the same manner as purchases and by Harris as cash advances, may
be done by cardholders either at the time an account is originated or
anytime thereafter. The Servicer will treat balance consolidations for
the BKB Portfolio in the same manner as purchases and by the end of 1998,
consistent with the conversion of the Harris Portfolio to the FDR
processing system, the Servicer will treat balance consolidations for the
Harris Portfolio in the same manner as purchases. Cardholders also
receive and may utilize special convenience checks issued by an Account
Originator. Convenience checks may be used by cardholders to draw against
their VISA and MasterCard credit card accounts at any time. The Servicer
treats such draws in the same manner as cash advances. All amounts due
with respect to purchases, cash advances and convenience checks are
included in the Receivables.
Each cardholder is subject to an agreement with the Account
Originator governing the terms and conditions of the related VISA or
MasterCard credit card account. Pursuant to each such agreement, except
as described herein, the Account Originator reserves the right, subject
to advance notice to the cardholder as may be required by law, to add to,
delete or change the terms and conditions of its VISA or MasterCard
credit card accounts at any time, including increasing or decreasing
periodic finance charges, fees, other charges or minimum monthly payment
requirements.
BUSINESS STRATEGY
Holdings will design and market its credit card program based on an
empirical analysis of the credit card business at the level of the
individual cardholder. Holdings will collect information about credit
card issuers, the consumer credit market, and current as well as
historical behavior of individual customers and prospects from both
internal and external sources. Factors which Holdings will consider
include credit scores, balance amounts, purchase types and amounts,
finance charges paid and other indicia of cardholder behavior over time.
It is anticipated that following the establishment of the Bank, the
Bank may enter into alliances with credit card issuers who have
concluded, among other things, that their current size and operational
capacities are too limited to allow them to maintain successful credit
card businesses on a stand alone basis. It is anticipated that such
arrangements may involve the selling of such credit card issuer's
non-strategic accounts to the Bank for fair market value and the
retention by such credit card issuer of those assets it considers
strategic (e.g. relationship or regional accounts). Any such
non-strategic accounts acquired by the Bank would be included as Accounts
and the Receivables arising thereunder added to the Trust only if certain
conditions, including the Rating Agency Condition, are satisfied.
Holdings may provide management and advisory services for the
strategic credit card accounts retained by any such credit card issuer;
however, any such retained strategic credit card accounts would not be
included in the Partners First Portfolio and the receivables arising in
such credit card accounts would not be included in the Trust.
PROCESSING AND SERVICING OF CREDIT CARD ACCOUNTS
Historically, BKB delegated the processing and servicing of its
accounts exclusively to FDR. In addition, BKB utilized the management
services of First Annapolis Marketing Information Services, Inc.
("FAMIS") to perform functions related to credit policy and risk
management, marketing acquisition and account management, data mining and
FDR oversight.
Historically, the Harris Portfolio was serviced by Harris'
employees in Buffalo Grove, Illinois. As of the Initial Series Issuance
Date, the accounts in the Harris Portfolio were maintained on the system
utilized by Harris prior to the Initial Series Issuance Date, which is
the CardPac System. FDR has recently acquired the Buffalo Grove facility,
has hired certain of its employees and is servicing the Harris Portfolio.
The Harris Portfolio is expected to be converted to the FDR processing
system in March 1998.
Holdings has delegated the majority of both the credit card
processing and account servicing functions to FDR, a subsidiary of First
Data Corp. ("FDC"), pursuant to a seven-year contract, automatically
renewable for an additional two-year period, entered into on the Initial
Series Issuance Date. All database management functions, data mining
activities, predictive model creating and daily oversight of FDR and FDR
activities will be performed in-house by employees of Holdings as of the
Initial Series Issuance Date. The remainder of the processing and
servicing work will be performed by a combination of alternative vendors
and in-house staff. FDR facilities currently located in Omaha, Nebraska,
Tulsa, Oklahoma, Buffalo Grove, Illinois, Atlanta, Georgia, Matteson,
Illinois and Phoenix, Arizona are utilized to clear transactions through
the VISA and MasterCard systems, post transactions to cardholder
accounts, create billing statements, provide credit processing,
operational support (including customer service), and perform collections
activity on delinquent accounts according to the policies and procedures
recommended by Holdings. Transactions creating the Receivables flow
through both the VISA and MasterCard systems and the FDR processing
system. If FDR should fail to perform its functions or become insolvent,
or should either the VISA or MasterCard system materially curtail its
activities, or should the Account Originators cease to be members of
either VISA or MasterCard associations for any reason, a Pay Out Event
could occur and delays in payments on the Receivables and possible
reductions in the dollar amounts thereof could also occur.
ACCOUNT ORIGINATION
BKB began originating accounts in September 1995 through (i) direct
mail solicitations of individuals residing in the United States who had
been prescreened at credit bureaus on the basis of criteria furnished by
the BKB; (ii) direct mail solicitations of individuals residing in the
United States without prescreening; (iii) outbound telemarketing programs
and (iv) applicant initiated requests made at the BKB's branch offices or
by telephone or via written letter. BKB applied the same credit criteria
without distinction among the foregoing sources of applications, as
described below in "-- Underwriting Procedures." In addition, BKB
purchased a credit card portfolio consisting of approximately 324,000
accounts with outstanding principal receivables of approximately $311
million in July 1996 from BayBank, N.A., of which approximately $19
million of Receivables were transferred to the Trust on the Initial
Series Issuance Date.
In 1966, Harris began originating accounts through applicant
initiated requests. In 1983, Harris began soliciting new cardholders
through mass mailings from bureau extracts. Outbound telemarketing
programs conducted in 1994 and 1995 were an additional source of
applications for Harris. Credit policy, as described below in
"Underwriting Procedures" does not vary with application source; however,
it has varied over time. In September 1990, Harris purchased a portfolio
of credit card accounts with approximately $207 million of outstanding
receivables from United Jersey Bank ("UJB"). As of December 1997, the UJB
portfolio comprised approximately 36,830 active accounts and $80 million
of receivables outstanding.
In March 1998, Holdings will designate BKB as the Account
Originator with respect to the credit card accounts in the Partners First
Portfolio, including the Accounts, originated by Harris. Harris will
continue to be an Account Originator with respect to new credit card
accounts originated by it, including any New Accounts. Prior to the
establishment of the Bank, Holdings may designate other financial
institutions as Account Originators and any such Account Originator would
originate credit card accounts into the Partner First Portfolio.
Following the establishment or acquisition of the Bank, the Bank will be
the sole Account Originator with respect to the Accounts and any New
Accounts. In addition, it is anticipated that the Bank or Holdings will
acquire accounts through the selective acquisition of portfolios. None of
the credit card accounts originated by the Bank or any Account Originator
may be designated as Accounts and none of the receivables arising under
such credit card accounts may be transferred to the Trust unless certain
conditions, including the Rating Agency Condition, are satisfied.
Going forward, the Account Originators will continue to originate
accounts through pre-approved and non-prescreened direct mail
solicitations to creditworthy consumers on a nationwide basis.
UNDERWRITING PROCEDURES
Historically, BKB and Harris reviewed all applications for credit
card accounts for completeness and creditworthiness based on credit
underwriting criteria established by BKB and Harris, as applicable. They
used credit reports issued by independent credit reporting agencies and,
in the event of any discrepancies between the application and the credit
report and in certain other circumstances, they verified certain
information regarding applicants.
Going forward, the primary new account source for the Account
Originators will be prescreened direct mail solicitation of qualified
prospective cardholders. Underwriting criteria included in the Credit
Card Guidelines recommended by Holdings, will be utilized by the Account
Originator at the credit bureaus to generate a list of qualifying
prospective cardholders. Account Originators will also obtain credit
scores using scoring models licensed by the credit bureaus from Fair
Isaac & Company ("FICO"), which specializes in developing credit scoring
models. The credit scoring models to be used by Account Originators are
intended to provide a general indication, based on the information
available, of the applicant's willingness and ability to repay the
applicant's obligations. Credit scoring will evaluate a potential
cardholder's credit profile and certain of the information provided by
the applicant in the credit application in order to statistically
quantify credit risk. Models for credit scoring will be developed by
using statistics to evaluate common characteristics and their correlation
with credit risk. The credit scoring models used will often be reviewed
and updated to reflect more current statistical data.
Holdings will also use information obtained on behalf of the
Account Originators from various third-party sources and Holdings'
internal database and then apply various predictive models to the list of
potential cardholders supplied by the credit bureaus to determine the
most creditworthy and more profitable prospects to solicit by mail.
Potential cardholders who receive direct mail solicitations will be
required to complete and return an acceptance certificate. The
information supplied by the potential cardholder on the acceptance
certificate will be used by Holdings to verify the potential cardholder's
credit information. As part of the verification process Holdings will
review a new credit bureau report and credit score which will be updated
based on the information supplied by the applicant and established
lending criteria. Credit lines will be established by the Account
Originators after this verification process has been completed and will
be commensurate with the new cardholder's updated credit profile, credit
score and income.
Non-prescreened applicants for credit cards will be reviewed for
completeness and accuracy. The Servicer will credit score all
non-prescreened applicants utilizing a FICO supplied credit scorecard.
Applicants who score above or below pre-set thresholds will be accepted
or rejected by the Account Originators accordingly. Applicants whose
credit score lies between these pre-set thresholds will be reviewed
manually by a credit analyst as part of the determination as to the
applicant's creditworthiness. Account Originators have the ability to
override decisions made by the scorecard upon receipt of additional
information from the applicant. Credit lines will be assigned by the
Account Originators based upon the cardholder's credit score, income and
credit profile.
Generally, the Account Originators will issue credit cards that
expire two years after issuance and will reissue credit cards with
two-year expiration dates, so long as the payment behavior and usage of
the cardholder satisfies certain criteria.
ADDITIONAL ACCOUNTS
Eligible Receivables from Additional Accounts, if needed, will be
added to the Trust from accounts originated or acquired by the Account
Originators through pre-approved applications and other sources, as
described above. See "Risk Factors -- Addition of Trust Assets."
BILLING AND PAYMENTS
The VISA and MasterCard credit card accounts of the BKB Portfolio
are currently grouped into twenty-one billing cycles and of the Harris
Portfolio are currently grouped into twenty-four billing cycles (each, a
"Billing Cycle") ending on various days throughout each month. Consistent
with the conversion to the FDR system in March 1998, the Harris Portfolio
will be grouped into 21 Billing Cycles. Each Billing Cycle has its own
monthly billing date, at which time the activity in the related accounts
during the month ending on such billing date is processed and mailed to
such cardholders. FDR sends a monthly billing statement to each BKB
Portfolio cardholder with a debit or credit balance of at least one
dollar at the end of the Billing Cycle or when a finance charge has been
imposed. Monthly statements are sent to each Harris Portfolio cardholder
unless (i) the account has been charged off, (ii) the account has a zero
balance with no activity, (iii) the account is coded as having a bankrupt
or deceased cardholder, (iv) the account activity has been confirmed as
fraudulent or (v) the account has had a credit balance for more than six
months.
With respect to the BKB Portfolio, each month cardholders generally
are required to make at least a minimum payment (the "Minimum Monthly
Payment") equal to the sum of (i) the greater of 2.0% of the new balance
of purchases and $15, or if the new balance of purchases is less than
$15, the amount of the new balance of purchases, (ii) the greater of 2.0%
of the new balance of cash advances and $15, or if the new balance of
cash advances is less than $15, the amount of the new balance of cash
advances, (iii) any past due amount from prior months, and (iv) at the
option of the Account Originator, the excess of the unpaid balance for an
account over the assigned credit limit.
With respect to the Harris Portfolio, the Minimum Monthly Payment
equals (i) for accounts where the current balance is less than the credit
limit, the greater of 1/36th of the current balance (not including
amounts in dispute) or $15.00 and (ii) for accounts that are overlimit,
the amount the account balance is above the credit limit.
Going forward, BKB's policy will generally continue to be applied
to new accounts in the Partners First Portfolio.
With regard to the BKB Portfolio, BKB reserves the option to allow
individual cardholders or groups of cardholders to skip their Minimum
Monthly Payments for one or more months. Finance charges in connection
with such skipped payments continue to accrue, and the amount of the next
Minimum Monthly Payment is determined as described above, based on the
account balance at the end of the next Billing Cycle. The effect of
skipped payments is to increase the amount of Finance Charge Receivables
and to decrease the rate of payments of Principal Receivables during the
Billing Cycles for which the offers apply. BKB's policy will continue to
be applied with respect to both new accounts originated by the Account
Originators and accounts from the Harris Portfolio.
Currently, for both the BKB Portfolio and the Harris Portfolio the
monthly periodic finance charges are calculated for both cash advances
and purchases by multiplying the applicable monthly periodic rate by the
average daily cash advance balance or average daily purchase balance,
respectively. Monthly periodic finance charges are calculated on cash
advances and purchases for the BKB Portfolio (including certain fees and
unpaid finance charges) from the date of the transaction or the first day
of the Billing Cycle in which the transaction is posted to the account
(whichever is later). Monthly periodic finance charges are calculated on
cash advances and purchases for the Harris Portfolio on the date the
transaction is posted to the account. The monthly periodic finance
charges in new accounts originated by the Account Originators will mirror
BKB policy. Following the conversion of the Harris portfolio to the FDR
processing system, monthly periodic finance charges will be calculated in
accordance with the BKB portfolio. Monthly periodic finance charges are
not assessed in most circumstances on purchases if the purchases new
balance shown in the billing statement is paid by the due date specified
in the monthly billing statement, or if the purchases previous balance is
zero. The next statement closing date is on average 25-28 days after the
billing date. The average annual percentage rates for purchases and cash
advances for virtually every account are variable rates. For the BKB
Portfolio, the current annual percentage rate for purchases is a variable
rate based on The Wall Street Journal prime rate plus a spread generally
ranging from 3.75% to 7.90%. The current annual percentage rate for cash
advances is a variable rate based on The Wall Street Journal prime rate
plus a spread generally ranging from 5.75% to 9.90%. Spreads in the BKB
Portfolio vary depending on risk profile and cardholder behavior. For the
Harris Portfolio, the current annual percentage rate for both purchases
and cash advances is a variable rate based on The Wall Street Journal
prime rate plus a spread generally ranging from 5.90% to 7.90%. Spreads
vary depending on account type (premium or standard), risk profile and
behavior.
For the BKB Portfolio, for accounts with an annual membership fee,
generally the annual membership fee is $18.00 for standard accounts and
$28.00 for premium accounts. Approximately 83% of BKB Portfolio Accounts
are assessed an annual fee. BKB reserves the right to waive the annual
membership fee, or a portion thereof, at its
discretion, in connection with solicitations for new accounts, or when
BKB determines a waiver to be necessary to operate its credit card
business on a competitive basis. For the Harris Portfolio accounts with
an annual membership fee, generally the annual membership fee is $20.00
for standard accounts and $35.00 for premium accounts. Approximately 13%
of the Harris Portfolio accounts are assessed an annual fee. Harris
reserved the right to waive the annual membership fee, or a portion
thereof, at its discretion, in connection with solicitations for new
accounts, or when Harris determined a waiver to be necessary to operate
its credit card business on a competitive basis. In general for the
Harris Portfolio, membership fees have not been waived. If a fee is
billed and is not paid, the account becomes delinquent and will be
processed by a collection representative. Generally, an account is closed
upon determining that the related cardholder is unwilling to pay the fee.
The annual membership fee for both the BKB and the Harris Portfolio
accounts is non-refundable. The annual fee policy for new accounts will
mirror the previous BKB policy of pricing cardholders according to their
behavior and risk profile. Harris Portfolio accounts will be repriced
gradually over time to achieve consistency with this policy.
However, certain Harris relationship accounts may be given a more
favorable structure.
With reference to the BKB Portfolio, in addition to the annual
membership fee, accounts are charged certain other fees including: (i) a
late fee, generally in the amount of $25.00 with respect to any monthly
payment if the required minimum monthly payment is not received by the
payment due date shown on the monthly billing statement; (ii) a cash
advance fee of 2.5% of the amount of the advance subject to a minimum fee
of $3.50 per transaction, (iii) a returned check charge, generally in the
amount of $25.00 and (iv) an over-the-limit fee, generally in the amount
of $25.00 with respect to any account more than a specified amount over
its credit limit at the time the monthly billing statement is created.
With reference to the Harris Portfolio, in addition to the annual
membership fee, accounts are charged certain other fees including: (i) a
late fee, generally in the amount of $20.00 with respect to any monthly
payment if the required minimum monthly payment is not received by the
payment due date shown on the monthly billing statement; (ii) a cash
advance fee of 2.0% of the amount of the advance subject to a minimum fee
of $5.00 and a maximum of $15.00 per transaction, unless the cash advance
is done through an automatic teller machine, in which case, the cash
advance fee is $2.00, (iii) a returned check charge, generally in the
amount of $20.00 and (iv) an over-the-limit fee, generally in the amount
of $20.00 with respect to any account more than a specified amount over
its credit limit at the time the monthly billing statement is created.
Finance charge policies for new accounts will mirror the previous BKB
policy of pricing cardholders according to their behavior and risk
profile. Harris accounts will be re-priced gradually over time to achieve
consistency with this policy.
With regard to the BKB Portfolio, payments by cardholders are
processed and applied first to annual membership fees, next to billed and
unpaid finance charges, next to any billed fees and other amounts not
subject to finance charges and then to billed and unpaid transactions.
Any excess is applied to unbilled transactions in the order determined by
BKB and then to unbilled finance charges. With regard to the Harris
Portfolio, payments are applied in the following priority: (i) retail
interest not paid, (ii) retail past due and overlimit fees, (iii) retail
insurance billed not paid, (iv) retail membership fees billed not paid,
(v) retail current month's balance, (vi) retail statement balance, (vii)
cash interest billed not paid, (viii) cash service charge billed not
paid, (ix) cash current month's balance, and (x) cash statement balance.
Consistent with the conversion of the Harris Portfolio to the FDR
processing system, Harris Portfolio cardholder payments will be processed
and applied in the same manner that BKB Portfolio is processed and
applied.
With respect to pricing, the accounts in the Harris Portfolio will
gradually be repriced according to policy established and utilized for
the BKB Portfolio. Annual fees and annual percentage rates will be
assigned to accounts based on risk profile and cardholder behavior. It is
expected that, eventually, most accounts will be subject to the same
late, overlimit, cash advance and returned check fees. There can be no
assurance that monthly periodic finance charges, fees and other charges
imposed by the Account Originators will remain at current levels in the
future.
INTERCHANGE
Members participating in the VISA and MasterCard associations
receive certain fees ("Interchange") as partial compensation for taking
credit risk, absorbing fraud losses, and funding receivables for a
limited period prior to initial billing. Under the VISA and MasterCard
systems, a portion of this Interchange in connection with cardholder
charges for merchandise and services is passed from banks which clear the
transactions for merchants to credit card-issuing banks. Interchange
ranges from approximately 1% to 2% of the transaction amount, although
VISA and MasterCard associations may from time to time change the amount
of Interchange reimbursed to banks issuing their credit cards.
Interchange with respect to each Account Originator will be allocated to
PFR in an amount equal to the product of (i) the total Interchange with
respect to the Account Originator's entire portfolio of credit card
accounts and (ii) a fraction, the numerator of which is the total credit
card sales charges arising in the credit card accounts included in the
Partner First Portfolio originated by such Account Originator, and the
denominator of which is the total credit card sales charges arising in
the Account Originator's entire portfolio of credit card accounts.
Interchange received by PFR will be allocated to the Trust in an amount
equal to the product of (i) the aggregate Interchange received by PFR
from the Account Originators and (ii) a fraction, the numerator of which
is the total amount of Receivables arising in the Accounts in the Trust
Portfolio and the denominator of which is the total credit card sales
charges arising in all of the credit card accounts in the Partners First
Portfolio. Such amount is an estimate of the actual Interchange and may
be greater or less than the actual amount of the Interchange relating to
the Accounts from time to time. Unless otherwise stated in the related
Prospectus Supplement, Interchange will be included in collections of
Finance Charge Receivables for purposes of calculating the Portfolio
Yield for a Series.
COLLECTION OF DELINQUENT ACCOUNTS
With regard to both the Harris Portfolio and the BKB Portfolio, an
account is delinquent if a minimum payment due thereunder is not received
by the Servicer by the time the cardholder's next billing statement is
generated, which was generally within five days after the due date
printed in the previous statement. Delinquent accounts are routed to the
pre-collections system at FDR where they are prioritized and early stage
collection efforts were initiated. These early efforts include the
printing of the overdue amount on the next billing statement and either a
telephone call or letter requesting payment of the past due amount. If
these early stage collection efforts are ineffective, contact by
telephone and/or mail is escalated and efforts to collect past due
amounts are made more frequently subject to all applicable legal
requirements.
In general, an account is restricted and charging privileges are
suspended when the account becomes fifteen (15) to thirty (30) days past
due for the BKB Portfolio and thirty (30) days past due for the Harris
Portfolio, or when a cardholder exceeds the account's credit limit within
pre-set parameters. At sixty (60) days past due, no additional extensions
of credit would be authorized for any reason. Each of BKB and Harris
reserves the right to enter into agreements with delinquent cardholders
to extend or otherwise change an account's payment schedule. A delinquent
account could be re-aged once in any twelve (12) month period if the
delinquent cardholder makes a payment equal to three minimum payments
over a ninety (90) day period.
The policy for both portfolios is to charge-off as uncollectible
any account which is six billing cycles past due (i.e., 180 days
delinquent). However, for the BKB Portfolio, if notice is received that a
cardholder has filed for bankruptcy then the account is charged-off as
soon as is practicable but generally no later than 25 days after receipt
of such notice. For the Harris Portfolio, bankrupt and deceased accounts
are charged off manually every month. Credit evaluation, servicing and
charge-off policies and collection practices may change over time in
accordance with the business judgment of the applicable Account
Originator, applicable law, guidelines established by applicable
regulatory authorities and market conditions.
Consistent with the conversion of the Harris Portfolio to the FDR
processing system, the collection of all delinquent accounts will be
performed consistent with BKB originated accounts.
RECOVERIES
The Transferor and the Servicer will be required, pursuant to the
terms of the Pooling and Servicing Agreement, to transfer to the Trust
all amounts received by the Servicer (net of out-of-pocket costs of
collecting such amounts, which the Transferor believes represents an
immaterial portion of the total collections with respect to the
Receivables), including insurance proceeds, with respect to Defaulted
Receivables, including amounts received by the Transferor or the Servicer
from the purchaser or transferee with respect to the sale or other
disposition of Defaulted Receivables ("Recoveries"). In the event of any
such sale or other disposition of Receivables, Recoveries will not
include amounts received by the purchaser or transferee of such
Receivables but will be limited to amounts received by the Transferor or
the Servicer from the purchaser or transferee. Collections of Recoveries
will be treated as collections of Principal Receivables; provided,
however, that to the extent the aggregate amount of Recoveries received
with respect to any monthly period exceeds the aggregate amount of
Principal Receivables (other than Ineligible Receivables) on the day such
Receivables became Defaulted Receivables for each day in such monthly
period, the amount of such excess will be treated as collections of
Finance Charge Receivables.
For the BKB Portfolio, the Servicer utilizes FDR's facilities to
administer the recovery of defaulted receivables. The Servicer will
prioritize defaulted receivables according to the likelihood of
successful recovery and selects a collection method based on the
information supplied by FDC. Included among the collection methods
utilized by the Servicer are primary and secondary third-party collection
agencies, which are retained to recover the defaulted receivables. As
compensation for their services, the collection agencies receive a
percentage of the amounts they collect. For the Harris portfolio, Harris
utilized internal facilities to administer the recovery of defaulted
receivables. However, by the end of the first half of 1998, consistent
with the conversion of the Harris Portfolio to the FDR processing system,
FDR will administer the recovery of defaulted receivables consistent with
the BKB originated accounts.
FRAUD PREVENTION
Historically, for both the BKB and Harris Portfolios, each
organization reviewed all applications for potential fraud by comparing
the information on the credit card application against the information
supplied by the credit bureaus. In addition, all applications were
checked against information supplied by the Issuers' Clearinghouse, a
national fraud database maintained jointly by VISA and MasterCard. For
the BKB Portfolio, once an account is approved, transactions are
monitored by FDR which scores each transaction based upon its likelihood
of being fraudulent. For the Harris Portfolio, the majority of fraud
functions were performed internally; however, both FDR and VISA monitored
transactions and attempted to identify potential fraudulent activity.
Potential fraudulent activity was researched by investigators and,
dependent upon their findings, accounts may be blocked or closed. Going
forward, Holdings' recommended fraud policy will follow that of BKB.
PARTNERS FIRST HOLDINGS, LLC
Partners First Holdings, LLC is a limited liability company
organized in the State of Delaware on December 17, 1997. Its principal
executive office is located at 900 Elkridge Landing Road, Suite 300,
Linthicum, MD 21090-2925, and its telephone number is (410) 865-8700. The
Prospectus Supplement for each Series will provide additional information
relating to the Servicer.
Holdings was formed in December 1997 pursuant to a Master Agreement
for the Formation of a Limited Liability Company, dated as of September
2, 1997 (the "Master Formation Agreement"), among BankBoston Corporation
("BankBoston"), a Massachusetts corporation, of which BKB is an indirect
subsidiary, Bankmont Financial Corp., a Delaware corporation
("Bankmont"), Harris, which is an indirect subsidiary of Bankmont, and
First Annapolis Consulting, Inc., a Maryland corporation ("First
Annapolis"). After consummation of the transactions contemplated by the
Master Formation Agreement, including the contributions by BKB and Harris
described above, the owners of Holdings are BKB, EFS (U.S.), Inc., a
Delaware corporation and subsidiary of Bankmont, and First Annapolis
Marketing Information Services, Inc. ("FAMIS"), a Maryland corporation
and wholly-owned subsidiary of First Annapolis. EFS (U.S.), Inc., BKB and
FAMIS have a 69%, 19% and 12% interest respectively, in the common equity
of Holdings. Holdings has been appointed as Servicer with respect to the
Accounts and the related Receivables. Holdings has delegated certain of
its servicing duties to FDR.
PARTNERS FIRST RECEIVABLES FUNDING, LLC
PFRF was organized under the laws of the State of Delaware on
January 26, 1998 and is a special purpose wholly owned subsidiary of PFR.
PFRF's principal office is currently located at 900 Elkridge Landing
Road, Suite 301, Linthicum, MD 21090-2925, and its telephone number is
(410) 855-8600. The Transferor was organized for the limited purposes of
facilitating the type of transactions described herein, purchasing,
holding, owning and selling receivables, and any activities incidental to
and necessary or convenient for the accomplishment of such purposes.
Neither the PFR nor the Transferor's board of managers intends to change
the business purpose of the Transferor.
THE ACCOUNTS
The Receivables arise in certain credit card accounts that have
been selected from the total portfolio of MasterCard and VISA accounts in
the Partners First Portfolio on the basis of criteria set forth in the
Pooling and Servicing Agreement. An account must be an Eligible Account
to be included in the Trust Portfolio. On the Initial Series Issuance
Date, the Trust Portfolio represented approximately 97% of the credit
card accounts in the Partners First Portfolio.
Pursuant to the Transferor Purchase Agreement and the Pooling and
Servicing Agreement, the Transferor has the right or is obligated
(subject to certain limitations and conditions) to require and PFR is
obligated (subject to certain limitations and conditions) to designate,
from time to time, additional qualifying VISA and MasterCard consumer
revolving credit card accounts to be included as Accounts and to convey
to the Transferor for ultimate conveyance to the Trust all Receivables of
such Additional Accounts, whether such Receivables are then existing or
thereafter created. Those Accounts must meet the eligibility criteria set
forth in the Pooling and Servicing Agreement as of the date the
Transferor designates such Accounts as Additional Accounts. PFR will
convey the Receivables then existing or thereafter created under such
Additional Accounts to the Transferor which in turn will convey such
Receivables to the Trust. Under the Pooling and Servicing Agreement, the
Transferor also has the right to convey Participation Interests to the
Trust subject to the conditions described in the Pooling and Servicing
Agreement. See "Description of the Pooling and Servicing Agreement --
Additions of Accounts or Participation Interests."
As of each date with respect to which Additional Accounts are
designated, PFR will represent and warrant to the Transferor that the
Receivables generated under the Additional Accounts meet the eligibility
requirements set forth in the Purchase Agreement and the Transferor will
represent and warrant to the Trust that such Receivables or Participation
Interests, if any, meet the eligibility requirements set forth in the
Pooling and Servicing Agreement. See "Description of the Pooling and
Servicing Agreement -- Conveyance of Receivables." Because the Initial
Accounts were designated as of the Initial Series Issuance Date and
subsequent Aggregate Addition Accounts may be designated from time to
time, there can be no assurance that all of such Accounts will continue
to meet the eligibility requirements as of any Series Closing Date. In
the Pooling and Servicing Agreement the Transferor is required to make
certain representations and warranties with respect to the Accounts and
the Receivables as of each Series Closing Date (or as of the related
addition date with respect to Additional Accounts). In the event of a
breach of any such representation or warranty by the Transferor, the
Transferor may be required to accept reassignment of the related
Receivables and, to the extent such breach relates to an Account, such
Account will no longer be included as an Account. See "Description of the
Pooling and Servicing Agreement -- Representations and Warranties."
Subject to certain limitations and restrictions, the Transferor may
also designate certain Accounts or Participation Interests, if any, for
removal from the Trust, in which case such Participation Interests or the
Receivables of the Removed Accounts will be reassigned to the Transferor.
Throughout the term of the Trust, the Receivables in the Trust will
consist of Receivables generated under the Accounts, Participation
Interests, if any, and the Receivables generated under Additional
Accounts, but will not include the Receivables generated under Removed
Accounts or removed Participation Interests.
The Prospectus Supplement relating to a Series will provide certain
information about the Trust Portfolio as of the date specified. Such
information will include the amount of Principal Receivables, the amount
of Finance Charge Receivables, the range of principal balances of the
Accounts and the average thereof, the range of credit lines of the
Accounts and the average thereof, the range of ages of the Accounts and
the average thereof, information with respect to the geographic
distribution of the Accounts, the types of Accounts and delinquency
statistics relating to the Accounts.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Pooling and
Servicing Agreement and the related Supplement substantially in the forms
filed as exhibits to the Registration Statement of which this Prospectus
is a part. The following summary describes certain terms of the Pooling
and Servicing Agreement and the related Supplement and is qualified in
its entirety by reference to the Pooling and Servicing Agreement and the
related Supplement.
The Certificates will evidence undivided beneficial interests in
the Trust Assets allocated to such Certificates, representing the right
to receive from such Trust Assets funds up to (but not in excess of) the
amounts required to make payments of interest and principal in the manner
described below.
The Certificates will initially be represented by one or more
Certificates registered in the name of the nominee of DTC (together with
any successor depository selected by the Transferor, the "Depository"),
except as set forth below. Unless otherwise stated in the related
Prospectus Supplement, the Certificates will be available for purchase in
minimum denominations of $1,000 and integral multiples thereof in
book-entry form only. The Transferor has been informed by DTC that DTC's
nominee will be Cede & Co. ("Cede"). Accordingly, Cede is expected to be
the holder of record of the Certificates. Except under the limited
circumstances described herein, no Certificateholder will be entitled to
receive a Certificate in fully registered, certificated form ("Definitive
Certificates") representing such person's interest in the Certificates.
Unless and until Definitive Certificates are issued under the limited
circumstances described herein, all references herein to actions by
Certificateholders shall refer to actions taken by DTC upon instructions
from its Participants (as defined herein), and all references herein to
distributions, notices, reports and statements to Certificateholders
shall refer to distributions, notices, reports and statements to Cede, as
the registered holder of the Certificates, for distribution to the
beneficial owners of the Certificates in accordance with DTC procedures.
See "-- Book-Entry Registration" and "-- Definitive Certificates."
Payments of interest and principal will be made on each related
Interest Payment Date to the Certificateholders in whose names the
Certificates were registered on the last day of the calendar month
preceding such Interest Payment Date, unless otherwise specified in the
related Prospectus Supplement (each, a "Record Date").
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement,
Certificateholders may hold their Certificates through DTC (in the United
States) or Cedel or Euroclear (in Europe) if they are participants of
such systems, or indirectly through organizations which are participants
in such systems.
Cede, as nominee for DTC, will hold the global Certificate or
Certificates. Cedel and Euroclear will hold omnibus positions on behalf
of their participants through customers' securities accounts in Cedel's
and Euroclear's names on the books of their respective Depositaries (as
defined herein) which in turn will hold such positions in customers'
securities accounts in the Depositaries' names on the books of DTC.
Citibank, N.A. will act as depositary for Cedel and Morgan Guaranty Trust
Company of New York will act as depositary for Euroclear (in such
capacities, the "Depositaries").
DTC is a limited-purpose trust company organized under the laws of
the State of New York, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the UCC and a "clearing
agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for its participating
organizations ("Participants") and facilitate the settlement of
securities transactions between Participants through electronic
book-entry changes in accounts of its Participants, thereby eliminating
the need for physical movement of certificates. Participants include
underwriters, securities brokers and dealers, banks, trust companies and
clearing corporations and may include certain other organizations.
Indirect access to the DTC system also is available to others such as
banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Transfers between Participants will occur in accordance with DTC
rules. Transfers between Cedel Participants (as defined herein) and
Euroclear Participants (as defined herein) will occur in accordance with
their respective rules and operating procedures.
Cross-market transfers between persons holding directly or
indirectly through DTC, on the one hand, and directly or indirectly
through Cedel Participants or Euroclear Participants, on the other, will
be effected in DTC in accordance with DTC rules on behalf of the relevant
European international clearing systems by its Depositary. Cross-market
transactions will require delivery of instructions to the relevant
European international clearing system by the counterparty in such system
in accordance with its rules and procedures and within its established
deadlines (European time). The relevant European international clearing
system will, if the transaction meets its settlement requirements,
deliver instructions to its Depositary to take action to effect final
settlement on its behalf by delivering or receiving securities in DTC,
and making or receiving payment in accordance with normal procedures for
same- day funds settlement applicable to DTC. Cedel Participants and
Euroclear Participants may not deliver instructions directly to the
Depositaries.
Because of time-zone differences, credits of securities received in
Cedel or Euroclear as a result of a transaction with a Participant will
be made during subsequent securities settlement processing and dated the
business day following the DTC settlement date. Such credits or any
transactions in such securities settled during such processing will be
reported to the relevant Euroclear or Cedel Participants on such business
day. Cash received in Cedel or Euroclear as a result of sales of
securities by or through a Cedel Participant or a Euroclear Participant
to a Participant will be received with value on the DTC settlement date
but will be available in the relevant Cedel or Euroclear cash account
only as of the business day following settlement in DTC.
Certificateholders that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership
of, or other interests in, Certificates may do so only through
Participants and Indirect Participants. In addition, Certificateholders
will receive all distributions of principal and interest on the
Certificates from the Trustee through DTC and its Participants. Under a
book-entry format, Certificateholders will receive payments after the
related Distribution Date, as the case may be, because, while payments
are required to be forwarded to Cede, as nominee for DTC, on each such
date, DTC will forward such payments to its Participants, which
thereafter will be required to forward them to Indirect Participants or
holders of beneficial interests in the Certificates. It is anticipated
that the only "Certificateholder" will be Cede, as nominee of DTC, and
that holders of beneficial interests in the Certificates will not be
recognized by the Trustee as Certificateholders under the Pooling and
Servicing Agreement. Holders of beneficial interests in the Certificates
will only be permitted to exercise the rights of Certificateholders under
the Pooling and Servicing Agreement indirectly through DTC and its
Participants who in turn will exercise their rights through DTC. The
Trustee, the Transferor, the Servicer and any paying agent, transfer
agent or registrar may treat the registered holder in whose name any
Certificate is registered (expected to be Cede) as the absolute owner
thereof (whether or not such Certificate shall be overdue and
notwithstanding any notice of ownership or writing thereon or any notice
to the contrary) for the purpose of making payment and for all other
purposes.
Under the rules, regulations and procedures creating and affecting
DTC and its operations, DTC is required to make book-entry transfers
among Participants on whose behalf it acts with respect to the
Certificates and is required to receive and transmit distributions of
principal of and interest on the Certificates. Participants and Indirect
Participants with which holders of beneficial interests in the
Certificates have accounts similarly are required to make book-entry
transfers and receive and transmit such payments on behalf of these
respective holders.
Because DTC can only act on behalf of Participants, who in turn act
on behalf of Indirect Participants and certain banks, the ability of
holders of beneficial interests in the Certificates to pledge
Certificates to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such Certificates, may be
limited due to the lack of a Definitive Certificate for such
Certificates.
DTC has advised the Transferor that it will take any action
permitted to be taken by a Certificateholder under the Pooling and
Servicing Agreement and the related Supplement only at the direction of
one or more Participants to whose account with DTC the Certificates are
credited. Additionally, DTC has advised the Transferor that it may take
actions with respect to the Certificateholders' Interest that conflict
with other of its actions with respect thereto.
Cedel is incorporated under the laws of Luxembourg as a
professional depository. Cedel holds securities for its participating
organizations ("Cedel Participants") and facilitates the clearance and
settlement of securities transactions between Cedel Participants through
electronic book-entry changes in accounts of Cedel Participants, thereby
eliminating the need for physical movement of certificates. Transactions
may be settled in Cedel in any of 36 currencies, including United States
dollars. Cedel provides to Cedel Participants, among other things,
services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing.
Cedel interfaces with domestic markets in several countries. As a
professional depository, Cedel is subject to regulation by the Luxembourg
Monetary Institute. Cedel Participants are recognized financial
institutions around the world, including underwriters, securities brokers
and dealers, banks, trust companies, clearing corporations and certain
other organizations. Indirect access to Cedel is also available to
others, such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Cedel Participant,
either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants
of Euroclear ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous
electronic book-entry delivery against payment, thereby eliminating the
need for physical movement of certificates and any risk from lack of
simultaneous transfers of securities and cash. Transactions may now be
settled in any of 34 currencies, including United States dollars.
Euroclear includes various other services, including securities lending
and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. Euroclear is operated by the Brussels, Belgium office of
Morgan Guaranty Trust Company of New York (the "Euroclear Operator"),
under contract with Euroclear Clearance Systems S.C., a Belgian
cooperative corporation (the "Cooperative"). All operations are conducted
by the Euroclear Operator, and all Euroclear securities clearance
accounts and Euroclear cash accounts are accounts with the Euroclear
Operator, not the Cooperative. The Cooperative establishes policy for
Euroclear on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), underwriters, securities brokers
and dealers and other professional financial intermediaries. Indirect
access to Euroclear is also available to other firms that clear through
or maintain a custodial relationship with a Euroclear Participant, either
directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As
such, it is regulated and examined by the Board of Governors of the
Federal Reserve System and the New York State Banking Department, as well
as the Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of
Euroclear and the related Operating Procedures of the Euroclear System
and applicable Belgian law (collectively, the "Euroclear Provisions").
The Euroclear Provisions govern transfers of securities and cash within
Euroclear, withdrawals of securities and cash from Euroclear, and
receipts of payments with respect to securities in Euroclear. All
securities in Euroclear are held on a fungible basis without attribution
of specific certificates to specific securities clearance accounts. The
Euroclear Operator acts under the Euroclear Provisions only on behalf of
Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
Distributions with respect to Certificates held through Cedel or
Euroclear will be credited to the cash accounts of Cedel Participants or
Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by its Depositary. Such distributions
will be subject to tax reporting in accordance with relevant United
States tax laws and regulations. See "U.S. Federal Income Tax
Consequences -- Foreign Investors." Cedel or the Euroclear Operator, as
the case may be, will take any other action permitted to be taken by a
Certificateholder under the Pooling and Servicing Agreement and the
related Supplement on behalf of a Cedel Participant or Euroclear
Participant only in accordance with its relevant rules and procedures and
subject to its Depositary's ability to effect such actions on its behalf
through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Certificates among
participants of DTC, Cedel and Euroclear, they are under no obligation to
perform or continue to perform such procedures and such procedures may be
discontinued at any time.
DEFINITIVE CERTIFICATES
Unless otherwise specified in the related Prospectus Supplement,
the Certificates of each Series will be issued as Definitive Certificates
in fully registered certificated form to Certificate Owners or their
nominees rather than to DTC or its nominee, only if (i) the Transferor
advises the Trustee in writing that DTC is no longer willing or able to
discharge properly its responsibilities as Depository with respect to
such Series of Certificates, and the Trustee or the Transferor is unable
to locate a qualified successor, (ii) the Transferor, at its option,
elects to terminate the book-entry system through DTC or (iii) after the
occurrence of a Servicer Default, Certificate Owners evidencing not less
than 50% of the aggregate unpaid principal amount of the Certificates,
advise the Trustee and DTC through Participants in writing that the
continuation of a book-entry system through DTC (or a successor thereto)
is no longer in the best interests of the Certificate Owners.
Upon the occurrence of any of the events described in the
immediately preceding paragraph, DTC is required to notify all
Participants of the availability through DTC of Definitive Certificates.
Upon surrender by DTC of the definitive certificates representing the
Certificates and instructions for re-registration, the Trustee will issue
the Certificates in the form of Definitive Certificates, and thereafter
the Trustee will recognize the holders of such Definitive Certificates as
Certificateholders under the Pooling and Servicing Agreement and the
related Supplement ("Holders").
Distribution of principal and interest on the Certificates will be
made by the Trustee directly to Holders in accordance with the procedures
set forth herein and in the Pooling and Servicing Agreement and the
related Prospectus Supplement. Interest payments and principal payments
will be made to Holders in whose names the Definitive Certificates were
registered at the close of business on the related Record Date.
Distributions will be made by check mailed to the address of such Holder
as it appears on the register maintained by the Trustee. The final
payment on any Certificate (whether Definitive Certificates or
Certificates registered in the name of Cede), however, will be made only
upon presentation and surrender of such Certificate on the final payment
date at such office or agency as is specified in the notice of final
distribution to Certificateholders. The Trustee will provide such notice
to registered Certificateholders not later than the fifth day of the
month of the final distribution.
Definitive Certificates will be transferable and exchangeable at
the offices of the transfer agent and registrar, which will initially be
the Trustee. No service charge will be imposed for any registration of
transfer or exchange, but the transfer agent and registrar may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith.
INTEREST
Interest will accrue on the Certificates of a Series or Class
offered hereby at the per annum rate either specified in or determined in
the manner specified in the related Prospectus Supplement. Except as
otherwise provided herein, collections of Finance Charge Receivables and
certain other amounts allocable to the Certificateholders' Interest of a
Series or Class offered hereby will generally be used to make interest
payments to Certificateholders of such Series or Class on each Interest
Payment Date specified in the related Prospectus Supplement; provided
that after the commencement of an Early Amortization Period with respect
to such Series, interest will be distributed to such Certificateholders
monthly on each Special Payment Date. If the Interest Payment Dates for a
Series or Class occur less frequently than monthly, such collections or
other amounts (or the portion thereof allocable to such Class) will be
deposited in one or more Interest Funding Accounts and used to make
interest payments to Certificateholders of such Series or Class on the
following Interest Payment Date. If a Series has more than one Class of
Certificates, each such Class may have a separate Interest Funding
Account. Funds on deposit in an Interest Funding Account will be invested
in Eligible Investments. Any earnings (net of losses and investment
expenses) on funds in an Interest Funding Account will be paid to, or at
the direction of, the Transferor except as otherwise specified in any
Supplement. Interest with respect to the Certificates of each Series
offered hereby will accrue and be calculated on the basis described in
the related Prospectus Supplement.
PRINCIPAL
The Certificates of each Series will have a Revolving Period during
which collections of Principal Receivables and certain other amounts
otherwise allocable to the Invested Amount of such Series will, (x) if
such Series is a Principal Sharing Series, be treated as Shared Principal
Collections and will be distributed to, or for the benefit of, the
Certificateholders of other Series in such Group or, if not required for
such purpose, the holders of the Transferor Certificates or deposited
into the Special Funding Account or (y) if such Series is not a Principal
Sharing Series, paid to the holders of the Transferor Certificates or
deposited into the Special Funding Account, as more fully described in
the related Prospectus Supplement. Unless an Early Amortization Period or
Early Accumulation Period commences with respect to a Series, following
the Revolving Period with respect to such Series, such Series will have
either a Controlled Accumulation Period or a Controlled Amortization
Period.
During the Controlled Accumulation Period, if any, with respect to
a Series, collections of Principal Receivables and certain other amounts
allocable to the Certificateholders' Interest of such Series (including
Shared Principal Collections, if any, allocable to such Series) will be
deposited on each Distribution Date in a Principal Funding Account and
used to make principal distributions to the Certificateholders of such
Series or any Class thereof when due. If so specified in the related
Prospectus Supplement, the amount to be deposited in a Principal Funding
Account for any Series offered hereby on any Distribution Date may, but
will not necessarily, be limited to an amount equal to a Controlled
Accumulation Amount specified in such Prospectus Supplement plus any
existing deficit controlled accumulation amount arising from prior
Distribution Dates. If the Prospectus Supplement for a Series so
specifies, the amount to be deposited in the Principal Funding Account on
a Distribution Date may be a variable amount. If a Series has more than
one Class of Certificates, each Class may have a separate Principal
Funding Account and Controlled Accumulation Amount and the Controlled
Accumulation Period with respect to each class may commence on different
dates. In addition, the related Prospectus Supplement may describe
certain priorities among such Classes with respect to deposits of
principal into such Principal Funding Accounts.
Subject to certain conditions including those set forth below, upon
written notice to the Trustee, the Servicer may elect to postpone the
commencement of the Accumulation Period with respect to a Series, and to
extend the length of the Revolving Period of such Series. The Servicer
may make such election only if the Accumulation Period Length (determined
as described below) is less than the number of months specified in the
Prospectus Supplement for such Series. On each Determination Date, until
the Accumulation Period begins, the Servicer will determine the
"Accumulation Period Length," which is the number of months expected to
be required to fully fund the Principal Funding Account no later than the
Scheduled Payment Date for such Series, based on (a) the expected monthly
collections of Principal Receivables expected to be distributable to the
Certificateholders of all Series (unless such Series is not a Principal
Sharing Series), assuming a principal payment rate no greater than the
lowest monthly principal payment rate on the Receivables for the
preceding twelve months and (b) the amount of principal expected to be
distributable to Certificateholders of Series (which may exclude certain
other Series) which are not expected to be in their Revolving Periods
during the Accumulation Period of the Series in respect of which the
Accumulation Period Length is being determined. If the Accumulation
Period Length is less than the number of months specified in the
Prospectus Supplement for such Series, the Servicer may, at its option,
postpone the commencement of the Accumulation Period such that the number
of months included in the Accumulation Period will be equal to or exceed
the Accumulation Period Length. The effect of the foregoing calculation
is to permit the reduction of the length of the Accumulation Period of a
Series based on the Invested Amounts of certain other Series which are
scheduled to be in their Revolving Periods during the Accumulation Period
for such Series and on increases in the principal payment rate occurring
after the Series Closing Date for such Series. The length of the
Accumulation Period for any Series will not be less than one month. If
the Accumulation Period of a Series is postponed in accordance with the
foregoing, and if a Pay Out Event occurs after the date originally
scheduled as the commencement of the Accumulation Period, it is probable
that Certificateholders would receive some of their principal later than
if the Accumulation Period had not been so postponed.
During the Controlled Amortization Period, if any, with respect to
a Series, collections of Principal Receivables and certain other amounts
allocable to the Certificateholders' Interest of such Series (including
Shared Principal Collections, if any, allocable to such Series) will be
used on each Distribution Date to make principal distributions to any
Class of Certificateholders then scheduled to receive such distributions.
If so specified in the related Prospectus Supplement, the amount to be
distributed to Certificateholders of any Series offered hereby on any
Distribution Date may, but will not necessarily, be limited to an amount
equal to the Controlled Amortization Amount specified in such Prospectus
Supplement plus any existing deficit controlled amortization amount
arising from prior Distribution Dates. If a Series has more than one
Class of Certificates, each Class may have a different Controlled
Amortization Amount. In addition, the related Prospectus Supplement may
describe certain priorities among such Classes with respect to such
distributions.
During the Early Accumulation Period, if any, with respect to a
Series, collections of Principal Receivables and certain other amounts
allocable to the Certificateholders' Interest of such Series (including
Shared Principal Collections, if any, allocated to such Series) will be
deposited on each Distribution Date in a Principal Funding Account and
used to make distributions of principal to the Certificateholders of such
Series or Class on the Expected Final Payment Date. The amount to be
deposited in the Principal Funding Account will not be limited to any
Controlled Deposit Amount.
During the Early Amortization Period with respect to a Series,
collections of Principal Receivables and certain other amounts allocable
to the Certificateholders' Interest of such Series (including Shared
Principal Collections, if any, allocable to such Series) will be
distributed as principal payments to the applicable Certificateholders
monthly on each Distribution Date beginning with the first Special
Payment Date. During the Early Amortization Period with respect to a
Series, distributions of principal to Certificateholders of such Series
will not be subject to any Controlled Deposit Amount or Controlled
Distribution Amount. In addition, upon the commencement of the Early
Amortization Period, any funds on deposit in a Principal Funding Account
with respect to such Series will be paid to the Certificateholders of the
relevant Class or Series on the first Special Payment Date.
Funds on deposit in any Principal Funding Account established with
respect to a Class or Series offered hereby will be invested in Eligible
Investments and may be subject to a guarantee or guaranteed investment
contract or a deposit account or other mechanism specified in the related
Prospectus Supplement intended to assure a minimum rate of return on the
investment of such funds. In order to enhance the likelihood of the
payment in full of the principal amount of a Class of Certificates
offered hereby at the end of a Controlled Accumulation Period or Early
Accumulation Period with respect thereto, such Class may be subject to a
maturity liquidity facility or a deposit account or other similar
mechanism specified in the relevant Prospectus Supplement.
PAY OUT EVENTS AND REINVESTMENT EVENTS
The Revolving Period with respect to a Series will continue through
the date specified in the applicable Prospectus Supplement and the
Controlled Amortization Period or Controlled Accumulation Period will
begin at such time, unless a Pay Out Event or Reinvestment Event occurs.
The Early Amortization Period with respect to such Series will commence
when a Pay Out Event occurs or is deemed to occur and the Early
Accumulation Period will occur when a Reinvestment Event occurs or is
deemed to occur. A "Pay Out Event" will occur with respect to all Series
upon the occurrence of an Insolvency Event with respect to the
Transferor. A Pay Out Event may occur with respect to any specific Series
upon the occurrence of any event specified in the related Prospectus
Supplement. Such events may include (i) the Trust becoming subject to
regulation as an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, (ii) the failure by the
Transferor to make any payment or deposit required under the Pooling and
Servicing Agreement within a specified period of the date such payment or
deposit is required to be made, (iii) the breach of specified covenants,
representations or warranties contained in the Pooling and Servicing
Agreement, after any applicable notice and cure period (and, if so
specified in the related Prospectus Supplement, only to the extent such
breach has a material adverse effect on the related Certificateholders),
(iv) the failure by the Transferor to make a required designation of
Additional Accounts for the Trust within a specified time after the date
such addition is required to be made, (v) a reduction in the Series
Adjusted Portfolio Yield below the rates, and for the period, specified
in the related Prospectus Supplement and (vi) the occurrence of a
Servicer Default. The Early Amortization Period with respect to a Series
will commence on the day on which a Pay Out Event occurs or is deemed to
occur with respect thereto. If an Early Amortization Period commences,
monthly distributions of principal to the Certificateholders of such
Series will begin on the Distribution Date in the Monthly Period
following the Monthly Period in which such Pay Out Event occurs (such
Distribution Date and each following Distribution Date with respect to
such Series, a "Special Payment Date"). Any amounts on deposit in a
Principal Funding Account or an Interest Funding Account with respect to
such Series at such time will be distributed on such first Special
Payment Date to the Certificateholders of such Series. If, because of the
occurrence of a Pay Out Event, the Early Amortization Period begins
earlier than the scheduled commencement of a Controlled Amortization
Period or prior to an Expected Final Payment Date, Certificateholders
will begin receiving distributions of principal earlier than they
otherwise would have and such distributions will not be subject to the
Controlled Deposit Amount or the Controlled Distribution Amount. As a
result, the average life of the Certificates may be reduced or increased.
If a Series has more than one Class of Certificates, each Class may have
different Pay Out Events which, in the case of any Series of Certificates
offered hereby, will be described in the related Prospectus Supplement.
A particular Series may have no Pay Out Events or only limited Pay
Out Events, but may have in lieu thereof specified events ("Reinvestment
Events") that end the reinvestment of the Trust in new Receivables and
apply available collections of Principal Receivables to the purchase of
Eligible Investments. A Reinvestment Event may include all or some of the
events that constitute Pay Out Events for other Series. The Early
Accumulation Period with respect to a Series will commence on the day on
which a Reinvestment Event occurs or is deemed to occur with respect
thereto. If a Series has more than one Class of Certificates, each Class
may have different Reinvestment Events (or may have only Pay Out Events)
which, in the case of any Series of Certificates offered hereby, will be
described in the related Prospectus Supplement.
In addition to the consequences of a Pay Out Event or Reinvestment
Event discussed above, if an Insolvency Event shall occur, immediately on
the day of such event the Transferor will cease to transfer Principal
Receivables to the Trust and promptly give notice to the Trustee of such
event. Under the terms of the Pooling and Servicing Agreement, as soon as
possible but in any event within 15 days, the Trustee will publish a
notice of the occurrence of the Insolvency Event stating that the Trustee
intends to sell, dispose of, or otherwise liquidate the Receivables in a
commercially reasonable manner unless instructions otherwise are received
within a specified period from Certificateholders holding Certificates
evidencing more than 50% of the Invested Amount of each Series of
Certificates issued and outstanding (or, with respect to any Series with
two or more Classes, 50% of the Invested Amount of each Class) and each
Enhancement Invested Amount and possibly the vote of other persons
specified in the Supplement for a Series and, for a Series offered
hereby, the related Prospectus Supplement to the effect that such
Certificateholders disapprove of the liquidation of Receivables and wish
to continue having Principal Receivables transferred to the Trust as
before such Insolvency Event. The Trustee will sell, dispose of, or
otherwise liquidate the Receivables in a commercially reasonable manner
and on commercially reasonable terms. The proceeds from the sale,
disposition or liquidation of the Receivables will be treated as
collections on the Receivables and applied as provided above and in each
Prospectus Supplement.
If the only Pay Out Event or Reinvestment Event to occur with
respect to any Series is the bankruptcy of the Transferor, the Trustee
may not be permitted to suspend transfers of Receivables to the Trust,
and the instructions to sell the Receivables may not be given effect.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer's compensation for its servicing activities and
reimbursement for its expenses is a monthly servicing fee (the "Servicing
Fee"). The Servicing Fee will be allocated among the Transferor's
Interest (the "Transferor Servicing Fee"), the holders of any
Participations and Certificateholders of each Series. The portion of the
Servicing Fee allocable to each Series of Certificates on any
Distribution Date (the "Monthly Servicing Fee") will generally be equal
to one-twelfth of the product of (a) the applicable servicing fee
percentage with respect to such Series and (b) the Invested Amount (as it
may be adjusted in accordance with the related Supplement) of such Series
with respect to the related Monthly Period. A portion of the Monthly
Servicing Fee with respect to a particular Series may be payable from
Interchange allocated to such Series as specified in the related
Supplement and, for a Series offered hereby, the related Prospectus
Supplement. For any Monthly Period, the portion of the Monthly Servicing
Fee payable from Interchange with respect to any Series will be an amount
equal to the portion of collections of Finance Charge Receivables
allocated to the Certificateholders' Interest of such Series with respect
to such Monthly Period that is attributable to Interchange (the "Servicer
Interchange"); provided, however, that Servicer Interchange for a Monthly
Period may not exceed one-twelfth of the product of (i) the Series
Adjusted Invested Amount, as of the last day of such Monthly Period and
(ii) a percentage specified in the Prospectus Supplement for such Series.
In the case of any insufficiency of Servicer Interchange with respect to
any Monthly Period, a portion of the Monthly Servicing Fee with respect
to such Monthly Period will not be paid to the extent of such
insufficiency and in no event shall the Trust, the Trustee, the holders
of any Participations or the Certificateholders be liable for the share
of the Servicing Fee to be paid out of Servicer Interchange.
The Servicer will pay from its servicing compensation certain
expenses incurred in connection with servicing the Receivables including,
without limitation, payment of the fees and disbursements of the Trustee,
paying Agent, transfer Agent and registrar and independent accountants
and other fees which are not expressly stated in the Pooling and
Servicing Agreement to be payable by the Trust or the Transferor other
than Federal, state and local income and franchise taxes, if any, of the
Trust.
TERMINATION OF THE TRUST
The Trust and the respective obligations and responsibilities of
the Transferor, the Servicer and the Trustee created pursuant to the
Pooling and Servicing Agreement (other than the obligation of the Trustee
to make payments to Investor Certificateholders as hereinafter set forth)
shall terminate upon the earlier of (i) December 31, 2029, (ii) at the
option of the Transferor, the day following the Distribution Date on
which the Invested Amount for each Series is zero and (iii) the day an
Insolvency Event has occurred.
DESCRIPTION OF THE POOLING AND SERVICING AGREEMENT
CONVEYANCE OF RECEIVABLES
On the Initial Series Issuance Date, PFR acquired approximately
$1,870,000,000 aggregate principal amount of Receivables, of which
approximately $1,190,000,000 aggregate principal amount of receivables
were conveyed to PFR by BKB and approximately $680,000,000 aggregate
principal amount of receivables were conveyed to PFR by Harris.
Immediately upon giving effect to such transactions PFR conveyed
approximately $1,846,000,000 aggregate principal amount of Receivables
(the "Initial Receivables") to the Transferor, which in turn transferred
the Initial Receivables to the Trust. The Initial Receivables constituted
all of the Eligible Receivables acquired by PFR from BKB and Harris on
the Initial Series Issuance Date. Pursuant to the Transferor Purchase
Agreement, PFR will sell and assign to the Transferor for assignment to
the Trust all of its interests in the Receivables then existing under the
Accounts and all Receivables thereafter created under the Accounts, all
Recoveries and Interchange allocable to the Trust, and the proceeds of
all of the foregoing. PFR may also sell and assign from time to time to
the Transferor for conveyance to the Trust Receivables in designated
Additional Accounts, and the Transferor may from time to time sell and
assign to the Trust its interest in Participation Interests, all
Recoveries and Interchange allocable to the Trust and the proceeds of all
of the foregoing.
On each Series Closing Date, the Trustee will authenticate and
deliver one or more certificates representing the Series or Class of
Certificates, in each case against payment to the Transferor of the net
proceeds of the sale of the Certificates. In the case of the Initial
Series Issuance Date, the Trustee will deliver to the Transferor the
Transferor Certificate, representing the Transferor's Interest.
In connection with the transfers of the Receivables, each Account
Originator will indicate in its respective computer records that the
applicable Receivables have been conveyed from such party to PFR. PFR
will indicate in its computer records that the Receivables have conveyed
from PFR to the Transferor and the Transferor will indicate in its
records that the Receivables have been conveyed from the Transferor to
the Trust. In addition, the Transferor will provide or cause to be
provided to the Trustee a computer file or a microfiche list containing a
true and complete list showing for each Account, as of the applicable
date of designation, (i) its account number, (ii) the aggregate amount
outstanding in such Account and (iii) except in the case of New Accounts,
the aggregate amount of Principal Receivables in such Account. The
Transferor will retain and will not deliver to the Trustee any other
records or agreements relating to the Accounts or the Receivables. Except
as set forth above, the records and agreements relating to the Accounts
and the Receivables will not be segregated from those relating to other
credit card accounts and receivables, and the physical documentation
relating to the Accounts or Receivables will not be stamped or marked to
reflect the transfer of Receivables to the Transferor or the Trust. The
Transferor will file UCC financing statements with respect to the
transfer of the Receivables from the Transferor to the Trust meeting the
requirements of applicable state law. See "Risk Factors" and "Certain
Legal Aspects of the Receivables."
As described below under "-- Additions of Accounts or Participation
Interests," the Transferor has the right (subject to certain limitations
and conditions), and in some circumstances is obligated, to require PFR
to designate from time to time Additional Accounts to be included as
Accounts and to convey to the Transferor (for conveyance by the
Transferor to the Trust) all Receivables in such Additional Accounts,
whether such Receivables are then existing or thereafter created. Each
such Additional Account must be an Eligible Account. In respect of any
designation of Additional Accounts, the Transferor will follow the
procedures set forth in the preceding paragraph, except the list will
show information for such Additional Accounts as of the date such
Additional Accounts are identified and selected. Aggregate Addition
Accounts will be selected by the Transferor in a manner which it
reasonably believes will not be materially adverse to the
Certificateholders. The Transferor has the right (subject to certain
conditions described below under "-- Additions of Accounts or
Participation Interests") to convey Participation Interests to the Trust.
In addition, the Transferor may (under certain circumstances and subject
to certain limitations and conditions) remove the Participation Interests
and the Receivables in certain Accounts as described below under "--
Removal of Accounts."
REPRESENTATIONS AND WARRANTIES
The Transferor makes representations and warranties to the Trust in
the Pooling and Servicing Agreement relating to the Accounts and the
Receivables as of each Series Issuance Date (or as of the related
addition date with respect to Additional Accounts) to the effect, among
other things, that as of each applicable date of designation, (a) each
Account was an Eligible Account, (b) each of the Receivables then
existing in the Initial Accounts or in the Additional Accounts, as
applicable, is an Eligible Receivable and (c) thereafter, on the date of
creation of any new Receivable, such Receivable is an Eligible
Receivable. If the Transferor breaches any representation and warranty
described in this paragraph in any material respect and such breach
remains uncured for 60 days, or such longer period as may be agreed to by
the Trustee and the Servicer, after the earlier to occur of the discovery
of such breach by the Transferor or receipt of written notice of such
breach by the Transferor and such breach has a material adverse effect on
the Certificateholders' Interest in such Receivable, all Receivables with
respect to the Account affected ("Ineligible Receivables") will be
reassigned to the Transferor on the terms and conditions set forth below
and such Account shall no longer be included as an Account.
"Eligible Receivable" means each receivable, or interest therein as
contemplated by each Purchase Agreement, (a) which has arisen under an
Eligible Account, (b) which was created in compliance in all material
respects with all requirements of law applicable to the related Account
Originator at the time of the creation of such Receivable and which was
created pursuant to a credit card agreement which complies in all
material respects with all requirements of law applicable to the related
Account Originator at the time of the creation of such receivable and the
requirements of law applicable to Holdings with respect to such
Receivable, (c) with respect to which all material consents, licenses,
approvals or authorizations of, or registrations or declarations with,
any governmental authority required to be obtained, effected or given in
connection with the creation of such Receivable or the execution,
delivery, creation and performance by the related Account Originator of
the related credit card agreements pursuant to which such Receivable was
created have been duly obtained or given and are in full force and
effect, (d) as to which at the time of its transfer to the Trust, the
Transferor or the Trust will have good and marketable title, free and
clear of all liens, encumbrances, charges and security interests (other
than any lien for municipal or other local taxes if such taxes are not
then due and payable or if the Transferor is then contesting the validity
thereof in good faith by appropriate proceedings and has set aside on its
books adequate reserves with respect thereto), (e) which is the legal,
valid and binding payment obligation of the related cardholder
enforceable against such cardholder in accordance with its terms, subject
to certain bankruptcy or insolvency related exceptions, (f) which is not
at the time of its transfer to the Trust subject to any right of
rescission, setoff, counterclaim or defense (including the defense of
usury), other than certain bankruptcy and insolvency related defenses,
and (g) which constitutes either an "account" or a "general intangible"
under the applicable UCC as then in effect.
An Ineligible Receivable will be reassigned to the Transferor on or
before the end of the Monthly Period in which such reassignment
obligation arises by the Transferor directing the Servicer to deduct the
portion of such Ineligible Receivable which is a Principal Receivable
from the aggregate amount of the Principal Receivables used to calculate
the Transferor Amount. In the event that the exclusion of the principal
portion of an Ineligible Receivable from the calculation of the
Transferor Amount would cause the Transferor Amount to be less than the
Required Transferor Amount, on the Distribution Date following the
Monthly Period in which such reassignment obligation arises the
Transferor will make a deposit into the Special Funding Account in
immediately available funds in an amount equal to the amount by which the
Transferor Amount would be reduced below the Required Transferor Amount.
The reassignment of any Ineligible Receivable to the Transferor, and the
obligation of the Transferor to make any deposits into the Special
Funding Account as described in this paragraph, is the sole remedy
respecting any breach of the representations and warranties described in
the preceding paragraph with respect to such Receivable available to the
Certificateholders or the Trustee on behalf of Certificateholders. PFR
will agree, in the Transferor Purchase Agreement, to repurchase from the
Transferor any Ineligible Receivables which shall be reassigned to the
Transferor and to provide the Transferor any amounts necessary to enable
the Transferor to make the deposit referred to above. The term
"Transferor Amount" means at any time of determination, an amount equal
to the sum of (i) total aggregate amount of Principal Receivables in the
Trust plus (ii) the amount on deposit in the Special Funding Account at
such time plus (iii) the aggregate principal amount on deposit in the
Principal Funding Account and the Pre-Funding Account for each Series
minus (iv) the aggregate Invested Amounts for all outstanding Series at
such time.
The Transferor also makes representations and warranties to the
Trust to the effect, among other things, that as of each Series Issuance
Date it is a corporation validly existing under the laws of the State of
Delaware, it has the authority to consummate the transactions
contemplated by the Pooling and Servicing Agreement and each Supplement
and will further represent to the Trust on each Series Issuance Date and,
with respect to the Additional Accounts, as of each addition date (a) the
Pooling and Servicing Agreement and each Supplement constitutes a valid,
binding and enforceable agreement of the Transferor and (b) the Pooling
and Servicing Agreement and each Supplement constitutes either a valid
sale, transfer and assignment to the Trust of all right, title and
interest of the Transferor in the Receivables, whether then existing or
thereafter created and the proceeds thereof (including proceeds in any of
the accounts established for the benefit of the Certificateholders) and
in Recoveries and Interchange allocable to the Trust or the grant of a
first priority perfected security interest under the applicable UCC in
such Receivables and the proceeds thereof (including proceeds in any of
the accounts established for the benefit of the Certificateholders) and
in Recoveries and Interchange allocable to the Trust, which is effective
as to each Receivable then existing on such date. In the event of a
material breach of any of the representations and warranties described in
this paragraph that has a material adverse effect on the
Certificateholders' Interest in the Receivables or the availability of
the proceeds thereof to the Trust (which determination will be made
without regard to whether funds are then available pursuant to any Series
Enhancement), either the Trustee or Certificateholders holding
Certificates evidencing not less than 50% of the aggregate unpaid
principal amount of all outstanding Certificates, by written notice to
the Transferor and the Servicer (and to the Trustee if given by the
Certificateholders), may direct the Transferor to accept the reassignment
of the Receivables in the Trust within 60 days of such notice, or within
such longer period specified in such notice. The Transferor will be
obligated to accept the reassignment of such Receivables on the
Distribution Date following the Monthly Period in which such reassignment
obligation arises. Such reassignment will not be required to be made,
however, if at the end of such applicable period, the representations and
warranties shall then be true and correct in all material respects and
any material adverse effect caused by such breach shall have been cured.
The price for such reassignment will be an amount equal to the sum of the
amounts specified therefor with respect to each Series in the related
Supplement. The payment of such reassignment price in immediately
available funds, will be considered a payment in full of the
Certificateholders' Interest and such funds will be distributed upon
presentation and surrender of the Certificates. If the Trustee or
Certificateholders give a notice as provided above, the obligation of the
Transferor to make any such deposit will constitute the sole remedy
respecting a breach of the representations and warranties available to
Certificateholders or the Trustee on behalf of Certificateholders. See
"Description of the Purchase Agreements -- Representations and
Warranties."
It is not required or anticipated that the Trustee will make any
initial or periodic general examination of the Receivables or any records
relating to the Receivables for the purpose of establishing the presence
or absence of defects, compliance with each of the Transferor's
representations and warranties or for any other purpose. In addition, it
is not anticipated or required that the Trustee will make any initial or
periodic general examination of the Servicer for the purpose of
establishing the compliance by the Servicer with its representations or
warranties or the performance by the Servicer of its obligations under
the Pooling and Servicing Agreement, any Supplement or for any other
purpose. The Servicer, however, will deliver to the Trustee on or before
March 31 of each calendar year an opinion of counsel with respect to the
validity of the interest of the Trust in and to the Receivables and
certain other components of the Trust.
TRANSFEROR CERTIFICATES
The Transferor Certificate represents the undivided interest in the
Trust not represented by the Certificates or any Participation issued and
outstanding under the Trust or the rights, if any, of any providers of
enhancement to receive payments from the Trust. The Transferor will
initially own the Transferor Certificate. The Transferor's Interest at
any time represents the right to the Trust Assets in excess of the
Certificateholders' Interest, the interest of any holder of a
Participation and Enhancement Invested Amounts of all Series then
outstanding. The Transferor Amount will fluctuate as the amount of the
Principal Receivables held by the Trust changes from time to time. In
addition, the Transferor intends to cause the issuance of Series from
time to time and any such issuance will have the effect of decreasing the
Transferor Amount to the extent of the initial Invested Amount of such
Series. The Pooling and Servicing Agreement provides that the Transferor
may exchange a portion of the Transferor Certificate for one or more
additional certificates (each, a "Supplemental Certificate") for transfer
or assignment to a person designated by the Transferor upon the execution
and delivery of a supplement to the Pooling and Servicing Agreement
(which supplement shall be subject to the amendment section of the
Pooling and Servicing Agreement to the extent that it amends any of the
terms of the Pooling and Servicing Agreement; see "-- Amendments");
provided, that (a) the Rating Agency Condition is satisfied for such
exchange, (b) such exchange will not result in any Adverse Effect and the
Transferor shall have delivered to the Trustee an officer's certificate
to the effect that the Transferor reasonably believes that such exchange
will not, based on the facts known to such officer at the time of such
certification, have an Adverse Effect, (c) the Transferor shall have
delivered to the Trustee a Tax Opinion (as defined herein) with respect
to such exchange and (d) the aggregate amount of Principal Receivables in
the Trust as of the date of such exchange will be greater than the
Required Minimum Principal Balance as of such date. Any subsequent
transfer or assignment of a Supplemental Certificate by a person other
than the Transferor will be subject to the condition set forth in clause
(c) above. On the Initial Series Issuance Date, the Transferor issued to
one of its affiliates a Supplemental Certificate representing the excess
of the Transferor Amount over a minimum retained Transferor Amount
representing at least 2.0% of the aggregate Invested Amount of all
Series.
ADDITIONS OF ACCOUNTS OR PARTICIPATION INTERESTS
The Transferor has the right under the Transferor Purchase
Agreement to require PFR to designate from time to time Additional
Accounts to be included as Accounts. PFR will convey to the Transferor,
which in turn will convey to the Trust, its interest in all Receivables
arising from the Additional Accounts, whether such Receivables are then
existing or thereafter created, subject to the following conditions,
among others: (i) each such Additional Account must be an Eligible
Account; and (ii) except for the addition of New Accounts (a) the
selection of the Aggregate Addition Accounts is done in a manner which it
reasonably believes will not result in an Adverse Effect; and (b) except
for the addition of New Accounts, the Rating Agency Condition shall have
been satisfied. "Adverse Effect" means any action that will result in the
occurrence of a Pay Out Event or Reinvestment Event or materially
adversely affect the amount or timing of distributions to the
Certificateholders of any Series or Class. The Transferor will be
obligated to require PFR to designate Additional Accounts (to the extent
available) if (a) the aggregate amount of Principal Receivables in the
Trust on the last business day of any calendar month is less than the
Required Minimum Principal Balance as of such last day or (b) the
Transferor Amount on the last business day of any calendar month is less
than the Required Transferor Amount as of such last day. In lieu of
adding Additional Accounts, the Transferor may convey Participation
Interests to the Trust. Participation Interests may, for example, include
rights in transferors' interests in, or certain credit card backed
securities issued by, other trusts which have as their primary assets
revolving credit card receivables originated or purchased by an Account
Originator. There are currently no Participation Interests held by the
Trust and Participation Interests may be added to the Trust only if the
requirements of the Securities Act applicable thereto have been satisfied
including, that such Participation Interests either have been registered
under the Securities Act and, if purchased from an affiliate of an
underwriter in the original distribution, the Participation Interests are
purchased in the secondary market at least three months after the sale of
any unsold allotments from the original distribution, or that such
Participation Interests are entitled to an exemption from the
registration requirements of the Securities Act and have been acquired by
the Registrant following the expiration of any holding period applicable
thereto under the Securities Act. In addition, Participation Interests
may be added to the Trust only if the Rating Agency Condition has been
satisfied, such addition will not result in an Adverse Effect and such
addition will not cause an Insolvency Event to occur. "Required Minimum
Principal Balance" as of any date of determination means the sum of the
numerator used in the Principal Allocation Percentage for each Series
outstanding on such date minus the amount on deposit in the Special
Funding Account minus the amount on deposit in the Principal Funding
Account for each Series outstanding on such date minus the amount on
deposit in the Pre-Funding Account for each Series outstanding on such
date. The "Series Invested Amount" for a Series will be the amount set
forth in the related Supplement and, for each Series offered hereby, in
the related Prospectus Supplement for such Series, but will generally
equal the initial Invested Amount for a Series.
Each Additional Account must be an Eligible Account at the time of
its designation. However, since Additional Accounts or Participation
Interests created after the Initial Series Issuance Date may not have
been a part of the portfolio of accounts of PFR as of the Initial Series
Issuance Date, they may not be of the same credit quality as the Initial
Accounts because such Additional Accounts or Participation Interests may
have been originated at a later date using credit criteria different from
those which were applied to the Initial Accounts or may have been
acquired from another credit card issuer or entity who had different
credit criteria. Consequently, the performance of such Additional
Accounts or Participation Interests may be better or worse than the
performance of the Initial Accounts.
REMOVAL OF ACCOUNTS
Subject to the conditions set forth in the next succeeding
sentence, the Transferor may on any day of any Monthly Period, but shall
not be obligated to, acquire all Receivables and proceeds thereof with
respect to Removed Accounts and Participation Interests. The Transferor
is permitted to designate and require reassignment to it of the
Receivables from Removed Accounts and Participation Interests only upon
satisfaction of the following conditions: (i) the Transferor shall have
delivered to the Trustee a computer file or microfiche list containing a
true and complete list of all Removed Accounts, such Accounts to be
identified by, among other things, account number and their aggregate
amount of Principal Receivables; (ii) the Transferor shall have delivered
an officer's certificate to the Trustee to the effect that (a) either (x)
no selection procedure reasonably believed by the Transferor to be
materially adverse to the interests of the Certificateholders or the
Transferor was utilized in removing the Removed Accounts from among any
pool of Accounts of a similar type or (y) a random selection procedure
was used by the Transferor in selecting the accounts to be removed and
(b) in the reasonable belief of Transferor such removal will not have an
Adverse Effect; and (iii) the Transferor shall have delivered prior
written notice of the removal to each Rating Agency, the Trustee and the
Servicer and prior to the date on which such Receivables are to be
removed the Rating Agency Condition shall have been satisfied with
respect to such removal. The foregoing conditions may be amended with the
consent of each Rating Agency but without the consent of
Certificateholders if such amendment is required to comply with any
accounting or regulatory restrictions to which the Trust, the Transferor,
Holdings PFR or any Account Originator may become subject.
DISCOUNT OPTION
The Pooling and Servicing Agreement provides that the Transferor
may at any time and from time to time, but without any obligation to do
so, designate a specified fixed or variable percentage based on a formula
(the "Discount Percentage") of the amount of Receivables arising in all
or any specified portion of the Accounts on and after the date such
designation becomes effective that otherwise would have been treated as
Principal Receivables to be treated as Finance Charge Receivables (the
"Discount Option Receivables"). Although there can be no assurance that
the Transferor will do so, such designation may occur because the
Transferor determines that the exercise of the discount option is needed
to provide a sufficient yield on the Receivables to cover interest and
other amounts due and payable from collections of Finance Charge
Receivables or to avoid the occurrence of a Pay Out Event or Reinvestment
Event relating to the reduction of the average yield on the portfolio of
Accounts in the Trust, if the related Supplement provides for such a Pay
Out Event or Reinvestment Event. After any such designation, pursuant to
the Pooling and Servicing Agreement, the Transferor may, without notice
to or consent of the Certificateholders, from time to time reduce or
withdraw the Discount Percentage; provided, however, that such reduction
or withdrawal will occur only if the Transferor delivers to the Trustee
and, in connection with certain Series, providers of Series Enhancement a
certificate of an authorized representative to the effect that, in the
reasonable belief of the Transferor, such reduction or withdrawal would
not have adverse regulatory or other accounting implications for the
Transferor. The Transferor must provide 30 days' prior written notice to
the Servicer, the Trustee, each Rating Agency and, in connection with
certain Series, providers of Series Enhancement of any such designation
or reduction or withdrawal, and such designation or reduction or
withdrawal will become effective on the date specified therein only if
(a) the Transferor has delivered to the Trustee and any such providers of
Series Enhancement a certificate of an authorized representative to the
effect that, based on the facts known to such representative at the time,
the Transferor reasonably believes that such designation or reduction or
withdrawal will not at the time of its occurrence cause a Pay Out Event
or Reinvestment Event or an event that, with notice or the lapse of time
or both, would constitute a Pay Out Event or Reinvestment Event, to occur
with respect to any Series and (b) the Transferor has received written
notice from each Rating Agency that such designation or reduction or
withdrawal will satisfy the Rating Agency Condition. On the Date of
Processing of any collections on or after the date the exercise of the
discount option takes effect, the product of (i) a fraction the numerator
of which is the amount of Discount Option Receivables and the denominator
of which is the amount of all of the Principal Receivables (including
Discount Option Receivables) at the end of the prior Monthly Period and
(ii) collections of Receivables that arise in the Accounts on such day on
or after the date such option is exercised that otherwise would be
Principal Receivables will be deemed collections of Finance Charge
Receivables and will be applied accordingly, unless otherwise provided in
the related Prospectus Supplement. Any such designation would result in
an increase in the amount of collections of Finance Charge Receivables, a
reduction in the balance of Principal Receivables and a reduction in the
Transferor Amount.
YIELD SUPPLEMENT ACCOUNT
If so specified in the Prospectus Supplement for any Series the
Servicer will establish and maintain an account in the name of the
Trustee, on behalf of the Trust, with an Eligible Institution for the
benefit of the Certificateholders of such Series. Amounts on deposit in
the Yield Supplement Account (together with investment earnings thereon)
will be released and deposited into the Collection Account in the amounts
and at the times specified in the Prospectus Supplement for such Series.
Each such deposit into the Collection Account will be treated as
collections of Finance Charge Receivables allocable to the Certificates
of the related Series. The Yield Supplement Account for any Series will
be funded with proceeds from the offering of the related Investor
Certificates.
PREMIUM OPTION
The Pooling and Servicing Agreement provides that the Transferor
may at any time and from time to time, but without any obligation to do
so, designate a specified fixed or variable percentage based on a formula
as specified in the related Prospectus Supplement (the "Premium
Percentage") of the amount of Receivables arising in all or any specified
portion of the Accounts on and after the date such designation becomes
effective that otherwise would have been treated as Finance Charge
Receivables to be treated as Principal Receivables (the "Premium Option
Receivables"). After any such designation, pursuant to the Pooling and
Servicing Agreement, the Transferor may, without notice to or consent of
the Certificateholders, from time to time reduce or withdraw the Premium
Percentage; provided, however, that such reduction or withdrawal will
occur only if the Transferor delivers to the Trustee and, in connection
with certain Series, providers of Series Enhancement a certificate of an
authorized representative to the effect that, in the reasonable belief of
the Transferor, such reduction or withdrawal would not have adverse
regulatory or other accounting implications for the Transferor. The
Transferor must provide 30 days' prior written notice to the Servicer,
the Trustee, each Rating Agency and any such provider of Series
Enhancement of any such designation or reduction or withdrawal, and such
designation or reduction or withdrawal will become effective on the date
specified therein only if (a) the Transferor has delivered to the Trustee
and any such providers of Series Enhancement a certificate of an
authorized representative to the effect that, based on the facts known to
such representative at the time, the Transferor reasonably believes that
such designation or reduction or withdrawal will not at the time of its
occurrence cause a Pay Out Event or Reinvestment Event or an event that,
with notice or the lapse of time or both, would constitute a Pay Out
Event or Reinvestment Event, to occur with respect to any Series and (b)
the Transferor has received written notice from each Rating Agency that
such designation or reduction or withdrawal will satisfy the Rating
Agency Condition. On the Date of Processing of any collections on or
after the date the exercise of the premium option takes effect, the
product of (i) a fraction the numerator of which is the amount of Premium
Option Receivables and the denominator of which is the amount of all of
the Finance Charge Receivables (including Premium Option Receivables) at
the end of the prior Monthly Period and (ii) collections of Receivables
that arise in the Accounts on such day on or after the date such option
is exercised that otherwise would be Finance Charge Receivables will be
deemed collections of Principal Receivables and will be applied
accordingly, unless otherwise provided in the related Prospectus
Supplement. Any such designation would result in an increase in the
amount of collections of Principal Receivables and a lower portfolio
yield with respect to collections of Finance Charge Receivables than
would otherwise occur. The Transferor might exercise this option because
an increase in the amount of collections of Principal Receivables could
result in a faster repayment of principal to Certificateholders during an
Amortization Period or accumulation of principal during an Accumulation
Period.
INDEMNIFICATION
The Pooling and Servicing Agreement provides that the Servicer will
indemnify the Trust and the Trustee from and against any loss, liability,
expense, damage or injury suffered or sustained arising out of certain of
the Servicer's actions or omissions with respect to the Trust pursuant to
the Pooling and Servicing Agreement.
Except as provided in the preceding paragraph, the Pooling and
Servicing Agreement provides that neither the Transferor nor the Servicer
nor any of their respective directors, officers, employees or agents will
be under any other liability to the Trust, the Trustee, the
Certificateholders, any Credit Enhancer or any other person for any
action taken, or for refraining from taking any action, in good faith
pursuant to the Pooling and Servicing Agreement. However, neither the
Transferor nor the Servicer will be protected against any liability which
would otherwise be imposed by reason of willful misfeasance, bad faith or
gross negligence of the Transferor, the Servicer or any such person in
the performance of their duties or by reason of reckless disregard of
their obligations and duties thereunder.
In addition, the Pooling and Servicing Agreement provides that the
Servicer is not under any obligation to appear in, prosecute or defend
any legal action which is not incidental to its servicing
responsibilities under the Pooling and Servicing Agreement. The Servicer
may, in its sole discretion, undertake any such legal action which it may
deem necessary or desirable for the benefit of Certificateholders with
respect to the Pooling and Servicing Agreement and the rights and duties
of the parties thereto and the interests of the Certificateholders
thereunder.
COLLECTION AND OTHER SERVICING PROCEDURES
Pursuant to the Pooling and Servicing Agreement, the Servicer is
responsible for servicing, collecting, enforcing and administering the
Receivables in accordance with customary and usual procedures for
servicing credit card receivables, but in any event at least comparable
with the policies and procedures and the degree of skill and care applied
or exercised with respect to any other credit card receivables it, or its
affiliates, service.
Pursuant to the Additional Receivables Purchase Agreements, except
as otherwise required by any requirement of law or as is deemed by the
related Account Originator (or any successor thereto under such
agreement) to be necessary in order for it to maintain its credit card
business or a program operated by such credit card business on a
competitive basis based on a good faith assessment by it of the nature of
the competition in the credit card business or such program, an Account
Originator will not take any action that will have the effect of reducing
the Portfolio Yield to a level that could reasonably be expected to cause
any Series to experience a Pay Out Event or Reinvestment Event based on
the insufficiency of the Series Adjusted Portfolio Yield or take any
action that would have the effect of reducing the Portfolio Yield to less
than the highest Average Rate for any Group. The related Account
Originator also covenants that unless required by law and except as
provided above, such Account Originator will take no action with respect
to the applicable credit card agreements or the applicable credit card
guidelines that, at the time of such action, such Account Originator
reasonably believes will have a material adverse effect on the Transferor
or the Certificateholders.
Servicing activities to be performed by the Servicer include
collecting and recording payments, communicating with cardholders,
investigating payment delinquencies, evaluating the increase of credit
limits and the issuance of credit cards, providing billing and tax
records to cardholders and maintaining internal records with respect to
each Account. Managerial and custodial services performed by the Servicer
on behalf of the Trust include providing assistance in any inspections of
the documents and records relating to the Accounts and Receivables by the
Trustee pursuant to the Pooling and Servicing Agreement, maintaining the
agreements, documents and files relating to the Accounts and Receivables
as custodian for the Trust and providing related data processing and
reporting services for Certificateholders and on behalf of the Trustee.
The Pooling and Servicing Agreement provides that the Servicer may
delegate its duties under that agreement to any entity that agrees to
conduct such duties in accordance with the Pooling and Servicing
Agreement and the Credit Card Guidelines. Notwithstanding any such
delegation the Servicer will continue to be liable for all of its
obligations under the Pooling and Servicing Agreement.
NEW ISSUANCES
The Pooling and Servicing Agreement provides that, pursuant to any
one or more Supplements, the Transferor may direct the Trustee to
authenticate from time to time new Series subject to the conditions
described below (each such issuance, a "New Issuance"). Each New Issuance
will have the effect of decreasing the Transferor Amount to the extent of
the initial Invested Amount of such new Series. Under the Pooling and
Servicing Agreement, the Transferor may designate, with respect to any
newly issued Series: (a) its name or designation; (b) its initial
principal amount (or method for calculating such amount) and its invested
amount in the Trust (the "Invested Amount"), which is generally based on
the aggregate amount of Principal Receivables in the Trust allocated to
such Series, and its Series Invested Amount; (c) its certificate rate (or
formula for the determination thereof); (d) the interest payment date or
dates (each, an "Interest Payment Date") and the date or dates from which
interest shall accrue; (e) the method for allocating collections to
Certificateholders of such Series; (f) any bank accounts to be used by
such Series and the terms governing the operation of any such bank
accounts; (g) the percentage used to calculate the Monthly Servicing
Fees; (h) the provider and terms of any form of Series Enhancement with
respect thereto; (i) the terms on which the Certificates of such Series
may be repurchased; (j) the Series Termination Date; (k) the number of
Classes of Certificates of such Series, and if such Series consists of
more than one Class, the rights and priorities of each such Class; (l)
the extent to which the Certificates of such Series will be issuable in
temporary or permanent global form (and, in such case, the depositary for
such global certificate or certificates, the terms and conditions, if
any, upon which such global certificate or certificates may be exchanged,
in whole or in part, for definitive certificates, and the manner in which
any interest payable on such global certificate or certificates will be
paid); (m) whether the Certificates of such Series may be issued in
bearer form and any limitations imposed thereon; (n) the priority of such
Series with respect to any other Series; (o) the Group, if any, in which
such Series will be included; and (p) any other relevant terms (all such
terms, the "Principal Terms" of such Series). None of the Transferor, the
Servicer, the Trustee or the Trust is required or intends to obtain the
consent of any Certificateholder of any outstanding Series to issue any
additional Series. The Transferor may offer any Series to the public
under a Prospectus Supplement or other Disclosure Document in
transactions either registered under the Securities Act or exempt from
registration thereunder, directly, through one or more underwriters or
placement agents, in fixed-price offerings or in negotiated transactions
or otherwise. See "Plan of Distribution." Any such Series may be issued
in fully registered or book-entry form in minimum denominations
determined by the Transferor. The Transferor intends to offer, from time
to time, additional Series.
In addition to the foregoing, it is a condition to the issuance of
each Series offered hereby, that on the related Series Issuance Date, the
aggregate amount of Receivables which are more than 30-days past due,
will not exceed 20% of the aggregate amount of Receivables in the Trust.
The Pooling and Servicing Agreement provides that the Transferor
may designate Principal Terms such that each Series has a Controlled
Accumulation Period or a Controlled Amortization Period that may have a
different length and begin on a different date than such periods for any
other Series. Further, one or more Series may be in their Controlled
Accumulation Period or Controlled Amortization Period while other Series
are not. Moreover, each Series may have the benefits of Series
Enhancement issued by enhancement providers different from the providers
of Series Enhancement with respect to any other Series. Under the Pooling
and Servicing Agreement, the Trustee shall hold any such Series
Enhancement only on behalf of the Certificateholders of the Series to
which such Series Enhancement relates. With respect to each such Series
Enhancement, the Transferor may deliver a different form of Series
Enhancement agreement. The Transferor also has the option under the
Pooling and Servicing Agreement to vary among Series the terms upon which
a Series may be repurchased by the Transferor. There is no limit to the
number of New Issuances the Transferor may cause under the Pooling and
Servicing Agreement. The Trust will terminate only as provided in the
Pooling and Servicing Agreement. There can be no assurance that the terms
of any Series might not have an impact on the timing and amount of
payments received by a Certificateholder of another Series.
Under the Pooling and Servicing Agreement and pursuant to a
Supplement, a New Issuance may only occur upon the satisfaction of
certain conditions provided in the Pooling and Servicing Agreement. The
obligation of the Trustee to authenticate the Certificates of such new
Series and to execute and deliver the related Supplement is subject to
the satisfaction of the following conditions: (a) on or before the fifth
day immediately preceding the date upon which the New Issuance is to
occur, the Transferor shall have given the Trustee, the Servicer and each
Rating Agency written notice of such New Issuance and the date upon which
the New Issuance is to occur; (b) the Transferor shall have delivered to
the Trustee the related Supplement, in form satisfactory to the Trustee,
executed by each party to the Pooling and Servicing Agreement other than
the Trustee; (c) the Transferor shall have delivered to the Trustee any
related Series Enhancement agreement executed by each of the parties to
such agreement; (d) the Trustee shall have received confirmation from
each Rating Agency that such New Issuance will satisfy the Rating Agency
Condition; (e) the Transferor shall have delivered to the Trustee and
certain providers of Series Enhancement a certificate of an authorized
officer, dated the date upon which the New Issuance is to occur, to the
effect that the Transferor reasonably believes that such issuance will
not, based on the facts known to such representative at the time of such
certification, have an Adverse Effect; (f) the Transferor shall have
delivered to the Trustee, each Rating Agency and certain providers of
Series Enhancement an opinion of counsel acceptable to the Trustee that
for Federal income tax purposes: (i) following such New Issuance the
Trust will not be deemed to be an association (or publicly traded
partnership) taxable as a corporation; (ii) such New Issuance will not
adversely affect the tax characterization as debt of Certificates of any
outstanding Series or Class that were characterized as debt at the time
of their issuance; (iii) such New Issuance will not cause or constitute
an event in which gain or loss would be recognized by any
Certificateholders; and (iv) except as is otherwise provided in a
Supplement with respect to any Series or Class thereof, the Certificates
of such Series or the specified Classes thereof will be properly
characterized as debt (an opinion of counsel to the effect referred to in
clauses (i), (ii) (iii) with respect to any action is referred to herein
as a "Tax Opinion"); (g) the aggregate amount of Principal Receivables
plus the principal amount of any Participation Interest shall be greater
than the Required Minimum Principal Balance as of the date upon which the
New Issuance is to occur after giving effect to such issuance; and (h)
any other conditions specified in any Supplement. Upon satisfaction of
the above conditions, the Trustee shall execute the Supplement and issue
to the Transferor the Certificates of such new Series for execution and
redelivery to the Trustee for authentication.
The Pooling and Servicing Agreement provides that, pursuant to any
one or more supplements to the Pooling and Servicing Agreement (each, a
"Participation Supplement"), the Transferor may direct the Trustee to
issue on behalf of the Trust one or more participations (each, a
"Participation"), to be delivered to or upon the order of the Transferor;
provided that (a) the Rating Agency Condition shall have been satisfied
with respect thereto, (b) the Transferor Amount (excluding the interest
represented by any Supplemental Certificate) shall not be less than the
Required Transferor Amount as of the date of, and after giving effect to,
such issuance and (c) the Transferor shall have delivered to the Trustee
and each Rating Agency a Tax Opinion, dated the date of such issuance,
with respect to such issuance. Any Participation may be transferred or
exchanged only upon satisfaction of the conditions described in clauses
(a) and (c) above. Each Participation will entitle its holder to a
specified percentage (the "Participation Percentage") of all Collections
of Principal Receivables and Finance Charge Receivables and any other
Trust Assets to the extent specified in the Participation Supplement.
COLLECTION ACCOUNT
The Servicer has established and maintains, or has caused to be
established and maintains, for the benefit of the Certificateholders in
the name of the Trustee, on behalf of the Trust, an account (the
"Collection Account") with an Eligible Institution. "Eligible
Institution" means any depository institution (which may be the Trustee)
organized under the laws of the United States or any one of the states
thereof, which at all times has a certificate of deposit rating
acceptable to each Rating Agency or a long-term unsecured debt rating
acceptable to each Rating Agency, except that no such rating will be
required of an institution which maintains a trust fund in a fully
segregated trust account with the corporate trust department of such
institution as long as such institution maintains the credit rating of
the applicable Rating Agency in one of its generic credit rating
categories which signifies investment grade and is a member of the FDIC.
Notwithstanding the preceding sentence, any institution the appointment
of which satisfies the Rating Agency Condition will be an Eligible
Institution. Funds in the Collection Account generally will be invested
in (i) obligations issued or fully guaranteed by the United States of
America or any instrumentality or agency thereof when such obligations
are backed by the full faith and credit of the United States of America,
(ii) demand deposits, time deposits or certificates of deposit of
depository institutions or trust companies incorporated under the laws of
the United States of America or any state thereof and subject to
supervision and examination by Federal or state banking or depository
institution authorities; provided that at the time of the Trust's
investment or contractual commitment to invest therein, the short-term
debt rating of such depository institution or trust company shall be in
the highest rating category of the applicable Rating Agency, (iii)
commercial paper or other short-term obligations having, at the time of
the Trust's investment or a contractual commitment to invest, a rating in
the highest rating category of the applicable Rating Agency, (iv) demand
deposits, time deposits or certificates of deposit which are fully
insured by the FDIC having, at the time of the Trust's investment
therein, a rating in the highest rating category of the applicable Rating
Agency, (v) bankers' acceptances issued by any depository institution or
trust company described in (ii) above, (vi) money market funds having, at
the time of the Trust's investment therein, a rating in the highest
rating category of the applicable Rating Agency, (vii) time deposits,
other than as referred to in (iv) above, with an entity, the commercial
paper of such entity having a credit rating in the highest rating
category of the applicable Rating Agency, (viii) certain repurchase
agreements meeting the requirements set forth in the Pooling and
Servicing Agreement, and (ix) any other investment if the Rating Agency
Condition has been satisfied (collectively, "Eligible Investments"). Any
earnings (net of losses and investment expenses) on funds in the
Collection Account will be paid to the Transferor. The Servicer has the
revocable power to withdraw funds from the Collection Account and to
instruct the Trustee to make withdrawals and payments from the Collection
Account for the purpose of carrying out its duties under the Pooling and
Servicing Agreement and any Supplement.
ALLOCATIONS
Pursuant to the Pooling and Servicing Agreement, during each
Monthly Period the Servicer will allocate to each outstanding Series its
Series Allocable Finance Charge Collections, Series Allocable Principal
Collections and Series Allocable Defaulted Amount.
"Series Adjusted Invested Amount" means, with respect to any Series
and for any Monthly Period, the Series Invested Amount for such Series
for such Monthly Period, less the excess, if any, of the cumulative
amount (calculated in accordance with the terms of the related Supplement
and, with respect to any Series offered hereby, the related Prospectus
Supplement) of investor charge-offs allocable to the Invested Amount for
such Series as of the last day of the immediately preceding Monthly
Period over the aggregate reimbursement of such investor charge-offs as
of such last day, or such lesser amount as may be provided in the
Supplement for such Series and, with respect to any Series offered
hereby, the related Prospectus Supplement.
"Series Allocable Finance Charge Collections," "Series Allocable
Principal Collections" and "Series Allocable Defaulted Amount" mean, with
respect to any Series and for any Monthly Period, the product of (a) the
Series Allocation Percentage and (b) the amount of collections of Finance
Charge Receivables deposited in the Collection Account, the amount of
collections of Principal Receivables deposited in the Collection Account
and the amount of all Defaulted Amounts with respect to such Monthly
Period, respectively.
"Series Allocation Percentage" means, with respect to any Series
and for any Monthly Period, the percentage equivalent of a fraction, the
numerator of which is the Series Adjusted Invested Amount as of the last
day of the immediately preceding Monthly Period plus the Series Required
Transferor Amount as of the last day of the immediately preceding Monthly
Period and the denominator of which is the Trust Adjusted Invested Amount
plus the sum of all Series Required Transferor Amounts as of such last
day.
"Series Required Transferor Amount" means for any Series an amount
specified in the Supplement for such Series and, for any Series offered
hereby, the related Prospectus Supplement.
"Trust Adjusted Invested Amount" means, with respect to any Monthly
Period, the sum of the Series Adjusted Invested Amounts (as adjusted in
any Supplement) for all outstanding Series plus the principal amount of
any Participation then outstanding.
The Servicer will then allocate amounts initially allocated to a
particular Series between the Certificateholders' Interest and the
Transferor's Interest for such Monthly Period as follows:
(i) the Series Allocable Finance Charge Collections and the Series
Allocable Defaulted Amount will at all times be allocated to the
Invested Amount of a Series based on the Floating Allocation
Percentage of such Series; and
(ii) the Series Allocable Principal Collections will at all times
be allocated to the Invested Amount of such Series based on the
Principal Allocation Percentage of such Series.
The "Floating Allocation Percentage" and the "Principal Allocation
Percentage" with respect to any Series will be determined as set forth in
the related Supplement and, with respect to each Series offered hereby,
in the related Prospectus Supplement. Amounts not allocated to the
Invested Amount of any Series as described above will be allocated to the
Transferor's Interest.
GROUPS OF SERIES
If so specified in the related Prospectus Supplement, the
Certificates of a Series may be included in a Reallocation Group, which
is a Group of Series subject to reallocations of collections of Finance
Charge Receivables and other amounts or obligations among Series in such
Group in the manner described below under "-- Reallocations Among
Certificates of Different Series within a Reallocation Group."
Collections of Finance Charge Receivables allocable to each Series in a
Reallocation Group will be aggregated and made available for certain
required payments for all Series in such Group. Consequently, the
issuance of new Series in such Group may have the effect of reducing or
increasing the amount of collections of Finance Charge Receivables
allocable to the Certificates of other Series in such Group. See "Risk
Factors -- Issuance of New Series." The Prospectus Supplement with
respect to a Series offered hereby will specify whether such Series will
be included in a Reallocation Group or another type of Group, whether any
previously issued Series have been included in such a Group and whether
any such Series or any previously issued Series may be removed from such
a Group.
REALLOCATIONS AMONG CERTIFICATES OF DIFFERENT SERIES WITHIN A REALLOCATION
GROUP
Group Investor Finance Charge Collections. Any Series offered
hereby may, if so specified in the related Prospectus Supplement, be
included in a Reallocation Group. Other Series issued in the future may
also be included in such Group.
The Servicer will calculate for each Monthly Period Group Investor
Finance Charge Collections (as defined below) for a particular
Reallocation Group and on the following Distribution Date will allocate
such amount among the Certificateholders' Interest (including any
Enhancement Invested Amount) for all Series in such Group in the
following priority:
(i) Group Investor Monthly Interest (as defined below);
(ii) Group Investor Default Amounts (as defined below);
(iii) Group Investor Monthly Fees (as defined below);
(iv) Group Investor Additional Amounts (as defined below); and
(v) the balance pro rata among each Series in such Group based
on the current Invested Amount of each such Series.
In the case of clauses (i), (ii), (iii) and (iv), if the amount of
Group Investor Finance Charge Collections is not sufficient to cover each
such amount in full, the amount available will be allocated among the
Series in such Group pro rata, based on the claim that each Series has
under the applicable clause. This means, for example, that if the amount
of Group Investor Finance Charge Collections is not sufficient to cover
Group Investor Monthly Interest, each Series in such Group will share
such amount pro rata, and any Series in such Group with a claim with
respect to monthly interest, overdue monthly interest and interest on
such overdue monthly interest, if applicable, which is larger than the
claim for such amounts for any other Series in such Group (due to a
higher certificate rate) will receive a proportionately larger allocation
than such other Series.
The amount of Group Investor Finance Charge Collections allocated
to the Certificateholders' Interest (including any Enhancement Invested
Amount) for a particular Series offered hereby as described above is
referred to herein as "Reallocated Investor Finance Charge Collections."
"Group Investor Additional Amounts" means for any Distribution Date
the sum of the amounts determined with respect to each Series in such
Group equal to (a) an amount equal to the amount by which the Invested
Amount of any Class of Certificates or any Enhancement Invested Amounts
have been reduced as a result of investor charge-offs, subordination of
principal collections and funding the investor default amount for any
other Class of Certificates or Enhancement Invested Amounts of such
Series and (b) if the related Supplement so provides, the amount of
interest at the applicable certificate rate that has accrued on the
amount described in the preceding clause (a).
"Group Investor Default Amount" means for any Distribution Date the
sum of the amounts determined with respect to each Series in such Group
equal to the product of the Series Allocable Defaulted Amount for such
Distribution Date and the applicable Floating Allocation Percentage for
such Distribution Date.
"Group Investor Finance Charge Collections" means for any
Distribution Date the aggregate amount of Investor Finance Charge
Collections for such Distribution Date for all Series in such Group.
"Group Investor Monthly Fees" means for any Distribution Date the
Monthly Servicing Fee for each Series in such Group, any Series
Enhancement fees and any other similar fees which are paid out of
Reallocated Investor Finance Charge Collections for such Series pursuant
to the applicable Supplement.
"Group Investor Monthly Interest" means for any Distribution Date
the sum of the aggregate amount of monthly interest, including overdue
monthly interest and interest on such overdue monthly interest, if
applicable, for all Series in such Group for such Distribution Date.
Finance Charge Receivables may be allocated and reallocated among
Series in a Group as described below.
Step 1 - total collections of Finance Charge Receivables are
allocated among Series based on the Series Allocation Percentage for each
Series. The amounts allocated to each Series pursuant to this Step 1 are
referred to as "Series Allocable Finance Charge Collections." See "--
Allocations" above.
Step 2 - the amount of collections of Finance Charge Receivables
allocable to the Invested Amount (including any Enhancement Invested
Amount) of a Series (the "Investor Finance Charge Collections") is
determined by multiplying Series Allocable Finance Charge Collections for
each Series by the applicable Floating Allocation Percentages. See "--
Allocations" above.
Step 3 - Investor Finance Charge Collections for all Series in a
particular Reallocation Group (or Group Investor Finance Charge
Collections) are pooled for reallocation to each such Series.
Step 4 - Group Investor Finance Charge Collections are reallocated
to each Series in such Group based on the Series' respective claim with
respect to interest payable on the Certificates or Enhancement Invested
Amount (if any) of such Series, the Defaulted Amount allocable to the
Certificateholders' Interest of such Series and the Monthly Servicing Fee
and certain other amounts in respect to such Series. The excess is
allocated pro rata among the Series in such Group based on their
respective Invested Amounts.
SHARING OF EXCESS FINANCE CHARGE COLLECTIONS AMONG EXCESS ALLOCATION SERIES
Any Series offered hereby may be designated as an Excess Allocation
Series (including a Series in a Reallocation Group or other type of
Group). Collections of Finance Charge Receivables and certain other
amounts allocable to the Certificateholders' Interest of any Excess
Allocation Series in excess of the amounts necessary to make required
payments with respect to such Series (including payments to the provider
of any related Series Enhancement) that are payable out of collections of
Finance Charge Receivables (any such excess, the "Excess Finance Charge
Collections") may be applied to cover any shortfalls with respect to
amounts payable from collections of Finance Charge Receivables allocable
to any other Excess Allocation Series, pro rata based upon the amount of
the shortfall with respect to amounts payable from collections of Finance
Charge Receivables, if any, with respect to each other Excess Allocation
Series; provided, however, that the sharing of Excess Finance Charge
Collections among Excess Allocation Series will cease if the Transferor
shall deliver to the Trustee a certificate of an authorized
representative to the effect that, in the reasonable belief of the
Transferor, the continued sharing of Excess Finance Charge Collections
among Excess Allocation Series would have adverse regulatory implications
with respect to the Transferor, Holdings or PFR. Following the delivery
by the Transferor of any such certificate to the Trustee there will not
be any further sharing of Excess Finance Charge Collections among such
Series in any such Group. In all cases, any Excess Finance Charge
Collections remaining after covering shortfalls with respect to all
outstanding Excess Allocation Series will be paid to the holders of the
Transferor Certificates. While any Series offered hereby may be
designated as an Excess Allocation Series, there can be no assurance that
(a) any other Series will be designated as an Excess Allocation Series,
(b) there will be any Excess Finance Charge Collections with respect to
any such other Series for any Monthly Period, (c) any agreement relating
to any Series Enhancement will not be amended in such a manner as to
increase payments to the providers of Series Enhancement and thereby
decrease the amount of Excess Finance Charge Collections available from
such Series or (d) the Transferor will not at any time deliver a
certificate as described above. While the Transferor believes that, based
upon applicable rules and regulations as currently in effect, the sharing
of Excess Finance Charge Collections among Excess Allocation Series will
not have adverse regulatory implications for it, Holdings, or PFR, there
can be no assurance that this will continue to be true in the future.
SHARED PRINCIPAL COLLECTIONS
If the Prospectus Supplement for the related Series provides that
such Series is a Principal Sharing Series, collections of Principal
Receivables for any Monthly Period allocated to the Certificateholders'
Interest of any such Series will first be used to cover certain amounts
described in the related Prospectus Supplement (including any required
deposits into a Principal Funding Account or required distributions to
Certificateholders of such Series in respect of principal). The Servicer
will determine the amount of collections of Principal Receivables for any
Monthly Period (plus certain other amounts described in the related
Prospectus Supplement) allocated to such Series remaining after covering
such required deposits and distributions and any similar amount remaining
for any other Principal Sharing Series plus amounts specified in any
Participation Supplement with respect to any Participation to be treated
as shared principal collections (collectively, "Shared Principal
Collections"). The Servicer will allocate the Shared Principal
Collections to cover any principal distributions to Certificateholders
and deposits to Principal Funding Accounts for any Principal Sharing
Series that are either scheduled or permitted and that have not been
covered out of collections of Principal Receivables and certain other
amounts allocable to the Certificateholders' Interest of such Series
(collectively, "Principal Shortfalls"). If Principal Shortfalls exceed
Shared Principal Collections for any Monthly Period, Shared Principal
Collections will be allocated pro rata among the applicable Series based
on the respective Principal Shortfalls of such Series. To the extent that
Shared Principal Collections exceed Principal Shortfalls, the balance
will be allocated to the holders of the Transferor Certificates, provided
that (a) such Shared Principal Collections will be distributed to the
holders of the Transferor Certificates only to the extent that the
Transferor Amount is greater than the Required Transferor Amount and (b)
in certain circumstances described below under "-- Special Funding
Account," such Shared Principal Collections will be deposited in the
Special Funding Account. Any such reallocation of collections of
Principal Receivables will not result in a reduction in the Invested
Amount of the Series to which such collections were initially allocated.
There can be no assurance that there will be any Shared Principal
Collections with respect to any Monthly Period or that any Series will be
designated as Principal Sharing Series.
PAIRED SERIES
If so provided in the related Supplement, a Prior Series may be
paired with a Paired Series issued by the Trust at or after the
commencement of the Controlled Amortization Period or Controlled
Accumulation Period for such Prior Series. As the Invested Amount of the
Prior Series is reduced, the Invested Amount in the Trust of the Paired
Series will increase by an equal amount. Upon payment in full of the
Prior Series, the Invested Amount of such Paired Series will be equal to
the Invested Amount paid to Certificateholders of such Prior Series. If a
Pay Out Event or Reinvestment Event occurs with respect to the Prior
Series or with respect to the Paired Series when the Prior Series is in a
Controlled Amortization Period or Controlled Accumulation Period, the
Series Allocation Percentage and the Principal Allocation Percentage for
the Prior Series and the Series Allocation Percentage and the Principal
Allocation Percentage for the Paired Series will be reset as provided in
the related Prospectus Supplement and the Controlled Amortization Period,
Controlled Accumulation Period, Early Amortization Period or Early
Accumulation Period for such Series could be lengthened.
SPECIAL FUNDING ACCOUNT
If, on any date, the Transferor Amount is less than or equal to the
Required Transferor Amount, the Servicer shall not distribute to the
holders of the Transferor Certificates any collections of Principal
Receivables allocable to a Series or a Group that otherwise would be
distributed to such holders, but shall deposit such funds in an account
with an Eligible Institution established and maintained by the Servicer
for the benefit of the Certificateholders of each Series, in the name of
the Trustee, on behalf of the Trust, and bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of
the Certificateholders of each Series (the "Special Funding Account").
Funds on deposit in the Special Funding Account will be withdrawn and
paid to the holders of the Transferor Certificates on any Distribution
Date to the extent that, after giving effect to such payment, the
Transferor Amount exceeds the Required Transferor Amount on such date;
provided, however, that if a Controlled Accumulation Period, Early
Accumulation Period, Controlled Amortization Period or Early Amortization
Period commences with respect to any Series, any funds on deposit in the
Special Funding Account will be released from the Special Funding
Account, deposited in the Collection Account and treated as collections
of Principal Receivables to the extent needed to make principal payments
due to or for the benefit of the Certificateholders of such Series.
Funds on deposit in the Special Funding Account will be invested by
the Trustee, at the direction of the Servicer, in Eligible Investments.
Any earnings (net of losses and investment expenses) earned on amounts on
deposit in the Special Funding Account during any Monthly Period will be
withdrawn from the Special Funding Account and treated as collections of
Finance Charge Receivables with respect to such Monthly Period.
FUNDING PERIOD; PRE-FUNDING ACCOUNT
For any Series of Certificates, the related Prospectus Supplement
may specify that during a Funding Period, the Pre-Funding Amount will be
held in a Pre-Funding Account pending the transfer of additional
Receivables to the Trust or pending the reduction of the Invested Amounts
of other Series issued by the Trust. The related Prospectus Supplement
will specify the initial Invested Amount with respect to such Series, the
Full Invested Amount and the date by which the Invested Amount is
expected to equal the Full Invested Amount. The Invested Amount will
increase as Receivables are delivered to the Trust or as the Invested
Amounts of other Series of the Trust are reduced. The Invested Amount may
also decrease due to the occurrence of a Pay Out Event with respect to
such Series as provided in the related Prospectus Supplement.
During the Funding Period, funds on deposit in the Pre-Funding
Account for a Series of Certificates will be withdrawn and paid to the
Transferor to the extent of any increases in the Invested Amount. If the
Invested Amount does not for any reason equal the Full Invested Amount by
the end of the Funding Period, any amount remaining in the Pre-Funding
Account and any additional amounts specified in the related Prospectus
Supplement will be payable to the Certificateholders of such Series in
the manner and at such time as set forth in the related Prospectus
Supplement.
If so specified in the related Prospectus Supplement, funds in the
Pre-Funding Account will be invested by the Trustee in Eligible
Investments or will be subject to a guaranteed rate or investment
agreement or other similar arrangement, and, in connection with each
Distribution Date during the Funding Period, investment earnings on funds
in the Pre-Funding Account during the related Monthly Period will be
withdrawn from the Pre-Funding Account and deposited, together with any
applicable payment under a guaranteed rate or investment agreement or
other similar arrangement, into the Collection Account for distribution
in respect of interest on the Certificates of the related Series in the
manner specified in the related Prospectus Supplement.
DEFAULTED RECEIVABLES; REBATES AND FRAUDULENT CHARGES
"Defaulted Receivables" for any Monthly Period are Principal
Receivables that were charged-off as uncollectible in such Monthly
Period. The "Defaulted Amount" for any Monthly Period will be an amount
(not less than zero) equal to (a) the excess, if any, of the amount of
Defaulted Receivables for such Monthly Period over the Recoveries for
such Monthly Period, minus (b) the amount of any Defaulted Receivables
the assignment or reassignment of which the Transferor or the Servicer
becomes obligated to accept during such Monthly Period (unless an event
relating to bankruptcy, receivership or insolvency has occurred with
respect to the Transferor or the Servicer, in which event the amount of
such Defaulted Receivables will not be added to the sum so subtracted).
Receivables in any Account will be charged-off as uncollectible in
accordance with the credit card guidelines and the Servicer's customary
and usual policies and procedures for servicing revolving credit card and
other revolving credit account receivables comparable to the Receivables.
The current policy of Holdings is to charge-off the receivables in an
account when that account becomes 181 days delinquent (or sooner in the
event of receipt of notice of death or bankruptcy of the cardholder), but
such policy may change in the future to conform with regulatory
requirements and applicable law.
If the Servicer adjusts downward the amount of any Principal
Receivable (other than Ineligible Receivables that have been, or are to
be, reassigned to the Transferor) because of a rebate, refund,
counterclaim, defense, error, fraudulent charge or counterfeit charge to
a cardholder, or such Principal Receivable was created in respect of
merchandise that was refused or returned by a cardholder or if the
Servicer otherwise adjusts downward the amount of any Principal
Receivable without receiving collections therefor or charging off such
amount as uncollectible (any such downward adjustment, a "Dilution"), the
amount of the Principal Receivables in the Trust with respect to the
Monthly Period in which such adjustment takes place will be reduced by
the amount of the adjustment. Furthermore, in the event that the
exclusion of any such Receivables would cause the Transferor Amount at
such time to be less than the Required Transferor Amount, the Transferor
will be required to pay an amount equal to such deficiency into the
Special Funding Account (any such payment, an "Adjustment Payment").
CREDIT ENHANCEMENT
General. For any Series, Credit Enhancement may be provided with
respect to one or more Classes thereof. Credit Enhancement with respect
to one or more Classes of a Series offered hereby may include a letter of
credit, a cash collateral account or guaranty, a spread account, a yield
supplement account, a collateral interest, a surety bond, an insurance
policy or any other form of credit enhancement described in the related
Prospectus Supplement, or any combination of the foregoing. Credit
Enhancement may also be provided to a Class or Classes of a Series or to
a Series by subordination provisions which require distributions of
principal or interest be made with respect to the Certificates of such
Class or Classes or such Series before distributions are made to one or
more Classes of such Series or to another Series (if the Supplement for
such Series so provides). If so specified in the related Prospectus
Supplement, any form of Credit Enhancement may be available to more than
one Class or Series to the extent described therein.
The presence of Credit Enhancement with respect to a Class is
intended to enhance the likelihood of receipt by Certificateholders of
such Class of the full amount of principal and interest with respect
thereto and to decrease the likelihood that such Certificateholders will
experience losses. However, unless otherwise specified in the related
Prospectus Supplement, the Credit Enhancement, if any, with respect
thereto will not provide protection against all risks of loss and will
not guarantee repayment of the entire principal balance of the
Certificates and interest thereon. If losses occur that exceed the amount
covered by the Credit Enhancement or that are not covered by the Credit
Enhancement, Certificateholders will bear their allocable share of such
losses. In addition, if specific Credit Enhancement is provided for the
benefit of more than one Class or Series, Certificateholders of any such
Class or Series will be subject to the risk that such Credit Enhancement
will be exhausted by the claims of Certificateholders of other Classes or
Series.
If Credit Enhancement is provided with respect to a Series offered
hereby, the related Prospectus Supplement will include a description of
(a) the amount payable under such Credit Enhancement, (b) any conditions
to payment thereunder not otherwise described herein, (c) the conditions
(if any) under which the amount payable under such Credit Enhancement may
be reduced and under which such Credit Enhancement may be terminated or
replaced and (d) any provisions of any agreement relating to such Credit
Enhancement material to the Certificateholders of such Series.
Additionally, in certain cases, the related Prospectus Supplement may set
forth certain information with respect to the provider of any third-party
Credit Enhancement (the "Credit Enhancer"), including (i) a brief
description of its principal business activities, (ii) its principal
place of business, place of incorporation or the jurisdiction under which
it is chartered or licensed to do business, (iii) if applicable, the
identity of regulatory agencies that exercise primary jurisdiction over
the conduct of its business and (iv) its total assets, and its
stockholders' or policyholders' surplus, if applicable, as of a date
specified in the Prospectus Supplement. If so described in the related
Prospectus Supplement, Credit Enhancement with respect to a Series
offered hereby may be available to pay principal of the Certificates of
such Series following the occurrence of certain Pay Out Events or
Reinvestment Events with respect to such Series. In such event, the
Credit Enhancer will have an interest in certain cash flows in respect of
the Receivables to the extent described in such Prospectus Supplement (an
"Enhancement Invested Amount") and may be entitled to the benefit of the
Trustee's security interest in the Receivables, in each case subordinated
to the interest of the Certificateholders of such Series.
Subordination. If so specified in the related Prospectus
Supplement, one or more Classes of a Series offered hereby may be
subordinated to one or more other Classes of such Series or a Series may
be subordinated to another Series. If so specified in the related
Prospectus Supplement, the rights of the holders of the subordinated
Certificates to receive distributions of principal or interest on any
payment date will be subordinated to such rights of the holders of the
Certificates that are senior to such subordinated Certificates to the
extent set forth in the related Prospectus Supplement. The related
Prospectus Supplement will also set forth information concerning the
amount of subordination of a Class or Classes of subordinated
Certificates in a Series or of the subordinated Certificates of another
Series, the circumstances in which such subordination will be applicable,
the manner, if any, in which the amount of subordination will decrease
over time, and the conditions under which amounts available from payments
that would otherwise be made to holders of such subordinated Certificates
will be distributed to holders of Certificates that are senior to such
subordinated Certificates. The amount of subordination will decrease
whenever amounts otherwise payable to the holders of subordinated
Certificates are paid to the holders of the Certificates that are senior
to such subordinated Certificates.
Letter of Credit. If so specified in the related Prospectus
Supplement, a letter of credit with respect to a Series or Class of
Certificates offered hereby may be issued by a bank or financial
institution specified in the related Prospectus Supplement (the "L/C
Issuer"). Subject to the terms and conditions specified in the related
Prospectus Supplement, the L/C Issuer will be obligated to honor drawings
under a letter of credit in an aggregate dollar amount (which may be
fixed or may be reduced as described in the related Prospectus
Supplement), net of unreimbursed payments thereunder, equal to the amount
described in the related Prospectus Supplement. The amount available
under a letter of credit will be reduced to the extent of the
unreimbursed payments thereunder.
Cash Collateral Account. If so specified in the related Prospectus
Supplement, support for a Series or one or more Classes thereof will be
provided by a guaranty (the "Cash Collateral Guaranty") secured by the
deposit of cash or certain Eligible Investments in an account (the "Cash
Collateral Account") reserved for the beneficiaries of the Cash
Collateral Guaranty or by a Cash Collateral Account alone. The amount
available pursuant to the Cash Collateral Guaranty or the Cash Collateral
Account will be the lesser of amounts on deposit in the Cash Collateral
Account and an amount specified in the related Prospectus Supplement. The
related Prospectus Supplement will set forth the circumstances under
which payments are made to beneficiaries of the Cash Collateral Guaranty
from the Cash Collateral Account or from the Cash Collateral Account
directly.
Reserve Account. If so specified in the related Prospectus
Supplement, support for a Series or one or more Classes thereof will be
provided by the establishment of a reserve account (the "Reserve
Account"). The Reserve Account may be funded, to the extent provided in
the related Prospectus Supplement, by an initial cash deposit, the
retention of certain periodic distributions of principal or interest
otherwise payable to one or more Classes of Certificates, including the
subordinated Certificates, or both, or the provision of a letter of
credit, guarantee insurance policy other form of credit or any
combination thereof. The Reserve Account will be established to assure
the subsequent distribution of principal or interest on the Certificates
of such Series or Class thereof in the manner provided in the related
Prospectus Supplement.
Yield Supplement Account. If so specified in the related Prospectus
Supplement the Servicer will establish and maintain a Yield Supplement
Account for the benefit of the Certificateholders of such Series. Amounts
on deposit in the Yield Supplement Account (together with investment
earnings thereon) will be released and deposited into the Collection
Account in the amounts and at the times specified in the Prospectus
Supplement for such Series. Each such deposit into the Collection Account
will be treated as collections of Finance Charge Receivables allocable to
the Certificates of the related Series. The Yield Supplement Account for
any Series will be funded with the proceeds from offering of the related
Investor Certificates.
Collateral Interest. If so specified in the related Prospectus
Supplement, support for a Series of Certificates or one or more Classes
thereof may be provided initially by an uncertificated, subordinated
interest in the Trust (the "Collateral Interest") in an amount initially
equal to a percentage of the Certificates of such Series specified in the
Prospectus Supplement. References to Enhancement Invested Amounts herein
include Collateral Interests, if any.
Surety Bond or Insurance Policy. If so specified in the related
Prospectus Supplement, insurance with respect to a Series or Class of
Certificates offered hereby may be provided by one or more insurance
companies. Such insurance will guarantee, with respect to one or more
Classes of the related Series, distributions of interest or principal in
the manner and amount specified in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, a surety bond
may be purchased for the benefit of the holders of any Series or Class of
Certificates offered hereby to assure distributions of interest or
principal with respect to such Series or Class of Certificates in the
manner and amount specified in the related Prospectus Supplement.
Spread Account. If so specified in the related Prospectus
Supplement, support for a Series or one or more Classes of a Series
offered hereby may be provided by the periodic deposit of certain
available excess cash flow from the Trust Assets into a spread account
intended to assure the subsequent distributions of interest and principal
on the Certificates of such Class or Series in the manner specified in
the related Prospectus Supplement.
INTEREST RATE SWAPS AND RELATED CAPS, FLOORS AND COLLARS
The Trustee on behalf of the Trust may enter into interest rate
swaps and related caps, floors and collars to minimize the risk to
Certificateholders from adverse changes in interest rates (collectively,
"Swaps").
An interest rate Swap is an agreement between two parties
("counterparties") to exchange a stream of interest payments on an agreed
hypothetical or "notional" principal amount. No principal amount is
exchanged between the counterparties to an interest rate Swap. In the
typical Swap, one party agrees to pay a fixed rate on a notional
principal amount, while the counterparty pays a floating rate based on
one or more referenced interest rates such as the London Interbank
Offered Rate ("LIBOR"), a specified bank's prime rate, or U.S. Treasury
Bill rates. Interest rate Swaps also permit counterparties to exchange a
floating rate obligation based upon one reference interest rate (such as
LIBOR) for a floating rate obligation based upon another referenced
interest rate (such as U.S. Treasury Bill rates).
The Swap market has grown substantially in recent years with a
significant number of banks and financial service firms acting both as
principals and as agents utilizing standardized Swap documentation. Caps,
floors and collars are more recent innovations, and they are less liquid
than other Swaps. There can be no assurance that the Trust will be able
to enter into or offset Swaps at any specific time or at prices or on
other terms that are advantageous. In addition, although the terms of
Swaps may provide for termination under certain circumstances, there can
be no assurance that the Trust will be able to terminate or offset a Swap
on favorable terms.
SERVICER COVENANTS
In the Pooling and Servicing Agreement, the Servicer has agreed as
to each Receivable and related Account that it will: (a) duly fulfill all
obligations on its part to be fulfilled under or in connection with the
Receivables or the related Accounts, and will maintain in effect all
qualifications required and comply in all material respects with all
requirements of law in order to service the Receivables and Accounts, the
failure to maintain or comply with which would have a material adverse
effect on the Certificateholders; (b) not permit any rescission or
cancellation of the Receivables except as ordered by a court of competent
jurisdiction or other governmental authority; (c) do nothing to impair
the rights of the Certificateholders in the Receivables or the related
Accounts; and (d) not reschedule, revise or defer payments due on the
Receivables except in accordance with its guidelines for servicing
receivables.
Under the terms of the Pooling and Servicing Agreement, all
Receivables in an Account will be assigned and transferred to the
Servicer and such Account will no longer be included as an Account if the
Servicer discovers, or receives written notice from the Trustee, that any
covenant of the Servicer set forth above has not been complied with in
all material respects and such noncompliance has not been cured within 60
days (or such longer period as may be agreed to by the Trustee and the
Transferor) thereafter and has a material adverse effect on the
Certificateholders' Interest in such Receivables. Such assignment and
transfer will be made when the Servicer deposits an amount equal to the
amount of such Receivables in the Collection Account on the business day
preceding the Distribution Date following the Monthly Period during which
such obligation arises. This transfer and assignment to the Servicer
constitutes the sole remedy available to the Certificateholders if such
covenant or warranty of the Servicer is not satisfied and the Trust's
interest in any such assigned Receivables will be automatically assigned
to the Servicer.
CERTAIN MATTERS REGARDING THE SERVICER
The Servicer may not resign from its obligations and duties under
the Pooling and Servicing Agreement except (i) upon determination that
the performance of such duties is no longer permissible under applicable
law or (ii) if such obligations and duties are assumed by any entity that
has satisfied the Rating Agency Condition. No such resignation will
become effective until the Trustee or a successor to the Servicer has
assumed the Servicer's responsibilities and obligations under the Pooling
and Servicing Agreement. Notwithstanding the foregoing, Holdings may
assign part or all of its obligations and duties as Servicer under the
Pooling and Servicing Agreement to an affiliate of Holdings as long as
Holdings shall have fully guaranteed the performance of such obligations
and duties under the Pooling and Servicing Agreement.
Any person into which, in accordance with the Pooling and Servicing
Agreement, the Transferor or the Servicer may be merged or consolidated
or any person resulting from any merger or consolidation to which the
Transferor or the Servicer is a party, or any person succeeding to the
business of the Transferor or the Servicer, will be the successor to the
Transferor or the Servicer, as the case may be, under the Pooling and
Servicing Agreement.
SERVICER DEFAULT
In the event of any Servicer Default (as defined below), either the
Trustee or Certificateholders holding Certificates evidencing more than
50% of the aggregate unpaid principal amount of all Certificates, by
written notice to the Servicer (and to the Trustee if given by the
Certificateholders) (a "Termination Notice"), may terminate all of the
rights and obligations of the Servicer, as Servicer, under the Pooling
and Servicing Agreement and in and to the Receivables and the proceeds
thereof and the Trustee will appoint a new Servicer (a "Service
Transfer"). The rights and interest of the Transferor under the Pooling
and Servicing Agreement in the Transferor's Interest will not be affected
by any Termination Notice or Service Transfer. If within 60 days of
receipt of a Termination Notice the Trustee does not receive any bids
from eligible servicers to act as successor Servicer and receives an
officer's certificate from the Transferor to the effect that the Servicer
cannot in good faith cure the Servicer Default which gave rise to the
Termination Notice, the Trustee shall grant a right of first refusal to
the Transferor which would permit the Transferor at its option to
purchase the Certificateholders' Interest on the Distribution Date in the
next calendar month. The purchase price for the Certificateholders'
Interest shall be equal to the sum of the amounts specified therefor with
respect to each outstanding Series in the related Supplement, and for any
Certificates offered hereby, in the Prospectus Supplement.
The Trustee will as promptly as possible, after the giving of a
Termination Notice, appoint a successor Servicer and if no successor
Servicer has been appointed by the Trustee and has accepted such
appointment by the time the Servicer ceases to act as Servicer, all
rights, authority, power and obligations of the Servicer under the
Pooling and Servicing Agreement will be vested in the Trustee. Prior to
any Service Transfer, the Trustee will seek to obtain bids from potential
servicers meeting certain eligibility requirements set forth in the
Pooling and Servicing Agreement to serve as a successor Servicer for
servicing compensation not in excess of the Servicing Fee plus any
amounts payable to the Transferor pursuant to the Pooling and Servicing
Agreement.
A "Servicer Default" refers to any of the following events:
(a) failure by the Servicer to make any payment, transfer or
deposit, or to give instructions to the Trustee to make any
payment, transfer or deposit, on the date the Servicer is
required to do so under the Pooling and Servicing Agreement or
any Supplement, which is not cured within a five business day
grace period;
(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 in the Pooling and Servicing
Agreement or any Supplement which has an Adverse Effect and
which continues unremedied for a period of 60 days after written
notice, or the Servicer assigns its duties under the Pooling and
Servicing Agreement, except as specifically permitted
thereunder;
(c) any representation, warranty or certification made by the
Servicer in the Pooling and Servicing Agreement, in any
Supplement or in any certificate delivered pursuant to the
Pooling and Servicing Agreement or any Supplement proves to have
been incorrect in any material respect when made, which has an
Adverse Effect on the rights of the Certificateholders of any
Series, and which Adverse Effect continues for a period of 60
days after written notice; or
(d) the occurrence of certain events of bankruptcy, insolvency
or receivership with respect to the Servicer.
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (a) above for a period of ten business days
after the applicable grace period or referred to under clauses (b) or (c)
for a period of 60 business days after the applicable grace period, will
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 other similar
occurrence. Upon the occurrence of any such event the Servicer will not
be relieved from using its best efforts to perform its obligations in a
timely manner in accordance with the terms of the Pooling and Servicing
Agreement and the Servicer must provide the Trustee, the Transferor and
any provider of Series Enhancement prompt notice of such failure or delay
by it, together with a description of its efforts to so perform its
obligations.
EVIDENCE AS TO COMPLIANCE
The Pooling and Servicing Agreement provides that on or before
August 31 of each calendar year or such other date as specified in the
related Prospectus Supplement, the Servicer will cause a firm of
independent certified public accountants (who may also render other
services to the Servicer or the Transferor and any affiliates thereof)
to furnish a report to the effect that such accounting firm has made a
study and evaluation of the Servicer's internal accounting controls
relative to the servicing of the Accounts and that, on the basis of such
examination, such firm is of the opinion that, assuming the accuracy of
reports by the Servicer's third party agents, the system of internal
accounting controls in effect on the date of such statement relating to
servicing procedures performed by the Servicer, taken as a whole, was
sufficient for the prevention and detection of errors and irregularities
in amounts that would be material to the financial statements of the
Servicer and that such servicing was conducted in compliance with the
sections of the Pooling and Servicing Agreement during the period covered
by such report (which shall be the period from July 1 (or for the initial
period, the relevant Series Issuance Date) of the preceding calendar year
to and including June 30 of such calendar year), except for such
exceptions or errors as such firm shall believe to be immaterial and such
other exceptions as shall be set forth in such statement.
The Pooling and Servicing Agreement provides for delivery to the
Trustee on or before August 31 of each calendar year or such other date
as specified in the related Prospectus Supplement, of an annual statement
signed by an officer of the Servicer to the effect that the Servicer has
fully performed its obligations under the Pooling and Servicing Agreement
throughout the preceding year, or, if there has been a default in the
performance of any such obligation, specifying the nature and status of
the default.
AMENDMENTS
The Pooling and Servicing Agreement and any Supplement may be
amended from time to time (including in connection with the issuance of a
Supplemental Certificate, addition of a Participation Interest,
allocation of assets in the Trust to a Series or Group, or to change the
definition of Monthly Period, Determination Date or Distribution Date) by
the Servicer, the Transferor and the Trustee, and without the consent of
the Certificateholders of any Series, provided that (i) an opinion of
counsel for the Transferor is addressed and delivered to the Trustee to
the effect that the conditions precedent to any such amendment have been
satisfied, (ii) the Transferor shall have delivered to the Trustee a
certificate of an officer of the Transferor to the effect that the
Transferor reasonably believes that such amendment will not have an
Adverse Effect and (iii) the Rating Agency Condition shall have been
satisfied with respect thereto.
The Pooling and Servicing Agreement or any Supplement may be
amended by the Transferor, the Servicer and the Trustee with the consent
of the Certificateholders evidencing not less than 66 2/3% of the
aggregate unpaid principal amount of the Certificates of all affected
Series for which the Transferor has not delivered an officer's
certificate stating that there will be no Adverse Effect, for the purpose
of adding any provisions to or changing in any manner or eliminating any
of the provisions of the Pooling and Servicing Agreement or any
Supplement or of modifying in any manner the rights of
Certificateholders. No such amendment, however, may (a) reduce in any
manner the amount of, or delay the timing of, deposits or distributions
on any Certificate without the consent of each Certificateholder, (b) (i)
change the definition or the manner of calculating the
Certificateholders' Interest or the Invested Amount or (ii) reduce the
aforesaid percentage of the aggregate unpaid principal amount of the
Certificates the holders of which are required to consent to any such
amendment, in each case without the consent of each Certificateholder or
(c) adversely affect the rating of any Series or Class by a Rating Agency
without the consent of the holders of Certificates of such Series or
Class evidencing not less than 66 2/3% of the aggregate unpaid principal
amount of the Certificates of such Series or Class. Promptly following
the execution of any amendment to the Pooling and Servicing Agreement
(other than an amendment described in the preceding paragraph), the
Trustee will furnish written notice of the substance of such amendment to
each Certificateholder. Notwithstanding the foregoing, any Supplement
executed in connection with the issuance of one or more new Series of
Certificates will not be considered an amendment to the Pooling and
Servicing Agreement.
LIST OF CERTIFICATEHOLDERS
Upon written request of any Holder or group of Holders of
Certificates of any Series or of all outstanding Series of record holding
Certificates evidencing not less than 10% of the aggregate unpaid
principal amount of the Certificates of such Series or all Series, as
applicable, the Trustee will afford such Holder or Holders of
Certificates access during business hours to the current list of
Certificateholders of such Series or of all outstanding Series, as the
case may be, for purposes of communicating with other Holders of
Certificates with respect to their rights under the Pooling and Servicing
Agreement. See "Description of the Certificates -- Book-Entry
Registration" and "-- Definitive Certificates."
The Pooling and Servicing Agreement does not provide for any annual
or other meetings of Certificateholders.
THE TRUSTEE
The Bank of New York will act as trustee under the Pooling and
Servicing Agreement. The corporate trust office of The Bank of New York
is located at 101 Barclay Street, New York, New York 10286. The
Transferor and the Servicer and their respective affiliates may from time
to time enter into normal banking and trustee relationships with the
Trustee and its affiliates. The Trustee or the Transferor may hold
Certificates in their own names; however, any Certificates so held shall
not be entitled to participate in any decisions made or instructions
given to the Trustee by the Certificateholders as a group. In addition,
for purposes of meeting the legal requirements of certain local
jurisdictions, the Trustee shall have the power to appoint a co-trustee
or separate trustees of all or any part of the Trust. In the event of
such appointment, all rights, powers, duties and obligations shall be
conferred or imposed upon the Trustee and such separate trustee or
co-trustee jointly, or, in any jurisdiction in which the Trustee shall be
incompetent or unqualified to perform certain acts, singly upon such
separate trustee or co-trustee, who shall exercise and perform such
rights, powers, duties and obligations solely at the direction of the
Trustee.
DESCRIPTION OF THE PURCHASE AGREEMENTS
PFR PURCHASE AGREEMENTS
On the Initial Series Issuance Date, each of BKB and Harris entered
into three separate receivables purchase agreements with PFR providing
for the sale by BKB or Harris, as applicable, to PFR of all of its right,
title and interest in and to the (i) receivables in existence on the
Initial Series Issuance Date which were not more than 29 days past due as
of the Initial Series Issuance Date (the "Current Initial Receivables
Purchase Agreement"), (ii) receivables in existence on the Initial Series
Issuance Date which were at least 30 days past due as of the Initial
Series Issuance Date and certain other receivables which were otherwise
impaired (the "Overdue Initial Receivables Purchase Agreement" and
together with the Current Initial Receivables Purchase Agreement, the
"Initial Receivables Purchase Agreements") and (iii) all receivables
arising in the Accounts (including any Additional Accounts) originated by
BKB or Harris, as applicable, which arise after the Initial Series
Issuance Date (the "Additional Receivables Purchase Agreements"). Each of
BKB and Harris entered into separate assignment and assumption agreements
with PFR (each an "Assignment and Assumption Agreement" and together with
the Initial Receivables Purchase Agreements and the Additional
Receivables Purchase Agreements, the "PFR Purchase Agreements"), pursuant
to which (i) each of BKB and Harris assigned to PFR all of their
respective right, title and interest in, to and under the receivables
subject to the applicable Initial Receivables Purchase Agreement and (ii)
PFR assumed all obligations with respect to such receivables. In
connection with such sale of receivables to PFR, each of BKB and Harris
have indicated in its respective computer records that the subject
receivables have been sold to PFR. In addition, each of BKB and Harris
will provide to PFR a computer file or a microfiche list containing a
true and complete list showing each Account owned by BKB or Harris, as
applicable, identified by account number and by total outstanding balance
of the related receivables on the applicable date of designation or
addition date for Additional Accounts, as the case may be. Each of BKB
and Harris, as seller, under the applicable PFR Purchase Agreement, filed
UCC financing statements meeting the requirements of applicable state law
in each of the jurisdictions in which the books and records relating to
the Accounts are maintained with respect to the Receivables. See "Risk
Factors -- Characteristics as a Sale; Insolvency and Receivership Risks"
and "Certain Legal Aspects of the Receivables."
Under the Additional Receivables Purchase Agreements, each newly
originated Additional Account will, subject to certain conditions, be
deemed to be an Account. Each of BKB and Harris are required under their
respective Additional Receivables Purchase Agreement to take all actions
necessary to comply, or to enable PFR to comply, with the requirements
under the Transferor Purchase Agreement relating to Additional Accounts.
Representations and Warranties; Initial Receivables Purchase
Agreements. In each Initial Receivables Purchase Agreement, each of BKB
and Harris represents and warrants to PFR that, as of the Initial Series
Issuance Date, (a) each Initial Receivables Purchase Agreement
constitutes a valid and binding obligation of BKB or Harris, as
applicable; (b) it is the sole owner of all right, title and interest in,
to and under all of the receivables sold by it to PFR, and has the right,
power and authority to sell and transfer the subject receivables to PFR;
(c) the receivables sold by it to PFR are not subject to any assignment,
lien, charge, encumbrance or security interest, except as specified in
the related cardholder agreements (other than the right of cardholders to
assert claims and defenses pursuant to applicable laws); (d) to the best
of its knowledge, the related Accounts are not subject to claims, offsets
or adjustments and represent the legal, valid and binding obligations of
the cardholders (other than the right of cardholders to assert claims and
defenses pursuant to applicable laws); (e) it is in compliance with the
applicable cardholder agreements , except where the failure to so comply
would not have a material adverse effect on the Receivables; and (f) it
is licensed to participate in programs offered by Visa and MasterCard to
the full extent necessary to generate the subject receivables.
Representations and Warranties; Assignment and Assumption
Agreements. Each of BKB and Harris represents and warrants to PFR in
their respective Assignment and Assumption Agreement, that as of the
Initial Series Issuance Date, (a) the Assignment and Assumption Agreement
and each of the related Initial Receivables Purchase Agreements
constitute a valid and binding obligation of BKB or Harris, as
applicable; (b) each of the Receivables conveyed by it to PFR is free and
clear of any lien (other than liens permitted under the Pooling and
Servicing Agreement) of any person claiming through or under BKB or
Harris, as applicable, and each of their respective affiliates; (c) the
Assignment and Assumption Agreement and the related Additional
Receivables Purchase Agreements each constitutes a valid sale, transfer
and assignment to PFR of all right, title and interest of BKB or Harris,
as applicable, in its respective Receivables and the proceeds thereof and
the Interchange and Recoveries payable pursuant thereto, or if such is
not the case, such agreements constitute a grant of a first priority
perfected security interest in such property to PFR; (d) each Account
designated by BKB or Harris, as applicable, as an Eligible Account, is an
Eligible Account; (e) each subject Receivable then existing and
designated as an Eligible Receivable is an Eligible Receivable; and (f)
no event of insolvency has occurred with respect to BKB or Harris, as
applicable, and the transfer of the subject Receivables has not been made
in contemplation of the occurrence thereof.
Representations and Warranties; Additional Receivables Purchase
Agreements Each of BKB and Harris represents and warrants to PFR in their
respective Additional Receivables Purchase Agreement that (a) as of the
date of the Additional Receivables Purchase Agreement and as of each date
of designation of Additional Accounts thereunder, it is duly organized
and in good standing and that it has the authority to consummate the
transactions contemplated by the Additional Receivables Purchase
Agreement; (b) the Additional Receivables Purchase Agreement constitutes
a valid and binding obligation of BKB or Harris, as applicable; (c) each
of the Receivables conveyed by it to PFR is free and clear of any lien
(except for liens permitted under the Pooling and Servicing Agreement) of
any person claiming through or under BKB or Harris, as applicable, or any
of their respective affiliates; (d) the Additional Receivables Purchase
Agreement constitutes a valid sale, transfer and assignment to PFR of all
right, title and interest of each of BKB or Harris, as applicable, in
their respective Receivables and the proceeds thereof and the Interchange
and Recoveries payable pursuant thereto, or if the Additional Receivables
Purchase Agreement does not constitute a sale of such property, then it
constitutes a grant of a first priority perfected security interest in
such property to PFR; (e) as of the Initial Series Issuance Date and as
of each date of designation of Additional Accounts under the Additional
Receivables Purchase Agreement, each Additional Account will be an
Eligible Account; and (f) as of the Initial Series Issuance Date and as
of each date of designation of Additional Accounts under the Additional
Receivables Purchase Agreement, each Receivable generated thereunder is,
on such date of designation, an Eligible Receivable.
TRANSFEROR PURCHASE AGREEMENT
Sale of Receivables. Pursuant to the Transferor Purchase Agreement,
PFR sells to the Transferor all its right, title and interest in and to
(i) all of the Eligible Receivables acquired by PFR from the Account
Originators and all of the Eligible Receivables created in the Accounts
following the date of the Transferor Purchase Agreement and (ii) the
Eligible Receivables in each Additional Account designated from time to
time for inclusion as an Account as of the date of such designation,
whether such Eligible Receivables shall then be existing or shall
thereafter be created.
In connection with such sale of the Receivables to the Transferor,
PFR indicates in its computer records that the Receivables have been sold
to PFRF by it and PFRF will indicate in its files that such Receivables
will be sold or transferred by it to the Trust. In addition, PFR will
provide or cause to be provided to the Transferor a computer file or a
microfiche list containing a true and complete list showing each Account
identified by account number and by total outstanding balance of the
related Receivables on the applicable Series date of designation or
addition date for Additional Accounts, as the case may be. The records of
PFR and agreements relating to the Receivables will be marked to evidence
such sale or transfer. PFR, as debtor/seller, and PFR files or causes to
be filed UCC financing statements meeting the requirements of applicable
state law in each of the jurisdictions in which the books and records
relating to the Accounts are maintained with respect to the Receivables.
See "Risk Factors -- Characteristics as a Sale; Insolvency and
Receivership Risks" and "Certain Legal Aspects of the Receivables."
Pursuant to the Transferor Purchase Agreement, the Transferor will,
subject to certain conditions, if the designation of Additional Accounts
is required under the Pooling and Servicing Agreement, designate
Additional Accounts to be included as Accounts under the Transferor
Purchase Agreement. See "Description of the Pooling and Servicing
Agreement -- Additions of Accounts or Participation Interests."
Representations and Warranties. In the Transferor Purchase
Agreement, PFR represents and warrants to the Transferor to the effect
that, among other things, (a) as of the date of the Transferor Purchase
Agreement and as of each date of designation of Additional Accounts under
the Transferor Purchase Agreement, it is duly organized and in good
standing and that it has the authority to consummate the transactions
contemplated by the Transferor Purchase Agreement, (b) as of the Initial
Series Issuance Date and as of each date of designation of Additional
Accounts under the Transferor Purchase Agreement, each Additional Account
will be an Eligible Account and (c) as of the Initial Series Issuance
Date and as of each date of designation of Additional Accounts under the
Transferor Purchase Agreement, each Receivable generated thereunder is,
on such date of designation, an Eligible Receivable. Any representation
and warranty set forth in the Transferor Purchase Agreement which results
in the requirement that the Transferor accept retransfer of an Ineligible
Receivable, then PFR will be obligated to repurchase such Ineligible
Receivable from the Transferor on the date of such retransfer. The
purchase price for any such Ineligible Receivable will be the principal
amount thereof plus applicable finance charges.
PFR also represents and warrants to the Transferor that, among
other things, as of the date of the Transferor Purchase Agreement and as
of each date of designation of Additional Accounts (a) the Transferor
Purchase Agreement constitutes a valid and binding obligation of PFR and
(b) the Transferor Purchase Agreement constitutes a valid sale to the
Transferor of all right, title and interest of PFR in and to the
Receivables then existing and thereafter created in the Accounts and in
the proceeds thereof, or if the Transferor Purchase Agreement does not
constitute a sale of such property, then it constitutes a grant of a
first priority perfected security interest in such property to the
Transferor. If the breach of any of the representations and warranties
described in this paragraph results in the obligation of the Transferor
under the Pooling and Servicing Agreement to accept retransfer of the
Receivables, PFR will repurchase the Receivables retransferred to the
Transferor for an amount of cash at least equal to the amount of cash the
Transferor is required to deposit under the Pooling and Servicing
Agreement in connection with such retransfer.
FORMATION TRANSACTIONS; ACCOUNT ORIGINATION
Contribution Agreements. Pursuant to the Contribution Agreements,
on the Initial Series Issuance Date, each of BKB and Harris contributed
to Holdings all of their respective rights under the credit card accounts
in the Partners First Portfolio, except (i) the related cardholder
agreements, (ii) all rights to create, enforce and collect the
receivables and any other amounts owing under the Partners First
Portfolio and (iii) all rights to amend and modify the related cardholder
agreements (collectively, the "Retained Rights"). Under the Contribution
Agreements and the Assistance Agreements, Holdings has the right to
designate the financial institutions that will exercise the Retained
Rights with respect to the Partners First Portfolio. On the Initial
Series Issuance Date, Holdings designated BKB and Harris as the Account
Originators with respect to the credit card accounts in the Partners
First Portfolio originated by BKB or Harris, respectively. Some time
prior to the end of March 1998, each of BKB and Harris will remain
Account Originators and will exercise the Retained Rights with respect to
the Accounts originated by BKB and Harris, as applicable. In March 1998,
Holdings will designate BKB as the sole Account Originator with respect
to the existing credit card accounts in the Partners First Portfolio,
including the Accounts. Harris will continue to be an Account Originator
with respect to new credit card accounts originated by it, including any
New Accounts. Prior to the establishment of the Bank, Holdings may
designate other financial institutions as Account Originators, and any
such Account Originators would originate credit card accounts into the
Partners First Portfolio. In addition, it is anticipated that upon the
establishment or acquisition by Holdings of the Bank, Holdings will
designate the Bank as the sole Account Originator with respect to the
credit card accounts in the Partners First Portfolio, including the
Accounts and any New Accounts, and, in connection therewith, each of BKB
and Harris will cease to be an Account Originator. As an Account
Originator, the Bank would also originate credit card accounts. However,
none of the credit card accounts originated by the Bank or any other
Account Originator may be designated as Accounts and none of the related
receivables may be transferred to the Trust unless certain conditions,
including the Rating Agency Condition, are satisfied. ; however, any such
credit card accounts may only be designated as an Account and the related
Receivables may only be included in the Trust, if certain conditions,
including the Rating Agency Condition, are satisfied.
Assistance Agreements. Pursuant to the Assistance Agreements, each
of BKB and Harris appointed Holdings as its sole and exclusive agent to
exercise all of its rights and perform all of its obligations with
respect to the credit card accounts in the Partners First Portfolio
originated by BKB and Harris, as applicable, except for the power to
determine the terms under which new credit card accounts will be
originated, whether to extend credit under the credit card accounts and
to effect Interchange settlement. In connection with such appointment,
Holdings authorized each of BKB and Harris to use, on a non-exclusive
basis, Holdings' rights under the credit card accounts in the Partners
First Portfolio and related assets including certain proprietary
information related thereto, to the extent necessary for each of BKB and
Harris to perform the forgoing functions. In its capacity as agent under
the Assistance Agreements, Holdings will perform certain functions
including, making recommendations with respect to the Credit Card
Guidelines, administering the Credit Card Guidelines, managing the
Partners First Portfolio, arranging for the billing and collection of any
receivables arising thereunder, and otherwise servicing and administering
the credit card accounts in the Partners First Portfolio and the related
receivables.
Under the rules of the VISA and MasterCard associations, only
certain financial institutions may directly issue credit cards and
advance credit under the credit card accounts which bear the names and
service marks of VISA or MasterCard. The Assistance Agreements were
required in connection with the designation of BKB and Harris as Account
Originators because Holdings is not a financial institution. On a going
forward basis the Bank and other financial institutions, if any,
designated by Holdings as Account Originators, will enter into assistance
agreements with Holdings in the form of, or substantially similar to, the
Assistance Agreement executed by each of BKB and Harris.
LIMITATIONS ON LIABILITY
In the event of a breach of a representation or warranty by BKB or
Harris under their respective Purchase Agreements or Assignment and
Assumption Agreements, BKB or Harris, as applicable, will be liable to
PFR for damages. Holdings has agreed to indemnify BKB and Harris for any
losses suffered by BKB or Harris, as applicable, resulting from damages
payable to PFR in respect of a breach by BKB or Harris of any of their
respective representations or warranties under the applicable Assignment
and Assumption Agreement, to the extent that BKB or Harris, as
applicable, would not have suffered such losses under the Initial
Purchase Agreements, and except for any such losses caused by the gross
negligence or willful misconduct of BKB or Harris, as applicable. In each
of the Assistance Agreements, Holdings agrees to indemnify BKB and Harris
for any losses suffered by BKB or Harris, as applicable, resulting from,
among other things, damages payable to PFR in respect of a breach by BKB
or Harris, of any of their respective representations or warranties under
the Additional Receivables Purchase Agreements, except to the extent
caused by the gross negligence or wilful misconduct of BKB or Harris, as
applicable. Under the Additional Receivables Purchase Agreements, the
liability of BKB and Harris for any breach of any representation or
warranty is limited to the amount of any recovery by BKB or Harris, as
applicable, from Holdings pursuant to Holdings' obligation to indemnify
BKB and Harris.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
Under the PFR Purchase Agreements, the Account Originators sell the
Receivables to PFR. Under the Transferor Purchase Agreement, PFR sells
the Eligible Receivables it purchased from the Account Originators to the
Transferor. Under the Pooling and Servicing Agreement, the Transferor, in
turn, transfers the Eligible Receivables to the Trust. Each Account
Originator, PFR and the Transferor represents and warrants that its
respective transfers constitute valid sales and assignments of all of its
respective right, title and interest in and to the Receivables subject to
the Purchase Agreement to which it is a party. The Transferor also
represents and warrants that, if the transfer of Receivables by the
Transferor to the Trust is deemed to create a security interest under the
UCC, there exists a valid, subsisting and enforceable first priority
perfected security interest in the Receivables in existence at the time
of the formation of the Trust or at the date of designation of any
Additional Accounts, as the case may be, in favor of the Trust and a
valid, subsisting and enforceable first priority perfected security
interest in the Receivables created thereafter in favor of the Trust on
and after their creation, in each case until termination of the Trust.
For a discussion of the Trust's rights arising from these representations
and warranties not being satisfied, see "Description of the Pooling and
Servicing Agreement -- Representations and Warranties."
Each Account Originator, PFR and the Transferor represents that the
Receivables are "accounts" or "general intangibles" for purposes of the
UCC. Both the sale of accounts and the transfer of accounts as security
for an obligation are treated under Article 9 of the UCC as creating a
security interest therein and are subject to its provisions and the
filing of an appropriate financing statement or statements is required to
perfect the interest of the Trust in the Receivables. If a transfer of
general intangibles is deemed to create a security interest rather than a
sale, Article 9 of the UCC applies and filing an appropriate financing
statement or statements is also required in order to perfect the security
interest of the Trust. Financing statements covering the Receivables will
be filed under the UCC to protect the Transferor and the Trust if any of
the transfers under the Purchase Agreements or the Pooling and Servicing
Agreements are deemed to be subject to the UCC. If a transfer of general
intangibles is deemed to be a sale, then the UCC is not applicable and no
further action under the UCC is required to protect the Trust's interest
from third parties.
There are certain limited circumstances under the UCC in which
prior or subsequent transferees of Receivables coming into existence
after the Initial Series Issuance Date could have an interest in such
Receivables with priority over the Trust's interest. A tax or other
government lien or other nonconsensual lien on property of an Account
Originator, PFR or the Transferor arising prior to the time a Receivable
comes into existence may also have priority over the interest of the
Trust in such Receivable. Furthermore, if the FDIC were appointed as a
conservator or receiver of an Account Originator, the conservator's or
receiver's administrative expenses may also have priority over the
interest of the Trust in such related Receivables. Under the Purchase
Agreements, however, each Account Originator and PFR warrants that it has
transferred the Receivables free and clear of the lien of any third
party. In addition, each Account Originator and PFR covenants that it
will not sell, pledge, assign, transfer or grant any lien on any
Receivable (or any interest therein) other than pursuant to the Purchase
Agreement to which it is a party.
CERTAIN MATTERS RELATING TO INSOLVENCY
The Transferor will not engage in any activities except purchasing
accounts receivable from PFR, forming trusts, transferring such accounts
receivable to such trusts, issuing notes or certificates and engaging in
activities incident to, or necessary or convenient to accomplish, the
foregoing. The Transferor has no intention of filing a voluntary petition
under the United States Bankruptcy Code or any similar applicable state
law so long as the Transferor is solvent and does not reasonably foresee
becoming insolvent.
Each Account Originator and PFR has represented and warranted in
the Purchase Agreements to which it is a party that the transfer of
Receivables pursuant such Purchase Agreement is a valid sale of the
Receivables or if not a sale of the Receivables, a grant of a first
priority perfected security interest in the Receivables. In addition,
each Account Originator, PFR and the Transferor have treated and will
treat the transaction described in the Purchase Agreement to which it is
a party as sales of the Receivables. Each Account Originator has taken or
will take all actions that are required under the UCC to perfect PFR's
interest in the Receivables conveyed to PFR by such Account Originator.
PFR has taken or will take all actions that are required under the UCC to
perfect the Transferor's ownership interest in the Receivables. However,
in the event of an insolvency, receivership or conservatorship of an
Account Originator, it is possible that a receiver or conservator could
attempt to recharacterize the transfer by such Account Originator as a
pledge of the subject Receivables rather than a true sale. The Federal
Deposit Insurance Act ("FDIA"), as amended by FIRREA, which became
effective August 9, 1989, sets forth certain powers that the FDIC could
exercise if it were appointed as conservator or receiver of an Account
Originator. Among other things, the FDIA grants such a conservator or
receiver the power to repudiate contracts of, and to request a stay of up
to 90 days of any judicial action or proceeding involving, an Account
Originator. In the event that PFR were to become a debtor in a bankruptcy
case and a creditor or trustee-in-bankruptcy of such debtor or such
debtor itself were to take the position that the sale of Receivables from
PFR to the Transferor should be recharacterized as a pledge of such
Receivables to secure a borrowing from such debtor, then delays in
payments of collections of Receivables to the Transferor (and therefore
to the Trust and to Certificateholders) could occur and (should the court
rule in favor of any such trustee, debtor in possession or creditor)
reductions in the amount of such payments could result.
To the extent that (i) an Account Originator granted a security
interest in the Receivables, (ii) the interest was validly perfected
before the insolvency of the Account Originator, (iii) the interest was
not taken or granted in contemplation of the Account Originator's
insolvency or with the intent to hinder, delay or defraud the Account
Originator or its respective creditors, (iv) the applicable Purchase
Agreement is continuously a record of such Account Originator and (v) the
applicable Purchase Agreement represents a bona fide and arm's length
transaction undertaken for adequate consideration in the ordinary course
of business, such valid perfected security interest of PFR should be
enforceable (to the extent of PFR's "actual direct compensatory damages")
notwithstanding the insolvency of, or the appointment of a receiver or
conservator for, the Account Originator and payments to the Trust with
respect to the Receivables (up to the amount of such damages) should not
be subject to an automatic stay of payment or to recovery by the FDIC as
conservator or receiver of the Account Originator. If, however, the FDIC
were to require the Transferor to establish its right to those payments
by submitting to and completing the administrative claims procedure
established under FIRREA, or the conservator or receiver were to request
a stay of proceedings with respect to the Account Originator as provided
under FIRREA, delays in payments on the Certificates and possible
reductions in the amount of those payments could occur. The FDIA does not
define the term "actual direct compensatory damages." On April 10, 1990,
the RTC, formerly a sister agency of the FDIC, adopted a statement of
policy (the "RTC Policy Statement") with respect to the payment of
interest on collateralized borrowings. The RTC Policy Statement states
that interest on such borrowings will be payable at the contract rate up
to the date of the redemption or payment by the conservator, receiver, or
the trustee of an amount equal to the principal owed plus the contract
rate of interest up to the date of such payment or redemption, plus any
expenses of liquidation if provided for in the contract, to the extent
secured by the collateral. In a 1993 case involving zero- coupon bonds,
however, a federal district court held that the RTC was instead obligated
to pay bondholders the fair market value of repudiated bonds as of the
date of repudiation. The FDIC itself has not adopted a policy statement
on payment of interest on collateralized borrowings.
In the event of an insolvency, receivership or conservatorship of
an Account Originator, and a creditor or conservator of the Account
Originator were to request a court to order that the Account Originator
should be substantively consolidated with the Transferor, delays in
payments on the Certificates and possible reductions in such payments
could result. In addition, in the event of an insolvency, receivership,
conservatorship or bankruptcy of PFR, and a creditor or
trustee-in-bankruptcy of PFR or PFR itself, as debtor in possession, were
to request a court to order that PFR should be substantively consolidated
with the Transferor, delays in payments on the Certificates and possible
reductions in such payments could result.
The Transferor will take all actions that are required under the
UCC to perfect the Trust's interest in the Receivables and the Transferor
has warranted to the Trust that the Trust will have a first priority
security interest therein and, with certain exceptions, in the proceeds
thereof. Nevertheless, a tax or government lien or other nonconsensual
lien on property of the Transferor arising prior to the time a Receivable
is conveyed to the Trust may have priority over the interest of the Trust
in such Receivable. The Transferor has been structured such that (i) the
voluntary or involuntary application for relief under Bankruptcy Code or
similar applicable state laws, and (ii) the substantive consolidation of
the Transferor and PFR are unlikely. The Transferor is a separate,
special purpose subsidiary, the certificate of incorporation of which
provides that it shall not file a voluntary petition for relief under
Bankruptcy Code without the unanimous affirmative vote of all of its
directors. Pursuant to the Pooling and Servicing Agreement, the Trustee
covenants that it will not at any time institute against the Transferor
any bankruptcy, reorganization or other proceedings under any Federal or
state bankruptcy or similar law. In addition, certain other steps will be
taken to avoid the Transferor's becoming a debtor in a bankruptcy case.
Notwithstanding such steps, if the Transferor were to become a debtor in
a bankruptcy case, and a bankruptcy trustee for the Transferor or a
creditor of the Transferor or the Transferor itself were to take the
position that the transfer of the Receivables from the Transferor to the
Trust should be recharacterized as a pledge of such Receivables, then
delays in payments on the Certificates and possible reductions in the
amount of such payments could result.
Upon the appointment of a bankruptcy trustee, receiver or
conservator or upon the commencement of a bankruptcy, receivership,
conservatorship or similar proceeding with respect to PFRF, the Servicer
will promptly give notice thereof to the Trustee and a Pay Out Event or
Reinvestment Event may occur with respect to a Series (or all of the
Series). Pursuant to the Pooling and Servicing Agreement, newly created
Receivables will not be transferred to the Trust on and after any such
appointment or voluntary liquidation. In the event of an Insolvency
Event, the Trustee will proceed to sell, dispose of or otherwise
liquidate the Receivables in a commercially reasonable manner and on
commercially reasonable terms, unless within a specified period of time
Certificateholders representing undivided interests aggregating more than
50% of the Invested Amount of each Series of Certificates issued and
outstanding (or, with respect to any Series with two or more Classes, 50%
of the Invested Amount of each Class) and possibly certain other persons
specified in the Supplement for a Series instruct otherwise (assuming
that the bankruptcy trustee, conservator or receiver does not order such
a sale despite such instructions). The proceeds from the sale of the
Receivables would be treated as collections of the Receivables and
deposited into the Collection Account and after distribution of such
amounts the Trust will terminate. This procedure could be delayed, as
described above. In addition, upon the occurrence of a Pay Out Event or
Reinvestment Event, if a trustee in bankruptcy, a conservator or receiver
is appointed for the Transferor and no Pay Out Event or Reinvestment
Event other than such conservatorship or receivership or bankruptcy or
insolvency of the Transferor exists, the bankruptcy trustee, conservator
or receiver may have the power to prevent the early sale, liquidation or
disposition of the Receivables and the commencement of the Early
Amortization Period or Early Accumulation Period and may be able to
require that new Principal Receivables be transferred to the Trust. In
addition, the trustee, receiver or conservator for the Transferor may
have the power to cause early sale of the Receivables and the early
payment of the Certificates or to prohibit the continued transfer of
Receivables to the Trust. See "Description of the Certificates -- Pay Out
Events and Reinvestment Events."
While Holdings is the Servicer, cash collections held by Holdings
may, subject to certain conditions, be commingled and used for the
benefit of Holdings prior to each Distribution Date and, in the event of
the bankruptcy, insolvency, receivership or conservatorship of Holdings
or, in certain circumstances, the lapse of certain time periods, the
Trust may not have a perfected security interest in such collections and
accordingly, be entitled to such collections. Holdings will be allowed to
make monthly rather than daily deposits of collections to the Collection
Account if Holdings obtains a commercial paper rating of at least A-1 and
P-1 (or its equivalent) by the applicable Rating Agency, or Holdings
makes other arrangements that satisfy the Rating Agency Condition. Unless
otherwise provided in the related Prospectus Supplement, if any of the
foregoing conditions are not satisfied, then Holdings will, within five
business days, commence the deposit of collections directly into the
Collection Account within two business days of the Date of Processing.
In the event of a Servicer Default relating to the bankruptcy or
insolvency of the Servicer, and no Servicer Default other than such
bankruptcy or insolvency related Servicer Default exists, the bankruptcy
trustee or the Servicer as debtor in possession, or the conservator or
receiver, as the case may be, may have the power to prevent either the
Trustee or the Certificateholders from appointing a successor Servicer.
See "Description of the Pooling and Servicing Agreement -- Servicer
Default."
CONSUMER PROTECTION LAWS
The relationship of the cardholder and credit card issuer is
extensively regulated by Federal and state consumer protection laws. With
respect to credit cards issued by the Account Originator, the most
significant federal laws include the Federal Truth-in-Lending, Equal
Credit Opportunity, Fair Credit Billing, Electronic Funds Transfer, Fair
Credit Reporting and Fair Debt Collection Practices Acts. These statutes
impose various disclosure requirements either before or when an Account
is opened, or both, and at the end of monthly billing cycles, and, in
addition, limit cardholder liability for unauthorized use, prohibit
certain discriminatory practices in extending credit, and regulate
practices followed in collections. In addition, cardholders are entitled
under these laws to have payments and credits applied to the credit card
account promptly and to request prompt resolution of billing errors.
Congress and the states may enact new laws and amendments to existing
laws to regulate further the credit card industry. The Trust may be
liable for certain violations of consumer protection laws that apply to
the Receivables, either as assignee from the Transferor (as the
applicable Account Originator's assignee) with respect to obligations
arising before transfer of the Receivables to the Trust or as the party
directly responsible for obligations arising after the transfer. In
addition, a cardholder may be entitled to assert such violations by way
of set-off against the obligation to pay the amount of Receivables owing.
All Receivables that were not created in compliance in all material
respects with the requirements of such laws (if such noncompliance has a
material adverse effect on the Certificateholders' interest therein) will
be reassigned to the Transferor and ultimately back to PFR. The Servicer
has also agreed in the Pooling and Servicing Agreement to indemnify the
Trust, among other things, for any liability arising from such
violations. For a discussion of the Trust's rights if the Receivables
were not created in compliance in all material respects with applicable
laws, see "Description of the Pooling and Servicing Agreement --
Representations and Warranties."
Application of federal and state bankruptcy and debtor relief laws
would affect the interests of the Certificateholders if such laws result
in any Receivables being charged off as uncollectible. See "Description
of the Pooling and Servicing Agreement -- Defaulted Receivables; Rebates
and Fraudulent Charges."
PROPOSED LEGISLATION
Congress and the states may enact new laws and amendments to
existing laws to regulate further the credit card industry or to reduce
finance charges or other fees or charges applicable to credit card
accounts. The potential effect of any such legislation could be to reduce
the yield on the Accounts. If such yield is reduced, a Pay Out Event or
Reinvestment Event could occur, and the Early Amortization Period or
Early Accumulation Period would commence. See "Description of the
Certificates -- Pay Out Events and Reinvestment Events."
U.S. FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following discussion, summarizing certain anticipated Federal
income tax consequences of the purchase, ownership and disposition of the
Certificates of a Series, is based upon the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), proposed, temporary and
final Treasury regulations thereunder, and published rulings and court
decisions in effect as of the date hereof, all of which are subject to
change, possibly retroactively. This discussion does not address every
aspect of the Federal income tax laws that may be relevant to Certificate
Owners of a Series in light of their personal investment circumstances or
to certain types of Certificate Owners of a Series subject to special
treatment under the Federal income tax laws (for example, banks and life
insurance companies). PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR
OWN TAX ADVISORS WITH REGARD TO THE FEDERAL TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP, OR DISPOSITION OF INTERESTS IN CERTIFICATES, AS WELL
AS THE TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, FOREIGN
COUNTRY, OR OTHER TAXING JURISDICTION.
CHARACTERIZATION OF THE CERTIFICATES AS INDEBTEDNESS
Unless otherwise specified in the related Prospectus Supplement,
special tax counsel to the Transferor ("Special Tax Counsel") specified
in such Prospectus Supplement will, upon issuance of a Series of
Certificates, issue an opinion to the Transferor based on the assumptions
and qualifications set forth in the opinion that the Certificates of such
Series that are offered pursuant to a Prospectus Supplement (the "Offered
Certificates;" and for purposes of this section "U.S. Federal Income Tax
Consequences" the term "Certificate Owner" refers to a holder of a
beneficial interest in an Offered Certificate) will be treated as
indebtedness for Federal income tax purposes. However, opinions of
counsel are not binding on the Internal Revenue Service (the "IRS") and
there can be no assurance that the IRS could not successfully challenge
this conclusion.
The Transferor expresses in the Pooling and Servicing Agreement its
intent that for Federal, state and local income or franchise tax
purposes, the Offered Certificates of each Series will be indebtedness
secured by the Receivables. The Transferor agrees and each
Certificateholder and Certificate Owner, by acquiring an interest in an
Offered Certificate, agrees or will be deemed to agree to treat the
Offered Certificates of such Series as indebtedness for Federal, state
and local income or franchise tax purposes. However, because different
criteria are used to determine the non-tax accounting characterization of
the transactions contemplated by the Pooling and Servicing Agreement, the
Transferor expects to treat such transaction, for regulatory and
financial accounting purposes, as a sale of an ownership interest in the
Receivables and not as a debt obligation.
In general, whether for Federal income tax purposes a transaction
constitutes a sale of property or a loan, the repayment of which is
secured by the property, is a question of fact, the resolution of which
is based upon the economic substance of the transaction rather than its
form or the manner in which it is labeled. While the IRS and the courts
have set forth several factors to be taken into account in determining
whether the substance of a transaction is a sale of property or a secured
indebtedness for Federal income tax purposes, the primary factor in
making this determination is whether the transferee has assumed the risk
of loss or other economic burdens relating to the property and has
obtained the benefits of ownership thereof. Unless otherwise set forth in
a Prospectus Supplement, it is expected that, as set forth in its
opinion, Special Tax Counsel will analyze and rely on several factors in
reaching its opinion that the weight of the benefits and burdens of
ownership of the Receivables has not been transferred to the Certificate
Owners.
In some instances, courts have held that a taxpayer is bound by a
particular form it has chosen for a transaction, even if the substance of
the transaction does not accord with its form. Unless otherwise specified
in a Prospectus Supplement, it is expected that Special Tax Counsel will
advise that the rationale of those cases will not apply to the
transaction evidenced by a Series of Certificates, because the form of
the transaction, as reflected in the operative provisions of the
documents, either is not inconsistent with the characterization of the
Offered Certificates of such Series as debt for Federal income tax
purposes or otherwise makes the rationale of those cases inapplicable to
this situation.
TAXATION OF INTEREST INCOME OF CERTIFICATEHOLDERS
As set forth above, it is expected that, unless otherwise specified
in a Prospectus Supplement, Special Tax Counsel will issue an opinion to
the Transferor that the Offered Certificates will constitute indebtedness
for Federal income tax purposes, and accordingly, interest thereon will
be includible in income by Certificate Owners as ordinary income when
received (in the case of a cash basis taxpayer) or accrued (in the case
of an accrual basis taxpayer) in accordance with their respective methods
of tax accounting. Interest received on the Offered Certificates may also
constitute "investment income" for purposes of certain limitations of the
Code concerning the deductibility of investment interest expense.
While it is not anticipated that the Offered Certificates will be
issued at a greater than de minimis discount, under applicable Treasury
regulations (the "Regulations") the Offered Certificates may nevertheless
be deemed to have been issued with original issue discount ("OID"). This
could be the case, for example, if interest payments for a Series are not
treated as "qualified stated interest" because the IRS determines that
(i) no reasonable legal remedies exist to compel timely payment and (ii)
the Offered Certificates do not have terms and conditions that make the
likelihood of late payment (other than a late payment that occurs within
a reasonable grace period) or nonpayment a remote contingency. The
Regulations provide that, for purposes of the foregoing test, the
possibility of nonpayment due to default, insolvency, or similar
circumstances, is ignored. Although this does not directly apply to the
Offered Certificates (because they have no actual default provisions) the
Transferor intends to take the position that, because nonpayment can
occur only as a result of events beyond its control (principally, loss
rates and payment delays on the Receivables substantially in excess of
those anticipated), nonpayment is a remote contingency. Based on the
foregoing, and on the fact that generally interest will accrue on the
Offered Certificates at a "qualified floating rate," the Transferor
intends to take the position that interest payments on the Offered
Certificates constitute qualified stated interest. If, however, interest
payments for a Series were not classified as "qualified stated interest,"
all of the taxable income to be recognized with respect to the Offered
Certificates would be includible in income as OID but would not be
includible again when the interest is actually received.
If the Offered Certificates are in fact issued at a greater than de
minimis discount or are treated as having been issued with OID under the
Regulations, the following rules will apply. The excess of the "stated
redemption price at maturity" of an Offered Certificate over the original
issue price (in this case, the initial offering price at which a
substantial amount of the Offered Certificates are sold to the public)
will constitute OID. A Certificate Owner must include OID in income as
interest over the term of the Offered Certificate under a constant yield
method. In general, OID must be included in income in advance of the
receipt of cash representing that income. In the case of a debt
instrument as to which the repayment of principal may be accelerated as a
result of the prepayment of other obligations securing the debt
instrument (a "Prepayable Instrument"), the periodic accrual of OID is
determined by taking into account both the prepayment assumptions used in
pricing the debt instrument and the prepayment experience. If this
provision applies to a Class of Certificates (which is not clear), the
amount of OID which will accrue in any given "accrual period" may either
increase or decrease depending upon the actual prepayment rate.
Accordingly, each Certificate Owner should consult its own tax advisor
regarding the impact to it of the OID rules if the Offered Certificates
are issued with OID. Under the Regulations, a holder of a Certificate
issued with de minimis OID must include such OID in income
proportionately as principal payments are made on a Class of
Certificates.
A holder who purchases an Offered Certificate at a discount from
its adjusted issue price may be subject to the "market discount" rules of
the Code. These rules provide, in part, for the treatment of gain
attributable to accrued market discount as ordinary income upon the
receipt of partial principal payments or on the sale or other disposition
of the Offered Certificate, and for the deferral of interest deductions
with respect to debt incurred to acquire or carry the Offered
Certificate.
A subsequent holder who purchases an Offered Certificate at a
premium may elect to amortize and deduct this premium over the remaining
term of the Offered Certificate in accordance with rules set forth in
Section 171 of the Code.
SALE OF A CERTIFICATE
In general, a Certificate Owner will recognize gain or loss upon
the sale, exchange, redemption, or other taxable disposition of an
Offered Certificate measured by the difference between (i) the amount of
cash and the fair market value of any property received (other than
amounts attributable to, and taxable as, accrued interest) and (ii) the
Certificate Owner's tax basis in the Offered Certificate (as increased by
any OID or market discount previously included in income by the holder
and decreased by any deductions previously allowed for amortizable bond
premium and by any payments reflecting principal or OID received with
respect to such Certificate). Subject to the market discount rules
discussed above and to the holding requirement for preferential capital
gain treatment, any such gain or loss generally will be such capital
gain, provided that the Offered Certificate was held as a capital asset
and provided, further, that if the rules applicable to Prepayable
Instruments apply, any OID not previously accrued will be treated as
ordinary income. The maximum ordinary income rate for individuals,
estates, and trusts exceeds the maximum such capital gains rate for such
taxpayers. In addition, capital losses generally may be used only to
offset capital gains.
TAX CHARACTERIZATION OF THE TRUST
The Pooling and Servicing Agreement permits the issuance of Classes
of Certificates that are treated for Federal income tax purposes either
as indebtedness or as an interest in a partnership. Accordingly, the
Trust could be characterized either as (i) a security device to hold
Receivables securing the repayment of the Certificates of all Series or
(ii) a partnership in which the Transferor and certain classes of
Certificateholders are partners, and which has issued debt represented by
other Classes of Certificates (including, unless otherwise specified in a
Supplement, the Offered Certificates). In connection with the issuance of
Certificates of any Series, Special Tax Counsel will render an opinion to
the Transferor, based on the assumptions and qualifications set forth
therein, that under then current law, the issuance of the Certificates of
such Series will not cause the Trust to be characterized for Federal
income tax purposes as an association (or publicly traded partnership)
taxable as a corporation.
The opinion of Special Tax Counsel with respect to Offered
Certificates and the Trust will not be binding on the courts or the IRS.
It is possible that the IRS could assert that, for purposes of the Code,
the transaction contemplated by this Prospectus and a related Prospectus
Supplement constitutes a sale of the Receivables (or an interest therein)
to the Certificate Owners of one or more Series or Classes and that the
proper classification of the legal relationship between the Transferor
and some or all of the Certificate Owners or Certificateholders of one or
more Series resulting from the transaction is that of a partnership
(including a publicly traded partnership) or a publicly traded
partnership taxable as a corporation. Unless otherwise specified in a
Prospectus Supplement for a Series, the Transferor intends to treat the
certificates of each Series that are sold to investors as indebtedness
for Federal income tax purposes and intends to treat any Participation as
a shared ownership interest in the Receivables, rather than an interest
in a partnership. Accordingly, the Transferor currently does not intend
to file the Federal income tax reports that would apply if any Class of
Certificates or any Participation was treated as an interest in a
partnership or corporation (unless, as is permitted by the Pooling and
Servicing Agreement, an interest in the Trust is issued or sold that is
intended to be classified as an interest in a partnership).
If the Trust were treated in whole or in part as a partnership in
which some or all Certificate Owners of one or more Series were partners,
that partnership could be classified as a publicly traded partnership
taxable as a corporation. A partnership will be classified as a publicly
traded partnership taxable as a corporation if equity interests therein
are traded on an "established securities market," or are "readily
tradeable" on a "secondary market" or its "substantial equivalent" unless
certain exceptions apply. One such exception would apply if the Trust is
not engaged in a "financial business" and 90% or more of its income
consists of interest and certain other types of passive income. Because
Treasury regulations do not clarify the meaning of a "financial business"
for this purpose, it is unclear whether this exception applies. The
Transferor intends to take measures designed to reduce the risk that the
Trust could be classified as a publicly traded partnership taxable as a
corporation by reason of trading of interests in the Trust other than the
Offered Certificates and other certificates with respect to which an
opinion is rendered that such certificates constitute debt for Federal
income tax purposes. Although the Transferor expects that such measures
would be successful, there can be no absolute assurance that the Trust
could not become a publicly traded partnership, because certain of the
actions necessary to comply with such exceptions are not fully within the
control of the Transferor.
If a transaction were treated as creating a partnership between the
Transferor and the Certificate Owners or Certificateholders of one or
more Series, the partnership itself would not be subject to Federal
income tax (unless it were to be characterized as a publicly traded
partnership taxable as a corporation); rather, the partners of such
partnership, including the Certificate Owners or Certificateholders of
such Series, would be taxed individually on their respective distributive
shares of the partnership's income, gain, loss, deductions and credits.
The amount and timing of items of income and deductions of a Certificate
Owner could differ if the Offered Certificates were held to constitute
partnership interests, rather than indebtedness. Moreover, unless the
partnership were treated as engaged in a trade or business, an
individual's share of expenses of the partnership would be miscellaneous
itemized deductions that, in the aggregate, are allowed as deductions
only to the extent they exceed two percent of the individual's adjusted
gross income, and would be subject to reduction under Section 68 of the
Code if the individual's adjusted gross income exceeded certain limits.
As a result, the individual might be taxed on a greater amount of income
than the stated rate on the Offered Certificates. Finally, all or a
portion of any taxable income allocated to a Certificate Owner that is a
pension, profit-sharing or employee benefit plan or other tax exempt
entity (including an individual retirement account) might, under certain
circumstances, constitute "unrelated business taxable income" which
generally would be taxable to the holder under the Code. Partnership
characterization also may have adverse state and local income or
franchise tax consequences for a Certificate Owner.
If it were determined that a transaction created an entity
classified as an association or as a publicly traded partnership taxable
as a corporation, the Trust would be subject to Federal income tax at
corporate income tax rates on the income it derives from the Receivables,
which would reduce the amounts available for distribution to the
Certificate Owners, possibly including Certificate Owners of a Class that
is treated as indebtedness. Such classification may also have adverse
state and local tax consequences that would reduce amounts available for
distribution to Certificate Owners. Cash distributions to the Certificate
Owners (except any Class not recharacterized as an equity interest)
generally would be treated as dividends for tax purposes to the extent of
such deemed corporation's earnings and profits.
FASIT
Certain provisions of the Code provide for the creation of a new
type of entity for federal income tax purposes, the "financial asset
securitization investment trust" ("FASIT"). While these provisions became
effective September 1, 1997, many technical issues concerning FASITs must
be addressed by Treasury regulations (which have not yet been issued).
The Pooling and Servicing Agreement may be amended in accordance with the
provisions thereof to provide that the Transferor may cause a FASIT
election to be made for the Trust if the Transferor delivers to the
Trustee an opinion of counsel to the effect that, for Federal income tax
purposes, (i) the issuance of FASIT regular interests will not adversely
affect the tax characterization as debt of Certificates of any
outstanding Series or Class that were characterized as debt at the time
of their issuance, (ii) following such issuance the Trust will not be
deemed to be an association (or publicly traded partnership) taxable as a
corporation and (iii) such issuance will not cause or constitute an event
in which gain or loss would be recognized by any Certificateholder or the
Trust.
FOREIGN INVESTORS
As set forth above, it is expected that Special Tax Counsel will
render an opinion, upon issuance, that the Offered Certificates will be
treated as debt for U.S. Federal income tax purposes. The following
information describes the U.S. Federal income tax treatment of investors
that are not U.S. persons ("Foreign Investors") if the Offered
Certificates are treated as debt. The term "Foreign Investor" means any
person other than (i) a citizen or resident of the United States, (ii) a
corporation, partnership or other entity organized in or under the laws
of the United States or any political subdivision thereof, (iii) an
estate the income of which is includible in gross income for U.S. Federal
income tax purposes, regardless of its source or (iv) a trust the income
of which is includible in gross income for U.S. Federal income tax
purposes, regardless of its source or, for tax years beginning after
December 31, 1996 (and, if a trustee so elects, for tax years ending
after August 20, 1996), a trust if a U.S. court is able to exercise
primary supervision over the administration of such trust and one or more
U.S. fiduciaries have the authority to control all substantial decisions
of such trust.
Interest, including OID, paid to a Foreign Investor will be subject
to U.S. withholding taxes at a rate of 30% unless (x) the income is
"effectively connected" with the conduct by such Foreign Investor of a
trade or business in the United States evidenced by IRS Form 4224, signed
by the Certificate Owner or such owner's Agent, claiming exemption from
withholding of tax on income effectively connected with the conduct of a
trade or business in the United States; (y) the Foreign Investor delivers
IRS Form 1001, signed by the Certificate Owner or such Certificate
Owner's Agent, claiming exemption from withholding under an applicable
tax treaty; or (z) the Foreign Investor and each securities clearing
organization, bank, or other financial institution that holds the Offered
Certificates on behalf of the customer in the ordinary course of its
trade or business, in the chain between the Certificate Owner and the
U.S. person otherwise required to withhold the U.S. tax, complies with
applicable identification requirements and, in addition (i) the non-U.S.
Certificate Owner does not actually or constructively own 10 percent or
more of the total combined voting power of all classes of stock of the
Transferor entitled to vote (or of a profits or capital interest of the
Trust if characterized as a partnership), (ii) the non-U.S. Certificate
Owner is not a controlled foreign corporation that is related to the
Transferor (or a trust treated as a partnership) through stock ownership,
(iii) the non-U.S. Certificate Owner is not a bank receiving interest
described in Code Section 881(c)(3)(A), (iv) such interest is not
contingent interest described in Code Section 871(h)(4), and (v) the
non-U.S. Certificate Owner does not bear certain relationships to any
holder of the Exchangeable Transferor Certificate other than the
Transferor or any holder of the Certificates of any Series not properly
characterized as debt. Applicable identification requirements generally
will be satisfied if there is delivered to a securities clearing
organization (i) IRS Form W-8 signed under penalties of perjury by the
Certificate Owner, stating that the Certificate Owner is not a U.S.
person and providing such Certificate Owner's name and address. In the
case of (x), (y) or (z) the appropriate form will be effective provided
that (a) the applicable form is delivered pursuant to applicable
procedures and is properly transmitted to the United States entity
otherwise required to withhold tax and (b) none of the entities receiving
the form has actual knowledge that the Certificate Owner is a U.S.
person.
Recently finalized Treasury regulations (the "Withholding
Regulations") could affect the procedures to be followed by a Foreign
Investor in complying with United States Federal withholding, backup
withholding and information reporting rules. The Proposed Regulations are
not currently effective but will be effective for payments made after
December 31, 1998. Prospective investors are urged to consult their tax
advisors regarding the effect, if any, of the Proposed Regulations on the
purchase, ownership, and disposition of the Offered Certificates.
A Certificate Owner that is a nonresident alien or foreign
corporation will not be subject to U.S. Federal income tax on gain
realized upon the sale, exchange, or redemption of an Offered
Certificate, provided that (i) such gain is not effectively connected
with the conduct of a trade or business in the United States, (ii) in the
case of a Certificate Owner that is an individual, such Certificate Owner
is not present in the United States for 183 days or more during the
taxable year in which such sale, exchange, or redemption occurs, and
(iii) in the case of gain representing accrued interest, the conditions
described in the second preceding paragraph are satisfied.
If the interests of the Certificate Owners of a Series were
reclassified as interests in a partnership (not taxable as a
corporation), such recharacterization could cause a Foreign Investor to
be treated as engaged in a trade or business in the United States. In
such event the Certificate Owner of such Series would be required to file
a Federal income tax return and, in general, would be subject to Federal
income tax, including branch profits tax in the case of a
Certificateholder that is a corporation, on its net income from the
partnership. Further, the partnership would be required, on a quarterly
basis, to pay withholding tax equal to the sum, for each foreign partner,
of such foreign partner's distributive share of "effectively connected"
income of the partnership multiplied by the highest rate of tax
applicable to that foreign partner. The tax withheld from each foreign
partner would be credited against such foreign partner's U.S. Federal
income tax liability.
DEFEASANCE
The Certificates are subject to Defeasance in certain
circumstances. It is not clear under the existing authorities whether
Defeasance would, for federal income tax purposes, result in a deemed
taxable sale or exchange of the Certificates in exchange for the amounts
deposited in the Principal Funding Account and the Reserve Account as a
result of the Defeasance; however, if such a sale or exchange were deemed
to occur, each Certificateholder would thereafter be deemed to own its
pro rata share of the assets in which such amount is invested, and would
be required to report its taxable income on such basis.
STATE AND LOCAL TAXATION
General. State income tax consequences to each Certificateholder
will depend upon the provisions of the state tax laws to which the
Certificateholder is subject. Most states modify or adjust the taxpayer's
Federal taxable income to arrive at the amount of income potentially
subject to state tax. Resident individuals generally pay state tax on
100% of such state-modified income, while corporations and other
taxpayers generally pay state tax only on that portion of state-modified
income assigned to the taxing state under the state's own apportionment
and allocation rules. Because each state's tax law is different, it is
impossible to predict the tax consequences to the Certificateholders in
all of the state taxing jurisdictions in which they are already subject
to tax. Certificateholders are urged to consult their own tax advisors
with respect to state taxes.
Illinois. Some of the activities to be undertaken by the Servicer
in servicing and collecting the Receivables will take place in Illinois.
Illinois imposes an income tax on corporations doing business in Illinois
measured by their net income apportioned to Illinois. This discussion is
based upon present provisions of Illinois law and regulations, and
applicable judicial or ruling authority, all of which are subject to
change, which change may be retroactive. No opinion of counsel or ruling
from the Illinois Department of Revenue will be sought on any of the
issues discussed below.
Assuming (i) the Certificates are treated as indebtedness and (ii)
the Trust is not a taxable entity for Federal income tax purposes, this
treatment will also apply for Illinois tax purposes. Pursuant to this
treatment, Certificateholders not otherwise subject to Illinois tax would
not become subject to such tax solely because of their ownership of the
Certificates. Certificateholders already subject to taxation in Illinois
as corporations, however, could be required to pay tax on the income
generated from ownership of the Certificates.
In the alternative, if the Certificates are treated as interests in
a partnership (not taxable as a corporation) for Federal income tax
purposes, the same treatment would also apply for Illinois tax purposes.
In such case, Illinois could view the partnership as doing business in
Illinois, and the entity (or the Certificateholders) could be subject to
Illinois income and personal property replacement taxes. Such taxes could
reduce amounts available for distribution to Certificateholders. Also, a
Certificateholder not otherwise subject to taxation in Illinois could
become subject to Illinois income taxes as a result of its mere ownership
of Certificates.
If the Certificates are instead treated as ownership interests in a
"publicly traded partnership" taxable as a corporation, then the entity
could be subject to Illinois income taxes. Such taxes could reduce
amounts available for distribution to Certificateholders. While there is
no authority directly on point, a Certificateholder not otherwise subject
to tax in Illinois should not become subject to Illinois taxes as a
result of its mere ownership of such an interest.
Finally, even if the Certificates are properly classified as debt
obligations for Federal Income tax purposes, they might be treated as
debt obligations of an entity owned by the Seller and the holders of any
other interest in the Trust (including any Collateral Interest). That
entity could be subject to Illinois income taxes. Such taxes could reduce
amounts available for distribution to Certificateholders. A
Certificateholder not otherwise subject to tax in Illinois would not
become subject to Illinois taxes as a result of its mere ownership of
Certificates.
Massachusetts. Some of the activities to be undertaken by the
Servicer in servicing the Receivables will take place in Massachusetts.
This discussion is based upon present provisions of Massachusetts law and
regulations, and applicable judicial and ruling authority, all of which
are subject to change, which change may be retroactive. No ruling on any
of the issues discussed below will be sought from the Massachusetts
Department of Revenue.
Assuming the Certificates are treated as indebtedness and the Trust
is treated as a security device for Federal income tax purposes, this
treatment will also apply for Massachusetts tax purposes. Pursuant to
this treatment, the Trust will not be subject to Massachusetts income tax
and Certificateholders not otherwise subject to Massachusetts tax would
not become subject to such tax solely because of their ownership of
Certificates.
Alternatively, if any of the Certificates or any other interests in
the Trust (including any Collateral Interest) were treated as interests
in a partnership for Federal income tax purposes, the same treatment
would apply for Massachusetts tax purposes. In such case, Massachusetts
could view the partnership as a corporate trust doing business in
Massachusetts, and the Trust could be subject to Massachusetts income tax
at a rate of up to 12% on its net income apportioned to Massachusetts.
Such tax could reduce amounts available for distribution to
Certificateholders. A Certificateholder not otherwise subject to taxation
in Massachusetts would not become subject to Massachusetts income taxes
as a result of its mere ownership of Certificates.
Other States. There can be no assurance that other states will not
claim that the Servicer has undertaken activities in such states. If such
a claim were made, no assurances can be given as to whether the
Certificates would be treated as indebtedness or the Trust would be
taxable by any particular state.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") and Section 4975 of the Code prohibit a pension,
profit sharing or other employee benefit plan from engaging in certain
transactions involving "plan assets" with persons that are "parties in
interest" under ERISA or "disqualified persons" under the Code with
respect to the plan. ERISA also imposes certain duties on persons who are
fiduciaries of plans subject to ERISA and prohibits certain transactions
between a plan and parties in interest with respect to such plans. Under
ERISA, any person who exercises any authority or control respecting the
management or disposition of the assets of a plan is considered to be a
fiduciary of such plan (subject to certain exceptions not here relevant).
A violation of these "prohibited transaction" rules may generate excise
tax and other liabilities under ERISA and the Code for such persons.
Plan fiduciaries must determine whether the acquisition and holding
of the Certificates of a Series and the operations of the Trust would
result in direct or indirect prohibited transactions under ERISA and the
Code. The operations of the Trust could result in prohibited transactions
if Benefit Plans that purchase the Certificates of a Series are deemed to
own an interest in the underlying assets of the Trust. There may also be
an improper delegation of the responsibility to manage Benefit Plan
assets if Benefit Plans that purchase the Certificates are deemed to own
an interest in the underlying assets of the Trust.
Pursuant to a final regulation (the "Final Regulation") issued by
the Department of Labor ("DOL") concerning the definition of what
constitutes the "plan assets" of an employee benefit plan subject to
ERISA or Section 4975 of the Code, or an individual retirement account
("IRA") (collectively referred to as "Benefit Plans"), the assets and
properties of certain entities in which a Benefit Plan makes an equity
investment could be deemed to be assets of the Benefit Plan in certain
circumstances. Accordingly, if Benefit Plans purchase Certificates of a
Series, the Trust could be deemed to hold plan assets unless one of the
exceptions under the Final Regulation is applicable to the Trust.
The Final Regulation only applies to the purchase by a Benefit Plan
of an "equity interest" in an entity. Assuming that interests in
Certificates of a Series are equity interests in the Trust, the Final
Regulation contains an exception that provides that if a Benefit Plan
acquires a "publicly-offered security," the issuer of the security is not
deemed to hold plan assets. A publicly-offered security is a security
that is (i) freely transferable, (ii) part of a class of securities that
is owned by 100 or more investors independent of the issuer and of one
another at the conclusion of the offering and (iii) either is (A) part of
a class of securities registered under Section 12(b) or 12(g) of the
Exchange Act or (B) sold to the Benefit Plan as part of an offering of
securities to the public pursuant to an effective registration statement
under the Securities Act and the class of securities of which such
security is a part is registered under the Exchange Act within 120 days
(or such later time as may be allowed by the Commission) after the end of
the fiscal year of the issuer during which the offering of such
securities to the public occurred.
In addition, the Final Regulation provides that if a Benefit Plan
invests in an "equity interest" of an entity that is neither a
"publicly-offered security" nor a security issued by an investment
company registered under the Investment Company Act of 1940, as amended,
the Benefit Plan's assets include both the equity interest and an
undivided interest in each of the entity's underlying assets, unless it
is established that equity participation by "benefit plan investors" is
not "significant" or that another exception applies. Under the Final
Regulation, equity participation in an entity by "benefit plan investors"
is "significant" on any date if, immediately after the most recent
acquisition of any equity interest in the entity (other than a
publicly-offered class of equity), 25% or more of the value of any class
of equity interests in the entity (other than a publicly-offered class)
is held by "benefit plan investors." For purposes of this determination,
the value of equity interests held by a person (other than a benefit plan
investor) that has discretionary authority or control with respect to the
assets of the entity or that provides investment advice for a fee with
respect to such assets (or any affiliate of such person) is disregarded.
The term "benefit plan investor" is defined in the Final Regulation as
(a) any employee benefit plan (as defined in Section 3(3) of ERISA),
whether or not it is subject to the provisions of Title I of ERISA, (b)
any plan described in Section 4975(e)(1) of the Code and (c) any entity
whose underlying assets include plan assets by reason of any such plan's
investment in the entity.
It is anticipated that interests in the Certificates of a Series
will meet the criteria of publicly-offered securities as set forth above.
The underwriters expect (although no assurances can be given) that
interests in certain Classes of Certificates of each Series, as specified
in the related Prospectus Supplement, will be held by at least 100
independent investors at the conclusion of the offering for such Series;
there are no restrictions imposed on the transfer of interests in the
Certificates of such Classes of such Series; and interests in the
Certificates of such Classes of such Series will be sold as part of an
offering pursuant to an effective registration statement under the
Securities Act and then will be timely registered under the Exchange Act.
If interests in the Certificates of a Series fail to meet the
criteria of publicly-offered securities and investment by benefit plan
investors is or becomes significant so that the Trust's assets are deemed
to include assets of Benefit Plans that are Certificateholders,
transactions involving the Trust and "parties in interest" or
"disqualified persons" with respect to such Benefit Plans might be
prohibited under Section 406 of ERISA and Section 4975 of the Code unless
an exemption is applicable. In addition, the Transferor or any
underwriter of such Series may be considered to be a party in interest,
disqualified person or fiduciary with respect to an investing Benefit
Plan. Accordingly, an investment by a Benefit Plan in Certificates may be
a prohibited transaction under ERISA and Section 4975 of the Code unless
such investment is subject to a statutory or administrative exemption.
Thus, for example, if a participant in any Benefit Plan is a cardholder
of one of the Accounts, under DOL interpretations the purchase of
interests in Certificates by such plan could constitute a prohibited
transaction. Five class exemptions issued by the DOL that could apply in
such event are DOL Prohibited Transaction Exemption ("PTE") 84-14 (Class
Exemption for Plan Asset Transactions Determined by Independent Qualified
Professional Asset Managers), 91-38 (Class Exemption for Certain
Transactions Involving Bank Collective Investment Funds), 90-1 (Class
Exemption for Certain Transactions Involving Insurance Company Pooled
Separate Accounts), 95-60 (Class Exemption for Certain Transactions
Involving Insurance Company General Accounts) and 96-23 (Class Exemption
for Plan Asset Transactions Determined by In-House Asset Managers). There
is no assurance that these exemptions, even if all of the conditions
specified therein are satisfied, or any other exemption will apply to all
transactions involving the Trust's assets.
IN LIGHT OF THE FOREGOING, FIDUCIARIES OF A BENEFIT PLAN
CONSIDERING THE PURCHASE OF INTERESTS IN CERTIFICATES OF ANY SERIES
SHOULD CONSULT THEIR OWN COUNSEL AS TO WHETHER THE ASSETS OF THE TRUST
WHICH ARE REPRESENTED BY SUCH INTERESTS WOULD BE CONSIDERED PLAN ASSETS,
AND WHETHER, UNDER THE GENERAL FIDUCIARY STANDARDS OF INVESTMENT PRUDENCE
AND DIVERSIFICATION, AN INVESTMENT IN CERTIFICATES OF ANY SERIES IS
APPROPRIATE FOR THE BENEFIT PLAN TAKING INTO ACCOUNT THE OVERALL
INVESTMENT POLICY OF THE BENEFIT PLAN AND THE COMPOSITION OF THE BENEFIT
PLAN'S INVESTMENT PORTFOLIO. In addition, fiduciaries should consider the
consequences that would apply if the Trust's assets were considered plan
assets, the applicability of exemptive relief from the prohibited
transaction rules and whether all conditions for such exemptive relief
would be satisfied.
In particular, insurance companies considering the purchase of
interests in Certificates of any Series should consult their own employee
benefits counsel or other appropriate counsel with respect to the United
States Supreme Court's decision in John Hancock Mutual Life Insurance Co.
v. Harris Trust & Savings Bank, 510 U.S. 86 (1993) ("John Hancock"), and
the applicability of PTE 95-60. In John Hancock, the Supreme Court held
that assets held in an insurance company's general account may be deemed
to be "plan assets" under certain circumstances; however, PTE 95-60 may
exempt some of the transactions that could occur as the result of the
acquisition and holding of interests in Certificates of a Series by an
insurance company general account from the penalties normally associated
with prohibited transactions. Accordingly, investors should analyze
whether John Hancock and PTE 95-60 or any other exemption may have an
impact with respect to their purchase of the Certificates of any Series.
In addition, insurance companies considering the purchase of
Certificates using assets of a general account should consult their own
employee benefits counsel or other appropriate counsel with respect to
the effect of the Small Business Job Protection Act of 1996 which added a
new Section 401(c) to ERISA relating to the status of the assets of
insurance company general accounts under ERISA and Section 4975 of the
Code. Pursuant to Section 401(c), the DOL is required to issue final
regulations (the "General Account Regulations") not later than December
31, 1997 with respect to insurance policies issued on or before December
31, 1998 that are supported by an insurer's general account. The General
Account Regulations are intended to provide guidance on which assets held
by the insurer constitute "plan assets" for purposes of the fiduciary
responsibility provisions of ERISA and Section 4975 of the Code. Section
401(c) also provides that, except in the case of avoidance of the General
Account Regulations and actions brought by the Secretary of Labor
relating to certain breaches of fiduciary duties that also constitute
breaches of state or Federal criminal law, until the date that is 18
months after the General Account Regulations become final, no liability
under the fiduciary responsibility and prohibited transaction provisions
of ERISA and Section 4975 may result on the basis of a claim that the
assets of the general account of an insurance company constitute the plan
assets of any Benefit Plan. The plan asset status of insurance company
separate accounts is unaffected by new Section 401(c) of ERISA, and
separate account assets continue to be treated as the plan assets of any
Benefit Plan invested in a separate account.
PLAN OF DISTRIBUTION
The Transferor may sell Certificates (a) through underwriters or
dealers, (b) directly to one or more purchasers, or (c) through agents.
The related Prospectus Supplement will set forth the terms of the
offering of any Certificates offered hereby, including, without
limitation, the names of any underwriters, the purchase price of such
Certificates and the proceeds to the Transferor from such sale, any
underwriting discounts and other items constituting underwriters'
compensation, any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers.
If underwriters are used in a sale of any Certificates of a Series
offered hereby, such Certificates will be acquired by the underwriters
for their own account and may be resold from time to time in one or more
transactions, including negotiated transactions, at a fixed public
offering price or at varying prices to be determined at the time of sale
or at the time of commitment therefor. Such Certificates may be offered
to the public either through underwriting syndicates represented by
managing underwriters or by underwriters without a syndicate. Unless
otherwise set forth in the related Prospectus Supplement, the obligations
of the underwriters to purchase such Certificates will be subject to
certain conditions precedent, and the underwriters will be obligated to
purchase all of such Certificates if any of such Certificates are
purchased. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from
time to time.
Certificates may also be sold directly by the Transferor or through
agents designated by the Transferor from time to time. Any agent involved
in the offer or sale of Certificates will be named, and any commissions
payable by the Transferor to such agent will be set forth, in the related
Prospectus Supplement. Unless otherwise indicated in the related
Prospectus Supplement, any such agent will act on a best efforts basis
for the period of its appointment.
Any underwriters, agents or dealers participating in the
distribution of Certificates may be deemed to be underwriters, and any
discounts or commissions received by them on the sale or resale of
Certificates may be deemed to be underwriting discounts and commissions,
under the Securities Act. Agents and underwriters may be entitled under
agreements entered into with the Transferor and the Bank to
indemnification by the Transferor and the Bank against certain civil
liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments that the agents or underwriters may
be required to make in respect thereof. Agents and underwriters may be
affiliates or customers of, engage in transactions with, or perform
services for, the Transferor and the Bank or their affiliates in the
ordinary course of business.
LEGAL MATTERS
Certain legal matters and Federal income tax matters relating to
the issuance of the Certificates will be passed upon for the Transferor
and the Trust by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New
York. Certain legal matters will be passed upon for the Underwriters by
the counsel named in the Prospectus Supplement.
INDEX OF DEFINED TERMS
Terms Page(s)
Account Originator.......................................................9
Accounts.....................................................1, 12, 39, 82
Accumulation Period Length..............................................53
Additional Accounts.....................................................38
Additional Receivables Purchase Agreements..............................78
Adjustment Payment......................................................71
Adverse Effect......................................................37, 60
Aggregate Addition......................................................38
Aggregate Addition Accounts.............................................37
Assignment and Assumption Agreement.....................................78
Assistance Agreement.....................................................9
Average Rate............................................................34
Bank ............................................................10
BankBoston ............................................................47
Bankmont ............................................................47
Benefit Plans...........................................................92
Billing Cycle...........................................................43
BKB ..........................................................1, 8
BKB Portfolio...........................................................39
Cash Collateral Account.................................................73
Cash Collateral Guaranty................................................73
Cede .........................................................6, 49
Cedel ............................................................17
Cedel Participants......................................................51
Certificate Owner.......................................................85
Certificate Owners.......................................................6
Certificate Rate.........................................................6
Certificateholders.......................................................6
Certificateholders' Interest............................................13
Certificates.............................................................1
Class .............................................................1
Code ............................................................85
Collateral Interest.....................................................73
Collection Account......................................................65
Commission .............................................................6
Contribution Agreement...................................................8
Controlled Accumulation Amount..........................................20
Controlled Accumulation Period..........................................19
Controlled Amortization Amount..........................................21
Controlled Amortization Period..........................................21
Controlled Deposit Amount...............................................20
Controlled Distribution Amount..........................................21
Cooperative ............................................................51
counterparties..........................................................74
Credit Card Guidelines..................................................10
Credit Enhancement......................................................25
Credit Enhancer.........................................................72
Current Initial Receivables Purchase Agreement..........................78
Date of Processing......................................................26
Defaulted Amount........................................................71
Defaulted Receivables...................................................71
Definitive Certificates.................................................49
Depositaries............................................................49
Depository ............................................................49
Determination Date......................................................26
Dilution ............................................................71
Disclosure Document.....................................................15
Discount Option Receivables.............................................61
Discount Percentage.....................................................61
Distribution Date.......................................................25
DOL ............................................................92
DTC .............................................................6
Early Accumulation Period...............................................20
Early Amortization Period...............................................21
Eligible Account........................................................38
Eligible Institution....................................................65
Eligible Investments....................................................66
Eligible Receivable.....................................................58
Enhancement Invested Amount.........................................13, 72
ERISA ............................................................92
Euroclear ............................................................18
Euroclear Operator......................................................51
Euroclear Participants..................................................51
Euroclear Provisions....................................................51
Excess Allocation Series................................................22
Excess Finance Charge Collections.......................................69
Exchange Act.............................................................6
Expected Final Payment Date.............................................18
FAMIS ........................................................41, 47
FASIT ............................................................89
FDC ........................................................28, 41
FDIA ............................................................82
FDIC ............................................................29
FDR .........................................................8, 39
FICO ............................................................42
Final Regulation........................................................92
Finance Charge Receivables..............................................17
FIRREA ............................................................29
First Annapolis.........................................................47
Floating Allocation Percentage..........................................67
Foreign Investors.......................................................89
Full Invested Amount....................................................24
Funding Period..........................................................24
General Account Regulations.............................................94
Group ............................................................13
Group Investor Additional Amounts.......................................68
Group Investor Default Amount...........................................68
Group Investor Finance Charge Collections...............................68
Group Investor Monthly Fees.............................................68
Group Investor Monthly Interest.........................................68
Harris ..........................................................1, 9
Harris Portfolio........................................................39
Holders ............................................................52
Holdings ..........................................................8, 9
Indirect Participants...................................................49
Ineligible Receivables..................................................57
Initial Accounts........................................................16
Initial Receivables.................................................12, 56
Initial Receivables Purchase Agreements.................................78
Initial Series Issuance Date.............................................8
Insolvency Event........................................................31
Interchange ........................................................13, 45
Interest Funding Account................................................18
Interest Payment Date...................................................64
Invested Amount.........................................................64
Investor Finance Charge Collections.....................................68
IRA ............................................................92
IRS ............................................................85
John Hancock............................................................94
L/C Issuer ............................................................72
LIBOR ............................................................74
Master Formation Agreement..............................................47
MasterCard ............................................................12
Minimum Monthly Payment.................................................43
Monthly Period..........................................................14
Monthly Servicing Fee...................................................56
New Accounts............................................................38
New Issuance............................................................64
notional ............................................................74
Offered Certificates....................................................85
OID ............................................................86
Overdue Initial Receivables Purchase Agreement..........................78
Paired Series...........................................................23
Participants............................................................49
Participation.......................................................15, 65
Participation Interests.................................................13
Participation Percentage................................................65
Participation Supplement............................................15, 65
Partners First Portfolio.................................................9
Pay Out Event...........................................................54
PFR .............................................................8
PFR Purchase Agreement..................................................11
PFR Purchase Agreements.................................................78
PFRF ..........................................................1, 8
Pooling and Servicing Agreement..........................................1
Portfolio Yield.........................................................34
Pre-Funding Account.....................................................24
Pre-Funding Amount......................................................24
Premium Option Receivables..............................................62
Premium Percentage......................................................62
Prepayable Instrument...................................................87
Principal Allocation Percentage.....................................23, 67
Principal Commencement Date.............................................18
Principal Funding Account...............................................20
Principal Receivables...................................................17
Principal Sharing Series................................................22
Principal Shortfalls....................................................69
Principal Terms.........................................................64
Prior Series............................................................23
Prospectus Supplement....................................................1
PTE ............................................................93
Purchase Agreements.....................................................11
Rating Agency...........................................................26
Rating Agency Condition.................................................37
Reallocated Investor Finance Charge Collections.........................68
Reallocation Group......................................................23
Receivables .........................................................1, 12
Record Date ............................................................49
Recoveries ........................................................12, 46
Regulations ............................................................86
Reinvestment Events.....................................................55
Removed Accounts........................................................16
Required Minimum Principal Balance......................................60
Required Transferor Amount..............................................14
Reserve Account.........................................................73
Retained Rights .....................................................9, 80
Revolving Period........................................................19
RTC ............................................................29
RTC Policy Statement....................................................83
Securities Act...........................................................6
Series ..........................................................1, 8
Series Adjusted Invested Amount.........................................66
Series Allocable Defaulted Amount.......................................66
Series Allocable Finance Charge Collections.........................66, 68
Series Allocable Principal Collections..................................66
Series Allocation Percentage............................................66
Series Closing Date.....................................................19
Series Cut-Off Date.....................................................19
Series Enhancement......................................................13
Series Invested Amount..................................................60
Series Required Transferor Amount.......................................66
Series Termination Date.................................................19
Service Transfer........................................................75
Servicer ..........................................................1, 8
Servicer Default........................................................75
Servicer Interchange....................................................56
Servicing Fee........................................................8, 56
Shared Principal Collections............................................69
Special Funding Account.................................................70
Special Payment Date....................................................55
Special Tax Counsel.....................................................85
Supplement..............................................................15
Supplemental Certificate................................................59
Supplemental Certificates...............................................15
Swaps ............................................................74
Tax Opinion ............................................................65
Termination Notice......................................................75
Transfer Date...........................................................26
Transferor ..........................................................1, 8
Transferor Amount...................................................14, 58
Transferor Certificate..................................................15
Transferor Certificates.................................................15
Transferor Purchase Agreement...........................................11
Transferor Servicing Fee................................................56
Transferor's Interest...................................................14
Trust ..........................................................1, 8
Trust Adjusted Invested Amount..........................................67
Trust Assets............................................................12
Trust Portfolio.........................................................39
Trustee ..........................................................1, 8
U.S. Federal Income Tax Consequences....................................85
UCC ............................................................30
UJB ............................................................41
VISA ............................................................12
Withholding Regulations.................................................90
Yield Supplement Account................................................17
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized list of the estimated expenses to be
incurred in connection with the offering of the securities being offered
hereunder other than underwriting discounts and commissions.
Registration Fee............................................. $303.03
Printing and Engraving.......................................
Trustee's Fees...............................................
Legal Fees and Expenses......................................
Accountant's Fees and Expenses...............................
Rating Agency Fees...........................................
Miscellaneous Fees...........................................
Total
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ITEM 15. INDEMNIFICATION OF OFFICERS AND MANAGERS
Section 11 of the Registrant's Limited Liability Company Agreement
("Section 11") provides that no person shall be personally liable to the
Registrant or its member for monetary damages for breach of fiduciary
duty as a manager; provided, however, that the foregoing does not
eliminate or limit the liability of a manager (i) for any breach of the
manager's duty of loyalty to the Registrant or its member, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law or (iii) for any transaction from which the
manager derived an improper personal benefit. The right of
indemnification provided in Section 11 is not exclusive of any other
rights to which any person seeking indemnification may otherwise be
entitled, and will be applicable to matters otherwise within its scope
whether or not such matters arose or arise before or after the adoption
of Section 11. Without limiting the generality or the effect of the
foregoing, the Registrant may enter into one or more agreements with any
person, which provide for indemnification greater or different than that
provided in Section 11. No repeal or modification of Section 11 by the
member of the Registrant may adversely affect any right or protection of
a manager of the Registrant existing by virtue of Section 11 at the time
of such repeal or modification.
Section 18-108 of the Delaware Limited Liability Company Act
provides that Delaware limited liability companies may indemnify any
manager or other person from any and all claims whatsoever.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
1.1 Form of Underwriting Agreement.*
3.1 Limited Liability Company Agreement of Partner First Receivables
Funding, LLC
4.1 Pooling and Servicing Agreement and related agreements as exhibits
thereto among Holdings, the Transferor and the Trustee.
4.2 Form of Series Supplement among Holdings, the Transferor and the
Trustee.**
4.3 Form of Prospectus Supplement.**
4.4 Merger Agreement between Partner First Receivables Funding, LLC and
Partner First Receivables Funding Corporation
4.5 Receivables Purchase Agreement between Partners First Receivables,
LLC and Partners First Receivables Funding, LLC.*
5.1 Form of opinion of Skadden, Arps, Slate, Meagher & Flom LLP with
respect to legality. *
8.1 Form of opinion of Skadden, Arps, Slate, Meagher & Flom LLP with
respect to tax matters.*
10.1 Master Agreement for the Formation of a Limited Liability Company
among BankBoston Corporation, Bankmont Financial Corp., Harris, and
First Annapolis Consulting, Inc.
10.2 Contribution Agreement between BKB and Holdings.
10.3 Receivables Purchase and Sale Agreement between BKB and PFR.
10.4 Overdue Receivables Purchase and Sale Agreement between BKB and PFR.
10.5 Receivables Purchase Agreement between BKB and PFR.
10.6 Assignment and Assumption Agreement between BKB and PFR.
10.7 Contribution Agreement between Harris and Holdings.
10.8 Receivables Purchase and Sale Agreement between Harris and PFR.
10.9 Overdue Receivables Purchase and Sale Agreement between Harris and
PFR.
10.10 Receivables Purchase Agreement between Harris and PFR.
10.11 Assignment and Assumption Agreement between Harris and PFR.
10.12 Servicing Agreement between First Data Resources, Inc. and Partners
First Holdings, LLC.
10.13 Assistance Agreement between the BKB and Holdings.
10.14 Assistance Agreement between the Harris and Holdings.
23.1 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
its opinion, filed as Exhibit 5.1).*
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in its
opinions filed as Exhibit 8.1).*
24 Power of Attorney.
99.1 Letter to the Securities and Exchange Commission of Kathleen
McGillicuddy.
99.2 Letter to the Securities and Exchange Commission of Rhanna Kidwell.
99.3 Letter to the Securities and Exchange Commission of William Parent.
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* To be filed by amendment
** Previously filed.
(b) Financial Statements
All financial statements, schedules and historical financial information
have been omitted as they are not applicable.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes as follows:
(i) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement: (i) to include
any prospectus required by Section 10(a)(3) of the Securities Act; (ii)
to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement; (iii) to include any material information
with respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the
registration statement; provided, however, that (a)(i) and (a)(ii) will
not apply if the information required to be included in a post-effective
amendment by those sub-paragraphs is contained in periodic reports filed
by the registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in this
registration statement.
(ii) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(iii) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(iv) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused
this Amendment No. 5 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the County of
Arundel, State of Maryland, on February 19, 1998.
PARTNERS FIRST RECEIVABLES FUNDING, LLC
(Registrant)
By /s/ John R. Soderlund
------------------------------------
Name: John R. Soderlund
Title: Chairman
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned does
hereby constitute and appoint each of Jeff H. Slawsky, John R. Soderlund,
Terence F. Browne and Mark J. Norwicz his true and lawful
attorney-in-fact and agent, each with full power of substitution, for him
and on his behalf to sign, execute and file this Registration Statement
and any or all amendments (including, without limitation, post-effective
amendments and any amendment or Registration Statement, with all exhibits
and any and all documents required to be filed with respect thereto, with
the Securities and Exchange Commission or any regulatory authority,
granting unto such attorney-in-fact and agent full power and authority to
do and perform each and every act and thing requisite and necessary to be
done in and about the premises in order to effectuate the same as fully
to all intents and purposes as he might or could do if personally
present, hereby ratifying and confirming all that such attorney-in-fact
and agents may lawfully do or cause to be done.
Pursuant to the Requirements of the Securities Act of 1933, this
Amendment No. 5 to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
PARTNERS FIRST RECEIVABLES FUNDING, LLC
SIGNATURE TITLE
- --------- -----
/s/ John R. Soderlund
- ------------------------
John R. Soderlund Chairman February 19, 1998
(Principal Executive
Officer) and Manager
/s/ Jeff H. Slawsky
- ------------------------
Jeff H. Slawsky President and Manager February 19, 1998
/s/ Mark J. Norwicz
- ------------------------
Mark J. Norwicz Treasurer and Manager February 19, 1998
(Principal Financial
Officer
Principal Accounting
Officer)
/s/ Terence F. Browne
- -------------------------
Terence F. Browne Secretary and Manager February 19, 1998
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
1.1 Form of Underwriting Agreement.*
3.1 Limited Liability Company Agreement of
Partners First Receivables Funding, LLC
4.1 Pooling and Servicing Agreement and
related agreements as exhibits thereto
among Holdings, the Transferor and the
Trustee.
4.2 Form of Series Supplement among Holdings,
the Transferor and the Trustee.**
4.3 Form of Prospectus Supplement.**
4.4 Merger Agreement between Partner First
Receivables Funding, LLC and Partner
First Receivables Funding Corporation.
4.5 Receivables Purchase Agreement between
Partners First Receivables, LLC and
Partners First Receivables Funding, LLC.*
5.1 Form of opinion of Skadden, Arps, Slate,
Meagher & Flom LLP with respect to
legality.*
8.1 Form of opinion of Skadden, Arps, Slate,
Meagher & Flom LLP with respect to tax
matters.*
10.1 Master Agreement for the Formation of a
Limited Liability Company among BankBoston
Corporation, Bankmont Financial Corp.,
Harris, and First Annapolis Consulting, Inc.
10.2 Contribution Agreement between BKB and
Holdings.
10.3 Receivables Purchase and Sale Agreement
between BKB and PFR.
10.4 Overdue Receivables Purchase and Sale
Agreement between BKB and PFR.
10.5 Receivables Purchase Agreement between
BKB and PFR.
10.6 Assignment and Assumption Agreement
between BKB and PFR.
10.7 Contribution Agreement between Harris
and Holdings.
10.8 Receivables Purchase and Sale Agreement
between Harris and PFR.
10.9 Purchase Receivables Purchase and Sale
Agreement between Harris and PFR.
10.10 Receivables Purchase Agreement between
Harris and PFR.
10.11 Assignment and Assumption Agreement
between Harris and Holdings.
10.12 Servicing Agreement between First Data
Resources,Inc. and Partners First
Holdings, LLC.
10.13 Assistance Agreement between BKB and
Holdings.
10.14 Assistance Agreement between Harris and
Holdings.
23.1 Consent of Skadden, Arps, Slate, Meagher
& Flom LLP (included in its opinion filed
as Exhibit 5.1).
23.2 Consent of Skadden, Arps, Slate, Meagher
& Flom LLP (included in its opinion filed
as Exhibit 8.1).
24 Power of Attorney
99.1 Letter to the Securities and Exchange
Commission of Kathleen McGillicuddy.
99.2 Letter to the Securities and Exchange
Commission of Rhanna Kidwell.
99.3 Letter to the Securities and Exchange
Commission of William Parent.
--------------------
* To be filed by amendment.
** Previously filed.
LIMITED LIABILITY COMPANY AGREEMENT
OF
PARTNERS FIRST RECEIVABLES FUNDING, LLC
A DELAWARE LIMITED LIABILITY COMPANY
The undersigned has formed a limited liability company pursuant
to, and in accordance with, the Delaware Limited Liability Company Act, 6
Del. C. Section 18-101, et seq. (the "Act"), and, in connection therewith,
hereby agrees as follows:
1. Name. The name of the limited liability company is Partners
First Receivables Funding, LLC (the "LLC").
2. Registered Office. The registered office of the LLC in the
State of Delaware is located at 1209 Orange Street, in the City of
Wilmington, County of New Castle.
3. Registered Agent. The name and address of the registered
agent of the LLC for service of process on the LLC in the State of Delaware
is The Corporation Trust Company, 1209 Orange Street, in the City of
Wilmington, County of New Castle.
4. Purpose. The nature of the business or purposes to be
conducted or promoted by the LLC is to engage in the following activities:
(a) to acquire for cash, promissory notes, or other
consideration from time to time all right, title and interest in
and to open-end or revolving credit receivables, including the
right to receive payment of interest or finance charges and other
obligations of the persons obligated to make payments with
respect thereto and any other proceeds related thereto, and any
other related rights (collectively, "Receivables") pursuant to
one or more receivables purchase agreements (the "Receivables
Purchase Agreements");
(b) to acquire, own, hold, service, sell, assign, pledge
and otherwise deal with the Receivables, collateral securing the
Receivables, any related insurance policies, agreements with
originators or servicers of Receivables and any proceeds or
further rights associated with any of the foregoing;
(c) to transfer Receivables to one or more trusts (the
"Trusts") pursuant to one or more pooling and servicing
agreements or other agreements (the "Pooling and Servicing
Agreements") to be entered into by and among, among others, the
LLC, the trustees named therein and any entities acting as
servicers of the Receivables;
(d) to authorize, sell, deliver to or acquire from the
Trusts certificates of one or more classes or series representing
undivided interests in the assets of the Trusts (collectively,
the "Certificates") or any other securities issued by the Trusts
pursuant to the Pooling and Servicing Agreements and to sell and
deliver any such Certificates or other securities;
(e) to enter into one or more indentures or other
agreements (collectively, the "Indentures") with the trustees
named therein, providing, among other things, for the issuance of
the Notes referred to below and the pledging of pools of
Receivables or Certificates of any class issued by one or more
Trusts;
(f) to authorize, issue, sell and deliver one or more
series and classes of bonds, notes or other evidences of
indebtedness secured or collateralized by one or more pools of
Receivables or by Certificates of any class issued by one or more
Trusts (collectively, the "Notes"), provided that the LLC shall
have no liability under any Notes except to the extent of the one
or more pools of Receivables or Certificates securing or
collateralizing such Notes;
(g) to hold, and to enjoy all of the rights and privileges
of a holder of, any Certificates issued by the Trusts to the LLC
under the related Pooling and Servicing Agreements and to hold
and enjoy all of the rights and privileges of any class of any
series of Notes issued under the related Indentures, including
any class or series of Notes or Certificates that may be
subordinate to any other class or series of Notes or
Certificates, respectively;
(h) to enter into and perform its obligations under the
Receivables Purchase Agreements, the Pooling and Servicing
Agreements, the Indentures, any agreement providing for the sale
of any Certificates or Notes (including any sale of Certificates
or Notes through one or more underwriters or dealers), and any
agreement providing for the funding of any amount due under any
Certificates through direct borrowings, letters of credit,
insurance, swap or cap agreements or otherwise (collectively, the
"Program Documents"); and
(i) to engage in all such other activities and to exercise
all such other powers permitted to LLCs under the laws of the
State of Delaware that are incidental to or connected with the
foregoing business or purposes or necessary or desirable to
accomplish the foregoing.
5. Conduct of Business. (a) Notwithstanding any other
provision of this Limited Liability Company Agreement (this "Agreement")
and any provision of law that otherwise so empowers the LLC, the LLC shall
not, without the affirmative vote of 100% of the members of the Board of
Managers (as defined herein) including at least two Independent Managers
(as defined herein), do any of the following:
(i) engage in any business or activity other than those set
forth in Section 4;
(ii) incur any indebtedness, or assume or guaranty any
indebtedness of any other entity, other than (i) indebtedness to the
Member or any affiliate thereof incurred in connection with the
acquisition of Receivables, which indebtedness from time to time may
be represented by notes issued by the LLC to the Member or any such
affiliate that will be subordinate to the Certificates and Notes and
will only be payable to the extent the LLC has available cash to pay
such indebtedness, (ii) indebtedness incurred in connection with Notes
issued in compliance with an Indenture, (iii) salaries, fees and
expenses to its professional advisors and counsel, mangers, officers
and employees and (iv) other indebtedness not exceeding $4,750 at any
one time outstanding, on account of incidentals or services supplied
or furnished to the LLC;
(iii) dissolve or liquidate, in whole or in part,
consolidate or merge with or into any other entity or convey or
transfer its properties and assets substantially as an entirety to any
entity.
(iv) institute proceedings to be adjudicated bankrupt or
insolvent, or consent to the institution of bankruptcy or insolvency
proceedings against it, or file a petition seeking or consent to
reorganization or relief under any applicable Federal or state law
relating to bankruptcy, or consent to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar
official) of the LLC or a substantial part of its property, or make
any assignment for the benefit of creditors, or admit in writing its
inability to pay its debts generally as they become due, or take
action in furtherance of any such action.
(b) The LLC shall at all times:
(i) maintain its existence as an LLC and remain in good
standing under the laws of the State of Delaware;
(ii) observe all corporate procedures required by this
Agreement and the limited liability company law of the State of
Delaware;
(iii) ensure that (x) the business and affairs of the LLC
are at all times managed by or under the direction of its Board of
Managers, (y) its Board of Managers shall have duly authorized all
actions requiring such authorization and, (z) when necessary, the LLC
shall have obtained proper authorization for action from its Member;
(iv) include at least two Independent Managers (as defined
herein);
(v) to the extent the LLC's office is located in the offices
of the Member or any affiliate of the Member, pay fair market rent for
its office space located in the offices of such affiliate and a fair
share of any overhead costs;
(vi) maintain the LLC's books, financial statements,
accounting records and other corporate documents and records separate
from those of the Member, any affiliate of the Member or any other
entity and keep correct and complete books and records of account and
minutes of meetings and other proceedings of its Board of Managers and
the Member;
(vii) not commingle the LLC's assets with those of the
Member or any affiliate of the Member, and not hold itself out as
being liable for the debts of another;
(viii) maintain separate bank accounts and books of account
from those of its affiliates and ensure that its funds and other
assets shall at all times be readily distinguishable from the funds
and other assets of its affiliates and not be commingled with the
funds or other assets of its affiliates;
(ix) disclose in its annual financial statements the
effects of the transactions contemplated herein and in each
Receivables Purchase Agreement in accordance with generally accepted
accounting principles. Such financial statements shall (x) clearly
indicate the separate existence of the LLC and its affiliates, (y)
reflect the LLC's separate assets and liabilities and (z) record the
purchase of the Receivables pursuant to the applicable Receivables
Purchase Agreement as a purchase under generally accepted accounting
principles;
(x) act solely in its own name and through its own
authorized officers and agents so as not to mislead others as to its
identity or the identity of any affiliate. All oral and written
communications of the LLC, including without limitation letters,
invoices, purchase orders, contracts, statements, and applications
shall be made solely in the name of the LLC;
(xi) pay from its own separate funds all material
liabilities incurred by it, including material operating and
administrative expenses; provided that the organizational expenses of
the LLC and expenses relating to the preparation, negotiation,
execution and delivery of the documentation with respect to the
issuance of the Certificates or Notes that it may issue from time to
time may be paid by an affiliate. No general overhead or
administrative expenses of any affiliate shall be charged or otherwise
allocated to the LLC unless such general overhead or administrative
expenses are directly attributable to services provided to or for the
account of the LLC;
(xii) pay from the LLC's assets all obligations and
indebtedness of any kind incurred by the LLC;
(xiii) except as provided in Section 5(a)(ii), ensure that
there will be no intercompany debt between the LLC and any affiliate;
provided, that the Member of the LLC may contribute capital to the LLC
in such amounts as are necessary to assure that such LLC has adequate
capital for its business and the LLC may issue subordinated notes in
the amount and manner specified in the related Receivables Purchase
Agreement;
(xiv) at all times maintain an arm's length relationship
with its affiliates; and
(xv) operate in such a manner that it would not be
substantively consolidated with any other entity.
(c) The LLC shall abide by all corporate formalities, including
the maintenance of current minute books, and the LLC shall cause its
financial statements to be prepared in accordance with generally accepted
accounting principles in a manner that indicates the separate existence of
the LLC and its assets and liabilities. The LLC shall not assume the
liabilities of the Member or any affiliate of the Member. The LLC shall not
guarantee the liabilities of the Member nor any affiliate of the Member,
and neither the Member or an affiliate of the Member shall make any
guaranty with respect to the obligations of the LLC. The LLC shall not:
(v) hold itself out as having agreed to pay or become liable for the debts
of any affiliate; (w) fail to correct any known misrepresentation with
respect to this Agreement to pay or become liable for the debts of any
affiliate; (x) operate or purport to operate as an integrated, single
economic unit with any affiliate in its dealings with any other Person; (y)
seek or obtain credit or incur any obligation to any Person based upon the
assets of an affiliate or unaffiliated entity; or (z) induce any Person
reasonably to rely on the creditworthiness of any affiliate in its dealings
with the LLC. The Managers of the LLC shall make decisions with respect to
the business and daily operations of the LLC independent of, and not
dictated by, the Member or any affiliate of the Member.
6. The Board of Managers. Pursuant to Section 18-402 of the
Act, and to the extent specifically set forth in this Agreement, certain
activities of the LLC shall be managed through a Board of Managers (the
"Board of Managers"). At all times that any Certificates or Notes are
outstanding, the Board of Managers of the LLC shall include at least two
Independent Managers. So long as any Certificates or Notes are
outstanding, this Section 6 shall not be amended without the prior written
consent of the Independent Managers. When voting on matters subject to the
vote of the Board of Managers, including those matters specified in Section
4, notwithstanding that the LLC is not then insolvent, the Independent
Managers shall take into account the interests of the creditors of the LLC
as well as the interests of the LLC. The Board of Managers shall have the
following characteristics:
(a) the Board of Managers shall meet annually and at such
other times as may be necessary for the business of the LLC upon
at least five (5) business days' prior written notice of the
time, place and purpose of the meeting given by any two (2)
Managers. Meetings of the Board of Managers may be in person or
by conference telephone or other similar communications system,
and actions of the Board of Managers may be by written consent.
The presence of three (3) Managers shall constitute a quorum.
Each Manager has the right to one vote. Each Manager not only
has the right to his own vote, but may vote by proxy for one
other Manager (except for votes which require unanimous consent
of the Managers hereunder, in which case no Independent Manager
shall be permitted to vote by proxy);
(b) the term of each Manager shall be one year, and the
Member shall designate the Managers, and shall replace or
reappoint such managers annually, by executing a certificate
signed by an authorized officer of the Member setting forth the
name of each Manager for the following year; and the Member may
remove any Manager for any reason or no reason by executing a
certificate setting forth the Manager being removed and the
replacement Manager;
(c) in the event there exists a vacancy on the Board of
Managers, the Member shall, as soon as practicable, execute a
certificate setting forth a replacement Manager; and
(d) the debts, obligations and liabilities of the LLC,
whether arising in contract, tort or otherwise, shall be solely
the debts, obligations and liabilities of the LLC, and no Manager
shall be obligated for any such debt, obligation or liability of
the LLC solely by reason of its acting as a Manager of the LLC.
(e) An "Independent Manager" shall be an individual who:
(A) is not and has not been employed by the Member or any of its
subsidiaries or affiliates as a director, manager officer or
employee (other than as an Independent manager of the LLC or any
other special purpose subsidiary of the Member or any of its
affiliates, the certificate of incorporation, limited liability
company agreement, or other governing document of which is
substantially similar hereto) within the five years immediately
prior to such individual's appointment as an Independent Manager;
(B) is not, and has not been within the five years immediately
prior to such individual's appointment as an Independent Manager,
affiliated with a supplier to which the Member and any of its
subsidiaries or affiliates collectively in the preceding fiscal
year of the Member made payments in consideration for the
supplier's products and services in excess of 3% of the
consolidated gross revenues of the Member and its subsidiaries
during such fiscal year; (C) does not have, and has not had
within the five years immediately prior to such individual's
appointment as an Independent Manager, a personal services
contract with the Member or any of its subsidiaries or
affiliates, from which fees and other compensation received by
the person pursuant to such personal services contract would
exceed 5% of his or her gross revenues during the preceding
calendar year; (D) is not affiliated with a tax-exempt entity
that receives, or has received within the five years prior to
such appointment as an Independent Manager, contributions from
the Member or any of its subsidiaries or affiliates, in excess of
the lesser of (1) 3% of the consolidated gross revenues of the
Member, and its subsidiaries during such fiscal year and (2) 5%
of the contributions received by the tax-exempt entity during
such fiscal year; (E) is not the beneficial owner at the time of
such individual's appointment as an Independent Manager, or at
any time thereafter while serving as an Independent Manager, of
such number of shares of any class of equity of the Member the
value of which constitutes more than 5% of such individual's net
worth; (F) is not a spouse, parent, sibling or child of any
person described by (A) through (E); and (G) is not, and was not
within the five years prior to such appointment as an Independent
Manager, a financial institution to which the Member or any of
its subsidiaries or affiliates owes outstanding indebtedness for
borrowed money in a sum exceeding more than 5% of the Member's
total consolidated assets.
(f) An "affiliate" of a person, or a person "affiliated
with," a specified person, shall mean a person that directly, or
indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the specified
person.
(g) The term "control" (including the terms "controlling,"
"controlled by" and "under common control with") shall mean the
possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a person, whether
through the ownership of voting securities, by contract, or
otherwise; provided, however, a person shall not be deemed to
control another person solely because he or she is a director of
such other person.
(h) The term "person" shall mean an individual,
partnership, firm, corporation, association, trust,
unincorporated organization or other entity, as well as any
syndicate or group deemed to be a person pursuant to Section
13(d)(3) of the Securities Exchange Act of 1934, as amended.
(i) A "subsidiary" of the Member shall mean any entity a
majority of voting equity of which is owned, directly or
indirectly through one or more other subsidiaries, by the Member.
(j) except as otherwise provided in Sections 5(a), 13, 14,
16, 17 and 18 of this Agreement, all actions of the Board of
Managers shall require a majority vote of the quorum of the
Managers; provided, however, that the Board of Managers may
delegate the day-to-day management of the LLC to an individual or
entity which may or may not be a Manager;
7. Tax Characterization. It is intended that the LLC be
classified for Federal income tax purposes as a non-entity, for so long as
it has a single member, and otherwise as a partnership.
8. Admission of the Member, Capital Contribution, Percentage
Interest and Allocation of Profits and Losses. (a) Simultaneously with
the execution and delivery of this Agreement, Partners First Receivables,
LLC shall be admitted as the Member of the LLC (the "Member") with an
interest of 100% (as such percentage may change from time to time, a
"Percentage Interest"). The name and address of the Member is as follows:
Partners First Receivables, LLC
220 Continental Drive
Suite 208
Newark, Delaware 19713
(b) A capital contribution shall be made by the Member.
(c) The Member hereby appoints the following persons to serve
initially as Managers of the Board of Managers of the LLC:
John R. Soderlund
Jeff H. Slawsky
Mark J. Norwicz
Terence F. Browne
Andrew L. Stidd
Kevin P. Burns
9. Distributions. At the time determined by a majority of the
Managers, but at least once during each fiscal year, the Managers shall
cause the LLC to distribute to the Member any cash held by it which is
neither reasonably necessary for the operation of the LLC or the
performance of its obligations under the Program Documents nor in violation
of Sections 18-607 or 18-804 of the Act.
10. Powers; Liability of the Member. (a) Subject to Section 5,
the Member shall have the right and authority to take all actions
specifically enumerated in the Certificate of Formation or this Agreement
or which the Member otherwise deems necessary, useful or appropriate for
the day-to-day management and conduct of the LLC's business. All
instruments, contracts, agreements and documents providing for the
acquisition, mortgage or disposition of property of the LLC shall be valid
and binding on the LLC only if executed by any officer of the Member, which
officer shall also be an "authorized person" within the meaning of the Act
for purposes of executing the LLC's Certificate of Formation.
(b) Except as expressly provided in the Program Documents, the
debts, obligations and liabilities of the LLC, whether arising in contract,
tort or otherwise, shall be solely the debts, obligations and liabilities
of the LLC, and the Member shall not be obligated for any such debt,
obligation or liability of the LLC solely by reason of its status as the
Member of the LLC.
11. Indemnification. (a) Subject to Section 11(g), any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is
or was a Manager, employee or agent of the LLC, shall be indemnified and
held harmless by the LLC to the fullest extent legally permissible against
all expenses, liabilities and losses (including attorneys' fees and
disbursements), judgments, fines and amounts paid in settlement actually
and reasonably incurred by such person in connection with such action, suit
or proceeding.
(b) To the extent that a Member, employee or agent of the LLC
has been successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in paragraph (a) of this Section 11, or in
defense of any claim, issue or matter therein, he shall be indemnified by
the LLC against expenses (including attorneys' fees and disbursements)
actually and reasonably incurred by him in connection therewith without the
necessity of any action being taken by the LLC other than the
determination, in good faith, that such defense has been successful. In
all other cases wherein indemnification is provided by this Section 11,
unless ordered by a court, indemnification shall be made by the LLC only as
authorized in the specific case upon a determination that indemnification
of the manager, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct specified in this
Section 11. Such determination shall be made (1) by the Board of Managers
by a majority vote of a quorum consisting of Managers who were not parties
to such action, suit or proceeding, or (2) if such a quorum is not
obtainable, or even if obtainable a quorum of disinterested Managers so
directs, by independent legal counsel in a written opinion.
(c) The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere
or its equivalent, shall not, of itself, create a presumption that the
person seeking indemnification did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests
of the LLC, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful. Entry of a
judgment by consent as part of a settlement shall not be deemed a final
adjudication of liability for negligence or misconduct in the performance
of duty, nor of any other issue or matter.
(d) Subject to Section 11(g), expenses (including attorneys'
fees and disbursements) incurred by a Manager, employee or agent of the LLC
in defending any civil, criminal, administrative or investigative action,
suit or proceeding may be paid by the LLC in advance of the final
disposition of such action, suit or proceeding as authorized by the Board
of Managers in the specific case upon receipt of an undertaking by or on
behalf of such Manager, employee or agent to repay such amount unless it
shall ultimately be determined that he is entitled to be indemnified by the
LLC. Expenses (including attorneys' fees and disbursements) incurred by
other employees or agents of the LLC in defending any civil, criminal,
administrative or investigative action, suit or proceeding may be paid by
the LLC upon such terms and conditions, if any, as the Board of Managers
deems appropriate.
(e) No Manager of the LLC shall be personally liable to the LLC
for monetary damages for any breach of fiduciary duty by such person as a
Manager. Notwithstanding the foregoing sentence, a Manager shall be liable
to the extent provided by applicable law (i) for breach of the Manager's
duty of loyalty to the LLC or the Member, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation
of law or (iii) for any transaction from which the Manager derived an
improper personal benefit. No amendment to or repeal of this Section
11.1(e) shall apply to or have any effect on the liability or alleged
liability of any Manager of the LLC for or with respect to any acts or
omissions of such Manager occurring prior to such amendment.
(f) The indemnification and advancement of expenses provided by
this Section 11 shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement may be entitled under any
agreement, vote of the Board of Managers or otherwise, both as to action in
an official capacity and as to action in another capacity while holding
such office, and shall continue as to a person who has ceased to be a
Manager, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
(g) Any amounts payable by the LLC in accordance with this
Section 11 shall be payable solely to the extent of funds actually received
by the LLC under the Program Documents.
12. Compensation. The Member shall not receive compensation for
services rendered to the LLC. The Managers shall receive such compensation
for their services as may be agreed between the Manager and the Member from
time to time.
13. Term. Pursuant to Section 18-801 of the Act, the LLC shall
dissolve, and its affairs shall be wound up, only upon the earliest to
occur of (a) one year and one day following the payment in full of all
outstanding securities issued by, or outstanding liabilities of, the Trust
and (b) December 31, 2059.
14. Assignments. Pursuant to Section 18-702 of Act, the Member
may sell, assign or participate in any or all of its limited liability
company interest at any time without the consent of the Managers, and the
assignee of any such limited liability company interest shall possess all
of the rights and obligations of a Member hereunder, and the right to
become a Member pursuant to Section 18-704 of the Act; provided that (i)
the Rating Agency Condition shall have been satisfied with respect to such
assignment and (ii) the Member provides an opinion of counsel to the
Trustee (which opinion of counsel shall in form and substance be reasonably
satisfactory to the Trustee) to the effect that the failure to retain such
interests will not cause the Trust to be classified for Federal income tax
purposes as an association taxable as a corporation (or a publicly traded
partnership).
15. Limited Liability. The Member shall have no liability for
the obligations of the LLC except to the extent provided herein and in the
Program Documents.
16. Bankruptcy of the Member. If any event of bankruptcy
specified in Section 18-304(a) shall occur with respect the Member, then
the Member shall, notwithstanding the occurrence of such event of
bankruptcy, remain a Member of the LLC and, notwithstanding such event of
bankruptcy, the LLC shall continue, subject to the provisions of Section
13.
17. Amendments. This Agreement may be amended only in a writing
signed by the Member; provided that, if any securities issued by the Trust
are outstanding, no such amendment shall be effective without a Rating
Confirmation; provided further that the provisions of Sections 5, 6, 13,
14, 15 and 16 hereof may be amended only with the unanimous written consent
of the Board of Managers.
18. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware.
19. Authorized Person. Deborah M. Reusch and/or Mary Keogh have
been authorized to sign and file the Certificate of Formation for the LLC
by the Member.
IN WITNESS WHEREOF, the undersigned has duly executed this
Limited Liability Company Agreement as of the 26th day of January, 1998.
PARTNERS FIRST RECEIVABLES FUNDING, LLC
By: /s/ Mark Norwicz
_________________________
Name: Mark Norwicz
Title: Treasurer
============================================================================
PARTNERS FIRST RECEIVABLES FUNDING, LLC
Transferor,
PARTNERS FIRST HOLDINGS, LLC
Servicer,
and
THE BANK OF NEW YORK
Trustee
PARTNERS FIRST CREDIT CARD MASTER TRUST
POOLING AND SERVICING AGREEMENT
Dated as of January 29, 1998
=========================================================================
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Other Definitional Provisions . . . . . . . . . . . . . . 34
ARTICLE II
CONVEYANCE OF RECEIVABLES
Section 2.1 Conveyance of Receivables . . . . . . . . . . . . . . . . 36
Section 2.2 Acceptance by Trustee . . . . . . . . . . . . . . . . . . 38
Section 2.3 Representations and Warranties of the
Transferor . . . . . . . . . . . . . . . . . . . . . . . 39
Section 2.4 Representations and Warranties of the
Transferor Relating to the Agreement and Any
Supplement and the Receivables. . . . . . . . . . . . . . 40
Section 2.5 Reassignment of Ineligible Receivables . . . . . . . . . 42
Section 2.6 Reassignment of Certificateholders' Interest in
Trust Portfolio . . . . . . . . . . . . . . . . . . . . . 44
Section 2.7 Covenants of the Transferor . . . . . . . . . . . . . . . 45
Section 2.8 Covenants of the Transferor with Respect to
Receivables Purchase Agreement . . . . . . . . . . . . . 49
Section 2.9 Addition of Accounts . . . . . . . . . . . . . . . . . . 50
Section 2.10 Removal of Accounts and Participation Interests . . . . . 55
Section 2.11 Account Allocations . . . . . . . . . . . . . . . . . . . 57
Section 2.12 Discount Option . . . . . . . . . . . . . . . . . . . . . 58
Section 2.13 Premium Option . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE III
ADMINISTRATION AND SERVICING
OF RECEIVABLES
Section 3.1 Acceptance of Appointment and Other Matters
Relating to the Servicer . . . . . . . . . . . . . . . . 61
Section 3.2 Servicing Compensation . . . . . . . . . . . . . . . . . 63
Section 3.3 Representations, Warranties and Covenants of
the Servicer . . . . . . . . . . . . . . . . . . . . . . 63
Section 3.4 Reports and Records for the Trustee . . . . . . . . . . . 67
Section 3.5 Annual Certificate of Servicer . . . . . . . . . . . . . 68
Section 3.6 Annual Servicing Report of Independent Public
Accountants; Copies of Reports Available . . . . . . . . 68
Section 3.7 Tax Treatment . . . . . . . . . . . . . . . . . . . . . . 69
Section 3.8 Notices to Holdings . . . . . . . . . . . . . . . . . . . 70
Section 3.9 Adjustments . . . . . . . . . . . . . . . . . . . . . . . 70
Section 3.10 Reports to the Commission . . . . . . . . . . . . . . . . 71
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
Section 4.1 Rights of Certificateholders . . . . . . . . . . . . . . 72
Section 4.2 Establishment of Collection Account and Special
Funding Account . . . . . . . . . . . . . . . . . . . . . 72
Section 4.3 Collections and Allocations . . . . . . . . . . . . . . . 75
Section 4.4 Shared Principal Collections . . . . . . . . . . . . . . 77
Section 4.5 Additional Withdrawals from the Collection
Account . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 4.6 Allocation of Trust Assets to Series or Groups . . . . . 77
ARTICLE V
DISTRIBUTIONS AND REPORTS TO
CERTIFICATEHOLDERS
ARTICLE VI
THE CERTIFICATES
Section 6.1 The Certificates . . . . . . . . . . . . . . . . . . . . 80
Section 6.2 Authentication of Certificates . . . . . . . . . . . . . 80
Section 6.3 New Issuances . . . . . . . . . . . . . . . . . . . . . . 81
Section 6.4 Registration of Transfer and Exchange of
Certificates . . . . . . . . . . . . . . . . . . . . . . 83
Section 6.5 Mutilated, Destroyed, Lost or Stolen
Certificates . . . . . . . . . . . . . . . . . . . . . . 87
Section 6.6 Persons Deemed Owners . . . . . . . . . . . . . . . . . . 87
Section 6.7 Appointment of Paying Agent . . . . . . . . . . . . . . . 88
Section 6.8 Access to List of Registered
Certificateholders' Names and Addresses . . . . . . . . . 89
Section 6.9 Authenticating Agent . . . . . . . . . . . . . . . . . . 90
Section 6.10 Book-Entry Certificates . . . . . . . . . . . . . . . . . 91
Section 6.11 Notices to Clearing Agency . . . . . . . . . . . . . . . 92
Section 6.12 Definitive Certificates . . . . . . . . . . . . . . . . . 92
Section 6.13 Global Certificate; Exchange Date . . . . . . . . . . . . 93
Section 6.14 Meetings of Certificateholders . . . . . . . . . . . . . 95
Section 6.15 Uncertificated Classes . . . . . . . . . . . . . . . . . 98
ARTICLE VII
OTHER MATTERS RELATING TO THE TRANSFEROR
Section 7.1 Liability of the Transferor . . . . . . . . . . . . . . . 99
Section 7.2 Merger or Consolidation of, or Assumption of
the Obligations of, the Transferor . . . . . . . . . . . 99
Section 7.3 Limitations on Liability of the Transferor . . . . . . . 100
Section 7.4 Transferor Authorized to Execute Registration
Statements and Reports on Behalf of the Trust . . . . . . 101
ARTICLE VIII
OTHER MATTERS RELATING TO THE SERVICER
Section 8.1 Liability of the Servicer . . . . . . . . . . . . . . . . 102
Section 8.2 Merger or Consolidation of, or Assumption of
the Obligations of, the Servicer . . . . . . . . . . . . 102
Section 8.3 Limitation on Liability of the Servicer and
Others . . . . . . . . . . . . . . . . . . . . . . . . . 103
Section 8.4 Servicer Indemnification of the Trust and the
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 103
Section 8.5 Resignation of the Servicer . . . . . . . . . . . . . . . 103
Section 8.6 Access to Certain Documentation and Information
Regarding the Receivables . . . . . . . . . . . . . . . . 104
Section 8.7 Delegation of Duties . . . . . . . . . . . . . . . . . . 105
Section 8.8 Examination of Records . . . . . . . . . . . . . . . . . 105
ARTICLE IX
INSOLVENCY EVENTS
Section 9.1 Rights upon the Occurrence of an Insolvency
Event . . . . . . . . . . . . . . . . . . . . . . . . . . 106
ARTICLE X
SERVICER DEFAULTS
Section 10.1 Servicer Defaults . . . . . . . . . . . . . . . . . . . . 108
Section 10.2 Trustee To Act; Appointment of Successor . . . . . . . . 111
Section 10.3 Notification to Certificateholders . . . . . . . . . . . 113
ARTICLE XI
THE TRUSTEE
Section 11.1 Duties of Trustee . . . . . . . . . . . . . . . . . . . . 114
Section 11.2 Certain Matters Affecting the Trustee . . . . . . . . . . 116
Section 11.3 Trustee Not Liable for Recitals in Certificates . . . . . 118
Section 11.4 Trustee May Own Certificates . . . . . . . . . . . . . . 118
Section 11.5 The Servicer To Pay Trustee's Fees and Expenses . . . . . 118
Section 11.6 Eligibility Requirements for Trustee . . . . . . . . . . 119
Section 11.7 Resignation or Removal of Trustee . . . . . . . . . . . . 119
Section 11.8 Successor Trustee . . . . . . . . . . . . . . . . . . . . 120
Section 11.9 Merger or Consolidation of Trustee . . . . . . . . . . . 121
Section 11.10 Appointment of Co-Trustee or Separate
Trustee . . . . . . . . . . . . . . . . . . . . . . . . .121
Section 11.11 Tax Returns . . . . . . . . . . . . . . . . . . . . . . .123
Section 11.12 Trustee May Enforce Claims Without
Possession of Certificates . . . . . . . . . . . . . . . .123
Section 11.13 Suits for Enforcement . . . . . . . . . . . . . . . . . .123
Section 11.14 Rights of Certificateholders To Direct
Trustee . . . . . . . . . . . . . . . . . . . . . . . . .124
Section 11.15 Representations and Warranties of Trustee . . . . . . . .124
Section 11.16 Maintenance of Office or Agency . . . . . . . . . . . . .125
ARTICLE XII
TERMINATION
Section 12.1 Termination of Trust . . . . . . . . . . . . . . . . . . 126
Section 12.2 Final Distribution . . . . . . . . . . . . . . . . . . . 126
Section 12.3 The Transferor's Termination Rights . . . . . . . . . . . 128
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.1 Amendment; Waiver of Past Defaults . . . . . . . . . . . 129
Section 13.2 Protection of Right, Title and Interest to
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . 131
Section 13.3 Limitation on Rights of Certificateholders . . . . . . . 132
Section 13.4 Governing Law . . . . . . . . . . . . . . . . . . . . . 133
Section 13.5 Notices; Payments . . . . . . . . . . . . . . . . . . . . 134
Section 13.6 Severability of Provisions . . . . . . . . . . . . . . . 135
Section 13.7 Certificates Nonassessable and Fully Paid . . . . . . . 135
Section 13.8 Further Assurances . . . . . . . . . . . . . . . . . . . 135
Section 13.9 Nonpetition Covenant . . . . . . . . . . . . . . . . . . 135
Section 13.10 No Waiver; Cumulative Remedies . . . . . . . . . . . . . 136
Section 13.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . 136
Section 13.12 Third-Party Beneficiaries . . . . . . . . . . . . . . . 136
Section 13.13 Actions by Certificateholders . . . . . . . . . . . . . 136
Section 13.14 Rule 144A Information . . . . . . . . . . . . . . . . . 136
Section 13.15 Merger and Integration . . . . . . . . . . . . . . . . . 137
Section 13.16 Headings . . . . . . . . . . . . . . . . . . . . . . . . 137
EXHIBITS
Exhibit A Form of Transferor Certificate
Exhibit B Form of Assignment of Receivables in
Additional Accounts
Exhibit C Form of Reassignment of Receivables in Removed
Accounts
Exhibit D Form of Annual Servicer's Certificate
Exhibit E-1 Form of Opinion of Counsel with respect to
Amendments
Exhibit E-2 Form of Opinion of Counsel with respect to
Accounts
Exhibit E-3 Form of Annual Opinion of Counsel
Exhibit F-1 Form of Certificate of Foreign Clearing Agency
Exhibit F-2 Form of Alternate Certificate to be delivered to Foreign
Clearing Agency
Exhibit F-3 Form of Certificate to be delivered to Foreign Clearing
Agency
Exhibit G-1 Private Placement Legend
Exhibit G-2 Representation Letter
Exhibit G-3 ERISA Legend
SCHEDULES
Schedule 1 List of Accounts [Deemed Incorporated]
POOLING AND SERVICING AGREEMENT dated as of January 29, 1998,
among PARTNERS FIRST RECEIVABLES FUNDING, LLC, a Delaware limited liability
company, as Transferor; PARTNERS FIRST HOLDINGS, LLC, a Delaware limited
liability company, as Servicer; and THE BANK OF NEW YORK, a New York
banking corporation, as Trustee.
In consideration of the mutual agreements herein contained, each
party agrees as follows for the benefit of the other parties, the
Certificateholders and any Series Enhancer (as defined below) to the extent
provided herein and in any Supplement:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. Whenever used in this Agreement, the
following words and phrases shall have the following meanings, and the
definitions of such terms are applicable to the singular as well as the
plural forms of such terms and to the masculine as well as to the feminine
and neuter genders of such terms.
"Account" shall mean (a) each Initial Account, (b) each
Additional Account (but only from and after the Addition Date with respect
thereto), (c) each Related Account, and (d) each Transferred Account, but
shall exclude (e) any Account all the Receivables in which on and after the
date of such action are: (i) removed by the Transferor pursuant to Section
2.10, (ii) reassigned to the Transferor pursuant to Section 2.5 or (iii)
assigned and transferred to the Servicer pursuant to Section 3.3.
"Account Originator" shall mean the original issuer of the credit
card relating to an Account, pursuant to a Credit Card Agreement or a
purchaser of such Account.
"Account Originator Purchase Agreement" shall mean the
receivables purchase agreement between PFR and an Account Originator,
pursuant to which the Account Originator sells Receivables to PFR.
"Account Owner" shall mean, with respect to any Account, the
entity which is either the Account Originator with respect to such Account
or an entity which has acquired such Account, and in either case, has sold
the related Receivables to PFR or the Transferor pursuant to a Receivables
Purchase Agreement.
"Account Owner Purchase Agreement" shall mean the receivables
purchase agreement between PFR and an Account Owner, pursuant to which the
Account Owner sells Receivables to PFR.
"Accumulation Period" shall mean, with respect to any Series, or
any Class within a Series, a period following the Revolving Period, which
shall be the controlled accumulation period, the principal accumulation
period, the rapid accumulation period, the optional accumulation period,
the limited accumulation period or other accumulation period, in each case
as defined with respect to such Series in the related Supplement.
"Act" shall mean the Securities Act of 1933, as amended.
"Addition Date" shall mean (i) with respect to Aggregate Addition
Accounts, the date from and after which such Aggregate Addition Accounts
are to be included as Accounts pursuant to subsection 2.9(a) or (b), (ii)
with respect to Participation Interests, the date from and after which such
Participation Interests are to be included as assets of the Trust pursuant
to subsection 2.9(a) or (b), and (iii) with respect to New Accounts, the
date on which such New Accounts are activated.
"Additional Account" shall mean each New Account and each
Aggregate Addition Account.
"Additional Cut-Off Date" shall mean (i) with respect to
Aggregate Addition Accounts or Participation Interests, the date specified
as such in the notice delivered with respect thereto pursuant to subsection
2.9(c) and (ii) with respect to New Accounts, the later of the dates on
which such New Accounts are originated or designated pursuant to subsection
2.9(d).
"Adjustment Payment" shall have the meaning specified in
subsection 3.9(a).
"Adjustment Payment Shortfall" shall mean, for any Monthly
Period, the amount by which the Transferor Amount would have been reduced
below zero as a result of adjustments to the aggregate amount of Principal
Receivables pursuant to subsection 3.9 of the Agreement and with respect to
which the Transferor was obligated but failed to make a deposit into the
Special Funding Account on the related Distribution Date.
"Adverse Effect" shall mean, with respect to any action, that
such action will (a) result in the occurrence of a Pay Out Event or a
Reinvestment Event or (b) materially adversely affect the amount or timing
of distributions to be made to the Investor Certificateholders of any
Series or Class pursuant to this Agreement and the related Supplement.
"Affiliate" shall mean, with respect to any specified Person, any
other Person controlling or controlled by or under common control with such
specified Person. For the purposes of this definition, "control" shall
mean the power to direct the management and policies of a Person, directly
or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Aggregate Addition" shall mean the designation of additional
Eligible Accounts, other than New Accounts, to be included as Accounts or
of Participation Interests to be included as Trust Assets pursuant to
subsection 2.9(a) or (b).
"Aggregate Addition Account" shall mean each Eligible Account
designated pursuant to subsection 2.9(a) or (b) to be included as an
Account and identified in the computer file or microfiche list delivered to
the Trustee by the Transferor pursuant to Sections 2.1 and 2.9(h).
"Aggregate Invested Amount" shall mean, as of any date of
determination, the aggregate adjusted Invested Amounts of all Series of
Certificates issued and outstanding on such date of determination.
"Agreement" shall mean this Pooling and Servicing Agreement and
all amendments hereof and supplements hereto, including, with respect to
any Series or Class, the related Supplement.
"Amortization Period" shall mean, with respect to any Series, or
any Class within a Series, a period following the Revolving Period, which
shall be the controlled amortization period, the principal amortization
period, the rapid amortization period, the optional amortization period,
the limited amortization period or other amortization period, in each case
as defined with respect to such Series in the related Supplement.
"Annual Membership Fee" shall have the meaning specified in the
Credit Card Agreement applicable to each Account for annual membership fees
or similar terms.
"Applicants" shall have the meaning specified in Section 6.8.
"Appointment Date" shall have the meaning specified in subsection
9.1(a).
"Assignment" shall have the meaning specified in subsection
2.9(h).
"Authorized Newspaper" shall mean any newspaper or newspapers of
general circulation in the Borough of Manhattan, The City of New York,
printed in the English language (and, with respect to any Series or Class,
if and so long as the Investor Certificates of such Series are listed on
the Luxembourg Stock Exchange and such Exchange shall so require, in
Luxembourg, printed in any language satisfying the requirements of such
exchange) and customarily published on each business day at such place,
whether or not published on Saturdays, Sundays or holidays.
"Automatic Addition Commencement Date" shall mean the date
specified in Section 2.9(h) hereof.
"Automatic Addition Suspension Date" shall mean the Business Day
specified in Section 2.9(h) hereof.
"Automatic Addition Termination Date" shall mean the Business Day
specified by the Transferor pursuant to Section 2.9(h) hereof.
"Average Rate" shall mean, as of any date of determination and
with respect to any Group, the percentage equivalent of a decimal equal to
the sum of the amounts for each outstanding Series (or each Class within
any Series consisting of more than one Class) within such Group obtained by
multiplying (a) the Certificate Rate (reduced to take into account the
payments received pursuant to any interest rate agreements net of any
amounts payable under such agreements, or, if such agreements result in a
net amount payable, increased by such net amount payable) for such Series
or Class, by (b) a fraction, the numerator of which is the aggregate unpaid
principal amount of the Investor Certificates of such Series or Class and
the denominator of which is the aggregate unpaid principal amount of all
Investor Certificates within such Group.
"Bearer Certificates" shall have the meaning specified in Section
6.1.
"Benefit Plan" shall have the meaning specified in subsection
6.4(c).
"Book-Entry Certificates" shall mean beneficial interests in the
Investor Certificates, ownership and transfers of which shall be made
through book entries by a Clearing Agency as described in Section 6.10.
"Business Day" shall mean any day other than (a) a Saturday or
Sunday or (b) any other day on which national banking associations or state
banking institutions in Illinois, Massachusetts, New York or any other
State in which the principal executive offices of Holdings or the Trustee,
is located, are authorized or obligated by law, executive order or
governmental decree to be closed or (c) for purposes of any particular
Series, any other day specified in the applicable Series Supplement.
"Cash Advance Fees" shall mean cash advance transaction fees and
cash advance late fees, if any, as specified in the Credit Card Agreement
applicable to each Account.
"Cedel" shall mean Cedel Bank, societe anonyme, a professional
depository incorporated under the laws of Luxembourg, and its successors.
"Certificate" shall mean any one of the Investor Certificates or
the Transferor Certificates.
"Certificateholder" or "Holder" shall mean an Investor
Certificateholder or a Person in whose name any one of the Transferor
Certificates is registered.
"Certificateholders' Interest" shall have the meaning specified
in Section 4.1. For purposes of determining whether Holders of Investor
Certificates evidencing a specified percentage of the Certificateholders'
Interest have approved, consented or otherwise agreed to any action
hereunder, such determination shall be made based on the percentage of the
Invested Amount represented by such Investor Certificates.
"Certificate Owner" shall mean, with respect to a Book-Entry
Certificate, the Person who is the owner of such Book-Entry Certificate, as
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly as a Clearing
Agency Participant or as an indirect participant, in accordance with the
rules of such Clearing Agency).
"Certificate Rate" shall mean, as of any particular date of
determination and with respect to any Series or Class, the certificate rate
as of such date specified therefor in the related Supplement.
"Certificate Register" shall mean the register maintained
pursuant to Section 6.4, providing for the registration of the Registered
Certificates and transfers and exchanges thereof.
"Class" shall mean, with respect to any Series, any one of the
classes of Investor Certificates of that Series.
"Clearing Agency" shall mean an organization registered as a
"clearing agency" pursuant to Section 17A of the Securities Exchange Act of
1934, as amended, and serving as clearing agency for a Series or Class of
Book-Entry Certificates.
"Clearing Agency Participant" shall mean a broker, dealer, bank,
other financial institution or other Person for whom from time to time a
Clearing Agency effects book-entry transfers and pledges of securities
deposited with the Clearing Agency.
"Closing Date" shall mean, with respect to any Series, the
closing date specified in the related Supplement.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collection Account" shall have the meaning specified in Section
4.2.
"Collections" shall mean all payments by or on behalf of Obligors
(including Insurance Proceeds) received in respect of the Receivables, in
the form of cash, checks, wire transfers, electronic transfers, ATM
transfers or any other form of payment in accordance with a Credit Card
Agreement in effect from time to time and all other amounts specified by
this Agreement or any Supplement as constituting Collections and shall
include Recoveries, investment earnings on amounts on deposit in the
Collection Account, Special Funding Account and any Series Account to the
extent specified in any Series Supplement and all ancillary fee income
received by the Servicer in respect of the Accounts. As specified in any
Participation Interest Supplement or Series Supplement, Collections shall
include amounts received with respect to Participation Interests. The
aggregate Recoveries received during any Monthly Period not in excess of
the aggregate amount of Principal Receivables (other than Ineligible
Receivables) which became Defaulted Receivables during such Monthly Period
shall be treated as Collections of Principal Receivables. The aggregate
Recoveries received during any Monthly Period in excess of the aggregate
Principal Receivables (other than Ineligible Receivables) which became
Defaulted Receivables during such Monthly Period shall be treated as
Collections of Finance Charge Receivables. Collections with respect to any
Monthly Period shall include a portion, calculated pursuant to subsection
2.7(i), of Interchange paid to the Trust with respect to such Monthly
Period, to be applied as if such amount were Collections of Finance Charge
Receivables for all purposes. Amounts withdrawn from the yield supplement
account or reserve account established with respect to any Series and
deposited in the Collection Account shall, unless otherwise specified in
the related Supplement, be treated as Collections of Finance Charge
Receivables.
"Common Depositary" shall mean, with respect to the Investor
Certificates of any Series or Class, the common depositary for the
respective accounts of any Foreign Clearing Agencies or any successor
thereto.
"Commission" shall mean the Securities and Exchange Commission
and its successors in interest.
"Companion Series" shall mean (i) each Series which has been
paired with another Series (which Series may be prefunded or partially
prefunded), such that the reduction of the Invested Amount of such Series
results in the increase of the Invested Amount of such other Series, as
described in the related Supplements, and (ii) such other Series.
"Corporate Trust Office" shall have the meaning specified in
Section 11.16.
"Coupon" shall have the meaning specified in Section 6.1.
"Credit Card Agreement" shall mean, with respect to a revolving
credit card account, the agreements between an Account Originator and the
Obligor governing the terms and conditions of such account, as such
agreements may be amended, modified or otherwise changed from time to time
and as distributed (including any amendments and revisions thereto) to
holders of such account.
"Credit Card Guidelines" shall mean, with respect to any Account
and the related Receivables, the respective policies and procedures of the
Account Owner (as of any date of determination, as such policies and
procedures may be amended from time to time), or of the Account Originator
(as of the date of origination of the Account), (a) relating to the
operation of its credit card business as of such date, which generally are
applicable to its portfolio of revolving credit card accounts or, in the
case of an Account Owner that has only a portion of its portfolio subject
to a Receivables Purchase Agreement, applicable to such portion of its
portfolio, and in each case which are consistent with prudent practice,
including the policies and procedures for determining the creditworthiness
of credit card customers and the extension of credit to credit card
customers, and (b) relating to the maintenance of credit card accounts and
collection of credit card receivables.
"Date of Processing" shall mean, with respect to any transaction
or receipt of Collections, the date on which such transaction is first
recorded on the Servicer's computer file of revolving credit card accounts
(without regard to the effective date of such recordation).
"Defaulted Amount" shall mean, with respect to any Monthly
Period, an amount (which shall not be less than zero) equal to (a) the
excess, if any, of the amount of Principal Receivables which became
Defaulted Receivables in such Monthly Period over the Recoveries for such
Monthly Period, minus (b) the amount of any Defaulted Receivables of which
the Transferor or the Servicer became obligated to accept reassignment or
assignment in accordance with the terms of this Agreement during such
Monthly Period; provided, however, that, if an Insolvency Event occurs with
respect to the Transferor, the amount of such Defaulted Receivables which
are subject to reassignment to the Transferor in accordance with the terms
of this Agreement shall not be added to the sum so subtracted and, if any
of the events described in subsection 10.1(d) occur with respect to the
Servicer, the amount of such Defaulted Receivables which are subject to
reassignment or assignment to the Servicer in accordance with the terms of
this Agreement shall not be added to the sum so subtracted.
"Defaulted Receivables" shall mean, with respect to any Monthly
Period, all Principal Receivables which are charged off as uncollectible in
such Monthly Period in accordance with the Credit Card Guidelines and the
Servicer's customary and usual servicing procedures for servicing revolving
credit card accounts. A Principal Receivable shall become a Defaulted
Receivable on the day on which such Principal Receivable is recorded as
charged-off on the Servicer's computer file of revolving credit card
accounts.
"Definitive Certificates" shall have the meaning specified in
Section 6.10.
"Definitive Euro-Certificates" shall have the meaning specified
in subsection 6.13(a).
"Deposit Date" shall mean each day on which the Servicer deposits
Collections in the Collection Account.
"Depository Agreement" shall mean, with respect to any Series or
Class of Book-Entry Certificates, the agreement among the Transferor, the
Trustee and the Clearing Agency.
"Determination Date" shall mean, unless otherwise specified in
the Supplement for a particular Series, the third Business Day preceding
the Distribution Date in each Monthly Period.
"Discount Option Date" shall mean each date on which a Discount
Percentage designated by the Transferor pursuant to Section 2.12 takes
effect.
"Discount Option Receivables" shall have the meaning specified in
subsection 2.12(a). The aggregate amount of Discount Option Receivables
outstanding on any Date of Processing occurring on or after the Discount
Option Date shall equal the sum of (a) the aggregate Discount Option
Receivables at the end of the prior Date of Processing (which amount, prior
to the Discount Option Date, shall be zero) plus (b) any new Discount
Option Receivables created on such Date of Processing minus (c) any
Discount Option Receivables Collections received on such Date of
Processing. Discount Option Receivables created on any Date of Processing
shall mean the product of the amount of any Principal Receivables created
on such Date of Processing (without giving effect to the proviso in the
definition of Principal Receivables) and the Discount Percentage.
"Discount Option Receivable Collections" shall mean on any Date
of Processing occurring in any Monthly Period succeeding the Monthly Period
in which the Discount Option Date occurs, the product of (a) a fraction the
numerator of which is the Discount Option Receivables and the denominator
of which is the sum of the Principal Receivables and the Discount Option
Receivables in each case (for both the numerator and the denominator) at
the end of the preceding Monthly Period and (b) Collections of Principal
Receivables on such Date of Processing (without giving effect to the
proviso in the definition of Principal Receivables).
"Discount Percentage" shall mean the percentages, if any,
designated by the Transferor pursuant to subsection 2.12(a).
"Distribution Date" shall mean, with respect to any Series, the
date specified in the applicable Supplement.
"Document Delivery Date" shall have the meaning specified in
subsection 2.9(g).
"Dollars", "$" or "U.S. $" shall mean United States dollars.
"Eligible Account" shall mean a consumer revolving credit card
account, which, as of (i) the Initial Issuance Date, in the case of an
Initial Account, or (ii) as of the applicable Additional Cut Off Date, in
the case of an Additional Account:
(a) is a revolving credit card account in existence and
maintained by the applicable Account Owner;
(b) is payable in Dollars;
(c) has a cardholder who has provided, as his most recent
billing address, an address located in the United States or its
territories or possessions or a military address;
(d) except as provided below, has a cardholder who has not been
identified by the Servicer in its computer files as being involved in
a voluntary or involuntary bankruptcy proceeding;
(e) has not been identified by the Servicer in its computer
files as an account with respect to which the related card has been
lost or stolen or has a cardholder who has not been identified by the
Servicer in its computer files as being deceased;
(f) is not sold or pledged to any other party except for any
sale by an Account Originator to an entity that has entered into a
Receivables Purchase Agreement;
(g) does not have outstanding receivables which have been sold
or pledged by the related Account Owner to any party other than PFR or
the Transferor pursuant to a Receivables Purchase Agreement;
(h) except as provided below, does not have any Receivables that
are Defaulted Receivables;
(i) does not have any Receivables that have been identified by
the Servicer or the relevant Obligor as having been incurred as a
result of fraudulent use of any related credit card;
(j) was created in accordance with the Credit Card Guidelines of
the applicable Account Originator at the time of creation of such
account;
(k) with respect to Additional Accounts, may, in lieu of
satisfying the requirements of clauses (a) through (j) above, be an
account which shall have satisfied the Rating Agency Condition.
Eligible Accounts may include Accounts, the Receivables of which have been
written off, the Receivables with respect to which the Servicer believes
the related Obligor is bankrupt as of the Initial Issuance Date, with
respect to the Initial Accounts, and as of the related Additional Cut-Off
Date, with respect to Additional Accounts; provided, that (a) the balance
of all Receivables included in such Accounts is reflected on the books and
records of such Seller (and is treated for purposes of this Agreement) as
"zero" and (b) charging privileges with respect to all such Accounts have
been canceled in accordance with the relevant Credit Card Guidelines.
"Eligible Deposit Account" shall mean either (a) a segregated
account with an Eligible Institution or (b) a segregated trust account with
the corporate trust department of a depository institution which is
authorized to engage in trust activities and which is organized under the
laws of the United States or any one of the states thereof, including the
District of Columbia (or any domestic branch of a foreign bank), and acts
as a trustee for funds deposited in such account, so long as any of the
unsecured, unguaranteed senior debt securities of such depository
institution shall have a credit rating from the Rating Agency in one of its
generic credit rating categories that signifies investment grade.
"Eligible Institution" shall mean any depository institution
(which may be the Trustee) organized under the laws of the United States or
any one of the states thereof, including the District of Columbia (or any
domestic branch of a foreign bank), which depository institution at all
times (a) is a member of the FDIC and (b) has (i) a long-term unsecured
debt rating acceptable to the Rating Agency or (ii) a certificate of
deposit rating acceptable to the Rating Agency, except that no such rating
will be required with respect to an institution which maintains a trust
fund in a fully segregated trust account with the corporate trust
department of such institution; provided that such institution is a member
of the FDIC and maintains a credit rating in one of the Rating Agency's
generic credit rating categories which signifies investment grade.
Notwithstanding the previous sentence, any institution the appointment of
which satisfies the Rating Agency Condition shall be considered an Eligible
Institution. If so qualified, the Servicer may be considered an Eligible
Institution for the purposes of this definition.
"Eligible Investments" shall mean negotiable instruments or
securities represented by instruments in bearer or registered form, or, in
the case of deposits described below, deposit accounts held in the name of
the Trustee in trust for the benefit of the Certificateholders, subject to
the exclusive custody and control of the Trustee and for which the Trustee
has sole signature authority, which evidence:
(a) obligations issued or fully guaranteed, as to timely
payment, by the United States of America or any instrumentality or
agency thereof when such obligations are backed by the full faith and
credit of the United States of America;
(b) demand deposits, time deposits or certificates of deposit
(having original maturities of no more than 365 days) of depository
institutions or trust companies incorporated under the laws of the
United States of America or any state thereof, including the District
of Columbia (or domestic branches of foreign banks) and subject to
supervision and examination by federal or state banking or depository
institution authorities; provided that at the time of the Trust's
investment or contractual commitment to invest therein, the depository
institution or trust company shall have the Highest Rating;
(c) commercial paper or other short-term securities having, at
the time of the Trust's investment or contractual commitment to invest
therein, the Highest Rating;
(d) demand deposits, time deposits and certificates of deposit
which are fully insured by the FDIC having, at the time of the Trust's
investment therein, the Highest Rating;
(e) bankers' acceptances (having original maturities of no more
than 365 days) issued by any depository institution or trust company
referred to in clause (b) above;
(f) money market funds having, at the time of the Trust's
investment therein, the Highest Rating (including funds for which the
Trustee or any of its Affiliates is investment manager or advisor);
(g) time deposits other than as referred to in clause (d) above,
with a Person the commercial paper of which has a credit rating
satisfactory to the Rating Agency;
(h) repurchase agreements transacted with either
(i) an entity subject to the United States federal
bankruptcy code, provided that (A) the repurchase agreement matures
prior to the next Distribution Date or is due on demand, (B) the
Trustee or a third party acting solely as agent for the Trustee has
possession of the collateral, (C) the Trustee on behalf of the Trust
has a perfected first priority security interest in the collateral,
(D) the market value of the collateral is maintained at the requisite
collateral percentage of the obligation in accordance with standards
of the Rating Agencies, (E) the failure to maintain the requisite
collateral level will obligate the Trustee to liquidate the collateral
immediately, (F) the securities subject to the repurchase agreement
are either obligations of, or fully guaranteed as to principal and
interest by, the United States of America or any instrumentality or
agency thereof, certificates of deposit or bankers acceptances and (G)
the securities subject to the repurchase agreement are free and clear
of any third party lien or claim; or
(ii) a financial institution insured by the FDIC, or any
broker-dealer with "retail customers" that is under the jurisdiction
of the Securities Investors Protection Corp. ("SIPC") provided that
(A) the market value of the collateral is maintained at the requisite
collateral percentage of the obligation in accordance with the
standards of the Rating Agencies, (B) the Trustee or a third party
(with a short-term debt rating of P-1 or higher by Moody's) acting
solely as agent for the Trustee has possession of the collateral, (C)
the Trustee on behalf of the Trust has a perfected first priority
security interest in the collateral, (D) the collateral is free and
clear of third party liens and, in the case of an SIPC broker, was not
acquired pursuant to a repurchase or reverse repurchase agreement and
(E) the failure to maintain the requisite collateral percentage will
obligate the Trustee to liquidate the collateral; provided, however,
that at the time of the Trust's investment or contractual commitment
to invest in any repurchase agreement, the short-term deposits or
commercial paper rating of such entity or institution in subsections
(i) and (ii) shall have a credit rating not lower than the Highest
Rating; and
(i) any other investment of a type or rating that satisfies the
Rating Agency Condition.
"Eligible Receivable" shall mean each Receivable, including,
where applicable, the underlying receivable:
(a) which has arisen in an Eligible Account;
(b) which was created in compliance in all material respects
with all Requirements of Law applicable to the related Account
Originator at the time of the creation of such Receivable and which
was created pursuant to a Credit Card Agreement which complies in all
material respects with all Requirements of Law applicable to the
related Account Originator at the time of the creation of such
Receivable and the Requirements of Law applicable to any subsequent
Account Owner with respect to such Receivable;
(c) with respect to which all material consents, licenses,
approvals or authorizations of, or registrations or declarations with,
any Governmental Authority required to be obtained, effected or given
in connection with the creation of such Receivable or the execution,
delivery and performance by the applicable Account Originator and any
subsequent Account Owner of the Credit Card Agreement pursuant to
which such Receivable was created, have been duly obtained, effected
or given and are in full force and effect;
(d) as to which at the time of the transfer of such Receivable
to the Trust, the Transferor or the Trust will have good and
marketable title thereto and which itself is, and the underlying
receivables are, free and clear of all Liens (other than any Lien for
municipal or other local taxes if such taxes are not then due and
payable or if the Transferor is then contesting the validity thereof
in good faith by appropriate proceedings and has set aside on its
books adequate reserves with respect thereto);
(e) which is the legal, valid and binding payment obligation of
the Obligor thereon enforceable against such Obligor in accordance
with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws, now or hereafter in effect, affecting the enforcement of
creditors' rights in general and except as such enforceability may be
limited by general principles of equity (whether considered in a suit
at law or in equity);
(f) which, at the time of transfer to the Trust, is not subject
to any right of rescission, setoff, counterclaim or any other defense
(including defenses arising out of violations of usury laws) of the
Obligor, other than defenses arising out of applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
the enforcement of creditors' rights in general; and
(g) which constitutes either an "account" or a "general
intangible" under and as defined in Article 9 of the UCC as then in
effect in the Relevant UCC State.
"Eligible Servicer" shall mean an entity which, at the time of
its appointment as Servicer, (a) is servicing or has the ability to service
a portfolio of revolving credit card accounts, (b) is legally qualified and
has the capacity to service the Accounts, (c) in the sole determination of
the Trustee, 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 its duties 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 or the obligations of such entity have been guaranteed by an
Affiliate thereof which has a net worth of at least $50,000,000 as of the
end of its most recent fiscal quarter.
"Enhancement Agreement" shall mean any agreement, instrument or
document governing the terms of any Series Enhancement or pursuant to which
any Series Enhancement is issued or outstanding.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Euroclear Operator" shall mean Morgan Guaranty Trust Company of
New York, Brussels office, as operator of the Euroclear System.
"Excess Allocation Series" shall mean a Series that, pursuant to
the Supplement therefor, is entitled to receive certain excess Collections
of Finance Charge Receivables, as more specifically set forth in such
Supplement.
"Exchange Date" shall mean, with respect to any Series, any date
that is after the related Closing Date, in the case of Definitive
Euro-Certificates in registered form, or upon presentation of certification
of non-United States beneficial ownership (as described in Section 6.13),
in the case of Definitive Euro-Certificates in bearer form.
"FDIC" shall mean the Federal Deposit Insurance Corporation or
any successor.
"FDR" shall have the meaning specified in Section 8.7.
"Finance Charge Receivables" shall mean all amounts billed to the
Obligors on any Account in respect of (i) all Periodic Rate Finance
Charges, (ii) Cash Advance Fees, (iii) Annual Membership Fees, (iv) Late
Fees, (v) Overlimit Fees, (vi) Returned Check Fees, (vii) Discount Option
Receivables, if any, (viii) Miscellaneous Fees and Charges and (ix) any
other fees with respect to the Accounts designated by the Transferor at any
time and from time to time to be included as Finance Charge Receivables;
provided, however, that after the Premium Option Date, Finance Charge
Receivables on any Date of Processing thereafter shall mean Finance Charge
Receivables as otherwise determined pursuant to this definition minus the
amount of Premium Option Receivables. Finance Charge Receivables shall
also include (a) the interest portion of Participation Interests as shall
be determined pursuant to, and only if so provided in, the applicable
Participation Interest Supplement or Series Supplement, (b) Interchange as
calculated pursuant to the Supplement for any Series, and (c) payments in
respect of Adjustments Payment Shortfalls pursuant to the proviso in the
last sentence of subsection 3.9(a). Collections of Finance Charge
Receivables shall include (i) the aggregate Recoveries received during any
Monthly Period in excess of the aggregate Principal Receivables (other than
Ineligible Receivables) which became Defaulted Receivables during such
Monthly Period and (ii) investment earnings on amounts on deposit in the
Collection Account, Special Funding Account and any Series Account to the
extent specified in any Series Supplement.
"FIRREA" shall mean the Financial Institutions Reform, Recovery
and Enforcement Act of 1989, as amended.
"Fitch" shall mean Fitch IBCA, Inc., or its successors.
"Foreign Clearing Agency" shall mean Cedel and the Euroclear
Operator.
"Global Certificate" shall have the meaning specified in
subsection 6.13(a).
"Global Certificate Exchange Date" shall mean, with respect to
any Series or Class, a date determined by the Manager with respect to such
Series or Class which is at least 40 days after the later of the
commencement of the offering of the related Investor Certificates and the
related Series Issuance Date.
"Governmental Authority" shall mean the United States of America,
any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
"Group" shall mean, with respect to any Series, the group of
Series, if any, in which the related Supplement specifies such Series is to
be included.
"Highest Rating" shall mean, with respect to Moody's, P-1 or Aaa,
with respect to Standard & Poor's, A-1+ or AAA, and with respect to Fitch,
F-1+ or AAA or or any rating category that will not cause a Ratings Event.
"Holdings" shall mean Partners First Holdings, LLC, a Delaware
limited liability company.
"Independent Director" shall have the meaning specified in
subsection 2.7(h)(vii).
"Ineligible Receivables" shall have the meaning specified in
subsection 2.5(a).
"Initial Account" shall mean each MasterCard and VISA(1) consumer
revolving credit card account which is identified in the computer file or
microfiche list delivered to the Trustee by the Transferor pursuant to
Section 2.1 on the Initial Issuance Date.
(1) MasterCard and VISA are registered trademarks of MasterCard
International Incorporated and VISA USA, Inc., respectively.
"Initial Issuance Date" shall mean January 29, 1998, the date the
Transferor Certificate is issued by the Trust and delivered to the
Transferor.
"Insolvency Event" shall have the meaning specified in subsection
9.1(a).
"Insolvency Proceeds" shall have the meaning specified in
subsection 9.1(b).
"Institutional Investor" shall mean an institutional accredited
investor within the meaning of Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Securities Act of 1933, as amended.
"Insurance Proceeds" shall mean any amounts received pursuant to
the payment of benefits under any credit life insurance policies, credit
disability or unemployment insurance policies covering any Obligor with
respect to Receivables under such Obligor's Account or any other credit
insurance policy designated by the Transferor including, without
limitation, credit insurance coverage of Receivables on a pooled basis.
"Interchange" shall mean interchange fees payable to an Account
Owner, as partial compensation for taking credit risk, absorbing fraud
losses, and funding receivables for the period prior to the initial
billing. Any reference in this Agreement or any Supplement to Interchange
shall refer only to the interchange fees that are transferred by the
Account Owner to PFR and by PFR to the Transferor, which shall be an amount
equal to the product of (i) the percentage equivalent of a fraction, the
numerator of which is the amount of cardholder sales charges in the
Accounts of such Account Owner, and the denominator of which is the total
amount of cardholder sales charges for all accounts in the Account Owner's
entire portfolio and (ii) the total interchange fees payable to the Account
Owner in respect of all of the accounts in the Account Owner's entire
portfolio. Interchange for any Series shall be calculated pursuant to the
related Supplement.
"Invested Amount" shall mean, with respect to any Series and for
any date, an amount equal to the invested amount or adjusted invested
amount, as applicable, specified in the related Supplement.
"Investment Company Act" shall mean the Investment Company Act of
1940, as amended.
"Investor Certificateholder" shall mean the Person in whose name
a Registered Certificate is registered in the Certificate Register or the
bearer of any Bearer Certificate (or the Global Certificate, as the case
may be) or Coupon.
"Investor Certificates" shall mean any certificated or
uncertificated interest in the Trust designated as, or deemed to be, an
"Investor Certificate" in the related Supplement.
"Investor Exchange" shall have the meaning specified in Section
6.3(b).
"Late Fees" shall have the meaning specified in the Credit Card
Agreement applicable to each Account for late fees or similar terms.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, equity interest,
encumbrance, lien (statutory or other), preference, participation interest,
priority or other security agreement or preferential arrangement of any
kind or nature whatsoever, including any conditional sale or other title
retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing and the filing of any financing
statement under the UCC or comparable law of any jurisdiction to evidence
any of the foregoing; provided, however, that any assignment permitted by
subsection 6.3(b) or Section 7.2 and the lien created by this Agreement
shall not be deemed to constitute a Lien.
"Manager" shall mean the lead manager, manager or co-manager or
Person performing a similar function with respect to an offering of
Definitive Euro-Certificates.
"Miscellaneous Fees and Charges" shall mean Receivables created
pursuant to any Credit Card Agreement in respect of any administrative fees
or service charges (including any portion of insurance premiums payable by
the Obligor which the Account Owner is not required to pay to the
applicable insurer) other than Late Fees, Overlimit Fees, Returned Check
Fees, Annual Membership Fees and Cash Advance Fees, including all ancillary
fee income received by the Servicer in respect of the Accounts.
"MasterCard" shall mean MasterCard International Incorporated,
and its successors in interest.
"Monthly Period" shall mean, with respect to each Distribution
Date, unless otherwise provided in a Supplement, the period from and
including the first day of the preceding calendar month to and including
the last day of such calendar month; provided, however, that unless
otherwise specified in the related Supplement, the initial Monthly Period
with respect to any Series will commence on the Closing Date with respect
to such Series.
"Monthly Servicing Fee" shall have the meaning specified in
Section 3.2.
"Moody's" shall mean Moody's Investors Service, Inc., or its
successor.
"New Account" shall mean each MasterCard and VISA consumer
revolving credit card account established pursuant to a Credit Card
Agreement, which account is designated pursuant to subsection 2.9(d) to be
included as an Account and is identified in the computer file or microfiche
list delivered to the Trustee by the Transferor pursuant to Section 2.1 and
subsection 2.9(h).
"Notices" shall have the meaning specified in subsection 13.5(a).
"Obligor" shall mean, with respect to any Account, the Person or
Persons obligated to make payments with respect to such Account, including
any guarantor thereof, but excluding any merchant.
"Officer's Certificate" shall mean, unless otherwise specified in
this Agreement, a certificate delivered to the Trustee signed by the
President, any Vice President or the Treasurer of the Transferor or the
Servicer, as the case may be, or by the President, any Vice President or
the financial controller (or an officer holding an office with equivalent
or more senior responsibilities or, in the case of the Servicer, a
Servicing Officer, and, in the case of the Transferor, any executive of the
Transferor designated in writing by a Vice President or more senior officer
of the Transferor for this purpose) of a Successor Servicer.
"Opinion of Counsel" shall mean a written opinion of counsel, who
may be counsel for, or an employee of, the Person providing the opinion and
who shall be reasonably acceptable to the Trustee.
"Overlimit Fees" shall have the meaning specified in the Credit
Card Agreement applicable to each Account for overlimit fees or similar
terms if such fees are provided for with respect to such Account.
"Participation Interest Supplement" shall mean a Supplement
entered into pursuant to subsection 2.9(a)(ii) or (b) in connection with
the conveyance of Participation Interests to the Trust.
"Participation Interests" shall have the meaning specified in
subsection 2.9(a)(ii).
"Paying Agent" shall mean any paying agent appointed pursuant to
Section 6.7 and shall initially be the Trustee; provided, that if the
Supplement for a Series so provides, a separate or additional Paying Agent
may be appointed with respect to such Series.
"Pay Out Event" shall mean, with respect to any Series, any Pay
Out Event specified in the related Supplement.
"Periodic Rate Finance Charges" shall have the meaning specified
in the Credit Card Agreement applicable to each Account for finance charges
(due to periodic rate) or any similar term.
"Person" shall mean any legal person, including any individual,
corporation, limited liability company, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization,
governmental entity or other entity of similar nature.
"PFR" shall mean Partners First Receivables, LLC, a Delaware
limited liability company and a wholly owned subsidiary of Holdings.
"PFRF" shall mean Partners First Receivables Funding, LLC, a
Delaware limited liability company and a wholly owned subsidiary of PFR.
"Portfolio Yield" shall mean with respect to the Trust as a whole
and, with respect to any Monthly Period, the annualized percentage
equivalent of a fraction (a) the numerator of which is the aggregate of the
sum of the Series Allocable Finance Charge Collections for all Series
during the immediately preceding Monthly Period calculated on a cash basis,
after subtracting therefrom the Series Allocable Defaulted Amounts for all
Series with respect to such Monthly Period and (b) the denominator of which
is the total amount of Principal Receivables plus (without duplication) the
then outstanding principal amount of any Participation Interests conveyed
to the Trust, plus the amount of funds on deposit in the Special Funding
Account, in each case, as of the last day of the immediately preceding
Monthly Period; provided that, with respect to any Monthly Period in which
an Aggregate Addition occurs or a removal of Accounts pursuant to Section
2.10 occurs, the amount of Principal Receivables and Participation
Interests referred to in clause (b) shall be the average amount of
Principal Receivables and Participation Interests in the Trust on each
Business Day during such Monthly Period based upon the assumptions that (1)
the aggregate amount of Principal Receivables in the Trust plus the then
outstanding principal amount of any Participation Interests conveyed to the
Trust at the end of the day on the last day of the prior Monthly Period is
the aggregate amount of Principal Receivables and Participation Interests
in the Trust on each Business Day of the period from and including the
first day of such Monthly Period to but excluding the related Addition Date
or Removal Date and (2) the aggregate amount of Principal Receivables in
the Trust plus the then outstanding principal amount of any Participation
Interests conveyed to the Trust at the end of the day on the related
Addition Date or Removal Date is the aggregate amount of Principal
Receivables and Participation Interests in the Trust on each Business Day
of the period from and including the related Addition Date or Removal Date
to and including the last day of such Monthly Period.
"Pre-Funding Account" shall mean, with respect to any Series, the
account, if any, specified in the related Supplement.
"Premium Option Date" shall mean each date on which a Premium
Percentage designated by the Transferor pursuant to Section 2.13 takes
effect.
"Premium Option Receivables" shall have the meaning specified in
Section 2.13. The aggregate amount of Premium Option Receivables
outstanding on any Date of Processing occurring on or after the Premium
Option Date shall equal the sum of (a) the aggregate Premium Option
Receivables at the end of the prior Date of Processing (which amount, prior
to the Premium Option Date, shall be zero) plus (b) any new Premium Option
Receivables created on such Date of Processing minus (c) any Premium Option
Receivables Collections received on such Date of Processing. Premium
Option Receivables created on any Date of Processing shall mean the product
of the amount of any Finance Charge Receivables created on such Date of
Processing and the Premium Percentage.
"Premium Option Receivable Collections" shall mean on any Date of
Processing occurring in any Monthly Period succeeding the Monthly Period in
which the Premium Option Date occurs, the product of (a) a fraction the
numerator of which is the Premium Option Receivables and the denominator of
which is the sum of the Finance Charge Receivables and the Premium Option
Receivables in each case (for both the numerator and the denominator) at
the end of the preceding Monthly Period and (b) Collections of Finance
Charge Receivables on such Date of Processing.
"Premium Percentage" shall mean the percentages, if any,
designated by the Transferor pursuant to Section 2.13.
"Principal Allocation Percentage" shall mean, with respect to any
Series, the percentage specified in the related Supplement.
"Principal Funding Account" shall mean, with respect to any
Series, the account, if any, specified in the related Supplement.
"Principal Receivables" shall mean all Receivables other than
Finance Charge Receivables or Defaulted Receivables. Principal
Receivables shall include the principal portion of Participation Interests
as shall be determined pursuant to, and only if so provided in, the
applicable Participation Interest Supplement or Series Supplement.
Collections of Principal Receivables also shall include the aggregate
Recoveries with respect to each Monthly Period not in excess of the
aggregate amount of Principal Receivables (other than Ineligible
Receivables) which became Defaulted Receivables during such Monthly
Period. In calculating the aggregate amount of Principal Receivables on
any day, the amount of Principal Receivables shall be reduced by the
aggregate amount of credit balances in the Accounts on such day. Any
Principal Receivables which the Transferor is unable to transfer as
provided in Section 2.11 shall not be included in calculating the amount of
Principal Receivables.
"Principal Sharing Series" shall mean a Series that, pursuant to
the Supplement therefor, is entitled to receive Shared Principal
Collections.
"Principal Shortfalls" shall have the meaning specified in
Section 4.4.
"Principal Terms" shall mean, with respect to any Series, (i) the
name or designation; (ii) the initial principal amount (or method for
calculating such amount), the Invested Amount, the Series Invested Amount
and the Required Series Transferor Amount, (iii) the Certificate Rate (or
method for the determination thereof); (iv) the payment date or dates and
the date or dates from which interest shall accrue; (v) the method for
allocating Collections to Investor Certificateholders; (vi) the designation
of any Series Accounts and the terms governing the operation of any such
Series Accounts; (vii) the Servicing Fee; (viii) the terms of any form of
Series Enhancements with respect thereto; (ix) the terms on which the
Investor Certificates of such Series may be exchanged for Investor
Certificates of another Series, repurchased by the Transferor or remarketed
to other investors; (x) the Series Termination Date; (xi) the number of
Classes of Investor Certificates of such Series and, if more than one
Class, the rights and priorities of each such Class; (xii) the extent to
which the Investor Certificates of such Series will be issuable in
temporary or permanent global form (and, in such case, the depositary for
such global certificate or certificates, the terms and conditions, if any,
upon which such global certificate may be exchanged, in whole or in part,
for Definitive Certificates, and the manner in which any interest payable
on a temporary or global certificate will be paid); (xiii) whether the
Investor Certificates of such Series may be issued in bearer form and any
limitations imposed thereon; (xiv) the priority of such Series with respect
to any other Series; (xv) whether such Series will be part of a Group;
(xvi) whether such Series will be a Principal Sharing Series, (xvii)
whether such Series will be an Excess Allocation Series, (xviii) the
Distribution Date for such Series, and (xix) any other terms of such
Series.
"Rating Agency" shall mean, with respect to any outstanding
Series or Class, each rating agency, as specified in the applicable
Supplement, selected by the Transferor to rate the Investor Certificates of
such Series or Class.
"Rating Agency Condition" shall mean, with respect to any action,
that the Rating Agency shall have notified the Transferor, the Servicer and
the Trustee in writing that such action will not result in a reduction or
withdrawal of the then existing rating of any outstanding Series or Class
with respect to which it is a Rating Agency.
"Ratings Event" with respect to any Class of any outstanding
Series of Investor Certificates rated by a Rating Agency, shall mean a
reduction or withdrawal of the rating of any such Class by a Rating Agency.
"Reassignment" shall have the meaning specified in Section 2.10.
"Receivables" shall mean all amounts shown on the Servicer's
records as amounts payable by Obligors on any Account from time to time,
including amounts owing for purchases of goods and services, cash advances
and Finance Charge Receivables. Receivables which become Defaulted
Receivables will cease to be included as Receivables as of the day on which
they become Defaulted Receivables. A Receivable shall be deemed to have
been created at the end of the Date of Processing of such Receivable.
"Receivables Purchase Agreement" shall mean, as applicable, (i)
the receivables purchase agreement between PFR and the Transferor, dated as
of January 29, 1998, as amended from time to time in accordance with the
terms thereof, (ii) any Account Owner Purchase Agreement, (iii) any
Account Originator Receivables Purchase Agreement, or (iv) any receivables
purchase agreement entered into by the Transferor and an Account Owner in
the future; provided, that (A) the Rating Agency Condition is satisfied
with respect to such receivables purchase agreement and (B) the Transferor
shall have delivered to the Trustee an Officer's Certificate to the effect
that such officer reasonably believes that the execution and delivery of
such receivables purchase agreement will not have an Adverse Effect.
"Record Date" shall mean, with respect to any Distribution Date,
the last day of the calendar month immediately preceding such Distribution
Date unless otherwise specified for a Series in the applicable Supplement.
"Recoveries" shall mean all amounts received (net of out-of-
pocket costs of collection) including Insurance Proceeds, with respect to
Defaulted Receivables, including the net proceeds of any sale of such
Defaulted Receivables by the Transferor.
"Registered Certificateholder" shall mean the Holder of a
Registered Certificate.
"Registered Certificates" shall have the meaning specified in
Section 6.1.
"Reinvestment Event" shall mean, if applicable with respect to
any Series, any Reinvestment Event specified in the related Supplement.
"Related Account" shall mean an Account with respect to which a
new credit account number has been issued by the applicable Account Owner
or Servicer or the Transferor under circumstances resulting from a lost or
stolen credit card and not requiring standard application and credit
evaluation procedures under the Credit Card Guidelines.
"Relevant UCC State" shall mean each jurisdiction in which the
filing of a UCC financing statement is necessary to evidence the security
interest of the Trustee established under this Agreement.
"Removal Date" shall have the meaning specified in Section 2.10.
"Removed Accounts" shall have the meaning specified in Section
2.10.
"Removed Participation Interests" shall have the meaning
specified in Section 2.10.
"Required Designation Date" shall have the meaning specified in
subsection 2.9(a).
"Required Minimum Principal Balance" shall mean, with respect to
any date, (a) the sum of the numerators used in the Principal Allocation
Percentage for each Series outstanding on such date minus (b) the Special
Funding Amount minus (c) the amount on deposit in the Principal Funding
Account for each Series outstanding on such date minus (d) the amount on
deposit in the Pre-Funding Account for each Series outstanding on such
date.
"Required Transferor Amount" shall mean, with respect to any
date, the sum of the Series Required Transferor Amounts for all Series
outstanding on such date.
"Requirements of Law" shall mean any law, treaty, rule or
regulation, or determination of an arbitrator or Governmental Authority,
whether Federal, state or local (including usury laws, the Federal Truth in
Lending Act and Regulation B and Regulation Z of the Board of Governors of
the Federal Reserve System), and, when used with respect to any Person, the
certificate of formation, certificate of incorporation and by-laws or other
organizational or governing documents of such Person.
"Responsible Officer" shall mean, when used with respect to the
Trustee, any officer within the Corporate Trust Office of the Trustee
including any vice president, assistant vice president, assistant
treasurer, assistant secretary, trust officer or any other officer of the
Trustee customarily performing functions similar to those performed by the
persons who at the time shall be such officers or to whom any corporate
trust matter is referred at the Corporate Trust Office because of such
officer's knowledge of and familiarity with the particular subject.
"Restart Date" shall mean the date specified in the notice
delivered by the Transferor to the Trustee pursuant to Section 2.9(h)
hereof.
"Returned Check Fees" shall have the meaning specified in the
Credit Card Agreement applicable to each Account for fees for returned
checks or similar terms.
"Revolving Period" shall mean, with respect to any Series, the
period specified in the related Supplement.
"Series" shall mean any series of Investor Certificates issued
pursuant to Section 6.3.
"Series Account" shall mean any deposit, trust, escrow or similar
account maintained for the benefit of the Investor Certificateholders of
any Series or Class, as specified in any Supplement.
"Series Adjusted Invested Amount" shall mean, with respect to any
Series and for any Monthly Period, the Series Invested Amount of such
Series, after subtracting therefrom the excess, if any, of the cumulative
amount (calculated in accordance with the terms of the related Supplement)
of investor charge-offs, subordination of principal collections and funding
the investor default amount or another Series allocable to the Invested
Amount for such Series as of the last day of the immediately preceding
Monthly Period over the aggregate reimbursement of such investor charge-
offs, subordination of principal collections and funding the investor
default amount for any other Class of Investor Certificates of such Series
or another Series as of such last day, or such lesser amount as may be
provided in the Series Supplement for such Series.
"Series Allocable Defaulted Amount" shall mean, with respect to
any Series and for any Monthly Period, the product of the Series Allocation
Percentage and the Defaulted Amount with respect to such Monthly Period.
"Series Allocable Finance Charge Collections" shall mean, with
respect to any Series and for any Monthly Period, the product of the Series
Allocation Percentage and the amount of Collections of Finance Charge
Receivables deposited in the Collection Account for such Monthly Period.
"Series Allocable Principal Collections" shall mean, with respect
to any Series and for any Monthly Period, the product of the Series
Allocation Percentage and the amount of Collections of Principal
Receivables deposited in the Collection Account for such Monthly Period.
"Series Allocation Percentage" shall mean, with respect to any
Series and for any Monthly Period, the percentage equivalent of a fraction,
the numerator of which is the Series Adjusted Invested Amount plus the
Series Required Transferor Amount as of the last day of the immediately
preceding Monthly Period and the denominator of which is the Trust Adjusted
Invested Amount plus the sum of all Series Required Transferor Amounts as
of such last day.
"Series Enhancement" shall mean the rights and benefits provided
to the Trust or the Investor Certificateholders of any Series or Class
pursuant to any letter of credit, surety bond, cash collateral account or
guaranty, collateral invested amount, spread account, yield supplement
account, guaranteed rate agreement, maturity liquidity facility, tax
protection agreement, notional principal contract, options, hedging
agreements, insurance policy or other similar arrangement. The
subordination of any Series or Class to another Series or Class shall be
deemed to be a Series Enhancement.
"Series Enhancer" shall mean the Person or Persons providing any
Series Enhancement, other than (except to the extent otherwise provided
with respect to any Series in the Supplement for such Series) the Investor
Certificateholders of any Series or Class which is subordinated to another
Series or Class.
"Series Invested Amount" shall have, with respect to any Series,
the meaning specified in the related Supplement.
"Series Issuance Date" shall mean, with respect to any Series,
the date on which the Investor Certificates of such Series are to be
originally issued in accordance with Section 6.3 and the related
Supplement.
"Series Required Transferor Amount" shall have the meaning, with
respect to any Series, specified in the related Supplement.
"Series Termination Date" shall mean, with respect to any Series,
the termination date for such Series specified in the related Supplement.
"Service Transfer" shall have the meaning specified in Section
10.1.
"Servicer" shall mean Holdings, in its capacity as Servicer
pursuant to this Agreement, and, after any Service Transfer, the Successor
Servicer.
"Servicer Default" shall have the meaning specified in Section
10.1.
"Servicer Interchange" shall have the meaning specified in
Section 3.2.
"Servicing Fee" shall have the meaning specified in Section 3.2.
"Servicing Fee Rate" shall mean, with respect to any Series, the
servicing fee rate specified in the related Supplement.
"Servicing Officer" shall mean 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 Trustee
by the Servicer, as such list may from time to time be amended.
"Shared Principal Collections" shall have the meaning specified
in Section 4.4.
"Special Funding Account" shall have the meaning set forth in
Section 4.2.
"Special Funding Amount" shall mean the amount on deposit in the
Special Funding Account.
"Standard & Poor's" shall mean Standard & Poor's Ratings Group or
its successor.
"Successor Servicer" shall have the meaning specified in
subsection 10.2(a).
"Supplement" shall mean, with respect to any Series, a supplement
to this Agreement, executed and delivered in connection with the original
issuance of the Investor Certificates of such Series pursuant to Section
6.3, and, with respect to any Participation Interest, an amendment to this
Agreement executed pursuant to Section 13.1, and, in either case, including
all amendments thereof and supplements thereto.
"Supplemental Certificate" shall have the meaning specified in
subsection 6.3(b).
"Tax Opinion" shall mean, with respect to any action, an Opinion
of Counsel to the effect that, for federal income tax purposes, (a) such
action will not adversely affect the tax characterization as debt of the
Investor Certificates of any outstanding Series or Class that was
characterized as debt at the time of its issuance, (b) following such
action the Trust will not be deemed to be an association (or publicly
traded partnership) taxable as a corporation, (c) such action will not
cause or constitute an event in which gain or loss would be recognized by
any Investor Certificateholder and (d) except as is otherwise provided in a
Supplement, in the case of subsection 6.3(b)(vi), the Investor Certificates
of the Series or class thereof established pursuant to such Supplement will
be properly characterized as debt.
"Termination Notice" shall have the meaning specified in
subsection 10.1(d).
"Termination Proceeds" shall have the meaning specified in
subsection 12.2(c).
"Transfer Agent and Registrar" shall have the meaning specified
in Section 6.4.
"Transfer Date" shall mean the Business Day immediately preceding
each Distribution Date.
"Transfer Restriction Event" shall have the meaning specified in
Section 2.11.
"Transferor" shall mean Partners First Receivables Funding, LLC,
a Delaware limited liability company and a wholly owned special purpose
subsidiary of PFR or its successor under this Agreement.
"Transferor LLC Agreement" shall mean the Limited Liability
Company Agreement of PFRF, dated as of January 26, 1998.
"Transferor Amount" shall mean on any date of determination an
amount equal to the difference between (I) the sum of (A) the aggregate
balance of Principal Receivables at the end of the day immediately prior to
such date of determination and (B) Special Funding Amount at the end of the
day immediately prior to such date of determination and (C) the aggregate
principal amounts on deposit in the Principal Funding Account and Pre-
Funding Account for each Series minus (II) the Aggregate Invested Amount at
the end of such day.
"Transferor Certificate" shall mean the certificate executed by
Partners First Receivables Funding, LLC and authenticated by or on behalf
of the Trustee, substantially in the form of Exhibit A, as the same may be
modified in accordance with Exhibit A.
"Transferor Certificates" shall mean, collectively, the
Transferor Certificate and any outstanding Supplemental Certificates.
"Transferor Percentage" shall have, with respect to each Series,
the meaning specified in the related Supplement
"Transferor's Interest" shall have the meaning specified in
Section 4.1.
"Transferred Account" shall mean each account into which an
Account shall be transferred provided that (i) such transfer was made in
accordance with the Credit Card Guidelines and (ii) such account can be
traced or identified as an account into which an Account has been
transferred.
"Trust" shall mean the Partners First Credit Card Master Trust
created by this Agreement.
"Trust Adjusted Invested Amount" shall mean, with respect to any
Monthly Period, the aggregate Series Adjusted Invested Amounts as adjusted
in any Supplement for all outstanding Series for such Monthly Period.
"Trust Assets" shall have the meaning specified in Section 2.1.
"Trustee" shall mean The Bank of New York, a New York banking
corporation, in its capacity as trustee on behalf of the Trust, or its
successor in interest, or any successor trustee appointed as herein
provided.
"Supplemental Certificate Supplement" shall have the meaning
specified in subsection 6.3(b).
"UCC" shall mean the Uniform Commercial Code, as amended from
time to time, as in effect in any specified jurisdiction.
"VISA" shall mean VISA USA, Inc., and its successors in interest.
Section 2.1 Other Definitional Provisions.
(a) With respect to any Series, all terms used herein and not
otherwise defined herein shall have meanings ascribed to them in the
related Supplement.
(b) 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.
(c) As used in this Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
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 given to them under generally accepted accounting
principles or regulatory accounting principles, as applicable and as in
effect on the date of this Agreement. To the extent that the definitions
of accounting terms in this Agreement or in any such certificate or other
document are inconsistent with the meanings of such terms under generally
accepted accounting principles or regulatory accounting principles in the
United States, the definitions contained in this Agreement or in any such
certificate or other document shall control.
(d) The agreements, representations and warranties of PFRF and
Holdings in this Agreement in each of their respective capacities as
Transferor and Servicer shall be deemed to be the agreements,
representations and warranties of PFRF and Holdings solely in each such
capacity for so long as PFRF and Holdings act in each such capacity under
this Agreement.
(e) Any reference to the Rating Agency shall only apply to any
specific rating agency if such rating agency is then rating any outstanding
Series.
(f) 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.
(g) The words "hereof", "herein" and "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 subsection, Section, Schedule or Exhibit are references to
subsections, Sections, Schedules and Exhibits in or to this Agreement
unless otherwise specified; and the term "including" means "including
without limitation."
[END OF ARTICLE I]
ARTICLE II
CONVEYANCE OF RECEIVABLES
Section 2.1 Conveyance of Receivables. By execution of this
Agreement, PFRF does hereby transfer, assign, set over, and otherwise
convey to the Trustee, on behalf of the Trust, for the benefit of the
Certificateholders, without recourse except as provided herein, all its
right, title and interest in, to and under (i) the Receivables existing at
the close of business on the Initial Issuance Date, in the case of
Receivables arising in the Initial Accounts, and on each Additional Cut-Off
Date, in the case of Receivables arising in the Additional Accounts, and in
each case thereafter created from time to time until the termination of the
Trust, all Interchange and Recoveries allocable to the Trust as provided
herein, all monies due or to become due and all amounts received with
respect thereto and all proceeds (including "proceeds" as defined in the
UCC) thereof and (ii) each Receivables Purchase Agreement. Such property,
together with the Collection Account, the Series Accounts and the Special
Funding Account and all monies on deposit in any such account, the rights
of the Trustee on behalf of the Trust under this Agreement and any
Supplement, the property conveyed to the Trustee on behalf of the Trust
under any Participation Interest Supplement, any Series Enhancement and the
right to receive Recoveries shall constitute the assets of the Trust (the
"Trust Assets"). The foregoing does not constitute and is not intended to
result in the creation or assumption by the Trust, the Trustee, any
Investor Certificateholder or any Series Enhancer of any obligation of any
Account Owner or the Transferor, the Servicer or any other Person in
connection with the Accounts or the Receivables or under any agreement or
instrument relating thereto, including any obligation to Obligors, merchant
banks, merchants clearance systems, VISA, MasterCard or insurers. The
Obligors shall not be notified in connection with the creation of the Trust
of the transfer, assignment, set-over and conveyance of the Receivables to
the Trust. The foregoing transfer, assignment, set-over and conveyance to
the Trust shall be made to the Trustee, on behalf of the Trust, and each
reference in this Agreement to such transfer, assignment, set-over and
conveyance shall be construed accordingly.
The Transferor agrees to record and file, at its own expense,
financing statements (and continuation statements when applicable) with
respect to the Receivables conveyed by the Transferor now existing and
hereafter created meeting the requirements of applicable state law in such
manner and in such jurisdictions as are necessary to perfect, and maintain
the perfection of, the transfer and assignment of its interest in such
Receivables to the Trust, and to deliver a file stamped copy of each such
financing statement or other evidence of such filing to the Trustee as soon
as practicable after the first Closing Date, in the case of Receivables
arising in the Initial Accounts, and (if any additional filing is so
necessary) as soon as practicable after the applicable Addition Date, in
the case of Receivables arising in Additional Accounts. The Trustee shall
be under no obligation whatsoever to file such financing or continuation
statements or to make any other filing under the UCC in connection with
such transfer and assignment.
The Transferor further agrees, at its own expense, (a) on or
prior to (x) the first Closing Date, in the case of the Initial Accounts,
(y) the applicable Addition Date, in the case of Additional Accounts, and
(z) the applicable Removal Date, in the case of Removed Accounts, to
indicate in the appropriate computer files that Receivables created (or
reassigned, in the case of Removed Accounts) in connection with the
Accounts have been conveyed to the Trust pursuant to this Agreement for the
benefit of the Certificateholders (or conveyed to the Transferor or its
designee in accordance with Section 2.10, in the case of Removed Accounts)
by including (or deleting in the case of Removed Accounts) in such computer
files the code identifying each such Account and (b) on or prior to (w) the
first Closing Date, in the case of the Initial Accounts, (x) the date that
is five Business Days after the applicable Addition Date, in the case of
Aggregate Additions, (y) the date that is 30 days after the applicable
Addition Date, in the case of New Accounts, and (z) the date that is five
Business Days after the applicable Removal Date, in the case of Removed
Accounts, to deliver, or cause to be delivered, to the Trustee, a copy of
the computer file or microfiche list delivered to the Transferor pursuant
to the related Receivables Purchase Agreement, containing a true and
complete list of all such Accounts specifying for each such Account, as of
the Initial Issuance Date, in the case of the Initial Accounts, the
applicable Additional Cut-Off Date in the case of Additional Accounts, and
the applicable Removal Date in the case of Removed Accounts, its account
number and, other than in the case of New Accounts, the aggregate amount
outstanding in such Account and the aggregate amount of Principal
Receivables outstanding in such Account. Each such file or list, as
supplemented, from time to time, to reflect Additional Accounts and Removed
Accounts, shall be marked as Schedule 1 to this Agreement and is hereby
incorporated into and made a part of this Agreement. The Transferor
further agrees not to alter the code referenced in this paragraph with
respect to any Account during the term of this Agreement unless and until
such Account becomes a Removed Account.
The Transferor hereby grants and transfers to the Trust, for the
benefit of the Certificateholders, a security interest in all of the
Transferor's right, title and interest in, to and under the Receivables and
all other Trust Assets, to secure a loan in an amount equal to the unpaid
principal amount of the Investor Certificates issued hereunder or to be
issued pursuant to this Agreement and the interest accrued at the related
Certificate Rate, and agrees that this Agreement shall constitute a
security agreement under applicable law.
Section 2.2 Acceptance by Trustee.
(a) The Trustee hereby acknowledges its acceptance on behalf of
the Trust of all right, title and interest to the property, now existing
and hereafter created, conveyed to the Trust pursuant to Section 2.1 and
declares that it shall maintain such right, title and interest, upon the
trust herein set forth, for the benefit of all Certificateholders. The
Trustee further acknowledges that, prior to or simultaneously with the
execution and delivery of this Agreement, the Transferor delivered to the
Trustee the computer file or microfiche list relating to the Initial
Accounts described in the penultimate paragraph of Section 2.1. The
Trustee shall maintain a copy of Schedule 1, as delivered from time to
time, at the Corporate Trust Office.
(b) The Trustee hereby agrees not to disclose to any Person any
of the account numbers or other information contained in the computer files
or microfiche lists marked as Schedule 1 and delivered to the Trustee, from
time to time, except (i) to a Successor Servicer or as required by a
Requirement of Law applicable to the Trustee, (ii) in connection with the
performance of the Trustee's duties hereunder, (iii) in enforcing the
rights of Certificateholders or (iv) to bona fide creditors or potential
creditors of any Account Originator, Account Owner, PFR or the Transferor
for the limited purpose of enabling any such creditor to identify
Receivables or Accounts subject to this Agreement or any Receivables
Purchase Agreement. The Trustee agrees to take such measures as shall be
reasonably requested by the Transferor to protect and maintain the security
and confidentiality of such information and, in connection therewith, shall
allow the Transferor or its duly authorized representatives to inspect the
Trustee's security and confidentiality arrangements as they specifically
relate to the administration of the Trust from time to time during normal
business hours upon prior written notice. The Trustee shall provide the
Transferor with notice five Business Days prior to disclosure of any
information of the type described in this subsection 2.2(b).
(c) The Trustee shall have no power to create, assume or incur
indebtedness or other liabilities in the name of the Trust other than as
contemplated in this Agreement.
Section 2.3 Representations and Warranties of the Transferor.
The Transferor hereby severally represents and warrants to the Trustee (and
agrees that the Trustee may conclusively rely on each such representation
and warranty in accepting the Receivables in trust and in authenticating
the Certificates) that:
(a) Organization and Good Standing. The Transferor is a limited
liability company validly existing under the laws of the jurisdiction of
its organization and has, in all material respects, full power and
authority to own its properties and conduct its business as presently owned
or conducted, and to execute, deliver and perform its obligations under
this Agreement, each Receivables Purchase Agreement and each applicable
Supplement and to execute and deliver to the Trustee the Certificates.
(b) Due Qualification. The Transferor is duly qualified to do
business and is in good standing as a foreign limited liability company and
has obtained all necessary licenses and approvals, in each jurisdiction in
which failure to so qualify or to obtain such licenses and approvals would
(i) render any Credit Card Agreement relating to an Account or any
Receivable conveyed to the Trust by the Transferor unenforceable by the
Transferor or the Trust or (ii) have a material adverse effect on the
Investor Certificateholders.
(c) Due Authorization. The execution and delivery of this
Agreement, each Receivables Purchase Agreement and each Supplement by the
Transferor and the execution and delivery to the Trustee of the
Certificates and the consummation by the Transferor of the transactions
provided for in this Agreement, each Receivables Purchase Agreement and
each Supplement have been duly authorized by the Transferor by all
necessary corporate action on the part of the Transferor.
(d) No Conflict. The execution and delivery by the Transferor
of this Agreement, each Receivables Purchase Agreement, each Supplement,
and the Certificates, the performance of the transactions contemplated by
this Agreement, each Receivables Purchase Agreement and each Supplement and
the fulfillment of the terms hereof and thereof applicable to the
Transferor, will not conflict with or violate any Requirements of Law
applicable to the Transferor 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 Transferor is a party or by which it or its properties are bound.
(e) No Proceedings. There are no proceedings or investigations,
pending or, to the best knowledge of the Transferor, threatened against the
Transferor before any Governmental Authority (i) asserting the invalidity
of this Agreement, each Receivables Purchase Agreement, each Supplement or
the Certificates, (ii) seeking to prevent the issuance of any of the
Certificates or the consummation of any of the transactions contemplated by
this Agreement, each Receivables Purchase Agreement, each Supplement or the
Certificates, (iii) seeking any determination or ruling that, in the
reasonable judgment of the Transferor, would materially and adversely
affect the performance by the Transferor of its obligations under this
Agreement, each Receivables Purchase Agreement or each Supplement, (iv)
seeking any determination or ruling that would materially and adversely
affect the validity or enforceability of this Agreement, each Receivables
Purchase Agreement, each Supplement or the Certificates or (v) seeking to
affect adversely the income or franchise tax attributes of the Trust under
the United States Federal or any State income or franchise tax systems.
(f) 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 Transferor in
connection with the execution and delivery by the Transferor of this
Agreement, each Receivables Purchase Agreement, each Supplement and the
Certificates and the performance of the transactions contemplated by this
Agreement and each Supplement by the Transferor have been duly obtained,
effected or given and are in full force and effect.
Section 2.4 Representations and Warranties of the Transferor
Relating to the Agreement and Any Supplement and the Receivables.
(a) Representations and Warranties. The Transferor hereby
severally represents and warrants to the Trustee as of the Initial Issuance
Date, each Closing Date and, with respect to Additional Accounts, as of the
related Addition Date that:
(i) this Agreement, each Receivables Purchase Agreement, each
Supplement and, in the case of Additional Accounts, the related
Assignment, each constitutes a legal, valid and binding obligation of
the Transferor enforceable against the Transferor in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally from time to time in effect
or general principles of equity;
(ii) as of the Initial Issuance Date and as of the related
Additional Cut-Off Date with respect to Additional Accounts, Schedule
1 to this Agreement, as supplemented to such date, is an accurate and
complete listing in all material respects of all the Accounts the
Receivables in which were transferred by the Transferor as of the
Initial Issuance Date or such Additional Cut-Off Date, as the case may
be, and the information contained therein with respect to the identity
of such Accounts and the Receivables existing thereunder is true and
correct in all material respects as of the Initial Issuance Date or
such Additional Cut-Off Date, as the case may be;
(iii) each Receivable conveyed to the Trust by the Transferor
has been conveyed to the Trust free and clear of any Lien of any
Person claiming through or under the Transferor or any of its
Affiliates (other than Liens permitted under subsection 2.7(b)).
(iv) all authorizations, consents, orders or approvals of or
registrations or declarations with any Governmental Authority required
to be obtained, effected or given by the Transferor in connection with
the conveyance by the Transferor of Receivables to the Trust have been
duly obtained, effected or given and are in full force and effect;
(v) either this Agreement or, in the case of Additional
Accounts, the related Assignment constitutes a valid sale, transfer
and assignment to the Trust of all right, title and interest of the
Transferor in the Receivables conveyed to the Trust and the proceeds
thereof and Recoveries and Interchange identified as relating to the
Receivables conveyed to the Trust or a grant of a first priority
perfected "security interest" (as defined in the UCC) in such property
to the Trust, which, in the case of existing Receivables and the
proceeds thereof and said Recoveries and Interchange, is enforceable
upon execution and delivery of this Agreement, or, with respect to
then existing Receivables in Additional Accounts, as of the applicable
Addition Date, and which will be enforceable with respect to such
Receivables hereafter and thereafter created and the proceeds thereof
upon such creation. Upon the filing of the financing statements and,
in the case of Receivables hereafter created and the proceeds thereof,
upon the creation thereof, the Trust shall have a first priority
perfected security or ownership interest in such property and
proceeds;
(vi) on the Initial Issuance Date, each Initial Account
specified in Schedule 1 is an Eligible Account and, on the applicable
Additional Cut-Off Date, each related Additional Account specified in
Schedule 1 is an Eligible Account;
(vii) on the Initial Issuance Date, each Receivable then
existing and conveyed to the Trust is an Eligible Receivable and, on
the applicable Additional Cut-Off Date, each Receivable contained in
the related Additional Accounts and conveyed to the Trust is an
Eligible Receivable; and
(viii) as of the date of the creation of any new Receivable in
an Account specified in a Receivables Purchase Agreement, such
Receivable is an Eligible Receivable.
(b) Notice of Breach. The representations and warranties set
forth in Section 2.3, this Section 2.4 and subsection 2.9(f) shall survive
the transfers and assignments of the Receivables to the Trust and the
issuance of the Certificates. Upon discovery by the Transferor, the
Servicer or the Trustee of a breach of any of the representations and
warranties set forth in Section 2.3, this Section 2.4 or subsection 2.9(f),
the party discovering such breach shall give notice to the other parties
and to each Series Enhancer within three Business Days following such
discovery; provided that the failure to give notice within three Business
Days does not preclude subsequent notice.
Section 2.5 Reassignment of Ineligible Receivables.
(a) Reassignment of Receivables. In the event (i) any
representation or warranty contained in subsection 2.4(a)(ii), (iii), (iv),
(vi), (vii) or (viii) is not true and correct in any material respect as of
the date specified therein with respect to any Receivable or the related
Account and such breach has a material adverse effect on the
Certificateholders' Interest in any Receivable (which determination shall
be made without regard to whether funds are then available pursuant to any
Series Enhancement) unless cured within 60 days (or such longer period, not
in excess of 120 days, as may be agreed to by the Trustee and the Servicer)
after the earlier to occur of the discovery thereof by the Transferor which
conveyed such Receivables to the Trust or receipt by the Transferor of
written notice thereof given by the Trustee or the Servicer, or (ii) it is
so provided in subsection 2.7(a) or 2.9(d)(iii) with respect to any
Receivables conveyed to the Trust by the Transferor, then the Transferor
shall accept reassignment of the Certificateholders' Interest in all
Receivables in the related Account ("Ineligible Receivables") on the terms
and conditions set forth in paragraph (b) below.
(b) Price of Reassignment. The Servicer shall deduct the
portion of such Ineligible Receivables reassigned to the Transferor which
are Principal Receivables from the aggregate amount of the Principal
Receivables used to calculate the Transferor Amount. In the event that,
following the exclusion of such Principal Receivables from the calculation
of the Transferor Amount, the Transferor Amount would be less than the
Required Transferor Amount, not later than 1:00 P.M., New York City time,
on the first Distribution Date following the Monthly Period in which such
reassignment obligation arises, the Transferor shall make a deposit into
the Special Funding Account in immediately available funds in an amount
equal to the amount by which the Transferor Amount would be below the
Required Transferor Amount (up to the amount of such Principal
Receivables).
Upon reassignment of any Ineligible Receivable, the Trustee, on
behalf of the Trust, shall automatically and without further action be
deemed to transfer, assign, set over and otherwise convey to the Transferor
or its designee, without recourse, representation or warranty, all the
right, title and interest of the Trust in and to such Ineligible
Receivable, all monies due or to become due and all proceeds thereof and
such reassigned Ineligible Receivable shall be treated by the Trust as
collected in full as of the date on which it was transferred. The
obligation of the Transferor to accept reassignment of any Ineligible
Receivables conveyed to the Trust by the Transferor, and to make the
deposits, if any, required to be made to the Special Funding Account as
provided in this Section, shall constitute the sole remedy respecting the
event giving rise to such obligation available to Certificateholders (or
the Trustee on behalf of the Certificateholders) or any Series Enhancer.
Notwithstanding any other provision of this subsection 2.5(b), a
reassignment of an Ineligible Receivable in excess of the amount that would
cause the Transferor Amount to be less than the Required Transferor Amount
shall not occur if the Transferor fails to make any deposit required by
this subsection 2.5(b) with respect to such Ineligible Receivable. The
Trustee shall execute such documents and instruments of transfer or
assignment and take such other actions as shall reasonably be requested and
provided by the Transferor to effect the conveyance of such Ineligible
Receivables pursuant to this subsection 2.5(b), but only upon receipt of an
Officer's Certificate from the Transferor that states that all conditions
set forth in this Section 2.5 have been satisfied.
Section 2.6 Reassignment of Certificateholders' Interest in
Trust Portfolio. In the event any representation or warranty of the
Transferor set forth in subsection 2.3(a) or (c) or subsection 2.4(a)(i) or
(v) is not true and correct in any material respect and such breach has a
material adverse effect on the Certificateholders' Interest in Receivables
conveyed to the Trust by the Transferor or the availability of the proceeds
thereof to the Trust (which determination shall be made without regard to
whether funds are then available pursuant to any Series Enhancement), then
either the Trustee or the Holders of Investor Certificates evidencing not
less than 50% of the aggregate unpaid principal amount of all outstanding
Investor Certificates, by notice then given to the Transferor and the
Servicer (and to the Trustee if given by the Investor Certificateholders),
may direct the Transferor to accept a reassignment of the
Certificateholders' Interest in the Receivables and any Participation
Interests conveyed to the Trust by the Transferor if such breach and any
material adverse effect caused by such breach is not cured within 60 days
of such notice (or within such longer period, not in excess of 120 days, as
may be specified in such notice), and upon those conditions the Transferor
shall be obligated to accept such reassignment on the terms set forth
below; provided, however, that such Receivables will not be reassigned to
the Transferor 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 in all material respects as if made on such day and (ii) the
Transferor shall have delivered to the Trustee a certificate of an
authorized officer describing the nature of such breach and the manner in
which the relevant representation and warranty has become true and correct.
The Transferor shall deposit in the Collection Account in
immediately available funds not later than 1:00 P.M., New York City time,
on the first Transfer Date following the Monthly Period in which such
reassignment obligation arises, in payment for such reassignment, an amount
equal to the sum of the amounts specified therefor with respect to each
outstanding Series in the related Supplement. Notwithstanding anything to
the contrary in this Agreement, such amounts shall be distributed to the
Investor Certificateholders on such Distribution Date in accordance with
the terms of each Supplement. If the Trustee or the Investor
Certificateholders give notice directing the Transferor to accept a
reassignment of the Certificateholders' Interest in the Receivables as
provided above, the obligation of the Transferor to accept such
reassignment pursuant to this Section and to make the deposit required to
be made to the Collection Account as provided in this paragraph shall
constitute the sole remedy respecting an event of the type specified in the
first sentence of this Section available to the Certificateholders (or the
Trustee on behalf of the Certificateholders) or any Series Enhancer.
Section 2.7 Covenants of the Transferor. The Transferor hereby
covenants that:
(a) Receivables Not To Be Evidenced by Promissory Notes. Except
in connection with its enforcement or collection of an Account, the
Transferor will take no action to cause any Receivable conveyed by it to
the Trust to be evidenced by any instrument (as defined in the UCC) and if
any such Receivable (or any underlying receivable) is so evidenced as a
result of any action of the Transferor it shall be deemed to be an
Ineligible Receivable in accordance with Section 2.5(a) and shall be
reassigned to the Transferor in accordance with Section 2.5(b).
(b) Security Interests. Except for the conveyances hereunder,
the Transferor will not sell, pledge, assign or transfer to any other
Person, or grant, create, incur, assume or suffer to exist any Lien on, any
Receivable or Participation Interest conveyed by it to the Trust, whether
now existing or hereafter created, or any interest therein, and the
Transferor shall defend the right, title and interest of the Trust in, to
and under the Receivables and any Participation Interest, whether now
existing or hereafter created, against all claims of third parties claiming
through or under the Transferor; provided, however, that nothing in this
Section 2.7(b) shall prevent or be deemed to prohibit the Transferor from
suffering to exist upon any of the Receivables or Participation Interests
any Liens for taxes if such taxes shall not at the time be due and payable
or if the Transferor shall currently be contesting the validity thereof in
good faith by appropriate proceedings and shall have set aside on its books
adequate reserves with respect thereto. Notwithstanding the foregoing,
nothing in this Section 2.7(b) shall be construed to prevent or be deemed
to prohibit the transfer of the Transferor Certificate and certain other
rights of the Transferor in accordance with the terms of this Agreement and
any related Supplement.
(c) Transferor's Interest. Except for the conveyances
hereunder, in connection with any transaction permitted by Section 7.2 and
Section 6.3 or any other transaction in connection with which the Rating
Agency Condition has been satisfied and the Transferor has delivered to the
Trustee a Tax Opinion, the Transferor agrees not to transfer, sell, assign,
exchange, participate or pledge, hypothecate or otherwise convey or grant a
security interest in the Transferor's Interest represented by the
Transferor Certificate and any such attempted transfer, assignment,
exchange, conveyance, pledge, hypothecation, grant or sale shall be void.
(d) Delivery of Collections or Recoveries. In the event that
the Transferor receives Collections or Recoveries, the Transferor agrees to
pay the Servicer all such Collections and Recoveries as soon as practicable
after receipt thereof.
(e) Notice of Liens. The Transferor shall notify the Trustee and
each Series Enhancer promptly after becoming aware of any Lien on any
Receivable (or on the underlying receivable) or Participation Interest
conveyed by it to the Trust other than the conveyances hereunder and under
each Receivables Purchase Agreement.
(f) Amendment of the Certificate of Formation. The Transferor
will not amend in any material respect the Transferor LLC Agreement or its
certificate of formation without providing the Rating Agency with notice no
later than the fifth Business Day prior to such amendment (unless the right
to such notice is waived by the Rating Agency) and satisfying the Rating
Agency Condition.
(g) Other Indebtedness. The Transferor shall not incur any
additional debt, unless the Rating Agency is provided with notice no later
than the fifth Business Day prior to the incurrence of such additional debt
(unless the right to such notice is waived by the Rating Agency) and the
Rating Agency Condition is satisfied with respect to the incurrence of such
debt.
(h) Separate Corporate Existence. The Transferor shall:
(i) maintain its corporate existence and remain in good standing
under the laws of the State of Delaware;
(ii) observe all procedures required by its certificate of
formation, the Transferor LLC Agreement and the laws of the State of
Delaware;
(iii) ensure that (x) the business and affairs of the Transferor
are at all times managed by or under the direction of its Board of
Directors, (y) its Board of Directors shall have duly authorized all
corporate actions requiring such authorization and, (z) when
necessary, the Transferor shall have obtained proper authorization for
corporate action from its stockholder;
(iv) at all times includes at least two Independent Managers (as
such term is defined in the Transferor LLC Agreement);
(v) maintain separate corporate records and books of account
from those of any Affiliate and keep correct and complete books and
records of account and minutes of the meetings and other proceedings
of its stockholder and Board of Directors;
(vi) pay the fair market rent for any office space located in
the office of any Affiliate and a fair share of any overhead costs;
(vii) maintain separate bank accounts and books of account from
those of its Affiliates and ensure that its funds and other assets
shall at all times be readily distinguishable from the funds and other
assets of its Affiliates and not be commingled with the funds or other
assets of its Affiliates;
(viii) pay from its own separate funds all material liabilities
incurred by it, including material operating and administrative
expenses; provided that the organizational expenses of the Transferor
and expenses relating to the preparation, negotiation, execution and
delivery of the documentation with respect to the issuance of the
Certificates or notes that it may issue from time to time may be paid
by an Affiliate. No general overhead or administrative expenses of
any Affiliate shall be charged or otherwise allocated to the
Transferor unless such general overhead or administrative expenses are
directly attributable to services provided to or for the account of
the Transferor.
(ix) conduct its business solely in its own name so as not to
mislead others as to its identity or the identity of any Affiliate.
All oral and written communications of the Transferor, including
without limitation letters, invoices, purchase orders, contracts,
statements, and applications shall be made solely in the name of the
Transferor;
(x) not make any guaranty with respect to the obligations of any
Affiliate and no Affiliate shall make any guaranty with respect to the
obligations of the Transferor;
(xi) ensure that there will be no intercompany debt between the
Transferor and any Affiliate; provided, that the stockholder of the
Transferor may contribute capital to the Transferor in such amounts as
are necessary to assure that such Transfer has adequate capital for
its business and the Transferor may issue subordinated notes in the
amount and manner specified in the Receivables Purchase Agreement;
(xii) act solely in its own name and through its duly authorized
officers or agents in the conduct of its business and at all times
maintain an arm's length relationship with its Affiliates. The
Transferor shall not: (v) hold itself out as having agreed to pay or
become liable for the debts of any Affiliate; (w) fail to correct any
known misrepresentation with respect to the Transferor's agreement to
pay or become liable for the debts of any Affiliate; (x) operate or
purport to operate as an integrated, single economic unit with any
Affiliate in its dealings with any other Person; (y) seek or obtain
credit or incur any obligation to any Person based upon the assets of
an Affiliate or unaffiliated entity; or (z) induce any Person
reasonably to rely on the creditworthiness of any Affiliate in its
dealings with the Transferor;
(xiii) disclose in any financial statements the effects of the
transactions contemplated herein and in each Receivables Purchase
Agreement in accordance with generally accepted accounting principles.
Such financial statements shall (x) clearly indicate the separate
existence of the Transferor and its Affiliates, (y) reflect the
Transferor's separate assets and liabilities and (z) record the
purchase of the Receivables pursuant to the applicable Receivables
Purchase Agreement as a purchase under generally accepted accounting
principles;
(xiv) on or before December 31 of each year, commencing December
31, 1998, deliver to the Rating Agency an Officer's Certificate
certifying that the Transferor has complied with all of the
requirements of the foregoing clauses (i) through (xiii) during the
preceding year, or in the case of the first such Officer's
Certificate, during the period commencing on the Initial Series
Issuance Date; provided, however, that the Transferor shall not be
required to deliver such Officer's Certificate with respect to any
year, if the Transferor shall otherwise have delivered to the Rating
Agency an Officer's Certificate to the same effect on or after June 30
of the applicable year.
(i) Interchange. With respect to any Distribution Date, on or
prior to the immediately preceding Determination Date, the Servicer shall
notify the Transferor of the amount of Interchange required to be included
as Collections of Finance Charge Receivables with respect to such Monthly
Period, which amount for any Series shall be specified in the related
Supplement. Not later than 1:00 p.m., New York City time, on the related
Transfer Date, the Transferor shall deposit into the Collection Account, in
immediately available funds, the amount of Interchange to be so included as
Collections of Finance Charge Receivables with respect to such Monthly
Period.
Section 2.8 Covenants of the Transferor with Respect to
Receivables Purchase Agreement. The Transferor, in its capacity as
purchaser of Receivables from PFR or an Account Owner pursuant to a
Receivables Purchase Agreement, hereby covenants that the Transferor will
at all times enforce the covenants and agreements of PFR, or such Account
Owner, as applicable, in such Receivables Purchase Agreement, including,
without limitation, the covenants to the effect set forth below:
(a) Periodic Rate Finance Charges. (i) Except (x) as otherwise
required by any Requirements of Law or (y) as is deemed by the related
Account Owner to be necessary in order for it to maintain its credit card
business or a program operated by such credit card business on a
competitive basis based on a good faith assessment by it of the nature of
the competition with respect to the credit card business or such program,
it shall not at any time take any action which would have the effect of
reducing the Portfolio Yield to a level that could be reasonably expected
to cause any Series to experience any Pay Out Event or Reinvestment Event
based on the insufficiency of the Portfolio Yield or any similar test and
(ii) except as otherwise required by any Requirements of Law, it shall not
take any action which would have the effect of reducing the Portfolio Yield
to less than the highest current Average Rate for any Group.
(b) Credit Card Agreements and Guidelines. Subject to
compliance with all Requirements of Law and paragraph (a) above any Account
Owner may change the terms and provisions of the applicable Credit Card
Agreements or the applicable Credit Card Guidelines in any respect
(including the calculation of the amount or the timing of charge-offs and
the Periodic Rate Finance Charges to be assessed thereon). Notwithstanding
the above, unless required by Requirements of Law or as permitted by
Section 2.8(a), no Account Owner will take any action with respect to the
applicable Credit Card Agreements or the applicable Credit Card Guidelines,
which, at the time of such action, the Account Owner reasonably believes
will have a material adverse effect on the Investor Certificateholders.
The Transferor further covenants that it will not enter into any
amendments to a Receivables Purchase Agreement or enter into a new
Receivables Purchase Agreement unless the Rating Agency Condition has been
satisfied.
Section 2.9 Addition of Accounts.
(a) Required Additional Accounts. (i) If, as of the close of
business on the last Business Day of any calendar month, (a) the total
amount of Principal Receivables is less than the Required Minimum Principal
Balance on such date or (b) the Transferor Amount is less than the Required
Transferor Amount on such date, the Transferor shall on or prior to the
close of business on the tenth Business Day of the next succeeding calendar
month (the "Required Designation Date"), cause to be designated additional
Eligible Accounts to be included as Accounts as of the Required Designation
Date or any earlier date in a sufficient amount (or such lesser amount as
shall represent all Eligible Accounts constituting VISA and MasterCard
consumer revolving credit card accounts then available to the Transferor
under the Receivables Purchase Agreements) such that, after giving effect
to such addition the aggregate principal balance of Principal Receivables,
conveyed to the Trust as of the close of business on the Addition Date is
at least equal to the Required Minimum Principal Balance on such date and
the Transferor Amount is at least equal to the Required Transferor Amount
on such date.
(ii) In lieu of, or in addition to, causing the designation of
Additional Accounts pursuant to clause (i) above, the Transferor may (but
shall not be required), subject to the conditions specified in paragraph
(c) below, convey to the Trust participations (including 100%
participations) representing undivided interests in a pool of assets
primarily consisting of revolving credit card receivables, consumer loan
receivables (secured and unsecured), charge card receivables, and any
interests in any of the foregoing, including securities representing or
backed by such receivables, and other self-liquidating financial assets
including any "Eligible Assets" as such term is defined in Rule 3a-7 under
the Investment Company Act (or any successor to such Rule) and collections,
together with all earnings, revenue, dividends, distributions, income,
issues and profits thereon ("Participation Interests"). Receivables shall
not be treated as a Participation Interest for purposes of this Agreement.
The addition of Participation Interests in the Trust pursuant to this
paragraph (a) or paragraph (b) below shall be effected by a Participation
Interest Supplement, dated the applicable Addition Date and entered into
pursuant to Section 13.1(a).
(iii) Any Additional Accounts or Participation Interests
designated to be included as Trust Assets pursuant to clauses (i) or (ii)
above may only be so included if (x) Standard & Poor's shall have notified
the Transferor, the Servicer and the Trustee in writing that such addition
will not result in a reduction or withdrawal of the then existing rating of
any outstanding Series or Class with respect to which Standard & Poor's is
a Rating Agency, (y) the applicable conditions specified in paragraph (c)
below have been satisfied and (z) Moody's shall have received prior written
notice of any such designation of Additional Accounts or Participation
Interests pursuant to clauses (i) or (ii) above..
(b) Permitted Aggregate Additions. The Transferor may from time
to time, at its sole discretion, subject to the conditions specified in
paragraph (c) below, voluntarily cause the designation of additional
Eligible Accounts to be included as Accounts or Participation Interests to
be included as Trust Assets, in either case as of a specified Additional
Cut-Off Date.
(c) Conditions to Aggregate Additions. On the Addition Date
with respect to any Aggregate Additions, the transfer of the Receivables in
Aggregate Addition Accounts (and such Aggregate Addition Accounts shall be
deemed to be Accounts for purposes of this Agreement) or Participation
Interests as of the close of business on the applicable Additional Cut-Off
Date, shall be subject to the satisfaction of the following conditions:
(i) on or before the eighth Business Day immediately preceding
the Addition Date, the Transferor shall have given the Trustee, the
Servicer and the Rating Agency notice (unless such notice requirement
is otherwise waived) that the Aggregate Addition Accounts or
Participation Interests will be included and specifying the applicable
Addition Date and Additional Cut-Off Date;
(ii) all Aggregate Addition Accounts shall be Eligible Accounts;
(iii) the Transferor shall have delivered to the Trustee copies
of UCC-1 financing statements covering such Aggregate Addition
Accounts, if necessary to perfect the Trust's interest in the
Receivables arising therein;
(iv) to the extent required by Section 4.3, the Transferor shall
have deposited in the Collection Account all Collections with respect
to such Aggregate Addition Accounts since the Additional Cut-Off Date;
(v) as of each of the Additional Cut-Off Date and the Addition
Date, no Insolvency Event with respect to the related Account Owner,
the Servicer, PFR or the Transferor shall have occurred nor shall the
transfer to the Trust of the Receivables arising in the Aggregate
Addition Accounts or of the Participation Interests have been made in
contemplation of the occurrence thereof;
(vi) solely with respect to Aggregate Additions designated
pursuant to subsection 2.9(b), the Rating Agency Condition shall have
been satisfied;
(vii) the Transferor shall have delivered to the Trustee an
Officer's Certificate, dated the Addition Date, confirming, to the
extent applicable, the items set forth in clauses (ii) through (vi)
above;
(viii) the addition to the Trust of the Receivables arising in
the Aggregate Addition Accounts or of the Participation Interests will
not result in an Adverse Effect and, in the case of Aggregate
Additions, the Transferor shall have delivered to the Trustee an
Officer's Certificate, dated the Addition Date, stating that the
Transferor reasonably believes that the addition to the Trust of the
Receivables arising in the Aggregate Addition Accounts or of the
Participation Interests will not have an Adverse Effect; and
(ix) the Transferor shall have delivered to the Trustee and the
Rating Agency an Opinion of Counsel, dated the Addition Date, in
accordance with subsection 13.2(d)(ii) or (iv), as applicable.
(d) New Accounts.
(i) The Transferor may from time to time, in its sole
discretion, subject to and in compliance with the limitations
specified in clause (ii) below and the conditions specified in
paragraph (e) below, voluntarily designate newly originated Eligible
Accounts to be included as New Accounts. For purposes of this
paragraph, Eligible Accounts shall be deemed to include only
MasterCard and VISA revolving credit card accounts of the same nature
as those included as Initial Accounts or which have previously been
included in any Aggregate Addition if the Assignment related to such
Aggregate Addition expressly provides that such type of revolving
credit card account is permitted to be designated as a New Account.
(ii) Unless and until the Rating Agency otherwise consents in
writing, the Transferor shall not be permitted to designate New
Accounts and, upon obtaining such consent, the number and balance of
New Accounts designated with respect to any period designated by the
Rating Agency shall not exceed the amounts designated by the Rating
Agency.
(e) Conditions to Addition of New Accounts. On the Addition
Date with respect to any New Accounts, the transfer of the Receivables in
such New Accounts as of the close of business on the applicable Additional
Cut-Off Date and the designation of such New Accounts as Accounts shall be
subject to the satisfaction of the following conditions:
(i) the New Accounts shall all be Eligible Accounts;
(ii) the Transferor shall have delivered to the Trustee copies
of UCC-1 financing statements covering such New Accounts, if necessary
to perfect the Trust's interest in the Receivables arising therein;
(iii) to the extent required by Section 4.3, the Transferor
shall have deposited in the Collection Account all Collections with
respect to such New Accounts since the Additional Cut-Off Date;
(iv) as of each of the Additional Cut-Off Date and the Addition
Date, no Insolvency Event with respect to the related Account Owner,
the Servicer, PFR or the Transferor, shall have occurred nor shall the
transfer to the Trust of the Receivables arising in the New Accounts
have been made in contemplation of the occurrence thereof; and
(v) the addition of the Receivables arising in the New Accounts
to the Trust will not result in the occurrence of a Pay Out Event or
Reinvestment Event.
(f) Representations and Warranties. The Transferor conveying
Additional Accounts or Participation Interests hereby represents and
warrants to the Trust as of the related Addition Date as to the matters set
forth in clauses (v) and (viii) of subsection 2.9(c) above and that, in the
case of Additional Accounts, the list delivered pursuant to paragraph (h)
below is, as of the applicable Additional Cut-Off Date, true and complete
in all material respects.
(g) Delivery of Documents. In the case of the designation of
Additional Accounts, the Transferor designating such Accounts shall deliver
to the Trustee (i) the computer file or microfiche list required to be
delivered pursuant to Section 2.1 with respect to such Additional Accounts
on the date such file or list is required to be delivered pursuant to
Section 2.1 (the "Document Delivery Date") and (ii) a duly executed,
written Assignment (including an acceptance by the Trustee for the benefit
of the Certificateholders), substantially in the form of Exhibit B (the
"Assignment"), on the Document Delivery Date. In addition, in the case of
the designation of New Accounts, the Transferor shall deliver to the
Trustee on the Document Delivery Date an Officer's Certificate confirming,
to the extent applicable, the items set forth in clauses (i) through (v) of
subsection 2.9(e) above.
(h) The Transferor may determine, in its sole discretion, that
commencing on a specified date (the "Automatic Addition Commencement Date")
it shall designate that all Eligible Accounts shall be included as Accounts
subject to satisfaction of the following conditions: the number of
Accounts the Receivables of which are designated to be included in the
Trust pursuant to this subsection 2.9(h) since (i) the first day of the
eleventh preceding Monthly Period (or, in the case of any date on which
Additional Accounts are to be added to the Trust which occurs on or before
the last day of the eleventh Monthly Period following the Automatic
Addition Commencement Date, the Automatic Addition Commencement Date) minus
the number of Accounts of the type described in clause (k) of the
definition of "Eligible Account" which have been added on the initial day
of the addition of such type of Account pursuant to such clause (k) since
the first day of such eleventh preceding Monthly Period (or Automatic
Addition Commencement Date, as the case may be) minus any Removed Accounts
removed since the first day of such eleventh preceding Monthly Period (or
Automatic Addition Commencement Date, as the case may be) shall not exceed
20% (or such other percentage as the Rating Agency may require) of the
number of Accounts on the first day of such eleventh preceding Monthly
Period (or Automatic Addition Commencement Date, as the case may be), and
(ii) the first day of the second preceding Monthly Period (or, in the case
of any date on which Additional Accounts are to be added to the Trust which
occurs on or before the last day of the second Monthly Period following the
Automatic Addition Commencement Date, the Automatic Addition Commencement
Date) minus the number of Accounts of the type described in clause (k) of
the definition of "Eligible Accounts" which have been added on the initial
day of the addition of such type of Account pursuant to such clause (k)
since the first day of such second preceding Monthly Period (or Automatic
Addition Commencement Date, as the case may be) minus any Removed Accounts
removed since the first day of such second preceding Monthly Period (or
Automatic Addition Commencement Date, as the case may be) shall not exceed
15% (or such other percentage as the Rating Agency may require) of the
number of Accounts on the first day of such second preceding Monthly Period
(or Automatic Addition Commencement Date, as the case may be).
For all purposes of this Agreement, all receivables of such
Additional Accounts shall be treated as Receivables upon their creation and
shall be subject to the eligibility criteria specified in the definitions
of "Eligible Receivable" and "Eligible Account." Notwithstanding the
foregoing, the Transferor may elect at any time, or may be required if the
percentages described above are exceeded, to suspend the automatic
inclusion in Accounts of new accounts which would otherwise be Additional
Accounts as of any Business Day (the "Automatic Addition Suspension Date"),
or terminate any such inclusion as of any Business Day (an "Automatic
Addition Termination Date") until a date (the "Restart Date") to be
identified in writing by the Transferor to the Trustee, the Servicer and
the Rating Agency at least 10 days prior to such Restart Date. Promptly
after an Automatic Addition Suspension Date or any Automatic Addition
Termination Date, or a Restart Date, the Transferor and the Trustee agree
to execute and the Transferor agrees to record and file at its own expense
an amendment to the financing statements referred to in Section 2.1 hereof
to specify the accounts then subject to this Agreement (which specification
may incorporate a list of accounts by reference) and may, except in
connection with any such filing made after a Restart Date, release any
security interest in any accounts created after the Automatic Addition
Suspension Date or any Automatic Addition Termination Date.
Section 2.10 Removal of Accounts and Participation Interests.
On any day of any Monthly Period the Transferor shall have the right to
require the reassignment to it or its designee of all the Trust's right,
title and interest in, to and under the Receivables then existing and
thereafter created, all monies due or to become due and all amounts
received thereafter with respect thereto and all proceeds thereof in or
with respect to the Accounts specified in a Receivables Purchase Agreement
(the "Removed Accounts") or Participation Interests conveyed to the Trust
by the Transferor (the "Removed Participation Interests") (unless otherwise
set forth in the applicable Participation Interest Supplement or Series
Supplement) and designated for removal by the Transferor, upon satisfaction
of the conditions in clauses (i), (iii), (iv) and (v) below:
(i) on or before the eighth Business Day immediately preceding
the Removal Date, the Transferor shall have given the Trustee, the
Servicer, the Rating Agency and each Series Enhancer notice (unless
such notice requirement is otherwise waived) of such removal and
specifying the date for removal of the Removed Accounts and removed
Participation Interests (the "Removal Date");
(ii) on or prior to the date that is five Business Days after
the Removal Date, the Transferor shall amend Schedule 1 by delivering
to the Trustee a computer file or microfiche list containing a true
and complete list of the Removed Accounts specifying for each such
Account, as of the date notice of the Removal Date is given, its
account number, the aggregate amount outstanding in such Account and
the aggregate amount of Principal Receivables outstanding in such
Account;
(iii) the Transferor shall have represented and warranted as of
the Removal Date that the list of Removed Accounts delivered pursuant
to paragraph (ii) above, as of the Removal Date, is true and complete
in all material respects;
(iv) the Rating Agency Condition shall have been satisfied with
respect to the removal of the Removed Accounts and removed
Participation Interests; and
(v) the Transferor shall have delivered to the Trustee an
Officer's Certificate, dated the Removal Date, to the effect that the
Transferor reasonably believes that (a) such removal will not have an
Adverse Effect, and (b) (I) no selection procedures believed by the
Transferor to be materially adverse to the interests of the Investor
Certificateholders have been used in selecting the Removed Accounts or
(II) a random selection procedure was used by the Transferor in
selecting the Removed Accounts.
Upon satisfaction of the above conditions, the Trustee shall
execute and deliver to the Transferor a written reassignment in
substantially the form of Exhibit C (the "Reassignment") and shall, without
further action, be deemed to sell, transfer, assign, set over and otherwise
convey to the Transferor or its designee, effective as of the Removal Date,
without recourse, representation or warranty, all the right, title and
interest of the Trust in and to the Receivables arising in the Removed
Accounts and Removed Participation Interests, all monies due and to become
due and all amounts received with respect thereto and all proceeds thereof
and any Insurance Proceeds relating thereto. The Trustee may conclusively
rely on the Officer's Certificate delivered pursuant to this Section 2.10
and shall have no duty to make inquiries with regard to the matters set
forth therein and shall incur no liability in so relying.
In addition to the foregoing, on the date when any Receivable in
an Account becomes a Defaulted Receivable, the Trust shall automatically
and without further action or consideration be deemed to transfer, set over
and otherwise convey to the Transferor, without recourse, representation or
warranty, all right, title and interest of the Trust in and to the
Defaulted Receivables in such Account, all monies due or to become due with
respect thereto, all proceeds thereof and any Insurance Proceeds relating
thereto; provided, that Recoveries of such Account shall be applied as
provided herein.
The foregoing conditions may be amended with the consent of the
Rating Agency but without the consent of Certificateholders if such
amendment is required to comply with any accounting or regulatory
restrictions to which the Trust, Holdings, the Transferor, PFR, any Account
Originator or any Account Owner may become subject.
Section 2.11 Account Allocations. In the event that the
Transferor is unable for any reason to transfer Receivables to the Trust in
accordance with the provisions of this Agreement, including by reason of
the application of the provisions of Section 9.1 or any order of any
Governmental Authority (a "Transfer Restriction Event"), then, in any such
event, (a) the Transferor and the Servicer agree (except as prohibited by
any such order) to allocate and pay to the Trust, after the date of such
inability, all Collections, including Collections of Receivables
transferred to the Trust prior to the occurrence of such event, and all
amounts which would have constituted Collections but for the Transferor's
inability to transfer Receivables (up to an aggregate amount equal to the
amount of Receivables transferred to the Trust by the Transferor in the
Trust on such date), (b) the Transferor and the Servicer agree that such
amounts will be applied as Collections in accordance with Article IV and
the terms of each Supplement and (c) for so long as the allocation and
application of all Collections and all amounts that would have constituted
Collections are made in accordance with clauses (a) and (b) above,
Principal Receivables and all amounts which would have constituted
Principal Receivables but for the Transferor's inability to transfer
Receivables to the Trust which are written off as uncollectible in
accordance with this Agreement shall continue to be allocated in accordance
with Article IV and the terms of each Supplement. For the purpose of the
immediately preceding sentence, the Transferor and the Servicer shall treat
the first received Collections with respect to the Accounts as allocable to
the Trust until the Trust shall have been allocated and paid Collections in
an amount equal to the aggregate amount of Principal Receivables in the
Trust as of the date of the occurrence of such event. If the Transferor
and the Servicer are unable pursuant to any Requirements of Law to allocate
Collections as described above, the Transferor and the Servicer agree that,
after the occurrence of such event, payments on each Account with respect
to the principal balance of such Account shall be allocated first to the
oldest principal balance of such Account and shall have such payments
applied as Collections in accordance with Article IV and the terms of each
Supplement. The parties hereto agree that Finance Charge Receivables,
whenever created, accrued in respect of Principal Receivables which have
been conveyed to the Trust shall continue to be a part of the Trust
notwithstanding any cessation of the transfer of additional Principal
Receivables to the Trust and Collections with respect thereto shall
continue to be allocated and paid in accordance with Article IV and the
terms of each Supplement.
Section 2.12 Discount Option.
(a) The Transferor shall have the option to designate at any
time and from time to time a percentage or percentages, which may be a
fixed percentage or a variable percentage based on a formula (the "Discount
Percentage"), of all or any specified portion of Principal Receivables
created after the Discount Option Date to be treated as Finance Charge
Receivables ("Discount Option Receivables"). The Transferor shall also
have the option of reducing or withdrawing the Discount Percentage, at any
time and from time to time, on and after such Discount Option Date;
provided, however, such reduction or withdrawal shall occur only if the
Transferor delivers to the Trustee and, in connection with certain Series,
the applicable Series Enhancers, a certificate of an authorized
representative to the effect that, in the reasonable belief of the
Transferor, such reduction or withdrawal would not have adverse regulatory
or other accounting implications for the Transferor. The Transferor shall
provide to the Servicer, the Trustee and any Rating Agency 30 days' prior
written notice of the Discount Option Date, and such designation shall
become effective on the Discount Option Date only if (a) the Transferor has
delivered to the Trustee and any such Series Enhancer a certificate of an
authorized representative to the effect that, based on the facts known to
such representative at the time, the Transferor reasonably believes that
such designation or reduction or withdrawal will not at the time of its
occurrence cause a Pay Out Event or Reinvestment Event or an event that,
with notice or the lapse of time or both, would constitute a Pay Out Event
or Reinvestment Event, to occur with respect to any Series and (b) the
Transferor has received written notice from the Rating Agency that such
designation, reduction or withdrawal will satisfy the Rating Agency
Condition .
(b) After the Discount Option Date, Discount Option Receivable
Collections shall be treated as Collections of Finance Charge Receivables.
Section 2.13 Premium Option.
(a) The Transferor shall have the option to designate at any
time and from time to time a percentage or percentages, which may be a
fixed percentage or a variable percentage based on a formula (the "Premium
Percentage"), of all or any specified portion of Finance Charge Receivables
created after the Premium Option Date to be treated as Principal
Receivables ("Premium Option Receivables"). The Transferor shall also have
the option of reducing or withdrawing the Premium Percentage, at any time
and from time to time, on and after such Premium Option Date; provided,
however, that such reduction or withdrawal may occur only if the Transferor
delivers to the Trustee and, in connection with certain Series, the
applicable Series Enhancers, a certificate of an authorized representative
to the effect that, in the reasonable belief of the Transferor, such
reduction or withdrawal would not have adverse regulatory or other
accounting implications for the Transferor. The Transferor shall provide
to the Servicer, the Trustee and any Rating Agency 30 days' prior written
notice of the Premium Option Date, and such designation shall become
effective on the Premium Option Date only if (a) the Transferor has
delivered to the Trustee and any such Series Enhancer a certificate of an
authorized representative to the effect that, based on the facts known to
such representative at the time, the Transferor reasonably believes that
such designation, reduction or withdrawal will not at the time of its
occurrence cause a Pay Out Event or Reinvestment Event or an event that,
with notice or the lapse of time or both, would constitute a Pay Out Event
or Reinvestment Event, to occur with respect to any Series, (b) the
Transferor has received written notice from the Rating Agency that such
designation, reduction or withdrawal will satisfy the Rating Agency
Condition and (c) the Transferor has delivered a Tax Opinion to the Trustee
and the Rating Agency
(b) After the Premium Option Date, Premium Option Receivables
Collections shall be treated as Collections of Principal Receivables.
[END OF ARTICLE II]
ARTICLE III
ADMINISTRATION AND SERVICING
OF RECEIVABLES
Section 3.1 Acceptance of Appointment and Other Matters Relating
to the Servicer.
(a) Holdings agrees to act as the Servicer under this Agreement
and the Certificateholders by their acceptance of Certificates consent to
Holdings acting as Servicer. Notwithstanding the foregoing or any other
provisions of this Agreement or any Supplement, the Investor
Certificateholders consent to any Account Owner acting as Servicer
hereunder, in full substitution for Holdings; provided that such Account
Owner acting as Servicer shall (i) be an Eligible Servicer and (ii)
expressly assume in writing (unless such assumption occurs by operation of
law), by an agreement supplemental hereto, executed and delivered to the
Trustee, the performance of every covenant and obligation of the Servicer,
as applicable hereunder, and shall in all respects be designated the
Servicer under this Agreement.
(b) As agent for the Transferor and the Trust, the Servicer
shall service and administer the Receivables and any Participation
Interests, shall collect and deposit into the Collection Account payments
due under the Receivables and any Participation Interests 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 Credit Card Guidelines. As
agent for the Transferor and the Trust, 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; provided, however,
that subject to the rights of the Trustee and the Certificateholders
hereunder, PFRF shall have the absolute right to direct the Servicer with
respect to any power conferred on the Servicer hereunder in accordance with
any such direction. Without limiting the generality of the foregoing and
subject to Section 10.1, the Servicer or its designee is hereby authorized
and empowered, unless such power is revoked by the Trustee on account of
the occurrence of a Servicer Default pursuant to Section 10.1, (i) to
instruct the Trustee to make withdrawals and payments from the Collection
Account, the Special Funding Account and any Series Account, as set forth
in this Agreement or any Supplement, (ii) to take any action required or
permitted under any Series Enhancement, as set forth in this Agreement or
any Supplement, (iii) to execute and deliver, on behalf of the Trust for
the benefit of the Certificateholders, 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 proceedings with respect to such Receivables and (iv) 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. The Trustee shall furnish the
Servicer with any documents 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 credit card
receivables.
(d) The Servicer shall comply with and perform its servicing
obligations with respect to the Accounts and Receivables in accordance with
the Credit Card Agreements relating to the Accounts and the Credit Card
Guidelines and all applicable rules and regulations of MasterCard and VISA,
except insofar as any failure to so comply or perform would not materially
and adversely affect the Trust or the Investor Certificateholders.
(e) The Servicer shall pay out of its own funds, without
reimbursement, all expenses incurred in connection with the Trust and the
servicing activities hereunder including expenses related to enforcement of
the Receivables, fees and disbursements of the Trustee (including the
reasonable fees and expenses of its outside counsel) and independent
accountants and all other fees and expenses, including the costs of filing
UCC continuation statements, the costs and expenses relating to obtaining
and maintaining the listing of any Investor Certificates on any stock
exchange and any stamp, documentary, excise, property (whether on real,
personal or intangible property) or any similar tax levied on the Trust or
the Trust's assets that are not expressly stated in this Agreement to be
payable by the Trust or the Transferor (other than federal, state, local
and foreign income and franchise taxes, if any, or any interest or
penalties with respect thereto, assessed on the Trust).
Section 3.2 Servicing Compensation. As full compensation for
its servicing activities hereunder and as reimbursement for any expense
incurred by it in connection therewith, the Servicer shall be entitled to
receive a servicing fee (the "Servicing Fee") with respect to each Monthly
Period, payable monthly on the related Distribution Date, in an amount
equal to one-twelfth of the product of (a) the weighted average of the
Servicing Fee Rates with respect to each outstanding Series (based upon the
Servicing Fee Rate for each Series and the Invested Amount (or such other
amount as specified in the related Supplement) of such Series, in each case
as of the last day of the prior Monthly Period) and (b) the amount of
Principal Receivables on the last day of the prior Monthly Period. The
share of the Servicing Fee allocable to the Certificateholders' Interest of
a particular Series with respect to any Monthly Period (the "Monthly
Servicing Fee") will be determined in accordance with the relevant
Supplement. For any Monthly Period, the portion of the Monthly Servicing
Fee with respect to any Series payable from Interchange shall be an amount
equal to the portion of collections of Finance Charge Receivables allocated
to the Certificateholders' Interest of such Series with respect to such
Monthly Period that is attributable to Interchange (the "Servicer
Interchange"); provided, however, that Servicer Interchange for a Monthly
Period may not exceed one-twelfth of the product of the Series Adjusted
Investor Amount, as of the last day of such Monthly Period and the
percentage specified in the related Supplement. The portion of the
Servicing Fee with respect to any Monthly Period not so allocated to the
Certificateholders' Interest of any particular Series shall be paid by the
Holders of the Transferor Certificates on the related Distribution Date and
in no event shall the Trust, the Trustee, the Investor Certificateholders
of any Series or any Series Enhancer be liable for the share of the
Servicing Fee with respect to any Monthly Period to be paid by the Holders
of the Transferor Certificates.
Section 3.3 Representations, Warranties and Covenants of the
Servicer. Holdings, as initial Servicer, hereby makes, and any Successor
Servicer by its appointment hereunder shall make, with respect to itself,
on each Closing Date (and on the date of any such appointment), the
following representations, warranties and covenants on which the Trustee
shall be deemed to have relied in accepting the Receivables in trust and in
authenticating the Certificates:
(a) Organization and Good Standing. The Servicer is a limited
liability company, corporation or other legal entity validly existing under
the applicable law of the jurisdiction of its organization or incorporation
and has, in all material respects, full power and authority to own its
properties and conduct its credit card servicing business as presently
owned or conducted, and to execute, deliver and perform its obligations
under this Agreement and each Supplement.
(b) Due Qualification. The Servicer is duly qualified to do
business and is in good standing as a foreign limited liability company or
other foreign entity (or is exempt from such requirements) and has obtained
all licenses and approvals required under the laws of each jurisdiction in
which the ownership or lease of its property or the conduct of its business
(other than the performance of its obligations hereunder) requires such
qualification, standing, license or approval, except to the extent that the
failure to so qualify, maintain such standing or be so licensed or approved
would not, in the aggregate, adversely effect the enforceability of the
Receivables. Either the Servicer is qualified to do business as a foreign
limited liability company, corporation or other foreign entity, is in good
standing, and has obtained all licenses and approvals as required under the
laws of all jurisdictions in which the performance of its obligations
pursuant to this Agreement requires such qualification, standing, license
or approval or the Servicer will have delegated its duties hereunder (in
accordance with subsection 8.7) to subservicers which, when taken together
with the Servicer are, in the aggregate, qualified to do business as a
foreign limited liability company, corporation or other foreign entity, are
in good standing, and have obtained all licenses and approvals as required
under the laws of all jurisdictions in which the performance by the
Servicer of its obligations pursuant to this Agreement requires such
qualification, standing, license or approval, except to the extent that the
failure to so qualify, maintain such standing or be so licensed or approved
would not, in the aggregate, materially and adversely affect the ability of
the Servicer to comply with this Agreement or to perform its obligations
hereunder or adversely effect the enforceability of the Receivables.
(c) Due Authorization. The execution, delivery, and performance
of this Agreement and each Supplement, and the other agreements and
instruments executed or to be executed by the Servicer as contemplated
hereby, have been duly authorized by the Servicer by all necessary action
on the part of the Servicer.
(d) Binding Obligation. This Agreement and each Supplement
constitutes a legal, valid and binding obligation of the Servicer,
enforceable in accordance with its terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally from time to
time in effect or by general principles of equity.
(e) No Conflict. The execution and delivery of this Agreement
and each Supplement by the Servicer, and the performance of the
transactions contemplated by this Agreement and each Supplement and the
fulfillment of the terms hereof and thereof applicable to the Servicer,
will not conflict with, violate or result in any breach of any of the terms
and provisions of, or constitute (with or without notice or lapse of time
or both) a default under, any 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 which would have an Adverse Effect.
(f) No Violation. The execution and delivery of this Agreement
and each Supplement by the Servicer, the performance of the transactions
contemplated by this Agreement and each Supplement and the fulfillment of
the terms hereof and thereof applicable to the Servicer will not conflict
with or violate any Requirements of Law applicable to the Servicer in a
manner which would have an Adverse Effect.
(g) 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 seeking to prevent the
consummation of any of the transactions contemplated by this Agreement or
any Supplement or seeking any determination or ruling that, in the
reasonable judgment of the Servicer, would materially and adversely affect
the performance by the Servicer of its obligations under this Agreement or
any Supplement.
(h) 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 underlying 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 the failure to comply with which
would have an Adverse Effect.
(i) No Rescission or Cancellation. The Servicer shall not
permit any rescission or cancellation of any Receivable (or the underlying
receivable) except in accordance with the Credit Card Guidelines or as
ordered by a court of competent jurisdiction or other Governmental
Authority.
(j) Protection of Certificateholders' Rights. The Servicer shall
take no action which, nor omit to take any action the omission of which,
would impair the rights of Certificateholders in any Receivable (or the
underlying receivable) or the related Account, if any, nor shall it
reschedule, revise or defer payments due on any Receivable except in
accordance with the Credit Card Guidelines.
(k) Receivables Not To Be Evidenced by Promissory Notes. Except
in connection with its enforcement or collection of an Account, the
Servicer will take no action to cause any Receivable to be evidenced by any
instrument, other than an instrument that, taken together with one or more
other writings, constitutes chattel paper (as such terms are defined in the
UCC) and if any Receivable is so evidenced it shall be reassigned or
assigned to the Servicer as provided in this Section.
(l) 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 of this Agreement and each
Supplement by the Servicer and the performance of the transactions
contemplated by this Agreement and each Supplement by the Servicer, have
been duly obtained, effected or given and are in full force and effect;
provided, however, that the Servicer makes no representation or warranty
regarding state securities or "blue sky" laws in connection with the
distribution of the Certificates.
(m) Computer Records. The Servicer shall update its computer
files with respect the Accounts on a daily basis.
In the event (x) any of the representations, warranties or
covenants of the Servicer contained in subsection 3.3 (h), (i), (j) or (l)
with respect to any Receivable or the related Account is breached, and such
breach has a material adverse effect on the Certificateholders' Interest in
such Receivable (which determination shall be made without regard to
whether funds are then available to any Investor Certificateholders
pursuant to any Series Enhancement) and is not cured within 60 days (or
such longer period, not in excess of 150 days, as may be agreed to by the
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 Trustee or the Transferor, or (y) as provided in
subsection 3.3(k) with respect to any Receivable, 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.
The Servicer shall effect such assignment by making a deposit
into the Collection Account in immediately available funds on the 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 reassignment or assignment to the Servicer, the
Trustee, on behalf of the Trust, shall automatically and without further
action be deemed to transfer, assign, set over and otherwise convey to the
Servicer, without recourse, representation or warranty, all right, title
and interest of the Trust in and to such Receivables, all monies due or to
become due and all amounts received with respect thereto and all proceeds
thereof. The Trustee 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 Receivables
pursuant to this Section but only upon receipt of an Officer's Certificate
of the Servicer that states that all conditions set forth in this section
have been satisfied. The obligation of the Servicer to accept reassignment
or assignment of such Receivables, 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 available to Certificateholders (or the Trustee on
behalf of Certificateholders) or any Series Enhancer, except as provided in
Section 8.4.
Section 3.4 Reports and Records for the Trustee.
(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 Trustee upon request a record setting forth (i) the
Collections in respect of Principal Receivables and in respect of Finance
Charge Receivables processed by the Servicer on the second preceding
Business Day in respect of each Account and (ii) the amount of Receivables
as of the close of business on the second preceding Business Day in each
Account. The Servicer shall, at all times, maintain its computer files
with respect to the Accounts in such a manner so that the Accounts may be
specifically identified and shall make available to the Trustee at the
office of the Servicer on any Business Day any computer programs necessary
to make such identification. The Trustee shall enter into such reasonable
confidentiality agreements as the Servicer shall deem necessary to protect
its interests and as are reasonably acceptable in form and substance to the
Trustee.
(b) Monthly Servicer's Certificate. Not later than the second
Business Day preceding each Distribution Date, the Servicer shall, with
respect to each outstanding Series, deliver to the Trustee and the Rating
Agency a certificate of a Servicing Officer in substantially the form set
forth in the related Supplement.
Section 3.5 Annual Certificate of Servicer. The Servicer shall
deliver to the Trustee and the Rating Agency on or before March 31 of each
calendar year, beginning with March 31, 1998, an Officer's Certificate
substantially in the form of Exhibit D.
Section 3.6 Annual Servicing Report of Independent Public
Accountants; Copies of Reports Available.
(a) On or before June 30 of each calendar year, beginning with
June 30, 1999, the Servicer shall cause a firm of nationally recognized
independent public accountants (who may also render other services to the
Servicer or the Transferor) to furnish a report (addressed to the Trustee)
to the Trustee, the Servicer and the Rating Agency to the effect such
accounting firm has made a study and evaluation of the Servicer's internal
accounting controls relative to the servicing of the Accounts and that, on
the basis of such examination, such firm is of the opinion that, assuming
the accuracy of reports by the Servicer's third party agents, the system of
internal accounting controls in effect on the date of such statement
relating to servicing procedures performed by the Servicer, taken as a
whole, was sufficient for the prevention and detection of errors and
irregularities in amounts that would be material to the financial
statements of the Servicer and that such servicing was conducted in
compliance with the sections of this Agreement during the period covered by
such report (which shall be the period from July 1) or for the initial
period, the relevant Closing Date) of the preceding calendar year to and
including June 30 of such calendar year), except for such exceptions or
errors as such firm shall believe to be immaterial and such other
exceptions as shall be set forth in such statement.
(b) On or before June 30 of each calendar year, beginning with
June 30, 1999, the Servicer shall cause a firm of nationally recognized
independent public accountants (who may also render other services to the
Servicer or the Transferor) to furnish a report to the Trustee, the
Servicer and each Rating Agency, to the effect that they have randomly
selected three of the 12 monthly certificates forwarded by the Servicer
pursuant to subsection 3.4(b) during the period covered by such report
(which shall be the 12-month period ending on December 31 of the preceding
calendar year) and have compared the amounts set forth therein with the
Servicer's computer reports which were the source of such amounts and found
them to be in agreement or shall disclose any exceptions noted and that
they have recalculated the mathematical accuracy of amounts derived in such
monthly certificates; provided, however, that the Servicer shall cause such
accountants to furnish such report with respect to a larger number of
months within such 12 month period if so requested in writing by the Rating
Agency; provided, further, that upon the occurrence of a charge-off with
respect to any Investor Certificate, the Servicer shall cause such
accountants to furnish such report with respect to all 12 of the monthly
certificates forwarded by the Servicer during such 12-month period.
(c) A copy of each certificate and report provided pursuant to
subsection 3.4(b), or Section 3.5 or 3.6 may be obtained by any Investor
Certificateholder or Certificate Owner by a request in writing to the
Trustee addressed to the Corporate Trust Office.
Section 3.7 Tax Treatment. The Transferor has entered into this
Agreement, and the Certificates will be issued with the intention that,
unless otherwise specified in any Supplement, for Federal, state and local
income and franchise tax purposes, the Investor Certificates (except any
Certificates held by the Transferor) of each Series will qualify as debt
secured by the Receivables. The Transferor, by entering into this
Agreement, each Certificateholder, by the acceptance of its Certificate
(and each Certificate Owner, by its acceptance of an interest in the
applicable Certificate), agree to treat the Investor Certificates for
Federal, state and local income and franchise tax purposes as debt. Each
Holder of an Investor Certificate agrees that it will cause any Certificate
Owner acquiring an interest in an Investor Certificate through it to comply
with this Agreement as to treatment as debt under applicable tax law, as
described in this Section 3.7. Furthermore, subject to Section 11.11 or
unless the Transferor shall determine that the filing of returns is
appropriate, the Trustee shall treat the Trust as a security device only
and shall not file tax returns or obtain an employer identification number
on behalf of the Trust and none of the parties hereto shall make the
election provided for in Treasury Regulation Section 301.7701-3(c).
Section 3.8 Notices to Holdings. In the event that Holdings is
no longer acting as Servicer, any Successor Servicer shall deliver or make
available to Holdings each certificate and report required to be provided
thereafter pursuant to subsection 3.4(b) and Sections 3.5 and 3.6.
Section 3.9 Adjustments.
(a) If the Servicer adjusts downward the amount of any
Receivable because of a rebate, refund, unauthorized charge or billing
error to a cardholder, because such Receivable was created in respect of
merchandise which was refused or returned by a cardholder, or if the
Servicer otherwise adjusts downward the amount of any Receivable without
receiving Collections therefor or charging off such amount as
uncollectible, then, in any such case, the amount of Principal Receivables
used to calculate the Transferor Amount, the Transferor's Interest, and
(unless otherwise specified) any other amount required herein or in any
Supplement 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
and (unless otherwise specified) any other amount required herein or in any
Supplement to be calculated by reference to the amount of Principal
Receivables will be reduced by the principal amount of any Receivable which
was discovered as having been created through a fraudulent or counterfeit
charge or with respect to which the covenant contained in subsection 2.7(b)
was breached. Any adjustment required pursuant to either of the two
preceding sentences shall be made on or prior to the end of the Monthly
Period in which such adjustment obligation arises. In the event that,
following the exclusion of such Principal Receivables from the calculation
of the Transferor Amount, the Transferor Amount would be less than the
Required Transferor Amount, not later than 1:00 P.M., New York City time,
on the Distribution Date following the Monthly Period in which such
adjustment obligation arises, the Transferor shall make a deposit into the
Special Funding Account in immediately available funds in an amount equal
to the amount by which the Transferor Amount would be less than the
Required Transferor Amount, due to adjustments with respect to Receivables
conveyed by such the Transferor (up to the amount of such Principal
Receivables) (any such payment, an "Adjustment Payment"). Any amount
deposited into the Special Funding Account pursuant to the preceding
sentence shall be considered Collections of Principal Receivables and shall
be applied in accordance with Article IV and the terms of each Supplement;
provided, however, that any such amounts paid by the Transferor after the
time period specified in the preceding sentence, to the extent of any
related Adjustment Payment Shortfall, shall not be deposited in the Special
Funding Account but shall be considered Collections of Finance Charge
Receivables and shall be applied in accordance with Article IV and the
Supplement.
(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 shall not require any change in any report
previously delivered pursuant to subsection 3.4(a).
Section 3.10 Reports to the Commission. The Servicer shall, on
behalf of the Trust, cause to be filed with the Commission any periodic
reports required to be filed under the provisions of the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Commission thereunder. The Transferor shall, at the expense of the
Servicer, cooperate in any reasonable request of the Servicer in connection
with such filings.
[END OF ARTICLE III]
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
Section 4.1 Rights of Certificateholders. The Investor
Certificates shall represent undivided interests in the Trust, which, with
respect to each Series, shall consist of the right to receive, to the
extent necessary to make the required payments with respect to the Investor
Certificates of such Series at the times and in the amounts specified in
the related Supplement, the portion of Collections allocable to Investor
Certificateholders of such Series pursuant to this Agreement and such
Supplement, funds on deposit in the Collection Account and the Special
Funding Account allocable to Certificateholders of such Series pursuant to
this Agreement and such Supplement, funds on deposit in any related Series
Account and funds available pursuant to any related Series Enhancement
(collectively, with respect to all Series, the "Certificateholders'
Interest"), it being understood that, except as specifically set forth in
the Supplement with respect thereto, the Investor Certificates of any
Series or Class shall not represent any interest in any Series Account or
Series Enhancement for the benefit of any other Series or Class. The
Transferor Certificates shall represent the ownership interest in the Trust
Assets not allocated pursuant to this Agreement or any Supplement to the
Certificateholders' Interest, and the right to receive Collections with
respect to the Receivables and other amounts at the times and in the
amounts specified in any Supplement to be paid to the Transferor on behalf
of all Holders of the Transferor Certificates (the "Transferor's
Interest"); provided, however, that the Transferor Certificates shall not
represent any interest in the Collection Account, any Series Account or any
Series Enhancement, except as specifically provided in this Agreement or
any Supplement.
Section 4.2 Establishment of Collection Account and Special
Funding Account. The Servicer, for the benefit of the Certificateholders,
shall establish and maintain in the name of the Trustee, on behalf of the
Trust, an Eligible Deposit Account bearing a designation clearly indicating
that the funds deposited therein are held for the benefit of the
Certificateholders (the "Collection Account"). The Trustee shall possess
all right, title and interest in all monies, instruments, securities,
documents, certificates of deposit and other property on deposit from time
to time in the Collection Account and in all proceeds, earnings, income,
revenue, dividends and distributions thereof for the benefit of the
Certificateholders.
The Collection Account shall be under the sole dominion and
control of the Trustee for the benefit of the Certificateholders. Except
as expressly provided in this Agreement, the Servicer agrees that it shall
have no right of setoff or banker's lien against, and no right to otherwise
deduct from, any funds held in the Collection Account for any amount owed
to it by the Trustee, the Trust, any Certificateholder or any Series
Enhancer. If, at any time, the Collection Account ceases to be an Eligible
Deposit Account, the Servicer shall provide written notice thereof to the
Rating Agency, and the Trustee (or the Servicer on its behalf) shall
within 10 Business Days (or such longer period, not to exceed 30 calendar
days, as to which the Rating Agency may consent) establish a new Collection
Account meeting the conditions specified above, transfer any monies,
documents, instruments, securities, certificates of deposit and other
property to such new Collection Account and from the date such new
Collection Account is established, it shall be the "Collection Account."
Pursuant to the authority granted to the Servicer in subsection 3.1(b), the
Servicer shall have the power, revocable by the Trustee, to make
withdrawals and payments from the Collection Account and to instruct the
Trustee to make withdrawals and payments from the Collection Account for
the purposes of carrying out the Servicer's or the Trustee's duties
hereunder. The Servicer shall reduce deposits into the Collection Account
payable by the Transferor on any Deposit Date to the extent the Transferor
is entitled to receive funds from the Collection Account on such Deposit
Date, but only to the extent such reduction would not reduce the Transferor
Amount to an amount less than the Required Transferor Amount.
Funds on deposit in the Collection Account (other than investment
earnings and amounts deposited pursuant to Sections 2.6, 9.1, 10.1 or 12.2)
shall at the written direction of the Servicer be invested by the Trustee
in Eligible Investments selected by the Servicer. All such Eligible
Investments shall be held by the Trustee for the benefit of the
Certificateholders. The Trustee shall maintain for the benefit of the
Certificateholders possession of the instruments, documents, certificates
of deposit or securities, if any, evidencing such Eligible Investments.
Investments of funds representing Collections collected during any Monthly
Period shall be invested in Eligible Investments that will mature so that
such funds will be available no later than the close of business on each
monthly Transfer Date following such Monthly Period. No such Eligible
Investment shall be disposed of prior to its maturity; provided, however,
that the Trustee may sell, liquidate or dispose of any such Eligible
Investment before its maturity, at the written direction of the Servicer,
if such sale, liquidation or disposal would not result in a loss of all or
part of the principal portion of such Eligible Investment or if, prior to
the maturity of such Eligible Investment, a default occurs in the payment
of principal, interest or any other amount with respect to such Eligible
Investment. Unless directed by the Servicer, funds deposited in the
Collection Account on a Transfer Date with respect to the immediately
succeeding Distribution Date are not required to be invested overnight. On
each Distribution Date, all interest and other investment earnings (net of
losses and investment expenses) on funds on deposit in the Collection
Account shall be treated as Collections of Finance Charge Receivables with
respect to the last day of the related Monthly Period, except as otherwise
specified in any Supplement. The Trustee shall bear no responsibility or
liability for any losses resulting from investment or reinvestment of any
funds in accordance with this Section 4.2 nor for the selection of Eligible
Investments in accordance with the provisions of this Agreement.
The Servicer, for the benefit of the Certificateholders, shall
establish and maintain in the name of the Trustee, on behalf of the Trust,
an Eligible Deposit Account bearing a designation clearly indicating that
the funds deposited therein are held for the benefit of the
Certificateholders (the "Special Funding Account"). The Trustee shall
possess all right, title and interest in all monies, instruments,
securities, documents, certificates of deposit and other property on
deposit from time to time in the Special Funding Account and in all
proceeds, dividends, distributions, earnings, income and revenue thereof
for the benefit of the Certificateholders. The Special Funding Account
shall be under the sole dominion and control of the Trustee for the benefit
of the Certificateholders. Except as expressly provided in this Agreement,
the Servicer agrees that it shall have no right of setoff or banker's lien
against, and no right to otherwise deduct from, any funds held in the
Special Funding Account for any amount owed to it by the Trustee, the
Trust, any Certificateholder or any Series Enhancer. If, at any time, the
Special Funding Account ceases to be an Eligible Deposit Account, the
Trustee (or the Servicer on its behalf) shall within 10 Business Days (or
such longer period, not to exceed 30 calendar days, as to which the Rating
Agency may consent) establish a new Special Funding Account meeting the
conditions specified above, transfer any monies, documents, instruments,
securities, certificates of deposit and other property to such new Special
Funding Account and from the date such new Special Funding Account is
established, it shall be the "Special Funding Account."
Funds on deposit in the Special Funding Account shall at the
written direction of the Servicer (who may be directed by the Transferor,
at its option) be invested by the Trustee in Eligible Investments selected
by the Servicer. All such Eligible Investments shall be held by the
Trustee for the benefit of the Certificateholders. The Trustee shall
maintain for the benefit of the Certificateholders possession of the
instruments, documents, certificates of deposit or securities, if any,
evidencing such Eligible Investments. Funds on deposit in the Special
Funding Account on any Distribution Date will be invested in Eligible
Investments that will mature so that such funds will be available no later
than the next succeeding Business Day. No such Eligible Investment shall
be disposed of prior to its maturity; provided, however, that the Trustee
may sell, liquidate or dispose of an Eligible Investment before its
maturity, at the written direction of the Servicer (who may be directed by
the Transferor, at its option) or if, prior to the maturity of such
Eligible Investment, a default occurs in the payment of principal, interest
or any other amount with respect to such Eligible Investment. Unless
directed by the Servicer, funds deposited in the Special Funding Account on
a Transfer Date with respect to the immediately succeeding Distribution
Date are not required to be invested overnight. On each Distribution Date,
all interest and other investment earnings (net of losses and investment
expenses) on funds on deposit in the Special Funding Account shall be
treated as Collections of Finance Charge Receivables with respect to the
last day of the related Monthly Period except as otherwise specified in the
related Supplement. On each Business Day on which funds are on deposit in
the Special Funding Account and on which no Series is in an Accumulation
Period or Amortization Period, the Servicer shall determine the amount (if
any) by which the Transferor Amount exceeds the Required Transferor Amount
on such date and shall instruct the Trustee to withdraw any such excess
from the Special Funding Account and pay such amount to the Holders of the
Transferor Certificates; provided, however, that, if an Accumulation Period
or Amortization Period has commenced and is continuing with respect to one
or more outstanding Series, any funds on deposit in the Special Funding
Account shall be treated as Shared Principal Collections and shall be
allocated and distributed in accordance with Section 4.4 and the terms of
each Supplement.
Section 4.3 Collections and Allocations.
(a) The Servicer will apply or will instruct the Trustee to
apply all funds on deposit in the Collection Account as described in this
Article IV and in each Supplement. Except as otherwise provided below, the
Servicer shall deposit Collections into the Collection Account as promptly
as possible after the Date of Processing of such Collections, but in no
event later than the second Business Day following the Date of Processing.
Subject to the express terms of any Supplement, but notwithstanding
anything else in this Agreement to the contrary, for so long as either (i)
Holdings remains the Servicer and Holdings or an Affiliate of Holdings
acceptable to the Rating Agencies maintains a short-term rating of not less
than A-1 by Standard & Poor and P-1 by Moody's and a certificate of deposit
rating of not less than A-1 by Standard & Poor's and P-1 by Moody's and no
Pay Out Event or Reinvestment Event shall have occurred or (ii) Holdings
shall have otherwise made arrangements which satisfy the Rating Agency
Condition, the Servicer need not make the daily deposits of Collections
into the Collection Account as provided in the preceding sentence, but may
make a single deposit in the Collection Account in immediately available
funds not later than 1:00 P.M., New York City time, on the Transfer Date
following the Monthly Period with respect to which such deposit relates.
In the event that neither of the foregoing conditions is satisfied, then
Holdings shall commence making daily deposits of Collections into the
Collection Account as provided above, within five Business Days of the date
on which neither of such conditions shall have been satisfied. Subject to
the first proviso in Section 4.4, but notwithstanding anything else in this
Agreement to the contrary, with respect to any Monthly Period, whether the
Servicer is required to make deposits of Collections pursuant to the first
or the second preceding sentence, (i) the Servicer will only be required to
deposit Collections into the Collection Account up to the aggregate amount
of Collections required to be deposited into any Series Account or, without
duplication, distributed on or prior to the related Distribution Date to
Investor Certificateholders or to any Series Enhancer pursuant to the terms
of any Supplement or Enhancement Agreement and (ii) if at any time prior to
such Distribution Date the amount of Collections deposited in the
Collection Account exceeds the amount required to be deposited pursuant to
clause (i) above, the Servicer will be permitted to withdraw the excess
from the Collection Account. Subject to the immediately preceding
sentence, the Servicer may retain its Servicing Fee with respect to a
Series and shall not be required to deposit it in the Collection Account.
(b) Collections of Finance Charge Receivables and Principal
Receivables and Defaulted Amounts will be allocated to each Series on the
basis of the Series Allocable Finance Charge Collections of such Series,
Series Allocable Principal Collections of such Series and Series Allocable
Defaulted Amount of such Series and amounts so allocated to any Series will
not, except as specified in the related Supplement, be available to the
Investor Certificateholders of any other Series. Allocations of the
foregoing amounts between the Certificateholders' Interest and the
Transferor's Interest, among the Series and among the Classes in any
Series, shall be set forth in the related Supplement or Supplements.
Section 4.4 Shared Principal Collections. On each Distribution
Date, (a) the Servicer shall allocate Shared Principal Collections (as
described below) to each Principal Sharing Series, pro rata, in proportion
to the Principal Shortfalls, if any, with respect to each such Series and
(b) the Servicer shall withdraw from the Collection Account and pay to the
Holders of the Transferor Certificates an amount equal to the excess, if
any, of (x) the aggregate amount for all outstanding Series of Collections
of Principal Receivables which the related Supplements specify are to be
treated as "Shared Principal Collections" for such Distribution Date over
(y) the aggregate amount for all outstanding Series which the related
Supplements specify are "Principal Shortfalls" for such Series and for such
Distribution Date; provided, however, that if the Transferor Amount as of
such Distribution Date (determined after giving effect to the Principal
Receivables or Participation Interests transferred to the Trust on such
date) is less than the Required Transferor Amount, the Servicer will not
distribute to the Holders of the Transferor Certificates any such amounts
that otherwise would be distributed to the Holders of the Transferor
Certificates, but shall deposit such funds in the Special Funding Account.
The Transferor may, at its option, instruct the Trustee to deposit Shared
Principal Collections which are otherwise payable to the Holders of the
Transferor Certificates pursuant to the provisions set forth above into the
Special Funding Account.
Section 4.5 Additional Withdrawals from the Collection Account.
On or before the Determination Date with respect to any Monthly Period, the
Servicer shall determine the amounts payable to each Account Owner with
respect to such Monthly Period under the applicable Receivables Purchase
Agreement in respect of amounts on deposit in the Collection Account that
were not transferred to the Trust hereunder, and the Servicer shall
withdraw such amounts from the Collection Account and pay such amount to
the applicable Account Owner.
Section 4.6 Allocation of Trust Assets to Series or Groups. To
the extent so provided in the Supplement for any Series or in an amendment
to this Agreement executed pursuant to subsection 13.1(a), Receivables
conveyed to the Trust pursuant to Section 2.1 and Receivables or
Participation Interests conveyed to the Trust pursuant to Section 2.9 or
any Participation Interest Supplement, and all Collections received with
respect to thereto may be allocated or applied in whole or in part to one
or more Series or Groups as may be provided in such Supplement or
amendment, provided, however, that any such allocation or application shall
be effective only upon satisfaction of the following conditions:
(i) on or before the fifth Business Day immediately preceding
such allocation, the Servicer shall have given the Trustee and the
Rating Agency written notice of such allocation;
(ii) the Rating Agency Condition shall have been satisfied with
respect to such allocation; and
(iii) the Servicer shall have delivered to the Trustee an
Officer's Certificate, dated the date of such allocation, to the
effect that the Servicer reasonably believes that such allocation will
not have an Adverse Effect.
Any such Supplement or amendment may provide that (i) such
allocation to one or more particular Series or Groups may terminate upon
the occurrence of certain events specified therein and (ii) that upon the
occurrence of any such event, such assets and any Collections with respect
thereto, shall be reallocated to other Series or Groups or to all Series,
all as shall be provided in such Supplement or amendment.
[END OF ARTICLE IV]
ARTICLE V
DISTRIBUTIONS AND REPORTS TO
CERTIFICATEHOLDERS
Distributions shall be made to, and reports shall be provided to,
Certificateholders as set forth in the applicable Supplement. The identity
of the Certificateholders with respect to distributions and reports shall
be determined according to the immediately preceding Record Date.
[END OF ARTICLE V]
ARTICLE VI
THE CERTIFICATES
Section 6.1 The Certificates. The Investor Certificates of any
Series or Class shall be issued in fully registered form (including any
uncertificated Series or Class which is registered in the Certificate
Register, the "Registered Certificates") unless the applicable Supplement
provides, in accordance with then applicable laws, that such Certificates
be issued in bearer form ("Bearer Certificates") with attached interest
coupons and a special coupon (collectively the "Coupons"). Such Registered
Certificates or Bearer Certificates, as the case may be, shall be
substantially in the form of the exhibits with respect thereto attached to
the applicable Supplement. The Transferor Certificate will be issued in
registered form, substantially in the form of Exhibit A, and shall upon
issue, be executed and delivered by the Transferor to the Trustee for
authentication and redelivery as provided in Section 6.2. If specified in
any Supplement, the Investor Certificates of any Series or Class shall be
issued upon initial issuance as one or more certificates evidencing the
aggregate original principal amount of such Series or Class as described in
Section 6.10. The Transferor Certificate shall be issued as a single
certificate. Each Certificate shall be executed by manual or facsimile
signature on behalf of the Transferor by its President or any Vice
President or by any attorney-in-fact duly authorized to execute such
Certificate on behalf of any such officer. Certificates bearing the manual
or facsimile signature of an individual who was, at the time when such
signature was affixed, authorized to sign on behalf of the Transferor shall
not be rendered invalid, notwithstanding that such individual ceased to be
so authorized prior to the authentication and delivery of such Certificates
or does not hold such office at the date of such Certificates. No
Certificates shall be entitled to any benefit under this Agreement, or be
valid for any purpose, unless there appears on such Certificate a
certificate of authentication substantially in the form provided for herein
executed by or on behalf of the Trustee by the manual signature of a duly
authorized signatory, and such certificate upon any Certificate shall be
conclusive evidence, and the only evidence, that such Certificate has been
duly authenticated and delivered hereunder. Bearer Certificates shall be
dated the Series Issuance Date. All Registered Certificates and
Transferor's Certificates shall be dated the date of their authentication.
Section 6.2 Authentication of Certificates. The Trustee shall,
at the written direction of the Transferor, authenticate and deliver the
Investor Certificates of each Series and Class that are issued upon
original issuance to or upon the order of the Transferor against payment to
the Transferor of the purchase price therefor. The Trustee shall
authenticate and deliver the Transferor Certificate to the Transferor
simultaneously with the execution of this Agreement. If specified in the
related Supplement for any Series or Class, the Trustee shall authenticate
and deliver outside the United States the Global Certificate that is issued
upon original issuance thereof.
Section 6.3 New Issuances.
(a) The Transferor may from time to time direct the Trustee, on
behalf of the Trust, to issue one or more new Series of Investor
Certificates. The Investor Certificates of all outstanding Series shall be
equally and ratably entitled as provided herein to the benefits of this
Agreement without preference, priority or distinction, all in accordance
with the terms and provisions of this Agreement and the applicable
Supplement except, with respect to any Series or Class, as provided in the
related Supplement.
(b) On or before the Series Issuance Date relating to any new
Series, the parties hereto will execute and deliver a Supplement which will
specify the Principal Terms of such new Series. The Trustee shall execute
the Supplement and the Transferor shall execute the Investor Certificates
of such Series and deliver such Investor Certificates to the Trustee for
authentication. In connection with the issuance of a new Series of
Investor Certificates or at any other time, a Transferor may surrender its
Transferor Certificate to the Trustee in exchange for a newly issued
Transferor Certificate and a second certificate (a "Supplemental
Certificate"), the terms of which shall be defined in a supplement (a
"Supplemental Certificate Supplement") to this Agreement (which
Supplemental Certificate Supplement shall be subject to Section 13.1 to the
extent that it amends any of the terms of this Agreement) to be delivered
to or upon the order of the Transferor. In addition, to the extent
permitted for any Series of Investor Certificates as specified in the
related Supplement, the Investor Certificateholders of such Series may
tender their Investor Certificates and the Transferor may tender the
Transferor Certificate to the Trustee pursuant to the terms and conditions
set forth in such Supplement in exchange for (i) one or more newly issued
Series of Investor Certificates and (ii) a reissued Transferor Certificate
(an "Investor Exchange"). The issuance of any such Investor Certificates
or Supplemental Certificate shall be subject to satisfaction of the
following conditions:
(i) on or before the fifth day immediately preceding the Series
Issuance Date or Transferor Certificate surrender and exchange, as the
case may be, the Transferor shall have given the Trustee, the Servicer
and the Rating Agency notice (unless such notice requirement is
otherwise waived) of such issuance and the Series Issuance Date or the
Transferor Certificate surrender and exchange, as the case may be;
(ii) the Transferor shall have delivered to the Trustee the
related Supplement or Supplemental Certificate Supplement, as
applicable, in form satisfactory to the Trustee, executed by each
party hereto (other than the Trustee and the Holder of the
Supplemental Certificate, if any);
(iii) the Transferor shall have delivered to the Trustee any
related Enhancement Agreement executed by each of the parties thereto,
other than the Trustee;
(iv) the Trustee shall have received confirmation from the
Rating Agency that the Rating Agency Condition shall have been
satisfied with respect to such issuance or the Transferor Certificate
surrender and exchange, as the case may be;
(v) such issuance or surrender and exchange, as the case may be,
will not result in any Adverse Effect and the Transferor shall have
delivered to the Trustee an Officer's Certificate, dated the Series
Issuance Date or the date of such surrender and exchange, as the case
may be, to the effect that the Transferor reasonably believes that
such issuance or such surrender and exchange, as the case may be, will
not, based on the facts known to such officer at the time of such
certification, have an Adverse Effect;
(vi) the Transferor shall have delivered to the Trustee (with a
copy to the Rating Agency) a Tax Opinion, dated the Series Issuance
Date or the date of such surrender and exchange, as the case may be,
with respect to such issuance or surrender and exchange, respectively;
and
(vii) the aggregate amount of Principal Receivables theretofore
conveyed to the Trust as of the Series Issuance Date or the date of
such surrender and exchange, as the case may be, shall be greater than
the Required Minimum Principal Balance as of the Series Issuance Date
or the date of such surrender and exchange, as the case may be, and
after giving effect to such issuance or such surrender and exchange,
respectively and the Transferor Amount shall be greater than or equal
to the Required Transferor Amount.
Any Supplemental Certificate held by any Person, and any Investor
Certificate held by the Transferor at any time after the date of its
initial issuance, may be transferred or exchanged only upon the delivery to
the Trustee of a Tax Opinion dated as of the date of such transfer or
exchange, as the case may be, with respect to such transfer or exchange.
Section 6.4 Registration of Transfer and Exchange of
Certificates.
(a) The Trustee shall cause to be kept at the Corporate Trust
Office a register (the "Certificate Register") in which, subject to such
reasonable regulations as it may prescribe, a transfer agent and registrar
(which may be the Trustee) (the "Transfer Agent and Registrar") shall
provide for the registration of the Registered Certificates and of
transfers and exchanges of the Registered Certificates as herein provided.
The Transfer Agent and Registrar shall initially be the Trustee and any
co-transfer agent and co-registrar chosen by the Transferor and acceptable
to the Trustee, including, if and so long as any Series or Class is listed
on the Luxembourg Stock Exchange and such exchange shall so require, a
co-transfer agent and co-registrar in Luxembourg. Any reference in this
Agreement to the Transfer Agent and Registrar shall include any co-transfer
agent and registrar unless the context requires otherwise.
The Trustee may revoke such appointment and remove any Transfer
Agent and Registrar if the Trustee determines in its sole discretion that
such transfer Agent and Registrar failed to perform its obligations under
this Agreement in any material respect. Any Transfer Agent and Registrar
shall be permitted to resign as Transfer Agent and Registrar upon 30 days'
notice to the Transferor, the Trustee and the Servicer; provided, however,
that such resignation shall not be effective and such Transfer Agent and
Registrar shall continue to perform its duties as Transfer Agent and
Registrar until the Trustee has appointed a successor Transfer Agent and
Registrar reasonably acceptable to the Transferor.
Subject to subsection (c) below, upon surrender for registration
of transfer or exchange of any Registered Certificate at any office or
agency of the Transfer Agent and Registrar maintained for such purpose, one
or more new Registered Certificates (of the same Series and Class) in
authorized denominations of like aggregate fractional undivided interests
in the Certificateholders' Interest shall be executed, authenticated and
delivered, in the name of the designated transferee or transferees.
At the option of a Registered Certificateholder, subject to
subsection (c) below and subject to the provisions of any Supplement or
other agreement establishing the terms of an instrument, Registered
Certificates (of the same Series and Class) may be exchanged for other
Registered Certificates of authorized denominations of like aggregate
fractional undivided interests in the Certificateholders' Interest, upon
surrender of the Registered Certificates to be exchanged at any such office
or agency; Registered Certificates, including Registered Certificates
received in exchange for Bearer Certificates, may not be exchanged for
Bearer Certificates. At the option of the Holder of a Bearer Certificate,
subject to applicable laws and regulations, Bearer Certificates may be
exchanged for other Bearer Certificates or Registered Certificates (of the
same Series and Class) of authorized denominations of like aggregate
fractional undivided interests in the Certificateholders' Interest, upon
surrender of the Bearer Certificates to be exchanged at an office or agency
of the Transfer Agent and Registrar located outside the United States.
Each Bearer Certificate surrendered pursuant to this Section shall have
attached thereto all unmatured Coupons; provided that any Bearer
Certificate so surrendered after the close of business on the Record Date
preceding the relevant payment date or distribution date after the expected
final payment date need not have attached the Coupon relating to such
payment date or distribution date (in each case, as specified in the
applicable Supplement).
The preceding provisions of this Section notwithstanding, the
Trustee or the Transfer Agent and Registrar, as the case may be, shall not
be required to register the transfer of or exchange any Certificate for a
period of 15 days preceding the due date for any payment with respect to
the Certificate.
Whenever any Investor Certificates are so surrendered for
exchange, the Transferor shall execute, the Trustee shall authenticate and
the Transfer Agent and Registrar shall deliver (in the case of Bearer
Certificates, outside the United States) the Investor Certificates which
the Investor Certificateholder making the exchange is entitled to receive.
Every Investor Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of
transfer in a form satisfactory to the Trustee or the Transfer Agent and
Registrar duly executed by the Investor Certificateholder or the attorney-
in-fact thereof duly authorized in writing.
No service charge shall be made for any registration of transfer
or exchange of Investor Certificates, but the Transfer Agent and Registrar
may require payment of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any such transfer or
exchange.
All Investor Certificates (together with any Coupons) surrendered
for registration of transfer and exchange or for payment shall be canceled
and disposed of in a manner satisfactory to the Trustee. The Trustee shall
cancel and destroy any Global Certificate upon its exchange in full for
Definitive Euro-Certificates and shall deliver a certificate of destruction
to the Transferor. Such certificate shall also state that a certificate or
certificates of a Foreign Clearing Agency to the effect referred to in
Section 6.13 was received with respect to each portion of the Global
Certificate exchanged for Definitive Euro-Certificates.
The Transferor shall execute and deliver to the Trustee Bearer
Certificates and Registered Certificates in such amounts and at such times
as are necessary to enable the Trustee to fulfill its responsibilities
under this Agreement, each Supplement and the Certificates.
The interest of any Investor Certificateholder in any Receivable
shall not be transferable other than through the transfer of an Investor
Certificate, and except as provided in this Article VI, a Certificate shall
not be transferable or divisible.
(b) The Transfer Agent and Registrar will maintain at its
expense in the Borough of Manhattan, The City of New York, and, if and so
long as any Series or Class is listed on the Luxembourg Stock Exchange,
Luxembourg, an office or agency where Investor Certificates may be
surrendered for registration of transfer or exchange (except that Bearer
Certificates may not be surrendered for exchange at any such office or
agency in the United States or its territories and possessions).
(c) (i) Registration of transfer of Investor Certificates
containing a legend substantially to the effect set forth on Exhibit
G-1 shall be effected only if such transfer (x) is made pursuant to an
effective registration statement under the Act, or is exempt from the
registration requirements under the Act, and (y) is made to a Person
which is not an employee benefit plan, trust or account, including an
individual retirement account, that is subject to ERISA or that is
described in Section 4975(e)(1) of the Code or an entity whose
underlying assets include plan assets by reason of a plan's investment
in such entity (a "Benefit Plan"). In the event that registration of
a transfer is to be made in reliance upon an exemption from the
registration requirements under the Act, the transferor or the
transferee shall deliver, at its expense, to the Transferor, the
Servicer and the Trustee, an investment letter from the transferee,
substantially in the form of the investment and ERISA representation
letter attached hereto as Exhibit G-2, and no registration of transfer
shall be made until such letter is so delivered.
Investor Certificates issued upon registration or transfer of, or
Investor Certificates issued in exchange for, Investor Certificates
bearing the legend referred to above shall also bear such legend
unless the Transferor, the Servicer, the Trustee and the Transfer
Agent and Registrar receive an Opinion of Counsel, satisfactory to
each of them, to the effect that such legend may be removed.
Whenever an Investor Certificate containing the legend referred
to above is presented to the Transfer Agent and Registrar for
registration of transfer, the Transfer Agent and Registrar shall
promptly seek instructions from the Servicer regarding such transfer
and shall be entitled to receive instructions signed by a Servicing
Officer prior to registering any such transfer. The Transferor hereby
agrees to indemnify the Transfer Agent and Registrar and the Trustee
and to hold each of them harmless against any loss, liability or
expense incurred without negligence or bad faith on their part arising
out of or in connection with actions taken or omitted by them in
relation to any such instructions furnished pursuant to this clause
(i).
(ii) Registration of transfer of Investor Certificates
containing a legend to the effect set forth on Exhibit G-3 shall be
effected only if such transfer is made to a Person which is not a
Benefit Plan. By accepting and holding any such Investor Certificate,
an Investor Certificateholder shall be deemed to have represented and
warranted that it is not a Benefit Plan. By acquiring any interest in
a Book-Entry Certificate which contains such legend, a Certificate
Owner shall be deemed to have represented and warranted that it is not
a Benefit Plan.
(iii) If so requested by the Transferor, the Trustee will make
available to any prospective purchaser of Investor Certificates who so
requests, a copy of a letter provided to the Trustee by or on behalf
of the Transferor relating to the transferability of any Series or
Class to a Benefit Plan.
Section 6.5 Mutilated, Destroyed, Lost or Stolen Certificates.
If (a) any mutilated Certificate (together, in the case of Bearer
Certificates, with all unmatured Coupons (if any) appertaining thereto) is
surrendered to the Transfer Agent and Registrar, or the Transfer Agent and
Registrar receives evidence to its satisfaction of the destruction, loss or
theft of any Certificate and (b) there is delivered to the Transfer Agent
and Registrar and the Trustee such security or indemnity as may be required
by them to save each of them harmless, then, in the absence of notice to
the Trustee that such Certificate has been acquired by a bona fide
purchaser, the Transferor shall execute, the Trustee shall authenticate and
the Transfer Agent and Registrar shall deliver (in the case of Bearer
Certificates, outside the United States), in exchange for or in lieu of any
such mutilated, destroyed, lost or stolen Certificate, a new Certificate of
like tenor and aggregate fractional undivided interest. In connection with
the issuance of any new Certificate under this Section, the Trustee or the
Transfer Agent and Registrar may require the payment by the
Certificateholder of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee and Transfer Agent
and Registrar) connected therewith. Any duplicate Certificate issued
pursuant to this Section shall constitute complete and indefeasible
evidence of ownership in the Trust, as if originally issued, whether or not
the lost, stolen or destroyed Certificate shall be found at any time.
Section 6.6 Persons Deemed Owners. The Trustee, the Paying
Agent, the Transfer Agent and Registrar, the Transferor, the Servicer and
any agent of any of them may (a) prior to due presentation of a Registered
Certificate for registration of transfer, treat the Person in whose name
any Registered Certificate is registered as the owner of such Registered
Certificate for the purpose of receiving distributions pursuant to the
terms of the applicable Supplement and for all other purposes whatsoever,
and (b) treat the bearer of a Bearer Certificate or Coupon as the owner of
such Bearer Certificate or Coupon for the purpose of receiving
distributions pursuant to the terms of the applicable Supplement and for
all other purposes whatsoever; and, in any such case, neither the Trustee,
the Paying Agent, the Transfer Agent and Registrar, the Transferor, the
Servicer nor any agent of any of them shall be affected by any notice to
the contrary. Notwithstanding the foregoing, in determining whether the
Holders of the requisite Investor Certificates have given any request,
demand, authorization, direction, notice, consent or waiver hereunder,
Certificates owned by any of the Transferor, the Servicer, any other Holder
of the Transferor Certificate or any Affiliate thereof, shall be
disregarded and deemed not to be outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, only
Certificates which a Responsible Officer of the Trustee actually knows to
be so owned shall be so disregarded. Certificates so owned which have been
pledged in good faith shall not be disregarded and may be regarded as
outstanding if the pledgee establishes to the satisfaction of the Trustee
the pledgee's right so to act with respect to such Certificates and that
the pledgee is not the Transferor, the Servicer, any other Holder of the
Transferor Certificate or any Affiliate thereof. None of the Transferor,
the Servicer, the Trustee, the Registrar or the Paying Agent will have any
responsibility or liability for any of the records relating to or on
account of beneficial ownership in Book-Entry Certificates or for
maintaining, supervising or reviewing records relating thereto.
Section 6.7 Appointment of Paying Agent. The Paying Agent shall
make distributions to Investor Certificateholders from the Collection
Account or applicable Series Account pursuant to the provisions of the
applicable Supplement and shall report the amounts of such distributions to
the Trustee. Any Paying Agent shall have the revocable power to withdraw
funds from the Collection Account or applicable Series Account for the
purpose of making the distributions referred to above. The Trustee may
revoke such power and remove the Paying Agent if the Trustee determines in
its sole discretion that the Paying Agent shall have failed to perform its
obligations under this Agreement or any Supplement in any material respect.
The Paying Agent shall initially be the Trustee and any co-paying agent
chosen by the Transferor and acceptable to the Trustee, including, if and
so long as any Series or Class is listed on the Luxembourg Stock Exchange
and such exchange so requires, a co-paying agent in Luxembourg or another
western European city. In the event that any Paying Agent shall resign,
the Trustee shall appoint a successor to act as Paying Agent. The Trustee
shall act as Paying Agent until a successor is appointed. The Trustee
shall cause each successor or additional Paying Agent to execute and
deliver to the Trustee an instrument in which such successor or additional
Paying Agent shall agree with the Trustee that it will hold all sums, if
any, held by it for payment to the Investor Certificateholders in trust for
the benefit of the Investor Certificateholders entitled thereto until such
sums shall be paid to such Investor Certificateholders. The Paying Agent
shall return all unclaimed funds to the Trustee and upon removal shall also
return all funds in its possession to the Trustee. The provisions of
Sections 11.1, 11.2, 11.3 and 11.5 shall apply to the Trustee also in its
role as Paying Agent, for so long as the Trustee shall act as Paying Agent.
Any reference in this Agreement to the Paying Agent shall include any
co-paying agent unless the context requires otherwise.
Section 6.8 Access to List of Registered Certificateholders'
Names and Addresses. The Trustee will furnish or cause to be furnished by
the Transfer Agent and Registrar to the Servicer or the Paying Agent,
within five Business Days after receipt by the Trustee of a request
therefor, a list in such form as the Servicer or the Paying Agent may
reasonably require, of the names and addresses of the Registered
Certificateholders. If any Holder or group of Holders of Investor
Certificates of any Series or all outstanding Series, as the case may be,
evidencing not less than 10% of the aggregate unpaid principal amount of
such Series or all outstanding Series, as applicable (the "Applicants"),
apply to the Trustee, and such application states that the Applicants
desire to communicate with other Investor Certificateholders with respect
to their rights under this Agreement or any Supplement or under the
Investor Certificates and is accompanied by a copy of the communication
which such Applicants propose to transmit, then the Trustee, after having
been adequately indemnified by such Applicants for its costs and expenses,
shall afford or shall cause the Transfer Agent and Registrar to afford such
Applicants access during normal business hours to the most recent list of
Registered Certificateholders of such Series or all outstanding Series, as
applicable, held by the Trustee, within five Business Days after the
receipt of such application. Such list shall be as of a date no more than
45 days prior to the date of receipt of such Applicants' request.
With respect to any Series of Registered Certificates, every
Registered Certificateholder, by receiving and holding a Registered
Certificate, agrees with the Trustee that neither the Trustee, the Transfer
Agent and Registrar, nor any of their respective agents, shall be held
accountable by reason of the disclosure of any such information as to the
names and addresses of the Registered Certificateholders hereunder,
regardless of the sources from which such information was derived.
Section 6.9 Authenticating Agent.
(a) The Trustee may appoint one or more authenticating agents
with respect to the Certificates which shall be authorized to act on behalf
of the Trustee in authenticating the Certificates in connection with the
issuance, delivery, registration of transfer, exchange or repayment of the
Certificates. Whenever reference is made in this Agreement to the
authentication of Certificates by the Trustee or the Trustee's certificate
of authentication, such reference shall be deemed to include authentication
on behalf of the Trustee by an authenticating agent and certificate of
authentication executed on behalf of the Trustee by an authenticating
agent. Each authenticating agent must be acceptable to the Transferor and
the Servicer.
(b) Any institution succeeding to the corporate agency business
of an authenticating agent shall continue to be an authenticating agent
without the execution or filing of any power or any further act on the part
of the Trustee or such authenticating agent. An authenticating agent may
at any time resign by giving notice of resignation to the Trustee and to
the Transferor. The Trustee may at any time terminate the agency of an
authenticating agent by giving notice of termination to such authenticating
agent and to the Transferor. Upon receiving such a notice of resignation
or upon such a termination, or in case at any time an authenticating agent
shall cease to be acceptable to the Trustee or the Transferor, the Trustee
promptly may appoint a successor authenticating agent. Any successor
authenticating agent upon acceptance of its appointment hereunder shall
become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an authenticating
agent. No successor authenticating agent shall be appointed unless
acceptable to the Trustee and the Transferor. The Transferor agrees to pay
to each authenticating agent from time to time reasonable compensation for
its services under this Section. The provisions of Sections 11.1, 11.2 and
11.3 shall be applicable to any authenticating agent.
(c) Pursuant to an appointment made under this Section, the
Certificates may have endorsed thereon, in lieu of the Trustee's
certificate of authentication, an alternate certificate of authentication
in substantially the following form:
This is one of the Certificates described in the Pooling and
Servicing Agreement.
____________________________
____________________________
as Authenticating Agent
for the Trustee,
By _________________________
Authorized Officer
Section 6.10 Book-Entry Certificates. Unless otherwise
specified in the related Supplement for any Series or Class, the Investor
Certificates, upon original issuance, shall be issued in the form of one or
more master Investor Certificates representing the Book-Entry Certificates,
to be delivered to the Clearing Agency, by, or on behalf of, the
Transferor. The Investor Certificates shall initially be registered on the
Certificate Register in the name of the Clearing Agency or its nominee, and
no Certificate Owner will receive a definitive certificate representing
such Certificate Owner's interest in the Investor Certificates, except as
provided in Section 6.12. Unless and until definitive, fully registered
Investor Certificates ("Definitive Certificates") have been issued to the
applicable Certificate Owners pursuant to Section 6.12 or as otherwise
specified in any such Supplement:
(a) the provisions of this Section shall be in full force and
effect;
(b) the Transferor, the Servicer and the Trustee may deal with
the Clearing Agency and the Clearing Agency Participants for all purposes
(including the making of distributions) as the authorized representatives
of the respective Certificate Owners;
(c) to the extent that the provisions of this Section conflict
with any other provisions of this Agreement, the provisions of this Section
shall control; and
(d) the rights of the respective Certificate Owners shall be
exercised only through the Clearing Agency and the Clearing Agency
Participants and shall be limited to those established by law and
agreements between such Certificate Owners and the Clearing Agency and/or
the Clearing Agency Participants. Pursuant to the Depository Agreement,
unless and until Definitive Certificates are issued pursuant to Section
6.12, the Clearing Agency will make book-entry transfers among the Clearing
Agency Participants and receive and transmit distributions of principal and
interest on the related Investor Certificates to such Clearing Agency
Participants.
For purposes of any provision of this Agreement requiring or
permitting actions with the consent of, or at the direction of, Investor
Certificateholders evidencing a specified percentage of the aggregate
unpaid principal amount of Investor Certificates, such direction or consent
may be given by Certificate Owners (acting through the Clearing Agency and
the Clearing Agency Participants) owning Investor Certificates evidencing
the requisite percentage of principal amount of Investor Certificates.
Section 6.11 Notices to Clearing Agency. Whenever any notice or
other communication is required to be given to Investor Certificateholders
of any Series or Class with respect to which Book-Entry Certificates have
been issued, unless and until Definitive Certificates shall have been
issued to the related Certificate Owners, the Trustee shall give all such
notices and communications to the applicable Clearing Agency.
Section 6.12 Definitive Certificates. If Book-Entry
Certificates have been issued with respect to any Series or Class and (a)
the Transferor advises the Trustee that the Clearing Agency is no longer
willing or able to discharge properly its responsibilities under the
Depository Agreement with respect to such Series or Class and the Trustee
or the Transferor is unable to locate a qualified successor, (b) the
Transferor, at its option, advises the Trustee that it elects to terminate
the book-entry system with respect to such Series or Class through the
Clearing Agency or (c) after the occurrence of a Servicer Default,
Certificate Owners of such Series or Class evidencing not less than 50% of
the aggregate unpaid principal amount of such Series or Class advise the
Trustee and the Clearing Agency through the Clearing Agency Participants
that the continuation of a book-entry system with respect to the Investor
Certificates of such Series or Class through the Clearing Agency is no
longer in the best interests of the Certificate Owners with respect to such
Certificates, then the Trustee shall notify all Certificate Owners of such
Certificates, through the Clearing Agency, of the occurrence of any such
event and of the availability of Definitive Certificates to Certificate
Owners requesting the same. Upon surrender to the Trustee of any such
Certificates by the Clearing Agency, accompanied by registration
instructions from the Clearing Agency for registration, the Trustee shall
authenticate and deliver such Definitive Certificates. Neither the
Transferor nor the Trustee shall be liable for any delay in delivery of
such instructions and may conclusively rely on, and shall be protected in
relying on, such instructions. Upon the issuance of such Definitive
Certificates all references herein to obligations imposed upon or to be
performed by the Clearing Agency shall be deemed to be imposed upon and
performed by the Trustee, to the extent applicable with respect to such
Definitive Certificates and the Trustee shall recognize the Holders of such
Definitive Certificates as Investor Certificateholders hereunder.
Section 6.13 Global Certificate; Exchange Date.
(a) If specified in the related Supplement for any Series or
Class, the Investor Certificates for such Series or Class initially will be
issued in the form of a single temporary global certificate (the "Global
Certificate") in bearer form, without interest coupons, in the denomination
of the entire aggregate principal amount of such Series or Class and
substantially in the form set forth in the exhibit with respect thereto
attached to the related Supplement. The Global Certificate will be
executed by the Transferor and authenticated and delivered by the Trustee
or its agent to the Common Depositary outside the United States for credit
to the respective accounts of the Foreign Clearing Agencies and may be
exchanged as described in this Section 6.13 for Definitive Euro-
Certificates in definitive form substantially in the form set forth in the
exhibit with respect thereto attached to the related Supplement (the
"Definitive Euro-Certificates"). The "Definitive-Euro-Certificates" shall
be Bearer Certificates for all purposes of this Agreement and the
provisions of this Agreement and the related Supplement relating to
Definitive Euro-Certificates shall apply to the Definitive Euro-
Certificates in all respects. The Definitive Euro-Certificates shall be
issued in the minimum denominations specified in the related Supplement.
(b) No interest will be paid in respect of any beneficial
interest in the Global Certificates and no exchange of an interest in the
Global Certificates for a Definitive Euro- Certificate may occur until the
person entitled to receive such Definitive Euro- Certificate provides
certification as to non-U.S. beneficial ownership as provided in this
Section 6.13. Until the Global Certificate with respect to a Series or
Class is exchanged for a Definitive Euro-Certificate for such Series or
Class, any holder thereof shall be entitled to receive payments of interest
thereon only to the extent that the person appearing in the records of the
Foreign Clearing Agency as the beneficial owner thereof or a portion
thereof has delivered to such Foreign Clearing Agency a certification and
the Foreign Clearing Agency has delivered to the Trustee a certification,
in each case pursuant to this Section 6.13 hereof on or prior to the date
of distribution.
(c) The Manager shall, upon its determination of the Global
Certificate Exchange Date, so advise the Trustee, the Transferor, the
Common Depositary and each Foreign Clearing Agency forthwith. Without
unnecessary delay, but in any event not later than the Global Certificate
Exchange Date, the Transferor will execute and deliver to the Trustee at
its London office or its designated office outside the United States
Definitive Euro-Certificates in an aggregate principal amount equal to the
entire Initial Invested Amount of such Series or Class. All Definitive
Euro- Certificates so issued and delivered will have Coupons attached. The
Global Certificate may be exchanged for an equal aggregate amount of Bearer
Certificates only on or after the Global Certificate Exchange Date.
Notwithstanding the foregoing, no holder of an interest in a Global
Certificate will have any right to receive a Bearer Certificate in exchange
for such interest prior to the Global Certificate Exchange Date and prior
to certification (in the manner provided in this Section 6.13) that either
such holder is not a United States person or is otherwise a permitted
holder.
(d) The Bearer Certificates shall be authenticated and delivered
by the Trustee or its agent in exchange for only that portion of the Global
Certificate, in respect of which there shall have been presented to the
Trustee by the applicable Foreign Clearing Agency, a certificate,
substantially in the form set forth in the exhibit with respect thereto
attached to the related Supplement, that the Trustee does not know to be
false, to the effect that such Foreign Clearing Agency has received from or
in respect of a person entitled to a particular principal amount of the
Investor Certificates of the applicable Series or Class (as shown by its
records), a certificate from such person in or substantially in the form
set forth in the exhibit with respect thereto attached to the related
Supplement. Upon receipt of such certification, the Trustee shall cause
the Global Certificates to be endorsed in accordance with subsection
6.13(d) below.
(e) On an exchange of the whole of a Global Certificate, such
Global Certificate shall be surrendered to the Trustee or its agent at its
office in London, England for cancellation and shall be returned by the
Trustee or its agent to the Transferor. On an exchange of only part of a
Global Certificate, details of such exchange shall be entered by the Paying
Agent with respect to the Series on behalf of the Trust, and further
exchanges may be effected, without the issue of a new Global Certificate,
by the Trust or its agent endorsing the schedule attached to the Global
Certificate previously issued to reflect a decrease in the aggregate
principal amount of the Global Certificate.
(f) Upon any such exchange of all or a portion of a Global
Certificate for a Bearer Certificate or Bearer Certificates, such Global
Certificate shall be endorsed by or on behalf of the Trustee to reflect the
reduction in the principal amount by an amount equal to the aggregate
principal amount of such Bearer Certificate or Bearer Certificates. Until
so exchanged in full, the Global Certificates will in all respects be
entitled to the same benefits under this Agreement and the related
Supplement as Bearer Certificates authenticated and delivered pursuant to
this Agreement and the related Supplement except that the beneficial owners
of such Global Certificate will not be entitled to receive payments of
interest until they have exchanged their beneficial interests in such
Global Certificate for Bearer Certificates.
(g) The delivery to the Trustee by a Foreign Clearing Agency of
any written statement referred to above may be relied upon by the
Transferor and the Trustee as conclusive evidence that a corresponding
certification or certifications has or have been delivered to such Foreign
Clearing Agency pursuant to the terms of the related Supplement.
(h) The Bearer Certificates to be delivered in exchange for the
Global Certificates shall be delivered only outside the United States.
(i) Any exchange as provided for in this Section shall be made
free of charge to the holders and the beneficial owners of the Global
Certificates and to the beneficial owners of the Bearer Certificates issued
in exchange, except that a person receiving a Bearer Certificate must bear
the cost of insurance, postage, transportation and the like in the event
that such person does not receive such Bearer Certificate in person at the
offices of the applicable Foreign Clearing Agency.
(j) Until the exchange of the Global Certificates as aforesaid,
the bearer thereof shall in all respects be entitled to the same benefits
as if it were the bearer of Bearer Certificates and the Coupons attached
thereto.
Section 6.14 Meetings of Certificateholders.
(a) If at the time any Bearer Certificates are issued and
outstanding with respect to any Series or Class to which any meeting
described below relates, the Servicer or the Trustee may at any time call a
meeting of Investor Certificateholders of any Series or Class or of all
Series, to be held at such time and at such place as the Servicer or the
Trustee, as the case may be, shall determine, for the purpose of approving
a modification of or amendment to, or obtaining a waiver of any covenant or
condition set forth in, this Agreement, any Supplement or the Investor
Certificates or of taking any other action permitted to be taken by
Investor Certificateholders hereunder or under any Supplement. Notice of
any meeting of Investor Certificateholders, setting forth the time and
place of such meeting and in general terms the action proposed to be taken
at such meeting, shall be given in accordance with Section 13.5, the first
mailing and publication to be not less than 20 nor more than 180 days prior
to the date fixed for the meeting. To be entitled to vote at any meeting
of Investor Certificateholders a Person shall be (i) a Holder of one or
more Investor Certificates of the applicable Series or Class or (ii) a
person appointed by an instrument in writing as proxy by the Holder of one
or more such Investor Certificates. The only persons who shall be entitled
to be present or to speak at any meeting of Investor Certificateholders
shall be the persons entitled to vote at such meeting and their counsel and
any representatives of the Transferor, the Servicer and the Trustee and
their respective counsel.
(b) At a meeting of Investor Certificateholders, persons
entitled to vote Investor Certificates evidencing a majority of the
aggregate unpaid principal amount of the applicable Series or Class or all
outstanding Series, as the case may be, shall constitute a quorum. No
business shall be transacted in the absence of a quorum, unless a quorum is
present when the meeting is called to order. In the absence of a quorum at
any such meeting, the meeting may be adjourned for a period of not less
than 10 days; in the absence of a quorum at any such meeting, such
adjourned meeting may be further adjourned for a period of not less than 10
days; at the reconvening of any meeting further adjourned for lack of a
quorum, the persons entitled to vote Investor Certificates evidencing at
least 25% of the aggregate unpaid principal amount of the applicable Series
or Class or all outstanding Series, as the case may be, shall constitute a
quorum for the taking of any action set forth in the notice of the original
meeting. Notice of the reconvening of any adjourned meeting shall be given
as provided above except that such notice must be given not less than five
days prior to the date on which the meeting is scheduled to be reconvened.
Notice of the reconvening of an adjourned meeting shall state expressly the
percentage of the aggregate principal amount of the outstanding applicable
Investor Certificates which shall constitute a quorum.
(c) Any Investor Certificateholder who has executed an
instrument in writing appointing a person as proxy shall be deemed to be
present for the purposes of determining a quorum and be deemed to have
voted; provided that such Investor Certificateholder shall be considered as
present or voting only with respect to the matters covered by such
instrument in writing. Subject to the provisions of Section 13.1, any
resolution passed or decision taken at any meeting of Investor
Certificateholders duly held in accordance with this Section shall be
binding on all Investor Certificateholders whether or not present or
represented at the meeting.
(d) The holding of Bearer Certificates shall be proved by the
production of such Bearer Certificates or by a certificate, satisfactory to
the Servicer, executed by any bank, trust company or recognized securities
dealer, wherever situated, satisfactory to the Servicer. Each such
certificate shall be dated and shall state that on the date thereof a
Bearer Certificate bearing a specified serial number was deposited with or
exhibited to such bank, trust company or recognized securities dealer by
the Person named in such certificate. Any such certificate may be issued
in respect of one or more Bearer Certificates specified therein. The
holding by the Person named in any such certificate of any Bearer
Certificate specified therein shall be presumed to continue for a period of
one year from the date of such certificate unless at the time of any
determination of such holding (i) another certificate bearing a later date
issued in respect of the same Bearer Certificate shall be produced, (ii)
the Bearer Certificate specified in such certificate shall be produced by
some other Person or (iii) the Bearer Certificate specified in such
certificate shall have ceased to be outstanding. The appointment of any
proxy shall be proved by having the signature of the Person executing the
proxy guaranteed by any bank, trust company or recognized securities dealer
satisfactory to the Trustee.
(e) The Trustee shall appoint a temporary chair of the meeting.
A permanent chair and a permanent secretary of the meeting shall be elected
by vote of the Holders of Investor Certificates evidencing a majority of
the aggregate unpaid principal amount of Investor Certificates of the
applicable Series or Class or all outstanding Series, as the case may be,
represented at the meeting. No vote shall be cast or counted at any
meeting in respect of any Investor Certificate challenged as not
outstanding and ruled by the chair of the meeting to be not outstanding.
The chair of the meeting shall have no right to vote except as an Investor
Certificateholder or proxy. Any meeting of Investor Certificateholders
duly called at which a quorum is present may be adjourned from time to
time, and the meeting may be held as so adjourned without further notice.
(f) The vote upon any resolution submitted to any meeting of
Investor Certificateholders shall be by written ballot on which shall be
subscribed the signatures of Investor Certificateholders or proxies and on
which shall be inscribed the serial number or numbers of the Investor
Certificates held or represented by them. The permanent chair of the
meeting shall appoint two inspectors of votes who shall count all votes
cast at the meeting for or against any resolution and who shall make and
file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. A record in duplicate of the
proceedings of each meeting of Investor Certificateholders shall be
prepared by the secretary of the meeting and there shall be attached to
said record the original reports of the inspectors of votes on any vote by
ballot taken thereat and affidavits by one or more persons having knowledge
of the facts setting forth a copy of the notice of the meeting and showing
that said notice was published as provided above. The record shall be
signed and verified by the permanent chair and secretary of the meeting and
one of the duplicates shall be delivered to the Servicer and the other to
the Trustee to be preserved by the Trustee, the latter to have attached
thereto the ballots voted at the meeting. Any record so signed and
verified shall be conclusive evidence of the matters therein stated.
Section 6.15 Uncertificated Classes. Notwithstanding anything
to the contrary contained in this Article VI or in Article XII, unless
otherwise specified in any Supplement any provisions contained in this
Article VI and in Article XII relating to the registration, form,
execution, authentication, delivery, presentation, cancellation and
surrender of Certificates shall not be applicable to any uncertificated
Certificates.
[END OF ARTICLE VI]
ARTICLE VII
OTHER MATTERS RELATING TO THE TRANSFEROR
Section 7.1 Liability of the Transferor. The Transferor shall
be severally, and not jointly, liable for all obligations, covenants,
representations and warranties of the Transferor arising under or related
to this Agreement or any Supplement. Except as provided in the preceding
sentence, the Transferor shall be liable only to the extent of the
obligations specifically undertaken by it in its capacity as the
Transferor.
Section 7.2 Merger or Consolidation of, or Assumption of the
Obligations of, the Transferor.
(a) The Transferor shall not dissolve, liquidate, consolidate
with or merge into any other entity or convey, transfer or sell its
properties and assets substantially as an entirety to any Person unless:
(i) (x) the entity formed by such consolidation or into which the
Transferor is merged or the Person which acquires by conveyance,
transfer or sale the properties and assets of the Transferor
substantially as an entirety shall be, if the Transferor is not the
surviving entity, organized and existing under the laws of the United
States of America or any State or the District of Columbia, and shall
be a savings association, a national banking association, a bank or
other entity which is not eligible to be a debtor in a case under
Title 11 of the United States Code or is a special purpose entity
whose powers and activities are limited to substantially the same
degree as provided in the Transferor LLC Agreement and, if the
Transferor is not the surviving entity, shall expressly assume, by an
agreement supplemental hereto, executed and delivered to the Trustee,
in form reasonably satisfactory to the Trustee, the performance of
every covenant and obligation of the Transferor hereunder; and (y) the
Transferor or the surviving entity, as the case may be, has delivered
to the Trustee (with a copy to the Rating Agency) an Officer's
Certificate and an Opinion of Counsel each stating that such
consolidation, merger, conveyance, transfer or sale and such
supplemental agreement comply with this Section, that such
supplemental agreement is a valid and binding obligation of such
surviving entity enforceable against such surviving entity in
accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally
from time to time in effect or general principles of equity, and that
all conditions precedent herein provided for relating to such
transaction have been complied with; and
(ii) the Rating Agency Condition shall have been satisfied with
respect to such consolidation, merger, conveyance or transfer.
(b) Except as permitted by subsection 2.7(c) and subsection
6.3(b), the obligations, rights or any part thereof of the Transferor
hereunder shall not be assignable nor shall any Person succeed to such
obligations or rights of the Transferor hereunder except (i) for
conveyances, mergers, consolidations, assumptions, sales or transfers in
accordance with the provisions of the foregoing paragraph and (ii) for
conveyances, mergers, consolidations, assumptions, sales or transfers to
other entities (1) which the Transferor and the Servicer determine will not
result in an Adverse Effect, (2) which meet the requirements of clause (ii)
of the preceding paragraph and (3) for which such purchaser, transferee,
pledgee or entity shall expressly assume, in an agreement supplemental
hereto, executed and delivered to the Trustee in writing in form
satisfactory to the Trustee, the performance of every covenant and
obligation of the Transferor thereby conveyed.
Section 7.3 Limitations on Liability of the Transferor. Subject
to Section 7.1, neither the Transferor nor any of the directors, officers,
employees, incorporators or agents of the Transferor acting in such
capacities shall be under any liability to the Trust, the Trustee, the
Certificateholders, any Series Enhancer or any other Person for any action
taken or for refraining from the taking of any action in good faith in such
capacities pursuant to this Agreement, it being expressly understood that
such liability is expressly waived and released as a condition of, and
consideration for, the execution of this Agreement and any Supplement and
the issuance of the Certificate; provided, however, that this provision
shall not protect the Transferor or any such person against any liability
which would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence in the performance of duties or by reason of
reckless disregard of obligations and duties hereunder. The Transferor and
any director, officer, employee or agent of the Transferor may rely in good
faith on any document of any kind prima facie properly executed and
submitted by any Person (other than the Transferor) respecting any matters
arising hereunder.
Section 7.4 Transferor Authorized to Execute Registration
Statements and Reports on Behalf of the Trust. The Trustee hereby
authorizes the Transferor to execute, on behalf of the Trust and file or
cause to be filed with the Securities and Exchange Commission any
registration statements prepared in connection with the issuance of
Investor Certificates and any periodic or annual reports prepared in
connection with the issuance of Investor Certificates or the delivery of
the monthly servicer's certificates required by Section 3.4.
[END OF ARTICLE VII]
ARTICLE VIII
OTHER MATTERS RELATING TO THE SERVICER
Section 8.1 Liability of the Servicer. The Servicer shall be
liable under this Article only to the extent of the obligations
specifically undertaken by the Servicer in its capacity as Servicer.
Section 8.2 Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer. The Servicer shall not consolidate with or
merge into any other entity or, except as provided herein, convey, transfer
or sell its properties and assets substantially as an entirety to any
Person, unless:
(a) the entity 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, an entity 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 entity shall
expressly assume, by an agreement supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, the
performance of every covenant and obligation of the Servicer
hereunder;
(b) the Servicer has delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel each stating that such
consolidation, merger, conveyance, transfer or sale comply with this
Section and that all conditions precedent herein provided for relating
to such transaction have been complied with;
(c) the Servicer shall have given the Rating Agencies
notice of such consolidation, merger or transfer or assets; and
(d) the entity formed by such consolidation or into which the
Servicer is merged or the Person which acquires by conveyance or transfer
the properties and assets of the Servicer substantially as an entirety
shall be an Eligible Servicer.
Section 8.3 Limitation on Liability of the Servicer and Others.
Except as provided in Section 8.4 and Section 11.5, neither the Servicer
nor any of the managers, directors, officers, employees or agents of the
Servicer in its capacity as Servicer shall be under any liability to the
Trust, the Trustee, the Certificateholders, any Series Enhancer 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 such Person against any liability which would otherwise be
imposed by reason of willful misfeasance, bad faith or gross negligence in
the performance of duties or by reason of reckless disregard of obligations
and duties hereunder. The Servicer and any member, director, officer,
employee or agent of the Servicer may rely in good faith on any document of
any kind prima facie properly executed and submitted by any Person (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 Certificateholders with respect to this
Agreement and the rights and duties of the parties hereto and the interests
of the Certificateholders hereunder.
Section 8.4 Servicer Indemnification of the Trust and the
Trustee. The Servicer shall indemnify and hold harmless the Trust and the
Trustee (including the Trustee in its capacity as Transfer Agent and
Registrar or as Paying Agent) and its directors, officers, employees and
agents from and against any loss, liability, expense, damage or injury
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 by the Trustee of the Trust (in the case of clause (a) or
(b), other than any such loss, liability, expense, damage, or injury as may
arise from the negligence or wilful misconduct of the 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. Indemnification pursuant to this Section shall not be
payable from the Trust Assets. The Servicer's obligations under this
Section 8.4 shall survive the termination of this Agreement or the Trust or
the earlier removal or resignation of the Trustee.
Section 8.5 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 Trustee, in
form satisfactory to the Trustee, of the obligations and duties of the
Servicer hereunder by any of its Affiliates or by any other entity the
appointment of which shall have satisfied the Rating Agency Condition and,
in either case, qualifies as an Eligible Servicer. Any determination
permitting the resignation of the Servicer shall be evidenced (i) as to
clause (a) above, by an Opinion of Counsel to such effect delivered to the
Trustee and (ii) as to clause (b) above, by an Officer's Certificate and an
Opinion of Counsel delivered to the Trustee (with a copy to the Rating
Agency) each stating that such assignment by Holdings and assumption by
such Affiliate and such supplemental agreement comply with this Section,
that such supplemental agreement is a valid and binding obligation of such
Affiliate enforceable against it in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally from time to time in effect or general principles of
equity, and that all conditions precedent herein relating to such
transaction have been complied with. No resignation shall become effective
until the Trustee or a Successor Servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance with Section
10.2 hereof. If within 120 days of the date of the determination that the
Servicer may no longer act as Servicer under clause (a) above the Trustee
is unable to appoint a Successor Servicer, the Trustee shall serve as
Successor Servicer. Notwithstanding the foregoing, the 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 Trustee shall give prompt notice
to the Rating Agency and each Series Enhancer upon the appointment of a
Successor Servicer.
Section 8.6 Access to Certain Documentation and Information
Regarding the Receivables. The Servicer shall provide to the Trustee
access to the documentation regarding the Accounts and the Receivables in
such cases where the Trustee is required in connection with the enforcement
of the rights of Certificateholders 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 and
confidentiality procedures and (d) at reasonably accessible offices in the
continental United States designated by the Servicer. Nothing in this
Section shall derogate from the obligation of the Transferor, the 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 as a result of such obligation
shall not constitute a breach of this Section.
Section 8.7 Delegation of Duties. The Servicer may enter into
servicing agreements with one or more subservicers (including any Affiliate
of the Servicer and any Account Originator) to perform all or a portion of
the servicing functions on behalf of the Servicer with respect to the
Accounts and the Receivables in accordance with the Credit Card Guidelines
and this Agreement; provided that the Servicer shall remain obligated and
be liable to the Trustee for the benefit of the Certificateholders for
servicing and administering the Accounts and the Receivables in accordance
with the provisions of this Agreement without diminution of such obligation
and liability by virtue of the appointment of such subservicer, to the same
extent and under the same terms and conditions as if the Servicer alone
were servicing and administering such Receivables. The fees and expenses
of the subservicer (if any) will be as agreed between the Servicer and its
subservicer and neither the Trustee nor the Certificateholders will have
any responsibility therefor. All actions of a subservicer taken pursuant
to such a subservicer agreement will be taken as an agent of the Servicer
with the same force and effect as though performed by the Servicer. Any
delegation of duties by the Servicer permitted hereunder shall not relieve
the Servicer of its liability and responsibility with respect to such
duties, and shall not constitute a resignation of the Servicer within the
meaning of subsection 8.5. It is understood and agreed by the parties
hereto that the Servicer may delegate certain of its duties hereunder to
First Data Resources, Inc. ("FDR").
Section 8.8 Examination of Records. The Transferor and the
Servicer shall indicate generally in their computer files or other records
that the Receivables arising in the Accounts have been conveyed to the
Trustee, on behalf of the Trust, pursuant to this Agreement for the benefit
of the Certificateholders. The Transferor and the Servicer shall, prior to
the sale or transfer to a third party of any receivable held in its
custody, examine its computer records and other records to determine that
such receivable is not, and does not include, a Receivable.
[END OF ARTICLE VIII]
ARTICLE IX
INSOLVENCY EVENTS
Section 9.1 Rights upon the Occurrence of an Insolvency Event.
(a) If either PFR or PFRF shall consent or fail to object to the
appointment of a bankruptcy trustee or conservator, 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 PFR or PFRF, as applicable, of or relating to all or substantially all
of PFR's or PFRF's property, as applicable, or the commencement of an
action seeking 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 conservator, receiver or liquidator in any
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings, or for the winding-up, insolvency, bankruptcy,
reorganization, conservatorship, receivership or liquidation of such
entity's affairs, or notwithstanding an objection by PFR or PFRF, as
applicable, any such action shall have remained undischarged or unstayed
for a period of 60 days; or PFR or PFRF, as applicable, shall admit in
writing its inability to pay its debts generally as they become due, file,
or consent or fail to object (or object without dismissal of any such
filing within 60 days of such filing) to the filing of, a petition to take
advantage of any applicable bankruptcy, insolvency or reorganization,
receivership or conservatorship statute, make an assignment for the benefit
of its creditors or voluntarily suspend payment of its obligations (any
such act or occurrence with respect to any Person being an "Insolvency
Event"), the Transferor shall on the day any such Insolvency Event occurs
(the "Appointment Date"), immediately cease to transfer Principal
Receivables to the Trust and shall promptly give notice to the Trustee
thereof. Notwithstanding any cessation of the transfer to the Trust of
additional Principal Receivables, Principal Receivables transferred to the
Trust prior to the occurrence of such Insolvency Event, Collections in
respect of such Principal Receivables and Finance Charge Receivables
(whenever created) accrued in respect of such Principal Receivables shall
continue to be a part of the Trust Assets. Upon the Appointment Date, this
Agreement and the Trust shall terminate, subject to the liquidation,
winding-up, insolvency, bankruptcy, reorganization and dissolution
procedures described below. Within 15 days of the Appointment Date, the
Trustee shall (i) publish a notice in an Authorized Newspaper that an
Insolvency Event has occurred, that the Trust has terminated and that the
Trustee intends to sell, dispose of or otherwise liquidate the Receivables
on commercially reasonable terms and in a commercially reasonable manner
and (ii) give notice to Certificateholders describing the provisions of
this Section and requesting instructions from such Holders. Unless the
Trustee shall have received instructions within 90 days from the date
notice pursuant to clause (i) above is first published from (x) Holders of
Investor Certificates evidencing more than 50% of the aggregate unpaid
principal amount of each Series or, with respect to any Series with two or
more Classes, of each Class, (y) the Transferor, and any Holder of a
Supplemental Certificate and any permitted assignee or successor under
Section 7.2, and (z) any other Person specified in any related Supplement
to the effect that such Persons disapprove of the liquidation of the
Receivables and wish to reconstitute the Trust pursuant to the terms of
this Agreement (as amended in connection with such reconstitution), the
Trustee shall promptly sell, dispose of or otherwise liquidate the
Receivables in a commercially reasonable manner and on commercially
reasonable terms, which may include the solicitation of competitive bids.
The Trustee may obtain a prior determination from any such conservator,
receiver or liquidator of the Transferor that the terms and manner of any
proposed sale, disposition or liquidation are commercially reasonable. The
provisions of this Section 9.1 and any provisions in a Supplement regarding
an Insolvency Event shall not be deemed to be mutually exclusive.
(b) The proceeds from the sale, disposition or liquidation of
the Receivables and any Participation Interests pursuant to paragraph (a)
("Insolvency Proceeds") shall be immediately deposited in the Collection
Account. The Trustee shall determine conclusively the amount of the
Insolvency Proceeds which are deemed to be Finance Charge Receivables and
Principal Receivables, allocating Insolvency Proceeds to Finance Charge
Receivables and Principal Receivables in the same proportion as the amount
of Finance Charge Receivables and Principal Receivables bear to one another
on the prior Determination Date. The Insolvency Proceeds shall be
allocated and distributed to Investor Certificateholders in accordance with
the terms of each Supplement.
[END OF ARTICLE IX]
ARTICLE X
SERVICER DEFAULTS
Section 10.1 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 instructions or to give notice to the Trustee to make
such payment, transfer or deposit on or before the date occurring five
Business Days after the date such payment, transfer or deposit or such
instruction or notice is required to be made or given, as the case may be,
under the terms of this Agreement or any Supplement;
(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 or any Supplement which has an Adverse
Effect and which continues unremedied for a period of 60 days after the
date on which notice of such failure, requiring the same to be remedied,
shall have been given to the Servicer by the Trustee, or to the Servicer
and the Trustee by Holders of Investor Certificates evidencing not less
than 10% of the aggregate unpaid principal amount of all Investor
Certificates (or, with respect to any such failure that does not relate to
all Series, 10% of the aggregate unpaid principal amount of all Series to
which such failure relates); or the Servicer shall assign or delegate its
duties under this Agreement, except as permitted by Sections 3.1(a), 8.2,
8.5 or 8.7;
(c) any representation, warranty or certification made by the
Servicer in this Agreement or any Supplement or in any certificate
delivered pursuant to this Agreement or any Supplement shall prove to have
been incorrect when made, which has an Adverse Effect on the rights of the
Investor Certificateholders of any Series (which determination shall be
made without regard to whether funds are then available pursuant to any
Series Enhancement) and which Adverse Effect continues for a period of 60
days after the date on which notice thereof, requiring the same to be
remedied, shall have been given to the Servicer by the Trustee, or to the
Servicer and the Trustee by the Holders of Investor Certificates evidencing
not less than 10% of the aggregate unpaid principal amount of all Investor
Certificates (or, with respect to any such representation, warranty or
certification that does not relate to all Series, 10% of the aggregate
unpaid principal amount of all Series to which such representation,
warranty or certification relates); or
(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 insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings, or the
winding-up or liquidation of its affairs, shall have been entered against
the Servicer and such decree or order shall have remained in force
undischarged or unstayed for a period of 60 days; or the Servicer shall
admit in writing its inability to pay its debts generally as they become
due, file a petition to take advantage of any applicable bankruptcy,
insolvency or reorganization statute, make any assignment for the benefit
of its creditors or voluntarily suspend payment of its obligations;
then, in the event of any Servicer Default, so long as the Servicer Default
shall not have been remedied, either the Trustee, or the Holders of
Investor Certificates evidencing more than 50% of the aggregate unpaid
principal amount of all Investor Certificates, by notice then given to the
Servicer (and to the Trustee if given by the Investor Certificateholders)
(a "Termination Notice"), may terminate all but not less than all 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
Trustee does not receive any bids from Eligible Servicers in accordance
with subsection 10.2(c) to act as a Successor Servicer and receives an
Officer's Certificate of the Transferor to the effect that the Servicer
cannot in good faith cure the Servicer Default which gave rise to the
Termination Notice, the Trustee shall grant a right of first refusal to the
Transferor which would permit the Transferor at its option to purchase the
Certificateholders' Interest on the Distribution Date in the next calendar
month.
The purchase price for the Certificateholders' Interest shall be
equal to the sum of the amounts specified therefor with respect to each
outstanding Series in the related Supplement. The Transferor shall notify
the Trustee and the Rating Agency prior to the Record Date for the
Distribution Date of the purchase if it is exercising such right of first
refusal. If the Transferor exercises such right of first refusal, the
Transferor shall deposit the purchase price into the Collection Account not
later than 1:00 P.M., New York City time, on such Distribution Date in
immediately available funds. The purchase price shall be allocated and
distributed to Investor Certificateholders in accordance with the terms of
each Supplement. The Transferor shall provide notice to the Rating Agency
of the exercise by it of such right of first refusal.
After receipt by the Servicer of a Termination Notice, and on the
date that a Successor Servicer is appointed by the Trustee pursuant to
Section 10.2, 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 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 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 Receivables provided for under this Agreement,
including all authority over all Collections which shall on the date of
transfer be held by the Servicer for deposit, or which have been deposited
by the Servicer, in the Collection Account, or which shall thereafter be
received with respect to the Receivables, and in assisting the Successor
Servicer. The Servicer shall within 20 Business Days transfer its
electronic records relating to the Receivables to the Successor Servicer in
such electronic form as the Successor Servicer may reasonably request and
shall promptly transfer to the Successor Servicer all other records,
correspondence and documents necessary for the continued servicing of the
Receivables in the manner and at such times as the Successor Servicer shall
reasonably request. To the extent that compliance with this Section 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 and
confidentiality agreements as the Servicer shall deem reasonably necessary
to protect its interests.
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, 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 its reasonable best efforts to perform its obligations in a timely
manner in accordance with the terms of this Agreement and the Servicer
shall provide the Trustee, the Transferor and any Series Enhancer with an
Officer's Certificate giving prompt notice of such failure or delay by it,
together with a description of its efforts so to perform its obligations.
Section 10.2 Trustee To Act; Appointment of Successor.
(a) On and after the receipt by the Servicer of a Termination
Notice pursuant to Section 10.1, the Servicer shall continue to perform all
servicing functions under this Agreement until the date specified in the
Termination Notice or otherwise specified by the Trustee or until a date
mutually agreed upon by the Servicer and Trustee. The 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 Trustee. 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
Trustee without further action shall automatically be appointed the
Successor Servicer. The Trustee may delegate any of its servicing
obligations to an Affiliate or agent in accordance with Sections 3.1(b) and
8.7. Notwithstanding the foregoing, the 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 Trustee shall give prompt notice to the Rating
Agency and each Series Enhancer upon the appointment of a Successor
Servicer.
(b) Upon its appointment, the Successor Servicer shall be the
successor in all respects to the Servicer with respect to servicing
functions under this Agreement and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the
Servicer by the terms and provisions hereof, and all references in this
Agreement to the Servicer shall be deemed to refer to the Successor
Servicer.
(c) In connection with any Termination Notice, the Trustee will
review any bids which it obtains from Eligible Servicers and shall be
permitted to appoint any Eligible Servicer submitting such a bid as a
Successor Servicer for servicing compensation not in excess of the
aggregate Servicing Fees for all Series plus the sum of the amounts with
respect to each Series and with respect to each Distribution Date equal to
any Collections of Finance Charge Receivables allocable to Investor
Certificateholders of such Series which are payable to the Holders of the
Transferor Certificates after payment of all amounts owing to the Investor
Certificateholders of such Series with respect to such Distribution Date or
required to be deposited in the applicable Series Accounts with respect to
such Distribution Date and any amounts required to be paid to any Series
Enhancer for such Series with respect to such Distribution Date pursuant to
the terms of any Enhancement Agreement; provided, however, that the Holders
of the Transferor Certificates shall be responsible for payment of their
portion of such aggregate Servicing Fees and all other such amounts in
excess of such aggregate Servicing Fees. Each holder of any of the
Transferor's Certificates agrees that, if Holdings (or any Successor
Servicer) is terminated as Servicer hereunder, the portion of the
Collections in respect of Finance Charge Receivables that the Transferor is
entitled to receive pursuant to this Agreement or any Supplement shall be
reduced by an amount sufficient to pay the Transferor's share of the
compensation of the Successor Servicer.
(d) All authority and power granted to the Successor Servicer
under this Agreement shall automatically cease and terminate upon
termination of the Trust pursuant to Section 12.1, and shall pass to and be
vested in the Transferor and, without limitation, the Transferor is hereby
authorized and empowered to execute and deliver, on behalf of the Successor
Servicer, as attorney-in-fact or otherwise, all documents and other
instruments, and to do and accomplish all other acts or things necessary or
appropriate to effect the purposes of such transfer of servicing rights.
The Successor Servicer agrees to cooperate with the Transferor in effecting
the termination of the responsibilities and rights of the Successor
Servicer to conduct servicing of the Receivables. The Successor Servicer
shall transfer its electronic records relating to the Receivables to
Holdings 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 shall require the Successor
Servicer to disclose to Holdings information of any kind which the
Successor Servicer deems to be confidential, Holdings shall be required to
enter into such customary licensing and confidentiality agreements as the
Successor Servicer shall deem necessary to protect its interests.
Section 10.3 Notification to Certificateholders. Within five
Business Days after the Servicer becomes aware of any Servicer Default, the
Servicer shall give notice thereof to the Trustee, the Rating Agency and
each Series Enhancer and the Trustee shall give notice to the Investor
Certificateholders. Upon any termination or appointment of a Successor
Servicer pursuant to this Article, the Trustee shall give prompt notice
thereof to the Investor Certificateholders.
[END OF ARTICLE X]
ARTICLE XI
THE TRUSTEE
Section 11.1 Duties of Trustee.
(a) The Trustee, prior to the occurrence of a Servicer Default
of which a Responsible Officer of the Trustee has actual knowledge and
after the curing of all Servicer Defaults which may have occurred,
undertakes to perform such duties and only such duties as are specifically
set forth in this Agreement and no implied duties or covenants by the
Trustee shall be read into this Agreement. If a Servicer Default to the
actual knowledge of a Responsible Officer of the Trustee has occurred
(which has not been cured or waived) the Trustee shall exercise such of the
rights and powers vested in it by this Agreement and use the same degree of
care and skill in their exercise as a prudent person would exercise or use
under the circumstances in the conduct of his or her own affairs.
(b) The Trustee may conclusively rely on and shall be fully
protected in acting on, or in refraining from acting in accord with, any
resolution, certificate, statement, instrument, Officer's Certificate,
opinion, report, notice, request, consent, order, appraisal, approval, bond
or other paper or document furnished to the Trustee pursuant to this
Agreement and believed by it to be genuine and to have been signed or
presented to it pursuant to this Agreement by the proper party or parties.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
substantially conform to the requirements of this Agreement. The Trustee
shall give prompt written notice to the Transferor and the Servicer of any
material lack of conformity of any such instrument to the applicable
requirements of this Agreement discovered by the Trustee which would
entitle a specified percentage of Investor Certificateholders to take any
action pursuant to this Agreement. If within 5 Business Days the
Transferor or the Servicer shall not have cured such material lack of
conformity, the Trustee shall provide notice of such material lack of
conformity to the Investor Certificateholders.
(c) Subject to paragraph (a), no provision of this Agreement
shall be construed to relieve the Trustee from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct. Consistent with the foregoing and for purposes of
clarification, it is understood and agreed by the parties hereto that:
(i) the Trustee shall not be liable for an error of judgment
made in good faith by a Responsible Officer or Responsible Officers of
the Trustee, unless it shall be proved that the Trustee was negligent
in ascertaining the pertinent facts;
(ii) the Trustee shall not be liable with respect to any action
taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of the Holders of Investor Certificates
evidencing more than 50% of the aggregate unpaid principal amount of
all Investor Certificates (or, with respect to any such action that
does not relate to all Series, 50% of the aggregate unpaid principal
amount of the Investor Certificates of all Series to which such action
relates) relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any
trust or power conferred upon the Trustee, under this Agreement; and
(iii) the Trustee shall not be charged with knowledge of any
failure by the Servicer to comply with the obligations of the Servicer
referred to in subsection 10.1 (a) or (b) nor with knowledge of a Pay
Out Event or Reinvestment Event unless a Responsible Officer of the
Trustee obtains actual knowledge of such failure or event or the
Trustee receives written notice of such failure or event from the
Servicer or any Holders of Investor Certificates evidencing not less
than 10% of the aggregate unpaid principal amount of all Investor
Certificates (or, with respect to any such failure that does not
relate to all Series, 10% of the aggregate unpaid principal amount of
the Investor Certificates of all Series to which such failure
relates).
(d) The Trustee shall not be required to expend or risk its own
funds or otherwise incur financial liability in the performance of any of
its duties hereunder or in the exercise of any of its rights or powers, if
there is reasonable ground for believing that the repayment of such funds
or adequate indemnity against such risk or liability is not reasonably
assured to it, and none of the provisions contained in this Agreement shall
in any event require the Trustee to perform, or be responsible for the
manner of performance of, any obligations of the Servicer under this
Agreement except during such time, if any, as the Trustee shall be the
successor to, and be vested with the rights, duties, powers and privileges
of, the Servicer in accordance with the terms of this Agreement.
(e) Except for actions expressly authorized by this Agreement,
the Trustee shall take no actions reasonably likely to impair the interests
of the Trust in any Receivable now existing or hereafter created or to
impair the value of any Receivable now existing or hereafter created.
(f) Except as expressly provided in this Agreement, the Trustee
shall have no power to vary the corpus of the Trust including by (i)
accepting any substitute obligation for a Receivable initially assigned to
the Trust under Section 2.1 or 2.9, (ii) adding any other investment,
obligation or security to the Trust or (iii) withdrawing from the Trust any
Receivables.
(g) In the event that the Paying Agent or the Transfer Agent and
Registrar shall fail to perform any obligation, duty or agreement in the
manner or on the day required to be performed by the Paying Agent or the
Transfer Agent and Registrar, as the case may be, under this Agreement, the
Trustee shall be obligated promptly upon its knowledge thereof to perform
such obligation, duty or agreement in the manner so required.
Section 11.2 Certain Matters Affecting the Trustee. Except as
otherwise provided in Section 11.1:
(a) the Trustee may consult with counsel and any written advice
of counsel or an Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or suffered or
omitted by it hereunder in good faith and in accordance with such written
advice of counsel or an Opinion of Counsel;
(b) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement, or to institute,
conduct or defend any litigation hereunder or in relation hereto, at the
request, order or direction of any of the Certificateholders, pursuant to
the provisions of this Agreement, unless such Certificateholders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which may be incurred therein or thereby;
provided, however, that nothing contained herein shall relieve the Trustee
of the obligations, upon the occurrence of a Servicer Default (which has
not been cured or waived) to exercise such of the rights and powers vested
in it by this Agreement, and to use the same degree of care and skill in
their exercise as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs;
(c) the Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and believed by it to be authorized
or within the discretion or rights or powers conferred upon it by this
Agreement;
(d) the Trustee shall not be bound to make any investigation
into the facts of matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, appraisal,
approval, bond or other paper or document believed by it to be genuine,
unless requested in writing so to do by Holders of Investor Certificates
evidencing more than 25% of the aggregate unpaid principal amount of all
Investor Certificates (or, with respect to any such matters that do not
relate to all Series, 25% of the aggregate unpaid principal amount of the
Investor Certificates of all Series to which such matters relate);
provided, however, that if the payment within a reasonable time to the
Trustee of the costs, expenses, or liabilities likely to be incurred by it
in the making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the
terms of this Agreement, the Trustee may require reasonable indemnity
against such cost, expense, or liability as a condition to so proceed;
(e) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian, nominee and the Trustee shall not be
responsible for any misconduct or negligence on the part of any such agent,
attorney, custodian or nominee appointed with due care by it hereunder;
(f) except as may be required by subsection 11.1(a), the Trustee
shall not be required to make any initial or periodic examination of any
documents or records related to the Receivables or the Accounts for the
purpose of establishing the presence or absence of defects, the compliance
by the Transferor with its representations and warranties or for any other
purpose;
(g) whether or not therein expressly so provided, every
provision of this Agreement relating to the conduct or affecting the
liability of or affording protection to the Trustee shall be subject to the
provisions of this Section 11.2;
(h) the Trustee shall have no liability with respect to the acts
or omissions of the Servicer (except and to the extent the Servicer is the
Trustee), including, acts or omissions in connection with the servicing,
management or administration of Receivables; calculations made by the
Servicer whether or not reported to the Trustee; and deposits into or
withdrawals from any accounts or funds established pursuant to the terms of
this Agreement; and
(i) in the event that the Trustee is also acting as Paying Agent
or Transfer Agent and Registrar hereunder, the rights and protections
afforded to the Trustee pursuant to this Article XI shall also be afforded
to such Paying Agent, Transfer Agent and Registrar.
Section 11.3 Trustee Not Liable for Recitals in Certificates.
The Trustee assumes no responsibility for the correctness of the recitals
contained herein and in the Certificates (other than the certificate of
authentication on the Certificates). Except as set forth in Section 11.15,
the Trustee makes no representations as to the validity or sufficiency of
this Agreement or any Supplement or of the Certificates (other than the
certificate of authentication on the Certificates) or of any Receivable or
related document or as to the perfection or priority of any security
interest therein or as to the efficacy of the Trust. The Trustee shall not
be accountable for the use or application by the Transferor of any of the
Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Transferor in respect of the
Receivables or deposited in or withdrawn from the Collection Account, any
Series Accounts or any other accounts hereafter established to effectuate
the transactions contemplated by this Agreement and in accordance with the
terms of this Agreement.
Section 11.4 Trustee May Own Certificates. Subject to any
restrictions that may otherwise be imposed by Section 406 of ERISA or
Section 4975(e) of the Code, the Trustee in its individual or any other
capacity may become the owner or pledgee of Investor Certificates with the
same rights as it would have if it were not the Trustee.
Section 11.5 The Servicer To Pay Trustee's Fees and Expenses.
The Servicer covenants and agrees to pay to the Trustee from time to time,
and the Trustee shall be entitled to receive, reasonable compensation
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all services rendered by
it in the execution of the trust hereby created and in the exercise and
performance of any of the powers and duties hereunder of the Trustee, and
the Servicer will pay or reimburse the Trustee upon its request for all
reasonable expenses (including, without limitation, expenses incurred in
connection with notices or other communications to Certificateholders),
disbursements and advances incurred or made by the Trustee in accordance
with any of the provisions of this Agreement or any Enhancement Agreement
(including the reasonable fees and expenses of its agents, any co-trustee
and counsel) except any such expense, disbursement or advance as may arise
from its negligence or bad faith and except as provided in the following
sentence. If the Trustee is appointed Successor Servicer pursuant to
Section 10.2, the provisions of this Section shall not apply to expenses,
disbursements and advances made or incurred by the Trustee in its capacity
as Successor Servicer, which shall be paid out of the Servicing Fee. The
Servicer's covenant to pay the expenses, disbursements and advances
provided for in this Section shall survive the termination of this
Agreement or the earlier resignation or removal of the Trustee.
Section 11.6 Eligibility Requirements for Trustee. The Trustee
hereunder shall at all times be a corporation organized and doing business
under the laws of the United States or any state thereof authorized under
such laws to exercise corporate trust powers, have a net worth of at least
$50,000,000, be subject to supervision or examination by Federal or state
authority and maintain any credit or deposit rating required by any Rating
Agency (which shall be Baa3, in the case of Moody's unless otherwise
notified, BBB- in the case of Standard & Poor's unless otherwise notified
and BBB- in the case of Fitch unless otherwise notified) or any higher
credit or deposit rating required in connection with the issuance of a
particular Series. If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then, for the purpose of this Section,
the combined capital and surplus of such corporation shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section, the Trustee
shall resign immediately in the manner and with the effect specified in
Section 11.7.
Section 11.7 Resignation or Removal of Trustee.
(a) The Trustee may at any time resign and be discharged from
the trust hereby created by giving written notice thereof to the Transferor
and the Servicer. Upon receiving such notice of resignation, the
Transferor shall promptly appoint a successor trustee by written
instrument, in duplicate, one copy of which instrument shall be delivered
to the resigning Trustee and one copy to the successor trustee. If no
successor trustee shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice of resignation,
the resigning Trustee may petition any court of competent jurisdiction for
the appointment of a successor trustee.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 11.6 and shall fail to resign
after request therefor by the Servicer, or if at any time the Trustee shall
be legally unable to act, or shall be adjudged a bankrupt or insolvent, or
if a receiver of the Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Servicer may remove the Trustee and promptly appoint
a successor trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to the
successor trustee.
(c) Any resignation or removal of the Trustee and appointment of
successor trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor
trustee as provided in Section 11.8.
(d) No Trustee under this Agreement shall be personally liable
for any action or omission of any successor trustee.
Section 11.8 Successor Trustee.
(a) Any successor trustee appointed as provided in Section 11.7
shall execute, acknowledge and deliver to the Transferor, to the Servicer
and to its predecessor Trustee an instrument accepting such appointment
hereunder, and thereupon the resignation or removal of the predecessor
Trustee shall become effective and such successor trustee, without any
further act, deed or conveyance, shall become fully vested with all the
rights, powers, duties and obligations of its predecessor hereunder, with
like effect as if originally named as Trustee herein. The predecessor
Trustee shall deliver, at the expense of the Servicer, to the successor
trustee all documents or copies thereof and statements held by it
hereunder; and the Transferor and the predecessor Trustee shall execute and
deliver such instruments and do such other things as may reasonably be
required for fully and certainly vesting and confirming in the successor
trustee all such rights, powers, duties and obligations.
(b) No successor trustee shall accept appointment as provided in
this Section unless at the time of such acceptance such successor trustee
shall be eligible under the provisions of Section 11.6.
(c) Notwithstanding any other provisions herein, the appointment
of a successor trustee shall not be effective unless the Rating Agency
Condition shall have been satisfied.
(d) Upon acceptance of appointment by a successor trustee as
provided in this Section, such successor trustee shall provide notice of
such succession hereunder to all Certificateholders and the Servicer shall
provide such notice to the Rating Agency and each Series Enhancer.
Section 11.9 Merger or Consolidation of Trustee. Any Person
into which the Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person
succeeding to the corporate trust business of the Trustee, shall be the
successor of the Trustee hereunder, provided such corporation shall be
eligible under the provisions of Section 11.6, without the execution or
filing of any paper or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding.
Section 11.10 Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding any other provisions of this Agreement, at
any time, for the purpose of meeting any Requirements of Law of any
jurisdiction in which any part of the Trust may at the time be located, the
Trustee shall have the power and may execute and deliver all instruments to
appoint one or more persons to act as a co-trustee or co-trustees, or
separate trustee or separate trustees, of all or any part of the Trust, and
to vest in such Person or Persons, in such capacity and for the benefit of
the Certificateholders, such title to the Trust, or any part thereof, and,
subject to the other provisions of this Section, such powers, duties,
obligations, rights and trusts as the Trustee may consider necessary or
desirable. No co-trustee or separate trustee hereunder shall be required
to meet the terms of eligibility as a successor trustee under Section 11.6
and no notice to Certificateholders of the appointment of any co-trustee or
separate trustee shall be required under Section 11.8.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions
and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Trustee
joining in such act) except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed
(whether as Trustee hereunder or as Successor Servicer) the Trustee
shall be incompetent or unqualified to perform such act or acts, in
which event such rights, powers, duties and obligations (including the
holding of title to the Trust or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, but solely at the direction of the Trustee;
(ii) no trustee hereunder shall be liable by reason of any act
or omission of any other trustee hereunder; and
(iii) the Trustee may at any time accept the resignation of or
remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees
and co-trustees, as effectively as if given to each of them. Every
instrument appointing any separate trustee or co-trustee shall refer to
this Agreement and the conditions of this Article. Each separate trustee
and co-trustee, upon its acceptance of the trusts conferred, shall be
vested with the estates or property specified in its instrument of
appointment, either jointly with the Trustee or separately, as may be
provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the
conduct of, affecting the liability of, or affording protection to, the
Trustee. Every such instrument shall be filed with the Trustee and a copy
thereof given to the Servicer.
(d) Any separate trustee or co-trustee may at any time
constitute the Trustee, its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under
or in respect of this Agreement on its behalf and in its name. If any
separate trustee or co-trustee shall die, become incapable of acting,
resign or be removed, all its estates, properties, rights, remedies and
trusts shall vest in and be exercised by the Trustee, to the extent
permitted by law, without the appointment of a new or successor trustee.
Section 11.11 Tax Returns. In the event the Trust shall be
required to file tax returns, the Servicer shall prepare or shall cause to
be prepared any tax returns required to be filed by the Trust and shall
remit such returns to the Trustee for signature (if it is determined that
the Trustee is required to sign such returns) at least five days before
such returns are due to be filed; the Trustee shall promptly sign such
returns and deliver such returns after signature to the Servicer and such
returns shall be filed by the Servicer. The Servicer in accordance with
the terms of each Supplement shall also prepare or shall cause to be
prepared all tax information required by law to be distributed to Investor
Certificateholders. The Trustee upon request, will furnish the Servicer
with all such information known to the Trustee as may be reasonably
required in connection with the preparation of all tax returns of the
Trust. In no event shall the Trustee or the Servicer (except as provided
in Section 8.4) be liable for any liabilities, costs or expenses of the
Trust or the Holders of Investor Certificates arising under any tax law,
including without limitation Federal, state, local or foreign income or
excise taxes or any other tax imposed or measured by income (or any
interest or penalty with respect thereto or arising from a failure to
comply therewith).
Section 11.12 Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name as trustee. Any recovery of
judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel, be for the ratable benefit of the Certificateholders in
respect of which such judgment has been obtained.
Section 11.13 Suits for Enforcement.
(a) If a Servicer Default shall occur and be continuing, the
Trustee, in its discretion may, subject to the provisions of Sections 11.1
and 11.14, proceed to protect and enforce its rights and the rights of the
Certificateholders under this Agreement by suit, action or proceeding in
equity or at law or otherwise, whether for the specific performance of any
covenant or agreement contained in this Agreement or in aid of the
execution of any power granted in this Agreement or for the enforcement of
any other legal, equitable or other remedy as the Trustee, being advised by
counsel, shall deem most effectual to protect and enforce any of the rights
of the Trustee or the Certificateholders.
(b) Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any
Certificateholder any plan of reorganization, arrangement, adjustment or
composition affecting the Investor Certificates or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Certificateholder in any such proceeding.
Section 11.14 Rights of Certificateholders To Direct Trustee.
Except as otherwise provided in the applicable Supplement, holders of
Investor Certificates evidencing more than 50% of the aggregate unpaid
principal amount of all Investor Certificates (or, with respect to any
remedy, trust or power that does not relate to all Series, 50% of the
aggregate unpaid principal amount of the Investor Certificates of all
Series to which such remedy, trust or power relates) shall have the right
to direct the time, method, and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred
on the Trustee; provided, however, that, subject to Section 11.1, the
Trustee shall have the right to decline to follow any such direction if the
Trustee after being advised by counsel determines that the action so
directed may not lawfully be taken, or if a Responsible Officer or Officers
of the Trustee in good faith shall determine that the proceedings so
directed would be illegal or involve it in personal liability or be unduly
prejudicial to the rights of Investor Certificateholders not parties to
such direction; and provided further, that nothing in this Agreement shall
impair the right of the Trustee to take any action deemed proper by the
Trustee and which is not inconsistent with such direction of the Investor
Certificateholders.
Section 11.15 Representations and Warranties of Trustee. The
Trustee represents and warrants that:
(i) the Trustee is a banking corporation organized, existing and
in good standing under the laws of State of New York;
(ii) the Trustee has full power, authority and right to
execute, deliver and perform this Agreement and each Supplement, and
has taken all necessary action to authorize the execution, delivery
and performance by it of this Agreement and each Supplement;
(iii) this Agreement and each Supplement has been duly executed
and delivered by the Trustee;
(iv) the Trustee meets the eligibility requirements set forth in
Section 11.6; and
(v) the Trustee will not use any office, place of business,
agents or employees of the Trustee in the State of Florida to act for, or
on behalf of, the Trust or the Trustee (in its capacity as Trustee of the
Trust), except to the extent that the Trustee first provides an opinion (at
the sole expense of the Transferor) of counsel satisfactory to the Servicer
stating that any such activities proposed to be carried on in Florida will
not cause the Trust to be subject to any Florida income or franchise tax.
Section 11.16 Maintenance of Office or Agency. The Trustee will
maintain at its expense an office or agency (the "Corporate Trust Office")
where notices and demands to or upon the Trustee in respect of the
Certificates and this Agreement may be served in the State of New York.
The Trustee maintains its Corporate Trust Office at 101 Barclay Street 12E,
New York, NY 10286, as such office and will give prompt notice to the
Servicer and to Investor Certificateholders of any change in the location
of the Certificate Register or any such office or agency.
[END OF ARTICLE XI]
ARTICLE XII
TERMINATION
Section 12.1 Termination of Trust. The Trust and the respective
obligations and responsibilities of the Transferor, the Servicer and the
Trustee created hereby (other than the obligation of the Trustee to make
payments to Investor Certificateholders as hereinafter set forth) shall
terminate, except with respect to the duties described in Section 8.4 and
subsection 12.2(b), upon the earlier of (i) December 31, 2059, (ii) at the
option of the Transferor, the day following the Distribution Date on which
the Invested Amount for each Series is zero and (iii) the time provided in
Section 9.1.
Section 12.2 Final Distribution.
(a) The Servicer shall give the Trustee at least 30 days' prior
notice of the Distribution Date on which the Investor Certificateholders of
any Series or Class may surrender their Investor Certificates for payment
of the final distribution on and cancellation of such Investor Certificates
(or, in the event of a final distribution resulting from the application of
Section 2.6, 9.1 or 10.1, notice of such Distribution Date promptly after
the Servicer has determined that a final distribution will occur, if such
determination is made less than 30 days prior to such Distribution Date).
Such notice shall be accompanied by an Officer's Certificate setting forth
the information specified in Section 3.5 covering the period during the
then-current calendar year through the date of such notice. Not later than
the fifth day of the month in which the final distribution in respect of
such Series or Class is payable to Investor Certificateholders, the Trustee
shall provide notice to Investor Certificateholders of such Series or Class
specifying (i) the date upon which final payment of such Series or Class
will be made upon presentation and surrender of Investor Certificates of
such Series or Class at the office or offices therein designated, (ii) the
amount of any such final payment and (iii) that the Record Date otherwise
applicable to such payment date is not applicable, payments being made only
upon presentation and surrender of such Investor Certificates at the office
or offices therein specified (which, in the case of Bearer Certificates,
shall be outside the United States). The Trustee shall give such notice to
the Transfer Agent and Registrar and the Paying Agent at the time such
notice is given to Investor Certificateholders.
(b) Notwithstanding a final distribution to the Investor
Certificateholders of any Series or Class (or the termination of the
Trust), except as otherwise provided in this paragraph, all funds then on
deposit in the Collection Account and any Series Account allocated to such
Investor Certificateholders shall continue to be held in trust for the
benefit of such Investor Certificateholders and the Paying Agent or the
Trustee shall pay such funds to such Investor Certificateholders upon
surrender of their Investor Certificates, if certificated (and any excess
shall be paid in accordance with the terms of any Enhancement Agreement).
In the event that all such Investor Certificateholders shall not surrender
their Investor Certificates for cancellation within six months after the
date specified in the notice from the Trustee described in paragraph (a),
the Trustee shall give a second notice to the remaining such Investor
Certificateholders to surrender their Investor Certificates for
cancellation and receive the final distribution with respect thereto (which
surrender and payment, in the case of Bearer Certificates, shall be outside
the United States). If within one year after the second notice all such
Investor Certificates shall not have been surrendered for cancellation, the
Trustee may take appropriate steps, or may appoint an agent to take
appropriate steps, to contact the remaining such Investor
Certificateholders concerning surrender of their Investor Certificates, and
the cost thereof shall be paid out of the funds in the Collection Account
or any Series Account held for the benefit of such Investor
Certificateholders. The Trustee and the Paying Agent shall pay to the
Transferor any monies held by them for the payment of principal or interest
that remains unclaimed for two years. After payment to the Transferor,
Investor Certificateholders entitled to the money must look to the
Transferor for payment as general creditors unless an applicable abandoned
property law designates another Person.
(c) In the event that the Invested Amount with respect to any
Series is greater than zero on its Series Termination Date (after giving
effect to deposits and distributions otherwise to be made on such Series
Termination Date), the Trustee will sell or cause to be sold on such Series
Termination Date an amount of Principal Receivables (or interests therein)
equal to 110% of the Invested Amount with respect to such Series on such
Series Termination Date plus related Finance Charge Receivables (after
giving effect to such deposits and distributions); provided, however, that
in no event shall such amount exceed the product of (i) the aggregate
Principal Receivables on such Series Termination Date and (ii) a fraction
the numerator of which is the product of (x) the Adjusted Invested Amount
for such Series and (y) the Transferor's Percentage for such Series and the
denominator of which is the sum of the numerators with respect to all
Series. The proceeds (the "Termination Proceeds") from such sale shall be
immediately deposited into the Collection Account for such Series. The
Termination Proceeds shall be allocated and distributed to Investor
Certificateholders of such Series in accordance with the terms of the
applicable Supplement.
Section 12.3 The Transferor's Termination Rights. Upon the
termination of the Trust pursuant to Section 12.1 and the surrender of the
Transferor Certificates, the Trustee shall sell, assign and convey to the
Holders of the Transferor Certificates or any of their designees, without
recourse, representation or warranty, all right, title and interest of the
Trust in the Receivables, whether then existing or thereafter created, all
monies due or to become due and all amounts received with respect thereto
(including all moneys then held in the Collection Account or any Series
Account) and all proceeds thereof, except for amounts held by the Trustee
pursuant to subsection 12.2(b). The Trustee shall execute and deliver such
instruments of transfer and assignment, in each case without recourse, as
shall be reasonably requested by the Transferor to vest in the Holders of
the Transferor Certificates or any of their designees all right, title and
interest which the Trust had in the Receivables.
[END OF ARTICLE XII]
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.1 Amendment; Waiver of Past Defaults.
(a) This Agreement or any Supplement may be amended from time to
time (including in connection with the issuance of a Supplemental
Certificate, conveyance of a Participation Interest, allocation of assets
pursuant to Section 4.6, or to change the definition of Monthly Period,
Determination Date or Distribution Date) by the Servicer, the Transferor
and the Trustee, by a written instrument signed by each of them, without
the consent of any of the Certificateholders, provided that (i) an Opinion
of Counsel for the Transferor (which Opinion of Counsel may, as to factual
matters, rely upon Officer's Certificates of the Transferor or the
Servicer) is addressed and delivered to the Trustee, dated the date of any
such amendment, to the effect that the conditions precedent to any such
amendment have been satisfied, (ii) the Transferor shall have delivered to
the Trustee an Officer's Certificate, dated the date of any such Amendment,
stating that the Transferor reasonably believes that such amendment will
not have an Adverse Effect and (iii) the Rating Agency Condition shall have
been satisfied with respect to any such amendment.
(b) This Agreement or any Supplement may also be amended from
time to time (including in connection with the issuance of a Supplemental
Certificate) by the Servicer, the Transferor and the Trustee, with the
consent of the Holders of Investor Certificates evidencing not less than
66-2/3% of the aggregate unpaid principal amount of the Investor
Certificates of all affected Series for which the Transferor has not
delivered an Officer's Certificate stating that there is no 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 any Supplement or of
modifying in any manner the rights of the Certificateholders; provided,
however, that no such amendment shall (i) reduce in any manner the amount
of or delay the timing of any distributions to (changes in Pay Out Events
or Reinvestment Events that decrease the likelihood of the occurrence
thereof shall not be considered delays in the timing of distributions for
purposes of this clause) be made to Investor Certificateholders or deposits
of amounts to be so distributed or the amount available under any Series
Enhancement without the consent of each affected Certificateholder, (ii)
change the definition of or the manner of calculating the interest of any
Investor Certificateholder without the consent of each affected Investor
Certificateholder, (iii) reduce the aforesaid percentage required to
consent to any such amendment without the consent of each Investor
Certificateholder, or (iv) adversely affect the rating of any Series or
Class by any Rating Agency without the consent of the Holders of Investor
Certificates of such Series or Class evidencing not less than 66-2/3% of
the aggregate unpaid principal amount of the Investor Certificates of such
Series or Class; provided, further however, that the Transferor shall have
delivered to the Trustee a Tax Opinion to the Trustee with respect to any
such amendment prior to the effectiveness thereof.
(c) Promptly after the execution of any such amendment or
consent (other than an amendment pursuant to paragraph (a)), the Trustee
shall furnish notification of the substance of such amendment to each
Investor Certificateholder, and the Servicer shall furnish notification of
the substance of such amendment to the Rating Agency and each Series
Enhancer.
(d) It shall not be necessary for the consent of Investor
Certificateholders under this Section 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 Investor
Certificateholders shall be subject to such reasonable requirements as the
Trustee may prescribe.
(e) Notwithstanding anything in this Section to the contrary, no
amendment may be made to this Agreement or any Supplement which would
adversely affect in any material respect the interests of any Series
Enhancer without the consent of such Series Enhancer.
(f) Any Supplement executed in accordance with the provisions of
Section 6.3 shall not be considered an amendment to this Agreement for the
purposes of this Section.
(g) The Holders of Investor Certificates evidencing more than
66-2/3% of the aggregate unpaid principal amount of the Investor
Certificates 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 all Series, 66-2/3% of the aggregate unpaid principal amount of
the Investor Certificates 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 Certificateholders, waive any default by the
Transferor or the Servicer in the performance of their obligations
hereunder and its consequences, except the failure to make any
distributions required to be made to Investor Certificateholders or to make
any required deposits of any amounts to be so distributed. Upon any such
waiver of a past default, such default shall cease to exist, and any
default arising therefrom shall be deemed to have been remedied for every
purpose of this Agreement. No such waiver shall extend to any subsequent
or other default or impair any right consequent thereon except to the
extent expressly so waived. The Servicer shall provide written notice to
the Rating Agencies of any waiver pursuant to this subsection 13.1(g).
(h) The Trustee may, but shall not be obligated to, enter into
any such amendment which affects the Trustee's rights, duties or immunities
under this Agreement or otherwise. In connection with the execution of any
amendment hereunder, the Trustee shall be entitled to receive the Opinion
of Counsel described in subsection 13.2(d).
Section 13.2 Protection of Right, Title and Interest to Trust.
(a) The Servicer shall cause this Agreement, all amendments and
supplements hereto and all financing statements and continuation statements
and any other necessary documents covering the Certificateholders' and the
Trustee's right, title and interest to the Trust to be promptly recorded,
registered and filed, and at all times to be kept recorded, registered and
filed, all in such manner and in such places as may be required by law
fully to preserve and protect the right, title and interest of the
Certificateholders and the Trustee hereunder to all property comprising the
Trust. The Servicer shall deliver to the Trustee file-stamped copies of,
or filing receipts for, any document recorded, registered or filed as
provided above, as soon as available following such recording, registration
or filing. The Transferor shall cooperate fully with the Servicer in
connection with the obligations set forth above and will execute any and
all documents reasonably required to fulfill the intent of this paragraph.
(b) Within 30 days after the Transferor makes any change in its
name, identity or corporate structure which would make any financing
statement or continuation statement filed in accordance with paragraph (a)
seriously misleading within the meaning of Section 9-402(7) (or any
comparable provision) of the UCC, such Transferor shall give the Trustee
notice of any such change and shall file such financing statements or
amendments as may be necessary to continue the perfection of the Trust's
security interest or ownership interest in the Receivables and the proceeds
thereof.
(c) The Transferor and the Servicer shall give the Trustee
prompt notice of any relocation of any office from which it services
Receivables or keeps records concerning the Receivables or of its principal
executive office and whether, as a result of such relocation, the
applicable provisions of the UCC would require the filing of any amendment
of any previously filed financing or continuation statement or of any new
financing statement and shall file such financing statements or amendments
as may be necessary to perfect or to continue the perfection of the Trust's
security interest in the Receivables and the proceeds thereof. The
Transferor and the Servicer shall at all times maintain each office from
which it services Receivables and its principal executive offices within
the United States.
(d) The Servicer shall deliver to the Trustee (i) upon the
execution and delivery of each amendment of this Agreement or any
Supplement, an Opinion of Counsel to the effect specified in Exhibit E-1;
(ii) on each date specified in subsection 2.9(c)(ix) with respect to
Aggregate Additions to be designated as Accounts, an Opinion of Counsel
substantially in the form of Exhibit E-2, (iii) semiannually, with respect
to any New Accounts included as Accounts, an Opinion of Counsel
substantially in the form of Exhibit E-2, (iv) on each Addition Date on
which any Participation Interests are to be included in the Trust pursuant
to subsection 2.9(a) or (b), an Opinion of Counsel covering the same
substantive legal issues addressed by Exhibits E-1 and E-2 but conformed to
the extent appropriate to relate to Participation Interests; and (v) on or
before March 31 of each year, beginning with March 31, 1998, an Opinion of
Counsel substantially in the form of Exhibit E-3.
Section 13.3 Limitation on Rights of Certificateholders.
(a) The death or incapacity of any Investor Certificateholder
shall not operate to terminate this Agreement or the Trust, nor shall such
death or incapacity entitle such Certificateholder's legal representatives
or heirs to claim an accounting or to take any action or commence any
proceeding in any court for a partition or winding up of the Trust, nor
otherwise affect the rights, obligations and liabilities of the parties
hereto or any of them.
(b) No Investor Certificateholder shall have any right to vote
(except as expressly provided in this Agreement) or in any manner otherwise
control the operation and management of the Trust, or the obligations of
the parties hereto, nor shall any Investor Certificateholder be under any
liability to any third person by reason of any action taken by the parties
to this Agreement pursuant to any provision hereof.
(c) No Investor Certificateholder shall have any right by virtue
of any provisions of this Agreement to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this
Agreement, unless such Investor Certificateholder previously shall have
made, and unless the Holders of Investor Certificates evidencing more than
50% of the aggregate unpaid principal amount of all Investor Certificates
(or, with respect to any such action, suit or proceeding that does not
relate to all Series, 50% of the aggregate unpaid principal amount of the
Investor Certificates of all Series to which such action, suit or
proceeding relates) shall have made, a request to the Trustee to institute
such action, suit or proceeding in its own name as Trustee hereunder and
shall have offered to the Trustee such reasonable indemnity as it may
require against the costs, expenses and liabilities to be incurred therein
or thereby, and the Trustee, for 60 days after such request and offer of
indemnity, shall have neglected or refused to institute any such action,
suit or proceeding; it being understood and intended, and being expressly
covenanted by each Investor Certificateholder with every other Investor
Certificateholder and the Trustee, that no one or more Investor
Certificateholders shall have any right in any manner whatever by virtue or
by availing itself or themselves of any provisions of this Agreement to
affect, disturb or prejudice the rights of the holders of any other of the
Investor Certificates, or to obtain or seek to obtain priority over or
preference to any other such Investor Certificateholder, or to enforce any
right under this Agreement, except in the manner herein provided and for
the equal, ratable and common benefit of all Investor Certificateholders
except as otherwise expressly provided in this Agreement. For the
protection and enforcement of the provisions of this Section, each and
every Investor Certificateholder and the Trustee shall be entitled to such
relief as can be given either at law or in equity.
SECTION 13.4 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO
ITS CONFLICT OF LAW PROVISIONS, AND OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 13.5 Notices; Payments.
(a) All demands, notices, instructions, directions and
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 registered mail, return receipt requested, or sent by
facsimile transmission (i) in the case of the Transferor, to Partners First
Receivables Funding, LLC, at 900 Elkridge Landing Road, Suite 300,
Linthicum, Maryland 21090 -- Attention: John R. Soderlund (facsimile no.
(410) 855-8599), (ii) in the case of the Servicer, to Partners First
Holdings, LLC, at 900 Elkridge Landing Road, Suite 300, Linthicum, Maryland
21090 -- Attention: John R. Soderlund (facsimile no. (410) 855-8599), (iii)
in the case of the Trustee, the Paying Agent or Transfer Agent and
Registrar, to The Bank of New York at 101 Barclay Street 12E, New York, NY
10286, Attention: Corporate Trust Department (facsimile no (212) 815-5544
), (iv) in the case of Moody's, to 99 Church Street, New York, New York
10007, Attention: ABS Monitoring Department, 4th Floor (facsimile no. (212)
553-4600), (v) in the case of Standard & Poor's, to 26 Broadway, New York,
New York 10004, Attention: Asset Backed Group, 15th Floor (facsimile no.
(212) 412-0323), (vi) in the case of Fitch, to One State Street Plaza, New
York, New York, Attention: Structured Finance Department (facsimile no.
(212) 480-4438), and (vii) to any other Person as specified in any
Supplement; or, as to each party, at such other address or facsimile number
as shall be designated by such party in a written notice to each other
party.
(b) Any Notice required or permitted to be given to a Holder of
Registered Certificates shall be given by first-class mail, postage
prepaid, at the address of such Holder as shown in the Certificate
Register. No Notice shall be required to be mailed to a Holder of Bearer
Certificates or Coupons but shall be given as provided below. Any Notice
so mailed within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given, whether or not the Investor
Certificateholder receives such Notice. In addition, (a) if and so long as
any Series or Class is listed on the Luxembourg Stock Exchange and such
Exchange shall so require, any Notice to Investor Certificateholders shall
be published in an Authorized Newspaper of general circulation in
Luxembourg within the time period prescribed in this Agreement and (b) in
the case of any Series or Class with respect to which any Bearer
Certificates are outstanding, any Notice required or permitted to be given
to Investor Certificateholders of such Series or Class shall be published
in an Authorized Newspaper within the time period prescribed in this
Agreement.
Section 13.6 Severability of Provisions. If any one or more of
the covenants, agreements, provisions or terms of this Agreement shall for
any reason whatsoever be held invalid, then such provisions shall be deemed
severable from the remaining provisions of this Agreement and shall in no
way affect the validity or enforceability of the remaining provisions or of
the Certificates or the rights of the Certificateholders.
Section 13.7 Certificates Nonassessable and Fully Paid. It is
the intention of the parties to this Agreement that the Certificateholders
shall not be personally liable for obligations of the Trust, that the
interests in the Trust represented by the Certificates shall be
nonassessable for any losses or expenses of the Trust or for any reason
whatsoever and that the Certificates upon authentication and delivery
thereof by the Trustee pursuant to Section 6.2 are and shall be deemed
fully paid.
Section 13.8 Further Assurances. The Transferor and the
Servicer agree to do and perform, from time to time, any and all acts and
to execute any and all further instruments required or reasonably requested
by the Trustee more fully to effect the purposes of this Agreement,
including the execution of any financing statements or continuation
statements relating to the Receivables for filing under the provisions of
the UCC of any applicable jurisdiction.
Section 13.9 Nonpetition Covenant. Notwithstanding any prior
termination of this Agreement, the Investor Certificateholders, the
Servicer, the Trustee, the Transferor, the Paying Agent, the Authenticating
Agent, the Transfer Agent, the Registrar, the Series Enhancers and each
Holder of a Supplemental Certificate shall not, prior to the date which is
one year and one day after the termination of this Agreement with respect
to the Trust or the Transferor, acquiesce, petition or otherwise invoke or
cause the Trust or the Transferor to invoke the process of any Governmental
Authority for the purpose of commencing or sustaining a case against the
Trust or the Transferor under any Federal or state bankruptcy, insolvency
or similar law or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of the Trust or the
Transferor or any substantial part of its property or ordering the winding-
up or liquidation of the affairs of the Trust or the Transferor.
Section 13.10 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Trustee or the
Certificateholders, 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 13.11 Counterparts. This Agreement may be executed in
two or more counterparts (and by different parties on separate
counterparts), each of which shall be an original, but all of which
together shall constitute one and the same instrument.
Section 13.12 Third-Party Beneficiaries. This Agreement will
inure to the benefit of and be binding upon the parties hereto, the
Certificateholders, any Series Enhancer and their respective successors and
permitted assigns. Except as otherwise expressly provided in this
Agreement (including Section 7.4), no other Person will have any right or
obligation hereunder.
Section 13.13 Actions by Certificateholders.
(a) Wherever in this Agreement a provision is made that an
action may be taken or a Notice given by Certificateholders, such action or
Notice may be taken or given by any Certificateholder, unless such
provision requires a specific percentage of Certificateholders.
(b) Any Notice, request, authorization, direction, consent,
waiver or other act by the Holder of a Certificate shall bind such Holder
and every subsequent Holder of such Certificate and of any Certificate
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
Trustee or the Servicer in reliance thereon, whether or not notation of
such action is made upon such Certificate.
Section 13.14 Rule 144A Information. For so long as any of the
Investor Certificates of any Series or Class are "restricted securities"
within the meaning of Rule 144(a)(3) under the Act, each of the Transferor,
the Trustee, the Servicer and any Series Enhancer agree to cooperate with
each other to provide to any Investor Certificateholders of such Series or
Class and to any prospective purchaser of Certificates designated by such
an Investor Certificateholder, upon the request of such Investor
Certificateholder or prospective purchaser, 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 Act.
Section 13.15 Merger and Integration. Except as specifically
stated otherwise herein, this Agreement sets forth the entire understanding
of the parties relating to the subject matter hereof, and all prior
understandings, written or oral, are superseded by this Agreement. This
Agreement may not be modified, amended, waived or supplemented except as
provided herein.
Section 13.16 Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation
of any provision hereof.
[END OF ARTICLE XIII]
IN WITNESS WHEREOF, the Transferor, the Servicer and the Trustee
have caused this Pooling and Servicing Agreement to be duly executed by
their respective officers as of the day and year first above written.
PARTNERS FIRST RECEIVABLES
FUNDING, LLC,
Transferor,
by /s/ Mark J. Norwicz
--------------------------------------
Name: Mark J. Norwicz
Title: Treasurer
PARTNERS FIRST HOLDINGS, LLC
Servicer,
by /s/ John R. Soderlund
--------------------------------------
Name: John R. Soderlund
Title: President and Chief
Executive Officer
THE BANK OF NEW YORK,
Trustee
by /s/ Wuhan Dansby
--------------------------------------
Name: Wuhan Dansby
Title: Assistant Vice President
EXHIBIT A
FORM OF TRANSFEROR CERTIFICATE
THIS TRANSFEROR CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. NEITHER THIS TRANSFEROR CERTIFICATE
NOR ANY PORTION HEREOF MAY BE OFFERED OR SOLD EXCEPT IN COMPLIANCE WITH THE
REGISTRATION PROVISIONS OF SUCH ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM SUCH REGISTRATION PROVISIONS.
THIS TRANSFEROR CERTIFICATE IS NOT PERMITTED TO BE TRANSFERRED,
ASSIGNED, EXCHANGED OR OTHERWISE PLEDGED OR CONVEYED EXCEPT IN COMPLIANCE
WITH THE TERMS OF THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
No. R-1 One Unit
PARTNERS FIRST CREDIT CARD MASTER TRUST
TRANSFEROR CERTIFICATE
THIS CERTIFICATE REPRESENTS AN INTEREST
IN CERTAIN ASSETS OF THE
PARTNERS FIRST CREDIT CARD MASTER TRUST
Evidencing an interest in a trust, the corpus of which consists primarily
of an interest in receivables generated from time to time in the ordinary
course of business in a portfolio of revolving credit card accounts
transferred by Partners First Receivables Funding, LLC (the "Transferor").
(Not an interest in or obligation of the Transferor
or any affiliate thereof)
This certifies that PARTNERS FIRST RECEIVABLES FUNDING, LLC
("PFRF") is the registered owner of a fractional interest in the assets of
Partners First Credit Card Master Trust, a trust organized under the laws
of Delaware (the "Trust") not allocated to the Certificateholders' Interest
or the interest of any Holder of a Supplemental Certificate pursuant to the
Pooling and Servicing Agreement dated as of January 29, 1998 (as amended
and supplemented, the "Agreement"), among PFRF, a Delaware limited
liability company, as Transferor, Partners First Holdings, LLC, as servicer
(the "Servicer"), and The Bank of New York, a New York banking corporation,
as trustee (the "Trustee"). The corpus of the Trust consists of (i) the
Transferor's fractional undivided interest in a portfolio of certain
receivables (the "Receivables") existing in the revolving credit card
accounts identified under the Agreement from time to time (the "Accounts"),
(ii) certain Receivables generated under the Accounts from time to time
thereafter, (iii) certain funds collected or to be collected from
accountholders in respect of the Receivables, (iv) all funds which are from
time to time on deposit in the Collection Account, Special Funding Account
and in the Series Accounts, (v) the benefits of any Series Enhancements
issued and to be issued by Series Enhancers with respect to one or more
Series of Investor Certificates and (vi) all other assets and interests
constituting the Trust, including Interchange and Recoveries allocated to
the Trust pursuant to the Agreement and any Supplement. Although a summary
of certain provisions of the Agreement is set forth below, this Certificate
does not purport to summarize the Agreement and reference is made to the
Agreement for information with respect to the interests, rights, benefits,
obligations, proceeds and duties evidenced hereby and the rights, duties
and obligations of the Trustee. A copy of the Agreement may be requested
from the Trustee by writing to the Trustee at the Corporate Trust Office.
To the extent not defined herein, the capitalized terms used herein have
the meanings ascribed to them in the Agreement.
This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement, as amended
and supplemented from time to time, the Transferor by virtue of the
acceptance hereof assents and is bound.
The Receivables consist of Principal Receivables which arise
generally from the purchase of merchandise and services and amounts
advanced to cardholders as cash advances and Finance Charge Receivables
which arise generally from Periodic Finance Charges, Late Fees and other
fees and charges with respect to the Accounts.
This Certificate is the Transferor Certificate, which represents
the Transferor's interest in certain assets of the Trust, including the
right to receive a portion of the Collections and other amounts at the
times and in the amounts specified in the Agreement. The aggregate
interest represented by the Transferor Certificate at any time in the
Receivables in the Trust shall not exceed the Transferor's Interest at such
time. In addition to the Transferor Certificate, (i) Investor Certificates
will be issued to investors pursuant to the Agreement, which will represent
the Certificateholders' Interest, and (ii) Supplemental Certificates may be
issued pursuant to the Agreement, which will represent that portion of the
Transferor's Interest not allocated to the Transferor. This Transferor
Certificate shall not represent any interest in the Collection Account, the
Special Funding Account or the Series Accounts, except as expressly
provided in the Agreement, or any Series Enhancements.
Unless otherwise specified in a Supplement with respect to a
particular Series the Transferor has entered into the Agreement, and this
Certificate is issued, with the intention that, for federal, state and
local income and franchise tax purposes, (i) the Investor Certificates of
each Series which are characterized as indebtedness at the time of their
issuance will qualify as indebtedness of the Transferor secured by the
Receivables and (ii) the Trust shall not be treated as an association
taxable as a corporation. The Transferor, by entering into the Agreement
and by the acceptance of this Transferor Certificate, agrees to treat the
Investor Certificates for federal, state and local income and franchise tax
purposes as indebtedness of the Transferor.
Subject to certain conditions and exceptions specified in the
Agreement, the obligations created by the Agreement and the Trust created
thereby shall terminate upon the earlier of (i) December 31, 2059, (ii) the
day following the Distribution Date on which the Invested Amount and
Enhancement Invested Amount for each Series is zero (provided the
Transferor has delivered a written notice to the Trustee electing to
terminate the Trust) and (iii) the time provided in Section 12.1 of the
Agreement.
Unless the certificate of authentication hereon has been executed
by or on behalf of the Trustee, by manual signature, this Certificate shall
not be entitled to any benefit under the Agreement or be valid for any
purpose.
IN WITNESS WHEREOF, the Transferor has caused this Certificate to
be duly executed.
PARTNERS FIRST RECEIVABLES
FUNDING, LLC
By ___________________________
Name:
Title:
Dated: [_________ __, ____]
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is the Transferor Certificate described in the
within-mentioned Agreement.
The Bank of New York,
as Trustee,
By _______________________
Authorized Signatory
or
By [_______________________],
as Authenticating Agent
for the Trustee,
By ________________________
Authorized Signatory
EXHIBIT B
FORM OF ASSIGNMENT OF RECEIVABLES IN ADDITIONAL ACCOUNTS
(As required by Section 2.9 of
the Pooling and Servicing Agreement)
ASSIGNMENT No. OF RECEIVABLES IN ADDITIONAL ACCOUNTS dated
1/
as of , , by and among PARTNERS FIRST RECEIVABLES FUNDING, LLC, a
Delaware limited liability company, as Transferor (the "Transferor"),
PARTNERS FIRST HOLDINGS, LLC, as servicer (the "Servicer"), and THE BANK OF
NEW YORK, a New York banking corporation not in its individual capacity but
solely as trustee (the "Trustee"), pursuant to the Pooling and Servicing
Agreement referred to below.
WITNESSETH
WHEREAS the Transferor and the Trustee are parties to the Pooling
and Servicing Agreement dated as of January 29, 1998 (as amended and
supplemented, the "Agreement");
WHEREAS, pursuant to the Agreement, the Transferor wishes to
designate Additional Accounts owned by the Transferor to be included as
Accounts and to convey the Receivables of such Additional Accounts, whether
now existing or hereafter created, to the Trust as part of the corpus of
the Trust (as each such term is defined in the Agreement); and
WHEREAS the Trustee is willing to accept such designation and
conveyance subject to the terms and conditions hereof;
NOW, THEREFORE, the Transferor and the Trustee hereby agree as
follows:
1. Defined Terms. All capitalized terms used herein shall have
the meanings ascribed to them in the Agreement unless otherwise defined
herein.
"Addition Date" shall mean, with respect to the Additional
Accounts designated hereby, , .
"Addition Cut-Off Date" shall mean, with respect to the
Additional Accounts designated hereby, , .
2. Designation of Additional Accounts. On or before the
Document Delivery Date, the Transferor will deliver to the Trustee a
computer file, microfiche list or printed list containing a true and
complete schedule identifying all such Additional Accounts specifying for
each such Account, as of the Addition Cut-Off Date, its account number, the
aggregate amount outstanding in such Account and the aggregate amount of
Principal Receivables outstanding in such Account, which computer file,
microfiche list or printed list shall supplement Schedule I to the
Agreement.
_____________
1/ To be dated as of the applicable Addition Date.
3. Conveyance of Receivables. (a) The Transferor does hereby
sell, transfer, assign, set over and otherwise convey, without recourse
except as set forth in the Pooling and Servicing Agreement, to the Trustee,
on behalf of the Trust, for the benefit of the Certificateholders, all its
right, title and interest in, to and under the Receivables of such
Additional Accounts existing at the close of business on the Addition Date
and thereafter created from time to time until the termination of the
Trust, all monies due or to become due and all amounts received with
respect thereto and all proceeds (including "proceeds" as defined in the
UCC) thereof. The foregoing does not constitute and is not intended to
result in the creation or assumption by the Trust, the Trustee, any
Investor Certificateholder or any Series Enhancer of any obligation of the
Servicer, the Transferor or any other Person in connection with the
Accounts, the Receivables or under any agreement or instrument relating
thereto, including any obligation to Obligors, merchant banks, merchants
clearance systems, VISA, MasterCard or insurers.
(b) The Transferor agrees to record and file, at its own
expense, financing statements (and continuation statements when applicable)
with respect to the Receivables now in Additional Accounts, meeting the
requirements of applicable state law in such manner and in such
jurisdictions as are necessary to perfect, and maintain perfection of, the
sale and assignment of its interest in such Receivables to the Trust, and
to deliver a file-stamped copy of each such financing statement or other
evidence of such filing to the Trustee on or prior to the Addition Date.
The Trustee shall be under no obligation whatsoever to file such financing
or continuation statements or to make any other filing under the UCC in
connection with such sale and assignment.
(c) In connection with such sale, the Transferor further
agrees, at its own expense, on or prior to the date of this Assignment, to
indicate in the appropriate computer files that Receivables created in
connection with the Additional Accounts and designated hereby have been
conveyed to the Trust pursuant to the Agreement and this Assignment for the
benefit of the Certificateholders.
(d) The Transferor does hereby grant to the Trustee a
security interest in all of its right, title and interest, whether now
owned or hereafter acquired, in and to the Receivables now existing and
hereafter created in the Additional Accounts, all monies due or to become
due and all amounts received with respect thereto and all "proceeds"
(including "proceeds" as defined in the UCC) thereof. This Assignment
constitutes a security agreement under the UCC.
4. Acceptance by Trustee. The Trustee hereby acknowledges its
acceptance on behalf of the Trust of all right, title and interest to the
property, now existing and hereafter created, conveyed to the Trust
pursuant to Section 3(a) of this Assignment, and declares that it shall
maintain such right, title and interest, upon the trust set forth in the
Agreement for the benefit of all Certificateholders. The Trustee further
acknowledges that, prior to or simultaneously with the execution and
delivery of this Assignment, the Transferor delivered to the Trustee the
computer file, microfiche list or printed list described in Section 2 of
this Assignment.
5. Representations and Warranties of the Transferor. The
Transferor hereby represents and warrants to the Trustee, on behalf of the
Trust, as of the date of this Assignment and as of the Addition Date that:
(a) Legal Valid and Binding Obligation. This Assignment
constitutes a legal, valid and binding obligation of the Transferor
enforceable against the Transferor in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect affecting the enforcement of creditors' rights in
general and except as such enforceability may be limited by general
principles of equity (whether considered in a suit at law or in
equity);
(b) Eligibility of Accounts. As of the Addition Cut-Off
Date, each Additional Account designated hereby is an Eligible
Account;
(c) Insolvency. As of each of the Addition Cut-Off Date
and the Addition Date, no Insolvency Event with respect to the
Transferor has occurred and the transfer by the Transferor of
Receivables arising in the Additional Accounts to the Trust has not
been made in contemplation of the occurrence thereof;
(d) Pay Out Event. The Transferor reasonably believes that
(A) the addition of the Receivables arising in the Additional Accounts
will not, based on the facts known to the Transferor, then or
thereafter cause a Pay Out Event to occur with respect to any Series
and (B) no selection procedure was utilized by the Transferor which
would result in the selection of Additional Accounts (from among the
available Eligible Accounts owned by the Transferor) that would be
materially adverse to the interests of the Investor Certificateholders
of any Series as of the Addition Date;
(e) Security Interest. This Assignment constitutes a valid
sale, transfer and assignment to the Trust of all right, title and
interest, whether now owned or hereafter acquired, of the Transferor
in the Receivables now existing or hereafter created in the Additional
Accounts, all monies due or to become due and all amounts received
with respect thereto and the "proceeds" (including "proceeds" as
defined in the UCC as in effect in the State of Delaware and other
applicable states) thereof, or, if this Assignment does not constitute
a sale of such property, it constitutes a grant of a "security
interest" (as defined in the UCC as in effect in the State of
Delaware, and other applicable states) in such property to the Trust,
which, in the case of existing Receivables and the proceeds thereof,
is enforceable upon execution and delivery of this Assignment, and
which will be enforceable with respect to such Receivables hereafter
created and the proceeds thereof upon such creation. Upon the filing
of the financing statements described in Section 3 of this Assignment
and, in the case of the Receivables hereafter created and the proceeds
thereof, upon the creation thereof, the Trust shall have a first
priority perfected security or ownership interest in such property;
(f) No Conflict. The execution and delivery by the
Transferor of this Assignment, the performance of the transactions
contemplated by this Assignment and the fulfillment of the terms
hereof applicable to the Transferor, will not conflict with or violate
any Requirements of Law applicable to the Transferor 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 Transferor is a party
or by which it or its properties are bound;
(g) No Proceedings. There are no proceedings or
investigations, pending or, to the best knowledge of the Transferor,
threatened against the Transferor before any court, regulatory body,
administrative agency or other tribunal or governmental
instrumentality (i) asserting the invalidity of this Assignment, (ii)
seeking to prevent the consummation of any of the transactions
contemplated by this Assignment, (iii) seeking any determination or
ruling that, in the reasonable judgment of the Transferor, would
materially and adversely affect the performance by the Transferor of
its obligations under this Assignment or (iv) seeking any
determination or ruling that would materially and adversely affect the
validity or enforceability of this Assignment; and
(h) All Consents. All authorizations, consents, orders or
approvals of any court or other governmental authority required to be
obtained by the Transferor in connection with the execution and
delivery of this Assignment by the Transferor and the performance of
the transactions contemplated by this Assignment by the Transferor,
have been obtained.
(i) No Adverse Effect. The assignment by the Transfer will
not result in an Adverse Effect.
6. Ratification of Agreement. As supplemented by this
Assignment, the Agreement is in all respects ratified and confirmed and the
Agreement as so supplemented by this Assignment shall be read, taken and
construed as one and the same instrument.
7. Counterparts. This Assignment may be executed in two or more
counterparts, and by different parties on separate counterparts, each of
which shall be an original, but all of which shall constitute one and the
same instrument.
8. GOVERNING LAW. THIS ASSIGNMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, 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.
IN WITNESS WHEREOF, the Transferor and the Trustee have caused
this Assignment to be duly executed by their respective officers as of the
day and year first above written.
PARTNERS FIRST RECEIVABLES
FUNDING, LLC
Transferor,
By ________________________________
Name:
Title:
THE BANK OF NEW YORK,
not in its individual capacity
but solely as Trustee,
By ________________________________
Name:
Title:
EXHIBIT C
FORM OF REASSIGNMENT OF RECEIVABLES IN REMOVED ACCOUNTS
(As required by Section 2.10 of
the Pooling and Servicing Agreement)
1/
REASSIGNMENT No. OF RECEIVABLES dated as of , by and
among PARTNERS FIRST RECEIVABLES FUNDING, LLC, a Delaware limited liability
company, as Transferor (the "Transferor"), and THE BANK OF NEW YORK, a New
York banking corporation not in its individual capacity but solely as
trustee (the "Trustee"), pursuant to the Pooling and Servicing Agreement
referred to below.
WITNESSETH:
WHEREAS the Transferor and the Trustee are parties to the Pooling
and Servicing Agreement dated as of January 29, 1998 (as amended and
supplemented, the "Agreement");
WHEREAS pursuant to the Agreement, the Transferor wishes to
remove from the Trust all Receivables owned by the Trust in certain
designated Accounts owned by the Transferor (the "Removed Accounts") and to
cause the Trustee to reconvey the Receivables of such Removed Accounts,
whether now existing or hereafter created, from the Trust to the
Transferor; and
WHEREAS the Trustee on behalf of the Trust is willing to accept
such designation and to reconvey the Receivables in the Removed Accounts
subject to the terms and conditions hereof;
NOW, THEREFORE, the Transferor and the Trustee hereby agree as
follows:
1. Defined Terms. All terms defined in the Agreement and used
herein shall have such defined meanings when used herein, unless otherwise
defined herein.
"Removal Date" shall mean, with respect to the Removed Accounts
designated hereby, , .
"Removal Notice Date" shall mean, with respect to the Removed
Accounts, , .
2. Designation of Removed Accounts. On or before the date that
is five Business Days after the Removal Date, the Transferor will deliver
to the Trustee a computer file, microfiche list or printed list containing
a true and complete schedule identifying all Accounts the Receivables of
which are being removed from the Trust, specifying for each such Account,
as of the Removal Notice Date, its account number, the aggregate amount
outstanding in such Account and the aggregate amount of Principal
Receivables in such Account, which computer file, microfiche list or
printed list shall supplement Schedule 1 to the Agreement.
3. Conveyance of Receivables. (a) The Trustee does hereby
transfer, assign, set over and otherwise convey to the Transferor, without
recourse, on and after the Removal Date, all right, title and interest of
the Trust in, to and under the Receivables existing at the close of
business on the Removal Date and thereafter created from time to time in
the Removed Accounts designated hereby, all monies due or to become due and
all amounts received with respect thereto and all proceeds thereof.
_________________
1/ To be dated as of the Removal Date.
(b) In connection with such transfer, the Trustee agrees to
execute and deliver to the Transferor on or prior to the date this
Reassignment is delivered, applicable termination statements prepared by
the Transferor with respect to the Receivables existing at the close of
business on the Removal Date and thereafter created from time to time in
the Removed Accounts reassigned hereby and the proceeds thereof evidencing
the release by the Trust of its interest in the Receivables in the Removed
Accounts, and meeting the requirements of applicable state law, in such
manner and such jurisdictions as are necessary to terminate such interest.
4. Representations and Warranties of the Transferor. The
Transferor hereby represents and warrants to the Trustee, on behalf of the
Trust, as of the Removal Date:
(a) Legal Valid and Binding Obligation. This Reassignment
constitutes a legal, valid and binding obligation of the Transferor
enforceable against the Transferor, in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
affecting the enforcement of creditors' rights in general and except as
such enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity); and
(b) Pay Out Event. The Transferor reasonably believes that
(A) the removal of the Receivables existing in the Removed Accounts will
not, based on the facts known to the Transferor, then or thereafter cause a
Pay Out Event to occur with respect to any Series and (B) no selection
procedure was utilized by the Transferor which would result in a selection
of Removed Accounts that would be materially adverse to the interests of
the Investor Certificateholders of any Series as of the Removal Date.
(c) List of Removed Accounts. The list of Removed Accounts
delivered pursuant to subsection 2.10(ii) of the Agreement, as of the
Removal Date, is true and complete in all material respects.
5. Ratification of Agreement. As supplemented by this
Reassignment, the Agreement is in all respects ratified and confirmed and
the Agreement as so supplemented by this Reassignment shall be read, taken
and construed as one and the same instrument.
6. Counterparts. This Reassignment may be executed in two or
more counterparts, and by different parties on separate counterparts, each
of which shall be an original, but all of which shall constitute one and
the same instrument.
7. GOVERNING LAW. THIS REASSIGNMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, 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.
IN WITNESS WHEREOF, the Transferor and the Trustee have caused
this Reassignment to be duly executed by their respective officers as of
the day and year first above written.
PARTNERS FIRST RECEIVABLES
FUNDING, LLC
Transferor
By ________________________________
Title:
THE BANK OF NEW YORK,
not in its individual capacity
but solely as Trustee,
By ________________________________
Title:
EXHIBIT D
FORM OF ANNUAL SERVICER'S CERTIFICATE
(To be delivered on or before June 30, of
each calendar year beginning with June 30, 1999,
pursuant to Section 3.5 of the Pooling and
Servicing Agreement referred to below)
PARTNERS FIRST HOLDINGS, LLC
PARTNERS FIRST CREDIT CARD MASTER TRUST
The undersigned, a duly authorized representative of Partners
First Holdings, LLC, as Servicer ("Holdings"), pursuant to the Pooling and
Servicing Agreement dated as of January 29, 1998 (as amended and
supplemented, the "Agreement"), among Partners First Receivables Funding,
LLC, as Transferor, Holdings, as Servicer, and The Bank of New York, as
Trustee, does hereby certify that:
1. Holdings is, as of the date hereof, the Servicer under the
Agreement. Capitalized terms used in this Certificate have their
respective meanings as set forth in the Agreement.
2. The undersigned is a Servicing Officer who is duly authorized
pursuant to the Agreement to execute and deliver this Certificate to the
Trustee.
3. A review of the activities of the Servicer during the year
ended December 31, ____, and of its performance under the Agreement was
conducted under my supervision.
4. Based on such review, the Servicer has, to the best of my
knowledge, performed in all material respects its obligations under the
Agreement throughout such year and no default in the performance of such
obligations has occurred or is continuing except as set forth in paragraph
5 below.
5. The following is a description of each default in the
performance of the Servicer's obligations under the provisions of the
Agreement known to me to have been made by the Servicer during the year
ended December 31, ____ which sets forth in detail (i) the nature of each
such default, (ii) the action taken by the Servicer, if any, to remedy each
such default and (iii) the current status of each such default: [If
applicable, insert "None."]
IN WITNESS WHEREOF, the undersigned has duly executed this
Certificate this ____ day of ________, 19____.
PARTNERS FIRST HOLDINGS, LLC
Servicer,
By ___________________________
Name:
Title:
EXHIBIT E-1
FORM OF OPINION OF COUNSEL
WITH RESPECT TO AMENDMENTS
Provisions to be included in
Opinion of Counsel to be delivered pursuant
to Section 13.2(d)(i)
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 Closing Date.
(i) The amendment to the [Pooling and Servicing Agreement],
[Supplement], attached hereto as Schedule 1 (the "Amendment" ), has
been duly authorized, executed and delivered by the Transferor and
constitutes the legal, valid and binding agreement of the Transferor,
enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws from time to time in effect
affecting creditors' rights generally. The enforceability of the
Transferor's obligations is also subject to general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law)
(ii) The Amendment has been entered into in accordance with the
terms and provisions of Section 13.1 of the Pooling and Servicing
Agreement.
EXHIBIT E-2
FORM OF OPINION OF COUNSEL
WITH RESPECT TO ACCOUNTS
Provisions to be included in
Opinion of Counsel to be
delivered pursuant to
subsection 13.2(d)(ii) or (iii)
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 Closing Date.
1. Except for any Receivable that is evidenced by an instrument, the
Receivables constitute either general intangibles or accounts under Article
9 of the UCC.
2. The Pooling and Servicing Agreement creates in favor of the
Trustee a security interest in the rights of the relevant Transferor in
such of the Receivables identified in Schedule 1 to the Pooling and
Servicing Agreement as constitute accounts. To the extent that such
security interest is not an interest of a buyer of accounts, then the
Pooling and Servicing Agreement creates in favor of the Trustee a security
interest in the rights of such Transferor in the proceeds of such
Receivables.
3. To extent that transactions contemplated by the Pooling and
Servicing Agreement do not constitute a sale by the relevant Transferor to
the Trustee of such of the Receivables as constitute general intangibles or
the proceeds thereof, the Pooling and Servicing Agreement creates in favor
of the Trustee a security interest in the rights of such Transferor in such
of the Receivables as constitute general intangibles and the proceeds
thereof.
4. The Receivables Purchase Agreements create in favor of the
Transferor a security interest in the rights of the Account Owner in such
of the Receivables identified in Schedule 1 to the Receivables Purchase
Agreements as constitute accounts.
5. To the extent that transactions contemplated by the
Receivables Purchase Agreements do not constitute a sale by the Account
Owner to the Transferor of such of the Receivables as constitute general
intangibles or the proceeds thereof, the Receivables Purchase Agreements
create in favor of the Transferor a security interest in the rights of the
Account Owner in such of the Receivables as constitute general intangibles
and the proceeds thereof.
6. The security interests described in paragraphs 2, 3, 4 and 5
above are perfected and of first priority.
EXHIBIT E-3
PROVISIONS TO BE INCLUDED IN
ANNUAL OPINION OF COUNSEL
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 Closing Date. Unless
otherwise indicated, all capitalized terms used herein shall have the
meanings ascribed to them in the Pooling and Servicing Agreement and in the
Assignment.
1. The Pooling and Servicing Agreement, together with the Assignments,
create in favor of the Trustee a security interest in the relevant
Transferor's rights in the Receivables identified in Schedule 1 to the
Pooling and Servicing Agreement. Such security interest is perfected and
of first priority.
EXHIBIT F-1
[FORM OF CLEARANCE SYSTEM CERTIFICATE
TO BE GIVEN TO THE TRUSTEE BY
EUROCLEAR OR CEDEL FOR
DELIVERY OF DEFINITIVE CERTIFICATES
IN EXCHANGE FOR A PORTION OF A
TEMPORARY GLOBAL SECURITY]
PARTNERS FIRST CREDIT CARD MASTER TRUST,
Class [___] Series [199_-_] [Floating Rate] [_%]
Asset Backed Certificates
[Insert title or sufficient description of
Certificates to be delivered]
We refer to that portion of the temporary Global Certificate in
respect of the above-captioned issue which is herewith submitted to be
exchanged for definitive Certificates (the "Submitted Portion") as provided
in the Pooling and Servicing Agreement dated as of January 29, 1998 (as
amended and supplemented, the "Agreement") in respect of such issue. This
is to certify that (i) we have received a certificate or certificates, in
writing or by tested telex, with respect to each of the persons appearing
in our records as being entitled to a beneficial interest in the Submitted
Portion and with respect to such persons beneficial interest either (a)
from such person, substantially in the form of Exhibit G-2 to the
Agreement, or (b) from [ ], substantially in the
form of Exhibit G-3 to the Agreement, and (ii) the Submitted Portion
includes no part of the temporary Global Certificate excepted in such
certificates
We further certify that as of the date hereof we have not
received any notification from any of the persons giving such certificates
to the effect that the statements made by them with respect to any part of
the Submitted Portion are no longer true and cannot be relied on as of the
date hereof.
We understand that this certificate is required in connection
with certain securities and tax laws in the United States of America. If
administrative or legal proceedings are commenced or threatened in
connection with which this certificate is or would be relevant, we
irrevocably authorize you to produce this certificate or a copy thereof to
any interested party in such proceedings.
Dated:1/ [Morgan Guaranty Trust, Company of New York,
Brussels office, as operator of the
Euroclear Systems] 2/
[Centrale de Livraison de
Valeurs Mobiliere S. A.]2/
By: _______________________________
___________________
1/ To be dated on the Exchange Date.
2/ Delete the inappropriate reference.
EXHIBIT F-2
[FORM OF CERTIFICATE TO BE DELIVERED
TO EUROCLEAR OR CEDEL
BY [INSERT NAME OF MANAGER]
WITH RESPECT TO REGISTERED CERTIFICATES SOLD TO
QUALIFIED INSTITUTIONAL BUYERS]
PARTNERS FIRST CREDIT CARD MASTER TRUST,
Class [___] Series [199_-_] [Floating Rate] [_%]
Asset Backed Certificates
In connection with the initial issuance and placement of the
above referenced Asset Backed Certificates (the "Certificates"), an
institutional investor in the United States ("institutional investor") is
purchasing U.S. $ aggregate principal amount of the
Certificates held in our account at [Morgan Guaranty Trust Company of New
York, Brussels office, as operator of the Euroclear System] [Cedel Bank] on
behalf of such investor.
We reasonably believe that such institutional investor is a
qualified institutional buyer as such term is defined under Rule 144A of
the Securities Act of 1933, as amended.
[We understand that this certificate is required in connection
with United States laws. We irrevocably authorize you to produce this
certificate or a copy hereof to any interested party in any administrative
or legal proceedings or official inquiry with respect to the matters
covered by this certificate.]
The Definitive Certificates in respect of this certificate are to
be issued in registered form in the minimum denomination of U.S. $500,000
and such Definitive Certificates (and, unless the Pooling and Servicing
Agreement or Supplement relating to the Certificates otherwise provides,
any Certificates issued in exchange or substitution for or on registration
of transfer of Certificates) shall bear the following legend:
"THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933 NEITHER THIS CERTIFICATE NOR ANY PORTION
HEREOF MAY BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE
UNITED STATES OR TO U.S. PERSONS (EACH AS DEFINED HEREIN), EXCEPT
IN COMPLIANCE WITH THE REGISTRATION PROVISIONS OF SUCH ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION
PROVISIONS. THE TRANSFER OF THIS CERTIFICATE IS SUBJECT TO
CERTAIN CONDITIONS SET FORTH IN THE POOLING AND SERVICING
AGREEMENT REFERRED TO HEREIN. THIS CERTIFICATE CANNOT BE
EXCHANGED FOR A BEARER CERTIFICATE."
Dated: [ ],
By: __________________________
Authorized Officer
EXHIBIT F-3
[FORM OF CERTIFICATE TO BE DELIVERED
TO EUROCLEAR OR CEDEL BY A BENEFICIAL OWNER
OF CERTIFICATES, OTHER THAN A QUALIFIED INSTITUTIONAL BUYER]
PARTNERS FIRST CREDIT CARD MASTER TRUST,
Class [___] Series [199_-_] [Floating Rate] [_%]
Asset Backed Certificates
This is to certify that as of the date hereof and except as
provided in the third paragraph hereof, the above-captioned Certificates
held by you for our account (i) are owned by a person that is a United
States person, or (ii) are owned by a United States person that is (A) the
foreign branch of a United States financial institution (as defined in U.S.
Treasury Regulations Section 1.165-12(c)(1)(v)) (a "financial institution")
purchasing for its own account or for resale, or (B) a United States person
who acquired the Certificates through the foreign branch of a financial
institution and who holds the Certificates through the financial
institution on the date hereof (and in either case (A) or (B), the
financial institution hereby agrees to comply with the requirements of
Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder), or (iii) are owned by a financial
institution for purposes of resale during the Restricted Period (as defined
in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)). In addition,
financial institutions described in clause (iii) of the preceding sentence
(whether or not also described in clause (i) or (ii)) certify that they
have not acquired the Certificates for purposes of resale directly or
indirectly to a United States person or to a person within the United
States or its possessions.
We undertake to advise you by tested telex if the above statement
as to beneficial ownership is not correct on the date of delivery of the
above-captioned Certificates in bearer form with respect to such of said
Certificates as then appear in your books as being held for our account.
This certificate excepts and does not relate to U.S.
$_______________ principal amount of Certificates held by you for our
account, as to which we are not yet able to certify beneficial ownership.
We understand that delivery of Definitive Certificates in such principal
amount cannot be made until we are able to so certify.
We understand that this certificate is required in connection
with certain securities and tax laws ln the United States of America. If
administrative or legal proceedings are commenced or threatened in
connection with which this certificate is or would be relevant, we
irrevocably authorize you to produce this certificate or a copy thereof to
any interested party in such proceedings. As used herein, "United States"
means the United States of America (including the States and the District
of Columbia), its territories, its possessions and other areas subject to
its jurisdiction; and "United States Person" means a citizen or resident of
the United States, a corporation, partnership or other entity created or
organized in or under the laws of the United States, or any political
subdivision thereof, or an estate or trust the income of which is subject
to United States federal income taxation regardless of its source.
Dated:1/
By: _________________________
As, or an agent for, the beneficial
owner(s) of the interest in the
Certificates to which this
certificate relates.
_________________
1/ This Certificate must be dated on the earlier of the date of
the first actual payment of interest in respect of the
Certificates and the date of the delivery of the
Certificates in definitive form.
EXHIBIT G-1
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"). NEITHER THIS CERTIFICATE NOR ANY
PORTION HEREOF MAY BE OFFERED, SOLD, PLEDGED, OR OTHERWISE TRANSFERRED
EXCEPT IN COMPLIANCE WITH THE REGISTRATION PROVISIONS OF THE 1933 ACT AND
ANY APPLICABLE PROVISIONS OF ANY STATE BLUE SKY OR SECURITIES LAWS OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION PROVISIONS. THE
TRANSFER OF THIS CERTIFICATE IS SUBJECT TO CERTAIN CONDITIONS SET FORTH IN
THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
THIS CERTIFICATE MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF A
BENEFIT PLAN (AS DEFINED BELOW).
EXHIBIT G-2
[FORM OF UNDERTAKING LETTER]
[Date]
The Bank of New York
101 Barclay Street, 12E
New York, New York 10286
Attention:
Partners First Receivables Funding, LLC
900 Elkridge Landing Road
Suite 400
Linthicum, MD 21090
Attention:
Re: Purchase of $___________1/ principal amount
of Partners First Credit Card Master Trust
Class [__] Series [199_-_] [Floating Rate]
[__%] Asset Backed Certificates
Dear Sirs:
In connection with our purchase of the above-referenced Asset
Backed Certificates (the "Certificates") we confirm that:
(i) we understand that the Certificates are not being registered
under the Securities Act of 1933, as amended (the "1933 Act"), and are
being sold to us in a transaction that is exempt from the registration
requirements of the 1933 Act;
(ii) any information we desire concerning the Certificates or any
other matter relevant to our decision to purchase the certificates is
or has been made available to us;
(iii) we have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks
of an investment in the Certificates, and we (and any account for
which we are purchasing under paragraph (iv) below) are able to bear
the economic risk of an investment in the Certificates; we (and any
account for which we are purchasing under paragraph (iv) below) are an
"accredited investor" (as such term is defined in Rule 501(a)(1), (2)
or (3) of Regulation D under the 1933 Act); and we are not, and none
of such accounts is, a Benefit Plan;
(iv) we are acquiring the Certificates for our own account or for
accounts as to which we exercise sole investment discretion and not
with a view to any distribution of the Certificates, subject,
nevertheless, to the understanding that the disposition of our
property shall at all times be and remain within our control;
__________________
1/ Not less than $250,000 minimum principal amount.
(v) we agree that the Certificates must be held indefinitely by
us unless subsequently registered under the 1933 Act or an exemption
from any registration requirements of that Act and any applicable
state securities laws available;
(vi) we agree that in the event that at some future time we wish
to dispose of or exchange any of the Certificates (such disposition or
exchange not being currently foreseen or contemplated), we will not
transfer or exchange any of the Certificates unless
(A)(l) the sale is of at least U.S. $250,000 principal
amount of Certificates to an Eligible Purchaser (as defined
below), (2) a letter to substantially the same effect as
paragraphs (i), (ii), (iii), (iv), (v) and (vi) of this letter is
executed promptly by the purchaser and (3) all offers or
solicitations in connection with the sale, whether directly or
through any agent acting on our behalf, are limited only to
Eligible Purchasers and are not made by means of any form of
general solicitation or general advertising whatsoever; or
(B) the Certificates are transferred pursuant to Rule 144
under the 1933 Act by us after we have held them for more than
three years; or
(C) the Certificates are sold in any other transaction that
does not require registration under the 1933 Act and, if the
Transferor, the Servicer, the Trustee or the Transfer Agent and
Registrar so requests, we theretofore have furnished to such
party an opinion of counsel satisfactory to such party, in form
and substance satisfactory to such party, to such effect; or
(D) the Certificates are transferred pursuant to an
exception from the registration requirements of the 1933 Act
under Rule 144A under the 1933 Act; and
(vii) we understand that the Certificates will bear a legend to
substantially the following effect:
"THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT") NEITHER THIS CERTIFICATE NOR ANY PORTION
HEREOF MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN
COMPLIANCE WITH THE REGISTRATION PROVISIONS OF THE 1933 ACT AND ANY
APPLICABLE PROVISIONS OF ANY STATE BLUE SKY OR SECURITIES LAWS OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION PROVISIONS. THE TRANSFER
OF THIS CERTIFICATE IS SUBJECT TO CERTAIN CONDITIONS SET FORTH IN THE
POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN."
"THIS CERTIFICATE MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF A
BENEFIT PLAN (AS DEFINED BELOW)."
The first paragraph of this legend may be removed if the Transferor, the
Servicer, the Trustee and the Transfer Agent and Registrar have received an
opinion of counsel satisfactory to them, in form and substance satisfactory
to them, to the effect that such paragraph may be removed.
"Eligible Purchaser" means either an Eligible Dealer or a corporation,
partnership or other entity which we have reasonable grounds to believe and
do believe can make representations with respect to itself to substantially
the same effect as the representations set forth herein. "Eligible Dealer"
means any corporation or other entity the principal business of which is
acting as a broker and/or dealer in securities. "Benefit Plan" means any
employee benefit plan, trust or account, including an individual retirement
account, that is subject to the Employee Retirement Income Security Act of
1974, as amended, or that is described in Section 4975(e)(1) of the
Internal Revenue Code of 1986, as amended, or an entity whose underlying
assets include plan assets by reason of a plan's investment in such entity.
Capitalized terms used but not defined herein shall have the meanings given
to such terms in the Pooling and Servicing Agreement, dated as of January
29, 1998, among Partners First Receivables Funding, LLC, as transferor,
Partners First Holdings, LLC, as servicer and The Bank of New York, as
trustee.
Very truly yours,
______________________________
(Name of Purchaser)
By: __________________________
(Authorized Officer)
EXHIBIT G-3
THIS CERTIFICATE MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF A BENEFIT
PLAN (AS DEFINED BELOW).1/
__________________
1/ The following text should be included in any Certificate in
which the above legend appears:
The [Certificates] may not be acquired by or for the
account of any employee benefit plan, trust or account,
including an individual retirement account, that is subject
to the Employee Retirement Income Security Act of 1974, as
amended, or that is described in Section 4975(e)(1) of the
Internal Revenue Code of 1986, as amended, or an entity
whose underlying assets include plan assets by reason of a
plan's investment in such entity (a "Benefit Plan"). By
accepting and holding this Certificate, the Holder hereof
shall be deemed to have represented and warranted that it is
not a Benefit Plan. By acquiring any interest in this
Certificate, the applicable Certificate Owner or Owners
shall be deemed to have represented and warranted that it or
they are not Benefit Plans.
SCHEDULE 1
List of Accounts
[Original list delivered to Trustee]
MERGER AGREEMENT
MERGER AGREEMENT dated as of February 19, 1998 (this
"Agreement"), by and among PARTNERS FIRST RECEIVABLES FUNDING CORPORATION,
a Delaware corporation (the "Company") and PARTNERS FIRST RECEIVABLES
FUNDING, LLC.
W I T N E S S E T H :
WHEREAS, Partners First Receivables, LLC ("Receivables") owns
100% of the issued and outstanding shares of common stock, no par value per
share, of the Company (all of such shares of common stock being
collectively referred to as the "Shares");
WHEREAS, Receivables has caused the formation of the LLC under
the Delaware Limited Liability Company Act and owns 100% of the interests
therein; and
WHEREAS, Receivables desires to merge the Company into the LLC
pursuant to Delaware Law (as defined below) and pursuant to the terms and
conditions set forth in this Agreement and the Certificate of Merger
regarding same (the "Merger");
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreement contained herein, the
parties hereto agree as follows:
ARTICLE I.
THE MERGER
1.1. Merger. Subject to the terms and conditions hereof and in
accordance with the applicable provisions of the Limited Liability Company
Act and the General Corporation Law of the State of Delaware (collectively,
the "Delaware Law"), the Company will be merged with and into LLC at the
Effective Time (as defined in Section 1.2) and the separate corporate
existence of the Company will thereupon cease (the "Merger").
1.2. Effective Time. At the time the LLC files a Certificate of
Merger (the "Certificate of Merger") with the Secretary of State of the
State of Delaware as provided under Delaware Law, the Merger will become
effective (the "Effective Time").
1.3. Effect of Merger. The LLC will be the surviving entity in
the Merger (sometimes hereinafter referred to as the "Surviving Company"),
and the separate corporate existence of the Company will cease upon the
Merger. The Limited Liability Company Agreement of the LLC dated as of the
date hereof (the "LLC Agreement") will be the limited liability company
agreement of the Surviving Company and the members and the managers of the
Surviving Company shall be as set forth in such LLC Agreement, from and
after the Effective Time, to serve in accordance with Delaware Law and the
terms of the LLC Agreement. The consummation of the Merger will have the
effects provided in Delaware Law with respect to a merger of a domestic
corporation into a domestic limited liability company. At the Effective
Time, the stock transfer books of the Company will be closed, and no
transfer of the Shares will thereafter be made.
1.4. Outstanding Shares. At the Effective Time, all of the
Company's then-outstanding Shares will be cancelled and retired. The
interests of Receivables in the Surviving Company shall be as set forth in
the LLC Agreement.
ARTICLE II.
MISCELLANEOUS PROVISIONS
2.1. Amendment and Modification. This Agreement may be amended
or modified at any time by the parties hereto, but only pursuant to an
instrument in writing signed by the parties.
2.2. Entire Agreement; Assignment. This Agreement constitutes
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all other prior agreements and understandings,
both written and oral, between the parties hereto with respect to the
subject matter hereof.
2.3. Validity. The invalidity or unenforceability of any term
or provision of this Agreement in any situation or jurisdiction shall not
affect the validity or enforceability of the other terms or provisions in
any other situation or in any other jurisdiction.
2.4. Governing Law. This Agreement shall be governed by,
enforced under and construed in accordance with the laws of the State of
Delaware, without giving effect to any choice or conflict of law provision
or rule thereof.
2.5. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and shall in no way be construed
to define, limit, describe, explain, modify, amplify or add to the
interpretation, construction or meaning of any provision of, or scope or
intent of, this Agreement nor in any way affect this Agreement.
2.6. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
2.7. Expenses. Whether or not this Agreement and the
transactions contemplated hereby are consummated, and except as otherwise
expressly set forth herein, all costs and expenses (including legal fees
and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses.
2.8. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and nothing in this
Agreement, express or implied, is intended to or shall confer upon any
other person any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
2.9. No Waivers. Except as otherwise expressly provided herein,
no failure to exercise, delay in exercising, or single or partial exercise
of any right, power or remedy by any party, and no course of dealing
between the parties, shall constitute a waiver of any such right, power or
remedy. No waiver by either party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation
or breach of warranty or covenant hereunder or affect in any way rights
arising by virtue of any prior or subsequent occurrence. No waiver shall
be valid unless in writing and signed by the party against whom such waiver
is sought to be enforced.
IN WITNESS WHEREOF, each of the undersigned has caused this
Agreement to be signed by its duly authorized representative as of the date
first above written.
COMPANY:
PARTNERS FIRST RECEIVABLES
FUNDING CORPORATION
By: /s/ Mark Norwicz
______________________
Name: Mark Norwicz
LLC:
PARTNERS FIRST RECEIVABLES FUNDING, LLC
By: /s/ John R. Soderlund
_______________________
Name: John R. Soderlund
==============================================================================
MASTER AGREEMENT FOR THE
FORMATION OF A LIMITED LIABILITY COMPANY
DATED AS OF SEPTEMBER 2, 1997
AMONG
BANKBOSTON CORPORATION,
BANKMONT FINANCIAL CORP.,
HARRIS TRUST AND SAVINGS BANK,
AND
FIRST ANNAPOLIS CONSULTING, INC.
==============================================================================
TABLE OF CONTENTS
SECTION HEADING PAGE
ARTICLE 1 DEFINED TERMS 1
ARTICLE 2 FORMATION OF LIMITED LIABILITY COMPANY...............6
ARTICLE 3 RELATED AGREEMENTS; CLOSING..........................6
Section 3.1. Formation of the Company and Receivables LLC......7
Section 3.2. Purchase of BKB Receivables.......................7
Section 3.3. Purchase of BKB Overdue Receivables...............7
Section 3.4. Contribution by BKB...............................7
Section 3.5. Purchase of Harris Receivables....................8
Section 3.6. Purchase of Harris Overdue Receivables............8
Section 3.7. Contribution by Harris............................8
Section 3.8. Contribution by Bankmont..........................8
Section 3.9. Acquisition of Harris Credit Card Operations
Facility by FDR or the Company....................8
Section 3.10. Contribution by FAMIS.............................9
Section 3.11. Account Solicitation and Servicing Agreement......9
Section 3.12. Registration Rights Agreement.....................9
Section 3.13. Termination and Release...........................9
Section 3.14. BKB Services Agreement............................9
Section 3.15. Harris Services Agreement.........................9
Section 3.16. Capital Retention Agreement.......................9
Section 3.17. Transitional Services Agreements.................10
Section 3.18. BKB Trademark License............................10
Section 3.19. Management Restricted Units Plan.................10
Section 3.20. Closing..........................................10
ARTICLE 4 REPRESENTATIONS AND WARRANTIES......................10
ARTICLE 5 CERTAIN COVENANTS...................................11
Section 5.1. Ordinary Course Operation........................11
Section 5.2. Certain Additional Covenants.....................11
Section 5.3. Cooperation......................................13
Section 5.4. Current Information..............................13
Section 5.5. Access, Information and Confidentiality..........13
Section 5.6. Consents and Approvals...........................14
Section 5.7. Executive Officers...............................14
Section 5.8. Soderlund Employment Agreement...................15
Section 5.9. Financing........................................15
Section 5.10. FAMIS Employees..................................16
Section 5.11. BKB Structuring Fee..............................16
Section 5.12. Disclosure Supplements...........................16
ARTICLE 6 CONDITIONS TO CLOSING...............................16
Section 6.1. Conditions to Obligation of Each Party...........17
Section 6.2. Additional Conditions to the Obligations of BKB..18
Section 6.3. Additional Conditions to the Obligations of
Bankmont and Harris..............................18
Section 6.4. Additional Conditions to the Obligations of FA...19
ARTICLE 7 TERMINATION.........................................20
Section 7.1. Grounds For Termination..........................20
Section 7.2. Effects of Termination...........................21
ARTICLE 8 GENERAL.............................................21
Section 8.1. Expenses.........................................21
Section 8.2. Notices..........................................22
Section 8.3. Entire Agreement.................................23
Section 8.4. Governing Law....................................23
Section 8.5. Consent to Jurisdiction..........................23
Section 8.6. Waiver of Certain Damages........................23
Section 8.7. Section Headings.................................23
Section 8.8. Assigns..........................................23
Section 8.9. No Implied Rights or Remedies....................24
Section 8.10. Counterparts.....................................24
Section 8.11. Construction.....................................24
Section 8.12. Severability.....................................24
Section 8.13. Waiver of Right to Jury Trial....................24
Section 8.14. Remedies.........................................24
EXHIBITS
Exhibit A -- Operating Agreement
Exhibit B -- Certificates of Formation
Exhibit C -- Form of BKB Purchase Agreement
Exhibit D -- Form of BKB Overdue Receivables Purchase Agreement
Exhibit E -- Form of BKB Contribution Agreement
Exhibit F -- Form of Harris Purchase Agreement
Exhibit G -- Form of Harris Overdue Receivables Purchase Agreement
Exhibit H -- Form of Harris Contribution Agreement
Exhibit I -- Form of Bankmont Contribution Agreement
Exhibit J -- Terms of Harris Credit Card Operations Facility Acquisition
Exhibit K -- Form of FAMIS Contribution Agreement
Exhibit L -- Form of Registration Rights Agreement
Exhibit M -- Form of Termination and Release
Exhibit N -- Form of BKB Services Agreement
Exhibit O -- Form of Harris Services Agreement
Exhibit P -- Capital Retention Agreement
Exhibit Q -- Form of Employment Agreement for John Soderlund
Exhibit R -- Terms of Bridge Loan
Exhibit S -- Form of FDR Release
SCHEDULES
Schedule 4A -- Certain Representations of BKB and FA
Schedule 4B -- Exceptions to Representations and Warranties
Schedule 5.2(b) -- Material Agreements
Schedule 5.2(f) -- Agreements with Employees
Schedule 6.2(d) -- BKB Third Party Consents
Schedule 6.3(d) -- Bankmont and Harris Third Party Consents
Schedule 6.4(d) -- FA Third Party Consents
Schedule 7.1(b) -- Required Regulatory Approvals
Schedule 8.1 -- Certain FAMIS Expenses
MASTER AGREEMENT FOR THE
FORMATION OF A LIMITED LIABILITY COMPANY
This is a Master Agreement for the Formation of a Limited Liability
Company, dated as of September 2, 1997 (as in effect from time to time,
this "Agreement"), among (a) BankBoston Corporation, a Massachusetts
corporation ("BKB"), (b) Bankmont Financial Corp., a Delaware corporation
("Bankmont"), (c) Harris Trust and Savings Bank, an Illinois banking
corporation ("Harris"), and (d) First Annapolis Consulting, Inc., a
Maryland corporation ("FA").
WHEREAS, the parties hereto wish to form a Delaware limited
liability company for the purpose of engaging in the retail credit card
business, both through the company's own portfolio and as a provider of
marketing services to others on a domestic and international level;
WHEREAS, certain of the parties hereto desire to participate in the
company through the purchase of membership interests in the company
("Membership Interests") and certain of the parties hereto desire to
participate in the company through the contribution or sale to the
company of certain credit card related assets owned by them or their
affiliates in exchange for cash and/or Membership Interests, in each case
upon the terms and conditions more fully set forth herein;
WHEREAS, the parties hereto desire that the company, BKB and Harris
(or certain Affiliates of BKB and Harris) enter into certain servicing
arrangements, pursuant to which the company will provide to BKB and
Harris (or certain Affiliates of BKB or Harris) certain accounting,
processing and marketing services for their credit card businesses, as
more fully set forth herein; and
WHEREAS, the parties hereto desire to arrange third-party financing
for the company, as more fully set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises, the
mutual covenants set forth below and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE 1
ARTICLE 1. DEFINED TERMS
In addition to the defined terms found elsewhere in this Agreement,
as used in this Agreement the following terms shall have the following
meanings:
"Account Solicitation and Services Agreement" shall have the
meaning set forth in Section 3.11.
"Affiliate" means, with respect to any Person, any other Person
controlling, controlled by or under common control with, such Person. As
used in this definition, (a) "control" (including, with its correlative
meanings, "controlling," "controlled by" and "under common control with")
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of that Person,
whether through the ownership of voting securities, by contract or
otherwise and (b) with respect to any Person other than a subsidiary of
the Company, the term "Affiliate" shall not include the Company or any
subsidiary of the Company.
"Agreement" has the meaning set forth in the preamble.
"Bankmont" has the meaning set forth in the preamble.
"Bankmont Contribution Agreement" has the meaning set forth in
Section 3.8.
"BKB" has the meaning set forth in the preamble.
"BKB-CT" means Bank of Boston Connecticut.
"BKB-NH" means BankBoston (NH), National Association.
"BKB Assets" means the assets of FNBB and/or BKB-NH to be
contributed to or purchased by the Company, the CEBA Bank and Receivables
LLC, as applicable, pursuant to the BKB Purchase Agreement, the BKB
Overdue Receivables Purchase Agreement and the BKB Contribution
Agreement.
"BKB Contribution Agreement" has the meaning set forth in Section 3.4.
"BKB International Credit Card Business" means the provision of
unsecured lines of credit accessible by VISA(R) or MasterCard(R) to
consumers located outside of the United States, the servicing of such
credit card relationships, and the provision of services incidental
thereto by BKB and its Affiliates.
"BKB Overdue Receivables" has the meaning set forth in Section 3.3.
"BKB Overdue Receivables Purchase Agreement" has the meaning set
forth in Section 3.3.
"BKB Purchase Agreement" has the meaning set forth in Section 3.2.
"BKB Relationship Credit Card Business" means the Credit Card
Business engaged in by BKB and its Affiliates with consumers who are
employees, officers or directors of BKB or BKB's Affiliates or a family
member of any such employee, officer or director or with any other Person
who maintains at least one other ongoing customer relationship with BKB
or any of its Affiliates at the time of reference.
"BKB Services Agreement" has the meaning set forth in Section 3.14.
"BKB Trademark License" has the meaning set forth in Section 3.18.
"BKB Value-Limited Credit Card Business" means the Credit Card
Business (other than the BKB Relationship Credit Card Business) of BKB
and its Affiliates in the United States, to the extent that the aggregate
outstanding balance of credit card accounts comprising such Credit Card
Business does not exceed $250 million.
"Business Day" means a day other than Saturday, Sunday or any day
on which banks located in the Commonwealth of Massachusetts or the State
of Illinois are authorized or obligated to close.
"CEBA Bank" has the meaning set forth in Section 3.10.
"CEBA Bank Rights" has the meaning set forth in Section 3.10.
"Capital Retention Agreement" has the meaning set forth in Section
3.16.
"Certificates of Formation" has the meaning set forth in Section 3.1.
"Closing" has the meaning set forth in Section 3.21.
"Closing Conditions" means the conditions set forth in Article 6
which must be fulfilled prior to Closing.
"Closing Date" has the meaning set forth in Section 3.21.
"Code" has the meaning set forth in Section 5.2(f).
"Common Units" has the meaning assigned to such term in the
Operating Agreement.
"Company" has the meaning set forth in Article 2.
"Company Business Plan" means the business plan of the Company,
including, without limitation, the capital structure described therein,
as in effect on the date hereof.
"Contribution Agreements" means, collectively, the BKB Contribution
Agreement, the Harris Contribution Agreement, the FAMIS Contribution
Agreement and the Bankmont Contribution Agreement.
"Contributed Assets" means, collectively, the BKB Assets, the FAMIS
Assets and the Harris Assets.
"Contributed Business" means (a) with respect to BKB, the Credit
Card Businesses of its Credit Card Subsidiaries which are to be
contributed and/or sold to the Company and/or its subsidiaries on the
Closing Date pursuant to the BKB Contribution Agreement, the BKB Purchase
Agreement and the BKB Overdue Receivables Purchase Agreement, (b) with
respect to Harris, the Credit Card Businesses which are to be contributed
and/or sold to the Company and/or its subsidiaries on the Closing Date
pursuant to the Harris Contribution Agreement, the Harris Purchase
Agreement, the Harris Overdue Receivables Purchase Agreement and, if
applicable, the Harris Credit Card Operations Agreement and (c) with
respect to FA, the businesses of its Credit Card Subsidiary which are to
be contributed and/or sold to the Company and/or its subsidiaries on the
Closing Date pursuant to the FAMIS Contribution Agreement.
"Credit Card Business" means the provision of unsecured lines of
credit accessible by Visa(R) or MasterCard(R) to consumers within the
United States of America, the servicing of such credit card
relationships, and the provision of services incidental thereto.
"Credit Card Subsidiaries" means (a) with respect to BKB, BKB-CT,
BKB-NH and FNBB and (b) with respect to FA, FAMIS. The parties to this
Agreement acknowledge that it is intended that, prior to the Closing
Date, BKB-CT will transfer its Credit Card Business to either FNBB or
BKB-NH. Upon such transfer, BKB-CT shall cease to be a Credit Card
Subsidiary.
"Disclosing Party" has the meaning set forth in Section 5.5(b).
"FA" has the meaning set forth in the preamble.
"FAMIS" has the meaning set forth in Section 3.10.
"FAMIS Assets" means the assets to be contributed to the Company by
FAMIS pursuant to the FAMIS Contribution Agreement.
"FAMIS Contribution Agreement" has the meaning set forth in Section
3.10.
"FAMIS Services Agreement" means a certain Services Agreement,
dated as of June 22, 1995, between FAMIS and FNBB, as amended by a letter
agreement dated November 12, 1996 between such parties.
"FAMIS Affiliate Agreement" means a certain Customer Transaction
Card Affiliate Agreement, dated as of June 22, 1995, between FAMIS and
BKB-CT.
"FDR" has the meaning set forth in Section 3.9.
"FNBB" means BankBoston, N.A., formerly The First National Bank of
Boston.
"Governmental Authority" has the meaning set forth in Section 6.1(a).
"Harris" has the meaning set forth in the preamble.
"Harris Assets" means the assets of Harris to be contributed to
and/or purchased by the Company, Receivables LLC and CEBA Bank, as
applicable, pursuant to the Harris Purchase Agreement, the Harris Overdue
Receivables Purchase Agreement, the Harris Contribution Agreement and, if
applicable, the Harris Credit Card Operations Agreement.
"Harris Contribution Agreement" has the meaning set forth in
Section 3.7.
"Harris Credit Card Operations" has the meaning set forth in
Section 3.9.
"Harris Credit Card Operations Agreement" has the meaning set forth
in Section 3.9.
"Harris Overdue Receivables" has the meaning set forth in Section
3.6.
"Harris Overdue Receivables Purchase Agreement" has the meaning set
forth in Section 3.6.
"Harris Purchase Agreement" has the meaning set forth in Section 3.5.
"Harris Services Agreement" has the meaning set forth in Section 3.15.
"Information" has the meaning set forth in Section 5.5(b).
"Management Restricted Units Plan" has the meaning set forth in
Section 3.19.
"Membership Interests" has the meaning set forth in the recitals hereto.
"Merrill" has the meaning set forth in Section 5.9(e).
"Nesbitt" has the meaning set forth in Section 5.9(e).
"Operating Agreement" shall mean that certain Limited Liability
Company Agreement to be dated as of the Closing Date among the Company,
BKB, Bankmont, Harris, FA and the other parties named therein,
substantially in the form of Exhibit A hereto, as in effect from time to
time.
"Person" means any individual, partnership, corporation,
association, trust, limited liability company, joint venture,
unincorporated organization and any government, governmental department
or agency or political subdivision thereof.
"Purchase Agreements" means the BKB Purchase Agreement, the BKB
Overdue Receivables Purchase Agreement, the Harris Purchase Agreement,
the Harris Overdue Receivables Purchase Agreement and, if applicable, the
Harris Credit Card Operations Agreement, collectively.
"Receivables LLC" means a Delaware limited liability company to be
formed prior to the Closing Date as a wholly-owned subsidiary of the
Company.
"Registration Rights Agreement" has the meaning set forth in
Section 3.12.
"Regulatory Approvals" shall mean any approval or consent of, or
notice to or filing with any United States or Canadian federal, state or
local banking, regulatory or other governmental agency or authority.
"Related Agreements" means, collectively, the Certificates of
Formation, the Operating Agreement, the Contribution Agreements, the
Purchase Agreements, the Registration Rights Agreement, the Account
Solicitation and Services Agreement, the BKB Services Agreement, the
Capital Retention Agreement, the Harris Services Agreement, the BKB
Trademark License and the Soderlund Employment Agreement.
"Required Regulatory Approvals" has the meaning set forth in
Section 7.1(b).
"Required Subdebt Amount" has the meaning set forth in Section
5.9(b).
"Series A Units" has the meaning assigned to such term in the
Operating Agreement.
"Soderlund Employment Agreement" has the meaning set forth in
Section 5.8.
"Termination and Release" has the meaning set forth in Section
3.13.
ARTICLE 2
FORMATION OF LIMITED LIABILITY COMPANY
The parties hereto agree that, subject to the terms and conditions
of this Agreement and the other Related Agreements, they shall form a
Delaware limited liability company (the "Company") to operate a consumer
credit card business as set forth in the Operating Agreement. It is
further understood that (a) this Agreement itself shall not constitute or
create a joint venture, partnership, limited liability company or any
other similar arrangement between the parties hereto and (b) no party
hereto shall be authorized to act as agent of any other party hereto.
ARTICLE 3
RELATED AGREEMENTS; CLOSING
Section 3.1. Formation of the Company and Receivables LLC. (a) On or
before the Closing Date, the parties hereto shall cause the Company and
Receivables LLC to be organized and formed under names to be agreed upon
by the parties hereto by filing Certificates of Formation, each
substantially in the form of Exhibit B hereto (as in effect from time to
time, the "Certificates of Formation"), with the Secretary of State of
the State of Delaware.
(b) On the Closing Date, the parties hereto shall enter into the
Operating Agreement.
Section 3.2. Purchase of BKB Receivables. On the Closing Date, BKB
shall cause its Credit Card Subsidiaries, as applicable, to enter into a
Receivables Purchase and Sale Agreement with CEBA Bank, substantially in
the form of Exhibit C hereto (as in effect from time to time, the "BKB
Purchase Agreement"), pursuant to which such subsidiaries shall sell to
CEBA Bank, and CEBA Bank shall purchase from such subsidiaries, the
accounts receivable (other than the BKB Overdue Receivables) generated by
the Credit Card Business of such subsidiaries (excluding the BKB
Relationship Credit Card Business and the BKB Value-Limited Credit Card
Business). In consideration of the foregoing, BKB, or such of its
Affiliates as BKB may designate, shall receive an amount equal to the sum
of all such credit card receivables sold to CEBA Bank, all as more fully
set forth in the BKB Purchase Agreement.
Section 3.3. Purchase of BKB Overdue Receivables. On the Closing
Date, BKB shall cause its Credit Card Subsidiaries, as applicable, to
enter into an Overdue Receivables Purchase and Sale Agreement with
Receivables LLC, substantially in the form of Exhibit D hereto (as in
effect from time to time, the "BKB Overdue Receivables Purchase
Agreement"), pursuant to which such subsidiaries shall sell to
Receivables LLC, and Receivables LLC shall purchase from such
subsidiaries, certain accounts receivable generated by the Credit Card
Business of such subsidiaries (excluding the BKB Relationship Credit Card
Business and the BKB Value-Limited Credit Card Business), including,
without limitation, all accounts receivable which are over thirty (30)
days in arrears or charged off as of the Closing Date (the "BKB Overdue
Receivables"). In consideration of the foregoing, BKB or such Affiliates
of BKB as BKB may designate, shall receive an amount equal to the sum of
all such credit card receivables sold to Receivables LLC pursuant to this
Section 3.3, all as more fully set forth in the BKB Overdue Receivables
Purchase Agreement.
Section 3.4. Contribution by BKB. On the Closing Date, BKB shall
cause its Credit Card Subsidiaries, as applicable, to enter into a
Contribution Agreement with the Company substantially in the form of
Exhibit E hereto (as in effect from time to time, the "BKB Contribution
Agreement"), pursuant to which such subsidiaries shall contribute to the
Company, and the Company shall assume from such subsidiaries, the
intangible assets (other than the accounts receivable) associated with
the Credit Card Business of such subsidiaries (excluding the BKB
Relationship Credit Card Business and the BKB Value-Limited Credit Card
Business). In consideration of the foregoing, BKB, or such of its
subsidiaries as BKB may designate, shall receive Membership Interests
comprised of (a) $50 million in stated value of Series A Units, and (b) a
19% share of all Common Units, all as more fully set forth in the BKB
Contribution Agreement.
Section 3.5. Purchase of Harris Receivables. On the Closing Date,
Harris shall enter into a Receivables Purchase and Sale Agreement with
CEBA Bank, substantially in the form of Exhibit F hereto (as in effect
from time to time, the "Harris Purchase Agreement"), pursuant to which
Harris shall sell to CEBA Bank, and CEBA Bank shall purchase from Harris,
the accounts receivable (other than the Harris Overdue Receivables)
generated by the Credit Card Business of Harris. In consideration of the
foregoing, Harris, or such of its Affiliates as Harris may designate,
shall receive an amount equal to the sum of all such credit card
receivables sold to CEBA Bank, all as more fully set forth in the Harris
Purchase Agreement.
Section 3.6. Purchase of Harris Overdue Receivables. On the Closing
Date, Harris shall enter into an Overdue Receivables Purchase and Sale
Agreement with Receivables LLC, substantially in the form of Exhibit G
hereto (as in effect from time to time, the "Harris Overdue Receivables
Purchase Agreement"), pursuant to which Harris shall sell to Receivables
LLC, and Receivables LLC shall purchase from Harris, certain accounts
receivable generated by the Credit Card Business of Harris, including,
without limitation, all accounts receivable which are over thirty (30)
days in arrears or charged off as of the Closing Date (the "Harris
Overdue Receivables"). In consideration of the foregoing, Harris, or such
of its Affiliates as Harris may designate, shall receive an amount equal
to the sum of all such credit card receivables sold to Receivables LLC
pursuant to this Section 3.6, all as more fully set forth in the Harris
Overdue Receivables Purchase Agreement.
Section 3.7. Contribution by Harris. On the Closing Date, Harris
shall enter into a Contribution Agreement with the Company, substantially
in the form of Exhibit H hereto (as in effect from time to time, the
"Harris Contribution Agreement"), pursuant to which Harris shall
contribute to the Company, and the Company shall assume from Harris, the
intangible assets (other than the accounts receivable) associated with
the Credit Card Business of Harris. In consideration of the foregoing,
Harris shall receive Membership Interests comprised of (a) $28,299,320 in
stated value of Series A Units, and (b) a 15.02% share of all Common
Units, all as more fully set forth in the Harris Contribution Agreement.
Section 3.8. Contribution by Bankmont. On the Closing Date, Bankmont
shall enter into a Contribution Agreement with the Company, substantially
in the form of Exhibit I hereto (as in effect from time to time, the
"Bankmont Contribution Agreement"), pursuant to which Bankmont shall
purchase Membership Interests comprised of (a) $101,700,680 in stated
value of Series A Units and (b) a 53.98% share of all Common Units for an
aggregate purchase price of $115 million, all as more fully set forth in
the Bankmont Contribution Agreement.
Section 3.9. Acquisition of Harris Credit Card Operations by FDR or
the Company. In the event that on the Closing Date Harris shall not have
consummated the sale of certain assets and liabilities relating to its
credit card operations facility (the "Harris Credit Card Operations
Facility") to First Data Resources Inc. ("FDR") substantially on the
terms set forth on Exhibit J hereto or on such other terms as may be
agreed to by FDR and Harris, then, on the Closing Date, the Company shall
purchase the Harris Credit Card Operations from Harris on terms to be
negotiated in good faith by the parties hereto, which terms shall be
consistent with the Proposed Term Sheet dated August 12, 1997 among, BKB,
FA and Bankmont, including, without limitation, an offer of employment by
the Company to all individuals who are employees of the Harris Credit
Card Business.
Section 3.10. Contribution by FAMIS. On or prior to the Closing Date,
FA shall transfer to First Annapolis Marketing Information Services,
Inc., a Maryland corporation ("FAMIS"), all of FA's rights (the "CEBA
Bank Rights") to the application filed on behalf of FA to form a CEBA
Bank (the "CEBA Bank") to be based in Delaware. On the Closing Date, FA
shall cause FAMIS to enter into a Contribution Agreement with the
Company, substantially in the form of Exhibit K hereto (as in effect from
time to time, the "FAMIS Contribution Agreement"), pursuant to which
FAMIS shall contribute to the Company, and the Company shall assume from
FAMIS, (a) substantially all of the assets of FAMIS, and (b) the CEBA
Bank Rights. In consideration of the foregoing, certain shareholders of
FAMIS shall receive Membership Interests comprised of (a) $20 million in
stated value of Series A Units and (b) a 12% share of all Common Units,
all as more fully set forth in the FAMIS Contribution Agreement.
Section 3.11. Account Solicitation and Servicing Agreement. On the
Closing Date, the Company will enter into an Account Solicitation and
Servicing Agreement with the CEBA Bank, in form and substance reasonably
satisfactory to the parties hereto (as in effect from time to time, the
"Account Solicitation and Servicing Agreement"), pursuant to which, among
other things, the Company will solicit new credit card account
relationships for the CEBA Bank and manage the CEBA Bank's credit card
account relationships.
Section 3.12. Registration Rights Agreement. On the Closing Date,
each of the parties listed on the signature pages thereto (or such other
permitted transferee as such parties may designate) shall execute and
deliver counterparts of a Registration Rights Agreement, substantially in
the form of Exhibit L hereto (as in effect from time to time, the
"Registration Rights Agreement").
Section 3.13. Termination and Release. On the Closing Date, FA shall
cause FAMIS to enter into, and BKB shall cause FNBB to enter into, a
Termination and Release in substantially the form attached hereto as
Exhibit M (the "Termination and Release").
Section 3.14. BKB Services Agreement. On the Closing Date, the
parties shall cause the Company to enter into a Services Agreement with
BKB, substantially in the form of Exhibit N (as in effect from time to
time, the "BKB Services Agreement"). Without limiting the foregoing, the
BKB Services Agreement shall include the Operations Manual (as defined
therein) which shall have been reviewed by and mutually agreed to by BKB
and the Company prior to the Closing Date.
Section 3.15. Harris Services Agreement. On the Closing Date, the
parties shall cause the Company to enter into a Servicing Agreement with
Harris, substantially in the form of Exhibit O hereto (as in effect from
time to time, the "Harris Services Agreement").
Section 3.16. Capital Retention Agreement. On the Closing Date, First
Annapolis Capital, LLC, the Company, CEBA Bank and Receivables LLC shall
enter into the Capital Retention Agreement, substantially in the form of
Exhibit P hereto (as in effect from time to time, the "Capital Retention
Agreement").
Section 3.17. Transitional Services Agreements. On the Closing Date,
the Company shall enter into a separate Transitional Services Agreement
with each of FA, Bankmont and BKB (or a respective Affiliate) with
respect to the provision of services by each of FA, Bankmont and BKB and
their respective applicable Affiliates to the Company on such terms as
may be reasonably satisfactory to the parties hereto.
Section 3.18. BKB Trademark License. On the Closing Date, BKB will
enter into a Trademark License Agreement (the "BKB Trademark License")
with the Company on such terms as may be reasonably satisfactory to the
parties hereto.
Section 3.19. Management Restricted Units Plan. On the Closing Date,
the Company shall enter into an incentive compensation plan (the
"Management Restricted Units Plan") providing for the granting to
selected employees of the Company certain restricted rights in up to four
percent (4%) of the Common Units of the Company on such terms as may be
agreed to by the parties hereto.
Section 3.20. Closing. Subject to the provisions of Article 6 hereof,
the consummation of the transactions contemplated by this Agreement shall
take place at a closing (the "Closing") to be held at the Chicago,
Illinois offices of Chapman and Cutler, on a mutually acceptable date not
later than the tenth Business Day after receipt of the Required
Regulatory Approvals or on such other date or at such other place as
shall be agreed to in writing by all of the parties hereto. The date on
which the Closing actually occurs is referred to herein as the "Closing
Date."
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Each of the parties hereto hereby represents and warrants to each
of the other parties hereto that (a) all of the representations and
warranties of such party and its Affiliates which are set forth in the
Related Agreements and on Schedule 4A hereto are true and correct as of
the date hereof as though made at and as of the date hereof (except as
specified on Schedule 4B hereto and excluding any representations and
warranties made by the Company or any of its subsidiaries) and shall be
true and correct in all material respects as of the Closing Date, with
respect to such party and its Affiliates and the Company, as though made
at and as of the Closing Date, except to the extent that any such
representation and warranty is made as of a specified date other than the
date hereof or the Closing Date, in which case such representation and
warranty shall be true and correct as of such specified date and (b)
except for the Required Regulatory Approvals listed on Schedule 7.1(a)
hereto and the consents of nongovernmental third parties listed on
Schedules 6.2(d), 6.3(d) and 6.4(d) hereto to be obtained by such party
and its Affiliates, no Regulatory Approvals or consents of
nongovernmental third parties are required in connection with the
execution, delivery or performance by such party or any of its Affiliates
of this Agreement or any of the Related Agreement to which such party or
any of its Affiliates is or is to be a party.
ARTICLE 5
CERTAIN COVENANTS
Section 5.1. Ordinary Course Operation. During the period commencing
on the date hereof and ending on the Closing Date, each of BKB and FA
agrees to cause each of its respective Credit Card Subsidiaries to, and
Harris shall:
(a) operate its respective Contributed Business only in the
ordinary course on a basis consistent with past practice; provided,
however, that for purposes of this Section 5.1(a), the
implementation of repricing strategies, account segmentation
strategies and direct marketing programs by Harris as recommended
by FA pursuant to an engagement letter between Harris and FA shall
be considered to be in the ordinary course of Harris' business.
(b) use all reasonable efforts to preserve its Contributed
Business and to keep available the services of the full-time
officers and employees engaged therein to the extent required to
conduct its Contributed Business in substantially the same manner
as conducted on the date hereof; provided, that changes in credit
card receivable portfolio size shall not be deemed to breach this
clause (b);
(c) use all reasonable efforts to maintain good relations
with cardholders and other Persons having a business relationship
with its Contributed Business;
(d) preserve and maintain all permits, licenses, approvals
and authorizations necessary to operate its Contributed Business
and renew the same if any should expire;
(e) use all reasonable efforts to maintain in full force and
effect all of the material contracts which constitute Contributed
Assets;
(f) comply in all material respects with all laws,
ordinances, rules and regulations applicable to its Contributed
Business; and
(g) maintain the books of account and records related to its
Contributed Business in the ordinary course consistent with past
practices.
Section 5.2. Certain Additional Covenants. During the period
commencing on the date hereof and ending on the Closing Date, without the
prior written consent of the other parties hereto or except as expressly
permitted or required by this Agreement, none of BKB and FA will permit
its respective Credit Card Subsidiaries to, and Harris shall not:
(a) make any material change in accounting methods,
principles or practices used by such Person in its Contributed
Business, unless required by law or by changes in GAAP;
(b) except as set forth on Schedule 5.2(b) hereto, (i) enter
into any material contract, transaction or commitment related to
such Person's Contributed Business or (ii) terminate or materially
change any material contracts which constitute Contributed Assets,
in each case, other than in the ordinary course of business
consistent with past practice;
(c) (i) except as set forth in item 2 in Schedule 5.2(b)
hereto, transfer or otherwise dispose of or encumber any of the
Contributed Assets, other than in the ordinary course of business
consistent with past practice; (ii) cancel any debt or waive or
compromise any claim or right related to such Person's Contributed
Business, other than in the ordinary course of business consistent
with past practice; (iii) make any capital expenditure or
commitment related to such Person's Contributed Business, other
than in the ordinary course of business consistent with past
practice; (iv) except with respect to endorsements of negotiable
instruments in the ordinary course of its business, incur, assume
or guarantee any indebtedness for borrowed money related to such
Person's Contributed Business which will constitute a liability to
the Company as of the Closing Date other than (A) purchase money
indebtedness, (B) indebtedness for borrowed money pursuant to
credit agreements, credit lines and other borrowing facilities and
arrangements in effect on the date of this Agreement, (C)
refinancing of existing indebtedness, or (D) indebtedness incurred
by such Person pursuant to any revolving credit facility utilized
to finance its Contributed Business; or (v) agree to do any of the
foregoing;
(d) unless required by applicable law or pursuant to this
Agreement or the other Related Agreements, materially alter or vary
its methods or policies of underwriting, originating, selling or
servicing, or buying or selling rights to service, the Contributed
Assets, except as specifically set forth in the proviso to Section
5.1(a) with respect to Harris;
(e) except as contemplated hereby or by the other Related
Agreements, enter into any servicing agreement with respect to the
Contributed Assets;
(f) enter into or amend any employment, bonus, severance, or
retirement contract or arrangement, or increase any salary or other
form of compensation payable or to become payable to any current or
former employee, officer, or director engaged in such Person's
Contributed Business (including any beneficiary thereof), except
(i) as may be required in order to obtain any favorable
determination letter with respect to any employee benefit plan
intended to be qualified under Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), (ii) merit increases
to employees (including directors and executive officers) in
accordance with past practices and general increases to employees
(excluding directors and executive officers) as a class in
accordance with past practice or as required by law, (iii) bonus
payments made to FAMIS employees prior to the Closing and (iv)
other obligations which would not become obligations of the Company
upon Closing; or
(g) enter into any agreement, understanding or transaction
with any Affiliate related to such Person's Contributed Business,
other than (i) on arms-length terms in the ordinary course of
business consistent with past practices, or (ii) as expressly
contemplated hereby or by the other Related Agreements.
Section 5.3. Cooperation. Each of the parties hereto will cooperate
in good faith and use all reasonable efforts to cause the transactions
contemplated by this Agreement and the other Related Agreements to be
consummated in accordance with the terms and conditions hereof and
thereof. The foregoing obligations in this Section 5.3 shall not be
deemed to require any party hereto to waive any right under this
Agreement or any other Related Agreement.
Section 5.4. Current Information. During the period commencing on
the date hereof and ending on the Closing Date, each of BKB, Harris and
FA will cause one or more of its representatives to confer on a regular
and frequent basis with representatives of the other parties hereto with
respect to the Contributed Assets and the status of the ongoing
Contributed Business operations of their respective Credit Card
Subsidiaries. Each of BKB, Harris and FA will promptly notify the other
parties hereto of any material change in the normal course of its
respective Credit Card Subsidiaries' Contributed Business or in its
Credit Card Business, as the case may be, or in the operation of any
properties relating thereto. To the extent permitted by applicable law,
each of the parties hereto (a) will promptly notify the other parties
hereto of any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated) or the
institution or the threat of litigation, involving such party which would
be reasonably likely in any manner to challenge, prevent, alter or
materially delay any of the transactions contemplated hereby or by the
other Related Agreements, and (b) will keep the other parties hereto
informed with respect to such events. Each of the parties hereto will
also notify the other parties hereto of the status of regulatory
applications and third party consents related to the transactions
contemplated hereby and by the other Related Agreements.
Section 5.5. Access, Information and Confidentiality. (a) During the
period commencing on the date hereof and ending on the Closing Date, each
of BKB, Harris and FA shall, and cause each of its respective Credit Card
Subsidiaries to, afford to the parties hereto and their respective
representatives (including, without limitation, officers and employees
and their authorized agents, consultants and advisors) such access during
normal business hours to its books, records, properties, personnel,
customers and other information related to such Person's Contributed
Assets and Contributed Business as the parties hereto may reasonably
request, unless restricted by law.
(b) Each party to this Agreement shall hold, and shall cause its
subsidiaries and the respective directors, officers, employees, agents,
consultants and advisors of such party and its subsidiaries to hold, in
strict confidence, at all times from and after the date hereof, unless
disclosure to a banking or other regulatory authority is necessary in
connection with any necessary regulatory approval or unless compelled to
disclose by judicial or administrative process or, in the written opinion
of its counsel, by other requirement of law or the applicable
requirements of any regulatory agency or relevant stock exchange, all
non-public records, books, contracts, reports, instruments, computer data
and other data and information, including, without limitation, all
information regarding customers, pricing policies, methods of operation,
proprietary computer programs, sales, products, profits, costs, markets,
key personnel, formulae, product applications, technical processes and
trade secrets (collectively, "Information") concerning the Company, any
other party hereto and any Affiliate of any other party hereto (or, if
required under a contract with a third party, such third party) furnished
or made available to it by such other parties, the Company or any
representative thereof pursuant to this Agreement or any other Related
Agreement, except to the extent that such Information can be shown to
have been (i) previously known by such party on a non-confidential basis,
(ii) available to such party on a non-confidential basis from a source
other than the disclosing party, (iii) in the public domain through no
fault of such party, or (iv) later lawfully acquired from other sources
by the party to which it was furnished or made available, and none of the
parties shall release or disclose such Information to any other person,
except its auditors, attorneys, financial advisors, bankers, other
consultants and advisors who have a need to know and are advised of the
confidentiality of such Information, and, to the extent permitted above,
to banking and other regulatory authorities. In the event that a party to
this Agreement receives notice that it will be compelled to disclose any
Information in connection with any necessary regulatory approval or by
judicial or administrative process, such party shall provide the party
who provided such Information (the "Disclosing Party") with prompt prior
written notice of such requirement so that the Disclosing Party may seek
a protective order or other appropriate remedy and/or waive the terms of
this Section 5.5 with respect to the disclosure of such Information. In
the event that such protective order or other remedy is not obtained,
only that portion of the Information which is legally required to be
disclosed shall be so disclosed.
Section 5.6. Consents and Approvals. Each of the parties hereto
shall use all reasonable efforts and cooperate in good faith with the
other parties hereto with a view to (a) obtaining as soon as practicable
all Required Regulatory Approvals and all third-party consents required
for the consummation of the transactions contemplated hereby and by the
other Related Agreements, and each party hereto shall make available to
the other parties hereto all information reasonably required in
connection with obtaining such approvals and consents; and (b) satisfying
all other Closing Conditions. Each of the parties hereto shall deliver to
the other parties hereto copies of all proposed filings to be made by
such party with banking, regulatory and other Governmental Authorities,
shall use its reasonable efforts to accommodate any suggestions or
recommendations made by the other parties hereto with respect thereto and
shall deliver to the other parties hereto, as soon as practicable, copies
of all final applications to Governmental Authorities, in each case with
respect to the transactions contemplated by this Agreement and the
Related Agreements.
Section 5.7. Executive Officers. On the Closing Date, the parties
hereto shall take such action as is necessary and proper to cause the
Company to appoint and employ, on terms satisfactory to the Management
Committee (as defined in the Operating Agreement), which in some
instances shall include incentives in the form of cash bonuses and/or
Management Restricted Units (as defined in the Operating Agreement) based
on performance parameters, the following individuals to serve as
executive officers of the Company, to hold the office(s) set forth
opposite their respective names in the table below, and such individuals
shall have accepted such offices until their successors are duly
appointed:
John R. Soderlund President and Chief Executive Officer
Jeff Slawsky Executive Vice President, Corporate
Development
Dean Papadopolous Executive Vice President, Marketing
and Analysis
Charles Velario Vice President, Credit Policy and
Risk Management
Charlene Rizzo Vice President, Operations
The parties agree to cooperate in hiring a Chief Financial Officer (who
will be an Executive Vice President), a General Counsel and officers in
charge of human resources and information technology.
Section 5.8. Soderlund Employment Agreement. On the Closing Date,
the parties hereto shall cause the Company to enter into an employment
agreement with John R. Soderlund, substantially in the form attached
hereto as Exhibit Q (as in effect from time to time, the "Soderlund
Employment Agreement").
Section 5.9. Financing.
(a) Cooperation. The parties hereto agree to cooperate in good
faith with each other and use all reasonable efforts to secure
third-party financing for the Company and/or its subsidiaries in amounts
sufficient to enable the Company and/or its subsidiaries to operate their
businesses after the Closing as contemplated by the Company Business
Plan, provided, however, that the parties hereto agree that none of the
parties hereto or any of their respective Affiliates shall be required to
provide any portion of such financing or any credit enhancements or
guaranties therefor other than as described in paragraph (c) below and,
in the case of Bankmont, the Bankmont Contribution Agreement.
(b) Subordinated Debt. The parties hereto agree to cooperate in
good faith with each other and use all reasonable efforts to cause the
Company (or one of its subsidiaries) to issue subordinated indebtedness
on the Closing Date in an amount sufficient to enable the Company to
effect the transactions contemplated to occur at the Closing pursuant to
this Agreement and the Related Agreements (the "Required Subdebt
Amount").
(c) Bridge Loan. In the event that the Company is unable to issue
subordinated indebtedness on the Closing Date in an amount at least equal
to the Required Subdebt Amount, then BKB and Bankmont shall provide or
cause to be provided a temporary bridge loan to the Company in an
aggregate amount equal to (i) the lesser of (A) $200 million and (B) the
Required Subdebt Amount, minus (ii) the amount of subordinated
indebtedness issued on the Closing Date pursuant to paragraph (b) above.
Any bridge loan shall be made 75% by Bankmont and 25% by BKB and shall be
on the terms set forth on Exhibit R hereto.
(d) Warehouse Line of Credit. The parties hereto agree to cooperate
in good faith with each other and use all reasonable efforts to obtain a
warehouse line of credit for the CEBA Bank and Receivables LLC on the
Closing Date in such amount as is necessary to finance the acquisition
and servicing by the CEBA Bank and Receivables LLC of the accounts
receivable sold by FNBB and BKB-NH and Harris to the CEBA Bank and
Receivables LLC pursuant to the BKB Purchase Agreement, the BKB Overdue
Receivables Purchase Agreement, the Harris Purchase Agreement and the
Harris Overdue Receivables Purchase Agreement.
(e) Securitization. The parties hereto agree to cooperate in good
faith with each other and to use all reasonable efforts to arrange for
the securitization contemplated by the Company Business Plan with respect
to certain of the accounts receivable sold by FNBB, BKB-NH and Harris to
the CEBA Bank and Receivables LLC pursuant to the BKB Purchase Agreement,
the BKB Overdue Receivables Purchase Agreement, the Harris Purchase
Agreement and the Harris Overdue Receivables Purchase Agreement.
Section 5.10. FAMIS Employees. The parties hereto hereby agree to
cooperate in good faith and to use reasonable efforts to cause the
Company, on the Closing Date, to make offers of employment to
substantially all of the then-current active employees of FAMIS at the
same base salary and with substantially similar employee benefits,
recognizing all prior service with FAMIS through the Closing Date.
Section 5.11. BKB Structuring Fee. The parties hereto agree to cause
the Company to pay to BKB by wire transfer of immediately available funds
on the Closing Date as a fee for services in connection with structuring
the transactions contemplated in this Agreement the sum of $5 million.
Section 5.12. Disclosure Supplements. From time to time prior to the
Closing Date, each party hereto will promptly give notice to the other
parties hereto of any matter hereafter arising which, if existing,
occurring or known at the date of this Agreement, would have been
required to be set forth or described by such party in the Schedules or
Exhibits hereto or to any Related Agreement or is necessary to correct
any information provided by such party in the Schedules or Exhibits
hereto or to any Related Agreement or has caused any representation or
warranty of such party herein or in any Related Agreement to become
inaccurate. No such notice shall be deemed to supplement or amend this
Agreement or any Related Agreement or any Schedules or Exhibits hereto or
thereto; provided, however, that upon consummation of the Closing, all
matters disclosed in notices given pursuant to and in accordance with the
terms of this Section 5.12 shall be treated as having been disclosed
herein or in the applicable Related Agreement as of the date hereof for
purposes of such party's indemnity obligations thereunder.
ARTICLE 6
CONDITIONS TO CLOSING
Section 6.1. Conditions to Obligation of Each Party. The respective
obligations of each of the parties hereto to consummate the Closing under
this Agreement and the other Related Agreements shall be subject to the
satisfaction, prior to or at Closing, of each of the following
conditions:
(a) No Injunction. On the Closing Date, there shall be no (i)
injunction, restraining order or decree of any nature of any United
States or Canadian federal, state or local court, governmental
commission, board or other regulatory authority or agency
("Governmental Authority") of competent jurisdiction in effect that
restrains or prohibits the consummation of any transaction
contemplated under this Agreement or any other Related Agreement or
(ii) pending action, suit or proceeding brought by any Governmental
Authority which seeks to restrain or prohibit consummation of any
such transaction.
(b) Regulatory Approvals. Each Required Regulatory Approval
shall have been obtained and any applicable waiting period in
respect thereof shall have expired or been terminated, and each
such Required Regulatory Approval shall be in full force and
effect.
(c) Financings. The Company and/or its subsidiaries shall
have received financing as contemplated by Sections 5.9(b) and/or
(c), as applicable, and 5.9(d).
(d) Other Transactions. Each of the Related Agreements shall
have been duly executed and delivered by each party thereto and
shall be in full force and effect, and the transactions
contemplated by the Contribution Agreements shall have been
consummated and have become effective in accordance with their
respective terms.
(e) FDR Assignment and Release. FDR shall have entered into a
Consent to Assignment and Release ("Release") substantially in the
form of Exhibit S hereto and the Company shall have accepted such
Release.
(f) FAMIS Employees. On the Closing Date, the Company shall
employ such former employees of FAMIS as are reasonably necessary
to operate the business of the Company and its subsidiaries as
contemplated by the Company Business Plan.
(g) Tax Treatment. No party hereto shall have delivered to
the other parties hereto a written legal opinion of such party's
external legal counsel (referred to in Section 8.2 hereof) to the
effect that, due to any changes occurring after the date hereof in
applicable law or in the transactions contemplated by this
Agreement and the Related Agreements, the contributions to be made
by any of the parties hereto or their respective Affiliates
pursuant to their respective Contribution Agreements would not
constitute tax free "exchanges" under Section 721 of the Code.
Section 6.2. Additional Conditions to the Obligations of BKB. The
obligations of BKB to consummate the Closing under this Agreement and the
other Related Agreements shall be subject to the satisfaction, prior to
or at Closing, of each of the following additional conditions:
(a) Representations and Warranties. The representations and
warranties of each of the other parties hereto or any of their
Affiliates which are set forth in this Agreement or in the Related
Agreements shall be true and correct in all material respects as of
the Closing Date as though made at and as of the Closing Date,
except to the extent that any representation and warranty is made
as of a specified date other than the Closing Date, in which case
such representation and warranty shall be true and correct as of
such date.
(b) Performance of Covenants. Each of the other parties
hereto shall have performed in all material respects all
obligations and agreements, and complied in all material respects
with all covenants and conditions, contained in this Agreement to
be performed or complied with by such party prior to or at the
Closing.
(c) Certificates. BKB shall have received a certificate of
each of the other parties hereto, dated the Closing Date, executed
on behalf of each of such parties to the effect that the conditions
specified in Sections 6.2(a) and 6.2(b) with respect to such party
have been fulfilled.
(d) Consents. All consents of non-governmental third parties
required for the consummation of the transactions contemplated
hereby by BKB and its Affiliates, including, without limitation,
BKB's Credit Card Subsidiaries, as set forth on Schedule 6.2(d)
shall have been obtained and shall be in full force and effect on
the Closing Date.
(e) Additional Deliveries. Each of the other parties hereto
shall have furnished BKB with such certificates, instruments or
other documents in the name or on behalf of such party, executed by
appropriate officers of such parties or others, including, without
limitation, certificates or correspondence of Governmental
Authorities or non-governmental third parties, to evidence
fulfillment of the conditions set forth in this Article 6 to be
fulfilled by Persons other than BKB and its Affiliates as BKB may
reasonably request; provided, however, that any such certificate,
instrument or other document so requested by BKB shall be of a type
that is customary in transactions similar to the transactions
contemplated hereby.
Section 6.3. Additional Conditions to the Obligations of Bankmont
and Harris. The obligations of Bankmont and Harris to consummate the
Closing under this Agreement and the other Related Agreements shall be
subject to the satisfaction, prior to or at Closing, of each of the
following additional conditions:
(a) Representations and Warranties. The representations and
warranties of each of the other parties hereto or any of their
Affiliates which are set forth in this Agreement or the Related
Agreements shall be true and correct in all material respects as of
the Closing Date as though made at and as of the Closing Date,
except to the extent that any representation and warranty is made
as of a specified date other than the Closing Date, in which case
such representation and warranty shall be true and correct as of
such date.
(b) Performance of Covenants. Each of the other parties
hereto shall have performed in all material respects all
obligations and agreements, and complied in all material respects
with all covenants and conditions, contained in this Agreement to
be performed or complied with by such party prior to or at the
Closing.
(c) Certificates. Bankmont and Harris shall have received a
certificate of each of the other parties hereto, dated the Closing
Date, executed on behalf of each of such parties to the effect that
the conditions specified in Sections 6.3(a) and 6.3(b) with respect
to such party have been fulfilled.
(d) Consents. All consents of non-governmental third parties
required for the consummation of the transactions contemplated
hereby by Harris, Bankmont and their respective Affiliates as set
forth on Schedule 6.3(d) shall have been obtained and shall be in
full force and effect on the Closing Date.
(e) Additional Deliveries. Each of the other parties hereto
shall have furnished Bankmont and Harris with such certificates,
instruments or other documents in the name or on behalf of such
party, executed by appropriate officers of such parties or others,
including, without limitation, certificates or correspondence of
Governmental Authorities or non-governmental third parties, to
evidence fulfillment of the conditions set forth in this Article 6
to be fulfilled by Persons other than Bankmont, Harris and their
respective Affiliates as Bankmont and Harris may reasonably
request; provided, however, that any such certificate, instrument
or other document so requested by Bankmont and Harris shall be of a
type that is customary in transactions similar to the transactions
contemplated hereby.
Section 6.4. Additional Conditions to the Obligations of FA. The
obligations of FA to consummate the Closing under this Agreement and the
other Related Agreements shall be subject to the satisfaction, prior to
or at Closing, of each of the following additional conditions:
(a) Representations and Warranties. The representations and
warranties of each of the other parties hereto or any of their
Affiliates which are set forth in this Agreement or the Related
Agreements shall be true and correct in all material respects as of
the Closing Date as though made at and as of the Closing Date,
except to the extent that any representation and warranty is made
as of a specified date other than the Closing Date, in which case
such representation and warranty shall be true and correct as of
such date.
(b) Performance of Covenants. Each of the other parties
hereto shall have performed in all material respects all
obligations and agreements, and complied in all material respects
with all covenants and conditions, contained in this Agreement to
be performed or complied with by such party prior to or at the
Closing.
(c) Certificates. FA shall have received a certificate of
each of the other parties hereto, dated the Closing Date, executed
on behalf of each of such parties to the effect that the conditions
specified in Sections 6.4(a) and 6.4(b) with respect to such party
have been fulfilled.
(d) Consents. All consents of non-governmental third parties
required for the consummation of the transactions contemplated
hereby by FA and its Affiliates, including, without limitation, its
Credit Card Subsidiary, as set forth on Schedule 6.4(d) shall have
been obtained and shall be in full force and effect on the Closing
Date.
(e) Additional Deliveries. Each of the other parties hereto
shall have furnished FA with such certificates, instruments or
other documents in the name or on behalf of such party, executed by
appropriate officers of such parties or others, including, without
limitation, certificates or correspondence of Governmental
Authorities or non-governmental third parties, to evidence
fulfillment of the conditions set forth in this Article 6 to be
fulfilled by Persons other than FA and its Affiliates as FA may
reasonably request; provided, however, that any such certificate,
instrument or other document so requested by FA shall be of a type
that is customary in transactions similar to the transactions
contemplated hereby.
ARTICLE 7
TERMINATION
Section 7.1. Grounds For Termination. This Agreement may be
terminated at any time prior to the Closing:
(a) by mutual written consent of all of the parties hereto;
(b) by any of the parties hereto (i) thirty (30) days after
the date on which any request or application for a Regulatory
Approval necessary for the consummation of the transactions
contemplated hereby and listed on Schedule 7.1(b) hereto (the
"Required Regulatory Approvals") shall have been denied, unless
within the thirty (30) day period following such denial a petition
for rehearing or an amended application has been filed with the
applicable Governmental Authority; provided, however, that no party
hereto shall have the right to terminate this Agreement pursuant to
this Section 7.1(b) if such denial shall be due to the failure of
the party seeking to terminate this Agreement to perform or observe
in any material respect the covenants and agreements of such party
set forth herein, or (ii) if any federal or state banking or other
Governmental Authority shall have issued a final permanent order,
injunction or other legal restraint or prohibition preventing the
consummation of the transactions contemplated hereby and the time
for appeal or petition for reconsideration of such order,
injunction, restraint or prohibition shall have expired without
such appeal or petition being granted or such order, injunction,
restraint or prohibition shall otherwise have become final and
non-appealable;
(c) by any of the parties hereto (but only if the terminating
party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein or in any of
the other Related Agreements) in the event of a material breach by
any other party hereto of any representation, warranty, covenant or
other agreement contained herein or in any of the other Related
Agreements, which breach is not cured after thirty (30) days'
written notice thereof is given to the party committing such
breach; or
(d) by any of the parties hereto if the Closing shall not
have occurred on or prior to December 31, 1997, unless the failure
of the Closing to occur by such date shall be due to the failure of
the party seeking to terminate this Agreement hereunder to perform
or observe in any material respect the covenants and agreements of
such party set forth in this Agreement or in any other Related
Agreements.
Section 7.2. Effects of Termination. In the event of termination of
this Agreement by any of the parties hereto as provided in Section 7.1,
this Agreement shall forthwith become null and void (other than this
Section 7.2 and Section 5.5(b) (Confidentiality)), which shall remain in
full force and effect), and there shall be no further liability on the
part of any of the parties hereto or their respective officers or
directors to the other parties hereto, except any liability of the
parties hereto under said Section 5.5(b) and, in the event of a willful
breach by any of the parties hereto of any representation, warranty,
covenant or agreement contained in this Agreement, in which case the
breaching party shall remain liable for any and all damages, costs and
expenses, including all reasonable attorneys' fees, sustained or incurred
by the non-breaching parties as a result thereof or in connection
therewith or with the enforcement of any of their rights hereunder,
whether sustained or incurred prior to, on or after the date hereof. In
no event shall any party hereto or any of such party's officers or
directors have any liability to any other party hereto arising out of or
relating to this Agreement in the event that the Closing occurs;
provided, that nothing herein shall limit the liability of any person
under any Related Agreement.
ARTICLE 8
GENERAL
Section 8.1. Expenses. Except as expressly set forth in this
Agreement or the Related Agreements, each party shall pay its own
expenses and costs incidental to the completion of the transactions
contemplated hereby incurred prior to July 1, 1997, excluding third party
fees paid by FA regarding formation of the CEBA Bank, legal fees paid by
BKB and its Affiliates regarding the BKB credit card portfolio
securitization and legal fees incurred by Bankmont or its Affiliates
regarding securitization of Harris' credit card portfolio, which shall be
reimbursed by the Company. The Company shall bear the legal, accounting
and other incidental costs of creating and financing the Company from
July 1, 1997 onwards, including, without limitation, all such expenses
incurred by FAMIS as set forth on Schedule 8.1 hereto.
Section 8.2. Notices. All notices, demands and other communications
hereunder shall be in writing or by written telecommunication, and shall
be deemed to have been duly given if delivered personally or if mailed by
certified mail, return receipt requested, postage prepaid or if sent by
overnight courier or sent by written telecommunication (answerback
confirmed), as follows:
If to BKB: BankBoston Corporation
100 Federal Street, 01-25-08
Boston, Massachusetts 02110
Attention: Mr. Peter J. Manning
and
BankBoston Corporation
100 Federal Street, 01-25-01
Boston, Massachusetts 02110
Attention: Gary Spiess, Esq.
with a copy sent
contemporaneously to: Bingham, Dana & Gould LLP
150 Federal Street
Boston, Massachusetts 02110
Attention: Norman J. Shachoy, Esq.
If to Bankmont: Bankmont Financial Corp.
111 West Monroe Street
Chicago, Illinois 60603
Attention: Paul V. Reagan, Esq.
with a copy sent
contemporaneously to: Chapman and Cutler
111 West Monroe Street, 17th Floor
Chicago, Illinois 60603
Attention: Marc P. Franson, Esq.
If to FA: First Annapolis Consulting, Inc.
900 Elkridge Landing Road, Suite 400
Linthicum, Maryland 21090
Attention: Mr. Frederick A. White
with a copy sent
contemporaneously to: Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178-0060
Attention: David G. Nichols, Jr.,
Esq.
Section 8.3. Entire Agreement. This Agreement (including the
Exhibits and Schedules hereto), together with the other Related
Agreements (including the Exhibits and Schedules thereto) contains the
entire understanding of the parties hereto and thereto, supersedes all
prior agreements and understandings relating to the subject matter hereof
and thereof and shall not be amended except by a written instrument
hereafter signed by all of the parties hereto or thereto. No waiver of
any provision of this Agreement shall be effective unless evidenced by a
written instrument signed by the waiving party. Each of the parties
hereto further acknowledges and agrees that, in entering into this
Agreement and entering into the other Related Agreements, it has not in
any way relied upon any oral or written agreements, statements, promises,
information, arrangements, understandings, representations or warranties,
express or implied, not specifically set forth in this Agreement or the
other Related Agreements.
Section 8.4. Governing Law. This Agreement shall be governed by,
and construed and enforced in accordance with, the laws of the State of
Delaware without regard to its conflict of laws rules.
Section 8.5. Consent to Jurisdiction. Each of the parties hereto
agrees that any suit, action or proceeding instituted against such party
under or in connection with this Agreement may be brought in a court of
competent jurisdiction in the State of Delaware. By execution hereof,
each party hereto irrevocably waives any objection to, and any right of
immunity on the grounds of, improper venue, the convenience of the forum,
the personal jurisdiction of such courts or the execution of judgments
resulting therefrom. Each party hereto hereby irrevocably accepts and
submits to the jurisdiction of such courts in any such action, suit or
proceeding.
Section 8.6. Waiver of Certain Damages. EACH OF THE PARTIES HERETO
TO THE FULLEST EXTENT PERMITTED BY LAW IRREVOCABLY WAIVES ANY RIGHTS THAT
IT MAY HAVE TO PUNITIVE, SPECIAL, EXEMPLARY OR CONSEQUENTIAL DAMAGES IN
RESPECT OF ANY LITIGATION BASED UPON, OR ARISING OUT OF, THIS AGREEMENT
OR ANY RELATED AGREEMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS OR ACTIONS OF ANY OF THEM RELATING THERETO.
Section 8.7. Section Headings. The headings of sections and
subsections are for reference only and shall not limit or control the
meaning thereof.
Section 8.8. Assigns. This Agreement and the other Related
Agreements shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, successors and permitted assigns.
Neither this Agreement nor any other Related Agreements nor the
obligations of any party hereunder or thereunder shall be assignable or
transferable by such party without the prior written consent of the other
parties hereto.
Section 8.9. No Implied Rights or Remedies. Except as otherwise
expressly provided herein, nothing herein expressed or implied is
intended or shall be construed to confer upon or to give any Person,
except the parties hereto, any rights or remedies under or by reason of
this Agreement.
Section 8.10. Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
Section 8.11. Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their
mutual intent, and no rule of strict construction will be applied against
any party.
Section 8.12. Severability. The invalidity or unenforceability of any
particular provision of this Agreement or any other Related Agreement
shall not affect the other provisions hereof or thereof, and this
Agreement shall be construed in all respects as if such invalid or
unenforceable provision was omitted.
Section 8.13. Waiver of Right to Jury Trial. EACH OF THE PARTIES
HERETO HEREBY WAIVES ITS RIGHTS TO A TRIAL BY JURY IN ANY LITIGATION IN
ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF, THIS
AGREEMENT OR ANY OF THE OTHER RELATED AGREEMENTS, OR THE VALIDITY,
INTERPRETATION OR ENFORCEMENT HEREOF OR THEREOF OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
Section 8.14. Remedies. The parties hereto will be entitled to
enforce their rights under this Agreement specifically (without posting a
bond or other security), to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights existing
in their favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of
this Agreement and that any party hereto may in its sole discretion apply
to any court of law or equity of competent jurisdiction for specific
performance and/or injunctive relief in order to enforce or prevent any
violation of the provisions of this Agreement.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties hereto have caused this Master Agreement for the Formation of a
Limited Liability Company to be duly executed and delivered as a sealed
instrument as of the date and year first above written.
BANKBOSTON CORPORATION
By: /s/ PETER J. MANNING
----------------------------
Name: Peter J. Manning
Title: Executive Vice President
BANKMONT FINANCIAL CORP.
By: /s/ PAUL V. REAGAN
----------------------------
Name: Paul V. Reagan
Title: General Counsel
HARRIS TRUST AND SAVINGS BANK
By: /s/ PAUL V. REAGAN
----------------------------
Name: Paul V. Reagan
Title: General Counsel
FIRST ANNAPOLIS CONSULTING, INC.
By: /s/ FREDERICK A. WHITE
----------------------------
Name: Frederick A. White
Title: President
Schedule 4A to
Master Agreement
CERTAIN REPRESENTATIONS
BKB hereby represents and warrants to each of the other parties hereto:
1. Organization. BKB is corporation duly organized, validly
existing and in good standing under the laws of the State of
Massachusetts.
2. Authority; Enforceability. BKB has the requisite power and
authority to enter into and carry out its obligations under this
Agreement. The execution, delivery and performance of this Agreement have
been duly authorized by all necessary action on the part of BKB. This
Agreement has been duly executed and delivered by BKB and constitutes the
legal, valid and binding obligation of BKB, enforceable against BKB in
accordance with its terms, except as enforcement thereof may be limited
by receivership, conservatorship, and supervisory powers of bank
regulatory authorities generally as well as bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or similar laws of
general applicability relating to or affecting creditors' rights or to
general equity principles (regardless of whether such matters are
considered in a proceeding in equity or at law) and the availability of
equitable remedies.
FA hereby represents and warrants to each of the other parties hereto:
1. Organization. FA is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland.
2. Authority; Enforceability. FA has the requisite power and
authority to enter into and carry out its obligations under this
Agreement. The execution, delivery and performance of this Agreement have
been duly authorized by all necessary action on the part of FA. This
Agreement has been duly executed and delivered by FA and constitutes the
legal, valid and binding obligation of FA, enforceable against FA in
accordance with its terms, except as enforcement thereof may be limited
by receivership, bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or similar laws of general applicability
relating to or affecting creditors' rights or to general equity
principles (regardless of whether such matters are considered in a
proceeding in equity or at law) and the availability of equitable
remedies.
Schedule 4B to
Master Agreement
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES OF RELATED AGREEMENTS
---------------------------------------------------------------------------
RELATED AGREEMENT EXCEPTED REPRESENTATION OR WARRANTY
---------------------------------------------------------------------------
----------------------------------------------------------------------------
Account Solicitation and Services Document not yet drafted at time of
Agreement signing
----------------------------------------------------------------------------
Bankmont Contribution Agreement Second
and third sentences of Section
4.2 (delivery and execution of
agreement); first sentence of
Section 4.4 (permits)
----------------------------------------------------------------------------
BKB Contribution Agreement Second
and third sentences of Section
4.2 (delivery and execution of
agreement); first sentence of
Section 4.5 (delivery of
Cardholder Agreements)
----------------------------------------------------------------------------
BKB Overdue Receivables Purchase Second and third sentences of Section
Agreement 4.2 (delivery and execution of
agreement); last sentence of Section
4.4 (sale of receivables)
----------------------------------------------------------------------------
BKB Purchase Agreement Second and
third sentences of Section 4.2
(delivery and execution of
agreement); last sentence of
Section 4.4 (sale of
receivables)
----------------------------------------------------------------------------
BKB Services Agreement Section 11.3(c) (authorization);
Section 11.3(d) (delivery)
----------------------------------------------------------------------------
BKB Trademark License Document not yet drafted at time of
signing
----------------------------------------------------------------------------
Capital Retention Agreement No exceptions
----------------------------------------------------------------------------
Certificate of Formation No representations or warranties in
this Related Agreement
----------------------------------------------------------------------------
FAMIS Contribution Second and third
sentences of Section 4.2
(delivery and execution of
agreement); Section 4.4
(governmental approvals); the
second sentence of Section 4.10
(delivery of contracts and
leases)
----------------------------------------------------------------------------
Harris Contribution Agreement Second
and third sentences of Section
4.2 (delivery and execution of
agreement); the last sentence of
4.4 (contribution of assets),
first sentence of Section 4.5
(delivery of Cardholder
Agreements)
----------------------------------------------------------------------------
Harris Credit Card Operations All warranties and representations
Agreement in this Related Agreement are
excepted (document not applicable at
time of signing)
----------------------------------------------------------------------------
Harris Overdue Receivables Purchase Second and third sentences of Section
Agreement 4.2 (delivery and execution of
agreement); last sentence of Section
4.4 (sale of receivables)
----------------------------------------------------------------------------
Harris Purchase Agreement Second and
third sentences of Section 4.2
(delivery and execution of
agreement); last sentence of
Section 4.4 (sale of
receivables)
----------------------------------------------------------------------------
Harris Services Agreement Section 4(a)(iii) (execution of
agreement)
----------------------------------------------------------------------------
Operating Agreement (LLC Agreement) This Schedule 4B not applicable to
this Related Agreement
----------------------------------------------------------------------------
Registration Rights Agreement This Schedule 4B not applicable to
this Related Agreement
----------------------------------------------------------------------------
Soderlund Employment Agreement This Schedule 4B not applicable to
this Related Agreement
----------------------------------------------------------------------------
Schedule 5.2(b) to
Master Agreement
BKB MATERIAL AGREEMENTS
None
FA MATERIAL AGREEMENTS
1. Material contracts, transactions and commitments entered into by
FAMIS in connection with the formation of, and for the benefit of, the
Company, and development of its business operations, including those
expressly referred to in this Agreement and in the Exhibits and Schedules
hereto (including Schedule 8.1).
2. On or prior to the Closing Date, FA will enter into agreements
with FAMIS pursuant to which FA will purchase substantially all of the
tangible personal property of FAMIS, including an automobile used by Mr.
Soderlund, at book value net of depreciation, and will enter into a lease
with FAMIS or the Company with respect to such property, on arms-length
terms.
BANKMONT MATERIAL AGREEMENTS
None
HARRIS MATERIAL AGREEMENTS
None
Schedule 6.2(d) to
Master Agreement
BKB THIRD PARTY CONSENTS
BKB will require consents from third parties to transfer the following
agreements:
(1) Fair, Isaac & Co. CrediTable Scorecard Agreement
(2) Fair, Isaac & Co. Behavioral Scoring Agreement
(3) Credit Data of New England Contract
(4) TransUnion Contract
(5) Axciom Contract
(6) Di-Mark Contract
(7) ALL Third-Party Agency Agreements for Pre- and Post-Charge-Offs
(8) U-$ave Agreement
(9) FDR Service Agreement
Schedule 6.3(d) to
Master Agreement
BANKMONT AND HARRIS THIRD PARTY CONSENTS
1. The non-governmental consents required by Harris and Bankmont
are those contained in Schedule 2.1(h) of the Contribution Agreement
between Harris and the Company.
2. The consent to assign that certain real estate lease on property
commonly known as 700 East Lake Cook Road, Buffalo Grove, IL (the
"Buffalo Grove Property"), as well as third party consents for assignment
of contractual rights for Harris credit card operations in connection
with the Buffalo Grove Property.
Schedule 6.4(d) to
Master Agreement
FA THIRD PARTY CONSENTS
- -------------------------------------=====================================
COMPANY DESCRIPTION
- -------------------------------------=====================================
Hewlett Packard Computer Equipment and Software
- -------------------------------------=====================================
Trans National Phone System
- -------------------------------------=====================================
BE Realty Limited Partnership Boston facilities
- -------------------------------------=====================================
American Trading Real Estate Delaware facilities
- -------------------------------------=====================================
Airport Square Management Maryland facilities
- -------------------------------------=====================================
First Security Service Corporation Facility Security
- -------------------------------------=====================================
Accent Interior Landscape Office Maintenance
- -------------------------------------=====================================
EBSCO Subscription Services Publications
- -------------------------------------=====================================
Town Coach Inc. Transportation
- -------------------------------------=====================================
World Com T-1 Line
- -------------------------------------=====================================
Platinum Technologies Data warehouse consultants
- -------------------------------------=====================================
Pitney Bowes Postage Services
- -------------------------------------=====================================
Xerox Note Payable Telecopiers
- -------------------------------------=====================================
AT&T Corporation Phone System
- -------------------------------------=====================================
Software Licenses
- -------------------------------------=====================================
[Dell Computer Warranties]
- -------------------------------------=====================================
[Leases for new furniture,
computers, etc.]
- -------------------------------------=====================================
Schedule 7.1(b) to
Master Agreement
BKB REQUIRED REGULATORY APPROVALS
(1) Approval from the Board of Governors of the Federal Reserve System
(or the Federal Reserve Bank of Boston acting under delegated
authority) of the BKB investments and the transaction contemplated
by the Master Agreement under Section 4(c)(8) of the Bank Holding
Company Act of 1956 and Regulation Y.
(2) Approval from the Office of the Comptroller of the Currency ("OCC")
of BKB's direct ownership of the Company and indirect ownership of
CEBA Bank under the Change in Bank Control Act, in the event the
direct ownership by BKB of the Company and thereby indirect
ownership of CEBA Bank is not included and approved in the
application of CEBA Bank to the OCC to charter a national banking
association as a limited purpose "credit card bank" under the
provisions of the Competitive Equality Banking Act.
BANKMONT REQUIRED REGULATORY APPROVALS
(1) Approval from the Board of Governors of the Federal Reserve System
(or the Federal Reserve Bank of Chicago acting under delegated
authority) of the Bankmont investments and the transaction
contemplated by the Master Agreement under Section 4(c)(8) of the
Bank Holding Company Act of 1956 and Regulation Y (permissible
non-banking activities) and Regulation H, provided that any joint
venture commitments be reasonably acceptable to Bankmont.
(2) If direct ownership by Bankmont of the Company and thereby indirect
ownership of CEBA Bank is not included and approved as a part of
the application of CEBA Bank, to the Office of the Comptroller of
the Currency ("OCC") to charter a national banking association as a
limited purpose "credit card bank" under the provisions of the
Competitive Equality Banking Act, approval by the OCC of Bankmont's
direct ownership of the Company and indirect ownership of CEBA
Bank. under the Change in Bank Control Act.
(3) Confirmation by the Federal Reserve Bank of Chicago that any
Bankmont representatives serving on the Board of Directors of CEBA
Bank. if any, will not violate Regulation L as promulgated by the
Board of Governors of the Federal Reserve System.
(4) Confirmation by the Illinois Commissioner of Banks and Real Estate
that no approvals or notices are required in connection with the
transactions contemplated by the Master Agreement.
(5) Approval from the Superintendent of Financial Institutions of
Canada for Bank of Montreal to acquire a substantial interest in a
permitted entity pursuant to the Bank Act [Canada].
FA REQUIRED REGULATORY APPROVALS
(1) Approval of the Office of the Comptroller of the Currency ("OCC")
to commence business as a federally-chartered credit card bank
chartered in the State of Delaware for the CEBA Bank.
(2) Approval of a request for subscription to stock of the Federal
Reserve Bank of Philadelphia for the CEBA Bank.
(3) Approval of an application for federal deposit insurance with the
Federal Deposit Insurance Corporation ("FDIC") for the CEBA Bank.
(4) Approval of Delaware leased space by the Delaware Historical
Commission in connection with FDIC and OCC applications.
(5) If required, approval by the Delaware Commissioner of Banks as to
the formation and registration of the Company as a bank holding
company under applicable Delaware law.
HARRIS REQUIRED REGULATORY APPROVALS
(1) Approval by the Board of Governors of the Federal Reserve System
(or the Federal Reserve Bank of Chicago acting under delegated
authority) of the Harris contribution in exchange for Membership
Interests in the Company, and the transactions contemplated by the
Master Agreement including with respect to (a) Section 4(c)(8) of
the Bank Holding Company Act of 1956 and Federal Reserve Board
Regulation Y (permissible non-banking activities), provided that
any joint venture commitments be reasonably acceptable to Harris,
(b) Regulation H (if applicable) and (c) 12 U.S.C. Section 335 as
to member bank ownership interests in companies.
(2) If direct ownership by Harris of the Company and thereby indirect
ownership of CEBA Bank is not included and approved as a part of
the application of CEBA Bank, to the Office of the Comptroller of
the Currency ("OCC") to charter a national banking association as a
limited purpose "credit card bank" under the provisions of the
Competitive Equality Banking Act, approval by the OCC of Harris'
direct ownership of the Company and indirect ownership of CEBA Bank
under the Change in Bank Control Act.
(3) Confirmation by the Federal Reserve Bank of Chicago that any Harris
representatives serving on the Board of Directors of CEBA Bank, if
any, will not violate Regulation L as promulgated by the Board of
Governors of the Federal Reserve System.
(4) Approval or confirmation by the Illinois Commissioner of Banks and
Real Estate that no approvals or notices are required in connection
with the transactions contemplated by the Master Agreement or the
ownership of the Membership Interests in the Company or indirect
ownership of CEBA Bank, including pursuant to Section 5(11) of the
Illinois Banking Act.
Schedule 8.1 to
Master Agreement
CERTAIN FAMIS EXPENSES
Before closing of the transactions contemplated by the Master Agreement,
FAMIS will incur the following expenses, not in the ordinary course of
business, for the benefit of the Company, including but not limited to:
Recruiting Expenses incurred by FAMIS or FA, necessary for the formation
of the Company to hire new employees into FAMIS who are anticipated to
become employees of the Company. These job positions include (by way of
example only) and are not limited to chief financial officer, financial
staff, human resources, information technology, marketing, analysis,
operations and administration. These expenses may include the cost of a
Human Resources consultant, agency fees, and advertisements.
Salaries and other direct costs, including benefits, of such new
employees hired for the benefit of the Company.
Fees and expense reimbursements incurred under the agreement between
FAMIS and Platinum Technology dated June 30, 1997 for the development of
the Company's credit card data warehouse.
Facility expenses including but not limited to, rent expense, security
deposits, telephone, utilities, security monitoring costs, maintenance,
and janitorial services, incurred with respect to the facilities obtained
for the benefit of the Company located at 900 Elkridge Landing Road,
Suite 300, Linthicum, MD, 133 Federal Street, 2nd floor, Boston, MA and
220 Continental Drive, Suite 220, Newark, DE, 19713.
Furniture and other tangible personal property (other than computers and
related equipment) acquired for the benefit of the Company, including but
not limited to, copiers, fax machines, modular furniture and
installation, conference room furniture and office furniture.
The cost of additional computer equipment and services, such as
installation and programming, acquired for the benefit of the Company.
These costs may include personal computers, printers and software
licensing.
Costs incurred to increase the computer data storage and processing
capacity necessary to include the Harris portfolio as well as additional
growth.
Any cost related to the conversion of Accounts to be acquired pursuant to
this Agreement, including but not limited to, additional staff for the
Company, third party consulting fees and travel.
The start-up costs incurred to develop employee benefit plans for
employees of the Company, including but not limited to profit sharing,
medical and dental.
CONTRIBUTION AGREEMENT
BETWEEN
BANKBOSTON (NH),
NATIONAL ASSOCIATION
AND
PARTNERS FIRST HOLDINGS, LLC
TABLE OF CONTENTS
Page
Parties.............................................................1
Recitals............................................................1
ARTICLE 1
DEFINITIONS.........................................................1
Section 1.1.Certain Defined Terms.......................1
ARTICLE 2
CONTRIBUTION OF ASSETS..............................................3
Section 2.1.Contributed Assets..........................3
Section 2.2.Excluded Assets.............................5
ARTICLE 3
ASSUMPTION OF OBLIGATIONS...........................................6
Section 3.1.Assumption of Obligations...................6
Section 3.2.Consideration...............................6
Section 3.3.Post-Closing Adjustments....................6
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER............................7
Section 4.1.Organization................................7
Section 4.2.Authority; Enforceability...................7
Section 4.3.No Conflicts................................7
Section 4.4.Ownership of Assets.........................7
Section 4.5.Cardholder and Related Agreements...........8
Section 4.6.Litigation..................................8
Section 4.7.Compliance with Applicable Law..............8
Section 4.8.Licenses to Carry on Credit Card Business...8
Section 4.9.Account Records.............................8
Section 4.10.Brokers....................................8
Section 4.11.Permits, Etc...............................9
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................9
Section 5.1.Organization................................9
Section 5.2.Authority; Enforceability...................9
Section 5.3.No Conflicts................................9
Section 5.4.Permits, Etc................................9
Section 5.5.Litigation.................................10
Section 5.6.Finder or Brokers..........................10
Section 5.7.Membership Interests.......................10
ARTICLE 6
CERTAIN TRANSITIONAL MATTERS.......................................10
Section 6.1.Transfers Requiring Consent................10
Section 6.2.Business Records...........................10
Section 6.3.Further Assistance.........................11
Section 6.4.Communications with Cardholders............11
Section 6.5.Licensing Arrangements.....................11
ARTICLE 7
INDEMNIFICATION....................................................11
Section 7.1.Indemnity by the Seller....................11
Section 7.2.Indemnity by the Company...................12
Section 7.3.Claims.....................................12
Section 7.4.Time Limits................................13
Section 7.5.Exclusive Remedy; Damage Limitations.......13
ARTICLE 8
GENERAL............................................................14
Section 8.1.Investment Representations.................14
Section 8.2.Notices....................................14
Section 8.3.Entire Agreement...........................15
Section 8.4.Governing Law..............................15
Section 8.5.Consent to Jurisdiction....................15
Section 8.6.Waiver of Certain Damages..................15
Section 8.7.Sections and Sub-Section Headings..........15
Section 8.8.Assigns....................................15
Section 8.9.No Implied Rights or Remedies..............15
Section 8.10.Counterparts..............................16
Section 8.11.Construction..............................16
Section 8.12.Severability..............................16
Section 8.13.Survival..................................16
Section 8.14.Waiver of Right to Jury Trial.............16
Section 8.15.The BKB Value-Limited Credit Card Business16
Section 8.16.Disputes..................................16
Section 8.17.Remedies..................................16
Signature..........................................................16
SCHEDULES
Schedule 2.1(a) -- Accounts
Schedule 2.1(f) -- Assigned Contracts
Schedule 4.6 -- Litigation
EXHIBITS
Exhibit A -- Initial BKB Value-Limited Credit Card Business Accounts
Exhibit B -- Investment Representations
Exhibit C -- Form of Confidential Purchaser Questionnaire
Exhibit D-- Tax Basis and Value of Contributed Assets
CONTRIBUTION AGREEMENT
This is a Contribution Agreement, dated as of January 29, 1998 (as
in effect from time to time, this "Agreement"), between BankBoston (NH),
National Association, a national banking association (the "Seller"), and
(b) Partners First Holdings, LLC, a Delaware limited liability company
(the "Company").
Whereas, pursuant to a certain Master Agreement for the Formation
of a Limited Liability Company, dated as of September 2, 1997,
among
BankBoston Corporation,
Bankmont Financial Corp., Harris Trust and Savings Bank and First
Annapolis Consulting, Inc. (as amended and in effect from time to time,
the "Master Agreement"), it is contemplated that the Seller will
contribute to the Company the intangible assets associated with the
Credit Card Business (as hereinafter defined) of the Seller other than
the BKB Relationship Credit Card Business, the BKB International Credit
Card Business and the BKB Value-Limited Credit Card Business, subject to
certain terms and conditions set forth more fully therein; and
Whereas, the Seller wishes to contribute such assets to the
Company, and the Company wishes to acquire such assets from the Seller
and assume certain related liabilities, in consideration for $50 million
in stated value of Series A Units and a nineteen percent (19%)
share of all Common Units (collectively, the "Membership Interests").
Now, Therefore, in consideration of the foregoing and the mutual
covenants set forth below, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree, intending to be legally bound, as follows:
ARTICLE 1
DEFINITIONS
Section 1.1.Certain Defined Terms. Capitalized terms used herein
without definition shall have the meanings assigned to such terms in the
Operating Agreement. Additionally, the following capitalized terms shall
have the following meanings:
"Accounts" has the meaning set forth in Section 2.1(a).
"Additional Agreements" means the contracts and agreements listed
on Schedule 2.1(f) hereto.
"Agreement" has the meaning set forth in the preamble.
"Assignment and Assumption" means the Assignment and Assumption
Agreement, dated as of the date hereof, by and between Seller and the
Company.
"Assistance Agreement" means the Assistance Agreement, dated as of
the date hereof, by and between the Company and Seller.
"Assumed Obligations" has the meaning set forth in Section 3.1.
"BIN" means VISA(R) Bank Identification Number.
"BKB Purchase Agreements" means (i) the Receivables Purchase and
Sale Agreement and (ii) the Overdue Receivables Purchase and Sale
Agreement, each dated as of the date hereof by and between the Seller and
Receivables LLC.
"Cardholder" means a holder of a Credit Card.
"Cardholder Agreements" means the agreements between the
Cardholders or obligors with respect to a Credit Card and the Seller,
including, without limitation, any agreements relating to credit
enhancements provided in connection with such Credit Card, as the same
has been amended or otherwise modified and in effect from time to time.
"Claim" has the meaning set forth in Section 7.3(a).
"Closing Date" means the date on which the transactions described
in this Agreement are consummated, except that for purposes of
determining Accounts, it shall mean the opening of business on the day on
which the transactions described in this Agreement are consummated.
"Company" has the meaning set forth in the preamble hereto.
"Company Indemnitees" has the meaning set forth in Section 7.1.
"Company Indemnity Representations" means the representations and
warranties of Company contained in Sections 5.4 and 5.5 of this
Agreement.
"Contributed Assets" has the meaning set forth in Section 2.1.
"Credit Card" means a MasterCard(R) or Visa(R) card issued by
Seller and associated solely with the Transferred Credit Card Business.
"Designated Agreements" means (i) the Cardholder Agreements and all
rights and privileges under the Cardholder Agreements, including, without
limitation, all rights to create, enforce and collect Receivables under
the Cardholder Agreements, all rights to enforce and collect amounts
owing under the Cardholder Agreements and all rights to amend and modify
the Cardholder Agreements, (ii) the Additional Agreements and all rights
and privileges under the Additional Agreements, (iii) all records and
information of Seller necessary for Seller to exercise its rights and
privileges under the Cardholder Agreements and the Additional Agreements
and (iv) the BIN numbers 432689 and 432690 and ICA numbers 544911 and
544912.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Governmental Authority" means any federal, national, state,
municipal, local, territorial or other governmental department,
commission, board, bureau, agency, regulatory authority, instrumentality,
judicial or administrative body, domestic or foreign, and Visa(R) and
MasterCard(R).
"ICA" means the MasterCard(R) Interbank Card Account.
"Indemnified Party" has the meaning set forth in Section 7.3(a).
"Indemnifying Party" has the meaning set forth in Section 7.3(a).
"Losses" has the meaning set forth in Section 7.1.
"Master Agreement" has the meaning set forth in the recitals
hereto.
"MasterCard(R)" means MasterCard International Incorporated.
"Membership Interests" has the meaning set forth in the
recitals hereto.
"Operating Agreement" means the Limited Liability Company Agreement
dated as of the date hereof by and among the founding members of the
Company, as originally
executed and delivered.
"Qualified Transferee" has the meaning set forth in Section
6.5.
"Receivables" means any and all amounts payable by the Cardholders
(whether billed or unbilled, posted or not) in connection with the
Accounts, including, without limitation, all principal, outstanding
purchases, cash advances, interest (including accrued but unbilled
interest), annual fees, finance and service charges and other charges and
fees.
"Receivables Purchase Agreement" means the Receivables Purchase
Agreement, dated as of the date hereof, by and between Seller and
Receivables LLC relating to the purchase and sale of Receivables after
the date hereof.
"Retained Liabilities" has the meaning set forth in Section 3.1.
"Seller" has the meaning set forth in the preamble hereto.
"Seller Indemnitees" has the meaning set forth in Section 7.2.
"Seller Indemnity Representations" means the representations and
warranties of Seller contained in Sections 4.5 (except the first sentence
thereof), 4.6, 4.7, 4.8, 4.9 and 4.11 of this Agreement.
"Subject Losses" has the meaning set forth in Section 7.5.
"Third Party Claim" has the meaning set forth in Section 7.3(a).
"Transferred Credit Card Business" means the Credit Card Business
of the Seller (including, without limitation, that formerly conducted by
Bank of Boston Connecticut, which has been transferred to the Seller)
other than the BKB Relationship Credit Card Business, the BKB
International Credit Card Business and the BKB Value-Limited Credit Card
Business.
"Unassigned Contracts" has the meaning set forth in Section 6.1(c).
"Visa(R)" means Visa U.S.A., Inc.
ARTICLE 2
CONTRIBUTION OF ASSETS
Section 2.1.Contributed Assets. Subject to the terms and conditions
set forth in this Agreement, the Seller hereby contributes, assigns,
transfers and delivers to the Company, and the Company hereby accepts,
assumes, acquires and takes assignment and delivery of, all of the
Seller's right, title and interest in, to and under the following assets
(other than the Excluded Assets) as of the Closing Date (hereinafter
referred to collectively as the "Contributed Assets"):
(a) All of the credit card accounts associated with the
Transferred Credit Card Business, including, without limitation,
dormant accounts, in-active accounts, closed accounts, accounts
without outstanding balances, accounts classified as "substandard,"
"doubtful," or "loss" or treated as "other loans especially
mentioned" in the most recent report of examination prepared by any
Federal or State supervisory agency, accounts in nonaccrual status,
accounts on which principal or interest payments are more than 30
days past due, accounts whose terms have been renegotiated or
compromised due to the deteriorating financial condition of the
Cardholder and accounts which are statused by Seller on the Closing
Date as bankrupt, deceased, fraud, lost or stolen or charged off
(such status to be determined in a manner consistent with Seller's
customary practice consistently applied), and the credit card
accounts identified in Schedule<0- 32>2.1(a), which is attached
hereto and/or provided herewith and made a part hereof (which may,
in the Seller's sole discretion, be in the form of a computer file
or magnetic tape, which contains sufficient information to identify
each account and respective Cardholder including name, address,
social security number, account number, status codes, account
balance and such other information as is mutually agreed upon by
Purchaser and Seller, as identification of the respective
Cardholders) (the "Accounts");
(b) All unprocessed applications and preapproved offers
outstanding on the Closing Date for Credit Cards other than those
which if processed and accepted would result in an account
associated with the BKB Relationship Credit Card Business or the
BKB International Credit Card Business or with a Cardholder located
in Massachusetts, Rhode Island, Connecticut or New Hampshire.
(c) All other rights in and to the business relationship
between the Seller and the Cardholders in their capacities as such,
including the right to offer ongoing Credit Card services to
Cardholders and the right to offer and provide other products and
services on a non-exclusive basis to Cardholders;
(d) The right to direct the Seller to transfer all of its
rights under the Designated Agreement to any other party at any
time and from time to time (without any further consideration being
payable by the Company) provided that (i) the designee is legally
capable of performing the obligations of the Seller thereunder,
(ii) such designee expressly assumes the obligations of the Seller
under the Designated Agreements and (iii) such designee expressly
acknowl edges that its rights thereunder are subject to, and that
it is bound by, the BKB Purchase Agreements, the Assignment and
Assumption and the Receivables Purchase Agreement;
(e) Any and all books and records under the Seller's control
relating solely to the Cardholders and the Accounts, including,
without limitation, all Account applications, statements, records
and correspondence and all customer lists and other information
under the Seller's control relating solely to such Cardholders and
such Accounts, whether in paper, microfilm, microfiche or magnetic
tape form;
(f) The rights of Seller under the contracts and agreements
listed on Schedule 2.1(h) hereof, to the extent the same are
assignable without breach of same or Seller has obtained any
necessary consents to such assignment or as otherwise may be
transferred to the Company; and
(g) The right to assign, license or designate to others any
or all of the foregoing.
Section 2.2.Excluded Assets. Anything contained in the foregoing to
the contrary notwithstanding, the Seller is not transferring to the
Company and the Company is not acquiring pursuant to this Agreement, and
the term "Contributed Assets" shall not in any event include, any of the
following (the "Excluded Assets"):
(a) Any cash;
(b) Any fees, charges or other amounts payable by any
Cardholders and not arising in connection with the Accounts or the
Transferred Credit Card
Business;
(c) Any of the Seller's trademarks, service marks or trade
names, or any stationery, office supplies, business forms, manuals
or similar property bearing the Seller's trademarks, trade names,
service marks, logos or similar corporate identification, unless
such trademarks, trade names, service marks, logos or similar
corporate identification have been redacted therefrom;
(d) Any assets related solely to Retained Liabilities;
(e) Any income tax refunds or claims therefor which the
Seller may be entitled to receive from any federal, state or local
authorities;
(f) Any assets of the Seller not used solely in the
Transferred Credit Card Business (including any assets used in a
Permitted Business) or not separable from the Seller's other
businesses;
(g) Any rights to any security deposits or other amounts
deposited with any state or other jurisdiction or regulatory
authority in connection with the qualification, certification,
licensing or permitting of the Seller in connection with the
conduct of the Seller's business, including, without limitation,
the Transferred Credit Card Business;
(h) Any consideration received by the Seller (or any
of their
Affiliates) pursuant to this Agreement;
(i) Any rights of the Seller under this Agreement or
any other
Related Agreement;
(j) Any rights of the Seller under the Cardholder Agreements
to indemnification or reimbursement and not relating to a liability
which the Company has assumed, or any other claims or rights of the
Seller under such agreements, in each case relating to the conduct
of the Transferred Credit Card Business prior to the Closing Date;
and
(k) Any rights or assets transferred and/or assigned by
Seller pursuant to the BKB Purchase Agreements, the Assignment and
Assumption or the Receivables Purchase Agreement; and
(l) The Designated Agreements (subject to the Company's right
to cause the same to be transferred as herein set forth).
ARTICLE 3
ASSUMPTION OF OBLIGATIONS
Section 3.1.Assumption of Obligations. The Company hereby assumes,
and agrees to pay, perform, fulfill and discharge, all of the Seller's
obligations with respect to the Contributed Assets from and after the
Closing Date, including, without limitation, the following obligations of
the Seller (collectively, the "Assumed Obligations"):
(a) All of the Seller's obligations under or in connection
with the Credit Cards and the Accounts (including, without
limitation, any related credit enhancements transferred to the
Company or its designee and the contracts assigned to Company or
its designee hereby and listed on Schedule 2.1(h) hereto)
arising from and after the Closing Date; and
(b) All fees, normal operating assessments and other charges
of Visa(R) and MasterCard(R) relating solely to the Transferred
Credit Card Business and relating to the period after the Closing
Date, except for those charges (i) arising from the Seller's
violation of any by-laws, rules or operating regulations of
MasterCard(R) and/or Visa(R) or other directive from or agreement
with MasterCard(R) and/or Visa(R) which are binding upon the
Seller, or (ii) relating to any special assessments with
respect to periods up to and including the Closing Date.
All obligations and liabilities of Seller not assumed by the Company
pursuant to this Section 3.1 or assumed by separate written
agreement signed by the Company (the "Retained Liabilities") are retained
by Seller and the Company shall not be liable therefor.
Section 3.2. Consideration. In consideration of the transfer of the
Contributed Assets by the Seller to the Company hereunder, the Company
agrees on the Closing Date to assume the Assumed Obligations and to
transfer to the Seller or to a Permitted Transferee thereof designated by
the Seller, the Membership Interests. The Seller's tax basis in the
Contributed Assets and the value of the Contributed Assets is set forth
on Exhibit D hereto.
Section 3.3. Post-Closing Adjustments. It is the intent of the
parties hereto that the Seller transfer to the Company all Accounts
associated with the Transferred Credit Card Business and, accordingly, if
it comes to the attention of either party that any Account was improperly
included on or excluded from Schedule 2.1(a), the parties shall execute a
mutually acceptable agreement appropriately amending Schedule 2.1(a) and
shall take such other actions as may be appropriate in order to place the
parties in the same position as they would have been in if Schedule
2.1(a) as originally delivered had been modified in accordance with such
amendment.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Company as
follows:
Section 4.1. Organization. The Seller is a national banking
association duly organized under the laws of the United States and is
authorized to conduct general banking business under such laws.
Section 4.2. Authority; Enforceability. The Seller has all requisite
power and authority (i) to enter into and carry out its obligations
under this Agreement, (ii) to hold the Contributed Assets being
contributed to the Company by the Seller and (iii) to contribute, assign
and transfer the Contributed Assets being contributed to the Company by
the Seller. The execution, delivery and performance of this Agreement
have been duly authorized by all necessary action on the part of the
Seller. This Agreement has been duly executed and delivered and
constitutes the legal, valid and binding obligation of the Seller,
enforceable against the Seller in accordance with its terms, except as
enforcement thereof may be limited by receivership, conservatorship and
supervisory powers of bank regulatory agencies generally, as well as
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
or similar laws of general applicability relating to or affecting
creditors' rights or to general equity principles (regardless of whether
such matters are considered in a proceeding in equity or at law) and the
availability of equitable remedies.
Section 4.3. No Conflicts. The execution, delivery and performance
by the Seller of this Agreement does not violate (a) Seller's Articles of
Association or By-Laws, as applicable, (b) any material agreement or
instrument to which the Seller is a party or by which the Seller is bound
or which affects the Contributed Assets, or (c) any law, rule or
regulation applicable to the Seller or which affects the Contributed
Assets.
Section 4.4. Ownership of Assets. Seller is the sole owner of all
right, title and interest in, to and under all of the Contributed Assets
being contributed by Seller to the Company under this Agreement. The
Seller has the right, power and authority to contribute and transfer the
Contributed Assets being contributed by it to the Company, and the
Contributed Assets are not subject to any assignment, lien, charge,
encumbrance or security interest, except that such assets may be
encumbered by the Cardholder Agreements and to other rights of
Cardholders and other obligors pursuant to 12 C.F.R. Section 226.12(c) and
section 226.13. The Seller hereby contributes the Contributed Assets being
contributed by it to the Company free and clear of all assignments,
liens, charges, encumbrances and other security interests and of all
claims or rights of third parties except as such assets may be encumbered
by the Cardholder Agreements and to other rights of Cardholders and other
obligors pursuant to 12 C.F.R. Section 226.12(c) and Section 226.13.
Section 4.5. Cardholder and Related Agreements. Seller has
heretofore delivered (or afforded the Company the opportunity to inspect)
representative forms of the Cardholder Agreements (but not all variances
of such Cardholder Agreements setting forth different rates or other
economic terms) and representative copies of the forms of written
applications for Credit Cards currently in use and copies of all
contracts listed on Schedule 2.1(h) hereof. The Cardholder
Agreements are legally binding agreements, enforceable in all material
respects against the Seller and, to the best of Seller's knowledge,
against the Cardholders or other obligors party thereto in accordance
with their respective terms, except as enforcement thereof may be limited
by bankruptcy, fraudulent transfer, reorganization, moratorium or similar
laws of general applicability relating to or affecting creditors' rights
or to general equity principles (regardless of whether such matters are
considered in a proceeding in equity or at law) and the availability of
equitable remedies. The Seller is in compliance with the Cardholder
Agreements except where the failure to so comply would not have a
material adverse effect on the Contributed Assets. The Cardholder
Agreements and contract obligations are in full force and effect, the
Seller is not in default in any material respect thereunder and to the
best of Seller's knowledge no other party thereto is in default
thereunder.
Section 4.6. Litigation. Except for the litigation described on
Schedule 4.6, which is attached hereto and made a part hereof,
there are no actions, suits or proceedings pending or, to the knowledge
of the Seller, threatened against or affecting the Seller which would
reasonably be expected to cause any material adverse effect on the
Contributed Assets. There is no action, suit or proceeding pending
against the Seller which would prevent the Seller from consummating the
sale of the Contributed Assets to the Company hereunder.
Section 4.7. Compliance with Applicable Law. The Seller has complied
in all material respects with applicable federal and state laws, rules
and regulations, and judicial, administrative and arbitrator's orders
relating thereto, which are applicable to the Transferred Credit Card
Business and the Contributed Assets, including, without limitation, the
federal Truth-in-Lending Act, Equal Credit Opportunity Act, Fair Credit
Reporting Act, Fair Debt Collection Practices Act and Regulations B and Z
promulgated by the Board of Governors of the Federal Reserve System.
Section 4.8. Licenses to Carry on Credit Card Business. The Seller
is licensed to participate in the programs offered by Visa(R) and by
MasterCard(R) to the full extent necessary to satisfy the terms of this
Agreement and the Cardholder Agreements.
Section 4.9. Account Records. The Account records are accurate and
complete in all material respects, in each case, as of the date when each
such record was made.
Section 4.10. Brokers. Neither the Seller nor any of its Affiliates
has agreed to pay any fee or commission to any agent, broker, finder or
other person for or on account of services rendered as a broker or finder
in connection with this Agreement or the contribution of the Contributed
Assets hereunder.
Section 4.1. Permits, Etc. The Seller has obtained or as of the
Closing Date will have obtained all licenses, permits and approvals of
all Governmental Authorities necessary for the Seller to contribute to
the Company the Contributed Assets to be contributed by the Seller to the
Company and to consummate the other transactions contemplated hereby. The
Seller has not received notice from any Governmental Authority indicating
that it would oppose or not grant or issue its consent or approval, if
required, with respect to the contribution of the Contributed Assets
hereunder or any of the other transactions contemplated hereby.
The Seller makes no other representations or warranties, expressed
or implied with respect to the subject matter hereof, other than as
specifically set forth in this Article 4.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Seller as
follows:
Section 5.1. Organization. The Company is a limited liability
company duly organized, validly existing and in good standing under the
laws of the State of Delaware.
Section 5.2. Authority; Enforceability. The Company has the
requisite power and authority (i) to enter into and carry out its
obligations under this Agreement, (ii) to receive and hold the
Contributed Assets and (iii) to assume the Assumed Obligations. The
execution, delivery and performance of this Agreement have been duly
authorized by all necessary action on the part of the Company. This
Agreement has been duly executed and delivered by the Company and
constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforcement thereof may be limited by receivership, bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or similar
laws of general applicability relating to or affecting creditors' rights
or to general equity principles (regardless of whether such matters are
considered in a proceeding in equity or at law) and the availability of
equitable remedies.
Section 5.3. No Conflicts. The execution, delivery and performance
of this Agreement by the Company does not violate (a) the
Certificate of Formation or the Operating Agreement, (b) any
material agreement or instrument to which the Company is a party or by
which the Company is bound, or (c) any law, rule or regulation
applicable to the Company.
Section 5.4. Permits, Etc. The Company has obtained all licenses,
permits and approvals of all Governmental Authorities necessary for the
Company to operate the businesses contemplated to be operated by it
pursuant to the Operating Agreement and to consummate the transactions
contemplated hereby.
Section 5.5. Litigation. There is no action, suit or proceeding
pending or, to the knowledge of the Company, threatened against the
Company which challenges the validity, propriety or enforceability of, or
seeks to enjoin the performance of, the transactions contemplated by this
Agreement.
Section 5.6. Finder or Brokers. Neither the Company nor any
Affiliate of the Company has agreed to pay any fee or commission to any
agent, broker, finder or other person for or on account of services
rendered as a broker or finder in connection with this Agreement or the
transactions contemplated hereby.
Section 5.7. Membership Interests. The Membership Interests are duly
authorized and when issued pursuant to the terms hereof will be fully
paid and nonassessable, and upon issuance to the Seller or its designees
will be owned by the Seller or its designees free and clear of any
claims, liens, encumbrances or security interests, other than the
restrictions contained in the Operating Agreement.
ARTICLE 6
CERTAIN TRANSITIONAL MATTERS
Section 6.1. Transfers Requiring Consent. To the extent that any
asset is not transferable or assignable without the consent of any third
party or the transfer or assignment of which would result in a violation
of any law or order (a "Non-Transferable Asset"), this Agreement shall
not constitute an assignment or an attempted assignment thereof. Seller
shall use its reasonable efforts to obtain the required consent of any
such third party to the transfer or assignment of any such
Non-Transferable Asset to the Company. If any such consent shall not be
obtained, Seller shall cooperate with the Company in any reasonable
arrangement (including reimbursement of monies paid by the Company on
account of any such arrangement) designed to provide the Company with the
benefits intended to be assigned to it under the relevant
Non-Transferable Asset.
Section 6.2. Business Records. The Company acknowledges that
certain business records of the Seller relating to the Seller's
Transferred Credit Card Business prior to the Closing Date will be
conveyed to the Company as part of the Contributed Assets, and that the
Seller may from time to time require access to such records, and the
Company agrees that upon reasonable prior notice from the Seller, it
will, during normal business hours, either provide the Seller with access
to or, at the Company's option, copies of such records for such purposes.
The Seller agrees to hold any confidential information so provided in
confidence. The Company agrees that it will not destroy any such business
records during the three (3) year period after the date hereof, and it
will not within the two (2) year period after such date destroy any
business records prepared prior to the date hereof without first
notifying the Seller and affording them the opportunity to remove or copy
them.
Section 6.3. Further Assistance. On and after the Closing Date
Seller shall (i) execute, acknowledge and deliver all such
acknowledgments and other instruments and take such further action as may
be necessary and appropriate to effectively vest in the Company the full
legal and equitable title to the Contributed Assets, and (ii) assist the
Company in the orderly transition of the Contributed Assets to the
Company, and (iii) deliver such other information as the Company may
reasonably request. In the event Seller shall receive any payments on the
Contributed Assets attributable to the period after the Closing Date, the
Seller shall hold them in trust for the Company, promptly endorse and
transfer such payments to the Company and take all actions to vest such
monies in Company.
Section 6.4. Communications with Cardholders. Not later than sixty
(60) days after the initial re-designation of the Designated Agreements
in accordance with the terms of Section 6.5 of this Agreement, the
Company or its designee shall have notified Cardholders of the
transactions contemplated by this Agreement by sending them a joint
communication from the Seller and the Company. Such communication shall
be at the Company's expense. Such communication shall be in a form
consented to by both parties prior to mailing, but neither party shall
unreasonably withhold consent. The parties agree that such communication
shall include a telephone number so that Cardholders may contact the
Company or its designee and will notify Cardholders that they will not be
permitted to use drafts (including, without limitation, cash advance
checks and balance transfer forms or checks) previously sent them by the
Seller. The Seller will honor such drafts for such period of time
specified by the Company, which shall not be more than one hundred eighty
(180) days after such re-designation and the Company shall promptly
reimburse the Seller for each such draft honored by it.
Section 6.5. The Designated Agreements. The Seller and the Company
acknowledge that all Receivables and net Interchange fees related thereto
generated by the Seller under the Designated Agreements are to be sold by
the Seller to Receivables LLC, a wholly owned subsidiary of the Company,
pursuant to the BKB Purchase Agreements, the Assignment and Assumption
and the Receivables Purchase Agreement. The Seller further acknowledges
that its retention of the Designated Agreements is subject to the right
of the Company to direct the Seller and each and every subsequent
transferee thereof to transfer the Designated Agreements to whomsoever
the Company may elect provided that such transferee is legally capable of
performing the obligations of the Seller and each and every transferee
thereof under the Designated Agreements, expressly assumes the
obligations of the Seller and each and every transferee thereof under the
Designated Agreements and expressly acknowledges that it is taking its
rights subject to and will be bound by the terms of the BKB Purchase
Agreements, the Assignment and Assumption and the Receivables Purchase
Agreement (to the extent such agreements are then in effect) (each being
a "Qualified Transferee"). Upon the election of the Company to terminate
the Seller's obligations under the Assistance Agreement, the Company
shall direct the Seller to, and upon such direction the Seller shall,
transfer (without payment of any further consideration) the Designated
Agreements to such Qualified Transferee. The Seller agrees to execute
such instruments of assignment and transfer as may be reasonably required
by the Company in order to effectuate the transfer of the Designated
Agreements to a Qualified Transferee. It is expressly acknowledged and
agreed that the right of the Company to direct the Designated Agreements
to be transferred is subject only to the conditions explicitly herein
stated, and is otherwise absolute and unconditional and that the grant of
such right to the Company is a material inducement to the Company in
entering into this Agreement.
ARTICLE 7
INDEMNIFICATION
Section 7.1. Indemnity by the Seller. The Seller agrees to
indemnify and hold the Company and its affiliates, employees, officers,
directors, controlling persons, successors and assigns (the "Company
Indemnitees"), harmless from and with respect to any and all claims,
liabilities, losses, damages, costs and expenses, including without
limitation the reasonable fees and disbursements of counsel and expert
witnesses, net of insurance proceeds (collectively, "Losses"), related to
or arising directly or indirectly out of (a) any inaccuracies in any
representation or warranty made by the Seller in or pursuant to this
Agreement, but only to the extent that Losses relating to or arising
directly or indirectly out of such inaccuracies when taken together with
Losses (as that term is defined in the BKB Purchase Agreements) for which
the Seller is obligated to indemnify Purchaser Indemnitees (as defined in
the BKB Purchase Agreements) pursuant to Section 7.1(a) each of the BKB
Purchase Agreements, without duplication, exceed $100,000 in the
aggregate, (b) any failure or breach by the Seller of any covenant,
obligation, or undertaking made by the Seller in this Agreement, (c) the
operation of the Contributed Assets by the Seller prior to the date
hereof, (d) the Retained Liabilities, or (e) any out-of-balance condition
in the Cardholder records existing on the Closing Date, whether or not
then known, in each case, except to the extent that such Losses were
caused by any such Indemnified Party's gross negligence or willful
misconduct.
Section 7.2. Indemnity by the Company. The Company agrees to
indemnify and hold the Seller and its affiliates, employees, officers,
directors, controlling persons, successors and assigns (the "Seller
Indemnitees") harmless from and with respect to any and all Losses
related to or arising directly or indirectly out of (a) any
inaccuracies in any representation or warranty made by the Company in or
pursuant to this Agreement, but only to the extent that Losses relating
to or arising directly or indirectly out of such inaccuracies when taken
together with Losses (as that term is defined in the BKB Purchase
Agreements) for which Receivables LLC is obligated to indemnify the
Seller Indemnitees (as defined in the BKB Purchase Agreements) pursuant
to Section 7.2(a) of each of the BKB Purchase Agreements, without
duplication, exceed $100,000 in the aggregate, (b) any failure or
breach by the Company of any covenant, obligation or undertaking made by
the Company in this Agreement (including without limitation any failure
by the Company to pay or perform any of the Assumed Obligations), or
(c) the operation of the Contributed Assets by the Company after
the Closing Date, in each case except to the extent that such Losses were
caused by any such Indemnified Party's gross negligence or willful
misconduct.
Section 7.3. Claims. (a) Any party seeking indemnification
hereunder (the "Indemnified Party") shall promptly notify the party
hereto obligated to provide indemnification hereunder (the "Indemnifying
Party") of any action, suit, proceeding, demand or breach (a "Claim")
with respect to which the Indemnified Party claims indemnification
hereunder, provided that failure of the Indemnified Party to give such
notice shall not relieve the Indemnifying Party of its obligations under
this Article 7 except to the extent, if at all, that such Indemnifying
Party shall have been prejudiced thereby. If such Claim relates to any
action, suit, proceeding or demand instituted against the Indemnified
Party by a third party (a "Third Party Claim"), then upon receipt of such
notice from the Indemnified Party the Indemnifying Party shall be
entitled to participate in the defense of such Third Party Claim, and if
and only if each of the following conditions is satisfied, the
Indemnifying Party may assume the defense of such Third Party Claim, and
in the case of such an assumption the Indemnifying Party shall have the
authority to negotiate, compromise and settle such Third Party Claim:
(i) the Indemnifying Party confirms in writing that it is
obligated hereunder to indemnify the Indemnified Party with respect
to such Third Party Claim; and
(ii) there is no conflict of interest which would make
separate representation by the Indemnified Party's own counsel
advisable.
The Indemnified Party shall retain the right to employ its own counsel
and to participate in the defense of any Third Party Claim, the defense
of which has been assumed by the Indemnifying Party pursuant hereto, but
the Indemnified Party shall bear and shall be solely responsible for its
own costs and expenses in connection with such participation. The
Indemnifying Party shall not, without the prior written consent of the
Indemnified Party, settle or compromise any claim or consent to the entry
of any judgment that does not include as an unconditional term thereof
the giving by the claimant or the plaintiff to the Indemnified Party a
release from all liability in respect of such claim.
(b) In the event of any Claim under Section 7.1 or 7.2, the
Indemnified Party shall advise the Indemnifying Party in writing of the
amount and circumstances
surrounding such Claim.
Section 7.4. Time Limits. No claim for indemnification under this
Article 7 may be asserted for the first time for any breach of any
representation or warranty after June 30, 1999.
Section 7.5. Exclusive Remedy; Damage Limitations. The Seller and
the Company acknowledge and agree that, except for the right to seek
specific performance of covenants and other agreements, the
indemnification rights and remedies available to each party under this
Article 7 shall be the sole and exclusive rights and remedies of the
Company and the Seller with respect to any Losses arising out of or
relating in any way to (a) any breach of this Agreement, (b) the
acquisition of the Contributed Assets and the assumption of the Assumed
Obligations by the Company, or (c) the consumma tion of the transactions
contemplated hereby (collectively, the "Subject Losses"), including
without limitation any claims, rights or remedies for negligent
misrepresenta tion but excluding specifically, any claims, rights or
remedies for fraud. Without limiting the generality of the foregoing,
except for remedies for fraud and as specifically authorized by this
Article 7, the Company and the Seller hereby waive, release and disclaim
any claims, rights or remedies arising in tort, by statute, or otherwise,
with respect to the Subject Losses. As provided in Section 8.6, in no
event shall the Company or the Seller be entitled to recover from the
other party hereto for incidental, special, consequential, exemplary or
punitive damages, and for all purposes of this Agreement, the term
"Losses" shall be deemed not to include any such damages. The Seller's
maximum aggregate liability, and the right of recovery of the Company
Indemnitees against the Seller under this Article 7 for Losses, arising
as a result of breaches of the Seller Indemnity Representations contained
herein shall, in all events other than fraud by Seller, be limited in the
aggregate to $10,000,000 less all amounts paid by the Seller under
Article 7 of the BKB Purchase Agreements as a result of breaches by
Seller of the Seller Indemnity Representations (as that term is defined
in the BKB Purchase Agreements). The Company's maximum aggregate
liability, and the right of recovery of the Seller Indemnitees against
the Company under this Article 7 for Losses, arising as a result of
breaches of the Company Indemnity Representations contained herein shall,
in all events other than fraud by the Company, be limited in the
aggregate to $10,000,000 less all amounts paid by Receivables, LLC under
the BKB Purchase Agreements as a result of breaches by Receivables, LLC
of the Purchaser Indemnity Representations (as that term is defined in
the BKB Purchase Agreements).
ARTICLE 8
GENERAL
Section 8.1. Investment Representations. On the Closing Date, the
Seller shall cause the recipient or recipients of the Membership
Interests (a) to make to the Company each of the representations
set forth as Exhibit B hereto and (b) to execute and deliver to the
Company a completed Confidential Purchaser Questionnaire, the form of
which is attached hereto as Exhibit C.
Section 8.2. Notices. All notices, demands and other communications
hereunder shall be in writing or by written telecommunication, and shall
be deemed to have been duly given if delivered personally or if mailed by
certified mail, return receipt requested, postage prepaid or if sent by
overnight courier or sent by written facsimile (answerback confirmed), as
follows:
If to the Seller: BankBoston (NH), National
Association
c/o BankBoston Corporation
100 Federal Street, 01-25-08
Boston, Massachusetts 02110
Attention: Mr. Peter J. Manning
and Gary A. Spiess, Esq.
with a copy sent contemporaneously to: Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
Attention: Norman J. Shachoy, Esq.
If to the Company: Partners First Holdings, LLC
900 Elkridge Landing Road
Suite 300
Linthicum, MD 21090
Attention: John R. Soderlund
with a copy sent contemporaneously to: Partners First Holdings, LLC
900 Elkridge Landing Road
Suite 300
Linthicum, MD 21090
Attention: Terence F. Browne, Esq.
Any such communication shall be deemed to have been received (i) when
delivered, if personally delivered, or sent by nationally-recognized
overnight courier or sent via facsimile (answerback confirmed) or
(ii) on the third Business Day following the date on which the piece
of mail containing such communications is posted, if sent
by certified mail.
Section 8.3. Entire Agreement. This Agreement (including the
Exhibits and Schedules hereto) contains the entire understanding of the
parties hereto, and supersedes all prior agreements and understandings
relating to the subject matter hereof. This Agreement shall not be
amended except by a written instrument hereafter signed by all of the
parties hereto. No waiver of any provision of this Agreement shall be
effective unless evidenced by a written instrument signed by the waiving
party. Each of the parties hereto further acknowledges and agrees that,
in entering into this Agreement, it has not in any way relied upon any
oral or written agreements, statements, promises, information,
arrangements, understandings, representations or warranties, express or
implied, not specifically set forth in this Agreement.
Section 8.4. Governing Law. This Agreement shall be governed by,
and construed and enforced in accordance with, the laws of the State of
Delaware without regard to its conflict of laws rules.
Section 8.5. Consent to Jurisdiction. Each of the parties hereto
agrees that any suit, action or proceeding instituted against such party
under or in connection with this Agreement may be brought in a court of
competent jurisdiction in the State of Delaware. By execution hereof,
each party hereto irrevocably waives any objection to, and any right of
immunity on the grounds of, improper venue, the convenience of the forum,
the personal jurisdiction of such courts or the execution of judgments
resulting therefrom. Each party hereto hereby irrevocably accepts and
submits to the jurisdiction of such courts in any such action, suit or
proceeding.
Section 8.6 Waiver of Certain Damages. Each of the parties hereto
irrevocably waives, to the fullest extent permitted by law any rights
that it may have to punitive, incidental, special, exemplary or
consequential damages in respect of any litigation based upon, or arising
out of, this Agreement or any course of conduct, course of dealing,
statements or actions of any of the parties hereto relating thereto.
Section 8.7. Sections and Sub-Section Headings. The headings of
sections and subsections are for reference only and shall not limit or
control the meaning thereof.
Section 8.8. Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns. Neither this Agreement nor the
obligations of any party hereunder shall be assignable or transferable by
such party without the prior written consent of the other party hereto.
Section 8.9. No Implied Rights or Remedies. Except as otherwise
expressly provided herein, nothing herein expressed or implied is
intended or shall be construed to confer upon or to give any Person,
except the parties hereto, any rights or remedies under or by reason of
this Agreement.
Section 8.10 Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
Section 8.1 Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties hereto to express
their mutual intent, and no rule of strict construction will be applied
against any party hereto.
Section 8.12 Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other
provisions hereof, and this Agreement shall be construed in all respects
as if such invalid or unenforceable provision were omitted.
Section 8.13 Survival. The representations, warranties and covenants
of the parties hereto shall survive indefinitely, unless otherwise
specified therein.
Section 8.14 Waiver of Right to Jury Trial. EACH OF THE PARTIES
HERETO WAIVES ITS RIGHTS TO A TRIAL BY JURY IN ANY LITIGATION IN ANY
COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF, THIS
AGREEMENT, OR THE VALIDITY, INTERPRETATION OR ENFORCEMENT HEREOF OR
THEREOF OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 8.15 The BKB Value-Limited Credit Card Business. For greater
certainty, the accounts associated with the BKB Value-Limited Credit Card
Business as of the date hereof are identified on Exhibit<0- 32>A hereto
(which may, in the Seller's sole discretion, be in the form of a computer
file or magnetic tape, which contains sufficient information to identify
each account and respective Cardholder including name, address, social
security number, account number, status codes, account balance and such
other information as is mutually agreed upon by Purchaser and Seller, as
identification of the respective Cardholders).
Section 8.16 Disputes. In the event of any dispute or disagreement
between the parties after the Closing Date, either with respect to the
interpretation of any provision of this Agreement or with respect to the
performance or nonperformance by any party hereto, upon the written
request of any party, corporate executives of Seller and the Company
shall attempt to resolve any such dispute.
Section 8.17 Remedies. Each party hereto will be entitled to enforce
its rights under this Agreement specifically (without posting a bond or
other security), to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights existing in
their favor. The parties hereto agree and acknowledge that money damages
may not be an adequate remedy for any breach of the provisions of this
Agreement and that either party may in its sole discretion apply to any
court of law or equity of competent jurisdiction for specific performance
and/or injunctive relief in order to enforce or prevent any violation of
the provisions of this Agreement. In the event of any dispute involving
the terms of this Agreement, the prevailing party shall be entitled to
collect reasonable fees and expenses incurred by the prevailing party in
connection with such dispute from the other parties to such dispute.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties hereto have caused this Contribution Agreement to be duly
executed and delivered as a sealed instrument as of the date and year
first above written.
BANKBOSTON (NH), NATIONAL ASSOCIATION
By /s/ William M. Parent
------------------------------------
Name: William M. Parent
Title:Authorized Officer
PARTNERS FIRST HOLDINGS, LLC
By /s/ John R. Soderlund
------------------------------------
Name: John R. Soderlund
Title:President and Chief
Executive Officer
SCHEDULE 2.1(A)
ACCOUNTS
TAPE TO BE SUPPLIED BY FIRST ANNAPOLIS MARKETING INFORMATION SERVICES,
INC., AS AGENT FOR SELLER.
SCHEDULE 2.1(F)
TO BKB CONTRIBUTION AGREEMENT
ASSIGNED CONTRACTS
(1) None.
SCHEDULE 4.6 TO
BKB CONTRIBUTION AGREEMENT
LITIGATION
None
EXHIBIT A
INITIAL BKB VALUE-LIMITED
CREDIT CARD BUSINESS ACCOUNTS
TAPE TO BE SUPPLIED BY FIRST ANNAPOLIS MARKETING INFORMATION SERVICES,
INC., AS AGENT FOR SELLER.
EXHIBIT B
FORM OF INVESTMENT REPRESENTATIONS
The undersigned, __________________ (the "Recipient") is a
recipient of "Membership Interests" pursuant to that certain Contribution
Agreement (the "Contribution Agreement") dated as of January 29, 1998
between Partners First Holdings, LLC, a Delaware limited liability
company (the "Company") and BankBoston (NH), National Association, a
national banking association. The Recipient hereby makes the following
investment representations:
(a)(i) The Membership Interests will be acquired by the
Recipient for investment only, for the Recipient's own account and
not as a nominee or agent and not with a view to the sale or
distribution of any part thereof in violation of applicable federal
or state securities laws; and (ii) the Recipient has no
current intention of selling, granting any participation in or
otherwise distributing the Membership Interests in violation of
applicable federal or state securities laws. The Recipient has no
contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant any participation to such person, or to any
third party, with respect to any of the Membership Interests in
violation of applicable federal or state securities laws.
(b) The Recipient understands that the Membership Interests
have not been registered under the Securities Act of 1933, as
amended (the "Securities Act"), on the basis that the exchange
provided for in the Contribu tion Agreement and the issuance of
securities thereunder is exempt from registration under the
Securities Act and that Company's reliance on such exemption is
predicated on the representations and warranties of the Recipient
set forth herein.
(c) The Recipient either (i) is an "accredited
investor" as defined in Rule 501 promulgated under the Securities
Act and has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of the
Recipient's investment in Company, or (ii) has a "purchaser
representative" as defined in Rule 501.
(d) The Recipient will not sell, transfer or otherwise
dispose of the Membership Interests or any portion thereof without
registration under the Securities Act and applicable state
securities laws, or an exemption therefrom.
The Recipient understands that, in the absence of an effective
registration statement covering the Membership Interests or an
available exemption from registration under the Securities Act and
applicable state securities laws, the Membership Interests must be
held by the Recipient indefinitely. In particular, the Recipient
acknowledges that (i) the Recipient is aware that the
Membership Interests may not be sold pursuant to Rule 144
promulgated under the Securities Act unless all of the conditions
of such rule are met, and (ii) among the current conditions
for use of Rule 144 by certain holders is the availability to
the public of current information about Company, which information
may not be available.
(e) The Recipient (i) is capable of bearing the
economic risk of holding the unregistered Membership Interests for
an indefinite period of time and has adequate means for providing
for the Recipient's current needs and contingencies, (ii) can
afford to suffer a complete loss of this investment and (iii)
understands all risk factors related to the purchase of the
Membership Interests.
(f) The Recipient understands that (i) the purchase of
the Member ship Interests involves a high degree of risk, (ii)
there is no established market for the Membership Interests and
(iii) it is not likely that any public market for the
Membership Interests will develop in the near future.
(g) Neither the Recipient nor anyone acting on the
Recipient's behalf has paid any commission or other remuneration to
any person in connection with the purchase of the Membership
Interests.
(h) The Recipient (if not an individual person) was not
organized for the purpose of making an investment in Company.
Signed on this 29th day of January, 1998.
RECIPIENT
Signature:-----------------------------
Name Printed:--------------------------
EXHIBIT C
FORM OF CONFIDENTIAL
PURCHASER QUESTIONNAIRE
This Confidential Purchaser Questionnaire is to be completed by all
investors in connection with the proposed issuance of certain securities
(the "Securities") of Partners First Holdings LLC, a Delaware limited
liability company (the "Company"). The purpose of this questionnaire is
to ascertain whether investors satisfy the investor requirements of
Regulation D promulgated under the Securities Act of 1933 (the "Act") and
whether investors satisfy the investor requirements of applicable state
securities laws. This questionnaire does not constitute an offer by the
Company or by any member, director or officer of the Company to sell the
Securities, but is merely a request for information.
IF THE ANSWER TO ANY QUESTION IS "NONE" OR "NOT APPLICABLE", PLEASE
SO STATE
1. Please provide the following information:
Name:_______________________________________
Social Security or
Federal ID Number:____________________________
Residence Address
(individuals only):_____________________________
Main Business
Address:___________________________________________
___________________________________________
2. Please check all applicable boxes:
o The undersigned is a private business development company as
defined in Section 202(a)(22) of the Investment Advisers Act
of 1940.
o The undersigned is a national banking association, an
organization described in Section 501 (c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business
trust, or a partnership, not formed for the specific purpose
of acquiring the securities offered, with total assets in
excess of $5,000,000.
o The undersigned is a director or executive officer of
the Company.
o The undersigned is an individual with a net worth
(either individually or jointly with his or her spouse) in
excess of $1,000,000 (For the purpose of determining net
worth, the undersigned's principal residence is valued at
cost, including the cost of improvements, net of current
encumbrances upon the property.)
o The undersigned is an individual who had an income in
excess of $200,000 in each of 1996 and 1997, or had a joint
income with his or her spouse in excess of $300,000 in each
of 1996 and 1997, and has a reasonable expectation of
reaching the same income level in 1998. (Income, for the
purpose of this response, is computed by adding the following
items to adjusted gross income for Federal income tax
purposes: any deductions for long term capital gain or
depletion, any exclusion for interest earned on tax-exempt
bonds, and any losses allocated from a limited partnership.)
o The undersigned is a trust with total assets in excess
of $5,000,000, not formed for the specific purpose of
acquiring the securities offered, whose purchase is directed
by a sophisticated person as described in Rule 506(b)(2)(ii)
of the General Rules and Regulations promulgated under the
Act.
o The undersigned is an entity in which all of the equity
owners are accredited investors.
o The undersigned is none of the above.
IF YOUR RESPONSE TO QUESTION 2 ABOVE WAS "NONE OF THE ABOVE", PLEASE
RESPOND TO THE REMAINDER OF THE INQUIRIES IN THIS QUESTIONNAIRE.
OTHERWISE, PLEASE SKIP QUESTION 3, AND SIGN AND DATE THE LAST PAGE OF
THIS QUESTIONNAIRE.
3. Investor knowledge and experience.
a. Do you have sufficient knowledge and experience in financial
and business matters so as to be capable of evaluating the
merits and risks associated with investing in the Company?
Yes ____ No ____
b. If the answer to question 3(a) is no, please name the
investment adviser, if any, with whom you have reviewed the
merits and risks of the Securities.
IF AN INVESTMENT ADVISER IS NAMED BELOW, SUCH INVESTMENT ADVISER MUST ACT
AS YOUR PURCHASER REPRESENTATIVE (AS DEFINED IN REGULATION D OF THE
SECURITIES ACT OF 1933, AS AMENDED) AND MUST COMPLETE A PURCHASER
REPRESENTATIVE QUESTIONNAIRE. PURCHASER REPRESENTATIVE QUESTIONNAIRES ARE
AVAILABLE FROM THE COMPANY UPON REQUEST.
Name:_________________________________
Firm:_________________________________
Address:______________________________
_________________________________
Telephone Number:
If the person named above acts as your Purchaser Representative:
(i) Do you understand the functions of a
Purchaser Representative?
Yes ____ No ____
(ii) Do you believe your Purchaser Representative has such
knowledge and experience in financial and business matters
that he is capable of evaluating the merits and risks of an
investment in the Company?
Yes ____ No ____
(iii) Have you reviewed the information contained in the completed
Purchaser Representative Questionnaire regarding such person?
Yes ____ No ____
c. Do you understand the nature of an investment in the Company and
the risks associated with such an investment?
Yes ____ No ____
d. Do you understand that there is no guarantee of any financial
return on this investment and that you run the risk of losing your entire
investment?
Yes ____ No ____
e. Do you understand that this investment provides limited
liquidity since the Securities are not freely transferable?
Yes ____ No ____
f. Do you have adequate means of providing for your current needs
and personal contingencies in view of the fact that this investment
provides limited liquidity?
Yes ____ No ____
g. Are you purchasing these securities for investment and not with
the intent to resell them?
Yes ____ No ____
h. You have the right and are encouraged to investigate the Company
and review relevant records and documents pertaining to the Company and
its business and to ask questions regarding this investment and the
operations and methods of doing business of the Company.
Have you conducted any such investigation, sought such
documents or asked questions?
Yes ____ No ____
i. Have you ever invested in securities?
Yes ____ No ____
j. Have you ever invested in investment partnership, venture
capital funds, or other non-marketable or restricted securities?
Yes ____ No ____
The undersigned hereby represents that, to the best of its
information and belief, the above information supplied in this
Confidential Purchaser Questionnaire by the undersigned is true and
correct in all respects.
- ----------------------- -------------------------
Date Signature
-------------------------
Name Printed
EXHIBIT D
TAX BASIS AND VALUE OF CONTRIBUTED ASSETS
1. The tax basis of the Contributed Assets is zero dollars.
2. The value of the Contributed Assets is Twenty-Six Million
Dollars ($26,000,000).
- ------------------------------------------------------------------------------
RECEIVABLES PURCHASE AND SALE AGREEMENT
BETWEEN
BANKBOSTON (NH), NATIONAL ASSOCIATION
AND
PARTNERS FIRST RECEIVABLES, LLC
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
Parties.............................................................1
Recitals............................................................1
ARTICLE 1
DEFINITIONS...................................................1
Section 1.1. Certain Defined Terms.....................1
ARTICLE 2
SALE OF ASSETS................................................3
Section 2.1. Accounts Receivable.......................3
Section 2.2. Excluded Assets...........................4
Section 2.3. Relative Valuation........................4
ARTICLE 3
ASSUMPTION OF OBLIGATIONS.....................................5
Section 3.1. Assumption of Obligations.................5
Section 3.2. Consideration.............................5
Section 3.3. Payment of Purchase Price.................5
Section 3.4. Post-Closing Adjustments..................5
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SELLER..................6
Section 4.1. Organization..............................6
Section 4.2. Authority; Enforceability.................6
Section 4.3. No Conflicts..............................7
Section 4.4. Ownership of Assets.......................7
Section 4.5. Cardholder Agreements.....................7
Section 4.6. Litigation................................7
Section 4.7. Accounts Receivable.......................8
Section 4.8. Compliance with Applicable Law............8
Section 4.9. Licensed to Carry on Credit Card Business.8
Section 4.10. Account Records..........................8
Section 4.11. Brokers..................................8
Section 4.12. Permits, Etc.............................8
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER...............9
Section 5.1. Organization..............................9
Section 5.2. Authority; Enforceability.................9
Section 5.3. No Conflicts..............................9
Section 5.4. Permits, Etc..............................9
Section 5.5. Litigation................................9
Section 5.6. Finders or Brokers........................9
ARTICLE 6
CERTAIN TRANSITIONAL MATTERS.................................10
Section 6.1. Third Party Consents.....................10
Section 6.2. Responsibility for Pre-Closing
Transactions...........................................10
Section 6.3. Business Records.........................10
Section 6.4. Further Assistance.......................10
ARTICLE 7
INDEMNIFICATION..............................................11
Section 7.1. Indemnity by the Seller..................11
Section 7.2. Indemnity by the Purchaser...............11
Section 7.3. Claims...................................11
Section 7.4. Time Limits..............................12
Section 7.5. Exclusive Remedy; Damage Limitations.....12
ARTICLE 8
ITEMS TO BE DELIVERED AT CLOSING.............................13
Section 8.1. Items to be Delivered by Seller..........13
Section 8.2. Items to Be Delivered by Purchaser.......13
ARTICLE 9
GENERAL......................................................14
Section 9.1. Disputes.................................14
Section 9.2. Notices..................................14
Section 9.3. Entire Agreement.........................15
Section 9.4. Governing Law............................15
Section 9.5. Consent to Jurisdiction..................15
Section 9.6. Waiver of Certain Damages................15
Section 9.7. Section and Subsection Headings..........15
Section 9.8. Assigns..................................16
Section 9.9. No Implied Rights or Remedies............16
Section 9.10. Counterparts.............................16
Section 9.11. Construction.............................16
Section 9.12. Severability.............................16
Section 9.13. Survival.................................16
Section 9.14. WAIVER OF RIGHT TO JURY TRIAL............16
Section 9.15. Remedies.................................16
ARTICLE 10
CHARGEBACKS..................................................17
Signatures.........................................................18
Schedules
Schedule 2.1-- Accounts
Schedule 4.6-- Litigation
RECEIVABLES PURCHASE AND SALE AGREEMENT
This Receivables Purchase and Sale Agreement, dated as of January
29, 1998 (as in effect from time to time, this "Agreement"), between
(a) BankBoston (NH), National Association (the "Seller"), and (b)
Partners First Receivables, LLC, a Delaware limited liability company
(the "Purchaser").
WHEREAS, Seller desires to sell the Accounts Receivable (as
hereinafter defined) to Purchaser, and Purchaser desires to purchase the
Accounts Receivable, on the terms and conditions hereinafter set forth
and provided.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants set forth below, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree, intending to be legally bound, as follows:
ARTICLE 1
DEFINITIONS
Section 1.1. Certain Defined Terms. Capitalized terms used herein
without definition have the meaning assigned to such terms in the Limited
Liability Company Agreement of Partners First Holdings, LLC dated as of
the date hereof among BankBoston (NH), National Association, Bankmont
Financial Corp., Harris Trust and Savings Bank, First Annapolis Marketing
Information Services, Inc. and the Company (the "Operating Agreement").
Additionally, the following capitalized terms shall have the following
meanings:
"Accounts" means all of the credit card accounts of the Seller's
Credit Card Business (other than Excluded Accounts) including, without
limitation, those identified on Schedule 2.1 which is attached
hereto or provided herewith and made a part hereof (which may in the
Seller's sole discretion be in the form of a computer file or magnetic
tape) which contains sufficient information to identify each account and
respective Cardholder such as name, address, social security number,
account number, status codes, account balance and such other information
as is mutually agreed upon by Purchaser and Seller.
"Accounts Receivable" has the meaning set forth in Section 2.1.
"Adjusted Closing Statement" has the meaning set forth in
Section 3.3(b).
"Agreement" has the meaning set forth in the preamble.
"Applicable Agreements" means (i) that certain Contribution
Agreement dated as of the date hereof by and between Partners First
Holdings, LLC and Seller, and (ii) that certain Overdue Receivables
Purchase and Sale Agreement dated as of the date hereof by and between
Seller and the Purchaser.
"Assumed Obligations" has the meaning set forth in
Section3.1.
"Cardholder" means a holder of a Credit Card.
"Cardholder Agreements" means the agreements between the
Cardholders or other obligors with respect to a Credit Card and Seller,
including, without limitation, any agreements relating to credit
enhancements provided in connection with such Credit Card, and as the
same has been amended or otherwise modified and in effect from time to
time.
"Chargeback Amount" has the meaning set forth in Article 10.
"Claim" has the meaning set forth in Section 7.3(a).
"Closing Date" means the date on which the transactions described
in this Agreement are consummated, except that for purposes of
determining Accounts or Accounts Receivable it shall mean the opening of
business on the day on which the transactions described in this Agreement
are consummated.
"Credit Card" means a MasterCard(R) or Visa(R) card issued by
Seller and associated solely with an Account of Seller's Credit Card
Business.
"Credit Card Business" means the provision of unsecured lines of
credit accessible by Visa(R) or MasterCard(R) to consumers within the
United States of America, the servicing of such credit card
relationships, and the provision of services incidental thereto.
"Estimated Purchase Price" has the meaning set forth in
Section 3.3.
"Excluded Accounts" has the meaning set forth in Section 2.2.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Governmental Authority" means any federal, national, state,
municipal, local, territorial or other governmental department,
commission, board, bureau, agency, regulatory authority, instrumentality,
judicial or administrative body, domestic or foreign and Visa(R) and
MasterCard(R).
"Indemnified Party" has the meaning set forth in Section 7.3(a).
"Indemnifying Party" has the meaning set forth in Section 7.3(a).
"Initial Closing Statement" has the meaning set forth in
Section 3.3(a).
"Losses" has the meaning set forth in Section 7.1.
"MasterCard(R)" means MasterCard International Incorporated.
"Purchase Price" has the meaning set forth in Section 3.2.
"Purchaser" has the meaning set forth in the preamble hereto.
"Purchaser Indemnitees" has the meaning set forth in Section
7.1.
"Purchaser Indemnity Representations" means the representations and
warranties of Purchaser contained in Section 5.4 and 5.5 of this
Agreement.
"Retained Liabilities" has the meaning set forth in
Section 3.1.
"Seller" has the meanings set forth in the preamble hereto.
"Seller Indemnitees" has the meanings set forth in Section 7.2.
"Seller Indemnity Representations" means the representations and
warranties of Seller contained in Sections 4.5, 4.6, 4.7 (except the
first sentence thereof), 4.8, 4.9, 4.10 and 4.12 of this Agreement.
"Subject Losses" has the meaning set forth in Section 7.5.
"Third Party Claim" has the meaning set forth in Section 7.3(a).
"Visa(R)" means Visa U.S.A., Inc.
"Zero Value Accounts" means Accounts which as of the Closing Date
are (i) statused by Seller as bankruptcy, deceased, fraud, lost or
stolen or charged off or (ii) 180 days or more contractually past
due (in each case such status to be determined in a manner consistent
with Seller's customary practices consistently applied).
ARTICLE 2
SALE OF ASSETS
Section 2.1. Accounts Receivable. On the Closing Date, and subject
to the terms and conditions set forth in this Agreement, the Seller
(subject to the provisions of Article 10 hereto) shall sell,
assign, transfer and deliver to Purchaser, and the Purchaser shall
purchase and take assignment and delivery of, all of the Seller's right,
title and interest in, to and under the following assets as of the
Closing Date (other than the Excluded Accounts and the Excluded Assets):
any and all amounts owing from the Cardholders to the Seller (whether
billed or unbilled, posted or not) in connection with the Accounts,
including, without limitation, all principal, outstanding purchases, cash
advances, interest (including accrued but unbilled interest), annual
fees, finance and service charges and other charges and fees, less any
and all amounts owing from the Seller to the Cardholders as a credit
balance, whether or not credited (hereinafter referred to collectively as
the "Accounts Receivable").
The parties hereto intend that the conveyance of the Seller's
right, title and interest in and to the Accounts Receivables shall
constitute an absolute sale, conveying good title free and clear of any
liens, claims, encumbrances or rights of others from the Seller to the
Purchaser and that the Accounts Receivables shall not be a part of the
Seller's estate in the event of the insolvency of the Seller or a
conservatorship, receivership or similar event with respect to the
Seller. It is the intention of the parties hereto that the arrangements
with respect to the Accounts Receivables shall constitute a purchase and
sale of such Accounts Receivables and not a loan. In the event, however,
that it were to be determined that the transactions evidenced hereby
constitute a loan and not a purchase and sale, it is the intention of the
parties hereto that this Agreement shall constitute a security agreement
under applicable law, and that the Seller shall be deemed to have granted
and does hereby grant to the Purchaser a first priority perfected
security interest, in all of the Seller's right, title and interest,
whether now owned or hereafter acquired, in, to and under the Accounts
Receivables to secure the rights of the Purchaser hereunder and the
obligations of the Seller hereunder.
Section 2.2. Excluded Assets. Notwithstanding the foregoing, the
Seller is not transferring to the Purchaser and the Purchaser is not
acquiring pursuant to this Agreement, and the term "Accounts Receivable"
shall not include, any other assets of Seller not specifically referenced
in Section 2.1 (the "Excluded Assets") or any Accounts Receivable
generated by or related to accounts which are part of Seller's BKB
International Credit Card Business, BKB Relationship Credit Card Business
or BKB Value-Limited Credit Card Business or are secured accounts,
commercial or business accounts, dormant accounts, in-active accounts,
closed accounts, accounts without outstanding balances, accounts
classified as "substandard," "doubtful," or "loss" or treated as "other
loans especially mentioned" in the most recent report of examination
prepared by any Federal or State supervisory agency, accounts in
nonaccrual status, accounts on which principal or interest payments are
more than 30 days past due, accounts whose terms have been renegotiated
or compromised due to the deteriorating financial condition of the
Cardholder and accounts which are statused by Seller on the Closing Date
as bankrupt, deceased, fraud, lost or stolen or charged off (such status
to be determined in a manner consistent with Seller's customary practices
consistently applied) ("Excluded Accounts").
Section 2.3. Relative Valuation. The Seller and the Purchaser agree
that, immediately after giving effect to the transactions effected by the
BKB Purchase Agreements, the Accounts Receivable and the Overdue
Receivables (as defined in the applicable BKB Purchase Agreement)
transferred by the Seller to the Purchaser pursuant to the BKB Purchase
Agreements will have characteristics substantially similar to the
Accounts Receivable and the Overdue Receivables (as defined in the
applicable BKB Purchase Agreement) comprising the BKB Value-Limited
Credit Card Business.
ARTICLE 3
ASSUMPTION OF OBLIGATIONS
Section 3.1. Assumption of Obligations. The Purchaser hereby
assumes, and agrees to pay, perform, fulfill and discharge, all of the
Seller's obligations with respect to the Accounts Receivable from and
after the Closing Date (collectively, the "Assumed Obligations").
Anything in this Agreement to the contrary notwithstanding, the Purchaser
shall not assume, and shall not be deemed to have assumed, any liability,
contract or obligation of the Seller not specifically listed or included
herein or assumed by separate written agreement signed by the Purchaser
(all such liabilities and obligations not being assumed being referred to
herein as the "Retained Liabilities"), which Retained Liabilities are
retained by the Seller and the Purchaser shall not be liable therefor.
Section 3.2. Consideration. In consideration of the sale of the
Accounts Receivable by the Seller to the Purchaser hereunder, the
Purchaser agrees to assume the Assumed Obligations and to pay to the
Seller, the purchase price ("Purchase Price") which shall be an amount
equal to the sum of all Accounts Receivable as of the Closing Date
Section 3.3. Payment of Purchase Price. (a) On the Closing Date,
the parties shall prepare a closing statement (the "Initial Closing
Statement") calculating the Purchase Price as of the date of the most
recently available data (or another date mutually acceptable to Purchaser
and Seller) with respect to the Accounts Receivable (the "Estimated
Purchase Price"). On the Closing Date, the Estimated Purchase Price shall
be paid in immediately available funds to Seller by Purchaser.
(b) As soon as practicable after the Closing Date, Purchaser and
Seller shall conduct and complete a post-Closing review of the Accounts
Receivable and shall prepare a closing statement as of the Closing Date
(the "Adjusted Closing Statement"), mutually acceptable to Seller and
Purchaser, and showing any adjustments from the Initial Closing Statement
including the difference between the Estimated Purchase Price and the
Purchase Price. Purchaser shall pay Seller (or Seller shall pay Purchaser
as the case may be) an amount equal to the difference between the
Estimated Purchase Price and the Purchase Price as reflected on the
Adjusted Closing Statement plus interest thereon at the federal funds
rate from the Closing Date to the date of payment.
Section 3.4. Post-Closing Adjustments. Seller is responsible for
any and all fees in connection with the Accounts Receivable related to
the period prior to the Closing Date, including fees, normal operating
assessments or penalties and other charges imposed by MasterCard(R) or
Visa(R). The parties hereto herebY agree to cooperate in good faith to
estimate such fees and include them on the Initial Closing Statement and
to make such post-closing adjustments between themselves as may be
necessary to give effect to the provisions hereof and to reflect such
adjustments on the Adjusted Closing Statement. Adjustments to amounts
calculated pursuant to Section 3.3 and this Section 3.4 may include
unposted amounts, miscalculations, errors, incorrect status,
mis-characterization or mis-classification of Accounts and Accounts
Receivable. For purposes of this adjustment, mis-classified Accounts
which should have been classified as Zero Value Accounts as of the
Closing Date will be valued accordingly. As provided in Section 6.2
hereof, for the purpose of determining when or whether an event took
place, the interchange date as specified by Visa(R) or MasterCard(R)
shall be determinative. (a) In the event that as of April 30, 1998 (the
"Adjustment Date") the aggregate outstanding amount of all Accounts
Receivable in connection with accounts generated by the approximately
5,846,849 mail piece credit card solicitation known as the "January
Mailing" is less than $84 million, then (i) Seller may sell to Purchaser,
on terms similar to those set forth in this Agreement, Credit Card
accounts in good standing included within the BKB Value-Limited Credit
Card Business with Accounts Receivable in good standing in an aggregate
outstanding amount as of the Adjustment Date not to exceed the amount of
such deficiency and (ii) Seller shall pay to the Purchaser, on or prior
to the date that is twenty Business Days after the Adjustment Date, an
amount equal to seven percent (7%) of the amount by which the sum of all
Accounts Receivable generated by the January Mailing as of the Adjustment
Date, plus all Accounts Receivable as of the Adjustment Date sold to
Purchaser pursuant to clause (i) above is less than $84 million.
(b) The Seller hereby agrees to pay expenses for the January
Mailing as attached hereto as Exhibit A which is Purchaser's estimate of
all expenses payable by BankBoston N.A. (to the extent such expenses are
not paid by BankBoston N.A. under Sections 4.3(b) (ii) and (iii) of the
Service Agreement, dated as of June 22, 1995, between BankBoston, N.A.
and First Annapolis Marketing Information Services, Inc.). Purchaser
agrees that it shall approve responses to the January Mailing using
substantially the same credit and other criteria as used to determine
recipients of such mailing, except for insubstantial changes in the
ordinary course of business consistent with Purchaser's past practices.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Purchaser as
follows:
Section 4.1. Organization. The Seller is a national banking
association organized under the laws of the United States and is
authorized to conduct general banking business under such laws.
Section 4.2. Authority; Enforceability. The Seller has all
requisite power and authority (i) to enter into and carry out its
obligations under this Agreement, (ii) to hold the Accounts Receivable
and (iii) to sell, assign and transfer the Accounts Receivable being sold
to the Purchaser by it. The execution, delivery and performance of this
Agreement have been duly authorized by all necessary action on the part
of the Seller. This Agreement has been duly executed and delivered and
constitutes the legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, except as
enforcement thereof may be limited by receivership, conservatorship and
supervisory powers of bank regulatory agencies generally, as well as
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
or similar laws of general applicability relating to or affecting
creditors' rights or to general equity principles (regardless of whether
such matters are considered in a proceeding in equity or at law) and the
availability of equitable remedies.
Section 4.3. No Conflicts. The execution, delivery and performance
by Seller of this Agreement does not violate (a) Seller's Articles of
Association or By-Laws, as applicable, (b) any material agreement or
instrument to which Seller is a party or by which Seller is bound or
which affects the Accounts Receivable, or (c) any law, rule or
regulation applicable to Seller or which affects the Accounts Receivable.
Section 4.4. Ownership of Assets. Seller is the sole owner of all
right, title and interest in, to and under the Accounts Receivable being
sold to the Purchaser under this Agreement. Seller has the right, power
and authority to sell and transfer the Accounts Receivable to the
Purchaser, and the Accounts Receivable are not subject to any assignment,
lien, charge, encumbrance or security interest, except that such Accounts
Receivable may be subject to the terms of the Cardholder Agreements and
to other rights of Cardholders and other obligors as specified in Section
4.7 hereof. Seller hereby sells the Accounts Receivable being sold by it
to the Purchaser free and clear of all assignments, liens, charges,
encumbrances and other security interests and of all claims or rights of
third parties, except as such Accounts Receivable may be subject to the
terms of the Cardholder Agreements and to other rights of Cardholders and
other obligors as specified in Section 4.7 hereof.
Section 4.5. Cardholder Agreements. The Accounts Receivable have
been generated pursuant to the Accounts and pursuant to Cardholder
Agreements which are legal, valid and binding upon the Seller and, to the
best of Seller's knowledge, such Cardholder Agreements are legally
binding agreements, enforceable in all material respects against the
Cardholders or other obligors who are a party thereto in accordance with
their respective terms, except as enforcement thereof may be limited by
bankruptcy, fraudulent transfer, reorganization, moratorium or similar
laws of general applicability relating to or affecting creditors' rights
or to general equity principles (regardless of whether such matters are
considered in a proceeding in equity or at law) and the availability of
equitable remedies. The Seller is in compliance with the Cardholder
Agreements except where the failure to so comply would not have a
material adverse effect on the Accounts Receivable.
Section 4.6. Litigation. Except for the litigation described on
Schedule 4.6, which is attached hereto and made a part hereof,
there are no actions, suits or proceedings pending or, to the knowledge
of the Seller, threatened against or affecting the Seller which would
reasonably be expected to cause any material adverse effect on the
Accounts Receivable. There is no action, suit or proceeding pending
against the Seller which would prevent the Seller from consummating the
sale of the Accounts Receivable to the Purchaser hereunder.
Section 4.7. Accounts Receivable. Other than the right of
Cardholders or other obligors to assert claims and defenses against the
Seller pursuant to 12 C.F.R. ss.226.12(c) and under any other applicable
laws and the Cardholders' "billing error" rights pursuant to 12 C.F.R.
ss.226.13, to the best of the Seller's knowledge, the Accounts Receivable
are not subject to Cardholder or other obligor claims, offsets or
adjustments and represent the legal, valid and binding obligations of the
Cardholders, enforceable against the Cardholders in accordance with their
terms, except as enforcement thereof may be limited by bankruptcy,
fraudulent transfer, reorganization, moratorium or similar laws of
general applicability relating to or affecting creditors' rights or to
general equity principles (regardless of whether such matters are
considered in a proceeding in equity or at law) and the availability of
equitable remedies. Seller makes no representation or warranty regarding
the payment or collectibility of the Accounts Receivable.
Section 4.8. Compliance with Applicable Law. The Accounts
Receivable have been generated in compliance, in all material respects,
with applicable federal and state laws, rules and regulations, and
judicial, administrative and arbitrator's orders relating thereto,
including without limitation the federal Truth-in-Lending Act, Equal
Credit Opportunity Act, Fair Credit Reporting Act, Fair Debt Collection
Practices Act and Regulations B and Z promulgated by the Board of
Governors of the Federal Reserve System.
Section 4.9. Licensed to Carry on Credit Card Business. The Seller
is and has been licensed to participate in the programs offered by
Visa(R) and by MasterCard(R) to the full extent necessary to generate the
Accounts Receivable.
Section 4.10. Account Records. The books and records relating to
the Accounts Receivable are accurate and complete in all material
respects, in each case, as of the date when each such record was made and
all information relating to application, payment history, customer
inquiry and other relevant Account information is contained in the
relevant books and records.
Section 4.11. Brokers. Neither Seller nor any Affiliate of Seller
has agreed to pay any fee or commission to any agent, broker, finder or
other person for or on account of services rendered as a broker or finder
in connection with this Agreement or the sale of the Accounts Receivable
hereunder.
Section 4.12. Permits, Etc. No consent of any Person and no
license, permit or approval with any Governmental Authority having
jurisdiction over Seller is required in connection with the transactions
contemplated by this Agreement. The Seller has not received notice from
any Governmental Authority indicating that it would oppose or not grant
or issue its consent or approval, if required, with respect to the sale
of the Accounts Receivable hereunder or any of the other transactions
contemplated hereby.
The Seller makes no other representations or warranties, expressed
or implied, with respect to the subject matter hereof other than as
specifically set forth in this Article 4.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Seller as
follows:
Section 5.1. Organization. The Purchaser is a limited liability
company duly organized and validly existing in good standing under the
laws of the State of Delaware.
Section 5.2. Authority; Enforceability. The Purchaser has all
requisite power and authority (i) to enter into and carry out its
obligations under this Agreement, (ii) to purchase and hold the
Accounts Receivable and (iii) to assume the Assumed Obligations.
The execution, delivery and performance of this Agreement have been duly
authorized by all necessary action on the part of the Purchaser. This
Agreement has been duly executed and delivered by the Purchaser and
constitutes the legal, valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or similar laws of general
applicability relating to or affecting creditors' rights or to general
equity principles (regardless of whether such matters are considered in a
proceeding in equity or at law) and the availability of equitable
remedies.
Section 5.3. No Conflicts. The execution, delivery and performance
of this Agreement by the Purchaser does not violate (a) Purchaser's
Certificate of Formation or Limited Liability Company Agreement, (b) any
material agreement or instrument to which the Purchaser is a party or by
which the Purchaser is bound, or (c) any law, rule or regulation
applicable to the Purchaser.
Section 5.4. Permits, Etc. The Purchaser has obtained all licenses,
permits and approvals of all Governmental Authorities necessary for the
Purchaser to purchase, service and collect the Accounts Receivable and to
consummate the transactions contemplated hereby.
Section 5.5. Litigation. There is no action, suit or proceeding
pending or, to the knowledge of the Purchaser, threatened against the
Purchaser which challenges the validity, propriety or enforceability of,
or seeks to enjoin the performance of, the transactions contemplated by
this Agreement.
Section 5.6. Finders or Brokers. Neither Purchaser nor any
Affiliate of Purchaser has agreed to pay any fee or commission to any
agent, broker, finder or other person for or on account of services
rendered as a broker or finder in connection with this Agreement or the
transactions contemplated hereby.
ARTICLE 6
CERTAIN TRANSITIONAL MATTERS
Section 6.1. Third Party Consents. To the extent any Assumed
Obligation is not transferable or assignable without the consent of any
third party or the transfer or assignment of which would result in a
violation of any law or order, this Agreement shall not constitute on
assignment or attempted assignment thereof; Seller shall use all
reasonable efforts to obtain the required consent of any such third party
to the transfer or assignment thereof to the Purchaser and if any such
consent shall not be obtained, Seller shall cooperate with the Purchaser
in any reasonable arrangement (including reimbursement of monies paid by
the Purchaser on account of any such arrangement) designed to provide the
Purchaser with the benefits and/or burdens intended to be transferred and
assigned to it thereunder.
Section 6.2. Responsibility for Pre-Closing Transactions. Subject
to the provisions of Article 10, the Seller shall remain liable after the
date hereof for all draft retrievals, representments or incorrectly
posted transactions arising from transactions with an interchange
transaction date occurring prior to the Closing Date with respect to the
Accounts Receivable.
Section 6.3. Business Records. The Purchaser acknowledges that
certain business records of the Seller relating to the Seller's Credit
Card Business prior to the Closing Date will be conveyed to the Purchaser
or others, and that the Seller may from time to time require access to
such records, and the Purchaser agrees that upon reasonable prior notice
from the Seller, it will, during normal business hours, either provide
the Seller with access to records under its custody or control or, at the
Purchaser's option, copies of such records for such purposes. The Seller
agrees to hold any information so provided as confidential and in strict
confidence as it would its own confidential information. The Purchaser
agrees that it will not destroy any such business records during the
three (3) year period after the date hereof, and it will not within the
two (2) year period after such date destroy any business records prepared
prior to the date hereof without first notifying the Seller and affording
the Seller the opportunity to remove or copy them.
Section 6.4. Further Assistance. On and after the Closing Date, the
Seller shall (i) execute, acknowledge and deliver all such
acknowledgments and other instruments (including financing statements)
and take such further action as may be necessary and appropriate to
effectively vest in the Purchaser the full legal and equitable title to
the Accounts Receivable or to perfect the Purchaser's interest therein,
and (ii) assist the Purchaser in the orderly transition of the Accounts
Receivable being acquired by the Purchaser, and (iii) deliver such other
information about the Accounts Receivable as the Purchaser may reasonably
request. Subject to the provisions of Article 10 hereof, in the event
Seller shall receive any payments relating to the Accounts Receivable
attributable to the period after the Closing Date, the Seller shall
promptly endorse and transfer such payments to the Purchaser and take all
necessary and reasonable actions to vest such monies in the Purchaser.
ARTICLE 7
INDEMNIFICATION
Section 7.1. Indemnity by the Seller. The Seller agrees to
indemnify and hold the Purchaser, and its affiliates, employees,
officers, directors, controlling persons, successors and assigns (the
"Purchaser Indemnitees"), harmless from and with respect to any and all
claims, liabilities, losses, damages, costs and expenses, including
without limitation the reasonable fees and disbursements of counsel and
expert witnesses, net of insurance proceeds (collectively, the "Losses"),
related to or arising directly or indirectly out of (a) any inaccuracies
in any representation or warranty made by the Seller in or pursuant to
this Agreement, (but only to the extent that Losses relating to or
arising directly or indirectly out of such inaccuracies when taken
together with Losses (as that term is defined in the Applicable
Agreements) for which the Seller is obligated to indemnify the Purchaser
Indemnitees (as defined in the BKB Overdue Receivables Purchase
Agreement) pursuant to Section 7.1(a) of the BKB Overdue Receivables
Purchase Agreement and the Company Indemnitees (as defined in the BKB
Contribution Agreement) pursuant to Section 7.1(a) of the BKB
Contribution Agreement, without duplication, exceed $100,000 in the
aggregate), (b) any failure or breach by the Seller of any covenant,
obligation, or undertaking made by the Seller in this Agreement or (c)
the Retained Liabilities, in each such case, except to the extent that
any such Losses were caused by any such Indemnified Party's gross
negligence or willful misconduct.
Section 7.2. Indemnity by the Purchaser. The Purchaser agrees to
indemnify and hold the Seller, and its affiliates, employees, officers,
directors, controlling persons, successors and assigns (the "Seller
Indemnitees"), harmless from and with respect to any and all Losses
related to or arising directly or indirectly out of (a)any inaccuracies
in any representation or warranty made by the Purchaser in this Agreement
(but only to the extent that Losses relating to or arising directly or
indirectly out of such inaccuracies when taken together with Losses (as
that term is defined in the Applicable Agreements) for which Purchaser
and/or the Company are obligated to indemnify the Seller Indemnitees (as
defined in the relevant Applicable Agreement) pursuant to Section 7.2(a)
of each such Applicable Agreement, without duplication, exceed $100,000
in the aggregate), (b) any failure or breach by the Purchaser of any
covenant, obligation or undertaking made by the Purchaser in this
Agreement (including without limitation any failure by the Purchaser to
pay or perform any of the Assumed Obligations), (c) the collection of the
Accounts Receivable by the Purchaser after the Closing Date, or (d) the
Assumed Obligations, in each case, except to the extent that any such
Losses are caused by any such Indemnified Party's gross negligence or
willful misconduct.
Section 7.3. Claims. (a) Any party seeking indemnification
hereunder (the "Indemnified Party") shall promptly notify the party
hereto obligated to provide indemnification hereunder (the "Indemnifying
Party") of any action, suit, proceeding, demand or breach (a "Claim")
with respect to which the Indemnified Party claims indemnification
hereunder, provided that failure of the Indemnified Party to give such
notice shall not relieve the Indemnifying Party of its obligations under
this Article 7 except to the extent, if at all, that such Indemnifying
Party shall have been prejudiced thereby. If such Claim relates to any
action, suit, proceeding or demand instituted against the Indemnified
Party by a third party (a "Third Party Claim"), then upon receipt of such
notice from the Indemnified Party the Indemnifying Party shall be
entitled to participate in the defense of such Third Party Claim, and if
and only if each of the following conditions is satisfied, the
Indemnifying Party may assume the defense of such Third Party Claim, and
in the case of such an assumption the Indemnifying Party shall have the
authority to negotiate, compromise and settle such Third Party Claim:
(i) the Indemnifying Party confirms in writing that it is
obligated hereunder to indemnify the Indemnified Party with respect
to such Third Party Claim; and
(ii) there is no conflict of interest which would make
separate representation by the Indemnified Party's own counsel
advisable.
The Indemnified Party shall retain the right to employ its own counsel
and to participate in the defense of any Third Party Claim, the defense
of which has been assumed by the Indemnifying Party pursuant hereto, but
the Indemnified Party shall bear and shall be solely responsible for its
own costs and expenses in connection with such participation. The
Indemnifying Party shall not, without the prior written consent of the
Indemnified Party, settle or compromise any claim or consent to the entry
of any judgment that does not include as an unconditional term thereof
the giving by the claimant or the plaintiff to the Indemnified Party a
release from all liability in respect of such claim.
(b) In the event of any Claim under Section 7.1 or 7.2, the
Indemnified Party shall advise the Indemnifying Party in writing of the
amount and circumstances surrounding such Claim.
Section 7.4. Time Limits. No claim for indemnification under this
Article 7 may be asserted for the first time after June 30, 1999.
Section 7.5. Exclusive Remedy; Damage Limitations. The Seller and
the Purchaser acknowledge and agree that, except for the right to seek
specific performance of covenants and other agreements, the
indemnification rights and remedies available to each party under this
Article 7 shall be the sole and exclusive rights and remedies of the
Purchaser and the Seller with respect to any Losses arising out of or
relating in any way to (a) any breach of this Agreement, (b) the
acquisition of the Accounts Receivable and the assumption of the Assumed
Obligations by the Purchaser, or (c) the consummation of the transactions
contemplated hereby (collectively, the "Subject Losses"), including
without limitation any claims, rights or remedies for negligent
misrepresentation but excluding specifically, any claims, rights or
remedies for fraud. Without limiting the generality of the foregoing,
except for remedies for fraud and as specifically authorized by this
Article 7, the Purchaser and the Seller hereby waive, release and
disclaim any claims, rights or remedies arising in tort, by statute, or
otherwise, with respect to the Subject Losses. As provided in Section
9.6, in no event shall the Purchaser or the Seller be entitled to recover
from the other party hereto for incidental, special, consequential,
exemplary or punitive damages, and for all purposes of this Agreement,
the term "Losses" shall be deemed not to include any such damages.
Seller's maximum aggregate liability, and the right of recovery of the
Purchaser Indemnitees against the Seller under this Article 7 for
Losses, arising as a result of breaches of the Seller Indemnity
Representations contained herein shall, in all events, other than fraud
by Seller, be limited in the aggregate to $10,000,000 less all amounts
paid by Seller under Article 7 of the respective Applicable Agreements as
a result of breaches by Seller of the Seller Indemnity Representations
(as that term is defined in the respective Applicable Agreements).
Purchaser's maximum aggregate liability, and the right of recovery of the
Seller Indemnitees against the Purchaser under this Article7 for Losses,
arising as a result of breaches of the Purchaser Indemnity
Representations contained herein shall, in all events other than fraud by
the Purchaser, be limited in the aggregate to $10,000,000, less all
amounts paid by the Company and/or the Purchaser under the Applicable
Agreements as a result of breaches by the Company and/or the Purchaser of
the Purchaser Indemnity Representations and the Company Indemnity
Representations (as such terms are defined in the respective Applicable
Agreements).
ARTICLE 8
ITEMS TO BE DELIVERED AT CLOSING
Section 8.1. Items to be Delivered by Seller. Seller shall deliver
to Purchaser:
(a) Such bills of sale, assignments, UCC-1 forms, and other
instruments and documents duly executed and in full force and effect with
respect to Seller as Purchaser may reasonably require as necessary or
desirable for transferring, assigning and conveying title to the Accounts
Receivable to Purchaser, all in form and substance reasonably
satisfactory to Purchaser;
(b) The Initial Closing Statement; and
(c) Such other documents as Purchaser may reasonably request.
Section 8.2. Items to Be Delivered by Purchaser. Purchaser shall
deliver to Seller:
(a) An Assignment and Assumption Agreement duly executed and in
full force and effect with respect to Purchaser;
(b) Payment of the Estimated Purchase Price stated on the Initial
Closing Statement by wire transfer of funds immediately available in
Boston, Massachusetts; and
(c) Such other documents as Seller may reasonably request.
ARTICLE 9
GENERAL
Section 9.1. Disputes. In the event of any dispute or disagreement
between the parties after the Closing Date, either with respect to the
interpretation of any provision of this Agreement or with respect to the
performance or nonperformance by any party hereto, upon the written
request of any party, corporate executives of Seller and Purchaser shall
attempt to resolve any such dispute.
Section 9.2. Notices. All notices, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given
if delivered personally or if mailed by certified mail, return receipt
requested, postage prepaid or if sent by overnight courier or sent by
written facsimile with answerback confirmed, as follows:
If to the Seller: c/o Bank Boston Corporation
100 Federal Street, at 25-08
Boston, Massachusetts 021110
Attn: Mr. Peter J. Manning and
Gary A. Spiess, Esq.
with a copy sent
contemporaneously to: Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
Attention: Norman J. Shachoy, Esq.
If to the Purchaser: Partners First Receivables, LLC
900 Elkridge Landing Road
Suite 300
Linthicum, Maryland 21090
Attention: John R. Soderlund
with a copy sent
contemporaneously to: Partners First Receivables, LLC
900 Elkridge Landing Road
Suite 300
Linthicum, Maryland 21090
Attention: Terence F. Browne, Esq.
Any such communication shall be deemed to have been received (i)
when delivered, if personally delivered, or sent by nationally recognized
overnight courier or sent via facsimile or (ii) on the third Business Day
following the date on which the piece of mail containing such
communication is posted, if sent by certified mail.
Section 9.3. Entire Agreement. This Agreement (including the
Exhibits (including the Assignment and Assumption Agreement dated of even
date herewith (the "Assignment") between the parties hereto) and
Schedules hereto) and the letter agreement dated of even date herewith
(the "Letter") among the Company, the Seller and BankBoston (NH),
National Association, a national banking association (this Agreement, the
Assignment and the Letter being, collectively the "Receivables
Agreements") contains the entire understanding of the parties hereto, and
supersedes all prior agreements and understandings relating to the
subject matter hereof; and further, provided that nothing contained in
this Agreement, the Assignment or the Letter shall be deemed in any
manner to amend, modify, revise or otherwise change or supersede any of
the terms or provisions of any of the other Receivables Agreements. This
Agreement shall not be amended except by a written instrument hereafter
signed by the authorized officers of all of the parties hereto. No waiver
of any provision of this Agreement shall be effective unless evidenced by
a written instrument signed by the waiving party. Each of the parties
hereto further acknowledges and agrees that, in entering into this
Agreement, it has not in any way relied upon any oral or written
agreements, statements, promises, information, arrangements,
understandings, representations or warranties, express or implied, not
specifically set forth in this Agreement.
Section 9.4. Governing Law. This Agreement shall be governed by,
and construed and enforced in accordance with, the laws of the State of
Delaware without regard to its conflict of laws rules.
Section 9.5. Consent to Jurisdiction. Each of the parties hereto
agrees that any suit, action or proceeding instituted against such party
under or in connection with this Agreement may be brought in a court of
competent jurisdiction in State of Delaware. By execution hereof, each
party hereto irrevocably waives any objection to, and any right of
immunity on the grounds of, improper venue, the convenience of the forum,
the personal jurisdiction of such courts or the execution of judgments
resulting therefrom. Each party hereto hereby irrevocably accepts and
submits to the jurisdiction of such courts in any such action, suit or
proceeding.
Section 9.6. Waiver of Certain Damages. Each of the parties hereto
irrevocably waives, to the fullest extent permitted by law, any rights
that it may have to punitive, incidental, special, exemplary or
consequential damages in respect of any litigation based upon, or arising
out of, this Agreement or any course of conduct, course of dealing,
statements or actions of any of the parties hereto relating thereto.
Section 9.7. Section and Subsection Headings. The headings of
sections and subsections are for reference only and shall not limit or
control the meaning thereof.
Section 9.8. Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns. Neither this Agreement nor the
obligations of any party hereunder shall be assignable or transferable by
any party without the prior written consent of the other party hereto.
Section 9.9. No Implied Rights or Remedies. Except as otherwise
expressly provided herein, nothing herein expressed or implied is
intended or shall be construed to confer upon or to give any Person,
except the parties hereto, any rights or remedies under or by reason of
this Agreement.
Section 9.10. Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
Section 9.11. Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties hereto to express
their mutual intent, and no rule of strict construction will be applied
against any party hereto.
Section 9.12. Severability. The invalidity or unenforceability of
any particular provision of this Agreement shall not affect the other
provisions hereof, and this Agreement shall be construed in all respects
as if such invalid or unenforceable provision were omitted.
Section 9.13. Survival. The representations, warranties and
covenants of the parties hereto shall survive indefinitely, unless
otherwise specified therein.
Section 9.14. WAIVER OF RIGHT TO JURY TRIAL. EACH OF THE PARTIES
HERETO HEREBY WAIVES ITS RIGHTS TO A TRIAL BY JURY IN ANY LITIGATION IN
ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF, THIS
AGREEMENT, OR THE VALIDITY, INTERPRETATION OR ENFORCEMENT HEREOF OR
THEREOF OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 9.15. Remedies. Each party hereto will be entitled to
enforce its rights under this Agreement specifically (without posting a
bond or other security), to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights existing
in their favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of
this Agreement and that either party may in its sole discretion apply to
any court of law or equity of competent jurisdiction for specific
performance and/or injunctive relief in order to enforce or prevent any
violation of the provisions of this Agreement. In the event of any
dispute involving the terms of this Agreement, the prevailing party shall
be entitled to collect reasonable fees and expenses incurred by the
prevailing party in connection with such dispute from the other parties
to such dispute.
ARTICLE 10
CHARGEBACKS
Seller shall retain all right, title and interest in claims against
or payments from merchants in respect of amounts that were charged back
through Visa(R) or MasterCard(R) by Seller prior to the Closing Date or
will be charged back after the Closing Date in each case in respect to
which Seller had credited the affected Account Receivable prior to the
Closing Date (the "Chargeback Amount"). In the event any such payment
with respect to such Chargeback Amount is received by Purchaser, such
amount shall be promptly paid to Seller. After the Closing Date,
Purchaser shall have all right, title and interest in claims against or
payments from merchants in respect of all amounts in connection with the
Accounts that were charged back through the systems of Visa(R) or
MasterCard(R) by Seller prior to the Closing Date and in respect to which
Seller had not credited the affected Account Receivable prior to the
Closing Date; provided, however, that if the merchant refuses to pay such
Chargeback Amount because of any act or omission of Seller in violation
of applicable rules of Visa(R) or Mastercard(R), Seller shall promptly
pay Purchaser such amount and Purchaser shall assign to Seller any and
all rights Purchaser may have against the merchant. Purchaser shall have
all right, title and interest in all claims against or payment from
merchants in respect of all amounts in connection with the Accounts that
are charged back through the systems of Visa(R) or Mastercard(R) after
the Closing Date and in respect to which the affected Account had not
been credited prior to the Closing Date, and in the event that any such
payment is received by Seller, such amount shall be promptly paid by
Seller to Purchaser.
In the event either party hereto receives, or otherwise has
possession of, documents which the other party needs in order to pursue a
chargeback claim, the party which has such documents shall send such
documents to the other party within five (5) Business Days after written
request therefore.
Anything contained in this Agreement to the contrary
notwithstanding, all amounts received with respect to any Account after
the Closing Date not in excess of the amount (if any) of the Chargeback
Amount with respect to such Account shall belong to Seller and, if
received by Purchaser after the Closing Date, shall be promptly paid to
Seller. Seller may retain any such amounts received by it after the
Closing Date.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties hereto have caused this Receivables Purchase and Sale Agreement
to be duly executed and delivered as a sealed instrument as of the date
and year first above written.
BANKBOSTON (NH), NATIONAL ASSOCIATION
By /s/ William M. Parent
____________________________________
Name: William M. Parent
Title: Authorized Officer
PARTNERS FIRST RECEIVABLES, LLC
By /s/ John R. Soderlund
____________________________________
Name: John R. Soderlund
Title: President and Chief Executive
Officer
SCHEDULE 2.1
ACCOUNTS
Tape to be supplied by First Annapolis Marketing Information
Services, Inc., as agent for the Seller.
SCHEDULE 4.6
LITIGATION
NONE
- ------------------------------------------------------------------------------
OVERDUE RECEIVABLES PURCHASE AND SALE AGREEMENT
BETWEEN
BANKBOSTON (NH), NATIONAL ASSOCIATION
AND
PARTNERS FIRST RECEIVABLES, LLC
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS...................................................1
Section 1.1. Certain Defined Terms.....................1
ARTICLE 2
SALE OF ASSETS................................................4
Section 2.1. Overdue Receivables.......................4
Section 2.2. Excluded Assets...........................4
Section 2.3. Relative Valuation........................4
ARTICLE 3
ASSUMPTION OF OBLIGATIONS.....................................5
Section 3.1. Assumption of Obligations.................5
Section 3.2. Consideration.............................5
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SELLER..................6
Section 4.2. Authority; Enforceability.................6
Section 4.3. No Conflicts..............................6
Section 4.4. Ownership of Assets.......................6
Section 4.5. Cardholder Agreements.....................7
Section 4.6. Litigation................................7
Section 4.7. Overdue Receivables.......................7
Section 4.8. Compliance with Applicable Law............7
Section 4.9. Licensed to Carry on Credit Card Business.7
Section 4.10. Account Records..........................8
Section 4.11. Brokers..................................8
Section 4.12. Permits, Etc.............................8
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER...............8
Section 5.1. Organization..............................8
Section 5.2. Authority; Enforceability.................8
Section 5.3. No Conflicts..............................8
Section 5.4. Permits, Etc..............................9
Section 5.5. Litigation................................9
Section 5.6. Finders or Brokers........................9
ARTICLE 6
CERTAIN TRANSITIONAL MATTERS..................................9
Section 6.1. Third Party Consents......................9
Section 6.2. Responsibility for Pre-Closing Transactions9
Section 6.3. Business Records..........................9
Section 6.4. Further Assistance.......................10
ARTICLE 7
INDEMNIFICATION..............................................10
Section 7.1. Indemnity by the Seller..................10
Section 7.2. Indemnity by the Purchaser...............10
Section 7.3. Claims...................................11
Section 7.4. Time Limits..............................11
Section 7.5. Exclusive Remedy; Damage Limitations.....11
ARTICLE 8
ITEMS TO BE DELIVERED AT CLOSING.............................12
Section 8.1. Items to be Delivered by Seller..........12
Section 8.2. Items to Be Delivered by Purchaser.......12
ARTICLE 9
GENERAL......................................................13
Section 9.1. Disputes.................................13
Section 9.2. Notices..................................13
Section 9.3 Entire Agreement.........................14
Section 9.4. Governing Law............................14
Section 9.5. Consent to Jurisdiction..................14
Section 9.6. Waiver of Certain Damages................14
Section 9.7. Section and Subsection Headings..........14
Section 9.8. Assigns..................................14
Section 9.9. No Implied Rights or Remedies............15
Section 9.10. Counterparts............................15
Section 9.11. Construction............................15
Section 9.12. Severability............................15
Section 9.13. Survival................................15
Section 9.14. Waiver of Right to Jury Trial...........15
Section 9.15. Remedies................................15
ARTICLE 10
CHARGEBACKS..................................................15
SCHEDULES
Schedule 2.1-- Overdue Accounts
Schedule 4.6-- Litigation
RECEIVABLES PURCHASE AND SALE AGREEMENT
This Overdue Receivables Purchase and Sale Agreement, dated as of
January 29, 1998 (as in effect from time to time, this "Agreement"),
between BankBoston (NH), National Association, a national banking
association (the "Seller"), and (b) Partners First Receivables,
LLC, a Delaware limited liability company (the "Purchaser").
WHEREAS, Seller desires to sell the Overdue Receivables (as
hereinafter defined) to Purchaser, and Purchaser desires to purchase the
Overdue Receivables, on the terms and conditions hereinafter set forth
and provided.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants set forth below, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree, intending to be legally bound, as follows:
ARTICLE 1
DEFINITIONS
Section 1.1. Certain Defined Terms. Capitalized terms used herein
without definition have the meaning assigned to such terms in the Limited
Liability Company Agreement of Partners First Holdings, LLC dated as of
the date hereof among BankBoston (NH), National Association, Bankmont
Financial Corp., Harris Trust and Savings Bank, First Annapolis Marketing
Information Services, Inc. and the Company (the "Operating Agreement").
Additionally, the following capitalized terms shall have the following
meanings:
"Adjusted Closing Statement" has the meaning set forth in
Section 3.3(b).
"Agreement" has the meaning set forth in the preamble.
"Applicable Agreements" means (i) that certain Contribution
Agreement dated as of the date hereof by and between Partners First
Holdings, LLC and Seller, and (ii) that certain Receivables Purchase and
Sale Agreement dated the date hereof by and between Seller and Purchaser.
"Assignment" has the meaning set forth in Section 9.3.
"Assumed Obligations" has the meaning set forth in Section 3.1.
"Cardholder" means a holder of a Credit Card.
"Cardholder Agreements" means the agreements between the
Cardholders or other obligors with respect to a Credit Card and the
Seller, including, without limitation, any agreements relating to credit
enhancements provided in connection with such Credit Card, and as the
same has been amended or otherwise modified and in effect from time to
time.
"Chargeback Amount" has the meaning set forth in Article 10.
"Claim" has the meaning set forth in Section7.3(a).
"Closing Date" means the date on which the transactions described
in this Agreement are consummated, except that for purposes of
determining Overdue Accounts or Overdue Receivables it shall mean the
opening of business on the day on which the transactions described in
this Agreement are consummated.
"Credit Card" means a MasterCard(R) or Visa(R) card issued by
Seller and associated solely with an Account of Seller's Credit Card
Business.
"Credit Card Business" means the provision of unsecured lines of
credit accessible by Visa(R) or MasterCard(R) to consumers within the
United States of America, the servicing of such credit card
relationships, and the provision of services incidental thereto.
"Estimated Purchase Price" has the meaning set forth in
Section 3.3.
"Excluded Accounts" has the meaning set forth in Section 2.2.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Governmental Authority" means any federal, national, state,
municipal, local, territorial or other governmental department,
commission, board, bureau, agency, regulatory authority, instrumentality,
judicial or administrative body, domestic or foreign and Visa(R) and
MasterCard(R).
"Indemnified Party" has the meaning set forth in Section 7.3(a).
"Indemnifying Party" has the meaning set forth in
Section 7.3(a).
"Initial Closing Statement" has the meaning set forth in
Section 3.3 (a).
"Letter" has the meaning set forth in Section 9.3.
"Losses" has the meaning set forth in Section 7.1.
"MasterCard(R)" means MasterCard International Incorporated.
"Overdue Accounts" means all of the credit card accounts of the
Seller's Credit Card Business (other than Excluded Accounts) identified
on Schedule 2.1 which is attached hereto or provided herewith and made a
part hereof (which may in the Seller's sole discretion be in the form of
a computer file or magnetic tape) consisting generally of any credit card
account of Seller's Credit Card Business (other than commercial or
business or secured accounts), including, dormant accounts, in-active
accounts, closed accounts, accounts which are classified as
"substandard," "doubtful," "loss" or treated as "other loans especially
mentioned" in the most recent report examination prepared by any Federal
or State supervisory agency, accounts in nonaccrual status, accounts on
which principal or interest payments are more than 30 days past due,
accounts whose terms have been renegotiated or compromised due to the
deteriorating financial condition of the Cardholder or accounts statused
by Seller as bankrupt, deceased, fraud, lost or stolen or charged off
(such status to be determined in a manner consistent with Seller's
customary practices consistently applied) and which contains sufficient
information to identify each account and respective Cardholder such as
name, address, social security number, account number, status codes,
account balance and such other information as is mutually agreed upon by
Purchaser and Seller.
"Overdue Receivables" has the meaning set forth in
Section 2.1.
"Purchase Price" has the meaning set forth in Section 3.2.
"Purchaser" has the meaning set forth in the preamble hereto.
"Purchaser Indemnitees" has the meaning set forth in Section
7.1.
"Purchaser Indemnity Representations" means the representations and
warranties of Purchaser contained in Section 5.4 and 5.5 of this
Agreement.
"Receivables Agreements" has the meaning set forth in Section
9.3.
"Retained Liabilities" has the meaning set forth in
Section 3.1.
"Seller" has the meanings set forth in the preamble hereto.
"Seller Indemnitees" has the meaning set forth in Section 7.2.
"Seller Indemnity Representations" means the representations and
warranties of Seller contained in Sections 4.5, 4.6, 4.7 (except the
first sentence thereof), 4.8, 4.9, 4.10 and 4.12 of this Agreement.
"Subject Losses" has the meaning set forth in Section 7.5.
"Third Party Claim" has the meaning set forth in Section 7.3(a).
"Visa(R)" means Visa U.S.A., Inc
"Zero Value Accounts" means Overdue Accounts which as of the
Closing Date (i) are statused by Sellers as bankruptcy, deceased,
fraud, lost or stolen or charged off or (ii) are 180 days or more
contractually past due (in each case, such status to be determined in a
manner consistent with Seller's customary practices consistently
applied).
ARTICLE 2
SALE OF ASSETS
Section 2.1. Overdue Receivables. On the Closing Date, and subject
to the terms and conditions set forth in this Agreement, the Seller
(subject to the provisions of Article 10 hereto) shall sell,
assign, transfer and deliver to Purchaser, and the Purchaser shall
purchase and take assignment and delivery of, all of the Seller's right,
title and interest in, to and under the following assets as of the
Closing Date (other than the Excluded Accounts and the Excluded Assets):
any and all amounts owing from the Cardholders to the Seller (whether
billed or unbilled, posted or not) in connection with the Overdue
Accounts, including, without limitation, all principal, outstanding
purchases, cash advances, interest (including accrued but unbilled
interest), annual fees, finance and service charges and other charges and
fees, less any and all amounts owing from the Seller to the Cardholders
as a credit balance, whether or not credited (hereinafter referred to
collectively as the "Overdue Receivables").
The parties hereto intend that the conveyance of the Seller's
right, title and interest in and to the Overdue Receivables shall
constitute an absolute sale, conveying good title free and clear of any
liens, claims, encumbrances or rights of others from the Seller to the
Purchaser and that the Overdue Receivables shall not be a part of the
Seller's estate in the event of the insolvency of the Seller or a
conservatorship, receivership or similar event with respect to the
Seller. It is the intention of the parties hereto that the arrangements
with respect to the Overdue Receivables shall constitute a purchase and
sale of such Overdue Receivables and not a loan. In the event, however,
that it were to be determined that the transactions evidenced hereby
constitute a loan and not a purchase and sale, it is the intention of the
parties hereto that this Agreement shall constitute a security agreement
under applicable law, and that the Seller shall be deemed to have granted
and does hereby grant to the Purchaser a first priority perfected
security interest, in all of the Seller's right, title and interest,
whether now owned or hereafter acquired, in, to and under the Overdue
Receivables to secure the rights of the Purchaser hereunder and the
obligations of the Seller hereunder.
Section 2.2. Excluded Assets. Notwithstanding the foregoing, the
Seller are not transferring to the Purchaser and the Purchaser is not
acquiring pursuant to this Agreement, and the term "Overdue Receivables"
shall not include, any other assets of Seller not specifically referenced
in Section 2.1 (the "Excluded Assets") or any Overdue Receivables
generated by or related to accounts which are secured accounts,
commercial or business accounts, or accounts which are a part of the
Seller' BKB International Credit Card Business, BKB Relationship Credit
Card Business or BKB Value-Limited Credit Card Business ("Excluded
Accounts").
Section 2.3. Relative Valuation. The Seller and the Purchaser agree
that, immediately after giving effect to the transactions effected by the
BKB Purchase Agreements, the Accounts Receivable and the Overdue
Receivables (as defined in the applicable BKB Purchase Agreement)
transferred by the Seller to the Purchaser pursuant to the BKB Purchase
Agreements will have characteristics substantially similar to the
Accounts Receivable and the Overdue Receivables (as defined in the
applicable BKB Purchase Agreement) comprising the BKB Value-Limited
Credit Card Business.
ARTICLE 3
ASSUMPTION OF OBLIGATIONS
Section 3.1. Assumption of Obligations. The Purchaser hereby
assumes, and agrees to pay, perform, fulfill and discharge, all of the
Seller's obligations with respect to the Overdue Receivables from and
after the Closing Date (collectively, the "Assumed Obligations").
Anything in this Agreement to the contrary notwithstanding, the Purchaser
shall not assume, and shall not be deemed to have assumed, any liability,
contract or obligation of the Seller not specifically listed or included
herein or assumed by separate written agreement signed by the Purchaser
(all such liabilities and obligations not being assumed being referred to
herein as the "Retained Liabilities"), which Retained Liabilities are
retained by the Seller and the Purchaser shall not be liable therefor.
Section 3.2. Consideration. In consideration of the sale of the
Overdue Receivables by the Seller to the Purchaser hereunder, the
Purchaser agrees to assume the Assumed Obligations and to pay to the
Seller, the purchase price ("Purchase Price") which shall be an amount
equal to (i) the sum of all Overdue Receivables as of the Closing
Date, (ii) less the sum of all Overdue Receivables of the Zero
Value Accounts as of the Closing Date and (iii) plus or minus any
other items or prorations agreed to by Seller and Purchaser.
Section 3.3. Payment of Purchase Price. (a) On the Closing Date,
the parties shall prepare a closing statement (the "Initial Closing
Statement") calculating the Purchase Price as of the date of the most
recently available data (or another date mutually acceptable to Purchaser
and Seller) with respect to the Overdue Receivables (the "Estimated
Purchase Price"). On the Closing Date, the Estimated Purchase Price shall
be paid in immediately available funds to the Seller by the Purchaser.
(b) As soon as practicable after the Closing Date, Purchaser and
Seller shall conduct and complete a post-Closing review of the Overdue
Receivables and shall prepare a closing statement as of the Closing Date
(the "Adjusted Closing Statement"), mutually acceptable to Seller and
Purchaser, and showing any adjustments from the Initial Closing Statement
including the difference between the Estimated Purchase Price and the
Purchase Price. Purchaser shall pay Seller (or Seller shall pay Purchaser
as the case may be) an amount equal to the difference between the
Estimated Purchase Price and the Purchase Price as reflected on the
Adjusted Closing Statement plus interest thereon at the federal funds
rate from the Closing Date to the date of payment.
Section 3.4. Post-Closing Adjustments. Seller is responsible for
any and all fees in connection with the Overdue Receivables related to
the period prior to the Closing Date, including fees, normal operating
assessments or penalties and other charges imposed by MasterCard(R) or
Visa(R). The parties hereto hereby agree to cooperate in good faith to
estimate such fees and include them on the Initial Closing Statement and
to make such post-closing adjustments between themselves as may be
necessary to give effect to the provisions hereof and to reflect such
adjustments on the Adjusted Closing Statement. Adjustments to amounts
calculated pursuant to Section 3.3 and this Section 3.4 may include
unposted amounts, miscalculations, errors, incorrect status,
mis-characterization or mis-classification of Overdue Accounts, Zero
Value Accounts and Overdue Receivables. For purposes of this adjustment,
mis-classified Overdue Accounts which should have been classified as Zero
Value Accounts as of the Closing Date will be valued accordingly. As
provided in Section 6.2 hereof, for the purpose of determining when or
whether an event took place, the interchange date as specified by Visa(R)
or MasterCard(R) shall be determinative.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SELLER
Seller hereby represents and warrants to the Purchaser as follows:
Section 4.1. Organization. Seller is a national banking association
organized under the laws of the United States and is authorized to
conduct general banking business under such laws.
Section 4.2. Authority; Enforceability. Seller has all requisite
power and authority (i) to enter into and carry out its obligations under
this Agreement, (ii) to hold the Overdue Receivables and (iii) to sell,
assign and transfer the Overdue Receivables being sold to the Purchaser
by it. The execution, delivery and performance of this Agreement have
been duly authorized by all necessary action on the part of the Seller.
This Agreement has been duly executed and delivered and constitutes the
legal, valid and binding obligation of Seller, enforceable against Seller
in accordance with its terms, except as enforcement thereof may be
limited by receivership, conservatorship and supervisory powers of bank
regulatory agencies generally, as well as bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or similar laws of
general applicability relating to or affecting creditors' rights or to
general equity principles (regardless of whether such matters are
considered in a proceeding in equity or at law) and the availability of
equitable remedies.
Section 4.3. No Conflicts. The execution, delivery and performance
by the Seller of this Agreement does not violate (a) Seller's Articles of
Association or By-Laws, as applicable, (b) any material agreement
or instrument to which Seller is a party or by which Seller is bound or
which affects the Overdue Receivables, or (c) any law, rule or
regulation applicable to Seller or which affects the Overdue Receivables.
Section 4.4. Ownership of Assets. Seller is the sole owner of all
right, title and interest in, to and under all of the Overdue Receivables
being sold by BKB-NH to the Purchaser under this Agreement. Seller has
the right, power and authority to sell and transfer the Overdue
Receivables being sold by it to the Purchaser, and the Overdue
Receivables are not subject to any assignment, lien, charge, encumbrance
or security interest, except that such Overdue Receivables may be subject
to the terms of the Cardholder Agreements and to other rights of
Cardholders and other obligors as specified in Section 4.7 hereof. Seller
hereby sells the Overdue Receivables being sold by it to the Purchaser
free and clear of all assignments, liens, charges, encumbrances and other
security interests and of all claims or rights of third parties, except
as such Overdue Receivables may be subject to the terms of the Cardholder
Agreements and to other rights of Cardholders and other obligors as
specified in Section 4.7 hereof.
Section 4.5. Cardholder Agreements. The Overdue Receivables have
been generated pursuant to the Overdue Accounts and pursuant to
Cardholder Agreements which are legal, valid and binding upon the Seller
and, to the best of Seller's knowledge, such Cardholder Agreements are
legally binding agreements, enforceable in all material respects against
the Cardholders or other obligors who are a party thereto in accordance
with their respective terms, except as enforcement thereof may be limited
by bankruptcy, fraudulent transfer, reorganization, moratorium or similar
laws of general applicability relating to or affecting creditors' rights
or to general equity principles (regardless of whether such matters are
considered in a proceeding in equity or at law) and the availability of
equitable remedies. The Seller are in compliance with the Cardholder
Agreements except where the failure to so comply would not have a
material adverse effect on the Overdue Receivables.
Section 4.6. Litigation. Except for the litigation described on
Schedule 4.6, which is attached hereto and made a part hereof,
there are no actions, suits or proceedings pending or, to the knowledge
of the Seller, threatened against or affecting the Seller which would
reasonably be expected to cause any material adverse effect on the
Overdue Receivables. There is no action, suit or proceeding pending
against the Seller which would prevent the Seller from consummating the
sale of the Overdue Receivables to the Purchaser hereunder.
Section 4.7. Overdue Receivables. Other than the right of
Cardholders or other obligors to assert claims and defenses against the
Seller pursuant to 12 C.F.R. ss.226.12(c) and under any other applicable
laws and the Cardholders' "billing error" rights pursuant to 12 C.F.R.
ss.226.13, to the best of the Seller's knowledge, the Overdue Receivables
are not subject to Cardholder or other obligor claims, offsets or
adjustments and represent the legal, valid and binding obligations of the
Cardholders, enforceable against the Cardholders in accordance with their
terms, except as enforcement thereof may be limited by bankruptcy,
fraudulent transfer, reorganization, moratorium or similar laws of
general applicability relating to or affecting creditors' rights or to
general equity principles (regardless of whether such matters are
considered in a proceeding in equity or at law) and the availability of
equitable remedies. Seller makes no representation or warranty regarding
the payment or collectibility of the Overdue Receivables.
Section 4.8. Compliance with Applicable Law. The Overdue
Receivables have been generated in compliance, in all material respects,
with applicable federal and state laws, rules and regulations, and
judicial, administrative and arbitrator's orders relating thereto,
including without limitation the federal Truth-in-Lending Act, Equal
Credit Opportunity Act, Fair Credit Reporting Act, Fair Debt Collection
Practices Act and Regulations B and Z promulgated by the Board of
Governors of the Federal Reserve System.
Section 4.9. Licensed to Carry on Credit Card Business. The Seller
is and has been licensed to participate in the programs offered by
Visa(R) and by MasterCard(R) to the full extent necessary to generate the
Overdue Receivables.
Section 4.10. Account Records. The books and records relating to
the Overdue Receivables are accurate and complete in all material
respects, in each case, as of the date when each such record was made and
all information relating to application, payment history, customer
inquiry and other relevant Account information is contained in the
relevant books and records.
Section 4.11. Brokers. Neither Seller nor any Affiliates of Seller
has agreed to pay any fee or commission to any agent, broker, finder or
other person for or on account of services rendered as a broker or finder
in connection with this Agreement or the sale of the Overdue Receivables
hereunder.
Section 4.12. Permits, Etc. No consent of any Person and no
license, permit or approval with any Governmental Authority having
jurisdiction over Seller is required in connection with the transactions
contemplated by this Agreement. Seller has not received notice from any
Governmental Authority indicating that it would oppose or not grant or
issue its consent or approval, if required, with respect to the sale of
the Overdue Receivables hereunder or any of the other transactions
contemplated hereby.
Seller makes no other representations or warranties,
expressed or implied, with respect to the subject matter hereof other
than as specifically set forth in this Article.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Seller as
follows:
Section 5.1. Organization. The Purchaser is a limited liability
company duly organized and validly existing in good standing under the
laws of the State of Delaware.
Section 5.2. Authority; Enforceability. The Purchaser has all
requisite power and authority (i) to enter into and carry out its
obligations under this Agreement, (ii) to purchase and hold the
Overdue Receivables and (iii) to assume the Assumed Obligations.
The execution, delivery and performance of this Agreement have been duly
authorized by all necessary action on the part of the Purchaser. This
Agreement has been duly executed and delivered by the Purchaser and
constitutes the legal, valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or similar laws of general
applicability relating to or affecting creditors' rights or to general
equity principles (regardless of whether such matters are considered in a
proceeding in equity or at law) and the availability of equitable
remedies.
Section 5.3. No Conflicts. The execution, delivery and performance
of this Agreement by the Purchaser does not violate (a) Purchaser's
Certificate of Formation or Limited Liability Company Agreement, (b)<0-
32>any material agreement or instrument to which the Purchaser is a party
or by which the Purchaser is bound, or (c) any law, rule or
regulation applicable to the Purchaser.
Section 5.4. Permits, Etc. The Purchaser has obtained all licenses,
permits and approvals of all Governmental Authorities necessary for the
Purchaser to purchase, service and collect the Overdue Receivables and to
consummate the transactions contemplated hereby.
Section 5.5. Litigation. There is no action, suit or proceeding
pending or, to the knowledge of the Purchaser, threatened against the
Purchaser which challenges the validity, propriety or enforceability of,
or seeks to enjoin the performance of, the transactions contemplated by
this Agreement.
Section 5.6. Finders or Brokers. Neither Purchaser nor any
Affiliate of Purchaser has agreed to pay any fee or commission to any
agent, broker, finder or other person for or on account of services
rendered as a broker or finder in connection with this Agreement or the
transactions contemplated hereby.
ARTICLE 6
CERTAIN TRANSITIONAL MATTERS
Section 6.1. Third Party Consents. To the extent any Assumed
Obligation is not transferable or assignable without the consent of any
third party or the transfer or assignment of which would result in a
violation of any law or order, this Agreement shall not constitute an
assignment or attempted assignment thereof; Seller shall use all
reasonable efforts to obtain the required consent of any such third party
to the transfer or assignment thereof to the Purchaser and if any such
consent shall not be obtained, Seller shall cooperate with the Purchaser
in any reasonable arrangement (including reimbursement of monies paid by
the Purchaser on account of any such arrangement) designed to provide the
Purchaser with the benefits and/or burdens intended to be transferred and
assigned to it thereunder.
Section 6.2. Responsibility for Pre-Closing Transactions. Subject
to the provisions of Article 10, the Seller shall remain liable after the
date hereof for all draft retrievals, representments or incorrectly
posted transactions arising from transactions with an interchange
transaction date occurring prior to the Closing Date with respect to the
Overdue
Section 6.3. Business Records. The Purchaser acknowledges that
certain business records of the Seller relating to the Seller's Credit
Card Business prior to the Closing Date will be conveyed to the Purchaser
or others, and that the Seller may from time to time require access to
such records, and the Purchaser agrees that upon reasonable prior notice
from the Seller, it will, during normal business hours, either provide
the Seller with access to records under its custody or control or, at the
Purchaser's option, copies of such records for such purposes. The Seller
agrees to hold any information so provided as confidential and in strict
confidence as it would its own confidential information. The Purchaser
agrees that it will not destroy any such business records during the
three (3) year period after the date hereof, and it will not within the
two (2) year period after such date destroy any business records
prepared prior to the date hereof without first notifying the Seller and
affording the Seller the opportunity to remove or copy them.
Section 6.4. Further Assistance. On and after the Closing Date,
Seller shall (i) execute, acknowledge and deliver all such
acknowledgments and other instruments (including financing statement) and
take such further action as may be necessary and appropriate to
effectively vest in the Purchaser the full legal and equitable title to
the Overdue Receivables or to perfect the Purchaser's interest therein,
and (ii) assist the Purchaser in the orderly transition of the
Overdue Receivables being acquired by the Purchaser, and (iii)<0-
32>deliver such other information about the Overdue Receivables as the
Purchaser may reasonably request. Subject to the provisions of Article 10
hereof, in the event Seller shall receive any payments relating to the
Overdue Receivables attributable to the period after the Closing Date,
the Seller shall promptly endorse and transfer such payments to the
Purchaser and take all necessary and reasonable actions to vest such
monies in the Purchaser.
ARTICLE 7
INDEMNIFICATION
Section 7.1. Indemnity by the Seller. The Seller agrees to
indemnify and hold the Purchaser, and its affiliates, employees,
officers, directors, controlling persons, successors and assigns (the
"Purchaser Indemnitees"), harmless from and with respect to any and all
claims, liabilities, losses, damages, costs and expenses, including
without limitation the reasonable fees and disbursements of counsel and
expert witnesses, net of insurance proceeds (collectively, the "Losses"),
related to or arising directly or indirectly out of (a) any
inaccuracies in any representation or warranty made by the Seller in or
pursuant to this Agreement, (but only to the extent that Losses relating
to or arising directly or indirectly out of such inaccuracies when taken
together with Losses (as that term is defined in the Applicable
Agreements) for which the Seller is obligated to indemnify the Purchaser
Indemnitees (as defined in the BKB Purchase Agreement) pursuant to
Section 7.1(a) of the BKB Purchase Agreement and the Company
Indemnitees (as defined in the BKB Contribution Agreement) pursuant to
Section 7.1(a) of the BKB Contribution Agreement, without
duplication, exceed $100,000 in the aggregate), (b) any failure or
breach by the Seller of any covenant, obligation, or undertaking made by
the Seller in this Agreement or (c) the Retained Liabilities, in
each such case, except to the extent that any such Losses were caused by
any such Indemnified Party's gross negligence or willful misconduct.
Section 7.2. Indemnity by the Purchaser. The Purchaser agrees to
indemnify and hold the Seller, and its affiliates, employees, officers,
directors, controlling persons, successors and assigns (the "Seller
Indemnitees"), harmless from and with respect to any and all Losses
related to or arising directly or indirectly out of (a) any
inaccuracies in any representation or warranty made by the Purchaser in
this Agreement (but only to the extent that Losses relating to or arising
directly or indirectly out of such inaccuracies when taken together with
Losses (as that term is defined in the Applicable Agreements) for which
Purchaser and/or the Company are obligated to indemnify the Seller
Indemnitees (as defined in the relevant Applicable Agreement) pursuant to
Section 7.2(a) of each such Applicable Agreement, without
duplication, exceed $100,000 in the aggregate), (b) any failure or
breach by the Purchaser of any covenant, obligation or undertaking made
by the Purchaser in this Agreement (including without limitation any
failure by the Purchaser to pay or perform any of the Assumed
Obligations), (c) the collection of the Overdue Receivables by the
Purchaser after the Closing Date, or (d) the Assumed Obligations,
in each case, except to the extent that any such Losses were caused by
any such Indemnified Party's gross negligence or willful misconduct.
Section 7.3. Claims. (a) Any party seeking indemnification
hereunder (the "Indemnified Party") shall promptly notify the party
hereto obligated to provide indemnification hereunder (the "Indemnifying
Party") of any action, suit, proceeding, demand or breach (a "Claim")
with respect to which the Indemnified Party claims indemnification
hereunder, provided that failure of the Indemnified Party to give such
notice shall not relieve the Indemnifying Party of its obligations under
this Article 7 except to the extent, if at all, that such Indemnifying
Party shall have been prejudiced thereby. If such Claim relates to any
action, suit, proceeding or demand instituted against the Indemnified
Party by a third party (a "Third Party Claim"), then upon receipt of such
notice from the Indemnified Party the Indemnifying Party shall be
entitled to participate in the defense of such Third Party Claim, and if
and only if each of the following conditions is satisfied, the
Indemnifying Party may assume the defense of such Third Party Claim, and
in the case of such an assumption the Indemnifying Party shall have the
authority to negotiate, compromise and settle such Third Party Claim:
(i) the Indemnifying Party confirms in writing that it is
obligated hereunder to indemnify the Indemnified Party with respect
to such Third Party Claim; and
(ii) there is no conflict of interest which would make
separate representation by the Indemnified Party's own counsel
advisable.
The Indemnified Party shall retain the right to employ its own counsel
and to participate in the defense of any Third Party Claim, the defense
of which has been assumed by the Indemnifying Party pursuant hereto, but
the Indemnified Party shall bear and shall be solely responsible for its
own costs and expenses in connection with such participation. The
Indemnifying Party shall not, without the prior written consent of the
Indemnified Party, settle or compromise any claim or consent to the entry
of any judgment that does not include as an unconditional term thereof
the giving by the claimant or the plaintiff to the Indemnified Party a
release from all liability in respect of such claim.
(b) In the event of any Claim under Section 7.1 or 7.2, the
Indemnified Party shall advise the Indemnifying Party in writing of the
amount and circumstances surrounding such Claim.
Section 7.4. Time Limits. No claim for indemnification under this
Article 7 may be asserted for the first time after June 30, 1999.
Section 7.5. Exclusive Remedy; Damage Limitations. The Seller and
the Purchaser acknowledge and agree that, except for the right to seek
specific performance of covenants and other agreements, the
indemnification rights and remedies available to each party under this
Article 7 shall be the sole and exclusive rights and remedies of the
Purchaser and the Seller with respect to any Losses arising out of or
relating in any way to (a) any breach of this Agreement, (b) the
acquisition of the Overdue Receivables and the assumption of the Assumed
Obligations by the Purchaser, or (c) the consummation of the transactions
contemplated hereby (collectively, the "Subject Losses"), including
without limitation any claims, rights or remedies for negligent
misrepresentation but excluding specifically, any claims, rights or
remedies for fraud. Without limiting the generality of the foregoing,
except for remedies for fraud and as specifically authorized by this
Article 7, the Purchaser and the Seller hereby waive, release and
disclaim any claims, rights or remedies arising in tort, by statute, or
otherwise, with respect to the Subject Losses. As provided in Section
9.6, in no event shall the Purchaser or the Seller be entitled to recover
from the other party hereto for incidental, special, consequential,
exemplary or punitive damages, and for all purposes of this Agreement,
the term "Losses" shall be deemed not to include any such damages.
Seller's maximum aggregate liability, and the right of recovery of the
Purchaser Indemnitees against the Seller under this Article 7 for Losses,
arising as a result of breaches of the Seller Indemnity Representations
contained herein shall, in all events, other than fraud by Seller, be
limited in the aggregate to $10,000,000 less all amounts paid by Seller
under Article 7 of the Applicable Agreements as a result of breaches by
Seller of the Seller Indemnity Representations (as that term is defined
in the respective Applicable Agreements). Purchaser's maximum aggregate
liability, and the right of recovery of the Seller Indemnitees against
the Purchaser under this Article 7 for Losses, arising as a result of
breaches of the Purchaser Indemnity Representations contained herein
shall, in all events other than fraud by the Purchaser, be limited in the
aggregate to $10,000,000, less all amounts paid by the Company and/or the
Purchaser under the Applicable Agreements as a result of breaches by the
Company and/or the Purchaser of the Purchaser Indemnity Representations
and/or the Company Indemnity Representations (as such terms are defined
in the respective Applicable Agreements).
ARTICLE 8
ITEMS TO BE DELIVERED AT CLOSING
Section 8.1. Items to be Delivered by Seller. Seller shall deliver
to Purchaser:
(a) Such bills of sale, assignments, UCC-1 forms, and other
instruments and documents duly executed and in full force and effect with
respect to Seller as Purchaser may reasonably require as necessary or
desirable for transferring, assigning and conveying title to the Overdue
Receivables to Purchaser, all in form and substance reasonably
satisfactory to Purchaser;
(b) The Initial Closing Statement; and
(c) Such other documents as Purchaser may reasonably request.
Section 8.2. Items to Be Delivered by Purchaser. Purchaser shall
deliver to Seller:
(a) An Assignment and Assumption Agreement duly executed and in
full force and effect with respect to Purchaser;
(b) Payment of the Estimated Purchase Price stated on the Initial
Closing Statement by wire transfer of funds immediately available in
Boston, Massachusetts; and
(c) Such other documents as Seller may reasonably request.
ARTICLE 9
GENERAL
Section 9.1. Disputes. In the event of any dispute or disagreement
between the parties after the Closing Date, either with respect to the
interpretation of any provision of this Agreement or with respect to the
performance or nonperformance by any party hereto, upon the written
request of any party, corporate executives of Seller and Purchaser shall
attempt to resolve any such dispute.
Section 9.2. Notices. All notices, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given
if delivered personally or if mailed by certified mail, return receipt
requested, postage prepaid or if sent by overnight courier or sent by
written facsimile with answerback confirmed, as follows:
If to the Seller: c/o Bank Boston Corporation
100 Federal Street, 01-25-08
Boston, Massachusetts 021110
Attn: Mr. Peter J. Manning and
Gary A. Spiess, Esq.
with a copy sent
contemporaneously to: Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
Attention: Norman J. Shachoy, Esq.
If to the Purchaser: Partners First Receivables, LLC
900 Elkridge Landing Road, Suite 300
Linthicum, Maryland 21090
Attention: John R. Soderlund
with a copy sent
contemporaneously to: artners First Receivables, LLC
P 00 Elkridge Landing Road, Suite 300
9 inthicum, Maryland 21090
L ttention: Terence F. Browne, Esq.
A
Any such communication shall be deemed to have been received (i)
when delivered, if personally delivered, or sent by nationally recognized
overnight courier or sent via facsimile or (ii) on the third Business Day
following the date on which the piece of mail containing such
communication is posted, if sent by certified mail.
Section 9.3. Entire Agreement. This Agreement (including the
Exhibits (including the Assignment and Assumption Agreement dated of even
date herewith (the "Assignment") between the parties hereto) and
Schedules hereto) and the letter agreement dated of even date herewith
(the "Letter" among the Company, the Seller and Harris Trust and Savings
Bank, an Illinois banking corporation (this Agreement, the Assignment and
the Letter being, collectively, the "Receivables Agreements") contains
the entire understanding of the parties hereto, and supersedes all prior
agreements and understandings relating to the subject matter hereof; and
further, provided that nothing contained in this Agreement, the
Assignment or the Letter shall be deemed in any manner to amend, modify,
revise or otherwise change or supercede any of the terms or provisions of
any of the other Receivables Agreements. This Agreement shall not be
amended except by a written instrument hereafter signed by the authorized
officers of all of the parties hereto. No waiver of any provision of this
Agreement shall be effective unless evidenced by a written instrument
signed by the waiving party. Each of the parties hereto further
acknowledges and agrees that, in entering into this Agreement, it has not
in any way relied upon any oral or written agreements, statements,
promises, information, arrangements, understandings, representations or
warranties, express or implied, not specifically set forth in this
Agreement.
Section 9.4. Governing Law. This Agreement shall be governed by,
and construed and enforced in accordance with, the laws of the State of
Delaware without regard to its conflict of laws rules.
Section 9.5. Consent to Jurisdiction. Each of the parties hereto
agrees that any suit, action or proceeding instituted against such party
under or in connection with this Agreement may be brought in a court of
competent jurisdiction in State of Delaware. By execution hereof, each
party hereto irrevocably waives any objection to, and any right of
immunity on the grounds of, improper venue, the convenience of the forum,
the personal jurisdiction of such courts or the execution of judgments
resulting therefrom. Each party hereto hereby irrevocably accepts and
submits to the jurisdiction of such courts in any such action, suit or
proceeding.
Section 9.6. Waiver of Certain Damages. Each of the parties hereto
irrevocably waives, to the fullest extent permitted by law, any rights
that it may have to punitive, incidental, special, exemplary or
consequential damages in respect of any litigation based upon, or arising
out of, this Agreement or any course of conduct, course of dealing,
statements or actions of any of the parties hereto relating thereto.
Section 9.7. Section and Subsection Headings. The headings of
sections and subsections are for reference only and shall not limit or
control the meaning thereof.
Section 9.8. Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns. Neither this Agreement nor the
obligations of any party hereunder shall be assignable or transferable by
any party without the prior written consent of the other party hereto.
Section 9.9. No Implied Rights or Remedies. Except as otherwise
expressly provided herein, nothing herein expressed or implied is
intended or shall be construed to confer upon or to give any Person,
except the parties hereto, any rights or remedies under or by reason of
this Agreement.
Section 9.10. Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
Section 9.11. Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties hereto to express
their mutual intent, and no rule of strict construction will be applied
against any party hereto.
Section 9.12. Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other
provisions hereof, and this Agreement shall be construed in all respects
as if such invalid or unenforceable provision were omitted.
Section 9.13. Survival. The representations, warranties and
covenants of the parties hereto shall survive indefinitely, unless
otherwise specified therein.
Section 9.14. Waiver of Right to Jury Trial. EACH OF THE PARTIES
HERETO HEREBY WAIVES ITS RIGHTS TO A TRIAL BY JURY IN ANY LITIGATION IN
ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF, THIS
AGREEMENT, OR THE VALIDITY, INTERPRETATION OR ENFORCEMENT HEREOF OR
THEREOF OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 9.15. Remedies. Each party hereto will be entitled to
enforce its rights under this Agreement specifically (without posting a
bond or other security), to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights existing
in their favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of
this Agreement and that either party may in its sole discretion apply to
any court of law or equity of competent jurisdiction for specific
performance and/or injunctive relief in order to enforce or prevent any
violation of the provisions of this Agreement. In the event of any
dispute involving the terms of this Agreement, the prevailing party shall
be entitled to collect reasonable fees and expenses incurred by the
prevailing party in connection with such dispute from the other parties
to such dispute.
ARTICLE 10
CHARGEBACKS
Seller shall retain all right, title and interest in claims against
or payments from merchants in respect of amounts that were charged back
through Visa(R) or MasterCard(R) by Seller prior to the Closing Date or
will be charged back after the Closing Date in each case in respect to
which Seller had credited the affected Overdue Receivables prior to the
Closing Date (the "Chargeback Amount"). In the event any such payment
with respect to such Chargeback Amount is received by Purchaser, such
amount shall be promptly paid to Seller. After the Closing Date,
Purchaser shall have all right, title and interest in claims against or
payments from merchants in respect of all amounts in connection with the
Overdue Accounts that were charged back through the systems of Visa(R) or
MasterCard(R) by Seller prior to the Closing Date and in respect to which
Seller had not credited the affected Overdue Receivables prior to the
Closing Date; provided, however, that if the merchant refuses to pay such
Chargeback Amount because of any act or omission of Seller in violation
of applicable rules of Visa(R) or Mastercard(R), Seller shall promptly
pay Purchaser such amount and Purchaser shall assign to Seller any and
all rights Purchaser may have against the merchant. Purchaser shall have
all right, title and interest in all claims against or payment from
merchants in respect of all amounts in connection with the Overdue
Accounts that are charged back through the systems of Visa(R) or
Mastercard(R) after the Closing Date and in respect to which the affected
Account had not been credited prior to the Closing Date, and in the event
that any such payment is received by Seller, such amount shall be
promptly paid by Seller to Purchaser.
In the event either party hereto receives, or otherwise has
possession of, documents which the other party needs in order to pursue a
chargeback claim, the party which has such documents shall send such
documents to the other party within five (5) Business Days after written
request therefore.
Anything contained in this Agreement to the contrary
notwithstanding, all amounts received with respect to any Account after
the Closing Date not in excess of the amount (if any) of the Chargeback
Amount with respect to such Account shall belong to Seller and, if
received by Purchaser after the Closing Date, shall be promptly paid to
Seller. Seller may retain any such amounts received by it after the
Closing Date.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties hereto have caused this Receivables Purchase and Sale Agreement
to be duly executed and delivered as a sealed instrument as of the date
and year first above written.
BANKBOSTON (NH), NATIONAL ASSOCIATION
By /s/ William M. Parent
____________________________________
Name: William M. Parent
Title: Authorized Officer
PARTNERS FIRST RECEIVABLES, LLC
By /s/ John R. Soderlund
____________________________________
Name: John R. Soderlund
Title: President and Chief
Executive Officer
SCHEDULE 2.1
OVERDUE ACCOUNTS
Tape to be supplied by First Annapolis Marketing Information
Services, Inc., as agent for the Seller.
SCHEDULE 4.6
LITIGATION
NONE
- ------------------------------------------------------------------------------
BANKBOSTON (NH), NATIONAL ASSOCIATION
and
PARTNERS FIRST RECEIVABLES, LLC
- ------------------------------------------------------------------------------
RECEIVABLES PURCHASE AGREEMENT
Dated as of January 29, 1998
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.1. Definitions.................................................1
Section 1.2. Other Definitional Provisions...............................4
ARTICLE II
PURCHASE AND CONVEYANCE OF RECEIVABLES
Section 2.1. Purchase....................................................4
Section 2.2. Additional Accounts.........................................6
ARTICLE III
CONSIDERATION AND PAYMENT
Section 3.1. Purchase Price..............................................6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1. Representations and Warranties of the Bank
Relating to the Bank..................................7
Section 4.2. Representations and Warranties of the Bank
Relating to the Agreement and the Receivables.........8
Section 4.3. Representations and Warranties of PFR......................10
Section 4.4. Limitation on Liability....................................11
ARTICLE V
COVENANTS
Section 5.1. Covenants of the Bank......................................11
ARTICLE VI
[RESERVED]
ARTICLE VII
[RESERVED]
ARTICLE VIII
TERM AND PURCHASE TERMINATION
Section 8.1. Term.......................................................13
Section 8.2. Purchase Termination.......................................13
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1. Amendment..................................................14
Section 9.2. Governing Law..............................................14
Section 9.3. Notices....................................................14
Section 9.4. Severability of Provisions.................................14
Section 9.5. Assignment.................................................15
Section 9.6. Acknowledgment and Agreement of the Bank...................15
Section 9.7. Further Assurances.........................................15
Section 9.8. No Waiver; Cumulative Remedies.............................16
Section 9.9. Counterparts...............................................16
Section 9.10 Binding; Third-Party Beneficiaries.........................16
Section 9.11 Merger and Integration.....................................16
Section 9.12 Headings...................................................16
Section 9.13 Schedules and Exhibits.....................................16
Section 9.14 Survival of Representations and Warranties.................16
Section 9.15 Nonpetition Covenant.......................................16
ii
<PAGE>
RECEIVABLES PURCHASE AGREEMENT, dated as of January 29, 1998,
by and between BANKBOSTON (NH), NATIONAL ASSOCIATION, a national banking
association organized under the laws of the United States (the "Bank"),
and PARTNERS FIRST RECEIVABLES, LLC, a Delaware limited liability company
("PFR").
W I T N E S S E T H:
WHEREAS, PFR desires to purchase, from time to time, certain
Receivables (hereinafter defined) from the Bank arising under specified
consumer revolving credit card accounts purchased or acquired by the Bank
and the Bank desires to sell such Receivables to PFR.
NOW, THEREFORE, it is hereby agreed by and between PFR and
the Bank as follows:
ARTICLE I.
DEFINITIONS
Section 1.1. Definitions. All capitalized terms used herein
or in any certificate, document, or Conveyance Paper made or delivered
pursuant hereto, and not defined herein or therein, shall have the
meaning ascribed thereto in the Pooling and Servicing Agreement; in
addition, the following words and phrases shall have the following
meanings:
"Account" shall mean (a) each MasterCard(R)1/ and VISA(R)1/
account established pursuant to a Credit Card Agreement identified by
account number and by the receivables balance as of the Closing Date in
the computer file, microfiche list or printed list delivered to PFR by
the Bank on the Closing Date, pursuant to the Contribution Agreement,
dated as of January 29, 1998, by and between the Bank and Holdings,(b)
each Additional Account (but only from and after the Addition Date with
respect thereto), (c) each Related Account, and (d) each Transferred
Account.
"Additional Account" shall mean each account maintained by
the Bank in accordance with the Assistance Agreement following the date
hereof.
"Addition Date" shall mean with respect to each Additional
Account, the date on which such Account is originated or acquired by the
Bank.
- --------
1/ MasterCard and VISA are registered trademarks of MasterCard
International Incorporated and of VISA USA, Inc., respectively.
"Agreement" shall mean this Receivables Purchase Agreement
and all amendments hereof and supplements hereto.
"Assistance Agreement" shall mean the License and Agency
Agreement dated as of January 29, 1998 between Holdings and the Bank.
"Bank" shall mean BankBoston (NH), National Association, a
national banking association organized under the laws of the United
States, and its successors and assigns.
"Closing Date" shall mean January 29, 1998.
"Conveyance" shall have the meaning specified in
subsection 2.1(a).
"Conveyance Papers" shall have the meaning specified in
subsection 4.1(c).
"Debtor Relief Laws" shall mean (i) the Bankruptcy Code of
the United States of America and (ii) all other applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, receivership,
insolvency, reorganization, suspension of payments, readjustment of debt,
marshalling of assets or similar debtor relief laws of the United States,
any state or any foreign country from time to time in effect affecting
the rights of creditors generally.
"Finance Charge Receivables" shall mean all Receivables in
the Accounts which would be treated as "Finance Charge Receivables" in
accordance with the definition for such term in the Pooling and Servicing
Agreement.
"Holdings" shall mean Partners First Holdings, LLC, a
Delaware limited liability company.
"Initial Account" shall mean each Account owned by the Bank
on the date hereof.
"Insolvency Event" shall have the meaning specified in
Section 8.2.
"Interchange" shall mean interchange fees payable to the Bank
in its capacity as credit card issuer, through VISA or MasterCard in
connection with cardholder charges for goods and services with respect to
the Accounts.
"Investor Certificate" shall have the meaning specified
in the Pooling and Serving Agreement.
"Monthly Period" shall mean the period from and including the
first day of a calendar month to and including the last day of such
calendar month.
"New Principal Receivables" shall have the meaning set
forth in Section 3.1.
"Obligor" shall mean, with respect to each Account, each
person that would be treated as an "Obligor" in accordance with the
definition for such term in the Pooling and Servicing Agreement.
"PFRF" shall mean Partners First Receivables Funding, LLC, a
Delaware limited liability company.
"Pooling and Servicing Agreement" shall mean the Pooling and
Servicing Agreement, dated as of January 29, 1998, among Holdings, as
Servicer, PFRF, as Transferor, and the Trustee, and all amendments and
supplements thereto.
"Principal Receivables" shall mean all Receivables in the
Accounts that would be treated as "Principal Receivables" in accordance
with the definition for such term in the Pooling and Servicing Agreement.
"Purchase Price" shall have the meaning set forth in
Section 3.1.
"Purchased Assets" shall have the meaning set forth in
Section 2.1.
"Receivables" shall mean all amounts shown on the Bank's
records as amounts payable by Obligors on any Account from time to time,
including amounts payable for Principal Receivables and Finance Charge
Receivables. A Receivable shall be deemed to have been created at the end
of the Date of Processing of such Receivable.
"Servicer" shall have the meaning set forth in the
Pooling and Servicing Agreement.
"Transaction Documents" shall mean, the Pooling and
Servicing Agreement, the Series 1998-1 Supplement, this Agreement and
each Receivables Purchase Agreement.
"Transferor" shall mean Partners First Receivables Funding,
LLC, a Delaware limited liability company, and its permitted successors
and assigns.
"Transferor Purchase Agreement" shall mean the Receivables
Purchase Agreement, dated as of January 29, 1998 between PFR, as seller
and the Transferor, as purchaser.
"Transferred Account" shall mean each account into which an
Account shall be transferred provided that (i) such transfer was made in
accordance with the Credit Card Guidelines and (ii) such account can be
traced or identified as an account into which an Account has been
transferred.
"Transferred Receivables" shall have the meaning set
forth in Section 2.1.
"Trust" shall mean the trust created by the Pooling and
Servicing Agreement.
"Trustee" shall mean The Bank of New York, a New York banking
corporation, the institution executing the Pooling and Servicing
Agreement as, and acting in the capacity of Trustee thereunder, or its
successor in interest, or any successor trustee appointed as provided in
the Pooling and Servicing Agreement.
Section 1.2. Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the
defined meanings when used in any certificate, other document, or
Conveyance Paper made or delivered pursuant hereto unless otherwise
defined therein.
(b) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement or any Conveyance Paper shall
refer to this Agreement as a whole and not to any particular provision of
this Agreement; and Section, Subsection, Schedule and Exhibit references
contained in this Agreement are references to Sections, Subsections,
Schedules and Exhibits in or to this Agreement unless otherwise
specified.
(c) All determinations of the principal or finance charge
balance of Receivables, and of any collections thereof, shall be made in
accordance with the Pooling and Servicing Agreement and all applicable
Supplements.
ARTICLE II.
PURCHASE AND CONVEYANCE OF RECEIVABLES
Section 2.1. Purchase.
(a) By execution of this Agreement, the Bank does hereby
sell, transfer, assign, set over and otherwise convey to PFR
(collectively, the "Conveyance"), without recourse except as provided
herein, all its right, title and interest in, to and under (i) all of the
Receivables created in the Accounts following the Closing Date and all
Receivables created in each Additional Account originated or acquired by
the Bank following the related Addition Date (the "Transferred
Receivables"), whether such Receivables shall then be existing or shall
thereafter be created and all monies due and or to become due and all
amounts received with respect thereto and all proceeds (including,
without limitation, "proceeds" as defined in the UCC) thereof and (ii)
the right to receive Interchange and Recoveries with respect to such
Receivables (the "Purchased Assets").
(b) In connection with such Conveyance, the Bank agrees (i)
to record and file, at its own expense, any financing statements (and
continuation statements with respect to such financing statements when
applicable) with respect to the Receivables now existing and hereafter
created, meeting the requirements of applicable state law in such manner
and in such jurisdictions as are necessary to perfect, and maintain
perfection of, the Conveyance of such Purchased Assets from the Bank to
PFR, (ii) that such financing statements shall name the Bank, as seller,
and PFR, as purchaser, of the Receivables and (iii) to deliver a
file-stamped copy of such financing statements or other evidence of such
filings (excluding such continuation statements, which shall be delivered
as filed) to PFR as soon as is practicable after filing.
(c) In connection with such Conveyance, the Bank further
agrees that it will, at its own expense, (i) on the date of creation of
each Account, indicate in its computer files that all of the Receivables
created in connection with such Account have been conveyed to PFR in
accordance with this Agreement by including in such computer files the
code identifying such Account and (ii) on or prior (x) to the date that
is 30 days after any date on which the Bank ceases to originate new
accounts in accordance with the Assistance Agreement and (y) any date on
which PFR is required to provide a computer file or microfiche list to
the Transferor under the Transferor Purchase Agreement, deliver to PFR a
computer file or microfiche list containing a true and complete list of
all such Accounts specifying for each such Account, as of the date on
which the Bank is no longer designating all new accounts originated in
accordance with the Assistance Agreement as Accounts, or the date
specified by PFR, as applicable (A) its account number, (B) the aggregate
amount outstanding in such Account and (C) the aggregate amount of
Principal Receivables in such Account. Each such file or list, as
supplemented from time to time to reflect Additional Accounts, shall be
marked as Schedule I to this Agreement, shall be delivered to PFR, and is
hereby incorporated into and made a part of this Agreement. The Bank
further agrees not to alter the code referenced in clause (i) of this
paragraph with respect to any Account during the term of this Agreement.
(d) The parties hereto intend that the conveyance of the
Bank's right, title and interest in and to the Receivables shall
constitute an absolute sale, conveying good title free and clear of any
liens, claims, encumbrances or rights of others from the Bank to PFR and
that the Receivables shall not be a part of the Bank's estate in the
event of the insolvency of the Bank or a conservatorship, receivership or
similar event with respect to the Bank. It is the intention of the
parties hereto that the arrangements with respect to the Receivables
shall constitute a purchase and sale of such Receivables and not a loan.
In the event, however, that it were to be determined that the
transactions evidenced hereby constitute a loan and not a purchase and
sale, it is the intention of the parties hereto that this Agreement shall
constitute a security agreement under applicable law, and that the Bank
shall be deemed to have granted and does hereby grant to PFR a
first priority perfected security interest, in all of the Bank's right,
title and interest, whether now owned or hereafter acquired, in, to and
under the Receivables and other Purchased Assets to secure the rights of
PFR hereunder and the obligations of the Bank hereunder.
Section 2.2. Additional Accounts.
(a) Each newly originated Additional Account shall be deemed
to be an Account hereunder. The Bank shall take all actions necessary to
comply, or to enable PFR to comply, with the requirements of Section 2.3
of the Transferor Purchase Agreement and shall cooperate with PFR to
enable it to perform with respect to the Receivables in such Additional
Accounts all actions specified in Section 2.3 of the Transferor Purchase
Agreement.
(b) On the Addition Date with respect to any Additional
Accounts, PFR shall purchase the Bank's right, title and interest in, to
and under the Receivables in Additional Accounts (and such Additional
Accounts shall be deemed to be Accounts for purposes of this Agreement)
as of the close of business on the applicable Addition Date, subject to
the satisfaction of the following conditions:
(i) the Bank shall have delivered to PFR copies of UCC-1
financing statements covering such Additional Accounts, if
necessary to perfect PFR's interest in the Receivables arising
therein;
(ii) to the extent required of PFR by 2.3(b) of the
Transferor Purchase Agreement, the Bank shall have deposited in the
Collection Account all Collections with respect to such Additional
Accounts since the Additional Cut-Off Date; and
(iii) as of each Addition Date, no Insolvency Event with
respect to the Bank shall have occurred nor shall the transfer of
the Receivables arising in the Additional Accounts to PFR have been
made in contemplation of the occurrence thereof.
Section 2.4. Representations and Warranties. The Bank
hereby represents and warrants to PFR as of the related Addition
Date as to the matters set forth in Section 2.2(b)(iii) above.
ARTICLE III.
CONSIDERATION AND PAYMENT
Section 3.1. Purchase Price.
(a) The Purchase Price for the Receivables (including
Receivables in Additional Accounts) to be conveyed to PFR under this
Agreement which come into existence after the Closing Date, shall be
payable on each day which such Receivables are conveyed by the Bank to
PFR in an amount equal to 100% of the aggregate balance of the Principal
Receivables so conveyed (the "New Principal Receivables"), adjusted to
reflect such factors as the Bank and PFR mutually agree will result in a
Purchase Price determined to be the fair market value of such New
Principal Receivables.
(b) The Purchase Price to be paid by PFR with respect to the
Receivables shall be paid in cash.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
Section 4.1. Representations and Warranties of the Bank
Relating to the Bank. The Bank hereby represents and warrants to, and
agrees with, PFR as of the Closing Date and on each Addition Date, that:
(a) Organization and Good Standing. The Bank is a national
banking association duly organized and validly existing under the laws of
the United States, continues to hold a valid certificate to due business
as a national banking association and has, in all material respects, full
power and authority to own its properties and conduct its business as
presently owned or conducted, and to execute, deliver and perform its
obligations under this Agreement.
(b) Due Qualification. The Bank is duly qualified to do
business and is in good standing as a national banking association (or is
exempt from such requirements) and has obtained all necessary licenses
and approvals, in each jurisdiction which requires such qualification
except where the failure to so qualify or obtain licenses or approvals
would not (i) render any Account or any Receivable unenforceable by the
Bank, PFR, the Transferor or the Trustee or (ii) have a material adverse
effect on the Certificateholders.
(c) Due Authorization. The execution, delivery and
performance of this Agreement and any other document or instrument
delivered pursuant hereto, including any supplemental conveyance (such
other documents or instruments, collectively, the "Conveyance Papers"),
and the consummation of the transactions provided for in this Agreement
and the Conveyance Papers have been duly authorized by the Bank by all
necessary corporate action on the part of the Bank.
(d) No Conflict. The execution and delivery of this Agreement
and the Conveyance Papers by the Bank, the performance of the
transactions contemplated by this Agreement and the Conveyance Papers,
and the fulfillment of the terms of this Agreement and the Conveyance
Papers will not conflict with, violate or result in any breach of any of
the terms and provisions of, or constitute (with or without notice or
lapse of time or both) a default under, any indenture, contract,
agreement, mortgage, deed of trust, or other instrument to which the Bank
is a party or by which it or any of its properties are bound which would
have a material adverse effect on the Bank's ability to perform its
obligations hereunder.
(e) No Violation. The execution, delivery and performance of
this Agreement and the Conveyance Papers by the Bank and the fulfillment
of the terms contemplated herein and therein applicable to the Bank will
not conflict with or violate any Requirements of Law applicable to the
Bank in a manner which would have a material adverse effect on the Bank's
ability to perform its obligations hereunder.
(f) No Proceedings. There are no proceedings or
investigations pending or, to the best knowledge of the Bank, threatened
against the Bank, before any Governmental Authority (i) asserting the
invalidity of this Agreement or the Conveyance Papers, (ii) seeking to
prevent the consummation of any of the transactions contemplated by this
Agreement or the Conveyance Papers, (iii) seeking any determination or
ruling that, in the reasonable judgment of the Bank, would materially and
adversely affect the performance by the Bank of its obligations under
this Agreement or the Conveyance Papers, (iv) seeking any determination
or ruling that would materially and adversely affect the validity or
enforceability of this Agreement or the Conveyance Papers or (v) seeking
to affect adversely the income tax attributes of the Trust under the
United States federal or Delaware income tax systems.
(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 Bank in
connection with the execution and delivery by the Bank of this Agreement
and the Conveyance Papers and the performance of the transactions
contemplated by this Agreement or the Conveyance Papers by the Bank have
been duly obtained, effected or given and are in full force and effect.
The representations and warranties set forth in this Section
4.1 shall survive the transfer and assignment of the Receivables to PFR.
Upon discovery by the Bank or PFR of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall
give written notice to the other party within three Business Days
following such discovery.
Section 4.2. Representations and Warranties of the Bank
Relating to the Agreement and the Receivables.
(a) Representations and Warranties. The Bank hereby
represents and warrants to PFR as of the Closing Date and, with respect
to Additional Accounts, as of the related Addition Date that:
(i) this Agreement constitutes a legal, valid and binding
obligation of the Bank enforceable against the Bank in accordance
with its terms, except as such enforceability may be limited by
receivership, conservatorship and supervisory powers of bank
regulatory agencies generally, as well as by applicable
bankruptcy, receivership, conservatorship, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights
generally from time to time in effect or general principles of
equity;
(ii) each Transferred Receivable has been conveyed to PFR
free and clear of any Lien of any Person claiming through or under
the Bank or any of its other Affiliates (other than Liens permitted
under subsection 2.7(b) of the Pooling and Servicing Agreement);
(iii) all authorizations, consents, orders or approvals of or
registrations or declarations with any Governmental Authority
required to be obtained, effected or given by the Bank in
connection with the conveyance of Transferred Receivables to PFR
have been duly obtained, effected or given and are in full force
and effect;
(iv) this Agreement or, in the case of the Additional
Accounts, the related Supplemental Conveyance constitutes a valid
sale, transfer and assignment to PFR of all right, title and
interest of the Bank in the Transferred Receivables and the
proceeds thereof and the Interchange payable pursuant to this
Agreement and the Recoveries payable pursuant to this Agreement or,
if this Agreement does not constitute a sale of such property, it
constitutes a grant of a first priority perfected "security
interest" (as defined in the UCC) in such property to PFR, which,
in the case of existing Transferred Receivables and the proceeds
thereof and said Recoveries and Interchange, is enforceable upon
execution and delivery of this Agreement, or, with respect to then
existing Receivables in Additional Accounts, as of the applicable
Addition Date, and which will be enforceable with respect to such
Receivables hereafter and thereafter created and the proceeds
thereof upon such creation. Upon the filing of the financing
statements and, in the case of Receivables hereafter created and
the proceeds thereof, upon the creation thereof, PFR shall have a
first priority perfected security or ownership interest in such
property and proceeds;
(v) on the Addition Date, each related Additional Account
designated as an Additional Account by the Bank to PFR is an
Eligible Account;
(vi) on the applicable Addition Date, each Receivable
designated as an Eligible Receivable by the Bank to PFR is an
Eligible Receivable; and
(vii) as of the date of the creation of any new Receivable,
each Receivable designated as an Eligible Receivable by the Bank to
PFR is an Eligible Receivable.
(b) Notice of Breach. The representations and warranties set
forth in this Section 4.2 shall survive the transfer and assignment of
the Receivables to PFR. Upon discovery by either the Bank or PFR of a
breach of any of the representations and warranties set forth in this
Section 4.2, the party discovering such breach shall give written notice
to the other party within three Business Days following such discovery;
provided that the failure to give notice within three Business Days does
not preclude subsequent notice. The Bank hereby acknowledges that PFR
intends to rely on the representations hereunder in connection with
representations made by PFR to secured parties, assignees or subsequent
transferees including but not limited to assignments made by PFR to the
Transferor pursuant to the Transferor Purchase Agreement.
(c) Representation and Warranty of the Bank as to
Information. The Bank hereby represents and warrants, as of each date on
which the file or list referred to in Section 2.1(c) is delivered to PFR,
that the information contained therein is true, complete and correct in
all material respects.
Section 4.3. Representations and Warranties of PFR. PFR
hereby represents and warrants to the Bank as of the Closing Date and,
with respect to Additional Accounts, as of the related Addition Date
that:
(a) Organization and Good Standing. PFR is a limited
liability company duly organized and validly existing and is in good
standing under the laws of the State of Delaware and has, in all material
respects, full power and authority to own its properties and conduct its
business as presently owned, conducted or contemplated by the Transaction
Documents and to execute, deliver and perform its obligations under this
Agreement and the Conveyance Papers.
(b) Due Authorization. The execution and delivery of this
Agreement and the Conveyance Papers and the consummation of the
transactions provided for in this Agreement and the Conveyance Papers
have been duly authorized by PFR by all necessary corporate action on the
part of PFR.
(c) No Conflict. The execution and delivery of this Agreement
and the Conveyance Papers by PFR, the performance of the transactions
contemplated by this Agreement and the Conveyance Papers, and the
fulfillment of the terms of this Agreement and the Conveyance Papers
applicable to PFR, will not 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
PFR is a party or by which it or any of its properties are bound.
(d) No Violation. The execution, delivery and performance of
this Agreement and the Conveyance Papers by PFR and the fulfillment of
the terms contemplated herein and therein applicable to PFR will not
conflict with or violate any Requirements of Law applicable to PFR.
(e) No Proceedings. There are no proceedings or
investigations pending or, to the best knowledge of PFR, threatened
against PFR, before any court, regulatory body, administrative agency, or
other tribunal or governmental instrumentality (i) asserting the
invalidity of this Agreement or the Conveyance Papers, (ii) seeking to
prevent the consummation of any of the transactions contemplated by this
Agreement or the Conveyance Papers, (iii) seeking any determination or
ruling that, in the reasonable judgment of PFR, would materially and
adversely affect the performance by PFR of its obligations under this
Agreement or the Conveyance Papers or (iv) seeking any determination or
ruling that would materially and adversely affect the validity or
enforceability of this Agreement or the Conveyance Papers.
(f) 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 PFR in connection
with the execution and delivery by PFR of this Agreement and the
Conveyance Papers and the performance of the transactions contemplated by
this Agreement and the Conveyance Papers have been duly obtained,
effected or given and are in full force and effect.
The representations and warranties set forth in this Section
4.3 shall survive the Conveyance of the Receivables to PFR. Upon
discovery by PFR or the Bank of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall
give prompt written notice to the other party.
Section 4.4. Limitation on Liability. The liability of the
Bank for any breach of any representation, warranty, term or condition of
this Agreement shall be limited, in the absence of gross negligence or
willful misconduct by the Bank, to an amount which shall not exceed with
respect to any claim the amount actually recovered by the Bank from
Holdings (without recourse to any guaranty of Holdings' obligations) with
respect to such claim pursuant to the Assistance Agreement.
ARTICLE V.
COVENANTS
Section 5.1. Covenants of the Bank. The Bank hereby covenants
and agrees with PFR as follows:
(a) Receivables Not To Be Evidenced by Promissory Notes.
Except in connection with its enforcement or collection of an Account,
the Bank will take no action to cause any Receivable to be evidenced by
any instrument other than an instrument that, taken together with one or
more other writings, constitutes chattel paper (as such terms are defined
in the UCC).
(b) Security Interests. Except for the conveyances hereunder,
the Bank will not sell, pledge, assign or transfer to any other Person,
or take any other action inconsistent with PFR's ownership of the
Receivables or grant, create, incur, assume or suffer to exist any Lien
on, any Receivable, whether now existing or hereafter created, or any
interest therein, and the Bank shall not claim any ownership interest in
the Receivables and shall defend the right, title and interest of PFR in,
to and under the Receivables, whether now existing or hereafter created,
against all claims of third parties claiming through or under the Bank;
provided, however, that nothing in this section shall prevent or be
deemed to prohibit the Bank from suffering to exist upon any of the
Receivables any Liens for taxes if such taxes shall not at the time be
due and payable or if the Bank shall currently be contesting the validity
thereof in good faith by appropriate proceedings and shall have set aside
on its books adequate reserves with respect thereto.
(c) Notice of Liens. The Bank shall notify PFR promptly after
becoming aware of any Lien on any Receivable other than the conveyances
hereunder and under Liens arising through or granted by PFR or any
subsequent transferee.
(d) Interchange. Not later than 1:00 p.m., New York City
time, on each Business Day, the Bank shall pay or cause to be paid to
PFR, in immediately available funds, the amount of Interchange to be
included as Collections of Finance Charge Receivables in the Accounts for
such Business Day, which shall be an amount equal to (i) the product of
(a) the total amount of interchange fees collected by the Bank on the
prior Business Day, and (b) a fraction, the numerator of which is the
aggregate amount of cardholder sales charges (net of returns) which arose
on the prior Business Day with respect to the Accounts and the
denominator of which is the aggregate amount of cardholder sales charges
(net of returns) which arose on the prior Business Day with respect to
all revolving consumer credit card accounts (including the Accounts)
owned by the Bank, or (ii) if at any time the Bank cannot identify or
cause to be identified the amount of such Interchange, the amount
reasonably estimated by the Bank as the amount of such Interchange.
(e) Documentation of Transfer. The Bank shall undertake to
file the documents which would be necessary to perfect and maintain the
transfer of the Purchased Assets to PFR.
(f) Segregation of Accounts. The records and agreements
relating to the Accounts will be marked to evidence the sale or transfer
of the Receivables to PFR; provided, however, that the documents or
agreements relating to the Accounts and the Receivables need not be
segregated from documents or agreements relating to other credit card
accounts and receivables.
(g) Periodic Rate Finance Charges. (i) Except (x) as
otherwise required by any Requirements of Law or (y) as is deemed by the
Bank to be necessary in order for it to maintain its credit card business
or a program operated by such credit card business on a competitive basis
based on a good faith assessment by it of the nature of the competition
with respect to the credit card business or such program, it shall not at
any time take any action which would have the effect of reducing the
Portfolio Yield to a level that could be reasonably expected to cause any
Series to experience any Pay Out Event or Reinvestment Event based on the
insufficiency of the Portfolio Yield or any similar test and (ii) except
as otherwise required by any Requirements of Law, it shall not take any
action which would have the effect of reducing the Portfolio Yield to be
less than the highest Average Rate for any Group.
(h) Credit Card Agreements and Guidelines. Subject to
compliance with all Requirements of Law and paragraph (g) above, the Bank
may change the terms and provisions of the applicable Credit Card
Agreements or the applicable Credit Card Guidelines in any respect
(including the calculation of the amount or the timing of charge-offs and
the Periodic Rate Finance Charges to be assessed thereon).
Notwithstanding the above, unless required by Requirements of Law or as
permitted by Section 5.2(g), the Bank will take no action with respect to
the applicable Credit Card Agreements or the applicable Credit Card
Guidelines, which, at the time of such action, the Bank reasonably
believes will have a material adverse effect on PFR, the Transferor or
the Investor Certificateholders.
(i) Official Records. The Bank will maintain this Agreement
as part of its official records.
The Bank further covenants that it will not enter into any
amendments to this Agreement or enter into a new Receivables Purchase
Agreement unless the Rating Agency Condition has been satisfied.
ARTICLE VI.
[RESERVED]
ARTICLE VII.
[RESERVED]
ARTICLE VIII.
TERM AND PURCHASE TERMINATION
Section 8.1. Term. This Agreement shall commence as of the
date of execution and delivery hereof and shall not terminate prior to
the termination of the Transferor Purchase Agreement as provided in
Article VIII of the Transferor Purchase Agreement.
Section 8.2. Purchase Termination. If the Bank shall fail
generally to, or admit in writing its inability to, pay its debts as they
become due; or if a proceeding shall have been instituted in a court
having jurisdiction in the premises seeking a decree or order for relief
in respect of the Bank in an involuntary case under any Debtor Relief
Law, or for the appointment of a receiver, liquidator, assignee, trustee,
custodian, sequestrator, conservator or other similar official of the
Bank or for any substantial part of the Bank's property, or for the
winding-up or liquidation of the Bank's affairs and, if instituted
against the Bank, any such proceeding shall continue undismissed or
unstayed and in effect, for a period of 60 consecutive days, or any of
the actions sought in such proceeding shall occur; or if the Bank shall
commence a voluntary case under any Debtor Relief Law, or if the Bank
shall consent to the entry of an order for relief in an involuntary case
under any Debtor Relief Law, or consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator, conservator or other similar official of, or for, any
substantial part of its property, or any general assignment for the
benefit of its creditors; or the Bank or any subsidiary of the Bank shall
have taken any corporate action in furtherance of any of the foregoing
actions (each an "Insolvency Event") or, if an Insolvency Event (as
defined in Section 8.2 of the Transferor Purchase Agreement) shall have
occurred; then the Bank shall immediately cease to transfer Principal
Receivables to PFR and shall promptly give notice to PFR of such
Insolvency Event. Notwithstanding any cessation of the transfer to PFR of
additional Principal Receivables, Principal Receivables transferred to
PFR prior to the occurrence of such Insolvency Event and Collections in
respect of such Principal Receivables and Finance Charge Receivables
whenever created or accrued in respect of such Principal Receivables,
shall continue to be property of PFR available for transfer by PFR to the
Transferor for transfer to the Trust pursuant to the Pooling and
Servicing Agreement.
ARTICLE IX.
MISCELLANEOUS PROVISIONS
Section 9.1. Amendment. This Agreement and any Conveyance
Papers and the rights and obligations of the parties hereunder may not be
changed orally, but only by an instrument in writing signed by PFR and
the Bank in accordance with this Section 9.1. This Agreement and any
Conveyance Papers may be amended from time to time by PFR and the Bank
(i) to cure any ambiguity, (ii) to correct or supplement any provisions
herein which may be inconsistent with any other provisions herein or in
any such other Conveyance Papers, (iii) to add any other provisions with
respect to matters or questions arising under this Agreement or any
Conveyance Papers which shall not be inconsistent with the provisions of
this Agreement or any Conveyance Papers, (iv) to change or modify the
Purchase Price and (v) to change, modify, delete or add any other
obligation of the Bank or PFR; provided, however, that no amendment
pursuant to clause (iv) or (v) of this Section 9.1 shall be effective
unless the Bank and PFR have been notified in writing that the Rating
Agency Condition has been satisfied; provided, further, that such action
shall not (as evidenced by an Opinion of Counsel delivered to the
Transferor and any subsequent assignee of the Receivables by PFR or the
Transferor) adversely affect in any material respect the interests of the
Transferor or any such subsequent assignee of the Receivables, including
without limitation the Trustee or the Investor Certificateholders, unless
any such assignee, including without limitation, the Trustee shall
consent thereto. Any reconveyance executed in accordance with the
provisions hereof shall not be considered to be an amendment to this
Agreement. A copy of any amendment to this Agreement shall be sent to the
Rating Agency.
Section 9.2. Governing Law. THIS AGREEMENT AND THE CONVEYANCE
PAPERS SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE, 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.
Section 9.3. Notices. All demands, notices and
communications hereunder shall be in writing and shall be deemed to
have been duly given if personally delivered at or mailed by
registered mail, return receipt requested, to (a) in the case of
PFR, 900 Elkridge Landing Road, Suite 300, Linthicum, Maryland
21090, Attention: John R. Soderlund (facsimile no. (410) 855-8599),
(b) in the case of the Bank, c/o BankBoston Corporation, 100
Federal Street, at 25-08, Boston, Massachusetts 02110, Attention:
Peter J. Manning (facsimile no. (617) 434-7825), with a copy to:
Bingham Dana LLP, 150 Federal St., Boston, Massachusetts 02110,
Attention: Norman Shachoy, Esq. (facsimile no. (617) 951-8736; or,
as to each party, at such other address as shall be designated by
such party in a written notice to each other party.
Section 9.4. Severability of Provisions. If any one or more
of the covenants, agreements, provisions or terms of this Agreement or
any Conveyance Paper shall for any reason whatsoever be held invalid,
then such covenants, agreements, provisions, or terms shall be deemed
severable from the remaining covenants, agreements, provisions, and terms
of this Agreement or any Conveyance Paper and shall in no way affect the
validity or enforceability of the other provisions of this Agreement or
of any Conveyance Paper.
Section 9.5. Assignment. Notwithstanding anything to the
contrary contained herein, other than PFR's assignment to the Transferor
and the Transferor's assignment to the Trustee, of all of their
respective rights in, to and under this Agreement to the extent such
rights relate to the Receivables purchased from PFR by the Transferor
pursuant to the Transferor Purchase Agreement, this Agreement and all
other Conveyance Papers may not be assigned by the parties hereto;
provided, however, that the Bank shall have the right to assign its
rights, title and interests, in, to and under this Agreement to (i) any
successor by merger assuming this Agreement or (ii) any affiliate owned
directly or indirectly by Holdings provided that each Rating Agency has
advised PFR and the Bank that the Rating Agency Condition has been
satisfied.
Section 9.6. Acknowledgment and Agreement of the Bank. By
execution below, the Bank expressly acknowledges and agrees that all of
PFR's rights, title, and interest in, to, and under this Agreement to the
extent such rights relate to Receivables transferred by PFR to the
Transferor, including, without limitation, all of PFR's right, title, and
interest in and to such Receivables, shall be assigned by PFR to the
Transferor and by the Transferor to the Trustee for the benefit of the
beneficiaries of the Trust, including the Certificateholders, and the
Bank consents to such assignments. The Bank further agrees that
notwithstanding any claim, counterclaim, right or setoff or defense which
it may have against PFR, due to a breach by PFR of this Agreement or for
any other reason, and notwithstanding the bankruptcy of PFR or any other
event whatsoever, the Bank's sole remedy against PFR shall be a claim
against PFR for money damages and, then only to the extent of funds
received by PFR pursuant to the Transfer or Purchase Agreement, and in no
event shall the Bank assert any claim on or any interest in the
Receivables or any proceeds thereof or take any action which would reduce
or delay receipt by Certificateholders of collections with respect to the
Receivables. Additionally, the Bank agrees for the benefit of the
Transferor and the Trustee that any amounts payable by the Bank to PFR
hereunder which are to be paid by PFR to the Transferor and by the
Transferor to the Trustee for the benefit of the Certificateholders shall
be paid by the Bank on behalf of PFR and the Transferor, directly to the
Trustee.
Section 9.7. Further Assurances. PFR and the Bank agree to do
and perform, from time to time, any and all acts and to execute any and
all further instruments required or reasonably requested by the other
party more fully to effect the purposes of this Agreement and the
Conveyance Papers including, without limitation, the execution of any
financing statements or continuation statements or equivalent documents
relating to the Receivables for filing under the provisions of the UCC or
other law of any applicable jurisdiction.
Section 9.8. No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of PFR or the Bank, any
right, remedy, power or privilege hereunder, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege.
Subject to Sections 4.4 and 9.6, the rights, remedies, powers and
privileges herein provided are cumulative and not exhaustive of any
rights, remedies, powers and privileges provided by law.
Section 9.9. Counterparts. This Agreement and all Conveyance
Papers may be executed in two or more counterparts (and by different
parties on separate counterparts), each of which shall be an original,
but all of which together shall constitute one and the same instrument.
Section 9.10. Binding; Third-Party Beneficiaries. This
Agreement and the Conveyance Papers will inure to the benefit of and be
binding upon the parties hereto and their respective successors and
permitted assigns. The Transferor and the Trustee shall be considered
third-party beneficiaries of this Agreement.
Section 9.11. Merger and Integration. Except as specifically
stated otherwise herein, this Agreement and the Conveyance Papers set
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 and the Conveyance Papers. This Agreement
and the Conveyance Papers may not be modified, amended, waived or
supplemented except as provided herein.
Section 9.12. Headings. The headings are for purposes
of reference only and shall not otherwise affect the meaning or
interpretation of any provision hereof.
Section 9.13. Schedules and Exhibits. The schedules and
exhibits attached hereto and referred to herein shall constitute a part
of this Agreement and are incorporated into this Agreement for all
purposes.
Section 9.14. Survival. All representations, warranties and
agreements contained in this Agreement shall remain operative and in full
force and effect and shall survive any subsequent conveyance of the
Receivables by PFR. The provisions of Section 4.4 shall survive the
termination of this Agreement.
Section 9.15. Nonpetition Covenant. The Bank hereby covenants
and agrees that prior to the date which is one year and one day after the
payment in full of all Investor Certificates of all Series, it will not
institute against or join any other Person in instituting against PFR any
bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceeding under the laws of the United
States or any state of the United States.
Section 9.16. Assignment and Assumption Agreement. The
parties hereby acknowledge and agree that the Conveyance set forth in
Section 2.1 and the conveyances of Receivables existing in the Accounts
on the Closing Date pursuant to Section I.2 and II.2 of the Assignment
and Assumption Agreement, dated as of the date hereof, between the Bank
and PFR (the "Assignment and Assumption Agreement") are intended to be
part of a single agreement, and in order to reflect such intent, such
Sections I.2 and II.2 (together with the definitions of any defined terms
used therein) are hereby incorporated herein by reference as if fully set
forth herein. The parties hereto agree that this Agreement and the
Assignment and Assumption Agreement shall not be separately assigned,
pledged, conveyed or otherwise transferred. It is the intention of the
parties hereto that the conveyance set forth in this Agreement and the
conveyance set forth in the Assignment and Assumption Agreement be
interpreted as a single integrated and interdependent whole and
that the obligations of the parties with respect to either conveyance be
dependent upon the other such conveyance.
IN WITNESS WHEREOF, the undersigned have caused this
Receivables Purchase Agreement to be duly executed by their respective
officers as of the day and year first above written.
BANKBOSTON (NH),
NATIONAL ASSOCIATION
By: /s/ William M. Parent
-------------------------------
Name: William M. Parent
Title: Authorized Officer
PARTNERS FIRST RECEIVABLES, LLC
By: /s/ Harry G. Pappas
-------------------------------
Name: Harry G. Pappas
Title: Chief Financial Officer
Schedule I
LIST OF ACCOUNTS
DEEMED INCORPORATED BY REFERENCE
ASSIGNMENT AND ASSUMPTION AGREEMENT dated January 29, 1998,
between Partners First Receivables, LLC, a Delaware limited liability
company (the "Company"), and BankBoston (NH), National Association, a
national banking association organized under the laws of the United
States (the "Bank").
WHEREAS, the Company and the Bank have entered into a certain
Receivables Purchase and Sale Agreement, dated as of January 29, 1998
(the "Receivables Purchase Agreement");
WHEREAS, the Receivables Purchase Agreement contemplates that
on the date hereof (a) the Bank shall assign and transfer to the Company
all of its right, title and interest in, to and under the Accounts
Receivables (other than the Excluded Accounts and the Excluded Assets)
(as defined in the Receivables Purchase Agreement) and (b) the Company
shall assume the Assumed Obligations (as defined in the Receivables
Purchase Agreement);
WHEREAS, the Company and the Bank have entered into a certain
Overdue Receivables Purchase and Sale Agreement, dated as of January 29,
1998 (the "Overdue Receivables Purchase Agreement" and, together with the
Receivables Purchase Agreement, the "Closing Date Receivables Purchase
Agreements");
WHEREAS, the Overdue Receivables Purchase Agreement
contemplates that on the date hereof (a) the Bank shall assign and
transfer to the Company all of its right, title and interest in, to and
under the Overdue Receivables (other than the Excluded Accounts and
Excluded Assets) (as defined in the Overdue Receivables Purchase
Agreement) and (b) the Company shall assume the Assumed Obligations (as
defined in the Overdue Receivables Purchase Agreement).
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
Transfer of Accounts Receivables
1. Defined Terms. The capitalized terms used in this Article
I but not otherwise defined in this Agreement shall have the respective
meanings assigned to them in the Receivables Purchase Agreement.
2. Assignment of the Accounts Receivable. As of the date
hereof, the Bank hereby sells, assigns, transfers, sets over and
otherwise conveys to the Company, all of the Bank's right, title and
interest in, to and under all the Accounts Receivable (other than the
Excluded Accounts and the Excluded Assets).
3. Assumption of the Assumed Obligations. Subject to the
terms of the Receivables Purchase Agreement, as of the date hereof, the
Company hereby assumes and agrees to pay, perform, fulfill and discharge
the Assumed Obligations from and after the date hereof.
4. Intent of Parties. The parties hereto intend that the
conveyance of the Bank's right, title and interest in and to the Accounts
Receivable shall constitute an absolute sale, conveying good title free
and clear of any liens, claims, encumbrances or rights of others from the
Bank to the Company and that the Accounts Receivable shall not be a part
of the Bank's estate in the event of the insolvency of the Bank or a
conservatorship, receivership or similar event with respect to the Bank.
It is the intention of the parties hereto that the arrangements with
respect to the Accounts Receivable shall constitute a purchase and sale
of such Accounts Receivable and not a loan. In the event, however, that
it were to be determined that the transactions evidenced hereby
constitute a loan and not a purchase and sale, it is the intention of the
parties hereto that this Agreement shall constitute a security agreement
under applicable law, and that the Bank shall be deemed to have granted
and does hereby grant to the Company a first priority perfected security
interest, in all of the Bank's right, title and interest, whether now
owned or hereafter acquired, in, to and under the Accounts Receivable to
secure the rights of the Company hereunder and the obligations of the
Bank hereunder.
ARTICLE II
Transfer of Overdue Receivables
1. Defined Terms. The capitalized terms used in this Article
II but not otherwise defined in this Agreement shall have the respective
meanings assigned to them in the Overdue Receivables Purchase Agreement.
2. Assignment of the Overdue Receivables. As of the date
hereof, the Bank hereby sells, assigns, transfers, sets over and
otherwise conveys to the Company, all of the Bank's right, title and
interest in, to and under all the Overdue Receivables (other than the
Excluded Accounts and the Excluded Assets).
3. Assumption of the Assumed Obligations. Subject to the
terms of the Overdue Receivables Purchase Agreement, as of the date
hereof, the Company hereby assumes and agrees to pay, perform, fulfill
and discharge the Assumed Obligations from an after the date hereof.
4. Intent of Parties. The parties hereto intend that the
conveyance of the Bank's right, title and interest in and to the Overdue
Receivables shall constitute an absolute sale, conveying good title free
and clear of any liens, claims, encumbrances or rights of others from the
Bank to the Company and that the Overdue Receivables shall not be a part
of the Bank's estate in the event of the insolvency of the Bank or a
conservatorship, receivership or similar event with respect to the Bank.
It is the intention of the parties hereto that the arrangements with
respect to the Overdue Receivables shall constitute a purchase and sale
of such Overdue Receivables and not a loan. In the event, however, that
it were to be determined that the transactions evidenced hereby
constitute a loan and not a purchase and sale, it is the intention of the
parties hereto that this Agreement shall constitute a security agreement
under applicable law, and that the Bank shall be deemed to have granted
and does hereby grant to the Company a first priority perfected security
interest, in all of the Bank's right, title and interest, whether now
owned or hereafter acquired, in, to and under the Overdue Receivables to
secure the rights of the Company hereunder and the obligations of the
Bank hereunder.
ARTICLE III
Representations and Warranties
1. Defined Terms. The capitalized terms used in this Article
III but not otherwise specifically defined in this Agreement (without
reference to any other agreement) shall have the respective meanings
assigned to them in the Receivables Purchase Agreement, dated as of
January 29, 1998, between the Bank and the Company, relating to
Receivables generated after the date hereof.
2. Representations and Warranties of the Bank Relating to the
Bank. The Bank hereby represents and warrants to, and agrees with, the
Company as of the Closing Date that:
(a) Organization and Good Standing. The Bank is a national
banking association duly organized and validly existing in good standing
under the laws of the United States and has, in all material respects,
full power and authority to own its properties and conduct its business
as presently owned or conducted, and to execute, deliver and perform its
obligations under this Agreement and the Closing Date Receivables
Purchase Agreements.
(b) Due Qualification. The Bank is duly qualified to do
business and is in good standing as a national banking association (or is
exempt from such requirements) and has obtained all necessary licenses
and approvals, in each jurisdiction which requires such qualification
except where the failure to so qualify or obtain licenses or approvals
would not (i) render any Account or any Receivable unenforceable by the
Bank, the Company, the Transferor or the Trustee or (ii) have a material
adverse effect on the Certificateholders.
(c) Due Authorization. The execution, delivery and
performance of this Agreement and the Closing Date Receivables Purchase
Agreements and any other document or instrument delivered pursuant hereto
or thereto, including any supplemental conveyance (such other documents
or instruments, collectively, the "Conveyance Papers"), and the
consummation of the transactions provided for in this Agreement, the
Closing Date Receivables Purchase Agreements and the Conveyance Papers
have been duly authorized by the Bank by all necessary corporate action
on the part of the Bank.
(d) No Conflict. The execution and delivery of this
Agreement, the Closing Date Receivables Purchase Agreements and the
Conveyance Papers by the Bank, the performance of the transactions
contemplated by this Agreement, the Closing Date Receivables Purchase
Agreements and the Conveyance Papers, and the fulfilment of the terms of
this Agreement, the Closing Date Receivables Purchase Agreements and the
Conveyance Papers will not conflict with, violate or result in any breach
of any of the terms and provisions of, or constitute (with or without
notice or lapse of time or both) a default under, any indenture,
contract, agreement, mortgage, deed of trust, or other instrument to
which the Bank is a party or by which it or any of its properties are
bound which would have a material adverse effect on the Bank's ability to
perform its obligations hereunder or thereunder.
(e) No Violation. The execution, delivery and performance of
this Agreement, the Closing Date Receivables Purchase Agreements and the
Conveyance Papers by the Bank and the fulfillment of the terms
contemplated herein and therein applicable to the Bank will not conflict
with or violate any Requirements of Law applicable to the Bank in a
manner which would have a material adverse effect on the Bank's ability
to perform its obligation hereunder or thereunder.
(f) No Proceedings. There are no proceedings or
investigations pending or, to the best knowledge of the Bank, threatened
against the Bank, before any Governmental Authority (i) asserting the
invalidity of this Agreement, the Closing Date Receivables Purchase
Agreements or the Conveyance Papers, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement,
the Closing Date Receivables Purchase Agreements or the Conveyance
Papers, (iii) seeking any determination or ruling that, in the reasonable
judgment of the Bank, would materially and aversely affect the
performance by the Bank of its obligations under this Agreement, the
Closing Date Receivables Purchase Agreements or the Conveyance Papers,
(iv) seeking any determination or ruling that would materially and
adversely affect the validity or enforceability of this Agreement, the
Closing Date Receivables Purchase Agreements or the Conveyance Papers or
(v) seeking to affect adversely the income tax attributes of the Trust
under the United States federal or Delaware income tax systems.
(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 Bank in
connection with the execution and delivery by the Bank of this Agreement,
the Closing Date Receivables Purchase Agreements and the Conveyance
Papers and the performance of the transactions contemplated by this
Agreement, the Closing Date Receivables Purchase Agreements or the
Conveyance Papers by the Bank have been duly obtained, effected or given
and are in full force and effect.
The representations and warranties set forth in this Article
III, Section 2 shall survive the transfer and assignment of the
Receivables to the Company. Upon discovery by the Bank or the Company of
a breach of any of the foregoing representations and warranties, the
party discovering such breach shall given written notice to the other
party within three (3) Business Days following such discovery.
3. Representations and Warranties of the Bank Relating to the
Agreement and the Receivables. The Bank hereby represents and warrants to
the Company as of the Closing Date that:
(i) each of this Agreement and the Closing Date Receivables
Purchase Agreements constitutes a legal, valid and binding obligation of
the Bank enforceable against the Bank in accordance with its terms,
except as such enforceability may be limited by receivership,
conservatorship and supervisory powers of bank regulatory agencies
generally, as well as by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally from time to time in effect or general principles of
equity;
(ii) as of the Initial Cut-Off Date, Schedule 2.1 to each of
the Closing Date Receivables Purchase Agreement as supplemented to such
date, contains an accurate and complete listing in all material respects
of all the Eligible Accounts as of the Initial Cut-Off Date and the
information contained therein with respect to the identity of such
Eligible Accounts and the Receivables existing thereunder is true and
correct in all material respects as of the Initial Cut-Off Date and as of
the Closing Date, the aggregate amount of Receivables in all the Initial
Accounts was $1,210,185,564.00, of which $1,189,789,333.00 were Principal
Receivables;
(iii) each Receivable has been conveyed to the Company free
and clear of any Lien of any Person claiming through or under the Bank or
any of its other Affiliates (other than Liens permitted under subsection
2.7(b) of the Pooling and Servicing Agreement);
(iv) all authorizations, consents, orders or approvals or
registrations or declarations with any Governmental Authority required to
be obtained, effected or given by the Bank in connection with the
conveyance of Receivables to the Company have been duly obtained,
effected or given and are in full force and effect;
(v) each of the Closing Date Receivables Purchase Agreements
constitutes a valid sale, transfer and assignment to the Company of all
right, title and interest of the Bank in the Receivables and the proceeds
thereof and the Interchange payable pursuant to the Closing Date
Receivables Purchase Agreements and the Recoveries payable pursuant to
the Closing Date Receivables Purchase Agreements or, if either of the
Closing Date Receivables Purchase Agreements does not constitute a sale
of such property, it constitutes a grant of a first priority perfected
"security interest" (as defined in the UCC) in such property to the
Company, which, in the case of existing Receivables and the proceeds
thereof and said Recoveries and Interchange, is enforceable upon
execution and delivery of the appropriate Closing Date Receivables
Purchase Agreement, and which will be enforceable with respect to such
Receivables hereafter and thereafter created and the proceeds thereof
upon such creation. Upon the filing of the financing statements and, in
the case of Receivables hereafter created and the proceeds thereof, upon
the creation thereof, the Company shall have a first priority perfected
security or ownership interest in such property and proceeds;
(vi) on the Initial Cut-Off Date, each Account designated as
an Eligible Account on Schedule I to each of the Closing Date Receivables
Purchase Agreements is an Eligible Account;
(vii) on the Initial Cut-Off Date, each Receivable then
existing and designated as an Eligible Receivable on Schedule I to each
of the Closing Date Receivables Purchase Agreements is an Eligible
Receivable; and
(viii)no Insolvency Event with respect to the Bank has
occurred nor has the transfer of the Receivables arising in the Accounts
to the Company been made in contemplation of the occurrence thereof.
4. The representations and warranties set forth in this
Article III, Section 3 shall survive the transfer and assignment of the
Receivables to the Company. Upon discovery by either the Bank or the
Company of a breach of any of the representations and warranties set
forth in this Article III, Section 3, the party discovering such breach
shall give written notice to the other party within three (3) Business
Days following such discovery; provided that the failure to give notice
within three (3) Business Days does not preclude subsequent notice. The
Bank hereby acknowledges that the Company intends to rely on the
representations hereunder in connection with the representations made by
the Company to secured parties, assignees or subsequent transferees
including but not limited to assignments made by the Company to the
Transferor pursuant to the Transferor Purchase Agreement.
5. Nonpetition Covenant. The Bank hereby covenants and agrees
that prior to the date which is one year and one day after the payment in
full of all Investor Certificates of all Series, it will not institute
against or join any other person in instituting against the Company any
bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceeding under the laws of the United
States or any state of the United States.
ARTICLE IV
Miscellaneous
1. Closing Date Receivables Purchase Agreements. This
Agreement has been executed and delivered pursuant to the Closing Date
Receivables Purchase Agreements and is subject to the provisions of
Article IX thereof (other than Section 9.6 thereof), which are hereby
incorporated herein; provided, however that for purposes of this
Agreement references to "Agreement" under such Article IX shall be deemed
to mean this Agreement.
2. Interpretation. None of the terms and provisions contained
herein shall be deemed in any manner to amend, modify, revise or
otherwise change or supersede any of the terms or provisions of the
Closing Date Receivables Purchase Agreements.
[SIGNATURE PAGE TO FOLLOW]
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by a duly authorized officer of each party hereto as of the
date first above written.
PARTNERS FIRST RECEIVABLES, LLC
By: /s/ John R. Soderlund
____________________________
Namee: John R. Soderlund
Title: President and Chief
Executive Officer
BANKBOSTON (NH), NATIONAL ASSOCIATION
By: /s/ William M. Parent
____________________________
Name: William M. Parent
Title: Authorized Officer
- ------------------------------------------------------------------------------
CONTRIBUTION AGREEMENT
BETWEEN
HARRIS TRUST AND SAVINGS BANK
AND
PARTNERS FIRST HOLDINGS, LLC
- ------------------------------------------------------------------------------
CONTRIBUTION AGREEMENT
This is a Contribution Agreement, dated as of January 29, 1998 (as
in effect from time to time, this "Agreement"), among (a) Harris
Trust and Savings Bank, an Illinois banking corporation (the "Seller")
and (b) Partners First Holdings, LLC, a Delaware limited liability
company (the "Company").
WHEREAS, pursuant to a certain Master Agreement for the Formation
of a Limited Liability Company, dated as of September 2, 1997,
among BankBoston Corporation, Bankmont Financial Corp., Harris Trust and
Savings Bank and First Annapolis Consulting, Inc. (as amended and in
effect from time to time, the "Master Agreement"), it is contemplated
that the Seller will contribute to the Company the intangible assets
associated with the Credit Card Business (as hereinafter defined) of the
Seller, subject to certain terms and conditions set forth more fully
therein; and
WHEREAS, the Seller wishes to contribute such assets to the
Company, and the Company wishes to acquire such assets from the Seller
and assume certain related liabilities, in consideration for $28,299,320
in stated value of Series A Units and a fifteen and two/one
hundredths percent (15.02%) share of all Common Units (collectively, the
"Membership Interests").
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants set forth below, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree, intending to be legally bound, as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Certain Defined Terms. Capitalized terms used herein
without definition shall have the meanings assigned to such terms in the
Operating Agreement. Additionally, the following capitalized terms shall
have the following meanings:
"Accounts" has the meaning set forth in Section 2.1(a).
"Agreement" has the meaning set forth in the preamble.
"Assignment and Assumption" means the Assignment and Assumption
Agreement, dated as of the date hereof, by and between the Seller and the
Company.
"Assistance Agreement" means the Assistance Agreement, dated
as of the date
hereof, by and between the Company and Seller.
"Assumed Obligations" has the meaning set forth in
Section 3.1.
"BIN" means the Visa(R) Bank Identification Number.
"Cardholder" means a holder of a Credit Card.
"Cardholder Agreements" means the agreements between the
Cardholders or obligors with respect to a Credit Card and the Seller,
including, without limitation, any agreements relating to credit
enhancements provided in connection with such Credit Card, as the same
has been amended or otherwise modified and in effect from time to time.
"Claim" has the meaning set forth in Section 7.3(a).
"Closing Date" means the date on which the transactions described
in this Agreement are consummated, except that for purposes of
determining Accounts, it shall mean the opening of business on the day on
which the transactions described in this Agreement are consummated.
"Company" has the meaning set forth in the preamble hereto.
"Company Indemnitees" has the meaning set forth in
Section 7.1.
"Company Indemnity Representations" means the representations and
warranties of Company contained in Sections 5.4 and 5.5 of this
Agreement.
"Contributed Assets" has the meaning set forth in
Section 2.1.
"Credit Card" means a MasterCard(R) or Visa(R) card issued by
Seller and associated solely with the Transferred Credit Card Business.
"Designated Agreements" means (i) the Cardholder Agreements and all
rights and privileges under the Cardholder Agreements, including, without
limitation, all rights to create, enforce and collect Receivables under
the Cardholder Agreements, all rights to enforce and collect amounts
owing under the Cardholder Agreements and all rights to amend and modify
the Cardholder Agreements, (ii) the Additional Agreements and all rights
and privileges under the Additional Agreements, (iii) all records and
information of Seller necessary for Seller to exercise its rights and
privileges under the Cardholder Agreements and the Additional Agreements
and (iv) the BIN numbers 401704, 438851, 460710, 468100, 468120, 468121,
468122, 468123, 468124, 468125, 468126, 468127, 468128, 468129, the ICA
numbers 1113-523000 through 1113- 523099.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Governmental Authority" means any federal, national, state,
municipal, local, territorial or other governmental department,
commission, board, bureau, agency, regulatory authority, instrumentality,
judicial or administrative body, domestic or foreign, and Visa(R) and
MasterCard(R).
"Harris" has the meaning set forth in the preamble hereto.
"Harris Purchase Agreements" means (i) the Receivables Purchase and
Sale Agreement and (ii) the Overdue Receivables Purchase and Sale
Agreement, each dated as of the date hereof by and between the Seller and
Receivables LLC and the Contribution Agreement dated as of the date
hereof by and among Bankmont and the Company.
"ICA" means the MasterCard(R) Interbank Card Account.
"Indemnified Party" has the meaning set forth in Section 7.3(a).
"Indemnifying Party" has the meaning set forth in
Section 7.3(a).
"Licensed Rights" has the meaning set forth in Section 6.7.
"Losses" has the meaning set forth in Section 7.1.
"Master Agreement" has the meaning set forth in the recitals
hereto.
"MasterCard(R)" means MasterCard International Incorporated.
"Membership Interests" has the meaning set forth in the
recitals hereto.
"Non-Transferable Asset" has the meaning set forth in
Section 6.1.
"Operating Agreement" means the Limited Liability Company Agreement
dated as of the date hereof by and among the founding members of the
Company, as originally
executed and delivered.
"Qualified Transferee" has the meaning set forth in Section
6.5.
"Receivables" means any and all amounts payable by the Cardholders
(whether billed or unbilled, posted or not) in connection with the
Accounts, including, without limitation, all principal, outstanding
purchases, cash advances, interest (including accrued but unbilled
interest), annual fees, finance and service charges and other charges and
fees.
"Receivables Purchase Agreement" means the Receivables Purchase
Agreement, dated as of the date hereof, by and between Seller and
Receivables LLC relating to the purchase and sale of Receivables after
the date hereof.
"Retained Liabilities" has the meaning set forth in
Section 3.1.
"Seller Indemnitees" has the meaning set forth in
Section 7.2.
"Seller Indemnity Representations" means the representations and
warranties of Seller contained in Sections 4.5 (except the first sentence
thereof), 4.6, 4.7, 4.8, 4.9 and 4.11 of this Agreement.
"Seller" has the meaning set forth in the preamble hereto.
"Subject Losses" has the meaning set forth in Section 7.5.
"Third Party Claim" has the meaning set forth in Section 7.3(a).
"Transferred Credit Card Business" means the Credit Card Business
of the Seller other than the Bankmont Relationship Credit Card Business
and the Bankmont Value-Limited Credit Card Business.
"Visa(R)" means Visa U.S.A., Inc.
"Zero Value Accounts" has the meaning set forth in the Harris
Purchase Agreements.
ARTICLE 2
CONTRIBUTION OF ASSETS
Section 2.1 Contributed Assets. Subject to the terms and conditions
set forth in this Agreement, the Seller hereby contributes, assigns,
transfers and delivers to the Company, and the Company hereby accepts,
assumes, acquires and takes assignment and delivery of, all of the
Seller's right, title and interest in, to and under the following assets
(other than the Excluded Assets) as of the Closing Date (hereinafter
referred to collectively as the "Contributed Assets"):
(a) All of the credit card accounts associated with the
Transferred Credit Card Business, including, without limitation,
dormant accounts, in-active accounts, closed accounts, accounts
without outstanding balances, accounts classified as "substandard,"
"doubtful," or "loss" or treated as "other loans especially
mentioned" in the most recent report of examination prepared by any
Federal or State supervisory agency, accounts in nonaccrual status,
accounts on which principal or interest payments are more than 30
days past due, accounts whose terms have been renegotiated or
compromised due to the deteriorating financial condition of the
Cardholder and accounts which are statused by Seller on the Closing
Date as bankrupt, deceased, fraud, lost or stolen or charged off
(such status to be determined in a manner consistent with Seller's
customary practice consistently applied), and the credit card
accounts identified in Schedule 2.1(a), which is attached
hereto and/or provided herewith and made a part hereof (which may,
in the Seller's sole discretion, be in the form of a computer file
or magnetic tape, which contains sufficient information to identify
each account and respective Cardholder including name, address,
social security number, account number, status codes, account
balance and such other information as is mutually agreed upon by
Purchaser and Seller, as identification of the respective
Cardholders) (the "Accounts");
(b) All unprocessed applications and preapproved offers
outstanding on the Closing Date for Credit Cards other than those
which if processed and accepted would result in an account
associated with the Bankmont Relationship Credit Card Business;
(c) All other rights in and to the business relationship
between the Seller and the Cardholders in their capacities as such,
including the right to offer ongoing Credit Card services to
Cardholders, and the right to offer and provide other products and
services on a non-exclusive basis to Cardholders;
(d) The right to direct the Seller to transfer all of its
rights under the Designated Agreements to any other party at any
time and from time to time (without any further consideration being
payable by the Company) provided that (i) the designee is legally
capable of performing the obligations of the Seller thereunder,
(ii) such designee expressly assumes the obligations of the Seller
under the Designated Agreements and (iii) such designee expressly
acknowledges that its rights thereunder are subject to, and that it
is bound by, the Harris Purchase Agreements, the Assignment and the
Assumption and the Receivables Purchase Agreement;
(e) Any and all books and records under the Seller's control
relating solely to the Cardholders and the Accounts, including,
without limitation, all Account applications, statements, records
and correspondence and all customer lists and other information
under the Seller's control relating solely to such Cardholders and
such Accounts, whether in paper, microfilm, microfiche or magnetic
tape form;
(f) The rights of Seller under the contracts and agreements
listed on Schedule 2.1(f) hereof, to the extent the same are
assignable without breach of same or Seller has obtained any
necessary consents to such assignment or as otherwise may be
transferred to Company; and
(g) The right to assign, license or designate to others any
or all of the foregoing.
Section 2.2 Excluded Assets. Anything contained in the foregoing to
the contrary notwithstanding, the Seller is not transferring to the
Company and the Company is not acquiring pursuant to this Agreement, and
the term "Contributed Assets" shall not in any event include, any of the
following (the "Excluded Assets"):
(a) Any cash;
(b) Any fees, charges or other amounts payable by any
Cardholders and not arising in connection with the Accounts or the
Transferred Credit Card
Business;
(c) Any of the Seller's trademarks, service marks or trade
names, or any stationery, office supplies, business forms, manuals
or similar property bearing the Seller's trademarks, trade names,
service marks, logos or similar corporate identification, unless
such trademarks, trade names, service marks, logos or similar
corporate identification have been redacted therefrom;
(d) Any assets related solely to Retained Liabilities;
(e) Any income tax refunds or claims therefor which the
Seller may be entitled to receive from any federal, state or local
authorities;
(f) Any assets of the Seller not used solely in the
Transferred Credit Card Business (including any assets used in a
Permitted Business) or not separable from the Seller's other
businesses;
(g) Any rights to any security deposits or other amounts
deposited with any state or other jurisdiction or regulatory
authority in connection with the qualification, certification,
licensing or permitting of the Seller in connection with the
conduct of the Seller's businesses, including, without limitation,
the Transferred Credit Card Business;
(h) Any consideration received by the Seller (or any of its
Affiliates) pursuant to this Agreement;
(i) Any rights of the Seller under this Agreement or
any other Related Agreement;
(j) Any rights of the Seller under the Cardholder Agreements
to indemnification or reimbursement and not relating to a liability
which the Company has assumed, or any other claims or rights of the
Seller under such agreements, in each case relating to the conduct
of the Transferred Credit Card Business prior to the Closing Date;
(k) Any rights or assets transferred and/or assigned by
Seller pursuant to the Harris Purchase Agreements, the Assignment
and Assumption or the Receivables Purchase Agreement; and
(l) The Designated Agreements (subject to the Company's right
to cause the same to be transferred as herein set forth).
ARTICLE 3
ASSUMPTION OF OBLIGATIONS
Section 3.1 Assumption of Obligations. The Company hereby assumes,
and agrees to pay, perform, fulfill and discharge, all of the Seller's
obligations with respect to the Contributed Assets from and after the
Closing Date, including, without limitation, the following obligations of
the Seller (collectively, the "Assumed Obligations"):
(a) All of the Seller's obligations under or in connection
with the Credit Cards and the Accounts (including, without
limitation, any related credit enhancements transferred to the
Company or its designee and the contracts assigned to Company or
its designee hereby and listed on Schedules 2.1(h) hereto)
arising from and after the Closing Date; and
(b) All fees, normal operating assessments and other charges
of Visa(R) and MasterCard(R) relating solely to the Transferred
Credit Card Business and relating to the period after the Closing
Date, except for those charges (i) arising from the Seller's
violation of any by-laws, rules or operating regulations of
MasterCard(R) and/or Visa(R) or other directive from or agreement
with MasterCard(R) and/or Visa(R) which are binding upon the
Seller, or (ii) relating to any special assessments with
respect to periods up to and including the Closing Date.
All obligations and liabilities of Seller not assumed by the Company
pursuant to this Section 3.1 or assumed by separate written
agreement signed by the Company (the "Retained Liabilities") are retained
by Seller and the Company shall not be liable therefor.
Section 3.2 Consideration. In consideration of the transfer of the
Contributed Assets by the Seller to the Company hereunder, the Company
agrees on the Closing Date to assume the Assumed Obligations and to
transfer to the Seller or to a Permitted Transferee thereof designated by
the Seller, the Membership Interests. The Seller's tax basis in the
Contributed Assets and the value of the Contributed Assets is set forth
on Exhibit C hereto.
Section 3.3 Adjustments. It is the intent of the parties hereto
that the Seller transfer to the Company all Accounts associated with the
Transferred Credit Card Business and, accordingly, if it comes to the
attention of either party that any Account was improperly included on or
excluded from Schedule 2.1(a), the parties shall execute a mutually
acceptable agreement appropriately amending Schedule 2.1(a) and shall
take such other actions as may be appropriate in order to place the
parties in the same position as they would have been in if Schedule
2.1(a) as originally delivered had been modified in accordance with such
admendment.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Company as
follows:
Section 4.1 Organization. Seller is an Illinois banking corporation
duly organized and validly existing under the laws of the State of
Illinois.
Section 4.2 Authority; Enforceability. The Seller has all requisite
power and authority (i) to enter into and carry out its obligations under
this Agreement, (ii) to hold the Contributed Assets being contributed to
the Company by the Seller and (iii) to contribute, assign and transfer
the Contributed Assets. The execution, delivery and performance of this
Agreement have been duly authorized by all necessary action on the part
of the Seller. This Agreement has been duly executed and delivered and
constitutes the legal, valid and binding obligation of the Seller,
enforceable against the Seller in accordance with its terms, except as
enforcement thereof may be limited by receivership, conservatorship and
supervisory powers of bank regulatory agencies generally, as well as
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
or similar laws of general applicability relating to or affecting
creditors' rights or to general equity principles (regardless of whether
such matters are considered in a proceeding in equity or at law) and the
availability of equitable remedies.
Section 4.3 No Conflicts. The execution, delivery and performance
by the Seller of this Agreement does not violate (a) the Seller's Charter
or By-Laws, (b) any material agreement or instrument to which the Seller
is a party or by which the Seller is bound or which affects the
Contributed Assets, or (c) any law, rule or regulation applicable to the
Seller or which affects the Contributed Assets.
Section 4.4 Ownership of Assets. Harris is the sole owner of all
right, title and interest in, to and under all of the Contributed Assets.
The Seller has the right, power and authority to contribute and transfer
the Contributed Assets and the Contributed Assets are not subject to any
assignment, lien, charge, encumbrance or security interest, except that
such assets may be encumbered by the Cardholder Agreements and to other
rights of Cardholders and other obligors pursuant to 12 C.F.R.
ss.226.12(c) and ss.226.13. The Seller hereby contributes the Contributed
Assets free and clear of all assignments, liens, charges, encumbrances
and other security interests and of all claims or rights of third parties
except as such assets may be encumbered by the Cardholder Agreements and
to other rights of Cardholders and other obligors pursuant to 12 C.F.R.
ss.226.12(c) and ss.226.13
Section 4.5 Cardholder and Related Agreements. Seller has
heretofore delivered (or afforded the Company the opportunity to inspect)
representative forms of the Cardholder Agreements (but not all variances
of such Cardholder Agreements setting forth different rates or other
economic terms) and representative copies of the forms of written
applications for Credit Cards currently in use and copies of all
contracts listed on Schedule 2.1(h) hereof. The Cardholder Agreements are
legally binding agreements, enforceable in all material respects against
the Seller and, to the best of Seller's knowledge, against the
Cardholders or other obligors party thereto in accordance with their
respective terms, except as enforcement thereof may be limited by
bankruptcy, fraudulent transfer, reorganization, moratorium or similar
laws of general applicability relating to or affecting creditors' rights
or to general equity principles (regardless of whether such matters are
considered in a proceeding in equity or at law) and the availability of
equitable remedies. The Seller is in compliance with the Cardholder
Agreements except where the failure to so comply would not have a
material adverse effect on the Contributed Assets. The Cardholder
Agreements and contract obligations are in full force and effect, the
Seller is not in default in any material respect thereunder and to the
best of Seller's knowledge no other party thereto is in default
thereunder.
Section 4.6 Litigation. Except for the litigation described on
Schedule 4.6, which is attached hereto and made a part hereof, there are
no actions, suits or proceedings pending or, to the knowledge of the
Seller, threatened against or affecting of the Seller which would
reasonably be expected to cause any material adverse effect on the
Contributed Assets. There is no action, suit or proceeding pending
against the Seller which would prevent the Seller from consummating the
sale of the Contributed Assets to the Company hereunder.
Section 4.7 Compliance with Applicable Law. The Seller has complied
in all material respects with applicable federal and state laws, rules
and regulations, and judicial, administrative and arbitrator's orders
relating thereto, which are applicable to the Transferred Credit Card
Business and the Contributed Assets, including, without limitation, the
federal Truth-in-Lending Act, Equal Credit Opportunity Act, Fair Credit
Reporting Act, Fair Debt Collection Practices Act and Regulations B and Z
promulgated by the Board of Governors of the Federal Reserve System.
Section 4.8 Licenses to Carry on Credit Card Business. The Seller
is licensed to participate in the programs offered by Visa(R) and by
MasterCard(R) to the full extent necessary to satisfy the terms of this
Agreement and the Cardholder Agreements.
Section 4.9 Account Records. The Account records are accurate and
complete in all material respects, in each case, as of the date when each
such record was made.
Section 4.10 Brokers. Neither the Seller nor any of its Affiliates
have agreed to pay any fee or commission to any agent, broker, finder or
other person for or on account of services rendered as a broker or finder
in connection with this Agreement or the contribution of the Contributed
Assets hereunder.
Section 4.11 Permits, Etc. The Seller has obtained or as of the
Closing Date will have obtained all licenses, permits and approvals of
all Governmental Authorities necessary for such Seller to contribute to
the Company the Contributed Assets to be contributed by the Seller to the
Company and to consummate the other transactions contemplated hereby. The
Seller has received no notice from any Governmental Authority indicating
that it would oppose or not grant or issue its consent or approval, if
required, with respect to the contribution of the Contributed Assets
hereunder or any of the other transactions contemplated hereby.
The Seller makes no other representations or warranties, expressed
or implied with respect to the subject matter hereof, other than as
specifically set forth in this Article 4.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Seller as
follows:
Section 5.1 Organization. The Company is a limited liability
company duly organized, validly existing and in good standing under the
laws of the State of Delaware.
Section 5.2 Authority; Enforceability. The Company has the
requisite power and authority (i) to enter into and carry out its
obligations under this Agreement, (ii) to receive and hold the
Contributed Assets and (iii) to assume the Assumed Obligations. The
execution, delivery and performance of this Agreement have been duly
authorized by all necessary action on the part of the Company. This
Agreement has been duly executed and delivered by the Company and
constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforcement thereof may be limited by receivership, bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or similar
laws of general applicability relating to or affecting creditors' rights
or to general equity principles (regardless of whether such matters are
considered in a proceeding in equity or at law) and the availability of
equitable remedies.
Section 5.3 No Conflicts. The execution, delivery and performance
of this Agreement by the Company does not violate (a) the Certificate of
Formation or the Operating Agreement, (b) any material agreement or
instrument to which the Company is a party or by which the Company is
bound, or (c) any law, rule or regulation applicable to the Company.
Section 5.4 Permits, Etc. The Company has obtained all licenses,
permits and approvals of all Governmental Authorities necessary for the
Company to operate the businesses contemplated to be operated by it
pursuant to the Operating Agreement and to consummate the transactions
contemplated hereby.
Section 5.5 Litigation. There is no action, suit or proceeding
pending or, to the knowledge of the Company, threatened against the
Company which challenges the validity, propriety or enforceability of, or
seeks to enjoin the performance of, the transactions contemplated by this
Agreement.
Section 5.6 Finder or Brokers. Neither the Company nor any
Affiliate of the Company has agreed to pay any fee or commission to any
agent, broker, finder or other person for or on account of services
rendered as a broker or finder in connection with this Agreement or the
transactions contemplated hereby.
Section 5.7 Membership Interests. The Membership Interests are duly
authorized and when issued pursuant to the terms hereof will be fully
paid and nonassessable, and upon issuance to the Seller or its designees
will be owned by the Seller or its designees free and clear of any
claims, liens, encumbrances or security interests, other than the
restrictions contained in the Operating Agreement.
ARTICLE 6
CERTAIN TRANSITIONAL MATTERS
Section 6.1 Transfers Requiring Consent. To the extent that any
asset is not transferable or assignable without the consent of any third
party or the transfer or assignment of which would result in a violation
of any law or order (a "Non-Transferable Asset"), this Agreement shall
not constitute an assignment or an attempted assignment thereof. Seller
shall use its reasonable efforts to obtain the required consent of any
such third party to the transfer or assignment of any such
Non-Transferable Asset to the Company. If any such consent shall not be
obtained, Seller shall cooperate with the Company in any reasonable
arrangement (including reimbursement of monies paid by the Company on
account of any such arrangement) designed to provide the Company with the
benefits intended to be assigned to it under the relevant
Non-Transferable Asset.
Section 6.2 Business Records. The Company acknowledges that certain
business records of the Seller relating to the Seller's Transferred
Credit Card Business prior to the Closing Date will be conveyed to the
Company as part of the Contributed Assets, and that the Seller may from
time to time require access to such records, and the Company agrees that
upon reasonable prior notice from the Seller, it will, during normal
business hours, either provide the Seller with access to or, at the
Company's option, copies of such records for such purposes. The Seller
agrees to hold any confidential information so provided in confidence.
The Company agrees that it will not destroy any such business records
during the three (3) year period after the date hereof, and it will not
within the two (2) year period after such date destroy any business
records prepared prior to the date hereof without first notifying the
Seller and affording it the opportunity to remove or copy them.
Section 6.3 Further Assistance. On and after the Closing Date
Seller shall (i) execute, acknowledge and deliver all such
acknowledgments and other instruments and take such further action as may
be necessary and appropriate to effectively vest in the Company the full
legal and equitable title to the Contributed Assets, and (ii) assist the
Company in the orderly transition of the Contributed Assets to the
Company, and (iii) deliver such other information as the Company may
reasonably request. In the event Seller shall receive any payments on the
Contributed Assets attributable to the period after the Closing Date, the
Seller shall hold them in trust for the Company, promptly endorse and
transfer such payments to the Company and take all actions to vest such
monies in Company.
Section 6.4 Communications with Cardholders. Not later than sixty
(60) days after the initial re-designation of the Designated Agreements
in accordance with the terms of Section 6.5 of this Agreement, the
Company or its designee shall have notified Cardholders of the
transactions contemplated by this Agreement by sending them a joint
communication from the applicable Seller and the Company. Such
communication shall be at the Company's expense. Such communication shall
be in a form consented to by both parties prior to mailing, but neither
party shall unreasonably withhold consent. The parties agree that such
communication shall include a telephone number so that Cardholders may
contact the Company or its designee and will notify Cardholders that they
will not be permitted to use drafts (including, without limitation cash
advance checks and balance transfer forms or checks) previously sent them
by the Seller. The Seller will honor such drafts for such period of time
specified by the Company, which shall not be more than one hundred eighty
(180) days after such re-designation and the Company shall promptly
reimburse the Seller for each such draft honored by it.
Section 6.5 The Designated Agreements. The Seller and the Company
acknowledge that all Receivables and net Interchange fees related thereto
generated by the Seller under the Designated Agreements are to be sold by
the Seller to Receivables LLC, a wholly owned subsidiary of the Company,
pursuant to the Harris Purchase Agreements, the Assignment and Assumption
and the Receivables Purchase Agreement. The Seller further acknowledges
that its retention of the Designated Agreements is subject to the right
of the Company to direct the Seller and each and every subsequent
transferee thereof to transfer the Designated Agreements to whomsoever
the Company may elect provided that such transferee is legally capable of
performing the obligations of the Seller and each and every transferee
thereof under the Designated Agreements, expressly assumes the
obligations of the Seller and each and every transferee thereof under the
Designated Agreements and expressly acknowledges that it is taking its
rights subject to and will be bound by the terms of the Harris Purchase
Agreements, the Assignment and Assumption and the Receivables Purchase
Agreement (to the extent such agreements are then in effect) (each being
a "Qualified Transferee"). Upon the election of the Company to terminate
the Seller's obligations under the Assistance Agreement, the Company
shall direct the Seller to, and upon such direction the Seller shall,
transfer (without payment of any further consideration) the Designated
Agreements to such Qualified Transferee. The Seller agrees to execute
such instruments of assignment and transfer as may be reasonably required
by the Company in order to effectuate the transfer of the Designated
Agreements to a Qualified Transferee. It is expressly acknowledged and
agreed that the right of the Company to direct the Designated Agreements
to be transferred is subject only to the conditions explicitly herein
stated, and is otherwise absolute and unconditional and that the grant of
such right to the Company is a material inducement to the Company in
entering into this Agreement.
Section 6.6 Use of BIN and ICA Numbers. To the extent that the
Seller has accounts which are not part of the Transferred Credit Card
Business which utilize the BIN and ICA numbers from and after the initial
re-designation of the Designated Agreements pursuant to Section 6.5
hereof, the Company shall allow the Seller to continue to use such BIN
and ICA numbers until the Seller converts such accounts to different BIN
and ICA numbers. The Seller shall retain all right, title and interest in
such accounts and amounts arising therefrom and the Seller shall be
responsible for all chargebacks with respect thereto. The Company and the
Seller will cooperate to develop a mutually agreeable process to service
and reimburse each other with respect to these accounts.
Section 6.7 Trademark License. On and subject to the conditions and
limitations set forth below, Seller hereby grants the Company the
nonexclusive right and license to use Seller's trademarks, service marks,
trade names and logos associated with the Transferred Credit Card
Business, as well as stocks of stationery, office supplies, and business
forms currently on hand and bearing any of the foregoing (collectively,
the "Licensed Rights") solely and only for the purpose of operating the
Transferred Credit Card Business, such license to expire one (1) year
from the date of the initial re- designation of the Designated Agreements
pursuant to Section 6.5 hereof, and to be terminable at the option of the
Seller by notice to the Company in the event of any breach by the Company
of the terms hereof. It is expressly understood and agreed that the
Company is not purchasing or acquiring any right, title or interest in
the Licensed Rights and that if any rights therein accrue to the Company
by operation of law, such rights shall automatically and without any
action on the part of the Company revert to the Seller. The foregoing
license is granted to the Company solely for the purpose of assisting in
transitioning the Transferred Credit Card Business to Company or its
designee, and the Company agrees to cease using each element of the
Licensed Rights as promptly as is reasonably practical (but in any event
within one (1) year from the date hereof) and solely for the purposes
hereinabove set forth. Any use of the Licensed Rights by the Company
shall be conducted in accordance with any applicable policies and
procedures of the Seller and in a professional manner consistent with the
Seller's image and own use of the Licensed Rights. The authorizations
contained herein shall not be assignable (nor is the Company permitted to
authorize any other party to use the Licensed Rights).
ARTICLE 7
INDEMNIFICATION
Section 7.1 Indemnity by the Seller. The Seller agrees to indemnify
and hold the Company and its affiliates, employees, officers, directors,
controlling persons, successors and assigns (the "Company Indemnitees"),
harmless from and with respect to any and all claims, liabilities,
losses, damages, costs and expenses, including without limitation the
reasonable fees and disbursements of counsel and expert witnesses, net of
insurance proceeds (collectively, "Losses"), related to or arising
directly or indirectly out of (a) any inaccuracies in any
representation or warranty made by the Seller in or pursuant to this
Agreement, (but only to the extent that Losses relating to or arising
directly or indirectly out of such inaccuracies when taken together with
Losses (as that term is defined in the Harris Purchase Agreements) for
which the Seller is obligated to indemnify Purchaser Indemnitees or
Company Indemnitees (as such terms are defined the Harris Purchase
Agreements) pursuant to Sections 5.1(a) or 7.1(a) (as applicable)
of each of the Harris Purchase Agreements, without duplication, exceed
$100,000 in the aggregate), (b) any failure or breach by the Seller
of any covenant, obligation, or undertaking made by the Seller in this
Agreement, (c) the operation of the Contributed Assets by the
Seller prior to the date hereof, (d) the Retained Liabilities, or
(e) any out-of-balance condition in the Cardholder records existing
on the Closing Date, whether or not then known, in each case, except to
the extent that such Losses were caused by any such Indemnified Party's
gross negligence or willful misconduct.
Section 7.2 Indemnity by the Company. The Company agrees to
indemnify and hold the Seller and its affiliates, employees, officers,
directors, controlling persons, successors and assigns (the "Seller
Indemnitees") harmless from and with respect to any and all Losses
related to or arising directly or indirectly out of (a) any inaccuracies
in any representation or warranty made by the Company in or pursuant to
this Agreement, but only to the extent that Losses relating to or arising
directly or indirectly out of such inaccuracies when taken together with
Losses (as that term is defined the Harris Purchase Agreements) for which
the Company and/or Receivables LLC are obligated to indemnify the Seller
Indemnitees or the Investor Indemnitees (as defined in the applicable
Harris Purchase Agreements) pursuant to Sections 5.2(a) or 7.2(a) (as
applicable) of each of the Harris Purchase Agreements, without
duplication, exceed $100,000 in the aggregate, (b) any failure or breach
by the Company of any covenant, obligation or undertaking made by the
Company in this Agreement (including without limitation any failure by
the Company to pay or perform any of the Assumed Obligations), or (c)the
operation of the Contributed Assets by the Company after the Closing
Date, in each case except to the extent that such Losses were caused by
any such Indemnified Party's gross negligence or willful misconduct.
Section 7.3 Claims. (a) Any party seeking indemnification
hereunder (the "Indemnified Party") shall promptly notify the party
hereto obligated to provide indemnification hereunder (the "Indemnifying
Party") of any action, suit, proceeding, demand or breach (a "Claim")
with respect to which the Indemnified Party claims indemnification
hereunder, provided that failure of the Indemnified Party to give such
notice shall not relieve the Indemnifying Party of its obligations under
this Article 7 except to the extent, if at all, that such Indemnifying
Party shall have been prejudiced thereby. If such Claim relates to any
action, suit, proceeding or demand instituted against the Indemnified
Party by a third party (a "Third Party Claim"), then upon receipt of such
notice from the Indemnified Party the Indemnifying Party shall be
entitled to participate in the defense of such Third Party Claim, and if
and only if each of the following conditions is satisfied, the
Indemnifying Party may assume the defense of such Third Party Claim, and
in the case of such an assumption the Indemnifying Party shall have the
authority to negotiate, compromise and settle such Third Party Claim:
(i) the Indemnifying Party confirms in writing that it is
obligated hereunder to indemnify the Indemnified Party with respect
to such Third Party Claim; and
(ii) there is no conflict of interest which would make
separate representation by the Indemnified Party's own counsel
advisable.
The Indemnified Party shall retain the right to employ its own
counsel and to participate in the defense of any Third Party Claim, the
defense of which has been assumed by the Indemnifying Party pursuant
hereto, but the Indemnified Party shall bear and shall be solely
responsible for its own costs and expenses in connection with such
participation. The Indemnifying Party shall not, without the prior
written consent of the Indemnified Party, settle or compromise any claim
or consent to the entry of any judgment that does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to
the Indemnified Party a release from all liability in respect of such
claim.
(b) In the event of any Claim under Section7.1 or 7.2, the
Indemnified Party shall advise the Indemnifying Party in writing of the
amount and circumstances
surrounding such Claim.
Section 7.4 Time Limits. No claim for indemnification under this
Article 7 may be asserted for the first time for any breach of any
representation or warranty after June 30, 1999.
Section 7.5 Exclusive Remedy; Damage Limitations. The Seller and
the Company acknowledge and agree that, except for the right to seek
specific performance of covenants and other agreements, the
indemnification rights and remedies available to each party under this
Article 7 shall be the sole and exclusive rights and remedies of the
Company and the Seller with respect to any Losses arising out of or
relating in any way to (a) any breach of this Agreement, (b)<0- 32>the
acquisition of the Contributed Assets and the assumption of the Assumed
Obligations by the Company, or (c)the consummation of the transactions
contemplated hereby (collectively, the "Subject Losses"), including
without limitation any claims, rights or remedies for negligent
misrepresentation but excluding specifically, any claims, rights or
remedies for fraud. Without limiting the generality of the foregoing,
except for remedies for fraud and as specifically authorized by this
Article 7, the Company and the Seller hereby waive, release and disclaim
any claims, rights or remedies arising in tort, by statute, or otherwise,
with respect to the Subject Losses. As provided in Section 8.6, in no
event shall the Company or the Seller be entitled to recover from the
other party hereto for incidental, special, consequential, exemplary or
punitive damages, and for all purposes of this Agreement, the term
"Losses" shall be deemed not to include any such damages. The Seller's
maximum aggregate liability, and the right of recovery of the Company
Indemnitees against the Seller under this Article 7 for Losses, arising
as a result of breaches of the Seller Indemnity Representations contained
herein shall, in all events other than fraud by Seller, be limited in the
aggregate to $5,900,000 less all amounts paid by Seller under the Harris
Purchase Agreements as a result of breaches by Seller of the Seller
Indemnity Representations (as that term is defined in the Harris Purchase
Agreements). The Company's maximum aggregate liability, and the right of
recovery of the Seller Indemnitees against the Company under this Article
7 for Losses, arising as a result of breaches of the Company Indemnity
Representations contained herein shall, in all events other than fraud by
the Company, be limited in the aggregate to $5,900,000 less all amounts
paid by the Company and/or Receivables LLC under the Harris Purchase
Agreements as a result of breaches of the Purchaser Indemnity
Representations and/or Company Indemnity Representatives (as such terms
are defined in the Harris Purchase Agreements).
ARTICLE 8
GENERAL
Section 8.1 Investment Representations. On the Closing Date, the
Seller shall cause the recipient or recipients of the Membership
Interests (a) to make to the Company each of the representations
set forth as Exhibit A hereto and (b) to execute and deliver to the
Company a completed Confidential Purchaser Questionnaire, the form of
which is attached hereto as Exhibit B.
Section 8.2 Notices. All notices, demands and other communications
hereunder shall be in writing or by written telecommunication, and shall
be deemed to have been duly given if delivered personally or if mailed by
certified mail, return receipt requested, postage prepaid or if sent by
overnight courier or sent by written facsimile (answerback confirmed), as
follows:
If to the Seller: Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
Attention: Mr. Paul V. Reagan
Senior Vice President
and U.S. General
Counsel.
with a copy sent
contemporaneously to: Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
Attention: Marc P. Franson, Esq.
If to the Company: Partners First Holdings, LLC
900 Elkridge Landing Road
Suite 300
Linthicum, MD 21090
Attention: John R. Soderlund
with a copy sent
contemporaneously to: Partners First Holdings, LLC
900 Elkridge Landing Road
Suite 300
Linthicum, MD 21090
Attention: Terence F. Browne, Esq.
Any such communication shall be deemed to have been received (i)
when delivered, if personally delivered, or sent by nationally-recognized
overnight courier or sent via facsimile (answerback confirmed) or (ii) on
the third Business Day following the date on which the piece of mail
containing such communications is posted, if sent by certified mail.
Section 8.3 Entire Agreement. This Agreement (including the
Exhibits and Schedules hereto) contains the entire understanding of the
parties hereto, and supersedes all prior agreements and understandings
relating to the subject matter hereof. This Agreement shall not be
amended except by a written instrument hereafter signed by all of the
parties hereto. No waiver of any provision of this Agreement shall be
effective unless evidenced by a written instrument signed by the waiving
party. Each of the parties hereto further acknowledges and agrees that,
in entering into this Agreement, it has not in any way relied upon any
oral or written agreements, statements, promises, information,
arrangements, understandings, representations or warranties, express or
implied, not specifically set forth in this Agreement.
Section 8.4 Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of
Delaware without regard to its conflict of laws rules.
Section 8.5 Consent to Jurisdiction. Each of the parties hereto
agrees that any suit, action or proceeding instituted against such party
under or in connection with this Agreement may be brought in a court of
competent jurisdiction in the State of Delaware. By execution hereof,
each party hereto irrevocably waives any objection to, and any right of
immunity on the grounds of, improper venue, the convenience of the forum,
the personal jurisdiction of such courts or the execution of judgments
resulting therefrom. Each party hereto hereby irrevocably accepts and
submits to the jurisdiction of such courts in any such action, suit or
proceeding.
Section 8.6 Waiver of Certain Damages. Each of the parties hereto
irrevocably waives, to the fullest extent permitted by law any rights
that it may have to punitive, incidental, special, exemplary or
consequential damages in respect of any litigation based upon, or arising
out of, this Agreement or any course of conduct, course of dealing,
statements or actions of any of the parties hereto relating thereto.
Section 8.7 Sections and Sub-Section Headings. The headings of
sections and subsections are for reference only and shall not limit or
control the meaning thereof.
Section 8.8 Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns. Neither this Agreement nor the
obligations of any party hereunder shall be assignable or transferable by
such party without the prior written consent of the other party hereto.
Section 8.9 No Implied Rights or Remedies. Except as otherwise
expressly provided herein, nothing herein expressed or implied is
intended or shall be construed to confer upon or to give any Person,
except the parties hereto, any rights or remedies under or by reason of
this Agreement.
Section 8.10 Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
Section 8.11 Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties hereto to express
their mutual intent, and no rule of strict construction will be applied
against any party hereto.
Section 8.12 Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other
provisions hereof, and this Agreement shall be construed in all respects
as if such invalid or unenforceable provision were omitted.
Section 8.13 Survival. The representations, warranties and covenants
of the parties hereto shall survive indefinitely, unless otherwise
specified therein.
Section 8.14 WAIVER OF RIGHT TO JURY TRIAL. EACH OF THE PARTIES
HERETO WAIVES ITS RIGHTS TO A TRIAL BY JURY IN ANY LITIGATION IN ANY
COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF, THIS
AGREEMENT, OR THE VALIDITY, INTERPRETATION OR ENFORCEMENT HEREOF OR
THEREOF OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 8.15 Disputes. In the event of any dispute or disagreement
between the parties after the Closing Date, either with respect to the
interpretation of any provision of this Agreement or with respect to the
performance or nonperformance by any party hereto, upon the written
request of any party, corporate executives of Seller and the Company
shall attempt to resolve any such dispute.
Section 8.16 Remedies. Each party hereto will be entitled to enforce
its rights under this Agreement specifically (without posting a bond or
other security), to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights existing in
their favor. The parties hereto agree and acknowledge that money damages
may not be an adequate remedy for any breach of the provisions of this
Agreement and that either party may in its sole discretion apply to any
court of law or equity of competent jurisdiction for specific performance
and/or injunctive relief in order to enforce or prevent any violation of
the provisions of this Agreement. In the event of any dispute involving
the terms of this Agreement, the prevailing party shall be entitled to
collect reasonable fees and expenses incurred by the prevailing party in
connection with such dispute from the other parties to such dispute.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties hereto have caused this Contribution Agreement to be duly
executed and delivered as a sealed instrument as of the date and year
first above written.
HARRIS TRUST AND SAVINGS BANK
By /s/ Kathleen M. Deane
___________________________________
Name: Kathleen M. Deane
Title: Vice President
PARTNERS FIRST HOLDINGS, LLC
By /s/ John R. Soderlund
___________________________________
Name: John R. Soderlund
Title: President and Chief Executive
Officer
SCHEDULE 2.1(A)
ACCOUNTS
To be supplied by Harris by tape.
SCHEDULE 2.1(F)
TO THE CONTRIBUTION AGREEMENT
AMONG
HARRIS TRUST AND SAVINGS BANK AND PARTNERS FIRST HOLDINGS, LLC
CONTRACTS TO BE TRANSFERRED
TO PARTNERS FIRST HOLDINGS, LLC
DATE OF
VENDOR AGREEMENT PURPOSE
------ --------- -------
o Babylon Financial Network, Inc.1 3-21-96 Affinity Program
o Chicago State University 5-6-94 Affinity Program
o LaLeche League International 5-31-88 Affinity Program
o Modern Woodmen of America 5-11-88 Affinity Program
o Sigma Chi 6-1-88 Affinity Program
o AVIS 3-1-97 Car Rental
o CUC International 10-9-96 PrivacyGuard Service
o Donald F. Smith & Associates 12-12-83 Customer solicitation
4-30-84 (insurance) - Regular and
1-1-91 Gold
2-19-91 card contracts
o Health Benefit Services, Inc. 3-1-96 Cardholder solicitation
(Plan Plus
Service Agreement)
o J.C. Penney Life Insurance Company 8-1-94 Customer solicitation
(credit
life insurance)
o May & Speh 12-1-92 Data Services for PMA
Credit
Card Information System
o Response Data Corporation Undated Overflow Processing
- --------
1 Oral consent received
to assign contract
o Signature Group (Signature Life 5-21-96 Cardholder solicitation,
Insurance Company of America, manage the "marketing
Montgomery Ward Life Insurance matrix"
Company, Forum Insurance Company,
Montgomery Ward Enterprises, Inc.,
Signature Agency, Inc.,
Signaturecard, Inc., Montgomery
Ward Auto Club, Inc. and Credit
Card Sentinel)
o US Life 11-1-95 Underwriting credit card
insurance plan (life,
disability,
unemployment)
o Albany Bank & Trust Company, NA2 11-8-95 Agent Bank
o Ashland State Bank (now Austin 8-11-95 Agent Bank
State Bank)
o Aurora National Bank d/b/a 2-14-97 Agent Bank
Citywide Bank Aurora National
o Aurora National Bank South d/b/a 2-14-97 Agent Bank
Citywide Bank Aurora National
South
o Bank of Amador2/ 8-18-94 Agent Bank
o Bank of East Asia 7-18-97 Agent Bank
o Bank of Southern California2/ 12-31-93 Agent Bank
(now First National Bank)
o Bank of Waukegan2/ 10-24-95 Agent Bank
o Batavia Savings Bank 10-26-95 Agent Bank
(now Pinnacle Bank)
o Capitol Bank of Westmont 10-30-95 Agent Bank
(now Banco Popular)
o Citizens Bank 1-1-96 Agent Bank
- ----------------
2 Letter of credit provided by agent bank.
o Citywide Bank of Denver 2-14-97 Agent Bank
o Commerce Bank of Aurora 4-8-96 Agent Bank
o First Bank of Missouri3/ 10-24-95 Agent Bank
o First Business Bank of Kansas City 2-14-95 Agent Bank
NA2/
o First Capitol Bank3/ 8-16-96 Agent Bank
-
o First Commercial Bank 3-22-96 Agent Bank
o First Community Bank 10-30-95 Agent Bank
o 1st Constitution Bank3 9-12-94 Agent Bank
o First Continental Bank3/ 6-10-96 Agent Bank
o First National Bank of Camdenton3/ 2-1-95 Agent Bank
o First National Bank of Castle Rock 11-7-96 Agent Bank
o Harbor Bank3/ 5-10-96 Agent Bank
o Heritage Bank of Central Illinois 2-21-97 Agent Bank
o Heritage Community Bank 10-24-95 Agent Bank
o Iowa State Bank 6-14-95 Agent Bank
o Jamestown Savings Bank 1-3-97 Agent Bank
o McHenry Savings Bank3/ 10-24-95 Agent Bank
o Midtown Bank 4-1-95 Agent Bank
o Missouri Bank & Trust Co. 5-24-95 Agent Bank
of Kansas City3/
o Pinnacle Bank Silvis 10-24-95 Agent Bank
o Rancho Santa Fe National Bank3/ 1-1-96 Agent Bank
- --------
3 Letter of Credit provided by agent
bank.
o Randolph County Bank3/ 10-24-95 Agent Bank
o San Diego National Bank3/ 10-27-95 Agent Bank
o Savanna State Bank 7-14-94 Agent Bank
o Scripps Bank4 8-10-95 Agent Bank
o Southern California Bank 8-10-96 Agent Bank
o SunWest Bank 8-23-96 Agent Bank
o Uptown National Bank of Chicago4/ 10-18-95 Agent Bank
- --------
4 Letter of Credit provided by agent bank.
SCHEDULE 4.6
TO THE
CONTRIBUTION AGREEMENT
AMONG
HARRIS TRUST AND SAVINGS BANK
AND
PARTNERS FIRST HOLDINGS, LLC
LITIGATION
-NONE-
EXHIBIT A
FORM OF INVESTMENT REPRESENTATIONS
The undersigned, __________________ (the "Recipient") is a
recipient of "Membership Interests" pursuant to that certain Contribution
Agreement (the "Contribution Agreement") dated as of January 29, 1998
between Partners First Holdings,, LLC, a Delaware limited liability
company ("Company") and Harris Trust and Savings Bank, an Illinois
banking corporation. The Recipient hereby makes the following investment
representations:
(a)(i)The Membership Interests will be acquired by the
Recipient for investment only, for the Recipient's own account and
not as a nominee or agent and not with a view to the sale or
distribution of any part thereof in violation of applicable federal
or state securities laws; and (ii) the Recipient has no
current intention of selling, granting any participation in or
otherwise distributing the Membership Interests in violation of
applicable federal or state securities laws. The Recipient has no
contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant any participation to such person, or to any
third party, with respect to any of the Membership Interests in
violation of applicable federal or state securities laws.
(b) The Recipient understands that the Membership Interests
have not been registered under the Securities Act of 1933, as
amended (the "Securities Act"), on the basis that the exchange
provided for in the Contribution Agreement and the issuance of
securities thereunder is exempt from registration under the
Securities Act and that Company's reliance on such exemption is
predicated on the representations and warranties of the Recipient
set forth herein.
(c) The Recipient either (i) is an "accredited
investor" as defined in Rule 501 promulgated under the Securities
Act and has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of the
Recipient's investment in Company, or (ii) has a "purchaser
representative" as defined in Rule 501.
(d) The Recipient will not sell, transfer or otherwise
dispose of the Membership Interests or any portion thereof without
registration under the Securities Act and applicable state
securities laws, or an exemption therefrom. The Recipient
understands that, in the absence of an effective registration
statement covering the Membership Interests or an available
exemption from registration under the Securities Act and applicable
state securities laws, the Membership Interests must be held by the
Recipient indefinitely. In particular, the Recipient acknowledges
that (i) the Recipient is aware that the Membership Interests may
not be sold pursuant to Rule 144 promulgated under the Securities Act
unless all of the conditions of such rule are met, and (ii) among the
current conditions for use of Rule 144 by certain holders is
the availability to the public of current information about
Company, which information may not be available.
(e) The Recipient (i) is capable of bearing the
economic risk of holding the unregistered Membership Interests for
an indefinite period of time and has adequate means for providing
for the Recipient's current needs and contingencies, (ii) can
afford to suffer a complete loss of this investment and (iii)
understands all risk factors related to the purchase of the
Membership Interests.
(f) The Recipient understands that (i) the purchase of
the Membership Interests involves a high degree of risk, (ii)
there is no established market for the Membership Interests and
(iii) it is not likely that any public market for the
Membership Interests will develop in the near future.
(g) Neither the Recipient nor anyone acting on the
Recipient's behalf has paid any commission or other remuneration to
any person in connection with the purchase of the Membership
Interests.
(h) The Recipient (if not an individual person) was not
organized for the purpose of making an investment in Company.
Signed on this 29th day of January, 1998.
RECIPIENT
Signature:_________________________________
Name Printed:______________________________
EXHIBIT B
FORM OF CONFIDENTIAL PURCHASER QUESTIONNAIRE
This Confidential Purchaser Questionnaire is to be completed by all
investors in connection with the proposed issuance of certain securities
(the "Securities") of Partners First Holdings, LLC, a Delaware limited
liability company (the "Company"). The purpose of this questionnaire is
to ascertain whether investors satisfy the investor requirements of
Regulation D promulgated under the Securities Act of 1933 (the "Act") and
whether investors satisfy the investor requirements of applicable state
securities laws. This questionnaire does not constitute an offer by the
Company or by any member, director or officer of the Company to sell the
Securities, but is merely a request for information.
IF THE ANSWER TO ANY QUESTION IS "NONE" OR "NOT APPLICABLE", PLEASE
SO STATE
1. Please provide the following information:
Name:______________________________________________
Social Security or
Federal ID Number:___________________________________
Residence Address
(individuals only):____________________________________
____________________________________
Main Business
Address:____________________________________________
____________________________________________
2. Please check all applicable boxes:
o The undersigned is a private business development company as
defined in Section 202(a)(22) of the Investment Advisers Act of
1940.
o The undersigned is a national banking association, an
organization described in Section 501 (c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business
trust, or a partnership, not formed for the specific purpose of
acquiring the securities offered, with total assets in excess of
$5,000,000.
o The undersigned is a director or executive officer of the
Company.
o The undersigned is an individual with a net worth (either
individually or jointly with his or her spouse) in excess of
$1,000,000 (For the purpose of determining net worth, the
undersigned's principal residence is valued at cost, including
the cost of improvements, net of current encumbrances upon the
property.)
o The undersigned is an individual who had an income in excess
of $200,000 in each of 1996 and 1997, or had a joint income with
his or her spouse in excess of $300,000 in each of 1996 and 1997,
and has a reasonable expectation of reaching the same income
level in 1998. (Income, for the purpose of this response, is
computed by adding the following items to adjusted gross income
for Federal income tax purposes: any deductions for long term
capital gain or depletion, any exclusion for interest earned on
tax-exempt bonds, and any losses allocated from a limited
partnership.)
o The undersigned is a trust with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring the
securities offered, whose purchase is directed by a sophisticated
person as described in Rule 506(b)(2)(ii) of the General Rules
and Regulations promulgated under the Act.
o The undersigned is an entity in which all of the equity
owners are accredited investors.
o The undersigned is none of the above.
IF YOUR RESPONSE TO QUESTION 2 ABOVE WAS "NONE OF THE ABOVE", PLEASE
RESPOND TO THE REMAINDER OF THE INQUIRIES IN THIS QUESTIONNAIRE.
OTHERWISE, PLEASE SKIP QUESTION 3, AND SIGN AND DATE THE LAST PAGE OF
THIS QUESTIONNAIRE.
3. Investor knowledge and experience.
a. Do you have sufficient knowledge and experience in financial
and business matters so as to be capable of evaluating the
merits and risks associated with investing in the Company?
Yes ____ No ____
b. If the answer to question 3(a) is no, please name the
investment adviser, if any, with whom you have reviewed the
merits and risks of the Securities.
IF AN INVESTMENT ADVISER IS NAMED BELOW, SUCH INVESTMENT ADVISER MUST ACT
AS YOUR PURCHASER REPRESENTATIVE (AS DEFINED IN REGULATION D OF THE
SECURITIES ACT OF 1933, AS AMENDED) AND MUST COMPLETE A PURCHASER
REPRESENTATIVE QUESTIONNAIRE. PURCHASER REPRESENTATIVE QUESTIONNAIRES ARE
AVAILABLE FROM THE COMPANY UPON REQUEST.
Name: __________________________________
Firm: ___________________________________
Address: ________________________________
________________________________
Telephone Number: _______________________
If the person named above acts as your Purchaser Representative:
(i) Do you understand the functions of a Purchaser
Representative?
Yes ____ No ____
(ii) Do you believe your Purchaser Representative has such
knowledge and experience in financial and business matters
that he is capable of evaluating the merits and risks of an
investment in the
Company?
Yes ____ No ____
(iii) Have you reviewed the information contained in the completed
Purchaser Representative Questionnaire regarding such person?
Yes ____ No ____
c. Do you understand the nature of an investment in the Company and
the risks associated with such an investment?
Yes ____ No ____
d. Do you understand that there is no guarantee of any financial
return on this investment and that you run the risk of losing your entire
investment?
Yes ____ No ____
e. Do you understand that this investment provides limited
liquidity since the Securities are not freely transferable?
Yes ____ No ____
f. Do you have adequate means of providing for your current needs
and personal contingencies in view of the fact that this investment
provides limited liquidity?
Yes ____ No ____
g. Are you purchasing these securities for investment and not with
the intent to resell them?
Yes ____ No ____
h. You have the right and are encouraged to investigate the Company
and review relevant records and documents pertaining to the Company and
its business and to ask questions regarding this investment and the
operations and methods of doing business of the Company.
Have you conducted any such investigation, sought such
documents or asked questions?
Yes ____ No ____
i. Have you ever invested in securities?
Yes ____ No ____
j. Have you ever invested in investment partnership,
venture capital funds,
or other non-marketable or restricted securities?
Yes ____ No ____
The undersigned hereby represents that, to the best of its information
and belief, the above information supplied in this Confidential Purchaser
Questionnaire by the undersigned is true and correct in all respects.
- ----------------------- -------------------------
Date Signature
-------------------------
Name Printed
EXHIBIT C
TAX BASIS AND VALUE OF
CONTRIBUTED ASSETS
As of the Closing Date, the tax basis of the Seller in
the Contributed Assets and the value of the Contributed
Assets are as follows:
1. Value of Contributed Assets $28,000,000
2. Adjusted Tax Basis of Contributed
Assets as of the Closing Date:
December 31, 1997 adjusted tax $22,576,654
basis
January amortization 279,392
-----------
Adjusted tax basis as of the
Closing Date $22,297,172
===========
TABLE OF CONTENTS
Parties.............................................................1
Recitals............................................................1
ARTICLE 1
DEFINITIONS....................................................1
Section 1.1 Certain Defined Terms.......................1
ARTICLE 2
CONTRIBUTION OF ASSETS.........................................4
Section 2.1 Contributed Assets..........................4
Section 2.2 Excluded Assets.............................5
ARTICLE 3
ASSUMPTION OF OBLIGATIONS.....................................7
Section 3.1 Assumption of Obligations...................7
Section 3.2 Consideration...............................7
Adjustments....................................................7
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SELLER...................7
Section 4.1 Organization................................8
Section 4.2 Authority; Enforceability...................8
Section 4.3 No Conflicts................................8
Section 4.4 Ownership of Assets.........................8
Section 4.5 Cardholder and Related Agreements...........8
Section 4.6 Litigation..................................9
Section 4.7 Compliance with Applicable Law..............9
Section 4.8 Licenses to Carry on Credit Card Business...9
Section 4.9 Account Records.............................9
Section 4.10Brokers.....................................9
Section 4.11Permits, Etc................................9
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................10
Section 5.1 Organization...............................10
Section 5.2 Authority; Enforceability..................10
Section 5.3 No Conflicts...............................10
Section 5.4 Permits, Etc...............................10
Section 5.5 Litigation.................................10
Section 5.6 Finder or Brokers..........................10
Section 5.7 Membership Interests.......................11
ARTICLE 6
CERTAIN TRANSITIONAL MATTERS..................................11
Section 6.1 Transfers Requiring Consent................11
Section 6.2 Business Records...........................11
Section 6.3 Further Assistance.........................11
Section 6.4 Communications with Cardholders............11
Section 6.5 The Designated Agreements..................12
Section 6.6 Use of BIN and ICA Numbers.................12
Section 6.7 Trademark License..........................13
ARTICLE 7
INDEMNIFICATION...............................................13
Section 7.1 Indemnity by the Seller....................13
Section 7.2 Indemnity by the Company...................14
Section 7.3 Claims.....................................14
Section 7.4 Time Limits................................15
Section 7.5 Exclusive Remedy; Damage Limitations.......15
ARTICLE 8
GENERAL.......................................................15
Section 8.1 Investment Representations................15
Section 8.2 Notices...................................16
Section 8.3 Entire Agreement..........................16
Section 8.4 Governing Law.............................17
Section 8.5 Consent to Jurisdiction...................17
Section 8.6 Waiver of Certain Damages.................17
Section 8.7 Sections and Sub-Section Headings.........17
Section 8.8 Assigns...................................17
Section 8.9 No Implied Rights or Remedies.............17
Section 8.10 Counterparts..............................17
Section 8.11 Construction..............................17
Section 8.12 Severability..............................18
Section 8.13 Survival..................................18
Section 8.14 WAIVER OF RIGHT TO JURY TRIAL.............18
Section 8.15 Disputes..................................18
Section 8.16 Remedies..................................18
Signature..........................................................19
SCHEDULES
Schedule 2.1(a-- Accounts
Schedule 2.1(f)-- Assigned Contracts
Schedule 4.6 -- Litigation
EXHIBITS
Exhibit A-- Investment Representations
Exhibit B-- Form of Confidential Purchaser Questionnaire
Exhibit C-- Tax Basis and Value of Contributed Assets
RECEIVABLES PURCHASE AND SALE AGREEMENT
BETWEEN
HARRIS TRUST AND SAVINGS BANK
AND
PARTNERS FIRST RECEIVABLES, LLC
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS.....................................................1
Section 1.1. Certain Defined Terms......................1
ARTICLE 2
SALE OF ASSETS..................................................4
Section 2.1. Accounts Receivable........................4
Section 2.2. Excluded Assets............................4
Section 2.3. Secured Accounts...........................5
ARTICLE 3
ASSUMPTION OF OBLIGATIONS.......................................5
Section 3.1. Assumption of Obligations..................5
Section 3.2. Consideration..............................5
Section 3.3. Payment of Purchase Price..................5
Section 3.4. Post-Closing Adjustments...................6
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SELLER....................6
Section 4.1. Organization...............................6
Section 4.2. Authority; Enforceability..................6
Section 4.3. No Conflicts...............................7
Section 4.4. Ownership of Assets........................7
Section 4.5. Cardholder Agreements......................7
Section 4.6. Litigation.................................7
Section 4.7. Accounts Receivable........................7
Section 4.8. Compliance with Applicable Law.............8
Section 4.9. Licensed to Carry on Credit Card
Business.................................8
Section 4.10. Account Records...........................8
Section 4.11. Brokers...................................8
Section 4.12. Permits, Etc..............................8
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.................9
Section 5.1. Organization...............................9
Section 5.2. Authority; Enforceability..................9
Section 5.3. No Conflicts...............................9
Section 5.4. Permits, Etc...............................9
ARTICLE 6
CERTAIN TRANSITIONAL MATTERS...................................10
Section 6.1. Third Party Consents......................10
Section 6.2. Responsibility for Pre-Closing
Transactio..............................10
Section 6.3. Business Records..........................10
Section 6.4. Further Assistance........................10
ARTICLE 7
INDEMNIFICATION................................................11
Section 7.1. Indemnity by the Seller...................11
Section 7.2. Indemnity by the Purchaser................11
Section 7.3. Claims....................................11
ARTICLE 8
ITEMS TO BE DELIVERED AT CLOSING...............................13
Section 8.1. Items to be Delivered by Seller. ........13
Section 8.2. Items to be Delivered by Purchaser........13
ARTICLE 9
GENERAL........................................................14
Section 9.1. Disputes..................................14
Section 9.2. Notices...................................14
Section 9.3. Entire Agreement..........................15
Section 9.4. Governing Law.............................15
Section 9.5. Consent to Jurisdiction...................15
Section 9.6. Waiver of Certain Damages.................15
Section 9.7. Section and Subsection Headings...........16
Section 9.8. Assigns...................................16
Section 9.9. No Implied Rights or Remedies.............16
Section 9.10. Counterparts.............................16
Section 9.11. Construction.............................16
Section 9.12. Severability.............................16
Section 9.13. Survival.................................16
Section 9.15. Remedies.................................16
ARTICLE 10
CHARGEBACKS....................................................17
Schedules
Schedule 2.1 -- Accounts
Schedule 4.6 -- Litigation
RECEIVABLES PURCHASE AND SALE AGREEMENT
This Receivables Purchase and Sale Agreement, dated as of January
29, 1998 (as in effect from time to time, this "Agreement"), between (a)
Harris Trust and Savings Bank, an Illinois banking corporation (the
"Seller"), and (b) Partners First Receivables, LLC, a Delaware limited
liability company (the "Purchaser").
WHEREAS, Seller desires to sell the Accounts Receivable (as
hereinafter defined) to Purchaser, and Purchaser desires to purchase the
Accounts Receivable, on the terms and conditions hereinafter set forth
and provided.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants set forth below, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree, intending to be legally bound, as follows:
ARTICLE 1
DEFINITIONS
Section 1.1. Certain Defined Terms. Capitalized terms used herein
without definition have the meaning assigned to such terms in the Limited
Liability Company Agreement of Partners First Holdings, LLC dated as of
the date hereof among BankBoston (NH), National Association, Bankmont
Financial Corp., Harris Trust and Savings Bank, First Annapolis Marketing
Information Services, Inc. and the Company (the "Operating Agreement").
Additionally, the following capitalized terms shall have the following
meanings:
"Accounts" means all of the credit card accounts of the Seller's
Credit Card Business (other than Excluded Accounts) including, without
limitation, those identified on Schedule 2.1 which is attached hereto or
provided herewith and made a part hereof (which may in the Seller's sole
discretion be in the form of a computer file or magnetic tape) which
contains sufficient information to identify each account and respective
Cardholder such as name, address, social security number, account number,
status codes, account balance and such other information as is mutually
agreed upon by Purchaser and Seller.
"Accounts Receivable" has the meaning set forth in Section 2.1.
"Adjusted Closing Statement" has the meaning set forth in Section
3.3(b).
"Agreement" has the meaning set forth in the preamble.
"Applicable Agreements" means (i) that certain Contribution
Agreement dated as of the date hereof by and between Partners First
Holdings, LLC and Seller, (ii) that certain Contribution Agreement dated
as of the date hereof by and between Partners First Holdings, LLC and
Bankmont Financial Corp., and (iii) that certain Overdue Receivables
Purchase and Sale Agreement dated as of the date hereof by and between
Seller and Purchaser.
"Assignment" has the meaning set forth in Section 9.3.
"Assumed Obligations" has the meaning set forth in Section 3.1.
"Cardholder" means a holder of a Credit Card.
"Cardholder Agreements" means the agreements between the
Cardholders or other obligors with respect to a Credit Card and the
Seller, including, without limitation, any agreements relating to credit
enhancements provided in connection with such Credit Card, and as the
same has been amended or otherwise modified and in effect from time to
time.
"Chargeback Amount" has the meaning set forth in Article 10.
"Claim" has the meaning set forth in Section 7.3(a).
"Closing Date" means the date on which the transactions described
in this Agreement are consummated, except that for purposes of
determining Accounts or Accounts Receivable it shall mean the opening of
business on the day on which the transactions described in this Agreement
are consummated.
"Credit Card" means a MasterCard(R) or Visa(R) card issued by
Seller and associated solely with an Account of Seller's Credit Card
Business.
"Credit Card Business" means the provision of lines of credit
accessible by Visa(R) or MasterCard(R) to consumers within the United
States of America, the servicing of such credit card relationships, and
the provision of services incidental thereto.
"Estimated Purchase Price" has the meaning set forth in Section
3.3.
"Excluded Accounts" has the meaning set forth in Section 2.2.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Governmental Authority" means any federal, national, state,
municipal, local, territorial or other governmental department,
commission, board, bureau, agency, regulatory authority, instrumentality,
judicial or administrative body, domestic or foreign and Visa(R) and
MasterCard(R).
"Indemnified Party" has the meaning set forth in Section 7.3(a).
"Indemnifying Party" has the meaning set forth in Section 7.3(a).
"Initial Closing Statement" has the meaning set forth in Section
3.3(a).
"Letter" has the meaning set forth in Section 9.3.
"Losses" has the meaning set forth in Section 7.1.
"MasterCard(R)" means MasterCard International Incorporated.
"Purchase Price" has the meaning set forth in Section 3.2.
"Purchaser" has the meaning set forth in the preamble hereto.
"Purchaser Indemnitees" has the meaning set forth in Section 7.1.
"Purchaser Indemnity Representations" means the representations
and warranties of Purchaser contained in Section 5.4 and 5.5 of this
Agreement.
"Receivables Agreements" has the meaning set forth in Section 9.3.
"Retained Liabilities" has the meaning set forth in Section 3.1.
"Seller" has the meaning set forth in the preamble hereto.
"Seller Indemnitees" has the meaning set forth in Section 7.2.
"Seller Indemnity Representations" means the representations and
warranties of Seller contained in Sections 4.5, 4.6, 4.7 (except the
first sentence thereof), 4.8, 4.9, 4.10 and 4.12 of this Agreement.
"Subject Losses" has the meaning set forth in Section 7.5.
"Third Party Claim" has the meaning set forth in Section 7.3(a).
"Visa(R)" means Visa U.S.A., Inc.
"Zero Value Accounts" means Accounts which, as of the Closing
Date are (i) statused by Seller as bankruptcy, deceased, fraud, lost or
stolen or charged off or (ii) 180 days or more contractually past due (in
each case, such status to be determined in accordance with Seller's
then-current written policies).
ARTICLE 2
SALE OF ASSETS
Section 2.1. Accounts Receivable. On the Closing Date, and
subject to the terms and conditions set forth in this Agreement, the
Seller (subject to the provisions of Article 10 hereto) shall sell,
assign, transfer and deliver to Purchaser, and the Purchaser shall
purchase and take assignment and delivery of, all of the Seller's right,
title and interest in, to and under the following assets as of the
Closing Date (other than the Excluded Accounts and the Excluded Assets):
any and all amounts owing from the Cardholders to the Seller (whether
billed or unbilled, posted or not) in connection with the Accounts,
including, without limitation, all principal, outstanding purchases, cash
advances, interest (including accrued but unbilled interest), annual
fees, finance and service charges and other charges and fees, less any
and all amounts owing from the Seller to the Cardholders as a credit
balance, whether or not credited (hereinafter referred to collectively as
the "Accounts Receivable").
The parties hereto intend that the conveyance of the Seller's
right, title and interest in and to the Accounts Receivable shall
constitute an absolute sale, conveying good title free and clear of any
liens, claims, encumbrances or rights of others from the Seller to the
Purchaser and that the Accounts Receivable shall not be a part of the
Seller's estate in the event of the insolvency of the Seller or a
conservatorship, receivership or similar event with respect to the
Seller. It is the intention of the parties hereto that the arrangements
with respect to the Accounts Receivable shall constitute a purchase and
sale of such Accounts Receivable and not a loan. In the event, however,
that it were to be determined that the transactions evidenced hereby
constitute a loan and not a purchase and sale, it is the intention of the
parties hereto that this Agreement shall constitute a security agreement
under applicable law, and that the Seller shall be deemed to have granted
and does hereby grant to the Purchaser a first priority perfected
security interest, in all of the Seller's right, title and interest,
whether now owned or hereafter acquired, in, to and under the Accounts
Receivable to secure the rights of the Purchaser hereunder and the
obligations of the Seller hereunder.
Section 2.2. Excluded Assets. Notwithstanding the foregoing, the
Seller is not transferring to the Purchaser and the Purchaser is not
acquiring pursuant to this Agreement, and the term "Accounts Receivable"
shall not include, any other assets of Seller not specifically referenced
in Section 2.1 (the "Excluded Assets") or any Accounts Receivable
generated by or related to accounts which are commercial or business
accounts, dormant accounts, in-active accounts, closed accounts, accounts
without outstanding balances, accounts classified as "substandard,"
"doubtful," or "loss" or treated as "other loans especially mentioned" in
the most recent report of examination prepared by any Federal or State
supervisory agency, accounts in nonaccrual status, accounts on which
principal or interest payments are more than 30 days past due, accounts
whose terms have been renegotiated or compromised due to the
deteriorating financial condition of the Cardholder and accounts which
are statused by Seller on the Closing Date as bankrupt, deceased, fraud,
lost or stolen or charged off (such status to be determined in accordance
with the Seller's then-current written policies) ("Excluded Accounts").
Section 2.3. Secured Accounts. Seller hereby transfers and
assigns to Purchaser all right, title and interest in and to certificates
of deposit and other deposit accounts constituting security for the
payments of the Accounts Receivable generated with respect to Accounts.
Subject to the terms of the agreements with Cardholders, Seller will
continue to administer and maintain the deposit accounts with Seller as
provided under any deposit agreements with Cardholders, including payment
of interest, if any, on such accounts and providing statements of account
balances to those depositors. Seller will place a "hold" on such deposit
accounts. Upon a Cardholder's default and upon the written direction of
Purchaser (or Purchaser's designee), Seller will turn over to Purchaser
amounts due Purchaser from such Cardholder. Purchaser and Seller will
cooperate to develop procedures to facilitate the utilization of the
security assigned to Purchaser hereunder for Purchaser's benefit.
ARTICLE 3
ASSUMPTION OF OBLIGATIONS
Section 3.1. Assumption of Obligations. The Purchaser hereby
assumes, and agrees to pay, perform, fulfill and discharge, all of the
Seller's obligations with respect to the Accounts Receivable from and
after the Closing Date (collectively, the "Assumed Obligations").
Anything in this Agreement to the contrary notwithstanding, the Purchaser
shall not assume, and shall not be deemed to have assumed, any liability,
contract or obligation of the Seller not specifically listed or included
herein or assumed by separate written agreement signed by the Purchaser
(all such liabilities and obligations not being assumed being referred to
herein as the "Retained Liabilities"), which Retained Liabilities are
retained by the Seller and the Purchaser shall not be liable therefor.
Section 3.2. Consideration. In consideration of the sale of the
Accounts Receivable by the Seller to the Purchaser hereunder, the
Purchaser agrees to assume the Assumed Obligations and to pay to the
Seller, the purchase price ("Purchase Price") which shall be an amount
equal to the sum of all Accounts Receivable as of the Closing Date, plus
or minus any other items or prorations agreed to by Seller and Purchaser.
Section 3.3. Payment of Purchase Price. (a) On the Closing Date,
the parties shall prepare a closing statement (the "Initial Closing
Statement") calculating the Purchase Price as of the date of the most
recently available data (or another date mutually acceptable to Purchaser
and Seller) with respect to the Accounts Receivable (the "Estimated
Purchase Price"). On the Closing Date, the Estimated Purchase Price shall
be paid in immediately available funds to Seller by Purchaser.
(b) As soon as practicable after the Closing Date, Purchaser and
Seller shall conduct and complete a post-Closing review of the Accounts
Receivable and shall prepare a closing statement as of the Closing Date
(the "Adjusted Closing Statement"), mutually acceptable to Seller and
Purchaser, and showing any adjustments from the Initial Closing Statement
including the difference between the Estimated Purchase Price and the
Purchase Price. Purchaser shall pay Seller (or Seller shall pay Purchaser
as the case may be) an amount equal to the difference between the
Estimated Purchase Price and the Purchase Price as reflected on the
Adjusted Closing Statement plus interest thereon at the federal funds
rate from the Closing Date to the date of payment.
Section 3.4. Post-Closing Adjustments. Seller is responsible for
any and all fees in connection with the Accounts Receivable related to
the period prior to the Closing Date, including fees, normal operating
assessments or penalties and other charges imposed by MasterCard(R) or
Visa(R). The parties hereto hereby agree to cooperate in good faith to
estimate such fees and include them on the Initial Closing Statement and
to make such post-closing adjustments between themselves as may be
necessary to give effect to the provisions hereof and to reflect such
adjustments on the Adjusted Closing Statement. Adjustments to amounts
calculated pursuant to Section 3.3 and this Section 3.4 may include
unposted amounts, miscalculations, errors, incorrect status,
mis-characterization or mis-classification of Accounts and Accounts
Receivable. For purposes of this adjustment, mis-classified Accounts
which should have been classified as Zero Value Accounts as of the
Closing Date will be valued accordingly. As provided in Section 6.2
hereof, for the purpose of determining when or whether an event took
place, the interchange date as specified by Visa(R) or MasterCard(R)
shall be determinative.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Purchaser as of
the Closing Date as follows:
Section 4.1. Organization. The Seller is a banking corporation
duly organized and validly existing under the laws of Illinois and is
authorized to conduct general banking business under such laws.
Section 4.2. Authority; Enforceability. The Seller has all
requisite power and authority (i) to enter into and carry out its
obligations under this Agreement, (ii) to hold the Accounts Receivable
and (iii) to sell, assign and transfer the Accounts Receivable being sold
to the Purchaser by the Seller. The execution, delivery and performance
of this Agreement have been duly authorized by all necessary action on
the part of Seller. This Agreement has been duly executed and delivered
by Seller and constitutes the legal, valid and binding obligation of the
Seller, enforceable against the Seller in accordance with its terms,
except as enforcement thereof may be limited by receivership,
conservatorship and supervisory powers of bank regulatory agencies
generally, as well as bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or similar laws of general applicability
relating to or affecting creditors' rights or to general equity
principles (regardless of whether such matters are considered in a
proceeding in equity or at law) and the availability of equitable
remedies.
Section 4.3. No Conflicts. The execution, delivery and
performance by the Seller of this Agreement does not violate (a) the
Seller's Charter or By-Laws, as applicable, (b) any material agreement or
instrument to which the Seller is a party or by which the Seller is bound
or which affects the Accounts Receivable, or (c) any law, rule or
regulation applicable to the Seller or which affects the Accounts
Receivable.
Section 4.4. Ownership of Assets. The Seller is the sole owner of
all right, title and interest in, to and under all of the Accounts
Receivable being sold by the Seller to the Purchaser under this
Agreement. The Seller has the right, power and authority to sell and
transfer the Accounts Receivable to the Purchaser, and the Accounts
Receivable are not subject to any assignment, lien, charge, encumbrance
or security interest, except that such Accounts Receivable may be subject
to the terms of the Cardholder Agreements and to other rights of
Cardholders and other obligors as specified in Section 4.7 hereof. The
Seller hereby sells the Accounts Receivable to the Purchaser free and
clear of all assignments, liens, charges, encumbrances and other security
interests and of all claims or rights of third parties, except as such
Accounts Receivable may be subject to the terms of the Cardholder
Agreements and to other rights of Cardholders and other obligors as
specified in Section 4.7 hereof.
Section 4.5. Cardholder Agreements. The Accounts Receivable have
been generated pursuant to the Accounts and pursuant to Cardholder
Agreements which are legal, valid and binding upon Seller and, to the
best of Seller's knowledge, such Cardholder Agreements are legally
binding agreements, enforceable in all material respects against the
Cardholders or other obligors who are a party thereto in accordance with
their respective terms, except as enforcement thereof may be limited by
bankruptcy, fraudulent transfer, reorganization, moratorium or similar
laws of general applicability relating to or affecting creditors' rights
or to general equity principles (regardless of whether such matters are
considered in a proceeding in equity or at law) and the availability of
equitable remedies. The Seller is in compliance with the Cardholder
Agreements except where the failure to so comply would not have a
material adverse effect on the Accounts Receivable.
Section 4.6. Litigation. Except for the litigation described on
Schedule 4.6, which is attached hereto and made a part hereof, there are
no actions, suits or proceedings pending or, to the knowledge of the
Seller, threatened against or affecting the Seller which would reasonably
be expected to cause any material adverse effect on the Accounts
Receivable. There is no action, suit or proceeding pending against the
Seller which would prevent the Seller from consummating the sale of the
Accounts Receivable to the Purchaser hereunder.
Section 4.7. Accounts Receivable. Other than the right of
Cardholders or other obligors to assert claims and defenses against the
Seller pursuant to 12 C.F.R. ss.226.12(c) and under any other applicable
laws and the Cardholders' "billing error" rights pursuant to 12 C.F.R.
ss.226.13, to the best of the Seller's knowledge, the Accounts Receivable
are not subject to Cardholder or other obligor claims, offsets or
adjustments and represent the legal, valid and binding obligations of the
Cardholders, enforceable against the Cardholders in accordance with their
terms, except as enforcement thereof may be limited by bankruptcy,
fraudulent transfer, reorganization, moratorium or similar laws of
general applicability relating to or affecting creditors' rights or to
general equity principles (regardless of whether such matters are
considered in a proceeding in equity or at law) and the availability of
equitable remedies. Seller makes no representation or warranty regarding
the payment or collectibility of the Accounts Receivable.
Section 4.8. Compliance with Applicable Law. The Accounts
Receivable have been generated in compliance, in all material respects,
with applicable federal and state laws, rules and regulations, and
judicial, administrative and arbitrator's orders relating thereto,
including without limitation the federal Truth-in-Lending Act, Equal
Credit Opportunity Act, Fair Credit Reporting Act, Fair Debt Collection
Practices Act and Regulations B and Z promulgated by the Board of
Governors of the Federal Reserve System.
Section 4.9. Licensed to Carry on Credit Card Business. The
Seller is and has been licensed to participate in the programs offered by
Visa(R) and by MasterCard(R) to the full extent necessary to generate the
Accounts Receivable.
Section 4.10. Account Records. The books and records relating to
the Accounts Receivable are accurate and complete in all material
respects, in each case, as of the date when each such record was made and
all information relating to application, payment history, customer
inquiry and other relevant Account information is contained in the
relevant books and records.
Section 4.11. Brokers. The Seller has not agreed to pay any fee
or commission to any agent, broker, finder or other person for or on
account of services rendered as a broker or finder in connection with
this Agreement or the sale of the Accounts Receivable hereunder.
Section 4.12. Permits, Etc. No consent of any Person and no
license, permit or approval with any Governmental Authority having
jurisdiction over Seller is required in connection with the transactions
contemplated by this Agreement. The Seller has not received notice from
any Governmental Authority indicating that it would oppose or not grant
or issue its consent or approval, if required, with respect to the sale
of the Accounts Receivable hereunder or any of the other transactions
contemplated hereby.
The Seller makes no other representations or warranties,
expressed or implied, with respect to the subject matter hereof other
than as specifically set forth in this Article 4.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Seller as of
the Closing Date as follows:
Section 5.1. Organization. The Purchaser is a limited liability
company duly organized and validly existing in good standing under the
laws of the State of Delaware.
Section 5.2. Authority; Enforceability. The Purchaser has all
requisite power and authority (i) to enter into and carry out its
obligations under this Agreement, (ii) to purchase and hold the Accounts
Receivable and (iii) to assume the Assumed Obligations. The execution,
delivery and performance of this Agreement have been duly authorized by
all necessary action on the part of the Purchaser. This Agreement has
been duly executed and delivered by the Purchaser and constitutes the
legal, valid and binding obligation of the Purchaser, enforceable against
the Purchaser in accordance with its terms, except as enforcement thereof
may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or similar laws of general applicability
relating to or affecting creditors' rights or to general equity
principles (regardless of whether such matters are considered in a
proceeding in equity or at law) and the availability of equitable
remedies.
Section 5.3. No Conflicts. The execution, delivery and
performance of this Agreement by the Purchaser does not violate (a)
Purchaser's Certificate of Formation or the Limited Liability Company
Agreement, (b) any material agreement or instrument to which the
Purchaser is a party or by which the Purchaser is bound, or (c) any law,
rule or regulation applicable to the Purchaser.
Section 5.4. Permits, Etc. The Purchaser has obtained all
licenses, permits and approvals of all Governmental Authorities necessary
for the Purchaser to purchase, service and collect the Accounts
Receivable and to consummate the transactions contemplated hereby.
Section 5.5. Litigation. There is no action, suit or proceeding
pending or, to the knowledge of the Purchaser, threatened against the
Purchaser which challenges the validity, propriety or enforceability of,
or seeks to enjoin the performance of, the transactions contemplated by
this Agreement.
Section 5.6. Finders or Brokers. Neither Purchaser nor any
Affiliate of Purchaser has agreed to pay any fee or commission to any
agent, broker, finder or other person for or on account of services
rendered as a broker or finder in connection with this Agreement or the
transactions contemplated hereby.
ARTICLE 6
CERTAIN TRANSITIONAL MATTERS
Section 6.1. Third Party Consents. To the extent any Assumed
Obligation is not transferable or assignable without the consent of any
third party or the transfer or assignment of which would result in a
violation of any law or order, this Agreement shall not constitute an
assignment or attempted assignment thereof; Seller shall use all
reasonable efforts to obtain the required consent of any such third party
to the transfer or assignment thereof to the Purchaser and if any such
consent shall not be obtained, Seller shall cooperate with the Purchaser
in any reasonable arrangement (including reimbursement of monies paid by
the Purchaser on account of any such arrangement) designed to provide the
Purchaser with the benefits and/or burdens intended to be transferred and
assigned to it thereunder.
Section 6.2. Responsibility for Pre-Closing Transactions. Subject
to the provisions of Article 10, the Seller shall remain liable after the
date hereof for all draft retrievals, representments or incorrectly
posted transactions arising from transactions with an interchange
transaction date occurring prior to the Closing Date with respect to the
Accounts Receivable.
Section 6.3. Business Records. The Purchaser acknowledges that
certain business records of the Seller relating to the Seller's Credit
Card Business prior to the Closing Date will be conveyed to the Purchaser
or others, and that the Seller may from time to time require access to
such records, and the Purchaser agrees that upon reasonable prior notice
from the Seller, it will, during normal business hours, either provide
the Seller with access to records under its custody or control or, at the
Purchaser's option, copies of such records for such purposes. The Seller
agrees to hold any information so provided as confidential and in strict
confidence as it would its own confidential information. The Purchaser
agrees that it will not destroy any such business records during the
three (3) year period after the date hereof, and it will not within the
two (2) year period after such date destroy any business records prepared
prior to the date hereof without first notifying the Seller and affording
the Seller the opportunity to remove or copy them.
Section 6.4. Further Assistance. On and after the Closing Date,
Seller shall (i) execute, acknowledge and deliver all such
acknowledgments and other instruments (including financing statements)
and take such further action as may be necessary and appropriate to
effectively vest in the Purchaser the full legal and equitable title to
the Accounts Receivable or to perfect the Purchaser's interest therein,
and (ii) assist the Purchaser in the orderly transition of the Accounts
Receivable being acquired by the Purchaser, and (iii) deliver such other
information about the Accounts Receivable as the Purchaser may reasonably
request. Subject to the provisions of Article 10 hereof, in the event
Seller shall receive any payments relating to the Accounts Receivable
attributable to the period after the Closing Date, the Seller shall
promptly endorse and transfer such payments to the Purchaser and take all
necessary and reasonable actions to vest such monies in the Purchaser.
ARTICLE 7
INDEMNIFICATION
Section 7.1. Indemnity by the Seller. The Seller agrees to
indemnify and hold the Purchaser, and its affiliates, employees,
officers, directors, controlling persons, successors and assigns (the
"Purchaser Indemnitees"), harmless from and with respect to any and all
claims, liabilities, losses, damages, costs and expenses, including
without limitation the reasonable fees and disbursements of counsel and
expert witnesses, net of insurance proceeds (collectively, the "Losses"),
related to or arising directly or indirectly out of (a) any inaccuracies
in any representation or warranty made by the Seller in or pursuant to
this Agreement, (but only to the extent that Losses relating to or
arising directly or indirectly out of such inaccuracies when taken
together with Losses (as that term is defined in the Applicable
Agreements) for which the Seller or Bankmont is obligated to indemnify
the Purchaser Indemnitees (as defined in the Harris Overdue Receivables
Purchase Agreement) pursuant to Section 7.1(a) of the Harris Overdue
Receivables Purchase Agreement and the Company Indemnitees (as defined in
the Harris Contribution Agreement and the Bankmont Contribution
Agreement) pursuant to Section 7.1(a) of the Harris Contribution
Agreement or Section 5.1(a) of the Bankmont Contribution Agreement,
without duplication, exceed $100,000 in the aggregate), (b) any failure
or breach by the Seller of any covenant, obligation, or undertaking made
by the Seller in this Agreement or (c) the Retained Liabilities, in each
such case, except to the extent that any such Losses were caused by any
such Indemnified Party's gross negligence or willful misconduct.
Section 7.2. Indemnity by the Purchaser. The Purchaser agrees to
indemnify and hold the Seller, and its affiliates, employees, officers,
directors, controlling persons, successors and assigns (the "Seller
Indemnitees"), harmless from and with respect to any and all Losses
related to or arising directly or indirectly out of (a) any inaccuracies
in any representation or warranty made by the Purchaser in this Agreement
(but only to the extent that Losses relating to or arising directly or
indirectly out of such inaccuracies when taken together with Losses (as
that term is defined in the Applicable Agreements) for which Purchaser
and/or the Company are obligated to indemnify the Seller Indemnitees (as
defined in the Harris Overdue Receivables Purchase Agreement and the
Harris Contribution Agreement) pursuant to Section 7.2(a) of the Harris
Overdue Receivables Purchase Agreement and the Harris Contribution
Agreement and/or the Investor Indemnitees (as defined in the Bankmont
Contribution Agreement) pursuant to Section 5.2(a) of the Bankmont
Contribution Agreement, without duplication, exceed $100,000 in the
aggregate), (b) any failure or breach by the Purchaser of any covenant,
obligation or undertaking made by the Purchaser in this Agreement
(including without limitation any failure by the Purchaser to pay or
perform any of the Assumed Obligations), (c) the collection of the
Accounts Receivable by the Purchaser after the Closing Date, or (d) the
Assumed Obligations, in each case, except to the extent that any such
Losses are caused by any such Indemnified Party's gross negligence or
willful misconduct.
Section 7.3. Claims. (a) Any party seeking indemnification
hereunder (the "Indemnified Party") shall promptly notify the party
hereto obligated to provide indemnification hereunder (the "Indemnifying
Party") of any action, suit, proceeding, demand or breach (a "Claim")
with respect to which the Indemnified Party claims indemnification
hereunder, provided that failure of the Indemnified Party to give such
notice shall not relieve the Indemnifying Party of its obligations under
this Article 7 except to the extent, if at all, that such Indemnifying
Party shall have been prejudiced thereby. If such Claim relates to any
action, suit, proceeding or demand instituted against the Indemnified
Party by a third party (a "Third Party Claim"), then upon receipt of such
notice from the Indemnified Party the Indemnifying Party shall be
entitled to participate in the defense of such Third Party Claim, and if
and only if each of the following conditions is satisfied, the
Indemnifying Party may assume the defense of such Third Party Claim, and
in the case of such an assumption the Indemnifying Party shall have the
authority to negotiate, compromise and settle such Third Party Claim:
(i) the Indemnifying Party confirms in writing that it is
obligated hereunder to indemnify the Indemnified Party with
respect to such Third Party Claim; and
(ii) there is no conflict of interest which would make
separate representation by the Indemnified Party's own counsel
advisable.
The Indemnified Party shall retain the right to employ its own counsel
and to participate in the defense of any Third Party Claim, the defense
of which has been assumed by the Indemnifying Party pursuant hereto, but
the Indemnified Party shall bear and shall be solely responsible for its
own costs and expenses in connection with such participation. The
Indemnifying Party shall not, without the prior written consent of the
Indemnified Party, settle or compromise any claim or consent to the entry
of any judgment that does not include as an unconditional term thereof
the giving by the claimant or the plaintiff to the Indemnified Party a
release from all liability in respect of such claim.
(b) In the event of any Claim under Section 7.1 or 7.2, the
Indemnified Party shall advise the Indemnifying Party in writing of the
amount and circumstances surrounding such Claim.
Section 7.4. Time Limits. No claim for indemnification under this
Article 7 may be asserted for the first time after June 30, 1999.
Section 7.5. Exclusive Remedy; Damage Limitations. The Seller and
the Purchaser acknowledge and agree that, except for the right to seek
specific performance of covenants and other agreements, the
indemnification rights and remedies available to each party under this
Article 7 shall be the sole and exclusive rights and remedies of the
Purchaser and the Seller with respect to any Losses arising out of or
relating in any way to (a) any breach of this Agreement, (b) the
acquisition of the Accounts Receivable and the assumption of the Assumed
Obligations by the Purchaser, or (c) the consummation of the transactions
contemplated hereby (collectively, the "Subject Losses"), including
without limitation any claims, rights or remedies for negligent
misrepresentation but excluding specifically, any claims, rights or
remedies for fraud. Without limiting the generality of the foregoing,
except for remedies for fraud and as specifically authorized by this
Article 7, the Purchaser and the Seller hereby waive, release and
disclaim any claims, rights or remedies arising in tort, by statute, or
otherwise, with respect to the Subject Losses. As provided in Section
9.6, in no event shall the Purchaser or the Seller be entitled to recover
from the other party hereto for incidental, special, consequential,
exemplary or punitive damages, and for all purposes of this Agreement,
the term "Losses" shall be deemed not to include any such damages.
Seller's maximum aggregate liability, and the right of recovery of the
Purchaser Indemnitees against the Seller under this Article 7 for Losses,
arising as a result of breaches of the Seller Indemnity Representations
contained herein shall, in all events, other than fraud by Seller, be
limited in the aggregate to $5,900,000 less all amounts paid by Seller
under Article 7 of the respective Applicable Agreements as a result of
breaches by Seller of the Seller Indemnity Representations (as that term
is defined in the respective Applicable Agreements). Purchaser's maximum
aggregate liability, and the right of recovery of the Seller Indemnitees
against the Purchaser under this Article 7 for Losses, arising as a
result of breaches of the Purchaser Indemnity Representations contained
herein shall, in all events other than fraud by the Purchaser, be limited
in the aggregate to $5,900,000 less all amounts paid by the Purchaser
and/or the Company under the Applicable Agreements as a result of
breaches by the Company and/or the Purchaser of the Purchaser Indemnity
Representations and the Company Indemnity Representatives (as such terms
are defined in the respective Applicable Agreements).
ARTICLE 8
ITEMS TO BE DELIVERED AT CLOSING
Section 8.1. Items to be Delivered by Seller. Seller shall
deliver to Purchaser:
(a) Such bills of sale, assignments, UCC-1 forms, and
other instruments and documents duly executed and in full force
and effect with respect to Seller as Purchaser may reasonably
require as necessary or desirable for transferring, assigning and
conveying title to the Accounts Receivable to Purchaser, all in
form and substance reasonably satisfactory to Purchaser;
(b) The Initial Closing Statement; and
(c) Such other documents as Purchaser may reasonably
request.
Section 8.2. Items to be Delivered by Purchaser. Purchaser shall
deliver to Seller:
(a) An Assignment and Assumption Agreement duly executed
and in full force and effect with respect to Purchaser;
(b) Payment of the Estimated Purchase Price stated on the
Initial Closing Statement by wire transfer of funds immediately
available in Chicago, Illinois; and
(c) Such other documents as Seller may reasonably request.
ARTICLE 9
GENERAL
Section 9.1. Disputes. In the event of any dispute or
disagreement between the parties after the Closing Date, either with
respect to the interpretation of any provision of this Agreement or with
respect to the performance or nonperformance by any party hereto, upon
the written request of any party, corporate executives of Seller and
Purchaser shall attempt to resolve any such dispute.
Section 9.2. Notices. All notices, demands and other
communications hereunder shall be in writing and shall be deemed to have
been duly given if delivered personally or if mailed by certified mail,
return receipt requested, postage prepaid or if sent by overnight courier
or sent by written facsimile with answerback confirmed, as follows:
If to the Seller: Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
Attention: Paul V. Reagan, Esq.
General Counsel
with a copy to: Bank of Montreal
3300 Bloor Street West
12th Floor, West Tower
Toronto, Ontario Canada
M8X 2X2
Attention: Mr. Robert W. Pearce
with a copy sent
contemporaneously to: Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
Attention: Marc P. Franson, Esq.
If to the Purchaser: Partners First Receivables, LLC
900 Elkridge Landing Road
Suite 300
Linthicum, MD 21090
Attention: John R. Soderlund
with a copy sent
contemporaneously to: Partners First Receivables, LLC
900 Elkridge Landing Road
Suite 300
Linthicum, MD 21090
Attention: Terence F. Browne, Esq.
Any such communication shall be deemed to have been received (i) when
delivered, if personally delivered, or sent by nationally recognized
overnight courier or sent via facsimile or (ii) on the third Business Day
following the date on which the piece of mail containing such
communication is posted, if sent by certified mail.
Section 9.3. Entire Agreement. This Agreement (including the
Exhibits (including the Assignment and Assumpton Agreement dated of even
date herewith (the "Assignment") between the parties hereto) and
Schedules hereto) and the letter agreement dated of even date herewith
(the "Letter") among the Company, the Seller and BankBoston (NH),
National Association, a national banking association (this Agreement, the
Assignment and the Letter being, collectively, the "Receivables
Agreements") contains the entire understanding of the parties hereto, and
supersedes all prior agreements and understandings relating to the
subject matter hereof; and further, provided that nothing contained in
this Agreement, the Assignment or the Letter shall be deemed in any
manner to amend, modify, revise or otherwise change or supersede any of
the terms or provisions of any of the other Receivables Agreements. This
Agreement shall not be amended except by a written instrument hereafter
signed by the authorized officers of all of the parties hereto. No waiver
of any provision of this Agreement shall be effective unless evidenced by
a written instrument signed by the waiving party. Each of the parties
hereto further acknowledges and agrees that, in entering into this
Agreement, it has not in any way relied upon any oral or written
agreements, statements, promises, information, arrangements,
understandings, representations or warranties, express or implied, not
specifically set forth in this Agreement.
Section 9.4. Governing Law. This Agreement shall be governed by,
and construed and enforced in accordance with, the laws of the State of
Delaware without regard to its conflict of laws rules.
Section 9.5. Consent to Jurisdiction. Each of the parties hereto
agrees that any suit, action or proceeding instituted against such party
under or in connection with this Agreement may be brought in a court of
competent jurisdiction in State of Delaware. By execution hereof, each
party hereto irrevocably waives any objection to, and any right of
immunity on the grounds of, improper venue, the convenience of the forum,
the personal jurisdiction of such courts or the execution of judgments
resulting therefrom. Each party hereto hereby irrevocably accepts and
submits to the jurisdiction of such courts in any such action, suit or
proceeding.
Section 9.6. Waiver of Certain Damages. Each of the parties
hereto irrevocably waives, to the fullest extent permitted by law, any
rights that it may have to punitive, incidental, special, exemplary or
consequential damages in respect of any litigation based upon, or arising
out of, this Agreement or any course of conduct, course of dealing,
statements or actions of any of the parties hereto relating thereto.
Section 9.7. Section and Subsection Headings. The headings of
sections and subsections are for reference only and shall not limit or
control the meaning thereof.
Section 9.8. Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns. Neither this Agreement nor the
obligations of any party hereunder shall be assignable or transferable by
any party without the prior written consent of the other party hereto.
Section 9.9. No Implied Rights or Remedies. Except as otherwise
expressly provided herein, nothing herein expressed or implied is
intended or shall be construed to confer upon or to give any Person,
except the parties hereto, any rights or remedies under or by reason of
this Agreement.
Section 9.10. Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
Section 9.11. Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties hereto to express
their mutual intent, and no rule of strict construction will be applied
against any party hereto.
Section 9.12. Severability. The invalidity or unenforceability of
any particular provision of this Agreement shall not affect the other
provisions hereof, and this Agreement shall be construed in all respects
as if such invalid or unenforceable provision were omitted.
Section 9.13. Survival. The representations, warranties and
covenants of the parties hereto shall survive indefinitely, unless
otherwise specified therein.
Section 9.14. Waiver of Right to Jury Trial. EACH OF THE PARTIES
HERETO HEREBY WAIVES ITS RIGHTS TO A TRIAL BY JURY IN ANY LITIGATION IN
ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF, THIS
AGREEMENT, OR THE VALIDITY, INTERPRETATION OR ENFORCEMENT HEREOF OR
THEREOF OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 9.15. Remedies. Each party hereto will be entitled to
enforce its rights under this Agreement specifically (without posting a
bond or other security), to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights existing
in their favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of
this Agreement and that either party may in its sole discretion apply to
any court of law or equity of competent jurisdiction for specific
performance and/or injunctive relief in order to enforce or prevent any
violation of the provisions of this Agreement. In the event of any
dispute involving the terms of this Agreement, the prevailing party shall
be entitled to collect reasonable fees and expenses incurred by the
prevailing party in connection with such dispute from the other parties
to such dispute.
ARTICLE 10
CHARGEBACKS
Seller shall retain all right, title and interest in claims
against or payments from merchants in respect of amounts that were
charged back through Visa(R) or MasterCard(R) by Seller prior to the
Closing Date or will be charged back after the Closing Date in each case
in respect to which Seller had credited the affected Account Receivable
prior to the Closing Date (the "Chargeback Amount"). In the event any
such payment with respect to such Chargeback Amount is received by
Purchaser, such amount shall be promptly paid to Seller. After the
Closing Date, Purchaser shall have all right, title and interest in
claims against or payments from merchants in respect of all amounts in
connection with the Accounts that were charged back through the systems
of Visa(R) or MasterCard(R) by Seller prior to the Closing Date and in
respect to which Seller had not credited the affected Account Receivable
prior to the Closing Date; provided, however, that if the merchant
refuses to pay such Chargeback Amount because of any act or omission of
Seller in violation of applicable rules of Visa(R) or Mastercard(R),
Seller shall promptly pay Purchaser such amount and Purchaser shall
assign to Seller any and all rights Purchaser may have against the
merchant. Purchaser shall have all right, title and interest in all
claims against or payment from merchants in respect of all amounts in
connection with the Accounts that are charged back through the systems of
Visa(R) or Mastercard(R) after the Closing Date and in respect to which
the affected Account had not been credited prior to the Closing Date, and
in the event that any such payment is received by Seller, such amount
shall be promptly paid by Seller to Purchaser.
In the event either party hereto receives, or otherwise has
possession of, documents which the other party needs in order to pursue a
chargeback claim, the party which has such documents shall send such
documents to the other party within five (5) Business Days after written
request therefore.
Anything contained in this Agreement to the contrary
notwithstanding, all amounts received with respect to any Account after
the Closing Date not in excess of the amount (if any) of the Chargeback
Amount with respect to such Account shall belong to Seller and, if
received by Purchaser after the Closing Date, shall be promptly paid to
Seller. Seller may retain any such amounts received by it after the
Closing Date.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties hereto have caused this Receivables Purchase and Sale Agreement
to be duly executed and delivered as a sealed instrument as of the date
and year first above written.
HARRIS TRUST AND SAVINGS BANK
By /s/ Kathleen M. Deane
__________________________
Name: Kathleen M. Deane
Title: Vice President
PARTNERS FIRST RECEIVABLES, LLC
By: /s/ John R. Soderlund
Name: John R. Soderlund
Title: President and Chief Executive
Officer
SCHEDULE 2.1
ACCOUNTS
TAPE TO BE SUPPLIED BY HARRIS.
SCHEDULE 4.6
LITIGATION
NONE
- ------------------------------------------------------------------------------
OVERDUE RECEIVABLES PURCHASE AND SALE AGREEMENT
BETWEEN
HARRIS TRUST AND SAVINGS BANK
AND
PARTNERS FIRST RECEIVABLES, LLC
- ------------------------------------------------------------------------------
OVERDUE RECEIVABLES PURCHASE AND SALE AGREEMENT
This Overdue Receivables Purchase and Sale Agreement, dated as of
January 29, 1998 (as in effect from time to time, this "Agreement"),
between (a) Harris Trust and Savings Bank, an Illinois banking
corporation (the "Seller"), and (b) Partners First Receivables, LLC, a
Delaware limited liability company (the "Purchaser").
WHEREAS, Seller desires to sell the Overdue Receivables (as
hereinafter defined) to Purchaser, and Purchaser desires to purchase the
Overdue Receivables, on the terms and conditions hereinafter set forth
and provided.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants set forth below, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree, intending to be legally bound, as follows:
ARTICLE 1
DEFINITIONS
Section 1.1. Certain Defined Terms. Capitalized terms used herein
without definition have the meaning assigned to such terms in the Limited
Liability Company Agreement of Partners First Holdings, LLC dated as of
the date hereof among BankBoston (NH), National Association, Bankmont
Financial Corp., Harris Trust and Savings Bank, First Annapolis Marketing
Information Services, Inc. and the Company (the "Operating Agreement").
Additionally, the following capitalized terms shall have the following
meanings:
"Adjusted Closing Statement" has the meaning set forth in
Section 3.3(b).
"Agreement" has the meaning set forth in the preamble.
"Applicable Agreements" means (i) that certain Contribution
Agreement dated as of the date hereof by and between Partners First
Holdings, LLC and Seller, (ii) that certain Contribution Agreement dated
as of the date hereof by and between Partners First Holdings, LLC and
Bankmont Financial Corp., and (iii) that certain Receivables Purchase and
Sale Agreement dated as of the date hereof by and between Seller and
Purchaser.
"Assignment" has the meaning set forth in Section 9.3.
"Assumed Obligations" has the meaning set forth in Section 3.1.
"Cardholder" means a holder of a Credit Card.
"Cardholder Agreements" means the agreements between the
Cardholders or other obligors with respect to a Credit Card and the
Seller, including, without limitation, any agreements relating to credit
enhancements provided in connection with such Credit Card, and as the
same has been amended or otherwise modified and in effect from time to
time.
"Chargeback Amount" has the meaning set forth in Article 10.
"Claim" has the meaning set forth in Section 7.3(a).
"Closing Date" means the date on which the transactions described
in this Agreement are consummated, except that for purposes of
determining Overdue Accounts or Overdue Receivables it shall mean the
opening of business on the day on which the transactions described in
this Agreement are consummated.
"Credit Card" means a MasterCard(R) or Visa(R) card issued by
Seller and associated solely with an Overdue Account of Seller's Credit
Card Business.
"Credit Card Business" means the provision of lines of credit
accessible by Visa(R) or MasterCard(R) to consumers within the United
States of America, the servicing of such credit card relationships, and
the provision of services incidental thereto.
"Estimated Purchase Price" has the meaning set forth in
Section 3.3.
"Excluded Accounts" has the meaning set forth in Section 2.2.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Governmental Authority" means any federal, national, state,
municipal, local, territorial or other governmental department,
commission, board, bureau, agency, regulatory authority, instrumentality,
judicial or administrative body, domestic or foreign and Visa(R) and
MasterCard(R).
"Indemnified Party" has the meaning set forth in Section
7.3(a).
"Indemnifying Party" has the meaning set forth in Section
7.3(a).
"Initial Closing Statement" has the meaning set forth in
Section 3.3(a).
"Letter" has the meaning set forth in Section 9.3.
"Losses" has the meaning set forth in Section 7.1.
"MasterCard(R)" means MasterCard International Incorporated.
"Overdue Accounts" means all of the credit card accounts of the
Seller's Credit Card Business (other than Excluded Accounts) identified
on Schedule 2.1 which is attached hereto or provided herewith and made a
part hereof (which may in the Seller's sole discretion be in the form of
a computer file or magnetic tape) consisting generally of any credit card
account of Seller's Credit Card Business (other than commercial or
business or accounts), including dormant accounts, inactive accounts,
closed accounts, accounts which are classified as "substandard,"
"doubtful," "loss" or treated as "other loans especially mentioned" in
the most recent report examination prepared by any Federal or State
supervisory agency, accounts in nonaccrual status, accounts on which
principal or interest payments are more than 30 days past due, accounts
whose terms have been renegotiated or compromised due to the
deteriorating financial condition of the Cardholder or accounts statused
by Seller as bankrupt, deceased, fraud, lost or stolen or charged off (in
accordance with the Seller's then-current written policies) and which
contains sufficient information to identify each account and respective
Cardholder such as name, address, social security number, account number,
status codes, account balance and such other information as is mutually
agreed upon by Purchaser and Seller.
"Overdue Receivables" has the meaning set forth in Section 2.1.
"Purchase Price" has the meaning set forth in Section 3.2.
"Purchaser" has the meaning set forth in the preamble hereto.
"Purchaser Indemnitees" has the meaning set forth in Section
7.1.
"Purchaser Indemnity Representations" means the representations and
warranties of Purchaser contained in Section 5.4 and 5.5 of this
Agreement.
"Receivables Agreements" has the meaning set forth in Section
9.3.
"Retained Liabilities" has the meaning set forth in Section
3.1.
"Seller" has the meaning set forth in the preamble hereto.
"Seller Indemnitees" has the meaning set forth in Section 7.2.
"Seller Indemnity Representations" means the representations and
warranties of Seller contained in Sections 4.5, 4.6, 4.7 (except the
first sentence thereof), 4.8, 4.9, 4.10 and 4.12 of this Agreement.
"Subject Losses" has the meaning set forth in Section 7.5.
"Third Party Claim" has the meaning set forth in Section
7.3(a).
"Visa(R)" means Visa U.S.A., Inc.
"Zero Value Accounts" means Overdue Accounts which, as of the
Closing Date are (i) statused by Seller as bankruptcy, deceased, fraud,
lost or stolen or charged off or (ii) 180 days or more contractually past
due (in each case, such status to be determined in accordance with
Seller's then-current written policies).
ARTICLE 2
SALE OF ASSETS
Section 2.1. Overdue Receivables. On the Closing Date, and subject
to the terms and conditions set forth in this Agreement, the Seller
(subject to the provisions of Article 10 hereto) shall sell, assign,
transfer and deliver to Purchaser, and the Purchaser shall purchase and
take assignment and delivery of, all of the Seller's right, title and
interest in, to and under the following assets as of the Closing Date
(other than the Excluded Accounts and the Excluded Assets): any and all
amounts owing from the Cardholders to the Seller (whether billed or
unbilled, posted or not) in connection with the Overdue Accounts,
including, without limitation, all principal, outstanding purchases, cash
advances, interest (including accrued but unbilled interest), annual
fees, finance and service charges and other charges and fees, less any
and all amounts owing from the Seller to the Cardholders as a credit
balance, whether or not credited (hereinafter referred to collectively as
the "Overdue Receivables").
The parties hereto intend that the conveyance of the Seller's
right, title and interest in and to the Overdue Receivables shall
constitute an absolute sale, conveying good title free and clear of any
liens, claims, encumbrances or rights of others from the Seller to the
Purchaser and that the Overdue Receivables shall not be a part of the
Seller's estate in the event of the insolvency of the Seller or a
conservatorship, receivership or similar event with respect to the
Seller. It is the intention of the parties hereto that the arrangements
with respect to the Overdue Receivables shall constitute a purchase and
sale of such Overdue Receivables and not a loan. In the event, however,
that it were to be determined that the transactions evidenced hereby
constitute a loan and not a purchase and sale, it is the intention of the
parties hereto that this Agreement shall constitute a security agreement
under applicable law, and that the Seller shall be deemed to have granted
and does hereby grant to the Purchaser a first priority perfected
security interest, in all of the Seller's right, title and interest,
whether now owned or hereafter acquired, in, to and under the Overdue
Receivables to secure the rights of the Purchaser hereunder and the
obligations of the Seller hereunder.
Section 2.2. Excluded Assets. Notwithstanding the foregoing, the
Seller is not transferring to the Purchaser and the Purchaser is not
acquiring pursuant to this Agreement, and the term "Overdue Receivables"
shall not include, any other assets of Seller not specifically referenced
in Section 2.1 (the "Excluded Assets") or any Overdue Receivables
generated by or related to accounts which are secured accounts,
commercial or business accounts ("Excluded Accounts").
2.3. Secured Accounts. Seller hereby transfers and assigns to
Purchaser all right, title and interest in and to certificates of deposit
and other deposit accounts constituting security for the payments of the
Overdue Receivables generated with respect to Accounts. Subject to the
terms of the agreements with Cardholders, Seller will continue to
administer and maintain the deposit accounts with Seller as provided
under any deposit agreements with Cardholders, including payment of
interest, if any, on such accounts and providing statements of account
balances to those depositors. Seller will place a "hold" on such deposit
accounts. Upon a Cardholder's default and upon the written direction of
Purchaser (or Purchaser's designee), Seller will turn over to Purchaser
amounts due Purchaser from such Cardholder. Purchaser and Seller will
cooperate to develop procedures to facilitate the utilization of the
security assigned to Purchaser hereunder for Purchaser's benefit.
ARTICLE 3
ASSUMPTION OF OBLIGATIONS
Section 3.1. Assumption of Obligations. The Purchaser hereby assumes,
and agrees to pay, perform, fulfill and discharge, all of the Seller's
obligations with respect to the Overdue Receivables from and after the
Closing Date (collectively, the "Assumed Obligations"). Anything in this
Agreement to the contrary notwithstanding, the Purchaser shall not
assume, and shall not be deemed to have assumed, any liability, contract
or obligation of the Seller not specifically listed or included herein or
assumed by separate written agreement signed by the Purchaser (all such
liabilities and obligations not being assumed being referred to herein as
the "Retained Liabilities"), which Retained Liabilities are retained by
the Seller and the Purchaser shall not be liable therefor.
Section 3.2. Consideration. In consideration of the sale of the
Overdue Receivables by the Seller to the Purchaser hereunder, the
Purchaser agrees to assume the Assumed Obligations and to pay to the
Seller, the purchase price ("Purchase Price") which shall be an amount
equal to (i) the sum of all Overdue Receivables as of the Closing Date,
(ii) less the sum of all Overdue Receivables of the Zero Value Accounts
as of the Closing Date, and (iii) plus or minus any other items or
prorations agreed to by Seller and Purchaser.
Section 3.3. Payment of Purchase Price. (a) On the Closing Date, the
parties shall prepare a closing statement (the "Initial Closing
Statement") calculating the Purchase Price as of the date of the most
recently available data (or another date mutually acceptable to Purchaser
and Seller) with respect to the Overdue Receivables (the "Estimated
Purchase Price"). On the Closing Date, the Estimated Purchase Price shall
be paid in immediately available funds to Seller by Purchaser.
(b) As soon as practicable after the Closing Date, Purchaser and
Seller shall conduct and complete a post-Closing review of the Overdue
Receivables and shall prepare a closing statement as of the Closing Date
(the "Adjusted Closing Statement"), mutually acceptable to Seller and
Purchaser, and showing any adjustments from the Initial Closing Statement
including the difference between the Estimated Purchase Price and the
Purchase Price. Purchaser shall pay Seller (or Seller shall pay Purchaser
as the case may be) an amount equal to the difference between the
Estimated Purchase Price and the Purchase Price as reflected on the
Adjusted Closing Statement plus interest thereon at the federal funds
rate from the Closing Date to the date of payment.
Section 3.4 Post-Closing Adjustments. Seller is responsible for any
and all fees in connection with the Overdue Receivables related to the
period prior to the Closing Date, including fees, normal operating
assessments or penalties and other charges imposed by MasterCard(R) or
Visa(R). The parties hereto hereby agree to cooperate in good faith to
estimate such fees and include them on the Initial Closing Statement and
to make such post-closing adjustments between themselves as may be
necessary to give effect to the provisions hereof and to reflect such
adjustments on the Adjusted Closing Statement. Adjustments to amounts
calculated pursuant to Sections 3.3 and this Section 3.4 hereof may
include unposted amounts, miscalculations, errors, incorrect status,
mischaracterization or mis-classification of Overdue Accounts, Zero Value
Accounts and Overdue Receivables prior to the Closing Date. For purposes
of this adjustment, mis-classified Overdue Accounts which should have
been classified as Zero Value Accounts will be valued accordingly. As
provided in Section 6.2 hereof, for the purposes of determining when or
whether an event took place, the interchange date as specified by Visa(R)
or MasterCard(R) shall be determinative.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Purchaser as
follows:
Section 4.1. Organization. The Seller is a banking corporation duly
organized and validly existing under the laws of Illinois and is
authorized to conduct general banking business under such laws.
Section 4.2. Authority; Enforceability. The Seller has all
requisite power and authority (i) to enter into and carry out its
obligations under this Agreement, (ii) to hold the Overdue Receivables
and (iii) to sell, assign and transfer the Overdue Receivables to the
Purchaser. The execution, delivery and performance of this Agreement have
been duly authorized by all necessary action on the part of Seller. This
Agreement has been duly executed and delivered by Seller and constitutes
the legal, valid and binding obligation of the Seller, enforceable
against the Seller in accordance with its terms, except as enforcement
thereof may be limited by receivership, conservatorship and supervisory
powers of bank regulatory agencies generally, as well as bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or similar
laws of general applicability relating to or affecting creditors' rights
or to general equity principles (regardless of whether such matters are
considered in a proceeding in equity or at law) and the availability of
equitable remedies.
Section 4.3. No Conflicts. The execution, delivery and performance by
the Seller of this Agreement does not violate (a) the Seller's Charter or
By-Laws, as applicable, (b) any material agreement or instrument to which
the Seller is a party or by which the Seller is bound or which affects
the Overdue Receivables, or (c) any law, rule or regulation applicable to
the Seller or which affects the Overdue Receivables.
Section 4.4. Ownership of Assets. The Seller is the sole owner of all
right, title and interest in, to and under all of the Overdue Receivables
being sold by the Seller to the Purchaser under this Agreement. The
Seller has the right, power and authority to sell and transfer the
Overdue Receivables to the Purchaser, and the Overdue Receivables are not
subject to any assignment, lien, charge, encumbrance or security
interest, except that such Overdue Receivables may be subject to the
terms of the Cardholder Agreements and to other rights of Cardholders and
other obligors as specified in Section 4.7 hereof. The Seller hereby
sells the Overdue Receivables to the Purchaser free and clear of all
assignments, liens, charges, encumbrances and other security interests
and of all claims or rights of third parties, except as such Overdue
Receivables may be subject to the terms of the Cardholder Agreements and
to other rights of Cardholders and other obligors as specified in Section
4.7 hereof.
Section 4.5. Cardholder Agreements. The Overdue Receivables have
been generated pursuant to the Overdue Accounts and pursuant to
Cardholder Agreements which are legal, valid and binding upon Seller and,
to the best of Seller's knowledge, such Cardholder Agreements are legally
binding agreements, enforceable in all material respects against the
Cardholders or other obligors who are a party thereto in accordance with
their respective terms, except as enforcement thereof may be limited by
bankruptcy, fraudulent transfer, reorganization, moratorium or similar
laws of general applicability relating to or affecting creditors' rights
or to general equity principles (regardless of whether such matters are
considered in a proceeding in equity or at law) and the availability of
equitable remedies. The Seller is in compliance with the Cardholder
Agreements except where the failure to so comply would not have a
material adverse effect on the Overdue Receivables.
Section 4.6. Litigation. Except for the litigation described on
Schedule 4.6, which is attached hereto and made a part hereof, there are
no actions, suits or proceedings pending or, to the knowledge of the
Seller, threatened against or affecting the Seller which would reasonably
be expected to cause any material adverse effect on the Overdue
Receivables. There is no action, suit or proceeding pending against the
Seller which would prevent the Seller from consummating the sale of the
Overdue Receivables to the Purchaser hereunder.
Section 4.7. Overdue Receivables. Other than the right of
Cardholders or other obligors to assert claims and defenses against the
Seller pursuant to 12 C.F.R. ss.226.12(c) and under any other applicable
laws and the Cardholders' "billing error" rights pursuant to 12 C.F.R.
ss.226.13, to the best of the Seller's knowledge, the Overdue Receivables
are not subject to Cardholder or other obligor claims, offsets or
adjustments and represent the legal, valid and binding obligations of the
Cardholders, enforceable against the Cardholders in accordance with their
terms, except as enforcement thereof may be limited by bankruptcy,
fraudulent transfer, reorganization, moratorium or similar laws of
general applicability relating to or affecting creditors' rights or to
general equity principles (regardless of whether such matters are
considered in a proceeding in equity or at law) and the availability of
equitable remedies. Seller makes no representation or warranty regarding
the payment or collectibility of the Overdue Receivables.
Section 4.8. Compliance with Applicable Law. The Overdue
Receivables have been generated in compliance, in all material respects,
with applicable federal and state laws, rules and regulations, and
judicial, administrative and arbitrator's orders relating thereto,
including without limitation the federal Truth-in-Lending Act, Equal
Credit Opportunity Act, Fair Credit Reporting Act, Fair Debt Collection
Practices Act and Regulations B and Z promulgated by the Board of
Governors of the Federal Reserve System.
Section 4.9. Licensed to Carry on Credit Card Business. The Seller
is and has been licensed to participate in the programs offered by
Visa(R) and by MasterCard(R) to the full extent necessary to generate the
Overdue Receivables.
Section 4.10. Account Records. The books and records relating to
the Overdue Receivables are accurate and complete in all material
respects, in each case, as of the date when each such record was made and
all information relating to application, payment history, customer
inquiry and other relevant Overdue Account information is contained in
the relevant books and records.
Section 4.11. Brokers. The Seller has not agreed to pay any fee or
commission to any agent, broker, finder or other person for or on account
of services rendered as a broker or finder in connection with this
Agreement or the sale of the Overdue Receivables hereunder.
Section 4.12. Permits, Etc. No consent of any Person and no license,
permit or approval with any Governmental Authority having jurisdiction
over Seller is required in connection with the transactions contemplated
by this Agreement. The Seller has not received notice from any
Governmental Authority indicating that it would oppose or not grant or
issue its consent or approval, if required, with respect to the sale of
the Overdue Receivables hereunder or any of the other transactions
contemplated hereby.
The Seller makes no other representations or warranties, expressed
or implied, with respect to the subject matter hereof other than as
specifically set forth in this Article 4.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Seller as
follows:
Section 5.1. Organization. The Purchaser is a limited liability
company duly organized and validly existing in good standing under the
laws of the State of Delaware.
Section 5.2. Authority; Enforceability. The Purchaser has all
requisite power and authority (i) to enter into and carry out its
obligations under this Agreement, (ii) to purchase and hold the Overdue
Receivables and (iii) to assume the Assumed Obligations. The execution,
delivery and performance of this Agreement have been duly authorized by
all necessary action on the part of the Purchaser. This Agreement has
been duly executed and delivered by the Purchaser and constitutes the
legal, valid and binding obligation of the Purchaser, enforceable against
the Purchaser in accordance with its terms, except as enforcement thereof
may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or similar laws of general applicability
relating to or affecting creditors' rights or to general equity
principles (regardless of whether such matters are considered in a
proceeding in equity or at law) and the availability of equitable
remedies.
Section 5.3. No Conflicts. The execution, delivery and performance of
this Agreement by the Purchaser does not violate (a) Purchaser's
Certificate of Formation or Limited Liability Company Agreement, (b) any
material agreement or instrument to which the Purchaser is a party or by
which the Purchaser is bound, or (c) any law, rule or regulation
applicable to the Purchaser.
Section 5.4. Permits, Etc. The Purchaser has obtained all licenses,
permits and approvals of all Governmental Authorities necessary for the
Purchaser to purchase, service and collect the Overdue Receivables and to
consummate the transactions contemplated hereby.
Section 5.5. Litigation. There is no action, suit or proceeding
pending or, to the knowledge of the Purchaser, threatened against the
Purchaser which challenges the validity, propriety or enforceability of,
or seeks to enjoin the performance of, the transactions contemplated by
this Agreement.
Section 5.6. Finders or Brokers. Neither Purchaser nor any Affiliate
of Purchaser has agreed to pay any fee or commission to any agent,
broker, finder or other person for or on account of services rendered as
a broker or finder in connection with this Agreement or the transactions
contemplated hereby.
ARTICLE 6
CERTAIN TRANSITIONAL MATTERS
Section 6.1. Third Party Consents. To the extent any Assumed
Obligation is not transferable or assignable without the consent of any
third party or the transfer or assignment of which would result in a
violation of any law or order, this Agreement shall not constitute on
assignment or attempted assignment thereof; Seller shall use all
reasonable efforts to obtain the required consent of any such third party
to the transfer or assignment thereof to the Purchaser and if any such
consent shall not be obtained, Seller shall cooperate with the Purchaser
in any reasonable arrangement (including reimbursement of monies paid by
the Purchaser on account of any such arrangement) designed to provide the
Purchaser with the benefits and/or burdens intended to be transferred and
assigned to it thereunder.
Section 6.2. Responsibility for Pre-Closing Transactions. Subject to
the provisions of Article 10, the Seller shall remain liable after the
date hereof for all draft retrievals, representments or incorrectly
posted transactions arising from transactions with an interchange
transaction date occurring prior to the Closing Date with respect to the
Overdue Receivables.
Section 6.3. Business Records. The Purchaser acknowledges that
certain business records of the Seller relating to the Seller's Credit
Card Business prior to the Closing Date will be conveyed to the Purchaser
or others, and that the Seller may from time to time require access to
such records, and the Purchaser agrees that upon reasonable prior notice
from the Seller, it will, during normal business hours, either provide
the Seller with access to records under its custody or control or, at the
Purchaser's option, copies of such records for such purposes. The Seller
agrees to hold any information so provided as confidential and in strict
confidence as it would its own confidential information. The Purchaser
agrees that it will not destroy any such business records during the
three (3) year period after the date hereof, and it will not within the
two (2) year period after such date destroy any business records prepared
prior to the date hereof without first notifying the Seller and affording
the Seller the opportunity to remove or copy them.
Section 6.4. Further Assistance. On and after the Closing Date,
Seller shall (i) execute, acknowledge and deliver all such
acknowledgments and other instruments (including financing statements)
and take such further action as may be necessary and appropriate to
effectively vest in the Purchaser the full legal and equitable title to
the Overdue Receivables or to perfect the Purchaser's interest therein,
and (ii) assist the Purchaser in the orderly transition of the Overdue
Receivables being acquired by the Purchaser, and (iii) deliver such other
information about the Overdue Receivables as the Purchaser may reasonably
request. Subject to the provisions of Article 10 hereof, in the event
Seller shall receive any payments relating to the Overdue Receivables
attributable to the period after the Closing Date, the Seller shall
promptly endorse and transfer such payments to the Purchaser and take all
necessary and reasonable actions to vest such monies in the Purchaser.
ARTICLE 7
INDEMNIFICATION
Section 7.1. Indemnity by the Seller. The Seller agrees to indemnify
and hold the Purchaser, and its affiliates, employees, officers,
directors, controlling persons, successors and assigns (the "Purchaser
Indemnitees"), harmless from and with respect to any and all claims,
liabilities, losses, damages, costs and expenses, including without
limitation the reasonable fees and disbursements of counsel and expert
witnesses, net of insurance proceeds (collectively, the "Losses"),
related to or arising directly or indirectly out of (a) any inaccuracies
in any representation or warranty made by the Seller in or pursuant to
this Agreement, (but only to the extent that Losses relating to or
arising directly or indirectly out of such inaccuracies when taken
together with Losses (as that term is defined in the Applicable
Agreements) for which the Seller or Bankmont is obligated to indemnify
the Purchaser Indemnitees (as defined in the Harris Purchase Agreement)
pursuant to Section 7.1(a) of the Harris Purchase Agreement and the
Company Indemnitees (as defined in the Harris Contribution Agreement and
the Bankmont Contribution Agreement) pursuant to Section 7.1(a) of the
Harris Contribution Agreement or Section 5.1 (a) of the Bankmont
Contribution Agreement, without duplication, exceed $100,000 in the
aggregate), (b) any failure or breach by the Seller of any covenant,
obligation, or undertaking made by the Seller in this Agreement or (c)
the Retained Liabilities, in each such case, except to the extent that
any such Losses were caused by any such Indemnified Party's gross
negligence or willful misconduct.
Section 7.2. Indemnity by the Purchaser. The Purchaser agrees to
indemnify and hold the Seller, and its affiliates, employees, officers,
directors, controlling persons, successors and assigns (the "Seller
Indemnitees"), harmless from and with respect to any and all Losses
related to or arising directly or indirectly out of (a) any inaccuracies
in any representation or warranty made by the Purchaser in this Agreement
(but only to the extent that Losses relating to or arising directly or
indirectly out of such inaccuracies when taken together with Losses (as
that term is defined in the Applicable Agreements) for which Purchaser
and/or the Company are obligated to indemnify the Seller Indemnitees (as
defined in the Harris Purchase Agreement and the Harris Contribution
Agreement) pursuant to Section 7.2(a) of the Harris Purchase Agreement
and the Harris Contribution Agreement and/or the Investor Indemnitees (as
defined in the Bankmont Contribution Agreement) pursuant to Section
5.2(a) of the Bankmont Contribution Agreement, without duplication,
exceed $100,000 in the aggregate), (b) any failure or breach by the
Purchaser of any covenant, obligation or undertaking made by the
Purchaser in this Agreement (including without limitation any failure by
the Purchaser to pay or perform any of the Assumed Obligations), (c) the
collection of the Overdue Receivables by the Purchaser after the Closing
Date, or (d) the Assumed Obligations, in each case, except to the extent
that any such Losses are caused by any such Indemnified Party's gross
negligence or willful misconduct.
Section 7.3. Claims. (a) Any party seeking indemnification hereunder
(the "Indemnified Party") shall promptly notify the party hereto
obligated to provide indemnification hereunder (the "Indemnifying Party")
of any action, suit, proceeding, demand or breach (a "Claim") with
respect to which the Indemnified Party claims indemnification hereunder,
provided that failure of the Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations under this Article
7 except to the extent, if at all, that such Indemnifying Party shall
have been prejudiced thereby. If such Claim relates to any action, suit,
proceeding or demand instituted against the Indemnified Party by a third
party (a "Third Party Claim"), then upon receipt of such notice from the
Indemnified Party the Indemnifying Party shall be entitled to participate
in the defense of such Third Party Claim, and if and only if each of the
following conditions is satisfied, the Indemnifying Party may assume the
defense of such Third Party Claim, and in the case of such an assumption
the Indemnifying Party shall have the authority to negotiate, compromise
and settle such Third Party Claim:
(i) the Indemnifying Party confirms in writing that it is
obligated hereunder toindemnify the Indemnified Party with respect to
such Third Party Claim; and
(ii) there is no conflict of interest which would make
separate representatibly the Indemnified Party's own counsel advisable.
The Indemnified Party shall retain the right to employ its own counsel
and to participate in the defense of any Third Party Claim, the defense
of which has been assumed by the Indemnifying Party pursuant hereto, but
the Indemnified Party shall bear and shall be solely responsible for its
own costs and expenses in connection with such participation. The
Indemnifying Party shall not, without the prior written consent of the
Indemnified Party, settle or compromise any claim or consent to the entry
of any judgment that does not include as an unconditional term thereof
the giving by the claimant or the plaintiff to the Indemnified Party a
release from all liability in respect of such claim.
(b) In the event of any Claim under Section 7.1 or 7.2, the
Indemnified Party shall advise the Indemnifying Party in writing of the
amount and circumstances surrounding such Claim.
Section 7.4. Time Limits. No claim for indemnification under this
Article 7 may be asserted for the first time after June 30, 1999.
Section 7.5. Exclusive Remedy; Damage Limitations. The Seller and
the Purchaser acknowledge and agree that, except for the right to seek
specific performance of covenants and other agreements, the
indemnification rights and remedies available to each party under this
Article 7 shall be the sole and exclusive rights and remedies of the
Purchaser and the Seller with respect to any Losses arising out of or
relating in any way to (a) any breach of this Agreement, (b) the
acquisition of the Overdue Receivables and the assumption of the Assumed
Obligations by the Purchaser, or (c) the consummation of the transactions
contemplated hereby (collectively, the "Subject Losses"), including
without limitation any claims, rights or remedies for negligent
misrepresentation but excluding specifically, any claims, rights or
remedies for fraud. Without limiting the generality of the foregoing,
except for remedies for fraud and as specifically authorized by this
Article 7, the Purchaser and the Seller hereby waive, release and
disclaim any claims, rights or remedies arising in tort, by statute, or
otherwise, with respect to the Subject Losses. As provided in Section
9.6, in no event shall the Purchaser or the Seller be entitled to recover
from the other party hereto for incidental, special, consequential,
exemplary or punitive damages, and for all purposes of this Agreement,
the term "Losses" shall be deemed not to include any such damages.
Seller's maximum aggregate liability, and the right of recovery of the
Purchaser Indemnitees against the Seller under this Article 7 for Losses,
arising as a result of breaches of the Seller Indemnity Representations
contained herein shall, in all events, other than fraud by Seller, be
limited in the aggregate to $5,900,000 less all amounts paid by Seller
under Article 7 of the respective Applicable Agreements as a result of
breaches by Seller of the Seller Indemnity Representations (as that term
is defined in the respective Applicable Agreements). Purchaser's maximum
aggregate liability, and the right of recovery of the Seller Indemnitees
against the Purchaser under this Article 7 for Losses arising as a result
of breaches of the Purchaser Indemnity Representations contained herein
shall, in all events other than fraud by the Purchaser, be limited in the
aggregate to $5,900,000 less all amounts paid by the Purchaser and/or the
Company under the Applicable Agreements as a result of breaches by the
Company and/or the Purchaser of the Purchaser Indemnity Representations
and the Company Indemnity Representations (as such terms are defined in
the respective Applicable Agreements).
ARTICLE 8
ITEMS TO BE DELIVERED AT CLOSING
Section 8.1. Items to be Delivered by Seller. Seller shall deliver to
Purchaser:
(a) Such bills of sale, assignments, UCC-1 forms, and other
instruments documents duly executed and in full force and effect
with respect to Seller as Purchaser may reasonably require as
necessary or desirable for transferring, assigning and
conveying title to the Overdue Receivables to Purchaser, all
in form and substance reasonably satisfactory to Purchaser;
(b) The Initial Closing Statement; and
(c) Such other documents as Purchaser may reasonably request.
Section 8.2. Items to Be Delivered by Purchaser. Purchaser
shall deliver to Seller:
(a) An Assignment and Assumption Agreement duly executed and
in full force and effect with respect to Purchaser;
(b) Payment of the Estimated Purchase Price stated on the Initial
Closing Statement by wire transfer of funds immediately available in
Chicago, Illinois; and
(c) Such other documents as Seller may reasonably request.
ARTICLE 9
GENERAL
Section 9.1. Disputes. In the event of any dispute or disagreement
between the parties after the Closing Date, either with respect to the
interpretation of any provision of this Agreement or with respect to the
performance or nonperformance by any party hereto, upon the written
request of any party, corporate executives of Seller and Purchaser shall
attempt to resolve any such dispute.
Section 9.2. Notices. All notices, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given
if delivered personally or if mailed by certified mail, return receipt
requested, postage prepaid or if sent by overnight courier or sent by
written facsimile with answerback confirmed, as follows:
If to the Seller: Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
Attn: Paul V. Reagan, Esq.
Senior Vice President
and U.S. General Counsel
with a copy to: Bank of Montreal
3300 Bloor Street West
12th Floor, West Tower
Toronto, Ontario Canada
M8X 2X2
Attention: Mr. Robert W. Pearce
with a copy sent Chapman and Cutler
contemporaneously to: 111 West Monroe Street
Chicago, Illinois 60603
Attention: Marc P. Franson, Esq.
If to the Purchaser: Partners First Receivables, LLC
900 Elkridge Landing Road
Suite 300
Linthicum, MD 21090
Attention: John R. Soderlund
with a copy sent Partners First Receivables, LLC
contemporaneously to: 900 Elkridge Landing Road
Suite 300
Linthicum, MD 21090
Attention: Terence F. Browne, Esq.
Any such communication shall be deemed to have been received (i)
when delivered, if personally delivered, or sent by nationally recognized
overnight courier or sent via facsimile or (ii) on the third Business Day
following the date on which the piece of mail containing such
communication is posted, if sent by certified mail.
Section 9.3Entire Agreement. This Agreement (including the Exhibits
(including the Assignment and Assumption Agreement dated of even date
herewith (the "Assignment") between the parties hereto) and Schedules
hereto) and the letter agreement dated of even date herewith (the
"Letter") among the Company, the Seller and BankBoston (NH), National
Association, a national banking association (this Agreement, the
Assignment and the Letter Being, collectively, the "Receivables
Agreements") contains the entire understanding of the parties hereto, and
supersedes all prior agreements and understandings relating to the
subject matter hereof; and further, provided that nothing contained in
this Agreement, the Assignment or the Letter shall be deemed in any
manner to amend, modify, revise or otherwise change or supersede any of
the terms or provisions of any of the other Receivables Agreements. This
Agreement shall not be amended except by a written instrument hereafter
signed by the authorized officers of all of the parties hereto. No waiver
of any provision of this Agreement shall be effective unless evidenced by
a written instrument signed by the waiving party. Each of the parties
hereto further acknowledges and agrees that, in entering into this
Agreement, it has not in any way relied upon any oral or written
agreements, statements, promises, information, arrangements,
understandings, representations or warranties, express or implied, not
specifically set forth in this Agreement.
Section 9.4. Governing Law. This Agreement shall be governed by,
and construed and enforced in accordance with, the laws of the State of
Delaware without regard to its conflict of laws rules.
Section 9.5. Consent to Jurisdiction. Each of the parties hereto
agrees that any suit, action or proceeding instituted against such party
under or in connection with this Agreement may be brought in a court of
competent jurisdiction in State of Delaware. By execution hereof, each
party hereto irrevocably waives any objection to, and any right of
immunity on the grounds of, improper venue, the convenience of the forum,
the personal jurisdiction of such courts or the execution of judgments
resulting therefrom. Each party hereto hereby irrevocably accepts and
submits to the jurisdiction of such courts in any such action, suit or
proceeding.
Section 9.6. Waiver of Certain Damages. Each of the parties hereto
irrevocably waives, to the fullest extent permitted by law, any rights
that it may have to punitive, incidental, special, exemplary or
consequential damages in respect of any litigation based upon, or arising
out of, this Agreement or any course of conduct, course of dealing,
statements or actions of any of the parties hereto relating thereto.
Section 9.7. Section and Subsection Headings. The headings of
sections and subsections are for reference only and shall not limit or
control the meaning thereof.
Section 9.8. Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns. Neither this Agreement nor the
obligations of any party hereunder shall be assignable or transferable by
any party without the prior written consent of the other party hereto.
Section 9.9. No Implied Rights or Remedies. Except as otherwise
expressly provided herein, nothing herein expressed or implied is
intended or shall be construed to confer upon or to give any Person,
except the parties hereto, any rights or remedies under or by reason of
this Agreement.
Section 9.10. Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
Section 9.11. Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties hereto to express
their mutual intent, and no rule of strict construction will be applied
against any party hereto.
Section 9.12. Severability. The invalidity or unenforceability of
any particular provision of this Agreement shall not affect the other
provisions hereof, and this Agreement shall be construed in all respects
as if such invalid or unenforceable provision were omitted.
Section 9.13. Survival. The representations, warranties and
covenants of the parties hereto shall survive indefinitely, unless
otherwise specified therein.
Section 9.14. WAIVER OF RIGHT TO JURY TRIAL. EACH OF THE PARTIES
HERETO HEREBY WAIVES ITS RIGHTS TO A TRIAL BY JURY IN ANY LITIGATION IN
ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF, THIS
AGREEMENT, OR THE VALIDITY, INTERPRETATION OR ENFORCEMENT HEREOF OR
THEREOF OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 9.15. Remedies. Each party hereto will be entitled to
enforce its rights under this Agreement specifically (without posting a
bond or other security), to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights existing
in their favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of
this Agreement and that either party may in its sole discretion apply to
any court of law or equity of competent jurisdiction for specific
performance and/or injunctive relief in order to enforce or prevent any
violation of the provisions of this Agreement. In the event of any
dispute involving the terms of this Agreement, the prevailing party shall
be entitled to collect reasonable fees and expenses incurred by the
prevailing party in connection with such dispute from the other parties
to such dispute.
ARTICLE 10
CHARGEBACKS
Seller shall retain all right, title and interest in claims against
or payments from merchants in respect of amounts that were charged back
through Visa(R) or MasterCard(R) by Seller prior to the Closing Date or
will be charged back after the Closing Date in each case in respect to
which Seller had credited the affected Overdue Receivables prior to the
Closing Date (the "Chargeback Amount"). In the event any such payment
with respect to such Chargeback Amount is received by Purchaser, such
amount shall be promptly paid to Seller. After the Closing Date,
Purchaser shall have all right, title and interest in claims against or
payments from merchants in respect of all amounts in connection with the
Overdue Accounts that were charged back through the systems of Visa(R) or
MasterCard(R) by Seller prior to the Closing Date and in respect to which
Seller had not credited the affected Overdue Receivables prior to the
Closing Date; provided, however, that if the merchant refuses to pay such
Chargeback Amount because of any act or omission of Seller in violation
of applicable rules of Visa(R) or MasterCard(R), Seller shall promptly
pay Purchaser such amount and Purchaser shall assign to Seller any and
all rights Purchaser may have against the merchant. Purchaser shall have
all right, title and interest in all claims against or payment from
merchants in respect of all amounts in connection with the Overdue
Accounts that are charged back through the systems of Visa(R) or
MasterCard(R) after the Closing Date and in respect to which the affected
Overdue Account had not been credited prior to the Closing Date, and in
the event that any such payment is received by Seller, such amount shall
be promptly paid by Seller to Purchaser.
In the event either party hereto receives, or otherwise has
possession of, documents which the other party needs in order to pursue a
chargeback claim, the party which has such documents shall send such
documents to the other party within five (5) Business Days after written
request therefore.
Anything contained in this Agreement to the contrary
notwithstanding, all amounts received with respect to any Overdue Account
after the Closing Date not in excess of the amount (if any) of the
Chargeback Amount with respect to such Overdue Account shall belong to
Seller and, if received by Purchaser after the Closing Date, shall be
promptly paid to Seller. Seller may retain any such amounts received by
it after the Closing Date.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties hereto have caused this Overdue Receivables Purchase and Sale
Agreement to be duly executed and delivered as a sealed instrument as of
the date and year first above written.
HARRIS TRUST AND SAVINGS BANK
By /s/ Kathleen M. Deane
_____________________________
Name: Kathleen M. Deane
Title: Vice President
PARTNERS FIRST RECEIVABLES, LLC
By /s/ John R. Soderlund
_____________________________
Name: John R. Soderlund
Title: President and Chief
Executive Officer
SCHEDULE 2.1
OVERDUE ACCOUNTS
TAPE TO BE SUPPLIED BY HARRIS.
SCHEDULE 4.6
LITIGATION
NONE
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS.........................................................1
Section 1.1. Certain Defined Terms. ...................1
ARTICLE 2
SALE OF ASSETS......................................................4
Section 2.1. Overdue Receivables.......................4
Section 2.2. Excluded Assets...........................4
Section 2.3 Secured Accounts..........................5
ARTICLE 3
ASSUMPTION OF OBLIGATIONS...........................................5
Section 3.1. Assumption of Obligations.................5
Section 3.2. Consideration.............................5
Section 3.3. Payment of Purchase Price.................5
Section 3.4. Post-Closing Adjustments..................6
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SELLER........................6
Section 4.1. Organization..............................6
Section 4.2. Authority; Enforceability.................6
Section 4.3. No Conflicts..............................7
Section 4.4. Ownership of Assets.......................7
Section 4.5. Cardholder Agreements.....................7
Section 4.6. Litigation................................7
Section 4.7. Overdue Receivables.......................7
Section 4.8. Compliance with Applicable Law............8
Section 4.9. Licensed to Carry on Credit Card Business.8
Section 4.10. Account Records..........................8
Section 4.11. Brokers..................................8
Section 4.12. Permits, Etc.............................8
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.....................8
Section 5.1. Organization..............................8
Section 5.2. Authority; Enforceability.................9
Section 5.3. No Conflicts..............................9
Section 5.4. Permits, Etc..............................9
Section 5.5. Litigation................................9
Section 5.6. Finders or Brokers........................9
ARTICLE 6
CERTAIN TRANSITIONAL MATTERS........................................9
Section 6.1. Third Party Consents......................9
Section 6.2. Responsibility for Pre-Closing
Transactions............................10
Section 6.3. Business Records.........................10
Section 6.4. Further Assistance.......................10
ARTICLE 7
INDEMNIFICATION....................................................10
Section 7.1. Indemnity by the Seller..................10
Section 7.2. Indemnity by the Purchaser...............11
Section 7.3.Claims....................................11
Section 7.4. Time Limits..............................12
Section 7.5. Exclusive Remedy; Damage Limitations.....12
ARTICLE 8
ITEMS TO BE DELIVERED AT CLOSING...................................13
Section 8.1. Items to be Delivered by Seller.........13
Section 8.2. Items to Be Delivered by Purchaser......13
ARTICLE 9
GENERAL............................................................13
Section 9.1. Disputes................................13
Section 9.2. Notices.................................13
Section 9.3. Entire Agreement........................14
Section 9.4. Governing Law...........................15
Section 9.5. Consent to Jurisdiction.................15
Section 9.6. Waiver of Certain Damages...............15
Section 9.7. Section and Subsection Headings.........15
Section 9.8. Assigns.................................15
Section 9.9. No Implied Rights or Remedies...........15
Section 9.10. Counterparts...........................16
Section 9.11. Construction...........................16
Section 9.12. Severability...........................16
Section 9.13. Survival...............................16
Section 9.14. WAIVER OF RIGHT TO JURY TRIAL..........16
Section 9.15. Remedies...............................16
ARTICLE 10
CHARGEBACKS........................................................16
Schedules
Schedule 2.1 - Overdue Accounts
Schedule 4.6 - Litigation
- ------------------------------------------------------------------------------
HARRIS TRUST AND SAVINGS BANK
and
PARTNERS FIRST RECEIVABLES, LLC
- ------------------------------------------------------------------------------
RECEIVABLES PURCHASE AGREEMENT
Dated as of January 29, 1998
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.1. Definitions..................................................1
Section 1.2. Other Definitional Provisions................................4
ARTICLE II
PURCHASE AND CONVEYANCE OF RECEIVABLES
Section 2.1. Purchase.....................................................4
Section 2.2. Additional Accounts..........................................6
ARTICLE III
CONSIDERATION AND PAYMENT
Section 3.1. Purchase Price...............................................6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1. Representations and Warranties of the Bank
Relating to the Bank...................................7
Section 4.2. Representations and Warranties of the Bank
Relating to the Agreement and the Receivables..........8
Section 4.3. Representations and Warranties of PFR.......................10
Section 4.4. Limitation on Liability.....................................11
ARTICLE V
COVENANTS
Section 5.1. Covenants of the Bank.......................................11
ARTICLE VI
[RESERVED]
ARTICLE VII
[RESERVED]
ARTICLE VIII
TERM AND PURCHASE TERMINATION
Section 8.1. Term........................................................13
Section 8.2. Purchase Termination........................................13
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1. Amendment...................................................14
Section 9.2. Governing Law...............................................14
Section 9.3. Notices.....................................................14
Section 9.4. Severability of Provisions..................................14
Section 9.5. Assignment..................................................15
Section 9.6. Acknowledgment and Agreement of the Bank....................15
Section 9.7. Further Assurances..........................................15
Section 9.8. No Waiver; Cumulative Remedies..............................16
Section 9.9. Counterparts................................................16
Section 9.10 Binding; Third-Party Beneficiaries..........................16
Section 9.11 Merger and Integration......................................16
Section 9.12 Headings....................................................16
Section 9.13 Schedules and Exhibits......................................16
Section 9.14 Survival of Representations and Warranties..................16
Section 9.15 Nonpetition Covenant........................................16
RECEIVABLES PURCHASE AGREEMENT, dated as of January 29, 1998,
by and between HARRIS TRUST AND SAVINGS BANK, a banking association
organized under the laws of the state of Illinois (the "Bank"), and
PARTNERS FIRST RECEIVABLES, LLC, a Delaware limited liability company
("PFR").
W I T N E S S E T H:
WHEREAS, PFR desires to purchase, from time to time, certain
Receivables (hereinafter defined) from the Bank arising under specified
consumer revolving credit card accounts purchased or acquired by the Bank
and the Bank desires to sell such Receivables to PFR.
NOW, THEREFORE, it is hereby agreed by and between PFR and
the Bank as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. All capitalized terms used herein
or in any certificate, document, or Conveyance Paper made or delivered
pursuant hereto, and not defined herein or therein, shall have the
meaning ascribed thereto in the Pooling and Servicing Agreement; in
addition, the following words and phrases shall have the following
meanings:
"Account" shall mean (a) each MasterCard(R)1/ and VISA(R)1/
account established pursuant to a Credit Card Agreement identified by
account number and by the receivables balance as of the Closing Date in
the computer file, microfiche list or printed list delivered to PFR by
the Bank on the Closing Date, pursuant to the Contribution Agreement,
dated as of January 29, 1998, by and between the Bank and Holdings, (b)
each Additional Account (but only from and after the Addition Date with
respect thereto), (c) each Related Account, and (d) each Transferred
Account.
"Additional Account" shall mean each account maintained by
the Bank in accordance with the License Agreement following the date
hereof, pursuant to a Credit Card Agreement identified by Account number
and by receivables balance as of the related Addition Date in the
computer file, microfiche list or printed list delivered to PFR by the
Bank on such Addition Date.
- --------
1/ MasterCard and VISA are registered trademarks of MasterCard
International Incorporated and of VISA USA, Inc., respectively.
"Addition Date" shall mean with respect to each Additional
Account, the date on which such Account is originated or acquired by the
Bank.
"Agreement" shall mean this Receivables Purchase Agreement
and all amendments hereof and supplements hereto.
"Assistance Agreement" shall mean the License and Agency
Agreement dated as of January 29, 1998 between Holdings and the Bank.
"Bank" shall mean Harris Trust and Savings Bank, a banking
corporation organized under the laws of the state of Illinois, and its
successors and assigns.
"Closing Date" shall mean January 29, 1998.
"Conveyance" shall have the meaning specified in
subsection 2.1(a).
"Conveyance Papers" shall have the meaning specified in
subsection 4.1(c).
"Debtor Relief Laws" shall mean (i) the Bankruptcy Code of
the United States of America and (ii) all other applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, receivership,
insolvency, reorganization, suspension of payments, readjustment of debt,
marshalling of assets or similar debtor relief laws of the United States,
any state or any foreign country from time to time in effect affecting
the rights of creditors generally.
"Finance Charge Receivables" shall mean all Receivables in
the Accounts which would be treated as "Finance Charge Receivables" in
accordance with the definition for such term in the Pooling and Servicing
Agreement.
"Holdings" shall mean Partners First Holdings, LLC, a
Delaware limited liability company.
"Initial Account" shall mean each Account owned by the Bank
on the date hereof.
"Insolvency Event" shall have the meaning specified in
Section 8.2.
"Interchange" shall mean interchange fees payable to the Bank
in its capacity as credit card issuer, through VISA or MasterCard in
connection with cardholder charges for goods and services with respect to
the Accounts.
"Investor Certificate" shall have the meaning specified
in the Pooling and Serving Agreement.
"Monthly Period" shall mean the period from and including the
first day of a calendar month to and including the last day of such
calendar month.
"New Principal Receivables" shall have the meaning set
forth in Section 3.1.
"Obligor" shall mean, with respect to each Account, each
person that would be treated as an "Obligor" in accordance with the
definition for such term in the Pooling and Servicing Agreement.
"PFRF" shall mean Partners First Receivables Funding, LLC, a
Delaware limited liability company.
"Pooling and Servicing Agreement" shall mean the Pooling and
Servicing Agreement, dated as of January 29, 1998, among Holdings, as
Servicer, PFRF, as Transferor, and the Trustee, and all amendments and
supplements thereto.
"Principal Receivables" shall mean all Receivables in the
Accounts that would be treated as "Principal Receivables" in accordance
with the definition for such term in the Pooling and Servicing Agreement.
"Purchase Price" shall have the meaning set forth in
Section 3.1.
"Purchased Assets" shall have the meaning set forth in
Section 2.1.
"Receivables" shall mean all amounts shown on the Bank's
records as amounts payable by Obligors on any Account from time to time,
including amounts payable for Principal Receivables and Finance Charge
Receivables. A Receivable shall be deemed to have been created at the end
of the Date of Processing of such Receivable.
"Servicer" shall have the meaning set forth in the
Pooling and Servicing Agreement.
"Transaction Documents" shall mean, the Pooling and
Servicing Agreement, the Series 1998-1 Supplement, this Agreement and
each Receivables Purchase Agreement.
"Transferor" shall mean Partners First Receivables Funding,
LLC, a Delaware limited liability company, and its permitted successors
and assigns.
"Transferor Purchase Agreement" shall mean the Receivables
Purchase Agreement, dated as of January 29, 1998 between PFR, as seller
and the Transferor, as purchaser.
"Transferred Account" shall mean each account into which an
Account shall be transferred provided that (i) such transfer was made in
accordance with the Credit Card Guidelines and (ii) such account can be
traced or identified as an account into which an Account has been
transferred.
"Transferred Receivables" shall have the meaning set
forth in Section 2.1.
"Trust" shall mean the trust created by the Pooling and
Servicing Agreement.
"Trustee" shall mean The Bank of New York, a New York banking
corporation, the institution executing the Pooling and Servicing
Agreement as, and acting in the capacity of Trustee thereunder, or its
successor in interest, or any successor trustee appointed as provided in
the Pooling and Servicing Agreement.
Section 1.2. Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the
defined meanings when used in any certificate, other document, or
Conveyance Paper made or delivered pursuant hereto unless otherwise
defined therein.
(b) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement or any Conveyance Paper shall
refer to this Agreement as a whole and not to any particular provision of
this Agreement; and Section, Subsection, Schedule and Exhibit references
contained in this Agreement are references to Sections, Subsections,
Schedules and Exhibits in or to this Agreement unless otherwise
specified.
(c) All determinations of the principal or finance charge
balance of Receivables, and of any collections thereof, shall be made in
accordance with the Pooling and Servicing Agreement and all applicable
Supplements.
ARTICLE II
PURCHASE AND CONVEYANCE OF RECEIVABLES
Section 2.1. Purchase.
(a) By execution of this Agreement, the Bank does hereby
sell, transfer, assign, set over and otherwise convey to PFR
(collectively, the "Conveyance"), without recourse except as provided
herein, all its right, title and interest in, to and under (i) all of the
Receivables created in the Accounts following the Closing Date and all
Receivables created in each Additional Account originated or acquired by
the Bank following the related Addition Date (the "Transferred
Receivables"), whether such Receivables shall then be existing or shall
thereafter be created and all monies due and or to become due and all
amounts received with respect thereto and all proceeds (including,
without limitation, "proceeds" as defined in the UCC) thereof and (ii)
the right to receive Interchange and Recoveries with respect to such
Receivables (the "Purchased Assets").
(b) In connection with such Conveyance, the Bank agrees (i)
to record and file, at its own expense, any financing statements (and
continuation statements with respect to such financing statements when
applicable) with respect to the Receivables now existing and hereafter
created, meeting the requirements of applicable state law in such manner
and in such jurisdictions as are necessary to perfect, and maintain
perfection of, the Conveyance of such Purchased Assets from the Bank to
PFR, (ii) that such financing statements shall name the Bank, as seller,
and PFR, as purchaser, of the Receivables and (iii) to deliver a
file-stamped copy of such financing statements or other evidence of such
filings (excluding such continuation statements, which shall be delivered
as filed) to PFR as soon as is practicable after filing.
(c) In connection with such Conveyance, the Bank further
agrees that it will, at its own expense, (i) on the date of creation of
each Account indicate in its computer files that all of the Receivables
created in connection with such Account have been conveyed to PFR in
accordance with this Agreement by including in such computer files the
code identifying such Account and (ii) on or prior (x) to the date that
is 30 days after any date on which the Bank ceases to originate new
accounts in accordance with the Assistance Agreement and (y) any date on
which PFR is required to provide a computer file or microfiche list to
the Transferor under the Transferor Purchase Agreement, deliver to PFR a
computer file or microfiche list containing a true and complete list of
all such Accounts specifying for each such Account, as of the date on
which the Bank is no longer designating all new accounts originated in
accordance with the Assistance Agreement as Accounts, or the date
specified by PFR, as applicable,(A) its account number, (B) the aggregate
amount outstanding in such Account and (C) the aggregate amount of
Principal Receivables in such Account. Each such file or list, as
supplemented from time to time to reflect Additional Accounts, shall be
marked as Schedule I to this Agreement, shall be delivered to PFR, and is
hereby incorporated into and made a part of this Agreement. The Bank
further agrees not to alter the code referenced in clause (i) of this
paragraph with respect to any Account during the term of this Agreement.
(d) The parties hereto intend that the conveyance of the
Bank's right, title and interest in and to the Receivables shall
constitute an absolute sale, conveying good title free and clear of any
liens, claims, encumbrances or rights of others from the Bank to PFR and
that the Receivables shall not be a part of the Bank's estate in the
event of the insolvency of the Bank or a conservatorship, receivership or
similar event with respect to the Bank. It is the intention of the
parties hereto that the arrangements with respect to the Receivables
shall constitute a purchase and sale of such Receivables and not a loan.
In the event, however, that it were to be determined that the
transactions evidenced hereby constitute a loan and not a purchase and
sale, it is the intention of the parties hereto that this Agreement shall
constitute a security agreement under applicable law, and that the Bank
shall be deemed to have granted and does hereby grant to PFR a first
priority perfected security interest, in all of the Bank's right, title
and interest, whether now owned or hereafter acquired, in, to and under
the Receivables and other Purchased Assets to secure the rights of PFR
hereunder and the obligations of the Bank hereunder.
Section 2.2. Additional Accounts.
(a) Each newly originated Additional Account shall be deemed
to be an Account hereunder. The Bank shall take all actions necessary to
comply, or to enable PFR to comply, with the requirements of Section 2.3
of the Transferor Purchase Agreement and shall cooperate with PFR to
enable it to perform with respect to the Receivables in such Additional
Accounts all actions specified in Section 2.3 of the Transferor Purchase
Agreement.
(b) On the Addition Date with respect to any Additional
Accounts, PFR shall purchase the Bank's right, title and interest in, to
and under the Receivables in Additional Accounts (and such Additional
Accounts shall be deemed to be Accounts for purposes of this Agreement)
as of the close of business on the Addition Date, subject to the
satisfaction of the following conditions:
(i) the Bank shall have delivered to PFR copies of UCC-1
financing statements covering such Additional Accounts, if
necessary to perfect PFR's interest in the Receivables arising
therein;
(ii) to the extent required of PFR by 2.3(b) of the
Transferor Purchase Agreement, the Bank shall have deposited in the
Collection Account all Collections with respect to such Additional
Accounts since the Additional Cut-Off Date; and
(iii) as of each Addition Date, no Insolvency Event with
respect to the Bank shall have occurred nor shall the transfer of
the Receivables arising in the Additional Accounts to PFR have been
made in contemplation of the occurrence thereof.
Section 2.4. Representations and Warranties. The Bank
hereby represents and warrants to PFR as of the related Addition
Date as to the matters set forth in Section 2.2(b)(iii) above.
ARTICLE III
CONSIDERATION AND PAYMENT
Section 3.1. Purchase Price.
(a) The Purchase Price for the Receivables (including
Receivables in Additional Accounts) to be conveyed to PFR under this
Agreement which come into existence after the Closing Date, shall be
payable on each day on which such Receivables are conveyed by the Bank to
PFR in an amount equal to 100% of the aggregate balance of the Principal
Receivables so conveyed (the "New Principal Receivables") adjusted to
reflect such factors as the Bank and PFR mutually agree will result in a
Purchase Price determined to be the fair market value of such New
Principal Receivables.
(b) The Purchase Price to be paid by PFR with respect to the
Receivables shall be paid in cash.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1. Representations and Warranties of the Bank
Relating to the Bank. The Bank hereby represents and warrants to, and
agrees with, PFR as of the Closing Date and on each Addition Date, that:
(a) Organization and Good Standing. The Bank is a banking
corporation duly organized and validly existing in good standing under
the laws of the State of Illinois and has, in all material respects, full
power and authority to own its properties and conduct its business as
presently owned or conducted, and to execute, deliver and perform its
obligations under this Agreement.
(b) Due Qualification. The Bank is duly qualified to do
business and is in good standing as an Illinois banking corporation (or
is exempt from such requirements) and has obtained all necessary licenses
and approvals, in each jurisdiction which requires such qualification
except where the failure to so qualify or obtain licenses or approvals
would not (i) render any Account or any Receivable unenforceable by the
Bank, PFR, the Transferor or the Trustee or (ii) have a material adverse
effect on the Certificateholders.
(c) Due Authorization. The execution, delivery and
performance of this Agreement and any other document or instrument
delivered pursuant hereto, including any supplemental conveyance (such
other documents or instruments, collectively, the "Conveyance Papers"),
and the consummation of the transactions provided for in this Agreement
and the Conveyance Papers have been duly authorized by the Bank by all
necessary corporate action on the part of the Bank.
(d) No Conflict. The execution and delivery of this Agreement
and the Conveyance Papers by the Bank, the performance of the
transactions contemplated by this Agreement and the Conveyance Papers,
and the fulfillment of the terms of this Agreement and the Conveyance
Papers will not conflict with, violate or result in any breach of any of
the terms and provisions of, or constitute (with or without notice or
lapse of time or both) a default under, any indenture, contract,
agreement, mortgage, deed of trust, or other instrument to which the Bank
is a party or by which it or any of its properties are bound which would
have a material adverse effect on the Bank's ability to perform its
obligations hereunder.
(e) No Violation. The execution, delivery and performance of
this Agreement and the Conveyance Papers by the Bank and the fulfillment
of the terms contemplated herein and therein applicable to the Bank will
not conflict with or violate any Requirements of Law applicable to the
Bank in a manner which would have a material adverse effect on the Bank's
ability to perform its obligations hereunder.
(f) No Proceedings. There are no proceedings or
investigations pending or, to the best knowledge of the Bank, threatened
against the Bank, before any Governmental Authority (i) asserting the
invalidity of this Agreement or the Conveyance Papers, (ii) seeking to
prevent the consummation of any of the transactions contemplated by this
Agreement or the Conveyance Papers, (iii) seeking any determination or
ruling that, in the reasonable judgment of the Bank, would materially and
adversely affect the performance by the Bank of its obligations under
this Agreement or the Conveyance Papers, (iv) seeking any determination
or ruling that would materially and adversely affect the validity or
enforceability of this Agreement or the Conveyance Papers or (v) seeking
to affect adversely the income tax attributes of the Trust under the
United States federal or Delaware income tax systems.
(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 Bank in
connection with the execution and delivery by the Bank of this Agreement
and the Conveyance Papers and the performance of the transactions
contemplated by this Agreement or the Conveyance Papers by the Bank have
been duly obtained, effected or given and are in full force and effect.
The representations and warranties set forth in this Section
4.1 shall survive the transfer and assignment of the Receivables to PFR.
Upon discovery by the Bank or PFR of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall
give written notice to the other party within three Business Days
following such discovery.
Section 4.2. Representations and Warranties of the Bank
Relating to the Agreement and the Receivables.
(a) Representations and Warranties. The Bank hereby
represents and warrants to PFR as of the Closing Date and, with respect
to Additional Accounts, as of the related Addition Date that:
(i) this Agreement constitutes a legal, valid and binding
obligation of the Bank enforceable against the Bank in accordance
with its terms, except as such enforceability may be limited by
receivership, conservatorship and supervisory powers of bank
regulatory agencies generally, as well as by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally from time to time in effect or general
principles of equity;
(ii) each Transferred Receivable has been conveyed to PFR
free and clear of any Lien of any Person claiming through or under
the Bank or any of its other Affiliates (other than Liens permitted
under subsection 2.7(b) of the Pooling and Servicing Agreement);
(iii) all authorizations, consents, orders or approvals of or
registrations or declarations with any Governmental Authority
required to be obtained, effected or given by the Bank in
connection with the conveyance of Transferred Receivables to PFR
have been duly obtained, effected or given and are in full force
and effect;
(iv) this Agreement or, in the case of the Additional
Accounts, the related Supplemental Conveyance constitutes a valid
sale, transfer and assignment to PFR of all right, title and
interest of the Bank in the Transferred Receivables and the
proceeds thereof and the Interchange payable pursuant to this
Agreement and the Recoveries payable pursuant to this Agreement or,
if this Agreement does not constitute a sale of such property, it
constitutes a grant of a first priority perfected "security
interest" (as defined in the UCC) in such property to PFR, which,
in the case of existing Transferred Receivables and the proceeds
thereof and said Recoveries and Interchange, is enforceable upon
execution and delivery of this Agreement, or, with respect to then
existing Receivables in Additional Accounts, as of the applicable
Addition Date, and which will be enforceable with respect to such
Receivables hereafter and thereafter created and the proceeds
thereof upon such creation. Upon the filing of the financing
statements and, in the case of Receivables hereafter created and
the proceeds thereof, upon the creation thereof, PFR shall have a
first priority perfected security or ownership interest in such
property and proceeds;
(v) on the Addition Date, each related Additional Account
designated by the Bank to PFR is an Eligible Account;
(vi) on the applicable Addition Date, each Receivable
designated as an Eligible receivable by the Bank to PFR is an
Eligible Receivable; and
(vii) as of the date of the creation of any new Receivable,
each Receivable designated as an Eligible Receivable by the Bank to
PFR is an Eligible Receivable.
(b) Notice of Breach. The representations and warranties set
forth in this Section 4.2 shall survive the transfer and assignment of
the Receivables to PFR. Upon discovery by either the Bank or PFR of a
breach of any of the representations and warranties set forth in this
Section 4.2, the party discovering such breach shall give written notice
to the other party within three Business Days following such discovery;
provided that the failure to give notice within three Business Days does
not preclude subsequent notice. The Bank hereby acknowledges that PFR
intends to rely on the representations hereunder in connection with
representations made by PFR to secured parties, assignees or subsequent
transferees including but not limited to assignments made by PFR to the
Transferor pursuant to the Transferor Purchase Agreement.
(c) Representation and Warranty of the Bank as to
Information. The Bank hereby represents and warrants, as of each date on
which the file or list referred to in Section 2.1(c) is delivered to PFR,
that the information contained therein is true, complete and correct in
all material respects.
Section 4.3. Representations and Warranties of PFR. PFR
hereby represents and warrants to the Bank as of the Closing Date and,
with respect to Additional Accounts, as of the related Addition Date
that:
(a) Organization and Good Standing. PFR is a limited
liability company duly organized and validly existing and is in good
standing under the laws of the State of Delaware and has, in all material
respects, full power and authority to own its properties and conduct its
business as presently owned, conducted or contemplated by the Transaction
Documents and to execute, deliver and perform its obligations under this
Agreement and the Conveyance Papers.
(b) Due Authorization. The execution and delivery of this
Agreement and the Conveyance Papers and the consummation of the
transactions provided for in this Agreement and the Conveyance Papers
have been duly authorized by PFR by all necessary corporate action on the
part of PFR.
(c) No Conflict. The execution and delivery of this Agreement
and the Conveyance Papers by PFR, the performance of the transactions
contemplated by this Agreement and the Conveyance Papers, and the
fulfillment of the terms of this Agreement and the Conveyance Papers
applicable to PFR, will not 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
PFR is a party or by which it or any of its properties are bound.
(d) No Violation. The execution, delivery and performance of
this Agreement and the Conveyance Papers by PFR and the fulfillment of
the terms contemplated herein and therein applicable to PFR will not
conflict with or violate any Requirements of Law applicable to PFR.
(e) No Proceedings. There are no proceedings or
investigations pending or, to the best knowledge of PFR, threatened
against PFR, before any court, regulatory body, administrative agency, or
other tribunal or governmental instrumentality (i) asserting the
invalidity of this Agreement or the Conveyance Papers, (ii) seeking to
prevent the consummation of any of the transactions contemplated by this
Agreement or the Conveyance Papers, (iii) seeking any determination or
ruling that, in the reasonable judgment of PFR, would materially and
adversely affect the performance by PFR of its obligations under this
Agreement or the Conveyance Papers or (iv) seeking any determination or
ruling that would materially and adversely affect the validity or
enforceability of this Agreement or the Conveyance Papers.
(f) 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 PFR in connection
with the execution and delivery by PFR of this Agreement and the
Conveyance Papers and the performance of the transactions contemplated by
this Agreement and the Conveyance Papers have been duly obtained,
effected or given and are in full force and effect.
The representations and warranties set forth in this Section
4.3 shall survive the Conveyance of the Receivables to PFR. Upon
discovery by PFR or the Bank of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall
give prompt written notice to the other party.
Section 4.4. Limitation on Liability. The liability of the
Bank for any breach of any representation, and warranty, term or
condition of this Agreement shall be limited, in the absence of gross
negligence or willful misconduct by the Bank, to an amount which shall
not exceed with respect to any claim the amount actually recovered by the
Bank from Holdings (without recourse to any guaranty of Holdings'
obligations) with respect to such claim pursuant to the Assistance
Agreement.
ARTICLE V
COVENANTS
Section 5.1. Covenants of the Bank. The Bank hereby covenants
and agrees with PFR as follows:
(a) Receivables Not To Be Evidenced by Promissory Notes.
Except in connection with its enforcement or collection of an Account,
the Bank will take no action to cause any Receivable to be evidenced by
any instrument other than an instrument that, taken together with one or
more other writings, constitutes chattel paper (as such terms are defined
in the UCC).
(b) Security Interests. Except for the conveyances hereunder,
the Bank will not sell, pledge, assign or transfer to any other Person,
or take any other action inconsistent with PFR's ownership of the
Receivables or grant, create, incur, assume or suffer to exist any Lien
on, any Receivable, whether now existing or hereafter created, or any
interest therein, and the Bank shall not claim any ownership interest in
the Receivables and shall defend the right, title and interest of PFR in,
to and under the Receivables, whether now existing or hereafter created,
against all claims of third parties claiming through or under the Bank;
provided, however, that nothing in this section shall prevent or be
deemed to prohibit the Bank from suffering to exist upon any of the
Receivables any Liens for taxes if such taxes shall not at the time be
due and payable or if the Bank shall currently be contesting the validity
thereof in good faith by appropriate proceedings and shall have set aside
on its books adequate reserves with respect thereto.
(c) Notice of Liens. The Bank shall notify PFR promptly after
becoming aware of any Lien on any Receivable other than the conveyances
hereunder and under Liens arising through or granted by PFR or any
subsequent transferee.
(d) Interchange. Not later than 1:00 p.m., New York City
time, on each Business Day, the Bank shall pay or cause to be paid to
PFR, in immediately available funds, the amount of Interchange to be
included as Collections of Finance Charge Receivables in the Accounts for
such Business Day, which shall be an amount equal to (i) the product of
(a) the total amount of interchange fees collected by the Bank on the
prior Business Day, and (b) a fraction, the numerator of which is the
aggregate amount of cardholder sales charges (net of returns) which arose
on the prior Business Day with respect to the Accounts and the
denominator of which is the aggregate amount of cardholder sales charges
(net of returns) which arose on the prior Business Day with respect to
all revolving consumer credit card accounts (including the Accounts)
owned by the Bank, or (ii) if at any time the Bank cannot identify or
cause to be identified the amount of such Interchange, the amount
reasonably estimated by the Bank as the amount of such Interchange.
(e) Documentation of Transfer. The Bank shall undertake to
file the documents which would be necessary to perfect and maintain the
transfer of the Purchased Assets to PFR.
(f) Segregation of Accounts. The records and agreements
relating to the Accounts will be marked to evidence the sale or transfer
of the Receivables to PFR; provided, however, that the documents or
agreements relating to the Accounts and the Receivables need not be
segregated from documents or agreements relating to other credit card
accounts and receivables.
(g) Periodic Rate Finance Charges. (i) Except (x) as
otherwise required by any Requirements of Law or (y) as is deemed by the
Bank to be necessary in order for it to maintain its credit card business
or a program operated by such credit card business on a competitive basis
based on a good faith assessment by it of the nature of the competition
with respect to the credit card business or such program, it shall not at
any time take any action which would have the effect of reducing the
Portfolio Yield to a level that could be reasonably expected to cause any
Series to experience any Pay Out Event or Reinvestment Event based on the
insufficiency of the Portfolio Yield or any similar test and (ii) except
as otherwise required by any Requirements of Law, it shall not take any
action which would have the effect of reducing the Portfolio Yield to be
less than the highest Average Rate for any Group.
(h) Credit Card Agreements and Guidelines. Subject to
compliance with all Requirements of Law and paragraph (g) above, the Bank
may change the terms and provisions of the applicable Credit Card
Agreements or the applicable Credit Card Guidelines in any respect
(including the calculation of the amount or the timing of charge-offs and
the Periodic Rate Finance Charges to be assessed thereon).
Notwithstanding the above, unless required by Requirements of Law or as
permitted by Section 5.2(g), the Bank will take no action with respect to
the applicable Credit Card Agreements or the applicable Credit Card
Guidelines, which, at the time of such action, the Bank reasonably
believes will have a material adverse effect on PFR, the Transferor or
the Investor Certificateholders.
(i) Official Records. The Bank will maintain this Agreement
as part of its official records.
The Bank further covenants that it will not enter into any
amendments to this Agreement or enter into a new Receivables Purchase
Agreement unless the Rating Agency Condition has been satisfied.
ARTICLE VI
[RESERVED]
ARTICLE VII
[RESERVED]
ARTICLE VIII
TERM AND PURCHASE TERMINATION
Section 8.1. Term. This Agreement shall commence as of the
date of execution and delivery hereof and shall not terminate prior to
the termination of the Transferor Purchase Agreement as provided in
Article VIII of the Transferor Purchase Agreement.
Section 8.2. Purchase Termination. If the Bank shall
fail generally to, or admit in writing its inability to, pay its
debts as they become due; or if a proceeding shall have been
instituted in a court having jurisdiction in the premises seeking a
decree or order for relief in respect of the Bank in an involuntary
case under any Debtor Relief Law, or for the appointment of a
receiver, liquidator, assignee, trustee, custodian, sequestrator,
conservator or other similar official of the Bank or for any
substantial part of the Bank's property, or for the winding-up or
liquidation of the Bank's affairs and, if instituted against the
Bank, any such proceeding shall continue undismissed or unstayed
and in effect, for a period of 60 consecutive days, or any of the
actions sought in such proceeding shall occur; or if the Bank shall
commence a voluntary case under any Debtor Relief Law, or if the
Bank shall consent to the entry of an order for relief in an
involuntary case under any Debtor Relief Law, or consent to the
appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator, conservator or other
similar official of, or for, any substantial part of its property,
or any general assignment for the benefit of its creditors; or the
Bank or any subsidiary of the Bank shall have taken any corporate
action in furtherance of any of the foregoing actions (each an
"Insolvency Event") or, if an Insolvency Event (as defined in
Section 8.2 of the Transferor Purchase Agreement) shall have
occurred; then the Bank shall immediately cease to transfer
Principal Receivables to PFR and shall promptly give notice to PFR
of such Insolvency Event. Notwithstanding any cessation of the
transfer to PFR of additional Principal Receivables, Principal
Receivables transferred to PFR prior to the occurrence of such
Insolvency Event and Collections in respect of such Principal
Receivables and Finance Charge Receivables whenever created or
accrued in respect of such Principal Receivables, shall continue to
be property of PFR available for transfer by PFR to the Transferor
for transfer to the Trust pursuant to the Pooling and Servicing
Agreement.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1. Amendment. This Agreement and any Conveyance
Papers and the rights and obligations of the parties hereunder may not be
changed orally, but only by an instrument in writing signed by PFR and
the Bank in accordance with this Section 9.1. This Agreement and any
Conveyance Papers may be amended from time to time by PFR and the Bank
(i) to cure any ambiguity, (ii) to correct or supplement any provisions
herein which may be inconsistent with any other provisions herein or in
any such other Conveyance Papers, (iii) to add any other provisions with
respect to matters or questions arising under this Agreement or any
Conveyance Papers which shall not be inconsistent with the provisions of
this Agreement or any Conveyance Papers, (iv) to change or modify the
Purchase Price and (v) to change, modify, delete or add any other
obligation of the Bank or PFR; provided, however, that no amendment
pursuant to clause (iv) or (v) of this Section 9.1 shall be effective
unless the Bank and PFR have been notified in writing that the Rating
Agency Condition has been satisfied; provided, further, that such action
shall not (as evidenced by an Opinion of Counsel delivered to the
Transferor and any subsequent assignee of the Receivables by PFR or the
Transferor) adversely affect in any material respect the interests of the
Transferor or any such subsequent assignee of the Receivables, including
without limitation the Trustee or the Investor Certificateholders, unless
any such assignee, including without limitation, the Trustee shall
consent thereto. Any reconveyance executed in accordance with the
provisions hereof shall not be considered to be an amendment to this
Agreement. A copy of any amendment to this Agreement shall be sent to the
Rating Agency.
Section 9.2. Governing Law. THIS AGREEMENT AND THE CONVEYANCE
PAPERS SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE, 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.
Section 9.3. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given
if personally delivered at or mailed by registered mail, return receipt
requested, to (a) in the case of PFR, 900 Elkridge Landing Road, Suite
300, Linthicum, Maryland 21090, Attention: John R. Soderlund (facsimile
no. (410) 855-8599), (b) in the case of the Bank, 111 West Monroe Street,
Chicago, Illinois 60603, Attention: Paul V. Reagan (facsimile no. (312)
461- 3869; or, as to each party, at such other address as shall be
designated by such party in a written notice to each other party.
Section 9.4. Severability of Provisions. If any one or more
of the covenants, agreements, provisions or terms of this Agreement or
any Conveyance Paper shall for any reason whatsoever be held invalid,
then such covenants, agreements, provisions, or terms shall be deemed
severable from the remaining covenants, agreements, provisions, and terms
of this Agreement or any Conveyance Paper and shall in no way affect the
validity or enforceability of the other provisions of this Agreement or
of any Conveyance Paper.
Section 9.5. Assignment. Notwithstanding anything to the
contrary contained herein, other than PFR's assignment to the Transferor
and the Transferor's assignment to the Trustee, of all of their
respective rights in, to and under this Agreement to the extent such
rights relate to the Receivables purchased from PFR by the Transferor
pursuant to the Transferor Purchase Agreement, this Agreement and all
other Conveyance Papers may not be assigned by the parties hereto;
provided, however, that the Bank shall have the right to assign its
rights, title and interests, in, to and under this Agreement to (i) any
successor by merger assuming this Agreement or (ii) any affiliate owned
directly or indirectly by Holdings provided that each Rating Agency has
advised PFR and the Bank that the Rating Agency Condition has been
satisfied.
Section 9.6. Acknowledgment and Agreement of the Bank. By
execution below, the Bank expressly acknowledges and agrees that all of
PFR's rights, title, and interest in, to, and under this Agreement to the
extent such rights relate to Receivables transferred by PFR to the
Transferor, including, without limitation, all of PFR's right, title, and
interest in and to such Receivables, shall be assigned by PFR to the
Transferor and by the Transferor to the Trustee for the benefit of the
beneficiaries of the Trust, including the Certificateholders, and the
Bank consents to such assignments. The Bank further agrees that
notwithstanding any claim, counterclaim, right or setoff or defense which
it may have against PFR, due to a breach by PFR of this Agreement or for
any other reason, and notwithstanding the bankruptcy of PFR or any other
event whatsoever, the Bank's sole remedy against PFR shall be a claim
against PFR for money damages and, then only to the extent of funds
received by PFR pursuant to the Transferor Purchase Agreement, and in no
event shall the Bank assert any claim on or any interest in the
Receivables or any proceeds thereof or take any action which would reduce
or delay receipt by Certificateholders of collections with respect to the
Receivables. Additionally, the Bank agrees for the benefit of the
Transferor and the Trustee that any amounts payable by the Bank to PFR
hereunder which are to be paid by PFR to the Transferor and by the
Transferor to the Trustee for the benefit of the Certificateholders shall
be paid by the Bank on behalf of PFR and the Transferor, directly to the
Trustee.
Section 9.7. Further Assurances. PFR and the Bank agree to do
and perform, from time to time, any and all acts and to execute any and
all further instruments required or reasonably requested by the other
party more fully to effect the purposes of this Agreement and the
Conveyance Papers including, without limitation, the execution of any
financing statements or continuation statements or equivalent documents
relating to the Receivables for filing under the provisions of the UCC or
other law of any applicable jurisdiction.
Section 9.8. No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of PFR or the Bank, any
right, remedy, power or privilege hereunder, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege.
Subject to Sections 4.4 and 9.6, the rights, remedies, powers and
privileges herein provided are cumulative and not exhaustive of any
rights, remedies, powers and privileges provided by law.
Section 9.9. Counterparts. This Agreement and all Conveyance
Papers may be executed in two or more counterparts (and by different
parties on separate counterparts), each of which shall be an original,
but all of which together shall constitute one and the same instrument.
Section 9.10. Binding; Third-Party Beneficiaries. This
Agreement and the Conveyance Papers will inure to the benefit of and be
binding upon the parties hereto and their respective successors and
permitted assigns. The Transferor and the Trustee shall be considered
third-party beneficiaries of this Agreement.
Section 9.11. Merger and Integration. Except as specifically
stated otherwise herein, this Agreement and the Conveyance Papers set
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 and the Conveyance Papers. This Agreement
and the Conveyance Papers may not be modified, amended, waived or
supplemented except as provided herein.
Section 9.12. Headings. The headings are for purposes of
reference only and shall not otherwise affect the meaning or
interpretation of any provision hereof.
Section 9.13. Schedules and Exhibits. The schedules and
exhibits attached hereto and referred to herein shall constitute a part
of this Agreement and are incorporated into this Agreement for all
purposes.
Section 9.14. Survival. All representations, warranties and
agreements contained in this Agreement shall remain operative and in full
force and effect and shall survive any subsequent conveyance of the
Receivables by PFR. The provisions of Section 4.4 shall survive the
termination of this Agreement.
Section 9.15. Nonpetition Covenant. The Bank hereby covenants
and agrees that prior to the date which is one year and one day after the
payment in full of all Investor Certificates of all Series, it will not
institute against or join any other Person in instituting against PFR any
bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceeding under the laws of the United
States or any state of the United States.
Section 9.16. Assignment and Assumption Agreement. The
parties hereby acknowledge and agree that the Conveyance set forth in
Section 2.1 and the conveyances of Receivables existing in the Accounts
on the Closing Date pursuant to Section I.2 and II.2 of the Assignment
and Assumption Agreement, dated as of the date hereof, between the Bank
and PFR (the "Assignment and Assumption Agreement") are intended to be
part of a single agreement, and in order to reflect such intent, such
Sections I.2 and II.2 (together with the definitions of any defined terms
used therein) are hereby incorporated herein by reference as if fully set
forth herein. The parties hereto agree that this Agreement and the
Assignment and Assumption Agreement shall not be separately assigned,
pledged, conveyed or otherwise transferred. It is the intention of the
parties hereto that the conveyance set forth in this Agreement and the
conveyance set forth in the Assignment and Assumption Agreement be
interpreted as a single integrated and interdependent whole and that the
obligations of the parties with respect to either conveyance be dependent
upon the other such conveyance.
IN WITNESS WHEREOF, the undersigned have caused this
Receivables Purchase Agreement to be duly executed by their respective
officers as of the day and year first above written.
HARRIS TRUST AND SAVINGS BANK
By: /s/ Paul V. Reagan
-------------------------------
Name: Paul V. Reagan
Title: Senior Vice President
PARTNERS FIRST RECEIVABLES, LLC
By: /s/ Harry G. Pappas
-------------------------------
Name: Harry G. Pappas
Title: Chief Financial Officer
Schedule I
LIST OF ACCOUNTS
DEEMED INCORPORATED BY REFERENCE
ASSIGNMENT AND ASSUMPTION AGREEMENT dated January 29, 1998,
between Partners First Receivables, LLC, a Delaware limited liability
company (the "Company"), and Harris Trust and Savings Bank, an Illinois
banking corporation (the "Bank").
WHEREAS, the Company and the Bank have entered into a certain
Receivables Purchase and Sale Agreement, dated as of January 29, 1998
(the "Receivables Purchase Agreement");
WHEREAS, the Receivables Purchase Agreement contemplates that
on the date hereof (a) the Bank shall assign and transfer to the Company
all of its right, title and interest in, to and under the Accounts
Receivables (other than the Excluded Accounts and the Excluded Assets)
(as defined in the Receivables Purchase Agreement) and (b) the Company
shall assume the Assumed Obligations (as defined in the Receivables
Purchase Agreement).
WHEREAS, the Company and the Bank have entered into a certain
Overdue Receivables Purchase and Sale Agreement, dated as of January 29,
1998 (the "Overdue Receivables Purchase Agreement" and, together with the
Receivables Purchase Agreement, the "Closing Date Receivables Purchase
Agreements");
WHEREAS, the Overdue Receivables Purchase Agreement
contemplates that on the date hereof (a) the Bank shall assign and
transfer to the Company all of its right, title and interest in, to and
under the Overdue Receivables (other than the Excluded Accounts and
Excluded Assets) (as defined in the Overdue Receivables Purchase
Agreement) and (b) the Company shall assume the Assumed Obligations (as
defined in the Overdue Receivables Purchase Agreement).
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
Transfer of Accounts Receivable
1. Defined Terms. The capitalized terms used in this Article
I but not otherwise defined in this Agreement shall have the respective
meanings assigned to them in the Receivables Purchase Agreement.
2. Assignment of the Accounts Receivable. As of the date
hereof, the Bank hereby sells, assigns, transfers, sets over, and
otherwise conveys to the Company, all of the Bank's right, title and
interest in, to and under all the Accounts Receivable (other than the
Excluded Accounts and the Excluded Assets).
3. Assumption of the Assumed Obligations. Subject to the
terms of the Receivables Purchase Agreement, as of the date hereof, the
Company hereby assumes and agrees to pay, perform, fulfill and discharge
the Assumed Obligations from and after the date hereof.
4. Intent of Parties. The parties hereto intend that the
conveyance of the Bank's right, title and interest in and to the Accounts
Receivable shall constitute an absolute sale, conveying good title free
and clear of any liens, claims, encumbrances or rights of others from the
Bank to the Company and that the Accounts Receivable shall not be a part
of the Bank's estate in the event of the insolvency of the Bank or a
conservatorship, receivership or similar event with respect to the Bank.
It is the intention of the parties hereto that the arrangements with
respect to the Accounts Receivable shall constitute a purchase and sale
of such Accounts Receivable and not a loan. In the event, however, that
it were to be determined that the transactions evidenced hereby
constitute a loan and not a purchase and sale, it is the intention of the
parties hereto that this Agreement shall constitute a security agreement
under applicable law, and that the Bank shall be deemed to have granted
and does hereby grant to the Company a first priority perfected security
interest, in all of the Bank's right, title and interest, whether now
owned or hereafter acquired, in, to and under the Accounts Receivable to
secure the rights of the Company hereunder and the obligations of the
Bank hereunder.
ARTICLE II
Transfer of Overdue Receivables
1. Defined Terms. The capitalized terms used in this Article
II but not otherwise defined in this Agreement shall have the respective
meanings assigned to them in the Overdue Receivables Purchase Agreement.
2. Assignment of the Overdue Receivables. As of the date
hereof, the Bank hereby sells, assigns, transfers, sets over and
otherwise conveys to the Company, all of the Bank's right, title and
interest in, to and under all the Overdue Receivables (other than the
Excluded Accounts and the Excluded Assets).
3. Assumption of the Assumed Obligations. Subject to the
terms of the Overdue Receivables Purchase Agreement, as of the date
hereof, the Company hereby assumes and agrees to pay, perform, fulfill
and discharge the Assumed Obligations from and after the date hereof.
4. Intent of Parties. The parties hereto intend that the
conveyance of the Bank's right, title and interest in and to the Overdue
Receivables shall constitute an absolute sale, conveying good title free
and clear of any liens, claims, encumbrances or rights of others from the
Bank to the Company and that the Overdue Receivables shall not be a part
of the Bank's estate in the event of the insolvency of the Bank or a
conservatorship, receivership or similar event with respect to the Bank.
It is the intention of the parties hereto that the arrangements with
respect to the Overdue Receivables shall constitute a purchase and sale
of such Overdue Receivables and not a loan. In the event, however, that
it were to be determined that the transactions evidenced hereby
constitute a loan and not a purchase and sale, it is the intention of the
parties hereto that this Agreement shall constitute a security agreement
under applicable law, and that the Bank shall be deemed to have granted
and does hereby grant to the Company a first priority perfected security
interest, in all of the Bank's right, title and interest, whether now
owned or hereafter acquired, in, to and under the Overdue Receivables to
secure the rights of the Company hereunder and the obligations of the
Bank hereunder.
ARTICLE III
Representations and Warranties
1. Defined Terms. The capitalized terms used in this Article
III but not otherwise specifically defined in this Agreement (without
reference to any other agreement) shall have the respective meanings
assigned to them in the Receivables Purchase Agreement, dated as of
January 29, 1998, between the Bank and the Company, relating to
Receivables generated after the date hereof.
2. Representations and Warranties of the Bank Relating to the
Bank. The Bank hereby represents and warrants to, and agrees with, the
Company as of the Closing Date that:
(a) Organization and Good Standing. The Bank is a banking
corporation duly organized and validly existing in good standing under
the laws of the State of Illinois and has, in all material respects, full
power and authority to own its properties and conduct its business as
presently owned or conducted, and to execute, deliver and perform its
obligations under this Agreement and the Closing Date Receivables
Purchase Agreements.
(b) Due Qualification. The Bank is duly qualified to do
business and is in good standing as a national banking association (or is
exempt from such requirements) and has obtained all necessary licenses
and approvals, in each jurisdiction which requires such qualification
except where the failure to so qualify or obtain licenses or approvals
would not (i) render any Account or any Receivable unenforceable by the
Bank, the Company, the Transferor or the Trustee or (ii) have a material
adverse effect on the Certificateholders.
(c) Due Authorization. The execution, delivery and
performance of this Agreement and the Closing Date Receivables Purchase
Agreements and any other document or instrument delivered pursuant hereto
or thereto, including any supplemental conveyance (such other documents
or instruments, collectively, the "Conveyance Papers"), and the
consummation of the transactions provided for in this Agreement, the
Closing Date Receivables Purchase Agreements and the Conveyance Papers
have been duly authorized by the Bank by all necessary corporate action
on the part of the Bank.
(d) No Conflict. The execution and delivery of this
Agreement, the Closing Date Receivables Purchase Agreements and the
Conveyance Papers by the Bank, the performance of the transactions
contemplated by this Agreement, the Closing Date Receivables Purchase
Agreements and the Conveyance Papers, and the fulfilment of the terms of
this Agreement, the Closing Date Receivables Purchase Agreements and the
Conveyance Papers will not conflict with, violate or result in any breach
of any of the terms and provisions of, or constitute (with or without
notice or lapse of time or both) a default under, any indenture,
contract, agreement, mortgage, deed of trust, or other instrument to
which the Bank is a party or by which it or any of its properties are
bound which would have a material adverse effect on the Bank's ability to
perform its obligations hereunder or thereunder.
(e) No Violation. The execution, delivery and performance of
this Agreement, the Closing Date Receivables Purchase Agreements and the
Conveyance Papers by the Bank and the fulfillment of the terms
contemplated herein and therein applicable to the Bank will not conflict
with or violate any Requirements of Law applicable to the Bank in a
manner which would have a material adverse effect on the Bank's ability
to perform its obligation hereunder or thereunder.
(f) No Proceedings. There are no proceedings or
investigations pending or, to the best knowledge of the Bank, threatened
against the Bank, before any Governmental Authority (i) asserting the
invalidity of this Agreement, the Closing Date Receivables Purchase
Agreements or the Conveyance Papers, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement,
the Closing Date Receivables Purchase Agreements or the Conveyance
Papers, (iii) seeking any determination or ruling that, in the reasonable
judgment of the Bank, would materially and aversely affect the
performance by the Bank of its obligations under this Agreement, the
Closing Date Receivables Purchase Agreements or the Conveyance Papers,
(iv) seeking any determination or ruling that would materially and
adversely affect the validity or enforceability of this Agreement, the
Closing Date Receivables Purchase Agreements or the Conveyance Papers or
(v) seeking to affect adversely the income tax attributes of the Trust
under the United States federal or Delaware income tax systems.
(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 Bank in
connection with the execution and delivery by the Bank of this Agreement,
the Closing Date Receivables Purchase Agreements and the Conveyance
Papers and the performance of the transactions contemplated by this
Agreement, the Closing Date Receivables Purchase Agreements or the
Conveyance Papers by the Bank have been duly obtained, effected or given
and are in full force and effect.
The representations and warranties set forth in this Article
III, Section 2 shall survive the transfer and assignment of the
Receivables to the Company. Upon discovery by the Bank or the Company of
a breach of any of the foregoing representations and warranties, the
party discovering such breach shall given written notice to the other
party within three (3) Business Days following such discovery.
3. Representations and Warranties of the Bank Relating to the
Agreement and the Receivables. The Bank hereby represents and warrants to
the Company as of the Closing Date that:
(i) each of this Agreement and the Closing Date Receivables
Purchase Agreements constitutes a legal, valid and binding obligation of
the Bank enforceable against the Bank in accordance with its terms,
except as such enforceability may be limited by receivership,
conservatorship and supervisory powers of bank regulatory agencies
generally, as well as by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally from time to time in effect or general principles of
equity;
(ii) as of the Initial Cut-Off Date, Schedule 2.1 to each of
the Closing Date Receivables Purchase Agreements as supplemented to such
date, contains an accurate and complete listing in all material respects
of all the Eligible Accounts as of the Initial Cut-Off Date and the
information contained therein with respect to the identity of such
Eligible Accounts and the Receivables existing thereunder is true and
correct in all material respects as of the Initial Cut-Off Date and as of
the Closing Date, the aggregate amount of Receivables in all the Initial
Accounts was $704,635,083.00, of which $694,394,931.00 were Principal
Receivables;
(iii) each Receivable has been conveyed to the Company, free
and clear of any Lien of any Person claiming through or under the Bank or
any of its other Affiliates (other than Liens permitted under subsection
2.7(b) of the Pooling and Servicing Agreement);
(iv) all authorizations, consents, orders or approvals or
registrations or declarations with any Governmental Authority required to
be obtained, effected or given by the Bank in connection with the
conveyance of Receivables to the Company have been duly obtained,
effected or given and are in full force and effect;
(v) each of the Closing Date Receivables Purchase Agreements
constitutes a valid sale, transfer and assignment to the Company of all
right, title and interest of the Bank in the Receivables and the proceeds
thereof and the Interchange payable pursuant to the Closing Date
Receivables Purchase Agreements and the Accounts Recovery payable
pursuant to the Closing Date Receivables Purchase Agreements or, if
either of the Closing Date Receivables Purchase Agreements does not
constitute a sale of such property, it constitutes a grant of a first
priority perfected "security interest" (as defined in the UCC) in such
property to the Company, which, in the case of existing Receivables and
the proceeds thereof and said Recoveries and Interchange, is enforceable
upon execution and delivery of the appropriate Closing Date Receivables
Purchase Agreement, and which will be enforceable with respect to such
Receivables hereafter and thereafter created and the proceeds thereof
upon such creation. Upon the filing of the financing statements and, in
the case of Receivables hereafter created and the proceeds thereof, upon
the creation thereof, the Company shall have a first priority perfected
security or ownership interest in such property and proceeds;
(vi) on the Initial Cut-Off Date, each Account designated as
an Eligible Account on Schedule I to each of the Closing Date Receivables
Purchase Agreements is an Eligible Account;
(vii) on the Initial Cut-Off Date, each Receivable then
existing and designated as an Eligible Receivable on Schedule I to each
of the Closing Date Receivable Purchase Agreements is an Eligible
Receivable; and
(viii) no Insolvency Event with respect to the Bank has
occurred nor has the transfer of the Receivables arising in the Accounts
to the Company been made in contemplation of the occurrence thereof.
4. The representations and warranties set forth in this
Article III, Section 3 shall survive the transfer and assignment of the
Receivables to the Company. Upon discovery by either the Bank or the
Company of a breach of any of the representations and warranties set
forth in this Article III, Section 3, the party discovering such breach
shall give written notice to the other party within three (3) Business
Days following such discovery; provided that the failure to give notice
within three (3) Business Days does not preclude subsequent notice. The
Bank hereby acknowledges that the Company intends to rely on the
representations hereunder in connection with the representations made by
the Company to secured parties, assignees or subsequent transferees
including but not limited to assignments made by the Company to the
Transferor pursuant to the Transferor Purchase Agreement.
5. Nonpetition Covenant. The Bank hereby covenants and agrees
that prior to the date which is one year and one day after the payment in
full of all Investor Certificates of all Series, it will not institute
against or join any other person in instituting against the Company any
bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceeding under the laws of the United
States or any state of the United States.
ARTICLE IV
Miscellaneous
1. Closing Date Receivables Purchase Agreements. This
Agreement has been executed and delivered pursuant to the Closing Date
Receivables Purchase Agreements and is subject to the provisions of
Article IX thereof (other than Section 9.6 thereof), which are hereby
incorporated herein; provided, however that for purposes of this
Agreement references to "Agreement" under such Article IX shall be deemed
to mean this Agreement.
2. Interpretation. None of the terms and provisions contained
herein shall be deemed in any manner to amend, modify, revise or
otherwise change or supersede any of the terms or provisions of the
Closing Date Receivables Purchase Agreements.
[SIGNATURE PAGE TO FOLLOW]
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by a duly authorized officer of each party hereto as of the
date first above written.
PARTNERS FIRST RECEIVABLES, LLC
By:/s/ John R. Soderlun
___________________________________
Name: John R. Soderlund
Title: President and Chief
Executive Officer
HARRIS TRUST AND SAVINGS BANK
By: /s/ Kathleen M. Deane
___________________________________
Name: Kathleen M. Deane
Title: Vice President
EXECUTION COPY
MASTER SERVICES AGREEMENT
BETWEEN
FIRST DATA RESOURCES INC.,
PARTNERS FIRST HOLDINGS, LLC
AND
PARTNERS FIRST RECEIVABLES, LLC
JANUARY 29, 1998
TABLE OF CONTENTS
Page
Article 1
Definitions................................................................ 1
Article 2
Services
2.1 Services............................................................. 8
2.2 Communication Links.................................................. 9
2.3 Harris Trust and Savings Bank Conversion............................. 9
2.4 Compliance With Laws................................................. 10
2.5 Relationship Management; Programming Support......................... 11
Article 3
Exclusivity and Execution by Clients
3.1 Sole and Exclusive Provider.......................................... 11
3.2 Execution of Client Supplements by Clients........................... 12
Article 4
Payment for Services
4.1 Fees and Charges..................................................... 13
4.2 Harris Trust and Savings Bank Interim Pricing........................ 13
Article 5
Indemnification
5.1 Customer's Indemnification........................................... 13
5.2 FDR's Indemnification................................................ 14
5.3 Claims Period........................................................ 15
5.4 Certain Procedures Regarding Third-Party Claims...................... 15
5.5 Exclusive Remedy..................................................... 17
Article 6
Limitations on Liability
6.1 Annual Limit on Liability............................................ 17
6.2 No Special Damages................................................... 19
Article 7
Disclaimer of Warranties................................................... 19
Article 8
Term of Agreement.......................................................... 20
Article 9
Termination
9.1 Termination by FDR................................................... 20
9.2 Termination by Customer.............................................. 20
9.3 Effect of Termination................................................ 21
9.4 Payments Upon Termination............................................ 22
9.5 Deconversion Assistance.............................................. 22
9.6 Partial Termination of Services...................................... 23
Article 10
Confidential Nature of Data
10.1 Customer's Proprietary Information................................... 24
10.2 FDR's Proprietary Information........................................ 25
10.3 Confidentiality of Agreement......................................... 25
10.4 Confidentiality...................................................... 25
10.5 Release of Information............................................... 26
10.6 Exclusions........................................................... 26
10.7 Remedy............................................................... 27
Article 11
Representations, Warranties and Covenants
11.1 FDR's Representations and Warranties................................. 27
11.2 Covenants of FDR..................................................... 28
11.3 Customer's Representations and Warranties............................ 28
11.4 Covenant of Customer................................................. 29
Article 12
Service Performance........................................................ 29
Article 13
General
13.1 Assignment........................................................... 29
13.2 Relationship of Parties.............................................. 29
13.3 Business Continuity Plan............................................. 29
13.4 State Law............................................................ 30
13.5 Notice............................................................... 30
13.6 Headings............................................................. 31
13.7 Waiver............................................................... 31
13.8 Force Majeure and Restricted Performance............................. 31
13.9 Severability......................................................... 32
13.10 Audit............................................................... 32
13.11 Risk of Loss........................................................ 33
13.12 Equal Employment Opportunity........................................ 33
13.13 Entire Agreement.................................................... 33
13.14 Informal Dispute Resolution......................................... 33
13.15 Arbitration......................................................... 34
13.16 Permissible Legal Proceeding........................................ 35
13.17 FDR Insurance Policies.............................................. 35
13.18 Publicity........................................................... 36
13.19 Minority and Women-Owned Business Enterprises....................... 36
13.20 Third Party Beneficiary............................................. 36
13.21 Several Liability................................................... 36
13.22 PF Receivables...................................................... 36
Exhibits
"A" - Services
"B" - Payment and Term
"C" - Form of Client Supplement
"D" - Performance Standards
"E" - Insurance Coverage Summary
"F" - Interim Pricing
"G" - Form of Agency Designation Agreement
"H" - Additional Cardholder Support Services
"I" - Form of PF Bank Client Supplement
MASTER SERVICES AGREEMENT
This Master Services Agreement dated as of January 29, 1998, is
between Partners First Holdings, LLC, a Delaware limited liability
company ("Customer"), Partners First Receivables, LLC, a Delaware limited
liability company and First Data Resources Inc., 7302 Pacific Street,
Omaha, Nebraska 68114 ("FDR").
RECITALS
A. Customer and Clients desire to obtain data processing and other
related services from FDR in connection with their respective Transaction
Card businesses in the United States.
B. FDR is willing to perform data processing and other related
services for the Transaction Card businesses in accordance with the terms
and conditions of this Agreement, including the acknowledgement of
Customer and Clients that FDR is acting solely as an agent in performing
the settlement functions and that FDR has no obligation to supply or
advance funds for settlement purposes.
In consideration of the foregoing premises and of the mutual
covenants and conditions hereinafter set forth, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE 1
DEFINITIONS
The following definitions apply to the terms set forth below when
used in this Agreement:
"Active Account" means, for any month of determination, a
Cardholder Account with a positive or negative balance at the end of such
month of determination.
"Affiliate" means, with respect to any Entity, another Entity
which, at the time in question, directly or indirectly, owns or controls,
is owned or controlled by, or is under common ownership or common control
with the first Entity. As used herein, "control" means the power to
direct the management or affairs of an Entity and "ownership" means the
beneficial ownership of more than fifty percent (50%) of the equity
securities of the Entity. Notwithstanding the foregoing, for purposes of
this Agreement (including the Supplements hereto) neither Bank of
Montreal, BankBoston Corporation nor any of their respective subsidiaries
shall be deemed to be Affiliates of Customer or any of its subsidiaries.
"Agency Agreement" is defined in Section 3.2(a) of
this Agreement.
"Agreement" shall mean this Master Services Agreement,
together with Exhibits "A", "B", "C", "D", "E", "F", "G", "H" and "I"
attached hereto, each executed Client Supplement and that certain letter
agreement by and between Customer and FDR of even date herewith, as any
or all of the foregoing may be amended from time to time in accordance
with the terms herein.
"Annual Limit" is defined in Section 6.1(a) of this
Agreement.
"Balance Sheet Expenses" means the unamortized portion of any
capital costs incurred by FDR in connection with facilities shut down
costs related to the facility acquired pursuant to that certain Harris
Credit Card Operations Facility Purchase Agreement dated as of January
29, 1998, by and between FDR and Harris Trust and Savings Bank, and
signing bonuses or conversions related to this Agreement. For purposes of
this definition, facilities shut down costs will only be included to the
extent that said facility is vacated prior to June 30, 1999.
"BankBoston Portfolio" means the cardholder portfolio for
which FDR is providing services pursuant to that certain Service
Agreement between FDR and BankBoston, N.A. (f/k/a The First National Bank
of Boston) dated as of June 22, 1995.
"Business Continuity Plan" is defined in Section 13.3
of this Agreement.
"Business Day" means, with respect to Exhibit "D", the
definition in Exhibit "D"; and with respect to the rest of this Agreement
and all exhibits other than Exhibit "D", any calendar day other than
Saturday, Sunday, those national holidays then currently recognized by
Customer and FDR Holidays.
"Cardholder" means an individual who has a Cardholder
Account with an Issuer.
"Cardholder Account" means an arrangement between an
individual and an Issuer which provides that the individual may use one
or more Transaction Cards issued by the Issuer.
"Cardholder Support Services" means the services identified
as such in Section II of Exhibit "A" to this Agreement.
"cc:Mail Software" is defined in Section II-f of
Exhibit "A" to this Agreement.
"Clearing Banks" mean BankBoston (NH), National Association
and Harris Trust and Savings Bank, each as holder of certain credit card
accounts subject to the right of Customer to direct the transfer of such
accounts to a designee of Customer.
"Client" means a client of Customer domiciled in the United
States which (i) acts as an Issuer in the United States at any time
during the Term, (ii) has a currently effective written agreement with
Customer pursuant to which Customer manages the Cardholder Accounts owned
by such client and (iii) has entered into a Client Supplement with FDR
and Customer.
"Client Supplement" or "Supplement" shall mean an agreement
substantially in the form of Exhibit "C" which is executed by FDR,
Customer and a Client.
"Closing Date" means the date of the closing under that
certain Master Agreement for the Formation of a Limited Liability
Company, dated as of September 2, 1997 among BankBoston Corporation, a
Massachusetts corporation, Bankmont Financial Corp., a Delaware
corporation, Harris Trust and Savings Bank, an Illinois banking
corporation and First Annapolis Consulting, Inc., a Maryland corporation.
"Committed Conversion Date" means the date set for the
Conversion by the Conversion Change Board following completion and
finalization of the Conversion Plan, which date shall not in any event be
later than June 30, 1998.
"Conversion" means the conversion of data relating to the
Customer's Accounts of Harris Trust and Savings Bank (other than secured
card accounts) to the FDR System, and the services required in
preparation for such conversion.
"Conversion Change Board" means the group of FDR and Customer
representatives charged with approving changes to the Conversion Plan.
"Conversion Plan" means the written plan for accomplishing
the Conversion as prepared by FDR and agreed to by Customer.
"Conversion Tapes" means the cardholder master file tapes and
supporting records of Harris Trust and Savings Bank which are required to
complete the Conversion.
"Customer's Accounts" means the Cardholder Accounts of
Customer or any Clients, as the case may be, which are subject to this
Agreement or the applicable Client Supplement.
"Customer's Credit Card Business" means the business of
Customer and Clients in the United States relating to the Customer's
Accounts. For purposes of this Agreement, the term Customer's Credit Card
Business shall not include any activities of Customer or Clients pursuant
to arrangements with Merchants to obtain Transaction Card Tickets from
the Merchants and present such tickets through an Interchange to an
Issuer.
"Customer's Proprietary Information" is defined in
Section 10.1 of this Agreement.
"Deconversion" means, in connection with the termination of
this Agreement or a Supplement or a partial termination pursuant to
Section 9.6, the removal of information concerning the affected
Customer's Accounts from the FDR System.
"Dispute" is defined in Section 13.14 of this Agreement.
"Disputed Amount" is defined in Section I-c of
Exhibit "B" to this Agreement.
"Disputing Parties" is defined in Section 13.14 of
this Agreement.
"Effective Date of Termination" is defined in Section 9.3 of
this Agreement.
"Entity" means a corporation, partnership, sole
proprietorship, joint venture, limited liability company or other form of
organization.
"Equasion APS" is defined in Section II-g of Exhibit "A" to
this Agreement.
"Exclusive Services" means all those services identified with
an asterisk in Section V of Exhibit "B" to this Agreement. No asterisk
anywhere in this Agreement or in any exhibit hereto (other than in
Section V of Exhibit "B") shall have any effect for purposes of this
definition.
"Expected Processing Fees" is defined in Section IX of
Exhibit "B" to this Agreement.
"FDR Hardware or Software" is defined in Section 11.3(f) of
this Agreement.
"FDR Holidays" is defined in Section IV of Exhibit "A"
to this Agreement.
"FDR's Proprietary Information" is defined in Section 10.2 of
this Agreement.
"FDR System" means the computer equipment, computer software
and related equipment and documentation used at any time and from time to
time by FDR to provide the services contemplated by this Agreement.
"Indemnified Party" is defined in Section 5.3 of this
Agreement.
"Indemnifying Party" is defined in Section 5.3 of this
Agreement.
"Infosight Services" is defined in Section II-e of
Exhibit "A" to this Agreement.
"Infosight Software" is defined in Section II-e of Exhibit
"A" to this Agreement.
"Initial Processing Year" is defined in Section 6.1(a)
of this Agreement.
"Initial Year Processing Fees" is defined in
Section 6.1(a) of this Agreement.
"Inquiry" is defined in Section I-c of Exhibit "B" to
this Agreement.
"Insolvency Event" occurs, with respect to any party,
when such party:
(i) is dissolved, becomes insolvent, generally fails to pay
or admits in writing its inability generally to pay its debts as
they become due;
(ii) makes a general assignment, arrangement, or composition
agreement with or for the benefit of its creditors; or
(iii) files a petition in bankruptcy or institutes any action
under federal or state law for the relief of debtors or seeks or
consents to the appointment of an administrator, receiver,
custodian, or similar official for the wind up of its business (or
has such a petition or action filed against it and such petition,
action or appointment is not dismissed or stayed within sixty (60)
days).
"Interchange" means the contractual agreements, rules,
regulations and procedures governing the relationships between, or the
actions in accordance with the contracts, agreements, rules, regulations
and procedures by, any two or more Entities in connection with the
Interchange Settlement.
"Interchange Settlement" means the process by which FDR, on
behalf of either or both of Customer or Clients, (a) initiates payment
for MasterCard and VISA Transaction Card Tickets presented by Acquirers
(as such term is defined in MasterCard and VISA regulations) to Customer
and Clients, (b) receives payment for MasterCard and VISA Transaction
Card Tickets presented by Customer and Clients to Issuers, and (c) remits
and receives payments for chargebacks and other Interchange fees and
expenses of or payable by Customer or Clients.
"Interim Processing Fees" is defined in Exhibit "F" to
this Agreement.
"Interim Processing Services" is defined in
Exhibit "F" to this Agreement.
"Issuer" means an Entity that has a Cardholder Account
with a Cardholder.
"Issuer's Clearinghouse Services" is defined in
Section II-c of Exhibit "A" to this Agreement.
"Laws" means any and all United States federal, state and
local laws, regulations, rules, ordinances and other binding governmental
requirements and judicial or administrative orders.
"Losses" means any and all liabilities, losses, damages,
claims, assessments, fines, penalties, costs, fees and expenses of every
kind, nature or description imposed or incurred in connection with this
Agreement (including, but not limited to, interest which may be imposed
in connection therewith, costs of and amounts paid in satisfaction of any
judgments, settlements, orders, awards, decrees or equitable relief,
reasonable fees and disbursements of counsel, consultants and expert
witnesses, and reasonable costs and expenses, including fees and
disbursements of counsel, incurred in enforcing any right of
indemnification against either party or with respect to any appeal).
Without limiting the generality of the foregoing, "Losses" shall include
any and all costs and expenses associated with any governmental
investigation, enforcement or other governmental action, or
administrative agency or judicial proceeding and all restitution,
reimbursement and other damages resulting therefrom.
"Mailboxes" is defined in Section II-f of Exhibit "A"
to this Agreement.
"MasterCard" means MasterCard International Incorporated or
its successors or assigns.
"Merchant" means an Entity that has the right to acquire or
otherwise acquires a Transaction Card Ticket as payment for goods,
services, or otherwise.
"Minimum Processing Fees" is defined in Section I-f of
Exhibit "B" to this Agreement.
"Old Year" is defined in Section I-a of Exhibit "B" to
this Agreement.
"Original Term" is defined in Section III-a of Exhibit "B" to
this Agreement.
"PC Access Software" is defined in Section III of Exhibit "A"
to this Agreement.
"PC Remote Access Services" is defined in Section II-d of
Exhibit "A" to this Agreement.
"PF Bank" means a national banking association or any other
type of regulated financial institution that can be a member of VISA or
MasterCard to be formed as a wholly owned subsidiary of Customer and
which shall, at the direction of Customer, hold Cardholder Accounts.
"PF Receivables" means Partners First Receivables, LLC.
"Procedures Manual" is defined in Section I-b of
Exhibit "A" to this Agreement.
"Processing Fees" means all fees and charges incurred for
services performed at the prices set forth in Exhibit "B", as adjusted
from time to time by mutual agreement of FDR and Customer consistent with
this Agreement, with the exception of Special Fees and specifically
excluding all charges for taxes and interest.
"Processing Quarter" is defined in Section III-a of
Exhibit "B" to this Agreement.
"Processing Quarter 1" is defined in Section III-a of
Exhibit "B" to this Agreement.
"Processing Year" is defined in Section III-a of
Exhibit "B" to this Agreement.
"Processing Year 1" is defined in Section III-a of
Exhibit "B" to this Agreement.
"Prohibited Card" is defined in Section III-c of
Exhibit "B" to this Agreement.
"Recovery Services Management" is defined in
Section II-i(a) of Exhibit "A" to this Agreement.
"Renewal Term" is defined in Section III-b of
Exhibit "B" to this Agreement.
"Repricing Review" is defined in Section I-k of
Exhibit "B" to this Agreement.
"Reward" is defined in Section IV-e of Exhibit "B" to
this Agreement.
"Special Fees" means the tariff line rates, WATS lines rates,
data circuit charges or any other rates charged to FDR by a
communications common carrier, postage, courier and any other charges and
methods of reimbursement described in Section I-a and Section IV of
Exhibit "B".
"Target Conversion Date" is defined in Section 2.3(a)
of this Agreement.
"Term" means the Original Term together with any Renewal Term
or any other extension of this Agreement.
"Termination Liquidated Damages" is defined in
Section IX of Exhibit "B" to this Agreement.
"Total Annual Processing Fees" is defined in
Section I-f of Exhibit "B" to this Agreement.
"Transaction Card" means a credit card issued by Customer or
Clients to an individual pursuant to a license from MasterCard or VISA;
provided, however, for purposes of this Agreement, the term "Transaction
Card" shall not include (i) any debit card or ATM card issued pursuant to
any such license, (ii) any commercial card, such as (a)
procurement/purchasing cards, (b) corporate travel and entertainment
cards, and (c) small business cards, (iii) any credit card issued outside
the United States, (iv) any activity or other card-based or cardlike
payment instrument or system and (v) any secured card.
"Transaction Card Ticket" means a record (whether paper,
magnetic, electronic or otherwise) which is created to evidence the use
of a Transaction Card as payment for goods, services, cash advances or
otherwise or for a credit or refund or otherwise.
"VISA" means VISA U.S.A. Inc. or its successors or
assigns.
"VISA Agreement" is defined in Section 13.8(a) of this
Agreement.
"Year 1 Minimum Processing Fees" is defined in
Section I-f of Exhibit "B" to this Agreement.
"Year 2 Minimum Processing Fees" is defined in
Section I-f of Exhibit "B" to this Agreement.
"Year 2000 Compliant" is defined in Section X of
Exhibit "B" to this Agreement.
ARTICLE 2
SERVICES
Services. FDR shall make available to and perform for
Customer and Clients issuing Transaction Cards in the United States the
services described in Exhibit "A" to the extent such services are
required for their respective Issuer businesses in the United States or
as specifically provided in Exhibit "A". More specifically, FDR will
provide credit card services, including data processing, credit
processing, customer service, collections and recovery services, and
fraud services. With the prior written approval of Customer, Exhibit "A"
and any document or service referred to in Exhibit "A" shall be subject
to revision by FDR from time to time during the Term of this Agreement to
reflect changes and improvements to the FDR System or the services
provided by FDR and offered generally to FDR customers and to reflect any
changes and improvements in the specific services provided to Customer
and Clients. In addition, if, during the Term of this Agreement, FDR is
acquired by or merged with or into a third party and, as a result of such
acquisition, the servicing of Customer's Accounts hereunder is converted
from the FDR System to another processing system, then FDR hereby agrees
to (a) assist in the conversion process by providing all resources
reasonably required to assist with the conversion and (b) pay to
Customer, upon the date of such conversion, the reasonable expenses
actually and necessarily incurred by Customer and Clients in connection
with such conversion. Notwithstanding the foregoing, FDR hereby agrees
that during the Term of this Agreement, except as may be mutually agreed
to in writing by FDR and Customer or as may be expressly mandated by
changes in the requirements of MasterCard's or VISA's rules or
regulations, it will not implement any changes or improvements to the FDR
System or convert from the FDR System to another processing system if
such action will either (i) materially degrade the quality of the
services being provided to Customer or Clients by FDR hereunder or (ii)
increase the fees and charges incurred by Customer or Clients in order to
have FDR service Customer's Accounts hereunder. FDR shall offer to
Customer and Clients all products and services offered by FDR to any
other FDR customers, except where the provision of such products or
services is prohibited by exclusivity arrangements between FDR and the
FDR customer with whom FDR developed such products and services. All
products and services provided by FDR to Customer and Clients hereunder
shall be provided using technologies, equipment, resources and procedures
that are at least as favorable to Customer and Clients as the most
favorable technologies, equipment, resources and procedures FDR uses for
other FDR customers.
Communication Links. FDR from time to time shall install,
provide or cause to be installed or provided the means for communicating
data from its facilities or equipment to the facilities or equipment of
Customer, Clients and third parties designated in writing by Customer and
Clients as FDR determines is desirable to perform this Agreement. The
method of transmission and the media employed will be determined by FDR
taking into consideration relevant factors such as traffic type, inbound
and outbound message sizes, traffic loading distribution, and the
equipment or devices which are or may be used.
2.3 Harris Trust and Savings Bank Conversion.
(a) Harris Trust and Savings Bank has delivered Conversion Tapes
and the completed cardholder initial visit questionnaire to FDR. Customer
will use reasonable efforts to cause Harris Trust and Savings Bank to
provide from time to time such updates and revisions to the Conversion
Tapes and the cardholder initial visit questionnaire as FDR may
reasonably request. FDR will use reasonable efforts to complete the
Conversion on or before March 31, 1998 (the "Target Conversion Date").
Customer and FDR will work diligently to complete and finalize the
Conversion Plan as soon as practicable and to determine whether
completion of the Conversion by the Target Conversion Date is achievable.
As soon as the Conversion Plan has been completed and finalized, the
Conversion Change Board will set a Committed Conversion Date, which may
be the Target Conversion Date, or which may be a date after the Target
Conversion Date, but which will not in any event be a date after June 30,
1998. Once a Committed Conversion Date has been set, the Conversion Plan
shall not be changed unless the Conversion Change Board approves the
change and certifies that the change will not adversely impact completion
of the Conversion on or before the Committed Conversion Date. Customer
understands and agrees that the Target Conversion Date only allows for
the standard Conversion process (i.e., the processes that convert data
from the Harris Trust and Savings Bank system to FDR's Cardholder Master
File, Memo File, On-Line Statement File, Cycle to Data Transaction File,
PIN File and Trailing Activity File), and that the Harris Trust and
Savings Bank portfolio will essentially mirror the BankBoston Portfolio
on the FDR System in all material respects.
(b) Customer will (i) use reasonable resources, including the
assignment of adequate personnel to assure timely performance of those
functions required of Customer under the Conversion Plan, and (ii) comply
with the provisions of the Conversion Plan and with any reasonable
request of FDR made thereunder so as to enable Conversion to be completed
on or before the Committed Conversion Date.
(c) FDR will (i) use reasonable resources, including the assignment
of adequate personnel to assure timely performance of those functions
required of FDR under the Conversion Plan, and (ii) comply with the
provisions of the Conversion Plan so as to enable Conversion to be
completed on or before the Committed Conversion Date.
(d) FDR shall not charge Customer for any services which FDR
performs in connection with the Conversion.
(e) The members of the Conversion Change Board shall be Perry
Cliburn, Bob Allen and the Customer's FDR relationship manager referred
to in Section 2.5 (from FDR), and Charlene Rizzo, Sheryl Westad and
Charles Valerio (from Customer), as such group may be modified from time
to time by mutual agreement
of FDR and Customer.
2.4 Compliance With Laws. (a) FDR, Customer and each Client
acknowledge that Customer's Credit Card Business is subject to various
Laws, including Laws relating to consumer credit protection; terms of a
Cardholder's Account; loan servicing; and Cardholder Support Services.
FDR and Customer or FDR and Client, as appropriate, each agree to
reasonably cooperate with and assist the other in identifying and
resolving compliance with Laws issues, in making such changes to the
Cardholder Support Services or other services provided under this
Agreement as may be required by applicable Laws and in providing
information and/or records in connection with regulatory, audit or legal
examinations, requests or proceedings.
(b) However, Customer and each Client acknowledge and agree that
each is solely responsible for monitoring legal developments applicable
to the operation of its respective business and credit card operations,
interpreting applicable state and federal laws, determining the
requirements for compliance with all applicable state and federal laws,
and maintaining an ongoing compliance program, subject to FDR's
performance of its obligations in subsections (c) and (d) below. Customer
and each Client acknowledge that FDR provides credit card processing
services to financial institutions chartered and regulated by various
state and federal agencies and nonfinancial institutions subject to
different regulatory oversight such that FDR cannot reasonably be
expected to monitor or interpret the laws applicable to its diverse
customer base, or provide compliance services to customers with respect
to such laws. Consequently, Customer and each Client agree that FDR has
no responsibility to monitor or interpret laws applicable to the business
of Customer or such Client, as applicable, to monitor or review the terms
and conditions of the credit card program of Customer or such Client, as
applicable, or the selection by Customer or such Client, as applicable,
of system options and parameters, or to assure that such selection of any
system option or parameter (either alone or acting in conjunction with
other system options and parameters selected by Customer or such Client,
as applicable) or Customer's or such Client's, as applicable, approved
written procedures are consistent with Laws applicable to Customer or
such Client, as applicable, or the terms and conditions of their
respective credit agreements with, or disclosures to, Cardholders.
(c) FDR further agrees to provide the services set forth on Exhibit
"H".
(d) FDR shall be entitled to rely upon and use, without
verification, any and all information, data and instructions at any time
submitted to FDR by Customer or any Client having to do with Customer,
such Client or their respective Cardholder Accounts, and FDR shall have
no responsibility or liability whatsoever for (i) the accuracy or
inaccuracy thereof, (ii) the wording or text authored or submitted by
Customer or any Client to FDR, for materials to be prepared or for other
purposes, (iii) the wording or text appearing on any forms, bankcards or
other materials furnished by Customer or any Client to FDR, (iv) the
Cardholder Support Services procedures that have been reviewed and
approved by Customer or any Client or (v) any noncompliance of such
information, data, instruction, procedures, wording or text with
applicable Laws, provided that FDR has not changed such information
without Customer's or such Client's authorization or consent and has
followed Customer's or such Client's instructions. However, FDR shall
notify Customer and such Client promptly of any errors which it
identifies in such materials and await further instructions if
appropriate.
2.5 Relationship Management; Programming Support. The FDR
relationship manager (currently, a Client Business Executive) will be
dedicated to the Customer account. FDR will use reasonable efforts to
insure that the tenure of the FDR relationship manager on the Customer's
account will be at least two years. FDR will use reasonable efforts to
insure that the tenure of each FDR employee dedicated to the Customer
account will be at least equal to the average tenure for all FDR
employees in similar assignments. Customer may reasonably request
reassignment of the relationship manager or any other FDR employee
dedicated to the Customer account, such requests not to be unreasonably
declined. The programming support services to be provided by FDR, and the
charges for them, are described and set forth in Section I-h of Exhibit
"B" to this Agreement.
ARTICLE 3
EXCLUSIVITY AND EXECUTION BY CLIENTS
Sole and Exclusive Provider. (a) During the Term of this
Agreement, except as specifically provided in Section 3.1(b), (c), (d)
and (e), (i) FDR shall be the sole and exclusive provider to Customer and
to Clients of all Exclusive Services whether such Client is a Client at
the time of signing of this Agreement or during the Term of this
Agreement becomes a Client; (ii) neither Customer nor any Client shall
perform or provide any Exclusive Services for Customer or any Client; and
(iii) neither Customer nor any Client shall agree with any third party to
have such third party perform or provide any Exclusive Services to
Customer or Clients.
(b) Notwithstanding anything to the contrary contained in this
Agreement or any exhibit hereto, this Agreement does not apply in any way
to the credit card business of Customer or any Client or any current or
future Affiliate of Customer or any Client outside of the United States
or any other business other than the Transaction Card business.
(c) If any Entity other than PF Bank becomes a Client after the
execution of this Agreement and such Client is, at the time of becoming a
Client, (i) receiving any services that would be Exclusive Services from
another party other than FDR with respect to its Cardholder Accounts,
(ii) performing any services that would be Exclusive Services for itself
with respect to its Cardholder Accounts; or (iii) not receiving or
performing for itself services that would be Exclusive Services, then
such Client shall only be required to receive from FDR those Exclusive
Services which the Client is receiving from FDR at such time and FDR
agrees to provide such Exclusive Services to such Client on the terms and
conditions and at the prices set forth herein. If Customer or PF Bank
acquires any Cardholder Accounts after the execution of this Agreement
and such Cardholder Accounts are subject to an agreement to obtain data
processing services from FDR at the date of acquisition, then Customer or
PF Bank, as applicable, shall only be required to receive from FDR those
Exclusive Services which are being provided pursuant to such agreement at
the date of acquisition and FDR agrees to provide such Exclusive Services
to such Client on the terms and conditions and at the prices set forth
herein.
(d) Notwithstanding any other provisions in this Section 3.1, if a
Client (other than PF Bank) acquires any Cardholder Accounts after the
execution of this Agreement, such Client shall not be required to obtain
any services from FDR pursuant to this Agreement in connection with any
such acquired Cardholder Accounts.
(e) Notwithstanding any other provisions in this Section 3.1, in
the event that any products or services which constitute Exclusive
Services (i) are offered by FDR to any FDR customers but cannot be
offered to Customer or Clients or (ii) are not offered by FDR, then,
Customer or Clients may provide such products or services or obtain such
products or services from any third party.
(f) Customer agrees to provide FDR with forecasts for such key
indicators of service volumes (not to include any forecasts of customer
service call volumes) with regard to any services which are not Exclusive
Services as the parties may agree upon from time to time.
(g) If Customer elects to have FDR perform any services which are
not Exclusive Services, then, Customer shall (i) use reasonable efforts
to promptly inform FDR upon deciding to transfer any material portion of
such business away from FDR and (ii) give FDR six (6) months prior notice
of any transfer by Customer of business away from FDR which, in the
twelve month period prior to the date of such notice accounted for at
least ten million dollars ($10,000,000.00) in Processing Fees to FDR.
(h) Notwithstanding anything to the contrary contained in this
Agreement or any exhibit hereto, Customer hereby agrees that Section
3.1(a) specifically applies to the Harris Trust and Savings Bank
portfolio acquired by Customer on the Closing Date.
Execution of Client Supplements by Clients. If, after the
execution of this Agreement, Customer has a prospective Client other than
PF Bank which wishes to receive services pursuant to this Agreement, then
in order to receive services pursuant to this Agreement, such Client must
sign a Client Supplement substantially similar to the one set forth as
Exhibit "C" (with such amendments and changes as may be agreed to by FDR,
Customer and such Client) and said Client Supplement must also be signed
by FDR and by Customer. At the time of becoming a Client, PF Bank shall
execute a Client Supplement in the form of Exhibit "I" attached hereto.
Notwithstanding anything to the contrary contained in this Agreement, in
any exhibit hereto or in any Client Supplement, FDR shall not be
obligated to sign any particular Client Supplement or Supplements other
than the PF Bank Supplement, and shall have the right, in its reasonable
business judgment, to refuse to sign any particular Client Supplement or
Supplements (other than the PF Bank Supplement, which FDR shall execute
upon the request of Customer at any time after the formation of PF Bank).
Customer and each of Clients agree that, in addition to the terms of the
Client Supplement:
(a) Pursuant to Agency Designation Agreements ("Agency Agreements")
entered into between Customer and each Client, a form of which is
attached as Exhibit "G" hereto, with such changes as may be agreed to by
Customer and FDR, and except as otherwise set forth in such Agency
Agreements, Customer has been designated and appointed as agent for each
Client for the limited purpose of acting on behalf of each such Client
and exercising all of said Client's powers under this Agreement and the
applicable Client Supplement.
(b) The services, functionality and performance standards
applicable to the Customer's Accounts of each Client under this
Agreement, will be the same services, functionality and performance
standards offered to Customer under this Agreement. Any deviations in
such services, functionality and performance standards (i) will be
specifically negotiated on an individual case-by-case basis; (ii) if
provided, will be provided pursuant to agreed-upon written terms,
conditions and fees; and (iii) if provided, will be reflected in the
applicable Client Supplement. FDR will not provide Cardholder Support
Services for the Customer's Accounts of any Client unless FDR is also
providing data processing services for such Customer's Accounts.
ARTICLE 4
PAYMENT FOR SERVICES
Fees and Charges. The Processing Fees for the services to be
performed under this Agreement are set forth in Exhibit "B". Exhibit "B"
also contains prices to be charged or methods for computing charges by
FDR for Special Fees such as but not limited to reimbursements,
assessments and pass-through fees.
Harris Trust and Savings Bank Interim Pricing.
Notwithstanding anything to the contrary contained in this Agreement,
with respect to the Harris Trust and Savings Bank portfolio acquired by
Customer on the Closing Date, during the period from the Closing Date
through the Conversion, FDR shall provide services hereunder to Customer,
Harris Trust and Savings Bank as Clearing Bank and PF Bank (as
applicable) for that portfolio at the fees and charges set forth in
Exhibit "F".
ARTICLE 5
INDEMNIFICATION
Customer's Indemnification. (a) Subject to the limitations
hereinafter set forth, Customer shall indemnify and hold harmless FDR and
its directors, officers, employees, agents and Affiliates from and
against any and all Losses to the extent that such Losses result from,
arise out of, or relate to: (i) the negligence, gross negligence or
willful misconduct of Customer or any of Customer's Affiliates (other
than the Clearing Banks and PF Bank), subcontractors or agents, except
Losses described in clause (iii) of this subsection 5.1(a); (ii) breach
by Customer of this Agreement, except Losses described in clause (iii) of
this subsection 5.1(a); or (iii) any claim (including claims resulting
from, arising out of or relating to (A) the negligence, gross negligence
or willful misconduct of Customer or any of Customer's Affiliates (other
than the Clearing Banks and PF Bank), subcontractors or agents, or (B)
breach of this Agreement by Customer) by a Client (whether brought by a
Client on its own behalf or on behalf of any third party) against FDR to
the extent that such claim has been previously settled or otherwise
resolved in writing between FDR and Customer, acting as agent for such
Client under the applicable Agency Agreement.
(b) Customer shall not have any obligation to indemnify FDR or any
of its directors, officers, employees, agents or Affiliates against any
Losses to the extent that such Losses result from, arise out of, or
relate to the negligence, gross negligence or willful misconduct of FDR
or any of FDR's Affiliates, subcontractors or agents, or result from,
arise out of or relate to breach by FDR of this Agreement.
(c) In the event that indemnification is sought hereunder by any of
FDR's directors, officers, employees, agents or Affiliates, FDR shall act
on behalf thereof and Customer shall be entitled to rely upon the acts
and representations of FDR as representing the acts and representations
of such director, officer, employee, agent or Affiliate.
FDR's Indemnification. (a) Subject to the limitations
hereinafter set forth, FDR shall indemnify and hold harmless Customer and
its directors, officers, employees, agents and Affiliates (other than the
Clearing Banks and PF Bank) from and against any and all Losses to the
extent that such Losses result from, arise out of, or relate to the
negligence, gross negligence or willful misconduct of FDR or any of FDR's
Affiliates, subcontractors or agents or result from, arise out of or
relate to the breach by FDR of this Agreement.
(b) FDR has and will have sufficient rights in the FDR System to
provide the products and services to be provided by FDR hereunder and the
FDR System does not and will not infringe or otherwise violate the
intellectual property or other proprietary rights of any third party. FDR
shall defend, at its expense, any action brought against Customer to the
extent that it is based on a claim that the FDR System infringes a United
States copyright or duly issued patent, or misappropriates the trade
secrets of or infringes upon or violates the intellectual property and
other proprietary rights of any third party. FDR shall indemnify and hold
harmless Customer against Losses attributable to such claim provided that
Customer gives FDR prompt notice of such claim, reasonable assistance,
and sole authority to defend or settle such claim. If the FDR System
becomes, or in FDR's opinion is likely to become, the subject of such a
claim then FDR may, at its option: (i) procure for Customer the right to
use the FDR System free of any liability for infringement or (ii) replace
or modify the FDR System to make it noninfringing. If FDR is unable or
determines that it is commercially impractical to undertake clause (i) or
(ii) of this paragraph, (A) Customer will cease to use the directly
affected portion of the FDR System, and if such FDR System is in
Customer's control, Customer shall return or destroy it, and (B) FDR will
grant Customer a pro rata credit for the license fee, if any, that
Customer paid separately for the affected FDR System computed by dividing
such license fee by the total number of months in the then current term
of the license for the affected FDR System and multiplying the result by
the number of months left in the unexpired license term for the affected
FDR System. FDR shall have no obligation under this subsection (b) if the
alleged infringement or violation is based upon use of the FDR System in
combination with other equipment or software not furnished by FDR or if
such claim arises from FDR's compliance with Customer's designs,
specifications or instructions or from modification of the FDR System by
Customer or any Client.
PARAGRAPHS (a) AND (b) OF THIS SECTION STATE THE ENTIRE LIABILITY OF FDR
CONCERNING PATENT, COPYRIGHT, TRADE SECRET OR OTHER PROPRIETARY RIGHTS
INFRINGEMENT.
(c) FDR shall not have any obligation to indemnify Customer or any
of its directors, officers, employees, agents or Affiliates against any
Losses to the extent that such Losses result from, arise out of, or
relate to the negligence, gross negligence or willful misconduct of
Customer, any Client or any of their respective Affiliates,
subcontractors or agents, or result from, arise out of or relate to
breach by Customer of this Agreement.
(d) In the event that indemnification is sought hereunder by any of
Customer's directors, officers, employees, agents or Affiliates (other
than the Clearing Banks and PF Bank), Customer shall act on behalf
thereof and FDR shall be entitled to rely upon the acts and
representations of Customer as representing the acts and representations
of such director, officer, employee, agent or Affiliate.
Claims Period. Neither FDR nor Customer shall be entitled to
indemnification under this Article 5 unless such party (the "Indemnified
Party") transmits notice of a claim for indemnification to the other
party (the "Indemnifying Party") prior to the earlier of:
(a) Two (2) years after the Indemnified Party becomes aware that
it, or any of its directors, officers, employees, agents or Affiliates,
has suffered or incurred, or reasonably expects to suffer or incur, any
Losses for which indemnification may be available under this Article 5;
and
(b) In cases of claims by one party against the other, four (4)
years after the termination of this Agreement, and in cases of claims
brought by Entities other than the parties, six (6) years after the
termination of this Agreement.
Certain Procedures Regarding Third-Party Claims. (a) Provided
that prompt notice is given by the Indemnified Party of any claim, suit
or proceeding that is made or brought by a third party for which
indemnification might be sought under this Article 5, unless the failure
to provide such notice does not prejudice the interests of the
Indemnifying Party, the Indemnifying Party, at its own expense and using
counsel of its own choosing, will promptly defend, contest and otherwise
protect against any such claim, suit or proceeding.
(b) The Indemnified Party may, but will not be obligated to,
participate in the defense of any such third-party claim, suit or
proceeding, at its own expense and using counsel of its own choosing, but
the Indemnifying Party shall be entitled to control the defense thereof
unless the Indemnified Party has relieved the Indemnifying Party from
liability with respect to the particular matter. (If the matter
reasonably appears to present the potential for liability greater than
the amount of any applicable Annual Limits as specified in Section 6.1
below, or if the matter for which indemnification is sought pertains in
part to claims for which the party from whom indemnification is sought
asserts it is not liable for indemnification under this Article 5, and if
the potential liability for such unindemnified amounts reasonably appears
to exceed the potential liability for the indemnified amounts, the party
seeking indemnification shall retain the right to consent to material
decisions in the defense of the matter.) The Indemnified Party shall
cooperate and provide such assistance as the Indemnifying Party
reasonably may request in connection with the Indemnifying Party's
defense and shall be entitled to recover from the Indemnifying Party the
reasonable costs of providing such assistance. The Indemnifying Party
shall inform the Indemnified Party on a regular basis of the status of
such claim, suit or proceeding and the Indemnifying Party's defense
thereof. In the event that the Indemnified Party retains counsel in
connection with a matter that reasonably appears to present the potential
for liability greater than the amount of any applicable Annual Limits and
the matter is resolved for less than any such Annual Limits, the
Indemnified Party's reasonable counsel fees and expenses shall be deemed
to be reimbursable under this Article 5.
(c) In any third-party claim, suit or proceeding, the defense of
which is controlled by the Indemnifying Party: (i) the Indemnifying Party
shall not, without the Indemnified Party's prior written consent,
compromise or settle such claim, suit or proceeding if (1) such
compromise or settlement would impose an injunction or other equitable
relief upon the Indemnified Party, (2) such compromise or settlement does
not include the third party's release of the Indemnified Party from all
liability relating to such claim, suit or proceeding, or (3) the amount
of such compromise or settlement attributable to an action occurring in
any Processing Year would, when aggregated with the amount of other
Losses for which the Indemnifying Party already is liable subject to the
applicable Annual Limit as described in Section 6.1, exceed such
applicable Annual Limit, provided that, if the Indemnified Party
withholds such consent in the circumstances described in clause (3), the
Indemnified Party shall be liable for all subsequently incurred expenses
of defense of such claim, suit or proceeding; and (ii) the Indemnified
Party shall not compromise or settle such claim, suit or proceeding
without the prior written consent of the Indemnifying Party, provided
that, if the Indemnified Party desires to compromise or settle such
claim, suit or proceeding and the Indemnifying Party refuses to consent
to such compromise or settlement, the Indemnified Party may enter into a
compromise or settlement but shall be solely responsible for the costs of
any compromise or settlement amount.
(d) If the Indemnifying Party fails to timely defend, contest or
otherwise protect against any such claim, suit or proceeding, the
Indemnified Party may, but will not be obligated to, defend, contest or
otherwise protect against the same, and make any compromise or settlement
thereof and recover the entire costs thereof from the Indemnifying Party,
including reasonable fees and disbursements of counsel and all amounts
paid as a result of such claim, suit or proceeding and the compromise or
settlement thereof.
Exclusive Remedy. Subject to Sections 9.4, 13.14, 13.15 and
13.16 of this Agreement, Section II.2.2 of Exhibit "D", Section IX of
Exhibit "B", and any equitable remedies which may otherwise be available
to the parties under common law principles, this Article 5 represents the
sole and exclusive remedy of Customer or FDR with regard to Losses.
ARTICLE 6
LIMITATIONS ON LIABILITY
6.1 Annual Limit on Liability. (a) The aggregate liability of
Customer to FDR and of FDR to Customer in any single Processing Year for
Losses ("Annual Limit") shall not exceed (i) an amount equal to one (1)
times the aggregate amount of Processing Fees paid (or payable) by the
Clearing Banks and PF Bank under their Client Supplements in the
immediately preceding Processing Year, or (ii) for Processing Year 1 (the
"Initial Processing Year"), the actual aggregate amount of Processing
Fees paid (or payable) by the Clearing Banks and PF Bank under their
Client Supplements in the Initial Processing Year ("Initial Year
Processing Fees"), or (iii) if PF Bank and the Clearing Banks, taken
together, are not clients under Client Supplements for the full
Processing Year, an amount equal to the total number of days, without
duplication, that PF Bank and the Clearing Banks were Clients during such
Processing Year times the quotient obtained by dividing the aggregate
amount of Processing Fees paid (or payable) by the Clearing Banks and PF
Bank in the prior Processing Year by three hundred sixty-five (365). If a
claim is made prior to the establishment of the Annual Limit for the
Initial Processing Year, the liability limitation initially applicable to
such Processing Year shall be an amount determined by taking the total
amount of Processing Fees paid (or payable) to FDR by the Clearing Banks
and PF Bank under their Client Supplements through the end of the last
complete month prior to the event giving rise to the claim, dividing that
amount by the number of complete months for which such Processing Fees
were paid (or payable), and multiplying that quotient by the number of
full calendar months in the Initial Processing Year. Within ninety (90)
days after the end of the Initial Processing Year, FDR will calculate the
Initial Year Processing Fees. If payments already made by FDR or Customer
for Losses in the Initial Processing Year exceed the Initial Year
Processing Fees, the party receiving such excess payment shall remit such
excess payment to the other party. If payments were not made by FDR or
Customer for Losses in the Initial Processing Year, based on the initial
liability limitations calculated hereunder, then FDR or Customer, as
applicable, shall pay to the other an amount equal to the amount of such
unpaid Losses, provided that the aggregate amount paid by FDR or
Customer, as applicable, to the other for Losses in the Initial
Processing Year shall not exceed the Initial Year Processing Fees.
(b) Notwithstanding the limitation of liability provided in Section
6.1(a), in the event that an Indemnifying Party's liability for Losses in
connection with this Agreement arises out of its gross negligence,
willful misconduct, or knowing commission of a material breach of this
Agreement, then its Annual Limit for such Losses shall be two (2) times
the amount calculated pursuant to Section 6.1(a).
(c) Notwithstanding the limitation of liability provided in Section
6.1(a), the Annual Limit for claims made pursuant to Section 5.1(a)(iii)
in any Processing Year shall equal the applicable Supplement Annual Limit
(as that term is defined in the applicable Client Supplement) for said
Processing Year under the applicable Client Supplement.
(d) The aggregate liability of FDR and Customer in any single
Processing Year shall be calculated on the basis of the aggregate amount
of Losses resulting from, arising out of, or relating to actions
occurring in such Processing Year. Each Annual Limit shall impose a cap
on liability only for Losses which result from, arise out of, or relate
to actions occurring in the Processing Year to which such Annual Limit
applies, and shall not limit a party's claims for Losses resulting from,
arising out of, or relating to actions occurring in other Processing
Years, even though the actions complained of are alleged to be part of a
pattern or course of conduct existing over more than one Processing Year
and may form the basis for a claim, suit or proceeding arising in a
subsequent Processing Year. By way of example only, the liability of one
party to the other party for Losses arising out of a claim involving
actions occurring in more than one Processing Year shall not be limited
to the Annual Limit for the year in which the claim is filed or the year
in which settlement is made or judgment is rendered final, but shall be
limited to the sum of the Annual Limits (minus the amount of other Losses
subject to the applicable Annual Limit) for the years in which the
actions complained of occurred.
(e) The Annual Limit shall not be construed to limit in any way the
payment obligations of Customer or FDR under Article 9 or that certain
letter agreement by and between Customer and FDR of even date herewith or
with respect to any amounts payable by Client, Customer, PF Receivables
or FDR pursuant to Exhibits "B," "D" or "F".
(f) FDR and Customer acknowledge and agree that (i) any and all
amounts paid by FDR pursuant to the Clearing Banks' Supplements and PF
Bank's Supplement which reduce the limit on FDR's liability specified in
any such Supplement shall also reduce the limit on FDR's liability
otherwise applicable under this Section 6.1, (ii) any and all amounts
paid by PF Bank pursuant to PF Bank's Supplement or by the Clearing Banks
pursuant to their Client Supplements which reduce the limit on PF Bank's
or any Clearing Bank's liability specified in any such Supplement shall
also reduce the limit on Customer's liability otherwise applicable under
this Section 6.1, (iii) any and all amounts paid by FDR pursuant to this
Agreement which reduce the limit on FDR's liability specified in this
Section 6.1 shall also reduce the limit on FDR's liability otherwise
applicable under the Clearing Banks' Supplements and the PF Bank
Supplement and (iv) any and all amounts paid by Customer pursuant to this
Agreement which reduce the limit on Customer's liability specified in
this Section 6.1 shall also reduce the limit on PF Bank's liability and
the Clearing Banks' liability otherwise applicable under the PF Bank
Supplement and the Clearing Banks' Supplements, respectively.
6.2 No Special Damages. OTHER THAN AS A RESULT OF ITS OWN GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT AND EXCEPT FOR PAYMENTS AS PROVIDED IN
ARTICLE 9, OR PURSUANT TO EXHIBIT "D", IN NO EVENT SHALL FDR OR CUSTOMER
BE LIABLE UNDER ANY THEORY OF TORT, CONTRACT, STRICT LIABILITY OR OTHER
LEGAL OR EQUITABLE THEORY FOR ANY LOST PROFITS OR EXEMPLARY, PUNITIVE,
SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES (COLLECTIVELY,
"SPECIAL DAMAGES"), EACH OF WHICH IS HEREBY EXCLUDED BY AGREEMENT OF THE
PARTIES REGARDLESS OF WHETHER OR NOT FDR OR CUSTOMER HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES; PROVIDED, HOWEVER, THAT NOTWITHSTANDING
THE FOREGOING AND SUBJECT TO THE LIMITATIONS SET FORTH IN SECTION 6.1 OF
THIS AGREEMENT, IN THE EVENT OF THE NEGLIGENCE OF FDR OR CUSTOMER OR THE
BREACH BY FDR OR CUSTOMER OF THIS AGREEMENT, FDR SHALL BE LIABLE TO
CUSTOMER, OR CUSTOMER SHALL BE LIABLE TO FDR, AS APPLICABLE, FOR SPECIAL
DAMAGES BUT (A) ONLY TO THE EXTENT OF OUT-OF-POCKET MONETARY DAMAGES (i)
PAID BY CUSTOMER OR ITS AFFILIATES TO ITS CUSTOMERS (OTHER THAN CLIENTS)
OR TO OTHER THIRD PARTIES SOLELY TO THE EXTENT RESULTING FROM, ARISING
OUT OF OR RELATING TO FDR'S NEGLIGENCE OR BREACH AND FOR WHICH FDR IS
OTHERWISE LIABLE TO PROVIDE INDEMNIFICATION UNDER ARTICLE 5 OR (ii) PAID
BY FDR OR ITS AFFILIATES TO ITS CUSTOMERS OR TO OTHER THIRD PARTIES
SOLELY TO THE EXTENT RESULTING FROM, ARISING OUT OF OR RELATING TO
CUSTOMER'S NEGLIGENCE OR BREACH AND FOR WHICH CUSTOMER IS OTHERWISE
LIABLE TO PROVIDE INDEMNIFICATION UNDER ARTICLE 5 AND (B) ONLY IF THE
INDEMNIFIED PARTY HAS COMPLIED WITH ITS OBLIGATIONS UNDER SECTION 5.4.
ARTICLE 7
DISCLAIMER OF WARRANTIES
Disclaimer of Warranties. EXCEPT AS SPECIFICALLY PROVIDED IN
ARTICLE 11 AND THE FIRST SENTENCE OF SECTION 5.2(b), FDR SPECIFICALLY
DISCLAIMS ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED ARISING OUT OF
OR RELATED TO THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, EACH OF WHICH IS
HEREBY EXCLUDED BY AGREEMENT OF THE PARTIES. FDR AND CUSTOMER HEREBY
AGREE THAT FDR'S OBLIGATIONS TO CUSTOMER ARE RELATED TO FDR PROVIDING
SERVICES HEREUNDER, THAT THIS AGREEMENT IS A SERVICE AGREEMENT FOR
PURPOSES OF THE UNIFORM COMMERCIAL CODE AND THEREFORE THE PROVISIONS OF
THE UNIFORM COMMERCIAL CODE SHALL NOT APPLY TO THIS AGREEMENT.
ARTICLE 8
TERM OF AGREEMENT
Term and Renewals. This Agreement is effective from the date
hereof and shall extend for the Original Term and Renewal Term, if any,
subject to and in accordance with Exhibit "B", Section III.
ARTICLE 9
TERMINATION
Termination by FDR. Despite anything to the contrary herein
contained, FDR, at its option, may terminate this Agreement upon delivery
of a notice of termination to Customer under the following circumstances:
(a) if Customer fails to pay any amount due under this Agreement
when due (which does not give rise to the right to terminate under any
other provision of this Section 9.1), within ten (10) Business Days after
notice to Customer of its failure to pay the amount;
(b) if any Insolvency Event occurs with respect to Customer;
(c) upon notice to Customer if Customer fails to perform or observe
any of the terms, covenants or conditions of Article 5 or Article 10 of
this Agreement, and Customer fails to cure such breach within twenty (20)
Business Days following its receipt of the notice of such breach; or
(d) upon expiration or termination of that certain Client
Supplement to be executed between and among FDR, Customer and PF Bank.
The rights of FDR to terminate under this Section 9.1 are
cumulative and the existence of the right under any provision or
subsection is not exclusive of the right under any other provision or
subsection.
Termination by Customer. Despite anything to the
contrary herein contained, Customer, at its option, may
terminate this Agreement as follows:
(a) immediately upon notice to FDR in the event any Insolvency
Event occurs with respect to FDR;
(b) as provided in Section III-c of Exhibit "B";
(c) upon notice to FDR following the occurrence of an event
specified in Exhibit "D" as provided for in Section 2.2(c)(i)(c) of
Exhibit "D";
(d) upon notice to FDR if FDR fails to perform or observe any of
the terms, covenants or conditions of Article 5 or Article 10 of this
Agreement, and FDR fails to cure such breach within twenty (20) Business
Days following its receipt of the notice of such breach; or
(e) upon notice to FDR if FDR fails to perform or observe any of
the terms, covenants or conditions of this Agreement (other than those
described in Section 9.2(a), (b), (c) or (d)), which when viewed in the
context of this Agreement taken as a whole are material, and FDR fails to
cure such breach within twenty (20) Business Days following its receipt
of the notice of such breach; or
(f) in the event VISA (or any of its successors in interest) has
terminated FDR's membership as a processor pursuant to the VISA rules, or
in the event MasterCard (or any of its successors in interest) has
terminated FDR's membership as a processor pursuant to the MasterCard
rules, upon notice to FDR;
(g) in the event Customer becomes subject to any Losses for which
FDR would be required to indemnify Customer pursuant to Section 5.2 of
this Agreement but for the application of the Annual Limit, ten (10) days
after the giving of notice to FDR specifying such Losses in reasonable
detail, provided that this right of termination shall not be applicable
in the event FDR pays Customer the amount of any such Losses within such
ten (10) day period; or
(h) upon notice to FDR, if: either (i) FDR's Year 2000 Compliance
consultant, the Gartner Group, or any federal bank regulatory authority
that examines FDR makes a determination that there is a material risk
that FDR will not be Year 2000 Compliant, or (ii) at any time after
December 31, 1998 FDR, the Gartner Group or any such federal bank
regulatory authority reports that FDR is not Year 2000 Compliant, and FDR
does not cure the material risk or the noncompliance, as the case may be,
within sixty (60) days after Customer has given notice to FDR of its
intent to terminate because of such material risk or noncompliance, as
the case may be. FDR will promptly notify Customer of any event described
in clause (i) or (ii) above.
The rights of Customer to terminate under this Section 9.2 are cumulative
and the existence of the right under any provision or subsection is not
exclusive of the right under any other provision or subsection.
Effect of Termination. Until the Effective Date of
Termination of this Agreement, FDR shall continue to provide services
hereunder to Customer and Clients in accordance with the terms and
conditions and at the prices set forth herein. Upon the Effective Date of
Termination FDR's obligation to provide such services shall cease, and
all outstanding unpaid amounts due and owing under this Agreement by
Customer to FDR or by FDR to Customer shall become immediately due and
payable. "Effective Date of Termination" means (i) the later of the date
provided for in Section 9.1 and, if Customer and Clients continue to pay
FDR all Processing Fees and Special Fees in accordance with the terms
hereof, the date on which the Deconversion of Customer's Accounts is
complete, if the termination is by FDR, or (ii) the date on which the
Deconversion of all Customer's Accounts is complete or such earlier date
as may be specified by Customer by notice to FDR if the termination is by
Customer. The termination of this Agreement shall not affect the
following:
(a) The obligations of Customer and PF Receivables to pay for
services rendered or any other obligation or liability owing or which
becomes owing under this Agreement whether the obligations arise prior to
or after the Effective Date of Termination, including the obligations to
make the payments provided in Sections 9.4, 9.5 and Sections I and IX of
Exhibit "B";
(b) The obligations in Section II of Exhibit "A" in connection with
the Infosight Services and the cc:Mail Software;
(c) The provisions of Article 5 or any other indemnification
obligations of either FDR or Customer;
(d) The provisions of Article 6;
(e) The provisions of Article 7; and
(f) The provisions of Article 10 or any other confidentiality
obligations of either FDR or Customer.
Payments Upon Termination. Despite anything in this Agreement
to the contrary, if (and only if) FDR terminates this Agreement pursuant
to Section 9.1, Customer shall pay to FDR upon Deconversion the
Termination Liquidated Damages calculated as set forth in Section IX of
Exhibit "B" to this Agreement.
Deconversion Assistance.
(a) Prior to expiration or after receipt by either FDR or Customer
of notice of termination of this Agreement or of notice of termination of
services pursuant to Section 9.6, Customer and FDR shall mutually,
expeditiously and in good faith proceed to mutually agree upon and
document a Deconversion project plan which plan shall specify a date for
the Deconversion to be completed. FDR and Customer contemplate that the
Deconversion project plan may involve a six (6) to nine (9) month time
frame for completion and implementation. As part of the Deconversion
project plan, FDR shall perform the services necessary for Customer to
transfer its Transaction Card business from the FDR System to the
internal or third-party provided data processing system which Customer
has selected. In connection with the services which FDR is required to
perform, FDR shall transfer all files of Customer data in
machine-readable magnetic tape media, including, but not necessarily
limited to, as applicable, the following files and any new data files
that may be incorporated into this Agreement:
Agent Bank Master Files
Cardholder Master Files
Cardholder Revolving Transaction Files
CIS Memo Files
(b) If either FDR or Customer provides a notice to the other
requesting the postponement of the Deconversion following termination of
this Agreement (or following partial termination of services pursuant to
Section 9.6) to a new date specified in such notice or otherwise does not
perform the obligations necessary to effect Deconversion on the scheduled
Deconversion date, then FDR and Customer shall negotiate in good faith to
establish a new Deconversion date that is approved by VISA and
MasterCard. Subject to the provisions of Section 9.5(c), the party
requesting or causing the delay shall pay the other party as additional
Deconversion compensation and not as a penalty an amount equal to the sum
of one thousand dollars ($1,000.00) per day from the originally scheduled
Deconversion date until the date that the Deconversion occurs; provided,
however, that amounts paid under this Section 9.5(b) shall not exceed in
the aggregate ninety thousand dollars ($90,000.00).
(c) Notwithstanding any other provision of this Section 9.5,
neither FDR nor Customer shall have any obligation to pay the other any
amounts under Section 9.5(b) if such party has performed all of its
obligations under the Deconversion project plan other than those which
such party is unable to perform due to the other's failure to perform its
obligations under the Deconversion project plan.
(d) In the event that FDR delays Deconversion by more than ninety
(90) days beyond the agreed-upon Deconversion date, Customer shall have
no obligation to pay FDR amounts due under Section I-e of Exhibit "B"
with respect to the affected Customer's Accounts.
(e) If the termination giving rise to the Deconversion arises
pursuant to Section 9.2, then FDR shall not charge Customer for any
services which FDR performs in connection with the Deconversion.
Partial Termination of Services. Despite anything to
the contrary contained herein,
(a) in the event that the membership of one of Clients in
VISA or MasterCard is terminated and such termination is not caused
by FDR, upon notice to Customer and the affected Client, FDR shall
no longer be required to provide pursuant to this Agreement
services with respect to the affected Client's VISA or MasterCard
transactions, as applicable, which VISA or MasterCard, as
applicable, prevents FDR from providing;
(b) in the event that MasterCard or VISA determines that the
relationship between FDR, Customer and a Client as provided for in
Section 3.2 and the applicable Client Supplement fails to comply
with the then current MasterCard or VISA rules or regulations
applicable to the provision of services by a third party to members
of MasterCard or VISA, upon notice to Customer and such Client, FDR
shall have the right, without liability to Customer or such Client,
to terminate Interchange Settlement of transactions on behalf of
such Client until such time as FDR shall have been notified by
MasterCard or VISA that the violation has been corrected;
(c) in the event that any Client fails to pay its Client
Daily Amount (as that term is defined in the applicable Client
Supplement) or other payment when required under the applicable
Client Supplement and does not cure the failure within two (2)
Business Days after notice to Customer and such Client of the
failure, FDR shall no longer be required to provide services for
such Client pursuant to this Agreement; and
(d) in the event that an Insolvency Event occurs with respect
to any Client, FDR shall no longer be required to provide services
for such Client pursuant to this Agreement.
Subject to the provisions of Section 9.1(d), for purposes of this
Agreement a termination of services under this Section 9.6 will not, in
and of itself, give rise to rights pursuant to which FDR may terminate
this Agreement, and will not, in and of itself, constitute a termination
to which the provisions of Sections 9.1 through 9.5 of this Article 9
apply, except that this Agreement shall terminate automatically upon
termination of the provision of services to Customer and each and every
Client pursuant to this Section 9.6. Should FDR exercise any partial
termination right pursuant to this Section 9.6, FDR shall continue to
provide services to Customer or to the affected Clients as the case may
be, for a period of thirty (30) days following said partial termination.
ARTICLE 10
CONFIDENTIAL NATURE OF DATA
Customer's Proprietary Information. FDR shall not obtain any
proprietary rights in any proprietary or confidential information which
has been or at any time after the date of this Agreement is disclosed,
directly or indirectly, to FDR by Customer or Clients ("Customer's
Proprietary Information"), including without limitation, any data or
information that is a trade secret; competitively sensitive material; or
Customer's and Clients' Cardholder Master Files, Agent Bank Master Files,
CIS Memo Files, methodologies, algorithms, data reduction techniques and
analysis, marketing techniques, consumer profile identification and
modeling strategies. FDR agrees to, and shall cause its Affiliates to,
return to Customer or Clients, as applicable, all Customer's or the
applicable Client's Customer's Proprietary Information upon Customer's or
such Client's request or upon the expiration or termination of this
Agreement or the applicable Client Supplement, except to the extent
retention of such Customer's Proprietary Information is deemed necessary
to comply with applicable Law. FDR agrees not to, and to cause its
Affiliates not to, use any of Customer's Proprietary Information for any
purpose except as expressly contemplated hereby.
FDR's Proprietary Information. Neither Customer nor Clients
shall obtain any proprietary rights in any proprietary or confidential
information which has been or at any time after the date of this
Agreement is disclosed, directly or indirectly, to Customer or any of
Clients by FDR, including any data or information that is a trade secret
or competitively sensitive material, FDR's user manuals, screen displays
and formats, FDR's computer software and documentation, software
performance results, flow charts and other specifications (whether or not
electronically stored), data and data formats (collectively, "FDR's
Proprietary Information") whether any of the materials are developed or
purchased specifically for performance of this Agreement or otherwise.
Customer and Clients agree to, and shall cause their respective
Affiliates to, return to FDR all of FDR's Proprietary Information upon
the expiration or termination of this Agreement or the applicable Client
Supplement except to the extent retention of such FDR's Proprietary
Information is deemed necessary to comply with applicable Law or sound
banking and credit practices. Customer and each Client agree not to, and
to cause their respective Affiliates not to, use any of FDR's Proprietary
Information for any purpose except as expressly contemplated hereby.
Confidentiality of Agreement. FDR and Customer shall keep
confidential and not disclose, and shall cause their respective
Affiliates and their respective directors, officers, employees,
representatives, agents and independent contractors to keep confidential
and not disclose, any of the terms and conditions of this Agreement
(including any Client Supplement) to any third party without the prior
written consent of the other. FDR and Customer may, however, make such
disclosures (i) as may be required by applicable regulatory authorities,
(ii) pursuant to applicable Laws, or (iii) in the context of due
diligence processes in connection with the issuance of securities or any
proposed merger or acquisition transaction (provided that the party to
which such information is disclosed shall have executed and delivered to
the party making such disclosure a confidentiality agreement limiting the
use of such information to such processes). No Client shall without the
prior written consent of FDR and Customer, disclose (or permit any of its
Affiliates or their respective directors, officers, employees,
representatives, agents and independent contractors to disclose) any of
the terms and conditions of this Agreement (including any Client
Supplement) to any third party. However, any Client may make such
disclosures (i) as may be required by applicable regulatory authorities,
(ii) pursuant to applicable Laws, or (iii) in the context of due
diligence processes in connection with the issuance of securities or any
proposed merger or acquisition transaction (provided that the party to
which such information is disclosed shall have executed and delivered to
the party making such disclosure a confidentiality agreement limiting the
use of such information to such processes).
Confidentiality. FDR, Customer and Clients agree to maintain
Customer's Proprietary Information and FDR's Proprietary Information
respectively, in strict confidence. Without limiting the generality of
the foregoing, FDR, Customer and Clients each agree:
(a) Not to disclose or permit any other person or Entity access to
Customer's Proprietary Information or FDR's Proprietary Information, as
appropriate, except that the disclosure or access shall be permitted to
an employee, officer, director, agent, representative, external or
internal auditors, independent contractors or regulatory authorities of
the party requiring access to the same in the course of his or her
employment or services;
(b) To ensure that its employees, officers, directors, agents,
representatives and independent contractors are advised of the
confidential nature of Customer's Proprietary Information and FDR's
Proprietary Information, as appropriate, and are precluded from taking
any action prohibited under this Article 10, provided that in any event
Customer, each Client and FDR shall each be liable for any breach of this
Article 10 by their respective employees, officers, directors, agents,
representatives and independent contractors;
(c) Not to alter or remove any identification, copyright or
proprietary rights notice which indicates the ownership of any part of
Customer's Proprietary Information or FDR's Proprietary Information, as
appropriate; and
(d) To notify FDR, the affected Client or Customer, as the
case may be, promptly and in writing of the circumstances surrounding any
possession, use or knowledge of Customer's Proprietary Information or
FDR's Proprietary Information, as appropriate, at any location or by any
Entity other than those authorized by this Agreement.
Release of Information. Despite the foregoing, (a) Customer
and each Client agree that Customer's Proprietary Information may be made
available to VISA, MasterCard or to supervisory or regulatory authorities
of FDR, Customer or Clients after notice to Customer and (b) FDR agrees
that FDR's Proprietary Information may be made available to VISA,
MasterCard or to supervisory or regulatory authorities of Customer,
Clients, FDR or their respective Affiliates after notice to FDR. Each
party shall cooperate with the others in an effort to limit the nature
and scope of any required disclosure.
Exclusions. Nothing in this Article 10 shall restrict FDR,
Customer or any Client with respect to Customer's Proprietary Information
or FDR's Proprietary Information, as appropriate, or information or data
identical or similar to such proprietary information but which:
(a) such Entity rightfully possessed before it received the
information as evidenced by written documentation;
(b) subsequently becomes publicly available through no fault of
such Entity;
(c) is subsequently furnished rightfully to such Entity by a third
party (no Affiliate of Customer (or of a Client) shall be considered to
be a third party) not known to be under restrictions on use or
disclosure;
(d) is independently developed by an employee, agent or contractor
of such Entity;
(e) is required to be disclosed by Law, provided that the
disclosing party will exercise reasonable efforts to notify the affected
party prior to disclosure so that the affected party may take any actions
required to protect its data and further provided that the disclosing
party will provide notice to the affected party of any release of
Customer's Proprietary Information or FDR's Proprietary Information at
the time of such release; or
(f) is disclosed in any proceeding to enforce FDR's or Customer's
rights under this Agreement, provided that all reasonable measures to
preserve the confidentiality of such information in any such proceeding
are taken by the disclosing party.
Remedy. In the event of any breach of this Article 10, FDR,
Customer and Clients agree that the Entity harmed by such breach (the
"Affected Party"), will suffer irreparable harm and the total amount of
monetary damages for any injury to the Affected Party from any violation
of this Article 10 will be difficult or impossible to calculate and will
therefore be an inadequate remedy. Accordingly, FDR, Customer and Clients
agree that the Affected Party shall be entitled to temporary and
permanent injunctive relief against the breaching party, its employees,
officers, directors, agents, representatives or independent contractors,
in addition to the other rights and remedies to which the Affected Party,
may be entitled to at law, in equity and under this Agreement for any
violation of this Article 10. The provisions of this Article 10 shall
survive the expiration or termination of this Agreement.
ARTICLE 11
REPRESENTATIONS, WARRANTIES AND COVENANTS
FDR's Representations and Warranties. As of the date hereof,
FDR represents and warrants to Customer, and as of the date of execution
of each Client Supplement, FDR represents and warrants to Customer and
the applicable Client as follows:
(a) It is a corporation validly organized and existing
under the laws of the State of Delaware;
(b) It has full power and authority under its organizational
documents and the laws of the State of Delaware to execute and deliver
this Agreement and the Client Supplements and to perform its obligations
hereunder and thereunder;
(c) It has by proper action duly authorized the execution and
delivery of this Agreement and of the Client Supplements and when validly
executed and delivered this Agreement and the Client Supplements shall
constitute legal, valid and binding agreements of FDR enforceable in
accordance with their terms;
(d) The execution and delivery of this Agreement and of the Client
Supplements and the consummation of the transactions herein and therein
contemplated do not conflict in any material respect with or constitute a
material breach or material default under its organizational documents or
under the terms and conditions of any documents, agreements or other
writings to which it is a party; and
(e) All products and services provided hereunder shall be "Year
2000 Compliant." "Year 2000 Compliant" shall have the meaning described
in Section X of Exhibit "B" to this
Agreement.
Covenants of FDR. FDR shall perform the services provided in
this Agreement pursuant to Exhibit "D", and, with respect to services
which are not subject to Exhibit "D", FDR shall provide the services to
the level of timeliness, accuracy, security, business specifications and
technical specifications which are set forth in the User Manuals listed
in Exhibit "A", Section I and as provided in the Procedures Manual.
Customer's Representations and Warranties. As of the date
hereof, Customer represents and warrants to FDR, and (except in the case
of Section 11.3(g) below) as of the date of execution of each Client
Supplement, Customer represents and warrants to FDR and the applicable
Client as follows:
(a) It is a limited liability company validly organized and
existing under the laws of the State of Delaware;
(b) It has full power and authority under its organizational
documents and the laws of the State of Delaware to execute and deliver
this Agreement and the Client Supplements and to perform its obligations
hereunder and thereunder;
(c) It has by proper action duly authorized the execution and
delivery of this Agreement and of the Client Supplements and when validly
executed and delivered this Agreement and the Client Supplements shall
constitute legal, valid and binding agreements of Customer enforceable in
accordance with their terms;
(d) The execution and delivery of this Agreement and of the Client
Supplements and the consummation of the transactions herein and therein
contemplated do not conflict in any material respect with or constitute a
material breach or material default under its organizational documents or
under the terms and conditions of any documents, agreements or other
writings to which it is a party;
(e) The execution and delivery of this Agreement and of each of the
Client Supplements does not, and will not, conflict in any material
respect with, or constitute a material breach or material default under,
the terms and conditions of any agreements between Customer and any of
its Clients;
(f) Any hardware or software provided by Customer and the
Customer's vendors (other than hardware or software that is provided by
FDR or is approved by FDR which, in any case, is properly installed (any
such hardware or software so installed being referred to as "FDR Hardware
or Software")) which is intended to deliver records to, or receive
records from, or to interact with, the products and services provided
hereunder is Year 2000 Compliant;
(g) As of the date of execution and delivery of this Agreement,
Customer has a paid-in capital of at least one hundred million dollars
($100,000,000.00), as reflected on Customer's balance sheet in accordance
with generally accepted accounting principles.
Covenant of Customer. Until such time as a Client Supplement
in the form of Exhibit "I" attached hereto has been executed and
delivered by Customer, FDR and PF Bank, Customer will not make any
distributions to its members in respect of their membership interests,
if, after such distributions, the equity of Customer and its
subsidiaries, not including loan loss reserves and as determined in
accordance with generally accepted accounting principles consistently
applied, would be less than fifty million dollars ($50,000,000.00),
except that Customer may make such distributions to its members to the
extent required for payment of taxes incurred in connection with the
ownership of such membership interests.
ARTICLE 12
SERVICE PERFORMANCE
Service Performance. The services provided hereunder will
be provided in accordance with the standards set forth in
Exhibit "D".
ARTICLE 13
GENERAL
13.1 Assignment. Except as otherwise provided herein, the rights
and obligations of FDR and Customer under this Agreement are personal and
not assignable, either voluntarily or by operation of law, without the
prior written consent of the other party, not to be unreasonably
withheld. Subject to the foregoing, all provisions contained in this
Agreement shall extend to and be binding upon FDR and Customer or their
respective successors and permitted assigns. Either FDR or Customer may
merge with or into any Entity without the consent of the other provided
the surviving Entity agrees to be bound by the terms of this Agreement.
13.2 Relationship of Parties. Nothing contained in this Agreement
shall be deemed or construed by FDR and Customer, or by any third party,
to create the relationship of partnership or joint venture between FDR
and Customer, it being understood and agreed that neither the method of
computing compensation nor any other provision contained herein shall be
deemed to create any relationship between FDR and Customer other than the
relationship of independent parties contracting for services. Neither
Customer nor FDR has, and neither of them shall hold itself out as
having, any authority to enter into any contract or create any obligation
or liability on behalf of, in the name of, or binding upon any other.
13.3 Business Continuity Plan. FDR has created a business
continuity plan (the "Business Continuity Plan"). FDR shall provide
Customer and each Client with a written summary of such Business
Continuity Plan upon the written request of Customer or such Client and
from time to time upon any updating of the Business Continuity Plan.
Despite the foregoing, FDR reserves the right to change such Business
Continuity Plan from time to time during the Term of this Agreement. At
any time, upon Customer's or any Client's request, FDR shall explain all
changes made to the Business Continuity Plan. Any such change shall not
degrade the quality of the Business Continuity Plan in a manner which has
a material, adverse impact on the services provided hereunder or under
any Client Supplement. FDR will undertake and make certain revisions to
its Business Continuity Plan which will meet or exceed regulatory agency
contingency planning criteria. FDR's Business Continuity Plan includes a
time frame schedule for recovering critical business functions.
13.4 State Law. This Agreement shall be governed by the laws of the
State of Delaware as to all matters, including validity, construction,
effect, performance and remedies without giving effect to the principles
of choice of law thereof.
13.5 Notice. All notices which FDR or Customer may be required or
desire to give to the other shall be in writing and shall be given by
personal service, telecopy, registered mail or certified mail (or its
equivalent), or overnight courier to each recipient at its respective
address or telecopy telephone number set forth below. Mailed notices and
notices by overnight courier shall be deemed to be given upon actual
receipt by the party to be notified. Notices delivered by telecopy shall
be confirmed in writing by overnight courier and shall be deemed to be
given upon actual receipt by the party to be notified.
If to FDR: First Data Resources Inc.
10825 Farnam Drive
Omaha, NE 68154
Attention: President
Telecopy Number: 402-222-7334
With a copy to: First Data Resources Inc.
10825 Farnam Drive
Omaha, NE 68154
Attention: General Counsel
Telecopy Number: 402-222-7700
If to Customer or
to PF Receivables: Partners First Holdings, LLC
900 Elkridge Landing Road
Suite 300
Linthicum, MD 21090
Attention: John Soderlund
Telecopy Number: 410-855-8599
With a copy to: Partners First Holdings, LLC
900 Elkridge Landing Road
Suite 300
Linthicum, MD 21090
Attention: Terry Browne, Esq.
Telecopy Number: 410-855-8599
A party may change its address or addresses set forth above by
giving each other party notice of the change in accordance with the
provisions of this section.
13.6 Headings. The section headings in this Agreement are solely
for convenience and shall not be considered in its interpretation. The
recitals set forth on the first page of this Agreement are incorporated
into the body of this Agreement. The exhibits referred to throughout this
Agreement are attached to this Agreement and are incorporated into this
Agreement. Unless the context clearly indicates, words used in the
singular include the plural, words in the plural include the singular and
the word "including" means "including but not limited to."
13.7 Waiver. The failure of FDR or Customer at any time to require
performance by the other of any provision of this Agreement shall not
affect in any way the full right to require the performance at any
subsequent time. The waiver by FDR or Customer of a breach of any
provision of this Agreement shall not be taken or held to be a waiver of
the provision itself. Any course of performance shall not be deemed to
amend or limit any provision of this Agreement.
13.8 Force Majeure and Restricted Performance. (a) If performance
by FDR of any service or obligation under this Agreement or any Client
Supplement, including Conversion or Deconversion, is prevented,
restricted, delayed or interfered with by reason of labor disputes,
strikes, acts of God, floods, lightning, severe weather, shortages of
materials, rationing, utility or communication failures, failure of
MasterCard or VISA, failure or delay in receiving electronic data,
earthquakes, war, revolution, civil commotion, acts of public enemies,
blockade, embargo, or any law, order, proclamation, regulation,
ordinance, demand or requirement having legal effect of any government or
any judicial authority or representative of any such government, or any
other act or omission whatsoever, whether similar or dissimilar to those
referred to in this clause, which is or are beyond the reasonable control
of FDR and which could not have been avoided through implementation of
the Business Continuity Plan, where applicable, then FDR shall provide
notice to Customer and each affected Client identifying the cause of the
prevention, restriction, delay or interference and FDR shall be excused
from the performance to the extent of the prevention, restriction, delay
or interference, so long as FDR is taking reasonable action to accomplish
such performance as promptly as possible under the circumstances. As a
condition to continuing to perform embossing services for card issuing
members of VISA U.S.A. Inc., FDR was required to enter into a VISA Card
Personalization Agreement dated May 1, 1993, (the "VISA Agreement").
Under certain circumstances VISA is permitted, pursuant to the VISA
Agreement, to temporarily or permanently prevent or restrict FDR's right
to perform embossing services for card issuing members of VISA U.S.A.
Inc. Customer and Clients hereby agree that if, as a result of VISA
exercising its rights under the VISA Agreement, FDR is prevented or
restricted by VISA from performing embossing services for Customer or
Clients, then FDR shall be excused from the performance of such embossing
services to the extent of such prevention or restriction by VISA.
(b) If performance by Customer or any Client of any service or
obligation under this Agreement or any Client Supplement is prevented,
restricted, delayed or interfered with by reason of labor disputes,
strikes, acts of God, floods, lightning, severe weather, shortages of
materials, rationing, utility or communication failures, failure of
MasterCard or VISA, failure or delay in receiving electronic data,
earthquakes, war, revolution, civil commotion, acts of public enemies,
blockade, embargo, or any law, order, proclamation, regulation,
ordinance, demand or requirement having legal effect of any government or
any judicial authority or representative of any such government, or any
other act or omission whatsoever, whether similar or dissimilar to those
referred to in this clause, which is or are beyond the reasonable control
of such party, then Customer or such Client, as applicable, shall be
excused from the performance to the extent of the prevention,
restriction, delay or interference, so long as such party is taking
reasonable actions to accomplish such performance as promptly as possible
under the circumstances.
13.9 Severability. If any provision of this Agreement is held
invalid or unenforceable for any reason, the invalidity shall not affect
the validity of the remaining provisions of this Agreement, and FDR and
Customer shall substitute for the invalid provisions a valid provision
which most closely approximates the intent and economic effect of the
invalid provision.
13.10 Audit. From time to time during the Term of this Agreement,
but at least biennially, FDR shall engage a nationally recognized
independent audit firm, selected and paid for by FDR, to perform an audit
of the electronic data processing environment maintained by FDR to
provide the services contemplated by this Agreement. FDR shall provide
Customer, at no charge, with a copy of the results of any audit. From
time to time during the Term of this Agreement, FDR shall also provide
Customer or persons authorized by and acting on behalf of Customer,
including an independent third party selected and paid for by Customer,
with reasonable access during normal business hours to FDR's facilities
and to FDR's accounting and business records in order to permit Customer,
or such authorized persons, to audit (or perform compliance reviews with
respect to) FDR's supporting procedures, controls and security methods
associated with the services being provided to Customer, FDR's compliance
with the settlement functions associated with each Client and all reports
delivered by FDR hereunder. In addition, FDR shall allow federal and
state governmental and banking authorities having jurisdiction over
Customer's business reasonable access during normal business hours to the
records, procedures and facilities of FDR related to this Agreement. FDR
shall reasonably cooperate with Customer, such other persons authorized
by Customer and any governmental and banking authorities in the conduct
of any audits, including giving them access, for discussion of any audit,
to officers and the independent auditors of FDR.
13.11 Risk of Loss. As between Customer and FDR, Customer shall be
responsible for any and all risk of loss to any tangible item (a)
provided by FDR for Customer (including without limitation statements and
embossed cards) upon the delivery of such items to the U.S. Postal
Service or such other courier as Customer may select, and (b) provided by
Customer to FDR until actual receipt of such items by FDR. As between
Customer and FDR, it is expressly understood that the U.S. Postal Service
and any courier selected by Customer are the agents of Customer and not
FDR.
13.12 Equal Employment Opportunity. FDR will not discriminate
against any employee or applicant for employment because of race, color,
religion, sex, national origin, disability, age or veteran status as
ordered by the Secretary of Labor pursuant to Section 202 of Executive
Order 11246, Section 503 of the Rehabilitation Act of 1973, and Section
402 of the Vietnam Era Veterans Readjustment Assistance Act of 1974.
13.13 Entire Agreement. This Agreement, including exhibits and the
executed Client Supplements, if any, and including that certain letter
agreement by and between Customer and FDR of even date herewith, sets
forth all of the promises, agreements, conditions and understandings
between FDR, PF Receivables and Customer respecting the subject matter
hereof and supersedes all negotiations, conversations, discussions,
correspondence, memorandums and agreements between the parties concerning
the subject matter. This Agreement, including exhibits, may not be
modified except by a writing signed by authorized representatives of FDR,
PF Receivables and Customer. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
13.14 Informal Dispute Resolution. Any controversy or claim between
FDR and Customer, whether on behalf of Customer or a Client (or any of
their Affiliates), or between FDR and any Client (or any of their
Affiliates) (the parties included in the Dispute hereinafter referred to
as the "Disputing Parties") arising from or in connection with this
Agreement or such Client's Client Supplement or the relationship of FDR
and Customer under this Agreement or the relationship of FDR and such
Client under such Supplement whether based on contract, tort, common law,
equity, statute, regulation, order or otherwise and whether arising
before or after termination of this Agreement (the "Dispute") shall be
resolved as follows:
(a) Upon written request of the party initiating the Dispute, the
Disputing Parties will each appoint a designated representative whose
task it will be to meet for the purpose of endeavoring to resolve such
Dispute.
(b) The designated representatives shall meet as often as the
Disputing Parties reasonably deem necessary to discuss the problem in an
effort to resolve the Dispute without the necessity of any formal
proceeding.
(c) Arbitration proceedings for the resolution of a Dispute under
Section 13.15 may not be commenced until the earlier of:
(i) the designated representatives concluding in good faith
that amicable resolution through continued negotiation of the
matter does not appear likely; or
(ii) the expiration of the thirty (30) day period immediately
following the initial request to negotiate the Dispute.
13.15 Arbitration. If the provisions of Section 13.14 have been
satisfied but the Dispute has not been resolved, then the Dispute shall
be settled pursuant to the following:
(a) Any Disputing Party may proceed to arbitration in the State of
Delaware in accordance with the then current Commercial Arbitration Rules
of the American Arbitration Association. The Disputing Parties agree that
any process or any paper in connection with any such arbitration may be
served by certified mail, return receipt requested, or by personal
service or in such other manner as may be permissible under the rules of
the arbitration tribunal, provided a reasonable time for appearance is
allowed.
(b) FDR, Customer and each Client agree to abide by and perform any
award rendered by the arbitrator(s) and further agree that a judgment
upon the award rendered by the arbitrator(s) may be entered in any court
having jurisdiction thereof.
(c) FDR, Customer and each Client acknowledge and agree that
performance of the obligations under this Agreement and under such
Client's Client Supplement necessitates the use of instrumentalities of
interstate commerce and, notwithstanding other general choice of law
provisions in this Agreement or such Client's Client Supplement, FDR,
Customer and each Client agree that the United States Arbitration Act
(Title 9 of the U.S. Code) shall govern the interpretation, enforcement
and proceedings with respect to this Section 13.15.
(d) A Dispute must be initiated in accordance with Section 13.14
within one year after the party initiating the Dispute becomes aware that
it, or any of its directors, officers, employees, agents or Affiliates,
has suffered or incurred, or reasonably expects to suffer or incur, any
Losses. Failure to file a Dispute within such one-year period shall
constitute a waiver of any rights or remedies with respect to such
Dispute. To avoid unnecessary costs or delays, should any Disputing Party
claim that the Dispute has been waived by virtue of the passage of time
as specified in this section, the arbitrator(s) shall address and resolve
this claim first before accepting evidence regarding the substantive
aspects of the Dispute. If the arbitrator(s) determine that the Dispute
was not filed within the one-year time period, the arbitrator(s) shall
dismiss the claim of the party initiating the Dispute with prejudice and
enter a decision and award in favor of the other party or parties to the
Dispute.
(e) FDR, Customer and each Client agree that arbitration
proceedings under this Section 13.15 are compromise negotiation for
purposes of the federal rules of evidence, state rules of evidence or any
other laws of evidence. The entire procedure is confidential and subject
to Article 10. No Disputing Party or arbitrator(s) may disclose the
existence, content or results of any arbitration hereunder without the
written consent of the Disputing Parties, except (i) to the extent
disclosure is required to enforce any applicable arbitration award, (ii)
as permitted under Section 10.6(e) or Section 10.6(f) of this Agreement,
or (iii) in the context of due diligence processes in connection with the
issuance of securities or any proposed merger or acquisition transaction
(provided that the party to which such information is disclosed shall
have executed and delivered to the party making such disclosure a
confidentiality agreement limiting the use of such information to such
processes). All conduct, statements, promises, offers, views and opinions
of all parties involved in an arbitration shall not be discoverable or
admissible for any purposes in litigation or other proceedings involving
the Disputing Parties and shall not be disclosed to any one not an agent,
employee, expert, witness, or representative for the Disputing Parties,
except (i) to the extent disclosure is required to enforce any applicable
arbitration award, (ii) as permitted under Section 10.6(e) or Section
10.6(f) of this Agreement, or (iii) in the context of due diligence
processes in connection with the issuance of securities or any proposed
merger or acquisition transaction (provided that the party to which such
information is disclosed shall have executed and delivered to the party
making such disclosure a confidentiality agreement limiting the use of
such information to such processes).
(f) FDR, Customer and each Client agree that the arbitrator or
chair of the arbitration panel shall have the discretion to order a
pre-hearing exchange of information by the Disputing Parties, limited to
a thirty-day period for production of requested documents and examination
by deposition of parties. Such discovery shall be scheduled at a
discovery conference to be conducted by the arbitrator or chair of the
arbitration panel as soon as practicable after the selection of the
arbitrator(s).
(g) The Disputing Parties shall each bear equally all fees and
costs and expenses of the arbitration, and the Disputing Parties shall
bear their own legal fees and expenses and the costs of its experts and
witnesses; provided, however, that if the position of a Disputing Party
is upheld by the arbitration panel in all material respects, then,
notwithstanding any applicable governing law provisions, the other
Disputing Party shall pay all costs, fees and expenses incurred by the
prevailing party.
13.16 Permissible Legal Proceeding. Notwithstanding anything
contained in Sections 13.14 and 13.15, (a) a Disputing Party may
institute legal proceedings to seek a temporary restraining order or
other temporary or preliminary injunctive relief to prevent immediate and
irreparable harm to itself, and for which monetary damages would be
inadequate, pending final resolution of the dispute, controversy or claim
pursuant to arbitration, and (b) a Disputing Party may institute legal
proceedings if necessary to preserve a superior position with respect to
other creditors. Such conduct shall not constitute a waiver of the right
of any Disputing Party to resort to arbitration to obtain relief other
than that specified in this Section 13.16.
13.17 FDR Insurance Policies. FDR agrees that during the Term of
this Agreement, it will obtain and maintain insurance covering various
types of liabilities which FDR, in its reasonable business judgment,
determines is appropriate to cover the potential exposure that FDR and
its customers could experience. At the time of the execution of this
Agreement, FDR has obtained and is maintaining the types of insurance
coverage and, at a minimum, the amounts described in Exhibit "E";
provided, however, that nothing in this Section 13.17 shall be construed
to require FDR to maintain the types of coverage or the amounts described
in Exhibit "E" and FDR, at its sole election, shall be permitted to make
any modification, change, reduction or increase in the types of coverage
or the amount of coverage which FDR, in its reasonable business judgment,
determines is appropriate.
13.18 Publicity. FDR and Customer will submit to the other all
advertising, written sales promotion, press releases and other publicity
or public relations materials in which reference to the other is proposed
to be made, and neither party will publish or use any such material
without the prior written consent of the other party. Notwithstanding the
foregoing, (i) FDR may include Customer's name in standardized customer
lists and in the experience sections of proposals to third parties in a
form approved in advance by Customer or in oral presentations to
prospective customers, provided, however, that no such reference shall
contain or imply any endorsement by Customer or any of its Affiliates of
FDR or any of its products or services, (ii) Customer may disclose the
existence and terms of this Agreement to Clients and prospective Clients
(provided that any such prospective Client executes a confidentiality
agreement) and (iii) whenever required by reason of legal, accounting or
regulatory requirements, public disclosure of the existence and general
nature of this Agreement may be made by FDR or Customer, FDR or Customer,
as applicable, agreeing to notify the other
thereof in each instance prior thereto if possible and if not as
promptly as practicable thereafter.
13.19 Minority and Women-Owned Business Enterprises. It is the
policy of Customer to place a fair portion of its buying business,
including contracts and subcontracts for goods and/or services, with
minority and women owned business enterprises. These enterprises shall be
afforded an equitable opportunity to compete for all contracts in which
they can provide competitive performance and pricing related to the
requirements outlined within this Agreement. Upon request, FDR will
submit to Customer reports with respect to the number of minority and
women owned business enterprises it subcontracts to fulfill its
obligations under this Agreement.
13.20 Third Party Beneficiary. Except as provided in Section 13.1
and as to any Indemnified Party, no person or Entity other than FDR,
Customer and Clients who have signed Client Supplements shall have any
rights under this Agreement.
13.21 Several Liability. FDR, Customer and each Client acknowledge
and agree that except as expressly set forth in this Agreement or the
Client Supplements the obligations of Customer and each Client shall be
several (and not joint) and none of Customer or any Client shall assume
or be liable for any obligations of any Entity other than the obligations
of Customer or such Client, as the case may be. Notwithstanding the
immediately preceding sentence, FDR may pursue a cause of action jointly
against Customer as agent and Client as principal for the tortious acts
of Customer committed while acting on behalf of Client pursuant to the
Agency Agreement.
13.22 PF Receivables. PF Receivables agrees to be jointly and
severally liable for all payment and indemnification obligations of
Customer to FDR under this Agreement, and for all other obligations of
Customer to FDR pursuant to Article 10 of this Agreement. PF Receivables
makes the representations and warranties specified in subsections
11.3(a), (b), (c), (d) and (e) to FDR as of the date hereof and as of the
date of execution of each Client Supplement.
IN WITNESS WHEREOF, the parties to this Agreement have caused it to
be executed by their duly authorized officers as of the day and year
first written above.
FIRST DATA RESOURCES INC.
By /s/ Jack R. McDonnell
________________________________
Name: Jack R. McDonnell
Title: Executive Vice President
PARTNERS FIRST HOLDINGS, LLC
By: /s/ John R. Soderlund
________________________________
Name: John R. Soderlund
Title: President and Chief Executive
Officer
PARTNERS FIRST RECEIVABLES, LLC
By: /s/ John R. Soderlund
________________________________
Name: John R. Soderlund
Title: President and Chief Executive
Officer
ASSISTANCE AGREEMENT (this "Agreement"), dated as of January
29, 1998, by and between Partners First Holdings, LLC, a Delaware limited
liability company ("Holdings"), and BankBoston (NH), National
Association, a national banking association (the "Bank").
WHEREAS, simultaneously with the execution and delivery of
this Agreement, the Bank and Holdings have entered into the Contribution
Agreement (as hereinafter defined) pursuant to which the Bank has
contributed to Holdings certain assets relating to the Initial Accounts,
including without limitation, the right to direct the Bank to transfer to
any other party at any time and without further consideration the Initial
Cardholder Agreements and other Initial Designated Agreements;
WHEREAS, pursuant to the Contribution Agreement, the Bank
shall continue to hold, be a party to and be entitled to extend credit
under the Initial Cardholder Agreements, subject to the terms and
conditions set forth therein;
WHEREAS, Holdings and the Bank mutually desire to assist
each other in the marketing, solicitation and origination of Accounts (as
hereinafter defined), subject to the terms and conditions set forth
herein;
WHEREAS, upon the origination or acquisition of Additional
Accounts (as hereinafter defined) utilizing the expertise and services of
Holdings on behalf of the Bank, the Bank desires to sell, transfer and
assign the Transferred Assets relating to such Additional Accounts to
Holdings and Holdings is willing to accept such Transferred Assets; and
WHEREAS, the Bank desires to engage the services of Holdings
and such sub-servicer as Holdings may designate to service the Accounts,
subject to the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged and intending to be legally bound, the parties hereto hereby
agree as follows:
Article I
Definitions
1.1. Definitions. As used in this Agreement, capitalized terms
used herein without definition shall have the meaning specified in the
Contribution Agreement and the following terms shall have the meaning
specified:
"Accounts" means the Initial Accounts and the Additional
Accounts.
"Account Information" means any and all books and records of
Holdings or the Bank relating solely to the Solicited Applicants,
Applicants, Eligible Applicants, Initial Cardholders, Additional
Cardholders and the Accounts, including, without limitation, all Account
applications, statements, records and correspondence and all customer
lists and other information under Holdings' or the Bank's control
relating solely to each of the foregoing and such Accounts, whether in
paper, microfilm, microfiche or magnetic tape form.
"Accounts Receivable" means any and all amounts payable by
the Cardholders (whether billed or unbilled, posted or not) in connection
with the Accounts, including, without limitation, all principal,
outstanding purchases, cash advances, interest (including accrued but
unbilled interest), annual fees, finance and service charges and other
charges and fees.
"Acquisition" has the meaning set forth in Section 3.3.
"Additional Account" means a Credit Card account originated
after the date hereof pursuant to Article III hereof.
"Additional Cardholder Agreement" has the meaning set forth
in Section 3.2.
"Additional Designated Agreements" means the Additional
Cardholder Agreements and all rights and privileges under the Additional
Cardholder Agreements, including, without limitation, all rights to
create, enforce and collect Accounts Receivable under the Additional
Cardholder Agreements, all rights to enforce and collect amounts owing
under the Additional Cardholder Agreements and all rights to amend and
modify the Additional Cardholder Agreements and all records and
information necessary for Bank to exercise its rights and privileges
under the Additional Cardholder Agreements.
"Adverse Consequences" means all actions, suits,
proceedings, hearings, investigations, charges, complaints, claims,
demands, injunctions, judgments, orders, rulings, decrees, damages, dues,
penalties, fines, costs, amounts paid in settlement, liabilities,
obligations, liens, losses, expenses, and fees, including court costs and
reasonable attorneys' fees and expenses, and all lost profits and
exemplary, punitive, consequential or other similar damages awarded to
any third party.
"Affiliate" means, with respect to any Person, any other
Person controlling, controlled by or under common control with, such
Person. As used in this definition, (a) "control" (including, with its
correlative meanings, "controlling," "controlled by" and "under common
control with") means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities, by contract
or otherwise, and (b) with respect to any Person other than a Subsidiary
of Holdings, the term "Affiliate" shall not include Holdings or any
Subsidiary of Holdings.
"Agreement" has the meaning in the preamble hereto.
"Applicant" means a Person who applies for a Credit Card.
"Applicant Information" has the meaning set forth in Section
3.2.
"Assigned Agreements" means the Additional Agreements as
defined in the Contribution Agreement.
"Bank" has the meaning in the preamble hereto.
"Bank International Credit Card Business" means the
provision of unsecured lines of credit accessible by VISA(R) or
MasterCard(R) to consumers located outside of the United States of
America, the servicing of such credit card relationships, and the
provision of services incidental thereto by the Bank and its Affiliates.
"Bank Relationship Credit Card Business" means the Credit
Card Business engaged in by the Bank and its Affiliates with consumers
who are employees, officers or directors of the Bank or the Bank
Affiliates or a family member of any such employees, officers or
directors or with any other Person who maintains at least one other
ongoing customer relationship with the Bank or any of its Affiliates at
the time of reference.
"Bank Required Information" has the meaning set forth in
Section 5.1(e).
"Bank Value-Limited Credit Card Business" means the Credit
Card Business (other than the Bank Relationship Credit Card Business)
engaged in by Bank and its Affiliates (other than pursuant to this
Agreement), to the extent that the aggregate outstanding balance of
credit card accounts comprising such Credit Card Business does not exceed
$250 million.
"Bankmont" means Bankmont Financial Corp., a Delaware
corporation.
"BIN" means the Visa(R) Bank Information Number.
"BKB" means BankBoston (NH), National Association, a
national banking association.
"Business Day" means a day other than Saturday, Sunday or
any day on which banks located in the Commonwealth of Massachusetts or
the State of Maryland are authorized or obligated to close.
"Cardholder" means a holder of a Credit Card which is a
party to either an Initial Cardholder Agreement or an Additional
Cardholder Agreement.
"Cardholder Agreement" means the agreement between the
Cardholder or other obligors and the Bank with respect to a Credit Card
including, without limitation, any agreement relating to credit
enhancements provided in connection with such Credit Card, as the same
has been amended or otherwise modified and in effect from time to time.
"Claim Notice" means written notification pursuant to
Section 7.2(a) of a Third Party Claim as to which indemnity under Section
7.1 is sought by an Indemnified Party, enclosing a copy of all papers
served, if any, on the Indemnified Party.
"Clearing Bank Supplement" means the Client Supplement,
substantially in the form of Exhibit C to the Master Services Agreement,
dated as of January 29, 1998, by and among the Bank, Holdings and FDR
relating to the Holdings Credit Card Business, as amended from time to
time in accordance with the terms thereof.
"Closing Date Receivables Purchase and Sale Agreements"
means the Receivables Purchase and Sale Agreement, dated as of January
29, 1998, by and between the Bank and Receivables and the Overdue
Receivables Purchase and Sale Agreement, dated as of January 29, 1998, by
and between the Bank and Receivables, collectively.
"Common Units" means the units designated as "Common Units"
pursuant to the terms of the Operating Agreement.
"Contribution Agreement" means the Contribution Agreement
dated as of January 29, 1998 by and between the Bank and Holdings.
"Credit Card" means a MasterCard(R) or VISA(R) card issued
by the Bank and associated solely with the Holdings Credit Card Business.
"Credit Card Business" means the provision of unsecured
lines of credit accessible by VISA(R) or MasterCard(R) credit cards to
consumers within the United States of America, the servicing of such
credit card relationships, and the provision of services incidental
thereto.
"Credit Date" has the meaning set forth in Section 4.1.
"Credit Event" has the meaning set forth in Section 4.1.
"Credit Policy" means the credit policy, as adopted by the
Bank and acceptable to Holdings used as the basis for determining
whether, when and to what extent to establish an Additional Account or to
extend credit under a Cardholder Agreement or Account, as amended from
time to time in accordance with the terms hereof (a copy of which has
been provided to Holdings on the date hereof).
"Designated Agreements" means the Initial Designated
Agreements and the Additional Designated Agreements.
"Disclosing Party" has the meaning set forth in Article VI.
"Dispute Notice" has the meaning set forth in Section
7.2(c).
"Dispute Period" means the period ending 30 calendar days
following receipt by the Indemnifying Party of an Indemnity Notice.
"Eligible Applicant" has the meaning set forth in Section
3.1(b).
"FA" means First Annapolis Marketing Information Services,
Inc., a Maryland corporation.
"FDR" means First Data Resources Inc.
"Governmental Authority" means may federal, national, state,
municipal, local, territorial or other governmental department,
commission, board, bureau, agency, regulatory authority, instrumentality,
judicial or administrative body, domestic or foreign.
"Holdings" has the meaning in the preamble hereto.
"Holdings Credit Card Business" means the Credit Card
Business of the Bank other than the Bank Relationship Credit Card
Business, the Bank International Credit Card Business and the Bank
Value-Limited Credit Card Business.
"Holdings Required Information" has the meaning set forth in
Section 5.2(d).
"ICA" means the MasterCard(R) Interbank Card Number.
"Indemnified Bank Parties" has the meaning set forth in
Section 7.1(a).
"Indemnified Holdings Parties" has the meaning set forth in
Section 7.1(b).
"Indemnified Parties" has the meaning set forth in Section
7.1(b).
"Indemnifying Party" means any Person against whom a claim
for indemnification is being asserted under any provision of Article VII.
"Indemnity Notice" means written notification pursuant to
Section 7.2(c) of a claim for indemnity under Article VII by an
Indemnified Party, specifying the nature of and basis for such claim,
together with the amount or, if not then reasonably ascertainable, the
estimated amount, determined in good faith, of such claim.
"Information" has the meaning set forth in Article VI.
"Initial Account" means a Credit Card account transferred to
Holdings by the Bank under the Contribution Agreement.
"Initial Cardholder Agreements" means the Cardholder
Agreements as defined in the Contribution Agreement.
"Initial Designated Agreements" means the Designated
Agreements as defined in the Contribution Agreement.
"Interchange" means the contractual agreements, rules,
regulations and procedures governing the relationships between, or the
actions in accordance with the contracts, agreements, rules, regulations
and procedures by, any two or more Persons in connection with Interchange
Settlement.
"Interchange Settlement" means the process by which FDR, on
behalf of the Bank (a) initiates payment for MasterCard(R) and VISA(R)
Transaction Card Tickets presented by "acquirers" (as such term is
defined in MasterCard(R) and VISA(R) regulations) to the Bank, (b)
receives payment for MasterCard(R) and VISA(R) Transaction Card Tickets
presented by the Bank, and (c) remits and receives payments for
chargebacks and other Interchange fees and expenses of or payable by the
Bank.
"Laws" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law of the
United States, any foreign country or any domestic or foreign state,
county, city or other political subdivision of any Governmental
Authority.
"Marketing Documents" has the meaning set forth in Section
3.1(a).
"Marketing Plan" has the meaning set forth in Section
3.1(a).
"MasterCard(R)" means MasterCard International Incorporated.
"Master Services Agreement" means the Master Services
Agreement, dated as of January 29, 1998, by and between Holdings and FDR,
as amended from time to time in accordance with the terms thereof.
"Operating Agreement" means the Limited Liability Company
Agreement, dated as of January 29, 1998, by and among BKB, Bankmont,
Harris Trust and Savings Bank, an Illinois banking corporation, FA, the
Company, and any of their respective permitted successors and assigns,
and Holdings.
"Origination" has the meaning set forth in Section 3.2.
"Person" means any individual, partnership, corporation,
association, trust, limited liability company, joint venture,
unincorporated organization and any government, governmental department
or agency or political subdivision thereof.
"Qualified Transferee" has the meaning set forth in Section
3.4.
"Receivables" means Partners First Receivables, LLC, a
Delaware limited liability company.
"Receivables Purchase Agreement" means the Receivables
Purchase Agreement, dated as of January 29, 1998, by and between the Bank
and Receivables to effect the daily sale of Accounts Receivable under the
Accounts after the date hereof, as amended from time to time in
accordance with the terms thereof.
"Required Information" means the Bank Required Information
and Holdings Required Information, collectively.
"Resolution Period" means the period ending 30 calendar days
following receipt by an Indemnified Party of a Dispute Notice.
"Series A Units" means the units designated as "Series A
Units" pursuant to the terms of the Operating Agreement.
"Service Mark" has the meaning set forth in Section 2.3.
"Settlement Account" has the meaning set forth in Section
5.2(i).
"Solicited Applicants" means Persons who are solicited to
open an Account pursuant to Section 3.1(b).
"Subsidiary" means any corporation, association, trust, or
other business entity, of which the designated parent shall at any time
own or control directly or indirectly through a Subsidiary of
Subsidiaries at least a majority (by number of votes) of the outstanding
shares of capital stock (or other shares of beneficial interest) entitled
ordinarily to vote for the election of such business entity's directors
(or in the case of a business entity that is not a corporation, for those
Persons exercising functions similar to directors of a corporation).
"Third Party Claim" has the meaning set forth in Section
7.2(a).
"Transferred Assets" means, with respect to the Additional
Accounts, (i) all rights in and to the business relationship between the
Bank and the Cardholder in their capacities as such, including the right
to offer ongoing Credit Card services to Cardholders party to the
Additional Cardholder Agreements and the right to offer and provide other
products and services on a non-exclusive basis to Cardholders, (ii) the
right to designate any other party at any time and from time to time,
without further consideration, a successor to the Bank (without any
further consideration being payable by the Company and the Bank agrees to
take all such actions as are necessary or required to effect such
designation) under the Additional Designated Agreements provided that (a)
the designee is legally capable of performing the obligations of the Bank
thereunder, (b) such designee expressly assumes the obligations of the
Bank under the Additional Designated Agreements and (c) such designee
expressly acknowledges that its rights thereunder are subject to, and
that it is bound by, the Receivables Purchase Agreement, (iii) any and
all books and records under the Bank's control relating solely to the
Cardholders and the Additional Accounts, including, without limitation,
all Additional Account applications, statements, records and
correspondence and all customer lists and other information under the
Bank's control relating solely to such Cardholders and such Additional
Accounts, whether in paper, microfilm, microfiche or magnetic tape form;
and (iv) the right to assign, license or designate to others any or all
of the foregoing, but excluding any rights or assets transferred or
assigned by the Bank pursuant to the Receivables Purchase Agreement;
provided, however, that Transferred Assets shall not include the
Additional Designated Agreements.
"VISA(R)" means VISA U.S.A., Inc.
1.2. Headings. The headings and subheadings in this Agreement are
included for convenience and identification only and are in no way
intended to describe, interpret, define or limit the scope, extent or
intent of this Agreement or any provision hereof.
1.3. Pronouns. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular or plural as
the identity of the Person may require.
Article II
Authorization/Appointment of Agent
2.1. Use of Assets. Holdings hereby authorizes the Bank to use,
on a non-exclusive basis, subject to the terms and conditions of this
Agreement, Holdings' rights and interest in, to and under the Contributed
Assets and the Transferred Assets to the extent necessary to enable the
Bank to perform its obligations hereunder.
2.2. Appointment of Holdings as Agent.
(a) The Bank shall (i) make the determination whether, when
and upon what terms to originate an Additional Account or to extend
credit under the Accounts, (ii) extend credit under the Accounts, (iii)
effect Interchange Settlement with respect to the Accounts pursuant to
and in accordance with this Agreement and the Clearing Bank Supplement,
(iv) comply with its covenants set forth in Section 5.1 hereof and (v)
maintain all such other licenses, permits or authorizations from
Governmental Authorities as are necessary to perform its obligations
under this Agreement. Except as set forth in the preceding sentence,
Section 3.4 of this Agreement, the Contribution Agreement and the
Receivables Purchase Agreement, the Bank shall have no other obligations
to Holdings with respect to the Accounts or Designated Agreements;
provided, however, that nothing herein shall relieve the Bank of its
obligations to Cardholders under the Cardholder Agreements.
(b) The Bank hereby appoints Holdings to act as its sole and
exclusive agent, with the power to appoint and retain sub-agents, and
Holdings accepts such appointment, to exercise, at Holdings' sole cost
and expense, all of the Bank's rights and perform all of its obligations
(other than as specified in Section 2.2(a) and subject to this Section
2.2(b)) with respect to the Accounts and under the Initial Designated
Agreements and the Additional Designated Agreements, including, without
limitation, the following:
(i) to make recommendations with respect to the Credit
Policy;
(ii) to administer the Credit Policy and to administer
and manage the Accounts and the Initial Cardholder Agreements and
the Additional Cardholder Agreements, in a manner consistent with
the Credit Policy, applied consistently and in a manner
consistent with past practice;
(iii) to arrange for the billing and collection of any
and all Accounts Receivable with respect to the Accounts;
(iv) to administer and manage all Accounts Receivable
arising under the Accounts, subject to the oversight of the Bank
and consistent with the Credit Policy, applied consistently and
in a manner consistent with past practice;
(v) to undertake and perform such collection,
enforcement, compromise and other activities with respect to the
Accounts as Holdings may deem appropriate;
(vi) to initiate and pursue or defend any suit or other
legal action or proceeding involving the Accounts, provided,
however, that no legal proceeding may be initiated or pursued (A)
in the name of the Bank without its prior written approval, not
to be withheld unreasonably, or (B) which seeks any remedy other
than solely monetary damages;
(vii) to settle, release, compromise or otherwise
dispose of any suit, cause of action, complaint or claim (whether
actual, pending or threatened) involving the Accounts; provided,
however, that such settlement, release, compromise or other
disposition involves solely the payment of monetary damages by
Holdings and no other form of relief;
(viii) to hire and retain such attorneys, consultants
and other service providers as Holdings may deem appropriate in
its sole discretion in furtherance of any activities involving
the Accounts; and
(ix) to perform such other acts as Holdings may deem
necessary, prudent or desirable in its sole discretion to
exercise the rights and perform the obligations of the Bank with
respect to the Accounts and under the Designated Agreements.
2.3. Service Mark License. Holdings hereby grants to the Bank the
right and license to use the service mark "Partners First," including all
registrations therefor and designs and logos (collectively, the "Service
Mark") in connection with the Bank's obligations under this Agreement,
subject to the following conditions and limitations. Such license is
non-exclusive as a general matter. The term of this license shall be
coextensive with the term of this Agreement. Holdings agrees that nothing
herein shall give to the Bank any right, title or interest in and to the
Service Mark (except with respect to use in accordance with the terms of
this Agreement), that the Service Mark is the sole property of Holdings
and that any and all uses of the Service Mark by the Bank shall enure to
the sole benefit of Holdings. It is expressly agreed and understood that
the Bank is not purchasing or acquiring any right, title or interest in
the Service Mark. The Bank agrees that if any rights in the Service Mark
accrues to the Bank by operation of law, such rights will revert to
Holdings. The Bank agrees to cooperate with Holdings in perfecting its
right, title and interest in the Service Mark by providing written
assignment of any rights therein which may have accrued to the Bank.
Except as expressly provided in this Agreement, and except as otherwise
agreed to in writing by Holdings, the Bank will not use the Service Mark
for any purposes not related to this Agreement. Any use of the Service
Mark by the Bank shall be conducted in accordance with any applicable
policies and procedures of Holdings which have been disclosed in writing
to the Bank, and shall be presented in a professional manner, consistent
with the image and use of the Service Mark by Holdings. In all events,
the Bank may rely on use of Service Mark which has been expressly
approved in writing by the Bank.
Article III
Accounts
3.1. Solicitation.
(a) The Bank hereby appoints Holdings as its sole and
exclusive agent to acquire, solicit and market Accounts with respect to
the Holdings Credit Card Business. Subject to the applicable requirements
of Law and the Credit Policy, Holdings, at its sole cost and expense,
shall develop and evaluate all data, documents and analysis it may
determine to be necessary, in its sole discretion (including without
limitation, developing the matrices for determining the profile type(s)
to be solicited), to formulate and implement a marketing strategy and
plan to solicit Accounts with respect to the Holdings Credit Card
Business (the "Marketing Plan"). Holdings shall also prepare, at its sole
cost and expense, all marketing documentation (including, without
limitation, brochures, advertisements, mailings and announcements) to be
used in the implementation of the Marketing Plan or the generation of
Additional Accounts (collectively, the "Marketing Documents"). The Bank
shall assist Holdings, as is necessary and appropriate, in the
development and preparation of the Marketing Plan and Marketing
Documents; and such Marketing Plan and Marketing Documents shall be
subject to the prior review and approval of the Bank.
(b) Holdings shall, at its sole cost and expense, implement
and administer the Marketing Plan which shall include overseeing and
administering the preparation and mailing of all Marketing Documents,
screening all responses to Marketing Documents and applications received
and providing the Bank with the initial recommendation with respect to
the Persons who qualify, in accordance with the Credit Policy, for the
origination of an Account and issuance of a Credit Card by the Bank (the
"Eligible Applicants"), and notifying Persons of their failure to so
qualify.
3.2. Origination. Holdings shall provide the Bank from time to
time with the names, addresses and all other relevant information
(including credit histories) with respect to each Solicited Applicant,
Applicant and Eligible Applicant (collectively, "Applicant Information").
Unless the Bank shall notify Holdings in writing not to originate an
Account no later than five (5) Business Days after receipt of the
Applicant Information with respect to each Eligible Applicant, Holdings
is hereby authorized to and shall, in the name of and on behalf of the
Bank, solely as agent for the Bank, establish an Additional Account for
such Eligible Applicant, cause the Bank to enter into a Cardholder
Agreement with such Eligible Applicant (an "Additional Cardholder
Agreement") and provide the Cardholder with a Credit Card (collectively,
an "Origination") to each Eligible Applicant. Holdings shall bear all
costs and expenses of an Origination, including, without limitation, the
cost of issuing and mailing the Credit Card to each Cardholder, and any
VISA(R) or MasterCard(R) costs, as the case may be. Simultaneously with
an Origination, in consideration of the services performed by Holdings as
specified in Section 3.1 above, the Bank hereby assigns, transfers and
delivers to Holdings and Holdings hereby accepts, assumes, acquires and
takes delivery of all of the Bank's interest in the Transferred Assets
relating to the Additional Accounts.
3.3. Acquisition of Accounts. If Holdings acquires (i) Credit
Card accounts and related Cardholder Agreements from the Bank or any of
the Bank's Affiliates pursuant to Section 8.1(a)(ii) or Section 8.1(b) of
the Operating Agreement, or (ii) other consumer line of credit accounts
accessible by VISA(R) and MasterCard(R) and related agreements from any
other Person, on terms mutually agreed to by Holdings and the Bank (each
being an "Acquisition"), then each such account shall constitute an
Additional Account, and each such Cardholder Agreement and related
agreement shall constitute an Additional Cardholder Agreement, for all
purposes hereof (other than Sections 3.1 and 3.2 hereof).
3.4. Additional Designated Agreements. The Bank and the Company
acknowledge that all Receivables and net Interchange fees related thereto
generated by the Bank under the Additional Designated Agreements are to
be sold by the Bank to a wholly owned subsidiary of the Company pursuant
to the Receivables Purchase Agreement. The Bank further acknowledges that
its retention of the Additional Designated Agreements is subject to the
right of the Company to direct the Bank and each and every subsequent
transferee thereof to transfer the Additional Designated Agreements to
whomsoever the Company may elect provided that such transferee is legally
capable of performing the obligations of the Bank and each and every
subsequent transferee thereof under the Additional Designated Agreements,
expressly assumes the obligations of the Bank and each and every
subsequent transferee thereof under the Additional Designated Agreements
and expressly acknowledges that it is taking its rights subject to and
will be bound by the terms of the Receivables Purchase Agreement (to the
extent such agreement is then in effect) (each being a "Qualified
Transferee"). Upon the election of the Company to terminate the Bank's
obligations under this Agreement, the Company shall direct the Bank to,
and upon such direction the Bank shall, transfer (without payment of any
further consideration) the Additional Designated Agreements to such
Qualified Transferee. The Bank agrees to execute such instruments of
assignment and transfer as may be reasonably required by the Company in
order to effectuate the transfer of the Additional Designated Agreements
to a Qualified Transferee. It is expressly acknowledged and agreed that
the right of the Company to direct the Additional Designated Agreements
to be transferred is subject only to the conditions explicitly herein
stated, and is otherwise absolute and unconditional and that the grant of
such right to the Company is a material inducement to the Company in
entering this Agreement.
3.5. Ownership of Accounts Receivable. Subject to the Receivables
Purchase Agreement, all Accounts Receivable arising under any of the
Accounts shall be the sole and exclusive property of the Bank and its
successors and assigns and Holdings shall not have, and hereby
irrevocably waives and disclaims, any ownership or other property
interest therein whatsoever.
Article IV
Representations and Warranties
4.1. Representations and Warranties of the Bank. The Bank hereby
represents and warrants to Holdings as of the date hereof, and, except
for representations and warranties which by their terms are made solely
as of the date hereof, as of the date of each Origination or Acquisition
and as of the date (a "Credit Date") of each extension of credit (a
"Credit Event") under either an Initial Cardholder Agreement or
Additional Cardholder Agreement that:
(a) Organization; Good Standing; Due Qualification. The Bank
is a national banking association duly organized and validly existing in
good standing and duly qualified to do business as a national banking
association under the laws of the United States and has, in all material
respects, full power and authority to own its properties and conduct its
business as presently owned or conducted, and to execute, deliver and
perform its obligations under this Agreement.
(b) Due Authorization. The execution, delivery and
performance of this Agreement and the consummation of the transactions
provided for in this Agreement have been duly authorized by all necessary
action on the part of the Bank. This Agreement constitutes the legal,
valid and binding obligation of the Bank, enforceable against the Bank in
accordance with its terms, except as enforcement thereof may be limited
by receivership, conservatorship and supervisory powers of bank
regulatory agencies generally, as well as bankruptcy, insolvency,
reorganization, moratorium or similar laws of general applicability
relating to or affecting creditors' rights or general equity principles
(regardless of whether such matters are considered in a proceeding in
equity or at law) and the availability of equitable remedies.
(c) No Conflict. The execution and delivery of this
Agreement by the Bank, the performance by the Bank of the transactions
contemplated by this Agreement, and the fulfillment by the Bank of the
terms of this Agreement will not conflict with, violate or result in any
breach of any of the terms and provisions of, or constitute (with or
without notice or lapse of time or both) a default under, any indenture,
contract, agreement, mortgage, deed of trust, or other instrument to
which the Bank is a party or by which it or any of its properties are
bound which would have a material adverse effect on the Bank's ability to
exercise its rights or perform its obligations hereunder.
(d) No Proceedings. As of the date hereof, there are no
proceedings or investigations pending or, to the best knowledge of the
Bank, threatened against the Bank 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,
(iii) seeking any determination or ruling that, in the reasonable
judgment of the Bank, would materially and adversely affect the exercise
by the Bank of its rights or performance by the Bank of its obligations
under this Agreement or (iv) seeking any determination or ruling that
would materially and adversely affect the validity or enforceability of
this Agreement.
(e) VISA(R) and MasterCard(R) Membership. As of the date
hereof, the Bank is a member in good standing of VISA(R) and
MasterCard(R).
4.2. Representations and Warranties of Holdings. Holdings hereby
represents and warrants to the Bank as of the date hereof and, except for
representations and warranties which by their terms are made solely as of
the date hereof, as of the date of each Origination or Acquisition and as
of each Credit Date:
(a) Organization and Good Standing. Holdings is a limited
liability company duly organized and validly existing in good standing
under the laws of the State of Delaware and has, in all material
respects, full power and authority to own its properties and conduct its
business as presently owned or conducted, and to execute, deliver and
perform its obligations under this Agreement.
(b) Due Qualification. Holdings is duly qualified to do
business and is in good standing (or is exempt from any requirements to
so qualify) and has obtained all necessary licenses and approvals from
Governmental Authorities, in each jurisdiction which 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 under this Agreement.
(c) Due Authorization. The execution, delivery and
performance of this Agreement, and the consummation of the transactions
provided for in this Agreement have been duly authorized by all necessary
action on the part of Holdings. This Agreement constitutes the legal,
valid and binding obligation of Holdings, enforceable against Holdings in
accordance with its terms, except as enforcement thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws of
general applicability relating to or affecting creditors's rights or
general equity principles (regardless of whether such matters are
considered in a proceeding in equity or at law) and the availability of
equitable remedies.
(d) No Conflict. The execution and delivery of this
Agreement by Holdings, the performance by Holdings of the transactions
contemplated by this Agreement, and the fulfillment by Holdings of the
terms of this Agreement will not conflict with, violate or result in any
breach of any of the terms and provisions of, or constitute (with or
without notice or lapse of time or both) a default under, any indenture,
contract, agreement, mortgage, deed of trust, or other instrument to
which Holdings is a party or by which it or any of its properties are
bound which would have a material adverse effect on Holdings' ability to
perform its obligations hereunder or thereunder.
(e) No Proceedings. As of the date hereof, there are no
proceedings or investigations pending or, to the best knowledge of
Holdings, threatened against Holdings 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, (iii) seeking any determination or ruling that, in the
reasonable judgment of Holdings, would materially and adversely affect
the performance by Holdings of its obligations under this Agreement, or
(iv) seeking any determination or ruling that would materially and
adversely affect the validity or enforceability of this Agreement.
Article V
Additional Covenants
5.1. The Bank. The Bank covenants and agrees with Holdings that
it shall:
(a) do or cause to be done all things necessary to preserve,
renew and keep in full force and effect its legal existence as a national
banking association organized under the laws of the United States or such
other organization with all power and authority necessary to perform the
Bank's obligations hereunder;
(b) use its reasonable best efforts to preserve, renew,
extend and keep in full force and effect and in good standing its
membership in each of VISA(R) and MasterCard(R);
(c) comply with all applicable Laws, rules, regulations,
decrees and orders of Governmental Authorities as is necessary to perform
its obligations under this Agreement;
(d) not take any action in violation of the terms and
conditions of the Credit Policy and the Initial Cardholder Agreements and
the Additional Cardholder Agreements with respect to each Origination or
Acquisition and Credit Event;
(e) maintain all records and information, in its possession
or control, in accordance with applicable Laws, in connection with the
operation of the Holdings Credit Card Business including the Accounts and
the Assigned Agreements (collectively, "Bank Required Information"),
subject to the authority of the Office of the Comptroller of the Currency
and all other applicable Governmental Authorities to inspect and/or copy
such records and information upon reasonable notice;
(f) provide to Holdings or to FDR, upon request by Holdings,
and upon reasonable prior notice, such Bank Required Information (or
reasonable access thereto) as shall be reasonably requested by Holdings
in connection with the operation of the Holdings Credit Card Business;
(g) not, without prior notice to and consultation with
Holdings, amend, modify, waive or terminate any of the terms and
conditions of the Credit Policy, the Initial Cardholder Agreements, the
Additional Cardholder Agreements or the Assigned Agreements;
(h) provide Holdings notice of any proceedings or
investigations pending or, to the best knowledge of the Bank, threatened
against the Bank 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, (iii) seeking any
determination or ruling that, in the reasonable judgment of the Bank,
would materially and adversely affect the performance by the Bank of its
obligations under this Agreement, or (iv) seeking any determination or
ruling that would materially and adversely affect the validity or
enforceability of this Agreement;
(i) remit to Holdings, upon request by Holdings, any excess
funds in the Settlement Account relating to the Accounts; and
(j) not originate any Credit Card accounts other than
Additional Accounts using BIN numbers 432689 and 432690 and ICA numbers
544911 and 544912.
5.2. Holdings. Holdings hereby covenants and agrees with the Bank
that it shall:
(a) do or cause to be done all things necessary to preserve,
renew and keep in full force and effect its legal existence as a limited
liability company organized under the laws of the State of Delaware;
(b) comply with all applicable Laws, rules, regulations,
decrees and orders of Governmental Authorities as is necessary to perform
its obligations under this Agreement;
(c) comply with the terms and conditions of the Credit
Policy and the terms and conditions of the Initial Cardholder Agreements
and the Additional Cardholder Agreements with respect to each Origination
or Acquisition and Credit Event;
(d) maintain all records and information, in its possession
or control, in accordance with applicable Laws, in connection with the
operation of the Holdings Credit Card Business including the Accounts and
the Assigned Agreements (collectively, "Holdings Required Information"),
subject to the authority of the Office of the Comptroller of the Currency
and all other applicable Governmental Authorities to inspect and/or copy
such records and information upon reasonable notice;
(e) provide to the Bank or to FDR, upon request by the Bank,
and upon reasonable prior notice, such Holdings Required Information (or
reasonable access thereto) as shall be reasonably requested by the Bank
in connection with the operation of the Holdings Credit Card Business;
(f) not take any action in violation of the terms and
conditions of the Credit Policy and the Initial Cardholder Agreements and
the Additional Cardholder Agreements with respect to each Origination or
Acquisition and Credit Event;
(g) not, without prior approval of the Bank, amend, modify,
waive or terminate any of the terms and conditions of the Initial
Cardholder Agreements, the Additional Cardholder Agreements or the
Assigned Agreements;
(h) provide the Bank notice of any proceedings or
investigations pending or, to the best knowledge of Holdings, threatened
against Holdings 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, (iii) seeking any
determination or ruling that, in the reasonable judgment of Holdings,
would materially and adversely affect the performance by Holdings of its
obligations under this Agreement, or (iv) seeking any determination or
ruling that would materially and adversely affect the validity or
enforceability of this Agreement;
(i) remit to an account maintained by the Bank to pay costs
and expenses to FDR (the "Settlement Account") sufficient funds to pay
settlement charges owed to FDR by the Bank relating to the Accounts
pursuant to the terms and conditions of the Clearing Bank Supplement, by
such time as is necessary so as to enable the Bank to comply with the
terms of the Clearing Bank Supplement;
(j) remit to an account maintained by the Bank to pay costs
and expenses to FDR all amounts owed to FDR by Holdings pursuant to the
Master Services Agreement and relating to the Accounts; and
(k) in connection with the Master Services Agreement, not
direct FDR to take any action inconsistent with the terms of the Credit
Policy or the Cardholder Agreements.
Article VI
Confidentiality
Neither party shall use, or permit any of its Affiliates or any
of its or its Affiliates' directors, officers, employees, agents,
consultants or advisors to use, any data or information concerning the
other, including, without limitation, any information made available to
it in connection with its performance under this Agreement for any
purpose which would be detrimental to the other. Each party shall hold,
and shall cause its respective Affiliates and its directors, officers,
employees, agents, consultants and advisors and those of its respective
Affiliates to hold, in strict confidence, unless disclosure to a banking
or other regulatory authority is necessary in connection with any
necessary regulatory approval or unless compelled to disclose by judicial
or administrative process or, in the written opinion of its counsel, by
other requirement of Law or the applicable requirements of any
Governmental Authority or relevant stock exchange, all non-public
records, books, contracts, reports, instruments, computer data and other
data and information (collectively, "Information") concerning the other
(or, if required under a contract with a third party, such third party)
furnished or made available to it by such Person or its representatives
pursuant to this Agreement, except to the extent that such Information
can be shown to have been (a) previously known by such party on a
nonconfidential basis, (b) available to such party on a nonconfidential
basis from a source other than the disclosing party, (c) in the public
domain through no fault of such party or (d) later lawfully acquired from
other sources by the party to which it was furnished, and no party shall
release or disclose such Information to any other Person, except its
auditors, attorneys, financial advisors, bankers, other consultants and
advisors and, to the extent permitted above, to banking and other
regulatory authorities. In the event that a party to this Agreement
receives notice that it will be compelled to disclose any Information in
connection with any necessary regulatory approval or by judicial or
administrative process, such party shall provide the Person who provided
such Information (the "Disclosing Party") with prompt prior written
notice of such requirement so that the Disclosing Party may seek a
protective order or other appropriate remedy and/or waive the terms of
any confidentiality agreement by and among any of the parties. In the
event that such protective order, other remedy or waiver is not obtained,
only that portion of the Information which is legally required to be
disclosed shall be so disclosed.
Article VII
Indemnification
7.1. Indemnification Provisions for Benefit of the Bank.
(a) It is the intent and purpose of this Agreement that
except as explicitly hereinafter set forth, the Indemnified Bank Parties
(as hereinafter defined) shall bear no risk in connection with the
transactions contemplated hereby and by the other agreements referred to
in clause (iii) below. Accordingly, Holdings shall indemnify and hold
harmless the Bank and its Affiliates from and against any Adverse
Consequences that any of the Bank on and following and its Affiliates
(determined, in each case, assuming that Holdings is not is an Affiliate
of the Bank following the date hereof) and their respective officers,
employees, directors, representatives and agents (collectively, the
"Indemnified Bank Parties") shall suffer or incur to the extent resulting
from, arising out of or relating to: (i) any breach by Holdings of any of
its representations or warranties contained in Section 4.2 hereof or any
of its covenants contained herein, (ii) any breach by the Bank of its
obligations under this Agreement, the Initial Cardholder Agreements, the
Additional Cardholder Agreements or the Assigned Agreements, except to
the extent caused by the gross negligence or willful misconduct of the
Bank or any Indemnified Bank Party or (iii) this Agreement, the Accounts,
the Initial Cardholder Agreements, the Additional Cardholder Agreements,
the Assigned Agreements, the Receivables Purchase Agreement, the Master
Services Agreement or the Clearing Bank Supplement (including, without
limitation, resulting from, arising out of or relating to breaches, acts
or omissions by any party (including the Bank) to any of the foregoing
agreements), except to the extent caused by (y) the gross negligence or
willful misconduct of the Bank or any Indemnified Bank Party or (z) the
failure of the Bank to obtain all licenses, permits, franchises or
authorizations from all Governmental Authorities necessary for the Bank
to enter into and to perform its obligations under this Agreement.
(b) Indemnification Provisions for Benefit of Holdings. The
Bank shall indemnify and hold harmless Holdings and its Affiliates from
and against any Adverse Consequences that Holdings and its Affiliates
(determined, in each case, assuming that the Bank and its Subsidiaries
are not Affiliates of Holdings) and their respective officers, employees,
directors, members of its management committee, representatives and
agents (collectively, the "Indemnified Holdings Parties" and, together
with the Indemnified Bank Parties, the "Indemnified Parties") shall
suffer resulting from, arising out of or relating to any breach by the
Bank of any of its representations or warranties contained in Section 4.1
hereof (other than the second sentence of Section 4.1(b)), or any of its
covenants contained herein, provided, however, indemnification for breach
of covenants shall be provided only to the extent that such Adverse
Consequences are caused by the gross negligence or willful misconduct of
the Bank or any Indemnified Bank Party.
7.2. Method of Asserting Claims. All claims for indemnification
by any Indemnified Party under Section 7.1 will be asserted and resolved
as follows:
(a) In order for an Indemnified Party to be entitled to any
indemnification provided or under Section 7.2 in respect of, arising out
of or involving a claim or demand made by any Person not a party to this
Agreement against the Indemnified Party (a "Third Party Claim"), the
Indemnified Party must deliver a Claim Notice to the Indemnifying Party
promptly after receipt by such Indemnified Party of written notice of the
Third Party Claim; provided, however, that failure to give such Claim
Notice shall not affect the indemnification provided hereunder except to
the extent the Indemnifying Party shall have been actually prejudiced as
a result of such failure. The Indemnifying Party shall promptly mitigate
any such prejudice to the extent possible.
(b) If a Third Party Claim is made against an Indemnified
Party, the Indemnifying Party shall be entitled to participate in the
defense thereof and, if it so chooses, to assume the defense thereof with
counsel selected by the Indemnifying Party, which counsel must be
reasonably satisfactory to the Indemnified Party. Should the Indemnifying
Party so elect to assume the defense of a Third Party Claim, the
Indemnifying Party shall not be liable to the Indemnified Party for legal
expenses subsequently incurred by the Indemnified Party in connection
with the defense thereof, but shall continue to pay for any expenses of
investigation or any Adverse Consequence suffered. If the Indemnifying
Party assumes such defense, the Indemnified Party shall have the right to
participate in the defense thereof and to employ counsel, at its own
expense, separate from the counsel employed by the Indemnifying Party. If
(i) the Indemnifying Party shall not assume the defense of a Third Party
Claim with counsel satisfactory to the Indemnified Party within five
Business Days after delivery of any Claim Notice, or (ii) legal counsel
for the Indemnified Party notifies the Indemnifying Party that there are
or may be legal defenses available to the Indemnified Party or to other
Indemnified Parties which are different from or additional to those
available to the Indemnifying Party, which, if the Indemnified Party and
the Indemnifying Party were to be represented by the same counsel, would
constitute a conflict of interest for such counsel or prejudice
prosecution of the defenses available to such Indemnified Party, or (iii)
if the Indemnifying Party shall assume the defense of a Third Party Claim
and fail to diligently prosecute such defense, then in each such case the
Indemnified Party, by notice to the Indemnifying Party, may employ its
own counsel and control the defense of the Third Party Claim and the
Indemnifying Party shall be liable for the reasonable fees, charges and
disbursements of counsel employed by the Indemnified Party; and the
Indemnified Party shall be promptly reimbursed for any such fees, charges
and disbursements, as and when incurred. Whether the Indemnifying Party
or the Indemnified Party controls the defense of any Third Party Claim,
the parties hereto shall cooperate in the defense thereof. Such
cooperation shall include the retention and provision to the counsel of
the controlling party of records and information which are reasonably
relevant to such Third Party Claim, and making employees available on a
mutually convenient basis to provide additional information and
explanation of any material provided hereunder. The Indemnifying Party
shall have the right to settle, compromise or discharge a Third Party
Claim (other than any such Third Party Claim in which criminal conduct is
alleged) without the Indemnified Party's consent if such settlement,
compromise or discharge (i) constitutes a complete and unconditional
discharge and release of the Indemnified Party, and (ii) provides for no
relief other than the payment of monetary damages and such monetary
damages are paid in full by the Indemnifying Party.
(c) In the event any Indemnified Party should have a claim
under Section 7.1 against any Indemnifying Party that does not involve a
Third Party Claim, the Indemnified Party shall deliver an Indemnity
Notice with reasonable promptness to the Indemnifying Party. The failure
by any Indemnified Party to give the Indemnity Notice shall not impair
such party's rights hereunder except to the extent that an Indemnifying
Party demonstrates that it has been irreparably prejudiced thereby. The
Indemnifying Party shall promptly mitigate any such prejudice to the
extent practicable. If the Indemnifying Party notifies the Indemnified
Party that it does not dispute the claim described in such Indemnity
Notice or fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes the claim described in such
Indemnity Notice, the Adverse Consequences in the amount specified in the
Indemnity Notice will be conclusively deemed a liability of the
Indemnifying Party under Section 7.1 and the Indemnifying Party shall pay
the amount of such Adverse Consequences to the Indemnified Party on
demand. If the Indemnifying Party has delivered notice disputing its
liability to the Indemnified Party (a "Dispute Notice") within the
Dispute Period, the Indemnifying Party and the Indemnified Party will
proceed in good faith to negotiate a resolution of such dispute, and if
not resolved through negotiations within the Resolution Period, such
dispute shall be resolved by litigation in a court of competent
jurisdiction.
(d) Holdings obligations under Section 7.1(a) shall be
secured by the guarantee of each of Bankmont, BKB and FA (and its
Affiliates), severally, as evidenced by each such party's execution and
delivery of a Guarantee Agreement, in the form attached hereto as Exhibit
A.
(e) Notwithstanding the termination of this Agreement, a
claim for indemnity may be made under the provisions of this Article VII
until the expiration of the applicable statute of limitations with
respect to such claim.
Article VIII
Payment
8.1. Payment. The Bank shall pay a monthly fee equal to $1,000
for the rights it has been authorized to use pursuant to Section 2.1
hereof. Holdings shall pay a monthly fee equal to $1,000 for the
Transferred Assets relating to Additional Accounts transferred to it
pursuant to Section 3.2 hereof. All such fees shall be due and payable in
arrears on or before the fifth (5th) Business Day of the next succeeding
calendar month.
8.2. Expenses. Holdings shall reimburse the Bank for all
reasonable costs and expenses incurred by the Bank in connection with the
performance of its obligations hereunder within ten (10) Business Days
after receipt by Holdings from the Bank of an invoice therefor. Holdings
shall be responsible for payment of all costs and expenses incurred by it
hereunder. This Section 8.2 shall survive the termination of this
Agreement.
Article IX
Miscellaneous
9.1. Notices. All notices, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given
if delivered personally or if mailed by certified mail, return receipt
requested, postage prepaid or if sent by overnight courier or sent by
facsimile (answerback confirmed), as follows:
If to the Bank:
BankBoston (NH), National Association
157 Main Street
Nashua, New Hampshire 03060
Attention: Mr. James M. Cosman
BankBoston Corporation
100 Federal Street, 01-25-08
Boston, Massachusetts 02110
Attention: Mr. Peter J. Manning
and
BankBoston Corporation
100 Federal Street, 01-25-01
Boston, Massachusetts 02110
Attention: Gary A. Spiess, Esq.
with a copy sent contemporaneously to:
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
Attention: Norman J. Shachoy, Esq.
If to Holdings:
Partners First Holdings, LLC
900 Elkridge Landing Road, Suite 300
Linthicum, Maryland 21090
Attention: John R. Soderlund
and
Partners First Holdings, LLC
900 Elkridge Landing Road, Suite 300
Linthicum, Maryland 21090
Attention: Terence F. Browne, Esq.
or such other address or to the attention of such other Person as the
recipient party shall have specified by prior written notice to the
sending party. Any such communication shall be deemed to have been
received (i) when delivered, if personally delivered, sent by
nationally-recognized overnight courier or sent via facsimile or (ii) on
the third Business Day following the date on which the piece of mail
containing such communication is posted, if sent by registered mail.
9.2. Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) contains the entire understanding of the parties hereto
and supersedes all prior agreements and understandings relating to the
subject matter hereof. Each of the parties hereto further acknowledges
and agrees that, in entering into this Agreement, they have not in any
way relied upon any oral or written agreements, statements, promises,
information, arrangements, understandings, representations or warranties,
express or implied, not specifically set forth in this Agreement.
9.3. Remedies. Subject to the terms of this Agreement, the
parties will be entitled to enforce their rights under this Agreement
specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights existing in their favor. The parties hereto
agree and acknowledge that money damages may not be an adequate remedy
for any breach of the provisions of this Agreement and that any party may
in its sole discretion apply to any court of law or equity of competent
jurisdiction for specific performance and/or injunctive relief in order
to enforce or prevent any violation of the provisions of this Agreement.
In the event of any dispute involving the terms of this Agreement, the
prevailing party shall be entitled to collect reasonable fees and
expenses incurred by the prevailing party in connection with such dispute
from the other parties to such dispute. Except for the remedies of
specific performance and injunctive relief, the remedies provided by
Article VII hereof are the sole and exclusive remedies available to the
parties under this Agreement.
9.4. Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of
Delaware without regard to its conflict of laws rules.
9.5. Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and
permitted assigns. Neither this Agreement nor the rights and obligations
of any party hereunder shall be assignable or transferable by such party
without the prior written consent of the other party hereto.
9.6. No Implied Rights or Remedies. Except as otherwise expressly
provided herein, nothing herein expressed or implied is intended or shall
be construed to confer upon or to give any Person, except the parties
hereto, any rights or remedies under or by reason of this Agreement.
9.7. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.8. Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction will be applied against any
party.
9.9. Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other
provisions hereof, and this Agreement shall be construed in all respects
as if such invalid or unenforceable provision was omitted.
9.10. Consent to Jurisdiction. Each of the parties hereto agrees
that any suit, action or proceeding instituted against such party under
or in connection with this Agreement may be brought in a court of
competent jurisdiction in the State of Delaware. By execution hereof,
each party hereto irrevocably waives any objection to, and any right of
immunity on the grounds of improper venue, the convenience of the forum,
the personal jurisdiction of such courts or the execution of judgments
resulting therefrom. Each party hereto irrevocably accepts and submits to
the jurisdiction of such courts in any such action, suit or proceeding.
9.11. Term. The term of this Agreement shall commence on the date
hereof and continue until the earlier of (i) Holdings' election to
terminate this Agreement by notice given at least sixty (60) days prior
to such termination date; provided, however, that Holdings shall only
exercise such right of termination if the Designated Agreements and all
rights and obligations of the Bank hereunder shall be assigned to an
organization with all power and authority necessary to hold the
Designated Agreements and to perform the Bank's obligations hereunder,
(ii) [the Series 1998 I-1 Termination Date] and (iii) Holdings' or the
Bank's election to terminate this Agreement or any portion thereof, if
required by any Governmental Authority, by notice given at least ten (10)
Business Days or such shorter period as may be otherwise required by such
Governmental Authority prior to such termination. Upon any such
termination of this Agreement, neither party shall have any further
obligations under this Agreement, except (y) as provided in Article VII,
Section 3.4 or Section 8.2 hereof and (z) the Bank's obligations under
Section 2.2(a)(ii) and 5.1(i) and Holdings' obligations under Section
5.2(i) shall survive any termination of this Agreement pursuant to clause
(i) of the immediately preceding sentence (other than on account of
action taken by any Governmental Authority) for a reasonable period of
time after the applicable termination date in order to permit the
Holdings or its designated transferee of the Designated Agreements to
become a member of VISA(R) and MasterCard(R).
9.12. Further Assurances. On and after the date hereof, each of
the Bank and Holdings shall, at the sole cost and expense of Holdings,
cooperate with the other in good faith to give effect to the terms hereof
and execute, acknowledge and deliver all such acknowledgments, documents
and other instruments; provide, subject to the requirements of applicable
Laws and Article VI hereof, the other with all information relating to
such party or the Accounts; and take such further action as the other
party may reasonably request to enable such party to exercise its rights
or perform its obligations under, or to fully and completely effectuate,
the terms, conditions and intent of this Agreement.
9.13. Force Majeure and Restricted Performance.
(a) If performance by the Bank of any obligation under this
Agreement or the Client Supplement is prevented, restricted, delayed or
interfered with by reason of labor disputes, strikes, acts of God,
floods, lightning, severe weather, shortages of materials, rationing,
utility or communication failures, failure of MasterCard(R) or VISA(R) or
their settlement (including interchange or settlement banks), failure or
delay in receiving electronic data, earthquakes, war, revolution, civil
commotion, acts of public enemies, blockade, embargo or any Law, or any
other act or omission whatsoever other than by the gross negligence or
wilful misconduct of the Bank, whether similar or dissimilar to those
referred to in this clause, which is or are beyond the reasonable control
of the Bank, the Bank shall provide written notice to Holdings
identifying the cause of the prevention, restriction, delay or
interference and the Bank shall be excused from the performance to the
extent of the prevention, restriction, delay or interference, so long as
the Bank is taking reasonable action to accomplish such performance as
promptly as possible under the circumstances.
(b) If performance by Holdings of any service or obligation
under this Agreement is prevented, restricted, delayed or interfered with
by reason of labor disputes, strikes, acts of God, floods, lightning,
severe weather, shortages or materials, rationing, utility or
communication failures, failure of MasterCard(R) or VISA(R) or their
settlement (including Interchange or settlement), failure or delay in
receiving electronic data, earthquakes, war, revolution, civil commotion,
acts of public enemies, blockade, embargo, or any Law, or any other act
or omission whatsoever, whether similar or dissimilar to those referred
to in this clause, which is or are beyond the reasonable control of
Holdings, Holdings shall be excused from the performance to the extent of
the prevention, restriction, delay or interference, so long as it is
taking reasonable actions to accomplish such performance as promptly as
possible under the circumstances.
9.14. Amendment. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of
each party hereto.
9.15. WAIVER OF RIGHT TO JURY TRIAL. EACH OF THE PARTIES HERETO
HEREBY WAIVES ITS RIGHTS TO A TRIAL BY JURY IN ANY LITIGATION IN ANY
COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF, THIS
AGREEMENT OR THE VALIDITY, INTERPRETATION OR ENFORCEMENT HEREOF OR ANY OF
THE TRANSACTIONS CONTEMPLATED HEREBY.
[Signature page to follow]
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above stated.
BANKBOSTON (NH), NATIONAL
ASSOCIATION
By: /s/ William M. Parent
___________________________
Name: William M. Parent
Title: Authorized Officer
PARTNERS FIRST HOLDINGS, LLC
By: /s/ John R. Soderlund
___________________________
Name: John R. Soderlund
Title: President and Chief
Executive Officer
ASSISTANCE AGREEMENT (this "Agreement"), dated as of
January 29, 1998, by and between Partners First Holdings, LLC, a Delaware
limited liability company ("Holdings"), Harris Trust and Savings Bank, an
Illinois banking corporation (the "Bank").
WHEREAS, simultaneously with the execution and delivery of
this Agreement, the Bank and Holdings have entered into the Contribution
Agreement (as hereinafter defined) pursuant to which the Bank has
contributed to Holdings certain assets relating to the Initial Accounts,
including without limitation, the right to direct the Bank to transfer to
any other party at any time and without consideration the Initial
Cardholder Agreements and other Initial Designated Agreements;
WHEREAS, pursuant to the Contribution Agreement, the Bank
shall continue to hold, be a party to and be entitled to extend credit
under the Initial Cardholder Agreements, subject to the terms and
conditions set forth therein;
WHEREAS, Holdings and the Bank mutually desire to assist
each other in the marketing, solicitation and origination of Accounts (as
hereinafter defined), subject to the terms and conditions set forth
herein;
WHEREAS, upon the origination or acquisition of Additional
Accounts (as hereinafter defined) utilizing the expertise and services of
Holdings on behalf of the Bank, the Bank desires to sell, transfer and
assign the Transferred Assets relating to such Additional Accounts to
Holdings and Holdings is willing to accept such Transferred Assets; and
WHEREAS, the Bank desires to engage the services of
Holdings and such sub-servicer as Holdings may designate to service the
Accounts, subject to the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged and intending to be legally bound, the parties hereto hereby
agree as follows:
Article I
Definitions
1.1. Definitions. As used in this Agreement, capitalized
terms used herein without definition shall have the meaning specified in
the Contribution Agreement and the following terms shall have the meaning
specified:
"Accounts" means the Initial Accounts and the Additional
Accounts.
"Account Information" means any and all books and records
of Holdings or the Bank relating solely to the Solicited Applicants,
Applicants, Eligible Applicants, Initial Cardholders, Additional
Cardholders and the Accounts, including, without limitation, all Account
applications, statements, records and correspondence and all customer
lists and other information under Holdings' or the Bank's control
relating solely to each of the foregoing and such Accounts, whether in
paper, microfilm, microfiche or magnetic tape form.
"Accounts Receivable" means any and all amounts payable by
the Cardholders (whether billed or unbilled, posted or not) in connection
with the Accounts, including, without limitation, all principal,
outstanding purchases, cash advances, interest (including accrued but
unbilled interest), annual fees, finance and service charges and other
charges and fees.
"Additional Account" means a Credit Card account originated
or acquired after the date hereof pursuant to Article III hereof.
"Acquisition" has the meaning set forth in Section 3.3.
"Additional Cardholder Agreement" has the meaning set forth
in Section 3.2.
"Additional Designated Agreements" means the Additional
Cardholder Agreements and all rights and privileges under the Additional
Cardholder Agreements, including, without limitation, all rights to
create, enforce and collect Accounts Receivable under the Additional
Cardholder Agreements, all rights to enforce and collect amounts owing
under the Additional Cardholder Agreements and all rights to amend and
modify the Additional Cardholder Agreements and all records and
information necessary for Bank to exercise its rights and privileges
under the Additional Cardholder Agreements.
"Adverse Consequences" means all actions, suits,
proceedings, hearings, investigations, charges, complaints, claims,
demands, injunctions, judgments, orders, rulings, decrees, damages, dues,
penalties, fines, costs, amounts paid in settlement, liabilities,
obligations, liens, losses, expenses, and fees, including court costs and
reasonable attorneys' fees and expenses, and all lost profits and
exemplary, punitive, consequential or other similar damages awarded to
any third party.
"Affiliate" means, with respect to any Person, any other
Person controlling, controlled by or under common control with, such
Person. As used in this definition, (a) "control" (including, with its
correlative meanings, "controlling," "controlled by" and "under common
control with") means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities, by contract
or otherwise, and (b) with respect to any Person other than a Subsidiary
of Holdings, the term "Affiliate" shall not include Holdings or any
Subsidiary of Holdings.
"Agreement" has the meaning in the preamble hereto.
"Applicant" means a Person who applies for a Credit Card.
"Applicant Information" has the meaning set forth in
Section 3.2.
"Assigned Agreements" means the Additional Agreements as
defined in the Contribution Agreement.
"Bank" has the meaning in the preamble hereto.
"Bank International Credit Card Business" means the
provision of unsecured lines of credit accessible by VISA(R) or
MasterCard(R) to consumers located outside of the United States of
America, the servicing of such credit card relationships, and the
provision of services incidental thereto by the Bank and its Affiliates.
"Bank Relationship Credit Card Business" means the Credit
Card Business engaged in by the Bank and its Affiliates with consumers
who are employees, officers or directors of the Bank or the Bank
Affiliates or a family member of any such employees, officers or
directors or with any other Person who maintains at least one other
ongoing customer relationship with the Bank or any of its Affiliates at
the time of reference.
"Bank Required Information" has the meaning set forth in
Section 5.1(e).
"Bank Value-Limited Credit Card Business" means the Credit
Card Business (other than the Bank Relationship Credit Card Business)
engaged in by Bank and its Affiliates (other than pursuant to this
Agreement), to the extent that the aggregate outstanding balance of
credit card accounts comprising such Credit Card Business does not exceed
$250 million.
"Bankmont" means Bankmont Financial Corp., a Delaware
corporation.
"BKB" means BankBoston (NH), National Association, a
national banking association.
"Business Day" means a day other than Saturday, Sunday or
any day on which banks located in the Commonwealth of Massachusetts or
the State of Maryland are authorized or obligated to close.
"Cardholder" means a holder of a Credit Card which is a
party to either an Initial Cardholder Agreement or an Additional
Cardholder Agreement.
"Cardholder Agreement" means the agreement between the
Cardholder or other obligors and the Bank with respect to a Credit Card
including, without limitation, any agreement relating to credit
enhancements provided in connection with such Credit Card, as the same
has been amended or otherwise modified and in effect from time to time.
"Claim Notice" means written notification pursuant to
Section 7.2(a) of a Third Party Claim as to which indemnity under Section
7.1 is sought by an Indemnified Party, enclosing a copy of all papers
served, if any, on the Indemnified Party.
"Clearing Bank Supplement" means the Client Supplement,
substantially in the form of Exhibit C to the Master Services Agreement,
dated as of January 29, 1998, by and among the Bank, Holdings and FDR
relating to the Holdings Credit Card Business, as amended from time to
time in accordance with the terms thereof.
"Closing Date Receivables Purchase and Sale Agreements"
means the Receivables Purchase and Sale Agreement, dated as of January
29, 1998, by and between the Bank and Receivables and the Overdue
Receivables Purchase and Sale Agreement, dated as of January 29, 1998, by
and between the Bank and Receivables, collectively.
"Common Units" means the units designated as "Common Units"
pursuant to the terms of the Operating Agreement.
"Contribution Agreement" means the Contribution Agreement
dated as of January 29, 1998 by and between the Bank and Holdings.
"Credit Card" means a MasterCard(R) or VISA(R) card issued
by the Bank and associated solely with the Holdings Credit Card Business.
"Credit Card Business" means the provision of unsecured
lines of credit accessible by VISA(R) or MasterCard(R) credit cards to
consumers within the United States of America, the servicing of such
credit card relationships, and the provision of services incidental
thereto.
"Credit Date" has the meaning set forth in Section 4.1.
"Credit Event" has the meaning set forth in Section 4.1.
"Credit Policy" means the credit policy, as adopted by the
Bank and acceptable to Holdings used as the basis for determining
whether, when and to what extent to establish an Additional Account or to
extend credit under a Cardholder Agreement or Account, as amended from
time to time in accordance with the terms hereof (a copy of which has
been provided to Holdings on the date hereof).
"Designated Agreements" means the Initial Designated
Agreements and the Additional Designated Agreements.
"Disclosing Party" has the meaning set forth in Article VI.
"Dispute Notice" has the meaning set forth in Section
7.2(c).
"Dispute Period" means the period ending 30 calendar days
following receipt by the Indemnifying Party of an Indemnity Notice.
"Eligible Applicant" has the meaning set forth in Section
3.1(b).
"FA" means First Annapolis Marketing Information Services,
Inc., a Maryland corporation.
"FDR" means First Data Resources Inc.
"Governmental Authority" means may federal, national,
state, municipal, local, territorial or other governmental department,
commission, board, bureau, agency, regulatory authority, instrumentality,
judicial or administrative body, domestic or foreign.
"Holdings" has the meaning in the preamble hereto.
"Holdings Credit Card Business" means the Credit Card
Business of the Bank (other than the Bank Relationship Credit Card
Business, the Bank International Credit Card Business and the Bank
Value-Limited Credit Card Business from and after the date the Bank
notifies Holdings of its election to exclude the same from the Holdings
Credit Card Business, any such exclusion to be prospective only).
"Holdings Required Information" has the meaning set forth
in Section 5.2(d).
"ICA" means the MasterCard(R) Interbank Card Account.
"Indemnified Bank Parties" has the meaning set forth in
Section 7.1(a).
"Indemnified Holdings Parties" has the meaning set forth in
Section 7.1(b).
"Indemnified Parties" has the meaning set forth in Section
7.1(b).
"Indemnifying Party" means any Person against whom a claim
for indemnification is being asserted under any provision of Article VII.
"Indemnity Notice" means written notification pursuant to
Section 7.2(c) of a claim for indemnity under Article VII by an
Indemnified Party, specifying the nature of and basis for such claim,
together with the amount or, if not then reasonably ascertainable, the
estimated amount, determined in good faith, of such claim.
"Information" has the meaning set forth in Article VI.
"Initial Account" means a Credit Card account transferred
to Holdings by the Bank under the Contribution Agreement.
"Initial Cardholder Agreements" means the Cardholder
Agreements as defined in the Contribution Agreement.
"Initial Designated Agreements" means the Designated
Agreements as defined in the Contribution Agreement.
"Interchange" means the contractual agreements, rules,
regulations and procedures governing the relationships between, or the
actions in accordance with the contracts, agreements, rules, regulations
and procedures by, any two or more Persons in connection with Interchange
Settlement.
"Interchange Settlement" means the process by which FDR, on
behalf of the Bank (a) initiates payment for MasterCard(R) and VISA(R)
Transaction Card Tickets presented by "acquirers" (as such term is
defined in MasterCard(R) and VISA(R) regulations) to the Bank, (b)
receives payment for MasterCard(R) and VISA(R) Transaction Card Tickets
presented by the Bank, and (c) remits and receives payments for
chargebacks and other Interchange fees and expenses of or payable by the
Bank.
"Laws" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law of the
United States, any foreign country or any domestic or foreign state,
county, city or other political subdivision of any Governmental
Authority.
"Marketing Documents" has the meaning set forth in Section
3.1(a).
"Marketing Plan" has the meaning set forth in Section
3.1(a).
"MasterCard(R)" means MasterCard International
Incorporated.
"Master Services Agreement" means the Master Services
Agreement, dated as of January 29, 1998, by and between Holdings and FDR,
as amended from time to time in accordance with the terms thereof.
"Operating Agreement" means the Limited Liability Company
Agreement, dated as of January 29, 1998, by and among BKB, Bankmont,
Harris Trust and Savings Bank, an Illinois banking corporation, FA, the
Company, and any of their respective permitted successors and assigns,
and Holdings.
"Origination" has the meaning set forth in Section 3.2.
"Person" means any individual, partnership, corporation,
association, trust, limited liability company, joint venture,
unincorporated organization and any government, governmental department
or agency or political subdivision thereof.
"Qualified Transferee" has the meaning set forth in Section
3.4.
"Receivables" means Partners First Receivables, LLC, a
Delaware limited liability company.
"Receivables Purchase Agreement" means the Receivables
Purchase Agreement, dated as of January 29, 1998, by and between the Bank
and Receivables to effect the daily sale of Accounts Receivable under the
Accounts after the date hereof, as amended from time to time in
accordance with the terms thereof.
"Required Information" means the Bank Required Information
and Holdings Required Information, collectively.
"Resolution Period" means the period ending 30 calendar
days following receipt by an Indemnified Party of a Dispute Notice.
"Series A Units" means the units designated as "Series A
Units" pursuant to the terms of the Operating Agreement.
"Settlement Account" has the meaning set forth in Section
5.2(i).
"Service Mark" has the meaning set forth in Section 2.3.
"Solicited Applicants" means Persons who are solicited to
open an Account pursuant to Section 3.1(b).
"Subsidiary" means any corporation, association, trust, or
other business entity, of which the designated parent shall at any time
own or control directly or indirectly through a Subsidiary of
Subsidiaries at least a majority (by number of votes) of the outstanding
shares of capital stock (or other shares of beneficial interest) entitled
ordinarily to vote for the election of such business entity's directors
(or in the case of a business entity that is not a corporation, for those
Persons exercising functions similar to directors of a corporation).
"Third Party Claim" has the meaning set forth in Section
7.2(a).
"Transferred Assets" means, with respect to the Additional
Accounts, (i) all rights in and to the business relationship between the
Bank and the Cardholder in their capacities as such, including the right
to offer ongoing Credit Card services to Cardholders party to the
Additional Cardholder Agreements and the right to offer and provide other
products and services on a non-exclusive basis to Cardholders, (ii) the
right to designate any other party at any time and from time to time
without further consideration a successor to the Bank (without any
further consideration being payable by the Company and the Bank agrees to
take all such actions as are necessary or required to effect such
designation) under the Additional Designated Agreements provided that (a)
the designee is legally capable of performing the obligations of the Bank
thereunder, (b) such designee expressly assumes the obligations of the
Bank under the Additional Designated Agreements and (c) such designee
expressly acknowledges that its rights thereunder are subject to, and
that it is bound by, the Receivables Purchase Agreement, (iii) any and
all books and records under the Bank's control relating solely to the
Cardholders and the Additional Accounts, including, without limitation,
all Additional Account applications, statements, records and
correspondence and all customer lists and other information under the
Bank's control relating solely to such Cardholders and such Additional
Accounts, whether in paper, microfilm, microfiche or magnetic tape form;
and (iv) the right to assign, license or designate to others any or all
of the foregoing, but excluding any rights or assets transferred or
assigned by the Bank pursuant to the Receivables Purchase Agreement;
provided, however, that Transferred Assets shall not include the
Additional Designated Agreements.
"VISA(R)" means VISA U.S.A., Inc.
1.2. Headings. The headings and subheadings in this
Agreement are included for convenience and identification only and are in
no way intended to describe, interpret, define or limit the scope, extent
or intent of this Agreement or any provision hereof.
1.3. Pronouns. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular or
plural as the identity of the Person may require.
Article II
Authorization/Appointment of Agent
2.1. Use of Assets. Holdings hereby authorizes the Bank to
use, on a non-exclusive basis, subject to the terms and conditions of
this Agreement, Holdings' rights and interest in, to and under the
Contributed Assets and the Transferred Assets to the extent necessary to
enable the Bank to perform its obligations hereunder.
2.2. Appointment of Holdings as Agent.
(a) The Bank shall (i) make the determination whether, when and
upon what terms to originate an Additional Account or to extend credit
under the Accounts, (ii) extend credit under the Accounts, (iii) effect
Interchange Settlement with respect to the Accounts pursuant to and in
accordance with this Agreement and the Clearing Bank Supplement, (iv)
comply with its covenants set forth in Section 5.1 hereof and (v)
maintain all such other licenses, permits or authorizations from
Governmental Authorities as are necessary to perform its obligations
under this Agreement. Except as set forth in the preceding sentence,
Section 3.4 of this Agreement, the Contribution Agreement and the
Receivables Purchase Agreement, the Bank shall have no other obligations
to Holdings with respect to the Accounts or the Designated Agreements;
provided, however that nothing contained herein shall relieve the Bank of
its obligations to Cardholders under the Cardholder Agreements,
Agreements, the Additional Cardholder Agreements.
(b) The Bank hereby appoints Holdings to act as its sole and
exclusive agent, with the power to appoint and retain sub-agents, and
Holdings accepts such appointment, to exercise, at Holdings' sole cost
and expense, all of the Bank's rights and perform all of its obligations
(other than as specified in Section 2.2(a) and subject to this Section
2.2(b)) with respect to the Accounts and under the Initial Designated
Agreements and the Additional Designated Agreements, including, without
limitation, the following:
(i) to make recommendations with respect to the Credit
Policy;
(ii) to administer the Credit Policy and to administer and
manage the Accounts and the Initial Cardholder Agreements and the
Additional Cardholder Agreements, in a manner consistent with the
Credit Policy, applied consistently and in a manner consistent
with past practice;
(iii) to arrange for the billing and collection of any and
all Accounts Receivable with respect to the Accounts;
(iv) to administer and manage all Accounts Receivable
arising under the Accounts, subject to the oversight of the Bank
and consistent with the Credit Policy, applied consistently and
in a manner consistent with past practice;
(v) to undertake and perform such collection, enforcement,
compromise and other activities with respect to the Accounts as
Holdings may deem appropriate;
(vi) to initiate and pursue or defend any suit or other
legal action or proceeding involving the Accounts, provided,
however, that no legal proceeding may be initiated or pursued (A)
in the name of the Bank without its prior written approval, not
to be withheld unreasonably, or (B) which seeks any remedy other
than solely monetary damages;
(vii) to settle, release, compromise or otherwise dispose
of any suit, cause of action, complaint or claim (whether actual,
pending or threatened) involving the Accounts; provided, however,
that such settlement, release, compromise or other disposition
involves solely the payment of monetary damages by Holdings and
no other form of relief;
(viii) to hire and retain such attorneys, consultants and
other service providers as Holdings may deem appropriate in its
sole discretion in furtherance of any activities involving the
Accounts; and
(ix) to perform such other acts as Holdings may deem
necessary, prudent or desirable in its sole discretion to
exercise the rights and perform the obligations of the Bank with
respect to the Accounts and under the Designated Agreements.
2.3. Service Mark License. Holdings hereby grants to the
Bank the right and license to use the service mark "Partners First,"
including all registrations therefor and designs and logos (collectively,
the "Service Mark") in connection with the Bank's obligations under this
Agreement, subject to the following conditions and limitations. Such
license is non-exclusive as a general matter. The term of this license
shall be coextensive with the term of this Agreement. Holdings agrees
that nothing herein shall give to the Bank any right, title or interest
in and to the Service Mark (except with respect to use in accordance with
the terms of this Agreement), that the Service Mark is the sole property
of Holdings and that any and all uses of the Service Mark by the Bank
shall enure to the sole benefit of Holdings. It is expressly agreed and
understood that the Bank is not purchasing or acquiring any right, title
or interest in the Service Mark. The Bank agrees that if any rights in
the Service Mark accrues to the Bank by operation of law, such rights
will revert to Holdings. The Bank agrees to cooperate with Holdings in
perfecting its right, title and interest in the Service Mark by providing
written assignment of any rights therein which may have accrued to the
Bank. Except as expressly provided in this Agreement, and except as
otherwise agreed to in writing by Holdings, the Bank will not use the
Service Mark for any purposes not related to this Agreement. Any use of
the Service Mark by the Bank shall be conducted in accordance with any
applicable policies and procedures of Holdings which have been disclosed
in writing to the Bank, and shall be presented in a professional manner,
consistent with the image and use of the Service Mark by Holdings. In all
events, the Bank may rely on use of Service Mark which has been expressly
approved in writing by the Bank.
Article III
Accounts
3.1. Solicitation.
(a) The Bank hereby appoints Holdings as its sole and exclusive
agent to acquire, solicit and market Accounts with respect to the
Holdings Credit Card Business. Subject to the applicable requirements of
Law and the Credit Policy, Holdings, at its sole cost and expense, shall
develop and evaluate all data, documents and analysis it may determine to
be necessary, in its sole discretion (including without limitation,
developing the matrices for determining the profile type(s) to be
solicited), to formulate and implement a marketing strategy and plan to
solicit Accounts with respect to the Holdings Credit Card Business (the
"Marketing Plan"). Holdings shall also prepare, at its sole cost and
expense, all marketing documentation (including, without limitation,
brochures, advertisements, mailings and announcements) to be used in the
implementation of the Marketing Plan or the generation of Additional
Accounts (collectively, the "Marketing Documents"). The Bank shall assist
Holdings, as is necessary and appropriate, in the development and
preparation of the Marketing Plan and Marketing Documents; and such
Marketing Plan and Marketing Documents shall be subject to the prior
review and approval of the Bank.
(b) Holdings shall, at its sole cost and expense, implement and
administer the Marketing Plan which shall include overseeing and
administering the preparation and mailing of all Marketing Documents,
screening all responses to Marketing Documents and applications received
and providing the Bank with the initial recommendation with respect to
the Persons who qualify, in accordance with the Credit Policy, for the
origination of an Account and issuance of a Credit Card by the Bank (the
"Eligible Applicants"), and notifying Persons of their failure to so
qualify.
3.2. Origination. Holdings shall provide the Bank from
time to time with the names, addresses and all other relevant information
(including credit histories) with respect to each Solicited Applicant,
Applicant and Eligible Applicant (collectively, "Applicant Information").
Unless the Bank shall notify Holdings in writing not to originate an
Account no later than five (5) Business Days after receipt of the
Applicant Information with respect to each Eligible Applicant, Holdings
is hereby authorized to and shall, in the name of and on behalf of the
Bank, solely as agent for the Bank, establish an Additional Account for
an Eligible Applicant, cause the Bank and a Cardholder to enter into a
Cardholder Agreement with such Eligible Applicant (an "Additional
Cardholder Agreement") and provide the Cardholder with a Credit Card
(collectively, an "Origination") to each Eligible Applicant. Holdings
shall bear all costs and expenses of an Origination, including, without
limitation, the cost of issuing and mailing the Credit Card to each
Cardholder, and any VISA(R) or MasterCard(R) costs, as the case may be.
Simultaneously with an Origination, in consideration of the services
performed by Holdings as specified in Section 3.1 above, the Bank hereby
assigns, transfers and delivers to Holdings and Holdings hereby accepts,
assumes, acquires and takes delivery of all of the Bank's interest in the
Transferred Assets relating to the Additional Accounts.
3.3. Acquisition of Accounts. If Holdings acquires (i)
Credit Card accounts and related Cardholder Agreements from the Bank or
any of the Bank's Affiliates pursuant to Section 8.1(a)(ii) or Section
8.1(b) Operating Agreement, or (ii) other consumer line of credit
accounts accessible by VISA(R) or MasterCard(R) and related agreements
from any other Person, on terms mutually agreed to by Holdings and the
Bank (each being an "Acquisition"), then each such account shall
constitute an Additional Account, and each such Cardholder Agreement and
related agreement shall constitute an Additional Cardholder Agreement,
for all purposes hereof (other than Sections 3.1 and 3.2 hereof.
3.4. Additional Designated Agreements. The Bank and the
Company acknowledge that all Receivables and net Interchange fees related
thereto generated by the Bank under the Additional Designated Agreements
are to be sold by the Bank to a wholly owned subsidiary of the Company
pursuant to the Receivables Purchase Agreement. The Bank further
acknowledges that its retention of the Additional Designated Agreements
is subject to the right of the Company to direct the Bank and each and
every subsequent transferee thereof to transfer the Additional Designated
Agreements to whomsoever the Company may elect provided that such
transferee is legally capable of performing the obligations of the Bank
and each and every subsequent transferee thereof under the Additional
Designated Agreements, expressly assumes the obligations of the Bank and
each and every subsequent transferee thereof under the Additional
Designated Agreements and expressly acknowledges that it is taking its
rights subject to and will be bound by the terms of the Receivables
Purchase Agreement (to the extent such agreement is then in effect) (each
being a "Qualified Transferee"). Upon the election of the Company to
terminate the Bank's obligations under this Agreement, the Company shall
direct the Bank to, and upon such direction the Bank shall, transfer
(without payment of any further consideration) the Additional Designated
Agreements to such Qualified Transferee. The Bank agrees to execute such
instruments of assignment and transfer as may be reasonably required by
the Company in order to effectuate the transfer of the Additional
Designated Agreements to a Qualified Transferee designee of the Company.
It is expressly acknowledged and agreed that the right of the Company to
direct the Additional Designated Agreements to be transferred is subject
only to the conditions explicitly herein stated, and is otherwise
absolute and unconditional and that the grant of such right to the
Company is a material inducement to the Company in entering this
Agreement.
3.5. Ownership of Accounts Receivable. Subject to the
Receivables Purchase Agreement, all Accounts Receivable arising under any
of the Accounts shall be the sole and exclusive property of the Bank and
its successors and assigns and Holdings shall not have, and hereby
irrevocably waives and disclaims, any ownership or other property
interest therein whatsoever.
Article IV
Representations and Warranties
4.1. Representations and Warranties of the Bank. The Bank
hereby represents and warrants to Holdings as of the date hereof, and,
except for representations and warranties which by their terms are made
solely as of the date hereof, as of the date of each Origination or
Acquisition and as of the date (a "Credit Date") of each extension of
credit (a "Credit Event") under either an Initial Cardholder Agreement or
Additional Cardholder Agreement that:
(a) Organization; Good Standing; Due Qualification. The Bank is a
banking corporation duly organized and validly existing in good standing
and duly qualified to do business as a banking corporation under the laws
of the State of Illinois and has, in all material respects, full power
and authority to own its properties and conduct its business as presently
owned or conducted, and to execute, deliver and perform its obligations
under this Agreement.
(b) Due Authorization. The execution, delivery and performance of
this Agreement and the consummation of the transactions provided for in
this Agreement have been duly authorized by all necessary action on the
part of the Bank. This Agreement constitutes the legal, valid and binding
obligation of the Bank, enforceable against the Bank in accordance with
its terms, except as enforcement thereof may be limited by receivership,
conservatorship and supervisory powers of bank regulatory agencies
generally, as well as bankruptcy, insolvency, reorganization, moratorium
or similar laws of general applicability relating to or affecting
creditors' rights or general equity principles (regardless of whether
such matters are considered in a proceeding in equity or at law) and the
availability of equitable remedies.
(c) No Conflict. The execution and delivery of this Agreement by
the Bank, the performance by the Bank of the transactions contemplated by
this Agreement, and the fulfillment by the Bank of the terms of this
Agreement will not conflict with, violate or result in any breach of any
of the terms and provisions of, or constitute (with or without notice or
lapse of time or both) a default under, any indenture, contract,
agreement, mortgage, deed of trust, or other instrument to which the Bank
is a party or by which it or any of its properties are bound which would
have a material adverse effect on the Bank's ability to exercise its
rights or perform its obligations hereunder.
(d) No Proceedings. As of the date hereof, there are no
proceedings or investigations pending or, to the best knowledge of the
Bank, threatened against the Bank 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,
(iii) seeking any determination or ruling that, in the reasonable
judgment of the Bank, would materially and adversely affect the exercise
by the Bank of its rights or performance by the Bank of its obligations
under this Agreement or (iv) seeking any determination or ruling that
would materially and adversely affect the validity or enforceability of
this Agreement.
(e) VISA(R) and MasterCard(R) Membership. As of the date hereof,
the Bank is a member in good standing of VISA(R) and MasterCard(R).
4.2. Representations and Warranties of Holdings. Holdings
hereby represents and warrants to the Bank as of the date hereof and,
except for representations and warranties which by their terms are made
solely as of the date hereof, as of the date of each Origination or
Acquisition and as of each Credit Date:
(a) Organization and Good Standing. Holdings is a limited
liability company duly organized and validly existing in good standing
under the laws of the State of Delaware and has, in all material
respects, full power and authority to own its properties and conduct its
business as presently owned or conducted, and to execute, deliver and
perform its obligations under this Agreement.
(b) Due Qualification. Holdings is duly qualified to do business
and is in good standing (or is exempt from any requirements to so
qualify) and has obtained all necessary licenses and approvals from
Governmental Authorities, in each jurisdiction which 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 under this Agreement.
(c) Due Authorization. The execution, delivery and performance of
this Agreement, and the consummation of the transactions provided for in
this Agreement have been duly authorized by all necessary action on the
part of Holdings. This Agreement constitutes the legal, valid and binding
obligation of Holdings, enforceable against Holdings in accordance with
its terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws of general
applicability relating to or affecting creditors's rights or general
equity principles (regardless of whether such matters are considered in a
proceeding in equity or at law) and the availability of equitable
remedies.
(d) No Conflict. The execution and delivery of this Agreement by
Holdings, the performance by Holdings of the transactions contemplated by
this Agreement, and the fulfillment by Holdings of the terms of this
Agreement will not conflict with, violate or result in any breach of any
of the terms and provisions of, or constitute (with or without notice or
lapse of time or both) a default under, any indenture, contract,
agreement, mortgage, deed of trust, or other instrument to which Holdings
is a party or by which it or any of its properties are bound which would
have a material adverse effect on Holdings' ability to perform its
obligations hereunder or thereunder.
(e) No Proceedings. As of the date hereof, there are no
proceedings or investigations pending or, to the best knowledge of
Holdings, threatened against Holdings 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, (iii) seeking any determination or ruling that, in the
reasonable judgment of Holdings, would materially and adversely affect
the performance by Holdings of its obligations under this Agreement, or
(iv) seeking any determination or ruling that would materially and
adversely affect the validity or enforceability of this Agreement.
Article V
Additional Covenants
5.1. The Bank. The Bank covenants and agrees with Holdings
that it shall:
(a) do or cause to be done all things necessary to preserve,
renew and keep in full force and effect its legal existence as a banking
corporation organized under the laws of the State of Illinois or such
other organization with all power and authority necessary to perform the
Bank's obligations hereunder;
(b) use its reasonable best efforts to preserve, renew, extend
and keep in full force and effect and in good standing its membership in
each of VISA(R) and MasterCard(R);
(c) comply with all applicable Laws, rules, regulations, decrees
and orders of Governmental Authorities as is necessary to perform its
obligations under this Agreement;
(d) not take any action in violation of the terms and conditions
of the Credit Policy and the Initial Cardholder Agreements and the
Additional Cardholder Agreements with respect to each Origination or
Acquisition and Credit Event;
(e) maintain all records and information, in its possession or
control, in accordance with applicable Laws, in connection with the
operation of the Holdings Credit Card Business including the Accounts and
the Assigned Agreements (collectively, "Bank Required Information"),
subject to the authority of the Board of Governors of the Federal Reserve
System, the Illinois Office of Banks and Real Estate and all other
applicable Governmental Authorities to inspect and/or copy such records
and information upon reasonable notice;
(f) provide to Holdings or to FDR, upon request by Holdings, and
upon reasonable prior notice, such Bank Required Information (or
reasonable access thereto) as shall be reasonably requested by Holdings
in connection with the operation of the Holdings Credit Card Business;
(g) not, without prior notice to and consultation with Holdings,
amend, modify, waive or terminate any of the terms and conditions of the
Credit Policy, the Initial Cardholder Agreements, the Additional
Cardholder Agreements or the Assigned Agreements;
(h) provide Holdings notice of any proceedings or investigations
pending or, to the best knowledge of the Bank, threatened against the
Bank 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, (iii) seeking any
determination or ruling that, in the reasonable judgment of the Bank,
would materially and adversely affect the performance by the Bank of its
obligations under this Agreement, or (iv) seeking any determination or
ruling that would materially and adversely affect the validity or
enforceability of this Agreement; and
(i) remit to Holdings, upon request by Holdings, any excess funds
in the Settlement Account relating to the Accounts.
5.2. Holdings. Holdings hereby covenants and agrees with
the Bank that it shall:
(a) do or cause to be done all things necessary to preserve,
renew and keep in full force and effect its legal existence as a limited
liability company organized under the laws of the State of Delaware;
(b) comply with all applicable Laws, rules, regulations, decrees
and orders of Governmental Authorities as is necessary to perform its
obligations under this Agreement;
(c) comply with the terms and conditions of the Credit Policy and
the terms and conditions of the Initial Cardholder Agreements and the
Additional Cardholder Agreements with respect to each Origination or
Acquisition and Credit Event;
(d) maintain all records and information, in its possession or
control, in accordance with applicable Laws, in connection with the
operation of the Holdings Credit Card Business including the Accounts and
the Assigned Agreements (collectively, "Holdings Required Information"),
subject to the authority of the Board of Governors of the Federal Reserve
System, the Illinois Office of Banks and Real Estate and all other
applicable Governmental Authorities to inspect and/or copy such records
and information upon reasonable notice;
(e) provide to the Bank or to FDR, upon request by the Bank, and
upon reasonable prior notice, such Holdings Required Information (or
reasonable access thereto) as shall be reasonably requested by the Bank
in connection with the operation of the Holdings Credit Card Business;
(f) not take any action in violation of the terms and conditions
of the Credit Policy and the Initial Cardholder Agreements and the
Additional Cardholder Agreements with respect to each Origination or
Acquisition and Credit Event;
(g) not, without prior approval of the Bank, amend, modify, waive
or terminate any of the terms and conditions of the Initial Cardholder
Agreements, the Additional Cardholder Agreements or the Assigned
Agreements;
(h) provide the Bank notice of any proceedings or investigations
pending or, to the best knowledge of Holdings, threatened against
Holdings 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, (iii) seeking any
determination or ruling that, in the reasonable judgment of Holdings,
would materially and adversely affect the performance by Holdings of its
obligations under this Agreement, or (iv) seeking any determination or
ruling that would materially and adversely affect the validity or
enforceability of this Agreement;
(i) remit to an account maintained by the Bank to pay costs and
expenses to FDR (the "Settlement Account") sufficient funds to pay
settlement charges owed to FDR by the Bank relating to the Accounts
pursuant to the terms and conditions of the Clearing Bank Supplement, by
such time as is necessary so as to enable the Bank to comply with the
terms of the Clearing Bank Supplement;
(j) remit to an account maintained by the Bank to pay costs and
expenses to FDR all amounts owed to FDR by Holdings pursuant to the
Master Services Agreement and relating to the Accounts; and
(k) in connection with the Master Services Agreement, not direct
FDR to take any action inconsistent with the terms of the Credit Policy
or the Cardholder Agreements.
Article VI
Confidentiality
Neither party shall use, or permit any of its Affiliates or any
of its or its Affiliates' directors, officers, employees, agents,
consultants or advisors to use, any data or information concerning the
other, including, without limitation, any information made available to
it in connection with its performance under this Agreement for any
purpose which would be detrimental to the other. Each party shall hold,
and shall cause its respective Affiliates and its directors, officers,
employees, agents, consultants and advisors and those of its respective
Affiliates to hold, in strict confidence, unless disclosure to a banking
or other regulatory authority is necessary in connection with any
necessary regulatory approval or unless compelled to disclose by judicial
or administrative process or, in the written opinion of its counsel, by
other requirement of Law or the applicable requirements of any
Governmental Authority or relevant stock exchange, all non-public
records, books, contracts, reports, instruments, computer data and other
data and information (collectively, "Information") concerning the other
(or, if required under a contract with a third party, such third party)
furnished or made available to it by such Person or its representatives
pursuant to this Agreement, except to the extent that such Information
can be shown to have been (a) previously known by such party on a
nonconfidential basis, (b) available to such party on a nonconfidential
basis from a source other than the disclosing party, (c) in the public
domain through no fault of such party or (d) later lawfully acquired from
other sources by the party to which it was furnished, and no party shall
release or disclose such Information to any other Person, except its
auditors, attorneys, financial advisors, bankers, other consultants and
advisors and, to the extent permitted above, to banking and other
regulatory authorities. In the event that a party to this Agreement
receives notice that it will be compelled to disclose any Information in
connection with any necessary regulatory approval or by judicial or
administrative process, such party shall provide the Person who provided
such Information (the "Disclosing Party") with prompt prior written
notice of such requirement so that the Disclosing Party may seek a
protective order or other appropriate remedy and/or waive the terms of
any confidentiality agreement by and among any of the parties. In the
event that such protective order, other remedy or waiver is not obtained,
only that portion of the Information which is legally required to be
disclosed shall be so disclosed.
Article VII
Indemnification
7.1. Indemnification Provisions for Benefit of the Bank.
(a) It is the intent and purpose of this Agreement that except as
explicitly hereinafter set forth, the Indemnified Bank Parties (as
hereinafter defined) shall bear no risk in connection with the
transactions contemplated hereby and by the other agreements referred to
in clause (iii) below. Accordingly, Holdings shall indemnify and hold
harmless the Bank and its Affiliates from and against any Adverse
Consequences that any of the Bank and its Affiliates (determined, in each
case, assuming that Holdings is not is an Affiliate of the Bank following
the date hereof) and their respective officers, employees, directors,
representatives and agents (collectively, the "Indemnified Bank Parties")
shall suffer or incur to the extent resulting from, arising out of or
relating to: (i) any breach by Holdings of any of its representations or
warranties contained in Section 4.2 hereof or any of its covenants
contained herein and with respect to the BIN and ICA numbers, (ii) any
breach by the Bank of its obligations under this Agreement, the Initial
Cardholder Agreements, the Additional Cardholder Agreements or the
Assigned Agreements, except to the extent caused by the gross negligence
or willful misconduct of the Bank or any Indemnified Bank Party or (iii)
this Agreement, the Accounts, the Initial Cardholder Agreements, the
Additional Cardholder Agreements, the Assigned Agreements, the
Receivables Purchase Agreement, the Master Services Agreement or the
Clearing Bank Supplement (including, without limitation, resulting from,
arising out of or relating to breaches, acts or omissions by any party
(including the Bank) to any of the foregoing agreements), except to the
extent caused by (y) the gross negligence or willful misconduct of the
Bank or any Indemnified Bank Party or (z) the failure of the Bank to
obtain all licenses, permits, franchises or authorizations from all
Governmental Authorities necessary for the Bank to enter into and to
perform its obligations under this Agreement.
(b) Indemnification Provisions for Benefit of Holdings. The Bank
shall indemnify and hold harmless Holdings and its Affiliates from and
against any Adverse Consequences that Holdings and its Affiliates
(determined, in each case, assuming that the Bank and its Subsidiaries
are not Affiliates of Holdings) and their respective officers, employees,
directors, members of its management committee, representatives and
agents (collectively, the "Indemnified Holdings Parties" and, together
with the Indemnified Bank Parties, the "Indemnified Parties") shall
suffer resulting from, arising out of or relating to any breach by the
Bank of any of its representations or warranties contained in Section 4.1
hereof (other than the second sentence of Section 4.1(b)), or any of its
covenants contained herein, provided, however, indemnification for breach
of covenants shall be provided only to the extent that such Adverse
Consequences are caused by the gross negligence or willful misconduct of
the Bank or any Indemnified Bank Party.
7.2. Method of Asserting Claims. All claims for
indemnification by any Indemnified Party under Section 7.1 will be
asserted and resolved as follows:
(a) In order for an Indemnified Party to be entitled to any
indemnification provided or under Section 7.2 in respect of, arising out
of or involving a claim or demand made by any Person not a party to this
Agreement against the Indemnified Party (a "Third Party Claim"), the
Indemnified Party must deliver a Claim Notice to the Indemnifying Party
promptly after receipt by such Indemnified Party of written notice of the
Third Party Claim; provided, however, that failure to give such Claim
Notice shall not affect the indemnification provided hereunder except to
the extent the Indemnifying Party shall have been actually prejudiced as
a result of such failure. The Indemnifying Party shall promptly mitigate
any such prejudice to the extent possible.
(b) If a Third Party Claim is made against an Indemnified Party,
the Indemnifying Party shall be entitled to participate in the defense
thereof and, if it so chooses, to assume the defense thereof with counsel
selected by the Indemnifying Party, which counsel must be reasonably
satisfactory to the Indemnified Party. Should the Indemnifying Party so
elect to assume the defense of a Third Party Claim, the Indemnifying
Party shall not be liable to the Indemnified Party for legal expenses
subsequently incurred by the Indemnified Party in connection with the
defense thereof, but shall continue to pay for any expenses of
investigation or any Adverse Consequence suffered. If the Indemnifying
Party assumes such defense, the Indemnified Party shall have the right to
participate in the defense thereof and to employ counsel, at its own
expense, separate from the counsel employed by the Indemnifying Party. If
(i) the Indemnifying Party shall not assume the defense of a Third Party
Claim with counsel satisfactory to the Indemnified Party within five
Business Days after delivery of any Claim Notice, or (ii) legal counsel
for the Indemnified Party notifies the Indemnifying Party that there are
or may be legal defenses available to the Indemnified Party or to other
Indemnified Parties which are different from or additional to those
available to the Indemnifying Party, which, if the Indemnified Party and
the Indemnifying Party were to be represented by the same counsel, would
constitute a conflict of interest for such counsel or prejudice
prosecution of the defenses available to such Indemnified Party, or (iii)
if the Indemnifying Party shall assume the defense of a Third Party Claim
and fail to diligently prosecute such defense, then in each such case the
Indemnified Party, by notice to the Indemnifying Party, may employ its
own counsel and control the defense of the Third Party Claim and the
Indemnifying Party shall be liable for the reasonable fees, charges and
disbursements of counsel employed by the Indemnified Party; and the
Indemnified Party shall be promptly reimbursed for any such fees, charges
and disbursements, as and when incurred. Whether the Indemnifying Party
or the Indemnified Party controls the defense of any Third Party Claim,
the parties hereto shall cooperate in the defense thereof. Such
cooperation shall include the retention and provision to the counsel of
the controlling party of records and information which are reasonably
relevant to such Third Party Claim, and making employees available on a
mutually convenient basis to provide additional information and
explanation of any material provided hereunder. The Indemnifying Party
shall have the right to settle, compromise or discharge a Third Party
Claim (other than any such Third Party Claim in which criminal conduct is
alleged) without the Indemnified Party's consent if such settlement,
compromise or discharge (i) constitutes a complete and unconditional
discharge and release of the Indemnified Party, and (ii) provides for no
relief other than the payment of monetary damages and such monetary
damages are paid in full by the Indemnifying Party.
(c) In the event any Indemnified Party should have a claim under
Section 7.1 against any Indemnifying Party that does not involve a Third
Party Claim, the Indemnified Party shall deliver an Indemnity Notice with
reasonable promptness to the Indemnifying Party. The failure by any
Indemnified Party to give the Indemnity Notice shall not impair such
party's rights hereunder except to the extent that an Indemnifying Party
demonstrates that it has been irreparably prejudiced thereby. The
Indemnifying Party shall promptly mitigate any such prejudice to the
extent practicable. If the Indemnifying Party notifies the Indemnified
Party that it does not dispute the claim described in such Indemnity
Notice or fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes the claim described in such
Indemnity Notice, the Adverse Consequences in the amount specified in the
Indemnity Notice will be conclusively deemed a liability of the
Indemnifying Party under Section 7.1 and the Indemnifying Party shall pay
the amount of such Adverse Consequences to the Indemnified Party on
demand. If the Indemnifying Party has delivered notice disputing its
liability to the Indemnified Party (a "Dispute Notice") within the
Dispute Period, the Indemnifying Party and the Indemnified Party will
proceed in good faith to negotiate a resolution of such dispute, and if
not resolved through negotiations within the Resolution Period, such
dispute shall be resolved by litigation in a court of competent
jurisdiction.
(d) Holdings obligations under Section 7.1(a) shall be secured by
the guarantee of each of Bankmont, BKB and FA (and its Affiliates),
severally, as evidenced by each such party's execution and delivery of a
Guarantee Agreement, in the form attached hereto as Exhibit A.
(e) Notwithstanding the termination of this Agreement, a claim
for indemnity may be made under the provisions of this Article VII until
the expiration of the applicable statute of limitations with respect to
such claim.
Article VIII
Payment
8.1. Payment. The Bank shall pay a monthly fee equal to
$1,000 for the rights it has been authorized to use pursuant to Section
2.1 hereof. Holdings shall pay a monthly fee equal to $1,000 for the
Transferred Assets relating to Additional Accounts transferred to it
pursuant to Section 3.2 hereof. All such fees shall be due and payable in
arrears on or before the fifth (5th) Business Day of the next succeeding
calendar month.
8.2. Expenses. Holdings shall reimburse the Bank for all
reasonable costs and expenses incurred by the Bank in connection with the
performance of its obligations hereunder within ten (10) Business Days
after receipt by Holdings from the Bank of an invoice therefor. Holdings
shall be responsible for payment of all costs and expenses incurred by it
hereunder. This Section 8.2 shall survive the termination of this
Agreement.
Article IX
Miscellaneous
9.1. Notices. All notices, demands and other
communications hereunder shall be in writing and shall be deemed to have
been duly given if delivered personally or if mailed by certified mail,
return receipt requested, postage prepaid or if sent by overnight courier
or sent by facsimile (answerback confirmed), as follows:
If to the Bank:
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
Attention: Paul V. Reagan, Esq. - General Counsel
and
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
Attention: Douglas D. Batchelder
and
Bank of Montreal
3300 Bloor Street West
12th Floor West Tower
Toronto, Ontario Canada
M8X 2X2
Attention: Robert Pearce
with a copy sent contemporaneously to:
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
Attention: Marc P. Franson, Esq.
If to Holdings:
Partners First Holdings, LLC
900 Elkridge Landing Road, Suite 300
Linthicum, Maryland 21090
Attention: John R. Soderlund
and
Partners First Holdings, LLC
900 Elkridge Landing Road, Suite 300
Linthicum, Maryland 21090
Attention: Terence F. Browne, Esq.
or such other address or to the attention of such other Person as the
recipient party shall have specified by prior written notice to the
sending party. Any such communication shall be deemed to have been
received (i) when delivered, if personally delivered, sent by
nationally-recognized overnight courier or sent via facsimile or (ii) on
the third Business Day following the date on which the piece of mail
containing such communication is posted, if sent by registered mail.
9.2. Entire Agreement. This Agreement (including the
Exhibits and Schedules hereto) contains the entire understanding of the
parties hereto and supersedes all prior agreements and understandings
relating to the subject matter hereof. Each of the parties hereto further
acknowledges and agrees that, in entering into this Agreement, they have
not in any way relied upon any oral or written agreements, statements,
promises, information, arrangements, understandings, representations or
warranties, express or implied, not specifically set forth in this
Agreement.
9.3. Remedies. Subject to the terms of this Agreement, the
parties will be entitled to enforce their rights under this Agreement
specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights existing in their favor. The parties hereto
agree and acknowledge that money damages may not be an adequate remedy
for any breach of the provisions of this Agreement and that any party may
in its sole discretion apply to any court of law or equity of competent
jurisdiction for specific performance and/or injunctive relief in order
to enforce or prevent any violation of the provisions of this Agreement.
In the event of any dispute involving the terms of this Agreement, the
prevailing party shall be entitled to collect reasonable fees and
expenses incurred by the prevailing party in connection with such dispute
from the other parties to such dispute. Except for the remedies of
specific performance and injunctive relief, the remedies provided by
Article VII hereof are the sole and exclusive remedies available to the
parties under this Agreement.
9.4. Governing Law. This Agreement shall be governed by,
and construed and enforced in accordance with, the laws of the State of
Delaware without regard to its conflict of laws rules.
9.5. Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Neither this Agreement nor the rights
and obligations of any party hereunder shall be assignable or
transferable by such party without the prior written consent of the other
party hereto.
9.6. No Implied Rights or Remedies. Except as otherwise
expressly provided herein, nothing herein expressed or implied is
intended or shall be construed to confer upon or to give any Person,
except the parties hereto, any rights or remedies under or by reason of
this Agreement.
9.7. Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
9.8. Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their
mutual intent, and no rule of strict construction will be applied against
any party.
9.9. Severability. The invalidity or unenforceability of
any particular provision of this Agreement shall not affect the other
provisions hereof, and this Agreement shall be construed in all respects
as if such invalid or unenforceable provision was omitted.
9.10. Consent to Jurisdiction. Each of the parties hereto
agrees that any suit, action or proceeding instituted against such party
under or in connection with this Agreement may be brought in a court of
competent jurisdiction in the State of Delaware. By execution hereof,
each party hereto irrevocably waives any objection to, and any right of
immunity on the grounds of improper venue, the convenience of the forum,
the personal jurisdiction of such courts or the execution of judgments
resulting therefrom. Each party hereto irrevocably accepts and submits to
the jurisdiction of such courts in any such action, suit or proceeding.
9.11. Term. The term of this Agreement shall commence on
the date hereof and continue until the earlier of (i) Holdings' election
to terminate this Agreement by notice given at least sixty (60) days
prior to such termination date; provided, however, that Holdings shall
only exercise such right of termination if the Designated Agreements and
all rights and obligations of the Bank hereunder shall be assigned to an
organization with all power and authority necessary to hold the
Designated Agreements and to perform the Bank's obligations hereunder,
(ii) [the Series 1998-1 Termination Date] and (iii) Holdings' or the
Bank's election to terminate this Agreement or any portion thereof, if
required by any Governmental Authority, by notice given at least ten (10)
Business Days or such shorter period as may be otherwise required by such
Governmental Authority prior to such termination. Upon any such
termination of this Agreement, neither party shall have any further
obligations under this Agreement, except (y) as provided in Article VII,
Section 3.4 or Section 8.2 hereof and (z) the Bank's obligations under
Section 2.2(a)(ii) and 5.1(i) and Holdings' obligations under Section
5.2(i) shall survive any termination of this Agreement pursuant to clause
(i) of the immediately preceding sentence (other than on account of
action taken by any Governmental Authority) for a reasonable period of
time after the applicable termination date in order to permit the
Holdings or its designated transferee of the Designated Agreements to
become a member of VISA and Mastercard.
9.12. Further Assurances. On and after the date hereof,
each of the Bank and Holdings shall, at the sole cost and expense of
Holdings, cooperate with the other in good faith to give effect to the
terms hereof and execute, acknowledge and deliver all such
acknowledgments, documents and other instruments; provide, subject to the
requirements of applicable Laws and Article VI hereof, the other with all
information relating to such party or the Accounts; and take such further
action as the other party may reasonably request to enable such party to
exercise its rights or perform its obligations under, or to fully and
completely effectuate, the terms, conditions and intent of this
Agreement.
9.13. Force Majeure and Restricted Performance.
(a) If performance by the Bank of any obligation under this
Agreement or the Client Supplement is prevented, restricted, delayed or
interfered with by reason of labor disputes, strikes, acts of God,
floods, lightning, severe weather, shortages of materials, rationing,
utility or communication failures, failure of MasterCard(R) or VISA(R) or
their settlement system (including Interchange or settlement banks),
failure or delay in receiving electronic data, earthquakes, war,
revolution, civil commotion, acts of public enemies, blockade, embargo or
any Law, or any other act or omission whatsoever other than by the gross
negligence or wilful misconduct of the Bank, whether similar or
dissimilar to those referred to in this clause, which is or are beyond
the reasonable control of the Bank, the Bank shall provide written notice
to Holdings identifying the cause of the prevention, restriction, delay
or interference and the Bank shall be excused from the performance to the
extent of the prevention, restriction, delay or interference, so long as
the Bank is taking reasonable action to accomplish such performance as
promptly as possible under the circumstances.
(b) If performance by Holdings of any service or obligation under
this Agreement is prevented, restricted, delayed or interfered with by
reason of labor disputes, strikes, acts of God, floods, lightning, severe
weather, shortages or materials, rationing, utility or communication
failures, failure of MasterCard(R) or VISA(R), failure or delay in
receiving electronic data, earthquakes, war, revolution, civil commotion,
acts of public enemies, blockade, embargo, or any Law, or any other act
or omission whatsoever, whether similar or dissimilar to those referred
to in this clause, which is or are beyond the reasonable control of
Holdings, Holdings shall be excused from the performance to the extent of
the prevention, restriction, delay or interference, so long as it is
taking reasonable actions to accomplish such performance as promptly as
possible under the circumstances.
9.14. Amendment. This Agreement may be amended,
supplemented or modified only by a written instrument duly executed by or
on behalf of each party hereto.
9.15. WAIVER OF RIGHT TO JURY TRIAL. EACH OF THE PARTIES
HERETO HEREBY WAIVES ITS RIGHTS TO A TRIAL BY JURY IN ANY LITIGATION IN
ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF, THIS
AGREEMENT OR THE VALIDITY, INTERPRETATION OR ENFORCEMENT HEREOF OR ANY OF
THE TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above stated.
HARRIS TRUST AND SAVINGS BANK
By: /s/ Kathleen M. Deane
_________________________
Name: Kathleen M. Deane
Title: Vice President
PARTNERS FIRST HOLDINGS, LLC
By: /s/ John R. Soderlund
__________________________
Name: John R. Soderlund
Title: President and Chief
Executive Officer
January 29, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Attention: Ms. Paula Dubberly
Partners First Receivables Funding
Corporation
900 Elkridge Landing Road
Linthicum, MD 21090
Attention: Terence Browne
Re: Partners First Receivables Funding Corporation
Registration Statement on Form S-3
File No. 333-29495 (the "Registration Statement")
Dear Ms. Dubberly:
In accordance with Section 11(b)(1) of the Securities Act of 1933,
as amended, the undersigned hereby informs the Securities and Exchange
Commission (the "Com mission") that the undersigned has resigned as
Chairman of the Board and Director of Partners First Receivables Funding
Corporation (formerly known as Credit Card Receivables Funding
Corporation), effective as of January 29, 1998.
The undersigned also hereby informs the Commission that the
undersigned will not be responsible for any part of the Registration
Statement which, as of the date such part becomes effective, contains an
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading.
In connection with the foregoing, the undersigned notes that no
part of the Registration Statement has become effective as of the date
hereof.
Very truly yours,
/s/ Kathleen M. McGillycuddy
-------------------------------
Kathleen M. McGillycuddy
January 29, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Attention: Ms. Paula Dubberly
Partners First Receivables Funding
Corporation
900 Elkridge Landing Road
Linthicum, MD 21090
Attention: Terence Browne
Re: Partners First Receivables Funding Corporation
Registration Statement on Form S-3
File No. 333-29495 (the "Registration Statement")
Dear Ms. Dubberly:
In accordance with Section 11(b)(1) of the Securities Act of 1933,
as amended, the undersigned hereby informs the Securities and Exchange
Commission (the "Com mission") that the undersigned has resigned as
Secretary and Treasurer of Partners First Receivables Funding Corporation
(formerly known as Credit Card Receivables Funding Corporation),
effective as of January 29, 1998.
The undersigned also hereby informs the Commission that the
undersigned will not be responsible for any part of the Registration
Statement which, as of the date such part becomes effective, contains an
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading.
In connection with the foregoing, the undersigned notes that no
part of the Registration Statement has become effective as of the date
hereof.
Very truly yours,
/s/ Rhanna Kidwell
----------------------------
Rhanna Kidwell
January 29, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Attention: Ms. Paula Dubberly
Partners First Receivables Funding
Corporation
900 Elkridge Landing Road
Linthicum, MD 21090
Attention: Terence Browne
Re: Partners First Receivables Funding Corporation
Registration Statement on Form S-3
File No. 333-29495 (the "Registration Statement")
Dear Ms. Dubberly:
In accordance with Section 11(b)(1) of the Securities Act of 1933,
as amended, the undersigned hereby informs the Securities and Exchange
Commission (the "Com mission") that the undersigned has resigned as
Director of Partners First Receivables Funding Corporation (formerly
known as Credit Card Receivables Funding Corpora tion), effective as of
January 29, 1998.
The undersigned also hereby informs the Commission that the
undersigned will not be responsible for any part of the Registration
Statement which, as of the date such part becomes effective, contains an
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading.
In connection with the foregoing, the undersigned notes that no
part of the Registration Statement has become effective as of the date
hereof.
Very truly yours,
/s/ William M. Parent
------------------------------
William M. Parent
