<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 27, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
COMPUCREDIT CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
GEORGIA 6141 58-2336689
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Identification No.)
Code Number)
</TABLE>
------------------------
TWO RAVINIA DRIVE
SUITE 1750
ATLANTA, GEORGIA 30346
(770) 901-5840
(Address, including zip code, and telephone number,
including area code, of registrant's executive offices)
------------------------------
BRETT M. SAMSKY
CHIEF FINANCIAL OFFICER
COMPUCREDIT CORPORATION
TWO RAVINIA DRIVE
SUITE 1750
ATLANTA, GEORGIA 30346
(770) 901-5840
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
WITH COPIES TO:
<TABLE>
<S> <C>
DANIEL T. FALSTAD, ESQ. DAVID S. KATZ, ESQ.
Troutman Sanders LLP Orrick, Herrington & Sutcliffe LLP
NationsBank Plaza, Suite 5200 3050 K Street, N.W.
600 Peachtree Street, N.E. Washington, D.C. 20007
Atlanta, Georgia 30308-2216 Telephone: (202) 339-8497
Telephone: (404) 885-3000 Facsimile: (202) 339-8500
Facsimile: (404) 885-3995
</TABLE>
----------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement has become effective.
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, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) 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 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 this form is a post-effective amendment filed pursuant to Rule 462(d)
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,
check the following box. / /
----------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING
TO BE REGISTERED REGISTERED(1)(2) UNIT(1) PRICE(2)(3)
<S> <C> <C> <C>
Common Stock, no par value per share............... -- -- $123,000,000
<CAPTION>
TITLE OF EACH CLASS OF SECURITIES AMOUNT OF
TO BE REGISTERED REGISTRATION FEE
<S> <C>
Common Stock, no par value per share............... $36,285
</TABLE>
(1) In accordance with Rule 457(o) under the Securities Act of 1933, as amended
(the "Securities Act") the number of shares being registered and the
proposed maximum offering price per share are not included in the table.
(2) Includes shares reserved for an over-allotment option granted to the
Underwriters.
(3) Estimated solely for the purposes of determining the registration fee
pursuant to Rule 457(o) under the Securities Act.
----------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE 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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
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 SUCH 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.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST , 1998
[LOGO]
SHARES
COMPUCREDIT CORPORATION
COMMON STOCK
------------------
All shares of the Common Stock of CompuCredit Corporation (the "Company")
offered hereby are being offered by the Company (the "Offering"). Prior to the
Offering made hereby, there has been no public market for the Common Stock. It
is currently anticipated that the initial public offering price (the "Offering
Price") will be between $ and $ per share. See "Underwriting"
for a discussion of the factors to be considered in determining the Offering
Price.
Application has been made to have the Common Stock approved for listing on
the Nasdaq National Market under the symbol "CCRT."
SEE "RISK FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
COMMON STOCK OFFERED HEREBY.
---------------------
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. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNT AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
<S> <C> <C> <C>
Per Share.............................. $ $ $
Total.................................. $ $ $
Total Assuming Full Exercise of
Over-Allotment Option (3)............ $ $ $
</TABLE>
(1) See "Underwriting."
(2) Before deducting expenses estimated at $ , which are payable by the
Company.
(3) Assuming exercise in full of the 30-day option granted by the Company to the
Underwriters to purchase up to additional shares, on the same terms,
solely to cover over-allotments. See "Underwriting."
-------------------
The shares of Common Stock are offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by the Underwriters, and subject
to their right to reject orders in whole or in part.
It is expected that delivery of the Common Stock will be made in New York City
on or about , 1998.
-------------------
PAINEWEBBER INCORPORATED
BEAR, STEARNS & CO. INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
------------------------
The date of this Prospectus is , 1998
<PAGE>
[Inside front cover graphic to be provided.]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
ii
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE
IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL OF THE INFORMATION IN THIS
PROSPECTUS (I) ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION,
(II) REGARDING OUTSTANDING SHARES, EXCLUDES 1,200,000 SHARES OF COMMON STOCK, NO
PAR VALUE (THE "COMMON STOCK"), RESERVED FOR ISSUANCE UNDER THE COMPANY'S 1998
STOCK OPTION PLAN, (III) GIVES EFFECT TO A 15-FOR-1 STOCK SPLIT TO BE EFFECTED
CONCURRENTLY WITH THE CONSUMMATION OF THE OFFERING AND (IV) GIVES EFFECT TO THE
EXCHANGE OF ALL OF THE OUTSTANDING SHARES OF THE COMPANY'S PREFERRED STOCK,
INCLUDING ACCRUED DIVIDENDS THEREON, FOR SHARES OF COMMON STOCK
CONCURRENTLY WITH THE CONSUMMATION OF THE OFFERING. SEE "UNDERWRITING." UNLESS
THE CONTEXT OTHERWISE REQUIRES, ALL REFERENCES TO THE "COMPANY" OR "COMPUCREDIT"
HEREIN REFER TO COMPUCREDIT CORPORATION AND ITS SUBSIDIARIES AND ITS
PREDECESSOR, COMPUCREDIT, L.P.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INHERENTLY INVOLVE
RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF
CERTAIN FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN
THIS PROSPECTUS. SEE "--SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS."
THE COMPANY
CompuCredit is an information-based, technology-driven originator and
purchaser of credit products and a direct marketer of fee-based products and
services. The Company's current credit product is the
Aspire-Registered Trademark- Visa-Registered Trademark- credit card, which the
Company offers to its clients on an unsecured basis. There are currently four
types of Aspire Visa branded cards: Classic, Gold, Platinum and Aspire
Diamond-TM-. In addition, the Company markets fee-based products and services to
its clients including life insurance, card registration, telecommunication
products and services, memberships in preferred buying clubs, travel services
and debt waiver programs in the event of disability or unemployment of the
client. The Company uses proprietary analytical techniques and information
provided by credit bureaus to target consumers who management believes are
under-served by more traditional providers of credit-related products. Consumers
in this under-served market are typically more reliant on finance companies and
retail store credit cards to meet their consumer credit needs and are less
likely than others to have general-purpose credit cards. Some of these consumers
have had a delinquency, a default or, in some instances, a bankruptcy in their
credit histories, but have, in the Company's view, demonstrated recovery, while
other consumers in this target market are establishing or expanding their
credit.
The Company was formed in August 1996 and has achieved significant growth
since it began soliciting clients in February 1997. For the six months ended
June 30, 1998, the Company had net income of $14.2 million as compared to a net
loss of $725,000 for fiscal 1997. A portfolio purchase completed in April 1998,
combined with the Company's direct mail and telemarketing campaigns, has
resulted in 202,000 accounts with an aggregate managed portfolio of $397.5
million of credit card receivables outstanding as of June 30, 1998. The Company
intends to continue the growth of its portfolio through pre-approved
solicitations and purchases of credit card receivables and may utilize either or
both of these means to varying degrees, depending upon its assessment of the
most cost-efficient means of account growth.
BUSINESS STRATEGY
Since inception, the Company has developed unique proprietary scoring models
which evaluate consumer credit and bankruptcy risk using credit bureau data and
repayment history on consumer loans. Management has built on its extensive
experience in consumer credit and collections to develop the target marketing
and account management strategies and criteria that are reflected in these
models. The Company's models include unique segmentation tools which the Company
utilizes to develop risk-based pricing matrices. These matrices determine the
amount of credit, applicable interest rates and other charges offered to each
targeted client. CompuCredit believes that its proprietary scoring models allow
it
1
<PAGE>
to evaluate credit risk more effectively than most traditional credit grantors,
to identify unique pools of consumers with similar risk characteristics and to
offer profitable credit options to these potential clients. In contrast, the
Company believes that traditional credit grantors make credit decisions more
frequently based on standard credit scores such as the Fair, Isaac & Company,
Inc. ("FICO") score. Consistent with the Company's strategy, the Company's
proprietary models have been continuously revised and refined to incorporate the
Company's experience with its clients. The Company believes that this continual
revision and refinement has improved, and will continue to improve, the accuracy
and reliability of its models.
Based on research it has conducted with Equifax Credit Information Services,
Inc. ("Equifax"), one of the country's largest providers of credit information,
the Company has determined that there are approximately 82 million consumers in
the United States that it believes are under-served by consumer credit grantors.
These are consumers who the Company believes are not being solicited with offers
of pre-approved credit cards as often as other consumers. Using its proprietary
scoring models, the Company believes that, at any given time, approximately 20
to 25 million of these 82 million under-served consumers present levels of
credit risk acceptable for the Company's product. Since 1996, the Company has
conducted periodic research that indicates that, while the size of this universe
of 20 to 25 million potential clients has been relatively constant, the
composition of this group has changed to a significant degree over time as
individuals' credit characteristics change relative to the Company's criteria
(i.e., different consumers are included in the potential pool of clients at any
given time).
The Company's systems monitor client behavior patterns throughout the client
relationship. In addition to employing risk-based analysis in determining its
target market and the pricing for each client account, the Company also monitors
transactions and the type of usage that occurs on its Aspire Visa cards as part
of its account management process. The Company believes that the combination of
its proprietary databases, custom scoring models, risk-based pricing strategy,
account management strategy and collections experience enables it to provide
credit to an under-served market, to assess the risk of its client portfolios
and to price its products accordingly.
CompuCredit's operational strategy is to focus on those functions that
constitute its competitive advantages and core competencies while outsourcing
certain back office and fulfillment functions. The Company's core competencies
include credit and risk decisioning, account acquisition strategies, management
of system and model development, collections and ongoing account management. The
Company's Aspire credit card is issued pursuant to an Affinity Card Agreement
with Columbus Bank and Trust Company ("CB&T"), a state-chartered banking
subsidiary of Synovus Financial Corporation. CB&T and its affiliate, Total
Systems Services, Inc. ("TSYS"), perform additional services for the Company
such as card embossing/mailing, fraud detection, cycle billing, payment
processing and transaction processing. The Company believes that outsourcing
allows the Company to leverage the vast expertise already available to the
credit card industry.
The Company finances the growth in its credit card receivables primarily
through asset-backed securitizations. As the Company originates or acquires
credit card receivables, it sells the receivables to a master trust or to a
third party asset-backed commercial paper conduit. The receivables that are sold
through securitization are removed from the Company's Balance Sheet for
financial reporting purposes. Following a sale, the Company receives cash flow
representing the finance and past due fees in excess of the sum of the return
paid to the investors, contractual servicing fees, credit losses and required
amortization payments. From inception to June 30, 1998, the Company has received
cumulative net proceeds of approximately $268.4 million from the securitization
of its credit card receivables. The significant growth to date of the Company's
credit card receivables portfolio has been supported by the Company's
contributed capital, retained earnings and the securitization of receivables.
The Offering will provide the Company with additional capital to fund future
growth.
2
<PAGE>
HISTORY
CompuCredit was formed in August 1996 by David G. Hanna, President, and
Richard W. Gilbert, Chief Operating Officer, after completing almost two years
of research and development with the assistance of Equifax. Both Mr. Hanna and
Mr. Gilbert have extensive experience in the credit and collections industries.
Mr. Hanna and Mr. Gilbert both held executive positions with Nationwide Credit,
Inc. ("Nationwide Credit"), a national third party collection agency, during the
1980's until its sale to First Financial Management Corporation (currently known
as First Data Corporation) in 1990. Mr. Hanna also founded Account Portfolios
L.P. ("Account Portfolios") in 1989 with Frank J. Hanna, III, his brother, who
is a principal shareholder of CompuCredit and will be a director of the Company
upon consummation of the Offering. Account Portfolios was sold in 1995 to
Outsourcing Solutions, Inc., a company controlled by McCown, De Leeuw & Co., a
private venture capital firm. Account Portfolios utilized proprietary scoring
models to analyze and collect on large purchased portfolios of non-performing
loans and consumer receivables. Before joining the Company in 1996, Mr. Gilbert
served initially as Chief Operating Officer of Equifax's collection division and
subsequently as General Manager of Strategic Client Services for Equifax.
Richard R. House, Jr., CompuCredit's Chief Credit Officer, joined the Company in
April 1997 from Equifax. While at Equifax, Mr. House served as Vice President
for Equifax's Decision Solutions division, which provided consulting and
modeling services to many of the nation's largest credit grantors. Collectively,
CompuCredit's founders and executive officers have over 53 years of experience
in various aspects of consumer finance.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company (1)...... shares
Common Stock to be outstanding after the
Offering (2)............................... shares
Use of Proceeds.............................. To finance the growth of the Company through
the origination and purchase of credit card
receivables and for marketing costs, working
capital and other general corporate purposes.
Proposed Nasdaq National Market Symbol....... "CCRT"
</TABLE>
- ------------------------
(1) Assumes that the Underwriters' option to purchase up to an additional
shares of Common Stock from the Company to cover over-allotments is not
exercised. See "Underwriting."
(2) Exclusive of 1,200,000 shares of Common Stock reserved for issuance upon the
exercise of options available for grant under the Company's 1998 Stock
Option Plan.
3
<PAGE>
RISK FACTORS
Investment in the shares of Common Stock offered hereby involves a high
degree of risk. Each prospective purchaser should carefully consider all of the
matters described herein under "Risk Factors."
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements and information
relating to the Company that are based on the beliefs of management of the
Company as well as assumptions made by and information currently available to
management. Such forward-looking statements are principally contained in the
sections "The Company," "Risk Factors," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business" and include,
without limitation, the Company's expectations and estimates as to the Company's
business operations and future performance. In addition, in those and other
portions of this Prospectus, the words "anticipates," "believes," "estimates,"
"expects," "plans," "intends" and similar expressions, as they relate to the
Company or its management, are intended to identify forward-looking statements.
Such statements reflect the current views of the Company's management with
respect to future events and are subject to certain risks, uncertainties and
assumptions, including the matters described herein under "Risk Factors." The
Company does not undertake to update any such forward-looking statements to
reflect changes in the Company's beliefs or expectations except as may be
required in the Company's reports filed with the Securities and Exchange
Commission (the "Commission").
ASPIRE-REGISTERED TRADEMARK- IS A REGISTERED TRADEMARK OF THE COMPANY, AND
COMPUCREDIT-TM-, ASPIRE DIAMOND-TM-, DIAMOND SELECT-TM- AND ASPIRE DIAMOND
SELECT-TM- ARE TRADEMARKS OF THE COMPANY. THIS PROSPECTUS ALSO CONTAINS TRADE
NAMES AND TRADEMARKS OF OTHER COMPANIES THAT ARE THE PROPERTY OF THEIR
RESPECTIVE OWNERS.
4
<PAGE>
SUMMARY FINANCIAL INFORMATION AND OPERATING DATA
The following summary financial and other data should be read in conjunction
with the Company's Consolidated Financial Statements and the related Notes
thereto and with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this Prospectus. The following
summary financial data for the year ended December 31, 1997, the period ended
December 31, 1996 and the six months ended June 30, 1998 are derived from the
Company's audited Consolidated Financial Statements, which have been audited by
Ernst & Young LLP, independent auditors. The financial data for the six months
ended June 30, 1997 are derived from unaudited financial statements. The
unaudited financial statements include all adjustments, consisting of normal
recurring accruals, which the Company considers necessary for a fair
presentation of the financial position and the results of operations for the
period. Operating results for the six months ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the entire year
ending December 31, 1998.
In order to provide funds for operations and to improve liquidity, in August
1997, the Company began selling (referred to as "securitizing") substantially
all of its credit card receivables to investors through a master trust or a
third party asset-backed commercial paper conduit. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity,
Funding and Capital Resources" and "Business -- Securitizations." In each
securitization transaction, the Company removes such credit card receivables
from its Balance Sheet and records a gain on the sale. These gains represent the
present value of the estimated future cash flows the Company expects to receive
over the estimated outstanding life of the receivables. This cash flow
represents the finance charges and past due fees in excess of the sum of the
return paid to the investors, estimated contractual servicing fees, credit
losses and required amortization payments. Upon securitization of credit card
receivables, amounts that otherwise would have been recorded as interest income,
interest expense and fee income are instead recorded as net securitization
income. As securitizations have occurred, the Company has relieved the allowance
for loan losses. The information in the following table under "Selected Credit
Card Data" includes securitized receivables (i.e., managed loan basis).
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 14, 1996 SIX MONTHS ENDED
(INCEPTION) TO TWELVE MONTHS ENDED JUNE 30,
DECEMBER 31, DECEMBER 31, --------------------
1996 1997 1997 1998
----------------- --------------------- --------- ---------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Interest income........................................ $ -- $ 2,658 $ 559 $ 643
Interest expense....................................... -- 361 184 506
----- ------- --------- ---------
Net interest income.................................. -- 2,297 375 137
Provision for loan losses.............................. -- 1,422 301 --
Securitization income.................................. -- 628 -- 20,201
Other operating income................................. -- 1,383 365 7,043
Other operating expense................................ 148 3,611 1,149 4,639
----- ------- --------- ---------
Income (loss) before income taxes.................... (148) (725) (710) 22,742
Income taxes........................................... -- -- -- 8,507
----- ------- --------- ---------
Net income (loss)...................................... $ (148) $ (725) $ (710) $ 14,235
----- ------- --------- ---------
----- ------- --------- ---------
Net income (loss) attributable to common
shareholders......................................... $ (1,341) $ 13,335
PRO FORMA STATEMENT OF OPERATIONS DATA (1):
Pro forma net income (loss) per share (unaudited)...... $ $
------- ---------
------- ---------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, AS OF JUNE 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
1996 1997 1997 1998
--------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Credit card receivables.................................................... $ -- $ -- $ 13,192 $ --
Retained interest in credit card receivables securitized (2)............... -- 14,494 -- 17,992
Amounts receivable from securitization (2)................................. -- 1,060 -- 33,621
Total assets............................................................... 253 20,215 14,717 57,600
Short-term borrowings...................................................... -- -- 11,900 7,500
Shareholders' equity....................................................... 152 19,127 2,117 33,362
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF JUNE 30,
1997 1998
------------------- ---------------
<S> <C> <C>
(IN THOUSANDS)
PRO FORMA BALANCE SHEET DATA (3):
Total assets............................................................... $ 30,215 $ 67,600
Shareholders' equity....................................................... 29,127 43,362
</TABLE>
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 14, 1996 SIX MONTHS ENDED
(INCEPTION) TO TWELVE MONTHS ENDED JUNE 30,
DECEMBER 31, DECEMBER 31, --------------------
1996 1997 1997 1998
----------------- --------------------- --------- ---------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PERCENTAGES)
SELECTED CREDIT CARD DATA (4):
Average managed loans................................. $ -- $ 11,151 $ 3,929 $ 187,523
Period-end managed loans.............................. -- 27,899 13,192 397,500
Period-end total accounts............................. -- 45 17 202
Net interest margin on managed loans (5).............. --% 19.4% 18.7% 16.7%
Net charge-off ratio on managed loans (6)............. -- 3.6 0.1 4.7
Delinquency ratio on managed loans (7)................ -- 6.0 0.6 9.6
</TABLE>
- ------------------------
(1) Pro forma per share information has been computed by dividing net earnings
or loss by the weighted average number of shares of Common Stock outstanding
during the period after giving effect to (i) a 15-for-1 stock split to be
effected concurrently with the consummation of the Offering, (ii) the
exchange of all of the outstanding shares of the Company's Preferred Stock,
including accrued dividends thereon, for shares of Common Stock
concurrently with the consummation of the Offering, and (iii) the issuance
of shares of Common Stock to an unrelated investor on August 21, 1998.
(2) Retained interests represent undivided ownership interests in the
CompuCredit Credit Card Master Trust (classified as "Retained Interest in
Credit Card Receivables") and interests in the third party asset-backed
commercial paper conduit (classified as "Amounts Receivable from
Securitization") through both of which the Company sells its receivables
under its asset-backed securitization programs. The retained interests equal
the amount of the retained certificates or participation interests of each
series held by the Company plus the amount of the receivables in excess of
the principal balance of the certificates or participation interests.
Substantially all of the Company's credit card receivables have been
securitized. As such, the Company has removed the credit card receivables
from its Balance Sheet, and as securitizations have occurred, the Company
has also relieved the allowance for loan losses.
(3) Restated to reflect only the issuance of shares of Common Stock on August
21, 1998 to an unrelated investor for cash proceeds of $10.0 million and not
the Offering.
(4) During the quarter ended June 30, 1998, the Company purchased a portfolio of
credit card accounts. The presented managed loan data excludes certain of
these accounts and their related receivables which at the time of purchase
were closed accounts in a certain delinquency status. Management believes
that these accounts were either in the process of being charged off by the
seller due to a contractual 180 day delinquency or were likely to be charged
off in the near term. Because of the accounts' closed and delinquent status
at the time of purchase, management believes that the Company would have
very little opportunity to influence the delinquency or default rates of
these accounts prior to charge-off. As such, the accounts, the receivables
and any activity in the accounts since the date of purchase have been
excluded from any managed loan data presented. At the time of purchase,
there were approximately 25,000 such accounts with $97.1 million of
outstanding receivables.
(5) Includes the Company's actual cost of funds plus all costs associated with
asset securitizations, including the interest expense paid to the investors.
(6) Net charge-off ratio reflects actual principal amounts charged off, less
recoveries, as a percentage of average managed credit card receivables on an
annualized basis.
(7) Delinquencies represent credit card receivables that were at least 30 days
past due at period end.
6
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE
FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE COMPANY
AND ITS BUSINESS BEFORE PURCHASING ANY OF THE SHARES OF COMMON STOCK OFFERED
HEREBY. CERTAIN STATEMENTS IN "RISK FACTORS" CONSTITUTE "FORWARD-LOOKING
STATEMENTS." SEE "PROSPECTUS SUMMARY--SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS."
LIMITED OPERATING HISTORY; UNCERTAINTY OF FUTURE OPERATING RESULTS
The Company was formed in August 1996 and began soliciting clients in
February 1997. Accordingly, the Company has a limited operating history upon
which an evaluation of its business and prospects can be based. The Company
incurred a net loss of $725,000 in 1997 (its first full year of operations) and
had net income of $14.2 million for the six months ended June 30, 1998. Due to
the Company's limited operating history, there can be no assurance that the
Company's revenue will grow or that the Company will be able to achieve
sustained profitability on a quarterly or annual basis. The Company began
originating and servicing credit card accounts in February 1997 and thus has
limited underwriting and servicing experience and limited delinquency and
default experience with respect to its credit card accounts. Although the
Company has experienced growth in credit card receivables outstanding (including
a substantial portfolio purchase in April 1998), revenues and net earnings,
there can be no assurance that these rates of growth will be sustainable or
indicative of future results. In addition, the Company's results of operations,
financial condition and liquidity depend, to a material extent, on its ability
to manage its credit card business and on the performance of the credit card
receivables outstanding. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
LACK OF SEASONING OF CREDIT CARD PORTFOLIO
The average age of a credit card issuer's portfolio of accounts is an
indicator of the stability of delinquency and default levels of that portfolio;
a portfolio of older accounts generally behaves more predictably than a newly
originated portfolio. The Company began originating accounts in February 1997,
and therefore all of its originated receivables are less than two years old as
of June 1998. In addition, although a majority of the accounts in the Company's
purchased portfolio are more than two years old, the Company has limited
operating history with respect to such accounts. As a result there can be no
assurance as to the levels of delinquencies and defaults, which may affect the
Company's earnings through net charge-offs over time. Until the accounts become
more seasoned, it is likely that the levels of such delinquencies and defaults
will increase as the average age of the Company's accounts increases. Any
material increases in delinquencies and defaults above management's expectations
would have a material adverse effect on the Company's results of operations and
financial condition.
RISKS ASSOCIATED WITH ACQUISITIONS OF RECEIVABLES FROM THIRD PARTIES
A significant portion of the credit card receivables securitized by the
Company were acquired by the Company through a portfolio acquisition, and the
Company anticipates that it may make additional portfolio acquisitions as part
of its growth strategy. These credit card receivables may have been originated
by the originator thereof using credit criteria different from the Company's
underwriting guidelines and may be of a different credit quality than
receivables originated by the Company. Furthermore, in connection with the
Company's securitization of such purchased receivables, the Company has
primarily relied upon the applicable representations and warranties made by the
seller in determining whether such receivables satisfy the representations and
warranties with respect to such receivables under the Transfer and
Administration Agreement entered into by the Company. Accordingly, these
receivables acquired by the Company through portfolio acquisition may
subsequently be determined to have breached the representations and warranties
under such Agreement, and if such breach cannot be cured, the Company may be
required to pay to the investor an amount equal to the amount of such
receivables. While the Company has certain rights to indemnification by the
seller which may be applicable and may obtain
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similar indemnification rights from sellers of portfolios purchased in the
future, there can be no assurance that the Company will be able to enforce such
indemnification rights or that such indemnification rights will be sufficient in
each case to reimburse the Company fully for any amounts it may be required to
pay to the investor in any securitization of the purchased portfolio.
SUBSTANTIAL NEED FOR LIQUIDITY
The Company has a substantial ongoing need for liquidity to finance its
operations, and this need is expected to increase to the extent that the volume
of its business increases. As a result of the Company's growth since inception,
the Company's cash requirements have in the past exceeded cash generated from
operations. The Company's primary operating cash requirements include the
funding of its originated credit card receivables, the funding of its purchases
of credit card receivables portfolios and, to a lesser extent, fees and expenses
in connection with its securitization program, marketing, solicitation,
servicing expenses, federal and state income tax payments and ongoing
administrative and other operating expenses. These cash requirements
substantially exceed the Company's cash flows from operations. Net cash used in
operating activities during the period from August 14, 1996 (inception) to
December 31, 1996 and for the year ended December 31, 1997 was $247,000 and $1.7
million, respectively. The Company currently funds its cash requirements
primarily through securitizations, and substantially all of its originated
credit card receivables and its purchases of credit card receivables portfolios
have been financed through securitizations. The investors in the Company's
securitization vehicles are administered by a single national banking
institution. At June 30, 1998, the Company had cash of approximately $2.3
million. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity, Funding and Capital Resources."
No assurance can be given that the Company will have access to the capital
markets in the future for additional equity or debt issuances or for
securitizations, or that financing through borrowings will be available on
acceptable terms to satisfy the Company's cash requirements. The Company's
inability to access the capital markets or to otherwise obtain acceptable
financing on a timely basis could have a material adverse effect on the
Company's results of operations or financial condition. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
RELIANCE ON THIRD PARTIES FOR BANK CHARTER AND CERTAIN OPERATIONS
The Company's Aspire credit card is issued pursuant to an Affinity Card
Agreement between CB&T and the Company. Because the Company does not have a bank
charter, it currently cannot issue credit cards without an affinity card
agreement with a bank. Unless the Company obtains a bank charter, it will
continue to rely upon CB&T to issue the Company's credit cards. CB&T, together
with its affiliate, TSYS, also performs many back office and account processing
functions with respect to the Aspire accounts. If CB&T and/or TSYS were either
unwilling or unable to continue to perform such services for the Company, the
Company would be required to enter into another contract with a provider of such
services. There can be no assurance that such an agreement with an alternate
provider could be entered into on terms that the Company deems favorable or that
such an agreement could be entered into in a timely manner such that the
Company's business would not be disrupted. Any disruption in the Company's
relationship with CB&T and TSYS could have a material adverse effect on the
Company's results of operations or financial condition. See "Business--Account
and Portfolio Management."
Moreover, the Company's business depends on a number of services provided by
third parties, including nationwide credit bureaus, postal and telephone service
providers, bank card associations and other providers of transaction processing
services. The Company has contingency plans designed to minimize the impact of a
disruption in the services it obtains from these third parties. However, a major
disruption in one or more of these services could have a material adverse effect
on the Company's results of operations or financial condition.
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RISKS ASSOCIATED WITH SECURITIZATIONS
The Company depends heavily upon the securitization of its credit card
receivables portfolios to fund its operations and has been able to complete
securitization transactions to date on terms that it believes are favorable to
the Company. The Company believes that it will require additional securitization
facilities or an increase in one or both of its existing facilities in order to
fund its growth. There can be no assurance, however, that such additional or
increased facilities will be available or that future securitization
transactions will be available on terms acceptable to the Company, or at all.
The timing of any securitization transaction is affected by a number of factors
beyond the Company's control, any of which could cause substantial delays,
including, without limitation, the volume of originated or purchased
receivables, market conditions and the approval by all parties of the terms of
the securitization. Any delay in the transfer of credit card receivables beyond
a quarter-end could reduce the gain on sale recognized in such quarter and could
result in decreased earnings or possible losses for the quarter being reported
by the Company. In addition, the Company's ability to securitize its assets
depends on the continued availability of acceptable credit enhancement terms and
the continued favorable legal, regulatory, accounting and tax environments for
securitization transactions. Any inability to obtain this additional funding or
any adverse change in the securitization market could force the Company to
reduce its volume of managed receivables or to rely on other potentially more
expensive funding sources.
Certain adverse changes in the Company's securitized receivables, including
delinquencies and losses, could have a material adverse effect on the Company's
results of operations or financial condition and the performance of the
Company's securitized receivables trust or third party asset-backed commercial
paper conduit and may cause early amortization of the outstanding securitization
certificates or participation interests. These changes could also impact the
Company's ability to effect other securitization transactions on acceptable
terms, thereby decreasing the Company's liquidity and forcing the Company to
rely on other funding sources to the extent available.
RISKS ASSOCIATED WITH GAIN ON SALE ACCOUNTING
Gains from the sale of receivables in the Company's securitization
transactions have constituted, and are likely to continue to constitute, a
significant portion of the Company's revenue. A portion of the gains are based
primarily on management's estimates of future payment and default rates and
other considerations in light of then-current conditions. If actual payments
with respect to receivables occur more quickly than was projected at the time
the receivables were sold, or if default rates are greater than projected at the
time such receivables were sold, a charge to earnings would be required and
would be taken in the period of adjustment. If actual payments occur more slowly
or if default rates are lower than estimated with respect to receivables sold,
total gains would exceed previously estimated amounts. There can be no assurance
that charges to earnings will not occur in the future as a result of actual
default and payment performance exceeding management's estimates.
ABILITY TO SUSTAIN AND MANAGE GROWTH
The Company has experienced rapid growth and expansion of its business. In
order to meet its strategic objectives, the Company must continue to achieve
growth in its credit card receivables portfolio. Continued growth in the
Company's credit card receivables portfolio depends on (i) the Company's ability
to attract new clients through originations or portfolio purchases, (ii) growth
in both existing and new account balances, (iii) the degree to which the Company
loses accounts and account balances to competing credit card issuers, (iv)
levels of delinquencies and losses, (v) the availability of funding (including,
but not limited to, securitizations) on favorable terms, and (vi) general
economic and other factors beyond the control of the Company. The Company's
growth is also dependent on the level of the Company's marketing expenditures
used to solicit new clients and the number of responses the Company receives
with respect to solicitations for its consumer credit, fee-based and other
financial service products. Any
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increases in postal rates could have a negative impact on the level and cost of
direct mail marketing activities.
Further growth of the Company will require employment and training of new
personnel, expansion of facilities, expansion of management systems and access
to additional capital. Furthermore, the Company's ability to manage portfolio
delinquency and default rates is dependent upon the maintenance of efficient
collection procedures, adequate collection staffing, internal controls and
automated systems. There can be no assurance that the Company's personnel,
procedures, staff, internal controls or systems will be adequate to support such
growth. If the Company is unable to manage its growth effectively, the Company's
profitability and its ability to achieve its strategic objectives will be
adversely affected.
RISKS RELATED TO TARGET MARKET
The Company targets its consumer credit products to clients who management
believes have been under-served by more traditional providers of credit-related
products. Some of the consumers included in the Company's target market are
consumers who are dependent upon finance companies, consumers with only retail
store credit cards and/or lacking general purpose credit cards, consumers who
may have had a delinquency, a default or, in some instances, a bankruptcy in
their credit histories, but have, in the Company's view, demonstrated recovery,
and consumers who are establishing or expanding their credit. This target market
generally entails a higher risk of nonperformance, higher frequencies of
delinquencies and higher defaults than consumers who are served by more
traditional providers of credit. Although the Company believes that the
underwriting criteria and collection methods it employs enable it to control the
higher risks inherent in extending credit to its target market, no assurance can
be given that such criteria and methods will afford adequate protection against
such risks. Consumer credit grantors traditionally have not solicited such
consumers to the same extent as they have solicited other market segments with
perceived lower levels of risk. As a result there is less historical experience
with respect to the credit risk and performance of under-served consumers. There
can be no assurance that the Company can successfully target and evaluate the
creditworthiness of such consumers and price its credit products so as to assure
the Company's overall profitability.
Primary risks associated with unsecured lending, which may be greater with
respect to the Company's target market, are that (i) delinquencies and credit
defaults may increase because of future economic downturns, (ii) an increasing
number of clients may default on the payment of their outstanding balances or
seek protection under bankruptcy laws, resulting in accounts being charged off
as uncollectible, (iii) fraud by clients and third parties may increase, and
(iv) unfavorable changes in clients' attitudes toward financing purchases with
debt or in client payment behavior, such as increases in discretionary repayment
of account balances, may result in diminished interest income. Additionally,
general economic factors, such as the rate of inflation, unemployment levels and
interest rates may affect the Company's target market clients more severely than
other market segments.
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company experiences the highest demand for its financial products and
services between October and December and experiences the lowest demand for its
financial products and services between January and March. The Company's
strategy of pursuing potential portfolio acquisitions may also create periodic
fluctuations in the Company's managed credit card receivables. These significant
fluctuations in its business directly impact the Company's operating results and
cash needs. In addition, the timing of any securitization transaction is
affected by a number of factors beyond the Company's control, any of which could
cause substantial delays, including, without limitation, the volume of
originated or purchased receivables, market conditions and the approval by all
parties of the terms of the securitization. Any delay in the transfer of credit
card receivables beyond a quarter-end could reduce the gain on sale recognized
in such quarter and could result in decreased earnings or possible losses for
the quarter being reported by the
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Company. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
DEPENDENCE ON KEY PERSONNEL
The Company's management and operations are dependent upon the skills and
experience of certain executive officers, including David G. Hanna, its
President, Richard W. Gilbert, its Chief Operating Officer, and Brett M. Samsky,
its Chief Financial Officer. The Company does not maintain key-man life
insurance for the benefit of the Company on any executive officer. The loss of
the services of members of the Company's senior management could have a material
adverse effect on the Company. The Company intends to enter into employment
agreements with its executive officers, including Mr. Hanna, Mr. Gilbert and Mr.
Samsky, which will contain confidentiality and non-compete provisions. There can
be no assurance, however, that such agreements will effectively limit such
persons' ability to depart the Company to pursue other opportunities. See
"Management."
INTEREST RATE RISK
The Company's credit card accounts generally have variable interest rates
based on a spread above the prime rate as published in THE WALL STREET JOURNAL.
All of the Company's accounts also have an interest rate minimum should the
designated index fall below a certain amount. Although the Company intends to
manage its interest rate risk through asset and liability management, as the
interest rate environment fluctuates, the Company may be adversely affected by
changes in its cost of funds as well as in the relationship between the indices
used in the Company's securitizations and other funding vehicles and the indices
used to determine the finance charges on account balances. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Interest Rate Sensitivity and Market Risk."
GENERAL ECONOMIC RISKS
The Company's business is directly related to consumer spending, which is
affected by employment rates, prevailing interest rates and other domestic
economic conditions. The risks associated with the Company's business become
more significant in an economic slowdown or recession. During periods of
economic slowdown or recession, the Company may experience a decreased demand
for its financial products and services and an increase in rates of
delinquencies and the frequency and severity of losses. Because of the Company's
focus on the under-served market, the Company's actual rates of delinquencies
and frequency and severity of losses may be higher in the future under adverse
economic conditions than those experienced in the consumer finance industry
generally. Any sustained period of economic slowdown or recession could have a
material adverse effect on the Company's results of operations or financial
condition.
CONSUMER AND DEBTOR PROTECTION LAWS AND REGULATIONS
The operations of the Company and of CB&T, as the issuer of the Aspire
credit card, are regulated by federal, state and local government authorities
and are subject to various laws, and the rules and regulations promulgated
thereunder (including the federal Truth-In-Lending Act, the federal Equal Credit
Opportunity Act, the federal Fair Credit Reporting Act, the federal Fair Debt
Collection Practices Act and the federal Telemarketing and Consumer Fraud and
Abuse Prevention Act), and judicial and administrative decisions imposing
various requirements and restrictions, including, among other things, regulating
credit granting activities, establishing maximum interest rates, establishing
maximum fee rates, requiring disclosures to clients and setting collection
procedures and other trade practices. Any failure by the Company or CB&T (as the
issuer of the Aspire credit card or in conjunction with the account servicing
activities it conducts on behalf of the Company) to comply with such legal
requirements also could adversely affect the ability of the Company or CB&T to
collect the full amount of the account balances. The Company also faces the risk
of litigation under state and federal consumer protection statutes, the
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rules and regulations promulgated thereunder and other laws. The Company does
not currently own a bank. However, the Company is seeking to organize a
state-chartered "credit card bank" under the laws of the State of Georgia. Such
bank, if organized, is expected to become the issuer of the Company's Aspire
credit card. If the Company completes that process, such banking subsidiary will
be subject to the various state and federal regulations generally applicable to
such institutions. See "Business--Consumer and Debtor Protection Laws and
Regulations."
IMPACT OF CHANGES IN LAW
Numerous legislative and regulatory proposals are advanced each year which,
if adopted, could adversely affect the Company's profitability or limit the
manner in which the Company conducts its activities. Changes in federal and
state bankruptcy and debtor relief laws also could adversely affect the Company
if such changes result in, among other things, additional administrative
expenses and accounts being written off as uncollectible. Although the Company
believes that it and CB&T (to the extent material to the Company's business) are
in compliance in all material respects with applicable local, state and federal
laws, rules and regulations, there can be no assurance that more restrictive
laws, rules and regulations will not be adopted in the future which may make
compliance more difficult or expensive, further limit or restrict the amount of
interest and other charges imposed on credit card accounts originated or
marketed by the Company or otherwise have a material adverse effect on the
results of operations or financial condition of the Company.
INTENSE COMPETITION
The Company faces intense and increasing competition from other consumer
lenders. In particular, the Company's credit card business competes with
national, regional and local bank card issuers, and with other general purpose
credit card issuers, including American Express-Registered Trademark-,
Discover-Registered Trademark- and issuers of Visa-Registered Trademark- and
MasterCard-Registered Trademark-. The Company also competes, to a lesser extent,
with retail card issuers, such as department stores and oil companies, and other
providers of unsecured credit. Large credit card issuers may compete with the
Company for clients by offering lower interest rates and fees. In addition, new
issuers have entered the market in recent years. Many of these competitors are
substantially larger than the Company and have greater financial resources.
Clients choose credit card issuers largely on the basis of price (mostly
interest rates and fees), credit limit and other product features. For this
reason, client loyalty is often limited. The Company may lose entire accounts,
or may lose account balances, to competing card issuers. The Company's future
growth is highly dependent upon the success of its marketing programs and
information-based strategies. Although management believes that opportunities
exist for continued growth in account origination and account balances, the
Company's competitors may already be or may begin employing many of the programs
and strategies that the Company has utilized to attract new accounts and
encourage account usage.
The Company's competitors are continually introducing new tactics to attract
clients and increase their market share. The most heavily-used techniques are
advertising, target marketing, balance transfers, price competition, incentive
programs and co-branding (for example, using the name of a sports team or a
professional association on their credit cards). In response to competition,
many issuers of credit cards have lowered interest rates and offered incentives
to retain existing clients and attract new ones. These competitive practices, as
well as competition that may develop in the future, could harm the Company's
ability to obtain clients and maintain its profitability.
There are numerous competitors in the fee-based products market, including
insurance companies, financial service institutions, other membership-based
consumer services providers and, to some degree, other credit card issuers, many
of which are larger, have more capital and are more experienced than the
Company. See "Business--Competition."
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OTHER INDUSTRY RISKS
Other industry risks that the Company faces include the risk of fraud by its
clients and third parties and the risk that clients will repay their receivables
more rapidly than they have in the past, reducing the amount of interest paid to
the Company. In addition, certain critics of the credit card industry have
focused on marketing practices that they claim encourage consumers to borrow
more money than they should, as well as on pricing practices that they claim are
either confusing or set at prices that are too high. Increased criticism of the
industry or criticism of the Company in the future could hurt client acceptance
of the Company's products or lead to changes in the law or in the applicable
regulatory environment.
NO PRIOR PUBLIC MARKET; VOLATILITY OF STOCK MARKET
Prior to the Offering, there has been no public market for the Common Stock.
There can be no assurance that an active trading market will develop or that
purchasers of the Common Stock will be able to resell their Common Stock at
prices equal to or greater than the Offering Price. The Offering Price of the
Common Stock was determined through negotiations between the Company and the
Representatives of the Underwriters (as defined herein) and may not reflect the
market price of the Common Stock after the Offering. See "Underwriting" for a
discussion of factors considered in determining the Offering Price.
In addition, the stock market has in recent years experienced extreme price
and volume fluctuations that often have been unrelated or disproportionate to
the operating performance of companies. Such fluctuations, and general economic
and market conditions, may adversely affect the market price of the Common
Stock. Further, the market price of the Common Stock could be subject to
significant fluctuations in response to the Company's operating results and
other factors, including the performance of other credit card issuers or
consumer finance companies. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
CONTROL BY MANAGEMENT AND CURRENT SHAREHOLDERS
Upon the completion of the Offering (assuming that the Underwriters' option
to purchase up to an additional shares of Common Stock from the Company
to cover over-allotments is not exercised), the Company's executive officers and
directors, in the aggregate, will beneficially own % of the outstanding
Common Stock of the Company. David G. Hanna and Frank J. Hanna, III, who are
brothers, will beneficially own, in the aggregate, % of the outstanding
Common Stock. As a result David G. Hanna and Frank J. Hanna, III and the
Company's executive officers and directors, in the aggregate, will be able to
exercise significant influence over all matters requiring shareholder approval,
including the election of directors and the approval of significant corporate
transactions. In addition, under the Company's Amended and Restated Articles of
Incorporation (the "Amended Articles"), to be effective concurrently with the
consummation of the Offering, the Board of Directors will have the authority to
issue undesignated preferred stock, no par value per share (the "Preferred
Stock"), and, subject to certain limitations, to determine the rights,
preferences, privileges and restrictions, including voting rights, of such
shares without any further vote or action by the shareholders. The voting power
of David G. Hanna and Frank J. Hanna, III and the Company's executive officers
and directors, or the issuance of Preferred Stock under certain circumstances,
could have the effect of delaying or preventing a change in control of the
Company. See "Principal Shareholders" and "Description of Capital Stock."
CERTAIN ANTI-TAKEOVER PROVISIONS
The Company will have no shares of Preferred Stock outstanding as of the
consummation of the Offering and has no current plans to issue Preferred Stock.
However, the Company's Amended Articles, to be effective concurrently with the
closing of the Offering, will authorize the Company to issue shares of Preferred
Stock in the future without shareholder approval and upon such terms and
conditions, and having such rights, privileges and preferences, including voting
rights, as the Board of Directors of the
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Company may determine. The issuance of Preferred Stock could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring, a majority of the outstanding voting stock of the
Company. See "Description of Capital Stock--Preferred Stock" and
"--Anti-Takeover Effects of Provisions of the Amended and Restated Articles of
Incorporation."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial numbers of shares of the Common Stock in the public
market following the Offering could adversely affect the market price of the
Common Stock and could impair the Company's ability to raise capital.
Immediately after completion of the Offering, the Company will have
shares of Common Stock outstanding, of which the shares offered hereby
will be eligible for sale without regard to volume or other limitations pursuant
to Rule 144 ("Rule 144") promulgated under the Securities Act of 1933, as
amended (the "Securities Act"), unless owned by "affiliates" of the Company, as
that term is defined under Rule 144. The Company, its executive officers,
directors, certain key employees and all other existing shareholders have agreed
pursuant to lock-up agreements that, without the prior written consent of
PaineWebber Incorporated, on behalf of the Representatives (as defined herein),
they will not sell or otherwise dispose of any shares of Common Stock
beneficially owned by them for a period of 365 days from the date of this
Prospectus. PaineWebber Incorporated, on behalf of the Underwriters, may, in its
discretion and at any time without notice, release all or a portion of the
shares subject to these lock-up agreements. The Company intends to register on
one or more registration statements on Form S-8 1,200,000 shares of Common Stock
issuable under its 1998 Stock Option Plan. In addition, the holders of a total
of 1,958,745 shares of Common Stock (after giving effect to a 15-for-1 stock
split to be effected concurrently with the consummation of the Offering) have
the right to require the Company to register such shares under the Securities
Act under certain circumstances. See "Description of Capital Stock--
Registration Rights," "Shares Eligible for Future Sale" and "Underwriting"
YEAR 2000 PROBLEM
The Company's software systems may be hampered by software deficiencies
relating generally to formatting and date calculations stemming from the Year
2000 (the "Year 2000 Problem"). In addition, the Year 2000 Problem also affects
the clients, suppliers and financial institutions with which the Company
transacts business. Although most of the Company's existing information systems
are less than two years old and were originally designed for Year 2000
compliance, the Company has created a Year 2000 project team to identify,
address and monitor internal systems and vendor issues related to the Year 2000
Problem. For functions or services provided by third party vendors, efforts are
under way to minimize the potential impact to the Company. The Company is
monitoring each vendor's progress in becoming Year 2000 -compliant. In addition,
alternate suppliers of critical products and services are being identified
wherever possible. Although management does not currently anticipate significant
implementation problems, the existence, nature and scope of the Year 2000
Problem and other implementation problems cannot be accurately predicted at this
time. To the extent that the Year 2000 Problem associated with the Company's
software systems is more extensive than management currently anticipates,
remediation of the Year 2000 Problem could have a material adverse effect on the
Company's results of operations or financial condition. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Year
2000."
DILUTION
Purchasers of the Common Stock will experience immediate and substantial
dilution in net tangible book value per share of Common Stock of $ per
share based upon an Offering Price of $ per share. See "Dilution."
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THE COMPANY
The Company is an information-based, technology-driven originator and
purchaser of credit products and a direct marketer of fee-based products and
services. The Company targets consumers who management believes are under-served
by more traditional providers of credit-related products. The Company's current
credit product is the Aspire Visa credit card, which the Company offers to its
clients on an unsecured basis. In addition, the Company markets fee-based
products and services to its clients including life insurance, card
registration, telecommunication products and services, memberships in preferred
buying clubs, travel services and debt waiver programs in the event of
disability or unemployment of the client.
The Company was formed as CompuCredit, L.P. in August 1996 and was merged
into CompuCredit Corporation in August 1997. The Company began soliciting
clients in February 1997. As of June 30, 1998, the Company had 66 employees. All
of the Company's employees are based in Atlanta, Georgia.
CompuCredit's executive offices are located at Two Ravinia Drive, Suite
1750, Atlanta, Georgia, 30346, and its telephone number is (770) 901-5840.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby are estimated to be $ million (or $ million if the
Underwriters' over-allotment option is exercised in full) after deducting
underwriting discounts and commissions, and estimated Offering expenses payable
by the Company. The net proceeds to the Company will be used to finance the
growth of the Company through the origination and purchase of credit card
receivables and for marketing costs, working capital and other general corporate
purposes. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity, Funding and Capital Resources" and "Business."
DIVIDEND POLICY
The Company currently intends to retain all future earnings after
consummation of the Offering for use in the expansion and operation of its
business. The Company does not anticipate paying dividends on the Common Stock
in the foreseeable future. The payment of future dividends will be at the sole
discretion of the Company's Board of Directors and will depend on, among other
things, future earnings, capital requirements, the general financial condition
of the Company and general business conditions.
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DILUTION
The pro forma net tangible book value of the Company at June 30, 1998, after
giving effect to (i) a 15-for-1 stock split to be effected concurrently with the
consummation of the Offering and (ii) the exchange of all of the outstanding
shares of the Company's Preferred Stock, including accrued dividends thereon,
for shares of Common Stock concurrently with the consummation of the
Offering, was $ , or $ per share, and (iii) the issuance of
shares of Common Stock to an unrelated investor on August 21, 1998. Pro forma
net tangible book value per share represents the amount of the Company's total
tangible assets less total liabilities, divided by the number of shares
outstanding. After giving effect to the receipt by the Company of the net
proceeds from the sale of the shares of Common Stock offered hereby at an
assumed Offering Price of $ per share, the pro forma, as adjusted, net
tangible book value of the Company at June 30, 1998 would have been $ ,
or $ per share. This represents an immediate increase in pro forma net
tangible book value of $ per share to the existing shareholders and an
immediate dilution of $ to new investors purchasing shares in the
Offering. The following table illustrates this per share dilution:
<TABLE>
<S> <C>
Offering Price per share (1)................................... $
Pro forma net tangible book value per share as of June 30,
1998 (2).................................................
Increase in pro forma net tangible book value per share
attributable to new investors............................
Pro forma, as adjusted, net tangible book value per share after
the Offering(3)..............................................
Dilution per share to new investors............................ $
</TABLE>
- ------------------------
(1) Before deducting underwriting discounts and commissions and estimated
Offering expenses payable by the Company.
(2) After giving effect to (i) a 15-for-1 stock split to be effected
concurrently with the consummation of the Offering, (ii) the exchange of all
of the outstanding shares of the Company's Preferred Stock, including
accrued dividends thereon, for shares of Common Stock concurrently
with the consummation of the Offering, and (iii) the issuance of shares of
Common Stock to an unrelated investor on August 21, 1998.
(3) Excludes shares of Common Stock issuable upon exercise of options
to be granted pursuant to the Company's 1998 Stock Option Plan. See
"Management--1998 Stock Option Plan."
The following table summarizes on a pro forma basis as of June 30, 1998, the
differences between the existing shareholders and the new investors (before
deducting underwriting discounts and commissions and estimated Offering
expenses) with respect to the number of shares of Common Stock purchased from
the Company, the total consideration paid and the average price per share:
<TABLE>
<CAPTION>
SHARES OWNED AFTER THE OFFERING TOTAL CONSIDERATION
-------------------------------- --------------------------------
NUMBER PERCENT AMOUNT PERCENT
--------------- ------- ------- -------
<S> <C> <C> <C> <C>
Existing shareholders........................................
New investors................................................
Total..................................................
<CAPTION>
AVERAGE PRICE
PER SHARE
-------------------
<S> <C>
Existing shareholders........................................
New investors................................................
Total..................................................
</TABLE>
16
<PAGE>
CAPITALIZATION
The following table sets forth the total capitalization of the Company (i)
on an actual basis as of June 30, 1998, (ii) on a pro forma basis giving effect
to (a) the 15-for-1 stock split to be effected concurrently with the
consummation of the Offering, (b) the exchange of all of the outstanding shares
of the Company's Preferred Stock, including accrued dividends thereon, for
shares of Common Stock concurrently with the consummation of the Offering,
and (c) the issuance of shares of Common Stock to an unrelated investor on
August 21, 1998, and (iii) on such pro forma basis, as adjusted to reflect the
sale of shares of Common Stock by the Company at an assumed Offering Price
of $ per share, after deducting underwriting discounts and commissions and
estimated Offering expenses payable by the Company. The information below should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Company's Consolidated Financial
Statements and related Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
-----------------------------------
<S> <C> <C> <C>
(UNAUDITED)
<CAPTION>
PRO FORMA,
ACTUAL PRO FORMA AS ADJUSTED
--------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Borrowings................................................................... $ -- $ $
Shareholders' Equity:
Preferred Stock, $100 par value; 500,000 shares authorized, 200,000 shares
issued and outstanding; 10,000,000 shares authorized, no shares issued
and outstanding, pro forma; no shares issued and outstanding pro forma,
as adjusted.............................................................. 20,000
Common Stock, no par value; 3,000,000 shares authorized; 2,061,855 shares
issued and outstanding; 60,000,000 shares authorized, shares issued
and outstanding, pro forma; shares issued and outstanding pro
forma, as adjusted....................................................... --
Additional paid-in capital................................................. --
Retained earnings.......................................................... 13,362
--------- ----------- -----------
Total shareholders' equity................................................. 33,362
--------- ----------- -----------
Total capitalization....................................................... $ 33,362 $ $
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth, for the periods indicated, certain selected
consolidated financial and other data for the Company. The selected consolidated
financial and other data below should be read in conjunction with the Company's
Consolidated Financial Statements and the related Notes thereto and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus. The following selected
financial data for the year ended December 31, 1997, the period ended December
31, 1996 and the six months ended June 30, 1998 are derived from the Company's
audited Consolidated Financial Statements, which have been audited by Ernst &
Young LLP, independent auditors. The financial data for the six months ended
June 30, 1997 are derived from unaudited financial statements. The unaudited
financial statements include all adjustments, consisting of normal recurring
accruals, which the Company considers necessary for a fair presentation of the
financial position and the results of operations for the period. Operating
results for the six months ended June 30, 1998 are not necessarily indicative of
the results that may be expected for the entire year ending December 31, 1998.
In order to provide funds for operations and to improve liquidity, in August
1997, the Company began selling (referred to as "securitizing") substantially
all of its credit card receivables to investors through a master trust or a
third party asset-backed commercial paper conduit. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity,
Funding and Capital Resources" and "Business -- Securitizations." In each
securitization transaction, the Company removes such credit card receivables
from its Balance Sheet and records a gain on the sale. These gains represent the
present value of the estimated future cash flows the Company expects to receive
over the estimated outstanding life of the receivables. This cash flow
represents the finance charges and past due fees in excess of the sum of the
return paid to the investors, estimated contractual servicing fees, credit
losses and required amortization payments. Upon securitization of credit card
receivables, amounts that otherwise would have been recorded as interest income,
interest expense and fee income are instead recorded as net securitization
income. As securitizations have occurred, the Company has relieved the allowance
for loan losses. The information in the following table under "Selected Credit
Card Data" includes securitized receivables (i.e., managed loan basis).
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 14, 1996 SIX MONTHS ENDED JUNE
(INCEPTION) TO TWELVE MONTHS ENDED 30,
DECEMBER 31, DECEMBER 31, ------------------------
1996 1997 1997 1998
----------------- --------------------- ----------- -----------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Interest income...................................... $ -- $ 2,658 $ 559 $ 643
Interest expense..................................... -- 361 184 506
------ ------- ----------- -----------
Net interest income.................................. -- 2,297 375 137
Provision for loan losses............................ -- 1,422 301 --
Securitization income................................ -- 628 -- 20,201
Other operating income............................... -- 1,383 365 7,043
Other operating expense.............................. 148 3,611 1,149 4,639
------ ------- ----------- -----------
Income (loss) before income taxes.................... (148) (725) (710) 22,742
Income taxes......................................... -- -- -- 8,507
------ ------- ----------- -----------
Net income (loss).................................... $ (148) $ (725) $ (710) $ 14,235
------ ------- ----------- -----------
------ ------- ----------- -----------
Net income (loss) attributable to common
shareholders....................................... $ (1,341) $ 13,335
PRO FORMA STATEMENT OF OPERATIONS
DATA (1):
Pro forma net income (loss) per share (unaudited).... $ $
------- -----------
------- -----------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF JUNE 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
1996 1997 1997 1998
--------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Credit card receivables................................................ $ -- $ -- $ 13,192 $ --
Retained interest in credit card receivables securitized (2)........... -- 14,494 -- 17,992
Amounts receivable from securitization (2)............................. -- 1,060 -- 33,621
Total assets........................................................... 253 20,215 14,717 57,600
Short-term borrowings.................................................. -- -- 11,900 7,500
Shareholders' equity................................................... 152 19,127 2,117 33,362
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE
AS OF DECEMBER 31, 30,
------------------ -------------
<S> <C> <C>
1997 1998
------------------ -------------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
PRO FORMA BALANCE SHEET DATA (3):
Total assets................................................................. $ 30,215 $ 67,600
Shareholders' equity......................................................... 29,127 43,362
</TABLE>
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 14, 1996 SIX MONTHS ENDED
(INCEPTION) TO TWELVE MONTHS ENDED JUNE 30,
DECEMBER 31, DECEMBER 31, --------------------
1996 1997 1997 1998
----------------- --------------------- --------- ---------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PERCENTAGES)
SELECTED CREDIT CARD DATA (4):
Average managed loans............................. $ -- $ 11,151 $ 3,929 $ 187,523
Period-end managed loans.......................... -- 27,899 13,192 397,500
Period-end total accounts......................... -- 45 17 202
Net interest margin on managed loans (5).......... --% 19.4% 18.7% 16.7%
Net charge-off ratio on managed loans (6)......... -- 3.6 0.1 4.7
Delinquency ratio on managed loans (7)............ -- 6.0 0.6 9.6
</TABLE>
- ------------------------
(1) Pro forma per share information has been computed by dividing net earnings
or loss by the weighted average number of shares of Common Stock outstanding
during the period after giving effect to (i) a 15-for-1 stock split to be
effected concurrently with the consummation of the Offering, (ii) the
exchange of all of the outstanding shares of the Company's Preferred Stock,
including accrued dividends thereon, for shares of Common Stock
concurrently with the consummation of the Offering, and (iii) the issuance
of shares of Common Stock to an unrelated investor on August 21, 1998.
(2) Retained interests represent undivided ownership interests in the
CompuCredit Credit Card Master Trust (classified as "Retained Interest in
Credit Card Receivables") and interests in the third party asset-backed
commercial paper conduit (classified as "Amounts Receivable from
Securitization") through both of which the Company sells its receivables
under its asset-backed securitization programs. The retained interests equal
the amount of the retained certificates or participation interests of each
series held by the Company plus the amount of the receivables in excess of
the principal balance of the certificates or participation interests.
Substantially all of the Company's credit card receivables have been
securitized. As such, the Company has removed the credit card receivables
from its Balance Sheet, and as securitizations have occurred, the Company
has also relieved the allowance for loan losses.
(3) Restated to reflect only the issuance of shares of Common Stock on August
21, 1998 to an unrelated investor for cash proceeds of $10.0 million and not
the Offering.
(4) During the quarter ended June 30, 1998, the Company purchased a portfolio of
credit card accounts. The presented managed loan data excludes certain of
these accounts and their related receivables which at the time of purchase
were closed accounts in a certain delinquency status. Management believes
that these accounts were either in the process of being charged off by the
seller due to a contractual 180 day delinquency or were likely to be charged
off in the near term. Because of the accounts' closed and delinquent status
at the time of purchase, management believes that the Company would have
very little opportunity to influence the delinquency or default rates of
these accounts prior to charge-off. As such, the accounts, the receivables
and any activity in the accounts since the date of purchase have been
excluded from any managed loan data presented. At the time of purchase,
there were approximately 25,000 such accounts with $97.1 million of
outstanding receivables.
(5) Includes the Company's actual cost of funds plus all costs associated with
asset securitizations, including the interest expense paid to the investors.
(6) Net charge-off ratio reflects actual principal amounts charged off, less
recoveries, as a percentage of average managed credit card receivables on an
annualized basis.
(7) Delinquencies represent credit card receivables that were at least 30 days
past due at period end.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE "SELECTED
CONSOLIDATED FINANCIAL DATA" AND THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS
AND THE RELATED NOTES THERETO INCLUDED HEREIN. CERTAIN STATEMENTS IN
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" CONSTITUTE FORWARD-LOOKING STATEMENTS. SEE "PROSPECTUS
SUMMARY--SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS."
GENERAL
CompuCredit is an information-based, technology-driven originator and
purchaser of credit products and a direct marketer of fee-based products and
services. The Company's current credit product is the Aspire Visa credit card,
which the Company offers to its clients on an unsecured basis. There are
currently four types of Aspire Visa branded cards: Classic, Gold, Platinum and
Aspire Diamond. In addition, the Company markets fee-based products and services
to its clients including life insurance, card registration, telecommunication
products and services, memberships in preferred buying clubs, travel services
and debt waiver programs in the event of disability or unemployment of the
client. The Company uses proprietary analytical techniques and information
provided by credit bureaus to target consumers who management believes are
under-served by more traditional providers of credit-related products. Consumers
in this under-served market are typically more reliant on finance companies and
retail store credit cards to meet their consumer credit needs and are less
likely than others to have general-purpose credit cards. Some of these consumers
have had a delinquency, a default or, in some instances, a bankruptcy in their
credit histories, but have, in the Company's view, demonstrated recovery, while
other consumers in this target market are establishing or expanding their
credit.
Consumer credit product revenues consist of (i) interest income on
outstanding revolving credit card receivables, (ii) credit card fees, including
annual membership, cash advance, over-limit, past-due and other credit card
fees, and (iii) interchange fees, which are the portion of the merchant fee
assessed by Visa and passed on to the Company on the purchase volume on the
Company's credit card receivables. Non-interest income includes securitization
income, servicing income and fee-based product revenues. The expenses relating
to consumer credit products are typically the costs of funding the Company's
receivables, credit losses and operating expenses, including employee
compensation, account solicitation and marketing expenses, data processing and
servicing expenses.
IMPACT OF CREDIT CARD SECURITIZATIONS
Since August 1997, the Company has actively engaged in asset-backed
securitization transactions and has adopted Statement of Financial Accounting
Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities" ("SFAS 125"), effective January 1, 1997.
Under SFAS 125, the Company records gains or losses on the sale (referred to as
"securitization") of credit card receivables based on the estimated fair value
of assets obtained and liabilities incurred in the sale. Gains represent the
present value of estimated cash flows the Company expects to receive over the
estimated outstanding period of the receivables and are reflected on the
Company's Balance Sheet under "Retained Interest in Credit Card Receivables
Securitized" and "Amounts Receivable from Securitization." These cash flows
represent an "interest only" ("I/O") strip, consisting of the finance charges
and past due fees in excess of the sum of the return paid to the investors,
estimated contractual servicing fees, credit losses and required amortization
payments. Exposure to credit losses on the securitized receivables is
contractually limited to the excess cash flows.
Certain estimates inherent in the determination of the fair value of the I/O
strip, including credit losses and payment rates, could materially change in the
near term. These estimates affect the reported amounts of assets and liabilities
as well as the reported amount of revenues and expenses during the reporting
period. Future gains reported in accordance with SFAS 125 will be dependent on
the timing and
20
<PAGE>
amount of future securitizations. The Company's estimates of future cash flows
will change based on the Company's assessment of the actual performance of new
and existing securitizations.
A securitization generally involves, at the time of sale, the transfer by
the Company, or by a wholly-owned subsidiary of the Company created for the
securitization, of the credit card receivables generated by a pool of credit
card accounts to an entity or entities created for the securitization, generally
a trust or other special purpose entity (collectively referred to herein as the
"Special Purpose Entities" or "SPEs"). The SPEs typically issue certificates or
participation interests representing undivided interests in the receivables that
have been transferred to the SPEs. The credit quality of the receivables is
typically supported by credit enhancement which, among other things, includes
the subordination of the Company's retained interest in the receivables pool.
The securitization results in the removal of the receivables, other than the
Company's retained interests, from the Company's Balance Sheet for financial
reporting purposes. In general, the Company's current securitization structures
provide for the daily securitization of all new credit card receivables arising
under the securitized accounts. In each of its securitization programs, the
Company retains the risk of compliance with federal and state laws and
regulations regarding the securitized accounts and any fraudulent activity with
regard to such accounts.
The receivables transferred to the SPEs include those outstanding in the
designated credit card accounts at the time of the initial transfer to the SPEs
and subsequent amounts arising under such accounts until the termination of the
securitization facility. The cash collected in payment of principal, interest
and fees received by the Company on receivables securitized is also transferred
to the SPEs. Certificates or participation interests in the SPEs are sold, and
the Company receives the proceeds from the sale. The Company received $12.7
million in proceeds from securitizations during 1997 and $255.7 million for the
six-month period ended June 30, 1998. The Company did not securitize receivables
during 1996 or during the six months ended June 30, 1997.
The holders of the certificates or participation interests in the SPEs or
the purchasers of the receivables are typically referred to as investors. The
amount of the receivables transferred to the SPEs exceeds the principal amount
of the certificates or participation interests issued to investors. The Company
retains an interest in the SPEs equal to the amount of the receivables in excess
of the principal balance of the certificates or participation interests and
records these retained interests at fair value on its Balance Sheet as "Retained
Interest in Credit Card Receivables Securitized" or "Amounts Receivable from
Securitization." The Company's retained interests fluctuate as clients make
principal payments or incur new charges on the securitized accounts. The Company
had no retained interests at June 30, 1997, $15.8 million at December 31, 1997
and $51.6 million at June 30, 1998.
The Company acts as a servicer for the credit card receivables that have
been securitized and receives servicing fees ranging up to 6.0% per year of the
securitized principal receivables. As the servicer, the Company continues to
provide all of the services typically performed for its clients either directly
or by contracting with third party service providers. The securitization of the
Company's receivables does not affect the Company's relationship with its
clients.
Investors are entitled to receive periodic interest payments at a floating
rate. In general, the Company's floating rate issuances are based on a spread
over the rate equivalent or the rate at which promissory notes are issued in the
commercial paper market (hereinafter, the "commercial paper rate"). Amounts
collected in excess of the amount needed to pay the servicing fees and the
periodic interest payments to investors are available to absorb the investors'
share of credit losses. Investors of the Company's securitization program are
generally entitled to receive principal payments either through monthly payments
during an amortization period or in one lump sum from the proceeds of issuances
of additional certificates or participation interests in the receivables pool.
Prior to the commencement of an amortization period, all principal payments
received on the SPEs' receivables are reinvested in new receivables generated in
accounts designated for the benefit of the applicable SPE. During an
amortization period, the investors' share of principal payments is paid to the
investors until they are paid in full.
21
<PAGE>
As an additional credit enhancement on one of the Company's securitization
programs, the excess cash collected, including both principal and finance charge
collections on the SPE's receivables in excess of the periodic interest payments
to investors, servicing costs and new purchases of principal receivables, is
paid to the investors as an accelerated amortization payment. Once the investors
are repaid, any remaining receivables and funds held in the SPE are payable to
the Company.
MANAGED LOAN PORTFOLIO
As of August 1997, the Company began securitizing substantially all of its
credit card receivables. The securitization results in the removal of the
receivables from the Company's Balance Sheet for financial reporting purposes.
The Company manages, reviews and analyzes its financial performance on a
"managed loan" portfolio basis as if the receivables securitized were still on
the Company's Balance Sheet.
During the quarter ended June 30, 1998, the Company purchased a portfolio of
credit card accounts with outstanding receivables at the time of purchase in
excess of $400 million. The presented managed loan data excludes certain of
these accounts and their related receivables which at the time of purchase were
closed accounts in a certain delinquency status. Management believes that these
accounts were either in the process of being charged off by the seller due to a
contractual 180 day delinquency or were likely to be charged off in the near
term. Because of the accounts' closed and delinquent status at the time of
purchase, management believes that the Company would have very little
opportunity to influence the delinquency or default rates of these accounts
prior to charge-off. As such, the accounts, the receivables and any activity in
the accounts since the date of purchase have been excluded from any managed loan
data presented. At the time of purchase, there were approximately 25,000 such
accounts representing $97.1 million of the over $400 million outstanding
receivables purchased.
The following table indicates the Company's interest margin on a managed
loan basis as if the receivables were not securitized and removed from the
Company's Balance Sheet. The table also indicates the ending and average managed
loans and the number of managed accounts. The net interest margin is equal to
net interest income divided by average securitized receivables and includes the
Company's actual cost of funds plus all costs associated with asset
securitizations, including the interest expense paid to the investors.
<TABLE>
<CAPTION>
AT OR FOR THE QUARTER ENDED
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1997 1997 1997 1998 1998
----------- ------------- ------------- ----------- ---------
<CAPTION>
(IN THOUSANDS, EXCEPT FOR PERCENTAGES)
<S> <C> <C> <C> <C> <C>
Period-end total managed loans..................... $ 13,192 $ 17,325 $ 27,899 $ 44,089 $ 397,500
Period-end total managed accounts.................. 17 19 45 51 202
Total average managed loan portfolio............... $ 7,798 $ 15,762 $ 20,983 $ 37,886 $ 337,161
Net interest margin on managed loans, annualized... 19.9% 22.0% 17.7% 13.9% 17.0%
</TABLE>
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998, COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Net income for the six months ended June 30, 1998 was $14.2 million, an
increase of $14.9 million over a net loss of $725,000 for the same period in
1997. The increase in net income was the result of increases in both net
securitization gains of $20.2 million and other operating income of $6.7
million. Such net securitization gains were the result of the Company
securitizing substantially all of its credit card receivables beginning in
August 1997. The increases in income were partially offset by increases in other
operating expenses of $3.5 million and income tax expense of $8.5 million. These
increases were largely attributable to the growth in managed loans from $13.2
million at June 30, 1997 to $397.5 million at June 30, 1998. The increase in
managed loans was the result of a portfolio purchase completed in the second
quarter of 1998, as well as direct mail and telemarketing campaigns.
Other operating income increased from $6.7 million for the six months ended
June 30, 1997 to $7.0 million for the six months ended June 30, 1998, primarily
due to a $4.8 million increase in servicing income
22
<PAGE>
and a $1.1 million increase in the Company's other credit card fees. The Company
receives servicing fees ranging up to 6.0% per year of the securitized principal
receivables and other credit card fees, including credit card fees such as
annual membership, over-limit and cash advance fees.
Other operating expenses increased to $4.6 million for the six months ended
June 1998, from $1.1 million for the same period in 1997. This increase
primarily reflects the increase in the cost of operations associated with the
growth in the Company's business, including $1.6 million of additional marketing
and solicitation expenses incurred during the 1998 period.
YEAR ENDED DECEMBER 31, 1997, COMPARED TO PERIOD FROM AUGUST 14, 1996
(INCEPTION) TO DECEMBER 31, 1996
The Company began soliciting clients in February 1997. Managed loans grew to
$27.9 million as of December 31, 1997, compared with no managed loans as of
December 31, 1996.
Net securitization income and other operating income increased from $0 for
the period from August 14, 1996 (inception) to December 31, 1996, to $2.0
million for the year ended December 31, 1997. Other operating expense increased
to $3.6 million for the year ended December 31, 1997 from $148,000 for the
period from August 14, 1996 (inception) to December 31, 1996. This increase
primarily reflects the increase in the cost of operations associated with the
growth in the Company's business, including $1.1 million of marketing and
solicitation costs and $1.0 million of credit card servicing costs during the
year ended December 31, 1997.
NET INTEREST INCOME
Net interest income consists of net interest earned on the Company's
retained interests in securitized credit card receivables. It also includes
interest and late fees earned on the Company's owned credit card receivables,
less interest expense on borrowings to fund the receivables. Prior to August
1997, the Company's interest income was earned on all outstanding credit card
receivables. In August 1997, the Company began securitizing substantially all of
its credit card receivables. The securitization results in the removal of the
receivables from the Company's Balance Sheet for financial reporting purposes. A
retained interest is recorded at fair value on the Company's Balance Sheet, and
the Company receives cash flows relating to this retained interest equal to the
finance charges and past due fees in excess of the sum of the return paid to
investors, estimated contractual servicing fees, credit losses and required
amortization payments. This cash flow received on the Company's retained
interest is recorded as interest income. The Company began issuing credit cards
in 1997 and, therefore, did not recognize any interest income for the period
from August 14, 1996 (inception) to December 31, 1996. Interest income totaled
$2.7 million for the year ended December 31, 1997 and increased from $559,000
for the six months ended June 30, 1997 to $643,000 for the same period in 1998.
While the Company's managed credit card loan portfolio grew substantially,
interest income did not increase proportionately, due to the fact that the
Company began securitizing substantially all of its credit card receivables
beginning in August 1997. See "--Impact of Credit Card Securitizations."
The growth in the Company's interest income has been partially offset by the
growth in the Company's interest expense. Interest expense for the six months
ended June 30, 1998 increased to $506,000 from $184,000 for the six months ended
June 30, 1997. In April 1998, the Company entered into a promissory note with a
related party in the face amount of $13.0 million. The outstanding balance on
the promissory note was $7.5 million at June 30, 1998, and subsequent to June
30, 1998, the note and all accrued interest were paid in full. Interest expense
for the year ended December 31, 1997 totaled $361,000 and related to short-term
borrowings that were paid in full in August 1997. Interest expense for the
period from August 14, 1996 (inception) to December 31, 1996 was $0.
23
<PAGE>
NET SECURITIZATION INCOME
Net securitization income for the six months ended June 30, 1998 increased
to $20.2 million from $0 for the six months ended June 30, 1997. Net
securitization income for the year ended December 31, 1997 totaled $628,000 and
was $0 for the period from August 14, 1996 (inception) to December 31, 1996. Net
securitization income represents the present value of estimated cash flows the
Company expects to receive over the estimated outstanding period of the
receivables securitized. The cash flows represent finance charges and past-due
fees in excess of the sum of the return paid to the investors, estimated
contractual servicing fees, credit losses and required amortization payments.
Securitization income is recognized at the time of the sale of the credit card
receivables in the selected credit card accounts at the time of the initial
securitization and those arising under the accounts until the termination of the
securitization.
The increase in the Company's net securitization income is due to the
increase in the volume of credit card receivables securitized. During the year
ended December 31, 1997, the Company securitized credit card receivables with a
total outstanding principal receivables balance of $30.8 million. The Company
did not securitize any credit card receivables during the first six months of
1997 and securitized $403.8 million of total outstanding principal receivables
for the six-month period ended June 30, 1998. These reported amounts of
outstanding credit card receivables securitized include both the outstanding
principal balances of credit card accounts at the time the credit card accounts
were securitized and the outstanding receivables arising under the accounts
after the initial sale. The significant increase in the total receivables
securitized during the six months ended June 30, 1998 is due in part to the
outstanding credit card receivables securitized by the Company relating to a
portfolio purchased by the Company during the second quarter of 1998.
OTHER OPERATING INCOME
Other operating income consists of the following for the periods indicated:
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS
AUGUST 14, 1996 ENDED JUNE 30,
(INCEPTION) TO YEAR ENDED --------------------
DECEMBER 31, 1996 DECEMBER 31, 1997 1997 1998
--------------------- ------------------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Servicing income........................................... $ -- $ -- $ -- $ 4,860
Other credit card fees..................................... -- 911 271 1,410
Interchange fees........................................... -- 279 94 589
Ancillary products......................................... -- 37 -- 184
Other...................................................... -- 156 -- --
----- ------ --------- ---------
Total other operating income........................... $ -- $ 1,383 $ 365 $ 7,043
----- ------ --------- ---------
----- ------ --------- ---------
</TABLE>
The Company began soliciting clients in February 1997, and as a result, the
Company had no operating income from August 14, 1996 (inception) to December 31,
1996 and only $365,000 for the six months ended June 30, 1997. The significant
increase in other operating income to $7.0 million for the first six months of
1998 relates to the growth in the Company's managed loan portfolio over that
same six-month period. The Company's managed loans grew from $27.9 million at
December 31, 1997 to $397.5 million at June 30, 1998. The Company acts as a
servicer for the credit card receivables that have been securitized and
recognized servicing income ranging up to 6.0% of the average principal
receivables outstanding during the period. Other credit card fees include credit
card fees such as annual membership, over-limit and cash advance fees.
Interchange fees are the portion of the merchant fee assessed by Visa and passed
on to the Company on the purchase volume on the Company's credit card
receivables. Ancillary product revenues are associated with the fee-based
products and services that the Company markets to its clients.
24
<PAGE>
OTHER OPERATING EXPENSE
Other operating expense consists of the following for the periods indicated:
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS ENDED
AUGUST 14, 1996 JUNE 30,
(INCEPTION) TO YEAR ENDED --------------------
DECEMBER 31, 1996 DECEMBER 31, 1997 1997 1998
--------------------- ------------------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Salaries and benefits..................................... $ -- $ 429 $ 102 $ 388
Credit card servicing..................................... -- 1,008 344 802
Marketing and solicitation................................ 27 1,081 279 1,879
Professional fees......................................... 20 252 153 402
Data processing........................................... -- 156 51 610
Net occupancy............................................. -- 35 11 43
Ancillary product expense................................. -- -- -- 101
Other..................................................... 101 650 209 414
----- ------ --------- ---------
Total other operating expense......................... $ 148 $ 3,611 $ 1,149 $ 4,639
----- ------ --------- ---------
----- ------ --------- ---------
</TABLE>
Other operating expense for the six months ended June 30, 1998 increased to $4.6
million from $1.2 million for the six months ended June 30, 1997 due primarily
to increases in marketing and solicitation and data processing expenses. Other
operating expense for the year ended December 31, 1997 increased to $3.6 million
from $148,000 for the period from August 14, 1996 (inception) to December 31,
1996. This increase primarily reflects increased credit card servicing and
marketing and solicitation expenses. In each case, the increases in operating
expenses were associated with the growth in the Company's credit card
receivables.
INCOME TAXES
As further described in Note 1 to the Company's Consolidated Financial
Statements included elsewhere in this Prospectus, the Company was a limited
partnership until it merged into a corporation on August 29, 1997. For the
period from August 14, 1996 (inception) through August 28, 1997, the entity was
a limited partnership, and, as a result, no income tax provision was recorded.
No income tax expense was recorded related to the activities of the Company for
the year ended December 31, 1997 because the Company had no income. The Company
recognized a deferred tax asset for the year ended December 31, 1997 due to
certain tax loss carryforwards, but recorded a valuation allowance related to
the deferred asset, resulting in a net deferred tax asset of $0.
The Company's provision for income taxes since merging into a corporation
includes both federal and state income taxes. Tax expense for the six months
ended June 30, 1998 was $8.5 million. The Company's effective tax rate was 37.4%
for the six months ended June 30, 1998.
ASSET QUALITY
The Company's delinquency and net loan charge-off rates at any point in time
reflect, among other factors, the credit risk of receivables, the average age of
the Company's various credit card account portfolios, the success of the
Company's collection and recovery efforts and general economic conditions. The
average age of the Company's credit card account portfolio affects the stability
of delinquency and loss rates of the portfolio. The Company began originating
accounts in February 1997, and therefore, all of the Company's originated
receivables are less than two years old. The majority of the accounts in the
Company's purchased portfolio were more than two years old at the time of the
purchase; however, the Company has a limited operating history with respect to
these accounts.
The Company's strategy for managing delinquency and loan losses consists of
active account management throughout the client relationship. This strategy
includes credit line management and risk-based pricing so that an acceptable
profit margin is maintained based on the risk of the credit card accounts.
25
<PAGE>
DELINQUENCIES. Delinquencies have the potential to impact earnings in the
form of net loan losses which impact the value of the Company's retained
interests in securitizations. Delinquencies are also costly in terms of the
personnel and resources dedicated to resolving them. Delinquency levels are
monitored on a managed basis, since delinquency on either an owned or managed
basis subjects the Company to credit loss exposure. A credit card account is
contractually delinquent if the minimum payment is not received by the specified
date on the client's statement. It is the Company's policy to continue to accrue
interest and fee income on all credit card accounts, except in limited
circumstances, until the account and all related loans, interest and other fees
are charged off. See "--Net Charge-Offs."
Certain purchased accounts are likely to move into delinquency categories
that were excluded at the time of purchase, as previously noted, and therefore
increase the reported delinquency and loan losses experienced on the portfolio
in future quarters. The Company's originated receivables are less than two years
old as of June 1998; however, a majority of the accounts in the Company's
purchased portfolio were more than two years old, resulting in an increase in
reported delinquencies in the 90 day or less delinquency categories. The
following table presents the delinquency trends of the Company's credit card
receivables portfolio on a managed loan portfolio basis:
<TABLE>
<CAPTION>
AT THE QUARTER ENDED
----------------------------------------------------------------------------
JUNE 30, SEPTEMBER 30, DECEMBER 31,
1997 1997 1997
------------------------ ------------------------ ------------------------
% OF % OF % OF
AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL
----------- ----- ----------- ----- ----------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
TOTAL MANAGED LOAN PORTFOLIO (1):
Loans Delinquent:
30 to 59 days............................ $ 81 0.6% $ 500 2.9% $ 620 2.2%
60 to 89 days............................ -- 0.0 330 1.9 397 1.4
90 or more............................... -- 0.0 314 1.8 648 2.4
-- -- --
--- ----------- -----------
Total.................................. $ 81 0.6% $ 1,144 6.6% $ 1,665 6.0%
-- -- --
-- -- --
--- ----------- -----------
--- ----------- -----------
<CAPTION>
MARCH 31, JUNE 30,
1998 1998
------------------------ ----------------------
% OF % OF
AMOUNT TOTAL AMOUNT TOTAL
----------- ----- --------- -----
<S> <C> <C> <C> <C>
TOTAL MANAGED LOAN PORTFOLIO (1):
Loans Delinquent:
30 to 59 days............................ $ 907 2.1% $ 21,260 5.4%
60 to 89 days............................ 500 1.1 12,802 3.2
90 or more............................... 1,050 2.4 3,997 1.0
-- --
----------- ---------
Total.................................. $ 2,457 5.6% $ 38,059 9.6%
-- --
-- --
----------- ---------
----------- ---------
</TABLE>
- ------------------------
(1) During the quarter ended June 30, 1998, the Company purchased a portfolio of
credit card accounts. The presented managed loan delinquency data excludes
certain of these accounts and their related receivables which at the time of
purchase were closed accounts in a certain delinquency status. Management
believes that these accounts were either in the process of being charged off
by the seller due to a contractual 180 day delinquency or were likely to be
charged off in the near term. Because of the accounts' closed and delinquent
status at the time of purchase, management believes that the Company would
have very little opportunity to influence the delinquency or default rates
of these accounts prior to charge-off. As such, the accounts and the
receivables have been excluded from the managed loan delinquency data
presented. At the time of purchase, there were approximately 25,000 such
accounts with $97.1 million of outstanding receivables.
NET CHARGE-OFFS. Net charge-offs include the principal amount of losses
from clients unwilling or unable to pay their loan balance, as well as bankrupt
and deceased clients, less current period recoveries. Net charge-offs exclude
accrued finance charges and fees, which are charged against the related income
at the time of charge-off. Losses from those accounts that are identified as
fraudulent are also excluded from net charge-offs and are included separately in
other operating expenses. Loans are generally charged off during the period in
which the loan becomes contractually 180 days past due, with the exception of
bankrupt accounts, which are charged off immediately upon formal notification of
bankruptcy, and deceased clients (without a surviving, contractually liable
individual or an estate large enough to pay the debt in full), which are also
charged off immediately upon notification.
The Company began originating accounts in February 1997, and therefore, all
of the Company's originated receivables are less than two years old as of June
1998. The majority of the accounts in the Company's purchased portfolio were
more than two years old; however, the Company has a limited operating history
with respect to these accounts. As previously noted, the Company excluded from
managed loan data certain accounts and their related receivables, which at the
time of purchase were
26
<PAGE>
closed accounts in a certain delinquency status. Certain purchased accounts are
likely to move into delinquency categories that were excluded at the time of
purchase and therefore increase the reported delinquency and net charge-offs
experienced on the portfolio in future quarters. Until the originated accounts
become more seasoned, it is likely that the levels of net charge-offs will
increase as the average age of the Company's accounts increase. The Company
plans to continue to focus its resources on refining its credit underwriting
standards for new accounts in the second half of 1998 and to increase its focus
on collection and post charge-off recovery efforts to minimize losses. The
following table presents the Company's net charge-offs for the periods indicated
on a managed portfolio basis:
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED
-----------------------------------------------------------------
JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1997 1997 1997 1998 1998
----------- ------------- ------------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
TOTAL MANAGED LOAN PORTFOLIO :
Average loans outstanding.......................... $ 7,798 $ 15,762 $ 20,983 $ 37,886 $ 337,161
Net charge-offs.................................... 1 70 334 928 3,447
Net charge-offs as a percentage of average loans
outstanding (1)(2)............................... 0.1% 1.8% 6.4% 9.8% 4.1%
</TABLE>
- ------------------------
(1) Annualized.
(2) During the quarter ended June 30, 1998, the Company purchased a portfolio of
credit card accounts. The presented managed loan net charge-off data
excludes certain of these accounts and their related receivables, which at
the time of purchase were closed accounts in a certain delinquency status.
Management believes that these accounts were either in the process of being
charged off by the seller due to a contractual 180 day delinquency or were
likely to be charged off in the near term. Because of the accounts' closed
and delinquent status at the time of purchase, management believes that the
Company would have very little opportunity to influence the delinquency or
default rates of these accounts prior to charge-off. As such, the accounts
and the receivables have been excluded from the managed net charge-off data
presented. At the time of purchase, there were approximately 25,000 such
accounts with $97.1 million of outstanding receivables.
CREDIT LOSSES. For securitized receivables, anticipated losses are
reflected in the calculations of net securitization income. Provisions for loan
losses are made in accordance with Statement of Financial Accounting Standards
No. 5 ("SFAS No. 5"), which requires provisions in amounts necessary to maintain
the allowance at a level estimated to be sufficient to absorb probable future
losses of principal and earned interest, net of recoveries (including recovery
of collateral, if applicable). In evaluating credit losses, the Company takes
into consideration several factors, including (i) historical charge-off and
recovery activity by receivables portfolio, (ii) recent and expected delinquency
and collection trends by receivables portfolio, (iii) current economic
conditions and recent trends in such conditions and the impact such conditions
might have on the clients' ability to repay, (iv) the risk characteristics of
the portfolios and (v) other factors. However, as the Company has limited
operating history, historical loss information from third parties has been used
to refine estimated delinquency patterns by credit risk pool. This external data
consists of the results from a test conducted by a third party contracted by the
Company which analyzed a group of consumers management believed to be very
similar to the Company's target market and additional credit risk data obtained
from two other external portfolios.
Substantially all of the Company's credit card receivables have been
securitized. As such, the Company has removed the credit card receivables from
its Balance Sheet, and as the Company has securitized its receivables, it has
also relieved any allowance for loan losses on its Balance Sheet.
INTEREST RATE SENSITIVITY AND MARKET RISK
Interest rate sensitivity refers to the potential volatility in income
resulting from the variability in the interest rate spread relationships between
asset and liability indices (basis risk) and the mismatch of repricing intervals
between assets and liabilities (gap risk). Market risk is the risk of loss from
adverse changes in market prices and rates. The Company's principal market risk
is related to changes in interest
27
<PAGE>
rates. This affects the Company directly in its lending and borrowing
activities, as well as indirectly as interest rates may impact the payment
performance of the Company's clients.
The Company attempts to minimize the impact of market interest rate
fluctuations on net interest income and net income by regularly evaluating the
risk inherent in its asset and liability structure, including its off-balance
sheet assets and liabilities such as securitized receivables. This risk arises
from continuous changes in the Company's asset and liability mix, changes in
market interest rates, including changes affected by fluctuations in the yield
curve, payment trends on the Company's interest-bearing assets and payment
requirements on the Company's interest-bearing liabilities, and the general
timing of all other cash flows. To manage the Company's direct risk to market
interest rates, management actively monitors the interest sensitive components
of the Company's managed balance sheet, as well as market interest rates, to
minimize the impact of changes in interest rates on the fair value of assets,
net income and cash flow. Management seeks to minimize the impact of changes in
interest rates primarily by matching asset and liability repricings. There can
be no assurance that management will be successful in its attempt to manage such
risks.
The Company attempts to minimize gap risk by utilizing variable interest
rates in pricing its securitization transactions in an effort to match the
variable rate pricing of the underlying receivables sold to the SPEs. At June
30, 1998, all of the Company's credit card receivables and other
interest-bearing assets had variable rate pricing, with loans carrying annual
percentage rates at a spread over the prime rate, subject to certain interest
rate floors. At June 30, 1998, the Company had $237.8 million in variable rate,
interest-bearing liabilities, both on-balance sheet and through securitizations.
Since both managed interest-bearing assets and liabilities reprice every 30
days, the Company believes that the impact of a change in interest rates would
not be material to the financial performance of the Company.
The Company incurs basis risk due to the fact that it funds managed assets
at a spread over the commercial paper rate while the rates on the underlying
assets are indexed to the prime rate. This basis risk results from the potential
variability in the spread between the prime rate and the commercial paper rate
over time. The Company has not currently hedged or altered this basis risk due
to the cost of hedging such risk versus the benefits from elimination of this
risk.
LIQUIDITY, FUNDING AND CAPITAL RESOURCES
The Company's goal is to maintain an adequate level of liquidity through
active management of assets and liabilities. Because the characteristics of the
Company's assets and liabilities change, liquidity management is a dynamic
process affected by the pricing and maturity of the Company's assets and
liabilities.
A significant source of liquidity for the Company has been the
securitization of credit card receivables. During the year ended December 31,
1997, and for the first six months of 1998, the Company received net proceeds of
$12.7 million and $255.7 million, respectively, from sales of its credit card
receivables through securitizations. Cash generated from these transactions was
used to reduce short-term borrowings and to fund further credit card receivables
growth. In addition, in April 1998, the Company entered into a promissory note
with a related party in the face amount of $13.0 million. The outstanding
balance on the promissory note was $7.5 million at June 30, 1998, and subsequent
to June 30, 1998, the note and all accrued interest were paid in full. In August
1998, the Company issued shares of Common Stock to an unrelated investor for
cash proceeds of $10.0 million.
The maturity terms of the Company's securitizations vary. Once repayment
begins, payments from clients on credit card receivables are accumulated for the
SPEs' investors and are no longer reinvested in new credit card receivables. At
that time, the Company's funding requirements for such new credit card
receivables will increase accordingly. The occurrence of certain events may also
cause the securitization transactions to amortize earlier than scheduled. Such
events include, in the case of the Company's securitized receivable trust, among
other things, a decline in the securitized receivables portfolio's annual yield
(the sum of interest and credit card late fees, less contractual servicing fees
and net credit losses)
28
<PAGE>
below a base rate (generally equal to the sum of the weighted average rate of
interest on the certificates plus 2.0%) and, in the case of the Company's other
securitization program, among other things, an increase in the charge-off rates
or a decline in the payment rates in excess of certain agreed upon thresholds.
These events would accelerate the need to utilize alternative funding sources.
The Company believes that securitizations will continue to be a reliable source
of funding; however, no assurance can be given to that effect.
As managed loans amortize or are otherwise paid, the Company's funding needs
will increase accordingly. The Company believes that its securitization
transactions, together with other potential debt or equity financing, will
provide adequate liquidity to the Company for meeting its on-going cash needs,
although no assurance can be given to that effect.
YEAR 2000
The Year 2000 Problem is a result of computer programs using two digit years
instead of four digits. Therefore, these computer programs do not properly
recognize a year that begins with "20" instead of "19." If not corrected, the
Year 2000 Problem could have a material adverse effect on the Company's results
of operations, financial condition and business prospects.
Although most of the Company's existing information systems are less than
two years old and were originally designed for Year 2000 compliance, the Company
has created a Year 2000 project team to identify, address and monitor internal
systems and vendor issues related to the Year 2000 Problem. Although the Company
expects to have all of its system modifications complete by the end of 1998,
unforeseen problems could arise in the year 2000 giving rise to delays and
malfunctions which may impact the Company's results of operations. In addition,
the Company is in discussions with outside third party providers of services or
systems and networks to determine whether these outside vendors have addressed
their Year 2000 systems issues. Although the Company is taking certain
precautionary measures to assure that it is not vulnerable to the failure by its
third party vendors to make necessary system modifications, there can be no
assurance that the Company's third party vendors will successfully address all
of their Year 2000 issues.
The Company believes that it has adequate resources to achieve Year 2000
compliance for any of its systems which are found to be non-compliant. Moreover,
the Company believes that the costs of its Year 2000 compliance will not be
material to the Company's consolidated financial position, results of operations
or cash flows.
29
<PAGE>
BUSINESS
THE COMPANY
CompuCredit is an information-based, technology-driven originator and
purchaser of credit products and a direct marketer of fee-based products and
services. The Company's current credit product is the Aspire Visa credit card,
which the Company offers to its clients on an unsecured basis. There are
currently four types of Aspire Visa branded cards: Classic, Gold, Platinum and
Aspire Diamond. In addition, the Company markets fee-based products and services
to its clients including life insurance, card registration, telecommunication
products and services, memberships in preferred buying clubs, travel services
and debt waiver programs in the event of disability or unemployment of the
client. The Company uses proprietary analytical techniques and information
provided by credit bureaus to target consumers who management believes are
under-served by more traditional providers of credit-related products. Consumers
in this under-served market are typically more reliant on finance companies and
retail store credit cards to meet their consumer credit needs and are less
likely than others to have general-purpose credit cards. Some of these consumers
have had a delinquency, a default or, in some instances, a bankruptcy in their
credit histories, but have, in the Company's view, demonstrated recovery, while
other consumers in this target market are establishing or expanding their
credit.
The Company was formed in August 1996 and has achieved significant growth
since it began soliciting clients in February 1997. For the six months ended
June 30, 1998, the Company had net income of $14.2 million as compared to a net
loss of $725,000 for fiscal 1997. A portfolio purchase completed in April 1998,
combined with the Company's direct mail and telemarketing campaigns, has
resulted in 202,000 accounts with an aggregate managed portfolio of $397.5
million of credit card receivables outstanding as of June 30, 1998. The Company
intends to continue the growth of its portfolio through pre-approved
solicitations and purchases of credit card receivables and may utilize either or
both of these means to varying degrees, depending upon its assessment of the
most cost-efficient means of account growth.
BUSINESS STRATEGY
Since inception, the Company has developed unique proprietary scoring models
which evaluate consumer credit and bankruptcy risk using credit bureau data and
repayment history on consumer loans. Management has built on its extensive
experience in consumer credit and collections to develop the target marketing
and account management strategies and criteria that are reflected in these
models. The Company's models include unique segmentation tools which the Company
utilizes to develop risk-based pricing matrices. These matrices determine the
amount of credit, applicable interest rates and other charges offered to each
targeted client. CompuCredit believes that its proprietary scoring models allow
it to evaluate credit risk more effectively than most traditional credit
grantors, to identify unique pools of consumers with similar risk
characteristics and to offer profitable credit options to these potential
clients. In contrast, the Company believes that traditional credit grantors make
credit decisions more frequently based on standard credit scores such as the
FICO score. Consistent with the Company's strategy, the Company's proprietary
models have been continuously revised and refined to incorporate the Company's
experience with its clients. The Company believes that this continual revision
and refinement has improved, and will continue to improve, the accuracy and
reliability of its models.
Based on research it has conducted with Equifax, one of the country's
largest providers of credit information, the Company has determined that there
are approximately 82 million consumers in the United States that it believes are
under-served by consumer credit grantors. These are consumers who the Company
believes are not being solicited with offers of pre-approved credit cards as
often as other consumers. Using its proprietary scoring models, the Company
believes that, at any given time, approximately 20 to 25 million of these 82
million under-served consumers present levels of credit risk acceptable for the
Company's product. Since 1996, the Company has conducted periodic research that
indicates that, while the size of this universe of 20 to 25 million potential
clients has been relatively constant, the
30
<PAGE>
composition of this group has changed to a significant degree over time as
individuals' credit characteristics change relative to the Company's criteria
(i.e., different consumers are included in the potential pool of clients at any
given time).
The Company's systems monitor client behavior patterns throughout the client
relationship. In addition to employing risk-based analysis in determining its
target market and the pricing for each client account, the Company also monitors
transactions and the type of usage that occurs on its Aspire Visa cards as part
of its account management process. The Company believes that the combination of
its proprietary databases, custom scoring models, risk-based pricing strategy,
account management strategy and collections experience enables it to provide
credit to an under-served market, to assess the risk of its client portfolios
and to price its products accordingly.
CompuCredit's operational strategy is to focus on those functions that
constitute its competitive advantages and core competencies while outsourcing
certain back office and fulfillment functions. The Company's core competencies
include credit and risk decisioning, account acquisition strategies, management
of system and model development, collections and ongoing account management. The
Company's Aspire credit card is issued pursuant to an Affinity Card Agreement
with CB&T, a state-chartered banking subsidiary of Synovus Financial
Corporation. CB&T and its affiliate, TSYS, perform additional services for the
Company such as card embossing/mailing, fraud detection, cycle billing, payment
processing and transaction processing. The Company believes that outsourcing
allows the Company to leverage the vast expertise already available to the
credit card industry.
The Company finances the growth in its credit card receivables primarily
through asset-backed securitizations. As the Company originates or acquires
credit card receivables, it sells the receivables to a master trust or to a
third party asset-backed commercial paper conduit. The receivables that are sold
through securitization are removed from the Company's Balance Sheet for
financial reporting purposes. Following a sale, the Company receives cash flow
representing the finance and past due fees in excess of the sum of the return
paid to the investors, contractual servicing fees, credit losses and required
amortization payments. From inception to June 30, 1998, the Company has received
cumulative net proceeds of approximately $268.4 million from the securitization
of its credit card receivables. The significant growth to date of the Company's
credit card receivables portfolio has been supported by the Company's
contributed capital, retained earnings and the securitization of receivables.
The Offering will provide the Company with additional capital to fund future
growth.
HISTORY
CompuCredit was formed in August 1996 by David G. Hanna, President, and
Richard W. Gilbert, Chief Operating Officer, after completing almost two years
of research and development with the assistance of Equifax. Both Mr. Hanna and
Mr. Gilbert have extensive experience in the credit and collections industries.
Mr. Hanna and Mr. Gilbert both held executive positions with Nationwide Credit,
a national third party collection agency, during the 1980's until its sale to
First Financial Management Corporation (currently known as First Data
Corporation) in 1990. Mr. Hanna also founded Account Portfolios in 1989 with
Frank J. Hanna, III, his brother, who is a principal shareholder of CompuCredit
and will be a director of the Company upon consummation of the Offering. Account
Portfolios was sold in 1995 to Outsourcing Solutions, Inc., a company controlled
by McCown, De Leeuw & Co., a private venture capital firm. Account Portfolios
utilized proprietary scoring models to analyze and collect on large purchased
portfolios of non-performing loans and consumer receivables. Before joining the
Company in 1996, Mr. Gilbert served initially as Chief Operating Officer of
Equifax's collection division and subsequently as General Manager of Strategic
Client Services for Equifax. Richard R. House, Jr., CompuCredit's Chief Credit
Officer, joined the Company in April 1997 from Equifax. While at Equifax, Mr.
House served as Vice President for Equifax's Decision Solutions division, which
provided consulting and modeling services to many of the nation's largest credit
grantors. Collectively, CompuCredit's founders and executive officers have over
53 years of experience in various aspects of consumer finance.
31
<PAGE>
THE CREDIT CARD INDUSTRY
At the end of March 1998 American consumers held an aggregate of $1.2
trillion of debt, exclusive of home mortgages. The Board of Governors of the
Federal Reserve System estimates that the size of the revolving credit market in
the United States was in excess of $530 billion as of March 1998. The Company
believes that the purchasing convenience associated with unsecured credit cards
has driven increased usage of credit cards and has made them the preferred
consumer credit vehicle.
Historically, traditional lenders (primarily traditional banking
organizations) have enjoyed significant advantages in consumer lending compared
to non-bank providers of consumer loans. However, a broadening access to
capital, coupled with technological advances, has diminished the advantage of
banks relative to non-banks. Attractive financing arrangements are now available
through the issuance of credit card asset-backed securities. Access to the
securitization market has enabled non-banks (such as the Company) to
competitively fund receivables growth.
During the 1990's, large banks with highly focused credit card
organizations, as well as "monoline" banking organizations specializing in
credit card lending, have dominated the U.S. credit card market. The Company
believes that the market's recent history suggests that future industry growth
and success will continue to be experienced primarily by highly focused,
technology-driven organizations that are adept at information-based marketing.
Credit card issuers make credit cards available to their clients in a
variety of ways. Many issuers offer cards as a convenience to existing
clients--a strategy to create greater affinity and client loyalty. This is
generally the case with credit cards offered by department stores as well as
smaller banks and credit unions. To apply for such a card the consumer typically
completes an application that is reviewed by the issuer for approval. In
contrast, for the larger issuers who control the vast majority of the market,
the most cost-effective means to achieve the growth rates they seek is the mass
mailing of credit card offers. Often this process is accomplished by obtaining a
list of names from one of the national credit bureaus. The Company believes that
the individuals on those lists will have met certain credit guidelines
established by these credit card issuers, typically based on widely-used credit
underwriting practices in the industry.
The Company believes that the key challenges for credit card issuers in the
near future will be (i) the management of credit quality, (ii) the management of
client attrition and retention and (iii) new account acquisition strategies. The
Company believes that as credit card issuers continue to use standard risk
assessment and target marketing tools, niches of under-served clients who will
actually perform better than their generic credit score indicates will continue
to develop, creating opportunity for specialty issuers with the information
systems and expertise to profitably market consumer credit products to these
client segments.
THE COMPANY'S DATABASE SYSTEM
The Company has developed a proprietary database management system which
supports all of the decision-making functions, including target marketing,
solicitation, application processing, account management and collections
activities. The database system is a comprehensive information warehouse that
maintains critical information regarding a client throughout the client's
relationship with the Company. The system's purpose is to gather, store and
analyze the data necessary to facilitate the Company's target marketing and risk
management decisions.
32
<PAGE>
[The omitted graphical material includes five rectangular boxes arranged
vertically with a downward arrow from each. The boxes are labeled (in order):
Target Marketing, Solicitation, Application Processing, Account Management, and
Collections and Delinquency Management.]
The Company's database system captures combinations of client information
gathered in the target marketing and solicitation phases of the client
relationship and additional data gathered throughout the remainder of the
relationship, including client behavior patterns. By combining this information,
the Company has established an analytical database linking static historical
data with actual client performance. The following is a partial listing of the
data elements maintained by the Company's database system with respect to each
phase of the client relationship:
[The omitted graphical material includes four boxes, each one referring to a
particular phase of the client relationship. The boxes include a partial listing
of data elements. The first box is titled Target Marketing and lists Credit
Bureau Data, Demographic Data, Previous Solicitation History, Target Marketing
Scores and Risk Scores. The second box is titled Solicitation and Application
Processing and lists Credit Bureau Data, Demographic Data, Original Pricing
Credit Line Offer and Potential Pricing/Credit Line Offers. The third box is
titled Account Management and lists Payment History, Balance, Credit Line,
Revenue, Behavior Scores and Transaction Data. The last box is titled
Collections and Delinquency Management and lists Payment History, Previous
Collections Efforts, Balance, Credit Line and Credit Bureau Data.]
33
<PAGE>
The Company's database system enables management to rapidly evaluate and
respond to changes in the risk profile of a client throughout the relationship.
The intranet interface provides the Company with timely and easy access to the
data.
[The omitted graphical representation illustrates the Company's use of its
database management system to process data gathered throughout the client
relationship and to provide CompuCredit management with critical information.
The figure consists of three rows of boxes. The first row includes five squares
labeled Target Marketing Data, Solicitation and Application Processing,
Fee-Based Product Marketing Data, Account Management Data and Collections Data,
with arrows from each box to and from the second row which contains one
rectangular box labeled Database Management System. The Database Management
System rectangular box has an arrow to and from the third row which has a
rectangular box labeled CompuCredit Management. An arrow pointing left to right
labeled Intranet Interface points to the arrow between the box titled Database
Management System and the box CompuCredit Management.]
The use of a single database system for all phases of the client
relationship enables the Company to continuously refine and optimize target
marketing and portfolio management decisions on the basis of continuous
feedback. Management believes that this capability has been critical in
identifying under-served segments which the Company anticipates will be
profitable and which have been overlooked by traditional providers of
credit-related products.
TARGET MARKETING SYSTEM
Since 1996, the Company has worked with Equifax to develop proprietary risk
evaluation systems using credit bureau data. Initially, the systems were
developed using randomly selected historical data sets of payment history on all
types of consumer loans. Since March 1997, these proprietary risk evaluation
systems include the specific behavior of CompuCredit's clients. The Company's
systems enable the Company to segment clients into narrower ranges within each
FICO score range. The Company believes that this sub-segmentation enables the
Company to avoid unacceptable credit risk and to price its products more
effectively.
Within each FICO score range, every potential client is evaluated using
numerous credit and marketing segmentation methods derived from a variety of
data sources. Potential clients are placed into
34
<PAGE>
unique product offering segments based upon combinations of factors reflecting
the Company's assessment of credit risk, bankruptcy risk, supply of revolving
credit, demand for revolving credit and payment capacity. These product offering
segments are chosen to meet the following primary target marketing strategies:
- Marketing to those under-served client segments who have acceptable credit
and bankruptcy risk and who have the highest revenue potential within
those segments;
- Providing a variety of general-purpose credit cards to satisfy the
different financial needs of various segments of the under-served market;
and
- Providing a variety of fee-based ancillary products and services to
leverage the Company's relationship with the under-served client.
The Company's marketing programs are intended to focus on those client
segments which have high revenue potential when compared to other segments and
demonstrate acceptable credit and bankruptcy risk. The Company seeks to
accomplish this by establishing, for each client segment, the appropriate risk-
based pricing level that will maintain an acceptable response rate to the
Company's direct mail and telemarketing campaigns. During 1997 and the six
months ended June 30, 1998, the Company solicited more than 3.2 million
potential clients and experienced a response rate that the Company believes is
significantly higher than the overall rate experienced by the credit card
industry. The Company believes the key to these efforts is the use of its unique
systems to evaluate credit risk more effectively than the use of FICO scores
alone.
Based on research it has conducted with Equifax, the Company has determined
that there are approximately 82 million consumers in the United States who it
believes are under-served by consumer credit grantors. These are consumers who
the Company believes are not being solicited with offers of pre-approved credit
cards as often as other consumers. These under-served consumers are often served
only by finance companies and retail store credit card issuers, both of which
offer far less consumer utility than a bankcard. Using its proprietary scoring
models, the Company believes that, at any given time, approximately 20 to 25
million of these 82 million under-served consumers present levels of credit risk
acceptable for the Company's product. Since 1996, the Company has conducted
periodic research that indicates that, while the size of this universe of 20 to
25 million potential clients has been relatively constant, the composition of
this group has changed to a significant degree over time as individuals' credit
characteristics change relative to the Company's criteria (i.e., different
consumers are included in the potential pool of clients at any given time). The
Company believes that these consumers have a need for convenient credit, are
avoided by most issuers, will respond positively to an offer and will repay
satisfactorily. The Company believes that by using its sophisticated database
system, it can apply advanced mathematical techniques to the under-served market
to identify profitable client segments and the appropriate pricing strategies
for each of these segments.
CompuCredit's client solicitation strategy is to test several differently
priced products against unique pools of potential clients with similar risk
characteristics. The results of direct mail and telemarketing campaigns and
follow-up mailings are continuously monitored and analyzed using the Company's
proprietary database system.
CompuCredit offers its Classic, Gold, Platinum and Diamond cards in a
variety of product offerings varying by the amount of the credit line, the
interest rate and the annual fee:
<TABLE>
<CAPTION>
CHARACTERISTIC RANGE OF OFFERINGS
- ----------------------------------------------- ---------------------------------------------
<S> <C>
Initial Credit Line............................ $500 to $10,000
APR............................................ Prime + 8.75% to Prime + 21.75%
Annual Fee..................................... $0 to $85
</TABLE>
35
<PAGE>
Product offerings for a particular client are determined by examining a
number of factors in the client's credit file, including the Company's
assessment of credit risk, bankruptcy risk, supply of revolving credit, demand
for revolving credit, payment criteria and revenue potential, among other
factors.
TARGET MARKETING IN PORTFOLIO ACQUISITIONS
The Company anticipates growing its receivables portfolio through the
aggressive use of its target marketing system to originate clients through
direct mail and telemarketing campaigns. The Company expects that it will also
pursue growth through the opportunistic purchase of existing credit card
portfolios. The Company utilizes the same analytical systems employed in its
direct mail and telemarketing campaigns to seek to purchase portfolios that are
primarily comprised of under-served clients. The Company's strategy for its
purchased portfolios is to use its numerous credit and marketing segmentation
methods to select those accounts to which an Aspire credit card will be issued
and to use its proprietary account management systems to enhance the performance
of the portfolio and to market fee-based ancillary products and services to the
new clients. As with the account origination process, each client is evaluated
using numerous credit and marketing segmentation methods derived from a variety
of data sources. Clients are placed into unique product offering segments based
upon combinations of factors reflecting their credit risk, bankruptcy risk,
supply of revolving credit, demand for revolving credit and payment capacity.
Currently, the Company has completed one portfolio acquisition and expects that
it will regularly evaluate other potential portfolio acquisitions.
The Company believes its unique target marketing system provides the same
competitive advantage when evaluating portfolios as when originating clients
through direct mail or telemarketing campaigns. The Company believes that its
ability to evaluate credit risk within FICO score ranges enables the Company to
more accurately determine the portfolio's overall credit risk than many other
companies that may bid on portfolio purchases and many portfolio sellers. The
Company believes that this risk evaluation expertise enables the Company to
avoid portfolio purchases in which the final purchase premium (or discount) does
not accurately reflect the credit risk of the portfolio. Conversely, in cases
involving portfolios in which the perceived credit risk, as reflected by the
FICO scores, is significantly higher than the Company's forecast of credit risk,
the Company may bid more aggressively for these portfolios.
The Company believes that its target marketing system, which combines its
proprietary risk evaluation system with sophisticated techniques for estimating
supply of revolving credit, demand for revolving credit and bankruptcy risk,
provides it with a competitive advantage in evaluating the potential
profitability of target clients, whether originated by the Company or purchased.
The Company is continuously seeking to refine its target marketing system
through the development of new analytical segmentation tools and the evaluation
of the system's effectiveness on previous marketing campaigns and portfolio
acquisitions.
SOLICITATION
The Company uses its target marketing strategies to identify potential
clients and to assess the type of product offering to be made to each potential
client. The Company then uses either direct mail or telemarketing campaigns to
solicit each client. The Company began soliciting clients in February 1997. In
each direct mail campaign conducted to date, the Company has experimented with
several combinations of rates, fees and credit limits directed at specific
client segments in order to evaluate response rates and further refine its
pricing strategies within each client segment and in the aggregate. Since its
inception, the Company has solicited new accounts from approximately 3.2 million
potential clients using direct mail and telemarketing. The Company has also
resolicited a limited number of those recipients of direct mail who did not
respond to an initial solicitation in order to utilize refined pricing
strategies developed following the evaluation of the results of earlier
mailings. To date, all of the Company's offers have been pre-approved offers for
an unsecured Visa credit card and have not included (and the Company does not
intend to offer) any teaser-rate pricing. Third party print production
facilities produce the Company's direct mail campaigns, and the Company
contracts with third party telemarketing providers for its telemarketing
campaigns. Responses to both direct mail and telemarketing campaigns are then
forwarded
36
<PAGE>
to the Company for application processing. The response data received is also
integrated into the Company's database system for future analysis and response
modeling.
APPLICATION PROCESSING
The Company contracts with third party providers for the data entry of
credit card applications resulting from its pre-approved solicitations.
Application coupons mailed in by clients are keyed by the data entry provider
into a machine-readable format. The Company also uses telemarketing vendors to
input application data for clients who respond to solicitations via the
telephone. Entered application data is electronically transmitted in batches to
the Company for processing by its application processing system.
The Company has developed flexible, proprietary methods of evaluating
applications using an application processing system that automates the
evaluation of client application data. The system utilizes pre-defined criteria
to review applicant-provided information and to compare the information to the
applicant's original solicitation data, as well as to data from an online credit
file that is automatically requested for each applicant. The system performs a
series of comparisons of identification information (e.g., name, address, social
security number) from the three data sources to verify that client-supplied
information is complete and accurate. Potentially fraudulent applications are
declined or held for further review.
The applicant's online credit file that is obtained after the receipt of his
or her response is further evaluated by the system to ensure that the applicant
still meets the creditworthiness criteria applied during the original prescreen
process. The same credit criteria, proprietary custom models and credit bureau
data items used during the initial prescreen selection process are recalculated
for each applicant. Applicants still meeting the Company's creditworthiness
criteria are designated as "approvals" and assigned a final credit offer.
Statistics related to response rates and final offers and terms are captured
daily for all processed applications and are transferred to the Company's
proprietary database for ongoing tracking and analysis.
FEE-BASED PRODUCTS AND SERVICES
The Company offers fee-based products and services to its clients, including
life insurance, card registration, telecommunication products and services,
memberships in preferred buying clubs, travel services and debt waiver programs
in the event of disability or unemployment of the client. These fee-based
products and services are offered at various times during the client
relationship based on tailored marketing lists derived from the Company's
database. The Company currently markets all non-credit products and services
pursuant to joint marketing agreements with third parties and is continually
evaluating additional products it offers to its clients either directly or
through continued joint marketing efforts with third party providers of such
products and services. Profitability for fee-based products and services is
affected by the response rates to product solicitations, the volume and
frequency of the marketing programs, the commission rates received from the
product providers, the claim rates and claims servicing costs for certain
products and the operating expenses associated with the programs. Several of the
Company's fee-based product relationships began in 1998, and these products and
services are expected to increase in the future as the Company continues to
increase its credit card client base and introduce new products. Response rates
experienced to date indicate strong demand for these products and services among
the Company's client base.
ACCOUNT AND PORTFOLIO MANAGEMENT
ONGOING ACCOUNT MANAGEMENT. The Company's management strategy is to
aggressively manage account activity using behavioral scoring, credit file data
and its proprietary risk evaluation systems. These strategies include the active
management of transaction authorizations, account renewals, over-limit accounts
and credit line modifications. CompuCredit uses an adaptive control system to
translate its strategies into the account management processes. The system
enables the Company to develop and test
37
<PAGE>
multiple strategies simultaneously, which allows the Company to continually
refine its account management activities. The Company has incorporated its
proprietary risk score into the control system, in addition to standard behavior
scores used widely in the industry, in order to better segment, evaluate and
properly manage the accounts. The Company believes that by combining external
credit file data along with historical and current client activity, it is able
to better predict the true risk associated with current and delinquent accounts.
The Company monitors authorizations for all accounts. Client credit
availability is limited for transaction types which the Company believes are
higher risks such as certain foreign transactions and cash advances. Credit
lines are managed to reward under-served clients who are performing well and to
mitigate losses from delinquent client segments. Accounts exhibiting favorable
credit characteristics are periodically reviewed for credit line increases, and
strategies are in place to aggressively reduce credit lines for clients
demonstrating indicators of increased credit or bankruptcy risk. Data relating
to account performance is captured and loaded into the Company's proprietary
database for ongoing analysis. The Company proactively adjusts account
management strategies as necessary, based on the results of such analyses.
Additionally, industry-standard fraud detection software is used to manage the
portfolio. Accounts are routed to manual work queues, and charging privileges
are suspended if the transaction-based fraud models indicate a high probability
of fraudulent card use.
CLIENT ADVISORY SERVICES. The Company has implemented an advisory program
to assist its clients in understanding the prudent use of general-purpose credit
cards. The Company uses its proprietary systems to identify clients who are not
delinquent but are exhibiting credit behavior likely to result in delinquency in
the future. These accounts are assigned to the Company's credit advisors who
actively review all account activity and, if necessary, contact the client via
letter or telephone. Actions taken by the Company may include client-friendly
advice concerning the prudent use of credit, temporary or permanent reduction in
credit line availability, review of the client's full credit report, debts and
income, and establishing repayment terms to assist the client in avoiding
becoming over-extended.
Management believes that this client advisory strategy is not widely
practiced in the credit card industry. The Company believes that its advisory
program enhances its relationship with its clients by providing valuable and
meaningful assistance while simultaneously contributing to prudent risk
management strategies to reduce bad debt losses.
OUTSOURCING. Certain account management functions--including card
embossing/mailing, fraud detection/investigation, cycle billing/payment
processing and transaction processing/authorization--are outsourced to CB&T and
TSYS. In January 1997, CompuCredit entered into an Affinity Card Agreement with
CB&T, a subsidiary of Synovus Financial Corporation, that provides for the
issuance of Aspire credit cards and the performance of the outsourced functions
noted above. The Company intends to file an application to organize a
state-chartered "credit card" bank under the laws of the State of Georgia which,
if organized, will become the issuer of the Aspire credit card following the
completion of its formation. However, the Company intends to continue to
outsource certain functions to CB&T and its affiliate, TSYS, by entering into a
new agreement with CB&T or TSYS which will provide for the servicing of the
Aspire accounts in substantially the same manner in which such services are
currently being performed.
COLLECTIONS AND DELINQUENCY MANAGEMENT
Management believes that its prior experience in successfully operating
professional collection agencies, coupled with its proprietary systems,
represents a significant competitive advantage in minimizing delinquencies, bad
debt losses and operating expenses associated with the collection process. The
Company uses its systems to develop custom collection models that rank-order
accounts based on collectability and level of risk. The output of these models
is then employed to identify the collection activity most likely to result in
curing the delinquency cost-effectively rather than treating all accounts the
same based on the mere passage of time, as the Company believes most creditors
do.
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<PAGE>
As in all aspects of its risk management strategies, the Company routinely
tests alternative strategies and compares the results with existing collection
strategies. Results are measured based on delinquency rates, expected losses and
costs to collect. Existing strategies are then adjusted as suggested by these
results. Management believes that maintaining the ongoing discipline of testing,
measuring and adjusting collection strategies will result in minimized bad debt
losses and operating expenses. The Company believes this approach differs
significantly from the approach taken by the vast majority of credit grantors
that implement collection strategies based on commonly accepted peer group
practices.
The Company opened a new 12,000 square foot collection facility in Atlanta,
Georgia in June 1998 which is operational from 8:00 a.m. until 9:00 p.m. Monday
through Saturday. The Company has a full-time staff with an average experience
of over ten years in collections. Management has instituted collector incentive
compensation plans similar to those it successfully employed in its prior
experience operating professional collection agencies. In addition to its
full-time staff, the Company outsources certain collection activities. The
Company continuously monitors the performance of its third party providers
against that of the Company's staff to determine which is more effective.
SECURITIZATIONS
The Company finances the growth of its credit card receivables primarily
through asset-backed securitizations. As the Company generates or acquires
credit card receivables, it securitizes the receivables through a master trust
or a third party asset-backed commercial paper conduit. In general, the
Company's current securitization structures provide for the daily securitization
of all new credit card receivables arising under the securitized accounts. The
receivables that are sold through securitization are removed from the Company's
Balance Sheet for financial reporting purposes. Following a sale, the Company
receives cash flows which represent the finance charges and past due fees in
excess of the sum of the return paid to investors, estimated contractual
servicing fees, credit losses and required amortization payments. During the
year ended December 31, 1997 and for the first six months of 1998, the Company
received net proceeds of approximately $12.7 million and $255.7 million,
respectively, from the sales of its credit card receivables through
securitizations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Impact of Credit Card Securitizations."
CONSUMER AND DEBTOR PROTECTION LAWS AND REGULATIONS
The Company's business is regulated under several federal and state consumer
protection and other laws, and the rules and regulations promulgated thereunder,
including the federal Truth-In-Lending Act, the federal Equal Credit Opportunity
Act, the federal Fair Credit Reporting Act, the federal Fair Debt Collection
Practices Act and the federal Telemarketing and Consumer Fraud and Abuse
Prevention Act. These statutes, among other things, impose certain disclosure
requirements when a consumer credit loan is advertised, when the account is
opened and when monthly billing statements are sent. In addition, these statutes
limit the liability of credit cardholders for unauthorized use, prohibit certain
discriminatory practices in extending credit and impose certain limitations on
the types of charges that may be assessed and the use of consumer credit
reports.
Changes in any such laws or regulations, or in the interpretation or
application thereof, could have a material adverse effect on the Company.
Various proposals which could affect the Company's business have been introduced
in Congress in recent years, including, among others, proposals relating to
imposing a statutory cap on credit card interest rates, substantially revising
the laws governing consumer bankruptcy, limiting the use of social security
numbers, permitting affiliations between banks and commercial, insurance or
securities firms, and other regulatory restructuring proposals. There have also
been proposals in state legislatures in recent years to restrict telemarketing
activities, impose statutory caps on consumer interest rates, limit the use of
social security numbers and expand consumer protection laws. It is impossible to
determine whether any of these proposals will become law and, if so, what impact
they will have on the Company.
39
<PAGE>
Although the Company believes that it and, to the extent applicable, CB&T
are currently in compliance with applicable statutes and regulations, there can
be no assurance that the Company or CB&T will be able to maintain such
compliance. The failure to comply with such statutes or regulations could have a
material adverse effect on the Company's results of operations or financial
condition. In addition, due to the consumer-oriented nature of the credit card
industry, there is a risk that the Company or other industry participants may be
named as defendants in litigation involving alleged violations of federal and
state laws and regulations, including consumer protection laws, and consumer law
torts, including fraud. Although the Company currently is not involved in any
material litigation, a significant judgment against the Company or within the
industry in connection with any such litigation could have a material adverse
effect on the Company's results of operations or financial condition.
The National Bank Act of 1864, as amended (the "National Bank Act"),
authorizes national banks to charge clients interest at the rates allowed by the
laws of the state in which the bank is located, regardless of any inconsistent
law of the state in which the bank's clients are located. A similar right is
granted to state institutions such as CB&T in the Depository Institutions
Deregulation and Monetary Control Act of 1980. In 1996, the United States
Supreme Court held that late payment fees are "interest" and therefore can be
"exported" under the National Bank Act, deferring to the Comptroller of the
Currency's interpretation that interest includes late payment fees, insufficient
funds fees, over-limit fees and certain other fees and charges associated with
credit card accounts. This decision does not directly apply to state
institutions such as CB&T. Although several courts have upheld the ability of
state institutions to export certain types of fees, a number of lawsuits have
been filed alleging that the laws of certain states prohibit the imposition of
late fees. If the courts do not follow existing precedents, CB&T's ability to
impose certain fees could be adversely affected, which could have a material
adverse effect on the Company's results of operations or financial condition.
The Company does not currently own a bank. However, the Company is seeking
to organize a state-chartered "credit card bank" under the laws of the State of
Georgia. Such bank, if organized, is expected to become the issuer of the
Company's Aspire credit card. If the Company completes that process, such
banking subsidiary will be subject to the various state and federal regulations
generally applicable to such institutions.
COMPETITION
The Company faces intense and increasing competition from other consumer
lenders. In particular, the Company's credit card business competes with
national, regional and local bank card issuers, and with other general-purpose
credit card issuers, including American Express, Discover and issuers of Visa
and MasterCard. The Company also competes, to a lesser extent, with retail
credit card issuers, such as department stores and oil companies, and other
providers of unsecured credit. Large credit card issuers may compete with the
Company for clients by offering lower interest rates and fees. In addition, new
issuers have entered the market in recent years. Many of these competitors are
substantially larger than the Company and have greater financial resources.
Clients choose credit card issuers largely on the basis of price (mostly
interest rates and fees), credit limit and other product features. For this
reason, client loyalty is often limited. The Company may lose entire accounts,
or may lose account balances, to competing credit card issuers.
The Company's competitors are continually introducing new tactics to attract
clients and increase their market share. The most heavily-used techniques are
advertising, target marketing, balance transfers, price competition, incentive
programs and co-branding (for example, using the name of a sports team or a
professional association on their credit cards). In response to competition,
certain issuers of credit cards have lowered interest rates and offered
incentives to retain existing clients and attract new ones. These competitive
practices, as well as competition that may develop in the future, could harm the
Company's ability to obtain clients and maintain its profitability.
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<PAGE>
PROPERTIES
The Company's principal executive offices and operations center are located
in leased premises aggregating approximately 3,000 and 12,000 square feet,
respectively, in Atlanta, Georgia. The Company believes that its facilities are
suitable to its businesses and that it will be able to lease or purchase
additional facilities as its needs require.
EMPLOYEES
As of June 30, 1998, the Company had 66 employees, all of whom are located
in Georgia. None of the Company's employees is represented by a collective
bargaining agreement. The Company considers its relations with its employees to
be good.
TRADEMARKS
Aspire is a registered trademark of the Company. CompuCredit, Aspire
Diamond, Diamond Select and Aspire Diamond Select are trademarks of the Company,
and applications to register such trademarks are pending. The Company considers
these trademarks to be readily identifiable with, and valuable to, its business.
PROPRIETARY RIGHTS AND LICENSES
The Company regards its database management system and its customer
selection and risk evaluation criteria as confidential and proprietary. The
Company's pre-screen customer selection criteria were initially developed under
a contract with Equifax; however, the Company owns all intellectual property
rights in the resulting model. The Company's database management system has been
developed by a third party developer under a contract pursuant to which the
Company has been granted an exclusive, perpetual license to use, copy, execute,
display and reproduce the software constituting the Company's database
management system with ownership of such software (subject to the Company's
license) vested in the third party developer. The third party developer also has
granted to the Company a nonexclusive license to use, copy or display for
internal use a system that automates the evaluation of client application data,
which, among other things, provide the Company with real-time access to credit
information concerning its target market and its customers. Such third party
developer continues to provide substantially all of the computer software design
and implementation services required by the Company in the continuing refinement
and use of its computer software systems. The third party developer has granted
to the Company a right of first refusal in the event the developer wishes to
sell or otherwise transfer any of its ownership rights in the software it
licenses to the Company during the term of the agreement. In addition, the
Company has the right to acquire the entity that owns the database management
system software for a purchase price of $2.4 million at any time beginning
September 23, 2000 and ending 12 months after the termination of the agreement
with the third party developer. The initial term of this agreement, which is
subject to extension or early termination under certain circumstances, expires
on September 23, 2000.
LEGAL PROCEEDINGS
The Company is not a party to any legal proceeding that management believes
is reasonably likely to have a material adverse effect on the Company's
financial position or results of operations.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The executive officers and directors of the Company (including persons who
will become directors upon the consummation of the Offering), as well as certain
key employees, and their ages as of August 15, 1998, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
David G. Hanna....................................... 34 President and Chairman of the Board
Richard W. Gilbert................................... 44 Chief Operating Officer and Director
Brett M. Samsky...................................... 33 Chief Financial Officer
Ashley L. Johnson.................................... 30 Controller
Richard R. House, Jr................................. 34 Chief Credit Officer
Andrew A. Yates...................................... 34 Director of Risk Management
Christopher J. Rief.................................. 31 Director of Operations
Frank J. Hanna, III.................................. 36 Director
Richard E. Huddleston................................ 54 Director
Gail Coutcher Hughes................................. 48 Director
James P. Kelly, III.................................. 42 Director
Mack F. Mattingly.................................... 67 Director
</TABLE>
DAVID G. HANNA, President and Chairman of the Board. Mr. Hanna has been the
President of the Company since its inception in 1996 and the sole director since
the Company's conversion to a corporation in August 1997. Mr. Hanna will become
Chairman of the Board upon consummation of the Offering. Mr. Hanna has been in
the credit industry for over ten years. Since 1992, Mr. Hanna has served as
President and a director of HBR Capital, Ltd. ("HBR Capital"), an investment
management company. In 1989, prior to forming CompuCredit, Mr. Hanna co-founded
and served as President of Account Portfolios, a purchaser and manager of
portfolios of non-performing loans and accounts receivable. Until Account
Portfolios was sold in 1995, it utilized proprietary scoring models to analyze
portfolio acquisitions as well as the portfolios that Account Portfolios had
purchased on an ongoing basis. From 1988 to 1992, he was President of the
Government Division of Nationwide Credit where he managed and directed division
operations, planning, strategy and sales, including collection performance,
adherence to contractual requirements and government marketing. He served as
Commercial Loan Officer at Citizens & Southern National Bank prior to joining
Nationwide Credit. Mr. Hanna has a BBA in Finance from the University of
Georgia. Mr. Hanna is the brother of Frank J. Hanna, III, who will become a
director upon consummation of the Offering.
RICHARD W. GILBERT, Chief Operating Officer and Director. Mr. Gilbert has
been the Chief Operating Officer of CompuCredit since its inception in 1996 and
will become a director upon consummation of the Offering. Mr. Gilbert has over
21 years' experience in the consumer credit industry. From 1990 until 1995, he
was employed by Equifax initially as Chief Operating Officer of its collection
division and subsequently as General Manager of Strategic Client Services. From
1995 until 1997, Mr. Gilbert was employed by HBR Capital, an investment
management company, as Chief Operating Officer of The American Education Fund,
L.P. From 1979 until Nationwide Credit was sold in 1990, Mr. Gilbert served in
various positions, including as Vice President of Operations, Vice President of
Development and Vice President of Marketing and as President of Financial Health
Services, a division of Nationwide Credit. Mr. Gilbert earned his J.D. degree,
CUM LAUDE, from John Marshall Law School in 1978 and completed his undergraduate
work at Berry College. He is a member of the Georgia Bar Association.
BRETT M. SAMSKY, Chief Financial Officer. Mr. Samsky has been the Chief
Financial Officer of CompuCredit since its inception in 1996. Mr. Samsky has
over five years' experience in the credit industry. From November 1992 to the
present, Mr. Samsky has served as Chief Financial Officer of HBR Capital, an
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investment management company. Mr. Samsky was Chief Financial Officer of Account
Portfolios, a purchaser and manager of portfolios of non-performing loans and
accounts receivable, from 1992 until its sale in 1995. Prior to joining Account
Portfolios, Mr. Samsky served as a senior accountant at Deloitte & Touche during
1986 and from 1988 to 1990. Mr. Samsky graduated magna cum laude with high
honors, earning a BBA and MAcc in Accounting from the University of Georgia. Mr.
Samsky also attended the University of Georgia Law School from 1990 to 1992 and
is a licensed Certified Public Accountant in the State of Georgia.
ASHLEY L. JOHNSON, Controller. Ms. Johnson has been the Controller of
CompuCredit since its inception in 1996 and has over five years of experience in
the credit industry. From May 1993 to the present, Ms. Johnson has served as
Controller of HBR Capital, an investment management company. From 1993 until its
sale in 1995, Ms. Johnson was the Controller for Account Portfolios, a purchaser
and manager of portfolios of non-performing loans and accounts receivable. Prior
to joining Account Portfolios, Ms. Johnson was a senior accountant at Deloitte &
Touche from 1989 to 1993. Ms. Johnson graduated MAGNA CUM LAUDE from Clemson
University with a BS in Accounting and is a licensed Certified Public Accountant
in the State of Georgia.
RICHARD R. HOUSE, JR., Chief Credit Officer. Mr. House joined the Company in
April 1997. Mr. House has over 12 years' experience in the consumer credit
industry. From 1993 until 1997, Mr. House managed and directed Equifax's
Decision Solutions division, Equifax's quantitative analysis and modeling group.
Prior to joining Equifax in 1991, he was employed by the JC Penney Company,
where he held various positions in credit operations and credit policy. Mr.
House earned a BA in Economics from the Georgia Institute of Technology and an
MA in Economics from Southern Methodist University.
ANDREW A. YATES, Director of Risk Management. Mr. Yates joined the Company
in April 1997. Mr. Yates has over 10 years of consumer credit experience. From
1995 to 1997, Mr. Yates served as a Senior Consultant for Equifax's Decision
Solutions division, Equifax's quantitative analysis and modeling group. Prior to
joining Equifax, Mr. Yates worked for JC Penney Company as a credit risk manager
from 1987 to 1994. Mr. Yates received a BS in Finance from the University of
Florida.
CHRISTOPHER J. RIEF, Director of Operations. Mr. Rief joined the Company in
May 1998. Mr. Rief has over eight years' experience in the credit industry. From
1995 to 1998, Mr. Rief was the Director of Client Service for First Data
Corporation's BankCard Program Services division. Prior to joining First Data
Corporation, he worked in the BankCard Center of Southtrust Bank of Alabama from
1990 to 1995. Mr. Rief graduated from Huntingdon College with a BA in
Management.
FRANK J. HANNA, III, Director. Mr. Hanna will become a director upon
consummation of the Offering. Since 1992, Mr. Hanna has served as Chief
Executive Officer of HBR Capital, an investment management company. In 1989, Mr.
Hanna co-founded and served as Chief Executive Officer of Account Portfolios, a
purchaser and manager of portfolios of non-performing loans and accounts
receivable. From 1988 to 1990, Mr. Hanna was Group Vice President, Finance and
Administration for Nationwide Credit. Prior to joining Nationwide Credit, Mr.
Hanna practiced corporate law in Atlanta. Mr. Hanna earned his J.D. degree, CUM
LAUDE, and a BBA in Finance as a first honor graduate from the University of
Georgia. Mr. Hanna is the brother of David G. Hanna, the President and Chairman
of the Board of CompuCredit.
RICHARD E. HUDDLESTON, Director. Mr. Huddleston will become a director upon
consummation of the Offering. Since March 1998, Mr. Huddleston has served as
Vice President of Sales for Financial Services for APAC Teleservices, Inc. From
October 1997 to March 1998, he worked as an independent consultant. From
December 1989 to April 1997, Mr. Huddleston served as Executive Vice President
and director of Prudential Bank and Trust and as Vice President and director of
Prudential Savings Bank and remained with such companies until October 1997. Mr.
Huddleston graduated from the University of Virginia McIntire School of Commerce
and Retail Banking in 1978.
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<PAGE>
GAIL COUTCHER HUGHES, Director. Ms. Coutcher Hughes will become a director
upon consummation of the Offering. Ms. Coutcher Hughes co-founded in February
1996 and serves as President of the Hughes Group, Ltd., an executive search
firm. From 1980 to January 1996, Ms. Coutcher Hughes was employed by Source
Finance, a national placement firm specializing in the placement of financial
and accounting professionals, where she served as Managing Partner of its
Atlanta office. Ms. Coutcher Hughes graduated from the University of Georgia in
1971 with a BBA in Accounting and is a licensed Certified Public Accountant in
the State of Georgia.
JAMES P. KELLY, III, Director. Mr. Kelly will become a director upon
consummation of the Offering. Since 1990, Mr. Kelly has been the owner of James
P. Kelly, III, P.C., a tax, corporate and education law firm. In 1991, Mr. Kelly
founded the Georgia Community Foundation, Inc. and currently serves as its
Executive Director and General Counsel. Mr. Kelly has a J.D. from the University
of Georgia, an MA of Taxation from Georgia State University and a BBA degree in
Management from the University of Georgia.
MACK F. MATTINGLY, Director. Senator Mattingly will become a director upon
consummation of the Offering. Senator Mattingly is currently a self-employed
entrepreneur, speaker and author. From 1992 until March 1993, he served as
United States Ambassador to the Republic of Seychelles. From 1987 to 1990,
Senator Mattingly served as the Assistant Secretary General for Defense Support
at NATO Headquarters in Belgium. In 1981, he was elected to the United States
Senate from the State of Georgia, where he served until 1987.
BOARD COMMITTEES
AUDIT COMMITTEE. As soon as practicable after the closing of the Offering
(the "Closing Date"), the Board of Directors will establish an audit committee
(the "Audit Committee"). A majority of the members of the Audit Committee will
be non-employee directors. The Audit Committee, among other things, will make
recommendations to the Board of Directors concerning the engagement of
independent public accountants, monitor and review the quality and activities of
the Company's internal audit function and those of its independent auditors, and
monitor the adequacy of the Company's operating and internal controls as
reported by management and the independent or internal auditors. The members of
the Audit Committee will be Frank J. Hanna, III, Gail Coutcher Hughes and James
P. Kelly, III.
COMPENSATION COMMITTEE. As soon as practicable after the Closing Date, the
Board of Directors will establish a compensation committee (the "Compensation
Committee"). The Compensation Committee, among other things, will review
salaries, benefits and other compensation of directors, officers and other
employees of the Company and make recommendations to the Board of Directors
concerning such matters. The members of the Compensation Committee will be David
G. Hanna, Richard E. Huddleston and Mack F. Mattingly.
DIRECTOR COMPENSATION
Members of the Board of Directors who are not employees of the Company or
holders of 5% or more of the Common Stock will receive options to purchase 5,000
shares of Common Stock upon initially joining the Board of Directors. The
Company intends to pay such directors a fee of $2,500 for each board or
committee meeting attended. Such directors will also be eligible to participate
in the 1998 Stock Option Plan. All directors will be reimbursed for expenses
incurred to attend the meetings of the Board of Directors or committees thereof.
The Company does not currently intend to provide employee directors with any
additional compensation (including grants of stock options) for their service on
the Board of Directors, except for reasonable out-of-pocket expenses incurred in
connection with their attendance at board meetings.
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EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual
compensation earned by the Company's President and the Company's other executive
officers whose annual salary and bonus during the 1997 fiscal year exceeded
$100,000 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION (1)
--------------------------------------------------
<S> <C> <C> <C> <C>
FISCAL OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- ----------------------------------------------------------------------- ----------- --------- --------- ---------------
David G. Hanna, President.............................................. 1997 $50,000(2) $ -- $ --
Richard W. Gilbert, Chief Operating Officer............................ 1997 175,000(2) -- --
Richard R. House, Jr., Chief Credit Officer............................ 1997 108,615(3) -- --
</TABLE>
- ------------------------
(1) The annual compensation of the above-named officers, as well as the
compensation of the other executive officers not required to be disclosed,
is, in the opinion of management, below market as compared to the Company's
competitors. The Company's executive officers also have not received any
bonuses or stock options and will not be granted stock options in connection
with the Offering. The Company believes that this approach to compensation,
combined with the executive officers' existing stock ownership, provides an
incentive for the executive officers to focus on the appreciation of the
value of the Common Stock. See "Principal Shareholders."
(2) All of the compensation disclosed for Mr. Hanna was paid by HBR Capital and
was reimbursed by the Company as part of a fee paid to HBR Capital for
management and accounting services provided to the Company in 1997. Of the
amount disclosed for Mr. Gilbert, $51,041 was paid by HBR Capital and
reimbursed by the Company pursuant to the same arrangement, and the balance
was paid by the Company.
(3) Reflects compensation for the period from April 21, 1997, when Mr. House
joined the Company, through December 31, 1997.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company does not currently have a Compensation Committee. David G. Hanna
was responsible for determining the compensation of executive officers during
fiscal year 1997. None of the executive officers of the Company has served on
the Board of Directors or the compensation committee of any entity that had
officers who served on the Company's Board of Directors.
1998 STOCK OPTION PLAN
On August 25, 1998, the Board of Directors adopted the CompuCredit
Corporation 1998 Stock Option Plan (the "1998 Stock Option Plan") which
authorizes the Company to grant options to purchase up to 1,200,000 shares of
the Common Stock, subject to approval by the Company's shareholders and the
consummation of the Offering. Under the 1998 Stock Option Plan, the Company has
the authority to grant both nonqualified stock options ("NQSOs") and incentive
stock options ("ISOs") within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"). The Company will receive no consideration
for stock options granted under the 1998 Stock Option Plan.
MAJOR PROVISIONS OF THE 1998 STOCK OPTION PLAN. The following summary of
the 1998 Stock Option Plan outlined below is qualified in its entirety by
reference to the full text of the 1998 Stock Option Plan, which is filed as an
exhibit to the Registration Statement of which this Prospectus is a part. The
major provisions of the 1998 Stock Option Plan are as follows:
PURPOSE. The purpose of the 1998 Stock Option Plan is to maximize the
long-term success of the Company, to ensure a balanced emphasis on both current
and long-term performance, to enhance participants' identification with
shareholders' interests and to facilitate the attraction and retention of key
individuals with outstanding abilities.
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ADMINISTRATION. In adopting the 1998 Stock Option Plan, the Board of
Directors designated the Compensation Committee to administer the 1998 Stock
Option Plan. In order to allow for the Company's maximum tax deductibility under
Section 162(m) of the Code, the Compensation Committee may delegate certain of
its responsibilities under the 1998 Stock Option Plan to a subcommittee
comprised solely of "outside directors" as such term is defined under Section
162(m). References in this discussion of the 1998 Stock Option Plan to the
Compensation Committee shall be deemed to include the Compensation Committee or
any other committee or person whom the Board of Directors designates to
administer the 1998 Stock Option Plan.
ELIGIBILITY. The persons who are eligible to receive awards pursuant to
the 1998 Stock Option Plan are members of the Board of Directors, employees,
consultants and advisors of the Company and its affiliates who have made or have
the capability of making a substantial contribution to the success of the
Company, as the Compensation Committee selects from time to time. The Company
estimates that at the present time all of its employees are eligible to
participate in the 1998 Stock Option Plan. In addition, each of the four
directors of the Company after the Offering who are not employees or officers of
the Company or holders of 5% or more of the Common Stock will be eligible to
participate in the 1998 Stock Option Plan.
OPTION TYPES. The 1998 Stock Option Plan permits the Compensation
Committee to grant, in its discretion, ISOs and NQSOs. Stock options designated
as ISOs will comply with Section 422 of the Code. The Company's officers and
employees are eligible to receive either ISOs or NQSOs under the 1998 Stock
Option Plan. Other individuals, including directors, who are not employees or
officers of the Company may only receive NQSOs under the 1998 Stock Option Plan.
OPTION PRICE. The Compensation Committee determines the exercise price
per share of the options, but in the case of ISOs, the price will in no event be
less than the Fair Market Value (as defined in the 1998 Stock Option Plan) of a
share of Common Stock on the date the ISO is granted.
TIME AND MANNER OF EXERCISE. Options may be exercised in whole at any
time, or in part from time to time with respect to whole shares only, within the
period permitted for exercise and shall be exercised by written notice to the
Company. Payment for shares of Common Stock purchased upon exercise of an option
shall be made in cash or in such other form as the Compensation Committee may
specify in the applicable option agreement. In addition to the payment of the
option price, the participant shall pay to the Company in cash or in Common
Stock the amount the Company is required to withhold or pay under federal or
state law with respect to the exercise of the option or, in the alternative, the
number of shares delivered by the Company under exercise of the option shall be
appropriately reduced to reimburse the Company for such payment.
NONTRANSFERABILITY. During the lifetime of the participant, ISOs
awarded under the 1998 Stock Option Plan may be exercised only by such person or
by such person's guardian or legal representative.
AMENDMENT OR TERMINATION OF THE 1998 STOCK OPTION PLAN. The Board of
Directors may terminate and in any respect amend or modify the 1998 Stock Option
Plan, except that shareholder approval is required in order to (i) increase the
total number of shares of Common Stock available under the 1998 Stock Option
Plan (unless such increase is a result of changes in capitalization as described
in the 1998 Stock Option Plan), (ii) materially modify the requirements as to
eligibility for participation in the 1998 Stock Option Plan, or (iii) extend the
term of the 1998 Stock Option Plan. Except as otherwise provided in the 1998
Stock Option Plan, no amendment, modification or termination of the 1998 Stock
Option Plan shall in any manner adversely affect the rights of any participant
under the 1998 Stock Option Plan without the consent of such participant.
FEDERAL INCOME TAX CONSEQUENCES OF THE 1998 STOCK OPTION PLAN. Under the
Code, an employee generally recognizes no regular taxable income as the result
of the grant or exercise of an ISO. However,
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<PAGE>
an amount equal to the difference between the fair market value of the Common
Stock on the date of exercise and the exercise price will be treated as an item
of adjustment in the year of exercise for purposes of the alternative minimum
tax.
The Company will not be allowed a deduction for federal income tax purposes
in connection with the grant or exercise of an ISO, regardless of the
applicability of the alternative minimum tax to the optionee. The Company will
be entitled to a deduction, however, to the extent that ordinary income is
recognized by the optionee upon a disqualifying disposition (see below).
Upon a sale or exchange of the shares at least two years after the grant of
an ISO and one year after exercise of the option, gain or loss will be
recognized by the optionee equal to the difference between the sales price and
the exercise price. Such gain or loss will be characterized for federal income
tax purposes as long-term capital gain or loss. The Company is not entitled to
any deduction under these circumstances.
If any optionee disposes of shares acquired upon issuance of an ISO prior to
completion of either of the above holding periods, the optionee will have made a
"disqualifying disposition" of the shares. In such event, the optionee will
recognize ordinary income at the time of disposition equal to the difference
between the exercise price and the lower of the fair market value of the Common
Stock at the date of the option exercise or the sales price of the Common Stock.
The Company generally will be entitled to a deduction in the same amount as the
ordinary income recognized by the optionee on a disqualifying disposition.
If the sales price of the Common Stock is lower than the exercise price, the
optionee generally will be entitled to a capital loss equal to the difference.
If the sales price of the Common Stock exceeds the fair market value of the
Common Stock on the date of option exercise, the optionee will recognize capital
gain on such disqualifying disposition in an amount equal to the difference
between (i) the amount realized by the optionee upon such disqualifying
disposition of the Common Stock and (ii) the exercise price, increased by the
total amount of ordinary income, if any, recognized by the optionee upon such
disqualifying disposition (as described in the second sentence of the preceding
paragraph). Any such capital gain or loss resulting from a disqualifying
disposition of shares acquired upon exercise of an ISO will be long-term capital
gain or loss if the shares with respect to which such gain or loss is realized
have been held for more than 12 months.
An optionee generally recognizes no taxable income as the result of the
grant of any NQSO, assuming that the option does not have a readily
ascertainable fair market value at the time it is granted (which is usually the
case with plans of this type). Upon exercise of an NQSO, an optionee will
normally recognize ordinary compensation income for federal tax purposes equal
to the excess, if any, of the then fair market value of the shares over the
exercise price. Optionees who are employees will be subject to withholding with
respect to income recognized upon exercise of an NQSO.
The Company will be entitled to a tax deduction to the extent and in the
year that ordinary income is recognized by the exercising optionee, so long as
the optionee's total compensation is deemed reasonable in amount.
Upon a sale of shares acquired pursuant to the exercise of an NQSO, any
difference between the sales price and the fair market value of the shares on
the date of exercise will be treated as capital gain or loss and will qualify
for long-term capital gain or loss treatment if the shares have been held for
more than 12 months.
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<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of the date of this Prospectus
and the percentage ownership of the Common Stock of the Company that will be
represented by the indicated shares beneficially held upon consummation of the
Offering. The information is provided with respect to (i) each person who is
known by the Company to own beneficially more than 5% of the outstanding shares
of Common Stock, (ii) each director of the Company and each person who will
become a director upon consummation of the Offering, (iii) each executive
officer, and (iv) all of the directors (including persons who will become
directors upon consummation of the Offering) and executive officers of the
Company as a group (10 persons). Except as otherwise indicated by footnote, the
named person has sole voting and investment power with respect to all of the
shares of Common Stock shown as beneficially owned. An asterisk indicates
beneficial ownership of less than 1% of the Common Stock outstanding.
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES (2)(3) PERCENT OF CLASS
- ------------------------------------------------------------------------ --------------------------- -------------------
<S> <C> <C>
Bravo Trust One (1).....................................................
Bravo Trust Two (1).....................................................
Frank J. Hanna, III (1)(4)..............................................
David G. Hanna (1)(5)...................................................
Richard W. Gilbert (1)..................................................
Brett M. Samsky.........................................................
Ashley L. Johnson.......................................................
Richard R. House, Jr....................................................
Richard E. Huddleston................................................... -- *
Gail Coutcher Hughes.................................................... -- *
James P. Kelly, III..................................................... -- *
Mack F. Mattingly....................................................... -- *
Directors and executive officers as a group (10 persons)................
</TABLE>
- ------------------------
(1) The address of the indicated holders is c/o CompuCredit Corporation, Two
Ravinia Drive, Suite 1750, Atlanta, Georgia 30346.
(2) Beneficial ownership is determined in accordance with the rules of the
Commission. Shares of Common Stock subject to options, warrants or other
rights to purchase which are currently exercisable or are exercisable within
60 days after the completion of the Offering are deemed outstanding for
purposes of computing the percentage ownership of the persons holding such
options, warrants or other rights, but are not deemed outstanding for
purposes of computing the percentage ownership of any other person. Unless
otherwise indicated, each person possesses sole voting and investment power
with respect to the shares identified as beneficially owned.
(3) Gives effect to (i) the exchange of all of the outstanding shares of the
Company's Preferred Stock, including accrued dividends thereon, for
shares of Common Stock concurrently with the consummation of the Offering
and (ii) the 15-for-1 stock split to be effected concurrently with the
consummation of the Offering.
(4) Includes shares of Common Stock issued to Bravo Trust One for which
Frank J. Hanna, III serves as sole trustee. Includes shares of Common
Stock issued to CompuCredit Management Corp., for which Frank J. Hanna, III
is a 50% owner.
(5) Includes shares of Common Stock issued to Bravo Trust Two for which
David G. Hanna serves as sole trustee. Includes shares of Common Stock
issued to CompuCredit Management Corp., for which David G. Hanna is a 50%
owner.
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<PAGE>
CERTAIN TRANSACTIONS
The Company has entered into a Stockholders Agreement with its shareholders
(the "Stockholders Agreement"). Pursuant to the Stockholders Agreement, (i) if
one or more of the shareholders accepts a BONA FIDE offer from a third party to
purchase more than 50% of the outstanding Common Stock, each of the other
shareholders may elect to sell their shares to the purchaser on the same terms
and conditions, and (ii) if shareholders owning more than 50% of the Common
Stock propose to transfer all of their shares to a third party, then such
transferring shareholders may require the other shareholders to sell all of the
shares owned by them to the proposed transferee on the same terms and
conditions. Atlantic Equity Corporation ("AEC"), an affiliate of NationsBanc
Montgomery Securities LLC, a member of the underwriting group, has certain
registration rights under the Stockholders Agreement. See "Description of
Capital Stock--Registration Rights." The Stockholders Agreement also provides
certain preemptive rights to AEC and restrictions on the transfer of shares,
each of which will terminate upon the consummation of the Offering. In addition,
the Stockholders Agreement provides that Frank J. Hanna, III and David G. Hanna,
or any of their affiliates, may not be issued additional shares of Common Stock
without the prior written consent of the holders of 90% of the Common Stock.
However, the Company anticipates that the Stockholders Agreement will be amended
immediately prior to the consummation of the Offering to eliminate this
provision.
Contemporaneously with the closing of the Offering, shares of Preferred
Stock of the Company held by (i) Brett M. Samsky (which shares had an aggregate
liquidation preference (including accrued dividends thereon) of $731,559 as of
June 30, 1998), (ii) a trust of which David G. Hanna is the sole trustee (which
shares had an aggregate liquidation preference (including accrued dividends
thereon) of $10,268,828 as of June 30, 1998), (iii) a trust of which Frank J.
Hanna, III is the sole trustee (which shares had an aggregate liquidation
preference (including accrued dividends thereon) of $10,268,828 as of June 30,
1998), and (iv) CompuCredit Management Corp., 50% of the outstanding stock of
which is held by each of David G. Hanna and Frank J. Hanna, III (which shares of
the Company's Preferred Stock had an aggregate liquidation preference (including
accrued dividends) of $247,224 as of June 30, 1998) will be exchanged with the
Company pursuant to a plan of recapitalization for that number of shares of
Common Stock which in each case is determined when the sum of the aggregate
liquidation preference of the shares held by each such person or trust and the
amount of accrued dividends thereon is divided by the Offering Price.
Pursuant to a promissory note dated as of April 17, 1998, the Company
borrowed $13.0 million from a limited partnership of which (i) the sole limited
partner is a trust of which the children of David G. Hanna and Frank J. Hanna,
III are included among the beneficiaries and (ii) the general partner is a
corporation, all of the outstanding capital stock of which is owned by Frank J.
Hanna, Jr., who is David G. Hanna's and Frank J. Hanna, III's father. Subsequent
to June 30, 1998, the promissory note was paid in full. An aggregate of $536,200
of interest was paid on this promissory note.
During 1997, the Company paid to HBR Capital an aggregate of $300,000 for
management and accounting services provided to the Company by employees of HBR
Capital. This arrangement was terminated on January 1, 1998. David G. Hanna and
Frank J. Hanna, III each own 50% of the capital stock of HBR Capital, and Frank
J. Hanna, III, David G. Hanna, Brett M. Samsky and Ashley L. Johnson are
employees of HBR Capital.
From time to time during 1997, a trust of which David G. Hanna is the sole
trustee and whose beneficiaries are members of David G. Hanna's immediate family
loaned the Company an aggregate of $7,450,000 pursuant to a series of promissory
notes, all of which notes were repaid, along with an aggregate of $180,476 of
interest, during 1997. Also from time to time during 1997, a trust of which
Frank J. Hanna, III is the sole trustee and whose beneficiaries are members of
Frank J. Hanna, III's immediate family loaned the Company an aggregate of
$7,450,000 pursuant to a series of promissory notes, all of which notes were
repaid, along with an aggregate of $180,476 of interest, during 1997.
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In connection with an Affinity Card Agreement dated January 6, 1997, by and
between the Company and CB&T, a trust of which Frank J. Hanna, III is the sole
trustee and whose beneficiaries are members of Frank J. Hanna, III's immediate
family entered into a Guarantor Agreement, dated December 20, 1996, with the
Company and a Pledge Agreement, dated January 8, 1997, with SunTrust Bank
whereby the trust granted to SunTrust Bank a security interest in and to certain
securities held by the trust and having a par value of $5.0 million, as
collateral for a standby letter of credit issued by SunTrust Bank in favor of
CB&T (the "Letter of Credit"). The Company paid $10,000 to the trust as initial
consideration for the Guarantor Agreement and agreed to pay an additional fee of
5% of any amount required to be paid out by SunTrust Bank pursuant to the Letter
of Credit. Another trust of which David G. Hanna is the sole trustee and whose
beneficiaries are members of David G. Hanna's immediate family has entered into
substantially similar arrangements with the Company and SunTrust Bank.
In 1996, Richard R. House, Jr. and Richard W. Gilbert loaned Visionary
Systems, Inc. ("VSI"), the third party developer of the Company's database
management system, an aggregate of $25,000 each in connection with VSI's
commencement of operations. This loan is convertible into shares of capital
stock of VSI which, upon conversion, would constitute two-thirds of the issued
and outstanding capital stock of VSI. Each of Messrs. House and Gilbert has
agreed that, for so long as he continues to be employed by CompuCredit or any of
its subsidiaries and the current agreement between the Company and VSI or any
other agreement between the Company or any of its subsidiaries and VSI or any of
its affiliates remains in effect, such conversion right will not be exercisable.
Each of Messrs. Gilbert and House has further agreed that, for so long as he
continues to be employed by the Company or any of its subsidiaries, he will not,
as a consequence of his creditor relationship with VSI or the conversion right,
derive any economic benefit from any business relationship or arrangement
between CompuCredit or any of its subsidiaries and VSI or any of its affiliates
(including for such purposes the existing agreement between CompuCredit and
VSI), provided that any benefit that may arise out of any ownership by Mr.
Gilbert or Mr. House of any securities of CompuCredit and any other benefit that
Mr. Gilbert or Mr. House may receive from CompuCredit in connection with their
employment by CompuCredit or any of its subsidiaries will not be deemed to be
prohibited by such provision.
DESCRIPTION OF CAPITAL STOCK
Upon consummation of the Offering, the authorized capital stock of the
Company will consist of 60,000,000 shares of Common Stock, no par value per
share, and 10,000,000 shares of Preferred Stock, no par value per share.
The following summary description of the Company's capital stock is not
intended to be complete and is qualified in its entirety by reference to the
provisions of applicable law and to the Company's Amended Articles and Amended
and Restated Bylaws filed as exhibits to the Registration Statement of which
this Prospectus is a part.
COMMON STOCK
As of the date of this Prospectus, there were 31,958,745 shares of Common
Stock outstanding (after giving effect to a 15-for-1 stock split to be effected
concurrently with the consummation of the Offering, but without giving effect to
the Offering) held by eleven shareholders. Based upon the number of shares
outstanding as of that date and giving effect to the issuance of the shares of
Common Stock offered hereby and the exchange of all of the outstanding shares of
the Company's Preferred Stock for Common Stock, there will be shares of
Common Stock outstanding upon the consummation of the Offering. Upon
consummation of the Offering, there will be outstanding stock options to
purchase shares of Common Stock.
Except as described below under "Description of Capital Stock--Anti-Takeover
Effects of Provisions of Amended and Restated Articles of Incorporation,"
holders of Common Stock are entitled to one vote
50
<PAGE>
for each share held on all matters submitted to a vote of shareholders and do
not have cumulative voting rights. Directors are elected by a plurality of the
votes of the shares present in person or by proxy at the shareholders meeting at
which a quorum is present, and entitled to vote in such election. Holders of
Common Stock are entitled to receive ratably such dividends, if any, as may be
declared by the Board of Directors out of funds legally available therefor,
subject to any preferential dividend rights of any outstanding Preferred Stock.
Upon the liquidation, dissolution or winding up of the Company, the holders of
Common Stock are entitled to receive ratably the net assets of the Company
available after the payment of all debts and other liabilities of the Company,
subject to the prior rights of any outstanding Preferred Stock. Holders of the
Common Stock have no preemptive, subscription, redemption or conversion rights
(except such preemptive rights as will terminate upon the consummation of the
Offering), nor are they entitled to the benefit of any sinking fund. The
outstanding shares of Common Stock are, and the shares offered by the Company in
the Offering will be, when issued and paid for, validly issued, fully paid and
nonassessable. The rights, powers, preferences and privileges of holders of
Common Stock are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of Preferred Stock which the Company may
designate and issue in the future.
PREFERRED STOCK
As of the date of this Prospectus, there are an aggregate of 200,000 shares
of Preferred Stock outstanding. The outstanding Preferred Stock, including
accrued dividends thereon, will be exchanged for an aggregate of shares of
Common Stock in connection with the consummation of the Offering, and, upon the
consummation of the Offering, there will be no shares of Preferred Stock
outstanding.
Following the consummation of the Offering, the Board of Directors will be
authorized, subject to any limitations prescribed by law, without further
shareholder approval, to issue from time to time up to an aggregate of
10,000,000 shares of Preferred Stock, in one or more series. Each such series of
Preferred Stock shall have such number of shares, designations, preferences,
voting powers, qualifications and special or relative rights or privileges as
shall be determined by the Board of Directors, which may include, among others,
dividend rights, voting rights, redemption and sinking fund provisions,
liquidation preferences, conversion rights and preemptive rights.
Subject to the consummation of the Offering, the shareholders of the Company
have granted to the Board of Directors the authority to issue the Preferred
Stock and to determine its rights and preferences in order to eliminate delays
associated with a shareholder vote on specific issuances. The rights of the
holders of Common Stock will be subject to the rights of the holders of any
Preferred Stock issued in the future. The issuance of Preferred Stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could adversely affect the voting power or other
rights of the holders of Common Stock and could make it more difficult for a
third party to acquire, or discourage a third party from attempting to acquire,
a majority of the outstanding voting stock of the Company. The Company has no
present plans to issue any shares of Preferred Stock.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF AMENDED AND RESTATED ARTICLES OF
INCORPORATION
Upon consummation of the Offering, the Amended Articles will authorize
"blank check" Preferred Stock. Although the Company has no current plans to
issue any shares of Preferred Stock, the Board of Directors can set the voting,
redemption, conversion and other rights relating to such Preferred Stock. The
rights of the holders of Common Stock will be subject to, and may be adversely
affected by, the rights of holders of any Preferred Stock that may be issued in
the future. The issuance of Preferred Stock could adversely affect the voting
power of holders of Common Stock and the likelihood that such holders will
receive dividend payments and payments upon liquidation and could have the
effect of delaying, deferring or preventing a change in control of the Company.
See "--Preferred Stock."
51
<PAGE>
GEORGIA ANTI-TAKEOVER STATUTES
The Georgia Business Corporation Code restricts certain business
combinations with "interested shareholders" and contains fair price requirements
applicable to certain mergers with "interested shareholders" that are summarized
below. The restrictions imposed by these statutes will not apply to a
corporation unless it elects to be governed by these statutes. The Company has
not elected to be covered by such restrictions but may do so in the future.
The Georgia business combination statute (the "Business Combination
Statute") regulates business combinations such as mergers, consolidations, share
exchanges and asset purchases where the acquired business has at least 100
shareholders residing in Georgia and has its principal office in Georgia, and
where the acquiror became an "interested shareholder" of the corporation, unless
either (i) the transaction resulting in such acquiror becoming an "interested
shareholder" or the business combination received the approval of the
corporation's board of directors prior to the date on which the acquiror became
an "interested shareholder," or (ii) the acquiror became the owner of at least
90% of the outstanding voting stock of the corporation (excluding shares held by
directors, officers and affiliates of the corporation and shares held by certain
other persons) in the same transaction in which the acquiror became an
"interested shareholder." For purposes of the Business Combination Statute, an
"interested shareholder" generally is any person who directly or indirectly,
alone or in concert with others, beneficially owns or controls 10% or more of
the voting power of the outstanding voting shares of the corporation. The
Business Combination Statute prohibits business combinations with an unapproved
"interested shareholder" for a period of five years after the date on which such
person became an "interested shareholder." The Business Combination Statute is
broad in its scope and is designed to inhibit unfriendly acquisitions.
The Georgia fair price statute (the "Fair Price Statute") prohibits certain
business combinations between a Georgia business corporation and an "interested
shareholder" unless (i) certain "fair price" criteria are satisfied, (ii) the
business combination is unanimously approved by the continuing directors, (iii)
the business combination is recommended by at least two-thirds of the continuing
directors and approved by a majority of the votes entitled to be cast by holders
of voting shares, other than voting shares beneficially owned by the "interested
shareholder," or (iv) the "interested shareholder" has been such for at least
three years and has not increased this ownership position in such three-year
period by more than 1% in any twelve-month period. The Fair Price Statute is
designed to inhibit unfriendly acquisitions that do not satisfy the specified
"fair price" requirements.
REGISTRATION RIGHTS
Under the Stockholders Agreement, AEC, which holds 927,825 shares of Common
Stock (after giving effect to the 15-for-1 stock split to be effected
concurrently with the consummation of the Offering), has piggyback registration
rights with respect to such shares and any additional shares of Common Stock
that it may acquire. If the Company proposes to register any of its securities
under the Securities Act (other than any registration on Form S-8 or another
form not available for registering the Common Stock for sale to the public), AEC
will have the right to require that any shares of Common Stock held by it be
included in such registration, subject to certain limitations set forth in the
Stockholders Agreement. Under the Stockholders Agreement, the Company is
required to bear the fees, costs and expenses of each registration of AEC's
shares, and AEC is required to bear all underwriting discounts and selling
commissions applicable to the sale of its Common Stock.
Pursuant to a Stock Purchase Agreement dated August 21, 1998 (the "Stock
Purchase Agreement") between an unrelated private investor and the Company, such
investor, which holds 1,030,920 shares of Common Stock (after giving effect to
the 15-for-1 stock split to be effected concurrently with the consummation of
the Offering), has demand and piggyback registration rights with respect to such
shares. If, at any time at least 12 months after the consummation of the
Offering, the Company proposes to register any of its securities under the
Securities Act (other than any registration on Form S-8 or another
52
<PAGE>
form not available for registering the Common Stock for sale to the public),
such investor will have the right to require that any shares of Common Stock
held by it be included in such registration, subject to certain limitations set
forth in the Stock Purchase Agreement. In addition, at any time beginning at
least 12 months after consummation of the Offering and ending on August 21,
2000, if the Company is qualified to use Form S-3, such investor will have to
right to request one registration on Form S-3 of all or a part of its shares,
subject to certain limitations set forth in the Stock Purchase Agreement. Under
the Stock Purchase Agreement, the Company is required to bear the fees, costs
and expenses of each registration of such investor's shares, and such investor
is required to bear all underwriting discounts and selling commissions
applicable to the sale of its Common Stock.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is .
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, the Company's Amended Articles will
authorize the issuance of up to 60,000,000 shares of Common Stock and 10,000,000
shares of Preferred Stock, and there will be outstanding shares of
Common Stock (assuming no exercise of the Underwriters' over-allotment option)
and no outstanding shares of Preferred Stock. The shares of Common Stock to be
sold in the Offering ( shares if the Underwriters' over-allotment option is
exercised in full) will be available for resale in the public market without
restriction or further registration under the Securities Act, except for shares
purchased by affiliates of the Company (in general, any person who has a control
relationship with the Company), which shares will be subject to the resale
limitations of Rule 144 promulgated under the Securities Act. The remaining
shares of Common Stock held by existing shareholders are "restricted"
shares within the meaning of Rule 144 under the Securities Act ("Restricted
Shares"). The Restricted Shares were issued and sold by the Company in private
transactions in reliance upon exemptions from registration under the Securities
Act and may not be sold except in compliance with the registration requirements
of the Securities Act or pursuant to an exemption from registration, such as the
exemption provided by Rule 144 under the Securities Act.
In general, under Rule 144, as currently in effect, any person (or persons
whose shares are aggregated) who has beneficially owned shares for at least one
year is entitled to sell, within any three-month period, a number of shares
which does not exceed the greater of (i) 1% of the then-outstanding shares of
Common Stock (approximately shares immediately after the Offering,
assuming no exercise of the Underwriters' over-allotment option) or (ii) the
average weekly trading volume of the Common Stock during the four calendar weeks
preceding the date on which notice of the sale is filed with the Commission.
Sales under Rule 144 may also be subject to certain manner of sale provisions,
notice requirements and the availability of current public information about the
Company. Any person (or persons whose shares are aggregated) who is not deemed
to have been an affiliate of the Company at any time during the three months
preceding a sale, and who has beneficially owned shares within the definition of
"restricted securities" under Rule 144 for at least two years, is entitled to
sell such shares under Rule 144(k) without regard to the volume limitation,
manner of sale provisions, public information requirements or notice
requirements. Upon completion of the Offering, there will be shares which may be
sold pursuant to Rule 144(k).
Upon completion of the Offering, the holders of a total of 1,958,745 shares
of Common Stock will be entitled to certain registration rights with respect to
such shares. See "Description of Capital Stock-- Registration Rights."
Promptly following the consummation of the Offering, the Company intends to
file one or more registration statements on Form S-8 under the Securities Act to
register all of the shares of Common Stock subject to then outstanding options
or future grants under the Company's 1998 Stock Option Plan. These
53
<PAGE>
registration statements are expected to become effective upon filing, and shares
covered by these registration statements will, subject to Rule 144 volume
limitations applicable to affiliates, be eligible for public sale after the
lock-up agreements with the Underwriters have expired and any vesting
requirements have been met.
Prior to the Offering, there has been no public market for the Common Stock,
and no prediction can be made of the effect that the sale or availability for
sale of shares of Common Stock will have on the market price of the Common
Stock. Nevertheless, sales of substantial amounts of such shares in the public
market, or the perception that such sales could occur, could adversely affect
the market price of the Common Stock and could impair the Company's future
ability to raise capital through an offering of its equity securities.
The Company, its executive officers, directors, key employees and all other
existing shareholders have agreed that, for a period of 365 days from the date
of this Prospectus, they will not, without the prior written consent of
PaineWebber Incorporated, acting on behalf of the Representatives, offer to
sell, sell, contract to sell, grant any option to sell, or otherwise dispose of,
or require the Company to file with the Commission a registration statement
under the Securities Act to register, any shares of Common Stock of the Company
or securities convertible into or exchangeable for any shares of Common Stock of
the Company or warrants or other rights to acquire shares of Common Stock of the
Company (other than with respect to employees of the Company pursuant to
employee stock option plans or in connection with other employee incentive
compensation arrangements).
54
<PAGE>
UNDERWRITING
The underwriters named below (the "Underwriters"), represented by
PaineWebber Incorporated, Bear, Stearns & Co. Inc. and NationsBanc Montgomery
Securities LLC (the "Representatives"), have severally agreed to purchase, and
the Company has agreed to sell, subject to the terms and conditions set forth in
an underwriting agreement (the "Underwriting Agreement"), the respective number
of shares of Common Stock set forth opposite their names below:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
- ----------------------------------------------------------------------------------------------- -------------------------
<S> <C>
PaineWebber Incorporated.......................................................................
Bear, Stearns & Co. Inc........................................................................
NationsBanc Montgomery Securities LLC..........................................................
-
Total......................................................................................
-
-
</TABLE>
In the Underwriting Agreement, the Underwriters have severally agreed,
subject to the terms and conditions set forth therein, to purchase all of the
shares of Common Stock being sold pursuant to the Underwriting Agreement (other
than those covered by the over-allotment option described below) if any shares
of Common Stock are purchased. The Underwriting Agreement provides that the
obligations of the Underwriters to purchase such shares of Common Stock are
subject to certain conditions precedent. The Underwriting Agreement also
provides that in the event of a default by any Underwriter, the purchase
commitments of the nondefaulting Underwriters may be increased or the
Underwriting Agreement may be terminated.
The Company has granted the Underwriters an option exercisable for 30 days
after the date hereof to purchase up to additional shares of Common Stock
to cover over-allotments, if any, at the Offering Price less the underwriting
discount and commissions. If the Underwriters exercise this option, each
Underwriter will have a firm commitment, subject to certain conditions, to
purchase approximately the same percentage of such additional shares of Common
Stock as the number of shares of Common Stock to be purchased by it shown in the
foregoing table bears to the shares of Common Stock initially offered hereby.
The Underwriters may purchase such shares of Common Stock only to cover
over-allotments made in connection with the Offering.
The Company has agreed to indemnify the several Underwriters against certain
civil liabilities, including liabilities under the federal securities laws, or
to contribute to payments which the Underwriters may be required to make in
respect thereof.
The Company, its executive officers, directors, certain key employees and
all other existing shareholders have agreed that, for a period of 365 days from
the date of this Prospectus, they will not, without the prior written consent of
PaineWebber Incorporated, on behalf of the Representatives, offer to sell, sell,
contract to sell, grant any option to sell, or otherwise dispose of, or require
the Company to file with the Commission a registration statement under the
Securities Act to register, any shares of Common Stock of the Company or
securities convertible into or exchangeable for any shares of Common Stock of
the Company or warrants or other rights to acquire shares of Common Stock of the
Company (other than with respect to employees of the Company pursuant to
employee stock option plans or in connection with other employee incentive
compensation arrangements).
Prior to the Offering, there has been no public market for the Common Stock.
Accordingly, the public Offering Price has been determined by negotiations
between the Company and the Representatives. Among the factors which were
considered in determining the Offering Price were the Company's future
prospects, the experience of its management, the economic condition of the
financial services industry in general, the general condition of the equity
securities market, the demand for similar securities of companies considered
comparable to the Company and other relevant factors.
55
<PAGE>
The Offering Price set forth on the cover page of this Prospectus should not
be considered an indication of the actual value of the Common Stock. The
Offering Price is subject to change as a result of market conditions and other
factors, and no assurance can be given that the Common Stock can be resold at
the Offering Price.
Application has been made to have the Common Stock approved for listing on
the Nasdaq National Market under the symbol "CCRT."
Until the distribution of the Common Stock is completed, rules of the
Commission may limit the ability of the Underwriters and certain selling group
members to bid for and purchase shares of Common Stock. As an exception to these
rules, the Representatives are permitted to engage in certain transactions that
stabilize the price of Common Stock. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
Common Stock.
In addition, if the Representatives over-allot (i.e., if they sell more
shares of Common Stock than are set forth on the cover page of this Prospectus)
and thereby create a short position in the Common Stock in connection with the
Offering, then the Representatives may reduce that short position by purchasing
Common Stock in the open market. The Representatives may also elect to reduce
any short position by exercising all or part of the over-allotment option
described herein.
The Representatives may also impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase
shares of Common Stock in the open market to reduce the Underwriters' short
position or to stabilize the price of the Common Stock, the Representatives may
reclaim the amount of the selling concession from the Underwriters and selling
group members who sold those shares as part of the Offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might otherwise be in the absence of such purchases. The imposition of a
penalty bid might also have an effect on the price of a security to the extent
that it were to discourage resales of the security by purchasers in the
Offering.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor any of the Underwriters makes any representation that the
Representatives will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
56
<PAGE>
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-1 under the
Securities Act with the Commission with respect to the Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the Common Stock, reference is
hereby made to such Registration Statement and the exhibits and schedules
thereto. A copy of the Registration Statement may be inspected by anyone without
charge at the Commission's principal office in Washington, D.C., at the regional
offices of the Commission located at 7 World Trade Center, New York, New York
10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and through the Commission's web site at http://www.sec.gov.
Copies of all or any part of the Registration Statement, or any materials the
Company has filed with the Commission, may be obtained from the Public Reference
Room of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, upon
payment of certain fees prescribed by the Commission. Further information
regarding the operation of the Public Reference Room may be obtained by calling
the Commission at 1-800-SEC-0330.
The Company intends to furnish its shareholders with annual reports
containing financial statements audited by an independent accounting firm and
quarterly reports containing unaudited financial information for the first three
quarters of each fiscal year.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Troutman Sanders LLP, Atlanta, Georgia, and certain
legal matters will be passed upon for the Underwriters by Orrick, Herrington &
Sutcliffe LLP, Washington, D.C.
EXPERTS
The consolidated financial statements of CompuCredit Corporation and
subsidiaries at June 30, 1998, December 31, 1997 and 1996, and for the six
months ended June 30, 1998, the year ended December 31, 1997 and the period from
August 14, 1996 (inception) to December 31, 1996, appearing in this Prospectus
and Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
57
<PAGE>
COMPUCREDIT CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Auditors............................................................................. F-2
Consolidated Balance Sheets as of June 30, 1998, December 31, 1997 and 1996 and Pro forma Balance Sheet
(unaudited) as of June 30, 1998.......................................................................... F-3
Consolidated Statements of Operations for the Period ended June 30, 1998, for the Year ended December 31,
1997 and for the Period from August 14, 1996 (date of inception) to December 31, 1996.................... F-4
Consolidated Statements of Shareholders' Equity for the Period ended June 30, 1998, the Year ended December
31, 1997 and the Period from August 14, 1996 (date of inception) to December 31, 1996.................... F-5
Consolidated Statements of Cash Flow for the Period ended June 30, 1998, the Year ended December 31, 1997
and the Period from August 14, 1996 (date of inception) to December 31, 1996............................. F-6
Notes to Consolidated Financial Statements for the Period ended June 30, 1998, the Year ended December 31,
1997 and the Period from August 14, 1996 (date of inception) to December 31, 1996........................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
CompuCredit Corporation
We have audited the accompanying consolidated balance sheets of CompuCredit
Corporation and Subsidiaries as of June 30, 1998 and December 31, 1997 and 1996
and the related consolidated statements of operations, shareholders' equity and
cash flows for the period ended June 30, 1998, for the year ended December 31,
1997, and for the period from August 14, 1996 (date of inception) to December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of CompuCredit
Corporation and Subsidiaries at June 30, 1998 and December 31, 1997 and 1996 and
the consolidated results of their operations and their cash flows for the period
ended June 30, 1998, for the year ended December 31, 1997, and for the period
from August 14, 1996 (date of inception) to December 31, 1996 in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
July 23, 1998
F-2
<PAGE>
COMPUCREDIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, 1998 JUNE 30, DECEMBER 31, DECEMBER 31,
PRO FORMA (UNAUDITED) 1998 1997 1996
--------------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents.................... $ 12,327,485 $ 2,327,485 $ 1,677,565 $ 52,672
Retained interest in credit card receivables
securitized................................ 17,992,072 17,992,072 14,494,270 --
Accrued interest and fees.................... 784,920 784,920 461,337 --
--------------------- ------------- ------------- -------------
Net credit card receivables.................. 18,776,992 18,776,992 14,955,607 --
Amounts receivable from securitization....... 33,620,947 33,620,947 1,059,753 --
Deferred costs, net.......................... 1,094,214 1,094,214 1,276,392 --
Software, furniture, fixtures and equipment,
net........................................ 1,196,813 1,196,813 676,936 --
Prepaid expenses............................. 497,396 497,396 422,524 127,400
Other assets................................. 86,253 86,253 146,322 73,026
--------------------- ------------- ------------- -------------
Total assets................................. $ 67,600,100 $ 57,600,100 $ 20,215,099 $ 253,098
--------------------- ------------- ------------- -------------
--------------------- ------------- ------------- -------------
LIABILITIES
Amounts payable under securitization......... $ 5,594,040 $ 5,594,040 $ 124,399 $ --
Accrued expenses............................. 1,251,205 1,251,205 840,891 100,779
Note payable................................. 7,500,000 7,500,000 -- --
Deferred revenue............................. 1,385,608 1,385,608 122,580 --
Deferred tax liability....................... 8,507,000 8,507,000 -- --
--------------------- ------------- ------------- -------------
Total liabilities............................ 24,237,853 24,237,853 1,087,870 100,779
SHAREHOLDERS' EQUITY
Common stock, no par value:
3,000,000 shares authorized, 2,061,855
shares issued and outstanding at June
30, 1998 and December 31, 1997; no
shares authorized, issued or
outstanding at December 31, 1996....... 30,000,000 -- -- --
Preferred stock, $100 par value:
Cumulative and nonparticipating; 500,000
shares authorized, 200,000 shares
issued and outstanding at June 30, 1998
and December 31, 1997; no shares
authorized, issued or outstanding at
December 31, 1996 -- 20,000,000 20,000,000 --
Contributed capital........................ -- -- -- 300,000
Retained earnings (deficit)................ 13,362,247 13,362,247 (872,771) (147,681)
--------------------- ------------- ------------- -------------
Total shareholders' equity................... 43,362,247 33,362,247 19,127,229 152,319
--------------------- ------------- ------------- -------------
Total liabilities and shareholders' equity... $ 67,600,100 $ 57,600,100 $ 20,215,099 $ 253,098
--------------------- ------------- ------------- -------------
--------------------- ------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
COMPUCREDIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD
AUGUST 14, 1996
FOR THE FOR THE (DATE OF INCEPTION)
PERIOD ENDED YEAR ENDED TO
JUNE 30, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
------------- ----------------- -------------------
<S> <C> <C> <C>
Interest income:
Interest................................................... $ 539,600 $ -- $ --
Finance charges, including fees............................ -- 2,624,500 --
Other...................................................... 103,436 33,336 --
------------- ----------------- ----------
Total interest income........................................ 643,036 2,657,836 --
Interest expense:
Short-term borrowings...................................... 506,200 360,952 --
------------- ----------------- ----------
Total interest expense....................................... 506,200 360,952 --
Net interest income.......................................... 136,836 2,296,884 --
Provision for loan losses.................................... -- 1,421,553 --
------------- ----------------- ----------
Net interest income after provision for loan losses.......... 136,836 875,331 --
Other operating income:
Securitization income, net................................. 20,201,063 627,673 --
Servicing income........................................... 4,859,592 -- --
Other credit card fees..................................... 1,410,240 911,311 --
Interchange fees........................................... 589,060 278,570 --
Ancillary products......................................... 184,377 37,120 --
Other...................................................... -- 155,264 --
------------- ----------------- ----------
Total other operating income................................. 27,244,332 2,009,938 --
Other operating expense:
Salaries and benefits...................................... 388,135 428,549 --
Credit card servicing...................................... 801,648 1,008,028 --
Marketing and solicitation................................. 1,879,322 1,081,173 26,797
Professional fees.......................................... 401,504 251,669 19,577
Data processing............................................ 610,097 156,204 --
Net occupancy.............................................. 43,436 35,648 --
Ancillary product expense.................................. 101,166 -- --
Other...................................................... 413,842 649,088 101,307
------------- ----------------- ----------
Total other operating expense................................ 4,639,150 3,610,359 147,681
Income (loss) before income taxes............................ 22,742,018 (725,090) (147,681)
Income tax expense........................................... 8,507,000 -- --
------------- ----------------- ----------
Net income (loss)............................................ $ 14,235,018 $ (725,090) $ (147,681)
------------- ----------------- ----------
------------- ----------------- ----------
Net income (loss) attributable to common shareholders..... $ 13,335,018 $ (1,341,090) $ --
Average number of shares outstanding......................... 2,061,855 2,061,855 --
Net income (loss) per common share........................... $ 6.47 $ (0.65) $ --
Pro forma net income per common share (unaudited; Note 13)... $ $
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
COMPUCREDIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE PERIOD ENDED JUNE 30, 1998, THE YEAR ENDED DECEMBER 31, 1997,
AND THE PERIOD AUGUST 14, 1996 (DATE OF INCEPTION) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK RETAINED TOTAL
--------------------- PREFERRED CONTRIBUTED EARNINGS SHAREHOLDERS'
SHARES AMOUNT STOCK CAPITAL (DEFICIT) EQUITY
---------- --------- ------------- -------------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at August 14, 1996
(inception)...................... -- $ -- $ -- $ -- $ -- $ --
Contributed capital, units A and
C holders...................... -- -- -- 300,000 -- 300,000
Net loss......................... -- -- -- -- (147,681) (147,681)
---------- --------- ------------- -------------- ---------------- -------------
Balance at December 31, 1996....... -- $ -- $ -- $ 300,000 $ (147,681) $ 152,319
Capital contribution............. -- -- -- 19,700,000 -- 19,700,000
Issuance of preferred stock...... -- -- 20,000,000 (20,000,000) -- --
Issuance of common stock......... 2,061,855 -- -- -- -- --
Net loss......................... -- -- -- -- (725,090) (725,090)
---------- --------- ------------- -------------- ---------------- -------------
Balance at December 31, 1997....... 2,061,855 $ -- $ 20,000,000 $ -- $ (872,771) $ 19,127,229
Net income....................... -- -- -- -- 14,235,018 14,235,018
---------- --------- ------------- -------------- ---------------- -------------
Balance at June 30, 1998........... 2,061,855 $ -- $ 20,000,000 $ -- $ 13,362,247 $ 33,362,247
---------- --------- ------------- -------------- ---------------- -------------
---------- --------- ------------- -------------- ---------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
COMPUCREDIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD
AUGUST 14, 1996
FOR THE PERIOD FOR THE (DATE OF INCEPTION)
ENDED YEAR ENDED TO
JUNE 30, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
-------------- ----------------- -------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)............................................ $ 14,235,018 $ (725,090) $ (147,681)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation expense....................................... 165,627 79,228 --
Amortization expense....................................... 326,834 214,999 --
Loan loss provision........................................ -- 1,421,553 --
Gain on securitization..................................... (20,843,138) (840,452) --
Changes in assets and liabilities:
Increase in accrued interest and fees.................... (323,583) (461,337) --
Increase in deferred costs............................... (137,229) (1,475,301) --
Increase in prepaid expenses............................. (74,872) (443,252) (127,400)
Increase in amounts receivable from securitization....... (973,656) (516,513) --
Increase in amounts payable under securitization......... 5,469,641 124,399 --
Increase in accrued expenses............................. 410,314 740,112 100,779
Increase in deferred tax liability....................... 8,507,000 -- --
Increase in deferred revenue............................. 1,263,028 122,580 --
Other.................................................... 52,644 58,744 (73,026)
-------------- ----------------- ----------
Net cash provided by (used in) operating activities.......... 8,077,628 (1,700,330) (247,328)
INVESTING ACTIVITIES
Net loans originated......................................... (44,297,097) (28,269,029) --
Credit card portfolio purchased.............................. (225,711,915) -- --
Recoveries of loans previously charged off................... 20,334 417 --
Proceeds from securitization of loans........................ 255,746,475 12,650,000 --
Purchases of property and equipment.......................... (192,262) (186,262) --
Software development costs................................... (493,243) (569,903) --
-------------- ----------------- ----------
Net cash used in investing activities........................ (14,927,708) (16,374,777) --
FINANCING ACTIVITIES
Proceeds from capital contributions.......................... -- 19,700,000 300,000
Proceeds from short-term borrowings.......................... 13,000,000 19,700,000 --
Payment of short-term borrowings............................. (5,500,000) (19,700,000) --
-------------- ----------------- ----------
Net cash provided by financing activities.................... 7,500,000 19,700,000 300,000
Net increase in cash......................................... 649,920 1,624,893 52,672
Cash and equivalents at beginning of period.................. 1,677,565 52,672 --
-------------- ----------------- ----------
Cash and equivalents at end of period........................ $ 2,327,485 $ 1,677,565 $ 52,672
-------------- ----------------- ----------
-------------- ----------------- ----------
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest....................................... $ 506,200 $ 360,952 $ --
Cash paid for income taxes................................... -- -- --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
COMPUCREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 1998, THE YEAR ENDED DECEMBER 31, 1997,
AND THE PERIOD AUGUST 14, 1996 (DATE OF INCEPTION) TO DECEMBER 31, 1996
1. ORGANIZATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of CompuCredit
Corporation and its subsidiaries (collectively, "the Company"). The principal
subsidiaries are CompuCredit Funding Corp. and CompuCredit Acquisition
Corporation which were formed for the purpose of effecting the securitization of
credit card receivables. All significant intercompany balances and transactions
have been eliminated for financial reporting purposes. The Company was formed
for the purpose of offering unsecured credit and fee based products and services
to a specialized segment of the consumer credit market. The Company has a
contractual arrangement with a third party financial institution pursuant to
which the financial institution issues general purpose Visa credit cards under
the Company's "Aspire" trademark, and the Company purchases the receivables
relating to such accounts. The Company also purchased a portfolio of credit
cards from a third party in 1998. The Company has contracted with third party
financial institutions to issue credit cards and to perform certain services for
the credit card receivables portfolio as well as the securitized receivables.
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles that require management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements as well as the reported amount of revenues
and expenses during the reporting period. Actual results could differ from these
estimates. Certain estimates such as credit losses, prepayment and discount
rates have a significant impact on the gains recorded on securitizations.
Certain amounts in prior period financial statements have been reclassified
to conform to the current period presentation.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed in
the preparation of the consolidated financial statements.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash, money market investments, and
overnight deposits. The Company considers all other highly liquid cash
investments with low interest rate risk to be cash equivalents. Cash equivalents
are valued at cost, which approximates market.
SECURITIZED CREDIT CARD RECEIVABLES
Interest and fee income on credit card loans is recognized as earned. Credit
card receivables are typically charged off in the next billing cycle after
becoming 180 days past due, although earlier charge offs may occur specifically
related to accounts of bankrupt or deceased clients. Bankrupt and deceased
clients' accounts are generally charged off within 30 days of verification. The
accrued interest portion of a charged off loan balance is reversed from current
period interest income with the remaining principal balance charged against the
allowance for loan losses.
F-7
<PAGE>
COMPUCREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED JUNE 30, 1998, THE YEAR ENDED DECEMBER 31, 1997,
AND THE PERIOD AUGUST 14, 1996 (DATE OF INCEPTION) TO DECEMBER 31, 1996
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED COSTS
The Company capitalizes certain costs paid to third parties related to its
credit card receivable securitizations. Such costs include legal fees and fees
incurred for services provided for establishing securitization facilities that
have ongoing benefit to the company, such as the master trust utilized for
future securitizations. These capitalized securitization costs are amortized
over a period of three years. The accumulated amortization of these costs was
$518,316 and $198,909 at June 30, 1998 and December 31, 1997, respectively.
ALLOWANCE FOR LOAN LOSSES
In 1997 prior to securitizations, an allowance for loan losses was
maintained at an amount estimated to be sufficient to absorb inherent losses,
net of recoveries, in the existing on-balance sheet loan portfolio. The
provision for loan losses is the periodic cost of maintaining an adequate
allowance. In evaluating the adequacy of the allowance for loan losses,
management takes into consideration several of the following factors: historical
charge-off and recovery activity (noting any particular trend changes over
recent periods); trends in delinquencies; trends in loan volume and size of
credit risks; the degree of risk inherent in the composition of the loan
portfolio; current and anticipated economic conditions; credit evaluations and
underwriting policies. The allowance for loan losses has been relieved, as
substantially all credit card receivables have been securitized.
FURNITURE, FIXTURES, AND EQUIPMENT
Furniture, fixtures and equipment are stated at cost less accumulated
depreciation. Depreciation and amortization expenses are computed using the
straight-line method over the estimated useful lives of the assets.
SOFTWARE DEVELOPMENT COSTS
The Company capitalizes certain costs related to internal development and
implementation of software used in operating activities of the Company. Software
development costs are stated at capitalized cost less accumulated amortization.
Depreciation and amortization expenses are computed using the straight-line
method over the estimated useful lives of the assets.
AMOUNTS PAYABLE UNDER SECURITIZATION
Amounts collected by the Company in payment of principal, interest, and fees
on receivables securitized are remitted to the special purpose entities on a
monthly basis. Amounts collected for a month are not remitted until the
following month, resulting in a payable from the Company to the special purpose
entities.
ASSET SECURITIZATION
The Company securitizes and sells a substantial portion of its company
issued credit card loans through the CompuCredit Credit Card Master Trust (the
"Trust"). Credit card loans are transferred to the Trust, which issues
certificates representing undivided ownership interest in the Trust. The Company
F-8
<PAGE>
COMPUCREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED JUNE 30, 1998, THE YEAR ENDED DECEMBER 31, 1997,
AND THE PERIOD AUGUST 14, 1996 (DATE OF INCEPTION) TO DECEMBER 31, 1996
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
retains interests in the Trust ("Retained Interest in Credit Card Receivables
Securitized" on the consolidated balance sheets) in an amount equal to the
amount of the retained certificates of each series held by the Company plus the
amount of the loans in excess of the principal balance of the certificates.
Although the Company continues to service the underlying credit card
accounts and maintains the client relationships, these transactions are treated
as sales and the securitized loans are not reflected on the consolidated balance
sheet. The Company has receivables from and payables to the Trust as a result of
securitizations, including amounts deposited in accounts held by the trustee for
the benefit of the Trust's certificate holders.
The Company also securitized its purchased portfolio of credit card loans by
transferring them to a third party commercial paper conduit. Transfer of credit
card loans between the Company and the commercial paper conduit are treated as
sales, and the securitized credit card loans are not reflected on the Company's
balance sheet. The Company retains interests in the securitized receivables
equal to the amount of loans in excess of the principal balances of the
certificates. These amounts are classified in Amounts Receivable from
Securitization and are subsequently accounted for and reported at market value
in accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" (Statement
No. 115). The Company continues to service the underlying credit card accounts
that have been securitized. The Company has receivables from and payables to the
commercial paper conduit as a result of securitizations, including amounts
deposited in accounts for the benefit of the commercial paper conduit's
investors.
The Company has adopted Statement of Financial Accounting Standards No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities" (Statement No. 125), effective for all transactions. Under
Statement No. 125, gains are recognized at the time of initial sale and each
subsequent sale of loan receivables from securitization at the time of sale.
These gains represent the present value of the estimated excess cash flows the
Company expects to retain over the estimated outstanding period of the
receivables. This excess cash flow represents finance charges and late fees in
excess of the sum of the return paid to the certificate holders, estimated
servicing fees and estimated loan losses. Certain estimates in the determination
of the gain are influenced by factors outside the Company's control, and, as a
result, such estimates could materially change in the near term.
In accordance with the provisions of Statement No. 125, the Company has
recorded an interest-only strip receivable, which is included in Amounts
Receivable from Securitization. The interest-only strip receivable was initially
recorded at allocated book value, and is subsequently accounted for and reported
at market value in accordance with Statement No. 115. Also included in Amounts
Receivable from Securitization are payments on credit card receivables and other
receivables due to the Company from the Trust.
CREDIT CARD FEES
Credit card fees include annual, overlimit, returned check, and cash advance
transaction fees. These fees are assessed according to agreements with clients.
Annual membership fees and direct loan origination costs are deferred and
amortized on a straight-line basis over the one-year period to which the fees or
costs pertain. The Company, under its securitization agreements, continues to
earn servicing income, interchange fees, ancillary products income, and other
credit card fees.
F-9
<PAGE>
COMPUCREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED JUNE 30, 1998, THE YEAR ENDED DECEMBER 31, 1997,
AND THE PERIOD AUGUST 14, 1996 (DATE OF INCEPTION) TO DECEMBER 31, 1996
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SOLICITATION EXPENSES
Credit card account and other product solicitation costs, including
printing, credit bureaus, list processing costs, telemarketing and postage, are
generally expensed as the solicitation occurs.
INCOME TAXES
The Company accounts for income taxes based on the liability method required
by Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (Statement No. 109).
Under the liability method, deferred income taxes reflect the net tax
effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes.
RECENT ACCOUNTING PRONOUNCEMENTS
As of January 1, 1998, the Company implemented FASB Statement of Financial
Accounting Standards No. 130 "Reporting Comprehensive Income" (Statement No.
130), which established new rules for the reporting and display of comprehensive
income and its components in a full set of general-purpose financial statements.
Application of Statement 130 has not impacted amounts previously reported for
net income or affected the comparability of previously issued financial
statements, as the Company currently has no financial statement items included
in the definition of comprehensive income.
3. CORPORATE REORGANIZATION
CompuCredit, L.P. (the "Partnership") was formed on August 14, 1996 as a
limited partnership under the Georgia Revised Uniform Limited Partnership Act of
the laws of the State of Georgia. The partners were classified as Series A
holders, Series B holders, and the Series C holder. Series A holders were
limited partners, holding 87% of the Partnership units, and contributing 99% of
the contributed capital. Series B holders were limited partners, holding 12% of
the Partnership units, making no capital contributions, and having interest
solely in the net profits of the Partnership. The Series C holder was the
General Partner, holding 1% of the Partnership units, and contributing 1% of the
contributed capital.
On August 29, 1997, the Partnership was merged into CompuCredit Corporation
under the laws of the State of Georgia. The $20,000,000 of contributed capital
of the Partnership was converted into 200,000 shares of $100 par value nonvoting
nonparticipating preferred stock of the Corporation. Cumulative dividends
accumulate on the outstanding preferred stock at an annual rate of 9%. There
were $1,516,000 and $616,000 of unpaid dividends in arrears related to the
preferred stock at June 30, 1998 and December 31, 1997, respectively. The
Corporation also issued 2,061,855 shares of common stock, no par value
(3,000,000 shares authorized), of which 936,568 are currently issued to the
holders of the nonvoting preferred stock of the Corporation. CompuCredit
Corporation continued the operations of CompuCredit, L.P.
F-10
<PAGE>
COMPUCREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED JUNE 30, 1998, THE YEAR ENDED DECEMBER 31, 1997,
AND THE PERIOD AUGUST 14, 1996 (DATE OF INCEPTION) TO DECEMBER 31, 1996
4. ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses was established during 1997 as the Company
began to establish its credit card receivables portfolio. The allowance was
relieved as the Company securitized the credit card receivables.
5. SECURITIZATIONS
The Company received proceeds from securitizations of $255,746,000 and
$12,650,000 during the period ended June 30, 1998 and the year ended December
31, 1997, respectively. As of June 30, 1998 and December 31, 1997, the Company
had retained interests in these loans securitized of $17,992,000, and
$14,494,000, respectively. Of the proceeds received in 1998, approximately
$222,000,000 related to the securitization of a portfolio the Company purchased
during the period ending June 30, 1998.
6. SOFTWARE, FURNITURE, FIXTURES, AND EQUIPMENT
Software, Furniture, Fixtures and Equipment consist of the following:
<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
------------- -----------------
<S> <C> <C>
Software........................................................................ $ 1,063,145 $ 569,903
Furniture and fixtures.......................................................... 40,004 32,471
Data processing and telephone equipment......................................... 338,519 153,790
------------- --------
Total cost...................................................................... 1,441,668 756,164
Less accumulated depreciation................................................... (244,855) (79,228)
------------- --------
Software, furniture, fixtures, and equipment, net............................... $ 1,196,813 $ 676,936
------------- --------
------------- --------
</TABLE>
7. LEASES
The Company leases premises and equipment under cancelable and noncancelable
leases, some of which contain renewal options under various terms. Total rental
expense was $40,826 and $35,311 for the period ended June 30, 1998 and the year
ended December 31, 1997, respectively. The future minimum rental commitments as
of June 30, 1998 for all noncancelable leases with initial or remaining terms of
more than one year are as follows:
<TABLE>
<S> <C>
July 1, 1998 to June 30, 1999................................................... $ 196,477
July 1, 1999, to June 30, 2000.................................................. 204,339
July 1, 2000 to June 30, 2001................................................... 212,542
July 1, 2001 to June 30, 2002................................................... 220,989
After June 30, 2002............................................................. 458,010
---------
$1,292,357
---------
---------
</TABLE>
8. BORROWINGS
On January 8, 1997, the Company entered into an irrevocable standby letter
of credit agreement for $10,000,000 with a bank. The letter of credit agreement
expires on January 8, 1999. The agreement
F-11
<PAGE>
COMPUCREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED JUNE 30, 1998, THE YEAR ENDED DECEMBER 31, 1997,
AND THE PERIOD AUGUST 14, 1996 (DATE OF INCEPTION) TO DECEMBER 31, 1996
8. BORROWINGS (CONTINUED)
contains provisions allowing the subservicer of the receivables to draw under
the letter of credit as needed. As of June 30, 1998 and December 31, 1997, the
letter of credit agreement was unused.
9. COMMITMENTS AND CONTINGENCIES
The Company enters into financial instruments with off balance sheet risk in
the normal course of business through the origination of unsecured credit card
receivables. These financial instruments consist of commitments to extend
credit. These instruments involve, to varying degrees, elements of credit risk
in excess of the amount recognized in the balance sheets. The principal amount
of these instruments reflects the maximum exposure the Company has in the
instruments. The Company has not experienced and does not anticipate that all of
its clients will exercise their entire available line of credit at any given
point in time. The Company has the right to reduce or cancel these available
lines of credit at any time.
10. INCOME TAXES
As described in Note 1, CompuCredit, L.P. converted from a partnership to a
corporation on August 29, 1997. For the period August 14, 1996 (date of
inception) through August 28, 1997, the entity was a limited partnership, and as
such, no income tax provision was recorded. No income tax expense was recorded
related to the activities of the corporation for the period August 29, 1997
through December 31, 1997, as the Company had no taxable income. A valuation
allowance of $82,000 was recorded in 1997, related to the Company's deferred tax
asset.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities, which represent the
difference between the amounts reported for financial reporting purposes and
amounts used for income tax purposes. Statement No. 109 requires that the
deferred tax effects of a change in tax status be included in income from
continuing operations at the date the change in tax status occurs. On August 29,
1997 when CompuCredit, L.P. converted to a C-corporation status for legal and
tax purposes and became subject to income taxes, deferred tax assets and
liabilities were recognized for existing temporary differences. At that date, a
tax benefit of $82,000 was recorded related to the recognition of existing
deferred tax assets. Such benefit was fully offset by a $82,000 valuation
allowance.
F-12
<PAGE>
COMPUCREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED JUNE 30, 1998, THE YEAR ENDED DECEMBER 31, 1997,
AND THE PERIOD AUGUST 14, 1996 (DATE OF INCEPTION) TO DECEMBER 31, 1996
10. INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities at June 30, 1998
and December 31, 1997 are presented below:
<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
------------- -----------------
<S> <C> <C>
Deferred tax assets:
Depreciation and amortization................................................. $ 57,000 $ 15,000
Loan loss provision........................................................... -- 368,000
Net operating loss carryforwards.............................................. 795,000 795,000
Other, net.................................................................... 23,000 --
------------- -----------------
Total deferred tax asset........................................................ 875,000 1,178,000
Deferred tax liabilities:
Software development costs.................................................... (352,000) (164,000)
Deferred Costs................................................................ (520,000) (585,000)
Gain on securitization........................................................ (8,510,000) (347,000)
------------- -----------------
Total deferred tax liability.................................................... (9,382,000) (1,096,000)
Valuation allowance............................................................. -- (82,000)
------------- -----------------
Net deferred tax (liability) asset.............................................. $ (8,507,000) $ --
------------- -----------------
------------- -----------------
</TABLE>
Income tax expense differed from amounts computed by applying the statutory
U.S. Federal income tax rate to pretax income from operations as a result of the
following:
<TABLE>
<CAPTION>
FOR THE
PERIOD
ENDED
JUNE 30, 1998
-------------
<S> <C>
Taxes at statutory rate............................................................................ $ 7,960,000
Increase in income taxes resulting from:
State income tax expense, net of federal income tax benefit...................................... 591,000
Decrease in income taxes resulting from:
Other, net....................................................................................... (44,000)
-------------
Total income tax expense........................................................................... $ 8,507,000
-------------
-------------
</TABLE>
F-13
<PAGE>
COMPUCREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED JUNE 30, 1998, THE YEAR ENDED DECEMBER 31, 1997,
AND THE PERIOD AUGUST 14, 1996 (DATE OF INCEPTION) TO DECEMBER 31, 1996
10. INCOME TAXES (CONTINUED)
The current and deferred portions of federal and state income tax expense
for the period ended June 30, 1998 are as follows:
<TABLE>
<CAPTION>
FOR THE
PERIOD
ENDED
JUNE 30, 1998
-------------
<S> <C>
Federal income tax expense:
Current tax expense.............................................................................. $ --
Deferred tax expense............................................................................. 7,611,000
-------------
Total federal income tax expense................................................................... 7,611,000
State income tax expense:
Current tax expense.............................................................................. --
Deferred tax expense............................................................................. 896,000
-------------
Total state income tax expense..................................................................... 896,000
-------------
Total income tax expense........................................................................... $ 8,507,000
-------------
-------------
</TABLE>
11. EARNINGS PER SHARE
The following table sets forth the computation of basic earnings per share:
<TABLE>
<CAPTION>
FOR THE
PERIOD FOR THE YEAR
ENDED ENDED
JUNE 30, 1998 DECEMBER 31, 1997
------------- -----------------
<S> <C> <C>
Numerator:
Net income (loss)............................................................ $14,235,018 $ (725,090)
Preferred stock dividends.................................................... (900,000) (616,000)
------------- -----------------
Numerator for basic earnings per share--income available to common
shareholders................................................................. 13,335,018 (1,341,090)
Denominator:
Denominator for basic earnings per share--weighted average shares
outstanding.................................................................. 2,061,855 2,061,855
Basic earnings (loss) per share................................................ $ 6.47 $ (0.65)
------------- -----------------
------------- -----------------
</TABLE>
12. RELATED PARTY TRANSACTIONS
In the first six months of 1998, the Company entered into a note with a
related party in the face amount of $13,000,000. Under the terms of the
promissory note, interest accrues at a rate of 2.0% per month and is payable
monthly in arrears. The entire outstanding principal balance of $7,500,000 is
due and payable in full upon demand. Subsequent to June 30, 1998, the promissory
note and all accrued interest was paid in full.
13. PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The pro forma balance sheet as of June 30, 1998 and the pro forma earnings
per share for the period ended June 30, 1998 and for the year ended December 31,
1997 are presented in the consolidated financial
F-14
<PAGE>
COMPUCREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED JUNE 30, 1998, THE YEAR ENDED DECEMBER 31, 1997,
AND THE PERIOD AUGUST 14, 1996 (DATE OF INCEPTION) TO DECEMBER 31, 1996
13. PRO FORMA FINANCIAL INFORMATION (UNAUDITED) (CONTINUED)
statements of the Company. The pro forma information is based on the historical
financial statements of the Company, giving effect to the following subsequent
and proposed transactions:
On August 21, 1998, the Company issued 68,728 shares of common stock to an
unrelated investor for cash proceeds of $10,000,000.
Contemporaneously with the closing of the Company's initial public offering
of shares of common stock, shares of preferred stock will be exchanged with the
Company pursuant to a plan of recapitalization. The exchange ratio for these
preferred shares shall be determined by adding the aggregate liquidation
preference of the preferred shares with the amount of cumulative dividends
payable on such shares, and dividing by the price per share to the public in the
common stock offering. Approximately shares of common stock are expected
to be issued in the exchange of the preferred shares.
By action of the Board of Directors, the Company will effect a 15-for-1
split of its common stock concurrent with the Company's initial public offering
of shares of common stock immediately before the above-described exchange of
preferred stock into common stock.
These pro forma results may not be indicative of the results that actually
would occur when these transactions are completed. The pro forma financial
statements should be read in conjunction with the audited financial statements
and notes of the Company contained elsewhere herein.
F-15
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION AND REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE UNDERWRITERS. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER
THAN THE REGISTERED SECURITIES TO WHICH IT RELATES. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary.................................... 1
Risk Factors.......................................... 7
The Company........................................... 15
Use of Proceeds....................................... 15
Dividend Policy....................................... 15
Dilution.............................................. 16
Capitalization........................................ 17
Selected Consolidated Financial Data.................. 18
Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 20
Business.............................................. 30
Management............................................ 42
Principal Shareholders................................ 48
Certain Transactions.................................. 49
Description of Capital Stock.......................... 50
Shares Eligible for Future Sale....................... 53
Underwriting.......................................... 55
Available Information................................. 57
Legal Matters......................................... 57
Experts............................................... 57
Index to Financial Statements......................... F-1
</TABLE>
-------------------
UNTIL , 1998 ALL DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
SHARES
COMPUCREDIT CORPORATION
COMMON STOCK
[LOGO]
-----------------
PROSPECTUS
-----------------
PAINEWEBBER INCORPORATED
BEAR, STEARNS & CO. INC.
NATIONSBANC MONTGOMERY
SECURITIES LLC
-----------
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Registration fee to Securities and Exchange Commission............. $ 36,285
National Association of Securities Dealers, Inc. filing fee........ +
NASDAQ National Market Listing fee................................. +
Transfer Agent's and Registrar's fees.............................. +
Printing and engraving costs....................................... +
Accounting fees and expenses....................................... +
Legal fees and expenses............................................ +
Miscellaneous expenses............................................. +
---------
Total.............................................................. $
</TABLE>
- ------------------------
+ to be completed by amendment.
The foregoing items, except for the registration fee to the Securities and
Exchange Commission, are estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Georgia Business Corporation Code (the "GBCC") permits a corporation to
eliminate or limit the personal liability of a director to the corporation or
its shareholders for monetary damages for breach of duty of care or other duty
as a director, provided that no provisions shall eliminate or limit the
liability of a director: (i) for any appropriation, in violation of his duties,
of any business opportunity of the corporation; (ii) for acts or omissions which
involve intentional misconduct or a knowing violation of law; (iii) for unlawful
corporate distributions; or (iv) for any transaction from which the director
received an improper personal benefit. This provision pertains only to breaches
of duty by directors in their capacity as directors (and not in any other
corporate capacity, such as officers) and limits liability only for breaches of
fiduciary duties under the GBCC (and not for violation of other laws, such as
the federal securities laws). The Amended and Restated Articles of Incorporation
exonerate the Company's directors from monetary liability to the extent
permitted by this statutory provision.
The Company's Amended and Restated Articles of Incorporation and Amended and
Restated Bylaws also provide that the Company shall indemnify any director, and
may indemnify any officer, 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 (including any action
by or in the right of the Company), by reason of the fact that such person is or
was a director or officer of the Company, or is or was serving at the request of
the Company as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including reasonable
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the Company
(and with respect to any criminal action or proceeding, if such person had no
reasonable cause to believe such person's conduct was unlawful), to the maximum
extent permitted by, and in the manner provided by, the GBCC. In addition, the
Amended and Restated Bylaws provide that the Company will advance to its
directors, and may advance to its officers, reasonable expenses of any such
proceeding; provided that, such person furnishes the Company with (i) a written
affirmation of such person's good faith belief that such person has met the
II-1
<PAGE>
applicable standard of conduct and (ii) a written undertaking to repay any
advances if it is ultimately determined that such person is not entitled to
indemnification.
Notwithstanding any provision of the Company's Amended and Restated Articles
of Incorporation and Amended and Restated Bylaws to the contrary, the GBCC
provides that the Company shall not indemnify a director or officer for any
liability incurred in a proceeding in which the director or officer is adjudged
liable to the Company or is subjected to injunctive relief in favor of the
Company: (i) for any appropriation, in violation of his duties, of any business
opportunity of the Company; (ii) for acts or omissions which involve intentional
misconduct or a knowing violation of law; (iii) for unlawful corporate
distributions; and (iv) for any transaction from which the director or officer
received an improper personal benefit.
The Underwriting Agreement filed as Exhibit 1.1 hereto also contains certain
provisions pursuant to which certain officers, directors and controlling persons
of the Company may be entitled to be indemnified by the underwriters named
therein.
The Company intends to purchase insurance with respect to, among other
things, liabilities that may accrue under the statutory provisions referred to
above.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On August 29, 1997, the Registrant issued to the partners of CompuCredit,
L.P., a Georgia limited partnership, in connection with the merger of
CompuCredit, L.P. with and into the Registrant, an aggregate of 2,000,000 shares
of Common Stock and 200,000 shares of Preferred Stock in exchange for an
aggregate of 86 Series A Units, 14 Series B Units and 1 Series C Unit of
CompuCredit, L.P. This transaction was exempt from registration under Section
4(2) of the Securities Act of 1933, as amended (the "Securities Act").
On August 29, 1997, the Registrant issued to Atlantic Equity Corporation, in
connection with the execution of a certain Certificate Purchase Agreement
relating to a securitization of credit card receivables by the Company, an
aggregate of 61,855 shares of Common Stock in consideration of the benefits
accruing to the Registrant under such Certificate Purchase Agreement. This
transaction was exempt from registration under Section 4(2) of the Securities
Act.
On August 21, 1998, the Registrant issued to Greystone Capital Partners I,
L.P., in a private placement exempt from registration under Section 4(2) of the
Securities Act, an aggregate of 68,728 shares of Common Stock for an aggregate
purchase price of $10,000,000.
All of the shares of Common Stock were acquired by the investors described
above for investment purposes and with no present intention toward the resale or
distribution thereof. The offers and sales were made without public
solicitation, and the stock certificates bear restrictive legends. No
underwriter was involved in the transactions, and no commissions were paid.
ITEM 16. EXHIBITS.
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Form of Amended and Restated Articles of Incorporation of Registrant to be filed
prior to the effectiveness of this Registration Statement.
3.2 Form of Amended and Restated Bylaws of Registrant.
4.1* Form of certificate representing shares of the Registrant's Common Stock.
5.1* Legal opinion of Troutman Sanders LLP regarding legality of securities being
registered.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.1 Stockholders Agreement, dated as of August 29, 1997, by and among the Registrant,
CompuCredit Management Corp., Frank J. Hanna, III, as Trustee of Bravo Trust One,
David G. Hanna, as Trustee of Bravo Trust Two, Brett M. Samsky, Richard W.
Gilbert, Richard R. House, Jr., Ashley L. Johnson and Atlantic Equity Corporation.
10.2 1998 Stock Option Plan and Form of Option Agreement.
10.3.1* Employment Agreement of David G. Hanna.
10.3.2* Employment Agreement of Brett M. Samsky.
10.3.3* Employment Agreement of Richard W. Gilbert.
10.3.4* Employment Agreement of Ashley L. Johnson.
10.3.5* Employment Agreement of Richard R. House, Jr.
10.4.1 Master Trust Pooling and Servicing Agreement, dated as of August 29, 1997, among
CompuCredit Funding Corp., as Transferor, CompuCredit Corporation, as Servicer,
and Bankers Trust Company, as Trustee.
10.4.2 Amendment No. 1, dated as of April 17, 1998, to the Pooling and Servicing
Agreement, dated as of August 29, 1997, among CompuCredit Funding Corp., as
Transferor, CompuCredit Corporation as Servicer, and Bankers Trust Company, as
Trustee.
10.4.3** Series 1997-One Supplement, dated as of August 29, 1997, to the Pooling and
Servicing Agreement, among CompuCredit Funding Corp., as Transferor, CompuCredit
Corporation, as Servicer, and Bankers Trust Company, as Trustee.
10.4.4 Amendment No. 2, dated as of April 17, 1998, to the Series 1997-One Supplement,
dated as of August 29, 1997, among CompuCredit Funding Corp., as Transferor,
CompuCredit Corporation, as Servicer, and Bankers Trust Company, as Trustee.
10.5** Transfer and Administration Agreement, dated as of April 17, 1998, among Kitty
Hawk Funding Corporation, as Buyer, Atlantic Equity Corporation, as Buyer,
CompuCredit Acquisition Funding Corp., as Transferor, CompuCredit Corporation, as
Servicer and Guarantor, and NationsBank, N.A. as Agent and Bank Investor.
10.6 Agreement, dated as of September 23, 1997, by and among CompuCredit Corporation,
Visionary Systems, Inc. and VSX Corporation.
10.7.1** Affinity Card Agreement, dated as of January 6, 1997, between Columbus Bank and
Trust Company and CompuCredit, L.P.
10.7.2 Amendment to Affinity Card Agreement, dated as of March 26, 1998, between Columbus
Bank and Trust Company and CompuCredit Corporation, as successor to CompuCredit,
L.P.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP.
23.2* Consent of Troutman Sanders LLP (included in Exhibit 5.1).
24.1 Power of Attorney (set forth on the signature page of this Registration
Statement).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
** Confidential treatment requested as to certain omitted portions of this
exhibit, which portions have been filed separately with the Securities and
Exchange Commission.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes 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 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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction to the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4), or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus 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 hereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-1 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Atlanta, State of Georgia on the 27th day of August, 1998.
COMPUCREDIT CORPORATION
By: /s/ DAVID G. HANNA
-----------------------------------------
David G. Hanna
President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
David G. Hanna and Brett M. Samsky, or either of them, the true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for and in the name, place and stead of the undersigned, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants unto said 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, as fully for all intents and purposes as the undersigned
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof. Pursuant to the requirements of the
Securities Act of 1933, as amended, this Registration Statement has been signed
by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ DAVID G. HANNA President and Director
- ------------------------------ (Principal Executive August 27, 1998
David G. Hanna Officer)
/s/ BRETT M. SAMSKY Chief Financial Officer
- ------------------------------ (Principal Financial August 27, 1998
Brett M. Samsky Officer)
/s/ ASHLEY L. JOHNSON Controller (Principal
- ------------------------------ Accounting Officer) August 27, 1998
Ashley L. Johnson
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Form of Amended and Restated Articles of Incorporation of Registrant to be filed
prior to the effectiveness of this Registration Statement.
3.2 Form of Amended and Restated Bylaws of Registrant.
4.1* Form of certificate representing shares of the Registrant's Common Stock.
5.1* Legal opinion of Troutman Sanders LLP regarding legality of securities being
registered.
10.1 Stockholders Agreement, dated as of August 29, 1997, by and among the Registrant,
CompuCredit Management Corp., Frank J. Hanna, III, as Trustee of Bravo Trust One,
David G. Hanna, as Trustee of Bravo Trust Two, Brett M. Samsky, Richard W.
Gilbert, Richard R. House, Jr., Ashley L. Johnson and Atlantic Equity
Corporation.
10.2 1998 Stock Option Plan and Form of Option Agreement.
10.3.1* Employment Agreement of David G. Hanna.
10.3.2* Employment Agreement of Brett M. Samsky.
10.3.3* Employment Agreement of Richard W. Gilbert.
10.3.4* Employment Agreement of Ashley L. Johnson.
10.3.5* Employment Agreement of Richard R. House, Jr.
10.4.1 Master Trust Pooling and Servicing Agreement, dated as of August 29, 1997, among
CompuCredit Funding Corp., as Transferor, CompuCredit Corporation, as Servicer,
and Bankers Trust Company, as Trustee.
10.4.2 Amendment No. 1, dated as of April 17, 1998, to the Pooling and Servicing
Agreement, dated as of August 29, 1997, among CompuCredit Funding Corp., as
Transferor, CompuCredit Corporation as Servicer, and Bankers Trust Company, as
Trustee.
10.4.3** Series 1997-One Supplement, dated as of August 29, 1997, to the Pooling and
Servicing Agreement, among CompuCredit Funding Corp., as Transferor, CompuCredit
Corporation, as Servicer, and Bankers Trust Company, as Trustee.
10.4.4 Amendment No. 2, dated as of April 17, 1998, to the Series 1997-One Supplement,
dated as of August 29, 1997, among CompuCredit Funding Corp., as Transferor,
CompuCredit Corporation, as Servicer, and Bankers Trust Company, as Trustee.
10.5** Transfer and Administration Agreement, dated as of April 17, 1998, among Kitty
Hawk Funding Corporation, as Buyer, Atlantic Equity Corporation, as Buyer,
CompuCredit Acquisition Funding Corp., as Transferor, CompuCredit Corporation, as
Servicer and Guarantor, and NationsBank, N.A. as Agent and Bank Investor.
10.6 Agreement, dated as of September 23, 1997, by and among CompuCredit Corporation,
Visionary Systems, Inc. and VSX Corporation.
10.7.1** Affinity Card Agreement, dated as of January 6, 1997, between Columbus Bank and
Trust Company and CompuCredit, L.P.
10.7.2 Amendment to Affinity Card Agreement, dated as of March 26, 1998, between
Columbus Bank and Trust Company and CompuCredit Corporation, as successor to
CompuCredit, L.P.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP.
23.2* Consent of Troutman Sanders LLP (included in Exhibit 5.1).
24.1 Power of Attorney (set forth on the signature page of this Registration
Statement).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
** Confidential treatment requested as to certain omitted portions of this
exhibit, which portions have been filed separately with the Securities and
Exchange Commission.
II-6
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
COMPUCREDIT CORPORATION
TO THE SECRETARY OF STATE
OF THE STATE OF GEORGIA
WHEREAS, pursuant to O.C.G.A. Sections 14-2-1003 and 14-2-1007, the Board
of Directors and Shareholders of the Corporation have provided that the Articles
of Incorporation of CompuCredit Corporation as heretofore amended, be amended
and restated as set forth herein;
NOW, THEREFORE, the Articles of Incorporation of the Corporation are hereby
amended and restated in their entirety to read as follows:
I.
NAME.
The name of the corporation is CompuCredit Corporation.
II.
PURPOSE.
The purpose of the Corporation is to engage in any form or type of business
for any lawful purpose or purposes not specifically prohibited to corporations
for profit under the laws of the State of Georgia and, to accomplish such
purpose, it shall have all rights, powers, privileges and immunities which are
now or hereafter may be allowed to corporations under the laws of the State of
Georgia.
III.
CAPITAL STOCK.
(a) Authorized Shares. The total number of shares of all classes of
capital stock which the Corporation shall have the authority to issue shall be
(i) 60,000,000 shares of no par value common stock (the "Common Stock") and (ii)
10,000,000 shares of no par value preferred stock (the "Preferred Stock"). The
preferences, limitations and relative rights in respect of the shares of each
class of stock shall be as hereinafter provided. Subject to the provisions of
applicable law and the rights of the holders of the outstanding shares of
Preferred Stock, the
<PAGE>
holders of shares of Common Stock shall be entitled to receive, when and as
declared by the Board of Directors of the Corporation, out of the assets of the
Corporation legally available therefor, dividends or other distributions,
whether payable in cash, property or securities of the Corporation.
(b) Voting Rights. Except as otherwise provided herein or by law, each
holder of Common Stock shall have one vote in respect of each share of Common
Stock held of record on each matter submitted to a vote of the shareholders of
the Corporation. The Preferred Stock shall have such voting rights, if any, as
may be designated by the Board of Directors pursuant to this Article III
subsection (e).
(c) Liquidation. In the event of a liquidation, dissolution or winding-up
of the Corporation or other similar event, after payment or provision for
payment to the holders of Preferred Stock of the amounts to which they may be
entitled, the remaining assets of the Corporation available to shareholders
shall be distributed equally per share to the holders of Common Stock. Neither
the merger nor consolidation of the Corporation, nor the sale, lease or
conveyance of all or part of its assets, shall be deemed to be a liquidation,
dissolution or winding-up of the Corporation within the meaning of this
provision.
(d) Dividends. Subject to the preferences and other rights of the
Preferred Stock, the holders of Common Stock shall be entitled to receive
dividends as and when declared by the Board of Directors out of funds legally
available therefor. Holders of Common Stock shall be entitled to share equally,
share for share, in dividends declared on Common Stock.
(e) Preferred Stock. The Board of Directors is hereby authorized, subject
to the limitations prescribed by law or the provisions of this Article III, by
filing articles of amendment pursuant to the applicable laws of the State of
Georgia, to provide for the issuance of shares of Preferred Stock in series, to
establish from time to time the number of shares to be included in each series
and to fix the designations, powers and preferences and rights of the shares of
each such series and the qualifications, limitations or restrictions thereof.
The authority of the Board of Directors with respect to each series shall
include, but not be limited to, the determination of the following:
(1) The number of shares constituting that series and the distinct
designation of that series;
(2) The dividend rate, if any, on such shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates, and
the relative rights of priority, if any, of payment of dividends or other
distributions on shares of that series;
(3) Whether that series shall have voting rights in addition to the
voting rights provided by law, and, if so, the terms of such voting rights;
(4) Whether that series shall have conversion privileges, and, if so,
the terms and conditions of such conversion, including provision for the
adjustment of the conversion rate in such events as the Board of Directors
shall determine;
2
<PAGE>
(5) Whether the shares of that series shall be redeemable or
exchangeable, and, if so, the terms and conditions of such redemption or
exchange, including the date or dates upon or after which they shall be
redeemable or exchangeable, and the amount per share payable in case of
redemption or exchange, which amount may vary under different conditions
and at different redemption or exchange rates;
(6) Whether that series shall have a sinking fund for redemption or
purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
(7) The rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the Corporation,
and the relative rights of priority, if any, of payment of shares of that
series; and
(8) Any other relative rights, preferences and limitations of that
series.
IV.
PREEMPTIVE RIGHTS.
Preemptive rights are hereby denied. No holder of any shares of this
Corporation shall have the preemptive right to purchase, subscribe for, or
otherwise acquire any shares of stock of the Corporation of any class now or
hereafter authorized or any securities exchangeable for or convertible into such
shares, or any warrants or other instruments evidencing rights or options to
subscribe for purchase or otherwise acquire shares.
V.
DIRECTOR LIABILITY
To the fullest extent that the Georgia Business Corporation Code, as it
exists on the date hereof or as it may hereafter be amended, permits the
limitation or elimination of the liability of directors, no director of the
Corporation shall be personally liable to the Corporation or its shareholders
for monetary damages for any action taken, or for failure to take action.
Neither the amendment or repeal of this Article V nor the adoption of any
provision of these Articles of Incorporation inconsistent with this Article
shall eliminate or adversely affect any right or protection of a director of the
Corporation existing immediately prior to such amendment, repeal or adoption.
VI.
These Amended and Restated Articles of Incorporation supersede and replace
in their entirety the Corporation's original Articles of Incorporation, as
heretofore amended and restated.
3
<PAGE>
VII.
These Amended and Restated Articles of Incorporation as hereinabove set
forth were duly adopted on August ___, 1998, by the shareholders of the
Corporation in accordance with the provisions of Sections 14-2-1003 and
14-2-1007 of the Georgia Business Corporation Code.
VIII.
PRINCIPAL OFFICE.
The mailing address of the initial principal office of the Corporation is
Two Ravinia Drive, N.E., Suite 1750, Atlanta, Georgia 30346.
4
<PAGE>
Exhibit 3.2
AMENDED AND RESTATED BYLAWS
OF
COMPUCREDIT CORPORATION
ARTICLE I
OFFICES
Section 1.1. Registered Office and Agent. The Corporation shall maintain a
registered office and shall have a registered agent whose office is identical
with such registered office.
Section 1.2. Other Offices. The Corporation may have offices at such place
or places, within or without the State of Georgia, as the Board of Directors may
from time to time appoint or as the business of the Corporation may require or
make desirable.
ARTICLE II
SHAREHOLDERS
Section 2.1. Place of Meetings. Meetings of the shareholders may be held on
the call of the Board of Directors at any place within or without the State of
Georgia as set forth in the notice thereof or in the event of a meeting held
pursuant to a waiver of notice, as may be set forth in the waiver, or if no
place is so specified, at the principal office of the Corporation.
Section 2.2. Annual Meeting. The annual meeting of the shareholders for the
election of Directors and for the transaction of such other business as may
properly come before the meeting shall be held at such place, either within or
without the State of Georgia, on such date within 180 days following the close
of the Corporation's fiscal year as the Board of Directors may by resolution
provide. In the event that such annual meeting is not held within the period
designated pursuant to this Section 2.2, the Board of Directors shall cause a
meeting in lieu thereof to be held as soon as conveniently may be thereafter,
and any business transacted or elections held at such meeting shall be as valid
as if transacted or held at the annual meeting. Such subsequent meeting shall be
called in the same manner as provided for special shareholders' meetings.
Section 2.3. Special Meetings. Special meetings of the shareholders may be
called at any time by the Board of Directors or the Chairman (if there shall be
one). A special meeting of the shareholders shall also be called if the holders
of at least twenty-five percent (25%) of the votes entitled to be cast on any
issue to be considered at the proposed special meeting sign, date and deliver to
the Corporation's Secretary one or more written demands for the meeting
describing the purpose or purposes for which it is to be held. A special meeting
called pursuant to this Section 2.3 shall be held at such place, either within
or without the State of Georgia, as is stated in the notice thereof.
<PAGE>
Section 2.4. Notice of Meetings. A written or printed notice stating the
date, time and place of the meeting, and in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered or
mailed by or at the direction of the President or Secretary or other person
calling the meeting, to each holder of record of stock of the Corporation at the
time entitled to vote, at his or her address as it appears upon the records of
the Corporation, not less than ten (10) nor more that sixty (60) days prior to
such meeting. If the Secretary fails to give such notice within twenty (20) days
after the call of a meeting, the person calling or requesting such meeting, or
any person designated by them, may give such notice. Notice of such meeting may
be waived by any shareholder as contemplated in Section 4.2 or by attendance at
the meeting, either in person or by proxy, for any purpose other than to state,
at the beginning of the meeting, an objection or objections to the transaction
of business. In the case of an annual or substitute annual meeting, the notice
of the meeting need not state the purpose or purposes of the meeting unless the
purpose or purposes constitute a matter which the Georgia Business Corporation
Code (the "Code") requires to be stated in the notice of the meeting. In the
case of a special meeting, the notice of meeting shall state the purpose or
purposes for which the meeting is called. Notice of any adjourned meeting of the
shareholders shall not be required if the date, time and place to which the
meeting is adjourned are announced at the meeting at which the adjournment is
taken, unless the Board of Directors sets a new record date for such meeting as
may be required pursuant to Section 2.7 hereof, in which case notice shall be
given in the manner provided in this Section 2.4.
Section 2.5. Quorum and Shareholder Vote. Unless otherwise provided by the
Articles of Incorporation, a quorum for action on any subject matter at any
annual or special meeting of shareholders shall exist when the holders of shares
entitled to vote a majority of the votes entitled to be cast on such subject
matter are represented in person or by proxy at such meeting. If a quorum is
present, the affirmative vote of such number of shares as is required by the
Code (as in effect at the time the vote is taken), for approval of the subject
matter being voted upon, shall be the act of the shareholders, unless a greater
vote is required by the Articles of Incorporation or these Bylaws. The
shareholders at a meeting at which a quorum is present may continue to transact
business until adjournment notwithstanding the withdrawal of enough shareholders
to leave less than a quorum, unless the meeting is adjourned under circumstances
where a new record date is or must be set pursuant to Section 2.7 hereof. If a
quorum is not present to organize a meeting, the meeting may be adjourned
pursuant to Section 2.7 hereof.
Section 2.6. Voting of Shares. Except as may otherwise be provided by the
Articles of Incorporation, each outstanding share having voting rights shall be
entitled to one vote on each matter submitted to a vote at a meeting of
shareholders. If a quorum is present, action on a matter (other than the
election of Directors) is approved if the votes cast favoring the action exceed
the votes cast opposing the action unless these Bylaws, the Articles of
Incorporation or the Code requires a greater number of affirmative votes. Unless
otherwise provided in the Articles of Incorporation, Directors are elected by a
plurality of the votes cast by the shares entitled to vote in the election at a
meeting at which a quorum is present. Shareholders do not have a right to
cumulate their votes for Directors unless the Articles of Incorporation so
provide.
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Section 2.7. Adjournments. Any meeting of the shareholders, whether or
not a quorum is present, may be adjourned by the holders of a majority of the
voting shares represented at the meeting to reconvene at a specific time and
place. It shall not be necessary to give any notice of the reconvened meeting or
of the business to be transacted, if the time and place of the reconvened
meeting are announced at the meeting which was adjourned except that if the
meeting is adjourned to a date more than 120 days after the date of the original
meeting, the Board of Directors must fix a new record date and provide notice of
the adjourned meeting to persons who are shareholders of the Corporation on the
new record date. At any such reconvened meeting at which a quorum is represented
or present, any business may be transacted which could have been transacted at
the meeting which was adjourned.
Section 2.8. Inspectors of Election. One or more inspectors of election
shall be appointed by the Board of Directors before or at each meeting of the
shareholders of the Corporation at which an election of Directors shall take
place; if no such appointment shall have been made or if the inspectors
appointed by the Board of Directors shall refuse to act or fail to attend, then
the Secretary of the Corporation (or, if he not be present, the secretary of the
meeting) shall act as the inspector of election for the meeting. The inspectors
shall receive and take in charge all proxies and ballots and shall decide all
questions touching upon the acceptance and rejection of votes. In case of a tie
vote by the inspectors on any question, the presiding officer shall decide.
Section 2.9. Action of Shareholders Without a Meeting. Subject to such
further conditions as may be required by law, any action which may be taken at a
meeting of the shareholders may be taken without a meeting if a written approval
and consent, setting forth the action authorized, shall be signed by each of the
shareholders entitled to vote on the date on which the last such shareholder
signs such approval and consent and upon the filing of such approval and consent
with the officer of the Corporation having custody of its books and records.
Such approval and consent so filed shall have the same effect as a unanimous
vote of the shareholders at a special meeting called for the purpose of
considering the action authorized.
Section 2.10. List of Shareholders. A complete list of the shareholders
entitled to vote at an ensuing meeting of shareholders arranged in alphabetical
order with the address of, and the number and class and series, if any, of
voting shares held by each shall be prepared by the Secretary, or other officer
of the Corporation having charge of the stock ledger, and shall be produced and
kept open at the time and place of the meeting and during the whole time of said
meeting shall be open to the examination of any shareholder. If the requirements
of this Section 2.10 have not been substantially complied with, the meeting
shall, on the reasonable demand of any shareholder in person or by proxy be
adjourned until the requirements are complied with. If no such demand is made,
failure to comply with the requirements of this section shall not affect the
validity of any action taken at such meeting.
Section 2.11. Notice of Business. No business may be transacted at an
annual meeting of shareholders, other than business that is either (a) specified
in the notice of meeting (or any supplement thereto) given by or at the
direction of the Board of Directors (or any duly authorized committee thereof),
(b) otherwise properly brought before the annual meeting by or at the
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direction of the Board of Directors (or any duly authorized committee thereof),
or (c) otherwise properly brought before the annual meeting by any shareholder
of the Corporation (i) who is a shareholder of record on the date of the giving
of the notice provided for in this Section 2.11 and on the record date for the
determination of shareholders entitled to vote at such annual meeting and (ii)
who complies with the notice procedures set forth in this Section 2.11. The
nomination by a shareholder of any person for election as a Director, other than
the persons nominated by the Board of Directors or any duly authorized committee
thereof, shall be considered business other than business specified in clauses
(a) and (b) above and shall be permitted only upon compliance with the
requirements of this Section 2.11.
In addition to any other applicable requirements for business to be
properly brought before an annual meeting by a shareholder, such shareholder
must have given timely notice thereof in proper written form to the Secretary of
the Corporation.
To be timely, a shareholder's notice to the Secretary must be delivered to
or mailed and received at the principal executive offices of the Corporation not
less than one hundred twenty (120) days nor more than one hundred fifty (150)
days prior to the anniversary date of the immediately preceding annual meeting
of shareholders; provided, however, that in the event that the annual meeting is
called for a date that is not within sixty (60) days before or after such
anniversary date, notice by the shareholder in order to be timely must be so
received not later than the close of business on the tenth (10th) day following
the day on which such notice of the date of the annual meeting was mailed or
such public disclosure of the date of the annual meeting was made, whichever
first occurs.
To be in proper written form, a shareholder's notice to the Secretary must
set forth as to each matter such shareholder proposes to bring before the annual
meeting (i) a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and record address of such shareholder, (iii) the class
or series and number of shares of capital stock of the Corporation which are
owned beneficially or of record by such shareholder, (iv) a description of all
arrangements or understandings between such shareholder and any other person or
persons (including their names) in connection with the proposal of such business
by such shareholder and any material interest of such shareholder in such
business, (v) a representation that such shareholder intends to appear in person
or by proxy at the annual meeting to bring such business before the meeting, and
(vi) in the case of the nomination of a person as a Director, a brief
description of the background and credentials of such person including (A) the
name, age, business address and residence address of such person, (B) the
principal occupation or employment of such person, (C) the class and number of
shares of the Corporation which are beneficially owned by such person, and (D)
any other information relating to such person that is required to be disclosed
in solicitations of proxies for election of Directors pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (including without
limitation such person's written consent to being named in the proxy statement
as a nominee and to serving as a Director if elected).
No business shall be conducted at the annual meeting of shareholders except
business brought before the annual meeting in accordance with the procedures set
forth in this
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Section 2.11; provided, however, that, once business has been properly brought
before the annual meeting in accordance with such procedures, nothing in this
Section 2.11 shall be deemed to preclude discussion by any shareholder of any
such business. If the Chairman (if there shall be one) of an annual meeting
determines that business was not properly brought before the meeting in
accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the business was not properly brought before the meeting and such
business shall not be transacted.
Section 2.12. Proxies. A shareholder entitled to vote pursuant to Section
2.6 may vote in person or by proxy duly executed in writing by the shareholder
or by his attorney-in-fact. A proxy shall not be valid after eleven (11) months
from the date of its execution, unless a longer period is expressly stated
therein. Unless written notice to the contrary is delivered to the Corporation
by the shareholder, a proxy for any meeting shall be valid for any reconvention
of any adjourned meeting. If the validity of any proxy is questioned, it must be
submitted to the Secretary of the shareholders' meeting for examination or to a
proxy officer or committee appointed by the person presiding at the meeting. The
Secretary of the meeting or, if appointed, the proxy officer or committee, shall
determine the validity or invalidity of any proxy submitted, and reference by
the Secretary in the minutes of the meeting to the regularity of a proxy shall
be received as prima facie evidence of the facts stated for the purpose of
establishing the presence of a quorum at such meeting and for all other
purposes.
Section 2.13. Conduct of Shareholders' Meetings. The Chairman of the Board
(if there shall be one) or such other person as shall be designated by the Board
of Directors from time to time shall preside at shareholders' meetings and shall
establish such reasonable procedures for the conduct of shareholders' meetings
as such officer deems to be necessary or appropriate, subject to the authority
of the Board of Directors to appoint a different presiding officer and to
establish additional or different procedures.
ARTICLE III
DIRECTORS
Section 3.1. Powers of Directors. All corporate powers shall be exercised
by or under the authority of, and the business and affairs of the Corporation
shall be managed under the direction of, the Board of Directors, subject to any
restrictions imposed by law, by the Articles of Incorporation, by these Bylaws
or by agreements among the shareholders that are otherwise lawful.
Section 3.2. Number, Election and Term of Directors. The number of
Directors of the Corporation shall be not less than five (5), the precise number
to be fixed by resolution of the Board of Directors from time to time. Unless
otherwise permitted by the Code, Directors shall be natural persons who are 18
years of age or older. At each annual meeting the shareholders shall elect the
Directors as set forth in Section 2.6. Each Director, except in case of death,
resignation, retirement, disqualification or removal, shall serve until the next
succeeding annual meeting and until his successor shall have been elected and
qualified.
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Section 3.3. Meetings of the Board; Notice of Meetings; Waiver of Notice.
The first meeting of each newly elected Board of Directors shall be held
immediately following the annual meeting of shareholders, and no notice of such
meeting shall be necessary. The Board of Directors may hold regular meetings in
accordance with such schedule as may be established by the Board of Directors,
and no notice of such regular meetings need be given. Special meetings of the
Board of Directors may be called by the Chairman of the Board (if there shall be
one), by the President, or by one-third of the Directors in office at that time,
and written notice of the date, time and place of such meetings shall be given
to each Director by first class mail at least seven (7) days before the meeting
or by telephone, telegraph, cablegram or in person at least two (2) days before
the meeting. Any Director may waive notice required to be given of a meeting,
either before or after the meeting, and shall be deemed to have waived notice if
she or he is present at or participates in such meeting unless the Director at
the beginning of the meeting (or promptly upon the Director's arrival) objects
to holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting. Neither the
business to be transacted at, nor the purpose of, any meeting of the Board of
Directors need be stated in the notice or waiver of notice of such meeting. Any
meeting may be held at any place within or without the State of Georgia.
Section 3.4. Quorum; Vote Requirement. The presence of a majority of the
Directors then in office shall constitute a quorum for the transaction of
business at any meeting. When a quorum is present, the vote of a majority of the
Directors present shall be the act of the Board of Directors, unless a greater
vote is required by law, by the Articles of Incorporation or by these Bylaws.
Section 3.5. Action of Directors Without a Meeting. Any action required by
law to be taken at a meeting of the Board of Directors, or any action which may
be taken at a meeting of the Board of Directors, or of any committee thereof,
may be taken without a meeting if written consent, setting forth the action so
taken, shall be signed by all the Directors, or all the members of the
committee, as the case may be, and be filed with the minutes of the proceedings
of the Board or the committee. Such consent shall have the same force and effect
as a unanimous vote of the Board or the committee, as the case may be.
Section 3.6. Committees. The Board of Directors may, in its discretion,
appoint committees, each consisting of one or more Directors, which shall have
and may exercise such delegated powers as shall be conferred on or authorized by
the resolutions appointing them, subject to such limitations as may be imposed
from time to time by the Code. A majority of any such committee may determine
its action, fix the date, time and place of its meetings and determine its rules
of procedure. Each committee shall keep minutes of its proceedings and actions
and shall report regularly to the Board of Directors. The Board of Directors
shall have power at any time to fill vacancies in, change the membership of, or
discharge any such committee.
Section 3.7. Removal. Any or all Directors may be removed from office at
any time with or without cause by affirmative vote of the holders of a majority
of the shares entitled to vote at an election of Directors. Removal action may
be taken at any shareholders' meeting with respect
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to which notice of such purpose has been given, and a removed Director's
successor may be elected at the same meeting to serve the unexpired term.
Section 3.8. Compensation. Directors may receive such compensation for
their services as Directors as the Board of Directors or the shareholders may
from time to time have fixed by vote. A Director may also serve the Corporation
in a capacity other than that of Director and receive compensation, as
determined by the Board of Directors, for services rendered in that other
capacity.
Section 3.9. Vacancies. A vacancy occurring in the Board of Directors by
reason of the removal of a Director by the shareholders shall be filled by the
shareholders, or, if authorized by the shareholders, by the remaining Directors.
Any other vacancy occurring in the Board of Directors may be filled by the
affirmative vote of a majority of the remaining Directors though less than a
quorum of the Board of Directors, or by the sole remaining Director, as the case
may be, or, if the vacancy is not so filled, or if no Director remains, by the
shareholders. A Director elected to fill a vacancy shall serve for the unexpired
term of his or her predecessor in office.
Section 3.10. Adjournments. A meeting of the Board of Directors, whether or
not a quorum is present, may be adjourned by a majority of the Directors present
to reconvene at a specific time and place. It shall not be necessary to give
notice of the reconvened meeting or of the business to be transacted, other than
by announcement at the meeting which was adjourned. At any such reconvened
meeting at which a quorum is present, any business may be transacted which could
have been transacted at the meeting which was adjourned.
Section 3.11. Telephone Conference Calls. Unless otherwise prohibited by
the Articles of Incorporation, members of the Board of Directors, or any
committee designated by such Board, may participate in a meeting of such Board
or committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section 3.11 shall
constitute presence in person at such meeting.
ARTICLE IV
NOTICE AND WAIVER
Section 4.1. Procedure. Whenever these Bylaws require notice to be given to
any shareholder or Director, the notice shall be given as prescribed in Sections
2.4 or 3.3 for any shareholder or Director, respectively. Whenever notice is
given to a shareholder or Director by mail, the notice shall be sent first-class
mail by depositing the same in a post office or letter box in a postage prepaid
sealed envelope addressed to the shareholder or Director at his address as it
appears on the books of the Corporation, and such notice shall be deemed to have
been given at the time the same is deposited in the United States mail.
Section 4.2. Waiver. Notice of a meeting need not be given to any
shareholder or Director who signs a waiver of such notice, in person or by
proxy, either before or after the
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meeting. Unless otherwise required by law or by these Bylaws, neither the
business transacted nor the purpose of the meeting need be specified in the
waiver. Attendance of a shareholder or Director at a meeting shall constitute a
waiver of notice of such meeting and waiver of any and all objections to the
place of the meeting, the time of the meeting, or the manner in which it has
been called or convened, except when such shareholder or Director attends such
meeting solely for the purpose of stating, at the beginning of the meeting, any
such objection or objections to the transaction of business.
ARTICLE V
OFFICERS
Section 5.1. Officers. The officers of the Corporation shall consist of a
President, a Secretary and a Chief Financial Officer, and such other officers or
assistant officers as may be elected by the Board of Directors. Any two or more
offices may be held by the same person. The Board may elect from among its
members, a Chairman, who shall preside at all meetings (unless the Board shall
otherwise determine) and shall have such other powers and duties as shall be
conferred on him by the Board of Directors.
Section 5.2. Election and Term. All officers shall be elected by the Board
of Directors and shall serve at the will of the Board of Directors and until
their successors have been elected and have qualified or until their earlier
death, resignation, removal, retirement or disqualification.
Section 5.3. President. The President shall be the chief executive of
the Corporation. He shall, under the direction of the Board of Directors,
supervise the management of the day-to-day business of the Corporation. He shall
have such further powers and duties as from time to time may be conferred on him
by the Board of Directors or any duly authorized committee thereof.
Section 5.4. Chief Financial Officer. The Chief Financial Officer shall
have custody and be responsible for all funds, securities and all financial
books and records of the Corporation, and shall have such further powers and
duties as shall be incident thereto and as otherwise conferred on him by the
Board of Directors.
Section 5.5. Secretary. The Secretary shall issue notice for and keep
the minutes of all meetings of the shareholders and the Directors and shall have
custody of the corporate seal and of all corporate books, stock books and other
like records of the Corporation. The Secretary shall also be responsible for
authenticating records of the Corporation and shall make such reports and shall
have such further powers and duties as shall be incident to his office.
Section 5.6. Other Duties and Authorities. In addition to the foregoing
especially enumerated powers and duties, and the powers and duties as generally
pertain to their respective offices, each officer, employee and agent shall have
such other duties and authorities as may be conferred on them by the Board of
Directors or any duly authorized committee thereof.
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Section 5.7. Delegation. In the case of absence or inability to act of any
officer of the Corporation and of any person herein authorized to act in his
place, the Board of Directors may from time to time delegate the powers or
duties of such officer to any other officer or any other person whom it may
select. The Board of Directors also shall have the authority to delegate to the
President or any other officer of the Corporation, from time to time, the power
to designate and appoint any other or additional officers of the Corporation and
to vest in such other or additional officers such powers and duties as shall be
consistent with such delegation by the Board of Directors.
Section 5.8. Removal. Any officer or agent elected by the Board of
Directors may be removed, with or without cause, at any time by the Board of
Directors at any meeting with respect to which notice of such purpose has been
given to the members thereof upon the majority vote of the Board of Directors. A
contract of employment for a definite term shall not prevent the removal of any
officer, but this provision shall not prevent the making of a contract of
employment with any officer and shall have no effect upon any cause of action
which any officer may have as a result of removal in breach of a contract of
employment.
Section 5.9. Bonds. The Board of Directors may by resolution require any or
all of the officers, agents or employees of the Corporation to give bonds to the
Corporation, with sufficient surety or sureties, conditioned on the faithful
performance of the duties of their respective offices or positions, and to
comply with such other conditions as may from time to time be required by the
Board of Directors.
ARTICLE VI
SHARES
Section 6.1. Form and Execution of Certificates. The shares of stock of the
Corporation shall be represented by certificates in such form as may be approved
from time to time by the Board of Directors, which certificates shall be issued
to the shareholders of the Corporation in numerical order from the stock book of
the Corporation, and each of which shall bear the name of the Corporation and
state that it is organized under the laws of the State of Georgia, the name of
the shareholder, and the number and class (and the designation of the series, if
any) of the shares represented. Each certificate shall be signed either manually
or by facsimile, by the President or a Vice President and by the Secretary or an
Assistant Secretary and shall be sealed with the seal of the Corporation or a
facsimile thereof. If the person who signed a share certificate, either manually
or in facsimile, no longer holds office when the certificate is issued, then the
certificate is nevertheless valid.
Section 6.2. Rights of Corporation with Respect to Registered Owners. Prior
to due presentation for transfer of registration of its shares, the Corporation
may treat the registered owner of the shares as the person exclusively entitled
to vote such shares, to receive any dividend or other distribution with respect
to such shares, and for all other purposes; and the Corporation shall not be
bound to recognize any equitable or other claim to or interest in such shares on
the
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part of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by law.
Section 6.3. Transfers of Shares. Shares of stock of the Corporation shall
be transferable only on the books of the Corporation, kept at the office of the
transfer agent designated to transfer the shares, and only upon surrender for
cancellation of the certificate or certificates representing the shares to be
transferred or, in the case of a certificate alleged to have been lost, stolen,
or destroyed, in accordance with the provisions of Section 6.5 of these Bylaws,
accompanied by an assignment in writing of such shares properly executed by the
shareholder of record or such shareholder's duly authorized attorney-in-fact and
with all taxes on the transfer having been paid. If the Corporation has a
transfer agent or agents or transfer clerk and registrar of transfers acting on
its behalf, the signature of any officer or representative thereof may be in
facsimile. The Corporation may refuse any requested transfer until furnished
evidence satisfactory to it that such transfer is proper. Upon the surrender of
a certificate for transfer of stock, such certificate shall at once be
conspicuously marked on its face "Cancelled" and filed with the permanent stock
records of the Corporation.
Section 6.4. Transfer Agent and Registrar. The Board of Directors may
appoint a transfer agent or agents and a registrar for the stock of the
Corporation, and may require by resolution that all stock certificates must bear
the signature of such transfer agent or agents and registrar or registrars.
Section 6.5. Lost, Stolen or Destroyed Certificates. Any person claiming a
share certificate to be lost, stolen or destroyed shall make an affidavit or
affirmation of the fact in such manner as the Board of Directors may require and
shall, if the Board of Directors so requires, give the Corporation a bond of
indemnity in form and amount, and with one or more sureties satisfactory to the
Board of Directors, as the Board of Directors may require, whereupon an
appropriate new certificate may be issued in lieu of the one alleged to have
been lost, stolen or destroyed.
Section 6.6. Fixing of Record Date. For the purpose of determining
shareholders entitled to notice or to vote at any meeting of shareholders or any
adjournment thereof, or entitled to receive payment of any dividend, or in order
to make a determination of shareholders for any other proper purpose, the Board
of Directors may fix in advance a date as the record date, such date to be not
more than 70 days prior to the date on which the particular action requiring
such determination of shareholders, is to be taken.
Section 6.7. Record Date if None Fixed. If no record date is fixed, as
provided in Section 6.6 of these Bylaws, then the record date for any
determination of shareholders which may be proper or required by law, shall be
the date on which notice is mailed, in the case of a shareholders' meeting; the
date on which the Board of Directors approves a resolution declaring a dividend,
in the case of a payment of a dividend; and the date on which any other action,
the consummation of which requires a determination of shareholders, is to be
taken.
ARTICLE VII
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INDEMNIFICATION OF DIRECTORS
Section 7.1. Mandatory Indemnification. The Corporation shall indemnify to
the fullest extent permitted by the Code any individual made a party to a
proceeding or threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (including any action by or in the right of the Corporation)
because he or she is or was a Director, or is or was serving at the request of
the Corporation as a director of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including reasonable
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such action, suit or
proceeding, in each case to the maximum extent permitted by, and in the manner
provide by the Code, if he or she acted in good faith and reasonably believed
(a) in the case of conduct in his or her official capacity, that the conduct was
in the best interests of the corporation; (b) in all other cases, that the
conduct was at least not opposed to the best interests of the Corporation; or
(c) in the case of any criminal proceeding, that he or she had no reasonable
cause to believe his conduct was unlawful.
Section 7.2. Permissive Indemnification. The Corporation shall be
authorized to indemnify to the fullest extent permitted by the Code, and to the
extent that applicable law from time to time in effect shall permit
indemnification that is broader than provided in these Bylaws, then to the
maximum extent authorized by law, any individual made a party to a proceeding or
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(including any action by or in the right of the Corporation) because he or she
is or was an officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as an officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including reasonable attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him or her in connection
with such action, suit or proceeding, in each case to the maximum extent
permitted by, and in the manner provide by the Code, if he or she acted in a
manner he or she believed in good faith to be in or not opposed to the best
interests of the Corporation and, in the case of any criminal proceeding, he or
she had no reasonable cause to believe his or her conduct was unlawful.
Section 7.3. Advances for Expenses of Directors. The Corporation shall pay
for or reimburse the reasonable expenses incurred by a Director, or a person who
was serving at the request of the Corporation as a director of another
corporation, partnership, joint venture, trust or other enterprise, who is a
party to a proceeding, and shall have the authority to pay for or reimburse the
reasonable expenses of an officer, employee or agent of the Corporation who is a
party to a proceeding, in each case in advance of disposition of a proceeding
if:
(a) Such person furnishes the Corporation a written affirmation of
his or her good faith belief that he or she has met the
standard of conduct set forth in Code Section 14-2-851 or that
the proceeding involves conduct for which liability has been
eliminated under a provision of the Articles of Incorporation
of the
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Corporation as authorized by paragraph (4) of subsection (b)
of Code Section 14-2-202; and
(b) Such person furnishes the Corporation a written undertaking,
executed personally on his or her behalf to repay any advances
if it is ultimately determined that he or she is not entitled
to indemnification under this Section 7.3.
The written undertaking required by paragraph (b) above must be an
unlimited general obligation of the Director or officer, employee or agent but
need not be secured and may be accepted without reference to financial ability
to make repayment.
Section 7.4. Indemnification Not Exclusive. The right to indemnification
and the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article VII shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
provision of the Articles of Incorporation, provision of these Bylaws,
agreement, vote of shareholders or disinterested Directors or otherwise.
Section 7.5. Amendment or Repeal. Any repeal or modification of the
foregoing provisions of this Article VII shall not adversely affect any right or
protection hereunder or any person in respect of any act or omission occurring
prior to the time of such repeal or modification.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Depositories. All funds of the Corporation shall be deposited
in the name of the Corporation in such depository or depositories as the Board
may designate and shall be drawn out on the checks, drafts or other orders
signed by such officer, officers, agent or agents as the Board may from time to
time authorize.
Section 8.2. Seal. The seal of the Corporation shall be as follows or as
otherwise may be approved by the Board of Directors from time to time:
The seal may be manually affixed to any document or may be lithographed or
otherwise printed on any document with the same force and effect as if it had
been affixed manually. The signature of the Secretary or an Assistant Secretary
shall attest the seal and may be a facsimile if and to the extent permitted by
law.
Section 8.3. Inspection of Books and Records. The Board of Directors shall
have power to determine which accounts, books and records of the Corporation
shall be open to the
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inspection of shareholders, except such as may by law be specifically open to
inspection, and shall have power to fix reasonable rules and regulations not in
conflict with the applicable law for the inspection of accounts, books and
records which by law or by determination of the Board of Directors shall be open
to inspection.
Section 8.4. Fiscal Year. The Board of Directors is authorized to fix the
fiscal year of the Corporation and to change the same from time to time as it
deems appropriate, but unless otherwise so determined shall begin on the first
day of January in each year and shall end on the last day of December in the
same year.
Section 8.5. Execution of Documents. No attestation by the Secretary or an
Assistant Secretary shall be necessary to make any contract, conveyance or other
document valid and legally binding which has been executed by and on behalf of
the Corporation by an officer or officers thereunto duly authorized in the
manner provided for in these Bylaws.
ARTICLE IX
AMENDMENT OF BYLAWS
Section 9.1. Amendment. The Board of Directors may amend or repeal these
Bylaws or adopt new bylaws by the affirmative vote of a majority of all
Directors then holding office, (a) except to the extent the Articles of
Incorporation or the Code reserves such power exclusively to the shareholders,
or (b) unless the shareholders in adopting, amending or repealing a particular
bylaw provide expressly that the Board of Directors may not amend or repeal that
bylaw. The shareholders may amend or repeal these Bylaws or adopt new Bylaws
even though these Bylaws may also be amended or repealed by the Board of
Directors.
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Exhibit 10.1
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT(this "Agreement") is made and entered into
as of August , 1997, by and among COMPUCREDIT CORPORATION, a Georgia
corporation (the "Company"), COMPUCREDIT MANAGEMENT CORP., a Georgia
corporation ("CCMC"), FRANK J. HANNA, III, as Trustee of BRAVO TRUST ONE, a
Georgia trust, U/A dated October 15, 1993 ("Trust One"), DAVID G. HANNA, as
Trust of BRAVO TRUST TWO, a Georgia trust, U/A dated October 15, 1993 ("Trust
Two"), BRETT M. SAMSKY, an individual resident of the State of Georgia
("Samsky"), RICHARD W. GILBERT, an individual resident of the State of Georgia
("Gilbert"), RICHARD R. HOUSE, an individual resident of the State of Georgia
("House"), ASHLEY L. JOHNSON, an individual resident of the State of Georgia
("Johnson"), and ATLANTIC EQUITY CORPORATION, a North Carolina corporation
("AEC")(CCMC, Trust One, Trust Two, Samsky, Gilbert, House, Johnson and AEC
being referred to herein collectively as the "Stockholders").
WITNESSETH
WHEREAS, CCMC (the "General Partner"), Trust One, Trust Two, Samsky,
Gilbert, House and Johnson (collectively, the "Limited Partners") previously
held those units of partnership interests in a limited partnership,
CompuCredit, L.P., organized under the laws of Georgia (the "Partnership"),
set forth on Exhibit A hereto; and
WHEREAS, the Company and the Partnership have entered that certain
Agreement and Plan of Merger, dated the date hereof, pursuant to which the
Class A Units and the Class C Units held by the General Partner and certain
of the Limited Partners were converted into shares of Common Stock and
Preferred Stock in the Company and the Class B Units held by certain of the
Limited Partners were converted into shares of Common Stock in the Company,
in each case as set forth on Exhibit B hereto; and
WHEREAS, AEC has entered into that certain Stock Purchase Agreement,
dated the date hereof, pursuant to which it has purchased from the Company
those shares of Common Stock set forth opposite its name on Exhibit B hereto
(the shares of Common Stock of the Company outstanding at any time being
referred to as the "Common Stock" at such time and the shares of Preferred
Stock of the Company outstanding at any time being referred to as the
"Preferred Stock" at such time; the shares of Common Stock and Preferred
Stock owned at any time by any of the Stockholders or any of their Permitted
Transferees (as hereinafter defined) being referred to as the "Shares" at
such time); and
WHEREAS, the parties to this Agreement consider it to be in their
individual and mutual best interests to provide for (i) certain restrictions
on transfer pertaining to the Shares
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held by the Stockholders, (ii) take-along and bring-along rights relating to
the Shares held by the Stockholders, and (iii) certain other matters as
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth below and other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties hereto, intending to be legally bound agree as follows:
1. RESTRICTIONS ON TRANSFER OF SHARES.
1.01 Transfer of Shares. Except as otherwise permitted herein, no
Stockholder shall sell, assign, transfer, give (whether by inter vivos
transfer or, upon the death of such Stockholder by testamentary disposition or
pursuant to the laws of intestate succession), pledge, encumber or otherwise
dispose of all or any part of such Stockholder's Shares to any person, trust,
association, partnership, firm, corporation or other legal entity (a
"Transfer") without the consent of the Stockholders owning a majority of the
Common Stock owned by the Stockholders and their Permitted Transferees,
unless such Stockholder complies with the provisions of this Article 1. A
Stockholder may Transfer all of any part of his or its Shares to any
Permitted Transferee (as hereinafter defined); provided, that prior to
effecting such a Transfer, the Permitted Transferee shall execute a
counterpart of this Agreement in accordance with Section 4.01 hereof, thereby
evidencing that the Shares held by such Permitted Transferee remain subject
to this Agreement and that such Permitted Transferee has become, for the
purposes of this Agreement, a Stockholder and is bound by the terms of this
Agreement. For the purposes of this Agreement, a "Permitted Transferee" of a
Stockholder shall mean (i) any person or entity that, directly or indirectly,
controls, is controlled by or is under common control with such Stockholder
(an "Affiliate") so long as such person or entity remains an Affiliate, or
(ii) in the case of a Stockholder who is an individual, (A) any spouse or
descendant of such Stockholder, or (B) an estate or a trust, if all the
beneficial interest in the Shares held by such estate or trust is owned by
the Stockholder and/or one of the persons specified in clause (ii)(A). For
the purposes of the definition of "Affiliate," "control" shall mean
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person, whether through the
ownership of more than fifty percent (50%) of the voting securities, by
contract or otherwise.
1.02 Termination of Transfer Restrictions. The transfer restrictions
set forth in this Article 1 with respect to the Shares shall terminate upon
the earlier of (i) the termination of this Agreement pursuant to Section 6.02
hereof and (ii) the date of the initial public offering of the Company's
Common Stock.
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2. TAG-ALONG AND BRING-ALONG RIGHTS.
2.01 Exercise of "Tag-Along Right".
(a) Transfers by the Stockholders. If one or more of the
Stockholders (the "Transferring Shareholders" for purposes of this Section
2.01) desires to accept a bona fide offer from a third party (a "Proposed
Purchaser") to purchase from the Transferring Shareholders more than fifty
percent (50%) of the total outstanding Common Stock (the "Offered Shares"),
each of the other Stockholders (a "Remaining Stockholder") may elect (the
"Tag-Along Right") to sell to such Proposed Purchaser, on the same terms and
conditions as were offered to the Transferring Stockholders, a number of the
Shares then owned by each Remaining Stockholder equal to a percentage of the
Offered Shares, which percentage shall be equal to the result obtained by
dividing (i) the number of Shares of Common Stock owned by such Remaining
Stockholder by (ii) the total number of shares of Common Stock issued and
outstanding at the time of calculation. If any Remaining Stockholders
exercise their Tag-Along Right, the Transferring Stockholders shall be
entitled to sell that portion of the Transferring Stockholders' Shares of
Common Stock equal to the difference between (a) the Offered Shares and (b)
the shares of Common Stock which the Remaining Stockholders elect to sell
pursuant to the exercise of their Tag-Along Right.
(b) Notification of Proposed Transfers. In the event of a
proposed Transfer pursuant to this Section 2.01, the Transferring
Stockholders shall notify in writing all Remaining Stockholders of the
proposed Transfer. Such notice shall set forth: (i) the name of the Proposed
Purchaser and the number of shares of Common Stock that are to be
transferred, (ii) the proposed amount and form of consideration and terms and
conditions of payment offered by such proposed transferee, and (iii) that the
Proposed Purchaser has been informed of the Tag-Along Right provided for in
this Section 2.01 and has agreed to purchase Shares in accordance with the
terms hereof. The Transferring Stockholders shall include with the notice all
documents proposed to be executed by the Remaining Stockholders in connection
with the proposed Transfer, and shall, to the extent such documents are
modified prior to such Transfer, promptly transmit such proposed modification
to each Remaining Stockholder who has provided a written notice to the
Company (the "Tag-Along Notice"). The Tag-Along Right may be exercised by any
Remaining Stockholder by delivery of the Tag-Along Notice within 30 days
following receipt of the notice specified in the immediately preceding
sentence. The Tag-Along Notice shall state the number and class of the
Stockholder's Shares that the Remaining Stockholder wishes to include in such
transfer to the proposed transferee. In the event that the Proposed Purchaser
does not purchase such shares on the same terms and conditions as those set
forth in the notice delivered by the Transferring Stockholders then the sale
by the Transferring Stockholders to the Proposed Purchaser shall be invalid.
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2.02 Exercise of "Bring-Along Right"
(a) Transfers by the Fund. If Stockholders owning more than
fifty percent (50%) of the Common Stock (the "Transferring Shareholders" for
purposes of this Section 2.02) propose to Transfer all of their Shares to a
proposed third party transferee in a bona fide, arms-length transaction,
then the Transferring Shareholders may, at their option, require (the
"Bring-Along Right") the other Stockholders to sell all of the Shares owned
by them (the "Designated Shares") to the proposed transferee for the same
consideration per share and otherwise on the same terms and conditions upon
which the Transferring Shareholders are selling their Shares.
(b) Notification of Proposed Transfer. The Transferring
Shareholders shall exercise their Bring-Along Right by sending written notice
of the exercise of the Bring-Along Right to each of the other Stockholders.
Such notice shall set forth: (i) the name and address of the proposed
transferee and the proposed amount and form of consideration per Share to be
paid by the proposed transferee and (ii) the terms and conditions of such
transaction. Such notice shall be accompanied by copies of all documents
required to be executed by the Stockholders in connection with such
transaction. Within 10 days following receipt of the notice, each of the
other Stockholders shall deliver to a representative of the Transferring
Shareholders, designated in the notice, certificates representing the
Designated Shares held by such Stockholder, duly endorsed, together with
fully executed copies of all other documents required to be executed in
connection with such transactions, including (if requested) customary legal
opinions from the counsel to such Stockholder. In the event that a
Stockholder should fail to deliver such certificates to the Transferring
Shareholders, the Company shall cause its books and records to show that such
Shares are bound by the provisions of this Section 2.02 and that such Shares
shall be transferred only to the third party purchaser upon surrender for
transfer by the holder thereof. If requested by the Transferring
Shareholders, each Stockholder also shall cause a representative that is duly
authorized to execute documents and to act on behalf of such Stockholder to
attend the closing of the transaction and to take such actions as are
reasonably requested by the Transferring Shareholders.
(c) Return of Designated Shares. If, within 120 days after the
Transferring Shareholders give such notice, the sale of the Designated Shares
by the Transferring Shareholders in accordance herewith has not been
completed, the Transferring Shareholders shall return to each Stockholder all
certificates representing the Designated Shares that such Stockholder
delivered for sale pursuant hereto.
(d) Payment for Designated Shares. Simultaneously with the
consummation of the sale of the Designated Shares by the Transferring
Shareholders and the other Stockholders pursuant to this Section 2.02, the
Transferring Shareholders shall remit to each of the Stockholders the total
sales price of the Designated Shares sold pursuant thereto (net of the other
Stockholders' pro rata share of any transaction expenses), and shall furnish
such
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other evidence of the completion and time of completion of such sale or other
disposition and the terms thereof as may be reasonably requested by such
Stockholders.
2.03 Certain Restrictions on Issuance of Capital Stock.
(a) Preemptive Rights. Except for issuances of Common
Stock (i) to employees of the Company or any subsidiary of the Company or
(ii) as consideration in connection with the acquisition of another company or
business to the seller or sellers thereof, if at any time after the date
hereof, the Company determines to issue additional Common Stock (including,
without limitation, options, warrants or securities convertible into Common
Stock) (collectively, "New Securities") to non-employee third parties, the
Company shall give written notice to AEC (i) stating the aggregate number of
such New Securities, the terms upon which such New Securities are to be
issued and the consideration (including any loans or other extensions of
credit made in connection therewith) to be paid therefor, (ii) stating the
date proposed for issuance of such New Securities (which date, the "Tender
Date", shall be not less than ten (10) business days after the date on which
such notice is given), and (iii) requesting that AEC indicate in writing
within seven (7) business days whether it will purchase a pro rata share of
such New Securities (based on its percentage ownership of aggregate Common
Stock outstanding immediately prior to such issuance of New Securities) on
the Tender Date. On or before the date which is seven (7) business days after
the date on which such notice was given, AEC shall respond to the Company in
writing indicating whether or not it wishes to purchase such pro rata share.
AEC shall purchase its New Securities on the same terms and for the same
price as specified in the notice, unless such terms have been modified with
respect to the third-party purchaser, in which event AEC shall purchase its
New Securities on the terms and for the price paid by such third-party
purchaser; provided, however, that if the modified terms are not acceptable
to AEC, AEC may revoke its election to purchase. Unless otherwise agreed, the
closing of such purchase shall occur on the Tender Date. Notwithstanding
anything herein to the contrary, the rights and obligations of the Company
and AEC under this Section 2.03(a) shall terminate upon the earlier of (i)
the fifth anniversary of the execution of this Agreement and (ii) the date of
the initial public offering of the Company's Common Stock registered under
the Securities Act (as defined below).
(b) Other Restrictions. Without the prior written
consent of the holders of ninety percent (90%) of the Common Stock of the
Corporation, the Corporation shall not be permitted to issue additional
shares of Common Stock to Frank J. Hanna, III, David G. Hanna or any of their
Affiliates.
3. ENFORCEABILITY.
3.01 Specific Performance. The parties hereto recognize and
hereby acknowledge that it is impossible to measure in money the damages
which would result to a party hereto by reason of a failure of any of the
parties hereto to perform any of the obligations imposed upon it or him under
this Agreement. Therefore, if any party hereto should institute an
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action or proceeding to enforce the provisions hereof, any person, including
the Company, against whom such action or proceeding is thereby brought hereby
waives the claim or defense that such party has an adequate remedy at law,
and such person shall not urge in any action or proceeding the claim or
defense that such a remedy at law exists.
3.02 Separate Agreement. The parties hereto recognize,
acknowledge and agree that this Agreement constitutes a separate agreement
independently supported by good and adequate consideration, the receipt and
sufficiency of which are hereby acknowledged, and that this Agreement shall
be interpreted, construed, and enforced separate and apart from any other
agreements between or among the parties hereto. The parties hereto further
agree that no claim or cause of action of any party hereto against any other
party hereto arising under any other agreement between or among the parties
hereto or out of any set of facts shall constitute a defense to the
enforcement of this Agreement.
3.03 Attempted Transfers in Contravention. Any attempted Transfer
in Contravention of this Agreement shall be void and of no effect and shall
not bind or be recognized by the Company. In the case of an attempted
Transfer not permitted hereby, the parties attempting to engage in such
Transfer shall indemnify and hold harmless (and hereby agree to indemnify and
hold harmless), the Company and the other Stockholders from all costs,
liabilities, and damages that any of such indemnified persons or entities may
incur (including, without limitation, incremental tax liability and
attorneys' fees and expenses) as a result of such attempted Transfer and
efforts to enforce the indemnity granted hereby.
4. ADDITIONAL PARTIES HERETO.
4.01 Transferees. Any transferee of a Stockholder who hereafter
becomes a holder of Shares shall and must become a party hereto by executing
a counterpart of this Agreement. Any such party executing this Agreement
shall thereafter be a party to this Agreement as fully and to the same extent
as if he or it had been an original signatory party hereof and shall be
deemed to be a Stockholder for the purposes hereof. Simultaneously with any
transfer, Exhibit B hereto will be amended and delivered to each Stockholder.
5. REGISTRATION RIGHTS.
5.01 Piggyback Registration. If at any time after the
consummation of the first underwritten public offering of its Common Stock
under the Securities Act of 1933, as amended (the "Securities Act"), the
Company proposes to register any of its Common Stock or other securities
under the Securities Act for sale to the public, whether for its own account
or for the account of other security holders or both (except with respect to
registration statements on Form S-8 or another form not available for
registering the Common Stock for sale to the public), each such time it will
give written notice to AEC of its intention so to do. Upon the written
request of
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AEC, given within 30 days after receipt of any such notice, to register any
of its Common Stock (which request shall state the intended method of
disposition thereof), the Company will use its best efforts to cause the
Common Stock as to which registration shall have been so requested to be
included in the securities to be covered by the registration statement
proposed to be filed by the Company, all to the extent requisite to permit
the sale or other disposition by AEC (in accordance with its written request)
of such Common Stock so registered. In the event that any registration
pursuant to this Section 5 shall be, in whole or in part, an underwritten
public offering of Common Stock, any request by AEC pursuant to this Section
5 to register Common Stock shall specify that either (i) such Common Stock
is to be included in the underwriting on the same terms and conditions as the
Common Stock otherwise being sold through underwriters under such
registration, or (ii) such Common Stock is to be sold in the open market
without any underwriting, on terms and conditions comparable to those
normally applicable to offerings of common stock in reasonably similar
circumstances. If and to the extent the managing underwriter shall be of the
reasonable opinion that the inclusion in any registration effected pursuant to
this Agreement of some or all of the Common Stock sought to be registered by
AEC would adversely affect the marketing of the securities to be sold by the
Company therein, the Common Stock AEC is permitted to include in the
registration will be reduced pro rata among AEC and each other stockholder of
the Company seeking to exercise registration rights similar to those granted
pursuant to this Section 5.01.
5.02 Registration Procedure and Expenses. If and whenever the
Company is required by the provisions of this Article 5 to use its best
efforts to effect the registration under the Securities Act of any of the
Common Stock held by AEC, the Company will, as promptly as practicable:
(a) prepare and file with the SEC a registration statement
with respect to such securities and use its best efforts to cause such
registration to become and remain effective for the period of the
distribution contemplated thereby (determined as hereinafter provided);
(b) Prior to the filing described in paragraph (a) above,
furnish to AEC copies of the registration statement and any amendments or
supplements thereto and any prospectus forming a part thereof, which
documents will be made available on a timely basis, for review by AEC's
counsel;
(c) notify AEC, promptly after the Company shall receive
notice thereof, of the time when the registration statement becomes effective
or when any amendment or supplement or any prospectus forming a part of the
registration statement has been filed;
(d) notify AEC promptly of any request by the SEC for the
amending or supplementing of the registration statement or prospectus or for
additional information;
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(e) (i) advise AEC after the Company shall receive notice
or otherwise obtain knowledge of the issuance of any order by the SEC
suspending the effectiveness of the registration statement or amendment
thereto or of the initiation or threatening of any proceeding for that
purpose and (ii) promptly use its reasonable efforts to prevent the issuance
of any order suspending the effectiveness of the registration statement or
amendment thereto or to obtain its withdrawal promptly if such an order
should be issued;
(f) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for the period specified in paragraph (a) above and to comply with
the provisions of the Securities Act with respect to the disposition of all
AEC's Common Stock covered by such registration statement in accordance with
AEC's intended method of disposition set forth in such registration statement
for such period;
(g) furnish to AEC and to each underwriter such number of
copies of the registration statement and the prospectus included therein
(including each preliminary prospectus) and such other documents, as such
persons may reasonably request in order to facilitate the public sale or
other disposition of AEC's Common Stock covered by such registration statement;
(h) use its reasonable efforts to register or qualify
AEC's Common Stock covered by such registration statement under the
securities or blue sky laws of such jurisdictions as AEC, or, in the case of
an underwritten public offering, the managing underwriter, shall reasonably
request;
(i) immediately notify AEC under such registration
statement and each underwriter, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus contained in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing, and, at the request of AEC, prepare
a supplement or amendment to the registration statement so that the
registration statement shall not, to the Company's knowledge, contain an
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading.
(j) make available for inspection by each seller, any
underwriter participating in any distribution pursuant to such registration
statement, and any attorney, accountant or other agent retained by such
seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such seller, underwriter, attorney, accountant or agent in connection with
such registration statement; and
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(k) cooperate and assist in any filings required to be made
with the National Association of Securities Dealers, Inc. (the "NASD") and
any performance of any due diligence investigation by any underwriter
(including any "qualified independent underwriter" as required to be
retained in accordance with the rules and regulations of the NASD).
In connection with each registration hereunder, AEC will furnish to the
Company in writing such information with respect to itself and the proposed
distribution by it as shall be reasonably necessary in order to assure
compliance with federal and applicable state securities laws. Compliance with
the obligation to furnish such information shall be a condition to the rights
afforded a AEC under this Article 5.
5.03 Expenses. All expenses incurred by the Company in complying with
this Article 5, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees and disbursements of counsel in
connection with registration under state securities laws, fees of the NASD or
any stock exchange, transfer taxes, fees of transfer agents and registrars
and costs of insurance (if any), but excluding any Selling Expenses (as
defined below), are herein called "Registration Expenses." All underwriting
discounts and selling commissions applicable to the sale of AEC's Common
Stock are herein called "Selling Expenses."
The Company will pay all Registration Expenses in connection with each
registration statement filed pursuant to this Article 5. All Selling Expenses
in connection with any registration statement filed pursuant to Section 5.01
hereof shall be borne by AEC in proportion to the number of shares sold by
AEC.
5.04 Indemnification.
(a) In the event of a registration of any of the Common Stock
of AEC under the Securities Act pursuant to Section 5.01 hereof, the Company
will indemnify and hold harmless AEC and its directors, officers, general
partners and agents, and each underwriter of such stock thereunder and its
agents, and each other person, if any, who controls AEC or underwriter within
the meaning of the Securities Act, against any losses, claims, damages, or
liabilities, joint or several, to which AEC or such underwriter or director,
officer, general partner or agent or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in any effective registration statement under which such
Common Stock was registered under the Securities Act pursuant to Section
5.01, any final prospectus contained therein, or any post-effective amendment
or supplement thereof, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therin not misleading, and will
reimburse AEC, each such underwriter, each such director, officer, general
partner or agent and each such controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such
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loss, claim, damage, liability or action; provided, however, that the Company
will not be liable in any such case if and to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by AEC, such underwriter, such
director, officer, general partner or agent or such controlling person in
writing specifically for use in such registration statement or prospectus.
(b) In the event of a registration of any of Common Stock of
AEC under the Securities Act pursuant to Section 5.01 hereof, AEC will
indemnify and hold harmless the Company, its agents and each person, if any,
who controls the Company within the meaning of the Securities Act, each
officer of the Company who signs the registration statement, each director of
the Company, each underwriter and each person who controls any underwriter
within the meaning of the Securities Act, against all losses, claims, damages
or liabilities, joint or several, to which the Company or such agent or
officer or director or underwriter or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in any effective registration statement under which such
Common Stock was registered under the Securities Act pursuant to Section
5.01, any final prospectus contained therein, or any post-effective amendment
or supplement thereof, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse the Company and each such officer, director, underwriter and
controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that AEC will be liable
hereunder in any such case if and only to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in reliance
upon and in conformity with information pertaining to AEC, as such, furnished
in writing to the Company by AEC specifically for use in such registration
statement or prospectus; provided, further, however, that the liability of
AEC hereunder shall be limited to the proceeds received by NCI from the sale
of Common Stock covered by such registration statement.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party
hereunder, notify the indemnifying party in writing thereof, but the omission
so to notify the indemnifying party shall not relieve it from any liability
which it may have to any indemnified party other than under this Section
5.04. In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the
indemnifying party to such indemnified party of its election so to assume and
undertake the defense thereof, the indemnifying party shall not be liable to
such indemnified party under this Section 5.04 for any legal expenses
subsequently
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incurred by such indemnified party in connection with the defenses thereof
other than reasonable costs of investigation and of liaison with counsel so
selected; provided, however, that, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be
reasonable defenses available to it which are different from or additional to
those available to the indemnifying party or if the interests of the
indemnified party reasonably may be deemed to conflict with the interests of
the indemnifying party, the indemnified party shall have the right to select a
separate counsel and to assume such legal defenses and otherwise to
participate in the defense of such action, with the expenses and fees of such
separate counsel and other expenses related to such participation to be
reimbursed by the indemnifying party as incurred.
5.05 Limitations on Registration Rights of Others. The Company
covenants and agrees that, from and after the date hereof, the Company will
not, without the prior written consent of AEC, enter into any agreement with
any equity holder of the Company to grant to such equity holder registration
rights more favorable to such equity holder than those granted hereunder to
AEC.
6. MISCELLANEOUS.
6.01 Legend on Stock Certificates. Each certificate representing
Shares subject to this Agreement shall bear on its face in conspicuous type
the following legend:
The shares of stock represented by this certificate (and
all transfers thereof) are subject to the terms of a
Stockholders Agreement, dated August , 1997 (and all
amendments thereto), by and among certain Stockholders of
the Company and the Company, a copy of which is on file
at the main office of the Company. Any sale, assignment,
transfer, gift, pledge, encumbrance or other disposition
of the shares evidenced by this certificate not in
conformity with said Agreement shall be invalid.
In the event such legend cannot practically be placed on the face of such
certificate, such legend shall be set out in conspicuous type on the back of
the certificate, and notice thereof shall be given in conspicuous type on the
front.
6.02 Termination. Unless earlier terminated by the written
agreement of the parties hereto, including all of the Stockholders and their
transferees who may hereafter become party hereto, this Agreement shall
terminate upon the sale of all or substantially all of the assets of the
Company or the acquisition of a single person of all of the outstanding
capital stock of the Company.
11
<PAGE>
6.03 Entire Agreement: Binding Effect: Governing Law. This
Agreement constitutes the entire agreement of the parties with respect to the
subject matter hereof and,except as provided in Section 4.01 hereof, may not
be modified or amended except in a writing executed by all the parties
hereto. Except as otherwise provided herein, all covenants and agreements
contained in this Agreement by or on behalf of any of the parties hereto
shall bind and inure to the benefit of the permitted transferees, successors
and assigns of the parties hereto whether expressed or not. This Agreement
shall be governed by and construed in accordance with the laws of the State
of Georgia (without regard to the conflict of laws principles thereof).
6.04 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.05 Headings. Section headings are for purposes of convenience
and reference only and do not form a part of, nor are they to be referred to
in the interpretation or construction of this Agreement.
6.06 Notices. All notices, requests, consents and other
communications to be given under or by reason of this Agreement shall be in
writing and shall be delivered personally, by facsimile, by overnight courier
service or mailed by certified or first class registered mail, postage
prepaid, in any case addressed as follows:
If to the Company, at
CompuCredit Corporation
Two Ravinia Drive
Suite 1750
Atlanta, Georgia 30346
Attention: Brett M. Samsky
Facsimile: (770) 901-5815
if to any Stockholder, to such Stockholder at the address or facsimile number
set forth for such Stockholder on Exhibit B hereto, or, in any such case, at
such other address or addresses as shall have been furnished in writing by
such party to the others. Any such notice, payment, demand, or communication
shall be deemed to be delivered, given, and received for all purposes hereof
(x) on the date of receipt if delivered personally or by courier, (y) five
days after posting if transmitted by mail, or (z) the date of transmission if
by telecopy, provided that the party to whom the telecopy was sent
acknowledges that such telecopy was received by such party in legible form,
or that such party responds to the telecopy without indicating that any part
of it was received in illegible form, whichever shall first occur.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
BRAVO TRUST ONE, U/A
By: /s/Frank J. Hanna, III
-----------------------------------
Frank J. Hanna, III
Trustee
BRAVO TRUST TWO, U/A
By: /s/David G. Hanna
-----------------------------------
David G. Hanna
Trustee
/s/Brett M. Samsky
--------------------------------------
Brett M. Samsky
/s/Richard W. Gilbert
--------------------------------------
Richard W. Gilbert
/s/Richard R. House
--------------------------------------
Richard R. House
/s/Ashley L. Johnson
--------------------------------------
Ashley L. Johnson
COMPUCREDIT CORPORATION
By: /s/Brett M. Samsky
-----------------------------------
Brett M. Samsky
Chief Financial Officer
13
<PAGE>
COMPUCREDIT MANAGEMENT CORP.
By: /s/Brett M. Samsky
-----------------------------------
Brett M. Samsky
Chief Financial Officer
ATLANTIC EQUITY CORPORATION
By: /s/Graham W. Denton, Jr.
-----------------------------------
Graham W. Denton, Jr.
Executive Vice President
14
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
Series A Series B Series C
Partner Units Units Units
- ------- ---------- ---------- ----------
<S> <C> <C> <C>
Bravo Trust One 41.5210
Bravo Trust Two 41.5210
Brett M. Samsky 2.9580 1.7755
Richard W. Gilbert 9.8639
Richard R. House 2.0182
Ashley L. Johnson 0.2523
CompuCredit Management Corp. 1.0000
</TABLE>
15
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
Common Preferred
Stockholder Stock Stock
- ----------- ---------- ---------
<S> <C> <C>
Bravo Trust One 411,466 95,451
Bravo Trust Two 411,466 95,451
Frank J. Hanna, III 411,466
David G. Hanna 411,466
Brett M. Samsky 93,816 6,800
Richard W. Gilbert 195,500
Richard R. House 40,000
Ashley L. Johnson 5,000
CompuCredit Management Corp. 19,820 2,298
Atlantic Equity Corporation 61,855
---------- ---------
2,061,855 200,000
</TABLE>
<PAGE>
COUNTERPART TO STOCKHOLDERS AGREEMENT
In consideration of the transfer of the 411,466 shares to me, Frank J.
Hanna, III, from Bravo Trust One and in accordance with Section 4.01 of that
certain Stockholders Agreement, dated August 29, 1997, by and among
CompuCredit Corporation and its stockholders (the "Stockholders Agreement"),
I hereby become a party to the Stockholders Agreement and acknowledge that I
am bound by its terms and conditions to the same extent as if I had been
an original signatory party thereto.
Date: September 19, 1997
------------------
In Presence of: /s/ Frank J. Hanna, III
------------------------
Frank J. Hanna, III
/s/ Brett M. Samsky
- -------------------------
<PAGE>
COUNTERPART TO STOCKHOLDERS AGREEMENT
In consideration of the transfer of the 411,466 shares to me, David G.
Hanna, from Bravo Trust Two and in accordance with Section 4.01 of that
certain Stockholders Agreement, dated August 29, 1997, by and among
CompuCredit Corporation and its stockholders (the "Stockholders Agreement"),
I hereby become a party to the Stockholders Agreement and acknowledge that I
am bound by its terms and conditions to the same extent as if I had been
an original signatory party thereto.
Date: September 19, 1997
------------------
In Presence of: /s/ David G. Hanna
-------------------
David G. Hanna
/s/ Brett M. Samsky
- -------------------------
<PAGE>
STOCK POWER
Frank J. Hanna, III, as Trustee of Bravo Trust One under agreement
with Vail D. Hanna dated October 15, 1993, does hereby distribute, assign and
transfer unto Frank J. Hanna, III, in his individual capacity, 411,466 shares
of the Common Stock of CompuCredit Corporation, a Georgia corporation (the
"Company"), standing in the name of said Trust on the books of said Company
represented by Certificate No. 2 herewith and does hereby irrevocably
constitute and appoint_______________as attorney-in-fact to transfer the said
stock on the books of the within named Company with full power of
substitution in the premises.
Date: September 19, 1997 BRAVO TRUST ONE
------------------
In Presence of: By: /s/ Frank J. Hanna, III
---------------------------
Frank J. Hanna, III
/s/ Brett M. Samsky
- ------------------------- Trustee
<PAGE>
STOCK POWER
David G. Hanna, as Trustee of Bravo Trust Two under agreement with Vail
D. Hanna dated October 15, 1993, does hereby distribute, assign and transfer
unto David G. Hanna, in his individual capacity, 411,466 shares of the Common
Stock of CompuCredit Corporation, a Georgia corporation (the "Company"),
standing in the name of said Trust on the books of said Company represented
by Certificate No. 3 herewith and does hereby irrevocably constitute and
appoint ______________________________ as attorney-in-fact to transfer the
said stock on the books of the within named Company with full power of
substitution in the premises.
Date: September 19, 1997 BRAVO TRUST TWO
---------------------------------
In Presence of: By: /s/ David G. Hanna
---------------------------
David G. Hanna
Trustee
/s/ Brett M. Samsky
- ---------------------------------------
<PAGE>
Exhibit 10.2
CompuCredit Corporation
STOCK OPTION PLAN
ARTICLE I
Purpose, Scope and Administration of the Plan
1.1 Purpose. The purpose of this Stock Option Plan is to maximize the
long-term success of CompuCredit Corporation (the "Company"), and its
affiliates, to ensure a balanced emphasis on both current and long-term
performance and to enhance participants' identification with growth in
shareholder value by providing financial incentives to selected members of its
and its affiliates' boards of directors, employees, consultants and advisers who
are in positions to make significant contributions toward that success. It is
intended that the Company will, through the grant of options to purchase its
common stock, attract and retain (and allow its affiliates to attract and
retain) highly qualified and competent employees and directors and motivate such
employees and directors to exert their best efforts on behalf of the Company and
its affiliates.
1.2 Definitions. Unless the context clearly indicates otherwise, for
purposes of this Plan:
(a) "Board of Directors" means the Board of Directors of
the Company.
(b) "Code" means the Internal Revenue Code of 1986, as
amended.
(c) "Committee" means the Compensation Committee of the Board
of Directors, which shall be composed of two or more members appointed from time
to time by the Board of Directors from among its members. If the Board of
Directors does not appoint a [Compensation] Committee, all references in this
Plan to the "Committee" shall be deemed to be references to the Board of
Directors where the context so permits or requires.
(d) "Common Stock" means the Common Stock of the Company, no
par value per share, or such other class of shares or other securities to which
the provisions of the Plan may be applicable by reason of the operation of
Section 3.1 hereof.
(e) "Company" means the Company and any affiliates of the
Company, including affiliates of the Company which become such after adoption of
this Plan; provided, however, that for purposes of granting Incentive Stock
Options, the term "Company" shall include
<PAGE>
only the Company and its subsidiaries
that are corporations in which the Company directly or indirectly owns stock
possessing 50 percent or more of the total combined voting power of all classes
of stock in such corporation as provided in Code Section 424(f).
(f) "Fair Market Value" of a share of Common Stock on a
specified date means:
(i) if the Common Stock is then traded on a national
securities exchange, the closing price on such date of a share
of the Common Stock as traded on the largest securities
exchange on which it is then traded; or
(ii) if the Common Stock is not then traded on a
national securities exchange, the mean between the closing
composite inter-dealer "bid" and "ask" prices for Common
Stock, as quoted on the NASDAQ National Market System (A) on
such date, or (B) if no "bid" and "ask" prices are quoted on
such date, then on the next preceding date on which such
prices were quoted; or
(iii) if the Common Stock is not then traded on a
national securities exchange or quoted on the NASDAQ National
Market System, the value determined in good faith by the
Committee.
(g) "Grant Date," as used with respect to a particular Option,
means the date as of which the Option is granted by the Committee pursuant to
the Plan.
(h) "Grantee" means the person to whom an Option is granted by
the Committee pursuant to the Plan.
(i) "Incentive Stock Option" means an Option, or any portion
thereof, granted to an employee of the Company which qualifies as an Incentive
Stock Option as described in Section 422 of the Code, unless the Committee
expressly designates the Option, or such portion thereof, as a Nonqualified
Stock Option.
(j) "Nonqualified Stock Option" means any option granted under
this Plan, other than an Incentive Stock Option.
(k) "Option" means an Option granted by the Committee pursuant
to Article II to purchase shares of Common Stock, which shall be designated at
the time of grant as either an Incentive Stock Option or a Nonqualified Stock
Option, as provided in Section 2.1 hereof.
(l) "Option Agreement" means the agreement between the Company
and a Grantee under which the Grantee is granted an Option pursuant to the Plan.
Option Agreements need not be identical with other Option Agreements, either in
form or substance, and need only conform to the terms and conditions of this
Plan.
2
<PAGE>
(m) "Option Period" means, with respect to any Option granted
hereunder, the period beginning on the Grant Date and ending at such time not
later than the tenth anniversary of the Grant Date as the Committee in its sole
discretion shall determine and during which the Option may be exercised.
(n) "Plan" means this the Company Stock Option Plan as set
forth herein and as amended from time to time.
1.3 Aggregate Limitation.
(a) The maximum number of shares of Common Stock with respect
to which Options may be granted shall not exceed a total of 1,200,000 shares in
the aggregate, subject to possible adjustment in accordance with Section 3.1.
(b) Any shares of Common Stock to be delivered by the Company
upon the exercise of Options shall, at the discretion of the Board of Directors,
be issued from the Company's authorized but unissued shares of Common Stock or
transferred from any available Common Stock held in treasury.
(c) The Committee may grant new Options hereunder with respect
to any shares for which an Option expires or otherwise terminates prior to being
exercised.
1.4 Administration of the Plan.
(a) The Plan shall be administered by the Committee, which
shall have the authority:
(i) To determine the directors, employees,
consultants and advisers of the Company to whom, and the times
at which, Options shall be granted, and the number of shares
of Common Stock to be subject to each such Option, taking into
consideration the nature of the services rendered by the
particular Grantee, the Grantee's potential contribution to
the long-term success of the Company and such other factors as
the Committee in its discretion may deem relevant;
(ii) To interpret and construe the provisions of the
Plan and to establish rules and regulations relating to it;
(iii) To prescribe the terms and conditions of the
Option Agreements for the grant of Options (which need not be
identical for all Grantees) in accordance and consistent with
the requirements of the Plan; and
(iv) To make all other determinations necessary or
advisable to administer the Plan in a proper and effective
manner.
3
<PAGE>
(b) All decisions and determinations of the Committee in the
administration of the Plan and on other matters concerning the Plan or any
Option shall be final, conclusive and binding on all persons, including (but not
by way of limitation) the Company, the shareholders and directors of the
Company, and any persons having any interest in any Options. The Committee shall
be entitled to rely in reaching its decisions on the advice of counsel (who may
be counsel to the Company).
1.5 Eligibility for Awards. The Committee shall in accordance with
Article II designate from time to time the directors, employees, consultants and
advisers of the Company who are to be granted Options. In no event may a person
who is not an employee of the Company be granted an Incentive Stock Option under
the Plan.
1.6 Effective Date and Duration of Plan. The Plan shall become
effective on the date of its adoption by the Board of Directors; provided, that
any grant of Options under the Plan prior to approval of the Plan by the
shareholders of the Company is subject to such shareholder approval within 12
months of adoption of the Plan by the Board of Directors. Unless previously
terminated by the Board of Directors, the Plan (but not any Options then
outstanding) shall terminate on the tenth anniversary of its adoption by the
Board of Directors.
ARTICLE II
Stock Options
2.1 Grant of Options.
(a) The Committee may from time to time, subject to the
provisions of the Plan, grant Options to directors, employees, consultants and
advisers of the Company under appropriate Option Agreements to purchase shares
of Common Stock up to the aggregate number of shares of Common Stock set forth
in Section 1.3(a).
(b) The Committee may designate as an Incentive Stock Option
any Option (or portion thereof) granted to an employee of the Company which
satisfies the requirements of Sections 2.2 and 2.3 hereof. Any portion of an
Option that is not designated as an Incentive Stock Option (or otherwise does
not qualify as an Incentive Stock Option) shall be a Nonqualified Stock Option.
A Nonqualified Stock Option must satisfy the requirements of Section 2.2 hereof,
but shall not be subject to the requirements of Section 2.3.
2.2 Option Requirements.
(a) An Option shall be evidenced by an Option Agreement
specifying the number and class of shares of Common Stock that may be purchased
upon its exercise and
4
<PAGE>
containing such other terms and conditions consistent with the Plan as the
Committee may determine to be applicable to that Option.
(b) No Option shall be granted under the Plan on or after the
tenth anniversary of the date upon which the Plan was adopted by the Board of
Directors.
(c) An Option shall expire by its terms at the expiration of
the Option Period and shall not be exercisable thereafter.
(d) The Committee may provide in the Option Agreement for the
expiration or termination of the Option prior to the expiration of the Option
Period, upon the occurrence of any event specified by the Committee.
(e) The Committee may provide in the Option Agreement for
vesting periods which require the passage of time and/or the occurrence of
events in order for the Option to become exercisable.
(f) The option price per share of Common Stock of an Incentive
Stock Option shall not be less than the Fair Market Value of a share of Common
Stock on the Grant Date. The option price per share of Common Stock of a
Nonqualified Stock Option shall be such price as shall be determined by the
Committee at the time any such Nonqualified Option is granted, and may be
greater than, equal to, or less than the Fair Market Value of a share of Common
Stock at the time such Nonqualified Option is granted.
(g) An Option shall not be transferable other than by will or
the laws of descent and distribution, except that any vested portion of
Nonqualified Stock Options may be transferred if the transfer is approved in
advance in writing by the Committee or Board of Directors in their sole
discretion. Unless transferred with approval as provided in the preceding
sentence, during the Grantee's lifetime an Option shall be exercisable only by
the Grantee or, if the Grantee is disabled and the Option remains exercisable,
by his or her duly appointed guardian or other legal representative. Upon the
Grantee's death, but only to the extent that the Option is otherwise exercisable
hereunder, an Option may be exercised by the Grantee's legal representative or
by a person who receives the right to exercise the Option under the Grantee's
will or by the applicable laws of descent and distribution.
(h) Each Option Agreement shall contain an agreement that,
upon demand by the Committee for such a representation, the Grantee (or any
person acting on the Grantee's behalf) shall deliver to the Committee at the
time of any exercise of an Option a written representation that the Common Stock
to be acquired upon such exercise is to be acquired for investment and not for
resale or with a view to the distribution thereof or such other representation
as may be required by the Committee. Upon such demand, delivery of such
representation prior to the delivery of any Common Stock issued upon exercise of
an Option and prior to the expiration of the Option period
5
<PAGE>
shall be a condition precedent to the right of the Grantee or such other person
to purchase any shares of Common Stock.
(i) A person electing to exercise an Option shall give written
notice of election to the Company in such form as the Committee may require,
accompanied by payment of the full purchase price of the shares of Common Stock
for which the election is made. Payment of the purchase price shall be made in
cash or in such other form (a note or other evidence of indebtedness or other
form of deferred payment) as the Committee may specify in the applicable Option
Agreement.
2.3 Incentive Stock Option Requirements.
(a) An Option granted to an employee of the Company and
designated by the Committee as an Incentive Stock Option is intended to qualify
as an "incentive stock option" within the meaning of Section 422 of the Code and
shall satisfy, in addition to the conditions of Section 2.2 above, the
conditions set forth in this Section 2.3.
(b) An Incentive Stock Option shall not be granted to an
individual who on the Grant Date owns stock possessing more than ten percent of
the total combined voting power of all classes of stock of the Company, unless
the option price per share of Common Stock will not be less than 110% of the
Fair Market Value thereof on the Grant Date and the Option Period does not
extend beyond five years from the Grant Date.
(c) The aggregate Fair Market Value, determined on the Grant
Date, of the shares of Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by a Grantee during any calendar year
(under the Plan or any other plan of the Company or any parent or subsidiary
thereof) shall not exceed $100,000.
ARTICLE III
General Provisions
3.1 Adjustment Provisions.
(a) In the event of:
(i) payment of a stock dividend in respect of
Common Stock; or
(ii) any recapitalization, reclassification, split-up
or consolidation of or other change in the Common Stock; or
6
<PAGE>
(iii) any exchange of the outstanding shares of
Common Stock in connection with a merger, consolidation or
other reorganization of or involving the Company or a sale by
the Company of all or a portion of its assets, for a different
number or class of shares of stock or other securities of the
Company or for shares of the stock or other securities of any
other corporation;
then the Committee shall, in such manner as it may determine in its sole
discretion, appropriately adjust the number and class of shares or other
securities which shall be subject to Options and the purchase price per share
which must be paid thereafter upon exercise of any Option. Any such adjustments
made by the Committee shall be final, conclusive and binding upon all persons,
including (but not by way of limitation) the Company, the shareholders and
directors of the Company, and any persons having any interest in any Options
which may be granted under the Plan.
(b) Except as provided above in subparagraph (a) of this
paragraph 3.1, issuance by the Company of shares of stock of any class or
securities convertible into shares of stock of any class shall not affect the
Options.
3.2 Additional Conditions. Any shares of Common Stock issued or
transferred under any provision of the Plan may be issued or transferred subject
to such conditions, in addition to those specifically provided in the Plan, as
the Committee or the Company may impose, and may require as a condition to
exercise of the Option that the Grantee (or any person acting on the Grantee's
behalf) enter into any agreement or execute any acknowledgment that the
Committee shall deem necessary to ensure that the shares of Common Stock
acquired pursuant to the Option will be subject to any shareholders agreement as
may be in effect at the time such Option is exercised.
3.3 No Rights as Shareholder or to Employment. No Grantee or any other
person authorized to purchase Common Stock upon exercise of an Option shall have
any interest in or shareholder rights with respect to any shares of the Common
Stock which are subject to any Option until certificates evidencing the shares
have been issued and delivered to the Grantee or any such person upon the
exercise of the Option. Furthermore, an Option shall not confer upon any Grantee
any rights to employment or any other relationship with the Company, including
without limitation any right to continue in the employ of the Company, nor
affect the right of the Company to terminate the employment or other
relationship of the Grantee with the Company at any time with or without cause.
3.4 Legal Restrictions. If in the opinion of legal counsel for the
Company the issuance or sale of any shares of Common Stock pursuant to the
exercise of an Option would not be lawful for any reason, including (but not by
way of limitation) the inability or failure of the Company to obtain from any
governmental authority or regulatory body the authority deemed necessary by such
counsel for such issuance or sale, the Company shall not be obligated to issue
or sell any Common Stock pursuant to the exercise of an Option to a Grantee or
any other authorized person unless the
7
<PAGE>
Company receives evidence satisfactory to its legal counsel that the issuance
and sale of the shares would not constitute a violation of any applicable
securities laws. The Company shall in no event be obligated to take any action
which may be required in order to permit, or to remedy or remove any prohibition
or limitation on, the issuance or sale of such shares to any Grantee or other
authorized person.
3.5 Rights Unaffected. The existence of the Options shall not affect:
the right or power of the Company and its shareholders to make adjustments,
recapitalizations, reorganizations or other changes in the the Company's capital
structure or its business; any issuance of bonds, debentures, preferred or prior
preference stocks affecting the Common Stock or the rights thereof; the
dissolution or liquidation of the Company, or sale or transfer of any part of
its assets or business; or any other corporate act, whether of a similar
character or otherwise.
3.6 Withholding Taxes. As a condition to exercise of an Option, the
Company may in its sole discretion withhold or require the Grantee to pay or
reimburse the Company for any taxes which the Company determines are required to
be withheld in connection with the grant or any exercise of an Option.
3.7 Choice of Law. The validity, interpretation and administration of
the Plan and of any rules, regulations, determinations or decisions made
thereunder, and the rights of any and all persons having or claiming to have any
interest therein or thereunder, shall be determined exclusively in accordance
with the laws of the State of Georgia. Without limiting the generality of the
foregoing, the period within which any action in connection with the Plan must
be commenced shall be governed by the laws of the State of Georgia, without
regard to the place where the act or omission complained of took place, the
residence of any party to such action or the place where the action may be
brought or maintained.
3.8 Amendment, Suspension and Termination of Plan. The Plan may from
time to time be terminated, suspended or amended by the Board of Directors in
such respects as it may deem advisable, including any such amendment effected
(i) so that the Incentive Stock Options granted hereunder shall be "incentive
stock options" as such term is defined in Section 422 of the Code, or (ii) to
conform to any change in any law or regulation governing the Plan, or the
Options granted hereunder; provided, however, that no such amendment shall
change the following unless approved by the shareholders of the Company within
twelve months following the date such amendment is adopted:
(A) The maximum aggregate number of shares for which Options
may be granted under the Plan, except as required under any adjustment
pursuant to Section 3.1 hereof; or
(B) The requirements as to eligibility for participation in
the Plan in any material respect.
8
<PAGE>
(C) Extend the term of the Plan.
3.9 Headings. The headings in this Plan are for convenience only and
are not to be used in interpreting the meaning or effect of any provisions
hereof.
9
<PAGE>
EXECUTION COPY
Exhibit 10.4.1
COMPUCREDIT FUNDING CORP.,
Transferor,
COMPUCREDIT CORPORATION,
Servicer,
and
BANKERS TRUST COMPANY,
Trustee
COMPUCREDIT CREDIT CARD MASTER TRUST
POOLING AND SERVICING AGREEMENT
Dated as of August 29, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
DEFINITIONS
Section 1.01. Definitions.................................................. 1
Section 1.02. Other Definitional Provisions................................ 24
ARTICLE II
CONVEYANCE OF RECEIVABLES
Section 2.01. Conveyance of Receivables.................................... 26
Section 2.02. Acceptance by Trustee........................................ 28
Section 2.03. Representations and Warranties of Each
Transferor Relating to Such Transferor...................... 29
Section 2.04. Representations and Warranties of each
Transferor Relating to the Agreement and
Any Supplement and the Receivables.......................... 31
Section 2.05. Treatment of Ineligible Receivables.......................... 33
Section 2.06. Reassignment of Certificateholders'
Interest in Trust Portfolio................................. 34
Section 2.07. Covenants of Each Transferor................................. 35
Section 2.08. Covenants of Each Transferor with Respect
to Receivables Purchase Agreement........................... 39
Section 2.09. Addition of Accounts......................................... 40
Section 2.10. Defaulted Receivables........................................ 42
Section 2.11. Account Allocations.......................................... 42
Section 2.12. Discount Option.............................................. 43
ARTICLE III
ADMINISTRATION AND SERVICING
OF RECEIVABLES
Section 3.01. Acceptance of Appointment and Other
Matters Relating to the Servicer............................ 44
Section 3.02. Servicing Compensation....................................... 45
Section 3.03. Representations, Warranties and Covenants
of the Servicer............................................. 46
Section 3.04. Reports and Records for the Trustee.......................... 49
Section 3.05. Annual Certificate of Servicer............................... 49
Section 3.06. Annual Servicing Report of Independent
Public Accountants; Copies of Reports
Available................................................... 49
Section 3.07. Tax Treatment................................................ 50
Section 3.08. Notices to CompuCredit....................................... 51
Section 3.09. Adjustments.................................................. 51
Section 3.10. Reports to the Commission.................................... 52
ARTICLE IV
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
RIGHTS OF CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
Section 4.01. Rights of Certificateholders................................. 53
Section 4.02. Establishment of Collection Account and
Special Funding Account..................................... 53
Section 4.03. Collections and Allocations.................................. 56
Section 4.04. Shared Principal Collections................................. 57
Section 4.05. Additional Withdrawals from the Collection
Account..................................................... 57
Section 4.06. Allocation of Trust Assets to Series or
Groups....................................................... 58
ARTICLE V
DISTRIBUTIONS AND REPORTS TO
CERTIFICATEHOLDERS
ARTICLE VI
THE CERTIFICATES
Section 6.01. The Certificates............................................. 60
Section 6.02. Authentication of Certificates............................... 60
Section 6.03. New Issuances................................................ 61
Section 6.04. Registration of Transfer and Exchange of
Certificates................................................ 62
Section 6.05. Mutilated, Destroyed, Lost or Stolen
Certificates................................................ 66
Section 6.06. Persons Deemed Owners........................................ 66
Section 6.07. Appointment of Paying Agent.................................. 67
Section 6.08. Access to List of Registered
Certificateholders' Names and Addresses..................... 68
Section 6.09. Authenticating Agent......................................... 68
Section 6.10. Book-Entry Certificates...................................... 69
Section 6.11. Notices to Clearing Agency................................... 70
Section 6.12. Definitive Certificates...................................... 70
Section 6.13. Global Certificate; Exchange Date............................ 71
Section 6.14. Meetings of Certificateholders............................... 73
Section 6.15. Uncertificated Classes....................................... 75
ARTICLE VII
OTHER MATTERS RELATING TO EACH TRANSFEROR
Page
Section 7.01. Liability of each Transferor................................. 76
Section 7.02. Merger or Consolidation of, or Assumption
of the Obligations of, a Transferor......................... 76
Section 7.03. Limitations on Liability of Each
Transferor.................................................. 77
ARTICLE VIII
OTHER MATTERS RELATING TO THE SERVICER
Section 8.01. Liability of the Servicer.................................... 78
Section 8.02. Merger or Consolidation of, or Assumption of the
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Obligations of, the Servicer.......................... 78
Section 8.03. Limitation on Liability of the Servicer
and Others.................................................. 79
Section 8.04. Servicer Indemnification of the Trust and
the Trustee................................................. 79
Section 8.05. Resignation of the Servicer.................................. 79
Section 8.06. Access to Certain Documentation and
Information Regarding the Receivables....................... 80
Section 8.07. Delegation of Duties......................................... 80
Section 8.08. Examination of Records....................................... 81
ARTICLE IX
INSOLVENCY EVENTS
Section 9.01. Rights upon the Occurrence of an
Insolvency Event............................................ 82
ARTICLE X
SERVICER DEFAULTS
Section 10.01. Servicer Defaults............................................ 83
Section 10.02. Trustee To Act; Appointment of Successor..................... 86
Section 10.03. Notification to Certificateholders........................... 87
ARTICLE XI
THE TRUSTEE
Section 11.01. Duties of Trustee............................................ 88
Section 11.02. Certain Matters Affecting the Trustee........................ 90
Section 11.03. Trustee Not Liable for Recitals in
Certificates................................................ 91
Section 11.04. Trustee May Own Certificates................................. 92
Section 11.05. The Servicer To Pay Trustee's Fees and
Expenses.................................................... 92
Section 11.06. Eligibility Requirements for Trustee......................... 92
Section 11.07. Resignation or Removal of Trustee............................ 93
Section 11.08. Successor Trustee............................................ 94
Section 11.09. Merger or Consolidation of Trustee........................... 94
Section 11.10. Appointment of Co-Trustee or Separate
Trustee..................................................... 94
Section 11.11. Tax Returns.................................................. 96
Section 11.12. Trustee May Enforce Claims Without
Possession of Certificates.................................. 96
Section 11.13. Suits for Enforcement........................................ 96
Section 11.14. Rights of Certificateholders To Direct
Trustee..................................................... 97
Section 11.15. Representations and Warranties of Trustee.................... 97
Section 11.16. Maintenance of Office or Agency.............................. 98
ARTICLE XII
TERMINATION
Section 12.01. Termination of Trust......................................... 99
Section 12.02. Final Distribution........................................... 99
Section 12.03. Transferor's Termination Rights..............................100
Section 12.04 Defeasance...................................................101
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ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.01. Amendment; Waiver of Past Defaults...........................103
Section 13.02. Protection of Right, Title and Interest to
Trust.......................................................105
Section 13.03. Limitation on Rights of Certificateholders...................106
Section 13.04. Governing Law................................................107
Section 13.05. Notices; Payments............................................107
Section 13.06. Severability of Provisions...................................109
Section 13.07. Certificates Nonassessable and Fully Paid....................109
Section 13.08. Further Assurances...........................................109
Section 13.09. Nonpetition Covenant.........................................109
Section 13.10. No Waiver; Cumulative Remedies...............................110
Section 13.11. Counterparts.................................................110
Section 13.12. Third-Party Beneficiaries....................................110
Section 13.13. Actions by Certificateholders................................110
Section 13.14. Rule 144A Information........................................110
Section 13.15. Merger and Integration.......................................111
Section 13.16. Headings.....................................................111
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EXHIBITS
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Exhibit A Form of Transferor Certificate
Exhibit B Form of Annual Servicer's Certificate
Exhibit C-1 Form of Opinion of Counsel with respect to
Amendments
Exhibit C-2 Form of Opinion of Counsel with respect to
Accounts
Exhibit C-3 Provisions to be Included in Annual Opinion of
Counsel
Exhibit D-1 Form of Clearance System Certificate to be
delivered to the Trustee by Euroclear or Cedel
Exhibit D-2 Form of Certificate to be delivered to Euroclear or
Cedel with respect to Registered Certificates sold
to Qualified Institutional Buyers ("QIBs")
Exhibit D-3 Form of Certificate to be delivered to Euroclear
or Cedel by a beneficial owner other than a QIB
Exhibit E-1 Private Placement Legend
Exhibit E-2 Form of Representation Letter
Exhibit E-3 ERISA Legend
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SCHEDULES
Schedule 1 List of Accounts [Deemed Incorporated]
<PAGE>
POOLING AND SERVICING AGREEMENT dated as of August 29, 1997, among
COMPUCREDIT FUNDING CORP., a Georgia corporation as Transferor; COMPUCREDIT
CORPORATION, a Georgia corporation, as Servicer; and Bankers Trust Company 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 1.01. 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 Automatic
Additional Account (but only from and after the Addition Date with respect
thereto), (c) each Related Account, and (d) each Transferred Account.
"Account Schedule" means a computer file or microfiche list containing
a true and complete list of Accounts, identified by account number and setting
forth the aggregate amount outstanding in such Account and the aggregate amount
of Principal Receivables outstanding in such account as of (a) the Initial
Cut-Off Date (for the Account Schedule delivered on the first Closing Date) or
(b) the end of the related Monthly Period (for any Account Schedule relating to
Automatic Additional Accounts).
"Account Owner" shall mean Columbus Bank, or any other entity which is
the issuer of the credit card relating to an Account pursuant to a Credit Card
Agreement.
"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" means (a) as to Automatic Additional Accounts, the date
on which such accounts are created or otherwise become Automatic Additional
Accounts pursuant to Section 2.09(a) and (b) as to Participation Interests, the
date from and after which such Participation Interests are to be included as
Trust Assets pursuant to Section 2.09(b).
"Additional Transferor" shall have the meaning specified in subsection
2.09(d).
<PAGE>
"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.
"Affinity Card Agreement" shall mean the Affinity Card Agreement dated
as of January 6, 1997, between Columbus Bank and CompuCredit, and all
amendments, modifications and supplements thereto and restatements thereof.
"Aggregate Invested Amount" shall mean, as of any date of
determination, the aggregate 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.
"Applicants" shall have the meaning specified in Section 6.08.
"Appointment Date" shall have the meaning specified in subsection
9.01(a).
"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 Additional Account" means each Visa(R) consumer revolving
credit card account established pursuant to a Credit Card Agreement between an
Account Owner and any Person with respect to which one or more credit cards are
issued to a cardholder bearing the name or logo "Aspire" which account comes
into existence after the Initial Cut-Off Date.
<PAGE>
"Automatic Addition Suspension Date" is defined in Section 2.09(a).
"Automatic Addition Termination Date" is defined in Section 2.09(a).
"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 6.01.
"Benefit Plan" shall have the meaning specified in subsection 6.04(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 New York, New York, Columbus, Georgia or any other State in
which the principal executive offices of CompuCredit, the Trustee, Columbus Bank
or other Account Owner, as the case may be, are 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, 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 4.01. For purposes of determining whether Holders of Investor
<PAGE>
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 6.04, 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.
"Collection Account" shall have the meaning specified in Section 4.02.
"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; provided, however, that during the period Columbus
Bank owns the Accounts pursuant to the Affinity Card Agreement, Collections
shall mean the sum of (i) Net Excess Amount payable by Columbus Bank to
CompuCredit, as defined in the Affinity Card Agreement and (ii) all amounts paid
by Columbus Bank to CompuCredit pursuant to Section 8.1(e)(iii) of the Affinity
Card Agreement. As specified in any Participation Interest Supplement or Series
Supplement, Collections shall include amounts received with respect to
Participation Interests. All Recoveries with respect
<PAGE>
to Receivables previously charged-off as uncollectible will be treated as
Collections of Finance Charge Receivables. Collections with respect to any
Monthly Period shall include a portion, calculated pursuant to subsection
2.07(h), 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.
"Columbus Bank" shall mean Columbus Bank and Trust Company, a state
bank chartered under the laws of the State of Georgia, and its successors and
permitted assigns under the Affinity Agreement.
"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.
"CompuCredit" shall mean CompuCredit Corporation, a Georgia
corporation, and its successors and permitted assigns hereunder.
"CompuCredit Funding" shall mean CompuCredit Funding Corp., a Georgia
corporation, and its successors and permitted assigns hereunder.
"Corporate Trust Office" shall mean the principal office of the Trustee
at which at any particular time its corporate trust business shall be
administered which office at the date of the execution of the Agreement located
at Four Albany Street, New York, New York 10006, Attention: Corporate Trust and
Agency Group - Structured Finance Group - 10th Floor, or at any other time at
such other address as the Trustee may designate from time to time by notice to
the Certificateholder, the Transferor and the Servicer.
"Coupon" shall have the meaning specified in Section 6.01.
"Credit Card Agreement" shall mean, with respect to a revolving credit
card account, the agreements (including any applicable truth in lending
disclosure statements) between an Account Owner and the Obligor governing the
terms and conditions of such account, as such agreements or statements 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 the respective policies and
procedures of the Servicer, Columbus Bank or any other Account Owner, as the
case may be, as such policies and procedures relate to the Accounts and as such
may be amended from time to time, (a) relating to the operation of its credit
card business, 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
<PAGE>
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 amount of Principal
Receivables which became Defaulted Receivables in 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 (including, without
duplication, Ineligible Receivables pursuant to Section 2.05); 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 10.01(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 (i) which are charged off as uncollectible in such
Monthly Period in accordance with the Credit Card Guidelines or the Servicer's
customary and usual servicing procedures for servicing revolving credit card
accounts; (ii) as to which any payment or part thereof remains unpaid for 180
days or more from the original due date for such Receivables; (iii) as to which
the Obligor thereof has been adjudicated a bankrupt; or (iv) as to which the
Obligor is deceased. A Principal Receivable shall become a Defaulted Receivable
no later than 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.
"Depositaries" shall mean the Person specified in the applicable
Supplement, in its capacity as depositary for the respective accounts of any
Clearing Agency or any Foreign Clearing Agencies.
"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, either (i) the twelfth calendar day of
<PAGE>
each calendar month (or if the twelfth calendar day is not a Business Day, then
the next Business Day) or (ii) such earlier date chosen by the Servicer.
"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.
"Dollars", "$" or "U.S. $" shall mean United States dollars.
"Eligible Account" shall mean a consumer revolving credit card account
owned by Columbus Bank, in the case of the Initial Accounts on the Initial
Cut-Off Date, or Columbus Bank or other Account Owner, in the case of Automatic
Additional Accounts which, as of the Initial Cut-Off Date with respect to an
Initial Account or as of the Addition Date with respect to an Automatic
Additional Account meets the following requirements:
(a) is a VISA(R) revolving credit card account in existence and
maintained by Columbus Bank or other Account Owner, as the case may be;
(b) is payable in Dollars;
(c) has an Obligor 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) has not been identified as an account with respect to which
the
<PAGE>
related card has been lost or stolen;
(e) has not been sold or pledged to any other party except for any
sale to another Account Owner that has either entered into a
Receivables Purchase Agreement or is an Additional Transferor;
(f) does not have receivables which have been sold or pledged by
Columbus Bank or any other Account Owner, as the case may be, to any
other party other than CompuCredit or any Transferor pursuant to a
Receivables Purchase Agreement;
(g) with respect to the Initial Accounts, is an account in
existence and maintained by Columbus Bank as of the Initial Cut-Off
Date;
(h) 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) which has a required monthly minimum payment of at least 3% of
the account balance;
(k) which has not been categorized as being one statement cycle or
more delinquent;
(l) which has an annual percentage rate of interest of not less
than 15%;
(m) the Obligor of which is not a corporation; and
(n) which had an original Fair, Isaacs & Co. credit risk score, at
the time an account is established, of no less than 580.
"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 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 acting 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 each 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.
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.
<PAGE>
"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, other than securities issued by
or obligations of CompuCredit or any Affiliate thereof, subject to the exclusive
custody and control of the Trustee and for which the Trustee has sole signature
authority, which mature so that funds will be available no later than the close
of business on each Transfer Date following each Monthly Period and which
evidence:
(a) direct obligations of, or obligations fully guaranteed as to
timely payment by, the United States of America;
(b) 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, 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
short-term debt rating of such depository institution or trust company
shall be A-1 by Standard and Poor's and P-1 by Moody's;
(c) commercial paper having, at the time of the Trust's investment
or contractual commitment to invest therein, a rating of A-1 by
Standard & Poor's and P-1 by Moody's;
(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, a rating of A-1 by Standard & Poor's and P-1 by
Moody's;
(e) bankers' acceptances issued by any depository institution or
trust company referred to in clause (b) above;
(f) 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; or
(g) any other investment of a type or rating that satisfies the
Rating Agency Condition.
"Eligible Receivable" shall mean each Receivable, including 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 institution which owned such
Receivable at the time of its creation and pursuant to a Credit Card
Agreement which complies in all material respects with all Requirements
of Law applicable to Columbus Bank or other Account Owner, as the case
may be;
<PAGE>
(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 Columbus Bank or other Account Owner, as
the case may be, 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 has been the subject of either a valid transfer and
assignment from the Transferor to the Trust of all the Transferor's
right, title and interest therein (including any proceeds thereof), or
the grant by the Transferor to the Trust of a valid first priority
perfected security interest therein (and in the proceeds thereof),
effective until the termination of the Trust;
(f) which, at all times will be 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);
(g) which, at the time of transfer to the Trust, has not been
waived or modified except as permitted in accordance with the Credit
Card Guidelines and which waiver or modification is reflected in the
Servicer's computer file of revolving credit card accounts;
(h) 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;
(i) as to which, at the time of transfer to the Trust, Columbus
Bank or other Account Owner, as the case may be, have satisfied all
their obligations required to be satisfied by such time;
(j) as to which, at the time of transfer to the Trust, none of the
Transferor, CompuCredit, Columbus Bank or any other Account Owner, as
the case may be, has taken any action which would impair, or omitted to
<PAGE>
take any action the omission of which would impair, the rights of the
Trust or the Certificateholders therein; and
(k) which constitutes either an "account", "chattel paper" or a
"general intangible" under and as defined in Article 9 of the UCC as
then in effect in the State of Georgia and any other state where the
filing of a financing statement is required to perfect the Trust's
interest in the Receivables and the proceeds thereof.
"Eligible Servicer" shall mean CompuCredit, the Trustee or, if neither
CompuCredit nor the Trustee is acting as Servicer, an entity which, at the time
of its appointment as Servicer, (a) is servicing a portfolio of revolving credit
card accounts, (b) is legally qualified and has the capacity to service the
Accounts, (c) 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.
"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.
"Facilities Management Agreement" shall mean the agreement attached as
Exhibit E to the Affinity Card Agreement and all amendments, modifications and
supplements thereto and restatements thereof.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor.
"Finance Charge Receivables" shall mean the sum of (A) all amounts
billed to the Obligors on any Account as determined based on either (a) the
actual amounts posted on the system servicing reports provided to the Servicer
by Total Systems Services, Inc. or other provider of such reports, if available
to the Servicer, or (b) if such actual amounts are not available to the
Servicer, the amount of Finance Charge Receivables for the prior Monthly
<PAGE>
Period or other reasonable estimation method, in respect of (i) all Periodic
Rate Finance Charges, (ii) Cash Advance Fees, (iii) annual membership fees and
annual service charges, (iv) Late Fees, (v) Overlimit Fees, and (vi) 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 (but any such
amount estimated pursuant to this clause (b) shall be reduced by the amount of
all accrued Finance Charge Receivables on Defaulted Receivables for such Monthly
Period) and (B) Discount Option Receivables, if any, after the Discount Option
Date. 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, (c) all Recoveries with respect to Receivables previously charged off as
uncollectible, (d) all Collections in respect of Ineligible Receivables and (e)
all amounts paid by Columbus Bank to CompuCredit pursuant to Section 8.1(e)(iii)
of the Affinity Card Agreement. For the avoidance of doubt, for so long as
Columbus Bank owns the Accounts pursuant to the Affinity Card Agreement, Finance
Charge Receivables and Collections thereon shall not include amounts accrued and
due to Columbus Bank in accordance with Exhibit C of the Affinity Card
Agreement.
"FIRREA" shall mean the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, as amended.
"Fitch" shall mean Fitch Investors Service, L.P. 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).
"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.
"Independent Director" shall have the meaning specified in subsection
2.07(g)(vii).
"Ineligible Receivable" shall have the meaning specified in subsection
2.05(a).
"Initial Account" shall mean each VISA(R) consumer revolving credit
card account established pursuant to a Credit Card Agreement between an Account
Owner and any Person with respect to which one or more credit cards are issued
to a cardholder bearing the name or logo "Aspire", which account is identified
in the computer file or microfiche list delivered to the Trustee by the
Transferor pursuant to Section 2.01 on the Initial Issuance Date.
<PAGE>
"Initial Cut-Off Date" shall mean August 22, 1997.
"Initial Issuance Date" shall mean August 29, 1997, the date the
Transferor Certificate is issued by the Trust and delivered to the Transferor.
"Insolvency Event" shall have the meaning specified in subsection 9.01.
"Insurance Proceeds" shall mean any amounts received by the Servicer
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.
"Interchange" shall mean interchange fees payable to Columbus Bank or
any other Account Owner (net of any interchange fees paid by such Account
Owner), in its capacity as credit card issuer, through VISA in connection with
cardholder charges for goods or services with respect to the Accounts, as
calculated pursuant to the related Supplement for any Series. Any reference in
this Agreement or any Supplement to Interchange shall refer to only the
fractional undivided interest in the interchange fees that are transferred by
CompuCredit or an Account Owner to a Transferor pursuant to a Receivables
Purchase Agreement, which fractional undivided interest may be less than a 100%
interest therein.
"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.
"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 6.03(b) or Section 7.02 and the lien created
by this Agreement shall not be deemed to constitute a
<PAGE>
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.
"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 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
3.02.
"Moody's" shall mean Moody's Investors Service, Inc., or its successor.
"Notices" shall have the meaning specified in subsection 13.05(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, the Treasurer, Chief Financial Officer, Controller or Member of
a Transferor or the Servicer, as the case may be, (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) or by the President, any Vice
President, the Chief Financial Officer, Controller or Member 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; provided, however, that any Tax
Opinion or other opinion relating to federal income tax matters shall be an
opinion of nationally recognized tax counsel.
"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 2.09(b) in connection with the conveyance of
Participation Interests to the Trust.
"Participation Interests" shall have the meaning specified in
subsection 2.09(b).
"Paying Agent" shall mean any paying agent appointed pursuant to
<PAGE>
Section 6.07 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.
"Principal Receivables" shall mean all Receivables other than Finance
Charge Receivables or Defaulted Receivables. Principal Receivables shall also
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. 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
4.04.
"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 issuer and 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
<PAGE>
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, and (xix) any other terms of
such Series.
"Rating Agency" shall mean, with respect to any outstanding Series or
Class of Investor Certificates which has been rated, 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
each 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; provided, however, that if no such series or class
of Investor Certificates has been rated, the Rating Agency Condition with
respect to any such action shall not apply.
"Reassignment" shall have the meaning specified in Section 2.10.
"Receivables" shall mean all amounts payable by Obligors on any Account
from time to time, including amounts payable for Principal Receivables 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. Unless the context otherwise requires (whether or not there is a
specific reference to the underlying receivable), any reference in this
Agreement or any Supplement to a Receivable (including any Principal Receivable,
Finance Charge Receivable or Defaulted Receivable) and any Collections thereon
or other amounts recoverable with respect thereto (including any Insurance
Proceeds or Recoveries with respect thereto) shall refer to only the fractional
undivided interest in the amounts paid or payable by Obligors on the Accounts
that are transferred by CompuCredit or an Account Owner to a Transferor pursuant
to a Receivables Purchase Agreement, which undivided interest may be less than a
100% undivided interest therein. Any reference in this Agreement or any
Supplement to the "underlying receivable" with respect to a Receivable shall
refer to the receivable in which such Receivable represents an undivided
interest.
"Receivables Purchase Agreement" shall mean, as applicable, (i) the
receivables purchase agreement between CompuCredit and Columbus Bank, dated as
of August 29, 1997 as amended from time to time in accordance with the terms
thereof, and including any receivables purchase agreement, substantially in the
form of such agreement dated as of August 29, 1997, entered into in the future
between CompuCredit or the Transferor and an Account Owner; provided, that (A)
the Rating Agency Condition is satisfied with respect to such receivables
purchase agreement and (B) CompuCredit or the Transferor, as applicable, 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, and (ii) the receivables
purchase agreement between CompuCredit and the Transferor, dated as of
August 29, 1997, as amended from time to time in accordance therewith.
<PAGE>
"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 by the Servicer (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
6.01.
"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 applicable Transferor under circumstances resulting from an
error or a lost or stolen credit card and not requiring standard application and
credit evaluation procedures under the Credit Card Guidelines.
"Required Minimum Principal Balance" shall mean, with respect to any
date (a) the sum of the numerators used to determine investor percentages with
respect to Principal Receivables for each Series outstanding on such date plus
the Required Transferor Amount on such date, minus (b) the Special Funding
Amount.
"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
incorporation and by-laws or other organizational or governing documents of such
Person.
"Responsible Officer" shall mean any officer within the Corporate Trust
Office including any Vice President, Managing Director, Assistant Vice
President, Secretary, Assistant Secretary or Assistant Treasurer or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also, with respect to a
particular matter, any other officer to whom such matter is referred because of
such officer's knowledge and familiarity with the particular subject.
"Restart Date" is defined in Section 2.09(a).
"Revolving Period" shall mean, with respect to any Series, the
<PAGE>
period specified in the related Supplement.
"Series" shall mean any series of Investor Certificates issued pursuant
to Section 6.03.
"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 for any other Class of Investor Certificates of such Series 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 with
respect to 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 with respect
to 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, collateral invested
amount, spread account, guaranteed rate agreement, maturity liquidity facility,
tax protection agreement, interest rate swap agreement, interest rate cap
agreement or other similar arrangement. The subordination of any Series or Class
to another Series or Class shall be deemed to be a Series Enhancement.
<PAGE>
"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 6.03 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 10.01.
"Servicer" shall mean CompuCredit, 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 10.01.
"Servicing Fee" shall have the meaning specified in Section 3.02.
"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 4.04.
"Special Funding Account" shall have the meaning set forth in Section
4.02.
"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
10.02(a).
<PAGE>
"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 6.03, and, with
respect to any Participation Interest, an amendment to this Agreement executed
pursuant to Section 13.01, and, in either case, including all amendments thereof
and supplements thereto.
"Supplemental Certificate" shall have the meaning specified in
subsection 6.03(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) such action will not cause the Trust to 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 6.03(b)(vi),
the Investor Certificates of the Series established pursuant to such Supplement
will be properly characterized as debt.
"Termination Notice" shall have the meaning specified in subsection
10.01(d).
"Termination Proceeds" shall have the meaning specified in subsection
12.02(c).
"Transfer Agent and Registrar" shall have the meaning specified in
Section 6.04.
"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 (a) CompuCredit Funding, a wholly owned special
purpose subsidiary of CompuCredit organized in the State of Georgia, or its
successor under this Agreement and (b) any Additional Transferor or Transferors.
References to "each Transferor" shall refer to each entity mentioned in the
preceding sentence and references to "the Transferor" shall refer to all of such
entities.
"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) the Special Funding Amount at the end of the day
immediately prior to such date of determination minus (II) the Aggregate
Invested Amount at the end of such day.
"Transferor Certificate" shall mean the certificate executed by
<PAGE>
CompuCredit Funding and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A.
"Transferor Certificate Supplement" shall have the meaning specified in
subsection 6.03(b).
"Transferor Certificates" shall mean, collectively, the Transferor
Certificate and any outstanding Supplemental Certificates.
"Transferor's Interest" shall have the meaning specified in Section
4.01.
"Transferred Account" shall mean each account into which an Account
shall be transferred provided that such transfer was made in accordance with the
Credit Card Guidelines.
"Trust" shall mean the CompuCredit 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 for all
outstanding Series for such Monthly Period.
"Trust Assets" shall have the meaning specified in Section 2.01.
"Trustee" shall mean Bankers Trust Company, 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.
"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 1.02. 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
<PAGE>
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 CompuCredit
Funding and CompuCredit in this Agreement in each of their respective
capacities as Transferor and Servicer shall be deemed to be the
agreements, representations and warranties of CompuCredit Funding and
CompuCredit solely in each such capacity for so long as CompuCredit
Funding and CompuCredit act in each such capacity under this Agreement.
(e) Any reference to each 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]
<PAGE>
ARTICLE II
CONVEYANCE OF RECEIVABLES
Section 2.01. Conveyance of Receivables. By execution of this
Agreement, the Transferor 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 all accounts, money, chattel paper,
securities, instruments, documents, deposit accounts, certificates of deposit,
letters of credit, advices of credit, banker's acceptances, uncertificated
securities, general intangibles, contract rights, goods and other property
consisting of, arising from or relating to, (i) in the case of Receivables
arising in the Initial Accounts (including Transferred Accounts and Related
Accounts related to such Initial Accounts), the Receivables existing at the
close of business on the Initial Cut-Off Date, and thereafter created from time
to time in the Initial Accounts until the termination of the Trust and (ii) in
the case of Receivables arising in the Automatic Additional Accounts (including
Transferred Accounts and Related Accounts related to such Initial Accounts), the
Receivables created from time to time after the Initial Cut-Off Date until the
termination of the Trust, (iii) all Interchange allocable to the Trust as
provided herein and Recoveries, (iv) all rights to payment and amounts due or to
become due with respect to all of the foregoing, (v) the Collection Account, the
Series Accounts and the Special Funding Account and all amounts, investment
property, financial assets and property credited to each and/or all of such
accounts, (vi) any property conveyed to the Trustee on behalf of the Trust
pursuant to any Participation Interest Supplement, (vii) all Series
Enhancements, (viii) Recoveries attributable to cardholder charges for
merchandise and services in the Accounts, (ix) all rights, remedies, powers,
privileges and claims of the Transferor under or with respect to the Receivables
Purchase Agreement (whether arising pursuant to the terms of the Receivables
Purchase Agreement or otherwise available to the Transferor at law or in
equity), including, without limitation, the rights of the Transferor to enforce
the Receivables Purchase Agreement, and to give or withhold any and all
consents, requests, notices, directions, approvals, extensions or waivers under
or with respect to the Receivables Purchase Agreement to the same extent as the
Transferor could but for the assignment and security interest granted to the
Trustee for the benefit of the Certificateholders, (x) all rights, remedies,
powers, privileges and claims of the Transferor under or with respect to any
"Key Person" insurance policies relating to David G. Hanna, Brett M. Samsky and
Rick Gilbert as to which the Transferor is a named insured, (xi) all amounts
received with respect to any of the foregoing and (xii) all proceeds (including
"proceeds" as defined in the UCC) thereof. Such property, together with all
monies and other property on deposit in the Collection Account,
the Series Accounts and the Special Funding 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, the right to receive Recoveries attributed
to cardholder charges for merchandise and services in the Accounts and the
rights of the Transferor under the Receivables Purchase Agreement 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 Columbus Bank or
<PAGE>
other Account Owner or the Transferor, any Additional 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 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.
Each Transferor agrees to record and file, at its own expense,
financing statements (and continuation statements when applicable) with respect
to the Receivables and other Trust Assets conveyed by such 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 and other Trust Assets to the Trust, and to deliver a file stamped
copy of each such financing statement or other evidence of such filing (which
can include telephonic confirmation) to the Trustee on or prior to the Closing
Date and, in the case of continuation statements, as soon as practicable after
receipt thereof by the Transferor. 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.
Each Transferor further agrees, at its own expense, (i) on or prior to
(A) the first Closing Date in the case of the Initial Accounts, (B) the
Automatic Addition Termination Date or any Automatic Addition Suspension Date,
or subsequent to a Restart Date, in the case of the Automatic Additional
Accounts to indicate in its books and records that Receivables created in
connection with the Accounts have been conveyed to the Trust pursuant to this
Agreement for the benefit of the Holders and (ii) on or prior to the date
referred to in clause (i)(B) to deliver to the Trustee an Account Schedule
(provided that such Account Schedule shall be provided in respect of Automatic
Additional Accounts on or prior to the Determination Date relating to the
Monthly Period during which their respective Addition Dates occur), specifying
for each such Account, as of the Automatic Addition Termination Date or
Automatic Addition Suspension Date, its account number, the aggregate amount
outstanding in such Account and the aggregate amount of Principal Receivables
outstanding in such Account. Each Account Schedule, as supplemented, from time
to time, shall be marked as Schedule 1 to this Agreement and is hereby
incorporated into and made a part of this Agreement. Once the books and records
referenced in clause (i) of this paragraph have been indicated with respect to
any Account, Transferor further agrees not to alter such indication during the
remaining term of this Agreement unless and until (x) a Restart Date has
occurred on which the Transferor starts including Automatic Additional Accounts
as Accounts or (y) the Transferors shall have delivered to the Trustee at least
30 days prior written notice of its intention to do so and has taken such action
as is necessary or advisable to cause the interest of the Trustee in the
Receivables and other Trust Assets to continue to be perfected with the priority
required by this Agreement, including the delivery to the Trustee of an Opinion
of Counsel to such effect.
<PAGE>
It is the intention of the parties hereto that the arrangements with
respect to the Receivables shall constitute either a purchase and sale of such
Receivables or a loan. In the event that it is 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 each Transferor shall be deemed to have
granted to the Trust a first priority perfected security interest in all of such
Transferor's right, title and interest, whether now owned or hereafter acquired,
in, to and under the Receivables and the other Trust Assets conveyed by such
Transferor to secure its obligations hereunder.
Section 2.02. 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 2.01 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 2.01. 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 Owner, CompuCredit
or any Transferor for the limited purpose of enabling any such creditor
to identify Receivables or Accounts subject to this Agreement or the
Receivables Purchase Agreements. The Trustee agrees to take such
measures as shall be reasonably requested by any Transferor to protect
and maintain the security and confidentiality of such information and,
in connection therewith, shall allow each 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
applicable Transferor with notice five Business Days prior to
disclosure of any information of the type described in this subsection
2.02(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 2.03. Representations and Warranties of Each Transferor
Relating to Such Transferor. Each Transferor hereby severally represents and
warrants to the Trust (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) as of the Initial Issuance Date and
<PAGE>
each Closing Date (but only if, in either case, it was a Transferor on such
Date) that:
(a) Organization and Good Standing. Such Transferor is a
corporation or limited liability company validly existing under the
laws 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 business as presently owned or conducted,
and to execute, deliver and perform its obligations under this
Agreement, any Receivables Purchase Agreement to which it is a party
and each applicable Supplement and to execute and deliver to the
Trustee the Certificates.
(b) Due Qualification. Such Transferor is duly qualified to do
business and is in good standing as a foreign corporation or 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 specified in a Receivables Purchase
Agreement with such Transferor or any Receivable conveyed to the Trust
by such Transferor unenforceable by such 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, any Receivables Purchase Agreement to which it is a party
and each Supplement by such Transferor and the execution and delivery
to the Trustee of the Certificates and the consummation by such
Transferor of the transactions provided for in this Agreement, each
Receivables Purchase Agreement to which it is a party and each
Supplement have been duly authorized by such Transferor by all
necessary action on the part of such Transferor.
(d) No Conflict. The execution and delivery by such Transferor of
this Agreement, each Receivables Purchase Agreement to which it is a
party, each Supplement, and the Certificates, the performance of the
transactions contemplated by this Agreement, any Receivables Purchase
Agreement to which it is a party and each Supplement and the
fulfillment of the terms hereof and thereof applicable to such
Transferor, will not conflict with or violate any Requirements of Law
applicable to such Transferor or conflict with, result in any breach of
any of the terms and provisions of, or constitute (with or without
notice or lapse of time or both) a default under, any indenture,
contract, agreement, mortgage, deed of trust or other instrument to
which such 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 such Transferor, threatened
against such Transferor before any Governmental Authority (i) asserting
the invalidity of this Agreement, any Receivables Purchase Agreement to
which it is a party, any 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, any
Receivables Purchase Agreement to which it is a party, any Supplement
or the Certificates, (iii) seeking any determination or ruling that, in
the
<PAGE>
reasonable judgment of such Transferor, would materially and adversely
affect the performance by such Transferor of its obligations under this
Agreement, any Receivables Purchase Agreement to which is it a party or
any Supplement, (iv) seeking any determination or ruling that would
materially and adversely affect the validity or enforceability of this
Agreement any Receivables Purchase Agreement to which it is a party,
any 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 such Transferor
in connection with the execution and delivery by such Transferor of
this Agreement, any Receivables Purchase Agreement to which it is a
party, each Supplement and the Certificates and the performance of the
transactions contemplated by this Agreement and each Supplement by such
Transferor have been duly obtained, effected or given and are in full
force and effect.
Section 2.04. Representations and Warranties of each Transferor
Relating to the Agreement and Any Supplement and the Receivables.
(a) Representations and Warranties. Each Transferor hereby
severally represents and warrants to the Trust and the Trustee as of
the Initial Issuance Date and each Closing Date (but only if, in either
case, it was a Transferor on such date) and, with respect to clauses
(vi) and (vii) below, on each Addition Date that:
(i) this Agreement, any Receivables Purchase Agreement to
which it is a party, each Supplement each constitutes a legal,
valid and binding obligation of such Transferor enforceable
against such 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 Cut-Off Date the portion of Schedule 1
to this Agreement under such Transferor's name, 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 such Transferor as of the Initial Cut-Off Date, 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 Cut-Off Date;
(iii) each Receivable conveyed to the Trust by such
Transferor has been conveyed to the Trust free and clear of any
Lien and each underlying receivable is free and clear of all
Liens;
(iv) all authorizations, consents, orders or approvals of or
registrations or declarations with any Governmental Authority
required to be obtained, effected or given by such Transferor in
connection with the conveyance by such Transferor of Receivables
to the Trust have been
<PAGE>
duly obtained, effected or given and are in full force and effect;
(v) either this Agreement constitutes a valid sale, transfer
and assignment to the Trust of all right, title and interest of
such Transferor in the Receivables conveyed to the Trust by such
Transferor and the proceeds thereof and Recoveries and Interchange
identified as relating to the Receivables conveyed to the Trust by
such Transferor 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 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, 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 Cut-Off Date, with respect to each
Initial Account, and on each Addition Date with respect to each
Automatic Additional Account, each such Account is an Eligible
Account;
(vii) on the Initial Cut-Off Date, each Receivable then
existing and conveyed to the Trust by such Transferor is an
Eligible Receivable and on each Addition Date with respect to an
Automatic Additional Account, each Receivable contained in such
Automatic Additional Account and conveyed to the Trust by such
Transferor is an Eligible Receivable;
(viii) as of the date of the creation of any new Receivable
in an Account specified in a Receivables Purchase Agreement with
such Transferor, such Receivable is an Eligible Receivable; and
(ix) no selection procedures believed by such Transferor to
be materially adverse to the interests of the Investor
Certificateholders have been used in selecting such Accounts
specified in a Receivables Purchase Agreement with such
Transferor.
(b) Notice of Breach. The representations and warranties set forth
in Section 2.03, this Section 2.04 and subsection 2.09(f) shall survive
the transfers and assignments of the Receivables to the Trust and the
issuance of the Certificates. Upon discovery by any Transferor, the
Servicer or a Responsible Officer of the Trustee of a breach of any of
the representations and warranties set forth in Section 2.03, this
Section 2.04 or subsection 2.09(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 2.05. Treatment of Ineligible Receivables.
(a) Reassignment of Receivables. In the event (i) any
representation or warranty contained in subsection 2.04(a)(ii), (iv),
(vi), (vii), (viii) or (ix) is not true and correct in any material
respect as of the date specified
<PAGE>
therein with respect to any Receivable or the related Account and such
breach results in such Receivable in the related Account becoming a
Defaulted Receivable or the Trust's rights in, to or under the
Receivable or its proceeds becoming impaired or the proceeds of such
Receivable not being available for any other reason to the Trust free
and clear of any Lien, 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 such Transferor of written notice thereof given by the
Trustee or the Servicer, (ii) in the event that a Receivable is not an
Eligible Receivable because of the failure to satisfy the conditions
set forth in clause (d) or (e) of the definition of "Eligible
Receivable" or (iii) it is so provided in subsection 2.07(a) with
respect to any Receivables conveyed to the Trust by such Transferor,
then such Receivable shall be designated an "Ineligible Receivable" and
shall be assigned a principal balance of zero for the purpose of
determining the aggregate amount of Principal Receivables on any day;
provided that such Receivables pursuant to clause (i) will not be
deemed to be Ineligible Receivables but will be deemed Eligible
Receivables and such Principal Receivables shall be included in
determining the aggregate Principal Receivables in the Trust if, on any
day prior to the end of such 60-day or longer period, (x) either (A) in
the case of an event described in clause (i), the relevant
representation and warranty shall be true and correct in all material
respects as if made on such day or (B) in the case of an event
described in clauses (ii) and (iii), the circumstances causing such
Receivable to become an Ineligible Receivable shall no longer exist and
(y) Transferor shall have delivered an Officer's Certificate describing
the nature of such breach and the manner in which the relevant
representation and warranty became true and correct.
(b) Price of Reassignment. On and after the date of its
designation as an Ineligible Receivable, each Ineligible Receivable
shall not be included in determining the aggregate amount of Principal
Receivables used to calculate the Transferor Amount or the investor
allocation percentages applicable to any Series. If, immediately
following the exclusion of such Principal Receivables from the
calculation of the Transferor Amount, the Transferor Amount would be
Tless than the Required Transferor Amount, Transferor shall make a
deposit into the Special Funding Account in immediately available funds
prior to the fifth succeeding Business Day in an amount equal to the
amount by which the Transferor Amount would be less than the Required
Transferor Amount (up to the amount of such Principal Receivables). The
payment of such deposit amount in immediately available funds shall
otherwise be considered payment in full of all of the Ineligible
Receivables.
The obligation of Transferor 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 Holders (or the Trustee on behalf of the Holders) or any
enhancement provider pursuant to any Enhancement Agreement.
Section 2.06. Reassignment of Certificateholders' Interest in Trust
Portfolio. In the event any representation or warranty of a Transferor set forth
in subsection 2.03(a) or (c) or subsection 2.04(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
<PAGE>
the Trust by such 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 such Transferor and the Servicer (and to the Trustee if
given by the Investor Certificateholders), may direct such Transferor to accept
a reassignment of the Certificateholders' Interest in the Receivables and any
Participation Interests conveyed to the Trust by such 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 such Transferor
shall be obligated to accept such reassignment on the terms set forth below;
provided, however, that such Receivables and Participation Interests will not be
reassigned to such 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) such 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 applicable Transferor shall deposit in the Collection Account in
immediately available funds not later than 11:00 a.m., New York City time, on
the fifth Business Day after the day on 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 applicable
Transferor to accept a reassignment of the Certificateholders' Interest in the
Receivables and Participation Interests as provided above, the obligation of
such 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 2.07. Covenants of Each Transferor. Each Transferor hereby
covenants to the Trustee on behalf of the Trust, for the benefit of the
Certificateholders, until the termination of the Trust that:
(a) Receivables Not To Be Evidenced by Promissory Notes. Except in
connection with its enforcement or collection of an Account, such
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
2.05(a) and shall be treated in accordance with Section 2.05(b).
(b) Security Interests. Except for the conveyances hereunder, such
<PAGE>
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 any underlying receivable) or Participation Interest
conveyed by it to the Trust, whether now existing or hereafter created,
or any interest therein, and such 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 such
Transferor.
(c) Transferor's Interest. Except for the conveyances hereunder,
and except in connection with any transaction permitted by Section 7.02
and as provided in subsection 2.09(d) and Section 6.03, such Transferor
agrees not to transfer, sell, assign, exchange or otherwise convey or
pledge, hypothecate or otherwise grant a security interest in the
Transferor's Interest represented by the Transferor Certificate or any
Supplemental 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 such
Transferor receives Collections or Recoveries, such Transferor agrees
to pay to the Servicer all such Collections and Recoveries as soon as
practicable after receipt thereof but in no event later than two
Business Days after receipt.
(e) Notice of Liens. Such Transferor shall notify the Trustee
and each Series Enhancer in writing 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 the Receivables Purchase Agreements.
(f) Amendment of the Certificate of Incorporation. Such Transferor
will not amend in any material respect its Certificate of
Incorporation, certificate of formation or other organization documents
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) Separate Corporate Existence. Such Transferor shall:
(i) Maintain in full effect its existence, rights and
franchises as a limited liability company or corporation under the
laws of the state of its organization or incorporation and will
obtain and preserve its qualification to do business in each
jurisdiction in which such qualification is or shall be necessary
to protect the validity and enforceability of this Agreement and
any Receivables Purchase Agreement to which it is a party and each
other instrument or agreement necessary or appropriate to proper
administration hereof and permit and effectuate the transactions
contemplated hereby.
(ii) Maintain its own deposit account or accounts, separate
from those of any Affiliate of such Transferor, with commercial
banking
<PAGE>
institutions. The funds of such Transferor will not be
diverted to any other Person or for other than the corporate use
of such Transferor, and, except as may be expressly permitted by
this Agreement or any Receivables Purchase Agreement to which it
is a party, the funds of such Transferor shall not be commingled
with those of any Affiliate of such Transferor.
(iii) Ensure that, to the extent that it shares the same
officers or other employees as any of its partners, members,
managers, stockholders or Affiliates, the salaries of and the
expenses related to providing benefits to such officers and other
employees shall be fairly allocated among such entities, and each
such entity shall bear its fair share of the salary and benefit
costs associated with all such common officers and employees.
(iv) Ensure that, to the extent that it jointly contracts
with any of its partners, members, managers, stockholders or
Affiliates to do business with vendors or service providers or to
share overhead expenses, the costs incurred in so doing shall be
allocated fairly among such entities, and each such entity shall
bear its fair share of such costs. To the extent that such
Transferor contracts or does business with vendors or service
providers where the goods and services provided are partially for
the benefit of any other Person, the costs incurred in so doing
shall be fairly allocated to or among such entities for whose
benefit the goods and services are provided, and each such entity
shall bear its fair share of such costs. All material transactions
between such Transferor and any of its partners, members,
managers, stockholders or Affiliates shall be only on an
arm's-length basis and shall receive the approval of such
Transferor's Board of Directors, partners, members, managers or
other governing body including at least one Independent Director
(defined below).
(v) Maintain a principal executive and administrative office
through which its business is conducted and a telephone number
separate from those of its members or stockholders and Affiliates.
To the extent that such Transferor and any of its members or
stockholders or Affiliates have offices in contiguous space, there
shall be fair and appropriate allocation of overhead costs among
them, and each such entity shall bear its fair share of such
expenses.
(vi) Conduct its affairs strictly in accordance with its
Certificate of Incorporation or other certificate of formation, as
the case may be, and observe all necessary, appropriate and
customary corporate formalities (or such formalities appropriate
to the entity), including, but not limited to, holding all regular
and special stockholders' and directors', or partners', members'
or managers', as the case may be, meetings appropriate to
authorize all entity action, keeping separate and accurate minutes
of such meetings, passing all resolutions or consents necessary to
authorize actions taken or to be taken, and maintaining accurate
and separate books, records and accounts, including, but not
<PAGE>
limited to, payroll and intercompany transaction accounts. Regular
stockholders' or other owners' and directors', partners', members'
or managers', as the case may be, meetings shall be held at least
annually.
(vii) Ensure that its Board of Directors shall at all times
include at least one Independent Director (for purposes hereof,
"Independent Director" shall mean any member of the Board of
Directors, or partner, member or manager, as the case may be, of
such Transferor that is not and has not at any time been (x) a
director, partner, member, manager, officer, agent, employee or
shareholder of any Affiliate of such Transferor or (y) a member of
the immediate family of any of the foregoing).
(viii) Ensure that decisions with respect to its business and
daily operations shall be independently made by such Transferor
(although the officer making any particular decision may also be
an officer, partner, member, manager or director of an Affiliate
of such Transferor) and shall not be dictated by an Affiliate of
such Transferor.
(ix) Act solely in its own corporate or entity name and
through its own authorized officers, members, managers and agents,
and no Affiliate of such Transferor shall be appointed to act as
agent of such Transferor, except as expressly contemplated by this
Agreement or any Receivables Purchase Agreement to which it is a
party. The Transferor shall at all times use its own stationery.
(x) Ensure that no Affiliate of such Transferor shall advance
funds to such Transferor, and no Affiliate of such Transferor will
otherwise guaranty debts of, such Transferor; provided, however,
that an Affiliate of such Transferor may provide funds to such
Transferor in connection with the capitalization of such
Transferor, including capital necessary to assure that such
Transferor has "substantial assets" as described in Treasury
Regulation Section 301.7701- 2(d)(2).
(xi) Other than organizational expenses and as expressly
provided herein, pay all expenses, indebtedness and other
obligations incurred by it.
(xii) Not enter into any guaranty, or otherwise become
liable, with respect to any obligation of any Affiliate of such
Transferor other than with respect to Section 7.04, nor shall
Transferor make any loans to any Person.
(xiii) Ensure that any financial reports required of such
Transferor shall comply with generally accepted accounting
principles and shall be issued separately from, but may be
consolidated with, any reports prepared for any of its Affiliates,
provided that any such consolidated reports shall indicate that
the assets of the Transferor are not available to the creditors of
any Affiliate of the Transferor.
<PAGE>
(xiv) Ensure that at all times it is adequately capitalized
to engage in the transactions contemplated in its Certificate of
Incorporation or other organization documents.
(h) 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 11:00 a.m., New York City time,
on the related Transfer Date, the Transferor shall remit to the
Servicer for 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 2.08. Covenants of Each Transferor with Respect to Receivables
Purchase Agreement. Each Transferor, in its capacity as purchaser of Receivables
from CompuCredit pursuant to a Receivables Purchase Agreement, hereby covenants
that such Transferor will at all times enforce the covenants and agreements of
CompuCredit in such Receivables Purchase Agreement, including covenants to the
effect that CompuCredit will enforce covenants, including covenants to the
effect set forth below, against an Account Owner under the Receivables Purchase
Agreement that CompuCredit has with such Account Owner:
(a) Credit Card Agreements and Guidelines. Each of the Transferor
and the Servicer shall comply and perform, their respective obligations
under the applicable Credit Card Agreements relating to the Accounts
and the Credit Card Guidelines except insofar as any failure so to
comply or perform would not materially and adversely affect the rights
of the Trust or the Investor Certificateholders hereunder (without
regard to the amount of any Series Enhancement) or under the
Certificates. Subject to compliance with all Requirements of Law, the
failure to comply with which would have a material adverse effect on
the Investor Certificateholders (without regard to the amount of any
Series Enhancement), the Transferor or the Servicer may change the
terms and provisions of the Agreements or the Credit Card Guidelines in
any respect as follows: (i) if the Transferor owns a comparable segment
of accounts, then such change shall be made applicable to such
comparable segment of the accounts owned and serviced by the Transferor
that have characteristics the same as, or substantially similar to, the
Accounts that are the subject of such change, (ii) if the Transferor
does not own such a comparable segment, then neither the Servicer nor
the Transferor will not make or cause to be made any such change with
the intent to materially benefit the Transferor over the Investor
Certificateholders and (iii) such change will not adversely and
materially affect the rights of the Trust or the Investor
Certificateholders.
(b) Delivery of Collections. In the event that a Transferor
receives Collections, such Transferor agrees to pay to the Servicer all
payments received by the Transferor with respect to Collections on the
Receivables promptly after receipt thereof by the Transferor, but in no
event later than two (2) Business Days after the receipt by the
Transferor thereof.
<PAGE>
Each 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 2.09. Addition of Accounts.
(a) Automatic Additional Accounts. Subject to any limitations
specified in any Supplement (which Supplement shall be subject to the
terms of Section 13.01 to the extent it amends any of the terms of this
Agreement), Automatic Additional Accounts shall be included as Accounts
from and after the date upon which they are created, and all
Receivables in Automatic Additional Accounts, whether such Receivables
are then existing or thereafter created, shall be transferred
automatically to the Trust upon their creation. For all purposes of
this Agreement, all receivables relating to Automatic 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." The Transferor may elect
at any time to terminate the inclusion in Accounts of new accounts
which would otherwise be Automatic Additional Accounts as of any
Business Day (the "Automatic Addition Termination Date"), or suspend
any such inclusion as of any Business Day (an "Automatic Addition
Suspension Date") until a date (the "Restart Date") to be notified in
writing by Transferor to Trustee by delivering to Trustee, Servicer and
each Rating Agency written notice of such election at least 10 days
prior to such Automatic Addition Termination Date, Automatic Addition
Suspension Date or Restart Date, as the case may be. Promptly after
each of an Automatic Addition Termination Date, an Automatic Addition
Suspension Date and a Restart Date, Transferor and Trustee agree to
execute, and Transferor agrees to record and file at its own expense,
an amendment to the financing statements referred to in Section 2.1 to
specify the accounts then subject to this Agreement (which
specification may incorporate a list of accounts by reference) and,
except in connection with any such filing made after a Restart Date, to
release any security in any accounts created after the Automatic
Addition Termination Date or Automatic Addition Suspension Date.
(b) Optional Participation Interests. In lieu of, or in addition
to, the Automatic Additional Accounts referred to in clause (a) above,
the Transferor may (but shall not be required), subject to 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 (b)
shall be effected by a Participation Interest Supplement, dated the
applicable Addition Date and entered into pursuant to Section 13.01(a).
(c) Representations and Warranties. Each Transferor conveying
<PAGE>
Automatic Additional Accounts or Participation Interests hereby
represents and warrants to the Trust and the Trustee as of the related
Addition Date that:
(i) as of each Addition Date, no Insolvency Event with
respect to Columbus Bank or other Account Owner, as applicable,
CompuCredit or the Transferor shall have occurred nor shall the
transfer to the Trust of the Receivables arising in the Automatic
Additional Accounts or of the Participation Interests have been
made in contemplation of the occurrence thereof; and
(ii) the addition to the Trust of the Receivables arising in
the Automatic Additional Accounts or of the Participation
Interests will not result in an Adverse Effect.
(d) Additional Transferors. The Transferor may designate
Affiliates of the Transferor to be included as Transferors ("Additional
Transferors") under this Agreement in an amendment hereto pursuant to
subsection 13.01(a) and, in connection with such designation, the
Transferor shall surrender the Transferor Certificate to the Trustee in
exchange for a newly issued Transferor Certificate modified to reflect
such Additional Transferor's interest in the Transferor's Interest;
provided, however, that, if the provisions of Section 6.03(b) are not
otherwise applicable, prior to any such designation and exchange the
conditions set forth in clauses (iv) and (vi) of subsection 6.03(b)
shall have been satisfied with respect thereto (as applied with respect
to an issuance of a new Series or of a Supplemental Certificate).
Section 2.10. Defaulted Receivables. 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 with respect to such Account, 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 remain
property of the Trust and be applied as provided herein.
Section 2.11. Account Allocations. In the event that any 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 9.01 or any order of any Governmental Authority (a
"Transfer Restriction Event"), then, in any such event, (a) such 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
such Transferor's inability to transfer Receivables (up to an aggregate amount
equal to the amount of Receivables transferred to the Trust by such Transferor
in the Trust on such date), (b) such 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 such
Transferor's inability to
<PAGE>
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, such 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 such Transferor and the Servicer are
unable pursuant to any Requirements of Law to allocate Collections as described
above, such 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.
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 (i) unless such designation in the reasonable belief of the
Transferor would cause a Pay Out Event or Reinvestment Event with
respect to any Series to occur, or an event which, with notice or lapse
of time or both, would constitute a Pay Out Event or Reinvestment Event
with respect to any Series and (ii) only if the Rating Agency Condition
shall have been satisfied with respect to such designation.
(b) After the Discount Option Date, Discount Option Receivable
Collections shall be treated as Collections of Finance Charge
Receivables.
[END OF ARTICLE II]
<PAGE>
ARTICLE III
ADMINISTRATION AND SERVICING
OF RECEIVABLES
Section 3.01. Acceptance of Appointment and Other Matters Relating to
the Servicer.
(a) CompuCredit agrees to act as the Servicer under this Agreement
and the Certificateholders by their acceptance of Certificates consent
to CompuCredit acting as Servicer.
(b) As agent for each Transferor and the Trust, the Servicer shall
service and administer the Receivables (including the underlying
receivables) and any Participation Interests, shall collect and deposit
into the Collection Account payments due under the Receivables
(including the underlying 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 each 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,
CompuCredit Funding shall have the absolute right to direct the
Servicer with respect to any power conferred on the Servicer hereunder.
Without limiting the generality of the foregoing and subject to Section
10.01, 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 10.01, (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.
<PAGE>
(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 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 (except as provided in Section 3.02), 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 3.02. 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") of a particular Series with respect to any
Monthly Period will each be determined in accordance with the relevant
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 3.03. Representations, Warranties and Covenants of the
Servicer. CompuCredit, 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
<PAGE>
partnership or a 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 partnership or
corporation or other foreign entity (or is exempt from such
requirements) and has obtained all necessary licenses and approvals in
each jurisdiction in which the servicing of the Receivables (including
the underlying receivables) and any Participation Interests as required
by this Agreement requires such qualification except where the failure
to so qualify or obtain licenses or approvals would not have a material
adverse effect on its ability to perform its obligations as Servicer
under this Agreement.
(c) Due Authorization. The execution, delivery, and performance 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.
(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.
(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.
<PAGE>
(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 (as 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.
In the event (x) any of the representations, warranties or covenants of
the Servicer contained in subsection 3.03 (h), (i) or (j) 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 120 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 3.03(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 not later than seven days
after such assignment obligation arises in an amount equal to the amount of such
Receivables.
<PAGE>
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 sell, 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 8.04.
Section 3.04. 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 each
Rating Agency a certificate of a Servicing Officer in substantially the
form set forth in the related Supplement.
Section 3.05. 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 B.
Section 3.06. Annual Servicing Report of Independent Public
Accountants; Copies of Reports Available.
(a) On or before April 15 of each calendar year, beginning with
April 15, 1998, 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
<PAGE>
Servicer and each Rating Agency to the effect that they have applied
certain procedures that accountants are reasonably able to review and
perform under such accounting firm's policies and are agreed upon with
the Servicer and examined certain documents and records relating to the
servicing of Accounts under this Agreement and each Supplement and
that, on the basis of such agreed-upon procedures, nothing has come to
the attention of such accountants that caused them to believe that the
servicing (including the allocation of Collections) has not been
conducted in compliance with the terms and conditions as set forth in
Article III and Article IV and Section 8.08 of this Agreement and the
applicable provisions of each Supplement, except for such exceptions as
they believe to be immaterial and such other exceptions as shall be set
forth in such statement. Such report shall set forth the agreed-upon
procedures performed. In the event such firm requires the Trustee to
agree to the procedures performed by such firm, the Servicer shall
direct the Trustee in writing to so agree; it being understood and
agreed that the Trustee will deliver such letter of agreement in
conclusive reliance upon the direction of the Servicer, and the Trustee
makes no independent inquiry or investigation as to, and shall have no
obligation or liability in respect of, the sufficiency, validity or
correctness of such procedures.
(b) On or before April 15 of each calendar year, beginning with
April 15, 1998, the Servicer shall cause a firm of nationally
recognized independent public accountants (who may also render other
services to the Servicer or Transferor) to furnish a report to the
Trustee, the Servicer and each Rating Agency to the effect that they
have applied certain procedures that accountants are reasonably able to
review and perform under such accounting firm's policies and are agreed
upon with the Servicer to compare the mathematical calculations of
certain amounts set forth in the Servicer's certificates delivered
pursuant to subsection 3.04(b) during the period covered by such report
with the Servicer's and Columbus Bank's computer reports that were the
source of such amounts and that on the basis of such agreed-upon
procedures and comparison, such accountants are of the opinion that
such amounts are in agreement, except for such exceptions as they
believe to be immaterial and such other exceptions as shall be set
forth in such statement. Such report shall set forth the agreed-upon
procedures performed.
(c) A copy of each certificate and report provided pursuant to
subsection 3.04(b), or Section 3.05 or 3.06 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 3.07. Tax Treatment. Unless otherwise specified in a Supplement
with respect to a particular Series, the Transferor has entered into this
Agreement, and the Certificates will be 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 secured by the Receivables and
(ii) the Trust shall not be treated as an association or publicly traded
partnership taxable as a corporation. The Transferor, by entering into this
Agreement, and each Certificateholder, by the acceptance of any such Certificate
(and each Certificate Owner, by its acceptance of an interest in the applicable
Certificate), agree to treat such Investor Certificates for federal, state and
local income and franchise tax purposes as indebtedness of the Transferor. Each
Holder of such Investor Certificate
<PAGE>
agrees that it will cause any Certificate Owner acquiring an interest in a
Certificate through it to comply with this Agreement as to treatment as
indebtedness under applicable tax law, as described in this Section 3.07.
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). The provisions of this Agreement shall be construed in
furtherance of the foregoing intended tax treatment.
Section 3.08. Notices to CompuCredit. In the event that CompuCredit is
no longer acting as Servicer, any Successor Servicer shall deliver or make
available to CompuCredit each certificate and report required to be provided
thereafter pursuant to subsection 3.04(b) and Sections 3.05 and 3.06.
Section 3.09. 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 2.07(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 seven days after such
adjustment, 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 Transferor (up to the amount of such
Principal Receivables).
(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
<PAGE>
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 3.04(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]
<PAGE>
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
Section 4.01. Rights of Certificateholders. The Investor Certificates
shall represent fractional 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
remainder of the Trust Assets not allocated pursuant to this Agreement or any
Supplement to the Certificateholders' Interest, including 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 4.02. 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 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 each Rating Agency may consent)
establish a new Collection Account meeting the conditions specified above,
transfer any monies, documents, instruments, securities,
<PAGE>
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 3.01(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 2.06, 9.01, 10.01 or 12.02)
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 Transfer Date following such Monthly Period in
amounts sufficient to the extent of such funds to make the required
distributions on the following Distribution Date. 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 paid to the Transferor, 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 4.02 nor for the selection of Eligible
Investments in accordance with the provisions of this Agreement. In addition,
the Trustee shall have no liability in respect of the losses incurred as a
result of the liquidation of any Eligible Investment prior to its stated
maturity or the failure of the Servicer to provide timely written investment
direction.
The 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
<PAGE>
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 each 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 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
date will be invested in Eligible Investments that will mature so that such
funds will be available no later than the close of business on the Transfer Date
following such date. 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, 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 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 in writing 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 4.04 and the terms of each Supplement.
Section 4.03. Collections and Allocations.
<PAGE>
(a) The Servicer will apply or will instruct the Trustee in
writing 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 the following conditions are
satisfied: (i) CompuCredit remains the Servicer and maintains a
commercial paper rating of not less than A-1 by Standard & Poor's and
P-1 by Moody's, and (ii) no Pay Out Event or Reinvestment Event shall
have occurred, 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 4:00 P.M., New York City
time, on the Transfer Date following the Monthly Period with respect to
which such deposit relates. Subject to the first proviso in Section
4.04 and the express terms of any Supplement, 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, Principal
Receivables and Defaulted Receivables 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 4.04. 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 (as defined below), 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
<PAGE>
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 in writing 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 4.05. 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 CompuCredit, Columbus Bank or any other
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 CompuCredit for distribution to CompuCredit, Columbus Bank or any
other Account Owner, as applicable.
Section 4.06. 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 13.01(a), Receivables conveyed to the
Trust pursuant to Section 2.01 and Receivables or Participation Interests
conveyed to the Trust pursuant to Section 2.09 or any Participation Interest
Supplement, and all Collections received with respect 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
each 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]
<PAGE>
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]
<PAGE>
ARTICLE VI
THE CERTIFICATES
Section 6.01. 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 6.02. 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 a single certificate and shall initially
represent the entire Transferor's Interest. Each Certificate shall be executed
by manual or facsimile signature on behalf of the Transferor by its President,
any Vice President or its Chief Financial Officer 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 Certificates shall be dated the date of
their authentication.
Section 6.02. 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. The Trustee shall at the written direction
of the Transferor 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 6.03. New Issuances.
(a) The Transferor may from time to time direct the Trustee, on
<PAGE>
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 "Transferor Certificate Supplement") to this Agreement
(which Transferor Certificate Supplement shall be subject to Section
13.01 to the extent that it amends any of the terms of this Agreement)
to be delivered to or upon the order of the Transferor. 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, such Transferor shall have given the
Trustee, the Servicer and each Rating Agency notice (unless such
notice requirement is otherwise waived) of such issuance and the
Series Issuance Date or such Transferor Certificate surrender and
exchange, as the case may be;
(ii) such Transferor shall have delivered to the Trustee the
related Supplement or Transferor 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) such Transferor shall have delivered to the Trustee any
related Enhancement Agreement executed by each of the parties
thereto, other than the Trustee;
(iv) the Rating Agency Condition shall have been satisfied
with respect to such issuance or such 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 each Rating Agency) a Tax Opinion, dated the Series
Issuance Date or
<PAGE>
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 plus the
principal amount of any Participation Interest 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
shall have delivered to the Trustee an Officer's Certificate to
such effect.
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 6.04. 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.
<PAGE>
At the option of a Registered Certificateholder, subject to subsection
(c) below, 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.
<PAGE>
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
E-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 E-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).
<PAGE>
(ii) Registration of transfer of Investor Certificates
containing a legend to the effect set forth on Exhibit E-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.
Section 6.05. 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 6.06. 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 a
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
<PAGE>
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 a Transferor Certificate or any
Affiliate thereof. None of the Transferor, the Servicer, the Trustee, the
Registrar, the Transfer Agent 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 6.07. 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 11.01, 11.02, 11.03 and
11.05 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 6.08. 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 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,
<PAGE>
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 6.09. 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 11.01, 11.02,
11.03 and 11.05 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:
<PAGE>
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 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
<PAGE>
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 in
writing 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 in writing 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 will
initially 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
by the Trustee at the written direction of the Transferor upon the same
conditions, in substantially the same manner and with the same effect
as the Definitive Certificates. The Global Certificate may be exchanged
as described below for Bearer or Registered Certificates in definitive
form (the "Definitive Euro-Certificates").
<PAGE>
(b) The Manager shall, upon its determination of the date of
completion of the distribution of the Investor Certificates of such
Series or Class, so advise the Trustee, the Transferor, the
Depositaries, and each Foreign Clearing Agency forthwith. Without
unnecessary delay, but in any event not prior to the Exchange Date, the
Transferor will execute and deliver to the Trustee at its London office
or its designated agent outside the United States definitive Bearer
Certificates in an aggregate principal amount equal to the entire
aggregate principal amount of such Series or Class. All Bearer
Certificates so issued and delivered will have Coupons attached. The
Global Certificate may be exchanged for an equal aggregate principal
amount of Definitive Euro-Certificates only on or after the Exchange
Date. An institutional investor that is a U.S. Person may exchange the
portion of the Global Certificate beneficially owned by it only for an
equal aggregate principal amount of Registered Certificates bearing the
applicable legend set forth in the form of Registered Certificates
attached to the related Supplement and having a minimum denomination of
$500,000, which may be in temporary form if the Transferor so elects.
The Transferor may elect to waive the $500,000 minimum denomination
requirement. Upon any demand for exchange for Definitive
Euro-Certificates in accordance with this paragraph, the Transferor
shall cause the Trustee to authenticate and deliver the Definitive
Euro-Certificates to the Holder (x) outside the United States, in the
case of Bearer Certificates, and (y) according to the instructions of
the Holder, in the case of Registered Certificates, but in either case
only upon presentation to the Trustee of a written statement
substantially in the form of Exhibit D-1 with respect to the Global
Certificate or portion thereof being exchanged, signed by a Foreign
Clearing Agency and dated on the Exchange Date or a subsequent date, to
the effect that it has received in writing or by tested telex or
facsimile a certification substantially in the form of (i) in the case
of beneficial ownership of the Global Certificate or a portion thereof
being exchanged by a United States institutional investor pursuant to
the second preceding sentence, the certificate in the form of Exhibit
D-2 signed by the Manager which sold the relevant Certificates or (ii)
in all other cases, the certificate in the form of Exhibit D-3, the
certificate referred to in this clause (ii) being dated on the earlier
of the first actual payment of interest in respect of such Certificates
and the date of the delivery of such Certificate in definitive form.
Upon receipt of such certification, the Trustee shall cause the Global
Certificate to be endorsed in accordance with paragraph (d) below. Any
exchange as provided in this Section shall be made free of charge to
the Holders and the beneficial owners of the Global Certificate and to
the beneficial owners of the Definitive Euro-Certificates issued in
exchange, except that a person receiving Definitive Euro-Certificates
must bear the cost of insurance, postage, transportation and the like
in the event that such person does not receive such Definitive
Euro-Certificates in person at the offices of a Foreign Clearing
Agency.
(c) 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 this Agreement.
(d) Upon any such exchange of all or a portion of the Global
Certificate for a Definitive Euro-Certificate or Certificates, such
Global
<PAGE>
Certificate shall be endorsed by or on behalf of the Trustee to
reflect the reduction of its principal amount by an amount equal to the
aggregate principal amount of such Definitive Euro-Certificate or
Certificates. Until so exchanged in full, such Global Certificate shall
in all respects be entitled to the same benefits under this Agreement
as Definitive Euro-Certificates authenticated and delivered hereunder
except that the beneficial owners of such Global Certificate shall not
be entitled to receive payments of interest on the Certificates until
they have exchanged their beneficial interests in such Global
Certificate for Definitive Euro-Certificates.
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 Certificate holders,
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 13.05, 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
<PAGE>
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 13.01, 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
<PAGE>
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]
<PAGE>
ARTICLE VII
OTHER MATTERS RELATING TO EACH TRANSFEROR
Section 7.01. Liability of each Transferor. Each Transferor shall be
severally, and not jointly, liable for all obligations, covenants,
representations and warranties of such Transferor arising under or related to
this Agreement or any Supplement. Except as provided in the preceding sentence,
each Transferor shall be liable only to the extent of the obligations
specifically undertaken by it in its capacity as a Transferor.
Section 7.02. Merger or Consolidation of, or Assumption of the
Obligations of, a Transferor.
(a) No Transferor shall dissolve, liquidate, consolidate with or
merge into any other corporation, limited liability company or 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
such 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 such
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 corporation or other entity
whose powers and activities are limited to substantially the same
degree as provided in the certificate of formation of CompuCredit
Funding and, if such 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
such Transferor hereunder; and (y) such Transferor or the
surviving entity, as the case may be, has delivered to the Trustee
(with a copy to each 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 2.07(c), the obligations,
rights or any part thereof of each Transferor hereunder shall not be
assignable nor shall any Person succeed to such obligations or rights
of any
<PAGE>
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 such 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 such Transferor thereby conveyed.
Section 7.03. Limitations on Liability of Each Transferor. Subject to
Section 7.01, no Transferor nor any of the directors, officers, employees,
incorporators, agents, partners, members or managers of any Transferor acting in
such capacities shall be under any liability to the Trust, the Trustee, the
Certificateholders, any Series Enhancer, any other Transferor 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 any 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. Each Transferor and any director, officer,
employee, partner, member or manager or agent of such Transferor may rely in
good faith on any document of any kind prima facie properly executed and
submitted by any Person (other than such Transferor) respecting any matters
arising hereunder.
[END OF ARTICLE VII]
<PAGE>
ARTICLE VIII
OTHER MATTERS RELATING TO THE SERVICER
Section 8.01. 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 8.02. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer. The Servicer shall not consolidate with or merge
into any other corporation, limited partnership, limited liability company or
other entity or convey, transfer or sell its properties and assets substantially
as an entirety to any Person, unless:
(a)(i) 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, a corporation or other 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 corporation or other 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;
(ii) the Servicer or the surviving entity, as the case may be
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, 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;
(iii) the Servicer shall have given the Rating Agencies
notice of such consolidation, merger or transfer or assets; and
(b) the corporation or other 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 8.03. Limitation on Liability of the Servicer and Others.
Except as provided in Section 8.04 and Section 11.05, neither the Servicer nor
any of the directors, officers, partners, members, managers, 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
<PAGE>
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 director, officer, employee,
partner, member or manager 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 8.04. 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, partners, members or
managers 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 or otherwise incurred in connection
with the transactions contemplated hereby or by any supplement hereto (in the
case of clause (a) or (b), other than such as may arise from the negligence or
wilful misconduct of the Trustee), including any judgment, award, settlement,
reasonable and actual attorneys' fees and expenses 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 8.04 shall survive the
termination of this Agreement or the Trust or the earlier removal or resignation
of the Trustee.
Section 8.05. 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 as to clause (a) above by an Opinion of Counsel to such
effect delivered to the Trustee. 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 10.02 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
<PAGE>
jurisdiction to appoint any established institution qualifying as an Eligible
Servicer as the Successor Servicer hereunder. The Trustee shall give prompt
notice to each Rating Agency and each Series Enhancer upon the appointment of a
Successor Servicer. Notwithstanding anything in this Agreement to the contrary,
CompuCredit may assign part or all of its obligations and duties as Servicer
under this Agreement to an Affiliate of CompuCredit so long as CompuCredit shall
have fully guaranteed the performance of such obligations and duties under this
Agreement.
Section 8.06. 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 8.07. Delegation of Duties. In the ordinary course of business,
the Servicer may at any time delegate its duties hereunder with respect to the
Accounts and the Receivables to any Person that agrees to conduct such duties in
accordance with the Credit Card Guidelines and this Agreement. Such delegation
shall not relieve the Servicer of its liability and responsibility with respect
to such duties, and shall not constitute a resignation within the meaning of
Section 8.05.
Section 8.08. Examination of Records. Each 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. Each 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]
<PAGE>
ARTICLE IX
INSOLVENCY EVENTS
Section 9.01. Rights upon the Occurrence of an Insolvency Event.
If CompuCredit Funding 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 CompuCredit
Funding of or relating to all or substantially all of CompuCredit Funding's
property, 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 CompuCredit Funding any such action
shall have remained undischarged or unstayed for a period of 60 days; or
CompuCredit Funding 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"), each 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.
[END OF ARTICLE IX]
<PAGE>
ARTICLE X
SERVICER DEFAULTS
Section 10.01. 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, any Supplement, the Affinity Card
Agreement or the Facilities Management Agreement 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 8.02 and
8.07;
(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 continues for a
period of 10 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
<PAGE>
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 10.02(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 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 11:00 a.m., New York City time, on the Transfer Date
preceding 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.
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 10.02,
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,
<PAGE>
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 all commercially reasonable efforts to
perform its obligations in a timely manner in accordance with the terms of this
Agreement and the Servicer shall provide the Trustee, each 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 10.02. Trustee To Act; Appointment of Successor.
(a) On and after the receipt by the Servicer of a Termination
Notice pursuant to Section 10.01, 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 3.01(b) and 8.07. Notwithstanding the
foregoing, the Trustee shall, if it is legally unable or unwilling 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
each 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.
<PAGE>
(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 CompuCredit (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 12.01, 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 the applicable Transferor or its
designee in such electronic form as it may reasonably request and shall
transfer all other records, correspondence and documents to it in the
manner and at such times as it shall reasonably request. To the extent
that compliance with this Section shall require the Successor Servicer
to disclose to CompuCredit information of any kind which the Successor
Servicer deems to be confidential, CompuCredit shall be required to
enter into such customary licensing and confidentiality agreements as
the Successor Servicer shall deem necessary to protect its interests.
Section 10.03. 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, each 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]
<PAGE>
ARTICLE XI
THE TRUSTEE
Section 11.01. 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, as to the truth of the
statements and correctness of the opinions expressed therein, upon all
resolutions, certificates, statements, opinions, reports, documents,
orders or other instruments furnished to the Trustee pursuant to this
Agreement. 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 five 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; provided, however, 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
<PAGE>
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 10.01 (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
Investors 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 2.01 or 2.09, (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 11.02. Certain Matters Affecting the Trustee. Except as
otherwise provided in Section 11.01:
(a) the Trustee may conclusively rely on and shall be fully
protected in acting on, or in refraining from acting in accordance
with, any resolution, certificate, statement, instrument, Officer's
Certificate, opinion, report, notice, request, consent, order,
appraisal, approval, bond or other paper or document 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;
<PAGE>
(b) the Trustee may consult with counsel and any advice of counsel
subsequently confirmed in writing 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;
(c) 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;
(d) 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;
(e) 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;
(f) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through
agents, attorneys, custodians or nominees 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;
(g) except as may be required by subsection 11.01(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;
(h) whether or not therein expressly so provided, every provision
of
<PAGE>
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 11.02;
(i) 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
(j) 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 11.03. 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 11.04. 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 11.05. 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, the Registrar, the Transfer Agent and the
Authenticating Agent) 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
<PAGE>
to Section 10.02, 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 11.06. 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, and BBB- in the case of
Standard & Poor's 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 11.07.
Section 11.07. 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 11.06 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 11.08.
<PAGE>
(d) No Trustee under this Agreement shall be personally liable for
any action or omission of any successor trustee.
Section 11.08. Successor Trustee.
(a) Any successor trustee appointed as provided in Section 11.07
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 11.06.
(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 each Rating Agency and each Series
Enhancer.
Section 11.09. 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 11.06, 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
<PAGE>
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 11.06 and no
notice to Certificateholders of the appointment of any co-trustee or
separate trustee shall be required under Section 11.08.
(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
<PAGE>
prepared such tax returns and shall provide such tax returns to the Trustee for
signature at least five days before such tax returns are due to be filed. 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 and shall deliver such information to the Trustee
at least five days prior to the date it is 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, and
shall, upon request, execute such returns. In no event shall the Trustee be
liable for any liabilities, costs or expenses of the Trust or any
Certificateholder arising under any tax law, including without limitation,
federal, state or local income or excise taxes or any other tax imposed on or
measured by income (or any interest or penalty with respect thereto 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
11.01 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
<PAGE>
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 11.01, 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 and
existing under the laws of the State of New York;
(ii) the Trustee has full power and authority 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; and
(iv) the Trustee meets the eligibility requirements set forth
in Section 11.06.
Section 11.16. Maintenance of Office or Agency. The Trustee will
maintain at its expense 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 will give prompt notice to the
Servicer and to Investor Certificateholders of any change in the location of the
Certificate Register or the Corporate Trust Office.
[END OF ARTICLE XI]
<PAGE>
ARTICLE XII
TERMINATION
Section 12.01. 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 8.04 and subsection 12.02(b),
upon the earlier of (i) August 29, 2018, (ii) at the option of the Transferor,
the day following the Distribution Date on which the Invested Amount for every
Series is zero and all amounts in respect of interest on all Certificates shall
have been paid and (iii) the time provided in Section 9.01.
Section 12.02. 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 2.06, 9.01 or 10.01, 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 3.05 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
<PAGE>
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 100% 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 Series
Allocation Percentage of Receivables with respect to such Series on
such Series Termination Date. 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 12.03. Transferor's Termination Rights. Upon the termination of
the Trust pursuant to Section 12.01 and the surrender of the Transferor
Certificates, the Trustee shall transfer, 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 12.02(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.
Section 12.04 Defeasance.
Notwithstanding anything to the contrary in this Agreement or any
Supplement:
(a) The Transferor may at its option be discharged from its
obligations with respect to all of the Investor Certificates issued by
the
<PAGE>
Trust or any specified Series thereof on the date the applicable
conditions set forth in Section 12.04(c) are satisfied ("Defeasance");
provided, however, that the following rights, obligations, powers,
duties and immunities shall survive until otherwise terminated or
discharged hereunder: (A) the rights of Holders of Investor
Certificates of the Trust or any specified Series thereof to receive,
solely from the trust fund provided for in Section 12.04(c), payments
in respect of principal of and interest on such Investor Certificates
when such payments are due; (B) the Transferor's obligations with
respect to such Series of Certificates under Sections 6.03, 6.04 and
12.02; (C) the rights, powers, trusts, duties and immunities of the
Trustee, the Paying Agent and the Transfer Agent and Registrar
hereunder; and (D) this Section 12.04.
(b) Subject to Section 12.04(c), the Transferor at its option may
use Collections to purchase Permitted Investments rather than
additional Receivables for transfer to the Trust until such time as no
Receivables remain in the Trust.
(c) The following shall be the conditions to Defeasance under
Section 12.04(a): (1) the Transferor irrevocably shall have deposited
or caused to be deposited with the Trustee, under the terms of an
irrevocable trust agreement in form and substance satisfactory to the
Trustee, as trust funds in trust for making the payments described
below (A) Dollars in an amount, or (B) Permitted Investments which
through the scheduled payment of principal and interest in respect
thereof will provide, not later than the due date of payment thereon,
money in an amount, or (C) a combination thereof, in each case
sufficient to pay and discharge, and, which shall be applied by the
Trustee to pay and discharge, all remaining scheduled interest and
principal payments on all outstanding Investor Certificates of the
Trust or any specified Series thereof on the dates scheduled for such
payments in this Agreement and the applicable Supplements and all
amounts owed to the enhancement provider pursuant to any Enhancement
Agreement for any Series if so provided in the related Supplements or
agreements with such Provider; (2) prior to its first exercise of its
right to substitute money or Permitted Investments for Receivables, the
Transferor shall deliver to the Trustee (x) an Opinion of Counsel to
the effect that such deposit and termination of obligations will not
result in the Trust being required to register as an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended, and (y) an Opinion of Counsel with respect to such deposit and
termination to the effect that it will not cause the Trust or any
portion thereof to be treated as an association or publicly traded
partnership taxable as a corporation; and (3) such deposit and
termination of obligations will not result in a Pay Out Event for any
Series.
[END OF ARTICLE XII]
<PAGE>
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.01. Amendment; Waiver of Past Defaults.
(a) This Agreement may be amended by the parties hereto from time
to time prior to, or in connection with, the issuance of the first
Series of Investor Certificates hereunder without the requirement of
any consents or the satisfaction of any conditions set forth below.
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 4.06, the designation of an Additional
Transferor, 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; provided, however, that
any such amendment to enable all or a portion of the Trust to qualify
as, and to permit an election to be made to cause the Trust to be
treated as a "financial asset securitization investment trust" under
the Internal Revenue Code (and, in connection with any such election,
to modify or eliminate existing provisions relating to the intended
Federal income tax treatment of the Certificates and the Trust) may be
made upon satisfaction of the Rating Agency Condition with respect to
such amendment without more.
(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
<PAGE>
Certificateholder or (iv) adversely affect the rating of any Series
or Class by each 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.
(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 each 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 6.03 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.
(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 13.02(d).
Section 13.02. Protection of Right, Title and Interest to Trust.
<PAGE>
(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 any 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) Each Transferor and the Servicer shall give the Trustee prompt
notice of any relocation of any office from which it services
Receivables (or the underlying receivables) or keeps records concerning
the Receivables (or the underlying 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. Each 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
C-1; (ii) semiannually, with respect to Automatic Additional Accounts
included as Accounts, an Opinion of Counsel substantially in the form
of Exhibit C-2, (iii) on each Addition Date on which any Participation
Interests are to be included in the Trust pursuant to subsection
2.09(b), an Opinion of Counsel covering the same substantive legal
issues addressed by Exhibits C-1 and C-2 but conformed to the extent
appropriate to relate to Participation Interests; and (iv) on or before
March 31 of each year, beginning with March 31, 1998, an Opinion of
Counsel substantially in the form of Exhibit C-3.
Section 13.03. Limitation on Rights of Certificateholders.
(a) The death or incapacity of any 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
<PAGE>
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 anything herein set forth
or contained in the terms of the Certificates, be construed so as to
constitute the Investor Certificateholders from time to time as
partners or members of an association, 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 13.04. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, 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 13.05. 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
<PAGE>
(i) in the case of the Transferor, to:
CompuCredit Funding Corp.
Two Ravinia Drive
Suite 650
Atlanta, Georgia 30346
Attention: Brett M. Samsky
(facsimile no. (770) 901-5815
with a copy to:
CompuCredit Corporation
Two Ravinia Drive, Suite 1750,
Atlanta, GA 30346
Attention: Brett M. Samsky
(facsimile no. (770) 901-5815)
(ii) in the case of the Servicer to:
CompuCredit Corporation
Two Ravinia Drive, Suite 1750
Atlanta, Georgia 30346
Attention: Brett M. Samsky
(facsimile no. (770) 901-5815)
(iii) in the case of the Trustee, the Paying Agent or
Transfer Agent and Registrar, to:
Bankers Trust Company
Corporate Trust and Agency Group
Four Albany Street
New York, New York 10006
Attention: Structured Finance Group, 10th Floor
(facsimile no. (212) 250-6439)
(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
<PAGE>
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 13.06. 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 13.07. 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 6.02
are and shall be deemed fully paid.
Section 13.08. 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 13.09. 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.
<PAGE>
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
7.04), 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.
<PAGE>
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]
<PAGE>
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.
COMPUCREDIT FUNDING CORP.,
Transferor,
by /s/ Brett M. Samsky
----------------------------
Name: Brett M. Samsky
Title: Chief Financial Officer
COMPUCREDIT CORPORATION,
Servicer,
by /s/ Brett M. Samsky
----------------------------
Name: Brett M. Samsky
Title: Chief Financial Officer
BANKERS TRUST COMPANY,
Trustee
by /s/ Patricia M.F. Russo
----------------------------
Name: Patricia M.F. Russo
Title: Vice President
<PAGE>
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
CompuCredit Card Master Trust
TRANSFEROR CERTIFICATE
THIS CERTIFICATE REPRESENTS AN INTEREST
IN CERTAIN ASSETS OF THE
COMPUCREDIT 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
CompuCredit Funding Corp. (the "Transferor").
(Not an interest in or obligation of the Transferor
or any affiliate thereof)
This certifies that COMPUCREDIT FUNDING CORP. is the registered
owner of a fractional interest in the assets of a trust (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 , 1997 (as amended and supplemented, the
"Agreement"), among CompuCredit Funding Corp., a Georgia corporation, as
Transferor, CompuCredit Corporation, as servicer (the "Servicer"), and
Bankers Trust Company, 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
A-1
<PAGE>
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 Rate 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.
A-2
<PAGE>
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) , 2018, (ii) the day
following the Distribution Date on which the Invested Amount and any amounts
required to be paid pursuant to any Enhancement Agreement 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 9.01
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.
COMPUCREDIT FUNDING CORP.
By
----------------------
Name:
Title:
Dated: [ , ]
----------- -- ----
A-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is the Transferor Certificate described in the within-mentioned
Agreement.
- ---------------------------,
as Trustee,
By
------------------------
Authorized Signatory
or
By [ ]
--------------------------,
as Authenticating Agent
for the Trustee,
By
------------------------
Authorized Signatory
A-4
<PAGE>
EXHIBIT B
FORM OF ANNUAL SERVICER'S CERTIFICATE
(To be delivered on or before March 31 of
each calendar year beginning with March 31, 1998,
pursuant to Section 3.05 of the Pooling and
Servicing Agreement referred to below)
COMPUCREDIT CORPORATION
COMPUCREDIT CREDIT CARD MASTER TRUST
The undersigned, a duly authorized representative of CompuCredit
Corporation, as Servicer ("CompuCredit"), pursuant to the Pooling and
Servicing Agreement dated as of , 1997 (as supplemented, the
"Agreement"), among CompuCredit Funding Corp., as transferor, CompuCredit,
and Bankers Trust Company, a New York banking corporation, as Trustee, does
hereby certify that:
1. CompuCredit 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 .
COMPUCREDIT CORPORATION,
Servicer,
By
----------------------
Name:
B-1
<PAGE>
Title:
B-2
<PAGE>
EXHIBIT C-1
FORM OF OPINION OF COUNSEL
WITH RESPECT TO AMENDMENTS
Provisions to be included in
Opinion of Counsel to be delivered pursuant
to Section 13.02(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 13.01 of the Pooling and Servicing
Agreement.
C-1
<PAGE>
EXHIBIT C-2
FORM OF OPINION OF COUNSEL
WITH RESPECT TO ACCOUNTS
Provisions to be included in
Opinion of Counsel to be
delivered pursuant to
subsection 13.02(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 the 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 Agreement creates in favor of the
Transferor a security interest in the rights of CompuCredit Corporation 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 CompuCredit Corporation 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 CompuCredit
C-2-1
<PAGE>
Corporation 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.
C-2-2
<PAGE>
EXHIBIT C-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:
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.
C-3
<PAGE>
EXHIBIT D-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]
COMPUCREDIT 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 __________ __, 1997 (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 D-2 to the Agreement, or (b) from
[_____________], substantially in the form of Exhibit D-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
D-1-1
<PAGE>
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.
D-1-2
<PAGE>
EXHIBIT D-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]
COMPUCREDIT 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
D-2-1
<PAGE>
EXHIBIT D-3
[FORM OF CERTIFICATE TO BE DELIVERED
TO EUROCLEAR OR CEDEL BY A BENEFICIAL OWNER
OF CERTIFICATES, OTHER THAN A QUALIFIED INSTITUTIONAL BUYER]
COMPUCREDIT 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 in the United States of America. If
administrative or legal proceedings are
D-3-1
<PAGE>
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.
D-3-2
<PAGE>
EXHIBIT E-1
[PRIVATE PLACEMENT LEGEND]
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).
E-1
<PAGE>
EXHIBIT E-2
[FORM OF REPRESENTATION LETTER]
[DATE]
[TRUSTEE]
CompuCredit, Corporation
Two Ravinia Drive
Suite 1750
Atlanta, Georgia 30346
Attention: Brett M. Samsky
Re: Purchase of $ (1)
principal amount of CompuCredit
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
- -------------------
(1) Not less than $250,000 minimum principal amount.
E-2-1
<PAGE>
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;
(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)(1) 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:
E-2-2
<PAGE>
"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)(l) 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
_________________, 1997, among CompuCredit, Funding Corp., as transferor,
CompuCredit Corporation, as Servicer and _________________________________,
as trustee.
Very truly yours,
------------------------------------
(Name of Purchaser)
By: --------------------------------
(Authorized Officer)
E-2-3
<PAGE>
EXHIBIT E-3
[ERISA LEGEND]
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.
E-3-1
<PAGE>
SCHEDULE 1
List of Accounts
[Original list delivered to Trustee]
1
<PAGE>
EXECUTION COPY
Exhibit 10.4.2
AMENDMENT NUMBER 1
TO
POOLING AND SERVICING AGREEMENT
THIS AMENDMENT NUMBER 1 dated as of April 17, 1998 (this
"Amendment") is among CompuCredit Funding Corp., as Transferor (the
"Transferor"), CompuCredit Corporation, as Servicer (the "Servicer") and
Bankers Trust Company, a New York banking company, as Trustee (the
"Trustee"), and amends that certain Pooling and Servicing Agreement dated as
of August 29, 1997 (as amended and supplemented, the "Pooling and Servicing
Agreement)" among the Transferor, the Servicer and the Trustee.
RECITALS
WHEREAS, pursuant to Section 13.01(b) of the Pooling and Servicing
Agreement, the parties to the Pooling and Servicing Agreement have determined
to amend the Pooling and Servicing Agreement in certain respects as provided
below;
WHEREAS, the Class A Certificateholder and the Class B
Certificateholder are willing to consent to such amendments;
WHEREAS, pursuant to Section 3.3(l) and 3.3(x) of the Certificate
Purchase Agreement, the Agent is willing to consent to such amendments;
NOW THEREFORE, in consideration of the premises and the agreements
contained herein, the parties hereto agree as follows:
SECTION 1. Amendments to Section 1.01. Section 1.01 of the
Pooling and Servicing Agreement is hereby amended as follows:
(a) The definition of "Automatic Additional Account" is deleted in its
entirety and the following is substituted therefor:
"Automatic Additional Account" means each Visa (Registered
Trademark) consumer revolving credit card account established pursuant
to a Credit Card Agreement between an Account Owner and any Person with
respect to which one or more credit cards are issued to a cardholder
bearing the name or logo "Aspire" which account comes into existence
after the Initial Cut-Off Date; provided, however, that Accounts shall
not include any credit card accounts the receivables of which have been
conveyed to NationsBank, N.A., as Agent, pursuant to the terms of the
Transfer and Administration Agreement dated as of April 17, 1998 by and
among CompuCredit Acquisition Funding Corp., CompuCredit Corporation,
Kitty Hawk Funding Corporation, Atlantic Equity Corporation,
NationsBank, N.A., as Agent and as Bank Investor.
(b) The proviso in the definition of "Collections" is deleted in its
entirety and the following is substituted therefor:
<PAGE>
provided, however, that during the period Columbus Bank owns the
Accounts pursuant to the Affinity Card Agreement, Collections shall
mean the sum of (i) the Net Excess Amount (as defined in the Affinity
Card Agreement) payable by Columbus Bank to CompuCredit in respect of
the Accounts, and (ii) all amounts paid by Columbus Bank to CompuCredit
in respect of the Accounts pursuant to Section 8.1(e)(iii) of the
Affinity Card Agreement
(c) Clause (e) in the second sentence of the definition of "Finance
Charge Receivables" is deleted in its entirety and the following is
substituted therefor:
(e) all amounts paid by Columbus Bank to CompuCredit in respect of the
Accounts pursuant to Section 8.1(e)(iii) of the Affinity Card Agreement
SECTION 2. Pooling and Servicing Agreement in Full Force and
Effect. Except as specifically amended hereby, all of the terms and
conditions of the Pooling and Servicing Agreement shall remain in full force
and effect. All references to the Pooling and Servicing Agreement in any
other document or instrument shall be deemed to mean such Pooling and
Servicing Agreement as amended by this Amendment. This Amendment shall not
constitute a novation of the Pooling and Servicing Agreement, but shall
constitute an amendment thereof. The parties hereto agree to be bound by the
terms and obligations of the Pooling and Servicing Agreement, as amended by
this Amendment, as though the terms and obligations of the Pooling and
Servicing Agreement were set forth herein.
SECTION 3. Counterparts. This Amendment may be executed in any
number of counterparts and by separate parties hereto on separate
counterparts, each of which when executed shall be deemed an original, but
all such counterparts taken together shall constitute one and the same
instrument.
SECTION 4. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO ITS CONFLICTS OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
SECTION 5. Defined Terms. Capitalized terms used herein and not
otherwise defined herein or amended by the terms of this Amendment shall have
the meanings assigned to such terms in the Pooling and Servicing Agreement.
IN WITNESS WHEREOF, the Transferor, the Servicer and the Trustee have
caused this Amendment to be duly executed by their respective officers as of
the day and year first above written.
COMPUCREDIT FUNDING CORP.,
as Transferor,
By: /s/ Brett M. Samsky
---------------------------
Name: Brett M. Samsky
Title: Chief Financial Officer
COMPUCREDIT CORPORATION,
<PAGE>
as Servicer,
By: /s/ Brett M. Samsky
-------------------------------
Name: Brett M. Samsky
Title: Chief Financial Officer
BANKERS TRUST COMPANY,
as Trustee,
By: /s/ Patricia M.F. Russo
-------------------------------
Name: Patricia M.F. Russo
Title: Vice President
Acknowledged and agreed to
as of this 17th day of
April, 1998
NATIONSBANK, N.A.,
as Administrative Agent and as
Bank Investor under the
Certificate Purchase Agreement
By: /s/ Michelle M. Heath
--------------------------------
Name: Michelle M. Heath
Title: Senior Vice President
ENTERPRISE FUNDING CORPORATION,
as Class A Certificateholder
By: [illegible]
--------------------------------
Name:
Title:
COMPUCREDIT FUNDING CORP.
as Class B Certificateholder
By: /s/ Brett M. Samsky
--------------------------------
Name: Brett M. Samsky
Title: Chief Financial Officer
[Amendment to Pooling and Servicing Agreement]
<PAGE>
EXECUTION COPY
Exhibit 10.4.3
- --------------------------------------------------------------------------------
SERIES 1997-One SUPPLEMENT
Dated as of August 29, 1997
to
POOLING AND SERVICING AGREEMENT
Dated as of August 29, 1997
$125,000,000
------------------------------
COMPUCREDIT CREDIT CARD MASTER TRUST
SERIES 1997-One
------------------------------
among
COMPUCREDIT FUNDING CORP.
Transferor
COMPUCREDIT CORPORATION, L.P.
Servicer
and
Bankers Trust Company
Trustee
on behalf of the Series 1997-One Certificateholders
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
CREATION OF THE SERIES 1997-ONE CERTIFICATES
<S> <C>
Section 1.01. Designation.......................................................................... 1
ARTICLE II
DEFINITIONS
Section 2.01. Definitions.......................................................................... 2
ARTICLE III
SERVICING FEE AND INTERCHANGE
Section 3.01. Servicing Compensation; Interchange.................................................. 15
ARTICLE IV
RIGHTS OF SERIES 1997-ONE CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
Section 4.01. Collections and Allocations.......................................................... 15
Section 4.02. Determination of Monthly Interest.................................................... 20
Section 4.03. Suspension of the Revolving Period;
Limited Amortization Period and Optional
Amortization......................................................................... 20
Section 4.04. Required Amount...................................................................... 21
Section 4.05. Application of Available Funds and
Available Principal Collections...................................................... 21
Section 4.06. Defaulted Amounts; Investor Charge-Offs.............................................. 24
Section 4.07. Excess Spread; Excess Finance Charge
Collections.......................................................................... 25
Section 4.08. Reallocated Principal Collections.................................................... 25
Section 4.09. Excess Finance Charge Collections.................................................... 26
Section 4.10. Reallocated Investor Finance Charge
Collections.......................................................................... 26
Section 4.11. Shared Principal Collections......................................................... 27
Section 4.12. Spread Account....................................................................... 27
Section 4.13. Invested Amount Increases............................................................ 29
ARTICLE V
DISTRIBUTIONS AND REPORTS TO
SERIES 1997-ONE CERTIFICATEHOLDERS
Section 5.01. Distributions........................................................................ 30
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 5.02. Reports and Statements to Series
1997-One Certificateholders.......................................................... 31
ARTICLE VI
PAY OUT EVENTS
Section 6.01. Pay Out Events....................................................................... 32
ARTICLE VII
OPTIONAL REPURCHASE; SERIES TERMINATION
Section 7.01. Optional Repurchase.................................................................. 34
Section 7.02. Series Termination................................................................... 34
ARTICLE VIII
FINAL DISTRIBUTIONS
Section 8.01. Sale of Receivables or Certificateholders' Interest pursuant to Section
2.06 or 10.01 of the Agreement and Section 7.01 or 7.02 of this Supplement........... 35
Section 8.02. Distribution of Proceeds of Sale,
Disposition or Liquidation of the
Receivables pursuant to Section 9.01 of
the Agreement........................................................................ 36
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.01. Ratification of Agreement............................................................ 37
Section 9.02. Counterparts......................................................................... 37
Section 9.03. Governing Law........................................................................ 38
Section 9.04. Tax Matters.......................................................................... 38
Section 9.05. Additional Provisions Regarding
Agreement............................................................................ 42
SECTION 9.06. Additional Provisions Regarding the
Servicer............................................................................. 42
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
- ---------
<S> <C>
Exhibit A. Form of Class A Certificate
Exhibit B. Form of Class B Certificate
Exhibit C-1 Form of Monthly Servicer's Statement
Exhibit C-2 Form of Weekly Servicer Report
Exhibit D. Form of Class B Increase Notice
Exhibit E. Form of Investment Letter
</TABLE>
<PAGE>
SERIES 1997-One SUPPLEMENT, dated as of August 29, 1997 (the
"Supplement"), among COMPUCREDIT FUNDING, CORP., a Georgia corporation,
as Transferor, COMPUCREDIT CORPORATION, a Georgia corporation, as
Servicer, and Bankers Trust Company, a New York banking corporation,
not in its individual capacity, but solely as Trustee.
Pursuant to the Pooling and Servicing Agreement dated as of August 29,
1997 (as amended and supplemented, the "Agreement"), among the Transferor, the
Servicer and the Trustee, the Transferor has created the Compucredit Credit Card
Master Trust (the "Trust"). Section 6.03 of the Agreement provides that the
Transferor may from time to time direct the Trustee to authenticate one or more
new Series of Investor Certificates representing fractional undivided interests
in the Trust. The Principal Terms of any new Series are to be set forth in a
Supplement to the Agreement.
Pursuant to this Supplement, the Transferor and the Trustee shall
create a new Series of Investor Certificates and specify the Principal Terms
thereof.
ARTICLE I
Creation of the Series 1997-One Certificates
Section 1.01. Designation.
(a) There is hereby created a Series of Investor Certificates to be
issued pursuant to the Agreement and this Supplement to be known as "Compucredit
Credit Card Master Trust, Series 1997-One." The Series 1997-One Certificates
shall be issued in two Classes, the first of which shall be known as the "Class
A Series 1997-One Floating Rate Variable Funding Certificates" and the second of
which shall be known as the "Class B Series 1997-One Floating Rate Variable
Funding Certificates."
(b) Series 1997-One shall be included in Group I and shall be a
Principal Sharing Series. Series 1997-One shall be an Excess Allocation Series.
Series 1997-One shall not be subordinated to any other Series. Notwithstanding
any provision in the Agreement or in this Supplement to the contrary, the first
Distribution Date with respect to Series 1997-One shall be the Distribution Date
related to the Monthly Period which follows the Monthly Period during which a
Class A Invested Amount Increase occurs.
(c) The opinions described in clauses (c) and (d) of the definition of
Tax Opinion in Section 1.01 of the Agreement shall not be applicable to the
Series 1997-One Certificates.
ARTICLE II
Definitions
Section 2.01. Definitions.
(a) Whenever used in this Supplement, the following words and phrases
<PAGE>
shall have the following meanings, and the definitions of such terms are
applicable to the singular as well as the plural forms of such terms and the
masculine as well as the feminine and neuter genders of such terms.
"Administrative Agent" shall mean NationsBank, N.A., or any successor
designated as the Agent in the Certificate Purchase Agreement.
"Aggregate Subordination Percentage" shall mean, for any date of
determination, the percentage equivalent of a fraction, the numerator of which
is equal to the sum, for all FICO Risk Score ranges shown in the table below, of
(a) the total amount of Principal Receivables in the Trust (calculated without
taking into account any Discount Option Receivables) as of the last day of the
preceding Monthly Period for all Accounts with FICO Risk Scores in the range
specified in the left-hand column of the table below, multiplied by (b) the
Subordination Percentage associated with the FICO Risk Score range specified in
the right-hand column of the table below, and the denominator of which is equal
to the total amount of Principal Receivables in the Trust (calculated without
taking into account any Discount Option Receivables) as of the last day of the
preceding Monthly Period.
<TABLE>
<CAPTION>
FICO Risk Subordination
Score Range(*) Percentage
------------------------------------------------ -----------------------------------
<S> <C>
*[material omitted] *[material omitted]
</TABLE>
(*) FICO risk score at the time of initial
booking of the account
"Amortization Period" shall mean, with respect to Series 1997-One, the
Controlled Amortization Period or the Early Amortization Period (or both), as
the context requires and, for purposes of Shared Principal Collections, the
Limited Amortization Period and an Optional Amortization Date, if so designated
by the Transferor.
"Available Funds" shall mean, with respect to any Monthly Period, an
amount equal to the sum of (a) the Reallocated Investor Finance Charge
Collections and (b) the amount of funds, if any, to be withdrawn from the Spread
Account which, pursuant to subsection 4.12(c), are required to be included in
Available Funds with respect to such Distribution Date.
"Available Principal Collections" shall mean, with respect to any
Monthly Period, an amount equal to the sum of (a) (i) an amount equal to the
Fixed/Floating Allocation Percentage of Series 1997-One Allocable Principal
Collections received during such Monthly Period minus (ii) the amount of
Reallocated Principal Collections with respect to such Monthly Period which
pursuant to Section 4.08 are required to fund the Class A Required Amount for
the related Distribution Date, (b) any Shared Principal Collections with respect
to other Series that are allocated to Series 1997-One in accordance with Section
4.04 of the Agreement and Section 4.11 hereof, (c)
- -----------------
*Deleted per the Registrant's request for confidential treatment and filed
separately with the Commission pursuant to Rule 24b-2.
<PAGE>
any other amounts which pursuant to Section 4.05 or 4.07 hereof are to be
treated as Available Principal Collections with respect to the related
Distribution Date.
"Available Spread Account Amount" shall mean, with respect to any
Distribution Date, the lesser of (a) the amount on deposit in the Spread Account
on such date (before giving effect to any deposit to be made to the Spread
Account on such date) and (b) the Required Spread Account Amount.
"Average Invested Amount" shall mean, for any period, the sum of the
Invested Amounts for each day in such period divided by the number of days in
such period.
"Base Rate" shall mean, with respect to any Monthly Period, the
annualized percentage equivalent of a fraction, the numerator of which is equal
to the sum of the Class A Monthly Interest and the Monthly Servicing Fee, if
any, with respect to the related Distribution Date and the denominator of which
is the Class A Average Invested Amount as of the last day of the preceding
Monthly Period.
"Certificate Assignment" shall have the meaning specified in Section
9.04(e).
"Certificate Purchase Agreement" shall mean the Certificate Purchase
Agreement dated as of August 29, 1997 by and among the Transferor, the
Administrative Agent and Enterprise Funding Corporation, and all amendments
thereto.
"Class A Average Invested Amount" shall mean, for any period, the sum
of the Class A Invested Amounts for each day in such period divided by the
number of days in such period.
"Class A Certificate Rate" shall have the meaning specified in the
Certificate Purchase Agreement.
"Class A Certificateholder" shall mean the Person in whose name a Class
A Certificate is registered in the Certificate Register.
"Class A Certificates" shall mean any one of the Certificates executed
by the Transferor and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A.
"Class A Floating Percentage" shall mean, with respect to any Monthly
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction, the numerator of which is equal to the Class A Invested Amount as of
the close of business on the last day of the preceding Monthly Period and the
denominator of which is equal to the Invested Amount as of such day; provided,
however, that with respect to the first Monthly Period, the Class A Floating
Percentage shall mean the percentage equivalent of a fraction, the numerator of
which is the Class A Initial Invested Amount and the denominator of which is the
Initial Invested Amount; provided further, however, that with respect to any
Monthly Period in which one or more Reset Dates occur with respect to an
Invested Amount Increase or an Optional Amortization Date, the Class A Floating
Percentage shall be recalculated as provided above but as of such Reset Date for
the period from and after the date on which any such Reset Date occurs to but
excluding the date (if any) that another such Reset Date occurs or, if no other
Reset Date occurs during such Monthly Period, to and including the last day of
such Monthly Period.
<PAGE>
"Class A Initial Invested Amount" shall mean $0.
"Class A Invested Amount" shall mean, on any date of determination, an
amount equal to (a) the Class A Initial Invested Amount, plus (b) the aggregate
principal amount of Class A Invested Amount Increases pursuant to Section 4.13
on or prior to such date, minus (c) the aggregate amount of principal payments
made to the Class A Certificateholders on or prior to such date, minus (d) the
excess, if any, of the aggregate amount of Class A Investor Charge-Offs for all
prior Distribution Dates over Class A Investor Charge-Offs reimbursed pursuant
to subsections 4.05(a)(vii) and 4.07(a) prior to such date.
"Class A Invested Amount Increase" shall have the meaning specified in
subsection 4.13(a).
"Class A Investor Charge-Offs" shall have the meaning specified in
subsection 4.06(a).
"Class A Investor Default Amount" shall mean, with respect to each
Monthly Period, an amount equal to the product of (i) the Investor Default
Amount for the related Monthly Period and (ii) the Class A Floating Percentage
for such Monthly Period.
"Class A Monthly Interest" shall have the meaning specified in
subsection 4.02(a).
"Class A Principal Percentage" shall mean, with respect to any Monthly
Period (i) during the Revolving Period, the Class A Floating Percentage and (ii)
during the Amortization Period or the Limited Amortization Period, the
percentage equivalent (which percentage shall never exceed 100%) of a fraction,
the numerator of which is the Class A Invested Amount as of the end of the
Revolving Period or suspension thereof, as the case may be, and the denominator
of which is the Invested Amount as of the end of the Revolving Period or
suspension thereof, as the case may be.
"Class A Required Amount" shall have the meaning specified in Section
4.04.
"Class B Average Invested Amount" shall mean, for any period, the sum
of the Class B Invested Amounts for each day in such period divided by the
number of days in such period.
"Class B Certificate Rate" shall mean, for any Interest Period with
respect to the Class B Certificates, a per annum rate of 0%, provided, however,
that upon notice to the Trustee and the Servicer, the Class B Certificate Rate
shall equal such other rate as shall be agreed upon by the Transferor and the
Class B Certificateholder, from time to time.
"Class B Certificateholder" shall mean the Person in whose name a Class
B Certificate is registered in the Certificate Register.
"Class B Certificates" shall mean any one of the Certificates executed
by the Transferor and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit B.
<PAGE>
"Class B Floating Percentage" shall mean, with respect to any Monthly
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction, the numerator of which is equal to the Class B Invested Amount as of
the close of business on the last day of the preceding Monthly Period and the
denominator of which is equal to the Invested Amount as of the close of business
on such day; provided, however, that with respect to the first Monthly Period,
the Class B Floating Percentage shall mean the percentage equivalent of a
fraction, the numerator of which is the Class B Initial Invested Amount and the
denominator of which is the Initial Invested Amount; provided further, however,
that with respect to any Monthly Period in which one or more Reset Dates occur
with respect to an Invested Amount Increase or an Optional Amortization Date,
the Class B Floating Percentage shall be recalculated as provided above but as
of such Reset Date for the period from and after the date on which any such
Reset Date occurs to but excluding the date (if any) that another such Reset
Date occurs or, if no other Reset Date occurs during such Monthly Period, to and
including the last day of such Monthly Period.
"Class B Initial Invested Amount" shall mean $12,500,000.
"Class B Invested Amount" shall mean, on any date of determination, an
amount equal to (a) the Class B Initial Invested Amount, plus (b) the aggregate
principal amount of Class B Invested Amount Increases pursuant to Section 4.13
on or prior to such date, minus (c) the aggregate amount of principal payments
made to the Class B Certificateholders prior to such date, minus (d) the
aggregate amount of Class B Investor Charge-Offs for all prior Distribution
Dates, minus (e) the amount of Reallocated Principal Collections allocated on
all prior Distribution Dates pursuant to Section 4.08 minus (f) an amount equal
to the amount by which the Class B Invested Amount has been reduced on all prior
Distribution Dates pursuant to subsection 4.06(a), plus (g) the amount of
Available Funds allocated and available on all prior Distribution Dates pursuant
to subsection 4.05(a)(xii) for the purpose of reimbursing amounts deducted
pursuant to the foregoing clauses (d), (e) and (f); and plus (h) the amount of
Excess Spread and Excess Finance Charge Collections allocated and available on
all prior Distribution Dates pursuant to subsection 4.07(a) for the purpose of
reimbursing amounts deducted pursuant to the foregoing clauses (d), (e) and (f);
provided, however, that the Class B Invested Amount may not be reduced below
zero.
"Class B Invested Amount Increase" shall have the meaning specified in
subsection 4.13(b).
"Class B Investor Charge-Offs" shall have the meaning specified in
subsection 4.06(b).
"Class B Investor Default Amount" shall mean, with respect to each
Monthly Period, an amount equal to the product of (i) the Investor Default
Amount for the related Monthly Period and (ii) the Class B Floating Percentage
for such Monthly Period.
"Class B Monthly Interest" shall have the meaning specified in
subsection 4.02(b).
"Class B Principal Percentage" shall mean, with respect to any Monthly
Period, (i) during the Revolving Period, the Class B Floating Percentage and
(ii) during the Amortization Period or the Limited Amortization Period, the
percentage equivalent (which percentage shall never exceed 100%) of a fraction,
the numerator of
<PAGE>
which is the Class B Invested Amount as of the end of the Revolving Period or
the suspension thereof, as the case may be, and the denominator of which is the
Invested Amount as of the end of the Revolving Period or the suspension thereof,
as the case may be.
"Closing Date" shall mean August 29, 1997.
"Commitment Termination Date" shall mean August 28, 1998, or such later
date as agreed to by the Administrative Agent and the Transferor.
"Controlled Amortization Period" shall mean, unless a Pay Out Event
with respect to Series 1997-One shall have occurred prior thereto, the period
commencing on the Termination Date (as defined in the Certificate Purchase
Agreement, excluding clause (v) thereof) and ending upon the first to occur of
(x) the commencement of the Early Amortization Period, (y) the payment in full
to Class A Certificateholders and the Class B Certificateholders of the Class A
Invested Amount and the Class B Invested Amount, respectively, and (z) the
Series 1997-One Termination Date.
"Delinquency Ratio" shall mean, for any Monthly Period, the ratio
(expressed as a percentage) of (i) the balance of all Receivables as to which,
as of the last day of such Monthly Period, any payment remains unpaid for more
than 30 days from the due date with respect thereto, but excludes Ineligible
Receivables, to (ii) the balance of all Receivables (excluding Ineligible
Receivables) as of the last day of such Monthly Period.
"Distribution Date" shall mean the fifteenth day of each calendar
month, or if such fifteenth day is not a Business Day, the next succeeding
Business Day.
"Early Amortization Period" shall mean the period commencing at the
close of business on the Business Day immediately preceding the day on which a
Pay Out Event with respect to Series 1997-One is deemed to have occurred, and
ending on the first to occur of (i) the payment in full of the Invested Amount
or (ii) the Series 1997-One Termination Date.
"Eligible Institution" shall mean any depositary 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 of AAA and Aaa or the
equivalent, as applicable, by each Rating Agency or (ii) a short-term unsecured
debt certificate of deposit rating of at least A-1 and P-1 by each Rating
Agency. Notwithstanding the previous sentence any institution the appointment of
which satisfies the Rating Agency Condition shall be considered an Eligible
Institution.
"Excess Finance Charge Collections" shall mean, with respect to any
Distribution Date, the aggregate amount of Collections of Finance Charge
Receivables allocable to other Series in excess of the amounts necessary to make
required payments with respect to such Series, if any.
"Excess Spread" shall mean, with respect to any Distribution Date, the
amount, if any, specified pursuant to subsection 4.05(a)(xiii) with respect to
such Distribution Date.
"Facility Limit" shall have the meaning specified in the Certificate
<PAGE>
Purchase Agreement.
"FICO Risk Score" shall mean, at the time of initial booking of an
Account, the Fair, Isaacs & Co. credit risk score with respect to such Account.
"Finance Charge Shortfall" shall have the meaning specified in Section
4.09.
"Fixed/Floating Allocation Percentage" shall mean, with respect to any
day during a Monthly Period, the percentage equivalent (which percentage shall
never exceed 100%) of a fraction, the numerator of which is (a) during the
Revolving Period, the Series Adjusted Invested Amount for Series 1997-One as of
the last day of the immediately preceding Monthly Period (or, in the case of the
first Monthly Period, the Initial Invested Amount) and (b) during the
Amortization Period or any Limited Amortization Period, the Series Adjusted
Invested Amount for Series 1997-One as of the close of business on the date on
which the Revolving Period shall have terminated or been suspended, as the case
may be, and the denominator of which is the product of (x) the sum of (i) the
total amount of Principal Receivables in the Trust as of the last day of the
immediately preceding Monthly Period (or with respect to the first Monthly
Period, the total amount of Principal Receivables in the Trust as of the Closing
Date) and (ii) the principal amount on deposit in the Special Funding Account as
of such last day (or with respect to the first Monthly Period, the Closing Date)
and (y) the Series 1997-One Allocation Percentage as of the last day of the
immediately preceding Monthly Period; provided, however, that with respect to
any Monthly Period in which one or more Reset Dates occurs the Fixed/Floating
Allocation Percentage shall be recalculated as provided above but as of such
Reset Date for the period from and including such Reset Date to but excluding
the next such Reset Date, if any, or if no other Reset Date occurs during such
Monthly Period, to and including the last day of such Monthly Period, as
applicable; provided further, that the numerator in clause (b) above shall
continue to be the Series Adjusted Invested Amount for Series 1997-One as of the
close of business on the date on which the Revolving Period shall have been
terminated or suspended unless the Invested Amount is paid in full on such date.
"Floating Allocation Percentage" shall mean, with respect to any
Monthly Period, the percentage equivalent (which percentage shall never exceed
100%) of a fraction, the numerator of which is the Invested Amount as of the
last day of the preceding Monthly Period (or in the case of the first Monthly
Period, the Initial Invested Amount) and the denominator of which is the product
of (x) the Series 1997-One Allocation Percentage with respect to such Monthly
Period and (y) the sum of (i) the total amount of Principal Receivables in the
Trust as of such day (or with respect to the first Monthly Period, the total
amount of Principal Receivables in the Trust on the Closing Date) and (ii) the
principal amount on deposit in the Special Funding Account as of such last day
(or with respect to the first Monthly Period, the Closing Date); provided,
however, that with respect to any Monthly Period in which one or more Reset
Dates occurs, the Floating Allocation Percentage shall be recalculated as
provided above but as of such Reset Date, for the period from and after the date
on which any such Reset Date occurs to but excluding the date, if any, that
another such Reset Date occurs or, if no other Reset Date occurs during such
Monthly Period, to and including the last day of such Monthly Period.
"Funding Period" shall have the meaning specified in the Certificate
Purchase Agreement.
"Group I" shall mean Series 1997-One and each other Series specified in
<PAGE>
the related Supplement to be included in Group I.
"Group I Investor Additional Amounts" shall mean, with respect to any
Monthly Period, the sum of (a) Series 1997-One Additional Amounts for such
Distribution Date and (b) for all other Series included in Group I, the sum of
(i) the aggregate net amount by which the Invested Amounts of such Series have
been reduced as a result of investor charge-offs, subordination of principal
collections and funding the investor default amounts in respect of any Class or
Series Enhancement interests of such Series as of such Distribution Date and
(ii) if the applicable Supplements so provide, the aggregate unpaid amount of
interest at the applicable certificate rates that has accrued on the amounts
described in the preceding clause (i) for such Distribution Date.
"Group I Investor Default Amount" shall mean, with respect to any
Distribution Date, the sum of (a) the Investor Default Amount for such
Distribution Date and (b) the aggregate amount of the investor default amounts
for all other Series included in Group I for such Distribution Date.
"Group I Investor Finance Charge Collections" shall mean, with respect
to any Distribution Date, the sum of (a) Investor Finance Charge Collections for
such Distribution Date and (b) the aggregate amount of the investor finance
charge collections for all other Series included in Group I for such
Distribution Date.
"Group I Investor Monthly Fees" shall mean with respect to any
Distribution Date, the sum of (a) Series 1997-One Monthly Fees for such
Distribution Date and (b) the aggregate amount of the servicing fees, investor
fees, fees payable to any Series Enhancer and any other similar fees, which are
payable out of reallocated investor finance charge collections pursuant to the
related Supplements, for all other Series included in Group I for such
Distribution Date.
"Group I Investor Monthly Interest" shall mean, with respect to any
Distribution Date, the sum of (a) Series 1997-One Monthly Interest for such
Distribution Date and (b) the aggregate amount of monthly interest, including
overdue monthly interest and interest on such overdue monthly interest, if such
amounts are payable out of reallocated investor finance charge collections
pursuant to the related Supplements, for all other Series included in Group I
for such Distribution Date.
"Initial Invested Amount" shall mean $12,500,000.
"Interest Distribution Date" shall have the meaning specified in
Section 4.02(c) hereof.
"Interest Period" shall mean, with respect to any Distribution Date,
the period from and including the Distribution Date immediately preceding such
Distribution Date (or, in the case of the first Distribution Date, from and
including the Closing Date) to but excluding such Distribution Date.
"Invested Amount" shall mean, as of any date of determination, an
amount equal to the sum of (a) the Class A Invested Amount as of such date and
(b) the Class B Invested Amount as of such date.
"Invested Amount Increase" shall mean a Class A Invested Amount
Increase or a Class B Invested Amount Increase.
<PAGE>
"Investment Letter" shall have the meaning specified in Section
9.04(c).
"Investor Charge-Offs" shall mean Class A Investor Charge-Offs and
Class B Investor Charge-Offs.
"Investor Default Amount" shall mean, with respect to any Monthly
Period, an amount equal to the product of (a) the Series 1997-One Allocable
Defaulted Amount for the related Monthly Period and (b) the Floating Allocation
Percentage for such Monthly Period.
"Investor Finance Charge Collections" shall mean with respect to any
Distribution Date, an amount equal to the product of (a) (i) during the
Revolving Period or the Limited Amortization Period, the Floating Allocation
Percentage for the related Monthly Period and (ii) during the Amortization
Period, the Fixed/Floating Allocation Percentage for the related Monthly Period
and (b) Series 1997-One Allocable Finance Charge Collections deposited in the
Collection Account for the related Monthly Period.
"Limited Amortization Amount" shall mean for any Distribution Date
relating to a Limited Amortization Period, the excess, if any, of (i) the amount
specified in the notice delivered by the Transferor in accordance with Section
4.03 over (ii) the aggregate amount of principal distributed to the Class A
Certificateholders on all prior Distribution Dates, if any, in such Limited
Amortization Period.
"Limited Amortization Period" shall mean, unless the Controlled
Amortization Period or the Early Amortization Period shall have commenced prior
thereto, a period beginning on the first day of the Monthly Period specified in
the notice delivered by the Transferor in accordance with Section 4.03, and
ending upon the first to occur of (i) the commencement of the Controlled
Amortization Period or the Early Amortization Period and (ii) the last day of
the Monthly Period related to the Distribution Date on which the aggregate
amount distributed pursuant to Section 4.05 (c)(ii) equals the Limited
Amortization Amount for such Distribution Date.
"Monthly Interest" means, with respect to any Distribution Date, the
Class A Monthly Interest and the Class B Monthly Interest for such Distribution
Date.
"Monthly Servicing Fee" shall have the meaning specified in Section
3.01.
"Net Portfolio Yield" shall mean, with respect to any Monthly Period,
the annualized percentage equivalent of a fraction, (A) the numerator of which
is equal to (a) Investor Finance Charge Collections with respect to such Monthly
Period, plus (b) without duplication of amounts referred to in clause (a) above,
the amount of Interchange to be included as Series 1997-One Allocable Finance
Charge Collections for such Monthly Period pursuant to subsection 3.01(b), minus
(c) the Investor Default Amount for the Distribution Date with respect to such
Monthly Period, and (B) the denominator of which is the Class A Average Invested
Amount with respect to such Monthly Period.
"Net Yield" shall mean, with respect to any Monthly Period, (a) the Net
Portfolio Yield with respect to such Monthly Period minus (b) the Base Rate with
respect to such Monthly Period.
"Optional Amortization Amount" shall have the meaning specified in
<PAGE>
subsection 4.03(b).
"Optional Amortization Date" shall have the meaning
specified in subsection 4.03(b).
"Optional Amortization Notice" shall have the meaning specified in
subsection 4.03(b).
"Participant" shall have the meaning specified in Section 9.04(f).
"Pay Out Event" shall mean any Pay Out Event specified in Section 6.01.
"Private Holder" shall mean each holder of a right to receive interest
or principal in respect of any direct or indirect interest in the Trust
including any financial instrument or contract the value of which is determined
in whole or part by reference to the Trust (including the Trust's assets, income
of the Trust or distributions made by the Trust), excluding any interest in the
Trust represented by any Series or Class of Certificates or any other interest
as to which the Transferor has provided to the Trustee an Opinion of Counsel to
the effect that such Series, Class or other interest will be treated as debt or
otherwise not as an equity interest in either the Trust or the Receivables for
federal income tax purposes, in each case, provided such interest is not
convertible or exchangeable into an interest in the Trust or the Trust's income
or equivalent value. Notwithstanding the immediately preceding sentence,
"Private Holder" shall also include any other Person that the Transferor
determines is, may be or may become a "partner" within the meaning of Section
1.7704-1(h)(1)(ii) of the United States Treasury Regulations (including by
reason of Section 1.7704-1(h)(3)). Private Holders include each holder of an
interest in the Series 1997-1 Certificates or the Transferor Certificates, the
Servicer, and the holder of any interest described in Section 12.02(c) of the
Agreement. Any Person holding more than one interest in the Trust each of which
separately would cause such Person to be a Private Holder shall be treated as a
single Private Holder. Each holder of an interest in a Private Holder which is a
partnership, S Corporation or a grantor trust under the Code shall be treated as
a Private Holder unless excepted with the consent of the Transferor (which
consent shall be based on an Opinion of Counsel generally to the effect that the
action taken pursuant to the consent will not cause the Trust to become a
publicly traded partnership treated as a corporation).
"Reallocated Investor Finance Charge Collections" shall mean that
portion of Group I Investor Finance Charge Collections allocated to Series
1997-One pursuant to Section 4.10.
"Reallocated Principal Collections" shall mean, with respect to any
Monthly Period, the product of (a) the Series 1997-One Allocable Principal
Collections deposited in the Collection Account for such Monthly Period, (b) the
Fixed/Floating Allocation Percentage, and (c) the Class B Principal Percentage.
"Reassignment Amount" shall mean, with respect to any Distribution
Date, after giving effect to any deposits and distributions otherwise to be made
on such Distribution Date, the sum of (i) the Invested Amount on such
Distribution Date plus (ii) Monthly Interest for such Distribution Date and any
Monthly Interest previously due but not distributed to the Series 1997-One
Certificateholders on a prior Distribution Date.
"Records" shall mean all Credit Card Agreements and other documents,
<PAGE>
books, records and other information (including, without limitation, computer
programs, tapes, discs, punch cards, data processing software and related
property and rights) maintained with respect to Receivables and the related
Obligors.
"Required Subordinate Amount" shall mean, on any date of determination,
the greater of (a) $12,500,000 and (b) (i)(A) the Class A Invested Amount as of
the end of the day immediately preceding such determination date, divided by (B)
1 minus the Aggregate Subordination Percentage minus (ii) the Class A Invested
Amount as of the end of the day immediately preceding such determination date,
or such other amount as agreed to by the Administrative Agent and the
Transferor.
"Required Spread Account Amount" shall mean, shall mean, on any date of
determination, the product of (i) the Class A Invested Amount as of such date of
determination and (ii) the Spread Account Cap Percentage as of such date of
determination.
"Reset Date" shall mean each of (a) an Addition Date, (b) a date on
which an Invested Amount Increase occurs (c) an Optional Amortization Date and
(d) any date on which a new Series is issued.
"Revolving Period" shall mean the period beginning at the close of
business on the Series Cut-Off Date and ending on the earlier of (a) the close
of business on the day immediately preceding the day the Controlled Amortization
Period commences and (b) the close of business on the day immediately preceding
the day the Early Amortization Period commences; provided, however, that the
Revolving Period shall be temporarily suspended for the duration of any Limited
Amortization Period.
"Series Cut-Off Date" shall mean the close of business on August 22,
1997.
"Series 1997-One" shall mean the Series of Certificates the terms of
which are specified in this Supplement.
"Series 1997-One Additional Amounts" shall mean, with respect to any
Distribution Date, the sum of the amounts determined pursuant to subsections
4.05(a)(vii) and (xii) for such Distribution Date.
"Series 1997-One Allocable Defaulted Amount" shall mean the Series
Allocable Defaulted Amount with respect to Series 1997-One.
"Series 1997-One Allocable Finance Charge Collections" shall mean the
Series Allocable Finance Charge Collections with respect to Series 1997-One.
"Series 1997-One Allocable Principal Collections" shall mean the Series
Allocable Principal Collections with respect to Series 1997-One.
"Series 1997-One Allocation Percentage" shall mean the Series
Allocation Percentage with respect to Series 1997-One which shall be an amount
equal to, with respect to any Monthly Period, the percentage equivalent of a
fraction, the numerator of which is the Series Adjusted Invested Amount for
Series 1997-One as of the last day of the immediately preceding Monthly Period
plus the Series Required Transferor Amount as of such last day and the
denominator of which is the Trust Adjusted Invested Amount plus the sum of all
Series Required Transferor Amounts as of such last day; provided, however, that
with respect to any Monthly Period in which one or more Reset Dates
<PAGE>
occurs, the Series 1997-One Allocation Percentage shall be recalculated as
provided above but as of such Reset Date for the period from and after the
date on which any such Reset Date occurs to but excluding the date, if any,
that another such Reset Date occurs or, if no other Reset Date occurs during
such Monthly Period, to and including the last day of such Monthly Period.
"Series 1997-One Certificate" shall mean a Class A Certificate or a
Class B Certificate.
"Series 1997-One Certificateholder" shall mean a Class A
Certificateholder or a Class B Certificateholder.
"Series 1997-One Certificateholders' Interest" shall mean the
Certificateholders' Interest for Series 1997-One.
"Series 1997-One Monthly Fees" shall mean, with respect to any
Distribution Date, the amount determined pursuant to subsection 4.05(a)(iv).
"Series 1997-One Monthly Interest" shall mean the amounts determined
pursuant to subsections 4.02(a) and (b).
"Series 1997-One Principal Shortfall" shall have the meaning specified
in Section 4.11.
"Series 1997-One Termination Date" shall mean the August 2007
Distribution Date.
"Series Invested Amount" shall mean, with respect to any date of
determination, the Initial Invested Amount plus the aggregate principal amount
of Invested Amount Increases and minus any payments of principal to the Series
1997-One Certificateholders during the Limited Amortization Period or on an
Optional Amortization Date.
"Series Required Transferor Amount" shall mean an amount equal to 0% of
the Invested Amount.
"Servicer Advance" shall have the meaning specified in Section 4.02(c).
"Servicing Base Amount" shall have the meaning specified in Section
3.01(a).
"Servicing Fee Rate" shall mean the greater of (a) 2.0% per annum and
(b) the percentage cost per annum of servicing the Accounts or Receivables
pursuant to the applicable fee schedule governing the then-effective servicing
or sub-servicing arrangement as estimated by independent public accountants on
behalf of the Trustee, the Class A Certificateholders and the Investor
Certificateholders of each other Series of Investor Certificates then
outstanding; provided, however, that during the period that Columbus Bank owns
the Accounts pursuant to the Affinity Card Agreement, the Servicing Fee Rate
shall be 0.10% per annum.
"Special Payment Date" shall mean each Distribution Date with respect
to the Early Amortization Period.
"Spread Account" shall have the meaning specified in subsection
4.12(a).
<PAGE>
"Spread Account Cap Percentage" shall mean, as of any date of
determination, if the most recent two-month average (calculated as of the
Determination Date immediately preceding such date) of the Net Yield for such
date is greater than or equal to the percentage set forth in the left-hand
column of the table below, and less than the percentage set forth in the middle
column of the table below, an amount equal to the percentage set forth next to
such percentages in the right-hand column of the table below:
<TABLE>
<CAPTION>
Average Net Yield
-----------------------------------------------------
Greater Than or Spread Account
Equal to Less Than Cap Percentage
-------- --------- --------------
<S> <C> <C>
6.0% 0%
5.0% 6.0% 3.0%
4.0% 5.0% 5.0%
3.0% 4.0% 7.0%
2.0% 3.0% 10.0%
0.0% 2.0% 100.0%
</TABLE>
"Spread Account Draw Amount" shall have the meaning specified in
Section 4.04.
"Spread Account Surplus" shall mean, as of any date of determination,
the amount, if any, by which the amount on deposit in the Spread Account exceeds
the Required Spread Account Amount.
"Termination Date" shall mean the earliest to occur of (a) the
commencement of the Early Amortization Period, (b) the second Business Day prior
to the Commitment Termination Date and (c) the date of termination as specified
in the Certificate Purchase Agreement.
"Tranche" shall have the meaning assigned to such term in the
Certificate Purchase Agreement.
"Transferor Percentage" shall mean 100% minus (a) the Floating
Allocation Percentage, when used at any time with respect to Defaulted
Receivables, (b) the Floating Allocation Percentage, when used during the
Revolving Period or the Limited Amortization Period with respect to Finance
Charge Receivables, (c) the Fixed/Floating Allocation Percentage, when used
during the Amortization Period with respect to Finance Charge Receivables or (d)
the Fixed/Floating Allocation Percentage, when used at any time with respect to
Principal Receivables.
"Weekly Release Conditions" shall mean (i) the date specified in clause
(a) or (b) of the definition of "Termination Date" shall not have occurred and
(ii) the Servicer shall have delivered to the Administrative Agent a completed
and satisfactory Weekly Servicer Report.
<PAGE>
"Weekly Servicer Report" shall mean a statement substantially in the
form of Exhibit C-2 prepared by the Servicer.
(b) Each capitalized term defined herein shall relate to the Series
1997-One Certificates and no other Series of Certificates issued by the Trust,
unless the context otherwise requires. All capitalized terms used herein and not
otherwise defined herein have the meanings ascribed to them in the Agreement. In
the event that any term or provision contained herein shall conflict with or be
inconsistent with any term or provision contained in the Agreement, the terms
and provisions of this Supplement shall govern.
(c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Supplement shall refer to this Supplement as a whole
and not to any particular provision of this Supplement; references to any
Article, subsection, Section or Exhibit are references to Articles, subsections,
Sections and Exhibits in or to this Supplement unless otherwise specified; and
the term "including" means "including without limitation."
ARTICLE III
Servicing Fee and Interchange
Section 3.01. Servicing Compensation; Interchange.
(a) Servicing Fee. The share of the Servicing Fee allocable to the
Series 1997-One Certificateholders with respect to any Distribution Date (the
"Monthly Servicing Fee") shall be equal to one-twelfth of the product of (a) the
Servicing Fee Rate and (b) (i) the Average Invested Amount for the Monthly
Period preceding such Distribution Date, minus (ii) the product of the amount,
if any, on deposit in the Special Funding Account as of the last day of the
Monthly Period preceding such Distribution Date and the Series 1997-One
Allocation Percentage with respect to such Monthly Period (the amount calculated
pursuant to this clause (b) is referred to as the "Servicing Base Amount"). The
remainder of the Servicing Fee shall be paid by the Holders of the Transferor
Certificates or the investor certificateholders of other Series (as provided in
the related Supplements) and in no event shall the Trust, the Trustee or the
Series 1997-One Certificateholders be liable for the share of the Servicing Fee
to be paid by the Holders of the Transferor Certificates or the investor
certificateholders of any other Series.
(b) Interchange. On or before each Determination Date, the Transferor
shall notify the Servicer of the amount of Interchange to be included as Series
1997-One Allocable Finance Charge Collections with respect to the preceding
Monthly Period as determined pursuant to this subsection 3.01(b). Such amount of
Interchange shall be equal to the product of (i) the amount of Interchange
attributable to the Accounts, as reasonably estimated by the Transferor, and
(ii) the Series 1997-One Allocation Percentage. On each Transfer Date, the
Transferor shall pay to the Servicer, and the Servicer shall deposit into the
Collection Account, in immediately available funds, the amount of Interchange to
be so included as Series 1997-One Allocable Finance Charge Collections with
respect to the preceding Monthly Period and such Interchange shall be treated as
a portion of Series 1997-One Allocable Finance Charge Collections for all
purposes of this Supplement and the Agreement.
<PAGE>
ARTICLE IV
Rights of Series 1997-One Certificateholders and
Allocation and Application of Collections
Section 4.01. Collections and Allocations.
(a) Allocations. Collections of Finance Charge Receivables and
Principal Receivables and Defaulted Receivables allocated to Series 1997-One
pursuant to Article IV of the Agreement (and, as described herein, Collections
of Finance Charge Receivables reallocated from other Series in Group I) shall be
allocated and distributed or reallocated as set forth in this Article. Anything
to the contrary in the Agreement notwithstanding, prior to the issuance of
another series of Investor Certificates all Collections of Finance Charge
Receivables and Principal Receivables and Defaulted Receivables pursuant to
Article IV of the Agreement will be deposited into the Collection Account and
withdrawn from the Collection Account only as provided below.
(b) Payments to the Transferor. The Servicer shall on the first
Business Day of each calendar week, upon satisfaction of the Weekly Release
Conditions, withdraw from the Collection Account and pay to the Holders of the
Transferor Certificates the following amounts:
(i) an amount equal to the Transferor Percentage for the
related Monthly Period of Series 1997-One Allocable Finance Charge
Collections deposited in the Collection Account; and
(ii) an amount equal to the Transferor Percentage for the
related Monthly Period of Series 1997-One Allocable Principal
Collections deposited in the Collection Account, if the Transferor
Amount (determined after giving effect to any Principal Receivables
transferred to the Trust on such date) exceeds zero; provided, however,
that if on such date the Available Spread Account Amount is less than
the Required Spread Account Amount (after giving effect to any deposits
into the Spread Account on such date pursuant to subsections
4.01(c)(ii)(w) and 4.05(a)(viii)), then an amount up to the Required
Spread Account Amount shall be deposited on such date into the Spread
Account.
The withdrawals to be made from the Collection Account pursuant to this
subsection 4.01(b) do not apply to deposits into the Collection Account that do
not represent Collections, including payment of the purchase price for the
Certificateholders' Interest pursuant to Section 2.06 or 10.01 of the Agreement,
payment of the purchase price for the Series 1997-One Certificateholders'
Interest pursuant to Section 7.01 of this Supplement and proceeds from the sale,
disposition or liquidation of Receivables pursuant to Section 9.01 or 12.02 of
the Agreement.
(c) Allocations to the Series 1997-One Certificateholders. The Servicer
shall, prior to the close of business on any Deposit Date, allocate to the
Series 1997-One Certificateholders the following amounts as set forth below:
(i) Allocations of Finance Charge Collections. The Servicer
shall allocate to the Series 1997-One Certificateholders the following
amounts as set forth below:
<PAGE>
(x) Allocations During the Revolving Period and the
Limited Amortization Period. During the Revolving Period and
the Limited Amortization Period, the Servicer shall allocate
to the Series 1997-One Certificateholders and retain in the
Collection Account for application as provided herein an
amount equal to the product of (A) the Floating Allocation
Percentage and (B) the Series 1997-One Allocation Percentage
and (C) the aggregate amount of Collections of Finance Charge
Receivables deposited in the Collection Account on such
Deposit Date; provided, however, that after the date on which
an amount of such Collections of Finance Charge Receivables
equal to the amount specified in subsection 4.05(a)(i) has
been deposited into the Collection Account and allocated to
the Series 1997-One Certificateholders, such amount shall be
paid to the Servicer; provided further, however, that after
the date on which an amount of such Collections of Finance
Charge Receivables equal to the sum of the amounts specified
in subsections 4.05(a)(i)-(viii) have been deposited into the
Collection Account (or paid to the Servicer pursuant to the
immediately preceding proviso) and allocated to the Series
1997-One Certificateholders (and, with respect to the amount
specified in subsection 4.05(a)(viii), deposited into the
Spread Account), such amount shall be paid to the Holders of
the Transferor Certificates.
(y) Allocations During the Amortization Period.
During the Amortization Period, the Servicer shall allocate to
the Series 1997-One Certificateholders and retain in the
Collection Account for application as provided herein an
amount equal to the product of (A) the Fixed/Floating
Allocation Percentage and (B) the Series 1997-One Allocation
Percentage and (C) the aggregate amount of Collections of
Finance Charge Receivables deposited in the Collection Account
on such Deposit Date; provided, however, that after the date
on which an amount of such Collections of Finance Charge
Receivables equal to the amount specified in subsection
4.05(a)(i) has been deposited into the Collection Account and
allocated to the Series 1997-One Certificateholders, such
amount shall be paid to the Servicer; provided further,
however, that after the date on which an amount of such
Collections of Finance Charge Receivables equal to the sum of
the amounts specified in subsections 4.05(a)(i) -(viii) have
been deposited into the Collection Account (or paid to the
Servicer pursuant to the immediately preceding proviso) and
allocated to the Series 1997-One Certificateholders (and, with
respect to the amount specified in subsection 4.05(a)(viii),
deposited into the Spread Account), such amount shall be paid
to the Holders of the Transferor Certificates.
(ii) Allocations of Principal Collections. The Servicer shall
allocate to the Series 1997-One Certificateholders the following
amounts as set forth below:
(w) Allocations During the Revolving Period. During
the Revolving Period (A) an amount equal to the product of (I)
the Class B Principal Percentage and (II) the Fixed/Floating
Allocation Percentage and (III) the Series 1997-One Allocation
Percentage and (IV) the aggregate amount of Collections of
Principal Receivables deposited in the Collection Account on
such Deposit Date, shall be allocated to the Series 1997-One
Certificateholders and retained in the Collection Account
until applied as provided herein and (B) an amount equal to
the product of (I) the Class A Principal Percentage and (II)
the Fixed/Floating Allocation
<PAGE>
Percentage and (III) the Series 1997-One Allocation Percentage
and (IV) the aggregate amount of Collections of Principal
Receivables deposited in the Collection Account on such
Deposit Date shall, if such Deposit Date is after an Optional
Amortization Notice has been given but prior to the related
Optional Amortization Date, be allocated to the Series
1997-One Certificateholders and retained in the Collection
Account until applied as provided herein; provided, however,
that, with respect to clause (B) above, if the sum of such
amount and all such preceding amounts since the date the
Optional Amortization Notice was given exceeds the Optional
Amortization Amount (less (x) any amounts which the Transferor
has notified the Trustee will be available to pay the Optional
Amortization Amount from the proceeds of the issuance of one
or more new Series of Investor Certificates and (y) any
amounts available in the Special Funding Account to pay such
Optional Amortization Amount), or if no Optional Amortization
Notice has been given or the needed amount has been allocated,
then such excess shall be first, if on such Deposit Date the
Available Spread Account Amount is less than the Required
Spread Account Amount (after giving effect to any deposits
into the Spread Account on such Deposit Date pursuant to
subsection 4.05(a)(viii)), deposited into the Spread Account,
second, if any other Principal Sharing Series is outstanding
and in its amortization period or accumulation period,
retained in the Collection Account for application, to the
extent necessary, as Shared Principal Collections on the
related Distribution Date, and third, paid to the Holders of
the Transferor Certificates on each Distribution Date;
provided, however, that any such amount to be paid to the
Holders of the Transferor Certificates shall be paid to such
Holders only if the Transferor Amount on such date is greater
than the Required Transferor Amount (after giving effect to
all Principal Receivables transferred to the Trust on such
day) and otherwise shall be deposited in the Special Funding
Account; provided further, however, that any such amount may
be paid to the Holders of the Transferor Certificates on the
first Business Day of each calendar week upon satisfaction of
the Weekly Release Conditions.
(x) Allocations During the Limited Amortization
Period. During the Limited Amortization Period, (A) an amount
equal to the product of (I) the Class B Principal Percentage
and (II) the Fixed/Floating Allocation Percentage and (III)
the Series 1997-One Allocation Percentage and (IV) the
aggregate amount of Collections of Principal Receivables
deposited in the Collection Account on such Deposit Date,
shall be allocated to the Series 1997-One Certificateholders
and retained in the Collection Account until applied as
provided herein and (B) an amount equal to the product of (I)
the Class A Principal Percentage and (II) the Fixed/Floating
Allocation Percentage and (III) the Series 1997-One Allocation
Percentage and (IV) the aggregate amount of Collections of
Principal Receivables deposited in the Collection Account on
such Deposit Date, shall be allocated to the Series 1997-One
Certificateholders and retained in the Collection Account
until applied as provided herein; provided, however, that,
with respect to clause (B) above,
after the date on which an amount of such Collections equal to
the Limited Amortization Amount has been deposited into the
Collection Account and allocated to the Series 1997-One
Certificateholders, such amount shall be first, if on such
Deposit Date the Available Spread Account Amount is less than
the Required Spread Account Amount (after giving effect to any
deposits into
<PAGE>
the Spread Account on such Deposit Date pursuant to subsection
4.05(a)(viii)), deposited into the Spread Account, second, if
any other Principal Sharing Series is outstanding and in its
amortization period or accumulation period, retained in the
Collection Account for application, to the extent necessary,
as Shared Principal Collections on the related Distribution
Date, and third paid to the Holders of the Transferor
Certificates only if the Transferor Amount on such Deposit
Date is greater than the Required Transferor Amount (after
giving effect to all Principal Receivables transferred to the
Trust on such day) and otherwise shall be deposited in the
Special Funding Account; provided further, however, that any
such amount shall be paid to the Holders of the Transferor
Certificates on the first Business Day of each calendar week
upon satisfaction of the Weekly Release Conditions.
(y) Allocations During the Controlled Amortization
Period. During the Controlled Amortization Period, an amount
equal to the product of (I) the Fixed/Floating Allocation
Percentage and (II) the Series 1997-One Allocation Percentage
and (III) the aggregate amount of Collections of Principal
Receivables deposited in the Collection Account on such
Deposit Date, shall be allocated to the Series 1997-One
Certificateholders and retained in the Collection Account
until applied as provided herein; provided, however, that
after the date on which an amount of such Collections equal to
the Invested Amount has been deposited into the Collection
Account and allocated to the Series 1997-One
Certificateholders, such amount shall be first, if any other
Principal Sharing Series is outstanding and in its
amortization period or accumulation period, retained in the
Collection Account for application, to the extent necessary,
as Shared Principal Collections on the related Distribution
Date, and second paid to the Holders of the Transferor
Certificates only if the Transferor Amount on such Deposit
Date is greater than the Required Transferor Amount (after
giving effect to all Principal Receivables transferred to the
Trust on such day) and otherwise shall be deposited in the
Special Funding Account.
(z) Allocations During the Early Amortization Period.
During the Early Amortization Period, an amount equal to the
product of (I) the Fixed/Floating Allocation Percentage and
(II) the Series 1997-One Allocation Percentage and (III) the
aggregate amount of Collections of Principal Receivables
deposited in the Collection Account on such Deposit Date,
shall be allocated to the Series 1997-One Certificateholders
and retained in the Collection Account until applied as
provided herein; provided, however, that after the date on
which an amount of such Collections equal to the Invested
Amount has been deposited into the Collection Account and
allocated to the Series 1997-One Certificateholders, such
amount shall be first, if any other Principal Sharing Series
is outstanding and in its amortization period or accumulation
period, retained in the Collection Account for application, to
the extent necessary, as Shared Principal Collections on the
related Distribution Date, and second paid to the Holders of
the Transferor Certificates only if the Transferor Amount on
such date is greater than the Required Transferor Amount
(after giving effect to all Principal Receivables transferred
to the Trust on such day) and otherwise shall be deposited in
the Special Funding Account.
<PAGE>
Section 4.02. Determination of Monthly Interest.
(a) The amount of monthly interest ("Class A Monthly Interest")
distributable from the Collection Account with respect to the Class A
Certificates on any Distribution Date shall be an amount determined as provided
in the Certificate Purchase Agreement.
(b) The amount of monthly interest ("Class B Monthly Interest")
distributable from the Collection Account with respect to the Class B
Certificates on any Distribution Date shall be an amount equal to the product of
(i) (A) a fraction, the numerator of which is the actual number of days in the
period from (and including) the immediately preceding Distribution Date (or in
the case of the first Distribution Date, the Closing Date) to (but excluding)
such Distribution Date and the denominator of which is 360, times (B) the Class
B Certificate Rate and (ii) the Class B Average Invested Amount with respect to
the related Interest Period.
(c) Interest accrued on each Tranche shall be payable on the day on
which such Tranche matures (each such day an "Interest Distribution Date"). The
Servicer, for so long as Compucredit is the Servicer, shall make an advance on
each Interest Distribution Date in an amount equal to the interest due and
payable with respect to each Tranche maturing on such Interest Distribution Date
(each such advance, a "Servicer Advance"). Such Servicer Advance shall be paid
to the Administrative Agent, for the benefit of the Class A Certificateholders,
on each such Interest Distribution Date. The Servicer shall not be required to
make a Servicer Advance to the extent that the Servicer, in its sole discretion,
determines that such Servicer Advance is unlikely to be recovered from amounts
retained in the Collection Account pursuant to Section 4.01(c)(i) and subsequent
applications of Available Funds pursuant to Section 4.05(a)(i). On each
Distribution Date, the Servicer shall be entitled to reimbursement, without
interest, for any Servicer Advances not previously reimbursed in accordance with
Section 4.05(a)(i).
Section 4.03. Suspension of the Revolving Period; Limited Amortization
Period and Optional Amortization. (a) The Transferor may from time to time at
its sole discretion, unless a Pay Out Event shall have occurred prior thereto,
suspend the Revolving Period and cause a Limited Amortization Period to commence
for one or more Monthly Periods by delivering to the Servicer, the Trustee and
the Administrative Agent written notice at least two Business Days prior to the
first day of the Monthly Period in which such Limited Amortization Period is
scheduled to commence, which notice shall specify the Limited Amortization
Amount for such Limited Amortization Period; provided, however, that any Limited
Amortization Amount shall be in an amount of $1,000,000 or any higher multiple
of $100,000; provided further that the Transferor may not cause a Limited
Amortization Period to commence unless, in the reasonable belief of the
Transferor, such Limited Amortization Period would not result in the occurrence
of a Pay Out Event.
(b) Optional Amortization. On any Business Day during the
Revolving Period, the Transferor may cause the Servicer to provide written
notice to the Trustee, the Administrative Agent and the Series 1997-One
Certificateholders (an "Optional Amortization Notice") at least five Business
Days prior to any Business Day that is the last day of a Funding Period (the
"Optional Amortization Date") stating its intention to cause a full amortization
of the Series 1997-One Certificates on the Optional Amortization Date in an
amount (the "Optional Amortization Amount") of (x) with respect to the Class A
Certificates, not less than the Class A Invested Amount on such Optional
Amortization Date and (y) with respect to the Class B Certificates, an
<PAGE>
amount equal to the Class B Invested Amount on such date. The Optional
Amortization Notice shall state the Optional Amortization Date, the Optional
Amortization Amount and the allocation of such Optional Amortization Amount
among the various outstanding Tranches that mature on such Optional Amortization
Date. The Optional Amortization Amount shall be paid from any Available
Principal Collections on deposit in the Collection Account, from funds on
deposit in the Special Funding Account (but only to the extent withdrawals from
the Special Funding Account will not cause the Transferor Amount to be less than
the Required Transferor Amount after giving effect to such withdrawal) or from
the proceeds of the issuance of one or more new Series of Investor Certificates
issued substantially contemporaneously with such full amortization (or any
combination of the above). The accrued interest, if any, on the Class B Invested
Amount being paid on such date shall be payable on the first Distribution Date
on or after the related Optional Amortization Date. On the Optional Amortization
Date the Servicer shall pay (x) the Optional Amortization Amount with respect to
the Class A Certificates to the Administrative Agent for the benefit of the
Class A Certificateholders and (y) the Optional Amortization Amount with respect
to the Class B Certificates to the Class B Certificateholders.
Section 4.04. Required Amount. With respect to each Distribution Date,
on the related Determination Date, the Servicer shall determine the amount (the
"Class A Required Amount"), if any, by which (x) the sum of the amounts required
pursuant to subsections 4.05(a)(i), (ii), (iii), (iv), (v) and (vi) for such
Distribution Date, exceeds (y) the Available Funds for such Distribution Date.
In the event that the difference between (x) the Class A Required Amount for
such Distribution Date and (y) the amount of Excess Spread and Excess Finance
Charge Collections applied with respect thereto pursuant to subsection 4.07(a)
on such Distribution Date is greater than zero (the "Spread Account Draw
Amount"), the Servicer shall give written notice to the Trustee of such positive
Class A Required Amount on the date of computation.
Section 4.05. Application of Available Funds and Available
Principal Collections. The Servicer shall apply, or shall cause the Trustee to
apply by written instruction to the Trustee, on each Distribution Date,
Available Funds and Available Principal Collections on deposit in the Collection
Account with respect to such Distribution
Date to make the following distributions:
(a) On each Distribution Date, an amount equal to the Available Funds
with respect to such Distribution Date will be distributed in the following
priority:
(i) an amount equal to the Servicer Advances made with respect
to the preceding Monthly Period which have not been reimbursed pursuant
to 4.05(c)(i) and any unreimbursed Servicer Advances from prior
Interest Periods shall be distributed to the Servicer, to the extent
not distributed pursuant to subsection 4.01(c)(i)(x) and (y);
(ii) an amount equal to Class A Monthly Interest for such
Distribution Date, plus the amount of any Class A Monthly Interest
previously due but not distributed to Class A Certificateholders on a
prior Distribution Date shall be distributed to the Paying Agent for
payment to Class A Certificateholders on the applicable Distribution
Date;
(iii) an amount equal to the Class A Investor Default Amount
for such Distribution Date shall be treated as a portion of Available
Principal Collections for such Distribution Date;
<PAGE>
(iv) an amount equal to the Monthly Servicing Fee for such
Distribution Date, plus the amount of any Monthly Servicing Fee
previously due but not distributed to the Servicer on a prior
Distribution Date, shall be distributed to the Servicer (unless such
amount has been netted against deposits to the Collection Account in
accordance with Section 4.03 of the Agreement);
(v) if the Transferor fails to deposit the amount the
Transferor is required to deposit on such Distribution Date into the
Special Funding Account pursuant to Section 3.09 of the Agreement, an
amount equal to the product of (a) the Class A Floating Percentage (b)
the Series 1997-One Allocation Percentage, (c) the Floating Allocation
Percentage, and (d) the amount the Transferor should have deposited
into the Special Funding Account on such Distribution Date shall be
treated as a portion of Available Principal Collections for such
Distribution Date;
(vi) if a Pay Out Event has occurred on or prior to such
Distribution Date, an amount up to the Class A Invested Amount on such
Distribution Date shall be treated as a portion of Available Principal
Collections for such Distribution Date and distributed to the Class A
Certificateholders;
(vii) an amount equal to the aggregate amount of Class A
Investor Charge-Offs which have not been previously reimbursed shall be
treated as a portion of Available Principal Collections for such
Distribution Date;
(viii) on each Distribution Date prior to the date on which
the Spread Account terminates pursuant to subsection 4.12(e), an amount
up to the excess, if any, of the Required Spread Account Amount for
such Distribution Date over the Available Spread Account Amount for
such Distribution Date shall be deposited into the Spread Account;
(ix) an amount equal to Class B Monthly Interest for such
Distribution Date, plus the amount of any Class B Monthly Interest
previously due but not distributed to Class B Certificateholders on a
prior Distribution Date shall be distributed to the Class B
Certificateholders;
(x) an amount equal to the Class B Investor Default Amount for
such Distribution Date shall be treated as a portion of Available
Principal Collections for such Distribution Date;
(xi) if the Transferor fails to deposit the amount the
Transferor is required to deposit on such Distribution Date into the
Special Funding Account pursuant to Section 3.09 of the Agreement, an
amount equal to the product of (a) the Class B Floating Percentage (b)
the Series 1997-One Allocation Percentage, (c) the Floating Allocation
Percentage, and (d) the amount the Transferor should have deposited
into the Special Funding Account on such Distribution Date shall be
treated as a portion of Available Principal Collections for such
Distribution Date;
(xii) an amount equal to the aggregate amount by which the
Class B Invested Amount has been reduced pursuant to clauses (d), (e)
and (f) of the definition of "Class B Invested Amount" in Section 2.01
of this Supplement (but not in excess of the aggregate amount of such
reductions which have not been previously reimbursed) shall be treated
as a portion of Available Principal Collections for such Distribution
Date; and
<PAGE>
(xiii) the balance, if any, shall constitute Excess Spread and
shall be allocated and distributed or deposited as set forth in Section
4.07.
(b) On each Distribution Date with respect to the Revolving Period, an
amount equal to the Available Principal Collections deposited in the Collection
Account for the related Monthly Period shall be distributed in the following
order of priority:
(i) an amount equal to the excess, if any, of the Class B
Invested Amount over the Required Subordinate Amount shall be
distributed to the Class B Certificateholders; and
(ii) the balance of such Available Principal Collections shall
be treated as Shared Principal Collections and applied in accordance
with Section 4.04 of the Agreement.
(c) On each Distribution Date with respect to the Limited Amortization
Period, an amount equal to the Available Principal Collections deposited in the
Collection Account for the related Monthly Period shall be distributed in the
following order of priority:
(i) an amount equal to the excess, if any, of the Class B
Invested Amount over the Required Subordinate Amount shall be
distributed to the Class B Certificateholders;
(ii) an amount equal to the Limited Amortization Amount shall
be distributed to the Class A Certificateholders; and
(iii) the balance of such Available Principal Collections
shall be treated as Shared Principal Collections and applied in
accordance with Section 4.04 of the Agreement.
(d) On each Distribution Date with respect to the Controlled
Amortization Period, an amount equal to the Available Principal Collections
deposited in the Collection Account for the related Monthly Period shall be
distributed in the following order of priority:
(i) an amount equal to the Class A Invested Amount shall be
distributed to the Class A Certificateholders;
(ii) for each Distribution Date beginning on the Distribution
Date on which the Class A Invested Amount shall have been paid in full,
an amount up to the Class B Invested Amount shall be paid to the Class
B Certificateholders; and
(iii) for each Distribution Date beginning on the Distribution
Date on which the Class B Invested Amount is paid in full, an amount
equal to the balance, if any, of such Available Principal Collections
shall be treated as Shared Principal Collections and applied in
accordance with Section 4.04 of the Agreement.
(e) On each Distribution Date with respect to the Early Amortization
Period, an amount equal to Available Principal Collections deposited in the
Collection Account for the related Monthly Period shall be distributed in the
following order of
<PAGE>
priority:
(i) an amount up to the Class A Invested Amount on such
Distribution Date shall be distributed to the Class A
Certificateholders;
(ii) for each Distribution Date beginning on the Distribution
Date on which the Class A Invested Amount is paid in full, an amount up
to the Class B Invested Amount on such Distribution Date shall be
distributed to the Class B Certificateholders;
(iii) for each Distribution Date, after giving effect to
paragraphs (i) and (ii) above, an amount equal to the balance, if any,
of such Available Principal Collections will be treated as Shared
Principal Collections and applied in accordance with Section 4.04 of
the Agreement.
Section 4.06. Defaulted Amounts; Investor Charge-Offs.
(a) On each Determination Date, the Servicer shall calculate the Class
A Investor Default Amount, if any, for the related Distribution Date. If, on any
Distribution Date, the Class A Required Amount for the related Monthly Period
exceeds the sum of (x) the amount of Reallocated Principal Collections allocated
to Series 1997-One with respect to such Monthly Period and (y) the amount of
Excess Spread and the Excess Finance Charge Collections allocable to Series
1997-One with respect to such Monthly Period, the Class B Invested Amount, if
any, will be reduced by the amount of such excess, but not by more than the
Class A Investor Default Amount for such Distribution Date. In the event that
such reduction would cause the Class B Invested Amount to be a negative number,
the Class B Invested Amount shall be reduced to zero, and the Class A Invested
Amount shall be reduced by the amount by which the Class B Invested Amount would
have been reduced below zero, but not by more than the excess, if any, of the
Class A Investor Default Amount for such Distribution Date over the amount of
the reduction, if any, of the Class B Invested Amount for such Distribution Date
(a "Class A Investor Charge-Off"). Class A Investor Charge-Offs shall thereafter
be reimbursed and the Class A Invested Amount increased (but not by an amount in
excess of the aggregate unreimbursed Class A Investor Charge-Offs) on any
Distribution Date by the amount of Available Funds and Excess Spread and Excess
Finance Charge Collections allocated and available for that purpose pursuant to
subsections 4.05(a)(vii) and 4.07(a).
(b) On each Determination Date, the Servicer shall calculate the Class
B Investor Default Amount. If on any Distribution Date the Class B Investor
Default Amount for the previous Monthly Period exceeds the sum of (x) the amount
of Available Funds allocated and available to pay the amount required pursuant
to subsection 4.05(a)(x) and (y) the amount of Excess Spread and Excess Finance
Charge Collections allocated to Series 1997-One with respect to the related
Monthly Period which are allocated and available to pay such amount pursuant to
subsection 4.07(a), the Class B Invested Amount will be reduced by the amount of
such excess but not by more than the lesser of the Class B Investor Default
Amount and the Class B Invested Amount for such Distribution Date (a "Class B
Investor Charge-Off"). The Class B Invested Amount will be reimbursed after any
reduction pursuant to this Section 4.06 on any Distribution Date by the sum of
(x) the amount of Available Funds allocated and available to pay the amount
required pursuant to subsection 4.05(a)(xii) and (y) the amount of Excess Spread
and Excess Finance Charge Collections allocated and available on such
Distribution date for that purpose as described under subsection 4.07(a).
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Section 4.07. Excess Spread; Excess Finance Charge Collections. The
Servicer shall apply, or shall cause the Trustee to apply by written instruction
to the Trustee, on each Distribution Date, Excess Spread and Excess Finance
Charge Collections allocated to Series 1997-One with respect to the related
Monthly Period, to make the following distributions or deposits in the following
order of priority:
(a) an amount equal to the amount, if any, by which (x) the
amounts required pursuant to subsections 4.05(a)(i)-(xii) with respect
to such Distribution Date exceeds (y) Available Funds with respect to
such Distribution Date and shall be distributed by the Trustee in
accordance with, and in the priority set forth in, subsections
4.05(a)(i)-(xii).
(b) the balance, if any, will constitute a portion of Excess
Finance Charge Collections for such Distribution Date and will be
available for allocation to other Series or to the Holders of the
Transferor Certificates as described in Section 4.05 of the Agreement.
Section 4.08. Reallocated Principal Collections. On each Distribution
Date, the Servicer shall apply, or shall cause the Trustee to apply, Reallocated
Principal Collections with respect to such Distribution Date, to make the
following distributions or deposits in the following order of priority: an
amount equal to the excess, if any, of (i) the Class A Required Amount, if any,
with respect to such Distribution Date over (ii) the amount of Excess Spread and
Excess Finance Charge Collections allocated to Series 1997-One with respect to
the related Monthly Period shall be distributed by the Trustee to fund any
deficiency pursuant to and in the priority set forth in subsections 4.05(a)(i),
(ii), (iii), (iv), (v), (vi) and (vii).
On each Distribution Date, the Class B Invested Amount shall
be reduced by the amount of Reallocated Principal Collections for such
Distribution Date. In the event that such reduction would cause the Class B
Invested Amount (after giving to any Class B Investor Charge-Offs for such
Distribution Date) to be a negative number, the Class B Invested Amount (after
giving effect to any Class B Investor Charge-Offs for such Distribution Date)
shall be reduced to zero.
Section 4.09. Excess Finance Charge Collections. Series 1997-One shall
be an Excess Allocation Series. Subject to Section 4.05 of the Agreement, Excess
Finance Charge Collections with respect to the Excess Allocation Series for any
Distribution Date will be allocated to Series 1997-One in an amount equal to the
product of (x) the aggregate amount of Excess Finance Charge Collections with
respect to all the Excess Allocation Series for such Distribution Date and (y) a
fraction, the numerator of which is the Finance Charge Shortfall for Series
1997-One for such Distribution Date and the denominator of which is the
aggregate amount of Finance Charge Shortfalls for all the Excess Allocation
Series for such Distribution Date. The "Finance Charge Shortfall" for Series
1997-One for any Distribution Date will be equal to the excess, if any, of (a)
the full amount required to be paid, without duplication, pursuant to subsection
4.05(a) on such Distribution Date over (b) the sum of (i) the Reallocated
Investor Finance Charge Collections and (ii) the amount of funds, if any, to be
withdrawn from the Spread Account which, pursuant to subsection 4.12(c), are
required to be included in Available Funds with respect to such Distribution
Date.
Section 4.10. Reallocated Investor Finance Charge Collections.
(a) That portion of Group I Investor Finance Charge Collections for any
<PAGE>
Distribution Date equal to the amount of Reallocated Investor Finance Charge
Collections for such Distribution Date will be allocated to Series 1997-One and
will be distributed as set forth in this Supplement.
(b) Reallocated Investor Finance Charge Collections with respect to any
Distribution Date shall equal the sum of (i) the aggregate amount of Series
1997-One Monthly Interest, Investor Default Amount, Series 1997-One Monthly Fees
and Series 1997-One Additional Amounts for such Distribution Date and (ii) that
portion of excess Group I Investor Finance Charge Collections to be included in
Reallocated Investor Finance Charge Collections pursuant to subsection (c)
hereof; provided, however, that if the amount of Group I Investor Finance Charge
Collections for such Distribution Date is less than the sum of (w) Group I
Investor Monthly Interest, (x) Group I Investor Default Amount, (y) Group I
Investor Monthly Fees and (z) Group I Investor Additional Amounts, then
Reallocated Investor Finance Charge Collections shall equal the sum of the
following amounts for such Distribution Date:
(A) The product of (I) Group I Investor Finance Charge
Collections (up to the amount of Group I Investor Monthly Interest) and
(II) a fraction, the numerator of which is Series 1997-One Monthly
Interest and the denominator of which is Group I Investor Monthly
Interest;
(B) the product of (I) Group I Investor Finance Charge
Collections less the amount of Group I Investor Monthly Interest (such
amount not less than zero) (up to the Group I Investor Default Amount)
and (II) a fraction, the numerator of which is the Investor Default
Amount and the denominator of which is the Group I Investor Default
Amount;
(C) the product of (I) Group I Investor Finance Charge
Collections less the amount of Group I Investor Monthly Interest and
the Group I Investor Default Amount (such amount not less than zero)
(up to Group I Investor Monthly Fees) and (II) a fraction, the
numerator of which is Series 1997-One Monthly Fees and the denominator
of which is Group I Investor Monthly Fees; and
(D) the product of (I) Group I Investor Finance Charge
Collections less the sum of (i) Group I Investor Monthly Interest, (ii)
the Group I Investor Default Amount and (iii) Group I Investor Monthly
Fees (such amount not less than zero) and (II) a fraction, the
numerator of which is Series 1997-One Additional Amounts and the
denominator of which is Group I Investor Additional Amounts.
(c) If the amount of Group I Investor Finance Charge Collections for
such Distribution Date exceeds the sum of (i) Group I Investor Monthly Interest,
(ii) Group I Investor Default Amount, (iii) Group I Investor Monthly Fees and
(iv) Group I Investor Additional Amounts, then Reallocated Investor Finance
Charge Collections for such Distribution Date shall include an amount equal to
the product of (x) the amount of such excess and (y) a fraction, the numerator
of which is the Invested Amount as of the last day of the second preceding
Monthly Period and the denominator of which is the sum of such Invested Amount
and the aggregate invested amounts for all other Series included in Group I as
of such last day.
Section 4.11. Shared Principal Collections. Subject to Section 4.04
of the Agreement, Shared Principal Collections for any Distribution Date will
be allocated to Series 1997-One in an amount equal to the product of (x) the
aggregate amount of Shared Principal Collections with respect to all
Principal Sharing Series for such Distribution Date and (y) a fraction, the
numerator of which is the Series
<PAGE>
1997-One Principal Shortfall for such Distribution Date and the denominator of
which is the aggregate amount of Principal Shortfalls for all the Series which
are Principal Sharing Series for such Distribution Date. The "Series 1997-One
Principal Shortfall" will be equal to (a) for any Distribution Date with respect
to the Revolving Period, zero; provided, that if such Distribution Date is an
Optional Amortization Date, the Series 1997-One Shortfall shall be an amount
determined by the Transferor not to exceed the related Optional Amortization
Amount, (b) for any Distribution Date with respect to the Limited Amortization
Period, the excess, if any, of the Limited Amortization Amount over the amount
of Available Principal Collections for such Distribution Date (excluding any
portion thereof attributable to Shared Principal Collections) and (c) for any
Distribution Date with respect to the Controlled Amortization Period or the
Early Amortization Period, the excess, if any, of the Invested Amount over the
amount of Available Principal Collections for such Distribution Date (excluding
any portion thereof attributable to Shared Principal Collections).
Section 4.12. Spread Account.
(a) The Servicer shall establish and maintain, in the name of the
Trustee, on behalf of the Trust, for the benefit of the Class A
Certificateholders, an Eligible Deposit Account (the "Spread Account") bearing a
designation clearly indicating that the funds deposited therein are held for the
benefit of the Class A Certificateholders. The Spread Account shall initially be
established with the Trustee. The Trustee shall possess all right, title and
interest in all funds on deposit from time to time in the Spread Account and in
all proceeds thereof. The Spread Account shall be under the sole dominion and
control of the Trustee for the benefit of the Class A Certificateholders. If at
any time the Spread 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 Administrative
Agent shall consent) establish a new Spread Account meeting the conditions
specified above as an Eligible Deposit Account, and shall transfer any cash or
any investments to such new Spread Account. The Trustee, at the written
direction of the Servicer, shall (i) make withdrawals from the Spread Account
from time to time in an amount up to the Available Spread Account Amount at such
time, for the purposes set forth in this Supplement, and (ii) on each
Distribution Date prior to the termination of the Spread Account make a deposit
into the Spread Account in the amount specified in, and otherwise in accordance
with, subsection 4.05(a)(viii).
(b) Funds on deposit in the Spread Account shall be invested at the
written direction of the Servicer by the Trustee in Eligible Investments. In no
event shall the Trustee be liable for the selection of Eligible Investments or
for investment losses incurred thereon. The Trustee shall have no liability in
respect of losses incurred as a result of the liquidation of any Eligible
Investment prior to its stated maturity or the failure of the Servicer to
provide timely written investment direction. The Trustee shall have no
obligation to invest or reinvest any amounts held hereunder in the absence of
written investment direction. Funds on deposit in the Spread Account on any
Transfer Date, after giving effect to any withdrawals from the Spread Account on
such Transfer Date, shall be invested in such investments that will mature so
that such funds will be available for withdrawal on or prior to the following
Transfer Date. The Trustee shall maintain for the benefit of the Class A
Certificateholders possession of the negotiable instruments or securities, if
any, evidencing such Eligible Investments. No such Eligible Investment shall be
disposed
<PAGE>
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. On each Distribution Date, all interest and earnings
(net of losses and investment expenses) accrued since the preceding Distribution
Date on funds on deposit in the Spread Account shall be retained in the Spread
Account (to the extent that the Available Spread Account Amount is less than the
Required Spread Account Amount) and the balance, if any, shall be deposited in
the Collection Account and treated as collections of Finance Charge Receivables
allocable to Series 1997-One. For purposes of determining the availability of
funds or the balance in the Spread Account for any reason under this Supplement,
except as otherwise provided in the preceding sentence, investment earnings on
such funds shall be deemed not to be available or on deposit.
(c) In the event that for any Distribution Date the Spread Account Draw
Amount is greater than zero, the Spread Account Draw Amount, up to the Available
Spread Account Amount, shall be withdrawn from the Spread Account on the related
Transfer Date by the Trustee (acting in accordance with the written instructions
of the Servicer), deposited into the Collection Account and included in
Available Funds for such Distribution Date.
(d) In the event that the Spread Account Surplus on any Distribution
Date, after giving effect to all deposits to and withdrawals from the Spread
Account with respect to such Distribution Date, is greater than zero, the
Trustee, acting in accordance with the written instructions of the Servicer,
shall withdraw from the Spread Account, and pay to the Transferor, an amount
equal to such Spread Account Surplus.
(e) Upon the earlier to occur of (i) the day on which the Class A
Invested Amount and all other accrued and unpaid amounts owing to the Class A
Certificateholders pursuant to the Certificate Purchase Agreement are paid in
full to the Class A Certificateholders and (ii) the termination of the Trust
pursuant to the Agreement, the Trustee, acting in accordance with the
instructions of the Servicer, after the prior payment of all amounts owing to
the Class A Certificateholders which are payable from the Spread Account as
provided herein, shall withdraw from the Spread Account and pay to the
Transferor all amounts, if any, on deposit in the Spread Account and the Spread
Account shall be deemed to have terminated for purposes of this Supplement.
Section 4.13. Invested Amount Increases. (a) The Class A
Certificateholders agree, by acceptance of the Class A Certificates, that the
Transferor may from time to time, prior to the commencement of the Controlled
Amortization Period or the Early Amortization Period, request upon one Business
Day prior written notice to each of the Trustee, the Servicer and the Class A
Certificateholders substantially in the form of Exhibit A to the Certificate
Purchase Agreement that the Class A Certificateholders acquire additional
undivided interests in the Trust in specified amounts (each such amount, a
"Class A Invested Amount Increase"); provided, however, that any applicable
conditions set forth in Section 2.2 of the Certificate Purchase Agreement shall
have been satisfied or waived as provided therein. The Class A
Certificateholders shall acquire such additional interest, upon payment, in
immediately available funds, to the Transferor of the amount of such Class A
Invested Amount Increase, in accordance with the payment instructions specified
in
<PAGE>
the notice delivered with respect to such Class A Invested Amount Increase.
(b) The Class B Certificateholders agree, by acceptance of the Class B
Certificates, that the Transferor may from time to time, prior to the
commencement of the Controlled Amortization Period or the Early Amortization
Period, request upon one Business Day prior written notice to each of the
Trustee, the Servicer and the Class B Certificateholders substantially in the
form of Exhibit D that the Class B Certificateholders acquire additional
undivided interests in the Trust in specified amounts (each such amount, a
"Class B Invested Amount Increase"); provided, however, that (i) after giving
effect to such Class B Invested Amount Increase, the Transferor Amount shall not
be less than the Required Transferor Amount and (ii) after giving effect to such
Class B Invested Amount Increase, (a) the product of the Transferor Amount and
the Series 1997-One Allocation Percentage shall not be less than (b) the Series
Required Transferor Amount. The Class B Certificateholders shall acquire such
additional interest through a reduction of the Transferor Interest by the amount
of such Class B Invested Amount Increase.
(c) The Transferor may on any Business Day permanently reduce the
Facility Limit if the following conditions are met: (i) after giving effect to
such reduction, the Facility Limit would be not less than the Class A Invested
Amount on the date of such reduction (after giving effect to any increase
pursuant to Section 4.13(a) on or prior to the date of such reduction of the
Facility Limit) and (ii) the Commitments (as defined in the Certificate Purchase
Agreement) are reduced by the same amount on such date. In order to effect the
reduction of the Facility Limit pursuant to this Section 4.13(c), the Transferor
shall deliver to the Servicer, the Trustee and the Administrative Agent at least
five Business Days prior to such reduction a written notice executed by a duly
authorized representative of the Transferor specifying the decrease in the
Facility Limit, the date on which such decrease is to become effective and the
Class A Invested Amount on such date. The Administrative Agent shall, subject to
the provisions of the Certificate Purchase Agreement and the Program Support
Agreement (as defined in the Certificate Purchase Agreement), take all actions
necessary to reduce the Commitments to an amount that will permit the specified
reduction of the Facility Limit. Upon the date specified in such notice, if the
conditions set forth in this Section 4.13(c) have been met, the Facility Limit
shall be reduced by the amount specified in such notice.
(d) No decrease in the Class A Invested Amount pursuant to Section 4.03
shall limit the ability of the Transferor to increase the Class A Invested
Amount pursuant to Section 4.13(a).
ARTICLE V
Distributions and Reports to
Series 1997-One Certificateholders
Section 5.01. Distributions.
(a) On each Distribution Date, the Paying Agent shall distribute to
each Class A Certificateholder (other than as provided in Section 12.02 of the
Agreement) such amounts held by the Paying Agent that are allocated and
available on such Distribution Date to pay the Class A Monthly Interest, any
principal payable to and other amounts due to the Class A Certificates pursuant
to this Supplement.
<PAGE>
(b) On each Special Payment Date, the Paying Agent shall distribute to
each Class A Certificateholder of record on the related Record Date (other than
as provided in Section 12.02 of the Agreement) such amounts held by the Paying
Agent that are allocated and available on such date to pay principal of the
Class A Certificates pursuant to this Supplement up to a maximum amount on any
such date equal to the Class A Invested Amount on such date.
(c) On each Distribution Date, the Paying Agent shall distribute to
each Class B Certificateholder of record on the related Record Date (other than
as provided in Section 12.02 of the Agreement) such amounts held by the Paying
Agent that are allocated and available on such Distribution Date to pay interest
on the Class B Certificates pursuant to this Supplement.
(d) On each Special Payment Date, the Paying Agent shall distribute to
each Class B Certificateholder of record on the related Record Date (other than
as provided in Section 12.02 of the Agreement) such amounts held by the Paying
Agent that are allocated and available on such date to pay principal of the
Class B Certificates pursuant to this Supplement up to a maximum amount on any
such date equal to the Class B Invested Amount on such date.
(e) The distributions to be made pursuant to this Section 5.01 are
subject to the provisions of Sections 2.06, 9.01, 10.01 and 12.02 of the
Agreement and Sections 8.01 and 8.02 of this Supplement.
(f) Except as provided in Section 12.02 of the Agreement with respect
to a final distribution, distributions to Series 1997-One Certificateholders
hereunder shall be made by wire transfer of immediately available funds to the
account that has been designated by the applicable Certificateholders not less
than ten Business Days prior to such Distribution Date.
Section 5.02. Reports and Statements to Series 1997-One
Certificateholders.
(a) Not later than each Determination Date, the Servicer shall deliver
to the Trustee, the Paying Agent and the Administrative Agent (i) a statement
substantially in the form of Exhibit C-1 prepared by the Servicer and (ii) a
certificate of a Servicing Officer substantially in the form attached thereto.
(b) A copy of each statement or certificate provided pursuant to
paragraph (a) or (b) may be obtained by any Series 1997-One Certificateholder or
any Certificate Owner thereof by a request in writing to the Servicer.
(c) On or before January 31 of each calendar year, beginning with
calendar year 1998, the Paying Agent, on behalf of the Trustee, shall furnish or
cause to be furnished to each Person who at any time during the preceding
calendar year was a Series 1997-One Certificateholder, a statement prepared by
the Servicer containing the information which is required to be contained in the
statement to Series 1997-One Certificateholders, as set forth in paragraph (a)
above aggregated for such calendar year or the applicable portion thereof during
which such Person was a Series 1997-One Certificateholder, together with other
information as is required to be provided by an issuer of indebtedness under the
Code. Such obligation of the Servicer shall be deemed to have been satisfied to
the extent that substantially comparable information shall be provided by the
Paying Agent pursuant to any requirements of the Code as from time to time in
effect.
<PAGE>
ARTICLE VI
Pay Out Events
Section 6.01. Pay Out Events. If any one of the following events shall
occur with respect to the Series 1997-One Certificates:
(a) the occurrence of an Insolvency Event relating to the
Transferor or Columbus Bank.
(b) the Trust becomes an investment company within the meaning
of the Investment Company Act;
(c) failure on the part of the Transferor (i) to make any
payment or deposit required by the terms of the Agreement or this
Supplement on or before the date occurring five Business Days after the
date such payment or deposit is required to be made therein or herein
or (ii) duly to observe or perform any other covenants or agreements of
the Transferor set forth in the Agreement, the Receivables Purchase
Agreement, the Certificate Purchase Agreement or this Supplement, which
failure has a material adverse effect on the Series 1997-One
Certificateholders and which continues unremedied for a period of 10
days after the date on which written notice of such failure, requiring
the same to be remedied, shall have been given to the Transferor by the
Trustee, or to the Transferor and the Trustee by any Holder of the
Series 1997-One Certificates;
(d) any representation or warranty made by the Transferor in
the Agreement or this Supplement shall prove to have been incorrect
when made or when delivered, which continues to be incorrect for a
period of 60 days after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to
the Transferor by the Trustee, or to the Transferor and the Trustee by
any Holder of the Series 1997-One Certificates, and as a result of
which the interests of the Series 1997-One Certificateholders are
materially and adversely affected for such period; provided, however,
that a Pay Out Event pursuant to this subsection 6.01(d) shall not be
deemed to have occurred hereunder if the Transferor has accepted
reassignment of the related Receivable, or all of such Receivables, if
applicable, during such period in accordance with the provisions of the
Agreement;
(e) any Servicer Default shall occur as a result of which the
interests of the Series 1997-One Certificateholders are materially and
adversely affected (provided that a Servicer Default under Section
10.01(d) of the Agreement is hereby deemed to materially and adversely
affect the Series 1997-One Certificateholders, and, notwithstanding
Section 10.01(d) of the Agreement, shall not be subject to any grace
period);
(f) on any date of determination, the Class B Invested Amount
is less than the Required Subordinate Amount and the Class B Invested
Amount continues to be less than the Required Subordinate Amount for a
period of two Business Days after such date of determination;
(g) on any date of determination, the Transferor Amount is
less than the Required Transferor Amount (after giving effect to all
Principal Receivables
<PAGE>
transferred to the Trust on such date of determination) and which
shortfall continues unremedied for a period of five days after the date
of such determination;
(h) the average Net Yield for any two consecutive Monthly
Periods is reduced to a rate which is less than 2.0%;
(i) the average Delinquency Ratio for any two consecutive
Monthly Periods exceeds 10.0%;
(j) the date on which a Program Support Provider (as defined
in the Certificate Purchase Agreement) shall have given notice that an
event of default has occurred and is continuing under their respective
agreements with the Purchaser (as defined in the Certificate Purchase
Agreement);
(k) for so long as the Affinity Card Agreement is in effect,
the Letter of Credit (as such term is defined in the Affinity Card
Agreement) maintained by CompuCredit in favor of Columbus Bank pursuant
to Section 3.3 of the Affinity Card Agreement shall be terminated,
revoked, reduced or drawn on and such termination, revocation or
reduction has not been remedied within five days and, in the case of a
drawing, such drawing is not reimbursed within five days;
(l) default in the payment at stated maturity of any
indebtedness of CompuCredit or any direct affiliate thereof having an
outstanding principal amount greater than $1,000,000 and such default
remains unremedied for a period of 30 days beyond any applicable grace
period;
(m) the change in control of CompuCredit or the Transferor
subject to Sections 7.02 and 8.02 of the Agreement;
(n) any of Messrs. David G. Hanna, Brett M. Samsky or Richard
Gilbert shall cease to be employed by CompuCredit, its affiliates or
agents, and such individual's position shall not be filled within 60
days of such individual's termination of employment or status as an
agent by an individual approved by the Administrative Agent;
(o) the Trustee shall, for any reason, fail to have a valid
and perfected first priority security interest in the Receivables;
(p) any material adverse change in the operations of the
Transferor, the Servicer or Columbus Bank, or any other event, which
materially affects the Transferor's or the Servicer's or Columbus
Bank's ability to either collect upon the Receivables or the
Transferor's, the Servicer's or Columbus Bank's ability to perform
thereunder, which has a material adverse effect on the Class A
Certificateholders;
(q) if during the period Columbus Bank services or subservices
the Receivables or the Accounts in any material respect, Columbus
Bank's senior unsecured debt ratings shall be downgraded below Baa2 or
BBB by Moody's or Standard & Poor's, respectively; and
(r) if, on any date, the product of (i) the Floating
Allocation Percentage (determined, for this purpose only, by using a
numerator equal to the Class A Invested Amount, or Class A Initial
Invested Amount, as applicable, in
<PAGE>
lieu of the Invested Amount or Initial Invested Amount, as applicable)
and (ii) the sum of the principal amount on deposit in the Special
Funding Account and the total amount of Principal Receivables in the
Trust on such date, is less than the Class A Invested Amount on such
date.
then, in the case of any event described in subparagraph (a), (d) or (e), after
the applicable grace period, if any, set forth in such subparagraphs, either the
Trustee or the Holders of Series 1997-One Certificates evidencing more than 50%
of the aggregate unpaid principal amount of Series 1997-One Certificates by
notice then given in writing to the Transferor and the Servicer (and to the
Trustee if given by the Series 1997-One Certificateholders) may declare that a
Pay Out Event has occurred with respect to Series 1997-One as of the date of
such notice, and, in the case of any event described in subparagraph (b), (c),
(f), (g), (h), (i), (j), (k), (l), (m), (n), (o), (p), (q) or (r) a Pay Out
Event shall occur with respect to Series 1997-One without any notice or other
action on the part of the Trustee or the Series 1997-One Certificateholders
immediately upon the occurrence of such event, unless such Pay Out Event is
waived by the Holders of Series 1997-One Certificates evidencing more than 50%
of the aggregate unpaid principal amount of Series 1997-One Certificates by
notice given in writing to the Trustee, the Transferor and the Servicer.
ARTICLE VII
Optional Repurchase; Series Termination
Section 7.01. Optional Repurchase.
(a) On any day occurring on or after the date on which the Invested
Amount is reduced to 10% or less of the largest Invested Amount at any time
on or after the Closing Date, the Transferor shall have the option to
purchase the Series 1997-One Certificateholders' Interest, at a purchase
price equal to (i) if such day is a Distribution Date, the Reassignment
Amount for such Distribution Date or (ii) if such day is not a Distribution
Date, the Reassignment Amount for the Distribution Date following such day.
(b) The Transferor shall give the Servicer and the Trustee at least 30
days prior written notice of the date on which the Transferor intends to
exercise such purchase option. Not later than 11:00 a.m., New York City time, on
such day the Transferor shall deposit the Reassignment Amount into the
Collection Account in immediately available funds. Such purchase option is
subject to payment in full of the Reassignment Amount. Following the deposit of
the Reassignment Amount into the Collection Amount in accordance with the
foregoing, the Invested Amount for Series 1997-One shall be reduced to zero and
the Series 1997-One Certificateholders shall have no further interest in the
Receivables. The Reassignment Amount shall be distributed as set forth in
subsection 8.01(b).
Section 7.02. Series Termination.
(a) If, on the June 2007 Distribution Date, the Invested Amount (after
giving effect to all changes therein on such date) would be greater than zero,
the
<PAGE>
Servicer, on behalf of the Trustee, shall, within the 40-day period which
begins on such Distribution Date, solicit bids for the sale of Principal
Receivables and the related Finance Charge Receivables (or interests therein) in
an amount equal to the Invested Amount at the close of business on the last day
of the Monthly Period preceding the Series 1997-One Termination Date (after
giving effect to all distributions required to be made on the Series 1997-One
Termination Date, except pursuant to this Section 7.02). Such bids shall require
that such sale shall (subject to subsection 7.02(b)) occur on the Series
1997-One Termination Date. The Transferor shall be entitled to participate in,
and to receive from the Servicer a copy of each other bid submitted in
connection with, such bidding process.
(b) The Servicer, on behalf of the Trustee, shall sell such
Receivables (or interests therein) on the Series 1997-One Termination Date to
the bidder who made the highest cash purchase offer. The proceeds of any such
sale shall be treated as Collections on the Receivables allocated to the Series
1997-One Certificateholders pursuant to the Agreement and this Supplement;
provided, however, that the Servicer shall determine conclusively the amount of
such proceeds which are allocable to Finance Charge Receivables and the amount
of such proceeds which are allocable to Principal Receivables. During the period
from the June 2007 Distribution Date to the Series 1997-One Termination Date,
the Servicer shall continue to collect payments on the Receivables and allocate
and deposit such Collections in accordance with the provisions of the Agreement
and the Supplements.
ARTICLE VIII
Final Distributions
Section 8.01. Sale of Receivables or Certificateholders' Interest
pursuant to Section 2.06 or 10.01 of the Agreement and Section 7.01 or 7.02 of
this Supplement.
(a) (i) The amount to be paid by the Transferor with respect
to Series 1997-One in connection with a reassignment of Receivables to
the Transferor pursuant to Section 2.06 of the Agreement shall equal
the Reassignment Amount for the first Distribution Date following the
Monthly Period in which the reassignment obligation arises under the
Agreement.
(ii) The amount to be paid by the Transferor with respect to
Series 1997-One in connection with a repurchase of the
Certificateholders' Interest pursuant to Section 10.01 of the Agreement
shall equal the Reassignment Amount for the Distribution Date of such
repurchase.
(b) With respect to the Reassignment Amount deposited into the
Collection Account pursuant to Section 7.01 or any amounts allocable to the
Series 1997-One Certificateholders' Interest deposited into the Collection
Account pursuant to Section 7.02, the Trustee shall, in accordance with the
written direction of the Servicer, not later than 11:00 a.m., New York City
time, on the related Distribution Date, make deposits or distributions of the
following amounts (in the priority set forth below and, in each case after
giving effect to any deposits and distributions otherwise to be made on such
date) in immediately available funds: (i) (x) the Class A Invested Amount on
such Distribution Date will be distributed to the Paying Agent for payment to
the Class A Certificateholders and (y) an amount equal to the sum of (A) Class A
Monthly Interest for such Distribution Date and (B) any Class A Monthly Interest
<PAGE>
previously due but not distributed to the Class A Certificateholders on a prior
Distribution Date will be distributed to the Paying Agent for payment to the
Class A Certificateholders and (ii) (x) the Class B Invested Amount on such
Distribution Date will be distributed to the Paying Agent for payment to the
Class B Certificateholders and (y) an amount equal to the sum of (A) Class B
Monthly Interest for such Distribution Date and (B) any Class B Monthly Interest
previously due but not distributed to the Class B Certificateholders on a prior
Distribution Date will be distributed to the Paying Agent for payment to the
Class B Certificateholders.
(c) Notwithstanding anything to the contrary in this Supplement or the
Agreement, all amounts distributed to the Paying Agent pursuant to subsection
8.01(b) for payment to the Series 1997-One Certificateholders shall be deemed
distributed in full to the Series 1997-One Certificateholders on the date on
which such funds are distributed to the Paying Agent pursuant to this Section
and shall be deemed to be a final distribution pursuant to Section 12.02 of the
Agreement.
Section 8.02. Distribution of Proceeds of Sale, Disposition or
Liquidation of the Receivables pursuant to Section 9.01 of the Agreement.
(a) Not later than 4:00 p.m., New York City time, on the Distribution
Date following the date on which the Insolvency Proceeds are deposited into the
Collection Account pursuant to subsection 9.01(b) of the Agreement, the Trustee
shall in accordance with the written direction of the Servicer (in the following
priority and, in each case, after giving effect to any deposits and
distributions otherwise to be made on such Distribution Date) (i) deduct an
amount equal to the Class A Invested Amount on such Distribution Date from the
portion of the Insolvency Proceeds allocated to Series 1997-One Allocable
Principal Collections and distribute such amount to the Paying Agent for payment
to the Class A Certificateholders, provided that the amount of such distribution
shall not exceed the product of (x) the portion of the Insolvency Proceeds
allocated to Series 1997-One Allocable Principal Collections and (y) the
Fixed/Floating Allocation Percentage with respect to the related Monthly Period
and (ii) deduct an amount equal to the Class B Invested Amount on such
Distribution Date from the portion of the Insolvency Proceeds allocated to
Series 1997-One Allocable Principal Collections and distribute such amount to
the Paying Agent for payment to the Class B Certificateholders, provided that
the amount of such distribution shall not exceed (x) the product of (A) the
portion of such Insolvency Proceeds allocated to Series 1997-One Allocable
Principal Collections and (B) the Fixed/Floating Allocation Percentage with
respect to the related Monthly Period minus (y) the amount distributed to the
Paying Agent pursuant to clause (i) of this sentence. To the extent that the
product of (A) the portion of the Insolvency Proceeds allocated to Series
1997-One Allocable Principal Collections and (B) the Fixed/Floating Allocation
Percentage with respect to the related Monthly Period exceeds the aggregate
amounts distributed to the Paying Agent pursuant to the preceding sentence, the
excess shall be allocated to the Transferor's Interest and shall be released to
the Holders of the Transferor Certificates on such Distribution Date.
(b) Not later than 4:00 p.m., New York City time, on such
Distribution Date, the Trustee shall in accordance with the written direction of
the Servicer (in the following priority and, in each case, after giving effect
to any deposits and distributions otherwise to be made on such Distribution
Date) (i) deduct an amount equal to the sum of (x) Class A Monthly Interest for
such Distribution Date and (y) any Class A Monthly Interest previously due but
not distributed to the Class A Certificateholders on a prior Distribution Date
from the portion of the Insolvency Proceeds allocated to Collections of Finance
Charge Receivables and distribute such
<PAGE>
amount to the Paying Agent for payment to the Class A Certificateholders,
provided that the amount of such distribution shall not exceed the product of
(x) the portion of the Insolvency Proceeds allocated to Series 1997-One
Allocable Finance Charge Collections and (y) the Floating Allocation
Percentage with respect to the related Monthly Period and (ii) deduct an
amount equal to the sum of (x) Class B Monthly Interest for such Distribution
Date and (y) Class B Monthly Interest previously due but not distributed to
the Class B Certificateholders on a prior Distribution Date from the portion
of the Insolvency Proceeds allocated to Series 1997-One Allocable Finance
Charge Collections and distribute such amount to the Paying Agent for payment
to the Class B Certificateholders, provided that the amount of such
distribution shall not exceed (x) the product of (x) the portion of the
Insolvency Proceeds allocated to Series 1997-One Allocable Finance Charge
Collections and (y) the Floating Allocation Percentage with respect to the
related Monthly Period minus (y) the amount distributed to the Paying Agent
pursuant to clause (i) of this sentence. To the extent that the product of
(A) the portion of the Insolvency Proceeds allocated to Series 1997-One
Allocable Finance Charge Collections and (B) the Floating Allocation
Percentage with respect to the related Monthly Period exceeds the aggregate
amount distributed to the Paying Agent pursuant to the preceding sentence,
the excess shall be allocated to the Transferor's Interest and shall be
released to the Holders of the Transferor Certificates on such Distribution
Date.
(c) Notwithstanding anything to the contrary in this Supplement or the
Agreement, all amounts distributed to the Paying Agent pursuant to this Section
for payment to the Series 1997-One Certificateholders shall be distributed in
full to the Series 1997-One Certificateholders on the date on which funds are
distributed to the Paying Agent pursuant to this Section and shall be deemed to
be a final distribution pursuant to Section 12.02 of the Agreement.
ARTICLE IX
Miscellaneous Provisions
Section 9.01. Ratification of Agreement. As supplemented by this
Supplement, the Agreement is in all respects ratified and confirmed and the
Agreement as so supplemented by this Supplement shall be read, taken and
construed as one and the same instrument.
Section 9.02. Counterparts. This Supplement may be executed in two or
more counterparts, and by different parties on separate counterparts, each of
which shall be an original, but all of which shall constitute one and the same
instrument.
Section 9.03. Governing Law. THIS SUPPLEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, 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 9.04. Tax Matters. (a) Notwithstanding anything to the contrary
herein, each of the Paying Agent, Servicer or Trustee shall be entitled to
withhold any amount that it determines in its sole discretion is required to be
withheld pursuant to Section 1446 of the Code and such amount shall be deemed to
have been paid for all purposes of the Agreement.
(b) Each of the Series 1997-One Certificateholders agrees that
prior to the
<PAGE>
date on which the first interest payment hereunder is due thereto, it will
provide to the Servicer and the Trustee (i) if such Series 1997-One
Certificateholder is incorporated or organized under the laws of a jurisdiction
outside the United States, two duly completed copies of the United States
Internal Revenue Service Form 4224 or, if the Transferor in its sole discretion
consents, Form 1001, or in either case successor applicable or required forms,
(ii) a duly completed copy of United States Internal Revenue Service Form W-9
or, if the Transferor in its sole discretion consents, Form W-8, or in either
case successor applicable or required forms, and (iii) such other forms and
information as may be required to confirm the availability of any applicable
exemption from United States federal, state or local withholding taxes. Each
Series 1997-One Certificateholder agrees to provide to the Servicer and Trustee,
like additional subsequent duly completed forms (subject to like consent)
satisfactory to the Servicer and Trustee on or before the date that any such
form expires or becomes obsolete, or upon the occurrence of any event requiring
an amendment, resubmission or change in the most recent form previously
delivered by it, and to provide such extensions or renewals as may be reasonably
requested by the Servicer or Trustee. Each Series 1997-One Certificateholder
certifies, represents and warrants that as of the date of this Agreement, or in
the case of a Series 1997-One Certificateholder which is an assignee as of the
date of such Certificate Assignment, that it is entitled (x) to receive payments
under this Agreement without deduction or withholding (other than pursuant to
Section 1446 of the Code, if applicable) of any United States federal income
taxes and (y) to an exemption from United States backup withholding tax. Each
Series 1997-One Certificateholder represents and warrants that it shall pay any
taxes imposed on such Series 1997-One Certificateholder attributable to its
interest in the Series 1997-One Certificates.
(c) Each Series 1997-One Certificateholder agrees with the
Transferor that: (a) such Series 1997-One Certificateholder will deliver to the
Transferor on or before the Closing Date or the effective date of any
participation or Certificate Assignment a letter in the form annexed hereto as
Exhibit E (an "Investment Letter"), executed by such assignee Series 1997-One
Certificateholder, in the case of a Certificate Assignment, or by the
Participant, in the case of a participation, with respect to the purchase by
such Series 1997-One Certificateholder or Participant of a portion of an
interest relating to the Series 1997-One Certificate and (b) all of the
statements made by such Series 1997-One Certificateholder in its Investment
Letter shall be true and correct as of the date made.
(d) Each Series 1997-One Certificateholder, by its holding of
an interest in the Series 1997-One Certificates, hereby severally represents,
warrants and covenants, and each Series 1997-One Certificateholder that acquires
an interest in the Series 1997-One Certificates by Certificate Assignment shall
be deemed to have severally represented, warranted and covenanted upon such
Certificate Assignment that: (i) such Series 1997-One Certificateholder has not
acquired and shall not sell, trade or transfer any interest in the Series
1997-One Certificates, nor cause any interest in the Series 1997-One
Certificates to be marketed, on or through either (A) an "established securities
market (or the substantial equivalent thereof)" within the meaning of Section
7704(b)(1) of the Code (including an interdealer quotation system that regularly
disseminates firm buy or sell quotations by identified brokers or dealers by
electronic means or otherwise) or (B) a "secondary market" (or the substantial
equivalent thereof) within the meaning of Section 7704(b)(2) of the Code
(including a market wherein interests in the Series 1997-One Certificates are
regularly quoted by any person making a market in such interests and a market
wherein any person regularly makes available bid or offer quotes with respect to
interests in the Series 1997-One Certificates and stands ready to effect buy or
sell transactions
<PAGE>
at the quoted prices for itself or on behalf of others), and (ii) unless the
Transferor consents otherwise, such Series 1997-One Certificateholder (A) is
properly classified as, and shall remain classified as, a "corporation" as
described in Section 7701(a)(3) of the Code and (B) is not, and shall not
become, an "S corporation" as described in Section 1361 of the Code. Each Series
1997-One Certificateholder represents, warrants and covenants that it shall (A)
cause each of its Participants otherwise permitted hereunder to make
representations, warranties and covenants similar to the foregoing for the
benefit of the Transferor and the Trust at the time such Participant becomes a
Participant and (B) forward a copy of such representations, warranties and
covenants to the Trustee. In the event of any breach of the representation,
warranty and covenant of a Series 1997-One Certificateholder or its Participant
that such Series 1997-One Certificateholder or participant shall remain
classified as a corporation other than an S corporation, such Series 1997-One
Certificateholder shall notify the Transferor promptly upon such Series 1997-One
Certificateholder's becoming aware of such breach, and thereupon the Series
1997-One Certificateholder hereby agrees to use reasonable efforts to procure a
replacement investor which is acceptable to the Transferor not so affected to
replace such affected Series 1997-One Certificateholder. In any such event, the
Transferor shall also have the right to procure a replacement investor. Each
affected Series 1997-One Certificateholder hereby agrees to take all actions
necessary to permit a replacement investor to succeed to its rights and
obligations hereunder. Each Series 1997-One Certificateholder which has a
Participant which has breached its representation, warranty and covenant that it
shall remain classified as a corporation other than an S corporation hereby
agrees (without limiting the right of the Transferor to procure a replacement
investor for such Series 1997-One Certificateholder as provided above in this
paragraph) to notify the Transferor of such breach promptly upon such Series
1997-One Certificateholder's becoming aware thereof and to use reasonable
efforts to procure a replacement Participant, as applicable, not so affected
which is acceptable to the Transferor to replace any such Participant.
(e) Subject to the provisions of subsection (h), each Series 1997-One
Certificateholder may at any time sell, assign or otherwise transfer, to the
extent of such Series 1997-One Certificateholder's interest in the Series
1997-One Certificates (each, a "Certificate Assignment"), to any Person to which
the Transferor may consent, which consent shall not be unreasonably withheld (it
being understood that such consent shall be considered to be withheld reasonably
on the basis that following such proposed Certificate Assignment the number of
Private Holders would exceed 80 or otherwise cause the Trust to be in jeopardy
of being treated as taxable as a publicly traded partnership pursuant to Section
7704 of the Code) all or part of its interest in the Series 1997-One
Certificates; provided, however, that any Certificate Assignment shall be void
unless (i) the minimum amount of such Certificate Assignment shall be
$5,000,000, (ii) such assignee Series 1997-One Certificateholder shall comply
with this Section 9.04 and shall have delivered to the Trustee, prior to the
effectiveness of such Certificate Assignment, a copy of an agreement under which
such assignee Series 1997-One Certificateholder has made the representations,
warranties and covenants required to be made pursuant to this Section 9.04, and
(iii) such proposed assignee shall provide the forms described in clauses (i),
(ii) and (iii) of subsection 9.04(b) (subject to the Transferor's consent, as
applicable and as set forth therein) in the manner described therein. In
connection with any Certificate Assignment, the assignor Series 1997-One
Certificateholder shall request in writing to the Trustee (who shall promptly
deliver it to the
<PAGE>
Transferor) for the consent of the Transferor (the Transferor shall respond to
any such request within ten Business Days after its receipt and the Transferor
will not unreasonably withhold such consent) it being understood that the
obtaining of such consent is a condition to the effectiveness of the Certificate
Assignment. Each assignee Series 1997-One Certificateholder is subject to the
terms and conditions of subsection 9.04(b) on an ongoing basis and hereby makes
the certifications, representations and warranties contained therein.
(f) Subject to the provisions of subsection (h), any Series 1997-One
Certificateholder may at any time grant a participation in all or part (but not
less than $5,000,000 of its interest in Series 1997-One Certificates to any
Person to which the Transferor may consent, which consent shall not be
unreasonably withheld (it being understood that such consent shall be considered
to be withheld reasonably on the basis that following such proposed
participation the number of Private Holders would exceed 80 or otherwise cause
the Trust to be in jeopardy of being treated as taxable as a publicly traded
partnership pursuant to Section 7704 of the Code) (each such Person, a
"Participant"); provided, however, that such participation shall be void, unless
such Participant complies with the applicable provisions of this Section 9.04
and such Series 1997-One Certificateholder delivers to the Trustee, prior to the
effectiveness of its participation, a copy of an agreement under which such
Participant has made the representations, warranties and covenants required to
be made pursuant to this Section. In connection with the granting of any such
participation to any Person, the granting Series 1997-One Certificateholder
shall provide a written request to the Trustee (who shall promptly deliver it to
the Transferor) for the consent of the Transferor to the granting of the
specified interest to any identified prospective Participant, the Transferor
shall respond to any such request within ten Business Days after its receipt, it
being understood that the obtaining of such consent is a condition to the
effectiveness of a participation. Each Series 1997-One Certificateholder hereby
acknowledges and agrees that any such participation will not alter or affect in
any way whatsoever such Series 1997-One Certificateholder's direct obligations
hereunder and that the Transferor shall have no obligation to have any
communication or relationship whatsoever with any Participant of such Series
1997-One Certificateholder in order to enforce the obligations of such Series
1997-One Certificateholder hereunder. Each Series 1997-One Certificateholder
shall promptly notify the Trustee (which shall promptly notify the Transferor)
in writing of the identity and interest of each Participant upon any such
disposition. As a condition of granting any participation, the Series 1997-One
Certificateholder hereby agrees to deliver to the Transferor a certification of
the proposed Participant pursuant to which the Participant certifies, represents
and warrants that (i) such Participant is entitled to (x) receive payments with
respect to its participation without deduction or withholding of any United
States federal income taxes and (y) an exemption from United States backup
withholding tax, (ii) prior to the date on which the first interest payment is
due to the Participant, such Series 1997-One Certificateholder will provide to
the Servicer and Trustee, the forms described in clauses (i), (ii) and (iii) of
subsection 9.04(b) (subject to the Transferor's consent, as applicable and as
set forth therein) as though the Participant were a Series 1997-One
Certificateholder, (iii) such Series 1997-One Certificateholder similarly will
provide subsequent forms as described in subsection 9.04(b) with respect to such
Participant as though it were a Series 1997-One Certificateholder, and (iv) such
Participant will pay any taxes imposed on its participation interest in the
Series 1997-One Certificates.
(g) Any holder of an interest in the Trust acquired pursuant
to Section 12.02(c) of the Agreement in respect of the Series 1997-One
Certificates shall be
<PAGE>
required to represent and covenant in connection with such acquisition that (x)
it has neither acquired, nor will it sell, trade or transfer any interest in the
Trust or cause any interest in the Trust to be marketed on or through either (i)
an "established securities market" within the meaning of Code section
7704(b)(1), including without limitation an interdealer quotation system that
regularly disseminates firm buy or sell quotations by identified brokers or
dealers by electronic means or otherwise or (ii) a "secondary market (or the
substantial equivalent thereof)" within the meaning of Code section 7704(b)(2),
including a market wherein interests in the Trust are regularly quoted by any
person making a market in such interests and a market wherein any person
regularly makes available to the public bid or offer quotes with respect to
interests in the Trust and stands ready to effect buy or sell transactions at
the quoted prices for itself or on behalf of others, (y) unless the Transferor
consents otherwise (which consent shall be based on an Opinion of Counsel
generally to the effect that the action taken pursuant to the consent will not
cause the Trust to become a publicly traded partnership treated as a
corporation), such holder (i) is properly classified as, and will remain
classified as, a "corporation" as described in Code section 7701(a)(3) and (ii)
is not, and will not become, an S corporation as described in Code section 1361,
and (z) it will (i) cause any participant with respect to such interest
otherwise permitted hereunder to make similar representations and covenants for
the benefit of the Transferor and the Trust and (ii) forward a copy of such
representations and covenants to the Trustee. Each such holder shall further
agree in connection with its acquisition of such interest that, in the event of
any breach of its (or its participant's) representation and covenant that it (or
its participant) is and shall remain classified as a corporation other than an S
corporation, the Transferor shall have the right to procure a replacement
investor to replace such holder (or its participant), and further that such
holder shall take all actions necessary to permit such replacement investor to
succeed to its rights and obligations as a holder (or to the rights of its
participant).
(h) Except (i) as provided in subsections (e) and (f) above and (ii) in
connection with any pledge to any Federal Reserve Bank to secure any obligation
of a Series 1997-One Certificateholder, no Investor Certificateholder may
transfer, assign, exchange or otherwise convey or pledge, hypothecate, or
otherwise grant a security interest in a Series 1997-One Certificate and any
such attempted transfer, assignment, exchange, conveyance, pledge, hypothecation
or grant shall be void.
Section 9.05. Additional Provisions Regarding Agreement.
(a) The Transferor may not either (i) convey Participation Interests
pursuant to Section 2.09(b) of the Agreement, (ii) designate Additional
Transferors pursuant to Section 2.09(d) of the Agreement, (iii) exercise its
defeasance option with respect to Series 1997-One pursuant to Section 12.04 of
the Agreement or (iv) change the Discount Percentage pursuant to Section 2.12 of
the Agreement, without the prior written consent of the Administrative Agent.
(b) Promptly after the execution of any amendment or consent pursuant
to Section 13.01 of the Agreement (other than an amendment pursuant to
13.01(a)), the Trustee shall furnish notification of the form of such amendment
to the Administrative Agent and the consent of the Administrative Agent shall be
necessary to approve the particular form of any proposed amendment.
(c)(i) On the date of execution of this Supplement, the
Transferor shall have a net worth calculated in accordance with generally
accepted accounting
<PAGE>
principles of at least $10,000,000 and (ii) the Transferor shall make no
distributions of dividends or returns of capital comprising its net worth, as
calculated in accordance with generally accepted accounting principles, except
to the extent that, after giving effect thereto, the Transferor shall have a net
worth at least equal to the greater of (a) 10% of the highest balance of
Principal Receivables outstanding with respect to the immediately preceding
twelve (12) calendar month period or (b) $10,000,000.
(d) For so long as no other Series of Investor Certificates other than
Series 1997-One is outstanding, Sections 3.06(a) and (b) of the Agreement shall
not be applicable.
SECTION 9.06. Additional Provisions Regarding the Servicer.
(a) No Extension or Amendment of Receivables. Except as otherwise
expressly permitted by the Agreement and the Credit Card Guidelines, the
Servicer will not extend, amend or otherwise modify the terms of any Receivable,
or amend, modify or waive any term or condition of any Account related thereto.
The Servicer further covenants that, except as otherwise required by any
Requirement of Law, it shall not reduce the periodic finance charges assessed on
any Receivable or other fees on any Account if, as a result of such reduction,
the reasonable expectation of the Net Yield as of such date would be less than
2.00% or has a material adverse effect on the Series 1997-One Certificateholders
and unless (a) such reduction is made applicable to the comparable segment of
the consumer revolving credit accounts owned or serviced by the Servicer that
have characteristics the same as, or substantially similar to, the Accounts that
are the subject of such change or (b) if it does not own such a comparable
segment, it will not make any such change with the intent to materially benefit
the Transferor or itself over the Series 1997- One Certificateholders.
(b) No Assignment. The Servicer shall not assign any of its rights or
delegate any of its duties hereunder or under the Agreement, other than
delegation to Columbus Bank pursuant to the Subservicer Letter Agreement, dated
as of August 29, 1997, by and between the Servicer and Columbus Bank, without
the prior written consent of the Agent.
(c) Furnishing of Information and Inspection of Records. (i) The
Servicer will furnish to the Transferor from time to time such information with
respect to the Receivables as the Transferor may reasonably request, including,
without limitation, listings identifying the Obligor and the outstanding
Principal Balance for each Receivable.
(ii) The Servicer will at any time and from time to time
during regular business hours permit the Transferor or its agents,
designees, or representatives, (a) to examine and make copies of and
take abstracts from all Records and (b) to visit the offices and
properties of the Servicer for the purpose of examining such Records,
and to discuss matters relating to Receivables or the Servicer's
performance under the Agreement with any of the officers, directors,
employees or independent public accountants of the Servicer having
knowledge of such matters.
(d) Keeping of Records and Books of Account. The Servicer will maintain
and implement administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing Receivables in the event
of the destruction of the originals thereof, and keep and maintain, all
documents, books,
<PAGE>
records and other information reasonably necessary or advisable for the
collection of all Receivables (including, without limitation, records adequate
to permit the daily identification of each new Receivable and all Collections of
and adjustments to each existing Receivable). The Servicer will give the
Transferor notice of any material change in the administrative and operating
procedures of the Servicer referred to in the previous sentence.
Section 9.07. Notices. The Trustee shall give notice to the Agent of
any proposed change or amendment to either the Affinity Card Agreement or the
Facilities Management Services Agreement with respect to which the Trustee's
consent is sought pursuant to the Agreement.
Section 9.08. Miscellaneous.
(a) Notwithstanding anything to the contrary contained herein,
prior to the date the first Class A Invested Amount Increase occurs, the amounts
payable to the Holders of the Transferor Certificate pursuant to Section 4.01(b)
and 4.01(c)(ii) shall not be subject to the Weekly Release Conditions and shall
be withdrawn by the Servicer on Deposit Dates and paid to the Holders of the
Transferor Certificates.
(b) Notwithstanding anything to the contrary contained herein,
prior to the date the first Class A Invested Amount Increase occurs, the
obligation of the Servicer to deliver any report pursuant to Articles IV and V
hereof or any other certificate required hereunder to the Class A
Certificateholders shall not be effective.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Supplement to be
duly executed and delivered by their respective duly authorized officers on the
day and year first above written.
COMPUCREDIT FUNDING CORP.
Transferor
By: /s/ Brett M. Samsky
------------------------------
Name: Brett M. Samsky
Title: Chief Financial Officer
COMPUCREDIT CORPORATION
Servicer
By: /s/ Brett M. Samsky
------------------------------
Name: Brett M. Samsky
Title: Chief Financial Officer
BANKERS TRUST COMPANY
not in its individual capacity,
but solely as Trustee,
By: /s/ Patricia M.F. Russo
------------------------------
Name: Patricia M.F. Russo
Title: Vice President
<PAGE>
EXHIBIT A
FORM OF CLASS A CERTIFICATE
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 AND THE SERIES 1997-ONE SUPPLEMENT THERETO REFERRED
TO HEREIN.
NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED TO
AN EMPLOYEE BENEFIT PLAN, TRUST OR ACCOUNT THAT IS SUBJECT TO THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR DESCRIBED IN SECTION
4975 (e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED,
ASSIGNED, EXCHANGED OR OTHERWISE PLEDGED OR CONVEYED, EXCEPT IN ACCORDANCE
WITH THE POOLING AND SERVICING AGREEMENT AND SERIES 1997-ONE SUPPLEMENT
REFERRED TO HEREIN.
REGISTERED $
----------
No. R-
------- CUSIP NO.
COMPUCREDIT CREDIT CARD MASTER TRUST
SERIES 1997-ONE
CLASS A FLOATING RATE VARIABLE FUNDING CERTIFICATE
Evidencing an undivided interest in certain assets of 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 consumer revolving credit card accounts serviced by
COMPUCREDIT CORPORATION
and other assets and interests constituting the Trust under the Pooling and
Servicing Agreement referred to below.
(Not an interest in or obligation of Compucredit Corporation,
Compucredit Funding Corp. or any of their respective affiliates). This
certifies that Enterprise Funding Corporation (the "Class A
Certificateholder") is the registered owner of a fractional undivided
interest in certain assets of a trust (the "Trust")
<PAGE>
created pursuant to the Pooling and Servicing Agreement, dated as of August ,
1997 (the "Agreement"), as supplemented by the Series 1997-One Supplement
dated as of August , 1997 (the "Supplement"), among Compucredit Funding
Corp., as Transferor, Compucredit Corporation, as Servicer, and Bankers Trust
Company, a banking corporation organized under the laws of the State of New
York, as trustee (the "Trustee"). The corpus of the Trust consists of (i) in
the case of Receivables arising in the Initial Accounts, the Receivables
existing at the close of business on the Initial Cut-Off Date, and thereafter
created from time to time in the Initial Accounts until the termination of
the Trust and (ii) in the case of Receivables arising in the Automatic
Additional Accounts, the Receivables created from time to time after the
Initial Cut-Off Date until the termination of the Trust, (iii) all
Interchange and Recoveries allocable to the Trust as provided in the
Agreement, (iv) all rights to payment and amounts due or to become due with
respect to all of the foregoing, (v) the Collection Account, the Series
Accounts and the Special Funding Account and all amounts, investment
property, financial assets and property credited to each and/or all of such
accounts, (vi) any property conveyed to the Trustee on behalf of the Trust
pursuant to any Participation Interest Supplement, (vii) all Series
Enhancements, (viii) Recoveries attributable to cardholder charges for
merchandise and services in the Accounts, (ix) all of the Transferor's rights
under the Receivables Purchase Agreement and (x) all amounts received with
respect to any of the foregoing; (xi) all proceeds (including "proceeds" as
defined in the UCC) thereof and (xii) all monies and other property on deposit
in the Collection Account, the Series Accounts and the Special Funding
Account, the rights of the Trustee on behalf of the Trust under the Agreement
and any Supplement, the property conveyed to the Trustee on behalf of the
Trust under any Participation Interest Supplement, any Series Enhancement,
the right to receive Recoveries attributed to cardholder charges for
merchandise and services in the Accounts and the rights of the Transferor
under the Receivables Purchase Agreement. The Holder of this Certificate is
entitled to the benefits of the subordination of the Class B Certificates to
the extent provided in the Supplement. Although a summary of certain
provisions of the Agreement and the Supplement is set forth below and in the
Summary of Terms and Conditions attached hereto and made a part hereof, this
Class A Certificate does not purport to summarize the Agreement and the
Supplement and reference is made to the Agreement and the Supplement 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 and the Supplement (without
schedules) 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 or the
Supplement, as applicable.
This Class A Certificate is issued under and is subject to the
terms, provisions and conditions of the Agreement and the Supplement, to
which Agreement and Supplement, each as amended and
A-2
<PAGE>
supplemented from time to time, the Class A Certificateholder by virtue of
the acceptance hereof assents and is bound.
It is the intent of the Transferor and the Class A
Certificateholder that, for federal, state and local income and franchise tax
purposes only, the Class A Certificate will qualify as indebtedness of the
Transferor secured by the Receivables. The Class A Certificateholder, by the
acceptance of this Class A Certificate, agrees to treat this Class A
Certificate for federal, state and local income and franchise tax purposes as
debt of the Transferor.
In general, payments of principal with respect to the Class A
Certificate are limited to the class A Invested Amount, which may be less
than the unpaid principal balance of the Class A Certificate.
This Class A Certificate 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 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 Class A 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 Class A Certificate,
the applicable Certificate Owner or Owners shall be deemed to have
represented and warranted that it or they are not Benefit Plans.
Unless the certificate of authentication hereon has been executed
by or on behalf of the Trustee, by manual signature, this Class A Certificate
shall not be entitled to any benefit under the Agreement or the Supplement or
be valid or any purpose.
A-3
<PAGE>
IN WITNESS WHEREOF, the Transferor has caused this Class A
Certificate to be duly executed.
COMPUCREDIT FUNDING CORP.
By:
-------------------------
Name:
Title:
Dated: August ____, 1997
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is the Class A Certificate described in the within-mentioned Agreement
and Supplement.
BANKERS TRUST COMPANY,
as Trustee,
By:
-------------------------
Authorized Officer
or
By:
-------------------------
as Authenticating Agent
for the Trustee,
By:
-------------------------
Authorized Officer
<PAGE>
COMPUCREDIT CREDIT CARD MASTER TRUST
SERIES 1997-ONE
CLASS A FLOATING RATE VARIABLE FUNDING CERTIFICATE
Summary of Terms and Conditions
The Receivables consist of Principal Receivables which arise
generally from the purchase of goods and services and amounts advanced to
cardmembers as cash advances and Finance Charge Receivables. This Class A
Certificate is one of a Series of Certificates entitled Compucredit Credit
Card Master Trust, Series 1997-One (the "Series 1997-One Certificates"), and
one of a class thereof entitled Class A Series 1997-One Floating Rate
Variable Funding Certificates, (the "Class A Certificate"), each of which
represents a fractional, undivided interest in certain assets of the Trust.
The assets of the Trust are allocated in part to the Investor
Certificateholders of all outstanding Series (the "Certificateholders'
Interest") with the remainder allocated to the Holder of the Transferor
Certificate. The aggregate interest represented by the Class A Certificate at
any time in the Principal Receivables in the Trust shall not exceed an amount
equal to the Class A Invested Amount at such time. The Class A Initial
Invested Amount is $0. The Class A Invested Amount on any determination date
will be an amount equal to (a) the Class A Initial Invested Amount, plus (b)
the aggregate principal amount of Class A Invested Amount Increases pursuant
to Section 4.13 of the Supplement prior to such date, minus (c) the aggregate
amount of principal payments made to the Class A Certificateholders on or
prior to such date, minus (d) the excess, if any, of the aggregate amount of
Class A Investor Charge-Offs for all prior Distribution Dates over Class A
Investor Charge-Offs reimbursed pursuant to subsections 4.05(a)(vii) and
4.07(a) of the Supplement prior to such date.
Subject to the terms and conditions of the Agreement, 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, which will represent
fractional, undivided interests in certain of the Trust Assets.
On each Distribution Date, the Paying Agent shall distribute to each
Class A Certificateholder of record on the last day of the preceding calendar
month (each a "Record Date") such amounts as are payable to the Class A
Certificateholders pursuant to the Agreement and the Supplement.
Distributions with respect to this Class A Certificate will be made by the
Paying Agent by wire transfer of immediately available funds to the account
that has been designated by the Certificateholder of this Class A Certificate
not less than ten business Days prior to such Distribution Date. Final
payment of this Class A Certificate will be made only upon presentation and
surrender of this Class A Certificate at the office or agency specified in
the notice of final distribution delivered by the Trustee to the Series
1997-One
S-1
<PAGE>
Certificateholders in accordance with the Agreement and the Supplement.
On any day occurring on or after the day on which the Invested Amount is
reduced to 10% or less of the largest Initial Invested Amount at any time on
or after the Closing Date, the Transferor has the option to repurchase the
Series 1997-One Certificateholders' Interest in the Trust. The repurchase
price will be equal to (a) if such day is a Distribution Date, the
Reassignment Amount for such Distribution Date or (b) if such day is not a
Distribution Date, the Reassignment Amount for the Distribution Date
following such day. Following the deposit of the Reassignment Amount in the
Collection Account, the Invested Amount for Series 1997-One shall be reduced
to zero and the Series 1997-One Certificateholders will not have any interest
in the Receivables and the Series 1977-One Certificates will represent only
the right to receive such Reassignment Amount.
This Class A Certificate does not represent an obligation of, or an
interest in, the Transferor or the Servicer or any affiliate of either of
them and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other governmental agency or instrumentality. This
Class A Certificate is limited in right of payment to certain Collections
with respect to the Receivables (and certain other amounts), all as more
specifically set forth hereinabove and in the Agreement and the Supplement.
The transfer or exchange of this Class A Certificate shall be registered
in the Certificate Register upon surrender of this Class A Certificate for
registration of transfer or exchange at any office or agency maintained by
the Transfer Agent and Registrar accompanied by a written instrument of
transfer, in a form satisfactory to the Trustee or the Transfer Agent and
Registrar, duly executed by the Class A Certificateholder or such Class A
Certificateholder's attorney, and duly authorized in writing with such
signature guaranteed, and thereupon one or more new Class A Certificates of
authorized denominations and for the same aggregate fractional undivided
interest will be issued to the designated transferee or transferees.
As provided in the Agreement and subject to certain limitations therein
set forth, Class A Certificates are exchangeable for new Class A Certificates
evidencing like aggregate fractional, undivided interests as requested by the
Class A Certificateholder surrendering such Class A Certificates. No service
charge may be imposed for any such exchange but the Servicer or Transfer Agent
and Registrar may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection therewith.
The Servicer, the Trustee, the Paying Agent and the Transfer Agent and
Registrar and any agent of any of them, may treat the person in whose name
this Class A Certificate is registered as the owner hereof for all purposes,
and neither the
S-2
<PAGE>
Servicer nor the Trustee, the Paying Agent, the Transfer Agent and Registrar,
nor any agent of any of them, shall be affected by notice to the contrary
except in certain circumstances described in the Agreement.
THIS CLASS A CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK, 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.
S-3
<PAGE>
ASSIGNMENT
Social Security or other identifying number of assignee _______________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ____________________________________
(name and address of assignee)
the within certificate and all rights thereunder, and hereby irrevocably
constitutes and appoints _______________________, attorney, to transfer said
certificate on the books kept for registration thereof, with full power of
substitution in the premises.
Dated: _______________________ _________________________(1)
Signature Guaranteed:
______________________
- -------------
(1) NOTE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within
Certificate in every particular, without alteration, enlargement or any
change whatsoever.
<PAGE>
FORM OF CLASS B CERTIFICATE EXHIBIT B
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 AND THE SERIES 1997-ONE SUPPLEMENT THERETO REFERRED
TO HEREIN.
NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED TO
AN EMPLOYEE BENEFIT PLAN, TRUST OR ACCOUNT THAT IS SUBJECT TO THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR DESCRIBED IN SECTION
4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED,
ASSIGNED, EXCHANGED OR OTHERWISE PLEDGED OR CONVEYED, EXCEPT IN ACCORDANCE
WITH THE POOLING AND SERVICING AGREEMENT AND SERIES 1997-ONE SUPPLEMENT
REFERRED TO HEREIN.
REGISTERED $
--------------
NO. R- CUSIP No.
---------
COMPUCREDIT CREDIT CARD MASTER TRUST
SERIES 1997-ONE
CLASS B FLOATING RATE VARIABLE FUNDING CERTIFICATE
Evidencing an undivided interest in certain assets of 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 consumer revolving
credit card accounts serviced by
COMPUCREDIT CORPORATION
and other assets and interests constituting the Trust under the Pooling and
Servicing Agreement referred to below.
(Not an interest in or obligation of Compucredit Corporation, Compucredit
Funding Corp. or any of their respective affiliates). This certifies that
[_______________________] (the "Class B Certificateholder") is the registered
owner of a fractional, undivided interest in certain assets of a trust (the
"Trust") created pursuant to the Pooling and Servicing Agreement, dated as of
August __, 1997 (the "Agreement"), as supplemented by the Series 1997-One
Supplement dated as of August __, 1997 (the
<PAGE>
"Supplement"), among Compucredit Funding Corp. as Transferor, Compucredit
Corporation, as Servicer, and Bankers Trust Company, a banking corporation
organized under the laws of the State of New York, as trustee (the
"Trustee"). The corpus of the Trust consists of (i) in the case of
Receivables arising in the Initial Accounts, the Receivables existing at the
close of business on the Initial Cut-Off Date, and thereafter created from
time to time in the Initial Accounts until the termination of the Trust and
(ii) in the case of Receivables arising in the Automatic Additional Accounts,
the Receivables created from time to time after the Initial Cut-Off Date
until the termination of the Trust, (iii) all Interchange and Recoveries
allocable to the Trust as provided in the Agreement, (iv) all rights to
payment and amounts due or to become due with respect to all of the
foregoing, (v) the Collection Account, the Series Accounts and the Special
Funding Account and all amounts, investment property, financial assets and
property credited to each and/or all of such accounts, (vi) any property
conveyed to the Trustee on behalf of the Trust pursuant to any Participation
Interest Supplement, (vii) all Series Enhancements, (viii) Recoveries
attributable to cardholder charges for merchandise and services in the
Accounts, (ix) all of the Transferor's rights under the Receivables Purchase
Agreement and (x) all amounts received with respect to any of the foregoing;
(xi) all proceeds (including "proceeds" as defined in the UCC) thereof and
(xii) all monies and other property on deposit in the Collection Account, the
Series Accounts and the Special Funding Account, the rights of the Trustee on
behalf of the Trust under the Agreement and any Supplement, the property
conveyed to the Trustee on behalf of the Trust under any Participation
Interest Supplement, any Series Enhancement, the right to receive Recoveries
attributed to cardholder charges for merchandise and services in the Accounts
and the rights of the Transferor under the Receivables Purchase Agreement.
Although a summary of certain provisions of the Agreement and the Supplement
is set forth below and in the Summary of Terms and Conditions attached hereto
and made a part hereof, this Class B Certificate does not purport to
summarize the Agreement and the Supplement and reference is made to the
Agreement and the Supplement 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 and
the Supplement (without schedules) 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 or the Supplement, as applicable.
This Class B Certificate is issued under and is subject to the
terms, provisions and conditions of the Agreement and the Supplement, to
which Agreement and Supplement, each as amended and supplemented from time to
time, the Class B Certificateholder by virtue of the acceptance hereof
assents and is bound.
B-2
<PAGE>
THIS CLASS B CERTIFICATE IS SUBORDINATED TO THE EXTENT NECESSARY
TO FUND PAYMENTS ON THE CLASS A CERTIFICATES TO THE EXTENT SPECIFIED IN THE
SUPPLEMENT.
It is the intent of the Transferor and the Class B
Certificateholder that, for federal, state and local income and franchise tax
purposes only, the Class B Certificate will qualify as indebtedness of the
Transferor secured by the Receivables. The Class B Certificateholder, by the
acceptance of this Class B Certificate, agrees to treat this Class B
Certificate for federal, state and local income and franchise tax purposes as
debt of the Transferor.
In general, payments of principal with respect to the Class B
Certificate are limited to the Class B Invested Amount, which may be less
than the unpaid principal balance of the Class B Certificate.
This Class B Certificate 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 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 Class B 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 Class B Certificate, the
applicable Certificate Owner or Owners shall be deemed to have represented
and warranted that it or they are not Benefit Plans.
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee, by manual signature, this Class B Certificate
shall not be entitled to any benefit under the Agreement or the Supplement or
be valid for any purpose.
B-3
<PAGE>
IN WITNESS WHEREOF, the Transferor has caused this Class B
Certificate to be duly executed.
COMPUCREDIT FUNDING CORP.
By: _____________________________
Name:
Title:
Dated: August , 1997
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is the Class B Certificate described in the within mentioned
Agreement and Supplement.
BANKERS TRUST COMPANY,
as Trustee,
By:
--------------------------------
Authorized Officer
or
By:
--------------------------------
as Authenticating Agent
for the Trustee,
By:
--------------------------------
Authorized Officer
<PAGE>
EXHIBIT C-1
FORM OF MONTHLY PAYMENT INSTRUCTIONS AND
NOTIFICATION TO THE TRUSTEE
----------------------------------------
COMPUCREDIT CREDIT CARD MASTER TRUST
SERIES 1997-ONE
----------------------------------------
Monthly Period - From: __/__/__
To: __/__/__
Determination Date __/__/__
Distribution Date __/__/__
Number of days in the Monthly Period __
Facility Amount $_____________
Revolving Period or Amortization Period? _____________
Termination Event? ___
Pursuant to Section 3.04(b) of the Pooling and Servicing Agreement dated as
of August __, 1997 (the "Pooling and Servicing Agreement") among CompuCredit
Corporation, as Servicer ("CompuCredit"), CompuCredit Funding Corp., as
Transferor ("Funding"), and Bankers Trust Company, as Trustee, (the
"Trustee") and section 5.02(b) of the Series 1997-One Supplement to Pooling
and Servicing Agreement dated as of August __, 1997 (the "Series Supplement")
among CompuCredit, Funding and the Trustee (the Pooling and Servicing
Agreement together with the Series Supplement, the "Agreement"), Compucredit
is required to prepare certain information each month regarding the current
distributions to the Certificateholders and the performance of the
CompuCredit Credit Card Master Trust (the "Trust") during the previous month.
The undersigned, a duly authorized representative of the Servicer, does
hereby certify:
i. Capitalized terms used in this Certificate have their respective
meanings set forth in the Agreement, References herein to certain
sections and subsections are references to their respective sections
and subsections of the Agreement.
ii. This Certificate is being delivered pursuant to Section 5.02(b) of
the Series Supplement.
iii. CompuCredit is the Servicer under the Agreement. The undersigned is
an authorized officer of the Servicer.
C-1
<PAGE>
iv. The date of this Certificate is on or prior to the Determination
Date prior to the Distribution Date specified above.
v. No Termination Event has occurred under the Agreement.
vi. As of the date hereof, to the best knowledge of the undersigned,
the Servicer has performed in all material respects all its
obligations under the Agreement through the Monthly Period
preceding such Distribution Date [or, if there has been a default
in the performance of any such obligation, set forth in detail the
(i) nature of such default, (ii) the action taken by the Servicer,
if any, to remedy such default and (iii) the current status of
each such default; if applicable, insert "None"].
A. PRINCIPAL BALANCE INFORMATION
1. Aggregate Principal Receivables outstanding during
the Monthly Period (excluding Finance Charge
Receivables and Defaulted Receivables:
(a) such Principal Receivables outstanding on the
last day of prior Monthly Period................... ________
(b) such Principal Receivables outstanding on the
last day of Monthly Period......................... ________
(c) average daily Principal Receivables outstanding
during the Monthly Period.......................... ________
(d) Principal Balance of all Ineligible Receivables
outstanding on the last day of Monthly Period...... ________
2. Discount Percentage (as defined in Section 2.12 of the
Pooling and Servicing Agreement)....................... ________
3. (a) Principal Receivables as of the last day of Prior
Monthly Period (line ____ minus (line ____ times
line ____)........................................ ________
(b) Average Principal Receivables during the Monthly
Period (line ____ minus (line ____ times line
____) ............................................ ________
(c) Principal Receivables as of the last day of
Monthly Period (line ____ minus (line ____
times line ____).................................. _________
C-2
<PAGE>
B. INVESTOR INFORMATION
4. The average Invested Amount during
the Monthly Period: .................................. ____________
5. Invested Amounted on the last day of
the prior Monthly Period.............................. ____________
(a) Class A Invested Amount on the
last day of the prior Monthly
Period............................................ ____________
(b) Class B Invested Amount on the
last day of the prior Monthly
Period............................................ ____________
6. Invested Amount Increases made during
the Monthly Period.................................... ____________
(a) Class A Invested Amount Increases
made during the Monthly Period.................... ____________
(b) Class B Invested Amount Increases
made during the Monthly Period.................... ____________
7. Invested Amount on the last day of
the Monthly Period.................................... ____________
(a) Class A Invested Amount on the
last day of the Monthly Period.................... ____________
(b) Class B Invested Amount on the
last day of the Monthly Period.................... ____________
C. DEFAULT INFORMATION
8. Defaulted Amounted for the Monthly
Period................................................ ____________
9. Series 1997-One Allocable Defaulted
Amount for the Monthly Period ........................ ____________
10. Investor Default Amount for the
Monthly Period........................................ ____________
(a) Class A Investor Default Amount .................. ____________
(b) Class B Investor Default Amount .................. ____________
11. Investor Default Amount for the prior
Monthly Period........................................ ____________
(a) Class A Investor Default Amount .................. ____________
(b) Class B Investor Default Amount .................. ____________
C-3
<PAGE>
D. INVESTOR PERCENTAGES FOR THE MONTHLY PERIOD
12. Series 1997-One Allocation Percentage................. ____________%
13. Fixed/Floating Allocation Percentage for the related
Monthly Period (during the Revolving period line ____
divided by line ____; during the Amortization Period,
line ____ divided by line ____, as of the related
Monthly Period........................................ ____________%
14. Floating Allocation Percentage for the related Monthly
Period (line ___ divided by line ____)................ ____________%
15. Class A Floating Percentage........................... ____________%
16. Class B Floating Percentage........................... ____________%
17. Class A Principal Percentage.......................... ____________%
18. Class B Principal Percentage.......................... ____________%
E. COLLECTIONS INFORMATION FOR THE MONTHLY PERIOD
19. (a) The aggregate amount of Cash Collections for
the Monthly Period................................ ____________
(b) Compensation due to Columbus Bank pursuant to
Exhibit C in the Affinity Card Agreement.......... ____________
(c) The aggregate amount of Series 1997-One Cash
Collections for the Monthly Period................ ____________
20. Interchange........................................... ____________
21. Aggregate amount of Collections of Principal
Receivables (actual Collections of Principal
Receivables without regard to Discount Option
Receivables, if any).................................. ____________
22. Collections of Discount Option Receivables (line ____
times line ____)...................................... ____________
23. Collections of Principal Receivables (line ____
minus line ____)...................................... ____________
24. The aggregate amount of Collections of Finance Charge
Receivables (line 17(c) plus line 18 minus line 21) ____________
25. The Fixed/Floating Allocation Percentage of Principal
Receivables (line ____ times line ____)............... ____________
C-4
<PAGE>
26. Transferor Percentage of Collections of Principal
Receivables .......................................... __________
27. The Floating Allocation Percentage of Finance Charge
Receivables (line ____ times line ____) ............... __________
28. Transferor Percentage of Collections of Finance
Charge Receivables ................................... __________
29. Special Funding Account balance .......................$__________
30. Required Spread Account Amount ........................$__________
31. Available Spread Account Amount .......................$__________
32. Check: line 17 plus line 18 minus line 23 minus line
24 minus line 25 minus line 26 must equal zero ........ __________
F. WITHDRAWAL INFORMATION FROM THE COLLECTION ACCOUNT RELATING
TO COLLECTIONS OF FINANCE CHARGE RECEIVABLES AND REALLOCATED
PRINCIPAL COLLECTIONS
Pursuant to Subsection 4.05(a)(i)
33. Servicer Advances made with respect to the preceding
Monthly Period ........................................$___________
34. Servicer Advances reimbursed during Monthly Period
pursuant to Section 4.05(c)(i) ........................$___________
35. Unreimbursed Servicer Advances from such Monthly
Period (line 31 minus line 32) ........................$___________
36. Unreimbursed Service Advances from previous Monthly
Periods ...............................................$___________
Pursuant to Subsection 4.05(a)(ii)
37. Class A Monthly Interest ............................. $___________
[(a) Program Fee (one-twelfth of 1% times
line _____) .....................................$___________
(b) Facility Fee (one-twelfth of 0.5%
times $125,000,000) .............................$___________
(c) Administrative Fee (one-twelfth of 0.10%
times $125,000,000) .............................$___________
(d) Dealer Fee (one-twelfth of 0.05% times
line ______)] ...................................$___________
38. Class A Monthly Interest previously due and unpaid ....$___________
C-5
<PAGE>
Pursuant to Subsection 4.05(a)(iii)
39. The Monthly Servicing Fee for the preceding Monthly
Period ................................................$___________
40. Accrued and unpaid Monthly Servicing Fees .............$___________
Pursuant to Subsection 4.05(a)(iv)
41. Class A Investor Default Amount for the preceding
Monthly Period shall be treated as Available
Principal Collections (line ____ times line ____) .....$___________
Pursuant to Subsection 4.05(a)(v)
42. If the Transferor fails to deposit the amount the
Transferor is required to deposit on such
Distribution Date into the Special Funding Account
pursuant to Section 3.09 of the Agreement, the
product of (a) the Class A Floating Percentage, (b)
the Series 1997-One Allocation Percentage, (c) the
Floating Allocation Percentage and (d) the amount the
Transferor should have deposited into the Special
Funding Account on such Distribution Date shall be
treated as a portion of Available Principal
Collections ...........................................$___________
Pursuant to Subsection 4.05(a)(vi)
43. If a Pay Out Event has occurred, an amount up to the
Class A Invested Amount shall be treated as Available
Principal Collections and distributed to the Class A
Certificateholders ....................................$___________
Pursuant to Subsection 4.05(a)(vii)
44. The aggregate Class A Investor Charge-Offs which have
not been previously reimbursed shall be treated as a
portion of Available Principal Collections
(line ___) ............................................$___________
C-6
<PAGE>
Pursuant to Subsection 4.05(a)(viii)
45. On each Distribution Date prior to the date on which
the Spread Account terminates pursuant to subsection
4.12(e) of the Series Supplement, an amount up to the
excess, if any, of the Required Spread Account Amount
over the Available Spread Account Amount shall be
deposited into the Spread Account .....................$___________
Pursuant to Subsection 4.05(a)(ix)
46. The Class B Monthly Interest ..........................$___________
47. Class B Monthly Interest previously due and unpaid ....$___________
Pursuant to Subsection 4.05(a)(x)
48. The Class B Investor Default Amount shall be treated
as a portion of Available Principal Collections (line
____ times line ____) .................................$___________
Pursuant to Subsection 4.05(a)(xi)
49. If the Transferor fails to deposit the amount the
Transferor is required to deposit on such
Distribution Date into the Special Funding Account
pursuant to Section 3.09 of the Agreement, the
product of (a) the Class B Floating Percentage, (b)
the Series 1997-One Allocation Percentage, (c) the
Floating Allocation Percentage and (d) the amount the
Transferor should have deposited into the Special
Funding Account on such Distribution Date shall be
treated as a portion of Available Principal
Collections ...........................................$___________
Pursuant to Subsection 4.05(a)(xii)
50. The aggregate amount by which the Class B Invested
Amount has been reduced pursuant to clauses (d), (e)
and (f) of the definition of "Class B Invested
Amount" in Section 2.01 of the Series Supplement
shall be treated as a portion of Available Principal
Collections. ..........................................$___________
C-7
<PAGE>
Pursuant to Subsection 4.05(a)(xiii)
51. Amount constituting Excess Spread to be allocated and
distributed or deposited as set forth in Section 4.07
of the Series Supplement (line 22 minus line 31 minus
lines 34 throught 48) .................................. $_________
52. Amount on line ____ allocated per Section 4.07 to
other Series ........................................... $_________
53. Amount on line ____ allocated per Section 4.07 to
Transferor ............................................. $_________
G. WITHDRAWAL INFORMATION FROM THE COLLECTION ACCOUNT RELATING
TO COLLECTIONS OF PRINCIPAL RECEIVABLES
54. Collections of Principal Receivables (line 21) ......... $_________
55. Collections of Finance Charge Receivables
recharacterized as Collections of Principal
Receivables:
(a) Class A Investor Default Amount for the
preceding Monthly Period shall be treated as
Available Principal Collections (line 39) ........ $_________
(b) If the Transferor fails to deposit the amount
the Transferor is required to deposit on such
Distribution Date into the Special Funding
Account pursuant to Section 3.09 of the
Agreement, the product of (a) the Class A
Floating Percentage and (b) the amount the
Transferor should have deposited into the
Special Funding Account on such Distribution
Date shall be treated as a portion of Available
Principal Collections (line 40) .................. $_________
(c) If a Pay Out Event has occurred, an amount up
to the Class A Invested Amount shall be treated
as Available Principal Collections and
distributed to the Class A Certificateholders
(line 41) ........................................ $_________
(d) The aggregate Class A Investor Charge-Offs
which have not been previously reimbursed shall
be treated as a portion of Available Principal
Collections (line 42) ............................ $_________
C-8
<PAGE>
(e) The Class B Investor Default Amount shall be
treated as a portion of Available Principal
Collections (line 46) ............................ $_________
(f) If the Transferor fails to deposit the amount
the Transferor is required to deposit on such
Distribution Date into the Special Funding
Account pursuant to Section 3.09 of the
Agreement, the product of (a) the Class B
Floating Percentage and (b) the amount the
Transferor should have deposited into the
Special Funding Account on such Distribution
Date shall be treated as a portion of Available
Principal Collections (line 47) .................. $_________
(g) The aggregate amount by which the Class B
Invested Amount has been reduced pursuant to
clauses (d), (e) and (f) of the definition of
"Class B Invested Amount" in Section 2.01 of
the Series Supplement shall be treated as a
portion of Available Principal Collections
(line 48) ........................................ $_________
56. Net Collections of Finance Charge Receivables
recharacterized as Collections of Principal
Receivables (sum of lines 53(a) through 53 (g) ......... $_________
57. Reallocated Principal Collections pursuant to Section
4.08 ................................................... $_________
58. Amounts deposited into Spread Account pursuant to
Subsection 4.01(b)(11) ................................. $_________
59. Amount deposited into Spread Account pursuant to
Subsections 4.01(c)(ii)(w) and 4.01(c)(ii)(x) .......... $_________
60. Shared Principal Collections allocated to Series
1997-One ............................................... $_________
61. Total Collections of Principal Receivables deposited
in the Collection Account (line 52 plus line 54 minus
line 55 minus line 56 minus line 57 plus line 58) ...... $_________
If Revolving Period, the amount specified in line 59 shall
be allocated as follows:
C-9
<PAGE>
Pursuant to Subsection 4.05(b)(i)
62. The excess, if any, of the Class B Invested Amount
over the Required Subordinate Amount ................... $_________
Pursuant to Subsection 4.05(b)(ii)
63. Amount to be treated as Shared Principal Collections
(line ____ minus line _____) ........................... $_________
64. Amount to be treated as reinvestment of Collections
of Principal Receivables ............................... $_________
If Limited Amortization Period, the amount specified in line 59 shall
be allocated as follows:
Pursuant to Subsection 4.05(c)(i)
65. The excess, if any, of the Class B Invested Amount
over the Required Subordinate Amount ................... $_________
Pursuant to Subsection 4.05(c)(ii)
66. Limited Amortization Amount ............................ $_________
Pursuant to Subsection 4.05(c)(iii)
67. Amount to be treated as Shared Principal Collections
(line ____ minus line _____) ........................... $_________
68. Amount to be treated as reinvestment of Collections
of Principal Receivables ............................... $_________
If Controlled or Early Amortization Period, the amount
specified in line 59 shall be allocated as follows:
Pursuant to Subsections 4.05(d)(i) and (e)(i)
69. Class A Invested Amount ................................ $_________
Pursuant to Subsections 4.05(d)(ii) and (e)(ii)
70. After the Class A Invested Amount is paid in full, an
amount up to the Class B Invested Amount ............... $_________
Pursuant to Subsections 4.05(d)(iii) and (e)(iii)
71. After the Class B Invested Amount is paid in full,
amount to be treated as Shared Principal Collections
(line ____ minus line ____) ............................ $_________
C-10
<PAGE>
H. INSTRUCTION TO MAKE CERTAIN PAYMENTS (FUNDS MOVEMENT ANALYSIS)
Pursuant to Section 5.01 of the Series Supplement, the Servicer does hereby
instruct the Trustee to pay in accordance with Section 5.01 from amounts held by
the Paying Agent, on _________________, which date is a Distribution Date under
the Series Supplement, the following amounts as set forth below:
72. Total Collections (line ____) .......................... $_________
73. Permitted withdrawals made by the Transferror from
the Collection Account during the Monthly Period
(a) Amounts withdrawn pursuant to line 32 ............ $_________
(b) Amounts in respect of Collections of Principal
Receivables previously withdrawn ................. $_________
(c) Amounts in respect of Collections of Finance
Charge Receivables previously withdrawn .......... $_________
74. Net Collections (line ____ minus line ____) ............ $_________
75. Pay to Servicer
(a) Payment of the sum of (line ____ plus line ____
plus line ____ plus line ____) plus (portion of
line ____, if applicable) ........................ $_________
76. Pay to Class B Certificateholders
(a) Payment of the sum of (line ____ plus line ____
plus (line ____ or line ____ or line ____ or
line ____, as applicable) plus (portion of line
____, if applicable) ............................. $_________
77. Pay to Spread Account
(a) Deposit the amounts specified in line ____ and
line ____ ........................................ $_________
78. Pay to Class A Certificateholders
(a) Payment of the sum of (line ____ plus line
____) plus (line ____ or line ____ or line
____, as applicable) plus (portion of line
____, if applicable) ............................. $_________
C-11
<PAGE>
79. Pay to Transferor
(a) Payment of line ____, if applicable .............. $_________
80. Check: Sum of lines ____ through ____ must equal line
____ ................................................... $_________
I. ACCRUED AND UNPAID AMOUNTS
After giving effect to the withdrawals and transfers to be made in
accordance with this notice, the following amounts will be accrued and unpaid
with respect to all Monthly Periods preceding the current calendar month.
81. The aggregate amount of all unreimbursed Class A
Investor Charge-Offs ................................... $_________
82. The aggregate amount by which the "Class B Invested
Amount" has been reduced pursuant to clauses (c),
(d), (e) and (f) of the definition thereof ............. $_________
83. Previously due and unpaid Class A Monthly Interest ..... $_________
84. Previously due and unpaid Servicing fees ............... $_________
J. MANAGEMENT REPORTING DATA
85. Number of re-aged accounts and receivables for the
related monthly period ................................. $_________
86. Dollar amount of re-aged accounts and receivables for
the related monthly period ............................. $_________
87. Losses by fraud ........................................ $_________
88. Total losses by non-fraud .............................. $_________
89. Non-fraud losses by bankruptcy ......................... $_________
90. Non-fraud losses by non-bankruptcy ..................... $_________
91. Total number of accounts ............................... $_________
92. End of month delinquencies
(a) 30-59 days delinquent ............................ $_________
(b) 60-89 days delinquent ............................ $_________
(c) 90+ days delinquent .............................. $_________
(c) Total 30+ days delinquent ........................ $_________
C-12
<PAGE>
93. Transferor's Interest as a percentage of the
aggregate amount of Principal Receivables outstanding
as of the last day of the Monthly Period ............... $_________
94. Transferor Percentage as of the end of the prior
Monthly Period (prior period line ____) ................ $_________
95. Net Portfolio Yield .................................... $_________
96. Base Rate .............................................. $_________
97. Net Yield .............................................. $_________
98. Prior Monthly Period Net Yield ......................... $_________
99. FICO score distribution:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
FICO Risk Score Subordination
Range* Receivables Percentage Total
-----------------------------------------------------------------
<S> <C> <C> <C>
*[material omitted] *[material omitted]
TOTAL
</TABLE>
*FICO Risk Score at the time of initial booking of account.
100. Aggregate Subordination Percentage total (line ____)
divided by line ____ ................................... $_________
101. Required Subordinate Amount (the greater of
$12,500,000.00 or the current month Class A Invested
(line ____ divided by 1 minus the Aggregate
Subordination Percentage (line ____) minus the
current month Class A Invested Amount (line ____) ...... $_________
102. Description of servicing currently provided by CB&T
versus in-house ........................................ $_________
103. CompuCredit Stockholder's Equity ....................... $_________
104. Ratio of Stockholder's Equity to total managed assets .. $_________
105. Vintage loss data, beginning March 1988, (including
average FICO score by vintage) ......................... $_________
C-13
- ------------------
*Deleted per the Registrant's request for confidential treatment and filed
separately with the Commission pursuant to Rule 24b-2.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
In-House CB&T
----------------------------- -----------------------------
----------------------------- -----------------------------
----------------------------- -----------------------------
----------------------------- -----------------------------
</TABLE>
IN WITNESS WHEREOF, the undersigned has duly executed this
Certificate this ____ day of _________, ____.
COMPUCREDIT CORPORATION,
By:
--------------------------
Name:
Title:
C-14
<PAGE>
EXHIBIT C-2
FORM OF WEEKLY SERVICER REPORT
I, [Name of Officer], the undersigned [Title of Officer] of CompuCredit
Funding Corp., a Georgia corporation, pursuant to Section 4.01 of the Series
Supplement dated August 29, 1997 (the "Series Supplement"), by and among the
Transferor, CompuCredit Corporation, a Georgia corporation, as servicer (in
such capacity, the "Servicer"), and Bankers Trust Company as Trustee (the
"Trustee"), hereby certify that as of ___________ __, 19__:
<TABLE>
<CAPTION>
<S> <C> <C>
(1) Total Principal Receivables in Trust $__________
(2) Total Special Funding Account Balance $__________
(3) Total Class A Invested Amount $__________
(4) Total Class B Invested Amount $__________
(5) Line 1 plus Line 2 minus Line 3 minus
Line 4 is not less than zero [YES]
(6) No Payout Event has occurred [YES]
(7) Transferor Amount is equal to or greater
than the Required Transferor Amount [YES]
(8) The date specified in Clause (a) or (b) of the
Definition of Termination Date have not occurred. [YES]
(9) Principal collections on deposit in the
Collection Account $__________
(10) Amount on deposit in the Spread Account $__________
(11) Required Spread Account Amount $__________
(12) Amount to be withdrawn $__________
</TABLE>
Capitalized terms used and not otherwise defined herein shall have the
meaning assigned to such terms in the Series Supplement, the Pooling and
Servicing Agreement, dated
C-2-1
<PAGE>
as of August 29, 1997, by and among the Transferor, the Servicer and the
Trustee.
C-2-2
<PAGE>
IN WITNESS WHEREOF, I have duly executed and delivered this Weekly
Servicer Report on this __ day of _________, 199_.
COMPUCREDIT FUNDING CORP.,
as Transferor
By:___________________________
Name:
Title:
C-2-3
<PAGE>
EXHIBIT D
FORM OF CLASS B INVESTED AMOUNT INCREASE NOTICE
I, [Name of Officer], the undersigned [Title of Officer] of CompuCredit
Funding Corp., a Georgia corporation, pursuant to Section 4.13(b) of the
Series Supplement dated August 29, 1997 (the "Series Supplement"), by and
among the Transferor, CompuCredit Corporation, a Georgia corporation, as
servicer (in such capacity, the "Servicer"), and Bankers Trust Company as
Trustee (the "Trustee"), hereby certify that:
(1) The Class B Invested Amount as of the
Business Day immediately preceding the
date hereof ............................. $________
(2) The total amount of the Class B
Invested Amount Increase requested
by the Transferor ........................ $________
(3) The Class B Invested Amount after
giving effect to the Class B
Invested Amount Increase (line 1
plus line 2) ............................. $________
(4) The Transferor Amount after giving
effect to the Class B Invested
Amount Increase, each as of the
Business Day immediately preceding
the date hereof .......................... $________
(5) The Transferor Amount is not less
than the Required Transferor Amount ...... [Yes]
(6) The product of the Transferor
Amount and the Series 1997--One
Allocation Percentage minus the
Series Required Transferor
Amount is not less than zero ............. [Yes]
Capitalized terms used and not otherwise defined herein shall have the
meaning assigned to such terms in the Series Supplement, the Pooling and
Servicing Agreement, dated as of August 29, 1997, by and among the
Transferor, the Servicer and the Trustee.
D-1
<PAGE>
IN WITNESS WHEREOF, I have duly executed and delivered this Class B
Investment Amount Increase Notice on this ___ day of ________, 199_.
COMPUCREDIT FUNDING CORP.,
as Transferor
By: --------------------
Name:
Title:
D-2
<PAGE>
EXHIBIT E
FORM OF INVESTMENT LETTER
________________, 19__
CompuCredit Funding Corporation
Bankers Trust Company, as Trustee
Re: Purchase of Class A Certificate
Ladies and Gentlemen:
This letter (the "Investment Letter") is delivered by Enterprise
Funding Corporation (the "Purchaser") and NationsBank, N.A., as Bank Investor
(the "Bank Investor") pursuant to Section 9.04 of the Series 1997-One
Supplement, dated as of August 29, 1997 relating to the CompuCredit Credit
Card Master Trust (the "Series Supplement"). Capitalized terms used herein
without definition shall have the meanings set forth in the Series 1997-One
Supplement or in the Certificate Purchase Agreement (as defined therein).
The Purchaser and the Bank Investor, each as to itself, represents to the
Transferor as follows:
i) it is authorized to enter into the Certificate Purchase
Agreement and to perform its obligations thereunder and to consummate the
transactions contemplated thereby;
ii) it has knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of an
investment in the Class A Certificate and it is able to bear the
economic risk of such investment;
iii) It has reviewed the Pooling and Servicing Agreement and
Series Supplement (including the schedule and exhibits thereto) and have
had the opportunity to perform due diligence with respect thereto and to
ask questions of and receive answers from the Transferor and its
representatives concerning the Transferor, the Trust and the Class A
Certificate;
iv) NationsBank, N.A. is an agent on behalf of the Purchaser and
neither the Purchaser nor the Bank Investor is acquiring the Class A
Certificate as an agent or otherwise for any other person. The
Purchaser is a Delaware
<PAGE>
corporation and has its principal office within the State of New York and the
Bank Investor is a national banking association with its principal office in
Charlotte, North Carolina;
v) each of the Purchaser, NationsBank, N.A., as agent for the
Purchaser (the "Agent"), and the Bank Investor is an "accredited investor" as
defined in Rule 501, promulgated by the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended. The
Purchaser, the Agent and the Bank investor understand that the offering and
sale of the Class A Certificate have not been and will not be registered
under the Securities Act of 1933, as amended, and have not and will not be
registered or qualified under any applicable "blue sky" law, and that the
offering and sale of the Class A Certificate have not been reviewed by,
passed on or submitted to any federal or state agency or commission,
securities exchange or other regulatory body;
vi) the Purchaser, through the Agent, and the Bank Investor is
acquiring or will acquire the Class A Certificate without a view to any
distribution, resale or other transfer thereof. The purchaser, the Agent and
the Bank Investor will not resell or otherwise transfer the Class A
Certificate or any portion thereof, (A) with a letter from the buyer or
transferee thereof in substantially the form hereof and (B) (i) pursuant to
an effective registration statement under the Securities Act of 1933, as
amended; (ii) in a transaction exempt from the registration requirements of
the Securities Act of 1933, as amended, and applicable state securities or
"blue sky" laws; (iii) to the Transferor or any affiliate of the Transferor;
(iv) to a person who the Purchaser and the Agent or the Bank Investor
reasonably believes is a qualified institutional buyer (within the meaning
thereof in Rule 144A under the Securities Act of 1933, as amended) that is
aware that the resale or other transfer is being made in reliance upon Rule
144A; or (v) pursuant to Regulation S under the Securities Act of 1933, as
amended.
vii) The Purchaser, the Agent and the Bank Investor understand that the
Class A Certificate will bear a legend to substantially the following effect:
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), IN RELIANCE UPON EXEMPTIONS PROVIDED
BY THE SECURITIES ACT. NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE
MADE EXCEPT IN COMPLIANCE WITH THE REGISTRATION PROVISION OF THE SECURITIES
ACT AND ANY APPLICABLE PROVISION UNDER STATE BLUE SKY OR SECURITIES LAWS OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH PROVISION. THE TRANSFER OF THIS
CERTIFICATE IS SUBJECT TO CERTAIN CONDITIONS SET FORTH IN THE POOLING AND
2
<PAGE>
SERVICING AGREEMENT AND SERIES SUPPLEMENT REFERRED TO HEREIN.
NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE ACQUIRED BY (A)
AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE
RETIREMENT SECURITY ACT OF 1974, AS AMENDED ("ERISA") THAT IS SUBJECT TO THE
PROVISIONS OF TITLE 1 OF ERISA, (B) A PLAN DESCRIBED IN SECTION 4975 (E)(1)
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR (C) ANY ENTITY WHOSE
UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN IS INVESTMENT IN
THE ENTITY (EACH A "BENEFIT PLAN"). BY ACCEPTING AND HOLDING THIS CERTIFICATE
OR ANY INTEREST HEREIN, THE HOLDER HEREOF OR ANY OWNER OF AN INTEREST HEREIN
SHALL BE DEEMED TO HAVE REPRESENTED AND WARRANTED THAT IT IS NOT A BENEFIT
PLAN.
viii) this Investment Letter has been duly authorized, executed and
delivered and constitutes the legal, valid and binding obligations of the
Purchaser, the Agent and the Bank Investor, enforceable against the
Purchaser, the Agent and the Bank Investor in accordance with its terms,
except as such enforceability may be limited by receivership,
conservatorship, bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and
general principles of equity;
ix) each of the Purchaser, the Agent and the Bank Investor represents
and warrants that it is not (i) an employee benefit plan as defined in Section
3(3) of ERISA) that is subject to the provisions of Title I of ERISA, (ii) a
plan described in Section 4975(e)(1) of the Internal Revenue Code, or (iii)
an entity whose underlying assets include plan assets by reason of a plan's
investment in such entity;
x) Each of the Purchaser and the Bank Investor represents, warrants
and covenants that it has not and will not acquire, and shall not sell, trade
or transfer any interest in the Class A Certificates to be marketed on or
through either (i) an "established securities market" within the meaning of
Section 7704(b)(1) of the Internal Revenue Code of 1986 (the "Code")
(including an interdealer quotation system that regularly disseminates firm
buy or sell quotations by identified brokers or dealers by electronic means
or otherwise) or (ii) a "secondary market" (or the substantial equivalent
thereto) within the meaning of Code Section 7704(b)(2) (including a market
wherein interests in the Class A Certificate are regularly quoted by any
person making a market in such interests and a market wherein any person
regularly makes available bid or offer quotes with respect to interests in
the Class A Certificates and stands ready to effect buy or sell transactions
at the quoted prices for itself or on behalf of others).
3
<PAGE>
xi) Unless the Transferor consents otherwise each of the Purchaser and
the Bank Investor represents, warrants and covenants that it (i) is properly
classified as, and will remain classified as, a "corporation" as described in
Code Section 7701 (a)(3) and (ii) is not, and will not become, an 'IS
corporation" under Code section 1361. Each of the Purchaser and the Bank
Investor represents, warrants and covenants that it shall (i) cause each of
its Participants otherwise permitted hereunder to make representations,
warranties and covenants as required by Section 9.04 of the Series Supplement
for the benefit of the Transferor and the Trust at the time such Participant
became a Participant and (ii) forward a copy of such representations,
warranties and covenants to the Trustee. In the event of any breach of the
representation, warranty and covenant of the Purchaser or the Bank Investor
or its Participant that such Purchaser or Bank Investor or its Participant
that such Purchaser or Bank Investor or its Participant that such Purchaser
or Bank Investor or its participant shall remain classified as a corporation
other than an S corporation, such Purchaser or Bank investor shall notify the
Transferor promptly upon such Purchaser's or Bank Investor's becoming aware
of such breach, and thereupon such Purchaser or Bank Investor hereby agrees
to use reasonable efforts to procure a replacement investor to succeed to its
rights and obligations hereunder. In any event, the transferor shall also
have a right to procure a replacement investor. Each affected Purchaser
hereby agrees to take all actions necessary to permit a replacement investor
to succeed to its rights and obligations hereunder. Each Purchaser or Bank
Investor which has a participant which has breached its representation,
warranty and covenant that it shall remain classified as a corporation other
than an S corporation hereby agrees (without limiting the right of the
Transferor to procure a replacement investor for such Purchaser as provided
above in this paragraph) to notify the Transferor of such breach promptly
upon such Purchaser's becoming aware thereof and to use reasonable efforts to
procure a replacement Participant, as applicable, not so affected which is
acceptable to the Transferor to replace any such Participant.
[if Bank Investor is organized under the laws of any jurisdiction outside
the United States:
xii) Under applicable law no taxes will be required to be withheld by
the Trust, the Trustee, the Transferor, or the Servicer with respect to any
payments to be made to such Bank Investor in respect of an interest in the
Class A Certificates, and the Bank Investor covenants that it will pay all
taxes attributable to its investment in the Class A Certificates.
xiii) The Bank Investor agrees (for the benefit of the Trust, the
Trustee, the Transferor and the Servicer) to provide those forms required to
be provided by Section 9.04 at the time and in the manner described therein,
and to
4
<PAGE>
comply with all applicable U.S. laws and regulations with regard to the
related withholding tax exemptions.)
The Transferor hereby consents to the transfer of the Class A
Certificate by the Purchaser to the Bank Investor.
Very truly yours,
ENTERPRISE FUNDING CORPORATION
as Purchaser
By:
-------------------------------
Name:
Title:
NATIONSBANK, N.A.,
as Agent and Bank Investor
By:
-------------------------------
Name: Michelle M. Heath
Title: Senior Vice President
AGREED TO AS OF THE DATE FIRST ABOVE WRITTEN:
COMPUCREDIT FUNDING CORP.
By:
-------------------------------
Name:
Title:
5
<PAGE>
EXECUTION COPY
Exhibit 10.4.4
AMENDMENT NUMBER 2
TO
SERIES 1997-ONE SUPPLEMENT
THIS AMENDMENT NUMBER 2 dated as of April 17, 1998 (this "Amendment")
to the SERIES 1997-ONE SUPPLEMENT, dated as of August 29, 1997 (as amended, the
"Series 1997-One Supplement"), is among CompuCredit Funding Corp., as
Transferor, CompuCredit Corporation, as Servicer and Bankers Trust Company, a
New York banking company, as Trustee. The Series 1997-One Supplement supplements
that Pooling and Servicing Agreement dated as of August 29, 1997 (as amended and
supplemented, the "Pooling and Servicing Agreement") among the Transferor, the
Servicer and the Trustee.
RECITALS
WHEREAS, pursuant to Section 13.01(b) of the Pooling and Servicing
Agreement, the parties to the Series 1997-One Supplement have determined to
amend the Series 1997-One Supplement in certain respects as provided below;
WHEREAS, the Class A Certificateholder and the Class B
Certificateholder are willing to consent to such amendments;
WHEREAS, pursuant to Section 3.3(l) and 3.3(x) of the Certificate
Purchase Agreement, the Agent is willing to consent to such amendments;
NOW THEREFORE, in consideration of the premises and the agreements
contained herein, the parties hereto agree as follows:
SECTION 1. Amendments to Section 6.01. Section 6.01 of the Series
1997-One Supplement is hereby amended as follows:
Section 6.01(k) of the Series 1997-One Supplement is deleted in its entirety
and the following is substituted therefor:
(k) for so long as the Affinity Card Agreement is in effect, the Letter of
Credit (as such term is defined in the Affinity Card Agreement) maintained
by CompuCredit in favor of Columbus Bank pursuant to Section 3.3 of the
Affinity Card Agreement shall, without the consent of Columbus Bank, be
terminated, revoked, reduced or drawn on and such termination, revocation or
reduction has not been remedied within five days and, in the case of a
drawing, such drawing is not reimbursed within five days;
SECTION 2. Key Person Insurance. The parties hereto agree to, and by
execution hereof, the Agent, the Bank Investor, the Class A Certificateholder
and the Class B Certificateholder acknowledge and consent to, the designation of
NationsBank, N.A., as Agent pursuant to the terms of the Transfer and
Administration Agreement dated as of April 17, 1998 by and among Kitty Hawk
Funding Corporation, Atlantic Equity Corporation,
<PAGE>
CompuCredit, CompuCredit Acquisition Funding Corp. and NationsBank, N.A., as
Agent and as Bank Investor, as a co-beneficiary together with the Transferor
under the terms of the "Key Person" insurance policies relating to David G.
Hanna, Brett M. Samsky and Rick Gilbert referred to in Section 2.01 of the
Pooling and Servicing Agreement.
SECTION 3. Series 1997-One Supplement in Full Force and Effect. Except
as specifically amended hereby, all of the terms and conditions of the Series
1997-One Supplement shall remain in full force and effect. All references to the
Series 1997-One Supplement in any other document or instrument shall be deemed
to mean such Series 1997-One Supplement as amended by this Amendment. This
Amendment shall not constitute a novation of the Series 1997-One Supplement, but
shall constitute an amendment thereof. The parties hereto agree to be bound by
the terms and obligations of the Series 1997-One Supplement, as amended by this
Amendment, as though the terms and obligations of the Series 1997-One Supplement
were set forth herein.
SECTION 4. Counterparts. This Amendment may be executed in any number
of counterparts and by separate parties hereto on separate counterparts, each of
which when executed shall be deemed an original, but all such counterparts taken
together shall constitute one and the same instrument.
SECTION 5. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO ITS CONFLICTS OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
SECTION 5. Defined Terms. Capitalized terms used herein and not
otherwise defined herein or amended by the terms of this Amendment shall have
the meanings assigned to such terms in the Series 1997-One Supplement and the
Pooling and Servicing Agreement.
<PAGE>
IN WITNESS WHEREOF, the Transferor, the Servicer and the Trustee have
caused this Amendment to be duly executed by their respective officers as of the
day and year first above written.
COMPUCREDIT FUNDING CORP.,
as Transferor,
By: /s/ Brett M. Samsky
-----------------------------
Name: Brett M. Samsky
Title: Chief Financial Officer
COMPUCREDIT CORPORATION,
as Servicer,
By: /s/ Brett M. Samsky
-----------------------------
Name: Brett M. Samsky
Title: Chief Financial Officer
BANKERS TRUST COMPANY,
as Trustee,
By: /s/ Patricia M.F. Russo
-----------------------------
Name: Patricia M.F. Russo
Title: Vice President
Acknowledged and agreed to
as of this 17th day of
April, 1998
NATIONSBANK, N.A.,
as Agent and as Bank Investor
under the Certificate Purchase
Agreement
By: /s/ Michelle M. Heath
-----------------------------
Name: Michelle M. Heath
Title: Senior Vice President
ENTERPRISE FUNDING CORPORATION,
as Class A Certificateholder
By: [illegible]
-----------------------------
Name:
Title:
COMPUCREDIT FUNDING CORP.
as Class B Certificateholder
By: /s/ Brett M. Samsky
-----------------------------
Name: Brett M. Samsky
<PAGE>
Title: Chief Financial Officer
[Amendment No. 2 to Series 1997-One Supplement]
<PAGE>
EXECUTION COPY
Exhibit 10.5
===============================================================================
TRANSFER AND ADMINISTRATION AGREEMENT
among
KITTY HAWK FUNDING CORPORATION,
as Buyer A,
ATLANTIC EQUITY CORPORATION,
as Buyer B,
COMPUCREDIT ACQUISITION FUNDING CORP.,
as the Transferor,
COMPUCREDIT CORPORATION,
individually and
as the Servicer
and the Guarantor
and
NATIONSBANK, N.A.,
as the Agent and a Bank Investor
Dated as of April 17, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS..........................................................................1
SECTION 1.1. Certain Defined Terms...............................................1
SECTION 1.2. Other Terms.......................................................25
SECTION 1.3. Computation of Time Periods.......................................26
ARTICLE II TRANSFERS AND SETTLEMENTS..........................................................26
SECTION 2.1. Facility...........................................................26
SECTION 2.2. Transfers..........................................................26
SECTION 2.3. Selection of Interest Rates and Interest Periods...................29
SECTION 2.4. [Reserved]........................................................32
SECTION 2.5. Allocation of Collections; Non-Liquidation Settlement and
Reinvestment Procedures...........................................32
SECTION 2.6. [Reserved]........................................................33
SECTION 2.7. Fees..............................................................34
SECTION 2.8. Protection of Transferred Interest of the Buyers and the Bank
Investors.........................................................34
SECTION 2.9. Deemed Collections; Application of Payments........................35
SECTION 2.10. Payments and Computations, Etc....................................38
SECTION 2.11. Reports............................................................38
SECTION 2.12. Collection Account................................................39
SECTION 2.13. Sharing of Payments, Etc..........................................40
SECTION 2.14. Defaulted Receivables.............................................40
SECTION 2.15. Optional Amortization.............................................40
ARTICLE III REPRESENTATIONS AND WARRANTIES....................................................41
<PAGE>
SECTION 3.1. Representations and Warranties of the Transferor..................41
SECTION 3.2. [Reserved]........................................................44
SECTION 3.3. Representations and Warranties of the Servicer....................45
SECTION 3.4. Reaffirmation of Representations and Warranties by the
Servicer..........................................................46
ARTICLE IV CONDITIONS PRECEDENT...............................................................47
SECTION 4.1. Conditions to Closing.............................................47
ARTICLE V COVENANTS...........................................................................50
SECTION 5.1. Affirmative Covenants of Transferor...............................50
SECTION 5.2. Negative Covenants of the Transferor..............................57
SECTION 5.3. Affirmative Covenants of the Servicer.............................59
SECTION 5.4. Negative Covenants of the Servicer................................61
ARTICLE VI ADMINISTRATION AND COLLECTIONS.....................................................62
SECTION 6.1. Appointment of Servicer...........................................62
SECTION 6.2. Duties of Servicer................................................63
SECTION 6.3. Rights After Designation of New Servicer..........................64
SECTION 6.4. Servicer Default..................................................64
SECTION 6.5. Responsibilities of the Transferor................................65
ARTICLE VII TERMINATION EVENTS................................................................65
SECTION 7.1. Termination Events................................................65
SECTION 7.2. Termination.......................................................68
SECTION 7.3. Optional Repurchase...............................................69
ARTICLE VIII INDEMNIFICATION; EXPENSES; RELATED MATTERS.......................................69
SECTION 8.1. Indemnities by the Transferor.....................................70
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<PAGE>
SECTION 8.2. Indemnity for Taxes, Reserves and Expenses........................73
SECTION 8.3. Taxes.............................................................74
SECTION 8.4. Other Costs, Expenses and Related Matters..........................77
SECTION 8.5. Amounts Limited to Available Funds................................78
SECTION 8.6. Indemnification by Servicer........................................78
ARTICLE IX THE AGENT; BANK COMMITMENT.........................................................80
SECTION 9.1. Authorization and Action..........................................80
SECTION 9.2. Agent's Reliance, Etc.............................................81
SECTION 9.3. Termination Events................................................81
SECTION 9.4. Rights as Bank Investor...........................................81
SECTION 9.5. Indemnification of the Agent......................................82
SECTION 9.6. Non-Reliance......................................................82
SECTION 9.7. Resignation of Agent..............................................83
SECTION 9.8. Payments by the Agent.............................................83
SECTION 9.9. Bank Commitment; Assignment to Bank Investors.....................84
SECTION 9.10. Tax Matters......................................................87
SECTION 9.11. Tax Treatment....................................................91
ARTICLE X GUARANTY AND GUARANTOR COVENANTS....................................................91
SECTION 10.1. Guaranty..........................................................91
SECTION 10.2. Waivers...........................................................92
SECTION 10.3. Reinstatement.....................................................93
SECTION 10.4. Subrogation.......................................................93
SECTION 10.5. Net Worth Ratio...................................................93
SECTION 10.6. Financial Reporting..............................................94
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SECTION 10.7. Notices...........................................................92
SECTION 10.8. Sub-Servicing Fee.................................................92
SECTION 10.9. Co-Beneficiary Designations.......................................92
ARTICLE XI MISCELLANEOUS......................................................................93
SECTION 11.1. Term of Agreement.................................................93
SECTION 11.2. Waivers; Amendments...............................................93
SECTION 11.3. Notices...........................................................94
SECTION 11.4. Governing Law; Submission to Jurisdiction; Integration............96
SECTION 11.5. Severability; Counterparts........................................97
SECTION 11.6. Successors and Assigns............................................97
SECTION 11.7. Disclosure........................................................98
SECTION 11.8. Confidentiality Agreement.........................................99
SECTION 11.9. No Bankruptcy Petition............................................99
SECTION 11.10. No Recourse Against Stockholders, Officers
or Directors.....................................................100
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
EXHIBIT A Form of Credit Card Agreement
EXHIBIT B [Reserved]
EXHIBIT C Form of Statement of Estimated Amounts
EXHIBIT D Form of Independent Accountants Report
EXHIBIT E Form of Monthly Servicer Report
EXHIBIT F [Reserved]
EXHIBIT G Form of Assignment and Assumption Agreement
EXHIBIT H List of Actions and Suits
EXHIBIT I [Reserved]
EXHIBIT J List of Subsidiaries, Divisions and Tradenames
EXHIBIT K Form of Investment Letter
</TABLE>
v
<PAGE>
TRANSFER AND ADMINISTRATION AGREEMENT
TRANSFER AND ADMINISTRATION AGREEMENT (this "Agreement"),
dated as of April 17, 1998, by and among KITTY HAWK FUNDING CORPORATION, a
Delaware corporation ("Buyer A"), ATLANTIC EQUITY CORPORATION, a North Carolina
corporation ("Buyer B" and, together with Buyer A, the "Buyers"), COMPUCREDIT
ACQUISITION FUNDING CORP., a Georgia corporation, as transferor (in such
capacity, the "Transferor"), COMPUCREDIT CORPORATION, a Georgia corporation,
individually, as servicer (in such capacity, the "Servicer") and as guarantor
(in such capacity, the "Guarantor"), and NATIONSBANK, N.A., a national banking
association ("NationsBank"), as agent for the Buyers and the Bank Investors (in
such capacity, the "Agent") and as a Bank Investor.
PRELIMINARY STATEMENTS
WHEREAS, the Transferor may desire to convey, transfer and
assign, from time to time, undivided percentage interests in certain accounts
receivable, and Buyer A may desire to, and the Bank Investors, if requested, and
Buyer B shall, accept such conveyance, transfer and assignment of such undivided
percentage interests, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings:
"Accounts" means each credit card account established pursuant
to a Credit Card Agreement with an Obligor as of the Cut-Off Date, which account
(i) (a) was sold to CB&T pursuant to the Sale and Purchase Agreement by the
Original Sellers, (b) is a credit card account of an Obligor into which an
Account of such Obligor is, pursuant to the Conversion, transferred in
accordance with the Credit Card Guidelines, (c) is a Transferred Account or (d)
is a Related Account, and (ii) is identified by account number and by the
principal receivables thereof as of the Cut-Off Date and referred to in the
Account Schedule delivered to the Agent on the Closing Date pursuant to Section
2.8(b), as such schedule is amended, modified or supplemented thereafter
pursuant to Section 2.8(b).
"Account Owner" means CB&T or any other entity which is the
issuer of the credit card relating to an Account pursuant to a Credit Card
Agreement, subject to Section 5.2(h) hereof.
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<PAGE>
"Account Schedule" means the schedule of Accounts (which
schedule may be in the form of a computer file or microfiche) of the Transferor
delivered to the Agent on the Closing Date, as amended or modified from time to
time pursuant to the terms of this Agreement.
"Accrued Interest Component" means, for any Collection Period,
the Interest Component of all Related Commercial Paper outstanding at any time
during such Collection Period which has accrued from the first day through the
last day of such Collection Period, whether or not such Related Commercial Paper
matures during such Collection Period. For purposes of the immediately preceding
sentence, the portion of the Interest Component of Related Commercial Paper
accrued in a Collection Period during which Related Commercial Paper has a
stated maturity date that succeeds the last day of such Collection Period shall
be computed based on the actual number of days that such Related Commercial
Paper was outstanding during such Collection Period.
"Adjusted LIBOR Rate" means, with respect to any period during
which the return to any Bank Investor or the Liquidity Provider is to be
calculated by reference to the London interbank offered rate, a rate which is
1.05% in excess of a rate per annum equal to the sum (rounded upwards, if
necessary, to the next higher 1/100 of 1%) of (A) the rate obtained by dividing
(i) the applicable LIBOR Rate by (ii) a percentage equal to 100% minus the
reserve percentage used for determining the maximum reserve requirement as
specified in Regulation D (including, without limitation, any marginal,
emergency, supplemental, special or other reserves) that is applicable to the
Agent during such period in respect of eurocurrency or eurodollar funding,
lending or liabilities (or, if more than one percentage shall be so applicable,
the daily average of such percentage for those days in such period during which
any such percentage shall be applicable) plus (B) the then daily net annual
assessment rate (rounded upwards, if necessary, to the nearest 1/100 of 1%) as
estimated by the Agent for determining the current annual assessment payable by
the Agent to the Federal Deposit Insurance Corporation in respect of
eurocurrency or eurodollar funding, lending or liabilities.
"Administrative Agent" means NationsBank, N.A., as
administrative agent.
"Adverse Claim" means a lien, security interest, charge or
encumbrance, or other right or claim in, of or on any Person's assets or
properties in favor of any other Person (including any UCC financing statement
or any similar instrument filed against such Person's assets or properties).
"Affected Assets" means, collectively, the Receivables and the
Related Security, Collections and Proceeds relating thereto.
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person. A Person shall be deemed to control
another Person if the controlling Person
2
<PAGE>
possesses, directly or indirectly, the power to direct or cause the direction of
the management or policies of the controlled Person, whether through ownership
of voting stock, by contract or otherwise.
"Affinity Card Agreement" means the Affinity Card Agreement,
dated January 6, 1997, among CB&T, CompuCredit and CAC, and all schedules and
exhibits thereto, as the same has been and may hereafter be amended, modified or
supplemented and in effect from time to time.
"Agent" means NationsBank, N.A., in its capacity as agent for
the Buyers and the Bank Investors, and any successor thereto appointed pursuant
to Article IX.
"Aggregate Unpaids" means, at any time, an amount equal
(without duplication) to the sum of (i) the aggregate accrued and unpaid
Carrying Costs at such time, (ii) Buyer A's Net Investment at such time and
(iii) all other amounts owed (whether due or accrued) under the Transaction
Documents by the Transferor to Buyer A and the Bank Investors at such time,
including, without limitation, any Early Collection Fee then due and owing.
"Applicable Rate" means the CP Rate, the Base Rate or the
Adjusted LIBOR Rate, as determined by the Agent.
"Arrangement Fee" means the fee payable by the Transferor to
the Administrative Agent pursuant to Section 2.7 hereof, the terms of which are
set forth in the Fee Letter.
"Assignment" means any sale, assignment or transfer by a Buyer
or Bank Investor of all or any part of its interest in this Agreement, but shall
not include a participation as described in Section 9.10(f).
"Assignment Amount" with respect to a Bank Investor shall mean
at any time an amount equal to the lesser of (i) such Bank Investor's Pro Rata
Share of Buyer A's Net Investment at such time and (ii) such Bank Investor's
unused Commitment.
"Assignment and Assumption Agreement" means an Assignment and
Assumption Agreement substantially in the form of Exhibit G attached hereto.
"Bank Investors" shall mean NationsBank, N.A. and its
successors and assigns.
"Bankruptcy Code" has the meaning assigned to that term in
Section 3.1(k).
"Base Rate" or "BR" means, a rate per annum equal to the
greater of (i) the prime rate of interest publicly announced by NationsBank from
time to time, changing when and as said prime rate changes (such rate not
necessarily being the
3
<PAGE>
lowest or best rate charged by NationsBank) and (ii) the sum of (a) 1.50% and
(b) the rate equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a Business
Day, the average of the quotations for such day for such transactions received
by NationsBank from three Federal funds brokers of recognized standing selected
by it.
"Benefit Plan" means any employee benefit plan as defined in
Section 3(3) of ERISA in respect of which the Transferor or any ERISA Affiliate
thereof is, or at any time during the immediately preceding six years was, an
"employer" as defined in Section 3(5) of ERISA.
"Business Day" means any day other than (a) a Saturday or
Sunday or (b) any other day on which national banking associations or state
banking institutions in New York, New York, Charlotte, North Carolina, Atlanta,
Georgia, Columbus, Georgia or any other State in which the principal executive
offices of CompuCredit, the Transferor, the Agent, CB&T or other Account Owner,
as the case may be, are located, are authorized or obligated by law, executive
order, or governmental decree to be closed, and, when used with respect to the
determination of any Adjusted LIBOR Rate or any notice with respect thereto, any
such day which is also a day for trading by and between banks in United States
dollar deposits in the London interbank market.
"Buyer A" means Kitty Hawk Funding Corporation, a Delaware
corporation, or any other NationsBank sponsored commercial paper conduit
facility, or any combination thereof, as determined by the Agent.
"Buyer A's Initial Net Investment" means $210,311,915.28.
"Buyer A's Net Investment" means the sum of the amounts paid
to the Transferor by Buyer A or the Bank Investors less the aggregate amount of
Collections received and applied by the Agent to reduce such Buyer A's Net
Investment pursuant to Section 2.5, 2.15 or 7.3 hereof; provided that such Buyer
A's Net Investment shall be restored and reinstated in the amount of any
Collections so received and applied if at any time the distribution of such
Collections is rescinded or must otherwise be returned for any reason.
"Buyer B" means Atlantic Equity Corporation, a North Carolina
corporation, and its successors and assigns.
"Buyer B Amounts" means, at any time, all amounts as are at
such time due and owing to Buyer B under the Fee Letter, this Agreement and the
Purchase Option Agreement.
4
<PAGE>
"Buyer B Distributions" means, at any time, Buyer B Amounts
and any amounts which are then due or thereafter become owing to Buyer B
pursuant to Section 2.5(b)(ii).
"Buyer B's Initial Net Investment" means $12,000,000.
"Buyer B's Net Investment" means Buyer B's Initial Net
Investment less the aggregate amount of Collections received and applied by the
Agent to reduce such Buyer B's Net Investment pursuant to Section 2.5, 2.15 or
7.3 hereof or pursuant to the Fee Letter; provided that Buyer B's Net Investment
shall be restored and reinstated in the amount of any Collections so received
and applied if at any time the distribution of such Collections is rescinded or
must otherwise be returned for any reason.
"Buyer B Program Fee" means the fee payable by the Transferor
to Buyer B pursuant to Section 2.7 hereof, the terms of which are set forth in
paragraph (d) of the Fee Letter.
"Buyers" means Buyer A and Buyer B.
"Buyers' Net Investment" means the sum of Buyer A's Net
Investment and Buyer B's Net Investment.
"CAC" means CompuCredit Acquisition Corporation, a Georgia
corporation, together with its successors and assigns.
"Capitalized Lease" of a Person means any lease of property by
such Person as lessee which would be capitalized on a balance sheet of such
Person prepared in accordance with GAAP.
"Carrying Costs" means, for a Collection Period, the sum
(without duplication) of (i) the sum of the dollar amount of Buyer A's
obligations for such Collection Period determined on an accrual basis in
accordance with GAAP consistently applied (a) to pay interest with respect to
Buyer A's Net Investment pursuant to the provisions of the Liquidity Provider
Agreement (such interest to be calculated based on the Adjusted LIBOR Rate,
provided that if a Termination Event shall have occurred, such interest shall be
calculated at the Base Rate plus 2.00%) outstanding at any time during such
Collection Period accrued from the first day through the last day of such
Collection Period, whether or not such interest is payable during such
Collection Period and to pay interest with respect to amounts disbursed by a
Credit Support Provider pursuant to the Credit Support Agreement outstanding at
any time during such Collection Period accrued from the first day through the
last day of such Collection Period, whether or not such interest is payable
during such Collection Period, (b) to pay the Accrued Interest Component of
Related Commercial Paper with respect to any Collection Period, to the extent
not paid through Servicer Advances, (c) to pay the Dealer Fee with respect to
Related Commercial Paper issued during such Collection Period, to the extent not
paid through Servicer Advances, (d) to pay any past due
5
<PAGE>
interest not paid in clause (a) and (b) with respect to prior Collection
Periods, and (e) any amounts owed to Buyer A pursuant to Sections 8.1, 8.2, 8.3,
8.4 and 8.6, (ii) the Program Fee and the Facility Fee accrued from the first
day through the last day of such Collection Period, whether or not such amount
is payable during such Collection Period, and (iii) all interest amounts due the
Bank Investors in accordance with Section 2.3(c), (d) and (e).
"Cash Advance Fees" shall mean cash advance transaction fees,
if any, as specified in the Credit Card Agreement applicable to each Account.
"Cash Equivalent Investment" means, at any time:
(a) any evidence of indebtedness, maturing not
more than one year after such time, issued or guaranteed by the United States
Government or any agency thereof;
(b) commercial paper, maturing not more than nine
months from the date of issue or corporate demand notes, in each case issued by
a corporation (other than the Transferor or any Affiliate of the Transferor)
organized under the laws of any state of the United States or of the District of
Columbia and rated at least A-1 by Standard & Poor's or P-1 by Moody's; or
(c) any certificate of deposit (or time
deposits represented by such certificates of deposit) or bankers acceptance,
maturing not more than one year after such time, or overnight federal funds
transactions, in each case that are issued or sold by a commercial banking
institution that is a member of the Federal Reserve System and has a combined
capital and surplus and undivided profits of not less than $500,000,000.
"CB&T" means Columbus Bank and Trust Company, a state
chartered bank organized under the laws of the State of Georgia, together with
its successors and assigns.
"CB&T Agreement" means the subservicer letter agreement, dated
the date hereof, among CB&T, CAC and the Agent, as it may be amended, modified
or supplemented from time to time.
"Charge-Off Rate" means, for any Collection Period, the
annualized percentage equivalent of a fraction, the numerator of which is equal
to the aggregate amount of the Principal Receivables of all Receivables that
became Defaulted Receivables during such Collection Period, less all Recoveries
received during such Collection Period, and the denominator of which is the
average daily Principal Receivables during such Collection Period.
"Closing Date" means April 17, 1998.
6
<PAGE>
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Agent" means NationsBank, N.A., as collateral
agent for any Liquidity Provider, any Credit Support Provider, the holders of
Commercial Paper and certain other parties.
"Collection Account" means the account, established by the
Agent, for the benefit of the Buyers and the Bank Investors.
"Collection Period" means the calendar month ending
immediately prior to a Remittance Date, or in the case of the first Collection
Period, the period commencing on the Closing Date to the end of the calendar
month ending immediately prior to the first Remittance Date.
"Collections" means, with respect to any Receivable, all cash
collections and other cash proceeds of such Receivable, including, without
limitation, all Recoveries, Finance Charges, if any, Interchange and cash
proceeds of Related Security with respect to such Receivable; provided, however,
the Sub-Servicing Fee and any commissions and similar amounts received in
respect of any benefit agreements with respect to receipts from parties using
the Obligors for product marketing purposes shall be excluded from
"Collections". For the purposes hereof, "cash" shall include payments received
in the form of checks, wire transfers, electronic transfers, ATM transfers and
any other form of payment made in accordance with a Credit Card Agreement.
"Commercial Paper" means the promissory notes issued by Buyer
A in the commercial paper market.
"Commitment" means (i) with respect to each Bank Investor
party hereto, the commitment of such Bank Investor to make acquisitions from the
Transferor or Buyer A in accordance herewith in an amount not to exceed the
dollar amount set forth opposite such Bank Investor's signature on the signature
page hereto under the heading "Commitment", after giving effect to any decreases
in the Facility Limit set forth in the definition thereof in this Agreement,
minus the dollar amount of any Commitment or portion thereof assigned by such
Bank Investor pursuant to an Assignment and Assumption Agreement plus the dollar
amount of any increase to such Bank Investor's Commitment consented to by such
Bank Investor prior to the time of determination, (ii) with respect to any
assignee of a Bank Investor party hereto taking pursuant to an Assignment and
Assumption Agreement, the commitment of such assignee to make acquisitions from
the Transferor or Buyer A not to exceed the amount set forth in such Assignment
and Assumption Agreement minus the dollar amount of any Commitment or portion
thereof assigned by such assignee pursuant to an Assignment and Assumption
Agreement prior to such time of determination and (iii) with respect to any
assignee of an assignee referred to in clause (ii), the commitment of such
assignee to make acquisitions from the Transferor or Buyer A not to exceed the
amount set forth in an Assignment and Assumption Agreement between such assignee
and its assign.
7
<PAGE>
"Commitment Termination Date" means April 16, 1999, or such
later date to which the Commitment Termination Date may be extended by
Transferor, the Agent and the Bank Investors not later than 30 days prior to the
then current Commitment Termination Date.
"CompuCredit" means CompuCredit Corporation, a Georgia
corporation.
"Conduit Assignee" shall mean any commercial paper conduit
administered by NationsBank and designated by NationsBank from time to time to
accept an assignment from Buyer A of all or a portion of Buyer A's Net
Investment.
"Conversion" means the transfer of the processing of the
Accounts to CB&T pursuant to the Interim Servicing Agreement.
"CP Rate" means, with respect to any Collection Period, the
rate equivalent to the rate (or if more than one rate, the weighted average of
the rates) at which Commercial Paper having a term equal to such Collection
Period may be sold by any placement agent or commercial paper dealer selected by
Buyer A, provided, however, that if the rate (or rates) as agreed between any
such agent or dealer and Buyer A is a discount rate, then the rate (or if more
than one rate, the weighted average of the rates) resulting from Buyer A's
converting such discount rate (or rates) to an interest-bearing equivalent rate
per annum.
"Credit Card Agreement" shall mean, with respect to a
revolving credit card account, the agreements (including any applicable truth in
lending disclosure statements), in substantially the form or forms attached as
Exhibit A hereto on the Closing Date and pursuant to Section 5.3(k), between an
Account Owner and the Obligor governing the terms and conditions of such
account, as such agreements or statements 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 the respective policies
and procedures of the Servicer, as such policies and procedures relate to the
Accounts and as such may be amended from time to time, (a) relating to the
operation of its credit card business, 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.
"Credit Support Agreement" means the agreement between Buyer A
and the Credit Support Provider evidencing the obligation of the Credit Support
Provider to
8
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provide credit support to Buyer A in connection with the issuance by Buyer A of
Commercial Paper.
"Credit Support Provider" means the Person or Persons who
provides credit support to Buyer A in connection with the issuance by Buyer A of
Commercial Paper.
"Cut-Off Date" means March 1, 1998.
"Dealer Fee" means the fee payable by the Transferor to Buyer
A, pursuant to Section 2.7 hereof, the terms of which are set forth in the Fee
Letter.
"Deemed Collections" means any Collections on any Receivable
deemed to have been received pursuant to Section 2.9(b) and (c) hereof.
"Defaulted Receivable" means a Receivable: (i) as to which any
payment, or part thereof, remains unpaid for 180 days or more from the original
due date for such Receivable; (ii) as to which an Event of Bankruptcy has
occurred and is continuing with respect to the Obligor thereof; (iii) which has
been identified by the Transferor, the Servicer or the Sub-Servicer as
uncollectible; (iv) as to which the Obligor is deceased; or (v) which,
consistent with the Credit Card Guidelines, should be written off as
uncollectible. A Principal Receivable shall become a Defaulted Receivable no
later than on the day on which such Principal Receivable is recorded as
charged-off on the Servicer's computer file of revolving credit card accounts.
"Delinquent Receivable" means a Receivable: (i) as to which
any payment, or part thereof, remains unpaid for more than 60 days from the
original due date for such Receivable and (ii) which is not a Defaulted
Receivable.
"Early Collection Fee" means, for any funding period during
which the portion of Buyer A's Net Investment that was allocated to such funding
period is reduced for any reason whatsoever, the excess, if any, of (i) the
additional interest that would have accrued during such funding period if such
reductions had not occurred, minus (ii) the income, if any, received by the
recipient of such reductions from investing the proceeds of such reductions.
"Eligible Account" shall mean, as of the Cut-Off Date, each
Account other than the following:
(i) Any account that has a disputed
balance;
(ii) Any account (a) with respect to which a
filing has been made by the related Obligor under the Bankruptcy Code or
any other bankruptcy, insolvency or other similar laws providing for relief
of debtors, whether such filing is voluntary or involuntary or (b) which
has or should have (in
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accordance with the Policies and Procedures) a status code of External
Status `B';
(iii) Any account (a) that has charged-off
or (b) which has or should have (in accordance with the Policies and
Procedures) a status code of External Status `Z';
(iv) Any account (a) the Obligor of which is deceased or (b)
which has or should have (in accordance with the Policies and Procedures) a
status code of RMS Status `D';
(v) Any account that is currently under
litigation;
(vi) Any account that has been classified,
or should have been classified (in accordance with the Policies and
Procedures) as a Lost/Stolen/Fraud (External Status `L' or `U') account;
(vii) Any account with a net credit balance;
(viii) Any account classified, or that should have been
classified (in accordance with the Policies and Procedures) as revoked
(External Status `E') or interest prohibited (External Status `I') or
customer closed (External Status `C') account, in each case, with a zero
balance;
(ix) Any account that is not subject to a valid Credit Card
Agreement that is the legal, valid and binding obligation of the related
Obligor and that is enforceable in accordance with its terms, except as
such enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights
generally and by general equity principles or as otherwise may be limited
by a right to offset, recoupment, adjustment or any other claim under 12
CFR ss.226.12(c), 12 CFR ss.226.13(d) and the Soldiers and Sailors Civil
Relief Act.
"Eligible Investments" means 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
Agent, other than securities issued by or obligations of CompuCredit or any
Affiliate thereof, subject to the exclusive custody and control of the Agent and
for which the Agent has sole signature authority, which mature so that funds
will be available no later than the close of business on the Business Day
preceding the Remittance Date following each Collection Period and which
evidence:
(a) direct obligations of, or obligations fully
guaranteed as to timely payment by, the United States of America;
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(b) 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, 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 Buyer's
investment or contractual commitment to invest therein, the short-term debt
rating of such depository institution or trust company shall be A-1 by Standard
and Poor's and P-1 by Moody's;
(c) commercial paper having, at the time of the
Buyer's investment or contractual commitment to invest therein, a rating of A-1
by Standard & Poor's and P-1 by Moody's;
(d) demand deposits, time deposits and
certificates of deposit which are fully insured by the FDIC having, at the time
of the Buyer's investment therein, a rating of A-1 by Standard & Poor's and P-1
by Moody's;
(e) bankers' acceptance issued by any depository
institution or trust company referred to in clause (b) above; or
(f) investments in money market funds having a rating
from either of Standard & Poor's or Moody's in the highest investment category
granted thereby or otherwise approved by the Agent.
"Eligible Pool Balance" means, as determined as of any day,
an amount equal to the sum of (i) the product of *[material omitted] and the
amount of Principal Receivables that are not Delinquent Receivables on and as
of such day and (ii) the product of *[material omitted] and the amount of
Principal Receivables that are Delinquent Receivables on and as of such day.
From and after a Termination Date, the Eligible Pool Balance shall be equal to
zero.
"Eligible Receivable" means, at any time, any Receivable:
(i) with respect to which the related Account is an
Eligible Account as of the Cut-Off Date;
(ii) which has been originated by NBD or the Account
Owner in the ordinary course of its business, sold to CAC pursuant to
the Initial Purchase Agreement and sold to the Transferor pursuant to
(and in accordance with) the Receivables Purchase Agreement and to which
the Transferor has good title thereto, free and clear of all Adverse
Claims (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);
- ---------------
* Deleted per the Registrant's request for confidential treatment and filed
separately with the Commission pursuant to Rule 24b-2.
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(iii) which (together with the Related Security,
Collections and Proceeds related thereto) has been the subject of either
a Transfer or the grant of a first priority perfected security interest
therein (and in the Collections and Related Security related thereto),
effective until the termination of this Agreement;
(iv) the Obligor of which is a United States resident
(except for Receivables in an outstanding amount not to exceed at any
time $5,000,000 individually or in the aggregate), is not an Affiliate
of any of the parties hereto, and is not a government or a governmental
subdivision or agency;
(v) which (A) arises pursuant to an Account with respect
to which each of CB&T, CAC, the Transferor and the Original Sellers, as
applicable, have performed all obligations required to be performed by
it thereunder, and (B) has been billed in accordance with the Credit
Card Agreement related thereto;
(vi) which is an "eligible asset" as defined in Rule 3a-7
under the Investment Company Act of 1940, as amended;
(vii) a purchase of which with the proceeds of Commercial
Paper would constitute a "current transaction" within the meaning of
Section 3(a)(3) of the Securities Act of 1933, as amended;
(viii) which is an "account", "chattel paper" or "general
intangible" within the meaning of Article 9 of the UCC of all applicable
jurisdictions;
(ix) which (A) satisfies all applicable requirements of
the Credit Card Guidelines and (B) is assignable without the consent of,
or notice to, the Obligor thereunder;
(x) which has not been compromised, adjusted or modified
(including by the extension of time for payment or the granting of any
discounts, allowances or credits); provided, however, that only such
portion of such Receivable that is the subject of such compromise,
adjustment or modification shall be deemed to be ineligible pursuant to
the terms of this clause (x);
(xi) which is serviced by the Servicer or the Sub-Servicer;
(xii) which, at all times will be 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
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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);
(xiii) which is denominated and payable only in United
States dollars in the United States;
(xiv) 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 by the Transferor or Account Owner in connection with
the creation of such Receivable or the execution, delivery, creation and
performance by the 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;
(xv) which was created in compliance in all material
respects with all Requirements of Law applicable to the institution
which owned such Receivable at the time of its creation and pursuant to
a Credit Card Agreement which complies in all material respects with all
Requirements of Law applicable to CB&T or other Account Owner, as the
case may be;
(xvi) which, as of the Transfer Date 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
(xvii) as to which, as of the Transfer Date, the Account
Owner, has not taken any action which would impair, or omitted to take
any action the omission of which would impair, the rights of the Buyers
or the Bank Investors therein.
"ERISA" means the U.S. Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"ERISA Affiliate" means, with respect to any Person, (i) any
corporation which is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Code) as such Person; (ii) a trade
or business (whether or not incorporated) under common control (within the
meaning of Section 414(c) of the Code) with such Person; or (iii) a member of
the same affiliated service group (within the meaning of Section 414(n) of the
Code) as such Person, any corporation described in clause (i) above or any trade
or business described in clause (ii) above.
"Event of Bankruptcy" means, (x) with respect to the
Transferor, that such Person (a) shall consent to the appointment of a
bankruptcy trustee or conservator or
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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 such Person or of or relating to all or
substantially all of the property of such Person; or (b) 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 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 such
Person and such decree or order shall have remained in force undischarged or
unstayed for a period of 60 days; or (c) such Person 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, reorganization, receivership or conservatorship statute
or make any assignment for the benefit of its creditors or voluntarily suspend
payment of its obligations and (y) with respect to any Person other than the
Transferor, that such Person (a) 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 such Person or of or
relating to all or substantially all of the property of such Person; or (b) 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 such Person and
such decree or order shall have remained in force undischarged or unstayed for a
period of 60 days; or (c) such Person 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 or make any
assignment for the benefit of its creditors or voluntarily suspend payment of
its obligations.
"Excluded Taxes" shall have the meaning specified in Section
8.3 hereof.
"Facilities Management Agreement" means the Facilities
Management Services Agreement, attached as Exhibit E to the Affinity Card
Agreement and all amendments, modifications and supplements thereto and
restatements thereof.
"Facility Fee" means the fee payable by the Transferor to
Buyer A pursuant to Section 2.7(a) hereof, the terms of which are set forth in
the Fee Letter.
"Facility Limit" means an amount equal to $215,000,000 through
the Commitment Termination Date or such other lesser amount as determined at the
Transferor's sole discretion and presented in writing to the Agent two (2)
Business Days prior to the date that such lesser amount takes effect; provided,
that, any reduction in the Facility Limit shall be permanent.
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<PAGE>
"Fee Letter" means the letter agreement dated March 4, 1998
among the Agent, Buyer B, the Transferor and CompuCredit with respect to the
fees to be paid by the Transferor hereunder, as amended, modified or
supplemented and in effect from time to time.
"Finance Charge Receivables" shall mean all amounts billed to
the Obligors on any Account, as determined based on either (a) the actual
amounts posted on the system servicing reports provided to the Servicer by Total
Systems Services, Inc. or other provider of such reports, if available to the
Servicer, or (b) if such actual amounts are not available to the Servicer, the
amount of Finance Charge Receivables for the prior Collection Period or other
reasonable estimation method, in respect of (i) all Periodic Rate Finance
Charges, (ii) Cash Advance Fees, (iii) annual membership fees and annual service
charges, (iv) Late Fees, (v) Overlimit Fees, and (vi) 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 (but any such amount
estimated pursuant to this clause (b) shall be reduced by the amount of all
accrued Finance Charge Receivables on Defaulted Receivables for such Collection
Period). Finance Charge Receivables shall also include (a) Interchange payable
to the owner of the Accounts in respect of the Receivables, (b) all Recoveries
with respect to Receivables previously charged off as uncollectible and (c) all
amounts paid by CB&T to CAC pursuant to Section 8.1(e)(iii) of the Affinity Card
Agreement.
"Finance Charges" means, with respect to an Account, any
finance, interest, late or similar charges owing by an Obligor pursuant to such
Account.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such accounting profession, which are in effect as of the date of
this Agreement.
"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.
"Guarantor" means CompuCredit and its successors and assigns.
"Guaranty" means the Guaranty of CompuCredit contained in
Article X of this Agreement.
"Incentive Fee" means the fee payable by the Transferor to
Buyer B pursuant to Section 2.7 hereof, the terms of which are set forth in the
Fee Letter.
"Incremental Transfer" means a Transfer which is made pursuant
to Section 2.2(a) hereof.
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"Indebtedness" means, with respect to any Person, without
duplication, such Person's (i) obligations for borrowed money, (ii) obligations
representing the deferred purchase price of property other than accounts payable
arising in the ordinary course of such Person's business on terms customary in
the trade, (iii) obligations, whether or not assumed, secured by liens or
payable out of the proceeds or production from property now or hereafter owned
or acquired by such Person, (iv) obligations which are evidenced by notes,
acceptances, or other instruments, (v) Capitalized Lease obligations and (vi)
any agreement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes
liable upon, the obligation of any other Person, or agrees to maintain the net
worth or working capital or other financial condition of any other Person or
otherwise assures any other creditor of such other Person against loss,
including, without limitation, any comfort letter, operating agreement or
take-or-pay contract and shall include, without limitation, the contingent
liability of such Person in connection with any application for a letter of
credit.
"Indemnified Amounts" has the meaning specified in Section 8.1
hereof.
"Indemnified Parties" has the meaning specified in Section 8.1
hereof.
"Initial Purchase Agreement" means the receivables purchase
agreement, dated the date hereof, between CB&T, as seller, and CAC, as
purchaser, as amended, modified or supplemented and in effect from time to time.
"Initial Transferor Interest" means an amount equal to
$12,000,000.
"Insurance Proceeds" shall mean any amounts received by the
Servicer 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.
"Interchange" shall mean interchange fees payable to CB&T or
any other Account Owner (net of any interchange fees paid by such Account
Owner), in its capacity as credit card issuer, through VISA or MasterCard in
connection with cardholder charges for goods or services with respect to the
Accounts. Any reference in this Agreement to Interchange shall refer to only the
fractional undivided interest in the interchange fees that are transferred by
CAC to the Transferor pursuant to the Receivables Purchase Agreement, which
fractional undivided interest may be less than 100% interest therein.
"Interim Servicing Agreement" means the Interim Servicing
Agreement, dated as of April 17, 1998, among CAC, CB&T and MWFC, as amended,
modified or supplemented and in effect from time to time.
"Interest Component" shall mean, (i) with respect to any
Commercial Paper issued on an interest-bearing basis, the interest payable on
such Commercial
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Paper at its maturity and (ii) with respect to any Commercial Paper issued on a
discount basis, the portion of the face amount of such Commercial Paper
representing the discount incurred in respect thereof (including any dealer
commissions).
"Investment Letter" has the meaning set forth in Section
9.10(c) hereof.
"Late Fees" shall have the meaning specified in the Credit
Card Agreement applicable to each Account for late fees or similar terms.
"Law" means any law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree or
award of any Governmental Authority.
"LIBOR Rate" means, with respect to any Collection Period, the
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Telerate Page 3750 (or any successor page) as the London interbank
offered rate for deposits in U.S. dollars at approximately 11:00 a.m. (London
time) two Business Days prior to the first day of such Collection Period for a
term of one month. If for any reason such rate is not available, the term "LIBOR
Rate" shall mean, for any Collection Period, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen
LIBO Page as the London interbank offered rate for deposits in dollars at
approximately 11:00 a.m. (London time) two London Business Days prior to the
first day of such Collection Period for a term of one month; provided, however,
if more than one rate is specified on the Reuters Screen LIBO Page, the
applicable rate shall be the arithmetic mean of all such rates.
"Liquidity Provider" means the Person or Persons who will
provide liquidity support to Buyer A in connection with the issuance by Buyer A
of Commercial Paper.
"Liquidity Provider Agreement" means the agreement between
Buyer A and the Liquidity Provider evidencing the obligation of the Liquidity
Provider to provide liquidity support to Buyer A in connection with the issuance
by Buyer A of Commercial Paper.
"Majority Investors" shall mean, at any time, the Agent and
those Bank Investors which hold Commitments aggregating in excess of 51% of the
Facility Limit as of such date.
"Material Adverse Effect" means any event or condition which
would have a material adverse effect on (i) the collectibility of the
Receivables, (ii) the condition (financial or otherwise), businesses or
properties of the Transferor, Account Owner, Servicer or Sub-Servicer or (iii)
the ability of the Transferor, Account Owner, Servicer or Sub-Servicer to
perform its respective obligations under the Transaction Documents to which it
is a party.
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"Monthly Servicer Report" means a report, in substantially the
form attached hereto as Exhibit E or in such other form as is mutually agreed to
by the Transferor and the Agent, furnished by the Servicer pursuant to Section
2.11 hereof.
"Moody's" means Moody's Investors Service, Inc.
"MRC" means Mountain Receivables Corporation, a Delaware
corporation, together with its successors and assigns.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA which is or was at any time during the current
year or the immediately preceding five years contributed to by the Transferor or
any ERISA Affiliate thereof on behalf of its employees.
"MWFC" means MountainWest Financial Corporation, a Utah
industrial loan corporation, together with its successors and assigns.
"NationsBank Entity" means NationsBank Corporation and any of
its direct or indirect wholly-owned subsidiaries.
"NBD" means NationsBank of Delaware, N.A., a national banking
association, and its successors and assigns.
"Net Asset Test" means, in connection with any assignment by
Buyer A to the Bank Investors of an interest in Buyer A's Net Investment
pursuant to Section 9.9 hereof, that on the day immediately prior to the day on
which such assignment is to take effect, the amount of Principal Receivables
shall be greater than or equal to Buyer A's Net Investment.
"Notice of Termination Event" shall have the meaning specified
in Section 9.3 hereof.
"Obligor" means a Person obligated to make payments for the
provision of goods and services pursuant to an Account.
"Officer's Certificate" shall mean, unless otherwise specified
in this Agreement, a certificate delivered to the Agent signed by the President,
any Vice President, the Treasurer, Chief Financial Officer, Controller or Member
of the Transferor or the Servicer, as the case may be, (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) or by the President, any Vice
President, the Chief Financial Officer, Controller or Member of a successor
Servicer.
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"Optional Amortization Amount" shall have the meaning
specified in Section 2.15.
"Optional Amortization Date" shall have the meaning specified
in Section 2.15.
"Optional Amortization Notice" shall have the meaning
specified in Section 2.15.
"Original Sellers" means, collectively, MWFC, MRC and NBD.
"Other Transferor" means any Person other than the Transferor
that has entered into a receivables purchase agreement, transfer and
administration agreement or other similar agreement with Buyer A.
"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.
"Participant" has the meaning set forth in Section 9.10(f)
hereof.
"Payment Rate" means, as of any month, the percentage
equivalent of a fraction, the numerator of which is equal to the average monthly
amount of all Collections (including amounts retained by the Sub-Servicer in
respect of the Sub-Servicing Fee) received during the preceding three Collection
Periods and the denominator of which is equal to the average monthly amount of
Principal Receivables outstanding during the preceding three Collection Periods.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any other entity succeeding to the functions currently performed by the Pension
Benefit Guaranty Corporation.
"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" means any corporation, limited liability company,
natural person, firm, joint venture, partnership, trust, unincorporated
organization, enterprise, government or any department or agency of any
government.
"Policies and Procedures" means the written policies and
procedures of the Original Sellers relating to the Accounts, as in effect from
time to time, a copy of which is attached as of the Closing Date as Exhibit K to
the Sale and Purchase Agreement.
"Potential Termination Event" means an event which but for the
lapse of time or the giving of notice, or both, would constitute a Termination
Event.
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"Principal Receivables" means, at any time, the then
outstanding principal amount of Eligible Receivables excluding any accrued and
outstanding Finance Charges related thereto and giving effect to the amount of
any credit balances and other adjustments existing with respect to such
Receivable on such day. The outstanding principal amount of any Defaulted
Receivables shall be considered to be zero for the purposes of any determination
hereunder of the aggregate outstanding amount of Principal Receivables.
"Private Holder" shall mean (i) each holder of a right to
receive interest or principal in respect of any direct or indirect interest in
the Transferred Interest including any financial instrument or contract the
value of which is determined in whole or in part by reference to the Transferred
Interest and (ii) any other Person that the Transferor determines is, may be or
may become a "partner" within the meaning of Section 1.7704-1(h)(1)(ii) of the
United States Treasury Regulations (including by reason of Section
1.7704-1(h)(3)). Any Person holding more than one interest in the Transferred
Interest each of which separately would cause such Person to be a Private Holder
shall be treated as a single Private Holder. Each holder of an interest in a
Private Holder which is a partnership, an S Corporation or a grantor trust under
the Code shall be treated as a Private Holder unless excepted with the consent
of the Transferor.
"Pro Rata Share" means, for a Bank Investor, the Commitment of
such Bank Investor divided by the sum of the Commitments of all Bank Investors.
"Proceeds" means "proceeds" as defined in Section 9-306(1) of
the UCC.
"Program Fee" means the fee payable by the Transferor to Buyer
A pursuant to Section 2.7 hereof, the terms of which are set forth in the Fee
Letter.
"Purchase Option Agreement" means the agreement, dated the
date hereof, among the Transferor, the Agent and the Buyers.
"Purchase Termination Date" means the date upon which the
Transferor shall cease, for any reason whatsoever, to make purchases of
Receivables from CAC under the Receivables Purchase Agreement or the Receivables
Purchase Agreement shall terminate for any reason whatsoever.
"Purchased Interest" means the interest in the Transferred
Interest acquired by the Liquidity Provider through purchase pursuant to the
terms of the Liquidity Provider Agreement.
"Reassignment Amount" shall mean, with respect to any
Remittance Date, after giving effect to any deposits and distributions otherwise
to be made on such Remittance Date, for Buyer A, without duplication, (i) the
sum of (a) Buyer A's Net Investment on such Remittance Date plus (b) accrued
interest, fees, and all other Aggregate Unpaids due and owing to Buyer A for
such Remittance Date and for Buyer
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B, (ii) the sum of (a) Buyer B's Net Investment on such Remittance Date plus (b)
the Buyer B Amounts then due and then owing to Buyer B.
"Receivable" means the indebtedness owed by any Obligor under
an Account and sold by (on the Closing Date) the Original Sellers to CB&T
pursuant to the Sale and Purchase Agreement, by CB&T to CAC pursuant to the
Initial Purchase Agreement and by CAC to the Transferor pursuant to the
Receivables Purchase Agreement, arising in connection with the sale or lease of
merchandise or the rendering of services, and includes the right to payment of
any Finance Charges and other obligations of such Obligor with respect thereto.
Notwithstanding the foregoing, once a Receivable has been deemed collected
pursuant to Section 2.9 hereof, it shall no longer constitute a Receivable
hereunder.
"Receivables Purchase Agreement" means the Receivables
Purchase Agreement, dated as of the date hereof, by and between CAC, as seller,
and the Transferor, as purchaser, as such agreement may be amended, modified or
supplemented and in effect from time to time.
"Recipients" shall have the meaning specified in Section 2.13
hereof.
"Records" means all Credit Card Agreements and other
documents, books, records and other information (including, without limitation,
computer programs, tapes, discs, punch cards, data processing software and
related property and rights) maintained with respect to Receivables, the
Accounts and the related Obligors.
"Recoveries" means all amounts received or collected by the
Servicer or the Sub-Servicer (net of out-of-pocket costs of collection) with
respect to Defaulted Receivables.
"Reinvestment Termination Date" means the second Business Day
after the delivery by Buyer A to the Transferor of written notice that Buyer A
elects not to maintain its interest in Buyer A's Net Investment; unless, on such
Business Day, the Bank Investors accept an assignment of Buyer A's interest in
the Transferred Interest. Any such notice shall be effective on the Business Day
given if such notice is given by 11:00 a.m. (New York City time) on such
Business Day and shall be effective on the immediately succeeding Business Day
if such notice is given after 11:00 a.m. (New York City time) on such Business
Day.
"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 an error or a lost
or stolen credit card and not requiring standard application and credit
evaluation procedures under the Credit Card Guidelines.
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"Related Commercial Paper" shall mean Commercial Paper issued
by Buyer A the proceeds of which were used to acquire, or refinance the
acquisition of, an interest in Receivables with respect to the Transferor.
"Related Security" means with respect to any Receivable, all
of the Transferor's rights, title and interest in, to and under:
(i) all of the Transferor's interest, if any, in the
merchandise (including returned or repossessed merchandise), if any,
the sale of which gave rise to such Receivable;
(ii) all other security interests or liens and
property subject thereto from time to time, if any, purporting to
secure payment of such Receivable, whether pursuant to the Account
related to such Receivable or otherwise, together with all financing
statements signed by an Obligor describing any collateral securing such
Receivable;
(iii) all guarantees, indemnities, warranties,
insurance (and proceeds and premium refunds thereof) or other
agreements or arrangements of any kind from time to time supporting or
securing payment of such Receivable whether pursuant to the Account
related to such Receivable or otherwise;
(iv) all Records related to such Receivable;
(v) all rights and remedies of the Transferor under
the Receivables Purchase Agreement, together with all financing
statements filed by the Transferor against CAC in connection therewith;
and
(vi) all Proceeds of any of the foregoing.
"Remittance Date" means the fifteenth day of each calendar
month, or if such day is not a Business Day, the next succeeding Business Day.
"Reportable Event" shall mean any of the events set forth in
Section 4043(b) of ERISA, other than those events for which notice to the PBGC
is waived under applicable PBGC regulations.
"Required Subordinate Percentage" shall equal 42%.
"Requirements of Law" shall mean any law, treaty, rule or
regulation, or determination of an arbitrator of 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
incorporation and by-laws or other organizational or governing documents of such
Person.
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"Sale and Purchase Agreement" means the sale and purchase
agreement, dated as of March 26, 1998, by and among the Original Sellers, CAC
and the Account Owner, as it may be amended, modified or supplemented and in
effect from time to time.
"Section 8.2 Costs" has the meaning specified in Section
8.2(f) hereof.
"Servicer" means at any time the Person then authorized
pursuant to Section 6.1 hereof to service, administer and collect Receivables.
"Servicer Advance" has the meaning set forth in Section 2.5(c)
hereof.
"Servicer Default" has the meaning set forth in Section 6.4
hereof.
"Servicing Fee" means, with respect to any Remittance Date,
the fee payable to the Servicer on such Remittance Date with respect to the
Accounts in an amount equal to (a) one-twelfth of the product of (i) 6% per
annum prior to the third anniversary of the Closing Date and 4% per annum
thereafter and (ii) the average daily Principal Receivables during the related
Collection Period minus (b) the Sub-Servicing Fee with respect to such
Collection Period. Such fee shall accrue from the initial Transfer Date to the
date on which the Buyers' Net Investment is reduced to zero. Such fee shall be
payable only from Collections pursuant to, and subject to the priority of
payments set forth in, Section 2.5 hereof.
"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 Agent by the
Servicer, as such list may from time to time be amended.
"Standard & Poor's" or "S&P" means Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc.
"Subordinate Percentage" shall mean an amount, stated as a
percentage, equal to 1 minus (Buyer A's Net Investment divided by the Principal
Receivables).
"Sub-Servicer" shall mean CB&T or any other third party
contractual servicer approved of in writing by the Agent.
"Sub-Servicing Fee" means, with respect to any Collection
Period, the fee excluded from Collections and payable by the Servicer to the
Sub-Servicer with respect to the Accounts. Such fee shall accrue from the
initial Transfer Date to the date on which the Buyers' Net Investment is reduced
to zero.
"Subsidiary" of a Person means any Person more than 50% of the
outstanding voting interests of which shall at any time be owned or controlled,
directly
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or indirectly, by such Person or by one or more Subsidiaries of such Person
or any similar business organization which is so owned or controlled.
"Taxes" shall have the meaning specified in Section 8.3
hereof.
"Telerate Page 3750" means the display designated as page 3750
on the Telerate Service (or such other page as may replace page 3750 on that
service or such other service or services as may be nominated by the British
Bankers' Association for the purpose of displaying London interbank offered
rates for U.S. dollar deposits).
"Termination Date" means the earliest of (i) the Business Day
designated by the Transferor to the Agent as the Termination Date at any time
following 60 days' written notice to the Agent, (ii) the date of termination of
the commitment of the Liquidity Provider under the Liquidity Provider Agreement,
(iii) the date of termination of the commitment of the Credit Support Provider
under the Credit Support Agreement, (iv) the day upon which the Termination Date
is declared or automatically occurs pursuant to Section 7.2(a) hereof, (v) two
Business Days prior to the Commitment Termination Date, (vi) the date on which a
Reinvestment Termination Date shall occur, (vii) the Purchase Termination Date
or (viii) the Optional Amortization Date or the date on which the Transferor
exercises the purchase option described in Section 7.3(b).
"Termination Event" means an event described in Section 7.1
hereof.
"Three-Month Average Charge-Off Rate" means, as of any month,
the annualized percentage equivalent of a fraction, the numerator of which is
equal to the aggregate amount of Principal Receivables that became Defaulted
Receivables during the preceding three consecutive Collection Periods, less all
Recoveries received during such Collection Periods, and the denominator of which
is the average daily Principal Receivables during such preceding three
Collection Periods.
"Transaction Costs" has the meaning specified in Section
8.4(a) hereof.
"Transaction Documents" means, collectively, this Agreement,
the Receivables Purchase Agreement, the Initial Purchase Agreement, the CB&T
Agreement, the Purchase Option Agreement, the Interim Servicing Agreement, the
Fee Letter, the Affinity Card Agreement, the Sale and Purchase Agreement, and
all of the other instruments, documents and other agreements executed and
delivered by CB&T, CAC, CompuCredit or the Transferor in connection with any of
the foregoing, in each case, as the same may be amended, restated, supplemented
or otherwise modified from time to time.
"Transfer" means a conveyance, transfer and assignment by the
Transferor to the Buyers or the Bank Investors of an undivided percentage
interest in Receivables hereunder (including, without limitation, as a result of
any reinvestment of Collections in Transferred Interests pursuant to Sections
2.2(b), 2.2 (e) and 2.5).
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"Transfer Date" means, with respect to each Transfer, the
Business Day on which such Transfer is made.
"Transfer Price" means with respect to any Transfer, the
amount paid to the Transferor by Buyer A, Buyer B or the Bank Investors as
described in the notice delivered by the Transferor pursuant to Section 2.2(b).
"Transferor" means CompuCredit Acquisition Funding Corp., a
Georgia corporation, and its successors and permitted, as approved in writing by
the Agent, assigns.
"Transferor's Interest" means the Principal Receivables less
the Buyers' Net Investment.
"Transferred Account" shall mean each account into which an
Account shall be transferred, provided that such transfer is made in accordance
with the Credit Card Guidelines.
"Transferred Interest" means, at any time of determination, an
undivided percentage interest in (i) each and every then outstanding Receivable,
(ii) all Related Security with respect to each such Receivable, (iii) all
Collections with respect thereto, and (iv) other Proceeds of the foregoing. The
Transferred Interest in each Receivable, together with Related Security,
Collections and Proceeds with respect thereto, shall at all times be equal to
the Transferred Interest in each other Receivable, together with Related
Security, Collections and Proceeds with respect thereto. To the extent that the
Transferred Interest shall decrease as a result of a recalculation of the
Transferor's Interest, the Agent, on behalf of the Buyers or the Bank Investors,
as applicable, shall be considered to have reconveyed to the Transferor an
undivided percentage interest in each Receivable, together with Related
Security, Collections and Proceeds with respect thereto, in an amount equal to
such decrease such that in each case the Transferred Interest in each Receivable
shall be equal to the Transferred Interest in each other Receivable. The
Transferred Interest shall be determined as a percentage equal to the Buyers'
Net Investment divided by the Principal Receivables.
"UCC" means, with respect to any state, the Uniform Commercial
Code as from time to time in effect in such state.
"U.S." or "United States" means the United States of America.
SECTION 1.2. Other Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP. All
terms used in Article 9 of the UCC in the State of New York, and not
specifically defined herein, are used herein as defined in such Article 9.
SECTION 1.3. Computation of Time Periods. Unless otherwise
stated in this Agreement, in the computation of a period of time from a
specified date to a later
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specified date, the word "from" means "from and including", the words "to"
and "until" each means "to but excluding", and the word "within" means "from
and excluding a specified date and to and including a later specified date".
ARTICLE II
TRANSFERS AND SETTLEMENTS
SECTION 2.1. Facility. Upon the terms and subject to the
conditions herein set forth, at any time prior to the Termination Date and the
occurrence of any Termination Event, (x) the Transferor may, at its option,
convey, transfer and assign to the Agent, on behalf of Buyer A, Buyer B or the
Bank Investors, as applicable, and (y) the Agent, on behalf of Buyer A, may, at
Buyer A's option, or the Agent, on behalf of the Bank Investors shall, and the
Agent on behalf of Buyer B shall (in the case of Buyer B solely on the date of
its purchase hereunder) accept such conveyance, transfer and assignment from the
Transferor of, without recourse except as provided herein, undivided percentage
interests in all of the Transferor's right, title and interest in and to the
Receivables, together with Related Security, Collections and Proceeds with
respect thereto, from time to time. By accepting any conveyance, transfer and
assignment hereunder, neither of the Buyers, any Bank Investor nor the Agent
assumes or shall have any obligations or liability under any of the Accounts,
all of which shall remain the obligations and liabilities of the Transferor, CAC
and any Account Owner. Notwithstanding anything to the contrary contained in
this Agreement, the undivided percentage interest acquired on behalf of Buyer B
hereunder shall be acquired solely on the date designated by the Transferor and
Buyer B and no additional Incremental Transfer shall be made on Buyer B's behalf
hereunder.
SECTION 2.2. Transfers.
(a) Upon the terms and subject to the conditions
herein set forth, the Transferor may, at its option, convey, transfer and assign
to the Agent, on behalf of Buyer A, Buyer B (in the case of the date of its
acquisition hereunder) or the Bank Investors, as applicable, and the Agent, on
behalf of Buyer A may, at Buyer A's option, or the Agent, on behalf of the Bank
Investors, provided that neither the Termination Date nor a Termination Event
shall have occurred, shall, and the Agent on behalf of Buyer B shall, in the
case of its acquisition hereunder and provided that neither the Termination Date
nor a Termination Event shall have occurred, in each case if so requested by the
Transferor, accept such conveyance, transfer and assignment from the Transferor,
without recourse except as provided herein, of undivided percentage interests in
the Receivables, together with Related Security, Collections and Proceeds with
respect thereto (each, an "Incremental Transfer"); provided, however, that (a)
the amount of any such Incremental Transfer made to Buyer A or the Bank
Investors, as the case may be, shall not exceed the least of the following
amounts after giving effect to such Incremental Transfer, each as determined on
the Business Day
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prior to the date of such Incremental Transfer: (x) the Facility Limit, minus
(in the case where the Transferred Interest is held by the Agent on behalf of
Buyer A) the Interest Component of all outstanding Related Commercial Paper,
minus Buyer A's Net Investment, (y) the amount of the Eligible Pool Balance
minus Buyer A's Net Investment, and (z) the aggregate amount of principal
receivables purchases made by Obligors which were not funded pursuant to Section
2.5 (a)(vi) since the date of the last Incremental Transfer, (b) that after
giving effect to the payment to the Transferor of such Transfer Price, no
Termination Event shall have occurred, (c) the representations and warranties
set forth in Sections 3.1 and 3.3 hereof shall be true and correct as of the
date of any such Incremental Transfer, (d) the payment to the Transferor of the
Transfer Price related thereto and the Monthly Servicer Report shall have been
delivered as required by Section 2.11 hereof and (e) the Transferor shall have
delivered to the Agent on the date of such Incremental Transfer a certificate in
form and substance satisfactory to the Agent, dated such date that the
conditions specified in the preceding clauses (a) through (d) of this Section
2.2(a) have been satisfied.
(b) The Transferor shall, by notice to the Agent
given by 10:00 a.m. (New York City time) at least two (2) Business Days prior to
the proposed date of any Incremental Transfer by telecopy, offer to convey,
transfer and assign to the Agent, on behalf of Buyer A or the Bank Investors, as
applicable, undivided percentage interests in the Receivables and the other
Affected Assets relating thereto. Each such notice shall specify (x) the desired
Transfer Price (which shall be at least $1,000,000 or integral multiples of
$100,000 in excess thereof) or, to the extent that the then available unused
portion of the Facility Limit is less than such amount, such lesser amount equal
to such available portion of the Facility Limit), (y) the desired date of such
Incremental Transfer and (z) the desired funding period(s) and allocation of
Buyer A's Net Investment of such Incremental Transfer thereto as required by
Section 2.3. The Agent will promptly notify Buyer A or each of the Bank
Investors, as the case may be, of the Agent's receipt of any request for an
Incremental Transfer to be made to the Agent on behalf of such Person. To the
extent that any such Incremental Transfer is requested of the Agent, on behalf
of Buyer A, Buyer A shall instruct the Agent to accept or reject such offer by
notice given to the Transferor and the Agent by telephone or telecopy by no
later than noon on the Business Day following its receipt of any such request.
Each notice of proposed Transfer shall be irrevocable and binding on the
Transferor and the Transferor shall indemnify Buyer A and each Bank Investor
against any loss or expense incurred by Buyer A or any Bank Investor, either
directly or indirectly (including, in the case of Buyer A, through the Liquidity
Provider Agreement) as a result of any failure by the Transferor to complete
such Incremental Transfer (other than as a result of an election by Buyer A not
to accept such Incremental Transfer) including, without limitation, any loss or
expense incurred by Buyer A or any Bank Investor, either directly or indirectly
(including, in the case of Buyer A, pursuant to the Liquidity Provider
Agreement) by reason of the liquidation or reemployment of funds acquired by
Buyer A (or the Liquidity Provider) or any Bank Investor (including, without
limitation, funds obtained by issuing commercial paper or promissory notes or
obtaining deposits as loans from third parties) for Buyer A or any Bank Investor
to fund such Incremental Transfer. If Buyer A elects not to acquire any such
Incremental Transfer, the Transferor, by no later than the close of business on
the Business Day following its delivery of a notice requesting an Incremental
Transfer pursuant to this Section 2.2(b), (i) may withdraw its request that
Buyer A acquire such Incremental
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Transfer or (ii) shall request the Bank Investors to accept an assignment of
such Incremental Transfer, in which case, if the Net Asset Test is met, Buyer
A's interest in Buyer A's Net Investment, prior to such request to acquire such
Incremental Transfer, shall also be assigned to the Bank Investors; provided,
however, that if the Net Asset Test is not met such assignments shall not be
made and the Transferor shall be deemed to have withdrawn its request that the
Bank Investors acquire such Incremental Transfer.
(c) On the date of the initial Incremental
Transfer, the Agent, on behalf of the Buyers or the Bank Investors, as
applicable, shall deliver written confirmation to the Transferor of the Transfer
Price, the funding period(s) and the Applicable Rate(s) relating to such
Transfer. On the date of each subsequent Incremental Transfer, the Agent shall
send written confirmation to the Transferor of the Transfer Price, the funding
period(s) and the Applicable Rate(s) applicable to such Incremental Transfer.
Following each Incremental Transfer, the Buyers shall deposit to the
Transferor's account at the location indicated in Section 11.3 hereof, in
immediately available funds, an amount equal to the Transfer Price for such
Incremental Transfer made to Buyer A, Buyer B (in the case of the Closing Date),
and the Bank Investors, respectively.
(d) By no later than 11:00 a.m. (New York City time)
on the date of any Incremental Transfer, Buyer B (in the case of the Closing
Date) and Buyer A or each Bank Investor, as the case may be, shall remit its
share (which, in the case of an Incremental Transfer to the Bank Investors,
shall be equal to such Bank Investor's Pro Rata Share) of the aggregate Transfer
Price for such Incremental Transfer to the account of the Agent specified
therefor from time to time by the Agent by notice to such Persons. The
obligation of each Bank Investor to remit its Pro Rata Share of any such
Transfer Price shall be several from that of each other Bank Investor, and the
failure of any Bank Investor to so make such amount available to the Agent shall
not relieve any other Bank Investor of its obligation hereunder. In addition,
neither Buyer B (in the case of the Closing Date) nor Buyer A shall be
responsible for the failure of the other or of any Bank Investor to comply with
its obligations hereunder. Following each Incremental Transfer and the Agent's
receipt of funds from the Buyers or the Bank Investors as aforesaid, the Agent
shall remit the Transfer Price to the Transferor's account at the location
indicated in Section 11.3 hereof, in immediately available funds, an amount
equal to the Transfer Price for such Incremental Transfer.
(e) On each Business Day occurring after the initial
Incremental Transfer hereunder and prior to the Termination Date and the
occurrence of any Termination Event, the Transferor hereby agrees to convey,
transfer and assign to the Agent, on behalf of Buyer A or the Bank Investors,
and the Agent, on behalf of Buyer A may, and the Agent, on behalf of the Bank
Investors shall, agree to purchase from the
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Transferor undivided percentage interests in each and every Receivable, together
with Related Security, Collections and Proceeds with respect thereto, to the
extent of the aggregate amount of principal receivables purchases made since the
preceding purchase under this Section 2.2(e), net of purchases made pursuant to
Section 2.2(a) hereof since such preceding purchase, such that after giving
effect to such Transfer, no Termination Event or Potential Termination Event
shall occur and the Subordinate Percentage is at least equal to or greater than
the Required Subordinate Percentage.
(f) The Transferor agrees to pay to CAC any
portion of the purchase price for Receivables received by the Transferor
hereunder which is due and owing to CAC for the purchase of such Receivables on
the same Business Day as such price was paid to the Transferor hereunder.
(g) The Transferor hereby grants to the Agent, on
behalf of Buyer B, Buyer A and the Bank Investors, a first priority perfected
and continuing security interest in all of the Transferor's right, title and
interest in, to and under the Receivables, together with Related Security,
Collections and Proceeds with respect thereto, and together with all of the
Transferor's rights under the Receivables Purchase Agreement with respect to the
Receivables and with respect to any obligations thereunder of CAC with respect
to the Receivables. This Agreement shall constitute a security agreement under
applicable law. The Transferor hereby assigns to the Agent, on behalf of Buyer
B, Buyer A and the Bank Investors, all of its rights and remedies under the
Receivables Purchase Agreement with respect to the Receivables and with respect
to any obligations thereunder of CAC with respect to the Receivables.
SECTION 2.3. Selection of Interest Rates and Interest
Periods.
(a) Prior to the Termination Date; Transferred
Interest Held on Behalf of Buyer A. At all times hereafter, but prior to the
Termination Date and not with respect to any portion of the Transferred Interest
held on behalf of the Bank Investors (or any of them), the Transferor may,
subject to Buyer A's approval and the limitations described below, request that
Buyer A's Net Investment be allocated among one or more funding periods, so that
the aggregate amounts so allocated at all times shall equal Buyer A's Net
Investment. The Transferor shall give Buyer A irrevocable notice by telephone of
the new requested funding period(s) at least two (2) Business Days prior to the
expiration of any then existing funding period; provided, however, that Buyer A
may select, (i) in its sole discretion, any such new funding period if the
Transferor fails to provide such notice on a timely basis or (ii) any such new
funding period if Buyer A determines after consultation and with the consent of
the Transferor, that the funding period requested by the Transferor is
unavailable or for any reason commercially undesirable. Buyer A confirms that it
is its intention to fund all or substantially all of Buyer A's Net Investment
held on behalf of it by issuing Related Commercial Paper; provided that Buyer A
may determine, from time to time, in its reasonable judgment, that funding such
Buyer A's Net Investment by means of Related Commercial Paper is not possible or
is not desirable for any reason. If the Liquidity Provider acquires from
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Buyer A a Purchased Interest with respect to the Receivables pursuant to the
terms of the Liquidity Provider Agreement, NationsBank, on behalf of the
Liquidity Provider, may exercise the right of selection granted to Buyer A
hereby. The initial funding period applicable to any such Purchased Interest
shall be a period of not greater than 14 days and shall accrue Carrying Costs on
the basis of the Base Rate. Thereafter, provided that the Termination Date shall
not have occurred, Carrying Costs shall accrue on the basis of either the Base
Rate or the Adjusted LIBOR Rate, as determined by NationsBank. In the case of
any funding period outstanding upon the Termination Date, such funding period
shall end on such date.
(b) After the Termination Date; Transferred
Interest Held on Behalf of Buyer A. At all times on and after the Termination
Date, with respect to any portion of the Transferred Interest which shall be
held by the Agent, on behalf of Buyer A, Buyer A or NationsBank, as Agent, as
applicable, shall select all funding periods and Applicable Rates applicable
thereto.
(c) Prior to the Termination Date; Transferred
Interest Held on Behalf of Bank Investors. At all times with respect to any
portion of the Transferred Interest held by the Agent on behalf of the Bank
Investors, but prior to the Termination Date, the initial funding period
applicable to such portion of Buyer A's Net Investment allocable thereto shall
be a period of not greater than 14 days and shall accrue Carrying Costs on the
basis of the Base Rate. Thereafter, with respect to such portion, and with
respect to any other portion of the Transferred Interest held on behalf of the
Bank Investors (or any of them), provided that the Termination Date shall not
have occurred, Carrying Costs shall accrue with respect thereto at either the
Base Rate or the Adjusted LIBOR Rate, at the Transferor's option, and for such
period as may be specified by the Transferor. The Transferor shall give the
Agent irrevocable notice by telephone of the new requested funding period at
least two (2) Business Days prior to the expiration of any then existing funding
period. In the case of any funding period outstanding upon the occurrence of the
Termination Date, such funding period shall end on the date of such occurrence.
(d) After the Termination Date; Transferred
Interest Held on Behalf of Bank Investor. At all times on and after the
Termination Date, with respect to any portion of the Transferred Interest held
by the Agent on behalf of the Bank Investors, the Agent shall select all funding
periods and Applicable Rates applicable thereto.
(e) LIBOR Rate Protection; Illegality.
(i) If the Agent is unable to obtain on
a timely basis the information necessary to determine the LIBOR Rate for
any proposed funding period, then
(A) the Agent shall forthwith notify
Buyer A or the Bank Investors, as
applicable, and the
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Transferor that the Adjusted LIBOR Rate
cannot be determined for such funding
period, and
(B) while such circumstances exist,
neither Buyer A, the Bank Investors nor the
Agent shall allocate any portion of Buyer
A's Net Investment which represents
Transfers acquired during such period or
reallocate Buyer A's Net Investment
allocated to any then existing funding
period ending during such period, to a
funding period which accrues Carrying Costs
on the basis of the Adjusted LIBOR Rate.
(ii) If, with respect to any outstanding funding period which
accrues Carrying Costs on the basis of the Adjusted LIBOR Rate, Buyer
A or any of the Bank Investors on behalf of which the Agent holds any
Transferred Interest notifies the Agent that it is unable to obtain
matching deposits in the London interbank market to fund its purchase
or maintenance of such Transferred Interest or that the Adjusted LIBOR
Rate applicable to such Transferred Interest will not adequately
reflect the cost to the Person of funding or maintaining its
respective interest in the Transferred Interest for such funding
period, then the Agent shall forthwith so notify the Transferor,
whereupon neither the Agent nor Buyer A or the Bank Investors, as
applicable, shall, while such circumstances exist, allocate any
portion of Buyer A's Net Investment which represents additional
Transfers acquired during such period or reallocate Buyer A's Net
Investment allocated to any funding period ending during such period,
to a funding period which accrues Carrying Costs on the basis of the
Adjusted LIBOR Rate.
(iii) Notwithstanding any other provision of this Agreement,
if Buyer A or any of the Bank Investors, as applicable, shall notify
the Agent that such Person has determined (or has been notified by any
Liquidity Provider) that the introduction of or any change in or in
the interpretation of any law or regulation makes it unlawful (either
for Buyer A, such Bank Investor, or such Liquidity Provider, as
applicable), or any central bank or other governmental authority
asserts that it is unlawful, for Buyer A, such Bank Investor or such
Liquidity Provider, as applicable, to fund the purchases or
maintenance of Transferred Interests at the Adjusted LIBOR Rate, then
(x) as of the effective date of such notice from such Person to the
Agent, the obligation or ability of Buyer A or such Bank Investor, as
applicable, to fund its purchase or maintenance of Transferred
Interests at the Adjusted LIBOR Rate shall be suspended until such
Person notifies the Agent that the circumstances causing such
suspension no longer exist and (y) the portion of Buyer A's Net
Investment allocated to each funding period which accrues Carrying
Costs on the basis of the Adjusted LIBOR Rate in which such Person
owns an interest shall either
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(1) if such Person may lawfully continue to maintain such Transferred
Interest at the Adjusted LIBOR Rate until the last day of the
applicable funding period, be reallocated on the last day of such
funding period to another funding period in respect of which the
portion of Buyer A's Net Investment allocated thereto which accrues
Carrying Costs on a basis other than the Adjusted LIBOR Rate or (2)
if such Person shall determine that it may not lawfully continue to
maintain such Transferred Interest at the Adjusted LIBOR Rate until
the end of the applicable funding period, such Person's share of
Buyer A's Net Investment allocated to such funding period shall be
deemed to accrue Carrying Costs on the basis of the Base Rate from
the effective date of such notice until the end of such funding
period.
SECTION 2.4. [Reserved].
SECTION 2.5. Allocation of Collections. (a) On each
Remittance Date, the Servicer shall apply Collections (including, without
limitation, the amount of Deemed Collections) for the immediately preceding
Collection Period in the following order:
(i) first, to repay any unreimbursed Servicer Advances;
(ii) second, to the payment to the Agent of
any accrued and unpaid Carrying Costs for any preceding Collection Period;
(iii) third, to Buyer A or the Bank nvestors, as the case may
be, in reduction of Buyer A's Net Investment, any excess of Buyer A's Net
Investment over the amount of the Eligible Pool Balance as of the last
Business Day of the immediately preceding Collection Period;
(iv) fourth, to the Servicer for any accrued and unpaid
Servicing Fees for any preceding Collection Period;
(v) fifth, to Buyer B, the amount of any accrued and
unpaid Buyer B Program Fee and Incentive Fee due and owing to it pursuant
to the Fee Letter, for any preceding Collection Period;
(vi) sixth, to the Transferor to be applied to the purchase
of additional undivided percentage interests in the Receivables pursuant to
Section 2.2(e) equal to the aggregate amount of principal receivables
purchases made by Obligors during such Collection Period, minus the amount
of purchases made pursuant to Sections 2.2(a) and 2.2(e) since the
preceding Remittance Date;
(vii) seventh, to the Agent in reduction of Buyer A's Net
Investment, until Buyer A's Net Investment is reduced to zero, and then in
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reduction of Buyer B's Net Investment, until Buyer B's Net Investment is
reduced to zero;
(viii) eighth, to the Agent, without
duplication, in satisfaction of all other Aggregate Unpaids that are due
and owing on such Remittance Date; and
(ix) ninth, any amounts remaining after
application in accordance with clauses (i) through (viii) above shall be
distributed in accordance with Section 2.5(b) hereof, so long as the
Transferor shall not have purchased Buyer B's Net Investment pursuant to
the Purchase Option Agreement or this Agreement.
(b) Collections remaining pursuant to clause
(ix) of Section 2.5(a) shall be distributed by the Servicer as follows:
(i) first, to the Transferor up to an
amount equal to the Initial Transferor Interest plus an amount
sufficient to yield an imputed internal rate of return of 7.50% per
annum on the Initial Transferor Interest; and
(ii) second, until all Receivables are reduced to zero, 90%
of remaining Collections will be distributed to the Transferor and 10%
of remaining Collections will be distributed to Buyer B.
(c) In the event that, on any date, there are
not sufficient Collections to pay the Carrying Costs due and payable on such
day, the Servicer, acting upon written notice from the Agent, shall make an
advance in an amount equal to the shortfall in funds available on such day
(each, a "Servicer Advance") and pay to the Agent, for the account of the
Buyers, the amount of such advance, provided, that the Servicer shall not be
required to make a Servicer Advance to the extent that it determines, in its
sole discretion, that such advance is unlikely to be recovered from Collections
in subsequent Collection Periods. On each Remittance Date, the Servicer shall be
entitled to reimbursement, without interest, for any Servicer Advances not
previously reimbursed in accordance with Section 2.5(a)(i).
SECTION 2.6. [Reserved].
SECTION 2.7. Fees. Notwithstanding any limitation on
recourse contained in this Agreement, the Transferor shall pay the following
non-refundable fees:
(a) On each Remittance Date, to Buyer A solely
for its own account, the Program Fee and the Facility Fee, in each case, accrued
during the related Collection Period and to the extent not paid on or prior to
such Remittance Date pursuant to Section 2.5(a)(ii).
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(b) On the date of execution hereof, to the
Administrative Agent solely for its own account, the Arrangement Fee.
(c) On each Remittance Date, to Buyer B solely for
its own account, the Buyer B Program Fee, in each case, accrued during the
related Collection Period and to the extent not paid on or prior to such
Remittance Date pursuant to Section 2.5(a)(v).
(d) On each Remittance Date commencing on the
forty-ninth month after the Closing Date, provided this Agreement is then in
effect, to Buyer B solely for its own account, the Incentive Fee accrued during
the related Collection Period and to the extent not paid on or prior to such
Remittance Date pursuant to Section 2.5(a)(v).
(e) On each day during the related Collection Period
on which Related Commercial Paper is issued by Buyer A, to Buyer A, the Dealer
Fee.
SECTION 2.8. Protection of Transferred Interest of the Buyers
and the Bank Investors. (A) The Transferor agrees that it will from time to
time, at its expense, promptly execute and deliver all instruments and documents
and take all actions as may be required by law or as the Agent may reasonably
request in order to perfect or protect the Transferred Interest or to enable the
Agent, the Buyers or the Bank Investors to exercise or enforce any of their
respective rights hereunder. Without limiting the foregoing, the Transferor will
upon the request of the Agent, the Buyers or any of the Bank Investors, in order
to accurately reflect the Transfers hereunder and the Transferred Interest, (x)
execute and file such financing or continuation statements or amendments thereto
or assignments thereof (as permitted pursuant to Section 9.9 hereof) as may be
reasonably requested by the Agent, the Buyers or any of the Bank Investors and
(y) mark its respective master data processing records and other documents with
a legend describing the conveyance to the Agent, for the benefit of the Buyers
and the Bank Investors, of the Transferred Interest. The Transferor shall obtain
such additional search reports as the Agent, the Buyers or any of the Bank
Investors shall reasonably request. To the fullest extent permitted by
applicable law, the Agent shall be permitted to sign and file continuation
statements and amendments thereto and assignments thereof without the
Transferor's signature. Carbon, photographic or other reproduction of this
Agreement or any financing statement shall be sufficient as a financing
statement. The Transferor shall not change its respective name, identity or
corporate structure (within the meaning of Section 9-402(7) of the UCC as in
effect in the States of New York and Georgia) nor relocate its respective chief
executive office or any office where Records are kept unless it shall have: (i)
given the Agent at least thirty (30) days prior notice thereof and (ii) prepared
at Transferor's expense and delivered to the Agent all financing statements,
instruments and other documents necessary to preserve and protect the
Transferred Interest or requested by the Agent in connection with such change or
relocation. Any filings under the UCC or otherwise that are
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occasioned by such change in name or location shall be made at the expense of
Transferor.
(b) On the Closing Date, the Transferor agrees
to deliver or to cause the Servicer to deliver to the Agent a computer file or
microfiche list containing a true and complete list of all Accounts, identified
by account number and by Receivable balance as of the Cut-Off Date. Such file or
list shall be marked as the Account Schedule delivered to the Agent as
confidential and proprietary, and is hereby incorporated into and made a part of
this Agreement. The Transferor agrees to deliver or to cause the Servicer to
deliver to the Agent within five (5) Business Days of the request therefor by
the Agent a computer file or microfiche list containing a true and complete list
of all Accounts, including all Accounts created on or after the Cut-Off Date, in
existence as of the last day of the prior Collection Period, identified by
account number and by Receivable balance as of the last day of the prior
Collection Period. Such file or list shall be marked as the Account Schedule
delivered to the agent as confidential and proprietary, shall replace the
previous Account Schedule delivered to the Agent and shall be incorporated into
and made a part of this Agreement. The Servicer agrees, at its own expense, by
the end of each Collection Period in which any Accounts or Related Accounts have
been originated, to indicate clearly and unambiguously in its master data
processing records that the Receivables created in connection with such Accounts
have been conveyed to the Transferor and transferred to the Agent, for the
benefit of the Buyers and the Bank Investors, pursuant to this Agreement.
SECTION 2.9. Deemed Collections; Application of Payments. (a)
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 changes in any
report previously delivered pursuant to Section 2.11.
(b) 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's Interest and (unless otherwise specified) any other amount required
herein to be calculated by reference to the amount of Principal Receivables,
will be reduced by the amount of the adjustment. Similarly, the
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amount of Principal Receivables used to calculate the Transferor's Interest and
(unless otherwise specified) any other amount required herein 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 5.1(j) was breached. Any adjustment required pursuant to
either of the two preceding sentences shall be made on or prior to the end of
the Collection Period in which such adjustment obligation arises. In the event
that, following the exclusion of such Principal Receivables from the calculation
of the Subordinate Percentage, the Subordinate Percentage would be less than the
Required Subordinate Percentage, not later than seven days after such
adjustment, the Transferor shall make a deposit into the Collection Account in
immediately available funds in an amount equal to such adjustment.
(c) (i) If on any day any of the representations
or warranties in Article III (except for the representations and warranties in
Sections 3.1(l) and 3.3(f)) was or becomes untrue with respect to a Receivable
(whether on or after the date of any transfer of an interest therein to the
Agent, the Buyers or the Bank Investors as contemplated hereunder), the
Transferor shall be deemed to have received on such day a Collection of such
Receivable in full and the Transferor shall on such day make a deposit into the
Collection Account in immediately available funds in an amount equal to the
amount of such Receivable, to be applied in accordance with Section 2.5 hereof.
(ii) If any Account for which a Credit
Card (as defined in the Sale and Purchase Agreement) is in effect shall not
constitute an Eligible Account as of the Cut-Off Date, (x) the Transferor shall
be deemed to have received on such day a Collection in respect of such Account
in an amount specified in the following clause (y) and (y) the Transferor shall
make a deposit into the Collection Account in immediately available funds in an
amount equal to the amount received by the Transferor pursuant to the Sale and
Purchase Agreement in respect of such Account, when such amount is received by
the Transferor or CAC, as the case may be, or within 2 Business Days after
receipt by the Account Owner, in each case pursuant to the Sale and Purchase
Agreement, to be applied in accordance with Section 2.5 hereof.
(iii) If on any day any Receivable
related to an Account governed by the terms of a Credit Card Agreement (other
than the Credit Card Agreement entered into with the Original Sellers) is not
an Eligible Receivable or a Defaulted Receivable, (x) the Transferor shall be
deemed to have received on the date on which it is determined that such
Receivable is not an Eligible Receivable or Defaulted Receivable a Collection
of such Receivable in full and (y) the Transferor shall make a deposit into
the Collection Account in immediately available funds in the amount of such
Receivable, to be applied in accordance with Section 2.5 hereof.
(d) In the event that the Transferor is unable
for any reason to transfer Receivables to the Agent in accordance with the
provisions of this Agreement,
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including by reason of 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 Agent, after the date of such inability, all Collections, including
Collections of Receivables transferred to the Agent 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 Agent by the Transferor up to
the Transferred Interest on such date), (b) the Transferor and the Servicer
agree that such amounts will be applied as Collections in accordance with
Article II 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 Agent which are written off as
uncollectible in accordance with this Agreement shall continue to be allocated
in accordance with Article II. 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 Agent until the
Agent shall have been allocated and paid Collections in an amount equal to the
aggregate amount of Principal Receivables up to the Transferred Interest as of
the date of the occurrence of such event. If 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
II. The parties hereto agree that Finance Charge Receivables, whenever created
and accrued in respect of Principal Receivables which have been conveyed to the
Agent shall continue to be a part of the Transferred Interest notwithstanding
any cessation of the transfer of additional Principal Receivables to the Agent
and Collections with respect thereto shall continue to be allocated and paid in
accordance with Article II.
SECTION 2.10. Payments and Computations, Etc. All amounts to
be paid or deposited by the Transferor or the Servicer hereunder shall be paid
or deposited in accordance with the terms hereof no later than 4:00 p.m. (New
York City time) on the day when due in immediately available funds; if such
amounts are payable to the Agent (whether on behalf of the Buyers or any Bank
Investor or otherwise) they shall be paid or deposited in the account of the
Agent indicated in Section 11.3 hereof, until otherwise notified by the Agent.
The Transferor shall, to the extent permitted by law, pay to the Agent, for the
benefit of the Buyers and the Bank Investors upon demand, interest on all
amounts not paid or deposited when due hereunder at a rate equal to 2% per annum
plus the Base Rate. All computations of interest and all per annum fees
hereunder shall be made on the basis of a year of 360 days for the actual number
of days (including the first but excluding the last day) elapsed. Any
computations by the Agent of amounts payable by the Transferor hereunder shall
be binding upon the Transferor absent manifest error.
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SECTION 2.11. Reports. (a) Reports and Records for the
Agent.
(i) 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 Agent 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 Agent at the office of the
Servicer on any Business Day any computer programs necessary to make
such identification.
(ii) Monthly Servicer Report. Not later
than the second Business Day preceding each Remittance Date, the
Servicer shall deliver to the Agent a Monthly Servicer's Report signed
by a Servicing Officer in substantially the form of Exhibit E hereto.
(b) Quarterly Certificate. The Servicer shall
deliver, or the Transferor shall cause the Servicer to deliver, to the Agent
within fifteen (15) days after the end of each calendar quarter of each calendar
year, beginning with the calendar quarter ending June 30, 1998, an Officer's
Certificate stating that (a) a review of the activities of the Servicer during
the preceding calendar quarter (or such shorter period as may have elapsed since
the Closing Date), and of its performance under this Agreement was made under
the supervision of the officer signing such certificate and (b) to the best of
such officer's knowledge, based on such review, the Servicer has fully performed
all of its obligations under this Agreement throughout such quarter (or such
shorter period as may have elapsed since the Closing Date), or, if there has
occurred an event which, with the giving of notice or passage of time or both,
would constitute a Termination Event or Servicer Default, specifying each such
event known to such officer, the nature and status thereof and the actions which
the Transferor or the Servicer, as the case may be, proposes to take with
respect thereto.
(c) Semi-Annual Servicing Report of Independent
Public Accountants. On or before October 15 of each year, for the period from
January 1 through June 30 for such year, and on or before April 15 of each year,
for the period from July 1 through December 31, beginning with October 15, 1998
(for the period from the Closing Date through June 30, 1998), 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 Agent to the effect that such firm has applied the procedures and
made the examinations set forth in Exhibit D hereto.
SECTION 2.12. Collection Account. There shall be established
on the day of the initial Incremental Transfer hereunder and maintained with the
Agent, a
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segregated account (the "Collection Account"), bearing a designation
clearly indicating that the funds deposited therein are held for the benefit of
the Agent, on behalf of the Buyers and the Bank Investors. The Servicer and the
Transferor shall remit or cause to be remitted daily within two Business Days of
receipt to the Collection Account all Collections received with respect to any
Receivables; provided, however, prior to the date of the Conversion, the
Servicer and Transferor shall remit daily within two Business Days of receipt to
the Collection Account all Collections received with respect to any Receivables
less the aggregate amount of principal receivables purchases made hereunder
since the last day on which Collections were remitted to the Collection Account.
Funds on deposit in the Collection Account (other than investment earnings)
shall be invested by the Agent in Eligible Investments that will mature so that
such funds will be available on the Business Day preceding the Remittance Date
following such investment. All interest and earnings (net of losses and
investment expenses) on funds on deposit in the Collection Account shall be
retained in the Collection Account and be available to make any payments
required to be made hereunder. Notwithstanding the foregoing, so long as (i) no
Termination Event or Potential Termination Event shall have occurred and be
continuing and (ii) the amount of the Eligible Pool Balance shall exceed Buyer
A's Net Investment as of the last day of the most recent Collection Period, the
Servicer shall be entitled to withdraw any Collections held in the Collection
Account in excess of the amount estimated by the Servicer accrued during such
Collection Period for Carrying Costs; provided, that, within two Business Days
after the first such withdrawal of every calendar month, the Servicer shall
deliver to the agent a statement in the form of Exhibit C hereto. On the
Business Day preceding the Remittance Date, the Servicer shall remit to the
Collection Account all amounts withdrawn from the Collection Account during the
preceding Collection Period net of (a) any amounts applied by the Transferor
during such Collection Period to reduce the Buyers' Net Investment, (b) any
amounts applied to make purchases pursuant to Section 2.2(e) during such
Collection Period and (c) any amounts which would otherwise be distributed on
such Remittance Date pursuant to Section 2.5(a)(i), 2.5(a)(iv) or 2.5(b)(i),
which shall be deemed paid pursuant to such Sections by virtue of the Servicer
not remitting such amounts to the Collection Account.
SECTION 2.13. Sharing of Payments, Etc. If a Buyer or any Bank
Investor (for purposes of this Section 2.13 only, being a "Recipient") shall
obtain any payment (whether voluntary, involuntary, through the exercise of any
right of setoff, or otherwise) on account of a Transferred Interest owned by it
(other than pursuant to Section 2.7, or Article VIII and other than as a result
of the differences in the timing of the applications of Collections pursuant to
Section 2.5) in excess of its ratable share of payments on account of the
Transferred Interest obtained by the Buyer and/or the Bank Investors entitled
thereto, such Recipient shall forthwith purchase from the Buyer and/or the Bank
Investors entitled to a share of such amount of the Transferred Interest owned
by such Persons hereunder as shall be necessary to cause such Recipient to share
the excess payment with each such other Person entitled thereto; provided,
however, that if all or any portion of such excess payment is thereafter
recovered from such Recipient, such purchase from each such other Person shall
be rescinded and each such other
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Person shall repay to the Recipient the purchase price paid by such Recipient
for such amount to the extent of such recovery, together with an amount equal to
such other Person's share (according to the proportion of (a) the amount of such
other Person's required payment to (b) the total amount so recovered from the
Recipient) of any interest or other amount paid or payable by the Recipient in
respect of the total amount so recovered.
SECTION 2.14. Defaulted Receivables. On the date when any
Receivable in an Account becomes a Defaulted Receivable, the Agent shall
automatically and without further action or consideration transfer, set over and
otherwise convey to the Transferor with respect to such Account, without
recourse, representation or warranty, all right, title and interest of the Agent
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 remain
property of the Agent and be applied as provided herein.
SECTION 2.15. Optional Amortization. On any day prior to the
occurrence of a Termination Event, the Transferor may in its sole discretion
cause the Servicer to provide written notice to the Agent (an "Optional
Amortization Notice") at least five Business Days prior to any Business Day that
is the last day of a Collection Period stating its intention to cause a full
amortization of the Buyers' Net Investment on the following Remittance Date (the
"Optional Amortization Date") in an amount equal to the sum of (a) the Buyers'
Net Investment, (b) all Aggregate Unpaids and Buyer B Amounts unpaid on such
Optional Amortization Date, plus (c) if such Optional Amortization Date occurs
on or before the first anniversary of the Closing Date, the amount (without
duplication) specified in the Purchase Option Agreement to be paid in respect
thereof (the "Optional Amortization Amount"). The Optional Amortization Notice
shall state the Optional Amortization Date and the allocation of the Optional
Amortization Amount among the various outstanding funding periods that mature on
such Optional Amortization Date. The Optional Amortization Amount shall be paid
from any Collections on deposit in the Collection Account or from the proceeds
of the issuance of one or more interests in the Transferred Interest issued
substantially contemporaneously with such full amortization (or any combination
of the above).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of the Transferor.
As of the Closing Date, each Remittance Date and the date of each Incremental
Transfer hereunder, the Transferor represents and warrants to the Agent, the
Buyers and the Bank Investors that:
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(a) Corporate Existence and Power. The
Transferor is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
corporate power and all material governmental licenses, authorizations, consents
and approvals required to carry on its business in each jurisdiction in which
its business is now conducted. The Transferor is duly qualified to do business
in, and is in good standing (or is exempt from such requirement), in every other
jurisdiction in which the nature of its business requires it to be so qualified,
except where the failure to be so qualified or in good standing would not have a
Material Adverse Effect.
(b) Corporate and Governmental Authorization;
Contravention. The execution, delivery and performance by the Transferor of this
Agreement, the Receivables Purchase Agreement, the Fee Letter and the other
Transaction Documents to which the Transferor is a party are within the
Transferor's corporate powers, have been duly authorized by all necessary
corporate action, require no action by or in respect of, or filing with, any
Governmental Authority or official thereof (except as contemplated by Section
2.8 hereof), and do not contravene, or constitute a default under, any provision
of applicable law, rule or regulation or of the Certificate of Incorporation or
Bylaws of the Transferor or of any agreement, judgment, injunction, order, writ,
decree or other instrument binding upon the Transferor or result in the creation
or imposition of any Adverse Claim on the assets of the Transferor (except as
contemplated by Section 2.8 hereof).
(c) Binding Effect. Each of this Agreement, the
Receivables Purchase Agreement, the Fee Letter, and the other Transaction
Documents to which the Transferor is a party constitutes the legal, valid and
binding obligation of the Transferor, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, insolvency, moratorium or other
similar laws affecting the rights of creditors generally.
(d) Perfection. Immediately preceding each
Transfer hereunder, the Transferor shall be the owner of all of the Receivables,
free and clear of all Adverse Claims. On or prior to each Transfer, all
financing statements and other documents required to be recorded or filed in
order to perfect and protect the Agent's Transferred Interest against all
creditors of and purchasers from the Transferor will have been duly filed in
each filing office necessary for such purpose and all filing fees and taxes, if
any, payable in connection with such filings shall have been paid in full.
(e) Accuracy of Information. All information
heretofore furnished by the Transferor (including without limitation, the
Monthly Servicer Reports, Account Schedule, any reports delivered pursuant to
Section 2.11 hereof and the Transferor's financial statements) to the Buyers,
any Bank Investors, the Agent or the Administrative Agent for purposes of or in
connection with this Agreement or any transaction contemplated hereby is, and
all such information hereafter furnished by the Transferor to the Buyers, any
Bank Investors, the Agent or the Administrative Agent will
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be, true and accurate in every material respect, on the date such information is
stated or certified.
(f) Tax Status. The Transferor has filed all
tax returns (federal, state and local) required to be filed and has paid or made
adequate provision for the payment of all taxes, assessments and other
governmental charges other than taxes, assessments and other governmental
charges being contested in good faith, and for which adequate reserves have been
set aside on the books of the Transferor.
(g) Action, Suits. Except as set forth in
Exhibit H hereof, there are no actions, suits or proceedings pending, or to the
knowledge of the Transferor threatened, against or affecting the Transferor or
any Affiliate of the Transferor or their respective properties, in or before any
court, arbitrator or other body, which may, individually or in the aggregate,
have a Material Adverse Effect.
(h) Use of Proceeds. No proceeds of any
Transfer will be used by the Transferor to acquire any security in any
transaction which is subject to Section 13 or 14 of the Securities Exchange Act
of 1934, as amended.
(i) Place of Business. The principal place of
business and chief executive office of the Transferor are located at the address
of the Transferor indicated in Section 11.3 hereof.
(j) Good Title. Upon each Transfer, the Agent
shall acquire a valid and perfected first priority undivided percentage interest
to the extent of the Transferred Interest or a first priority perfected security
interest in each Receivable that exists on the date of such Transfer and in the
Related Security, Collections and Proceeds with respect thereto free and clear
of any Adverse Claim.
(k) Tradenames, Etc. As of the date hereof:
(i) the Transferor has only the subsidiaries and divisions listed on Exhibit J
hereto; and (ii) the Transferor has, within the last five (5) years, operated
only under the tradenames identified in Exhibit J hereto, and, within the last
five (5) years, has not changed its name, merged with or into or consolidated
with any other corporation or been the subject of any proceeding under Title 11,
United States Code (the "Bankruptcy Code"), except as disclosed in Exhibit J
hereto.
(l) Nature of Receivables. Each Receivable (x)
represented by the Transferor or the Servicer to be an Eligible Receivable
(including in any Monthly Servicer Report or other report delivered pursuant to
Section 2.11 hereof) or (y) included in the calculation of Principal Receivables
in fact satisfies at such time the definition of "Eligible Receivable" set forth
herein and, in the case of clause (y) above, is not a Receivable of the type
excluded from the definition of "Principal Receivables."
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(m) Coverage Requirement; Amount of Receivables.
The Subordinate Percentage as of the most recent calculation date is not less
than the Required Subordinate Percentage.
(n) Credit Card Guidelines. Since January 15,
1998, there have been no material changes in the Credit Card Guidelines other
than as permitted hereunder.
(o) No Termination Event. No event has occurred
and is continuing and no condition exists which constitutes a Termination Event
or a Potential Termination Event.
(p) Not an Investment Company. The Transferor
is not, and is not controlled by, an "investment company" within the meaning of
the Investment Company Act of 1940, as amended, or is exempt from all provisions
of such Act.
(q) ERISA. Each of the Transferor and its ERISA
Affiliates is in compliance in all material respects with ERISA and no lien
exists in favor of the PBGC on any of the Receivables.
(r) Bulk Sales. No transaction contemplated
hereby or by the Receivables Purchase Agreement requires compliance with any
bulk sales act or similar law.
(s) Transfers Under Receivables Purchase
Agreement. Each Receivable which has been transferred to the Transferor by CAC
has been purchased by the Transferor from CAC pursuant to, and in accordance
with, the terms of the Receivables Purchase Agreement, by CAC from CB&T pursuant
to the Initial Purchase Agreement and, to the extent applicable, by CB&T from
the Original Sellers under the Sale and Purchase Agreement.
(t) Preference; Voidability. The Transferor
shall have given reasonably equivalent value to CAC in consideration for the
transfer to the Transferor of the Receivables and Related Security from CAC, and
each such transfer shall not have been made for or on account of an antecedent
debt owed by CAC to the Transferor and no such transfer is or may be voidable
under any Section of the Bankruptcy Reform Act of 1978 (11 U.S.C. ss.ss. 101 et
seq.), as amended.
(u) Representations and Warranties of the
Transferor. Each of the representations and warranties of the Transferor set
forth in the Receivables Purchase Agreement is true and correct in all material
respects and the Transferor hereby remakes all such representations and
warranties for the benefit of the Agent, the Buyers, the Bank Investors and the
Administrative Agent.
(v) Notice of Breach. The representations and
warranties set forth in this Section 3.1 shall survive the transfers and
assignments of the Receivables.
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Upon discovery by the Transferor, the Servicer or the Agent of a breach of any
of the representations and warranties set forth in this Section 3.1, the party
discovering such breach shall give prompt written notice thereof to the other
parties within three Business Days following such discovery, provided that the
failure to give notice within three Business Days does not preclude subsequent
notice.
(w) Notice of Events Having a Material Adverse
Effect. The Transferor shall advise the Agent promptly, in reasonable detail, of
the occurrence of any event, other than as described in Section 3.1(v) or
Section 5.1(l), which would have a material adverse effect on the Agent's, Bank
Investors' or Buyers' interest in the Receivables or the collectibility thereof.
(x) Notice of Amendments to Affinity Card
Agreement and Facilities Management Agreement. The Transferor shall deliver to
the Agent promptly copies of all changes or amendments to the Affinity Card
Agreement and the Facilities Management Agreement.
SECTION 3.2. [Reserved].
SECTION 3.3. Representations and Warranties of the Servicer.
As of the Closing Date, the Servicer represents and warrants to the Agent, the
Buyers and the Bank Investors that:
(a) Corporate Existence and Power. The Servicer
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has all corporate power and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business in each jurisdiction in which its business is now
conducted. The Servicer is duly qualified to do business in, and is in good
standing (or is exempt from such requirement), in every other jurisdiction in
which the nature of its business requires it to be so qualified, except where
the failure to be so qualified or in good standing would not have a Material
Adverse Effect.
(b) Corporate and Governmental Authorization;
Contravention. The execution, delivery and performance by the Servicer of this
Agreement are within the Servicer's corporate powers, have been duly authorized
by all necessary corporate action, require no action by or in respect of, or
filing with, any Governmental Authority or official thereof, and do not
contravene, conflict with, or constitute a default under, any provision of
applicable law, rule or regulation or of the Certificate of Incorporation or
Bylaws of the Servicer or of any agreement, judgment, injunction, order, writ,
decree or other instrument binding upon the Servicer or result in the creation
or imposition of any Adverse Claim on the assets of the Servicer or any of its
Subsidiaries.
(c) Binding Effect. This Agreement and each
other Transaction Document to which the Servicer is a party constitute the
legal, valid and binding obligations of the Servicer, enforceable against the
Servicer in accordance with its
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terms, subject to applicable bankruptcy, insolvency, moratorium or other similar
laws affecting the rights of creditors.
(d) Accuracy of Information. All information
heretofore furnished by the Servicer to the Agent, the Buyers, any Bank Investor
or the Administrative Agent for purposes of or in connection with this Agreement
or any transaction contemplated hereby is, and all such information hereafter
furnished by the Servicer to the Agent, the Buyers, any Bank Investor or the
Administrative Agent will be, true, accurate and complete in every material
respect, on the date such information is stated or certified.
(e) Action, Suits. Except as set forth in
Exhibit H, there are no actions, suits or proceedings pending, or to the
knowledge of the Servicer threatened, against or affecting the Servicer or any
Affiliate of the Servicer or their respective properties, in or before any
court, arbitrator or other body, which may, individually or in the aggregate,
have a Material Adverse Effect.
(f) Nature of Receivables. Each Receivable
included in the calculation of Principal Receivables in fact satisfies at such
time the definition of "Eligible Receivable" and is not a Receivable excluded
from the definition of "Principal Receivables".
(g) Amount of Receivables. As of March 1, 1998,
the aggregate amount of Receivables was approximately *[material omitted].
(h) Credit Card Guidelines. Since January 15,
1998, there have been no material changes in the Credit Card Guidelines other
than as permitted hereunder.
(i) Collections and Servicing. Since January 15,
1998, there has been no material adverse change in the ability of the Servicer
or Sub-Servicer to service and collect the Receivables.
(j) Not an Investment Company. The Servicer is
not, and is not controlled by, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or is exempt from all provisions of
such Act.
(k) No Conflict. The execution and delivery of
this Agreement by the Servicer, and the performance of the transactions
contemplated by this Agreement 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 material terms and provisions of, or constitute (with
or without notice or lapse of time or both) a material default under, any
indenture, contract, agreement, mortgage, deed of trust or other instrument to
which the Servicer is a party or by which it or its properties are bound.
- ----------------
* Deleted per the Registrant's request for confidential treatment and filed
separately with the Commission pursuant to Rule 24b-2.
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(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 by the Servicer and
the performance of the transactions contemplated by this Agreement by the
Servicer, have been duly obtained, effected or given and are in full force and
effect.
(m) Tax Status. The Servicer has filed all tax
returns (federal, state and local) required to be filed and has paid or made
adequate provision for the payment of all taxes, assessments and other
governmental charges, other than taxes, assessments and other governmental
charges being contested in good faith.
(n) ERISA. The Servicer is in compliance in all
material respects with ERISA.
SECTION 3.4. Reaffirmation of Representations and Warranties
by the Servicer. On each Remittance Date and on the date of each Incremental
Transfer made hereunder, the Servicer shall be deemed to have certified that all
representations and warranties described in Section 3.3 hereof are correct on
and as of such day as though made on and as of such date.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1. Conditions to Closing. On or prior to the Closing
Date, the sales of Accounts and initial Receivables under the Sale and Purchase
Agreement, and the sale of Receivables under the Initial Purchase Agreement and
Receivables Purchase Agreement shall have been consummated and the Transferor
shall deliver to the Agent the following documents and instruments and pay the
following fees, all of which shall be in form and substance acceptable to the
Agent:
(a) A copy of the resolutions of the Board of
Directors of the Transferor certified by its Secretary approving the execution,
delivery and performance by the Transferor of this Agreement, the Receivables
Purchase Agreement and the other Transaction Documents to be delivered by the
Transferor hereunder or thereunder.
(b) A copy of the resolutions of the Board of
Directors of each of CAC and CompuCredit certified by its Secretary approving
the execution, delivery and performance by it of this Agreement and the other
Transaction Documents to which it is a party to be delivered by it hereunder or
thereunder.
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(c) The Articles of Incorporation of the
Transferor certified by the Secretary of State or other similar official of the
Transferor's jurisdiction of incorporation dated a date reasonably prior to the
Closing Date.
(d) The Articles of Incorporation of each of CAC
and CompuCredit certified by the Secretary of State or other similar official of
its jurisdiction of incorporation dated a date reasonably prior to the Closing
Date.
(e) A Good Standing Certificate for the
Transferor issued by the Secretary of State or a similar official of the
Transferor's jurisdiction of incorporation and certificates of qualification as
a foreign corporation issued by the Secretaries of State or other similar
officials of each jurisdiction where such qualification is material to the
transactions contemplated by this Agreement and the other Transaction Documents,
in each case, dated a date reasonably prior to the Closing Date.
(f) A Good Standing Certificate for the each of
CAC and CompuCredit issued by the Secretary of State or a similar official of
its jurisdiction of incorporation and certificates of qualification as a foreign
corporation issued by the Secretaries of State or other similar officials of
each jurisdiction when such qualification is material to the transactions
contemplated by this Agreement and the Receivables Purchase Agreement and the
other Transaction Documents, in each case, dated a date reasonably prior to the
Closing Date.
(g) A Certificate of the Secretary of the
Transferor substantially in the form requested by the Agent.
(h) A Certificate of the Secretary of
CompuCredit substantially in the form requested by the Agent.
(i) Copies of proper financing statements (Form
UCC-1), dated a date reasonably near to the date of the initial Incremental
Transfer naming the Transferor as the debtor in favor of the Agent, for the
benefit of the Buyers and the Bank Investors, as secured party or other similar
instruments or documents as may be necessary or in the reasonable opinion of the
Agent desirable under the UCC of all appropriate jurisdictions or any comparable
law to perfect the Agent's undivided percentage interest in all Receivables and
the Related Security, Collections and Proceeds relating thereto.
(j) Copies of proper financing statements (Form
UCC-1), dated a date reasonably near to the date of the initial Incremental
Transfer naming (i) CAC as the debtor in favor of the Transferor as secured
party and the Agent, for the benefit of the Buyers and the Bank Investors, as
assignee of the secured party, (ii) CB&T as the debtor in favor of CAC as
secured party and (iii) the Original Sellers as the debtor and CB&T as secured
party, or other similar instruments or documents as may be necessary or in the
reasonable opinion of the Agent desirable under the UCC of all
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appropriate jurisdictions or any comparable law to perfect the Transferor's
interest in all Receivables.
(k) Copies of proper financing statements (Form
UCC-3), if any, necessary to terminate all security interests and other rights
of any person in Accounts or Receivables previously granted.
(l) Certified copies of request for information
or copies (Form UCC-11) (or a similar search report certified by parties
acceptable to the Agent) dated a date reasonably near the date of the initial
Incremental Transfer listing all effective financing statements which name CB&T,
CAC or the Transferor (under their respective present names and any previous
names) as debtor and which are filed in jurisdictions in which the filings were
made pursuant to items (i) or (j) above together with copies of such financing
statements (none of which shall cover any Receivables or Accounts).
(m) An opinion of Orrick, Herrington & Sutcliffe LLP
and Jones, Day, Reavis & Pogue, counsel to the Transferor, the Servicer and CAC,
covering the matters requested by the Agent.
(n) An opinion of Orrick, Herrington & Sutcliffe LLP,
counsel to the Transferor and CAC, covering certain bankruptcy and insolvency
matters (i.e. "true sale" and nonconsolidation) in form and substance
satisfactory to the Agent and Agent's counsel.
(o) The Account Schedule, consisting of a
computer tape setting forth all Receivables and the Principal Receivables
thereon as of the Cut-Off Date and such other information as the Agent may
reasonably request.
(p) An executed copy, including exhibits and opinions
thereto, of this Agreement, the Initial Purchase Agreement, the Receivables
Purchase Agreement, the Fee Letter and each of the other Transaction Documents.
(q) The Arrangement Fee in accordance with Section
2.7(b).
(r) A summary of daily net settlements to the
extent provided by the Original Sellers for the period from April 1, 1998
through the Closing Date.
(s) Evidence of the appointment of CT
Corporation as agent for process as required by Section 11.4 hereof.
(t) An executed copy of the CB&T Agreement.
(u) Copies of all documents relating to the
servicing of Accounts, including all fee schedules and exhibits.
(v) An executed copy of the Fee Letter shall have
been executed by the Transferor.
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(w) An executed copy of the Purchase Option
Agreement.
(x) An executed copy of each amendment to the
Transaction Documents (as defined in the Certificate Purchase Agreement (Series
1997-One), dated as of August 29, 1997, among CompuCredit, NationsBank,
Enterprise Funding Corporation and CompuCredit Funding Corp.) made on account of
the Transfers contemplated hereunder.
(y) Executed copies of Confidentiality
Agreements between CompuCredit on one hand and each of the Buyers, the Agent,
the Bank Investors and NationsBank of Texas, N.A.
(z) The form of Credit Card Agreement currently in
effect.
(aa) A copy of the Credit Card Guidelines.
ARTICLE V
COVENANTS
SECTION 5.1. Affirmative Covenants of Transferor. At all times
from the date hereof to the later to occur of (i) the Termination Date or (ii)
the date on which the Buyers' Net Investment has been reduced to zero, all
Carrying Costs, all other Aggregate Unpaids and all Buyer B Distributions shall
have been paid in full, in cash, unless the Agent shall otherwise consent in
writing:
(a) Financial Reporting. The Transferor will
maintain a system of accounting established and administered in accordance with
GAAP, and furnish to the Agent:
(i) Annual Reporting. Within one
hundred five (105) days after the close of the Transferor's fiscal
years, beginning with the fiscal year ending in 1998, unaudited
financial statements, prepared in accordance with GAAP for the
Transferor, including balance sheets (but excluding financial
footnotes, except for footnotes regarding accounting policies and
procedures) as of the end of such period, related statements of
operations, shareholder's equity and cash flows, and accompanied by a
certificate of the chief financial officer or chairman, president,
treasurer or any executive vice president of the Transferor, stating
that no Termination Event or Potential Termination Event exists, or if
any Termination Event or Potential Termination Event exists, stating
the nature and status thereof.
(ii) Quarterly Reporting. Within sixty
(60) days after the close of the first three quarterly periods of the
Transferor's fiscal years, unaudited balance sheets, excluding
financial footnotes, as at the close of each
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such period and related statements of operations, shareholder's equity
and cash flows for the period from the beginning of such fiscal year
to the end of such quarter, all certified by its chief financial
officer.
(iii) Compliance Certificate. Together
with the financial statements required hereunder, a compliance
certificate signed by the Transferor's chief financial officer stating
that (x) the attached financial statements (except for the financial
footnotes excluded as described above) have been prepared in
accordance with GAAP and, to the best of such Person's knowledge,
accurately reflect the financial condition of the Transferor and (y)
to the best of such Person's knowledge, no Termination Event or
Potential Termination Event exists, or if any Termination Event or
Potential Termination Event exists, stating the nature and status
thereof.
(iv) Shareholders Statements and Reports.
Promptly upon the furnishing thereof to the shareholders of the
Transferor, copies of all financial statements, reports and proxy
statements so furnished.
(v) S.E.C. Filings. Promptly upon the
filing thereof, copies of all registration statements and annual,
quarterly, monthly or other regular reports which the Transferor files
with the Securities Exchange Commission.
(vi) Notice of Termination Events or
Potential Termination Events. As soon as possible and in any event
within two (2) days after the occurrence of each Termination Event or
each Potential Termination Event, a statement of the chief financial
officer or chief accounting officer of the Transferor setting forth
details of such Termination Event or Potential Termination Event and
the action which the Transferor proposes to take with respect thereto.
(vii) ERISA. Promptly after the filing or receiving thereof,
copies of all reports and notices with respect to any Reportable Event
(as defined in Article IV of ERISA) which the Transferor or any ERISA
Affiliate thereof, files under ERISA with the Internal Revenue
Service, the PBGC or the U.S. Department of Labor or which the
Transferor or any ERISA Affiliates thereof, receive from the Internal
Revenue Service, the PGBC or the U.S. Department of Labor.
(viii) Notices under Transaction Documents.
Promptly after its receipt thereof, copies of all notices, amendments
and waivers given to the Transferor by CB&T, CompuCredit or CAC under
or pursuant to any of the Transaction Documents.
(ix) Other Information. Such other
information (including non-financial information) as the Agent may
from time to time reasonably request (as can reasonably be obtained by
the Transferor).
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(b) Conduct of Business. The Transferor will
carry on and conduct its business in substantially the same manner and in
substantially the same fields of enterprise as it is presently conducted and do
all things necessary to remain duly incorporated, validly existing and in good
standing as a domestic corporation in its jurisdiction of incorporation and
maintain all requisite authority to conduct its business in each jurisdiction in
which its business is conducted.
(c) Compliance with Laws. The Transferor will comply
with all laws, rules, regulations, orders, writs, judgments, injunctions,
decrees or awards to which it or its respective properties may be subject.
(d) Furnishing of Information and Inspection of
Records. The Transferor will furnish to the Agent from time to time such
information with respect to the Receivables as the Agent may reasonably request,
including, without limitation, listings identifying the Principal Receivables
for each Receivable. The Transferor will, at any time and from time to time
during regular business hours permit the Agent, or its agents or
representatives, at the Transferor's expense (i) to examine and make copies of
and take abstracts from all Records and (ii) to visit the offices and properties
of the Transferor for the purpose of examining such Records, and to discuss
matters relating to Receivables or the Transferor's performance hereunder and
under the other Transaction Documents to which such Person is a party with any
of the officers, directors, employees or independent public accountants of the
Transferor having knowledge of such matters. In addition, the Transferor shall
(x) use its best efforts to permit the Agent to have access to the premises and
employees of MWFC, as servicer under the Interim Servicing Agreement, for the
purpose of obtaining such information with respect to the Receivables as the
Agent shall reasonably request and (y) if access cannot be obtained, as referred
to in clause (x) above, if requested by the Agent, the Transferor shall exercise
its rights under the Receivables Purchase Agreement to cause CAC to visit the
premises of MWFC in order to obtain all such information as is reasonably
requested by the Agent. Notwithstanding the foregoing, the Agent or its agents
and representatives shall not visit the offices and properties as described in
clause (ii) above more frequently than (a) once a month for the first six months
after the Closing Date and two times thereafter until the first anniversary of
the Closing Date and (b) four times per year after the first anniversary of the
Closing Date; provided that, neither of the limitations set forth in (a) or (b)
above shall apply upon the occurrence and during the continuance of a
Termination Event or Potential Termination Event.
(e) Keeping of Records and Books of Account.
The Transferor will maintain and implement administrative and operating
procedures (including, without limitation, an ability to recreate records
evidencing Receivables in the event of the destruction of the originals
thereof), and keep and maintain, all documents, books, records and other
information reasonably necessary or advisable for the collection of all
Receivables (including, without limitation, records adequate to permit the daily
identification of each new Receivable and all Collections of and adjustments to
each existing Receivable). The Transferor will give the Agent notice of any
material change
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in the administrative and operating procedures of the Transferor referred to in
the previous sentence.
(f) Treatment. The Transferor will not (i)
account for (including for accounting and tax purposes), or otherwise treat, the
transactions contemplated by the Receivables Purchase Agreement in any manner
other than as a sale of Receivables by CAC to the Transferor or (ii) account for
or otherwise treat the transactions contemplated hereby in any manner other than
as a pledge of Receivables by the Transferor to the Agent for the benefit of the
Buyers or the Bank Investors, as applicable. In addition, the Transferor shall
disclose (in a footnote or otherwise) in all of its respective financial
statements (including any such financial statements consolidated with any other
Persons' financial statements) the existence and nature of the transaction
contemplated hereby and by the Receivables Purchase Agreement and the interest
of the Transferor and the Agent, on behalf of the Buyers and the Bank Investors,
as owner and pledgee, respectively, in the Affected Assets.
(g) Separate Business. The Transferor shall:
(i) Maintain in full effect its existence, rights and
franchises as a corporation or (after 10 days' prior notice
given to the Agent and the execution and delivery by the
Transferor of all documents and opinions of counsel as the
Agent shall request, together with the Agent's approval of any
organizational documents therefor) a limited liability
corporation, under the laws of the state of its organization
or incorporation and will obtain and preserve its
qualification to do business in each jurisdiction in which
such qualification is or shall be necessary to protect the
validity and enforceability of this Agreement and the
Receivables Purchase Agreement and each other instrument or
agreement necessary or appropriate to the proper
administration hereof and to permit and effectuate the
transactions contemplated hereby.
(ii) Maintain its own deposit account or accounts,
separate from those of any Affiliate of such Transferor, with
commercial banking institutions. The funds of such Transferor
will not be diverted to any other Person or for other than the
corporate use of such Transferor, and, except as may be
expressly permitted by this Agreement or the Receivables
Purchase Agreement, the funds of such Transferor shall not be
commingled with those of any Affiliate of such Transferor.
(iii) Ensure that, to the extent that it shares the
same officers or other employees as any of its partners,
members, managers, stockholders or Affiliates, the salaries of
and the expenses related to providing benefits to such
officers and other employees shall be fairly allocated among
such entities, and each such entity shall bear its fair share
of the salary and benefit costs associated with all such
common officers and employees.
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(iv) Ensure that, to the extent that it jointly
contracts with any of its partners, members, managers,
stockholders or Affiliates to do business with vendors or
service providers or to share overhead expenses, the costs
incurred in so doing shall be allocated fairly among such
entities, and each such entity shall bear its fair share of
such costs. To the extent that such Transferor contracts or
does business with vendors or service providers where the
goods and services provided are partially for the benefit of
any other Person, the costs incurred in so doing shall be
fairly allocated to or among such entities for whose benefit
the goods and services are provided, and each such entity
shall bear its fair share of such costs. All material
transactions between such Transferor and any of its partners,
members, managers, stockholders or Affiliates shall be only on
an arm's-length basis and shall receive the approval of such
Transferor's Board of Directors, partners, members, managers
or other governing body including at least one Independent
Director (defined below).
(v) Maintain a principal executive and administrative
office through which its business is conducted and a telephone
number separate from those of its members or stockholders and
Affiliates. To the extent that such Transferor and any of its
members or stockholders or Affiliates have offices in
contiguous space, there shall be fair and appropriate
allocation of overhead costs among them, and each such entity
shall bear its fair share of such expenses.
(vi) Conduct its affairs strictly in accordance with
its Certificate of Incorporation or other certificate of
formation, as the case may be, and observe all necessary,
appropriate and customary corporate formalities (or such
formalities appropriate to the entity), including, but not
limited to, holding all regular and special stockholders' and
directors', or partners', members' or managers', as the case
may be, meetings appropriate to authorize all entity action,
keeping separate and accurate minutes of such meetings,
passing all resolutions or consents necessary to authorize
actions taken or to be taken, and maintaining accurate and
separate books, records, accounts and other corporate
documents and records, including, but not limited to, payroll
and intercompany transaction accounts. Regular stockholders'
or other owners' and directors', partners', members' or
managers', as the case may be, meetings shall be held at least
annually. The Transferor shall not engage in any business not
permitted by its Certificate of Incorporation, as in effect on
the Closing Date.
(vii) Ensure that its Board of Directors shall at all
times include at least one Independent Director (for purposes
hereof, "Independent Director" shall mean any member of the
Board of Directors, or partner,
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member or manager, as the case may be, of such Transferor that
is not and has not at any time been (x) a director, partner,
member, manager, officer, agent, employee or shareholder of
any Affiliate of such Transferor or (y) a member of the
immediate family of any of the foregoing); provided, that,
within 90 days after the Closing Date, the Transferor shall
appoint an Independent Director reasonably satisfactory to the
Agent, the consent of the Agent not to be unreasonably
withheld.
(viii) Ensure that decisions with respect to its
business and daily operations shall be independently made by
such Transferor (although the officer making any particular
decision may also be an officer, partner, member, manager or
director of an Affiliate of such Transferor) and shall not be
dictated by an Affiliate of such Transferor.
(ix) Act solely in its own corporate or entity name
and through its own authorized officers, members, managers and
agents, and no Affiliate of such Transferor shall be appointed
to act as agent of such Transferor, except as expressly
contemplated by this Agreement or the Receivables Purchase
Agreement. The Transferor shall at all times use its own
stationery.
(x) Ensure that no Affiliate of such Transferor shall
advance funds to such Transferor, and no Affiliate of such
Transferor will otherwise guaranty debts of, such Transferor,
except for the guaranty of CompuCredit contained in this
Agreement; provided, however, that (i) an Affiliate of such
Transferor may provide funds to such Transferor in connection
with the capitalization of such Transferor, including capital
necessary to assure that such Transferor has "substantial
assets" as described in Treasury Regulation Section
301.7701-2(d)(2) as in effect prior to amendment by Treasury
Decision 8697 on December 17, 1996.
(xi) Other than organizational expenses and as
expressly provided herein, pay all expenses, indebtedness and
other obligations incurred by it from Transferor's own
separate assets.
(xii) Not enter into any guaranty, or otherwise
become liable, with respect to any obligation of any Affiliate
of such Transferor nor shall the Transferor make any loans to
any Person.
(xiii) Ensure that any financial reports required of
such Transferor shall comply with generally accepted
accounting principles and shall be issued separately from, but
may be consolidated with, any reports prepared for any of its
Affiliates, provided that any such consolidated reports shall
indicate that the assets of the Transferor are not available
to the creditors of any Affiliate of the Transferor.
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(xiv) Ensure that at all times it is adequately
capitalized to engage in the transactions contemplated in its
Certificate of Incorporation or other organization documents.
(xv) Not commingle its assets with any Affiliate of
the Transferor, except as provided in the Transaction
Documents.
(xvi) Make investments directly or by brokers engaged
and paid by Transferor or its agents (provided that if any
such agent is an Affiliate of the Transferor it shall be
compensated at a fair market rate for its services).
(h) Corporate Documents. The Transferor shall
not amend, alter, change or repeal Articles II, IV(b), IX, X, XI or XII of its
Articles of Incorporation or Articles II, Article IV Section 4(b) or Article VII
Section 2(a) of its bylaws without the prior written consent of the Agent.
(i) Receivables Purchase Agreement. The
Transferor, in its capacity as purchaser of the Receivables from CAC (as
purchaser of the Receivables from CB&T) pursuant to the Receivables Purchase
Agreement, will at all times enforce the covenants and agreements of CAC in the
Receivables Purchase Agreement and vigorously pursue all its rights and remedies
thereunder, including, without limitation, its rights and remedies with respect
to the Sale and Purchase Agreement and Initial Purchase Agreement. With respect
to any Receivable sold by CAC, the Transferor shall, and shall cause CAC to,
effect such sale under, and pursuant to the terms of, a Receivables Purchase
Agreement, including, without limitation, the payment by the Transferor in cash
to CAC of an amount equal to the purchase price for such Receivable as required
or permitted by the terms of such Receivables Purchase Agreement.
(j) Security Interests. Except for the
conveyance hereunder, the Transferor will not sell, pledge, assign or transfer
to any other Person, or grant, create, incur, assume or suffer to exist any
Adverse Claim on, any Receivable (or any underlying receivable) conveyed by it
to the Buyers or the Bank Investors, as the case may be, whether now existing or
hereafter created, or any interest therein, and the Transferor shall defend the
right, title and interest of the Buyers or the Bank Investors, as the case may
be in, to and under the Receivables, whether now existing or hereafter created,
against all claims of third parties claiming through or under the Transferor;
provided, however, the Transferor may sell, pledge, transfer, convey,
hypothecate or otherwise grant a security interest in the Transferor's Interest
to any Person so long as (i) any claim of any such Person in the Affected Assets
pursuant to any such sale, pledge, transfer, conveyance, hypothecation or grant
of a security interest in the Transferor's Interest is in all respects
subordinate to the claims of the Buyers and the Bank Investors, and the Agent
shall be satisfied with the terms of such subordination, (ii) such person shall
agree in writing to be bound by the provisions of this Agreement
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relating to the Transferor's Interest and to Sections 11.9 and 11.10 hereof and
(iii) such Person shall execute any documents, or deliver any opinions,
reasonably requested by the Agent in order to ensure that the rights and
remedies of the Buyers with respect to the Transferred Interest are not impaired
as a result of any such sale, pledge, transfer, conveyance, hypothecation or
security interest.
(k) Delivery of Collections or Recoveries. In
the event that the Transferor receives Collections or Recoveries, the Transferor
agrees to pay to the Servicer all such Collections and Recoveries as soon as
practicable after receipt thereof but in no event later than two Business Days
after receipt.
(l) Notice of Liens. The Transferor shall notify the
Agent in writing promptly
after becoming aware of any Adverse Claim on any Receivable conveyed by it to
the Buyers or the Bank Investors, as the case may be, other than the conveyances
hereunder and under the receivables purchase agreements.
(m) Amounts. The Transferor agrees to remit, or
cause to be remitted, to the Collection Account, all amounts paid as adjustments
after the Closing Date with respect to the purchase price paid for the
Receivables under the Sale and Purchase Agreement, and all amounts required to
be paid by CB&T to the Agent, Buyers, Bank Investors or Transferor pursuant to
the CB&T Agreement and received by the Transferor, all of the foregoing to be
deemed part of "Collections."
(n) Receivables Purchase Agreement. The
Transferor further covenants that it will not amend, modify or supplement the
Receivables Purchase Agreement or enter into a new receivables purchase
agreement without the prior written consent of the Agent and will not take any
other action under any other Transaction Documents to which it is a party that
would have a material adverse effect on the Agent, the Buyers or the Bank
Investors or which is inconsistent with the terms of any other Transaction
Document.
SECTION 5.2. Negative Covenants of the Transferor. At all
times from the date hereof to the later to occur of (i) the Termination Date or
(ii) the date on which the Buyers' Net Investment has been reduced to zero, all
Carrying Costs, all other Aggregate Unpaids and all Buyer B Distributions shall
have been paid in full, in cash, unless the Agent shall otherwise consent in
writing:
(a) No Sales, Liens, Etc. Except as otherwise
provided herein and in the Receivables Purchase Agreement, the Transferor will
not sell, assign (by operation of law or otherwise) or otherwise dispose of, or
create or suffer to exist any Adverse Claim upon (or the filing of any financing
statement) or with respect to any of the Affected Assets.
(b) No Extension or Amendment of Receivables.
Except as otherwise permitted in Section 6.2 hereof or the Credit Card
Guidelines, the Transferor
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will not extend, amend or otherwise modify the terms of any Receivable, or
amend, modify or waive any term or condition of any Account related thereto.
(c) Change of Name, Etc. The Transferor will
not change its name, identity or structure or the location of its chief
executive office, unless at least 10 days prior to the effective date of any
such change the Transferor delivers to the Agent such documents, instruments or
agreements, executed by the Transferor, as are necessary to reflect such change
and to continue the perfection of the Agent's security interests in the Affected
Assets.
(d) Other Debt. Except as provided for herein,
the Transferor will not create, incur, assume or suffer to exist any
Indebtedness whether current or funded, or any other liability other than (i)
indebtedness of the Transferor under the Transaction Documents and (ii) other
Indebtedness incurred in the ordinary course of its business in an amount not to
exceed $100,000 at any time outstanding.
(e) ERISA Matters. The Transferor will not (i)
engage or permit any of its respective ERISA Affiliates to engage in any
prohibited transaction (as defined in Section 4975 of the Code and Section 406
of ERISA) for which an exemption is not available or has not previously been
obtained from the U.S. Department of Labor; (ii) permit to exist any accumulated
funding deficiency (as defined in Section 302(a) of ERISA and Section 412(a) of
the Code) or funding deficiency with respect to any Benefit Plan other than a
Multiemployer Plan; (iii) fail to make any payments to any Multiemployer Plan
that the Transferor or any ERISA Affiliate thereof is required to make under the
agreement relating to such Multiemployer Plan or any law pertaining thereto;
(iv) terminate any Benefit Plan so as to result in any liability; or (v) permit
to exist any occurrence of any reportable event described in Title IV of ERISA
which represents a material risk of a liability to the Transferor or any ERISA
Affiliate under ERISA or the Code.
(f) Changes to Credit Card Agreements. The
Transferor shall not change (or consent to change) the terms and provisions of
the Credit Card Agreements or the Credit Card Guidelines in any respect
(including, without limitation, the calculation of the amount, and the timing,
of uncollectible Receivables) except to the extent (a) such change is made
applicable to the comparable segment of the consumer revolving credit accounts
owned or serviced by the Transferor, that have characteristics the same as, or
substantially similar to, the Accounts that are the subject of such change or
(b) if it does not own or service such a comparable segment, it will not make
any such change with the intent to materially benefit itself over the Agent, the
Buyers or any Bank Investor, and such change does not materially and adversely
affect the rights of the Agent, the Buyers or any Bank Investor in the
Receivables or the collectibility of the Receivables. References to the
Receivables in this paragraph shall be deemed to refer to the Receivables in the
aggregate.
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(g) No Assignment. The Transferor shall not
assign any of its rights (other than as permitted pursuant to Section 5.1(j)) or
delegate any of its duties hereunder or under any of the other Transaction
Documents to which it is a party without the prior written consent of the Agent.
(h) No Designation. The Transferor shall not
designate or permit to be designated an Account Owner other than CB&T without
the prior written consent of the Agent and the execution and delivery of all
financing statements and agreements required by the Agent to perfect and protect
the interests of the Agent, Buyers and Bank Investors herein, which shall be
satisfactory to the Agent.
(i) 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 in which an
undivided interest is conveyed by it hereunder to be evidenced by any instrument
(as defined in the UCC) and if any such Receivable (or any underlying
receivable) is so evidenced, it shall be treated as a Receivable which is
subject to Section 2.9 (b) hereof.
SECTION 5.3. Affirmative Covenants of the Servicer. At all
times from the date hereof to the later to occur of (i) the Termination Date or
(ii) the date on which the Buyers' Net Investment has been reduced to zero, all
Carrying Costs shall have been paid in full and all other Aggregate Unpaids and
all Buyer B Distributions shall have been paid in full, in cash, unless the
Agent shall otherwise consent in writing:
(a) Conduct of Business. The Servicer will
carry on and conduct its business in substantially the same manner and in
substantially the same fields of enterprise as it is presently conducted and do
all things necessary to remain duly incorporated, validly existing and in good
standing as a domestic corporation in its jurisdiction of incorporation and
maintain all requisite authority to conduct its business in each jurisdiction in
which its business is conducted.
(b) Compliance with Laws. The Servicer shall duly
satisfy all obligations on its
part to be fulfilled under or in connection with each Receivable and the related
Account, if any, will maintain in effect all qualifications required under
Requirements of Law in order to service properly each Receivable and the related
Account, if any, and will comply in all material respects with all other
Requirements of Law in connection with servicing each Receivable and the related
Account the failure to comply with which would have a material adverse effect on
the Agent's, Bank Investors' or Buyers' interest in the Receivables or the
collectibility thereof.
(c) Furnishing of Information and Inspection of
Records. The Servicer will furnish to the Agent from time to time such
information with respect to the Accounts and the Receivables as the Agent may
reasonably request, including, without limitation, listings identifying the
Obligor and the related Principal Receivables. The Servicer will, at any time
and from time to time during regular business hours permit the Agent, or its
agents or representatives, at the Servicer's expense (i) to examine and
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make copies of and take abstracts from all Records and (ii) subject to the same
limitations as the last sentence of Section 5.1(d) with respect to the Servicer,
to visit the offices and properties of the Servicer for the purpose of examining
such Records, and to discuss matters relating to Receivables or the Servicer's
performance hereunder and under the other Transaction Documents to which such
Person is a party with any of the officers, directors, employees or independent
public accountants of the Servicer having knowledge of such matters.
(d) Keeping of Records and Books of Account.
The Servicer will maintain and implement administrative and operating procedures
(including, without limitation, an ability to recreate records evidencing
Receivables in the event of the destruction of the originals thereof), and keep
and maintain, all documents, books, records and other information reasonably
necessary or advisable for the collection of all Receivables (including, without
limitation, records adequate to permit the daily identification of each new
Receivable and all Collections of and adjustments to each existing Receivable).
The Servicer will give the Agent notice of any material change in the
administrative and operating procedures of the Servicer referred to in the
previous sentence.
(e) Credit Card Guidelines. The Servicer will
comply in all material respects with the Credit Card Guidelines in regard to
each Receivable and the related Account.
(f) Collections Received. The Servicer shall
hold in trust, and deposit, immediately, but in any event not later than two
Business Days after its receipt thereof, to the Collection Account any
Collections received from time to time by the Servicer.
(g) FICO Risk Scores. The Servicer will, once every
three months, update the Fair, Isaacs & Co. credit risk score with respect to
each Account the Receivables of which have not become Defaulted Receivables and
append the Account Schedule to reflect such updated scores.
(h) Status Reports. The Servicer shall provide
the Agent with a copy of the "monthly status report" received by the Servicer
referenced in Section 2.17 of the Affinity Card Agreement or Section 1 of the
Facilities Management Agreement.
(i) Facilities Management Agreement. The
Servicer shall deliver to the Agent an execution copy of the Facilities
Management Agreement, if and when executed.
(j) Notices. The Servicer shall promptly notify the
Agent of CB&T's failure to observe, keep or perform any material term,
condition, covenant, representation or warranty of the Facilities Management
Agreement, Affinity Card Agreement or Initial Purchase Agreement. Promptly after
its receipt thereof, the Servicer shall deliver to the Agent copies of all
notices, amendments and waivers
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delivered by or to the Servicer under or pursuant to any of the Transaction
Documents. The Servicer shall deliver to the Agent (a) on or as soon as
practicable after the Closing Date, the Valuation Date Statement (as defined in
the Sale and Purchase Agreement) and (b) when delivered pursuant to the Sale and
Purchase Agreement, copies of all other reports relating to the valuation of the
Accounts or Receivables on the Closing Date.
(k) New Credit Card Agreement. Promptly after
the date of the Conversion, deliver to the Agent any new form of Credit Card
Agreement to be used by the Servicer.
(l) Amounts. The Servicer agrees to remit, or
cause to be remitted, to the Collection Account, all amounts paid as adjustments
after the Closing Date with respect to the purchase price paid for the
Receivables under the Sale and Purchase Agreement, and all amounts required to
be paid by CB&T to the Agent, Buyers, Bank Investors or Transferor pursuant to
the CB&T Agreement and received by the Servicer, all of the foregoing to be
deemed part of "Collections."
SECTION 5.4. Negative Covenants of the Servicer. At all times
from the date hereof to the later to occur of (i) the Termination Date or (ii)
the date on which the Buyers' Net Investment has been reduced to zero, all
Carrying Costs, all other Aggregate Unpaids and all Buyer B Distributions shall
have been paid in full, in cash, unless the Agent shall otherwise consent in
writing:
(a) No Extension or Amendment of Receivables.
Except as otherwise permitted in Section 6.2 hereof and the Credit Card
Guidelines, the Servicer will not extend, amend or otherwise modify the terms of
any Receivable, or amend, modify or waive any term or condition of any Account
related thereto.
(b) No Change in Business or Credit Card
Guidelines. The Servicer will not make any change in the character of its
business or in the Credit Card Guidelines, which change would, in either case,
impair the collectibility of any substantial portion of the Receivables or
otherwise result in a material adverse effect on the Agent's, Bank Investors' or
Buyers' interest in the Receivables or the collectibility thereof.
(c) Marketing or Sale of Accounts. The Servicer will
not, and will not permit any
of its Affiliates to, market for balance transfers any Accounts with respect to
which Transferred Interests in Receivables have been conveyed hereunder, except
for Accounts with Defaulted Receivables and other credit card accounts,
provided, that, such credit card accounts shall constitute Accounts hereunder
and the receivables created thereunder shall constitute Receivables hereunder.
(d) Amendment to Transaction Documents. The
Servicer will not amend, modify, or supplement any Transaction Document to which
it is a party or waive any provisions thereof, in each case except with the
prior written consent of the
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Agent and the Administrative Agent, except that no such consent shall be
required with respect to any amendment to the Affinity Card Agreement or
Facilities Management Agreement; provided, however, that each of the Buyers, the
Bank Investors and the Agent agrees that any termination or revocation of, or
reduction in, the Letter of Credit (as such term is defined in the Affinity Card
Agreement) with the consent of CB&T shall be deemed not to have a material
adverse effect on the interests of the Buyers or the Bank Investors and shall
not require any consent of the Agent or the Administrative Agent (but notice
thereof shall be provided to the Agent); nor shall the Servicer take any other
action under such Transaction Documents that shall have a material adverse
effect on the interests of the Buyers, the Liquidity Providers, the Credit
Support Provider, or the Bank Investors or which is inconsistent with the terms
of such Transaction Document. The Servicer shall deliver to the Agent promptly
copies of all changes or amendments to the Affinity Card Agreement and the
Facilities Management Agreement.
(e) No Rescission or Cancellation. The Servicer
shall not permit any rescission or cancellation of any Receivable except in
accordance with the Credit Card Guidelines or as ordered by a court of competent
jurisdiction or other Governmental Authority.
(f) Protection of Buyers' Rights. The Servicer shall
take no action which, nor omit to take any action the omission of which, would
impair the rights of the Buyers or the Bank Investors, as the case may be, in
any 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.
(g) Receivable 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 (as defined in the UCC) and if any Receivable is so evidenced as a
result of the Servicer's actions it shall be treated as a Receivable which is
subject to Section 2.9(b) hereof.
ARTICLE VI
ADMINISTRATION AND COLLECTIONS
SECTION 6.
SECTION 6.1. Appointment of Servicer. The servicing,
administering and collection of the Receivables shall be conducted by such
Person (the "Servicer") so designated from time to time in accordance with this
Section 6.1. CompuCredit is hereby designated as, and hereby agrees to perform
the duties and obligations of, the Servicer pursuant to the terms hereof. The
Servicer may not, except pursuant to the CB&T Agreement, delegate any of its
rights, duties or obligations hereunder, or designate a substitute Servicer,
without the prior written consent of the Agent, and provided that the Servicer
shall continue to remain solely liable for the performance of the duties as
Servicer hereunder notwithstanding any such delegation hereunder. The
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Agent may, and upon the direction of the Majority Investors the Agent shall,
after the occurrence of a Servicer Default designate as Servicer any Person
(including itself) to succeed CompuCredit or any successor Servicer, on the
condition in each case that any such Person so designated shall agree to perform
the duties and obligations of the Servicer pursuant to the terms hereof. The
Agent may notify any Obligor of the Transferred Interest.
SECTION 6.2. Duties of Servicer.
(a) The Servicer shall take or cause to be taken
all such action as may be necessary or advisable to collect each Receivable from
time to time, all in accordance with applicable laws, rules and regulations,
with reasonable care and diligence, and in accordance with the Credit Card
Guidelines. Each of the Transferor, the Buyers, the Agent and the Bank Investors
hereby appoints as its agent the Servicer, from time to time designated pursuant
to Section 6.1 hereof, to enforce its respective rights and interests in and
under the Affected Assets. To the extent permitted by applicable law, each of
the Transferor and the existing Servicer hereby grants to any Servicer appointed
hereunder an irrevocable power of attorney to take any and all steps in the
Transferor's and/or the existing Servicer's name and on behalf of the Transferor
or the existing Servicer necessary or desirable, in the reasonable determination
of the Servicer, to collect all amounts due under any and all Receivables,
including, without limitation, endorsing the Transferor's and/or the existing
Servicer's name on checks and other instruments representing Collections and
enforcing such Receivables and the related Accounts. The Servicer shall set
aside for the account of the Transferor and the Agent their respective allocable
shares of the Collections of Receivables in accordance with Section 2.5 hereof.
The Servicer shall segregate and deposit to the Agent's account the Agent's
allocable share of Collections of Receivables when required pursuant to Article
II hereof. The Transferor shall deliver to the Servicer and the Servicer shall
hold in trust for the Transferor and the Agent, on behalf of the Buyers and the
Bank Investors, in accordance with their respective interests, all Records which
evidence or relate to Receivables or Related Security. The Servicer shall not
make the Agent, the Buyers or any of the Bank Investors a party to any
litigation without the prior written consent of such Person.
(b) The Servicer shall, as soon as practicable
following receipt thereof, turn over to the Transferor any collections of any
indebtedness of any Person which is not on account of a Receivable. The
Servicer, if other than the Transferor or CompuCredit or an Affiliate of the
Transferor or CompuCredit, shall as soon as practicable upon demand, deliver to
CompuCredit all Records in its possession which evidence or relate to
indebtedness of an Obligor which is not a Receivable.
(c) Notwithstanding anything to the contrary
contained in this Article VI, the Servicer, if not the Transferor, CompuCredit
or any Affiliate of the Transferor or CompuCredit, shall have no obligation to
collect, enforce or take any other action described in this Article VI with
respect to any indebtedness that is not included
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in the Transferred Interest other than to deliver to the Transferor the
collections and documents with respect to any such indebtedness as described in
Section 6.2(b) hereof.
SECTION 6.3. Rights After Designation of New Servicer.
At any time following the designation of a Servicer (other than the Transferor,
CompuCredit or any Affiliate of the Transferor or CompuCredit) pursuant to
Section 6.1 hereof:
(i) The Agent may direct that payment
of all amounts payable under any Receivable be made
directly to the Agent or its designee.
(ii) The Transferor shall, at the Agent's
request and at the Transferor's expense, give notice of the
Agent's, the Transferor's, Buyer B's, Buyer A's and/or the
Bank Investors' respective undivided interests in the
Receivables to each Obligor and direct that payments be
made directly to the Agent or its designee.
(iii) The Transferor shall, at the
Agent's request, (A) assemble all of the Records, and shall
make the same available to the Agent or its designee at a
place selected by the Agent or its designee, and (B)
segregate all cash, checks and other instruments received
by it from time to time constituting Collections of
Receivables in a manner acceptable to the Agent and shall,
promptly upon receipt, remit all such cash, checks and
instruments, duly endorsed or with duly executed
instruments of transfer, to the Agent or its designee.
(iv) The Transferor and the existing
Servicer hereby authorize the Agent to take any and all
steps in the Transferor's or the existing Servicer's name
and on behalf of the Transferor and the existing Servicer
necessary or desirable, in the determination of the Agent,
to collect all amounts due under any and all Receivables,
including, without limitation, endorsing the Transferor's
or the existing Servicer's name on checks and other
instruments representing Collections and enforcing such
Receivables and the related Accounts.
SECTION 6.4. Servicer Default. The occurrence of any one
or more of the following events shall constitute a Servicer Default:
(a) the Servicer shall fail to make any payment,
transfer or deposit required to be made by it hereunder within five Business
Days after the date on which it was required to be made hereunder; or
(b) the Servicer shall fail duly to observe or
perform in any material respect any other covenants or agreements of the
Servicer set forth in this Agreement, which continues unremedied for a period of
10 days; or the Servicer shall assign or delegate its duties under this
Agreement, except as permitted by Section 6.1
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hereof; or
(c) any representation, warranty, certification
or statement made by the Servicer in this Agreement or in any of the other
Transaction Documents or in any certificate or report delivered by it pursuant
to any of the foregoing shall prove to have been incorrect when made or deemed
made, which has a material adverse effect on the rights of the Agent, the Buyers
or the Bank Investors and which continues for a period of 10 days; or
(d) any Event of Bankruptcy shall occur with respect
to the Servicer.
SECTION 6.5. Responsibilities of the Transferor. Anything
herein to the contrary notwithstanding, the Transferor shall (i) perform all of
its obligations under the Accounts related to the Receivables to the same extent
as if interests in such Receivables had not been transferred hereunder and the
exercise by the Agent, the Buyers and the Bank Investors of their rights
hereunder and under the Receivables Purchase Agreement shall not relieve the
Transferor from such obligations and (ii) pay when due any taxes, including
without limitation, any sales taxes payable in connection with the Receivables
and their creation and satisfaction. Neither the Agent, the Buyers nor any of
the Bank Investors shall have any obligation or liability with respect to any
Receivable or related Accounts, nor shall it be obligated to perform any of the
obligations of CAC or the Transferor thereunder.
ARTICLE VII
TERMINATION EVENTS
SECTION 7.1. Termination Events. The occurrence of any
one or more of the following events shall constitute a Termination Event:
(a) any representation or warranty made by the
Transferor in any Transaction Document shall prove to have been incorrect when
made, and as a result of which the interests of the Agent, the Buyers or the
Bank Investors hereunder are materially and adversely affected;
(b) any failure by the Transferor to make any
payment, transfer or deposit on or before the date such payment, transfer or
deposit is required to be made under the terms of this Agreement which continues
unremedied for a period of five Business Days;
(c) failure on the part of the Transferor duly
to observe or perform in any material respect any other covenants or agreements
of the Transferor set forth in any Transaction Document and which continues
unremedied for a period of 10 days;
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(d) a failure by the Transferor, CompuCredit or
any direct Affiliate thereof to perform any term, provision or condition
contained in any agreement to which any such Person is a party and under which
any Indebtedness owing by the Transferor, CompuCredit or any direct Affiliate
thereof greater than $5,000,000 was created or is governed, regardless of
whether such failure constitutes an "event of default" or "default" under any
such agreement; or any Indebtedness owing by the Transferor, CompuCredit or any
direct affiliate thereof (other than Indebtedness of CompuCredit of the type
described in clause (vi) of the definition of "Indebtedness") greater than
$5,000,000 shall be declared to be due and payable or required to be prepaid
(other than by a regularly scheduled payment) prior to the date of maturity
thereof;
(e) any Event of Bankruptcy shall occur with
respect to the Transferor, the Account Owner, the Servicer or the Sub-Servicer;
(f) the Agent, on behalf of the Buyers and the
Bank Investors, shall, for any reason, fail or cease to have a valid and
perfected first priority security interest in the Receivables;
(g) a Servicer Default shall have occurred, and
as a result of which the interests of the Agent, the Buyers or the Bank
Investors are materially and adversely affected;
(h) there shall have occurred any material
adverse change in the operations of the Transferor, Servicer or Sub-Servicer, or
any other event, which materially adversely affects the Transferor's, Servicer's
or Sub-Servicer's ability either to collect upon the Receivables or to perform
its obligations under the Transaction Documents;
(i) the Liquidity Provider or the Credit Support
Provider shall have given notice that an event of default has occurred and is
continuing under any of its respective agreements with Buyer A;
(j) the Subordinate Percentage is less than the
Required Subordinate Percentage;
(k) CB&T or CAC shall default in the performance
of any payment or undertaking to be performed or observed by it under the CB&T
Agreement, Affinity Card Agreement or the Facilities Management Agreement and
such default shall continue beyond any applicable grace period and shall have a
material adverse effect on the interests of the Agent, the Buyers or the Bank
Investors;
(l) for so long as the Affinity Card Agreement
is in effect, the Letter of Credit (as such term is defined in the Affinity Card
Agreement) maintained by CompuCredit in favor of CB&T pursuant to Section 3.3 of
the Affinity Card Agreement shall, without the consent of CB&T, be terminated,
revoked or reduced, or shall be
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drawn on, and such termination, revocation or reduction shall not have been
remedied within five days and, in the case of a drawing, such drawing shall not
have been reimbursed within five days;
(m) if CB&T is acting as Servicer or
Sub-Servicer with respect to the Receivables or the Accounts in any material
respect, the rating of the senior unsecured debt of CB&T is downgraded below
Baa2 by Moody's or BBB by Standard & Poor's, respectively;
(n) CompuCredit Corporation shall at any time
fail to own more than 50% of the outstanding voting stock of CompuCredit
Acquisition Corporation or CompuCredit Acquisition Corporation shall at any time
fail to own more than 50% of the outstanding voting stock of the Transferor;
(o) any of Messrs. David G. Hanna, Brett M. Samsky or
Richard Gilbert shall cease to be employed by CompuCredit, its Affiliates or
agents, and such individual's position shall not be filled within 60 days of
such individual's termination of employment or status as an agent by an
individual approved by the Administrative Agent;
(p) the Payment Rate for any of the months
ending after the Closing Date set forth below shall be equal to or less than the
percentage set forth opposite such month below:
<TABLE>
<CAPTION>
Month After Closing Date Percentage
------------------------ ----------
<S> <C>
Months 7 through 9 2.1%
Months 10 through 15 2.2%
Months 16 through 20 2.3%
Months 21 through 25 2.5%
Month 26 and thereafter 3.0%;
</TABLE>
(q) the Charge-Off Rate for any of the months
ending after the Closing Date set forth below shall equal or exceed the
percentage set forth opposite such month below:
<TABLE>
<CAPTION>
Month After Closing Date Percentage
------------------------ ----------
<S> <C>
Month 7 35%
Month 8 34%
Month 9 33%
Month 10 32%
Month 11 31%;
</TABLE>
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(r) the Three-Month Average Charge-Off Rate for
any of the months ending after the Closing Date set forth below shall equal or
exceed the percentage set forth opposite such month below:
<TABLE>
<CAPTION>
Month After Closing Date Percentage
------------------------ ----------
<S> <C>
Months 12 through 17 30%
Months 18 through 24 27%
Month 25 and thereafter 22%;
</TABLE>
(s) the Transferor consolidates or merges with
or into any other Person, except that the Transferor may merge with or into
another Person so long as (a) the surviving entity is either the Transferor or a
Subsidiary of CompuCredit, (b) no Termination Event would occur as a result of
such merger and (c) where a Subsidiary of CompuCredit is the surviving entity,
such Subsidiary assumes in writing all obligations of the Transferor under the
Transaction Documents;
(t) CompuCredit consolidates or merges with or into
any other Person, except that CompuCredit may merge with or into another Person
so long as (a) the surviving entity is either the Servicer or a Subsidiary of
CompuCredit, (b) no Termination Event would occur as a result of such merger and
(c) where a Subsidiary of CompuCredit is the surviving entity, such Subsidiary
assumes in writing all obligations of CompuCredit under the Transaction
Documents; or
(u) any failure by CompuCredit to perform any
term, provision or condition of the Guaranty and, in the case of its failure to
make a payment under the Guaranty, such payment equals or exceeds $500,000
individually or in the aggregate.
SECTION 7.2. Termination.
(a) Upon the occurrence of any Termination
Event, the Agent may, or at the direction of the Majority Investors shall, by
notice to the Transferor and the Servicer declare the Termination Date to have
occurred; provided, however, that in the case of any event described in Section
7.1(e) or 7.1(f) above, the Termination Date shall be deemed to have occurred
automatically upon the occurrence of such event unless such Termination Event
shall have been waived by the Majority Investors. Upon any such declaration or
automatic occurrence, the Agent shall have, in addition to all other rights and
remedies under this Agreement or otherwise, all other rights and remedies
provided under the UCC of the applicable jurisdiction and other applicable laws,
all of which rights shall be cumulative.
(b) At all times after the declaration or
automatic occurrence of the Termination Date pursuant to Section 7.2(a), the
Base Rate plus 2.00% shall be the Applicable Rate applicable to Buyer A's Net
Investment.
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(c) Upon the occurrence of a Termination Event,
unless waived by the Agent, the Transferor shall have the option of repurchasing
the Transferred Interest as further set forth in, and by payment of the amounts
specified in, the Purchase Option Agreement.
(d) Any waiver of a Termination Event under this
Section (or any other waiver under this Agreement) may be made upon written
notice to the Transferor for any period of time specified by the Agent, or may
be a permanent waiver. In the event that any such period is specified, the Agent
may, in its sole discretion upon written notice to the Transferor, extend such
waiver for a further period or periods, or upon written notice to the Transferor
may declare a Termination Event after any such period has expired, all without
prejudice to its further rights and remedies hereunder.
SECTION 7.3. Optional Repurchase.
(a) On any day occurring on or after the date on
which the Buyers' Net Investment is reduced to 10% or less of the Buyers'
Initial Net Investment at any time on or after the Closing Date, the Transferor
may, at its option, purchase Buyer A's Net Investment and/or Buyer B's Net
Investment, at a purchase price equal to (i) if such day is a Remittance Date,
the applicable Reassignment Amount for such Remittance Date or (ii) if such day
is not a Remittance Date, the applicable Reassignment Amount for the Remittance
Date following such day.
(b) The Transferor shall give the Servicer and the
Agent at least 30 days prior
written notice of the date on which the Transferor intends to exercise such
purchase option. Not later than 11:00 a.m., New York City time, on such day the
Transferor shall deposit the applicable Reassignment Amount into the Collection
Account in immediately available funds. Such purchase option is subject to
payment in full of the applicable Reassignment Amount. Following the deposit of
the applicable Reassignment Amount into the Collection Account in accordance
with the foregoing, Buyer A's Net Investment or Buyer B's Net Investment, as the
case may be, shall be reduced to zero and Buyer A or Buyer B, as applicable,
shall have no further interest in the Receivables. The Reassignment Amount shall
be distributed as set forth in accordance with the priorities set forth in
Section 2.5.
ARTICLE VIII
INDEMNIFICATION; EXPENSES; RELATED MATTERS
SECTION 8.1. Indemnities by the Transferor. (a) Without
limiting any other rights which the Agent, the Buyers or the Bank Investors may
have hereunder or under applicable law, the Transferor hereby agrees to
indemnify the Buyers, the Bank Investors, the Agent, the Administrative Agent,
the Collateral Agent, the Liquidity Provider and the Credit Support Provider and
any successors and permitted assigns and any of their respective officers,
directors and employees (collectively, "Indemnified
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Parties") from and against any and all damages, losses, claims, liabilities,
costs and expenses, including, without limitation, reasonable and actual
attorneys' fees (which such attorneys may be employees of the Liquidity
Provider, the Credit Support Provider, the Agent, the Administrative Agent or
the Collateral Agent, as applicable) and disbursements (all of the foregoing
being collectively referred to as "Indemnified Amounts") awarded against or
incurred by any of them in any action or proceeding between the Transferor or
CompuCredit (including, in its capacity as the Servicer) and any of the
Indemnified Parties or between any of the Indemnified Parties and any third
party or otherwise arising out of or as a result of this Agreement, the other
Transaction Documents, the ownership or maintenance, either directly or
indirectly, by the Agent, the Buyers or any Bank Investor of the Transferred
Interest or any of the other transactions contemplated hereby or thereby,
excluding, however, (i) Indemnified Amounts to the extent resulting from gross
negligence or willful misconduct on the part of an Indemnified Party, (ii)
recourse (except as otherwise specifically provided in this Agreement) for
uncollectible Receivables, (iii) Indemnified Amounts specifically excluded from
coverage under Sections 8.2, 8.3 and 8.4 and (iv) Taxes and Excluded Taxes.
Without limiting the generality of the foregoing, the Transferor shall indemnify
each Indemnified Party for Indemnified Amounts relating to or resulting from:
(i) any representation or warranty made
by the Transferor or any officers of the Transferor under or in
connection with this Agreement, the Receivable Purchase Agreement, any
of the other Transaction Documents, any Monthly Servicer Report or any
other information or report delivered by the Transferor or the
Servicer pursuant hereto, which shall have been false or incorrect in
any material respect when made or deemed made;
(ii) the failure by the Transferor to comply
with any applicable law, rule or regulation with respect to any
Receivable or the related Account, or the nonconformity of any
Receivable or the related Account with any such applicable law, rule
or regulation;
(iii) the failure to vest and maintain
vested in the Agent, on behalf of the Buyers and the Bank Investors,
an undivided first priority, perfected security interest (to the
extent of the Transferred Interest) in the Affected Assets free and
clear of any Adverse Claim (except as may be expressly permitted under
the Transaction Documents);
(iv) the failure to file, or any delay in
filing, financing statements, continuation statements, or other
similar instruments or documents under the UCC of any applicable
jurisdiction or other applicable laws with respect to any of the
Affected Assets;
(v) any dispute, claim, offset or
defense (other than discharge in bankruptcy) of the Obligor to the
payment of any Receivable (including, without limitation, a defense
based on such Receivable or the related
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Account not being the legal, valid and binding obligation of such
Obligor 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, 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)), or any other claim resulting from the sale of merchandise or
services related to such Receivable or the furnishing or failure to
furnish such merchandise or services;
(vi) any products liability claim or
personal injury or property damage suit or other similar or related
claim or action of whatever sort arising out of or in connection with
merchandise or services which are the subject of any Receivable;
(vii) the failure by the Transferor to
comply with any term, provision or covenant contained in this
Agreement or any of the other Transaction Documents to which it is a
party or to perform any of its respective duties under the Accounts;
(viii) any repayment by any Indemnified
Party of any amount previously distributed in reduction of the Buyers'
Net Investment which such Indemnified Party believes in good faith is
required to be made;
(ix) the commingling by the Transferor or
the Servicer of Collections of Receivables at any time with other
funds;
(x) any investigation, litigation or
proceeding related to this Agreement, any of the other Transaction
Documents, the use of proceeds of Transfers by the Transferor, the
interests in the Transferred Interests, or any Receivable or Related
Security;
(xi) any inability to obtain any judgment in
or utilize the court or other adjudication system of, any state in
which an Obligor may be located as a result of the failure of the
Transferor to qualify to do business or file any notice of business
activity report or any similar report;
(xii) any failure of the Transferor to give
reasonably equivalent value to CAC in consideration of the purchase by
the Transferor from CAC of any Receivable, or any attempt by any
Person to void, rescind or set-aside any such transfer under statutory
provisions or common law or equitable action, including, without
limitation, any provision of the Bankruptcy Code; or
(xiii) any action taken by the Transferor in
the enforcement or collection of any Receivable;
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provided, however, that if Buyer A enters into agreements for
the purchase of interests in receivables from one or more Other Transferors,
Buyer A shall allocate such Indemnified Amounts which are in connection with the
Liquidity Provider Agreement, the Credit Support Agreement or the credit support
furnished by the Credit Support Provider to the Transferor and each Other
Transferor; and provided, further, that if such Indemnified Amounts are
attributable to the Transferor or the Servicer and not attributable to any Other
Transferor, the Transferor shall be solely liable for such Indemnified Amounts
or if such Indemnified Amounts are attributable to Other Transferors and not
attributable to the Transferor or the Servicer, such Other Transferors shall be
solely liable for such Indemnified Amounts.
(b) Procedures. Promptly after receipt by an
Indemnified Party under Section 8.1 of written notice of any damage, loss or
expense in respect of which indemnity may be sought hereunder by it, such
Indemnified Party will, if a claim is to be made against the Transferor, notify
the Transferor thereof in writing; but the omission so to notify the Transferor
will not relieve the Transferor from any liability (otherwise than under this
Section 8.1) which it may have to any Indemnified Party except as may be
required or provided otherwise than under this Section 8.1. Thereafter, the
Indemnified Party and the Transferor shall consult, to the extent appropriate,
with a view to minimizing the cost to the Transferor of its obligations
hereunder. In case any Indemnified Party receives written notice of any damage,
loss or expense in respect of which indemnity may be sought hereunder by it and
it notifies the Transferor thereof, the Transferor will be entitled to
participate therein, and to the extent that it may elect by written notice
delivered to the Indemnified Party promptly after receiving the aforesaid notice
from such Indemnified Party, to assume the defense thereof, with counsel
reasonably satisfactory at all times to such Indemnified Party; provided,
however, that if the parties against which any damage, loss or expense arises
include both the Indemnified Party and the Transferor and the Indemnified Party
shall have reasonably concluded that there may be legal defenses available to it
or other Indemnified Parties which are different from or additional to those
available to the Transferor and may conflict therewith, the Indemnified Party or
Parties shall have the right to select one separate counsel for such Indemnified
Party or Parties to assume such legal defenses and otherwise to participate in
the defense of such damage, loss or expenses on behalf of such Indemnified Party
or Parties. Upon receipt of notice from the Transferor to such Indemnified Party
of its election to assume the defense of such damage, loss or expense and
approval by the Indemnified Party of counsel, the Transferor shall not be liable
to such Indemnified Party under this Section 8.1 for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof unless (i) the Indemnified Party shall have employed such counsel in
connection with assumption of legal defenses in accordance with the proviso to
the next preceding sentence, (ii) the Transferor shall not have employed and
continued to employ counsel reasonably satisfactory to the Indemnified Party to
represent the Indemnified Party within a reasonable time after notice of
commencement of the action or (iii) the Transferor shall have authorized the
employment of counsel for the Indemnified Party at the expense of the
Transferor.
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(c) Notwithstanding any other provisions
contained in this Section 8.1, (i) the Transferor shall not be liable for any
settlement, compromise or consent to the entry of any order adjudicating or
otherwise disposing of any damage, loss, or expense effected without its consent
and (ii) after the Transferor has assumed the defense of any damage, loss or
expense under Section 8.1 with respect to any Indemnified Party, it will not
settle, compromise or consent to entry of any order adjudicating or otherwise
disposing thereof (1) if such settlement, compromise or order involved the
payment of money damages except if the Transferor agrees with such Indemnified
Party to pay such money damages and, if not simultaneously paid, to furnish such
Indemnified Party with satisfactory evidence of its ability to pay such money
damages, (2) if such settlement, compromise or order involves any relief against
such Indemnified Party, other than the payment of money damages, except with the
prior written consent of such Indemnified Party and (3) if such settlement,
compromise or order does not provide a full release of the Indemnified Party,
without the prior written consent of such Indemnified Party.
(d) Each Indemnified Party shall use its good faith
efforts to mitigate, reduce or eliminate any losses, expenses or claims for
indemnification pursuant to this Section 8.1.
SECTION 8.2. Indemnity for Taxes, Reserves and Expenses. (a)
If after the date hereof, the adoption of any Law or bank regulatory guideline
or any amendment or change in the interpretation of any existing or future Law
or bank regulatory guideline by any Governmental Authority charged with the
administration, interpretation or application thereof, or the compliance with
any directive of any Governmental Authority (in the case of any bank regulatory
guideline, whether or not having the force of Law):
(i) shall subject any Indemnified Party
other than Buyer B to any tax, duty or other charge (other than Excluded
Taxes) with respect to this Agreement, the other Transaction Documents, the
ownership, maintenance or financing of the Transferred Interest, the
Receivables or payments of amounts due hereunder, or shall change the basis
of taxation of payments to any Indemnified Party other than Buyer B of
amounts payable in respect of this Agreement, the other Transaction
Documents, the ownership, maintenance or financing of the Transferred
Interest, the Receivables or payments of amounts due hereunder or its
obligation to advance funds hereunder, under the Liquidity Provider
Agreement or the credit support furnished by the Credit Support Provider or
otherwise in respect of this Agreement, the other Transaction Documents,
the ownership, maintenance or financing of the Transferred Interest or the
Receivables (except for changes in the rate of general corporate,
franchise, net income or other income tax imposed on such Indemnified Party
other than Buyer B);
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(ii) shall impose, modify or deem applicable
any reserve, special deposit or similar requirement (including, without
limitation, any such requirement imposed by the Board of Governors of the
Federal Reserve System) against assets of, deposits with or for the account
of, or credit extended by, any Indemnified Party or shall impose on any
Indemnified Party or on the United States market for certificates of
deposit or the London interbank market any other condition affecting this
Agreement, the other Transaction Documents, the ownership, maintenance or
financing of the Transferred Interest, the Receivables or payments of
amounts due hereunder or its obligation to advance funds hereunder, under
the Liquidity Provider Agreement or the credit support provided by the
Credit Support Provider or otherwise in respect of this Agreement, the
other Transaction Documents, the ownership, maintenance or financing of the
Transferred Interest or the Receivables; or
(iii) other than Taxes or Excluded Taxes,
imposes upon any Indemnified Party any other expense (including, without
limitation, reasonable attorneys' fees and expenses, and expenses of
litigation or preparation therefor in contesting any of the foregoing) with
respect to this Agreement, the other Transaction Documents, the ownership,
maintenance or financing of the Transferred Interest, the Receivables or
payments of amounts due hereunder or its obligation to advance funds
hereunder under the Liquidity Provider Agreement or the credit support
furnished by the Credit Support Provider or otherwise in respect of this
Agreement, the other Transaction Documents, the ownership, maintenance or
financing of the Transferred Interests or the Receivables;
and the result of any of the foregoing is to increase the cost to such
Indemnified Party with respect to this Agreement, the other Transaction
Documents, the ownership, maintenance or financing of the Transferred Interest,
the Receivables, the obligations hereunder, the funding of any purchases
hereunder, the Liquidity Provider Agreement or the Credit Support Agreement, by
an amount deemed by such Indemnified Party to be material, then, within ten (10)
days after demand by such Indemnified Party through the Agent, the Transferor
shall pay to the Agent, for the benefit of such Indemnified Party, such
additional amount or amounts as will compensate such Indemnified Party for such
increased cost or reduction.
(b) If any Indemnified Party shall have
determined that after the date hereof, the adoption of any applicable Law or
bank regulatory guideline regarding capital adequacy, or any change therein, or
any change in the interpretation thereof by any Governmental Authority, or any
directive regarding capital adequacy (in the case of any bank regulatory
guideline, whether or not having the force of law) of any such Governmental
Authority, has or would have the effect of reducing the rate of return on
capital of such Indemnified Party as a consequence of such Indemnified Party's
obligations hereunder or with respect hereto to a level below that which such
Indemnified Party (or its parent) could have achieved but for such adoption,
change,
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request or directive (taking into consideration its policies with
respect to capital adequacy) by an amount deemed by such Indemnified Party to be
material, then from time to time, within ten (10) days after demand by such
Indemnified Party through the Agent, the Transferor shall pay to the Agent, for
the benefit of such Indemnified Party, such additional amount or amounts as will
compensate such Indemnified Party (or its parent) for such reduction.
(c) The Buyers and each Bank Investor will promptly
notify the Agent and the Agent will promptly notify the Transferor of any event
of which it has knowledge, occurring after the date hereof, which will entitle
an Indemnified Party to compensation pursuant to this Section 8.2, provided,
that any failure by any such Person to deliver any such notice shall not impair
or affect in any manner the Transferor's obligations under this Section. A
notice by the Agent or the applicable Indemnified Party claiming compensation
under this Section and setting forth the additional amount or amounts to be paid
to it hereunder shall be conclusive in the absence of manifest error, provided
that such determinations and allocations are made in good faith and on a
reasonable basis, reasonable written evidence (including an explanation of the
applicable regulatory change and a reasonably detailed computation of an
accounting for any amounts demanded) of which shall be provided to the
Transferor upon request. In determining such amount, the Agent or any applicable
Indemnified Party may use any reasonable averaging and attributing methods.
(d) Each Indemnified Party agrees that it will use
reasonable efforts to reduce or eliminate any claim for indemnity pursuant to
this Section 8.2 including, subject to applicable law, a change in the funding
office of such Indemnified Party; provided, however, that nothing contained
herein shall obligate any Indemnified Party to take any action that imposes on
such Indemnified Party any additional costs or legal or regulatory burdens which
such Indemnified Party reasonably considers material, nor which, in such
Indemnified Party's reasonable opinion, would have an adverse effect on its
business, operations or financial condition.
(e) In determining amounts indemnified against under
this Section 8.2, the parties shall take into account any Tax benefits to the
Indemnified Party of the payment of Tax and the receipt of the indemnity
provided for this Section 8.2.
(f) Anything in this Section 8.2 to the contrary
notwithstanding, if Buyer A enters into agreements for the acquisition of
interests in receivables from one or more Other Transferors, Buyer A shall
allocate the liability for any amounts under this Section 8.2 which are in
connection with the Liquidity Provider Agreement, the Credit Support Agreement
or the credit support provided by the Credit Support Provider ("Section 8.2
Costs") to the Transferor and each Other Transferor; provided, however, that if
such Section 8.2 Costs are attributable to the Transferor, CAC or the Servicer
and not attributable to any Other Transferor, the Transferor shall be solely
liable for such Section 8.2 Costs or if such Section 8.2 Costs are attributable
to Other
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Transferors and not attributable to the Transferor, CAC or the
Servicer, such Other Transferors shall be solely liable for such Section 8.2
Costs.
(g) Each Indemnified Party agrees to promptly notify
the Transferor if such Person receives notice of any potential tax assessment by
any federal, state or local tax authority for which the Transferor may be liable
pursuant to Section 8.2 or 8.3 hereof. Each Indemnified Party further agrees
that the Transferor shall bear no cost (including costs relating to penalties
and interest) relating to the failure of such Person to file in a timely manner
any tax returns required to be filed by such Person in accordance with
applicable statutes and regulations.
SECTION 8.3. Taxes. All payments made hereunder by the
Transferor, CompuCredit or the Servicer (each, a "payor") to the Buyers, any
Bank Investor or the Agent (each, a "recipient") shall be made free and clear of
and without deduction for any present or future income, excise, stamp or
franchise taxes and any other taxes, fees, duties, withholdings or other charges
of any nature whatsoever imposed by any taxing authority on any recipient (or
any assignee of such parties), but excluding (i) income and withholding taxes
(including, without limitation, branch profits taxes, minimum taxes and taxes
computed under alternative methods, at least one of which is based on net
income) and franchise taxes that are based on income or any other tax upon or
measured by income or gross receipts imposed on a recipient, in each case as a
result of a present or former connection between the jurisdiction of the
government or taxing authority imposing such tax and such recipient (including,
without limitation, withholding taxes attributable to the treatment of the
recipient as having "effectively connected taxable income" within the meaning of
Section 1446(c) of the Code); (ii) any taxes, levies, imposts, duties, charges,
or fees that would not have been imposed but for the failure by such recipient
to provide and keep current certification or other documentation required to
qualify for an exemption from or reduced rate thereof; and (iii) any taxes,
levies, imposts, duties, charges, or fees imposed as a result of change by any
recipient of the office in which any purchase hereunder is made, accounted for
or booked other than those Taxes that would have been applicable if such office
had not been changed, including any such change pursuant to any Requirement of
Law and any change in circumstances which, in the good faith judgment of the
recipient and the Transferor leaves such recipient no practicable alternative
except to change such office or as a result of the sale, transfer or assignment
by any recipient of its interest hereunder (all such exclusions being herein
called "Excluded Taxes" and all such non-excluded taxes, levies, imposts,
duties, charges, or fees being hereinafter called "Taxes"). In the event that
any withholding or deduction from any payment made by the payor hereunder is
required in respect of any Taxes then such payor shall:
(a) pay directly to the relevant authority the
full amount required to be so withheld or deducted;
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(b) promptly forward to the Agent an official
receipt or other documentation satisfactory to the Agent evidencing such payment
to such authority; and
(c) pay to the recipient such additional amount
or amounts as is necessary to ensure that the net amount actually received by
the recipient will equal the full amount such recipient would have received had
no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against any recipient with respect
to any payment received by such recipient hereunder, the recipient may pay such
Taxes and the payor will promptly pay such additional amounts (including any
penalties, interest or expenses) as shall be necessary in order that the net
amount received by the recipient after the payment of such Taxes (including any
Taxes on such additional amount) shall equal the amount such recipient would
have received had such Taxes not been asserted.
If the payor fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the recipient the required
receipts or other required documentary evidence, the payor shall indemnify the
recipient for any incremental Taxes, interest, or penalties that may become
payable by any recipient as a result of any such failure.
SECTION 8.4. Other Costs, Expenses and Related Matters. (a)
The Transferor agrees, upon receipt of a written invoice, to pay or cause to be
paid, and to save the Buyers, the Bank Investors and the Agent harmless against
liability for the payment of, all reasonable out-of-pocket expenses (including,
without limitation, attorneys', accountants' and other third parties' fees and
expenses, any filing fees and expenses incurred by officers or employees of the
Buyers, the Bank Investors and/or the Agent or intangible, documentary or
recording taxes incurred by or on behalf of the Buyers, any Bank Investor and
the Agent) (i) in connection with the negotiation, execution, delivery and
preparation of this Agreement, the other Transaction Documents and any documents
or instruments delivered pursuant hereto and thereto and the transactions
contemplated hereby or thereby (including, without limitation, the perfection or
protection of the Transferred Interest), provided, however, that the Transferor
shall not be liable for the payment of fees of attorneys for Buyer A, the Bank
Investors and the Agent incurred in connection with this clause (i) in excess of
$120,000 and (ii) from time to time (a) relating to any amendments, waivers or
consents under this Agreement and the other Transaction Documents, (b) arising
in connection with the Buyers', any Bank Investor's, the Agent's or the
Collateral Agent's enforcement or preservation of rights (including, without
limitation, the perfection and protection of the Transferred Interest under this
Agreement), or (c) arising in connection with any audit, dispute, disagreement,
litigation or preparation for litigation involving this Agreement or any of the
other Transaction Documents (all of such amounts, collectively, "Transaction
Costs").
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(b) The Transferor shall pay the Agent, for the
account of Buyer A and the Bank Investors, as applicable, on demand any Early
Collection Fee due on account of the reduction of Buyer A's Net Investment on a
day other than the last day of a funding period.
SECTION 8.5. Amounts Limited to Available Funds.
Notwithstanding anything else in this Agreement to the contrary, the obligations
of the Transferor under this Article VIII shall be payable hereunder solely to
the extent funds are available therefor and, to the extent such funds are
insufficient or unavailable to pay any amounts owing by the Transferor pursuant
to this Article VIII, it shall not constitute a claim against the Transferor.
SECTION 8.6. Indemnification by Servicer. (a) The Servicer
shall indemnify and hold harmless the Indemnified Parties from and against any
loss, liability, expense, damage or injury suffered or sustained by reason of
willful misfeasance, bad faith, or negligence in the performance of the duties
of the Servicer or by reason of reckless disregard of obligations and duties of
the Servicer hereunder or by reason of any acts, omissions or alleged acts or
omissions of the Servicer pursuant to this Agreement; provided, however, that
the Servicer shall not indemnify any such Indemnified Party for any such loss,
liability, expense, damage or injury suffered or sustained by reason of any
action taken or omitted at the written request of such Indemnified Party; and
provided, further, that the Servicer shall not indemnify any such Indemnified
Party for any such loss, liability, expense, damage or injury incurred with
respect to any action taken by such Indemnified Party constituting fraud, gross
negligence, breach of fiduciary duty or willful misconduct, with respect to the
uncollectibility of the Receivables or with respect to any federal, state or
local income or franchise taxes (or any interest or penalties with respect
thereto) required to be paid by any such Indemnified Party in connection
herewith to any taxing authority. The Servicer shall not be liable for acts or
omissions of any successor Servicer. The provisions of this indemnity shall run
directly to and be enforceable by an injured party subject to the limitations
hereof.
(b) Promptly after receipt by an Indemnified Party under
Section 8.6 of written notice of any damage, loss or expense in respect of which
indemnity may by sought hereunder by it, such Indemnified Party will, if a claim
is to be made against the Servicer, notify the Servicer thereof in writing; but
the omission so to notify the Servicer will not relieve the Servicer from any
liability (otherwise than under this Section 8.6) which it may have to any
Indemnified Party except as may be required or provided otherwise than under
this Section 8.6. Thereafter, the Indemnified Party and the Servicer shall
consult, to the extent appropriate, with a view to minimizing the cost to the
Servicer of its obligations hereunder. In case any Indemnified Party receives
written notice of any damage, loss or expense in respect of which indemnity may
be sought hereunder by it and it notifies the Servicer thereof, the Servicer
will be entitled to participate therein, and to the extent that it may elect by
written notice delivered to the Indemnified Party promptly after receiving the
aforesaid notice from such Indemnified Party, to assume the defense thereof,
with counsel reasonably satisfactory at all times to such Indemnified Party;
provided, however, that if the parties against which any damage, loss or expense
arises include both the Indemnified Party and the Servicer and the Indemnified
Party shall have reasonably concluded that there may be legal defenses available
to it or other Indemnified Parties which are different from or additional to
those available to the Servicer and may conflict therewith, the Indemnified
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Party or parties shall have the right to select one separate counsel for such
Indemnified Party or parties to assume such legal defenses and otherwise to
participate in the defense of such damage, loss or expenses on behalf of such
Indemnified Party or parties. Upon receipt of notice from the Servicer to such
Indemnified Party of its election as to assume the defense of such damage, loss,
or expense and approval by the Indemnified Party of counsel, the Servicer shall
not be liable to such Indemnified Party under this Section 8.6 for any legal or
other expenses subsequently incurred by such Indemnified Party in connection
with the defense thereof unless (i) the Indemnified Party shall have employed
such counsel in connection with assumption of legal defenses in accordance with
the proviso to the next preceding sentence, (ii) the Servicer shall not have
employed and continued to employ counsel reasonably satisfactory to the
Indemnified Party to represent the Indemnified Party within a reasonable time
after notice of commencement of the action or (iii) the Servicer shall have
authorized the employment of counsel for the Indemnified Party at the expense of
the Servicer.
(c) Notwithstanding any other provisions contained in this
Section 8.6, (i) the Servicer shall not be liable for any settlement, compromise
or consent to the entry of any order adjudicating or otherwise disposing of any
damage, loss, or expense effected without its consent and (ii) after the
Servicer has assumed the defense of any damage, loss or expense under Section
8.6(b) with respect to any Indemnified Party, it will not settle, compromise or
consent to entry of any order adjudicating or otherwise disposing thereof (1) if
such settlement, compromise or order involved the payment of money damages
except if the Servicer agrees with such Indemnified Party to pay such money
damages and, if not simultaneously paid, to furnish such Indemnified Party with
satisfactory evidence of its ability to pay such money damages, (2) if such
settlement, compromise or order involves any relief against such Indemnified
Party, other than the payment of money damages, except with the prior written
consent of such Indemnified Party and (3) if such settlement, compromise or
order does not provide a full release of the Indemnified Party, without the
prior written consent of such Indemnified Party.
ARTICLE IX
THE AGENT; BANK COMMITMENT
SECTION 9.1. Authorization and Action. Each of the Buyers and
each Bank Investor hereby irrevocably appoints and authorizes the Agent to act
as its agent under this Agreement and the other Transaction Documents with such
powers and
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discretion as are specifically delegated to the Agent by the terms of
this Agreement and the other Transaction Documents, together with such other
powers as are reasonably incidental thereto. The Agent (which term as used in
this sentence and in Section 9.5 and the first sentence of Section 9.6 hereof
shall include its affiliates and its own and its affiliates' officers,
directors, employees, and agents): (a) shall not have any duties or
responsibilities except those expressly set forth in this Agreement and shall
not be a trustee or fiduciary for the Buyers or any Bank Investor; (b) shall not
be responsible to the Buyers or any Bank Investor for any recital, statement,
representation or warranty (whether written or oral) made in or in connection
with any Transaction Document or any certificate or other document referred to
or provided for in, or received by any of them under, any Transaction Document,
or for the value, validity, effectiveness, genuineness, enforceability, or
sufficiency of any Transaction Document, or any other document referred to or
provided for therein or for any failure by any of the Transferor, CAC,
CompuCredit or any other Person to perform any of its obligations thereunder;
(c) shall not be responsible for or have any duty to ascertain, inquire into, or
verify the performance or observance of any covenants or agreements by any of
the Transferor, CAC or the Servicer or the satisfaction of any condition or to
inspect the property (including the books and records) of any of the Transferor,
CAC or the Servicer or any of their Subsidiaries or Affiliates; (d) shall not be
required to initiate or conduct any litigation or collection proceedings under
any Transaction Document; and (e) shall not be responsible for any action taken
or omitted to be taken by it under or in connection with any Transaction
Document, except for its own gross negligence or willful misconduct. The Agent
may employ agents and attorneys-in-fact and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
with reasonable care.
SECTION 9.2. Agent's Reliance, Etc. The Agent shall be
entitled to rely upon any certification, notice, instrument, writing, or other
communication (including, without limitation, any thereof by telephone or
telecopy) believed by it to be genuine and correct and to have been signed, sent
or made by or on behalf of the proper Person or Persons, and upon advice and
statements of legal counsel (including counsel for any of the Transferor, CAC or
CompuCredit), independent accountants, and other experts selected by the Agent.
As to any matters not expressly provided for by this Agreement, the Agent shall
not be required to exercise any discretion or take any action, but shall be
required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Majority
Investors, and such instructions shall be binding on the Buyers and all of the
Bank Investors; provided, however, that the Agent shall not be required to take
any action that exposes the Agent to personal liability or that is contrary to
any Transaction Document or applicable law or unless it shall first be
indemnified to its satisfaction by the Bank Investors against any and all
liability and expense which may be incurred by it by reason of taking any such
action.
SECTION 9.3. Termination Events. The Agent shall not be deemed
to have knowledge or notice of the occurrence of a Potential Termination Event
or a
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Termination Event unless the Agent has received written notice from a
Buyer, Bank Investor or the Transferor specifying such Potential Termination
Event or Termination Event and stating that such notice is a "Notice of
Termination Event". In the event that the Agent receives such a notice of the
occurrence of a Potential Termination Event or Termination Event, the Agent
shall give prompt notice thereof to the Buyers and Bank Investors. The Agent
shall (subject to Section 9.2 hereof) take such action with respect to such
Potential Termination Event or Termination Event as shall reasonably be directed
by the Majority Investors, provided that, unless and until the Agent shall have
received such directions, the Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Potential
Termination Event or Termination Event as it shall deem advisable in the best
interest of the Buyers and the Bank Investors.
SECTION 9.4. Rights as Bank Investor. (a) With respect to its
Commitment, NationsBank (and any successor acting as Agent) in its capacity as a
Bank Investor hereunder shall have the same rights and powers hereunder as any
other Bank Investor and may exercise the same as though it were not acting as
the Agent, and the term "Bank Investor" or "Bank Investors" shall, unless the
context otherwise indicates, include the Agent in its individual capacity.
NationsBank (and any successor acting as Agent) and its affiliates may (without
having to account therefor to the Buyers or any Bank Investor) accept deposits
from, lend money to, make investments in, provide services to, and generally
engage in any kind of lending, trust, or other business with any of the
Transferor, CAC, CompuCredit and CB&T or any of their Subsidiaries or Affiliates
as if it were not acting as Agent, and NationsBank (and any successor acting as
Agent) and its affiliates may accept fees and other consideration from any of
the Transferor, CAC, CompuCredit and CB&T or any of their Subsidiaries or
Affiliates for services in connection with this Agreement or otherwise without
having to account for the same to the Buyers or any Bank Investor.
(b) The Transferor and CompuCredit, on behalf of
itself and its Affiliates, acknowledge that NBD is a seller under the Sale and
Purchase Agreement and each hereby (i) waives any and all claims against
NationsBanc Montgomery Securities LLC, the Buyers, the Agent and their
Affiliates and successors and assigns (the "NationsBank Persons") that may arise
as a result of the transactions described herein based on their affiliation with
NBD, and (ii) agree that the NationsBank Persons are involved in the
transactions described herein solely in the capacities described herein, and not
in any capacity as financial advisor, portfolio evaluator, purchase price
assessor or otherwise. Nothing contained herein shall be deemed to limit any and
all remedies available to CAC or any of its Affiliates against NBD under the
Sale and Purchase Agreement.
SECTION 9.5. Indemnification of the Agent. The Bank Investors
agree to indemnify the Agent (to the extent not reimbursed by the Transferor),
ratably in accordance with their Pro Rata Shares, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses
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(including attorneys' fees), or disbursements of any kind or nature whatsoever
which may be imposed on, incurred by, or asserted against the Agent (including
by the Buyers or any Bank Investor) in any way relating to or arising out of
this Agreement or any other Transaction Document or the transactions
contemplated thereby or any action taken or omitted by the Agent under this
Agreement or any other Transaction Document, provided that no Bank Investors
shall be liable for any of the foregoing to the extent they arise from the gross
negligence or willful misconduct of the Person indemnified. Without limitation
of the foregoing, the Bank Investors agree to reimburse the Agent, ratably in
accordance with their Pro Rata Shares, promptly upon demand for any
out-of-pocket expenses (including attorneys' fees) incurred by the Agent in
connection with the administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement and the
other Transaction Documents, to the extent that such expenses are incurred in
the interests of or otherwise in respect of the Bank Investors hereunder and/or
thereunder and to the extent that the Agent is not reimbursed for such expenses
by the Transferor. The agreements contained in this Section shall survive
payment in full of the Buyers' Net Investment and all other amounts payable
under this Agreement.
SECTION 9.6. Non-Reliance. Each of the Buyers and each Bank
Investor agrees that it has, independently and without reliance on the Agent or
the Buyers or any Bank Investor, and based on such documents and information as
it has deemed appropriate, made its own credit analysis of the Transferor, CAC,
CompuCredit, CB&T and their Subsidiaries and decision to enter into this
Agreement and that it will, independently and without reliance upon the Agent,
the Buyers or any Bank Investor, and based on such documents and information as
it shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under the Transaction Documents. Except
for notices, reports, and other documents and information expressly required to
be furnished to the Buyers and the Bank Investors by the Agent hereunder, the
Agent shall not have any duty or responsibility to provide any party hereunder
with any credit or other information concerning the affairs, financial
condition, or business of any of the Transferor, CAC, CompuCredit, CB&T or any
of their Subsidiaries or Affiliates that may come into the possession of the
Agent or any of its Affiliates.
SECTION 9.7. Resignation of Agent. The Agent may resign at any
time by giving notice thereof to the Buyers, the Bank Investors and the
Transferor. Upon any such resignation, the Majority Investors shall have the
right to appoint a successor Agent. If no successor Agent shall have been so
appointed by the Majority Investors and shall have accepted such appointment
within thirty (30) days after the retiring Agent's giving of notice of
resignation, then the retiring Agent may, on behalf of the Buyers and the Bank
Investors, appoint a successor Agent which shall be a commercial bank organized
under the laws of the United States of America having combined capital and
surplus of at least $100,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor, such successor shall thereupon
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succeed to and become vested with all the rights, powers, discretion,
privileges, and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Article IX shall continue
in effect for its benefit in respect of any actions taken or omitted to be taken
by it while it was acting as Agent.
SECTION 9.8. Payments by the Agent. Unless specifically
allocated to a Bank Investor pursuant to the terms of this Agreement, all
amounts received by the Agent on behalf of the Bank Investors shall be paid by
the Agent to the Bank Investors (at their respective accounts specified in their
respective Assignment and Assumption Agreements) in accordance with their
respective related pro rata interests in Buyer A's Net Investment on the
Business Day received by the Agent, unless such amounts are received after 12:00
noon on such Business Day, in which case the Agent shall use its reasonable
efforts to pay such amounts to the Bank Investors on such Business Day, but, in
any event, shall pay such amounts to the Bank Investors in accordance with their
respective related pro rata interests in Buyer A's Net Investment not later than
the following Business Day.
SECTION 9.9. Bank Commitment; Assignment to Bank
Investors.
(a) Bank Commitment. At any time on or prior to
the Commitment Termination Date, in the event that Buyer A does not effect an
Incremental Transfer as requested under Section 2.2(a), then at any time, the
Transferor shall have the right to require Buyer A to assign its interest in
Buyer A's Net Investment in whole to the Bank Investors pursuant to this Section
9.9. In addition, at any time on or prior to the Commitment Termination Date (i)
upon the occurrence of a Termination Event that results in the Termination Date
or (ii) Buyer A elects to give notice to the Transferor of its election not to
maintain its interest in Buyer A's Net Investment, the Transferor hereby
requests and directs that Buyer A assign its interest in Buyer A's Net
Investment in whole to the Bank Investors pursuant to this Section 9.9 and the
Transferor hereby agrees to pay the amounts described in Section 9.9(d) below.
Provided that the Net Asset Test is satisfied, upon any such election by Buyer A
or any such request by the Transferor, Buyer A shall make such assignment and
the Bank Investors shall accept such assignment and shall assume all of Buyer
A's obligations hereunder. In connection with any assignment from Buyer A to the
Bank Investors pursuant to this Section 9.9, each Bank Investor shall, on the
date of such assignment, pay to Buyer A an amount equal to its Assignment
Amount. Upon any Assignment by Buyer A to the Bank Investors contemplated
hereunder, Buyer A shall cease to make any additional Incremental Transfers
hereunder.
(b) Assignment. No Bank Investor may assign all
or a portion of its interests in Buyer A's Net Investment, the Receivables,
Collections, Related Security and Proceeds with respect thereto or its rights
and obligations hereunder to any Person unless approved in writing (i) by the
Administrative Agent, on behalf of Buyer A and the Agent and (ii) the Transferor
(which approval shall be not unreasonably withheld) and
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made in accordance with Section 9.10 hereof. In the case of an Assignment by
Buyer A to the Bank Investors or by a Bank Investor to another Person, the
assignor shall deliver to the assignee(s) an Assignment and Assumption Agreement
in substantially the form of Exhibit G attached hereto, duly executed, assigning
to the assignee a pro rata interest in Buyer A's Net Investment, the
Receivables, Collections, Related Security and Proceeds with respect thereto and
the assignor's rights and obligations hereunder and the assignor shall promptly
execute and deliver all further instruments and documents, and take all further
action, that the assignee may reasonably request, in order to protect, or more
fully evidence the assignee's right, title and interest in and to such interest
and to enable the Agent, on behalf of such assignee, to exercise or enforce any
rights hereunder and under the other Transaction Documents to which such
assignor is or, immediately prior to such Assignment, was a party. Upon any such
Assignment, (i) the assignee shall have all of the rights and obligations of the
assignor hereunder and under the other Transaction Documents to which such
assignor is or, immediately prior to such Assignment, was a party with respect
to such interest for all purposes of this Agreement and under the other
Transaction Documents to which such assignor is or, immediately prior to such
Assignment, was a party (it being understood that the Bank Investors, as
assignees, shall (x) be obligated to fund Incremental Transfers under Section
2.2(b) in accordance with the terms thereof, notwithstanding that Buyer A was
not so obligated and (y) not have the right to elect the commencement of the
amortization of Buyer A's Net Investment pursuant to the definition of
"Reinvestment Termination Date", notwithstanding that Buyer A had such right)
and (ii) the assignor shall relinquish its rights with respect to such interest
for all purposes of this Agreement and under the other Transaction Documents to
which such assignor is or, immediately prior to such assignment, was a party. No
such Assignment shall be effective unless a fully executed copy of the related
Assignment and Assumption Agreement shall be delivered to the Agent and the
Transferor. No Bank Investor shall assign any portion of its Commitment
hereunder without also simultaneously assigning an equal portion of its interest
in the Liquidity Provider Agreement.
(c) Effects of Assignment. By executing and
delivering an Assignment and Assumption Agreement, the assignor and assignee
thereunder confirm to and agree with each other and the other parties hereto as
follows: (i) other than as provided in such Assignment and Assumption Agreement,
the assignor makes no representation or warranty and assumes no responsibility
with respect to any statements, warranties or representations made in or in
connection with this Agreement, the other Transaction Documents or any other
instrument or document furnished pursuant hereto or thereto or the execution,
legality, validity, enforceability, genuineness, sufficiency or value or this
Agreement, the other Transaction Documents or any such other instrument or
document; (ii) the assignor makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Transferor, CAC,
CB&T or CompuCredit or the performance or observance of their respective
obligations under this Agreement, the Receivables Purchase Agreement, the other
Transaction Documents or any other instrument or document furnished pursuant
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hereto; (iii) such assignee confirms that it has received a copy of this
Agreement, the Receivables Purchase Agreement and such other instruments,
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Assumption Agreement and
to purchase such interest; (iv) such assignee will, independently and without
reliance upon the Agent, or any of its Affiliates, or the assignor and based on
such agreements, documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement and the other Transaction Documents; (v) such assignee
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement, the other Transaction Documents
and any other instrument or document furnished pursuant hereto or thereto as are
delegated to the Agent by the terms hereof or thereof, together with such powers
as are reasonably incidental thereto and to enforce its respective rights and
interests in and under this Agreement, the other Transaction Documents, the
Receivables and the Related Security; (vi) such assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement and the other Transaction Documents are required to be
performed by it as the assignee of the assignor; and (vii) such assignee agrees
that it will not institute against Buyer A any proceeding of the type referred
to in Section 11.9 prior to the date which is one year and one day after the
payment in full of all Commercial Paper issued by Buyer A.
(d) Transferor's Obligation to Pay Certain
Amounts; Additional Assignment Amount. The Transferor shall pay to the Agent,
for the account of Buyer A, in connection with any Assignment by Buyer A to the
Bank Investors pursuant to this Section 9.9, an aggregate amount equal to all
Carrying Costs to accrue through the end of each outstanding funding period plus
all other Aggregate Unpaids (other than Buyer A's Net Investment). To the extent
that such Carrying Costs relate to interest or discount on Related Commercial
Paper, if the Transferor fails to make payment of such amounts at or prior to
the time of assignment by Buyer A to the Bank Investors, such amount shall be
paid by the Bank Investors (in accordance with their respective Pro Rata Shares)
to Buyer A as additional consideration for the interests assigned to the Bank
Investors and the amount of Buyer A's Net Investment hereunder held by the Bank
Investors shall be increased by an amount equal to the additional amount so paid
by the Bank Investors. In the event that funds paid by the Bank Investors or the
Transferor under this Section 9.9 are not required to be used immediately by
Buyer A to pay maturing Related Commercial Paper, Buyer A agrees to invest such
funds in Cash Equivalent Investments until such time as such funds are required
to pay maturing Related Commercial Paper and, after the payment of all Related
Commercial Paper, Buyer A shall pay to the Transferor all remaining funds paid
by the Transferor or the Bank Investors pursuant to this Section 9.9 and the
investment earnings (net of investment losses, if any, on any such Cash
Equivalent Investments) on such funds.
(e) Administration of Agreement After
Assignment. After any Assignment by Buyer A to the Bank Investors pursuant to
this Section 9.9 (and the
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payment of all amounts owing to Buyer A in connection therewith), all rights of
the Administrative Agent and the Collateral Agent set forth herein shall be
deemed to be afforded to the Agent on behalf of the Bank Investors instead of
either such party.
(f) Payments. After any Assignment by Buyer A
to the Bank Investors pursuant to this Section 9.9, all payments to be made
hereunder by the Transferor or the Servicer to the Agent for the benefit of
Buyer A shall be made to the Agent's account as such account shall have been
notified to the Transferor and the Servicer for the benefit of the Bank
Investor.
(g) Downgrade of Bank Investor. If at any time
prior to any Assignment by Buyer A to the Bank Investors as contemplated
pursuant to this Section 9.9, the short term debt rating of any Bank Investor
shall be "A-2" or "P-2" from Standard & Poor's or Moody's, respectively, with
negative credit implications, such Bank Investor, upon request of the Agent,
shall, within 30 days of such request, assign its rights and obligations
hereunder to another financial institution (which institution's short term debt
shall be rated at least "A-2" and "P-2" from Standard & Poor's and Moody's,
respectively, and which shall not be so rated with negative credit
implications). If the short term debt rating of a Bank Investor shall be "A-3"
or "P-3", or lower, from Standard & Poor's or Moody's, respectively (or such
rating shall have been withdrawn by Standard & Poor's or Moody's), such Bank
Investor, upon request of the Agent, shall, within five (5) Business Days of
such request, assign its rights and obligations hereunder to another financial
institution (which institution's short term debt shall be rated at least "A-2"
and "P-2" from Standard & Poor's and Moody's, respectively, and which shall not
be so rated with negative credit implications). In either such case, if any such
Bank Investor shall not have assigned its rights and obligations under this
Agreement within the applicable time period described above, Buyer A shall have
the right to require such Bank Investor to accept the Assignment of such Bank
Investor's Pro Rata Share of Buyer A's Net Investment; such Assignment shall
occur in accordance with the applicable provisions of this Section 9.9. Such
Bank Investor shall be obligated to pay to Buyer A, in connection with such
Assignment, in addition to the Pro Rata Share of Buyer A's Net Investment, an
amount equal to the interest component of the outstanding Commercial Paper
issued to fund the portion of Buyer A's Net Investment being assigned to such
Bank Investor, as reasonably determined by the Agent. Notwithstanding anything
contained herein to the contrary, upon any such Assignment to a downgraded Bank
Investor as contemplated pursuant to the immediately preceding sentence, the
aggregate available amount of the Facility Limit, solely as it relates to new
Incremental Transfers by Buyer A, shall be reduced by the amount of unused
Commitment of such downgraded Bank Investor; it being understood and agreed,
that nothing in this sentence or the two preceding sentences shall affect or
diminish in any way any such downgraded Bank Investor's Commitment to the
Transferor or such downgraded Bank Investor's other obligations and liabilities
hereunder and under the other Transaction Documents. The Agent shall give the
Transferor prompt written notice of any Assignment to a Bank Investor pursuant
to this Section 9.9.
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SECTION 9.10. Tax Matters.
(a) Notwithstanding anything to the contrary herein, the
Servicer shall be entitled to withhold any amount that it determines in its sole
discretion is required to be withheld pursuant to Section 1446 of the Code and
such amount shall be deemed to have been paid for all purposes of the Agreement.
(b) Each of the Buyers and the Bank Investors agrees that
prior to the date on which the first interest payment hereunder is due thereto,
it will provide to the Servicer (i) if such Buyer or Bank Investor, as
applicable, is incorporated or organized under the laws of a jurisdiction
outside the United States, two duly completed copies of the United States
Internal Revenue Service Form 4224 or, if the Transferor in its sole discretion
consents, Form 1001, or in either case successor applicable or required forms,
(ii) a duly completed copy of United States Internal Revenue Service Form W-9
or, if the Transferor in its sole discretion consents, Form W-8, or in either
case successor applicable or required forms, and (iii) such other forms and
information as may be required to confirm the availability of any applicable
exemption from United States federal, state or local withholding taxes. Each
Buyer and Bank Investor agrees to provide to the Servicer like additional
subsequent duly completed forms (subject to like consent) satisfactory to the
Servicer on or before the date that any such form expires or becomes obsolete,
or upon the occurrence of any event requiring an amendment, resubmission or
change in the most recent form previously delivered by it, and to provide such
extensions or renewals as may be reasonably requested by the Servicer. Each
Buyer and Bank Investor certifies, represents and warrants that as of the date
of this Agreement, or in the case of a Buyer which is an assignee as of the date
of such Assignment, that it is entitled (x) to receive payments under this
Agreement without deduction or withholding (other than pursuant to Section 1446
of the Code, if applicable) of any United States federal income taxes and (y) to
an exemption from United States backup withholding tax. Each Buyer and Bank
Investor represents and warrants that it shall pay any taxes imposed on such
Buyer or Bank Investor, as applicable, attributable to its interest in the
Transferred Interest.
(c) Each Buyer and Bank Investor agrees with the Transferor
that: (i) such Buyer or Bank Investor, as applicable, will deliver to the
Transferor, on or before the Closing Date or the effective date of any
participation or Assignment, a letter in the form annexed hereto as Exhibit K
(an "Investment Letter"), executed by such assignee Buyer or Bank Investor, as
the case may be, in the case of a Assignment, or by the Participant, in the case
of a participation, with respect to the purchase by such Buyer or Bank Investor,
as applicable, or Participant of a portion of an interest relating to the
Transferred Interest and (ii) all of the statements made by such Buyer or Bank
Investor, as applicable, in its Investment Letter shall be true and correct as
of the date made.
(d) Each Buyer or Bank Investor, as applicable, by its holding
of an interest in the Transferred Interest, hereby severally represents,
warrants and covenants, and each Buyer or Bank Investor, as applicable, that
acquires an interest in
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the Transferred Interest by Assignment shall be deemed to have severally
represented, warranted and covenanted upon such Assignment that: (i) such Buyer
or Bank Investor, as applicable, has not acquired and shall not sell, trade or
transfer any interest in the Transferred Interest, nor cause any interest in the
Transferred Interest to be marketed, on or through either (A) an "established
securities market" (or the substantial equivalent thereof) within the meaning of
Section 7704(b)(1) of the Code (including an interdealer quotation system that
regularly disseminates firm buy or sell quotations by identified brokers or
dealers by electronic means or otherwise) or (B) a "secondary market" (or the
substantial equivalent thereof) within the meaning of Section 7704(b)(2) of the
Code (including a market wherein interests in the Transferred Interest are
regularly quoted by any person making a market in such interests and a market
wherein any person regularly makes available bid or offer quotes with respect to
interests in the Transferred Interest and stands ready to effect buy or sell
transactions at the quoted prices for itself or on behalf of others), and (ii)
unless the Transferor consents otherwise, such Buyer or Bank Investor, as
applicable, (A) is properly classified as, and shall remain classified as, a
"corporation" as described in Section 7701(a)(3) of the Code and (B) is not, and
shall not become, an "S corporation" as described in Section 1361 of the Code.
Each Buyer or Bank Investor, as applicable, represents, warrants and covenants
that it shall (A) cause each of its Participants otherwise permitted hereunder
to make representations, warranties and covenants similar to the foregoing for
the benefit of the Transferor at the time such Participant becomes a Participant
and (B) forward a copy of such representations, warranties and covenants to the
Transferor. In the event of any breach of the representation, warranty and
covenant of a Buyer or Bank Investor, as applicable, or its Participant that
such Buyer or Bank Investor, as applicable, or Participant shall remain
classified as a corporation other than an S corporation, such Buyer or Bank
Investor, as applicable, shall notify the Transferor promptly upon such Buyer's
or Bank Investor's, as applicable, becoming aware of such breach, and thereupon
the Buyer or Bank Investor, as applicable, hereby agrees to use reasonable
efforts to procure a replacement investor which is acceptable to the Transferor
not so affected to replace such affected Buyer or Bank Investor, as applicable.
In any such event, the Transferor shall also have the right to procure a
replacement investor. Each affected Buyer and Bank Investor hereby agrees to
take all actions necessary to permit a replacement investor to succeed to its
rights and obligations hereunder. Each Buyer and Bank Investor which has a
Participant which has breached its representation, warranty and covenant that it
shall remain classified as a corporation other than an S corporation hereby
agrees (without limiting the right of the Transferor to procure a replacement
investor for such Buyer or Bank Investor, as applicable, as provided above in
this paragraph) to notify the Transferor of such breach promptly upon such
Buyer's or Bank Investor's, as applicable, becoming aware thereof and to use
reasonable efforts to procure a replacement Participant, as applicable, not so
affected which is acceptable to the Transferor to replace any such Participant.
(e) Subject to the provisions of subsection (g), each Buyer
and Bank Investor may at any time sell, assign or otherwise transfer, to the
extent of such Buyer's or Bank Investor's, as applicable, interest in the
Transferred Interest, to (i) any
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NationsBank Entity, in the case of an Assignment by Buyer B or its assigns, (ii)
a Conduit Assignee, in the case of an Assignment by Buyer A or its assigns or
(iii) any other Person to which the Transferor may consent, which consent shall
not be unreasonably withheld (it being understood that such consent shall be
considered to be withheld reasonably on the basis that, and no Assignment
pursuant to clause (i) or (ii) above shall be permitted if, following such
proposed Assignment the number of Private Holders would exceed 80 or otherwise
cause the arrangement created pursuant to this Agreement to be in jeopardy of
being treated as taxable as a publicly traded partnership pursuant to Section
7704 of the Code) all or part of its interest in the Transferred Interest;
provided, however, that any Assignment shall be void unless (x) the minimum
amount of such Assignment shall be $5,000,000, (y) such assignee Buyer or Bank
Investor, as applicable, shall comply with this Section 9.10 and shall have
delivered to the Transferor, prior to the effectiveness of such Assignment, a
copy of an agreement under which such assignee has made the representations,
warranties and covenants required to be made pursuant to this Section 9.10, and
(z) such proposed assignee shall provide the forms described in clauses (x), (y)
and (z) of subsection 9.10(b) (subject to the Transferor's consent, as
applicable and as set forth therein) in the manner described therein. In
connection with any Assignment, the assignor Buyer or Bank Investor, as
applicable, shall request in writing to the Transferor for the consent of the
Transferor (if required pursuant to this Section) (the Transferor shall respond
to any such request within ten Business Days after its receipt and the
Transferor will not unreasonably withhold such consent) it being understood that
the obtaining of such consent (if required pursuant to this Section) is a
condition to the effectiveness of the Assignment. Each assignee of a Buyer or
Bank Investor, as applicable, is subject to the terms and conditions of
subsection 9.10(b) on an ongoing basis and hereby makes the certifications,
representations and warranties contained therein.
(f) Subject to the provisions of subsection (g), any Buyer or
Bank Investor may at any time grant a participation in all or part (but not less
than $5,000,000) of its interest in the Transferred Interest to (i) any
NationsBank Entity, in the case of a participation granted by Buyer B or its
assigns, (ii) a Conduit Assignee, in the case of a participation granted by
Buyer A or its assigns or (iii) any other Person to which the Transferor may
consent, which consent shall not be unreasonably withheld (it being understood
that such consent shall be considered to be withheld reasonably on the basis
that, and no participation pursuant to clause (i) or (ii) above shall be
permitted if, following such proposed participation the number of Private
Holders would exceed 80 or otherwise cause the arrangement created pursuant to
this Agreement to be in jeopardy of being treated as taxable as a publicly
traded partnership pursuant to Section 7704 of the Code) (each such Person, a
"Participant"); provided, however, that such participation shall be void, unless
such Participant complies with the applicable provisions of this Section 9.10
and such Buyer or Bank Investor, as applicable, delivers to the Transferor,
prior to the effectiveness of its participation, a copy of an agreement under
which such Participant has made the representations, warranties and covenants to
be made pursuant to this Section 9.10. In connection with the granting of any
such participation to any Person, the granting Buyer or Bank Investor, as
applicable, shall
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provide a written request to the Transferor for the consent of the Transferor to
the granting of the specified interest to any identified prospective
Participant, if such consent is required to be given pursuant to this Section,
and the Transferor shall respond to any such request within ten Business Days
after its receipt, it being understood that the obtaining of such consent (if so
required) is a condition to the effectiveness of a participation. Each Buyer and
Bank Investor hereby acknowledges and agrees that any such participation will
not alter or affect in any way whatsoever such Buyer's and Bank Investor's
direct obligations hereunder and that the Transferor shall have no obligation to
have any communication or relationship whatsoever with any Participant of such
Buyer or Bank Investor, as applicable, in order to enforce the obligations of
such Buyer or Bank Investor, as applicable, hereunder. Each Buyer and Bank
Investor shall promptly notify the Transferor in writing of the identity and
interest of each Participant upon any such disposition. As a condition of
granting any participation, the applicable Buyer or Bank Investor hereby agrees
to deliver to the Transferor a certification of the proposed Participant
pursuant to which the Participant certifies, represents and warrants that (i)
such Participant is entitled to (x) receive payments with respect to its
participation without deduction or withholding of any United States federal
income taxes and (y) an exemption from United States backup withholding tax,
(ii) prior to the date on which the first interest payment is due to the
Participant, such Buyer or Bank Investor, as applicable, will provide to the
Servicer the forms described in clauses (i), (ii) and (iii) of subsection
9.10(b) (subject to the Transferor's consent, as applicable and as set forth
therein) as though the Participant were a Buyer or Bank Investor, as applicable,
(iii) such Buyer or Bank Investor similarly will provide subsequent forms as
described in subsection 9.10(b) with respect to such Participant as though it
were a Buyer or Bank Investor, as applicable, and (iv) such Participant will pay
any taxes imposed on its participation interest in the Transferred Interest.
(g) Except (i) as provided in subsections (e) and (f) above
and in Sections 9.9 and 11.6 hereof and (ii) in connection with any pledge to
any Federal Reserve Bank to secure any obligation of a Buyer or Bank Investor,
no Buyer or Bank Investor may transfer, assign, exchange or otherwise convey or
pledge, hypothecate, or otherwise grant a security interest in the Transferred
Interest and any such attempted transfer, assignment, exchange, conveyance,
pledge, hypothecation or grant shall be void.
SECTION 9.11. Tax Treatment. The Transferor has entered into
this Agreement, and the interests of the Buyers in the Transferred Interest will
be issued, with the intention that, for federal, state and local income and
franchise tax purposes, the Transferred Interest will qualify as indebtedness
secured by the Receivables. The Transferor, by entering into this Agreement, and
each Buyer, by the acceptance of any such interest in the Transferred Interest,
agree to treat such interest in the Transferred Interest for federal, state and
local income and franchise tax purposes as indebtedness of the Transferor. Each
Buyer agrees that it will cause any Person acquiring an interest in the
Transferred Interest through it to comply with this Agreement as to treatment as
indebtedness under applicable tax law, as described in this Section 9.11. None
of the
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parties hereto shall make the election provided for in Treasury
Regulation section 301.7701-3(c). The provisions of this Agreement shall be
construed in furtherance of the foregoing intended tax treatment.
ARTICLE X
GUARANTY AND GUARANTOR COVENANTS
SECTION 10.1. Guaranty. In consideration of, and in order to
induce the Buyers, the Bank Investors and the Agent to enter into this Agreement
and to accept the Transfers hereunder, the Guarantor hereby unconditionally and
irrevocably guarantees to the Buyers, Bank Investors, Agent, Administrative
Agent, Collateral Agent, Liquidity Provider and Credit Support Provider and
their respective successors and assigns, the due and punctual performance and
payment by the Transferor, of all representations and warranties, covenants,
agreements, terms, conditions and indemnities to be performed and observed by
the Transferor under this Agreement, including, without limitation, the due and
punctual payment of all sums which are or may become due and owing by the
Transferor under the terms and provisions of this Agreement; provided, however,
that the Guarantor shall not bear any recourse for losses on Receivables with
respect to which the Obligors have failed to make payments and, notwithstanding
any other provision of this Section 10.1, if the Transferor is unable to pay, as
a result of Obligors' failing to make payment on Receivables, any amount of the
Buyers' Net Investment or any amount constituting Carrying Costs or the Buyer B
Amounts, then CompuCredit shall not be liable for such amounts (except for
amounts with respect to the breach of any of the Transferor's obligations under
Article VIII hereunder or of any of its representations or warranties or other
covenants and indemnifications hereunder). In no event shall CompuCredit be
liable for the nonperformance, nonobservance or failure to pay by any Person
other than the Transferor.
SECTION 10.2. Waivers. (a) The Guarantor hereby waives
promptness, diligence and notice of acceptance of the guaranty made in Section
10.1 (the "Guaranty") of any action taken or omitted in reliance hereon or of
any default in the payment of any such sums or in the performance of any
covenants, agreements, terms, conditions and any demand, protest or other notice
of any kind. The Guarantor expressly waives the right to require any party to
protect, secure, perfect, insure, proceed against or exhaust any collateral in
which a security interest, lien, mortgage or like encumbrance has been granted
by the Transferor as security for the payment of any sums due hereunder or to
exhaust any right or take any action against the Transferor or any other Person
or any collateral.
(b) The obligations of the Guarantor under this
Guaranty constitute a present and continuing guaranty of payment and not of
collectibility and all payments made by the Guarantor hereunder will be made
without set-off, counterclaim
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or other defense. The obligations of the Guarantor under this Guaranty shall be
absolute and unconditional and shall not be subject to any counterclaim,
set-off, deduction or defense. This Guaranty shall remain in full force and
effect without regard to and shall not be released, discharged or in any way
affected or impaired by any thing, event, happening, matter, circumstance or
condition whatsoever, whether or not the Guarantor shall have any knowledge or
notice thereof or consent thereto, including, without limitation: (i) any
amendment or modification of or supplement to any Transaction Documents,
assignment or transfer of any interest of the Buyers, Bank Investors or Agent
therein, including, without limitation, any renewal or extension of the terms of
payment of any sums due or contingently due hereunder or the granting of time in
respect of any payment, any furnishing or acceptance of security or any release
of any security so furnished or accepted for any sum due or contingently due
hereunder; (ii) any waiver, consent, extension, granting of time, forbearance,
indulgence or other action or inaction under or in respect of any Transaction
Document or any exercise or no exercise of any right, remedy or power in respect
thereof; (iii) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or similar proceedings with respect to
the Guarantor, Transferor or any other Person, or the properties or creditors
thereof; (iv) the occurrence of any Termination Event under this Agreement, or
any invalidity, illegality or any unenforceability of, or any misrepresentation,
irregularity or other defect in, any provision of any Transaction Document; (v)
any transfer or purported transfer, any consolidation or merger of the
Transferor or any other Person with or into any other corporation or entity, or
any change whatsoever in the objects, capital structure, constitution or
business of the Transferor or any other Person; (vi) any failure on the part of
the Transferor or any other Person to perform or comply with any term of any
Transaction Document; (vii) any suit or other action brought by any creditors of
the Transferor for any reason whatsoever, including, without limitation, any
suit or action in any way attacking or involving any Transaction Document or
(viii) any limitation contained in Section 8.5 hereof.
SECTION 10.3. Reinstatement. The obligations of the Guarantor
in respect of this Guaranty shall continue to be effective or shall be
reinstated, as the case may be, if at any time any payment in respect of any
obligations guaranteed hereunder is rescinded or must otherwise be returned by
any of the parties in whose favor this Guaranty is being made upon the
insolvency, bankruptcy or reorganization of the Transferor or otherwise, all as
though such payment had not been made.
SECTION 10.4. Subrogation. If the Guarantor shall make any
payment due in respect of this Guaranty, it shall to the extent permitted by
applicable law, be subrogated to the rights of the party in respect of which
such payment was made; provided however, that such rights of subrogation and all
indebtedness and claims arising therefrom shall be, and the Guarantor hereby
declares that they are, and shall at all times be, in all respects subordinate
and junior to all sums due or contingently due under the Transaction Documents.
The Guarantor hereby agrees that the foregoing right of subrogation shall not be
effective until, and that it shall not be entitled to receive any payment, under
any condition, in respect of any such subrogated
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claim unless and until, all sums which may become due, or are stated in the
Transaction Documents to become due, shall have become due, shall have been paid
in full or funds for their payment shall have been duly and sufficiently
provided.
SECTION 10.5. Net Worth Ratio. The Guarantor agrees that, at
all times during the period referred to in the first paragraph of Section 5.2
hereof, the ratio of (a) its tangible net worth (equal to shareholders' equity
according to GAAP minus any write-up in the book value of assets resulting from
the revaluation thereof subsequent to the date hereof minus treasury stock minus
patents, copyrights, trademarks or goodwill and other like intangibles,
excluding capitalized software not in excess of $4,000,000) to (b) total assets
managed by the Guarantor (determined, with respect to the Receivables, based on
the purchase price paid with respect to the Receivables pursuant to the Sale and
Purchase Agreement) shall not be less than .08:1.
SECTION 10.6. Financial Reporting. CompuCredit will
maintain, a system of accounting established and administered in accordance with
GAAP, and will furnish to the Agent:
(i) Annual Reporting. (A) Within one
hundred five (105) days after the close of CompuCredit's fiscal year,
(beginning with the fiscal year ending in 1998) audited financial
statements, prepared in accordance with GAAP on a consolidated basis
for CompuCredit, including balance sheets as of the end of such
period, related statements of operations, shareholder's equity and
cash flows, accompanied by an unqualified audit report certified by
independent certified public accountants, which accountants shall be
acceptable to the Agent, prepared in accordance with GAAP and, upon
the Agent's request, any management letter prepared by said
accountants and accompanied by a certificate of said accountants that
CompuCredit is in compliance with its agreement set forth in Section
10.5 or, if CompuCredit is not in compliance with such agreement,
stating the nature and status thereof and showing the computation of
the financial ratios and restrictions set forth in Section 10.5.
(ii) Quarterly Reporting. Within
sixty (60) days after the close of the first three quarterly periods
of CompuCredit's fiscal year, for CompuCredit consolidated unaudited
balance sheets (excluding financial footnotes) as at the close of each
such period and consolidated related statements of operations,
shareholder's equity and cash flows for the period from the beginning
of such fiscal year to the end of such quarter, and showing the
computation of each of the financial ratios and restrictions set forth
in Section 10.5 all certified by its chief financial officer,
chairman, president, treasurer or any executive vice president.
(iii) Compliance Certificate.
Together with the financial statements required hereunder, a
compliance certificate signed by the chief financial officer,
chairman, president, treasurer or any executive vice president of
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CompuCredit stating that the attached financial statements (except for
the financial footnotes excluded in clause (ii) above) have been
prepared in accordance with GAAP and, to the best of such person's
knowledge, accurately reflect the financial condition of CompuCredit,
and showing compliance with, the financial ratios and restrictions set
forth in Section 10.5.
(iv) Shareholders Statements and
Reports. Promptly upon the furnishing thereof to the shareholders of
CompuCredit, copies of all financial statements, reports and proxy
statements so furnished.
(v) S.E.C. Filings. Promptly upon the
filing thereof, copies of all registration statements and annual,
quarterly, monthly or other regular reports which CompuCredit files
with the Securities and Exchange Commission.
SECTION 10.7. Notices. CompuCredit shall promptly notify the
Agent of (i) a Termination Event or (ii) CB&T's failure to observe, keep or
perform any material term, condition, covenant, representation or warranty of
the Facilities Management Agreement or the Affinity Card Agreement, in each
case, of which it has knowledge.
SECTION 10.8. Sub-Servicing Fee. On the last day of any
Collection Period, the Servicer shall pay to the Agent, for the benefit of the
Buyers and the Bank Investors, as applicable, the amount of any Sub-Servicing
Fee retained by the Sub-Servicer during such Collection Period in excess of
one-twelfth of the product of (i) 4% per annum and (ii) the average daily
Principal Receivables during such Collection Period. Such amount shall be paid
by the Servicer in immediately available funds to the Collection Account, to be
distributed on the next Remittance Date in accordance with Section 2.5 hereof.
SECTION 10.9. Co-Beneficiary Designations. By no later than 30
days after the Closing Date, CompuCredit shall cause (and shall furnish the
Agent with evidence demonstrating) the Agent to be designated a (a)
co-beneficiary of the "Key Person" insurance obtained by CompuCredit with
respect to the following principals of CompuCredit: David G. Hanna, Brett M.
Samsky, and Rick Gilbert, and (b) co-insured party on the fidelity bond
insurance policy obtained by CompuCredit covering losses from employee, officer
and director theft, fraud, misappropriation, and embezzlement, for all
employees, officers and directors of CompuCredit, in the amount of at least $25
million.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Term of Agreement. This Agreement shall
terminate on the date following the Termination Date upon which the Buyers' Net
Investment has
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been reduced to zero, all Carrying Costs have been paid in full
and all other Aggregate Unpaids and all Buyer B Distributions have been paid in
full, in each case, in cash; provided, however, that (i) the rights and remedies
of the Agent, Buyer A, Buyer B, the Bank Investors and the Administrative Agent
with respect to any representation and warranty made or deemed to be made by the
Transferor pursuant to this Agreement, (ii) the indemnification and payment
provisions of Article VIII, and (iii) the agreement set forth in Section 11.9
hereof, shall be continuing and shall survive any termination of this Agreement.
SECTION 11.2. Waivers; Amendments. (a) No failure or delay on
the part of the Agent, Buyer A, Buyer B, the Administrative Agent or any Bank
Investor in exercising any power, right or remedy under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or remedy preclude any other further exercise thereof or the
exercise of any other power, right or remedy. The rights and remedies herein
provided shall be cumulative and nonexclusive of any rights or remedies provided
by law.
(b) Any provision of this Agreement or any other
Transaction Document may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by the Transferor, the Servicer, Buyer A,
Buyer B and the Majority Investors (and, if Article IX or the rights or duties
of the Agent are affected thereby, by the Agent); provided that no such
amendment or waiver shall, unless signed by each Bank Investor directly affected
thereby, (i) increase the Commitment of a Bank Investor, (ii) reduce the Buyers'
Net Investment or rate of interest to accrue thereon or any fees or other
amounts payable hereunder, (iii) postpone any date fixed for the payment of any
scheduled distribution in respect of the Buyers' Net Investment or interest with
respect thereto or any fees or other amounts payable hereunder or for
termination of any Commitment, (iv) change the percentage of the Commitments or
the number of Bank Investors, which shall be required for the Bank Investors or
any of them to take any action under this Section or any other provision of this
Agreement, (v) release all or substantially all of the property with respect to
which a security interest therein has been granted hereunder to the Agent or the
Bank Investors or (vi) extend or permit the extension of the Commitment
Termination Date. In the event the Agent requests Buyer A's, Buyer B's or a Bank
Investor's consent pursuant to the foregoing provisions and the Agent does not
receive a consent (either positive or negative) from Buyer A, Buyer B or such
Bank Investor within 10 Business Days of Buyer A's, Buyer B's or Bank Investor's
receipt of such request, then Buyer A, Buyer B or such Bank Investor (and its
percentage interest hereunder) shall be disregarded in determining whether the
Agent shall have obtained sufficient consent hereunder.
SECTION 11.3. Notices. Except as provided below, all
communications and notices provided for hereunder shall be in writing (including
telecopy or electronic facsimile transmission or similar writing) and shall be
given to the other party at its address or telecopy number set forth below or at
such other address or telecopy number as such party may hereafter specify for
the purposes of notice to
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such party. Each such notice or other communication shall be effective (i) if
given by telecopy, when such telecopy is transmitted to the telecopy number
specified in this Section 11.3 and confirmation is received, (ii) if given by
mail, 3 Business Days following such posting, postage prepaid, U.S. certified or
registered, (iii) if given by overnight courier, one (1) Business Day after
deposit thereof with a national overnight courier service, or (iv) if given by
any other means, when received at the address specified in this Section 11.3.
However, anything in this Section to the contrary notwithstanding, the
Transferor hereby authorizes Buyer A to effect Transfers and funding period
selections based on telephonic notices made by any Person which Buyer A in good
faith believes to be acting on behalf of the Transferor. The Transferor agrees
to deliver promptly to Buyer A a written confirmation of each telephonic notice
signed by an authorized officer of Transferor. However, the absence of such
confirmation shall not affect the validity of such notice. If the written
confirmation differs in any material respect from the action taken by Buyer A,
the records of Buyer A shall govern absent manifest error.
If to Buyer A:
Kitty Hawk Funding Corporation
c/o Lord Securities Corporation
Two Wall Street
New York, New York 10005
Attention: Frank Bilotta
Telephone: (212) 346-9008
Telecopy: (212) 346-9012
(with a copy to the Administrative Agent)
If to Buyer B:
Atlantic Equity Corporation
100 North Tryon Street
NC1-007-20-01
Charlotte, NC 28255
Attention: Marilyn Cromwell
Phone: (704) 386-8380
Fax: (704) 388-9211
If to the Transferor:
CompuCredit Acquisition Funding Corp.
Two Ravinia Drive, Suite 650
Atlanta, GA 30346
Telephone: (770) 901-5814
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Telecopy: (770) 901-5826
Payment Information:
NationsBank of Georgia, N.A.
Atlanta, Georgia
ABA # 061000052
Account: CompuCredit Acquisition Funding Corp.
Account No. 326 118 7159
If to CompuCredit Corporation:
CompuCredit Corporation
Two Ravinia Drive, Suite 1750
Atlanta, GA 30346
Telephone: (770) 901-5840
Telecopy: (770) 901-5815
If to the Collateral Agent:
NationsBank, N.A.
NationsBank Corporate Center--10th Floor
Charlotte, North Carolina 28255
Attention: Michelle M. Heath--
Structured Finance
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
If to the Agent:
NationsBank, N.A.
NationsBank Corporate Center--10th Floor
Charlotte, North Carolina 28255
Attention: Michelle M. Heath--
Structured Finance
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
Payment Information:
NationsBank, N.A.
ABA 053-000-196
for the account of NationsBank Charlotte
Account No. 1093601650000
Attn.: Camille Zerbinos
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If to the Administrative Agent:
NationsBank, N.A.
NationsBank Corporate Center--10th Floor
Charlotte, North Carolina 28255
Attention: Michelle M. Heath--
Structured Finance
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
If to the Bank Investors, at their respective addresses set
forth on the signature pages hereto or of the Assignment and Assumption
Agreement pursuant to which it became a party hereto.
SECTION 11.4. Governing Law; Submission to Jurisdiction;
Integration.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
THE CONFLICT OF LAW PRINCIPLES THEREOF. EACH OF THE PARTIES HERETO HEREBY
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN THE
CITY OF NEW YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. Each of the
parties hereto hereby irrevocably waives, to the fullest extent it may
effectively do so, any objection which it may now or hereafter have to the
laying of the venue of any such proceeding brought in such a court and any claim
that any such proceeding brought in such a court has been brought in an
inconvenient forum. Nothing in this Section 11.4 shall affect the right of the
parties hereto to bring any action or proceeding against any other party hereto
or its property in the courts of other jurisdictions.
(b) EACH OF THE PARTIES HERETO HEREBY WAIVES ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE AMONG ANY OF THEM ARISING OUT OF, CONNECTED WITH,
RELATING TO OR INCIDENTAL TO THE RELATIONSHIP BETWEEN THEM IN CONNECTION WITH
THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS.
(c) This Agreement contains the final and
complete integration of all prior expressions by the parties hereto with respect
to the subject matter hereof and shall constitute the entire Agreement among the
parties hereto with respect to the subject matter hereof superseding all prior
oral or written understandings.
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(d) The Transferor and CompuCredit each hereby
appoint CT Corporation located at
1633 Broadway, New York, New York 10019 as the authorized agent upon whom
process may be served in any action arising out of or based upon this Agreement,
the other Transaction Documents to which such Person is a party or the
transactions contemplated hereby or thereby that may be instituted in the United
States District Court for the Southern District of New York and of any New York
State court sitting in The City of New York by Buyer A, Buyer B, the Agent, any
Bank Investor, the Collateral Agent or any assignee of any of them.
SECTION 11.5. Severability; Counterparts. This Agreement may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
Agreement. Any provisions of this Agreement which are prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 11.6. Successors and Assigns. (A) This Agreement shall
be binding on the parties hereto and their respective successors and assigns;
provided, however, that (other than as permitted pursuant to Section 5.1(j))
neither the Transferor nor CompuCredit may assign any of its rights or delegate
any of its duties hereunder or under the Receivables Purchase Agreement or under
any of the other Transaction Documents to which it is a party without the prior
written consent of the Agent.
(b) Without limiting the foregoing, Buyer A may,
from time to time, with prior or concurrent notice to Transferor and Servicer,
in one transaction or a series of transactions, assign all or a portion of Buyer
A's Net Investment and its rights and obligations under this Agreement and any
other Transaction Documents to which it is a party to a Conduit Assignee. Upon
and to the extent of such assignment by Buyer A to a Conduit Assignee, (i) such
Conduit Assignee shall be the owner of the assigned portion of Buyer A's Net
Investment, (ii) the related administrative or managing agent for such Conduit
Assignee will act as the Administrative Agent for such Conduit Assignee, with
all corresponding rights and powers, express or implied, granted to the
Administrative Agent hereunder or under the other Transaction Documents, (iii)
such Conduit Assignee and its Liquidity Provider(s) and credit support
provider(s) and other related parties shall have the benefit of all the rights
and protections provided to Buyer A and its Liquidity Provider(s) and Credit
Support Provider(s), respectively, herein and in the other Transaction Documents
(including, without limitation, any limitation on recourse against such Conduit
Assignee or related parties, any agreement not to file or join in the filing of
a petition to commence an insolvency proceeding against such Conduit Assignee,
and the right to assign to another Conduit Assignee as provided in this
paragraph), (iv) such Conduit Assignee shall assume all (or the assigned or
assumed portion) of Buyer A's obligations, if any, hereunder or any other
Transaction
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Document, and Buyer A shall be released from such obligations, in each case to
the extent of such assignment, and the obligations of Buyer A and such Conduit
Assignee shall be several and not joint, (v) all distributions in respect of
Buyer A's Net Investment shall be made to the applicable agent or administrative
agent, as applicable, on behalf of Buyer A and such Conduit Assignee on a pro
rata basis according to their respective interests, (vi) the defined terms and
other terms and provisions of this Agreement and the other Transaction Documents
shall be interpreted in accordance with the foregoing, and (vii) if requested by
the Agent or the agent or administrative agent with respect to the Conduit
Assignee, the parties will execute and deliver such further agreements and
documents and take such other actions as the Agent or such agent or
administrative agent may reasonably request to evidence and give effect to the
foregoing. No assignment by Buyer A to a Conduit Assignee of all or any portion
of Buyer A's Net Investment shall in any way diminish the related Bank
Investors' obligation under Section 9.9 to fund any Incremental Transfer not
funded by Buyer A or such Conduit Assignee or to acquire from Buyer A or such
Conduit Assignee all or any portion of Buyer A's Net Investment.
(c) Each of the Transferor and CompuCredit
hereby agrees and consents to the assignment by Buyer A from time to time of all
or any part of its rights under, interest in and title to this Agreement and the
Transferred Interest to any Liquidity Provider or to any Conduit Assignee as set
forth in Section 11.6(b); provided, however, that any such assignment shall be
made in accordance with the provisions of Section 9.10 hereof. In addition, each
of the Transferor and CompuCredit hereby consents to and acknowledges the
assignment by Buyer A of all of its rights under, interest in and title to this
Agreement and the Transferred Interest to the Collateral Agent.
SECTION 11.7. Disclosure. Each of the Transferor and
CompuCredit hereby consents to the disclosure of any non-public information with
respect to it received by the Buyers, the Agent, any Bank Investor or the
Administrative Agent to any of the Buyers, the Agent, any nationally recognized
rating agency rating Buyer A's Commercial Paper, the Administrative Agent, the
Collateral Agent, any Bank Investor, or, to the extent that it is an Affiliate
of the Agent, the Liquidity Provider or the Credit Support Provider in relation
to this Agreement. NationsBank or any of its affiliates shall not share any
proprietary information concerning the Transferor, CompuCredit, the Accounts or
the Receivables with any individuals who act primarily as employees of NBD or
any employees of the NationsBank Card Services business unit or any credit card
company or credit card business unit acquired by NationsBank or any of its
affiliates.
SECTION 11.8. Confidentiality Agreement. Each of the
Transferor and CompuCredit hereby agrees that it will not disclose the contents
of this Agreement or any other proprietary or confidential information of the
Buyers, the Agent, the Administrative Agent, the Collateral Agent, any Liquidity
Provider or any Bank Investor to any other Person except (i) its auditors and
attorneys, employees or financial
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advisors (other than any commercial bank) and any nationally recognized rating
agency, provided such auditors, attorneys, employees, financial advisors or
rating agencies are informed of the highly confidential nature of such
information, (ii) as otherwise required by applicable law or order of a court of
competent jurisdiction, or (iii) required in response to any summons or subpoena
or in connection with any litigation; and provided, further, however, that the
Transferor and the Servicer shall have no obligation of confidentiality in
respect of any information which may be generally available to the public or
becomes available to the public through no fault of theirs. Such documents shall
include, but not be limited to, research studies, proprietary technology, trade
secrets, know-how, market studies and forecasts, competitive analyses, pricing
policies, the substance of agreements with customers and others, marketing
arrangements, customer lists and other documents embodying such confidential
information.
SECTION 11.9. No Bankruptcy Petition. (a) Each of the
Transferor and CompuCredit hereby covenants and agrees that, prior to the date
which is one year and one day after the payment in full of all outstanding
Commercial Paper or other indebtedness of Buyer A, it will not institute
against, or join any other Person in instituting against, Buyer A 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.
(b) Notwithstanding any prior termination of
this Agreement, the Buyers, the Bank Investors, the Agent, the Administrative
Agent, the Collateral Agent, the Servicer, each Person which acquires an
interest in the Transferor's Interest and each of their respective successors
and assigns, shall not, prior to the date which is one year and one day after
the termination of this Agreement, acquiesce, petition or otherwise invoke or
cause the Transferor to invoke the process of any Governmental Authority for the
purpose of commencing or sustaining a case against 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 Transferor or any substantial part of its property or ordering the
winding-up or liquidation of the affairs of the Transferor.
SECTION 11.10. No Recourse Against Stockholders, Officers or
Directors. No recourse under any obligation, covenant or agreement of Buyer A
contained in this Agreement shall be had against Lord Securities Corporation
("LSC") (or any affiliate thereof), or any stockholder, officer or director of
Buyer A, as such, by the enforcement of any assessment or by any legal or
equitable proceeding, by virtue of any statute or otherwise; it being expressly
agreed and understood that this Agreement is solely a corporate obligation of
Buyer A, and that no personal liability whatsoever shall attach to or be
incurred by LSC (or any affiliate thereof), or the stockholders, officers or
directors of the buyer, as such, or any of them, under or by reason of any of
the obligations, covenants or agreements of Buyer A contained in this Agreement,
or implied therefrom, and that any and all personal liability for breaches by
Buyer A of any
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of such obligations, covenants or agreements, either at common
law or at equity, or by statute or constitution, of LSC (or any affiliate
thereof) and every such stockholder, officer or director of the Buyers is hereby
expressly waived as a condition of and consideration for the execution of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Transfer and Administration Agreement as of the date first
written above.
KITTY HAWK FUNDING CORPORATION,
as Buyer A
By: /s/ Frank B. Bilotta
------------------------------------
Name: Frank B. Bilotta
Title: Vice President
Net Investment ATLANTIC EQUITY CORPORATION, as Buyer B
$12,000,000
By: /s/ Richard Gross
------------------------------------
Name: Richard Gross
Title: Executive Vice President
COMPUCREDIT ACQUISITION FUNDING CORP.,
as the Transferor
By: /s/ Brett M. Samsky
------------------------------------
Name: Brett M. Samsky
Title: Chief Financial Officer
COMPUCREDIT CORPORATION, individually
and as Servicer and Guarantor
By: /s/ Brett M. Samsky
------------------------------------
Name: Brett M. Samsky
Title: Chief Financial Officer
Commitment NATIONSBANK, N.A., as the Agent
$215,000,000 and a Bank Investor
By: /s/ Michelle M. Heath
------------------------------------
Name: Michelle M. Heath
Title: Senior Vice President
<PAGE>
Exhibit 10.6
AGREEMENT
This AGREEMENT, dated and effective as of the 23rd day of September, 1997
(the "Effective Date"), is entered into by and among COMPUCREDIT corporation,
a Georgia corporation ("CompuCredit"), VISIONARY SYSTEMS INC., a Georgia
corporation ("VSI") and VSx Corporation, a Georgia corporation ("VSx"). VSx
and VSI are sometimes collectively referred to as "Developers" and Developers
and CompuCredit are sometimes collectively referred to as the "Parties." A
master list of defined terms used in this Agreement is contained in
Appendix A.
Background
A. CompuCredit is in the business of, among other things, developing various
consumer credit products and services, such as a credit card and products and
services relating to the home equity loan business.
B. The Developers are in the business of, among other things, designing and
developing computer software and database programs.
C. CompuCredit desires for Developers to develop a system of computer
programs and databases that will, among other things, gather, store and
analyze certain classes of data necessary to facilitate key marketing, risk
and financial management decisions in the consumer credit and financial
products industries (this system, together with all error corrections,
modifications, derivative works, updates and enhancements and any
documentation associated with the system shall collectively be referred to as
the "System").
D. For purposes of this Agreement, the System shall be deemed to be
comprised of three core components: (i) the "Brain" which will be developed
by VSx on the Data Warehousing platform ("Brain Platform") and is more
specifically described on Exhibit A, (ii) the "Switch" which will be
developed by VSI or the Transaction Processing platform ("Switch Platform")
and is more specifically described on Exhibit B, and (iii) the "Switch
Criteria" which will be developed by VSI and is more specifically described
on Exhibit B.
E. James A. Eckstein ("Eckstein") owns one hundred percent (100%) of the
outstanding capital stock of VSI and serves as its president.
F. VSI owns one hundred percent (100%) of the outstanding capital stock of
VSx and Eckstein serves as the president of VSx.
G. Prior to the Effective Date, VSI was developing the System. As of the
Effective Date, VSI will continue the development of the Switch and Switch
Criteria and VSx will assume responsibility for the development of the Brain.
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H. One primary purpose of this Agreement is to set forth the terms and
conditions under which the Developers will continue the development of the
System (such development services to be referred to collectively as the
"System Services") and perform certain additional mutually agreeable data
processing, software design and development, consulting and miscellaneous
related services for CompuCredit related to CompuCredit's business (such
mutually agreeable additional services to be referred to collectively as the
"Ancillary Services"). Developers' System Services and Ancillary Services
are sometimes referred to collectively as the "Services".
I. The Parties currently anticipate that the Services will be performed
during the three (3) years following the Effective Date.
J. Another primary purpose of this Agreement is for Developers to grant
CompuCredit certain licenses to use certain technology associated with the
System that one or more of the Developers will continue to own.
In consideration of the rights and benefits that they will each receive as a
result of the transactions contemplated by this Agreement (the adequacy and
sufficiency of which consideration the Parties acknowledge) and intending to
be legally bound by this Agreement, the Parties agree as follows:
1.System Services; Ancillary Services
1.1 System Services During the System Development Period (as defined at the
end of this Section 1.1), CompuCredit hereby engages (i)VSx to complete the
development of the Brain, (ii) VSI to continue development of the Switch,
(iii) VSI to develop the Switch Criteria and (iv) either Developer to develop
other System Deliverables (as defined in Section 3.1). The Developers agree
to provide CompuCredit with all documentation and supporting materials
reasonably necessary for CompuCredit to use the System Deliverables for the
purposes and to the extent contemplated hereunder. The period of time from
the Effective Date through the earlier to occur of (i) the "Final System
Deliverable Acceptance Date" (as defined in Section 3.2) with respect to the
last remaining mutually agreed System Deliverable to be provided by VSx or
VSI to CompuCredit or (ii) the date this Agreement is terminated in
accordance with Section 7.1(a), shall be referred to as the "System
Development Period."
1.2 Ancillary Services In addition to the System Services, the Developers
agree to perform the Ancillary Services at the direction of and for
CompuCredit. During the term of this Agreement, VSI shall treat its
obligation to perform the Ancillary Services as first in priority over any
obligations it may have to any customer other than CompuCredit unless
otherwise agreed by the Parties. The specific types of and details of the
Ancillary Services will be mutually agreed upon by CompuCredit and the
Developers at the weekly meetings discussed in Section 2.2 and at other
times. The Developers' obligation to perform the Ancillary Services shall last
for the duration of the "Ancillary Services Period," which shall extend
throughout the System Development Period through the earlier to occur of (i)
the date this Agreement is terminated in accordance with
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Section 7.1(a)or(ii) until either the Developers or CompuCredit terminates
the Ancillary Services Period in accordance with Section 7.1(c).
1.3 Timetable
(a) Subject to the limitations set forth in this Agreement, Developers shall
commit and utilize sufficient financial and human resources to enable the
Developers to meet any mutually agreed deadlines and complete any tasks
associated with the Services. To the extent CompuCredit is to be responsible
for any out-of-pocket costs or expenses associated with the Services, those
costs or expenses must be within budgetary guidelines mutually agreed upon by
CompuCredit and Developers. The Developers shall notify CompuCredit promptly
of any circumstances, when and as they arise, that may reasonably be
anticipated to lead to a material deviation from any mutually agreed
deadlines associated with the Services.
(b) Unless (i) CompuCredit obtains access to the Source Code pursuant to
Section 1.6(f); (ii) Developers have materially breached a material
obligation under this Agreement and have not cured the breach within any cure
periods allowed in this Agreement and the Agreement is terminated pursuant to
Section 7.1(a)(i) or (ii); or (iii) CompuCredit exercises the Purchase Option
under Section 1.8, CompuCredit will use only VSx to complete development with
any components related to the Brain and the Brain Platform and will only use
VSI to complete the development of the Switch Criteria. Under no
circumstances shall CompuCredit use any party other than VSI to develop any
component related to the Switch.
1.4 Restriction on Certain Conflicting Activities of Developers Throughout
the System Development Period and the Ancillary Services Period, except with
CompuCredit's prior written permission, (i) the sole business function of VSx
shall be devoted to performing the Services relating to the development of
the Brain and other System Deliverables for the Brain Platform and for
performing Ancillary Services not performed by VSI, (ii) no Developer shall
provide services to or grant licenses or rights to any third party that could
reasonably be expected to impair or conflict with any one of the Developers'
responsibilities hereunder, (iii) Developers shall not provide any services
substantially similar to any component of the Services related to the Brain
or grant any rights or licenses with respect to the technology related to the
Brain similar to those granted to CompuCredit in this Agreement in either
case to any person or entity engaged in any business activities that are
directly in competition with CompuCredit ("CompuCredit Competitor"), (iv) VSx
will not sell all or any portion of its proprietary rights to the Brain
except as permitted under Section 1.8, and (v) no Developer shall take any
action, directly or indirectly, alone or in conjunction with any other person
or entity, that is intended to or that could reasonably be expected to
adversely affect or cut off CompuCredit's Right of First Refusal set forth in
Section 1.7 or its Purchase Option set forth in Section 1.8. The obligations
of Developers under this Section 1.4 shall apply to Developers, their
respective officers or directors (acting in either their corporate or
individual capacity), and any entity controlled by, controlling and under
common control with Developers ("Developer Affiliates"). Notwithstanding
anything else set forth herein, CompuCredit acknowledges that the provision
of service bureau-type
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services by VSI to entities and persons other than CompuCredit during the
term of this Agreement with respect to the Switch shall not be in violation
of this Section 1.4.
1.5 Use of Third Party Consultants or Developers Without the prior written
consent of CompuCredit, Developers shall not retain any third parties to
furnish services or products in connection with the Services, nor shall
Developers accept any such services or products; provided, however, that to
the extent that CompuCredit approves retention of any such third party
consultant or developer, such consultant or developer shall execute
appropriate confidentiality and other documents reasonably required by
CompuCredit.
1.6 Licenses
(a) VSx hereby grants CompuCredit an exclusive, perpetual license to use, copy
execute, display, and reproduce (in any medium including firmware) the Brain.
(b) VSI hereby grants CompuCredit a nonexclusive license to use, copy,
execute, or display Switch for internal use only.
(c) CompuCredit hereby grants VSI a nonexclusive license to use, copy, modify,
execute, display, reproduce (in any medium including firmware) and prepare
derivative works of the Switch Criteria but only to the extent that is
necessary or appropriate to develop the System for CompuCredit as set forth
in this Agreement.
(d) CompuCredit shall not be permitted under the terms of the above licenses
to sell or sublicense to any unaffiliated third party any of the technology
licensed to CompuCredit in Sections 1.6(a) and 1.6(b) above; provided,
however, that the license rights shall extend to any entities that control
CompuCredit, are controlled by CompuCredit or under common control with
CompuCredit (a "CompuCredit Affiliate"); and provided, further, that the
license rights may be transferred by CompuCredit to any third party that
purchases all or substantially all of CompuCredit's assets or to the
surviving corporation in the event of a merger between CompuCredit, subject
to Sections 1.9 and 8.6. As used in this paragraph, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of management and policies of such person or entity, whether
through the ownership of voting securities, by contract or otherwise.
(e) The license set forth in Sections 1.6(a) and 1.6(b) with respect to the
Brain and Switch shall survive any termination of the System Development
Period, Ancillary Services Period and this Agreement: provided, however, that
(i) such license shall only be with respect to those System Deliverables
concerning the Brain and Switch that have been delivered as of the effective
date of such termination, and (ii) such license shall not survive termination
if the Agreement is terminated for the uncured material breach by
CompuCredit of material provision of this Agreement.
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(f) CompuCredit shall have the right, at any time during the term of the
above licenses, in its discretion and at its expense, to require Developers
to deposit the then current source code to the Brain in escrow. Such deposit
into the source code escrow shall be under mutually agreed terms by the
Parties and shall be paid for by CompuCredit. The source code escrow shall
be maintained for as long as CompuCredit has license rights to the underlying
technology, and Developers shall ensure that the escrowed source materials
are updated with the then current System Deliverables as often as reasonably
necessary to keep them current in a source code escrow. Access to the source
code shall be permitted only under one of the following conditions:
(i)either Developer or Eckstein files for relief under the federal Bankruptcy
Code, or any action is filed against either Developer or Eckstein under such
Code and such action is not cured in thirty (30) days; (ii) either Developer
or Eckstein enters into a general assignment for the benefit of the
creditors; (iii) upon the failure of either Developer to modify a System
Deliverable so that it meets the Performance Criteria (as defined in Section
3.1) pursuant to the terms set forth in Section 3.1; or (iv) upon the
material breach of this Agreement by a Developer that is uncured and a
subsequent termination pursuant to Section 7.1(a). The rights set forth in
this Section shall terminate upon the termination of this Agreement.
1.7 Right of First Refusal Developers will not sell, transfer, divide,
convey or give away all or any portion of the Brain or Switch that it owns to
a third party without first giving CompuCredit a right of first refusal (the
"Right of First Refusal") to acquire such items on terms and conditions
substantially the same as those that would apply to the third party. VSI
shall give CompuCredit Credit at least thirty (30) days to exercise its
Right of First Refusal. This Right of First Refusal is effective as of the
Effective Data and will expire upon the termination of this Agreement.
Notwithstanding the foregoing, the Parties agree that CompuCredit shall have
no Right of First Refusal in the event any portion of the Switch is
transferred by VSI to a wholly-owned subsidiary of VSI pursuant to Section
8.6 hereof; provided, however, that such subsidiary shall be subject to the
terms of this section with respect to any further transfers.
1.8 Purchase Option Developers hereby grant CompuCredit an option (the
"Purchase Option") during the term set forth below, to acquire all of the
issued and outstanding stock of VSx for a purchase price equal to $2,400,000.
If CompuCredit elects to exercise its Purchase Option, CompuCredit will
notify the Developers of this election and will furnish the Developers with a
Stock Purchase Agreement containing terms and conditions to be negotiated and
mutually agreed to by the Parties. VSI and VSx will execute the Stock
Purchase Agreement upon their agreement to the terms thereof. Developers
agree that during the option period set forth below and except as otherwise
provided by the terms of this Agreement, no stock or shares of VSx will be
transferred to any party other than CompuCredit, no change of control in VSx
or VSI will occur, none of the material assets of VSI or VSx will be sold to
any party other than CompuCredit, and no Developer will take any action or
permit any action to be taken that is intended to, or that would likely have
the effect of, defeating the Purchase Option granted to CompuCredit under
this provision. This Purchase Option is effective beginning three years
after the Effective Date if the Agreement has not been terminated prior to
such date and will continue until twelve (12) months after the termination of
this Agreement. In the event the Purchase Option is exercised, neither VSI
nor Eckstein shall be further responsible for any future obligations or
liabilities of VSx
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related to the Brain or Brain Platform hereunder (other than any obligations
or liability under Sections 5.1 or 5.3) to the extent that such liability is
caused by the acts or omissions of VSx prior to the exercise of the Purchase
Option. Notwithstanding anything else set forth herein, the Purchase Option
shall terminate immediately upon CompuCredit's material breach and subsequent
termination of this Agreement pursuant to Section 7.1(a).
1.9 Processing Charges In the event of a sale of CompuCredit to a third
party or a change of control of CompuCredit and the assignment of this
Agreement pursuant to Section 8.6 hereof, Developers agree not to charge the
purchaser or the successor entity, as the case may be, any transaction fee
for use of the Switch or any other System component that is more than the
lesser of $.25 per transaction or the lowest rate charged by Developers to
any other party. Such rate shall be effective for one year after the
assignment of this Agreement unless the Purchase Option is exercised, in which
case the rate shall be effective for one year after the exercise of such
Purchase Option.
2. Project Management, Meetings and Reports, Project Site
2.1 Project Management The contact person for CompuCredit shall be David
Hanna, whose address, telephone and facsimile numbers are:
David G. Hanna
HBR Capital, Ltd.
Two Ravinia Drive
Atlanta, Georgia 30346
Telephone: (770)901-5800
Facsimile: (770)901-5815
and the contact person for VSI and VSx shall be Eckstein, whose address,
telephone and facsimile numbers are:
James A. Eckstein
Visionary Systems, Inc.
164 Peachtree Way, N.W.
Atlanta, Georgia 30305
Telephone: (404)842-1607
Facsimile: (404)841-1024
2.2 Weekly Status Meetings and Periodic Reports During the System
Development Period, except as may be waived by CompuCredit on a case-by-case
basis, the Parties shall meet at least once weekly to discuss the status of
the System Services and the System in general. Another purpose of these
weekly meetings shall be for the Parties to make mutually agreed changes to
the schedules and agenda. If CompuCredit so requests, Developers will
provide it with periodic written status reports relating to the Services.
Also at these weekly meetings, the parties may agree to the performance by
VSx or VSI of certain Ancillary Services, as contemplated by
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Section 1. After the end of the System Development Period, for the
duration of the Ancillary Services Period, the Parties will meet at mutually
agreeable times and locations to discuss matters related to the Ancillary
Services.
2.3 Project Site During the Development Period, CompuCredit shall provide
VSx and VSI, at no cost, with mutually acceptable office space in
CompuCredit's data-processing facilities (the "Project Site") and access to
the System for VSx and VSI in order to develop, install or service System
Deliverables. VSx and VSI will not be permitted to access the System from
any location other than the Project Site, except under mutually agreed upon
terms. CompuCredit shall have no responsibility for compensating or
providing any rights or benefits to any contractors, agents, employees or
personnel of VSx or VSI other than any express obligations to Eckstein under
this Agreement.
2.4 Essential Nature of Eckstein's Services The personal services of
Eckstein with respect to the development of the System are deemed essential
by CompuCredit, and any significant unavailability, inability or
unwillingness of Eckstein, during the term of this Agreement to perform the
obligations of Developers, unless beyond the reasonable control of Eckstein
and despite his reasonably diligent efforts to perform, shall constitute a
a material breach of this Agreement by Developers. In the event that
CompuCredit exercises its Purchase Option, VSI will ensure that Eckstein
makes himself available to CompuCredit for a mutually agreeable period of
time, which shall in no event be less than one (1)year, to serve as a
consultant to VSx at a rate $200 per working hour and VSI will ensure that
Eckstein is available to VSx for this consulting work for at least forty
hours per month. There will be no carry-over of unused hours in one month to
another month. During the term of this Agreement, Developers will ensure that
Eckstein devotes at least 90% of his working time to the Services unless
otherwise agreed by the Parties.
3. System Acceptance and Follow-up Assistance
3.1 System Acceptance Test Upon the completion of a System component for the
Brain Platform or the Switch Platform developed by either of the Developers
in accordance with the terms hereunder (a "System Deliverable"), the Developer
responsible for furnishing that System Deliverable (the "Responsible
Developer") and CompuCredit shall perform a series of acceptance tests on the
System Deliverable (the "Acceptance Test"), the content, form and purposes of
which shall be mutually agreed by CompuCredit and the Responsible Developer,
to ensure that the System Deliverable (i) performs in accordance with any
design criteria or any performance criteria mutually agreed by the Responsible
Developer and CompuCredit in writing ("Design Criteria"), and (ii) to the
extent it is software, performs repetitively on an appropriate variety of
data without failure or error (the requirements set forth in (i) and (ii) being
collectively referred to as the "Performance Criteria"). If the System
Deliverable does not conform to the Performance Criteria, the Responsible
Developer shall modify the System Deliverable to correct the nonconformity.
The Acceptance Tests shall be repeated until the System Deliverable conforms
to the Performance Criteria. The inability of the Responsible Developer to
modify a System Deliverable so that it meets the Performance Criteria shall
be considered a material
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breach hereunder and CompuCredit may at its option (A) terminate this
Agreement by providing Developers with written notice of termination pursuant
to Section 7.1(a), or (B) if related to the Brain, CompuCredit may obtain
access to the source code to modify or correct the System Deliverable itself
pursuant to Section 1.6(f).
3.2 System Acceptance If and when CompuCredit is satisfied that the
Acceptance Tests establish that a System Deliverable meets any agreed upon
Performance Criteria or is otherwise acceptable it shall give written notice
to the Responsible Developer that it is accepting the System Deliverable, and
the date of such notice shall be referred to as the "Final System Deliverable
Acceptance Date" and such acceptance shall be known as "Final System
Deliverable Acceptance." Notwithstanding the foregoing, CompuCredit's first
commercial or other business use of the System Delivery shall be deemed the
"Final System Deliverable Acceptance" and the date of such first use shall be
deemed the "Final System Deliverable Acceptance Date."
4. Compensation
4.1 Initial Payment CompuCredit shall pay Developers One Hundred Twenty-Five
Thousand Dollars ($125,000) as follows:
$25,000 Within fourteen (14) business days
following the Effective Date
$25,000 October 1,1997
$25,000 January 1,1998
$25,000 April 1,1998
$25,000 July 1, 1998
These payments shall be the fee for the Developers' agreement to perform the
development services hereunder as well as the fee for the licenses granted by
the Developers hereunder, including the exclusive license granted by VSx to
CompuCredit in Section 1.6(a) hereof. By accepting the initial payment,
Developers shall indicate their agreement to proceed with the Services with
diligence and due care. None of the payments shall be refundable in any
event unless a Developer materially breaches a material obligation under
Section 6.2 or 6.3 of this Agreement or a representation or warranty of
Developers in Section 5 proves to be materially inaccurate in which case
Developers shall promptly repay CompuCredit the amount paid hereunder.
Notwithstanding the foregoing, Developers shall have no obligation under any
term of this Agreement or otherwise to refund any payments more than nine
months after such payment has been made.
4.2 Monthly Payments On or before the tenth (10th) day of each calendar
month during the term of this Agreement, CompuCredit shall pay (a) VSx for
time spent by VSx personnel and (b) VSI for time spent by VSI personnel at
rates set forth in the table attached as Exhibit C and, if approved in advance
by CompuCredit pursuant to Section 1.5, agents and contractors of VSx and VSI
in performing the Services during the preceding month. Notwithstanding the
foregoing,
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CompuCredit shall not be responsible for paying for any fees that fall
outside of any limitations mutually agreed upon by the Developers and
CompuCredit prior to their being incurred.
4.3 Costs and Expenses CompuCredit shall reimburse the Developers for any
ordinary, necessary and reasonable travel, lodging or other out-of-pocket
expense reasonably incurred by the Developers solely in connection with
performing the Services. CompuCredit must pre-approve any single expense of a
Developer amounting to more than Five Hundred Dollars ($500) to the extent
that the Developer wishes to seek reimbursement for such amounts. The
Developers shall provide CompuCredit with reasonable documentation to support
and verify any expenses submitted for reimbursement pursuant to this Section
4.3.
5. Representations, Warranties and Indemnities
5.1 Representations and Warranties of Developer Developers jointly and
severally represent and warrant to CompuCredit that:
(a) Each System Deliverable and all work product generated by Developers in
connection with the Services, including all material, works, writing, ideas
or dialogue written, submitted or interpolated in and for the System
Deliverable or the Services, will be the Responsible Developer's original
work or will be work acquired and owned by the Responsible Developer
immediately prior to its transfer and assignment to CompuCredit under this
Agreement (except for material in the public domain), and shall have not been
copied in whole or in part from any other work. No System Deliverable shall
infringe upon or violate any patent, copyright, trademark, trade secret or
other intellectual property or other proprietary right of any third party.
(b) Developers' performance of their respective obligations under this
Agreement will not trigger or constitute a breach of any legal or contractual
obligation of any one or more of the Developers.
(c) Developers are fully authorized to enter into and fully perform their
obligations under this Agreement.
(d) The System Deliverables shall operate in accordance with any Performance
Criteria one (1) year after the Final System Deliverable Acceptance Date. If
CompuCredit reasonably determines that the System Deliverable fails to meet
such Performance Criteria during the one year period, then the Responsible
Developer shall use commercially reasonable efforts, at its own expense, to
correct the performance deficiency within fifteen (15) business days of being
notified by CompuCredit of the problems. Notwithstanding anything to the
contrary in this Section 5.1(d), however, the Developers may require
CompuCredit to bear the costs associated with correcting errors in a System
Deliverable while the System Deliverable is in an "alpha" or "beta" stage of
development prior to Final System Deliverable Acceptance.
(e) Each System Deliverable containing or constituting software and any
additional software generated as a result of the Services shall be designed
to be used prior to, during and after the
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beginning of the calendar year 2000 A.D. and the System Deliverable and such
software will operate during each such time period without error relating to
date data, specifically including any error relating to, or the product of,
date data which represents or references different centuries or more than one
century.
(f) Developers will comply with all policies, procedures and regulations
required by third party data providers including, but not limited to, credit
bureaus.
(g) THE LIMITED WARRANTIES STATED ABOVE ARE IN LIEU OF ALL OTHER WARRANTIES
GIVEN BY THE DEVELOPERS IN CONNECTION WITH THE SERVICES AND SYSTEM
DELIVERABLES PROVIDED UNDER THIS AGREEMENT, INCLUDING THE IMPLIED WARRANTIES
OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT.
DEVELOPERS DO NOT REPRESENT, WARRANT OR GUARANTEE SUCCESS IN THE DEVELOPMENT
EFFORT TO CREATE THE SYSTEM.
(h) Any claims made under this Section 5.1 shall be made within three (3)
years after the termination of this Agreement.
5.2 Representations and Warranties of CompuCredit CompuCredit represents and
warrants to the Developers that:
(a) CompuCredit owns or has acquired rights to all proprietary interests in
the Switch Criteria necessary to grant the intellectual property rights set
forth in this Agreement.
(b) CompuCredit's performance of its obligations under this Agreement will
not trigger or constitute a breach of any legal or contractual obligation of
CompuCredit.
(c) CompuCredit is fully authorized to enter into and fully perform its
obligations under this Agreement.
(d) CompuCredit has purchased or licensed all the necessary third party
computer hardware and software which may be required to develop and operate
the System and the Developers have the right to use such third party hardware
and software to which Developers will be given access hereunder.
(e) Any claims made under this Section 5.2 shall be made within three (3)
years after the termination of this Agreement.
5.3 Indemnifications
(a) Developers shall jointly and severally (i) indemnify and hold harmless
CompuCredit, its officers, directors and CompuCredit Affiliates (collectively,
the "CompuCredit Parties") from and against any liability, cost, loss or
expense of any kind (including but not limited to attorneys
10
<PAGE>
fees and court costs), and (ii) defend, through use of legal counsel chosen
by Developers, any suit or proceeding against a CompuCredit Party, in the
case of both (i) and (ii) arising out of or based on any claim, demand or
action alleging that a System Deliverable or any other product or service
provided by a Developer to CompuCredit under this Agreement infringes any
copyright, patent, trademark, trade secret or other intellectual property or
other proprietary right of any third party (a "Third Party IP Right").
Developers shall have no obligations hereunder to the extent that such claim,
demand or action arises from or occurs as a result of (i) the use of the
System Deliverable in combination with unapproved items unless the Developers
specifically recommended them as a combination or under the circumstances
Developers could reasonably be expected to have contemplated that
CompuCredit would use the System Deliverable in connection with such items,
or (ii) the failure of CompuCredit to implement changes, replacements, or new
releases recommended by Developer(s) and made available to CompuCredit at no
cost or nominal cost, where such claim, demand or action would have been
avoided by such changes, replacements or new releases. Notwithstanding the
foregoing, Developers shall not have any liability under this section or
otherwise to CompuCredit for any liability, cost, loss or expense of any kind
arising out of or based on any actual or alleged violation of the Fair Credit
and Reporting Act ("FCRA").
(b) In the event that a System Deliverable or any other product or service
provided by a Developer to CompuCredit hereunder is held in any such suit or
proceeding to infringe a Third Party IP Right, or if any Developer believes
that there is a reasonable basis for such an infringement claim to be
asserted or that a System Deliverable or any such other product or service is
infringing, then Developers, at their expense, shall take one of the
following remedial actions (the choice of which action Developers should take
shall be made mutually by the Parties): (i) procure for CompuCredit the right
to continue using the allegedly infringing item or service; or (ii) replace
the allegedly infringing item or service with one that is not infringing,
that is the functional equivalent of the replaced item and that meets any
applicable Performance Criteria. If neither of the foregoing options is
reasonably available, CompuCredit agrees to cease all use of such infringing
or potentially infringing System Deliverables.
(c) Developers shall jointly and severally (i) indemnify and hold harmless
the CompuCredit Parties from and against any liability, cost, loss or expense
of any kind (including but not limited to attorneys fees and court costs), and
(ii) defend, through use of legal counsel chosen by Developers, any suit or
proceeding against a CompuCredit Party, in the case of both (i) and (ii),
arising out of or based on any material inaccuracy in any representation or
warranty of Developers in this Agreement or any material breach by any
Developer of any of its obligations under this Agreement.
(d) CompuCredit shall (i) indemnify and hold harmless the Developers, their
officers, directors and affiliated entities (collectively, the "Developer
Parties") from and against any liability, cost, loss or expense of any kind
(including but not limited to attorneys fees and court costs), and (ii)
defend, through use of legal counsel chosen by CompuCredit, any suit or
proceeding against a Developer Party, in the case of both (i) and (ii) arising
out of or based on any claim, demand or action alleging any violation of or
otherwise relating to the FCRA.
11
<PAGE>
(e) CompuCredit shall (i) indemnify and hold harmless the Developer
Parties from and against any liability, cost, loss or expense of any kind
(including but not limited to attorneys fees and court costs), and (ii)
defend, through the use of legal counsel chosen by CompuCredit any suit or
proceeding against a Developer Party, in the case of both (i) and (ii),
arising out of or based on any material inaccuracy in any representation or
warranty of CompuCredit in this Agreement or any material breach by
CompuCredit of any of its obligations under this Agreement.
(f) The indemnification obligations set forth herein shall survive
for one year after the termination of this Agreement.
5.4 Limitation of Liability
UNDER NO CIRCUMSTANCES SHALL ANY PARTY BE RESPONSIBLE TO ANY OTHER PARTY FOR
ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR
IN CONNECTION WITH THIS AGREEMENT OR ANY ACTS OR OMISSIONS ASSOCIATED
THEREWITH OR RELATING TO THE SERVICES OR SYSTEM DELIVERABLES, WHETHER SUCH
CLAIM IS BASED ON BREACH OF WARRANTY, CONTRACT, TORT OR OTHER LEGAL THEORY
AND REGARDLESS OF THE CAUSES OF SUCH LOSS OR DAMAGES OR WHETHER ANY OTHER
REMEDY PROVIDED HEREIN FAILS, NOR SHALL A PARTY'S TOTAL LIABILITY EXCEED AN
AMOUNT EQUAL TO THE TOTAL AMOUNT PAID BY COMPUCREDIT TO DEVELOPERS PURSUANT
TO SECTION 4.2 OF THIS AGREEMENT. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN
THIS AGREEMENT, THE LIMITATIONS OF LIABILITY SET FORTH IN THIS SECTION 5.4
SHALL NOT APPLY TO A PARTY'S INDEMNIFICATION OBLIGATIONS UNDER SECTION 5.3(a)
OR SECTION 5.3(d).
6. Ownership and Proprietary Rights; Limited License Back
6.1 Ownership
(a) For purposes of this Agreement "Intellectual Property" (whether such term
is capitalized or used in lower case letters) shall mean collectively (i)
copyrights, copyright registrations or applications, trademarks (and the
goodwill associated therewith), trademark registrations or applications (and
the goodwill associated therewith), moral rights, and any other rights to any
form or medium of expression, (ii) Trade Secrets (as defined in Section
6.2(b)), privacy rights, and any other protection for confidential
information or ideas, (iii) patents, patent registrations and patent
applications, (iv) any items, information or theories which are protectable
or registrable under any of the copyright, trademark, patent, Trade Secret,
confidentiality or other similar laws, and (v) any other similar rights or
interests, recognized by applicable law.
12
<PAGE>
(b) Subject to all rights granted or applicable to the Developers in this
Agreement, the Parties acknowledge and agree that all Intellectual Property
associated with the Switch Criteria is currently owned and shall continue to
be owned by CompuCredit.
(c) Subject to all rights granted or applicable to CompuCredit in this
Agreement, the Parties acknowledge and agree that (i) VSI shall own all
Intellectual Property associated with the Switch and other System
Deliverables related to the Switch Platform developed and/or provided
hereunder, and (ii) VSx shall own all Intellectual Property associated with
the Brain and other System Deliverables related to the Brain Platform
developed and/or provided hereunder.
(d) To the extent that the Developers do not own the Intellectual Property as
set forth in paragraph (c) above, then (i) if one Developer owns any
Intellectual Property rights in and with respect to the Intellectual Property
the other Developer claims to own, then the Developers hereby agree that they
will immediately take any action necessary to consolidate ownership of all
Intellectual Property rights in the Developer so that the claim set forth in
paragraph (c) is correct, and until such consolidation of ownership occurs,
the licenses granted in Section 1.6 shall be deemed to be made by all
Developers having an ownership interest in the Brain, Switch, or other
Intellectual Property, as the case may be; and (ii) if CompuCredit owns any
Intellectual Property rights in and with respect to the Intellectual Property
the Developers claim to own, then CompuCredit hereby agrees to immediately
take any action necessary to transfer ownership of all Intellectual Property
rights in the proper Developer so that the claim set forth in paragraph (c)
is correct.
6.2 Non-Disclosure Covenant
(a) Each Party acknowledges that it may be exposed to certain "Confidential
Information" and "Trade Secrets" (both as defined in paragraph (b) of this
Section 6.2) of the other Parties during the term of this Agreement, and that
its unauthorized use or disclosure of such information or data could cause
immediate and irreparable harm to the Party whose information is misused or
disclosed. Accordingly, except to the extent that it is necessary to use such
information or data to perform its express obligations under this Agreement,
no Party shall (and each Party shall take diligent measures to ensure that
none of its employees, other personnel or affiliates shall), without the
express prior written consent of the other Party, disclose or divulge or use,
modify or copy, directly or indirectly, in any way for any person or entity:
(a) any of another Party's Confidential Information during the term of this
Agreement and for a period of three (3) years after the later to end of the
System Development Period or the Ancillary Services Period; and (b) any of
another Party's Trade Secrets at any time during which such information shall
constitute a Trade Secret.
(b) For purposes of this Agreement, "Confidential Information" means valuable
and proprietary non-public business information or data other than Trade
Secrets and "Trade Secret" means information (including, but not limited to,
confidential business information, technical or non-technical data, formulas,
patterns, compilations, programs, devices, methods, techniques, drawings,
processes, financial data, financial plans, product plans, lists of actual or
potential customers or suppliers) of or about a Party that: (a) derives
economic value, actual or potential,
13
<PAGE>
from not being generally known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value from its
disclosure or use; and (b) is the subject of efforts that are reasonable
under the circumstances to maintain irs secrecy. Each Party agrees to use
reasonable efforts to identify any information disclosed to the other as
Confidential Information or Trade Secrets; provided, however, that failure to
do so shall not eliminate or lessen the other Party's responsibilities or
obligations hereunder.
6.3 Non-Interference Covenant
(a) Developers agree that for a period of twelve (12) months after the end of
this Agreement, no Developer will (i) solicit any person or entity that was a
client or customer or actively sought prospective client or customer of
CompuCredit during the twelve months prior to the end of the Agreement (a
"CompuCredit Customer") for the purposes of providing the CompuCredit
Customer or having the CompuCredit Customer provided with services or
products substantially similar to those offered by CompuCredit to such
CompuCredit Customer, or (ii) solicit any employee, contractor or other
personnel of CompuCredit to terminate a contractual relationship with
CompuCredit or sever an affiliation with CompuCredit Credit in order
to affiliate with a CompuCredit Competitor.
(b) CompuCredit agrees that for a period of twelve (12) months after the end
of this Agreement, it will not (i) solicit any person or entity that was a
client or customer or actively sought prospective client or customer of
either Developer during the twelve months prior to the end of the Agreement
(a "Developer Customer") for the purposes of providing the Developer Customer
or having the Developer Customer provided with services or products
substantially similar to those offered by the Developer to such Developer
Customer, or (ii) solicit any employee, contractor or other personnel of
Developer to terminate a contractual relationship with Developer or to sever an
affiliation with Developer in order to affiliate with any CompuCredit Party.
7. Termination
7.1 Termination
(a) Except with respect to the Surviving Provisions (as described in
subsection (d) of this Section 7.1), this Agreement shall terminate on the
date three (3) years after the Effective Date ("Initial Term") unless either
the System Services or Ancillary Services are continued after such three (3)
year period pursuant to paragraphs (b) or (c) below in which case the
Agreement shall terminate upon the termination of the later of the
termination of the System Services and Ancillary Services. Notwithstanding
the foregoing, this Agreement shall terminate early upon the occurrence of
the following (with VSI and VSx being deemed a single Party for purposes of
(i) and (ii) below):
(i) in the event that the other Party materially breaches any of its
obligations under this Agreement in which case the Agreement shall terminate
upon thirty (30) business days written notice and a failure to cure such
breach during such thirty (30) business days;
14
<PAGE>
(ii) in the event of a breach by the other Party of its obligations
under Section 1.4, 6.2, or 63, in which case the Agreement shall terminate
immediately upon notice to the other party; and
(iii) CompuCredit may terminate the Agreement for any reason by
providing Developers with at least ninety (90) days prior written notice;
provided, however, that CompuCredit shall not be entitled to a refund of any
monies paid hereunder in this case.
(b) After the Initial Term, CompuCredit may elect by written notice to
Developers to extend the System Development Period on a month-to-month basis
following the end of the Initial Term, during which extension periods
CompuCredit shall continue paying Developers monthly fees pursuant to EXHIBIT
C.
(c) After the Initial Term, the Ancillary Services shall continue from month
to month and CompuCredit shall continue paying Developers monthly fees
pursuant to EXHIBIT C, unless either the Developers or CompuCredit terminate
the Ancillary Services Period, with such termination shall be effective sixty
(60) days after delivery of written notice of such termination by the
terminating Party(ies) to the other Party(ies).
(d) Upon any termination of this Agreement, CompuCredit shall promptly return
all property of the Developers to the Developers, including but not limited
to any Confidential Information and Trade Secrets; and Developers shall
promptly return all such property of CompuCredit to CompuCredit. In addition,
VSI shall promptly deliver to CompuCredit all work in process relating to the
Switch Criteria.
(e) Notwithstanding anything to the contrary in this Agreement, the following
provisions of this Agreement shall survive the termination of this Agreement:
Sections 1.6 (other than 1.6(f); 1.8; 1.9; 2.4; 4.1; 5.1 (with survival to be
limited to a period of three years after termination of the Agreement); 5.3;
5.4; 6.7; and 8 and the Guaranty and Joinder of Eckstein set forth as
Attachment A.
8. Miscellaneous
8.1 Severability If any provision in this Agreement or any application of
those provisions is found invalid, illegal or unenforceable in any respect,
then the validity, legality and enforceability of the remaining provisions in
this Agreement and any other applications of such provisions and the
remaining provisions will not in any way be affected or impaired by such
invalidity, illegality or unenforceability.
8.2 Choice of Law, Interpretation The validity, construction, and enforcement
of this agreement, and the determination of the rights and duties of the
parties, will be governed by the laws of the State of Georgia (exclusive of
any choice of law or other provision that would result in the application of
the laws of any other jurisdiction).
15
<PAGE>
8.3 Notices All notices and other communications required or permitted under
this Agreement will be in writing (including a facsimile) and will be deemed
given when either delivered personally, via facsimile, or five days after
being deposited in the United States mail, postage prepaid and addressed as
set forth in Section 2.1, or to such other address as each Party may
designate in writing to the address set forth on the signature page or any
succession address specified by such party to the other Parties in accordance
herewith.
8.4 Amendments and Waiver No amendment, change, or modification of this
Agreement or any of the terms, conditions or provisions hereof, and no waiver
of a right, remedy, privilege or power, or discharge of an obligation or
liability, conferred upon, vested in, or imposed upon any Party under or
pursuant to this Agreement, and no consent to any act or omission pertaining
hereto will be effective unless embodied in a written instrument signed by
both Parties. No failure to exercise and no delay in exercising any right,
remedy, privilege, or power under or pursuant to this Agreement will operate
as a waiver thereof, nor will any single or partial exercise of any right,
remedy, privilege, or power provided for under or pursuant to this Agreement
by either party hereto preclude or limit such party from any other or further
exercise thereof or from pursuing any other right, remedy, privilege, or
power available to this Agreement, at law, in equity or otherwise.
8.5 Relationship Between Parties The Parties acknowledge that Developers will
perform their obligations hereunder as independent contractors and not as
joint venturers or partners of in any other capacity inconsistent with an
independent contractor capacity. Developers' employees and agents, if any,
are not CompuCredit's employees or agents, and will have no authority to bind
CompuCredit by contract or otherwise. Nothing contained herein will be
construed as creating any agency, partnership, joint venture or other form of
joint enterprise among the Parties.
8.6 Assignment This Agreement may not be assigned, in whole or part, by any
Party without the prior written consent of the other Parties, and any
approved assignee must agree in writing to be bound by the terms of this
Agreement. Notwithstanding the foregoing, CompuCredit cannot unreasonably
withhold consent if VSI wishes to assign its rights under this Agreement to a
wholly-owned subsidiary of VSI in connection with a transfer of all property
(including all Intellectual Property) associated with the Switch to such
subsidiary assuming the subsidiary of VSI assumes all rights and obligations
of VSI hereunder.
8.7 Entire Agreement This Agreement, together with any and all Exhibits and
other attachments attached to or associated with this Agreement, including
but not limited to the Joinder and Guaranty of Eckstein attached hereto (each
of which is hereby incorporated by reference into the body of this
Agreement), constitutes the entire agreement among the Parties with respect
to the subject matter hereof, and supercedes any prior statement or writing
not a part of this Agreement or otherwise referenced in this Agreement, and
no Party will be bound by any prior or contemporaneous representation,
statement, promise, warranty, covenant, or agreement pertaining thereto
unless set forth or referred to in this Agreement.
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8.8 Force Majeure. No Party shall be in default by reason of any failure in
performance, if such failure arises solely from causes beyond any reasonable
control of the Party (notwithstanding the Party's taking diligent steps to
avoid the forces causing the failure to perform and to mitigate the adverse
consequences to the other Party(ies) of such forces), including without
limitation acts of God, natural disasters, strikes, freight embargoes, a
failure of CompuCredit's computer systems (as to the Developers only) or
another Party's untimely, inaccurate or inadequate performance of its
obligations hereunder.
COMPUCREDIT, Corporation VISIONARY SYSTEMS INC.
By: /s/David G. Hanna By: /s/James A. Eckstein
----------------------------- -----------------------------
Printed Name: David G. Hanna Printed Name: James A. Eckstein
------------------- -------------------
Its: President Its: President
---------------------------- ----------------------------
Title Title
VSx, Corporation
By: /s/ James A. Eckstein
-----------------------------
Printed Name: James A. Eckstein
-------------------
Its: President
----------------------------
Title
17
<PAGE>
ATTACHMENT A
JOINDER AND GUARANTY
The undersigned, James A. Eckstein ("Eckstein"), hereby guarantees the
full and complete performance by each Developer of the Developer's
obligations under Sections 1.4, 2.4, 6.2, and 6.3(a) of this Agreement,
provided, however, that Eckstein shall only be responsible for the
Developer's material and intentional breach under Sections 1.4, 6.2; and
6.3(a) of the Agreement. Eckstein's obligations hereunder shall be limited to
the total amount paid by CompuCredit to Developers under Section 4.2 of the
Agreement between CompuCredit Corporation; Visionary Systems, Inc. and VSx
Corporation dated the 23rd day of September, 1997 ("Agreement") less any
amounts received by CompuCredit from the Developers for such breach. This
Joiner and Guaranty shall terminate upon the termination of all obligations
owed by Developers to CompuCredit under Sections 1.4, 6.2 and 6.3 of the
Agreement. Eckstein agrees that this Joiner and Guaranty shall be
incorporated by reference into the Agreement.
/s/ James A. Eckstein
- ---------------------------
JAMES ECKSTEIN
<PAGE>
APPENDIX A
DEFINED TERMS
Term Section
------ ---------
Acceptance Tests 3.1
Ancillary Services Period 1.2
Ancillary Services Background
Brain Background
Company Competitor 1.4
CompuCredit Preamble
CompuCredit Affiliate 1.6(c)
CompuCredit Customer 6.3
CompuCredit Parties 5.3(a)
Confidential Information 6.2(a)
Developer Affiliates 1.4
Developers Preamble
Eckstein Preamble
Effective Date Preamble
Final System Deliverable Acceptance Date 3.2
Final System Deliverable Acceptance 3.2
Initial Development Period 7.1
Intellectual Property 6.1
Licensed Technology 1.6(c)
Parties Preamble
Project Site 2.3
Purchase Option 1.8
Responsible Developer 3.1
Right of First Refusal 1.7
Services Background
Switch Background
System Background
System Deliverable 3.1
System Deliverable Period 1.1
System Services Background
Third Party IP Rights 5.3(a)
Trade Secrets 6.2(a)
VSI Preamble
VSx Preamble
<PAGE>
Exhibit A
The Brain
- -------------------------------------------------------------------------------
Refer to the following diagram when reviewing the functional descriptions
below:
[This chart places The Brain in the center and the following
boxes surrounding it: Web Interface Components: Response Web;
Data Warehouse 1; Analysts Workstation; and Data Warehouse 2.
These boxes are described in the text below.]
ResponseWeb
- -------------------------------------------------------------------------------
The ResponseWeb is a custom developed intranet application used to
analyze characteristics of those consumers responding to a credit card
offer. The ResponseWeb data model contains attributes from each of the
following sources:
Pre-Screen Credit Bureau File
Solicitation file
Telemarketing Response Data
Mailing Response Data
<PAGE>
TSYS Master File
FICO Triad Feed
Transaction Data
The ResponseWeb is primarily a reporting system used by managers and
analysts to provide input to the development of a response model. A
response model predicts the likelihood of response from any solicitation
prospect. By analyzing the information within the ResponseWeb database,
analysts can determine which if any attributes of the pre-screen file
are predictive of response. If attributes are found to be predictive a
model is developed to eliminate from future mailings candidates not
likely to respond, thereby reducing marketing costs. In addition
predictive attributes can be added to a criteria allowing for selection
of prospects who appear likely to respond.
As currently designed ResponseWeb does not generate an executable model
rather it's intention is to generate specifications from which an
executable model can be developed.
AccountWeb
The AccountWeb acts as the central repository of all master file
attributes in The Brain. Attributes come from the following sources:
Prospect Files
Pre-Screen Credit Bureau File
Solicitation file
Response Data
New Account File
Transaction data (VISA)
Master File Transaction Data
Demographic attributes (Polk and Donnelly)
Existing non-Portfolio rejects
The AccountWeb maintains a common data model all attributes are
normalized prior to import. This reduces duplicated and redundant data
and brings data integrity to the database.
In addition to being a central repository for portfolio information,
the AccountWeb will also be used to further enhance risk model
development activities as well as support effective marketing and
cross-selling of affinity programs.
Analysts Workstation
The Analysts Workstation provides the analyst access to the Data
Warehouse's through both custom developed applications (such as
ResponseWeb) as well as a set of client/server based
3
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OLAP (On-Line Analytical Processing) tools such as SAS and MS Excel. Its
key role will be to facilitate the job of the model development staff.
The Loader within the Analysts Workstation will allow the model
development staff to download subsets of the Information Warehouse for
more efficient analysis efforts.
A groupware tool will also be available to the model development staff
through the Analysts Workstation. Collaboration is critical to successful
model building. This groupware tool will provide analysts an easy to use
interface to keep notes, track progress, and share results with each
other. As envisioned this tool will provide a history of all of the efforts
of the model development group becoming effectively a group journal.
Such a history reduces the risk of loss of intellectual property in the
event of the loss of key group resources.
FinancialWeb
___________________________________________________________________________
Accessible, detailed and up to date financial results are required by
card issuers to track the financial success of their portfolio. The
concept of the FinancialWeb is both to provide card issuers with this
information as well as to allow the credit grantors financial staff to
forecast success or failure of alternative pricing/expense allocation
strategies.
CollectionWeb
___________________________________________________________________________
The CollectionWeb is a custom developed intranet application used to
analyze the collectability of a set of accounts. The CollectionWeb data
model contains attributes from the operational collections system of the
credit grantor. Collection departments can be more efficient by pinpointing
characteristics of a portfolio customer which are indicative of their
likelihood to pay. Segmenting and rank ordering the populations by these
characteristics reduces effort and increases return for the department.
Data Warehouse 1
___________________________________________________________________________
The underlying database schema used to support analysis of existing
accounts and solicitation data. Data elements for this warehouse come from
a combination of those elements in the application Web's described above.
Data Warehouse 2
___________________________________________________________________________
The underlying database schema used to support any prospecting efforts.
Data elements for this warehouse come from a combination of those elements
in the application Web's described above.
4
<PAGE>
DESCRIPTION OF GRAPHIC MATERIALS FOR EXHIBITS
---------------------------------------------
Exhibit B
---------
THE SWITCH
- ----------
The Switch is a tool used by credit grantors to provide them with
real-time access to credit information. VSI will maintain ownership to
all of the items shown in squares. Each customer maintains ownership of
the items represented by circles. Figure 1 below depicts the functional
components of the Switch as visualized today.
[The figure depicted on this page contains the following Functional
Component Labels of the Switch within squares: Other Source Access,
Credit Bureau Access, Input Request Processing, Application Manager,
Criteria Processing, Internal Database Access, External Database Access,
Response Formatting and Output Response Processing.
The following Functional Component Labels of the Switch are contained
within circles: Proprietary Criteria and Proprietary Model. These
components are described in the text below.]
5
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INPUT REQUEST PROCESSING
--------------------------------------------------------------------------
All aspects of accepting a request from a customer are covered
here. This functionality accepts the message and/or reads an
input file, and formats it for processing throughout the rest of
the system.
APPLICATION MANAGER
--------------------------------------------------------------------------
This functionality controls the flow of the input request and
output response as they travel through the system.
OTHER SOURCE ACCESS
--------------------------------------------------------------------------
This functionality allows for on-line sources other than credit
bureaus to be accessed by the system.
CREDIT BUREAU ACCESS
--------------------------------------------------------------------------
This functionality manages all aspects of the interface to the
three major credit.
INTERNAL DATABASE ACCESS
--------------------------------------------------------------------------
Customers have the option of loading a database of information
for the switch to access during processing. This information is
often used to support custom criteria and custom modeling.
EXTERNAL DATABASE ACCESS
--------------------------------------------------------------------------
Customers also have the option of having the Switch read directly
from an existing database they maintain. This information is
often used to support custom criteria and custom modeling.
CRITERIA PROCESSING
--------------------------------------------------------------------------
This functionality supports the use of custom proprietary
criteria's developed for the customer to run on the Switch.
PROPRIETARY CRITERIA
--------------------------------------------------------------------------
This is the customers proprietary criteria. VSI will code this
criteria specifically for each customer as part of the setup
process. Ownership of this code rests with the customer.
PROPRIETARY MODEL
--------------------------------------------------------------------------
This is the customers proprietary custom model. VSI will code
this model specifically for each customer as part of the setup
process. Ownership of this code rests with the customer.
RESPONSE FORMATTING
--------------------------------------------------------------------------
This functionality formats the response for return to the source.
OUTPUT RESPONSE PROCESSING
--------------------------------------------------------------------------
This functionality sends the appropriate response to the source.
Often the response may need to be returned to more than one
location, via more than one mechanism (e.g. in addition to an-
6
<PAGE>
immediate response from the system the customer may request a
tape of all transactions processed to be sent at a later time).
7
<PAGE>
Exhibit C
---------
Rates
- -------------------------------------------------------------------------------
Development Rates
-----------------
<TABLE>
<CAPTION>
Employee Annual Salary Hrly. Rate to Charge Type of Employee
- ---------------------- -------------------- ----------------
<S> <C> <C>
20,000 $ 18.23 Junior
30,000 $ 27.34 Junior
40,000 $ 36.46 Junior
50,000 $ 45.57 Intermediate
60,000 $ 54.69 Intermediate
70,000 $ 63.80 Intermediate
80,000 $ 72.92 Intermediate
90,000 $ 82.03 Intermediate
100,000 $ 91.15 Senior
110,000 $100.26 Senior
120,000 $109.38 Senior
130,000 $118.49 Senior
140,000 $127.60 Senior
150,000 $136.72 Senior
</TABLE>
Operations/Support Rates
------------------------
<TABLE>
<CAPTION>
Employee Annual Salary Hrly. Rate to Charge Type of Employee
- ---------------------- -------------------- ----------------
<S> <C> <C>
20,000 $ 15.63 Junior
30,000 $ 23.44 Junior
40,000 $ 31.25 Junior
50,000 $ 39.06 Intermediate
60,000 $ 46.88 Intermediate
70,000 $ 54.69 Intermediate
80,000 $ 62.50 Intermediate
90,000 $ 70.31 Intermediate
100,000 $ 78.13 Senior
110,000 $ 85.94 Senior
120,000 $ 93.75 Senior
130,000 $101.56 Senior
140,000 $109.38 Senior
150,000 $117.19 Senior
</TABLE>
<PAGE>
Exhibit 10.7.1
AFFINITY CARD AGREEMENT
THIS AFFINITY CARD AGREEMENT ("Agreement"), made as of the 6th day of
January, 1997, between COLUMBUS BANK AND TRUST COMPANY, a bank organized
under the laws of the State of Georgia with offices at 1148 Broadway,
Columbus, Georgia 31901 (hereinafter referred to as "CB&T"), and CompuCredit,
L.P., a limited partnership organized under the laws of the State of Georgia
with offices at Two Ravinia Drive, Suite 1750, Atlanta, Georgia 30346
(hereinafter referred to as "CompuCredit").
WITNESSETH:
WHEREAS, CB&T is a bank authorized to engage in the business of issuing
to consumers lines of credit that are accessible by credit cards; and
WHEREAS, CB&T is a licensed principal member of Visa, U.S.A., Inc.
("Visa"); and
WHEREAS, CompuCredit has relationships with consumers and is desirous of
having CB&T issue Visa credit cards to consumers who are creditworthy under
the standards contemplated hereby; and
WHEREAS, on the terms and conditions described herein, CB&T and
CompuCredit desire to enter into a relationship under which, among other
things, CB&T will issue such credit cards and CompuCredit will perform
certain services; and
WHEREAS, under certain circumstances, in order to assist CB&T in
connection with the funding of receivables, CompuCredit shall purchase
certain of the accounts receivable generated by the use of Credit Cards;
<PAGE>
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter set forth and for other goods and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, CB&T and
CompuCredit agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. Except as otherwise specifically indicated, the
following terms shall have the indicated meanings;
"Cardholder" shall mean an individual in whose name a Credit Card
Account is established.
"Cardholder Agreement" shall mean an agreement between CB&T and a
Cardholder for the extension of credit in connection with a Credit Card
Account.
"Aspire Card" shall mean a Visa Card bearing the name or logo "Aspire"
on the front thereof.
"Credit Card" or "Card" shall mean each Aspire Card.
"Credit Card Account" or "Account" shall mean an account that is opened
by CB&T pursuant to which one or more Credit Cards are issued to a
Cardholder, including, without limitation, any and all documents, books and
records pertaining thereto and any and all rights, remedies, benefits,
interests and titles, both legal and equitable, to which CB&T as creditor and
issuer may now or hereafter be entitled with respect thereto.
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"Credit Card Receivables" shall mean all amounts owing to CB&T on the
Accounts, including, without limitation, principal balances from outstanding
purchases and cash advances, accrued finance charges, late charges, returned
check charges and any other charges and fees, whether or not billed, as of
the close of business on a given day, less any payments and credits received
in respect to the Accounts prior to the close of business on such day.
"Net Excess Amount" means, for any relevant period (such period not to
exceed one month in duration), the amount collected from all Cardholders by
CB&T with respect to Accounts, less accrued amounts set forth on Exhibit C.
"Program" shall mean the affinity credit card program conducted pursuant
to the terms hereof.
"Program Receivables" shall means the net outstanding book principal
balances of purchases and cash advances made on the Accounts.
"Solicitation Materials" means any applications, marketing materials,
advertising pieces, sales literature, telemarketing scripts, any other
materials used to induce persons to apply for Credit Cards, and any other
materials used to induce use of the Credit Cards.
1.2 Construction. Unless the context otherwise clearly indicates,
words used in the singular include the plural and words used in the plural
include the singular.
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ARTICLE 2
ESTABLISHMENT OF CREDIT CARD ACCOUNTS
2.1 ISSUANCE OF CREDIT CARDS. CB&T shall issue Credit Cards to each
applicant for a Card who qualifies for such type of Card under the Credit
Criteria (as defined in Section 2.3 hereof). CB&T shall extend credit with
respect to said Credit Cards, and CompuCredit shall not be considered a
creditor on any Credit Card Account for any purpose whatsoever. Subject to
the Operating Regulations (as defined in Section 2.11 hereof) and the terms
of Section 2.9 herein, each Credit Card shall have the name, logo and/or
trademark of Aspire Card on the front thereof and shall be of a design
approved by CB&T, CompuCredit and Visa, as applicable.
2.2 SOLICITATION OF NEW ACCOUNTS. CompuCredit shall, at its own expense,
have the sole and exclusive right to solicit applications for Credit Cards
from individuals, corporations, partnerships and/or other entities on behalf
of CB&T. CompuCredit shall bear all marketing expenses incurred in connection
with the Program. CompuCredit shall, at its own expense, create, produce and
mail Solicitation Materials to promote the Program and solicit new Credit
Card Accounts for CB&T. CompuCredit shall provide copies of all Solicitation
Materials to CB&T for its review and approval as soon as practicable, but no
less than 20 business days prior to their first intended use. CB&T shall respond
by approving, or giving specific reasons for disapproval, within ten business
days of receipt and shall not unreasonably withhold or delay its approval of
such materials. No Solicitation Materials may be distributed by CompuCredit
without the approval of CB&T. The frequency and timing of such solicitations
shall be
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<PAGE>
determined by CompuCredit in consultation with CB&T. In CompuCredit's
discretion, solicitations may be conducted by direct mail, telephone, or
other means. CompuCredit shall (i) prepare and include on or with each
solicitation any notices and disclosures required under applicable laws and
regulations as determined by CB&T from time to time, (ii) provide such
notices and disclosures to CB&T for its review and approval, and (iii)
otherwise conduct all such solicitation activities in compliance with all
material applicable laws and regulations. CB&T shall be identified to
Cardholders as the Card issuer and the creditor for loans made on the Credit
Card Accounts.
2.3 APPLICATIONS
(a) CB&T will require that each person who desires to become a
Cardholder complete a written application or apply for a Credit Card in
response to a telemarketing solicitation. CB&T shall ensure that the form of
the written application, the telemarketing script and all other Solicitation
Materials are in compliance with all material applicable laws and
regulations. The credit criteria for issuing Credit Cards (the "Credit
Criteria") established by CB&T in consultation with CompuCredit are set forth
in the Aspire Operations Manual (as defined in Section 2.6 below). CB&T will
notify CompuCredit at least 180 days in advance of any changes to the Credit
Criteria which have not previously been consented to by CompuCredit.
(b) CB&T shall approve an applicant for a Credit Card only if the
applicant meets the applicable Credit Criteria. In the event that an
applicant for a Card does not meet the Credit Criteria, CB&T shall notify
the applicant in accordance with applicable laws and regulations.
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<PAGE>
2.4 Establishment of Credit Card Accounts. Upon approval of an
application, CB&T shall establish a Credit Card Account for the applicant.
CB&T shall provide one or more Credit Cards to each approved applicant and
shall automatically issue a renewal card to each Cardholder at each scheduled
Credit Card renewal date, if such Cardholder continues to meet the Credit
Criteria. CB&T shall prepare and provide to each Cardholder a Cardholder
Agreement and disclosure statement and such other notices or documents
related to such Cardholder's Credit Card Account as are required from time to
time, in the determination of CB&T, under applicable laws and regulations.
The Cardholder Agreement and disclosure statement and other documents shall
provide, as appropriate, that they are governed by Georgia law and federal
law. CB&T shall be responsible for preparing and providing said documents and
shall ensure that they comply with all material applicable laws and
regulations.
2.5 Account Terms. The terms and conditions for the Credit Cards
applicable to the Credit Card Accounts are set out in the forms of Cardholder
Agreements attached hereto as Exhibit B and incorporated herein. CB&T shall
ensure that the terms and conditions for the Credit Cards (including, without
limitation, the interest rates, fees and charges) are in compliance with all
material applicable laws and regulations. Changes in the Account terms and
conditions shall be made by CB&T with the written consent of CompuCredit,
which consent shall not unreasonably be withheld.
2.6 Account Administration. Except as otherwise provided herein, or in
the agreements referred to in Section 2.8 hereof, CB&T will perform or
provide for the performance of all services that may be required in order to
establish and maintain the
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<PAGE>
Credits Card Accounts, including, but not limited to: credit approval,
issuance of Credit Cards, making of credit card loans and receipt of payments
from Cardholders. CB&T and CompuCredit shall cooperate in the development of
one or more manuals of operations, policies and procedures for the operation
of the Program (collectively, "Aspire Operations Manual" or "Manual"), the
contents of which are hereby incorporated herein by reference. All
administration and services to be provided by CB&T shall be provided by CB&T
in accordance with the terms of the Solicitation Materials and Cardholder
Agreements, the Aspire Operations Manual, the Operating Regulations (as
defined in Section 2.11 below) and this Agreement. CompuCredit acknowledges
that it has reviewed and understands such policies and procedures and hereby
agrees that CB&T shall apply such policies and procedures for the services
provided under this Agreement. CB&T may subcontract with a third party to
provide any service required to be provided by CB&T hereunder, provided the
CompuCredit shall approve such third party and the terms of any agreement
with said party.
2.7 Non-Credit Revenue on Accounts
(a) CompuCredit shall, at its own expense and at no cost to CB&T,
arrange for third parties to provide enhancements to Cardholders in connection
with the Program.
(b) CompuCredit shall be entitled, at its own expense, to solicit
Cardholders for goods and services, including, without limitation, insurance
products, and to place solicitation or promotional materials in communications
by CB&T to Cardholders. CompuCredit shall provide copies of all such
solicitation and promotional materials to
7
<PAGE>
CT&T for its review and approval as soon as practicable, but no less than 20
business days prior to their first intended use. CB&T shall respond by
approving, or giving specific reasons for disapproval, within ten business
days of receipt and shall not unreasonably withhold or delay its approval of
such documents. No solicitation or promotional materials may be distributed
by CompuCredit without the approval of CB&T. CompuCredit shall meet all
applicable standard and requirements of "TSYS" (as defined in Section 2.8
hereof) in connection with inserts in periodic statements and shall comply
with applicable laws and regulations in connection therewith.
(c) CompuCredit shall be entitled to retain all income
and fees, if any, resulting from the foregoing enhancements, solicitations and
promotions.
(d) Any rebates, marketing fees, revenues or other fees
or discounts that are paid or granted by VISA to CB&T with respect, or
apportionable, to Accounts shall be paid over to CompuCredit as additional
consideration under this Agreement net of any Visa Base 1 or Base 2 billings
to CB&T with respect, or apportionable, to Accounts.
2.8 Ancillary Agreements. The following additional agreements
have been entered into in connection with the Program and have been approved
by CompuCredit:
(i) A processing agreement between CB&T and Total System
Services, Inc. ("TSYS") (the "Processing Agreement"), under which TSYS will
provide certain data processing, authorization, settlement and related
services with respect to the Accounts; and
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<PAGE>
(ii) A data processing agreement between CB&T and Synovus
Data Corp. ("SDC") (the "SDC Agreement"), under which SDC will provide
certain data processing services with respect to the Accounts.
2.9 Use of Names and Trademarks
(a) CompuCredit hereby authorizes CB&T, during the term
of this Agreement and for a period of up to 180 days after any purchase of
Accounts by CompuCredit, on a non-exclusive, nonassignable basis, to use
CompuCredit's name and such trademarks of CompuCredit, including, without
limitation, the "Aspire" servicemark, as may be used in connection with the
Credit Card Accounts (the "CompuCredit Credit Card Marks" or "CompuCredit
Marks") in the forms and formats approved by CompuCredit: (i) on Credit
Cards, and (ii) on periodic statements, Cardholder Agreements and other
communications to Cardholders with respect to the Credit Card Accounts.
CompuCredit represents and warrants to CB&T that CompuCredit has the power
and authority to provide the authorization herein granted. It is expressly
agreed that CB&T is not acquiring any right, title or interest in the name
"CompuCredit" or any trade names, trademarks, logos or service marks of
CompuCredit or of the Credit Card design, all of which shall be the property
of CompuCredit. CB&T shall make no use of any trade names, trademarks, logos
or service marks of CompuCredit, or of the Credit Card design without
CompuCredit prior written consent, except as specifically authorized in this
Section 2.9.
(b) CB&T hereby authorizes CompuCredit during the term
of this Agreement and for a period of up to 180 days after any purchase of
Accounts by CompuCredit, on
9
<PAGE>
a non-exclusive, nonassignable basis, to use CB&T's name and such trademarks
of CB&T as may be used in connection with the Credit Card Accounts (the "CB&T
Credit Card Marks" or "CB&T Marks"), in the forms and formats approved by
CB&T, in communications to Cardholder's with respect to the Credit Card
Accounts made by CompuCredit pursuant to its obligations under this
Agreement. It is expressly agreed that CompuCredit is not acquiring any
right, title or interest in the names "Columbus Bank and Trust Company" or
"CB&T" or any trade names, trademarks, logos or service marks of CB&T, all of
which shall be the property of CB&T. CompuCredit shall make no use of the
names "Columbus Bank and Trust Company" or "CB&T," or of any trade names,
trademarks, logos or service marks of CB&T, without CB&T's prior written
consent, except as specifically authorized in this Section 2.9.
(c) Use of Name and Trademarks. Except as otherwise provided herein,
neither party shall use the registered trademarks, service marks, logo, name
or any other proprietary designations of the other party without that party's
prior written consent. Each party shall submit to the other party for prior
approval any advertising or promotional materials referring to or describing
the Credit Card Program in which such trademarks are to be used, which
approval shall not unreasonably be withheld or delayed.
2.10 Cooperation. Each party hereto agrees to cooperate fully with the
other party hereto in furnishing any information or performing any action
reasonably requested by such party that is needed by the requesting party to
perform its obligations under this Agreement or to comply with applicable
laws and regulations.
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<PAGE>
Each party agrees that it shall furnish the other party with true, accurate
and complete copies of such records and all other information with respect
to the Credit Card Accounts and the Program as such party or its authorized
representatives may reasonably request, provided however that neither party
shall be required to divulge any records to the extent prohibited by
applicable law.
2.11 Visa Membership. At all times during the term of this Agreement,
CB&T shall use its best efforts to maintain its membership in Visa. CB&T
shall be responsible for making all reports to Visa which may be required by
its membership therein. CB&T will comply with the operating rules and
regulations of Visa ("Operating Regulations") in connection with the Program.
However, if CB&T loses its membership, CompuCredit may terminate this
agreement and the Facilities Management Services Agreement without any
termination fee.
2.12 Non-exclusive Arrangement. There shall be no restriction on CB&T's
right to issue credit cards independent of the Program and to perform credit
card services on its own behalf or for other parties or affinity groups.
2.13 Ownership of Account Relationships. During the term hereof, CB&T
shall not, directly or indirectly, transfer, sell or disclosure to any other
person or entity any list (whether in written or other form) containing the
names, addresses and/or telephone numbers of Cardholders that exists by
reason of those persons being Cardholders (a "Cardholder List"). CB&T shall
not, directly or indirectly, solicit Cardholders by using a Cardholder List,
in whole or in part, for any other credit card, or for any other purpose,
without the prior written consent of CompuCredit. This Section 2.13 shall not
prohibit
11
<PAGE>
any transfer, sale or disclosure of the name, address or telephone number of,
or any solicitation of, any person of whose existence CB&T has or obtains
knowledge otherwise than by reason of CB&T's participation in this Agreement.
2.14 Performance. CB&T represents and warrants that it has, or will
have on or before December 1, 1996, all of the necessary facilities and
personnel to establish, operate and administer the Program in accordance with
the terms of this Agreement; that it shall perform its obligations hereunder
at all times and in all respects in accordance with all material applicable
federal, state, and local laws and regulations; and that it will perform its
obligations hereunder in a timely manner and with due care.
2.15 Assistance with Conversion. Upon any termination of this
Agreement, CB&T shall provide to CompuCredit all assistance reasonably
necessary to enable CompuCredit to convert the accounts serviced hereunder to
the processing system designated by CompuCredit, and cooperate with
CompuCredit in its efforts to effect such conversion, at the earliest
practicable date.
2.16 Accuracy of Account Records. The Cardholder Agreement and Account
records of CB&T shall at all times fully and accurately reflect in all
material respects the true outstanding balance of the Accounts.
2.17 Reports. CB&T shall provide to CompuCredit periodic reports
(through TSYS or otherwise), including, without limitation, new account
application status reports, delinquent account reports, charge-off
documentation and settlement reports, and such other reports as CompuCredit
may reasonably request from time to time. The frequency and content of such
reports shall be mutually agreed upon by CB&T and
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<PAGE>
CompuCredit, consistent with CB&T's and/or TSYS' systems capability, as
applicable, and CB&T's and/or TSYS' report production schedule.
Unless otherwise agreed to by CompuCredit in writing, CB&T shall submit
to CompuCredit a monthly status report, in addition to the standard reports
described in the immediately preceding paragraph. The report shall (i)
generally describe CB&T's activities and accomplishments during the preceding
six months; (ii) list the status of projects and tasks requested by
CompuCredit; (iii) summarize account activity; and (iv) identify actual or
anticipated problem areas and the impact of such problem areas.
CompuCredit may, at its own expense and upon reasonable prior notice,
have full access to and the right to inspect and copy the books, records and
data records of CB&T, or to which CB&T has access as a client of any
subcontractor performing work for or on behalf of CB&T, relating to the
Program, and during the term of this Agreement, CB&T shall furnish to
CompuCredit all such information concerning Accounts established and
administered by CB&T pursuant to this Agreement as CompuCredit may reasonably
request.
2.18 Expenses. CompuCredit agrees to reimburse CB&T for those
reasonable and customary outside legal fees actually incurred related to
CB&T's review and approval of the Solicitation Materials.
2.19 No Further Fees. The amounts set forth in Exhibit C and other
amounts expressly provided for in this Agreement include all amounts
chargeable by CB&T under this Agreement, and CompuCredit shall not be
required to pay, and CB&T shall
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<PAGE>
not be permitted to invoice CompuCredit for, any other charges in connection
herewith, except for those additional services agreed to by CompuCredit in
writing.
ARTICLE 3
FINANCIAL TERMS
3.1 Co-Branding Fee. CompuCredit shall pay to CB&T a co-branding fee
of $10,000 per year with such fee to be paid annually within 30 days of
CompuCredit's receipt of a bill from CB&T; provided, however, that
CompuCredit shall pre-pay the fee for the first two years.
3.2 Deposit. Throughout the term of this Agreement, CompuCredit shall
maintain at CB&T a non-interest bearing deposit of $1,000,000 (the
"Deposit"). Such deposit shall be refundable to CompuCredit and paid to
CompuCredit by CB&T after termination of this Agreement, after all amounts
due to CB&T pursuant to this Agreement have been paid, but in no event
earlier than 30 days following termination of this Agreement. The Deposit
shall bear interest at CB&T's Prime Rate from the date of termination of this
Agreement until the Deposit is refunded to CompuCredit.
3.3 Letter of Credit. During the term of this Agreement, CompuCredit
shall maintain an irrevocable letter of credit it the amount of $10,000,000
(such letter and any replacement or additional letters are collectively
referred to as "Letter of Credit") in favor of CB&T with a financial
institution approved by CB&T to secure its obligations under this Agreement.
The Letter of Credit shall be substantially in the form attached as Exhibit
D. CB&T may require CompuCredit to increase the amount of the Letter of
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Credit or obtain a new letter of credit if deemed necessary by CB&T to cover
potential liabilities of the Program. If at any time CompuCredit does not
make any payment under this Agreement when due, after expiration of any
applicable notice and cure period, CB&T may immediately access the Letter of
Credit. CompuCredit may revoke the Letter of Credit after termination of this
Agreement.
3.4 Marketing Fee. CB&T shall pay to CompuCredit daily a marketing fee
equal to the Net Excess Amount attributable to Program Receivables owned by
CB&T.
3.5 Program Fee. To induce CB&T to enter into this Agreement and
establish the Program provided for herein, CompuCredit agrees that for any
month in which (i) the amount calculated pursuant to Exhibit C exceeds (ii)
the total amount collected from all Cardholders by CB&T with respect to all
Accounts, CompuCredit shall pay to CB&T, within 15 days of receipt of an
invoice from CB&T, a program fee for the month equal to the amount by which
(i) above exceeds (ii).
ARTICLE 4
PURCHASE AND SALE OF RECEIVABLES AND ACCOUNTS
4.1 Purchase and Sale of Receivables.
(a) At any time when outstanding Program Receivables exceed $1,000,000,
CB&T shall thereafter sell to CompuCredit and CompuCredit shall thereafter
purchase from CB&T, on a daily basis, (i) 100% of the Program Receivables in
excess of $1,000,000 and (ii) all of CB&T's right, title and interest in and
to Net Excess Amount attributable to the purchased Program Receivables. For
purposes hereof, the purchase
15
<PAGE>
price ("Purchase Price") shall be equal to 100% of the Program Receivables in
excess of $1,000,000. With respect to Program Receivables sold to CompuCredit
under this Section 4.1(a), CB&T shall pay daily to CompuCredit the Net Excess
Amount attributable to Program Receivables owned by CompuCredit. CB&T may net
daily all amounts due to or from the parties under this Section 4.1(a)
("Settlement Amount"). CB&T shall provide CompuCredit daily with a report
setting forth the calculation of all amounts due under this Section 4.1(a).
(b) No later than 1:00 p.m. (eastern time) on each banking day, CB&T
shall notify by facsimile transmission the Chief Financial Officer or such
officer's designee at CompuCredit of the Settlement Amount due to or owed by
CompuCredit for transactions pursuant to Section 4.1(a) above. For purposes
hereof, "banking day" shall mean a day that CB&T is open for business and
excluding Saturdays, Sundays and legal holidays. Payments due for any day
shall be made by the appropriate party by wire transfer no later than 4:00
p.m. (eastern time), unless CB&T is late in notifying CompuCredit of the
Settlement Amount due for any day, in which case the appropriate party shall
use all reasonable efforts to send the wire transfer within the time period
set forth above or as soon thereafter as possible, but in any event no later
than 5:00 p.m. (eastern time) of the next banking day following CompuCredit's
receipt of notice from CB&T. In the event the wire transfer is not received
by 5:00 p.m. (eastern time) of the next banking day following CompuCredit's
receipt of notice from CB&T, CB&T may immediately access the Letter of Credit.
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The party receiving payment shall promptly notify the party sending
payment by facsimile transmission if any such required payment is not
received when due and shall use reasonable efforts to provide such notice to
the party sending payment by 5:30 p.m. (eastern time) of the due date but in
no event shall such notice be given later than 12:30 p.m. (eastern time) of
the banking day following said due date.
(c) In the event CompuCredit has reason to dispute the accuracy of the
Settlement Amount reported by CB&T for any day, CompuCredit shall promptly so
notify CB&T, but such notice shall not effect either party's obligation for
timely payment of the Settlement Amount as noticed by CB&T.
In the event it is determined that CompuCredit was correct in disputing
the accuracy of the Settlement Amount for a given day, or if CB&T shall fail
for any other reason to properly remit the Settlement Amount due for any
given day to CompuCredit, CB&T shall promptly remit to CompuCredit (i) the
amount due CompuCredit with interest thereon computed at the rate of three
(3) percentage points above the CB&T "prime rate" in effect on the date said
sum was first due, or (ii) $100, whichever is greater.
If CompuCredit shall fail for any reason to remit to CB&T the Settlement
Amount due for any given day, then CompuCredit shall promptly remit to CB&T
the amount due CB&T with interest thereon from the date such sum was due
until the date the Settlement Amount is paid computed at the rate of three
(3) percentage points above the CB&T "prime rate" in effect on the date said
sum was first due. However, if CompuCredit makes a payment under this
provision and CB&T uses the Letter of Credit
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to satisfy the Settlement Amount then CB&T shall promptly remit to
CompuCredit (i) the amount due CompuCredit with interest thereon computed at
the rate of three (3) percentage points above the CB&T "prime rate" in effect
on the date said sum was paid in duplicate, or (ii) $100, whichever is greater.
If CompuCredit fails on any given day to pay the Purchase Price
indicated by CB&T, as provided hereunder, even in the event CompuCredit
disputes such amount, and such failure is not cured within five (5) banking
days from the date CompuCredit receives notification of nonpayment, CB&T may
(but need not and without waiver of its rights), in addition to any other
rights and remedies it may have, upon notice to CompuCredit sell to any third
party any interest in the Program Receivables that CompuCredit failed to
purchase; provided, however, that CB&T shall not sell any interest in Program
Receivables until it shall have utilized all funds available under the Letter
of Credit to purchase Program Receivables for CompuCredit's account.
(d) CB&T shall remain the owner of all Credit Card Accounts,
notwithstanding any sale of any Program Receivables to CompuCredit or a third
party, under this Section 4.1. CompuCredit shall not be deemed to have
assumed any obligations of CB&T with respect to the Credit Card Accounts by
virtue of any purchase of an interest in Program Receivables hereunder.
Except as otherwise provided herein, CB&T shall not sell any Credit Card
Receivables or any interest therein to any third party without the prior
written consent of CompuCredit.
(e) The sale of receivables contemplated in (a) hereof shall occur upon
settlement therefor by or on behalf of CompuCredit and no additional
documents shall
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be required by the parties to effect any such sale. Notwithstanding the
foregoing, if, in the reasonable judgment of either party, in connection with
any such purchase and sale, any additional instrument, document, or
certificate is required to further evidence such purchase and sale, the other
party shall execute and deliver any such document.
4.2 Sale of Accounts
(a) Except as provided in this Agreement, CB&T shall not sell or
transfer any Credit Card Account created under the Program, or any interest
therein, to any unaffiliated party without the prior written consent of
CompuCredit.
(b) Upon expiration or termination of this Agreement, CompuCredit shall
have the right, exercisable by providing written notice to CB&T no later than
sixty (60) days after notice of termination is provided by a party hereunder,
to purchase the Accounts and all Credit Card Receivables then owned by CB&T
or to arrange for said purchase by a financial institution designated by
CompuCredit. The purchase price for said Accounts and Credit Card Receivables
shall be equal to 100% of the Program Receivables then owed by CB&T. The
terms of Section 8.1(e) hereof shall apply to any such purchase.
4.3 Covenants of CB&T. During the term of this Agreement, (i) CB&T
shall take no action (or fail to take any action) which would serve to allow
for the creation of a lien, pledge, security interest or other encumbrance on
any of the Credit Card Receivables or Accounts, (ii) CB&T shall take no
action (or fail to take any action) that could result in CB&T no longer being
the lawful owner of the Accounts and Credit Card Receivables, (iii) CB&T
shall take no action (or fail to take any action) that could prevent
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CB&T from having the absolute right and authority to sell the Accounts and
Credit Card Receivables.
ARTICLE 5
ADDITIONAL PRODUCTS AND SERVICES
5.1 Additional Services. In the event CompuCredit requests CB&T to
perform any additional services in connection with the Cards issued under the
Program which are not already required to be performed under this Agreement
by CB&T, and which would entail additional expense by CB&T, and CB&T agrees
to provide such services in connection with Cards issued hereunder, then the
details and the costs of such services shall be agreed to by CompuCredit and
CB&T in writing and shall be attached to this Agreement as an amendment or
set forth in a separate document.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties of CB&T. CB&T hereby represents and
warrants CompuCredit as follows:
(a) Organization. CB&T is a bank duly organized, validly existing and in
good standing under the laws of the State of Georgia.
(b) Capacity; Authority; Validity. CB&T has all necessary corporate
power and authority to enter into this Agreement and to perform all of the
obligations to be performed by it under this Agreement. This Agreement and
the consummation by
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CB&T of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of CB&T, and this Agreement has been
duly executed and delivered by CB&T and constitutes the valid and binding
obligation of CB&T and is enforceable in accordance with its terms (except
as such enforceability may be limited by equitable limitations on the
availability of equitable remedies and by bankruptcy and other laws affecting
the rights of creditors generally).
(c) Compliance. All aspects of the Program, all terms of the Accounts
and the Cardholder Agreements, and all Solicitation Materials and other
documents, materials and agreements supplied or communicated in any form to
Cardholders, prospective Cardholders or others in connection with the Program
comply and will comply in all material respects with applicable law and
regulations.
(d) Conflicts; Defaults. Neither the execution and delivery of this
Agreement by CB&T nor the consummation of the transactions contemplated
herein by CB&T will (i) conflict with, result in the breach of, constitute a
default under, or accelerate the performance required by, the terms of any
contract, instrument or commitment to which CB&T is a party or by which CB&T
is bound, (ii) violate the articles of incorporation or bylaws, or any other
equivalent organizational document, of CB&T, (iii) result in the creation of
any lien, charge or encumbrance upon any of the Credit Card Accounts or the
Credit Card Receivables (except pursuant to the terms hereof), or (iv)
require the consent or approval of any other party to any contract,
instrument or commitment to which CB&T is a party or by which it is bound.
CB&T is not subject to any agreement
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with any regulatory authority which would prevent the consummation by CB&T of
the transactions contemplated by this Agreement.
(e) Litigation. At the date of this Agreement, there is not pending any
claim, litigation, proceeding, arbitration, investigation or material
controversy before any governmental agency to which CB&T is a party, which
adversely affects any of its assets or the ability of CB&T to consummate the
transactions contemplated hereby, and, to the best of CB&T's knowledge, no
such claim, litigation, proceeding, arbitration, investigation or controversy
has been threatened or is contemplated and no facts exist which would provide
a basis for any such claim, litigation, proceeding, arbitration,
investigation or controversy.
(f) No Consent, Etc. At the date of this Agreement, no consent of any
person (including without limitation, any stockholder or creditor of CB&T)
and no consent, license, permit or approval or authorization or exemption by
notice or report to, or registration, filing or declaration with, any
governmental authority is required (other than those previously obtained and
delivered to CompuCredit) in connection with the execution or delivery of
this Agreement by CB&T, the validity of this Agreement with respect to CB&T,
the enforceability of this Agreement against CB&T, the consummation by CB&T
of the transactions contemplated hereby, or the performance by CB&T of its
obligations hereunder.
(g) FDIC Insurance. CB&T is, and at all times during the term hereof
will remain, a member of the Federal Deposit Insurance Corporation.
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6.2 Representations and Warranties of CompuCredit. CompuCredit hereby
represents and warrants to CB&T as follows:
(a) Organization. CompuCredit is a limited partnership duly
organized, validly existing and in good standing under the laws of the State
of Georgia.
(b) Capacity; Authority; Validity. CompuCredit has all necessary
power and authority to enter into this Agreement and to perform all of the
obligations to be performed by it under this Agreement. This Agreement and
the consummation by CompuCredit of the transactions contemplated hereby have
been duly and validly authorized by all necessary action on the part of
CompuCredit, and this Agreement has been duly executed and delivered by
CompuCredit and constitutes the valid and binding obligation of CompuCredit
and is enforceable in accordance with its terms (except as such
enforceability may be limited by equitable limitations on the availability of
equitable remedies and by bankruptcy and other laws affecting the rights of
creditors generally).
(c) Conflicts; Defaults. Neither the execution and delivery of this
Agreement by CompuCredit nor the consummation of the transactions
contemplated herein by CompuCredit will (i) conflict with, result in the
breach of, constitute a default under, or accelerate the performance provided
by the terms of any contract, instrument or commitment to which CompuCredit
is a party or by which it is bound, (ii) violate the certificate of
incorporation or bylaws, or any other equivalent organizational document, of
CompuCredit, (iii) require any consent or approval under any judgment, order,
writ, decree, permit or license, to which CompuCredit is a party or by which
it is bound, or
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(iv) require the consent or approval of any other party to any contract,
instrument or commitment to which CompuCredit is a party or by which it is
bound. CompuCredit is not subject to any agreement with any regulatory
authority which would prevent the consummation by CompuCredit of the
transactions contemplated by this Agreement.
(d) Litigation. There is no claim, or any litigation, proceeding,
arbitration, investigation or controversy pending, to which CompuCredit is a
party and by which it is bound, which adversely affects CompuCredit's ability
to consummate the transactions contemplated hereby and, to the best of
CompuCredit's knowledge and information, no such claim, litigation,
proceeding, arbitration, investigation or controversy has been threatened or
is contemplated; to the best of CompuCredit's knowledge, no facts exist
which would provide a basis for any such claim, litigation, proceeding,
arbitration, investigation or controversy.
(e) No Consent, Etc. No consent of any person (including without
limitation, any stockholder or creditor of CompuCredit) and no consent,
license, permit or approval or authorization or exemption by notice or report
to, or registration, filing or declaration with, any governmental authority
is required (other than those previously obtained and delivered to CB&T) in
connection with the execution or delivery of this Agreement by CompuCredit,
the validity or enforceability of this Agreement against CompuCredit, the
consummation of the transactions contemplated thereby, or the performance by
CompuCredit of its obligations thereunder.
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ARTICLE 7
CONFIDENTIAL INFORMATION
7.1 Confidential Information. All material and information supplied by
one party to the other party in the course of the negotiation of this
Agreement and its performance hereunder, including, but not limited to,
information concerning either party's marketing plans; technological
developments, objectives and results; and financial results are confidential
and proprietary to the disclosing party ("Confidential Information").
Confidential Information does not include any information that was (i) known
to the receiving party at the time of disclosure or developed independently
by such party without violating the terms herein; (ii) in the public domain
at the time of disclosure or enters the public domain following disclosure
through no fault of the receiving party; or (iii) disclosed to the receiving
party by a third party that is not prohibited by law or agreement from
disclosing the same. Notwithstanding the foregoing, but without limiting the
effect of the last sentence of Section 2.12(b) hereof, each Cardholder List
shall be deemed Confidential Information owned by CompuCredit.
7.2 Protection of Confidential Information. Confidential Information
shall be used by each party solely in the performance of its obligations
pursuant to this Agreement. Each party shall receive Confidential Information
in confidence and not disclose Confidential Information to any third party,
except as may be necessary to perform its obligations pursuant to this
Agreement and except as may be required by law or agreed upon in writing by
the other party. Each party shall take all reasonable steps to safeguard
Confidential Information disclosed to it so as to ensure that no
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unauthorized person shall have access to any Confidential Information. Each
party shall, among other safeguards which it may consider necessary, require
its employees, agents, and subcontractors having access to Confidential
Information to enter into appropriate confidentiality agreements containing
such terms as are necessary to satisfy its obligation herein. Each party
shall promptly report to the other party any unauthorized disclosure or use
of any Confidential Information of that party of which it becomes aware. Upon
request or upon termination of this Agreement, each party shall return to
the other party all Confidential Information in its possession or control. No
disclosure by a party hereto of Confidential Information of such party shall
constitute a grant to the other party of any interest or right whatsoever in
such Confidential Information, which shall remain the property solely of the
disclosing party. Nothing contained herein shall limit a party's rights to
use its Confidential Information in any manner whatsoever.
7.3 Survival. The terms of this Article 7 shall survive the termination
of this Agreement.
ARTICLE 8
MISCELLANEOUS
8.1 Term and Termination.
(a) Term. This Agreement shall commence on the date first above written
and shall continue in full force and effect until December 31, 1998 (the
"Initial Term"), unless otherwise terminated as provided in Section 8.1(b) or
(c) herein. After the Initial Term, this Agreement shall be extended for
renewal terms of two (2) years each
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("Renewal Term"), unless one party notifies the other party of its intent to
terminate this Agreement at least 180 days prior to the end of the Initial
Term or any Renewal Term. The termination of this Agreement shall not
terminate, affect or impair any rights, obligations or liabilities of either
party hereto that may accrue prior to such termination or that, under the
terms of this Agreement, continue after the termination.
(b) Termination. (i) Either party to this Agreement may
terminate this Agreement, reserving all other remedies and rights hereunder
in whole or in part, upon the following conditions:
(A) Event of Default. Subject to the terms of
Section 8.1(f) hereof, upon the occurrence of an Event of Default caused by
one party, the nondefaulting party may terminate this Agreement by giving ten
(10) banking days' notice (five banking days in the case of CompuCredit's
failure to purchase Credit Card Receivables pursuant to Section 4.1 hereof
and exhaustion of the Letter of Credit) prior written notice to the
defaulting party of its intent to terminate this Agreement. For purposes of
this Agreement, an "Event of Default" hereunder shall occur in the event either
party defaults in the performance of any of its material duties or
obligations under this Agreement and fails to correct the default, to the
reasonable satisfaction of the other party, within a 30-day cure period
(which cure period shall be five (5) banking days for CompuCredit's failure
to purchase Credit Card Receivables pursuant to Section 4.1 hereof and
exhaustion of the Letter of Credit) commencing upon receipt of notice from
the other party. Notwithstanding the foregoing, except in the case of an
Event of Default consisting of a failure by CompuCredit to purchase Credit
Card Receivables
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pursuant to Section 4.1 hereof and exhaustion of the Letter of Credit, notice
of termination may not be sent until the party seeking to terminate has
followed the provisions of Section 8.1(f) hereof. In the event CB&T
terminates this Agreement because of a failure of CompuCredit to purchase
Credit Card Receivables pursuant to Section 4.1 hereof and exhaustion of the
Letter of Credit, CompuCredit shall pay CB&T a termination fee of $50,000 in
addition to any other sums owed to CB&T hereunder.
(B) Bankruptcy. Either party may terminate this
Agreement, at any time upon notice to the other party, after the filing by
the other party of any petition in bankruptcy or for reorganization or debt
consolidation under the federal bankruptcy laws or under any comparable law,
or upon the other party's making of an assignment of its assets for the
benefit of creditors, or upon the application of the other party for the
appointment of a receiver or trustee of its assets.
(C) Termination for Force Majeure or Changes in
Laws or Regulations. This Agreement may be terminated by either party on or
after the ninetieth (90th) day following the giving of notice by the other
party that such notice-giving party's performance is: (A) prevented or
delayed by a force majeure event listed in Section 8.7 hereof, if the failure
to perform has not been cured at the end of such ninety (90) day period, or
(B) rendered (through no act or omission of such party) illegal or
impermissible for that party or its ultimate parent corporation due to
changes in laws or regulations applicable to the terminating party.
(ii) In the event CompuCredit terminates this Agreement
other than pursuant to Section 8.1(b)(i) above, or in the event CompuCredit
purchases the Credit Card
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Accounts pursuant to Section 8.1(e) below, and does not simultaneously with
such termination or purchase enter into the Facilities Management Services
Agreement (substantially in the form attached hereto as Exhibit E),
CompuCredit shall pay a termination fee to CB&T equal to the greater of
(a) six times the total amount of fees, as set forth on Exhibit C hereto,
incurred for the calendar month preceding such termination or purchase or
(b) six times the minimum monthly servicing fee set forth on Exhibit C.
(c) Ownership of a Bank by CompuCredit. If CompuCredit
receives approval to establish or obtain control of any bank, thrift or
industrial loan company, upon notice to CB&T, CompuCredit may terminate this
Agreement and exercise its rights under Section (e) hereof to purchase all
Accounts and Credit Card Receivables then owned by CB&T or an affiliate of
CB&T, for a total price equal to 100% of the Program Receivables then owed by
CB&T and any affiliate of CB&T, with such sale to occur as expeditiously as
possible on a mutually agreed upon date.
(d) Duties After Termination. Upon termination of this
Agreement, in order to preserve the goodwill of Cardholders both parties
shall cooperate in order to ensure a smooth and orderly termination of their
relationship and a transition of Cardholder Accounts. In the event CB&T
terminates this Agreement, CB&T shall continue to maintain and service the
Accounts and fulfill all of its obligations hereunder for a period of up to
180 days after the termination in order to allow CompuCredit to convert the
Accounts to an alternative credit card issuer or processor; provided, however,
that if the termination results from a failure of CompuCredit to purchase
Credit Card Receivables
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under the terms of Section 4.1 hereof and the exhaustion of the Letter of
Credit, then CB&T, upon one (1) day's prior notice to CompuCredit, may refuse
to authorize any new charges on Accounts.
(e) Purchase of Accounts.
(i) (A) CompuCredit shall have the right,
exercisable by providing written notice to CB&T, to purchase, and (B) CB&T
shall have the right, upon the expiration or termination of this Agreement,
exercisable by providing written notice to CompuCredit, to cause CompuCredit
to purchase, all of the Credit Card Accounts and (to the extent not
previously purchased by CompuCredit) all of the Credit Card Receivables as of
the date of such purchase; provided, however, that should CompuCredit exercise
its right to purchase the Credit Card Accounts before that date which is two
years following the date of this Agreement (the "Initial Termination Date"),
then (1) CompuCredit and CB&T shall execute, in conjunction with any such
purchase, the Facilities Management Services Agreement (substantially in the
form attached hereto as Exhibit E), (2) such Facilities Management Services
Agreement shall have an initial term that will expire on the initial
Termination Date, and (3) this Agreement shall terminate upon the signing of
such Facilities Management Services Agreement. CompuCredit may fulfill such
obligation by arranging for said purchase to be made by a third party
designated by CompuCredit. The purchase price in the event of a purchase and
sale under this Section 8.1(e) shall be equal to 100% of the Program
Receivables owned by CB&T on the date of purchase.
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(ii) CB&T shall transfer to CompuCredit all books and records relating
to the Accounts and Credit Card Receivables and each party shall return all
property belonging to the other party which is in its possession or control
at the time of termination and shall discontinue the use of and return to the
other party, or at the request of the other party destroy, all written and
printed materials bearing the other party's name and logo.
(iii) In the event CompuCredit defaults in its obligation to purchase the
Accounts and CompuCredit's Letter of Credit becomes exhausted, CB&T (without
limiting any other remedy it may have) may elect to retain the Accounts, in
which case CB&T shall so notify CompuCredit and may repurchase from
CompuCredit CompuCredit's interest in any Credit Card Receivables, for a
total price equal to 100% of the Program Receivables owned by CompuCredit on
the purchase date, or the parties may mutually agree to sell the Accounts and
Credit Card Receivables to an unrelated purchaser, in which case any premium
received on the sale of the Accounts shall be payable in full to CompuCredit,
less any fees due to CB&T under this Agreement and any reasonable and
actually incurred expenses incurred by CB&T in connection with the sale of
the Accounts.
(iv) From and after the date of purchase, CB&T agrees to (A) segregate,
specially mark and otherwise appropriately identify all Accounts purchased by
CompuCredit as belonging to CompuCredit and (B) to execute and deliver to
CompuCredit such additional documents and instruments and to take such
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action, all without further consideration, as CompuCredit shall reasonably
request to effectuate the giving, granting, bargaining, sale, conveyance,
setting over, delivery, transfer, confirmation and assignment provided for
therein, including, without limitation, such Uniform Commercial Code
financing statements as may be requested by CompuCredit. CompuCredit agrees
to reimburse CB&T for those reasonable and customary outside legal fees
actually incurred related to the purchase not to exceed $5,000 in aggregate,
if the purchase is by CompuCredit or an affiliate of CompuCredit. CompuCredit
agrees to reimburse CB&T for those reasonable and customary outside legal
fees actually incurred relating to a purchase by an entity that is not
CompuCredit or an affiliate of CompuCredit.
(v) CB&T shall (A) give such further assurances to CompuCredit
and shall execute, acknowledge and deliver all such acknowledgements,
assignments and other instruments and take such further action as may be
reasonably necessary and appropriate to effectively vest in CompuCredit the
full legal and equitable title to all Accounts and Credit Card Receivables
purchased by CompuCredit and (B) make reasonable efforts to assist
CompuCredit in the orderly transition of the operations being acquired by
CompuCredit, including sending to CompuCredit any payments on Accounts which
may be received by CB&T after Closing. CB&T agrees to work with CompuCredit's
personnel to assure a smooth transition of the Accounts and continuity of
operations with respect to the Accounts.
(f) Resolution of Disputes. The parties agree that it is their desire
to use their best efforts to resolve amicably any and all disputes or
disagreements that may arise
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between them with respect to the interpretation of any provision of this
Agreement or with respect to the performance by the parties under this
Agreement, in order to avoid an early termination of this Agreement. Toward
that end, the parties agree that in the event any dispute or disagreement
arises that cannot be resolved at the operating level by the employees of
each party having direct responsibility for the performance or operating
function in question, each of the parties will promptly appoint a designated
officer to meet the purpose of endeavoring to resolve such dispute or
negotiate an adjustment to such provision. Any disputes that, if not
resolved, may lead to an allegation by one party that an Event of Default has
occurred by the other party shall be referred to the Chief Financial Officer
of CB&T and the Chief Financial Officer of CompuCredit, who shall confer and
diligently attempt to find reasonable methods of correcting the condition
giving rise to the anticipated Event of Default. No legal proceedings for the
resolution of any such dispute may be commenced or notice of termination of
this Agreement may be served until such Chief Financial Officers have so
conferred, and until either party concludes, in good faith, that amicable
resolution through continued negotiation of the matter at issue does not
appear likely and one party provides written notice of same to the other
party.
8.2 Indemnification
(a) Except to the extent of any Losses which arise form the direct
acts or omissions of CB&T or an affiliate of CB&T, CompuCredit will indemnify
and hold harmless CB&T and its respective directors, officers, employees,
agents and affiliates and permitted assigns ("CB&T Indemnified Parties") from
and against any all "Losses"
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(as herein defined) arising out of (i) any failure of CompuCredit to comply
with any of the terms and conditions of this Agreement, (ii) any inaccuracy
of a representation or warranty made by CompuCredit herein, or (iii) any
infringement or alleged infringement of any of the CompuCredit Card Marks, or
the use thereof hereunder, on the rights of any third party.
(b) Except to the extent of any Losses which arise from the direct
acts or omissions of CompuCredit, CB&T shall be liable to and shall indemnify
and hold harmless CompuCredit and its respective officers, directors,
employees, agents and affiliates, from and against any Losses (as defined
below) arising out of (i) the failure of CB&T to comply with any of the terms
and conditions of this Agreement, (ii) the inaccuracy of any representation
or warranty made by CB&T herein, (iii) any infringement or alleged
infringement of any of the CB&T Credit Card Marks, or the use thereof
hereunder, on the rights of any third party, or (iv) any losses resulting
from a failure of CB&T to comply, in respect of its obligations in connection
with the Program hereunder, with any applicable laws or regulations whether
immaterial or material, regardless of whether such failure to comply would
constitute a breach of a representation, warranty or covenant of CB&T
hereunder.
(c) For the purposes of this Agreement, the term "Losses" shall mean
all out-of-pocket costs, damages, losses, fines, penalties, judgments,
settlements, and expenses whatsoever, including, without limitation, (i)
outside attorneys' fees and disbursements and court costs reasonably incurred
by the indemnified party; and (ii) costs (including reasonable expenses and
reasonable value of time spent)
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attributable to the necessity that any officer or employee (other than
in-house attorneys) of any Indemnified Party spend more than 25% of his or
her normal business hours, over a period of two (2) months, in connection
with any judicial, administrative, legislative, or other proceeding.
8.3 Procedures For Indemnification
(a) Notice of Claims. In the event any claim is made, any suit or
action is commenced, or any knowledge of a state of facts that, if not
corrected, would give rise to a right of indemnification of a party hereunder
("Indemnified Party") by the other party ("Indemnifying Party") is received,
the Indemnified Party will give notice to the Indemnifying Party as promptly
as practicable, but, in the case of lawsuit, in no event later than the time
necessary to enable the Indemnifying Party to file a timely answer to the
complaint. The Indemnified Party shall make available to the Indemnifying
Party and its counsel and accountants at reasonable times and for reasonable
periods, during normal business hours, all books and records of the
Indemnified Party relating to any such possible claim for indemnification,
and each party hereunder will render to the other such assistance as it may
reasonably require of the other (at the expenses of the party requesting
assistance) in order to insure prompt and adequate defense of any suit, claim
or proceeding based upon a state of facts which may give rise to a right of
indemnification hereunder.
(b) Defense And Counsel. Subject to the terms hereof, the Indemnifying
Party shall have the right to defend any suit, claim or proceeding. The
Indemnifying Party shall notify the Indemnified Party via facsimile
transmission, with a copy by mail,
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within ten (10) days of having been notified pursuant to this Section 8.3(a)
if the Indemnifying Party elects to employ counsel and assume the defense of
any such claim, suit or action. The Indemnifying Party shall institute and
maintain any such defense diligently and reasonably and shall keep the
Indemnified Party fully advised of the status thereof. The Indemnified Party
shall have the right to employ its own counsel if the Indemnified Party so
elects to assume such defense, but the fees and expense of such counsel shall
be at the Indemnified Party's expenses, unless (i) the employment of such
counsel shall have been authorized in writing by the Indemnifying Party; (ii)
such Indemnified Party shall have reasonably concluded that the interests of
such parties are conflicting such that it would be inappropriate for the same
counsel to represent both parties (in which case the Indemnifying Party shall
not have the right to direct the defense of such action on behalf of the
Indemnified Party), and in either of such events such reasonable fees and
expenses shall be borne by the Indemnifying Party; or (iii) the Indemnifying
Party shall not have employed counsel to take charge of the defense of such
action after electing to assume the defense thereof.
(c) Settlement of Claims. The Indemnifying Party shall not have the
right to compromise and settle any suit, claim or proceeding in the name of
the Indemnified Party; provided, however, that the Indemnifying Party shall
not compromise or settle a suit, claim or proceeding (i) unless it
indemnifies the Indemnified Party for all Losses arising out of or relating
thereto and (ii) with respect to any suit, claim or proceeding which seeks
any non-monetary relief, without the consent of the Indemnified Party, which
consent shall not be reasonably withheld. Any final judgment or decree
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entered on or in, any claim, suit or action which the Indemnifying Party did
not assume the defense of in accordance herewith, shall be deemed to have
been consent to by, and shall (subject to the other provisions hereof) be
binding upon, the Indemnifying Party as fully as if the Indemnifying Party
had assumed the defense thereof and a final judgment or decree had been
entered in such suit or action, or with regard to such claim, by a court of
competent jurisdiction for the amount of such settlement, compromise,
judgment or decree. The Indemnifying Party shall be subrogated to any claims
or rights of the Indemnified Party as against any other Persons with respect
to any amount paid by the Indemnifying Party under this Section 8.3.
(d) Indemnification Payments. Amounts owing under Section 8.2 shall be
paid promptly upon written demand for indemnification containing in
reasonable detail the facts giving rise to such liability, provided,
however, that if the Indemnifying Party notifies the Indemnified Party
within thirty (30) days of receipt of such demand that it disputes its
obligation to indemnify and the parties are not otherwise able to reach
agreement, the controversy shall be settled by final judgment entered by a
court of competent jurisdiction.
(e) Survival. The terms of Section 8.2 and 8.3 shall survive the
termination of this Agreement provided, however, that a direct claim made by
a party hereto against the other party hereto for breach of any part of this
Agreement other than Sections 8.2 and 8.3 hereof, shall only survive the
termination of this Agreement for a period of five years.
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8.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia without regard to its
conflict of laws rules.
8.5 Press Releases. Except as may be required by law or regulation or a
court or regulatory authority or any stock exchange, neither CB&T nor
CompuCredit, nor their respective parents or affiliates, shall issue a press
release or make public announcement or any disclosure to any third party
related to the terms of this Agreement without the prior consent of the other
party hereto, which consent shall not be unreasonably withheld or delayed.
8.6 Relationship of the Parties. CB&T and CompuCredit agree that in
performing their responsibilities pursuant to this Agreement they are in the
position of independent contractors. This Agreement is not intended to
create, nor does it create and shall not be construed to create, a
relationship of partners or joint venturers or any association for profit
between and among CB&T and CompuCredit.
8.7 Force Majeure. In the event that either party fails to perform its
obligations under this Agreement in whole or in part as a consequence of
events beyond its reasonable control (including, without limitation, acts of
God, fire, explosion, public utility failure, accident, floods, embargoes,
epidemics, war, nuclear disaster or riot), such failure to perform shall not
be considered a breach of this Agreement during the period of such
disability. In the event of any force majeure occurrence as set forth in
this Section, the disabled party shall use its best effort to meet its
obligations as set forth in this Agreement. The disabled party shall promptly
and in writing advise the
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other party if it is unable to perform due to a force majeure event, the
expected duration of such inability to perform and of any developments (or
changes therein) that appear likely to affect the ability of that party to
perform any of its obligations hereunder a whole or in part.
8.8 Books and Records. Each party shall maintain books of account and
records, in accordance with standard accounting practices and procedures, of
all financial transactions arising in connection with its obligations
pursuant to this Agreement for a period of not less than five years from the
date last recorded or created, and after such time the other party will be
offered a reasonable opportunity to take possession of such records at its
expense prior to their destruction. In addition to and notwithstanding the
foregoing, to the extent either party has sole possession of any records
required to be maintained by the other party pursuant to applicable state or
federal laws or regulations, the party with possession shall maintain such
records in such form and for such time periods as are provided for in such
laws and regulations. Subject to the first sentence of this Section, either
party may, at its own expense and upon reasonable prior notice, have full
access to and the right to inspect and copy the books and records of the
other party relating to services performed herein by that party, and during
the term of this Agreement, each party shall furnish to the other party all
such information concerning transactions and services provided by it pursuant
to this Agreement as that party may reasonably request.
8.9 Notices. All notices, requests and approvals required by this
Agreement (i) shall be in writing, (ii) shall be addressed to the parties as
indicated below unless
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notified in wiring of a change in address, and (iii) shall be deemed to have
been given either when personally delivered or, if sent by mail, in which
event it shall be sent postage prepaid, upon delivery thereof, or, if sent by
telegraph, telex, facsimile (with oral confirmation of receipt), or
nationally recognized overnight delivery, upon delivery thereof. The
addresses of the parties are as follows:
To CB&T: COLUMBUS BANK AND TRUST COMPANY
Attention: President
901 Front Avenue, Suite 202
Columbus, Georgia 31901
-OR-
P.O. Box 120
Columbus, Georgia 31902-0120
FAX: (706) 649-4808
To CompuCredit: COMPUCREDIT, L.P.
Attention: Chief Financial Officer
Two Ravinia Drive, Suite 1750
Atlanta, Georgia 30346
FAX: (770) 901-5815
8.10 Modification and Changes. This Agreement, together with any Exhibits
attached hereto, constitutes the entire agreement between the parties
relating to the subject matter herein. This Agreement may only be amended by
a written document signed by both parties; provided, however, that there may
be separate written agreements signed by both parties from time to time that
serve to augment certain of the provisions contained herein. In the course of
the planning and coordination of this Agreement, written documents have been
exchanged between the parties. Such
40
<PAGE>
written documents shall not be deemed to amend or supplement this Agreement
unless signed by both parties.
8.11 Assignment. This Agreement and the rights and obligations created
under it shall be binding upon and inure solely to the benefit of the parties
hereto and their respective successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. Except as
otherwise provided herein, this Agreement shall not be assigned by either
party, except to a wholly-owning parent or to a wholly-owned subsidiary of
such assigning party's wholly-owning parent, without the written consent of
the other party, which consent shall not unreasonably be withheld or delayed,
and any such permitted assignment shall terminate when such assignee is no
longer a wholly-owning parent of such party or a wholly-owned subsidiary of
such party or of such party's wholly-owning parent.
8.12 Effectiveness. This Agreement shall become effective when it has
been accepted and executed on behalf of CB&T by an authorized officer and on
behalf of CompuCredit by an authorized officer.
8.13 Waivers. Neither of the parties shall be deemed to have waived any
of its rights, powers or remedies hereunder unless such waiver is approved in
writing by the waiving party.
8.14 Severability. If any provision of this Agreement or portion thereof
is held invalid, illegal, void or unenforceable by reason of any rule of law,
administrative or judicial provision or public policy, all other provisions
of this Agreement shall nevertheless remain in full force and effect.
41
<PAGE>
8.15 Headings. The headings contained herein are for convenience of
reference only and are not intended to define, limit, expand or describe the
scope or intent of any provision of this Agreement.
8.16 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original for all purposes and
all of which shall be deemed, collectively, one agreement, but in making
proof hereof it shall not be necessary to exhibit more than one.
8.17 Expenses. Except as otherwise specifically provided in this
Agreement, all parties shall pay their own costs and expenses in connection
with this Agreement and the transactions contemplated hereby, including,
without limitation, all regulatory fees, attorneys' fees, accounting fees and
other expenses.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
COLUMBUS BANK AND TRUST COMPANY COMPUCREDIT, L.P.
By: CompuCredit Management
Corp., its sole General Partner
By: /s/ Connie Masden By: /s/ David A. King
------------------------------ ---------------------------
Title: AVP Bankcard Title: President
-------------------------- -----------------------
42
<PAGE>
Exhibit A
[Intentionally Left Blank]
43
<PAGE>
Exhibit B
VISA-Registered Trademark- GOLD CREDIT CARD
ACCOUNT AGREEMENT
(NY Residents: RETAIL INSTALLMENT
CREDIT AGREEMENT)
Dear Customer:
This Agreement is your contract concerning the use of your Account. It
contains disclosures required by the federal Truth in Lending Act, along with
important information about your Account. Since the terms of this Agreement
become effective immediately when you have accepted, signed, or used your
Account, we encourage you to read all of it and keep it for your records.
Please feel free to call with any questions you may have. We look forward to
serving you.
PARTNERSHIP CARD SERVICE
P.O. BOX 120-C, COLUMBUS, GEORGIA 31902-0120
PHONE: 1-800-348-8783
COLUMBUS BANK AND TRUST COMPANY
BANK CREDIT CARD
AGREEMENT
(NY Residents: RETAIL INSTALLMENT
CREDIT AGREEMENT)
- -------------------------------------------------------------------------------
Cardholder Agreement
This Agreement contains the terms which govern the use of your Card, and
outlines both your responsibilities and ours. You do not have to sign the
Agreement, but once you have accepted, signed or used the Card, or the
Account, the Agreement will be in force. Please read it in its entirety and
keep it for your reference. This Agreement begins on the earlier of (i) the
date you sign an Account application that is approved by us, or (ii) the
first date that we extend credit to you on your account, as evidenced by a
signed sales slip or memorandum, a cash advance transaction, or otherwise.
Prior to the date this Agreement begins, you will not be liable for any
purchase or lease of property or services by use of the Card after its loss
or theft.
Definitions
To simplify this Agreement for you, the definitions listed below will apply
throughout, both in this Agreement and in your monthly statement. In addition,
the words you, your, and yours refers to the Cardholder who holds the Card
and is responsible for the Account. The words we, us, and our refer to
Columbus Bank & Trust Company, Columbus, Georgia and any agent through which
the Account is established.
Account: The Credit Card Account, for which you were issued a Card imprinted
with your Account number, that is subject to all the terms and conditions of
this Agreement.
Account Year: The 12-month period (consisting of 12 Billing Cycles)
commencing with the first billing cycle that begins when the Account is
opened, and each successive 12-month period thereafter.
Annual Percentage Rate: The yearly rate at which you are charged for your
credit.
ATM: Automated Teller Machine
Billing Cycle: The time interval covered by a monthly statement. Each Billing
Cycle is approximately 30 days in length.
Card: Any Visa Credit Card issued by us which you may use to obtain cash,
make Purchases, or lease goods or services on credit. Use of your Account
number to obtain credit will be considered a use of the card.
Card Carrier: The card carrier we send with your card.
Cardholder: The person to whom a Card is issued, or who has agreed to pay
obligations arising from a Card issued to another Person.
Cash Advance: Credit extended to you in the form of a cash loan through any
financial institution honoring the Card, either presented directly or through
any other credit instrument, check, device, overdraft coverage plan or ATM
that we make available to you.
Closing Date: The date of the last day of a Billing Cycle.
Convenience Check or Check: Any check we make available to you for the
purpose of drawing against your Account. These are subject to the same terms
and definitions as Cash Advances.
Credit Line: The maximum amount of credit available to you on your Account.
Finance Charge: The cost of credit extended to you on your Account. This is
computed by applying the Monthly Periodic Rate to your Average Daily Balance,
and adding a fixed fee to Cash Advance transactions.
Monthly Periodic Rate: A periodic interest rate amounting to one-twelfth of
the Annual Percentage Rate.
New Balance: The total outstanding Account balance on the Closing Date
specified in your monthly statement.
Other Charges: Charges to your Account other than Finance Charges. These are
listed below under "Account Fees."
Periodic Rate: The percentage rate of Finance Charge imposed against a
balance for a period. In this Agreement, a "Monthly" Periodic Rate is used.
Person: A natural person; also a corporation, partnership, proprietorship,
association, cooperative, estate, trust, government unit, or other entity.
Previous Balance: The balance of your Account at the beginning of a Billing
Cycle. This will be the same as the "New Balance" shown on your previous bill.
Prime Rate: The base interest rate on corporate loans at the larger U.S.
banks as published daily in the "Money Rates" section of The Wall Street
Journal. The rate applicable to your Account will be the highest Prime Rate
published on the 25th day of the calendar month preceding the month in which
the Billing Cycle begins (or if not published on that day, on the day of its
next publication following that date).
Purchase: Extensions of credit to your Account for the purpose of purchasing
or leasing goods or services from participating establishments.
User: Any Person authorized by you to obtain credit under your Account.
USING YOUR CREDIT CARD
- -------------------------------------------------------------------------------
Purchases or Cash Advances
You may use your Card or Convenience Checks to purchase or lease goods or
services from participating establishments. You may also use your Card to
obtain Cash Advances from your Account by presenting it to us, or to any
institution that accepts the Card for that purpose, or by making a withdrawal
of cash at an ATM. You will owe us for these amounts, plus any applicable
Finance Charges and Other Charges, payable in U.S. dollars.
Your Credit Line
You may not use your Account in any way that would cause you to go over your
Credit Line. We may refuse to authorize or accept any transaction on your
Account that would cause you to exceed your Credit Line or if your Account is
delinquent. We may temporarily agree to allow you to exceed your limit;
however, in that case you must repay the excess amount according to the
terms of this Agreement. We may change your Credit Line at any time and will
notify you accordingly.
Convenience Checks
We may supply you with personalized Convenience Checks that are subject to
the following conditions. Payment of a Check will be considered as a Cash
Advance on your Account. Your Check must be written in U.S. dollars. Only the
person whose name appears on the Check may sign it. We are authorized to pay
any Check drawn on your Account even if the signature does not correspond
exactly to the signature on our records.
You agree that Convenience Checks written on your Account will not be
returned to you. We are entitled to return your Check unpaid if there is not
enough available credit in your Account or if your Account is in default. If
we honor the Check under these circumstances, the amount in excess of your
Credit Line will be due immediately. You may not use a Convenience Check to
make payments on your Account.
We may pay Checks dated more than six months prior to the date they are
presented for payment. You may stop payment on a Check if we receive your
instruction within ample time to act on your request. A verbal request is
binding on us for 14 calendar days and a written request for six months,
unless you notify us otherwise in writing.
You may not write a postdated Check, but we may pay a Check regardless of a
postdate. We will not certify a Convenience Check.
MAKING PAYMENTS
- -------------------------------------------------------------------------------
Monthly Statements
We will send a statement at the end of each monthly Billing Cycle if there is
a debit or credit balance on your Account of $1 or more, a balance on which a
Finance Charge has been imposed, or as otherwise required by applicable law.
You agree to pay us, or any party to whom we may transfer and assign your
Account, in U.S. dollars according to all terms and conditions of this
Agreement.
The Minimum Payment is 3% of the New Balance, or at least $10. If you elect
not to pay your balance in full, you must pay the Minimum Payment within 25
days of the Closing Date of the Billing Cycle, which is shown as the
"Payment Due Date" on your statement. Your Minimum Payment will also include
any past due amount and any amount by which the New Balance exceeds the
Credit Line, whichever of these two is greater.
You may at any time pay off your entire balance in full or more than the
Minimum Payment without incurring any additional charge for prepayment.
Security Interest
If we now or in the future, hold any title, pledge or security interest in
any of your property other than your principal residence, it may be that the
terms of the instrument creating such title, pledge or security interest
will also secure your obligations on this Account.
HOW FINANCE CHARGES ARE DETERMINED
- -------------------------------------------------------------------------------
Your FINANCE CHARGE will include a fixed fee amounting to 3% ($2 minimum; $50
maximum) of each Cash Advance posted during a Billing Cycle, and an amount
computed by applying a Monthly Periodic Rate to the sum of (i) your Average
Daily Balance of Cash Advances and (ii) your Average Daily Balance of
Purchases. Subject to any grace period, finance charges on Purchases will be
imposed at the Periodic Rate from the date each Purchase is made and will
continue to accrue on unpaid balances as long as they remain unpaid. You will
have a 25-day grace period to repay your New Balance before a Finance Charge
on Purchases will be imposed. However, you will only be entitled to this
grace period if your Previous Balance is (i) zero, (ii) a credit balance, or
(iii) paid in full by the "Payment Due Date" shown on your monthly billing
statement. Finance charges on Cash Advances (in addition to Fixed fees) will
be imposed at the Periodic Rate from the date each Cash Advance is made and
will continue to accrue on unpaid balances as long as it remains unpaid.
There is no time period within which to pay to avoid Finance Charges on Cash
Advances.
To get the Average Daily Balance of Cash Advances, we take the beginning
balance of your Account each day, including unpaid Finance Charges and Other
Charges, add any new Cash Advances as of the date of transaction, and
subtract any payments and credits (as of the date of posting), and all
outstanding Purchases. This gives us the daily balance for Cash Advances.
Then we add all these daily balances for the Billing Cycle together and
divide the total by the number of days in the Billing Cycle. This gives us
the Average Daily Balance of Cash Advances.
To get the Average Daily Balance of Purchases we take the beginning balance
of your Account each day, including unpaid Finance Charges and other
Charges, add any new Purchases as of the date of transaction, and subtract
any payments and credits (as of the date of posting), and all outstanding
Cash Advances. This gives us the daily balance for Purchases. Then, we add
all these daily balances for the Billing Cycle together and divide the total
by the number of days in the Billing Cycle. This gives the Average Daily
Balance of Purchases.
Computing The Annual Percentage Rate (APR) and Monthly Periodic Rate
Your Monthly Periodic Rate and corresponding Annual Percentage Rate may vary.
The Monthly Periodic Rate applied in any billing period will be equal to 1/12
of the total of (i) the highest Prime Rate published in the "Money Rates"
section of The Wall Street Journal on the 25th day of the calendar month
preceding the month in which the Billing Cycle begins (or if not published
that day, on the day of its next publication following that date) and (ii)
10.75%. However, the Monthly Periodic Rate will in no event be less than
1.58333% (corresponding ANNUAL PERCENTAGE RAGE 19%). If the prime rate
increases, the Monthly Periodic Rate and corresponding Annual Percentage Rate
may increase, and, as a result, the Finance Charge, the Minimum Payment, and
the number of payments may also increase. Any new Monthly Periodic Rate will
apply to your entire balance.
The current Monthly Periodic Rate (and corresponding Annual Percentage Rate)
under the above formula are printed on your Card Carrier. Your Card Carrier
is hereby incorporated into and made a part of this Agreement.
ACCOUNT FEES
- -------------------------------------------------------------------------------
In addition to Finance Charges and fixed fees for Cash Advances, a variety of
fees and charges may be applied to your Account, as follows:
Annual Fee
You agree to pay us an annual fee of $50 for the use of your Card and access
to all Card benefits over twelve (12) months following the assessment of the
fee. The fee for the initial twelve (12) month period be assessed upon
opening your account. Subsequent annual fees will be assessed during the
month of account anniversary. If we revoke your Card, we will refund a pro
rata portion of the annual fee to you.
Late Payment Charge
If you do not make your minimum payment before the Closing Date of the
Billing Cycle, we will apply a late payment charge of $25 to your Account.
Overlimit Fee
If your New Balance exceeds your Credit Line on the Closing Date of the
Billing Cycle, we will apply an overlimit fee of $25 to your Account.
Returned Check Fee
Should any check or money order in payment of your Account be returned to us
unpaid for any reason we will apply a returned check fee in the amount of
$25 to your account.
YOUR BILLING RIGHTS AND OUR RESPONSIBILITIES
- -------------------------------------------------------------------------------
Lost Cards and Unauthorized Use
If your Card is lost or stolen, or used without your consent, you may be
liable for the unauthorized use of your Card, but you will not be liable for
unauthorized use that occurs after you notify us orally or in writing of the
loss, theft or possible unauthorized use at:
Security Department
BankCard Center
P.O. Box 120-C
Columbus GA 31902
1-800-348-8783
or
706-649-7167 Outside U.S. or in the Columbus, GA area.
In any case, your liability will not exceed $50.
<PAGE>
Your Billing Rights - Keep This Notice For Future Use
- -------------------------------------------------------------------------------
This notice contains important information about your rights and our
responsibilities under the Fair Credit Billing Act.
Notify us in case of errors or questions about your bill.
If you think your bill is wrong, or if you need more information about a
transaction on your bill, please write to us at Dispute Resolution Office,
Partnership Card Services, P.O. Box 120-C, Columbus, GA 31902-0120. We must
hear from you no later than 60 days after we send you the first bill on which
the error or problem appeared. You can telephone us, but doing so will not
preserve your rights.
In your letter, give us the following information.
- - Your name and Account number.
- - The dollar amount of the suspected error.
- - Describe the error and explain, if you can, why you believe there is an
error. If you need more information, describe the item you are not sure
about.
If you have authorized us to pay your Card bill automatically from your
savings or Checking Account, you can stop the payment on any amount you think
is wrong. To stop paymnet, your letter must reach us three business days
before the automatic payment is scheduled to occur.
Your rights and our responsibilities after we receive your written notice.
We must acknowledge your letter within 30 days unless we have corrected the
error by then. Within 90 days, we must either correct the error or explain
why we believe the bill is correct.
After we receive your letter, we cannot try to collect any amount you
question or report you as delinquent. We can continue to bill you for the
amount in question, including Finance Charges, and we can apply any unpaid
amount against your Credit Line. You do not have to pay any questioned amount
while we are investigating, but you are still obligated to pay the parts of
your bill that are not in question.
If we find that we have made a mistake on your bill, you will not have to pay
any Finance Charges related to any questioned amount. If we did not make a
mistake, you may have to pay Finance Charges, and you will have to make up
any missed payments on the questioned amount. In either case, we will send
you a statement of the amount you owe and the date that it is due.
If you fail to pay the amount that we think you owe, we may report you as
delinquent. However, if our explanation does not satisfy you and you write to
us within 10 days telling us that you still refuse to pay, we must tell anyone
we report you to that you have a question about your bill, and we must tell
you the name of anyone to whom we reported you. We must tell anyone we report
you to that the matter has been settled between us when it is settled.
If we do not follow these rules, we cannot collect the first $50 of the
questioned amount, even if your bill was correct.
Special Rule for Credit Card Purchases
If you have a problem with the quality of property or services that you
purchased with a credit card, and you have tried in good faith to correct the
problem with the merchant, you may have the right not to pay the remaining
amount due on the property or services. There are two limitations on this
right: (1) you must have made the purchase in your home state or, if not
within your home state, within 100 miles of your current mailing address; and
(2) the purchase price must have been more than $50. These limitations do not
apply if we own or operate the merchant, or if we mailed you the advertisement
for the property or services.
Telephone Monitoring
From time to time, we may monitor telephone calls regarding your Account with
us to assure the quality of our service.
OUR RIGHTS, AND HOW THEY AFFECT YOU
- -------------------------------------------------------------------------------
Refunds
If a seller agrees to give a refund, you will accept a credit on your Account
instead of a cash refund.
No Waiver of Rights; Disputed Amounts
We can accept late or partial payments without losing any of our rights under
this Agreement. You agree not to send us partial payments marked "paid in
full," "without recourse," or similar language. If you send such a payment,
we may accept it without losing any of our rights under this Agreement. All
written communications concerning disputed amounts, including any check or
other payment instrument that indicates that the payment constitutes "payment
in full" of the amount owed or that is tendered with other conditions or
limitations or as full satisfaction of a disputed amount, must be mailed or
delivered to P.O. Box 120-C, Columbus, Georgia 31902-0120.
Credit Reports and Information Reporting
You authorize us to make or have made any credit, employment, or other
investigative inquiries we deem appropriate to extend you credit or collect
the amounts owed to us on your Account. We may report your performance under
this Agreement and can furnish information about your Account or credit file
to consumer reporting agencies and others who may properly receive the
information, including your failure to make minimum payments on time. We
(including any assignee) may also obtain follow-up credit reports on you and
may exchange information about you or your Account with our (its) affiliates.
Otherwise, no one else will be given information about your Account without
your permission or proper legal authority. We will try to notify you by
telephone or mail of any legal process served to us in order to give you an
opportunity to object to it, unless the law prohibits the notice. You can
request that we not furnish marketing information concerning you which
discloses your identity by calling us at (800) 348-8783 or writing to us at
P.O. Box 120-C, Columbus, Georgia 31902-0120.
Collection and Default
Unless prohibited by applicable law, your Account is considered to be in
default if (1) you do not make at least the Minimum Payment on or before the
Payment Due Date, (2) you try to exceed or do exceed your Credit Line without
permission, (3) you become subject to bankruptcy or insolvency proceedings,
(4) you become subject to attachment or garnishment proceedings, (5) you give
us any false information or signature, (6) you die, or (7) you fail to comply
with any portion of this Agreement. Our accepting a late or partial payment
does not waive the default. Default on this Account will constitute default
on all accounts you hold with us.
If you are in default, we may declare the entire balance due immediately.
Unless prohibited by applicable law, you must pay all costs and attorneys'
fees related to the collection of your Account.
Change of Terms
Subject to the limitations of aplicable law, we may, at any time, change any
of the terms and conditions of, or add new terms or conditions to, this
Agreement. We will mail written notice of such a change to you when and in
the manner required by applicable law. As of the effective date, the changed
terms will apply to new Purchases and Cash Advances and also to the
outstanding balance of your Account, subject to the limitations of applicable
law.
Delay in Enforcement
We can delay enforcing our rights under this Agreement without losing them.
OTHER PROVISIONS
- --------------------------------------------------------------------------------
Ownership and Use of Your Card
As the Account Cardholder, you are liable for all credit obtained under your
Account, whether by yourself or as authorized User. If you authorize another
person to use your Card or a Convenience Check, you are liable for any credit
obtained on your Account for as long as that person holds the Card or Check.
In addition, you will remain liable until you recover possession of the Card
or Check. Misuse of your Card by an authorized User will not be considered
unauthorized use. Upon demand, you must return any Card we supply to you or
destroy the Card by cutting it in half immediately. Convenience Checks must
be mailed or returned to us upon request.
Transactions
You will retain for statement verification your copy of each purchase slip,
Cash Advance or other transaction to your Account.
Transfer and Termination of Your Account
You may not transfer your Account to any other Person. We may assign your
Account to any other Person at any time. Either you or we may terminate or
suspend your credit privileges at any time. However, you will remain liable
for all charges until they are paid in full.
Foreign Currency Conversion
You may make a Purchase or obtain a Cash Advance in a currency other than
U.S. dollars. If you do, the VISA association will convert the transaction
into U.S. dollars according to their procedures. The conversion rate they use
may differ from any published rate in effect on the day that you made the
transaction or it was posted to your Account. You agree to pay us the amount
as converted into U.S. dollars according to VISA association procedures.
Honoring Your Card
We are not liable for the failure or refusal of a merchant, ATM or other
institution to honor your Card. Although you may have credit available, we
will not be liable for the failure to authorize credit due to operational
difficulties or mistakes. Transactions made above a certain dollar amount may
require authorization by us before the transaction can be approved. In
addition, we may limit the number and amount of transactions approved in one
day for security reasons.
Change of Address, Employment and Telephone
We will send all written notices and statements to your address as it appears
on our records. To avoid delays and missed payments that could affect your
credit standing, you agree to advise us promptly if you change your mailing
address, place of employment, or telephone number.
Severability
In the event that any provision of this Agreement is determined to be invalid
or unenforceable for any reason, the remaining provisions will remain in
effect.
Headings and Governance
The headings used in this Agreement are for the convenience of reference only
and are not intended to define or describe the scope or intent of any portion
of the Agreement. This Agreement is governed by federal law and the laws of
the state of Georgia, as applicable.
NOTICE TO THE BUYER
1. DO NOT SIGN THIS CREDIT AGREEMENT BEFORE YOU READ IT OR IF IT CONTAINS ANY
BLANK SPACES.
2. YOU ARE ENTITLED TO A COMPLETELY FILLED IN COPY OF THIS CREDIT AGREEMENT.
Your signature on the application represents your signature on this Agreement.
(NY Residents: RETAIL INSTALLMENT CREDIT AGREEMENT).
- -----------------------------------
[put signature of Bank Officer here]
- -----------------------------------
[put title of Bank Officer here]
- -----------------------------------
DATE: [put date of printing here]
MARYLAND RESIDENTS: Finance charges will be imposed in amounts or at rates
not in excess of those permitted by law. You have the right to receive an
answer to a written inquiry concerning the status of your Account.
NEW JERSEY RESIDENTS: Where this Agreement refers to acts or practices by us
which are or may be required by "applicable law," such acts or practices are
not required by New Jersey law, subject to the following limitation: we will
send prior written notice of any increase in the rate or amount of finance
charge (except for any increase in the rate or amount of finance charge that
results from an increase in the Prime Rate as described above in the
paragraph entitled "Computing The Annual Percentage Rate (APR) and Monthly
Periodic Rate"). Where this Agreement refers to acts or practices that may or
will be taken by us unless prohibited by, or subject to, or as permitted by,
requirements or limitations of "applicable law," New Jersey law permits the
act or practice subject to the following limitation: we do not impose
collection costs and may impose attorneys' fees under the paragraph above
entitled "Collection and Default" up to a maximum of 20% of the first $500 of
your outstanding balance and 10% of the excess.
VIRGINIA RESIDENTS: To avoid additional finance charges being applied to your
current purchases on next month's statement, pay the new balance on this
statement in full by the due date.
WISCONSIN RESIDENTS: We will not charge you attorneys' fees, court costs, or
other collection costs incurred as a result of your default.
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
For Your Information
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Exhibit C
- -------------------------------------------------------------------------------
ASPIRECARD--Card Servicing Pricing December 1996
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Portfolio Services
Project Management
TSYS Liaison
Customer Service *[material omitted]
Accounting
Fraud Detection
Monitoring
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Application - $12.50 per manual review, judgementally only
Processing - $3 per keyed application--approved/declined
- $1.50 per keyed application in response to
in-bound telemarketing or solicitation
- $.50 per application transmitted into ACE from
marketing agency
- $3 per fulfillment package (including cost of
card, credit bureau check, and mailing)
-
- --------------------------------------------------------------------------------
Inbound telephone $0.94 per call
applications
- --------------------------------------------------------------------------------
Collections *[material omitted] monthly per delinquent account
worked by a collector (calls and/or skip tracing)
- --------------------------------------------------------------------------------
Fraud/Investigations $50 per hour for case management approved by
CompuCredit; plus out-of-pocket expenses for
out-of-office investigations only.
- --------------------------------------------------------------------------------
Information Support Customized TSYS Total Access reports $75 per hour
- --------------------------------------------------------------------------------
Customized Projects Additional services quoted on a project basis
- --------------------------------------------------------------------------------
Pass-Through - $1,000 per month per TSYS data transmission type
Expenses - TSYS charges for data circuit to CompuCredit
for collections
- --------------------------------------------------------------------------------
Monthly Minimum $10,000 monthly servicing fee
- --------------------------------------------------------------------------------
</TABLE>
- ------------------
* Deleted per the Registrant's request for confidential treatment and filed
separately with the Commission pursuant to Rule 24b-2
45
<PAGE>
Exhibit D
BANK LETTERHEAD
- ------------------------------------------------------------------------------
(Date)
Beneficiary: Columbus Bank & Trust Company
P.O. Box 120
Columbus, GA 31902
RE: CompuCredit, L.P.
Letter of Credit No.______________________
We have established this Irrevocable Letter of Credit No._____in your favor
as "Beneficiary" for drawings up to U.S. $_______________effective (date),
and expiring at our office located at (bank address), with our close of
business on (date).
The term "Beneficiary" includes any successor by operation of law of the
named Beneficiary including, without limitation, any liquidator,
rehabilitator, receiver or conservator.
We hereby undertake to promptly honor your sight draft(s) drawn on us,
indicating our Credit No.______, for all or any part of this Credit if
presented at (Bank) on or before the expiration date or any automatically
extended expiration date.
Such a sight draft shall be accompanied by a certification by an officer
stating that an Event of Default shall have occurred under that certain
Affinity Card Agreement, dated November _____, 1996, between you and
CompuCredit L.P., due to CompuCredit, L.P.'s failure to perform under said
Affinity Card Agreement.
Except as stated herein, this undertaking is not subject to any condition or
qualification. The obligation of the Bank under this Letter of Credit shall
be the individual obligation of the Bank, in no way contingent upon
reimbursement with respect thereto.
It is a condition of this Letter of Credit that it shall be deemed automatically
extended without amendment for one year from the expiration date hereof, or
any future expiration date, unless sixty (60) days prior to any expiration
date we shall notify you by Registered Mail that we elect not to consider
this Letter of Credit renewed for any such additional period.
This Letter of Credit is subject to and governed by the Laws of the State of
Georgia and the 1993 revision of the Uniform Customs and Practice for
Documentary Credits of the
46
<PAGE>
International Chamber of Commerce (Publication 500) and, in the event of any
conflict, the Laws of the State of Georgia will control.
(Bank Name)
By:
-------------------------------------
Title:
----------------------------------
By:
-------------------------------------
Title:
----------------------------------
47
<PAGE>
Exhibit E
FACILITIES MANAGEMENT SERVICES AGREEMENT
This Agreement (the "Agreement") is made and entered into this
______ day of _______________, 19___ by and between COLUMBUS BANK AND TRUST
COMPANY ("CB&T") of Columbus, Georgia, and CompuCredit, L.P., a Georgia
limited partnership ("CompuCredit") of Atlanta, Georgia.
PREAMBLE
The terms and provisions of this Agreement provide for the
utilization by CompuCredit of CB&T's facilities management services
("Services") commencing with the purchase by CompuCredit of certain credit
card accounts ("Accounts") originated by CB&T pursuant to the Affinity Card
Agreement of even date herewith between CB&T and CompuCredit. Capitalized
terms used, but not defined, herein are used as defined in the Affinity Card
Agreement. To provide for the receipt of the Services by CompuCredit and in
consideration of the terms and provisions specified in this Agreement, the
parties hereto agree as follows:
SECTION 1
SERVICES PROVIDED BY CB&T
Upon any purchase of the Accounts by CompuCredit pursuant to the
Affinity Card Agreement referenced above, CB&T will provide the Services
identified and described on Exhibit A, attached hereto and made a part hereof
by reference, and shall provide such Services in accordance with the Aspire
Operations Manual ("Manual"), which is made a part hereof by reference,
except as otherwise provided herein. The Manual shall be signed by
CompuCredit and CB&T and shall provide for written amendments thereto from
time to time as agreed to by the parties. All services shall be provided in
accordance with applicable VISA Operating Regulations and procedures. CB&T
will provide the Services in connection with (i) the Aspire Card and (ii)
such other credit cards or bankcards as agreed in writing by CompuCredit and
CB&T (collectively,
<PAGE>
"CompuCredit Cards"). CompuCredit acknowledges that it has reviewed and
understands such policies and procedures and hereby agrees that CB&T shall
apply such policies and procedures for the services provided under this
Agreement.
CB&T shall provide to CompuCredit periodic reports (through Total Systems
Services, Inc. ("TSYS") or otherwise), including but not limited to, new
account application status reports, delinquent account reports, charge-off
documentation and settlement reports, and such other reports as CompuCredit
may reasonably request from time to time. The frequency and content of such
reports shall be mutually agreed upon by CB&T and CompuCredit, consistent
with CB&T and/or TSYS' systems capability, as applicable, and CB&T's and/or
TSYS' report production schedule.
Unless otherwise agreed to by CompuCredit in writing, CB&T shall submit to
CompuCredit a monthly status report, in addition to the standard reports
described in the immediately preceding paragraph. The report shall (i)
generally describe CB&T's activities and accomplishments during the preceding
six (6) months; (ii) list the status of projects and tasks assigned by
CompuCredit; (iii) summarize account activity; and (iv) identify actual or
anticipated problem areas and the impact of such problems areas.
CompuCredit may, at its own expense and upon reasonable prior notice, have
full access to and the right to inspect and copy the books, records and data
records of CB&T relating to services performed herein by CB&T (or to which
CB&T has access as a client of any subcontractor performing work for or on
behalf of CB&T), and during the term of this Agreement, CB&T shall furnish
to CompuCredit all such information concerning transactions and services
provided by CB&T or on CB&T's behalf pursuant to this Agreement as CompuCredit
may reasonably request.
In the event that CompuCredit requests that CB&T perform any additional
facilities management services in connection with the CompuCredit Cards, and
CB&T agrees to provide such services, then the details and the cost of such
services shall be agreed to by CompuCredit and CB&T in writing and shall be
attached to this Agreement as an amendment or set forth in a separate
document.
2
<PAGE>
SECTION 2
TERM
A. Initial Term. The Initial Term of this Agreement shall commence on
December ___, 1996 and shall continue until December 31, 1998 (the "Initial
Term").
B. Renewals. After the Initial Term, this Agreement shall be extended
for renewal terms of two (2) years each ("Renewal Term") unless one party
notifies the other party of its intent to terminate this Agreement at least 180
days prior to the end of the Initial Term or any Renewal Term.
C. Termination
(1) In the event CompuCredit terminates this Agreement, other than
as provided in Paragraph B of this Section 2 or other than for breach
pursuant to Paragraph 3 or 4 of this Section 2, CompuCredit shall pay a
termination fee to CB&T equaling six times the total amount of Fees (defined
in Section 3 hereof) incurred for the calendar month preceding termination or
six times the minimum monthly servicing fee, whichever is greater.
(2) CB&T may terminate this Agreement in the event CompuCredit
fails to make or adequately and timely provide for the payment of fees and
expenses due hereunder, but only if CB&T gives CompuCredit written notice of
such failure and CompuCredit fails to remedy such failure within fifteen (15)
business days after its receipt of said notice. Upon the expiration of the
fifteen (15) day period provided for above, CB&T may terminate this Agreement
by giving CompuCredit written notice, which termination shall be effective
seven (7) business days after receipt of such notice by notice by
CompuCredit. If such failure to pay is remedied by CompuCredit within such
fifteen (15) day period, then this Agreement shall continue as though no such
notice had been given.
(3) If either party fails to observe, keep or perform any material
term or condition of this Agreement, or the Manual, required to be observed,
kept or performed by that party, the other party, in addition to any other
rights and remedies it may have, shall have the right to terminate this
Agreement without paying a termination fee; provided, however, that the party
seeking to terminate the Agreement gives the other
3
<PAGE>
party a written notice of such failure claimed to be a breach of terms and
conditions of this Agreement, and the party receiving said notice fails to
remedy the breach, to the reasonable satisfaction of the non-breaching party,
within thirty (30) days after receipt of said notice. If the breach is not
remedied by the defaulting party within the thirty (30) day period provided
for above, the non-defaulting party may terminate this Agreement by giving
the defaulting party written notice effective immediately. If the breach is
remedied by the defaulting party within such thirty (30) day period, then
this Agreement shall continue as though no such notice had been given.
(4) In the event either party to this Agreement shall cease
conducting business in the ordinary course, become insolvent, make a general
assignment for the benefit of creditors, suffer or permit the appointment of a
receiver for its business or assets, or shall avail itself of, or become
subject to, and proceeding under the federal bankruptcy laws of any statute
of any state relating to insolvency or the protection of the rights of
creditors, then at the option of the other party hereto, the other party may
terminate this Agreement at any time upon notice of the other party.
(5) Termination of this Agreement shall not terminate CompuCredit's
obligation to pay CB&T for all services performed and expenses incurred under
the Agreement prior to the discontinuance of performance of the Services by
CB&T hereunder.
(6) In the event that CompuCredit does not terminate this Agreement
and CompuCredit sells in excess of the greater of (i) 10% of the Accounts
within any 12-month period or (ii) 25,000 Accounts within any 12-month
period, and CB&T ceases to service such accounts, CB&T shall receive a
deconversion fee equaling six (6) times a percentage (described below) of the
total amount of Fees incurred for the calendar month preceding the first sale
of the Accounts. The applicable percentage for purposes of the foregoing
calculation is the number of Accounts sold during the 12-month period divided
by the total number of Accounts being serviced by CB&T during the calendar
month preceding the sale of the Accounts that would make this subsection
applicable.
4
<PAGE>
D. Post-Termination
(1) Duties After Termination. Upon termination of this
Agreement, in order to preserve the goodwill of Cardholders both parties
shall cooperate in order to ensure a smooth and orderly termination of their
relationship and a transition of Cardholder Accounts. In the event CB&T
terminates this Agreement, CB&T shall continue to maintain and service the
Accounts and fulfill all of its obligations hereunder for a period of up to
180 days after the termination in order to allow CompuCredit to convert the
Accounts to an alternative servicer.
(2) Assistance with Conversion. Upon any termination of this
Agreement, CB&T shall provide to CompuCredit all assistance reasonably
necessary to enable CompuCredit to convert the accounts serviced hereunder to
the processing system designated by CompuCredit and shall cooperate with
CompuCredit in its efforts to effect such conversion at the earliest
practicable date.
SECTION 3
FEES
A. Servicing Fees. CompuCredit agrees to pay fees and reimburse
expenses to CB&T (Collectively, "Fees") in return for the Services provided by
CB&T under this Agreement in accordance with Exhibit B, attached hereto and
made a part hereof by reference. CompuCredit agrees to pay all invoices from
CB&T for such Services within thirty (30) days of receipt thereof.
B. No Further Fees. The servicing fees set forth in Exhibit B
shall be deemed to include all fees and expenses related to this Agreement,
and CompuCredit shall not be required to pay any other charges in connection
herewith, except for those additional services agreed to by CompuCredit in
writing.
SECTION 4
CONFIDENTIAL INFORMATION
A. All material and information supplied by one party to the other
party in the course of the negotiation of this Agreement and its performance
hereunder, including.
5
<PAGE>
but not limited to, information concerning either party's marketing plans;
technological developments, objectives and results; and financial results are
confidential and proprietary to the disclosing party ("Confidential
Information"), Confidential Information does not include any information that
was (i) known to the receiving party at the time of disclosure or developed
independently by such party without violating the terms herein; (ii) in the
public domain at the time of disclosure or enters the public domain following
disclosure through no fault of the receiving party; or (iii) disclosed to the
receiving party by a third party that is not prohibited by law or agreement
from disclosing the same. Notwithstanding the foregoing, each CompuCredit
list containing the names, addresses and/or telephone numbers of CompuCredit
Card cardholders shall be deemed Confidential Information owned by
CompuCredit; provided, however, that this provision shall not prohibit any
transfer, sale or disclosure of the name, address or telephone number of, or
any solicitation of, any person of whose existence CB&T has or obtains
knowledge otherwise than by reason of CB&T's participation in this Agreement
or the Affinity Card Agreement.
B. Confidential Information shall be used by each party solely in
the performance of its obligations pursuant to this Agreement. Each party
shall receive Confidential Information in confidence and not disclose
Confidential Information to any third party, except as may be necessary to
perform its obligations pursuant to this Agreement and except as may be
required by law or agreed upon in writing by the other party. Each party
shall take all reasonable steps to safeguard Confidential Information
disclosed to it so as to ensure that no unauthorized person shall have access
to any Confidential Information. Each party shall, among other safeguards
which it may consider necessary, require its employees, agents, and
subcontractors having access to Confidential Information to enter into
appropriate confidentiality agreements outlining such terms as are necessary
to satisfy its obligation herein. Each party shall promptly report to the
other party and unauthorized disclosure or use of any Confidential Information
of that party to which it became aware. Upon request or upon termination of
this Agreement, each party shall return to the other party all Confidential
Information in its possession or control. No disclosure by a party hereto of
Confidential
6
<PAGE>
Information of such party shall constitute a grant to the other party of any
interest or right whatsoever in such Confidential Information, which shall
remain the property solely of the disclosing party. Nothing contained herein
shall limit a party's rights to use its Confidential Information in any manner
whatsoever.
C. The terms of this Section 4 shall survive the termination of this
Agreement.
SECTION 5
USE OF NAMES AND TRADEMARKS
A. CompuCredit hereby authorizes CB&T, during the term of this
Agreement, on a non-exclusive, non-assignable basis, to use CompuCredit's
name and such trademarks of CompuCredit, including, without limitation, the
"Aspire" servicemark, as may be necessary in connection with the Services
provided under this Agreement (the "CompuCredit Credit Card Marks"), in the
forms and formats approved by CompuCredit, in various communications to
cardholders with respect to the CompuCredit Cards.
B. CB&T hereby authorizes CompuCredit, during the term of this
Agreement, on a non-exclusive, non-assignable basis, to use CB&T's name and
such trademarks of CB&T as may be used in connection with the Services
provided under this Agreement (the "CB&T Credit Card Marks"), in the forms
and formats approved by CB&T, in communications to CompuCredit Card
cardholders with respect to the CompuCredit Card accounts serviced pursuant
to this Agreement.
C. Except as otherwise provided herein, neither party shall use the
registered trademarks, service marks, logo, name or any other proprietary
designations of the other party without that party's prior written consent.
Each party shall submit to the other party for prior approval any advertising
or promotional materials relating to the services provided under this
Agreement in which such trademarks are to be used, and/or for any materials
that will be provided to the cardholders of the CompuCredit Cards pursuant to
this Agreement in which such trademarks are to be used, which approval shall
not unreasonably be withheld or delayed.
7
<PAGE>
SECTION 6
INDEMNIFICATION
A. Except to the extent of any Losses which arise from the direct acts
or omissions of CB&T or an affiliate of CB&T, CompuCredit will indemnify and
hold harmless CB&T, and its directors, officers, employees, agents and
affiliates and permitted assigns from and against any and all "Losses" (as
herein defined) arising out of (i) any failure of CompuCredit to comply with
any of the terms and conditions of this Agreement, (ii) any inaccuracy of a
representation or warranty made by CompuCredit herein, or (iii) any
infringement or alleged infringement on the rights of any third party by use
of any of the CompuCredit Credit Card Marks, or the use thereof hereunder.
B. Except to the extent of any Losses which arise from the direct acts
or omissions of CompuCredit, CB&T shall be liable to and shall indemnify and
hold harmless CompuCredit and its officers, directors, employees, agents,
affiliates, and permitted assigns from and against any Losses (as defined
below) arising out of (i) any failure of CB&T to comply with any of the terms
and conditions of this Agreement, (ii) any inaccuracy of a representation or
warranty made by CB&T herein, (iii) any infringement or alleged infringement
on the rights of any third party by use of the CB&T Credit Card Marks, or the
use thereof hereunder, or (iv) any losses resulting from a failure of CB&T to
comply, in respect of its obligations in connection with the Program
hereunder, with any applicable laws or regulations whether immaterial or
material regardless of whether such failing to comply would constitute a
breach of a representation, warranty or covenant of CB&T hereunder.
C. For the purposes of this Section 6, the term "Losses" shall mean
all out-of-pocket costs, damages, losses, and expenses whatsoever, including,
without limitation, (i) outside attorneys' fees and disbursements and court
costs reasonably incurred by the indemnified party and (ii) costs (including
reasonable expenses and reasonable value of time spent) attributable to the
necessity that any officer or employee (other than in-house attorneys) of any
Indemnified Party spend more than 25% of his or her normal business hours,
over a period of two (2) months, in connection with any judicial,
administrative, legislative, or other proceeding arising out of the
obligations or services
8
<PAGE>
provided hereunder by such party, including without limitation, any claim
that a party hereto has failed to obtain any permission or license to use any
software utilized in the performance of this Agreement.
SECTION 7
NOTICES
A. Any written notice required or permitted to be given by CompuCredit
to CB&T hereunder shall be addressed to:
COLUMBUS BANK AND TRUST COMPANY
Attention: BankCard Center Manager
902 Front Avenue, Suite 202
Columbus, Georgia 31901
--OR--
P.O. Box 120
Columbus, Georgia 31902
FAX: (706) 649-4808
and any written notice required, or permitted to be given by CB&T to
CompuCredit under this Agreement shall be addressed to:
COMPUCREDIT, L.P.
Attention: Chief Financial Officer
Two Ravinia Drive, Suite 1750
Atlanta, Georgia 30346
FAX: (770) 901-5815
B. All written notices provided for hereunder shall be delivered in
person, sent by courier, sent by certified mail with a return receipt
requested, sent by nationally recognized overnight delivery service, or
transmitted by facsimile (with oral confirmation of receipt) and shall be
effective when delivered or received. The parties to this Agreement, by
notice in writing, may designate another address or office to which notices
shall be given pursuant to this Agreement.
9
<PAGE>
SECTION 8
ADDITIONAL PROVISIONS
A. Nothing herein contained shall be construed as constituting a
partnership, joint venture or agency between CompuCredit and CB&T.
B. This Agreement shall not be assignable in whole or in part by either
party without the other party's prior written consent, except that such
consent shall not be required for the assignment of this Agreement to an
entity that is an affiliate of the assigning party (which assignment shall
not relieve the assigning party of any obligation hereunder). Upon notice to
CompuCredit, CB&T may sub-contract with other entities with respect to the
provision of the Services hereunder, but no such subcontracts shall alter
CompuCredit's rights against CB&T under this Agreement.
C. Each party to this Agreement hereby represents and warrants to the
other that it has the full right, power and authority to enter into and
perform this Agreement in accordance with all the terms, provisions,
covenants and conditions hereof, and that the execution and delivery of this
Agreement has been duly authorized by proper corporate action.
D. Any delay, waiver, or omission by CompuCredit or CB&T to exercise any
right or power arising from any breach or default of the other party in any
of the terms, provisions, or covenants of this Agreement shall not be
construed to be a waiver of any subsequent breach or default of the same or
any other terms, provisions or covenants on the part of the other party.
E. CB&T represents and warrants that any media used to render the
Services and which were generated by CB&T of affiliated companies (including
without limitation TSYS) contain no computer instructions, circuitry or other
technological means whose purpose is to disrupt, damage, or interfere with
CompuCredit's use of its computer and telecommunications facilities for their
commercial, test, or research purposes.
F. CB&T hereby represents and warrants to CompuCredit that it has the
full right and authority to use any and all software used in the performance
of its obligations under this Agreement.
10
<PAGE>
G. This Agreement shall be binding upon and shall insure to the
benefit of the parties hereto and their representatives and their respective
successors and assigns.
H. This Agreement constitutes the entire agreement between the
parties hereto relating to the subject matter hereof; provided, however, that
there may be separate written agreements signed by both parties from time to
time which serve to augment certain of the provisions contained herein. No
modification or amendment of this Agreement shall be effective unless and
until set forth in writing and signed by both parties hereto.
I. This Agreement shall be governed in all respects by and
construed in accordance with the laws of the State of Georgia.
J. Except as otherwise specifically provided in this Agreement,
all parties shall pay their own costs and expenses in connection with this
Agreement and the transactions contemplated hereby, including, without
limitation, all regulatory fees, attorneys' fees, accounting fees and other
expenses.
K. This Agreement may be executed in multiple counterparts, each
of which shall be deemed an original for all purposes and all of which shall
be deemed, collectively, one agreement, but in making proof hereof it shall
not be necessary to exhibit more than one.
L. CB&T represents and warrants that it has, or will have on or
before December 1, 1996, all of the necessary facilities and personnel to
provide the Services in accordance with the terms of this Agreement; that it
shall perform its obligations hereunder at all times and in all respects in
accordance with all material applicable federal, state, and local laws and
regulations; and that it will perform its obligations hereunder in a timely
manner and with due care.
11
<PAGE>
IN WITNESS WHEREOF each of the parties has caused this agreement to
be executed on its behalf by its duly authorized officers as of the day,
month and year first above written.
COMPUCREDIT L.P. COLUMBUS BANK AND TRUST
By: CompuCredit Management Corp., COMPANY
Its sole General Partner
By: By:
---------------------------- -------------------------
Title: Title:
------------------------- ----------------------
12
<PAGE>
Exhibit A
ASPIRE CARD PROGRAM SERVICE FEATURES
Project Management: Program Administrator
Report Management
Accounting: Settlement of all Visa transactions
Calculation and settlement of Visa quarterly fees
Customer Service: Customer Support provided 8 a.m. - 9 p.m. ET, seven
days a week
1-800 number of VRU
Chargebacks
Inquiries
Customer Service Mail (name changes, adding
authorized users, etc.)
Convenience Checks
Charge Plus Insurance
Balance Transfers
Automatic Payment Deductions
VRU: VRU available to provide 24 hours Customer Service, 7
days a week
Information available:
Balance
Last Payment
Credit Limit
Last five transactions
Originating Services: Data entry of applications
Processing of fulfillment material for approved
accounts
In-bound applications: Processing of inbound telephone applications
Credit: Review of pending accounts to approve/decline based
on judgmental criteria
Collection: The Melita Team primarily works one and two month
accounts using the power dialer, using Behavioral
Scoring to set collection priorities.
The Bankruptcy staff knows the importance of handling
each case quickly and efficiently. Knowledge of
regulations, aggressive actions and negotiations help
us maximize our recovery without an overburden of
legal fees.
The Recovery Team has helped keep net charge-off
figures low by bringing in the recover dollars. If
the in-house recovery specialist can't help the
customer, we use collection agencies or
13
<PAGE>
attorneys. The effectiveness of each are monitored to
insure maximized recovery potential.
Fraud/Investigations: Credit Bureau Fraud Detection Analysis
Alert File (Internal Fraud Detection)
Handwriting analysis on suspicious written requests
Clearing House Alert File (Visa Fraud File)
Monitoring of various fraud detection reports to
include:
Activity Exceeds Maximum Report
Large Dollars Payment Report
Over Limit Report
Credit Balance Report
External programs focusing on top fraud states
through VSIL (Visa Strategic Information Line) and
TOSS (Total Office Security System)
Networking contacts with federal, state and local law
enforcement to include a twenty year association with
the International Association of Credit Card
Investigators.
Data Processing: CB&T utilizes two sister companies, Synovus Data
Corp. and Total System Services for data processing.
Total System Services provides the platform that
houses all account information and the software that
operates the authorization system, credit analysis
system, collections systems and the fraud detection
system, among others. TSYS also generates the
plastics and statements for all accounts. Synovus
Data Corp. processes convenience checks through the
Federal Reserve System, remittance processing ACH
transmissions for CB&T.
14
<PAGE>
<TABLE>
<CAPTION>
Exhibit B
- -------------------------------------------------------------------------------
ASPIRE CARD
Card Servicing Pricing - December, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Portfolio Services
Project Management
TSYS Liaison
Customer Service *[material omitted]
Accounting
Fraud Detection
Monitoring
- --------------------------------------------------------------------------------
</TABLE>
Application - $12.50 per manual review; judgmental only
Processing - $3 per keyed application - approved/declined
- $1.50 per keyed application in response to
in-bound telemarketing or solicitation
- $.50 per application transmitted into ACE from
marketing agency
- $3 per fulfillment package (including cost of
card, credit bureau check, and mailing)
- --------------------------------------------------------------------------------
Inbound telephone $0.94 per call
applications
- --------------------------------------------------------------------------------
Collections *[material omitted] monthly per delinquent account
worked by a collector (calls and/or skip tracing)
- --------------------------------------------------------------------------------
Fraud/ $50 per hour for case management approved by
Investigations CompuCredit; plus out-of-pocket expenses for out of
office investigations only
- --------------------------------------------------------------------------------
Information Support Customized TSYS Total Access reports $75 per hour
- --------------------------------------------------------------------------------
Customized Additional services quoted on a project basis
Projects
- --------------------------------------------------------------------------------
Pass-through - $1,000 per month per TSYS data transmission type
Expenses - TSYS charges for data circuit to CompuCredit for
collections
- --------------------------------------------------------------------------------
Monthly Minimum $10,000 Monthly Servicing Fee
- --------------------------------------------------------------------------------
- ------------------
* Deleted per the Registrant's request for confidential treatment and filed
separately with the Commission pursuant to Rule 24b-2
15
<PAGE>
Exhibit 10.7.2
Amendment to Affinity Card Agreement
This is an Amendment (this "Amendment"), dated as of March 26, 1998, to
that certain Affinity Card Agreement (the "Affinity Agreement"), dated as of
January 6, 1997, by and between Columbus Bank & Trust Company ("CB&T") and
CompuCredit Corporation ("CompuCredit"), a corporation organized under the
laws of the State of Georgia as the successor to CompuCredit L.P., as
heretofore amended.
RECITALS
A. Under a proposed transaction among CB&T, CompuCredit Acquisition
Corporation ("CompuCredit Acquisition"), MountainWest Financial Corporation
("MWFC"), Mountain Receivables Corporation ("MRC") and NationsBank of
Delaware N.A. ("NB"), CB&T as Purchaser would acquire certain credit card
accounts and related receivables from MWFC, MRC and NB (MWFC, MRC and NB are
sometimes referred to herein collectively as "Sellers") and, simultaneously
with closing any such acquisition CB&T would transfer the receivable so
acquired to CompuCredit Acquisition. Such agreement as may be entered into
among CB&T, CompuCredit Acquisition and the Sellers relating to any such
transaction is referred to herein as the "Sale and Purchase Agreement". Any
interim servicing agreement providing for servicing of the acquired credit
card accounts and related receivables prior to conversion of same to CB&T's
system, any assignment and assumption agreement, and any other agreements and
instruments (except for this Amendment) to which CB&T may become a party in
connection with the proposed acquisition of credit card accounts and related
receivables, are hereinafter referred to collectively as the "Related
Agreements".
B. This Amendment sets forth certain agreements between CB&T,
CompuCredit and CompuCredit Acquisition (i) with respect to the sale of
receivables to CompuCredit Acquisition by CB&T should CB&T close the purchase
from Sellers of such receivables and the related credit card accounts, (ii)
with respect to the addition of CompuCredit Acquisition as a party to the
Affinity Agreement and the status under the Affinity Agreement of such
receivables and the related credit card accounts, if so acquired; and future
receivables arising pursuant thereto following such closing, and (iii)
otherwise pertaining to the respective rights and obligations of CB&T,
CompuCredit and CompuCredit Acquisition.
NOW THEREFORE, for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, CB&T, CompuCredit and CompuCredit
Acquisition agree as follows:
1. CB&T, CompuCredit and CompuCredit Acquisition agree that
CompuCredit Acquisition, upon its execution of this Amendment, is added as a
party to the Affinity Agreement, and that CompuCredit and CompuCredit
Acquisition shall be jointly and severally liable for all obligations of
either CompuCredit or CompuCredit Acquisition, or both, under the Affinity
Agreement as herein
<PAGE>
amended, regardless of whether such obligations are referred to as the
obligations of CompuCredit or of CompuCredit Acquisition or of both.
2. (a) In the event CB&T purchases credit card accounts ("Acquired
Accounts") and related receivables ("Acquired Receivables") pursuant to the
Sale and Purchase Agreement and the Assignment and Assumption Agreement
referred to therein, CompuCredit Acquisition hereby irrevocably and
unconditionally agrees that it shall, at the Closing of said purchase and
simultaneously therewith, conclude the purchase from CB&T of 100% of CB&T's
interest in the Acquired Receivables so acquired from Sellers, paying CB&T
as the purchase price therefor, in immediately available funds, an amount
equal to 100% of the purchase price required to be paid by CB&T at such
Closing to the Sellers as the purchase price for the Acquired Receivables,
the Acquired Accounts and any other assets acquired by CB&T from Sellers at
Closing.
(b) At CB&T's option, CompuCredit Acquisition's payment of the
purchase price as described in Section 2(a) above shall either by by wire
transfer to CB&T's account or wire transfer directly to the accounts of
Sellers in payment of the portion of the purchase price due from CB&T to each
Seller in connection with the Closing of the Sale and Purchase Agreement.
(c) The Acquired Accounts, and any other assets acquired by CB&T
pursuant to the Sale and Purchase Agreement (except the Acquired
Receivables), shall remain the property of CB&T. The Acquired Accounts, the
Acquired Receivables, and receivables arising on or after the Closing date
pursuant to the Acquired Accounts, shall, commencing as of the Closing Date,
be subject to the terms of the Affinity Agreement to the extent hereinafter
specified in this Amendment.
3. At the Closing, upon consummation of the purchase by CB&T from
Sellers and the payment by CompuCredit Acquisition of the purchase price due
CB&T with respect to the sale of Acquired Receivables by CB&T to CompuCredit
Acquisition, CB&T and CompuCredit Acquisition shall execute and deliver an
assignment and any other instruments as may be requested by CB&T, each in
form and substance satisfactory to CB&T, reflecting such sale to CompuCredit
Acquisition, of all of CB&T's interest in the Acquired Receivables.
Upon completion of the post-Closing settlement between CB&T and
Sellers (including, without limitation, any repurchase of Accounts pursuant
to Section 7.1 of the Sale and Purchase Agreement) adjusting the Purchase
Price under the Sale and Purchase Agreement, a like adjustment shall be made
in the purchase price paid by CompuCredit Acquisition to CB&T hereunder for
the Acquired Receivables and CompuCredit Acquisition or CB&T, as the case may
be, shall remit the amount of the adjustment to the other.
2
<PAGE>
4. CB&T hereby covenants and agrees with CompuCredit and CompuCredit
Acquisition as follows:
(a) CB&T shall provide an opinion of counsel dated as of the date of
the Sale and Purchase Agreement and relating to same, and an
opinion of counsel dated as of the date of the Interim Servicing
Agreement and relating to same, both in substantially the form
attached hereto as EXHIBIT A.
(b) CB&T shall provide an opinion of counsel dated as of the Closing
Date and addressed to CompuCredit Acquisition, and to such other
CompuCredit Acquisition may reasonably request or as may
reasonably be required to facilitate the closing of CompuCredit
Acquisition's securitization transaction (the "Securitization")
relating to CompuCredit Acquisition's interest in the Acquired
Receivables and other Credit Card Receivables arising pursuant
to the Acquired Accounts and sold from time to time by CB&T to
CompuCredit Acquisition; such opinion to be in form and
substance mutually agreed upon between CB&T and CompuCredit
Acquisition and relating to
(i) CB&T's due organization and good standing as a Georgia
state-chartered bank, and
(ii) CB&T's corporate power and authority to enter into and
perform its obligations under the Receivables Purchase
Agreement (as hereinafter defined), and
(iii) the due authorization, execution and delivery by CB&T
of the Receivables Purchase Agreement, and
(iv) CB&T's corporate power and authority to enter into and
perform its obligations under the Subservicer Letter
Agreement (as hereinafter defined); and
(v) the due authorization, execution and delivery by CB&T
of the Subservicer Letter Agreement, and
specifying, to such counsel's knowledge, whether
(vi) no consent, approval, authorization or order of any
governmental agency or body was or is required for the
execution and delivery by CB&T of the Receivables
3
<PAGE>
Purchase Agreement or the performance by CB&T of its
obligations thereunder, except such as have been
obtained and the filing of Uniform Commercial Code
financing statements relating to the Purchased Assets
(as such term is defined in the Receivables Purchase
Agreement); and
(vii) neither the execution and delivery of the Receivables
Purchase Agreement by CB&T nor the performance by CB&T
of the transactions therein contemplated, nor the
fulfillment of the terms thereof by CB&T did or will (A)
result in any violation of any statute or regulation or
any order or decree of any court or governmental
authority binding upon CB&T or its property, or (B)
conflict with, or result in a breach or violation of any
term or provision, or result in a default under any of
the terms and provisions, of CB&T's articles of
incorporation or by-laws or any material indenture, loan
agreement known to such counsel to which CB&T is a
party or by which CB&T is bound; and
(viii) there are no legal governmental proceedings pending (or,
if to such counsels's knowledge any are pending, listing
same) to which CB&T is a party or subject which,
individually or in the aggregate would have a material
adverse effect on the ability of CB&T to perform its
obligations under the Receivables Purchase Agreement, or
which assert the invalidity thereof, or which seek to
prevent any of the transactions contemplated thereby.
(c) Notwithstanding anything else to the contrary, CB&T hereby
consents to the transfer and assignment of all of its interest in
the Acquired Assets and its rights and obligations under the Sale
and Purchase Agreement and this Agreement to any third party
designated by CompuCredit or CompuCredit Acquisition; provided,
however, that such assignment shall not affect the rights of CB&T
for any indemnification.
(d) CB&T agrees, in connection with the Securitization,
4
<PAGE>
(i) to execute and deliver a receivables purchase agreement
("Receivables Purchase Agreement"), and
(ii) to execute and deliver a subservicer letter agreement
("Subservicer Letter Agreement"),
in each case in substantially the form as the comparable document
executed by CB&T on August 29, 1997, but both revised (i) to omit
any representation or warranty of the kind captioned "Compliance"
in the August 29, 1997 document, with respect to any matter or
condition (regardless of when asserted or discovered) wholly or
partly relating to, or having its origins in, the period prior to
the Closing of the Sale and Purchase Agreement, (ii) to make clear
that the term "such property as used in Section 4.02(a)(iv) of the
Receivables Purchase Agreement refers only to CB&T's right, title
and interest in the indicated items, (iii) to specify that the
representations concerning freedom of any Transferred Interest or
Receivable from any Lien shall refer only to Liens created by CB&T,
(iv) to reflect in any other representations or warranties of CB&T
any changed circumstances the failure to reflect which would make
such representation or warranty untrue as of the date of execution
of such Receivables Purchase Agreement, and (v) in such other
respects as CB&T and CompuCredit Acquisition may mutually agree for
the purpose of facilitating the Securitization.
(e) Upon the reasonable request of CompuCredit or CompuCredit
Acquisition, CB&T agrees to cooperate with and assist CompuCredit
and CompuCredit Acquisition in consummating the Securitization,
such cooperation and assistance to be provided at the expense of
CompuCredit and CompuCredit Acquisition.
5. Commencing following the Closing of the purchase by CompuCredit
Acquisition from CB&T of the Acquired Receivables,
(a) "Credit Card Receivables" as defined in the Affinity Agreement
shall include all amounts owning to CB&T on the Acquired Accounts
including, without limitation, principal balances from
outstanding purchases and cash advances, accrued finance charges,
late charges, returned check charges and any other charges and
fees, whether or not billed,
5
<PAGE>
as of the close of business on a given day, less any payments
and credits received in respect of the Acquired Accounts prior
to the close of business on such day,
(b) each of the Acquired Accounts shall be considered a "Credit
Card Account" or "Account" pursuant to the Affinity Agreement,
(c) each credit card associated with the Acquired Accounts shall be
considered a "Credit Card" or "Card" pursuant to the Affinity
Agreement,
(d) each individual in whose name an Acquired Account is established
shall be considered a "Cardholder" under the Affinity Agreement,
(e) each agreement between CB&T and a Cardholder for the extension
of credit in connection with an Acquired Account shall be
considered a "Cardholder Agreement" under the Affinity Agreement,
and
(f) the net outstanding book principal balances of new purchases and
cash advances made on the Acquired Accounts on and after the
Closing Date shall be considered "Program Receivables" pursuant
to the Affinity Agreement,
and, as such, each of the foregoing shall be subject to the various
agreements of the parties applicable thereto pursuant to those terms and
conditions of the Affinity Agreement as are not inconsistent with the terms
of this Amendment, but the terms of this Amendment shall control to the
extent of any inconsistency; provided, however, that any receivables arising
in the Acquired Assets will be purchased by CompuCredit Acquisition.
6. Notwithstanding any provision of the Affinity Agreement or of the
Sale and Purchase Agreement or any Related Agreement to the contrary, except
as expressly stated below in Section 8:
(a) the Credit Card Receivables consisting of the Acquired
Receivables sold by CB&T to CompuCredit Acquisition at the
Closing shall be sold without recourse to CB&T; and
(b) Program Receivables and any other Credit Card Receivables
arising pursuant to the Acquired Accounts and sold from time to
time by CB&T to CompuCredit Acquisition or to any third party
designated by CompuCredit or CompuCredit Acquisition, shall be
so sold without recourse to CB&T; and
(c) Any Acquired Accounts as may be sold by CB&T to CompuCredit
Acquisition or to any third party designated by
6
<PAGE>
CompuCredit or CompuCredit Acquisition, shall be so sold without recourse to
CB&T; and
(d) CB&T makes no representation or warranty and shall have no
obligation to CompuCredit or CompuCredit Acquisition (including but not
limited to any obligation to indemnify or hold harmless CompuCredit or
CompuCredit Acquisition or any other person), (i) with respect to any matter
or condition (regardless of when asserted or discovered) wholly or partly
relating to, or having its origins in, the period prior to the Closing of the
Sale and Purchase Agreement, or (ii) with respect to any other matter to
which the indemnification obligations of CompuCredit and CompuCredit
Acquisition under Section 7 below are applicable.
7. Notwithstanding any provision of the Affinity Agreement or of
the Sale and Purchase Agreement or any Related Agreement to the contrary,
CompuCredit and CompuCredit Acquisition hereby jointly and severally agree to
indemnify and hold harmless, CB&T and its parent and affiliated corporations,
and each of their directors, officers, employees, agents and affiliates and
permitted assigns (the "Indemnified CB&T Parties"), from and against any and
all existing and future claims, demands, fines, taxes, penalties, damages,
liabilities, losses (which shall include, but not be limited to, all "Losses"
as that term is defined in the existing indemnification provisions of the
Affinity Agreement), costs, and expenses of any kind whatsoever (including
but not limited to reasonable attorneys' and accountants' fees), arising out
of or relating to the Sale and Purchase Agreement or any Related Agreements
or any of the transactions contemplated therein or herein or any of the
Acquired Accounts or Acquired Receivables or any other receivables related to
the Acquired Accounts, and including, without limiting the generality of the
foregoing:
(a) taxes of any kind (including but not limited to "Taxes" as
defined in the Sale and Purchase Agreement), whether accruing under the terms
of the Sale and Purchase Agreement or any Related Agreements, or as a result
of any of the transactions contemplated therein or herein;
(b) any obligations of CB&T paid or incurred pursuant to the
Sale and Purchase Agreement or any of the Related Agreements, and any claims,
defenses or offsets of any kind asserted by any of the Sellers, or by any
other person, under or in connection with the Sale and Purchase Agreement, or
under or in connection with any Related Agreements, and including without
limitation claims asserted under or in respect of any provisions pursuant to
which CB&T assumes any liabilities or makes any representations or
warranties or agrees to provide indemnification or otherwise undertakes any
obligation;
(c) claims, defenses or offsets of any kind asserted by or on
behalf of any cardholders or guarantors under any of the
7
<PAGE>
Acquired Accounts;
(d) claims or demands of regulatory or administrative agencies
with respect to the Sale and Purchase Agreement or any Related Agreements or
the transactions contemplated therein or herein (except to the extent CB&T
shall have breached any of its representations set forth in Section 8 hereof
and the claim or demand of the regulatory or administrative agency directly
results from the state of affairs to which such breach relates), or with
respect to any of the Acquired Accounts;
(e) any losses on any of the Acquired Accounts or Acquired
Receivables or any other receivables related to the Acquired Accounts,
including but not limited to credit losses and fraud losses; and
(f) conversion costs and expenses, and any other costs and
expenses incurred under or in connection with the negotiation, execution,
delivery and performance of the Sale and Purchase Agreement and any Related
Agreements;
provided, however, that neither CompuCredit nor CompuCredit Acquisition
shall have any obligation to indemnify any CB&T Indemnified Party for a loss
amount claimed under this Section 7 if CB&T shall have breached any of its
representations set forth in Section 6 of this Amendment and the loss in
question directly results from the state of affairs to which such breach
relates.
The indemnification provided for in this Section 7 shall be in
addition to, and not in limitation of, any indemnification obligations of
CompuCredit or CompuCredit Acquisition under the existing provisions of the
Affinity Agreement. Further, CB&T, at its option, may elect to have the
section of the Affinity Agreement entitled "Procedures for Indemnification"
apply to any and all matters for which indemnification is provided pursuant
to this Section 7.
CompuCredit and CompuCredit Acquisition shall provide copies of
their financial statements to CB&T on a quarterly basis.
8. CB&T represents to CompuCredit and CompuCredit Acquisition that,
as of the time of execution and delivery by CB&T of the Sale and Purchase
Agreement:
(a) CB&T is a state-chartered bank, validly existing and in good
standing under the laws of the State of Georgia.
(b) CB&T has all necessary corporate power and authority to
enter into the Sale and Purchase Agreement, and the
Assignment and Assumption Agreement and Interim Servicing
Agreement referred
8
<PAGE>
to therein, and to perform all of the obligations to be performed by
it under said Agreements. The Sale and Purchase Agreement,
Assignment and Assumption Agreement and Interim Servicing Agreement
and the consummation by CB&T of the transactions contemplated
thereby have been duly and validly authorized by all necessary
corporate action of CB&T. The Sale and Purchase Agreement has been
duly executed and delivered by CB&T. The Sale and Purchase
Agreement, Assignment and Assumption Agreement and Interim Servicing
Agreement, once duly executed and delivered by all parties thereto,
shall constitute the valid and binding obligations of CB&T,
enforceable against CB&T in accordance with their respective terms
(except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium, receivership,
conservatorship, the rights and obligations of receivers and
conservators of insured depository institutions under 12 U.S.C.
Section 1821(d) and (e) and other laws relating to or affecting
creditors' rights generally and by general equity principles).
(c) To CB&T's knowledge, neither the execution and delivery of the Sale
and Purchase Agreement, and the Assignment and Assumption Agreement
and Interim Servicing Agreement referred to therein, by CB&T nor the
consummation of the transactions contemplated thereby by CB&T will
(i) conflict with, result in the breach of, constitute a default
under, or accelerate the performance required by, the terms of any
order, law, regulation, contract, instrument or commitment to which
CB&T is a party or by which CB&T is bound, (ii) violate the
organizational document of CB&T, (iii) require any consent,
approval, authorization or filing (other than UCC filings) under any
law, regulation, judgment, order, writ, decree, permit or license to
which CB&T is a party or by which CB&T is bound, or (iv) require the
consent or approval of any other party to any contract, instrument
or commitment to which CB&T is a party or by which CB&T is bound,
other than the approvals of regulatory authorities, if any, which
have been obtained or will be obtained prior to or on the Closing
Date of the Sale and Purchase Agreement. To CB&T's knowledge, CB&T
is not subject to any agreement or understanding with any regulatory
authority which would prevent the consummation by CB&T of the
transactions contemplated by the Sale and Purchase Agreement and the
Assignment and Assumption
9
<PAGE>
Agreement and Interim Servicing Agreement referred to therein.
(d) CB&T 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 the Sale and
Purchase Agreement or the transactions contemplated thereby
which would give rise to any valid claim against the Sellers
under the Sale and Purchase Agreement for any brokerage
commission or finder's fee or like payment.
(e) To CB&T's knowledge, there is no federal or state statute, rule
or regulation, or order or rule of any federal or state
regulatory agency, which would prevent CB&T from purchasing the
Acquired Accounts or Acquired Receivables or other assets to be
acquired by CB&T pursuant to the Sale and Purchase Agreement.
(f) CB&T is qualified to participate in, and is a member in good
standing of, the MasterCard credit card programs.
As used in the foregoing representations, CB&T's knowledge refers to the
actual knowledge of any of CB&T's officers; accordingly, for all purposes of
this Amendment representations made above "To CB&T's knowledge" shall be
deemed to have been breached only if the matters so represented are not true
within the actual knowledge of said officers at the time as of which such
representations are made as hereinabove set forth.
9. The provisions of this Amendment shall survive the execution,
delivery and termination or expiration of the Sale and Purchase Agreement and
any Related Agreements, the Closing of the Sale and Purchase Agreement, the
sale by CB&T of the Acquired Receivables to CompuCredit Acquisition, the
execution, delivery, and termination or expiration of the Receivables
Purchase Agreement and Subservicer Letter Agreement and any related
transactions, the execution, delivery and termination or expiration of any
other transactions relating to the securitization or other disposition of any
of the Acquired Assets or any receivables arising on or after the Closing
date pursuant to the Acquired Accounts, the conversion of Acquired Accounts
to CB&T's system, and the expiration or termination of the Affinity Agreement.
10. In the event of any inconsistency between any provisions of this
Amendment and any provisions of:
(a) the existing Affinity Agreement, or
10
<PAGE>
(b) the Sale and Purchase Agreement, or
(c) any of the Related Agreements, or
(d) any other agreements to which CB&T and/or CompuCredit or
CompuCredit Acquisition may now or hereafter be a party to
the extent such agreements affect any matters which are the
subject of Sections 6, 7 and 9 of this Amendment,
the provisions of this Amendment shall control to the extent of such
inconsistency.
11. The invalidity or unenforceability of any provision of this
Amendment shall not affect the validity or enforceability of any other
provision.
12. Except as herein amended, the Affinity Agreement shall continue
in effect in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of the date set forth above.
COLUMBUS BANK AND TRUST COMPANY COMPUCREDIT CORPORATION
By: /s/ N. Fraser Cruickshank By: /s/ Brett M. Samsky
----------------------------- ---------------------------
N. Fraser Cruickshank Brett M. Samsky
Vice President Chief Financial Officer
COMPUCREDIT ACQUISITION CORPORATION
By: /s/ Brett M. Samsky
-----------------------------
Brett M. Samsky
Chief Financial Officer
11
<PAGE>
EXHIBIT A
CompuCredit Acquisition Corporation
_________________________________
_________________________________
Ladies and Gentlemen:
I am Deputy General Counsel of Synovus Financial Corp., the parent
company of Columbus Bank and Trust Company, a state bank chartered under the
laws of the State of Georgia ("CB&T"). This opinion is being provided to you
in connection with the Sale and Purchase Agreement ("Sale and Purchase
Agreement"), dated as of ____________________, 1998 by and among MountainWest
Financial Corporation ("MWFC"), Mountain Receivables Corporation, NationsBank
of Delaware N.A., CompuCredit Acquisition Corporation ("CAC"), and CB&T.
As the basis for rendering the following opinions, I, or attorneys under
my supervision, have examined, or caused to be examined, a copy of the Sale
and Purchase Agreement and originals or copies certified or otherwise
identified to my satisfaction of such certificates, records, other agreements
and instruments and documents as I, or such attorneys, have deemed necessary
or advisable. In such examination, the genuineness of all signatures (other
than those of CB&T), the authenticity of all documents submitted as originals
and the conformity to the originals of all documents submitted as copies have
been assumed. Also, as to matters of fact expressed herein, I have relied
upon statements, representations or certificates of the responsible officers
of CB&T and public officers.
I have assumed that all parties to the Sale and Purchase Agreement other
than CB&T have the power and authority to enter into and perform their
obligations under the Sale and Purchase Agreement, respectively, and that the
Sale and Purchase Agreement was duly authorized, executed and delivered by,
and constitutes the legal, valid and binding obligation of each of the
parties thereto, other than CB&T, enforceable against such parties in
accordance with its terms.
In this opinion, the phrase "to my knowledge" refers to my actual
knowledge or to the actual knowledge of an attorney under my supervision in
connection with our review of the Sale and Purchase Agreement and the
information, inquiries and investigations described in the preceding
paragraphs.
In giving the opinions set forth below, you should note that I am a member
of the bar of the State of Georgia and I express no opinion other than under
the laws of the State of Georgia and the Federal laws of the United States of
America.
Based on the foregoing, I am of the opinion that:
12
<PAGE>
(i) CB&T is a Georgia state-chartered bank in good standing, duly
organized and validly existing under the laws of the State of Georgia;
(ii) CB&T had and has full corporate power and authority to enter into
and perform its obligations under the State and Purchase Agreement;
(iii) the Sale and Purchase Agreement has been duly authorized, executed
and delivered by CB&T;
(iv) to my knowledge, no consent, approval, authorization or order of
any governmental agency or body was or is required for the execution and
delivery by CB&T of the Sale and Purchase Agreement or the performance by
CB&T of its obligations thereunder, except such as have been obtained and the
filing of Uniform Commercial Code financing Statements;
(v) to my knowledge, neither the execution and delivery of the Sale and
Purchase Agreement by CB&T nor the performance by CB&T of the transactions
therein contemplated, nor the fulfillment of the terms thereof by CB&T did
or will (A) result in any violation of any statute of regulation or any order
or decree of any court or governmental authority binding upon CB&T or its
property, or (B) conflict with, or result in a breach or violation of any
term or provision, or result in a default under any of the terms and
provisions, of CB&T's articles of incorporation or by-laws or any material
indenture, loan agreement or other material agreement known to me to which
CB&T is a party or by which CB&T is bound;
(vi) to my knowledge, there are no legal or governmental proceedings
pending to which CB&T is a party or subject which, individually or in the
aggregate, would have a material adverse effect on the ability of CB&T to
perform its obligations under the Sale and Purchase Agreement, or which
assert the invalidity thereof, or which seek to prevent any of the
transactions contemplated thereby.
My opinions are subject to: (a) limitations imposed by bankruptcy,
insolvency, reorganization, arrangement, fraudulent conveyance, moratorium,
or other laws relating to or affecting the rights of creditors generally, (b)
general principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or in law; (c) the unenforceability of
rights to indemnification and contribution which may be limited by applicable
law or equitable principles or as otherwise may be unenforceable as against
public policy; and (d) the unenforceability under certain circumstances of
provisions imposing penalties, forfeitures, late payment charges or an
increase in interest rate upon delinquency in payment or the occurrence of any
event of default.
13
<PAGE>
This opinion is solely for your benefit and may not be relied upon or
used by, circulated, quoted or referred to, nor may copies hereof be
delivered to, any person without my prior written approval. I disclaim any
obligation to update this opinion letter for events occurring or coming to our
attention after the date hereof.
Very truly yours,
Kathleen Moates
<PAGE>
Exhibit 21.1
Subsidiaries of the Registrant
<TABLE>
<CAPTION>
Name State of Incorporation
---- ----------------------
<S> <C>
CompuCredit Funding Corp. Georgia
CompuCredit Acquisition Corporation Georgia
CompuCredit Acquisition Funding Corp. Georgia
</TABLE>
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the captions "Summary Financial
Information and Operating Data", "Selected Consolidated Financial Data", and
"Experts" and to the use of our report dated July 23, 1998, in the
Registration Statement (Form S-1 No. 333-00000) and related Prospectus of
CompuCredit Corporation for the registration of 000,000 shares of its common
stock.
/s/ ERNST & YOUNG LLP
Atlanta, Georgia
August 27, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
FINANCIAL STATEMENTS COMPUCREDIT CORPORATION AND SUBSIDIARIES FOR THE PERIOD
ENDED JUNE 30, 1998 AND THE YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<CIK> 0001068199
<NAME> COMPUCREDIT CORPORATION
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> JUN-30-1998 DEC-31-1997
<CASH> 2,327,485 1,677,565
<SECURITIES> 0 0
<RECEIVABLES> 18,776,992 14,955,607
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0<F1> 0<F1>
<PP&E> 1,441,668 756,164
<DEPRECIATION> (244,855) (79,228)
<TOTAL-ASSETS> 57,600,100 20,215,099
<CURRENT-LIABILITIES> 0<F1> 0<F1>
<BONDS> 0 0
0 0
20,000,000 20,000,000
<COMMON> 0 0
<OTHER-SE> 13,362,247 (872,771)
<TOTAL-LIABILITY-AND-EQUITY> 57,600,100 20,215,099
<SALES> 0 0
<TOTAL-REVENUES> 27,887,368 4,667,774
<CGS> 0 0
<TOTAL-COSTS> 5,145,350 3,971,311
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 1,421,553
<INTEREST-EXPENSE> 0<F2> 0<F2>
<INCOME-PRETAX> 22,742,018 (725,090)
<INCOME-TAX> 8,507,000 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 14,235,018 (725,090)
<EPS-PRIMARY> 6.47 (0.65)
<EPS-DILUTED> 0<F3> 0<F3>
<FN>
<F1>THE CONSOLIDATED BALANCE SHEET INCLUDED IN THE REGISTRANT'S FORM S-1 IS
UNCLASSIFIED.
<F2>INTEREST EXPENSE IS CONSIDERED AN OPERATING EXPENSE FOR THE REGISTRANT,
AS ONE OF THE REGISTRANT'S PRIMARY SOURCES OF INCOME IS INTEREST EARNED ON
SECURITIZED CREDIT CARD LOANS.
<F3>EPS ON A DILUTED BASIS IS NOT PRESENTED.
</FN>
</TABLE>
