<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _________.
0-26019
------------------------
(Commission File Number)
NEXTCARD, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 68-0384-606
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
595 MARKET STREET, SUITE 1800, SAN FRANCISCO, CALIFORNIA 94105
(Address of Principal Executive Offices) (Zip Code)
(415) 836-9700
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ ] No [X]
As of July 31, 1999, there were 45,951,911 shares of the registrant's Common
Stock, par value $.001 per share outstanding, of which 3,660,110 were nonvoting.
<PAGE> 2
NEXTCARD, INC. AND SUBSIDIARY
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1999
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C>
ITEM 1. Financial Statements (unaudited):
Condensed Balance sheets.................................... 3
Condensed Consolidated Statements of
Operations.................................................. 4
Condensed Consolidated Statements of Changes
in Stockholders' Equity..................................... 5
Condensed Consolidated Statements of Cash Flows............. 6
Notes to Condensed Consolidated Financial
Statements.................................................. 7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................. 11
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk........ 32
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................. 33
Item 2. Changes in Securities and Use of Proceeds.......................... 33
Item 3. Defaults Upon Senior Securities Holders............................ 33
Item 4. Submission of Matters to a Vote of Security Holders................ 34
Item 5. Other Information.................................................. 34
Item 6. Exhibits and Reports on Form 8-K................................... 34
Signatures................................................................. 36
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NEXTCARD, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data) (Unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 131,327 $ 40,134
Cash and cash equivalents, restricted 8,600 --
Credit card loans receivable, less allowance for
loan losses 140,525 --
of $2,007 at June 30, 1999
Servicing and profit-and-loss sharing receivable -- 966
Prepaid loan fees 5,725 2,100
Equipment and leasehold improvements, net 6,002 2,102
Prepaid and other assets 1,376 240
------------- -------------
Total assets $ 293,555 $ 45,542
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Accounts payable $ 5,139 $ 3,366
Accrued expenses 4,231 1,242
Equipment loan 1,997 504
Other borrowings 10,000 --
Deferred revenue 484 493
Secured borrowings 126,629 --
------------- -------------
Total liabilities 148,480 5,605
------------- -------------
Stockholders' equity
Convertible preferred stock -- 33
Common stock 46 5
Additional paid-in capital 213,460 63,875
Deferred stock compensation (20,783) (6,000)
Notes receivable from stockholders (26) (26)
Accumulated deficit (47,622) (17,950)
------------- -------------
Total stockholders' equity 145,075 39,937
------------- -------------
Total liabilities and stockholders' equity $ 293,555 $ 45,542
============= =============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
NEXTCARD, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data) (Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income:
Cash and investments $ 905 $ 79 $ 1,185 $ 112
Credit card loans 2,126 -- 2,506 --
----------- ----------- ----------- -----------
Total interest income 3,031 79 3,691 112
Interest expense 1,866 1 2,513 1
----------- ----------- ----------- -----------
Net interest income 1,165 78 1,178 111
Provision for loan losses 1,047 -- 2,042 --
Net interest income (loss) after ----------- ------------ ----------- -----------
provision for loan losses 118 78 (864) 111
Non-interest income: ----------- ----------- ----------- -----------
Servicing and profit-and-loss sharing 136 130 340 164
Interchange fee 318 -- 414 --
Credit card fees and other 159 3 202 3
----------- ----------- ----------- -----------
Total non-interest income 613 133 956 167
Non-interest expenses: ----------- ----------- ----------- -----------
Salaries and employee benefits 5,288 1,349 8,597 2,138
Marketing and advertising 4,997 936 7,552 1,145
Credit card activation and servicing
costs 2,481 391 4,003 442
Occupancy and equipment 877 160 1,429 276
Professional fees 211 77 466 118
Amortization of deferred compensation 3,381 235 4,747 399
Amortization of loan structuring fee 1,743 -- 2,311 --
Other 443 133 659 204
----------- ----------- ----------- -----------
Total non-interest expenses 19,421 3,281 29,764 4,722
----------- ----------- ----------- -----------
Loss before income taxes (18,690) (3,070) (29,672) (4,444)
Provision for income taxes -- -- -- --
----------- ----------- ----------- -----------
Net loss $ (18,690) $ (3,070) $ (29,672) $ (4,444)
=========== =========== =========== ===========
Basic and diluted net loss per common
share $ (0.74) $ (1.03) $ (2.05) $ (1.53)
=========== =========== =========== ===========
Weighted average common shares used in
net loss per common share calculation 25,153 2,970 14,509 2,912
=========== =========== =========== ===========
Pro forma basic and diluted net loss
per common share $ (0.45) $ (0.17) $ (0.76) $ (0.30)
=========== =========== =========== ===========
Weighted average common shares used in
computing pro forma basic and
diluted net loss per common share 41,104 18,046 38,797 14,994
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
NEXTCARD, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollars in thousands, except per share data) (Unaudited)
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED
STOCK SERIES A-D COMMON STOCK
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1997 9,110,250 $ 9 4,894,875 $ 5
Issuance of convertible
preferred stock Series C 9,132,660 9
Return of convertible
preferred stock Series
A in settlement of
notes receivable (21,096)
Deferred stock
compensation
Amortization of deferred
stock compensation
Net loss
----------- ----------- ----------- -----------
BALANCES AT JUNE 30 ,1998 18,221,814 $ 18 4,894,875 $ 5
=========== =========== =========== ===========
BALANCES AT DECEMBER 31, 1998 32,625,734 $ 33 4,932,374 $ 5
Issuance of common stock
upon exercise of
warrants and options 1,466,622 1
Issuance of common stock
from IPO, net of
expenses 6,900,000 7
Issuance of common stock
warrants
Conversion of preferred
stock to common stock (32,625,734) (33) 32,625,734 33
Deferred stock
compensation
Amortization for deferred
stock compensation
Net loss
----------- ----------- ----------- -----------
BALANCES AT JUNE 30, 1999 -- $ -- 45,924,730 $ 46
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
ADDITIONAL DEFERRED NOTES TOTAL
PAID-IN STOCK RECEIVABLE FROM ACCUMULATED STOCKHOLDERS'
CAPITAL COMPENSATION STOCKHOLDERS DEFICIT EQUITY
----------- ------------ --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1997 $ 4,695 $ - $ (36) $ (1,886) $ 2,787
Issuance of convertible
preferred stock Series C 11,662 11,671
Return of convertible
preferred stock Series
A in settlement of
notes receivable (9) 9 --
Deferred stock
compensation 1,700 (1,700) --
Amortization of deferred
stock compensation 399 399
Net loss (4,444) (4,444)
----------- -------- ----------- ----------- -----------
BALANCES AT JUNE 30 ,1998 $ 18,048 $ (1,301) $ (27) $ (6,330) $ 10,413
=========== ======== =========== =========== ===========
BALANCES AT DECEMBER 31, 1998 $ 63,875 $ (6,000) $ (26) $ (17,950) $ 39,937
Issuance of common stock
upon exercise of
warrants and options 322 323
Issuance of common stock
from IPO, net of
expenses 127,040 127,048
Issuance of common stock
warrants 2,693 2,693
Conversion of preferred
stock to common stock --
Deferred stock
compensation 19,530 (19,530) --
Amortization for deferred
stock compensation 4,747 4,747
Net loss (29,672) (29,672)
----------- -------- ----------- ----------- -----------
BALANCES AT JUNE 30, 1999 $ 213,460 $(20,783) $ (26) $ (47,622) $ 145,075
=========== ======== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
NEXTCARD, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands, except per share data) (Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1999 1998
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (29,672) $ (4,444)
Adjustments to net loss to arrive at cash used in
operating activities:
Provision for loan losses 2,042 --
Deprecation and amortization 2,982 64
Amortization of deferred stock 4,747 399
Change in operating assets and liabilities:
(Increase) decrease in servicing and profit and
loss sharing 907 (163)
receivable
Decrease in receivable from third party processor -- 500
Increase in accounts payable 1,773 606
Increase in accrued expenses 2,989 390
Increase in prepaid and other assets (4,528) (14)
--------- ---------
Net cash used in operating activities (18,760) (2,662)
--------- ---------
INVESTING ACTIVITIES:
Net loans originated or collected (142,566) --
Purchase of equipment and leasehold improvements (4,375) (509)
--------- ---------
Net cash used in investing activities (146,941) (509)
--------- ---------
FINANCING ACTIVITIES:
Net change in secured borrowings 126,629 --
Proceeds from other borrowings 10,000 --
Proceeds from issuance of convertible preferred stock -- 11,671
Proceeds from issuance of common stock, net 127,372 --
Proceeds from equipment loan 1,659 --
Payments made on equipment loan (166) --
--------- ---------
Net cash provided by financing activities 265,494 11,671
--------- ---------
Net increase in cash and cash equivalents 99,793 8,500
Cash and cash equivalents at the beginning of the
period 40,134 2,840
--------- ---------
Cash and cash equivalents at the end of the period $ 139,927 $ 11,340
========= =========
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for interest $ 1,606 $ --
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Unearned stock based compensation $ 19,530 $ 1,700
Issuance of preferred stock warrants for loan
structuring/origination fee $ 2,693 --
Return of convertible preferred stock Series A -- $ 9
Issuance of convertible preferred stock Series C -- $ 11,671
</TABLE>
6
<PAGE> 7
NEXTCARD, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The consolidated financial statements include NextCard, Inc. and its wholly
owned subsidiary, NextCard Funding Corp. (collectively "the Company"). The
Company is an Internet-based provider of consumer credit.
INTERIM FINANCIAL STATEMENTS
The unaudited interim consolidated financial statements and related unaudited
financial information in the footnotes have been prepared in accordance with
generally accepted accounting principles and the rules and regulations of the
Securities and Exchange Commission (the "SEC") for interim financial statements.
Such interim financial statements reflect all adjustments consisting of normal
recurring adjustments which, in the opinion of management, are necessary to
present fairly the consolidated financial position of the Company and the
results of its operations and its cash flows for the interim periods. These
consolidated financial statements should be read in conjunction with the
financial statements and the notes thereto contained in the Form S-1
Registration Statement, as amended, filed with the SEC in connection with the
Company's initial public offering ("IPO"). The nature of the Company's business
is such that the results of any interim period may not be indicative of the
results to be expected for the entire year.
All significant intercompany transactions and balances have been eliminated.
Certain reclassifications have been made to prior year financial statements to
conform to the 1999 presentation.
2. INITIAL PUBLIC OFFERING
On May 19, 1999, the Company completed its IPO, in which it sold 6.9 million
shares of its common stock at a price of $20.00 per share, raising $138.0
million in gross proceeds. Offering proceeds to the Company, net of
approximately $9.7 million in aggregate underwriters discounts and commissions
and $1.3 million in related expenses, were approximately $127.0 million.
Immediately prior to the closing of the IPO, the Company's stock split 4.5
shares for every one share of common stock then outstanding. Simultaneously with
the closing of the IPO, each outstanding share of the Company's preferred stock
automatically converted into 4.5 shares of common stock. In addition, the
Company reincorporated from California to Delaware. All share and per share data
in the accompanying financial statements have been restated to reflect the
conversion, the stock split and the reincorporation.
7
<PAGE> 8
3. EARNINGS PER SHARE
Basic net loss per common share and diluted net loss per common share are
presented in conformity with Statement of Financial Accounting Standards No.
128, "Earnings Per Share" ("FAS 128"), for all periods presented. In accordance
with FAS 128, basic and diluted net loss per common share has been computed
using the weighted-average number of shares of common stock outstanding during
the period, less shares subject to repurchase. Shares associated with stock
options and convertible preferred stock are not included because their inclusion
would be antidilutive (i.e., reduce the net loss per share). Pro forma basic and
diluted net loss per common share has been computed as described above, and also
gives effect, under SEC guidance, to the conversion of the convertible preferred
stock (using the if-converted method) from the original date of issuance.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
----------------------- -----------------------
(Dollars in thousands, except per share data) 1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net loss available to common stockholders $(18,690) $ (3,070) $(29,672) $ (4,444)
======== ======== ======== ========
Basic and diluted:
Weighted average shares of common
stock outstanding 26,128 4,895 15,542 9,844
Less: Weighted average shares subject
to repurchase (975) (1,925) (1,033) (6,932)
-------- -------- -------- --------
Weighted average shares used in
computing basic and diluted net
loss per common shares 25,153 2,970 14,509 2,912
======== ======== ======== ========
Basic and diluted net loss per shares $ (0.74) $ (1.03) $ (2.05) $ (1.53)
======== ======== ======== ========
Pro forma:
Net loss $(18,690) $ (3,070) $(29,672) $ (4,444)
======== ======== ======== ========
Shares used above 25,153 2,970 14,509 2,912
Pro forma adjustment to reflect
weighted effect of assumed
conversion of convertible preferred
stock 15,951 15,076 24,288 12,082
-------- -------- -------- --------
Shares used in computing pro forma
basic and diluted net loss per
common share 41,104 18,046 38,797 14,994
======== ======== ======== ========
Pro forma basic and diluted net loss
per common share $ (0.45) $ (0.17) $ (0.76) $ (0.30)
======== ======== ======== ========
</TABLE>
8
<PAGE> 9
4. ALLOWANCE FOR LOAN LOSSES
The activity in the allowance for loan losses for the six month period ended
June 30, 1999 is as follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
<S> <C>
Balance at January 1, 1999 $ --
Provision for loan losses 2,042
Charge-offs (35)
-------
Balance at June 30, 1999 $ 2,007
=======
</TABLE>
5. CREDIT FACILITIES AND SECURED BORROWINGS
In May 1999, the Company entered into a $5.0 million line of credit with a
finance company. Borrowings under the line of credit accrue interest at 12.25%
per year, are repayable in 36 monthly installments of principal and interest
through April 2002 and are secured by a subordinated security interest in all
tangible and intangible assets. This line of credit had an outstanding balance
of $5.0 million at June 30, 1999.
Until January 12, 1999, Heritage Bank of Commerce ("Heritage") funded all of the
credit card accounts and loans originated through the Company's website.
Beginning January 1999, the Company began purchasing such credit card
receivables from Heritage. Until May 21, 1999, the Company utilized a $100.0
million secured borrowing facility extended to NextCard Funding Corp., by Credit
Suisse First Boston ("Credit Suisse") to fund the majority of those receivables.
On May 21, 1999, the Company executed a $300.0 million commercial paper conduit
facility through Barclays Bank PLC and began utilizing this facility to purchase
credit card receivables. Borrowings under the facility are secured by the
purchased receivables. The Company also used a portion of the Barclays facility
to pay off the $87.8 million balance then outstanding under the Credit Suisse
facility. As of June 30, 1999, $126.6 million was outstanding under this
facility.
In addition, on June 23, 1999, the Company entered into a similar facility with
ING Barings (U.S.) Capital Markets LLC. This facility amount is $150.0 million,
and the Company's borrowings are secured by all credit card receivables that may
be purchased by using funds from this facility. As of June 30, 1999, there were
no amounts outstanding under the ING Barings facility.
9
<PAGE> 10
6. SUBSEQUENT EVENTS
On July 15, 1999, the Company exercised its option to purchase all remaining
credit card receivables from Heritage for an aggregate purchase price of $22.2
million.
On August 4, 1999, the Company signed a definitive agreement to acquire Textron
National Bank ("TNB"), a wholly owned indirect subsidiary of Textron
Corporation, for $3.0 million (plus TNB's net book value of approximately $2.0
million), with additional $1.0 million payments on each of September 30, 2000
and September 30, 2001. TNB has not actively engaged in the banking business for
several years, and at the closing will hold a maximum of $2.6 million of cash
and cash-equivalents and a single deposit liability of not more than $600,000.
Under the terms of the agreement, TNB will, at the closing, convert into a
national bank limited to credit card operations and change its name to
"NextBank, National Association" ("NextBank"). As soon as practicable following
the closing, the Company intends to cause NextBank to become a member of the
Visa system and commence the issuance of NextCard Visa cards, with the NextCard
accounts held by NextBank. The credit card receivables generated from these
accounts will be funded, in part, by accepting customer deposits. The closing of
the transaction is subject to regulatory approval and the satisfaction of
certain other conditions.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This quarterly report contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements include
statements regarding intent, belief or current expectations of the Company and
its management. In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "should," "expect," "plan," "anticipate,"
"believe," "estimate," "predict," "potential" or "continue," the negative of
such terms or other comparable terminology. These statements are only
predictions. Actual events or results may differ materially. Stockholders and
prospective investors are cautioned that any such forward-looking statements are
not guarantees of future performance and involve a number of risks and
uncertainties that may cause the Company's actual results to differ materially
from the results discussed in the forward-looking statements. Among the factors
that could cause actual results to differ materially from those indicated by
such forward-looking statements are those factors discussed below.
OVERVIEW
The Company is a leading Internet-based provider of consumer credit. The Company
was the first to offer an online approval system for a Visa(R) card and to
provide interactive, customized offers for credit card applicants.
The Company combines expertise in consumer credit, an exclusive Internet focus
and sophisticated direct marketing techniques with the aim of attracting
profitable customer segments on the Internet. The Company's product, the
NextCard(R) Visa, which the Company calls the First True Internet Visa, is
marketed to consumers exclusively through its website, www.nextcard.com. The
Company offers credit card customers a unique combination of convenience,
customization, shopping enhancements and online customer service. The NextCard
Visa can be used for both online and offline purchases.
EARNINGS SUMMARY
Net loss for the three months ended June 30, 1999, was $18.7 million, or $0.45
per pro forma share, up 503% from $3.1 million, or $.17 per pro forma share, for
the second quarter of 1998. The increase in net loss is the result of increases
in interest expense, the provision for loan losses and other operating expenses.
These increases were partially offset by increases in net interest income and
other operating income. These increases are largely attributable to the growth
in average managed loans to $127.6 million for the second quarter 1999 from $5.2
million for the second quarter 1998.
Net loss for the six months ended June 30, 1999, was $29.7 million, or $0.76 per
pro forma share, up 575% from $4.4 million, or $0.30 per pro forma share, for
the six months ended June 30, 1998. The increase in net loss is the result of
increases in interest expense, the provision for loan losses and other operating
expenses. These increases were partially offset by increases in net interest
income and other operating income. These increases are largely
11
<PAGE> 12
attributable to the growth in average managed loans to $112.3 million for the
six months ended June 30, 1999, from $3.6 million for the same period in 1998.
MANAGED LOAN PORTFOLIO
Until January 12, 1999, Heritage Bank of Commerce ("Heritage") funded all of the
credit card accounts and loans originated through the Company's website pursuant
to a Consumer Credit Card Program Agreement. Under that agreement, the Company
charged Heritage for origination and servicing of the accounts and shared 50% of
the resulting net profits or losses, as defined.
Beginning January 1999, the Company began purchasing credit card receivables
utilizing secured lending facilities extended to its subsidiary, NextCard
Funding Corp. Pursuant to the terms of the Company's Account Origination
Agreement with Heritage, Heritage continues to fund newly originated credit card
receivables, which are then purchased on a daily basis by NextCard Funding using
borrowings from its secured lending facilities. The purchased receivables are
pledged as collateral for the secured lending facilities.
The Company's managed loan portfolio is comprised of all credit card loan
receivables generated under the NextCard Visa and outstanding on Heritage's and
the Company's balance sheets. Since Heritage has funded and still owns a portion
of the managed loan portfolio, that portion of the credit card loans are not an
asset of the Company, and therefore, are not shown on the Company's consolidated
balance sheets. The following table summarizes the Company's managed loan
portfolio:
<TABLE>
<CAPTION>
(Dollars in thousands) JUNE 30
----------------------
1999 1998
-------- --------
<S> <C> <C>
PERIOD-END BALANCES
Credit card loans:
On-balance sheet $142,532 $ --
Heritage owned 20,914 9,402
-------- --------
Total managed loan portfolio $163,446 $ 9,402
======== ========
AVERAGE BALANCES
Credit card loans:
On-balance sheet $ 71,123 $ --
Heritage owned 34,764 3,591
-------- --------
Total managed loan portfolio $105,887 $ 3,591
======== ========
</TABLE>
12
<PAGE> 13
NET INTEREST INCOME
Net interest income consists primarily of interest earned on the Company's cash
and investment securities and credit card loans less interest expense on
borrowings to fund these earning assets.
Net interest income for the three and six months ended June 30, 1999, was $1.2
million and $1.2 million, respectively, compared to $78,000 and $111,000 for the
same periods in 1998. These increases were primarily due to $102.9 million and
$71.1 million increases in on balance sheet average loans over the comparable
periods in 1998 and $77.2 million and $56.5 million increases in average cash
and investments over the comparable periods in 1998. The annualized net interest
margin on average earning assets for the three months ended June 30, 1999 was
2.5% compared with .08% for the three months ended March 31, 1999. The second
quarter net interest margin was favorably impacted by the repricing of the
Company's credit card loan portfolio due to the expiration of the introductory
rate loans which were outstanding in the first quarter. The second quarter net
interest margin was negatively impacted by $225,000 of loan fee amortization
expense related to $2.7 million of warrants paid to a finance company in 1999 in
connection with a financing transaction. This loan fee is being amortized over a
three year period. The annualized negative, net interest spread for the three
months ended June 30, 1999 was (1.14%) compared with (2.04%) for the three
months ended March 31, 1999. The net interest spread is the annualized yield on
average interest-earning assets minus the annualized funding rate on average
interest-bearing liabilities. The net interest spread is expected to continue to
improve as the Company's loan portfolio grows with higher-yielding loans and the
full effects of the Company's more favorable terms on recently negotiated
conduit funding facilities are realized.
The following tables provide an analysis of interest income and expense, net
interest spread, net interest margin and average balance sheet data for the
three and six month periods ended June 30, 1999.
13
<PAGE> 14
STATEMENTS OF AVERAGE BALANCES, INCOME AND EXPENSES, YIELDS AND RATES
(Dollars in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1999 JUNE 30, 1999
------------------------------------- -------------------------------------
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest-Earning assets
Consumer loans $ 102,944 $ 2,126 8.26% $ 71,123 $ 2,506 7.04%
Interest-earning cash 83,486 905 4.34% 61,543 1,185 3.85%
--------- --------- --------- --------- --------- ---------
Total interest-earning
assets 186,430 3,031 6.50% 132,666 3,691 5.56%
Allowance for loan losses (1,478) (1,001)
Other assets 11,019 8,918
--------- ---------
Total assets $ 195,971 $ 140,583
========= =========
LIABILITIES AND EQUITY
Interest-bearing liabilities
Borrowings $ 97,772 $ 1,866 7.64% $ 66,138 $ 2,513 7.60%
Other liabilities 9,170 7,593
--------- ---------
Total liabilities 106,942 73,731
Equity 89,029 66,852
--------- ---------
Total liabilities and
equity $ 195,971 $ 140,583
========= =========
NET INTEREST SPREAD (1.14%) (2.04%)
--------- ---------
Interest income to average
interest-earning assets 6.50% 5.56%
Interest expense to average
interest-earning assets 4.00% 3.79%
--------- ---------
NET INTEREST MARGIN 2.50% 1.77%
--------- ---------
</TABLE>
NON-INTEREST INCOME
Interchange and other credit card fees consist of income from the Visa system
for purchases made with the NextCard Visa and fees paid by the Company's
cardholders, such as late fees, overlimit fees and program fees. Such income for
the three and six months ended June 30, 1999, was $477,000 and $616,000,
respectively. Interchange and other credit card fees are expected to continue to
increase in the future as the Company continues to purchase receivables from
Heritage and the portfolio grows.
Servicing and profit-and-loss sharing income consists of amounts arising under
the Consumer Credit Card Program Agreement with Heritage. Such income for the
three and six months ended June 30, 1999 increased $6,000 and $176,000,
respectively, compared to $130,000 and $164,000 for the same periods in 1998.
These increases were attributable to increased credit card accounts and loans
originated and outstanding under the Consumer Credit Card Program Agreement in
1999 compared to 1998. However, the Company anticipates servicing and
profit-and-loss sharing income to decrease in the
14
<PAGE> 15
future because the Company is now purchasing all of the new credit card loan
receivables from Heritage under the Account Origination Agreement.
NON-INTEREST EXPENSE
Total non-interest expense for the three and six months ended June 30, 1999,
increased $16.1 million and $25.0 million, respectively, over the comparable
periods in 1998, primarily due to employee compensation, credit card activation
and servicing costs and marketing expenses. Employee compensation increased due
to staffing needs to support the increase in credit card accounts and other
functions. In addition, the amortization of deferred compensation, which
represents the difference between the exercise price of certain stock options
grants and the estimated fair value of the Company's common stock at the time of
such grants, for the three and six months ended June 30, 1999 was $3.4 million
and $4.7 million. The increase in credit card activation and servicing costs was
largely due to the increased number of credit card accounts, transaction volumes
and loan balances. The increase in other expenses is primarily due to general
growth in the business lines and building an infrastructure to support the
growth.
ASSET QUALITY
The Company's delinquency and net loan charge-off rates reflect, among other
factors, the credit risk of loans, the average age of the Company's
credit card account portfolio, the success of the Company's collection and
recovery efforts and general economic conditions. Additionally, the credit risk
of the loans is impacted by the underwriting criteria utilized by the Company to
approve new customers. The average age of the Company's credit card portfolio
affects the level and stability of delinquency and loss rates of the portfolio.
The Company continues to focus its resources on refining its credit underwriting
standards for new accounts, as well as on collections and post charge-off
recovery efforts, to minimize net losses. At June 30, 1999, the entire loan
portfolio was less than 18 months old. Accordingly, the Company believes that
its loan portfolio will experience increasing or fluctuating levels of
delinquency and loan losses as the average age of the Company's accounts and
balances increase.
This trend is reflected in the change in the Company's net charge-off ratio. For
the quarter ended June 30, 1999, the Company's managed net charge-off ratio was
1.34% compared to 0.23% for the quarter ended June 30, 1998. For the six months
ended June 30, 1999 the net charge-off ratio stood at 1.07% compared to 0.17%
for the six months ended June 30, 1998. The Company believes, consistent with
its statistical models and other credit analyses, that this rate will continue
to fluctuate but generally rise over the next year as the portfolio ages and
becomes more seasoned.
15
<PAGE> 16
The Company's primary strategy for managing loan losses is the development of
underwriting criteria and credit scoring algorithms to assess the
credit-worthiness of new accounts and provide conservative credit-line
assignments. In addition, the Company monitors credit lines closely, and has
built a collections department, as well as using outside parties, to manage
delinquent loans. Individual accounts and their related credit lines are also
continually managed using various marketing, credit and other management
processes in order to continue to maximize the profitability of accounts.
DELINQUENCIES
Delinquency levels are monitored on a managed basis, since delinquency on either
an owned or managed basis exposes the Company to loss exposure either directly
or through the Heritage profit-and-loss sharing arrangement. A credit card
account is contractually delinquent if the minimum payment is not received by
the specified date on the cardholder'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 reversed. Credit card loans are generally charged off when the
loan becomes contractually delinquent 180 past due, with the exception of
bankrupt accounts, which are charged off no later that the month after formal
notification of bankruptcy. The following table presents the delinquency trends
of the Company's credit card loan portfolio on a managed portfolio basis:
<TABLE>
<CAPTION>
JUNE 30
----------------------------------------------------
(Dollars in thousands) 1999 1998
------------------------- -------------------------
LOANS % OF TOTAL LOANS % OF TOTAL
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Managed loan portfolio $ 163,446 100.00% $ 9,402 100.00%
Loans delinquent:
31 - 60 days 951 0.58% 27 0.29%
61 - 90 days 445 0.27% 3 0.03%
91 or more 563 0.35% 0 0.00%
----------- ----------- ----------- -----------
Total $ 1,959 1.20% 30 0.32%
=========== =========== =========== ===========
</TABLE>
NET CHARGE-OFFS
Net charge-offs include the principal amount of losses from cardholders
unwilling or unable to pay their loan balances, as well as bankrupt and deceased
cardholders, less current period recoveries. Net charge-offs exclude finance
charges and fees, which are charged against the related income at the time of
charge-off. Losses from new account fraud and fraudulent cardholder activity are
included in non-interest expense.
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<PAGE> 17
The following table presents the Company's net charge-offs for the periods
indicated as reported in the consolidated financial statements and on a managed
portfolio basis:
<TABLE>
<CAPTION>
(Dollars in thousands) THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30
-------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ON-BALANCE SHEET:
Average loans outstanding $ 102,944 $ -- $ 71,123 $ --
Net charge-offs 34 -- 34 --
Net charge-offs as a
percentage of average loans
outstanding 0.13% 0.00% 0.10% 0.00%
MANAGED:
Average loans outstanding 127,595 5,228 112,328 $ 3,591
Net charge-offs 426 3 601 3
Net charge-offs as a
percentage of average loans
outstanding 1.34% 0.23% 1.07% 0.17%
</TABLE>
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained for on-balance sheet loans. For
loans maintained on Heritage's balance sheet, anticipated losses and related
reserves are reflected in the calculations of the servicing and profit-and-loss
sharing income from Heritage. Provisions for loan losses are made in amounts
necessary to maintain the allowance at a level estimated to be sufficient to
absorb probable losses inherent in the existing on-balance sheet loan portfolio.
The provision for loan losses for on-balance sheet loans for the three and six
months ended June 30, 1999, totaled $1.0 million and $2.0 million, respectively.
The Company anticipates that the provision for loan losses will increase as the
credit card loan portfolio continues to increase and season. The following table
presents the change in the Company's allowance for loan losses for the periods
presented:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS ENDED
ENDED JUNE 30, JUNE 30,
1999 1999
--------------- ---------------
(Dollars in thousands)
<S> <C> <C>
Balance at beginning of period $ 995 $ --
Provision for loan losses 1,047 2,042
Charge-offs (35) (35)
--------------- ---------------
Balance at end of period $ 2,007 $ 2,007
=============== ===============
</TABLE>
17
<PAGE> 18
LIQUIDITY AND CAPITAL RESOURCES
The Company finances the growth of its credit card loan portfolio through cash
flow from operations, secured bank financings, conduit facilities and equity
issuance.
As of June 30, 1999, the Company had $139.9 million of cash and cash
equivalents, of which $127.0 million had been obtained through the Company's IPO
in May 1999.
Until January 12, 1999, Heritage funded all of the credit card accounts and
loans originated through the Company's website. Beginning January 1999, the
Company began purchasing such credit card receivables from Heritage. Until May
21, 1999, the Company utilized a $100.0 million secured borrowing facility
extended to NextCard Funding Corp., by Credit Suisse to fund the majority of
those receivables. On May 21, 1999, the Company executed a $300.0 million
commercial paper conduit facility through Barclays Bank PLC and began utilizing
this facility to purchase credit card receivables. Borrowings under the facility
are secured by the purchased receivables. The Company also used a portion of the
Barclays facility to pay off the $87.8 million balance then outstanding under
the Credit Suisse facility. As of June 30, 1999, $126.6 million was outstanding
under this facility.
In addition, on June 23, 1999, the Company entered into a similar facility with
ING Barings (U.S.) Capital Markets LLC. This facility amount is $150.0 million,
and the Company's borrowings are secured by all credit card receivables that may
be purchased by using funds from this facility. As of June 30, 1999, there were
no amounts outstanding under the ING Barings facility.
The Company will have the ability to fund new receivables during the revolving
period of these structures. After the revolving period, principal collections
generated by the receivables will be used to pay the principal amount owed. The
revolving period ends in June 2001 for the Barclays facility and in January 2002
for the ING Barings facility.
In May 1999, the Company entered into a $5.0 million line of credit with a
finance company for general corporate purposes. Borrowings under the line of
credit accrue interest at 12.25% per year, are repayable in 36 monthly
installments of principal and interest through April 2002 and are secured by a
subordinated security interest in all tangible and intangible assets. This line
of credit had an outstanding balance of $5.0 million at June 30, 1999.
18
<PAGE> 19
YEAR 2000 COMPLIANCE
Many existing computer programs use only two digits to identify a year. These
programs were designed and developed without addressing the impact of the
upcoming change in the century. If not corrected, many computer software
applications could fail or create erroneous results by, at or beyond the year
2000. We use internally developed software, as well as computer technology and
other services provided to us by third-party vendors that may fail due to the
year 2000 phenomenon. For example, the Company is dependent on a service bureau
for account processing and other customer functions. The Company is also
dependent on telecommunications vendors to maintain its network and a third
party that hosts our servers.
As the Company was formed less than three years ago, the Company developed its
systems and technology in light of the year 2000 problem, as opposed to many
older companies that rely on legacy systems designed before this problem was
known. On April 30, 1999, the Company completed its initial review and testing
of year 2000 compliance for all of its internally developed software, which
include substantially all of the systems for the operation of its website, such
as its instant online approval system, customer interaction and transaction
systems and our security, monitoring and back-up capabilities. Based on such
testing, the Company believes its internally developed software and systems are
year 2000 compliant, which means that all date data will process without error,
interruption or loss of functionality of any software or system due to the
change in century.
On April 16, 1999, the Company completed its assessment of the year 2000
readiness of its third-party supplied software and hardware, and of its vendors.
During the assessment phase, eleven vendors were identified as critical to the
Company, all of whom have provided the Company with certifications of year 2000
compliance or a readiness disclosure statement. Testing (including leap year
testing) of our systems with those of First Data Resources, a third-party
supplier of certain fulfillment and customer service functions and provide of
online customer service capabilities, is presently expected to be completed by
August 1999. However, based on the results of preliminary testing of all
affected systems, the Company believes that the systems will be year 2000
compliant. Accordingly, based on the results of the responses the Company has
received and the availability of alternate year 2000 compliant vendors, the
Company does not believe further remediation planning is necessary to ensure
seamless operation at and after January 1, 2000.
If a year 2000 problem with one of the Company's vendor's systems causes such
vendor to fail to provide the Company services it had agreed to provide the
Company, the Company would seek to recover from such vendor damages for the
amount it suffered due to such failure. The Company would base its suit on
breach of the vendor's agreement with it and misrepresentation of such vendor's
year 2000 representation to it. However, there can be no assurance that such
agreements and such representations will be enforceable.
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<PAGE> 20
Based on the results of our testing, the Company believes our worst-case
scenario would be the failure of the Internet infrastructure due to a year 2000
problem. The year 2000 readiness of the general infrastructure necessary to
support our operations is difficult to assess. For instance, the Company depends
on the general availability of the Internet to provide its services. The Company
also depends on the year 2000 compliance of the computer systems and financial
services used by consumers. A significant disruption in the ability of consumers
to reliably access the Internet or portions of it or to use their credit cards
would have an adverse effect on demand for the Company's services and could have
a material adverse effect on the Company's growth.
To date, the Company has incurred approximately $225,000 of expense relating to
year 2000 analysis, testing and remediation efforts. The Company anticipates
that, when all analysis, testing and remediation efforts are complete, it will
have incurred approximately $400,000 of expenses, all of which will be
recognized in 1999. However such expenses could be significantly higher than
anticipated by the Company.
20
<PAGE> 21
ADDITIONAL FACTORS WHICH MAY AFFECT FUTURE RESULTS
As discussed in the Company's Registration Statement, as filed with the SEC in
connection with the Company's IPO, the following additional risk factors could
materially affect the Company's business, operating results and financial
condition.
RISKS RELATED TO THE COMPANY'S BUSINESS
THE COMPANY'S LIMITED OPERATING HISTORY MAKES EVALUATION OF ITS BUSINESS AND
PROSPECTS DIFFICULT.
The Company was formed in June 1996. The Company introduced the NextCard Visa in
December 1997. The Company has only a limited operating history on which to base
an evaluation of the Company's business and prospects. The Company's business
and prospects must be considered in light of the risks, uncertainties, expenses
and difficulties frequently encountered by companies in their early stages of
development, particularly companies in new and rapidly evolving markets such as
the market for Internet products and services.
THE COMPANY HAS A HISTORY OF LOSSES AND IT ANTICIPATES SIGNIFICANT FUTURE
LOSSES.
The Company incurred net losses of $1.9 million for the period from the
Company's inception through December 31, 1997, $16.1 million for the year ended
December 31, 1998 and $29.7 million for the six months ended June 30, 1999. As
of June 30, 1999, the Company had an accumulated deficit of $47.6 million. To
date, the Company has not achieved profitability and expects to incur
significant and increasing net losses for the next three years. The Company
intends to continue to invest significantly in marketing, operations, technology
and the development of statistical analyses. As a result, the Company will need
to generate significant revenues to achieve profitability. The Company cannot be
certain that it will be able either to maintain the Company's recent revenue
growth rates or to generate adequate revenues to achieve profitability. If the
Company does achieve profitability, the Company cannot be certain that it can
sustain or increase profitability on a quarterly or annual basis in the future.
THE COMPANY'S LIMITED OPERATING HISTORY MAKES ITS FINANCIAL FORECASTING
DIFFICULT.
Due to the Company's limited operating history, it cannot forecast operating
expenses based on its historical results. Accordingly, the Company bases its
operating expenses, in part, on future revenue projections. Most of these
expenses are fixed in the short term and the Company may not be able to quickly
reduce spending if it achieves lower than anticipated revenues. The Company's
ability to accurately forecast its revenues is limited. If the Company's
revenues do not meet its internally developed projections, the Company's net
losses will be even greater than anticipated and the Company's business,
operating results and financial condition may be materially and adversely
affected.
21
<PAGE> 22
THE COMPANY'S CREDIT CARD PORTFOLIO MAKES ITS PREDICTION OF DELINQUENCY AND LOSS
LEVELS DIFFICULT.
As of June 30, 1999, over 70% of the Company's credit card accounts had been
generated in the past twelve months. As a result, the Company cannot accurately
predict the levels of delinquencies and losses that can be expected from its
loan portfolio over time. As the Company's portfolio of accounts becomes more
seasoned, the level of losses may increase. Any material increase in
delinquencies or losses above the Company's expectations could materially and
adversely impact the Company's results of operations and financial condition.
THE COMPANY MAY BE UNABLE TO RETAIN CUSTOMERS WHEN IT INCREASES ITS INTRODUCTORY
INTEREST RATES.
To attract new customers, the Company generally offers low introductory interest
rates that increase after expiration of the introductory period. Given the
Company's limited operating history, it does not know what percentage of its
customers will continue to use their NextCard Visa after the end of this period.
If fewer customers than it expects continue to use their NextCard Visa after the
expiration of the introductory offer, the Company's results of operations would
be adversely affected.
THE COMPANY MAY ENCOUNTER DIFFICULTIES DUE TO ITS UNTESTED CUSTOMER BASE.
The Company targets its credit card products to Internet users. Lenders
historically have not solicited this market to the same extent as more
traditional market segments. As a result, there is less historical experience
with respect to the credit risk and performance of these consumers. The Company
may not be able to successfully target and evaluate the creditworthiness of such
consumers to manage the expected delinquencies and losses or to appropriately
price the Company's products. In addition, the Company may consider using
additional internally developed criteria to enhance or replace its existing
criteria. The Company has limited experience developing and implementing such
credit criteria. As a result, as compared to issuers targeting traditional
market segments, the Company could experience any or all of the following:
- - a greater number of customer payment defaults or other unfavorable cardholder
payment behavior;
- - an increase in fraud by the Company's cardholders and third parties; and
- - changes in the traditional patterns of cardholder loyalty and usage.
In addition, because the Company is targeting a new customer base, the Company
has comparatively little information about the potential size of its target
market, its customer usage patterns and other factors that could significantly
affect the demand for the Company's products and services. Moreover, general
economic factors, such as the rate
22
<PAGE> 23
of inflation, unemployment levels and interest rates may affect the Company's
target market customers more severely than other market segments.
FLUCTUATIONS IN THE COMPANY'S QUARTERLY REVENUES AND OPERATING RESULTS MAY
AFFECT THE PRICE OF ITS COMMON STOCK.
Quarterly fluctuations in the Company's earnings could adversely affect the
market price of the Company's common stock. The Company's revenue consists of
the finance charges paid by the Company's customers based on their outstanding
balances, the amounts received through the Visa system based upon a percentage
of the Company's customers' purchases and the fees paid by the Company's
customers. As a result, the Company depends substantially on the level of
customer balances, the level of interest rates on the Company's credit card
portfolios and the volume of NextCard Visa purchases. Variations of such factors
could affect the Company's quarterly revenues. Any shortfall in the Company's
revenue would have a direct impact on the Company's operating results for a
particular quarter.
The Company's quarterly operating results may fluctuate significantly as a
result of a variety of factors, many of which are outside the Company's control.
These factors include:
- - the volume of credit card loans generated from the Company's products and the
Company's ability to successfully manage its credit card loan portfolio;
- - the announcement or introduction of new websites, services and products by us
or the Company's competitors and the level of price competition for the products
and services we offer;
- - the amount and timing of the Company's operating costs and capital
expenditures relating to the expansion of the Company's business, operations and
infrastructure;
- - technical difficulties, system downtime, Internet service problems and the
Company's ability to expand and upgrade the Company's computer systems to handle
increased traffic;
- - the success of the Company's brand building, advertising and marketing
campaigns; and
- - general economic conditions, including interest rate volatility, and economic
conditions specific to the Internet, online commerce and the credit card
industry.
23
<PAGE> 24
THE COMPANY MAY BE UNABLE TO SATISFACTORILY FUND ITS WORKING CAPITAL
REQUIREMENTS.
If the Company's current funding becomes insufficient to support future
operating requirements, the Company will need to obtain additional funding
either by increasing the Company's lines of credit or by raising additional debt
or equity from the public or private capital markets. There can be no assurance
that such additional funding will be available on terms attractive to the
Company, or at all. Failure by the Company to raise additional funding when
needed could have a material adverse effect on the Company's business, results
of operations and financial condition. If additional funds are raised through
the issuance of equity securities, the ownership percentage of the Company's
then-current stockholders would be reduced. Furthermore, such equity securities
might have rights, preferences or privileges senior to those of the Company's
common stock.
THE COMPANY'S CUSTOMERS MAY BECOME DISSATISFIED BY SYSTEM DISRUPTIONS.
The Company's website has in the past experienced, and may in the future
experience, slower than normal response times or other problems, such as system
unavailability. Customers may become dissatisfied by any system failure that
interrupts or delays the Company's ability to provide the Company's services to
them. Any interruption or delay in the Company's operations could materially and
adversely affect the Company's business.
If the number of users of the Company's website increases substantially, the
Company will need to significantly expand and upgrade the Company's technology,
transaction processing systems and network infrastructure. The Company's website
must accommodate a high volume of users and deliver frequently updated
information. The number of visitors and credit card applicants to the Company's
website has increased substantially since it introduced the NextCard Visa, and
it anticipates that this traffic will further increase over time. However, it is
difficult to predict the future traffic on the Company's website. Marketing
efforts and other events, such as publicity resulting from this offering, could
cause traffic to strain the Company's site's capacity. The Company does not know
whether it will be able to accurately project the rate or timing of any traffic
increases, or expand and upgrade the Company's systems and infrastructure to
accommodate such increases in a timely manner.
The Company's systems and operations also are vulnerable to damage or
interruption from human error, natural disasters, power loss, telecommunication
failures, break-ins, sabotage, computer viruses, acts of vandalism and similar
events. As the Company currently does not have back-up systems for most aspects
of its operations, a failure of a single aspect of the Company's system could
cause interruption or delay in the Company's entire operations. It does not
carry sufficient business interruption insurance to compensate for losses that
could occur.
THE COMPANY MAY BE UNABLE TO SATISFACTORILY FUND ITS LOAN PORTFOLIO.
The Company's primary source of funding is the securitization of its credit
card loan portfolio through commercial paper conduit facilities. Securitization
transactions involve the sale of beneficial interests in credit card loan
balances. Until now, the Company has completed securitization transactions on
terms that it believes are favorable. The availability of securitization
funding, however, depends on how difficult and expensive such funding is.
Securitizations can be affected by many factors, such as whether a third party
will be willing to provide credit enhancement and the rates at which
accountholders have repaid their balances in the past. In addition, legal,
regulatory, accounting and tax changes can make securitization funding more
difficult, more expensive or unavailable on any terms. Securitizations may not
always offer the Company attractive funding, and the Company may have to seek
other more expensive funding sources in the future. In general, the amount,
type and cost of the Company's financing affects the Company's financial
results. Changes within the Company's organization and changes in the activities
of parties the Company has agreements or understandings could make the
financings available to the Company more difficult, more expensive or
unavailable on any terms.
If the Company successfully creates NextBank, its strategy will be to fund a
portion of its loan portfolio through short-term deposits received by NextBank.
The Company may not be able to attract or retain sufficient deposits at
attractive interest rates to fund its loan portfolio through NextBank.
Moreover, if adequate capital is not available, the Company also may be subject
to an increased level of regulatory supervision that would have an adverse
effect on our operating results and financial condition.
THE COMPANY DEPENDS ON A LIMITED NUMBER OF VENDORS FOR ESSENTIAL SERVICES.
24
<PAGE> 25
The Company relies on a number of services furnished to itself by either a
single vendor or a limited number of vendors. For example, all of the NextCard
Visa credit cards generated on the Company's website are issued by Heritage in
accordance with an account origination agreement. Under the agreement, Heritage
issues credit cards to each applicant who qualifies under specified credit card
guidelines. Heritage's obligation to establish new credit card accounts
terminates on December 31, 1999. If successfully created, NextBank, a proposed
wholly owned subsidiary of the Company, would replace Heritage as the issuer of
the NextCard Visa. If the Company is not successful in creating NextBank on a
timely basis, the Company's failure to extend the Company's arrangement with
Heritage or enter into an alternative arrangement would have a material adverse
effect on it.
The Company also depends, directly and indirectly, on other key third party
vendors to provide essential services. Any interruption, deterioration or
termination in these third-party services could be disruptive to the Company's
business. In the event that any of the Company's agreements with any of these
third parties is terminated, it may not be able to find an alternative source of
support on a timely or commercially reasonable basis, if at all. As a result,
any such interruption, deterioration or termination would have a material
adverse effect on the Company's results of operations and financial condition.
THE COMPANY MAY BE ADVERSELY AFFECTED IF IT FAILS TO ATTRACT AND RETAIN KEY
PERSONNEL.
The Company's success depends largely on the skills, experience and performance
of certain key members of the Company's management. If it loses one or more of
these key employees, particularly Jeremy Lent, the Company's Chairman of the
Board, President and Chief Executive Officer, the Company's business, operating
results and financial condition would be materially adversely affected. The
Company's success also depends on the Company's continued ability to attract,
retain and motivate highly skilled employees. Competition for employees both for
Internet-based businesses and for financial services businesses is intense,
particularly for personnel with technical training and experience. The Company
may be unable to retain its key employees or to attract, assimilate or retain
other highly qualified employees in the future. The Company has from time to
time in the past experienced, and it expects to experience in the future,
difficulty in hiring and retaining highly skilled employees with appropriate
qualifications.
THE COMPANY MAY BE UNABLE TO EFFECTIVELY MANAGE THE RAPID GROWTH IN ITS
OPERATIONS.
Since the introduction of the Company's NextCard Visa product in December 1997,
it has experienced rapid growth in the Company's operations. From December 31,
1997 through June 30, 1999, we grew from approximately 18 to 215 employees, and
the Company's loans under management increased from $0 to $163.4 million. The
Company is planning for continued rapid growth of its operations. This growth
requires the Company to expand its marketing, customer service and support,
credit and technology organizations. There can be no assurance that it will be
able to attract and retain sufficient numbers of personnel to satisfy the
Company's anticipated growth. In particular, as the Company relies heavily on
temporary personnel to satisfy its growing personnel
25
<PAGE> 26
demands, the Company may be unable to continue to attract and retain a
sufficient number of temporary employees to support its future growth. Rapid
growth places a significant strain on the Company's financial reporting,
information and management systems and resources. The Company's business,
results of operations and financial condition will be materially and adversely
affected if it is unable to effectively manage its expanding operations. For
example, if the Company is unable to maintain and scale the Company's financial
reporting and information systems, it may not have access to adequate, accurate
and timely financial information.
THE COMPANY MAY NOT SUCCESSFULLY DEVELOP NEXTCARD AS A BRAND.
The dynamics of a brand name have traditionally worked differently in the credit
card market than in many other industries. In the credit card market, consumers
have responded more to the brand name of Visa or MasterCard(R) than to the
identity of the issuer. The Internet may change the underlying market dynamics
for brand recognition as compared to the offline market. Accordingly, the
Company is aggressively implementing its marketing plan to establish brand
recognition with Internet users to persuade customers to switch to the Company's
products and services, particularly because it competes, or expects to compete,
with larger financial institutions that have well-established brand names. The
Company can provide no assurances that it will successfully develop the
Company's brand name. If the brand name of online credit card issuers becomes
important, and if other credit card issuers begin to compete with us for online
brand name recognition, the Company's business, results of operations and
financial condition could be materially adversely affected.
RISKS RELATED TO THE COMPANY'S INDUSTRY
THE COMPANY'S PERFORMANCE WILL DEPEND ON THE GROWTH OF THE INTERNET AND INTERNET
COMMERCE.
The Company's future success depends heavily on the overall continued growth and
acceptance of the Internet, including its use in electronic commerce. If
Internet usage or commerce does not continue to grow or grows more slowly than
expected, the Company's business, operating results and financial condition will
be adversely affected. Consumers and businesses may reject the Internet as a
viable medium for a number of reasons. These include potentially inadequate
network infrastructure, slow development of enabling technologies and
insufficient commercial support. The Internet infrastructure may not be able to
support the demands placed on it by increased Internet usage and bandwidth
requirements. In addition, delays in the development or adoption of new
standards and procedures required to handle increased levels of Internet
activity, or increased government regulation, could cause the Internet to lose
its viability as a commercial medium. Even if the required infrastructure,
standards, procedures or related products, services and facilities are
developed, we may incur substantial expenses adapting the Company's solutions to
changing or emerging technologies.
26
<PAGE> 27
THE COMPANY'S PERFORMANCE WILL DEPEND ON THE CONTINUED GROWTH OF THE FINANCIAL
SERVICES MARKET.
The Company's business would be adversely affected if the growth in Internet
financial products and services does not continue or is slower than expected.
Although the Company believes the Internet has the potential to transform the
delivery of consumer financial products, consumers' acceptance of recently
introduced financial products and services is at an early stage and is subject
to a high level of uncertainty. To date, there exist relatively few proven
online financial institutions. Although the Company's long-term vision is to
redefine the banking experience for the Internet consumer, presently it offers
only a single product, the NextCard Visa, and it has no specific plans for
additional products. In addition, as the online financial services industry
matures, government-imposed regulations could become so stringent that the
Company may be economically precluded from offering online financial products
and services.
INTENSE AND INCREASING COMPETITION IN FINANCIAL SERVICES COULD HARM ITS
BUSINESS.
The financial services market is rapidly evolving and intensely competitive. The
Company operates in this intensely competitive environment with a number of
other companies, many of whom have significantly longer operating histories,
greater name recognition, larger customer bases and significantly greater
financial, technical and marketing resources than we do. Some of the Company's
competitors may be able to obtain funding at a more favorable rate than it can
obtain. The Company's business model anticipates that it will derive a large
majority of the Company's revenue from the interest charged on credit card
balances contained in the portfolio of loans it holds. Increased competition
could require the Company to reduce the interest rates it charges on the
Company's customers' balances. This could have a material adverse effect on the
Company's business, results of operations and financial condition.
Other credit card issuers and traditional commercial banks may increasingly
compete in the online credit card market. In addition, existing Internet
providers and new Internet entrants may launch new websites using commercially
available software. While the credit card market traditionally has been very
fragmented, the Internet could change traditional market dynamics and enable new
competitors to rapidly acquire significant market share.
The Company's competitors may respond more quickly than we can to new or
emerging technologies and changes in customer requirements. They may be able to:
- - devote greater resources than the Company can to the development, promotion
and sale of their products and services;
- - replicate the Company's products and services;
- - engage in more extensive research and development;
27
<PAGE> 28
- - undertake farther-reaching marketing campaigns;
- - adopt more aggressive pricing policies;
- - make more attractive offers to existing and potential employees and strategic
partners;
- - more quickly develop new products and services or enhance existing products
and services;
- - bundle consumer products and services in a manner that the Company cannot
provide; and
- - establish cooperative relationships among themselves or with third parties,
including large Internet participants, to increase the ability of their products
and services to address the needs of the Company's prospective customers.
The Company cannot assure that it will be able to compete successfully or that
competitive pressures will not materially and adversely affect the Company's
business, results of operations or financial condition.
OUR OPERATING RESULTS ARE SUBJECT TO INTEREST RATE FLUCTUATIONS.
A majority of the Company's revenues are generated by the interest rates it
charges on outstanding receivable balances. At the same time, the Company's
borrowings costs under the Company's commercial paper conduit facilities are
generally indexed to variable commercial paper rates. Thus, changes in the
prevailing interest rates could materially adversely affect the Company's
results of operations and financial condition. See "Quantitative and
Qualitative Disclosures About Market Risk."
THE COMPANY MAY BE UNABLE TO INTRODUCE NEW SERVICES, FEATURES AND FUNCTIONS.
The Internet and related financial institutions marketplaces are characterized
by rapidly changing technologies, evolving industry standards, frequent new
product and service introductions and changing customer demands. The Company's
future success will depend on the Company's ability to adapt to rapidly changing
technologies and to enhance existing products and services, as well as to
develop and introduce a variety of new products and services to address the
Company's customers' changing demands. The Company may experience difficulties
that delay or prevent the successful design, development, introduction or
marketing of the Company's products and services. In addition, material delays
in introducing new products and services and enhancements may cause customers to
forego purchases of the Company's products and services and purchase instead
those of the Company's competitors.
SECURITY BREACHES COULD DAMAGE THE COMPANY'S REPUTATION AND BUSINESS.
The secure transmission of confidential information over the Internet is
essential to maintain consumer and supplier confidence in the NextCard service.
Advances in computer capabilities, new discoveries or other developments could
result in a compromise or breach of the technology used by us to protect
customer transaction data.
A party that is able to circumvent the Company's security systems could steal
proprietary information or cause interruptions in the Company's operations.
Security breaches could damage the Company's reputation and expose us to a risk
of loss or litigation. The Company's insurance policies carry low coverage
limits, which may not be adequate to
28
<PAGE> 29
reimburse us for losses caused by security breaches. The Company cannot
guarantee that its security measures will prevent security breaches.
Consumers generally are concerned with security and privacy on the Internet and
any publicized security problems could inhibit the growth of the Internet as a
means of conducting commercial transactions. The Company's ability to provide
financial services over the Internet would be severely impeded if consumers
become unwilling to transmit confidential information online. As a result, the
Company's operations and financial condition would be materially adversely
affected.
THE COMPANY MAY FACE INCREASED GOVERNMENTAL REGULATION AND LEGAL UNCERTAINTIES.
To date, communications and commerce on the Internet have not been highly
regulated. However, Congress has held hearings on whether to regulate providers
of services and transactions in the electronic commerce market. It is possible
that Congress or individual states could enact laws regulating Internet banking
that address issues such as user privacy, pricing and the characteristics and
quality of products and services. Any restrictions on the collection and use of
such consumer information over the Internet could adversely affect the Company's
direct marketing efforts. In addition, several telecommunications companies have
petitioned the Federal Communications Commission to regulate Internet service
providers in a manner similar to long distance telephone carriers and to impose
access fees on these companies. This could increase the cost of transmitting
data over the Internet. Moreover, it may take years to determine the extent to
which existing laws relating to issues such as property ownership, libel and
personal privacy are applicable to the Internet. Any new laws or regulations
relating to the Internet could adversely affect the Company's business.
The Company's business is subject to extensive federal and state regulation,
including regulation under consumer protection laws. If the Company successfully
forms NextBank, it would be subject to regulation under federal and California
banking laws as well as regulatory supervision from the Office of the
Comptroller of the Currency, or OCC, and the Federal Deposit Insurance
Corporation (the "FDIC"). As an affiliate of NextBank, the Company will also
will be subject to oversight by the OCC and FDIC. Existing and future
legislation and regulatory supervision could have a material adverse effect on
the Company's business, including the Company's credit and authentication
policies, pricing and products.
NextBank also will be subject to minimum capital, funding and leverage
requirements prescribed by federal statute and OCC regulations or orders. If
NextBank fails to meet these regulatory capital requirements, NextBank will be
subject to additional restrictions that could have a material adverse effect on
the Company's ability to conduct normal operations and possibly result in the
seizure of NextBank by government regulators under certain circumstances. The
Company's ability to maintain or increase NextBank's capital levels in the
future will be subject to, among other things, general economic conditions, the
Company's ability to raise new capital and the Company's ability and willingness
to make additional capital contributions to NextBank or a related institution.
29
<PAGE> 30
THE COMPANY MAY FACE DIFFICULTIES PROTECTING AND ENFORCING ITS INTELLECTUAL
PROPERTY RIGHTS.
The Company's success and ability to compete are substantially dependent on the
Company's proprietary technology and trademarks, which we attempt to protect
through a combination of patent, copyright, trade secret and trademark laws as
well as confidentiality procedures and contractual provisions. However, any
steps the Company takes to protect the Company's intellectual property may be
inadequate, time consuming and expensive. Furthermore, despite the Company's
efforts, it may be unable to prevent third parties from infringing upon or
misappropriating the Company's intellectual property. Any such infringement or
misappropriation could have a material adverse effect on the Company's business,
results of operations and financial condition. In addition, the Company may
infringe upon the intellectual property rights of third parties, including third
party rights in patents that have not yet been issued. Any such infringement, or
alleged infringement, could have a material adverse effect on the Company's
business, results of operations and financial condition.
The Company has filed three patent applications and applied to register several
of the Company's trademarks in the United States. The Company cannot assure that
the Company's patent applications or trademark registrations will be approved.
Moreover, even if approved, they may not provide the Company with any
competitive advantages or may be challenged by third parties. Legal standards
relating to the validity, enforceability and scope of intellectual property
rights in Internet-related industries are uncertain and still evolving, and the
future viability or value of any of the Company's intellectual property rights
is uncertain. Any litigation surrounding such rights could force the Company to
divert important financial and other resources away from the Company's business
operations.
The Company collects and utilizes data derived from applications on the NextCard
website and through transactions made using the Company's products. Although the
Company believes that it has the right to use such data and compile such data in
the Company's database, it cannot assure that any intellectual property
protection will be available for such information. In addition, third parties
may claim rights to such information.
The Company has licensed, and may license in the future, elements of the
Company's trademarks, trade dress and similar proprietary rights to third
parties. While it attempts to ensure that the quality of the Company's brand is
maintained by such business partners, such partners may take actions that could
materially and adversely affect the value of the Company's proprietary rights or
the Company's reputation. This could, in turn, have a material adverse effect on
the Company's business, results of operations and financial condition.
30
<PAGE> 31
PROTECTION OF THE COMPANY'S DOMAIN NAME IS UNCERTAIN.
The Company currently holds the domain name nextcard.com. The regulations
governing the acquisition and maintenance of domain names are subject to change.
Governing bodies could, among other things, modify the requirements for holding
domain names. Accordingly, the Company may be unable to acquire or maintain the
Company's domain name in all jurisdictions in which it would otherwise seek to
do so. Furthermore, the relationship between regulations governing domain names
and laws protecting trademarks and similar proprietary rights is unclear.
Therefore, the Company may be unable to prevent third parties from acquiring
domain names that are similar to, infringe upon or otherwise decrease the value
of the Company's domain name, trademarks and other proprietary rights.
31
<PAGE> 32
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss from adverse changes in market prices and rates.
The Company's principal market risk is due to changes in interest 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
cardholders.
The majority of the Company's revenues are generated by the interest rates it
charges on outstanding receivable balances in the form of finance charges. The
Company's receivables generally yield either a variable interest rate indexed to
the prime rate, or a fixed interest rate, set independently of market interest
rates. Accordingly, fluctuations in interest rates will affect the Company's
revenues. At the same time, the Company's borrowing costs under the Company's
commercial paper conduit facilities are generally indexed to variable commercial
paper rates, and may also fluctuate based on general interest rate fluctuations.
A rise in the Company's borrowing costs may not be met by a corresponding
increase in revenues generated by finance charges. Likewise, a decrease in
revenues generated by finance charges may not be met by a corresponding decrease
in borrowing costs. Thus, either a rise or a fall in the prevailing interest
rates could materially adversely affect the Company's results of operations and
financial condition.
To manage the Company's direct risk to market interest rates, management
actively monitors the interest rates and the interest sensitive components of
the Company's balance sheet to minimize the impact changes in interest rates
have on the fair value of assets, liabilities, net income and cash flow.
Management seeks to minimize the impact of changes in interest rates on the
Company primarily by matching assets and liability repricings.
The Company's fixed interest rate credit card receivables have no stated
maturity or repricing period. However, the Company generally has the right to
increase rates when the customer fails to comply with the terms of the account
agreement. In addition, the Company's credit card receivables may be repriced by
the Company upon providing the required prior notice to the customer, which is
generally no more that 30 days.
The Company may manage its interest rate risk through interest rate hedging
techniques. However, the Company currently does not use such techniques and it
may not be successful in reducing or eliminating the Company's interest rate
risk in the future.
32
<PAGE> 33
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to any lawsuit that, taken separately or
collectively, if decided adversely would be likely to have a material, adverse
effect on its business, financial prospects or results of operations.
ITEM 2. CHANGES IN SECURITIES
On May 19, 1999, the Company completed its IPO in which it sold 6.9 million
shares of its common stock, $0.001 par value. The managing underwriters in the
offering were Donaldson, Lufkin & Jenrette Securities Corporation, Thomas Weisel
Partners LLC and, U.S. Bancorp Piper Jaffray. The shares of common stock sold in
the offering were registered under the Securities Act of 1933, as amended, on a
Registration Statement on Form S-1 (Reg. No. 333-74755) that was declared
effective by the SEC on May 14, 1999. The 6.9 million shares of common were sold
at a price of $20.00 per share for gross proceeds of $138.0 million. Offering
proceeds to the Company, net of approximately $9.7 million in aggregate
underwriter discounts and commissions and $1.3 million in other related
expenses, were approximately $127.0 million.
The Company intends to use the net proceeds to finance its credit card
receivables under its secured borrowing facilities, capitalize NextBank, when,
and if, NextBank commences operations, and for marketing. In addition, the
Company will use the balance of the net proceeds for working capital, including
certain acquisition costs related to originating credit card receivables,
interest expense under borrowing facilities and general corporate overhead
expense. None of the net proceeds of the offering were paid by the Company,
directly or indirectly, to any director, officer or general partner of the
Company or any of their associates, or to any persons owning 10% or more of any
class of the Company's equity securities, or to any affiliates of the company.
Immediately prior to the closing of the IPO, the Company's stock split 4.5
shares for every one share of common stock then outstanding. Simultaneously with
the closing of the IPO, each outstanding share of the Company's preferred stock
automatically converted into 4.5 shares of common stock. In addition, the
Company reincorporated from California to Delaware.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
33
<PAGE> 34
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
Immediately prior to its IPO, the Company's shareholders unanimously approved
the Company's reincorporation from California to Delaware and in connection
therewith, a 4.5-to-1 split of the Company's common stock. The Company's
shareholders also adopted an Employee Stock Purchase Plan and approved an
expansion of the Company's 1997 Stock Plan.
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
10.1+ Amended and Restated Pooling and Servicing Agreement,
dated as May 21, 1999, among NextCard Funding Corp, as
Transferor, NextCard, Inc., as Servicer, and The Bank of
New York, as Trustee.
10.2+ Series 1999-1 Supplement, dated as of May 21, 1999, to the
Amended and Restated Pooling and Servicing Agreement,
among NextCard Funding Corp, as Transferor, NextCard,
Inc., as Servicer, and The Bank of New York, as Trustee.
10.3+ Series 1999-2 Supplement, dated as of May 21, 1999, to the
Amended and Restated Pooling and Servicing Agreement,
among NextCard Funding Corp, as Transferor, NextCard,
Inc., as Servicer, and The Bank of New York, as Trustee.
10.4+ Amended and Restated Account Origination Agreement dated
May 21, 1999, among NextCard, NextCard Funding Corp. and
Heritage Bank of Commerce.
10.5+ Amendment No.1, dated July 15, 1999, to Amended and
Restated Account Origination Agreement, among NextCard,
NextCard Funding Corp. and Heritage Bank of Commerce.
10.6+ Certificate Purchase Agreement, dated May 21, 1999, among
NextCard Funding Corp., as Transferor, NextCard, Inc. as
Servicer, Sheffield Receivables Corporation, as Purchaser,
and Barclays Bank PLC, as Agent.
</TABLE>
34
<PAGE> 35
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
10.7+ Certificate Purchase Agreement, dated June 16, 1999, among
NextCard Funding Corp., as Transferor, NextCard, Inc. as
Servicer, Holland Limited Securitization, Inc., as
Purchaser, and ING Baring (U.S.) Capital Markets LLC, as
Agent.
27.1 Financial Data Schedule
</TABLE>
+ Portions redacted pursuant to a request for confidential treatment
filed with the Securities and Exchange Commission.
(b) Reports on Form 8-K
Not applicable
35
<PAGE> 36
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEXTCARD, INC.
--------------
(Registrant)
Date: August 13, 1999 /s/ Jeremy R. Lent
------------------
Jeremy R. Lent
Chairman of the Board, President and
Chief Executive Officer
Date: August 13, 1999 /s/ John V. Hashman
-------------------
John V. Hashman
Chief Financial Officer
36
<PAGE> 37
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
10.1+ Amended and Restated Pooling and Servicing Agreement,
dated as May 21, 1999, among NextCard Funding Corp, as
Transferor, NextCard, Inc., as Servicer, and The Bank of
New York, as Trustee.
10.2+ Series 1999-1 Supplement, dated as of May 21, 1999, to the
Amended and Restated Pooling and Servicing Agreement,
among NextCard Funding Corp, as Transferor, NextCard,
Inc., as Servicer, and The Bank of New York, as Trustee.
10.3+ Series 1999-2 Supplement, dated as of May 21, 1999, to the
Amended and Restated Pooling and Servicing Agreement,
among NextCard Funding Corp, as Transferor, NextCard,
Inc., as Servicer, and The Bank of New York, as Trustee.
10.4+ Amended and Restated Account Origination Agreement dated
May 21, 1999, among NextCard, NextCard Funding Corp. and
Heritage Bank of Commerce.
10.5+ Amendment No.1, dated July 15, 1999, to Amended and
Restated Account Origination Agreement, among NextCard,
NextCard Funding Corp. and Heritage Bank of Commerce.
10.6+ Certificate Purchase Agreement, dated May 21, 1999, among
NextCard Funding Corp., as Transferor, NextCard, Inc. as
Servicer, Sheffield Receivables Corporation, as Purchaser,
and Barclays Bank PLC, as Agent.
10.7+ Certificate Purchase Agreement, dated June 16, 1999, among
NextCard Funding Corp., as Transferor, NextCard, Inc. as
Servicer, Holland Limited Securitization, Inc., as
Purchaser, and ING Baring (U.S.)
Capital Markets LLC, as Agent.
27.1 Financial Data Schedule
</TABLE>
+ Portions redacted pursuant to a request for confidential treatment
filed with the Securities and Exchange Commission.
37
<PAGE> 1
EXHIBIT 10.1
[EXECUTION COPY]
- --------------------------------------------------------------------------------
NEXTCARD FUNDING CORP.,
as Transferor,
NEXTCARD, INC.,
as Servicer,
and
THE BANK OF NEW YORK,
as Trustee
NEXTCARD MASTER TRUST I
AMENDED AND RESTATED
POOLING AND SERVICING AGREEMENT
Dated as of May 21, 1999
- --------------------------------------------------------------------------------
99
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I Definitions...............................................................1
Section 1.01. Definitions........................................................1
Section 1.02. Other Definitional Provisions.....................................20
ARTICLE II Conveyance of Receivables................................................22
Section 2.01. Conveyance of Receivables.........................................22
Section 2.02. Acceptance by Trustee.............................................23
Section 2.03. Representations and Warranties of Each Transferor Relating
to Such Transferor................................................24
Section 2.04. Representations and Warranties of Each Transferor Relating
to the Agreement, the Receivables Transfer Agreements and
Any Supplement and the Receivables................................26
Section 2.05. Reassignment of Ineligible Receivables............................28
Section 2.06. Reassignment of Receivables in Trust Portfolio....................29
Section 2.07. Covenants of the Transferor.......................................30
Section 2.08. Covenants of Each Transferor with Respect to Receivables
Transfer Agreements...............................................33
Section 2.09. Addition of Accounts..............................................34
Section 2.10. Removal of Accounts and Participation Interests...................37
Section 2.11. Account Allocations...............................................38
Section 2.12. Discount Option...................................................39
ARTICLE III Administration and Servicing of Receivables..............................40
</TABLE>
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<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<S> <C>
Section 3.01. Acceptance of Appointment and Other Matters Relating to the
Servicer..........................................................40
Section 3.02. Servicing Compensation............................................41
Section 3.03. Representations, Warranties and Covenants of the Servicer.........41
Section 3.04. Reports and Records for the Trustee...............................44
Section 3.05. Annual Certificate of Servicer....................................44
Section 3.06. Annual Servicing Report of Independent Public Accountants;
Copies of Reports Available.......................................45
Section 3.07. Tax Treatment.....................................................45
Section 3.08. Notices to NextCard, Inc..........................................46
Section 3.09. Adjustments.......................................................46
Section 3.10. Reports to the Commission.........................................47
Section 3.11. Reports to Rating Agencies........................................47
ARTICLE IV Rights of Certificateholders and Allocation and Application of
Collections..............................................................48
Section 4.01. Rights of Certificateholders......................................48
Section 4.02. Establishment of Collection Account and Excess Funding
Account; Appointment of Securities Intermediary...................48
Section 4.03. Collections and Allocations.......................................51
Section 4.04. Shared Collections................................................52
Section 4.05. Additional Withdrawals from the Collection Account................52
Section 4.06. Allocation of Trust Assets to Series or Groups....................53
</TABLE>
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<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<S> <C>
ARTICLE V Distributions and Reports to Certificateholders..........................54
ARTICLE VI The Certificates.........................................................55
Section 6.01. The Certificates..................................................55
Section 6.02. Authentication of Certificates....................................55
Section 6.03. New Issuances.....................................................55
Section 6.04. Registration of Transfer and Exchange of Certificates.............57
Section 6.05. Mutilated, Destroyed, Lost or Stolen Certificates.................60
Section 6.06. Persons Deemed Owners.............................................60
Section 6.07. Appointment of Paying Agent.......................................61
Section 6.08. Access to List of Registered Certificateholders' Names and
Addresses.........................................................61
Section 6.09. Authenticating Agent..............................................62
Section 6.10. Book-Entry Certificates...........................................63
Section 6.11. Notices to Clearing Agency........................................63
Section 6.12. Definitive Certificates...........................................64
Section 6.13. Global Certificate; Exchange Date.................................64
Section 6.14. Meetings of Certificateholders....................................65
Section 6.15. Uncertificated Classes............................................67
</TABLE>
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<PAGE> 5
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<S> <C>
ARTICLE VII Other Matters Relating to the Transferor.................................68
Section 7.01. Liability of the Transferor.......................................68
Section 7.02. Merger or Consolidation of, or Assumption of the Obligations
of, the Transferor................................................68
Section 7.03. Limitations on Liability of the Transferor........................69
ARTICLE VIII Other Matters Relating to the Servicer...................................70
Section 8.01. Liability of the Servicer.........................................70
Section 8.02. Merger or Consolidation of, or Assumption of the Obligations
of, the Servicer..................................................70
Section 8.03. Limitation on Liability of the Servicer and Others................70
Section 8.04. Servicer Indemnification of the Trust and the Trustee.............71
Section 8.05. Resignation of the Servicer.......................................71
Section 8.06. Access to Certain Documentation and Information Regarding
the Receivables...................................................72
Section 8.07. Delegation of Duties..............................................72
Section 8.08. Examination of Records............................................72
ARTICLE IX Pay Out Events...........................................................73
Section 9.01. Trust Pay Out Events..............................................73
Section 9.02. Rights Upon the Occurrence of an Insolvency Event.................73
ARTICLE X Servicer Defaults........................................................74
Section 10.01. Servicer Defaults.................................................74
</TABLE>
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<PAGE> 6
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<S> <C>
Section 10.02. Trustee To Act, Appointment of Successor..........................76
Section 10.03. Notification to Certificateholders................................77
ARTICLE XI The Trustee..............................................................78
Section 11.01. Duties of Trustee.................................................78
Section 11.02. Certain Matters Affecting the Trustee.............................79
Section 11.03. Trustee Not Liable for Recitals in Certificates...................80
Section 11.04. Trustee May Own Certificates......................................80
Section 11.05. Servicer To Pay Trustee's Fees and Expenses.......................81
Section 11.06. Eligibility Requirements for Trustee..............................81
Section 11.07. Resignation or Removal of Trustee.................................81
Section 11.08. Successor Trustee.................................................82
Section 11.09. Merger or Consolidation of Trustee................................82
Section 11.10. Appointment of Co-Trustee or Separate Trustee.....................83
Section 11.11. Tax Returns.......................................................84
Section 11.12. Trustee May Enforce Claims Without Possession of Certificates.....84
Section 11.13. Suits for Enforcement.............................................84
Section 11.14. Rights of Certificateholders To Direct Trustee....................85
</TABLE>
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<PAGE> 7
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<S> <C>
Section 11.15. Representations and Warranties of Trustee.........................85
Section 11.16. Maintenance of Office or Agency...................................85
ARTICLE XII Termination..............................................................86
Section 12.01. Termination of Trust..............................................86
Section 12.02. Final Distribution................................................86
Section 12.03. Transferor's Termination Rights...................................87
Section 12.04. Defeasance........................................................87
Section 12.05. Optional Purchase.................................................89
ARTICLE XIII Miscellaneous Provisions.................................................90
Section 13.01. Amendment; Waiver of Past Defaults................................90
Section 13.02. Protection of Right, Title and Interest to Trust..................91
Section 13.03. Limitation on Rights of Certificateholders........................92
SECTION 13.04. GOVERNING LAW.....................................................93
Section 13.05. Notices; Payments.................................................93
Section 13.06. Rule 144A Information.............................................94
Section 13.07. Severability of Provisions........................................94
Section 13.08. Assignment........................................................94
Section 13.09. Certificates Nonassessable and Fully Paid.........................94
</TABLE>
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<PAGE> 8
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<S> <C>
Section 13.10. Further Assurances................................................94
Section 13.11. Nonpetition Covenant..............................................94
Section 13.12. No Waiver; Cumulative Remedies....................................95
Section 13.13. Counterparts......................................................95
Section 13.14. Third-Party Beneficiaries.........................................95
Section 13.15. Actions by Certificateholders.....................................95
Section 13.16. Merger and Integration............................................95
Section 13.17. Headings..........................................................95
Section 13.18. Construction of Agreement.........................................95
</TABLE>
106
<PAGE> 9
This AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT dated
as of May 21, 1999, among NEXTCARD FUNDING CORP., a Delaware corporation, as
Transferor, NEXTCARD, INC., a Delaware corporation, as Servicer, and THE BANK OF
NEW YORK, a New York banking corporation, as Trustee, amends and restates that
certain Pooling and Servicing Agreement dated as of December 1, 1998, among
NextCard Funding Corp., as Transferor, NextCard, Inc.(as successor to NextCard,
Inc., a California corporation), as Servicer, and The Bank of New York, as
Trustee, as supplemented by Supplement No. 1 thereto dated as of December 1,
1998 among NextCard Funding Corp., as Transferor, NextCard, Inc. (as successor
to NextCard, Inc., a California corporation), as Servicer, and The Bank of New
York, as Trustee and Securities Intermediary.
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 (to the extent provided herein and in
any Supplement):
ARTICLE I
Definitions
1.1 Definitions. Whenever used in this Agreement, the
following words and phrases shall have the following meanings, and the
definitions of such terms are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such terms.
"Account" shall mean each Initial Account and each Additional
Account, but shall exclude any Account in which all the Receivables are either
reassigned or assigned to the Transferor or its designee or the Servicer in
accordance with the terms of this Agreement. The definition of Account shall
include each account into which an Account is transferred (a "Transferred
Account"); provided that (i) such transfer is made in accordance with the Credit
Card Guidelines and (ii) such Transferred Account can be traced or identified,
by reference to or by way of the computer files or microfiche lists delivered to
the Trustee pursuant to Section 2.01 or 2.09, as an account into which an
Account has been transferred. The term "Account" shall be deemed to refer to an
Additional Account only from and after the Addition Date with respect thereto,
and the term "Account" shall be deemed to refer to any Removed Account only
prior to the Removal Date with respect thereto.
"Account Originator" shall mean Heritage Bank of Commerce or any
other entity which is the issuer of the credit card relating to an Account
pursuant to a Cardholder Agreement.
"Account Owner" shall mean the Account Originator relating to an
Account or any Person who has acquired such Account and has sold the related
Receivables to the Transferor pursuant to a Receivables Purchase 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 accumulation or other period, including any controlled accumulation
period or rapid accumulation period, in which
<PAGE> 10
Collections of Principal Receivables are accumulated in an account for the
benefit of the Investor Certificateholders of such Series, or a Class within
such Series, in each case as defined for such Series in the related Supplement.
"Act" shall mean the Securities Act of 1933, as amended.
"Addition" shall mean the designation of (i) additional Eligible
Accounts to be included as Accounts or (ii) Participation Interests to be
included as Trust Assets pursuant to subsection 2.09(a), (b) or (d).
"Addition Cut-Off Date" shall mean, with respect to any
Additional Accounts or Participation Interests to be included in the Trust, the
date specified in the related Assignment.
"Addition Date" shall mean (i) with respect to Additional
Accounts, the date on which the Receivables in such Additional Accounts are
conveyed to the Trust pursuant to subsection 2.09(a), (b) or (d) and (ii) with
respect to Participation Interests, the date from and after which such
Participation Interests are to be included as Trust Assets pursuant to
subsection 2.09(a) or (b).
"Additional Account" shall mean each consumer revolving credit
card account established pursuant to a Cardholder Agreement, which account is
designated pursuant to subsection 2.09(a), (b) or (d) to be included as an
Account and is identified in a computer file or microfiche list delivered to the
Trustee by the Transferor pursuant to Sections 2.01 and 2.09.
"Additional Transferors" shall have the meaning specified in
subsection 2.09(e).
"Adverse Effect" shall mean, with respect to any action, that
such action will (a) result in the occurrence of a Pay Out Event or Reinvestment
Event with respect to any Series or (b) materially adversely affect the amount
or timing of distributions to be made to the Investor Certificateholders of any
Series or Class pursuant to this Agreement and the related Supplement.
"Affiliate" shall mean, with respect to any specified Person,
any other Person controlling or controlled by or under common control with such
specified Person. For the purposes of this definition, "control" shall mean the
power to direct the management and policies of a Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Aggregate Invested Amount" shall mean, as of any date of
determination, the sum of (i) the aggregate Invested Amounts of all Series of
Certificates issued and outstanding on such date of determination plus (ii) the
sum of the Enhancement Investor Amounts, if any, for all outstanding Series on
such date of determination.
"Aggregate Series Percentage" shall mean, with respect to
Principal Receivables, Defaulted Receivables and Finance Charge Receivables as
of any date of determination, the sum of the Series Percentages for such
categories of Receivables for all outstanding Series on such
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<PAGE> 11
date of determination; provided, however, that the Aggregate Series Percentage
shall not exceed 100%.
"Agreement" shall mean this Amended and Restated 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, controlled accumulation period, the
principal amortization period, the rapid amortization period, the rapid
accumulation period, the optional amortization period, the limited amortization
period or other amortization period or accumulation 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.
"Assignment" shall have the meaning specified in subsection
2.09(c)(vii).
"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 or Class 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" shall have the meaning specified
in subsection 2.09(d)(i).
"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 (including security entitlements relating thereto),
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, (b) any other day on which banking institutions in New York, New York
(or, with respect to any Series, any additional city specified in the related
Supplement) or any other State in which the principal executive offices of the
Transferor or any Additional Transferor or the Trustee 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.
"Cardholder Agreement" shall mean, with respect to a consumer
revolving credit card account, the agreements between an Account Owner, and the
related Obligor governing the
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<PAGE> 12
terms and conditions of such account, as such agreements may be amended,
modified or otherwise changed from time to time and as distributed (including
any amendments and revisions thereto) to holders of such account.
"Cash Advance Fees" shall have the meaning specified in the
Cardholder Agreement applicable to an Account for cash advance fees or similar
terms.
"Cedel" shall mean Cedelbank, 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.
"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 or as an indirect
participant, in accordance with the rules of such Clearing Agency).
"Certificate Rate" shall mean, with respect to any Series or
Class, the certificate rate 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 the Transferor 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 a 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 of securities deposited with the
Clearing Agency.
"Closing Date" shall mean, with respect to any Series, the
closing date specified in the related Supplement.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
4
<PAGE> 13
"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 (to the extent collected), wire transfers,
electronic transfers, ATM transfers or other form of payment in accordance with
the Cardholder Agreement in effect from time to time. As specified in any
Participation Interest Supplement or Supplement, Collections shall include
amounts received with respect to Participation Interests. All Recoveries with
respect 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 Interchange, calculated pursuant to subsection
2.07(h), 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.
"Commission" shall mean the United States Securities and
Exchange Commission.
"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.
"Contractually Delinquent" with respect to an Account, shall
mean an Account as to which the required minimum payment set forth on the
related billing statement has not been received by the due date thereof.
"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 this Agreement is
located at 101 Barclay Street, 12th Floor East, New York, New York 10286.
"Coupon" shall have the meaning specified in Section 6.01.
"Credit Card Guidelines" shall mean the written policies and
procedures of the Servicer, Heritage Bank of Commerce or any other Account
Owner, as the case may be, relating to the operation of its consumer revolving
lending business, which are consistent with prudent practice, including, without
limitation, the written policies and procedures for determining the
creditworthiness of credit card account customers, the extension of credit to
credit card account customers and relating to the maintenance of credit card
accounts and collection of receivables with respect thereto, as such policies
and procedures may be amended, modified, or otherwise changed from time to time.
"Date of Processing" shall mean, with respect to any transaction
or receipt of Collections, the Business Day such transaction or receipt of
Collections is first recorded on the Servicer's computer file of consumer
revolving credit card accounts (without regard to the effective date of such
recordation).
5
<PAGE> 14
"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 included in any Account the
Receivables of which the related Transferor or the Servicer became obligated to
accept reassignment or assignment in accordance with the terms of this Agreement
during such Monthly Period; provided, however, that, if an Insolvency Event
occurs with respect to the Transferor, the amount of such Defaulted Receivables
which are subject to reassignment to the Transferor in accordance with the terms
of this Agreement shall not be added to the sum so subtracted and, if any of the
events described in subsection 10.01(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 which are charged off as uncollectible in such
Monthly Period in accordance with the Credit Card Guidelines and the Servicer's
customary and usual servicing procedures for servicing consumer revolving credit
card and other revolving credit account receivables comparable to the
Receivables. A Principal Receivable shall become a Defaulted Receivable on the
day on which such Principal Receivable is recorded as charged off on the
Servicer's computer master file of consumer revolving credit card accounts but,
in any event, shall be deemed a Defaulted Receivable no later than the month
following the day the related Account becomes 180 days Contractually Delinquent
unless the Obligor cures such default by making a partial payment which
satisfies the criteria for curing delinquencies set forth in the applicable
Credit Card Guidelines.
"Defeasance" shall have the meaning specified in subsection
12.04(a).
"Defeased Series" shall have the meaning specified in subsection
12.04(a).
"Definitive Certificates" shall have the meaning specified in
Section 6.10.
"Definitive Euro-Certificates" shall have the meaning specified
in Section 6.13.
"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, if applicable with respect to
any Series or Class, the depository agreement among the Transferor, the Trustee
and a Clearing Agency, or as otherwise provided in the related Supplement.
"Determination Date" shall mean, unless otherwise specified in
the related Supplement, with respect to any Distribution Date, the third
Business Day preceding such
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<PAGE> 15
Distribution Date.
"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, unless otherwise defined in a
Supplement with respect to a Series, the fifteenth day of each calendar month
or, if such fifteenth day is not a Business Day, the next succeeding Business
Day.
"Dollars," "$" or "U.S. $" shall mean United States Dollars.
"Eligible Account" shall mean a consumer revolving credit card
account owned by Heritage Bank of Commerce, in the case of the Initial Accounts,
or Heritage Bank of Commerce or other Account Owner, in the case of Additional
Accounts, which accounts are identified by the relevant Account Owner as of the
Initial Cut-Off Date or Addition Cut-Off Date, as applicable, as having the
following characteristics:
(a) is in existence and maintained by Heritage Bank of
Commerce, in the case of the Initial Accounts, or Heritage Bank of Commerce or
other Account Owner in the case of Additional Accounts;
(b) is payable in Dollars;
(c) except as provided below, has not been identified as an
7
<PAGE> 16
account the credit card or cards with respect to which have been reported to the
applicable Account Owner as having been lost or stolen or has an Obligor who has
not been identified as deceased;
(d) the Obligor of which has provided, as his or her billing
address, an address located in the United States (or its territories or
possessions or military address);
(e) except as provided below, does not have any Receivables
which are Defaulted Receivables;
(f) except as provided below, does not have any Receivables
which have been identified by the applicable Account Owner or the relevant
Obligor as having been incurred as a result of fraudulent use of any related
credit card;
(g) was created in accordance with the Credit Card
Guidelines of the applicable Account Originator at the time of creation of such
Account; and
(h) does not have outstanding Receivables which have been
sold or pledged by the related Account Owner to any party other than the
Transferor pursuant to a Receivables Purchase Agreement.
8
<PAGE> 17
Eligible Accounts may include Accounts, the Receivables of which
have been written off, or with respect to which the Transferor believes the
related Obligor is bankrupt, or as to which certain Receivables have been
identified by the Obligor as having been incurred as a result of fraudulent use
of any credit cards, or as to which any credit cards have been reported to the
Account Owner or the Servicer as lost or stolen, in each case as of the Initial
Cut-Off Date, with respect to the Initial Accounts, and as of the related
Addition Cut-Off Date, with respect to Additional Accounts; provided that (a)
the balance of all Receivables included in such Accounts is reflected on the
books and records of the Account Owner (and is treated for purposes of this
Agreement) as "zero," and (b) charging privileges with respect to all such
Accounts have been canceled in accordance with the relevant Credit Card
Guidelines.
"Eligible Institution" shall mean a 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) has
either (i) a long-term unsecured debt rating of A2 or better by Moody's or (ii)
a certificate of deposit rating of P-1 by Moody's, (b) has either (i) a
long-term unsecured debt rating of A by Standard & Poor's or (ii) a certificate
of deposit rating of A-1+ by Standard & Poor's and (c) is a member of the FDIC.
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 Trustee may be considered an Eligible
Institution for the purposes of this definition.
"Eligible Investments" shall mean securities, instruments,
securities entitlements or other investment property with respect to:
(a) direct obligations of, and obligations fully guaranteed
as to timely payment of principal and interest by, the United States of America;
(b) demand deposits, time deposits or certificates of
deposit (having original maturities of no more than 365 days) of depository
institutions or trust companies incorporated under the laws of the United States
of America or any state thereof (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 in the highest investment
category of each Rating Agency;
(c) commercial paper or other short-term obligations having
initial maturities of no more than 270 days, and having, at the time of the
Trust's investment or contractual commitment to invest therein, a rating from
each Rating Agency in its highest investment category;
(d) notes or bankers' acceptances (having original
maturities of no more than 365 days) issued by any depository institution or
trust company referred to in (b) above;
9
<PAGE> 18
(e) investments in money market funds rated in the highest
investment category by each Rating Agency or otherwise approved in writing by
each Rating Agency;
(f) time deposits, other than as referred to in clause (e)
above, with a Person the commercial paper of which has a credit rating from each
Rating Agency in its highest investment category; or
(g) any other investments approved in writing by each Rating
Agency.
"Eligible Receivable" shall mean each Receivable:
(a) which has arisen under an Eligible Account;
(b) which was created in compliance with all Requirements of
Law applicable to the related Account Originator and any institution which owned
the Receivable at the time of its creation, the failure to comply with which
would have a material adverse effect on Investor Certificateholders, and
pursuant to a Cardholder Agreement which complies in all material respects with
all Requirements of Law applicable to the related Account Originator and Account
Owner, the failure to comply with which would have a material adverse effect on
Investor Certificateholders;
(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 or given by the applicable
Account Originator and any subsequent Account Owner, in connection with the
creation of such Receivable or the execution, delivery and performance by the
applicable Account Originator and any subsequent Account Owner of its
obligations, if any, under the related Cardholder Agreement have been duly
obtained or given and are in full force and effect as of such date of creation
of such Receivable;
(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, 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 or the grant of a first priority perfected security
interest therein (and in the proceeds thereof), effective until the termination
of the Trust;
10
<PAGE> 19
(f) which at and after the time of transfer to the Trust is
the legal, valid and binding payment obligation of the Obligor thereon, legally
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 constitutes either an "account" or a "general
intangible" under and as defined in Article 9 of the UCC;
(h) which, at the time of its 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;
(i) which, at the time of its transfer to the Trust, is not
subject to any right of rescission, setoff, counterclaim or any other defense of
the Obligor (including the defense of usury), other than defenses arising out of
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws 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 equity) or as to which the Servicer is required
by Section 3.09 to make an adjustment;
(j) as to which, at the time of its transfer to the Trust,
the relevant Account Originator and any subsequent Account Owner has satisfied
all its obligations required to be satisfied by such time; and
(k) as to which, at the time of its transfer to the Trust,
none of the Transferor, the Servicer, Heritage Bank of Commerce or any other
Account Owner, as the case may be, has taken any action which, or failed to take
any action the omission of which, would, at the time of its transfer to the
Trust, impair the rights of the Trust or the Certificateholders therein.
"Eligible Servicer" shall mean the Trustee, or if the Trustee is
not 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 (including, if
applicable, the ability to service VISA(R)1 credit card accounts), (c) 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 (d) has demonstrated the ability to
professionally and competently service a portfolio of similar accounts in
accordance with high standards of skill and care.
- --------
1 VISA is a registered trademark of VISA USA, Inc.
11
<PAGE> 20
"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.
"Enhancement Investor Amount" shall have the meaning, if
applicable with respect to any Series, specified in the related Supplement.
"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 Excess Finance Charge
Collections, as more specifically set forth in the Supplement. If so specified
in the Supplement for a Group of Series, such Series may be Excess Allocation
Series only for the Series in such Group.
"Excess Finance Charge Collections" shall have the meaning
specified in subsection 4.04(b).
"Excess Funding Account" shall have the meaning specified in
Section 4.02.
"Excess Funding Amount" shall mean the amount on deposit in the
Excess Funding Account.
"Excess Spread" with respect to each Series shall have the
meaning specified in the applicable Supplement.
"Exchange Date" shall mean, with respect to any Series, any date
that is after the related Closing Date, in the case of Definitive
Euro-Certificates in registered form, or upon presentation of certification of
non-United States beneficial ownership (as described in Section 6.13), in the
case of Definitive Euro-Certificates in bearer form.
"FDIC" shall mean the Federal Deposit Insurance Corporation or
any successor.
"Finance Charge Receivables" shall mean all amounts billed to
the Obligors on any Account in respect of (i) Periodic Finance Charges, (ii)
annual membership fees and annual service charges, (iii) Late Fees, (iv)
Overlimit Fees, (v) Cash Advance Fees, (vi) Discount Option Receivables, if any,
and (vii) all other fees and charges with respect to the Accounts designated by
the Transferor to be included as Finance Charge Receivables. Finance Charge
Receivables shall also include (i) the interest portion of Participation
Interests as shall be determined pursuant to the applicable Participation
Interest Supplement or Supplement, (ii) Interchange and (iii) all Recoveries
with respect to Receivables previously charged off as uncollectible.
"Finance Charge Shortfall" shall have the meaning specified in
subsection 4.04(b).
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<PAGE> 21
"FIRREA" shall mean the Financial Institutions Reform, Recovery
and Enforcement Act of 1989, as amended.
"Fitch" shall mean Fitch IBCA, Inc. or its successors.
"Foreign Clearing Agency" shall mean Cedel and the Euroclear
Operator.
"Global Certificate" shall have the meaning specified in
subsection 6.13(a).
"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.
"Heritage Bank of Commerce" shall mean Heritage Bank of
Commerce, a California state chartered bank, and its successors and assigns.
"Ineligible Receivables" shall have the meaning specified in
subsection 2.05(a).
"Initial Account" shall mean each VISA account established
pursuant to a Cardholder Agreement between Heritage Bank of Commerce and any
Person, and identified by account number and by the Receivable balance in a
computer file or microfiche list delivered to the Trustee by the Transferor on
or prior to the Initial Closing Date pursuant to Section 2.01.
"Initial Closing Date" shall mean December 29, 1998.
"Initial Cut-Off Date" shall mean December 1, 1998.
"Insolvency Event" shall have the meaning specified in
subsection 9.01(a)(i).
"Insurance Proceeds" shall mean any amounts recovered by the
Servicer pursuant to any credit insurance policies covering any Obligor with
respect to Receivables under such Obligor's Account.
"Interchange" shall mean the portion allocable to the Accounts
of interchange fees payable to any Account Owner, in its capacity as credit card
issuer, through VISA in connection with cardholder charges for goods, services
and cash advances. Any reference in this Agreement or any Supplement to
Interchange shall refer only to the portion of such interchange fees for any
Monthly Period equal to the product of (i) the total amount of interchange fees
paid or payable to the Transferor with respect to such Monthly Period, (ii) a
fraction the numerator of which is the aggregate amount of cardholder charges
for goods and services in the Accounts with respect to such Monthly Period and
the denominator of which is the aggregate amount of cardholder charges for goods
and services in all VISA consumer revolving credit card accounts owned by the
Transferor with respect to such Monthly Period.
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<PAGE> 22
"Invested Amount" shall mean, with respect to any Series and for
any date, an amount equal to the Invested Amount specified in the related
Supplement.
"Investment Company Act" shall mean the Investment Company Act
of 1940, as amended from time to time.
"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 Cardholder
Agreement applicable to each Account for late fees or similar terms.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, participation or equity interest, deposit
arrangement, encumbrance, lien (statutory or other), preference, 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 (other than
any such financing statement filed for informational purposes only) or
comparable law of any jurisdiction to evidence any of the foregoing, excluding
any lien or filing pursuant to this Agreement; provided, however, that any
assignment or transfer pursuant to subsection 6.03(c) or (d) or Section 7.02
shall not be deemed to constitute a Lien.
"Manager" shall mean the lead manager, manager or co-manager or
Person performing a similar function with respect to an offering of Definitive
Euro-Certificates.
"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 be as designated in the related Supplement.
"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).
"NextCard, Inc." shall mean NextCard, Inc., a Delaware
corporation, and its successors and assigns.
"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
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excluding any merchant.
"Officer's Certificate" shall mean, unless otherwise specified
in this Agreement, a certificate delivered to the Trustee signed by the Chairman
of the Board, President, any Vice President or the Treasurer of the Transferor
or the Servicer, as the case may be.
"Opinion of Counsel" shall mean a written opinion of counsel,
who may be counsel for, or an employee of, the Person providing the opinion and
who shall be reasonably acceptable to the Trustee.
"Overlimit Fees" shall have the meaning specified in the
Cardholder Agreement applicable to each Account for overlimit fees or similar
terms if such fees are provided for with respect to such Account.
"Participation Interests" shall have the meaning specified in
subsection 2.09(a)(ii).
"Participation Interest Supplement" shall mean a Supplement
entered into pursuant to subsections 2.09(a)(ii) and 13.01(a) in connection with
the conveyance of Participation Interests to the Trust.
"Participating Transferor" shall have the meaning specified in
subsection 2.09(c)(i).
"Paying Agent" shall mean any paying agent and co-paying agent
appointed pursuant to Section 6.07 and shall initially be the Trustee; provided,
that if the Supplement for a Series so provides, a Paying Agent may be appointed
with respect to such Series.
"Pay Out Event" shall mean, with respect to each Series, a Trust
Pay Out Event or a Series Pay Out Event.
"Periodic Finance Charges" shall have the meaning specified in
the Cardholder 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, partnership, limited liability company, joint venture, association,
joint-stock company, trust, unincorporated organization, governmental entity or
other entity of similar nature.
"Principal Receivables" shall mean all amounts charged by
Obligors for merchandise and services, cash advances and check advances, but
shall not include Finance Charge Receivables or Defaulted Receivables; provided,
however, that after the Discount Option Date, Principal Receivables on any Date
of Processing thereafter shall mean Principal Receivables as otherwise
determined pursuant to this definition minus the amount of any Discount Option
Receivables. Principal Receivables shall also include the principal portion of
Participation Interests as shall be determined pursuant to the applicable
Participation Interest Supplement or Supplement. In calculating the aggregate
amount of Principal Receivables on any
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day, the amount of Principal Receivables shall be reduced by the aggregate
amount of credit balances in the Accounts on such day. Any Receivables which the
related Transferor is unable to transfer as provided in Section 2.11 shall not
be included in calculating the aggregate amount of Principal Receivables, except
to the extent so provided in Section 2.11.
"Principal Sharing Series" shall mean a Series that, pursuant to
the Supplement therefor, is entitled to receive Shared Principal Collections. If
so specified in the Supplement for a Group of Series, such Series may be a
Principal Sharing Series only for the Series in such Group.
"Principal Shortfalls" shall have the meaning specified in
subsection 4.04(a).
"Principal Terms" shall mean, with respect to any Series, (i)
the name or designation; (ii) the initial principal amount and the Invested
Amount (or method for calculating such 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 Certificateholders of such Series; (vi) the designation of any
Series Accounts and the terms governing the operation of any such Series
Accounts; (vii) the method of calculating the servicing fee with respect
thereto; (viii) the terms of any form of Series Enhancement 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 such
Series consists of more than one Class, the rights and priorities of each such
Class; (xii) the extent to which the Investor Certificates of such Series will
be issuable in temporary or permanent global form (and, in such case, the
depositary for such Global Certificate or Certificates, the terms and
conditions, if any, upon which such Global Certificate may be exchanged, in
whole or in part, for Definitive Certificates, and the manner in which any
interest payable on a temporary or Global Certificate will be paid); (xiii)
whether the Investor Certificates of such Series may be issued as Bearer
Certificates and any limitations imposed thereon; (xiv) the priority of such
Series with respect to any other Series; (xv) the Group, if any, to which such
Series belongs; (xvi) whether or not such Series is a Principal Sharing Series,
whether such Series is an Excess Allocation Series, and (xvii) any other terms
of such Series.
"Qualified Account" shall mean either (a) a segregated trust
account established with the corporate trust department of a Securities
Intermediary or (b) a segregated account with a Securities Intermediary that is
an Eligible Institution.
"Rating Agency" shall mean, with respect to any outstanding
Series or Class, each statistical rating agency, if any, selected by the
Transferor to rate the Investor Certificates of such Series or Class, as
specified in the related Supplement.
"Rating Agency Condition" shall mean, with respect to any
action, that each Rating Agency, if any, shall have notified the Transferor in
writing that such action will not result in a reduction or withdrawal of the
rating of any outstanding Series or Class with respect to which it is a Rating
Agency.
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"Reassignment" shall have the meaning specified in Section 2.10.
"Receivable" shall mean all amounts shown on the Servicer's
records as 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.
"Receivables Transfer Agreements" shall mean (i) the Amended and
Restated Account Origination Agreement by and between the Servicer, the
Transferor and Heritage Bank of Commerce dated as of May 21, 1999, as amended
from time to time in accordance with the terms thereof, and (ii) any receivables
transfer agreement entered into between the Servicer, the Transferor and an
Account Owner in the future; provided, that before the Transferor shall enter
into any additional receivables transfer agreement as described in (ii) of this
definition, (a) the Rating Agency Condition is satisfied with respect to such
receivables transfer agreement and (b) the Transferor shall have delivered to
the Trustee an Officer's Certificate to the effect that such officer reasonably
believes that the execution and delivery of such receivables transfer agreement
and the purchase of Receivables from the Account Owner named therein will not
have an Adverse Effect.
"Record Date" shall mean, with respect to any Distribution Date,
the last Business Day of the preceding Monthly Period, except as otherwise
provided with respect to a Series in the related Supplement.
"Recoveries" shall mean amounts, excluding Insurance Proceeds,
received by the Servicer with respect to Receivables which have previously
become Defaulted Receivables.
"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, with respect to any Series,
such event or events, if any, specified in the Supplement as an event resulting
in a rapid accumulation period with respect to such Series, which may include
events designated herein as Trust Pay Out Events.
"Removal Cut-Off Date" shall have the meaning specified in
subsection 2.10(b).
"Removal Date" shall have the meaning specified in subsection
2.10(a).
"Removal Notice Date" shall have the meaning specified in
subsection 2.10(a).
"Removed Accounts" shall have the meaning specified in Section
2.10.
"Required Designation Date" shall have the meaning specified in
subsection 2.09(a).
"Required Principal Balance" shall mean, as of any date of
determination, an
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amount equal to the difference between (a) the sum of the Invested Amounts for
each Series outstanding on such date, minus (b) the Excess Funding Amount.
"Required Transferor Amount" shall mean, with respect to any
date, an amount equal to (i) the product of the Required Transferor Percentage
and (ii) the sum of the Invested Amounts for each Series outstanding on such
date.
"Required Transferor Percentage" shall mean [*]; provided,
however, that the Transferor may reduce the Required Transferor Percentage upon
(x) 30 days' prior notice to the Trustee and each Rating Agency, (y)
satisfaction of the Rating Agency Condition with respect thereto and (z)
delivery to the Trustee of a certificate of a Vice President or more senior
officer of the Transferor stating that the Transferor reasonably believes that
such reduction will not, based on the facts known to such officer at the time of
such certification, then or thereafter have an Adverse Effect; provided further,
that the Required Transferor Percentage shall not at any time be less than [*].
"Requirements of Law" with respect to any Person shall mean the
certificate of incorporation or articles of association and by-laws or other
organizational or governing documents of such Person, and any law, treaty, rule
or regulation, or determination of an arbitrator or Governmental Authority, in
each case applicable to or binding upon such Person or to which such Person is
subject, whether Federal, state or local (including, without limitation, usury
laws, the Federal Truth in Lending Act and Regulation Z and Regulation B of the
Board of Governors of the Federal Reserve System).
"Responsible Officer" shall mean any officer within the
Corporate Trust Office (or any successor group of the Trustee) including any
Vice President, any Assistant Secretary, any Assistant Treasurer, or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the above-designated officers who has direct responsibility
for the administration of this Agreement and also, with respect to a particular
matter, any other officer to whom such matter is referred because of such
officer's knowledge of and familiarity with the particular subject.
"Revolving Period" shall mean, with respect to any Series, the
period specified as such in the related Supplement.
"Rule 144A" shall mean Rule 144A under the Act, as such Rule may
be amended from time to time.
"Securities Intermediary" shall mean The Bank of New York, a New
York banking corporation, or any other entity that is a depository institution
that in the ordinary course of its business maintains securities accounts for
others and is acting in that capacity and which is organized under the laws of
the United States or any one of the states thereof, including the District of
Columbia (or any domestic branch of a foreign bank) which has a credit rating
from each Rating Agency in one of its generic credit rating categories which
signifies investment grade.
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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"Series" shall mean any series of Investor Certificates
established pursuant to a Supplement.
"Series Account" shall mean any deposit, trust, escrow or
similar account maintained for the benefit of any Series or Class, as specified
in any Supplement.
"Series Enhancement" shall mean the rights and benefits provided
to the Investor Certificateholders of any Series or Class pursuant to any letter
of credit, surety bond, cash collateral account, cash collateral guaranty,
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.
"Series Enhancer" shall mean the Person or Persons providing any
Series Enhancement, other than the Investor Certificateholders of any Series or
Class which is subordinated to another Series or Class.
"Series Pay Out Event" shall mean, with respect to any Series,
each event, if any, specified in the Supplement as a Series Pay Out Event with
respect to such Series.
"Series Percentage" shall have, with respect to Principal
Receivables, Finance Charge Receivables and Defaulted Receivables, and any
Series of Certificates, the meaning stated 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.
"Servicer" shall mean initially NextCard, Inc. and its permitted
successors and assigns, in its capacity as Servicer pursuant to this Agreement,
and thereafter any Person appointed Successor Servicer as herein provided.
"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
any attorney-in-fact of the Servicer, involved in, or responsible for, the
administration and servicing of the Receivables 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 subsection 4.04(a).
"Standard & Poor's" shall mean Standard & Poor's, a division of
The McGraw-
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Hill Companies, or its successor.
"Successor Servicer" shall have the meaning specified in
subsection 10.02(a).
"Supplement" shall mean, with respect to any Series, a
Supplement to this Agreement, executed and delivered in connection with the
original issuance of the Investor
Certificates of such Series pursuant to Section 6.03, and all
amendments thereof and supplements thereto.
"Supplemental Certificate" shall have the meaning specified in
subsection 6.03(c).
"Tax Opinion" shall mean, with respect to any action, an Opinion
of Counsel (which for this purpose shall not include any employee of the
Transferor or any Affiliate thereof) to the effect that, (a) for Federal income
tax purposes, such action will not adversely affect the tax characterization of
Investor Certificates of any outstanding Series or Class that were characterized
as debt at the time of their issuance, (b) such action will not cause the Trust
to be deemed to be an association (or publicly traded partnership) taxable as a
corporation and (c) such action will not cause or constitute an event in which
gain or loss would be recognized by any Investor Certificateholder.
"Termination Notice" shall have the meaning specified in Section
10.01.
"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) NextCard Funding Corp., a
wholly-owned special purpose subsidiary of NextCard, Inc. and incorporated in
the State of Delaware, 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 such entities.
"Transferor Amount" shall mean, on any date of determination, an
amount equal to (i) the sum of (a) an amount equal to the aggregate amount of
Principal Receivables at the end of the day immediately prior to such date of
determination plus (b) the Excess Funding Amount at the end of the day
immediately prior to such date of determination, minus (ii) the sum of the
Invested Amounts for each Series outstanding on such date at the end of such
day.
"Transferor Certificate" shall mean the certificate executed by
the Transferor and authenticated by or on behalf of the Trustee, substantially
in the form of Exhibit A, as the same may be modified in accordance with
subsection 2.09(e).
"Transferor Certificates" shall mean, collectively, the
Transferor Certificate and any outstanding Supplemental Certificates.
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"Transferor Percentage" shall mean, on any date of
determination, when used with respect to Principal Receivables, Finance Charge
Receivables and Defaulted Receivables, a percentage equal to 100% minus the
Aggregate Series Percentage with respect to such categories of Receivables.
"Transferor's Interest" shall have the meaning specified in
Section 4.01.
"Transferred Account" shall have the meaning set forth in the
definition of "Account."
"Trust" shall mean the NextCard Master Trust I created by this
Agreement.
"Trust Assets" shall have the meaning specified in Section 2.01.
"Trust Invested Amount" shall mean the aggregate Invested
Amounts for all outstanding Series of Certificates.
"Trustee" shall mean The Bank of New York, a New York banking
corporation, in its capacity as trustee on behalf of the Trust, or its successor
in interest, or any successor trustee appointed as herein provided.
"Trust Pay Out Event" shall mean each event specified in
subsection 9.01; provided, however, that with respect to any Series, if so
specified in the related Supplement, a Trust Pay Out Event may instead be a
Reinvestment Event.
"UCC" shall mean the Uniform Commercial Code, as amended from
time to time, as in effect in the State of California or any other state or
states where the filing of a financing statement is required to perfect the
Trust's interest in the Receivables and the proceeds thereof or in any other
specified jurisdiction.
"United States" shall mean the United States of America
(including the States and the District of Columbia), its territories, its
possessions and other areas subject to its jurisdiction.
"Vice President" when used with respect to the Transferor or the
Servicer shall mean any vice president thereof whether or not designated by a
number or word or words added before or after the title "vice president."
"VISA" shall mean VISA USA, Inc.
1.2 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.
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(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. To the extent that the definitions of
accounting terms in this Agreement or in any such certificate or other document
are inconsistent with the meanings of such terms under generally accepted
accounting principles or regulatory accounting principles, the definitions
contained in this Agreement or in any such certificate or other document shall
control.
(d) The agreements, representations and warranties of
NextCard Funding Corp. and NextCard, Inc. in this Agreement in each of their
respective capacities as Transferor and as Servicer, shall be deemed to be the
agreements, representations and warranties of NextCard Funding Corp. and
NextCard, Inc. solely in each such capacity for so long as NextCard Funding
Corp. and NextCard, Inc. act in each such capacity under this Agreement.
(e) 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
Section, Schedule or Exhibit are references to Sections, Schedules and Exhibits
in or to this Agreement unless otherwise specified; and the term "including"
means "including without limitation."
(f) Unless otherwise specifically provided herein, the
failure of this Agreement to specify the meaning of a term or the applicability
of a provision to any Series shall not preclude the meaning of such term or the
applicability of such provision with respect to such Series being set forth in
the Supplement therefor.
ARTICLE II
Conveyance of Receivables
2.1. Conveyance of Receivables. By execution of this
Agreement, NextCard Funding Corp., as Transferor, does hereby transfer, assign,
set over and otherwise convey to the Trustee, on behalf of the Trust, for the
benefit of the Certificateholders, all its right, title and interest in, to and
under the Receivables existing at the close of business on the Initial Cut-Off
Date, in the case of Receivables arising in the Initial Accounts, and on each
Addition Cut-Off Date, in the case of Receivables arising in the Additional
Accounts, and in each case thereafter created from time to time until the
termination of the Trust, all monies due or to become due and all amounts
received with respect thereto (including any and all Recoveries) and all
proceeds (including "proceeds" as defined in the UCC) thereof and any other
Trust Assets (as hereinafter defined). Such property, together with all monies
and other property on deposit in or credited to or held in the Collection
Account, the Excess Funding Account, the Series Accounts and any Series
Enhancement 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
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assumption by the Trust, the Trustee, any Investor Certificateholder or any
Series Enhancer of any obligation of Heritage Bank of Commerce or other Account
Owner, or the Servicer, the Transferor, any Additional Transferor 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, merchant clearance systems, VISA or insurers. Any transfer, assignment,
set over and conveyance that this Agreement provides is to be made to the Trust
shall be made to the Trustee, on behalf of the Trust and for the benefit of the
Certificateholders, and each reference in this Agreement to any such transfer,
assignment set over and conveyance shall be construed accordingly.
The Transferor agrees to record and file, at its own expense,
financing statements (and continuation statements when applicable) with respect
to the Receivables 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 the Receivables to the Trustee, and to deliver a
file stamped copy of each such financing statement or other evidence of such
filing (which may, for purposes of this Section 2.01, consist of telephone
confirmation of such filing) to the Trustee on or prior to the Initial Closing
Date, in the case of Receivables arising in the Initial Accounts, and (if any
additional filing is so necessary) the applicable Addition Date, in the case of
Receivables arising in Additional Accounts.
The Transferor further agrees, at its own expense, (a) on or
prior to (x) the Initial Closing Date, in the case of the Initial Accounts, (y)
the applicable Addition Date, in the case of Additional Accounts, and (z) the
applicable Removal Date, in the case of Removed Accounts, to cause each Account
Owner to indicate in its respective computer files and the Transferor will
indicate in its records that Receivables created in connection with the Accounts
(other than Removed Accounts) have been conveyed to the Trustee pursuant to this
Agreement for the benefit of the Certificateholders (or conveyed to the
Transferor or its designee in the case of Removed Accounts) by including (or
deleting in the case of Removed Accounts) in such computer files a clearly
specified code correctly indicating the ownership of the Receivables, and (b) on
or prior to the Initial Closing Date, each Addition Date and each Removal Date,
as applicable, to deliver to the Trustee a computer file or microfiche list
containing a true and complete list of all such Accounts specifying for each
such Account, as of the Initial Cut-Off Date, in the case of the Initial
Accounts, the applicable Addition Cut-Off Date, in the case of Additional
Accounts, and the applicable Removal Cut-Off Date, in the case of Removed
Accounts, its account number, the aggregate amount outstanding in such Account
and the aggregate amount of Principal Receivables outstanding in such Account.
Such file or list, as supplemented from time to time to reflect Additional
Accounts and Removed Accounts, shall be marked as Schedule 1 to this Agreement
and is hereby incorporated into and made a part of this Agreement. The
Transferor agrees not to alter the code or field referenced in clause (a) above
with respect to any Account during the term of this Agreement unless and until
such Accounts become Removed Accounts or unless and until (i) the Transferor
shall give written notice of any such alteration to the Trustee, such written
notice to be as of the date of its receipt by the Trustee incorporated into and
made part of this Agreement, and (ii) the Trustee and the Transferor shall
execute and file any UCC financing statement or amendment thereof necessitated
by such
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alteration.
2.2. Acceptance by Trustee.
(a) The Trustee hereby acknowledges its acceptance on behalf
of the Trust of all right, title and interest to the property, now existing and
hereafter created, conveyed to the Trustee 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.
(b) The Trustee hereby agrees not to disclose to any Person
(or to any other department or operating division of the Trustee, other than the
corporate trust department of the Trustee or, if the Trustee shall be appointed
the Successor Servicer, such other departments or operating divisions of the
Trustee as shall be necessary to fulfill its duties as Servicer), any of the
account numbers or other information contained in the computer files or
microfiche lists marked as Schedule 1 or otherwise 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,
(iv) to bona fide creditors or potential creditors of any Account Owner, the
Servicer or any Transferor for the limited purpose of enabling any such creditor
to identify Receivables or Accounts subject to this Agreement or the Receivables
Transfer Agreements or (v) after consultation with the Transferor, as requested
by any Person in connection with the financing statements filed pursuant to this
Agreement. The Trustee also agrees not to use any of the foregoing information
for any purpose other than for the purposes provided for in this Agreement. The
Trustee agrees to take such measures as shall be reasonably requested by the
Transferor to protect and maintain the security and confidentiality of such
information and, in connection therewith, will allow the Transferor to inspect
the Trustee's security and confidentiality arrangements from time to time during
normal business hours. The Trustee shall provide the Transferor with notice five
Business Days prior to any disclosure pursuant to 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 or any Supplement.
2.3. Representations and Warranties of Each Transferor
Relating to Such Transferor. Each Transferor hereby represents and warrants to
the Trust as of each Closing Date (but only if it was a Transferor on such date)
that:
(a) Organization and Good Standing. Such Transferor is a
corporation duly organized and validly existing in good standing under the laws
of the jurisdiction of its organization or incorporation, and has in all
material respects, full corporate power and authority to own or lease its
properties and conduct its business as such properties are presently owned or
leased and such business is presently conducted, to execute, deliver and perform
its obligations under this Agreement, any Receivables Transfer Agreement to
which it is a party and each applicable Supplement and to execute and deliver to
the Trustee the Certificates pursuant hereto.
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(b) Due Qualification. Such Transferor is duly qualified to
do business and is in good standing as a foreign corporation (or is exempt from
such requirements), 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 Cardholder Agreement relating to an Account
specified in a Receivables Transfer Agreement with such Transferor or any
Receivable transferred to the Trustee by such Transferor unenforceable by such
Transferor, the Servicer or the Trustee or (ii) would have a material adverse
effect on the interests of the Certificateholders hereunder or under any
Supplement; provided, however, that no representation or warranty is made with
respect to any qualification, licenses or approvals which the Trustee has or may
be required at any time to obtain, if any, in connection with the transactions
contemplated hereby.
(c) Due Authorization. (i) The execution, delivery and
performance of this Agreement, each Receivables Transfer 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 Transfer
Agreement to which it is a party and each Supplement have been duly authorized
by such Transferor by all necessary corporate action on the part of such
Transferor and (ii) this Agreement, each Receivables Transfer Agreement to which
it is a party and each Supplement will remain, from the time of its execution,
an official record of such Transferor.
(d) No Conflict. The execution and delivery by such
Transferor of this Agreement, each Receivables Transfer Agreement to which it is
a party, each Supplement and the Certificates, the performance by such
Transferor of the transactions contemplated by this Agreement, each Receivables
Transfer Agreement to which it is a party and each Supplement and the
fulfillment by such Transferor of the terms hereof and thereof applicable to
such Transferor will not conflict with or violate any Requirement of Law
applicable to such Transferor or conflict with, result in any breach of any of
the material terms and provisions of, or constitute (with or without notice or
lapse of time or both) a material default under, any indenture, contract,
agreement, mortgage, deed of trust, or other instrument to which such Transferor
is a party or by which it or any of 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 court, regulatory body, administrative
agency, or other tribunal or governmental instrumentality (i) asserting the
invalidity of this Agreement, any Receivables Transfer Agreement to which it is
a party, any Supplement or the Certificates, (ii) seeking to prevent the
issuance of the Certificates or the consummation of any of the transactions
contemplated by this Agreement, any Receivables Transfer Agreement to which it
is a party, any Supplement or the Certificates, (iii) seeking any determination
or ruling that, in the reasonable judgment of such Transferor, would materially
and adversely affect the performance by such Transferor of its obligations under
this Agreement, any Receivables Transfer Agreement to which it is a party, or
any Supplement, (iv) seeking any determination or ruling that, in the reasonable
judgment of such Transferor, materially and adversely affect the validity or
enforceability of this Agreement,
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any Receivables Transfer Agreement to which it is a party, any Supplement or the
Certificates or (v) seeking to affect adversely the income tax attributes of the
Trust or any Certificates under the United States Federal or any State income or
franchise tax systems.
(f) All Consents Required. All approvals, authorizations,
consents, orders or other actions of any Person or of any governmental body or
official 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 Transfer Agreement to which it is a party, each Supplement and
the Certificates, the performance by such Transferor of the transactions
contemplated by this Agreement, each Receivables Transfer Agreement to which it
is a party and each Supplement and the fulfillment by such Transferor of the
terms hereof and thereof, have been duly obtained, effected or given and are in
full force and effect except for approvals, authorizations, consents, orders or
other actions which if not obtained will not individually or in the aggregate
have any material adverse effect upon the ability of the Transferor to perform
its obligations hereunder; and provided, however, that such Transferor makes no
representation or warranty regarding state securities or "blue sky" laws in
connection with the distribution of the Certificates.
(g) Insolvency. No Insolvency Event with respect to such
Transferor has occurred and the transfer of the Receivables by such Transferor
to the Trust has not been made in contemplation of the occurrence thereof.
The representations and warranties of each Transferor set forth
in this Section 2.03 shall survive the transfer and assignment by such
Transferor of the respective Receivables to the Trust. Upon discovery by such
Transferor, the Servicer or the Trustee of a breach of any of the
representations and warranties by such Transferor set forth in this Section
2.03, the party discovering such breach shall give prompt written notice to the
others. Such Transferor agrees to cooperate with the Servicer and the Trustee in
attempting to cure any such breach. For purposes of the representations and
warranties set forth in this Section 2.03, each reference to a Supplement shall
be deemed to refer only to those Supplements in effect as of the relevant
Closing Date.
2.4. Representations and Warranties of Each Transferor
Relating to the Agreement, the Receivables Transfer Agreements and Any
Supplement and the Receivables.
(a) Representations and Warranties. Each Transferor hereby
represents and warrants to the Trust as of each Closing Date and, with respect
to Additional Accounts the Receivables in which are being transferred by such
Transferor to the Trust, as of the related Addition Date (but only if, in either
case, it was a Transferor on such date) that:
(i) this Agreement, any Receivables Transfer
Agreement to which it is a party, each Supplement and, in the
case of Additional Accounts, the related Assignment, 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
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limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect
affecting the enforcement of creditors' rights generally from
time to time in effect or general principles of equity (whether
considered in a suit at law or in equity);
(ii) as of the Initial Cut-Off Date and as of
the related Addition Date with respect to Additional Accounts,
the portion of Schedule 1 to this Agreement under such
Transferor's name, as supplemented on such date, is an accurate
and complete listing of all the Accounts the Receivables in
which were transferred by such Transferor as of the Initial
Cut-Off Date or such Addition Cut-Off Date, as the case may be,
and the information contained therein with respect to the
identity of such Accounts and the Receivables existing
thereunder is true and correct as of the Initial Cut-Off Date or
such Addition Cut-Off Date, as the case may be;
(iii) each Receivable conveyed to the Trustee
by such Transferor has been conveyed to the Trust free and clear
of any Lien of any Person claiming through or under such
Transferor or any of its Affiliates (other than Liens permitted
under subsection 2.07(b)) and in compliance with all
Requirements of Law applicable to such Transferor;
(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 duly
obtained, effected or given and are in full force and effect;
(v) either this Agreement or, in the case of
Additional Accounts, the related Assignment constitutes an
absolute sale, transfer and assignment to the Trustee of all
right, title and interest of such Transferor in the Receivables
conveyed to the Trustee by such Transferor and the proceeds
thereof or, if this Agreement or, in the case of Additional
Accounts, the related Assignment does not constitute an absolute
sale of such property, it constitutes a grant by such Transferor
of a "security interest" (as defined in the UCC) in such
property to the Trustee, which, in the case of existing
Receivables and the proceeds thereof, is enforceable upon
execution and delivery of this Agreement or, with respect to
then-existing Receivables in Additional Accounts, as of the
applicable Addition Date, and which will be enforceable with
respect to such Receivables hereafter and thereafter created and
the proceeds thereof upon such creation. Upon the filing of the
financing statements pursuant to Sections 2.01 and 2.09 and, in
the case of Receivables hereafter created and the proceeds
thereof, upon the creation thereof, the Trustee shall have a
first priority perfected security or ownership interest in such
property and proceeds except for (x) Liens permitted under
subsection 2.07(b), (y) the interests of the Transferor as
Holder of the Transferor Certificate or any Supplemental
Certificate, and (z) the
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Transferor's right, if any, to interest accruing on and
investment earnings, if any, in respect of the Collection
Account or any Series Account, as provided in this Agreement or
the related Supplement; provided, however, that such Transferor
makes no representation or warranty with respect to the effect
of Section 9-306 of the UCC on the rights of the Trustee to
proceeds held by such Transferor;
(vi) except as otherwise expressly provided
in this Agreement or any Supplement, neither such Transferor nor
any Person claiming through or under such Transferor has any
claim to or interest in the Collection Account, the Excess
Funding Account, any Series Account or any Series Enhancement;
(vii) on the Initial Cut-Off Date, each
Initial Account specified in Schedule 1 with respect to such
Transferor is an Eligible Account and, on the applicable
Addition Cut-Off Date, each related Additional Account specified
in Schedule 1 with respect to such Transferor is an Eligible
Account;
(viii) on the Initial Cut-Off Date, each
Receivable then existing and conveyed to the Trustee by such
Transferor is an Eligible Receivable and, on the applicable
Addition Cut-Off Date, each Receivable contained in any related
Additional Account and conveyed to the Trustee by such
Transferor is an Eligible Receivable;
(ix) as of the date of the creation of any
new Receivable in an Account specified in a Receivables Transfer
Agreement with such Transferor, such Receivable is an Eligible
Receivable; and
(x) no selection procedures believed by such
Transferor to be materially adverse to the interests of the
Investor Certificateholders have been used in selecting the
Initial Accounts or Additional Accounts.
(b) Notice of Breach. The representations and warranties of
each Transferor set forth in this Section 2.04 shall survive the transfer and
assignment by such Transferor of Receivables to the Trustee. Upon discovery by
such Transferor, the Servicer or the Trustee of a breach of any of the
representations and warranties by such Transferor set forth in this Section
2.04, the party discovering such breach shall give prompt written notice to the
others. Such Transferor agrees to cooperate with the Servicer and the Trustee in
attempting to cure any such breach. For purposes of the representations and
warranties set forth in this Section 2.04, each reference to a Supplement shall
be deemed to refer only to those Supplements in effect as of the date of the
relevant representations or warranties.
2.5. Reassignment of Ineligible Receivables.
(a) Reassignment of Receivables. In the event (i) any
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representation or warranty contained in subsection 2.04(a)(ii), (iii), (iv),
(vii), (viii), (ix) or (x) is not true and correct in any material respect as of
the date specified in the applicable subsection with respect to any Account or
the related Receivables transferred to the Trust by such Transferor and as a
result of such breach any Receivables in the related Account become Defaulted
Receivables or the Trust's rights in, to or under such Receivables or the
proceeds of such Receivables are impaired or such proceeds are not available for
any reason to the Trust free and clear of any Lien, unless cured within 60 days
(or such longer period, not in excess of 150 days, as may be agreed to by the
Trustee) after the earlier to occur of the discovery thereof by such Transferor
or receipt by such Transferor of notice thereof given by the Trustee, or (ii) it
is so provided in subsection 2.07(a) with respect to any Receivables transferred
to the Trust by such Transferor, then such Transferor shall accept reassignment
of all Receivables in the related Account ("Ineligible Receivables") on the
terms and conditions set forth in paragraph (b) below; provided, however, that
such Receivables will not be deemed to be Ineligible Receivables and will not be
reassigned to such Transferor 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)
above 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 clause (ii) above the circumstances causing such Receivable to
become an Ineligible Receivable shall no longer exist and (y) such Transferor
shall have delivered to the Trustee an Officer's Certificate describing the
nature of such breach and the manner in which the relevant representation and
warranty became true and correct. The Transferor will notify the Rating Agencies
of any such breach that is not cured within the time periods specified above.
(b) Price of Reassignment. The Servicer shall deduct the
portion of the Ineligible Receivables reassigned to each Transferor which are
Principal Receivables from the aggregate amount of Principal Receivables used to
calculate the Transferor Amount, the Series Percentages and any other percentage
used to allocate within or among Series that is applicable to any Series. 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 12:00 noon, New York City time,
on the first Distribution Date following the Monthly Period in which such
reassignment obligation arises, the relevant Transferor shall make a deposit
into the Excess Funding Account in immediately available funds in an amount
equal to the amount by which the Transferor Amount would be reduced below the
Required Transferor Amount (up to the amount of such Principal Receivables).
Upon the deposit, if any, required to be made to the Excess
Funding Account as provided in this Section and the reassignment of Ineligible
Receivables, the Trustee, on behalf of the Trust, shall automatically and
without further action be deemed to transfer, assign, set over and otherwise
convey to the relevant Transferor or its designee, without recourse,
representation or warranty, all the right, title and interest of the Trust in
and to such Ineligible 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 reasonably be requested by the relevant Transferor
to effect the conveyance of Ineligible Receivables pursuant to this Section. The
obligation of each Transferor
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to accept reassignment of any Ineligible Receivables, and to make the deposits,
if any, required to be made to the Excess Funding Account as provided in this
Section, shall constitute the sole remedy respecting the event giving rise to
such obligation available to Certificateholders (or the Trustee on behalf of the
Certificateholders).
2.6. Reassignment of Receivables 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), (v) or (vi) is not true and correct in
any material respect and such breach has a material adverse effect on the
Certificateholders' Interest in the Receivables transferred to the Trust by such
Transferor, then either the Trustee or the Holders of Investor Certificates
evidencing more than 50% of the Aggregate Invested Amount, 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
Receivables transferred 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 150 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 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 became
true and correct. The Transferor will notify the Rating Agencies of any such
breach that is not cured within the time periods specified above.
The relevant Transferor shall deposit in the Collection Account
in immediately available funds not later than 12:00 noon, New York City time, on
the first Distribution Date following the Monthly Period in which such
reassignment obligation arises, in payment for such reassignment, an amount
equal to the sum of the amounts specified therefor with respect to each
outstanding Series in the related Supplement. Notwithstanding anything to the
contrary in this Agreement, such amounts shall be distributed on such
Distribution Date in accordance with Article IV and the terms of each
Supplement.
Upon the deposit, if any, required to be made to the Collection
Account as provided in this Section and the reassignment of the Receivables, the
Trustee, on behalf of the Trust, shall automatically and without further action
be deemed to transfer, assign, set over and otherwise convey to the relevant
Transferor or its designee, without recourse, representation or warranty, all
the 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 reasonably be
requested by the relevant Transferor to effect the conveyance of such
Receivables pursuant to this Section. The obligation of each Transferor to
accept reassignment of any Receivables, and to make the deposits, if any,
required to be made to the Collection Account as provided in this section, shall
constitute the sole remedy respecting the event giving rise to such obligation
available to Certificateholders (or the Trustee on behalf of the
Certificateholders) or any Series Enhancer.
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2.7. Covenants of the Transferor. Each Transferor hereby
covenants as follows:
(a) Receivables to be Accounts or General Intangibles.
Except in connection with the enforcement or collection of a Receivable, such
Transferor will take no action to cause any Receivable transferred by it to the
Trust to be evidenced by any instrument or chattel paper (as defined in the UCC)
and, if any such Receivable is so evidenced, it shall be deemed to be an
Ineligible Receivable in accordance with subsection 2.05(a) and shall be
reassigned to such Transferor in accordance with subsection 2.05(b).
(b) Security Interests. Except for the conveyances
hereunder, such 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 transferred by it to the Trust, whether now existing or hereafter
created, or any interest therein; such Transferor will immediately notify the
Trustee of the existence of any Lien on any such Receivable; and such Transferor
shall defend the right, title and interest of the Trust in, to and under such
Receivables, whether now existing or hereafter created, against all claims of
third parties claiming through or under such Transferor; provided, however, that
nothing in this subsection 2.07(b) shall prevent or be deemed to prohibit such
Transferor from suffering to exist upon any of the Receivables transferred by it
to the Trust any Liens for municipal or other local taxes if such taxes shall
not at the time be due and payable or if such Transferor shall currently be
contesting the validity thereof in good faith by appropriate proceedings and
shall have set aside on its books adequate reserves with respect thereto.
(c) Transferor's Interest. Except for the conveyances
hereunder, in connection with any transaction permitted by Section 7.02 and as
provided in Sections 2.09(e) and 6.03, such Transferor agrees not to transfer,
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 or grant shall be void.
(d) Delivery of Collections. In the event that such
Transferor receives Collections, such Transferor agrees to pay the Servicer all
such Collections as soon as practicable after receipt thereof but in no event
later than two Business Days after the Date of Processing by the Transferor.
(e) Notice of Liens. Such Transferor shall notify the
Trustee promptly after becoming aware of any Lien on any Receivable other than
the conveyances hereunder and under the Receivables Transfer Agreements or Liens
permitted under subsection 2.07(b).
(f) Other Indebtedness. Such Transferor shall not incur any
additional debt, unless the Rating Agency is provided with notice no later than
the fifth Business Day prior to the incurrence of such additional debt (unless
the right to such notice is waived by the Rating Agency) and the Rating Agency
Condition is satisfied with respect to the incurrence of such debt.
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(g) Separate Corporate Existence. Such Transferor shall:
(i) Maintain in full effect its existence,
rights and franchises as a corporation under the laws of the
state of its 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
Transfer 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 bank or securities
account or accounts, separate from those of any Affiliate of
such Transferor, with commercial financial institutions. The
funds and other property 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 Transfer Agreement to which it is a
party, the funds and other property 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
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 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 Affiliates
shall be only on an arm's-length basis and shall receive the
approval of such Transferor's Board of Directors 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 stockholders
and Affiliates. To the extent that such Transferor and any of
its stockholders or Affiliates have offices in
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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 and observe all
necessary, appropriate and customary corporate formalities,
including, but not limited to, holding all regular and special
stockholders' and directors' meetings appropriate to authorize
all corporate 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
limited to, payroll and intercompany transaction accounts.
Regular stockholders' and directors' 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 a duly
appointed director of such Transferor who shall not have been,
at the time of such appointment or at any time in the preceding
five years, (i) a direct or indirect legal or beneficial owner
(beyond a nominal amount) of such Transferor or more than 5% of
the outstanding voting stock of any of its Affiliates, (ii) a
creditor, supplier, employee, officer, director, family member,
manager or contractor of such Transferor or any of its
Affiliates, or (iii) a person who controls (whether directly,
indirectly or otherwise) such Transferor or any of its
Affiliates or any creditor, supplier, employee, officer,
director, manager or contractor of such Transferor or any of its
Affiliates).
(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 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 name and
through its own authorized officers 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 Transfer 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.
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(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 nor shall such Transferor make any
loans to any Person.
(xiii) Ensure that any financial reports
required of such Transferor shall be issued separately from, but
may be consolidated with, any reports prepared for any of its
Affiliates so long as such consolidated reports contain
footnotes describing the effect of the transactions between the
Transferor and such Affiliate and also state that the assets of
the Transferor are not available to pay creditors of the
Affiliate.
(xiv) Ensure that at all times it is
adequately capitalized to engage in the transactions
contemplated in its Certificate of Incorporation.
(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.
Not later than 3:00 p.m., New York City time, on the related Transfer Date, the
Transferor shall deposit into the Collection Account, in immediately available
funds, the amount of Interchange to be so included as Collections of Finance
Charge Receivables with respect to such Monthly Period.
2.8. Covenants of Each Transferor with Respect to
Receivables Transfer Agreements. Each Transferor hereby covenants that it will
at all times enforce the covenants and agreements of the Account Owners under
the terms of the Receivables Transfer Agreements to which it is a party,
including covenants to the effect set forth below:
(a) Periodic Finance Charges and Other Fees. (i) Except (x)
as otherwise required by any Requirements of Law, or (y) as is deemed by the
Account Owner to be necessary in order for it to maintain its credit card
business on a competitive basis based on a good faith assessment by it of the
nature of its competition in the credit card business, it shall not at any time
reduce the annual percentage rate of the Periodic Finance Charges assessed on
the Receivables transferred by it to the Transferor or other fees charged on any
of the Accounts owned by it if, as a result of any such reduction, either (i)
such Account Owner's reasonable expectation is that such reduction will cause a
Pay Out Event or Reinvestment Event to occur or (ii) such reduction is not also
applied to any comparable segments of consumer revolving credit card accounts
owned by such Account Owner which have characteristics the same as, or
substantially similar to, such Accounts.
(b) Cardholder Agreements and Credit Card Guidelines. Such
Account Owner shall comply with and perform its obligations under the Cardholder
Agreements relating to the Accounts owned by it and the Credit Card Guidelines
and all applicable rules and regulations of VISA except insofar as any failure
so to comply or perform would not materially and adversely affect the rights of
the Trust or the Certificateholders hereunder. Subject to compliance with all
Requirements of Law and paragraph (a) above, such Account Owner may
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change the terms and provisions of the Cardholder Agreements or the Credit Card
Guidelines with respect to any of the Accounts owned by it in any respect
(including the calculation of the amount or the timing of charge-offs and the
Periodic Finance Charges and other fees to be assessed thereon) only if in the
reasonable judgment of such Account Owner such change is made applicable to any
comparable segment of the consumer revolving credit card accounts owned by such
Account Owner which have characteristics the same as, or substantially similar
to, such Accounts. Notwithstanding the above, unless required by Requirements of
Law or as permitted by Section 2.08(a), no Account Owner will take any action
with respect to the applicable Credit Card Agreements or the applicable Credit
Card Guidelines, which, at the time of such action, the Account Owner reasonably
believes will have a material adverse effect on the Investor Certificateholders.
(c) VISA. Such Account Owner, to the extent applicable to
Accounts owned or serviced by such Account Owner, shall use its best efforts to
remain, either directly or indirectly, a member in good standing of the VISA
system and any other similar entity's or organization's system relating to any
other type of consumer revolving credit card accounts included as Accounts.
Each Transferor further covenants that it will not enter into
any amendments to a Receivables Transfer Agreement or enter into a new
Receivables Transfer Agreement unless the Rating Agency Condition has been
satisfied.
2.9. Addition of Accounts.
(a) Additional Accounts.
(i) Required Additions. If on any
Determination Date, as of the close of business on the last
Business Day of the preceding Monthly Period, the Transferor
Amount is less than the Required Transferor Amount, the
Transferor shall on or prior to the close of business on the
10th Business Day following such Determination Date (the
"Required Designation Date"), unless the Transferor Amount
exceeds the Required Transferor Amount as of the close of
business on any day after the last Business Day of such Monthly
Period and prior to the Required Designation Date, cause to be
designated additional Eligible Accounts to be included as
Accounts as of the Required Designation Date or any earlier date
in a sufficient amount such that, after giving effect to such
addition, the Transferor Amount as of the close of business on
the applicable Addition Date is at least equal to the Required
Transferor Amount on such date. The failure of any condition set
forth in paragraph (c) below, as the case may be, shall not
relieve the Transferor of its obligation pursuant to this
paragraph; provided, however, that the failure of the Transferor
to transfer Receivables to the Trust as provided in this clause
(i) solely as a result of the unavailability of a sufficient
amount of Eligible Receivables shall not constitute a breach of
this Agreement; provided further, that any such failure which
has not been timely cured may nevertheless result in the
occurrence
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of a Pay Out Event or Reimbursement Event.
(ii) Optional Participation Interests. In
lieu of, or in addition to, designating Additional Accounts
pursuant to clause (i) above, the Transferor may, subject to the
conditions specified in paragraph (c) below, convey to the Trust
participations (including 100% participations) representing
undivided interests in a pool of assets primarily consisting of
revolving credit card receivables and any interests in any of
the foregoing, including securities representing or backed by
such receivables and collections thereon ("Participation
Interests"). The addition of Participation Interests in the
Trust pursuant to this paragraph (a) or paragraph (b) below
shall be effected by a Participation Interest Supplement, dated
the applicable Addition Date and entered into pursuant to
subsection 13.01(a).
(b) Restricted Additions. Each Transferor may from time to
time, at its sole discretion, subject to the conditions specified below,
designate additional Eligible Accounts to be included as Accounts or
Participation Interests to be included as Trust Assets, in either case as of the
applicable Addition Date.
(c) Conditions to Required Additions, Optional Participation
Interests and Restricted Additions. On the Addition Date with respect to any
Additional Accounts or Participation Interests designated pursuant to subsection
2.09(a) or (b), the Transferor shall transfer the Receivables in such Additional
Accounts (and such Additional Accounts shall be deemed to be Accounts for
purposes of this Agreement) or shall transfer such Participation Interests, in
each case as of the close of business on the applicable Addition Date, subject
to the satisfaction of the following conditions:
(i) on or before the tenth Business Day
immediately preceding the Addition Date, each Transferor which
owns any such Additional Account or is transferring any such
Participation Interest to the Trust (a "Participating
Transferor") shall have given the Trustee and each Rating Agency
written notice that the Additional Accounts or Participation
Interests will be included and specifying the applicable
Addition Date, the Addition Cut-Off Date, and the approximate
number of accounts expected to be added and the approximate
aggregate balances expected to be outstanding in the accounts to
be added (in the case of Additional Accounts);
(ii) in the case of Additional Accounts, the
Participating Transferor shall have delivered to the Trustee
copies of UCC-1 financing statements covering such Additional
Accounts, if necessary to perfect the Trust's interest in the
Receivables arising therein;
(iii) as of each of the Addition Cut-Off Date
and the Addition Date, no Insolvency Event with respect to the
Participating Transferor or the Account Owner of the Additional
Accounts shall have occurred nor shall the transfer of the
Receivables arising in the Additional
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Accounts or of the Participation Interests to the Trust have
been made in contemplation of the occurrence thereof;
(iv) except in the case of an Addition
pursuant to subsection 2.09(a)(i), the Rating Agency Condition
shall have been satisfied;
(v) each Participating Transferor shall have
delivered to the Trustee an Officer's Certificate, dated the
Addition Date, stating that (x) in the case of Additional
Accounts, as of the applicable Addition Cut-Off Date, the
Additional Accounts are all Eligible Accounts, (y) to the extent
applicable, the conditions set forth in clauses (ii) through
(iv) above and (viii) below have been satisfied and (z) such
Participating Transferor reasonably believes that the addition
by such Participating Transferor of the Receivables arising in
the Additional Accounts or of the Participation Interests to the
Trust will not, based on the facts known to such officer at the
time of such addition, then or thereafter result in an Adverse
Effect with respect to any Series;
(vi) the Participating Transferors shall have
delivered to the Trustee and each Rating Agency an Opinion of
Counsel, dated the Addition Date, in accordance with subsection
13.02(d);
(vii) in the case of designation of Additional
Accounts, Participating Transferors shall have delivered to the
Trustee (x) the computer file or microfiche list required to be
delivered pursuant to Section 2.01 with respect to such
Additional Accounts and (y) a duly executed, written assignment
(including an acceptance by the Trustee for the benefit of the
Certificateholders), substantially in the form of Exhibit B (the
"Assignment"); and
(viii) to the extent required by Section 4.03,
the Servicer shall have deposited in the Collection Account all
Collections with respect to such Automatic Additional Accounts
since the Addition Cut-off Date.
(d) Automatic Account Additions.
(i) Each Transferor may from time to time,
at its sole discretion, subject to and in compliance with the
limitations specified below, designate Eligible Accounts
("Automatic Additional Accounts") to be included as Accounts as
of the applicable Addition Date. For purposes of this paragraph,
Eligible Accounts shall be deemed to include only consumer
revolving credit card accounts of the same nature as those
included as Initial Accounts.
(ii) Within 30 days after the Addition Date
with respect to any Automatic Additional Accounts, the relevant
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Transferor shall have delivered to the Trustee and each Rating
Agency an Opinion of Counsel in accordance with subsection
13.02(d), with respect to the Automatic Additional Accounts
included as Accounts on such Addition Date, confirming the
validity and perfection of the transfer of such Automatic
Additional Accounts. If such Opinion of Counsel with respect to
any Automatic Additional Accounts is not so received, the
ability of such Transferor to designate Automatic Additional
Accounts will be suspended until such time as each Rating Agency
otherwise consents in writing. If such Transferor is unable to
deliver an Opinion of Counsel with respect to any Automatic
Additional Account, such inability shall be deemed to be a
breach of the representation in subsection 2.04(a)(viii) with
respect to the Receivables in such Automatic Additional Account
for purposes of Section 2.05; provided, that the cure period for
such breach shall not exceed 30 days.
(iii) Each Participating Transferor shall have
delivered to the Trustee copies of UCC-1 financing statements
covering such Automatic Additional Accounts, if necessary to
perfect the Trust's interest in the Receivables arising therein.
(iv) As of each of the Addition Cut-Off Date
and the Addition Date, no Insolvency Event with respect to any
Participating Transferor or the Account Owner of the Additional
Accounts shall have occurred nor shall the transfer of the
Receivables arising in the Automatic Additional Accounts to the
Trust have been made in contemplation of the occurrence thereof.
(v) Each Participating Transferor shall have
delivered to the Trustee an Officer's Certificate, dated the
Addition Date, stating that (x) as of the applicable Addition
Cut-Off Date, such Automatic Additional Accounts are all
Eligible Accounts, (y) to the extent applicable, the conditions
set forth in clauses (ii) through (v) above have been satisfied
and (z) such Participating Transferor reasonably believes that
the addition by such Participating Transferor of the Receivables
arising in such Automatic Additional Accounts will not, based on
the facts known to such officer at the time of such addition,
then or thereafter result in an Adverse Effect with respect to
any Series.
(vi) The Participating Transferor shall have
delivered to the Trustee (x) the computer file or microfiche
list required to be delivered pursuant to Section 2.01 with
respect to such Automatic Additional Accounts and (y) a duly
executed Assignment.
(e) Additional Transferors. The Transferor may designate
Affiliates of NextCard, Inc. to be included as Transferors ("Additional
Transferors") under this Agreement by 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
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Transferor's interest in the Transferor's Interest; provided, however, that
prior to any such designation and exchange the conditions set forth in
subsection 6.03(c) or 6.03(d), as applicable, shall have been satisfied with
respect thereto.
2.10. Removal of Accounts and Participation Interests. On any
day of any Monthly Period each Transferor shall have the right to designate
certain Accounts to be removed as Accounts and to require the reassignment to it
or its designee of all the Trust's right, title and interest in, to and under
the Receivables then existing and thereafter created in such Removed Accounts,
all monies due or to become due and all amounts received with respect thereto
and all proceeds thereof in or with respect to such Accounts or Participation
Interests conveyed to the Trust by a Transferor. The removal of Accounts
specified for removal (the "Removed Accounts") and Participation Interests
specified for removal ("Removed Participation Interests") are subject to the
satisfaction of the following conditions:
(a) on or before the fifth Business Day immediately
preceding the Removal Date (the "Removal Notice Date"), such Transferor shall
have given the Trustee, the Servicer, each Rating Agency and any Series Enhancer
written notice of such removal, specifying the date for removal of the Removed
Accounts or Participation Interests (the "Removal Date");
(b) with respect to Removed Accounts, on or prior to the
Removal Date, such Transferor shall have amended Schedule 1 by delivering to the
Trustee a computer file or microfiche list containing a true and complete list
of the Removed Accounts specifying for each such Account, as of the last day of
the Monthly Period preceding the Removal Notice Date (the "Removal Cut-Off
Date"), its account number, the aggregate amount outstanding in such Account and
the aggregate amount of Principal Receivables outstanding in such Account;
(c) with respect to Removed Accounts, such Transferor shall
have represented and warranted as of the Removal Date that the list of Removed
Accounts delivered pursuant to paragraph (b) above, as of the Removal Cut-Off
Date, is true and complete in all material respects;
(d) the Rating Agency Condition shall have been satisfied
with respect to such removal;
(e) such Transferor shall have delivered to the Trustee an
Officer's Certificate, dated the Removal Date, to the effect that such
Transferor reasonably believes that (i) such removal will not, based on the
facts known to such officer at the time of such certification, then or
thereafter cause an Adverse Effect to occur with respect to any Series, (ii) no
selection procedure believed by such Transferor to be materially adverse to the
interests of the Investor Certificateholders of any Series as of the Removal
Date have been used in selecting the Removed Accounts or Participation
Interests, (iii) to the extent applicable, the conditions set forth in
subsections (c), (d) and (f) of this Section 2.10 have been satisfied and (iv)
no selection procedure was used which was intended to include a
disproportionately higher level of Defaulted Receivables in the Removed Accounts
than exist in the Accounts and the removal of such Accounts is not for the
intended purpose of mitigating losses to the Trust; and
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(f) as of the Removal Cut-Off Date, no more than 10% of the
Receivables outstanding are more than thirty days Contractually Delinquent.
Upon satisfaction of the above conditions, the Trustee shall
execute and deliver to the relevant Transferor or its designee a written
reassignment in substantially the form of Exhibit C (the "Reassignment") and
shall, without further action, be deemed to transfer, assign, set over and
otherwise convey to such Transferor or its designee, effective as of the Removal
Date, without recourse, representation or warranty, all the right, title and
interest of the Trust in and to the Participation Interests or Receivables
arising in the Removed Accounts, all monies due and to become due and all
amounts received with respect thereto and all proceeds thereof. In addition, the
Trustee shall execute such other documents and instruments of transfer or
assignment and take such other actions as shall reasonably be requested by the
relevant Transferor to effect the conveyance of Participation Interests or
Receivables pursuant to this Section 2.10.
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 9.02 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 of Receivables
transferred to the Trust by such Transferor, including Collections of
Receivables transferred to the Trust by such Transferor 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 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
or the Servicer is 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
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terms of each Supplement.
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
increasing, 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.
ARTICLE III
Administration and Servicing
of Receivables
3.1. Acceptance of Appointment and Other Matters Relating to
the Servicer.
(a) NextCard, Inc. agrees to act as the Servicer under this
Agreement and the Certificateholders by their acceptance of Certificates consent
to NextCard, Inc. acting as Servicer.
(b) The Servicer shall service and administer the
Receivables, shall collect payments due under the Receivables and shall charge
off as uncollectible Receivables, all in accordance with its customary and usual
servicing procedures for servicing credit card receivables comparable to the
Receivables and in accordance with the Credit Card Guidelines. The Servicer
shall have full power and authority, acting alone or through any party properly
designated by it hereunder, to do any and all things in connection with such
servicing and administration which it may deem necessary or desirable. Without
limiting the generality of the foregoing, subject to Section 10.01 and provided
NextCard, Inc. is the Servicer, the Servicer or its designee is hereby
authorized and empowered (i) unless such power and authority is revoked by the
Trustee as a result of the occurrence of a Servicer Default, to make withdrawals
and payments or to instruct the Trustee in writing to make withdrawals and
payments from the Collection Account, the Excess Funding Account and any Series
Account, as set forth in this Agreement or any Supplement, and (ii) to take any
action required or permitted under any Series
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Enhancement, as set forth in this Agreement or any Supplement. Without limiting
the generality of the foregoing and subject to Section 10.01, the Servicer or
its designee is hereby authorized and empowered 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 laws or reporting requirements. The Trustee shall furnish the
Servicer with any powers of attorney or other documents necessary or appropriate
to enable the Servicer to carry out its servicing and administrative duties
hereunder.
(c) The Servicer shall not 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 in connection with servicing other credit card receivables.
(d) The Servicer shall comply with and perform its servicing
obligations with respect to the Accounts and Receivables in accordance with the
Cardholder Agreements relating to the Accounts and the Credit Card Guidelines
and all applicable rules and regulations of VISA and any other similar entity or
organization relating to any other type of consumer revolving credit card
accounts included as Accounts, 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, any Paying Agent and any Transfer Agent and Registrar and
independent accountants and all other fees and expenses, including the costs of
filing UCC financing and continuation statements, 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, franchise and other taxes, if
any, or any interest or penalties with respect thereto, assessed on the Trust).
(f) The Servicer agrees that upon a request by the
Transferor it will use its reasonable best efforts to obtain and maintain the
listing of the Investor Certificates of any Series or Class on any specified
security exchange. If any such request is made, the Servicer shall give notice
to the Transferor and the Trustee on the date on which such Investor
Certificates are approved for such listing and within three Business Days
following receipt of notice by the Servicer of any actual, proposed or
contemplated delisting of such Investor Certificates by any such securities
exchange. The Trustee or the Servicer, each in its sole discretion, may
terminate any listing on any such securities exchange at any time subject to the
notice requirements set forth in the preceding sentence.
3.2. Servicing Compensation. As full compensation for its
servicing activities hereunder and as reimbursement for any expense incurred by
it in
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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 (i) the Certificateholders'
Interest of a particular Series with respect to any Monthly Period (the "Monthly
Servicing Fee") and (ii) the Enhancement Investor Amount, if any, 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 paid by the Certificateholders' Interest or
the Enhancement Investor Amount, if any, of a 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.
3.3. Representations, Warranties and Covenants of the
Servicer. NextCard, Inc., as initial Servicer, hereby makes, and any Successor
Servicer by its appointment hereunder shall make, on each Closing Date (and on
the date of any such appointment), the following representations, warranties and
covenants:
(a) Organization and Good Standing. The Servicer is duly
organized, validly existing and in good standing under the laws of the
jurisdiction governing its creation, and has full corporate power and authority
to execute, deliver and perform its obligations under this Agreement and each
Supplement and, in all material respects, to own or lease its properties and
conduct its business as such properties are presently owned or leased and as
such business is presently conducted.
(b) Due Qualification. The Servicer is duly qualified to do
business and is in good standing as a foreign corporation (or is exempt from
such requirements), and has obtained all necessary licenses and approvals in
each jurisdiction in which the performance of its obligations pursuant to this
Agreement or under any Supplement requires such licenses and approvals and shall
maintain such licenses and approvals except to the extent that such failure
would not have a material adverse effect on the interests of the Investor
Certificateholders hereunder or under any Supplement.
(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 corporate action on
the part of the Servicer and this Agreement and each Supplement will remain,
from the time of its execution, an official record 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
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its terms, except as 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).
(e) 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, violate, 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
default under, any Requirement of Law applicable to the Servicer or any
indenture, contract, agreement, mortgage, deed of trust or other instrument to
which the Servicer is a party or by which it or any of its properties are bound.
(f) No Proceedings. There are no proceedings or
investigations pending or, to the best knowledge of the Servicer, threatened
against the Servicer before any court, regulatory body, administrative agency or
other tribunal or governmental instrumentality seeking to prevent the issuance
of the Certificates or the consummation of any of the transactions contemplated
by this Agreement or any Supplement, 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, or seeking any determination or ruling that, in the
reasonable judgment of the Servicer, would materially and adversely affect the
validity or enforceability of this Agreement or any Supplement.
(g) Compliance with Requirements of Law. The Servicer shall
duly satisfy all obligations on its part to be fulfilled under or in connection
with the Receivables and the related Accounts, will maintain in effect all
qualifications required under Requirements of Law in order to service the
Receivables and the related Accounts properly and will comply in all material
respects with all other Requirements of Law in connection with servicing the
Receivables and the related Accounts, the failure to comply with which would
have a material adverse effect on the interests of the Certificateholders.
(h) No Rescission or Cancellation. Subject to Section 3.09,
the Servicer shall not permit any rescission or cancellation of a Receivable
except as ordered by a court of competent jurisdiction or other Governmental
Authority or in the ordinary course of its business and in accordance with the
Credit Card Guidelines.
(i) Protection of Certificateholders' Rights. The Servicer
shall take no action which, nor omit to take any action the omission of which,
would substantially impair the rights of Certificateholders in any Receivable or
Account, nor shall it, except in the ordinary course of its business and in
accordance with the Credit Card Guidelines, reschedule, revise or defer
Collections due on the Receivables.
(j) Receivables Not To Be Evidenced by Promissory Notes.
Except in connection with its enforcement or collection of a Receivable, the
Servicer will take no action to cause any Receivable to be evidenced by any
instrument (as defined in the UCC) and, if
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any Receivable is so evidenced as a result of the actions of the Servicer, it
shall be reassigned or assigned to the Servicer as provided in this Section.
(k) All Consents Required. All approvals, authorizations,
consents, orders or other actions of any Person or of any governmental body or
official required in connection with the execution and delivery by the Servicer
of this Agreement and each Supplement, the performance by the Servicer of the
transactions contemplated by this Agreement and each Supplement and the
fulfillment by the Servicer of the terms hereof and thereof, have been obtained,
except such approvals, authorizations, consents, orders or other actions which
if not obtained, effected or given will not, individually or in the aggregate,
have any material adverse effect upon the execution and delivery by the Servicer
of this Agreement or any Supplement or the performance by the Servicer of the
transactions contemplated by this Agreement and each Supplement and the
fulfillment by the Servicer of the terms hereof and thereof; and provided,
however, that the Servicer makes no representation or warranty regarding state
securities or "blue sky" laws in connection with the distribution of the
Certificates.
For purposes of the representations and warranties set forth in
this Section 3.03, each reference to a Supplement shall be deemed to refer only
to those Supplements in effect as of the relevant Closing Date or the date of
appointment of a Successor Servicer, as applicable.
In the event any of the representations, warranties or covenants
of the Servicer contained in paragraph (g), (h), (i) or (j) with respect to any
Receivable or the related Account is breached, and as a result of such breach
the Trust's rights in, to or under any Receivable in the related Account or the
proceeds of such Receivable are impaired or such proceeds are not available for
any reason to the Trust free and clear of any Lien, then no later than the
expiration of 60 days (or such longer period, not in excess of 150 days, as may
be agreed to by the Trustee) from 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, all Receivables in the Account or Accounts to which such event
relates shall be reassigned or assigned to the Servicer on the terms and
conditions set forth below; provided, however, that such Receivables will not be
reassigned or assigned to the Servicer if, on any day prior to the end of such
60-day or longer period, (i) the relevant representation and warranty shall be
true and correct, or the relevant covenant shall have been complied with, in all
material respects and (ii) the Servicer shall have delivered to the Trustee a
certificate of an authorized officer describing the nature of such breach and
the manner in which such breach was cured.
The Servicer shall effect such assignment by making a deposit
into the Collection Account in immediately available funds on the Transfer Date
following the Monthly Period in which such assignment obligation arises in an
amount equal to the amount of such Receivables, which deposit shall be
considered a Collection of Principal Receivables and shall be applied in
accordance with Article IV and the terms of each Supplement.
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,
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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. 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.
3.4. Reports and Records for the Trustee.
(a) Daily Records. On each Business Day, the Servicer, upon
prior written notice by the Trustee, shall make or cause to be made available at
the office of the Servicer on any Business Day during normal business hours for
inspection by the Trustee 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 the Accounts
and (ii) the amount of Receivables as of the close of business on the second
preceding Business Day. 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.
(b) Monthly Servicer's Certificate. Not later than the
Determination Date immediately preceding each Distribution Date, the Servicer
shall, with respect to each outstanding Series, deliver to the Trustee, the
Paying Agent and each Rating Agency a certificate of a Servicing Officer in
substantially the form set forth in the related Supplement.
3.5. Annual Certificate of Servicer. The Servicer shall
deliver to the Trustee and each Rating Agency, on or before March 31, of each
calendar year, beginning with March 31, 2000, an Officer's Certificate (with
appropriate insertions) substantially in the form of Exhibit D.
3.6. Annual Servicing Report of Independent Public
Accountants; Copies of Reports Available.
(a) On or before March 31, of each calendar year, beginning
with March 31, 2000, the Servicer shall cause a firm of nationally recognized
independent public accountants (who may also render other services to the
Servicer or the Transferor or any Account Owner) to furnish a report (addressed
to the Trustee) to the Trustee, the Servicer and each Rating Agency to the
effect that they have applied certain procedures agreed upon with the Servicer
and examined certain documents and records relating to the servicing of the
Receivables under this Agreement and each Supplement for the prior calendar year
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 set forth in Articles III and IV and Section 8.08
of this Agreement and the applicable provisions of each Supplement, except for
such exceptions as they
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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.
(b) On or before March 31, of each calendar year, beginning
with March 31, 2000, the Servicer shall cause a firm of nationally recognized
independent public accountants (who may also render other services to the
Servicer or the Transferor or any Account Owner) to furnish a report (addressed
to the Trustee) to the Trustee, the Servicer and each Rating Agency to the
effect that they have applied certain procedures 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 computer reports which 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.
(c) A copy of each certificate and report provided pursuant
to subsection 3.04(b), 3.05 or 3.06 may be obtained by any Investor
Certificateholder or Certificate Owner by a request to the Trustee addressed to
the Corporate Trust Office.
3.7. 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 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. The parties hereto agree that they shall not cause or
permit the making, as applicable, of any election under Treasury Regulation
Section 301.7701-3 whereby the Trust or any portion thereof would be treated as
a corporation for federal income tax purposes and, except as required by Section
11.11, shall not file tax returns or obtain any federal employer identification
number for the Trust but shall treat the Trust as a security device for such
purposes. The provisions of this Agreement shall be construed in furtherance of
the foregoing intended tax treatment.
3.8. Notices to NextCard, Inc. In the event that NextCard,
Inc. is no longer acting as Servicer, any Successor Servicer shall deliver to
NextCard, Inc. each certificate and report required to be provided thereafter
pursuant to subsection 3.04(b), 3.05 or 3.06.
3.9. Adjustments.
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(a) If the Servicer adjusts downward the amount of any
Receivable because of a rebate, refund, unauthorized charge or billing error to
an account holder, or because such Receivable was created in respect of
merchandise which was refused or returned by an account holder, or if the
Servicer otherwise adjusts downward the amount of any Receivable without
receiving Collections therefor or charging off such amount as uncollectible or
for other reasons relating to the financial condition of the Obligor thereof,
then, in any such case, the amount of Principal Receivables used to calculate
the Transferor Amount, the Series Percentages and any other percentage used to
allocate within or among Series applicable to any Series will be reduced by the
amount of the adjustment. Similarly, the amount of Principal Receivables used to
calculate the Transferor Amount, the Series Percentages and any other percentage
used to allocate within or among Series applicable to any Series will be reduced
by the amount of any Receivable which was discovered as having been created
through a fraudulent or counterfeit charge. 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 12:00 noon, New York City time, on the third
Business Day following the Monthly Period in which such adjustment obligation
arises, the Transferor which transferred such Principal Receivables to the Trust
shall make a deposit into the Excess Funding Account in immediately available
funds in an amount equal to the amount by which the Transferor Amount would be
below the Required Transferor Amount (up to the amount of such Principal
Receivables).
(b) If (i) the Servicer makes a deposit into the Collection
Account in respect of a Collection of a Receivable and such Collection was
received by the Servicer in the form of a check which is not honored for any
reason or (ii) the Servicer makes a mistake with respect to the amount of any
Collection and deposits an amount that is less than or more than the actual
amount of such Collection, the Servicer shall appropriately adjust the amount
subsequently deposited into the Collection Account to reflect such dishonored
check or mistake. Any Receivable in respect of which a dishonored check is
received shall be deemed not to have been paid.
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 cooperate in any reasonable request of the Servicer in
connection with such filings.
3.11. Reports to Rating Agencies. The Servicer agrees to
deliver the following to each Rating Agency (unless one or more of such Rating
Agencies agrees in writing to waive receipt of such reports, in which case, the
reports need not be delivered to the Rating Agency or Rating Agencies which
waived the requirement):
(a) Within 30 days after the Addition Date with respect to
any Automatic Additional Accounts (as defined in subsection 2.09(d) of this
Agreement), unless the
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Rating Agency Condition has been satisfied with respect to the designation of
such Automatic Additional Accounts, the Servicer shall deliver to each Rating
Agency a written report which shall contain (i) the aggregate number of
Automatic Additional Accounts designated to the Trust during the three
consecutive Monthly Periods ending with the Monthly Period in which such
Addition Date occurred and the aggregate amount of Principal Receivables
contained in such Automatic Additional Accounts; (ii) the aggregate number of
Automatic Additional Accounts designated to the Trust during the 12 consecutive
Monthly Periods ending with the Monthly Period in which such Addition Date
occurred and the aggregate amount of Principal Receivables contained in such
Automatic Additional Accounts; (iii) the number of Accounts and the amount of
Principal Receivables in the Trust as of the first day of the three consecutive
Monthly Periods described in (i) above occurred; (iv) the number of Accounts and
the amount of Principal Receivables in the Trust as of the first day of the 12
consecutive Monthly Periods described in (ii) above; (v) the percentage which
the number of Automatic Additional Accounts described in (i) above is of the
number of Accounts described in (iii) above; (vi) the percentage which the
amount of Principal Receivables described in (i) above is of the amount of
Principal Receivables described in (iii) above; (vii) the percentage which the
number of Automatic Additional Accounts described in (ii) above is of the number
of Accounts described in (iv) above; and (viii) the percentage which the amount
of Principal Receivables described in (ii) above is of the amount of Principal
Receivables described in (iv) above.
(b) Not later than the Determination Date in each month, the
Servicer shall deliver to each Rating Agency a written report setting forth, as
of the last day of the immediately preceding Monthly Period, the number of
Accounts which had addresses located in the territories or possessions of the
United States or which were military addresses not located in the United States
and the amount of Principal Receivables in such Accounts; provided that the
report described in this provision (b) shall not be required if the number of
such Accounts is less than 1% of all Accounts as of the end of such Monthly
Period and the amount of Principal Receivables in such Accounts is less than 1%
of all Principal Receivables as of the end of such Monthly Period.
ARTICLE IV
Rights of Certificateholders and
Allocation and Application of Collections
4.1. 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 Excess Funding Account allocable to
Certificateholders of such Series pursuant to this Agreement and such
Supplement, funds on deposit in any related Series Account and
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funds available pursuant to any related Series Enhancement (collectively, with
respect to all Series, the "Certificateholders' Interest"), it being understood
that 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 this Agreement or any Supplement to
be paid to the Holders of the Transferor Certificates (the "Transferor's
Interest"); provided, however, that the Transferor Certificates shall not
represent any interest in the Collection Account, the Excess Funding Account,
any Series Account or any Series Enhancement, except as specifically provided in
this Agreement or any Supplement; provided further, that the foregoing shall not
be construed to limit the Trustee's obligations to make payments to the Holders
of the Transferor Certificates, the Transferor and the Servicer as and when
required under this Agreement and any Supplement.
4.2. Establishment of Collection Account and Excess Funding
Account; Appointment of Securities Intermediary. The Servicer, for the benefit
of the Certificateholders, shall cause to be established and maintained in the
name of the Trustee, on behalf of the Trust, a Qualified Account with a
Securities Intermediary bearing a designation clearly indicating that the funds
and other property credited thereto are held for the benefit of the
Certificateholders (the "Collection Account"). The Collection Account shall
consist of two segregated subaccounts: (1) the "Collection Account Investment
Subaccount," to which financial assets credited to the Collection Account shall
be credited, and as to which financial assets the Securities Intermediary
undertakes to treat the Trustee as entitled to exercise the rights that comprise
such financial assets; and (2) the "Collection Account Cash Subaccount," to
which money or instruments deposited in the Collection Account shall be
credited. The Trustee shall possess all right, title and interest in all funds
and other property on deposit from time to time in or credited to the Collection
Account including the subaccounts therein and all proceeds thereof. The
Collection Account including the subaccounts therein 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 against, and no right to otherwise deduct from,
any funds held in the Collection Account and the subaccounts therein for any
amount owed to it by the Trustee, the Trust, any Certificateholder or any Series
Enhancer. If, at any time, the Collection Account or any subaccount therein
ceases to be a Qualified Account, the Trustee (or the Servicer on its behalf)
shall within ten 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 cash or any
investments to such new Collection Account and from the date such new Collection
Account is established, it shall be the "Collection Account."
Funds on deposit in the Collection Account (other than amounts
deposited pursuant to Section 2.06, 10.01 or 12.02) shall be invested by the
Trustee in Eligible Investments in accordance with written instructions of the
Servicer. All such Eligible Investments shall be held by the Trustee or its
nominee for the benefit of the
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Certificateholders in the Collection Account Investment Subaccount. The Trustee
shall maintain for the benefit of the Certificateholders possession of the
instruments or securities, if any, evidencing such Eligible Investments.
Delivery of any Eligible Investment to the Trustee, and custody of the same by
the Trustee, may be through the Securities Intermediary. Investments of funds
representing Collections collected during any Monthly Period shall be invested
in Eligible Investments that will mature so that funds will be available at the
close of business on the Transfer Date following such Monthly Period. Unless
directed by the Servicer in writing, funds deposited in the Collection Account
on a Transfer Date with respect to the next following Distribution Date are not
required to be invested overnight. For purposes of determining the availability
of funds or the balances in the Collection Account for any reason under this
Agreement, all investment earnings net of investment expenses and losses on such
funds shall be deemed not to be available or on deposit.
The Servicer, for the benefit of the Certificateholders, shall
cause to be established and maintained in the name of the Trustee, on behalf of
the Trust, a Qualified Account with a Securities Intermediary bearing a
designation clearly indicating that the funds and other property deposited
therein or credited thereto are held for the benefit of the Certificateholders
(the "Excess Funding Account"). The Excess Funding Account shall consist of two
segregated subaccounts: (i) the "Excess Funding Investment Subaccount," to which
financial assets credited to the Excess Funding Account shall be credited, and
as to which financial assets the Securities Intermediary undertakes to treat the
Trustee as entitled to exercise the rights that comprise such financial assets;
and (ii) the "Excess Funding Account Cash Subaccount," to which money or
instruments deposited in the Excess Funding Account shall be credited. The
Trustee shall possess all right, title and interest in all funds and other
property on deposit from time to time in or credited to the Excess Funding
Account including the subaccounts therein and all proceeds thereof. The Excess
Funding Account including any subaccounts therein 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 against, and no right to otherwise deduct from,
any funds held in the Excess Funding Account and the subaccounts therein for any
amount owed to it by the Trustee, the Trust, any Certificateholder or any Series
Enhancer. If, at any time, the Excess Funding Account or any subaccount therein
cease to be a Qualified 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 Excess Funding
Account meeting the conditions specified above, transfer any cash or any
investments to such new Excess Funding Account and from the date such new Excess
Funding Account is established, it shall be the "Excess Funding Account."
Funds on deposit in the Excess Funding Account shall be invested
by the Trustee in Eligible Investments in accordance with written instructions
of the Servicer. All such Eligible Investments shall be held by the Trustee or
its nominee for the benefit of the Certificateholders in the Excess Funding
Investment Subaccount. Delivery of any Eligible Investment to the Trustee, and
custody of the same by the Trustee, may be through the Securities Intermediary.
The Trustee shall maintain for the benefit of the Certificateholders possession
of the instruments or securities, if any, evidencing such Eligible Investments.
Funds on deposit in the Excess Funding Account on any date (after giving effect
to any withdrawals from the Excess Funding Account on such date) will be
invested in Eligible Investments that will mature so that funds will be
available at
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the close of business on the Transfer Date following such date. Unless directed
by the Servicer in writing, funds deposited in the Excess Funding Account on a
Transfer Date with respect to the next following Distribution Date are not
required to be invested overnight. On each Transfer Date, the Servicer shall
instruct the Trustee to withdraw on the related Distribution Date from the
Excess Funding Account and deposit in the Collection Account all interest and
other investment earnings (net of losses and investment expenses) on funds and
other property on deposit in or credited to the Excess Funding Account, for
application as Collections of Finance Charge Receivables with respect to the
prior Monthly Period. Interest (including reinvested interest) and other
investment income and earnings on funds and other property on deposit in or
credited to the Excess Funding Account shall not be considered part of the
Excess Funding Amount for purposes of this Agreement. On each Business Day on
which funds are on deposit in the Excess Funding Account, the Servicer shall
determine the lesser of (x) the amount by which the Transferor Amount exceeds
the Required Transferor Amount on such date and (y) the amount by which the
aggregate amount of Principal Receivables exceeds the Required Principal Balance
and shall instruct the Trustee to withdraw such lesser amount, if any, from the
Excess Funding Account (to the extent of funds on deposit therein on such date)
and pay such amount to the Holders of the Transferor Certificates. On any
Transfer Date on which one or more Series is in an Accumulation Period or
Amortization Period, the Servicer shall determine the aggregate amount of
Principal Shortfalls, if any, with respect to each such Series that is a
Principal Sharing Series (after giving effect to the allocation and payment
provisions in the Supplement with respect to each such Series), and the Servicer
shall instruct the Trustee to withdraw such amount (up to the Excess Funding
Amount) from the Excess Funding Account on the succeeding Distribution Date and
allocate such amount among each such Series as Shared Principal Collections as
specified herein and in each related Supplement.
The Bank of New York is hereby appointed as the initial
Securities Intermediary hereunder and The Bank of New York hereby accepts such
appointment.
The Securities Intermediary shall be, and The Bank of New York
as initial Securities Intermediary hereunder hereby represents that it is, as of
the date hereof and shall be for so long as it is the Securities Intermediary
hereunder a corporation or national bank that it is a securities intermediary as
defined in the UCC. The Securities Intermediary shall agree and The Bank of New
York, as Securities Intermediary does hereby agree with the parties hereto that
each of the Collection Account Investment Subaccount and the Excess Funding
Account Investment Subaccount shall be an account to which financial assets may
be credited and shall undertake to treat the Trustee as entitled to exercise
rights that comprise such financial assets. The Securities Intermediary shall
acknowledge and The Bank of New York does hereby acknowledge that the
"securities intermediary's jurisdiction" as defined in the UCC as in effect in
the State of New York with respect to the Eligible Investments, shall be the
State of New York. The Securities Intermediary shall represent and covenant and
The Bank of New York does hereby represent and covenant that it is not and will
not be (as long as it is the Securities Intermediary hereunder) a party to any
agreement that is inconsistent with the provisions of this Agreement. The
Securities Intermediary shall covenant and The Bank of New York does hereby
covenant that it will not take any action inconsistent with the provisions of
this Agreement applicable to it.
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It is the intent of the Trustee, the Servicer and the Transferor
that each of the Collection Account Subaccount and the Excess Funding Account
Investment Subaccount shall be a securities account of the Trustee and not an
account of the Transferor or the Servicer. Nonetheless, (i) the Securities
Intermediary shall agree to comply with entitlement orders originated by the
Trustee without further consent by the Transferor or the Servicer, (ii) The Bank
of New York as initial Security Intermediary agrees that for so long as it is
the Securities Intermediary hereunder, it will comply with entitlement orders
originated by the Trustee without further consent by the Transferor or the
Servicer; and (iii) the Securities Intermediary covenants that it will not agree
with any person other than the Trustee to comply with entitlement orders
originated by such other person, and The Bank of New York as initial Securities
Intermediary covenants that, for so long as it is the Securities Intermediary,
it will not agree with any person other than the Trustee to comply with
entitlement orders originated by such other person.
4.3. Collections and Allocations.
(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 or as
expressly provided in any Supplement with respect to Collections allocated to
the related Series, the Servicer shall deposit Collections into the Collection
Account no later than the second Business Day following the Date of Processing
of such Collections. Subject to the first proviso in Section 4.04, but
notwithstanding anything else in this Agreement to the contrary, with respect to
any Monthly Period, (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
and pay them to the Holders of the Transferor Certificate. 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) Allocations for the Transferor Certificates. Throughout
the existence of the Trust, unless otherwise stated in any Supplement, the
Servicer shall allocate to the Holders of the Transferor Certificates an amount
equal to the product of (a) the Transferor Percentage and (b) the aggregate
amount of such Collections allocated to Principal Receivables and Finance Charge
Receivables, respectively, in respect of each Monthly Period. Notwithstanding
anything in this Agreement to the contrary, unless otherwise stated in any
Supplement, the Servicer need not deposit this amount or any other amounts so
allocated to the Transferor Certificates pursuant to any Supplement into the
Collection Account and shall pay such amounts as collected to the Holders of the
Transferor Certificates.
The payments to be made to the Holders of the Transferor
Certificates pursuant to this subsection 4.03(b) do not apply to deposits to the
Collection Account or other amounts that
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do not represent Collections, including payment of the acquisition price for
Receivables pursuant to Section 2.06 or 10.01, proceeds from the sale,
disposition or liquidation of Receivables pursuant to Section 12.02 or payment
of the acquisition price for the Certificateholders' Interest of a specific
Series pursuant to the related Supplement.
4.4. Shared Collections.
(a) On each Distribution Date, (i) the Servicer shall
allocate Shared Principal Collections to each Principal Sharing Series, pro
rata, in proportion to the Principal Shortfalls, if any, with respect to each
such Series and (ii) 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 or this Agreement specify
are to be treated as "Shared Principal Collections" for such Distribution Date
over (y) the aggregate amount for all outstanding Principal Sharing Series which
the related Supplements specify are "Principal Shortfalls" for such Distribution
Date; provided, however, that if, on any Distribution Date the Transferor Amount
is less than or equal to the Required Transferor Amount, the Servicer will not
distribute to the Holders of the Transferor Certificates any Shared Principal
Collections that otherwise would be distributed to the Holders of the Transferor
Certificates but shall deposit such funds in the Excess Funding Account.
Notwithstanding the foregoing, a Group of Series may specify in their related
Supplement that Shared Principal Collections from such Series shall be allocated
as provided above but only among the Series in such Group.
(b) On each Distribution Date, (i) the Servicer shall
allocate Excess Finance Charge Collections (as described below) to each Excess
Allocation Series pro rata, in proportion to the Finance Charge Shortfalls (as
described below), if any, with respect to each such Series and (ii) 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 Finance Charge
Receivables which the related Supplements specify are to be treated as "Excess
Finance Charge Collections" for such Distribution Date over (y) the aggregate
amount for all outstanding Series which the related Supplements specify are
"Finance Charge Shortfalls" for such Series and such Distribution Date. A Group
of Series may specify in their related Supplement that Excess Finance Charge
Collections from such Series shall be allocated as provided above but only among
the Series in such Group.
4.5. Additional Withdrawals from the Collection Account. On
or before the Determination Date with respect to any Monthly Period, the
Servicer shall determine the amounts payable to Heritage Bank of Commerce or any
other Account Owner with respect to such Monthly Period under the applicable
Receivables Transfer Agreement in respect of amounts on deposit in the
Collection Account, if any, that were not transferred to the Transferor under
such Receivables Transfer Agreement, and the Servicer shall withdraw such
amounts from the Collection Account and pay such amount to Heritage Bank of
Commerce or other Account Owner, as applicable.
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4.6. Allocation of Trust Assets to Series or Groups. To the
extent so provided in the Supplement for any Series or in an amendment to this
Agreement executed pursuant to subsection 13.01(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 to such Receivables or
Participation Interests, may be allocated 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 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 Transferor shall have delivered to
the Trustee an Officer's Certificate, dated the date of such
allocation, to the effect that the Transferor 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.
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.
ARTICLE VI
The Certificates
6.1. The Certificates. The Investor Certificates of any
Series or Class may be issued in bearer form ("Bearer Certificates") with
attached interest coupons and any other applicable coupon (collectively, the
"Coupons") or in fully registered form ("Registered Certificates") and 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 issuance be
executed and delivered by the Transferor to the Trustee for authentication and
redelivery as provided in
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Section 6.02. Except as otherwise provided in Section 6.03 or in any Supplement,
Bearer Certificates and Registered Certificates shall be issued in minimum
denominations of $100,000 and in integral multiples of $1,000 in excess thereof.
If specified in any Supplement, the Investor Certificates of any Series or Class
shall be issued upon initial issuance as a single certificate evidencing the
aggregate original principal amount of such Series or Class as described in
Section 6.13. 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
respective President or any Vice President. 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 related Closing Date. All
Registered Certificates and Transferor Certificates shall be dated the date of
their authentication.
6.2. Authentication of Certificates. The Trustee shall
authenticate and deliver the Investor Certificates of each Series and Class that
are issued upon original issuance to or upon the order of the Transferor against
payment to the Transferor of the purchase price therefor. The Trustee shall
authenticate and deliver the Transferor Certificate to the Transferor
simultaneously with its delivery of the Investor Certificates of the first
Series to be issued hereunder. 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.
6.3. New Issuances.
(a) The Transferor may from time to time direct the Trustee,
on behalf of the Trust, to authenticate 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 Closing 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 terms of such Supplement may
modify or amend any of the terms of this Agreement solely as applied to such new
Series. The obligation of the Trustee to authenticate the Investor Certificates
of such new Series and to execute and deliver the related Supplement is subject
to the satisfaction of the following conditions:
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(i) on or before the fifth day immediately
preceding the Closing Date, the Transferor shall have given the
Trustee and the Servicer notice of such issuance and the Closing
Date; and on or before the tenth day immediately preceding the
Closing Date, the Transferor shall have given each Rating Agency
notice of such issuance;
(ii) the Transferor shall have delivered to
the Trustee the related Supplement, in form satisfactory to the
Trustee, executed by each party thereto other than the Trustee;
(iii) the Transferor shall have delivered to
the Trustee any related Enhancement Agreement executed by each
of the parties thereto, other than the Trustee;
(iv) the Rating Agency Condition shall have
been satisfied with respect to such issuance;
(v) the Transferor shall have delivered to
the Trustee an Officer's Certificate, dated the Closing Date, to
the effect that the Transferor reasonably believes that such
issuance will not, based on the facts known to such officer at
the time of such certification, then or thereafter cause a Pay
Out Event or a Reinvestment Event to occur with respect to any
Series; and
(vi) the Transferor shall have delivered to
the Trustee and each Rating Agency a Tax Opinion, dated the
Closing Date, with respect to such issuance.
Upon satisfaction of the above conditions, the Trustee shall
execute the Supplement and authenticate the Investor Certificates of such Series
upon execution thereof by the Transferor.
(c) The Transferor may surrender the Transferor Certificate
to the Trustee in exchange for a newly issued Transferor Certificate and one or
more additional certificates (each a "Supplemental Certificate"), the terms of
which shall be defined in a supplement to this Agreement (which supplement shall
be subject to subsection 13.01(a) only to the extent that it amends any of the
terms of this Agreement), to be delivered to or upon the order of the Transferor
(or the Holder of a Supplemental Certificate, in the case of the transfer or
exchange thereof, as provided below), upon satisfaction of the following
conditions:
(i) The Transferor shall have given written
notice to each Rating Agency of such exchange and the Rating
Agency Condition shall have been satisfied with respect to such
exchange;
(ii) the Transferor Amount (excluding the
interest represented by any Supplemental Certificate) shall not
be
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less than [*] of the total amount of Principal Receivables as of
the date of, and after giving effect to, such exchange; and
(iii) if any Series of Investor Certificates
are outstanding that were characterized as debt at the time of
their issuance, the Transferor shall have delivered to the
Trustee and each Rating Agency a Tax Opinion, dated the date of
such exchange (or transfer or exchange as provided below), with
respect thereto.
Any Supplemental Certificate may be transferred or exchanged only upon
satisfaction of the conditions set forth in clauses (ii) and (iii) above.
(d) The Transferor Certificate (or any interest therein) may
be transferred to a Person which is a member of the "affiliated group" of which
NextCard, Inc. is the "common parent" (as such terms are defined in Section
1504(a) of the Code); provided that if any Series of Investor Certificates are
outstanding that were characterized as debt at the time of their issuance, the
Transferor shall have delivered to the Trustee and each Rating Agency a Tax
Opinion, dated the date of such transfer, with respect thereto.
6.4. Registration of Transfer and Exchange of Certificates.
(a) The Trustee shall cause to be kept at the office or
agency to be maintained in accordance with the provisions of Section 11.16 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 co-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 paragraph (c) below, upon surrender for registration
of transfer 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
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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authorized denominations of like aggregate fractional undivided interests in the
Certificateholders' Interest shall be executed, authenticated and delivered, in
the name of the designated transferee or transferees.
At the option of a Registered Certificateholder, 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 after the expected final payment date need not have
attached the Coupon relating to such payment date (in each case, as specified in
the applicable Supplement).
Whenever any Investor Certificates are so surrendered for
exchange, the Transferor shall execute, the Trustee shall authenticate and the
Transfer Agent and Registrar shall deliver (in the case of Bearer Certificates,
outside the United States) the Investor Certificates which the Investor
Certificateholder making the exchange is entitled to receive. Every Investor
Certificate presented or surrendered for registration of transfer or exchange
shall be accompanied by a written instrument of transfer in a form satisfactory
to the Trustee or the Transfer Agent and Registrar duly executed by the Investor
Certificateholder or the attorney-in-fact thereof duly authorized in writing.
No service charge shall be made for any registration of transfer
or exchange of Investor Certificates, but the Transfer Agent and Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any such transfer or exchange.
All Investor Certificates (together with any Coupons)
surrendered for registration of transfer and exchange or for payment shall be
canceled and disposed of in a manner satisfactory to the Trustee. The Trustee
shall cancel and destroy any Global Certificate upon its exchange in full for
Definitive Euro-Certificates and shall deliver a certificate of destruction to
the Transferor. Such certificate shall also state that a certificate or
certificates of a Foreign Clearing Agency to the effect referred to in Section
6.13 was received with respect to each portion of the Global Certificate
exchanged for Definitive Euro-Certificates.
The Transferor shall execute and deliver to the Trustee Bearer
Certificates and Registered Certificates in such amounts and at such times as
are necessary to enable the Trustee
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to fulfill its responsibilities under this Agreement, each Supplement and the
Certificates.
(b) The Transfer Agent and Registrar shall 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,
the co-transfer agent and co-registrar appointed pursuant to Section 6.04(a)
shall maintain at its expense, subject to reimbursement by the Servicer in
accordance with the terms of any fee letter with the Servicer relating to such
Series or Class, 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).
(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).
(ii) Registration of transfer of Investor
Certificates containing a
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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.
(iii) If so requested by the Transferor, the
Trustee will make available to any prospective purchaser of
Investor Certificates who so requests, a copy of a letter
provided to the Trustee by or on behalf of the Transferor
relating to the transferability of any Series or Class to a
Benefit Plan.
6.5. Mutilated, Destroyed, Lost or Stolen Certificates. If
(a) any mutilated Certificate (together, in the case of Bearer Certificates,
with all unmatured Coupons (if any) appertaining thereto) is surrendered to the
Transfer Agent and Registrar, or the Transfer Agent and Registrar receives
evidence to its satisfaction of the destruction, loss or theft of any
Certificate and (b) there is delivered to the Transfer Agent and Registrar and
the Trustee such security or indemnity as may be required by them to save each
of them harmless, then, in the absence of notice to the Trustee that such
Certificate has been acquired by a protected 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.
6.6. Persons Deemed Owners. The Trustee, the Paying Agent,
the Transfer Agent and Registrar 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 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, any Account Owner, the
Servicer, any other Holder of a Transferor Certificate, the Trustee or any
Affiliate thereof, shall be disregarded and deemed not to be outstanding,
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except that, in determining whether the Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent or
waiver, only Certificates which 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 to so 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.
6.7. Appointment of Paying Agent. The Paying Agent shall make
distributions to Investor Certificateholders from the Collection Account or any
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 any 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. Any Paying Agent
shall be permitted to resign as Paying Agent upon 30 days' notice to the
Trustee. In the event that any Paying Agent shall resign, the Trustee shall
appoint a successor to act as Paying Agent. 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.
6.8. Access to List of Registered Certificateholders' Names
and Addresses. The Trustee will furnish or cause to be furnished by the Transfer
Agent and Registrar to the Servicer, the Transferor or the Paying Agent, within
five Business Days after receipt by the Trustee of a request therefor, a list in
such form as the Servicer, the Transferor or the Paying Agent may reasonably
require, of the names and addresses of the Registered Certificateholders. If any
Holder or group of Holders of Investor Certificates of any Series or all
outstanding Series, as the case may be, evidencing not less than 10% of the
aggregate unpaid principal amount of such Series or all outstanding Series, as
applicable (the "Applicants"), apply to the Trustee, and such application states
that the Applicants desire to communicate with other Investor Certificateholders
with respect to their rights under this Agreement or any Supplement or under the
Investor Certificates and is accompanied by a copy of the communication which
such Applicants propose to transmit, then the Trustee, after having been
adequately indemnified
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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.
Every Registered Certificateholder, by receiving and holding a
Registered Certificate, agrees with the Trustee that none of the Transferor, the
Servicer, 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.
6.9. Authenticating Agent. (a) The Trustee may appoint one or
more authenticating agents with respect to the Certificates which shall be
authorized to act on behalf of the Trustee in authenticating the Certificates in
connection with the issuance, delivery, registration of transfer, exchange or
repayment of the Certificates. Whenever reference is made in this Agreement to
the authentication of Certificates by the Trustee or the Trustee's certificate
of authentication, such reference shall be deemed to include authentication on
behalf of the Trustee by an authenticating agent and certificate of
authentication executed on behalf of the Trustee by an authenticating agent.
Each authenticating agent must be acceptable to the Transferor and the Servicer.
(a) 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 and 11.03 shall be applicable to any authenticating agent.
(b) Pursuant to an appointment made under this Section, the
Certificates may have endorsed thereon, in lieu of the Trustee's certificate of
authentication, an alternate certificate of authentication in substantially the
following form:
This is one of the Certificates described in the Amended and
Restated Pooling and Servicing Agreement.
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as Authenticating Agent for the Trustee,
by
Authorized Officer
6.10. Book-Entry Certificates. If so specified in the related
Supplement for any Series or Class, the Investor Certificates, upon original
issuance, may be issued in the form of one or more typewritten or
word-processing system produced Investor Certificates representing the
Book-Entry Certificates, to be delivered to the Clearing Agency, by, or on
behalf of, the Transferor. The Investor Certificates shall initially be
registered on the Certificate Register in the name of the Clearing Agency or its
nominee, and no Certificate Owner will receive a definitive certificate
representing such Certificate Owner's interest in the Investor Certificates,
except as provided in Section 6.12. Unless and until definitive, fully
registered Investor Certificates ("Definitive Certificates") have been issued to
the applicable Certificate Owners pursuant to Section 6.12 or as otherwise
specified in any such Supplement:
(a) the provisions of this Section shall be in full force
and effect;
(b) the Transferor, the Servicer and the Trustee may deal
with the Clearing Agency and the Clearing Agency Participants for all purposes
(including the making of distributions) as the authorized representatives of the
respective Certificate Owners;
(c) to the extent that the provisions of this Section
conflict with any other provisions of this Agreement, the provisions of this
Section shall control; and
(d) the rights of the respective Certificate Owners shall be
exercised only through the Clearing Agency and the Clearing Agency Participants
and shall be limited to those established by law and agreements between such
Certificate Owners and the Clearing Agency or the Clearing Agency Participants.
Pursuant to the Depository Agreement, unless and until Definitive Certificates
are issued pursuant to Section 6.12, the Clearing Agency will make book-entry
transfers among the Clearing Agency Participants and receive and transmit
distributions of principal and interest on the related Investor Certificates to
such Clearing Agency Participants.
For purposes of any provision of this Agreement requiring or
permitting actions with the consent of, or at the direction of, Investor
Certificateholders evidencing a specified percentage of the aggregate unpaid
principal amount of Investor Certificates, such direction or consent may be
given by Certificate Owners (acting through the Clearing Agency and the Clearing
Agency Participants) owning Investor Certificates evidencing the requisite
percentage of principal amount of Investor Certificates.
6.11. Notices to Clearing Agency. Whenever any notice or other
communication is required to be given to Investor Certificateholders of any
Series or
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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.
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 in writing 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 are unable to
locate a qualified successor, (b) the Transferor, at its option, advises the
Trustee that it elects to terminate the book-entry system with respect to such
Series or Class through the Clearing Agency or (c) after the occurrence of a
Servicer Default, Certificate Owners of such Series or Class evidencing more
than 50% of the aggregate unpaid principal amount of such Series or Class advise
the Trustee and the Clearing Agency through the Clearing Agency Participants
that the continuation of a book-entry system with respect to the Investor
Certificates of such Series or Class through the Clearing Agency is no longer in
the best interests of the Certificate Owners with respect to such Certificates,
then the Trustee shall notify all Certificate Owners of such Certificates,
through the Clearing Agency, of the occurrence of any such event and of the
availability of Definitive Certificates to Certificate Owners requesting the
same. Upon surrender to the Trustee of any such Certificates by the Clearing
Agency, accompanied by registration instructions from the Clearing Agency for
registration, the Transferor shall execute and 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.
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 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").
(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
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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 waive the $500,000 minimum
denomination requirement if it so elects. 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 F-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 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 F-2 signed by the Manager which sold the
relevant Certificates or (ii) in all other cases, the certificate in the form of
Exhibit F-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
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
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beneficial interests in such Global Certificate for Definitive
Euro-Certificates.
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 Transferor, 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 Transferor, the
Servicer or the Trustee, as the case may be, shall determine, for the purpose of
approving a modification of or amendment to, or obtaining a waiver of any
covenant or condition set forth in, this Agreement, any Supplement or the
Investor Certificates or of taking any other action permitted to be taken by
Investor Certificateholders hereunder or under any Supplement. Notice of any
meeting of Investor Certificateholders, setting forth the time and place of such
meeting and in general terms the action proposed to be taken at such meeting,
shall be given in accordance with Section 13.05, 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 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
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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 chairman of the
meeting. A permanent chairman 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 chairman of
the meeting to be not outstanding. The chairman 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 chairman of the meeting shall appoint
two inspectors of votes who shall count all votes cast at the meeting for or
against any resolution and who shall make and file with the secretary of the
meeting their verified written reports in duplicate of all votes cast at the
meeting. A record in duplicate of the proceedings of each meeting of Investor
Certificateholders shall be prepared by the secretary of the meeting and there
shall be attached to said record the original reports of the inspectors of votes
on any vote by ballot taken thereat and affidavits by one or more persons having
knowledge of the facts setting forth a copy of the notice of the meeting and
showing that said notice was published as provided above. The record shall be
signed and verified by the permanent chairman 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
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attached thereto the ballots voted at the meeting. Any record so signed and
verified shall be conclusive evidence of the matters therein stated.
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.
ARTICLE VII
Other Matters Relating to the Transferor
7.1. Liability of the Transferor. Each Transferor (including
any Additional Transferors) shall be severally and not jointly liable for the
obligations, covenants, representations and warranties of such Transferor
arising under or related to this Agreement or any Supplement. Each Transferor
shall be liable only to the extent of the obligations specifically undertaken by
it in its capacity as a Transferor.
7.2. Merger or Consolidation of, or Assumption of the
Obligations of, the Transferor.
(a) No Transferor shall dissolve, liquidate, consolidate
with or merge into any other corporation or convey or transfer its properties
and assets substantially as an entirety to any Person unless:
(i) (x) the corporation 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 such 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 subject to Title 11 of the
United States Code or is a special purpose corporation whose
powers and activities are limited to substantially the same
degree as provided in the Certificate of Incorporation of
NextCard Funding Corp. 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 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 or transfer 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
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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 (whether considered in a suit at law or in equity), and
that all conditions precedent herein provided for relating to
such transaction have been complied with;
(ii) the Rating Agency Condition shall have
been satisfied with respect to such consolidation, merger,
conveyance or transfer; and
(iii) the relevant Transferor shall have
delivered to the Trustee and each Rating Agency a Tax Opinion,
dated the date of such consolidation, merger, conveyance or
transfer, with respect thereto.
(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
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 clauses (ii) and (iii) 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.
7.3. Limitations on Liability of the Transferor. Subject to
Section 7.01, neither the Transferor nor any of its directors, officers,
employees, incorporators or agents acting in such capacities shall be under any
liability to the Trust, the Trustee, the Certificateholders, the Certificate
Owners, 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 Certificates; 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 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.
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ARTICLE VIII
Other Matters Relating to the Servicer
8.1. Liability of the Servicer. The Servicer shall be liable
under this Article only to the extent of the obligations specifically undertaken
by the Servicer in its capacity as Servicer.
8.2. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer. The Servicer shall not consolidate with or merge
into any other corporation or convey or transfer its properties and assets
substantially as an entirety to any Person, unless:
(a) (i) the corporation 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, if the Servicer is not the surviving entity, a corporation 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 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 has delivered to the
Trustee an Officer's Certificate and an Opinion of Counsel each
stating that such consolidation, merger, conveyance or transfer
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 and except as such
enforceability may be limited by general principles of equity
(whether considered in a suit at law or in equity), and that all
conditions precedent herein provided for relating to such
transaction have been complied with;
(b) the Rating Agency Condition shall have been satisfied
with respect to such assignment and succession; and
(c) the corporation 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.
8.3. Limitation on Liability of the Servicer and Others.
Except as provided in Section 8.04, neither the Servicer nor any of the
directors, officers, employees or agents of the Servicer in its capacity as
Servicer shall be under any liability to the Trust, the Trustee, the
Certificateholders, any Series Enhancer or any other Person for any action taken
or for refraining from the taking of any action in good faith in its capacity as
Servicer pursuant to this Agreement; provided, however, that this provision
shall not protect the Servicer
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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 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.
8.4. Servicer Indemnification of the Trust and the Trustee.
The Servicer shall indemnify and hold harmless the Trust and the Trustee 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, including any judgment, award, settlement, reasonable attorneys' fees and
expenses and other costs or expenses incurred in connection with the defense of
any action, proceeding or claim; provided, however, that the Servicer shall not
indemnify the Trustee if such acts, omissions or alleged acts or omissions
constitute or are caused by fraud, negligence, or willful misconduct by the
Trustee; provided further, that the Servicer shall not indemnify the Trust, the
Investor Certificateholders or the Certificate Owners for any liabilities, costs
or expenses of the Trust with respect to any action taken by the Trustee at the
request of the Investor Certificateholders; provided further, that the Servicer
shall not indemnify the Trust, the Investor Certificateholders or the
Certificate Owners as to any losses, claims or damages incurred by any of them
in their capacities as investors, including without limitation losses incurred
as a result of Defaulted Receivables; and provided further, that the Servicer
shall not indemnify the Trust, the Investor Certificateholders or the
Certificate Owners for any liabilities, costs or expenses of the Trust, the
Investor Certificateholders or the Certificate Owners arising under any tax law,
including without limitation, any Federal, state, local or foreign income or
franchise taxes or any other tax imposed on or measured by income (or any
interest or penalties with respect thereto or arising from a failure to comply
therewith) required to be paid by the Trust, the Investor Certificateholders or
the Certificate Owners in connection herewith to any taxing authority.
Indemnification pursuant to this Section shall not be payable from the Trust
Assets. The provisions of this indemnity shall run directly to and be
enforceable by the Trust or the Trustee subject to the limitations hereof and
shall survive the termination of this Agreement or the Trust or the earlier
removal or resignation of the Trustee.
8.5. Resignation of the Servicer. The Servicer shall not
resign from the obligations and duties hereby imposed on it except (a) upon
determination that (i) the performance of its duties hereunder is no longer
permissible under applicable law and (ii) there is no reasonable action which
the Servicer could take to make the performance of its duties hereunder
permissible under applicable law or (b) upon the assumption, by an agreement
supplemental hereto, executed and delivered to the Trustee, in form satisfactory
to the Trustee, of the obligations and duties of the Servicer hereunder by any
of its Affiliates that is a direct or
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indirect wholly owned subsidiary of NextCard, Inc. 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. 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;
provided, however, that the Trustee shall have continued authority to appoint
another Eligible Servicer. Notwithstanding the foregoing, the Trustee shall, if
it is legally unable so to act, petition a court of competent jurisdiction to
appoint any established institution qualifying as an Eligible Servicer as the
Successor Servicer hereunder. The Trustee shall give prompt notice to each
Rating Agency upon the appointment of a Successor Servicer. Notwithstanding
anything in this Agreement to the contrary, NextCard, Inc. may assign part or
all of its obligations and duties as Servicer under this Agreement to an
Affiliate of NextCard, Inc. so long as NextCard, Inc. shall have fully
guaranteed the performance of such obligations and duties under this Agreement.
8.6. Access to Certain Documentation and Information
Regarding the Receivables. The Servicer shall provide to the Trustee access to
the documentation regarding the Accounts and the Receivables in such cases where
the Trustee is required in connection with the enforcement of the rights of
Certificateholders or by applicable statutes or regulations to review such
documentation, such access being afforded without charge but only (a) upon
reasonable request, (b) during normal business hours, (c) subject to the
Servicer's normal security and confidentiality procedures and (d) at reasonably
accessible offices in the continental United States designated by the Servicer.
Nothing in this Section shall derogate from the obligation of the Transferor,
the Trustee and the Servicer to observe any applicable law prohibiting
disclosure of information regarding the Obligors and the failure of the Servicer
to provide access as provided in this Section as a result of such obligation
shall not constitute a breach of this Section.
8.7. Delegation of Duties. In the ordinary course of
business, the Servicer may at any time delegate any duties hereunder to any
Person who agrees to conduct such duties in accordance with the Credit Card
Guidelines and this Agreement; provided, however, in the case of significant
delegation to a Person other than to an Account Owner or any Affiliate of an
Account Owner, (i) at least 30 days prior written notice shall be given to the
Trustee and each Rating Agency of such delegation and (ii) at or prior to the
end of such 30-day period the Servicer shall have determined that the Rating
Agency Condition has been met. Any such delegations 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. The fees
and expenses of any such Person will not be the responsibility of the Trustee or
the Certificateholders.
8.8. Examination of Records. The Servicer shall clearly and
unambiguously indicate in its computer files or other records that the
Receivables arising in
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the Accounts have been conveyed to the Trustee, on behalf of the Trust, pursuant
to this Agreement for the benefit of the Certificateholders. The Servicer shall,
prior to the sale or transfer to a third party of any receivable held in its
custody, examine its computer and other records to determine that such
receivable is not a Receivable.
ARTICLE IX
Pay Out Events
9.1. Trust Pay Out Events. If any one of the following
events shall occur with respect to the Trust ("Trust Pay Out Events"):
(i) any Transferor or any of the Account
Owners shall consent to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings of
or relating to such Transferor or Account Owner or of or
relating to all or substantially all of 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
conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against such Transferor or
Account Owner; or any Transferor or Account Owner shall admit in
writing its inability to pay its debts generally as they become
due, file a petition to take advantage of any applicable
insolvency or reorganization statute, make any assignment for
the benefit of its creditors or voluntarily suspend payment of
its obligations (any such event, an "Insolvency Event");
(ii) the Trust shall become subject to
regulation by the Commission as an "investment company" within
the meaning of the Investment Company Act; or
(iii) a Transfer Restriction Event shall
occur;
then, a Trust Pay Out Event shall occur with respect to each Series without any
notice or other action on the part of the Trustee or the Investor
Certificateholders, immediately upon the occurrence of such event.
9.2. Rights Upon the Occurrence of an Insolvency Event. If
the Transferor causes an Insolvency Event to occur with respect to the
Transferor or an Account Owner or if an Insolvency Event otherwise occurs with
respect to the Transferor or an Account Owner, the Transferor shall on the day
any such Insolvency Event occurs 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
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Insolvency Event and 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.
ARTICLE X
Servicer Defaults
10.1. Servicer Defaults. If any one of the following events
(a "Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to make any payment,
transfer or deposit or to give instructions or notice to the Trustee pursuant to
the terms of this Agreement or any Supplement on or before the date occurring
five Business Days after the date such payment, transfer or deposit or such
instruction or notice is required to be made or given, as the case may be, under
the terms of this Agreement or any Supplement;
(b) failure on the part of the Servicer duly to observe or
perform in any material respect any other covenants or agreements of the
Servicer set forth in this Agreement or any Supplement which has a material
adverse effect on the interests hereunder of the Investor Certificateholders of
any Series or Class and which continues unremedied for a period of 60 days after
the date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by the Trustee, or to the
Servicer and the Trustee by Holders of Investor Certificates evidencing more
than 50% of the Aggregate Invested Amount (or, with respect to any such failure
that does not relate to all Series, 50% of the aggregate Invested Amount of all
Series to which such failure relates); or the Servicer shall delegate its duties
under this Agreement, except as permitted by Sections 8.02 or 8.07, a
Responsible Officer of the Trustee has actual knowledge of such delegation and
such delegation continues unremedied for 15 days after the date on which written
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 Holders of
Investor Certificates evidencing more than 50% of the Aggregate Invested Amount;
(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 a material adverse effect on the rights of the Investor
Certificateholders of any Series or Class and which continues to be incorrect in
any material respect for a period of 60 days after the date on which written
notice of such failure, requiring the same to be remedied, shall have been given
to the Servicer by the Trustee, or to the Servicer and the Trustee by the
Holders of Investor Certificates evidencing more than 50% of the Aggregate
Invested Amount (or, with respect to any such representation, warranty or
certification that does not relate to all Series, 50% of the Aggregate Invested
Amount of all Series to which such representation, warranty or certification
relates); or
(d) the Servicer shall consent to the appointment of a
conservator
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or receiver or liquidator in any insolvency, readjustment of debt, marshaling of
assets and liabilities or similar proceedings of or relating to the Servicer or
of or relating to all or substantially all of 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 conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshaling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of its affairs, shall
have been entered against the Servicer, and such decree or order shall have
remained in force undischarged or unstayed for a period of 60 days; or the
Servicer shall admit in writing its inability to pay its debts generally as they
become due, file a petition to take advantage of any applicable 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 Invested
Amount, 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 Servicer to the effect that the Servicer cannot
in good faith cure the Servicer Default which gave rise to the Termination
Notice, the Trustee shall offer the Transferor the right at its option to
purchase the Certificateholders' Interest on the Distribution Date next
succeeding 60 days after the receipt by the Servicer of a Termination Notice.
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 in writing prior to the Record Date for the Distribution Date of the
purchase if it is exercising such option. If the Transferor exercises such
option, the Transferor shall deposit the purchase price into the Collection
Account not later than 12:00 noon, New York City time, on such Distribution Date
in immediately available funds. The purchase price shall be allocated and
distributed to Investor Certificateholders in accordance with Article IV and the
terms of each Supplement.
After receipt by the Servicer of such Termination Notice, and on
the date that a Successor Servicer shall have been 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 a Successor Servicer; 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 transfer of servicing rights. 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, without limitation, the transfer to such
Successor Servicer of all authority of the
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Servicer to service the Receivables provided for under this Agreement,
including, without limitation, all authority over all Collections which shall on
the date of transfer be held by the Servicer for deposit, or which have been
deposited by the Servicer, in the Collection Account, or which shall thereafter
be received with respect to the Receivables, and in assisting the Successor
Servicer and in enforcing all rights to Insurance Proceeds. The Servicer shall
promptly transfer its electronic records relating to the Receivables to the
Successor Servicer in such electronic form as the Successor Servicer may
reasonably request and shall promptly transfer to the Successor Servicer all
other records, correspondence and documents necessary for the continued
servicing of the Receivables in the manner and at such times as the Successor
Servicer shall reasonably request. To the extent that compliance with this
Section 10.01 shall require the Servicer to disclose to the Successor Servicer
information of any kind which the Servicer reasonably deems to be confidential,
the Successor Servicer shall be required to enter into such customary licensing
and confidentiality agreements as the Servicer shall deem necessary to protect
its interests.
Notwithstanding the foregoing, any delay in or failure of
performance under subsection 10.01(a) for a period of 5 Business Days or under
subsections 10.01(b) or (c) for a period of 60 days (in addition to any period
provided in subsections 10.01(a), (b) or (c)) shall not constitute a Servicer
Default until the expiration of such additional 5 Business Days or 60 days,
respectively, 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, terrorism,
public disorder, rebellion or sabotage, epidemics, landslides, lightning, fire,
hurricanes, earthquakes, floods or similar causes. The preceding sentence shall
not relieve the Servicer from using its best efforts to perform its respective
obligations in a timely manner in accordance with the terms of this Agreement
and any Supplement and the Servicer shall provide the Trustee, each Rating
Agency, the Holders of the Transferor Certificates and the Investor
Certificateholders with an Officer's Certificate giving prompt notice of such
failure or delay by it, together with a description of its efforts to so perform
its obligations.
10.2. Trustee To Act, Appointment of Successor.
(a) On and after the receipt by the Servicer of a
Termination Notice pursuant to Section 10.01, 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; provided, however, that the
Trustee shall have continued authority to appoint another Eligible Servicer. The
Trustee may delegate any of its servicing obligations to an Affiliate of the
Trustee or agent in accordance with Sections 3.01(b) and 8.07. Notwithstanding
the foregoing, the Trustee shall, if it is unable so to act, petition a court of
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'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 upon the appointment of a Successor
Servicer.
(b) Upon its appointment, the Successor Servicer shall be
the successor to the Servicer with respect to servicing functions under this
Agreement and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Servicer by the terms and provisions
hereof, and all references in this Agreement to the Servicer shall be deemed to
refer to the Successor Servicer.
(c) In connection with any Termination Notice, the Trustee
will review any bids which it obtains from Eligible Servicers and shall be
permitted to appoint any Eligible Servicer submitting such a bid as a Successor
Servicer for servicing compensation not in excess of the aggregate Servicing
Fees for all Series; provided, however, that the Holders of the Transferor
Certificates shall be responsible for payment of the Transferor's portion of
such aggregate Servicing Fees and that no such monthly compensation paid out of
Collections shall be in excess of such aggregate Servicing Fees. Each Holder of
a Transferor Certificate agrees that, if NextCard, Inc. (or any Successor
Servicer) is terminated as Servicer hereunder, the portion of the Collections in
respect of Finance Charge Receivables that such Holders are entitled to receive
pursuant to this Agreement or any Supplement shall be reduced by an amount
sufficient to pay such Holders' share (determined by reference to the
Supplements with respect to any outstanding Series) of the compensation of the
Successor Servicer.
(d) All authority and power granted to the Successor
Servicer or the 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 or the Servicer, as attorney-in-fact or otherwise, all
documents and other instruments, and to do and accomplish all other acts or
things necessary or appropriate to effect the purposes of such transfer of
servicing rights. The Successor Servicer and the Servicer agree to cooperate
with the Transferor in effecting the termination of the responsibilities and
rights of the Successor Servicer or the Servicer to conduct servicing on the
Receivables. The Successor Servicer or the Servicer shall transfer its
electronic records relating to the Receivables to the Transferor in such
electronic form as the Transferor may reasonably request and shall transfer all
other records, correspondence and documents to the Transferor in the manner and
at such times as the Transferor shall reasonably request. To the extent that
compliance with this Section 10.02 shall require the Successor Servicer or the
Servicer to disclose to the Transferor information of any kind which the
Successor Servicer or the Servicer deems to be confidential, the Transferor
shall be required to enter into such customary licensing and confidentiality
agreements as the Successor Servicer or the Servicer shall deem necessary to
protect its interests.
10.3. Notification to Certificateholders. Within two
Business Days after the Servicer becomes aware of any Servicer Default, the
Servicer shall give notice thereof to the Trustee and each Rating Agency and the
Trustee shall give notice to the Investor Certificateholders. Upon any
termination or appointment of a Successor Servicer
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pursuant to this Article, the Trustee shall give prompt notice thereof to the
Investor Certificateholders.
ARTICLE XI
The Trustee
11.1. Duties of Trustee.
(a) The Trustee, prior to the occurrence of a Servicer
Default 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. If a Responsible Officer has received written notice
that a Servicer Default 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 its exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(b) The Trustee, upon receipt of all resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments furnished to the Trustee that 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.
(c) Subject to subsection 11.01(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 misconduct;
provided, however, that:
(i) the Trustee shall not be personally
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 personally
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 Invested Amount of any Series relating to the time, method
and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred upon
the Trustee in relation to such Series, under this Agreement;
and
(iii) the Trustee shall not be charged with
knowledge of any failure by the Servicer referred to in clauses
(a) and (b) of Section 10.01 unless a Responsible Officer of the
Trustee obtains actual knowledge of such failure or the Trustee
receives written notice of such failure from the Servicer or any
Holders of Investor Certificates evidencing not less than 10% of
the Invested Amount of any Series adversely affected thereby.
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(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 including, without limitation, its duties as Successor
Servicer, 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
of the 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 action reasonably likely to (i) impair the
interests of the Trust in any Receivable now existing or hereafter created or
(ii) impair the value of any Receivable now existing or hereafter created.
(f) The Trustee shall have no power to vary the corpus of
the Trust, except as expressly provided in this Agreement.
(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 as soon as possible upon actual knowledge of a
Responsible Officer thereof and receipt of appropriate records, if any, to
perform such obligation, duty or agreement in the manner so required.
(h) If the Transferor has agreed to transfer any of its
consumer revolving credit card receivables (other than the Receivables) to
another Person, upon the written request of the Transferor, the Trustee will
enter into such intercreditor agreements with the transferee of such receivables
as are customary and necessary to separately identify the rights, if any, of the
Trust and such other Person in the Transferor's consumer revolving credit card
receivables; provided, that the Trustee shall not be required to enter into any
intercreditor agreement which could adversely affect the interests of the
Certificateholders and, upon the request of the Trustee, the Transferor will
deliver an Opinion of Counsel on any matters relating to such intercreditor
agreement, reasonably requested by the Trustee.
11.2. Certain Matters Affecting the Trustee. Except as
otherwise provided in Section 11.01:
(a) The Trustee may conclusively rely on and shall be
protected in acting on, or in refraining from acting in accord with, any
Assignment, the initial report, the annual Servicer's certificate, the monthly
payment instructions and notification to the Trustee, the monthly
Certificateholder's statement, any resolution, Officer's Certificate,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, 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;
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(b) the Trustee may consult with counsel of its selection,
and any advice or 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 advice or 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 any Enhancement
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, or any Enhancement Provider, pursuant to the provisions of
this Agreement or any Enhancement Agreement, unless such Certificateholders or
any Enhancement Provider shall have offered to the Trustee reasonable security
or indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby; nothing contained herein shall, however, relieve the Trustee
of the obligations, upon the occurrence of any Servicer Default (which has not
been cured), to exercise such of the rights and powers vested in it by this
Agreement and any Series Enhancement, and to use the same degree of care and
skill in its exercise as a prudent person would exercise or use under the
circumstances in the conduct of person's own affairs;
(d) the Trustee shall not be personally 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 Assignment, the initial report, the
annual Servicer's certificate, the monthly payment instructions and notification
to the Trustee, the monthly Certificateholder's statement, any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, approval, bond or other paper or document, unless requested in writing so
to do by Holders of Investor Certificates evidencing more than 50% of the
Invested Amount of any Series which could be adversely affected if the Trustee
does not perform such acts;
(f) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian, and the Trustee shall not be responsible for
any misconduct or negligence on the part of any such agent, attorney or
custodian appointed with due care by it hereunder; and
(g) except as may be required by subsection 11.01(a) hereof,
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.
11.3. Trustee Not Liable for Recitals in Certificates. The
Trustee assumes no responsibility for the correctness of the recitals contained
herein and in the certificates (other than the certificate of authentication on
the Certificates). Except as set forth in Section 11.15, the Trustee makes no
representations as to the validity or sufficiency of this Agreement or any
Supplement or of the Certificates (other than the certificate of authentication
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on the Certificates) or of any Receivable or related document. 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 or the Holders of the Transferor
Certificates in respect of the Receivables or deposited in or withdrawn from the
Collection Account, the Excess Funding Account or any Series Account by the
Servicer.
11.4. Trustee May Own Certificates. Subject to Section 6.06,
the Trustee in its individual or any other capacity may become the owner or
pledgee of Investor Certificates or Supplemental Certificates with the same
rights as it would have if it were not the Trustee.
11.5. 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 (without reimbursement from the Collection Account or otherwise, except
as provided in Section 3.02) upon its request for all reasonable expenses and
disbursements incurred or made by the Trustee (including the fees and expenses
of Trustee's counsel) in accordance with any of the provisions of this Agreement
except any such expense or disbursement as may arise from its own negligence or
bad faith and except as provided in the following sentence. If the Trustee is
appointed Successor Servicer pursuant to Section 10.02, the provisions of this
Section 11.05 shall not apply to expenses or disbursements made or incurred by
the Trustee in its capacity as Successor Servicer. The obligations of the
Transferor under this Section 11.05 shall survive the termination of the Trust
and the resignation or removal of the Trustee.
11.6. Eligibility Requirements for Trustee. The Trustee
hereunder shall at all times be a bank or a corporation organized and doing
business under the laws of the United States of America or any state thereof and
subject to supervision or examination by Federal or state authority and
authorized under such laws to exercise corporate trust powers that either (x)
has a long-term unsecured debt rating of at least Baa3 by Moody's and BBB- by
Standard & Poor's and, in the case of an entity that is subject to risk-based
capital adequacy requirements, risk-based capital of at least $50,000,000 or, in
the case of an entity that is not subject to risk-based capital adequacy
requirements, a combined capital and surplus of at least $50,000,000 or (y)
shall otherwise be acceptable to each Rating Agency. If such bank or 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 11.06, the combined capital and surplus of such bank or
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. The Trustee shall not be an
Affiliate of the Transferor. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 11.06, the Trustee
shall resign immediately in the manner and with the effect specified in Section
11.07.
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11.7. Resignation or Removal of Trustee.
(a) The Trustee may at any time resign and be discharged
from the trust hereby created by giving written notice thereof to the Servicer.
Upon receiving such notice of resignation, the Servicer 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 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
written request therefor by the Servicer or the Transferor, or if at any time
the Trustee shall be legally unable to act, or shall be adjudged a bankrupt or
insolvent, or 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 or Transferor may, but shall not be required to,
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 a successor trustee pursuant to any of the provisions of this
Section 11.07 shall not become effective until acceptance of appointment by the
successor trustee as provided in Section 11.08 and any liability of the Trustee
arising hereunder shall survive such appointment of a successor trustee.
11.8. 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 the like effect as if originally
named as Trustee herein. The predecessor Trustee shall deliver to the successor
trustee all documents 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 11.08 unless at the time of such acceptance such
successor trustee shall be eligible under the provisions of Section 11.06.
(c) Upon acceptance of appointment by a successor trustee as
provided in this Section 11.08, such successor trustee shall provide notice of
such succession
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hereunder to all Investor Certificateholders and the Servicer shall provide such
notice to each Rating Agency and any Series Enhancer entitled thereto pursuant
to the relevant Supplement.
11.9. Merger or Consolidation of Trustee. Any Person into
which the Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding to
the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such corporation shall be eligible under the
provisions of Section 11.06, 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.
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 legal requirements 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 11.10, such powers, duties, obligations,
rights and trusts as the Trustee may consider necessary or desirable; provided,
however, that the Trustee shall exercise due care in the appointment of any
co-trustee. The Trustee shall notify the Rating Agencies of any such appointment
of any such co-trustee. 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 laws of any
jurisdiction in which any particular act or acts are to be
performed (whether as Trustee hereunder or as successor to the
Servicer hereunder) 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 personally
liable by reason of any act or omission of any other trustee
hereunder; and
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\ (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 XI. 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 as 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 to 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
of 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.
11.11. Tax Returns. In the event the Trust shall be required
to file tax returns, the Servicer, as soon as practicable after it is made aware
of such requirement, shall prepare or cause to be prepared any tax returns
required to be filed by the Trust and, to the extent possible, shall file such
returns at least five days before such returns are due to be filed. The Trustee
is hereby authorized to sign any such return on behalf of the Trust. The
Servicer shall prepare or shall cause to be prepared all tax information
required by law to be distributed to 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 Certificateholders. The Servicer, upon request, will
furnish the Trustee with all such information known to the Servicer as may be
reasonably required in connection with the preparation of all tax returns of the
Trust. In no event shall the Trustee, the Transferor or the Servicer be liable
for any liabilities, costs or expenses of the Trust, the Investor
Certificateholders or the Certificate Owners arising under any tax law,
including without limitation federal, state, local or foreign income or excise
taxes or any other tax imposed on or measured by income (or any interest or
penalty with respect thereto or arising from a failure to comply therewith).
11.12. Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under this Agreement or any Series
of 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 any Series of
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Certificates in respect of which such judgment has been obtained.
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 10.01 and
11.14, proceed to protect and enforce its rights and the rights of any Series of
Certificates under this Agreement by a 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 any Series
of Certificates.
(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 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.
11.14. Rights of Certificateholders To Direct Trustee.
Holders of Investor Certificates evidencing more than 50% of the Aggregate
Invested Amount (or, with respect to any remedy, trust or power that does not
relate to all Series, 50% of the aggregate Invested Amount of all Series to
which such remedy, trust or power relates) shall have the right to direct the
time, method, and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee;
provided, however, that, subject to Section 11.01, the Trustee shall have the
right to decline to follow any such direction if the Trustee being advised by
counsel determines that the action so directed may not lawfully be taken, or if
the Trustee in good faith shall, by a Responsible Officer or Responsible
Officers of the Trustee, determine that the proceedings so directed would be
illegal or involve it in personal liability or be unduly prejudicial to the
rights of 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 such Holders of Investor Certificates.
11.15. Representations and Warranties of Trustee. The Trustee
represents and warrants as of each Closing Date that:
(a) the Trustee is a banking corporation organized, existing
and authorized to engage in the business of banking under the laws of the State
of New York;
(b) the Trustee has full power, authority and right to
execute, deliver and perform this Agreement and each Supplement, and has taken
all necessary action to authorize the execution, delivery and performance by it
of this Agreement and each Supplement; and
(c) this Agreement and each Supplement has been duly
executed
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and delivered by the Trustee.
11.16. Maintenance of Office or Agency. The Trustee will
maintain at its expense an office or agency (the "Corporate Trust Office") where
notices and demands to or upon the Trustee in respect of the Certificates and
this Agreement may be served in the Borough of Manhattan, the City of New York,
in the case of Registered Certificates and Holders thereof. The Corporate Trust
Office shall initially be located at 101 Barclay Street, 12th Floor East, New
York, New York 10286. The Trustee will give prompt notice to the Servicer and to
Investor Certificateholders of any change in the location of the Certificate
Register or any such office or agency.
ARTICLE XII
Termination
12.1. Termination of Trust. The Trust and the respective
obligations and responsibilities of the Transferor, the Servicer and the Trustee
created hereby (other than the obligation of the Trustee to make payments to
Investor Certificateholders as hereinafter set forth) shall terminate, except
with respect to the duties described in Sections 8.04 and 12.02(b), upon the
earliest of (i) January 1, 2050 and (ii) the day following the payment date on
which the Aggregate Invested Amount and the Enhancement Investor Amount, if any,
for each Series is zero (provided that the Transferor has delivered a written
notice to the Trustee electing to terminate the Trust).
12.2. Final Distribution.
(a) The Servicer shall give the Trustee at least 30 days'
prior notice of the payment 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 Sections 2.06,
9.02 or 10.01, notice of such payment 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 payment 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.
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(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 (and any excess shall be paid to the Holder of the Transferor
Certificate). In the event that all such Investor Certificateholders shall not
surrender their Investor Certificates for cancellation within six months after
the date specified in the notice from the Trustee described in paragraph (a),
the Trustee shall give a second notice to the remaining such Investor
Certificateholders to surrender their Investor Certificates for cancellation and
receive the final distribution with respect thereto (which surrender and
payment, in the case of Bearer Certificates, shall be outside the United
States). If within one year after the second notice all such Investor
Certificates shall not have been surrendered for cancellation, the Trustee may
take appropriate steps, or may appoint an agent to take appropriate steps, to
contact the remaining such Investor Certificateholders concerning surrender of
their Investor Certificates, and the cost thereof shall be paid out of the funds
in the Collection Account or any Series Account held for the benefit of such
Investor Certificateholders. The Trustee and the Paying Agent shall pay to the
Transferor any monies held by them for the payment of principal or interest that
remains unclaimed for two years. After payment to the Transferor, Investor
Certificateholders entitled to the money must look to the Transferor for payment
as general creditors unless an applicable abandoned property law designates
another Person.
(c) In the event that the Invested Amount with respect to
any Series is greater than zero on its Series Termination Date or such earlier
date as is specified in the related Supplement (after giving effect to deposits
and distributions otherwise to be made on such date), the Trustee will sell or
cause to be sold on such Series Termination Date, in accordance with the
procedures and subject to the conditions described in such Supplement, Principal
Receivables and the related Finance Charge Receivables (or interests therein) in
an amount equal to 100% of the Invested Amount and accrued and unpaid interest
thereon with respect to such Series on such date (after giving effect to such
deposits and distributions; provided, however, that in no event shall such
amount exceed such Series' Percentages of Receivables on such Series Termination
Date). The proceeds from any such sale shall be allocated and distributed in
accordance with the terms of the applicable Supplement.
11.3. 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 assign and convey to the Holders of the
Transferor Certificates or their designee, 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 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 and such other
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related assets.
12.4. Defeasance. Notwithstanding anything to the contrary
in this Agreement or any Supplement:
(a) The Transferor may at its option be discharged from its
obligations hereunder with respect to any Series or all outstanding Series (the
"Defeased Series") on the date the applicable conditions set forth in subsection
12.04(c) are satisfied (a "Defeasance"); provided, however, that the following
rights, obligations, powers, duties and immunities shall survive with respect to
the Defeased Series until otherwise terminated or discharged hereunder: (i) the
rights of the Holders of Investor Certificates of the Defeased Series to
receive, solely from the trust fund provided for in subsection 12.04(c),
payments in respect of principal of and interest on such Investor Certificates
when such payments are due; (ii) the Transferor's obligations with respect to
such Certificates under Sections 6.04 and 6.05; (iii) the rights, powers,
trusts, duties, and immunities of the Trustee, the Paying Agent and the
Registrar hereunder; and (iv) this Section 12.04.
(b) Subject to subsection 12.04(c), the Transferor at its
option may cause Collections allocated to the Defeased Series and available to
purchase additional Receivables to be applied to purchase Eligible Investments
rather than additional Receivables.
(c) The following shall be the conditions to Defeasance
under subsection 12.04(a):
(i) the Transferor irrevocably shall have
deposited or caused to be deposited with the Trustee (such
deposit to be made from other than the Transferor's or any
Affiliate of the Transferor's funds), 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) Eligible
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 (without relying on income or gain from reinvestment
of such amount), 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 Defeased Series on the dates scheduled for such payments in
this Agreement and the applicable Supplements and all amounts
owing to the Series Enhancers with respect to the Defeased
Series;
(ii) a statement from a firm of nationally
recognized independent public accountants (who may also render
other services to the Transferor) to the effect that such
deposit is sufficient to pay the amounts specified in clause (i)
above;
(iii) prior to its first exercise of its
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right pursuant to this Section 12.04 with respect to a Defeased
Series to substitute money or Eligible Investments for
Receivables, if any Series of Investor Certificates are
outstanding that were characterized as debt at the time of their
issuance, the Transferor shall have delivered to the Trustee an
Opinion of Counsel to the effect that such deposit and
termination of obligations will not cause the Trust to be an
association or publicly traded partnership taxable as a
corporation, and (in any case) 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;
(iv) the Transferor shall have delivered to
the Trustee an Officer's Certificate of the Transferor stating
the Transferor reasonably believes that such deposit and
termination of obligations will not, based on the facts known to
such officer at the time of such certification, then cause a Pay
Out Event or Reinvestment Event with respect to any Series or
any event that, with the giving of notice or the lapse of time,
would result in the occurrence of a Pay Out Event with respect
to any Series; and
(v) the Rating Agency Condition shall have
been satisfied and the Transferor shall have delivered copies of
such written notice to the Servicer and the Trustee.
12.5. Optional Purchase.
(a) If so provided in any Supplement, the Transferor may,
but shall not be obligated to, cause a final distribution to be made in respect
of the related Series of Investor Certificates on a specified Distribution Date
or when the Invested Amount reaches a specified level or under any circumstances
specified in such Supplement by depositing into the Collection Account or the
applicable Series Account, not later than the Transfer Date preceding such
Distribution Date, for application in accordance with Section 12.02, the amount
specified in such Supplement.
(b) The amount deposited pursuant to subsection 12.05(a)
shall be paid to the Investor Certificateholders of the related Series pursuant
to Section 12.02 on the related Distribution Date following the date of such
deposit. All Certificates of a Series which are purchased by the Transferor
pursuant to subsection 12.05(a) shall be delivered by the Transferor upon such
purchase to, and be cancelled by, the Transfer Agent and Registrar and be
disposed of in a manner satisfactory to the Trustee and the Transferor. The
Invested Amount of each Series which is purchased by the Transferor pursuant to
subsection 12.05(a) shall, for the purposes of the definitions of "Invested
Amount" and "Transferor Amount," be deemed to be equal to zero on the
Distribution Date following the making of the deposit, and the Transferor Amount
shall thereupon be deemed to have been increased by the Invested Amount of such
Series.
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ARTICLE XIII
Miscellaneous Provisions
13.1. Amendment; Waiver of Past Defaults.
(a) This Agreement or any Supplement may be amended from
time to time (including in connection with (x) the provision of additional
Series Enhancement for the benefit of the Certificateholders of any Series (or
the reduction of such Series Enhancement), (y) the addition of a Participation
Interest to the Trust or (z) the designation of an Additional Transferor) by the
Servicer, the Transferor (including, if applicable, any Additional Transferor
being designated) and the Trustee without the consent of any of the
Certificateholders, provided that (i) the Transferor shall have delivered to the
Trustee an Officer's Certificate to the effect that the Transferor reasonably
believes that such action will not have an Adverse Effect and (ii) the Rating
Agency Condition shall have been satisfied with respect to any such amendment.
Additionally, notwithstanding the preceding sentence, this Agreement and any
Supplement may be amended by the Servicer and the Trustee at the direction of
the Transferor without the consent of any of the Certificateholders or Series
Enhancers to add, modify or eliminate such provisions as may be necessary or
advisable in order to enable all or a portion of the Trust (i) 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" as described in the provisions
of Section 860L of the Code, and (ii) to avoid the imposition of state or local
income or franchise taxes imposed on the Trust's property or its income;
provided, however, that (i) the Transferor delivers to the Trustee an Officer's
Certificate to the effect that the proposed amendments meet the requirements set
forth in this subsection, (ii) the Rating Agency Condition shall have been
satisfied with respect to any such amendment and (iii) such amendment does not
affect the rights, duties or obligations of the Trustee hereunder. The
amendments which the Transferor may make without the consent of
Certificateholders or Series Enhancers pursuant to the preceding sentence may
include, without limitation, the addition of a sale of Receivables and
termination of the Trust upon the occurrence of an Insolvency Event pursuant to
Section 9.01 hereof.
(b) This Agreement or any Supplement may also be amended
from time to time 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 Invested Amount of the Investor Certificates of all adversely
affected Series, 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 be made to Investor Certificateholders
or deposits of amounts to be so distributed or the amount available under any
Series Enhancement without the consent of each affected Certificateholder, (ii)
change the definition of or the manner of calculating the interest of any
Investor Certificateholder without the consent of each affected Investor
Certificateholder, (iii) reduce the aforesaid percentage required to consent to
any such amendment without the consent of each Investor Certificateholder or
(iv) adversely affect the rating of any Series or Class by each Rating Agency
without the consent of the Holders of Investor Certificates of such
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Series or Class evidencing not less than 66-2/3% of the aggregate Invested
Amount of the Investor Certificates of such Series or Class. Any amendment to be
effected pursuant to this paragraph shall be deemed not to adversely affect any
outstanding Series with respect to which the Transferor shall deliver an Opinion
of Counsel, addressed and delivered to the Trustee, that such action will not,
in such counsel's reasonable opinion, have an Adverse Effect with respect to
such Series. 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.
(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.
(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) Any Supplement executed in accordance with the
provisions of subsection 6.03(b) shall not be considered an amendment to this
Agreement for the purposes of this Section.
(f) The Holders of Investor Certificates evidencing more
than 66-2/3% of the aggregate Invested 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 Invested 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 thereto except to the extent expressly so waived.
13.2. Protection of Right, Title and Interest to Trust.
(a) The Servicer shall cause this Agreement, all amendments
and supplements hereto and all financing statements and continuation statements
and any other necessary documents covering the Certificateholders' and the
Trustee's right, title and interest to the Trust to be promptly recorded,
registered and filed, and at all times to be kept recorded, registered and
filed, all in such manner and in such places as may be required by law fully to
preserve and protect the right, title and interest of the Certificateholders and
the Trustee hereunder to all property comprising the Trust. The Servicer shall
deliver to the Trustee file-
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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 in the
Receivables and the proceeds thereof.
(c) Each Transferor and the Servicer will at all times
maintain each office from which it services Receivables and its principal
executive offices within the United States.
(d) The Transferor will 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 G-1; and (ii) on each
Addition Date on which any Additional Accounts (other than Automatic Additional
Accounts) are to be designated as Accounts pursuant to subsections 2.09(a) or
(b) and on each date specified in subsection 2.09(d)(iii) with respect to the
designation of Automatic Additional Accounts as Accounts, an Opinion of Counsel
substantially in the form of Exhibit G-2, and on each Addition Date on which any
Participation Interests are to be included in the Trust pursuant to subsections
2.09(a) or (b), an Opinion of Counsel covering the same substantive legal issues
addressed by Exhibit G-2 but conformed to the extent appropriate to relate to
Participation Interests.
13.3. 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 Certificateholders' legal representatives or heirs to
claim an accounting or to take any action or commence any proceeding in any
court for a partition or winding up of the Trust, nor otherwise affect the
rights, obligations and liabilities of the parties hereto or any of them.
(b) No Investor Certificateholder shall have any right to
vote (except as expressly provided in this Agreement) or in any manner otherwise
control the operation and management of the Trust, or the obligations of the
parties hereto, nor shall 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
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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.
13.4. 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 THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
13.5. Notices; Payments.
(a) All demands, notices, instructions, directions and
communications (collectively, "Notices") under this Agreement shall be in
writing and shall be deemed to have been duly given if personally delivered at,
mailed by registered mail, return receipt requested, or sent by facsimile
transmission (i) in the case of the Transferor, to NextCard Funding Corp., 595
Market Street, Suite 2250, San Francisco, California 94105, Attn: Chief
Financial Officer, (ii) in the case of the Servicer, to NextCard, Inc., 595
Market Street, Suite 950, San Francisco, California 94105, Attn: Chief Financial
Officer (facsimile no. 415-836-9701), (iii) in the case of the Paying Agent or
the Trustee, Transfer Agent and Registrar, to 101 Barclay Street, 12th Floor
East, New York, New York, 10286, Attention: Corporate Trust Administration
(facsimile no. (212) 815-5544), (iv) in the case of Moody's, to 99 Church
Street, New York, New York 10007, Attn: 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, Attn: 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
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a written notice to each other party.
(b) Any Notice required or permitted to be given to a Holder
of Registered Certificates shall be given by first-class mail, postage prepaid,
at the address of such Holder as shown in the Certificate Register. No Notice
shall be required to be mailed to a Holder of Bearer Certificates or Coupons but
shall be given as provided below. Any Notice so mailed within the time
prescribed in this Agreement shall be conclusively presumed to have been duly
given, whether or not the Investor Certificateholder receives such Notice. In
addition, (a) if and so long as any Series or Class is listed on the Luxembourg
Stock Exchange and such Exchange shall so require, any Notice to Investor
Certificateholders shall be published in an Authorized Newspaper of general
circulation in Luxembourg within the time period prescribed in this Agreement
and (b) in the case of any Series or Class with respect to which any Bearer
Certificates are outstanding, any Notice required or permitted to be given to
Investor Certificateholders of such Series or Class shall be published in an
Authorized Newspaper within the time period prescribed in this Agreement.
13.6. 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.
13.7. 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.
13.8. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Section 8.02, this Agreement may not be
assigned by the Servicer without the prior consent of Holders of Investor
Certificates evidencing not less than 66-2/3% of the Aggregate Invested Amount.
The Servicer shall give the Rating Agencies prior written notice of any such
assignment.
13.9. 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 Certificates upon
authentication thereof by the Trustee pursuant to Section 6.02 are and shall be
deemed fully paid.
13.10. 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
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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.
13.11. Nonpetition Covenant. Notwithstanding any prior
termination of this Agreement, the Servicer, the Trustee, each Transferor, each
Series Enhancer and each Holder of a 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, 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.
13.12. 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.
13.13. 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.
13.14. Third-Party Beneficiaries. This Agreement will inure to
the benefit of and be binding upon the parties hereto, the Certificateholders,
any Series Enhancer (to the extent provided in this Agreement and the related
Supplement) and their respective successors and permitted assigns. Except as
otherwise expressly provided in this Agreement, no other Person will have any
right or obligation hereunder.
13.15. 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.
(a) 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, the Transferor
or the Servicer in reliance thereon, whether or not notation of such action is
made upon such Certificate.
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13.16. 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.
13.17. Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
13.18. Construction of Agreement. It is the express intent of
the parties hereto that the transfer of the Receivables to the Trustee pursuant
to this Agreement to be, and be construed as, an absolute assignment to the
Trustee, and not a borrowing by the Transferor secured by the Receivables. It
is, further, not the intention of the parties that such transfer be deemed a
pledge of the Receivables by the Transferor to the Trustee to secure a debt of
the Transferor. However, if it should be determined that, notwithstanding the
intent of the parties, the Receivables are held to be property of the
Transferor, or if for any reason this Agreement is held or deemed to create a
security interest, then (a) this Agreement shall be deemed to be a security
agreement within the meaning of the applicable Uniform Commercial Code, and (b)
the transfer provided for in this Agreement shall be the grant of a security
interest to the Trustee on behalf of the Trust, for the benefit of the
Certificateholders in all of the Transferor's right, title and interest, whether
now owned or hereafter acquired, in, to and under the Receivables existing at
the close of business on the Initial Cut-Off Date, in the case of Receivables
arising in the Initial Accounts, and on each Addition Cut-Off Date, in the case
of Receivables arising in the Additional Accounts, and in each case thereafter
created from time to time until the termination of the Trust, all monies due or
to become due and all amounts received with respect thereto (including any and
all Recoveries) and all proceeds (including "proceeds" as defined in the UCC)
thereof and any other Trust Assets. This Agreement shall constitute a security
agreement under applicable law.
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IN WITNESS WHEREOF, the Transferor, the Servicer and the Trustee
have caused this Agreement to be duly executed by their respective officers as
of the day and year first above written.
NextCard Funding Corp.,
Transferor,
By /s/ John V. Hashman
---------------------------------
Name: John V. Hashman
Title: Chief Financial Officer
NextCard, Inc.,
Servicer,
By /s/ John V. Hashman
---------------------------------
Name: John V. Hashman
Title: Chief Financial Officer
THE BANK OF NEW YORK,
as Trustee and as Securities Intermediary under
Section 4.02 of this Agreement
By /s/ Kimberly Gilfoil
---------------------------------
Name: Kimberly Gilfoil
Title: Assistant Treasurer
98
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I Creation of the Series 1999-1 Certificates..............................1
Section 1.01. Designation........................................................1
ARTICLE II Definitions.............................................................2
Section 2.01. Definitions........................................................2
ARTICLE III Servicing Fee..........................................................11
Section 3.01. Servicing Compensation............................................11
ARTICLE IV Rights of Series 1999-1 Certificateholders and Allocation and
Application of Collections.............................................11
Section 4.01. Collections and Allocations.......................................11
Section 4.02. Determination of Monthly Interest.................................13
Section 4.03. Suspension of the Revolving Period; Limited Amortization
Period............................................................14
Section 4.04. Required Amount...................................................14
Section 4.05. Application of Series 1999-1 Allocable Finance Charge
Collections and Available Principal Collections...................14
Section 4.06. Defaulted Amounts; Investor Charge-Offs...........................15
Section 4.07. Excess Spread and Excess Finance Charge Collections...............16
Section 4.08. Excess Finance Charge Collections.................................16
Section 4.09. Shared Principal Collections......................................17
Section 4.10. Invested Amount Increases.........................................17
Section 4.11. Reserve Account...................................................18
Section 4.12. Interest Rate Caps................................................19
</TABLE>
2
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE V Distributions and Reports to Series 1999-1 Certificateholders..........21
Section 5.01. Distributions.....................................................21
Section 5.02. Reports and Statements to Certificateholders......................21
ARTICLE VI Pay Out Events.........................................................21
Section 6.01. Pay Out Events....................................................21
ARTICLE VII Optional Repurchase; Series Termination................................23
Section 7.01. Optional Repurchase...............................................23
Section 7.02. Series Termination................................................24
ARTICLE VIII Final Distributions....................................................24
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........................................24
ARTICLE IX Miscellaneous Provisions...............................................25
Section 9.01. Ratification of Agreement.........................................25
Section 9.02. Counterparts......................................................25
Section 9.03. Governing Law.....................................................25
Section 9.04. Private Placement of Series 1999-1 Certificates; Form of
Delivery of Series 1999-1 Certificates............................25
Section 9.05. Successors and Assigns............................................26
Section 9.06. Amendments........................................................26
</TABLE>
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<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 9.07. Amendments to Agreement...........................................26
Section 9.08. Tax Matters.......................................................27
</TABLE>
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<PAGE> 4
SERIES 1999-1 SUPPLEMENT, dated as of June 16, 1999 (the
"Supplement"), among NEXTCARD FUNDING CORP., a Delaware
corporation, as Transferor, NEXTCARD, INC., a Delaware
corporation, as Servicer, and THE BANK OF NEW YORK, a New York
banking corporation, as Trustee.
Pursuant to the Pooling and Servicing Agreement, dated as of
December 1, 1998, as amended and restated by the Amended and Restated Pooling
and Servicing Agreement, dated as of May 21, 1999 (as amended, restated and
supplemented, the "Agreement"), among the Transferor, the Servicer and the
Trustee, the Transferor has created the NextCard Master Trust I (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 1999-1 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 "NextCard Master Trust I, Series 1999-1." The Series 1999-1
Certificates shall be known as the "Series 1999-1 Variable Funding
Certificates."
(b) Series 1999-1 shall be a Principal Sharing Series.
Series 1999-1 shall be an Excess Allocation Series. Series 1999-1 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 1999-1 shall be the August 16, 1999 Distribution Date and the first
Monthly Period shall begin on and include the Closing Date and end on and
include July 31, 1999. The Closing Date shall be a Discount Option Date and the
Discount Percentage shall be [*] or such other percentage as shall be mutually
acceptable to the Transferor and the Administrative Agent, which Discount
Percentage shall apply to all Principal Receivables (without giving effect to
the proviso in the definition of Principal Receivables) arising on or after the
Closing Date. Notwithstanding anything to the contrary in the Agreement, the
Transferor shall not reduce or withdraw such Discount Percentage or otherwise
modify the application thereof unless the Rating Agency Condition shall have
been satisfied with respect to such action.
ARTICLE II
Definitions
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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<PAGE> 5
Section 2.01. Definitions.
(a) Whenever used in this Supplement, the following words
and phrases shall have the following meanings, and the definitions of such terms
are applicable to the singular as well as the plural forms of such terms and the
masculine as well as the feminine and neuter genders of such terms.
"Account Origination Agreement" shall mean the Amended and
Restated Account Origination Agreement by and between the Servicer, the
Transferor and Heritage Bank of Commerce dated as of May 21, 1999, as amended
from time to time in accordance with the terms thereof.
"Additional Amounts" shall have the meaning specified in the
Certificate Purchase Agreement.
"Additional Interest" shall have the meaning specified in
Section 4.02(b).
"Administrative Agent" shall mean ING Baring (U.S.) Capital
Markets, LLC, in its capacity as agent under the Certificate Purchase Agreement,
and any successor thereto appointed pursuant to the Certificate Purchase
Agreement.
"Amortization Period" shall mean, with respect to Series 1999-1,
as the context requires, the Scheduled Amortization Period, the Early
Amortization Period or any Limited Amortization Period.
"Available Principal Collections" shall mean, with respect to
any Monthly Period, an amount equal to the sum of (a) the Series 1999-1
Allocable Principal Collections received during such Monthly Period, (b) any
Shared Principal Collections with respect to other Series that are allocated to
Series 1999-1 in accordance with Section 4.04 of the Agreement and Section 4.09
hereof and (c) any other amounts which pursuant to Section 4.05, 4.07 or 4.11
hereof are to be treated as Available Principal Collections with respect to the
related Distribution Date.
"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.
"Bank" shall mean Heritage Bank of Commerce.
"Base Rate" shall mean, with respect to any Monthly Period, the
annualized percentage equivalent of a fraction, (a) the numerator of which is
the sum of the Monthly Interest and the Monthly Servicing Fee for such Monthly
Period and (b) the denominator of which is the Average Invested Amount as of the
last day of such Monthly Period.
"Cap Rate" shall mean [*] per annum.
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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"Certificate Assignment" shall have the meaning specified in
Section 9.08(e).
"Certificate Purchase Agreement" shall mean the Certificate
Purchase Agreement, dated as of June 16, 1999, among the Transferor, the
Servicer, the Administrative Agent and the Purchaser, and all amendments
thereto.
"Certificate Rate" shall have the meaning specified in the
Certificate Purchase Agreement.
"Certificateholder" shall mean the Person in whose name a
Certificate is registered in the Certificate Register.
"Certificates" shall mean any one of the Series 1999-1 Variable
Funding Certificates executed by the Transferor and authenticated by or on
behalf of the Trustee, substantially in the form of Exhibit A.
"Closing Date" shall have the meaning specified in the
Certificate Purchase Agreement.
"Credit Bureau Agency" shall mean any of Trans Union LLC,
Experian Inc. or Equifax Inc., or any of their respective successors.
"Distribution Date" shall mean August 16, 1999, and the
fifteenth day of each calendar month thereafter, 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 1999-1 is deemed to have occurred, and
ending on the first to occur of (i) the payment in full of the Invested Amount
and (ii) the Series 1999-1 Termination Date.
"Excess Spread" shall mean, with respect to any Distribution
Date, the sum of the amounts, if any, specified pursuant to subsections
4.05(a)(iv).
"Excess Spread Percentage" shall mean, for any Monthly Period,
the difference between the Portfolio Yield and the Base Rate for such Monthly
Period.
"FICO Score" shall mean , with respect to any Obligor, the
average of any two of the risk scores indicated on such Obligor's credit
reports, as calculated by the applicable Credit Bureau Agency using software
developed by Fair, Isaac and Co., Inc.
"Finance Charge Shortfall" shall have the meaning specified in
Section 4.08.
"Increase Amount" shall have the meaning specified in Section
4.10(a).
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<PAGE> 7
"Increase Conditions" shall mean, with respect to any requested
Invested Amount Increase hereunder, all of the following:
(a) the request with respect to such Invested Amount
Increase shall have been delivered to the Trustee, the Administrative Agent and
the Servicer by the time, and shall otherwise conform to the requirements,
specified in Section 4.10(a);
(b) after giving effect to such Invested Amount Increase,
the Invested Amount shall not exceed the Maximum Invested Amount;
(c) no Pay Out Event or event that, after the giving of
notice or the lapse of time, would constitute a Pay Out Event, has occurred and
is continuing or would result from such Invested Amount Increase;
(d) the Scheduled Amortization Period shall not have
commenced as of such Increase Date;
(e) all of the representations and warranties of the
Transferor and the Servicer set forth in the Agreement shall be true and correct
as though made on and as of such Increase Date (except that representations and
warranties set forth in Sections 2.04(a)(ii), (vii), (viii) and (ix) shall be
deemed to be made only as of the applicable date specified in such sections);
(f) after giving effect to such Invested Amount Increase,
the Transferor Percentage shall be equal to or greater than the Required
Transferor Percentage on such date;
(g) the Servicer shall have delivered to the Administrative
Agent a copy of the Servicer Report prepared as of the immediately prior
Determination Date, signed by a Servicing Officer;
(h) the Interest Rate Cap Requirement is satisfied on such
date;
(i) as of the most recent Distribution Date preceding the
applicable Increase Date, no unreimbursed Investor Charge-Offs remain
outstanding;
(j) the amount on deposit in the Reserve Account shall equal
the Required Reserve Account Amount on such Increase Date after giving effect to
the Invested Amount Increase and the Required Reserve Account Addition made on
such Increase Date;
(k) as of the most recent preceding Determination Date, the
Excess Spread
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<PAGE> 8
Percentage is equal to or greater than [*]; and
(l) the Transferor shall have delivered to the Trustee, the
Administrative Agent and the Servicer an Officer's Certificate dated as of such
Increase Date certifying that the conditions described in paragraphs (a) through
(k) above have been satisfied.
"Increase Date" shall have the meaning specified in Section
4.10(a).
"Initial Invested Amount" shall mean $0.
"Interest Period" shall mean, with respect to any Distribution
Date, the period from and including the Distribution Date immediately preceding
such Distribution Date (or, in the case of the first Distribution Date, from and
including the Closing Date) to but excluding such Distribution Date.
"Interest Rate Cap" shall mean an interest rate cap agreement
for the benefit of the Trust between the Trustee, acting on behalf of the Trust,
and an Interest Rate Cap Provider, substantially in the form of Exhibit D,
obtained by the Transferor pursuant to Section 4.12(a) and having a cap rate
equal to the Cap Rate, or any Replacement Interest Rate Cap or Qualified
Substitute Arrangement with respect thereto.
"Interest Rate Cap Payment" shall mean, with respect to any
Distribution Date, any payment required to be made on the preceding Business Day
by an Interest Rate Cap Provider to the Trustee for deposit in the Collection
Account as Series 1999-1 Allocable Finance Charge Collections.
"Interest Rate Cap Provider" shall mean any obligor under an
Interest Rate Cap, or if any Replacement Interest Rate Cap or Qualified
Substitute Arrangement is obtained for such Interest Rate Cap pursuant to
Section 4.12, any obligor with respect to such Replacement Interest Rate Cap or
Qualified Substitute Arrangement.
"Interest Rate Cap Requirement" shall mean as of any date of
determination, that (i) the Trust shall have the benefits of Interest Rate Caps,
Replacement Interest Rate Caps or Qualified Substitute Arrangements satisfying
the requirements of Section 4.12 and (ii) the long-term unsecured debt ratings
of each Interest Rate Cap Provider shall be at least AA by Standard & Poor's and
Aa2 by Moody's or the short-term unsecured debt ratings of the Interest Rate Cap
Provider shall be at least A-1 by Standard & Poor's and P-1 by Moody's;
provided, however, that if ING Baring (U.S.) Capital Markets, LLC or an
Affiliate thereof is an Interest Rate Cap Provider, no rating requirement will
apply to such Interest Rate Cap Provider.
"Interest Shortfall" shall have the meaning specified in Section
4.02(b).
"Invested Amount" shall mean, on any date of determination, an
amount equal to (a) the Initial Invested Amount, plus (b) the aggregate
principal amount of Invested Amount
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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<PAGE> 9
Increases pursuant to Section 4.10 on or prior to such date, minus (c) the
aggregate amount of principal payments made to the Certificateholders on or
prior to such date, minus (d) the excess, if any, of the aggregate amount of
Investor Charge-Offs for all prior Distribution Dates over Investor Charge-Offs
reimbursed pursuant to Section 4.07(b) prior to such date.
"Invested Amount Increase" shall have the meaning specified in
Section 4.10(a).
"Investment Letter" shall mean an Investment Letter
substantially in the form of Exhibit C executed by a Certificateholder.
"Investor Charge-Offs" shall have the meaning specified in
Section 4.06.
"Investor Default Amount" shall mean, with respect to any
Monthly Period, an amount equal to the product of (a) the Defaulted Amount for
the related Monthly Period and (b) the Series 1999-1 Floating Allocation
Percentage for such Monthly Period.
"Limited Amortization Amount" shall have the meaning specified
in Section 4.03.
"Limited Amortization Period" shall mean, unless the Scheduled
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 Scheduled
Amortization Period or the Early Amortization Period and (ii) the last day of
the Monthly Period related to the Distribution Date on which the applicable
Limited Amortization Amount shall have been paid in full.
"Maximum Invested Amount" shall mean an amount equal to the
Purchase Commitment in effect from time to time.
"Monthly Interest" shall have the meaning specified in the
Certificate Purchase Agreement.
"Monthly Servicer Report" shall have the meaning specified in
Section 5.02.
"Monthly Servicing Fee" shall have the meaning specified in
Section 3.01.
"Notional Amount" shall mean the notional amount of any Interest
Rate Cap.
"Official Body" shall mean any government or political
subdivision or any agency, authority, bureau, central bank, commission,
department or instrumentality thereof, or any court, tribunal, grand jury or
arbitrator, in each case whether foreign or domestic.
"Partial Participant" shall have the meaning specified in
Section 9.08(f).
"Participant" shall have the meaning specified in Section
9.08(f).
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"Pay Out Event" shall mean any Pay Out Event specified in
Section 6.01.
"Payment Rate" shall mean, for any Monthly Period, the
percentage equivalent of a fraction, the numerator of which is the aggregate
amount of Collections of Receivables during such Monthly Period and the
denominator of which is the aggregate amount of Receivables outstanding as of
the first day of such Monthly Period.
"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 (i) the amount of Series 1999-1 Allocable Finance Charge
Collections with respect to such Monthly Period minus (ii) the Investor Default
Amount for such Monthly Period and (b) the denominator of which is the Average
Invested Amount for such Monthly Period.
"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 (or may be) 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 the holders of the
Transferor Certificate or any interest therein, the interest of the Servicer,
and 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.
"Purchase Commitment" shall have the meaning specified in the
Certificate Purchase Agreement.
"Purchaser" shall mean Holland Limited Securitization, Inc., a
Delaware corporation, together with its successors and permitted assigns.
"Qualified Substitute Arrangement" shall have the meaning
specified in Section 4.12(b).
[*]
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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[*]
"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 1999-1 Certificateholders, plus (iii) the amount of any Additional
Interest, if any, for such Distribution Date and any Additional Interest
previously due but not distributed to the Certificateholders on a prior
Distribution Date.
"Replacement Interest Rate Cap" shall mean any interest rate cap
having the same terms and conditions as the form of interest rate agreement set
forth in Exhibit D, in the case of a replacement to an Interest Rate Cap, and
otherwise satisfying the conditions set forth in Section 4.12.
"Required Amount" shall have the meaning specified in Section
4.04.
"Required Excess Spread Reserve Account Percentage" shall mean,
with respect to any Determination Date or Increase Date, the percentage in the
right-hand column below corresponding to the applicable Three-Month Average
Excess Spread Percentage set forth in the left-hand column below:
<TABLE>
<CAPTION>
Three-Month Average Required Excess Spread
Excess Spread Percentage Reserve Account Percentage
------------------------ --------------------------
<S> <C>
< [*] [*]%
>= [*] and < [*] [*]%
>= [*] [*]%
</TABLE>
provided, that, if the Required Excess Spread Reserve Account Percentage has at
any time increased, then the Required Excess Spread Reserve Account Percentage
shall not decrease below the increased percentage unless a lower percentage is
the appropriate Required Excess Spread Reserve Account Percentage for [*]
provided, further, that each of the Required Excess Spread Reserve Account
Percentages set forth in the right-hand column above shall be increased by (i)
1.0% if the average of the ratios of Defaulted Receivables to Principal
Receivables determined on any three consecutive prior Monthly Periods equals or
exceeds [*]% and (ii) 1.0% if the average of the Payment Rates for any three
consecutive prior Monthly Periods shall be equal to or less than [*]% on any
Determination Date.
"Required Reserve Account Addition" shall have the meaning
specified in Section 4.10(a).
"Required Reserve Account Amount" shall mean, with respect to
any
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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Determination Date or Increase Date, the product of (a)(i) in the case of any
Determination Date, the Invested Amount for the Distribution Date following such
Determination Date after giving effect to the principal distributions to be made
on such Distribution Date and (ii) in the case of any Increase Date, the
Invested Amount after giving effect to the Invested Amount Increase on such
Increase Date, and (b) the greater of (i) [*] and (ii) the Required Excess
Spread Reserve Account Percentage for such Determination Date or Increase Date;
provided, however, that the Required Reserve Account Amount shall in no event be
reduced below [*].
"Reserve Account" shall have the meaning specified in Section
4.11(a).
"Reserve Account Deficiency" shall have the meaning specified in
Section 4.07(c).
"Reset Date" shall mean each of (a) an Addition Date, (b) a
Removal Date, and (c) a date on which an Invested Amount Increase occurs.
"Revolving Period" shall mean the period beginning at the close
of business on the Closing Date and ending on the earlier of (a) the close of
business on the day immediately preceding the day the Scheduled 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.
"Scheduled Amortization Date" shall mean the last day of the
January 2002 Monthly Period.
"Scheduled Amortization Period" shall mean, unless a Pay Out
Event with respect to Series 1999-1 shall have occurred prior thereto, the
period commencing on the Scheduled Amortization Date and ending upon the first
to occur of (x) the commencement of the Early Amortization Period, (y) the
payment in full of the Invested Amount and (z) the Series 1999-1 Termination
Date; provided, however, that the commencement of the Scheduled Amortization
Period may occur on such later date as may be mutually agreed upon by the
Administrative Agent and the Transferor.
"Series 1999-1" shall mean the Series of Certificates the terms
of which are specified in this Supplement.
"Series 1999-1 Allocable Finance Charge Collections" shall mean
an amount equal to, with respect to any Monthly Period, the product of (i) the
Series 1999-1 Floating Allocation Percentage and (ii) Collections of Finance
Charge Receivables received by the Servicer during such Monthly Period, plus any
Interest Rate Cap Payments received from any Interest Rate Cap Provider prior to
the Distribution Date in the month following such Monthly Period.
"Series 1999-1 Allocable Principal Collections" shall mean an
amount equal to,
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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(a) with respect to any Monthly Period during the Revolving Period, the product
of (i) the Series 1999-1 Floating Allocation Percentage and (ii) Collections of
Principal Receivables received by the Servicer during such Monthly Period, and
(b) with respect to any Monthly Period during an Amortization Period, the
product of (i) the Series 1999-1 Fixed Allocation Percentage and (ii)
Collections of Principal Receivables received by the Servicer during such
Monthly Period.
"Series 1999-1 Certificateholders' Interest" shall mean the
Certificateholders' Interest for Series 1999-1.
"Series 1999-1 Fixed Allocation Percentage" shall mean an amount
equal to, with respect to any Monthly Period during an Amortization Period, the
percentage equivalent of a fraction, the numerator of which is the Invested
Amount as of the last day of the Revolving Period and the denominator of which
is the greatest of (a) the aggregate amount of Principal Receivables plus the
amount then on deposit in the Excess Funding Account, in each case as of the
last day of such Monthly Period, (b) the Trust Invested Amount as of such last
day and (c) the sum of the numerators used to calculate the fixed allocation
percentages for all Series then outstanding for such Monthly Period; provided,
however, that with respect to any Monthly Period in which one or more Reset
Dates occurs, the Series 1999-1 Fixed 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 1999-1 Floating Allocation Percentage" shall mean an
amount equal to, with respect to any Monthly Period, the percentage equivalent
of a fraction, the numerator of which is the Invested Amount as of the last day
of the immediately preceding Monthly Period and the denominator of which is the
greater of (a) the aggregate amount of Principal Receivables plus the amount
then on deposit in the Excess Funding Account, in each case as of as of the last
day of such Monthly Period, and (b) the Trust Invested Amount as of such last
day; provided, however, that with respect to any Monthly Period in which one or
more Reset Dates occurs, the Series 1999-1 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.
"Series 1999-1 Termination Date" shall mean the Distribution
Date occurring in the 36th calendar month following the earlier to occur of (x)
the commencement of the Scheduled Amortization Period or (y) the commencement of
the Early Amortization Period.
"Series Percentage" shall mean for any Monthly Period, (a) with
respect to Finance Charge Receivables and Defaulted Amounts at any time and
Principal Receivables during the Revolving Period, the Series 1999-1 Floating
Allocation Percentage and (b) with respect to Principal Receivables during any
Amortization Period, the Series 1999-1 Fixed Allocation Percentage.
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<PAGE> 14
"Servicing Fee Rate" shall mean 2.0% per annum.
"Shared Principal Collections" shall mean Shared Principal
Collections as defined and described in Section 4.04 of the Agreement; amounts
to be treated as Shared Principal Collections under this Supplement are
described in subsections 4.05(b)(ii) and (c)(ii).
"Three-Month Average Excess Spread" shall mean, (i) for any
Determination Date or Increase Date occurring on or after the Determination Date
in any month, the average of the Excess Spread Percentages for each of the three
preceding Monthly Periods and (ii) for any Increase Date occurring prior to the
Determination Date in any month, the average of the Excess Spread Percentages
for each of the three Monthly Periods preceding the immediately prior Monthly
Period.
(b) Notwithstanding anything to the contrary in the
Agreement, (i) no action that is subject to the Rating Agency Condition or that
requires Rating Agency consent pursuant to the terms of the Agreement or this
Series Supplement (regardless of whether one or more Series of Investor
Certificates rated by any Rating Agency is then outstanding), shall be taken
unless the Administrative Agent shall have first consented in writing to such
action, which consent by the Administrative Agent shall not be unreasonably
withheld, and (ii) the Administrative Agent shall receive all notices, opinions,
reports, certifications and other items to be provided to each Rating Agency
pursuant to the Agreement as supplemented by this Series Supplement.
(c) Each capitalized term defined herein shall relate to the
Series 1999-1 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.
(d) 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
Section 3.01. Servicing Compensation. The share of the Servicing
Fee allocable to the Series 1999-1 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) the Average Invested Amount
for the Monthly Period preceding such Distribution Date;
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<PAGE> 15
provided, however, that with respect to the first Distribution Date, the Monthly
Servicing Fee shall equal the product of (a) a fraction, the numerator of which
shall be the number of days in the period beginning on the Closing Date and
ending on July 31, 1999 and the denominator of which shall be 360, (b) the
Servicing Fee Rate and (c) the Average Invested Amount for the period beginning
on the Closing Date and ending on July 31, 1999.
ARTICLE IV
Rights of Series 1999-1 Certificateholders and
Allocation and Application of Collections
Section 4.01. Collections and Allocations.
(a) Allocations. Prior to the close of business on each
Deposit Date, Collections of Finance Charge Receivables, Principal Receivables
and Defaulted Receivables allocated to Series 1999-1 pursuant to Article IV of
the Agreement (and, as described herein, Collections of Finance Charge
Receivables reallocated from other Series) shall be allocated and distributed or
reallocated as set forth in this Article IV.
(b) Allocations to the Series 1999-1 Certificateholders. The
Servicer shall prior to the close of business on any Deposit Date allocate, or
cause the Trustee to allocate, to the Series 1999-1 Certificateholders and the
Holders of the Transferor Certificates as follows:
(i) Allocations of Finance Charge Collections. The
Servicer shall allocate, or cause the Trustee to allocate, to the Series
1999-1 Certificateholders and retain in the Collection Account for
application or reallocation as provided herein an amount equal to the
product of (A) the Series 1999-1 Floating Allocation Percentage and (B)
the aggregate amount of Collections of Finance Charge Receivables
deposited in the Collection Account on such Deposit Date.
(ii) Allocations of Principal Collections. The
Servicer shall allocate to the Series 1999-1 Certificateholders, or
cause the Trustee to allocate, the following amounts as set forth below:
(x) Allocations During the Revolving Period. During
the Revolving Period, an amount equal to the product of (I) the
Series 1999-1 Floating Allocation Percentage and (II) the
aggregate amount of Collections of Principal Receivables
deposited in the Collection Account on such Deposit Date shall
be allocated to the Series 1999-1 Certificateholders and, if any
other Principal Sharing Series is outstanding and in its
amortization period or accumulation period, shall be retained in
the Collection Account for application, to the extent necessary,
as Shared Principal Collections on the related Distribution
Date, and if no other Principal Sharing Series is outstanding
and in its amortization period or accumulation period, shall be
paid to the Holders of the Transferor Certificates;
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provided, however, that such amount to be paid to the Holders of
the Transferor Certificates on any Deposit Date shall be paid to
such Holders 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 Excess Funding
Account.
(y) Allocations During any Limited Amortization
Period. During any Limited Amortization Period, an amount equal
to the product of (I) the Series 1999-1 Fixed Allocation
Percentage and (II) the aggregate amount of Collections of
Principal Receivables deposited in the Collection Account on
such Deposit Date shall be allocated to the Series 1999-1
Certificateholders and retained in the Collection Account until
applied as provided herein; provided, however, that, if the
Series 1999-1 Allocable Principal Collections deposited on that
and each prior Deposit Date during the then current Monthly
Period exceed the difference between the Limited Amortization
Amount and the total amount of principal payments paid to the
Series 1999-1 Certificateholders during the related Limited
Amortization Period, then such excess 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 Excess Funding Account.
(z) Allocations During the Scheduled Amortization
Period or the Early Amortization Period. During the Scheduled
Amortization Period or the Early Amortization Period, an amount
equal to the product of (I) the Series 1999-1 Fixed Allocation
Percentage and (II) the aggregate amount of Collections of
Principal Receivables deposited in the Collection Account on
such Deposit Date shall be allocated to the Series 1999-1
Certificateholders and retained in the Collection Account until
applied as provided herein; provided, however, that if 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 1999-1 Certificateholders, amounts
allocated to the Series 1999-1 Certificateholders pursuant to
this subsection (z) 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 Excess Funding Account.
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The withdrawals to be made from the Collection Account pursuant
to this Section 4.01 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 1999-1 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.
Section 4.02. Determination of Monthly Interest.
(a) The amount of monthly interest distributable from the
Collection Account with respect to the Certificates on any Distribution Date
shall be amounts equal to the amounts calculated by the Administrative Agent
pursuant to the Certificate Purchase Agreement as the Monthly Interest for the
related Interest Period. Notwithstanding anything to the contrary herein, the
Monthly Interest shall be distributed on the Certificates only to the extent
permitted by applicable law.
(b) Two Business Days prior to each Distribution Date, the
Servicer shall determine and notify the Trustee in writing of the excess, if any
(the "Interest Shortfall"), of (x) the Monthly Interest for such Distribution
Date over (y) the amount which will be available to be distributed with respect
to the Certificates on such Distribution Date in respect thereof pursuant to
this Supplement. If, on any Distribution Date, the Interest Shortfall is greater
than zero, on each subsequent Distribution Date until such Interest Shortfall is
fully paid, an additional amount ("Additional Interest") equal to (x) the actual
number of days in the Interest Period commencing on such Distribution Date
divided by 360, multiplied by (y) the product of (i) the Certificate Rate for
such Interest Period plus 2.0% per annum and (ii) such Interest Shortfall shall
be payable as provided herein with respect to the Certificates. Notwithstanding
anything to the contrary herein, Additional Interest shall be distributed with
respect to the Certificates only to the extent permitted by applicable law.
(c) On or before the fourth Business Day preceding each
Distribution Date, the Administrative Agent shall calculate the Certificate Rate
and the Monthly Interest for the related Interest Period. Pursuant to the
Certificate Purchase Agreement, the Administrative Agent shall provide the
Servicer with written notice of the Certificate Rate and the Monthly Interest
for such Interest Period on or before the fourth Business Day preceding such
Distribution Date.
Section 4.03. Suspension of the Revolving Period; Limited
Amortization Period. The Transferor may from time to time, in 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 aggregate amount of the
decrease in the Invested Amount (the "Limited
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Amortization Amount") for such Limited Amortization Period; provided, however,
that any Limited Amortization Amount shall be in an amount of at least
$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.
Section 4.04. Required Amount. With respect to each Distribution
Date, on the related Determination Date, the Servicer shall determine the amount
(the "Required Amount"), if any, by which (x) the sum of the amounts required
pursuant to subsections 4.05(a)(i), (ii) and (iii) for such Distribution Date,
exceeds (y) the Series 1999-1 Allocable Finance Charge Collections for such
Distribution Date. In the event that the difference between (x) the Required
Amount for such Distribution Date and (y) the amount of Excess Spread and Excess
Finance Charge Collections allocated to Series 1999-1 applied with respect
thereto pursuant to Section 4.07(a) on such Distribution Date is greater than
zero, the Servicer shall give written notice to the Trustee of such positive
Required Amount on the date of computation.
Section 4.05. Application of Series 1999-1 Allocable Finance
Charge Collections 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, Series 1999-1 Allocable Finance Charge
Collections 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 Series
1999-1 Allocable Finance Charge Collections will be distributed or deposited in
the following priority:
(i) an amount equal to Monthly Interest for such
Distribution Date, plus the amount of any Monthly Interest previously
due but not distributed to Certificateholders, plus the amount of any
Additional Interest for such Distribution Date and any Additional
Interest previously due but not distributed to Certificateholders on a
prior Distribution Date, shall be distributed to the Certificateholders;
(ii) an amount equal to the Investor Default Amount
for such Distribution Date shall be treated as a portion of Available
Principal Collections for such Distribution Date;
(iii) 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 4.04 of the Agreement); provided, however, that
if NextCard, Inc. or an Affiliate is the Servicer and the amount of
Excess Spread and Excess Finance Charge Collections allocated to Series
1999-1 with respect to the related Monthly Period would otherwise be
insufficient to make the deposit to the Reserve Account required by
Section 4.07(c), the amount distributed to the Servicer pursuant to this
Section 4.05(a)(iii)
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on such Distribution Date shall be reduced, not below zero, by an amount
equal to the Reserve Account Deficiency; and
(iv) 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 Limited
Amortization Period, an amount equal to the Available Principal Collections for
the related Monthly Period shall be distributed in the following order of
priority:
(i) an amount which, together with the aggregate
amounts distributed pursuant to this clause (i) on prior Distribution
Dates with respect to the same Limited Amortization Amount, equals the
Limited Amortization Amount, shall be distributed to the
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 Scheduled
Amortization Period or the Early Amortization Period, an amount equal to the
Available Principal Collections for the related Monthly Period shall be
distributed in the following order of priority:
(i) an amount up to the Invested Amount on such
Distribution Date shall be distributed to the Certificateholders; and
(ii) for each Distribution Date beginning on the
Distribution Date on which the 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.
Section 4.06. Defaulted Amounts; Investor Charge-Offs. On each
Determination Date, the Servicer shall calculate the Investor Default Amount, if
any, for the related Distribution Date. If, on any Distribution Date, the
Required Amount for the related Monthly Period exceeds the sum of (a) the amount
of Excess Spread and Excess Finance Charge Collections allocable to Series
1999-1 with respect to such Monthly Period, and (b) the amount then on deposit
in the Reserve Account, the Invested Amount shall be reduced by the amount by
which such Required Amount exceeds such sum, but not by more than the Investor
Default Amount for such Distribution Date (an "Investor Charge-Off"). Investor
Charge-Offs shall thereafter be reimbursed and the Invested Amount increased
(but not by an amount in excess of the aggregate unreimbursed Investor
Charge-Offs) on any Distribution Date by the amount of Series 1999-1 Allocable
Finance Charge Collections and Excess Spread and Excess Finance Charge
Collections allocated to Series 1999-1 with respect to the related Monthly
Period which are allocated and available for that purpose pursuant to Section
4.07(b).
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Section 4.07. Excess Spread and 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 1999-1 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 Required Amount shall be
distributed by the Trustee to fund the Required Amount in accordance with, and
in the priority set forth in, subsections 4.05(a)(i), (ii) and (iii);
(b) an amount equal to the aggregate amount of Investor
Charge-Offs which have not been previously reimbursed shall be treated as a
portion of Available Principal Collections for such Distribution Date;
(c) if the amount on deposit in the Reserve Account is less
than the Required Reserve Account Amount for the immediately preceding
Determination Date (such difference, the "Reserve Account Deficiency"), an
amount equal to such Reserve Account Deficiency shall be deposited in the
Reserve Account;
(d) any Additional Amounts due and payable to the
Administrative Agent pursuant to the Certificate Purchase Agreement with respect
to such Distribution Date shall be paid to the Administrative Agent; and
(e) 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 4.04 of the Agreement.
Section 4.08. Excess Finance Charge Collections. Series 1999-1
shall be an Excess Allocation Series. Subject to Section 4.04 of the Agreement,
Excess Finance Charge Collections with respect to the Excess Allocation Series
for any Distribution Date will be allocated to Series 1999-1 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 1999-1 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
1999-1 for any Distribution Date will be equal to the excess, if any, of (a) the
full amount required to be paid, without duplication, pursuant to subsections
4.05(a)(i)-(iii) and subsections 4.07(a) through (d) on such Distribution Date
over (b) the Series 1999-1 Allocable Finance Charge Collections applied on such
Distribution Date.
Section 4.09. Shared Principal Collections. Subject to Section
4.04 of the Agreement, Shared Principal Collections for any Distribution Date
will be allocated to Series 1999-1 in an amount equal to the product of (x) the
aggregate amount of Shared Principal
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Collections with respect to all Principal Sharing Series for such Distribution
Date and (y) a fraction, the numerator of which is the Series 1999-1 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 "Principal Shortfalls" for Series
1999-1 will be equal to (a) for any Distribution Date with respect to the
Revolving Period, zero; (b) for any Distribution Date with respect to the
Limited Amortization Period, the excess, if any, of the Limited Amortization
Amount not previously distributed 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 Scheduled 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 4.10. Invested Amount Increases.
(a) The Series 1999-1 Certificateholders agree, by
acceptance of their Certificates, that the Transferor may, from time to time,
prior to the earlier of the commencement of the Scheduled Amortization Period
and the commencement of the Early Amortization Period and so long as a Limited
Amortization Period is not outstanding, and subject to the terms, conditions and
restrictions set forth in this Section 4.10(a) and in the Certificate Purchase
Agreement, request that the Certificateholders acquire additional undivided
interests in the Trust in specified amounts (each, an "Invested Amount
Increase"). Each and every Invested Amount Increase shall, however, be subject
to the satisfaction of the Increase Conditions, and shall be permitted only (i)
during the Revolving Period and (ii) upon the request made by the Transferor to
the Administrative Agent to increase the outstanding principal balance of the
Certificates held by the Purchaser and the Invested Amount to an amount not to
exceed the Maximum Invested Amount. Any such Invested Amount Increase shall be
in a minimum amount of [*] or an integral multiple of [*] in excess of that
amount. To request any such increase, the Transferor shall be required to give
to each of the Trustee, the Servicer and the Administrative Agent, at least two
Business Days prior to the date of the requested Invested Amount Increase, an
irrevocable Invested Amount Increase Request in the form attached hereto as
Exhibit E, specifying (i) the amount of such increase (the "Increase Amount"),
(ii) the date on which such Invested Amount Increase is to occur, which date
shall be a Business Day during the Revolving Period (an "Increase Date"), (iii)
the difference between the Required Reserve Account Amount for such Increase
Date after giving effect to the Increase Amount on such Increase Date and the
amount then on deposit in the Reserve Account (such difference, the "Required
Reserve Account Addition") and (iv) the payment instructions for remittance of
the proceeds of such requested Invested Amount Increase. The proceeds of such
Invested Amount Increase shall be remitted to the Transferor and the Trustee,
for deposit in the Reserve Account in accordance with Section 4.11.(c), in
accordance with such payment instructions.
(b) On the Increase Date for such Invested Amount Increase,
after satisfaction of all conditions to such Invested Amount Increase, the
Purchaser shall remit such Increase Amount, to the extent it has otherwise
agreed or committed to fund such Increase, no later than
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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3:00 p.m. (New York City time) in immediately available funds in accordance with
the payment instructions specified in the Notice of Invested Amount Increase,
and upon such remittance the outstanding principal balance of the Certificates,
held by the Purchaser and the Invested Amount, shall be increased by the amount
of such remittance. Concurrently with the making of such Invested Amount
Increase, the Transferor and the Administrative Agent shall deliver to the
Trustee a confirmation of such Invested Amount Increase, specifying the Increase
Amount, and the Trustee shall promptly annotate the Certificate Register
accordingly.
Section 4.11. Reserve Account.
(a) The Servicer, for the benefit of the Series 1999-1
Certificateholders, shall establish and maintain with the Trustee or its nominee
in the name of the Trustee, on behalf of the Trust, an Eligible Account
(including any subaccount thereof) bearing a designation clearly indicating that
the funds and other property credited thereto are held for the benefit of the
Series 1999-1 Certificateholders (the "Reserve Account").
The Reserve Account shall be under the sole dominion and control
of the Trustee for the benefit of the Series 1999-1 Certificateholders. Except
as expressly provided in this Supplement or the 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 Reserve Account for any amount owed
to it by the Trustee, the Trust or any Series 1999-1 Certificateholder. If, at
any time, the Reserve Account ceases to be an Eligible 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 may
consent) establish a new Reserve Account meeting the conditions specified above,
transfer any monies, documents, instruments, securities, security entitlements,
certificates of deposit and other property to such new Reserve Account and from
the date such new Reserve Account is established, it shall be the "Reserve
Account." The Servicer shall have the power, revocable by the Trustee, to make
withdrawals and payments from the Reserve Account and to instruct the Trustee to
make withdrawals and payments from the Reserve Account for the purposes of
carrying out the Servicer's or the Trustee's duties hereunder.
(b) On each Distribution Date, the Servicer shall direct the
Trustee in writing to (i) withdraw an amount equal to the lesser of (A) the
excess of (x) Required Amount for such Distribution Date over (y) the amount of
Excess Spread and Excess Finance Charge Collections allocated for Series 1999-1
with respect to the related Monthly Period and (B) the amount available in the
Reserve Account, from the Reserve Account, (ii) deposit such amount into the
Collection Account and (iii) apply such amount in the amounts and pursuant to
the priorities set forth in subsection 4.07(a). If on any Distribution Date,
after giving effect to all withdrawals from and deposits to the Reserve Account,
the amount on deposit in the Reserve Account would exceed the Required Reserve
Account Amount, such excess shall be deposited into the Collection Account and
treated as Collections of Finance Charge Receivables.
(c) On each Increase Date, the Trustee shall deposit all
funds remitted by the
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Administrative Agent on such Increase Date that constitute the Required Reserve
Account Addition for such Increase Date into the Reserve Account.
(d) Funds on deposit in the Reserve Account shall at the
written direction of the Servicer be invested by the Trustee or its nominee in
Eligible Investments selected by the Servicer. All such Eligible Investments
shall be held by the Trustee for the benefit of the Series 1999-1
Certificateholders. Investments of funds representing Collections collected
during any Monthly Period shall be invested in Eligible Investments that will
mature so that such funds will be available no later than the close of business
on each monthly Transfer Date following such Monthly Period 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 in writing, funds
deposited in the Reserve Account on a Transfer Date with respect to the
immediately succeeding Distribution Date are not required to be invested
overnight.
Section 4.12. Interest Rate Caps.
(a) The Transferor shall obtain Interest Rate Caps in favor
of the Trustee for the benefit of the Trust with aggregate Notional Amounts at
any time at least equal to the then-outstanding Invested Amount. Each Interest
Rate Cap shall provide that (i) the Trust shall not be required to make any
payments thereunder, (ii) the Interest Rate Cap shall terminate no earlier than
the Distribution Date occurring in December 2002 and (iii) the Trust shall be
entitled to receive Interest Rate Cap Payments (determined in accordance with
the Interest Rate Cap) from the applicable Interest Rate Cap Provider on the
Business Day immediately preceding each Distribution Date if the composite
interest rate for "AA" commercial paper with a maturity of 30 days, as reported
by the Federal Reserve Bank of New York in Federal Reserve Statistical Release
H.15, for any Interest Period exceeds the Cap Rate. Each Interest Rate Cap
Payment and any payments upon early termination of an Interest Rate Cap shall be
deposited into the Collection Account as Series 1999-1 Allocable Finance Charge
Collections. Payments received by the Trustee from an Interest Rate Cap Provider
upon the early termination of an Interest Rate Cap shall be applied to the
purchase of a Replacement Interest Rate Cap or Qualified Substitute Arrangement
(as defined below), or if no Replacement Interest Rate Cap or Qualified
Substitute Arrangement is obtained, shall be applied in accordance with Section
4.05.
(b) If (i) an Interest Rate Cap Provider is a Person other
than the Administrative Agent or an Affiliate of the Administrative Agent, (ii)
the long-term unsecured debt rating of such Interest Rate Cap Provider is
withdrawn or reduced below AA by Standard & Poor's or Aa2 by Moody's, and (iii)
the short-term unsecured debt rating of such Interest Rate Cap Provider is
withdrawn or reduced below A-1 by Standard & Poor's or P-1 by Moody's, then
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within thirty days after such Interest Rate Cap Provider has received notice of
such decline in the creditworthiness of such Interest Rate Cap Provider as
determined by Standard & Poor's or Moody's, as the case may be, either (x) such
Interest Rate Cap Provider, upon satisfaction of the Rating Agency Condition,
will enter into an arrangement the purpose of which shall be to ensure
performance by such Interest Rate Cap Provider of its obligations under the
applicable Interest Rate Cap; or (y) the Servicer shall at its option take one
of the following actions: (i) provided that a Replacement Interest Rate Cap or
Qualified Substitute Arrangement (as described below) meeting the requirements
of Section 4.12(c) has been obtained, direct the Trustee (A) to provide written
notice to such Interest Rate Cap Provider of its intention to terminate the
applicable Interest Rate Cap within such thirty-day period and (B) to terminate
the applicable Interest Rate Cap within such thirty-day period, to request the
payment to it of all amounts due to the Trust under the applicable Interest Rate
Cap through the termination date and to deposit any such amounts so received, on
the day of receipt, into the Collection Account, (ii) establish any other
arrangement (including an arrangement or arrangements in addition to or in
substitution for any prior arrangement made in accordance with the provisions of
this Section 4.12(b)) which satisfies the Rating Agency Condition (a "Qualified
Substitute Arrangement") or (iii) give notice to the Trustee of the occurrence
of the event described in Section 6.01(l).
(c) The Trustee shall not terminate an Interest Rate Cap
unless, prior to the expiration of the thirty-day period referred to in said
Section 4.12(b), the Transferor delivers to the Trustee (i) a Replacement
Interest Rate Cap or a Qualified Substitute Arrangement, (ii) to the extent
applicable, an Opinion of Counsel as to the due authorization, execution and
delivery and validity and enforceability of such Replacement Interest Rate Cap
or Qualified Substitute Arrangement, as the case may be, and (iii) evidence that
the termination of such Interest Rate Cap and its replacement with such
Replacement Interest Rate Cap or Qualified Substitute Arrangement has satisfied
the Rating Agency Condition.
(d) The Servicer shall notify the Trustee and the Rating
Agencies within five Business Days after obtaining knowledge that the senior
long-term or short-term rating of an Interest Rate Cap Provider has been
withdrawn or reduced by Standard & Poor's or Moody's.
(e) Notwithstanding the foregoing, the Transferor may at any
time obtain a Replacement Interest Rate Cap for any Interest Rate Cap, provided
that the Transferor delivers to the Trustee (i) an Opinion of Counsel as to the
due authorization, execution and delivery and validity and enforceability of
such Replacement Interest Rate Cap and (ii) evidence that the termination of the
then current Interest Rate Cap and its replacement with such Replacement
Interest Rate Cap has satisfied the Rating Agency Condition.
(f) The Trustee hereby appoints the Servicer to perform the
duties of the calculation agent under each Interest Rate Cap Agreement and the
Servicer accepts such appointment.
(g) By virtue of its acceptance of a Series 1999-1
Certificate, each Series 1999-1 Certificateholder shall be deemed to have agreed
that it will have no direct right of action
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against the Interest Rate Cap Providers for any failure to make any payment due
under the Interest Rate Caps.
(h) The Transferor shall have the option to terminate any
Interest Rate Cap at any time if the Transferor obtains a Qualified Substitute
Arrangement for such Interest Rate Cap.
ARTICLE V
Distributions and Reports to
Series 1999-1 Certificateholders
Section 5.01. Distributions. On each Distribution Date, the
Trustee shall distribute to the Series 1999-1 Certificateholders of record on
the preceding Record Date (other than as provided in Section 12.02 of the
Agreement respecting a final distribution) the amounts required to be
distributed thereon pursuant to Article IV hereof. Distributions to Series
1999-1 Certificateholders hereunder shall be made by wire transfer in
immediately available funds.
Section 5.02. Reports and Statements to Certificateholders.
(a) No later than the Business Day following each
Determination Date, the Servicer will provide to the Administrative Agent and
the Trustee statements, substantially in the form of Exhibit B hereto (each, a
"Monthly Servicer Report"), setting forth certain information relating to the
Trust and the Certificates.
(b) On or before January 31 of each calendar year, beginning
with calendar year 2000, the Trustee shall furnish or cause to be furnished to
each Person who at any time during the preceding calendar year was a Series
1999-1 Certificateholder, a statement prepared by the Servicer containing the
information which is required to be contained in the statement to Series 1999-1
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 1999-1 Certificateholder, together with other information as is required
to be provided by an issuer of indebtedness under the Internal Revenue Code and
such other customary information as is necessary to enable the Series 1999-1
Certificateholders to prepare their tax returns. Such obligation of the Trustee
shall be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Trustee pursuant to any
requirements of the Internal Revenue Code as from time to time in effect.
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 1999-1 Certificates:
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(a) the occurrence of an Insolvency Event relating to the
Transferor, an Account Owner or the Servicer;
(b) the Trust or the Transferor becomes an investment
company within the meaning of the Investment Company Act;
(c) the Transferor shall become unable, for any reason, to
transfer Receivables to the Trust pursuant to the Agreement;
(d) the Transferor or the Servicer shall fail (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) to observe or
perform any other covenants or agreements of the Transferor or the Servicer set
forth in the Agreement, the Certificate Purchase Agreement or this Supplement,
which failure has a material adverse effect on the Certificateholders and which
continues unremedied for a period of 30 days after the date on which written
notice of such failure, requiring the same to be remedied, shall have been given
to the Transferor or the Servicer, as applicable, by the Trustee, or to the
Transferor or the Servicer, as applicable, and the Trustee by any Holder of the
Certificates;
(e) any representation or warranty made by the Transferor or
the Servicer in the Agreement or this Supplement shall prove to have been
incorrect in any material respect when made or when delivered and continues to
be incorrect in any material respect for a period of 30 days after the date on
which written notice of such failure, requiring the same to be remedied, shall
have been given to the Transferor or the Servicer, as applicable, by the
Trustee, or to the Transferor and the Trustee by any Holder of the Series 1999-1
Certificates and as a result of which the interests of the Certificateholders
are materially and adversely affected for such period; provided, however, that a
Pay Out Event pursuant to this Section 6.01(e) shall not be deemed to have
occurred 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;
(f) the average of the Portfolio Yields for any three
consecutive Monthly Periods is less than the average of the Base Rates for such
three consecutive Monthly Periods;
(g) NextCard, Inc., the Servicer or the Transferor thereof
shall be in payment default under any loan agreement such that the lender
thereunder would be authorized, pursuant to the terms of such agreement, to
demand immediate payment by NextCard, Inc., the Servicer or the Transferor of an
amount in excess of [*]
(h) if Heritage Bank of Commerce is an Account Owner, the
occurrence of
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
27
<PAGE> 27
any uncured material default under the Account Origination Agreement or the
Account Origination Agreement is terminated;
(i) a court of competent jurisdiction shall issue a final
non-appealable order to the effect that the Trustee shall, for any reason, fail
to have a valid and perfected first priority security interest in the
Receivables;
(j) any failure to pay to Certificateholders the full amount
of interest due on the Certificates on any Distribution Date;
(k) failure on the part of an Interest Rate Cap Provider to
make an Interest Rate Cap Payment;
(l) at any time, the Interest Rate Cap Requirement is not
satisfied;
(m) a failure of the Transferor to convey Receivables in
Additional Accounts to the Trust within five Business Days after it is required
to do so pursuant to Section 2.09(a)(i) of the Agreement;
(n) any Governmental Authority having jurisdiction over the
Purchaser shall prohibit the Purchaser from issuing or selling its commercial
paper;
(o) the Purchaser is unable to issue its commercial paper
for a period of ninety consecutive days due to a suspension or material
limitation in the trade of commercial paper in the United States;
(p) NextCard, Inc. shall fail to own, directly or
indirectly, all of the outstanding shares of capital stock of the Transferor;
(q) the [*] shall not be satisfied; or
(r) Three-Month Average Excess Spread is less than [*] as
of any Determination Date;
then, in the case of any event described in subparagraph (d), (e), (g), (j),
(k), (l), (n), (o), (p) or (q) after the applicable grace period, if any, set
forth in such subparagraphs, either the Trustee or the Holders of Series 1999-1
Certificates evidencing more than 50% of the aggregate unpaid principal amount
of Certificates by notice then given in writing to the Transferor and the
Servicer (and to the Trustee if given by the Certificateholders) may declare
that a Pay Out Event has occurred with respect to Series 1999-1 as of the date
of such notice, and, in the case of any event described in subparagraph (a),
(b), (c), (f), (h), (i), (m) or (r) a Pay Out Event shall occur with respect to
Series 1999-1 without any notice or other action on the part of the Trustee or
the Series 1999-1 Certificateholders immediately upon the occurrence of such
event.
ARTICLE VII
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
28
<PAGE> 28
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 5% or less of the highest Invested Amount during
the Revolving Period, at any time on or after the Closing Date, the Transferor
shall have the option to purchase the Series 1999-1 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, the Trustee and
the Administrative Agent at least 30 days prior written notice of the date on
which the Transferor intends to exercise such purchase option. Not later than
2:00 p.m., New York City time, on the exercise date 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 1999-1
shall be reduced to zero and the Series 1999-1 Certificateholders shall have no
further interest in the Receivables. The Reassignment Amount shall be
distributed as set forth in Section 8.01(b).
Section 7.02. Series Termination.
(a) If, on the Distribution Date occurring two months prior
to the Series 1999-1 Termination Date, the Invested Amount (after giving effect
to all changes therein on such date) would be greater than zero, the 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 together with accrued and unpaid interest at the close of
business on the last day of the Monthly Period preceding the Series 1999-1
Termination Date (after giving effect to all distributions required to be made
on the Series 1999-1 Termination Date, except pursuant to this Section 7.02).
Such bids shall require that such sale shall (subject to Section 7.02(b)) occur
on the Series 1999-1 Termination Date. The Transferor shall be entitled to
participate in, and to receive from the Trustee 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 1999-1 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
1999-1 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 Distribution Date occurring two
29
<PAGE> 29
months prior to the Series 1999-1 Termination Date to the Series 1999-1
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) The amount to be paid by the Transferor with respect to
Series 1999-1 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.
(b) The amount to be paid by the Transferor with respect to
Series 1999-1 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.
(c) With respect to the Reassignment Amount deposited into
the Collection Account pursuant to Section 7.01 or any amounts allocable to the
Series 1999-1 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 12:00 noon, 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 be made on such date) in immediately
available funds: (x) the Invested Amount on such Distribution Date will be
distributed to the Paying Agent for payment to the Certificateholders and (y) an
amount equal to the sum of (A) Monthly Interest for such Distribution Date and
(B) any Monthly Interest previously due but not distributed to the
Certificateholders on a prior Distribution Date will be distributed to the
Paying Agent for payment to the Certificateholders.
(d) Notwithstanding anything to the contrary in this
Supplement or the Agreement, all amounts distributed to the Paying Agent
pursuant to Section 8.01(c) for payment to the Series 1999-1 Certificateholders
shall be deemed distributed in full to the Series 1999-1 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.
ARTICLE IX
Miscellaneous Provisions
30
<PAGE> 30
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. Private Placement of Series 1999-1 Certificates;
Form of Delivery of Series 1999-1 Certificates.
(a) The Series 1999-1 Certificates have not been registered
under the Securities Act of 1933, as amended, (the "Securities Act"), or any
state securities law. No transfer of any Series 1999-1 Certificate shall be made
except to the Purchaser or in accordance with the terms of the Certificate
Purchase Agreement and either (i) pursuant to an effective registration under
the Securities Act and applicable state securities or "blue sky" laws or (ii) in
a transaction exempt from the registration requirements of the Securities Act
and applicable state securities or "blue sky" laws, to (A) a person who the
transferor reasonably believes is a Qualified Institutional Buyer within the
meaning thereof in Rule 144A under the Securities Act that is aware that the
resale or other transfer is being made in reliance on Rule 144A, (2) a person
who is an accredited investor as defined in Rule 501(a) under the Securities Act
or (3) an institution which has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of the
investment therein. The Series 1999-1 Certificates shall bear legends to the
effect set forth in Exhibit A. The Transferor is not obligated to register the
Series 1999-1 Certificates under the Securities Act or any other securities or
"blue sky" law or to take any other action not otherwise required under this
Supplement or the Agreement to permit the transfer of Series 1999-1 Certificates
without registration or as described above.
(b) The Series 1999-1 Certificates shall be delivered as
Registered Certificates as provided in Section 6.01.
Section 9.05. Successors and Assigns. This Supplement shall be
binding upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns, except that the Transferor may not assign or
transfer any of its rights under this Supplement without the prior written
consent of the Administrative Agent and without prior notice to each Rating
Agency.
31
<PAGE> 31
Section 9.06. Amendments.
In addition to the conditions to the amendment of the Agreement
and this Supplement set forth in the Agreement, neither the Agreement nor this
Supplement may be amended without the prior written consent of the
Administrative Agent; provided, however, that, the Agreement may be amended
without the prior written consent of the Administrative Agent if, not less than
five Business Days prior to the effectiveness of any such amendment, there shall
have been delivered to the Administrative Agent (i) an Opinion of Counsel
addressed to the Administrative Agent that any such amendment shall not
adversely affect in any material respect the interests of the Series 1999-1
Certificateholders and (ii) a copy of such amendment.
Section 9.07. Amendments to Agreement.
(a) For the term of this Supplement, the definition of
"Eligible Account" is hereby amended with the addition of the following
condition:
(i) The Obligor of which had a FICO score as of the
date of the approval of the origination of the Account of at least [*].
(b) For the terms of this Supplement, Section 2.09(c) of the
Agreement is hereby amended with the addition of the following condition (ix):
(ix) after giving effect to the Additional Accounts,
no more than [*] of the Accounts (calculated on the basis of the amount
of outstanding Principal Receivables relating to the Accounts on the
dates they became Accounts) shall have related Obligors with FICO Scores
as of the date of origination of their Accounts of less than [*].
(c) For the terms of this Supplement, Section 3.03 of the
Agreement is hereby amended with the addition of the following paragraph (l):
(l) Year 2000 Readiness. The Servicer has reviewed
the areas within its business and operations that could reasonably be
expected to be adversely affected by the risk that computer applications
used by it (or by its suppliers and vendors) to process any data related
to this Agreement may produce materially adverse consequences in
performing date-sensitive functions subsequent to any date after
December 31, 1999 (such risk being referred to herein as the "Year 2000
Problem"). The Servicer is taking or causing to be taken reasonable
measures to address the Year 2000 Problem on a timely basis. To the best
of the Servicer's knowledge, the Year 2000 Problem will not materially
and adversely affect the Servicer's ability to perform its obligations
under this Agreement.
Section 9.08. Tax Matters.
(a) Notwithstanding anything to the contrary herein, each of
the Paying
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
32
<PAGE> 32
Agent, Servicer or Trustee shall be entitled to withhold any amount that it
reasonably 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 1999-1 Certificateholders agrees that
prior to the date on which the first interest payment hereunder is due thereto,
it will provide to the Servicer and the Trustee (i) if such Series 1999-1
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 successor applicable or required forms,
(ii) if the Transferor so requests, a duly completed copy of United States
Internal Revenue Service Form W-9 or successor applicable or required forms, and
(iii) such other forms and information as the Transferor may reasonably request
to confirm the availability of any applicable exemption from United States
federal, state or local withholding taxes. Each Series 1999-1 Certificateholder
agrees to provide to the Servicer and Trustee, like additional subsequent duly
completed forms 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 1999-1
Certificateholder certifies, represents and warrants that as of the date of this
Agreement, or in the case of a Series 1999-1 Certificateholder which is an
assignee as of the date of such Certificate Assignment, that (i) it is entitled
(x) to receive payments under this Agreement without deduction or withholding of
any United States federal income taxes (other than taxes required to be withheld
pursuant to Section 1446 of the Code) and (y) to an exemption from United States
backup withholding tax and (ii) it will pay any taxes attributable to its
ownership of an interest in the Certificates.
(c) Each Series 1999-1 Certificateholder agrees with the
Transferor that: (a) such Series 1999-1 Certificateholder will deliver to the
Transferor on or before the Closing Date or the effective date of any
participation or Certificate Assignment an Investment Letter, executed by such
assignee Series 1999-1 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 1999-1 Certificateholder or Participant of a
portion of an interest relating to the Investor Certificate and (b) all of the
statements made by such Series 1999-1 Certificateholder in its Investment Letter
shall be true and correct as of the date made.
(d) Each Series 1999-1 Certificateholder, by its holding of
an interest in the Investor Certificates, hereby severally represents, warrants
and covenants, and each Series 1999-1 Certificateholder that acquires an
interest in the Investor Certificates by Certificate Assignment shall be deemed
to have severally represented, warranted and covenanted upon such Certificate
Assignment that: (i) such Series 1999-1 Certificateholder has not acquired and
shall not sell, trade or transfer any interest in the Investor Certificates, nor
cause any interest in the Investor Certificates to be marketed, on or through
either (A) an "established securities market" 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
33
<PAGE> 33
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 Investor 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
Investor Certificates and stands ready to effect buy or sell transactions at the
quoted prices for itself or on behalf of others), and (ii) unless the Transferor
consents otherwise, such Series 1999-1 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. In the event of any
breach of the representation, warranty and covenant of an Series 1999-1
Certificateholder or its Participant that such Series 1999-1 Certificateholder
or participant shall remain classified as a corporation other than an S
corporation, such Series 1999-1 Certificateholder shall notify the Transferor
promptly upon such Series 1999-1 Certificateholder's becoming aware of such
breach, and thereupon the Series 1999-1 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 1999-1
Certificateholder. In any such event, the Transferor shall also have the right
to procure a replacement investor. Each affected Series 1999-1 Certificateholder
hereby agrees to take all actions necessary to permit a replacement investor to
succeed to its rights and obligations hereunder. Each Series 1999-1
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 1999-1
Certificateholder as provided above in this paragraph) to notify the Transferor
of such breach promptly upon such Series 1999-1 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 9.04(a), each
Series 1999-1 Certificateholder may at any time sell, assign or otherwise
transfer, to the extent of such Series 1999-1 Certificateholder's interest in
the Investor Certificates (each, a "Certificate Assignment"), to (i) the
Administrative Agent or the Purchaser or (ii) 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 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) (upon such Certificate Assignment, a "Series 1999-1
Certificateholder") all or part of its interest in the Investor 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 1999-1 Certificateholder shall comply with this Section 9.08 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
1999-1 Certificateholder has made the representations, warranties and covenants
required to be made pursuant to this Section 9.08, (iii) there shall not be, in
the aggregate, more than [*]
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
34
<PAGE> 34
Certificateholders and Partial Participants after giving effect to such
Assignment, and (iv) such proposed assignee shall provide the forms described in
(i), (ii) and (iii) of subsection 9.08(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 to a Person other than the
Administrative Agent or the Purchaser, the assignor Series 1999-1
Certificateholder shall request in writing to the Trustee (who shall promptly
deliver it to the Transferor) for the consent of the Transferor (the Transferor
shall respond to any such request within ten Business Days after its receipt and
the Transferor will not unreasonably withhold such consent) it being understood
that the obtaining of such consent is a condition to the effectiveness of such a
Certificate Assignment. Each assignee Series 1999-1 Certificateholder is subject
to the terms and conditions of subsection 9.08(b) on an ongoing basis and hereby
makes the certifications, representations and warranties contained therein, and
the assigning Series 1999-1 Certificateholder hereby certifies, represents and
warrants that its assignee's certifications, representations and warranties
thereunder are true.
(f) Subject to the provisions of subsection 9.04(a), any
Series 1999-1 Certificateholder may at any time grant a participation in all or
part (but not less than $5,000,000) of its interest in Investor Certificates to
(i) the Administrative Agent or the Purchaser or (ii) 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 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) (the Administrative Agent, the Purchaser and each such other Person, a
"Participant" and each Participant acquiring a participation in less than all of
a Certificateholder's rights with respect to payments due thereunder, a "Partial
Participant"); provided, however, that such participation shall be void, unless
(i) such Participant complies with the applicable provisions of this Section
9.08, (ii) there shall not be, in the aggregate, more than [*]
Certificateholders and Partial Participants after giving effect to such
participation, and (iii) such Series 1999-1 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 other than to the
Administrative Agent or the Purchaser, the granting Series 1999-1
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 such a participation. Each Series 1999-1
Certificateholder hereby acknowledges and agrees that any such participation
will not alter or affect in any way whatsoever such Series 1999-1
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 1999-1 Certificateholder in order to enforce the
obligations of such Series 1999-1 Certificateholder hereunder. Each Series
1999-1
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
35
<PAGE> 35
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. In granting any participation, the Series 1999-1
Certificateholder 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 1999-1
Certificateholder will provide to the Servicer and Trustee, the forms described
in (i), (ii) and (iii) of subsection 9.08(b) (subject to the Transferor's
consent, as applicable and as set forth therein) as though the Participant were
a Series 1999-1 Certificateholder, and (iii) such Series 1999-1
Certificateholder similarly will provide subsequent forms as described in
subsection 9.08(b) with respect to such Participant as though it were a Series
1999-1 Certificateholder.
(g) Any holder of an interest in the Trust acquired pursuant
to Section 12.01(b) of the Agreement in respect of the Series 1999-1
Certificates shall be 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).
[Signature Page to Follow]
36
<PAGE> 36
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.
NEXTCARD FUNDING CORP.,
as Transferor
By: /s/ Robert Linderman
-----------------------------
Name: Robert Linderman
Title: General Counsel and Secretary
NEXTCARD, INC.,
as Servicer
By: /s/ Robert Linderman
-----------------------------
Name: Robert Linderman
Title: General Counsel and Secretary
THE BANK OF NEW YORK,
as Trustee
By: /s/ Kimberly Gilfoil
-----------------------------
Name: Kimberly Gilfoil
Title: Assistant Treasurer
<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I Creation of the Series 1999-2 Certificates................................1
Section 1.01. Designation........................................................1
ARTICLE II Definitions...............................................................2
Section 2.01. Definitions........................................................2
ARTICLE III Servicing Fee............................................................11
Section 3.01. Servicing Compensation............................................11
ARTICLE IV Rights of Series 1999-2 Certificateholders and Allocation and
Application of Collections...............................................12
Section 4.01. Collections and Allocations.......................................12
Section 4.02. Determination of Monthly Interest.................................14
Section 4.03. Suspension of the Revolving Period; Limited Amortization
Period............................................................14
Section 4.04. Required Amount...................................................14
Section 4.05. Application of Series 1999-2 Allocable Finance Charge
Collections and Available Principal Collections...................15
Section 4.06. Defaulted Amounts; Investor Charge-Offs...........................16
Section 4.07. Excess Spread and Excess Finance Charge Collections...............16
Section 4.08. Excess Finance Charge Collections.................................17
Section 4.09. Shared Principal Collections......................................17
Section 4.10. Invested Amount Increases.........................................17
Section 4.11. Reserve Account...................................................18
Section 4.12. Interest Rate Cap.................................................19
</TABLE>
2
<PAGE> 2
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE V Distributions and Reports to Series 1999-2 Certificateholders............21
Section 5.01. Distributions.....................................................21
Section 5.02. Reports and Statements to Certificateholders......................21
ARTICLE VI Pay Out Events...........................................................22
Section 6.01. Pay Out Events....................................................22
ARTICLE VII Optional Repurchase; Series Termination..................................23
Section 7.01. Optional Repurchase...............................................23
Section 7.02. Series Termination................................................24
ARTICLE VIII Final Distributions......................................................25
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........................................25
ARTICLE IX Miscellaneous Provisions.................................................25
Section 9.01. Ratification of Agreement.........................................25
Section 9.02. Counterparts......................................................25
Section 9.03. Governing Law.....................................................26
Section 9.04. Private Placement of Series 1999-2 Certificates; Form of
Delivery of Series 1999-2 Certificates............................26
Section 9.05. Successors and Assigns............................................26
Section 9.06. Amendments........................................................26
</TABLE>
3
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 9.07. Amendments to Agreement...........................................27
Section 9.08. Tax Matters.......................................................27
</TABLE>
4
<PAGE> 4
SERIES 1999-2 SUPPLEMENT, dated as of May 21, 1999 (the
"Supplement"), among NEXTCARD FUNDING CORP., a Delaware
corporation, as Transferor, NEXTCARD, INC., a California
corporation, as Servicer, and THE BANK OF NEW YORK, a New York
banking corporation, as Trustee.
Pursuant to the Pooling and Servicing Agreement, dated as of
December 1, 1998, as amended and restated by the Amended and Restated Pooling
and Servicing Agreement, dated as of May 21, 1999 (as amended, restated and
supplemented, the "Agreement"), among the Transferor, the Servicer and the
Trustee, the Transferor has created the NextCard Master Trust I (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 1999-2 Certificates
.1. 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 "NextCard Master Trust I, Series 1999-2." The Series 1999-2
Certificates shall be known as the "Series 1999-2 Variable Funding
Certificates."
(b) Series 1999-2 shall be a Principal Sharing Series.
Series 1999-2 shall be an Excess Allocation Series. Series 1999-2 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 1999-2 shall be the July 15, 1999 Distribution Date and the first
Monthly Period shall begin on and include May 21, 1999 and end on and include
June 30, 1999. The Closing Date shall be a Discount Option Date and the Discount
Percentage shall be [*] or such other percentage as shall be mutually acceptable
to the Transferor and the Administrative Agent, which Discount Percentage shall
apply to all Principal Receivables (without giving effect to the proviso in the
definition of Principal Receivables) arising on or after the Closing Date.
Notwithstanding anything to the contrary in the Agreement, the Transferor shall
not reduce or withdraw such Discount Percentage or otherwise modify the
application thereof unless the Rating Agency Condition shall have been satisfied
with respect to such action.
ARTICLE II
Definitions
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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.1. Definitions.
(a) Whenever used in this Supplement, the following words
and phrases shall have the following meanings, and the definitions of such terms
are applicable to the singular as well as the plural forms of such terms and the
masculine as well as the feminine and neuter genders of such terms.
"Account Origination Agreement" shall mean the Amended and
Restated Account Origination Agreement by and between the Servicer, the
Transferor and Heritage Bank of Commerce dated as of May 21, 1999, as amended
from time to time in accordance with the terms thereof.
"Additional Amounts" shall have the meaning specified in the
Certificate Purchase Agreement.
"Additional Interest" shall have the meaning specified in
Section 4.02(b).
"Administrative Agent" shall mean Barclays Bank PLC, in its
capacity as agent under the Certificate Purchase Agreement, and any successor
thereto appointed pursuant to the Certificate Purchase Agreement.
"Amortization Period" shall mean, with respect to Series 1999-2,
as the context requires, the Scheduled Amortization Period, the Early
Amortization Period or any Limited Amortization Period.
"Available Principal Collections" shall mean, with respect to
any Monthly Period, an amount equal to the sum of (a) the Series 1999-2
Allocable Principal Collections received during such Monthly Period, (b) any
Shared Principal Collections with respect to other Series that are allocated to
Series 1999-2 in accordance with Section 4.04 of the Agreement and Section 4.09
hereof and (c) any other amounts which pursuant to Section 4.05, 4.07 or 4.11
hereof are to be treated as Available Principal Collections with respect to the
related Distribution Date.
"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.
"Bank" shall mean Heritage Bank of Commerce.
"Base Rate" shall mean, with respect to any Monthly Period, the
annualized percentage equivalent of a fraction, (a) the numerator of which is
the sum of the Monthly Interest and the Monthly Servicing Fee for such Monthly
Period and (b) the denominator of which is the Average Invested Amount as of the
last day of such Monthly Period.
"Cap Rate" shall mean [*] per annum.
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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"Certificate Assignment" shall have the meaning specified in
Section 9.08(e).
"Certificate Purchase Agreement" shall mean the Certificate
Purchase Agreement, dated as of May 21, 1999, among the Transferor, the
Servicer, the Administrative Agent and the Purchaser, and all amendments
thereto.
"Certificate Rate" shall have the meaning specified in the
Certificate Purchase Agreement.
"Certificateholder" shall mean the Person in whose name a
Certificate is registered in the Certificate Register. On the Closing Date, the
Administrative Agent shall be the Certificateholder on behalf of the Purchaser.
"Certificates" shall mean any one of the Series 1999-2 Variable
Funding Certificates executed by the Transferor and authenticated by or on
behalf of the Trustee, substantially in the form of Exhibit A.
"Closing Date" shall mean May 21, 1999.
"Credit Bureau Agency" shall mean any of Trans Union LLC,
Experian Inc. or Equifax Inc., or any of their respective successors.
"Distribution Date" shall mean July 15, 1999, and the fifteenth
day of each calendar month thereafter, 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 1999-2 is deemed to have occurred, and
ending on the first to occur of (i) the payment in full of the Invested Amount
and (ii) the Series 1999-2 Termination Date.
"Excess Spread" shall mean, with respect to any Distribution
Date, the sum of the amounts, if any, specified pursuant to subsections
4.05(a)(iv).
"Excess Spread Percentage" shall mean, for any Monthly Period,
the difference between the Portfolio Yield and the Base Rate for such Monthly
Period.
"FICO Score" shall mean , with respect to any Obligor, the
average of any two of the risk scores indicated on such Obligor's credit
reports, as calculated by the applicable Credit Bureau Agency using software
developed by Fair, Isaac and Co., Inc.
"FICO Scoring Date" [*]
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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[*].
"Finance Charge Shortfall" shall have the meaning specified in
Section 4.08.
"Increase Amount" shall have the meaning specified in Section
4.10(a).
"Increase Conditions" shall mean, with respect to any requested
Invested Amount Increase hereunder, all of the following:
(a) the request with respect to such Invested Amount
Increase shall have been delivered to the Trustee, the Administrative Agent and
the Servicer by the time, and shall otherwise conform to the requirements,
specified in Section 4.10(a);
(b) after giving effect to such Invested Amount Increase,
the Invested Amount shall not exceed the Maximum Invested Amount;
(c) no Pay Out Event or event that, after the giving of
notice or the lapse of time, would constitute a Pay Out Event, has occurred and
is continuing or would result from such Invested Amount Increase;
(d) the Scheduled Amortization Period shall not have
commenced as of such Increase Date;
(e) all of the representations and warranties of the
Transferor and the Servicer set forth in the Agreement shall be true and correct
as though made on and as of such Increase Date (except that representations and
warranties set forth in Sections 2.04(a)(ii), (vii), (viii) and (ix) shall be
deemed to be made only as of the applicable date specified in such sections);
(f) after giving effect to such Invested Amount Increase,
the Transferor Percentage shall be equal to or greater than the Required
Transferor Percentage on such date;
(g) the Servicer shall have delivered to the Administrative
Agent a copy of the Servicer Report prepared as of the immediately prior
Determination Date, signed by a Servicing Officer;
(h) the Interest Rate Cap Requirement is satisfied on such
date;
(i) as of the most recent Distribution Date preceding the
applicable Increase Date, no unreimbursed Investor Charge-Offs remain
outstanding;
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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(j) the amount on deposit in the Reserve Account shall equal
the Required Reserve Account Amount on such Increase Date after giving effect to
the Invested Amount Increase and the Required Reserve Account Addition made on
such Increase Date; and
(k) the Transferor shall have delivered to the Trustee, the
Administrative Agent and the Servicer an Officer's Certificate dated as of such
Increase Date certifying that the conditions described in paragraphs (a) through
(j) above have been satisfied.
"Increase Date" shall have the meaning specified in Section
4.10(a). "Initial Invested Amount" shall mean $95,129,084.82.
"Interest Period" shall mean, with respect to any Distribution
Date, the period from and including the Distribution Date immediately preceding
such Distribution Date (or, in the case of the first Distribution Date, from and
including the Closing Date) to but excluding such Distribution Date.
"Interest Rate Cap" shall mean the interest rate cap agreement
for the benefit of the Trust dated the Closing Date between the Trustee, acting
on behalf of the Trust, and the Interest Rate Cap Provider, substantially in the
form of Exhibit D, having a notional amount equal to the Notional Amount and a
cap rate equal to the Cap Rate, or any Replacement Interest Rate Cap or
Qualified Substitute Arrangement with respect thereto.
"Interest Rate Cap Payment" shall mean, with respect to any
Distribution Date, any payment required to be made on the preceding Business Day
by the Interest Rate Cap Provider to the Trustee for deposit in the Collection
Account as Series 1999-2 Allocable Finance Charge Collections.
"Interest Rate Cap Provider" shall mean Barclays Bank PLC
(London Head Office), in its capacity as obligor under the Interest Rate Cap, or
if any Replacement Interest Rate Cap or Qualified Substitute Arrangement is
obtained pursuant to Section 4.12, any obligor with respect to such Replacement
Interest Rate Cap or Qualified Substitute Arrangement.
"Interest Rate Cap Requirement" shall mean as of any date of
determination, that (i) the Trust shall have the benefits of the Interest Rate
Cap, a Replacement Interest Rate Cap or Qualified Substitute Arrangement
satisfying the requirements of Section 4.12 and (ii) the long-term unsecured
debt ratings of the Interest Rate Cap Provider shall be at least AA by Standard
& Poor's and Aa2 by Moody's or the short-term unsecured debt ratings of the
Interest Rate Cap Provider shall be at least A-1+ by Standard & Poor's and P-1
by Moody's unless Barclays Bank PLC (London Head Office) is the Interest Rate
Cap Provider, in which case no rating requirement will apply.
"Interest Shortfall" shall have the meaning specified in Section
4.02(b).
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<PAGE> 9
"Invested Amount" shall mean, on any date of determination, an
amount equal to (a) the Initial Invested Amount, plus (b) the aggregate
principal amount of Invested Amount Increases pursuant to Section 4.10 on or
prior to such date, minus (c) the aggregate amount of principal payments made to
the Certificateholders on or prior to such date, minus (d) the excess, if any,
of the aggregate amount of Investor Charge-Offs for all prior Distribution Dates
over Investor Charge-Offs reimbursed pursuant to Section 4.07(b) prior to such
date.
"Invested Amount Increase" shall have the meaning specified in
Section 4.10(a).
"Investment Letter" shall mean an Investment Letter
substantially in the form of Exhibit C executed by a Certificateholder.
"Investor Charge-Offs" shall have the meaning specified in
Section 4.06.
"Investor Default Amount" shall mean, with respect to any
Monthly Period, an amount equal to the product of (a) the Defaulted Amount for
the related Monthly Period and (b) the Series 1999-2 Floating Allocation
Percentage for such Monthly Period.
"Limited Amortization Amount" shall have the meaning specified
in Section 4.03.
"Limited Amortization Period" shall mean, unless the Scheduled
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 Scheduled
Amortization Period or the Early Amortization Period and (ii) the last day of
the Monthly Period related to the Distribution Date on which the applicable
Limited Amortization Amount shall have been paid in full.
"Liquidity Reduction Date" shall have the meaning specified in
the Certificate Purchase Agreement.
"Maximum Invested Amount" shall mean $300,000,000, as such
amount may be increased or decreased from time to time in accordance with the
Certificate Purchase Agreement.
"Monthly Interest" shall have the meaning specified in the
Certificate Purchase Agreement.
"Monthly Servicer Report" shall have the meaning specified in
Section 5.02.
"Monthly Servicing Fee" shall have the meaning specified in
Section 3.01.
"Notional Amount" shall mean the notional amount of the Interest
Rate Cap, which shall be, with respect to the period from the Closing Date until
the close of business on May 20, 2001 an amount equal to the Maximum Invested
Amount and commencing May 21, 2001 shall be zero.
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"Official Body" shall mean any government or political
subdivision or any agency, authority, bureau, central bank, commission,
department or instrumentality thereof, or any court, tribunal, grand jury or
arbitrator, in each case whether foreign or domestic.
"Partial Participant" shall have the meaning specified in
Section 9.08(f).
"Participant" shall have the meaning specified in Section
9.08(f).
"Pay Out Event" shall mean any Pay Out Event specified in
Section 6.01.
"Permitted Assignee" shall have the meaning specified in the
Certificate Purchase Agreement.
"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 (i) the amount of Series 1999-2 Allocable Finance Charge
Collections with respect to such Monthly Period minus (ii) the Investor Default
Amount for such Monthly Period and (b) the denominator of which is the Average
Invested Amount for such Monthly Period.
"Principal Payment Rate" shall mean, for any Monthly Period, the
percentage equivalent of a fraction, the numerator of which is the aggregate
amount of Collections of Principal Receivables during such Monthly Period and
the denominator of which is the aggregate amount of Principal Receivables
outstanding as of the first day of such Monthly Period.
"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 (or may be) 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 the holders of the
Transferor Certificate or any interest therein, the interest of the Servicer,
and 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.
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"Purchaser" shall mean Sheffield Receivables Corporation, a
Delaware corporation, together with its successors and permitted assigns.
"Qualified Substitute Arrangement" shall have the meaning
specified in Section 4.12(b).
"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 1999-2 Certificateholders, plus (iii) the amount of any Additional
Interest, if any, for such Distribution Date and any Additional Interest
previously due but not distributed to the Certificateholders on a prior
Distribution Date.
"Replacement Interest Rate Cap" shall mean any interest rate cap
having the same terms and conditions as the interest rate agreement set forth in
Exhibit D, in the case of a replacement to the Interest Rate Cap, and otherwise
satisfying the conditions set forth in Section 4.12.
"Required Amount" shall have the meaning specified in Section
4.04.
"Required Excess Spread Reserve Account Percentage" shall mean,
with respect to any Determination Date or Increase Date, the percentage in the
right-hand column below corresponding to the applicable Three-Month Average
Excess Spread Percentage set forth in the left-hand column below:
<TABLE>
<CAPTION>
Three-Month Average Required Excess Spread
Excess Spread Percentage Reserve Account Percentage
------------------------ --------------------------
<S> <C>
< [*] [*]
>= [*] and > [*] [*]
>= [*] and > [*] [*]
>= [*] and > [*] [*]
>= [*] [*]
</TABLE>
provided, that, if the Required Excess Spread Reserve Account Percentage has at
any time increased, then the Required Excess Spread Reserve Account Percentage
shall not decrease below the increased percentage unless a lower percentage is
the appropriate Required Excess Spread Reserve Account Percentage for three
consecutive Determination Dates; provided, further, that each of the Required
Excess Spread Reserve Account Percentages set forth in the right-hand column
above shall be increased by 1.0% if the Principal Payment Rate (i) for the
preceding Monthly Period, in the case of any Determination Date or Increase Date
occurring on or after the Determination Date in any month, or (ii) for the
second preceding Monthly Period, in the case of any Increase Date occurring
before the Determination Date in any month, shall be less
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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<PAGE> 12
than [*] on such Determination Date or Increase Date.
"Required FICO Reserve Account Percentage" shall mean, with
respect to any Determination Date or Increase Date, the amount specified under
the right-hand column below corresponding to the weighted average (by Principal
Balance of the Receivables in the related Account as of such Determination Date
or Increase Date) of the FICO Scores of the Obligors [*] set forth in the
left-hand column below:
<TABLE>
<CAPTION>
Weighted Average Required FICO Reserve
FICO Score Account Percentage
---------------- ---------------------
<S> <C>
FICO >= [*] [*]
[*] <= FICO < [*] [*]
[*] <= FICO < [*] [*]
[*] <= FICO < [*] [*]
FICO < [*] [*]
</TABLE>
"Required Reserve Account Addition" shall have the meaning
specified in Section 4.10(a).
"Required Reserve Account Amount" shall mean, with respect to
any Determination Date or Increase Date, the product of (a) (i) in the case of
any Determination Date, the Invested Amount for the Distribution Date following
such Determination Date after giving effect to the principal distributions to be
made on such Distribution Date and (ii) in the case of any Increase Date, the
Invested Amount after giving effect to the Invested Amount Increase on such
Increase Date, and (b) the sum of (i) [*], (ii) the Required Excess Spread
Reserve Account Percentage for such Determination Date or Increase Date and
(iii) the Required FICO Reserve Account Percentage for such Determination Date
or Increase Date; provided, however, that (i) from and after the commencement of
the Early Amortization Period, the Required Reserve Account Amount shall equal
[*] and (ii) the Required Reserve Account Amount shall in no event be reduced
below the lesser of (A) [*] of the Maximum Invested Amount and (B) during the
Scheduled Amortization Period, the Invested Amount.
"Reserve Account" shall have the meaning specified in Section
4.11(a).
"Reset Date" shall mean each of (a) an Addition Date, (b) a
Removal Date, and (c) a date on which an Invested Amount Increase occurs.
"Revolving Period" shall mean the period beginning at the close
of business on
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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the Series Cut-Off Date and ending on the earlier of (a) the close of business
on the day immediately preceding the day the Scheduled 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.
"Scheduled Amortization Date" shall mean the earlier of (a) the
last day of the June 2001 Monthly Period and (b) the Liquidity Reduction Date.
"Scheduled Amortization Period" shall mean, unless a Pay Out
Event with respect to Series 1999-2 shall have occurred prior thereto, the
period commencing on the Scheduled Amortization Date and ending upon the first
to occur of (x) the commencement of the Early Amortization Period, (y) the
payment in full of the Invested Amount and (z) the Series 1999-2 Termination
Date; provided, however, that the commencement of the Scheduled Amortization
Period may occur on such later date as may be mutually agreed upon by the
Administrative Agent and the Transferor.
"Series Cut-Off Date" shall mean the close of business on May
21, 1999.
"Series 1999-2" shall mean the Series of Certificates the terms
of which are specified in this Supplement.
"Series 1999-2 Allocable Finance Charge Collections" shall mean
an amount equal to, with respect to any Monthly Period, the product of (i) the
Series 1999-2 Floating Allocation Percentage and (ii) Collections of Finance
Charge Receivables received by the Servicer during such Monthly Period, plus any
Interest Rate Cap Payments received from the Interest Rate Cap Provider prior to
the Distribution Date in the month following such Monthly Period.
"Series 1999-2 Allocable Principal Collections" shall mean an
amount equal to, (a) with respect to any Monthly Period during the Revolving
Period, the product of (i) the Series 1999-2 Floating Allocation Percentage and
(ii) Collections of Principal Receivables received by the Servicer during such
Monthly Period, and (b) with respect to any Monthly Period during an
Amortization Period, the product of (i) the Series 1999-2 Fixed Allocation
Percentage and (ii) Collections of Principal Receivables received by the
Servicer during such Monthly Period.
"Series 1999-2 Certificateholders' Interest" shall mean the
Certificateholders' Interest for Series 1999-2.
"Series 1999-2 Fixed Allocation Percentage" shall mean an amount
equal to, with respect to any Monthly Period during an Amortization Period, the
percentage equivalent of a fraction, the numerator of which is the Invested
Amount as of the last day of the Revolving Period and the denominator of which
is the greatest of (a) the aggregate amount of Principal Receivables plus the
amount then on deposit in the Excess Funding Account, in each case as of
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<PAGE> 14
the last day of such Monthly Period, (b) the Trust Invested Amount as of such
last day and (c) the sum of the numerators used to calculate the fixed
allocation percentages for all Series then outstanding for such Monthly Period;
provided, however, that with respect to any Monthly Period in which one or more
Reset Dates occurs, the Series 1999-2 Fixed 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 1999-2 Floating Allocation Percentage" shall mean an
amount equal to, with respect to any Monthly Period, the percentage equivalent
of a fraction, the numerator of which is the Invested Amount as of the last day
of the immediately preceding Monthly Period and the denominator of which is the
greater of (a) the aggregate amount of Principal Receivables plus the amount
then on deposit in the Excess Funding Account, in each case as of as of the last
day of such Monthly Period, and (b) the Trust Invested Amount as of such last
day; provided, however, that with respect to any Monthly Period in which one or
more Reset Dates occurs, the Series 1999-2 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.
"Series 1999-2 Termination Date" shall mean the Distribution
Date occurring in the 36th calendar month following the earlier to occur of (x)
the commencement of the Scheduled Amortization Period or (y) the commencement of
the Early Amortization Period.
"Series Percentage" shall mean for any Monthly Period, (a) with
respect to Finance Charge Receivables and Defaulted Amounts at any time and
Principal Receivables during the Revolving Period, the Series 1999-2 Floating
Allocation Percentage and (b) with respect to Principal Receivables during any
Amortization Period, the Series 1999-2 Fixed Allocation Percentage.
"Servicing Fee Rate" shall mean 2.0% per annum.
"Shared Principal Collections" shall mean Shared Principal
Collections as defined and described in Section 4.04 of the Agreement; amounts
to be treated as Shared Principal Collections under this Supplement are
described in subsections 4.05(b)(ii) and (c)(ii).
"Three-Month Average Excess Spread" shall mean, (i) for any
Determination Date or Increase Date occurring on or after the Determination Date
in any month, the average of the Excess Spread Percentages for each of the three
preceding Monthly Periods and (ii) for any Increase Date occurring prior to the
Determination Date in any month, the average of the Excess Spread Percentages
for each of the three Monthly Periods preceding the immediately prior Monthly
Period.
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<PAGE> 15
(b) Notwithstanding anything to the contrary in the
Agreement, (i) no action that is subject to the Rating Agency Condition or that
requires Rating Agency consent pursuant to the terms of the Agreement or this
Series Supplement (regardless of whether one or more Series of Investor
Certificates rated by any Rating Agency is then outstanding), shall be taken
unless the Administrative Agent shall have first consented in writing to such
action, which consent by the Administrative Agent shall not be unreasonably
withheld, and (ii) the Administrative Agent shall receive all notices, opinions,
reports, certifications and other items to be provided to each Rating Agency
pursuant to the Agreement as supplemented by this Series Supplement.
(c) Each capitalized term defined herein shall relate to the
Series 1999-2 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.
(d) 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 I
Servicing Fee
1.1. Servicing Compensation. The share of the Servicing Fee
allocable to the Series 1999-2 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) the Average Invested Amount
for the Monthly Period preceding such Distribution Date; provided, however, that
with respect to the first Distribution Date, the Monthly Servicing Fee shall
equal the product of (a) a fraction, the numerator of which shall be the number
of days in the period beginning on the Closing Date and ending on June 30, 1999
and the denominator of which shall be 360, (b) the Servicing Fee Rate and (c)
the Average Invested Amount for the period beginning on the Closing Date and
ending on June 30, 1999.
ARTICLE II
Rights of Series 1999-2 Certificateholders and
Allocation and Application of Collections
2.1. Collections and Allocations.
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<PAGE> 16
(a) Allocations. Prior to the close of business on each
Deposit Date, Collections of Finance Charge Receivables, Principal Receivables
and Defaulted Receivables allocated to Series 1999-2 pursuant to Article IV of
the Agreement (and, as described herein, Collections of Finance Charge
Receivables reallocated from other Series) shall be allocated and distributed or
reallocated as set forth in this Article IV.
(b) Allocations to the Series 1999-2 Certificateholders. The
Servicer shall prior to the close of business on any Deposit Date allocate, or
cause the Trustee to allocate, to the Series 1999-2 Certificateholders and the
Holders of the Transferor Certificates as follows:
(i) Allocations of Finance Charge Collections. The
Servicer shall allocate, or cause the Trustee to
allocate, to the Series 1999-2 Certificateholders and retain in the
Collection Account for application or reallocation as provided herein an
amount equal to the product of (A) the Series 1999-2 Floating Allocation
Percentage and (B) the aggregate amount of Collections of Finance Charge
Receivables deposited in the Collection Account on such Deposit Date.
(ii) Allocations of Principal Collections. The
Servicer shall allocate to the Series 1999-2 Certificateholders, or
cause the Trustee to allocate, the following amounts as set forth below:
(x) Allocations During the Revolving Period. During the
Revolving Period, an amount equal to the product of (I) the Series
1999-2 Floating Allocation Percentage and (II) the aggregate amount of
Collections of Principal Receivables deposited in the Collection Account
on such Deposit Date shall be allocated to the Series 1999-2
Certificateholders and, if any other Principal Sharing Series is
outstanding and in its amortization period or accumulation period, shall
be retained in the Collection Account for application, to the extent
necessary, as Shared Principal Collections on the related Distribution
Date, and if no other Principal Sharing Series is outstanding and in its
amortization period or accumulation period, shall be paid to the Holders
of the Transferor Certificates; provided, however, that such amount to
be paid to the Holders of the Transferor Certificates on any Deposit
Date shall be paid to such Holders 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 Excess Funding
Account.
(y) Allocations During any Limited Amortization Period.
During any Limited Amortization Period, an amount equal to the product
of (I) the Series 1999-2 Fixed Allocation Percentage and (II) the
aggregate amount of Collections of Principal Receivables deposited in
the Collection Account on such Deposit Date shall be allocated to the
Series 1999-2 Certificateholders and retained in the Collection Account
until applied as provided herein; provided, however, that, if
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the Series 1999-2 Allocable Principal Collections deposited on that and
each prior Deposit Date during the then current Monthly Period exceed
the difference between the Limited Amortization Amount and the total
amount of principal payments paid to the Series 1999-2
Certificateholders during the related Limited Amortization Period, then
such excess 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 Excess Funding Account.
(z) Allocations During the Scheduled Amortization Period or
the Early Amortization Period. During the Scheduled Amortization Period
or the Early Amortization Period, an amount equal to the product of (I)
the Series 1999-2 Fixed Allocation Percentage and (II) the aggregate
amount of Collections of Principal Receivables deposited in the
Collection Account on such Deposit Date shall be allocated to the Series
1999-2 Certificateholders and retained in the Collection Account until
applied as provided herein; provided, however, that if 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
1999-2 Certificateholders, amounts allocated to the Series 1999-2
Certificateholders pursuant to this subsection (z) 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 Excess Funding
Account.
The withdrawals to be made from the Collection Account pursuant
to this Section 4.01 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 1999-2 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.
2.2. Determination of Monthly Interest.
(a) The amount of monthly interest distributable from the
Collection Account with respect to the Certificates on any Distribution Date
shall be amounts
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equal to the amounts calculated by the Administrative Agent pursuant to the
Certificate Purchase Agreement as the Monthly Interest for the related Interest
Period. Notwithstanding anything to the contrary herein, the Monthly Interest
shall be distributed on the Certificates only to the extent permitted by
applicable law.
(b) Two Business Days prior to each Distribution Date, the
Servicer shall determine and notify the Trustee in writing of the excess, if any
(the "Interest Shortfall"), of (x) the Monthly Interest for such Distribution
Date over (y) the amount which will be available to be distributed with respect
to the Certificates on such Distribution Date in respect thereof pursuant to
this Supplement. If, on any Distribution Date, the Interest Shortfall is greater
than zero, on each subsequent Distribution Date until such Interest Shortfall is
fully paid, an additional amount ("Additional Interest") equal to (x) the actual
number of days in the Interest Period commencing on such Distribution Date
divided by 360, multiplied by (y) the product of (i) the Certificate Rate for
such Interest Period plus 2.0% per annum and (ii) such Interest Shortfall shall
be payable as provided herein with respect to the Certificates. Notwithstanding
anything to the contrary herein, Additional Interest shall be distributed with
respect to the Certificates only to the extent permitted by applicable law.
(c) On or before the fourth Business Day preceding each
Distribution Date, the Administrative Agent shall calculate the Certificate Rate
and the Monthly Interest for the related Interest Period. Pursuant to the
Certificate Purchase Agreement, the Administrative Agent shall provide the
Servicer with written notice of the Certificate Rate and the Monthly Interest
for such Interest Period on or before the fourth Business Day preceding such
Distribution Date.
2.3. Suspension of the Revolving Period; Limited Amortization
Period. The Transferor may from time to time, in 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 at least $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.
2.4. Required Amount. With respect to each Distribution Date,
on the related Determination Date, the Servicer shall determine the amount (the
"Required Amount"), if any, by which (x) the sum of the amounts required
pursuant to subsections 4.05(a)(i), (ii) and (iii) for such Distribution Date,
exceeds (y) the Series 1999-2 Allocable Finance Charge Collections for such
Distribution Date. In the event that the difference between (x) the Required
Amount for such Distribution Date and (y) the amount of Excess
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Spread and Excess Finance Charge Collections allocated to Series 1999-2 applied
with respect thereto pursuant to Section 4.07(a) on such Distribution Date is
greater than zero, the Servicer shall give written notice to the Trustee of such
positive Required Amount on the date of computation.
2.5. Application of Series 1999-2 Allocable Finance Charge
Collections 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, Series 1999-2 Allocable Finance Charge Collections 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 Series
1999-2 Allocable Finance Charge Collections will be distributed or deposited in
the following priority:
(i) an amount equal to Monthly Interest for such
Distribution Date, plus the amount of any Monthly Interest previously
due but not distributed to Certificateholders, plus the amount of any
Additional Interest for such Distribution Date and any Additional
Interest previously due but not distributed to Certificateholders on a
prior Distribution Date, shall be distributed to the Certificateholders;
(ii) 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 4.04 of the Agreement);
(iii) an amount equal to the Investor Default Amount
for such Distribution Date shall be treated as a portion of Available
Principal Collections for such Distribution Date; and
(iv) 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 Limited
Amortization Period, an amount equal to the Available Principal Collections for
the related Monthly Period shall be distributed in the following order of
priority:
(i) an amount which, together with the aggregate
amounts distributed pursuant to this clause (i) on prior Distribution
Dates with respect to the same Limited Amortization Amount, equals the
Limited Amortization Amount, shall be distributed to the
Certificateholders; and
(ii) the balance of such Available Principal
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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 Scheduled
Amortization Period or the Early Amortization Period, an amount equal to the
Available Principal Collections for the related Monthly Period shall be
distributed in the following order of priority:
(i) an amount up to the Invested Amount on such
Distribution Date shall be distributed to the Certificateholders; and
(ii) for each Distribution Date beginning on the
Distribution Date on which the 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.
2.6. Defaulted Amounts; Investor Charge-Offs. On each
Determination Date, the Servicer shall calculate the Investor Default Amount, if
any, for the related Distribution Date. If, on any Distribution Date, the
Required Amount for the related Monthly Period exceeds the sum of (a) the amount
of Excess Spread and Excess Finance Charge Collections allocable to Series
1999-2 with respect to such Monthly Period, and (b) the amount then on deposit
in the Reserve Account, the Invested Amount shall be reduced by the amount by
which such Required Amount exceeds such sum, but not by more than the Investor
Default Amount for such Distribution Date (an "Investor Charge-Off"). Investor
Charge-Offs shall thereafter be reimbursed and the Invested Amount increased
(but not by an amount in excess of the aggregate unreimbursed Investor
Charge-Offs) on any Distribution Date by the amount of Series 1999-2 Allocable
Finance Charge Collections and Excess Spread and Excess Finance Charge
Collections allocated to Series 1999-2 with respect to the related Monthly
Period which are allocated and available for that purpose pursuant to Section
4.07(b).
2.7. Excess Spread and 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 1999-2 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 Required Amount shall be
distributed by the Trustee to fund the Required Amount in accordance with, and
in the priority set forth in, subsections 4.05(a)(i), (ii) and (iii);
(b) an amount equal to the aggregate amount of Investor
Charge-Offs which have not been previously reimbursed shall be treated as a
portion of Available Principal Collections for such Distribution Date;
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(c) if the amount on deposit in the Reserve Account is less
than the Required Reserve Account Amount for the immediately preceding
Determination Date (such difference, the "Reserve Account Deficiency"), an
amount equal to such Reserve Account Deficiency shall be deposited in the
Reserve Account;
(d) any Additional Amounts due and payable to the
Administrative Agent pursuant to the Certificate Purchase Agreement with respect
to such Distribution Date shall be paid to the Administrative Agent; and
(e) 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 4.04 of the Agreement.
2.8. Excess Finance Charge Collections. Series 1999-2 shall
be an Excess Allocation Series. Subject to Section 4.04 of the Agreement, Excess
Finance Charge Collections with respect to the Excess Allocation Series for any
Distribution Date will be allocated to Series 1999-2 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
1999-2 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 1999-2 for any
Distribution Date will be equal to the excess, if any, of (a) the full amount
required to be paid, without duplication, pursuant to subsections
4.05(a)(i)-(iii) and subsections 4.07(a) through (d) on such Distribution Date
over (b) the Series 1999-2 Allocable Finance Charge Collections applied on such
Distribution Date.
2.9. Shared Principal Collections. Subject to Section 4.04 of
the Agreement, Shared Principal Collections for any Distribution Date will be
allocated to Series 1999-2 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 1999-2 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
"Principal Shortfalls" for Series 1999-2 will be equal to (a) for any
Distribution Date with respect to the Revolving Period, zero; (b) for any
Distribution Date with respect to the Limited Amortization Period, the excess,
if any, of the Limited Amortization Amount not previously distributed 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 Scheduled 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).
2.10. Invested Amount Increases.
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(a) The Series 1999-2 Certificateholders agree, by
acceptance of their Certificates, that the Transferor may, from time to time,
prior to the earlier of the commencement of the Scheduled Amortization Period
and the commencement of the Early Amortization Period and so long as a Limited
Amortization Period is not outstanding, and subject to the terms, conditions and
restrictions set forth in this Section 4.10(a) and in the Certificate Purchase
Agreement, request that the Certificateholders acquire additional undivided
interests in the Trust in specified amounts (each, an "Invested Amount
Increase"). Each and every Invested Amount Increase shall, however, be subject
to the satisfaction of the Increase Conditions, and shall be permitted only (i)
during the Revolving Period and (ii) upon the request made by the Transferor to
the Administrative Agent to increase the outstanding principal balance of the
Certificates held by the Purchaser and the Invested Amount to an amount not to
exceed the Maximum Invested Amount. Any such Invested Amount Increase shall be
(i) if the applicable Increase Date occurs no more than 90 days after the
Closing Date, in a minimum amount of [*] or an integral multiple of [*] in
excess of that amount or (ii) if the applicable Increase Date occurs 90 days or
more after the Closing Date, in a minimum amount of [*] or an integral
multiple of [*] in excess of that amount. To request any such increase, the
Transferor shall be required to give to each of the Trustee, the Servicer and
the Administrative Agent, at least two Business Days prior to the date of the
requested Invested Amount Increase, an irrevocable Invested Amount Increase
Request in the form attached hereto as Exhibit E, specifying (i) the amount of
such increase (the "Increase Amount"), (ii) the date on which such Invested
Amount Increase is to occur, which date shall be a Business Day during the
Revolving Period (an "Increase Date"), (iii) the difference between the Required
Reserve Account Amount for such Increase Date after giving effect to the
Increase Amount on such Increase Date and the amount then on deposit in the
Reserve Account (such difference, the "Required Reserve Account Addition") and
(iv) the payment instructions for remittance of the proceeds of such requested
Invested Amount Increase. The proceeds of such Invested Amount Increase shall be
remitted to the Transferor and the Trustee, for deposit in the Reserve Account
in accordance with Section 4.11.(c), in accordance with such payment
instructions.
(b) On the Increase Date for such Invested Amount Increase,
after satisfaction of all conditions to such Invested Amount Increase, the
Purchaser shall remit such Increase Amount, to the extent it has otherwise
agreed or committed to fund such Increase, no later than 3:00 p.m. (New York
City time) in immediately available funds in accordance with the payment
instructions specified in the Notice of Invested Amount Increase, and upon such
remittance the outstanding principal balance of the Certificates, held by the
Purchaser and the Invested Amount, shall be increased by the amount of such
remittance. Concurrently with the making of such Invested Amount Increase, the
Transferor and the Administrative Agent shall deliver to the Trustee a
confirmation of such Invested Amount Increase, specifying the Increase Amount,
and the Trustee shall promptly annotate the Certificate Register accordingly.
2.11. Reserve Account.
(a) The Servicer, for the benefit of the Series 1999-2
Certificateholders, shall establish and maintain with the Trustee or its nominee
in the name of the
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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Trustee, on behalf of the Trust, an Eligible Account (including any subaccount
thereof) bearing a designation clearly indicating that the funds and other
property credited thereto are held for the benefit of the Series 1999-2
Certificateholders (the "Reserve Account").
The Reserve Account shall be under the sole dominion and control
of the Trustee for the benefit of the Series 1999-2 Certificateholders. Except
as expressly provided in this Supplement or the 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 Reserve Account for any amount owed
to it by the Trustee, the Trust or any Series 1999-2 Certificateholder. If, at
any time, the Reserve Account ceases to be an Eligible 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 may
consent) establish a new Reserve Account meeting the conditions specified above,
transfer any monies, documents, instruments, securities, security entitlements,
certificates of deposit and other property to such new Reserve Account and from
the date such new Reserve Account is established, it shall be the "Reserve
Account." The Servicer shall have the power, revocable by the Trustee, to make
withdrawals and payments from the Reserve Account and to instruct the Trustee to
make withdrawals and payments from the Reserve Account for the purposes of
carrying out the Servicer's or the Trustee's duties hereunder.
(b) On each Distribution Date, the Servicer shall direct the
Trustee in writing to (i) withdraw an amount equal to the lesser of (A) the
excess of (x) Required Amount for such Distribution Date over (y) the amount of
Excess Spread and Excess Finance Charge Collections allocated for Series 1999-2
with respect to the related Monthly Period and (B) the amount available in the
Reserve Account, from the Reserve Account, (ii) deposit such amount into the
Collection Account and (iii) apply such amount in the amounts and pursuant to
the priorities set forth in subsection 4.07(a). If on any Distribution Date
during the Revolving Period, the Scheduled Amortization Period or any Limited
Amortization Period, after giving effect to all withdrawals from and deposits to
the Reserve Account, the amount on deposit in the Reserve Account would exceed
the Required Reserve Account Amount, such excess shall be deposited into the
Collection Account and treated as Collections of Finance Charge Receivables. If
on any Distribution Date during the Early Amortization Period, after giving
effect to all withdrawals from and deposits to the Reserve Account, there are
any amounts on deposit in the Reserve Account, such amounts shall be treated as
Available Principal Collections for such Distribution Date.
(c) On each Increase Date, the Trustee shall deposit all
funds remitted by the Administrative Agent on such Increase Date that constitute
the Required Reserve Account Addition for such Increase Date into the Reserve
Account.
(d) Funds on deposit in the Reserve Account shall at the
written direction of the Servicer be invested by the Trustee or its nominee in
Eligible Investments selected by the Servicer. All such Eligible Investments
shall be held by the Trustee for the benefit of the Series 1999-2
Certificateholders. Investments of funds representing Collections collected
during any
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Monthly Period shall be invested in Eligible Investments that will mature so
that such funds will be available no later than the close of business on each
monthly Transfer Date following such Monthly Period 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 in writing, funds deposited in the
Reserve Account on a Transfer Date with respect to the immediately succeeding
Distribution Date are not required to be invested overnight.
2.12. Interest Rate Cap.
(a) The Transferor hereby represents that it has obtained
the Interest Rate Cap in favor of the Trustee for the benefit of the Trust. The
Interest Rate Cap provides that (i) the Trust shall not be required to make any
payments thereunder, (ii) the Interest Rate Cap shall terminate on the earlier
of (A) the date of the final payment with respect to the Series 1999-2
Certificates and (B) the date on which the Notional Amount is reduced to zero
and (iii) the Trust shall be entitled to receive Interest Rate Cap Payments
(determined in accordance with the Interest Rate Cap) from the Interest Rate Cap
Provider on the Business Day immediately preceding each Distribution Date if the
composite interest rate for "AA" commercial paper with a maturity of 30 days, as
reported by the Federal Reserve Bank of New York in Federal Reserve Statistical
Release H.15, for any Interest Period exceeds the Cap Rate and the Notional
Amount is greater than zero. Each Interest Rate Cap Payment and any payments
upon early termination of the Interest Rate Cap shall be deposited into the
Collection Account as Series 1999-2 Allocable Finance Charge Collections.
Payments received by the Trustee from the Interest Rate Cap Provider upon the
early termination of the Interest Rate Cap shall be applied to the purchase of a
Replacement Interest Rate Cap or Qualified Substitute Arrangement (as defined
below), or if no Replacement Interest Rate Cap or Qualified Substitute
Arrangement is obtained, shall be applied in accordance with Section 4.05.
(b) If (i) the Interest Rate Cap Provider is a Person other
than the Administrative Agent or an Affiliate of the Administrative Agent, (ii)
the long-term unsecured debt rating of the Interest Rate Cap Provider is
withdrawn or reduced below AA by Standard & Poor's or Aa2 by Moody's, and (iii)
the short-term unsecured debt rating of the Interest Rate Cap Provider is
withdrawn or reduced below A-1+ by Standard & Poor's or P-1 by Moody's, then
within thirty days after the Interest Rate Cap Provider has received notice of
such decline in the creditworthiness of the Interest Rate Cap Provider as
determined by Standard & Poor's or Moody's, as the case may be, either (x) the
Interest Rate Cap Provider, upon satisfaction of the Rating Agency Condition,
will enter into an arrangement the purpose of which shall be to ensure
performance by the Interest Rate Cap Provider of its obligations under the
Interest Rate Cap; or (y) the Servicer shall at its option take one of the
following actions: (i) provided that the
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Replacement Interest Rate Cap or Qualified Substitute Arrangement (as described
below) meeting the requirements of Section 4.12(c) have been obtained, direct
the Trustee (A) to provide written notice to the Interest Rate Cap Provider of
its intention to terminate the Interest Rate Cap within such thirty-day period
and (B) to terminate the Interest Rate Cap within such thirty-day period, to
request the payment to it of all amounts due to the Trust under the Interest
Rate Cap through the termination date and to deposit any such amounts so
received, on the day of receipt, into the Collection Account, (ii) establish any
other arrangement (including an arrangement or arrangements in addition to or in
substitution for any prior arrangement made in accordance with the provisions of
this Section 4.12(b)) which satisfies the Rating Agency Condition (a "Qualified
Substitute Arrangement") or (iii) give notice to the Trustee of the occurrence
of the event described in Section 6.01(l).
(c) The Trustee shall not terminate the Interest Rate Cap
unless, prior to the expiration of the thirty-day period referred to in said
Section 4.12(b), the Transferor delivers to the Trustee (i) a Replacement
Interest Rate Cap or a Qualified Substitute Arrangement, (ii) to the extent
applicable, an Opinion of Counsel as to the due authorization, execution and
delivery and validity and enforceability of such Replacement Interest Rate Cap
or Qualified Substitute Arrangement, as the case may be, and (iii) evidence that
the termination of the Interest Rate Cap and its replacement with such
Replacement Interest Rate Cap or Qualified Substitute Arrangement has satisfied
the Rating Agency Condition.
(d) The Servicer shall notify the Trustee and the Rating
Agencies within five Business Days after obtaining knowledge that the senior
long-term or short-term rating of the Interest Rate Cap Provider has been
withdrawn or reduced by Standard & Poor's or Moody's.
(e) Notwithstanding the foregoing, the Transferor may at any
time obtain a Replacement Interest Rate Cap, provided that the Transferor
delivers to the Trustee (i) an Opinion of Counsel as to the due authorization,
execution and delivery and validity and enforceability of such Replacement
Interest Rate Cap and (ii) evidence that the termination of the then current
Interest Rate Cap and its replacement with such Replacement Interest Rate Cap
has satisfied the Rating Agency Condition.
(f) The Trustee hereby appoints the Servicer to perform the
duties of the calculation agent under the Interest Rate Cap Agreement and the
Servicer accepts such appointment.
(g) By virtue of its acceptance of a Series 1999-2
Certificate, each Series 1999-2 Certificateholder shall be deemed to have agreed
that it will have no direct right of action against the Interest Rate Cap
Provider for any failure to make any payment due under the Interest Rate Cap.
(h) The Transferor shall have the option to terminate the
Interest Rate Cap at any time if the Transferor obtains a Qualified Substitute
Arrangement.
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ARTICLE III
Distributions and Reports to
Series 1999-2 Certificateholders
3.1. Distributions. On each Distribution Date, the Trustee
shall distribute to the Series 1999-2 Certificateholders of record on the
preceding Record Date (other than as provided in Section 12.02 of the Agreement
respecting a final distribution) the amounts required to be distributed thereon
pursuant to Article IV hereof. Distributions to Series 1999-2 Certificateholders
hereunder shall be made by wire transfer in immediately available funds.
3.2. Reports and Statements to Certificateholders.
(a) No later than the Business Day following each
Determination Date, the Servicer will provide to the Administrative Agent and
the Trustee statements, substantially in the form of Exhibit B hereto (each, a
"Monthly Servicer Report"), setting forth certain information relating to the
Trust and the Certificates.
(b) On or before January 31 of each calendar year, beginning
with calendar year 2000, the Trustee shall furnish or cause to be furnished to
each Person who at any time during the preceding calendar year was a Series
1999-2 Certificateholder, a statement prepared by the Servicer containing the
information which is required to be contained in the statement to Series 1999-2
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 1999-2 Certificateholder, together with other information as is required
to be provided by an issuer of indebtedness under the Internal Revenue Code and
such other customary information as is necessary to enable the Series 1999-2
Certificateholders to prepare their tax returns. Such obligation of the Trustee
shall be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Trustee pursuant to any
requirements of the Internal Revenue Code as from time to time in effect.
ARTICLE IV
Pay Out Events
.1. Pay Out Events. If any one of the following events shall
occur with respect to the Series 1999-2 Certificates:
(a) the occurrence of an Insolvency Event relating to the
Transferor, an Account Owner or the Servicer;
(b) the Trust or the Transferor becomes an investment
company within the meaning of the Investment Company Act;
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(c) the Transferor shall become unable, for any reason, to
transfer Receivables to the Trust pursuant to the Agreement;
(d) the Transferor or the Servicer shall fail (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) to observe or
perform any other covenants or agreements of the Transferor or the Servicer set
forth in the Agreement, the Certificate Purchase Agreement or this Supplement,
which failure has a material adverse effect on the Certificateholders and which
continues unremedied for a period of 30 days after the date on which written
notice of such failure, requiring the same to be remedied, shall have been given
to the Transferor or the Servicer, as applicable, by the Trustee, or to the
Transferor or the Servicer, as applicable, and the Trustee by any Holder of the
Certificates;
(e) any representation or warranty made by the Transferor or
the Servicer in the Agreement or this Supplement shall prove to have been
incorrect in any material respect when made or when delivered and continues to
be incorrect in any material respect for a period of 30 days after the date on
which written notice of such failure, requiring the same to be remedied, shall
have been given to the Transferor or the Servicer, as applicable, by the
Trustee, or to the Transferor and the Trustee by any Holder of the Series 1999-2
Certificates and as a result of which the interests of the Certificateholders
are materially and adversely affected for such period; provided, however, that a
Pay Out Event pursuant to this Section 6.01(e) shall not be deemed to have
occurred 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;
(f) Three-Month Average Excess Spread is less than [*] as
of any Determination Date;
(g) the Servicer or the Transferor thereof shall be in
Default under any loan agreement such that the lender thereunder would be
authorized, pursuant to the terms of such agreement, to demand immediate payment
by the Servicer, the Transferor of an amount in excess of [*];
(h) if Heritage Bank of Commerce is an Account Owner, the
occurrence of any uncured material default under the Account Origination
Agreement or the Account Origination Agreement is terminated;
(i) a court of competent jurisdiction shall issue a final
non-appealable order to the effect that the Trustee shall, for any reason, fail
to have a valid and perfected first priority security interest in the
Receivables;
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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<PAGE> 28
(j) any failure to pay to Certificateholders the full amount
of interest due on the Certificates on any Distribution Date;
(k) failure on the part of the Interest Rate Cap Provider to
make an Interest Rate Cap Payment;
(l) at any time, the Interest Rate Cap Requirement is not
satisfied; or
(m) a failure of the Transferor to convey Receivables in
Additional Accounts to the Trust within five Business Days after it is required
to do so pursuant to Section 2.09(a)(i) of the Agreement;
then, in the case of any event described in subparagraph (d), (e), (g), (j), (k)
or (l) after the applicable grace period, if any, set forth in such
subparagraphs, either the Trustee or the Holders of Series 1999-2 Certificates
evidencing more than 50% of the aggregate unpaid principal amount of
Certificates by notice then given in writing to the Transferor and the Servicer
(and to the Trustee if given by the Certificateholders) may declare that a Pay
Out Event has occurred with respect to Series 1999-2 as of the date of such
notice, and, in the case of any event described in subparagraph (a), (b), (c),
(f), (h), (i) or (m) a Pay Out Event shall occur with respect to Series 1999-2
without any notice or other action on the part of the Trustee or the Series
1999-2 Certificateholders immediately upon the occurrence of such event.
ARTICLE V
Optional Repurchase; Series Termination
5.1. Optional Repurchase.
(a) On any day occurring on or after the date on which the
Invested Amount is reduced to 5% or less of the highest Invested Amount during
the Revolving Period, at any time on or after the Closing Date, the Transferor
shall have the option to purchase the Series 1999-2 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, the Trustee and
the Administrative Agent at least 30 days prior written notice of the date on
which the Transferor intends to exercise such purchase option. Not later than
2:00 p.m., New York City time, on the exercise date 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 1999-2
shall be reduced to zero and the Series 1999-2 Certificateholders shall have no
further interest in the
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<PAGE> 29
Receivables. The Reassignment Amount shall be distributed as set forth in
Section 8.01(b).
5.2. Series Termination.
(a) If, on the Distribution Date occurring two months prior
to the Series 1999-2 Termination Date, the Invested Amount (after giving effect
to all changes therein on such date) would be greater than zero, the 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 together with accrued and unpaid interest at the close of
business on the last day of the Monthly Period preceding the Series 1999-2
Termination Date (after giving effect to all distributions required to be made
on the Series 1999-2 Termination Date, except pursuant to this Section 7.02).
Such bids shall require that such sale shall (subject to Section 7.02(b)) occur
on the Series 1999-2 Termination Date. The Transferor shall be entitled to
participate in, and to receive from the Trustee 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 1999-2 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
1999-2 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 Distribution Date occurring two months prior to the Series 1999-2
Termination Date to the Series 1999-2 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 VI
Final Distributions
6.1. 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) The amount to be paid by the Transferor with respect to
Series 1999-2 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.
(b) The amount to be paid by the Transferor with respect to
Series 1999-2 in connection with a repurchase of the Certificateholders'
Interest pursuant to
30
<PAGE> 30
Section 10.01 of the Agreement shall equal the Reassignment Amount for the
Distribution Date of such repurchase.
(c) With respect to the Reassignment Amount deposited into
the Collection Account pursuant to Section 7.01 or any amounts allocable to the
Series 1999-2 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 12:00 noon, 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 be made on such date) in immediately
available funds: (x) the Invested Amount on such Distribution Date will be
distributed to the Paying Agent for payment to the Certificateholders and (y) an
amount equal to the sum of (A) Monthly Interest for such Distribution Date and
(B) any Monthly Interest previously due but not distributed to the
Certificateholders on a prior Distribution Date will be distributed to the
Paying Agent for payment to the Certificateholders.
(d) Notwithstanding anything to the contrary in this
Supplement or the Agreement, all amounts distributed to the Paying Agent
pursuant to Section 8.01(c) for payment to the Series 1999-2 Certificateholders
shall be deemed distributed in full to the Series 1999-2 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.
ARTICLE VII
Miscellaneous Provisions
7.1. 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.
7.2. 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.
7.3. 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.
7.4. Private Placement of Series 1999-2 Certificates; Form of
Delivery of Series 1999-2 Certificates.
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<PAGE> 31
(a) The Series 1999-2 Certificates have not been registered
under the Securities Act of 1933, as amended, (the "Securities Act"), or any
state securities law. No transfer of any Series 1999-2 Certificate shall be made
except to the Purchaser or in accordance with the terms of the Certificate
Purchase Agreement and either (i) pursuant to an effective registration under
the Securities Act and applicable state securities or "blue sky" laws or (ii) in
a transaction exempt from the registration requirements of the Securities Act
and applicable state securities or "blue sky" laws, to (A) a person who the
transferor reasonably believes is a Qualified Institutional Buyer within the
meaning thereof in Rule 144A under the Securities Act that is aware that the
resale or other transfer is being made in reliance on Rule 144A, (2) a person
who is an accredited investor as defined in Rule 501(a) under the Securities Act
or (3) an institution which has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of the
investment therein. The Series 1999-2 Certificates shall bear legends to the
effect set forth in Exhibit A. The Transferor is not obligated to register the
Series 1999-2 Certificates under the Securities Act or any other securities or
"blue sky" law or to take any other action not otherwise required under this
Supplement or the Agreement to permit the transfer of Series 1999-2 Certificates
without registration or as described above.
(b) The Series 1999-2 Certificates shall be delivered as
Registered Certificates as provided in Section 6.01.
7.5. Successors and Assigns. This Supplement shall be binding
upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns, except that the Transferor may not assign or
transfer any of its rights under this Supplement without the prior written
consent of the Administrative Agent and without prior notice to each Rating
Agency.
7.6. Amendments.
In addition to the conditions to the amendment of the Agreement
and this Supplement set forth in the Agreement, neither the Agreement nor this
Supplement may be amended without the prior written consent of the
Administrative Agent; provided, however, that, the Agreement may be amended
without the prior written consent of the Administrative Agent if, not less than
five Business Days prior to the effectiveness of any such amendment, there shall
have been delivered to the Administrative Agent (i) an Opinion of Counsel
addressed to the Administrative Agent that any such amendment shall not
adversely affect in any material respect the interests of the Series 1999-2
Certificateholders and (ii) a copy of such amendment.
7.7. Amendments to Agreement.
(a) For the term of this Supplement, the definition of
"Eligible Account" is hereby amended with the addition of the following
condition:
(i) The Obligor of which had a FICO score as of the
date of the
32
<PAGE> 32
approval of the origination of the Account of at least [*].
(b) For the terms of this Supplement, Section 2.09(c) of the
Agreement is hereby amended with the addition of the following condition (ix):
(ix) after giving effect to the Additional Accounts,
no more than [*] of the Accounts (calculated on the basis of the amount
of outstanding Principal Receivables relating to the Accounts on the
dates they became Accounts) shall have related Obligors with FICO Scores
as of the date of origination of their Accounts of less than [*].
(c) For the terms of this Supplement, Section 3.03 of the
Agreement is hereby amended with the addition of the following paragraph (l):
(l) Service Providers: The Servicer shall engage
First Data, Total Systems or, subject to the Rating Agency Condition,
another Person, to bill Obligors, record charges incurred under and
payments received on Accounts and calculate finance charges due under
the Accounts.
7.8. 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 reasonably 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 1999-2 Certificateholders agrees that
prior to the date on which the first interest payment hereunder is due thereto,
it will provide to the Servicer and the Trustee (i) if such Series 1999-2
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 successor applicable or required forms,
(ii) if the Transferor so requests, a duly completed copy of United States
Internal Revenue Service Form W-9 or successor applicable or required forms, and
(iii) such other forms and information as the Transferor may reasonably request
to confirm the availability of any applicable exemption from United States
federal, state or local withholding taxes. Each Series 1999-2 Certificateholder
agrees to provide to the Servicer and Trustee, like additional subsequent duly
completed forms 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 1999-2
Certificateholder certifies, represents and warrants that as of the date of this
Agreement, or in the case of a Series 1999-2 Certificateholder which is an
assignee as of the date of such Certificate Assignment, that (i) it is entitled
(x) to receive payments under this Agreement without deduction or withholding of
any United States federal income taxes (other than taxes
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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<PAGE> 33
required to be withheld pursuant to Section 1446 of the Code) and (y) to an
exemption from United States backup withholding tax and (ii) it will pay any
taxes attributable to its ownership of an interest in the Certificates.
(c) Each Series 1999-2 Certificateholder agrees with the
Transferor that: (a) such Series 1999-2 Certificateholder will deliver to the
Transferor on or before the Closing Date or the effective date of any
participation or Certificate Assignment an Investment Letter, executed by such
assignee Series 1999-2 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 1999-2 Certificateholder or Participant of a
portion of an interest relating to the Investor Certificate and (b) all of the
statements made by such Series 1999-2 Certificateholder in its Investment Letter
shall be true and correct as of the date made.
(d) Each Series 1999-2 Certificateholder, by its holding of
an interest in the Investor Certificates, hereby severally represents, warrants
and covenants, and each Series 1999-2 Certificateholder that acquires an
interest in the Investor Certificates by Certificate Assignment shall be deemed
to have severally represented, warranted and covenanted upon such Certificate
Assignment that: (i) such Series 1999-2 Certificateholder has not acquired and
shall not sell, trade or transfer any interest in the Investor Certificates, nor
cause any interest in the Investor Certificates to be marketed, on or through
either (A) an "established securities market" 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 Investor 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 Investor Certificates and stands ready to effect buy or sell transactions
at the quoted prices for itself or on behalf of others), and (ii) unless the
Transferor consents otherwise, such Series 1999-2 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. In the
event of any breach of the representation, warranty and covenant of an Series
1999-2 Certificateholder or its Participant that such Series 1999-2
Certificateholder or participant shall remain classified as a corporation other
than an S corporation, such Series 1999-2 Certificateholder shall notify the
Transferor promptly upon such Series 1999-2 Certificateholder's becoming aware
of such breach, and thereupon the Series 1999-2 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 1999-2
Certificateholder. In any such event, the Transferor shall also have the right
to procure a replacement investor. Each affected Series 1999-2 Certificateholder
hereby agrees to take all actions necessary to permit a replacement investor to
succeed to its rights and obligations hereunder. Each Series 1999-2
Certificateholder which has a Participant which has breached its representation,
warranty and covenant that it shall remain classified as a corporation other
than
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<PAGE> 34
an S corporation hereby agrees (without limiting the right of the Transferor to
procure a replacement investor for such Series 1999-2 Certificateholder as
provided above in this paragraph) to notify the Transferor of such breach
promptly upon such Series 1999-2 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 9.04(a), each
Series 1999-2 Certificateholder may at any time sell, assign or otherwise
transfer, to the extent of such Series 1999-2 Certificateholder's interest in
the Investor Certificates (each, a "Certificate Assignment"), to (i) any
Permitted Assignee, the Administrative Agent or the Purchaser or (ii) 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 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) (upon such Certificate
Assignment, a "Series 1999-2 Certificateholder") all or part of its interest in
the Investor 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 1999-2 Certificateholder shall comply
with this Section 9.08 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 1999-2 Certificateholder has made the representations,
warranties and covenants required to be made pursuant to this Section 9.08,
(iii) there shall not be, in the aggregate, more than [*] Certificateholders and
Partial Participants after giving effect to such Assignment, and (iv) such
proposed assignee shall provide the forms described in (i), (ii) and (iii) of
subsection 9.08(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 to a Person other than a Permitted Assignee, the
Administrative Agent or the Purchaser, the assignor Series 1999-2
Certificateholder shall request in writing to the Trustee (who shall promptly
deliver it to the Transferor) for the consent of the Transferor (the Transferor
shall respond to any such request within ten Business Days after its receipt and
the Transferor will not unreasonably withhold such consent) it being understood
that the obtaining of such consent is a condition to the effectiveness of such a
Certificate Assignment. Each assignee Series 1999-2 Certificateholder is subject
to the terms and conditions of subsection 9.08(b) on an ongoing basis and hereby
makes the certifications, representations and warranties contained therein, and
the assigning Series 1999-2 Certificateholder hereby certifies, represents and
warrants that its assignee's certifications, representations and warranties
thereunder are true.
(f) Subject to the provisions of subsection 9.04(a), any
Series 1999-2 Certificateholder may at any time grant a participation in all or
part (but not less than $5,000,000) of its interest in Investor Certificates to
(i) any Permitted Assignee, the Administrative Agent or the Purchaser or (ii)
any other Person to which the Transferor may consent, which consent shall not be
unreasonably withheld (it being understood that such consent
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
35
<PAGE> 35
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
Permitted Assignee, the Administrative Agent, the Purchaser and each such other
Person, a "Participant" and each Participant acquiring a participation in less
than all of a Certificateholder's rights with respect to payments due
thereunder, a "Partial Participant"); provided, however, that such participation
shall be void, unless (i) such Participant complies with the applicable
provisions of this Section 9.08, (ii) there shall not be, in the aggregate, more
than [*] Certificateholders and Partial Participants after giving effect to such
participation, and (iii) such Series 1999-2 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 other than to a Permitted
Assignee, the Administrative Agent or the Purchaser, the granting Series 1999-2
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 such a participation. Each Series 1999-2
Certificateholder hereby acknowledges and agrees that any such participation
will not alter or affect in any way whatsoever such Series 1999-2
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 1999-2 Certificateholder in order to enforce the
obligations of such Series 1999-2 Certificateholder hereunder. Each Series
1999-2 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. In granting any participation, the Series
1999-2 Certificateholder 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 1999-2 Certificateholder will provide to the Servicer
and Trustee, the forms described in (i), (ii) and (iii) of subsection 9.08(b)
(subject to the Transferor's consent, as applicable and as set forth therein) as
though the Participant were a Series 1999-2 Certificateholder, and (iii) such
Series 1999-2 Certificateholder similarly will provide subsequent forms as
described in subsection 9.08(b) with respect to such Participant as though it
were a Series 1999-2 Certificateholder.
(g) Any holder of an interest in the Trust acquired pursuant
to Section 12.01(b) of the Agreement in respect of the Series 1999-2
Certificates shall be 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
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
36
<PAGE> 36
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).
[Signature Page to Follow]
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<PAGE> 37
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.
NEXTCARD FUNDING CORP.,
as Transferor
By: /s/ John V. Hashman
------------------------------
Name: John V. Hashman
Title: Chief Financial Officer
NEXTCARD, INC.,
as Servicer
By: /s/ John V. Hashman
------------------------------
Name: John V. Hashman
Title: Chief Financial Officer
THE BANK OF NEW YORK,
as Trustee
By: /s/ Kimberly Gilfoil
------------------------------
Name: Kimberly Gilfoil
Title: Assistant Treasurer
[Signature Page to Series 1999-2 Supplement]
38
<PAGE> 38
<PAGE> 1
EXECUTION COPY EXHIBIT 10.4
AMENDED AND RESTATED ACCOUNT ORIGINATION AGREEMENT
This AMENDED AND RESTATED ACCOUNT ORIGINATION AGREEMENT ("Agreement") is
made as of this 21st day of May, 1999, by and between NEXTCARD, INC., a Delaware
corporation ("NextCard") (as successor to NextCard, Inc., a California
corporation), NEXTCARD FUNDING CORP., a Delaware corporation ("Funding"), and
HERITAGE BANK OF COMMERCE, a California state-chartered bank (the "Bank").
W I T N E S S E T H:
WHEREAS, NextCard, Funding and the Bank are parties to that certain
Account Origination Agreement dated as of December 29, 1998 (the "Original
Agreement") and desire to amend and restate the Original Agreement as specified
herein; and
WHEREAS, the Bank is a licensed member of Visa, U.S.A., Inc. ("Visa")
and authorized to issue credit cards;
NOW, THEREFORE, in consideration of the premises and mutual covenants
included in this Agreement and for other goods and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, NextCard, Funding and
the Bank agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Capitalized terms have the meanings indicated
below.
"ACCOUNT" means an open-end, revolving Visa account opened by the Bank
pursuant to the Program on and after November 16, 1998, pursuant to which one or
more Credit Cards are
<PAGE> 2
issued to a Cardholder, including any and all rights, remedies, benefits,
interests and entitlements with respect thereto.
"BANK MARKS" has the meaning specified in Section 3.1(c).
"CARDHOLDER" means an individual in whose name an Account is
established.
"CARDHOLDER AGREEMENT" means an agreement between the Bank and a
Cardholder for the extension of credit in connection with an Account.
"CARDHOLDER-SPECIFIC INFORMATION" means Cardholder names, postal and
electronic mail addresses, telephone numbers and Cardholder-specific transaction
information.
"CONFIDENTIAL INFORMATION" has the meaning specified in Section 3.4.
"CREDIT CARD" or "CARD" means each Visa card issued by the Bank pursuant
to this Agreement.
"CREDIT CARD GUIDELINES" means the Credit Card Guidelines attached
hereto as Exhibit A, as amended from time to time with the prior approval of
NextCard and the Bank.
"EVENT OF DEFAULT" has the meaning specified in Section 6.2(a).
"FEDERAL FUNDS RATE" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including any
such successor, "H.15(519)") for such day, and if none is set forth for such
day, the rate set forth for the preceding Business Day, in each case opposite
the caption "Federal Funds (Effective)".
"EXTENSION FEE" has the meaning specified in Section 6.1(a).
"INDEMNIFIED PARTY" has the meaning specified in Section 7.4.
"INDEMNIFYING PARTY" has the meaning specified in Section 7.4.
2
<PAGE> 3
"INITIAL AGREEMENT" means that certain Consumer Credit Card Program
Agreement dated November 25, 1997 between NextCard and the Bank.
"INITIAL TERM" has the meaning specified in Section 6.1.
"LOSSES" has the meaning specified in Section 7.3.
"NEXTCARD MARKS" has the meaning specified in Section 3.1(a).
"PROGRAM" means the credit card program conducted pursuant to the terms
of this Agreement and specifically excludes the program conducted pursuant to
the Initial Agreement.
"PROGRAM INFORMATION" means all information, other than
Cardholder-Specific Information, acquired through the operation of this
Agreement or concerning the Accounts. Program Information includes
Cardholder-Specific Information to the extent that the Cardholder-Specific
Information is redacted to mask any correlation between the Cardholder-Specific
Information and the identity of any specific Cardholder.
"PROGRAM MATERIALS" means any applications, marketing materials,
advertising, Web sites and content, disclosures, Account agreements, Account
statements, billing and collection notices used in connection with the Program,
as developed by NextCard from time to time.
"PURCHASE PRICE" means, as of any day with respect to any Receivables,
(a) the sum of [*] minus (b) any credits and payments to the related Accounts.
"RECEIVABLES" means all amounts owing to the Bank on the Accounts
including, without limitation, principal balances from outstanding purchases,
balance transfers and cash advances, accrued finance charges, late charges,
returned check charges, interchange income and any other charges and fees,
whether or not billed, as of the close of business on a given day.
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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"SETTLEMENT AMOUNT" means, as of any day with respect to any
Receivables, (a) the Purchase Price of such Receivables minus (b) the amount of
any fees, charges or other income, including amounts payable to Funding pursuant
to Section 2.11, paid by other parties with respect to the Receivables, all of
which are payable to Funding hereunder, to the extent not previously netted out
of a Settlement Amount.
"SETTLEMENT DATE" shall have the meaning specified in Section 4.1(a).
"THIRD PARTY PROCESSOR" means any third party providing any data
processing services with respect to the Accounts or the Receivables.
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.
ARTICLE II
ESTABLISHMENT OF ACCOUNTS
2.1 Solicitation of Accounts.
(a) NextCard shall have the sole and exclusive right to
solicit applications for Credit Cards on behalf of the Bank.
(b) NextCard will use the Internet to solicit potential
applicants to submit applications to open Accounts. NextCard's Internet
marketing activities may include, in NextCard's discretion, targeted e-mail
solicitations, banner advertising, hyperlinks and agreements with other sites
and companies on the Internet. The Accounts and Cards will include
Internet-enhanced features, including online approval, online balance transfers
and online customer service. NextCard may from time to time implement additional
Internet-enhanced features.
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(c) All advertising and marketing materials will indicate
that the Bank is the issuer of Cards and the party with whom the Accounts are
maintained.
(d) NextCard does not warrant or guarantee that it will
generate any particular number of Accounts or amount of Receivables.
2.2 Applications.
(a) NextCard shall ensure that the form of the application
for a Credit Card and all other Program Materials, including without limitation
solicitation materials, are in compliance with all material applicable laws and
regulations.
(b) In the event that an applicant for a Card does not
satisfy the requirements of the Credit Card Guidelines, NextCard shall notify
the applicant in accordance with applicable laws and regulations.
2.3 Issuance of Credit Cards. So long as no Event of Default shall
have occurred, the Bank shall issue Credit Cards to each applicant for a Card
who qualifies for such type of Card under the Credit Card Guidelines and such
underwriting algorithms as are approved in writing by the Bank and NextCard from
time to time. Subject to Section 6.4 hereof, the Bank shall extend credit with
respect to such Credit Cards in accordance with the Credit Card Guidelines.
NextCard shall design and provide the Credit Cards in forms consistent with Visa
guidelines. NextCard, on behalf of the Bank, shall automatically issue a renewal
card to each qualified Cardholder at each scheduled Credit Card renewal date.
2.4 Establishment of Accounts.
(a) Upon approval of an application, the Bank shall
establish an Account for the applicant.
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(b) NextCard shall prepare and provide, or cause to be
provided to each Cardholder a Cardholder Agreement and disclosure statement and
such other notices or documents related to such Cardholder's Account as are
required from time to time under applicable laws and regulations.
2.5 Account Terms. Certain terms and conditions for the Credit Cards
applicable to the Accounts are set out in the Credit Card Guidelines. NextCard
shall ensure that the Credit Card Guidelines and the other terms and conditions
for the Credit Cards (including, without limitation, the interest rates, fees,
charges and disclosures) are in compliance with all material applicable laws and
regulations.
2.6 Servicing. NextCard shall be responsible for servicing and
maintaining the Accounts, processing payments thereon and collections efforts
with respect thereto, either by itself or through Third Party Processors. Such
servicing shall include maintaining a customer service website, maintaining all
communications with Cardholders and modifying the terms and conditions of any
Account. All costs relating to servicing the Accounts shall be paid by NextCard.
2.7 Other Bank Obligations
(a) Visa Membership. The Bank shall maintain its membership
in Visa. The Bank shall be responsible for making all reports to Visa which may
be required by its membership therein and shall comply with the operating rules
and regulations of Visa in connection with the Program. Any termination of the
Bank's membership in Visa shall be grounds for termination of this Agreement
pursuant to Section 6.2(b).
(b) Board Approval. This Agreement and all sales of
Receivables and
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Accounts pursuant to this Agreement shall be approved by the Board of Directors
of the Bank and such approval is or will be reflected in the minutes of the
Board of Directors. The Bank shall provide copies of such resolutions of the
Board of Directors, certified by the Secretary or other officer of the Bank, as
may be reasonably requested by NextCard. The Bank shall maintain such
resolutions in its permanent official records continuously from the time of
their adoption.
(c) Other Requirements. The Bank shall comply with all
regulatory and administrative requirements applicable to it, and shall be solely
responsible for its Community Reinvestment Act compliance requirements as they
relate to the Program.
(d) Opinion. Prior to the effectiveness of this Agreement,
the Bank shall deliver to Funding, NextCard and any provider of financing for
the Receivables an opinion of counsel substantially in the form set forth on
Exhibit B.
(e) Recordkeeping. The Bank shall maintain adequate and
sufficient records so that at all times it is possible to distinguish the
Accounts from any other credit card accounts owned or serviced by the Bank.
(f) UCC-1 Financing Statement. The Bank shall execute and
deliver to Funding for filing with the California Secretary of State a UCC-1
financing statement evidencing the sale of Receivables to Funding pursuant to
this Agreement.
2.8 Reports, Information and Materials.
(a) NextCard shall provide to the Bank periodic reports
(through Third Party Processors or otherwise) as the Bank may reasonably request
from time to time.
(b) NextCard shall furnish to the Bank all information
concerning the Accounts as may be required by law or necessary to enable to the
Bank to satisfy its obligations
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under this Agreement. NextCard will cooperate with the Bank in connection with
any regulatory examination or audit of the Program.
(c) NextCard shall not change the Credit Card Guidelines or
the Program Materials without the prior written consent of the Bank.
2.9 Expenses. NextCard agrees to reimburse the Bank for (a)
out-of-pocket expenses incurred in the maintenance of the Program, including, if
the Bank is not already a member of Visa, the costs associated with the Bank
becoming and maintaining a membership in Visa, (b) any taxes payable by the Bank
resulting from the sale of Receivables other than income taxes, (c) the funding
costs relating to the Receivables prior to their purchase pursuant to this
Agreement at the Federal Funds Rate or such other rate as may be agreed to by
NextCard and the Bank and (d) reasonable legal fees not to exceed $12,500 in
connection with this Amended and Restated Account Origination Agreement.
2.10 Origination Fees. NextCard shall pay to the Bank on a monthly
basis a one-time fee of [*] for each Account that is (a) booked on the system of
the Third Party Processor that books Accounts and (b) sold on NextCard's system
on or after January 1, 1999. Such payments shall be made no later than the
fifteenth day of each calendar month for all Accounts opened during the
preceding calendar month. If by September 30, 1999 NextCard has not paid the
Bank at least [*] pursuant to this Section 2.10, NextCard shall pay to the Bank
the difference between [*] and the actual amount paid by NextCard to the Bank
pursuant to this Section 2.10. This obligation will survive any earlier
termination of this Agreement pursuant to Section 6.2(d).
2.11 Visa Revenues. Any rebates, marketing fees, revenues or other
fees or discounts
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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that are paid or granted by Visa to the Bank with respect to the Accounts shall
be paid over to Funding upon receipt by the Bank on a daily basis as additional
consideration under this Agreement.
2.12 Nature of Arrangement. During the term of this Agreement
NextCard shall be the exclusive fee-for-origination credit card originator for
the Bank. NextCard may enter into other fee-for-origination agreements with
other financial institutions.
2.13 Minimum Account Allocation. If between the period from February
1, 1999 and September 30, 1999 NextCard enters into other fee-for-origination
agreements with other financial institutions, NextCard shall nonetheless ensure
that at least [*] of the Accounts originated on a monthly basis through a
NextCard program during such period are established by the Bank; provided,
however, that this Section 2.13 shall not be applicable to any Accounts
established by a wholly-owned subsidiary of NextCard. Furthermore, the Bank will
be the exclusive originator of NextCard accounts during the period from January
1, 1999 to and including January 31, 1999.
2.14 Clearing Accounts. The Bank shall maintain cash clearing
accounts necessary to settle amounts paid and received on the Accounts prior to
their posting on the system of the Third Party Processor. NextCard shall
reimburse the Bank for its reasonable costs relating to such cash clearing
accounts.
2.15 Marketing to Cardholders. NextCard may from time to time solicit
Cardholders for goods and services and place solicitation or promotional
materials in communications to Cardholders, and any income and fees resulting
from the foregoing solicitations and promotions shall be paid directly to
NextCard. The Bank shall not solicit Cardholders, other than any
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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Cardholder that was a customer of the Bank prior to the date of this Agreement
or a Cardholder that has a relationship with the Bank that develops or was
developed independently of the Program, for any purpose.
ARTICLE III
INTELLECTUAL PROPERTY
3.1 Trademarks.
(a) The Bank acknowledges that, as between NextCard and the
Bank, NextCard owns and will own the service marks "NextBank," "NextCard,"
"Credit Choice," and derivatives of the foregoing, and any other presently
existing or future trademarks, service marks, trade names, rights in packaging,
rights of publicity, merchandising rights, advertising rights, and similar
rights by which the Program is or becomes known or with which the Program is or
becomes associated, other than the mark "Heritage" and derivatives thereof
(collectively, the "NextCard Marks").
(b) The Bank acknowledges that, as between NextCard and the
Bank, NextCard owns all rights in the URL addresses used in conjunction with the
Program, including without limitation "nextcard.com," "NextBank.com," and
"creditchoice.com."
(c) NextCard acknowledges that, as between NextCard and the
Bank, the Bank owns the service mark "Heritage" and derivatives thereof
(collectively, the "Bank Marks").
(d) All goodwill that is or becomes associated with the
above-referenced marks as a result of the use of such marks in association with
the Program will accrue solely to the benefit of the respective owner of such
marks. After termination of this Agreement, any party may use its marks free of
any claim whatsoever of ownership or interest by the other party.
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(e) The Bank hereby licenses to NextCard during the term of
this Agreement the use of the "Heritage" mark solely in connection with the
performance of its marketing and other obligations hereunder. Specifically for
purposes of identifying the Visa card issuer, NextCard may use the "Heritage"
mark in any marketing or advertising materials relating to the Program. NextCard
will follow the Bank's instructions regarding the appearance, use and display of
such mark, subject to any requirements of Visa and any regulatory requirements.
(f) NextCard hereby licenses to the Bank during the term of
this Agreement the use of the Program Materials and the mark "NextCard" to
identify the Card and the Program. The Bank will follow NextCard's instructions
regarding the appearance, use, and display of such mark, subject to any
requirements of Visa and any regulatory requirements.
3.2 Copyright. NextCard will own all copyrights in all Program
Materials and derivative works thereof.
3.3 Ownership and Use of Information.
(a) Cardholder-Specific Information will be owned by
Heritage. Heritage hereby grants to NextCard a perpetual unrestricted license
(i) during the term of this Agreement, to use the Cardholder-Specific
Information for Program purposes, including but not limited to the servicing of
the Accounts, and (ii) following the termination of this Agreement, unless
NextCard purchases the Cardholder-Specific Information pursuant to Section
4.2(b) hereof, to use the Cardholder-Specific Information only for statistical
and analytic purposes.
(b) NextCard and Heritage will own jointly the Program
Information, and each party may use the Program Information for its own
purposes; provided, that each party will treat any Program Information in its
possession at any time as Confidential Information.
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(c) Heritage and NextCard (i) acknowledge that the Program
Information will be used by each of them to create certain analyses and
statistical models that may have predictive value beyond the Program, and (ii)
agree that such analyses and statistical models will be the sole and exclusive
property of the party creating such analyses and statistical models and will be
treated as Confidential Information. NextCard represents and warrants to
Heritage that no such analyses or statistical models will include information
that is identified with any specifically identifiable Cardholder.
3.4 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 any 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 (a) known to the receiving party at the
time of disclosure or developed independently by such party without violating
the terms herein; (b) in the public domain at the time of disclosure or enters
the public domain following disclosure through no fault of the receiving party;
or (c) disclosed to the receiving party by a third party that is not prohibited
by law or agreement from disclosing the same. In particular, the
Cardholder-Specific Information and the Program Information shall be deemed
Confidential Information owned by NextCard.
3.5 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
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and any agreement relating to the financing of the Receivables and except as may
be required by law or agreed upon in writing by the other party; provided,
however, that no party may disclose Confidential Information in violation of any
confidentiality or privacy guidelines or regulations imposed by federal or state
authorities. 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 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.
3.6 Survival. The terms of this Article 3 shall survive the
termination of this Agreement; provided, however, that upon the termination of
this Agreement each party will discontinue immediately the use of any trade or
service marks licensed from the other except to the extent necessary to satisfy
their respective obligations under Section 6.4 hereof following the termination
of this Agreement.
ARTICLE IV
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PURCHASE AND SALE OF RECEIVABLES AND ACCOUNTS
4.1 Purchase and Sale of Receivables.
(a) Funding hereby purchases from the Bank, and the Bank
hereby sells to Funding, all of the Receivables, whether now in existence or
hereafter arising, for the Purchase Price. The Receivables shall be transferred
to Funding on a daily basis or such other frequency as may be agreed to by the
Bank and Funding. On each day when Receivables are transferred to Funding
pursuant to this Agreement (the "Settlement Date"), the Bank shall notify
Funding of the Settlement Amount for such day as specified in paragraph (b)
below and shall pay to the Bank such Settlement Amount. After the Settlement
Date for any Receivables, the Bank shall have no further economic interest in
such Receivables. NextCard shall provide Funding and the Bank with a report
setting forth the calculation of the Settlement Amount on each Settlement Date.
(b) No later than 10:00 a.m., California time, on each
Settlement Date, the Bank shall notify Funding of the Settlement Amount due to
or owed by Funding or the Bank for such day. Payments due for any day shall be
made by the appropriate party by wire transfer no later than 1:00 p.m.,
California time, unless the Bank is late in providing notice of the Settlement
Amount due for any day, in which case the appropriate party shall use all
reasonable efforts to send the wire transfer as soon thereafter as possible.
(c) In the event that Funding has reason to dispute the
accuracy of the Settlement Amount reported by the Bank, Funding shall promptly
so notify the Bank. In the event it is determined that either party shall not
have remitted to the other party the proper Settlement Amount, such party shall
promptly remit to the other party any additional amount due
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the other party, together with interest at the Federal Funds Rate.
(d) Subject to Section 6.4 hereof, the Bank shall remain the
owner of all Accounts, notwithstanding any sale of any Receivables to Funding
under this Section 4.1. Funding shall not be deemed to have assumed any
obligations of the Bank with respect to the Accounts by virtue of any purchase
of Receivables hereunder.
(e) Subject to Section 6.4(b) hereof, the Bank shall not
sell any Receivables or any interest therein to any third party without the
prior written consent of Funding.
(f) The sale of Receivables contemplated herein shall occur
upon settlement therefor by or on behalf of Funding and no additional documents
shall 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) Subject to Section 6.4, the Bank shall not sell or
transfer any Account created under the Program, or any interest therein, to any
third party without the prior written consent of Funding.
(b) At any time or from time to time, Funding or its
assignee shall have the right, exercisable by providing written notice to the
Bank at least thirty (30) business days prior to the settlement date for such
purchase, to purchase all of the Accounts and the Cardholder-Specific
Information relating thereto then owned by the Bank or to arrange for said
purchase by another party. The purchase price for the Accounts shall be ten
cents per Account and the
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purchase price for the Cardholder-Specific Information shall be a total of $50.
4.3 Covenants of the Bank. Except as contemplated by this Agreement,
the Bank (a) shall not create or suffer to exist any lien, pledge, security
interest or other encumbrance on any of the Receivables or Accounts, (b) shall
not take any action, or fail to take any action, that could result in the Bank
no longer being the exclusive owner of the Accounts and Receivables, (c) shall
not take any action, or fail to take any action, that could prevent the Bank
from having the absolute right and authority to sell the Accounts and
Receivables and (d) unless the Bank shall have provided Funding with at least
thirty (30) days prior notice thereof and executed such financing statements and
other instruments as Funding reasonably deems necessary or desirable to maintain
a perfected interest in the Receivables, shall not move its principal place of
business and chief executive office outside the State of California.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of the Bank. The Bank hereby
represents and warrants to NextCard and Funding as follows:
(a) Organization. The Bank is a bank duly organized, validly
existing and in good standing under the laws of the State of California.
(b) Capacity; Authority; Validity. The Bank 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 the Bank of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of the Bank, and this Agreement has been duly executed and delivered by the Bank
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and constitutes the valid and binding obligation of the Bank 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; No Defaults. Neither the execution and
delivery of this Agreement by the Bank nor the consummation of the transactions
contemplated herein by the Bank will (i) conflict with, result in the breach of,
constitute a default under, or accelerate the terms of any contract, instrument
or commitment to which the Bank is a party or by which the Bank is bound, (ii)
violate the articles of incorporation or bylaws, or any other equivalent
organizational document, of the Bank, (iii) result in the creation of any lien,
charge or encumbrance upon any of the Accounts or the 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 the Bank is a
party or by which it is bound. The Bank is not subject to any agreement with any
regulatory authority that would prevent the consummation by the Bank of the
transactions contemplated by this Agreement.
(d) Litigation. There is no claim, litigation, proceeding,
arbitration, investigation or material controversy pending before any
governmental agency to which the Bank is a party that adversely affects the
ability of the Bank to consummate the transactions contemplated hereby, and, to
the best of the Bank's knowledge, no such claim, litigation, proceeding,
arbitration, investigation or controversy has been threatened or is
contemplated.
(e) No Consent, Etc. No consent of any person (including
without limitation, any stockholder or creditor of the Bank) and no consent,
license, permit or approval or
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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 NextCard) in connection with the execution
or delivery of this Agreement by the Bank, the validity of this Agreement with
respect to the Bank, the enforceability of this Agreement against the Bank, the
consummation by the Bank of the transactions contemplated hereby, or the
performance by the Bank of its obligations hereunder; provided, however, that
the Bank makes no representation as to whether any consent from Visa is
required.
(f) Memberships. The Bank is, and at all times during the
term hereof will remain, a member of the Federal Deposit Insurance Corporation
and the Visa system.
(g) Commercial Matters. (i) This Agreement was undertaken in
the ordinary course of business, not in contemplation of insolvency of the Bank,
and with no intent to hinder, delay, or defraud the Bank or its creditors; (ii)
this Agreement represents a bona fide and arm's length transaction; (iii)
Funding is not an insider or affiliate of the Bank; (iv) this Agreement was
entered into in return for adequate consideration; (v) this Agreement was
entered into before the first transfer of Receivables will be effected pursuant
to this Agreement; and (vi) the Bank's principal place of business and chief
executive office is located in the State of California.
5.2 Representations and Warranties of NextCard. NextCard hereby
represents and warrants to the Bank and Funding as follows:
(a) Organization. NextCard is a corporation duly organized,
validly existing and in good standing under the laws of the State of California.
(b) Capacity; Authority; Validity. NextCard has all
necessary corporate power and authority to enter into this Agreement and to
perform all of the obligations to be
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performed by it under this Agreement. This Agreement and the consummation by
NextCard of the transactions contemplated hereby have been duly and validly
authorized by all necessary action on the part of NextCard, and this Agreement
has been duly executed and delivered by NextCard and constitutes the valid and
binding obligation of NextCard 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; No Defaults. Neither the execution and
delivery of this Agreement by NextCard nor the consummation of the transactions
contemplated herein by NextCard will (i) conflict with, result in the breach of,
constitute a default under, or accelerate the performance of the terms of any
contract, instrument or commitment to which NextCard is a party or by which it
is bound, (ii) violate the articles of incorporation or bylaws of NextCard or
(iii) require the consent or approval of any other party to any contract,
instrument or commitment to which NextCard is a party or by which it is bound.
NextCard is not subject to any agreement with any regulatory authority that
would prevent the consummation by NextCard of the transactions contemplated by
this Agreement.
(d) Litigation. There is no claim, litigation, proceeding,
arbitration, investigation or material controversy pending before any
governmental authority to which NextCard is a party that adversely affects
NextCard's ability to consummate the transactions contemplated hereby and, to
the best of NextCard's knowledge, no such claim, litigation, proceeding,
arbitration, investigation or controversy has been threatened or is
contemplated.
(e) No Consent, Etc. No consent of any person or entity
(including without
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limitation, Visa and any stockholder or creditor of NextCard) 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 in connection with the execution or delivery of this Agreement by
NextCard, the validity or enforceability of this Agreement against NextCard, the
consummation of the transactions contemplated thereby, or the performance by
NextCard of its obligations hereunder.
(f) Compliance. All terms of the Accounts and the Cardholder
Agreements and all Program Materials comply in all material respects with
applicable law and regulations.
(g) Commercial Matters. (i) This Agreement was undertaken in
the ordinary course of business, not in contemplation of insolvency of the Bank,
and with no intent to hinder, delay, or defraud the Bank or its creditors; (ii)
this Agreement represents a bona fide and arm's length transaction; (iii) this
Agreement was entered into in return for adequate consideration; and (iv) this
Agreement was entered into before the first transfer of Receivables will be
effected pursuant to this Agreement.
5.3 Representations and Warranties of Funding. Funding hereby
represents and warrants to the Bank and NextCard as follows:
(a) Organization. Funding is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
(b) Capacity; Authority; Validity. Funding 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 Funding of the transactions contemplated hereby have been
duly and validly authorized by all necessary action
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on the part of Funding, and this Agreement has been duly executed and delivered
by Funding and constitutes the valid and binding obligation of Funding 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; No Defaults. Neither the execution and
delivery of this Agreement by Funding nor the consummation of the transactions
contemplated herein by Funding will (i) conflict with, result in the breach of,
constitute a default under, or accelerate the performance of the terms of any
contract, instrument or commitment to which Funding is a party or by which it is
bound, (ii) violate the articles of incorporation or bylaws of Funding or (iii)
require the consent or approval of any other party to any contract, instrument
or commitment to which Funding is a party or by which it is bound. Funding is
not subject to any agreement with any regulatory authority that would prevent
the consummation by Funding of the transactions contemplated by this Agreement.
(d) Litigation. There is no claim, litigation, proceeding,
arbitration, investigation or controversy pending before any governmental
authority to which Funding is a party that adversely affects Funding's ability
to consummate the transactions contemplated hereby and, to the best of Funding's
knowledge, no such claim, litigation, proceeding, arbitration, investigation or
controversy has been threatened or is contemplated.
(e) No Consent, Etc. No consent of any person (including
without limitation, any stockholder or creditor of Funding) 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 in connection with the execution or delivery of this
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Agreement by Funding, the validity or enforceability of this Agreement against
Funding, the consummation of the transactions contemplated thereby, or the
performance by Funding of its obligations hereunder.
(f) Ability to Finance Purchases. Funding shall at all times
maintain a credit facility sufficient to finance its obligation to purchase
Receivables hereunder.
(g) Commercial Matters. (i) This Agreement was undertaken in
the ordinary course of business, not in contemplation of insolvency of the Bank,
and with no intent to hinder, delay, or defraud the Bank or its creditors; (ii)
this Agreement represents a bona fide and arm's length transaction; (iii)
Funding is not an insider or affiliate of the Bank; (iv) this Agreement was
entered into in return for adequate consideration; and (v) this Agreement was
entered into before the first transfer of Receivables will be effected pursuant
to this Agreement.
(h) Manner of Foreclosure. Funding will not attempt to
foreclose on the Receivables or the proceeds thereof after the appointment of
the Federal Deposit Insurance Corporation (the "FDIC") as conservator or
receiver for the Bank (i) in a manner that is not commercially reasonable, (ii)
in a manner that requires the involvement of the FDIC, (iii) in a manner that
requires judicial action, (iv) without the existence of an event of default
other than the appointment of a conservator or receiver for the Bank or the
insolvency of the Bank, or (v) in a manner that does not comply with any
applicable law (not including the receivership and conservatorship provisions of
the Federal Deposit Insurance Act, as amended).
ARTICLE VI
TERM AND TERMINATION
6.1 Term. This Agreement shall commence on the date first above
written and, unless
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<PAGE> 23
otherwise terminated as provided in Section 6.2 herein, shall continue in full
force and effect until December 31, 1999 (the "Initial Term"), provided,
however, that the Bank's obligation to establish new Accounts and the related
obligation of NextCard to solicit new Accounts shall terminate on September 30,
1999. After the Initial Term, subject to Section 6.4, this Agreement may be
extended at the written request of Funding for one month periods until December
31, 2001 upon the payment by Funding of an extension fee equal to [*] per month
(the "Extension Fee"). The Extension Fee for each month shall be payable upon
the first day of such month. In addition, Funding shall pay the Bank a fee of
[*] per month for each calendar month this Agreement is in effect during the
period from October 1, 1999 through and including December 31, 1999. The
termination of this Agreement shall not terminate, affect or impair any rights,
obligations or liabilities of any party hereto that may accrue prior to such
termination or that, under the terms of this Agreement, continue after the
termination or otherwise affect the rights and obligations of the parties
hereunder except as provided in this Article VI.
6.2 Termination. Subject to Section 6.4, any party to this Agreement
may terminate this Agreement, reserving all other remedies and rights hereunder
in whole or in part, under the following conditions:
(a) Event of Default. Subject to Section 6.4, upon the
occurrence of an Event of Default, a nondefaulting party may terminate this
Agreement by giving fifteen (15) days' 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 any 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 thirty (30) day cure period
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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<PAGE> 24
commencing upon receipt of notice from the other party.
(b) Bankruptcy. Subject to Section 6.4, any party may
terminate this Agreement, at any time upon notice to the other parties, after
the filing by any 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 any other party's making of an assignment of its
assets for the benefit of creditors, or upon the application of any other party
for the appointment of a receiver or trustee of its assets.
(c) Changes in Laws or Regulations. This Agreement may be
terminated by any party on or after the ninetieth (90th) day following the
giving of notice by such party that such party's performance is rendered
(through no act or omission of such party) illegal or impermissible for that
party due to changes in laws or regulations applicable to the terminating party
or a determination by a governmental authority having jurisdiction over such
party.
(d) Accounts Purchased. This Agreement may be terminated
immediately upon the purchase by NextCard, Funding or any assignee of all the
Accounts pursuant to Article IV.
6.3 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 Accounts. The Bank shall transfer to NextCard or any successor or
assignee all books and records relating to the Accounts and Receivables in its
possession, subject to any regulatory obligations relating to retaining
duplicate books and records, and each party shall return all property belonging
to the other party that is in its possession or control at the time of
termination and shall discontinue the use of and
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<PAGE> 25
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. In
connection with any termination of this Agreement, the Bank agrees to make
reasonable efforts to assist Funding in the orderly transition of the Accounts
and Receivables acquired by Funding, including sending to Funding any payments
on Accounts that may be received by the Bank after the purchase date.
6.4 Right to Purchase Accounts and Receivables Continues; Duties
Upon Termination.
(a) NextCard, Funding and their assignees shall have the
exclusive right to purchase all Accounts, Cardholder-Specific Information and
Receivables pursuant to Article IV hereof for a period of one year from the
termination of this Agreement, but not later than December 31, 2001 (the
"Exercise Period").
(b) During the Exercise Period, subject to the next
sentence, the Bank will fund, and Funding or its assignees will purchase,
additional Receivables generated under Accounts originated prior to the Exercise
Period in compliance with the terms of this Agreement. If (i) the Extension Fee
is not paid when due, (ii) Funding or its assignees fails to purchase
Receivables on any day or (iii) the Bank reasonably believes that Funding or its
assignees will not have the ability to purchase any Receivables, then the Bank
may, subject to compliance with applicable law, (1) cease originating additional
Receivables under existing Accounts; (2) reduce outstanding credit limits under
the Accounts to the then current balance of the Receivables; (3) close Accounts
with zero balances; and/or (4) sell the Accounts, together with the related
Receivables. In the event the Bank exercises its rights under clause (4) above,
NextCard and Funding shall cooperate in effecting all such sales. Except as
otherwise provided in this Section
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<PAGE> 26
6.4(b), the obligations of NextCard, Funding and the Bank, as the case may be,
under the second sentence of Section 2.3, Article IV, Section 6.3, this Section
6.4, Article VII and any other provisions of this Agreement that by its terms
extends beyond the termination of this Agreement shall remain in full force and
effect following the termination of this Agreement.
ARTICLE VII
INDEMNIFICATION
7.1 NextCard Indemnification. Except to the extent of any Losses
that arise from the willful misconduct or gross negligence of the Bank or its
directors, officers, employees, agents or affiliates, NextCard shall indemnify
and hold harmless the Bank and its respective directors, officers, employees and
agents from and against any and all Losses resulting from (a) any failure of
NextCard to comply with any of the terms and conditions of this Agreement, (b)
any inaccuracy of a representation or warranty made by NextCard herein, (c) any
infringement or alleged infringement of any of the NextCard Marks, or the use
thereof hereunder, on the rights of any third party, (d) any failure of NextCard
to comply, in respect of its obligations in connection with the Program
hereunder, with any applicable laws or regulations, including without limitation
any consumer lending law or regulation, or (e) any failure of any Program
Materials to comply with any applicable laws, including without limitation any
consumer lending law or regulation.
7.2 Bank Indemnification. Except to the extent of any Losses that
arise from the acts or omissions of NextCard, Funding or their directors,
officers, employees, agents or affiliates, the Bank shall indemnify and hold
harmless NextCard, Funding and their respective directors, officers, employees,
agents and assigns from and against any and all Losses resulting from
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<PAGE> 27
(a) any failure of the Bank to comply with any of the terms and conditions of
this Agreement, (b) the inaccuracy of any representation or warranty made by the
Bank herein, (c) any infringement or alleged infringement of any of the Bank
Credit Card Marks, or the use thereof hereunder, on the rights of any third
party, or (d) any failure of the Bank to comply, in respect of its obligations
in connection with the Program hereunder, with any applicable laws or
regulations.
7.3 Definition of Losses. 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, outside attorneys' fees and disbursements and court costs reasonably
incurred by the Indemnified Party.
7.4 Procedures for Indemnification.
(a) Notice of Claims. In the event any claim is made or any
suit or action is commenced as to which a party (the "Indemnified Party")
intends to seek indemnification, the Indemnified Party shall give notice to the
party from whom indemnification is sought (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 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
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<PAGE> 28
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, within ten (10) days of having been notified pursuant to Section
7.4(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 expense.
(c) Settlement of Claims. The Indemnifying Party shall have
the right to compromise and settle any suit, claim or proceeding in the name of
the Indemnified Party. 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 7.4.
(d) Indemnification Payments. Amounts owing under Section
7.4 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.
7.5 Survival. The terms of this Article VII shall survive the
termination of this
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<PAGE> 29
Agreement for a period of five years.
ARTICLE VIII
MISCELLANEOUS
8.1 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California without regard to its
conflict of laws rules.
8.2 Press Releases. No party hereto shall issue a press release or
make a public announcement or any disclosure to any third party related to the
terms of this Agreement without the prior consent of the other parties hereto
unless any such release, announcement or disclosure is required by any
applicable law or regulatory authority.
8.3 Relationship of the Parties. The Bank, Funding and NextCard
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 ventures or any association for profit among
the Bank, Funding and NextCard.
8.4 Force Majeure. In the event that any 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 other
party if it is unable to perform due to a force majeure event, the expected
29
<PAGE> 30
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.
8.5 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 any 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.
8.6 Notices. All notices, requests and approvals required by this
Agreement shall be in writing and shall be deemed to have been given upon
delivery thereof at the addresses of the parties as follows, or such other
address as any party may specify in writing:
To Bank: 150 Almaden Blvd.
San Jose, CA 95113
Attn: Kenneth B. Silveira, Executive Vice President
To NextCard: 595 Market Street, Suite 950
San Francisco, CA 94105
Attn: John Hashman, Chief Financial Officer
With a copy to Robert Linderman, Esq., General Counsel
To Funding: 595 Market Street, Suite 2250
San Francisco, CA 94105
Attn: John Hashman, Chief Financial Officer
With a copy to Robert Linderman, Esq., General Counsel
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<PAGE> 31
8.7 Modification and Changes. This Agreement constitutes the entire
agreement among the parties relating to the subject matter herein. This
Agreement may only be amended by a written document signed by all parties.
8.8 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 any party
except with the written consent of each other party hereto.
8.9 Waivers. None 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.
8.10 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.
8.11 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.
8.12 Integration. This Agreement states the entire agreement between
the parties with respect to the subject matter hereof, and all prior or
contemporaneous written or oral agreements and understandings other than the
Initial Agreement are merged herein and superseded hereby. The parties
acknowledge that the Initial Agreement remains in full force and effect.
8.13 No Set-Off. The Bank agrees not to set off the obligations of
NextCard under the
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<PAGE> 32
Initial Agreement against any payments required to be made to NextCard or
Funding under this Agreement.
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<PAGE> 33
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
HERITAGE BANK OF COMMERCE NEXTCARD, INC.
By: /s/ Kenneth B. Silveira By: /s/ John V. Hashman
------------------------------- -------------------------------------
Name: Kenneth B. Silveira Name: John V. Hashman
Title: Senior Vice President Title: Chief Financial Officer
NEXTCARD FUNDING CORP.
By: /s/ John V. Hashman
-------------------------------
Name: John V. Hashman
Title: Chief Financial Officer
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<PAGE> 34
EXHIBIT A - CREDIT CARD GUIDELINES
UNDERWRITING APPROVALS FOR ELIGIBLE RECEIVABLES
1. Application Information Decline Criteria
a) Certain information must be completed to form a valid
application. NextCard will not accept an application that is not
considered valid. The information required from the applicant
includes items such as the following:
- Applicant's first and last name;
- Home address;
- Social security number;
- Date of birth; and
- [*]
b) Once NextCard receives a valid application, we will review the
data and may decline an applicant if they do not meet the
following requirements (pre-bureau criteria):
- Applicant [*]; or
- Applicant [*]
c) Excessive applications or accounts per customer and/or household
policy.
- NextCard will decline an applicant if they exceed the
number of allowable accounts per customer and/or
household (currently one account per customer).
- NextCard may decline an applicant if they have [*].
- NextCard may decline an applicant if they have [*].
2. Credit Bureau Authentication Review
- NextCard requires a certain level of authentication of
the bureau files. If this requirement is not met, the
applicant will be declined. Currently, NextCard requires
a minimum of [*] bureau matches for an application to
- -----------------------------
[*]
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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<PAGE> 35
be considered authentic.
- Further, if NextCard receives certain alert messages
regarding the validity of the bureau file, based on the
message received, NextCard will [*]
3. Credit Bureau Underwriting Criteria
NextCard approves/declines applicants based upon a combination of their
[*], their [*] and, in certain cases,
[*]
Each of these components is discussed below.
a) [*]
[*]
[*]
[*]
b) [*]
[*]
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
A-35
<PAGE> 36
[*]
c) [*]
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
A-36
<PAGE> 1
EXECUTION VERSION EXHIBIT 10.5
AMENDMENT NO. 1 TO
AMENDED AND RESTATED ACCOUNT ORIGINATION AGREEMENT
This AMENDMENT NO. 1 TO AMENDED AND RESTATED ACCOUNT ORIGINATION
AGREEMENT ("Amendment") is made as of this 15th day of July, 1999, by and among
NEXTCARD, INC., a Delaware corporation ("NextCard"), NEXTCARD FUNDING CORP., a
Delaware corporation ("Funding"), and HERITAGE BANK OF COMMERCE, a California
state-chartered bank (the "Bank").
W I T N E S S E T H:
WHEREAS, NextCard, Funding and the Bank are parties to that certain
Amended and Restated Account Origination Agreement dated as of May 21, 1999 (the
"Agreement") and desire to amend the Agreement as specified herein; and
WHEREAS, NextCard and the Bank are parties to that certain Consumer
Credit Card Program Agreement dated November 25, 1997 (the "Initial Agreement")
and desire to make the receivables and accounts originated under the Initial
Agreement subject to the Agreement;
WHEREAS, NextCard has previously paid to the Bank [*] for the option to
purchase receivables and accounts originated under the Initial Agreement;
WHEREAS, the Bank is a licensed member of Visa, U.S.A., Inc. ("Visa")
and authorized to issue credit cards; and
WHEREAS, each of Barclays Bank PLC and ING Baring (U.S.) Capital Markets
LLC have consented to this Amendment.
NOW, THEREFORE, in consideration of the premises and mutual covenants
included in
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
<PAGE> 2
this Amendment and for other goods and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, NextCard, Funding and the Bank
agree as follows:
SECTION 1. DEFINITIONS
a. The following definitions in the Agreement are amended and
replaced, to read in their entirety as follows:
"ACCOUNT" means an open-end, revolving Visa account opened by the Bank
pursuant to the Program, pursuant to which one or more Credit Cards are issued
to a Cardholder, including any and all rights, remedies, benefits, interests and
entitlements with respect thereto.
"EXTENSION FEE" has the meaning specified in Section 6.4(a).
"PROGRAM" means the credit card program conducted pursuant to the terms
of this Agreement and specifically includes the program conducted pursuant to
the Initial Agreement.
"PURCHASE PRICE" means, as of any day with respect to any Receivables
other than those purchased on the effective date of the Amendment, (a) the sum
of [*] minus (b) any credits and payments to the related Accounts.
b. The definition of "INITIAL TERM" is hereby deleted.
SECTION 2. PURCHASE OF INITIAL AGREEMENT RECEIVABLES
a. Purchase of Outstanding Balance. On the date hereof, Funding
shall purchase from the Bank and the Bank shall sell to Funding all of the
Receivables outstanding as of the preceding Business Day relating to the
Accounts originated under the Initial Agreement, including the right to
recoveries on charged-off Accounts, for a purchase price equal to [*]
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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<PAGE> 3
of the outstanding principal amount thereof, other than any amounts relating to
charged-off Accounts.
b. Subsequent Purchases. After the date hereof, Funding shall
purchase from the Bank and the Bank shall sell to Funding Receivables arising
under the Accounts originated under the Initial Agreement on the terms specified
in the Agreement.
c. Amendment to UCC Financing Statement. The Bank shall execute and
deliver to Funding for filing with the California Secretary of State an
amendment to the UCC-1 financing statement filed in connection with the
execution of the Agreement reflecting the terms of this Amendment.
SECTION 3. NATURE OF ARRANGEMENT
Section 2.12 of the Agreement is amended, to read in its entirety as
follows:
2.12 Nature of Arrangement. During the term of this Agreement
NextCard shall be the exclusive fee-for-origination credit card originator for
the Bank. During the term of this Agreement, NextCard may not enter into other
fee for origination agreements with other financial institutions other than
NextBank, N.A., unless (a) the Bank has notified NextCard pursuant to Section
6.2(e) that it intends to terminate this Agreement or (b) the Bank does not
agree to amend the Credit Card Guidelines as requested by NextCard, in which
case NextCard may enter into origination agreements with any other financial
institutions to originate accounts upon the terms specified in the proposed
amended Credit Card Guidelines that have been rejected by the Bank.
SECTION 4. MINIMUM ACCOUNT ALLOCATION
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<PAGE> 4
Section 2.13 of the Agreement is amended, to read in its entirety as
follows:
2.13 Minimum Account Allocation.
(a) Subject to paragraph (b) below, if between the period from
February 1, 1999 and October 31, 1999 NextCard enters into any origination
agreement with NextBank, N.A., NextCard shall nonetheless ensure that at least
[*] of the Accounts originated on a monthly basis through a NextCard program
during such period are established by the Bank. Subject to paragraphs (b) and
(c) below, for the period from November 1, 1999 through November 30, 1999,
NextCard shall ensure that at least [*] of the Accounts originated on a monthly
basis through a NextCard program during such period are established by the Bank,
and for the period from December 1, 1999 through the termination of this
Agreement, NextCard shall ensure that at least [*] of the Accounts originated on
a monthly basis through a NextCard program during such period are established by
the Bank.
(b) NextCard shall not be required to comply with the provisions of
Section 2.13(a) with respect to the minimum percentage of Accounts to be
originated by the Bank during the last calendar quarter of 1999 if NextCard has
paid to the Bank, either in cash or as origination fee compensation pursuant to
Section 2.10 of the Agreement, or any combination thereof, an aggregate of [*]
at any time during such last calendar quarter of 1999.
(c) The provisions of Section 2.13(a) with respect to the minimum
percentage of Accounts to be originated by the Bank shall not apply to accounts
originated by any financial institution other than NextBank, N.A., if such
financial
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
4
<PAGE> 5
institution originates accounts in accordance with the terms of any amendments
to the Credit Card Guidelines that have been rejected by the Bank as
contemplated by Section 2.12.
SECTION 5. TIMING OF RECEIVABLES PURCHASES
Pursuant to Section 4.1(a), Funding and the Bank agree that the
Receivables shall be transferred to Funding on the fifth Business Day following
origination by the Bank or on such other mutually agreeable time as may be
agreed to by Funding and the Bank.
SECTION 6. SALE OF ACCOUNTS AND OTHER ASSETS
Section 4.2(b) of the Agreement is amended, to read in its entirety as
follows:
(b) Subject to Section 6.4, at any time or from time to time,
Funding or its assignee shall have the right, exercisable by providing written
notice to the Bank at least thirty (30) business days prior to the settlement
date for such purchase, to purchase all of the Accounts, the Cardholder-Specific
Information relating thereto and the Program Information then owned by the Bank
or to arrange for said purchase by another party. The purchase price for the
Accounts shall be ten cents per Account and the purchase price for the
Cardholder-Specific Information and the Program Information shall be a total of
$50.
SECTION 7. CHANGE IN TERM
Section 6.1 of the Agreement is amended, to read in its entirety as
follows:
6.1 Term. This Agreement shall commence on the date first above
written and shall continue until terminated as provided in Section 6.2 herein.
The termination of this
5
<PAGE> 6
Agreement shall not terminate, affect or impair any rights, obligations or
liabilities of any party hereto that may accrue prior to such termination or
that, under the terms of this Agreement, continue after the termination or
otherwise affect the rights and obligations of the parties hereunder except as
provided in this Article VI.
SECTION 8. TERMINATION EVENTS
The following paragraphs (e), (f) and (g) shall be added to the end of
Section 6.2:
(e) Notice by the Bank. This Agreement may be terminated by the Bank
upon six months prior written notice to NextCard and Funding, provided that such
notice is delivered after September 30, 1999.
(f) Notice by NextCard or Funding. This Agreement may be terminated
by NextCard or Funding upon thirty days prior written notice to the Bank;
provided, however, that neither NextCard nor Funding may terminate this
Agreement prior to December 31, 1999 unless NextCard has paid to the Bank,
either in cash or as origination fee compensation pursuant to Section 2.10 of
the Agreement, or any combination thereof, an aggregate of [*] at any time
during the last calendar quarter of 1999.
(g) Purchase of Accounts. If this Agreement is terminated pursuant
to paragraph (e) or (f) above, Funding or its assignee shall purchase all of the
Accounts from the Bank pursuant to Section 4.2(b) within thirty days of such
termination, and any termination notice shall be deemed to constitute the notice
required under Section 4.2(b). This paragraph (g) shall survive the termination
of this Agreement.
SECTION 9. CHANGE TO EXERCISE PERIOD
Section 6.4(a) of the Agreement is amended, to read in its entirety as
follows:
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
6
<PAGE> 7
(a) NextCard, Funding and their assignees shall have the exclusive
right to purchase all Accounts, Cardholder-Specific Information and Receivables
pursuant to Article IV hereof for a period of one year from the termination of
this Agreement pursuant to Sections 6.1(a), (b) or (c), but not later than
December 31, 2001 (the "Exercise Period"). During the Exercise Period, Funding
shall pay the Bank a fee of [*] per month (the "Extension Fee") for each
calendar month that the Bank continues to fund Receivables pursuant to Section
6.4(b). The Extension Fee shall be payable on the first day of each such month,
and shall be pro-rated for any partial months.
SECTION 10. MISCELLANEOUS
a. Governing Law. This Amendment shall be governed by and construed
in accordance with the laws of the State of California without regard to its
conflict of laws rules.
b. Effect of Amendment; Agreement Continues in Effect. On and after
the date hereof, all references to the Agreement shall mean the Agreement as
amended hereby. Except as specifically amended hereby, the Agreement remains in
full force and effect.
c. Legal Fees. NextCard agrees to reimburse the Bank for reasonable
legal fees not to exceed $15,000 incurred in connection with this Amendment.
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date set forth above.
HERITAGE BANK OF COMMERCE NEXTCARD, INC.
By: /s/ Kenneth B. Silveira By: /s/ John V. Hashman
------------------------------- -------------------------------------
Name: Kenneth B. Silveira Name: John V. Hashman
Title: Executive Vice President Title: Chief Financial Officer
NEXTCARD FUNDING CORP.
By: /s/ John V. Hashman
-------------------------------
Name: John V. Hashman
Title: Chief Financial Officer
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EXHIBIT 10.6
[Execution Copy]
================================================================================
CERTIFICATE PURCHASE AGREEMENT
Dated as of May 21, 1999
among
NEXTCARD FUNDING CORP.,
as the Transferor,
NEXTCARD, INC.,
as the Servicer,
SHEFFIELD RECEIVABLES CORPORATION,
as the Purchaser,
and
BARCLAYS BANK PLC,
as the Agent
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TABLE OF CONTENTS
<TABLE>
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Section Page
ARTICLE I
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DEFINITIONS............................................ 1
SECTION 1.01. Terms Defined in the Supplement and the Pooling and Servicing
Agreement; Certain Defined Terms.........................................1
SECTION 1.02. Accounting Terms; Other Terms.............................................11
SECTION 1.03. Other Rules of Construction...............................................11
SECTION 1.04. Computation of Time Periods...............................................11
ARTICLE II
PURCHASE AND SALE; PURCHASE COMMITMENT...............................12
SECTION 2.01. Purchase and Sale of the Certificates.....................................12
SECTION 2.02. Purchase Price............................................................12
SECTION 2.03. Increases and Decreases in the Invested Amount............................12
SECTION 2.04. Commitment Fee............................................................13
SECTION 2.05. Termination or Reduction of the Purchase Commitment.......................13
SECTION 2.06. Calculation and Payment of Monthly Interest and Fees; Selection
of Commercial Paper Note Maturities.....................................13
SECTION 2.07. Increased Costs...........................................................14
SECTION 2.08. Increased Capital.........................................................16
SECTION 2.09. Taxes.....................................................................17
ARTICLE III
CLOSING.............................................21
SECTION 3.01. Closing...................................................................21
SECTION 3.02. Transactions to be Effected at the Closing................................21
ARTICLE IV
PURCHASER CONDITIONS PRECEDENT.................................21
SECTION 4.01. Conditions Precedent to the Purchase of the Certificates..................21
SECTION 4.02. Conditions Precedent to Invested Amount Increases.........................23
ARTICLE V
TRANSFEROR CONDITIONS PRECEDENT.................................24
SECTION 5.01. Conditions Precedent to the Sale of the Certificates......................24
</TABLE>
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<TABLE>
Section Page
ARTICLE VI
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REPRESENTATIONS AND WARRANTIES.................................25
SECTION 6.01. Corporate Existence.......................................................25
SECTION 6.02. Corporate Authority.......................................................25
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<TABLE>
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Section Page
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SECTION 6.03. No Consents Required......................................................26
SECTION 6.04. No Violation..............................................................26
SECTION 6.05. Financial Statements......................................................26
SECTION 6.06. No Proceeding.............................................................27
SECTION 6.07. Trust Indenture Act; Investment Company Act...............................27
SECTION 6.08. No Pay Out Event or Other Default.........................................27
SECTION 6.09. The Certificates..........................................................27
SECTION 6.10. Absence of Material Adverse Change........................................28
SECTION 6.11. Taxes, Etc................................................................28
SECTION 6.12. Disclosure................................................................28
SECTION 6.13. Year 2000 Plan............................................................28
SECTION 6.14. FICO Scores...............................................................29
SECTION 6.15. Location of Offices.......................................................29
SECTION 6.16. Pooling and Servicing Representations and
Warranties....................................................29
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER AND THE AGENT.................................29
SECTION 7.01. Organization..............................................................29
SECTION 7.02. Authority.................................................................29
SECTION 7.03. Securities Act............................................................30
SECTION 7.04. Investment Company Act....................................................30
ARTICLE VIII
COVENANTS OF THE TRANSFEROR....................................31
SECTION 8.01. Access to Information.....................................................31
SECTION 8.02. Reporting Requirements of the Transferor..................................31
SECTION 8.03. Optional Repurchase.......................................................32
SECTION 8.04. Termination of the Loan Agreement.........................................32
SECTION 8.05. Location of Chief Executive Office........................................33
ARTICLE IX
[RESERVED].............................................33
ARTICLE X
INDEMNIFICATION...........................................33
SECTION 10.01. Indemnification by the Transferor and the Servicer.......................33
SECTION 10.02. Costs and Expenses.......................................................34
ARTICLE XI
THE AGENT............................................35
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<TABLE>
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Section Page
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SECTION 11.01. Authorization and Action.................................................35
SECTION 11.02. Agent's Reliance, Etc....................................................35
SECTION 11.03. Agent and Affiliates.....................................................36
SECTION 11.04. Purchase Decision........................................................36
SECTION 11.05. Indemnification..........................................................37
SECTION 11.06. Successor Agent..........................................................37
ARTICLE XII
MISCELLANEOUS.........................................38
SECTION 12.01. Amendments, Etc..........................................................38
SECTION 12.02. Notices, Etc.............................................................38
SECTION 12.03. No Waiver; Remedies......................................................39
SECTION 12.04. Binding Effect; Assignability............................................40
SECTION 12.05. Certificates as Evidence of Indebtedness.................................42
SECTION 12.06. Governing Law............................................................42
SECTION 12.07. No Proceedings...........................................................42
SECTION 12.08. Execution in Counterparts................................................43
SECTION 12.09. No Recourse..............................................................43
SECTION 12.10. Confidentiality..........................................................44
</TABLE>
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CERTIFICATE PURCHASE AGREEMENT dated as of May 21, 1999, among NEXTCARD
FUNDING CORP., a Delaware corporation, as the Transferor, NEXTCARD, INC., a
Delaware corporation ("NextCard"), as the Servicer, SHEFFIELD RECEIVABLES
CORPORATION, a Delaware corporation (the "Purchaser") and BARCLAYS BANK PLC
("Barclays"), as agent (in such capacity, the "Agent") for the Purchaser and the
other "Owners" (as defined below).
In consideration of the representations, warranties and agreements herein
contained, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Terms Defined in the Supplement and the Pooling and Servicing
Agreement; Certain Defined Terms. Unless otherwise defined herein, terms defined
in the Supplement (as defined below) or the Pooling and Servicing Agreement (as
defined below) are used herein with the meanings ascribed to them therein. In
addition, as used herein, the following terms shall have the following meanings:
"Act" shall mean the Securities Act of 1933.
"Additional Amounts" shall mean, for each Interest Period, an amount equal
to the sum of (a) the aggregate amount payable to all Affected Parties pursuant
to Sections 2.07, 2.08 and 2.09 in respect of such Interest Period and (b) the
aggregate of such amounts with respect to prior Interest Periods which remain
unpaid.
"Affected Party" shall mean the Purchaser, the Agent, each Liquidity
Provider, any permitted assignee of the Purchaser or any Liquidity Provider, any
Enhancement Provider and any assignee of any Enhancement Provider or Barclays.
"Agreement" shall mean this agreement and any supplements, amendments,
exhibits and schedules hereto.
"Alternative Rate" shall mean, with respect to any Interest Period (or
portion thereof), an interest rate per annum
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equal to the Eurodollar Rate (Reserve Adjusted); provided, however, that:
(a) if the Required Owners shall notify the Agent prior to the related
rate determination date that a Eurodollar Rate Disruption Event has
occurred and is continuing, then the "Alternative Rate" for such Interest
Period (or portion thereof) shall be an interest rate per annum equal to
the Alternate Base Rate in effect from time to time during such Interest
Period (or portion thereof) unless the Agent and the Transferor agree in
writing to a different rate;
(b) if any Owner shall have notified the Agent on or before the
applicable rate determination date that the Eurodollar Rate for any
Interest Period (or portion thereof) does not accurately reflect the cost
to such Owners of funding their respective investments in the Certificates
for such Interest Period (or portion thereof), then the "Alternative Rate"
with respect to such Owner's share of the outstanding principal balance of
the Certificates for such Interest Period (or portion thereof) shall be an
interest rate per annum equal to the Alternate Base Rate in effect from
time to time during such Interest Period (or portion thereof) unless the
Agent and the Transferor agree in writing to a different rate;
(c) if for any reason the Alternative Rate becomes applicable on
notice to the Agent of less than three Business Days (determined giving
effect to clause (b) of the definition of "Business Day"), the "Alternative
Rate" shall be the Alternate Base Rate in effect from time to time during
the period prior to the satisfaction of such three Business Days' notice
requirement (determined giving effect to clause (b) of the definition of
"Business Day"); and
(d) notwithstanding anything to the contrary in clauses (a) through
(c) above, at all times following the occurrence of a Pay Out Event the
"Alternative Rate" for any Interest Period shall be a rate per annum equal
to the Alternate Base Rate in effect from time to time during such Interest
Period, unless the Agent and the Transferor agree in writing to a different
rate.
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"Alternate Base Rate" shall mean, on any date, a fluctuating rate of
interest per annum equal to the highest of:
(a) the rate of interest most recently announced by Barclays at its
branch office in New York, New York as its prime or reference rate; and
(b) the Federal Funds Rate plus 0.50%.
The Alternate Base Rate is not necessarily intended to be the lowest rate of
interest determined by Barclays in connection with extensions of credit.
"Barclays" shall have the meaning specified in the preamble hereto.
"Breakage Costs" means, for each Owner for each funding period, to the
extent that an Owner is funding the maintenance of its investment in the
Invested Amount during such funding period through the issuance of Commercial
Paper Notes or at the Eurodollar Rate (Reserve Adjusted), during which the
amount of such investment is reduced (in whole or in part) prior to the end of
the period for which it was originally scheduled to remain outstanding, whether
as a result of the commencement of a Limited Amortization Period or otherwise
(the amount of such reduced investment being referred to as the "Allocated
Amount"), the excess of (a) the discount or interest that would have accrued on
the Allocated Amount during the remainder of such funding period if such
reduction had not occurred over (b) the income scheduled to be received by such
Owner from investing the Allocated Amount for the remainder of such funding
period, it being understood that in investing such Allocated Amount such Owner
will, but without limitation to its discretion, endeavor to minimize the
associated Breakage Costs.
"Business Day" shall mean a day that is (a) a "Business Day" under and as
defined in the Pooling and Servicing Agreement and (b) when used in connection
with the Eurodollar Rate, a day on which dealings in Dollars are carried on in
the London interbank market and, if the Eurodollar Rate is being determined
pursuant to the second sentence of the definition of "Eurodollar Rate," in the
eurodollar interbank market of the Agent's Eurodollar Office.
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"Certificate Rate" shall mean, for any Interest Period, the sum of (a) the
Program Fee Rate and (b) Cost of Funds for such Interest Period, adjusted, as
necessary, to yield, when applied to the outstanding principal balance of the
Certificates, an amount sufficient to pay interest on the incremental effective
principal balance of any funding resulting from the capitalization of interest
during such Interest Period. On the Business Day immediately preceding each
Determination Date, the Agent shall notify the Servicer and the Trustee of the
Certificate Rate for the related Interest Period.
"Closing" shall have the meaning set forth in Section 3.01.
"Closing Date" shall have the meaning set forth in Section 3.01.
"Collection Date" shall mean the earliest Business Day following the
termination (as opposed to suspension) of the Revolving Period on which the
Invested Amount shall have been reduced to zero and all other amounts due to the
Owners shall have been paid in full.
"Commercial Paper Notes" shall mean short-term promissory notes issued or
to be issued by the Purchaser to fund its investments in accounts receivable and
other financial assets.
"Commitment Fee Rate" shall have the meaning specified in the Fee Letter.
"Cost of Funds" shall mean, for any Interest Period, the weighted average
(based upon time and dollar amount) of the following rates applicable during
such Interest Period for each Owner: (a) to the extent such Owner is the
Purchaser and funds its share of the outstanding principal balance of the
Certificates for such Interest Period by issuing Commercial Paper
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Notes, a rate equal to the CP Rate for such Interest Period and (b) to the
extent such Owner either (i) is not the Purchaser or (ii) is the Purchaser and
funds its share of the Invested Amount for such Interest Period other than by
issuing Commercial Paper Notes, a rate equal to the Alternative Rate for such
Interest Period or such other rate as the Agent and the Transferor shall agree
to in writing.
"CP Rate" shall mean with respect to any Interest Period (or portion
thereof), the per annum rate calculated to yield the "weighted average cost" (as
defined below) related to the issuance of Commercial Paper Notes that are
allocated, in whole or in part by the Purchaser (or by the Agent) to fund or
maintain its interest in the Certificates during such Interest Period (or
portion thereof) and all interests in receivables or other financial assets of
"Other Pool Transferors" (as defined below), if any, held by the Purchaser;
provided, however, that if any component of such rate is a discount rate, in
calculating the "CP Rate" for such Interest Period (or portion thereof) the
Purchaser shall for such component use the rate resulting from converting such
discount rate to an interest-bearing equivalent rate per annum. As used in this
definition, (a) the Purchaser's "weighted average cost" for any Interest Period
means the sum of (i) the actual interest paid to purchasers of the applicable
Commercial Paper Notes, (ii) the commissions of placement agents and dealers in
respect of such Commercial Paper Notes; provided, however, that such commissions
shall not exceed [*] of the outstanding face amount of such Commercial Paper
Notes from time to time unless the Agent shall have provided the Transferor with
prior notice that such commissions will exceed such amount, and (iii) other
borrowings by the Purchaser (other than under any Liquidity Agreement),
including to fund small or odd dollar amounts that are not easily accommodated
in the commercial paper market and (b) "Other Pool Transferors" means all other
Persons that transfer interests (including security interests) in receivables or
other financial assets to the Purchaser to the extent that such interests in
receivables or other financial assets are aggregated with the interest of the
Purchaser in the Certificates and funded on a pooled basis by the Purchaser; and
provided, further, that at all times following the occurrence of
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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a Pay Out Event, the "CP Rate" for any Interest Period (or portion thereof)
shall be the Alternative Rate in effect from time to time.
"Dollars" or "$" shall mean lawful money of the United States.
"Enhancement Agreement" shall mean and include any agreement (other than
any Liquidity Agreement) outstanding from time to time for the benefit of the
Purchaser providing for the issuance of one or more letters of credit or surety
bonds for the account of the Purchaser, the making of loans to the Purchaser or
any other extensions of credit to or for the account of the Purchaser to support
all or any part of the Purchaser's payment obligations under its Commercial
Paper Notes or to provide an alternate means of funding the Purchaser's
investments in accounts receivable or other financial assets, in each case, as
amended, supplemented or otherwise modified from time to time.
"Enhancement Provider" shall mean and include Barclays and any other or
additional bank, financial guaranty insurance company or other financial
institution now or hereafter extending credit or having a commitment to extend
credit to or for the account of the Purchaser under an Enhancement Agreement so
long as such other or additional bank, financial guaranty insurance company or
other financial institution is, at the time of each extension of such credit and
each incurrence of a commitment to extend such credit either a Permitted
Assignee or a Person consented to in writing by the Transferor.
"Eurocurrency Liabilities" shall have the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurodollar Margin" shall have the meaning specified in the Fee Letter.
"Eurodollar Office" shall mean such office or offices through which the
Agent determines the Eurodollar Rate. A Eurodollar Office of the Agent may be,
at the option of the Agent, either a domestic or foreign office.
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"Eurodollar Rate" shall mean, with respect to any Interest Period (or
portion thereof), a per annum rate of interest equal to the rate shown on page
3750 of the Dow Jones & Company Telerate screen or any successor page as the
composite offered rate for London interbank deposits for a period approximating
such Interest Period (or portion thereof), as shown under the heading "USD" as
of 11:00 A.M. (London time) on the second Business Day before (and for value on)
the first day of such Interest Period (or portion thereof). In the event no such
rate appears, the Eurodollar Rate shall be, with respect to any Interest Period,
the per annum rate of interest at which Dollar deposits in immediately available
funds are offered to the Eurodollar Office of the Agent by prime banks in the
interbank eurodollar market at or about 10:00 a.m., London time, on the second
Business Day before (and for value on) the first day of such Interest Period (or
portion thereof) and in an amount of not less than $1,000,000 for such Interest
Period (or portion thereof).
"Eurodollar Rate (Reserve Adjusted)" shall mean, with respect to any
Interest Period (or portion thereof), the sum of (a) the Eurodollar Margin and
(b) the per annum rate of interest (rounded upward, if necessary, to the nearest
whole multiple of 1/16th of one percent per annum) determined by dividing (i)
the Eurodollar Rate for such Interest Period (or portion thereof) by (ii) one
minus the Eurodollar Reserve Percentage (expressed as a decimal) applicable
during such Interest Period (or portion thereof).
"Eurodollar Rate Disruption Event" shall mean, for any Owner for any
Interest Period, any of the following: (a) a determination by such Owner that it
would be contrary to law or to the directive of any central bank or other
Governmental Authority to obtain Dollars in the London interbank market to fund
or maintain its investment in the Certificates for such Interest Period or (b)
the inability of such Owner by reason of circumstances affecting the London
interbank market generally, to obtain Dollars in such market to fund its
investment in the Certificates for such Interest Period.
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"Eurodollar Reserve Percentage" shall mean, with respect to any Interest
Period (or portion thereof), the reserve percentage (rounded upwards, if
necessary, to the nearest 1/16th of one percent per annum) applicable during
such Interest Period (or portion thereof) (or, if more than one such percentage
shall be so applicable during such Interest Period, the daily average of such
percentages for those days in such Interest Period (or portion thereof) during
which any such percentages shall be in effect) under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including, without
limitation, any emergency, supplemental or other marginal reserve requirement)
for banks or other financial institutions subject to such regulations with
respect to liabilities or assets consisting of or including Eurocurrency
Liabilities having a term equal to such Interest Period (or portion thereof).
"Excluded Taxes" shall have the meaning specified in Section 2.09(a).
"Federal Bankruptcy Code" shall mean the bankruptcy code of the United
States of America codified in Title 11 of the United States Code.
"Federal Funds Rate" shall mean, for any period, a fluctuating per annum
interest rate for each day during such period equal to (a) 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 no such rate is published for such day because such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York; or (b) if such rate is not so published for any day that is a
Business Day, the average of the quotations for such day on such transactions
received by Barclays from three federal funds brokers of recognized standing
selected by it.
"Fee Letter" shall mean the letter agreement of even date herewith, among
the Transferor, NextCard, the Purchaser and
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the Agent, regarding certain fees payable by the Transferor under or in
connection with this Agreement, as the same may be amended, restated or
otherwise modified from time to time.
"Governmental Actions" shall mean any and all consents, approvals, permits,
orders, authorizations, waivers, exceptions, variances, exemptions or licenses
of, or registrations, declarations or filings with, any Governmental Authority
required under any Governmental Rules.
"Governmental Rules" shall mean any and all laws, statutes, codes, rules,
regulations, ordinances, orders, writs, decrees and injunctions of any
Governmental Authority and any and all legally binding conditions, standards,
prohibitions, requirements and judgments of any Governmental Authority.
"Interpretation" as used in Sections 2.07 and 2.08 hereof with respect to
any law or regulation shall mean the interpretation or application of such law
or regulation by any Governmental Authority (including, without limitation, any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government), central bank, accounting standards
board, financial services industry advisory body or any comparable entity.
"Liquidity Agreement" shall mean and include (a) the Revolving Asset
Purchase Agreement of even date herewith among the Purchaser, Barclays, and the
Liquidity Providers supporting the Purchaser's payment obligations with respect
to the Commercial Paper Notes issued to fund its purchase or maintenance of the
Certificates hereunder, as amended, supplemented or otherwise modified from time
to time, and (b) any other agreement outstanding from time to time for the
benefit of the Purchaser providing for the sale by the Purchaser of undivided
percentage interests in the Certificates or the making of loans or other
extensions of credit to support all or part of the Purchaser's payment
obligations under the Commercial Paper Notes issued to fund its purchase or
maintenance of the Certificates or to provide an alternate means of funding the
Purchaser's investment in the Certificates hereunder, and under which the amount
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available from such sale or such extension of credit is limited to an amount
calculated by reference to the value or eligible unpaid balance of such
Certificates or any portion thereof or the level of credit enhancement available
with respect thereto, in each case as amended, supplemented or otherwise
modified from time to time.
"Liquidity Provider" shall mean a financial institution providing liquidity
support to or for the account of the Purchaser pursuant to a Liquidity
Agreement, so long as, at the time of each extension of such support and each
incurrence of a commitment to extend such support, such financial institution is
either a Permitted Assignee or a Person consented to in writing by the
Transferor.
"Liquidity Reduction Date" shall mean either (a) unless the applicable
Liquidity Provider is earlier replaced by the Agent with a commercial bank
satisfactory to the Agent having a commercial paper or short-term deposit rating
of A-1+ from Standard & Poor's and P1 from Moody's, the latest of (i) the day on
which any portion of the commitment of any Liquidity Provider to provide
liquidity support to the Purchaser in connection with the Certificates shall be
terminated, (ii) such later date as the Agent may specify and (iii) the first
Business Day that is at least 90 days after delivery by the Agent to the
Transferor of written notice that the commitment of any Liquidity Provider to
provide liquidity support to the Purchaser in connection with the Certificates
shall be terminated or (b) unless the applicable Liquidity Provider is earlier
replaced by the Agent with a commercial bank satisfactory to the Agent having a
commercial paper or short-term deposit rating of A-1+ from Standard & Poor's and
P1 from Moody's the latest of (i) the first Business Day that is 30 days after
the date on which a Liquidity Provider is downgraded to a level less than that
required by the rating agencies rating the commercial paper notes of the
Purchaser (a "Downgrade Event"), (ii) such later date as the Agent may specify
and (iii) the first Business Day that is at least 30 days after delivery by the
Agent to the Transferor of written notice of the applicable Downgrade Event.
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"Losses" shall have the meaning set forth in Section 10.01.
"Monthly Interest" shall mean with respect to any Distribution Date, an
amount equal to the sum of (a) the product of (i) the Certificate Rate in effect
with respect to the Interest Period ending immediately prior to such
Distribution Date, (ii) the average daily principal balance of the Certificates
during such Interest Period, and (iii) a fraction the numerator of which is the
actual number of days in such Interest Period and the denominator of which is
360, plus (b) all Breakage Costs incurred by Owners during the immediately
preceding Interest Period.
"Other Taxes" shall mean any present or future stamp or documentary taxes
or any other excise or property taxes, charges or similar levies that arise from
any payment or deposit required to be made hereunder, under the Pooling and
Servicing Agreement or the Supplement or from the execution, delivery or
registration of, or otherwise with respect to, any of the foregoing.
"Owner" shall mean the Purchaser and all other owners by assignment,
participation or otherwise of a Certificate or any interest therein.
"Permitted Assignee" shall mean each Person listed in a letter from the
Transferor to the Agent dated as of the date hereof, as such list may be
modified from time to time by the Transferor; provided that such modifications
do not result in fewer than 15 Persons being specified in such letter.
"Pooling and Servicing Agreement" shall mean the Amended and Restated
Pooling and Servicing Agreement dated as of May 21, 1999, among the Transferor,
the Servicer and the Trustee, as amended, supplemented or otherwise modified
from time to time in accordance with the terms thereof.
"Program Fee Rate" shall have the meaning specified in the Fee Letter.
"Purchase Commitment" shall mean the commitment of the
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Purchaser to acquire interests in the Certificates in a maximum aggregate
principal amount outstanding from time to time not to exceed $300,000,000, as
such amount may be reduced from time to time pursuant to Section 2.05.
"Purchase Commitment Termination Date" shall mean the earliest of (a) the
Business Day preceding the day on which the Scheduled Amortization Period
commences, (b) the Business Day preceding the day on which the Early
Amortization Period commences and (c) the Scheduled Liquidity Termination Date.
"Purchase Price" shall have the meaning set forth in Section 2.02.
"Required Owners" shall mean, at any time, those Owners owning interests in
Certificates aggregating 66-2/3% of the aggregate unpaid principal balance of
the Certificates at such time.
"Scheduled Liquidity Termination Date" shall mean May 19, 2000, as such
date may be extended pursuant to Section 2.05(b).
"Certificate Documents" shall mean the Pooling and Servicing Agreement, the
Series 1999-2 Supplement, each Receivables Purchase Agreement and the
Certificates.
"Supplement" shall mean the Series 1999-2 Supplement dated as of May 21,
1999, among the Transferor, the Servicer and the Trustee.
"Taxes" shall have the meaning set forth in Section 2.09(a).
"Transferor" shall have the meaning specified in the preamble hereto.
"UCC" shall mean the Uniform Commercial Code as from time to time in effect
in the applicable jurisdiction.
"Year 2000 Plan" shall have the meaning set forth in
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Section 6.09.
"Year 2000 Problem" shall have the meaning set forth in Section 6.09.
SECTION 1.02. Accounting Terms; Other Terms. Any accounting terms used in
this Agreement shall, unless otherwise specifically provided, have the meanings
customarily given to them in accordance with generally accepted United States
accounting principles or United States regulatory accounting principles, as
applicable, as in effect from time to time, and all financial computations
hereunder shall, unless otherwise specifically provided, be computed in
accordance with generally accepted United States accounting principles or United
States regulatory accounting principles, as applicable, as in effect from time
to time, consistently applied. 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 1.03. Other Rules of Construction. References in this Agreement to
sections, schedules and exhibits are to sections of and schedules and exhibits
to this Agreement unless otherwise indicated. The words "hereof", "herein",
"hereunder" and comparable terms refer to the entirety of this Agreement and not
to any particular article, section or other subdivision hereof or attachment
hereto. Words in the singular include the plural and in the plural include the
singular. Unless the context otherwise requires, the word "or" is not exclusive.
The word "including" shall be deemed to mean "including, without limitation".
The section and article headings and table of contents contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Except as otherwise specified
herein, all references herein (a) to any Person shall be deemed to include such
Person's successors and assigns and (b) to any Governmental Rule or contract
specifically defined or referred to herein shall be deemed references to such
Governmental Rule or contract as the same may be supplemented, amended, waived,
consolidated, replaced or modified from time to time, but only to
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the extent permitted by, and effected in accordance with, the terms thereof.
SECTION 1.04. Computation of Time Periods. Unless otherwise stated in this
Agreement, in the computation of a period of time from a specified date to a
later specified date, the word "from" means "from and including" and the words
"to" and "until" each mean "to but excluding."
ARTICLE II
PURCHASE AND SALE; PURCHASE COMMITMENT
SECTION 2.01. Purchase and Sale of the Certificates. On the terms and
subject to the conditions set forth in this Agreement, and in reliance on the
covenants, representations, warranties and agreements herein set forth, the
Transferor agrees to sell, transfer and deliver to the Agent, at the Closing,
for the benefit of the Purchaser and any other Owners from time to time, and the
Purchaser agrees to purchase from the Transferor, at the Closing, the entire
beneficial interest in the Certificates.
SECTION 2.02. Purchase Price. The Certificates are to be purchased at an
initial purchase price (the "Purchase Price") of $95,129,084.82, representing
100% of the Initial Invested Amount. Upon satisfaction of the conditions to
closing set forth in Articles IV and V, the Purchase Price is to be remitted to
the Transferor in immediately available funds by wire transfer pursuant to
written instructions to be provided to the Agent at least five Business Days
prior to the Closing Date.
SECTION 2.03. Increases and Decreases in the Invested Amount. (a) Subject
to the terms and conditions of Section 4.10 of the Supplement, the Purchaser
hereby agrees from the Closing Date to (but not including) the Purchase
Commitment Termination Date to fund any Invested Amount Increase requested by
the Transferor from the Agent and the Purchaser in accordance with the
procedures described in Section 4.10 of the Supplement;
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provided, however, that at no time shall the aggregate outstanding principal
amount of the Certificates allocable to the Purchaser exceed the Purchase
Commitment. On the date of the applicable Invested Amount Increase, the
Purchaser shall remit to the Agent, in immediately available funds, the amount
of such Invested Amount Increase, whereupon the Agent will remit such amount, in
immediately available funds, to the Transferor in accordance with such payment
instructions as the Transferor shall have delivered in writing to the Agent at
least one Business Day prior to the date of such Invested Amount Increase.
(b) The Invested Amount may be decreased from time to time in
accordance with the procedures described in of the Supplement and, so long
as the Purchase Commitment Termination Date has not occurred, subsequently
increased in accordance with the requirements of this Agreement and Section
4.10 of the Supplement.
(c) Notwithstanding anything to the contrary contained herein, if any
Invested Amount Increase is not made on the date specified by the
Transferor in its written request therefor delivered pursuant to Section
4.10 of the Supplement, the Transferor shall indemnify each Affected Party
against any reasonable loss, cost or expense incurred by such Affected
Party as a result of such occurrence, including, without limitation, any
reasonable loss, cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Affected Party to
fund such anticipated Invested Amount Increase.
SECTION 2.04. Commitment Fee. From and after the Closing Date until the
Purchase Commitment Termination Date, the Transferor shall pay to the Purchaser
a commitment fee equal to the product of (a) the average daily amount of the
excess of (i) the Purchase Commitment over (ii) the aggregate outstanding
principal amount of all Certificates held by or for the benefit of the Purchaser
and (b) the Commitment Fee Rate, payable in arrears on each Distribution Date.
SECTION 2.05. Termination or Reduction of the Purchase
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Commitment; Scheduled Liquidity Termination Date. (a) Upon at least five
Business Days' notice to the Purchaser, the Transferor may terminate in whole or
reduce in part the unused portion of the Purchase Commitment; provided, however,
that any such reduction in part shall be in a minimum amount of $10,000,000 or
an integral multiple of $1,000,000 in excess thereof and (ii) if, after giving
effect to such reduction, the Purchase Commitment would be less that
$100,000,000, such reduction shall be either in such smaller amount as will not
cause the Purchase Commitment to be less than $100,000,000 or in a amount
sufficient to reduce the Purchase Commitment hereunder to zero.
(b) If the Scheduled Liquidity Termination Date in effect at any time
will not be extended, the Agent agrees that it will so notify the
Transferor and the Servicer in writing at least 30 days prior to such
Scheduled Liquidity Termination Date. To the extent that the Agent has not
delivered a notice of nonextension as contemplated in the preceding
sentence, the Agent will, on or before the Scheduled Liquidity Termination
Date then in effect, notify the Transferor and the Servicer of the new
Scheduled Liquidity Termination Date, whereupon such new date shall be the
effective Scheduled Liquidity Termination Date.
SECTION 2.06. Calculation and Payment of Monthly Interest and Fees;
Selection of Commercial Paper Note Maturities. (a) The amount of interest
payable on each Distribution Date in respect of Certificates shall equal the
Monthly Interest for such Distribution Date. The Agent shall notify the
Servicer, the Trustee and the Purchaser, on the Business Day preceding each
Determination Date, of the Monthly Interest for the related Distribution Date
and the Certificate Rate for the related Interest Period.
(b) Out of the Monthly Interest received by the Agent for each
Interest Period, the Agent shall remit to each Owner an amount of interest
equal to the product of (i) such Owner's cost of funds and (ii) such
Owner's allocable share of the Invested Amount during such Interest Period,
plus the amount of any Breakage Costs applicable to such Owner in respect
of such Distribution Date.
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(c) All computations of interest, fees and other amounts under this
Agreement shall be made on the basis of a year of 360 days and the actual
number of days elapsed. Whenever any payment or deposit to be made
hereunder shall be due on a day other than a Business Day, such payment or
deposit shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of such payment or
deposit.
(d) The Purchaser (or the Agent on its behalf) shall select the
maturities of Commercial Paper Notes allocated to fund or maintain the
Purchaser's interest in the Certificates in consultation with the
Transferor; provided, however, that (i) such no such Commercial Paper Note
shall in any event mature more than 90 days after the date it is issued and
(ii) notwithstanding the Agent's agreement to consult with the Transferor
in selecting maturities for such Commercial Paper Notes, the Agent, on
behalf of the Purchaser, shall retain full and absolute discretion to
select such maturities.
SECTION 2.07. Increased Costs. (a) If due to the introduction of or any
change (including, without limitation, any change by way of imposition or
increase of reserve requirements) in or in the Interpretation of any law or
regulation or the imposition of any guideline or request from any central bank
or other Governmental Authority after the date hereof, there shall be an
increase in the cost to an Affected Party of making, funding or maintaining any
investment in the Certificates or any interest therein or of agreeing to
purchase or invest in the Certificates or any interest therein, as the case may
be (other than by reason of any Interpretation of or change in laws or
regulations relating to Taxes or Excluded Taxes, such Affected Party shall
promptly submit to the Transferor, the Servicer and the Agent a certificate
setting forth in reasonable detail, the calculation of such increased costs
incurred by such Affected Party. In determining such amount, such Affected Party
may use any reasonable averaging and attribution methods, consistent with the
averaging and attribution methods generally used by such Affected Party in
determining amounts of this type. The amount of increased costs set forth in
such certificate (which
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certificate shall, in the absence of manifest error, be prima facie evidence as
to such amount) shall be included in the Additional Amounts for (a) the first
full Interest Period immediately succeeding the date on which the certificate
specifying the amount owing was delivered and (b) to the extent remaining
outstanding, each Interest Period thereafter until paid in full. The Agent
shall, out of amounts received by it in respect of the Additional Amounts on any
Distribution Date, pay to each Affected Party, any increased costs due pursuant
to this Section 2.07, provided, however, that if the amount distributable in
respect of the Additional Amounts on any Distribution Date is less than the
aggregate amount payable to all Affected Parties pursuant to Sections 2.07, 2.08
and 2.09 for the corresponding Interest Period, the resulting shortfall shall be
allocated among such Affected Parties on a pro rata basis (determined by the
amount owed to each). Failure on the part of any Affected Party to demand
compensation for any amount pursuant to this Section 2.07 for any period shall
not constitute a waiver of such Affected Party's right to demand compensation
for such period; provided, however, that no Affected Party shall be entitled to
compensation for any such amount relating to any period ending more than six
months prior to the date that such Affected Party notifies the Transferor, the
Servicer and the Agent in writing thereof.
(b) Each Owner agrees that it shall use its best efforts to take (or
cause any Affected Party claiming through such Owner to take) such steps as
would eliminate or reduce the amount of any increased costs described in
this Section 2.07 incurred by such Owner or Affected Party; provided that
no such steps shall be required to be taken if, in the reasonable judgment
of such Owner or Affected Party, such steps would be disadvantageous to
such Owner or Affected Party or inconsistent with its internal policy and
legal and regulatory restrictions. To the extent that, notwithstanding such
efforts, any Owner that is a Liquidity Provider (or any Affected Party
claiming through an Owner that is a Liquidity Provider) is unable to
eliminate such increased costs and makes a demand hereunder, the Purchaser
may replace such Liquidity Provider with another commercial bank
satisfactory to the Purchaser, the Agent and the Transferor; provided,
however, that the Purchaser shall be under no
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obligation to so replace a Liquidity Provider requesting any amount under
this Section 2.07, and shall in no event replace such Liquidity Provider if
it is Barclays.
SECTION 2.08. Increased Capital. (a) If the introduction of or any change
in or in the Interpretation of any law or regulation or the imposition of any
guideline or request from any central bank or other Governmental Authority, in
each case, after the date hereof, affects or would affect the amount of capital
required or expected to be maintained by any Affected Party, and such Affected
Party determines that the amount of such capital is increased as a result of (i)
the existence of the Purchaser's agreement to make or maintain an investment in
the Certificates or any interest therein and other similar agreements or
facilities, or (ii) the existence of any agreement by Affected Parties to make
or maintain an investment in the Certificates or any interest therein or to fund
any such investment and any other commitments of the same type, such Affected
Party shall promptly submit to the Transferor, the Servicer and the Agent a
certificate setting forth the additional amounts required to compensate such
Affected Party in light of such circumstances. In determining such amount, such
Affected Party may use any reasonable averaging and attribution methods,
consistent with the averaging and attribution methods generally used by such
Affected Party in determining amounts of this type. The amount set forth in such
certificate (which certificate shall, in the absence of manifest error, be prima
facie evidence as to such amount) shall be included in the Additional Amounts
for (a) the first full Interest Period immediately succeeding the date on which
the certificate specifying the amount owing was delivered and (b) to the extent
remaining outstanding, each Interest Period thereafter until paid in full. The
Agent shall, out of amounts received by it in respect of the Additional Amounts
on any Distribution Date, pay to each Affected Party any amount due pursuant to
this Section 2.08, provided, however, that if the amount distributable in
respect of the Additional Amounts on any Distribution Date is less than the
aggregate amount payable to all Affected Parties pursuant to Sections 2.07, 2.08
and 2.09 for the corresponding Interest Period, the resulting shortfall shall be
allocated among such Affected Parties on a pro rata basis (determined by the
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amount owed to each). Failure on the part of any Affected Party to demand
compensation for any amount pursuant to this Section 2.08 for any period shall
not constitute a waiver of such Affected Party's right to demand compensation
for such period; provided, however, that no Affected Party shall be entitled to
compensation for any such amount relating to any period ending more than six
months prior to the date that such Affected Party notifies the Transferor, the
Servicer and the Agent in writing thereof.
(b) Each Owner agrees that it shall use its best efforts to take (or
cause any Affected Party claiming through such Owner to take) such steps as
would eliminate or reduce the amount of any increased costs described in
this Section 2.08 incurred by such Owner or Affected Party; provided that
no such steps shall be required to be taken if, in the reasonable judgment
of such Owner or Affected Party, such steps would be disadvantageous to
such Owner or Affected Party or inconsistent with its internal policy and
legal and regulatory restrictions. To the extent that, notwithstanding such
efforts, any Owner that is a Liquidity Provider (or any Affected Party
claiming through an Owner that is a Liquidity Provider) is unable to
eliminate such amount in respect of which compensation is payable pursuant
to this Section 2.08 and makes a demand hereunder, the Purchaser may
replace such Liquidity Provider with another commercial bank satisfactory
to the Purchaser, the Agent and the Transferor; provided, however, that the
Purchaser shall be under no obligation to so replace a Liquidity Provider
requesting any amount under this Section 2.08, and shall in no event
replace such Liquidity Provider if it is Barclays.
SECTION 2.09. Taxes. (a) Subject to subsection 2.09(d), any and all
payments and deposits required to be made hereunder or under the Pooling and
Servicing Agreement or the Supplement by the Transferor or the Trustee to or for
the benefit the Agent or any Owner shall be made, to the extent allowed by law,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto imposed by any Governmental Authority, excluding, in the case of
each Owner
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and the Agent, (x) taxes, levies, imposts, deductions, charges or withholdings
imposed on, or measured by reference to, the net income of such Owner or the
Agent, as applicable, franchise taxes imposed on such Owner or the Agent, as
applicable (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 any other taxes (other than withholding taxes not imposed by
section 1446 of the Code and Other Taxes), levies, imposts, deductions, charges
or withholdings based or imposed on income or the receipts or gross receipts of
such Owner or the Agent, as applicable, in each case, by any of (i) the United
States or any State thereof, (ii) the state or foreign jurisdiction under the
laws of which such Owner or the Agent, as applicable, is organized, with which
it has a present or former connection (other than solely by reason of this
Agreement), or in which it is otherwise doing business or (iii) any political
subdivision thereof; (y) any taxes, levies, imposts, duties, charges or fees to
the extent of any credit or other benefit actually realized by such Agent or
Owner, as applicable, as a result thereof; and (z) any taxes, levies, imposts,
duties, charges or fees imposed as a result of a change by the Agent or Owner,
as applicable, of the office in which all or any part of its interest in the
Certificates is acquired, accounted for or booked (all such excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
referred to herein as "Excluded Taxes" and all such nonexcluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being referred to
herein as "Taxes"). If the Transferor or the Trustee shall be required by law to
deduct any Taxes from or in respect of any sum required to be paid or deposited
hereunder to or for the benefit any Owner or the Agent, then, to the extent
provided in subsection 2.09(d), (i) such sum shall be increased as may be
necessary so that, after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.09), such Owner or
the Agent (as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Transferor or the Trustee
(as appropriate) shall make such deductions and (iii) the Transferor or the
Trustee (as appropriate) shall pay the full amount deducted to the relevant
taxation authority or other authority in accordance with applicable law.
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(b) To the extent provided in subsection 2.09(d), each Owner and the
Agent shall be reimbursed for the full amount of Taxes or Other Taxes
(including, without limitation, any Taxes or Other Taxes imposed by any
jurisdiction on amounts otherwise payable under this Section 2.09) paid by
such Owner or the Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect
thereto. Each Owner and the Agent agrees to promptly notify the Transferor
and the Servicer of any payment of such Taxes or Other Taxes made by it
and, if practicable, any request, demand or notice received in respect
thereof prior to such payment. In addition, in the event any Owner is
required, in accordance with and pursuant to the terms of any agreement or
other document providing liquidity support, credit enhancement or other
similar support to such Owner in connection with the Certificates or the
funding or maintenance of an interest therein, to compensate a bank or
other financial institution in respect of taxes under circumstances similar
to those described in this Section 2.09, then, to the extent provided in
subsection 2.09(d), such Owner shall be reimbursed for any such
compensation so paid by it. A certificate as to the amount of any
indemnification pursuant to this subsection 2.09(b) submitted to the
Transferor by such Owner or the Agent, as the case may be, setting forth in
reasonable detail the basis for and the calculation thereof, shall (absent
manifest error) be prima facie evidence as to such amount.
(c) Within 30 days after the date of any payment of Taxes or Other
Taxes, the Transferor will furnish to the Agent the original or a certified
receipt evidencing payment thereof.
(d) Any amounts payable to an Owner or the Agent pursuant to this
Section 2.09 shall be included in the Additional Amounts for (i) in the
case of amounts payable pursuant to subsection 2.09(a), the Interest Period
in respect of which the payment subject to withholding is made, (ii) in the
case of amounts payable pursuant to subsection 2.09(b), the first full
Interest Period immediately succeeding the date on which the certificate
specifying the amount owing was delivered and (iii) in either case, to the
extent remaining outstanding, each
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Interest Period thereafter until paid in full. The Agent shall, out of
amounts received by it in respect of the Additional Amounts on any
Distribution Date, pay to each Owner and itself, as applicable, any
reimbursement due pursuant to this Section 2.09, provided, however, that if
the amount distributable in respect of the Additional Amounts on any
Distribution Date is less than the aggregate amount payable to all Affected
Parties pursuant to Sections 2.07, 2.08 and 2.09 for the corresponding
Interest Period, the resulting shortfall shall be allocated among such
Affected Parties on a pro rata basis (determined by the amount owed to
each).
(e) The Agent and each Owner (i) that is organized under the laws of a
jurisdiction outside the United States hereby agrees to complete, execute
and deliver to the Trustee from time to time prior to the initial
Distribution Date on which such Person will be entitled to receive
distributions pursuant to the Supplement and this Agreement, Internal
Revenue Service form 4224 (or any successor form), (ii) at the request of
the Transferor, hereby agrees to complete, execute and deliver to the
Trustee from time to time prior to the initial Distribution Date on which
such Person will be entitled to receive distributions pursuant to the
Supplement and this Agreement, Internal Revenue Service form W-9 (or any
successor form), and (iii) hereby agrees to complete, execute and deliver
to the Trustee from time to time prior to the initial Distribution Date on
which such Person will be entitled to receive distributions pursuant to the
Supplement and this Agreement, such other forms or certificates as may be
required under the laws of any applicable jurisdiction in order to permit
the Transferor or the Trustee to make payments to, and deposit funds to or
for the account of, such Person hereunder and under the Pooling and
Servicing Agreement and the Supplement without any deduction or withholding
for or on account of any United States tax. Each of the Agent and each
Owner agrees to provide like additional subsequent duly executed forms 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 Transferor or
the Trustee. Each of the Agent and the Owner certifies, represents and
warrants
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that as of the date of this Agreement, or in the case of an Owner which is
an assignee as of the date of such assignment, that (i) it is entitled (x)
to receive payments under this Agreement without deduction or withholding
of any United States federal income taxes (other than taxes subject to
withholding pursuant to Code Section 1446) and (y) to an exemption from
United States backup withholding tax and (ii) it will pay any taxes
attributable to its ownership of an interest in the Certificates. Each of
the Agent and each Owner further agrees that compliance with this
subsection 2.09(e) (including by reason of subsection 12.04(c) in the case
of any sale or assignment of any interest in Certificates) is a condition
to the payment of any amount otherwise due pursuant to subsections 2.09(a)
and 2.09(b) hereof. Notwithstanding anything to the contrary herein, each
of the Paying Agent, Servicer and Trustee shall be entitled to withhold any
amount that it reasonably 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 to the Agent or Owner, as applicable, for all
purposes of the Agreement.
(f) Any Owner entitled to the payment of any additional amount
pursuant to this Section 2.09 shall use its reasonable efforts (consistent
with its internal policy and legal and regulatory restrictions) to take
such steps as would eliminate or reduce the amount of such payment;
provided that no such steps shall be required to be taken if, in the
reasonable judgment of such Owner, such steps would be materially
disadvantageous to such Owner. To the extent that, notwithstanding such
efforts, any Owner that is a Liquidity Provider is unable to eliminate an
amount payable under this Section 2.09 and makes a demand hereunder, the
Purchaser shall use its reasonable efforts to replace such Liquidity
Provider with another commercial bank satisfactory to the Purchaser, the
Agent and the Transferor; provided, however, that the Purchaser shall be
under no obligation to so replace such Liquidity Provider if it is
Barclays.
(g) Without prejudice to the survival of any other agreement of the
Transferor hereunder, the agreements and obligations of the Transferor
contained in this Section 2.09 shall survive the termination of this
Agreement.
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ARTICLE III
CLOSING
SECTION 3.01. Closing. The Closing (the "Closing") of the purchase and sale
of the Certificates shall take place at the offices of Orrick, Herrington &
Sutcliffe LLP, 666 Fifth Avenue, New York, New York 10103, at 10:00 a.m.
(Eastern Daylight Time), on May 21, 1999, or, if the conditions to closing set
forth in Articles IV and V of this Agreement shall not have been satisfied or
waived by such date, as soon as practicable after such conditions shall have
been satisfied or waived, or at such other time, date and place as the parties
shall agree upon (the date of the Closing being referred to herein as the
"Closing Date").
SECTION 3.02. Transactions to be Effected at the Closing. At the Closing,
(a) the Purchaser will deliver to the Transferor (by wire transfer of
immediately available funds to a bank account designated by the Transferor at
least two Business Days prior to the Closing Date) an amount equal to the
Purchase Price (net of certain amounts to be retained by the Agent pursuant to
instructions from the Transferor) and (b) the Transferor shall deliver the
Certificates to the Agent.
ARTICLE IV
PURCHASER CONDITIONS PRECEDENT
SECTION 4.01. Conditions Precedent to the Purchase of the Certificates. The
obligation of the Purchaser to purchase and pay for the Certificates on the
Closing Date is subject to the satisfaction at the time of the Closing of the
following conditions:
(a) Performance by the Transferor. All the terms, covenants,
agreements and conditions of this Agreement, the Pooling and Servicing
Agreement and the Supplement to be complied with and performed by the
Transferor by the Closing shall have
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been complied with and performed in all material respects.
(b) Representations and Warranties. Each of the representations and
warranties of the Transferor made in this Agreement, the Pooling and
Servicing Agreement and the Supplement shall be true and correct in all
material respects as of the time of the Closing as though made as of such
time (except to the extent they expressly relate to an earlier time).
(c) Officers' Certificate. The Agent shall have received from the
Transferor, in form and substance reasonably satisfactory to the Purchaser
and the Agent, an Officer's Certificate, dated the Closing Date, certifying
as to the satisfaction of the conditions set forth in subsections 4.01(a)
and 4.01(b).
(d) Certain Opinions of Counsel. The Agent shall have received from
Orrick, Herrington & Sutcliffe LLP, acting as counsel to the Transferor,
the Servicer and/or certain other parties, as applicable, favorable
opinions, dated the Closing Date and reasonably satisfactory in form and
substance to the Purchaser, the Agent and their counsel.
(e) Opinion of Counsel to the Trustee. The Agent shall have received
from McGuire, Woods, Battle & Boothe LLP, counsel to the Trustee, a
favorable opinion, dated the Closing Date and reasonably satisfactory in
form and substance to the Purchaser, the Agent and their counsel.
(f) Financing Statements. The Agent shall have received evidence
reasonably satisfactory to the Purchaser and the Agent that, on or before
the Closing Date, UCC-1 financing statements have been filed in the offices
of the Secretary of State or comparable offices of the applicable states
and in the appropriate office or offices in such other locations as may be
specified in the relevant opinions of counsel delivered pursuant to
subsection 4.01(d) and in such other jurisdictions as its counsel deems
appropriate, reflecting the assignments contemplated by such opinions of
counsel and the respective interests of the applicable parties.
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(g) Ratings. To the extent required, each of Moody's and Standard &
Poor's shall have confirmed in writing to the Purchaser that the purchase
by the Purchaser of its interest in the Certificates would not result in
the reduction or withdrawal of the then current rating of the Commercial
Paper Notes.
(h) Reserve Account. The Reserve Account shall have been established
in accordance with the requirements of Section 4.11 of the Supplement, and
there shall have been deposited therein an amount at least equal to the
Required Reserve Account Amount, determined by reference to the Initial
Invested Amount.
(i) Pooling and Servicing Agreement et al. The Agent and the Purchaser
shall have received a fully executed copy of each of the Pooling and
Servicing Agreement, the Supplement and the other instruments, documents
and agreements required to be delivered thereunder. Each of the Pooling and
Servicing Agreement and the Supplement shall have been duly authorized,
executed and delivered by the Transferor, the Servicer, and the Trustee,
and shall be in full force and effect on the Closing Date.
(j) Interest Rate Cap. The Interest Rate Cap shall be in full force
and effect in accordance with the requirements of Section 4.13 of the
Supplement.
(k) No Actions or Proceedings. No action, suit, proceeding or
investigation by or before any Governmental Authority shall have been
instituted to restrain or prohibit the consummation by the Transferor, the
Agent or the Purchaser of, or to invalidate, the transactions contemplated
by this Agreement, the Supplement or any of the Liquidity Agreements or
Enhancement Agreements in any material respect.
(l) Approvals and Consents. All Governmental Actions of Governmental
Authorities required by the Agent, the Purchaser or the Transferor with
respect to the transactions contemplated by this Agreement, the Supplement
and the Liquidity Agreements and Enhancement Agreements shall have been
obtained or made.
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(m) Commercial Paper Market. The commercial paper market shall be
available to the Purchaser at the time of the Closing.
(n) Payment of Fees. All fees required to be paid to the Agent or the
Purchaser in connection with the Closing pursuant to the Fee Letter shall
have been paid.
(o) Other Documents. The Transferor shall have furnished to the
Purchaser or the Agent, as the case may be, such other information,
certificates and documents as the Purchaser, the Agent or their counsel may
reasonably request.
SECTION 4.02. Conditions Precedent to Invested Amount Increases. The
obligation of the Purchaser to make any Invested Amount Increase is subject to
the satisfaction, as of the applicable Increase Date, of each of the applicable
Increase Conditions and the other applicable conditions specified herein.
ARTICLE V
TRANSFEROR CONDITIONS PRECEDENT
SECTION 5.01. Conditions Precedent to the Sale of the Certificates. The
obligation of the Transferor to sell the Certificates to the Agent on the
Closing Date for the benefit of the Purchaser and the subsequent Owners from
time to time is subject to the satisfaction at the time of the Closing of the
following conditions:
(a) Performance by the Purchaser and the Agent. All the terms,
covenants, agreements and conditions of this Agreement to be complied with
and performed by the Purchaser or the Agent, as the case may be, by the
Closing shall have been complied with and performed in all material
respects.
(b) Representations and Warranties. Each of the representations and
warranties of each of the Purchaser and the Agent made in this Agreement
shall be true and correct in all
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material respects as of the time of the Closing as though made as of
such time (except to the extent they expressly relate to an earlier time).
(c) Officer's Certificate. The Transferor shall have received from the
Purchaser, in form and substance reasonably satisfactory to the Transferor,
a certificate signed by an officer of the Purchaser, dated the Closing
Date, certifying as to the satisfaction of the conditions set forth in
subsections 5.01(a) and 5.01(b).
(d) Opinion of Counsel to the Purchaser. The Transferor shall have
received from Sidley & Austin, counsel to the Purchaser, a favorable
opinion, dated the Closing Date and reasonably satisfactory in form and
substance to the Transferor and its counsel.
(e) Opinion of Counsel to the Trustee. The Transferor shall have
received from McGuire, Woods, Battle & Boothe LLP, counsel to the Trustee,
a favorable opinion, dated the Closing Date and reasonably satisfactory in
form and substance to the Transferor and its counsel.
(h) No Actions or Proceedings. No action, suit, proceeding or
investigation by or before any Governmental Authority shall have been
instituted to restrain or prohibit the consummation by the Transferor, the
Agent or the Purchaser of, or to invalidate, the transactions contemplated
by this Agreement in any material respect.
(i) Approvals and Consents. All Governmental Actions of Governmental
Authorities required by the Purchaser, the Agent or the Transferor with
respect to the transactions contemplated by this Agreement shall have been
obtained or made.
(j) Other Documents. The Purchaser or the Agent, as applicable, shall
have furnished to the Transferor such other information, certificates and
documents as the Transferor or its counsel may reasonably request.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Each of the Transferor and the Servicer hereby represents and warrants to
the Owners and the Agent with respect to itself (giving effect, in the case of
any Successor Servicer, any successor to the Transferor or any Additional
Transferor, to such changes to Section 6.01 as may be necessary to reflect
accurately the incorporation or other formation of such Successor Servicer,
successor to the Transferor or Additional Transferor) as of the date of this
Agreement, as of the Closing Date, and as of (and as a condition to any Invested
Amount Increase occurring on) each Increase Date (but excluding, in the case of
any Increase Date, Section 6.05), in each case with reference to the facts and
circumstances then existing, as follows:
SECTION 6.01. Corporate Existence. The Transferor is a corporation validly
existing and in good standing under the laws of the State of Delaware, with full
power and authority under such laws to own its properties and conduct its
business as such properties are presently owned and such business is presently
conducted and to execute, deliver and perform its obligations under this
Agreement and each Certificate Document to which it is a party. The Servicer is
a corporation validly existing and in good standing under the laws of the State
of Delaware, with full power and authority under such laws to own its properties
and conduct its business as such properties are presently owned and such
business is presently conducted and to execute, deliver and perform its
obligations under this Agreement and each Certificate Document to which it is a
party.
SECTION 6.02. Corporate Authority. The Transferor or the Servicer, as
applicable, has the corporate power, authority and right to make, execute,
deliver and perform this Agreement and each Certificate Document to which it is
a party and all the transactions contemplated hereby and thereby and has taken
all necessary corporate action to authorize the execution, delivery and
performance of this Agreement and each Certificate Document
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to which it is a party; and, when executed and delivered, each of this Agreement
and the Certificate Documents to which it is a party will constitute its legal,
valid and binding obligation, enforceable in accordance with its terms, subject
to applicable bankruptcy, reorganization, insolvency, moratorium, receivership,
conservatorship and other laws of general applicability relating to or affecting
creditors' rights generally from time to time in effect. The enforceability of
its obligations under such agreements is also subject to general principles of
equity, regardless of whether such enforceability is considered in a proceeding
in equity or at law, and no representation or warranty is made with respect to
the enforceability of its obligations under any indemnification provisions in
such agreements to the extent that indemnification is sought in connection with
securities laws violations and is contrary to public policy.
SECTION 6.03. No Consents Required. No consent, license, approval or
authorization of, or registration with, any Governmental Authority is required
to be obtained by the Transferor or the Servicer, as applicable, in connection
with the execution, delivery or performance by the Transferor or the Servicer,
as applicable, of each of this Agreement and the Certificate Documents that has
not been duly obtained and which is not and will not be in full force and effect
on the Closing Date or the relevant Increase Date, as applicable.
SECTION 6.04. No Violation. The execution, delivery and performance of each
of this Agreement and the Certificate Documents do not violate any provision of
any existing law or regulation applicable to the Transferor or the Servicer, as
applicable, any order or decree of any court or other judicial authority to
which it is subject, its charter or By-laws or any mortgage, indenture, contract
or other agreement to which it is a party or by which it or any significant
portion of its properties is bound (other than violations of such laws,
regulations, orders, decrees, mortgages, indentures, contracts and other
agreements which, individually or in the aggregate, would not have a material
adverse effect on the Transferor's or the Servicer's, as applicable, ability to
perform its obligations under, or the validity or enforceability of, this
Agreement or
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the Certificate Documents).
SECTION 6.05. Financial Statements. Prior to the Closing Date, the
Transferor has delivered or caused to be delivered to the Agent complete and
correct copies of, (a) the audited consolidated balance sheet of NextCard and
its subsidiaries as of December 31, 1998, and the related audited consolidated
statements of income and cash flows of NextCard and its subsidiaries for the
fiscal year then ended, accompanied by the opinion of NextCard's independent
certified public accountants and (b) the unaudited consolidated balance sheet of
NextCard and its subsidiaries as of March 31, 1999, and the related unaudited
consolidated statements of income and cash flows of NextCard and its
subsidiaries for the fiscal quarter then ended. Such financial statements are
complete and correct in all material respects and fairly present the financial
condition of NextCard and its subsidiaries as of their respective dates and the
results of operations of NextCard and its subsidiaries for the applicable
periods then ended, subject to year-end adjustments in the case of unaudited
information, all in accordance with generally accepted accounting principles or
regulatory accounting principles, as applicable, consistently applied.
SECTION 6.06. No Proceeding. There is no action, litigation or proceeding
before any court, tribunal or governmental body presently pending or, to the
knowledge of the Transferor or the Servicer, as applicable, threatened against
the Transferor or the Servicer, as applicable, with respect to this Agreement,
the Certificate Documents, the transactions contemplated hereby or thereby or
the issuance of the Certificates, and there is no such litigation or proceeding
against it or any significant portion of its properties which would have a
material adverse effect on the transactions contemplated by, or its ability to
perform its obligations under, this Agreement or any Certificate Document to
which it is a party.
SECTION 6.07. Trust Indenture Act; Investment Company Act. Neither the
Pooling and Servicing Agreement nor the Supplement is required to be qualified
under the Trust Indenture
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Act of 1939, and the Trust is not required to be registered under the Investment
Company Act of 1940, as amended.
SECTION 6.08. No Pay Out Event or Other Default. No Pay Out Event or
Servicer Default has occurred and is continuing, both before and immediately
after giving effect to the purchase or issuance of the Certificates or the
relevant Invested Amount Increase, as applicable, and no event, act or omission
has occurred and is continuing which, with the lapse of time, the giving of
notice, or both, would constitute a Pay Out Event or Servicer Default.
SECTION 6.09. The Certificates. The Certificates have been duly and validly
authorized, and, when executed and authenticated in accordance with the terms of
the Pooling and Servicing Agreement and the Supplement and delivered to the
Agent in accordance with this Agreement, will be duly and validly issued and
outstanding, and will be entitled to the benefits of, as applicable, this
Agreement and the applicable Certificate Documents.
SECTION 6.10. Absence of Material Adverse Change. Since December 31, 1998,
there has not been any material adverse change in the condition (financial or
otherwise) of NextCard that has not been disclosed in writing by the Transferor
or NextCard to the Agent.
SECTION 6.11. Taxes, Etc. Any taxes, fees and other charges of Governmental
Authorities imposed upon the Transferor or the Servicer, as applicable, in
connection with the execution, delivery and performance by the Transferor or the
Servicer, as applicable, of this Agreement, the Pooling and Servicing Agreement,
the Supplement and, the Certificates or otherwise in connection with the Trust
have been paid or will be paid by the Transferor or the Servicer, as applicable,
at or prior to the Closing Date or the relevant Increase Date, as applicable, to
the extent then due.
SECTION 6.12. Disclosure. All written factual information heretofore
furnished by the Transferor, the Servicer
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or any of their respective representatives to the Agent or any Owner or any of
their representatives for purposes of or in connection with this Agreement,
including, without limitation, information relating to the Accounts and
Receivables and the Transferor?s credit card businesses, was true and correct in
all material respects on the (a) date such information was furnished by the
Transferor or the Servicer, as applicable, or (b) if such information
specifically relates to an earlier date, on such earlier date.
SECTION 6.13. Year 2000 Plan. Each of the Transferor and the Servicer have
reviewed the areas within its business and operations that could be adversely
affected by, and have developed a plan (the "Year 2000 Plan") to address on a
timely basis, the risk that computer applications used to process any data
related to this Agreement may produce materially adverse consequences in
performing date-sensitive functions involving certain dates prior to and any
date after December 31, 1999 (such risk being referred to herein as the "Year
2000 Problem"). Each of the Transferor and the Servicer is taking or causing to
be taken reasonable measures to address the Year 2000 Problem on a timely basis.
To the best of the Transferor's and the Servicer's knowledge, the Year 2000
Problem will not materially and adversely affect the interests of the Owners
under this Agreement, the Supplement and the Pooling and Servicing Agreement.
SECTION 6.14. FICO Scores. As of the Closing Date, no more than [*] of
the aggregate Principal Receivables have related Obligors with FICO Scores as of
the date of the origination of their respective Accounts of less than [*].
SECTION 6.15. Location of Offices. The Transferor's principal place of
business and chief executive office is located in the State of California, or
such other jurisdiction with respect to which the requirements specified in
Section 8.05 hereof have been satisfied.
SECTION 6.16. Pooling and Servicing Representations and Warranties. Its
representations and warranties in
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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Sections 2.03 and 2.04 (in the case of a Transferor) or Section 3.03 (in the
case of the Servicer) of the Pooling and Servicing Agreement are true and
correct in all material respects as of the dates they were made (unless they
specifically refer to an earlier date, in which case they were true and correct
on such earlier date).
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER AND THE AGENT
Each of the Purchaser and the Agent hereby represents and warrants to the
Transferor as to itself as of the date of this Agreement and as of the Closing
Date as follows:
SECTION 7.01. Organization. The Purchaser has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the State
of Delaware. The Agent is duly incorporated under the laws of England.
SECTION 7.02. Authority. The Purchaser or the Agent, as applicable, has the
corporate power, authority and right to make, execute, deliver and perform this
Agreement and all the transactions contemplated hereby and has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Agreement; and, when executed and delivered, this Agreement will
constitute its legal, valid and binding obligation, enforceable in accordance
with its terms, subject to applicable bankruptcy, reorganization, insolvency,
moratorium, receivership, conservatorship and other laws of general
applicability relating to or affecting creditors' rights generally from time to
time in effect. The enforceability of its obligations under this Agreement is
also subject to general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law, and no
representation or warranty is made with respect to the enforceability of its
obligations under any indemnification provisions in such agreements to the
extent that indemnification
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is sought in connection with securities laws violations and is contrary to
public policy.
SECTION 7.03. Securities Act. The Certificates purchased by the Agent for
the benefit of the Purchaser pursuant to this Agreement will be acquired for
investment only and not with a view to any public distribution thereof, and
neither the Purchaser nor the Agent will offer to sell or otherwise dispose of
any Certificates so acquired by it (or any interest therein) in violation of any
of the registration requirements of the Act or any applicable state or other
securities laws. Each of the Purchaser and the Agent acknowledges that it has no
right to require the Transferor to register under the Act or any other
securities law any Certificates to be acquired by the Agent for the benefit of
the Purchaser or any other Owner pursuant to this Agreement. Each of the Agent
and the Purchaser will execute and deliver to the Transferor on or before the
Closing Date an Investment Letter with respect to the purchase of the
Certificates.
SECTION 7.04. Investment Company Act. Neither the Purchaser nor the Agent
is subject to registration as an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
ARTICLE VIII
COVENANTS OF THE TRANSFEROR
SECTION 8.01. Access to Information. From the Closing Date until the
Collection Date, each of the Transferor and the Servicer will, at any time and
from time to time during regular business hours, on at least five Business Days'
(or if a Pay Out Event or Servicer Default or event that with the giving of
notice or lapse of time or both would constitute a Pay Out Event or Servicer
Default, has occurred, one Business Day's) notice to the Transferor or the
Servicer, as the case may be, permit the Agent or any Owner, or its agents or
representatives, at the Agent's or such Owner's expense (or if a Pay Out Event
or Servicer Default or event that with the giving of notice or lapse of time or
both
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would constitute a Pay Out Event or Servicer Default, has occurred, at the
expense of the Transferor in the case of a Pay Out Event or the Servicer in the
case of a Servicer Default), (a) to examine all books, records and documents
(including computer tapes and disks) in the possession or under the control of
the Transferor or the Servicer, as the case may be, relating to the Receivables
(other than names of account holders and strategic plans for the Servicer's
credit card business), including the forms of Credit Card Agreements under which
such Receivables arise, and (b) to visit the offices and properties of the
Transferor or the Servicer, as applicable, for the purpose of examining such
materials described in clause (a) above.
SECTION 8.02. Reporting Requirements of the Transferor. From the Closing
Date until the Collection Date, the Transferor will furnish to the Agent:
(a) a copy of each certificate, report, statement, notice or other
communication furnished by or on behalf of the Transferor or the Servicer
to the Trustee or any Rating Agency, or any Series Enhancer (other than
investment instructions or any such item furnished to the Trustee or any
Rating Agency relating solely to one or more Series other than Series
1999-2), concurrently therewith, and promptly after receipt thereof, a copy
of each notice, demand or other communication received by or on behalf of
the Transferor or the Servicer under the Pooling and Servicing Agreement or
the Supplement (other than any such item relating solely to one or more
Series other than Series 1999-2);
(b) such other information, documents, records or reports respecting
the Accounts, the Receivables or the servicing thereof or the Trust as the
Agent or any Owner may from time to time reasonably request;
(c) (i) within 90 days following the end of each fiscal year of
NextCard, beginning with the fiscal year ending December 31, 1999, the
audited consolidated balance sheet of NextCard and its subsidiaries as of
the end of such
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fiscal year, and the related audited consolidated statements of income and
cash flows of NextCard and its subsidiaries for such fiscal year,
accompanied by the opinion of NextCard's independent certified public
accountants and (b) within 45 days following the end of each fiscal quarter
of NextCard, beginning with the fiscal quarter ending June 30, 1999, the
unaudited consolidated balance sheet of NextCard and its subsidiaries as of
the end of such fiscal quarter, and the related unaudited consolidated
statements of income and cash flows of NextCard and its subsidiaries for
such fiscal quarter; and
(d) such publicly available information, documents, records or reports
respecting NextCard, the Transferor or the condition or operations,
financial or otherwise, of NextCard or the Transferor as the Agent or any
Owner may from time to time reasonably request.
SECTION 8.03. Optional Repurchase. The Transferor shall not exercise its
right to repurchase the Certificates pursuant to Section 7.01 of the Supplement
and Section 12.05 of the Pooling and Servicing Agreement unless the Owners and
the Agent have been paid, or will be paid upon such repurchase, the outstanding
principal balance of the Certificates, all interest thereon and all other
amounts owing hereunder in full.
SECTION 8.04. Termination of the Loan Agreement. Upon the Closing, the
Transferor shall furnish to the Agent documentation satisfactory in form and
substance to the Agent evidencing (a) the termination of Supplement No. 1, dated
as of December 1, 1998, among the Transferor, the Servicer and the Trustee,
supplementing the Pooling and Servicing Agreement as in effect prior to the
amendment and restatement thereof as of May 21, 1999, (b) the termination of the
Loan Agreement, dated as of December 29, 1998, among the Transferor, the lenders
party thereto and Credit Suisse First Boston, New York Branch, as administrative
agent and arranger, (c) the repayment in full of all loans and other amounts
owing under such Loan
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Agreement and (d) the release of any and all liens, security interests,
guaranties and other interests or arrangements supporting repayment of such
loans and other amounts under such Loan Agreement, other than liens, security
interests and other interests or arrangements granted to and held by the Trustee
under the Pooling and Servicing Agreement for the benefit of the
Certificateholders.
SECTION 8.05. Location of Chief Executive Office. The Transferor shall not
move its principal place of business and chief executive office to a location
outside the State of California unless it shall have given the Agent at least 30
days' prior written notice of such relocation and shall have executed and filed
such UCC financing statements and other items and delivered such opinions as the
Agent deems reasonably necessary to maintain the Trustee's perfected security
interest in the Receivables.
ARTICLE IX
[RESERVED]
ARTICLE X
INDEMNIFICATION
SECTION 10.01. Indemnification by the Transferor and the Servicer. (a) The
Transferor shall indemnify and hold harmless each Owner, the Agent, their
respective Affiliates and their respective officers, directors, employees,
stockholders, agents and representatives, against any and all losses, claims,
damages, liabilities or reasonable expenses (including legal and accounting
fees) (collectively, "Losses"), as incurred (payable promptly upon written
request), for or on account of or arising from or in connection with or
otherwise with respect to any breach of any representation or warranty of the
Transferor set forth in this Agreement, the Supplement or the Pooling and
Servicing Agreement or in any certificate delivered pursuant hereto or thereto;
provided, however, that the Transferor shall not be so required to indemnify any
such Person or otherwise be liable to any such Person hereunder for (i) any
Losses incurred
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for or on account of or arising from or in connection with or otherwise with
respect to any breach of any representation or warranty set forth in the Pooling
and Servicing Agreement a remedy for the breach of which is provided in Section
2.05 or 2.06 of the Pooling and Servicing Agreement or (ii) any Losses asserted
by any such Person constituting indirect or consequential damages incurred by
such Person.
(b) The Servicer shall indemnify and hold harmless each Owner, the
Agent, their respective Affiliates and their respective officers,
directors, employees, stockholders, agents and representatives, against any
and all Losses, as incurred (payable promptly upon written request), for or
on account of or arising from or in connection with or otherwise with
respect to any breach of any representation or warranty of the Servicer set
forth in this Agreement, the Supplement or the Pooling and Servicing
Agreement or in any certificate delivered pursuant hereto or thereto;
provided, however, that the Servicer shall not be so required to indemnify
any such Person or otherwise be liable to any such Person hereunder for (i)
any Losses incurred for or on account of or arising from or in connection
with or otherwise with respect to any breach of any representation or
warranty set forth in the Pooling and Servicing Agreement a remedy for the
breach of which is provided in Section 3.03 of the Pooling and Servicing
Agreement or (ii) any Losses asserted by any such Person constituting
indirect or consequential damages incurred by such Person.
SECTION 10.02. Costs and Expenses. The Transferor agrees to pay on demand
to (a) the Agent and the Purchaser all reasonable costs and expenses in
connection with the preparation, execution, delivery and administration
(including any amendments, waivers or consents, other than amendments, waivers
and consents made solely at the request of the Purchaser or the Agent, as
opposed to the Transferor or the Servicer) of this Agreement and the other
documents to be delivered hereunder or in connection herewith, including,
without limitation, (i) the reasonable fees and out-of-pocket expenses of
counsel for each of the Agent and the Purchaser, with respect thereto and with
respect to advising each of the Agent and the Purchaser, as to its respective
rights
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and remedies under this Agreement and the other documents delivered hereunder or
in connection herewith, (ii) rating agency fees, costs and expenses incurred in
connection with the purchase by the Purchaser of the Certificates, and (iii)
other reasonable fees, costs and expenses incurred by the Purchaser or the Agent
in connection with the purchase by the Purchaser of the Certificates (including
trustee's fees, costs and expenses), and (b) to the Agent and any other Affected
Party, all reasonable costs and expenses, if any (including reasonable counsel
fees and expenses), in connection with the enforcement of this Agreement, and
the other documents delivered hereunder or in connection herewith.
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ARTICLE XI
THE AGENT
SECTION 11.01. Authorization and Action. (a) Each of the Owners hereby
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement and any related agreement,
instrument and document as are delegated to the Agent by the terms hereof or
thereof, together with such powers as are reasonably incidental thereto. The
Agent reserves the right, in its sole discretion to exercise any rights and
remedies under this Agreement or any related agreement, instrument or document
executed and delivered pursuant hereto, or pursuant to applicable law, and also
to agree to any amendment, modification or waiver of this Agreement or any
related agreement, instrument and document, in each instance, on behalf of the
Owners. Notwithstanding anything herein or elsewhere to the contrary, the Agent
shall not be required to take any action which exposes the Agent to personal
liability or which is contrary to this Agreement or applicable law.
(b) The Purchaser and each subsequent Owner from time to time hereby
consents to the registration of the Certificates in the name of the Agent,
solely for purposes of administration and convenience, and agrees that in
such capacity the Agent shall have no beneficial ownership interest in any
Certificate. Without limiting the authorization of and delegation to the
Agent set forth in the foregoing Section 11.01(a), it is hereby
acknowledged and agreed that all payments in respect of any Certificates
and in respect of fees and other amounts owing to the Owners under this
Agreement shall, except as otherwise expressly provided herein, be remitted
by the applicable payor to the Agent, and the Agent shall distribute all
such amounts, promptly following receipt thereof, to the applicable parties
in interest according to their respective interests therein, determined by
reference to the terms of the Pooling and Servicing Agreement, the
Supplement, this Agreement and the Agent's books and records relating to
such Certificates, the Pooling and Servicing Agreement, the Supplement and
this Agreement (it being agreed that the entries made in such books and
records of the
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Agent shall be conclusive and binding for all purposes absent manifest
error).
SECTION 11.02. Agent's Reliance, Etc. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them as Agent under or in connection with this
Agreement or any related agreement, instrument or document except for its or
their own gross negligence or willful misconduct. Without limiting the
foregoing, the Agent: (a) may consult with legal counsel (including counsel for
the Transferor, the Servicer or the Trustee), independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (b) makes no warranty or representation to any
Owner and shall not be responsible to any Owner for any statements, warranties
or representations made in or in connection with this Agreement or in connection
with any related agreement, instrument or document; (c) shall not have any duty
to ascertain or to inquire as to the performance or observance of any of the
terms, covenants or conditions of this Agreement or any related agreement,
instrument or document on the part of the Transferor, the Servicer or the
Trustee or to inspect the property (including the books and records) of the
Transferor, the Servicer or the Trustee; (d) shall not be responsible to any
Owner for the due execution, legality, validity, enforceability, genuineness or
sufficiency of value of this Agreement or any related agreement, instrument or
document; (e) shall not be deemed to be acting as any Owner's trustee or
otherwise in a fiduciary capacity hereunder or in connection with any related
agreement, instrument or document; and (f) shall incur no liability under or in
respect of this Agreement or any related agreement, instrument or document by
acting upon any notice (including notice by telephone), consent, certificate or
other instrument or writing (which may be by telex or facsimile) believed by it
to be genuine and signed or sent by the proper party or parties.
SECTION 11.03. Agent and Affiliates. To the extent that the Agent or any of
its Affiliates shall become an Owner,
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the Agent or such Affiliate, in such capacity, shall have the same rights and
powers under this Agreement and each related agreement, instrument and document
as would any Owner and may exercise the same as though it were not the Agent or
such Affiliate, as the case may be. The Agent and its Affiliates may generally
engage in any kind of business with the Transferor or the Trustee, any Obligor
or any of their respective Affiliates and any Person who may do business with or
own securities of any of the foregoing, all as if it were not the Agent or such
Affiliate, as the case may be, and without any duty to account therefor to the
Owners.
SECTION 11.04. Purchase Decision. Each Owner acknowledges that it has,
independently and without reliance upon the Agent, any other Owner or any of
their respective Affiliates, and based on such documents and information as it
has deemed appropriate, made its own evaluation and decision to enter into this
Agreement and to invest in the Certificates (or such interest therein as such
Owner may hold). Each Owner also acknowledges that it will, independently and
without reliance upon the Agent, any other Owner or any of their respective
Affiliates, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own decisions in taking or not
taking action under this Agreement or any related agreement, instrument or other
document.
SECTION 11.05. Indemnification. Each Owner (other than the Purchaser)
agrees to indemnify the Agent (to the extent not reimbursed by any the
Transferor), ratably according to its share of the aggregate outstanding
principal balance of the Certificates from time to time, from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses, or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against the Agent
in any way relating to or arising out of this Agreement or any related
agreement, instrument or document, or any action taken or omitted by the Agent
under this Agreement, or any related agreement, instrument or document;
provided, however, that an Owner shall not be liable for any portion of such
liabilities, obligations, losses, damages,
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penalties, actions, judgments, suits, costs, expenses, or disbursements
resulting from the Agent's gross negligence or willful misconduct. Without
limitation of the generality of the foregoing, each Owner (including the
Purchaser, but only to the extent the Purchaser is reimbursed by the Transferor
for such a expenses) agrees to reimburse the Agent, ratably according to its
share of the aggregate outstanding principal balance of the Certificates from
time to time, promptly upon demand, for any out-of-pocket expenses (including
reasonable counsel 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 or and related agreement,
instrument or document.
SECTION 11.06. Successor Agent. The Agent may resign at any time by giving
thirty days' notice thereof to the Owners, the Transferor and the Trustee and
such resignation shall become effective upon the appointment and acceptance of a
successor Agent as described below. Upon any such resignation, the Owners shall
have the right to appoint a successor Agent approved by the Transferor (which
approval will not be unreasonably withheld or delayed). If no successor Agent
shall have been so appointed by the Owners and accepted such appointment within
30 days after the retiring Agent's giving of notice of resignation, then the
retiring Agent may, on behalf of the Owners, appoint a successor Agent approved
by the Transferor (which approval will not be unreasonably withheld or delayed),
which successor Agent shall be (a) either (i) a commercial bank having a
combined capital and surplus of at least $250,000,000 or (ii) an Affiliate of
such bank and (b) experienced in the types of transactions contemplated by this
Agreement. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all of the rights, powers, 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 or removal
hereunder as Agent, the provisions of this Article XI shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent
hereunder.
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ARTICLE XII
MISCELLANEOUS
SECTION 12.01. Amendments, Etc. No amendment or waiver of any provision of
this Agreement, and no consent to any departure by the Transferor or the
Servicer herefrom, shall in any event be effective unless (a) the same shall be
in writing and signed by the Transferor, the Servicer, the Required Owners and
the Agent, and (b) each Rating Agency then rating the Commercial Paper Notes
shall have confirmed that such amendment, waiver or consent will not result in a
reduction or withdrawal of its then current rating of such Commercial Paper
Notes. Any such amendment, waiver or consent shall be effective in any event
only in the specific instance and for the specific purpose for which given.
SECTION 12.02. Notices, Etc. All notices and other communications provided
for hereunder shall, unless otherwise stated herein, be in writing (including
telecopies, telegraphic, telex or cable communication) and mailed, telecopied,
telegraphed, telexed, cabled or delivered, as to each party hereto, at its
address set forth below or at such other address as shall be designated by such
party in a written notice to the other party hereto. All such notices and
communications shall, when mailed, telecopied, telegraphed, telexed or cabled,
be effective when deposited in the mails, telecopied, delivered to the telegraph
company, confirmed by telex answer back or delivered to the cable company,
respectively.
If to the Purchaser:
Sheffield Receivables Corporation
c/o Barclays Bank PLC
222 Broadway
New York, New York 10038
Attention: Michael Wade
Telephone No.: (212) 412-2812
Telecopier No.: (212) 412-6846
51
<PAGE> 52
With a copy to the Agent;
If to the Agent:
Barclays Bank PLC
222 Broadway
New York, New York 10038
Attention: Michael Wade
Telephone No.: (212) 412-2812
Telecopier No.: (212) 412-6846;
If to the Transferor:
NextCard Funding Corp.
595 Market Street
Suite 2250
San Francisco, California 94105
Attention: Chief Financial Officer; and
If to the Servicer:
NextCard, Inc.
595 Market Street
Suite 950
San Francisco, California 94105
Attention: Chief Financial Officer
Telephone No.: (415) 826-9700
Telecopier No.: (415) 836-9701.
SECTION 12.03. No Waiver; Remedies. No failure on the part of any party
hereto to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 12.04. Binding Effect; Assignability. (a) This Agreement shall be
binding upon each of and inure to the benefit of the Transferor, the Servicer,
the Agent, the
52
<PAGE> 53
Owners and their respective successors and permitted assigns.
(b) Neither the Transferor nor the Servicer may assign any of its
rights and obligations hereunder or any interest herein without the prior
written consent of the Required Owners and the Agent.
(c) An Owner may, at any time, subject to the terms and
conditions hereinafter set forth and the terms and conditions of the
Supplement, (i) without the consent of the Transferor, assign, or grant
undivided participation interests in, any or all of its rights and
obligations hereunder or under the Certificates to the Purchaser, any
Liquidity Provider, any Enhancement Provider, Barclays or any Permitted
Assignee and (ii) with the prior written consent of the Transferor, such
consent not to be unreasonably withheld, assign, or grant undivided
participation interests in, any or all of its rights and obligations
hereunder or under the Certificates to any other Person; provided, however,
that (A) without the prior written consent of the Transferor, such consent
not to be unreasonably withheld, no participant (other than the Purchaser,
a Liquidity Provider, any Enhancement Provider or Barclays) or Affected
Party claiming through a participant (other than the Purchaser, a Liquidity
Provider, an Enhancement Provider or Barclays) shall be entitled to receive
any payment pursuant to Sections 2.07, 2.08, 2.09 or 10.02 in excess of the
amount that the Owner granting such participation interest would have been
entitled to receive had such participation interest not been sold to such
participant; (B) in the case of any transfer by sale, assignment or
participation, the transferee as a condition of transfer shall be subject
to compliance with subsections 2.09(e) and (f) hereof; (C) the aggregate
number of Owners at any time shall not exceed [*] (excluding, if
applicable, any Federal Reserve Bank to which a pledge is made); and (D) no
assignment or participation hereunder shall be effective unless the Agent
shall have first consented thereto in writing, such consent being required
for the purpose of assuring compliance with the requirements of this
subsection 12.04(c). Any assignment or grant of a participation interest by
an Owner pursuant to this subsection 12.04(c) shall be effected pursuant to
documentation satisfactory in form and substance to
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
53
<PAGE> 54
the Agent. Upon the consummation of any such assignment or sale hereunder,
the assignee shall be subject to all of the obligations and entitled to all
of the rights and benefits of the assignor hereunder. The Agent shall
promptly notify the Transferor of any sale, assignment or participation
under this Section 12.04. The Purchaser hereby agrees that promptly
following the sale of any assignment or participation by any Liquidity
Provider or Enhancement Provider of all or any portion of its rights and
obligations under the applicable Liquidity Agreement or Enhancement
Agreement, the Purchaser, to the extent that the Transferor's prior consent
to such assignment or participation is not required hereunder, shall notify
the Transferor thereof, specifying the transferor, the transferee and the
extent of the applicable assignment or participation.
(d) It is expressly agreed that, in connection with any assignment,
sale or other transfer or any proposed assignment, sale or other transfer
of any Certificate or any interest therein, each Owner making or proposing
to make such assignment, sale or other transfer may provide such
information regarding the Receivables, the Trust, the Pooling and Servicing
Agreement and the Supplement as such Owner may deem appropriate to any such
assignee, purchaser or other transferee or proposed assignee, purchaser or
other transferee, as applicable (any such Person being a "Transferee"), of
such Certificate or such interest therein, provided, that the Transferor
shall have the right to review and participate in the preparation of such
information for distribution to any Transferee and, provided, further, that
prior to any such disclosure of such information, such Transferee shall
have agreed to maintain the confidentiality of such information designated
by the Transferor as confidential on substantially the basis set forth in
Section 12.10.
(e) Except as otherwise expressly provided herein, no Owner shall
assign, sell or otherwise transfer any Certificates or any interest therein
to any Person unless such Person delivers to the Transferor a duly executed
letter substantially in the form of the Investment Letter.
(f) The Agent may assign at any time its rights and
54
<PAGE> 55
obligations hereunder and interests herein as Agent (i) without the consent
of the Owners or the Transferor, to any Affiliate of Barclays and (ii) with
the prior written consent of the Transferor (such consent not to be
unreasonably withheld), to any other Person.
(g) Each Owner may assign and pledge all or a portion of such Owner's
interest in the Certificates to any Federal Reserve Bank as collateral to
secure any obligation of such Owner to such Federal Reserve Bank.
Notwithstanding anything to the contrary herein or in the Supplement, such
assignment may be made at any time without notice or other obligation with
respect to the assignment, including the delivery of an Investment Letter.
(h) This Agreement shall create and constitute the continuing
obligations of the parties hereto in accordance with its terms, and shall
remain in full force and effect until the Collection Date; provided,
however, that the provisions of Sections 10.01, 10.02, 12.07, 12.09 and
12.10 shall be continuing and shall survive any termination of this
Agreement.
(i) To the extent that pursuant to the terms of the Supplement or this
Agreement, the Transferor has the right to procure a replacement for the
Agent or any Owner, and the Person proposed to be replaced is either
Barclays or the Purchaser, the Transferor agrees that it shall not be
entitled to replace either such Person in any capacity under or in
connection with this Agreement or the Supplement unless each of the
Purchaser and Barclays is replaced in each and every capacity in which it
acts under or in connection with this Agreement and the Supplement. Without
limiting the foregoing, each of the Purchaser and the Agent hereby agrees
to take all actions necessary to permit a replacement to succeed to its
respective rights and obligations hereunder.
SECTION 12.05. Certificates as Evidence of Indebtedness. It is the intent
of the Transferor, the Purchaser and the other Owners that, for all federal,
state, local and foreign taxes, the Certificates will be evidence of
indebtedness of the Transferor. Each of the Transferor, the Purchaser and the
55
<PAGE> 56
other Owners agrees to treat the Certificates for purposes of all federal,
state, local and foreign taxes as indebtedness of the Transferor secured by the
Receivables and other assets held in the Trust.
SECTION 12.06. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW PROVISIONS EXCEPT SECTION 5-1401 OF THE
NEW YORK GENERAL OBLIGATIONS LAW.
SECTION 12.07. No Proceedings. (a) The Transferor, each Owner and the Agent
each hereby agrees that it will not, prior to the date that is one year and one
day after the latest maturing commercial paper note, medium term note or other
debt instrument issued by the Purchaser has been issued, acquiesce, petition or
otherwise invoke or cause the Purchaser to invoke the process of any
Governmental Authority for the purpose of commencing or sustaining a case
against the Purchaser 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 Purchaser or any substantial part
of its property or ordering the winding-up or liquidation of the affairs of the
Purchaser. The Transferor, each Owner and the Agent each hereby further agrees
that prior to the date that is one year and one day after the latest maturing
commercial paper note, medium term note or other debt instrument issued by the
Purchaser has been issued, amounts payable by the Purchaser under or in
connection with this Agreement as reimbursement for out-of-pocket expenses or
indemnification shall be payable only to the extent that payment thereof will
not render the Purchaser insolvent and is made from funds of the Purchaser that
are freely distributable by the Purchaser at the Purchaser's discretion.
(b) Each Owner and the Agent hereby agrees that it will not, prior to
the date that is one year and one day after the termination of the Pooling
and Servicing Agreement with respect to the Trust or the Transferor,
acquiesce, petition or otherwise invoke or cause the Trust or the
Transferor to invoke
56
<PAGE> 57
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. Each Owner and the Agent each further agrees that
prior to the date that is one year and one day after the termination of the
Pooling and Servicing Agreement with respect to the Transferor, amounts
payable by the Transferor under or in connection with this Agreement as
reimbursement for out-of-pocket expenses or indemnification shall be
payable only to the extent that payment thereof will not render the
Transferor insolvent and is made from funds of the Transferor that are
freely distributable by the Transferor at the Transferor's discretion.
(c) The provisions of this Section 12.07 shall survive the termination
of this Agreement.
SECTION 12.08. Execution in 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.
SECTION 12.09. No Recourse. (a) No recourse under or with respect to any
obligation, covenant or agreement (including, without limitation, the payment of
any fees or any other obligations) of the Purchaser (whether in its capacity as
the Purchaser or as an Owner under this Agreement) as contained in this
Agreement or any other agreement, instrument or document entered into by it
pursuant hereto or in connection herewith shall be had against any incorporator,
affiliate, stockholder, officer, employee or director of the Purchaser, as such,
by the enforcement of any assessment or by any legal or equitable proceeding, by
virtue of any statute or otherwise (except to the extent that recourse against
any such Person arises from the
57
<PAGE> 58
gross negligence or willful misconduct of such Person); it being expressly
agreed and understood that the agreements of the Purchaser contained in this
Agreement and all of the other agreements, instruments and documents entered
into by it pursuant hereto or in connection herewith are, in each case, solely
the corporate obligations of the Purchaser, and that no personal liability
whatsoever shall attach to or be incurred by any incorporator, stockholder,
affiliate, officer, employee or director of the Purchaser, as such, or any of
them, under or by reason of any of the obligations, covenants or agreements of
the Purchaser contained in this Agreement or in any other such instruments,
documents or agreements, or which are implied therefrom, and that any and all
personal liability of each incorporator, stockholder, affiliate, officer,
employee or director of the Purchaser, or any of them, for breaches by the
Purchaser of any such obligations, covenants or agreements, which liability may
arise either at common law or at equity, or by statute or constitution, or
otherwise, is hereby expressly waived except to the extent that such personal
liability of any such Person arises from the gross negligence or willful
misconduct of such Person.
(b) The provisions of this Section 12.09 shall survive the termination
of this Agreement.
SECTION 12.10. Confidentiality. Each Owner and the Agent hereby agrees to
take such measures as shall be reasonably requested by the Transferor to protect
and maintain the confidentiality of such information relating to the Receivables
as such Transferor may from time to time expressly identify to such Owner or the
Agent (as the case may be) as confidential information; provided, however, that
none of the Owners or the Agent shall be obligated to take or observe any such
measure if to do so would, in the reasonable judgment of such Owner or the
Agent, as the case may be, (a) be inconsistent with any Requirement of Law or
compliance by such Owner or the Agent with any binding request of any regulatory
body having jurisdiction over such Owner or the Agent, as the case may be or (b)
materially and adversely affect the ability of such Owner or the Agent to
perform its obligations hereunder or in connection herewith or to enforce its
rights hereunder or in connection herewith.
58
<PAGE> 59
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
NEXTCARD FUNDING CORP.
By: /s/ JOHN V. HASHMAN
-----------------------------------
Name: John V. Hashman
Title: Chief Financial Officer
NEXTCARD, INC.
By: /s/ JOHN V. HASHMAN
-----------------------------------
Name: John V. Hashman
Title: Chief Financial Officer
SHEFFIELD RECEIVABLES CORPORATION
By: Barclays Bank PLC,
as attorney-in-fact
By: /s/ ANDREW SHUSTER
-----------------------------------
Name: Andrew Shuster
Title: Associate Director
BARCLAYS BANK PLC, as the Agent
By: /s/ ANDREW SHUSTER
-----------------------------------
Name: Andrew Shuster
Title: Associate Director
Signature Page -- 59
to
Certificate Purchase Agreement
Dated as of May 21, 1999
(NextCard Master Trust, Series 1999-2)
<PAGE> 1
EXHIBIT 10.7
[Execution Copy]
================================================================================
CERTIFICATE PURCHASE AGREEMENT
Dated as of June 16, 1999
among
NEXTCARD FUNDING CORP.,
as the Transferor,
NEXTCARD, INC.,
as the Servicer,
HOLLAND LIMITED SECURITIZATION, INC.,
as the Purchaser,
and
ING BARING (U.S.) CAPITAL MARKETS LLC,
as the Agent
================================================================================
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS 1
<TABLE>
<S> <C> <C>
SECTION 1.01. Terms Defined in the Supplement and the Pooling and Servicing
Agreement; Certain Defined Terms 1
SECTION 1.02. Accounting Terms; Other Terms 12
SECTION 1.03. Other Rules of Construction 12
SECTION 1.04. Computation of Time Periods 13
ARTICLE II
PURCHASE AND SALE; PURCHASE COMMITMENT 13
SECTION 2.01. Purchase and Sale of the Certificates 13
SECTION 2.02. Purchase Price 13
SECTION 2.03. Increases and Decreases in the Invested Amount 13
SECTION 2.04. Commitment Fee 14
SECTION 2.05. Termination or Reduction of the Facility Limit 14
SECTION 2.06. Calculation and Payment of Monthly Interest and Fees; Selection
of Commercial Paper Note Maturities 15
SECTION 2.07. Increased Costs 15
SECTION 2.08. Increased Capital 17
SECTION 2.09. Taxes 18
ARTICLE III
CLOSING 22
SECTION 3.01. Closing 22
SECTION 3.02. Transactions to be Effected at the Closing 23
ARTICLE IV
PURCHASER CONDITIONS PRECEDENT 23
SECTION 4.01. Conditions Precedent to the Purchase of the Certificates 23
SECTION 4.02. Conditions Precedent to Invested Amount Increases 25
ARTICLE V
TRANSFEROR CONDITIONS PRECEDENT 25
SECTION 5.01. Conditions Precedent to the Sale of the Certificates 25
ARTICLE VI
REPRESENTATIONS AND WARRANTIES 27
SECTION 6.01. Corporate Existence 27
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 6.02. Corporate Authority 27
SECTION 6.03. No Consents Required 28
SECTION 6.04. No Violation 28
SECTION 6.05. Financial Statements 28
SECTION 6.06. No Proceeding 29
SECTION 6.07. Trust Indenture Act; Investment Company Act 29
SECTION 6.08. No Pay Out Event or Other Default 29
SECTION 6.09. The Certificates 30
SECTION 6.10. Absence of Material Adverse Change 30
SECTION 6.11. Taxes, Etc 30
SECTION 6.12. Disclosure 30
SECTION 6.13. Year 2000 Plan 30
SECTION 6.14. FICO Scores 31
SECTION 6.15. Location of Offices 31
SECTION 6.16. Pooling and Servicing Representations and Warranties 31
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND THE AGENT 31
SECTION 7.01. Organization 32
SECTION 7.02. Authority 32
SECTION 7.03. Securities Act 32
SECTION 7.04. Investment Company Act 32
ARTICLE VIII
COVENANTS OF THE TRANSFEROR 33
SECTION 8.01. Access to Information 33
SECTION 8.02. Reporting Requirements of the Transferor 33
SECTION 8.03. Optional Repurchase 34
SECTION 8.04. Location of Chief Executive Office 35
ARTICLE IX
[RESERVED] 35
ARTICLE X
INDEMNIFICATION 35
SECTION 10.01. Indemnification by the Transferor and the Servicer 35
SECTION 10.02. Costs and Expenses 36
ARTICLE XI
THE AGENT 37
SECTION 11.01. Authorization and Action 37
SECTION 11.02. Agent's Reliance, Etc. 37
SECTION 11.03. Agent and Affiliates 38
SECTION 11.04. Purchase Decision 38
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 11.05. Indemnification 39
SECTION 11.06. Successor Agent 39
ARTICLE XII
MISCELLANEOUS 40
SECTION 12.01. Amendments, Etc. 40
SECTION 12.02. Notices, Etc. 40
SECTION 12.03. No Waiver; Remedies 41
SECTION 12.04. Binding Effect; Assignability 42
SECTION 12.05. Certificates as Evidence of Indebtedness 44
SECTION 12.06. Governing Law 44
SECTION 12.07. No Proceedings 45
SECTION 12.08. Execution in Counterparts 46
SECTION 12.09. No Recourse 46
SECTION 12.10. Confidentiality 47
</TABLE>
iii
<PAGE> 5
CERTIFICATE PURCHASE AGREEMENT dated as of June 16, 1999, among NEXTCARD
FUNDING CORP., a Delaware corporation, as the Transferor, NEXTCARD, INC., a
Delaware corporation ("NextCard"), as the Servicer, HOLLAND LIMITED
SECURITIZATION, INC., a Delaware corporation (the "Purchaser") and ING BARING
(U.S.) CAPITAL MARKETS LLC, ("ING Capital"), as agent (in such capacity, the
"Agent") for the Purchaser and the other "Owners" (as defined below).
In consideration of the representations, warranties and agreements herein
contained, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Terms Defined in the Supplement and the Pooling and Servicing
Agreement; Certain Defined Terms. Unless otherwise defined herein, terms defined
in the Supplement (as defined below) or the Pooling and Servicing Agreement (as
defined below) are used herein with the meanings ascribed to them therein. In
addition, as used herein, the following terms shall have the following meanings:
"Act" shall mean the Securities Act of 1933.
"Additional Amounts" shall mean, for each Interest Period, an amount equal
to the sum of (a) the aggregate amount payable to all Affected Parties pursuant
to Sections 2.07, 2.08 and 2.09 in respect of such Interest Period and (b) the
aggregate of such amounts with respect to prior Interest Periods which remain
unpaid.
"Affected Party" shall mean the Purchaser, the Agent, ING Bank, each
Liquidity Provider, any permitted assignee of the Purchaser or any Liquidity
Provider, any Enhancement Provider and any assignee of any Enhancement Provider.
"Agreement" shall mean this agreement and any supplements, amendments,
exhibits and schedules hereto.
"Alternative Rate" shall mean, with respect to any Interest Period (or
portion thereof), an interest rate per annum equal to the Eurodollar Rate
(Reserve Adjusted) unless the Transferor, following consultation with the Agent,
specifies in writing that the "Alternative Rate" for any
<PAGE> 6
Interest Period shall be the Alternate Base Rate; provided, however, that:
(a) if the Required Owners shall notify the Agent prior to the related
rate determination date that a Eurodollar Rate Disruption Event has
occurred and is continuing, then the "Alternative Rate" for such Interest
Period (or portion thereof) shall be an interest rate per annum equal to
the Alternate Base Rate in effect from time to time during such Interest
Period (or portion thereof) unless the Agent and the Transferor agree in
writing to a different rate;
(b) if any Owner shall have notified the Agent on or before the
applicable rate determination date that the Eurodollar Rate for any
Interest Period (or portion thereof) does not accurately reflect the cost
to such Owners of funding their respective investments in the Certificates
for such Interest Period (or portion thereof), then the "Alternative Rate"
with respect to such Owner's share of the outstanding principal balance of
the Certificates for such Interest Period (or portion thereof) shall be an
interest rate per annum equal to the Alternate Base Rate in effect from
time to time during such Interest Period (or portion thereof) unless (i)
such Owner is the Purchaser and the commercial paper rating on the
Commercial Paper Notes has been downgraded to a level less than A-1 from
Standard & Poor's and F-1 from Fitch for reasons unrelated to the
investment of the Purchaser in the Certificates or (ii) the Agent and the
Transferor agree in writing to a different rate; and
(c) if for any reason the Alternative Rate becomes applicable on
notice to the Agent of less than three Business Days (determined giving
effect to clause (b) of the definition of "Business Day"), the "Alternative
Rate" shall be the Alternate Base Rate in effect from time to time during
the period prior to the satisfaction of such three Business Days' notice
requirement (determined giving effect to clause (b) of the definition of
"Business Day").
"Alternate Base Rate" shall mean, on any date, a fluctuating rate of
interest per annum equal to the sum of (a) the Applicable Margin and (b) the
highest of:
2
<PAGE> 7
(i) the arithmetic average of the rates of interest publicly
announced by The Chase Manhattan Bank, Citibank, N.A. and Morgan
Guaranty Trust Company of New York (or their respective successors) as
their respective prime commercial lending rates (or, as to any such
bank that does not announce such a rate, such bank's "base" or other
rate determined by the Agent to be the equivalent rate announced by
such bank), except that, if any such bank shall, for any period, cease
to announce publicly its prime commercial lending (or equivalent)
rate, the Agent shall, during such period, determine a rate for
purposes of this clause (a) based upon the prime commercial lending
(or equivalent) rates announced publicly by the other such banks; it
being understood, further, that (A) the prime commercial lending (or
equivalent) rates used in computing a rate for purposes of this clause
(i) are not intended to be the lowest rates of interest charged by
such banks in connection with extensions of credit to debtors and (B)
the rate determined pursuant to this clause (i) shall change as and
when such banks' prime commercial lending (or equivalent) rates
change; and
(ii) the Federal Funds Rate plus 0.50%.
"Applicable Margin" shall have the meaning specified in the Fee Letter.
"Breakage Costs" means, for each Owner for each funding period, to the
extent that an Owner is funding the maintenance of its investment in the
Invested Amount during such funding period through the issuance of Commercial
Paper Notes or at the Eurodollar Rate (Reserve Adjusted), during which the
amount of such investment is reduced (in whole or in part) prior to the end of
the period for which it was originally scheduled to remain outstanding, whether
as a result of the commencement of a Limited Amortization Period or otherwise
(the amount of such reduced investment being referred to as the "Allocated
Amount"), the excess of (a) the discount or interest that would have accrued on
the Allocated Amount during the remainder of such funding period if such
reduction had not occurred over (b) the income scheduled to be received by such
Owner from investing the Allocated Amount for the remainder of such funding
period, it being understood that in investing such Allocated Amount such Owner
will, but without limitation to its discretion, endeavor to minimize the
associated Breakage Costs.
3
<PAGE> 8
"Business Day" shall mean a day that is (a) a "Business Day" under and as
defined in the Pooling and Servicing Agreement and (b) when used in connection
with the Eurodollar Rate, a day on which dealings in Dollars are carried on in
the London interbank market and, if the Eurodollar Rate is being determined
pursuant to the second sentence of the definition of "Eurodollar Rate," in the
eurodollar interbank market of the Agent's Eurodollar Office.
"Certificate Documents" shall mean the Pooling and Servicing Agreement, the
Series 1999-1 Supplement, each Receivables Purchase Agreement and the
Certificates.
"Certificate Rate" shall mean, for any Interest Period, the Cost of Funds
for such Interest Period, adjusted, as necessary, to yield, when applied to the
outstanding principal balance of the Certificates, an amount sufficient to pay
interest on the incremental effective principal balance of any funding resulting
from the capitalization of interest during such Interest Period; provided,
however, to the extent that a Pay Out Event (other than a Pay Out Event
occurring pursuant to Section 6.01(n) or (o) of the Supplement) is continuing
for all or any portion of any Interest Period, the Certificate Rate for such
Interest Period shall be increased by a percentage equal to the product of (a)
2.00% and (b) a fraction having as its numerator, the number of days in such
Interest Period that such Pay Out Event was continuing, and as its denominator,
360. On the Business Day immediately preceding each Determination Date, the
Agent shall notify the Servicer and the Trustee of the Certificate Rate for the
related Interest Period.
"Closing" shall have the meaning set forth in Section 3.01.
"Closing Date" shall have the meaning set forth in Section 3.01.
"Collection Date" shall mean the earliest Business Day following the
termination (as opposed to suspension) of the Revolving Period on which the
Invested Amount shall have been reduced to zero and all other amounts due to the
Owners shall have been paid in full.
"Commercial Paper Notes" shall mean short-term promissory notes issued or
to be issued by the Purchaser to
4
<PAGE> 9
fund its investments in accounts receivable and other financial assets.
"Commitment Fee Rate" shall have the meaning specified in the Fee Letter.
"Cost of Funds" shall mean, for any Interest Period, the weighted average
(based upon time and dollar amount) of the following rates applicable during
such Interest Period for each Owner: (a) to the extent such Owner is the
Purchaser and funds its share of the outstanding principal balance of the
Certificates for such Interest Period by issuing Commercial Paper Notes, a rate
equal to the CP Rate for such Interest Period and (b) to the extent such Owner
either (i) is not the Purchaser or (ii) is the Purchaser and funds its share of
the Invested Amount for such Interest Period other than by issuing Commercial
Paper Notes, a rate equal to the Alternative Rate for such Interest Period or
such other rate as the Agent and the Transferor shall agree to in writing.
"CP Rate" shall mean with respect to any Interest Period (or portion
thereof), the sum of (a) the Applicable Margin and (b) the per annum rate
calculated to yield the "weighted average cost" (as defined below) related to
the issuance of Commercial Paper Notes that are allocated, in whole or in part
by the Purchaser (or by the Agent) to fund or maintain its interest in the
Certificates during such Interest Period (or portion thereof) and all interests
in receivables or other financial assets of "Other Pool Transferors" (as defined
below), if any, held by the Purchaser; provided, however, that if any component
of such rate is a discount rate, in calculating the "CP Rate" for such Interest
Period (or portion thereof) the Purchaser shall for such component use the rate
resulting from converting such discount rate to an interest-bearing equivalent
rate per annum. As used in this definition, (a) the Purchaser's "weighted
average cost" for any Interest Period means the sum of (i) the actual interest
paid to purchasers of the applicable Commercial Paper Notes, (ii) the
commissions of placement agents and dealers in respect of such Commercial Paper
Notes; provided, however, that such commissions shall not exceed [*] of the
outstanding face amount of such Commercial Paper Notes from time to time unless
the Agent shall have provided the Transferor with prior notice that such
commissions will exceed such amount, and (iii) other borrowings by the Purchaser
(other than under any Liquidity Agreement), including to fund small or odd
dollar amounts that are not easily accommodated
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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<PAGE> 10
in the commercial paper market and (b) "Other Pool Transferors" means all other
Persons that transfer interests (including security interests) in receivables or
other financial assets to the Purchaser to the extent that such interests in
receivables or other financial assets are aggregated with the interest of the
Purchaser in the Certificates and funded on a pooled basis by the Purchaser; and
provided, further, that at all times following the occurrence of a Pay Out
Event, the "CP Rate" for any Interest Period (or portion thereof) shall be the
Alternative Rate in effect from time to time.
"Discount Amount" shall mean at any time an amount equal to:
FL - FL
---------------
Discount Factor
where:
FL = the Facility Limit in effect on the
date of determination
Discount
Factor = [*], or such other number (equal to
or greater than 1.00) designated by
the Agent to the Transferor.
"Dollars" or "$" shall mean lawful money of the
United States.
"Enhancement Agreement" shall mean and include any agreement (other than
any Liquidity Agreement) outstanding from time to time for the benefit of the
Purchaser providing for the issuance of one or more letters of credit or surety
bonds for the account of the Purchaser, the making of loans to the Purchaser or
any other extensions of credit to or for the account of the Purchaser to support
all or any part of the Purchaser's payment obligations under its Commercial
Paper Notes or to provide an alternate means of funding the Purchaser's
investments in accounts receivable or other financial assets, in each case, as
amended, supplemented or otherwise modified from time to time.
"Enhancement Provider" shall mean and include ING Capital, ING Bank and any
other or additional bank, financial guaranty insurance company or other
financial institution now or hereafter extending credit or having a commitment
to extend
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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<PAGE> 11
credit to or for the account of the Purchaser under an Enhancement Agreement so
long as such other or additional bank, financial guaranty insurance company or
other financial institution is, at the time of each extension of such credit and
each incurrence of a commitment to extend such credit, ING Capital, ING Bank or
a Person consented to in writing by the Transferor (such consent not to be
unreasonably withheld).
"Eurocurrency Liabilities" shall have the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurodollar Office" shall mean such office or offices through which the
Agent determines the Eurodollar Rate. A Eurodollar Office of the Agent may be,
at the option of the Agent, either a domestic or foreign office.
"Eurodollar Rate" shall mean, with respect to any Interest Period (or
portion thereof), a per annum rate of interest equal to the rate shown on page
3750 of the Dow Jones & Company Telerate screen or any successor page as the
composite offered rate for London interbank deposits for a period approximating
such Interest Period (or portion thereof), as shown under the heading "USD" as
of 11:00 A.M. (London time) on the second Business Day before (and for value on)
the first day of such Interest Period (or portion thereof). In the event no such
rate appears, the Eurodollar Rate shall be, with respect to any Interest Period,
the per annum rate of interest at which Dollar deposits in immediately available
funds are offered to the Eurodollar Office of the Agent by prime banks in the
interbank eurodollar market at or about 10:00 a.m., London time, on the second
Business Day before (and for value on) the first day of such Interest Period (or
portion thereof) and in an amount of not less than $1,000,000 for such Interest
Period (or portion thereof).
"Eurodollar Rate (Reserve Adjusted)" shall mean, with respect to any
Interest Period (or portion thereof), the sum of (a) the Applicable Margin and
(b) the per annum rate of interest (rounded upward, if necessary, to the nearest
whole multiple of 1/16th of one percent per annum) determined by dividing (i)
the Eurodollar Rate for such Interest Period (or portion thereof) by (ii) one
minus the Eurodollar Reserve Percentage (expressed as a decimal) applicable
during such Interest Period (or portion thereof).
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<PAGE> 12
"Eurodollar Rate Disruption Event" shall mean, for any Owner for any
Interest Period, any of the following: (a) a determination by such Owner that it
would be contrary to law or to the directive of any central bank or other
Governmental Authority to obtain Dollars in the London interbank market to fund
or maintain its investment in the Certificates for such Interest Period or (b)
the inability of such Owner by reason of circumstances affecting the London
interbank market generally, to obtain Dollars in such market to fund its
investment in the Certificates for such Interest Period.
"Eurodollar Reserve Percentage" shall mean, with respect to any Interest
Period (or portion thereof), the reserve percentage (rounded upwards, if
necessary, to the nearest 1/16th of one percent per annum) applicable during
such Interest Period (or portion thereof) (or, if more than one such percentage
shall be so applicable during such Interest Period, the daily average of such
percentages for those days in such Interest Period (or portion thereof) during
which any such percentages shall be in effect) under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including, without
limitation, any emergency, supplemental or other marginal reserve requirement)
for banks or other financial institutions subject to such regulations with
respect to liabilities or assets consisting of or including Eurocurrency
Liabilities having a term equal to such Interest Period (or portion thereof).
"Excluded Taxes" shall have the meaning specified in Section 2.09(a).
"Facility Limit" shall mean, at any time, $150,000,000, as such amount may
be reduced from time to time pursuant to Section 2.05.
"Federal Bankruptcy Code" shall mean the bankruptcy code of the United
States of America codified in Title 11 of the United States Code.
"Federal Funds Rate" shall mean, for any period, a fluctuating per annum
interest rate for each day during such period equal to (a) 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 no such rate is published
8
<PAGE> 13
for such day because such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York; or (b) if such rate is
not so published for any day that is a Business Day, the average of the
quotations for such day on such transactions received by the Agent from three
federal funds brokers of recognized standing selected by it.
"Fee Letter" shall mean the letter agreement of even date herewith, among
the Transferor, NextCard, the Purchaser and the Agent, regarding certain fees
payable by the Transferor under or in connection with this Agreement, as the
same may be amended, restated or otherwise modified from time to time.
"Governmental Actions" shall mean any and all consents, approvals, permits,
orders, authorizations, waivers, exceptions, variances, exemptions or licenses
of, or registrations, declarations or filings with, any Governmental Authority
required under any Governmental Rules.
"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, whether of the United States of America, any state or other
political subdivision thereof or any other domestic or foreign jurisdiction.
"Governmental Rules" shall mean any and all laws, statutes, codes, rules,
regulations, ordinances, orders, writs, decrees and injunctions of any
Governmental Authority and any and all legally binding conditions, standards,
prohibitions, requirements and judgments of any Governmental Authority.
"ING Bank" shall mean ING Bank, N.V.
"ING Capital" shall have the meaning set forth in the preamble hereto.
"Interpretation" as used in Sections 2.07 and 2.08 hereof with respect to
any law or regulation shall mean the interpretation or application of such law
or regulation by any Governmental Authority (including, without limitation, any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government),
9
<PAGE> 14
central bank, accounting standards board, financial services industry advisory
body or any comparable entity.
"Liquidity Agreement" shall mean and include (a) the Liquidity Agreement of
even date herewith among the Purchaser, ING Capital, and the Liquidity Providers
supporting the Purchaser's payment obligations with respect to the Commercial
Paper Notes issued to fund its purchase or maintenance of the Certificates
hereunder, as amended, supplemented or otherwise modified from time to time, and
(b) any other agreement outstanding from time to time for the benefit of the
Purchaser providing for the sale by the Purchaser of undivided percentage
interests in the Certificates or the making of loans or other extensions of
credit to support all or part of the Purchaser's payment obligations under the
Commercial Paper Notes issued to fund its purchase or maintenance of the
Certificates or to provide an alternate means of funding the Purchaser's
investment in the Certificates hereunder, and under which the amount available
from such sale or such extension of credit is limited to an amount calculated by
reference to the value or eligible unpaid balance of such Certificates or any
portion thereof or the level of credit enhancement available with respect
thereto, in each case as amended, supplemented or otherwise modified from time
to time.
"Liquidity Provider" shall mean a financial institution providing liquidity
support to or for the account of the Purchaser pursuant to or in connection with
a Liquidity Agreement, so long as, at the time of each extension of such support
and each incurrence of a commitment to extend such support, such financial
institution is ING Capital, ING Bank or a Person consented to in writing by the
Transferor (such consent not to be unreasonably withheld).
"Losses" shall have the meaning set forth in Section 10.01.
"Monthly Interest" shall mean with respect to any Distribution Date, an
amount equal to the sum of (a) the product of (i) the Certificate Rate in effect
with respect to the Interest Period ending immediately prior to such
Distribution Date, (ii) the average daily principal balance of the Certificates
during such Interest Period, and (iii) a fraction the numerator of which is the
actual number of days in such Interest Period and the denominator of which is
360, plus (b) all Breakage Costs incurred by Owners during the immediately
preceding Interest Period.
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<PAGE> 15
"Other Taxes" shall mean any present or future stamp or documentary taxes
or any other excise or property taxes, charges or similar levies that arise from
any payment or deposit required to be made hereunder, under the Pooling and
Servicing Agreement or the Supplement or from the execution, delivery or
registration of, or otherwise with respect to, any of the foregoing.
"Owner" shall mean the Purchaser and all other owners by assignment,
participation or otherwise of a Certificate or any interest therein.
"Pooling and Servicing Agreement" shall mean the Amended and Restated
Pooling and Servicing Agreement dated as of May 21, 1999, among the Transferor,
the Servicer and the Trustee, as amended, supplemented or otherwise modified
from time to time in accordance with the terms thereof.
"Purchase Commitment" shall mean the commitment of the Purchaser to acquire
interests in the Certificates in a maximum aggregate principal amount
outstanding from time to time not to exceed the excess of the Facility Limit at
such time (as such amount may be reduced from time to time pursuant to Section
2.05) over the Discount Amount at such time.
"Purchase Commitment Termination Date" shall mean the earlier of (a) the
Business Day preceding the day on which the Scheduled Amortization Period
commences and (b) the Business Day preceding the day on which the Early
Amortization Period commences.
"Purchase Price" shall have the meaning set forth in Section 2.02.
"Required Owners" shall mean, at any time, those Owners owning interests in
Certificates aggregating 66-2/3% of the aggregate unpaid principal balance of
the Certificates at such time.
"Supplement" shall mean the Series 1999-1 Supplement dated as of June 16,
1999, among the Transferor, the Servicer and the Trustee.
"Taxes" shall have the meaning set forth in Section 2.09(a).
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<PAGE> 16
"Transferor" shall have the meaning specified in the preamble hereto.
"UCC" shall mean the Uniform Commercial Code as from time to time in effect
in the applicable jurisdiction.
"Year 2000 Plan" shall have the meaning set forth in Section 6.13.
"Year 2000 Problem" shall have the meaning set forth in Section 6.13.
SECTION 1.02. Accounting Terms; Other Terms. Any accounting terms used in
this Agreement shall, unless otherwise specifically provided, have the meanings
customarily given to them in accordance with generally accepted United States
accounting principles or United States regulatory accounting principles, as
applicable, as in effect from time to time, and all financial computations
hereunder shall, unless otherwise specifically provided, be computed in
accordance with generally accepted United States accounting principles or United
States regulatory accounting principles, as applicable, as in effect from time
to time, consistently applied. 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 1.03. Other Rules of Construction. References in this Agreement to
sections, schedules and exhibits are to sections of and schedules and exhibits
to this Agreement unless otherwise indicated. The words "hereof", "herein",
"hereunder" and comparable terms refer to the entirety of this Agreement and not
to any particular article, section or other subdivision hereof or attachment
hereto. Words in the singular include the plural and in the plural include the
singular. Unless the context otherwise requires, the word "or" is not exclusive.
The word "including" shall be deemed to mean "including, without limitation".
The section and article headings and table of contents contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Except as otherwise specified
herein, all references herein (a) to any Person shall be deemed to include such
Person's successors and assigns and (b) to any Governmental Rule or contract
specifically defined or referred to herein shall be deemed references to such
Governmental Rule or contract as the same may be supplemented, amended, waived,
consolidated,
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<PAGE> 17
replaced or modified from time to time, but only to the extent permitted by, and
effected in accordance with, the terms thereof.
SECTION 1.04. Computation of Time Periods. Unless otherwise stated in this
Agreement, in the computation of a period of time from a specified date to a
later specified date, the word "from" means "from and including" and the words
"to" and "until" each mean "to but excluding."
ARTICLE II
PURCHASE AND SALE; PURCHASE COMMITMENT
SECTION 2.01. Purchase and Sale of the Certificates. On the terms and
subject to the conditions set forth in this Agreement, and in reliance on the
covenants, representations, warranties and agreements herein set forth, the
Transferor agrees to sell, transfer and deliver to the Purchaser, at the
Closing, and the Purchaser agrees to purchase from the Transferor, at the
Closing, the Certificates.
SECTION 2.02. Purchase Price. The Certificates are to be purchased at an
initial purchase price (the "Purchase Price") of $0, representing 100% of the
Initial Invested Amount. Upon satisfaction of the conditions to closing set
forth in Articles IV and V, the Purchase Price is to be remitted to the
Transferor in immediately available funds by wire transfer pursuant to written
instructions to be provided to the Agent at least five Business Days prior to
the Closing Date.
SECTION 2.03. Increases and Decreases in the Invested Amount. (a) Subject
to the terms and conditions of Section 4.10 of the Supplement, the Purchaser
hereby agrees from the Closing Date to (but not including) the Purchase
Commitment Termination Date to fund any Invested Amount Increase requested by
the Transferor from the Purchaser in accordance with the procedures described in
Section 4.10 of the Supplement; provided, however, that at no time shall the
aggregate outstanding principal amount of the Certificates allocable to the
Purchaser exceed the Purchase Commitment. On the date of the applicable Invested
Amount Increase, the Purchaser shall remit to the Agent, in immediately
available funds, the amount of such Invested Amount Increase, whereupon
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<PAGE> 18
the Agent will remit such amount, in immediately available funds, to the
Transferor in accordance with such payment instructions as the Transferor shall
have delivered in writing to the Agent at least one Business Day prior to the
date of such Invested Amount Increase.
(b) The Invested Amount may be decreased from time to time in
accordance with the procedures described in the Supplement and, so long as
the Purchase Commitment Termination Date has not occurred, subsequently
increased in accordance with the requirements of this Agreement and Section
4.10 of the Supplement.
(c) Notwithstanding anything to the contrary contained herein, if any
Invested Amount Increase is not made on the date specified by the
Transferor in its written request therefor delivered pursuant to Section
4.10 of the Supplement, the Transferor shall indemnify each Affected Party
against any reasonable loss, cost or expense incurred by such Affected
Party as a result of such occurrence, including, without limitation, any
reasonable loss, cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Affected Party to
fund such anticipated Invested Amount Increase.
SECTION 2.04. Commitment Fee. From and after the Closing Date until the
Purchase Commitment Termination Date, the Transferor shall pay to the Purchaser
a commitment fee equal to the product of (a) the average daily amount of the
excess of (i) the Purchase Commitment over (ii) the aggregate outstanding
principal amount of all Certificates held by or for the benefit of the Purchaser
and (b) the Commitment Fee Rate, payable in arrears on each Distribution Date.
SECTION 2.05. Termination or Reduction of the Facility Limit. Upon at least
five Business Days' notice to the Purchaser, the Transferor may terminate in
whole or reduce in part the unused portion of the Facility Limit; provided,
however, that (i) any such reduction in part shall be in a minimum amount of
$10,000,000 or an integral multiple of $1,000,000 in excess thereof and (ii) if,
after giving effect to such reduction, the Facility Limit would be less than
$100,000,000, such reduction shall be either in such smaller amount as will not
cause the Facility Limit to be less than $100,000,000, or in an amount
sufficient to reduce the Facility Limit to zero.
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<PAGE> 19
SECTION 2.06. Calculation and Payment of Monthly Interest and Fees;
Selection of Commercial Paper Note Maturities. (a) The amount of interest
payable on each Distribution Date in respect of Certificates shall equal the
Monthly Interest for such Distribution Date. The Agent shall notify the
Servicer, the Trustee and the Purchaser, on the Business Day preceding each
Determination Date, of the Monthly Interest for the related Distribution Date
and the Certificate Rate for the related Interest Period.
(b) Out of the Monthly Interest received by the Agent for each
Interest Period as contemplated in Section 11.01(b), the Agent shall remit
to each Owner an amount of interest equal to the product of (i) such
Owner's cost of funds and (ii) such Owner's allocable share of the Invested
Amount during such Interest Period, plus the amount of any Breakage Costs
applicable to such Owner in respect of such Distribution Date.
(c) All computations of interest, fees and other amounts under this
Agreement shall be made on the basis of a year of 360 days and the actual
number of days elapsed. Whenever any payment or deposit to be made
hereunder shall be due on a day other than a Business Day, such payment or
deposit shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of such payment or
deposit.
(d) The Purchaser (or the Agent on its behalf) shall select the
maturities of Commercial Paper Notes allocated to fund or maintain the
Purchaser's interest in the Certificates in consultation with the
Transferor; provided, however, that (i) no such Commercial Paper Note shall
in any event mature more than 90 days after the date it is issued and (ii)
notwithstanding the Agent's agreement to consult with the Transferor in
selecting maturities for such Commercial Paper Notes, the Agent, on behalf
of the Purchaser, shall retain full and absolute discretion to select such
maturities.
SECTION 2.07. Increased Costs. (a) If due to the introduction of or any
change (including, without limitation, any change by way of imposition or
increase of reserve requirements) in or in the Interpretation of any law or
regulation or the imposition of any guideline or request from any central bank
or other Governmental Authority after the date hereof, there shall be an
increase in the cost to an Affected Party of making, funding or maintaining any
15
<PAGE> 20
investment in the Certificates or any interest therein or of agreeing to
purchase or invest in the Certificates or any interest therein, as the case may
be (other than by reason of any Interpretation of or change in laws or
regulations relating to Taxes or Excluded Taxes, such Affected Party shall
promptly submit to the Transferor, the Servicer and the Agent a certificate
setting forth in reasonable detail, the calculation of such increased costs
incurred by such Affected Party. In determining such amount, such Affected Party
may use any reasonable averaging and attribution methods, consistent with the
averaging and attribution methods generally used by such Affected Party in
determining amounts of this type. The amount of increased costs set forth in
such certificate (which certificate shall, in the absence of manifest error, be
prima facie evidence as to such amount) shall be included in the Additional
Amounts for (a) the first full Interest Period immediately succeeding the date
on which the certificate specifying the amount owing was delivered and (b) to
the extent remaining outstanding, each Interest Period thereafter until paid in
full. The Agent shall, out of amounts received by it (as contemplated in Section
11.01(b)) in respect of the Additional Amounts on any Distribution Date (as
contemplated in Section 11.01(b)), pay to each Affected Party, any increased
costs due pursuant to this Section 2.07, provided, however, that if the amount
distributable in respect of the Additional Amounts on any Distribution Date is
less than the aggregate amount payable to all Affected Parties pursuant to
Sections 2.07, 2.08 and 2.09 for the corresponding Interest Period, the
resulting shortfall shall be allocated among such Affected Parties on a pro rata
basis (determined by the amount owed to each). Failure on the part of any
Affected Party to demand compensation for any amount pursuant to this Section
2.07 for any period shall not constitute a waiver of such Affected Party's right
to demand compensation for such period; provided, however, that no Affected
Party shall be entitled to compensation for any such amount relating to any
period ending more than six months prior to the date that such Affected Party
notifies the Transferor, the Servicer and the Agent in writing thereof.
(b) Each Owner agrees that it shall use its best efforts to take (or
cause any Affected Party claiming through such Owner to take) such steps as
would eliminate or reduce the amount of any increased costs described in
this Section 2.07 incurred by such Owner or Affected Party; provided that
no such steps shall be required to be taken if, in the reasonable judgment
of such Owner or Affected Party, such
16
<PAGE> 21
steps would be disadvantageous to such Owner or Affected Party or
inconsistent with its internal policy and legal and regulatory
restrictions. To the extent that, notwithstanding such efforts, any Owner
that is a Liquidity Provider (or any Affected Party claiming through an
Owner that is a Liquidity Provider) is unable to eliminate such increased
costs and makes a demand hereunder, the Purchaser may replace such
Liquidity Provider with another commercial bank satisfactory to the
Purchaser, the Agent and the Transferor; provided, however, that the
Purchaser shall be under no obligation to so replace a Liquidity Provider
requesting any amount under this Section 2.07, and shall in no event
replace such Liquidity Provider if it is ING Capital.
SECTION 2.08. Increased Capital. (a) If the introduction of or any change
in or in the Interpretation of any law or regulation or the imposition of any
guideline or request from any central bank or other Governmental Authority, in
each case, after the date hereof, affects or would affect the amount of capital
required or expected to be maintained by any Affected Party, and such Affected
Party determines that the amount of such capital is increased as a result of (i)
the existence of the Purchaser's agreement to make or maintain an investment in
the Certificates or any interest therein and other similar agreements or
facilities, or (ii) the existence of any agreement by Affected Parties to make
or maintain an investment in the Certificates or any interest therein or to fund
any such investment and any other commitments of the same type, such Affected
Party shall promptly submit to the Transferor, the Servicer and the Agent a
certificate setting forth the additional amounts required to compensate such
Affected Party in light of such circumstances. In determining such amount, such
Affected Party may use any reasonable averaging and attribution methods,
consistent with the averaging and attribution methods generally used by such
Affected Party in determining amounts of this type. The amount set forth in such
certificate (which certificate shall, in the absence of manifest error, be prima
facie evidence as to such amount) shall be included in the Additional Amounts
for (a) the first full Interest Period immediately succeeding the date on which
the certificate specifying the amount owing was delivered and (b) to the extent
remaining outstanding, each Interest Period thereafter until paid in full. The
Agent shall, out of amounts received by it in respect of the Additional Amounts
on any Distribution Date (as contemplated in Section 11.01(b)), pay to each
Affected Party any amount due pursuant to this Section 2.08, provided, however,
that if
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<PAGE> 22
the amount distributable in respect of the Additional Amounts on any
Distribution Date is less than the aggregate amount payable to all Affected
Parties pursuant to Sections 2.07, 2.08 and 2.09 for the corresponding Interest
Period, the resulting shortfall shall be allocated among such Affected Parties
on a pro rata basis (determined by the amount owed to each). Failure on the part
of any Affected Party to demand compensation for any amount pursuant to this
Section 2.08 for any period shall not constitute a waiver of such Affected
Party's right to demand compensation for such period; provided, however, that no
Affected Party shall be entitled to compensation for any such amount relating to
any period ending more than six months prior to the date that such Affected
Party notifies the Transferor, the Servicer and the Agent in writing thereof.
(b) Each Owner agrees that it shall use its best efforts to take (or
cause any Affected Party claiming through such Owner to take) such steps as
would eliminate or reduce the amount of any increased costs described in
this Section 2.08 incurred by such Owner or Affected Party; provided that
no such steps shall be required to be taken if, in the reasonable judgment
of such Owner or Affected Party, such steps would be disadvantageous to
such Owner or Affected Party or inconsistent with its internal policy and
legal and regulatory restrictions. To the extent that, notwithstanding such
efforts, any Owner that is a Liquidity Provider (or any Affected Party
claiming through an Owner that is a Liquidity Provider) is unable to
eliminate such amount in respect of which compensation is payable pursuant
to this Section 2.08 and makes a demand hereunder, the Purchaser may
replace such Liquidity Provider with another commercial bank satisfactory
to the Purchaser, the Agent and the Transferor; provided, however, that the
Purchaser shall be under no obligation to so replace a Liquidity Provider
requesting any amount under this Section 2.08, and shall in no event
replace such Liquidity Provider if it is ING Capital.
SECTION 2.09. Taxes. (a) Subject to subsection 2.09(d), any and all
payments and deposits required to be made hereunder or under the Pooling and
Servicing Agreement or the Supplement by the Transferor or the Trustee to or for
the benefit the Agent or any Owner shall be made, to the extent allowed by law,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto imposed by any Governmental Authority,
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<PAGE> 23
excluding, in the case of each Owner and the Agent, (x) taxes, levies, imposts,
deductions, charges or withholdings imposed on, or measured by reference to, the
net income of such Owner or the Agent, as applicable, franchise taxes imposed on
such Owner or the Agent, as applicable (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 any other taxes (other than
withholding taxes not imposed by section 1446 of the Code and Other Taxes),
levies, imposts, deductions, charges or withholdings based or imposed on income
or the receipts or gross receipts of such Owner or the Agent, as applicable, in
each case, by any of (i) the United States or any State thereof, (ii) the state
or foreign jurisdiction under the laws of which such Owner or the Agent, as
applicable, is organized, with which it has a present or former connection
(other than solely by reason of this Agreement), or in which it is otherwise
doing business or (iii) any political subdivision thereof; (y) any taxes,
levies, imposts, duties, charges or fees to the extent of any credit or other
benefit actually realized by such Agent or Owner, as applicable, as a result
thereof; and (z) any taxes, levies, imposts, duties, charges or fees imposed as
a result of a change by the Agent or Owner, as applicable, of the office in
which all or any part of its interest in the Certificates is acquired, accounted
for or booked (all such excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being referred to herein as "Excluded Taxes" and
all such nonexcluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities being referred to herein as "Taxes"). If the Transferor or the
Trustee shall be required by law to deduct any Taxes from or in respect of any
sum required to be paid or deposited hereunder to or for the benefit any Owner
or the Agent, then, to the extent provided in subsection 2.09(d), (i) such sum
shall be increased as may be necessary so that, after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.09), such Owner or the Agent (as the case may be) receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) the Transferor or the Trustee (as appropriate) shall make such deductions
and (iii) the Transferor or the Trustee (as appropriate) shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(b) To the extent provided in subsection 2.09(d), each Owner and the
Agent shall be reimbursed for the full
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<PAGE> 24
amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts otherwise payable under
this Section 2.09) paid by such Owner or the Agent (as the case may be) and
any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto. Each Owner and the Agent agrees to
promptly notify the Transferor and the Servicer of any payment of such
Taxes or Other Taxes made by it and, if practicable, any request, demand or
notice received in respect thereof prior to such payment. In addition, in
the event any Owner is required, in accordance with and pursuant to the
terms of any agreement or other document providing liquidity support,
credit enhancement or other similar support to such Owner in connection
with the Certificates or the funding or maintenance of an interest therein,
to compensate a bank or other financial institution in respect of taxes
under circumstances similar to those described in this Section 2.09, then,
to the extent provided in subsection 2.09(d), such Owner shall be
reimbursed for any such compensation so paid by it. A certificate as to the
amount of any indemnification pursuant to this subsection 2.09(b) submitted
to the Transferor by such Owner or the Agent, as the case may be, setting
forth in reasonable detail the basis for and the calculation thereof, shall
(absent manifest error) be prima facie evidence as to such amount.
(c) Within 30 days after the date of any payment of Taxes or Other
Taxes, the Transferor will furnish to the Agent the original or a certified
receipt evidencing payment thereof.
(d) Any amounts payable to an Owner or the Agent pursuant to this
Section 2.09 shall be included in the Additional Amounts for (i) in the
case of amounts payable pursuant to subsection 2.09(a), the Interest Period
in respect of which the payment subject to withholding is made, (ii) in the
case of amounts payable pursuant to subsection 2.09(b), the first full
Interest Period immediately succeeding the date on which the certificate
specifying the amount owing was delivered and (iii) in either case, to the
extent remaining outstanding, each Interest Period thereafter until paid in
full. The Agent shall, out of amounts received by it in respect of the
Additional Amounts on any Distribution Date (as contemplated in Section
11.01(b)), pay to each Owner and itself, as applicable, any reimbursement
due pursuant to this Section 2.09, provided, however, that if the amount
distributable in respect of the Additional Amounts on any
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Distribution Date is less than the aggregate amount payable to all Affected
Parties pursuant to Sections 2.07, 2.08 and 2.09 for the corresponding
Interest Period, the resulting shortfall shall be allocated among such
Affected Parties on a pro rata basis (determined by the amount owed to
each).
(e) The Agent and each Owner (i) that is organized under the laws of a
jurisdiction outside the United States hereby agrees to complete, execute
and deliver to the Trustee from time to time prior to the initial
Distribution Date on which such Person will be entitled to receive
distributions pursuant to the Supplement and this Agreement, Internal
Revenue Service form 4224 (or any successor form), (ii) at the request of
the Transferor, hereby agrees to complete, execute and deliver to the
Trustee from time to time prior to the initial Distribution Date on which
such Person will be entitled to receive distributions pursuant to the
Supplement and this Agreement, Internal Revenue Service form W-9 (or any
successor form), and (iii) hereby agrees to complete, execute and deliver
to the Trustee from time to time prior to the initial Distribution Date on
which such Person will be entitled to receive distributions pursuant to the
Supplement and this Agreement, such other forms or certificates as may be
required under the laws of any applicable jurisdiction in order to permit
the Transferor or the Trustee to make payments to, and deposit funds to or
for the account of, such Person hereunder and under the Pooling and
Servicing Agreement and the Supplement without any deduction or withholding
for or on account of any United States tax. Each of the Agent and each
Owner agrees to provide like additional subsequent duly executed forms 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 Transferor or
the Trustee. Each of the Agent and the Owner certifies, represents and
warrants that as of the date of this Agreement, or in the case of an Owner
which is an assignee as of the date of such assignment, that (i) it is
entitled (x) to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes (other than taxes
subject to withholding pursuant to Code Section 1446) and (y) to an
exemption from United States backup withholding tax and (ii) it will pay
any taxes attributable to its ownership of an interest in the Certificates.
Each of the Agent and each Owner further agrees that compliance with this
subsection 2.09(e) (including by
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reason of subsection 12.04(c) in the case of any sale or assignment of any
interest in Certificates) is a condition to the payment of any amount
otherwise due pursuant to subsections 2.09(a) and 2.09(b) hereof.
Notwithstanding anything to the contrary herein, each of the Paying Agent,
Servicer and Trustee shall be entitled to withhold any amount that it
reasonably 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 to the Agent or Owner, as applicable, for all purposes of
the Agreement.
(f) Any Owner entitled to the payment of any additional amount
pursuant to this Section 2.09 shall use its reasonable efforts (consistent
with its internal policy and legal and regulatory restrictions) to take
such steps as would eliminate or reduce the amount of such payment;
provided that no such steps shall be required to be taken if, in the
reasonable judgment of such Owner, such steps would be materially
disadvantageous to such Owner. To the extent that, notwithstanding such
efforts, any Owner that is a Liquidity Provider is unable to eliminate an
amount payable under this Section 2.09 and makes a demand hereunder, the
Purchaser shall use its reasonable efforts to replace such Liquidity
Provider with another commercial bank satisfactory to the Purchaser, the
Agent and the Transferor; provided, however, that the Purchaser shall be
under no obligation to so replace such Liquidity Provider if it is ING
Capital.
(g) Without prejudice to the survival of any other agreement of the
Transferor hereunder, the agreements and obligations of the Transferor
contained in this Section 2.09 shall survive the termination of this
Agreement.
ARTICLE III
CLOSING
SECTION 3.01. Closing. The Closing (the "Closing") of the purchase and sale
of the Certificates shall take place at the offices of Orrick, Herrington &
Sutcliffe LLP, 666 Fifth Avenue, New York, New York 10103, at 10:00 a.m.
(Eastern Daylight Time), on June 23, 1999, or, if the conditions to closing set
forth in Articles IV and V of this Agreement shall not have been satisfied or
waived by such date, as soon as practicable after such conditions shall have
been satisfied or waived, or at such other time, date and
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place as the parties shall agree upon (the date of the Closing being referred to
herein as the "Closing Date").
SECTION 3.02. Transactions to be Effected at the Closing. At the Closing,
(a) the Purchaser will deliver to the Transferor (by wire transfer of
immediately available funds to a bank account designated by the Transferor at
least two Business Days prior to the Closing Date) an amount equal to $0,
representing full and complete payment of the Purchase Price and (b) the
Transferor shall deliver the Certificates to the Agent on behalf of the
Purchaser.
ARTICLE IV
PURCHASER CONDITIONS PRECEDENT
SECTION 4.01. Conditions Precedent to the Purchase of the Certificates. The
obligation of the Purchaser to purchase and pay for the Certificates on the
Closing Date is subject to the satisfaction at the time of the Closing of the
following conditions:
(a) Performance by the Transferor. All the terms, covenants,
agreements and conditions of this Agreement, the Pooling and Servicing
Agreement and the Supplement to be complied with and performed by the
Transferor by the Closing shall have been complied with and performed in
all material respects.
(b) Representations and Warranties. Each of the representations and
warranties of the Transferor made in this Agreement, the Pooling and
Servicing Agreement and the Supplement shall be true and correct in all
material respects as of the time of the Closing as though made as of such
time (except to the extent they expressly relate to an earlier time).
(c) Officers' Certificate. The Agent shall have received from the
Transferor, in form and substance reasonably satisfactory to the Purchaser
and the Agent, an Officer's Certificate, dated the Closing Date, certifying
as to the satisfaction of the conditions set forth in subsections 4.01(a)
and 4.01(b).
(d) Certain Opinions of Counsel. The Agent shall have received from
Orrick, Herrington & Sutcliffe LLP, acting
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as counsel to the Transferor, the Servicer and/or certain other parties, as
applicable, favorable opinions, dated the Closing Date and reasonably
satisfactory in form and substance to the Purchaser, the Agent and their
counsel.
(e) Opinion of Counsel to the Trustee. The Agent shall have received
from McGuire, Woods, Battle & Boothe LLP, counsel to the Trustee, a
favorable opinion, dated the Closing Date and reasonably satisfactory in
form and substance to the Purchaser, the Agent and their counsel.
(f) Financing Statements. The Agent shall have received evidence
reasonably satisfactory to the Purchaser and the Agent that, on or before
the Closing Date, UCC-1 financing statements have been filed in the offices
of the Secretary of State or comparable offices of the applicable states
and in the appropriate office or offices in such other locations as may be
specified in the relevant opinions of counsel delivered pursuant to
subsection 4.01(d) and in such other jurisdictions as its counsel deems
appropriate, reflecting the assignments contemplated by such opinions of
counsel and the respective interests of the applicable parties.
(g) Ratings. Each of Fitch and Standard & Poor's shall have confirmed
in writing to the Purchaser that the purchase by the Purchaser of its
interest in the Certificates would not result in the reduction or
withdrawal of the then current rating of the Commercial Paper Notes.
(h) Reserve Account. The Reserve Account shall have been established
in accordance with the requirements of Section 4.11 of the Supplement.
(i) Pooling and Servicing Agreement et al. The Agent and the Purchaser
shall have received a fully executed copy of each of the Pooling and
Servicing Agreement, the Supplement and the other instruments, documents
and agreements required to be delivered thereunder. Each of the Pooling and
Servicing Agreement and the Supplement shall have been duly authorized,
executed and delivered by the Transferor, the Servicer, and the Trustee,
and shall be in full force and effect on the Closing Date.
(j) No Actions or Proceedings. No action, suit, proceeding or
investigation by or before any Governmental Authority shall have been
instituted to restrain or prohibit the consummation by the Transferor, the
Agent or the Purchaser
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of, or to invalidate, the transactions contemplated by this Agreement, the
Supplement or any of the Liquidity Agreements or Enhancement Agreements in
any material respect.
(k) Approvals and Consents. All Governmental Actions of Governmental
Authorities required by the Agent, the Purchaser or the Transferor with
respect to the transactions contemplated by this Agreement, the Supplement
and the Liquidity Agreements and Enhancement Agreements shall have been
obtained or made.
(l) Commercial Paper Market. The commercial paper market shall be
available to the Purchaser at the time of the Closing.
(m) Payment of Fees. All fees required to be paid to the Agent or the
Purchaser in connection with the Closing pursuant to the Fee Letter shall
have been paid.
(n) Other Documents. The Transferor shall have furnished to the
Purchaser or the Agent, as the case may be, such other information,
certificates and documents as the Purchaser, the Agent or their counsel may
reasonably request.
SECTION 4.02. Conditions Precedent to Invested Amount Increases. The
obligation of the Purchaser to make any Invested Amount Increase is subject to
the satisfaction, as of the applicable Increase Date, of each of the applicable
Increase Conditions and the other applicable conditions specified herein.
ARTICLE V
TRANSFEROR CONDITIONS PRECEDENT
SECTION 5.01. Conditions Precedent to the Sale of the Certificates. The
obligation of the Transferor to sell the Certificates to the Agent on the
Closing Date for the benefit of the Purchaser and the subsequent Owners from
time to time is subject to the satisfaction at the time of the Closing of the
following conditions:
(a) Performance by the Purchaser and the Agent. All the terms,
covenants, agreements and conditions of this Agreement to be complied with
and performed by the Purchaser
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or the Agent, as the case may be, by the Closing shall have been complied
with and performed in all material respects.
(b) Representations and Warranties. Each of the representations and
warranties of each of the Purchaser and the Agent made in this Agreement
shall be true and correct in all material respects as of the time of the
Closing as though made as of such time (except to the extent they expressly
relate to an earlier time).
(c) Officer's Certificate. The Transferor shall have received from the
Purchaser, in form and substance reasonably satisfactory to the Transferor,
a certificate signed by an officer of the Purchaser, dated the Closing
Date, certifying as to the satisfaction of the conditions set forth in
subsections 5.01(a) and 5.01(b).
(d) Opinions of Counsel to the Purchaser and the Agent. The Transferor
shall have received from (i) Sidley & Austin, counsel to the Purchaser, a
favorable opinion, dated the Closing Date and reasonably satisfactory in
form and substance to the Transferor and its counsel and (ii) from internal
counsel to the Agent, a favorable opinion, dated the Closing Date and
reasonably satisfactory in form and substance to the Transferor and its
counsel.
(e) Opinion of Counsel to the Trustee. The Transferor shall have
received from McGuire, Woods, Battle & Boothe LLP, counsel to the Trustee,
a favorable opinion, dated the Closing Date and reasonably satisfactory in
form and substance to the Transferor and its counsel.
(h) No Actions or Proceedings. No action, suit, proceeding or
investigation by or before any Governmental Authority shall have been
instituted to restrain or prohibit the consummation by the Transferor, the
Agent or the Purchaser of, or to invalidate, the transactions contemplated
by this Agreement in any material respect.
(i) Approvals and Consents. All Governmental Actions of Governmental
Authorities required by the Purchaser, the Agent or the Transferor with
respect to the transactions contemplated by this Agreement shall have been
obtained or made.
(j) Other Documents. The Purchaser or the Agent, as applicable, shall
have furnished to the Transferor such
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other information, certificates and documents as the Transferor or its
counsel may reasonably request.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Each of the Transferor and the Servicer hereby represents and warrants to
the Owners and the Agent with respect to itself (giving effect, in the case of
any Successor Servicer, any successor to the Transferor or any Additional
Transferor, to such changes to Section 6.01 as may be necessary to reflect
accurately the incorporation or other formation of such Successor Servicer,
successor to the Transferor or Additional Transferor) as of the date of this
Agreement, as of the Closing Date, and as of (and as a condition to any Invested
Amount Increase occurring on) each Increase Date (but excluding, in the case of
any Increase Date, Section 6.05), in each case with reference to the facts and
circumstances then existing, as follows:
SECTION 6.01. Corporate Existence. The Transferor is a corporation validly
existing and in good standing under the laws of the State of Delaware, with full
power and authority under such laws to own its properties and conduct its
business as such properties are presently owned and such business is presently
conducted and to execute, deliver and perform its obligations under this
Agreement and each Certificate Document to which it is a party. The Servicer is
a corporation validly existing and in good standing under the laws of the State
of Delaware, with full power and authority under such laws to own its properties
and conduct its business as such properties are presently owned and such
business is presently conducted and to execute, deliver and perform its
obligations under this Agreement and each Certificate Document to which it is a
party.
SECTION 6.02. Corporate Authority. The Transferor or the Servicer, as
applicable, has the corporate power, authority and right to make, execute,
deliver and perform this Agreement and each Certificate Document to which it is
a party and all the transactions contemplated hereby and thereby and has taken
all necessary corporate action to authorize the execution, delivery and
performance of this Agreement and each Certificate Document to which it is a
party; and, when executed and delivered, each of this Agreement and the
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Certificate Documents to which it is a party will constitute its legal, valid
and binding obligation, enforceable in accordance with its terms, subject to
applicable bankruptcy, reorganization, insolvency, moratorium, receivership,
conservatorship and other laws of general applicability relating to or affecting
creditors' rights generally from time to time in effect. The enforceability of
its obligations under such agreements is also subject to general principles of
equity, regardless of whether such enforceability is considered in a proceeding
in equity or at law, and no representation or warranty is made with respect to
the enforceability of its obligations under any indemnification provisions in
such agreements to the extent that indemnification is sought in connection with
securities laws violations and is contrary to public policy.
SECTION 6.03. No Consents Required. No consent, license, approval or
authorization of, or registration with, any Governmental Authority is required
to be obtained by the Transferor or the Servicer, as applicable, in connection
with the execution, delivery or performance by the Transferor or the Servicer,
as applicable, of each of this Agreement and the Certificate Documents that has
not been duly obtained and which is not and will not be in full force and effect
on the Closing Date or the relevant Increase Date, as applicable.
SECTION 6.04. No Violation. The execution, delivery and performance of each
of this Agreement and the Certificate Documents do not violate any provision of
any existing law or regulation applicable to the Transferor or the Servicer, as
applicable, any order or decree of any court or other judicial authority to
which it is subject, its charter or By-laws or any mortgage, indenture, contract
or other agreement to which it is a party or by which it or any significant
portion of its properties is bound (other than violations of such laws,
regulations, orders, decrees, mortgages, indentures, contracts and other
agreements which, individually or in the aggregate, would not have a material
adverse effect on the Transferor's or the Servicer's, as applicable, ability to
perform its obligations under, or the validity or enforceability of, this
Agreement or the Certificate Documents).
SECTION 6.05. Financial Statements. Prior to the Closing Date, the
Transferor has delivered or caused to be delivered to the Agent complete and
correct copies of, (a) the audited consolidated balance sheet of NextCard and
its
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subsidiaries as of December 31, 1998, and the related audited consolidated
statements of income and cash flows of NextCard and its subsidiaries for the
fiscal year then ended, accompanied by the opinion of NextCard's independent
certified public accountants and (b) the unaudited consolidated balance sheet of
NextCard and its subsidiaries as of March 31, 1999, and the related unaudited
consolidated statements of income and cash flows of NextCard and its
subsidiaries for the fiscal quarter then ended. Such financial statements are
complete and correct in all material respects and fairly present the financial
condition of NextCard and its subsidiaries as of their respective dates and the
results of operations of NextCard and its subsidiaries for the applicable
periods then ended, subject to year-end adjustments in the case of unaudited
information, all in accordance with generally accepted accounting principles or
regulatory accounting principles, as applicable, consistently applied.
SECTION 6.06. No Proceeding. There is no action, litigation or proceeding
before any court, tribunal or governmental body presently pending or, to the
knowledge of the Transferor or the Servicer, as applicable, threatened against
the Transferor or the Servicer, as applicable, with respect to this Agreement,
the Certificate Documents, the transactions contemplated hereby or thereby or
the issuance of the Certificates, and there is no such litigation or proceeding
against it or any significant portion of its properties which would have a
material adverse effect on the transactions contemplated by, or its ability to
perform its obligations under, this Agreement or any Certificate Document to
which it is a party.
SECTION 6.07. Trust Indenture Act; Investment Company Act. Neither the
Pooling and Servicing Agreement nor the Supplement is required to be qualified
under the Trust Indenture Act of 1939, and neither the Trust nor the Transferor
is required to be registered under the Investment Company Act of 1940, as
amended.
SECTION 6.08. No Pay Out Event or Other Default. No Pay Out Event or
Servicer Default has occurred and is continuing, both before and immediately
after giving effect to the purchase or issuance of the Certificates or the
relevant Invested Amount Increase, as applicable, and no event, act or omission
has occurred and is continuing which, with the lapse
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of time, the giving of notice, or both, would constitute a Pay Out Event or
Servicer Default.
SECTION 6.09. The Certificates. The Certificates have been duly and validly
authorized, and, when executed and authenticated in accordance with the terms of
the Pooling and Servicing Agreement and the Supplement and delivered to the
Agent in accordance with this Agreement, will be duly and validly issued and
outstanding, and will be entitled to the benefits of, as applicable, this
Agreement and the applicable Certificate Documents.
SECTION 6.10. Absence of Material Adverse Change. Since December 31, 1998,
there has not been any material adverse change in the condition (financial or
otherwise) of NextCard that has not been disclosed in writing by the Transferor
or NextCard to the Agent.
SECTION 6.11. Taxes, Etc. Any taxes, fees and other charges of Governmental
Authorities imposed upon the Transferor or the Servicer, as applicable, in
connection with the execution, delivery and performance by the Transferor or the
Servicer, as applicable, of this Agreement, the Pooling and Servicing Agreement,
the Supplement and, the Certificates or otherwise in connection with the Trust
have been paid or will be paid by the Transferor or the Servicer, as applicable,
at or prior to the Closing Date or the relevant Increase Date, as applicable, to
the extent then due.
SECTION 6.12. Disclosure. All written factual information heretofore
furnished by the Transferor, the Servicer or any of their respective
representatives to the Agent or any Owner or any of their representatives for
purposes of or in connection with this Agreement, including, without limitation,
information relating to the Accounts and Receivables and the Transferor's credit
card businesses, was true and correct in all material respects on the (a) date
such information was furnished by the Transferor or the Servicer, as applicable,
or (b) if such information specifically relates to an earlier date, on such
earlier date.
SECTION 6.13. Year 2000 Plan. Each of the Transferor and the Servicer have
reviewed the areas within its business and operations that could reasonably be
expected to be adversely affected by, and have developed a plan (the "Year 2000
Plan") to address on a timely basis, the risk that computer applications used to
process any data related to this
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Agreement (whether by the Transferor, the Servicer or any of their respective
suppliers or vendors) may produce materially adverse consequences in performing
date-sensitive functions involving certain dates prior to and any date after
December 31, 1999 (such risk being referred to herein as the "Year 2000
Problem"). Each of the Transferor and the Servicer is taking or causing to be
taken reasonable measures to address the Year 2000 Problem on a timely basis. To
the best of the Transferor's and the Servicer's knowledge, the Year 2000 Problem
will not materially and adversely affect the interests of the Owners under this
Agreement, the Supplement and the Pooling and Servicing Agreement.
SECTION 6.14. FICO Scores. As of the Closing Date, no more than [*] of
the Accounts (calculated on the basis of the amount of outstanding Principal
Receivables relating to the Accounts on the dates they became Accounts) have
related Obligors with FICO Scores as of the date of the origination of their
Accounts of less than [*].
SECTION 6.15. Location of Offices. The Transferor's principal place of
business and chief executive office is located in the State of California, or
such other jurisdiction with respect to which the requirements specified in
Section 8.05 hereof have been satisfied.
SECTION 6.16. Pooling and Servicing Representations and
Warranties. Its representations and warranties in Sections 2.03 and 2.04 (in the
case of a Transferor) or Section 3.03 (in the case of the Servicer) of the
Pooling and Servicing Agreement are true and correct in all material respects as
of the dates they were made (unless they specifically refer to an earlier date,
in which case they were true and correct on such earlier date).
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER AND THE AGENT
Each of the Purchaser and the Agent hereby represents and warrants to the
Transferor as to itself as of the date of this Agreement and as of the Closing
Date as follows:
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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SECTION 7.01. Organization. The Purchaser has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the State
of Delaware. The Agent has been duly organized and is validly existing as a
limited liability company in good standing under the laws of the State of
Delaware.
SECTION 7.02. Authority. The Purchaser or the Agent, as applicable, has the
corporate power, authority and right to make, execute, deliver and perform this
Agreement and all the transactions contemplated hereby and has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Agreement; and, when executed and delivered, this Agreement will
constitute its legal, valid and binding obligation, enforceable in accordance
with its terms, subject to applicable bankruptcy, reorganization, insolvency,
moratorium, receivership, conservatorship and other laws of general
applicability relating to or affecting creditors' rights generally from time to
time in effect. The enforceability of its obligations under this Agreement is
also subject to general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law, and no
representation or warranty is made with respect to the enforceability of its
obligations under any indemnification provisions in such agreements to the
extent that indemnification is sought in connection with securities laws
violations and is contrary to public policy.
SECTION 7.03. Securities Act. The Certificates purchased by the Agent for
the benefit of the Purchaser pursuant to this Agreement will be acquired for
investment only and not with a view to any public distribution thereof, and
neither the Purchaser nor the Agent will offer to sell or otherwise dispose of
any Certificates so acquired by it (or any interest therein) in violation of any
of the registration requirements of the Act or any applicable state or other
securities laws. Each of the Purchaser and the Agent acknowledges that it has no
right to require the Transferor to register under the Act or any other
securities law any Certificates to be acquired by the Agent for the benefit of
the Purchaser or any other Owner pursuant to this Agreement. Each of the Agent
and the Purchaser will execute and deliver to the Transferor on or before the
Closing Date an Investment Letter with respect to the purchase of the
Certificates.
SECTION 7.04. Investment Company Act. Neither the Purchaser nor the Agent
is subject to registration as an
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"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
ARTICLE VIII
COVENANTS OF THE TRANSFEROR
SECTION 8.01. Access to Information. From the Closing Date until the
Collection Date, each of the Transferor and the Servicer will, at any time and
from time to time during regular business hours, on at least five Business Days'
(or if a Pay Out Event or Servicer Default or event that with the giving of
notice or lapse of time or both would constitute a Pay Out Event or Servicer
Default, has occurred, one Business Day's) notice to the Transferor or the
Servicer, as the case may be, permit the Agent or any Owner, or its agents or
representatives, at the Agent's or such Owner's expense (or if a Pay Out Event
or Servicer Default or event that with the giving of notice or lapse of time or
both would constitute a Pay Out Event or Servicer Default, has occurred, at the
expense of the Transferor in the case of a Pay Out Event or the Servicer in the
case of a Servicer Default), (a) to examine all books, records and documents
(including computer tapes and disks) in the possession or under the control of
the Transferor or the Servicer, as the case may be, relating to the Receivables
(other than names of account holders and strategic plans for the Servicer's
credit card business), including the forms of Credit Card Agreements under which
such Receivables arise, and (b) to visit the offices and properties of the
Transferor or the Servicer, as applicable, for the purpose of examining such
materials described in clause (a) above.
SECTION 8.02. Reporting Requirements of the Transferor. From the Closing
Date until the Collection Date, the Transferor will furnish to the Agent:
(a) a copy of each certificate, report, statement, notice or other
communication furnished by or on behalf of the Transferor or the Servicer
to the Trustee or any Rating Agency, or any Series Enhancer (other than
investment instructions or any such item furnished to the Trustee or any
Rating Agency relating solely to one or more Series other than Series
1999-1), concurrently therewith, and promptly after receipt thereof, a copy
of each notice, demand or other communication received by or
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on behalf of the Transferor or the Servicer under the Pooling and Servicing
Agreement or the Supplement (other than any such item relating solely to
one or more Series other than Series 1999-1);
(b) copies of all material amendments to any Receivables Transfer
Agreement;
(c) prompt notice of any failure on the part of any party thereto to
observe or perform any material term of any Receivables Transfer Agreement;
(d) (i) within 90 days following the end of each fiscal year of
NextCard, beginning with the fiscal year ending December 31, 1999, the
audited consolidated balance sheet of NextCard and its subsidiaries as of
the end of such fiscal year, and the related audited consolidated
statements of income and cash flows of NextCard and its subsidiaries for
such fiscal year, accompanied by the opinion of nationally-recognized
independent certified public accountants and (ii) within 45 days following
the end of each fiscal quarter of NextCard, beginning with the fiscal
quarter ending June 30, 1999, the unaudited consolidated balance sheet of
NextCard and its subsidiaries as of the end of such fiscal quarter, and the
related unaudited consolidated statements of income and cash flows of
NextCard and its subsidiaries for such fiscal quarter; and
(e) such publicly available information, documents, records or reports
respecting NextCard, the Transferor, any Account Owner or the condition or
operations, financial or otherwise, of NextCard, the Transferor or any
Account Owner as the Agent or any Owner may from time to time reasonably
request; and
(f) such other information, documents, records or reports respecting
the Accounts, the Receivables or the servicing thereof or the Trust as the
Agent or any Owner may from time to time reasonably request;
SECTION 8.03. Optional Repurchase. The Transferor shall not exercise its
right to repurchase the Certificates pursuant to Section 7.01 of the Supplement
and Section 12.05 of the Pooling and Servicing Agreement unless the Owners and
the Agent have been paid, or will be paid upon such repurchase, the outstanding
principal balance of the
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Certificates, all interest thereon and all other amounts owing hereunder in
full.
SECTION 8.04. Location of Chief Executive Office. The Transferor shall not
move its principal place of business and chief executive office to a location
outside the State of California unless it shall have given the Agent at least 30
days' prior written notice of such relocation and shall have executed and filed
such UCC financing statements and other items and delivered such opinions as the
Agent deems reasonably necessary to maintain the Trustee's perfected security
interest in the Receivables.
ARTICLE IX
[RESERVED]
ARTICLE X
INDEMNIFICATION
SECTION 10.01. Indemnification by the Transferor and the Servicer. (a) The
Transferor shall indemnify and hold harmless each Owner, the Agent, their
respective Affiliates and their respective officers, directors, employees,
stockholders, agents and representatives, against any and all losses, claims,
damages, liabilities or reasonable expenses (including legal and accounting
fees) (collectively, "Losses"), as incurred (payable promptly upon written
request), for or on account of or arising from or in connection with or
otherwise with respect to any breach of any representation or warranty of the
Transferor set forth in this Agreement, the Supplement or the Pooling and
Servicing Agreement or in any certificate delivered pursuant hereto or thereto;
provided, however, that the Transferor shall not be so required to indemnify any
such Person or otherwise be liable to any such Person hereunder for (i) any
Losses incurred for or on account of or arising from or in connection with or
otherwise with respect to any breach of any representation or warranty set forth
in the Pooling and Servicing Agreement a remedy for the breach of which is
provided in Section 2.05 or 2.06 of the Pooling and Servicing Agreement or (ii)
any Losses asserted by any such Person constituting indirect or consequential
damages incurred by such Person.
35
<PAGE> 40
(b) The Servicer shall indemnify and hold harmless each Owner, the
Agent, their respective Affiliates and their respective officers,
directors, employees, stockholders, agents and representatives, against any
and all Losses, as incurred (payable promptly upon written request), for or
on account of or arising from or in connection with or otherwise with
respect to any breach of any representation or warranty of the Servicer set
forth in this Agreement, the Supplement or the Pooling and Servicing
Agreement or in any certificate delivered pursuant hereto or thereto;
provided, however, that the Servicer shall not be so required to indemnify
any such Person or otherwise be liable to any such Person hereunder for (i)
any Losses incurred for or on account of or arising from or in connection
with or otherwise with respect to any breach of any representation or
warranty set forth in the Pooling and Servicing Agreement a remedy for the
breach of which is provided in Section 3.03 of the Pooling and Servicing
Agreement or (ii) any Losses asserted by any such Person constituting
indirect or consequential damages incurred by such Person.
SECTION 10.02. Costs and Expenses. The Transferor agrees to pay on demand
to (a) the Agent and the Purchaser all reasonable costs and expenses in
connection with the preparation, execution, delivery and administration
(including any amendments, waivers or consents, other than amendments, waivers
and consents made solely at the request of the Purchaser or the Agent, as
opposed to the Transferor or the Servicer) of this Agreement and the other
documents to be delivered hereunder or in connection herewith, including,
without limitation, (i) the reasonable fees and out-of-pocket expenses of
counsel for each of the Agent and the Purchaser, with respect thereto and with
respect to advising each of the Agent and the Purchaser, as to its respective
rights and remedies under this Agreement and the other documents delivered
hereunder or in connection herewith, (ii) rating agency fees, costs and expenses
incurred in connection with the purchase by the Purchaser of the Certificates,
and (iii) other reasonable fees, costs and expenses incurred by the Purchaser or
the Agent in connection with the purchase by the Purchaser of the Certificates
(including trustee's fees, costs and expenses), and (b) to the Agent and any
other Affected Party, all reasonable costs and expenses, if any (including
reasonable counsel fees and expenses), in connection with the enforcement of
this Agreement, and the other documents delivered hereunder or in connection
herewith.
36
<PAGE> 41
ARTICLE XI
THE AGENT
SECTION 11.01. Authorization and Action. (a) Each of the Owners hereby
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement and any related agreement,
instrument and document as are delegated to the Agent by the terms hereof or
thereof, together with such powers as are reasonably incidental thereto. The
Agent reserves the right, in its sole discretion to exercise any rights and
remedies under this Agreement or any related agreement, instrument or document
executed and delivered pursuant hereto, or pursuant to applicable law, and also
to agree to any amendment, modification or waiver of this Agreement or any
related agreement, instrument and document, in each instance, on behalf of the
Owners. Notwithstanding anything herein or elsewhere to the contrary, the Agent
shall not be required to take any action which exposes the Agent to personal
liability or which is contrary to this Agreement or applicable law.
(b) The Purchaser and each subsequent Owner from time to time hereby
acknowledges and agrees that all payments in respect of any Certificates
and in respect of fees and other amounts owing to the Owners under this
Agreement shall, except as otherwise expressly provided herein, be remitted
by the applicable payor to the Agent on behalf of the Owners, and the Agent
shall distribute all such amounts, promptly following receipt thereof, to
the applicable parties in interest according to their respective interests
therein, determined by reference to the terms of the Pooling and Servicing
Agreement, the Supplement, this Agreement and the Agent's books and records
relating to such Certificates, the Pooling and Servicing Agreement, the
Supplement and this Agreement (it being agreed that the entries made in
such books and records of the Agent shall be conclusive and binding for all
purposes absent manifest error).
SECTION 11.02. Agent's Reliance, Etc. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them as Agent under or in connection with this
Agreement or any related agreement, instrument or document except for its or
their own gross negligence or willful misconduct. Without limiting the
foregoing, the Agent: (a) may consult with legal counsel (including counsel for
the Transferor, the
37
<PAGE> 42
Servicer or the Trustee), independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (b) makes no warranty or representation to any
Owner and shall not be responsible to any Owner for any statements, warranties
or representations made in or in connection with this Agreement or in connection
with any related agreement, instrument or document; (c) shall not have any duty
to ascertain or to inquire as to the performance or observance of any of the
terms, covenants or conditions of this Agreement or any related agreement,
instrument or document on the part of the Transferor, the Servicer or the
Trustee or to inspect the property (including the books and records) of the
Transferor, the Servicer or the Trustee; (d) shall not be responsible to any
Owner for the due execution, legality, validity, enforceability, genuineness or
sufficiency of value of this Agreement or any related agreement, instrument or
document; (e) shall not be deemed to be acting as any Owner's trustee or
otherwise in a fiduciary capacity hereunder or in connection with any related
agreement, instrument or document; and (f) shall incur no liability under or in
respect of this Agreement or any related agreement, instrument or document by
acting upon any notice (including notice by telephone), consent, certificate or
other instrument or writing (which may be by telex or facsimile) believed by it
to be genuine and signed or sent by the proper party or parties.
SECTION 11.03. Agent and Affiliates. To the extent that the Agent or any of
its Affiliates shall become an Owner, the Agent or such Affiliate, in such
capacity, shall have the same rights and powers under this Agreement and each
related agreement, instrument and document as would any Owner and may exercise
the same as though it were not the Agent or such Affiliate, as the case may be.
The Agent and its Affiliates may generally engage in any kind of business with
the Transferor or the Trustee, any Obligor or any of their respective Affiliates
and any Person who may do business with or own securities of any of the
foregoing, all as if it were not the Agent or such Affiliate, as the case may
be, and without any duty to account therefor to the Owners.
SECTION 11.04. Purchase Decision. Each Owner acknowledges that it has,
independently and without reliance upon the Agent, any other Owner or any of
their respective Affiliates, and based on such documents and information as it
has deemed appropriate, made its own evaluation and decision
38
<PAGE> 43
to enter into this Agreement and to invest in the Certificates (or such interest
therein as such Owner may hold). Each Owner also acknowledges that it will,
independently and without reliance upon the Agent, any other Owner or any of
their respective Affiliates, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own decisions in taking
or not taking action under this Agreement or any related agreement, instrument
or other document.
SECTION 11.05. Indemnification. Each Owner (other than the Purchaser)
agrees to indemnify the Agent (to the extent not reimbursed by any the
Transferor), ratably according to its share of the aggregate outstanding
principal balance of the Certificates from time to time, from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses, or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against the Agent
in any way relating to or arising out of this Agreement or any related
agreement, instrument or document, or any action taken or omitted by the Agent
under this Agreement, or any related agreement, instrument or document;
provided, however, that an Owner shall not be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses, or disbursements resulting from the Agent's gross negligence or
willful misconduct. Without limitation of the generality of the foregoing, each
Owner (including the Purchaser, but only to the extent the Purchaser is
reimbursed by the Transferor for such a expenses) agrees to reimburse the Agent,
ratably according to its share of the aggregate outstanding principal balance of
the Certificates from time to time, promptly upon demand, for any out-of-pocket
expenses (including reasonable counsel 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 or and related agreement,
instrument or document.
SECTION 11.06. Successor Agent. The Agent may resign at any time by giving
thirty days' notice thereof to the Owners, the Transferor and the Trustee and
such resignation shall become effective upon the appointment and acceptance of a
successor Agent as described below. Upon any such resignation, the Owners shall
have the right to appoint a successor Agent approved by the Transferor (which
approval
39
<PAGE> 44
will not be unreasonably withheld or delayed). If no successor Agent shall have
been so appointed by the Owners and accepted such appointment within 30 days
after the retiring Agent's giving of notice of resignation, then the retiring
Agent may, on behalf of the Owners, appoint a successor Agent approved by the
Transferor (which approval will not be unreasonably withheld or delayed), which
successor Agent shall be (a) either (i) a commercial bank having a combined
capital and surplus of at least $250,000,000 or (ii) an Affiliate of such bank
and (b) experienced in the types of transactions contemplated by this Agreement.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall thereupon succeed to and become vested with all of
the rights, powers, 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 or removal hereunder as Agent, the
provisions of this Article XI shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent hereunder.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. Amendments, Etc. No amendment or waiver of any provision of
this Agreement, and no consent to any departure by the Transferor or the
Servicer herefrom, shall in any event be effective unless (a) the same shall be
in writing and signed by the Transferor, the Servicer, the Required Owners and
the Agent, and (b) each Rating Agency then rating the Commercial Paper Notes
shall have confirmed that such amendment, waiver or consent will not result in a
reduction or withdrawal of its then current rating of such Commercial Paper
Notes. Any such amendment, waiver or consent shall be effective in any event
only in the specific instance and for the specific purpose for which given.
SECTION 12.02. Notices, Etc. All notices and other communications provided
for hereunder shall, unless otherwise stated herein, be in writing (including
telecopies, telegraphic, telex or cable communication) and mailed, telecopied,
telegraphed, telexed, cabled or delivered, as to each party hereto, at its
address set forth below or at such other address as shall be designated by such
party in a written notice to the other party hereto. All such notices
40
<PAGE> 45
and communications shall, when mailed, telecopied, telegraphed, telexed or
cabled, be effective when deposited in the mails, telecopied, delivered to the
telegraph company, confirmed by telex answer back or delivered to the cable
company, respectively.
If to the Purchaser:
Holland Limited Securitization, Inc.
c/o ING Baring (U.S.) Capital Markets LLC
55 East 52nd Street
New York, New York 10055
Telephone No.: (212) 409-1895
Telecopier No.: (212) 409-1251
With a copy to the Agent;
If to the Agent:
ING Baring (U.S.) Capital Markets LLC
55 East 52nd Street
New York, New York 10055
Telephone No.: (212) 409-1895
Telecopier No.: (212) 409-1251
If to the Transferor:
NextCard Funding Corp.
595 Market Street
Suite 2250
San Francisco, California 94105
Attention: Chief Financial Officer; and
If to the Servicer:
NextCard, Inc.
595 Market Street
Suite 950
San Francisco, California 94105
Attention: Chief Financial Officer
Telephone No.: (415) 826-9700
Telecopier No.: (415) 836-9701.
SECTION 12.03. No Waiver; Remedies. No failure on the part of any party
hereto to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right
41
<PAGE> 46
hereunder preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law.
SECTION 12.04. Binding Effect; Assignability. (a) This Agreement shall be
binding upon each of and inure to the benefit of the Transferor, the Servicer,
the Agent, the Owners and their respective successors and permitted assigns.
(b) Neither the Transferor nor the Servicer may assign any of its
rights and obligations hereunder or any interest herein without the prior
written consent of the Required Owners and the Agent.
(c) An Owner may, at any time, subject to the terms and conditions
hereinafter set forth and the terms and conditions of the Supplement, (i)
without the consent of the Transferor, assign, or grant undivided
participation interests in, any or all of its rights and obligations
hereunder or under the Certificates to the Purchaser, any Liquidity
Provider, any Enhancement Provider or ING Capital and (ii) with the prior
written consent of the Transferor, such consent not to be unreasonably
withheld, assign, or grant undivided participation interests in, any or all
of its rights and obligations hereunder or under the Certificates to any
other Person; provided, however, that (A) without the prior written consent
of the Transferor, such consent not to be unreasonably withheld, no
participant (other than the Purchaser, a Liquidity Provider, any
Enhancement Provider or ING Capital) or Affected Party claiming through a
participant (other than the Purchaser, a Liquidity Provider, an Enhancement
Provider or ING Capital) shall be entitled to receive any payment pursuant
to Sections 2.07, 2.08, 2.09 or 10.02 in excess of the amount that the
Owner granting such participation interest would have been entitled to
receive had such participation interest not been sold to such participant;
(B) in the case of any transfer by sale, assignment or participation, the
transferee as a condition of transfer shall be subject to compliance with
subsections 2.09(e) and (f) hereof; (C) the aggregate number of Owners at
any time shall not exceed [*] (excluding, if applicable, any Federal
Reserve Bank to which a pledge is made); and (D) no assignment or
participation hereunder shall be effective unless the Agent shall have
first consented thereto in writing, such consent being required for the
purpose of assuring compliance with the requirements of this subsection
12.04(c). Any assignment or grant of a
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
42
<PAGE> 47
participation interest by an Owner pursuant to this subsection 12.04(c)
shall be effected pursuant to documentation satisfactory in form and
substance to the Agent. Upon the consummation of any such assignment or
sale hereunder, the assignee shall be subject to all of the obligations and
entitled to all of the rights and benefits of the assignor hereunder. The
Agent shall promptly notify the Transferor of any sale, assignment or
participation under this Section 12.04. The Purchaser hereby agrees that
promptly following the sale of any assignment or participation by any
Liquidity Provider or Enhancement Provider of all or any portion of its
rights and obligations under the applicable Liquidity Agreement or
Enhancement Agreement, the Purchaser, to the extent that the Transferor's
prior consent to such assignment or participation is not required
hereunder, shall notify the Transferor thereof, specifying the transferor,
the transferee and the extent of the applicable assignment or
participation.
(d) It is expressly agreed that, in connection with any assignment,
sale or other transfer or any proposed assignment, sale or other transfer
of any Certificate or any interest therein, each Owner making or proposing
to make such assignment, sale or other transfer may provide such
information regarding the Receivables, the Trust, the Pooling and Servicing
Agreement and the Supplement as such Owner may deem appropriate to any such
assignee, purchaser or other transferee or proposed assignee, purchaser or
other transferee, as applicable (any such Person being a "Transferee"), of
such Certificate or such interest therein, provided, that the Transferor
shall have the right to review and participate in the preparation of such
information for distribution to any Transferee and, provided, further, that
prior to any such disclosure of such information, such Transferee shall
have agreed to maintain the confidentiality of such information designated
by the Transferor as confidential on substantially the basis set forth in
Section 12.10.
(e) Except as otherwise expressly provided herein, no Owner shall
assign, sell or otherwise transfer any Certificates or any interest therein
to any Person unless such Person delivers to the Transferor a duly executed
letter substantially in the form of the Investment Letter.
(f) The Agent may assign at any time its rights and obligations
hereunder and interests herein as Agent (i) without the consent of the
Owners or the Transferor, to any
43
<PAGE> 48
Affiliate of ING Capital and (ii) with the prior written consent of the
Transferor (such consent not to be unreasonably withheld), to any other
Person.
(g) Each Owner may assign and pledge all or a portion of such Owner's
interest in the Certificates to any Federal Reserve Bank as collateral to
secure any obligation of such Owner to such Federal Reserve Bank.
Notwithstanding anything to the contrary herein or in the Supplement, such
assignment may be made at any time without notice or other obligation with
respect to the assignment, including the delivery of an Investment Letter.
(h) This Agreement shall create and constitute the continuing
obligations of the parties hereto in accordance with its terms, and shall
remain in full force and effect until the Collection Date; provided,
however, that the provisions of Sections 10.01, 10.02, 12.07, 12.09 and
12.10 shall be continuing and shall survive any termination of this
Agreement.
(i) To the extent that pursuant to the terms of the Supplement or this
Agreement, the Transferor has the right to procure a replacement for the
Agent or any Owner, and the Person proposed to be replaced is either ING
Capital or the Purchaser, the Transferor agrees that it shall not be
entitled to replace either such Person in any capacity under or in
connection with this Agreement or the Supplement unless each of the
Purchaser and ING Capital is replaced in each and every capacity in which
it acts under or in connection with this Agreement and the Supplement.
Without limiting the foregoing, each of the Purchaser and the Agent hereby
agrees to take all actions necessary to permit a replacement to succeed to
its respective rights and obligations hereunder.
SECTION 12.05. Certificates as Evidence of Indebtedness. It is the intent
of the Transferor, the Purchaser and the other Owners that, for all federal,
state, local and foreign taxes, the Certificates will be evidence of
indebtedness of the Transferor. Each of the Transferor, the Purchaser and the
other Owners agrees to treat the Certificates for purposes of all federal,
state, local and foreign taxes as indebtedness of the Transferor secured by the
Receivables and other assets held in the Trust.
SECTION 12.06. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
44
<PAGE> 49
THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW
PROVISIONS EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
SECTION 12.07. No Proceedings. (a) The Transferor, each Owner and the Agent
each hereby agrees that it will not, prior to the date that is one year and one
day after the latest maturing commercial paper note, medium term note or other
debt instrument issued by the Purchaser has been issued, acquiesce, petition or
otherwise invoke or cause the Purchaser to invoke the process of any
Governmental Authority for the purpose of commencing or sustaining a case
against the Purchaser 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 Purchaser or any substantial part
of its property or ordering the winding-up or liquidation of the affairs of the
Purchaser. The Transferor, each Owner and the Agent each hereby further agrees
that prior to the date that is one year and one day after the latest maturing
commercial paper note, medium term note or other debt instrument issued by the
Purchaser has been issued, amounts payable by the Purchaser under or in
connection with this Agreement as reimbursement for out-of-pocket expenses or
indemnification shall be payable only to the extent that payment thereof will
not render the Purchaser insolvent and is made from funds of the Purchaser that
are freely distributable by the Purchaser at the Purchaser's discretion.
(b) Each Owner and the Agent hereby agrees that it will not, prior to
the date that is one year and one day after the termination of the Pooling
and Servicing 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. Each Owner and
the Agent each further agrees that prior to the date that is one year and
one day after the termination of the Pooling and Servicing Agreement with
respect to the Transferor, amounts payable by the Transferor under or in
connection with this Agreement as reimbursement for out-of-
45
<PAGE> 50
pocket expenses or indemnification shall be payable only to the extent that
payment thereof will not render the Transferor insolvent and is made from
funds of the Transferor that are freely distributable by the Transferor at
the Transferor's discretion.
(c) The provisions of this Section 12.07 shall survive the termination
of this Agreement.
SECTION 12.08. Execution in 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.
SECTION 12.09. No Recourse. (a) No recourse under or with respect to any
obligation, covenant or agreement (including, without limitation, the payment of
any fees or any other obligations) of the Purchaser (whether in its capacity as
the Purchaser or as an Owner under this Agreement) as contained in this
Agreement or any other agreement, instrument or document entered into by it
pursuant hereto or in connection herewith shall be had against any incorporator,
affiliate, stockholder, officer, employee or director of the Purchaser, as such,
by the enforcement of any assessment or by any legal or equitable proceeding, by
virtue of any statute or otherwise (except to the extent that recourse against
any such Person arises from the gross negligence or willful misconduct of such
Person); it being expressly agreed and understood that the agreements of the
Purchaser contained in this Agreement and all of the other agreements,
instruments and documents entered into by it pursuant hereto or in connection
herewith are, in each case, solely the corporate obligations of the Purchaser,
and that no personal liability whatsoever shall attach to or be incurred by any
incorporator, stockholder, affiliate, officer, employee or director of the
Purchaser, as such, or any of them, under or by reason of any of the
obligations, covenants or agreements of the Purchaser contained in this
Agreement or in any other such instruments, documents or agreements, or which
are implied therefrom, and that any and all personal liability of each
incorporator, stockholder, affiliate, officer, employee or director of the
Purchaser, or any of them, for breaches by the Purchaser of any such
obligations, covenants or agreements, which liability may arise either at common
law or at equity, or by statute or constitution, or otherwise, is hereby
expressly waived except
46
<PAGE> 51
to the extent that such personal liability of any such Person arises from the
gross negligence or willful misconduct of such Person.
(b) The provisions of this Section 12.09 shall survive the termination
of this Agreement.
SECTION 12.10. Confidentiality. Each Owner and the Agent hereby agrees to
take such measures as shall be reasonably requested by the Transferor to protect
and maintain the confidentiality of such information relating to the Receivables
as such Transferor may from time to time expressly identify to such Owner or the
Agent (as the case may be) as confidential information; provided, however, that
none of the Owners or the Agent shall be obligated to take or observe any such
measure if to do so would, in the reasonable judgment of such Owner or the
Agent, as the case may be, (a) be inconsistent with any Requirement of Law or
compliance by such Owner or the Agent with any binding request of any regulatory
body having jurisdiction over such Owner or the Agent, as the case may be or (b)
materially and adversely affect the ability of such Owner or the Agent to
perform its obligations hereunder or in connection herewith or to enforce its
rights hereunder or in connection herewith.
47
<PAGE> 52
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
NEXTCARD FUNDING CORP.
By: /s/ ROBERT LINDERMAN
--------------------------------
Name: Robert Linderman
Title: General Counsel
and Secretary
NEXTCARD, INC.
By: /s/ ROBERT LINDERMAN
--------------------------------
Name: Robert Linderman
Title: General Counsel
and Secretary
HOLLAND LIMITED SECURITIZATION, INC.
By: ING Baring (U.S.) Capital
Markets LLC, as attorney-in-fact
By: /s/ LAUREL CHOATE
--------------------------------
Name: Laurel Choate
Title: Vice President
ING BARING (U.S.) CAPITAL
MARKETS LLC, as the Agent
By: /s/ LAUREL CHOATE
--------------------------------
Name: Laurel Choate
Title: Vice President
Signature Page -- 1
to
Certificate Purchase Agreement
Dated as of June 16, 1999
(NextCard Master Trust, Series 1999-1)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF NEXTCARD, INC. FOR THE QUARTER ENDED JUNE
30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 0
<INT-BEARING-DEPOSITS> 139,927
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 142,532
<ALLOWANCE> 2,007
<TOTAL-ASSETS> 293,555
<DEPOSITS> 0
<SHORT-TERM> 126,629
<LIABILITIES-OTHER> 9,854
<LONG-TERM> 11,997
0
0
<COMMON> 46
<OTHER-SE> 145,029
<TOTAL-LIABILITIES-AND-EQUITY> 293,555
<INTEREST-LOAN> 2,506
<INTEREST-INVEST> 1,185
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 3,691
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 2,513
<INTEREST-INCOME-NET> 1,178
<LOAN-LOSSES> 2,042
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 29,764
<INCOME-PRETAX> (29,672)
<INCOME-PRE-EXTRAORDINARY> (29,672)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (29,672)
<EPS-BASIC> (2.05)
<EPS-DILUTED> (2.05)
<YIELD-ACTUAL> 5.56
<LOANS-NON> 0
<LOANS-PAST> 563
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 35
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 2,007
<ALLOWANCE-DOMESTIC> 2,007
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
