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Exhibit 4.5
PURCHASE AND SERVICING AGREEMENT
Dated as of July 1, 1994,
Among
ZALE FUNDING TRUST,
DIAMOND FUNDING CORP.,
ZALE DELAWARE, INC.,
And
JEWELERS FINANCIAL SERVICES, INC.
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
PURCHASE OF RECEIVABLES;
CONSIDERATION AND PAYMENT . . . . . . . . . . . . . . . . . . . . . 2
Section 2.01. Purchase of Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.02. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.03. Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.04. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.05. Adjustments for Ineligible Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.06. Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.07. Finance Charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.08. Allocations Between Purchased and Non-Purchased Receivables. . . . . . . . . . . . . . . . . 6
Section 2.09. Recovery of Sales Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.10. Addition of Sellers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III
CONDITIONS TO PURCHASES OF RECEIVABLES . . . . . . . . . . . . . . . . . . 8
Section 3.01. Conditions Precedent to the Issuer's Initial Purchase of Receivables. . . . . . . . . . . . . 8
Section 3.02. Conditions Precedent to All of the Issuer's Purchases of Receivables. . . . . . . . . . . . . 8
Section 3.03. Conditions Precedent to the Seller's and DFC's Obligations on the Initial Purchase Date. . . 9
Section 3.04. Conditions Precedent to the Seller's Obligations on All Purchase Dates. . . . . . . . . . . . 9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 10
Section 4.01. Certain Representations and Warranties of the Parties. . . . . . . . . . . . . . . . . . . . 10
Section 4.02. Additional Representations and Warranties of the Seller, DFC and the Servicer. . . . . . . . 11
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Section 4.03. Additional Representations and Warranties of the Seller and DFC. . . . . . . . . . . . . . . 13
Section 4.04. Representations and Warranties of the Issuer. . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE V
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.01. Affirmative Covenants of the Seller and Servicer. . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.02. Negative Covenants of the Seller and Servicer. . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VI
ADMINISTRATION AND SERVICING
OF PURCHASED RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.01. Appointment of and Acceptance by the Servicer of Servicing Obligations. . . . . . . . . . . . 25
Section 6.02. Servicing Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 6.03. Reports and Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.04. Collection Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 6.05. Allocations and Applications of Collections. . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.06. Maintenance of Property; Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.07. Access to Certain Documentation Regarding the Purchased Receivables. . . . . . . . . . . . . 32
Section 6.08. Certain Responsibilities of the Servicer and the Seller. . . . . . . . . . . . . . . . . . . 32
Section 6.09. Limitation on Liability of the Seller, DFC and Others. . . . . . . . . . . . . . . . . . . . 32
Section 6.10. Successor Servicer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.11. Termination of Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VII
ADDITIONAL RIGHTS AND OBLIGATIONS
IN RESPECT OF THE PURCHASED RECEIVABLES . . . . . . . . . . . . . . . . . . 38
Section 7.01. Collection of Receivables; Rights of the Issuer and its Assignees. . . . . . . . . . . . . . 38
ARTICLE VIII
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.01. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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ARTICLE IX
SUBORDINATED NOTE; CAPITAL CONTRIBUTION . . . . . . . . . . . . . . . . . . 42
Section 9.01. Subordinated Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 9.02. Restrictions on Transfer of Subordinated Note. . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.03. Initial Capital Contribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE X
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 10.01. Amendments, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 10.02. Notices, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 10.03. No Waiver; Cumulative Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 10.04. Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 10.05. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 10.06. Costs, Expenses and Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 10.07. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 10.08. License. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 10.09. Merger or Consolidation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 10.10. Acknowledgment of Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 10.11. WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 10.12. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 10.13. No Petition in Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 10.14. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 10.15. Third Party Beneficiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.16. Jurisdiction; Consent to Service of Process. . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.17. Confirmation of Intent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.18 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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Exhibits
Exhibit A Form of Daily Report
Exhibit B Form of Monthly Settlement Statement
Exhibit C Form of Subordinated Note
Schedules
Schedule I Tradenames of the Seller
Schedule II Reserved
Schedule III Account Schedule
Annexes
Annex I Glossary of Terms
Annex II Conditions to Closing
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PURCHASE AND SERVICING AGREEMENT (this "Agreement"), dated as
of July 1, 1994, among ZALE FUNDING TRUST, a Delaware statutory business trust
(the "Issuer"), ZALE DELAWARE, INC., a Delaware corporation (the "Seller"),
DIAMOND FUNDING CORP., a Delaware corporation ("DFC"), and JEWELERS FINANCIAL
SERVICES, INC., a Delaware corporation ("JFS" or the "Servicer").
W I T N E S S E T H :
WHEREAS, the Issuer, the Seller, DFC and the Servicer desire
to enter into a receivables financing facility pursuant to which, inter alia,
(1) the Issuer will purchase from the Seller and, on the Issuance Date only,
DFC, and the Seller and DFC will sell to the Issuer, Receivables, (2) the
Issuer will purchase Receivables with net cash proceeds received by the Issuer
from the issuance and sale of one or more Series of notes and cash collections
on the Purchased Receivables, (3) the repayment of all Series of notes will be
secured by a security interest in substantially all of the assets of the
Issuer, including the Purchased Receivables, and (4) the Servicer will service
the Purchased Receivables, in each case in accordance with the terms and
conditions set forth in the Transaction Documents;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby expressly acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. Capitalized terms used but not
otherwise defined in this Agreement are used in this Agreement with the
meanings assigned to such terms in the Glossary of Terms attached as Annex I to
this Agreement.
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ARTICLE II
PURCHASE OF RECEIVABLES;
CONSIDERATION AND PAYMENT
Section 2.01. Purchase of Receivables. (a) The Seller hereby
sells, assigns, transfers and conveys to the Issuer, on the initial Purchase
Date and on each Purchase Date thereafter, on the terms and subject to the
conditions specifically set forth herein, all of its right, title and interest,
in, to and under (a) all Eligible Receivables of the Seller now existing and
hereafter originated by the Seller and all payment and enforcement rights (but
not any obligations) to, in and under the related Credit Card Agreements, (b)
all Collections in respect of such Receivables credited to the related Account
on or after the Cut-Off Date and all monies due or to become due with respect
to the foregoing and all collateral security therefor, (c) all proceeds of the
foregoing, including without limitation Insurance Proceeds relating thereto and
(d) all Recoveries. On the initial Purchase Date, all the Seller's right,
title and interest in and to all of the Seller's existing Receivables and after
the initial Purchase Date, all the Seller's right, title and interest in and to
all Receivables newly originated by the Seller, including, without limitation,
all Receivables set forth in the initial Daily Report in the case of
Receivables sold on the initial Purchase Date and in the most recent Daily
Report in the case of all other Receivables, shall be sold, assigned,
transferred and conveyed to the Issuer by the sale, assignment, transfer and
conveyance set forth in the immediately preceding sentence without any further
action by the Seller.
(b) DFC hereby sells, assigns, transfers and conveys to the
Issuer, on the initial Purchase Date, on the terms and subject to the
conditions specifically set forth herein, all of its right, title and interest,
in, to and under (a) all Eligible Receivables of DFC now existing and all
payment and enforcement rights (but not any obligations) to, in and under the
related Credit Card Agreements, (b) all Collections in respect of such
Receivables credited to the related Account on or after the Cut-Off Date and
all monies due or to become due with respect to the foregoing and all
collateral security therefor, (c) all proceeds of the foregoing, including
without limitation Insurance Proceeds relating thereto and (d) all Recoveries.
On the initial Purchase Date, all DFC's right, title and interest in and to all
such Receivables including, without limitation, all such
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Receivables set forth in the initial Daily Report, shall be sold, assigned,
transferred and conveyed to the Issuer by the sale, assignment, transfer and
conveyance set forth in the immediately preceding sentence without any further
action by DFC.
(c) All sales of Receivables by the Seller or DFC hereunder
shall be without recourse to, or representation or warranty of any kind
(express or implied) by, the Seller or DFC, except as otherwise specifically
provided herein. The foregoing sale, assignment, transfer and conveyance does
not constitute and is not intended to result in a creation or assumption by the
Issuer of any obligation of the Seller, DFC or any other Person in connection
with the Accounts, the Receivables, the Credit Card Agreements or any other
agreement relating thereto, including without limitation any obligation to
Obligors. It is understood and agreed that no purchases of Receivables
hereunder shall occur after the Purchase Termination Date.
Section 2.02. Termination. The Seller's obligation to sell
the Receivables under this Agreement shall terminate on the earlier to occur of
(i) the satisfaction and discharge of the Indenture pursuant to Section 12.01
thereof (notwithstanding the survival of certain obligations as set forth in
such Section 12.01, (ii) an Early Amortization Event or (iii) the first day of
the August 1999 Cycle Month (the "Purchase Termination Date").
Section 2.03. Purchase Price. The amount payable by the
Issuer (the "Purchase Price") shall be equal to (i) on the initial Purchase
Date for Eligible Receivables sold to the Issuer by the Seller or DFC on such
date, the aggregate Principal Receivables of such Eligible Receivables as of
the close of business on the Business Day preceding the Cut-Off Date (other
than Receivables contained in Accounts which were written off as uncollectible
in accordance with the Credit Card Guidelines prior to the initial Purchase
Date) as set forth in the initial Daily Report or (ii) on any Purchase Date
thereafter, for Eligible Receivables sold to the Issuer by the Seller on such
date the aggregate amount of Principal Receivables of such Receivables, in each
case as adjusted pursuant to Sections 2.05 and 2.06 of this Agreement.
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Section 2.04. Payments
(a) Payment of Purchase Price. The Purchase
Price for Receivables shall be paid to the Seller or DFC, as applicable, or
provided for in the manner provided below on the Issuance Date and each day
thereafter that a Daily Report is prepared and delivered to the Issuer in
accordance with Section 6.03(a) of this Agreement (each, a "Purchase Date").
The Issuance Date shall be the initial Purchase Date hereunder. The Purchase
Price shall be paid by the Issuer to the Seller and DFC on the initial Purchase
Date and to the Seller on each Purchase Date thereafter as follows:
(1) on the initial Purchase Date, (A) by making a cash
payment to DFC and (B) by making a cash payment to the Seller and by
issuing the Subordinated Note;
(2) on each Purchase Date after the initial Purchase
Date, (A) by making a cash payment to the Seller up to an amount equal
to funds available therefor on such Purchase Date pursuant to Section
5.01 of the Indenture; provided that, in no event shall cash payments
be made to the extent such payments would cause a Borrowing Base
Deficiency to exist; and (B) by means of an addition to the principal
amount of the Subordinated Note in an aggregate amount equal to the
excess, if any, of the Purchase Price to be paid to the Seller on such
date (as adjusted pursuant to Sections 2.05 and 2.06 of this
Agreement) over the amount of any cash payment made on such day to the
Seller in consideration for the Receivables.
(b) Time; Date; Location. Unless otherwise
specified in this Agreement, all payments under this Agreement shall be made
(1) not later than 1:00 p.m. (New York City time) on the date specified
therefor in lawful money of the United States of America in same day funds, (2)
if to the Seller or DFC, to the bank account designated in writing by the
Seller or DFC to the Issuer and (3) if to the Issuer, to the bank account
designated in writing by the Issuer to the Seller. Amounts not paid by the
Seller when due under this Agreement shall be payable on demand and shall bear
interest at a rate equal at all times to the lesser of (1) the prime rate as
reported in The Wall Street Journal and (2) the maximum rate permitted under
applicable law. Whenever any payment to be made under this Agreement shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day.
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Section 2.05. Adjustments for Ineligible Receivables. In the
event of a breach of the representation and warranty set forth in Section
4.03(a) hereof, then promptly upon the earlier to occur of the discovery of
such breach by the Seller or Servicer or receipt by the Seller of written
notice from the Indenture Trustee of such breach, the Purchase Price for
Receivables to be purchased from the Seller on such day shall be reduced by the
outstanding principal amount of the Receivables with respect to which such
breach occurred and the Servicer shall deduct the outstanding principal amount
of such Receivables from the Pool Balance. In the event such reduction of the
Pool Balance would cause the Trust's Participation Amount to be less than the
Aggregate Available Subordinated Amount, on the date of such reduction the
Seller shall make a deposit (the "Transfer Deposit Amount") to the Collateral
Account in immediately available funds in an amount equal to the amount by
which the Trust's Participation Amount would otherwise be reduced below the
Aggregate Available Subordinated Amount. The obligation of the Seller to
accept adjustment of the Purchase Price as herein provided or to deposit the
Transfer Deposit Amount shall be the sole remedy respecting breach of the
representations and warranties identified in the first sentence of this Section
2.05 available to the noteholders of any Series or the Indenture Trustee on
behalf of the noteholders of any Series.
Section 2.06. Returns. The Seller may accept returns of
goods for full or partial credit (a "Credit Return") or make a daily adjustment
in the principal amount or finance or other charges accrued or payable with
respect to an Account if such adjustment is permitted by and made in accordance
with the Credit Card Guidelines (a "Credit Adjustment"). Each Credit Return
and Credit Adjustment (including any Credit Adjustment required by any
Requirement of Law) shall be made by the Seller on the applicable Date of
Processing. All Credit Returns and Credit Adjustments on any Date of
Processing shall be in an amount equal to the aggregate amount of all such
returns and adjustments made with respect to the Purchased Receivables on such
Date of Processing (the "Return Amount"). The Servicer shall deduct the Return
Amount from the Pool Balance on such Date of Processing. To the extent such
reduction reduces the Trust's Participation Amount below the Aggregate
Available Subordinated Amount for the immediately preceding Determination Date
(after giving effect to the allocations, distributions, withdrawals and
deposits to be made on the Payment Date immediately following such
Determination Date),
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the Seller will deposit a cash amount equal to such deficiency into the
Collateral Account in immediately available funds (an "Adjustment Payment") on
the day on which such adjustment occurs.
Section 2.07. Finance Charges. Finance Charges, whenever
created and whenever received, accrued in respect of Purchased Receivables,
shall be the property of the Issuer and all Collections with respect thereto
shall be allocated and treated as Collections in respect of Purchased
Receivables.
Section 2.08. Allocations Between Purchased and Non-Purchased
Receivables. The Seller, the Issuer and the Servicer agree that the Servicer
shall apply Collections on an Account by Account basis between Purchased
Receivables and Non-Purchased Receivables as set forth below:
(a) Collections. All Collections of Finance
Charges received in respect of an Account containing both Purchased Receivables
and Non-Purchased Receivables shall be allocated for the purposes of this
Agreement on a pro rata basis (based on Purchase Prices) between Purchased
Receivables and Non-Purchased Receivables in the Account. All other
Collections received in respect of an Account containing both Purchased
Receivables and Non-Purchased Receivables shall be allocated for the purposes
of this Agreement (1) first, to pay Purchased Receivables in the Account until
such Purchased Receivables are paid in full and (2) second, to pay
Non-Purchased Receivables in the Account. All Collections in respect of any
Account that contains only Purchased Receivables shall be paid in respect of
Purchased Receivables and all Collections in respect of any Account that
contains only Non-Purchased Receivables shall be paid in respect of
Non-Purchased Receivables.
(b) Credits; Returns. All credits and returns
made after the Purchase Termination Date shall be applied to the Receivable to
which such credit or return relates, whether with respect to a Purchased
Receivable or a Non-Purchased Receivable.
(c) Gross Charge-Offs. Gross Charge-Offs of any
Account shall be made for all Receivables in the Account, with a pro rata
reduction (based on Purchase Prices) in Purchased Receivables and Non-Purchased
Receivables in the Account.
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(d) Recoveries. Recoveries with respect to any
Account shall be applied (1) first, in respect of Gross Charge-Offs of
Purchased Receivables in the Account until such Recoveries equal the amount of
such Gross Charge-Offs of Purchased Receivables in full and (2) second, in
respect of Gross Charge-Offs of Non-Purchased Receivables in the Account.
Section 2.09. Recovery of Sales Tax. The Seller may, at its
option, repurchase any Purchased Receivables from the Issuer that have been
charged off in accordance with the Credit Card Guidelines to the extent
necessary to recover state sales tax related to such Purchased Receivables, at
a price equal to the sum of (a) the amount of Recoveries with respect to such
Purchased Receivables plus (b) the proceeds from such state sales tax. Upon
any such repurchase, the Seller (1) agrees, to the extent not paid at the time
of repurchase, to pay promptly to the Issuer the amount of any Recoveries
received in respect of such repurchased charged-off Purchased Receivables and,
immediately upon crediting of such amount to the Seller by offset or otherwise,
the amount of state sales tax recovered with respect thereto, and (2) shall
grant a security interest to the Issuer in such repurchased Receivables and any
proceeds thereof (including any Recoveries therefrom) to secure the repurchase
price of such Receivables.
Section 2.10. Addition of Sellers. Any Subsidiary of Zale
Corp. may sell its Receivables hereunder to the Issuer if the Rating Agency
Condition is satisfied with respect to such addition. Zale Corp. and its
Subsidiary that is proposed to sell Receivables shall give to the Issuer and
the Rating Agencies not less than thirty days' prior written notice of the
effective date of the addition of such Subsidiary as a seller of Receivables.
Once such notice has been given, any addition of a Subsidiary of Zale Corp. as
a seller of Receivables pursuant to this Section 2.10 shall become effective on
the first Business Day following the expiration of such thirty-day period (or
such later date as may be specified in such notice) on which (i) the Rating
Agency Condition has been satisfied, (ii) such Subsidiary and the parties
hereto shall have executed and delivered such agreements, instruments and other
documents and such amendments or other modifications to the Transaction
Documents, in form and substance reasonably satisfactory to the Issuer and the
Indenture Trustee, that the Issuer and the Indenture Trustee reasonably
determine are necessary or appropriate to effect such addition.
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ARTICLE III
CONDITIONS TO PURCHASES OF RECEIVABLES
Section 3.01. Conditions Precedent to the Issuer's Initial
Purchase of Receivables. The obligation of the Issuer to purchase the
Receivables hereunder on the initial Purchase Date from the Seller and DFC
shall be subject to the satisfaction of each of the conditions precedent
contained in Annex II to this Agreement.
Section 3.02. Conditions Precedent to All of the Issuer's
Purchases of Receivables. The obligation of the Issuer to purchase each
Receivable on each Purchase Date (including the initial Purchase Date) from the
Seller and, on the initial Purchase Date only, DFC shall be subject to the
further conditions precedent that on such Purchase Date:
(a) The following statement shall be true (and delivery
by the Seller, DFC or the Servicer of the Daily Report and the
acceptance by the Seller and DFC of the Purchase Price for any
Receivables on any Purchase Date shall constitute a representation and
warranty by the Seller that on such Purchase Date such statement is
true):
the representations and warranties of the Seller, DFC and the
Servicer contained in Sections 4.01, 4.02 and 4.03 of this
Agreement shall be true and correct in all material respects
on and as of such Purchase Date as though made on and as of
such date (except to the extent that such representations or
warranties expressly relate to an earlier date, in which case
such representations and warranties shall be true and correct
in all material respects as of such earlier date).
(b) No material change shall have occurred after the
initial Purchase Date with respect to the Seller's and the Servicer's
systems, computer programs, related materials, computer tapes, disks
and cassettes, procedures and record keeping relating to and required
for the collection of the Purchased Receivables by the Servicer which
makes them not sufficient and
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satisfactory in order to permit the purchase and administration and
collection of the Purchased Receivables by the Servicer in accordance
with the terms and intent of this Agreement.
(c) The Issuer shall have received payment in full of all
amounts for which payment has been requested by the Issuer pursuant to
Section 10.06 of this Agreement.
(d) The Issuer shall have received such other approvals,
opinions or documents as the Issuer may reasonably request.
(e) The Seller and the Servicer shall have complied in
all material respects with all the covenants and satisfied all their
respective obligations under this Agreement required to be complied
with or satisfied as of such date.
Section 3.03. Conditions Precedent to the Seller's and DFC's
Obligations on the Initial Purchase Date. The obligations of the Seller on the
initial Purchase Date shall be subject to the conditions precedent that the
Seller shall have received on or before such Purchase Date the following, dated
the Purchase Date (unless otherwise indicated) and in form and substance
satisfactory to the Seller:
a duly executed copy of the Trust Agreement, and the names and
true signatures of the officers of the Owner Trustee
authorized on the Issuer's behalf to sign this Agreement and
the other documents to be delivered by it hereunder.
Section 3.04. Conditions Precedent to the Seller's
Obligations on All Purchase Dates. The obligations of the Seller on any
Purchase Date (including the initial Purchase Date) shall be subject to the
further conditions precedent that on such Purchase Date (and the payment by the
Issuer of the Purchase Price shall constitute a representation and warranty by
the Issuer that on such date such statements are true) the representations and
warranties of the Issuer contained in Section 4.04 of this Agreement are true
and correct in all material respects on and as of such Purchase Date as though
made on and as of such date (except to the extent that such representations or
warranties expressly relate to an earlier date, in which case such
representations
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or warranties shall be true and correct in all material respects as of such
earlier date).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. Certain Representations and Warranties of the
Parties. Each of the Seller, DFC and the Servicer represents and warrants as
to itself, as follows:
(a) Organization and Good Standing. It (1) is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and is duly qualified as a
foreign corporation and is in good standing in each jurisdiction in which such
qualification is required, except where the failure to so qualify would not
reasonably be expected to have a material adverse effect on its condition
(financial or otherwise), operations or properties, (2) has all the requisite
corporate power and authority to execute, deliver and perform its obligations
under and effect the transactions contemplated by this Agreement and (3) has
all requisite corporate power and authority and the legal right to own, pledge,
mortgage and operate its properties, and to conduct its business as now or
currently proposed to be conducted.
(b) Due Authorization and No Conflict. The
execution, delivery and performance by it of this Agreement, and all
instruments and documents to which it is a party and which are to be delivered
hereunder by it, and the transactions contemplated hereby and thereby, (1) are
within its corporate powers, (2) have been duly authorized by all necessary
corporate action, including the consent of stockholders and shareholders where
required, (3) do not (A) contravene its charter or bylaws, (B) violate any law
or regulation (including without limitation Regulation G, Regulation T,
Regulation U or Regulation X of the Board) or any order or decree of any
Governmental Authority, which violation would have a material adverse effect on
the rights and remedies of the Indenture Trustee and the noteholders of any
Series under any Transaction Document, (C) conflict with or result in the
breach of, or constitute a default under, any indenture, mortgage or deed of
trust enforceable against it or any lease, agreement or other instrument
binding on or affecting it or any of its properties, which conflict, breach or
default would have a material adverse effect on the rights
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and remedies of the Indenture Trustee and the noteholders of any Series under
any Transaction Document, or (D) result in or require the creation or
imposition of any Lien upon any of its property, including without limitation
pursuant to any agreement or instrument referred to in clause (C) above, except
as created, imposed or contemplated by any of the Transaction Documents, (4) do
not require compliance on its part with any bulk sales act or similar law and
(5) do not require the consent, authorization by or approval of or notice to or
filing or registration with, any Governmental Authority or any other Person
other than those that have been obtained.
(c) Enforceability. This Agreement and the other
Transaction Documents to which it is a party have been validly executed and
delivered by it and this Agreement and the other Transaction Documents to which
it is a party constitute its legal, valid and binding obligation, enforceable
against it in accordance with its terms, subject to general principles of
equity and subject to bankruptcy, insolvency, reorganization, moratorium and
similar laws now or hereafter in effect relating to creditors' rights
generally.
(d) No Proceedings. Except as set forth in the
Private Placement Memorandum, there is no unstayed action, suit or proceeding
pending or, to its knowledge, threatened against or affecting it, before any
court, governmental agency or arbitrator that (1) is reasonably likely to be
determined adversely to it and that, if so determined, would have a material
adverse effect on the rights and remedies of the Indenture Trustee and the
noteholders of any Series under any Transaction Document, or (2) that purports
to affect the legality, validity or enforceability of this Agreement, any of
the other Transaction Documents or the transactions contemplated hereby or
thereby.
Section 4.02. Additional Representations and Warranties of
the Seller, DFC and the Servicer. Each of the Seller, DFC and the Servicer
additionally represents and warrants as to itself as follows:
(a) Statements Made. The written statements of
its senior officers that have been or will be furnished to the Indenture
Trustee and the noteholders of all Series in connection with this Agreement and
any other Transaction Document, and any financial statement delivered pursuant
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hereto or thereto (other than to the extent such statements constitute
projections), taken as a whole and in light of the circumstances in which made,
at the time so furnished contained no untrue statement of a material fact and
did not omit to state a material fact necessary to make the statements therein
not misleading; and, to the extent that any such statements constitute
projections, such projections were prepared in good faith on the basis of fully
disclosed assumptions, believed by it to be reasonable at the time such
projections were furnished to the Indenture Trustee or the noteholders of all
Series, as the case may be.
(b) Location of Office and Records. The chief
place of business and chief executive office of (i) the Seller is located at
901 West Walnut Hill Lane, Irving, Texas 75038 and (ii) DFC is located at 901
West Walnut Hill Lane, Irving, Texas 75038; and the offices where the Seller
and DFC keep all their original books, records and documents evidencing
Purchased Receivables or the related Credit Card Agreements are located at such
addresses, except that the Credit Card Agreements and substantially all charge
slips for each Account are located at the Originator's store. The chief place
of business and chief executive office of JFS and the offices where JFS keeps
all its original books, records and documents evidencing the Purchased
Receivables is located at 901 West Walnut Hill Lane, Irving, Texas 75038. The
chief place of business and chief executive office of DFC and the offices where
DFC keeps all its original books, records and documents evidencing the
Purchased Receivables is located at 901 West Walnut Hill Lane, Irving, Texas
75038. The locations set forth in this subsection (b) for the Seller, DFC and
JFS have been the same locations for the four months immediately prior to the
date of this Agreement.
(c) Indenture Trustee Can Perform. Upon the
delivery by it to the Indenture Trustee of the Transaction Documents and
related materials relating to the administration of the Purchased Receivables
pursuant to Section 7.01(b) of this Agreement, the Indenture Trustee shall have
been furnished with all data and materials necessary to permit immediate
collection of the Purchased Receivables by the Indenture Trustee, without the
participation of the Seller, DFC, the Servicer or the Issuer in such
collection; and it is not restricted by agreement, law, regulation or otherwise
from granting the license to the Issuer contained in Section 10.08 of this
Agreement.
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(d) Bank Accounts and Post Office Boxes. Set
forth on Schedule I to the Indenture is a complete and accurate description, as
of the Issuance Date, of each Post Office Box, Collection Deposit Account,
Concentration Account, the Collateral Account and the Excess Funding Account;
each of the Collection Deposit Accounts has been validly and effectively
assigned to the Indenture Trustee pursuant to the Collection Deposit Account
Letters; and all cash and other proceeds of the Collateral are subject to the
terms and conditions of this Agreement and the Indenture.
(e) No Consent. No action, authorization,
qualification, license, permit, consent or approval of, registration or filing
with or any other action by any Governmental Authority is or will be required
in connection with the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated by this Agreement by the
Seller, DFC or the Servicer, except such as have been made or obtained and are
in full force and effect.
(f) Taxes. It has filed or caused to be filed all
tax returns and reports required by law to have been filed by it and has paid
all taxes, assessments and governmental charges thereby shown to be owing,
except any such taxes, assessments or charges (i) which are being diligently
contested in good faith by appropriate proceedings, (ii) for which adequate
reserves in accordance with GAAP shall have been set aside on its books and
(iii) with respect to which no Lien has been imposed upon any Receivables or
related assets.
Section 4.03. Additional Representations and Warranties of
the Seller and DFC. The Seller and DFC additionally represent and warrant as
follows:
(a) Eligible Receivables. As of the Purchase
Date with respect to each Receivable, each such Receivable, unless otherwise
identified to the Issuer by the Servicer in the Daily Report for such date,
will be an Eligible Receivable.
(b) Sale of Receivables. On the initial Purchase
Date, each of DFC and the Seller, and on each Purchase Date thereafter, the
Seller, is and will be the sole legal and beneficial owner of the Receivables
being sold by it; upon the sale of each Receivable by the Seller and DFC to the
Issuer, the Issuer will become the sole legal and
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beneficial owner of the Purchased Receivables and the Collections with respect
thereto, free and clear of any Liens (except for Liens created, imposed or
contemplated by any of the Transaction Documents); and no effective financing
statement or other instrument similar in effect covering all or any part of the
Purchased Receivables or Collections with respect thereto will at such time be
on file in any filing or recording office except such as have been filed
pursuant to or as contemplated by the Transaction Documents or with respect to
which the Indenture Trustee has received effective UCC termination statements.
(c) Tradenames. Schedule I to this Agreement
sets forth, as of the date of this Agreement, a complete and accurate list of
the tradenames of the Originators and DFC (or its predecessors in interest) for
the six-year period preceding the date of this Agreement.
(d) Financial Statements. The Indenture Trustee
has previously been furnished copies of the audited consolidated financial
statements of Zale Corp. and its consolidated subsidiaries for the fiscal year
ended March 31, 1994.
(e) UCC Classification. The Receivables, at the
time of sale thereof by the Seller to the Issuer, are "accounts," "chattel
paper" or "general intangibles" as defined in the UCC and no part of the
Seller's right to payment for goods sold or leased is evidenced by an
"instrument" which is not also a security agreement.
(f) No Material Adverse Change. No material
adverse change in the business, assets, operations or condition (financial or
otherwise) of Zale Corp. and its subsidiaries taken as a whole has occurred
from that set forth in Zale Corp.'s audited consolidated financial statements
for the fiscal year ended March 31, 1994.
(g) Information Provided in Computer Files. All
material information with respect to the Accounts and the Receivables provided
to the Indenture Trustee on the computer file was true and correct in all
material respects as of the Cut-Off Date.
(h) Account Schedule. Schedule III to this
Agreement sets forth all Accounts as of the Cut-Off Date.
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(i) Valid Transfer and Assignment. The transfer
of Receivables by the Seller and DFC to the Issuer under this Agreement
constitutes a valid transfer and assignment to the Issuer of all right, title
and interest of the Seller or DFC, as applicable, in and to the Receivables,
whether now existing or hereafter created, and the proceeds thereof (including
amounts in any of the accounts established for the benefit of noteholders of
all Series).
(j) Return Policy. The Seller currently has a
30-day return policy. The Seller shall notify the Rating Agencies of any
change in such policy within seven Business Days of such change.
(k) It has valid business reasons for selling its
interests in the Receivables rather than obtaining a loan with the Receivables
as collateral.
(l) Each Receivable has not been satisfied,
subordinated or rescinded and no provision of the Receivable has been waived,
altered or modified in any respect.
(m) Each Receivable is not or will not be subject
to any right of rescission, set-off, recoupment, counterclaim or defense,
whether arising out of transactions concerning the Receivable between the
Obligor and the Seller or DFC, or otherwise and no such right has been asserted
with respect thereto.
(n) No purchase of an interest in any Receivable or
related asset by the Issuer from it constitutes a fraudulent transfer or
fraudulent conveyance under the United States Bankruptcy Code or applicable
state bankruptcy or insolvency laws or is otherwise void or voidable or subject
to subordination under similar laws or principles or for any other reason.
(o) The Seller does not have any defined benefit
plans and contributions to its defined contribution plans are made solely at
the discretion of the Seller's board of directors.
Section 4.04. Representations and Warranties of the Issuer.
The Issuer represents and warrants to the Seller, DFC and the Servicer as
follows:
(a) Organization; Powers. The Issuer (1) is a business
trust duly organized, validly existing and in good
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standing under the laws of Delaware, (2) has all requisite power and authority
to own its property and assets and to carry on its business as now conducted
and as proposed to be conducted, (3) is qualified to do business in every
jurisdiction where such qualification is required, except where the failure to
so qualify would not reasonably be expected to have a Material Adverse Effect
and (4) has the power and authority to execute, deliver and perform its
obligations under this Agreement and each other Transaction Document or
instrument contemplated thereby to which it is a party and to issue the Notes.
(b) Authorization. The execution, delivery and
performance by the Issuer of this Agreement and the other Transaction Documents
to which it is a party and the performance by the Issuer of the other
transactions contemplated thereby (1) have been duly authorized by the Owner
Trustee on behalf of the Issuer and (2) will not (A) violate (i) any provision
of law, statute, rule or regulation, which violation would have a Material
Adverse Effect, (ii) any provision of the Trust Agreement, (iii) any order of
any Governmental Authority or (iv) any provision of any indenture, agreement or
other instrument to which the Issuer is a party or by which it or any of its
property is or may be bound, which violation would have a Material Adverse
Effect, (B) be in conflict with, result in a breach of or constitute (alone or
with notice or lapse of time or both) a default under any such indenture,
agreement or other instrument, which conflict, breach or default would have a
Material Adverse Effect or (C) result in the creation or imposition of any Lien
upon or with respect to any property or assets now owned or hereafter acquired
by the Issuer, except the Liens created, imposed or contemplated by any of the
Transaction Documents.
(c) Enforceability. This Agreement has been duly
executed and delivered by the Issuer and constitutes, and each other
Transaction Document when executed and delivered by the Issuer will constitute,
a legal, valid and binding obligation of the Issuer enforceable against the
Issuer in accordance with its terms, subject to general principles of equity
and to bankruptcy, insolvency, reorganization, moratorium and similar laws now
or hereafter in effect relating to creditors' rights generally.
(d) Litigation. There is no action, suit, investigation,
litigation or proceeding at law or in equity or by or before any Governmental
Authority now pending
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against, or, to the knowledge of the Issuer, threatened against, the Issuer or
any of its business, property or rights (1) that involves any of the
Transaction Documents or the Transactions or (2) as to which there is a
reasonable probability of an adverse determination and which, if adversely
determined, would, individually or in the aggregate, have a Material Adverse
Effect.
ARTICLE V
COVENANTS
Section 5.01. Affirmative Covenants of the Seller and
Servicer. So long as the Issuer shall have any interest in any Purchased
Receivable, unless the Issuer and the Majority Noteholders otherwise consent in
writing:
(a) Financial Statements. The Seller shall
deliver or cause to be delivered to the Issuer, the Servicer, and the Indenture
Trustee, and each noteholder of any Series who has provided to the Seller a
written request therefor:
(1) Annual Financial Statements. Within 100 days
after the end of each fiscal year of Zale Corp., the consolidated Balance Sheet
and related Statements of Income and Cash Flows of Zale Corp. and its
consolidated subsidiaries, showing the financial condition of Zale Corp. and
its consolidated subsidiaries as of the close of such fiscal year and the
results of the operations of Zale Corp. and its consolidated subsidiaries
during such year, all audited by Arthur Andersen & Co. or other independent
public accountants of recognized national standing;
(2) Quarterly Financial Statements. Within 50
days after the end of the first three fiscal quarters of Zale Corp., (A) the
unaudited consolidated Balance Sheet and related Statement of Income and Cash
Flows of Zale Corp. and its consolidated subsidiaries, showing the financial
condition of Zale Corp. and its consolidated subsidiaries as of the close of
such fiscal quarter and the results of the operations of Zale Corp. and its
consolidated subsidiaries during such fiscal quarter and the then elapsed
portion of such fiscal year, and (B) a certificate of a Financial Officer of
Zale Corp. certifying that such financial statements fairly present the
financial condition and results of operations of Zale Corp. and its
consolidated subsidiaries
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on a consolidated basis in accordance with GAAP consistently applied, subject
to normal year-end audit adjustments without GAAP footnotes; and
(3) Monthly Financial Statements. Not later than
the last day of the month (or, if such day is not a Business Day, the next
succeeding Business Day) following each fiscal month of Zale Corp. (or,
notwithstanding the foregoing, 50 days in the case of the last month of each
fiscal quarter and 100 days in the case of the last month of each fiscal year),
beginning with the fiscal month ending August 31, 1994, (A) the unaudited
consolidated Balance Sheet and related Statements of Income and Cash Flows of
Zale Corp. and its consolidated subsidiaries, showing the financial condition
of Zale Corp. and its consolidated subsidiaries as of the close of such fiscal
month and the results of the operations of Zale Corp. and its consolidated
subsidiaries during such fiscal month and the then elapsed portion of the
fiscal year of Zale Corp. and (B) a certificate of a Financial Officer of Zale
Corp. certifying that such financial statements fairly present the financial
condition and results of operations of Zale Corp. and its consolidated
subsidiaries on a consolidated basis in accordance with GAAP consistently
applied, subject to normal year-end audit adjustments and without GAAP
footnotes.
(b) Compliance with Laws, etc. Each of the
Seller and the Servicer shall comply in all material respects with all
applicable laws, rules and regulations of any Governmental Authority, including
without limitation rules and regulations relating to truth in lending, fair
credit billing, fair credit reporting, equal credit opportunity and fair debt
collection practices and privacy, except where the failure to so comply would
not have a Material Adverse Effect.
(c) Preservation of Corporate Existence. The
Seller and the Servicer shall do or cause to be done all things necessary (1)
to preserve, renew and keep in full force and effect its legal existence and
(2) to maintain such legal existence separate from that of the Issuer.
(d) Inspection Rights. Each of the Seller and
the Servicer shall, from time to time, at any reasonable time during normal
business hours, upon at least two Business Days' prior notice, permit the
Issuer or any of its agents or representatives or the Indenture Trustee, acting
at the written direction of the Majority Noteholders, (1) to examine
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and make copies of and abstracts from the records, books of account and
documents (including without limitation computer tapes and disks) of the Seller
and the Servicer relating to the Purchased Receivables and the underlying
Credit Card Agreements; and (2) to visit the properties of the Seller and the
Servicer for the purpose of determining compliance under the Transaction
Documents, and to discuss the affairs, finances and accounts of the Seller and
the Servicer relating to the Purchased Receivables or the Seller's or the
Servicer's performance under this Agreement with any of the Seller's or the
Servicer's senior officers, directors, independent certified public accountants
and consultants.
(e) Keeping of Records and Books of Account.
Each of the Seller and the Servicer shall maintain and implement, or cause to
be maintained or implemented, administrative and operating procedures
reasonably necessary or advisable for the transfer, administration, servicing
and collection of amounts owing on all Purchased Receivables, and, unless and
until delivery to the Issuer, keep and maintain, or cause to be kept and
maintained, all documents, books, records and other information reasonably
necessary or advisable for the transfer, administration, servicing and
collection of amounts owing on all such Purchased Receivables.
(f) Location of Records. Each of the Seller and
the Servicer shall (1) keep its chief place of business and chief executive
office and the offices where it keeps its original books, records and documents
evidencing Purchased Receivables or the related Credit Card Agreements (other
than the Credit Card Agreements and substantially all charge slips for each
Account) at the addresses specified in Section 4.02(b) of this Agreement, or
upon 30 days' prior written notice to the Issuer and the Indenture Trustee, at
such other locations in a jurisdiction where all action required by Section
5.01(n) of this Agreement shall have been taken and completed and be in full
force and effect, and (2) cause each retail store to keep all Credit Card
Agreements and substantially all charge slips for each Account of customers of
such store in a centralized, segregated and marked location at such store.
(g) Computer Files. The Seller shall direct the
Servicer to, and the Servicer shall, at its own cost and expense, (1) retain
the electronic ledger used by the Seller and the Servicer as a master record of
the Accounts and copies of all material documents relating to each Account as
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custodian for the Issuer and the Indenture Trustee and other Persons with
interests in the Purchased Receivables and (2) mark, or cause to be marked with
a legend, the computer records pertaining to the Purchased Receivables, and use
its best efforts to mark all records pertaining to the Related Contracts and
all storage facilities where information is maintained pertaining to the
Purchased Receivables, to the effect that interests in the Purchased
Receivables from time to time existing in the Accounts related thereto have
been conveyed to the Issuer and that the Indenture Trustee has a security
interest in such Purchased Receivables for the benefit of the Secured Parties
pursuant to the Indenture.
(h) Credit Card Agreements and Credit Card
Guidelines. Each of the Seller and the Servicer shall comply with and perform
its obligations in accordance with the Credit Card Guidelines, except (1)
insofar as any failure so to comply or perform would not have a material
adverse effect on the rights and remedies of the Indenture Trustee and the
noteholders of any Series under any Transaction Document or (2) if such failure
to comply is necessary under any Requirement of Law. With respect to any
change to the Credit Card Guidelines that is material and that is not necessary
under any Requirement of Law, (1) the Seller and the Servicer shall, prior to
making any such change, give 30 days' written notice to the noteholders of any
Series of any such change, (2) the Majority Noteholders shall have such 30-day
period to notify the Seller and the Servicer that such Majority Noteholders
deem the change to have a material adverse effect on the rights and remedies of
the Indenture Trustee and the noteholders of such Series (any which notice
shall state in reasonable detail the reasons for such opinion) and (3) if such
notice is given in such 30-day period and such change would have such effect,
such change shall not be made; provided that, if no such notice is received by
the Seller and the Servicer within such 30-day period, such change shall be
deemed not to have such effect and the Indenture Trustee and the noteholders of
all Series shall be deemed to have consented to such change.
(i) Daily Reports; Monthly Settlement Statements;
Other Reports. The Servicer shall furnish (or, if JFS is not the Servicer, JFS
shall provide the Servicer with such information as may be required by the
Servicer to furnish) the Seller, the Issuer, the Indenture Trustee with each
Daily Report and Monthly Settlement Statement required by Sections 6.03(a) and
6.03(b) of this Agreement and other records that show the performance of the
Purchased Receiv-
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ables and such other reports as may be reasonably requested by the Issuer and
by the Indenture Trustee, acting at the direction of the Majority Noteholders.
(j) Insurance. Except to the extent failure to
do so would not reasonably be expected to have a material adverse effect on the
rights and remedies of the Indenture Trustee and the noteholders of any Series
under any Transaction Document, each of the Seller and the Servicer shall (1)
keep its insurable properties adequately insured at all times by financially
sound and responsible insurers, and maintain such other insurance, to such
extent and against such risks, including fire and other risks insured against
by extended coverage, as is customary with companies of the same or similar
size in the same or similar businesses; (2) maintain in full force and effect
public liability insurance against claims for personal injury or death or
property damage occurring upon, in, about or in connection with the use of any
properties owned, occupied or controlled by it in such amounts and with such
deductibles as are customary with companies of the same or similar size in the
same or similar businesses and in the same geographic area; and (3) maintain
such other insurance as may be required by law.
(k) Obligations and Taxes. Each of the Seller
and the Servicer shall (1) pay any material obligations enforceable against or
binding on it promptly and in accordance with terms thereof and (2) pay and
discharge promptly when due all sales tax and all material taxes, assessments
and governmental charges or levies imposed upon, and enforceable against or
binding on, it or upon its income or profits or in respect of its property,
before the same shall become in default, as well as all material lawful claims
enforceable against or binding on it for labor, materials and supplies or
otherwise which, if unpaid, might become a Lien or charge upon such properties
or any part thereof; provided that, with respect to both clauses (1) and (2) in
this Section 5.01(k), it shall not be required to pay and discharge or to cause
to be paid and discharged any such obligation, tax, assessment, charge, levy or
claim so long as the validity or amount thereof shall be contested in good
faith by appropriate proceedings and it shall have set aside on its books
adequate reserves with respect thereto.
(l) Furnishing Copies, etc. Each of the Seller
and the Servicer shall furnish to the Issuer and to the Indenture Trustee
promptly following request therefor,
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such information, documents, records or reports with respect to the Purchased
Receivables or the underlying Credit Card Agreements or the operations or
conditions (financial or otherwise) of the Seller or the Servicer as the Issuer
or the Indenture Trustee, acting at the written direction of the Majority
Noteholders, may from time to time reasonably request.
(m) Obligations with Respect to Accounts. Each
of the Seller and the Servicer shall (1) duly fulfill all obligations on its
part to be fulfilled under or in connection with each Account, except where the
failure to so fulfill (A) would not have a material adverse effect on the
rights and remedies of the Indenture Trustee and the noteholders of any Series
or (B) is necessary under any Requirement of Law and (2) not do anything to
impair the rights of the Issuer in the Purchased Receivables or under the
Credit Card Agreements.
(n) Continuing Compliance with the UCC. Each of
the Seller and the Servicer shall, at its expense, preserve, continue and
maintain or cause to be preserved, continued and maintained the Issuer's valid
and properly protected and perfected title to each Purchased Receivable,
including without limitation filing or recording UCC financing statements in
each relevant jurisdiction.
(o) Further Action Evidencing Purchases. Each of
the Seller and the Servicer shall, at its expense, promptly execute and deliver
all further instruments and documents, and take all further action, that may be
necessary or desirable or that the Issuer may reasonably request, in order to
protect or more fully evidence the Issuer's right, title and interest in the
Purchased Receivables and its rights under the Credit Card Agreements with
respect thereto, or to enable the Issuer to exercise or enforce any such
rights, and without limiting the generality of the foregoing, (1) the Seller
shall, upon the request of the Issuer, execute and file such financing or
continuation statements, or amendments thereto, and such other instruments or
notices as may be necessary or, in the opinion of the Issuer, advisable, (2)
the Seller shall provide to the Issuer upon request copies of any records
relating to the Purchased Receivables and any records reasonably related to
determining compliance with the Transaction Documents, (3) the Seller shall
hereby irrevocably authorize the Issuer to file one or more financing or
continuation statements, and amendments thereto, relating to all or any part of
the Purchased Receivables sold
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or to be sold by the Seller, or the underlying Credit Card Agreements with
respect thereto, without the signature of the Seller where permitted by law,
(4) if the Seller or the Servicer fails to perform any of its agreements or
obligations under this Agreement, the Issuer may (but shall not be required to)
perform, or cause the performance of, such agreements or obligations, and the
costs and expenses of the Issuer incurred in connection therewith shall be
payable by the Seller as provided in Section 10.06 of this Agreement and (5)
each of the Seller shall (A) indicate on its books and records that the
Purchased Receivables have been sold and assigned to the Issuer, and provide to
the Issuer and the Indenture Trustee, upon request, copies of such records, (B)
obtain the agreement of any Person having a Lien in and to any Receivable owned
by the Seller (other than any Lien created, imposed or contemplated by any of
the Transaction Documents) to release such Lien upon the sale of any such
Receivable to the Issuer and (C) notify the Issuer promptly after obtaining
knowledge that any Purchased Receivable has become subject to a Lien other than
any Lien created, imposed or contemplated by any of the Transaction Documents.
(p) Receivables Processing Facility; Storage
Facility. JFS shall (1) maintain its facilities from which it services the
Purchased Receivables in its present condition, ordinary wear and tear
excepted, or such other facility of similar quality, security and safety as JFS
may select from time to time, (2) subject to approval of the lenders under the
Working Capital Credit Agreement, if necessary, make all property tax payments,
lease payments and all other payments with respect to such facility, including
any indebtedness secured by such facility, whether JFS shall be the Servicer or
a Successor Servicer shall have been appointed, and (3) (A) ensure that any
Successor Servicer shall have complete and unrestricted access, at JFS's
expense, to such facility and all computers and other systems relating to the
servicing of the Purchased Receivables, (B) use its best efforts to retain the
employees based at such facility to provide assistance to any Successor
Servicer after the appointment of such Successor Servicer and (C) continue to
store on a daily basis all back-up files relating to the Purchased Receivables
and the servicing of the Purchased Receivables at One Safe Place, 3501 North
MacArthur, Suite 304, Irving, Texas 75062, or such other storage facility of
similar quality, security and safety as JFS may select from time to time,
until, in the case of clauses (3)(A), (3)(B) and (3)(C) of this Section
5.01(p), the earlier of (x) the indefeasible payment in full in cash
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of the principal and interest of the Notes payable in accordance with the
Indenture, (y) the receipt by the Indenture Trustee of all Collections in
respect of all Purchased Receivables and (z) the time that a Successor Servicer
is able to perform its obligations under this Agreement without the assistance
of JFS.
(q) Tradenames. The Seller shall promptly notify
the Issuer and the Indenture Trustee of any tradenames of the Originators
additional to those set forth on Schedule I to this Agreement.
(r) Sale Treatment. The Seller and the Servicer
shall perform the transactions contemplated by this Agreement in a manner that
is consistent with the Issuer's ownership interest in the Purchased Receivables
under applicable law.
(s) Non-consolidation with Issuer. The Seller
shall operate its business in such a manner that the Issuer will not be
substantially consolidated with the Seller or any Affiliate of the Seller.
Section 5.02. Negative Covenants of the Seller and Servicer.
So long as the Issuer shall have any interest in any Purchased Receivable,
unless the Issuer and the Majority Noteholders otherwise consent in writing:
(a) Liens. Neither the Seller nor the Servicer
shall, except as otherwise provided in this Agreement, sell, assign (by
operation of law or otherwise) or otherwise dispose of, or create or suffer to
exist any Lien upon or with respect to, any Purchased Receivables, any Accounts
or any Credit Card Agreements with respect thereto, or assign any right to
receive proceeds in respect thereof, except as set forth in or as contemplated
by, and for Liens created, imposed or contemplated by, any of the Transaction
Documents; provided that, nothing in this Section 5.02(a) or in any other
Transaction Document shall prohibit or be deemed to prohibit the Seller or an
Affiliate of the Seller from selling, assigning or otherwise transferring, or
financing, any accounts or chattel paper of the Seller or such Affiliate
pursuant to any factoring or other arrangements.
(b) Change in Business. Neither the Seller nor
the Servicer shall make any material change in the type of business it conducts
on the Issuance Date that would have a material adverse effect on the rights
and remedies of the
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Indenture Trustee and the noteholders of any Series under any Transaction
Document.
(c) Change in Payment Instructions to Obligors.
Neither the Seller nor the Servicer shall instruct the Obligors of any
Purchased Receivables to make any payments with respect to such Purchased
Receivables other than as described in this Agreement or in the Indenture.
ARTICLE VI
ADMINISTRATION AND SERVICING
OF PURCHASED RECEIVABLES
Section 6.01. Appointment of and Acceptance by the Servicer
of Servicing Obligations. The Issuer hereby appoints JFS as Servicer of the
Purchased Receivables. JFS agrees to act as the Servicer under this Agreement,
pursuant to and in accordance with the terms of this Agreement and the
Indenture, on behalf of the Issuer and the Indenture Trustee, it being
understood that the relationship of the Servicer to the Indenture Trustee is
intended by the parties to be that of an independent contractor and not that of
a joint venturer, partner or agent. The Servicer shall (1) service and
administer each Account and collect and enforce the Purchased Receivables due
thereunder, (2) except as otherwise limited by this Agreement, exercise all
discretionary powers involved in such management, administration and collection
and (3) bear all costs and expenses incurred in connection therewith that may
be necessary or advisable and permitted for carrying out the transactions
contemplated by this Agreement and the Indenture. Servicing activities to be
performed by the Servicer include collecting and recording payments,
communicating with Cardholders, investigating payment delinquencies and
maintaining internal records with respect to each Cardholder. Managerial
services performed by the Servicer on behalf of the Issuer include providing
related data processing and reporting services for noteholders of any Series
and on behalf of the Indenture Trustee and performing certain services required
pursuant to Sections 5.07, 9.05 and 9.06 of the Indenture. Although physical
possession of the agreements, documents and files relating to the Receivables
will be held by the respective stores generating the Accounts, the Servicer,
pursuant to the terms of this Agreement, will be responsible for maintaining
custody of such documents relating to the Receivables. In
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the servicing and administration of the Accounts and the collection and
enforcement of the Purchased Receivables due thereunder, the Servicer shall
exercise a degree of skill and care consistent with those of a reasonable and
prudent servicer of retail credit card receivables, but in any event at least
comparable with the policies and procedures and the degree of skill and care
that it has exercised in servicing Receivables of the Seller and Affiliates of
the Seller, and the Servicer shall comply and perform in accordance with the
Credit Card Guidelines, except to the extent that failure to so comply or
perform (1) would not have a material adverse effect on the rights and remedies
of the Indenture Trustee and the noteholders of any Series under any
Transaction Document or (2) is necessary under any Requirement of Law. The
Servicer shall be permitted to subcontract its obligations under this Section
6.01 to any Person satisfactory to the Seller, the Issuer and the Indenture
Trustee who agrees to perform such obligations in accordance with the terms of
this Agreement and the Credit Card Guidelines; provided that, the Servicer
shall remain fully responsible to the Issuer for any and all acts or failures
to act of any such subcontractor to the same extent as if the Servicer were
fully and directly responsible for such subcontractor's duties and
responsibilities. In the ordinary course of business, the Servicer may at any
time delegate any of its duties under this Section 6.01 to any Person who
agrees to conduct such duties in accordance with the terms of this Agreement
and the Credit Card Guidelines; provided that, such delegation shall not
relieve the Servicer of any of its liabilities and responsibilities with
respect to such duties, and shall not constitute a resignation within the
meaning of Section 6.10(a) of this Agreement.
Section 6.02. Servicing Compensation. As compensation for
its servicing activities hereunder and reimbursement for its expenses incurred
as the Servicer, the Servicer shall be entitled to receive on each Payment Date
(i) the Monthly Servicing Fee, pursuant to Section 5.02(iv) of the Indenture
and (ii) from the Issuer, an amount equal to one-twelfth of the Servicing Fee
less the Monthly Servicing Fee. The Servicer shall bear all costs and expenses
(without right of reimbursement other than the Servicing Fee) incurred in
connection with performing its servicing activities under this Agreement,
including, without limitation, fees and disbursements of the Indenture Trustee
(including the reasonable fees and expenses of its counsel) and independent
accountants, fees and expenses incurred in collecting Purchased Receivables and
generating Recoveries, and all
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other expenses incurred by the Servicer in connection with its servicing
activities under this Agreement; provided that, in no event shall the Servicer
be liable for any Federal, state or local income or franchise tax, or any
interest or penalties with respect thereto, assessed on the Indenture Trustee,
any noteholder of any Series or the Issuer. The Servicer shall be required to
pay such costs and expenses for its own account, and shall not be entitled to
any payment therefor other than the Servicing Fee.
Section 6.03. Reports and Statements.
(a) Daily Report. On each Business Day, the
Servicer shall prepare a Daily Report substantially in the form of Exhibit A to
this Agreement, on the basis of the sales and collections figures reported the
previous day or days from the Servicer's central computer processing center.
The Daily Report shall report, among other things, the dollar amount of
Receivables originations reported to the Servicer since the preceding Daily
Report and the dollar amount of Collections and Recoveries received in the
Collateral Account for the Applicable Day or Applicable Days covered by such
Daily Report (or, in the case of a Daily Report delivered on a day following a
Saturday, Sunday or other non-Business Day, the aggregate such activity for the
preceding Business Day and such non-Business Days). The Servicer shall also
determine the Noteholder Default Amount on each Business Day and reflect such
amounts in the Daily Report. By 12:00 Noon (New York City time) on each
Business Day, the Servicer shall deliver the Daily Report to the Issuer, the
Seller and the Indenture Trustee, which Daily Report shall be certified by a
Financial Officer of the Servicer; provided that, if a Force Majeure or a
"system failure" or other similar technical failure in the operations of the
Servicer shall occur that prevents the preparation or delivery of any Daily
Report within such time, the Servicer shall use its best efforts to recreate
Daily Reports for each Applicable Day missed as a result thereof or, if the
Servicer is unable to recreate such Daily Reports, the Servicer shall prepare a
composite Daily Report for each such missed Applicable Day and, in either case,
the Servicer shall deliver such Daily Reports to the Issuer, the Seller and the
Indenture Trustee within three Business Days of the date such Daily Report(s)
were otherwise required to be delivered. Upon the discovery of any error in
any Daily Report by the Issuer, the Seller, the Servicer or the Indenture
Trustee, the Issuer, the Seller, the Servicer and the Indenture Trustee shall
confer and shall agree upon any necessary adjustments to correct any such
error. Unless
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the Issuer and the Indenture Trustee have received actual notice of any such
error, the Issuer and the Indenture Trustee may rely on any Daily Report for
all purposes under this Agreement and the other Transaction Documents.
(b) Monthly Settlement Statement. The Servicer
shall on each Determination Date, by 12:00 Noon (New York City time), prepare
and deliver to the Issuer, the Seller, the Indenture Trustee, each Rating
Agency and Bear Stearns, the Monthly Settlement Statement for the related
Settlement Period substantially in the form of Exhibit B to this Agreement,
certified by a Financial Officer of the Servicer; provided that, with respect
to any Monthly Settlement Statement, if a Force Majeure or a "system failure"
or other similar technical failure in the operations of the Servicer shall
occur that prevents the preparation or delivery of any Monthly Settlement
Statement, a Monthly Settlement Statement containing all information for each
day required to be included therein shall be prepared and delivered to the
Issuer, the Seller and the Indenture Trustee within three Business Days of the
date such Monthly Settlement Statement was otherwise required to be delivered.
(c) Annual Independent Public Accountant's
Servicing Report. The Servicer shall, no later than July 31 of each year
(commencing July 31, 1995), cause either Arthur Andersen & Co., Price
Waterhouse, Coopers & Lybrand, Deloitte & Touche, Ernst & Young or KPMG Peat
Marwick (or any of their successors in interest) (which firm may also render
other services to the Servicer or any Affiliate thereof) to furnish a report,
as of April 30 of such year, to the Issuer, the Seller, each Rating Agency and
the Indenture Trustee, performing certain agreed upon procedures with respect
to certain documents and records relating to the servicing of the Receivables
and that, based upon such agreed-upon procedures, no matters came to their
attention that caused them to believe that such servicing was not conducted in
compliance with certain applicable terms and conditions set forth in this
Agreement except for such exceptions or errors as such firm shall believe to be
immaterial and such other exceptions as shall be set forth in such statement.
Each such accountants' report shall state that the accountants have compared
the amounts contained in one randomly selected Daily Report from each fiscal
quarter and two randomly selected Monthly Settlement Statements delivered by
the Servicer during the period covered by such report with the records from
which such amounts were derived and that, on the basis of such comparison, such
accountants are of the opinion
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that the amounts are in agreement with such records, except for such exceptions
as they believe to be immaterial and such other exceptions as shall be set
forth in such report.
(d) Compliance Statements. The Servicer shall
deliver to the Issuer and to the Indenture Trustee, on or before July 31 of
each year (beginning July 31, 1995) a certificate signed by a Financial Officer
stating that (1) a review of its activities relating to the servicing of the
Accounts during the prior year ending April 30 and performance under this
Agreement and the Indenture has been made under such officer's supervision, and
(2) to the best of such officer's knowledge, based on such review, it has
fulfilled all its obligations under this Agreement throughout the period
covered by such certificate, or, if there has been a default in the fulfillment
of any such obligations, specifying each such default known to such officer and
the nature and status thereof.
Section 6.04. Collection Procedures.
(a) Collection Deposits and Transfers. On or
before the Issuance Date, the Servicer, the Seller and the Issuer shall have
established and shall maintain thereafter the system of collecting and
processing Collections of Purchased Receivables set forth in this Section 6.04.
The Obligors may make payments on Purchased Receivables only (1) by check
mailed to the Post Office Boxes (such payments, upon receipt in the Post Office
Boxes being referred to as "Mail Payments") or (2) by cash or check to the
Servicer or at stores operated by the Originators as the case may be (such
payments, upon receipt by such stores, being referred to as "Store Payments").
With respect to all Mail Payments, the Servicer shall (A) remove such Mail
Payments, or cause such Mail Payments to be removed, from the Post Office Boxes
on each Business Day, and process such payments by recording the amount of the
payment received from each Obligor and the applicable Account number, (B) no
later than one Business Day following the receipt of any Mail Payments in the
Post Office Boxes, deposit such Mail Payments, or cause such Mail Payments to
be deposited, in a Collection Deposit Account and (C) transfer, or cause to be
transferred, such Mail Payments to the Collateral Account (excluding, with
certain exceptions, certain portions thereof allocable to the Seller) on the
same day that such funds become available. With respect to all Store Payments,
the Servicer and the Seller shall (1) cause all Store Payments to be (A)
processed as soon as possible after such payments are received by the
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Seller or the Servicer and (B) deposit in Local Store Bank Accounts no later
than one local (with respect to the location of the applicable Local Store Bank
Account) business day following the day of such receipt, (2) no later than two
local (with respect to the location of the applicable Local Store Bank Account)
business days following such initial receipt, transfer, or cause to be
transferred, such Store Payments to a Concentration Account (such account,
identified as such on Schedule I to the Indenture, or any successor
concentration account, which successor concentration account may be established
solely at the option of the Seller or any Affiliate thereof, referred to as the
"Concentration Account") and (3) transfer, or cause to be transferred, such
Store Payments from such Concentration Account to the Collateral Account
(excluding, with certain exceptions, certain portions thereof allocable to the
Seller) on the same day.
(b) Force Majeure. If any deposits or transfers
prescribed by Section 6.04(a) of this Agreement cannot be made within the time
period specified in such Section 6.04(a) as a result of a Force Majeure or a
depository institution's failure to so deposit or transfer, so long as such
deposits or transfers are made promptly after the cessation of such Force
Majeure or a depository institution's failure to so deposit or transfer, but in
no event later than three Business Days or local business days (with respect to
the location of the applicable Local Store Bank Account), as the case may be,
after such time period specified, the provisions of such Section 6.04(a) shall
be deemed to have been fully complied with.
(c) Deposit of Recoveries. The Servicer shall
deposit, or cause to be deposited, all Recoveries in accordance with Section
6.04(a) of this Agreement.
(d) Funds Held in Trust. Any funds held by the
Seller or the Servicer representing Collections of Purchased Receivables shall,
until deposited in a Collection Deposit Account or the Collateral Account, be
held in trust by the Seller or the Servicer, as the case may be, for and as the
Indenture Trustee's property pursuant to the terms of the Indenture, and,
except as provided in Section 6.04(a) of this Agreement with respect to Store
Payments, shall not be commingled with the Seller's or the Servicer's other
funds or property.
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(e) Waiver of Set-off. The Seller and the
Servicer irrevocably waives any right to set off against, or otherwise deduct
from, any Collections.
(f) Bank Accounts. The Seller agrees that it
shall have no bank account, deposit account or trust account for the collection
of Purchased Receivables other than the Local Store Bank Accounts and the
Concentration Account, and that it shall not make or maintain any deposits from
Collections in any bank account, deposit account or trust account other than
the Local Store Bank Accounts and the Concentration Account and Collection
Deposit Accounts.
Section 6.05. Allocations and Applications of Collections.
Collections deposited into the Collateral Account shall be allocated,
transferred and distributed in accordance with the Indenture.
Section 6.06. Maintenance of Property; Insurance. The
Servicer shall (1) keep all property and assets useful and necessary in its
business as Servicer in good working order and condition (normal wear and tear
excepted), (2) furnish to the Issuer, upon written request, full information as
to the insurance carried, (3) within five days of receipt of notice from any
insurer, furnish the Issuer with a copy of any notice of cancellation or
material change in coverage from that existing on the Issuance Date, (4)
forthwith, furnish the Issuer with notice of any cancellation or nonrenewal of
coverage by the Servicer, (5) maintain disaster recovery systems and back-up
computer and other information management systems that, in the Servicer's
reasonable judgment, are sufficient to protect its business as Servicer against
material interruption or loss in the event of damage to, or loss or destruction
of, its primary computer and information management systems and (6) furnish to
the Issuer and to the Indenture Trustee, acting at the written direction of the
Majority Noteholders, upon written request, full information as to such
disaster recovery systems and back-up computer and information management
systems, except, in the case of clause (1) of this Section 6.06, to the extent
failure to keep or maintain would not have a material adverse effect on the
rights and remedies of the Indenture Trustee and the noteholders of any Series
under the Transaction Documents.
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Section 6.07. Access to Certain Documentation Regarding the
Purchased Receivables. The Servicer shall provide the Issuer and the Indenture
Trustee, and their respective representatives, access to the documentation
regarding the Accounts and the Purchased Receivables in such cases where the
Issuer is required, in connection with the enforcement of the rights of the
Issuer, the Indenture Trustee or any noteholder of any Series, or by applicable
statutes or regulations, to review such documentation, such access being
afforded without charge but only (1) upon two Business Days prior notice
(provided that, no such prior notice shall be required if an Early Amortization
Event has occurred and is continuing), (2) during normal business hours, (3)
subject to the Servicer's normal security and confidentiality procedures and
(4) at offices designated by the Servicer. The obligation of the Servicer to
provide access to such documentation shall survive the Servicer's termination
as Servicer. Nothing in this Section 6.07 shall derogate from any obligation
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 6.07 as a result of any such obligation shall not constitute a
breach of this Section 6.07.
Section 6.08. Certain Responsibilities of the Servicer and
the Seller. Notwithstanding anything in this Agreement to the contrary, (1)
the Seller shall perform all its obligations under the Credit Card Guidelines
related to the Purchased Receivables to the same extent as if such Purchased
Receivables had not been transferred to the Issuer hereunder, (2) the exercise
by the Issuer of any of its rights under this Agreement shall not relieve the
Seller or the Servicer from such of its obligations under this Agreement with
respect to such Purchased Receivables (other than the obligations of any
predecessor Servicer under this Agreement with respect to which the Issuer has
terminated the appointment of such Servicer as the Servicer) and (3) except as
provided by law, the Issuer shall not have any obligation or liability with
respect to any Purchased Receivables or the underlying Credit Card Agreements,
nor shall the Issuer be obligated to perform any of the obligations or duties
of the Seller or the Servicer thereunder.
Section 6.09. Limitation on Liability of the Seller, DFC and
Others. No recourse under or upon any obligation or covenant of this
Agreement, or the Purchased Receivables, or for any claim based thereon or
otherwise in respect thereof, shall be had against any incorporator,
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stockholder, shareholder, employee, officer or director, in its capacity as
such, past, present or future, of any party hereto or of any successor party,
either directly or through such party, whether by virtue of any constitution or
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise, it being expressly understood that this Agreement and the
obligations issued hereunder are solely corporate obligations, and that no such
personal liability whatever shall attach to, or is or shall be incurred by the
incorporators, stockholders, shareholders, employees, officers or directors, as
such, of any such party or of any successor party, or any of them, because of
the creation of the obligations hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Agreement or in the
Purchased Receivables or implied therefrom, and that any and all such personal
liability, either at common law or in equity or by constitution or statute, of,
and any and all such rights and claims against, every such incorporator,
stockholder, shareholder, employee, officer or director, as such, because of
the creation of the indebtedness hereby authorized, or under or by reason of
the obligations or covenants contained in this Agreement or in the Purchased
Receivables or implied therefrom, are hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Agreement. The
Issuer, the Seller, DFC, the Servicer, the Indenture Trustee and any of their
respective directors, officers or employees may rely in good faith on any
document of any kind prima facie properly executed and submitted by any Person
respecting any matters arising under this Agreement.
Section 6.10. Successor Servicer.
(a) Servicer Resignation. The Servicer shall not
resign from its obligations and duties under this Agreement except upon a
determination that the performance of its duties hereunder is no longer
permissible under applicable law. Any such determination permitting the
resignation of the Servicer shall be evidenced as to the immediately preceding
sentence by an opinion of counsel to such effect delivered to the Issuer, the
Seller and the Indenture Trustee. No such resignation shall become effective
until a Successor Servicer shall have assumed the responsibilities and
obligations of the Servicer in accordance with Section 6.10 of this Agreement.
(b) Servicer Default. Any of the following events
shall constitute a "Servicer Default":
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(i) failure by the Servicer to make any payment, transfer or
deposit, or to give instructions to the Indenture Trustee to make
certain payments, transfers or deposits, on the date the Servicer is
required to do so under this Agreement or any Series Supplement (or
within the applicable grace period, which shall not exceed five
Business Days);
(ii) failure on the part of the Servicer duly to observe or
perform in any respect any other covenants or agreements of the
Servicer which has a material adverse effect on the noteholders of any
Series issued and outstanding and which continues unremedied for a
period of sixty days after written notice and continues to have a
material adverse effect on such noteholders of any Series then
outstanding; or the delegation by the Servicer of its duties under
this Agreement, except as specifically permitted thereunder;
(iii) any representation, warranty or certification made by
the Servicer in this Agreement, or in any certificate delivered
pursuant to this Agreement, proves to have been incorrect when made
which has a material adverse effect on the noteholders of any Series
then outstanding, and which continues to be incorrect in any material
respect for a period of sixty days after written notice and continues
to have a material adverse effect on such noteholders; or
(iv) one of the events set forth in subsections 10.01(e) or
(f) of the Indenture shall have occurred with respect to the Servicer.
Notwithstanding the foregoing, a delay in or failure of performance
referred to in clause (i) above for a period of ten Business Days, or referred
to under clause (ii) or (iii) for a period of sixty Business Days (in addition
to any period provided in (i), (ii) or (iii)), shall not constitute a Servicer
Default until the expiration of such additional ten or sixty Business 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
a Force Majeure. Upon the occurrence of any such event, the Servicer shall not
be relieved from using its best efforts to perform its obligations in a timely
manner in accordance with the terms of this Agreement, and the Servicer shall
provide the Indenture Trustee, any provider of Enhancement, the Seller and
noteholders of each Series issued
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and outstanding prompt notice of such failure or delay by it, together with a
description of the cause of such failure or delay and its efforts to perform
its obligations.
In the event of any Servicer Default, either the Indenture Trustee or
the Majority Noteholders, by written notice to the Servicer (and to the
Indenture Trustee if given by the noteholders of each Series), may terminate
all of the rights and obligations of the Servicer as servicer under this
Agreement and in and to the Receivables and the proceeds thereof and the
Indenture Trustee may appoint a new Servicer (a "Service Transfer"), provided
that, notwithstanding any such termination, such terminated Servicer shall
remain responsible for any acts or omissions to act by it as Servicer prior to
such termination. On and after the receipt by the Servicer of a Servicer
Termination Notice, the Servicer shall continue to perform all servicing
functions under this Agreement until the date specified in the Servicer
Termination Notice or, if no such date is specified in the Servicer Termination
Notice, until a date mutually agreed upon by the Servicer and the Issuer.
(c) Appointment of Successor Servicer; Optional
Repurchase of Purchased Receivables. As promptly as possible after the giving
of a notice to the Servicer of the termination of its rights and obligations of
the Servicer as servicer under this Agreement pursuant to Section 6.10(b)
hereof, the Indenture Trustee shall, acting at the written direction of the
Majority Noteholders, appoint a successor servicer (the "Successor Servicer")
and such Successor Servicer shall accept its appointment by a written
assumption in a form acceptable to the Issuer and the Indenture Trustee. On
the date that a Successor Servicer shall have been so appointed and shall have
accepted such appointment, all authority and power of the Servicer under this
Agreement shall pass to and be vested in such Successor Servicer. The
Indenture Trustee, acting at the written direction of the Majority Noteholders,
is hereby authorized and empowered to (1) upon the failure of the predecessor
Servicer to cooperate, to execute and deliver, on behalf of the predecessor
Servicer as attorney-in-fact or otherwise, all documents and other instruments
upon the failure of the predecessor Servicer to execute or deliver such
documents or instruments and (2) do and accomplish all other acts or things
necessary or appropriate, in either case to effect the purposes of such
transfer of servicing rights. If no such Servicer has been appointed and has
accepted such appointment by the time the Servicer ceases to act as Servicer,
all
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authority, power and obligations of the Servicer under this Agreement shall
pass to and be vested in the Indenture Trustee. The Issuer and the Indenture
Trustee may obtain bids from any potential successor servicer. If the Issuer
and the Indenture Trustee are unable to obtain any bids from any potential
successor servicer and the Servicer delivers to the Issuer and the Indenture
Trustee an officer's certificate to the effect that it cannot in good faith
cure the Servicer Default which gave rise to a transfer of servicing, and if
the Indenture Trustee is legally unable to act as successor Servicer, then the
Indenture Trustee shall give the Seller the right of first refusal to purchase
the Purchased Receivables on terms equivalent to the best purchase offer as
determined by the Indenture Trustee.
(d) Agreement to Cooperate; Servicing Transfer.
In connection with any succession of servicing under this Agreement, the
predecessor Servicer agrees to cooperate with the Issuer and the Indenture
Trustee and the Successor Servicer in effecting such succession under this
Agreement, including without limitation (1) the transfer to the Successor
Servicer of all authority of the Servicer to service the Accounts provided for
under this Agreement (including without limitation all authority over all
Collections which shall on the date of transfer be held by the predecessor
Servicer for deposit, or which shall thereafter be received by the predecessor
Servicer with respect to the Accounts) and (2) the prompt transfer by the
predecessor Servicer to the Successor Servicer of (a) the predecessor
Servicer's electronic records relating to the Accounts and the Purchased
Receivables in such electronic form as the Successor Servicer may reasonably
request and (b) all other records, correspondence and documents necessary for
the continued servicing of the Accounts in the manner and at such times as the
Successor Servicer shall reasonably request. To the extent that compliance
with this Section 6.10(d) shall require the predecessor Servicer to disclose to
the Successor Servicer information of any kind which the predecessor Servicer
reasonably deems to be confidential, the Successor Servicer shall be required
to enter into such customary licensing and confidentiality agreements as the
predecessor Servicer shall deem necessary to protect its interests. All costs
and expenses incurred in connection with a transfer of servicing under this
Agreement shall be borne by the predecessor Servicer. The Seller shall, upon
request at all times, provide such information and assistance to the
predecessor Servicer or the Successor Servicer as shall be required for the
predecessor Servicer or the
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Successor Servicer to perform its obligations under this Agreement.
(e) Successor Servicer. Upon its appointment,
any Successor Servicer shall be the successor in all respects to the
predecessor Servicer with respect to all 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
of this Agreement, and all references in this Agreement to the Servicer shall
be deemed to refer to the Successor Servicer. The Successor Servicer shall
expressly be authorized to delegate any of its duties under this Agreement to
the predecessor Servicer on and after the date of any transfer of servicing
pursuant to Section 6.01 of this Agreement; provided, however, that the
Successor Servicer, as Servicer hereunder, shall continue to be fully
responsible for the performance of any duties so delegated.
Section 6.11. Termination of Authority. All authority and
power granted to the Servicer under this Agreement shall automatically cease
and terminate upon termination of this Agreement and the Indenture and shall
pass to and be vested in the Seller, and the Seller is hereby authorized and
empowered to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, all documents and other instruments, and to do
and accomplish all other acts or things necessary or appropriate to effect the
purposes of such transfer of servicing rights. The Servicer agrees to
cooperate with the Seller in effecting the termination of the responsibilities
and rights of the Servicer to conduct servicing of the Purchased Receivables,
including without limitation the transfer by the Servicer to the Seller, in the
manner and at such times as the Seller shall request, of (1) the Servicer's
electronic records relating to the Accounts and the Purchased Receivables
therein in such electronic form as the Seller may request and (2) all other
records, correspondence and documents relating to the Purchased Receivables.
To the extent that compliance with this Section 6.11 shall require the Servicer
to disclose to the Seller information of any kind which the Servicer deems to
be confidential, the Seller shall be required to enter into such customary
licensing and confidentiality agreements as the Servicer shall reasonably deem
necessary to protect its interests.
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ARTICLE VII
ADDITIONAL RIGHTS AND OBLIGATIONS
IN RESPECT OF THE PURCHASED RECEIVABLES
Section 7.01. Collection of Receivables; Rights of the Issuer
and its Assignees.
(a) The Issuer (and its assignees) may at any
time (1) notify the Obligors of the Issuer's ownership of the Purchased
Receivables and direct that payment of all amounts due or to become due under
the Purchased Receivables be made directly to the Issuer or its designee and
(2) give notice, or require that the Seller, at the Seller's expense, give
notice of such ownership to each such Obligor and direct that all payments of
such amounts be made directly to the Issuer or its designee;
(b) Each of the Seller and the Servicer shall (1)
upon the Issuer's (or its assignee's) request, and at the Seller's or the
Servicer's expense, (A) assemble all the Seller's or the Servicer's documents,
instruments and other records (including without limitation credit files and
computer tapes or disks) that evidence or will evidence or record Purchased
Receivables or the underlying Credit Card Agreements relating to the Purchased
Receivables and that are otherwise necessary or desirable to effect Collections
of such Purchased Receivables (collectively, the "Documents") and (B) deliver
the Documents to the Issuer or its designee at a place designated by the
Issuer; (2) deliver to the Issuer, its designees or assignees all computer
programs, material and data necessary to the immediate collection of the
Purchased Receivables by the Issuer, or a party designated by the Issuer, with
or without the participation of the Seller or the Servicer; and (3) make such
arrangements with respect to the collection of the Purchased Receivables as may
be reasonably required by the Indenture Trustee; and
(c) Each of the Seller and DFC hereby irrevocably
authorizes the Issuer and its designee or assignees to take any and all steps
in such Seller's or DFC's name and on the Seller's or DFC's behalf necessary or
desirable, in the reasonable opinion of the Issuer and any such designee or
assignee, to collect all amounts due under the Purchased Receivables,
including, without limitation, opening mail received at the Post Office Boxes,
endorsing the Seller's name on checks and other instruments representing
Collections, enforcing the Purchased Receivables and the
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underlying Credit Card Agreements and exercising all rights and remedies in
respect thereof.
ARTICLE VIII
INDEMNIFICATION
Section 8.01.
(a) The Servicer shall indemnify the Issuer, the
Owner Trustee, the noteholders of each Series and the Indenture Trustee and
each of their respective directors, officers, employees and agents, from and
against any loss, liability, expense, damage or injury suffered or sustained
arising out of the activities of the Servicer pursuant to this Agreement,
including those arising from acts or omissions of the Servicer; provided,
however, that the Servicer shall not indemnify (i) the Issuer or the
noteholders of any Series for any liabilities, costs and expenses with respect
to Federal, state or local income or franchise taxes required to be paid by the
Issuer or the noteholders of any Series or (ii) the Issuer, the noteholders of
any Series or the Indenture Trustee for liabilities imposed by reason of any
gross negligence, willful misconduct or bad faith of the Indenture Trustee.
(b) Without limiting or being limited by the
foregoing, each of the Seller and the Servicer shall pay on demand to the
Issuer or the Indenture Trustee, as the case may be, any and all amounts
necessary to indemnify the Issuer or the Indenture Trustee, as the case may be,
from and against any loss, liability, expense, damage or injury (any such
amount or any amounts payable pursuant to subsection (a) hereof collectively
referred to as "Indemnified Amounts") and all Indemnified Amounts relating to
or resulting from:
(i) the sale of any Receivable of the Seller or DFC that
is not at the date of such sale an Eligible Receivable;
(ii) reliance on any written representation or warranty
made or deemed made by the Seller, DFC or the Servicer under or in
connection with this Agreement that shall prove to have been false or
misleading in any material respect when made or deemed made;
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(iii) the failure by the Seller, DFC or the Servicer to
comply with any applicable law, rule or regulation with respect to any
Purchased Receivable or the related Credit Card Agreement, or the
nonconformity of any Purchased Receivable or the related Credit Card
Agreement with any such applicable law, rule or regulation;
(iv) the failure by the Seller, DFC or the Servicer to
have filed, or any delay by the Seller, DFC or the Servicer in filing,
financing statements or other similar instruments or documents under
the UCC of any applicable jurisdiction or other applicable laws with
respect to the Issuer's interest in any Purchased Receivables;
(v) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the payment
of any Purchased Receivable (including without limitation a defense
based on such Purchased Receivable or the related Credit Card
Agreement not being a legal, valid and binding obligation of such
Obligor enforceable against it in accordance with its terms) or any
other claim of the Obligor resulting from the sale of the merchandise
or services related to any such Purchased Receivable or the furnishing
or failure to furnish such merchandise or services;
(vi) any failure of the Seller, DFC or the Servicer to
perform its duties or obligations in all material respects under this
Agreement, the Indenture and each Credit Card Agreement;
(vii) any products liability claim arising out of or in
connection with merchandise, insurance or services that are the
subject of any charge pursuant to any Credit Card Agreement;
(viii) except as provided in Section 6.04 of this Agreement
with respect to Store Payments, the commingling of Collections of
Purchased Receivables at any time with other funds other than funds of
the Issuer;
(ix) any investigation, litigation or proceeding in
respect of this Agreement, any Purchased Receivable or any Credit Card
Agreement;
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(x) the payment by the Issuer of any taxes owed by the
Seller, DFC or the Servicer, including without limitation Federal,
state or local income taxes, excise taxes or business taxes, or any
tax liens of the Pension Benefit Guaranty Corporation, or any
successor thereto, asserted under the Employee Retirement Income
Security Act of 1974, as amended from time to time, to which the
Purchased Receivables are made subject as a result of the Issuer being
an Affiliate of the Seller;
(xi) any claim arising under any patent, trademark or
license or any interest therein (including without limitation any
software license) owned by the Issuer, the Seller, DFC or the Servicer
or used by the Issuer, the Seller, DFC or the Servicer in connection
with the Purchased Receivables; or
(xii) any amounts required to be paid by the Issuer pursuant
to Section 11.04 of the Indenture.
Notwithstanding the foregoing, none of the Seller, DFC or the Servicer shall
under any circumstances indemnify the Issuer (or its designees or assignees)
for any Indemnified Amounts that result from any default by any Obligor with
respect to any Purchased Receivables, other than resulting from the
circumstances described in clause (i), (iii) or (vi) above.
(c) In the event of a Service Transfer, the
Successor Servicer shall indemnify the Seller for any losses, claims, damages
and liabilities of the Seller as described in this paragraph arising from the
actions or omissions of such Successor Servicer.
(d) None of the Seller, DFC, the Servicer or any
of their directors, officers, employees or agents shall be under any other
liability to the Indenture Trustee, the noteholders of any Series or any other
person for any action taken, or for refraining from taking any action, in good
faith pursuant to this Agreement. However, none of the Seller, DFC, the
Servicer or any of their directors, officers, employees or agents shall be
protected against any liability which would otherwise be imposed by reason of
willful misfeasance, bad faith or gross negligence of any such person in the
performance of their duties or by reason of reckless disregard of their
obligations and duties thereunder.
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(e) In addition, the Servicer is not under any
obligation to appear in, prosecute or defend any legal action which is not
incidental to its servicing responsibilities under this Agreement, nor is any
Successor Servicer liable for any acts of any of its predecessor Servicers.
The Servicer may, in its sole discretion, undertake any such legal action which
it may deem necessary or desirable for the benefit of noteholders of any Series
with respect to this Agreement and the rights and duties of the parties thereto
and the interest of the noteholders of any Series thereunder.
ARTICLE IX
SUBORDINATED NOTE; CAPITAL CONTRIBUTION
Section 9.01. Subordinated Note.
(a) Issuance and Principal Amount. On the
Issuance Date, the Issuer shall issue a subordinated note (the "Subordinated
Note") to the Seller in substantially the form of Exhibit C to this Agreement.
The principal amount of the Subordinated Note shall be calculated pursuant to
the Daily Report. In no event shall the principal amount of the Subordinated
Note calculated pursuant to the Daily Report at any date of determination
exceed the excess of (a) the amount of Eligible Receivables at such time less
(b) the Net Note Principal Amount at such date. If the principal amount of the
Subordinated Note decreases as a result of the preceding sentence, no cash
shall be paid to the Seller as a result of such decrease. Other than with
respect to any payments by the Seller to the Issuer expressly required herein,
the Issuer shall have the right (but not the obligation) to offset or adjust
the Subordinated Note by any amounts owed by the Seller to the Issuer under
this Agreement.
(b) Payments of Interest and Principal;
Subordination. Interest on the principal amount of the Subordinated Note shall
accrue at the rate of 8.15% per annum, computed on the basis of the actual
number of days elapsed and a 360-day year from and including the initial
Purchase Date to but excluding the date, after reduction of the outstanding
principal amount of the Notes and the notes of each other outstanding Series to
zero, immediately preceding the date on which the remaining outstanding
principal amount of the Subordinated Note is paid in full. Subject to the
subordination provisions set forth in
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subsection (c) below (the "Subordination Provisions"), the Issuer may pay
accrued interest on the Subordinated Note on any Business Day and on the Final
Maturity Date. Subject to the Subordination Provisions, the Issuer shall also
pay accrued interest on the principal amount of each prepayment of the
Subordinated Note on the date of each such prepayment. Subject to the
Subordination Provisions, any unpaid principal of the Subordinated Note shall
be paid on the Final Maturity Date. Subject to the Subordination Provisions,
the principal amount of the Subordinated Note may be prepaid on any Business
Day without premium or penalty.
(c) Upon any distribution of all or any of the
assets of the Issuer to creditors of the Issuer upon the dissolution, winding
up, total or partial liquidation, arrangement, reorganization, adjustment,
protection, relief, or composition of the Issuer or its debts, any payment or
distribution of any kind (including without limitation cash, property,
securities and any payment or distribution which may be payable or deliverable
by reason of the payment of any other Indebtedness of the Issuer being
subordinated to the payment of the Subordinated Note) in respect of the
Subordinated Note that otherwise would be payable or deliverable upon or with
respect to the Subordinated Note, directly or indirectly, by set-off or in any
other manner (including without limitation from or by way of Collateral) shall
be paid or delivered directly to the Indenture Trustee for application (in the
case of cash) to, or as Collateral (in the case of non-cash property or
securities) for the payment or prepayment in full of, the Notes until all
principal of (as such principal amount may have been reduced by the allocation
thereto of noteholder charge-offs in accordance with the applicable Indenture)
and interest on the Notes and the notes of each other outstanding Series shall
have been indefeasibly paid in full in cash. The Indenture Trustee is
irrevocably authorized and empowered (in its own name or in the name of the
Seller or otherwise), but shall have no obligation, to demand, sue for, collect
and receive every payment or distribution referred to in the immediately
preceding sentence to give acquittance therefor, to file claims and proofs of
claim with respect thereto and to take such other action (including without
limitation voting the Subordinated Note and enforcing any security interest or
other lien securing payment of the Subordinated Note) as the Indenture Trustee
may deem necessary or advisable for the exercise or enforcement of any of the
rights or interest of the noteholders of any Series pursuant to and in
accordance with the Transaction Documents. The Seller shall duly and
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promptly take such action as the Indenture Trustee, acting at the written
direction of the Majority Noteholders, may request, consistent with the terms
of this Agreement and the other Transaction Documents, to (1) collect the
Subordinated Note for the account of the noteholders of any Series and to file
appropriate claims or proofs of claim in respect of the Subordinated Note, (2)
execute and deliver to the Indenture Trustee such powers of attorney,
assignments or other instruments as the Indenture Trustee may reasonably
request in order to enable the Indenture Trustee to enforce any and all claims
with respect to, and any security interests and other liens securing payment
of, the Subordinated Note and (3) collect and receive any and all payments or
distributions which may be payable or deliverable upon or with respect to the
Subordinated Note. All payments or distributions upon or with respect to the
Subordinated Note that are received by the Seller contrary to the provisions of
this Agreement and the other Transaction Documents shall be received in trust
for the benefit of the noteholders of all Series, shall be segregated from
other funds and property held by the Seller and shall be forthwith paid over to
the Indenture Trustee in the same form as so received (with any necessary
endorsement), to be applied (in the case of cash) to, or held as collateral (in
the case of non-cash property or securities) for the payment or prepayment in
full of, the Notes until the Notes shall have been indefeasibly paid in full in
cash. The Seller agrees that no payment or distribution to the noteholders of
any Series with respect to the Subordinated Note pursuant to the provisions of
the Agreement and the other Transaction Documents shall entitle the Seller to
exercise any rights or subrogation in respect thereof against the Issuer until
all principal of (as such principal amount may have been reduced by the
allocation of noteholder charge-offs in accordance with the applicable
Indenture) and interest on the Notes and the notes of each other outstanding
Series shall have been indefeasibly paid in full in cash. Each of the Seller
and the Issuer hereby waives promptness, diligence, notice of acceptance and
any other notice with respect to the Subordinated Note and any requirement that
the Indenture Trustee protect, secure, perfect or insure any security interest
or lien on any property subject thereto or exhaust any right or take any action
against the Issuer or any other Person with respect thereto.
(d) Unsecured Obligations. The Subordinated Note
represents solely an obligation of the Issuer to make certain payments to the
extent, in the manner and at the
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times set forth in this Agreement, and does not represent a security interest
in the Purchased Receivables or the proceeds thereof.
Section 9.02. Restrictions on Transfer of Subordinated Note.
Without the prior written consent of the Majority Noteholders, the Subordinated
Note or any right of the Seller to receive payments thereunder may not be
assigned, transferred, exchanged, pledged, hypothecated, participated or
otherwise conveyed, except (1) to the Working Capital Lenders or (2) to an
Affiliate of the Seller other than the Issuer. Upon such transfer, the
Indenture Trustee will receive written notice of the new holder of the
Subordinated Note and shall provide notice of such transfer to each Rating
Agency.
Section 9.03. Initial Capital Contribution. On the initial
Purchase Date, the Seller shall contribute as capital to the Issuer, cash in an
amount equal to $[40,000,000]. The Issuer shall use such capital contribution
to pay the Seller and DFC, as applicable, for the Purchased Receivables
purchased on the initial Purchase Date.
ARTICLE X
MISCELLANEOUS
Section 10.01. Amendments, etc. No amendment or waiver of
any provision of this Agreement, or consent to any departure therefrom by the
Issuer, the Seller or the Servicer shall in any event be effective unless (a)
the same shall be in writing and signed by the Issuer, the Seller and the
Servicer and (b) if required pursuant to Article XIII of the Indenture, the
Majority Noteholders have consented or agreed to consent thereto and Standard &
Poor's and Duff & Phelps have each provided or agreed to provide written
confirmation to the Issuer and the Indenture Trustee that such amendment,
waiver or consent shall not result in a reduction in the rating of any of the
Notes. Any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it is given.
Section 10.02. Notices, etc. All notices and other
communications provided under this Agreement shall be in writing (including
telegraphic, telex, facsimile or cable communication) and shall be delivered in
hand, mailed by United States certified or registered first class mail, sent
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by overnight courier, telegraphed, telexed, transmitted, telecopied or cabled:
(a) If to the Issuer, to it at:
Zale Funding Trust
c/o Wilmington Trust Company, as Trustee
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
Telephone (302) 651-1000
with separate copies to:
General Counsel and Secretary
and
Treasurer, Finance Department
Zale Corporation
901 West Walnut Hill Lane
Irving, Texas 75038
Telephone (214) 580-4576
Telecopy (214) 580-5336
(b) If to the Seller, to it at:
901 West Walnut Hill Lane
Irving, Texas 75038
Attention: General Counsel and Secretary
and
Treasurer, Finance Department
Telephone (214) 580-4576
Telecopy (214) 580-5336
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(c) If to JFS, to it at:
901 West Walnut Hill Lane
Irving, Texas 75038
Attention: President
Telephone (214) 580-5241
Telecopy (214) 580-4011
with separate copies to:
General Counsel and Secretary
and
Treasurer, Finance Department
Zale Corporation
901 West Walnut Hill Lane
Irving, Texas 75038
Telephone (214) 580-4576
Telecopy (214) 580-5336
or, as to each such party, at such other address as shall be designated by such
party in a written notice to all other parties. All notices and other
communications given under this Agreement in accordance with the provisions of
this Agreement shall be deemed to have been given (1) on the date of receipt if
delivered by hand or overnight courier service or cabled or sent by telex,
telecopy or other telegraphic communications equipment of the sender or (2) on
the date five Business Days after dispatch by certified or registered mail if
mailed, in each case delivered, sent or mailed (properly addressed) to such
party as provided in this Section 10.02.
Section 10.03. No Waiver; Cumulative Remedies. No failure on
the part of any party to this Agreement to exercise, and no delay by any such
party in exercising, any right under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right 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 10.04. Binding Effect. This Agreement shall become
effective, as of the date first above written, when it shall have been executed
by the Issuer, the Seller,
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DFC and the Servicer. From and after the date this Agreement shall have so
become effective, this Agreement shall be binding upon and inure to the benefit
of the Issuer, the Seller, DFC and the Servicer, and their respective
successors and assigns (including without limitation the Indenture Trustee),
except that neither the Seller, DFC nor the Servicer shall have the right to
assign its rights under this Agreement or any interest in this Agreement
without the prior written consent of the Issuer. 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 earlier of
(1) the time at which all outstanding amounts with respect to the Notes and the
Subordinated Note have been paid in full in cash and (2) the time of final
application of all remaining Collateral to the repayment of all outstanding
amounts with respect to the Notes and the Subordinated Note; provided that, the
indemnification provisions of Article VIII of this Agreement shall be
continuing and shall survive any termination of this Agreement.
SECTION 10.05. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT
TO THE EXTENT THAT THE VALIDITY OR PROTECTION OF THE ISSUER'S INTEREST IN THE
PURCHASED RECEIVABLES, OR REMEDIES HEREUNDER IN RESPECT THEREOF, ARE GOVERNED
BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
Section 10.06. Costs, Expenses and Taxes. In addition to the
rights of indemnification granted to the Issuer under Article VIII of this
Agreement, the Seller agrees to pay on demand (1) all reasonable costs and
expenses of the Issuer in connection with the preparation, execution and
delivery of this Agreement and the documents to be delivered hereunder,
including without limitation the reasonable fees and out-of-pocket expenses of
counsel for the Issuer with respect thereto and with respect to advising the
Issuer as to its rights and remedies under this Agreement, (2) all reasonable
costs and expenses of the Issuer (including without limitation the reasonable
fees and out-of-pocket expenses of counsel for the Issuer) in connection with
the enforcement (whether through negotiations, legal proceedings or otherwise)
of this Agreement and the documents to be delivered hereunder and (3) any and
all stamp and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing and recording
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of this Agreement or the other documents to be delivered hereunder (and the
Seller agrees to hold the Issuer harmless from and against any and all
liabilities with respect to or resulting from any delay in paying or omitting
to pay such taxes and fees).
Section 10.07. Headings. All section and subsection headings
and the Table of Contents used in this Agreement are for convenience of
reference only and shall not affect the construction or interpretation of this
Agreement.
Section 10.08. License. Upon the occurrence and during the
continuance of an Early Amortization Event, each of the Seller, DFC and the
Servicer shall be deemed to have granted to the Issuer a non-exclusive and,
except to the extent provided below, non-transferable, license to use the
various tradenames (the "Licensed Names") listed in Schedule II to this
Agreement, which license to use (1) may be transferred by the Issuer to the
Indenture Trustee and by the Indenture Trustee pursuant to the Indenture to the
extent necessary to collect the Purchased Receivables in a commercially
reasonable manner, (2) is limited to (a) such uses of the Licensed Names as are
reasonably necessary to the collection by the Issuer or the Indenture Trustee
in a commercially reasonable manner of the Purchased Receivables and (b)
actions taken in accordance with the terms of this Agreement and the Indenture
and (3) shall expire on the expiration of a reasonable time for the collection
of all Purchased Receivables. Notwithstanding anything to the contrary in this
Agreement or in any other agreement between the parties, no other use or
display of the Licensed Names shall be made by the Indenture Trustee except as
granted in this Section 10.08.
Section 10.09. Merger or Consolidation. Any person into
which the Seller or the Servicer may be merged or consolidated or any person
resulting from any merger or consolidation to which the Seller or the Servicer
is a party, or any person succeeding to the business of the Seller or the
Servicer, upon execution of a supplement to this Agreement (notice of which
shall promptly be provided to each Rating Agency) and delivery of an opinion of
counsel with respect to the compliance of the transaction with the applicable
provisions of this Agreement, will be the successor to the Seller or the
Servicer, as the case may be, under this Agreement.
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SECTION 10.10. ACKNOWLEDGMENT OF ASSIGNMENT. EACH OF THE
SELLER, DFC AND THE SERVICER HEREBY ACKNOWLEDGES AND CONSENTS TO THE SECURITY
INTEREST GRANTED BY THE ISSUER IN THE PURCHASED RECEIVABLES AND THE RIGHTS OF
THE ISSUER UNDER THIS AGREEMENT PURSUANT TO THE INDENTURE AND EACH OF THE
SELLER, DFC AND THE SERVICER HEREBY ACKNOWLEDGES THAT THE INDENTURE TRUSTEE
SHALL ENFORCE THE RIGHTS OF THE ISSUER.
SECTION 10.11. WAIVER OF JURY TRIAL. EACH PARTY TO THIS
AGREEMENT WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH
PARTY TO THIS AGREEMENT (1) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY
OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PARTY WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (2) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION 10.11.
Section 10.12. Severability. In the event any one or more of
the provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality or enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby, and the parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid, legal and enforceable provisions, the economic effect of which comes as
close as possible to that of the invalid, illegal or unenforceable provisions.
Section 10.13. No Petition in Bankruptcy. Each of the
Seller, DFC and the Servicer, severally and not jointly, covenants and agrees
that, prior to the date which is one year and one day after the payment in full
of all outstanding Notes it shall not (notwithstanding that the Seller, DFC or
the Servicer may at such time be holder of record or beneficial owner of any
Notes) institute against, or join any other Person in instituting against, the
Issuer any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceeding under the laws of the United States or
any state of the United States.
Section 10.14. Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall
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constitute an original but all of which when taken together shall constitute
but one contract.
Section 10.15. Third Party Beneficiaries. Each of the
Secured Parties shall be a third-party beneficiary of this Agreement. In
addition, the Seller hereby agrees to be liable for any and all liability
imposed upon the Trust other than liabilities to any person holding an interest
in the Trust which is characterized as equity for federal income tax purposes
and any liability which pursuant to its terms is recourse only to the assets of
the Trust.
Section 10.16. Jurisdiction; Consent to Service of Process.
Each party to this Agreement hereby irrevocably and unconditionally (1)
submits, for itself and its property, to the nonexclusive jurisdiction of any
New York State court or Federal court of the United States of America for the
Southern District of New York, and any appellate court from any thereof, in any
action or proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment arising out of or relating to this
Agreement; (2) agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, Federal court; (3) agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law;
(4) consents that any such action or proceeding may be brought in such courts
and waives any objection it may now or hereafter have to the laying of venue of
any such action or proceeding in any such court and any objection it may now or
hereafter have that such action or proceeding was brought in an inconvenient
court, and agrees not to plead or claim the same; (5) consents to service of
process in the manner provided for notices in Section 10.02 of this Agreement
(provided that, nothing in this Agreement shall affect the right of any such
party to serve process in any other manner permitted by law); and (6) waives,
to the maximum extent not prohibited by law, any right it may have to claim or
recover in any such action or proceeding any special, exemplary, punitive or
consequential damages.
Section 10.17. Confirmation of Intent. It is the express
intent of the parties to this Agreement that the sale, assignment, transfer and
conveyance, from the Seller to the Issuer pursuant to Section 2.01 of this
Agreement, of all of the Seller's and DFC's right, title and interest in, to
and under the property set forth in such Section 2.01, in
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each case and at all times shall be treated under applicable law as a sale by
the Seller and DFC to the Issuer of such property. If, at any time, it is
determined that all or any portion of such property continues to be property of
the Seller or DFC, then the Seller or DFC shall hereby grant and shall be
deemed to have granted to the Issuer a security interest in all of such
property and this Agreement shall constitute a security agreement under
applicable law.
Section 10.18 Limitation of Liability. It is expressly
understood and agreed by the parties hereto that (a) this Agreement is executed
and delivered by Wilmington Trust Company, not individually or personally but
solely as the Owner Trustee of the Issuer under the Trust Agreement, in the
exercise of the powers and authority conferred and vested in it, (b) each of
the representations, undertakings and agreements herein made on the part of the
Issuer is made and intended not as personal representations, undertakings and
agreements by Wilmington Trust Company but is made and intended for the purpose
of binding only the Issuer, (c) nothing herein contained shall be construed as
creating any liability on Wilmington Trust Company, individually or personally,
to perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the Seller, DFC or the Servicer
and by any Person claiming by through or under the Seller, DFC or the Servicer
and (d) under no circumstances shall Wilmington Trust Company be personally
liable for the payment of any indebtedness or expenses of the Issuer or be
liable for the breach or failure of any obligation, representation, warranty or
covenant made or undertaken by the Issuer under this Agreement or the other
Transaction Documents.
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IN WITNESS WHEREOF, each of the parties to this Agreement has
caused this Agreement to be duly executed and delivered in New York City, New
York by its proper and duly authorized officers as of the date first above
written.
ZALE FUNDING TRUST
By: WILMINGTON TRUST COMPANY, not in
its individual capacity but
solely as Owner Trustee under
the Amended and Restated Trust
Agreement dated as of July 15, 1994
By: /s/ Emmett R. Harmon
_________________________________________
Name: Emmett R. Harmon
Title: Vice President
ZALE DELAWARE, INC.
By: /s/ Thomas E. Whiddon
_________________________________________
Name: Thomas E. Whiddon
Title: Senior Vice President-Treasurer
DIAMOND FUNDING CORP.
By: /s/ Thomas E. Whiddon
_________________________________________
Name: Thomas E. Whiddon
Title: Senior Vice President-Treasurer
JEWELERS FINANCIAL SERVICES, INC.
By: /s/ Thomas E. Whiddon
_________________________________________
Name: Thomas E. Whiddon
Title: Senior Vice President-Treasurer
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Agreed to and accepted:
BANKERS TRUST COMPANY, not in its
individual capacity but solely as
Indenture Trustee
By: /s/ Louis Bodi
_________________________________
Name: Louis Bodi
Title: Assistant Vice President
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